Updated: Thursday January 14, 2010/AlKhamis Muharram 29, 1431/Bruhaspathivara Pausa 24, 1931, at

07:12:16 PM

Course Contents:

1.The Stamp Act (II) of 1899 (as amended upto date).

Book Recommended:

1.The Stamp Act, 1899 (II of 1899) by Mian Ghulam Hussain and S. A. Abid.

It is applicable where one conveys his right to other, e.g., partnership deed, sale deed, gift deed etc.

Difference between Promissory Note and Bill of Exchange: A Promissory Note differs from a Bill of Exchange
in the following respects:

1.Parties:

Note: There are two parties in Promissory Note like promisor and promisee or maker and payee.

Bill: There are always three parties in Bill of Exchange, like drawer (one who signs a Bill of Exchange as the
maker), drawee (the person to whom a Bill of Exchange is addressed), and payee (a person to whom a Bill
of Exchange is payable).

2.Mode of payment:

Note: The executant or maker undertakes (promises) himself to pay amount.

Bill: Maker directs another person to pay sum.

3.Liability:

Note: Since he binds himself to pay, so his liability is absolute.

Bill: Since the drawee becomes surety so liability of maker becomes conditional or secondary.

4.Origination:

Note: Maker is originator of the Promissory Note.

Bill: Drawee who accepts is not originator.

5.Holding of payee status:

Note: Promise cannot be made of payment to maker himself. Maker and payee are two different persons.

Bill: In case of Bill of Exchange maker may hold two positions at a time, i. e., drawer and payee.

6.Noting:

Note: Noting is not made on Promissory Note if it remains unpaid or refused.

Bill: If the payment is refused, noting is made on back of it, which is conclusive proof of refusal of
payment.

7.Installments:
 Note: It is not drawn in installments.

Bill: It can be drawn in sets.

8.Acceptance:

Note: Acceptance of note is always unconditional.

Bill: It can be accepted conditionally.

9.Status of maker:

Note: Maker is principal debtor.

Bill: Maker is principal surety.

Difference between Cheque and Bill of Exchange: Following are differences between Cheque and Bill of
Exchange:

1.Drawn at:

Cheque: It is always drawn on a specified banker.

Bill: It may be drawn on any one. Banker may also be subject of it.

2.Time for payment:

Cheque: It becomes payable right at the time when it is presented for payment.

Bill: Its payment may take grace period, which is three days after it becomes due for payment.

3.Acceptance:

Cheque: It does not require acceptance and becomes payable upon presentation at the counter of bank.

Bill: It requires acceptance before payment.

4.Discharge upon refusal:

Cheque: Maker of Cheque is not discharged if it is not presented unless drawer has sustained damage by
the delay.

Bill: Drawer discharges if payee fails to present it at due date or commits default.

5.Notice:

Cheque: Banker is not obliged of notice if Cheque is not met.

Bill: Notice is necessary through Notary Public (a person licensed by government) if it dishonors.

6.Revocation:

Cheque: It is revocable after it is issued.

Bill: It remains irrevocable after it is made.

Instruments chargeable with duty u/s 3: Following documents are liable to pay stamp duty:
1.Execution in Pakistan: If any person executes any document in Pakistan or after July 01, 1899, which is not
previously executed is liable to pay stamp duty.

2. Negotiable instrument: Bill of Exchange and Promissory Note which are drawn out of Pakistan but
negotiated in Pakistan require stamp duty.

3. Other negotiable instrument: Any negotiable instrument other than of Bill of Exchange and Promissory
Note which is executed out of Pakistan but received in Pakistan needs to pay stamp duty.

Exemption: This general rule has exception such as:

1.Instrument of government: All the instruments relating to government are exempt to pay stamp duty.

2.Instrument executed by government:

3.Instrument executed on the behalf of government:

4.Instrument executed in favour of government:

5.Instrument of sale of ship:

6.Instrument of transfer of ship:

7.Instrument relating to ship:

8.Instrument of the mortgage of ship:

9.Where local government exempts:

Several instruments used in single transaction or sale, mortgage, or settlement u/s 4: Where more
instruments are used in completion of single transaction, stamp duty shall be paid on principal instrument.

