A money-recovery suit involving property transferred under the agreement requires a determination of maintainability after evidence.

In brief

The question

1. Whether the respondent’s suit for recovery of ₹2,76,00,000 was maintainable in light of Ext. 2 and the alleged transfer of property in lieu of the money.

The court held

The Court allowed the appeal, set aside the trial court’s judgment and decree, and remanded the case for the trial court to frame an issue on whether the suit was maintainable in law and on the facts, allow the parties to adduce evidence, and deliver a fresh judgment on all issues.

It also directed

The appeal and connected interlocutory application were disposed of accordingly.

01Facts

The respondent claimed that he had paid the appellant ₹2,76,00,000, which the appellant agreed in a written agreement dated 4 February 2004 (Ext. 2) to repay by December 2006.

pp. 3–4

The respondent sued for recovery. The appellant disputed the claim and argued that Ext. 2 recorded a transfer of property in lieu of the amount.

pp. 3–4

The trial court decreed recovery of ₹2,76,00,000 with interest at 15% per annum from 4 February 2004.

pp. 3–4

The appellant appealed, contending, among other things, that the document was a mortgage and that a money-recovery suit was not maintainable.

pp. 3–4

02Issues

i.1. Whether the respondent’s suit for recovery of ₹2,76,00,000 was maintainable in light of Ext. 2 and the alleged transfer of property in lieu of the money.

pp. 4–5

ii.2. Whether the case should be remanded because the trial court had not framed an issue on maintainability and the parties had not had an opportunity to adduce evidence on it.

p. 5

03Law Applied

Section 4 of the Negotiable Instruments Act defines a promissory note as a written instrument containing an unconditional undertaking, signed by its maker, to pay a certain sum of money to a specified person or their order, or to the bearer.

p. 4

The Court stated that an unconditional undertaking to pay is necessary for an instrument to qualify as a promissory note; Ext. 2 was prima facie not such a note because it indicated that property had been handed over in lieu of the money.

p. 4

The appeal was brought under Section 96 read with Order XLI Rule 1 of the Code of Civil Procedure.

p. 3

Provisions in the judgment · 2 · Linked ones open on LawLens

Code of Civil Procedure, 1908 Section 96

Negotiable Instruments Act, 1881 Section 4

04Reasoning

The trial court had treated the money-repayment portion of Ext. 2 as sufficient to sustain the suit, regarding its property-related terms as irrelevant to the claim for money.

p. 4

The appellate court considered that approach in light of the appellant’s contention that the property was transferred in lieu of the amount claimed.

p. 4

Because Ext. 2 was prima facie not a promissory note and the consequences of the alleged property transfer had not been addressed through a framed maintainability issue, the Court considered that both parties should have an opportunity to present evidence on that question before the trial court decided the claim.

pp. 4–5