Promissory Note – The Law – (Short Notes)

By Y.Srinivasa Rao, M.A (English Lit.)., B.Ed., LL.M., Research Scholar in Law of Torts., Principal Senior Civil Judge.

Table of Contents:-

  1. Defination of Promissory note
  2. Essential Ingredients
  3. Presumption
  4. Burden of Proof for Promissory note
  5. Stamp Duty on Promissory note
  6. Period of Limitation
  7. Case- Law

Promissory Note:

Defination of Promissory note:

 Promissory note is an instrument in writing (not being a bank-note or a currency-note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to or to the order of, a certain person or to the bearer of the instrument, Section 4, Negotiable Instruments Act, 1881.

If there is a clear promise to repay hand loan, it must follow that the instrument falls in the definition of promissory note, Mohanlal v. Sk. Bashir, (2008) 2 Mah LJ 258. 

Promissory Note is defined in the Bills of Exchange Act, 1882, 45 & 46 Vict. c. 61, S. 83, as ‘an unconditional promise in writing, made by one person to another, signed by the maker, engaging to pay on demand or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person or to bearer.’ The note can require payment at a particular place (Josolyne v. Roberts, (1908) 2 KB 349).

Promissory note includes a treasury bill, Section 2(h), Government Securities Act, 2006

Promissory note means any instrument whereby the maker engages absolutely to pay a specified sum of money to another at a time therein limited or on demand or at sight, Section 2(k), Limitation Act, 1963.

Essential Ingredients of Promissory note:

A document, to be treated as a promissory note, requires to satisfy the following conditions:

       (1)  It must be in writing;

      (2)  It must contain an unconditional undertaking to pay, signed by the maker;

      (3)  The unconditional undertaking  to pay must be in relation to payment of certain sum of money; and

   (4)           The money is payable to or to the order of a certain person or to the bearer of the instrument.

See. B. Jaya Raghava Naidu v. B. Rama Subba Reddy, (2011) 2 ICC 393 (AP), and also see. Kadorilal And Anr. vs Sukhlal Sajan Singh, AIR 1968 MP 4.

A Full Bench of the Madhya Pradesh High Court in Santsingh v. Madandas Panika and another, AIR 1976 M.P. 144 held that an instrument is a promissory note, if it satisfies the following elements.

                ‘(i)          There should be an unconditional undertaking to pay;

                (ii)           The sum should be a sum of money and should be certain;

                (iii)          The payment should be to the order of a person who is certain, or to the bearer of the instrument; and

                (iv)          The maker should sign it.’

In the case of Raghunath Balakrishna Deshpande v. Biharilal Krishna Prasad Dave , AIR 1972 Mysore 159, V.S. Malimath, J (as His Lordship then was) laid emphasis on explanation (i) to Section 13 (1) of the 1881 Act and held that a document, which is a promissory note could be a negotiable instrument under Section 13(1) of the Act, if the amount is payable either to order or to bearer. But, in view of the latter part of the said explanation, a promissory note shall be deemed to be payable to order, if the amount is expressed to be payable to a particular person and does not contain words ‘prohibiting transfer or indicating an intention that it shall not be transferable.’


Presumption is an inference of a certain fact drawn from other proved facts. While inferring the existence of a fact from another, the court is only applying a process of intelligent reasoning which the mind of a prudent man would do under similar circumstances. Unless the presumption is disproved or dispelled or rebutted the court can treat the presumption as tantamounting to proof, State of A.P. v. V. Vasudeva Rao,  2004 SCC (Cri) 968.

118. Presumptions as to negotiable instruments – Until the contrary is proved, the following presumptions shall be made:

(a) of consideration – that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration.”

Presumption under Section 1118 (a)  of the Act is rebuttable in nature. See. M.S. Narayana Menon @ Mani vs State Of Kerala & Anr, (2006) 6 SCC 39.

In P. Ramanatha Aiyar’s Advanced Law Lexicon, 3rd edition, at page 3697, the term ‘presumption’ has been defined as under:

“A presumption is an inference as to the existence of a fact not actually known arising from its connection with another which is known.

