Allowed

Meethian v. Jafar Khan

Kerala HC19 May 2022OP(C)/1623/2016

Case brief

AI extract

What is this about?

The High Court at Ernakulam held that a document acknowledging receipt of pre-existing loan funds and stipulating profit-sharing terms was an agreement, not a bond, under the Kerala Stamp Act. Consequently, the order impounding the document and imposing a penalty was quashed.

What did the court decide?

Set aside the impugned order and direct the trial court to mark and accept the document in evidence.

Meethian Vs Jafar Khan — Contract and Commercial Disputes | Kerala HC (2022)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE MR.JUSTICE V.G.ARUN

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THURSDAY, THE 19^TH DAY OF MAY 2022 / 29TH VAISAKHA, 1944

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OP(C) NO. 1623 OF 2016

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AGAINST THE ORDER/JUDGMENT IN OS 188/2014 OF MUNSIFF COURT, PERUMBAVOOR

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PETITIONER/S:

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MEETHIAN AGED 60 YEARS AGED 60 YEARS, BUSINESS, S/O. MUHAMMED, VELLANI VEETTIL, NICHIMA-MANALIMUKKU KARA, ALUVA EAST VILLAGE, ALUVA TLAUK, PIN-683 563. BY ADVS. SRI.S.B.PREMACHANDRA PRABHU SRI.K.B.RAJESH

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RESPONDENT/S:

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JAFAR KHAN AGED 51 YEARS AGED 51 YEARS, BUSINESS, S/O. OUKKAR HAJI, KARUVILLI MUGALARKUDY, VENGOLA KARA, ARAKAPPADDY VILLAGE, KUNNATHUNADU TALUK, VENGOLA P.O., PIN-688 554. BY ADVS. SRI.SANIL JOSE PRAVEEN K. JOY

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THIS OP (CIVIL) HAVING BEEN FINALLY HEARD ON 09.12.2021,

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THE COURT ON 19.05.2022, DELIVERED THE FOLLOWING:

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O.P.(C) No.1623 of 2016

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JUDGMENT

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Dated this the 19^th day of May, 2022

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The petitioner is the plaintiff in O.S.No.188

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of 2014 on the files of the Munsiff's Court,

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Perumabvoor. The suit is filed for realisation of an amount of Rs.10 lakhs with interest and costs from the respondent/defendant. As per the averments in the plaint, the defendant had borrowed Rs.10 lakhs from the plaintiff for the purpose of his business on 15.05.2013. The same day, defendant executed an agreement, agreeing to pay Rs.1,50,000/- per month to the plaintiff as share of profits from the business. The defendant also handed over two cheques, land tax receipts and copy of the title deed of his property, as security for the transaction. In spite of the agreement, the defendant failed to pay the amount of Rs.1,50,000/- towards share of profit and the

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O.P.(C) No.1623 of 2016

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cheques for Rs.10 lakhs given as security was dishonoured on presentation. Hence the suit.

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The respondent/defendant resisted the suit by refuting the averment that he had borrowed Rs.10 lakhs from the plaintiff. The defendant contended that he had borrowed money from one Abdul Salam on the strength of blank cheque leafs, signed blank stamp papers and blank papers. The plaintiff is the friend of Abdul Salam and had filed the suit, misusing the cheque leafs and stamp paper.

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On the suit being listed for trial, the plaintiff filed proof affidavit in lieu of chief examination and gave evidence as PW1. In the proof affidavit, the plaintiff marked 5 documents as Exts.A1 to A5. Ext.A5 (Ext.P3 herein) is the agreement dated 15.05.2013 executed between the plaintiff and the defendant. Marking of Ext.P3 was objected by the defendant's Counsel, mainly on the ground that the document ought to be

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O.P.(C) No.1623 of 2016

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registered, since immovable property is mentioned

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therein. The plaintiff's Counsel countered the contention by submitting that Ext.P3 is produced for a collateral purpose and hence, the objection against marking cannot be sustained. Thereupon, the learned Munsifff passed the following order;

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“Exts.A1 to A5 marked. Ext.A5 is marked

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under the objection of the defendant. According to plaintiff, A5 is produced for collateral purpose. Plaintiff is mainly depending on Exts.A1 to A4.”

