Law:

Section:

Stamp Act (II of 1899)-----S. 2(5)(a)-Bond-Obligation in instrument to pay damages in case of partnership deed being not executed within fixed time-Not an obligation contemplated by cl. (a) of S. 2(5)-Obligation under instrument, in circumstances, arose only any "initial" partnership deed not executed-Instrument not containing any obligation to pay held to be an agreement with a penal clause and not a bond. A executed an instrument in favour of N, the relevant words of which were as follows :- "I have taken rupees one lac and fifty thousand from N, by means of a pronote,,have entered into an agreement,,..If 1 fail to complete the said agreement within the period aforesaid f will be responsible for payment of Rs. 20,000 per month as damages in addition to the return of the sum aforesaid." Held : The obligation to pay damages in case, the deed of partnership was not executed within the time fixed was not an obligation coming under clause (a) of the definition. There is as far as this part of the document is concerned no initial obligation to pay. The obligation arises only if the specified act namely the execution of the deed of partnership is not done. The instrument in this respect therefore was an agreement with a penal clause and was therefore rightly held to be an agreement and not a bond. If the instrument is considered as a whole there can be no doubt that it was executed solely for the purposes of taking the drawee into partnership and not for securing the liability of the drawer to repay the amount he had borrowed under the promissory. note. The most important circumstance in this connection is the bringing into existence of both the promissory note and the agreement to execute the deed of partnership almost at the same time and as parts of one and the same transaction. It is significant that the instrument does not state that the amount was received already. The words used in that connection viz. 'the money which has already been taken or will be taken' indicate that the entire money had not been received by the time the second document was executed. If the intention of the parties was that the instrument should create two obligations namely the…

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