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Present: Dalton and Lyall Grant JJ.
RAMEN CHETTY v,. RENGANATHAN PILLAI.
330—D. C. Colombo, 12,931.
Money Lending Ordinance—Pro-note' as security for future loans—Falsestatement as to capital sum borrowed—Right to relief—Inadvertence—Ordinance No. 2 of 1918, ss. 2, 10, 13.
A promissory note, given as security for future loans, whichcontains a false statement in regard to the capital sum actuallyborrowed, is not enforceable.
Where such a false statement was the result of a deliberate actand was not due to inadvertence, the Court is not empowered togrant relief under section 10 (2) of the Money Ijending Ordinance.
Wijcsinghe t>. Don Gmgoris 2 over-ruled.
Hp HE plaintiff sued the defendants jointly and severally to recoverthe sum of Bs. 11,080 alleged to be balance due to him ona promissory note for Rs. 100,000 made by them. The defendantspleaded that no money was paid to them on the note, which wasgiven to the plaintiff as security for future advances. They alsopleaded that under section 13 of the Money Lending Ordinance5 26 L. J. Q. B. 310.2 27 N. L. R. 342.
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1927. the note was “ fictitious,” and that- the action could not be main-tained. The learned District Judge held that the amount statedvht&yv. as due was fictitious and that the note had not been filled inacc01*cjallce with the requirements of section 10. He further heldthat this was a case in which the Court should give relief undersection 10 (2) and entered judgment in favour of the plaintiff forthe balance claimed, condemning him to pay the defendants' costs.
H. H. Jjaitliolomeusz (with Garvin), for defendants, appellant.
Hay ley (with Navuratnam), for plaintiff, respondent.
February 1, 1927. Dalton-J.—
The plaintiff in this .action sued the defendants jointly andseverally to recover the sum of Bs. 11,080 and interest alleged tobe the balance still due to him on a promissory note for *Rs. 100,000dated January 19, 1922, and made by them.
The note sued on. marked A, is in the following form: —
Capital biim borrowed:Bs. 100,000.
charges deducted or paidin advance: NilRate of interestper
centum per annum?J5 por cenl.
Colombo, J anuary 19, 1922.
On demand we the undersigned jointly andseverally promise to pay $. R. M. M.* A.Raman Chetty or order the sum of BupeesOne hundred thousand .only, currency forvalue received, with interest thereon at therate of fifteen per centum per annum from thedate hereof.
• Signed in Tamil.
Signed in Tamil.
The defendants did not deny the making of the note, but theypleaded that no money was paid to them on the note, it beingdelivered to the plaintiff as security for further advances. Theyfurther denied that any sum was due by them on the note. Theyalso pleaded that under section 13 of the Money Lending Ordinancethe note was fictitious and the action could not be maintained,whilst the provisions /of section 10 had not been complied with andthe note was not enforceable.
The issues proposed to and accepted by the r.vial Judge were asfollows: —
Was the note (A) delivered by defendants to plaintiff as
security for future transactions?
Was the amount stated as due on the note (A) fictitious,
and does the note contravene the provisions of section 13of the Money Lending Ordinance?
Has the note been filled up in accordance with the require-
ments of section 10 of the Money Lending Ordinance?
If not, can plaintiff maintain this action?
( 341 .)
No issue was raised as to the amount of the balance due on the 1*27.note, assuming that plaintiff could maintain his action. Plaintiff Damon J.
did seek to give evidence on that point, but objection thereto was
taken on behalf of the defendant, the objection being upheld by
the trial Judge. He admitted the evidence in.so far as it went to RengmaAan
elucidate the first issue, as to whether the transaction was one to
secure future advances, but for no other purpose.
