Andhra HC (Pre-Telangana)
Mc. Dowell And Co., Ltd., Visakhapatnam vs District Registrar, Visakhapatnam on 16 March, 2000
Equivalent citations: 2000(3)ALD199, 2000(2)ALT743, AIR 2000 ANDHRA PRADESH 374, 2000 A I H C 3526, 2000 CLC 1565 (AP), (2000) 3 CURCC 338, (2000) 2 ANDH LT 743
ORDER S. Ananda Reddy, J.
1. This referred case is at the instance of the petitioner-company referred by the Chief Controlling Revenue Authority under Section 57 of the Indian Stamp Act, 1899 (hereinafter referred to as 'the Act'). The following question is referred for the opinion of this Court:
"Whether the document under consideration styled as letter of subrogation and special Power of Attorney is a General Power of Attorney attracting a stamp duty of Rs.20/- or whether it is in addition an assignment of the benefit of a contract to be treated as Conveyance under Article 20 of Schedule I-A of Indian Stamp Act."
2. The facts of the case are as follows:
The petitioner-company approached the District Registrar, Visakhapatnam with a draft deed purporting to be a letter of subrogation and special power of attorney for opinion under Section 31 of the Act. The District Registrar opined that the document was an assignment of the benefit of a contract to be treated as conveyance under Article 20 of Schedule I-A of the Act and also the power of attorney under Article 42(c) of Schedule I-A, chargeable with higher duties. However, the District Registrar referred the matter under Section 56(2) of the Act, to the Commissioner of Survey, Settlements and Land Records. The Inspector General, Registration and Stamps, whose remarks were called for, confirmed the opinion of the District Registrar. On receipt of the remarks of the Inspector General, Registration and Stamps, a communication was sent from the Office of the Commissioner of Survey, Settlement and Land Records with the remarks of the inspector General to the District Registrar treating it as if it was the decision of the Chief Controlling Revenue Authority. The District Registrar accordingly adjudicated the document. Aggrieved by the said opinion of the District Registrar, Visakhapatnam, the petitioner-company filed a petition before the Chief Controlling Revenue Authority for reference. The Chief Controlling Revenue Authority thereafter referred the matter to this Court expressing his opinion. According to the opinion of the Chief Controlling Revenue Authority, the document is only power of attorney authorising the insurance Company to proceed against the Transporter for recovery of the loss and it is chargeable at the rate of Rs.20/- under Article 42(c) of the Schedule I-A.
3. The petitioner-company is the manufacturer, which dispatches its goods to different destinations. In order to safeguard its interest from any loss in the transit, the goods were insured with the National Insurance Company Limited. Whenever there is loss/damage to the petitioner in respect of the goods insured, the loss will be compensated by the Insurance Company and the Insurance Company will proceed against the transporting agency or transporter to make good the loss. In that connection for proper, effective and convenient proseculion of the proceedings, the document in question is proposed to be executed in favour of the Insurance Company.
4. The document in question is styled as "a letter of Subrogation and Speci;il Power of Attorney" executed by the petitii .ner-company in favour of the National Insurance Company Limited, subrogating to the rights of the petitioner-Company arising from Me loss/damage to the goods, in consideration of paying the amount assured under the Insurance policy to the petitioner-company.
5. The relevant terms as appearing in the document are as under:
"We hereby assign, transfer and abandon all our actionable rights, title and interest in and to the said goods and proceeds thereof......"
"We hereby guarantee that we are the persons entitled to enforce the terms of the contract of transportation......"
"We hereby subrogate to you the rights and powers that we have in consequence or arising from loss/damage to the undermentioned goods......"
"We also hereby authorise you to use our name in any action or proceeding that you may bring either in your own name or in our name......"
"We hereby authorise you to file a suit or suits in Courts of law against ...... Indian Railways, the Sea Carriers Charters Agents......"
"We further hereby give you authority to sign, declare, verify and affirm and execute jointly and severally in our name and on our behalf, plaints, affidavits......"
"We further undertake, if called upon by you, to do so, ourselves to institute any such action......"
"We further agree that any monies collected from any carriers...... or any persons shall be your property".
"We hereby appoint you, your officers and agents...... severally our agents and attorneys...... in fact with irrecoverable power to collect any and all such claims....."
