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Kadorilal and anr. Vs. Sukhlal Sajan Singh - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtMadhya Pradesh High Court
Decided On
Case NumberCivil Revn. No. 83 of 1966
Judge
Reported inAIR1968MP4
ActsStamp Act, 1899 - Sections 2(5), 2(22), 3, 13 and 13(1); Negotiable Instruments Act - Sections 4; Code of Civil Procedure (CPC) , 1908
AppellantKadorilal and anr.
RespondentSukhlal Sajan Singh
Appellant AdvocateN.K. Jain, Adv.
Respondent AdvocateB.D. Gupta, Adv.
DispositionPetition dismissed
Cases ReferredKhaju Khan v. Rajendra Prasad
Excerpt:
.....there was no reason why this kind of a document, which otherwise satisfied the other tests of a promissory note, should not be treated as a promissory note for the purposes of the stamp act also. ' 6. the document in question, on theface of it, contains a recital that it is payableto order the hindi expression k ftlds uke ;g uksv gksxk mls--clearly indicates that the our is payable to order. it appears that our learned brother failed to note this part of the document. 7. we would, however, like to record our opinion, as a larger bench was constituted for resolving this controversy. was of the opinion that a document, if it contained all the elements of a promissory note and was styled as a promissory note as well, could be treated as negotiable by reason of the provisions contained in..........1962 rai 68 wherein it was observed at page 76 'it is, therefore, clear that even if a promissory note is payable to a particular person it will be deemed to be payable to order and will be negotiable instrument under th' negotiable instruments act unless expressly or by implication its transfer is prohibited. therefore, looking to the definition of the promissory note in the stamp act as well as in the negotiable instruments act it seems that a promissory note should, in its popular sense as understood by men of business, be negotiable. the only exception which the stamp act provides is that it need not be negotiable in cases where it falls within the wider definition as given in that act. if it does not fall within the wider definition of the stamp act, then under the negotiable.....
Judgment:
ORDER

1. This revision petition came up for hearing before our learned brother Newaskar, J., who was of the opinion that an important question of law was involved and that the revision should be placed before a larger Bench to be nominated by the Honourable the Chief Justice. Accordingly, this case has been placed before us for disposal.

2. The applicants are plaintiffs. They filed a suit, out of which this revision arises, for recovery of certain amount on the basis of two documents, styled as promissory notes. The document dated 19th June 1964 (Ex P-2) is not sufficiently stamped as a promissory note. The non-applicant, therefore, objected to its admission in evidence. The trial Court held that it was a promissory note and being insufficiently stamped was inadmissible in evidence. The applicant's contention was that it was a bond, as It was attested by witnesses and that it could be validated on payment of penalty, and that the trial Court was wrong in holding the document Inadmissible. Hence this revision.

3. The document in question is on a printed form and reads thus:

xzkehljh uksV

ge lq[kyky oYn lqtku flag dkSe nkxh lkfduflEjkgja bdjkj djrs gS fd ekaxus ij dkMksjhyky vUnhyky tSu] ofn'kk dks ;k ftldsuke ;g uksV gksxk mls :i;s OO :O% vadu pkj lkS flQZ nsaxsA vkSj vkt rkjh[kls bu :i;ksa ij C;kt nj ekg nj lSadMk ckjg vkus izek.ks fgUnh ferh ls bu :i;ksaij nsaxs bu :i;ksa dk eqvkotk gedks fey pqdk gSA

ferh tSB lquh yEcr 2O2 rkO.&'&' lu .' dkxj ferh dqokj onh O :i;s pqdrk djnwaxk :O OO :i;s jlhnh fVfdV 2O iSls

lgh x.kwyky xokg&ukjk;.k flag nO lq[kyky

4. In support of the submission that the document in question is a bond and not a promissory note, reliance has been placed on the definition of 'bond' (Section 2(5)) in the Stamp Act. Under Clause (b) of Section 2(5), any instrument attested by a witness and not payable to order or bearer, whereby a person obliges himself to pay money to another, is treated to be a bond. The argument is that an instrument which satisfies the other requirements of a promissory note, but, which on the face of it is not negotiable, that is to say which does not contain a recital that it is payable to order and which is attested by a witness, must necessarily be held to be a bond.

