Allahabad High Court
Indian City Properties Ltd. vs State Of U.P. And Others on 27 January, 2023
Author: Rohit Ranjan Agarwal
Bench: Rohit Ranjan Agarwal
HIGH COURT OF JUDICATURE AT ALLAHABAD Court No. - 10 Case :- WRIT - C No. - 33896 of 2001 Petitioner :- Indian City Properties Ltd. Respondent :- State of U.P. and Others Counsel for Petitioner :- Anil Sharma,Raj Mohan Saggi,Shrey Sharma Counsel for Respondent :- C.S.C.,L.P.Tiwari Hon'ble Rohit Ranjan Agarwal,J.
1. Heard Sri Anil Sharma, learned Senior Counsel assisted by Sri Shrey Sharma, learned counsel for the the petitioner and Sri Ajay Singh, learned Standing Counsel for the State.
2. This writ petition has been filed assailing the order dated 05.07.2000 passed by the District Magistrate, Kanpur Nagar imposing deficiency of stamp duty amounting to Rs.51,67,490/- and penalty of the same amount totaling Rs.1,03,34,980/- in proceedings under Section 33/47-A of the Indian Stamp Act and the order dated 24.08.2001 passed by the Chief Controlling Revenue Authorities, UP, Lucknow dismissing the revision of the petitioner.
3. The case, in brief, is that the petitioner is a registered company incorporated under the provisions of the Companies Act, having its registered office at Thapar House, Calcutta. On 19th June, 1944, an indenture was executed between the Company and Lala Karam Chand Thapar and B.M. Thapar, the trustees which was registered with the Sub-Registrar. Through this indenture, the company borrowed a sum of Rs.7.5 lakhs on issue of bearer debentures carrying interest @ 5% per annum. The money was secured through the properties mentioned in Schedule-II of the indenture, which were referred as mortgaged premises. A supplementary indenture was entered between the parties on 08.12.1955, and properties mentioned in Schedule-II of the original trust deeds were substituted by the properties mentioned in Part- II of the supplementary deed.
4. The company, thereafter, executed deed of release and re-conveyance on 22.11.1999. The properties which were situated in State of U.P. was released and re-conveyed through this deed, and a stamp duty of Rs.210 was paid. The Sub-Registrar, on 25.11.1999, submitted a report and pointed out that deed in question was in fact, the sale deed and a stamp duty of Rs.51,67,700/- was attracted. A notice was issued to the petitioner on 05.01.2000, pursuant to which, objections were filed on 29.02.2000. The District Magistrate in proceedings under Section 33/47-A rejected the objections of the petitioners and held a deficiency of Rs.51,67,490/- and also imposed a penalty of the same amount, totalling Rs.1,03,34,980/-.
5. Aggrieved by the aforesaid order, a revision was preferred before Chief Controlling Revenue Authority which was dismissed on 24.08.2001, hence the writ petition.
6. Learned Senior Counsel submitted that both the authorities were not correct to hold that the release and re-conveyance deed of 1999 was a transfer, in fact, it was the release of the mortgaged property by the trustees when the money was paid. According to him, the District Magistrate wrongly held that the words used in para 4 of the Original Trust Deed mentioning the words conveying, transferring and assigning the property mortgaged to the trustees was not in fact a sale, but the assignment was subject to the provisions of redemption. According to him, the stamp duty would be attracted as per Article 54 of Schedule I-B of the Stamp Act applicable in the State of U.P. He then contended that the authorities had misread the original deed of 1944, and also supplementary deed of 1955. From the reading of both the deeds, it is clear that mortgage will be redeemed upon the payment made by the company.
7. Per contra, learned Standing Counsel submitted that the District Magistrate was right in holding that it was a sale deed, because the original deed of 1944 has used the words conveyance, transfer and assignment, which is covered under Article 23 of Schedule I-B of the Stamp Act as applicable in the State of U.P. He then contended that the properties which were transferred to the trustees in the year 1944 and thereafter, by supplementary indenture of the year 1955 were re-transferred through sale in the year 1999, and attracted stamp duty.
8. I have heard the counsel for parties and perused the material on record.
9. The question which needs adjudication by this Court is as to whether the indenture which was entered between the parties on 19.06.1944 and by a supplementary indenture dated 08.12.1955, certain properties mentioned in Schedule-II of the original deed were substituted by another set of properties, would after a release and re-conveyance deeds executed on 22.11.1999 would attract stamp duty holding it to be a sale.
