J. N. Bhat, J. :- This is a revision petition under the Small Cause Courts Act against a decree passed by the City Munsiff for 500 with costs against the petitioners in favour of the respondent. This case originally came up before one of us, but owing to a conflict of authority on the point was referred to a Division Bench.

2. The suit was originally instituted in the court of the Judge Small Cause Court Srinagar and then was transferred to the court of the City Munsiff Srinagar. The learned Munsiff heard the case, recorded the evidence, and then decreed the suit as indicated above.

3. A preliminary objection was raised by the learned counsel appearing for the respondent that as the decree was passed by the City Munsiff the decree was appealable and this revision was incompetent. This objection of the respondents learned counsel does not merit any consideration in view of Section 24(4) of the Civil Procedure Code which lays down that the court trying any suit transferred or withdrawn under this Section from a small cause court shall for the purpose of such suits be deemed to be a court of small causes. This Sub-Section clearly means that even if the suit is heard by a regular civil court but has been transferred from the Court of Small Causes, the regular court will be deemed to be a court of small causes for the purpose of this suit. The decree passed by the City Munsiff in this suit will be considered to be a decree of the court of small causes and hence this revision is maintainable.

4. The only point that was argued before us was that the pronote which was the main document in the suit was inadmissible in evidence as not being properly stamped. Before we discuss this point, it is very necessary to be clear about the facts of this case. The plaintiff originally did not bring the suit on the basis of the pronote but in para (1) of his plaint he stated that the defendants for their own business had borrowed 750 as loan from the plaintiff on the basis of a receipt dated 6th May 58 and other documents. They had agreed to repay the debt on demand. The plaintiff admitted having received 250 on account of the debt and sued for the balance of the loan advanced. During the trial the pronote was produced in the court. It is not disputed that this pronote is not properly stamped and further it is admitted that under Section 35 of the Stamp Act this pronote is inadmissible in evidence.

The plaintiff feeling the weakness that the promissory note, by means of which the loan had been advanced, was not admissible in evidence did not mention the promissory note at all in his plaint. On the other hand he tried to base his suit on the receipt which was executed by the borrowers at the time of taking this loan and the execution of the pronote. He has very cleverly used the words receipt dated 6th May 58 and other documents. Other documents are the pronote in dispute and no other. The receipt also cannot furnish him an independent cause of action because the recitals in the receipt itself are that 750 were received by the petitioners as the loan borrowed on the basis of a separate pronote of even date. Therefore these two documents the pronote and the receipt of 6th May 58, are part and parcel of the same transaction. The receipt is an acknowledgment of the receipt of money and the pronote forms the terms of the contract between the parties.

5. There has been a lot of controversy on this proposition of law amongst different High Courts and in the same High Court from time to time as to when a promissory note or bill of exchange is inadmissible in evidence for want of proper stamp duty whether the person in whose favour the promissory note is executed can lead other evidence independent of the promissory note and prove the transaction. As will appear from this judgment different courts have laid down different standards and there is a clear conflict of opinion on this point. Before discussing the Indian law and only a few of the conflicting authorities on this point, it will be desirable to say something about the English law on the subject.

6. The tendency in England has always been to ignore as far as possible stamp objections. In Roscoes Treatise on Evidence in Civil Actions (Edn. 20 Vol. 1 page 226) it has been observed :

"When the transaction is capable of being legally proved by other evidence than that of the instrument which ought to bear a stamp, such evidence, if allowed by the pleadings, may be resorted to. Thus where a promissory note appears to be improperly stamped, the plaintiff may resort to the original consideration."

7. These principles of English law have influenced certain Indian High Courts in holding that if a promissory note or a bill of exchange is inadmissible in evidence, the creditor can prove the debt by other oral evidence. After going through numerous authorities on the subject, I feel that certain conclusions can be drawn from a study of these cases.

