PROMISSORY NOTES -PROBLEMS- 5

LIMITATION PROBLEMS :- ARTICLE 35 - FOR RECOVERY OF PRONOTE AMOUNT IS 3 YEARS, UNLESS ANY PART PAYMENT WAS MADE AND ENDORSED ON THE REVERSE OF THE PRONOTE OR GAVE AN UNDERTAKING IN A SEPARATE SLIP WITH IN 3 YEARS, UNDER SEC.18 OF INDIAN LIMITATION ACT. OR EXECUTED FRESH PRONOTE OR AN UNDERTAKING UNCONDITIONALLY PROMISED TO REPAY THE TIME BARRED DEBT AS PER SEC. 25[3] OF INDIAN CONTRACT, THE LIMITATION WILL NOT BE EXTENDED. EXCEPT WHEN THE LAST DAY IS HAPPEN TO BE PUBLIC HOLIDAY, A SUIT CAN BE FILED ON THE NEXT DAY. ON THE LAST DAY WITHIN 24 HOURS, THE SUIT CAN BE PRESENTED FOR RECOVER Y.

18. Effect of acknowledgment in writing - (1) Where before the expiration of the prescribed period for a suit or application in respect or any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derived his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed. (2) Where the writing containing thee acknowledgement is undated, oral evidence may be given of the time when it was signed; but subject to the provisions of the Indian Evidence Act,1872 ( 1 of 1872), oral evidence of its contents shall not be received. Explanation - For the purposes of this section, - (a) An acknowledgment may be sufficient though it omits to specify the exact nature of the property or right, or avers that the time for payment, delivery, performance or enjoyment has not yet come or is accompanied by refusal to pay, deliver, perform or permit to enjoy, or is coupled with a claim to set-off, or is addressed to a person other than a person entitled to the property or night; (b) The word "signed" means signed either personally or by an agent duly Authorised in this behalf ; and (c) An application for the execution of a decree or order shall not be deemed to be an application in respect of any property or right. NOTES - It is not necessary that an acknowledgment within Section 18 must contain a promise pay or should amount to a promise to pay. (Subbarsadya v.Narashimha, AIR 1936 Mad.939) The above section corresponds to S.19 of the old Act and makes slight changes. 35. On a bill of exchange or promissory note payable on demand and not accompanied by any writing restraining or postponing the right to sue. Three years The date of the bill or note.

PROMISSORY NOTES -PROBLEMS- 4

1. PECULAR PROBLEMS :- INSUFFICIENTLY STAMPED PRONOTE; PRONOTE WITH INCOMPLETE COLUMNS; PRONOTE SECRIBED BY PLAINTIFF HIMSELF OR SOME COLUMNS FILLED BY PLAINTIFF HIMSELF; STAMP NOT PROPERLY CANCELLED; ENDORSEMENT OF PARTPAYMENTS WITH OUT SIGNATURE OR TUMBING OF DEBTOR; LACK OF ATTESTATORS AND SCRIBER ; SELF SCRIBED OR BY THIRD PARTY BUT WITHOUT MENTIONING THE NAME AND SIGNATURE WHO SCRIBED THE PRONOTE;PARTPAYMENTS MADE BY THIRD PERSONS; 2. Sec. 20 of NEGOTIABLE INSTRUMENTS ACT SAYS THAT WHEN A STAMPED PAPER OF PRONOTE GIVEN WITHOUT FILLING UP COLUMS OR A WHITE PAPER WITH DULY STAMPED AND SIGNED WITH WHOLLY BLANK OR PARTLY FILLED, WAS GIVEN TO THE PLAINTIFF, THEN IT IS DEEMED THAT THE DEFENDANT AUTHORISED THE PLAINTIFF TO FILL THE COLUMN AND PLACE THE AMOUNT UP TO THE LIMIT OF STAMP VALUE; HENCE BY FILLING UP THE COLUMNS WITH REAL FACTS, THE PLAINTIFF CAN FILE A SUIT FOR RECOVERY OF THE AMOUNT INDEBTED BY THE DEFENDANT TO HIM; 3. SEC. 28,29 AND 35 OF NEGOTIABLE INSTRUMENTS ACT :- SAYS THAT IF AN AGENT SIGNS IN THE CAPACITY OF AGENT FOR HIS PRICIPAL ON THE PRONOTE OR MADE AN ENDORSEMENT ON IT . HIS PRICIPAL IS LIABLE ELSE HE ALONE IS LIABLE. LIKE WISE WHEN A LEGAL REPRESENTATIVE ENDORSED HIS SIGNATURE ON BEHALF OF DECEASED DEBTOR, HE HIMSELF LIABLE FOR TOTAL AMOUNT, IF NOT PLACED ANY CONDITIONS, ELSE, HIS SHARE IS ONLY LIABLE OUT OF ASSESTS OF DECEASED HE RECEIVED;4. AS PER ARTICLE 49 OF SCHEDULE -I OF INDIAN STAMP ACT - [a] when payable on demand - [i] when the amount or value does not exceed Rs. 250/- = TEN PAISE ; [ii] when the amount or value exceeds Rs.250/- but does not exceed Rs. 1000/- = FIFTEEN PAISE; [iii] in any other case = TWENTY PAISE; [b] when payable other Wise than on demand = the same duty as a Bill of exchange [No. 13] for the same amount payable otherwise than on demand AS PER AMENDMENT DATED 1-3-2004.