10. Before adverting to decide the issue in hand, a cursory glance of some of the provisions of the Indian Stamp Act, 1899 is necessary for the better appreciation of the case. Section 2(10) of the Act defines "Conveyance", and Section 2(14) defines "Instrument", which are extracted hereasunder:-
"Conveyance".- "Conveyance" includes a conveyance on sale and every instrument by which property, whether movable or immovable, is transferred inter vivos and which is not otherwise specifically provided for [by Schedule I, Schedule I-A or Schedule I-B], [as the case may be];
[Explanation.- An instrument whereby a co-owner of a property having defined share therein, transfers such share or part thereof to another co-owner of the property, is for the purposes of this clause an instrument by which property is transferred];
"Instrument"- "Instrument" includes every document and record created or maintained in or by an electronic storage and retrieval device or media by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded."
11. Similarly, Article 23 and Article 54 of Schedule I-B as applicable to the State of U.P. are extracted hereasunder:-
"23. Conveyance [as defined by Section 2(10) not being a Transfer charged or exempted under No. 62-
(a) if relating to immovable property where the amount or value of the consideration of such conveyance as set forth therein or the market value of the immovable property which is the subject of such conveyance, whichever is greater does not exceed Rs.500.
Where it exceeds Rs. 500 but does not exceed Rs. 1,000 and for every Rs. 1,000 or part thereof in excess of Rs. 1,000.
(b) if relating to movable property where the amount or value of the consideration of such conveyance as set forth therein does not exceed Rs.1,000.
and for every Rs.1000 or part thereof in excess of Rs.1000.
Exemption Assignment of copyright in musical works by resident of, or first published in India.
Explanation For the purposes of this Article, in the case of an agreement to sell an immovable property, where possession is delivered before the execution or at the time of execution, or is agreed to be delivered without executing the conveyance, the agreement shall be deemed to be a conveyance and stamp duty thereon shall be payable accordingly:
Provided that the provisions of Section 47-A shall mutatis mutandis apply to such agreement:
Provided further that when conveyance in pursuance of such agreement is executed, the stamp duty paid on the agreement shall be adjusted towards the total duty payable on the conveyance."
54. Re-conveyance of Mortgaged Property-
(a) if the consideration for which the property was mortgaged does not exceed Rs. 1,000
(b) in any other case Sixty rupees.
One hundred and twenty-five rupees.
One hundred and twenty-five rupees.
Twenty rupees.
Twenty rupees.
The same duty as a Conveyance [No. 23 clause (a)] for the amount of such consideration as set forth in the Re-conveyance.
[The same duty as a Conveyance [No.23 clause (a)] for Rs. 1,000.]"
12. Chapter IV of Transfer of Property Act, 1882 (hereinafter called as "Act of 1882") provides for mortgages of immovable properties and charges. Section 58 defines the word "Mortgage", while Section 58 (e) defines "English Mortgage". Section 60 provides for right of mortgagors to redeem. Relevant paras Section 58 (a), (e) and Section 60 are extracted hereasunder:-
"58. "Mortgage", "mortgagor", "mortgagee", "mortgage-money" and "mortgage-deed" defined.--(a) A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being arc called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage-deed.
(e) English mortgage.--Where the mortgagor binds himself to repay the mortgage-money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an English mortgage.
60. Right of mortgagor to redeem.--At any time after the principal money has become 9 [due], the mortgagor has a right, on payment or tender, at a proper time and place, of the mortgagemoney, to require the mortgagee(a) to deliver 10 [to the mortgagor the mortgage-deed and all documents relating to the mortgaged property which are in the possession or power of the mortgagee], (b) where the mortgagee is in possession of the mortgaged property, to deliver possession thereof to the mortgagor, and (c)at the cost of the mortgagor either to re-transfer the mortgaged property to him or to such third person as he may direct, or to execute and (where the mortgage has been effected by a registered instrument) to have registered an acknowledgement in writing that any right in derogation of his interest transferred to the mortgagee has been extinguished: Provided that the right conferred by this section has not been extinguished by act of the parties or by 11[decree] of a Court. The right conferred by this section is called a right to redeem, and a suit to enforce it is called a suit for redemption. Nothing in this section shall be deemed to render invalid any provision to the effect that, if the time fixed for payment of the principal money has been allowed to pass or no such time has been fixed. the mortgagee shall be entitled to reasonable notice before payment or tender of such money.
