Kerala High Court
M. Manohar Kammath vs M. Ram Mohan Kammath And Anr. on 20 September, 1991
Equivalent citations: AIR1992KER128, AIR 1992 KERALA 128, (1991) 2 KER LJ 723 (1991) 2 KER LT 714, (1991) 2 KER LT 714
JUDGMENT Varghese Kalliath, J.
1. This case comes up before us on a reference made by Krishnamoorthy, J. The reference has occasioned since the learned Judge felt that the view expressed in Gopalan v. Chellappan, 1988 (2) KLT 433, conflicts with the view taken in the decision Kochunarayanan v. Aravindakshan, 1974 KLT 301. Obviously for an authoritative pronouncement on the question and to avoid the conflict, our noble and learned brother, Krishnamoorthy, thought an excathedra decision by a Division Bench of this Court on the question is necessary.
2. The question raised is under the Kerala Stamp Act (Act 17 of 1959), hereinafter referred to as the Act. The short facts are these:
3. In execution of a decree, the judgment-debtor produced a document. He produced it with a petition to receive the same. The decree-holder contended that the document cannot be received as it is not properly stamped. The decree directed the judgment-
debtor to put the decree-holder in possession of the suit property. The appellate Court granted time till 1-12-1988 for the judgment-debtor to vacate the premises. The execution petition was filed for delivery of the possession of the suit property. The judgment-debtor put forward a defence that subsequent to the decree and after surrender of possession of the property, a new agreement of lease was executed by the judgment-debtor and that he is holding possession of the property by virtue of that document of lease. He wanted the production of that document, and for that purpose, he filed the petition. This document was found to be not properly stamped.
4. The execution Court found that the document is not properly stamped. It held that the proper stamp duty chargeable on the document is Rs. 2025/- and impounded the document and directed to pay penalty of Rs. 22,255/-. This order of the execution Court is challenged in this Civil Revision Petition.
5. There is a dispute as regards the correct article of the Act applicable on the basis of the recitals in the document. But, this question is not very seriously pressed before us. The dispute is as to whether the article that is applicable on the basis of the recitals in the document is Article 33(v) or Article 33(viii). Counsel for revision petitioner does not press for an investigation as to whether Article 33(v) or Article 33(viii) is applicable on the recitals of the document. It makes not much difference in payment of duty, if either of the articles is made applicable. We shall quote Articles 33(v) and 33(viii) of the Act.
"33. Lease-including an under lease or sublease and any agreement to let or sub-let --
..............
(v) where the lease purports to be for a term exceeding 20 years but not exceeding 30 years :
..............
The same duty as a conveyance (No. 21 or 22 as the case may be) for a consideration equal to twice the amount or value of the average annual rent reserved.
(viii) where the lease does not purport to befor any definite term :
The same duty as a conveyance (No. 21 or 22 as the case may be) for a consideration equal to three times the amount or value of the average annual rent reserved which would be paid or delivered for the first ten years if the lease continued so long."
6. The larger question that has to be decided is whether the document is liable to be 'impounded and whether the order impounding the document under the circumstances unfolded in the case is correct in law. Section 33 of the Act deals with examination and impounding of instruments. It provides thus:--
"Examination and impounding of instruments : -
(1) Every person having by law or consent of parties authority to receive evidence, and every person in charge of a public office, except an Officer of Police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly stamped, impound the same (2.) For that purpose every such person shall examine every instrument so chargeable and so produce or coming before him, in order to ascertain whether it is stamped with a stamp of the value and description required by the law in force in the State when such instrument was executed or first executed.
Provided that - ......"
7. Counsel for revision petitioner submit-(ed that though a reading of the recitals in the document will attract the definition of lease in the Act, since the document has not been registered as contemplated under the Registration Act, the document is not liable to be impounded on the ground that it has not been properly stamped. Counsel submitted that the decision reported in 1988 (2) KLT 433, is applicable in the case and what is laid down in 1988 (2) KLT 433, is the correct law. He also submitted that the question decided in 1974 KLT 301 has no direct application in the circumstances of the case. He explained his argument and submitted that even if some observations in the decision reported in 1974 KLT 301 are in conflict with what has been stated in the decision reported in 198,8 (2) K LT 433, to that extent, 1974 KLT 301, is not good law.