8. There is hardly any difference of opinion on the point that if the promissory note or the bill of exchange which is admissible in evidence for want of proper stamp duty is executed in token of a previous liability or an antecedent debt or a transaction not contemporaneous with the execution of the promissory note or the bill of exchange, the creditor can fall back upon the original consideration and prove the debt, notwithstanding the fact that the pronote on which the suit is based is not admissible in evidence. (See A.I.R. 1935 Calcutta 658, A.I.R. 1933 Patna 575 (FB), (1881) ILR 7 Cal. 256, A.I.R. 1961 Rajasthan 235 and (1887) ILR 9 All 351). There are however other authorities which lay down that if all the terms of a contract are not contained in the promissory note which is the basis of the suit but is insufficiently stamped and hence inadmissible in evidence the court can allow other evidence to be led in about the debt incurred. This seems to be an interpretation which is more or less of a recent origin, and tries to reconcile the sharp conflict of authorities on the points relating to the permissibility of leading oral evidence apart from the terms of an inadmissible promissory note executed for the purpose of securing a loan. Some of the leading authorities on the point are as under : A.I.R. 1945 Calcutta 268; AIR 1943 Allahabad 220 (FB); A.I.R. 1938 Madras 785 (FB); A.I.R. 1954 Punjab 301. and A.I.R. 1050 Patna 493.

9. Then there remains the two classes of cases which are in sharp conflict with each other. They relate to the admission or otherwise of other oral evidence in addition to the terms of a promissory note which is inadmissible in evidence. As already stated, there is sharp conflict in the view points of different High Courts on the point and even the same High Court has taken contradictory views at different times. There are two reported authorities of this court which have been brought to our notice. They are 3 J and K LR 1 and (1948-49) 7 J and K LR 43. In the former case it has been held that if the suit is based on an unstamped pronote the suit is maintainable on the basis of the original consideration. In the latter authority it has been laid down that a suit on the basis of an inadmissible promissory note is not maintainable. From the other High Courts only a few authorities may be mentioned.

10. AIR 1933 Allahabad 109 lays down that a suit on a promissory note which was insufficiently stamped and a receipt thereof could not be brought if the pronote and the loan were simultaneous. The same view was held in A.I.R. 1954 Punjab 301.

11. In A.I.R. 1938 Madras 785 (FB) amongst other things while overruling its earlier decisions in A.I.R. 1926 Madras 1140 and A.I.R. 1935 Madras 206 it was laid down that if all the terms are contained in the promissory note no suit could lie on the original consideration.

12. AIR 1931 Allahabad 183 (FB) overrules (1912) ILR 34 All. 158 and (1906) ILR 28 All. 293 and has held that it the money was advanced on terms contained in a promissory note which was inadmissible in evidence, the lender could not prove the terms of the contract by oral evidence. Although this authority was overruled in A.I.R. 1943 Allahabad 220 yet in that authority also Hamilton J. dissenting from the other Judges laid down :

"..... .the intention was to reduce the terms of the contract to the form of a document which in view of the nature of the contract happened to be a form of a negotiable instrument, namely a pronote. In my opinion, therefore, the plaintiff could not prove the loan by oral evidence."

13. A.I.R. 1922 Lahore 307 lays down that if a loan is advanced on the security of an insufficiently stamped Hundi, secondary evidence of the loan would be inadmissible. To the same effect are the observations in A.I.R. 1927 Lahore 89.

14. In A.I.R. 1934 Lahore 606 a Division Bench consisting of Sir Shadi Lal, C.J. and Rangi Lal, J. laid down that if a pronote was inadmissible in evidence for want of stamp no decree could be passed in the case even if the execution of the pronote was admitted.

15. In A.I.R. 1946 Allahabad 150 it was held that if all the terms of the loan were contained in an insufficiently stamped promissory note the plaintiff could not fall back on the original consideration. This authority was relied upon in AIR 1946 Allahabad 126 (FB).

16. In (1881) ILR 7 Cal. 256 it was laid down that when the incurring of the loan and the execution of the promissory note were simultaneous, no suit could lie on the basis of an insufficiently stamped promissory note.

17. In AIR 1931 Allahabad 183 (FB) the same view was held.

18. In A.I.R. 1936 Madras 179 (FB) it was laid down that if the promissory note and the incurring of the loan were contemporaneous, the original contract could not be proved aliunde.

