Article 48 - Schedule 1-A of Indian Stamp Act,,, is applicable to the document [has been found that the suit is actually based on two documents, i.e., promissory notes executed by the late husband of the defendant no.1. However, the defendant No.1 has stood as surety by executing security bond on the bottom of promissory notes as such both the suit promissory note change its character to that of bonds and the stamp dutyought to have been paid] in question in the case on hand because the bond is a security bond = In a contract of guarantee, there are three persons, namely, (i) Principal Debtor; (ii) Surety; and (iii) Creditor. While, in a contract of indemnity, there are only two persons, namely, (i) person to be indemnified; and (ii) indemnifier. Thus, in a contract of guarantee, there is a principal debtor and in a contract of indemnity, there is none. In a Contract of Guarantee, the security is of the creditor and in a Contract of Indemnity; there is re- imbursement of loss of the indemnified person. In a contract of guarantee, the surety, when he discharges the debt of the principal debtor, becomes entitled to proceed against the principal debtor. In a Contract of Indemnity, the indemnifier cannot sue the person, who caused loss to the indemnified. In a Contract of Guarantee, there is a promise to be liable for a debt on the principal debtors default. In a contract of indemnity, there is a promise to become liable to the Indemnified person whenever he becomes liable. In a contract of guarantee, there is both a primary and secondary liability. In a contract of indemnity, there is only primary liability of the indemnifier to the indemnified person. In a contract of guarantee, the guarantee is unconnected with the contract guaranteed. Thus, in a contract of guarantee, there are three contracts one between the principal debtor and the creditor, the 2nd between the creditor and the surety and the 3rd an implied contract between the surety and the principal debtor; and the liability of the principal debtor in a contract of guarantee is primary and that of surety is secondary though the liability of the surety is co-extensive with that of the principal debtor unless it is otherwise provided for in the contract. A contract of guarantee is precisely a contract to perform the promise, of discharge of the liability, of a third person in case of his default. Such person who gives guarantee is called the surety and the person in respect of whose default, the guarantee is given is called the principal debtor and the person for whom the guarantee is given is called the creditor. A guarantee may be either oral or written. Therefore, Article 13 of Schedule 1-A of the Indian Stamp Act, in the well-considered view of this Court is not applicable to the facts of the case on hand. But, Article 48, the contents of which are extracted supra, is applicable to the document in question in the case on hand because the bond is a security bond executed by the surety or guarantor in view of the fact that there are three parties to the contract and the surety has undertaken to pay the debt in case of failure of the principal debtor to pay the said debt covered by the promissory note to the creditor.

THE HONBLE SRI JUSTICE M.SEETHARAMA MURTI          

Civil Revision Petition No.4299 of 2012

01-03-2016

Smt.A.Shakunthala W/o late Ashaiah ...Petitioner

A.Mangamma and another...Respondents  

Counsel for Petitioner: Sri B.S.Prasad

Counsel for Respondents 1 and 2 : G.Seshadri

<GIST:

>HEAD NOTE:  

? Cases referred
1996 (1) ALT 917 (F.B)
AIR 1986 AP 3
2009(2) ALD 112

THE HONBLE SRI JUSTICE M.SEETHARAMA MURTI          

Civil Revision Petition No.4299 of 2012

ORDER:

        This Civil Revision Petition under Article 227 of the Constitution of
India
by the plaintiff is directed against the order dated 20.03.2012 of the learned
IV
Senior Civil Judge, City Civil Courts, Hyderabad passed in I.A.no.3167 of 2012
in
O.S.no.111 of 2010 filed with a request to direct the office of the Court below
to put up an appropriate note for collecting the stamp duty, if any, payable on
the suit documents, as envisaged under Article 48 of Schedule I A of the Indian
Stamp Act, 1899.

2.      I have heard the submissions of the learned counsel for the plaintiff
(the plaintiff, for brevity) and the learned counsel for the respondents/
defendants (the defendants, for brevity).  I have perused the material record.