8. Forthrightly we have to say that we are now called upon to decide the correctness of the decision reported in 1988(2) KLT433. We say so, since counsel for respondent submitted that the decision reported in 1988(2) KLT 433, is not laying down the correct law on the subject. ,
9. Counsel for revision petitioner wanted to support the decision reported in 1988(2) KLT 433 by referring to the decisions reported in AIR 1953 Madras 764(C. E. Co. v. C. C. Rev. Authority) and AIR 1973 MP 172 (Hatesing v. Kishan). Counsel for respondent has relied on AIR 1969 Mad 1 (Chief Cont. Rev. Authority v. Canara L & B Syndicate) and 1974 KLT 301.
10. Before considering the decisions, we shall refer to the relevant statutory provisions. Section 2(1) of the Act defines a lease to mean a lease of immovable property and includes-
"(i) &(ii)..............
(iii) an agreement or other undertaking in writing, not being a counterpart of a lease, to cultivate, occupy, or pay or deliver rent for immovable property;
The definition of lease in the Act, it has to be noted, is not identical to the definition in Section 105 of the Transfer of Property Act, where the lease of immovable property is defined as a transfer of a right to enjoy such property made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee who accepts the transfer on such terms. In a way, the definition of lease in the Stamp Act is wider than the definition of lease of immovable property in the T. P. Act.
11. Section 2(j) of the Act defines "instrument" to include every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded, but does not include a bill of exchange, promissory note, bill of lading, letter of credit, policy of insurance, transfer of share, debenture proxy and , receipt, he word "executed" is also defined in the Act under Section 2(0 -- "executed" and "execution" used with reference to instruments; means "signed" and "signature". Section 2(b) of the Act defines "chargeable" thus: -- "chargeable" means, as applied to an instrument executed or first executed after the commencement of the Act, chargeable under the Act, and as applied to any other instrument chargeable under the law in force the territories of the State of Kerala when such instrument was executed, or, where several persons executed the instrument at different times, first executed.
12. Now we shall advert to Section 17 of the Act. Section 17 of the Act comes under that part of the Act captioned as "C. of the time of Stamping Instruments". This section assumes the position of the ganglion, the nerve centre of this case. It is axial and centroidal in resolving the riddle paused in this case. The section postulates that all instruments chargeable with duty and executed by any person in the State of Kerala shall be stamped before or at the time of execution. For clarity, we quote the section.
"17. Instruments executed in the State of Kerala:--
All instruments chargeable with duty and executed by any person in the State of Kerala shall be stamped before or at the time of execution."
Certainly, a clear understanding of the tenor and bearing; pith and substance; spirit and essence and significance and import of the term execution is important for resolving the question raised in this case.
13. The definition of the words "executed" and "execution" has been taken from Section 122(1) of the English Stamp Act. In an old decision reported in ILR 19 Bombay 635 (Bhavaji Harbum v. Devi Punja), Farran, J. observed thus : "executed" means completed and the term "execution" when applied to a document is the last act or series of acts which completes it. It might be defined as a formal completion. Thus, execution of deeds is the signing, sealing and delivery of them in the presence of witnesses. Execution of a will includes attestation. In each class of instruments we have to consider when the instrument is formally complete.
14. The definition of executed and execution in a way restricts and confines it to mean signed, and signature. It is possible to say that it may include the signature of all persons, who are required by the character of the document to sign in the document. This we say because there may be cases where both parties have to sign in the document, and if one of the parties alone has signed, it will be difficult for us to hold that the document is executed. This is important because the chargeability of stamp duty depends upon execution of the document. It is also perhaps possible to hold in this context that if a document had to be signed by attesting witnesses in order to make it a valid execution of the document the signatures of the attesting witnesses are also to be necessary to treat the document as an instrument, executed falling within the definition of that category of instruments, chargeable with stamp duty. But, once a document is complete in execution in the sense that all persons required to be signed in the document have signed, then at once, the chargeability under the Stamp Act is attracted. A liability to stamp duty is brought down upon the instrument with reference to the relevant articles as soon as it is executed. We give emphasis to this aspect of the matter, for the reason that the liability to stamp duty is the cause for holding that the instrument i not properly stamped, and the liability commences and continues as soon as the instrument is executed. Perhaps, the instrument may not be valid in law for other reasons. Nevertheless, it attracts the liability for stump duty, when the execution of it is completed.
