Report No. 67
7.22. Promise to pay how far required.-
Thus, under the definition in the Stamp Act, latter half, it is not necessary that the document must be a promissory note within the Negotiable Instruments Act. Even then, it has been held that it is an essential characteristic of the definition in the Stamp Act that there should be a promise to pay to some person or persons or to order or to the bearer of the note. A promise to pay the amount in one event, with a provision in another event to deposit it in court, does not make the document a promissory note.1
1. Kutta Mada Venkataratam v. Pali Chetty, AIR 1933 Mad 306 (308).
7.23. Whether unconditional undertaking required.-
It has been held in a Madras case,1 that the question must be decided by adopting the test whether there was an unconditional undertaking to pay a sum of money. In that case, it was held to be an unconditional undertaking. On the other hand, the Allahabad High Court has held2 that a document containing a promise to pay on a contingency can fall within the Stamp Act. Thus, a promise by A to pay B Rs. 500 "seven days after my marriage with C" is not a promissory note under the Negotiable Instruments Act,3 but may be so under the Stamp Act.
1. Karuthappa Rowthen v. Bava Moideen, 1913 ILR 36 Mad 370 (372) (Sundara Ayyar and Phillips, JJ.).
2. Sushi! Chandra v. Valiyulla, AIR 1941 All 155 (158, 160).
3. Section 4, illustration (f), Negotiable Instruments Act.
7.24. These points, it was stated, show the difficulty caused by the extended part of the definition.1
1. Cf. See discussion relating to section 2-Bill of Exchange (supra).
7.25. Two alternatives.-
In order to improve the position in this regard, two alternatives were put forth before us. One alternative would be to confine the extended part of the definition to documents analogous to promissory notes. The other alternative would be to omit the extended part altogether. We appreciate the difficulty caused by the present vague definition. We have, after some discussion, come to the conclusion that the definition, wide as it is, should not be disturbed, since it has stood for a long time and revenue is involved and no compelling reason exists. But1 we are recommending an amendment of section 35 (the principal sanction), for mitigating the hardship.
1. See recommendation as to section 35, Proviso (a), infra.
7.26. Attested promissory notes.-
We now deal with another question-the question of charging duty on attested promissory notes. Here, one has to determine whether the document is a bond or a promissory note.
7.27. Question of attestation.-
As already stated1, the definition of 'promissory note' consists of two parts, namely, the portion referring to the Negotiable Instruments Act and the portion not so referring but added by the Stamp Act. For the moment, we are concerned with a point arising out of the earlier half of the definition of promissory note, which refers to the Negotiable Instruments Act. A controversy has arisen as to attested documents. In order to appreciate the controversy, it will be convenient if the relevant part of the definition of "bond" in the Stamp Act is quoted. It reads thus:-
"(5) 'bond' includes, (b) any Instrument attested by a witness and not payable to order or bearer whereby a person obliges himself to pay money to another.".
It is now proposed to add, in this part of the definition of bond,2 the words "expressed to be", so that the revised definition of this part will read as follows:-
(b) any instrument attested by a witness and not expressed to be payable to order or bearer whereby a person obliges himself to pay money to another,
1. Section 2(5)-"bond".
2. See recomendation relating to section 2(5)-"bond".
7.28. Requirement of attestation.-
This amendment, however, will not solve the following question, which arises out of the requirement of attestation. The question is this. If a document is not attested, but creates an obligation to pay money, is it chargeable as a promissory note or as a bond ? It is assumed that the document contains an undertaking to pay money to a certain person etc. and is, in all respects, a document which satisfies the requirements of a promissory note as defined in section 4 of the Negotiable Instruments Act, which is as follows:-
"4. Promissory note.-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."
This controversy arises because the definition of 'bond' is inclusive. In a Patna case,1 it has been held that an unattested document promising repayment of loan on demand after a stipulated date is a bond only, and is chargeable as a bond under Article 15. The document in the Patna case was not attested, and was not expressed to be payable to order or bearer, and stated that the two debtors who had affixed their thumb impressions and signatures in the margin had taken the money mentioned in the letter and written letter on demand. The Patna High Court held, in the first place, that since the payment could not be enforced within a stipulated period, and the expiry of the stipulated period had to be followed by a demand, the document was not a promissory note. A demand was a condition precedent to payment, and therefore, there was no "unconditional" undertaking. It was not a promissory note. On this point, it followed an earlier Madras case.2 But it may be noted that that case has been overruled by the Madras High Court in a recent judgment.3
Secondly, the Patna High Court pointed out that the definition of "bond" in the Stamp Act is not exhaustive, and does not exclude an unattested document if it is not covered by the two clauses of Article 49 (promissory note).
1. Radha Devi v. Dhanik Lal, AIR 1971 Pat 378 (380) para. 6.
2. Muthu Gounder v. Perumayammal, AIR 1961 Mad 347 (Ramachandra lyer, J.).
3. Thennappa Chettiar v. Andiappa Chettiar, (1971) 1 MLJ 214 (DB).
7.30. In a Mysore case,1 Malimath, J. observed-
"It was next urged by Shri Joshi that as the document is attested, the same is not a promissory note. It is no doubt true that a promissory note does not require attestation. At the same time, it is necessary to note that there is nothing in the Negotiable Instruments Act to indicate that an attestation of a document like the promissory note is prohibited. Attestation of a document is usually got done for the sake of abundant caution even though attestation is not the requirement of law. Merely because the document in question which is otherwise a promissory note, has been attested, it does not lose its character as a promissory note. I have, therefore, no hesitation in holding that the document in question is a promissory note."
1. Raghunath v. Bihari Lal, AIR 1972 Mys 159 (160-161), para. 4, dissenting from Ram Narayan v. Ram Chand, AIR 1962 Pat 325.
7.31. In the later Madras case,1 it was held that a document in the following terms was not conditional:-
"I have already received Rs. 15,000 from your Colombo A.S. shop for doing business of my own, I shall pay it after two years on demand by you with interest at two annas per month per Rs. 100 to you or to your order and receive back this promissory note."
1. Thenappa Chettiar v. Andiyappa Chettiar, (1971) 1 ML.1 214.
7.31A. The Court pointed out that, in the earlier case1, section 5, second paragraph, of the Negotiable Instruments Act had not been discussed. The fact that the payment was postponed did not make any difference, because of section 5. Hence, a document in this case was held to be a promissory note under Article 49(b) of the Stamp Act, and inadmissible, since it was not sufficiently stamped. The question of attestation was not in issue.
1. Muthu Gounder v. Perumayammal, AIR 1961 Mad 347.
7.32. It was suggested to us that an amendment should be made in the definition of "promissory note" to exclude attested documents from the scope of that definition, for the purposes of the Stamp Act. This would clarify the position, and avoid needless controversies. We have, after careful consideration, accepted the suggestion. We may note that the suggestion had been included in our Questionnaire,1 and has received substantial support.
1. Question 14(b) of the Questionnaire.