3.      The introductory facts are as follows:
        The plaintiff had filed the suit for recovery of money from the
defendants by invoking summary procedure under Order XXXVII of the Code of
Civil Procedure, 1908 (the Code, for brevity).   The suit was based on two
promissory notes said to have been executed by the late husband of the 1st
defendant.  The application of the defendants filed for granting leave to
defend the suit was dismissed by the trial Court.  When the suit is posted for
consideration, the trial Court passed a suo motu order on 31.12.2010, which
reads as follows:
During the course of consideration of the matter, it has been
found that the suit is actually based on two documents, i.e.,
promissory notes executed by the late husband of the
defendant no.1.  However, the defendant No.1 has stood as
surety by executing security bond on the bottom of
promissory notes as such both the suit promissory note
change its character to that of bonds and the stamp duty
ought to have been as per item No.13 of schedule I-A of the
Indian Stamp Act, 1899.

(Reproduced verbatim)

Responding to the said order, the plaintiff had contended that a portion of
each of the promissory notes, that is, a distinct bottom portion of each of the
instruments consists a contract of guarantee or alternatively a contract of
indemnity coming within the ambit of the provision of either Section 126 or
Section 124 of the Indian Contract Act and that the duty payable in either case
under Articles 30 and 48 of the Schedule I A of the Indian Stamp Act is the
same, i.e., 3 per centum of the value of the security subject to a maximum of
Rs.100/-.  So contending, the plaintiff had filed the interlocutory application
praying the Court below to direct the office to put up an appropriate note for
collection of the stamp duty payable on the said document.  The office of the
Court below had put up an office note stating that the stamp duty and penalty
are collectable in accordance with the provision of Article 48 of schedule 1-A
of
the Indian Stamp Act and that an amount of Rs.100/- towards stamp duty and a
further sum of Rs.1,000/- towards penalty (i.e., Rs.1,100/-in all) are payable
on each instrument and that a total sum of Rs.2,200/- is collectable on the two
documents/instruments.  The plaintiff is not objecting to the contents of the
said office note of the court below and is prepared to comply with the said
directions in the office note, as per the submissions made at the hearing.
However, the Court below after perusing the documents did not agree with the
note put up by its office and therefore, disapproved the office note and had
further directed that the stamp duty and penalty are collectable as per Article
13 of Schedule 1-A of the Act and had accordingly rejected IASR of the plaintiff
by the order, which is impugned.  Hence, the plaintiff is before this Court.

4.      Before completing the narration of facts, it is necessary to refer to
infra
the relevant provisions of law.
      Section 2(5) of the Indian Stamp Act defines Bond.
        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 specific
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;

5.      Articles 13, 30 and 48 of Schedule 1-A of the Indian Stamp Act read
thus:

13.  Bond, as  defined  by  Section 2(5), not   being
       Otherwise  provided for, by this Act, or by the
       Andhra Pradesh Court-fees and Suits Valuation
       Act, 1956 (Act VII of 1956)

        (a)  Where the amount or value secured            Three rupees for every
                  does not exceed Rs.1,000/-;                         one
hundred rupees or
                                                           part thereof;
                                               
      (b)   Where it exceeds Rs.1,000/-.                     The  same  duty  as
under

Clause   (a)  for   the  first

Rs.1,000  and   for   every

Rs.500 or part thereof  in
                     excess of Rs.1,000 fifteen
                     rupees

       Exemptions

Bond, when  executed   by  any  person
for the purpose  of  guaranteeing   that
the local income  derived  from private
subscriptions to a charitable dispensary
or hospital or any other object of public
utility, shall not be less than a specified
sum per mensem.  


30: Indemnity Bond.                                         The same duty as a
Security Bond
                                                                         (No.48)
for the same amount.



48.   Security  bond  or  mortgage deed       3 percentum of the value of the
security
executed  by  way  of   security   for  the     subject  to a  maximum  of
rupees  one
due execution of an office or to  account     hundred.
for money  or  other property received  by
virtue thereof, or executed by a  surety to
secure the due performance of a contract.

       Exemptions

       Bond or other instruments when executed:

(a)     by any person for the purpose of guaranteeing that the local income
derived
from private subscription to a chartiable dispensary or hospital, or any other
object
of public utility, shall not be less than a specified sum pre mensem;
(b)     executed by persons taking advances under the Land Improvement Loans  
Act, 1883 (Central Act 19 of 1883) or the Agriculturists Loans Act, 1884
(Central
Act 12 of 1884), or by their sureties  as security for the repayment of such
advances;
(c)     executed by officers of Government or their sureties to secure the due
execution of an office or the due accounting for money or other property
received
by virtue thereof].

