Some Fond Thoughts about a Giant among Titans

(By K.G. Balasubramanian, Advocate, High Court of Kerala)

The name Veerachandra Menon evokes thoughts of respect, admiration and inspiration. Not necessarily in that order and certainly not those feelings alone, but many more, depending on who and what you are. I did not have the good fortune to be a junior at his office, but I had opportunities to be associated with him off and on.

Clients and lawyers spoke his name in hushed tones. He was Veerachandra Menon to everyone (Veeran, to the very closest ones). To me and many others, he was a fatherly figure. He showed us that rivalry is only one side of the revelry in the profession, not its only side and that it should not overtake mutual respect.

I remember my first meeting with him at Irinjalakuda during my toddler days at the Bar. I had heard lawyers and my late father’s senior clerks talking of him in very deferential words. I had looked forward to meeting him with mixed feelings of apprehension, respect and honestly some degree of envy justified by his towering reputation and the huge gap of decad between us.

He had come to Irinjalakuda for a criminal trial. For reasons of appetite and outlook, I had decided that criminal court was not my parlour, that I did not belong there. Wonder of wonders, he recognized me from afar at first sight and beckoned to me, without being introduced as the son of his late friend. His very first words of affection and regard - I should say, to the envy of my contemporaries – were soothing and encouraging. I learnt later that he had the same attitude towards every human being. Wise to the vices and ways of the world, he could not be otherwise.

I will be deceiving myself if I do not mention the voraciousness that hallmarked Veerachandra Menon in reading a large number of law journals and his phenomenal memory. A junior lawyer had to be sure he had noticed and understood the latest judgements (for and against him) before discussing a case with him.

I must mention his steadfast adherence to punctuality and rueful reaction to his rare failure on that. Imagine conducting trials – civil and criminal – at Thrissur, Chalakudy, Irinjalakuda, Kodungallur and Chowghat the same day with clock-like precision, without missing a beat or a point! I am not exaggerating, I swear. I have seen him appear suddenly in court like “the Ghost who Walks” from out of nowhere when the presiding officer/clients/witnesses were fretting at not seeing him and the opposite counsel was heaving a sigh of relief at the thought of the case being adjourned. I have also seen him disappear likewise – in a hurry to reach the next court far away - without anyone noticing. Each trial was a challenge to him, like a baseball game – to make every run “HOME”! His enthusiasm was infectious. His repartees were eloquently phrased. I do not recall a single instance, during my interaction with him, when he uttered an extra syllable while examining a witness or arguing a case, except when the opponent was recalcitrant.

I am not equipped to speak of his legendary success as a trial lawyer. I would say he kindled hope in every client and junior. He always maintained a positive outlook. “Negative” was not a term he was familiar with. His words of criticism about anything and anyone were extremely polite and truthful. His conduct in court was delightful, regal and exemplary, a treat to the senses. A rare combination of being humble and authoritative in every word and gesture, he took the presiding officer and witness into confidence. Despite all preparedness, the witness never knew what had hit him when he was finally told by the presiding officer “you may step down”. When he hit back infrequently, the victim stayed hit!

I know there have been (and there are) lawyers of same calibre and qualities. But to my mind, he was not just Veerachandra MENON, but a phenoMENON – a true representative of the industrious and intelligent lawyer community and the brilliant epitome of shrewd and polite advocacy.

The King is dead! Long live the King !!

The Scope and Reach of the Words "Otherwise Dealt with"

Occurring  in  Section 52 of the Transfer of Property Act

(By N.Subramaniam, Advocate, High Court of Kerala, Ernakulam)

I. Question posed before Allahabad High Court (in AIR 1970 All. 648) was whether, raising of construction wrongfully, would come within the meaning of “otherwise dealt with” as occurring in Section 52 of T.P. Act. Section 52 of T.P. Act reads as follows:-

Transfer of property pending suit relating thereto -- During the pendency in any Court having authority within the limits of India excluding the State of Jammu and Kashmir or established beyond such limits by the Central Government of any suit or proceedings which is not collusive and in which any right to immovable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose.

Explanation-- For the purposes of this section, the pendency of a suit or proceeding shall be deemed to commence from the date of the presentation of the plaint or the institution of the proceeding in a Court of competent jurisdiction, and to continue until the suit or proceeding has been disposed of by a final decree or order and complete satisfaction or discharge of such decree or order has been obtained, or has become unobtainable by reason of the expiration of any period of limitation prescribed for the execution thereof by any law for the time being in force.

On the basis of the judgment by Allahabad High Court, it is clear that the principle enshrined in S.52 of T.P. Act applies to raising of construction wrongfully also.   The Allahabad High Court has referred to 

AIR 1934 Lah. 978 (Narain Singh  v. Imamudin);

(1872) 18 Weekly Reporter  527 (Radha Gobind Shaha  v. Brijendra Coomar Roy Choudhari)

AIR 1927 Rangoon 82 (Kauksike v. Onghock Sein).

Mohd. Ismail v. Ashiq Hussain, the matter involved in AIR 1970 All. 648 arises in execution proceedings.

When the suit was filed there was no constructions in the land in dispute. Defendant -J.D. had only dug the foundations. That was the reason, why the suit was filed for recovery of possession of the property occupied by defendant and belonged to the plaintiff and also for permanent injunction. There was no prayer for removal or demolition of the construction. The defendant completed the ground floor before the temporary injunction would be finally decided.

