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Before Saleern Akhtar, J
MUHAMMAD SHARIF-Plaintiff
versus
MUHAMMAD HASHIM PARACHA AND ANOTHER-Defendants
Suit No. 500 of 1985, decided on 2nd October, 1986.
(a) Stamp Act (II of 1899)-
-- S. 2 (22)-Negotiable Instruments Act (XXVI of 1881), S. 4 "Promissory note"-.-Definition-Scope widened by Stamp Act 1899 Definition of "promissory note" in S. 2 (22) of Stamp Act 1899 has imported definition of "promissory note" as provided by S. 4 of Negotiable Instruments Act 1881 but has widened the same by in cluding in its fold a note promising 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.
(b) Stamp Act (II of 1899)-
-- Ss. 11 & 49 [as amended by Sind Finance Ordinance (VI of 1982)] Stamp Rules, 1925, Rr. 5 & 13 (f ) -Promissory note, stamp duty on-Extent-On a promissory note payable on demand, for amount not exceeding two and a half lac stamp duty, held, would be rupees fifteen-When amount exceeds, same would be chargeable with stamp duty of rupees thirty-Promissory note in respect of amount exceeding rupees two and a half lac could be stamped with adhesive stamp - Provisions of S. 11 of Stamp Act being directory and permissive, does not prohibit that promissory note of any other value cannot be stamped with adhesive stamp.
(c) Negotiable Instruments Act (XXVI of 1881)--
-- S. 4-Stamp Act (II of 1899), S. 2 (22)-Promissory note-Indivi dual and joint liability-Promissory note executed by one person for himself and on behalf of another jointly and severally or by two persons jointly and severally, held, would bind both of them indivi dually and collectively-Such promissory note cannot be treated as three separate promissory notes requiring stamp duty for each promissory note separately-Such joint and individual liability would arise from one document-Stamp duty is chargeable on basis of amount mentioned in promissory note and not on basis of number of persons executing same-No restriction is placed restraining number of persons who could execute promissory note jointly or severally.
(d) Negotiable Instruments Act (XXVI of 1881)-
-- Ss. 4 & 1 l8-Stamp Act (II of 1899), S. 2 (22)-Promissory note executed as security for payment of loan-Validity of-Considera tion-Where a promissory note was executed for payment of any loan or amount due under agreement, same, held, was executed for valid consideration and would be a valid document.
(e) Contract Act (IX of 1872)-
-- S. 2 (h)-Qanun-e-Shahadat Order (10 of 1984), Art. 118-Breach of agreement-Proof-Suit for recovery of contract amount-Where defendant failed to prove that any breach of agreement was committ ed by plaintiff justifying stoppage of payment to him, while admitt ing liability to pay claimed amount, plaintiff, held, was entitled to decree of his suit.
Zahid Tariq for Plaintiff.
Kanwer Mukhtar Ahmad for Defendants.
Date of hearing : 2nd October, 1986.
The plaintiff has filed this suit for recovery of Rs. 1,50,000. The plaintiff and the defendant entered into an agreement on 17-3-1984 whereby the plaintiff who held 50,000 shares of the defendant No. 2 of the face value of Rs. 10 each sold the same to defendant No. 1 for Rs. 5,00,000. The defendant No. 1 agreed to pay this amount in instalments of Rs. 50,000 to be paid on or before of 15th of every month. The first instalment was to be paid till 14-4-1984. To secure the payment of Rs. 5,00,000 the defen dant executed a promissory note dated 17-3-1984 promising to pay on demand a sum of Rs. 5 lacs to the plaintiff. The defendant No. 1 paid Rs. 3,50,000 but has failed to pay Rs. 1,50,000.
