The Stamp Act is a fiscal measure enacted to secure revenue for the State on certain classes of instruments. It is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. It has been rightly observed by the Apex Court in a case that, the endeavour should be to avoid snap decisions and to afford litigants a real opportunity of fighting out their cases fairly and squarely. Costs will be adequate compensation in many cases and in others the Court has almost unlimited discretion about the terms it can impose provided always the discretion is judicially exercised and is not arbitrary.1The stringent provisions of the Act are conceived in the interest of the revenue. Once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of the initial defect in the instrument.2This object is achieved by making those documents inadmissible in evidence, if they are not properly stamped according to the Indian Stamp Act, 1899.3The Court generally does not encourage the objections taken merely on account of the insufficiency of stamps, the matter really relating to the revenue.4Objects and Reasons in this regard may be looked into to find out as to what mischief is sought to be remedied and how the Government proposed to get over the situation faced by it by seeking to amend the law.5Further, it is pertinent to mention here that the enactment is prohibitory in nature and not confined to affording a party a protection of which he may avail himself or not as he pleases. Although the protection of revenue is its primary object, it is not framed solely for the protection of the revenue and to be enforced solely at the instance of the revenue officials, nor is the penalty limited in cases for which a penalty is exigible.6Further, the whole purport of the Indian Stamp Act is to make available certain dues and to collect revenue but it does not mean and imply overriding the effect over another statute operating in a completely different sphere.7
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1. Sangram Singh v. Election Tribunal, Kotah, Bhurey Lal Baya, MANU/SC/0044/1955 : AIR 1955 SC 425, decided on 22-3-1955.
2. Hindustan Steel Ltd. v. Dilip Construction Co., MANU/SC/0474/1969 : (1969) 1 SCC 597: AIR 1969 SC 1238.
3. Section 35, as section 49 in the Registration Act, 1908.
4. Harbans Singh v. Punjab State, AIR 1963 Punj 182.
5. Parkview Enterprises v. The State, MANU/TN/0100/1989 : AIR 1990 Mad 251 (DB).
6. Surajmull Nagarmull v. Triton Insurance, 52 IA 126: 29 CWN 893: MANU/PR/0044/1924 : AIR 1925 PC 83; Raju JMA v. Krishnamurthy Bhatt, AIR 1976 Guj 72.
7. Hameed Joharan v. Abdul Salam, MANU/SC/0444/2001 : (2001) 7 SCC 573.
In order to further understand the provisions of the Indian Stamp
Act, 1899, it would be beneficial to distinguish between the pleadings and conveyancing. The dictionary meaning of the term 'plead' means 'to state and argue a case'. Therefore, the pleading includes respective contentions of the parties in a dispute, which are reduced into writing. Therefore, the term pleading would be applicable to the Court proceedings including filing of the complaint/plaint, etc., replies thereto and other incidental documents related to the dispute filed by either of the parties. Needless to mention here that our legal system is adversary legal system wherein there are two contesting parties. One party stakes its claim or right to a particular thing, which is disputed by the opposite side before the Court. Under these circumstances each of the parties in support of its claim files in writing the various contentions and submissions in terms of the different provisions under the law before the Court. All these documents constitute pleadings. It is only after the completion of the pleadings that a matter is argued and subsequently the dispute is adjudicated by the Court. On the other hand the dictionary meaning of the 'conveyance' is 'an act by which property is conveyed or voluntarily transferred from one person to another by means of a written instrument and other formalities'. It also means 'instrument' itself. Therefore, the term conveyancing does not apply to the Court proceedings, rather it is applicable to the instruments, which have been documented not for the purpose of court proceedings, rather for the purpose of creating evidence of a particular transaction. So broadly speaking the pleading and conveyancing may be distinguished by simply stating that while the pleadings are applicable to Court proceedings and conveyancing is applicable to the documentation done outside the Court and not meant for the Court proceedings particularly, though they may be used in the Court proceeding, in order to substantiate a particular contention, claim or submission.
It is reiterated that the Indian Stamp Act, 1899 is a fiscal statute, purpose of which is basically to collect the revenue for the Government. Besides this, it lends authenticity to a particular instrument. Since a particular document is not appropriately stamped in terms of Indian Stamp Act, it loses its evidentiary value and sometimes may also lead to penal consequences. In the year 1869 the British Government adopted this fiscal measure to raise the revenue by way of enacting the Stamp Act, 1869 (18 of 1869), which was replaced by Indian Stamp Act, 1879 (1 of 1879). However, this Act of 1879 was amended from time to time by 10 different enactments and inspite of that need was felt to enact a more comprehensive law. Hence, Indian Stamp Bill was introduced in the Legislature, which was referred to the Select Committee. On the recommendations of the Select Committee, changes were made in the Bill. Consequently, the Indian Stamp Act, 1899 was passed by the Legislature which received its assent on 27-1-1899. However, the Act came into force on 1st day of July, 1899 as Indian Stamp Act, 1899 (2 of 1899). It is pertinent to mention here that from time to time even this Act was amended by way of different Amendment Acts.
Section 2 of the Indian Stamp Act, 1899 (in short Act), defines various terms used in the enactment, of which some terms for the purpose of general understanding of the Scheme of the Act are very important. These include 'Conveyance'1, 'Duly stamped'2, 'Executed and execution'3, 'Impressed stamp'4, 'India'5, 'Instrument'6, 'Paper'7and 'Stamp'8.
Section 3 of the Act is the charging section, which provides as to which instrument shall be chargeable with duty and as to how much duty has to be affixed on that instrument, so that the instrument in question may be termed as stamped with appropriate duty. Similarly, the said section also provides as to which document shall not be chargeable to any duty.
Section 4 of the Act provides that where, in the case of any sale, mortgage or settlement, several instruments are employed for completing the transaction, the principal instrument only shall be chargeable with duty and each other instrument shall be chargeable with a duty of one rupee only instead of the duty, if any, prescribed for it in Schedule I.
Section 5 of the Act reflects the fiscal nature of the enactment since it provides a measure for prevention of circumventing stamp duty under certain circumstances. Section 6 of the Act has to be read in the background ofsection 5. On one hand, section 5 uses the term 'several distinct matters' with regard to the instrument, falling under distinct matters, which shall be chargeable with the aggregate amount of duties with which separate instruments, each comprising or relating to one of such matters, would be chargeable under the Act, whereas section 6 uses term "several descriptions" and makes an instrument liable to stamp duty with the highest of one, in case it falls under several descriptions. This provision also reflects that object of the present enactment is to collect revenue and accordingly its different provisions
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1. Section 2(10): "Conveyance" includes a conveyance on sale and every instrument by which property, whether movable or immovable, is transferred inter vivos and which is not otherwise specifically provided for by Schedule I.
2. Section 2(11): "Duly stamped", as applied to an instrument, means the instrument bears an adhesive or impressed stamp of not less than the proper amount and that such stamp has been affixed or used in accordance with law for the time being in force in [India].
3. Section 2(12): "Executed" and "execution", used with reference to instruments, mean "signed" and "signature".
4. Section 2(13): "Impressed stamp" includes _ (a) labels affixed and impressed by the proper officer, and (b) stamps embossed or engraved on stamped paper.
5. Section 2(13A): "India" means the territory of India excluding the State of Jammu and Kashmir.
6. Section 2(14): "Instrument" includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded.
7. Section 2(18): "Paper" includes vellum, parchment or any other material on which an instrument may be written.
8. Section 2(26): "Stamp" means any mark, seal or endorsement by any agency or person duly authorized by the State Government, and includes an adhesive or impressed stamp, for the purpose of duty chargeable under this Act.
have to be interpreted in case of any dispute arising in the matter, in favour of the revenue. Similarly, sections 12, 13, 14 and 15 also substantiate this aspect of the matter that interpretation of different provisions of the Act has to be in favour of revenue, in case two interpretations are possible of a particular section. Section 29 fixes liability of making the payment of stamp duty. In other words, it lays down as to who would be liable to pay stamp duty for a particular instrument. Chapter III of the Act provides elaborate provisions in the form of sections 31 and 32 for adjudication as to proper stamp and for that purpose "Collector" has been authorized to adjudicate the disputes in this regard. Chaper IV deals with as to how instrument which are duly stamped have to be treated. It is worth mentioning here that, like section 49 of the Registration
Act, 1908, section 35 of the Indian Stamp Act, 1899 makes the instruments not duly stamped inadmissible in evidence. However, the case law in this regard makes it clear that the objection on this issue has to be taken at the first instance and such an issue has to be decided by the Court concerned at that very point, hence decision on that aspect cannot be deferred till the final decision of the case.1Moreover, once an instrument has been admitted in evidence, such admission shall not except as provided in section 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped2. While discussing case law various provisions of this Chapter, more particularly sections 33, 35, 36, 38, 39, 41, 42 and 44 would be discussed in detail.
CHAPTER VI provides redressal of grievance of the affected party in the adjudication qua objection as to improperly stamped instrument. This has been provided by way of reference and revision. One would find that under
section 31, the Collector has been, at the lowest rank, empowered to adjudicate as to the quantum of duty (if any), with which an instrument is chargeable with stamp duty. He can exercise his power in respect of any instrument whether executed or not and whether previously stamped or not, which is brought before him and the person bringing it applies for his opinion. The person concerned has to pay fee of such amount as the Collector may direct in each case. Under Chapter VI, if the Collector acting under sections 31, 40 or 41, is doubtful with regard to amount of duty, with which any instrument is chargeable, he may refer the matter with his own opinion thereon for the decision of Chief Controlling Revenue Authority. For that purpose, he has to draw up a statement of the case and consequently such authority, to whom the case has been referred for determination of duty, shall consider the case and send a copy of its decision to the Collector, who shall proceed to assess and charge the duty (if any) in conformity with such decision3. Chief Controlling Revenue Authority may state any case referred to it by the Collector, as mentioned above, or otherwise coming to its notice may refer such case with its own opinion thereon to the concerned High Court4. Such reference shall be decided by not less than three Judges of
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1. Javer Chand v. Pukhraj Surana, (1962) 2 SCR 333: MANU/SC/0036/1961 : AIR 1961 SC 1655.
2. Section 36.
3. Section 56.
4. Section 57(1).
the High Court to which it is referred and in case of difference the opinion of the majority shall prevail1. Needless to mention that aggrieved party from such opinion of the High Court may approach the Apex Court by way of Special Leave to Appeal.
CHAPTER VII lays down the penal consequences for a person responsible for executing the instrument, which is not duly stamped. The last chapter is in the form of supplementary provisions and is not relevant for the purpose of our present study.
1. The Stamp Act is a fiscal measure enacted to secure revenue for the State on certain classes of instruments. It is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. The stringent provisions of the Act are conceived in the interest of the revenue. Once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of the initial defect in the instrument.2
2. Further, the whole purport of the Indian Stamp Act is to make available certain dues and to collect revenue but it does not mean and imply overriding the effect over another statute operating in a completely different sphere.3
3. With regard to the meaning assigned to the words "distinct matters" in section 5 of the Act in contradiction to words "several descriptions" occurring in section 6, the Court held that whether an instrument relates to a single matter or to a distinct matter will depend on a number of factors such as who are parties thereto, which is the subject-matter on which it operates and so forth. If a number of persons join in executing one instrument, and there is community of interest between them in the subject-matter comprised therein, it will be chargeable with a single duty. But if the interests of the executants are separate, the instrument must be construed as comprising distinct matters.4
4. With regard to the interpretation of the words "before whom any instrument chargeable.....is produced or comes in the performance of his functions", as occurring in section 33 of the Indian Stamp
Act, 1899 (in other words whether a document can be impounded when it is brought before the Collector for seeking his advise as to what the proper stamp duty would be?) the Court held that it would be an extraordinary position if a person seeking the advice of the Collector and not wanting to rely upon an instrument, as evidence of
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1. Section 57(2).
2. Hindustan Steel Ltd. v. Dilip Construction Co., MANU/SC/0474/1969 : (1969) 1 SCC 597: AIR 1969 SC 1238.
3. Hameed Joharan v. Abdul Salam, MANU/SC/0444/2001 : (2001) 7 SCC 573.
4. Member, Board of Revenue v. Arthur Paul Benthall, (1955) 2 SCR 842: MANU/SC/0002/1955 : AIR 1956 SC 35.
any fact to be proved, nor wanting to do any further act in regard to the instrument so as to effectuate its operation, should also be liable to the penalties which unstamped instruments used as above might involve. The scheme of the Act shows that where a person is simply seeking the opinion of the Collector as to the proper duty in regard to an instrument, he approaches him under section 31. If it is properly stamped and the person executing the document wants to proceed with effectuating the document or using it for the purposes of evidence, he is to make up the duties and under section 32 the Collector will then make an endorsement and the instrument will be treated as if it was duly stamped from the very beginning. But if he does not want to proceed any further than seeking the determination of the duty payable then no consequence will follow and an executed document is in the same position as an instrument which is unexecuted and unstamped and after the determination of the duty the Collector becomes functus officio and the provisions of section 33 have no application. The provisions of that section are a subsequent stage when something more than mere asking of the opinion of the Collector is to be done.1
5. Three questions might arise with regard to objection qua a document, which is not properly stamped. Firstly, once an instrument has been admitted in evidence, can its admissibility be questioned subsequently on the ground that it has not been stamped or has not been properly stamped. Secondly, at what point of time a person may challenge the admissibility of a particular document on the ground that it is not properly stamped, or thirdly whether the Court can defer its decision if an objection is raised to the admissibility of a document on the ground of its not being properly stamped. The Supreme Court while elaborating the provisions of section 36 of the Stamp Act observed that section is categorical in its term that when a document has once been admitted in evidence, such admission cannot be called in question at any stage of the suit or the proceeding on the ground that the instrument had not been duly stamped. The only exception recognized by the section is the class of cases contemplated by section 61. Where a question as to the admissibility of a document is raised on the ground that it has not been stamped, or has not been properly stamped, it has to be decided then and there when the document is tendered in evidence. Once the Court, rightly or wrongly, decides to admit the document in evidence, so far as the parties are concerned, the matter is closed. Section 35 is in the nature of a penal provision and has far reaching effects. Parties to a litigation, where such a controversy is raised, have to be circumspect and the party challenging the admissibility of the document has to be alert to see that the document is not admitted in evidence by the Court. The Court
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1. Govt. of U.P. v. Raja Mohd. Amir Ahmad Khan, (1962) 1 SCR 97: MANU/SC/0030/1961 : AIR 1961 SC 787.
has to judicially determine the matter as soon as the document is tendered in evidence and before it is marked as an exhibit in the case.1
6. Phrase "subject to a mortgage or other incumbrance" in the explanation to section 24 qualifies the word "sale" and not the word "property".2
7. What is the difference between the phrases "admitted in evidence" and "acted upon" as occurring in section 35 of the Indian Stamp
Act, 1899: At this juncture, students may recall section 49 of the Indian Registration Act, 1908, which talks about the effect of non-registration of a document, required to be compulsorily registered.
It has been held that under section 36, an instrument once admitted in evidence shall not be called in question at any stage of the same suit or proceeding on the ground that it has not been duly stamped. Section 36 does not prohibit a challenge against an instrument that it shall not be acted upon because it is not duly stamped, but on that account there is no bar against an instrument not duly stamped being acted upon after payment of the stamp duty and penalty according to the procedure prescribed by the Act. The doubt, if any, is removed by the terms of section 42(2) which enact, in terms unmistakable, that every instrument endorsed by the Collector under section 42(1) shall be admissible in evidence and may be acted upon as if it has been duly stamped.3
8. With reference to the stamp duty upon instruments generally, it is a well settled rule of law that an instrument must be stamped for its leading and principal object, and the stamp covers everything accessory to that object. In order to determine whether any, and if any, what stamp duty is chargeable upon an instrument the legal principle is that the real and true meaning of the instrument is to be ascertained; that the description of it given in the instrument itself by the parties is immaterial, even although they may have believed that its effect and operation was to create a security mentioned in the Stamp Act, and they so declared.4
9. Under section 36, once the document has been admitted the objection of its inadmissibility on the ground of its not being properly stamped cannot be taken. It was held that the Court, and of necessity it would be trial Court, before which the objection is taken about admissibility of document on the ground that it is not duly stamped, has to judicially determine the matter as soon as the document is tendered in evidence and before it is marked as an exhibit in the case and where a document has been inadvertently admitted without the court
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1. Javer Chand v. Pukhraj Surana, (1962) 2 SCR 333: MANU/SC/0036/1961 : AIR 1961 SC 1655.