A presumption is a conclusion drawn from the proof of facts or circumstances and stands as establishing facts until overcome by contrary proof.

A presumption is a probable consequence drawn from facts (either certain, or proved by direct testimony) as to the truth of a fact alleged but of which there is no direct proof. It follows, therefore that a presumption of any fact is an inference of that fact from others that are known”. (per ABBOTT, C.J., R. v. Burdett, 4 B. & Ald,161) The word ‘Presumption’ inherently imports an act of reasoning a conclusion of the judgment; and it is applied to denote such facts or moral phenomena, as from experience we known to be invariably, or commonly, connected with some other related facts. (Wills on Circumstantial Evidence) A presumption is a probable inference which common sense draws from circumstances usually occurring in such cases. The slightest presumption is of the nature of probability, and there are almost infinite shades from slight probability to the highest moral certainty. A presumption, strictly speaking, results from a previously known and ascertained connection between the presumed fact and the fact from which the inference is made.”

Burden of Proof for Promissory note:

What would be the effect of the expressions ‘May Presume’, ‘Shall Presume’ and ‘Conclusive Proof’ has been considered by this Court in Union of India (UOI) Vs. Pramod Gupta (D)  by L.Rs. and Ors., [(2005) 12 SCC 1] in the following terms:

“It is true that the legislature used two different phraseologies “shall be presumed” and “may be presumed” in Section 42 of the Punjab Land Revenue Act and furthermore although provided for the mode and manner of rebuttal of such presumption as regards the right to mines and minerals said to be vested in the Government vis- `-vis the absence thereof in relation to the lands presumed to be retained by the landowners but the same would not mean that the words “shall presume” would be conclusive. The meaning of the expressions “may presume” and “shall presume” have been explained in Section 4 of the Evidence Act, 1872, from a perusal whereof it would be evident that whenever it is directed that the court shall presume a fact it shall regard such fact as proved unless disproved. In terms of the said provision, thus, the expression “shall presume” cannot be held to be synonymous with “conclusive proof”

In terms of Section 4 of the Evidence Act whenever it is provided by the Act that the Court shall presume a fact, it shall regard such fact as proved unless and until it is disproved. The words ‘proved’ and ‘disproved’ have been defined in Section 3 of the Evidence Act (the interpretation clause) to mean: –

Proved A fact is said to be proved when, after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.

Disproved A fact is said to be disproved when, after considering the matters before it the Court either believes that it does not exist, or considers its non-existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it does not exist.”

Applying the said definitions of ‘proved’ or ‘disproved’ to principle behind Section 118 (a)  of the Act, the Court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon.

Stamp Duty on Promissory note:

Stamp duty on Promissory note:- Article 49 to the Schedule-1 of the Indian Stamp Act:-

Promissory note:-

InstrumentStamp duty
Art. 49. Promissory Note:—[as defined by Section 2(22)— (a) when payable on demand— (i) when the amount or value does not exceed Rs. 250 ; (ii) when the amount or value exceeds Rs. 250 but does not exceed Rs. 1,000; (iii) in any other case (b) when payable otherwise than on deman

Five paise Ten paise
Fifteen paise

Period of Limitation:

Art. 31On a bill of exchange or promissory note payable at a fixed time after dateThree yearsWhen the bill or note falls due.
Art. 34On a bill of exchange or promissory note payable at a fixed time after sight or after demandThree yearsWhen the fixed time expires
Art. 35On a bill of exchange or promissory note payable on demand and not accompanied by any writing restraining or postponing the right to sue.Three yearsThe date of the bill or note.


Art. 35On a bill of exchange or promissory note payable on demand and not accompanied by any writing restraining or postponing the right to sue.Three yearsThe date of the bill or note.

There appears to be an apparent distinction between Articles 35 and 40 though as per the definition of “Bill of Exchange” in Section 2(c) of the Act, 1963 and definition of ‘cheque’ in Section 6 of the N.I. Act, either of the instruments embraces the other. The cheque by all means is an order issued by the drawer thereof directing his banker for payment of money to a specific or definite individual or entity. A cheque cannot be drawn on a person other than a Banker. This is what mainly distinguishes a cheque from a Bill of Exchange.

