2017 PLP 35 (CLD)

YAHYA AFRIDI, J.

Through the instant appeal, Liaqat Ali Khan, the appellant, has challenged the judgment and decree dated 21.03.2015, passed by the learned Additional District Judge-IV, Kohat whereby the suit of the respondent-plaintiff against the appellant-defendant for recovery of Rupees Two Million with interest was accepted and decreed. Hence the instant appeal.

2. The brief and essential facts-of the case are that respondent-plaintiff instituted a suit against the appellant- defendant for recovery of Rupees Two Million along with interest since October, 2012, on the basis of written instrument dated 7.10.2012 executed by the appellant-defendant in favour of respondent-plaintiff ("disputed Promissory Note"), which on demand was not honoured by appellant-defendant.

3. On the institution of the suit by the respondent-plaintiff, the trial Court summoned the appellant-defendant, who appeared and sought 'leave to appear and defend' the case, and after hearing the learned counsel for the parties, 'leave' was granted vide order dated 20.1.2014. Hence, the appellant-defendant submitted his Written Statement, raising various legal and factual issues. From the divergent pleadings of the parties, the trial Court framed the following issues:-

1. Whether the plaintiff possesses cause of action to invoke the jurisdiction of this Court under Order XXXVII, C.P.C.? OPP

2. Whether the claim of the plaintiff qualified to be brought before this Court being based on negotiable instrument or otherwise? OP Parties

3. Whether the agreement deed dated 7.10.2012 was executed by the defendant and was not honored? OPP

4. Whether the plaintiff is entitled to the decree as prayed for? OPP

5. Relief

4. Both the parties produced their pro and contra evidence, and after hearing the learned counsel for the parties, the trial Court decreed the suit of the respondent-plaintiff against the appellant-defendant in terms that; "Suit of the plaintiff is decreed. Decree for recovery of rupees two million along with 10% interest per annum, since October, 2012 is passed in favour of plaintiff against the defendant with costs. Plaintiff is directed to affix Court Fee of Rs.I5000/- on her claim, within 30 days of this order, failing which the decree would be ineffective and suit shall be considered as dismissed."

5. The appellant feeling aggrieved from the judgment and decree dated 21.3.2015 passed by the trial Court, challenged the same by filing the instant appeal before this Court.

6. The worthy, counsel for the appellant vehemently contended that the disputed promissory note was in fact an ordinary agreement and thus could not qualify to be the basis of a summary proceedings envisaged under Order XXXVII of the C.P.C.; that the disputed promissory note did not fulfill the essential ingredients provided under section 4 of the Negotiable Instruments Act, 1881 ("Act") as it contained interests of a third party; that on merits there was no consideration for the arrangement between the parties and the actual dispute related to some immoveable property; that the worthy trial Court has wrongly granted interest on the disputed claim. The worthy counsel sought reliance on Messrs Seri Sugar Mills' case (2013 CLD 1254), Khalid Mahmood's case (PLD 2011 Lahore 52), Rashid-ur-Rehman's case (PLD 2005 Lahore 416) and Bherulal's case (AIR (38) 1951 Ajmer 71).

7. In rebuttal, the worthy counsel for the respondent vehemently opposed the contentions of the worthy counsel for the appellant and contended that the disputed promissory note entails two different transactions with two different persons and the same were independent of each other; and that the transaction recorded between the appellant and the respondent fulfilled the condition precedent for a promissory note, as provided under section 4 of the Act; and that the appellant in his evidence has admitted the execution of the disputed promissory note and did not deny the contents thereof; Order XXXVII, Rule 1 of the C.P.C. vest the District Judge to adjudge matters relating to promissory note as in the present case. The worthy counsel sought reliance upon Arab Khan's case (2014 CLC 533), Abdul Aleem Butt's case (2015 CLC 1144) and Syed Fida-ur-Rehman Shah's case (2012 CLD 842).