2. Board of Revenue v. Rai Saheb Sidhnath Mehrotra, (1965) 2 SCR 269: MANU/SC/0252/1964 : AIR 1965 SC 1092.
3. Hindustan Steel Ltd. v. Dilip Construction Co., MANU/SC/0474/1969 : (1969) 1 SCC 597: AIR 1969 SC 1238.
4. The Madras Refineries Ltd. v. The Chief Controlling Revenue Authority, Board of Revenue, MANU/SC/0292/1977 : (1977) 2 SCC 308: AIR 1977 SC 500.
applying its mind as to the question of admissibility, the instrument could not be said to have been admitted in evidence with a view to attracting section 36. The endorsement made by the learned trial Judge that "Objected, allowed subject to objection", clearly indicates that when the objection was raised it was not judicially determined and the document was merely tentatively marked and in such a situation section 36 would not be attracted.1
10. There is no period of limitation under section 33(1) of the Indian Stamp Act, by virtue of which the concerned authority is under obligation to impound the instrument in question, if it appears to him that such instrument is not duly stamped.2
11. With regard to section 2(15) read with section 35 of the Indian Stamp Act, 1899, it was noted that the Indian Stamp Act, 1899 has been engrafted in the statute book to consolidate and amend the law relating to stamps. Its applicability thus stand restricted to the scheme of the Act, the same being a true fiscal statute in nature and therefore strict construction is required to be offered and no liberal interpretation. No doubt section 2(15), it was observed, includes a decree of partition and section 35 lays down a bar in the matter of unstamped or insufficient stamp being admitted in evidence or being acted upon - but that does not mean that the period shall remain suspended until the stamp paper is furnished and the partition decree is drawn thereon and subsequently signed by the Judge. Otherwise the result would be utter absurd, because if somebody does not wish to furnish the stamp paper within the time specified therein and as required by the Civil Court to draw up the partition decree or if someone does not at all furnish the stamp paper, does that mean and imply, no period of limitation can be said to be attracted for execution or a limitless period of limitation is available. The intent of the Legislature in enacting the Limitation Act shall have to be given its proper weightage. Absurdity cannot be the outcome of interpretation by a Court order and wherever there is even a possibility of such absurdity it would be a plain exercise of judicial power to repel the same rather than encouraging it. The whole purport of the Indian Stamp Act is to make available certain dues and to collect revenue but it does not mean and imply overriding effect over another statute operating in a completely different sphere.3
12. The Apex Court has held that the principles relating to charging stamp duty are as under:
(i) The object of the Stamp Act is generation of revenue. It is therefore a fiscal enactment and has to be interpreted accordingly.
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1. Ram Rattan v. Bajrang Lal, MANU/SC/0318/1978 : (1978) 3 SCC 236.
2. Trideshwar Dayal v. Maheshwar Dayal, MANU/SC/0609/1989 : (1990) 1 SCC 357.
3. Hameed Joharan v. Abdul Salam, MANU/SC/0444/2001 : (2001) 7 SCC 573.
(ii) Stamp duty is levied with reference to the instrument and not in regard to the transaction, unless otherwise specifically provided in the Act.
(iii) Stamp duty is determined with reference to the substance of the transaction as embodied in the instrument and not with reference to the title, caption or nomenclature of the instrument.
(iv) For classification of an instrument, that is to determine whether an instrument comes within a particular description in an article in the Schedule to the Act, the instrument should be read and construed as whole.
(v) Where an instrument falls under two or more descriptions in the Schedule to the Act, the instrument shall be chargeable with only one duty, that is the highest of the duties applicable to the different description. But where an instrument relates to several distinct matters, it shall be chargeable with the aggregate amount of duties to which separate instruments would be chargeable.1
Question of law decided:No specific question of law is involved in the present case. Rather a question of fact was the issue. The Court was called upon to decide whether document in question was simply an agreement or lease as well as agreement. The question carried importance in the fact that if the document was only an agreement, then it attracted less stamp duty. On the other hand, if it was a lease as well as agreement, then it attracted more duty.
Facts of the case:The facts of the case in a very narrow compass are that reference was made under section 61 of the Stamp Act and thereby calling upon the Allahabad High Court to decide as to whether paper No. 7C was a lease as well as an agreement or only an agreement. The learned Judge of the Small Cause Court was of the opinion that the document was an agreement only, whereas Inspector of Stamps held the view otherwise.
Decision of the case:The Court came to the conclusion after perusing the document that it was a lease as well as an agreement and gave following mentioned findings:-
"It is executed not by the lessor but by the lessee, and the later covenants that he would take certain premises from the lessor, make certain alterations in the premises at his own cost, pay Rs. 9 a month as rent and the period of occupation was fixed as five years. It was also stipulated that the executant will not leave the premises for five years and if he did vacate the premises within five years he would be liable for the rent of five years. The document was executed on 11th December, 1927 on a general stamp of 8 annas. As we said before, the terms of the document leave no room for doubt that it is a lease as well as an
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1. S.N. Mathur v. Board of Revenue, MANU/SC/0235/2009 : (2009) 13 SCC 301, decided on 18-2-2009.
agreement. 'Lease' under the Stamp Act "includes a kabuliyat or other undertaking in wrinting.... to occupy or pay or deliver rent for immovable property. Under section 6, Stamp Act, if an instrument is so framed as to come within two or more of the descriptions in Sch. 1 and if the duties chargeable thereunder are different, the instrument will be chargeable only with the highest of such duties. The document is a lease as well as an agreement, and as the duty for a lease is higher, it will be chargeable only as a lease. The annual rent reserved is Rs. 108, that is to say, it exceeds Rs.100 and does not exceed Rs. 200. As a conveyance a duty of Rs. 2 is chargeable. In case of a lease, where the lease purports to be for a term in excess of three years, as it is in the present case, the duty is the same as on a conveyance for a consideration equal to the amount or value of the average annual rent reserved. We, therefore, declare that the document is chargeable as a lease, and we determine the amount of duty thereon as Rs. 2 Annas 8 having already been paid, the deficiency is Re. 1-8-0. Under section 35 of the Act a penalty is also leviable and such a penalty shall be ten times the amount of the deficiency, that is Rs. 15. We make the above declaration and we direct that a copy of our judgment will be sent to the Collector".
Thus, the reference was answered accordingly.
Question of law decided:The issue for decision in this case is as to the meaning to the words "distinct matters" in section 5 of the Act in contradiction to words "several descriptions" occurring in section 6. The Court held that whether an instrument relates to a single matter or to a distinct matter will depend on a number of factors such as who are parties thereto, which is the subject-matter on which it operates and so forth. If a number of persons join in executing one instrument, and there is community of interest between them in the subject-matter comprised therein, it will be chargeable with a single duty. But if the interests of the executants are separate, the instrument must be construed as comprising distinct matters.
Facts of the case:The present case arises out of reference made to the Chief Controlling Revenue Authority, to whom eventually the matter was referred by the Collector, who was approached by the respondent to adjudicate qua the duty payable on a Power-of-Attorney executed by him marked as Ex. A, which he proposed to execute. In fact, the respondent was, at the material time, the Managing Director of Messrs Bird and Co. Ltd., and of Messrs F.W. Heilgers and Co. Ltd., which were acting as Managing Agents of several Companies registered under the Indian Companies Act. He was also a Director of a number of other Companies, and had on occasions acted as liquidator of some Companies, as executor or administrator of estates of deceased persons and as trustees of various estates. On 4-7-1949 by that power, he empowered Messrs Douglas Chisholm Fairbairn and John James Brims Sutherland jointly and severally to act for him in his individual capacity and also as executor, administrator, trustee, managing agent, liquidator and all other capacities. In this way, the reference was heard by a Bench consisting of the Chief Justice, and S.R. Das Gupta, Justice, in terms of section 57(2) of the Indian Stamp Act, who differed in their opinion.
The learned Chief Justice with whom Das, J. agreed, held that the different capacities of the executant did not constitute distinct matters for purposes of section 5 of the Act, and that the proper duty payable on the instrument was Rs. 10 under article 48(d) of Schedule 1A of the Stamp Act as amended by section 13 of Bengal Act III of 1992, S.R. Das Gupta, J. was of the opinion that the different capacities of the executant were distinct matters for the purpose of sections 5, and that the instrument was chargeable with the aggregate amount of duty payable if separate instruments were executant in respect of each of those capacities. In the result, the question was answered in accordance with the opinion of the majority in favour of the respondent. Against that decision, the Board of Revenue, West Bengal has preferred this appeal by special leave, and contends that the instrument in question comprises distinct matters, and must be stamped in accordance with section 5.
Decision of the case:Before coming, to the decision of the matter, the Court found it useful to look into the statutory provisions bearing on the question which are sections 3 to 6 of the Indian Stamp Act, 1899 (in short Act). Section 3 is the charging section, and it enacts that subject to certain exemptions, every instrument mentioned in the Schedule to the Act shall be chargeable with the duty of the amount indicated therein as the proper duty therefor. Section 4 lays down that when in the case of any sale, mortgage or settlement several instruments are employed for completing the transaction, only one of them called the principal instrument is chargeable with the duty mentioned in Schedule 1, and that the other instruments are chargeable each with a duty of one rupee. Section 5 enacts that any instrument comprising or relating to several distinct matters shall be chargeable with the aggregate amount of the duties with which separate instruments, each comprising or relating to one of such matters, would be chargeable under the Act. Section 6, so far as is material, runs as follows:-
"Subject to the provisions of last preceding section, an instrument so framed as to come within two or more of the descriptions in Schedule I, shall, where the duties chargeable thereunder are different, be chargeable only with the highest of such duties".
The contention of the respondent, which found favour with the majority of learned Judges in the Court below was that the word "matters" in section 5 is synonymous with the word "description" occurring in section 6, and that they both refer to the several categories of instruments which are set out in the Schedule. The argument in support of this contention was this: "Section 5 lays down that the duty payable when the instrument comprises or relates to distinct matters is the aggregate of what would be payable on separate instruments relating to each of these matters. An instrument would be chargeable under section 3 only if it fell within one of the categories mentioned in the Schedule. Therefore, what is contemplated by section 5 is a combination in one document of different categories of instruments such as sale and mortgage, sale and lease or mortgage and lease and the like. But when the category is one and the same, then section 5 has no application and as, in the present case, the instrument in question is a power-of-attorney, it would fall under article 48(a) in whatever capacity it was executed, and there being only one category, there are no distinct matters within section 5". However, the Supreme Court while rejecting this contention observed that:
"We are unable to accept the contention that the word "matter" in section 5 was intended to convey the same meaning as the word "description" in section 6. In its popular sense, the expression "distinct matters" would connote something different from distinct "categories". Two transactions might be of the same description, but all the same, they might be distinct. If A sells Black-acre to X and mortgages
White-acre to Y; the transactions fall under different categories, and they are also distinct matters. But if A mortgages Black-acre to X and mortgages White-acre to Y, the two transactions fall under the same category, but they would certainly be distinct matters. If the intention of the legislature was that the expression 'distinct matters' in section 5 should be understood not in its popular sense but narrowly as meaning different categories in the Schedule, nothing would have been easier than to say so. When two words of different import are used in a statute in two consecutive provisions, it would be difficult to maintain that they are used in the same sense, and the conclusion must follow that the expression "distinct matters" in section 5 and "descriptions" insection 6 have different connotations".
Against this conclusion, it was urged that if the word "matters" in section is construed as meaning anything other than "categories" or in the phraseology of section 6, "descriptions" mentioned in the Schedule, then there can be no conflict between the two sections, and the clause in section 6 that it is "subject to the provision of the last preceding section" would be meaningless and useless. While rejecting the contention it was observed that:
"Though the topics covered by sections 5 and 6 are different, it is not difficult to conceive of instruments which might raise questions falling to be determined under both the sections. Thus, if a partnership carried on by the members of a family is wound up and the deed of dissolution effects also a partition of the family properties as in Secretary, Board of Revenue v. Alagappa Chettiar, ILR 1937 Mad 553, the instrument can be viewed both as a deed of dissolution and a deed of partition, and under section 6, the duty payable will be the higher duty as on an instrument of partition. But supposing by that very deed one of the members creates a charge or mortgage over the properties allotted to his share in favour of another member for moneys borrowed by him for his own purposes, that would be a distinct matter which would attract section 5. Now, but for the saving clause, a contention might be advanced that sections 5 and 6 are mutually exculsive, and as the instrument falls within section 6, the only duty payable thereon is as on an instrument of partition and no more. The purpose of the clause in section 6 is to repel any such contention".
In support of the contention that "matters" in section 5 meant same thing as "description" in section 6, the Scheme of the Act was stressed as embodied in sections 3 to 6. It was argued that under section 3 the duty was laid not on all instruments but on those which were of the descriptions mentioned in the Schedule, that section 4 enacted a special provision with reference to three of the categories mentioned in the schedule, sale (conveyance), mortgage and settlement, that if they were completed in more than one instrument, not all of them were liable for the duty specified in the Schedule but only one of them called the principal document, and that section 6 provided that when the instrument fell under two or more of the categories in the Schedule, the duty payable was the highest payable on any one of them, that thus the categories in the schedule were the pivot on which the entire scheme revolved, and that in construing the section in the light of that scheme, the expression "distinct matter" must in the setting be construed as distinct categories. To construe "distinct matters" as something different from "distinct categories" would be, it was argued, to introduce a concept foreign to the scheme of the enactment. However, the Court not only rejected various judgments cited on behalf of the respondent but also this line of argument and observed as under:
"The error in this argument lies in thinking that the object and scope of sections 4 to 6 are the same, which in fact they are not. Section 4 deals with a single transaction completed in several instruments, and
section 6 with a single transaction which might be viewed as falling under more than one category, whereas section 5 applies only when the instrument comprises more than one transaction, and it is immaterial for this purpose whether those transactions are of the same category or of different categories. The topics dealt with in the three sections being thus different, no useful purpose will be served by referring to
section 4 or section 6 for determining the scope of section 5 or for construing its terms. It is not without significance that the legislature has used three different words in relation to the three sections, "transaction" in section 4, "matter" in section 5 and "description" in section 6".
Under these circumstances, it was held that, section 5 would apply even when the instrument comprises matters of the same description, the point for decision is whether the instrument proposed to be executed by the respondent is a single power-of-attorney or a combination of several of them. While rejecting the contention that when the executant of one instrument confers on the attorney a general authority to act for him in whatever matters he could act, then there is, in fact, only a single delegation and that therefore the instrument must be construed as a single power-of-attorney. It was further held as under:
"We are unable to agree with the respondent that when a person executes a power-of-attorney in respect of all the matters in which he could act, it should be held, as a matter of law and without regard to the contents of the instrument, to comprise a single matter. Whether it relates to a single matter or to distinct matters will, in our opinion, depend on a number of factors such as who are parties thereto, which is the subject-matter on which it operates and so forth. Thus, if A executes one power authorizing X to manage one estate and Y to manage another estate, there would really be two distinct matters, though there is only one instrument executed by one person. But if both X and Y are constituted attorneys to act jointly and severally in respect of both the estates, then there is only one delegation and one matter, and that is specifically provided for in article 48(d). Conversely, if a number of persons join in executing one instrument, and there is community of interest between them in the subject-matter comprised therein, it will be chargeable with a single duty. This was held in Davis v. Williams, 104 ER 358; Bowen v. Ashley, 127 ER 467 (469); Goodson v. Forbes, 128 ER 999 (1000-1001) and other cases. But if the interests of the executants are separate, the instrument must be construed as comprising distinct matters. Applying the same principle to powers-of-attorney, it was held in Alien v. Morrison, 108 ER 1152 (1153) that when members of a mutual insurance club executed a single power, it related to one matter, Lord Tenterdon, C.J. observing that "there was certainly a community of purpose actuating all the members of this club". In Reference under Stamp Act, 1899, section 46, ILR 9 Mad 358, a power-of-attorney executed by thirty-six persons in relation to a fund in which they were jointly interested was held to comprise a single matter. A similar decision was given in Reference under Stamp Act, 1899, section 46, ILR 15 Mad 386 where a power-of-attorney was executed by ten mirasdars empowering the collection of communal income appurtenant to their mirasi rights. On the other hand, where several donors having separate interests execute a single power-of-attorney with reference to their respective properties as, for example, when A constitutes X as attorney for management of his estate Black-acre and B constitutes the same person as attorney for the management of his estate. White-acre, then the instrument must be held to comprise distinct matters. It was so decided in Reference under Stamp Act, 1899, section 46, 2 MLJ 178. Thus, the question whether a power-of-attorney relates to distinct matters is one that will have to be decided on a consideration of the terms of the instrument and the nature and the extent of the authority conferred thereby.