After the constructions were made by the judgment debtor, the plaintiff did not apply for amendment of the plaint and hence he was simply granted a decree for possession and injunction. When this decree was put into execution, the judgment debtor raised an objection that, the removal or demolition of the constructions could not be ordered by the executing court. The objection was repelled by the executing court but in appeal the learned Civil Judge allowed the objection, holding that, in execution of the decree for possession, there could be no removal of the constructions. The Allahabad High Court found that the words “otherwise dealt with” in Section 52 of T.P. Act are general and can also include the raising of construction wrongfully. It was also ruled when the defendant could not, in any manner deal with the immovable property in dispute in the suit, he cannot to the disadvantage of the plaintiff decree holder, claim any advantage out of the constructions wrongfully made. 

The reasoning as found, is this.

If it were necessary for the plaintiff to always institute a new suit with regard to any wrongful act done during the pendency of the suit, the litigation would never come to an end and it shall be open to the defendant to cause an irreparable injury to the plaintiff. Therefore the Allahabad High Court found that it had no difficulty in the executing court ordering the removal or demolition of construction made during pendency of the suit, during the execution of decree for possession. Some are the impression that doctrine of lis pendens - would apply only transfer or alienation of suit property during the pendency of suit.

II. The rule laid down in AIR 1927 Rangoon 82 was that, the J.D. should vacate the building in the land as soon as the order was communicated to him and he was given 2 months time to vacate, if he pleases he can dismantle the building and remove its material. Distinction had been made between the construction before the institution of suit illegally and the construction made during the pendency of suit.

It is held as follows:-

Where the constructions were made before the institution of the suit, the rule laid down in the Rangoon case could be adopted; but where the constructions were made during the pendency of the suit, constructions made are against the law and hence shall be deemed to have been made by the judgment-debtor at his own risk and responsibility namely, that he shall not be able to claim any benefit of such constructions during the execution proceeding. When the judgment debtor had no right to the constructions, he can raise no objection to the removal of the constructions during the execution. Where it appears to the executing court that the costs of removal or demolition of the constructions would exceed the costs of material to be fetched after the demolition and the decree holder is willing to let the construction stand on the land, the rule laid down in (1872) 18 WR 527 (Cal.) (supra) can be adopted namely, that it can be left open to the decree holder to decide what he shall do with the constructions after he is given actual possession of the land along with the constructions standing thereon. Thereby the judgment debtor would not be put to any additional expenses. But if costs of demolition shall not exceed the costs of the materials and the judgment debtor is willing to release the materials in favour of the decree holder free of charges, and the decree holder is willing to accept the constructions, the executing court need not direct the demolition of the constructions, the ownership which would automatically pass to the decree holder.

III. The following are the other examples which fall within the meaning of “otherwise dealt with.”

(1) The entering into a contract for sale of the land in suit, which is capable of specific performance of.

1917 Oudh 193 at 194

(2) Partition of the property in suit;  though a mere filing of a suit for partition is not a dealing with the property such as is contemplated by the section.

ILR 1913 (38) Bom. 427 at 429 

AIR 1959 Ker. 67 at 72 D.B. following 

ILR 1913 (37) Bom. 427

AIR 1950 Assam 119 at 126.

1950 Travancore Cochin L.R. 23 (30) D.B.

3. The obtaining of a collusive decree or order relating to the property.

AIR 1928 Mad. 735 at 741

4.  The entering into a compromise with a third party regarding the subject matter of the suit.

AIR 1982 Punjab 44 at 47 

(1926) 96 Indian Cases 450(451) Lahore H.C. 

1982 All L.J. 188 (192) relies on 1948 P.C. 147 

ILR 3 Lahore 264

5. The erection of a fresh obstruction, pending suit for removal of obstruction to property.

AIR 1934 Lah. 978 (979)

6. Surrendering property to a third person pending suit for possession

7.  In the undermentioned cases the doctrine of lis pendens has been applied to a case of acquisition of title by adverse possession pending a suit.

AIR 1955 NOC 3705

AIR 1925 Nag. 421

AIR 1925 Nag. 132(134)

AIR 1968 M.P. 229 (At 231 -232)

IV. In the following cases, the acts of a party were held not to amount to any transfer or other dealing with the property in suit.

1.  Where a party to a pending suit entered into a compromise with a third party merely recognizing a transfer which had been made to him before suit.

AIR 1929 Bom. 337 at 339 D.B.

2. A executed a mortgage in favour of B of certain properties and afterwards executed a trust deed vesting such property in the trustees. Subsequently, the trustees were discharged, and A took possession of the properties. B then brought a suit on the mortgage and, pending the suit.   A appointed new trustees. It was held that A’s act was not a transfer or other dealing with the property within the meaning of this section. 

AIR 1939 Oudh 161 (172)

3. An adoption pendente lite.

ILR 1880(5) Bom. 630 (634 -635) D.B.

4.  An admission by a party to the suit of the execution of a deed before the Registering Officer.

AIR 1957 Punj. 238 (244)

5.  Pending a mortgage suit, the mortgagor executed a mortgage to X for paying off other mortgages which had been executed prior to the suit in favour of Y and Z. It was held that X merely took over the prior mortgages and that the act of the mortgagor was not a new transaction or dealing with the property during the pendency of the suit.

