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Shiva Sahakari Up Jal Sinchan vs The Nanded District Central on 25 July, 2012

Bombay High Court Bombay High Court Shiva Sahakari Up Jal Sinchan vs The Nanded District Central on 25 July, 2012 Bench: S. S. Shinde 1 wp9317.11 IN THE HIGH COURT OF JUDICATURE AT BOMBAY BENCH AT AURANGABAD WRIT PETITION NO.9317 OF 2011 Shiva Sahakari Up Jal Sinchan Sanstha Ltd., Shivprasad Nagar(Manatha), Taluka Hadgaon District Nanded, Through its Chairman : Mr. Narendra s/o Shivprasad Maliwal, Age: Major, Occ: Agri., R/o. Manatha, Taluka Hadgaon, Dist. Nanded. ...PETITIONER VERSUS 1. The Nanded District Central Co-op.Bank, Head office: Station Road, Nanded, Through its General Manager. 2. The Nanded District Central Co-op. Bank, Branch Office Manatha, Taluka Hadgaon Dist. Nanded, Through its Branch Manager. 3. Rajesh Surendrakumar Maliwal, Age: Major, Occ: Agriculture, R/o. as above. 4. Kamalkishor Shivprasad Maliwal, Age: Major, Occ: Agril., R/o. As above. 5. Omprakash Kanhyalal Gilda,
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Shiva Sahakari Up Jal Sinchan vs The Nanded District Central on 25 July, 2012

Age: Major, Occ: Agril., R/o. As above. ...RESPONDENTS ... Mr. M.V. Deshpande, Advocate for petitioner. Mr. K.J. Suryawanshi, Advocate for respondent Nos. 1 and 2. ... 2 wp9317.11 CORAM: S.S. SHINDE, J. RESERVED ON :10/07/2012 PRONOUNCED ON :25/07/2012 JUDGMENT : . Rule. Rule made returnable forthwith. By consent heard finally. This writ petition takes exception to the judgment and order dated 29th August, 2011 passed by the Maharashtra State Co- operative Appellate Court, Mumbai, Bench Aurangabad, in Appeal No. 26 of 2010. 2. It is the case of the petitioner that, the petitioner is a registered society and is established to lift water from river by way of lift irrigation. The respondent No.1 is the District Central Co-operative Bank and the respondent No. 2 is the branch of the said bank. . The petitioner society applied for loan of Rs.11,94,000/- to the respondent No.1 bank, through the respondent No.2. The respondent No. 1 sanctioned loan with thirteen yearly instalments 3 wp9317.11 with interest @ 13% p.a. for 12 years period for repayment, on condition of executing promissory notes, by the present petitioner. . The petitioner society then paid initial instalment and then amount towards the price of sugar cane was forwarded to the bank by the sugar factory, where the sugar cane was supplied. It is further case of the petitioner that, after some period, the respondent bank itself has gone to the stage of liquidation and some dispute arose about the repayment of loan. . The respondent Nos. 1 and 2 then filed Dispute NO. CC/156/2005 under Section 91 of the Maharashtra Co-operative Societies A ct, 1960, for recovery of the loan amount. In the said Dispute, the bank has claimed that, the opponents have executed promissory notes to the extent of respondent to the bank or its nominee. These promissory notes were filed in the Co-operative Court at Nanded. 4 wp9317.11 . The opponents i.e. present petitioner and respondent Nos. 3 to 5 appeared and filed their written statement. The opponents have admitted the fact of obtaining loan, but disputed that, there was any default and also that, the amount is wrongly calculated in the Dispute. The parties went for the trial with these pleadings. The disputant led evidence and tried to rely upon the documents, promissory notes and bond papers. It is the case of the petitioner that, admittedly those documents are not at all stamped. The petitioner and other opponents raised objection for exhibiting the documents. The disputant, therefore, filed an application dated 2nd March, 2009, thereby seeking permission to affix stamp by impounding the documents. The opponents submitted their objection to the said application by objection dated 18th April, 2009, and prayed for rejection of the application of the disputant. . It was the contention of the opponents that, 5 wp9317.11
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Shiva Sahakari Up Jal Sinchan vs The Nanded District Central on 25 July, 2012