It may be mentioned that questions of this character cannot now arise in England in view of special provision of the Finance Act, 1927 (17 &18, Geo. 5, Ch. 10) section 56 which runs as follows:-
'No instrument chargeable with stamp duty under the heading Letter of Power-of-Attorney and Commission, Factory, Mandate, or other instrument in the nature thereof in the First Schedule to the Stamp Act, 1899, shall be charged with duty more than once by reason only that more persons than one are named in the instrument as donors or donees (whether jointly or severally or otherwise), of the powers thereby conferred or that those powers relate to more than one matter.'
There is no provision in the statute law of this country similar to the above, and it is significant that it assumes that a power-of-attorney might consist of distinct matters by reason of the fact that there are several donors or donees mentioned in it, or that it relates to more than one matter."
While applying the aforesaid principals of law, as laid down in the matter it was observed by the Court as under:
"Now, considering Exhibit A in the light of the above discussion, the point for determination is whether it can be said to comprise distinct matters by reason of the fact that the respondent has executed it in different capacities. In this form, the question is bereft of authority, and falls to be decided on well-recognized principles applicable to the matter. It is, as has been stated above, settled law that when two persons join in executing a power-of-attorney, whether it comprises distinct matters or not will depend on whether the interests of the executants in the
subject-matter of the power are separate or joint. Conversely, if one person holding properties in two different capacities, each unconnected with the other, executes a power in respect of both of them, the instrument should logically be held to comprise distinct matters. That will be in consonance with the generally accepted notion of what are distinct matters, and that certainly was the view which the respondent himself took of the matter when he expressly recited in the power that he executed it both in his individual capacity and in his other capacities. But it is contended by Mr. Chaudhury that the fact that the respondent filled several capacities would not affect the character of the instrument as relating to a single matter, as the delegation thereunder extended to whatever the respondent could do, and that it would be immaterial that he held some properties in his individual capacity and some others as trustee or executor, as the legal title to all of them would vest in him equally in the latter as well as in the former capacity. We are concerned, he argued, not with the source from which the title flowed but with the reservoir in which it is now contained.
This is to attach more importance to the form of the matter than to its substance. When a person is appointed trustee, the legal title to the estate does, under the English law, undoubtedly vest in him; but then he holds it for the benefit of the cestui que trust in whom the equitable estate vests. Under the Indian law, it is well established that there can be trusts and fiduciary relations in the nature of trust even without there being a vesting of the legal estate in the trustee as in the case of mutts and temples. In such cases, the legal title is vested in the institution, the mahant or shebait being the manager thereof, and any delegation of authority by him can only be on behalf of the institution which he represents. When a person possesses both a personal capacity and a representative capacity, such as trustee, and there is a delegation of power by him in both those capacities, the position of law is exactly the same as if different persons join in executing a power in respect of matters which are unrelated. There being no community of interest between the personal estate belonging to the executant and the trust estate vested in him, they must be held to be distinct matters for purposes of section 5. The position is the same when a person is executor or administrator, because in that capacity he represents the estate of the deceased, whose persona is deemed to continue in him for purposes of administration".
The last argument put forward on behalf of the respondent to the effect that if every capacity of the donor is to be considered as a distinct matter, one has to hold that there are distinct matters not only with reference to the capacity of the executant as trustee, executor and so forth, but in respect of every transaction entered into by him in his personal capacity, was also rejected on the following terms:-
"Thus, it is argued, if he confers on his attorney authority to sell one property, to mortgage another and to lease a third, he would have acted in three different capacities as vendor, mortgagor and lessor, and the instrument will have to be stamped as relating to three distinct matters. This, he contended, would destroy the very basis of a general
power-of-attorney. The fallacy in this argument is in mixing up the capacity which a person possesses with acts exercisable by virtue of that capacity. When an executor, for example, sells one property for discharging the debts of the testator and mortgages another for raising funds for carrying on his business, he no doubt acts in two different transactions; but in respect of both of them, he functions only in his capacity as executor. In our opinion, there is no substance in this contention".
Accordingly, while differing from the majority opinion of the High Court, it was held that instrument in question comprises distinct matters in respect of several capacities of the respondent mentioned therein, and that the view taken by the revenue authorities and supported by the minority view of the High Court was correct. Accordingly, the appeal was allowed with costs on the appellant before the Supreme Court as well as in the Court below.
The above mentioned judgment was delivered by Justice T.L. Venkatarama Ayyar, which represented the majority view of the Supreme Court. However, Justice Bhagwati did not agree with the conclusion reached in the judgment and while upholding the majority view of the High Court held as under:
"While agreeing in the main with the construction put upon
sections 4, 5 and 6 of the Act and the connotation of the words "distinct matters" used in section 5, I am of the view that the question still survives whether the instrument in question is a single power-of-attorney or a combination of several of them. The argument which has impressed my Brother Judges forming the majority of the Bench is that though the instrument is executed by one individual, if he fills several capacities and the authority conferred is general, there would be distinct delegations in respect of each of those capacities and the instrument should bear the aggregate of stamp duty payable in respect of each of such capacities. With the greatest respect, I am unable to accede to that argument. I agree that the question whether a power-of-attorney relates to distinct matters is one that will have to be decided on the consideration of the terms of the instrument and the nature and the extent of the authority conferred thereby. The fact, however, that the donor of the power-of-attorney executes it in different capacities is not sufficient in my opinion to constitute the instrument, one comprising distinct matters and thus requiring to be stamped with the aggregate amount of the duties with which separate instruments each comprising or relating to one of such matters would be chargeable under the Act, within the meaning of section 5. The transaction is a single transaction whereby the donor constitutes the donees jointly and severally his attorneys for him and in his name and on his behalf to act for him in his individual capacity and also in his capacity as managing director, director, Managing agent, agent, secretary or liquidator of any company in which he is or may at any time thereafter be interested in any such capacity as aforesaid and also as executor, administrator, trustee or in any capacity whatsoever as occasion shall require. No doubt, different capacities enjoyed by the donor are combined herein but that does not constitute him different individuals thus bringing the instrument within the mischief of
section 5. The executants of the instrument are not several individuals but is only one individual, the donor himself, though he enjoys different capacities. These different capacities have a bearing on the nature and extent of the powers which he could exercise as such. In his own individual capacity he could exercise all the powers as the full owner qua whatever right, title and interest he enjoys in the property, whether it be an absolute interest or a limited one; he may be the absolute owner of the property or may have a life interest therein, he may have a mortgagee's interest or a lessee's interest therein, he may be a dominant owner of a tenement or may be a mere licensee; but whatever interest he enjoys in that property will be the subject-matter of the power which he executes in favour of the donee. He may, apart from this individual interest which he enjoys therein, be a trustee of certain property and he may also enjoy the several interests described above in his capacity as such trustee. It may be that in his turn he may be accountable to the beneficiaries for the due administration of the affairs of the trust but that does not mean that he, as trustee, is not entitled to exercise all these powers, the trust property having vested in him, and he being therefore in a position to exercise all these powers in relation thereto.
The same would be the position if he were an executor or an administrator of an estate, in possession of the estate of the deceased as such. The property of the deceased would vest in him though his powers of dealing with the same would be circumscribed either by the provisions of the testamentary instrument or the limitations imposed upon the same by law. All these circumstances would certainly impose limitations on his powers of dealing with the properties but that does not detract from the position that he is entitled to deal with those properties and exercise all the powers in relation thereto though with the limitations imposed upon them by reason of the capacities which he enjoys. It follows, therefore, that, though enjoying different capacities, he is the same individual who functions though in different capacities and conducts his affairs in the various capacities which he enjoys but as a single individual. He is not one individual when he is acting in his own individual capacity; he is not another individual when he is acting as a trustee of a particular estate and he is not a third individual when he is acting as an executor or administrator of a deceased person. In whatever capacity he is acting he is the same individual dealing with various affairs with which he is concerned though with the limitations imposed upon his powers of dealing with the properties by reason of the properties having vested in him in different capacities."
Accordingly, Justice Bhagwati opined that instrument in question did not comprise distinct matters but comprised one matter only and that matter is the execution of a general power-of-attorney by the donor in favour of the donees constituting the donees his attorneys to act for him in all the capacities which he enjoys. It was, however, observed that the said instrument could not be split up into separate instruments each comprising or relating to a distinct matter insofar as the different capacities of the donor were concerned. The general power-of-attorney comprises all acts which can be done by the donor himself which he enjoys and could not be split up into individual acts which the donor is capable of performing and which he appoints his attorney to do for him and in his name and on his behalf. It is within the very nature of the general power-of-attorney that all the distinct acts which the donor was capable of performing are comprised in the one instrument which was executed by him and if that was the position, it was logical that whatever acts the donor is capable of performing whether in his individual capacity or in his representative capacity as trustee or as executor or administrator are also comprised within the instrument and are not distinct matters to be dealt with as such so as to attract the operation of section 5. Accordingly, the appeal was dismissed with costs by Justice Bhagwati.
However, finally the appeal was allowed with costs, as mentioned above, in view of the majority opinion by the Supreme Court.
Question of law decided:The present case involves interpretation of the words "before whom any instrument chargeable.....is produced or comes in the performance of his functions", as occurring in section 33 of the Indian Stamp Act, 1899. In other words whether it can be impounded when it is brought before the Collector for seeking his advise as to what the proper stamp duty would be? The Court held that it would be an extraordinary position if a person seeking the advice of the Collector and not wanting to rely upon an instrument as evidence of any fact to be proved nor wanting to do any further act in regard to the instrument so as to effectuate its operation should also be liable to the penalties which unstamped instruments used might involve. The scheme of the Act shows that where a person is simply seeking the opinion of the Collector as to the proper duty in regard to an instrument, he approaches him under section 31. If it is properly stamped and the person executing the document wants to proceed with effectuating the document or using it for the purposes of evidence, he is to make up the duties and under section 32 the Collector will then make an endorsement and the instrument will be treated as if it was duly stamped from the very beginning. But if he does not want to proceed any further than seeking the determination of the duty payable then no consequence will follow and an executed document is in the same position as an instrument which is unexecuted and unstamped and after the determination of the duty the Collector becomes functus officio and the provisions of section 33 have no application. The provisions of that section are a subsequent stage when something more than mere asking of the opinion of the Collector is to be done.
Facts of the case:This is an appeal against the judgment and order of the High Court of Allahabad on a certificate granted by that Court. The respondent filed a petition under article 226 of the Constitution praying that the imposition of stamp duty by the Collector of Sitapur, of Rs. 85,595/7/- and a penalty ofRs. 5 was against law and could not be realized against him and prayed that the order be quashed. On 12-9-1948, the respondent executed a wakf by oral recitation of Sigha and then it was written on a stamped papers which was signed by the respondent and attested by witnesses. On 15-9-1948, it was presented to the Collector for his opinion under section 31 as to the duty chargeable. As the Collector himself was in doubt, he referred the matter to the Board of Revenue, which after a fairly long time, held that the document was liable to duty in accordance with article 58 of the Stamp Act, 1899. On 29-10-1951, the Collector held that Rs. 8,58,598/7/- were payable as stamp duty and ordered that it be deposited within fifteen days. Notice to this effect was served on the respondent on 10-11-1951. Thereupon the respondent filed a petition in the High Court under article 226 which was dismissed on 3-11-1952, on the ground that it was premature. On 2-2-1954, a further notice was served upon the respondent to deposit the amount of the stamp duty plus the penalty ofRs. 5 within a month otherwise proceedings would be taken against him under section 48 of the Stamp Act, 1899. Thereafter on 1-3-1944, the respondent filed a petition under article 226 of Constitution in the Allahabad High Court challenging the legality of the imposition of the stamp duty and the penalty and prayed for a writ of certiorari. A Full Bench of the High Court quashed the order of the Collector and the State of U.P. has come in the appeal by way of this special leave.
Decision of the Court:In order to resolve the issue involved in the present case, the Court relied upon the interpretation of sections 31, 32 and 33 of the Stamp Act and as far as facts of the case are concerned, as mentioned above, admittedly the document in question was submitted to the Collector for his opinion under section 31 for adjudication of the quantum of stamp duty. A bare reading of section 32 shows that when such instrument is brought to the Collector under section 31 and he determines that it was already fully stamped or he determines the duty which is payable on such a document that duty is paid, the Collector shall certify by endorsement on the instrument presented that full duty with which it is chargeable has been paid and upon such endorsement being made, the instrument shall be deemed to be fully stamped or not chargeable to duty as the case may be. Needless to say that under proviso to section 32, the Collector is not authorized to make the endorsement if an instrument is brought to him a month after the date of its execution. While arguing its case before the Court, the counsel for the State referred to the various definitions under section 2 including duly stamped under section 2(11), instrument under section 2(14) and executed under section 2(12) and also section 3, which lays down what "chargeable" means and then to section 17 which provides as to when an instrument has to be stamped. Though certain other sections were also relied upon by counsel for State but the Court did not consider them to refer for the purposes of finding out as to what is the consequence of a person applying to Collector for his determination as to the proper duty on an instrument. The main thrust of the State's counsel was that such a conclusion would depend upon whether instrument which is submitted for the opinion of the Collector was at that point of time executed or not. In other words, if an instrument whether stamped or not is submitted for the opinion of the Collector before it is executed, i.e., it is signed then the Collector is required to give his determination of the duty chargeable and return the document to the person seeking his opinion but if the document is scribed on a stamped paper or unstamped paper and is executed then different consequences follow. In the latter case it was submitted that under section 33, the Collector is required to impound the document if he finds that it is not duly stamped. On the other hand the respondent argued that the Collector becomes functus officio once he has given his opinion and can take no action under section 33. It is in view of these rival contentions that the Court formulated that the question is, does this power of impounding arise in the present case?
The Court observed that the instrument in dispute was not produced as a piece of evidence nor for its being acted upon e.g., registration, nor for endorsement as under section 32 of the Stamp Act, 1899 but was merely brought before the Collector for seeking his advice as to what the proper duty would be. The words "every person.... before whom any instrument.... is produced or comes in the performance of his functions" refer firstly to production before judicial or other officers performing judicial functions as evidence of any fact to be proved and secondly refer to other officers who have to perform any function in regard to those instruments where they come before them, e.g., registration. They do not extend to the determination of the question as to what the duty payable is. They do not cover the acts which fall within the scope of section 31, because that section is complete by itself and it ends by saying that the Collector shall determine the duty with which, in his judgment, the instrument is chargeable, if it is chargeable at all. Section 31 does not postulate anything further to be done by the Collector. It was conceded that if the instrument is unexecuted i.e., not signed and the opinion of the Collector is sought, he has to give his opinion and return it with his opinion to the person seeking his opinion. The language in regard to executed and unstamped documents is no different and the powers and duties of the Collector in regard to those instruments are the same, that is, when he is asked to give his opinion, he has to determine the duty with which, in his judgment, the instrument is chargeable and there his duties and powers in regard to that matter end. Then follows section 32. Under that section the Collector has to certify by endorsement on the instrument brought to him under section 31 that full duty has been paid, if the instrument is duly stamped or it is unstamped and the duty is made up, or it is not chargeable to duty. Under that section the endorsement can be made only if the instrument is presented within a month of its execution. But what happens when the instrument has been executed more than a month before its being brought before the Collector? Section 31 places no limitation in regard to the time and there is no reason why any time limit should be imposed in regard to seeking of opinion as to the duty payable.
Finally, it was held as under:
"Chapter IV of the Act which deals with instruments not duly stamped and which contains sections 33 to 48, provides for impounding of documents, how the impounded documents are to be dealt with, Collector's powers to stamp instruments impounded and how the duties and penalties are to be recovered. It would be an extraordinary position if a person seeking the advice of the Collector and not wanting to rely upon an instrument as evidence of any fact to be proved nor wanting to do any further act in regard to the instrument so as to effectuate its operation should also be liable to be penalties which unstamped instruments used as above might involve. The scheme of the Act shows that where a person is simply seeking the opinion of the Collector as to the proper duty in regard to an instrument, he approaches him under section 31. If it is properly stamped and the person executing the document wants to proceed with effectuating the document or using it for the purposes of evidence, he is to makeup the duty and under
section 32 the Collector will then make an endorsement and the instrument will be treated as if it was duly stamped from the very beginning. But if he does not want to proceed any further than seeking the determination of the duty payable then no consequence will follow and an executed document is in the same position as an instrument which is unexecuted and unstamped and after the determination of the duty the Collector becomes functus officio and the provisions of section 33 have no application. The provisions of that section are a subsequent stage when something more than mere asking of the opinion of the Collector is to be done"
After relying upon various judgments on the doctrine of functus officio, the Court laid down that once Collector determines the duty he becomes functus officio and could not impound the instrument under section 33 and consequently the proceedings could not, therefore, be taken. Hence, the appeal was dismissed.
