Promissory note
GANGO PADHYAYA
(Querist) 13 June 2018
This query is : Resolved
Promissory Note should contain two signatures of the maker one for execution as provided under Section 4 of Negotiable Instrument Act and the other for cancellation of Adhesive Stamps under Section 12 of the Indian Stamp Act
I REQUIRE CITATIONS
Guest
(Expert) 14 June 2018
When you have cited the provisions of the law, yourself, what need you have felt for any citation?
Guest
(Expert) 14 June 2018
When you have cited the provisions of the law, yourself, what need you have felt for any citation?
Guest
(Expert) 14 June 2018
When you have cited the provisions of the law, yourself, what need you have felt for any citation?
R.Ramachandran
(Expert) 14 June 2018
If the promissory note contains the signature of the borrower across the adhesive stamp affixed on the promissory note that will be suffice. In those situations two separate signatures - one for promissory note and one for cancelling the adhesive stamp - are not required.
The situation envisaged in Sec. 12 of the Stamp Act will arise only when a promissory note was executed first without affixing the stamp; and when the stamp was affixed subsequently (thereby requiring the cancellation of the stamp).
GANGO PADHYAYA
(Querist) 17 June 2018
AIR1981Ker86, ILR1982(1)Kerala749
Negotiable Instruments Act, 1881 (Central Act 26 of 1881) Sections 4 and 13 - An instrument not mentioning the name of the "promisee" and not made payable to "or order" is still a promissory note and negotiable.The appeal arises out of the suit filed by the Appellant against the Respondents for recovery of amounts due under promissory notes executed by the 3rd Respondent, the Managing Director of the 1st Respondent Firm, the 2nd Respondent being the other partner. The 2nd Respondent resisted the suits contenting inter alia that the instruments are not promotes, that the 3rd Respondent who executed the same has no authority to bind the firm, that the instruments are not duly executed, that stamps were affixed subsequently and therefore there is material alteration. The trial court dismissed the suit. Allowing the appeal,Held: Going by the definition in Section 4 of the Negotiable Instruments Act, it is not necessary that the promise should be to pay the money to the "order" of a certain person. Even without such a clause a document could be a promissory note. A reading of Section 4 and 13 of the Negotiable Instruments Act makes it clear that a document, if it otherwise satisfies the definition of promissory note, will not cease to be so merely because the words "to order" are absent in the document. Even without such an expression, the document could be a promissory note It is also negotiable in case the document does not contains words or expressions prohibiting negotiation. Section 4 of the Negotiable Instruments Act only requires that the document must show that the amount is to be paid to or to the order of "a certain person". If a document clearly states that it is so payable to a certain person specifically described therein as such in the body of the document, the matter is clearly beyond controversy. The documents are, so to say, addressed to the respective promisees that is followed by a promise to pay though the word "you" is not present. A reading of each of the documents as a whole would show that the person whose name is written at the top was intended to be indicated as the payee under the document. In each of the documents, the payee is ascertained by name and the name is given at the top. The instruments definitely and with certainty point out of the persons who are to receive the money. The same is the position with reference to Negotiable Instrument, as defined in Section 13(1) of Negotiable Instruments Act. Explanation 1 to Section 13 of the Act says, inter alia, that a promissory note is payable to order which is expressed to be so payable or which is expressed to be payable to a particular person, and does not contain words, prohibiting transfer or indicating an intention that it shall not be transferable. In other words, a promissory note is payable to order in two cases, namely, where it is expressed to be so payable to order or where even if it is not expressed to be so payable to order, if it is expressed to be payable, to a particular person and does not prohibit expressly or by implication transfer of the note.Stamp Act, 1959 (Kerala Act 17 of 1959) Section 12--Mode of Cancellation of adhesive Stamps--Drawing two parallel lines across the stamps effectively and legally cancels the stamps.