28. Liability of agent signing.-An agent who sign his name to a promissory note, bill of exchange or cheque without indicating thereon that he signs as agent, or that he does not intend thereby to incur personal responsibility, is liable personally on the instrument, except to those who induced him to sign upon the belief that the principal only would be held liable.

29. Liability of legal representative signing.-A legal representative of a deceased person who sign his name to a promissory note, bill of exchange or cheque is liable personally thereon unless he expressly limits his liability to the extent of the assets received by him as such. 35. Liability of endorser. In the absence of a contract to the contrary, whoever indorses and delivers a negotiable instrument before maturity, without in such endorsement, expressly excluding or making conditional his own liability, is bound thereby to every subsequent holder, in case of dishonour by the drawee, acceptor or maker, to compensate such holder for any loss or damage caused to him by such dishonor, provided due notice of dishonour has been given to, or received by, such endorser as hereinafter provided. Every endorser after dishonour is liable as upon an instrument payable on demand.

PROMISSORY NOTES -PROBLEMS- 3

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

Illustrations

A sign instrument in the following terms: (a) "I promise to pay B on order Rs. 500". (b) "I acknowledge myself to be indebted to B in Rs. 1, 000, to be paid on demand, for value received." (c) "Mr. B, I.O.U Rs. 1,000." (d) "I promise to pay B Rs. 500 and all other sums which shall be due to him." (e) I promise to pay B Rs. 500 first deducting there out any money which he may owe me." (f) "I promise to pay B Rs. 500 seven days after my marriage with C." (g) "I promise to pay B Rs. 500 on D's death, provided D leaves me enough to pay that sum," (h) "I promise to pay B Rs. 500 and to deliver to him my black horse on 1st January next." The instruments respectively marked (a) and (b) are promissory notes. The instruments respectively marked (c), (d), (e), (f), (g) and (h) are not promissory notes.

20.Inchoate stamped instruments.- Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in [India], and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as then case may be, upon it a negotiable instrument, instrument, for any amount specified therein and not exceeding the amount covered by the stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount, provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder. 18. Where amount is stated differently in figures and words.- If the amount undertaken or ordered to be paid is stated differently in figures and in words, the amount stated in words shall be the amount undertaken or ordered to be paid 43. Negotiable instrument made, etc., without consideration.-A negotiable instrument made, drawn, accepted, indorsed, or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if any such party has transferred the instrument with or without endorsement to a holder for consideration, such holder, and every subsequent holder deriving title from him, may recover the amount due on such instrument from the transferor for consideration or any prior party thereto. Exception I.- No party for whose accommodation a negotiable instrument has been made, drawn, accepted or indorsed can, if he has paid the amount thereof, recover thereon such amount from any person who became a party to such instrument for his accommodation. Exception II.-No party to the instrument who has induced any other party to make, draw, accept, indorse or transfer the same to him for a consideration which he has failed to pay or perform in full shall recover there in an amount exceeding the value of the consideration (if any) which he has actually paid or performed. 87. Affect of material alteration. Any material alteration of a negotiable instrument renders the same void as against anyone who is a party thereto at the time of making such alteration and does not consent thereto, unless it was made in order to carry out the common intention of the original parties; Alteration by endorsee:- And any such alteration, if made by an endorsee, discharges his endorser from all liability to him in respect of the consideration thereof. The provisions of this section are subject to those of sections 20, 49, 86 and 125. 118. Presumptions as to negotiable instruments of consideration Until the contrary is proved, the following presumptions shall be made:- (a) of consideration-that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration; (b) as to date- that every negotiable instrument bearing a date was made or drawn on such date; (c) as to time of acceptance- that every accepted bill of exchange was accepted within a reasonable time after its date its date and before its maturity; (d) as to time of transfer.- that every transfer of a negotiable instrument was made before its maturity; (e) as to order of endorsements - that the endorsements appearing upon a negotiable instrument were made in the order in which they appear thereon; (f) as to stamps-that a lost promissory note, bill of exchange or cheque was duly stamped; (g) that holder is a holder in due course - that the holder of a negotiable instrument is a holder in due course; provided that, where the instrument has been contained from its lawful owner, or form any person in lawful custody thereof, by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him.