under Section 33 of the Bombay Stamp Act, 1958, there is no provision for impounding the promissory notes for payment of stamp duty. On the contrary, as per Indian Stamp Act, 1899, there is prohibition in respect of admissibility of bill of exchange or promissory notes, which are not duly stamped. It is the case of the petitioner that, in the present case, it is not even case of the deficit stamp of due stamp duty, but no stamp is affixed on any of the promissory notes and those documents are not at all admissible in evidence. 3. The trial Court heard both the sides and by order dated 13th July, 2009,rejected the application Exhibit-68 filed by the original disputant. . The disputant bank i.e. the respondent Nos. 1 and 2 herein, preferred appeal before the Maharashtra State Co-operative Appellate Court, Aurangabad on 5th October, 2009. The said appeal 6 wp9317.11 is registered and numbered as Appeal No. 26 of 2010. The Co-operative appellate Court heard the matter finally and by judgment and order dated 29 th August, 2011, allowed the appeal and directed the trial Court to exhibit the document and set aside the order passed by the trial Court. Being aggrieved by the said judgment and order of the Co-operate Appellate Court, Aurangabad dated 29th August, 2011, this writ petition is filed by the petitioner. 4. The learned Counsel appearing for the petitioner submits that, the Co-operative appellate Court has completely lost sight of the provisions of Section 33 of the Indian Stamp Act, 1899. The Co-operative appellate Court has committed serious error of law by holding that, the promissory note is not at all required to be stamped. It is further submitted that, the Co-operative appellate Court has committed error of law while applying the provisions of Section 11 of the Indian Stamp Act, 1899, and wrongly held 7 wp9317.11 that, promissory note is not required to be stamped. It is submitted that, the Co-operative appellate Court ought to have appreciated that, the promissory note is the basic and only instrument promising the payment on demand and it is not an ordinary piece of paper and the same is in fact an agreement for repayment, hence, unless it is duly stamped, it cannot be read in evidence. The findings recorded by the Co-operative appellate Court are, in fact, perverse, holding that, the promissory notes are not required to be stamped. It is further submitted that, if sch document is allowed to be read in evidence, it will be contrary to the provisions of Indian Stamp Act and Evidence Act. It is submitted that, entire proceedings are required to be dismissed for want of proving necessary documents. . The learned Counsel invited my attention to the judgments of this Court in the case of M/s. Wolstenholme International Ltd. vs. Twin Stars Industrial Corporation and others, reported in AIR 8 wp9317.11 2001 Bombay. 409 and in particular paragraph-10 of the said judgment and submitted that, under proviso (a) to Section 35, a power is given to the officer concerned, to admit the instrument in evidence on the payment of a duty and penalty. This proviso to the said section does not apply inter alia to bill of exchange or promissory note. In other words, Legislature has made exception so as to provide the power to admit in evidence an instrument upon the payment of duty and penalty would not be applicable to a Bill of Exchange, a promissory note or an instrument not chargeable to duty exceeding 10 paise. It is submitted that, when the disputant presented promissory notes in the evidence, same were not stamped and in view of the proviso to section 35(a) of the Indian Stamp Act, 1899, the power to admit in evidence an instrument upon the payment of duty and penalty, is not applicable to bill of exchange, promissory note or instrument not chargeable to duty exceeding 10 paise. Therefore, according to the Counsel for the petitioner, when promissory notes 9 wp9317.11 were tendered in the evidence, being not stamped, should have been returned to the disputant. It is submitted that, the Co-operative Court has rightly held that, said promissory notes cannot be read in evidence. However, the Co-operative appellate Court on erroneous interpretation of the relevant provisions held that, the said promissory notes can be read in evidence and direction is given to the Co-operative Court to exhibit the
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Shiva Sahakari Up Jal Sinchan vs The Nanded District Central on 25 July, 2012