With reference to the issues framed the tried Judge has foundthat the note was delivered by the defendants to the plaintiff assecurity for future transactions. He also held that the amountstated as due was fictitious contravening the provisions of section18, and further that the note had not been filled up in accordance'with the requirements of section 10. He adds, however, that hewas prepared to hold under section 10 (2) that this was a case inwhich the Court should give relief on conditions. He accordinglyheld that plaintiff was entitled to the balance claimed, but thecondition of obtaining relief was that he be condemned to pay thedefendants’ costs.
Tlis defendants appeal from this decision on the following groundswhich were argued before us:—
The answer to the first issue being in favour of the defend-ants, they were entitled to judgment.
'2) The note was not enforceable, having regard to the findingson the issues, and there was no proof of any inadvertenceupon which relief could be given.
(8) There is no evidence to show how the sum awarded is madeup or that any sum is due at all.
It is quite clear from the plaint that plaintiff sought to recoverthe sum of Es. 11,080 as balance of principal and interest on thenote (A), although the plaint does not say that the sum ofEs. 100,000 was actually lent on the note. The defendants in theiranswer are in my opinion equally indefinite. They deny that anymoney was paid on the note, but that it was delivered to'the plaintiffto secure future advances. They do not deny that Es. 11.080 isdue to plaintiff in respect of those advances, but state that nothing isdue on the note. They plead also the provisions of the MoneyLending Ordinance to which I have referred.
Mr. Burtliolomeusz strenuously argued for the appellants thatthe plaintiff was unable to succeed in his claim if he failed upon the' iirst issue. That issue contained the main contest between theparties, he urged, and it being shown that tbs note was madeto secure future advances, plaintiff could not succeed in his claim.
The action was instituted, it is to be noted, under the provisionsof Chapter L1II of the Code, as a summary action on a liquid claimplaintiff suing on the note as a promissory note. It does not appear
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1927.that defendantsobtained any leaveto defend, out they have filed
DaZtox.j.answer withoutany objection by the plaintiff. They also applied
– to the Court for particulars, and for an account showing the datesan<* amoun^s °f the payments alleged to have been made by themRenganathfm tp the plaintiff. This application was refused as it was held thatPilUn. ftny payment made by them would be particularly within theirknowledge. The defendants appealed from that order, but thisCourt pointed out that all they had to do, so far as their applicationwas concerned, was to plead that they had either paid or accountedto the plaintiff for more than he had given them credit in the plaint.The proceedingstherefore, after theinstitution of the action, have
continued as inan ordinary action,but still based upon the note.
As the case came before the Court I am unable to agree with theargument that, because it was found that the note was one tosecure future advances, therefore plaintiff’s claim must he dismissed.As framed it is impossible to separate the first issue from the subse-quent issues, as it seems to have been framed having in view thedefence raised under the Money Lending Ordinance, and it was notcontemplated that an auswer to that issue alone unfavourable tothe plaintiff would result in the dismissal of his claim.
The question raised in the second ground of appeal set out above*is, however, in my opinion a much more difficult one. Having regardto the findings, is the note enforceable? The effect of sections 10and 13 have recently been considered in Wijcysinghe v. Don Giri-goris.1 There the plaintiff sued the defendant as maker of apromissory note to recover the sum of Us. 220. The note bore onthe margin the particulars required by section 10, but those parti-culars were false, inasmuch as it was found that the sum actuallyborrowed was only Rs. 80. The Commissioner of Requests thereforeheld that the note was not enforceable, hut this decision was reversedon appeal. In his judgment Jayewardene J. goes very fully intothe matter in respect of both sections 13 and 10, and I am inclinedto agree with liis conc lusion that under section 13 the promissorynote is not void. As lie points out, however, the question whetherthe note was not enforceable under section 10 5s a more difficultone, and I entirely agree.
Section 10 provides that every promissory note given as securityfor the loan of money shall have a separate and distinct statement-of—
The capital sum actually borrowed;
The amount of any sum deducted or paid at or about the
time of the loan as interest, premium, or charges paid inadvance; and
The rate of interest per centum per annum payable in respect
of such loan;
1 *7 A'. L. It 342.
