Loan Agreement between Friends and Relatives

स्टाम्प ड्यूटी

An agreement to lend and repay money is stamped as an Agreement — Article 5, Schedule I-A to the Indian Stamp Act, 1899 as applicable in Punjab, or the equivalent entry in the Chandigarh Administration's own stamp duty schedule — rather than under any article specific to a mortgage or a bond, because this Agreement (on the unsecured or cheque-security options) creates no charge on immovable property. PUNJAB: stamp under Article 5 at the residuary rate for an agreement not otherwise provided for, unless a more specific sub-clause of Article 5 fits the facts. Confirm the current figure and the correct sub-clause with the Sub-Registrar of the tehsil, or against the Department of Revenue, Rehabilitation and Disaster Management's published stamp duty table at revenue.punjab.gov.in, before the stamp is bought — the Loan Amount and the interest terms fixed by this Agreement can affect which sub-clause applies. E-stamp through the Stock Holding Corporation of India Limited (SHCIL), in the name of the Party who is to bear the duty under clause 12. CHANDIGARH: the same residuary agreement entry applies under the Chandigarh Administration's Rates of Stamp Duty & Registration Fees table at revenue.chd.gov.in; confirm the current figure at the office of the Sub-Registrar, 30 Bays Building, Sector 17, before the stamp is bought. BOTH: this is a comparatively low-value stamp, but an insufficiently stamped instrument is inadmissible in evidence under s.35 of the Indian Stamp Act, 1899 until the deficiency and any penalty are paid — which defeats the very purpose of putting the loan in writing, including its Order XXXVII advantage. Buy the stamp in advance of signing wherever that is practical.

रजिस्ट्री

Not compulsorily registrable. s.17 of the Registration Act, 1908 reaches instruments that create, declare, assign, limit or extinguish a right, title or interest in immovable property, and certain other specified instruments; a personal loan agreement that creates no such interest is not on that list, whichever security option in clause 6 is chosen — a post-dated cheque and a third-party guarantee are both personal, not proprietary, security. Optional registration under s.18 of that Act is available in both Punjab and Chandigarh but is rarely used for a document of this kind and adds nothing to its enforceability. If the Parties instead agree to secure the loan by a mortgage of immovable property, that mortgage is a separate instrument with its own, generally compulsory, registration requirement — this Agreement does not cover that case.

नोटरी

Not legally required, but useful for the same reason it is useful on an Acknowledgement of Debt: it independently fixes the date of signing, which matters if the Disbursement Date, the Repayment Date or the running of limitation is ever disputed. Have it notarised by a Notary Public, or presented before an Oath Commissioner, at or shortly after signing.

गवाह

Not legally required for a simple contract under the Indian Contract Act, 1872, which asks only for offer, acceptance and consideration between competent parties. Two independent witnesses are nonetheless taken on this Agreement, as on comparable documents in this library, because a dispute between friends or relatives over a personal loan is very often a dispute about what was actually signed and when — precisely what independent witnesses and notarisation both help to fix.