document and read it in evidence. Therefore, according to the learned Counsel for the petitioner, this writ petition deserves to be allowed. 5. On the other hand, the learned Counsel appearing for the respondents submitted that, the Co-operative Appellate Court, after considering the relevant provisions of the Bombay Stamp Act, 1958, has rightly accepted the contention of the disputant and directed the Co-operative Court to exhibit the promissory notes and read the same in evidence. It is submitted that, the Co-operative Court has wrongly rejected the application at 10 wp9317.11 Exhibit-68 for impounding the promissory notes by affixing stamp duty. The learned Counsel further submits that, the Co-operative Court did not consider the provisions of Section 34 of the Bombay Stamp Act, by which the document can be impounded by allowing the parties, to affix the proper stamp. It is submitted that, there is power under Section 34 of the Bombay Stamp Act to impound the document, however, the Co-operative Court has wrongly rejected the application of the original respondent Nos. 1 and 2. It is submitted that, Co-operative appellate Court has rightly considered the provisions of Bombay Stamp Act and Indian Stamp Act, and came to the conclusion that, the Act does not provide that, the promissory notes are required to be duly stamped and objection taken by the appellant in cross examination, to exhibit the promissory notes, is not legal and valid. It is submitted that, there is no any provision under the Bombay Stamp Act or Indian Stamp Act that, the promissory notes executed by the borrower in favour of the bank 11 wp9317.11 should be stamped. It is further submitted that, there are huge dues against the petitioner and with the intention to prolong the legal recovery, the petitioner has raised objection before the trial Court not to exhibit the promissory note. 6. I have given anxious consideration to the submissions of the Counsel appearing for the parties. With the able assistance of the Counsel for the parties, I have perused the writ petition, annexures thereto, other documents brought to the notice of this Court and also relevant provisions of the Bombay Stamp Act, and also Indian Stamp Act, 1899 and the provisions of the Negotiable Instruments Act, 1881 and the judgments cited by the Counsel appearing for the parties. Upon careful perusal of the order of the trial Court below Exhibit-68, it appears that, the trial Court after appreciating the contentions held that, promissory note which is tendered in evidence by the disputant bank is not admissible in evidence since it is not stamped and further said defect 12 wp9317.11 cannot be cured by sending the document for impounding or levying appropriate stamp duty in view of proviso (a) to Section 35 of the Indian Stamp Act, 1899. 7. The order of the trial Court was challenged before the Maharashtra State Co- operative Appellate Court, Mumbai, Bench Aurangabad. The Co-operative appellate Court framed as many as four points for its consideration/determination. The first point is, whether the promissory note is required to be duly stamped as per Bombay Stamp Act?. The said point is answered in the negative. The second point is, whether the order dated 13.07.09, passed "Below Exhibit-68" by the learned Judge, Co-op. Court, Nanded in dispute bearing no. 156/05 is legal & valid?. The second point is answered in the negative and it is held that, interference in the order of the trial Court is called for and accordingly, set aside the order dated 13.07.09 passed "Below Exh.68" in Dispute bearing No. 13 wp9317.11 156/02 and directed the trial Court to exhibit the documents and read the same in the evidence. While allowing the appeal, the Co-operative appellate Court relied upon the provisions of Bombay Stamp Act and has taken a view that, sub-section (b) of Section 11 of the Indian Stamp Act, 1899, provides bills of exchange and promissory note drawn or made out of India may be stamped, however, the said provision is not mandatory. The Co-operative appellate Court reached to the conclusion that, the promissory note, if drawn out of India, then it is required to be stamped. Thus, the provision does not provides that, promissory note is
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Shiva Sahakari Up Jal Sinchan vs The Nanded District Central on 25 July, 2012