8. Arguments of learned counsel for the parties heard and with their able assistance perused the record.

9. Let us commence with addressing the jurisdictional issue; "Whether the plaintiff possesses cause of action to invoke the jurisdiction of this Court under Order XXXVII, C.P.C.? In this regard, it would be appropriate to first review the provisions provided under Rule-2 of Order XXXVII of C.P.C., which reads:- "

2. Institution of summary suits upon bills of exchange etc. (1) All suits upon bills of exchange, hundies or promissory notes, may, in case the plaintiff desires to proceed hereunder, be instituted by presenting a plaint in the form prescribed; but the summons shall be in Form No.4 in Appendix B or in such other form as may be from time to time prescribed. (2) In any case in which the plaint and summons are in such forms, respectively, the defendant shall not appear or defend the suit unless he obtains leave from a judge as hereinafter provided so to appear and defend, and, in default of his obtaining such leave or of his appearance and defence in pursuance thereof, the allegations in the plaint shall be deemed to be admitted, and the plaintiff shall be entitled to a decree. (a) for the principal sum due on the instrument and for interest calculated in accordance with the provisions of section 79 or section 80, as the case may be of the Negotiable Instruments Act, 1881, up to the date of institution of the suit, or for the suit, mentioned in the summons', whichever is less, and for interest up to the date of the decree at the same rate or at such other rate as the Court thinks fit; and (b) for such subsequent interest, if any, as the Court may order under section 34, of this Code; and (c) for such sums for costs as may be prescribed; Provided that, if the plaintiff claims more than such fixed sum for costs, the costs shall be ascertained in the ordinary way." (emphasis provided)

10. The term promissory note provided in the above provision had not been defined in C.P.C., and this would lead us to view its definition provided in Section 4 of the Act, which reads as under; "Section-4 Promissory Note." A "promissory note" is an instrument in writing (not being a bank-note or a currency note) containing an unconditional undertaking, signed by the maker, to pay on demand or at a fixed or determinable future time, a certain sum of money only to, or to the order of, a certain person, or the bearer of the instrument. A sign instruments in the following terms: (a) "I promise to pay B or order Rs.500." (b) "I acknowledge myself to be indebted to B in Rs.1,00, to be paid on demand, for value received." (c) "Mr B, I O U Rs.1,000." (d) "I promise to pay B Rs.500; and all other sums which shall be due to him." (e) "I promise to pay B Rs.500, first deducting there out any money which he may owe me." (f) "I promise to pay B Rs.500 seven days after my marriage with C. (g) "I promise to pay B Rs.500 on D's death, provided D leaves me enough to pay that sum." (h) "I promise to pay B Rs.500 and to deliver to him my black horse on 1st January next."

11. The careful reading of the aforementioned definition provides six essential ingredients of a promissory note, which we may term the condition precedent to the definition test;- (i) It must be an instrument in writing, but it must not be a banknote or a currency-note. (ii) It must contain an unconditional promise or undertaking to pay. (iii) It must be signed by the maker. (iv) The payee should be a certain person. (v) The promise or undertaking to pay must be to pay a certain sum of money only. The promise to pay must not be clogged or involved with any other matter of different character. (vi) The payee must be a certain person, that is, the payment must be expressed to be made to (a) the person in whose favour it is executed, or (b) the order of such person, or (c) the bearer of the instrument.

