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Reading the document in its entirety and determining if an obligation is established by the document itself or if it only acknowledges an existing liability is the true criteria for determining whether a given document is a bond or not: Kerala High Court

Reading the document in its entirety and determining if an obligation is established by the document itself or if it only acknowledges an existing liability is the true criteria for determining whether a given document is a bond or not is upheld by the Kerala High Court in the case of A.V. Ravi v. M.M. Abdulkhadar through Justice R. Narayana Pisharadi.

FACTS OF THE CASE

The current lawsuit was brought in an effort to recover money and obtain other relief. The paper that the first defendant allegedly signed in the plaintiff’s favour constituted the foundation for the money claim.

The defendants objected to the marking of the document when it was offered as evidence on the grounds that it was a bond and that the stamping was insufficient.

In its ruling, the trial court concluded that the lawsuit instrument was merely an agreement and not a bond. Additionally, the defendants had launched a challenge, arguing that as the document was a mortgage deed, it needed to be compulsorily registered. Furthermore, it was argued that the present case’s document is not a bond but rather merely an agreement because it does not impose a duty to pay a specific or defined sum.

JUDGEMENT

The Section 2(a) of the Kerala Stamp Act, 1959 provides the following definition of a bond:

(i) Any instrument by which a person is bound, is considered a “bond”. A person obligates himself to pay money to another under the condition that, as the case may be, the obligation will be void if a specific conduct is committed;

(ii) any document attested by a witness that obligates a person to pay money to another and is not payable to order or bearer; and

(iii) any document with this attestation requiring one person to send grain or other agricultural products to another;

It was noted be the Court that the definition of bond in Section 2(5) of the Indian Stamp Act, 1899 is the same as the term provided above. All instruments fall under the specified description.

According to the Senior Counsel for the Petitioner, the lawsuit document falls under the previously indicated Clause (ii). But the first respondent’s knowledgeable counsel would argue that in order for the document to trigger Clause (ii) of Section 2(a) of the Act, the obligation created by it must be to pay a specific or definite amount rather than something that must be determined by the Court.

Court said that in order to understand the instrument’s true nature, one must first interpret it as a whole before determining its primary function. The underlying intent and impact of the terms used in the document, not its name or the format it takes, are what matter.

A bond has a responsibility to repay any money the instrument itself has generated. Normally, a document that attests to the acceptance of a prior liability or duty would not become a bond.

Reading the document in its entirety and determining if an obligation is established by the document itself or if it only acknowledges an existing liability is the true criteria for determining whether a given document is a bond or not.

If the obligation already existed, any later document or document executed afterward that sets forth the terms and conditions of the contract or describes the nature of the duty shall only constitute an agreement.

The fact that, according to the wording of the instrument, a liability is formed for a predetermined sum, namely the amount borrowed and 10% of that amount, was not taken into account by the trial court. Additionally, it did not take into account whether the document’s stipulation was adequate to treat it as a bond.

The High Court approved the initial petition and also ordered that the trial court take into account whether the lawsuit document is an agreement or a bond.

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JUDGEMENT REVIEWED BY NISHTHA GARHWAL

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