(1910) 7 Indian Cases 473 (D.B.)

6. The institution of a suit relating to the same property. 

AIR1948 Pat.111 at 112.

7. Taking of forcible possession by one party from another during pendency of a litigation.

AIR 1965 Punjab 415 (at 420-423) (F.B.)

AIR 1973 SC 2537 (Rajendar Singh v. Santa Singh)

The above are some of the decisions on the point, which may be useful some times.

Insufficiently Stamped Promissory Note -- Not A Gordian Knot Anymore and

 Impressed  Stamp  Paper  Not  Incompatible  with 

‘On  Demand  Promissory  Note’.

(By Nizam A., Advocate, Alappuzha)

This is an attempt to point out some of the relevant and interesting facets of the law relating to the levy of stamp duty on promissory notes and allied matters in the context of the following observations of a Division Bench of the Hon’ble High Court of Kerala in Sadasivan K. v. B. Unnikrishnan Nair  (2011 (4) KLT 917), “A formidable aspect that arises in this case is that while the suit is only on a DPN which is an instrument covered by the Central Stamp Act, the DPN in hand is not one that is stamped in accordance with law. No revenue stamp is affixed on the DPN. It is engrossed on a stamp paper. That is insufficient in terms of the Central Act. Not only that, unlike in the State Act, the defect or deficiency in relation to levy of stamp duty under the Central Act, on the DPN, is not rectifiable by any process after its production in the Court. Therefore, Ext. A1 produced as DPN is a void one.”

1.  Promissory  Note  a  Central  Subject

Bills of exchange, Promissory notes, cheques and other like instruments are enumerated as entry No. 46 in list I (Union List) of the 7th Schedule of the Constitution of India and are therefore central subjects. Entry No. 91 thereof relates to rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts. Hence as per Article 246 of the Constitution of India, only the Parliament is competent to make laws with respect to promissory notes including the law as to rates of stamp duty payable for promissory notes. Hence the law applicable is the Indian Stamp Act and the Rules made there under and the provisions of the Kerala State Stamp Act, 1959 are not applicable with respect to promissory notes. General Law relating to promissory notes and bills of exchange is contained in the central statute, The Negotiable Instruments Act, 1881. Articles 49 and 13 of the Indian Stamp Act prescribes ad valarom stamp duty leviable for promissory notes and bills of exchange. Different stamp duties are prescribed for promissory notes payable on demand and for promissory notes payable otherwise than on demand. If the promissory note is payable on demand stamp duty payable is under Art. 49(a) of Schedule I to the Indian Stamp Act and if it is payable otherwise than on demand, duty is chargeable under Art. 49(b) and is the same as a Bill of Exchange (Art.13).

2. Promissory Note payable on demand and a promissory note payable otherwise than on demand - Distinction 

The distinction between a promissory note payable on demand and a promissory note payable otherwise than on demand is succinctly explained by Hon’ble Justice Padmanabhan in Sreenivasan v. Subbarama Sastrikal (1987 (2) KLT 219: AIR 1988 Ker.112) in the following words:

“In order to make a promissory note ‘on demand’, it must be payable ‘at once’, ‘forthwith’ or ‘immediately’. The expression ‘on demand’, unlike in ordinary parlance, has, a technical connotation in the law of negotiable instruments. If any time is fixed for payment then payment could be demanded and the amount becomes payable only after that period and in such a case the instrument is only one payable otherwise than on demand even though the words ‘on demand’ are there. That is because payment need be made only on or after that period. When time for payment is fixed a promissory note cannot be payable ‘on demand’ whatever be the wording. A promissory note payable ‘on demand’ is one payable without any demand and time limit. The true import of the words ‘on demand’ is that the debt is due and payable immediately. Even the words ‘on demand’ are not necessary to make it on demand because under S.19 of the Negotiable Instruments Act a pronote in which no time for payment is specified is one payable on demand.”

3. The effect of 2006 amendment to proviso (a) to Section 35 of the Indian Stamp Act-Insufficiently stamped Promissory Note - Not a Gordian Knot anymore

Section 35 of the Indian Stamp Act as it stood prior to the Amendment Act 21 of 2006, with its proviso (a) read as follows. “No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped: Provided that-

(a) any such instrument not being an instrument chargeable with a duty not exceeding ten naye paise only or a bill of exchange or promissory note shall subject to all just exceptions be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion.”

The non application of the curative provision in the above proviso to Section 35 of the Central Stamp Act to the unstamped/insufficiently stamped promissory notes had paved way for unjust technicality of law scoring over substantial justice and defeating just causes.

By virtue of Section 69 of the above referred Act 21 of 2006(Financial Act) the words “not being an instrument chargeable with a duty not exceeding ten naye paise only or a bill of exchange or promissory note shall subject to all just exceptions” are omitted from the proviso (a) of Section 35 of the Indian Stamp Act and the word “shall” is substituted.