Art. 36On a promissory note or bond payable by instalments.Three yearsThe expiration of the first term of payment as to the part then payable; and for the other parts, the expiration of the respective terms of payment

Article 37 of the Limitation Act, 1963 reads as under:

Description of suit

37. On a promissory note or bond payable by instalments, which provides that; if default be made in payment of one or more instalments the whole shall be due.

Period of limitation Three years Time from which period begins to run When the default is made, unless where the payee or obligee waives the benefit of the provision and then when fresh default is made in respect of which there is no such waiver.

Articles 19 and 20 of the Act, 1963 are extracted below:

Art. 19For money payable for money lent.Three yearsWhen the loan is made
Art. 20Like suit when the lender has given a cheque for the moneyThree yearsWhen the cheque is paid

It was held that Article 20 of the Limitation Act, 1963 applies to a suit filed for recovery of money by a lender, who had lent money by means of a cheque. In such case, no cause of action for the suit can arise till the cheque is honoured. It is the date of encahsment of the cheque which is set by Article 20 as the starting point of limitation. Further held that a suit for money on a dishonoured cheque drawn by a borrower cannot be held to be governed by Article 19 of the Act, 1963.

Case- Law:

Sch. 1, Art 49(a) and (b and Negotiate Instruments – Insufficiently stamped Promissory note – inadmissibility. See. Shamlal and Co. v. V.R.C. Rajagopala Che …, 1977 SCC OnLine Mad 42. Held. under the provisions of Section 12 of the Stamp Act if promissory note was not duly stamped and accordingly if any question arose as to its admissibility in evidence the same may have to be held to be inadmissible. See. Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao &Ors, (1971) 1 SCC 545

Burden of Proof: See. M.S. Narayana Menon @ Mani vs State Of Kerala & Anr, (2006) 6 SCC 39

Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118 (a)  would arise that it is supported by a consideration. Such a presumption is rebuttable.  – Bharat Barrel & Drum Manufacturing Company Vs. Amin Chand Payrelal, (1999) 3 SCC 35]

The cause of action or limitation begins on the date of the execution of the deed or promissory note itself. See. Central Bank of India v. Ali Mohammad, 1992 SCC OnLine Bom 109.

The distinction between a suit on the promissory note and a suit upon the debt has been clearly pointed out in Vithalrao Sheshgirirao Moktesar v. Vithalrao Sondekar, (1922) 25 Bom L.R. 151.

 In the case of a simple bond or of a promissory note, the suit, if based upon the debt, can end in a decree against persons not parties to the bond or the promissory note, if their liability for the debt can be established. – Sukhadakanta Bhattacharjya Vs. Jogineekanta Bhattacharjya,  AIR 1934 Cal 73.

Section 18 of Limitation Act 1963 which deals with extension of period of limitation by acknowledgement. – Agni Aviation Consultants v. State of Te …, 2020 SCC OnLine TS 1462.

Promissory note is not a compulsory attestable document. See. Bonala Raju v. Sarupuru Sreenivasulu, 2005 SCC OnLine AP 836.

Presumptions are of two kinds, presumptions of fact and of law. Presumptions of fact are inferences logically drawn from one fact as to the existence of other facts. Presumptions of fact are rebuttable by evidence to the contrary. Presumptions of law may be either irrebuttable, so that no evidence to the contrary may be given or rebuttable. A rebuttable presumption of law is a legal rule to be applied by the Court in the absence of conflicting evidence. (Halsbury, 4th Edition paras 111, 112). We are here concerned with rebuttable presumptions for it is not in dispute that S. 118 of the Negotiable Instruments Act deals with one such. See. G. Vasu vs Syed Yaseen Sifuddin Quadri, AIR 1987 AP 139.

Presumption arises in law that when the legislature uses the same word in different parts of the same Section or Statute, the word is used in the same sense throughout, S.C. Dhatchayani v. A. Sathar Essa, (2008) 3 LW 1189 (Mad).

Negotiable Instruments Act,1881

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