Question of law decided:Once an instrument has been admitted in evidence can its admissibility be questioned subsequently on the ground that it has not been stamped or has not been properly stamped. Secondly, at what point of time a person may challenge the admissibility of a particular document on the ground that it is not being properly stamped or thirdly whether the Court can defer its decision if an objection is raised to the admissibility of a document on the ground of its not being properly stamped. The Supreme Court while elaborating the provisions of section 36 of the Stamp Act, 1899 observed that section is categorical in its term that when a document has once been admitted in evidence, such admission cannot be called in question at any stage of the suit or the proceeding on the ground that the instrument had not been duly stamped. The only exception recognized by the section is the class of cases contemplated by section 61. Where a question as to the admissibility of a document is raised on the ground that it has not been stamped, or has not been properly stamped, it has to be decided then and there when the document is tendered in evidence. Once the Court, rightly or wrongly, decides to admit the document in evidence, so far as the parties are concerned, the matter is closed. Section 35 is in the nature of a penal provision and has far reaching effects. Parties to a litigation, where such a controversy is raised, have to be circumspect and the party challenging the admissibility of the document has to be alert to see that the document is not admitted in evidence by the Court. The Court has to judicially determine the matter as soon as the document is tendered in evidence and before it is marked as an exhibit in the case.
Facts of the case:The present appeal arises out of suit for realization ofRs. 39,615, principal with interest on the basis of two hundis which were not denied having been executed himself by the defendant. But the only defence taken on behalf of the defendant was that the said hundis were without consideration, since the plaintiff as part of agreement did not send the gold for which such hundis were executed and therefore they were not honoured. The suit was decreed in the appeal with cost and future interest. However, on appeal the High Court of Rajasthan at Jodhpur allowed the appeal and dismissed the said suit and granted certificate to the appellant under
article 133(1)(a) of Constitution of India. The most important plea raised by the defendant was that the hundis were inadmissible because they had not been stamped according to the Stamp Law. During the trial the said hundis were admitted to have been executed and the trial Judge on this issue opined as under:
"Therefore, in this case the plaintiff having paid the penalty, the two documents in suit having been exhibited and numbered under the signatures of the presiding officer of court and the same having thus been introduced in evidence and also referred to and read in evidence by the defendant's learned counsel, the provisions of section 36 of the Stamp Act, 1899, which are mandatory, at once come into play and the disputed documents cannot be rejected and excluded from evidence and they shall accordingly properly form part of evidence on record. Issue 2 is thus decided against the defendant."
The Supreme Court while elaborating the provisions of section 36 of the Stamp Act, as applicable to the facts of the present case observed that section is categorical in its terms that when a document has once been admitted in evidence, such admission cannot be called in question at any stage of the suit or the proceeding on the ground that the instrument had not been duly stamped. The only exception recognized by the section is the class of cases contemplated by section 61, which is not material to the present controversy. Section 36 does not admit of other exceptions. Where a question as to the admissibility of a document is raised on the ground that it has not been stamped, or has not been properly stamped, it has to be decided then and there when the document is tendered in evidence. Once the Court, rightly or wrongly, decides to admit the document in evidence, so far as the parties are concerned, the matter is closed. Section 35 is in the nature of a penal provision and has far reaching effects. Parties to a litigation, where such a controversy is raised, have to be circumspect and the party challenging the admissibility of the document has to be alert to see that the document is not admitted in evidence by the Court. The Court has to judicially determine the matter as soon as the document is tendered in evidence and before it is marked as an exhibit in the case. The Court found in this case that the record disclosed the fact that the hundis were marked asExts. P1 and P2 and bore the endorsement "admitted in evidence" under the signature of the Court. It was not, therefore, found to be one of those cases where a document had been inadvertently admitted, without the Court applying its mind to the question of its admissibility. Once a document had been marked as an exhibit in the case and the trial had proceeded all along on the footing that the document was an exhibit in the case and had been used by the parties in examination and cross-examination of their witnesses, section 36 of the Stamp Act, 1899 comes into operation. Once a document had been admitted in evidence, as aforesaid, it was not open either to the Trial Court itself or to a Court of appeal or revision to go behind that order. Such an order was not one of those judicial orders which are liable to be reviewed or revised by the same Court or a Court of superior jurisdiction.
Hence, the Supreme Court observed that High Court was in error in refusing to act upon those hundis which had been properly proved since their execution was admitted by executant himself. Accordingly, the appeal was allowed and the judgment and decree as passed by the High Court was set aside and that of the trial Court was restored.
Question of law decided:The case does not involve any question of law and the decision pertains to peculiar facts of the case, in the background of explanation to section 24 of the Indian Stamp Act, 1899. It was observed in this case that phrase "subject to a mortgage or other incumbrance" in the explanation to section 24 qualifies the word "sale" and not the word "property".
Facts of the case:The relevant facts are as follows. The respondent is one of the executants of the deed dated December 15, 1952. The executants, hereinafter referred to as the vendors, were lessees of two plots of land and on these plots they had constructed an oil mill, known as Sri Govind Oil Mills, and Ice and Cold Storage Factory, and buildings in which the factories stood. The Ice and Cold Storage Factory was being run by the vendors in partnership with Shyam Sunder Gupta and Satya Prakash Gupta. The vendors had equitably mortgaged these properties with the Chartered Bank of India, and a sum ofRs. 10,00,000 was due to the Bank. In order to pay off the debt, the vendors entered into a contract with Messrs Oil Corporation of India Ltd., hereinafter referred to as the vendees for the sale of the lands, buildings, plants, machinery and stores and goodwill of the Govind Oil Mills and Ice and Cold Storage Factory for a sum of Rs. 5,55,000 made up as follows:
Rs. 1,12,000 for the plant and machinery and goodwill of the Ice andCold Storage Factory, Rs. 3,00,000 for the machinery of Sri Govind Oil Mills, Rs. 25,000 for stores, Rs. 18,000 for goodwill, and Rs. 1,00,000 for the buildings and the lessee rights in the plots. Out of this Rs. 66,000 was payable to Messrs Shyam Sunder Gupta and Satya Parkash Gupta in respect of their share in the Kanpur Ice and Cold Storage Factory, and the remainder to the vendors.
The Chartered Bank agreed to release from its charge the properties to be conveyed to the vendees provided a sum of Rs. 5,00,000 was paid to it. The vendees agreed to pay the said Bank a sum of Rs. 4,89,000, while the vendors agreed to pay Rs. 11,000 to the Bank to make up the balance.
In pursuance of this agreement, the vendors handed over the possession of plant and machinery of the two factories to the vendees, who paid before
December 15, 1952, Rs. 3,89,000 to the said Bank. On December 15, 1952, the sale deed in respect of the building and the lessee rights was executed.
Clause 2 of the deed provided that the vendees hereby declare that the properties hereby conveyed are free from all encumbrances except the charge in favour of the Chartered Bank of India, Australia and China, The Mall, Kanpur, which would be paid off so far as the properties hereby conveyed are concerned in the manner set forth above.
On these facts the Board of Revenue referred to the following questions to the High Court:-
(1) Whether the document is a sale deed for a consideration ofRs. 1,00,000 as contended by the executants.
(2) Whether in view of the provisions of section 24 of the Stamp Act, 1899, the sale consideration shall be deemed to be Rs. 5,55,000 and duty liable to be paid thereon as held by the Board.
(3) Whether the consideration of the sale will be deemed to be Rs. ten lakhs i.e., the entire amount due to the mortgagee Bank, and duty is payable thereon.
(4) On what amount is the additional stamp duty under section 107 of the Kanpur Development Act, 1945, leviable.
The High Court gave the following answer to the first three questions:
"The document in question is a sale deed for a consideration ofRs. 1,00,000 only and that the Stamp duty payable in respect of it was to be calculated on the amount and not on any higher amount."
The appellant, the Board of Revenue, by way of the present appeal by Special Leave against the said judgment of the High Court of Allahabad, challenged the answer given by the Court to the said three questions.
Decision of the case:It was contended on behalf of the appellant that a true interpretation of section 24 of the Indian Stamp Act, 1899, the consideration for the purpose of calculating, ad valorem duty is either Rs. 10,00,000 or Rs. 5,55,000 or at least Rs. 1,11,000. The Court before giving decision in the matter posed the question: What is the underlying object of section 24 and referred to
Illustration 2 to the section, which reads as under:
"A sells property to B for Rs. 500 which is subject to a mortgage to C for Rs. 1,000 and unpaid interest Rs. 200. Stamp-duty is payable onRs. 1700."
The Court observed that:
"In this illustration the consideration set forth in the conveyance isRs. 500, and under article 23, the amount on which the Stamp Duty is leviable would be Rs. 500 only. There is no doubt that this is not the real value of the property for if the property was not the subject-matter of mortgage, A would not sell the property for Rs. 500 and B would pay more than Rs. 500. The legislature, therefore, adopted a simple test for valuing the property taken by the vendees, and the test adopted was that any unpaid mortgage money or money charge, together with interest (if any) due on the sum shall be deemed to be part of the consideration for the sale. Therefore, in the illustration the sum of Rs. 1000 and Rs. 200 are added to Rs. 500 and the sum on which the stamp duty is payable is determined at Rs. 1700."
Thereafter a judgment in case of Commissioners of Inland Revenue v. Liquidators of City of Glasgow Bank, (1880) 5 App Cas 317 was taken note into, in which said underlying reason was explained as follows:-
"If any other rule was adopted, it is quite plain that the fair incidence of this tax would be altogether frustrated and defeated. A proprietor has an estate worth 20,000 pounds. There is a bond upon it for 10,000 pounds. He sells that estate, and the purchaser pays to him the difference between the amount of the bond and the value of the estate, so that the bond being for 10,000 pounds he pays 10,000 pounds. The day after he obtains investment to pay off the bond. Well, the practical result of that is that he has paid 20,000 pounds as the purchase money of this estate, and he has obtained a conveyance with an ad valorem stamp of the value of 10,000 pounds. That is a simple defeating of the purpose and intention of the legislature as expressed in this clause, and therefore, I think, upon the plain meaning of this section, that there was no intention whatever to go back upon the enactment of the 16 and 17 Vict., and to restore the enactment of the 55 Geo. III, which is what the liquidators are contending for. On the contrary, it seems to me that the 73rd section plainly intended to continue the provision of the statute 16 and 17 Vict."
The Court thereafter came to the next point to be determined in the matter as to what does the phrase "sale of property subject to a mortgage" mean? On this aspect, it was observed that:
"The next point that needs determination is: What does the phrase "sale of property subject to a mortgage" mean? Does this phrase mean that whenever mortgaged property is sold the explanation applies or does it imply that if mortgaged property is sold subject to the mortgage then and then only the explanation applies? In our view, the correct meaning is the latter meaning. Let us see what would be the position if A, instead of selling property as in Illustration 2, adopts the following mode of selling. A sells property to B for Rs. 1700, which is subject to mortgage to C for Rs. 1000 and unpaid interest Rs. 200. A agrees thatRs. 1200 be paid to C and Rs. 500 to him. If the first meaning is adopted, the consideration on which the stamp duty would be leviable would be Rs. 1700, which is the consideration expressed in terms of article 23, and Rs. 1200 deemed to be consideration within section 24, the total amounting to Rs. 2900. In our opinion this result could never have been intended. We agree with the decision of the Calcutta High Court in U.K. Janardhan Rao v. Secretary of State, ILR 58 Cal 33: MANU/WB/0202/1930 : AIR 1931 Cal 193 (FB), and of the Bombay High Court in Waman Martand Bhalerao v. Commissioner Central Division, MANU/MH/0116/1924 : AIR 1924 Bom 524: ILR 49 Bom 73, that the phrase "subject to a mortgage or other incumbrance" in the explanation to section 24 qualifies the word "sale" and not the word "property". We need hardly say that the Stamp Act is a taxing statute and must be construed strictly and if two meanings are equally possible, the meaning in favour of the subject must be given effect to.
Before we consider the facts of this case, we may mention that it is plain from the explanation that it is only the unpaid mortgage money that is deemed to be part of the consideration. If the mortgage money has been paid off by the date of the conveyance, the explanation does not require it to be added to the consideration. If the mortgage money has been paid off by the vendee before the date of the sale, as part of the consideration, it would be included in the amount leviable with stamp duty under article 23, but not under the explanation. The conveyance deed would, in the above eventuality, recite the fact that so much money has been paid to the mortgagee and it would be the consideration expressed in the deed."
Thereafter, the law as explained in the matter was applied to the facts of the case and it was held that when the deed was executed Rs. 3,89,000 had already been paid by the vendees to the Bank. Apparently from the aforementioned facts break up of Rs. 5,55,000 clearly shows that Rs. 5,55,000 (Rs. 1,12,000 for the plant and machinery and goodwill of the Ice and Cold Storage Factory, Rs. 3,00,000 for the machinery of Sri Govind Oil Mills,Rs. 25,000 for stores, Rs.18,000 for goodwill and Rs. 1,00,000 for the buildings and the lessee rights in the plots) was to be paid for items other than the immovable property conveyed by the said deed and the sum of Rs. 3,89,000 had nothing to do with the immovable property. Since, the payment ofRs. 3,89,000 to the bank left outstanding as Rs. 1,11,000 as mortgage money, out of which one lac is expressed to be the consideration for the conveyance of the immovable property, and therefore, falls within article 23. This leaves Rs. 11,000 and the question arises whether this sum should be taken into consideration for the purpose of levying stamp duty. As observed above Rs. 11,000 forms part of the price for items other than the immovable property. Therefore, this sum could not be included for the purpose of levying stamp duty.
In the result, the Supreme Court agreed with the High Court that the stamp duty has to be calculated only on the sum of Rs. 1,00,000. Hence, the appeal was dismissed.
Question of law decided:The case reveals the consequence of an instrument, which is not duly stamped under the Indian Stamp Act, 1899 and in this regard the Court differentiated between the phrases "admitted in evidence" and "acted upon" as occurring in section 35 of the Indian Stamp Act, 1899. At this juncture, students may recall to section 49 of the Indian Registration Act, which talks about the effect of non-registration of a document, required to be compulsorily registered.
The Court laid down that under section 36, an instrument once admitted in evidence shall not be called in question at any stage of the same suit or proceeding on the ground that it has not been duly stamped. Section 36 does not prohibit a challenge against an instrument that it shall not be acted upon because it is not duly stamped, but on that account there is no bar against an instrument not duly stamped being acted upon after payment of the stamp duty and penalty according to the procedure prescribed by the Act. The doubt, if any, is removed by the terms of section 42(2) which enact, in terms unmistakable that every instrument endorsed by the Collector under section 42(1) shall be admissible in evidence and may be acted upon as if it has been duly stamped.
The Court in this judgment also laid down landmark observations with regard to the Indian Stamp Act, 1899 to the effect that it is a fiscal measure enacted to secure revenue for the State on certain classes of instruments. It is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. The stringent provisions of the Act are conceived in the interest of the revenue. Once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of the initial defect in the instrument.
Facts of the case:The respondents entered into a contract with Hindustan Steel Ltd. for "raising, stacking carting and loading into wagons limestone, at Nandini Mines." Dispute, which arose between the parties, was referred to arbitration, pursuant to clause 61 of the agreement. The arbitrators differed, and the dispute was referred to an umpire who made and published his award on April 19, 1967. The umpire filed the award in the Court of the District Judge, Rajnandgaon in the State of Madhya Pradesh and gave notice of the filing of the award to the parties to the dispute, on July 14, 1967. The appellant filed an application for setting aside the award under sections 30 and 33 of the Indian Arbitration Act, 1940. One of the contentions raised by the appellants was that, the award was unstamped and on that account "invalid and illegal and liable to be set aside". The respondents then applied to the District Court that the award be impounded and validated by levy of stamp duty and penalty. By order, dated September 29, 1967, the District Judge directed that the award be impounded. He then called upon the respondents to pay the appropriate stamp duty on the award and penalty and directed that an authenticated copy of the instrument be sent to the Collector, Durg, together with a certificate in writing stating the receipt of the amount of duty and penalty. Against that order the appellant moved the High Court of Madhya Pradesh in exercise of its revisional jurisdiction. The High Court rejected the petition and the appellant filed the present appeal to the Supreme Court with special leave.
Decision of the Court:It was argued on behalf of the appellant that an instrument which is not stamped as required by the Indian Stamp Act, 1899, may, on payment of stamp duty and penalty, be "admitted in evidence", but cannot be "acted upon" for, "the instrument has no existence in the eye of law". Therefore, it was urged that the District Judge acted within the jurisdiction while proceeding to entertain the application for filing the award.