6. The said document is intended to be executed by the petitioner-company in favour of the Insurance Company after receiving the compensation for the damages in terms of the Insurance policy in respect of the goods insured with the Insurance Company. Though the District Registrar opined that the document in question was an assignment of the benefit of a contract to be treated as a conveyance and also power of attorney, bur according to the Chief Controlling Revenue Authority, there is no conveyance of any property, and it is only a power of attorney authorising the Insurance Company to proceed against the transporter to recover the loss which is chargeable under Article 42(c) of the Act at the rate of Rs.20/-.
7. None appeared for the petitioner-company.
8. The learned Government Pleader for Revenue contended that the beneficial interest in the moveable property has been conveyed under the document. The right of the petitioner-company to proceed against the transporters for the loss caused in respect of the movable property is conveyed/assigned to the Insurance Company under the impugned document. Therefore, the District Registrar has rightly opined that the document in question has to be treated as a conveyance deed and power of attorney and requires to be stamped as such.
9. From the material on record it is clear that the petitioner-company while transporting its goods insures with the Insurance Company to make good the loss if any that would occur. On the happening of an event of loss or damage to the goods, the Insurance Company compensates the petitioner-company and in order to proceed against the transporters to recover the loss on account of the damage caused to the goods of the petitioner-company, the petitioner-company proposes to execute the said document. The petitioner has got a right to proceed against the trasnporter for damages and the Insurance Company was also interested to reduce its loss/ liability by recovering the damages from the transporter. In order to have convenient and effective prosecution, the petitioner-company proposed the letter of subrogation and power of attorney in favour of the National Insurance Company Limited. Rut according to the District Registrar the benefit of contract was assigned under the document and hence it should be treated as a conveyance deed. At Ihis stage it is proper to refer to the definition of Conveyance contained in Section 2(10) of the Act.
"Conveyance includes a conveyance of sale and every instrument by which property whether movable or immovable, is transferred inter vivos and which is not otherwise specifically provided for by Sehedule-I (or by Schedule !-A), as the case may be."
10. If \sc look into the terms of the documents, the petitioner-Company intends to assign, transfer and abandon all its actionable claims and interest (in and to the goods and proceeds thereof) and all the rights and remedies against the transporters which, at the first blush, appears to be a deed of conveyance, but in fact, it is not so.
11. The assignability of the rights under a contract were considered by the Supreme Court in the case of Khardah Company Limited, AIR 1962 SC 1810. wherein it was held that there is in law a clear distinction between assignment of rights under a contract by a party who performs his obligations thereunder and assignment of a claim for compensation which one party has against the other for breach of contract. The latter is a mere claim for damages, which cannot be assigned in law; the former is a benefit under an agreement, which is capable of assignment.
12. The Supreme Court in the case of Union of India v. Sarada Mills Limited, , considered the issue regarding the assignment of rights under the policy of insurance and held that subrogation does not confer any independent risht on the under writers to maintain in their own name and without reference to the persons assured, an action tor damages. The right of assured is one of those rights, which arc incidental to the property insured. In this case, the assured company on satisfaction of its claim for the loss and damage by the Insurance Company, has assigned all rights against the railway administration in favour of the insurer as subrogce and the letter of subrogation contains intrinsic evidence that (lie Mill would give the Insurance Company facilities for enforcing the rights, but the Insurance Company has chosen to allow the Mill to sue. It was held that the cause of action of tlic Mill against the railway administration did nut perish on giving a letter of subrogation. The Mill was competent to maintain the suit hut was answerable and accountable to the Insurance Company to the extent of the amount paid by it to the Mill. The Supreme Court after referring to the provisions or" Sections 6(e) and 130 of the Transfer of Property Act. observed that actionable claims under the Indian Law include claims recognised by the Court either as unsecured debt or as to beneficial interest in movable property not in possession. A debt is an obligation to pay a liquidated or certain sum of money. A beneficial interest in movable property will include a right to recover insurance money. But, mere right to sue cannot be transferred. It was further held that "a bare right of action might be claim to damages for breach of contract or claim to damages lor tort. An assignment of a mere right of litigation is bad. An assignment of property is valid even though that property may be incapable of being recovered without litigation. The reason behind the rule is that a bare right of action for damages is not assignable because the law will not recognise any transaction which may savour of maintenance of champerty, ft is only when there is some interest in the subject matter that a transaction can he saved from the imputation of maintenance. That interest must exist apart from the assignment and to that extent must be independent of it. A chose in action for breach of contract was not assignable at law but was assignable at equity".
