A suit based on a release deed is maintainable even if the promissory notes evidencing the consideration for the release deed are inadmissible due to insufficient stamp duty, and leave to defend will be refused if the defenses raised are frivolous and dishonest.

( 1 ) THE plaintiffs have brought a suit for recovery of Rs. l,12,800. 00 along with pendente lite and future interest @ l2/o p. a.

( 2 ) THE plaintiffs and defendants Nos. 2 and 3 were partners and were carrying on business under the name and style of M/s. Radha Fancy Store, defendant No. I in shop Nos. 67-68, outside Moti Bazar, Chandni Chowk, Delhi. The plaintiffs retired from that partnership in consideration of payment of a sum of Rs. l,00,000. 00 in the following manner :- Rs. 40. 000. 00 by cheque dated October 10, 1980 in favour of plaintiff No. 1. Rs. 10,000. 00 by cheque dated October 10, 1980 in favour of plaintiff No. 2. Rs. 50,coo. 00 to be paid to plaintiff No. I after one year of October 10, 1980. Rs. 50,000. 00 to be paid to plaintiff No. 2 within one year of October 10, 1980.

( 3 ) IN respect of the aforesaid transaction, a deed of release dated October 10, 1980 was executed between the parties. In that deed, there was an incorporation of promise of the defendant Nos. 2 and 3 to pay the balance amount of Rs. 1,00,000. 00 within one year there after. Further, defendant Nos. 2 and 3 also executed one promissory note and receipt for Rs. 50. 000. 00 in favour of plaintiff No. I and another promissory note and receipt for the same amount in favour of plaintiff No. 2.

( 4 ) ACCORDING to the plaintiffs, on the basis of the aforesaid documents, the defendants became liable to pay to the plaintiffs a sum of Rs. l,00,000. 00 with interest 12% p. a. on or before October, 1981. However, the payment was not made and, therefore, the present suit was brought. The plaintiffs claim Rs. 1,00,000. 00 as principal and a further sum of Rs. 12,800. 00 as interest from October 10, 1980 till the institution of the suit.

( 5 ) THE suit was brought under the provisions of Order 37 of the Code of Civil Procedure (hereinafter referred to as the code ) since the suit was on the basis of a contract in writing (release deed) and two promissory notes.

( 6 ) SUMMONS to the defendants were issued. The defendants came up with an application for leave to defend which is 1. A. 301 of 1982. The defendants pray that they should be given unconditional leave to defend. They urge that both the promissory notes, which form the basis of the suit, are inadmissible in evidence for want of proper stamp. They explain that the promissory notes are payable otherwise on demand and as such they should be stamped as bill of exchange while the same has not been done. They also plead that the suit is bad for misjonder of causes of action and parties and that separate suit should have been brought by the plaintiffs in respect of separate promissory notes. According to them, a sum of Rs. 28,000. 00 only and a further sum of Rs. 5000. 00 was due to the plaintiffs in terms of the account books, while much more (Rs. 50,000. 00 ) was paid and that, therefore, they arc not entitled to any further amount. They have also put forward a defence that it was the obligation of the plaintiffs to ice that the tenancy rights of the shops, in which partnership business was being carried on, are transferred in favour of defendant Nos. 2 and 3, that the said obligation was never discharged and that, therefore, the plaintiffs are not entitled to any amount on the basis of the release deed and the promissory note.

( 7 ) THE aforesaid application was contested by the plaintiffs.

( 8 ) THE main emphasis of the learned counsel for the defendants at the time of arguments was on the point of inadmissibility of both the promissory notes on the ground of deficiency of stamps. It is Article 49 of Schedule I of the Indian Stamps Act which provides for the stamp duty on a promissory note. The said Article reads as under :

"49. Promissory Note as defined by Section 2 (22) (a) When payable on demand- (i) When the amount or value does Ten naye paise. not exceed Rs. 250. (ii) When the amount or value ex- Finteen naye paisecceds Rs. 250, but does not exceed Rs. 1000. (iii) in any other ca