Andhra HC (Pre-Telangana)
A. Bapiraju And Ors. vs District Registrar, Registration And ... on 26 October, 1966
Equivalent citations: AIR1968AP142, AIR 1968 ANDHRA PRADESH 142, (1967) 2 ANDH WR 320, ILR (1969) ANDH PRA 328, (1967) 2 ANDHLT 123
Author: P. Jaganmohan Reddy
Bench: P. Jaganmohan Reddy
JUDGMENT Venkatesam, J.
1. This case was referred to the High Court by the Chief controlling Revenue Authority (Board of Revenue, Andhra Pradesh, Hyderabad), for a determination of the question, whether the document in question is a power of attorney, or a mortgage with possession.
2. The facts leading to the reference may shortly be stated. P.A.J. Seetharamaraju and two others (hereinafter called "the applicants") presented a document entitled 'power of Attorney' dated 20-8-1962, to the Sub Registrar, Cheepurupalli, for registration. The Sub Registrar referred the document to the District Registrar, Srikakulam, who, by his order dated 4-1-1963, acting under Section 38(2) of the Indian Stamp Act (Act 2 of 1899) hereinafter referred to as 'the act'), took the view that the document is a mortgage with possession for Rupees 1,50,000 requiring a stamp duty of Rs. 12,000 under Article 35(a) of the Act. But, as the document bore a stamp only of Rs. 11-50, the District Registrar Directed the sub-Registrar to collect the balance of stamp duty of Rs. 11,988-50, together with the penalty of Rs. 5.
3. Against that order, a revision was preferred by the applicant to the Board of Revenue, under Section 56 (1) of the Act. The Board of Revenue relying upon four conditions in the document viz., (1) the firm of Lala Gopikrishna Gokuldas (hereinafter called "the agents") shall work on behalf of the applicants the mines mentioned in Schedules A and B to the plaint in Os. No. 46 of 1961 on the file of the Subordinate Judge's Court, Srikakulam; (2) the agents may. In their discretion, appropriate the net sale proceeds towards the decree amount due to them; (3) the applicants agree not to revoke, cancel, or modify the power of attorney in question unless and until the amount due to the agents under the compromise decree is completely discharged; and (4) there should be an accounting and ascertainment of the net sale proceeds worked out during the period, and appropriated to the decree amount, coupled with the fact that the agents were put in possession of the properties (mines and the mining ore) was of the opinion that the properties were held as security in satisfaction of the decree debt, and that that document is, therefore a usufructuary mortgage. It was also of the opinion that as the document in question came within the description of both "power of attorney" as well as "mortgage with possession", in schedule I, it is chargeable with the higher of such stamp duties under Section 6 of the Act.
4. In order to appreciate the question in controversy, a few more facts may be stated.
5. The agents filed OS. No. 46 of 1961 on the file of the Subordinate Judge's court, Srikakulam, against 18 defendants, 1 to 3 of whom were the applicants, for recovery of Rs. 2,71,336-6-3, said to be due to the firm as financing and selling agents under agreements executed in its favour by defendants 1 to 3. It was prayed in the plaint that a decree may be granted for Rs. 2,71,336-6-3, with subsequent interest defendants 1 to 3, and against the charged properties mentioned in Schedules A and B attached to the plaint, in the hands of any of the defendants and for sale of the charged properties for realisation of the amount decreed. A decree was prayed against defendants 1 to 3 and 4 to 10 for an account of the Manganese ore stocks and the assets raised or received by them since 30-6-1956 and against defendants 1, 3, 7 and 8 for account and for other reliefs. This suit was eventually compromised between the parties on 19-8-1962. The petition to compromise was filed in Court on 21-8-1962 and a decree was passed by the Court on 22-8-1962.
