STATE BANK OF INDIA Vs. PREMCO SAW MILL
LAWS(GJH)-1983-7-4
HIGH COURT OF GUJARAT
Decided on July 22,1983

STATE BANK OF INDIA Appellant
VERSUS
PREMCO SAW MILL Respondents

JUDGEMENT

J.P.DESAI, N.H.BHATT - (1.) Another argument however was advanced before us and we are required to deal with it. Mr. Bhatt for the defendant No. 3 submitted that consideration set out in the two documents Ex. 86 and 91 was a term of the contract to pay the money to the defendants Nos. 1 and 2 as far as the promise of the defendant No. 3 was concerned and no oral evidence could be led about what that other consideration was. Even a bare look at Exhs. 86 and 91 shows that the consideration set out in those two documents is the banks (future) readiness to advance some loans to the defendants Nos. 1 and 2. However it is a common ground that the loans were already advanced and they were not to be advanced afresh at the time or subsequent to the agreements of guarantee. So ex-facie the consideration mentioned in these two documents Exhs. 86 and 91 was incorrect to the knowledge of all the parties. The question is what is then the consideration. It is the settled legal position that if the document is stating some wrong consideration oral evidence can be given to show that real consideration was other than what has been stated in the document. Mr. Bhatt however tries to distinguish this position of one kind of consideration pleaded and permitting other to be proved on the ground that where the reciprocal promises are there as a consideration for each other they are a part and parcel of the whole contract and therefore they are terms of the contract and therefore no oral evidence could be led contrary to the one that is set out in the agreement itself. The argument of Mr. Bhatt would therefore come to this-that if the documents Exs. 86 and 91 show that the bank will give loans to the defendant No. 2 and if that was the explicitly stated consideration for the defendant No. 3 to enter into contract of indemnity or guarantee no oral evidence could be led to show that for the defendant No. 3 there was any other consideration other than the future promise on the part of the bank to advance loans to the defendants Nos. 1 and 2. We find it difficult to accept this submission of Mr. Bhatt for two reasons. It is not the say even of the defendant No. 3 that there was any occasion for the bank for a promise to advance loan in future. Secondly the real consideration to the knowledge of all the three parties viz. the bank the defendant No. 2 and the defendant No. 3 was the forbearing of taking action in terms of the threat communicated in the notice Ex. 76 dated 28-10-1975. Sec. 91 read with sec. 92 of the Indian Evidence Act was pressed into service. We have to bear in mind that sec. 91 qua a contract restricts oral evidence in respect of the terms of the contract. Can a consideration of a contract be said to be a term of the contract ? Our categorical answer is no. A contract is nothing but a promise to do or forbear to do something. Anything which is enlarging or limiting or conditioning that promise to do something is a term of the contract. As per example payment with or without interest is a term of the contract. Paying the amount in any certain instalments is a term of contract. Paying at a particular place or time or after sometime is a term of the contract. Paying on certain contingency is also a term of the contract. In other words anything enlarging abridging or conditioning the act of the promise is a term of the contract. Consideration cannot be said to be a term of the contract though it is intervoven with it. Without consideration there would never be a contract coming into existence. But we are not prepared to say that a consideration is a term of the contract. If any authority for the proposition is needed we can advert to the case of MAHALAKSHMI AMMA V. KRISHNA HOLLA REPORTED IN AIR 1938 MADRAS P-320 and the case of DARYAOSINGH BHAGWANSING CHHATRI V. COL. KRISHNARAO VISHNUPANT KUKDE REPORTED IN AIR 1939 NAGPUR P.-91. There it has been specifically laid down that in case of consideration mentioned in a written document it is open to the party contesting it to show that there was no consideration or that the consideration was different from the one that is described in the contract and this although will not be hit by sec. 91 of the Evidence Act.
(2.) Mr. Bhatt however tried to distinguish this proposition of law by contending that where the consideration is in the from of an executory promise such executory promise would be a part and parcel of the promise because according to him as defined in clause (e) of sec. 2 of the Indian Contract Act every promise and other such promise forming the consideration for each other are an agreement conjointly. It is to be noted with pertinence that every promise is a contract. Where there are reciprocal promises these two promises put together also can be said to be an agreement because both the parties i.e. promissor and promisee in one sense are the promisee and the promissor in another sense and therefore as a matter of fact there are two promises involved in such a set of reciprocal promises. However this would not show that one promise which is the consideration for the other promise is a term of the latter contract. We do not see any distinction between the two. Once we accept the principle that even if one kind of consideration is set out in a document another kind of consideration can be proved by oral evidence the alleged distinction disappears. Mr. Bhatt however in this connection invited our attention to the two judgments. One is a Full Bench judgment of the Allahabad High Court in the case of MOHAMMAD TAKI KHAN V. JANG SINGH REPORTED IN AIR 1935 ALLAHABAD P. 529 which is a case not of a contract but of an executed contract in the form of a sale. It is to be noted with pertinence that sale is a transfer of property for a consideration. So the act of transfer and consideration together constitute sale. Unless both are there there cannot be a sale. So consideration is a part and parcel of the sale transaction and if a document mentions a particular consideration any oral evidence proving the consideration being less or more or distinct obviously will be tentamount to permitting the transaction to be presented different from the one which it really is. It is to be noted with pertinence that sec. 91 deals with three types of situations. Firstly it deals with a contract; secondly it deals with a transfer required by law to be in writing and thirdly it deals with a matter which is required to be in the form of a document as per some law. The judgment cited by Mr. Bhatt deals with this second type of category of sec. 91 of the Evidence Act. Similar in 1939 Nagpur P-20 also there is a case of sale and what is observed therein will not refer the facts of the present case.
(3.) In above view of the matter we are of the opinion that the learned judge was clearly in error in holding that there was no forbearance. We therefore hold that the bank had furnished consideration to the defendant No. 2 in the form of forbearance from the legal action which was contemplated as per notice Ex. 76 dated 28-10-1975 and we find that this forbearance was made good by not taking any action at the time the promise was given by the defendant No. 3 in the form of Exs. 86 and 91.;


Click here to view full judgement.
Copyright © Regent Computronics Pvt.Ltd.