Banking · Law of Limitation and Documentation
In the context of bank credit facilities, a borrower executes a Demand Promissory Note alongside a Loan Agreement. After two years, it is realized that the stamp duty affixed to the Demand Promissory Note was insufficient at the time of execution under the Indian Stamp Act, 1899. What is the legal standing of this specific instrument regarding its admissibility as evidence in a court of law?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The document can be validated for admission by paying the deficit stamp duty plus a penalty of ten times the deficiency as ordered by the Collector.
- 2Under Section 35 of the Indian Stamp Act, a Demand Promissory Note that is unstamped or insufficiently stamped cannot be validated by paying a penalty and remains permanently inadmissible as evidence.✓
- 3The bank can rely on the doctrine of substantial compliance to admit the note as long as the primary Loan Agreement is correctly stamped.
- 4The document remains provisionally admissible for a period of three years from the date of execution, provided the borrower acknowledges the debt in writing.
Correct answer
Under Section 35 of the Indian Stamp Act, a Demand Promissory Note that is unstamped or insufficiently stamped cannot be validated by paying a penalty and remains permanently inadmissible as evidence.
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