In this scenario, the Court while referring to relevant provisions of the Stamp Act, including the definition "instrument" in section 2(14), "duly stamped" under section 2(11), and other provisions under sections 38, 39 and 40 observed that the award is an "instrument" within the meaning of the Stamp Act and it was required to be stamped. Being not stamped, it cannot be received in evidence nor can it be acted upon but the Court was competent to impound it and send it to the Collector with a certificate in writing stating the amount of duty and penalty levied thereon. On an instrument so received the Collector may adjudge whether it is duly stamped and he may require penalty to be paid thereon, if in his view it has not been duly stamped. If the duty and penalty are paid, the Collector will certify by endorsement on the instrument that the proper duty and penalty had been paid. The instrument which is not duly stamped cannot be received in evidence by any person, who has authority to receive evidence, and it cannot be acted upon by that person or by any public officer. Section 36 provides that the admissibility of an instrument once admitted in evidence shall not, except as provided in section 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped. While referring to the contentions of the counsel for the appellant, it was observed that:
"Relying upon the difference in the phraseology between sections 35 and 36, it was urged that an instrument which is not duly stamped may be admitted in evidence on payment of duty and penalty, but it cannot be acted upon because section 35 operates as a bar to the admission in evidence of the instrument not duly stamped as well as to its being acted upon, and the Legislature has by section 36 in the conditions set out therein removed the bar only against admission in evidence of the instrument. The argument ignores the true import of section 36. By that section an instrument once admitted in evidence shall not be called in question at any stage of the same suit or proceeding on the ground that it has not been duly stamped. Section 36 does not prohibit a challenge against an instrument that it shall not be acted upon because it is not duly stamped, but on that account there is no bar against an instrument not duly stamped being acted upon after payment of the stamp duty and penalty according to the procedure prescribed by the Act. The doubt, if any, is removed by the terms of section 42(2) which enact, in terms unmistakable, that every instrument endorsed by the Collector under section 42(1) shall be admissible in evidence and may be acted upon as if it has been duly stamped."
In this background the Court made a very important and landmark observation about the Act as under:
"The Stamp Act is a fiscal measure enacted to secure revenue for the State on certain classes of instruments: It is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. The stringent provisions of the Act are conceived in the interest of the revenue. Once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of the initial defect in the instrument. Viewed in that light the scheme is clear. Section 35 of the Stamp Act operates as a bar to an unstamped instrument being admitted in evidence or being acted upon. Section 40 provides the procedure for instruments being impounded, sub-section (1) of section 42 provides for certifying that an instrument is duly stamped, and sub-section (2) of section 42 enacts the consequences resulting from such certification."
The Court also relied upon the following mentioned observations in the judgment delivered by M.C. Desai, J., in Mst. Bittan Bibi v. Kuntu Lal, ILR (1952) 2 All 984:
"A Court is prohibited from admitting an instrument in evidence and a Court and a public officer both are prohibited from acting upon it. Thus a Court is prohibited from both admitting it in evidence and acting upon it. It follows that the acting upon is not included in the admission and that a document can be admitted in evidence but not be acted upon. Of course, it cannot be acted upon without its being admitted, but it can be admitted and yet be not acted upon. If every document, upon admission, became automatically liable to be acted upon, the provision in section 35 that an instrument chargeable with duty but not duly stamped, shall not be acted upon by the Court, would be rendered redundant by the provision that it shall not be admitted in evidence for any purpose. To act upon an instrument is to give effect to it or to enforce it."
Under these circumstances, the Court held that learned Judge attributed to section 36 a meaning which the Legislature did not intend. It was, however, observed that attention of the learned Judge was apparently not invited to section 42(2) of the Act which expressly renders an instrument, when certified by endorsement that proper duty and penalty have been levied in respect thereof, capable of being acted upon as if it had been duly stamped. Thus the appeal was dismissed.
Question of law decided:The case lays down the principles, on the facts of the case. On the basis of interpretation of section 4 as to which of the several instruments, employed for completing the transaction, is the principal instrument so as to attract stamp duty as prescribed in Schedule I. Therefore, the case is more on facts and less on any question of law.
Facts of the case:The company was incorporated under the Indian Companies Act, 1956, as a public limited company. An agreement known as the Loan and Note Purchase Agreement was executed between the company and the First National City Bank and six others on December 20, 1966, by which the company agreed to authorize the creation and issuance of $ 14, 880,000 (U.S.) principal amount of its 5% secured notes Series 'A' and $ 74,40,300 (U.S.) principal amount of its 5% secured notes Series 'B', and the sale of, or the borrowing to be evidenced by such notes in accordance with the terms and provisions of the agreement. The notes were to be issued under and secured by a Deed of Trust and Mortgage between the company and the First National City Bank. It was also agreed that the notes shall be secured and shall have the other terms and provisions provided in the agreement and shall be guaranteed by the President of India pursuant to the terms of a "Guarantee Agreement", in the prescribed form. The clauses of the Loan and Note Purchase Agreement, the Deed of Trust and Mortgage and Guarantee Agreement are relevant in the present dispute and would be referred as and when necessary. The Deed of Trust and Mortgage and the Guarantee Agreement were executed between the President and the First National City Bank (as Trustee) on June 15, 1967. In the meantime the company made an application to the Collector under section 31 of the Act for opinion as to the stamp duty with which the Deed of Trust and Mortgage was chargeable, and the Collector referred the matter to the Board of Revenue. The Board decided on June 28, 1967 that the duty was chargeable on the Trust and Mortgage Deed under article 40(b) of Schedule I to the Act. The company paid Rs. 39,66,500 as stamp duty under protest, stating that it would move the Board for a reference of the controversy to the High Court. The Trust and Mortgage Deed was registered on June 30, 1967, and the 'A' series debentures were issued the same day. The company applied to the Board of Revenue to state the case to the High Court. 'B' series debentures were issued on June 28, 1968. The case was started on March 28, 1969 and was decided by the impugned decision of the High Court dated October 9, 1974.
Before the High Court, the Board of Revenue, Madras, which was the Chief Controlling Revenue Authority, stated the case raising certain questions for decision, out of which first question was answered in favour of the Revenue and second question against the Madras Refineries Ltd. (in short company). Thus the present special leave was filed before the Supreme Court.
Decision of the Court:In the appeal filed by Special Leave before the Apex Court, the appellant company contended that it was the Guaranteed Agreement, which was the principal and primary security and the Deed of Trust and Mortgage was a collateral or auxiliary security and the stamp duty on the Deed of Trust and Mortgage was payable in accordance with article 40(c) of the Constitution of India. It was also argued that the Guarantee Agreement was exempted from duty under section 3 of the Stamp Act and the debentures were exempt under article 27. In this regard attention of the Court was invited to the following passage in Sergeant on Stamp Duties and Companies Capital Duty, sixth edition, page 6:
With reference to the stamp duty upon instruments generally, it is a well-settled rule of law that an instrument must be stamped for its leading and principal object, and the stamp covers everything accessory to that object.
Similarly, another case referred was Limmer Asphalte Paving Co. v. I.R.C., (1872) LR 7 Exch 211, from which following mentioned observations were relied upon:
"In order to determine whether any, and if any, what stamp duty is chargeable upon an instrument the legal principle is that the real and true meaning of the instrument is to be ascertained; that the description of it given in the instrument itself by the parties is immaterial, even although they may have believed that its effect and operation was to create a security mentioned in the Stamp Act, and they so declared."
The Court agreed with the statement of law and therefore came to the conclusion that it has to determine the real and true meaning of the Guarantee Agreement and to decide whether it could be said to be the principal and primary security. The Court observed that the Loan and Note Purchase Agreement was executed on December 20, 1966, between the company and the First National City Bank and others. Under that agreement, the company was to authorize the creation and issuance of secured notes, series A and B, referred to above, and the notes were to be "issued under and secured by the Deed of Trust and Mortgage between the company and the First National City Bank". It was then stated in the Loan and Note Purchase Agreement as follows:-
The Notes shall be dated, shall mature, shall bear interest, shall be payable, shall be secured and shall have such other terms and provisions as provided in the Mortgage and shall be guaranteed by the President of India pursuant to the terms of a Guarantee Agreement (the "Guarantee Agreement") in the form attached hereto as Exhibit 3.
It would thus appear that it was the Deed of Trust and Mortgage which was the security for the loan, although the loan was also guaranteed by the President in terms of the Guarantee Agreement.
As has been stated the Guarantee Agreement was made between the President of India and the First National City Bank. It was clearly stated in that agreement that the First National City Bank executed it "as Trustee under Deed of Trust and Mortgage dated as of June 15, 1967". The Trust and Mortgage Deed was thus executed before the execution of the Guarantee Agreement, even though both of them were executed on the same day, namely June 15, 1967.
The Court noticed as under:
"It is true that it has been stated in the Guarantee Agreement that the President of India as the guarantor, unconditionally guaranteed "as primary obliger and not as surety merely, the due and punctual payment from time to time" of the principal as well as the interest, etc., stated in the agreement. And it was for that purpose that the guarantor agreed to "endorse upon each of the notes at or before the issue and delivery thereof by the company, its guarantee of the prompt payment of the principal, interest and premium thereof and of the other indebtedness". It is also true that as stated in paragraph 10 of the Guarantee Agreement, the obligations of the guarantor were "absolute and unconditional under any and all circumstances, and shall not be to any extent or in any way discharged, impaired or otherwise affected, except by performance thereof in accordance with the terms thereof. We have also noticed the further stipulation that "each and every remedy of the Trustee shall, to the extent permitted by law, be cumulative and shall be in addition to any other remedy given hereunder or under the Mortgage or any of the other collateral or now or hereafter existing at law or in equity or by statute.
Mr. Ram Reddy has relied heavily on these averments in the Guarantee Agreement but that cannot detract from the basic fact that the Deed of Trust and Mortgage was executed first in point of time and was the principal or primary security for the loan according to the terms and conditions of the agreement between the parties. It was that document which constituted the First National City Bank as the trustee, and enabled it to enter into the Guarantee Agreement with the President, and the President guaranteed due performance of the obligations undertaken by the company thereunder."
The Court also took note of the fact that the Deed of Trust and Mortgage, which was executed between the company and the First National City Bank as a national banking association incorporated and existing under the laws of United States of America, stated that as the company was in the process of constructing a refinery for the refining of crude oil and deemed it necessary to borrow money from time to time to finance such construction and to issue its notes therefor and to "mortgage and charge its properties hereinafter described to secure the payment of such notes" it executed the Deed of Trust and Mortgage as security in accordance with the terms and conditions of article 2 of the Deed of Trust and Mortgage to secure the due payment of the principal of and the premium, if any, and the interest on the notes and of all other moneys for the time being and from time to time owning on the security of that indenture and on the notes and the performance by the company of all of its obligations thereunder. The Deed of Trust and Mortgage was, therefore, clearly the principal or the primary security and could not be said to be a "collateral agreement". The parties in fact clearly stated in article 1, section 1.01 of the Deed of Trust and Mortgage as follows:-
The term "Collateral Agreements" shall mean the Guarantee Agreement and the undertaking, hereinafter defined.
It was therefore specifically agreed between the parties that the Deed of Trust and Mortgage was not a collateral agreement.
Hence, the Court concluded that in all these facts and circumstances it is futile to contend that the Deed of Trust and Mortgage was not the principal or primary security. As was stated in article 9 of that document, that security became enforceable in case of any or more "events of default", and it cannot be said that merely because Guarantee Agreement contained the stipulation that the President, as the guarantor, unconditionally guaranteed the due and punctual payment of principal and interest, etc. "as primary obligator and not as surety merely" that agreement became the principal on the primary security. It is the real and true meaning of the Deed of Trust and Mortgage and the Guarantee Agreement, which the Court observed, had to be ascertained and this leaves no room for doubt that the view taken by the High Court in this respect is correct and does not call for interference. The Court rejected the different judgments in this behalf, relied upon by counsel for the appellant on the ground that they were decided on different facts and had no real bearing on the controversy before the Supreme Court. It was also concluded that the Guarantee Agreement was executed for and on behalf of the President by his authorized representative and no stamp duty was chargeable for it by virtue of the proviso to section 3 of the Act. It was the Deed of Trust and Mortgage, which was a "mortgage deed" within the meaning of clause (17) of section 2 of the Act, and it was, therefore, clearly chargeable with stamp duty at the rate prescribed in article 40(b) of Schedule I to the Act. With regard to the last argument on behalf of the appellant that in case the Guarantee Agreement was not the principal instrument debentures issued by the company were principal and primary security, the Court held as under:
"We have examined the other argument of Mr. Ram Reddy that even if the Guarantee Agreement was not the principal instrument within the meaning of sub-section (1) of section 4 of the Act, we should hold that the debentures which were issued by the company were the principal and primary security, and that the Deed of Trust and Mortgage was the "other instrument" within the meaning of that sub-section and was chargeable with a duty of Rs. 4.50 p. instead of the duty prescribed for it in the Schedule. This argument is also futile for we find that the secured notes (Series A and B) were issued under and were secured by the Deed of Trust and Mortgage. As such, the notes were issued in consequence and on the security of the Deed of Trust and mortgage and there is no justification for the contention that the debentures were the principal instruments and not the Deed of Trust and Mortgage."
In the end the appeal was dismissed and the impugned judgment of the High Court was confirmed with costs.
Question of law decided:The present case elaborates the true import of section 36 and explains under what circumstances one can say that once the document has been admitted the objection of its inadmissibility on the ground of not properly stamped cannot be taken. It was held that the court, and of necessity it would be Trial Court, before which the objection is taken about admissibility of document, on the ground that it is not duly stamped has to judicially determine the matter as soon as the document is tendered in evidence and before it is marked as an exhibit in the case and where a document has been inadvertently admitted without the court applying its mind as to the question of admissibility, the instrument could not be said to have been admitted in evidence with a view to attracting section 36. The endorsement made by the learned trial Judge that "Objected, allowed subject to objection", clearly indicates that when the objection was raised it was not judicially determined and the document was merely tentatively marked and in such a situation section 36 would not be attracted.
Besides this the case also deals an important issue under the Registration Act, 1908 and decides as to whether "gift of turn of worship" as Shebait-cum-Pujari in a Hindu temple requires compulsory registration under the Registration Act, 1908 or not. It was held that Hindu law has always treated hereditary office as immovable property. After referring the definition of immovable property under the Transfer of Property Act, 1882, under the Registration Act, 1908 and General Clauses Act, 1897, the Court came to the conclusion that Shebait's hereditary office is immovable property because the definition includes hereditary allowances. Office of Shebait is hereditary unless provision to the contrary is made in the deed creating the endowment. In the conception of Shebait both the elements of office and property, duties and personal interest are mixed up and blended together and one of the elements cannot be detached from the other. After referring to old texts, one of the principal sources of Hindu law and the commentaries thereon, it was held that over a century the courts with very few exceptions have recognized hereditary office of Shebait as immovable property and it has all along been treated as immovable property almost uniformly. Hence, while examining the nature and character of an office as envisaged by Hindu law it would be correct to accept and designate it in the same manner as has been done by the Hindu Law text writers and accepted by Courts over a long period. Therefore, it was concluded that hereditary office of Shebait, which would be enjoyed by the person by turn would be immovable property. In other words, the gift of such immovable property must of course be by registered instrument.
Facts of the case:The suit was filed by the plaintiff/appellant, who died pending the appeal, for a declaration that he was entitled to right of worship by turn called (Osra) for 10 days in a circuit of 18 months in the temple in Rajasthan under the Will Ext. I dated September 22, 1961 executed by deceased Mst. Acharaj, wife of Onkar. The suit was contested on various contentions, but for the purpose of the present case the only surviving contention was whether document Ext. I purporting to be a Will of the said deceased is Will or gift and if the latter, whether it is admissible in evidence on the ground that it was not duly stamped and registered, as required by law?
When the plaintiff referred to the disputed document in his evidence and proceeded to prove the same, an objection was raised on behalf of the defendants that the document was inadmissible in evidence as being not duly stamped and for want of registration. The Trial Court did not decide the objection when raised but made a note: "Objected. Allowed subject to objection", and proceeded to make the document as Ext. I. When at the stage of arguments, the defendants contended that the document Ext. I is inadmissible in evidence, the learned trial Judge rejected the contention taking recourse to section 36 of the Stamp Act, 1899. On the question of registration, it was held that the document is not compulsorily registrable insofar as the subject-matter of the suit is concerned, viz., turn of worship which, in the opinion of the learned trial Judge was movable property. On appeal by the defendants the judgment of the trial Judge was reversed, inter alia, holding that the document Ext. I was a gift and as it involved gift of immovable property, the document was inadmissible in evidence both on the ground that it is not duly stamped and for want of registration. The plaintiff's second appeal to the High Court did not meet with success.
Decision of the case:The only question canvassed before the Supreme Court was that even if upon its true construction the document Ext.I purports to be a gift of turn of worship as a Shebait-cum-Pujari in a Hindu temple, does it purport to transfer an interest in immovable property, and therefore, the document is compulsorily registrable? On the question whether the document was duly stamped it was said with some justification that it was not open to the Court to exclude the document from being read in evidence on the ground that it was not duly stamped because in any event under section 33 of the Stamp Act, 1899, it is obligatory upon the Court to impound the document and recover duty and penalty as provided in proviso (a) to section 35.
