Facts of the Case
- A writes and signs a document stating:
“I of my own free will and accord approached B and borrowed from him the sum of Rs.100 bearing interest at the rate of 2 per cent per mensem. I have, therefore, executed these few presents by way of a promissory note so that it may serve as evidence and be of use when needed.” - The document is signed by A, acknowledging the loan.
- The issue is whether this document qualifies as a promissory note under Indian law.
Issues in the Case
- Does the document contain a clear and unconditional promise to pay a certain sum of money?
- Is a mere acknowledgment of debt sufficient to constitute a promissory note?
- Does the intention “to serve as evidence” qualify the document as a negotiable instrument?
Principles Associated With It
- As per Section 4 of the Negotiable Instruments Act, 1881, a promissory note must:
- Contain an unconditional undertaking to pay
- Be in writing and signed by the maker
- Specify a certain sum of money
- Be payable to a certain person or to the bearer
- A mere acknowledgment of debt or a statement meant only to be evidence of a transaction does not amount to a promissory note.
- The instrument must show a clear promise to pay, not merely an intention or record of borrowing.
Judgement
- The statement does not contain an express promise to pay, but rather acknowledges a past loan and states that the document is executed to serve as evidence.
- It lacks the mandatory element of an unconditional promise to pay a specific sum.
- Therefore, the document is not a promissory note under Section 4 of the Negotiable Instruments Act.
- It may be treated as an acknowledgment of debt, but not a negotiable instrument.