2006 PLP 537 (YLR)

NADEEM AZHAR SIDDIQI, J.--This is a suit under Order XXXVII, rule 1, C.P.C. filed by the plaintiff on the basis of promissory note dated 25-2-1998 allegedly executed by the defendant against consideration of Rs.70,00,

000. Along with the plaint photocopies of the promissory note, receipt and letter of undertaking were filed. The claim of the plaintiff is that the defendant is his old friend and in February, 1998 approached him with a request for a loan of Rs.70,00,

000. The plaintiff paid the said amount on execution of demand promissory note dated 25-2-1998 which was delivered to him as security for the repayment of loan. It was further stated in the plaint that in spite of repeated demands made by the plaintiff and the promises made by the defendant from time to time the defendant failed to pay the loan amount hence a JIRGA was called and in presence of JIRGA Letter of Undertaking dated 18-12-2000 was executed by the defendant. The defendant in spite of undertaking failed to pay the amount. On 22-7-2003 the plaintiff met with the defendant and asked him to pay the amount. The defendant refused to pay the amount, hence the suit was filed. After filing the suit summons under Summary Chapter were issued to the defendant who filed application under Order XXXVII, rule 3, C.P.C. (C.M.A. No.4814 of 2003) to which the plaintiff filed his counter-affidavit. In the application apart from other pleas it was stated that promissory note is not sufficiently stamped and some stamps appearing on the promissory note had not been cancelled. It was also stated in the said application that Annexure 'A' to the plaint (Promissory Note) is a forged document. This application came up for hearing on 24-5-2004 and was dismissed in non-prosecution. A restoration application being C.M.A. No. 3918 of 2004 was filed and the same was also dismissed on 5-9-2005 for non-prosecution. Thereafter, the suit was fixed for final disposal on 2-11-2005. While hearing the case on 2-11-2005. I have noticed that several revenue stamps appearing on the backside of promissory note were not properly cancelled. I, therefore, asked the learned counsel for the plaintiff to satisfy me that in absence of proper cancellation of revenue stamps how this document can be treated as a promissory note properly stamped and directed the learned counsel to file affidavit along with original documents which was filed. Learned counsel for the plaintiff submits that mere non-cancellation of revenue stamps appearing on the back of the promissory note has no effect on the validity of promissory note and the same will remain a promissory note in terms of section 4 of the Negotiable Instrument Act, 1881 and that defect if any can be cured by payment of deficit duty and penalties thereon. He further contends that the stamps appearing on the back of the promissory note were properly cancelled in accordance with section 12 of the Stamp Act, 1899. The learned counsel for the plaintiff relied upon the following reported cases: (1) Muhammad Hanif v. Kissan Dost (Pvt.) Limited (2003 CLD 224) (2) Mst. Sajida Abbas Zaidi v. Syed Arshad Ali Jafri (1990 CLC 1018) (3) Habib Bank Ltd. v. Raza Sons & Co. and another (PLD 1978 Karachi 425) (S.B.) The next contention of the learned counsel is that once the document is admitted in evidence the same cannot be questioned in view of section 36 of the Stamp Act, 1899. In support of his contention the learned counsel relied upon the following reported cases:-- (1) Rehmat Ali v. Wahid Bux (NLR 1979 Civil SC 809) (2) Abul Hashem v. Serajul Haque and others (PLD 1961 Dacca 596) (3) Muhammad Ashiq and another v. Niaz Ahmad and another (PLD 2004 Lahore 95) (4) Munir Ahmad Kahloon v. Rana Muhammad Yousaf (PLD 2003 Lahore 173) (5) Hafizullah v. Haji Hussain Bakhsh (1990 CLC 603). I have heard the learned counsel? for the plaintiff and perused the record of the case. Regarding his first contention learned counsel submits that in accordance with the schedule of Stamp Act Rs.100 is the proper duty to be affixed on the promissory note and the promissory note is properly stamped. I have seen the original promissory note which bear 100 revenue stamps of Re.1 each. From further perusal of the stamps affixed on the promissory note it is clear that at least eight revenue stamps of Re.1 each were not properly cancelled in accordance with section 12 of the Stamp Act. The revenue stamps neither bear the signature or part of signature of the executant nor cancelled by drawing a line. The purpose of cancellation is that it cannot be used again and so far such stamps are cancelled, be deemed to be unstamped. In the case of Muhammad Hanif the Court has held as under:-- "

all the adhesive stamps totally valuing Rs.10 stands cancelled either making a line on them or through signature of the appellant." In the case of Mst. Sajida Abbas Zaidi the Court has held that:-- "In the present case the adhesive stamps of Rs.15 which are applied on the back of the leaf on which the pro note and its receipts are written, are cancelled by rubber stamp bearing word "Attested"." It was further held in the same case that: - "--In any case all the stamps appear to have been effectually cancelled by this rubber stamp in such a manner that anybody would at once find out that these stamps have been used and would not use them again." In the case of Habib Bank Limited it was held that:-- "