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and t>he sect:on goes on to provide that any promissory note not 1927.
complying with the provisions of this section shall not be enforceable x)AMOir j.
provided that relief can be given in the case set out.
Note “ A ” complies in form with all these requirements, but in RengaZrtianfact when it was made no capital sum was actually borrowed, nor PUlaiwas any value received as stated therein. It was intended to besecurity for loans which might in future be made to the makersup to the sum of Bs. 100,000.
Jayewardene A. J. holds that a false statement under head (b) or
does not make the note unenforceable, because, section 14 makesa lender who fails to give the particulars under these heads guiltyof the offence created by section 13, which latter section does notinvalidate the note. He further points out that the making of afalse statement under head (a) is howhere penalized, and that theword “ actually ” in the section is omitted from the margin of theschedule. I regret I am unable to agree with the conclusion arrivedat. It seems to me to give the material parts of section 10 nomeaning, and in effect to be contrary to the, as it appears to me,clearly expressed intention of the legislature. It seems to beinconceivable that all the legislature required was an outwardcompliance with the form of note set out in the schedule withoutany reference to the actual and true facts of the transaction.
I quite appreciate the difficulty arising from . section 2. Thissection is practically the same as section 1 of the Money Lender'sAct (63 & 64 Viet. c. 51) with the addition of sub-heads (b) anci (c).
The section provides, under sub-head (c), that, in cases where theamount stated in the note as due was to the knowledge of thelender fictitious, the Court might re-open the transaction. It doesnot treat such notes as unenforceable. Is that inconsistent withthe interpretation that I would put upon the words of section 10?
I am unable to say that it is. Section 10 does provide for relieffrom its drastic provisions in case of a default due to inadvertenceand not to any intention to evade the provisions of the section.
LYJuy not then section 2 have in contemplation the re-opening oftransactions in the case of loans in which relief was given by theCourt under section 10, and in which, apart from the giving of therelief, tlie notes would otherwise not be enforceable?
In reply to the argument based upon the unenforceability of thenote, owing to the provisions of section 10, Mr. Hayley answersthat the note is :n fact no note at all, and so does not fall under thesection. There was no loan, and therefore it was impossible tocomplv with the provisions of heads (a), (b) or (c). If so, how doeshe propose to maintain his action? Plaintiff instituted his actonup in the basis that the note was a promissory note for the sum ofRs. 100,000 received by the defendants. The terms of the note
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HamenQhetty v.Ren'ganathw iPtUai
itself are clear, and it closely follows the forms set out in the schedule.If the argument now put forward on behalf. of the plaintiff beaccepted it can only result in the dismissal of his claims.
I have therefore come to the conclusion that the note is notenforceable. The question remains whether this is a case in whichthe Court should give relief. The trial J udge states that had itbeen necessary (it was not necessaiy as he followed Wijcysinghe v.Girigoris (supra) ) he would, have been prepared to give relief to theplaintiff, but .condemning him to pay the defendants’ costs. Thesection provides that relief fnay be given in any case in which theCourt is satisfied the default is due to inadvertence and not to anyintention to evade the provisions of section 10. Inadvertence isstated to be the effect of inattention, an oversight, mistake, orfault which proceeds from negligence of thought. In hi re Pieris 1Smith L.J. held that* as used in the Bankruptcy rules, the word,meant the opposite of deliberate election, and-that the word pointed,to forgetfulness or .accident. °There is no suggestion here of anyneglect of thought, forgetfulness, or accident in connection with themaking of this note. It was the result of a deliberate act, so faras one can judge, wit|i full knowledge that, on .the face of it, it didnot correctly represent the actual transaction entered into by theparties. It has not in my opinion been shown that it is a case inwhich the Court was empowered to grant relief.
A further question lias been raised that the sum awarded by thejudgment includes compound interest and so cannot stand. Thatcompound interest is included and would appear to be correct. Inview,' however, of. my opinion that the appellant must succeed on'the question of the enforceability of the note it is not necessary todeal with it.