Section 69 of the Amendment Act came into effect from 18.4.2006. Therefore, from that date onwards the above referred incurability of the promissory note and bill of exchange is erased out and promissory note and bill of exchange are brought at par with the other instruments. After the said date provision relating to payment of penalty and making the instrument admissible in evidence contained in the proviso (a) of section 35 of the Indian Stamp Act is applicable to promissory note also. In the first place it would be hard to find a reason or justification for such a differential treatment with respect to Promissory note and bill of exchange. But it took a long time for the legislature to realise this anomaly and only by the above referred Amendment Act the provision for payment of penalty and making good the deficiency of stamp duty is made applicable to promissory notes and bills of exchange also. In my view after the coming into force of the Constitution of India, on a proper analysis it could have been found that the selective exclusion of promissory notes and bills of exchange from the application of curative provision in the proviso (a) to Section 35 of the Stamp Act was arbitrary and it unreasonably discriminated, for no fault of himself, a creditor in whose favour a promissory note is executed vis a vis creditor holding an instrument other than a promissory note evidencing the debt and the discriminatory provision could not have passed the test on the touch stone of the ominous Art.14 of the Constitution of India and could have been held unconstitutional. Now the Parliament has scraped the discriminatory provision and the mischief is remedied by the above welcome Amendment Act of 2006, though it came very late. Therefore rulings/judicial precedents holding that the curative provision in proviso (a) to Section 35 of the Indian Stamp Act is not applicable to Promissory note are abrogated by the said change of statutory law and are not good law now. The change of law brought about and the effect of the above amendment are not appropriately publicised even by/in the latest editions of text books on the subject and there is a need for that. “Insufficiently stamped promissory note is not a Gordian Knot anymore.”

4. Allowing claims based on the original consideration when the promissory note is not stamped and inadmissable in evidence

In their quest to do justice and to mitigate the harsh law as it stood prior to 2006 Amendment of proviso(a), the courts rightly evolved a mechanism of allowing the plaintiffs to resort/fall back on the original cause of action when it is distinct and separate from the cause of action embodied in the promissory note. In this regard I would quote the following passage from M.N. Basu on the Indian Stamp Act Ninth Edition Page 261. “A transaction by a promissory note may be one of the three kinds: first the contract may be considered as contained wholly in the promissory note as in illustration (b) to Section 91 of the Evidence Act, in which case if the plaintiff could not sue on the promissory note, he could not sue at all; or secondly, the promissory note may be regarded as a conditional payment of the amount of the loan: in which case, if the promissory note is insufficiently stamped it is only a worthless piece of paper and the plaintiff can sue on the original loan; or thirdly, the promissory note may be passed as security for the loan, in which case, there is no necessity for the plaintiff to sue on the promissory note at all, and whether it is properly stamped or not, he can bring a suit on the loan. (Jacob & Co. v. A. P Vicumsey (AIR 1927 Bom. 437) (M.N. Basu on the Indian Stamp Act Ninth Edition Page 261.). In the case of 2nd and 3rd instances above the plaintiff could base his case on the promissory note and in the alternative on the original debt. When the promissory notes were held inadmissible amendments of plaints were justly allowed by courts to bring in the cause of action based on the original loan transaction.

5.   Distinction  between  Bond  and  Promissory  Note

Prior to the above amendment, as the exception clause in the proviso (a) to Section 35 was mandatory, insufficiently stamped promissory notes were held to be inadmissible for any purpose and as stated above many just claims based on insufficiently stamped promissory notes were defeated on the above unjust technical ground of non curability of insufficiency of stamp duty with respect to promissory notes. The unfortunate situation prior to the Amendment Act 2006 was that if the unstamped instrument was interpreted and found to be a promissory note, generally it was a ‘sudden death’ for the plaintiff and true case based on unstamped promissory note would fail for unjust technical ground. Stamp duty as provided in Article 49 of the Indian Stamp Act for promissory note payable on demand is small compared to that of bond under Article 13 of the Kerala Stamp Act. In the above contexts the distinction between promissory note and bond as defined in the Stamp Act assumed more significance. So in money suits based on such instruments, diverse arguments as to whether the instrument is to be construed as a bond or agreement or promissory note, for the purpose of stamp duty became a usual scenario/sight in the civil courts, at the time of tendering the instrument in evidence. 

As per S.2(22) of the Central Stamp Act, the definition of promissory note shall be as defined by Negotiable Instruments Act, 1881. S.4 of the Negotiable Instruments Act reads as under:-

“4. “Promissory note” - A “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.”

“As per Section 2(a) of Kerala Stamp Act and 2(5) of the Central Stamp Act “bond” includes —

(i) 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;

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

(iii) any instrument so attested, whereby a person obliges himself to deliver grain or other agricultural produce to another;

The essential ingredients of bond as included in the 2nd division of the definition are as under:

(1) the person obliges himself to pay money to another.

(2) the instrument must be attested by a witness.

(3) that the amount shall not be payable to order or bearer and a person obliges himself to pay money to another.

Some of the distinguishing features of promissory note, bond and agreement for the purpose of Stamp Act are brought out by the Hon’ble High Court of Kerala in Mathai Mathew v. Thampi (1989 (1) KLT 138). In the case of a bond the obligation is always created by the document. In the above judgment, this remarkable characteristic of bond is very lucidly explained by Hon’ble Justice K.T. Thomas in the following words “the distinguishing feature of a bond is that the obligation must have been created in the instrument itself. If the obligation was a pre-existing one it does not partake of the character of a bond. The definition in the Act, no doubt, is inclusive in scope. However the striking common feature in all the three divisions of the definition is the requirement that the obligation must have been created by the document itself. This can be discerned from the following words commonly used in all the three divisions; “instrument whereby a person obliges himself”. Thus a document which evidences acknowledgement of an antecedent obligation or a pre-existing liability would not normally became a bond. It may be, that a document evidencing an antecedent liability may also become a bond if a new obligation is created by the document despite its reference to any pre­existing obligation.

