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Report No. 67

11.11. Proper time of cancellation.-

A number of points arise on this section. We shall take them up one by one. The first point relates to the proper time of cancellation. The section makes it obligatory on the first holder to affix a stamp on the foreign bill or note and to cancel the same before he does any of the Acts set out in the section. If the stamp is not cancelled at the proper time, it cannot be cancelled afterwards. Thus, where a stamp was affixed to a hundi which was drawn at Indore before it was presented for payment in British India, but was not cancelled before presentation, it was, in a suit on the basis of the hundi, held that in the face of the imperative words of this section, it was impossible to accede to the suggestion that the stamp could be cancelled in the court.1

1. Ramprasad v. Shrinivas Balmukund, (1925) 27 Born LR 1122 (1126).

11.12. On this point, the English law1 is, however, different. The (English) Stamp Act of 1891, section 35, Proviso (b), enables a bona fide holder to cancel the stamp itself, if it was not cancelled when the foreign bill came into his hands; and upon his so doing such bill is deemed to be duly stamped and as valid and available as if the stamp had been duly cancelled by the person by whom it was affixed. Under the English law, therefore, a foreign bill, in order to be admissible in evidence, requires only that the proper stamp should have been affixed.2 Construing this proviso, Blackburn, J. expressed an opinion that the cancellation may be made in open Court at any time before the verdict.3

1. Section 35, Proviso (b) Stamp Act, 1891 (English).

2. Marc. v. Rovy, (1874) 31 LT 372 (374): 23 WR (English) 89.

3. Valle v. Michael, (1874) 30 Law Times 463 (464).

11.13. Recommendation to adopt the English provision.-

It would, in our view, be an improvement, if the position which prevails in England is adopted. The primary object of the requirement of cancellation is to ensure that the stamp is not used again. This object is achieved as much by the English provision as by the Indian section. The present holder should not be penalised for the faults of the previous holder. We recommend that the section should be suitably amended.

11.14. Meaning of "first holder".-

The second point relates to the important opening words in section 19, viz., "first holder in India"1. The Act is not concerned with the possession of the bill or promissory note before then. On this point no clarification is required.

1. Shiva Subramania v. Kalankarayan, AIR 1941 Mad 868.

11.15. Instruments stamped with Indian stamp outside India.-

The third point is important. According to the madras High Court, the Legislature does not appear to be interested in whether a promissory note has or has not been stamped outside India with the result that a note stamped outside India will have to be stamped again before endorsement.1 Thus, when a bill of exchange not payable on demand drawn out of India or a pronote made out of India has been duly stamped abroad with Indian stamps of the proper amount and description, and the stamps have been cancelled, the question of its being stamped in India arises, because section 19 compels the first "holder" thereof to stamp it before he does any of the acts mentioned therein.

The same view was taken in another case2 of the Madras High Court,-"In the interests of judicial comity"-and quite apart from any consideration of the correctness of the decision therein. The facts of the case appear, however, to have been reported meagerly. It is also not clear whether the "first holder of the pronote in India" in this case was the promisee himself or his transferee. The Punjab High Court has, however, taken a contrary view.3 According to that High Court, if an Indian Stamp is already affixed on the promissory note, then, a fresh stamp will not be needed, because, to do so would be to charge double duty.

1. Siva Subramania v. Kalankarayan, AIR 1941 Mad 868 (869, 870) (Mochett, J.).

2. I.D. Lobo v. Marajal Doggu, AIR 1953 Mad 424.

3. Rattan Chand Birooram v. L. Khairatiram Nandlal, AIR 1955 Punj 88 (90), para. 5-6.

11.16. Recommendation for amendment.-

Whatever be the correct interpretation of the existing language of section 3(b) read with section 19, it appears to us that there is no reason why an instrument bearing an Indian stamp should again be stamped with an Indian stamp when it is presented for acceptance or payment or endorsement etc. as contemplated by section 19. Indian revenue law has already been complied with, by affixing the Indian stamp. If this approach is correct, it would be desirable to add an Explanation to section 19 to the effect that where the promissory note already bears an Indian stamp, it shall not be necessary to stamp it again. Such an amendment has been favoured by almost all the replies to our Questionnaire also.1

1. Q. 35.

11.17. Suit to enforce the liability.-

The last proposition to which attention should be drawn while discussing section 19 is that where a promissory note is executed outside India, it is admissible here if the suit is brought to enforce the liability created by the promissory note. The requirement of stamp under section 19 arises only when a first holder in India does one of the specified acts, namely, presentation for acceptance, presentation for payment, endorsement, transfer or otherwise negotiation in India. In an early Madras1 case, it was clearly stated, that the provisions of section 19, Indian Stamp Act, are applicable to a holder only where there is one of those acts set out in the section and that an instrument need not be stamped in the manner provided when it was not dealt with in any of the ways set out. Thus,2 even if a pronote executed out of India is not stamped, a suit can be brought on the pronote as between the promisor and promisee. No amendment is required on this point.

1. Md. knothan v. Md. Hussain Rawthan, 1899 ILR 22 Mad 337.

2. Siva Subramania v. Kalankarayan, AIR 1941 Mad 868 (case-law reviewed).



Indian Stamp Act, 1899 Back




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