With regard to the nature of document as to whether it is Will or gift, the Court observed as under:
"Mst. Acharaj, wife of Onkar had inherited the right to worship by turn for ten days in a circuit of 18 months in Kalyanji Maharaj Temple. It is common ground that she was entitled during her turn to officiate as Pujari and receive all the offerings made to the deity. During the period of her turn she would be holding the office of a Shebait. She purported to transfer this office with its ancillary rights to plaintiff Ram Rattan under the deed Ext. I purporting to be a Will. Upon its true construction it has been held to be a deed of gift and that finding was not controverted, nor was it possible to controvert it, in view of the recital in the deed that "now Ram Rattan will acquire legal rights and possession of my entire property from the date the Will is written, the details of the property are in Schedule 'A' and after him, his legal heirs will acquire these rights". It appears crystal clear that the document purports to pass the title to the property thereby conveyed in present and in the face of this recital it could never be said that the document Ext. I purports to be a Will."
Now coming to the controversy under the Indian Stamp Act, 1899 and the Registration Act, 1908, let us discuss the same one by one.
Controversy under the Indian Stamp Act:With regard to scope ofsection 36 in the present case, the Court observed that when the document was tendered in evidence by the plaintiff while in witness box, objection having been raised by the defendants that the document was inadmissible in evidence as it was not duly stamped and for want of registration, it was obligatory upon the learned trial Judge to apply his mind to the objection raised and to decide the objections in accordance with law. Tendency sometimes is to postpone the decision to avoid interruption in the process of recording evidence and therefore a very convenient device is resorted to, of marking the document in evidence subject to objection. This, however, would not mean that the objection as to admissibility on the ground that the instrument is not duly stamped is finally disposed of. It would none the less be obligatory upon the court to decide the objection. If after applying mind to the rival contentions the trial Court admits a document in evidence, section 36 of the Stamp Act, 1899 would come into play and such admission cannot be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped. The court, and of necessity it would be Trial Court before which the objection is taken about admissibility of document on the ground that it is not duly stamped has to judicially determine the matter as soon as the document is tendered in evidence and before it is marked as an exhibit in the case and where a document has been inadvertently admitted without the court applying its mind as to the question of admissibility, the instrument could not be said to have been admitted in evidence with a view to attracting section 36. The endorsement made by the learned trial Judge that "Objected, allowed subject to objection", clearly indicates that when the objection was raised it was not judicially determined and the document was merely tentatively marked and in such a situation section 36 would not be attracted.
Thereafter, with regard to dispute as to whether the said document had to be impounded or not because of its not duly stamped the Court observed as under:
"Mr. Desai then contended that where an instrument not duly stamped or insufficiently stamped is tendered in evidence, the court has to impound it as obligated by section 33 and then proceed as required by section 35, viz., to recover the deficit stamp duty along with penalty. Undoubtedly, if a person having by law authority to receive evidence and the Civil Court is one such person before whom any instrument chargeable with duty is produced and it is found that such instrument is not duly stamped, the same has to be impounded. The duty and penalty has to be recovered according to law. Section 35, however, prohibits its admission in evidence till such duty and penalty is paid. The plaintiff has neither paid the duty nor penalty till today. Therefore, stricto sensu the instrument is not admissible in evidence. Mr. Desai, however, wanted us to refer the instrument to the authority competent to adjudicate the requisite stamp duty payable on the instrument and then recover the duty and penalty which the party who tendered the instrument in evidence is in any event bound to pay and, therefore, on this account it was said that the document should not be excluded from evidence. The duty and the penalty has to be paid when the document is tendered in evidence and an objection is raised. The difficulty in this case arises from the fact that the learned trial Judge declined to decide the objection on merits and then sought refuge under section 36. The plaintiff was, therefore, unable to pay the deficit duty and penalty which when paid subject to all just exceptions, the document has to be admitted in evidence. In this background while holding that the document Ext. I would be inadmissible in evidence as it is not duly stamped, we would not decline to take it into consideration because the Trial Court is bound to impound the document and deal with it according to law."
Hence, under the Indian Stamp Act, 1899 the Court took the view that since the document was not duly stamped it could not be taken into consideration because the Trial Court was bound to impound the same and deal it with according to law.
Controversy under the Indian Registration Act, 1908:Serious controversy centered, however, round the question whether right to worship by turn is immovable property, gift of which can only be made by registered instrument. Hindu law recognizes gift of property to an idol. In respect of possession and management of the property which belongs to the Devasthanam or temple the responsibility would be in the manager who is described by Hindu law as Shebait. The devolution of the office of Shebait depends on the terms of the deed or Will by which it is created and in the absence of a provision to the contrary, the settlor himself becomes a Shebait and the office devolves according to line of inheritance from the founder and passes to his heirs. This led to an arrangement amongst various heirs equally entitled to inherit the office for the due execution of the functions belonging to the office, discharging duty in turn. This turn of worship is styled as 'Pala' in West Bengal and 'Osra' in Rajasthan. Shebait being held to be property, in Angurbala Mullick v. Debabrata Mullick, MANU/SC/0062/1951 : 1951 SCR 1125, this Court recognized the right of a family to succeed to the religious office of Shebaitiship. This hereditary office of Shebait is traceable to old Hindu texts and is a recognized concept of traditional Hindu law. It appears to be heritable and partible in the strict sense that it is enjoyed by heirs of equal degree by turn and transferable by gift subject to the limitation that it may not pass to a non-Hindu. On principles of morality and propriety sale of the office of Shebait is not favoured.
The position of Shebait is not merely that of a Pujari. He is a human ministrant of the deity. By virtue of the office a Shebait is an administrator of the property attached to the temple of which he is Shebait. Both the elements of office and property, of duties and personal interest are blended together in the conception of Shebaitship and neither can be detached from the other.
On the question whether hereditary of Shebait is immovable property, the Court held that much before the enactment of the Transfer of Property Act, 1882 a question arose in the context of the Limitation Act then in force whether a suit for a share in the worship and the emolument incidental to the same would be a suit for recovery of immovable property or an interest in immovable property. In Krishnabhat bia Hiragange v. Kanabhat bia Mahalbhat, 6 Bom HCR 137, after referring to various texts of Hindu law and the commentaries of English commentators thereon, a Division Bench of the Bombay High Court held as under:
"Although, therefore, the office of a priest in a temple, when it is not annexed to the ownership of any land, or held by virtue of such ownership, may not, in the ordinary sense of the term, be immovable property, but is an incorporeal hereditament of a personal nature, yet being by the custom of Hindus classed with immovable property, and so regarded in their law....
The privileges and precedence attached to a hereditary office were termed in Hindu law as Nibandha, and the next of Yajnavalkya treated Nibandha, loosely translated as corody, as immovable property. Soon thereafter the question again arose in Balvantray alias Tatiaji Banaji v. Purshotam Sidheshvar, 9 Bom HCR 99 where, in view of a conflict in decision between Krishnabhat and Baiji Manor v. Desai Kallianrai Hukmatraj, 6 Bom HCR 56 the matter was referred to a Full Bench of 5 Judges. The question arose in the context of the Limitation Act in a suit to recover fees payable to the incumbent of a hereditary office, viz. that of a village Jotshi (astrologer). The contention was that such a hereditary office of village Jotshi is immovable property. After exhaustively referring to the texts of Yajnavalkya and the commentaries thereon, Westropp, C.J., observed that the word 'corody' is not a happy translation of term Nibandha. It was held that Hindu law has always treated hereditary office as immovable property. These two decisions were affirmed by the Judicial Committee of the Privy Council in Maharana Fattehsangji Jaswantsangji v. Dassi Kallianraiji Hakoomutraiji. The principle that emerges from these decisions is that when the question concerns the rights of Hindus it must be taken to include whatever the Hindu law classes as immovable although not so in ordinary acception of the word and to the application of this rule within the appropriate limits the Judicial Committee sees no objection."
After referring the definition of immovable property under the Transfer of Property Act, 1882, under the Registration Act, 1908 and General Clauses
Act, 1897, the Court came to the conclusion that Shebait's hereditary office is immovable property because the definition includes hereditary allowances. Office of Shebait is hereditary unless provision to the contrary is made in the deed creating the endowment. In the conception of Shebait both the elements of office and property, duties and personal interest are mixed up and blended together and one of the elements cannot be detached from the other. After referring to old texts, one of the principal sources of Hindu law and the commentaries thereon, it was held that over a century the Courts with very few exceptions have recognized hereditary office of Shebait as immovable property and it has all along been treated as immovable property almost uniformly. Hence, while examining the nature and character of an office as envisaged by the Hindu law it would be correct to accept and designate it in the same manner as has been done by the Hindu Law text writers and accepted by courts over a long period. Therefore, it was concluded that hereditary office of Shebait, which would be enjoyed by the person by turn would be immovable property. In other words the gift of such immovable property must of course be by registered instrument and the document in question not being registered, the High Court was justified in excluding it from evidence. Therefore, the plaintiff's suit was held to be rightly dismissed and consequently the appeal was rejected.
Question of law decided:There is no period of limitation undersection 33(1) of the Indian Stamp Act, 1899, by virtue of which the concerned authority is under obligation to impound the instrument in question, if it appears to him that such instrument is not duly stamped.
Facts of the case:The case involves very interesting series of facts, since the person having failed till the highest Court not only in Special Leave to Appeal but also in the Review Application tried his luck again by other means, by having recourse to the Indian Stamp Act, 1899. It would be more appropriate to look into the facts from the judgment of the Court itself, which are reproduced as under:
"A dispute between the appellants and respondent No. 1, who are members of a family, was referred to an arbitrator, who made an award on October 9, 1973 and filed the same within a few days before the Civil Court for making it a rule of the court. On objection by the present appellants, the prayer was rejected on March 18, 1976 and the order was confirmed by the High Court on July 8, 1981 in a regular first appeal. An application for special leave was dismissed by this Court on April 18, 1983 and a prayer for review was also rejected. It is stated on behalf of the appellants that in the meantime respondent 1 applied before the Collector for summoning the award and realizing the duty and penalty. A copy of the award was annexed to the application. The respondent's prayer was opposed by the appellants but was allowed by the Collector on July 15, 1983; and, on a request made to the Civil Court for sending the award, the Civil Court asked the office to do so. The appellants moved the Chief Controlling Revenue Authority under section 56 of the Indian Stamp Act, 1899 (hereinafter referred to as 'the Act') against the Collector's order dated July 15, 1983. The Authority in exercise of its revisional power set aside the impugned order of the Collector, inter alia, on the ground of lack of jurisdiction. The respondent challenged this judgment before the High Court in a writ case which was allowed by the impugned judgment dated February 27, 1989. The matter was remanded to the Collector to decide the case afresh in the light of the observations. The High Court also doubted the power of the Chief Controlling Revenue Authority to entertain the appellants' application under section 56 of the Act. This judgment is the subject-matter of the present appeal."
Decision of the Court:It was contended on behalf of the appellants that there cannot be any doubt about the power of the Chief Controlling Authority to correct an erroneous order of the Collector and emphasis was laid on the language of section 56 suggesting its wide application. The Court also agreed that Authority is not only vested with jurisdiction but has the duty to quash an order passed by the Collector purporting to be under Chapters IV and V of the Act by exercising power beyond his jurisdiction. It was held that to hold otherwise will lead to an absurd situation where a subordinate authority makes an order beyond its jurisdiction, which would have to be suffered on account of its unassailability before a higher authority. The Supreme Court in Janardan Reddy v. State of Hyderabad, MANU/SC/0027/1951 : AIR 1951 SC 217, after referring to a number of decisions, laid down that it is well settled that if a Court acts without jurisdiction, its decision can be challenged in the same way as it would have been challenged if it had acted with jurisdiction i.e. an appeal would lie to the Court to which it would lie if its order was with jurisdiction. However, the Court found difficulty to find any defect in the Collector directing to take steps for the realization of the stamp duty, in the present case. The Court held that contention of the appellants that respondent had no locus standi to move the Collector for impounding the award, was untenable and section 33(1) of the Indian Stamp Act, 1899 had no application. In reply, it was urged that the order of impounding the award was passed by Civil Court itself on March 18, 1976, and the further orders of the Collector dated July 22, 1983 and of the Civil Court dated August 27, 1983 were passed merely by way of implementing the same. It was held that counsel was right in relying upon the concluding portion of the order of the Civil Court dated March 18, 1976 and sending it to the Collector for necessary action. Court found that further steps in pursuance of this judgment were not taken promptly and it was respondent 1 who drew the attention to this aspect, but it cannot be legitimately suggested that as the reminder for implementing the order came from the respondent, who was motivated by a desire to salvage the situation to his advantage, further steps could not be taken. There is no question of limitation arising in this situation and it cannot be said that what had to be done promptly in 1976 could not be done later. The orders of the Collector dated July 15, 1983 and July 22, 1983 must, therefore, in the circumstances, be held to have been passed as the follow-up steps in pursuance of the Civil Court's direction dated March 18, 1976, and no valid objection can be taken against them. The Collector, therefore, shall have to proceed further for realization of the escaped duty. With regard to taking keen interest of the respondent 1 to illegally reopen the question of making the award a rule of the Court, it was observed as under:
"Lastly, Mr. Satish Chandra argued that respondent No. 1 is taking keen interest in the present proceeding in an attempt to illegally reopen the question of making the award a rule of the Court, which stood concluded by the impugned judgment of the High Court and the orders of this Court dismissing the special leave petition therefrom and he cannot be allowed to do so. The reply of Mr. Sanghi has been that this aspect is not relevant in the present proceeding for realization of the duty and need not be decided at this stage. His stand is that an award which is not made rule of the court is not a useless piece of paper and can be of some use, say by way of defence in a suit. He said that this question will have to be considered if and when the occasion arises. Having regard to the limited scope of the present proceeding, we agree with
Mr. Sanghi that we may not go into this aspect in the present case, but we would clarify the position that on the strength of the present judgment it will not be open to the respondent to urge that the effect of the High Court decision dated July 8, 1981 and the orders of this Court dismissing the special leave petition therefrom and later the review application has disappeared or has got modified. The appeal is disposed of in the above terms."
Accordingly, the order of the Collector was upheld.
Question of law decided:Can delay in the matter of furnishing of stamp papers by decree-holder extend the period of limitation qua execution of the decree, which is 12 years under article 136 of the Limitation Act, 1963?
The court while giving answer in negative observed that no one can take advantage of his own wrong and as such the period of limitation of 12 years was reckoned from the date of passing of the final decree and not from the date when the stamp papers are furnished for its execution.
Facts of the case:The factual score records that preliminary decree for partition was passed on 8-6-1969 and a final decree thereon was passedon 20-11-1970. The suit being a suit for partition, the parties were under an obligation to furnish the stamp paper for drafting of the final decree and it is on 28-2-1972, the District Court, Nagapattinam in the erstwhile State of Madras (presently Chennai) issued notice to the parties to furnish stamp papers and granting time till 17-3-1972. The records depict that the decree-holder, in fact, did not furnish any stamp paper by reason wherefor, no decree was drafted or finalized. The factual score further records that the original decree-holder died on 17-1-1977 and it is on 26-7-1983 that an application was filed by the legal representative of the decree-holder to implead themselves as additional plaintiffs and on 23-2-1984, the same was ordered and the legal representatives of the original plaintiff were impleaded on 8-3-1984 and after incorporation of the names of the legal heirs in the suit register, an execution application was presented before the District Court on 21-5-1984.
In the meanwhile a civil revision petition was filed before the High Court (CRP No. 2374 of 1984) against the order of impleadment but the same was dismissed on 8-10-1984.
As per the records on 11-12-1984, the execution petition was dismissed with a finding that since the same was filed beyond twelve years, the execution petition was barred by limitation. Subsequently, a revision petition was filed against the said order (CRP No. 2000 of 1985) and on 10-3-1989, the High Court, however, did set aside the order of the executing Court and directed that the question of limitation should be considered afresh. The records further depict that on 13-7-1989, the District Court held that the execution petition is not barred by limitation. As against the order of the District Court dated 13-7-1989, a revision petition was filed before the High Court by the legal heirs of the first defendant challenging the said finding and the learned single Judge of the High Court in a very detailed and elaborate judgment allowed the civil revision petition and set aside the order of the District Court. Consequently, the execution petition also stood dismissed and hence the special leave petition before the Supreme Court and the subsequent grant of leave by the Supreme Court.