In the written statement the defendants have admitted the execution of the agreement, sale of shares of the defendant No. 2 and also the execution of the promissory note for Rs. 5 lacs. The defendants also admitted that Rs. 3,50,000 have been paid and the balance amount of Rs. 1,50,003 was not paid as the plaintiff committed breach of the agree ment and started a campaign of vilification and harassment against the defendants by making false reports to the authorities having business dealings with the defendant. It is also averred that the defendants were put under threat and harassment by the plaintiff who suffered mental agony, torture and loss of reputation. On the basis of the pleadings the following issues were framed :-
(1) Whether the promissory note is properly stamped, if not its effect
(2) Whether the promissory note was executed by way of collateral security in terms of agreement dated 17-3-1984, if so, is it without consideration
(3) Whether the plaintiff has committed breach of agreement, if so, is the defendant relieved of the responsibility for making payment
(4) Relief.
Issue No. 1
There is no dispute about the execution of the promissory note. The learned counsel for the defendant has contended that the promissory note bears adhesive stamp and he has not been written on paper with embossed or engraved stamp, therefore, it is not a valid promissory note. The second contention of the learned counsel for the defendant is that this promissory note has been executed by two persons and their liability is joint and several therefore, in law there are three promissory notes and thus it has been insufficiently stamped. As regards the first contention the learned counsel has referred to rule 5 of Pakistan Stamp Rules 1925 which reads as follows :-
"5. Promissory notes and bill of exchange. -A promissory note or bill-of-exchange shall, except as provided by section 11 or by rules 13 and 17, be written oar paper on which a stamp of the proper value, with or without the word hundi' has been engraved or embossed."
Reference has also been made to section 11 of the Stamp Act which reads as follows :-
"11. Use of adhesive stamps.-The following instruments may be stamped with adhesive stamps, namely :---
(a) instruments chargeable with a duty not exceeding twenty-five paisa except parts of bills of exchange payable otherwise than on demand and drawn in sets ;
(b) bills of exchange, and promissory notes drawn or made out of Pakistan ;
(c) entry as an advocate, Vakil or attorney on the roll of a High Court ;
(d) notarial acts, and
(e) transfers by endorsement of shares in any incorporated company or other body corporate".
Promissory note has been defined by section 2(22) of the Stamp Act as follows :-----
"(22).- Promissory note' means x promissory note as defined by the Negotiable Instrument 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 ;"
This definition has imported the definition of promissory note provided' by section 4 of the Negotiable Instrument Act. However, for purposes of Stamp Act the second paragraph of section 2(22) widens the definition of promissory note as defined by section 4 of the Negotiable Instrument Act which reads 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 instru ment."
There is no dispute that Exh. 5/2 is covered by the definition of the promissory note. A promissory note is chargeable with stamp duty under Article 49 of the Stamp Act which after amendment by the Sind Finance ordinance, 1982, reads as follows:--
"49. Promissory Note as defined by section 2(22)-
(4) When payable on demand
(i) When the amount or value does not exceed
two hundred fifty thousand rupees; Fifteen Rupees.
(ii) When the amount exceeds two hundred
fifty thousand rupee; Thirty rupees.
(b) When payable otherwise than The same duty as on a
on demand; Bill of Exchange
(No. 13) for the same
amount payable other
wise than on demand.
According to Article 49 as amended by the Finance Ordinance 1982 on a promissory note payable on demand for the amount not exceeding Rs. 2,50,000 the stamp duty is Rs. 15 but where the amount exceeds Rs. 2,50,000 it is chargeable with stamp duty of Rs. 30. Clause (b) of; Article 49 reproduced above is not applicable to the present case.
Mr. Tariq, the learned counsel for the plaintiff relying on the following rule 13 (f) of the Pakistan Stamp Rules 1925 contended that the promis sory note has been properly stamped :----
"13. Use of adhesive stamps on certain instruments.-The following instruments may be stamped with adhesive stamps namely:-----
(f) Instruments chargeable with stamp duty under Articles 19, 36, 37, 49 (a) (ii) and (iii) and 52 of Schedule 1.
In view of rule 13(f) instruments which are chargeable with stamp duty under Article 49(a)(ii) can be stamped with adhesive stamp applicable Article 49(a)(ii) as reproduced above is pin which the amount exceeds Rs. 2,50,000. Ticable to the promissory note under rule 13 read with Article 49 as amended by Sind Finance Ordinance, 1982, a promissory note in respect of amount exceeding Rs. 2,50,000 can be stamped with adhesive stamp.