6. The compromise decree provided, inter alia, that there shall be a decree for Rs. 1,50,000 against defendants 1 to 3 and 8, and that the same shall, without prejudice to the other rights of the agent (decree-holders) under the succeeding clauses of the compromise be a charge on the mines and the mining ores specified in Schedules A and B & also the ore extracted or to be extracted therefrom & their possession was agreed to be handed over to the decree-holders with mining equipment buildings, vehicles, etc., described in the schedule. The decree recited that the ore belonging to defendants 1 to 3 & 8 was already under attachment, and that the agents shall take possession of the ore remaining with the receiver and sell the same. In order to enable the decree-holders to realise the balance of the decree amount, defendants 1 to 3 (applicants) and 8 as, owners, or lessees, or licensees of the mines specified to Schedules A and B to the plaint, agreed to execute in favour of the agents an irrevocable power of attorney, authorising them to work the mines and sell the ore as they may consider best in their discretion, and appropriate the net sale proceeds towards the decree, and the compromise petition recited that the power of attorney was executed by the applicants on 20th August, 1962 and duly registered and delivered to the agents. The applicants and the 8th defendants assured the agents that there were no prior encumbrances and also agreed not to create any charge, or mortgage or encumber the same, nor deal with the mines or the mining ores, or the ore extracted or to be extracted. The agents shall make applications for renewal of the lease or licence whenever necessary on behalf of the applicants If on account of non-compliance of any rules or regulations by the applicants or the 8th defendant or of any legal or technical impediment by the mining authorities the agents suffer any loss, or the lease or licence is withdrawn, or cancelled, or the agents are obstructed in the realisation of the decree amount, defendants 1 to 3 (applicants) shall make good the loss sustained by the agents. Without prejudice to the foregoing, the applicants also agreed that the agents shall have a charge and lien over all the ore mined from the mines mentioned in Schedules A and B in confirmation of the lien under the registered deed dated 30-6-1956 for satisfying the decree, and also the mining ores specified in the Schedules and a charge decree to be passed in those terms.
7. It is manifest that the power of attorney in question was executed pursuant to the compromise. The power of attorney recited that fact, and also that for realisation of the decree amount, properties specified in the compromise petition were put in possession of the agents It contained the clauses relied on by the Board of Revenue and other clauses, namely that the applicants shall not enter into any agreements with any persons other than the agents for working the mines, or create any charge on the mines or the ore, and also that the agents will have to put the name boards in the mining area, for which the applicants shall not object till the decree in satisfied.
8. The contention on behalf of the Government is that the compromise decree and the power of attorney read together amounted to a mortgage with possession, and though styled a power of attorney it should be stamped as a mortgage with possession.
9. At this stage, it may be useful to refer to the relevant provisions of the Act.
10. Mortgage-deed is defined in Section 2 (17) of the Act as follows:--
"Mortgage deed includes every instrument whereby for the purpose of securing money advanced, or to be advanced, by way of loan, on an existing or future debt, or the performance of an engagement, one person, transfers or creates to or in favour of another, a right over or in respect of specified property."
Power of Attorney, under Section 2(21) includes:
"Any instrument (not chargeable with a fee under the law relating to court-fees for the time being in force) empowering a specified person to act for and in the name of the person executing it."
The charging Section 3 lays down that subject to the provisions of the Act and the exemptions contained in Schedule I, every instrument mentioned in that Schedule shall be chargeable with the duty and the amount indicated in that Schedule. According to the last Schedule as amended in Andhra Pradesh, a mortgage-deed when possession of the property is given by the mortgagor, or agreed to be given is chargeable with the same duty as conveyance under Article 20, and if the document in question is held to be a mortgage with possession the duty will be Rs. 12,000 Article 42 provides for the stamp duty payable for a Dower of attorney, and in the instant case, the stamp duty amounts to Rs. 11-50 if held to be a power of attorney.
11. The argument of Sri Kuppuswamy, the learned counsel for the applicants is: (1) that, under the Stamp Act, it is the instrument but not the transaction that has to be charged: (2) that, it is the form and recitals of the instrument that have to be looked into, but not the substance of the transaction as gathered from the document in question and other contemporaneous documents: and (3) that, the motive in resorting to a particular form of document is irrelevant.