It is urged that though under Section 13(1) read with explanation I of the Negotiable Instruments Act a promissory note which is not, on the face of it, payable to order but which does not contain the words prohibiting transfer or indicating an intention that provision cannot be relied on as in the Stamp Act the definition of a 'promissory note' as given in Section 4(1) of the Negotiable Instruments Act alone has been adopted as the definition of a promissory note. Section 4 of the Negotiable 'Instruments Act clearly requires that the instrument, on the face of it, must be payable to order. The contention, therefore, is that an instrument, which is not on the face of it payable to order, should be treated as a promissory note for the purposes of the Negotiable Instruments Act; but so far as the Stamp Act is concerned, it is not a promissory note and as such if the instrument is attested by a witness, it will come within the definition of a 'bond'.

It is also submitted that Section 13 of the Negotiable Instruments Act was amended in 1919 when the Explanation was added, and that subsequent amendment of the Negotiable Instruments Act could not be read in the Stamp Act which adopted the definition of a 'promissory note' as it stood when the Stamp Act was enacted. Reliance for these submissions has been placed on: Ram Narayan v. Ram Chandra, AIR 1962 Pat 325. Khetra Mohan Saha v. Jamini, ILR 54 Cal 445 = (AIR 1927 Cal 472); Dashrath Tukaram v Kashiram Raoji, AIR 1937 Nag 61; Govula Ramakistiah v. Yellappa, AIR 1959 Andh Pra 653 and Mohammad Mustafa Ali Khan v. Rai Raieshwari Devi. AIR 1959 All 583 (FB).

5. Our learned brother Newaskar, J.,it appears, proceeded on the assumption that the instrument in question was not on the face of it negotiable, i.e. it was not payable to order. He, however, felt that in view of the decision of the Privy Council in Mohd. Akbar Khan v. Attar Singh, AIR 1936 PC 171 there was no reason why this kind of a document, which otherwise satisfied the other tests of a promissory note, should not be treated as a promissory note for the purposes of the Stamp Act also. hE expressed his view thus:

'In dealing with the provisions contained in Section 2(22) (definition of promissory note) of the Stamp Art their Lordships referred to the provisions contained in Section 13 of the Negotiable Instruments Act together with the Explanation contained thereon. The instrument with which they were required to deal was one which had been executed on 1st of April 1917 (i.e. before the amendment of Section 13 of the Negotiable Instruments Act). While considering the question as to the instrument can be held to be negotiable byreason of the fact that it would under Ex-planation below S 13 of the Negotiable Instruments Act be construed as payable to order their Lordships did not give it as their reason for not construing it to be not negotiable on the ground that the amendment effected by the amendment Act of 1919 in Section 13(1) of the Negotiable Instruments Act cannot be imported in the definition as contained in Section 2(22) of the Stamp Act. The document before them was styled as a re-ciept' and their Lordships considered the matter on broad ground, holding that the instrument in that case could not have been intended by the parties to be negotiable. If a document contains all the essential elements of a promissory note, is styled as a promissory note and is negotiable by reasons of provisions contained in Section 13 explanation I, it is somewhat incomprehensible as to why such a document ought not to be treated as a promissorv note merely because it is attested.'

6. The document in question, on theface of it, contains a recital that it is payableto order The Hindi expression

^^;k ftlds uke ;g uksV gksxk mls-----**

clearly indicates that the our is payable to order. It appears that our learned brother failed to note this part of the document. As the document, on the face of it, shows that it is negotiable, there is no necessity of resorting to Section 13 and the Explanation thereto. In this view of the matter it is not necessary for us in this case to decide the question as posed by the learned counsel for the applicants and as indicated by our learned brother.

7. We would, however, like to record our opinion, as a larger Bench was constituted for resolving this controversy. We would first refer to the decision of the Patna High Court in AIR 1962 Pat 325 (supra) wherein the case law upto that date has been summarized. In that case, it was pointed out that before the amendment of Section 13 of the Negotiable Instruments Act the consistent view of the various High Courts in India was that an instrument, which was not on the face of it payable to order, was not a 'promissory note' as defined in Section 4 of the Negotiable Instruments Act and could not be treated as a promissory note under the Stamp Act as defined in Section 2(22) and that such an instrument, if attested by a witness, fell within the definition of a 'bond' under Clause (b) of Section 2(5) of the Stamp Act. The cases referred to are: (1885) ILR 8 Mad 87 (FB): (1887) ILR 10 Mad 158 (FB); (1890) ILR 13 Mad 147 (FB) and (1905) ILR 29 Bom 82 (FB)

The Patna High Court then proceeded to say that the amendment of Section 13 of the Negotiable Instruments Act had not the effect of shaking the authority of the said decisions. The reasoning of the Patna High Court is that when Section 2(22) of the Stamp Act refersto the definition of a 'promissory note' as given in the Negotiable Instruments Act in Section 4, that definition is borrowed from the Negotiable Instruments Act and is incoro-porated by reference in the Stamp Act. This being the position, any subsequent amendment made in the Negotiable Instruments Act will not have the effect of amending the definition of a 'promissory note' so far as the Stamp Act is concerned.

