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Santsingh Vs. Madandas Panika and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial;Civil
CourtMadhya Pradesh High Court
Decided On
Case NumberCivil Revn. No. 849 of 1974
Judge
Reported inAIR1976MP144
ActsStamp Act, 1899 - Sections 2(5), 2(22) and 6; Negotiable Instruments Act, 1881 - Sections 4 and 13
AppellantSantsingh
RespondentMadandas Panika and anr.
Appellant AdvocateJ.P. Dwivedi, Adv.
Respondent AdvocateR.K. Pandey, Adv.
DispositionRevision dismissed
Cases ReferredA. K. Hameed v. Appukutti
Excerpt:
- - 9. having thus pointed out the distinction between a promissory note and a bond, we may at once say that in the last-mentioned situation, that is, where an instrument comes within the description of a promissory note as well as that of a bond, by virtue of section 6 of the stamp act, it will be chargeable only with the highest of the duties chargeable, i. the plaintiff's contention is that the instrument is a promissory note not only because it specifically says so, but also because all the elements of a promissory note are satisfied......we would answer the two question? set out in the beginning as follows :--(1) an instrument is e. promissorynote if there are present the followingelements : (i) there should be an unconditional undertaking to pay; (ii) the sum should be a sum ofj money and should be certain; (iii) the payment should be to theorder of a person who is certain, or tothe bearer of the instrument; and (iv) the maker should sign it. (2) an instrument is a bond within the meaning of section 2(5)(b) of the stamp act, if the following elements are present :-- (i) there must be an undertaking to pay; (ii) the sum should be a sum of money but not necessarily certain; (iii) the payment will foe to another person named in the instrument; (iv) the maker should sign it; (v) the instrument must be attested by a.....
Judgment:

Shiv Dayal, C.J.

1. The two questions raised for our determination are :--

(1) What is the distinction between a 'bond' and a 'promissory note'; and

(2) Whether for tihe purposes of the Stamp Act, in the definition of promissory note, the explanation to Section 13 of the Negotiable Instruments Act can be engrafted in Section 4 of that Act

2. As regards the second question, certain observations were made by a Division Bench of this Court in Kodorilal v. Sukhlal, AIR 1968 Madh Pra 4 although Shri Pandey contended that those observations are obiter, the question being of frequent occurrence, it has been referred to this Bench.

3. Section 2(5) of the Stamp Act defines a bond thus :---

' 'bond' includes-

(a) any instrument whereby a person obliges himself to pay money to another, on condition that the obligation shall be void if a specified act is performed, or is not performed, as the case may be;

(b) any instrument attested by a witness and not payable to order or bearer, whereby a person obliges himself to pay money to another and

(c) any instrument so attested, where-by a person obliges himself to deliver grain or other agricultural produce to another.'

And Section 2(22) of the Stamp Act defines a promissory note by reference to the Negotiable Instruments Act thus :--

' 'Promissory note' means a promissory note as defined by the Negotiable Instruments Act, 1881;

It also includes a note promising the payment of any sum of money out of any particular fund which may or may not be available, or upon any condition or contingency which may or may not be performed or happen.'

In Section 4 of the Negotiable Instruments Act, 'Promissory note' is denned in these words :--

'A 'Promissory note' is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.'

4. The essentials of a promissory note are :--

(1) An unconditional undertaking to pay;

(2) The sum should be a sum of money and should be certain;

(3) The payment should be to the order of a person who is certain, or to the bearer of the instrument; and

(4) The maker should sign it. If these four conditions exist, the instrument is a promissory note.

5. The question of distinguishing a promissory note from a bond arises by reference to Clause (b) of the above definition of bond. The essentials of a bond are :--

(1) There must be an undertaking to pay;

(2) The sum should be a sum of money but not necessarily certain;

(3) The payment will be to another person named in the instrument;

(4) The maker should sisn it;

(5) The instrument must be attested by a witness; and

(6) It must not be payable to order or bearer.

On a comparison between the essentials of a promissory note and those of a bond, three distinguishing features emerge :---

(i) If money payable under the instrument is not certain, it cannot be a promissory note, although it can be a bond.

(ii) If the instrument is not attested by a witness, it cannot be a bond, although it may be a promissory note.

(iii) If the instrument is payable to order or bearer, it cannot be a bond, but it can be a promissory note.

6. To put it differently, there are two peculiar features of a bond :--

(1) Positive -- it must be attested by a witness.

(2) Negative -- it must not be payable to order or bearer.

