Abeyesekere v. Jayatileke.
Present: Akbar and Koch JJT.
ABEYESEKERE v. JAYATILEKE45—D. C. Negombo, 8,093.
Promissory note—Insufficiently stamped—Right to recover the money lent—Lender not a professional money lender—Ordinance No. 2 of 1918,.ss. 8 and 10.
The failure to stamp duly a promissory note taken as security for aloan does not affect the right of the lender to recover the money duewhere the lender is not a person to whom the provisions of the Money
Lending Ordinance apply.
1 1 N. L. R. 217.
2 35 N. L. R. 352.
KOCH J.—Abeyesekere v. Jayatileke.
^ PPEAL from a judgment of the District Judge of Negombo.
S. Subramaniam, for defendant, appellant.'
L. A. Rajapakse, for plaintiff, respondent.
Cur. adv. vult.
June 17, 1936. Koch J.—
This is an appeal from a holding of the original Court that, on thealternative causes of action to recover two sums of Rs. 500 each that hadbeen lent on January 20 and February 19, 1927, respectively, with accruedinterest, the plaintiff is entitled to recover, although the said loanswere sought to be secured by two promissory-notes bearing these datesand for these sums but which were not duly stamped.
The learned District Judge has not given any reasons for so holding butit is clear to us what those reasons should be.
There can be little doubt that under section 36 of the Stamp Ordinance,No. 22 of 1909, these promissory notes cannot be admitted in evidence forany purpose whatsoever as they have not been duly stamped, nor can theirregularity be cured by the payment of a penalty. The plaintiff inconsequence has to depend upon other proof in support of his claim.The plaintiff is not a money lender and the provisions of Ordinance No. 2of 1918 do not apply to him.
Mr. Subramaniam argued to us that as the result of the decision inSockalingam Chettiar v. Ramanayake a Court is prevented from regardingthese transactions even as ordinary loans as the promissory notes whichwere taken as securities for them not having been duly stamped, werereceived in contravention of the terms of the Stamp Ordinance and therebysubjected the parties responsible for this act to a criminal prosecution foran offence against the Stamp law.
I fear very much that the judgments in Sockalingam Chettiar v. Rama-nayake (supra) have been sometimes misunderstood and a wider appli-cation has been sought to be given to them than was ever intended. Thatdecision was purely in regard to a money lending transaction by anadmitted money lender who thereby brought himself under the provisionsof Ordinance No. 2 of 1918. Section 10 of that Ordinance insists on amoney lender conforming to certain requirements when he lends outmoney, and section 8 (1) requires him to record such loans in a certainmanner. If he takes promissory notes for these loans he has to obey thedirections in both these sections, but if he makes loans unaccompaniedby such securities he has at least to see that the terms of the latter sectionhave not been contravened. If he acts in breach of these requirementshe commits a criminal offence, and this being so, this Court held that notonly cannot the promissory notes be looked at but also that the trans-actions that have been recorded by such notes cannot equally be regardedBy acting in the way he did, the money lender committed an illegal actwhich is inseparable from the transaction on which he sued. The trans-action being illegal, it should be regarded as unclean in the eye of the lawand no Court should therefore assist a transgressor to recover on such atransaction, even if there be an admission by the debtor of either thewhole or a part of the debt.
1 35 N. L. R. 33.
AKBAR J.—Abeyesekere v. Jayatileke.
In the case before us the plaintiff, who is admittedly not a money lender,is seeking to recover two sums he lent to the defendant. It is true he hastaken as security two promissory notes insufficiently stamped. Fordoing so he can be prosecuted for a breach of the revenue law and he isalso prevented from relying on the notes as evidence of the transactions,but there is nothing illegal in the transaction of the loan itself. He neednot have taken any .notes at all nor did the law compel him to grant theloan in such manner that a failure on his part to do so could be visited bya prosecution ; the circumstance that he did take faulty promissory notesmay render him liable to punishment, but such failure cannot affect theactual validity of the loan transaction. Taking a promissory note forgoods sold and delivered is, as we know, a common practice in trade.Can it be seriously argued that if the promissory note is bad for in-sufficiency of stamp duty, the sale is also bad and the considerationunderlying it cannot be recovered ? There is nothing in the StampOrdinance to even remotely indicate that the actual loan or the sale inthe case I have instanced is in any way tainted by the default of thelender or the seller in taking an unstamped or insufficiently stampedpromissory note as security. I may state that I am at a loss to under-stand why Sockalingam Chettiar v, Ramanayake (supra) should have beenrelied on by Mr. Subramaniam or his argument. To my mind thisdecision far from assisting is against him. In succinctly setting out theeffect of the various relevant rulings to the point in that case I said atpage 44, under No. (3) : —
“ If the penalty is imposed for doing or not doing an act which shouldnot be done or done at the time the contract is entered into, it is neces-sary to consider whether the penalty has been imposed for the purposeof the protection of the revenue or for the protection of the public. Iffor the former purpose, the contract may be enforced ; if for the latter,the contract is unenforceable ”.
The penalty imposed under the Stamp Ordinance is for the protectionof the revenue, while the penalty imposed under the Money LendingOrdinance is for the protection of the public. It follows therefore fromthis decision that the .contract or loans as arises in the case before us canbe enforced.
The appeal must therefore be dismissed with costs.
I agree with the judgment of my brother. As I read section58 of the Stamp Ordinance, 1909, it is not the contract which ispenalized but the act of a person drawing, issuing, endorsing, transferringor signing, &c., an improperly stamped bill of exchange, cheque orpromissory note.
In the case before me the loan was admitted and I cannot see how theissue of the unstamped promissory notes can affect the contract to repaythe money lent. I agree with the interpretation placed by my brotheron Sockalingam Chettiar v. Ramanayake In that case as explained byDalton A.C.J. although the contract on the bond was not illegal, yet in
1 35 N. L. S. 33.
Aron v. Senanayake.
order to prove what was due on the bond, each transaction in respect" ofthe unstamped notes had to be proved and this was the only kind of proofrecognized by the bond. To take an extreme example, suppose goodswere bought by A on credit from B and within six months after the saleA issued an improperly stamped promissory note as security for themoney due on the goods sold. Can it be contended that the issue of thispromissory note affected the contract of sale made six months prior tothe issue ? The following cases appear to be in point: Pramatha NathSandal and others v. Dwarka Nath Dey *; Yarlagada Veera Ragavayya v.Gorantla Ramyya' ; and 1 East, page 58 and note (a).
The appeal will, therefore, be dismissed with costs.
ABEYESEKERE v. JAYATILEKE