Andhra HC (Pre-Telangana)
Pusapati Sudhakar vs Koppu Venkata Prabhakara Rao on 1 July, 2005
Equivalent citations: AIR2005AP386, 2005(4)ALD817, 2005(4)ALT500, AIR 2005 ANDHRA PRADESH 386, 2006 ALL LJ EE 171, (2005) 4 ANDHLD 817, (2005) 4 ANDH LT 500, (2005) 3 RECCIVR 684
Author: L. Narasimha Reddy
Bench: L. Narasimha Reddy
JUDGMENT L. Narasimha Reddy, J.
1. This revision raises a short, but important question of law.
2. The respondent filed O.S. No. 75 of 1997, against the petitioner in the Court of Senior Civil Judge, Vizianagaram, for the relief of recovery of a sum of Rs. 92,400/-, comprising of principal of Rs. 60,000/-, and the interest at 18% per annum from 1 -8-1994 to 31-7-1997. The suit claim is based on a document dated 31-7-1994. During the course of the trial of the suit, the petitioner raised an objection, as to the admissibility of the document. According to him, it witnesses two transactions, viz., receipt of a sum of Rs. 55,000/-, under a promissory note, dated 30-6-1994, and a fresh promissory note of lending a sum of Rs. 60,000/-, and that it was not properly stamped. It was alleged that as against the stamp duty of Rs. 1/-, for receipt, and 20 paise, for promissory note, stamps worth 40 paise alone were affixed. This objection as to the admissibility was rejected by the trial Court through its order dated 3-7-2004. The respondent was permitted to pay the deficit stamp duty and penalty. Hence, this revision.
3. Sri G. Rama Gopal, learned counsel for the petitioner submits that the instrument answers the description of the "receipt", under Entry 53, and of a "promissory note", covered by Entry 49 of the Schedule to the Indian Stamp Act (for short 'the Act'). He submits that the instrument was chargeable under Section 5 of the Act, with the aggregate amount of duties, payable for the said two transactions, and since it is not properly stamped, it is inadmissible in evidence. He contends that the trial Court committed an error in adjusting the stamp duty of 40 paise, towards the 25 paise, payable on a promissory note and permitting the respondent to pay the deficit stamp duty. He submits that such a course of action is impermissible in law, and the defect, as to insufficiency of stamp duty, on a promissory note, cannot be cured, in view of the prohibition contained in Section 35 of the Act. He places reliance upon the judgment of a Division Bench of Jammu and Kashmir High Court in Kasturi Lal v. Bharat Finance Co, .
4. Sri D. Ramalinga Swamy, learned counsel for the respondent, on the other hand, submits that once an instrument attracts the provisions of Section 5 of the Act, it cannot be known after any of individual transactions, covered by it. According to the learned counsel, such instruments partake a different character, and the bar contained under Section 35 of the Act, does not apply to them. Learned counsel submits that in such cases, it is permissible in law to pay the deficit stamp duty, under proviso (a) to Section 35 of the Act.
5. A perusal of the instrument in question discloses that the respondent was due a sum of Rs. 55,000/-, to the petitioner, under a promissory note dated 30-6-1994, and the latter approached the former for his immediate necessities. The respondent is said to have repaid the sum of Rs. 55,000/-, payable under promissory note dated 30-6-1994, and in addition, lent a sum of Rs. 60,000/-, repayable on demand, with interest of Rs. 1,50 ps., per month, on every Rs. 100/-. The instrument also acknowledges the receipt of Rs. 60,000/- lent through it. In that sense, it constitutes a receipt for a sum of Rs. 55,000/- and a promissory note, for repayment of an amount of Rs. 60,000/-. It is not in dispute that the stamp duty payable on a receipt is Re. 1/- under one Entry 53, and the one, payable on promissory note, for an amount, exceeding Rs. 1,000/-, is 25 paise. Since the instrument evidences more transactions than one, Section 5 gets attracted. It reads as under:
"Section- 5: Instruments relating to several distinct matters. - 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 this Act."
Therefore, the stamp duty payable on the instrument is Rs. 1.25 paise (one rupee + 25 paise). The trial Court made a reference to Section 6 of the Act, which mandates that, where the instrument is so framed, as to come under two or more, descriptions in Schedule I, and the duties chargeable for them are different, it shall be charged with the highest. Section 6, however, is subject to Section 5. In that view of the matter, the aggregate amount of duty payable on both the transactions was required to be paid. Even if Section 6 is applied, it does not emerge that the proper stamp is paid on the instrument in question.