Section 13(1) of the Negotiable Instruments Act with Explanation (i) as amended/substituted by Act VIII of 1919 reads as follows -- A “Negotiable Instrument” means a Promissory note, bill of exchange or cheque payable either to order or to bearer.

Explanation (i) - A promissory note, bill of exchange or cheque 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.

An interesting question arises as to whether a document which is attested by a witness and whereby a person has obliged himself to pay money to another is ‘payable to order’ or ‘not payable to order’ for the purpose of determining whether it has to be stamped as a bond or a promissory note. Majority of the High Courts have taken the view that Explanation (i) to Section 13 of the Negotiable Instruments Act cannot be read into the above definition of bond in 2(5)(b) of the Stamp Act, so as to make an instrument attested by witness and not ex facie made payable to order as one payable to order, to take it out from the scope of the definition of bond for the purpose of avoiding higher stamp duty. ( Kethra Mohan Saha v. Jamni Kantha Dewan (AIR 1927 Cal. 472), Veerappandayan v. Oganthappandayan (AIR 1929 Mad. 599), Govula Ramakistiah v. Yerram Yellappa (AIR 1959 A.P. 653), Jaikumar Shivlal Shah v. Motilal Hirechand Gandhi (AIR 1973 Bom. 27), Ramdeo v. Gulab Chand (AIR 1958 Raj. 183), Sant Singh v. Madandas Panika (AIR 1976 M.P. 144 (F.B.)). The dichotomy in the definitions of bond and promissory note is elaborately dealt with by the Hon’ble High Court of Madhya Pradesh in Bhismath Pandey v. Phoola & Ors. (AIR 2007 M.P. 31) following the above referred Full Bench decision in Sant Singh v. Madandas Panika. It is held that a document which comes within the second division of the definition of bond, that is any instrument attested by a witness and is not expressely payable to order or bearer, whereby a person obliges himself to pay money to another could come with in the definition of a promissory note and bond. In such cases Section 6 of the Stamp Act which reads as follows “an instrument so framed as to come within two or more of the descriptions in the Schedule shall, where the duties chargeable there under are different, be chargeable only with the highest of such duties:”,comes in to play and the instrument would be treated as a bond for the purpose of Stamp duty.

A few High Court Judgments have differed from the above view and held that the Instrument must be specifically ‘not payable to order’ in order to be construed as a bond in view of the above explanation to Section 13 of the Negotiable Instruments Act. According to these judgments Explanation 1 to Section 13 of the Negotiable Instruments Act could be read/imported into the Stamp Act, for determining the nature of an instrument to see whether it is a Bond or Promissory note (RB Deshpande v BK Dave (AIR 1972 Mys. 159), Khirodnath Gountia v. Arjun Panda (AIR 1972 Orissa 95). Bashyam & Adiga’s ‘The Negotiable Instruments Act’ 17th Edition revised by Justice Ranganath Misra, Former Chief Justice of India in p. 174 disapproves the former view taken by the majority of the High Courts and states that “The learned Judges have apparently taken the view on a first impression of the matter”. Bashyam & Adiga favours the latter view and affirms that attestation and non-negotiability are the two essential attributes of a bond and holds that “having regard to the provisions of the Negotiable Instruments Act and the Indian Stamp Act one cannot shut one’s eye to the provisions of the Negotiable Instruments Act when one is obliged to construe the meaning of bond as defined in section 2(5)(b). The Negotiable Instruments Act and the Indian Stamp Act have to be read together in order to find out whether the document is bond or promissory note. After the above referred amendment of 1919 to Section 13 of the Negotiable Instruments Act if a document to be a bond it must be specifically ‘not payable to order’. For if it is payable to a certain person and it does not contain words prohibiting transfer or indicating an intention that it shall not be transferable, it is payable to order”. An Instrument must be stamped according to its legal effect and intention. In the light of the reasons assigned, the view favoured by Bashyam & Adiga appears to be the correct view, though majority of the Hon’ble High Courts have held otherwise. 

6.  Section  36  Indian  Stamp  Act  a  fetter on  Superior  Appelate/Revisional  Court

In Sadasivan K. v. B. Unnikrishnan Nair  (2011 (4) KLT 917) a Division Bench of the Hon’ble High Court of Kerala after comparing the signature in the suit document with the admitted signature of the defendant and relying on the report of the handwriting expert found that the suit document (Ext. A1) is a fabricated document, incidentally the bench further held as follows “A formidable aspect that arises in this case is that while the suit is only on a DPN which is an instrument covered by the Central Stamp Act, the DPN in hand is not one that is stamped in accordance with law. No revenue stamp is affixed on the DPN. It is engrossed on a stamp paper. That is insufficient in terms of the Central Act. Not only that, unlike in the State Act, the defect or deficiency in relation to levy of stamp duty under the Central Act, on the DPN, is not rectifiable by any process after its production in the Court. Therefore, Ext. A1 produced as DPN is a void one.”

