Allahabad High Court
State Of U.P. vs Willard India Ltd. on 4 February, 1987
Equivalent citations: AIR1987ALL230, [1987]62COMPCAS134(ALL), 1987 SCFBRC 246, AIR 1987 ALLAHABAD 230, 1987 ALL. L. J. 801, 1987 UPLBEC 233, 1987 ALL CJ 430, (1987) 13 ALL LR 324, 1987 ALL TAX J 241, 1987 ALL WC 625, 1987 UPTC 457
Author: K.J. Shetty
Bench: K.J. Shetty
JUDGMENT K.J. Shetty, C.J.
1. This is a reference application under Section 57 of the Stamp Act.
2. The Board of Revenue as the Chief Controlling Revenue Authority was of opinion that the document dated Dec., 16, 1975, is chargeable to duty under Article 6 of the Schedule I B. The question before us is whether the document is such that it could fall under Article 6 or under Article 5(c) of Schedule I-B.
3. The deed has some background. It has been referred to in the preamble of the deed. It states that it is an inter se agreement between Willard India Limited (Company) and five other financial institutions, which are: IFCI, PICUP, NGB, FNCB and ICICI. It refers to diverse loan agreements executed by the Company with the aforesaid financial institutions. It is not disputed that on May 31, 1974, the Company deposited with IFCI the title deed and other relatable documents of its immoveable properties, situate at Sikandarabad Industrial Estate in Buland-shahr district (State of Uttar Pradesh). IFCI received the title deeds not only as security for its loan advanced to the Company but also as an agent of the other four financial institutions. It was evidently a joint security.
4. Thereafter the question arose as to how the said financial institutions should arrange their inter se rights over the joint securities. That would be clear from the resolution of the Company dated May 29, 1974. Pursuant to the resolution the document in question was executed and it was registered at Delhi with the Stamp Duty of Rs. 21.50.
The adjudication in regard to the proper stamp duty payable was made by the Collector under Section 31 of the Act and a certificate was issued under Section 32 to the effect that the full stamp duty of Rs. 21.50 has been paid.
5. A copy of the document was received by District Registrar, Bulandshar. It was filed under Section 66(3) of the Registration Act in his file book No. 1, Volume 7. In the course of the departmental auditing, it was found that higher duty is leviable in regard to the said document and the deficiency of the stamp duty was assessed at Rs, 1,16,178.50. The audit party was of the opinion that the document falls under Article 6(1) of Schedule I-B. that was also the opinion of the Chief Controlling Revenue Authority.
6. We have heard learned counsel on both sides and also perused the terms of the document. The document is no more than an agreement relating to inter se rights of the financial institutions in regard to the joint securities already furnished. It is not a memorandum by which document of title has been deposited for the purpose of creating equitable mortgage in relation to properties. That equitable mortgage had already been created earlier. We do not think, therefore, that the document could be considered as an equitable mortgage falling under Article 6.
6A. Article 6 reads as follows : --
"6. Agreement relating to deposit of title deeds, pawn or pledge, that is to say, any instrument evidencing an agreement relating to.....
(1) the deposit of title deeds of instruments constituting or being evidence of the title to any property whatever (other than a marketable security); or (2) the pawn or pledge of movable property, where such deposit, pawn or pledge has been made by way of security for the repayment of money advanced or to be advanced by way of loan or an existing or future debt....."
7. The learned Standing Counsel urged that the agreement in question relates to deposit of title deeds even though it does not by itself evidence the deposit of title deeds. We do not think that mere reference to an earlier deed by which the title deeds have been deposited, would be sufficient to attract Article 6.
8. Almost a similar question arose for consideration in Murugharajendra Co. v. Chief Controlling Revenue Authority, AIR 1974 Kant 60, (FB). There a company had deposited title deeds in the Bank in respect of its fixed assets. The Company wanted to borrow additional sum and so requested the Bank to advance the additional sum on the selfsame assets. The Bank agreed to the proposal and informed the Company by a letter in which reference to earlier mortgage by deposit of title deeds was made. The question arose whether that letter was liable to stamp duty as a deed of mortgage. It was held that the letter was not intended by the mortgagees to be the sole repository of the terms of the equitable mortgage, but it was only an acknowledgment of an already concluded equitable mortgage and as such was not liable to stamp duty under Article 6.
9. A more detailed discussion with regard to the scope of Article 6 is found in the decision of the Madras High Court in The Chief Controlling Revenue Authority, Madras v. Pioneer Spinners Private Ltd., AIR 1968 Mad 223, (FB). It was observed :
"The mere fact that there is reference to the original proposal and the proposal is made the basis for the articles of agreement and there is thus reference in a way to the deposil of title deeds and the documents deposited are also specified in the articles of agreement, cannot make the instrument itself the repository of the bargain between the parties relating to the deposit of the title deeds. The proposal contains a provision for the execution of the document called "articles of agreement" and with reference to this document certainly the proposal does from a basis. In our view, the phrase, "relating to," in Article 6 cannot be read as merely meaning "connected with". Statutes imposing duties are to be so construed as (not?) to make any instrument liable to stamp unless manifestly within the intention of the legislature."
10. In the light of these principles, with which we entirely agree, the agreement in question before us could not fall under Article 6. As earlier stated, the company had deposited the litle, deeds in respect of its properties on May 31, 1974, with IFCI. The IFCI acting for itself and also as an agent of the other financial institutions had received the securities. The present agreement just refers to that earlier deed. That much is not sufficient to attract the provisions of Article 6.
11. In our opinion, the agreement in question could fall only under Article 5(c) of Schedule I-B.
12. The reference is accordingly answered and the parties are to bear their own costs.