067-NLR-NLR-V-15-KRISHNAPPA-CHETTY-v.-CARPEN-CHETTY.pdf
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Present: Lascelles C.J. and Wood Benton J.KRISHNAPPA CHETTY v. CABPEN CHETTY.
93—D. 6 Kandy, 21,165.
Post-dated cheque—Not invalid—Stamp Ordinance, No. 22 of 1900, s. 64.
A cheque is not invalid by reason of its being post-dated.
An endorsee of a cheque, who knew at the time of the endorse-ment that the cheque was post-dated, may nevertheless maintainan action on the note.
A
PPEAL from a judgment of the District Judge of Kandy (F. R.Dias, Esq.). The facts are set out in the judgment.
if. A. Jayewardcne (with him Balasingham), for the defendant-appellant.—A cheque is a bill* of exchange (see section 73 of theBills of Exchange Act). The law imposes a penalty on any one whoissues a post-dated cheque (see section 64 of " The Stamp Ordinance,1909 ”). Where the law imposes a penalty the act is. illegal. SeePeris v. Fernando, 1 Melliss v. The Shirley Local Board, 2 Wells v.Higgins,3 Annamalai v. Perera* and Gye v. FallonThe cheque inthis case is post-dated and therefore illegal. It cannot be sued upon.The plaintiff knew when he took the cheque that it was apost-dated cheque.
Under the Stamp Ordinance of 1861 it was held that the holder ofa post-dated cheque who took it with knowledge that it was post-dated could not sue on the cheque. Chartered Mercantile Bank v.Silva & Co.* As the term “ cheque ” is included in the term “ bill ofexchange, ’* that judgment is applicable to section 64 of the presentOrdinance.
A post-dated cheque is not, really speaking, a cheque, but a bill ofexchange, as it is not payable oh demand; a cheque must be payableon demand. A post-dated cheque, being a bill of exchange payableon a certain day, should be stampedas a bill of exchange.
> (1905) 1 Bo!. 199.*(1902) 6 N. L. R. 108,at page 1U.
* (1885) 16 Q. B. D.451.*(1813) 4 Taunt. 881.
* (1913) 14 N. L. R.131.•Rant. (1863-68) 199.
1912.
( 244 )
1912.
Kriahnappa
Chetty v.OarpenChetty
The intention to defraud the revenue, which is necessary to>establish the offence under section 64, is inferred from the fact thatthe cheque is post-dated. The defrauding of the revenue is the-direct and inevitable consequence of the act of issuing a post-datedcheque, and the person who issues a post-dated cheque must bepresumed to have intended to defraud the revenue.
Samarawickreme (with him Cooray), for respondent.—Section 64 ofthe Stamp Ordinance does not refer to cheques. The word “cheque”has been purposely omitted. The term “ bill of exchange ” is used intwo senses in the Ordinance: the wider including notes and cheques,and the narrower mercantile usage. In section 64 it is used in thenarrower sense.
A cheque has not to be stamped as a bill of exchange because ithappens to be postponed; a document has to be stamped accordingto its character on the face of the instrument (Bull v. O’Sullivan1).Even if section 64 applied to cheques, the party may be liable tothe penalty prescribed, but the cheque would not be invalid. Themere fact that an act is penalized does not necessarily invalidatea. contract.
The Chartered Mercantile Bank v. Silva & Co. 4 is no authoritynow, as the section which was interpreted in that case is notidentical with the present section.
H. A. Jayewardene, in reply.—As. the cheque was not payable ondemand when it was drawn, it was not, strictly speaking, a cheque.The case in Ramanathan’s Reports is applicable, if the cheque is to betreated as a bill of exchange.
[Lascelles C.J.—Is not the English law applicable to this case?Under the Bills of Exchange Act a cheque is not invalid by reason ofits being post-dated.] The Bills of Exchange Act, though applicableto Ceylon, cannot over-ride our Stamp Ordinance. [Lascelles C.J.-—There is nothing in our Stamp. Ordinance inconsistent with theBills of Exchange Act. The Ordinance does not say that a post-dated cheque or bill is invalid.]
Gut. adv. vult.
■ June 11, 1912. Lascelles C.J.—
This appeal raises a question of law which is of some publicimportance, namely, whether, since the enactment of the StampOrdinance of 1909 an action can be maintained to recover moneyon a post-dated cheque. The defendant on July 15, 1911, issued toV. S. S. P. Suppramanian Chetty a cheque for Rs. 4,000. Thecheque was dated August 4, 1911, and was to be presented forpayment on that date. Suppramainian Chetty endorsed the chequeto the plaintiff, who duly presented the cheque at the Kandy branchof the National Bank of India. The cheque having been returnedH1871) L. R. 6 Q. B. 209.* Ram.. {1863-68) 193.