7. It is also clear that if in an instrument the above two distinguishing features (positive and negative) are present, then, even if the four essentials of a promissory note are also present, the instrument will still be a bond, because all the ingredients of a promissory note are also present in a bond with the exception that whereas a promissory note can be payable, apart from the person named in it, to the order of that person or to the bearer of the instrument, a bond cannot be payable to order or bearer.

8. Therefore, an instrument, which is not payable to bearer or order but is attested by a witness will also be a bond within the definition of Section 2(5) of the Stamp Act, although simultaneously it may also fall within the definition of promissory note within the meaning of Section 2(22) of the Stamp Act read with Section 4 of the Negotiable Instruments Act.

9. Having thus pointed out the distinction between a promissory note and a bond, we may at once say that in the last-mentioned situation, that is, where an instrument comes within the description of a promissory note as well as that of a bond, by virtue of Section 6 of the Stamp Act, it will be chargeable only with the highest of the duties chargeable, i. e., stamp duty as chargeable on a bond. That section reads thus :--

'Subject to the provisions of the last preceding section, an instrument so framed as to come within two or more of the descriptions in Schedule I, shall, where the duties chargeable thereunder are different be chargeable only with the highest of such duties : Provided that nothing in this Act contained shall render chargeable with duty exceeding one rupee a counterpart or duplicate of any instrument chargeable with duty and in respect of which the proper duty has been paid.'

10. This brings us to the question which arises because of Explanation (i) to Section 13(1) of the Negotiable Instruments Act. It reads thus :--

'13 (1) A 'negotiable instrument' means a promissory note, bill of exchange or cheque payable either to order or to bearer.

Explanation (i).-- A promissory note, bill of exchange or cheque is payable to order which is expressed to be so payable or which is expressed to be payable to particular person, and does not contain words prohibiting transfer or indicating an intention that it shall not be transferable.'

The effect of this explanation is to introduce a fiction. Where a promissory note is not by its terms, that is, where it is not expressly payable to order or bearer, it will be payable to the certain person named in it, but not to order or bearer. In other words, it will not be a negotiable instrument. See the above definition contained in Section 13 of the Negotiable Instruments Act. It is by virtue of the above explanation that although it may not be expressly payable to order, yet, if it does not contain any words which prohibit a transfer or which indicate an intention that it shall not be transferable, then the promissory note shall be payable to order of the person also. In other words, in the promissory note it will be implicit to read that it is payable to order, provided there are no other words prohibiting transfer or indicating an intention that it shall not be transferable. It is obvious enough that the whole object of this explanation is that where a promissory note is transferred, the transferee will have the right to enforce repayment, provided there is no prohibition in the instrument that it shall not be transferred, or words indicating such an intention.

11. Now, if this explanation is engrafted on the definition of promissory note in Section 4 of Negotiable Instruments Act, then a promissory note will always be payable to order, whether expressly it is so made payable or not, provided there is no prohibition. On those premises, it is an argument that a promissory note, which does not contain any such prohibition, cannot be a bond because by virtue of the above explanation to Section 13, it is payable to order and, therefore, excluded from the definition of a bond. This reasoning found favour with the Division Bench which decided Kadori-lal v. Sukhlal (supra). We are unable to accept that proposition. For the purposesof Stamp Act, only such instrument can be a promissory note, which falls within the definition of promissory note, as contained in Section 2(22) of the Stamp Act Now, that definition is by reference to a ^ provision contained in another enactment A definition by reference is merely for the sake of economy of words. Instead of reproducing the entire language of the definition which is given in another statute, a mere reference is made, but the true effect of a definition by reference is that the definition in the other statute should as if be cut out and pasted here, but no other provision of the Negotiable Instruments Act. Perhaps, all the sections of the Negotiable Instruments Act may apply to a promissory note, but except Section 4, there is no other section which 'defines' a promissory note. What is permissible to read and what has to be X read in Section 2(22) of the Stamp Act is merely the definition of promissory note and nothing else, not the effect of incidents of a promissory note. And, the definition of promissory note is contained only in Section 4 of the Negotiable Instruments Act. For the purposes of the Stamp Act, a promissory note means a promissory note as defined in the Negotiable Instruments Act. The expression 'as defined' has reference only to Section 4 and no other section of the Negotiable Instruments Act

12. Therefore, this will be our answer to the second question.

13. We do not agree with the de-cision in A. K. Hameed v. Appukutti, AIR 1969 Ker 189 cited by Shri Dwivedi after the hearing.