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Thereafter, the parties adduced

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evidence. After closure of evidence, the case posted for hearing on the issue of admissibility of Ext.P3. After hearing both sides, the learned Munsiff passed the impugned Ext.P4 order, holding that Ext.P3 is not an agreement, but a bond and is not sufficiently stamped. Based on the finding, the court impounded Ext.P3 under Section 33 of the Kerala Stamp Act and directed the plaintiff to pay penalty and stamp duty within

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O.P.(C) No.1623 of 2016

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three days. Hence, this original petition, seeking to set aside Ext.P4 and direct the court below to mark and accept Ext.P3 document in evidence.

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Adv.S.B.Premachandra Prabhu, learned Counsel for the petitioner assailed the findings in the impugned order and submitted that the trial court committed a fundamental flaw in holding Ext.P3 to be a bond and not an agreement. The said finding is against the wordings in the document, which makes it clear that Ext.P3 pertains to a pre-existing liability. The trial court also committed a mistake in failing to appreciate the plaintiff's contention that Ext.P3 is produced for collateral purpose and Exts.A1 to A4 documents alone are being relied upon for the

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purpose of the suit. To buttress these

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contentions, learned Counsel drew attention to the definition of 'bond' under Section 2(a) of the Kerala Stamp Act, 1959 and the decisions of

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this Court in Radha v. Sankaranarayanan [2007(1) KLT 20], Chamiyappa Mannadiar v. Danavan [2007(1) KLT 733], and Viswananthan v. Leslie Philip [2010 (4) KLT 277] .

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Adv.Praveen K.Joy, learned Counsel for the respondent supported the impugned order by contending that Ext.P3 clearly falls within the definition of 'bond' under Section 2(a).

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According to the learned Counsel, under Ext.P3, the respondent is obliged to pay money to the petitioner and the borrowal and the liability to pay is acknowledged in the document. It is contended that, going by the distinction between bond and agreement laid down in the decisions cited by the Counsel, Ext.P3 can never be treated as an agreement.

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interpretation of Ext.P3, it is essential to read

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and understand the document. For convenience,

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O.P.(C) No.1623 of 2016

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the English translation of Ext.P3 is extracted here under;

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“The second party has entrusted Rs.10 lakhs with the first party towards capital investment in the first party's business and the first party has acknowledged receipt of the said amount of Rs.10 lakhs. The first party has agreed to pay Rs.1,50,000/- before the 16^th of every English month to the second party towards profit of business for that month and to obtain receipt for such payment. The first party has entrusted with the second party cheque Nos. 011686 and 133794 pertaining to his personal account in the ICICI, Perumbavoor Branch. Further, the first party has entrusted with the second party, the land tax receipt pertaining to his property in Block No.28, ReSy.Nos.254/3-2, 250/7-2 and 255/1-2 in Arakkapady village admeasuring 17.2 Ares, 16.356 Ares and 6.35 Ares respectively, along with photocopy of document No.3921 of 2003 of SRO Perumbavur. The first party has signed the agreement, agreeing that in the event of the first party failing to act in terms of the agreement, the second party can realise the principal amount and share of profit by utilizing the cheques and other documents.”

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Now to the question whether the above

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O.P.(C) No.1623 of 2016

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terms in Ext.P3 would make it a 'bond' or an 'agreement'. For this, Section 2(a) of the Stamp

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Act, extracted hereunder, has to be scrutinized;

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“(a) “bond” includes:- (i) any instrument

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where by 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;

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(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

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

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The essential ingredient which distinguishes a bond from an agreement is the obligation for payment mentioned in the instrument itself. If the obligation was a pre-existing one, it does not partake the character of a bond. In State of

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Kerala v. McDowell and Company Ltd [1994(1) KLT

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802 (SC)] , construing the definition of 'bond' in sub-clause (i) of Clause (a) of Section 2 of the