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from, the bank, on the ground that the endorsee’s name was illegible 1912.and the maker’s name was not initialled, by the ban^ shroff, the LASCBTXBgiplaintiff now sues to recover from the defendant the amount for C.J.which the cheque was given. The defendant, among other grounds Kriahnappa*of defence, pleaded that the cheque being post-dated to the knowledge ChOtyv.of the plaintiff was void and of no avail in law. The learnedDistrict Judge has given judgment for the plaintiff. On appeal^ theonly ground urged before us was that the learned District Judgewas wrong in his ruling that an action on a post-dated cheque wasmaintainable. The law of Ceylon prior to the enactment of “ TheStamp Ordinance, 1909, ” may be stated as follows:—By section 2of Ordinance No. 5 of 1852 the law to be administered in Ceylonin respect of all contracts and questions arising within the Islandupon or relating to bills of exchange, promissory notes, and chequeswas the same as would be administered in England in the likecase at the corresponding period, unless other provision was, or*should be, made by any Ordinance then in force in the Colony orthereafter to be enacted. Prior to the Stamp Act of 1870 thepost-dating of cheques payable on demand was prohibited byEnglish law, but this prohibition was removed by the Stamp Actof 1870, and cheques by the law of England are not now invalid byreason only that they are ante-dated [Bills of Exchange Act, 1882,section 13 (2)]. Turning to the statute law of Ceylon we find thatsection 18 of the Stamp Ordinance (No. 11) of 1861 imposed penaltieson all who issued post-dated cheques payable on demand not dulystamped as bills of exchange, and on all who knowingly receivedthem, and on bankers who cashed them. The application of thissection was discussed in Chartered Mercantile Bank v Silva & Co.,1where it was decided that the holder of a post-dated cheque, whotook it with knowledge that it was post-dated, .could not sue on thecheque. The Stamp Ordinance of 1890 by section 20 ‘ (5) re-enactedand amplified the substance of section 18 of the Ordinance of 1861.
It is thus clear that under the Stamp Ordinances which precededthe enactment of 4< The Stamp Ordinance, 1909 ”, an action was-not maintainable on a post-dated cheque payable on demand, if theholder took the cheque with knowledge that it was post-dated.
The question raised by this appeal is whether ” The StampOrdinance, 1909, has assimilated the law of Ceylon as regards the*validity of post-dated cheques on demand to the Jaw of England, orwhether it has perpetuated the provisions of the earlier StampOrdinances under which such cheques are invalid. The materialsection in ” The Stamp Ordinance, 1909, ” is section 64 (a)—
” Any person who with intent to defraud the Government ofduty, draws, makes, or issues any bill of exchange orpromissory note bearing a date subsequent to that onwhich such bill or note is actually drawn, or made …”
* Ram. (1863-68) 199.
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1912.
Xa8CB£LES
C.J.
JCriaknoppaChatty v.OarpenChatty
On this section four questions Were discussed, which may beformulated as follows, namely, (1) whether the affirmative proofof intent to defraud the Government must be proved; (2) whether,for the purpose of determining whether a cheque is sufficientlystamped, it is permissible to have regard to collateral evidence aswell as to the form and terms of the document itself; (3) whether,assuming that proof of an intention to defraud is unnecessary, itfollows from the fact that the making of the instruments namedin section 64 is subjected to a penalty that the instrument?themselves are invalid; and (4) whether the section has anyapplication to cheques which are not specially referred to in thesection.
With regard to the first question, in the Indian case of TiamenChetty v. Mahomed Glwuse1 a similar question came beforethe High Court, and it was there held, under section 67 of theIndian Stamp Act (corresponding to, and identical with, section 64of the Ceylon Ordinance), that the section became applicable onlywhen fraudulent intent was proved. This ruling, which is inaccordance with the natural construction of the section, woulddispose of the present appeal, for there is no proof, and no reasonto suspect, that the cheque now sued on was post-dated in order todefraud the Government. This post-dated cheque, like most otherpost-dated cheques, was given because the drawer was not infunds at the time.
This case is also an authority on the second of the questionswhich I have formulated. Following the English authorities ofBull v. O’Sullivan2 and Gatty v. Fry,3 the High Court heldthat in determining whether a document is sufficiently stampedfor the purpose of deciding upon its admissibility in evidence youmust look at the document itself as it stands, and not at any•collateral circumstances which may be proved in evidence. In ■other words, the test of admissibility is whether the instrumentappears, when tendered in evidence, to be sufficiently stamped.This principle is also fatal to the appeal, for the cheque under■consideration is in form and terms a cheque on demand, and bearsthe 5-cent stamp prescribed for such instruments.
