Shantilal vs Vijay Kumar

Prakash Shrivastava, J.

This writ petition has been filed by the petitioner challenging the order dated 3-12-2008, passed by the Court of 1st Additional Distt. Judge, Ratlam in Case No. 8-B/2008 holding the document dated 16-10-2002 to be bond and directing the plaintiff to pay appropriate Stamp duty as per the provision of Indian Stamp Act before admitting the document in evidence.

The petitioner (plaintiff) has filed the suit for recovery against the respondent (defendant) on the basis of the document in question dated 16-10-2002. The Trial Court by the order dated 3-12-2008 examined the nature of the document and held it to be bond and further held that as per Article 12 of Schedule I-A of the Indian Stamp Act duty was payable at the rate of 4% whereas the document was executed only on the Stamp of Rs. 100/- which was not on adequate Stamp, therefore, not admissible in evidence. The Trial Court directed the petitioner to pay proper stamp duty and penalty as per the provisions of Stamp Act before admitting the document in evidence. Aggrieved with this order petitioner has filed the present writ petition under Article 227 of the Constitution of India.

Learned Counsel appearing for the petitioner submitted that the Trial Court has committed an error in treating the document in question to be a bond whereas the document is only an agreement which has been executed on proper Stamp paper.

Learned Counsel appearing for the respondent submitted that no error has been committed by the Trial Court in treating the document as bond since it satisfies the requirement of bond.

We have heard the learned Counsel for the parties and perused the record.

The definition of bond given in Section 2(5)(b) of the Indian Stamp Act, 1899 read as under:

"Bond" includes:

(a) any instrument whereby a person obliges himself to pay money to another, on condition that the obligation shall be void if a specified act is performed, or is not performed, as the case may be;

(b) any instrument attested by a witness and not payable to order or bearer, whereby a person obliges himself to pay money to another; and

(c) any instrument so attested whereby a person obliges himself to deliver grain or other agricultural produce to another.

The definition of bond is inclusive definition and the bond as defined in Section 2(5)(b) is to be given the widest meaning. An instrument which satisfies the conditions mentioned in the above section is included within definition of bond. The necessary requisites of bond are that the instrument should be signed, attested by witness, not payable to order or bearer and by the instrument a person should oblige himself to pay money to another or to deliver grain or other agricultural produce to another.

To Full Bench of this Court in the matter of Santsingh v. Madandas Gyandas Panika and Anr. reported in 1976 MPLJ 238 , has noted the essentials of the bond as under:

The essential of bond are:

(1) There must be an undertaking to pay;

(2) The sum should be a sum of money but not necessarily certain;

(3) The payment will be to another person named in the instrument;

(4) The maker should sign it;

(5) The instrument must be attested by a witness; and

(6) It must not be payable to order or bearer.

In the present matter, the order of the Trial Court has been challenged on the ground that the document in question is not a bond, but it is an agreement. For determining the true character of an instrument, the instrument is required to be read as a whole and its dominant purpose is to be ascertained. The basic difference between the bond and the agreement is that in the case of bond, in the event of breach, the party to the instrument, who is obliged to pay, is liable to pay the sum stipulated in the instrument whereas in the case of agreement the quantum of damages is to be fixed by the Court.

The Calcutta High Court in the matter of Gisborne and Co. v. Subal Bowri, reported in (1882) ILR 8 Cal. 284 , while considering the difference between the bond and agreement has held that:

The definition of a bond in Section 5 of the Act is precisely what we understand by a bond in England, and it is an obligation of a different character from a covenant to do a particular act, the breach of which must be compensated in damages.

Whether a penal clause is attached to such a covenant or not, the remedy for the breach of it is in form and substance a suit for damages; and by Section 74 of the Indian Contract Act, the English rule with regard to liquidated damages is abolished, and the plaintiff in such a suit has no right under any circumstances to claim the penalty itself as such. He can only recover such compensation, not exceeding the amount of the penalty, as the Judge at the trial considers reasonable; but he is entitled to that compensation whether he proves any actual damages or not.