The alleged promissory note in Sadasivan K. v. B. Unnikrishnan Nair (supra) was dated 22.11.1995, therefore there is scope for a possible argument that amendment to the above proviso (a) would not be applicable to the alleged promissory note in that case, on the ground that the amendment to the statute is with prospective effect only and the curative provision in proviso (a) to Section 35 would be applicable only to a promissory executed after the amendment has come into force. But in view of clear provision in Section 36 of the Central Stamp Act the appellate court or the revisional court could not reverse the order of the lower court admitting the instrument in evidence and hold the instrument as void. In the matter of application of Section 36 to the case of instruments which are exempted from the application of the proviso (a) to Section 35 (as it stood prior to 2006 amendment) there were conflicting views among the different High Courts. The High Courts of Madras (Venkata Reddi v. Hussain Setti (AIR 1934 Mad. 383), Bombay (Lakshman Das v. Rambhau, 20 Bom .791) and Rajasthan took the view that Section 36 did not preclude an appellate court from dealing with the illegality and that an instrument which falls within the definition of a promissory note cannot under any circumstances, be admitted in evidence, if unstamped. Where as the High Courts of Rangoon (Ma Nyun v. Maung San Mya AIR 1929 Rang. 9), Andhra Pradesh (Nalluru Basavaiah Naidu v. Takkella Venkateswarulu(AIR 1957 A.P. 1022), Bom. (Bhagwan Das v. Chhaganlal (AIR 1944 Bom. 235) and Nagpur (Rambhao v. Gurudayal Nagolal Khatri, AIR Nag. 225) had taken the view that insufficiently stamped promissory note once admitted, cannot subsequently be called in question in view of S. 36 of the Stamp Act. The matter has been set at rest by  the Hon’ble Supreme Court comprising B.P. Sinha, C.J.I. ; K. Subba Rao; Raghubar Dayal; J. R. Mudholkar, JJ. in Javer Chand and Others v. Pukhraj Surana (AIR 1961 SC 1655). Explaining the scope of the plain words in S. 36 the court catagorically held that once the insufficiently stamped instrument is admitted in evidence so far as the parties are concerned the matter is closed, it is not open either to the Trial Court itself or to a Court of appeal or revision to go behind that order. Such an order is not one of those judicial orders which are liable to be reviewed or revised by the same Court or a Court of superior jurisdiction.

It is submitted that the law laid down by the above formidable 4 Judges bench decision of the Hon’ble Supreme Court was not taken note of by the Hon’ble Division bench of the High Court of Kerala in Sadasivan K. v. B. Unnikrishnan Nair (supra) and therefore Hon’ble Court went wrong in holding, the promissory note admitted in evidence by the Trial Court, as void.

7.  Impressed  Stamp  Paper  not  incompatible  with  on  demand  promissory  note

There is a wrong perception that, as the promissory note is dealt with by the Central Stamp Act, the description of stamps to be used in it shall mandatorily be central adhesive revenue stamp. Such perception is against the relevant provisions of the Indian Stamp Act and the Rules there under, the Indian Stamp (Kerala) Rules, 1960. Section 10 of the Indian Stamp Act interalia authorises the State Governments to make rules regulating the description of stamps which may be used, in the case of promissory notes and other instruments dealt with by the Indian Stamp Act. It is very significant to note that the rule making power is vested with the State Governments and not the Central Government. In exercise of the powers conferred under Section 10 of the Indian Stamp Act, the Government of Kerala has made Rules named the Indian Stamp (Kerala) Rules 1960. The Indian Stamp (Kerala) Rules applies to documents specified in Entry 91 of List I of the 7th Schedule of the Constitution of India. Broadly the kinds of Stamps by means of which duties are paid are impressed stamps and adhesive stamps. As per Rule 4(c) Stamps purchased in Kerala State alone be used for instruments executed within the State and chargeable with duty under the Act. The Government of India stamps shall be sealed with the word “Kerala” before they are issued from the treasuries of the State. By virtue of Rule 17 of Stamp Rules r/w Section 37 of the Indian Stamp Act(corresponding S.36 of Kerala Stamp Act), when an instrument bears a stamp of proper amount but of improper description the Collector may, on payment of the duty with which the instrument is chargeable certify by an endorsement that it is duly stamped.

As per Rule 5 of the Indian Stamp (Kerala) Rules, a promissory note or bill of exchange shall, except as provided by Section 11 or by Rules 13 and 16 be written on paper on which a stamp of the proper value, with or without the word “hundi” has been engraved or embossed.” As per Section 11 of the Indian Stamp Act, Instruments chargeable with duty not exceeding ten naye paise and certain other specified instruments may be stamped with adhesive stamps. Above referred Rule 13 reads as below.

“The following instruments may be stamped with adhesive stamps, namely:-

……………………………

(d) Instruments chargeable with stamp duty under Article 37, 49(a) (ii) and (iii) and 52 of Schedule 1 of the Indian Stamp Act".