The third question is academic, for my ruling on the two formerquestions are decisive of the appeal. But as the question involved is•one which repeatedly crops up in this Court, it may be well to statethe conclusion at which I have arrived. The general question in-volved is whether, when the Legislature imposes a penalty on personswho do a particular act, such act is necessary to be regarded asunlawful and of no legal effect. There are many English authoritieson the subject, but the rule of interpretation laid down by LordEsher, Master oi the Rolls, in Melliss v. The Shirley Local Board,*
‘ 11889) I. L. R. 16 Cal. 433.* (1877) L. R. 3 Ex. D. 865.
>(1871) L. R. 6 Q. B. 309.* (1885) 16 Q. B. D. 446.
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has, I believe, been generally accepted as a correct statement ofthe result of the cases on the point. ** I think, " said Lord Esher,“ that this rule of interpretation has been laid down that, although astatute contains no express words making void a contract which itprohibits, yet when it inflicts a penalty for the breach of the pro-hibition you must consider the whole Act as well as the particularenactment in question, and come to a decision, either from thecontext or the subject-matter, whether the penalty is imposed withintent merely to deter persons from entering into the contract, orfor the purposes of revenue, or whether it is intended that thecontract shall not be entered into so as to be valid at lawApplying this test, there can be but one answer to the question underconsideratidn. We find in “ The Stamp Ordinance, 1909,M severalinstances where penalties are imposed with the object of deterringpersons from doing the prohibited act, but obviously without theintention of branding the prohibited act as illegal. By section 67,for example, a notary who, in preparing an instrument, omits to setout the consideration is liable to a penalty. But it could not becontended that the effect of this section was to invalidate theinstrument. The same intention is obvious in sections 60, 61, and62, and fa most of the sections in chapter VI. 1 think it is quiteclear on the principle of construction laid down in Melliss v. TheShirley Local Board,,1 that section 64 does not necessarily invalidate.post-dated cheques.
The last question is whether section 64 applies at all to cheques.The learned District Judge states that it has been held thatcheques are not within the scope of the corresponding section 68 ofthe Indian Stamp Act. Possibly this statement is based on a noteto section 67 in Donoghf$ Indian Stamp Law. The authorities therecited do not seem to me to bear out the proposition; but be thisas it may, I think no exception can be taken to the soundness of thestatement. Section 64 of the Ceylon Act and section 68 of the-Indian Act refer only to bills of exchange and promissory notes.It is true that the definition of <4 bill of exchange ” in the .EnglishBills of Exchange Act, which definition is incorporated in theCeylon Ordinance, would include a cheque. But an examination*of the Ordinance as a whole removes all doubt on the question.Some sections—section 49 for example—are intended to apply to-all the three classes of instruments which fall within the definitionof “ bills of exchange, " namely, bills of exchange, promissory notes,,and cheques. In such cases all three instruments are specified.Other sections, such as 51 (1), apply only to bills of exchange andcheques. These instruments are specified, and the case of promissorynotes is dealt with in the following sub-section. As a question ofconstruction, I am Clearly of opinion that section 64 applies onlyto the instruments specified in the section, and that cheques are not*
i (1885) 16 Q. B; D. 446.
1912.
liASCBEXiBff
C.J.
Kriehnappw
Chetty v.CarpetiChetty
1912.
UA80EU.B9
C.J.
KriahnappaChetty v.Car penChetty
( 248 )
within the scope of the section. The language of the Ordinance inthis respect is quite consistent. The term “ bills of exchange ” isin. some cases used in its generic sense, but where cheques andpromissory notes, or either of these instruments, are particularized,the intention is clear that the term “ bill of exchange ” is not usedin its generic sense, but is intended to denote a bill of exchangein the ordinary acceptation of the term.
The result is that the appeal fails on all of the four groundsraised in the argument. I think there can be no doubt but thatthe effect of “ The Stamp Ordinance, 1909 ”, has been to assimilatethe law of Ceylon as regards post-dated cheques to the law ofEngland. The appeal fails, and is dismissed with costs.
Wood Renton J.—
The plaintiff-respondent sued the defendant-appellant in thisaction for the recovery of a sum of Rs. 4,000 on a cheque for thatamount by the defendant-appellant in favour of one SuppramanianChetty, who endorsed it in his favour. The appellant denied theendorsement, alleged want of consideration, and further pleadedthat the action was not maintainable, inasmuch as the cheque inquestion was post-dated. The learned District Judge decided allthese issues in favour of the respondent. The only one that hasbeen pressed upon us in appeal is that the action canot be main-tained because the cheque sued on was post-dated. The factsthat it was so post-dated, and that the respondent at the timeof its endorsement knew it to be so. are not denied by therespondent.
