Ghulam Nabi Mathanji and another vs Lal Mohammad Bangree and others

(1) The question before the Bull Bench is whether a negotiable instrument executed or negotiated in the State must be affixed with stamps of the

description prescribed by the Jammu and Kashmir Stamp Act, 1977 or with those prescribed by the Indian Stamp Act, 1899.

(2) This question has arisen in two civil suits between the parties herein which are pending in this court on its original side. Both these suits are

founded upon pronotes. Before the learned single Judge trying these suit an objection was taken on behalf of the defendants that the pronotes were

inadmissible in evidence as they were not duly stamped. It was contended that the pronotes bear stamps of the description prescribed by the State

Act and not those prescribed by the Central Act, as they should have, having regard to the provisions of the Negotiable Instruments Act which

was applicable to the State. The learned Single Judge felt that the question raised required consideration by a larger bench and made a reference

accordingly. That is how the matter has come before us.

(3) The Law relating to stamps in force in the State is contained in the Jammu and Kashmir Stamp Act, 1977. This Act was enacted by the then

Maharaja as an absolute ruler of the State having plenary powers of legislation in relation thereto The Act came into force on 1st day of Baisakh

1978 corresponding to 13th April, 1920 A D. Ever since it has remained in force in the State. Meanwhile, following accession of the State to the

Union of India, The constitution of India made applicable to the State, of course, with some additions and modifications. The constitutional

relationship between Union and the State defined by the provisions of the Constitution applicable to the State, envisages that in respect of certain

matters provided in List 1 in 7th schedule of the Constitution, the power of legislation in relation to the State would exclusively vest in the Union

parliament, These matters include the matter covered by entry 91 of the said list which reads thus :

Rates of Stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurances, transfer of

shares, debentures, proxies and receipts.

(4) Alongside it is provided by Art. 372 of the Constitution that all the law in force in the territory of India immediately before the commencement

of constitution shall continue in force therein until altered or repealed or amended by the competent legislature or other competent authority. The

expression 'law in force' has been defined as including a law passed or made by the Legislature or other competent authority in the territory of

India before the commencement of the constitution which was not previously repealed. The Jammu and Kashmir Stamp Act clearly fulfilled this

requirement. The application of the Constitution of India to the State could not therefore affect the validity or the operation of the Act even as

respects the matter covered by entry 91 of the Union list as long as the Union parliament did not make any law applicable to the State governing

that matter. In point of fact the Union parliament has not so far made any such law in relation to the State. The Indian Stamp Act' 1899 has been

amended to govern part B states, as the State like the Jammu and Kashmir State. This is what is clear from section (1) of the Indian ' Stamp Act,

1899 which reads thus :

This Act may be called THE INDIAN STAMP ACT, 1899.

It extends to the whole of India except the State of Jammu and Kashmir provided that it shall not apply to the territories which, immediately

before the 1st November, 1955, were comprised in Part B State (excluding the State of Jammu and Kashmir) except to the extent to which the

provisions of this Act relate to rates of stamp duty in respect of the documents specified in Entry 91 of List of the seventh schedule to the

Constitution/'

It shall come into force on the first day of July, 1899.

(5)After the application of the constitution of India to the State, the Jammu and Kashmir Stamp Act, therefore, continues to be a good law as good

as it was when it was originally enactedeven as respect matter covered by entry 91 of the Union list. That being so a negotiable instrument

executed or negotiated in the State roust be stamped in accordance with the provisions of the said Act. In other words such instrument should not

only bear stamps of the description prescribed by the said Act but also of the value provided in the said Act.

This conclusion is not open to question on the ground, as Mr Kaul tried to make out, that it runs counter to section 20 of the Negotiable

Instruments Act, 1831 which is applicable to the State The section gives general authority to a person to whom a signed and stamped paper is

delivered to convert into a negotiable instrument payable to himself or any specified person. It opens with the words ""where one person signs 1

and delivers to another a paper stamp in accordance with the law relating to negotiable instrument then in force in India"". Adverting to these words

Mr. Kaul contended that the implication clearly was that a negotiable instrument must be stamped in accordance with the Indian Stamp Act

irrespective of the fact whether it was executed within the State or outside. The argument is not correct. These words suggest that in order that a

signed paper delivered to any person may be converted into a negotiable instrument, it must be stamped in accordance with the provisions of law

relating to stamps in force in India. That law may not be uniform in India, as it actually is nor, because the Indian Stamp Act 1899 does not apply

to the State of Jammu and Kashmir which has an Act of its own called the Stamp Act, 1977, although the State is a part of India under Art 1 of

the Constitution. Therefore, in order to convert a paper signed in the State into a negotiable instrument, it must be stamped in accordance with the

JandK Stamp Act, 1977. Even if it were assumed that reference in the opening words of section 20 of the Negotiable instruments Act was to the

Indian Stamp Act, the argument of Mr. Kaul does not help him. The Negotiable Instrument Act was extended to the State under an Act of the

parliament called the Jammu and Kashmir ( Extension of Laws) Act, 1956. Section 3 of that Act Provides as under :

Any reference in any Act or in the Ordinance mentioned in the Schedule to a law which is not in force in the State of Jammu and Kashmir shall, in

relation to that State, be construed as a reference to the corresponding law, if any, in force in that State.

(6) Accordingly reference to the Indian Stamp Act in Section 20 of the Negotiable instrument Act, if at all that is so, must be construed as

reference to the Jammu and Kashmir Stamp Act, 1977 because the Indian Stamp Act does not admittedly apply to the State of Jammu and

Kashmir.

(7) In these circumstances I am of the opinion that in the present state of the law in force in the State of Jammu and Kashmir a negotiable

instrument executed or negotiated in the S ate must be affixed with stamps of the value and description given in the Jammu and Kashmir Stamp

Act, 1977. I answer the question accordingly.