In the instant case the position is identical. Here instead of signature a line runs across the whole stamp. It, therefore, constitutes effective cancellation of the stamp." In all the above three cases though the question raised was non-cancellation of stamps but in all the judgments it was held that stamps were properly cancelled either by signature or by drawing line and the same cannot be used again. The above judgments are not helpful to the plaintiff as in the instant case the stamps were affixed but not effectively cancelled as such the promissory note is deemed to be unstamped to that extent. Furthermore, section 35 of the Stamp Act provides that instrument not duly stamped inadmissible in evidence. Proviso (a) of the above section provides that any such instrument not being an instrument chargeable with a duty of one anna (or half an anna) only, or a bill of? exchange or promissory note shall, subject to all just exceptions, be admitted. From the above proviso it is clear that promissory note if not duly stamped is inadmissible in evidence and the defect cannot be cured by payment of duty and penalty. The other contention of the learned counsel for the plaintiff is that once the promissory note was admitted in evidence the same cannot be questioned. First of all in this case no evidence was recorded and the from first this objection was there. Even in his application for leave to defend the defendant in para.(i) has stated that the stamps appearing on the promissory note have not been cancelled as required under the Stamps Act. While hearing the case on 2-11-2005. I have also taken this objection and directed the plaintiff to file his affidavit along with original documents, the promissory note was produced in Court in compliance of the order dated 2-11-2005. In all the above cases the promissory note was admitted in evidence and was duly exhibited. Section 36 of the Stamp Act provides that where an instrument has been admitted in evidence, such admission shall not, except as provided under section 61 of Stamp Act be called in question at any stage of the same suit proceeding on the ground that the instrument has not been stamped. In the instant case 'no evidence was recorded and the promissory note was not exhibited. The promissory note was only produced in Court in the direction for the Court and same cannot be equated with the production of document during evidence. All the above judgments are of no help to the plaintiff. Since I have held that promissory note is not duly stamped suit on the basis of promissory note under Order XXXVII, rule 1, C.P.C. is non-maintainable under law. Now the question is whether to dismiss the suit or to convert the same from short cause to long cause and allow the plaintiff to prove his case independent of the instrument. This question was examined by he Indian Courts as well as our own Courts. In the case of Jatindra Seb Lask versus Khala Singh (AIR 1964 Assam 138) it was held that suit is based on insufficiently stamped promissory note is liable to be dismissed. However, in the case of K.M. Muneer versus Mirza Rashid Ahmad (PLD 1963 (W.P.) Karachi 905) a Division Bench of this Court after examining case-law from Indian Jurisdiction held that: "(a) If the promissory not embodies all the terms of the contract and the instrument is improperly stamped, no suit on the debt will lie in view of the bar of section 91, Evidence Act, and section 35, Stamp Act. But if it does not embody all the terms of. the contract, the true nature of the transaction can be proved and the plaintiff's claim can be decreed on that basis. (b) In those cases where an instrument has been given as collateral security or any way of conditional payment, a suit on the debt will lie and there would be a cause of action independent of the instrument for its recovery." In the above judgment the following para. from the case of Sheo Nath Prasad versus Sarjoo Nonia and another (AIR 1943 All. 220) has been quoted which is very relevant to this case and reads as under:-- "In my opinion, the law on the subject may thus be stated, when a promissory note was given in consideration of a sum of money it is a question of fact in each case whether the sum of money was given as a loan or not as a loan; in the absence of all evidence the presumption is that it was given by way of loan; and there is a further presumption that the promissory note was given in conditional payment of the loan. If by reason of the defect of stamp the promissory note is held inadmissible in evidence, it is open to the plaintiff to prove the loan and all its terms and to recover the loan irrespective and independently of the promissory note by giving other evidence including that furnished by a contemporaneous receipt, if there be any. It is for the defendant to prove that the promissory note was given for a sum of money which was not given as a loan or it was given in absolute satisfaction of the loan or the plaintiff has made it his own by his agreement or by his conduct. If the defendant succeeds in proving any of these facts the plaintiff shall be restricted to the promissory note and he shall not be allowed to recover independently of the promissory note." The question before the Court was that in view of admitted position that the pro notes on the basis of which original suits were filed were not properly stamped and not admissible in evidence under section 35 of Stamps Act, 1899, the plaintiff can fall back on original consideration and claim a decree for the amount in dispute on that basis. The D.B. of this Court held that a suit on the debt will be and there would be cause of action independent of the instrument for its recovery. In this case also the plaintiff in paras.2 and 3 of the plaint has stated that the amount was paid as loan and for repayment of the loan amount the defendant executed and delivered to the plaintiff a demand promissory note dated 25-2-1998. Since in the instant case also the promissory note did not embody all the terms of the contract, Article 102 of the Qanun-e-Shahadat Order, 1984 nor section 35 of the Stamp Act, 1899 would be a bar in the way of the lender to file a suit for recovery of the debt alleged to have been advanced by him as loan. I, therefore, ordered that this suit be converted from short cause to long cause and fresh summons in ordinary course be issued to the defendant for a date to be fixed by the office. The plaintiff is required to prove the advancement of loan by adducing evidence independent of the pro note. H.B.T./T-2/K?????????????????????????????????????????????????????????????????????????? Order accordingly.