12. We shall now refer to some of the leading decisions on the point.
13. In an old English case reported in Limmer Asphalte Paving Co. Ltd. v. Inland Revenue Commr. (1872) 7 Ex. 212 (215) the question for Consideration was whether the document (in that case, a conveyance of sale) was chargeable with stamp duty as a conveyance. It was held that for that purpose the real and true meaning of the instrument had to be ascertained, and that the description of it given in the instrument itself by the parties is immaterial even though they may have believed that its effect and operation was to create a security mentioned in the Stamp Act, and they so declared. It was observed:
"The question therefore, stamp or no stamp and if a stamp to what amount is to be determined upon the real and true character and meaning of the writing. It is sufficient to refer to the case of Rex v. Inhabitants of Ridgwell. (1827) 6 B & C 665 to establish this proposition."
14. In Commissioners of Inland Revenue v. G. Angus and Co., (1889) 23 QBD 579 (589) the Commissioners of Inland Revenue held that ad valorem stamp duty ought to be paid on the instrument as a "conveyance of transfer on sale". The Divisional Court having overruled that opinion, the appeal came before the Court of Appeal. The contention advanced before it was that the instrument was a conveyance on sale within the meaning of Section 70 of the Stamp Act of 1870 in England. Lord Esher, M. R. held that the first thing to be noticed was that the thing made liable to the duty was an instrument, and that if a contract of purchase and sale or a conveyance by way of purchase and sale, can be or was carried out without an instrument the case was not within the section and no tax was imposed. His Lordship observed:
"It is not the transaction of purchase and sale which is struck at: it is the instrument whereby the purchase and sale are effected which is struck at. And if anyone can carry through a purchase and sale without an instrument, then the legislature have not reached that transaction. The next thing is that it is not every instrument which may be brought into being in the course of a transaction of purchase and sale which is struck at. It is the instrument whereby any property upon the sale thereof is legally or equitably transferred The taxation is confined to the instrument whereby the property is transferred. The transfer must be made by the instrument. If a transfer requires something more than an instrument to carry it through, then the transaction is not struck at, and the instrument is not struck at because the property is not transferred by it."
His Lordship further observed:
"I come therefore to the conclusion first that, if this instrument is an agreement of which specific performance would be immediately granted still it is only an agreement. Something more is required to convey the property Secondly I doubt very much whether immediately specific performance would be decreed of the agreement as regards the goodwill. The truth is that the goodwill of the business will pass to the purchasers not by this instrument, but as soon as the real estate to which the goodwill is attached has passed to them: the moment the real estate is conveyed to them the goodwill will pass to them It will not pass to them by this agreement alone; it will pass by the conveyance of the real estate which is contemplated as some thing subsequent to this agreement. And thirdly, I think that, if the purchasers choose to rest upon this agreement, and possession is given to them of the premises, of the business and of the goodwill and they are not interfered with for the next twenty years, that can make no difference; it is only when they proceed to a "conveyance" properly so-called that this stamp duty attaches. In my opinion the judgment of the Divisional Court was right, and these appeals must be dismissed. The construction which I have put on Section 70, will I think give a distinct and clear meaning to the words which for some time puzzled me 'legally or equitably' transferred; the word 'legally' applied to the legal transfer of a legal right, and the word 'equitably' applies to an equitable transfer of an equitable interest."
15. In Minister of Stamps v. Annie Quayle-Towaned, 1909 AC 633 the facts were that the testator some years before his death executed a power of attorney in favour of his daughter, the respondent, and by a verbal gift in order to escape taxation authorized her to appropriate the purchase-moneys received thereunder of lands sold by him and of mortgage money due to him, to relend the latter to the mortgagors in her own name and generally to invest his moneys, in her own name. The question was, whether the gift to the daughter was liable to be charged with duty. It was held that under the New Zealand Stamp Act, and Section 35 of, the Newzealand Deceased Persons' Estates Duties Act, 1881 the gift to the daughter, being verbal could not be stamped, and that the deeds executed in carrying out the transaction of gift were not deeds of gift within the meaning of the New Zealand Stamp Acts, and did not operate a disposition of property within the meaning of Section 35 of the New Zealand Deceased Persons' Estates Duties Act. Lord Loreburn. Lord Chancellor who spoke for the Judicial Committee of the Privy Council, found that the testator intended to give, and did effectively give to his daughter large sums of money during the later years of his life and that he deliberately intended to part with as much of his property as he safely could in her favour in order to escape payment of taxes either during his life or after his death. It was observed that the gift effected in favour of the daughter was carried out by two deeds which did not themselves convey anything to the daughter, but what was conveyed to her was the authority emanating from the testator that she could have the moneys received by her under the power of attorney for herself, and that authority beings oral could not be stamped The Lord Chancellor approved the observations of the learned Chief Justice of the Supreme Court of New Zealand that the statute taxes instruments, and does not tax transactions, and that as there was no gift by any document there was no duty payable under the Estate Duties Act.