15. Section 17 of the Act mandates that all instruments chargeable with duty and executed by any person in India shall he stamped before or at the time of execution. The words shall be stamped before or at the time of execution have been used to give certainty as regards the time of stamping. A view was prevalent that an instrument, which was not stamped before the time of execution or at the time of execution can be produced before a court by affixing proper stamp immediately before the production of the same before the court, even though it has been executed long prior to the date of production of the document before the court. This view can no longer hold the field by virtue of the clean and clear provision contained in Section 17 of the Act. It was once thought that the court had no business to enquire when the instrument bore a proper stamp as to when the stamp was affixed. This was prior to the Indian Stamp Act 1899. -- vide (1875) XXIV Weekly Reporter 198 (Sreemutty Noor Bibee v Shaikh Rumzan). It held thus:--
"A document is receivable on being duly stamped, and as bearing the stamp required by the law, for the purpose of the trial in which the document is tendered in evidence, and it is no business of the Court to enquire what time the stamp was affixed, or whether the provision of the stamp law was duly observed, which is a matter connected with the law as to penalties."
In Kali Churn Das v. Nobe Kriste Pal ((1882) IX CLR 272) the Court observed : --
"When a document, which under the Stamp laws requires to be stamped, is tendered in evidence, the only question for the Court is whether it bears a proper stamp at the time when it is tendered the Court is not bound, nor is it at liberty, to allow the parties to go into evidence to show at what time the document was stamped."
16. The document we have to consider is complete with reference to execution, since both parties have signed the document. There is no dispute that the document has not been executed. As we said earlier, the case pleaded by counsel for revision petitioner is that the document is not valid in law, since it is not registered.
17. Now we shall examine the decision reported in 1988 (2) KLT 433. The learned single Judge was considering a document, the recitals of which constituted a mortgage, it was executed but was not registered. His Lordship has referred to Section 59 of the Transfer of Property Act and said that the section provides that such a document can have legal effect only by a registered instrument signed by the mortgagor and attested by at least two witnesses. Further, his Lordship said that one of the attributes of a valid mortgage is transfer of an interest in immovable property and not a purported transfer and to call such an instrument a valid mortgage, it should not only be executed and attested, but it should also be registered (emphasis given by us). To put it differently it is not enough if the document purports to effect a transfer. Saying so, since the document was found not registered, the learned single Judge held that the document is not chargeable with stamp duty. The observation that the document is invalid or will not transfer right in the property and really it will not effect a transfer at all may not be juris-prudentially and strictly correct, but in the sense that the document is not enforceable, it can be said that there is valid mortgage created by the document. But, the question is whether such a document is chargeable with stamp duty. That has to be decided with reference to the Stamp Act. As we said earlier, the Stamp Act provides at what point of time, a document falls to be chargeable with duty and the time is before or at the time of execution of the instrument. When once the document purporting to be a mortgage is executed, at once it invites and attracts by virtue of Section 17 the liability to be charged with stamp duty. There is no escape from it.
18. The learned single Judge has relied on AIR 1953 Mad 764 and AIR 1973 MP 172 and also referred to AIR 1969 SC 1238 : (1969 All LJ 1006) (H.S. Ltd. v. Dilip Construction) and also AIR 1965 SC 1092 (The Board v. Siddnath). His Lordship dissented AIR 1969 Mad 1 (FB) and AIR 1968 AP 213 (FB). The reasoning given by the learned single Judge is clear from this observation, "to call such an instrument a valid mortgage it should not only be executed and attested, but it should also be registered. To put it differently, it is not enough if the document purports io effect a transfer. It must transfer". His Lordship said that this view is supported by a Full Bench ruling of the Madras High Court (AIR 1953 Mad 764) and a decision of the Madhya Pradesh High Court (AIR 1973 MP 172).