6.      It is also pertinent to next note that the Court below had referred to the
ratio laid down in Bolisetti Bhavannarayana @ Venkata Bhavannarayana v.
Kommuru Vullakki Cloth Merchant Firm, Tenali, represented by partner
Kommuru Vullakki and others , wherein this Court had held that the definition
of term bond is inclusive and not restrictive and that the definition is
exhaustive and not restrictive, and that it does not say that any document not
attested by witness would not be a bond, though an obligation is incurred by
one to pay money to another.  It was also held that accordingly, when clause
(b) of Section 2(5) of the Stamp Act mentions that any instrument attested by
a witness and not payable to order or bearer, whereby a person obliges himself
to pay money to another would be included within the meaning of bond, it
does not mean that similar document without attestation by a witness would
not be included or excluded by the definition of bond.

7.      It is also apt to further note that the plaintiff had placed reliance on
two
decisions, viz., Manda Suryakanthamma v. District Registrar of Assurance,
Srikakulam  and S.N.Mathur v. Board of Revenue and others   in support of
his contention that the note put up by the office is correct.  However, the
trial
Court held that the ratios in the said decisions are not applicable to the facts
and circumstances of the case on hand.

8.      The learned counsel for the plaintiff would contend that the view of the
Court below that the provision of Article 13 of Schedule 1-A of the Indian Stamp
Act is applicable is highly erroneous and that the trial Court had failed to
properly appreciate the ratios in the decisions cited on behalf of the plaintiff
and that the trial Court had erroneously followed a decision, which is
inapplicable to the facts of the case, and that the trial Court ought to have
considered the contents of the office note, which was put up with correct
contents, and ought not to have disagreed with the office note and ought to
have accepted the same as correct and that the trial Court had failed to take
note of the fact that not only the nomenclature of the document, but also the
contents of the documents make it evident that on the transactions contained
in the documents, viz., two bottom portions of the promissory notes,  namely,
on the surety/guarantee bonds, the stamp duty and penalty payable
respectively are Rs.100/- and Rs.1,000/- that is, in all, Rs.2,200/- on the two
documents put together as rightly suggested in the office note of the court
below and that the Court below was in error in calling upon the plaintiff to pay
the stamp duty and penalty as per Article 13 of Schedule 1-A of the Indian
Stamp Act and in rejecting IASR filed by the plaintiff.

9.      The learned counsel for the defendants while supporting the orders of
the Court below had inter alia contended that the Court below cannot be found
fault for following a ratio in a Full Bench decision of this Court and for
passing
a reasoned order after adverting to the facts and the legal position correctly.

10.     I have bestowed my attention to the facts and I have given earnest
consideration to the submissions.  I have carefully gone through the provisions
of law, which are extracted supra and the precedents cited.

10.1    The suit is brought by the plaintiff on the basis of two documents for
recovery of money from the defendants.  Both the suit documents are of the
same nature and contain the same content; and they are printed proformae
with certain blanks, which are filled by the parties at the time of entering
into
the transactions.  Admittedly, each document is having two portions/parts,
viz., (i) the upper portion, viz., promissory note; and (ii) the bottom portion,
which is now the subject matter of controversy.  The bottom portion titled
Jameenu reads as follows:


The said bottom portion deals with Jameenu (security/surety), where under
one Mangamma/the 1st defendant stood as a guarantor/surety for the money
borrowed by her late husband under the promissory note and agreed to repay
the promissory note debt personally in case of failure of the promisee to pay
the same to the promissor.  The said Jameenu/guarantee portion of the
document was attested by two witnesses and was signed by said Mangamma    
who is the guarantor/surety.  The promissory note is a contract.  The security
bond was executed by way of a security by a surety to secure the due
performance of a contract.  Therefore, in the well-considered view of this
Court, the transaction in question is covered by Article 48 of Schedule 1-A of
the Indian Stamp Act and it does not fall within any of the exemptions.
Article 30 deals with Indemnity Bond and the duty payable is the same duty as the
security bond under Article 48, as rightly contended by the learned counsel for
the plaintiff, even assuming for a moment that the said bottom portion of the
document is to be construed as an indemnity bond.  Article 13, which the trial
Court had stated in its order as applicable to the facts of the present case,
deals with bond as defined by Section 2(5) of the Indian Stamp Act not being a
debenture and not being otherwise provided for, by this Act (the Indian Stamp
Act), or by the Andhra Pradesh Court-fees and Suits Valuation Act, 1956.  As
per the provision of this Article, the stamp duty payable is Rs.3/- for every
one hundred rupees or part thereof where the amount or value secured does not
exceed Rs.1,000/-; however, where it exceeds Rs.1,000/-, the duty payable is
the same duty as under Clause (a) for the first Rs.1,000/- and fifteen rupees
(Rs.15/-) for every Rs.500 or part thereof in excess of Rs.1,000.

