Case Note & Summary
The appellant-plaintiff filed a suit for recovery of Rs. 15,00,000 with interest against the respondent-defendant, who is his sister-in-law. The plaintiff claimed that in 1997, he had obtained a hand loan of Rs. 52,000 from the defendant and executed a promissory note. Subsequently, the defendant allegedly agreed to pay a larger sum, leading to the suit. The trial court rejected the plaint under Order 7 Rule 11 of the Code of Civil Procedure, 1908, holding that the suit was based on an unstamped promissory note and thus not maintainable. The plaintiff appealed. The High Court allowed the appeal, setting aside the trial court's order. The court held that even if the promissory note was insufficiently stamped, it could be admitted in evidence for a collateral purpose, such as proving the loan transaction, upon payment of stamp duty and penalty. The court emphasized that the rejection of the plaint at the threshold was premature and that the trial court should have impounded the document and allowed the plaintiff to pay the deficit stamp duty and penalty. The matter was remanded back to the trial court for fresh consideration.
Headnote
A) Civil Procedure - Rejection of Plaint - Suit for Recovery of Debt - The trial court rejected the plaint under Order 7 Rule 11 CPC holding that the suit was based on an unstamped promissory note and thus not maintainable. The appellate court held that the document could be admitted for collateral purpose under Section 35 of the Bombay Stamp Act, 1958, and the plaint could not be rejected at the threshold. (Paras 1-10) B) Stamp Act - Admissibility of Insufficiently Stamped Document - Section 35 of the Bombay Stamp Act, 1958 - The court held that even if a promissory note is insufficiently stamped, it can be admitted in evidence for a collateral purpose, such as proving the loan transaction, upon payment of stamp duty and penalty. The trial court's rejection of the plaint was premature. (Paras 5-10) C) Evidence Act - Promissory Note as Evidence of Loan - The court observed that the promissory note, though insufficiently stamped, could be used to prove the fact of loan as a collateral transaction. The suit for recovery of money based on the loan is not barred merely because the promissory note is not properly stamped. (Paras 5-10)
Issue of Consideration
Whether a promissory note which is insufficiently stamped can be admitted in evidence for a collateral purpose, and whether the rejection of the plaint by the trial court on the ground that the suit is based on an unstamped promissory note is sustainable.
Final Decision
The appeal is allowed. The impugned order dated 30/06/2014 passed by the Civil Judge, Senior Division, Latur, rejecting the plaint, is set aside. The matter is remanded back to the trial court for fresh consideration in accordance with law. The trial court is directed to decide the suit afresh, keeping in view the observations made in the judgment. Civil Application No. 9348 of 2014 is disposed of.
Law Points
- Admissibility of insufficiently stamped promissory note for collateral purpose
- Section 35 of the Bombay Stamp Act
- 1958
- Order 7 Rule 14 of the Code of Civil Procedure
- 1908
- Document not impounded at trial stage
- Rejection of plaint for want of proper stamp