As per Article 49, in the case of promissory note payable on demand when the amount does not exceed Rs. 250/- stamp duty payable is five paise (Article 49(a)(i)),when the amount or value exceeds Rs. 250/- but does not exceed Rs. 1,000/- the duty payable is ten paise (Article 49(a)(ii)) and in any other case of promissory note payable on demand the duty payable is fifteen paise (Article 49(a)(iii)). On demand promissory note under Article (49(a)(i)) is covered by Section 11 of the Indian Stamp Act whereas on demand promissory note under Article (49(a)(ii)) and (49(a)(iii)) are covered by Rule 13.The word used in Rule 5 is ‘shall’ and in Section 11 and Rule 13 is ‘May’ which is generally permissive and not mandatory. There is nothing in the context to suggest that “May’ is used in a mandatory sense in Rule 13 and S.11. Therefore what could be discerned from a conjoint reading of the above referred Rule 5, 13 and Section 11 is that Promissory note payable otherwise than on demand shall be written on impressed stamp paper and ‘on demand promissory note’ can be stamped with either adhesive stamp or written on impressed stamp paper (see P. Murthy v A.R. Kothandaraman (AIR 1978 Mad. 412). Hence it can be stated that ‘Impressed stamp paper is not incompatible with ‘on demand’ promissory note’.

8. Conclusion

With due respect the above quoted observation of the Division Bench of the Hon’ble High Court of Kerala in Sadasivan K. v. B. Unnikrishnan Nair (supra) was rendered without referring to or having present to its mind the relevant statutory provisions hence per incuriam and cannot be considered as a binding precedent.

Media Trial and Interference with Administration of Justice 
-- A Dangerous Trend

(By Biju Menon K.,Sub Judge, Ottapalam)

Media trial or trial by media is a phrase used to describe the negative impact of television and newspaper coverage of cases pending before court. Medias often create an atmosphere of hysteria in sensational cases, beginning with commencement of investigation and carried on till trial. Often, details leaked by investigating agencies to media tend to affect the outcome of trial. By public hysteria, a fair trial with logical conclusion often invites public wrath if it is adverse to the perceptions created by media and media makers. In a country like India, mob mentality, independent of the media, is rare. It is not that all judges get carried away by outpouring of the media and spokesmen, but it puts them under pressure. Their verdict may, at times, be criticised insensibly if in contrast with observations of the media.

M.P. Lodha v. State of West Bengal is one among many cases where the apex court came down heavily on media trial. It was held thus:-

“Having gone through the records, we find one disturbing factor which we feel is necessary to comment upon in the interests of justice. The death of Chandhni took place on 28th  February, 2002 and the complaint in this regard was registered and the investigation was in progress. The application for grant of anticipatory bail was disposed of by the High Court of Calcutta on 13.2.2004 and special leave petition was pending before this court. Even then, an article has appeared in a magazine called ‘Saga’ titled “Doomed by Dowry” written by one Kakoli Poddar based on her interview with the family of the deceased giving version of the tragedy and extensively quoting the father of the deceased as to his version in the case. The facts narrated therein are all materials that may be used in the forthcoming trial in this case and we have no hesitation that this type of articles appearing in the media would certainly interfere with the administration of justice. We deprecate this practice and caution the publisher, editor and the journalist who was responsible for the said article against indulging in such trial by media when the issue is subjudice.  However, to prevent any further issue being raised in this regard, we treat the matter as closed and hope that the other concerned in journalism would take note of this displeasure expressed by us for interfering with the administration of justice ."        (emphasis by me)

The hope expressed by the apex court has not reached the media, especially those in Kerala. Investigative journalism is a very loose phrase, invariably clamouring for protection of right to expression and freedom of press. Very often, the media reports colourful accounts of so called eye witnesses and investigating officers. Its effect on trial is drastic. Quite often these accounts go against the prosecution version regarding the incident. If the verdict in unacceptable, media and politicians unleash scathing attacks on the judge for deviation from their conclusions. Earlier accounts of witnesses are projected to justify their pre-trial conclusions. Is this not naked intrusion into the administration of justice? Media has to understand that there is a system to deal with investigation and trial of cases. One can understand fair criticism of judgments by media, which is good for the system. But what is really happening is total deviation from that objective.

With ever increasing number of newspapers and visual media houses, competition is inevitable. Many criminal cases being focus of public attention, reliable news thereon will certainly increase ratings of T.V.channels and newspapers. But the cause for concern is that this is now at risk to administration of justice. The directions of the Hon’ble Supreme Court in the matter have not been heeded. The media cannot become apostles of virtues overnight. We need a comprehensive law which regulates media coverage at least in criminal cases, starting from the stage of investigation and ending before trial. The law should restrain investigating agencies from leaking information on matters pending investigation. Case diary details are inaccessible even to defence lawyers. It should also curb parallel investigation by the media. Interviews of witnesses and publication thereof at any stage of criminal cases should be banned. Let the media expose inadequacies in investigation or trial, but it cannot work as a parallel agency entitled to grill out a convenient version of truth at the cost of damaging our competent judicial system.

The Law Commission of India, in its 200th report severely criticised the growing trend among medias to interfere in the process of trial and thereby causing great prejudice to the accused. For the sake of brevity, I only quote a relevant portion:-

“‘If excessive publicity in the media about a suspect or an accused before trial prejudices a fair trial or results in characterizing him as a person who had indeed committed the crime, it amounts to undue interference with the administration of justice, calling for proceedings for contempt of court against the media. Other issues about the privacy rights of individuals or defendants may also arise. Public figures, with slender rights against defamation are more in danger and more vulnerable in the hands of the media.’

In the interest of the system, it is not possible or desirable to invoke contempt jurisdiction in every case of media excess. Whether it is legislation or contempt of court proceedings, there should be a curb on this dangerous trend which is now assuming alarming proportions. It is high time that those interested in free trial stand up and fight this grave injustice.