10.2    The Full Bench decision of this Court relied upon by the trial Court
clearly lays down that even though a bond is not attested, still, it does not
mean that a document similar to the bond without attestation by a witness
would not be included or excluded in the definition of bond.  There is no
dispute with the settled proposition.  In the case on hand, the portion of the
document, which is now in question, is attested by two witnesses.  There is
also no dispute with the proposition that the stamp duty is determined with
reference to the substance of the transaction as embodied in the instrument
and not with reference to the title, caption or nomenclature of the instrument.
For classification of instruments, that is, to determine whether an instrument
comes within a particular description in an Article to the Schedule to the
Indian Stamp Act, the instrument should be read and construed as a whole.  It is also
not in dispute that where an instrument falls under two or more descriptions in
the Schedule to the Indian Stamp Act, the instrument shall be chargeable with
only one duty, that is the highest of the duties applicable to the different
description. [vide S.N.Mathur v. Board of Revenue and others] (3rd supra).

10.3    In a contract of guarantee,
 there are three persons, namely, 
(i) Principal Debtor; 
(ii) Surety; and 
(iii) Creditor.  
While, in a contract of indemnity,
there are only two persons, namely, 
(i) person to be indemnified; and 
(ii) indemnifier.   
Thus, in a contract of guarantee, there is a principal debtor and
in a contract of indemnity, there is none.  
In a Contract of Guarantee, the
security is of the creditor and in a Contract of Indemnity; there is re-
imbursement of loss of the indemnified person. 
 In a contract of guarantee, the
surety, when he discharges the debt of the principal debtor, becomes entitled
to proceed against the principal debtor.  
In a Contract of Indemnity, the
indemnifier cannot sue the person, who caused loss to the indemnified.   In a
Contract of Guarantee, there is a promise to be liable for a debt on the
principal debtors default.   
In a contract of indemnity, there is a promise to
become liable to the Indemnified person whenever he becomes liable. 
 In a contract of guarantee, there is both a primary and secondary liability.  
In a contract of indemnity, there is only primary liability of the indemnifier to the
indemnified person.  
In a contract of guarantee, the guarantee is unconnected
with the contract guaranteed.   
Thus, in a contract of guarantee, there are
three contracts  one between the principal debtor and the creditor, the 2nd
between the creditor and the surety and the 3rd an implied contract between
the surety and the principal debtor; and the liability of the principal debtor
in a contract of guarantee is primary and that of surety is secondary though the
liability of the surety is co-extensive with that of the principal debtor unless
it is otherwise provided for in the contract. 
 A contract of guarantee is precisely
a contract to perform the promise, of discharge of the liability, of a third
person in case of his default.   Such person who gives guarantee is called the surety
and the person in respect of whose default, the guarantee is given is called the
principal debtor and the person for whom the guarantee is given is called the
creditor.  A guarantee may be either oral or written.  
Therefore, Article 13 of
Schedule 1-A of the Indian Stamp Act, in the well-considered view of this Court
is not applicable to the facts of the case on hand.  But, Article 48, the
contents of which are extracted supra, is applicable to the document in question in the
case on hand because the bond is a security bond executed by the surety or
guarantor in view of the fact that there are three parties to the contract and
the surety has undertaken to pay the debt in case of failure of the principal
debtor to pay the said debt covered by the promissory note to the creditor.

10.4    Viewed thus, this Court finds that the order impugned of the Court
below in not accepting the office note and further directing the plaintiff to
pay the stamp duty in accordance with Article 13 of the Indian Stamp Act, is
unsustainable under facts and in law and is, therefore, liable to be set aside.

11.     In the result, the Civil Revision Petition is allowed and the impugned
order is set aside.  The Court below is directed to collect stamp duty and
penalty on the two documents in question, as per the office note as the
plaintiff is since prepared to pay the stamp duty and penalty as noted in the
office note.  There shall be no order as to costs.
        Miscellaneous petitions, if any, pending in this revision shall stand
closed.
_____________________  
M. SEETHARAMA MURTI, J    

01st March 2016

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