12. There has been extensive legal deliberation upon the nature and essentials of an instrument to qualify the legal requirements of being termed as a promissory note. In this regard, an authoritative legal discourse was rendered by the Privy Council in Muhammad Akbar Khan's case (AIR 1936 Privy Council 171), wherein a written instrument was legally analyzed to consider, whether the same was a promissory note or otherwise. The English translation of the said document stipulated that:- "May God protect us. This (one) receipt is hereby executed by Bhai Hira Singh Attar Singh Kharbanda, residents of Hoti, for Rupees 43,900 (forty three thousand and nine hundred rupees) half of which amount comes to twenty one thousand nine hundred and fifty, received from the firm of Lala Duni Chand Lala Hari Chand Sethi for and on behalf of Captain Muhammad Akbar Khan of Hoti. This amount to be payable after 2 (two) years. Interest at the rate of Rs.4- 5-0 (Rs. four annas five) per cent per year to be charged. Dated this 20th day of Chetar (first month of Hindu Calendar year) Sambat 1974, corresponding to 1st April 1917. Stamp has been duly affixed. (Sd) Hira Singh, Kharbanda. (Sd) Attar Singh, Kharband. The above written instrument was legally commented upon by lord Atkin, while speaking for the Court, in terms that:- "If this document is otherwise within the definition of a promissory note, it would seem that it must be negotiable for there appear to be no words prohibiting transfer or indicating an intention that it should not be transferable. It must be admitted that it would be a somewhat unusual visitor in the accustomed circles of negotiable paper. It is indeed doubtful whether a document can properly be styled a promissory note which does not contain an undertaking to pay, not merely an undertaking which has to be inferred from the words used. It is plain that the implied promise to pay arising from an acknowledgment of a debt will not suffice; for the third illustration indicates that an IOU is not a promissory note, though of the implied promise to pay there can be no doubt. The second illustration however seems to show that the express words "I promise" or "I undertake" are unnecessary. The form of words is taken from an early English case, reported in Selwyn's N.P. 11th Edn. P.401, from Scacc. M I Geo II MSS (1), where according to the learned author the Court stated that the words "to be paid" in the document (sic.) there sued on amounted to a promise to pay, observing that the same words in a lease would amount to a covenant to pay rent. It does not appear to form a useful general illustration except in the case of a document in that particular form of words. Their Lordships prefer to decide this point on the broad ground that such a document as this is not and could not be intended to be brought within a definition relating to documents which are to be negotiable instruments. Such documents must come into existence for the purpose only of recording an agreement to pay money and nothing more, though of course they may state the consideration. Receipts and agreements generally are not intended to be negotiable, and serious embarrassment would be caused in commerce if the negotiable net were cast too wide. This document plainly is a receipt for money containing the terms on which it is to be repaid."

13. The ratio decidendi of Akbar Khan's case (supra) was that an instrument was not only to state an undertaking to pay a certain amount to a specific person by its maker, but was also to be intended to be negotiable. This view of the Privy Council was reaffirmed in a subsequent pronouncement in Karam Chand's case (AIR 1938 PC 121). These two land mark decisions have formed the judicial foundation on the requirements for any instrument to be termed as a promissory note; it has to not only pass the definition test of having all the essentials provided in section 4 of the Act, but also to withstand the negotiability test of being intended by its maker to be negotiable.

14. A Full Bench of the Rajistan High Court in Nanga's case (AIR 1962 Rajistan 68), while dilating upon an entry of the creditors accounts book, was confronted to address, whether in addition to fulfilling the condition of a promissory note provided under the Act or the Stamp Act, 1899, the same required to fulfill the Negotiability Test. Bhargava J, speaking for the Full Bench on the said issue, concluded that:- "I am therefore, of the view that a promissory note besides fulfilling the requirements as laid down in Section 4 of the Negotiable Instruments Act must also be intended by the parties at the time of its execution to be a promissory note as understood by commercial persons in its popular sense which means that unless it falls within the exception provided in the wider definition of the Stamp Act, or is otherwise expressly or by implication made not transferable, it must be intended by the parties to be negotiable instrument. If the instrument does not fall within the above mentioned exceptions and does not stand the test of negotiability, it will not be a promissory note even though it contains an unconditional undertaking to pay money."

15. Keeping in view the legal principles enunciated in the aforementioned precedents as our guiding principle, let us now review the disputed promissory note, which has been adjudged by the trial Court to be a promissory note, within the contemplation of the Act and thus qualifying it to be the basis for a suit filed under the enabling provisions of Order XXXVII, of C.P.C. The said document (Ex.PW1/1) reads as under:-

16. Before this Court deliberates and comments upon the terms stipulated in the above document, it would be most appropriate to keep in mind the following general settled principles of interpreting a written instrument; (i) the description of the instrument; (ii) the language of the instrument is to be taken as a whole; (iii) the circumstances under which the document was executed; (iv) the intention of the parties manifest on the face of the document; and (v) the surrounding circumstances. In addition to the above, the judicial consensus on an instrument to fulfill the requirements of a promissory note under the Act is that the same must further satisfy the following; (i) the promise to pay must be the substance of the instrument; (ii) there must be nothing else inconsistent with the character of the instrument as substantially a promise to pay; and (iii) the instrument must be intended by parties to be a promissory note and the intention to make such note must appear on the face of the instrument."