Duty on principal document: Duty is paid only on principal document.

Duty on other instruments: All other instruments shall bear a stamp duty of Rs. 4/ (now Rs. 20/) on each
page. Duty prescribed in Schedule shall not be applicable.

Amount of duty: Duty is applicable as prescribed under Schedule I.

Determination of principal instrument: It is left to parties to determine whether, which instrument is principal
for the purpose of payment of stamp duty.

Highest duty: Party has to pay highest duty on the instruments where several instruments are used to
complete single transaction.

Instruments relating to several distinct matters u/s 5: Under this law instrument containing more than one
matters is allowed which are distinct. It is different than S. 4 where only under which more than one similar
type transactions are allowed for the purposes of stamp duty. This section is related with several distinct
matters.

Amount of duty: Where instrument comprises on more transactions, stamp duty shall be paid on the aggregate
value of all the documents.

Example: Where a document is both a sale deed and a bond, it is chargeable with aggregate duty of a sale deed
and a bond.
Instruments coming within several descriptions in Schedule I u/s 6: Where instrument comes under two or
more descriptions under Schedule I, stamp duty shall be paid of highest value prescribed for the purpose.

Amount of duty: As per this section where an instrument comes within the provisions of two or more Articles
in the Schedule I, the instrument is to be charged with the highest of the duties leviable when such duties are
different.

Policies of sea insurance u/s 7: If sea policy is taken and nothing is mentioned in it except, which is
compulsory, it shall not be applicable and acceptable.

Validity of sea policy: Sea policy remains valid for maximum period of twelve months. It cannot go beyond
one year.

Coverage under sea policy: Sea policy remains invalid unless following things are provided under it:

1.Particular risk or adventure.

2.Names of the subscribers or underwriters.

3.Amount of the insurance.

Bonds, debentures, or other securities issued on loans under Act XI of 1879 u/s 8: Stamp duty is paid at once
for whole amount of the loan. Payment of loan on installments does not effect the stamp duty. Subsequently no
duty is paid.

10% debentures are forfeited where they are issued without payment of compulsory stamp duty. Such
deduction is calculated on the payable stamp duty.

Examination and impounding of instrument u/s 33: The Civil Judge had the authority to impound (confine,
confiscate) the document if he is of opinion that document is not sufficiently stamped. He could admit the
document in evidence if eleven times the stamp duty was paid. If the document was not admitted in evidence
then S. 38 (2) was applicable and the document was to be sent to the Collector. U/s 38 (2) he could only send
the to the Collector, he had no power to impose penalty.

1.Must be stamped:

2.Who can impound:

a)Every person consented:

b)Incharge of public office:

3.Exception: Criminal Court cannot impound document except trial under chapters 12 and 36.

4.Usefulness:

a)Awareness:

b)Education:

c)Protection of right:

d)Income of government:

5.Object:
 a)Punishment:

b)Awareness:

c)Prevention of government loss:

Special provision as to unstamped receipts u/s 34: When during audit any receipt is produced before auditor
or public officer unstamped on which duty is payable maximum twenty five paisas, it shall not be impounded
(taking into custody). Only deficiency shall be made good.

The person producing such receipt shall be required to affix duly stamp on the receipt for its presentation.

Instruments not duly stamped inadmissible in evidence u/s 35: It is general provision of Stamp Act as with as
of the QanuneShahdat Order, that document having no duly stamped or deficiently stamped is not acceptable
in evidence.

Where document produced for evidence requires maximum stamp duty paisas twenty five, penalty shall be
imposed to Rs. 5/, but where deficiency is more than Rs. 5/ then ten time penalty of the due duty shall be
imposed in addition to the actual duty.

A seller is liable to pay stamp duty on receipt when he issues cash memo or any receipt of payment of cash.
Where seller issues receipt unstamped, buyer can produce this receipt against seller upon the payment of
penalty of Rs. 1/.