required to be duly stamped. 8. Upon careful perusal of the judgment of the Co-operate appellate Court, it appears that, the Co-operative appellate Court has not considered that, "promissory note" is covered under the Indian Stamp Act, 1899. Sub-section 22 of Section 2 of the Indian Stamp Act, 1899 defines "promissory note" means a promissory note as 14 wp9317.11 defined by the Negotiable Instruments 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". . Under Section 4 of Chapter II of the Negotiable Instruments Act, 1881 (26 of 1881), "promissory note" is defined, which reads thus ; "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." . Therefore, it appears to this Court that, the subject "promissory note" is covered under the Indian Stamp Act, 1899. 9. Whether the promissory note payable 15 wp9317.11 otherwise than on demand not duly stamped as required by Schedule-I, Article 49(b) of Indian Stamp Act, is admissible in evidence or not?. The said question felt for consideration of this Court in the case of Kallappa Pundalik Reddi vs. Laxmibai Dattoba Vellaram and others reported in 1994 Mh.L.J. 1839. In the said judgment, in the facts of that case, this Court has taken a view that, promissory note was not one payable on demand but was payable otherwise than on demand and was inadmissible in evidence as it was not stamped as required by Article 49(b) of the Schedule-I of the Indian Stamp Act. Section 35 of the Indian Stamp Act contains an absolute prohibition in respect of non-admissibility of bills of exchange or promissory notes which are not duly stamped. The document could not be received in evidence even on payment of deficit stamp duty and penalty. . In the case of Jatindra Mohan Deb Laskar vs. Khara Singh and others reported in AIR 1964 16 wp9317.11 Assam 138, the question, whether insufficiently stamped promissory note, is admissible in evidence or not, has been considered by the High Court of Assam and view is taken that, where a promissory note is insufficiently stamped, it is inadmissible in evidence for any purpose, that is to say, such a document should neither be received in evidence nor acted upon. Hence a suit based upon insufficiently stamped promissory note is liable to be dismissed. 10. This Court in the case of M/s. Wolstenholme International Ltd., (supra), had occasion to interpret proviso (a) to Section 35 of the Indian Stamp Act, 1899 and in paragraph-10 of the said judgment, this Court has taken a view that, the Legislature has made an exception so as to provide that the power to admit in evidence an instrument upon the payment of duty and penalty would not be applicable to a Bill of Exchange, a promissory note or an instrument not chargeable to duty exceeding 10 paise. In paragraph-10 of the 17 wp9317.11 said judgment, this Court held ; "Therefore, whereas an instrument which is chargeable with duty can be admitted in evidence by a person having by law or consent of parties authority to receive evidence, upon the payment of duty and penalty, as the case may be, this would not apply to the excepted categories of instruments specified in proviso (a) to Section 35; Similarly, the power of the Collector impounding an instrument under Section 37 or receiving an instrument sent to him under sub-section (2) of Section 38 to certify the instrument upon the payment of proper duty or penalty is not attracted to an instrument falling in the excepted category. The view which I take is fortified by a Judgment of a learned single Judge of this
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Shiva Sahakari Up Jal Sinchan vs The Nanded District Central on 25 July, 2012

Court, D.R. Dhanuka, J. in Kaliappa Pundlik Reddi vs. Laxmibai Dattoba Vellaram, reported in 1994 Mah.L.J. 1839. A similar view was taken by a Division Bench of the Madras High Court in Thenappa Chettiar vs. Andiyappa Chettiar. AIR 1971 Mad. 290." 18 wp9317.11 11. Therefore, it follows from the authoritative pronouncements of this Court and also the High Court of Assam referred above, "promissory note" which is payable otherwise than on demand not duly stamped as required by Schedule-I Article 49(b) of Indian Stamp Act, 1899, is inadmissible in evidence. Same cannot be received in evidence even on payment of deficit stamp duty and penalty. The defect that, promissory note is not duly stamped or inadequately stamped, cannot be cured in view of the proviso (a) to Section 35 of the Indian Stamp Act, 1899, as held by this Court in the case of M/s. Wolstenholme International Ltd., (supra). Therefore, this Court is of the opinion that, the view taken by the Co-operative Court, Nanded i.e. trial Court, is the correct view. The view taken by the Co-operative appellate Court is not in consonance with the relevant legal provisions and also authoritative pronouncements of this Court in the judgments cited supra. Therefore, the impugned judgment and order of the Co-operative 19 wp9317.11 appellate Court cannot sustain in law, therefore same is quashed and set aside. The order below Exhibit-68 passed by the Judge of the Co-operative Court, Nanded in Dispute No. CC/156/2005 is upheld and stands confirmed. 12. The writ petition is allowed to the above extent, same stands disposed of. Rule made absolute on above terms. sd/[S.S. SHINDE, J.] sut/JULY12

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