Z.A. Chinwala vs Minoo Jal Pardiwala and Another

M.P. Thakkar, J.—Two questions arise in this revisional application directed against an interlocutory order passed by the learned Judge

presiding over 10th Court, City Civil Court, on July 23, 1976, namely, (1) Whether the learned trial Judge was right in holding that the document in

question was a ''bond'' within the meaning of Section 2(c)(ii) of the Bombay Stamp Act 1958, and (2) whether the learned trial Judge was

empowered to pass an order directing the petitioner-plaintiff to pay the deficit stamp fees on the footing that the document was a bond alongwith

ten times the penalty on the amount of deficit.

So far as the first point is concerned, the view taken by the learned trial Judge appears to be exceptionable. Under the document in question

executed on October 17, 1972 which is attested by witnesses and which does not make he amount under the document payable to order or

bearer, a new arrangement has been arrived at in respect of the preexisting liability for a sum of Rs. 1500/- due by opponent-defendant to

petitioner-plaintiff. By this document a time-schedule has been provided for repayment of the debt by instalments as stipulated iii the agreement and

an obligation to pay the amount as per the tine-schedule has been undertaken. There is also a stipulating to the effect that in case of failure to

adhere to the time-schedule of payment, the amount may be recovered by taking legal steps along with interest at 12%.

The expression ""bond"" has been defined for the purposes of the Bombay Stamp Act, 1958 in Section 2(c) (ii) as under:

In this Act, unless there is anything repugnant in the subject or context,-

XX XX XX

(c) ""bond"" includes,

XX XX XX

(ii) any instrument attested by a witness and not payable to order or bearer, where by a person obliges himself to pay money to another.

The Learned Counsel for the petitioner has contended that inasmuch as there is a reference to the pre-existing liability of Rs. 15000/-, the

document in question can be considered to be a supplementary document which provides for the manner of payment of the original debt as also for

the payment of interest and it cannot, therefore, be said that by this document the opponent has obliged himself to pay a sum of money to the

petitioner. It is contended that the obligation was already in existence and this document merely contains a recital pertaining to the said obligation.

This document by itself does not create an obligation to pay. So runs the argument. And on this premise it is contended that the document would

not fall within the description of ""bond"" within the meaning of Section 2(c)(ii) of the Bombay Stamp Act. Reliance in this connection has been

placed on Radha Swami Sat Sang Sabha Vs. Raj Narain, , which has been cited with approval by Special Bench of the Allahabad High Court in

Hindustan Sugar Mills Ltd. Vs. State of U.P. and Others, . In Radha Swami Sal Sang Sabha''s case the document which came up for

consideration was a supplementary document subsequently executed after promissory notes were executed by the debtor in favour of the creditor.

In terms it has been mentioned therein that the promissory notes were kept alive and all that was achieved by the document in question was-to

provide for a fresh liability to pay interest apart from making the provision regarding manner of payment of principal debt it appears that in

substance the view taken by the Court was that the reference to the pre-existing debt was an incidental reference and that the document in question

was one making a provision for payment of interest which was not provided by the original document. In paragraph 16 of that judgment it has in

terms been observed as under:

In the case before us, the four promissory notes remained outstanding and we know that, as a matter of fact, three suits were filed on the basis of

the four promissory notes, one of the suits consolidating two promissory notes and the other two suits were upon the basis of the other two

promissory notes.

The Court has thereafter made it clear that in every case one has to look at the intention of the parties and that so far as the document before the

Court was concerned, ""we find that in the present case the intention of the parties was not to extinguish the old promissory notes but to keep them

alive and the document only provided for the method of payment and for reduction of interest under certain contingencies.

The Division Bench has also in terms referred in the fact that if there was either a fresh contract without any antecedent contract at all or there

was a novation of the contract and the old contract was extinguished, the mailer would stand on a different footing. What emerges from the

aforesaid discussion is (i) that the paramount consideration to be borne in mind is as regards the real intention of the parties; (ii) if by the document

the original contract is extinguished and a new contract is substituted in its place, the document would fall within the description of ""bond""; (iii) if the

original contract is kept alive and a supplementary agreement is executed which in substance provides for interest or mode of payment only and if

the reference to the original contract is made only in an incidental manner in passing, then the document would not fail within the definition of

''bond''. The view taken by the Division Bench has been approved by the Special Bench of the Allahabad High Court in M/s. Hindustan Sugar