19. Of course, AIR 1953 Mad 764 is a Full Bench decision consisting of eminent Judges -- Rajamanner C. J., Rajagopalan and Venkatarama Aiyer, JJ. It has to be noted that that was a case where the instrument considered, was in the category of a mortgage. The Full Bench said that the transfer contemplated by section 2( 17) Stamp Act is a transfer valid in law and such a valid transfer would not have been effected under the document dated 23-2-1948, which was neither attested nor registered. So, the document which was considered in the Full Bench decision is obviously a document not attested and registered.
20. In the Full Bench case reported in AIR 1953 Madras 764, it is possible to say if we hold that execution includes the signing of all persons who are necessarily to sign the document to make a valid execution of the document; the document is not executed within the meaning of the definition of the word execution in the Act; since this is a question on which two views are possible. In fact, a later Full Bench of Madras High Court adopted a restrictive interpretation of the decision in AIR 1953 Mad 764 and without overruling the decision, held that if a document is complete in execution, but not registered, cannot escape the liability of payment of stamp duty. The later Full Bench found the ratio of the decision of the Full Bench reported in AIR 1953 Mad 764 has to be restricted to certain category of documents where there is no attestation and when the law requires attestation to make the execution a valid one. This restrictive interpretation can be only on the basis that execution includes the signing of the attesters also. But, this view has not been found favour with a Full Bench decision of the Andhra Pradesh High Court.
21. The Full Bench decision reported in AIR !969 Mad 1 definitely restricted the scope and application of the ratio of the decision reported in AIR 1953 Mad 764. The Full Bench considered the import of the definition executed. It said, a document has to be considered as chargeable to stamp duty, when it is executed, which term executed itself has to be interpreted in the light of the definition embodied in Section 2(12). It also said under Section 2(12), executed means signed and execution means signature; so it is clear that this will include the signatures of all persons, who are required by the character of the document to sign in the document, in order to give that document effect according to law. Further the Full Bench said, if a document is of such a character that both parties to the document should sign it to constitute it a binding agreement between them, it should contain the signatures of both; similarly if it had to be signed by two attesters in order to make it legal, this will also be necessarily part of the definition. After saying so, the Full Bench held that once a document is complete in execution with the above requirements and the effective words of disposition are there, immediately transferring rights by the very virtue of the document, the question of its subsequent registration is a distinct matter altogether and the document is certainly liable to stamp duty with reference to the relevant articles of the Stamp Act, since execution is complete. The Full Bench made it clear that though registration is necessary under the law, to give legal effect to the document (we would use the term enforceability of the document), it is not merely a power of the executant to register the document, the party to which the interest is conveyed can also have it compulsorily registered. Obviously, the category under which an instrument falls cannot be affected by the mere absence of registration, if the document is otherwise fully dispositive in character and duly executed. Obviously from what we have adverted to above, the Full Bench AIR 1969 Mad 1 has given importance to the execution of the document, which will transfer the property or the right contemplated under the instrument in question. But, considering the definition of execution in the Stamp Act, the Full Bench was prepared, we would say, to extend the scope of the definition executed and execution to include the signing or the signatures of not only the parties, but also the attesters, if the document requires attestation. But, the Full Bench decision of the Andhra Pradesh High Court did not go to this extent.
the Andhra Pradesh High Court said that the decision reported in AIR 1953 Mad 764 is not good law.
22. We may also refer to the decision reported in AIR 1963 SC 1307 (New Central Jute Mills v. State of West Bengal) wherein the Supreme Court has said that "primarily, the liability of an instrument to stamp duty arises on execution". We may also refer to the following observations of the learned Judges in the decision reported in A-1R 1969 Mad I, with reference to the earlier Full Bench decision of the same court (AIR. 1953 Mad 764).
"The real question is, did the case in AIR 1953 Mad 764 (FB) purport to decide that, even though a document is otherwise COMplete as a conveyance, or a deed of mortgage, and the recitals therein fully transfer the relevant rights in the property, it is still not liable to stamp duty, either as a conveyance or as a deed of mortgage, purely because it has not been registered."