In arguing the point of law just stated on the appellant’sbehalf, Mr. H. A. Jayewardene relied on section 64 of the StampOrdinance of 1909 (No. 22 of 1909), which provides that anyperson who—
“ (a) With intent to defraud the Government of duty, draws,makes, or issues any bill of exchange or promissory notebearing a date subsequent to that on which such bill ornote is actually drawn or made; or‘ ‘ (b) Knowing that such bill or • note has been so post-dated,endorses, transfers, presents for acceptance or payment,or accepts, pays or receives payment of such bill ornote, or in any manner negotiates the same . . .shall be punishable with a fine which may extend toone thousand rupees ”.
Mr. H. A. Jayewardene contended that the effect of this provisionwas not merely to penalize, but to prohibit post-dating of cheques;and consequently that a cheque so post-dated was illegal, and
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could not be sued upon in a court of law. To tliis argument, itseems to me that there are several answers. In the first place, Ido not think that section 64 of Ordinance No. 22 of 1909 appliesto cheques at all. Cheques are not referred to in the section, anda very cursory examination of the provisions of the Ordinance issufficient to show that, while a cheque is itself a form of “ billof exchange ” frequently included in the latter term, there areprovisions which are restricted to bills of exchange, properly socalled, and distinguished both from cheques and from promissorynotes. Section 68, for example, which deals with bills of exchange“ drawn in sets according to the custom of merchants ", is clearlyan enactment of that character. Mr. H. A. Jhvewardens arguedin connection with this branch of his argument that a post-dated,cheque is really a bill of exchange, and requires to be stamped assuch. The authorities, however, do not in my opinion supportthat contention. See Bull v. O’Sullivan,1 * Gatty v. Fry,1 RamenChatty v. Mahomed Ghouse.3
But even if section 64 of Ordinance No. 22 of 1909 includedcheques, the offence which- it creates can only be established byaffirmative proof that the cheque was post-dated “ with intent to-defraud In the present case any such intent is negatived by theevidence and by the findings of the District Judge, and I do notthink that ft would be legitimate for a Court to infer fraudulentintention from the mere fact that the person who post-dates a chequemay be assumed to know that bv so doing he is depriving theGovernment of revenue.
The last answer to Mr. H. A. Jayewardene’s argument whichsuggests itself to me is that, even if section 64 applied to cheques,and proof of express intent to defraud were not necessary, the-section merely penalizes, and does not render illegal, the post-datingof cheques. The law applicable to this question. wa3 laid down bythe Court of Appeal in England in the case of Melliss v. The ShirleyLocal Board4 as follows: —
Although a statutecontains noexpress wordsmakingvoid a
contract which it prohibits, yet when it inflicts a penalty for the breach.of the prohibition yonmust considerthewhole Actaswellas the
particular enactment inquestion, andcometo a decision,either from-
the context or the subject-matter, whether the penalty is imposedwith intent merely to(deter personsfromenteringintothecontract-,
or for the purposes of revenue, or whether it is. intended that thecontract shall not be entered into so as to t>e valid in law.
It is clear from this passage that the question with which we arehere- concerned is to be answered according to the circumstances ofeach particular case, and that, even where a contract is expressly
i (1871) L. R. 6 Q. B. 209.3 (1889) 1. L. R. 16 Cal. 432.
« (1877) 2 Ex. D. 265.* (1885) 16 Q. B. D. 451.
1912.
WoodRenton S.
KrishnappaChatty v.CarpmChatty
( 250 )
1912.
WoodBitnoN J.
JCrishnappaChetty v.OarpenChetty
prohibited, the' imposition of a penalty does not necessarily involvethe consequence that the contact is struck with such illegalitythat it cannot form a good foundation for an action.
A fortiori, the imposition of a penalty will not necessarily stampa contract with illegality, where as here, the Legislature has notprohibited the act which it has penalized. It must .be rememberedthat t)ie English statute law as to bills of exchange is Jn force inCeylon, and that under that law a cheque is not invalid by reasononly of the fact that it has been post-dated. In view of thesecircumstances, I am unable to hold that the effect of section 64 ofOrdinance No. 22 of 1909 is to prevent a good action from beingbrought on a post-dated cheque.
The decision of Creasy C.J. and Stewart J. in Chartered MercantileBank v. Silva <6 Co.,1 “ that a man who receives a post-dated cheque.with knowledge that it is post-dated shall not be allowed to sue onit,” turned, I think, on the fact that that was then the law inEngland. Section 18 of " The Stamp Ordinance, 1861 ” (No. 11 of1861), was, it is true, substantially identical with section 64 ofOrdinance No. 22 of 1909. But Creasy. C.J. and Stewart J. would,in my opinion, have construed the former section differently if thepresent English law as to post-dated cheques had been in force atthe time of their decision.
I would dismiss the appeal with costs.
Appeal dismissed.
♦
1 (2886) Ram. (1863-68) 199.