Andhra HC (Pre-Telangana)
Bolisetti Bhavannarayana @ Venkata ... vs Kommuru Vullakki Cloth Merchant Firm, ... on 8 February, 1996
Equivalent citations: 1996(1)ALD(CRI)530, 1996(1)ALT917
Author: V. Rajagopala Reddy
Bench: V. Rajagopala Reddy
JUDGMENT K.M. Agarwal, J.
1. Neither the order of reference made by the learned single Judge, nor that made by the Division Bench gives any definite indication as to the specific question or questions referred to the Full Bench. The learned single Judge felt that:
"There is a conflict in the Divisional Bench decisions of this Court in Ramakistaiah v. Yellappa and P. Ramana Reddy v. K. Rukminamma (1968 (1) An. W.R. 221) with regard to applicability of Explanation (i) to Section 13 (1) of the Negotiable Instruments Act, 1881 in deciding whether a document is a promissory note within the definition of Section 4 of the Negotiable Instruments Act".
The Divisional Bench also felt that there was a divergence of opinion as to the nature of the suit document, which required to be settled at rest by a Full Bench in view of its general importance. To quote the words of the Division Bench:
"As stated supra, there are conflicting views expressed in the two earlier judgments i.e., Ramakistiah's case (1st supra) and State Bank's case (2nd supra) and the later judgment in Ramana Reddi's case (3rd supra). As the interpretation as to whether the document in question is a promissory note or not is a very important question of law occurring day-in and day-out that arises in civil matters, we feel that it is just and proper to refer the matter to a Full Bench so as to resolve this conflict. Moreover, as the revision petition arises out of an order in the pending suit, there is any amount of urgency for being posted before a Full Bench."
The suit document itself was not the subject matter of consideration in any of the cases referred to in the two orders of reference and there is no conflict of opinion as to the nature of this particular document, though there is a dispute between the parties about its nature. Under these circumstances, we formulate the following questions for the Full Bench on the basis of what we understand to be the difficulty in the present case:
(1) Whether the Court can or cannot look into the provisions of Explanation (i) to Section 13(1) of the Negotiable Instruments Act, 1881 for the purpose of deciding the nature of any document as a Bond or as a Promissory Note?
(2) Whether the suit document is a Promissory Note? If not, what is its nature?
2. As to the first question, we may remind ourselves of the fact that the Indian Stamp Act, 1899, (in short, the "Stamp Act"), levies stamp duty on various documents at varying rates and, therefore, it becomes necessary first to determine the nature of any document before deciding the question of proper stamp duty payable on such document. Accordingly the definition of a 'bond' or a 'promissory note' as given in the Stamp Act alone is material for the purpose of determination of the nature of any document. Section 2(22) of the Stamp Act defines 'promissory note' as follows:
"Promissory note" means a promissory note as defined by the Negotiable Instruments Act, 1881;
"It also includes a note promissing 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 the context of this definition of "promissory note" given in Section 2(22) of the Stamp Act, the definition of the term as given in Negotiable Instruments Act, 1881 assumes importance. Section 4 of the latter act defines "promissory note" as follows:
"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.
Illustrations A signs instruments in the following terms:
(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."
(c) "Mr. B, I.O.U. Rs. 1,000".
(d) "I promise to pay B Rs. 500, and all other sums which shall be due to him."
(e) "I promise to pay B Rs. 500, first deducting thereout any money which he may owe me."
(f) "I promise to pay B Rs. 500 seven days after my marriage with C."
(g) "I promise to pay B Rs. 500 on D's death, provided D leaves me enough to pay that sum."
(h) "I promise to pay B Rs. 500 and to deliver to him my black horse on 1st January next."
The instruments respectively marked (a) and (b) are promissory notes. The instruments respectively marked (c), (d), (e), (f), (g) and (h) are not promissory notes."