An instrument, which does not satisfy the requirement of negotiability on the face of it as required under Section 4 of the Negotiable Instruments Act may still become negotiable by reason of Section 13 read with explanation I so far as the Negotiable Instruments Act is concerned; but for that reason the instrument cannot be treated as a promissory note under the Stamp Act. In this view of the matter, the Patna High Court came to the conclusion that the authority of the cases decided before the amendment was made was not shaken. The other cases cited above were considered and relied on by the Patna High Court for arriving at the said conclusion

8. All the abovesaid decisions proceed on the view that if Section 4 of the Negotiable Instruments Act alone is read, without the aid of Section 13. an instrument cannot be treated as a promissory note unless, on the face of it, it bears a recital that the amount is payable to the person named therein or to order. Our learned brother Nevaskar, J., however, expressed the view that the Privy Council in AIR 1936 PC 171 (supra) did take into consideration Section 13 of the Negotiable Instruments Act while deciding the question as to whether the document was a promissory note or not within the meaning of Section 2(22) of the Stamp Act, though the document was executed before the amendment In this view of the matter, Nevaskar, J. was of the opinion that a document, if it contained all the elements of a promissory note and was styled as a promissory note as well, could be treated as negotiable by reason of the provisions contained in Section 13, Explanation I, as was done by the Privy Council.

It is no doubt true that in AIR 1936 PC 171 (supra) their Lordships of the Privy Council had specifically referred to Section 13 of the Negotiable Instruments Act. But apart from that, their Lordships appeared to have been satisfied that a document may be treated as a promissory note without any recital that it is negotiable. Their Lordships observed:

'If this document is otherwise within the definition of a promissory note, it would seem that it must be negotiable, for there appears to be no words prohibiting transfer or indicating an intention that it should not be transferable. It must be admitted that it would be a somewhat unusual visitor in the accustomed circles of negotiable papers.'

This observation clearly shows that even without taking the aid of Section 13(1) with the explanation, a document can be treated as a promissory note if it otherwise satisfies the requirements of a promissory note. A similar view was expressed by a Full Bench of the Rajasthan High Court in Nanga v. Dhanna-lal, AIR 1962 Rai 68 wherein it was observed at page 76

'It is, therefore, clear that even if a promissory note is payable to a particular person it will be deemed to be payable to order and will be negotiable instrument under th' Negotiable Instruments Act unless expressly or by implication its transfer is prohibited. Therefore, looking to the definition of the promissory note in the Stamp Act as well as in the Negotiable Instruments Act it seems that a promissory note should, in its popular sense as understood by men of business, be negotiable. The only exception which the stamp Act provides is that it need not be negotiable in cases where it falls within the wider definition as given in that Act. If it does not fall within the wider definition of the Stamp Act, then under the Negotiable Instruments Act it need not be negotiable in those cases only where expressly or by implication it is not transferable. In all other cases a promissory note should stand the test of negotiability There can be promissory notes which may not be negotiable but such notes can only be those which fall within the above mentioned exceptions. 'Bearing these exceptions if they are intended to be promissory notes they should be Negotiable ' (Underlining (here in ' ') is by us).

This decision indicates that the negotiability of a promissory note does not depend on the recital to that effect in the document itself; but that all promissory notes are presumed to be negotiable unless they fall within the exceptions pointed out by their Lordshins.

9. In this connection, note may also bs taken of illustrations (a) and (b) under Section 4 of the Negotiable Instruments Act. Those illustrations read thus:

'(a) I promise to pay B or order Rs. 500.

(b) I acknowledge myself to be indebted to B in Rs. 1,000 to be paid on demand, for value received.'