14. As a result of the above discussion, we would answer the two question? set out in the beginning as follows :--

(1) An instrument is e. promissorynote if there are present the followingelements :

(i) There should be an unconditional undertaking to pay;

(ii) The sum should be a sum ofj money and should be certain;

(iii) The payment should be to theorder of a person who is certain, or tothe bearer of the instrument; and

(iv) The maker should sign it.

(2) An instrument is a bond within the meaning of Section 2(5)(b) of the Stamp Act, if the following elements are present :--

(i) There must be an undertaking to pay;

(ii) The sum should be a sum of money but not necessarily certain;

(iii) The payment will foe to another person named in the instrument;

(iv) The maker should sign it;

(v) The instrument must be attested by a witness; and

(vi) It must not be payable to order or bearer.

(3) A bond has two distinguishing features :--

(i) Positive -- it must be attested by a witness.

(ii) Negative -- it must not be payable to order or bearer.

(4) For the purposes of the Stamp Act, it is only the definition as contained in Section 4 of the Negotiable Instruments Act which is to be read as if reproduced verbatim in Section 2(22) of the Stamp Act, but no other provision of the Negotiable Instruments Act can be read in Section 2(22) of the Stamp Act, because of the restrictive words 'as denned in'.

(5) Explanation (1) of Section 13 of the Negotiable Instruments Act may have its own effect and impact on a promissory note for the purposes of tine Negotiable Instruments Act, but it has nothing to do with the 'definition' of a promissory note and, therefore, that explanation is wholly irrelevant for the purposes of the Stamp Act. It cannot, therefore, be said that every promissory note must be excluded from the definition of Stamp Act, unless it contains an express prohibition within the meaning of the explanation to Section 13 of the Negotiable Instruments Act

15. As the whole case has been referred to us, we will deal with its facts. The question in this revision is whether the document on which the suit has been brought is a promissory note or a bond within the meaning of the Stamp Act. The instrument on which the suit is based reads as follows :--

^esa enunkl -------------------------- :i;k2000 ---------------------- lkgwdkj larflag ------------------- ls uxnh okLrsHkj [kpsZ djt fy;s gS fygktk rgjksj djrk gwa fd C;kt nj Qh lnh ekgokj vlye; lwn ekaxusa ij lkgwdkj o eqdke jk;x<+ ;k tgk ij gqdqe nsa vnk d:axkfygktk ;g izkesljh izksuksV viuh jkth [kq'kh o gks'k gokl ls fy[k fn;k-------------------------- vxj :i;k vnk ugha dj ldrk rks lkgwdkj dks gd gksxk fdesjh eu dqyk tk;nkn ls olwy dj ldrk gSA blesa eq>s ;k esjs okfjlksa dks fdlhizdkj dk mtj ugha gksxk rk- 2. ekg fnu cq/kokj lu~.'O*

As soon as this instrument was produced in the Court, counsel for the defendant objected that it did not bear sufficient stamp. The objection was that it requires stamp as on a bond under Section 2(5) of the Stamp Act. The plaintiff's contention was that it is a promissory note so that it bears adequate stamp. The objection found favour with the learned trial Judge. He held the instrument to be a bond and directed it to be impounded, permitting, at the same time, the plaintiff to make up the deficiency in the stamp. Aggrieved by that order, the plaintiff filed this revision. The plaintiff's contention is that the instrument is a promissory note not only because it specifically says so, but also because all the elements of a promissory note are satisfied.

16. In our opinion, the instrument is a bond because it is attested by a witness (positive distinguishing feature) and is not payable to bearer or order (negative distinguishing feature). Shri Dwivedi faintly argued that the words 'JAHAN PAR HUKMA DEN' mean, that it is payable to order, but this argument cannot be accepted. These words refer to the place of payment. The debtor agreed to pay at such 'place' as may be specified by the creditor. It does not refer to any 'person' so that it is not payable to the order of the person named as payee, that is, Santsingh. It would be altogether a different matter if Santsingh had transferred this instrument to some one else. He could have enforced its repayment by virtue of the explanation to Section 13. But, for the reasons already stated, it is a promissory note which is not payable to bearer or order within the meaning of Section 4 of the Negotiable Instruments Act but it is within the meaning of promissory note under Section 2(22) of the Stamp Act. This instrument is, therefore, one which falls both within the definition of 'promissory' note under Section 2(22) of the Stamp Act and of a 'bond' under Section 2(5) of the Stamp Act. That being so, Section 6 of the Stamp Act steps in and this instrument is chargeable to stamp duty as a bond.

17. The order passed by the trial Court is right.

18. The revision is dismissed. In the circumstances of the case, we direct that the parties shall bear their own costs. The record shall be returned to the trial Court within five days from today for proceeding further with the suit according to law.


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