19. As against this view we have other authorities which lay down that not withstanding the fact that a promissory note is inadmissible in evidence, the creditor can be permitted to lead oral evidence about the actual loan and a decree passed thereon. For this view the following authorities may be mentioned : AIR 193S Bom. 286; A.I.R. 1935 Madras 206; AIR 1946 Allahabad 126 (FB); A.I.R. 1961 Rajasthan 235; A.I.R. 1957 Hyderabad 35; A.I.R. 1945 Calcutta 268; AIR 1953 Allahabad 535; A.I.R. 1934 Rangoon 389 (FB) and A.I.R. 1932 Oudh 235.

20. After giving our careful consideration to the proposition of law involved and going through the authorities of which only a few have been cited above, we are of the opinion that if a loan is taken on the basis of a promissory note or a bill of exchange which is inadmissible in evidence and the terms of the contract are reduced into writing in the shape of a promissory note or a bill of exchange no suit shall be on the basis of such a pronote or bill of exchange and the creditor shall not be permitted to lead oral evidence to prove the original debt apart from the terms of the pronote or the bill of exchange in question. We shall give our reasons for holding this view after we discuss some of the authorities which hold a contrary view.

21. The prohibition of permitting a creditor to prove the debt by other oral evidence is based on an interpretation of Section 91 of the Evidence Act which we shall discuss at its proper place. Before we give our reasons for this view let us consider some of the contrary authorities.

22. A.I.R. 1934 Rangoon 389 (FB) which is a judgment given by five Judges of that court some English law and English authorities have been cited and their Lordships have held :

"In cases in which the parties agree that the negotiable instrument shall be taken as conditional payment only and not in accord and satisfaction of the original debt that terms of the agreement is not generally embodied in the negotiable instrument and in such cases Section 91 has no application. Moreover it has long been a cause of surprise to me that the courts should so often be disposed to hold that a lender has agreed to accept a promissory note or a bill of exchange in satisfaction of the loan, and not as conditional payment of the debt." It is further laid down in this authority :

"I apprehend that the same principles apply as between borrower and lender, and that when a promissory note or bill of exchange is given for a loan prima facie it is given and taken as conditional payment, and not in accord and satisfaction of the debt. If the promissory note or bill of exchange is taken as conditional payment and that term is embodied in the document cadit questio, but if it is not therein set out the document does not contain all the terms of the agreement upon which the loan was made, and in my opinion Section 91 Evidence Act does not apply."

23. With utmost deference to the learned Judges these observations are more or less off the point. Their Lordships seem anxious to somehow evade the operation of Section 91 and they incorporate so many other conditions in the judgment. As would appear from the portions quoted above strictly speaking the terms of Section 91 are not at all attracted. We do not know where-from their Lordships have got that a promissory note or a bill of exchange is given for a loan prima facie as conditional payment and not in accord and satisfaction of the debt. The question therefore that is under discussion is not strictly covered by this authority.

24. A Full Bench of the Oudh High Court in A.I.R. 1932 Oudh 235, Srivastava, J. writing for the Full Bench, observed :

"Speaking with all respect, it seems to me that the cases which have taken a contrary view with reference to the provisions of Section 91, Evidence Act, have not given sufficient consideration to the question whether proof of the fact and of the amount of the loan or of payment of the consideration money is a term of the contract evidenced by the pronote. As I venture to think that it is not so, in my opinion Section 91 does not stand in the way of the plaintiff recovering his money on proof of the advance of the money to the defendant."

In this judgment scant justice has been done to Section 91, Evidence Act. The question for determination in this case was whether the terms of the contract are valid in the shape of a promissory note. Such other things whether the amount of the loan or payment of the consideration was not a term of the pronote is an observation beside the point and it is not clear where-from his Lordship has held that these matters are not evidenced by the pronote.