PROMISSORY NOTES - PROBLEMS -2

limitation = the limitation for recovery of pronote amount is 3 years, from the date of execution. under sec.18 of limitation act any part payment is made and endorsed on the reverse side of pronote with due signature or tumbimpression of defendant with in the 3 years, again another 3 years would come from the date of endorsement; mode of endorsement = there is no specific mode , except mentioning the date and amount paid towards the pronote debt. it may scribed by the defendant or any other person and is duly signed by the defendant or thumb impression should be affixed. no stamp is required ; sec.25 of Indian contract act = a time barred debt may be renoved by making specific endorsement that i again promised to repay the debt with or without interest and it should be duly signed on stamp. cancellation of stamp = while signing or thumbing, it should come not only on stamp and also on the document.

PROMISSORY NOTES - PROBLEMS -1

• WHAT IS PROMISSORY NOTE = AN UNCONDITIONAL UNDERTAKING TO REPAY THE DEBT WITH OR WITHOUT INTEREST, ON DEMAND TO THE PLAINTIFF [ WHO FILED THE SUIT FOR RECOVERY]IS CALLED A PROMISSORY NOTE; WHAT IS DEBT = DEBT MAY BE PRESENT OR PAST CONSIDERATION ; MAY BE CASH OR KIND ,SHOULD NOT BE TAINTED WITH ILLEGALITY , BORROWED OR RECEIVED OR TAKEN BY THE DEFENDANT FROM THE PLAINTIFF OR FROM HIS AUTHORIZED PERSON; PROFORMA OF PRO-NOTE = THERE IS NO FIXED PROFORMA FOR PRO-NOTE. THE ESSENTIAL WORDS ARE " I, PROMISED TO REPAY THE DEBT ON DEMAND TO YOU OR TO YOUR ORDER, WITH OR WITHOUT INTEREST"; GENERAL MISTAKES = CORRECTIONS OR OVER WRITINGS IN DATES, AMOUNTS, INTEREST COLUMNS . EXCEPT IN INTEREST COLUMN, OTHER COLUMNS CORRECTIONS OR OVERWRITING MAY BE CONSIDERED AS MATERIAL ALTERATIONS ; REQUIRED STAMP = THE MAXIMUM VALUE OF THE STAMP IS 25 PAISE;AND THE PRO NOTE MAY BE ENGROSSED ON NON-JUDICIAL STAMP ALSO. NOT ONLY REVENUE STAMP, A NON-JUDICIAL STAMP OF ADHESIVE ALSO CAN BE AFFIXED BUT NOT POSTAL STAMP. HOW TO PROVE THE PRO NOTE = BY PRODUCING THE PRO NOTE AND ALONG WITH PLAINTIFF, ONE ATTESTER OR SCRIBER MUST BE EXAMINED WHEN IT WAS DENIED.; INGREDIENTS TO PROVE = EXECUTION, PASSING OF CONSIDERATION WHEN DENIED BY THE DEFENDANT ; HOW TO DISPROVE = BY EXAMINING ATTESTER OR SCRIBER WHEN CONSIDERATION NOT PASSED AND IN CASE OF FORGERY BY EXAMINING THOSE PERSONS OR BY SENDING TO EXPERT OPINION;