16. A Full Bench of this Court in Mohammad Hussain v. District Registrar, Kurnool, (SB) had to consider whether a particular document was an agreement of agency or a mortgage in that case, applicant No. 1 executed on 6th June, 1958 a deed of simple mortgage for Rs. 1,00,000 in favour of Andhra Cotton Co., Secunderabad paying a stamp duty of Rs. 1,500. Two days later an agreement was executed by applicant No. 1 in favour of applicant No. 2 appointing the latter as his agent for managing the ginning and pressing factory at Adoni, engrossing the document on a stamp paper of Rs. 37-50 under Article 6 of Schedule I-A of the Stamp Act. When it was presented for registration the question arose whether it constituted usufructuary mortgage chargeable with duty under Article 33(a) of Schedule I-A of the Central Act. The Board of Revenue was inclined to take the view that the two documents constituted a deed of mortgage with possession, but submitted the case under Section 57 of the Act for the decision of the High Court. Chandrareddy C. J., who spoke for the Court after citing the decisions in Commissioner of Income-tax Madras v. Ibrahimsa, ILR 51 Mad 455 = (AIR 1928 Mad 543) (FB); Pathumma Umma v. A. Mohideen, AIR 1928 Mad 929; Bank of Chettinad Ltd. v. Commissioner of Income-tax, ILR (1941) Mad 89 (98) = (AIR 1940 PC 183 at p. 184-185): Inland Revenue Commrs. v. Westminster, (1936) AC 1 and Partition v. Attorney General, (1869) 4 HL 100 (122) held that due regard must be had to the form adopted by the parties, and not to the substance of the matter, and that the court could not enter into the spirit of it for the purpose of deciding whether it falls within the ambit of Article 33(a) or 33(b) of Schedule I, his Lordship observed:
"Another principle that is to be borne in mind in the context of this enquiry is that, it is the instrument that is presented for registration that should be taxed. We cannot read a number of documents to see if a particular transaction is spread over all these instruments. We have to take into account the nature of the document that is sought to be taxed".
The learned Chief Justice extracted the observations of Lord Loreburn, L. C., in (1909) AC 633 with approval and held that it is only the instrument that is presented for registration that is charged with stamp duty, and that the authorities cannot look into various documents that are connected with it with a view to judge the nature of the transaction that is covered bv this document read in conjunction with several others. Accordingly, it was held that the first document was a simple mortgage falling under Article 33(a) and the second was an instrument attracting Article 6 of that Act. The learned Chief Justice observed that even if it was assumed that the parties adopted the device of resorting to two documents with a view to avoid stamp duty, that was beside the point.
17. In Board of Revenue, Madras v. N. Narasimhan, a similar principle was laid down by a Full Bench of the Madras High Court, and it was held that the Revenue authorities cannot say that the object of the transaction as to achieve a purpose not disclosed in the document, and that, therefore, the document should be deemed to be that which it is not. It was also laid down that the true scope of the rule of substance prevailing over the form with reference to a document chargeable to stamp duty was that the recitals therein should not be lost sight of merely because the parties gave a particular description of the nature of the document.
18. Having regard to the recitals in the compromise decree and the power of attorney referred to above, it is manifest that the charge in the mines and the ore was created by the said decree, and the agents were put in possession of the mines and the ore by virtue of the same. The compromise decree itself provided for an irrevocable power of attorney being executed in favour of the agents for working the mines and paying themselves the net sale proceeds and the applicants not creating any charge or mortgage or lien over the properties. A reference to or a repetition of these clauses and the conditions relied on by the Board of Revenue in the power of Attorney would not alter its character, or the nature of the document. It may be mentioned that all other terms are those usually found in a contract of del credere agency. As a result of the rights acquired under the two documents, it may be that the agents have been enabled to treat the mines and the ore as security for the realisation of the debt due to them, as if it were a mortgage with possession. But that is looking at the substance of the transaction resulting from both the documents, a course which is not permitted in law for determining the stamp duty. As noticed above, whether the document is liable to stamp duty or not has to be decided only by a reference to the form and nature of the document and its recitals. Applying this test, the document in question cannot be said to be a mortgage with possession.