The claim of the plaintiff should have been dismissed in the lowerCourt with costs. This appeal is allowed with costs..
Lyall Grant J.—
This is an action on a promissory ilote. The plaint set out thaton the note the defendants jointly and severally promised to payto the plaintiff or order on demand the sum of*Rs. 100,000 withinterest thereon at the rate of 15 ppr cent, per annum from the dateof the said note. The plaint continues—“ Giving .the defendantscredit for various amounts paid from to time on account, thereis now justly and truly due and owing to the plaintiff from thedefendants jointly and severally on the said promissory note thesum of Rs. 11,080, being balance principal and interest/'
The prayer of the plaint was for judgment against the defendantsjointly and severally for the said sun of Rs. .11.060, togetherwith interest on the sum of Rs.. 7,500 at .the rate of 15 per cent, perannum from the date of the plaint to the date of decree, &c.
1(im)lQ.B. atp. 631.
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The defendants pleaded in answer that no money was pad by the 1927.plaintiff to the defendants on the note, but that the said rate was T/v.4T~tdelivered to the plaintiff as a security for future transactions. They Gbaot J.denied that any sum was due by them to the plaintiff on the note. BatmenIn further answer they pleaded that the plaintiff could not maintain Ohetty v.the action on the note, as the amount stated there as due was tothe knowledge of the plaintiff fictitious, and that the documentcontravened the provisions of section 13 of the Money LendingOrdinance, No. 2 of 1918. They further pleaded that the note hadnot been filled up in accordance with the requirements of section 10of the above-mentioned Ordinance and that therefore the note wasnot enforceable.
The proceedings were in the form of summary procedure on aliquid claim under Chapter LITI. of the Civil Procedure Code. Underthis procedure the defendant is not allowed to appear or to defendthe action unless he obtains leave from the Court.
There is no record in this case of any definite leave having beengiven, but ihere is a journal entry showing that the defendantsmoved for time to file their answers, that the plaintiff consentedand that the application was allowed.
When the case came up for trial, the following issues wereframed:—
Was tile note (A) delivered by the defendants to the plaintiffas security for future transactions ?
I'2 Was the amount stated as due on the note (A) fictitious, anddoes the note contravene the provisions of section 13 ofthe Money Lending Ordinance?
(8) Has the note been filled up in accordance with the require:ments of section 10 of the Money Lending Ordinance?
14) If not. can. the plaintiff maintain this action? .
The first three issues were answered in favour of the defendants,but the fourth issue was answered in favour of the plaintiff. Judg-ment was entered for the plaintiff as prayed for except that plaintiffwas condemned to pay defendant's costs.
The learned District Judge held that the note was obnoxious tosection 10 of the Money Lending Ordinance as having been givenas security for the loan of money and also held that in the marginof the note the wrong sum was entered as the amount borrowed.
The amount entered was Es. 100,000 and the District Judge heldthat the proper amount- to have been entered was nil.
After so finding the District Judge said that he was prepared tohold under the provisions of section 10 (2) that this was. a case inwhich the Court might- give relief on such terms as it deemed fit,and that he was prepared to give judgment for the balance dueclaimed, but to give costs to the defendants.
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1987* In so deciding he followed the case of Wijeyemghe v. Don Qirigorittrlvitt.(supra). In that case itwas held that a promissory note inwhich
Gbaot J.thesum borrowed was wrongly stated is not void, that? anaction
jRamencanhe brought on suchnote, and that in such a case theCourt
Ohetty v.haspower under section2, sub-sections (1) and (2), of theMoney
itenoea^/Mui.Ordinance to ascertain what sum was actually borrowed
and is due from the debtor' to the creditor.
That was a decision by a single judge, and if it was correctlydecided, the appeal must be dismissed.