Inefficient EPFO creates more Troubles than to Resolves them 

(By H.L.Kumar, Advocate, Editor, Labour Law Reporter)

Despite withdrawing its earlier notifications (dated 23.5.2011 and 30.11.2012) pertaining allowances for provident fund contributions to the EPFO is again planning to notify its interpretation on allowances ignoring that in the presence of its Advocates, the Supreme Court in its order dated 12.4.2013 has directed for final disposal/appeals in this context in second week of August, 2013.  These appeals are about various allowances whether EPF contributions be deducted or not?  The EPFO has not learnt about illegal decision by demanding and recovering contributions on leave encashment.  Ultimately it has to bite the dust when in 2008, the Supreme Court held that it was illegal and money as recovered was to be adjusted in future payment to be made by the employers.

Employees’ Provident Fund Organisation (EPFO) is one such organization in the country, which has gained the notoriety of disturbing the hornets’ nest, often without any reason or justification which results into multiplicity of litigation. It is now again contemplating to revise the definition of wages for contribution towards the Employees’ Provident Fund and the Employees’ Pension Scheme.  At present, it is calculated at the rate of 12 per cent on basic and dearness allowance and the matching contribution is made by the employers.  This move is being resisted by the ‘industry’, for the obvious reasons as it will put more burdens on it. The government introduced a triple test - ‘Ordinarily, Necessarily and Uniformly’ - to define basic wages for provident fund deduction through a circular issued on 30th November 2012, but had later stayed its implementation.  Similarly, on 23rd May, 2011 instructions pertaining to allowances were issued which were also withdrawn and kept in abeyance.

First of all, it is necessary to know what the definition of the relevant legal provisions.  Section 2(b) defining basic wages which is to be read with section 6 of the Provident Fund Act, provides for contribution and read as under :-

“The contribution which shall be paid by the employer to the Fund shall be twelve per cent of the basic wages, dearness allowance and retaining allowance (if any) for the time being payable to each of the employees (whether employed by him directly or by or through a Service Provider) and the employee’s contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding twelve per cent of his basic wages, dearness allowance and retaining allowance (if any), subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section………….”

Therefore, by reading of the legal provisions relating to ‘basic wages’ and allowances, it is clear that contributions under Provident Fund Act are to be paid only on basic wages (which specifically excludes house rent allowance (HRA)), DA and retention allowance.  That is the reason that many organizations of the industry challenged the proposal of the EPF in various High Courts, which has finally come to the Supreme Court. In this regards two High Courts namely; the Gwalior bench of Madhya Pradesh High Court and Calcutta High Court have given two diametrically opposite rulings.  When it was brought to the notice of the Supreme Court in a Special Leave Petition, it granted leave by clubbing all of them and has posted it for final hearing in 2nd week of August 2013 only.  Hopefully, the law will be settled for the days to come.  The question of interpretation of the allowances for attracting Employees’ Provident Fund contributions has finally reached the Supreme Court after over 50 years i.e. after Bridge & Roof Company case.  The EPFO is Respondent and also appellant in another case i.e. G4 Security Services and August is not too far.  The administrative wisdom calls that the EPFO should wait for the outcome lest it may withdraw its notification for the third time after the interpretation by the Apex Court.  It is pertinent to remind the EPFO that based on an ex-parte judgment of Bombay High Court, it has started recovering provident fund contributions on encashment of leave.  Which when challenged by Manipal Academy the Supreme Court in 2008 directed the adjustment of future payment by the employers, the contributions as recovered with observations that the encashment of leave will not attract provident funds contributions since the definition of ‘basic wages’ given under the Act did not intend to include such type of payment besides that the Apex Court in Bridge & Roof Company (India) Limited has also clearly interpreted the term ‘basic wage’ hence the reliance as placed by the EPFO on the judgment of Bombay High Court has not been proper.

The dispassionate analysis of the proposal of the Employees’ Provident Fund will make it absolutely clear that it is neither good for the ‘industry’ nor for the employees.  No doubt, it will have huge financial implications both for industry and government and may even be counterproductive to the EPFO, as industrial organisations which are extending coverage to employees receiving salaries above Rs. 6,500 per month may choose to opt out, depriving the employees’ coverage under a globally renowned social security scheme.

Under the current rules, an organised sector worker is not required to mandatorily join the provident fund scheme if his/her basic salary exceeds  Rs. 6,500 a month.

Most of the employees today join an organisation above this statutory limit and they are voluntarily covered by the industry and, therefore, for employees who are on a higher salary bracket and receiving allowances as incentives to promote business, the PF contribution should be restricted to basic salary.

What is most unfortunate part of the functioning of the EPFO is that left hand does not know what the right hand is doing. Its inefficiency is nowhere more glaringly seen than in Delhi, under the very nose of the seat of the power. The wages ceiling for coverage of an employee is Rs.6,500 per month is effective from May, 2001 and it continues to remain the same whereas even an unskilled worker in Delhi is getting minimum wages at Rs. 7,722 per month and, thus, he/she is an ‘excluded employee’ under the Employees’ Provident Fund. The Organisation has sadly not been able to rationalize this dichotomy for the larger interests of the workers but often tries to tread on the path that is full of thistles and is hardly good for any of the stakeholders.