Mill''s case (supra). The crucial test, therefore, is to inquire what is real intention of the parties and whether the document in question in substance

brings about a new contract in place of the old and whether it is a contract which is merely supplemental to the original contract. A very simple test

can be devised in this connection. Can a plaintiff maintain a suit on the original contract without having to face the defence of novalio? In other

words, if the subsequent document can defeat the suit of the plaintiff on the ground that the obligation undertaken tinder the original contract has

been substituted by the new arrangement, it cannot be said that the subsequent document is merely a supplementary document. If a plaintiff can

maintain his action on the basis of the original contract along with the subsequent contract, the document in question can be said to be a

supplementary document which does not bring about a novatio and would not fall within the description of ""bond"". In the present case a suit on the

original contract of deposit would not be maintainable in view of the subsequent contract by which a time-schedule for payment was agreed upon

coupled with a liability to pay interest on the failure to abide by the time-schedule. In view of the subsequent document the plaintiff could not have

maintained an action on the original contract. Under the original contract the plaintiff could have sued for repayment at any time. Under the

subsequent contract the plaintiff could not sue for repayment unless the time-schedule was breached. Under the original contract no interest could

ever be claimed. Under the new contract no interest could be claimed provided the time-schedule was adhered to, but the liability to pay interest

would arise if the time-schedule was scuttled. Under the circumstances, the subsequent contract constitutes novatio and it cannot be said to be a

supplementary agreement which only incidentally makes a reference to the pre-existing liability. This document itself creates a liability to pay in

accordance with the time-schedule embodied in the document and it also entitles the plaintiff to claim repayment along with interest only upon

failure to abide by the time-schedule and upon a breach being committed. Under the circumstances, it cannot be said to be a supplementary

agreement making a provision in relation to matters which were not provided in the original agreement. It is in point of fact a new agreement and,

therefore, it would fall within the description of ""bond"" within the meaning of Section 2(c)(ii) of the Bombay Stamp Act. The view taken by the

learned trial Judge is, therefore, correct.

Counsel for the petitioner is, however, right in his submission that under the Stamp Act, a party producing a document in a Court of law has an

option to pray for the document being admitted on payment of deficit stamp fees along with ten times the penalty. But it is merely an option. There

is no obligation on his part to pay the deficit stamp fee along with ten times the deficit by way of penalty irrespective of whether he wants the

document to be admitted in evidence or not. He is right in this submission. The Court cannot insist that the document should be tendered in

evidence on payment of deficit along with penalty at ten times the deficit. There is no provision in the Stamp Act which empowers the Court to

oblige a litigant to pay the deficit along with penalty at ten times the deficit and get the document admitted. It is perfectly open to a litigant to say

that he does not want the document to be admitted and will take consequences. The learned trial Judge had, therefore, no jurisdiction to direct the

petitioner-plaintiff to by the deficit along with the penalty. That part of the order must, therefore, be quashed and set aside. It maybe remarked that

having regard to the scheme of the Bombay Stamp Act, when a document which is not sufficiently stamped is produced before the Court, the

Court is required to impound the document and to deal with it in the manner provided by Section 37 of the Stamp Act, that is to say, to send it to

the Collector. If the document is admitted on payment of deficit and penalty, the document has to be impounded and forwarded along with the

amount recovered from the party producing the document. If however, the document has not been admitted in evidence on payment of deficit and

penalty, the Court has to forward the document impounded by it to the Collector for being dealt with in accordance with law as enjoined by

Section 39. After impounding the only power that the Court has is to send to the Collector and the consequential steps for recovery can be taken

only by the Collector u/s 39. The Court cannot make the recovery by coercive method or by ordering the party producing the document to pay the

deficit along with penalty. The learned trial Judge, therefore, is directed to follow the procedure prescribed by the Stamp Act in the light of the

observations made herein. It may be stated that u/s 39 the Collector (unlike the Court) has the authority to require the payment of the deficit duty

together with a penalty of even Rs. 5/- or, if he thinks fit, a larger amount which in any case cannot exceed ten times the amount of deficit.

6.1. The petition is, therefore, partly allowed. The order passed by the learned trial Judge ordering the petitioner-plaintiff to pay the deficit along

with the penalty is quashed and set aside. The learned trial Judge is directed to proceed to deal with the impounded document in accordance with

law as observed hereinabove. Rule is made absolute to the aforesaid extent only. There will be no order regarding costs.

The learned trial Judge has directed the stay of (he suit by the impugned order. But then presumably the order of stay is only to enable the

plaintiff to pay up the deficit duty along with penalty if so desired. In view of the order passed by this Court, there is no question of continuing the

stay any further and the trial Court will be required to proceed with the suit in accordance with law on the footing that the petitioner-plaintiff does

not insist on the document being admitted on payment of deficit along with penalty in the Court. Of course it will be open to the petitioner plaintiff

to produce the document at a subsequent stage after the deficit has been paid up as per the order if any of the Collector u/s 39 of the Bombay

Stamp Act.