The remedy upon a bond is very different. The plaintiff in the case of a simple money bond recovers the sum named in the bond, or in the case of a bond conditioned for the performance of covenants he recovers the actual damage which can prove that he has sustained. In either case not only is the bond a contract of a different form and nature from a covenant with a penal clause, but the remedy upon it, and the amount recoverable for the breach of it, is also different.

The Full Bench of Delhi High Court in the matter of In the Matter of Hamdard Dawakhana (Wakf) Delhi C., , while considering the same issue held that:

(12) It is trite to say that every bond is an agreement. So is the case with a mortgage or sale or exchange. But what we have to see is whether that agreement has acquired the character of a "bond". We have already noticed the relevant clauses in the instruments in question. There is no dispute that under those instruments one of the parties thereto had obliged itself to pay moneys to others.

(14) The test laid down by the learned Chief Justice for distinguishing a "bond" from an "agreement", is : In the former case, in the event of breach the party to the instrument, who had obliged to pay money to the other, is liable to pay the sum stipulated in the instrument. In the latter case, the quantum of damages has to be fixed by the Court. If we apply that test to the facts of the present case, it is clear that the liability of Hamdard Dawakhana is fixed. Its liability is to pay the same stipulated. There is no question of damages in this case.

The Special Bench of Calcutta High Court in the matter of The Bengal Paper Mills Co. Ltd. Vs. The Collector of Calcutta and Others, , while considering the difference between the bond and agreement following Delhi and Calcutta judgments has held that:

In the matter of In the Matter of Hamdard Dawakhana (Wakf) Delhi C., , a Full Bench of the Delhi High Court, on the basis of the Calcutta High Court''s judgment, reported in (1862) ILR 8 Cal 284, which we have cited above, has explained the difference between a ''bond'' u/s 2(5) and an ''agreement''. In the case of a bond in the event of breach, the party to the instrument who had obliged to pay money to the other is liable to pay the sums stipulated in the instrument. In the latter case, the quantum of damages has to be fixed by the Court.

The Allahabad High Court in the matter reported in Maula Bux and Others Vs. Munna Lal and Others, , while considering the document which was in the form of agreement but satisfied the conditions of bond held that:

An instrument, in the form of an agreement between two parties, reciting that a certain sum is due from the first party to the second conventing that the first party will pay the same with interest in certain installments, and being attested by witnesses and not being payable to order or bearer, comes within the definition of a bond as given in Section 2(5) of the Stamp Act, and the stamp duty payable thereon is that for a bond, although the instrument appears to be in the form of an agreement.

The nature of the document dated 16-10-2002 needs to fee ascertained in the light of aforesaid position in law. On perusal and analysis of the document dated 16-10-2002, we find that the document contains following features:

(1) There is unconditional undertaking to pay by Vijay Kumar.

(2) The sum payable is the sum of money.

(3) Under the instrument the payment is to be made to Shantilal, who has been named in the instrument and it is not payable to the order of a person or the bearer of the instrument.

(4) The instrument is signed by Vijay Kumar.

(5) The instrument is attested by two witnesses.

The above features of the document dated 16-10-2002, establish that the document satisfies all the requirement of bond and is covered within meaning of the bond as given in Section 2(5)(b) of the Indian Stamp Act.

Since the document under consideration contains expressed stipulation regarding the payment of amount and on the breach of the document the party concerned has the remedy to recover the amount mentioned in the document instead of claiming damage and in fact the plaintiffs suit itself is for recovery of the amount mentioned in the document, therefore, the document has rightly been held to be the bond by the Trial Court.

Though the instrument is titled as agreement, but on reading the document as a whole it becomes clear that it is a bond since it satisfies all the requirements of bond.

In view of the aforesaid analysis, we do not find any illegality in the order of the Trial Court. The writ petition is accordingly dismissed.

No order as to cost.