Redemption of portion of mortgaged property.--Nothing in this section shall entitle a person interested in a share only of the mortgaged property to redeem his own share only, on payment of a proportionate part of the amount remaining due on the mortgage, except 1 [only] where a mortgagee, or, if there are more mortgagees than one, all such mortgagees, has or have acquired, in whole or in part, the share of a mortgager."
13. From the reading of definition ''Conveyance' and ''Instrument', it is clear that indenture which was entered in the year 1944 (original deed), a right was created in favour of the trustees on money being lent out to the company to the tune of Rs.7.5 lakhs, for which debenture carrying an interest of 5% was issued by the petitioner company. Through, instrument executed on 09th June, 1944 and thereafter, supplementary indenture entered between the parties on 08.12.1955, the right over the property mortgaged by the petitioner company mentioned in the schedule was created in favour of the trustees.
14. Section 58 (a) of the Act, 1882 clearly provides that a mortgage is the transfer of an interest in specific immovable properties for the purpose of securing the payment of money advanced or to be advanced by way of loan, existing on future debt, or the performance of an engagement which may give rise to the pecuniary liability.
15. Mortgaging of the properties mentioned in IInd Schedule of indenture of original deed which were substituted by the properties mentioned in Part II of the supplementary deed of 1955 by the petitioner binds him to repay the mortgaged money. The mortgage of property with the rider that it will be re-transferred to the mortgagors upon payment is a transaction called as ''English Mortgage' defined under Section 58 (e). Para 4 of the indenture of 1944 clearly provided that petitioner conveys, transfers and assigns unto the trustees, the land specified in IInd Schedule. The trustees were to hold the properties mortgaged subject to proviso for redemption contained in the indenture. Thus, the transaction entered between the parties on 19.06.1944 was an ''English Mortgage', and when the re-payment was done by the company, reconveyance deed was executed on 22.11.1999 for releasing the properties so mortgaged.
16. Section 60 the Act 1882 clearly provides the right of mortgagors to redeem at any time after the payment of money.
17. The word "Indenture" used in the deed executed in the years 1944 and 1955 means the formal agreement, contract made between the contracting parties. The terms mentioned in the indenture/agreement bind the parties. While, dealing with the document by the stamping authorities of the State, the intention of the document has to be given primacy.
18. Both the authorities wrongly arrived at a conclusion that reconveyance deed of 22.11.1999 was in fact, a sale deed and through the document, property was being transferred by the trustees to the company. Both the authorities lost sight of the fact that indenture of 1944 clearly provided that through the document which was executed between the parties, certain rights were being transferred to the trustees by the company for the loan which was extended and the trustees held over the property, which was subject to right of redemption to be exercised by the mortgagors.
19. Article 54 of Schedule I-B of the Stamp Act, as applicable to the State of U.P., provides for the rate of stamp duty to be paid for reconveyance of mortgaged property. The stamp duty has to be charged as per Article 54 of Schedule I-B.
20. In M/s Hero Motors Ltd. Vs. State of U.P. 2009 (1) ADJ 569, this Court while considering the impact of Section 2 (10) and 2 (14) and Article 23 of Schedule I-B in matters relating amalgamation of one company with another held that a scheme of arrangement involves transfers of business. The consideration of a transfer under scheme of arrangement would be the shares allotted by the transferee company to the shareholders of the transferrers company. The valuation of shares would, therefore, be the consideration upon which stamp duty would be payable at the rate provided for conveyance of movable properties.
21. In the present case, through indenture of 1944, the loan which was extended to the company by trustees was secured by mortgaging properties of the companies mentioned in Schedule II. Once, the repayment was made by the mortgagors, the company had right of redemption of mortgage and, thus, the reconveyance deed was rightly executed on 22.11.1999 for reverting back the property to the petitioner company by the trustees.
22. The loan which was extended carried a 5% interest payable on the debentures issued by the company in favour of the trustees. Findings recorded by both the authorities to the extent that reconveyance deed was a sale deed is totally alien to the concept of mortgage and right of redemption.
23. The language of indenture is clear and no meaning can be assigned to it, except that loan was extended to petitioner company which issued debenture carrying 5% interest and on redemption, the property mortgaged in favour of the trustees was to be released.
24. The imposition of stamp duty on the reconveyance deed dated 22.11.1999 holding to be sale deed is unsustainable in the eyes of law, and the orders passed by the District Magistrate dated 05.07.2000 and by the Chief Controlling Revenue Authority, U.P., Lucknow dated 24.08.2001 are hereby set aside.
25. Writ petition succeeds and is, hereby, allowed.
Order Date :- 27.1.2023 SK Goswami