6. The defect as to stamp duty is not so fatal, as in the case of registration, where it is "compulsory under law". By and large, the defect as to stamp duty is curable with the payment of penalty. Here again, the principle is not absolute. Section 35 renders instruments not duty stamped, inadmissible in evidence. Proviso (a) is important in this regard. It reads as under:
Section -35: Instruments not duly stamped inadmissible in evidence, etc. - No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped:
Provided that-
(a) any such instrument not being an instrument chargeable [with a duty not exceeding ten naye paise] only, or a bill of exchange or promissory note, shall, subject to all just exceptions, be admitted in evidence on payment of the duty with which the same is chargeable or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, a sum of equal to ten times such duty or portion."
(Other portion of the Section omitted as not necessary for the present purpose)
7. A perusal of the same discloses that except certain categories of instruments, rest become admissible, in evidence, on payment of the deficit stamp duty, as well as penalty of Rs. 5/-, subject to certain maximum. Such facility is not available to the class of instruments mentioned therein, such as, an instrument, which is chargeable with a duty, not exceeding 10 paise only, a bill of exchange, and a promissory note. These instruments do not become admissible, even if deficit stamp duty and penalty is paid.
8. The respondent insisted that out of the stamp duty of 40 paise, paid on the instrument, the stamp duty of 25 paise may be adjusted towards the one, payable for the transaction of promissory note, and the deficit duty as well as penalty can be permitted to be paid on the transaction of receipt, as regards of which, there is no prohibition. Counsel for the petitioner, on the one hand, submits that it is impermissible to split the transactions, which are evidenced by a single instrument and to undertake adjustment of stamp duties.
9. In Kasturi Lal v. Bharat Finance Co. (supra), a Division Bench of Jammu and Kashmir High Court held that if an instrument dealt with distinct matters, and the aggregate of stamp duty payable on such matters is not paid, it is impermissible to split the transactions to render the instrument, valid for one of the matters. It was observed that the instrument becomes inadmissible in evidence, as a whole, if it was not stamped on the aggregate. For arriving at this conclusion, reference was made to Sub-section (11) of Section 2 of the Act, which defines the expression "duty stamped", as well as the expression "distinct matter", occurring in Section 5. The judgment of the Madras High Court in S.R.M.S.T. Narayana Chettiar v. The Kaleeswarar Mills Ltd, , was relied upon. The relevant portion of the judgment in Kasturi Lal's case (1 supra), reads as under:
"The instrument has to be read as a whole and treated as a single instrument for the purposes of stamp duty. Furthermore, 'distinct .matter' in Section 5 connotes a transaction to achieve a distinct object, and does not include a matter which is merely accessory or ancillary, to such object. The entire document has to be read as a whole to find out its dominant object. It necessarily follows that an instrument comprising distinct matters, which does not bear the aggregate amount of duty chargeable for each such matter, cannot be said to be duly stamped within the meaning of Section 2(11), and consequently cannot be admitted in evidence for any purpose under Section 35, including the purpose to prove that matter on which the duty chargeable stands already paid. The principal object behind enacting Section 35 is to ensure, that no party to an instrument escapes payment of full duty chargeable on it with impunity. This object is bound to be defeated in case a party is permitted to make use of an instrument according to its needs or exigencies of situation without fully complying with the provisions of the Act."
10. It was held by the Jammu and Kashmir High Court that it is impermissible to split a k document, which comprises of distinct matters and to validate it for the limited purpose of one such matters. However, it did not deal with the question as to what character such a document would partake, in the context of payment of deficit stamp duty with penalty, under proviso (a) to Section 35. In fact, such a contention does not appear to have been advanced before it. The question before it was, as to whether the instrument, as it stood, was admissible in evidence, under Section 35 and not whether the defect could have been cured under the provisions of the Act.
11. As observed earlier, the defect as to stamp duty on a promissory note cannot be cured and thereby, it becomes inadmissible in evidence. However, it needs to be noted that once the instrument evidences more transactions, or matters than one, it assumes a character, which is distinct, from either, of such transactions. The non-availability of the facility of payment of deficit stamp duty is only in respect of three categories of instruments viz., an instrument, chargeable with a duty, not exceeding 10 paise, a bill of exchange, or promissory note. Such facility is available for rest of categories of instruments. An instrument, which relates to several distinct matters, certainly falls into the residuary category. The result is that, though there is no escape from the obligation to pay the aggregate of the stamp duty on the distinct matters witnessed by the instrument, falling under Section 5 of the Act, the facility of curing the defect by paying the deficit duty with penalty is very much available for it. Though in not so many terms, this is what the trial Court did. Hence, no exception can be taken to the order under revision.
12. Hence, the C.R.P is dismissed. There shall be do order as to costs.