True, the Full Bench (AIR 1953 Mad 764) observed at the end of the judgment that "The very difference between the definition of an agreement in Section 2( 14) and a mortgage deed in Section 2( 17) should show that the transfer provided for in Section 2( 17) is a transfer valid in law, to make a document liable to stamp duty as a mortgage deed, it is not enough if the document purports to effect a transfer. It must transfer". This observation of course, would indicate that a purported transfer without satisfying the legal requirements will not attract the liability of stamp duty. It will be an erroneous understanding and interpretation of the judgment based on a truncated portion of the judgment not taking into account the various features of the document in question adverted to by the Full Bench and further, we have to hold that if what is stated in the quote above is the ratio of the decision and the dicta laid down in that decision; we respectfully disagree.
23. The later Full Bench said that such an interpretation is not warranted and would definitely do violence to the reasoning and intention of the earlier Full Bench, to arrive at the ratio of the decision. The later Full Bench AIR 1969 Mad 1 observed (at page 4):
"It would be an erroneous principle of interpreting the judgment, to press into service the last few observations alone, divorced from the earlier dicta and the explicit fact that the learned Judges were dealing with a document, which could not be a 'mortgage deed' at all, because it was not attested by two witnesses, as the law, requires. Clearly, what the learned Judge meant was that, where the document contained recitals of disposition creating a transfer of rights, by the very force of the recitals between the parties, and it has been completely executed the requirements of the law being satisfied in that respect it must be interpreted as actually transferring the rights, and hence, as amount ing either to a conveyance or a mortgage deed, as the case may be. But, where this execution is incomplete, even if the recitals purport to transfer rights, the document cannot come tinker, the category of a 'mortgage deed' as defined in law. The learned Judge explicitly observed 'Leaving aside the question of registration of an insufficiently stamped document in the earlier passage."
We see no reason to disagree with the decision reported in AIR 1969 Mad 1 (Chief Cont.
Rev. Authority v, Canara I & B Syndicate) and with great respect, find no good reason stated by the learned single Judge to disagree with the decision reported in AIR 1969 Mad 1.
24. Now we shall advert to the decision reported in AIR 1968 AP 213 (Hazrami Gangaram v. Kamlabai). This is a Full Bench decision consisting of five judges P. Jaganmohan Reddy, C. J., Basi Reddy, Chandrasekhara Sastry, Anantanarayana Ayyar and Krishna Rao, JJ. This was also a case of a document which was purported to be a mortgage. There was: some controversy as regards the real character of the document. In short, what was considered on this aspect of the matter was whether the document was a mortgage within the meaning of Section 2(17) of the Act. After referring to the relevant provisions of the Stamp Act 'and also the Transfer of Property Act and the Registration Act, the court said for the purpose of the Stamp Act, the crucial time for determining whether an instrument chargeable with duty and is duly stamped or not is before or at the time of its execution, and no other formalities under any law need be satisfied. In considering this question, the court further said, there is no warrant for the importation, of the requirements of either of the Transfer of Property Act or the Registration Act to construe documents or instruments under the Stamp Act as the latter Act itself specifically defines the terms used therein. It is pertinent to quote the following passage from this decision.
"To hold that an instrument must be a valid one under law before it is liable to stamp duty will be to ignore the requirements of the definition or to make them otiose. Further, if the document required registration for legal validity before it can be considered whether it is liable for stamp duty or not, then the Registrar cannot impound it before registration; though he is so authorised under Section 33 and under Section 35 unless an instrument is duly stamped, it cannot be registered or received in evidence. In other words, the definition and the terms of every section of the Act indicate clearly that a'n instrument need not be valid in law or meet the requirements of law as a valid document before it is chargeable to stamp duty under the Act."
25. 'We are of opinion, when the Full Bench of the Andhra Pradesh High Court said that an instrument need not be valid in law or meet the requirements of law as a valid document, only indicates that it is not a document of a particular category or character, which is enforceable in law. We say so, because if a document is per se invalid, on account of the fact that it has not been properly executed, it cannot be said that even though it is not a valid document in law, stamp duty has to be paid. When a document is executed and that document requires further formalities to be complied with, like registration for making it an enforceable document, it cannot be said that it is not a valid document, for the purpose of stamp duty. A document can be a valid document, but it may not be an enforceable document.