25. In A.I.R. 1953 Allahabad 535 a Division Bench of that court has held, relying on AIR 1943 Allahabad 220 (FB) that it was immaterial that the promissory note and the loan of money were part and parcel of the same transaction and were made simultaneously and that even in such a case a promissory note ordinarily and presumably is given as a conditional payment or as a collateral security and the advance of the loan was a distinct and separate cause of action by itself which could be sued upon and proved by other evidence, even though the promissory note was not admissible in evidence :

26. In this judgment it has further been observed :

"But with all respect one may be permitted to ask as to what would happen if the term that the promissory note is to be given as a conditional payment or by way of collateral security only were also to be recorded in the promissory note. Would the loan be provable by evidence other than by the production of the promissory note or not It would be anamalous indeed if the loan can be proved when the promissory note does not expressly say that it was executed by way of conditional payment or as collateral security merely and not in absolute discharge of the loan, but the loan cannot be proved when express mention is made of the aforesaid nature of the promissory note. Whether the promissory note recites this fact or not, the presumption of law, in the absence of contrary evidence, is that a promissory note is by way of conditional payment or as collateral security merely and not in absolute discharge of the loan. Where this term is not mentioned in the promissory note, it can be implied. The mention or non-mention of the said term in the promissory note should not, therefore, make any difference."

The learned Judges have come to the finding :

"It is clear that a promissory note or other negotiable instrument may be taken in supersession of or absolute discharge of, an oral debt But in the absence of the evidence to the contrary, the presumption is that it is as a conditional payment or as a collateral security only. Where it is in absolute payment or discharge of oral debt, the document alone can be used to prove the terms of the debt because in that case the debt has been reduced to the form of a document. But where the document is not taken in absolute discharge or in satisfaction of the debt, the debt has been reduced to the form of a document and therefore Section 91 is no bar to the proof of the debt otherwise than by production of the document. It is conceded on all hands that where a promissory note is taken in lieu of a pre-existing debt, it is usually taken merely by way of collateral security, and in such a case where the promissory note cannot be produced, the original oral contract of loan may be proved by other evidence. ....."

27. With utmost deference to the learned Judges we are unable to see wherefrom they have got the presumption that a negotiable instrument is only a conditional payment and a collateral security. In our opinion every case depends upon its own facts as the learned Judges have themselves envisaged because if the promissory note has been executed for a past liability or a pre-existing debt it is usually taken merely by way of collateral security. With the latter portion of this proposition there can be no dispute.

In A.I.R. 1938 Bombay 286 Rangnekar, J. has laid down :

"It seems to me, on principle, the distinction made by some of the cases is unsustainable. As I have pointed out, if there is a loan, that itself gives a cause of action, and the fact that there is a loan, cannot be a term of the contract. It does not therefore matter whether the loan was made at the same time as the document, which is the evidence of it, and the document is not properly stamped and therefore inadmissible in evidence. Supposing the loan is made at 10 Oclock, and parties separate and 5 minutes after that the creditor comes to the debtor and says "I want a promissory note" and the debtor executes a promissory note, then it can be said that the loan was independent of the promissory note. But if the loan is made at 10 Oclock, and exactly at ten Oclock the promissory note is taken, then it is said that it is a simultaneous transaction and therefore if you cannot sue on the promissory note because it is not properly stamped, then your suit must fail, as both formed part of the same transaction. I am unable to appreciate the distinction."

28. With utmost deference to the learned Judge, it may be stated that the proposition of law as laid down is not in our opinion correct. The learned Judge has omitted to enunciate the implications of the distinction of the illustration given by him. In fact it is not physically possible that the advance of the loan and the execution of the promissory note must be exactly simultaneous, because the two processes, i.e., the payment of the money and the execution of the document must succeed each other whatever the order be. They cannot both be clone exactly at the same hour, minute or second. The difference in time whether it be short or long is not the criterion. The real gist of the matter is that if it is intended that the advance of the loan and the execution of the promissory note which contains all the terms of the contract are part of the same transaction then if the pronote is inadmissible in evidence the suit must fail. If however the two are independent actions, no matter what the interval of time between the two is, they can be said to be two independent transactions and in such a case even though the promissory note is inadmissible in evidence, the creditor can fall back on the original consideration i.e., prove the loan by other oral evidence. There is a real difference and a distinction between the two matters.

