A negotiable instrument executed or negotiated in the State of Jammu and Kashmir must be stamped in accordance with the provisions of the Jammu and Kashmir Stamp Act, 1977.

The question before the Fall Bench is whether a negotiable instrument executed or negotiated in the State must be affixed with stamps of the description prescribed by the Jammu and Kashmir Stamp Act, 1977 or with these prescribed by the Indian Stamp Act, 1899.

2. This question has arisen in two civil suits between the parties herein which are pending in this court on its original side. Both these suits are founded upon pronotes. Before the learned single Judge trying these suits an objection was taken on behalf of the defendants that the pronotes were inadmissible in evidence as they were not duly stamped. It was contended that the pronotes bear stamps of the description prescribed by the State Act and not these prescribed by the Central Act, as they should have, having regard to the provisions of the Negotiable Instruments Act which was applicable to the State. The learned Single Judge felt that the question raised required consideration by a larger bench and made a reference accordingly. That is how the matter has come before us.

3. The law relating to stamps in force in the State is contained in the Jammu and Kashmir Stamp Act, 1977. This Act was enacted by the then Maharaja as an absolute ruler of the State having plenary powers of legislation in relation thereto. The Act came into force on 1st day of Baisakh 1978 corresponding to 13th April, 1920 A.D. Ever since it has remained in force in the State. Meanwhile, following accession of the State to the Union of India. The constitution of India was made applicable to the State, of course, with some additions and modifications. The constitutional relationship between the Union and the State, as defined by the provisions of the Constitution applicable to the State, envisages that, in respect of certain matters provided in List 1 in 7th schedule of the Constitution, the power of legislation in relation to the State would exclusively vest in the Union Parliament. These matters include the matter covered by entry 91 of the said list which reads thus :

"Rates of Stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts.™™

Alongside it is provided by Art, 372 of the Constitution of India that all the law in force in the territory of India immediately before the commencement of constitution shall continue in force therein until altered or repealed or amended by the competent legislature or other competent authority. The expression ˜Law in forced has been defined as including a law passed or made by the Legislature or other competent authority in the territory of India before the commencement of the constitution which was not previously repealed. The Jammu and Kashmir Stamp Act clearly fulfilled this requirement. The application of the Constitution of India to the State could not therefore affect the validity or the operation of the Act even as respects the matter covered by entry 91 of the Union list as long as the Union Parliament did not make any law applicable to the State governing that matter. In point of fact the Union Parliament has not so far made any such law in relation to the State. The Indian Stamp Act, 1899 has been amended to govern part B States as the States like the Jammu and Kashmir State where then called, in the matter but not so the Jammu and Kashmir State. This is what is clear from section (1) of the Indian Stamp Act, 1899 which reads thus:

"This Act may be called THE INDIAN STAMP ACT, 1899.

2. It extends to the whole of India except the State of Jammu and Kashmir provided that it shall not apply to the territories which immediately before the 1st November, 1956, were comprised in Part B States (excluding the State of Jammu and Kashmir) except to the extent to which the provisions of this Act relate to rates of stamp duty in respect of the documents specified in Entry 91 of List 1 of the seventh schedule to the Constitution."

3. It