Section 10 of the Money Lending Ordinance requires that in everypromissory note given as security for the loan of money, there shallbe separately and. distinctly set forth upon the document inter alia(a) the capital sum actually borrowed, and (c)/ the rate of interest*per centum per annum payable in respect of such loan.
Sub-section (2) provides that any promissory note not complyingwith the provisions of this section shall not be enforceable, providedthat in any case in which the court shall be satisfied that the defaultwas due to inadvertence and not to any intention to evade theprovisions of the section, it may give relief against the effect of this-sub-section on such terms as it may deem fit.
Sub-section (3) preserves the negotiability of promissory note*in which particulars are set forth. Sub-section (4)( provides that apromissoiy note setting forth the said particulars substantially inthe form given in the schedule to the Ordinance shall be deemed tobe in compliance with the section.
Section 11 preserves the rights of bona fide holders for value whohave not had any notice of any matter affecting the enforceabilityof such note.
Section 13 makes it an offence for a person to take as security fora loan a promissory note in which the amount stated as due is tothe knowledge of the lender fictitious.
The question arises whether the provisions of section 10 are suffi-ciently complied with where a ialse entry is made in the note as tothe capital sum actually borrowed. Personally I am quite unableto see how an entry setting forth a. sum of Us. 100,000 as the amountactually borrowed, when in fact the sum borrowed was in7, can hesaid to set forth the capital sum actually borrowed.
It must always be kept in mind that a promissory note is anegotiable instrument, and careful provision to preserve its negoti-ability is made in the Ordinance.
A bona- fide holder for value without- notice of a note' of thisdescription would presumably be entitled to recover by summaryprocedure from the borrower the full amount mentioned on the notewith interest thereon at the rate set . out. The section only makesa note of this nature unenforceable as against the- lender and holderswith notice. It seems to me quite clear that the intention of the
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Legislature in enacting section 10 was to prevent a lender suingupon a note where the required particulars were falsely set out.Where it otherwise it would be easy for an unscrupulous person toavoid the effect of the section.
Belief is provided in eases of bona fide error. The learned District tJudge says he was prepared to hold that in the present case if therewas a default, it was due to an inadvertence. There is, however,no evidence to support such a finding.
Jayewardene A.J. in Wijeysinghc v. Don Girigoiis (supra) con-sidered that the terms of sub-section (4) affected the requirements ofsub-section (1) (a) and made it unnecessary for-the lender to state■correctly the amount actually borrowed.
I must, however, say that I cannot read sub-section (4) in thatsense. The sub-section merely provides for a form contained in aschedule in which the particulars have to be set forth.
The word “ substantially ” in sub-section (4) to my mind merelymeans that the exact form prescribed in the schedule need notnecessarily be Hollowed.
I do not think it is necessary to consider the effect of sections 13and 14 in connection with this case except perhaps in so far as thefact that section 13 makes it an offence to misstate the amount dueon the note, may tend further to show that the intention of theLegislature in section 10 was that the true amount should be stated,and consequently that a note in which the amount stated as dueis to the knowledge of the lender fictitious, should not be enforceableby him. The plaintiff may .or may not have a good claim for thedebt which he alleges to be due, but he is not entitled, in myopinion, to seek his remedy by the summary procedure reserved forthe enforcement of liquid claims.
It is true that under section 2 of the Money Lending Ordinanceit is open to the Court to re-open the transaction and take an account,&e. The section does not lay down any procedure which the Courtis to follow in so aetiug nor does it impose any obligation on theCourt to adopt this course.
The true issues between the plaintiff and defendant are: —
What money has defendant received from plaintiff and how
much of it remains owing?
What interest is payable on money so received?
These issues seem to me to necessitate completely new pleadingsas the present plaint and answers give no clue as to the true positionof the parties. .
I agree that the appeal should be allowed and that the present ■action should be dismissed with costs.
RAMEN CHETTY v. RENGANATHAN PILLAI