J.B.MEHTA - (1.) The petitioner defendant challenges in this petition the order of the learned Civil Judge dated March 28 1966 by which he admitted the document in question as an agreement on payment of penalty rejecting the petitioners contention that it being a promissory note was inadmissible in evidence for want of sufficient stamp. Mr. Zaveri has challenged this order as being patently erroneous. The document in question was executed by the petitioner defendant on July 19 1961 The title of the document is Khata of defendant Thakker Prabhuram Nagji. The document states that Rs. 651.00 are received by the executant Prabhuram Nagji in respect of the share of M/s. Narottamdas Laljibhai i.e. the H.U.F. firm of the plaintiffs on July 19 1961 which had been debited to this defendant after arriving at the (BAKI) balance on making up the account. The amount was to be paid by the defendant as and when the plaintiff- firm M/s . Narottamdas Laljibhai demanded and if the defendant committed default in paying the same the plaintiff firm was entitled to recover the same from his person and property and if any expense was incurred on that behalf the defendant was liable for the same. The trial Court construed the document on its all the recitals and in the light of the surrounding circumstances after ascertaining of the parties and interpreted it to be an agreement stating the balance due and even though the promise to pay on demand was coupled with it the document was held to be substantially and read as a whole a Khata baki or an agreement and not a promissory note. We have to see whether these tests which are applied by the learned trial Judge disclose any patent error of law so that it can be held that he had not posed the right test.
(2.) In Mortgage Insurance Corporation Ltd. v. Commissioner of Inland Revenue 21 Q.B.D. 352 a strong Bench of the Court of Appeal interpreted the wide terms of sec. 49 of the English Stamp Act. Their Lordships pointed out that the wide phraseology in sec. 49(1) which included within the definition of promissory note any document containing promise to pay any sum or money had to be restricted in the context as otherwise the literal meaning would require all sorts of documents which contain promise to pay such as bonds mortgages etc. to be treated as promissory notes. Their Lordships therefore restricted the words containing a promise to mean that it must be substance of the document the whole contents which could not mean containing a promise to pay as merely forming one of the number of stipulations. Therefore the true interpretation which was accepted by their Lordships was that it included documents contents of which consisted substantially of a promise to pay a definite sum of money and of nothing else Irs Md. Akbar Khan v. Attar Singh 1936 P. C. 171 their Lordships of the Privy Council concurred in the said reasoning of the Court of Appeal and gave a restricted meaning to the much wider definition in the Indian Stamp Act even in the context of sec. 2(22) of the Indian Stamp Act where the language did not suffer from the same defect as in the English Stamp Act which ignored the definition in the Bills of Exchange Act 1882 At Page 174 their Lordship further pointed out that where the document was primarily a receipt even if it was coupled with a promise to pay it could not be regarded as a promissory note in view of the aforesaid restricted construction. Considering the test of intention of the parties their Lordships pointed out that the receipts and agreements generally are not intended to be negotiable and serious embarrassment would be caused in commerce if the negotiable net were cast too wide. The document in question was not held to be a promissory note but merely a receipt containing the terms on which the amount was to be refunded. As the document did not record or purport to record all the terms of contract between the parties and as there was nothing in the document explaining how the money came to be received the parties were not prevented from showing that it was paid by way of loan or deposit or for some other purpose. In the next decision in Lala Karam Chand v. Firm Mian Mir Ahmed 1938 P. C. 121 at page 122 their Lordship pointed out that there was a strong current of authority in India to the effect that documents of this character containing a promise to pay came within the ban of sec. 35 of the Stamp Act. Their Lordships however pointed out at page 123 that in Md. Akbar Khans case their Lordships had settled the true legal position that documents of this nature viz.; receipt or agreements even where they contain express promise to pay were not promissory notes as they were clearly never intended to be negotiable instruments at all and they could not be held to be inadmissible in evidence for want of a stamp. Even the Supreme Court has taken the same view. In Anna Malai v. Veerappa A.I.R. 1956 S.C. 12 at page 14 their Lordships held that a receipt showing credit of the amount in respect of stridhan money merely evidenced the deposit and it was a document recording a transaction of deposit between the parties. Their Lordships pointed out that even though a receipt recording this deposit was coupled with an agreement that it would be payable on demand and even if this express agreement was recorded in the aforesaid document the transaction of deposit was not thereby converted into a transaction of loan and the words we shall pay the said sum could not convert the document into a promissory note. Such a document could not therefore be held to be inadmissible evidence by virtue of sec. 35 of the Indian Stamp Act. Therefore the aforesaid decisions including the decision of the Supreme Court have settled the right test to be adopted when a question arose as to the admissibility of the document in evidence by virtue of sec. 35 of the Indian Stamp Act. Their Lordships in terms out at page 14 that a promise to pay would be involved both in the promissory note and a deposit and the Court would have to dispose of this question by having regard to the intention of the parties and the circumstances of the case to arrive at the conclusion whether the document was a promissory note. Therefore such receipts which evidence the deposit or merely acknowledge of payment done in some earlier transaction when read as a whole and when looked at its entire substance in the context of the intention of the parties could never be treated as promissory notes merely because such receipts are coupled with an express promise to pay the amount mentioned in the document on demand.
(3.) Mr. Zaveri however; vehemently relied on the decision of the Division Bench in Jagjivandas is v. Gumanbhai VI G.L.R. 778. The Division Bench in that case had to decide a totally different question and it had not to resolve a conflict as to whether the document was a promissory note or something else. The Division Bench only disposed of the narrow question as to whether the negotiability was an essential test for deciding whether the document was a promissory note the Division Bench only held that every promissory note is not necessarily a negotiable instrument because the promissory note is a large wider term which may include both the kinds of promissory notes which are negotiable instruments as well as not. The Division Bench also resolved the question as to the effect of the words whenever you demand which were held not to restrict negotiability. This decision could hardly help Mr. Zaveri in his present contention. Their Lordships never faced the present question as to how the document is to be interpreted for which tests are laid down by the high authorities already mentioned. Even the other decisions cited by Mr. Zaveri would hardly be material on this relevant question as they could never purport to lay down any different test than what these highest authorities have laid down including the decision of the Supreme Court. Mr. Zaveri had vehemently relied upon the decision of the Rajasthan High Court in Gordhan Singh v. Suwa Lal A.I.R. 1959 Raj. 156 which has been approved even by the Full Bench of that Court in Nanga v. Dhannalal. A.I.R. 1962 Raj. 68. In that decision it was pointed out that in order that a document may fall within the definition of promissory note contained in the Negotiable Instrument Act it is necessary that: (i) there should be unconditional undertaking to pay (ii) the sum should be a sum of money and should be certain (iii) the payment should be to or to the order of a person who is certain or to the bearer of the instrument and (iv) the maker should sign it. Besides fulfilling the above tests the instrument must pass three further tests viz. (1) the promise to pay must be the substance of the instrument (2) there must be nothing else inconsistent with the character of the instrument as substantially a promise to pay and (3) the instrument must be intended by the parties to be a promissory note. It is a question of fact in each case whether a particular document is to be regarded as an acknowledgment or promise and in order to decide the question the primary intention of the parties and the real characteristics of the document must be looked into. This decision really reiterates the Same tests which have been laid down in the aforesaid decision by the high authorities which have been already considered by me.;