Facts of the Case
- A document states:
“We have received the sum of Rs.9,000 from Shri R.R. Sharma. This amount will be repaid on demand. We have received this amount in cash.” - The document acknowledges receipt of money, states it will be repaid on demand, and is assumed to be signed by the issuer.
- The issue is whether such a document constitutes a promissory note under Indian law.
Issues in the Case
- Does the document contain an unconditional promise to pay?
- Is an acknowledgment of receipt of money, coupled with a statement to repay on demand, sufficient to make it a promissory note?
- Does the document meet the statutory requirements of a promissory note under the Negotiable Instruments Act?
Principles Associated With It
- Under Section 4 of the Negotiable Instruments Act, 1881, a promissory note must:
- Be in writing
- Contain an unconditional undertaking to pay
- Be signed by the maker
- Specify a certain sum of money
- Be payable to a certain person or to bearer or order
- The phrase “will be repaid on demand” shows a clear and unconditional promise to pay, not just an acknowledgment.
- The fact that money was received in cash and a promise to repay on demand is made strengthens its enforceability as a promissory note.
Judgement
- The document does more than just acknowledge receipt of money — it includes a clear and unconditional promise to repay.
- As long as the document is signed, it fulfills all requirements of Section 4.
- Therefore, the document is a valid promissory note, enforceable under the law.