Decision of the Court:Before deciding the issue, the Court observed that the availability of the plea of limitation in the matter of execution of decree has been the key issue in this appeal and as such first of all tried to find out what is the actual meaning of term "execution". It was observed that the term "execution" stands derived from the Latin ex sequi, meaning, to follow out, follow to the end, or perform, and equivalent to the French executer, so that, when used in their proper sense, all three convey the meaning of carrying out some act or course of conduct to its completion. Reference was also made to the meaning derived by Lord Denning in Overseas Aviation Engg. (GB) Ltd. Re, (1962) 3 All ER 12, which may be reproduced as under:
"The word 'execution' is not defined in the Act. It is, of course, a word familiar to lawyers. 'Execution' means, quite simply, the process for enforcing or giving effect to the judgment of the court and it is 'completed' when the judgment-creditor gets the money or other thing awarded to him by the judgment. That this is the meaning is seen by reference to that valuable old book Rastill Termes de la Ley, where it is stated: 'Execution is, where judgment is given in any action, that the plaintiff shall recover the land, debt or damages, as the case is; and when any writ is awarded to put him in possession, or to do any other thing whereby the plaintiff should the better be satisfied his debt or damages, that is called a writ of execution; and when he hath the possession of the land, or is paid the debt or damages, or hath the body of the defendant awarded to prison, then he hath execution. And the same meaning is to be found in Blackman v. Fysh, (1892) 3 Ch 209, when Kekewich, J. said that execution means the 'process of law for the enforcement of a judgment creditor's right and in order to give effect to that right'. In cases when execution was had by means of a common law writ, such as fieri facias or elegit, it was legal execution: when it was had by means of an equitable remedy, such as the appointment of a receiver, then it was equitable execution. But in either case it was 'execution' because it was the process for enforcing or giving effect to the judgment of the Court."
Thereafter, before adverting to the factual aspect of the matter, the Court also recapitulated various periods of limitation as prescribed under the Limitation Act, as engrafted in the statute-book from time to time. It was observed that law of limitation in India, as a matter of fact, was introduced for the first time in 1859 being revised in 1871, 1877 and it was only thereafter that the Limitation
Act, 1908 was enacted and was in force for more than half a century till replaced by the present Act of 1963. It was observed that presently, article 136 of the Limitation Act, 1963 prescribes a period of twelve years for the execution of a decree other than a decree granting a mandatory injunction or order of any Civil Court. As regards the time from which the period of twelve years ought to commence, the statute has been rather specific in recording that the period would commence from the date of the decree or order when the same becomes enforceable. The Court did not find it necessary to go into the other situations as envisaged in the statute for the present purpose, save what is noticed above. The Court observed that to put it shortly, it, therefore, appears that a twelve-year period certain has been the legislative choice in the matter of execution of a decree. The Court also noted that corresponding provisions of the Act of 1908 were in articles 182 and 183 and as regards the statutes of 1871 and 1877, the corresponding provisions were contained in articles 167, 168, 169, 179, and 180 respectively. Significantly, article 182 of the Limitation Act of 1908 provided a period of three years for the execution of a decree. Since the reference to the 1908 Act would be merely academic, the Court refrained from recording the details pertaining to article 182 save what is noted hereinbefore. It is in this context, however, the Court said that the Report of the Law Commission on the Act of 1963 assumed some importance, as regards the question of limitation and true purport of article 136. Before elaborating any further, it would be convenient to note the Report of the Law Commission which reads as below:
"170. Article 182 has been a very fruitful source of litigation and is a weapon in the hands of both the dishonest decree-holder and the dishonest judgment-debtor. It has given rise to innumerable decisions. The commentary in Rustomji's Limitation Act (5th Edn.) on this article itself covers nearly 200 pages. In our opinion the maximum period of limitation for the execution of a decree or order of any civil court should be 12 years from the date when the decree or order became enforceable (which is usually the date of the decree) or where the decree or subsequent order directs any payment of money or the delivery of any property to be made at a certain date or at recurring periods, the date of the default in making the payment or delivery in respect of which the applicant seeks to execute the decree. There is, therefore, no need for a provision compelling the decree-holder to keep the decree alive by making an application every three years. There exists a provision already in section 48 of the Civil Procedure Code that a decree ceases to be enforceable after a period of 12 years. In England also, the time fixed for enforcing a judgment is 12 years. Either the decree-holder succeeds in realizing his decree within this period or he fails and there should be no provision enabling the execution of a decree after that period. To this provision an exception will have to be made to the effect that the court may order the execution of a decree upon an application presented after the expiration of the period of 12 years, where the judgment-debtor has, by fraud or force, prevented the execution of decree at sometime within the twelve years immediately preceding the date of the application. Section 48 of the Code of Civil Procedure, 1908 may be deleted and its provisions may be incorporated in this Act. Article 183 should be deleted....."
In pursuance of the aforesaid recommendation, the present article has been enacted in place of articles 182 and 183 of the 1908 Act. Section 48 of the Code of Civil Procedure, 1908 has been repealed
Thereafter, the Court emphasized the meaning of word 'enforceable' as occurring in section 136 of the Limitation Act, 1963. It was observed that word 'enforcement' has been defined as 'the act or process of compelling compliance with a law, mandate or command'. It was observed as under:
"As noticed earlier in this judgment, article 136 of the Limitation
Act, 1963 being the governing statutory provision, prescribes a period of twelve years when the decree or order becomes enforceable. The word 'enforce' in common acceptation means and implies "compel observance of" (vide Concise Oxford Dictionary) and in Black's Law Dictionary "enforce" has been attributed a meaning "to give force or effect to; to compel obedience to" and "enforcement" has been defined as "the act or process of compelling compliance with a law, mandate or command". In ordinary parlance, "enforce" means and implies "compel observance of". Corpus Juris Secundum attributes the following for the word "enforce".
"Enforce - In general, to cause to be executed or performed, to cause to take effect, or to compel obedience to, as to enforce laws or rules; to control; to execute with vigour; to put in execution; to put in force; also to exact, or to obtain authoritatively. The word is used in a multiplicity of ways and is given many shades of meaning and applicability, but it does not necessarily imply actual force or coercion. As applied to process, the term implies execution and embraces all the legal means of collecting a judgment, including proceedings supplemental to execution.
The past tense or past participle 'enforced' has been said to have the same primary meaning as 'compelled."
It is in this context, the Court felt inclined to record its concurrence to the observations of the Full Bench of the Bombay High Court in Subhash Ganpatrao Buty v. Maroti, MANU/MH/0153/1975 : AIR 1975 Bom 244. The Full Bench in the decision observed:
The language used by the Legislature in article 136 if read in its proper perspective, to wit: "when the decree or order becomes enforceable" must have been to clear up any confusion that might have arisen by reason of the user of the expression "the date of the decree or order" which was used in the earlier Act. The intention of the legislature stands clearly exposed by the language used therein viz. to permit a twelve year period certain from the date of the decree or order. It is in this context that a decision of the Calcutta High Court in the case of Biswapati Dey v. Kennsington Stores, MANU/WB/0029/1972 : AIR 1972 Cal 172, wherein the learned single Judge in no uncertain terms expressed his opinion that there cannot be any ambiguity in the language used in the third column and the words used therein, to wit: "when the decree or order becomes enforceable" should be read in their literal sense. We do feel it expedient to lend our concurrence to such an observation of the learned single Judge of the Calcutta High Court. The requirement of the Limitation Act in the matter of enforcement of a decree is the date on which the decree becomes enforceable or capable of being enforced - What is required is to assess the legislative intent and if the intent appears to be otherwise clear and unambiguous, question of attributing a different meaning other than the literal meaning of the words used would not arise."
"It is the duty of the Court to interpret the language actually employed and to determine the intention of the legislature from such language and since there is no ambiguity about the language actually employed, neither the recommendation of the Law Commission nor the aims and objects as set out in the Statement of Objects and Reasons can be brought in aid or can be allowed to influence the natural and grammatical meaning of the Explanation as enacted by Parliament."
While applying the aforesaid judgment of Biswapati Dey, as delivered by Calcutta High Court, to the facts of the present case, the Supreme Court observed as under:
"Article 136 of the Act of 1963 prescribes as noticed above, atwelve-year period certain and what is relevant for article 136 is, as to when the decree became enforceable and not when the decree became executable. The decision of the Calcutta High Court in Biswapati's case has dealt with the issue very succinctly and laid down that the word "enforceable" should be read in its literal sense. In the contextual facts, the final decree upon acceptance of the Report of the Commissioner was passed on 20-11-1970, while it is true that notice to furnish stamp paper was issued on 28-2-1972 and the time granted was up to 17-3-1972 but that by itself will not take it out of the purview of article 136 as regards the enforceability of the decree. Furnishing of stamp paper was an act entirely within the domain and control of the appellant and any delay in the matter of furnishing of the same cannot possibly be said to be putting a stop to the period of limitation being run-no one can take advantage of his own wrong: as a matter of fact, in the contextual facts, no stamp paper was filed until 26-3-1984 - does that mean and imply that the period of limitation as prescribed under article 136 stands extended for a period of twelve years from 26-3-1984? The answer if it be stated to be in the affirmative, would lead to an utter absurdity and a mockery of the provisions of the statute. Suspension of the period of limitation by reason of one's own failure cannot but be said to be fallacious argument, though, however, suspension can be had when the decree is a conditional one in the sense that some extraneous events have to happen on the fulfilment of which alone it could be enforced-furnishing of stamped paper was entirely in the domain and power of the decree-holder and there was nothing to prevent him from acting in terms therewith and thus it cannot but be said that the decree was capable of being enforced on and from 20-11-1970 and the twelve-year period ought to be counted therefrom. It is more or less in an identical situation, this Court even five decades ago in the case of Yeshwant Deorao Deshmukh v. Walchand Ramchand Kothari, MANU/SC/0033/1950 : AIR 1951 SC 16 has stated:
'The decree was not a conditional one in the sense that some extraneous event was to happen on the fulfilment of which alone it could be executed. The payment of court fees on the amount found due was entirely in the power of the decree-holder and there was nothing to prevent him from paying it then and there; it was a decree capable of execution from the very date it was passed.'
Needless to record that engrossment of stamped paper would undoubtedly render the decree executable but that does not mean and imply, however, that the enforceability of the decree would remain suspended until furnishing of the stamped paper-this is opposed to the fundamental principle on which the statutes of limitation are founded. It cannot but be the general policy of our law to use the legal diligence and this has been the consistent legal theory from the ancient times: even the doctrine of prescription in Roman law prescribes such a concept of legal diligence and since its incorporation therein, the doctrine has always been favoured rather than claiming disfavour. Law courts never tolerate an indolent litigant since delay defeats equity - the Latin maxim vigilantibus et non dormientibus jura subveniunt (the law assists those who are vigilant and not those who are indolent). As a matter of fact, lapse of time is a species for forfeiture of right. Wood V.C. in Manby v. Bewicke, (1857) 69 ER 1140:
'The legislature has in this, as in every civilized country that has ever existed, thought fit to prescribe certain limitations of time after which persons may suppose themselves to be in peaceful possession of their property, and capable of transmitting the estates of which they are in possession, without any apprehension of the title being impugned by litigation in respect of transactions which occurred at a distant period, when evidence in support of their own title may be most difficult to obtain'.
Recently this Court in W.B. Essential Commodities Supply Corpn. v. Swadesh Agro Farming & Storage (P) Ltd., MANU/SC/0568/1999 : (1999) 8 SCC 315 had the occasion to consider the question of limitation under article 136 of the Limitation Act of 1963 and upon consideration of the decision in the case of Yeshwant Deorao held that under the scheme of the Limitation Act, execution applications like plaints have to be presented in the Court within the time prescribed by the Limitation Act. A decree-holder, this Court went on to record, does not have the benefit of exclusion of the time taken for obtaining even the certified copy of the decree like the appellant who prefers an appeal much less can he claim to deduct time taken by the court in drawing up and signing the decree. In fine, this Court observed that if the time is reckoned not from the date of the decree but from the date when it is prepared, it would amount to doing violence to the provisions of the Limitation Act as well as of Orders XX and XXI, rule 11 CPC, which is clearly impermissible."
The appellant heavily relied upon the judgment delivered in Shankar Balwant Lokhande v. Chandrakant Shanker Lokhande, reported, in MANU/SC/0243/1995 : (1995) 3 SCC 413, in support of its case. But the Court did not agree with the said judgment, the same being, first of all, per incuriam as certain statutory provisions were not considered in that judgment and consequently the said observations were simply found to be obiter. Not only this it was also observed that the factual situation in that case was also completely different, since there was no final decree at all but only a preliminary decree. Further, Court found the said decision inapplicable in the contextual facts on the ground that the same was delivered in the perspective of the 1908 Act (the old Act) and not the Limitation Act of 1963. The Court also found that the language of article 136 is clear, categorical and unambiguous and it is the difficulty experienced in the matter of interpretation of article 182 "which has been a very fruitful source of litigation", prompted incorporation of article 136 in the statute book. The recommendation of the Law Commission in the matter of incorporation of article 136 thus assumes a positive and a definite role: a twelve year period certain has been the express opinion of the Commission and by reason therefor section 48 of the Code stands deleted from the main body of the sections, which incidentally provided for a twelve year period certain for execution proceedings. In this context further reference was also made to Mulla's CPC and various other judgments of United Kingdom. In this regard observations of the Supreme Court as made in Amar Nath Om Prakash v. State of Punjab, MANU/SC/0224/1984 : (1985) 1 SCC 345 find importance, from which following mentioned para was reproduced:
"We consider it proper to say, as we have already said in other cases, that judgments of courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgments. They interpret words of statutes; their words are not to be interpreted as statutes."
It is fruitful at this juncture to reproduce the observations of yet another decision of the Supreme Court in Municipal Corporation of Delhi v. Gurnam Kaur, MANU/SC/0323/1988 : (1989) 1 SCC 101, which are as under:
"11. Pronouncements of law, which are not part of the ratio decidendi are classed as obiter dicta and are not authoritative. With all respect to the learned Judge who passed the order in Jamna Das v. Delhi Admn., [WP Nos. 981-82 of 1984] and to the learned Judge who agreed with him, we cannot concede that this Court is bound to follow it. It was delivered without argument, without reference to the relevant provisions of the Act conferring express power on the Municipal Corporation to direct removal of encroachments from any public place like pavements or public streets, and without any citation of authority. Accordingly, we do not propose to uphold the decision of the High Court because, it seems to us that it is wrong in principle and cannot be justified by the terms of the relevant provisions. A decision should be treated as given per incuriam when it is given in ignorance of the terms of a statute or of a rule having the force of a statute. So far as the order shows, no argument was addressed to the Court on the question whether or not any direction could properly be made compelling the Municipal Corporation to construct a stall at the pitching site of a pavement squatter. Professor P.J. Fitzerald, Editor of Salmond on Jurisprudence, 12th Edn. explains the concept of sub silentio at p. 153 in these words:
"A decision passes sub silentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind. The Court may consciously decide in favour of one party because of Point A, which it considers and pronounces upon. It may be shown, however, that logically the court should not have decided in favour of the particular party unless it also decided Point B in his favour; but Point B was not argued or considered by the Court. In such circumstances, although Point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on Point B. Point B is said to pass sub silentio'."
On the next count, the Counsel for the appellant very strongly contended that question as to when a decree for partition becomes enforceable cannot be decided in any event without reference to relevant provisions of the Stamp Act, since a decree for partition is also an instrument of partition in terms of
section 2(15) of the Indian Stamp Act, 1899. In this regard reference was made to section 35 of the Stamp Act, which created a three-fold bar in respect of unstamped or insufficiently stamped document viz.:
I. That it shall not be received in evidence.
II. That it shall not be acted upon.
III. That it shall not be registered or authenticated.
The contention of the appellant was that the partition decree thus even though already passed cannot be acted upon, neither becomes enforceable unless drawn up and engrossed on stamp paper. Therefore, it was argued that the period of limitation in respect of partition decree cannot begin to run till it is engrossed on requisite stamp paper, in view of the legislative bar under section 35 of the Indian Stamp Act, 1899. It was contended that enforceability includes the whole process of getting an award as well as execution since execution otherwise means due performance of all formalities, necessary to give validity to a document. But, the Court, while rejecting the contention, held that prescription of twelve-year period certainly cannot possibly be obliterated by an enactment wholly unconnected therewith. Legislative mandate as sanctioned under article 136 cannot be kept in abeyance unless the self-same legislation makes a provision therefor. It was also noticed that by passing of a final decree, the rights stand crystalised and it is only thereafter its enforceability can be had, though not otherwise.