13. The learned Government Pleader relied upon the decision of the Madras High Court in the case of Vasudev Mudaliar v. Caledonian Insurance company, . In this case the Madras High Court considered the right of the Insurance Company to maintain a suit for damages/compensation against the third party. The Insurance Company paid the compensation as per the policy and brought an action against third party for the recovery of loss. The basis of the claim of the Insurance Company was that it was subrogatcd to the rights of the assured against third party-defendants including the right to sue and recover damages from them and in any case it held an assignment from the assured of all his rights. The suit was dismissed holding that the rights and remedies in respect of the damages were not assignable.
14. On appeal, it was held that though a formal alignment of the kind by the assured of his rights and remedies to the insurer was prohibited by Section 6(c) of the Transfer of Property Act but applying the general principle of Section 69 of the Indian Contract Act together with the principles applicable to contract of insurance in England, decreed the suit.
15. On further appeal, the High Court held that "on principles of English authority and having regard to the peculiar nature and effect of a contract of insurance providing cover for motor vehicles against risks, the view of the Principal Judge, City Civil Court, as to the maintainability of suit such as this brought by an insurer, is correct. But. the judgment can be sustained, not on the ground of subrogation, which is its basis, but on the ground of assignment by the assured of his rights to the insurer". A contract of motor insurance, is, one of the indemnity. It is implied in the very nature of the contract of indemnity that the indemnifier is entitled to recoup or minimise the damages, fn other words, arising out of the nature of a contract of indemnity, the insurer, when he has indemnified the assured, he is subrogated to his rights and remedies against third parties, who have occasioned the loss.
16. It was also observed that it should be noted that the fact that an insurer is subrogated to the rights and remedies of the assured does not ipso jure enable him to sue third parties in his own name. It will only entitle the insurer to sue in the name of the assured by subrogation. The insurer gets no beller rights or no different remedies than the assured himself. Subrogation and its effect should not be mixed up with that of transfer or an assignment by the assured of his rights and remedies. An assignment or transfer implies something more than subrogation and vests in the insurer the assured's interest, rights and remedies in respect of the subject matter and substance of the insurance and the insurer on that strength can maintain a suit.
17. The above view of the Madras High Court is contrary to the law laid down by the Supreme Court and the same was rendered without even referring to ihe decision of the Supreme Court in the case of Khardah Company Limited (supra).
18. At this stage it is useful to refer to the definition of 'Actionable Claim.
"Actionable claim means a claim to any debt, other than a debt secured.......... of immoveable property....... or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of claimant....... whether such debt or beneficial interest be existent, accruing, conditional or contingent.
It cannot be disputed that the rights under a contract are beneficial interest in moveable properties. They are certainly not things in possession and a right to the benefit of an obligation under a contract can only be and are enforced by an aclion at law. Right to benefit of a contract therefore falls within the definition of "actionable claim".
That a right to sue for damages is not an actionable claim is also stressed by the amendment made in Section 6(e) to the effect that a mere right to sue cannot be transferred (Abu Mahomed v. S.C. Chunder, (1909) 36 Cal. 345), The definition of actionable claim has been extended so as to include such equitable choses in action as debts or beneficial interest in moveable property whether existent, accruing, conditional or contingent. Actionable claims therefore include claims recognised by the Courts as affording grounds for relief either-(i) as to unsecured debts or (ii) as to beneficial interests in moveable property not in possession, actual or constructive - whether present or future, conditional or contingent.
19. In view of the above legal position though the document in question contains the terms "assign and transfer of actionable rights, title and interest in and to the goods or proceeds thereof, the petitioner company has no subsisting right or title in the goods as they are not in existence. The petitioner company is entilled to claim only damages and such a right is only a mere right to sue which is incapable of transfer. Therefore, the use of the above terms, in the circumstances of this case, has no significance as the petitioner-company itself does not have such right or title either to assign or transfer.
20. From the above factual and legal position, it is clear that the right of the petitioner-company to claim damages against transport company is neither assignable nor transferable. Therefore, the question of treating the disputed document as a document of conveyance or assignment does not arise, as the right of the petitioner is a mere right for damages. Therefore, the Chief Controlling Revenue Authority is right in opining that the document is chargeable only as a Power of Attorney under Article 42(c) of Schedule I-A of the Act.
21. Therefore, the reference is answered in favour of the petitioner-company holding that the document under consideration is a General Power of Attorney attracting stamp duty of Rs.20/- under Article 42(c) of Schedule I-A of the Act.