29. After a careful consideration of all the authorities we can safely say that barring only a few extreme authorities the consensus of opinion is that if the loan and the execution of the pronote are part of the same transaction and all the terms agreed upon between the parties are reduced to the form of a promissory note, if the promissory note or for that matter a bill of exchange which is the basis of the suit is inadmissible in evidence, the suit must fail and the creditor cannot be permitted to give evidence apart from the terms of the promissory note. This is, as we have already indicated, based on the mandatory and clear provisions of Section 91 of the Evidence Act which lays down that :

"When the terms of a contract, or of a grant or of any other disposition of property, have been reduced to the form of a document, and in all cases in which any matter is required by law to be reduced to the form of a document, no evidence shall be given in proof of the terms of such contract, grant or other disposition of property, or of such matter, except the document itself, or secondary evidence of its contents in cases in which secondary evidence is admissible under the provisions hereinbefore contained......"

If the terms of any loan are reduced to writing in the shape of a promissory note or a bill of exchange and there are no other matters of the contract which have been left out of the document, Section 91 bars the production of the oral evidence except the promissory note itself, if that promissory note is not admissible in evidence, it would be defeating the provisions of this Section by trying to prove the claim by other oral evidence. Those authorities which lay down that the promissory note is only a conditional security lose sight of the provisions of this Section. The other authorities which have tried to develop a new point have the provisions of Section 91 of the Act before their mind and therefore have tried to bypass these provisions by introducing such theories as that of the pronote not containing all the terms of the contract or that of the pronote not being a final accord or discharge of the debt, so on and so forth. But we have no hesitation in holding, as has been held earlier in this order, that when the terms of the entire contract between the parties are reduced to the form of a promissory note and the advance of the loan and the execution of the promissory note are part of the same transaction, the provisions of Section 91 are a clear bar to any other evidence except the pronote and if the pronote is inadmissible in evidence the whole suit must fail.

30. Applying this test to the facts of this case it has been clearly admitted by the plaintiff and held by this order that the execution of the pronote and the receipt in question dated 6th May 58 and the advance of loan of 750/- to the petitioners by the plaintiff were part of the same transaction. It is nobodys case that there were some other terms of the contract except the promissory note. Hence in our opinion the plaintiff could not lead any other oral evidence and prove the debt by means of that evidence. It is true that the law as it is or as we interpret it may be very hard. In our opinion the feeling that this interpretation would lead to miscarriage of substantial justice has prevailed upon some courts to interpret the provisions of Section 35 of the Stamp Act and Section 91 of the Evidence Act liberally so as to avoid the mischief arising from a strict interpretation of these Sections. But as a court of law we have to apply the law, not to bypass it, may be the attempt to bypass is founded on very laudable intentions and a sense of not allowing technicalities to prevail in order to defeat substantial justice. But that is a matter for the legislature, not for courts. The legislature can by appropriate amendments lessen the rigour of these Sections.

31. We are therefore clearly of the opinion that the decree passed by the trial court cannot be maintained. The suit being based on ah inadmissible pronote could not be decreed and no other evidence could be permitted to prove the defendants debt. We, therefore, accept this revision petition, and dismiss the suit but in view of the circumstances and the conflict of opinion between different High Courts on the point, we leave the parties to bear their own costs throughout.

Ali, J. : I agree with the well reasoned judgment proposed by my learned brother Bhat J. and would like to add a few words of my own.

33. The question involved in the present case is as to whether or not a suit will be on proof of original consideration where the pronote evidencing the same is found to be inadmissible in evidence.

34. There has been a serious divergence of judicial opinion on this question and numerous authorities have been carefully analysed by my learned brother Bhat J. and it is not necessary for me to repeat them. Taking, however, the broad aspects of the question involved, it seems to me that there may be three classes of cases where such a question may come up for consideration.