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O.P.(C) No.1623 of 2016

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Kerala Stamp Act, the Apex Court held as under;

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“20. In our view, the definition of bond in sub-clause (1) of clause (a) of S.2 of the Kerala Stamp Act is clear and unambiguous. It must be read as it stands, nothing may be read in or implied. The word ‘whereby’ must be read as meaning what it ordinarily does, namely, ‘by which’. An instrument, therefore, by which a person puts himself under an obligation to pay a sum of money to another on condition that the obligation shall be void if some specific act is, or is not, performed is a bond. The only question to pose is, has the executant of the instrument put himself under an obligation, or bound himself, to pay a sum of money to another, the obligation to be void under specified circumstances? If the executant can be sued for that sum of money only upon the strength of the instrument, the instrument is a bond.”

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Similar view has been taken by this

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Court in Radha (supra) , therein, after referring to the facts of that case, it was also observed

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that even without the agreement, petitioner is entitled to sue for realisation of the amount borrowed earlier. Dilating on this question, it was held in Viswanathan v. Leslie Philip [2010

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(4) KLT 277] as under;

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“3. Decisions relied on by the learned Sub Judge and referred to in the order under challenge and the decisions relied on by the counsel for petitioner highlighted one thing - if liability to pay the amount is created for the first time by the document, it is a bond while, if the document speaks about liability of the person concerned to pay a preexisting liability it is not a bond. In West Coast Electroplating Co. Ltd . v. Sreedharan (supra) it was observed as a distinguishing feature between an obligation under a bond and an obligation under an ordinary contract that a breach of an obligation under a bond does not sound in damages whereas damages is what are who break an ordinary contract is subject to. It was held that in every case one has to look at the intention of the parties and if the intention of parties is not to extinguish the earlier obligation but to keep it alive

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and the document subsequently executed only provides for the method of payment and for reduction of interest under certain contingency such a document is merely an agreement and not a bond.”

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In the case at hand, the sum of Rs.10

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lakhs was entrusted with the defendant prior to the execution of the document, though on the same

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day, and in Ext.P3, the defendant has acknowledged the receipt of the amount. Therefore, in the strict sense the obligation is not created by the instrument. Moreover, the amount is paid towards capital investment in the respondent's business and as per the agreement, the respondent has to pay Rs.1,50,000/- every month as profit from the business. It is nowhere mentioned that such payment is towards refund of any amount borrowed. Moreover, the document itself authorises the petitioner to realise the principal amount and the amount due as profit from business by initiating legal action based on

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O.P.(C) No.1623 of 2016

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the cheque and other documents. Being so, it is

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possible to sue the defendant based on the other documents. In fact, the definite case of the petitioner is that Ext.P3 is produced only for the collateral purpose of proving the circumstances under which the cheques and documents were issued. The above aspects lead to the irresistible conclusion that Ext.P3 is an

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agreement and not a bond.

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allowed. Ext.P3 order is set aside and the trial court directed to mark and accept the said

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document in evidence.

Sd/-

V.G.ARUN JUDGE

Scl/

O.P.(C) No.1623 of 2016

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APPENDIX OF OP(C) 1623/2016

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PETITIONER	EXHIBITS
P1	TRUE COPY OF THE NO.188/2014 ON TH	PLAINT IN O.S E FILED OF THE
	MUNSIFF'S COURT,	PERUMBAVVOR.
P2	TRUE COPY OF THE	WRITTEN STATEMENT IN
	O.S. NO. 188/2014	ON THE FILE OF THE
	MUNSIFF'S COURT,	PERUMBAVOOR.
P3	TRUE COPY OF THE	AGREEMENT DATED
	15.05.2013 EXECUT	ED BY THE PARTIES.
P4	TRUE COPY OF THE	ORDER DATED 27.6.2016
	IN O.S. NO.188/20	14 ON THE FILED OF
	THE MUNSIFF'S COU	RT, PERUMBAVOOR.

Meethian v. Jafar Khan

Case brief

What is this about?

What did the court decide?

Meethian v. Jafar Khan

Case brief

What is this about?

What did the court decide?

What the court decided

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