Mr. Kanwar Mukhtar Ahmed, the learned counsel for the defendant, has specifically referred to section 11 and contended that according to this provision of law promissory note executed or made out of Pakistan can be stamped with adhesive stamp, but other promissory notes made in Pakistan cannot be stamped with adhesive stamp. The provision of section 11 is directly and permissive as the words used are that the follow ing instruments may' be stamped with adhesive stamp. It does not prohibit nor impose restriction that promissory notes of any other value D cannot be stamped with adhesive stamp. This reasoning finds support from rule 13 read with Article 49 as amended by the Sind Finance Ordinance VI of 1982 which permit fixation of adhesive stamp on promissory note even in. cases where amount exceeds Rs. 2,50,000.
The next contention of the learned counsel is that promissory note incorporates the liability of three persons namely the defendant No. 1 and the defendant No. 2 severally and the liability of the defendants jointly. According to the learned counsel for the defendants this means that there are three documents incorporated in one document and for the purposes of stamp duty each promissory note should have been stamped with Rs. 30, therefore, the total stamp duty payable on such document was Rs. 90. Thus, the pronote has been insufficiently stamped. The argument of the learned counsel is based with reference to the liability of the executant. The learned counsel has referred to a commentary from Aggarwal on Stamp Act where it has been stated that where two persons jointly and severally execute a pronote there are three liabilities. In the same book in the foot note it is mentioned that this comment is with reference to Order I, rule VI, C. P. C. A promissory note executed by one person for himself and on behalf of another jointly and severally or by two persons jointly and severally binds both of them individually and collectively. The joint and individual liability arises from one document. Such promissory note cannot be treated as three separate promissory notes requiring stamp duty for each promissory note separately. Under the Stamp Act the stamp duty is charged on the basis of the amount mentioned in the promissory note and not on the basis of the number of persons executing it. No restriction has been placed under law restricting the number of persons, who could execute the promissory note jointly or severally. My finding is in the affirmative. The effect of this finding is that the promissory note is a duly and properly stamped document.
Issue No. 2;
The learned counsel for the defendant contended that the promissory note was executed in pursuance of agreement entered into between the parties under which the defendant was bound to pay Rs. 5,00,000 to the plaintiff and the promissory note was executed as a collateral security, therefore, it is without consideration. On the admitted facts it is clear that the defendants were liable to pay Rs. 5,60,000 and as a security for its payment, the promissory note was executed. There is a valid considera tion for execution of such a promissory note and merely because it was F executed as a security for payment of any loan or amount due under an agreement it cannot be held to be without consideration. The promissory note is a valid document executed for consideration.
Issue No. 3;
The defendant has alleged that the plaintiff has committed breach of agreement and, therefore, the payment of Rs. 1,50,000, was withheld. In support of this allegation the defendant No. 1 has appeared and stated that after the agreement he had paid seven instalments but the plaintiff started a campaign of vilification against the defendants and instigated sub-contractors and workers of the defendants to make false complaints before various Government Authorities. According to the defendants the plaintiff had agreed orally .to cooperate with the defendants, but as he indulged in aforestated activities he committed breach of agreement and payment was stopped. Except the words of the defendant No. 1 there is no evidence to establish this fact. The defendants could have examined such authorities or produced such reports which were lodged against them, but no effort was made in this direction. It may be mentioned that the plaintiff was employed with the defendant No. 1 who started his G career with him and was ultimately made one of the directors of the defendant No. 2. There seems to be some personal animosity which has led to this unfortunate situation. However, on the basis of record the defendants have failed to prove that any breach of agreement was com mitted by the plaintiff justifying stoppage of payment to the plaintiff. The defendant No. 1 has frankly admitted that he was liable to pay Rs. 1,50,000 to the plaintiff but due to his subsequent conduct he did not pay the same. This can hardly be a defence particularly as the defendant has not been able to establish the misconduct of the plaintiff.1 In these circumstances my finding is in the negative.
Issue No. 4;
In view of the above discussion the suit is decreed for Rs. 1,50,000.
A. A. Suit decreed.
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