In illustration (a) there is a promise to pay to order; while in illustration (b) there is no recital as to payment to order; and yet that illustration is treated to be an example of a promissory note One may infer from this that the absence of recital from the document may not render the document not negotiable. Their Lordships of the Patna High Court refused to take into consideration the illustration given under Section 4 of the Negotiable Instruments Act on the ground that the illustrations do not form part of the enacted portion and that they cannot be relied upon for proper interpretation of the section. It is no doubt true that illustrations cannot have the effect of modifying thelanguage of the section and they cannot either curtail or expand the ambit of the section which alone forms the enactment. But illustrations appended to a section form part of the section, are of relevance and value in the construction of the text of the section and they should not be readily rejected as repugnant to the section- In Mahomed Syedol Ariffin v Yeoh Ooi Gork, 43 Ind App 256 at p. 263 = (AIR 1916 PC 242 at p. 244) Lord Shaw in delivering the opinion of the Board observed:

'It is the duty of a court of law to accept, if that can be done, the illustrations given as being both, of relevance and value in the construction of the text. The illustrations should in no case be rejected because they do not square with ideas possibly derived from another system of jurisprudence as to the law with which they or the sections deal. And it would require a very special case to warrant their rejection on the ground of their assumed repugnancy to the sections themselves. It would be the very last resort of construction to make this assumption. The great usefulness of the illustrations, which have although not part of the sections, been expressly furnished by the legislature as helpful in the working and application of the statute, should not be thus impaired.'

This view was followed by their Lordships of the Supreme Court in Jumma Masjid v. Kodimaniandra Deviah, AIR 1962 SC 847 at p. 851 Illustration (b) under Section 4 of the Negotiable Instruments Act, in our opinion, has not the effect of in any way controlling Section 4. What it indicates is that an instrument, which on the face of it does not contain the recital of being payable to order may still be treated as an instrument of that nature, the term being implicit in the kind of commercial instrument

10. If one looks to Section 13 of the Negotiable Instrumments Act, one finds that in the main part of Sub-section (1) a promissory note, bill of exchange or a cheque payable either to order or to bearer is described as a negotiable instrument. So far as the promissory note and the bill of exchange are concerned, the definitions them selves require that they should be payable to order of the person in whose favour they are drawn. The expression 'payable either to order or to bearer' In the main part of subsection (1) of Section 13 cannot, therefore, legitimately refer to a promissory note or a bill or exchange. That expression refers only to the last document, namely, the cheque, which is not necessarily payable either to order or to bearer. If this is so, it appears that the purpose of the Explanation is to treat all promissory notes and bills of exchange as negotiable instruments irrespective of the fact whether the recital to that effect is present on the face of the document or not unless there are words prohibiting transfer.

The Explanation, therefore, does not take the matter any further and only prescribes that in the absence of such prohibition all other promissory notes are negotiable. The purpose of the Explanation under Section 13(1) appears to be to point out what promissory notes are not negotiable rather than to enlarge the scope of the promissory notes which were not negotiable till then but were made negotiable by the amendment. The decision of the Privy Council in AIR 1936 PC 171 (supra) also indicates that promissory notes, which are well known in the commercial world, are always treated as negotiable and that it is not necessary that the negotiability should be writ large on the said documents.

If we are right in interpreting the Privy Council decision in the manner we have done, it appears that the decisions of the Pc?,tna High Court and the decision of other High Courts relied on by that Court cannot be said to lay down the correct law. In any case, the Privy Council decision clearly indicates that the aid of Section 13 of the Negotiable Instruments Act can be taken even for the purpose of deciding whether the document is a promissory note or not for the purposes of the Stamp Act. This matter was not considered by the Patna High Court as also by the other High Courts, including the Nagpur High Court in AIR 1937 Nag 61 which followed the decision of the Calcutta High Court in ILR 54 Cal 445= (AIR 1927 Cal 472) We are, therefore, inclined to agree with the view expressed by Nevaskar, J. and hold that a document, if it contains all the essential elements of a promissory note, is styled as a promissory note and is negotiable by reason of the provisions contained in S 13, Explanation I, ought to be treated as a promissory note for the purposes of the Stamp Act as well.

11. In this particular case, as we have already pointed out, the document on the face of it is negotiable and there is no difficulty in holding that it is a promissory note and not a bond.