With regard to section 2(15) read with section 35 of the Indian StampAct, 1899 it was noted that the Indian Stamp Act, 1899 has been engrafted in the Statute Book to consolidate and amend the law relating to stamps. Its applicability thus stand restricted to the Scheme of the Act, the same being a true fiscal statute in nature and therefore strict construction is required to be offered and no liberal interpretation. No doubt section 2(15), it was observed, includes a decree of partition and section 35 lays down a bar in the matter of unstamped or insufficient stamp being admitted in evidence or being acted upon - but that does not mean that the period shall remain suspended until the stamp paper is furnished and the partition decree is drawn thereon and subsequently signed by the Judge. Otherwise the result would be utter absurd, because if somebody does not wish to furnish the stamp paper within the time specified therein and as required by the Civil Court to draw up the partition decree or if someone does not at all furnish the stamp paper, does that mean and imply, no period of limitation can be said to be attracted for execution or a limitless period of limitation is available. The intent of the Legislature in enacting the Limitation Act shall have to be given its proper weightage. Absurdity cannot be the outcome of interpretation by a Court order and wherever there is even a possibility of such absurdity it would be a plain exercise of judicial power to repel the same rather than encouraging it. The whole purport of the Indian Stamp Act is to make available certain dues and to collect revenue but it does not mean and imply overriding the effect over another statute operating in a completely different sphere.
The Court rejected the said argument from another perspective also as under:
"Let us examine the matter from another perspective. The Limitation Act has been engrafted in the statute-book in the year 1963 and the Indian Stamp Act, 1899 has been brought into existence by the British Parliament in 1899 though, however, the Government of India Adaptation of Indian Laws Order, 1937, the Indian Independence Adaptation of Central Acts and Ordinance Order, 1948 and the Adaptation of Laws Order, 1950 allowed this fiscal statute to remain on the statute-book. The legislature while engrafting the 1963 Act, it is presumed and there being a golden canon of interpretation of statutes, that it had in its mind the existing Indian Stamp Act, 1899 before engrafting the provisions under article 136. A later statute obviously will have the effect of nullifying an earlier statute in the event of there being any conflict provided however, and in the event there is otherwise legislative competency in regard thereto. As regards the legislative competency, there cannot be any doubt which can stand focused, neither is there any difficulty in correlating the two statutes being operative in two different and specified spheres. Enforceability of the decree cannot be the subject-matter of section 35, neither can the limitation be said to be under suspension. The heading of the section viz. "Instrument not duly stamped inadmissible in evidence etc." (emphasis supplied) itself denotes its sphere of applicability: it has no relation with the commencement of the period of limitation. As noticed above, "executability" and "enforceability" are two different concepts having two specific connotations in legal parlance. They cannot be termed as synonymous, as contended by Mr. Mani nor can they be attributed one and the same meaning. Significantly, the final partition decree, whenever it is drawn, bears the date of the decree when the same was pronounced by the Court and not when it stands engrossed on a stamp paper and signed by the Judge and this simple illustration takes out the main thrust of Mr. Mani's submission as regards the applicability of the Stamp Act vis-a-vis the enforceability of the decree. The decree may not be received in evidence nor can it be acted upon but the period of limitation cannot be said to remain under suspension at the volition and mercy of the litigant. Limitation starts by reason of the statutory provisions as prescribed in the statute. Time does not stop running at the instance of any individual unless, of course, the same has a statutory sanction being conditional, as more fully noticed hereinbefore: the Special Bench decision of the Calcutta High Court in the case of Bholanath Karmakar v. Madanmohan Karmakar, MANU/WB/0001/1988 : AIR 1988 Cal 1 in our view has completely misread and misapplied the law for the reasons noted above and thus cannot but be said to be not correctly decided and thus stands overruled. Undoubtedly, the judgment of the Calcutta High Court has been a very learned judgment but appreciation of the legislative intent has not been effected in a manner apposite to the intent rather had a quick shift therefrom by reason wherefor, the Special Bench came to a manifest error in recording that the period of limitation for execution of a partition decree shall not begin to run until the decree is engrossed on requisite stamp paper."
Therefore, the appeal was dismissed.
Question of law decided:The principles relating to charging stamp duty are as under:
(i) The object of the Stamp Act is generation of revenue. It is therefore a fiscal enactment and has to be interpreted accordingly.
(ii) Stamp duty is levied with reference to the instrument and not in regard to the transaction, unless otherwise specifically provided in the Act.
(iii) Stamp duty is determined with reference to the substance of the transaction as embodied in the instrument and not with reference to the title, caption or nomenclature of the instrument.
(iv) For classification of an instrument, that is to determine whether an instrument comes within a particular description in an article in the Schedule to the Act, the instrument should be read and construed as whole.
(v) Where an instrument falls under two or more descriptions in the Schedule to the Act, the instrument shall be chargeable with only one duty, that is the highest of the duties applicable to the different description. But where an instrument relates to several distinct matters, it shall be chargeable with the aggregate amount of duties to which separate instruments would be chargeable.
Facts of the case:This appeal relates to the stamp duty payable in regard to a deed of trust dated 9-8-1991 executed by the appellant and his two brothers. The executants paid a stamp duty of Rs. 1,325 thereon, under article 64 of Schedule I-B to the Indian Stamp Act, 1899 as amended in U.P. ('Act' for short). The registering authority being of the view that it was not duly stamped, impounded it and referred it to the adjudicating authority. The said Authority made an order that the deed also answered the definition of "settlement" as defined under section 2(24) of the Act, and therefore stamp duty was payable under article 58 of Schedule I-B of the Act on the declared value of the trust property (Rs. 2,10,000). He directed recovery of deficit stamp duty of Rs. 10,225 and an equal amount as penalty. The said order was challenged by the appellant by filing a revision before the Chief Controller (Board of Revenue), Allahabad. The revisional authority dismissed the revision by orderdated 21-5-1996. The appellant challenged the said order in Writ PetitionNo. 54 of 2002. The High Court dismissed the writ petition holding that the authority under the Stamp Act did not commit any error in construing the instrument to be a "settlement" as defined under section 2(24) of the Act and that stamp duty was payable under article 58. The said order is challenged in this appeal.
Decision of the Court:The Court perused the title part of the instrument, which read thus : "This deed of Private Trust is made on 9-8-1991 by (names of three Donor Trustees) in order to preserve, protect and manage the property known as `Mathur Atithi Shala' situated at Chitrakoot, on the following terms and conditions:" The preamble to the instrument recites that the said property was the self-acquired property of their father and he had constructed the Atithi Shala therein for housing the pilgrims, and the said property is being used for the said purpose ever since then; that they (the three donor Trustees) had inherited the said property from their father and they possess and own the said `Mathur Atithi Shala' and have full disposing power; that as they were no longer able to manage the property, they decided to form a private trust consisting of the member of the family to look after the said property and have accordingly created the said trust to be known as `Shri Jamuna Janki Mathur Trust' for the due preservation, protection and management of the said property. The operative portion of the said deed states:
"The Donor Trustees in pursuance of their wish and desire as aforesaid do hereby grant, convey and transfer all that property i.e., `Mathur Atithishala' described in the Schedule hereto, unto and to the use of the Trustees to HAVE AND TO HOLD the same in trust for the said donor trustees subject to such powers and limitations as are hereinafter specified. It is made clear that the Trust shall own, possess and manage the Trust Property once and for all."
The deed thereafter proceeded to set down the objects of the Trust which are charitable and religious in nature. It also constituted a Board of Trustees consisting of the three donors and two other family members and an Executive Committee consisting of ten members. It also provided the eligibility criteria for being appointed as a trustee, the term of office of the trustees, the circumstances in which the trustees will cease to hold the office and the powers and duties of the trustees.
The Court observed that the question for consideration is not whether the instrument is a deed of trust or not. The fact that the instrument falls within the description of Trust deed is not in doubt. In fact that is not challenged by the State. The question is whether the instrument answers the definition of 'settlement' and therefore would also come under the description of 'settlement deed' in article 58. The appellant contends that it will not, and for that purpose relies on the recitals of the trust deed that the Trust is created for preserving, protecting and managing the trust property known as 'Mathur Atithishala' in Chitrakoot. The state contends that it will, and for that purpose relies on the operative portion of the instrument which shows that the three owners conveyed and transferred their property to the Trustees, to have and to hold the same and to own, possess and manage it as Trust Property. On the contentions raised, the question that arises for consideration is whether the instrument in question which answers the description of 'Trust deed', will also answer the description of "settlement deed", and if so whether stamp duty is payable on the instrument, under article 58 of Schedule I-B to the Act.
The Court, after referring to the relevant provisions of the Act, held that the principles relating to charging stamp duty are well-settled and laid down the same as under:
(i) The object of the Stamp Act is generation of revenue. It is therefore a fiscal enactment and has to be interpreted accordingly.
(ii) Stamp duty is levied with reference to the instrument and not in regard to the transaction, unless otherwise specifically provided in the Act.
(iii) Stamp duty is determined with reference to the substance of the transaction as embodied in the instrument and not with reference to the title, caption or nomenclature of the instrument.
(iv) For classification of an instrument, that is to determine whether an instrument comes within a particular description in an article in the Schedule to the Act, the instrument should be read and construed as whole.
(v) Where an instrument falls under two or more descriptions in the Schedule to the Act, the instrument shall be chargeable with only one duty, that is the highest of the duties applicable to the different description. But where an instrument relates to several distinct matters, it shall be chargeable with the aggregate amount of duties to which separate instruments would be chargeable.
Merely because an instrument answers the definition of a trust deed it does not cease to be a settlement deed for the purpose of stamp duty, if it answers the definition of 'settlement' also. It is well-settled that all trusts are not settlements, and all settlements are not trusts, but a deed of trust can also be a deed of settlement.
Court further observed:
"It is evident from the definition of "settlement" in section 2(24) that any non-testamentary disposition in writing, either of moveable or immovable property made for any religious or charitable purpose is a settlement. The definition also makes it clear that even where there is no such disposition in writing, any instrument recording whether by way of declaration of trust or otherwise, the terms of any of such disposition will also be a settlement. It is thus evident that not only instruments which are non-testamentary dispositions of property for any religious or charitable purpose, but also declarations of trust which record the terms of such disposition, are settlements. `Disposition' is a term of wide import which encompasses any devise or mode by which property can pass and includes giving away or giving up by a person of something which was his own [see: Commissioner of Gift Tax Madras v. N.S. Getty Chettiar, MANU/SC/0407/1970 : AIR 1971 SC 240 and Collector of Estate Duty Andhra Pradesh v. Kancharla Kesava Rao, [1973] MANU/SC/0542/1972 : 89 ITR 261 (SC)]. This Court has also held that the word "disposition" refers to a bilateral or multilateral act of transfer and will not apply to a unilateral act as, for example, when a person treats his individual property as a joint family property. [See: Goli Eswariah v. Commissioner of Gift Tax, [1970] MANU/SC/0258/1970 : 76 ITR 675 (SC)]. Black's Law Dictionary defines "disposition" as the act of transferring something to the care or possession of another; or relinquishment or giving up of property". In this case, the instrument is not termed as a "Settlement". It is clearly a declaration of trust and is described as a `deed of Trust'. But it records the terms of disposition of an immovable property for religious and charitable purposes. The operative portion of the instrument clearly recites that the three donors/Founders grant, convey and transfer their property `Mathur Atithishala' unto the trustees (that is the three founders and two others) and also declares that the Trust shall own, possess and manage the same as the absolute owner. The three executants of the Trust deed divested themselves of ownership of the property which was transferred to the Trust represented by five trustees. Thus, there was a disposition for religious and charitable purposes. It is thus clear that the instrument answers the definition of "settlement" under section 2(24) of the Act. As the stamp duty leviable under a deed of settlement under article 58 is more than the stamp duty leviable in regard to a deed of trust under article 64, the authorities under the Stamp Act have rightly held that the instrument is chargeable with the higher duty prescribed under article 58 applicable to a settlement."
In reference to the three decisions relied on by the appellant the Court observed as under:
"In Narendra Singh Ju Deo (supra), the Chief Controlling Revenue Authority made a reference to the High Court under section 57 of the Act, expressing the opinion that the instrument was a trust and not a settlement, but had some doubt about it. A Full Bench of the Allahabad High Court held that the instrument was not a settlement in view of the following circumstances: (a) Though the owner of the property transferred the property to three trustees who were to manage the property on his behalf during his life-time and to make certain arrangements in the event of his death, there was nothing to show that the deed could be regarded as one executed for the purpose of distribution of owner's property. (b) The owner of the property had reserved a right of revocation of the trust to himself and it seemed that the general intention of the owner was that the property should remain in the hands of the trustees for sometime and that they should deal with it in the manner in which he would have dealt with it, if he had not created a deed of trust. The said decision was not supported by any reasoning or principle. In fact, the said decision was not accepted by a larger Bench of that High Court in Board of Revenue, Uttar Pradesh v. Sridhar (supra), wherein a Special Bench of five Judges examined whether a draft deed in respect of which a reference was made under section 57 of the Act, was a declaration of trust or settlement. They examined the terms of the deed and found that there was a disposition of property. The Court held:
"This definition of the word "Settlement" itself makes it clear that even instruments which are executed containing a declaration of trust can be settlements provided the conditions laid down in the earlier part of the definition are satisfied. The question in these circumstances that falls for own opinion is whether this particular instrument, to which this instrument relates, is a "settlement" or not, even though it may on the face of it, be a deed of Trust."
We respectfully agree with the said observations. Referring to the earlier decision in Narendra Singh Ju Deo, the Special Bench held that the reasons given therein to hold that the disposition did not amount to a settlement were not sufficient to take the instrument out of the category of a 'settlement' as defined under section 2(24). It was held that the instrument would be a settlement, even if the disposition was not for the purpose of distribution of the owner's property if the disposition was for the purpose of providing for some persons depending on the settler. It was also observed that the reservation of the right of revocation had no bearing on the question whether a deed of trust amounted to a settlement or not. The Bench concluded that deed of trust as also a deed of settlement, can be for a limited period.
In T. Ranganathan Pillai (supra), a Full Bench of the Madras High Court was dealing with a reference in respect of a deed purporting to be a Trust deed under which a Trust was created by the founder of the Trust in respect of his properties for the benefit of his family and himself. During the arguments, it was conceded on behalf of the State that the deed did not fall within the definition of 'Settlement' either under clauses (a) and (c) of section 2(24). The High Court also noted that ultimately the learned Counsel for the State conceded that even clause (b) of section 2(24) did not apply. Consequently the High Court held that it was not a deed of settlement but only a declaration of Trust. The High Court on an examination of the terms of the instrument, also held that it was not made for any of the three purposes mentioned in clauses (a), (b) and (c) ofsection 2(24), and therefore, it was not a settlement. The said decision is therefore of no assistance.
In Sardar Deohao Jadhav (supra), the MP High Court was considering the question whether the instrument before it was a trust deed or a settlement deed. In that case the properties had already been dedicated to the family deities by the forefathers of the executant of the trust deed and the executant was only having custody of the properties which was in the ownership of the deities. By the deed of trust, the executant merely purported to make proper provision in respect of the discharge of duties of his office of Shebait of the family deities and declared a trust in respect of the properties mentioned therein. There was no disposition, but merely a declaration or assertion that the properties belonged to the deities. In those circumstances, the High Court found, reading the deed as a whole, that the executant was executing a trust deed in respect of the properties of family deities of which he was the Shebait and the essence of the document was to provide for the custody of the properties, and not to make any 'disposition'. By executing the deed of trust, the executant neither transferred nor parted with any property. He 'lost' nothing by executing the deed. The High Court therefore held that the instrument was liable to be stamped underarticle 64, as a Trust deed. The decision, on the facts, is inapplicable.
Neither of the three decisions relied on by Appellant is therefore of any assistance. In Banarsi Dass Ahluwalia (supra), relied on by the respondents, a Special Bench of the Delhi High Court was considering an instrument whereby the founder created a public charitable trust and appointed himself as the first trustee and dedicated and endowed upon trust his various assets and properties and declared that the business and properties described thereunder, shall no longer be the personal business and properties of the founder but shall be held in Trust. The Delhi High Court held that the term 'settlement' had a larger ambit than 'trust' having regard to the definition of settlement insection 2(24). It also held that while a trust made for the purposes specified in section 2(24) would always be a settlement, the converse may not be true. The Court therefore held that the deed of trust also answered the definition of 'settlement' and having regard to section 6, when an instrument is covered by both articles 64 and 58 of the Act, it shall be chargeable to duty underarticle 58 as the duty thereunder was higher than the duty under article 64. This decision reiterates the principle enunciated by the Allahabad High Court in Sridhar (supra). Be that as it may."
Therefore, the decision to subject the deed to stamp duty under article 58 of the Act was upheld and consequently it was held that the case did not warrant levy of penalty equal to the deficit stamp duty. On the facts and circumstances, the Court reduced the penalty to Rs. 5. The appeal was allowed in part accordingly
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