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2010 DIGILAW 454 (MP)

Rajkishore Pandey v. Gyan Chandra Jain

2010-04-20

K.K.LAHOTI, K.S.CHAUHAN

body2010
JUDGMENT : This petition is directed against an order (Annexure P-1), dated 4-9-2009 by the Additional District Judge, Panna in Civil Suit No. 1-B/2009, by which the Trial Court found that the document in question (Annexure P-2) is not a promissory note, but is a bond and the petitioner is liable to pay stamp duty and 10 times penalty. 2. Learned Counsel for petitioner assailed the impugned order on the ground that in fact the document in question is a promissory note. He has placed reliance to Section 4 of the Negotiable Instruments Act, 1881 (hereinafter referred to as "the Act of 1881") in support of his contention and submitted that the document in question falls within the four corners of Section 4 of the Act of 1881, but the Trial Court erred in arriving at a finding that the document is a bond. He has drawn attention of the Court to Section 2 (5) of the Indian Stamp Act, 1899 to show that the document in question does not fall within the definition of bond as defined in Section 2 (5) of the Indian Stamp Act. Lastly, it was submitted that even if the document is found to be a bond, then the Trial Court ought to have sent it to the Collector concerned for dealing with the document as per Section 40 of the Indian Stamp Act. In this regard, he has placed reliance to a judgment of Division Bench of this Court in Bhismat Pandey Vs. Phoola and others, 2009(4) M.P.H.T. 357 = 2009 (4) MPLJ 486 . 3. Shri Abhishek Arjaria, learned Counsel for respondent supported the order passed by the Trial Court. He submitted that a Full Bench of this Court in Santsingh Ladharam Vs. Madandas Gyandas Panika and another, 1976 MPLJ 238 , has considered this aspect in which considering the definition of the promissory note and bond found certain distinguishing features between the both. He has drawn attention of this Court to Paras 4 to 7 of the Full Bench judgment and submitted that in the light of the aforesaid judgment, the document has been rightly treated as a bond by the Trial Court. He has also placed reliance to a judgment of Single Bench of this Court in Dr. Praveen Nahar Vs. Krishan Gopal Sanghi and another, 2006(1) M.P.H.T. 485 = 2006 (I) MPJR 422 , in support of his contention. 4. He has also placed reliance to a judgment of Single Bench of this Court in Dr. Praveen Nahar Vs. Krishan Gopal Sanghi and another, 2006(1) M.P.H.T. 485 = 2006 (I) MPJR 422 , in support of his contention. 4. To appreciate the rival contention of the parties, it would be appropriate if the document (Annexure P-2) is referred verbatim which reads thus : - @ Hindi @ From the perusal of the aforesaid document, it is apparent that Gyan Chandra after receiving Rs. 1,00,000/- from Ram Kishore had promised to repay within 2 years along with interest at bank rate. The document is signed by the executant and attested by two witnesses. 5. A Full Bench of this Court has considered different between promissory note and bond. For ready reference, Paras 3 to 7 of the judgment of the Full Bench in Santsingh Ladharam (supra), are referred, which read thus :- "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, whereby 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 :- A "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 defined in these words:- "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 arise 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 sign 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 the 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 :- (a) Positive - it must be attested by a witness. (b) 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. In the light of Santsingh Ladharam (supra), a Single Bench of this Court in Dr. Praveen Nahar (supra), considered the same issue. 6. In the light of Santsingh Ladharam (supra), a Single Bench of this Court in Dr. Praveen Nahar (supra), considered the same issue. 6. Now in the light of the Full Bench judgment in Santsingh Ladharam (supra), the document in question may be examined. From the perusal of the document, it is apparent that the essential ingredients of the promissory note are not existing, i.e., an unconditional undertaking to pay, the amount payable is not certain and thirdly, the payment is not to be made to the order or to the bearer of the instrument. But essential ingredients of the bond are existing in the document in question, i.e., there is an undertaking to pay, the sum payable by the executant is uncertain as it is to be paid alongwith bank interest. The payment is to be made to a certain person and the instrument is attested by two witnesses. In view of existence of the essential ingredients of the bond, there is no iota of doubt that the document in question is a bond and the Trial Court has rightly held that it is a bond and not a promissory note. 7. Now the second contention of the petitioner may be examined. That in case it is found that document in question is bond then what recourse could have been adopted by the Trial Court. In this regard, he has placed reliance to a Division Bench judgment of this Court in Bhismat Pandey (supra). The Division Bench of this Court in Bhismat Pandey (supra), considering this question held thus :- 13. Now one more question remains for consideration that after arriving at a finding that the document in question is a bond what procedure is to be adopted by the Trial Court. In this regard, a recent judgment of this Court in Mukesh Yaduvanshi Vs. Sml. Radhadevi Awasthy, W.P. No. 13974/2008, decided on 22-7-2009 may be referred in which a judgment of Apex Court in Peleti Subba Rao Vs. Anumala