This definition of promissory note itself indicates that there may be several types of promissory notes. Out of these various categories of promissory notes, some may be treated as 'negotiable instrument' within the meaning of Section 13 of the Negotiable Instruments Act and some others may not be so treated, but by that very fact, the nature of the document will not change, if it is otherwise a promissory note. In other words, if a document is a 'promissory note' within the meaning of Section 4 of the Act, it will continue to be 'promissory note', whether it comes or does not come within the meaning of the term 'negotiable instrument' as defined in Section 13 of the Act. For this reason, were are of the view that Section 13 of the Negotiable Instruments Act, or the definition of the term 'negotiable instrument' is wholly irrelevant when it comes to deciding the nature of a particular document as a promissory note, or otherwise. Similarly and for similar reasons, it is wholly irrelevant to refer to the provisions of Section 13 of the Act while deciding the nature of any document as a 'bond' or otherwise. Accordingly anything to the contrary held in any of the authorities referred to in the orders of reference is not a good law.
3. As to the second question, the document in question reads as follows:
"Dated 21-1-1980 Hand letter given on behalf of Kommuru Vullaki Cloth Merchants, Tenali to Sri Bolisetti Bhavannarayana son of Rama Mohana Rao, resident of Dhulipudi village.
For the purpose of our necessity we have on this day taken a sum of Rs. 5,000/- (Rupees Five thousand only) as hand loan from you. We shall pay the above sum with interest at 1.50% per mensem.
1. Sd /-Kommuru Ramamohana Rao
2. Sd/- Kommuru Satyanarayana.
Scribe Annam Punnaiah."
A critical analysis of the document in question would show that it consists of two parts and is not attested. The first part reads : "For the purpose of our necessity we have on this day taken a sum of Rs. 5,000 /- (Rupees Five thousand only) as hand loan from you." The second part says: "We shall pay the above sum with interest at 1.50% per mensem." The first part of the document is undoubtedly an acknowledgement of debt, but the second part is a promise to pay with interest. Article 1 of Schedule I of the Stamp Act describes an "acknowledgement" as:
"Acknowledgement, of a debt exceeding twenty rupees in amount or value, written or signed by or on behalf of, debtor in order to supply evidence of such debt in any book (other than a banker's pass book or) on a separate piece of paper when such book or paper is left in the creditor's possession provided that such acknowledgement does not contain any promise to pay the debt or any stipulation to pay interest or to deliver any goods or other property."
As the document in question admittedly contains a "promise to pay the debt" as also "stipulation to pay interest", it cannot be an acknowledgement on the face of its description as given in Article 1 of Schedule I of the Stamp Act. It cannot also be a promissory note, because it does not satisfy all the ingredients of a promissory note as defined in Section 4 of the Negotiable Instruments Act, read with Section 2(22) of the Stamp Act The document in question does not contain any promise to pay "to, or to the order of a certain person", nor "to the bearer of the instrument." It is, therefore, also not a promissory note. Then what is the nature of the document?
4. Though the amount mentioned in the document in question is "not payable to order or bearer", the makers of the document have obliged themselves to pay money with interest to the person named at the top of the document. It has, therefore, to be seen if the document can be said to be a "bond".
5. Section 2(5) of the stamp Act defines "bond" as follows: "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."
It would, thus, appear that the said definition of the term "bond" is not exclusive, but inclusive. In other words, the definition is exhaustive and not restrictive. It does not say that any document not attested by witnesses would not be a bond, though an obligation is incurred by one to pay money to another. Accordingly when Clause (b) of Section 2(5) of the Stamp Act mentions that "any instrument attested by a witness and not payable to order or bearer, whereby a person obliges himself to pay money to another" would be included within the meaning of "bond", it does not mean that similar document without attestation by a witness would not be included, or excluded from the definition of "bond". Under the circumstances, we are of the view that the document in question is a bond, though not attested by a witness.
6. The questions are accordingly answered. Let the papers be now placed before the appropriate Single Bench for further disposal of the revision in accordance with law. No Costs.