Held: Section 12 of the Stamp Act deals with cancellation. Even according to this provision cancellation by writing the signature or initials is not the only way of cancelling the stamp. Cancellation must be done is an effectual manner. Writing the name or initials is one such effectual manner indicated in Section 12(3) of the Act. There could be other effectual ways in which stamps could be cancelled. The purpose of cancellation is to see that the stamps are not used again as is mentioned in Section 12 clause (1) (a) and (b) of the Stamp Act, where it is stated "cancel the same so that it cannot be used again". The expression "so that it cannot be used again" only means that it cannot be used again in the normal course without realising that stamp has already been cancelled. The expression does not imply that the cancellation must be made in such a way as to make it impossible for any dishonest person to use the same once again fraudulently. The test to see if stamp has been effectually cancelled is to see whether an ordinary, honest, law-abiding citizen would on seeing the stamp believe that it is already cancelled and. therefore refrain from using it or would believe that it has not already been used and therefore would proceed to use it once again. Cancellation is expected to be done according to Section 12 of the Stamp Act, either when stamps are affixed or when it is executed, that is, when it is signed. The provision could only mean that the stamps must be cancelled other immediately they are affixed or. immediately after the maker puts his signature. In other words, the entire process must take place in such a manner that one must be able to say that it has been done simultaneously as part of the same transaction. Partnership Act, 1932 (Central Act 9 of 932) Sections 18, 19, 20 and '22 -- Managing partner executing a pronote in the letter head of the firm without describing himself as managing partner of the firm will bind the firm--Section 27 of the Negotiable Instruments Act. Held: In the normal course signatory of a negotiable instrument alone is liable there under. Even it he happens to sign an instrument only as an agent, he alone will be liable if he signs it without indicating thereon that he signed only as an agent or that he does not thereby intend to incur personal responsibility. At the same time, a principal may be bound by a duly authorised agent executing a negotiable instrument, provided the agent "acts in the name of the principal". The special provisions (namely Sections -26 and 27) of the Negotiable Instruments Act override the provisions of Section 22 of the Partnership Act, in so far as negotiable instruments are concerned. In other words, a firm or the principal will be bound under the negotiable instrument only if the agent, that is the partner, "acts" in the name of the firm. It is not sufficient that the partner in some other manner implies an intention to bind the firm. It is necessary that the making of a negotiable instrument must, in order to bind the firm, be done by a partner in the name of the firm. The name of the firm must be clearly and sufficiently disclosed on the face of the instrument. The firm will be bound by the partner's signature if the name of the firm is disclosed in such a way that on a fair interpretation of the instrument, the firm name is the real name of the person liable on the instrument. The real question is whether the instrument is so drawn that in form it binds the firm. It is not sufficient that the firm name is mentioned only as an address of the signatory-partner. The responsibility of the firm must be made plain and must be instantly recognised from the form in which the instrument is made, since the instrument may pass from hand to hand. The true meaning of the instrument must be evident at the first glance. This, however, does not mean that the firm will be liable only if the signatory signs specifically on behalf of the firm. It is sufficient if the form in which the instrument is drawn up or made is such that it may be said reasonably that the instrument has been made by a duly authorised agent acting in the name of the principal, that is, by a partner acting in the name of the firm. Each of the three promissory notes in this case has been written on a letterhead which contains the full name, description and address of the partnership firm. It is no doubt true that the promissory notes are seen signed only by third Defendant, who did not put the name of the firm or put his description as Managing Partner under the signature. If this had been done, the matter would have been beyond all controversy. In the body of the note the promise is not that "I promise to pay", but that "We promise to pay". The expression "We", it appears has been deliberately used for the purpose of disclosing the liability of the firm. This view gains strength when considering the fact that the promissory notes have been executed on the letter-heads which contain the full name description of the firm. It cannot be said that the letter-heads have been used only to indicate the address of the third Defendant. On the face of these documents it is clear beyond any doubt that the third Defendant was clearly acting and purporting to act in the name of the firm.Negotiable Instrument Act, 1881 (Central Act 26 of 1881) Section 80--Even if no rate of interest is specified in an instrument Plaintiff is entitled to interest.Held: Even if the parties did not agree to pay interest, the Plaintiffs would be entitled to claim interest. Under Section 80 of the Act, where no rate of interest is specified in an instrument, interest shall be calculated at the rate of 6 per cent per annum from the date on which the money should have been paid by the party concerned until realisation of the amount due or until such date as the court directs. Where the instrument is silent regarding interest, it is a case where no rate of interest is specified in the instrument. Hence interest could be ordered at the rate provided under Section 80 of the Negotiable Instrument Act.
GANGO PADHYAYA
(Querist) 17 June 2018
In the above similar fashion it is equal to this or not
Promissory Note should contain two signatures of the maker one for execution as provided under Section 4 of Negotiable Instrument Act and the other for cancellation of Adhesive Stamps under Section 12 of the Indian Stamp Act by any mode as suggested supra
R.Ramachandran
(Expert) 17 June 2018
Your understanding that ALWAYS there should be two signatures one while executing the promissory note and another to cancel the adhesive stamp IS NOT CORRECT.
There can be one signature across the adhesive stamp affixed on a promissory note. That is sufficient.
As already indicated by me, if a signature was originally affixed on a promissory note without affixing the stamp, then when the adhesive stamp was affixed subsequently, the same needs to be cancelled, say by affixing the signature. OTHERWISE NOT.
If you can indicate as to what is your practical situation, one would be in a better position to answer.