S. Narendra, (2002) 10 SCC 427 , is referred thus:- "Chapter IV of the Indian Stamp Act contains provisions regarding "instruments not duly stamped". Sml. Radhadevi Awasthy, W.P. No. 13974/2008, decided on 22-7-2009 may be referred in which a judgment of Apex Court in Peleti Subba Rao Vs. Anumala S. Narendra, (2002) 10 SCC 427 , is referred thus:- "Chapter IV of the Indian Stamp Act contains provisions regarding "instruments not duly stamped". Section 35 falls under the said chapter and empowers the Trial Court to direct the party (who wants the document to be acted upon) to pay the stamp duty (or the deficient portion) together with a penalty of rupees fifteen, or, when ten times the amount of the proper duty or deficient portion thereof exceeds fifteen rupees, a sum equal to ten times such duty or portion. This is for the purpose of enabling the document to be admitted in evidence. In such a situation the document would be admitted only on payment of the aforesaid sum. In a case, where the party is not willing or he cannot afford to pay the said sum the Court has to adopt the procedure envisaged in Section 38 (2) of the Act. In a case where the party fails to pay the penalty suggested by the Court the document impounded has to be sent to the Collector for the purpose of taking further steps in respect of that document as provided in Section 40 of the Act. The Collector has the power to require the person concerned to pay the proper duty together with a penalty amount which the Collector has to fix in consideration of all aspects involved. The restriction imposed on the Collector in imposing the penalty amount is that under no circumstances the penalty amount shall go beyond ten times the duty or the deficient portion thereof. That is the farthest limit which means that only in very extreme situations the penalty need be imposed up to that limit. The Collector is not required by law to impose the maximum rate of penalty as a matter of course whenever an impounded document is sent to him. He has to take into account various aspects including the financial position of the person concerned. The impugned judgments passed by the Trial Court and the High Court are set aside. The Collector is not required by law to impose the maximum rate of penalty as a matter of course whenever an impounded document is sent to him. He has to take into account various aspects including the financial position of the person concerned. The impugned judgments passed by the Trial Court and the High Court are set aside. The Trial Court is directed to impound the document as indicated in Section 33 (1) and forward the same to the Collector concerned as envisaged in Section 38 (2) of the Act." It was held by the Division Bench thus :- "In view of the aforesaid settled position of the law, prayer made by the petitioner is allowed. Petitioner is permitted to move an application before the Trial Court for forwarding the document under Section 38 (2) of the Act to the Collector. On filing such an application, the Trial Court shall forward the original agreement to the Collector Hoshangabad to complete the proceedings envisaged in Section 40 of the Act, within a period of one month from the date of receipt of the document. 6. In view of the aforesaid, this petition is finally disposed of with the following directions:- (i) Petitioner is permitted to move an application before the Trial Court under Section 38 (2) of the Stamp Act for forwarding the agreement to the Collector, Hoshangabad for initiating proceedings as envisaged under Section 40 of the Act. (ii) The Trial Court on filing such an application shall forward the document with a specific direction to the Collector to complete the proceedings within a period of one month from the date of receipt of the document. (iii) The Collector, Hoshangabad shall proceed in the matter in accordance with Section 40 of the Act. The Collector while considering the question of payment of duty and penalty shall follow the law laid down by the Apex Court in Para 6 of Peteti Subbarao (supra) and remit the document after due ascertainment as per Section 40 of the Act. Thereafter, the Trial Court shall proceed in the matter, in accordance with law. Considering the facts of the case, there shall be no order as to costs." 14. Thereafter, the Trial Court shall proceed in the matter, in accordance with law. Considering the facts of the case, there shall be no order as to costs." 14. In view of aforesaid, it is directed that the Trial Court shall impound the document in question and shall send it to the Collector, Panna with a specific direction to him for dealing with the document as per Section 40 of the Indian Stamp Act, within a period of sixty days from the date of receipt of such document." 8. In view of the settled position by another Division Bench, there is no doubt that the Trial Court after impounding the document ought to have sent it to the Collector, Panna with a specific direction to him to deal with the document as per Section 40 of the Indian Stamp Act, but the Trial Court erred in directing for payment of stamp duty and 10 times penalty on the document. 9. In view of aforesaid, earlier part of order treating the document as bond is sustainable in law but latter part of the order directing payment of stamp duty and 10 times penalty on the document is hereby set aside and in place of this, it is directed that the Trial Court shall send the document to the Collector, Panna with a specific direction to him to deal with the document as per Section 40 of the Indian Stamp Act, within a period of sixty days from the date of receipt of such document. With the aforesaid directions, this petition is disposed of finally with no order as to costs.