4. “Promissory note.” A “promissory note” is an instrument in writing (not being a banknote or a currency-note) containing an unconditional undertaking, signed by the maker, to pay on demand or at a fixed or determinable future time a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.

Illustrations

A signs instruments in the following terms:

(a) “I promise to pay B or order Rs. 500.”

(b) “I acknowledge myself to be indebted to B in Rs. 1,000 to be paid on demand, for value received.”

(c) “Mr. B, I O U Rs. 1,000.” (d) “I promise to pay B Rs. 500 and all other sums which shall be due to him.”

(e) “I promise to pay B Rs. 500, first deducting thereout any money which he may owe me.”

(f) “I promise to pay B Rs. 500 seven days after my marriage with C.”

(g) “I promise to pay B Rs. 500 on D’s death, provided D leaves me enough to pay that sum.”

(h) “I promise to pay B Rs. 500 and to deliver to him my black horse on 1st January next.”

The instruments respectively marked (a) and (b) are promissory notes. The instruments respectively marked (c), (d), (e), (f), (g) and (h) are not promissory notes.

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— “Promissory note” — Not required to be attested by witnesses — Scope — As per Section 4 of the Negotiable Instruments Act, 1881, a promissory note is required to contain four essential ingredients: (i) an unconditional undertaking to pay, (ii) the sum should be the sum of money and certain, (iii) the payment should be to or to the order of a person who is certain, or to the bearer, of the instrument, and (iv) the maker should sign it. If an instrument fulfils these four conditions, it will be called a promissory note, and the requirement of attestation of a document provided under Article 17(2)(a) of the Qanun-e-Shahdat, 1984, does not apply to a promissory note. [PLR 2024 SC 2 = PLD 2024 SC 45 = 2023 SCP 365]

— “Promissory note” — Not required to be attested by witnesses — Scope — If an instrument, notwithstanding the provisions of Section 4 of the Negotiable Instruments Act, 1881, is attested by witnesses, the nature and character thereof shall not be affected. It shall remain a promissory note and shall not be converted into a bond within the meaning of section 2(5)(b) of the Stamp Act, 1899. [PLR 2024 SC 2 = PLD 2024 SC 45 = 2023 SCP 365]

— “Promissory note” — Mode of evidence — If a promissory note is not witnessed and it does not appear that any third person saw it signed, in which case, the best evidence is the handwriting of the parties. But if it is witnessed, then it appears, on the face of the promissory note, that there is better evidence behind it; and the best evidence that the nature of the case admits of, the law requires. [PLR 2024 SC 2 = PLD 2024 SC 45 = 2023 SCP 365]

5. “Bill of exchange”. A “bill of exchange” is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay on demand or at a fixed or determinable future time a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.

A promise or order to pay is not “conditional,” within the meaning of this section and section 4, by reason of the time for payment of the amount or any instalment thereof being expressed to be on the lapse of a certain period after the occurrence of a specified event which, according to the ordinary expectation of mankind, is certain to happen, although the time of its happening may be uncertain.

The sum payable may be “certain,” within the meaning of this section and section 4, although it includes future interest or return in any other form or is payable at an indicated rate of exchange, or is payable at the current rate of exchange, and although it is to be paid in stated instalments and contains a provision that on default of payment of one or more instalments or interest or return in any other form, the whole or the unpaid balance shall become due.

A promise or order to pay is not ‘conditional’ nor is the sum payable ‘uncertain’ within the meaning of this section or section 4 by reason of the sum payable being subject to adjustment for profit or loss, as the case may be, of the business of the maker.

Where the person intended can reasonably be ascertained from the promissory note or the bill of exchange, he is a “certain person” within the meaning of this section and section 4, although he is misnamed or designated by description only.

An order to pay out of a particular fund is not unconditional within the meaning of this section; but an unqualified order to pay, coupled with—

(a) an indication of a particular fund out of which the drawee is to reimburse himself or a particular account to be debited to the amount, or

(b) a statement of the transaction which gives rise to the note or bill, is unconditional.

