sridhar pasumarthy (ADVOCATE) 28 October 2014

Promissory note suit

Respected Fellow Members,

Promissory note was executed undertaking to pay the amount with interest at 18% on demand. But, on its backside, promisor wrote that amount with interest would be paid after 18 months in his own handwriting and put his signature beneath it. Promissory note was affixed with Rs.1/- revenue stamp.

Basing on the said pronote I filed the suit.

Material averments in the plaint in brief are :-

"On dt.xxxx, defendant borrowed an amount of Rs.xxxx/- from the plaintiff and executed the suit promissory note in favour of the plaintiff in his own handwriting promising to repay the same with interest at 18% p.a. either to the plaintiff or to his order, on demand. He also endorsed on the backside of the said promissory note in his own handwriting that he would repay the amount after 18 months."

Now, defendant filed his written statement denying the signature and handwriting on the promissory note as well as of the endorsement on the backside of the promissory note is not that of him and that it was fabricated under certain circumstances by the plaintiff.

That material aspect in the written statement is "The suit promissory note is not a demand promissory note and it is a promissory note payable otherwise than on demand by virtue of endorsement on backside of promissory note. As such, according to Article 49 (2) of Schedule I of Indian Stamp Act, stamp duty is insufficient and hence it is not admissible in evidence as per Section 35 of stamp Act and hence, the suit is liable to be dismissed on this sole ground.

Now my doubts are :-

1. What is the effect of words written on the backside of the promissory note particularly with respect to deciding stamp duty?

2.Whether the words written on the backside of promissory note are part and parcel of the suit promissory note or can it be termed as different transaction?

3. Is there any way to get the suit promissory note marked without any objection?

I am very anxious of knowing the answers as you all knew well that suit will be dismissed if promissory note is not marked.

Pls clarify my doubts. Thanks in advance.

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2 Replies

adv.raghavan (Advocate,9444674980) 28 October 2014

It is precarious situation. when he had denied the signature in promissory note, then what is the point in contradicting material aspect of the case. Endorsement made on the back side of the Note will not form part of this case. You may refer the following case.

Shivasankara Chettiar vs Natesa Chettiar , IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 31.01.2008,CORAM :THE HONBLE MR. JUSTICE S.TAMILVANAN,A.S.Nos.355 of 1996

In support of his contention, the learned counsel for the appellant relied on the decision, Sreenivasan vs. Subbarama Sastrikal, reported in AIR 1988 KERALA 112, wherein, it has been held that "a pro-note contains an unconditional undertaking signed by the maker to pay certain amount with certain interest to or to the order of the certain person on demand without fixing any time for payment and after execution of the promissory note on the back side of the promissory note an endorsement was recorded under the signature of both the parties that if the amount is paid within one month, the interest need not be paid." The Kerala High Court in the judgment has held that the endorsement is independent of the promissory note and it was executed only after execution of the promissory note. Even, if that was included and executed as part of the promissory note itself, it would not have in any way changed the nature of the pro-note as one payable otherwise than on demand.

14. In the instant case, admittedly, the respondent has executed the suit promissory note, Ex.A.1, promising to repay the amount with 12% interest on demand. As per the endorsement, Ex.A.2, made on the back of the promissory note, he has also made part payment on 05.10.1989 and while making the endorsement, Ex.A.2, he mentioned the balance amount without adding interest payable as on the date and further, as per the endorsement, the entire balance should be paid on or before 30.05.1990. Therefore, as contended by the learned counsel for the appellant, it can be construed as an endorsement only for the part payment of Rs.40,000/-. It is clear that the endorsement unilaterally made by the respondent on the back of the suit pro-note does not form part of the pro-note. The respondent has also not complied with the condition stipulated by him, by making payment of the entire balance on or before 30.05.1990. Therefore, based on the endorsement, Ex.A.2, the Court cannot draw any legal presumption that the appellant had waived the interest payable to him from the date of pro-note till the date of the aforesaid endorsement.