Lexicon Finance Limited vs Park Securities Ltd.
2003 Latest Caselaw 1192 Bom

JUDGMENT

D. G. Karnik, J.

1. Heard the learned counsel for the parties.

2. The learned counsel for the plaintiff has filed on record compilation of original documents on 13th November 2003. The compilation is marked as Exhibit-A only for the purpose of identification.

3. The first document produced in the compilation is a document styled as "Inter Corporate Deposit Agreement" dated 27th February 1998. It is a document executed between the plaintiff and the defendant the recital clause in the agreement states that the defendant was in need of financial assistance and the plaintiff agreed to grant to the defendant Inter Corporate Deposit of Rs. 4,00,000/-. Paragraph No. 4 of the operative part of the agreement states that the Inter Corporate Deposit of Rs. 4,00,000/- was given to the defendant by cheque dated 27th February 1998, Clause Nos. (5) and (6) of the document are material and read as under :--

 (5)     "The borrower shall repay the said ICD of Rs. 4,00,000/- (Rupees Four lakhs only) together with the interest thereon, on or before 28-4-1998." 
 

 (6)     The borrower, shall so long as the ICD remains unpaid, pay interest thereon or the balance thereof due from time to time at the rate of 24% per annum. If the said interest is not paid accordingly the borrower shall pay penal interest at the rate of 3% interest per month to be compounded monthly from the date of default."  
 

4. The document is signed by parties. The plaintiff's signature is attested by one witness and defendant's signature is attested by another witness. Though the document is styled as "Inter Corporate Deposit Agreement", in my opinion, it is squarely covered by the definition of a bond. Clause (c) of Section 2 of the Bombay Stamp Act which reads as under:--

  

 "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 instruments so attested whereby a person obliges himself to deliver grain or other agricultural produce to another;"
 

 (Explanation being not material for deciding the controversy before me, is omitted)   
 

5. Under Sub-clause (ii) of Clause (c), any instrument attested by a witness which is not payable to an order or bearer, whereby a person obliges himself to pay money to another is clearly a bond. The present instrument is attested by a witness, is not payable to the bearer and creates an obligation on the defendant to pay the principal sum of money of Rs. 4,00,000/- together with interest, and enhanced interest in case of default, to the plaintiff who is the lender.

6. The learned counsel for the plaintiff relies upon a judgment of this Court in Patel Stone Trading Co. v. Ram Sing . In paragraph No. 4, the learned Single Judge observed : (Page 618 of 1974 Mh.L.J.) "The real test to decide as to whether a particular document is a bond or not is to find out after reading the document as a whole as to whether an obligation is created by the document itself or it is merely an acknowledgment of a pre-existing liability. If there is merely an acknowledgment of pre-existing liability which could have been enforced apart from the document itself, then the matter stands on a different footing. But if the document creates an obligation in itself with an express promise for payment of an amount, in my opinion such a document will have to be termed as a bond within the meaning of Section 2(c)(ii) of the Bombay Stamp Act."

The judgment draws a distinction between a document creating an obligation and a document which is merely an acknowledgment of a liability. The former is a bond while the latter is not.

7. Let me, therefore examine whether the Inter Corporate Deposit Agreement creates an obligation or is merely an acknowledgment of a preexisting liability. The learned counsel for the plaintiff strenuously contended that the Inter Corporate Deposit Agreement does not by itself create an obligation to pay. He invited my attention to a separate receipt executed by the defendant acknowledging the receipt of the loan. He therefore submitted therefore the obligation to pay the money was created by the receipt and not by the Inter Corporate Deposit Agreement. I am unable to agree. Both the receipt and Inter Corporate Deposit Agreement are contemporaneous and appear to have been executed simultaneously. In paragraph No. 4 of the Inter Corporate Agreement itself, it is stated that the plaintiff has advanced to the defendant a loan of Rs. 4,00,000/-, the receipt of which is expressly admitted by the defendant. A separate money receipt is also issued by the defendant. After the said acknowledgment of the money, in paragraph No. 4, an obligation to pay money with interest is created by clause No. 5 and an obligation to pay interest at a higher rate is created by clause No. 6. The separate money receipt is merely an acknowledgment and does not by itself create an obligation to pay the money with interest, and further enhanced interest in case of default. Hence, the contention of the learned counsel that the Inter Corporate Deposit Agreement is merely an acknowledgment of a pre-existing liability is rejected. It has to be held that the Inter Corporate Deposit Agreement amounts a Bond as defined under Section 2(c) of the Bombay Stamp Act.

8. By virtue of a power conferred under proviso (b) to Sub-section (2) of Section 3 of the Bombay Stamp Act, the duty of impounding instrument is delegated to the Prothonotary and Sr. Master.

Summons for Judgment adjourned for 8 weeks.