Where contract is made through correspondence, they shall be admissible in evidence provided that any one of
them is duly stamped.

Document of any nature cannot be confiscated or impounded in criminal proceedings. All documents are liable
to admit in evidence. A criminal Court cannot refuse to admit a document in evidence though it is not duly
stamped.

All instruments executed by or on behalf of government are exempt from the payment of compulsory duty.

Admission of instrument where not to be questioned u/s 36: Where Court admits any document in evidence,
objection cannot be raised by the party as to its insufficiency of the stamps. Only appellate Court can take its
notice at its own motion.

Admission of improperly stamped instruments u/s 37: Where stamps are affixed of the sufficient amount but
with wrong description, deficiency can be made good. This is upto government whatever laws are made to do
so.

Person may commit mistake as to stamp of actual denomination and affixes the postal stamp. He has not tried
to avoid the affixation of stamp. He can be allowed to affix the stamps of correct denomination.

Offences under Stamp Act u/ss 62 to 69: Following the offences under Stamp Act:

1.Drawing Bill of Exchange or Promissory Note without stamps other as witness:

2.Making Bill of Exchange or Promissory Note without stamps other as witness:

3.Issuance Bill of Exchange or Promissory Note without stamps other as witness:

4.Transferring Bill of Exchange or Promissory Note without stamps other as witness:

5.Signing Bill of Exchange or Promissory Note without stamps other as witness:

6.Execution Bill of Exchange or Promissory Note without stamps other as witness:

7.Voting as proxy without affixing stamps:

8.Attempting to vote as proxy without affixing stamps:

9.Failure to cancel stamps: Penalty is Rs. 200// as fine.

10.Defraud to government:

11.Refuses to give receipt:

12.Separate receipts to defeat stamps:

13.Postdating Bill of Exchange to defraud government:

14.Disobey rules in selling stamps:

15.Selling stamps without appointment:

Aims and objectives of Stamp Act: Following can be described:

1.To increase government income:

2.Regularization of document:

3.Evidentiary value of document:

4.Creation of rights:

5.Registration on duty payment:

6.Penalization on unpaid duty:

7.Prevention of fraud and loss to government:

8.Consolidation the law relating to stamps:

9.Amend the law relating to stamps:

Law regarding refund of stamps not used for proper purpose: Sections 54 to 59 of the Stamp Act are related
with the refund of stamps which are not used for the purpose they were bought. Rule 19 of Stamp Rules
prescribes that any person either seller or his power of attorney may get refund of the stamps.

Mr. Muhammad Akram, Advocate filed an application in the office of District Officer (Revenue), Lahore, for
the refund of stamp papers worth to Rs. 800,000/ which he had bought for the execution of Sale Deed. Later
on sale deed could not be executed due to certain reasons. District Officer (Revenue), Lahore, declined his
application on the ground that rules do not allow the refund of stamp papers to the person other than who has
bought the papers, i.e., seller. Mr. Muhammad Akram, Advocate, filed a Writ Petition No. 9077/2005, dated 25
052005, in Lahore High Court, Lahore. Mr. Justice Nasim Sikander, directed the District Officer (Revenue),
Lahore, to decide the matter within ten days in accordance to law. District Officer (Revenue), Lahore, decided
the matter on 06062005, declining the application of Mr. Muhammad Akram, Advocate, on the ground that
rules do not allow the refund to him but to owner of the property only.

Mr. Muhammad Akram, Advocate, aggrieved by the said order, filed an Appeal No. 11572 of 2005, in Lahore
High Court, Lahore, which was accepted and decided on 21022006, directing District Officer (Revenue),
Lahore, to refund the amount of Stamp Papers to appellant.

In the said appeal, the seller was also a party and was called to appear in court, but she did not appear before
court, therefore, court decided an appeal in favour of appellant.

Mr. Justice Nasim Sikander of Lahore High Court adjudicated in a similar Civil Miscellaneous[1] to refund the
stamp papers to the applicant rather seller.

[1]
CM No. 152L/2005, dated 26042004 (Civil Origin No. 31 of 1985).

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