17. Now, when we carefully review the disputed promissory note (Ex.PW1/1), it comes to light that the same fulfills the definition test; Liaqat Ali Khan, the executant thereof (Ex.PW1/1) undertook to pay. Mst. Shafaq Urooj, Rs.2,000,000/- to be paid within six months. The terms agreed upon by Liaqat Ali Khan prima facia fulfilled the essential requirements of a promissory note, as provided under section 4 of the Act.

18. Interestingly, the disputed promissory note does not withstand the negotiability test. Liaqat Ali Khan, in addition to the undertaking rendered to pay Mst. Shafaq Urooj, also undertook to transfer 13 marlas of land in favour of Ikram Khan son of Saadullah Khan. This stipulation by Liaqat Ali Khan raises serious questions about the intention of Liaqat Ali Khan or for that matter Mst. Shafaq Urooj to consider the said document to be negotiable. The addition of this specific stipulation would clearly take the said instrument outside the scope of it being negotiable within the contemplation of section 13 of the Act.

19. More importantly, the disputed promissory note has been titled to be an Iqrar Nama and also refers to an arrangement regarding transfer of property to a third party. Thus it can safely be stated that the disputed promissory note (Ex.PW1/1) could not be intended by its maker to be a promissory note.

20. Even otherwise, the circumstances surrounding the execution of the disputed promissory note (Ex.PW1/1), as gathered from the evidence recorded by the parties reveals that, Liaqat Ali Khan was acknowledging his debt and undertaking payment to Mst. Shafaq Urooj and also promising to transfer 13 marlas of specific land to Ikram Khan. At best the said document can be termed as an acknowledgment of debt or an agreement between the parties. But the same could not practicably be negotiable by Mst. Shafaq Urooj.

21. The above findings lead us to conclude that the disputed promissory note (Ex.PW1/1) was not a promissory note, within the contemplation of the Act. This crucial finding begs the vital question, whether this Court should reject the impugned decision having been passed by a Court lacking jurisdiction. In ordinary circumstances, this Court would have out rightly set aside the decision passed by a Court lacking jurisdiction. However, in the peculiar circumstances of the present case, this Court would not reject the impugned decision on this score; Firstly, it is an admitted position that the trial Court granted leave to the present appellant, and thereafter, a proper trial followed, within the contemplation of Rule 7 of Order XXXVII, of C.P.C. Thus, the appellant was provided with all the opportunity to produce evidence to rebut the claim of the respondent-plaintiff. Had the trial Court proceeded to decide the case in a summary manner, within the purview of Rule 2 of Order XXXVII of C.P.C., a case could have been made out in favour of the appellant to have been prejudiced. But the peculiar circumstances of the present case, when the trial Court proceeded with the suit as an ordinary trial by providing both parties to produce their pro and contra evidence, no question of prejudice to either party can be raised. More recently, the Lahore High Court in Chand Bagh's case (PLD 2011 Lahore 473), wherein seeking guidance from the judicial pronouncement of the apex Court in Sheikh Abdul Majeed's case (PLD 1988 SC 124), Syed Nazir Hussain Rizvi's case (PLD 2005 SC 787), Haji Ali Khan and Company's case (PLD 1995 SC 362) and Abdul Karim Jaffarani's case (1984 SCMR 568), the principle was reaffirmed that:- "It is settled law that when summary procedure is not attracted, the suit can be proceeded with as an ordinary suit and the jurisdiction of the Court in this regard is not barred....... It, therefore, follows from the above that even if, for the sake of arguments, it was to be concluded that a suit was not triable by resort to the summary procedure prescribed under Order XXXVII of C.P.C., its trial could nevertheless proceed as an ordinary suit." Secondly, keeping in view the pecuniary value of the suit being two million rupees, the appeal against the decree passed even by a civil Court would lie to the High Court and not to the District Court. Hence, the appellant has not been prejudiced by losing a forum of appeal. Thirdly, the present appellant has been provided an ample opportunity to produce all his evidence to rebut the stance taken by Mst. Shafaq Urooj, the respondent-plaintiff. In fact, it has to be taken into account that Liaqat Ali Khan, the present appellant, who appeared as DW-1 admitted to have executed the disputed promissory note (Ex.PW1/1), and more importantly also admitted the contents thereof.