12. It was, however, urged by the learned counsel for the applicants, basing his arguments on the decision of the Privy Council in AIR 1936 PC 171 (supra) and that of the Nagpur High Court in Ganpatdas v. Harivallabh, AIR 1941 Nag 1 that a document, which may satisfy the tests of a promissory note may not yet be held to be so and that in each case it should be decided on the tenor and the circumstances of the case whether the parties intended to execute a promissory note or some other document, such as. a receipt or a bond. In AIR 1936 PC 171 (supra) their Lordships of the Privy Council observed:

'Their Lordships prefer to decide this point on the broad ground that such a documerit as this is not and could not be Intended to be brought within a definition relating to documents which are to be negoti-able instruments. Such documents must come into existence for the purpose only of recording an agreement to pay money and nothing more, though of course they may state the consideration. Receipts and agreements generally are not intended to be negotiable, and serious embarrassment could be caused in commerce if the negotiable net were cast too wide. This document plainly is a receipt for money containing the terms on which it is to be repaid. It is not without significance that the defendants who drew it, and who were experienced moneylenders, did not draw it on paper with an impressed stamp as they would have had to if the document were a promissory note, and that they affixed a stamp which is sufficient if the document is a simple receipt. Being primarily a receipt even, if coupled with a promise to pay it is not a promissory note.'

In that case, on the face of it, the document was in the form of a receipt and was only an agreement to pay the money at the specified rate of interest Such receipts and agreements are not generally intended to be negotiable, and hence their Lordships held that the document could not be treated as a promissory note. This is not the case here. The document is in form and is styled as a promissory note and contains all the recitals of a promissory note. It also appears that this was not the first time that either the defendants had taken any loan from the plaintiff or that the defendants had executed any note to that effect. There are two promissory notes on record, one of which is a valid document, while the other is not because it is insufficiently stamped. The parties are businessmen. It cannot, therefore, be said that the idea in executing the document in question was only to acknowledge the receipt of the money or to enter into an agreement to return it and not to make the document negotiable,

It is not a case where persons, who were not aware of commercial transactions, executed the document. In these circumstances, when the document on the face of it satisfies all the tests of a promissory note, there is no justification for interpreting it in any other manner In determining whether a document is sufficiently stamped for the purpose of deciding upon its admissibi-lity in evidence the document itself as it stands, and not any collateral circumstances which may be shown in evidence, must be looked at: See Ramen Chetty v. Mohom-ed Ghouse, (1889) ILR 16 Cal 432 and Sakharam Shankar v Ram Chandra. (1903) ILR 27 Bom 279 (FB)

In the Privy Council case also their Lordships have considered the document itself and have not taken into consideration any collateral circumstances. In AIR 1941Nag 1 (supra) after referring to the Privy Council decision in AIR 1936 PC 171 (supra) and Karam Chand v. Firm Mian Mir Ahmad Aziz Ahmad, AIR 1938 PC 121 his Lordship observed:

'It is consequently necessary to look into the terms of the document and the surrounding circumstances to see whether it was intended to be a promissory note in the sense of its being intended to be used as a negotiable instrument'

But, further on, his Lordship proceeds to say:

'It is a well recognized rule of construction of documents that they must be construed as a whole that every part of the document must receive attention and that the intention should be gathered from the whole context of the instrument so as to make one entire whole.'

From this observation it is clear that when reference to surrounding circumstances was made what was meant was that the attention should not only be confined to the fact that the instrument contained a promise to pay, but the whole document, its tenor, the purpose for which it was executed as described in the document itself should be considered. The ruling does not go so far as to say that any extraneous evidence is admissible to interpret the document. This decision, therefore, is not of any assistance to the applicants. We may also refer to the decision of this Court in Khaju Khan v. Rajendra Prasad, 1961 Jab LJ 1247 wherein Sharma, J. observed:

'But in case where the instrument contains a definite promise to pay to a particular person, Explanation (1) to Section 13(1) of the Negotiable Instruments Act will apply with the result that if the instrument does not contain words prohibiting transfer or indicating an intention that it shall not ba transferable, the promissory note shall be deemed to be payable to order. 'In such a case no question of proving the intention of the parties by evidence extrinsic to the document can possibly arise''.

Underlining (here in ' ') is by us.

13. On the plain language used In the document in question and keeping in mind the fact that the parties are not strangers to such transactions the inevitable conclusion is that the document is a promissory note and cannot be validated as a bond. The decision of the lower Court is thus correct and is affirmed.

14. The revision petition is dismissedwith costs. Counsel's fee Rs. 30.


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