(i) Cases where the plaintiff sues merely on the basis of a pronote pure and simple without alleging an independent transaction. In such cases, where the pronote is found to be inadmissible in evidence, there can be no difficulty in holding that the suit will have to be dismissed and the transaction of loan cannot be proved.

(ii) There may be cases where there is an independent transaction of loan and after a sufficient interval of the said transaction a pronote is executed either to guarantee the transaction entered into between the parties before or to evidence the transaction. In such cases the preponderance of authorities is that where the original transaction is independent of and separable from the pronote, the plaintiff can certainly be allowed to prove the transaction and succeed on proof of the same. In such cases, even if the pronote is inadmissible in evidence, a decree can be granted on the basis of the original transaction.

(iii) Then there may be cases where a transaction has been entered into between the parties and a pronote has been executed simultaneously. These are the cases which present serious difficulty and various High Courts in India have expressed divergent views as to whether or not in such cases the plaintiff can be allowed to fall back upon the basis of the original transaction, if the pronote is found to be inadmissible.

35. There are some authorities, as referred to in the judgment of my learned brother Bhat J. which take the view that even though the transaction of loan and the pronote be simultaneous, yet it is possible to separate the two and hold that the transaction of loan was independent of the pronote. With very great respect, to the learned Judges who have taken this view, I am at a loss to understand this process of reasoning. Whenever a transaction is concluded between the parries and simultaneously a pro-note is executed, the position is that the transaction merges into the pronote and the pronote becomes the basis of the transaction itself. In these circumstances, therefore, it will be difficult, if not impossible, to divorce the pronote from the original transaction. In fact when once a transaction merges into a pronote then the transaction before the execution of the pronote would be really in the nature of a pure negotiation or at any rate in the nature of an executory contract which passes into the domain of an executed contract on the execution of the pronote.

Suppose A asks B to give him an advance of certain sum of money, B agrees to advance the loan and insists that a pronote be executed. Accordingly, a pronote is executed. In such a case, it cannot be said that the desire of A to get loan from B and Bs proposal to accept the offer of A is a transaction which is independent of the pronote when the parties decide to execute a pronote after all. Indeed if the original transaction and the execution of the pronote are simultaneous and yet it is held that the transaction may still be independent of the pronote, it would amount to allowing a litigant to circumscribe the law and it would defeat the very object of Section 35 of the Stamp Act and Section 91 of the Evidence Act. Neither can the plaintiff be allowed in such cases to plead the original transaction only ignoring completely the pronote, for that would also allow a litigant to succeed on a transaction which really forms part of the pronote and which is specifically prohibited by Section 35 of the Stamp Act and Section 91 of the Evidence Act.

Furthermore, even where there is some interval between the transaction of loan and the execution of the pronote, the essential point that has to be considered is to analyse the recitals of the pronote. Where the recitals of the pronote make it absolutely clear that the transaction which took place between the parties earlier than the execution of the pronote has actually merged into the execution of the pronote, then the plaintiff cannot succeed if the pronote is inadmissible as being insufficiently stamped despite the fact that the transaction of loan may have taken place earlier than the execution of the pronote. On the other hand, the recitals of a pronote may show that its execution was intended merely as a proof of a finally concluded transaction between the parties and not the basis of the same. In such cases, it is manifest that even if the pronote is inadmissible, the plaintiff can succeed on proof of the original transaction. This seems to me to be the most logical view to be taken in such cases.

36. In the instant case, on a perusal of the contents of the pronote and the evidence led by the parties, there can be, no doubt, that the transaction of loan entered into between them had merged completely in the pronote executed by the defendant and the receipt granted by him. The plaintiff has been clever enough not to refer to the hand note in his pleadings, but as pointed out by my learned brother, such a deliberate omission to refer to the hand note, would not alter the nature of the transaction entered into between the parties. The pronote was after all produced in evidence and I fully agree with my brother that the transaction between the parties had merged into the pronote. Thus it cannot be said in this case, mat the transaction of loan was wholly independent of the pronote.

37. For these reasons, therefore, I agree with my brother Bhat, J. that the suit of the plaintiff be dismissed and the petition be allowed.