19. Mr. Sambasiva Rao, the learned Government Pleader contended that the parties resorted to a compromise decree and a contemporaneous power of attorney only with a view to evade payment of the stamp duty on a mortgage with possession. But that is a situation which cannot be helped. As observed by Chandra Reddy C. J., in (SB) there could be no impediment to a party adopting a particular form to minimise the expense of stamp duty and if the parties are entitled under law to take advantage of any camouflage for the purpose of avoiding higher duty, they cannot be penalised for taking advantage of the letter of the law.
20. In Mashook Ameen Suzzada v. Marem Reddy, (1874-75) 8 Mad HC 31 cited on behalf of the Government, the creditors were allowed to occupy a land for 55 years at a fixed rent of Rs. 280 out of which after deducting Rs. 150 for the plaintiff's maintenance and other specific purposes, Rs. 120 were declared to be applicable for liquidation of debt of Rs. 6,538 ascertained to be due and in that way the debt would be liquidated in 55 years, the creditors during such period having full possession and enjoyment of the land and its profits. On a construction of these terms, their Lordships held that the agreement created a mortgage security, but not a lease.
21. In Varaprasada Rao v. Collector of Krishna, (FB) the document which the. Full Bench had to construe was executed for the purpose of completion of the construction of an unfinished cinema hall and the subsequent management of the said cinema hall after completion by the four financiers. It recited that the cinema hall which was partly constructed together with the site should be put in possession of those four individuals and they should spend Rs. 40,000 for completing the construction and providing furniture and equipment for running, the cinema. It further stipulated that in the event of some money being required for completing it, the persons should also advance such amount after giving notice to the owner of the cinema hall and manage the same. One of the clauses expressly provided that all the four financiers should have mortgage rights over the properties described in the document together with the machinery, fittings etc., and the title deeds relating to such property were handed by the owner to the four financiers. It provided for the execution of the necessary documents subject to certain conditions prescribed therein The document was, however, executed on a stamp paper of Rs. 1-50. Their Lordships of the Full Bench held that the clause which inter alia provided that the four financiers should have the mortgage rights over the properties and they were put in possession for completing the construction and for management of the cinema, evidenced all the essential elements which constituted a mortgage with possession. It was held that neither the name given to the document, nor the fact that the parties contemplated execution of further document was of any consequence and that it was a usufructuary mortgage.
22. The facts in Miran Bakhsh v. Emperor, AIR 1945 Lah 69 (SB), also cited on behalf of the Government are distinguishable.
23. It is well settled that the construction of the terms of one document cannot be an authority for the construction of another document, as each case depends on the terms of the document in that particular case.
24. The decision of the Supreme Court in S. Chattanatha Karayalar v. Central Bank of India, 1966-2 SCJ 317 (320) = (AIR 1965 SC 1856 (1859), is not a case under the Stamp Act. The question for consideration in that case was whether the status of the third defendant therein in relation to a transaction on an overdraft account was that of a surety or a co-obligant It was held that there was an integrated transaction constituted by three documents executed between the parties on the same day, and their legal effect was to confer on the 3rd defendant the status of a surety, and not of a co-obligant. Their Lordships held that the principle is well established that if a transaction is contained in more than one document between the same parties, they must be read and interpreted together and they are one document. The principle laid down by their Lordships is unexceptionable but it is of no assistance in deciding the question in controversy in the instant case.
25. In view of the foregoing discussion, we hold that the document in question is liable to be charged with duty only as a power of attorney but not as a mortgage with possession. We answer the question accordingly. The applicants are entitled to their cost from the Revenue. Advocate's fee is fixed at Rs. 100/-.