Where the payee is a fictitious or non-existing person the bill of exchange may be treated as payable to bearer.

— Application to restrain the encashment of unconditional bank guarantee — Interim injunction, refusal of — Scope — Petitioner seeks redress from High Court, challenging the decision of the District Judge who affirmed the Trial Court’s dismissal of its’ application to restrain the respondent from invoking the bank guarantee — The contractual arrangement between the petitioner and respondent involved the supply of items from the United States, with the petitioner obligated to furnish an on-demand performance guarantee — The bank guarantee, being unconditional and independent of the main contract, was supplied as per contractual requirements — Despite an extension in the supply period (by respondent) and amendments to the letter of credit, a dispute arose when respondent demanded late payment charges and called upon the bank guarantee after supply of items’ — The petitioner, contesting the claim, sought an interlocutory injunction from the Civil Court under the Arbitration Act, 1940, which was denied by both the Trial Court and the District Judge — The petitioner now petitions to High Court, challenging the adverse rulings and seeking relief — Validity — There’s a disagreement between the parties about whether respondent rightfully asked for late payment charges — The courts below rightly decided not to give an opinion on this dispute as it should be resolved by arbitrators — The guarantee in question is unconditional, meaning the bank had to meet respondent’s demand — The petitioner couldn’t show a strong reason to stop the guarantee payment temporarily, and there’s no proof of fraud by respondent — The claim that the petitioner didn’t break any terms of the contract needs arbitration for confirmation — There’s no evidence of financial trouble, and doubts about respondent’s ability to pay, if petitioner’s claim is ultimately accepted — Writ petition, being devoid of merit, is dismissed. [PLR 2024 Lahore 1 = PLD 2024 Lahore 1 = 2023 LHC 4474]

— Application to restrain the encashment of unconditional bank guarantee — Interim injunction — Scope — In seeking an interim injunction, certain stringent criteria must be met by the applicant — Mere allegations of breaches in contractual obligations or claims of fraud and unfair conduct in the plaint are insufficient grounds for the applicant to succeed. In commercial cases involving breach of contract, the court should exhibit robust skepticism towards assertions that damages are an inadequate remedy; a determination in favour of damages signifies a refusal to grant an injunction based on the balance of convenience — The applicant faces insurmountable barriers and must demonstrate that the respondent’s conduct is of significant consequence, causing irretrievable harm, surpassing the autonomy principle — Moreover, the applicant needs to establish that, upon successful trial, restitution or compensation from the respondent would be unattainable — Clear proof of fraud and notice of such fraud by the bank are indispensable pre-requisites — These stringent conditions emphasize that mere contract breaches with counter allegations do not warrant exceptions to the non-interference rule, particularly in commercial cases where allegations of breach alone are insufficient — Furthermore, the applicant must assert an inability to recover the amount from the beneficiary upon trial success. [PLR 2024 Lahore 1 = PLD 2024 Lahore 1 = 2023 LHC 4474]

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;

(b) as to date; that every negotiable instrument bearing a date was made or drawn on such date;

(c) as to time of acceptance; that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity;

(d) as to time of transfer; that every transfer of a negotiable instrument was made before its maturity;

(e) as to order of indorsement; that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon;

(f) as to stamp; that a lost promissory note, bill of exchange or cheque was duly stamped;

(g) that holder is a holder in due course; that the holder of a negotiable instrument is a holder in due course: provided that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burthen of proving that the holder is a holder in due course lies upon him.

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— Presumptions as to negotiable instruments — Scope — Section 118 provides that until the contrary is proved, inter alia the presumption that every negotiable instrument was made for consideration shall be drawn — Such a presumption is only a prima facie, and may be displaced by raising a probable defence. [PLR 2024 SC 2 = PLD 2024 SC 45 = 2023 SCP 365]