22. Thus, this Court is not in consonance with the contention of the worthy counsel for the appellant that the impugned judgment and decree passed by the trial Court be set aside on the touchstone of the disputed promissory note (Ex.PW1/1) being not a promissory note.

23. Canvassing through the evidence produced by the parties, it is noted that the respondent-plaintiff was able to prove her claim by producing the disputed promissory note (Ex.PW1/1), through its scribe, namely, Hafiz Rasheed Farooq (PW-1), and its contents were testified by its two witnesses Ikramullah (PW-2) and Mudassir (PW-4). More importantly, Liaqat Ali Khan, though disputing the veracity of the disputed promissory note in the written statement, admitted not only its execution but also its contents, while appearing as his own sole witness (DW-1). Thus, when a fact was admitted by the defendant, Liaqat Ali Khan, then the plaintiff Mst. Shafat Urooj was not to prove the same.

24. Moreover, as far as the claim of the present appellant that the agreement between him and Mst. Shafaq Urooj related to the transfer of 13 marlas of immoveable property is concerned, it is noted that despite being provided full opportunity, no tangible evidence was produced by him during the trial in support thereof.

25. It would also be important to address the objection of the worthy counsel for the appellant regarding rate of interest imposed by the trial Court. It is noted that in case this Court had come to the conclusion that Ex.PW1/1 was a promissory note then the interest charged by the trial Court would have been contrary to the express provision provided under section 34 of C.P.C. read with section 79 of the Act and the interest to be charged could not exceed 6%. However, as this Court has adjudged Ex.PW1/1 not to be a promissory note then this objection of the worthy counsel for the appellant is not legally correct and justifiable. What has, however, irked this Court is that the trial Court has imposed interest from October, 2012, which in fact is the date of the execution of Ex.PW1/1, when Liaqat Ali Khan undertook to pay Mst. Shafaq Urooj rupees two million within six months without agreeing to and stipulating any term for interest therein. Thus, interest could be demanded and legally imposed after the expiry of the agreed term of repayment of six months. Furthermore, the Mst. Shafaq Urooj, the plaintiff, while testifying as her own witness was unable to specify when she had demanded the disputed amount from Liaqat Ali Khan, the defendant. Thus, the time from where interest was imposed by the trial Court warrants correction. As far as the rate of interest of 10% imposed by the trial Court is concerned, the same appears to be "reasonable" and not arbitrary, hence maintained. Accordingly, for the reasons stated hereinabove, the findings of the Court on the issues framed are as under:- ISSUES FINDINGS Whether the plaintiff possesses cause of action to invoke the jurisdiction of this Court under Order XXXVII, C.P.C.? OPP In the affirmative Whether the claim of the plaintiff qualified to be brought before this Court being based on negotiable instrument or otherwise? OP Parties In the negative. Whether the agreement deed dated 7.10.2012 was executed by the defendant and was not honoured? OPP In the affirmative Whether the plaintiff is entitled to the decree as prayed for? OPP In the affirmative. Relief. Decree for recovery of rupees two million along with 10% interest per annum, from the date of institution of the suit till its realization is passed in favour of Mst. Shafaq Urooj/plaintiff against Liaqat Ali Khan the defendant with costs. The instant appeal is disposed of in the above terms. MH/288/P Order accordingly.