All valid documents at all times, may not be enforceable. Nevertheless, they may retain the character or be included in the category of the document in question and perhaps, continue to be a valid document. It is informative to note that in. Burma, formal documents written on palm leaves are by custom treated as completed documents and admitted in evidence, though not signed. But under Section 2( 12) being unsigned, such documents will not be liable to stamp, duty as they are not executed. Thus it has been held by a Full Bench of the Burma Chief Court in Inre. Chet Po. 22 Ind Cas 75 : AIR 1914 Law Bur 219 (FB) that an instrument chargeable with stamp duty on being executed is not liable to duty until it is signed, although this fact does not necessarily imply that the unsigned document is incomplete for the purpose for which it was drawn up. Again in AIR 1936 Lah 449 (Shams Din v. Collector, Amritsar) a special bench of the Lahore High Court held that the intention behind the definition given under Section 2(12) of the Stamp Act was to make it clear at what time, a document became executed so as to be chargeable with stamp duty under Section 3 of the Stamp Act. Coldstre'am, J. delivering the judgment of the Bench said at page Lah. 451 :
"Signature alone will not, in all cases, complete the execution of a document for the purpose of giving it legal validity, for instance a will may not be legally executed until it is duly attested by witnesses, a Hundi is not executed until it is delivered (See (1895) II R 19 Bom 635), but for the purpose of Stamp Act, the clause makes all documents which are chargeable as soon as they are signed by the executant."
26. The Full Bench of the Andhra Pradesh High Court in AIR 1968 AP 213 very clearly observed that they cannot agree with the decision reported in AIR 1953 Mad 764. What is stated as the opinion of the Full Bench is apposite.
"In the view we have taken, we must, with great respect, dissent from the views of the eminent Judges of the Full Bench of the . Madras High Court in Crompton Engineering Co's Case AIR 1953 Mad 764 (FB) before whom the several aspects to which we have referred, were not argued, nor were they otherwise considered -- and held that for the purposes of the Stamp Act, the crucial time for determining whether an instrument chargeable with duty is duly stamped or not, is before or at the time of execution, and that apart from its execution, no other formalities under any other law need be satisfied."
27. We may also refer to the decision reported in AIR 1973 MP 172, which has been relied on by the learned single Judge in 1988(2) KLT 433. In this decision, reference is made to the decision reported in AIR 1953 Mad 764. But, it has to be noted that the Court found that the document in question is not a lease as defined in the Stamp Act, and so, no stamp duty is payable. This is a vital distinction. In considering the question of payment of stamp duty, of course, the learned single Judge has referred to the decision reported in AIR 1953 Mad 764, and respectfully followed the decision. However, we feel that this decision (AIR 1973 MP 172) is of much assistance to resolve the question now raised before us.
28. Now we feel that we are obliged to refer to the decision reported in 1974 KLT 301. The ratio of the decision is stated very clearly thus :--
"When once the transaction is defined in the Act itself it is not permissible to go outside the provisions of the Act and search for a definition of the very same term in some other statute. In as much as the expression 'lease' has been defined in the Act the Court below was right in holding that the definition of "lease" in the Transfer of Property Act or for that matter in any other statute cannot be of any assistance. Being a taxing statute if a particular transaction is hit by the provisions of the statute the person concerned cannot escape liability by pressing into service provisions of other statutes."
29. The observations contained in 1988(2) KLT 433 really conflicts with the ratio of the decision (Kochunarayanan v. Aravindakshan) (1974 KLT 301), quoted above. We do not see any good reason to disagree with the ratio of the decision reported in 1974 KLT
301.
30. In view of what we have discussed, with great respect, we dissent from the view taken by our noble and learned brother, Justice Radhakrishna Menon, in 1988(2) KLT 433 and we hold that the law laid down in Gopalan v. Chellappan is not good law. In the result, the Civil Revision Petition is dismissed. No order as to costs.