The Indian Stamps Act,1899

[Cites 453, Cited by 0]

Law Commission Report

The Indian Stamps Act,1899

LAW COMMISSION OF INDIA

SIXTY- SEVENTH REPORT

THE INDIAN STAMP ACT, 1899

February, 1977

P._B, GI-i'.=D-dragadlcar
CHAIRMAN.
LAW COMMISSION ' T
GOVERNMENT OF INDIA
12, TUGHLAK ROAD,
NEW DELI-II-11 '
, March 1, 1971
Minister
great pleasure in forwarding herewith the sixty--seventh Report of the Commission
' lliéilildian Stamp Act, 1899.
Z _ the iirst Chapter indicates, the Law Comruissiom, span after its initial constitution, had

_ _ ,__ that it would revise the Stamp "Act. However, since the Commission was then
°' with other subjects of an urgent nature, it could not take up the work of revising

- Act, as announced. Thereafter, that announced 'plan has remained unimplemented

the present Commission submitted its l_lepor_ta on», topics, which it thought were
it felt that the earlier announcement nude by the ﬁrst Dommission should be
'out and athorough study of the Stamp Act indie iriih a view to make suitablereeuim

ngntﬁﬁons for amendment in regard to its provisions.

the whole Act was carefully examined, and question pertaining to its
particulars was considered and the and cons of every recommendation

discussed.

,lti"_order to facilitate the 'formulation of its ﬁnal recommendations, the amt
a_ _ 'e to persons and institutions interested in the problem, and the replies eeeeined
by it in response to its Questionnaire have been carefully examined; Besides, some suggestions
gtiig amendments in the Act had already been received; these also have received careful

by the Commission.

the Commission has decided to makeetbe reoomjliendations indicated in the 'I'?.ep'ort.

:;f.*e¢ _
' I hope, will speak for itself. But, I would iihrlgq unntion some irnpostant amend-

elm
to improving its working. _

'p1@s|u°yT _ notes' and 'policies of insurance' '- ' 'r'1:ain'problems ant!'the'CoIrm Mend' T
to solve them by suitable redrafting tin: ,

discus' sion of the entire problem in its broad pe1:specive, examnnn' ' g its I

the Commission has recommended in order and. rationalise thelelv.

: exatnination of the Act, the Commission }hat:*tl:e_cIe_fi_t1itions of 'hiils of _,

(in

It is obvious, that in an Act, like the Stamp Act, provisions relating to the mode of denoting
payable duty are of considerable relevance in their proper collection. Bearing this principle in
mind, the Commission has made suitable recommendations to provide for consolid,au'on_ of dntim
on certain instruments not covered at present and also for the use of the fraiilringlnlachines.
These amc_nd.men1n, it-is hoped, will simplify the machinery of collection and pave the way

for its modernisation.
_ 4'

In regard to the meaning of the expression 'bond', the Commission found consideratm,
uncertainty which appeared to cause inconvenience not only to the tax-payers, but also. in "'
some-cases loss to the revenue and in many cases unnecessary waste of valuable judicial time.
The Commission believes that the recommendations, which it has made for the amendment oi
this part of the Act, will, to a large extent, rationalise the position in that behalf. T

It is plain that in the Stamp Act where the important and indeed vital matter _pert_:'_ms no '
the person who is liable to bear burden of duty vi':-a_vz's Government. The present prmisions _
insections 3, 29, 4.t].and 48 are somewhat sketchy and incomplete and the diverslty}ot.
opinion in respect of the import of these provisions appeared to _the Commisﬁon to weakirn, the _
very foundation of the authority of the State to recover the deﬁciency in stamp duties
the person, on whom.the liability is imposed, remains substantially undeﬁned and therefore

nnitlentiﬁed. After careful Study of the 't1'ue ji_1ristic position inthis matter and the views expressed -

by several judicial decisions, the Commission has recommended a solution which attempts I-to state
thefposition in a clear, compact and ei1dily_inteI|igib1e manner. - ' - _ ' Kr' ;~ ' .

'It is clear that if the proper.duty prescribed by the Act is not paid, the Act must
for a suitable penalty. To some extent, however, the penalty provision prescribed by seétion____

-- .35 has.;by»reason of, its drastic character, proved to be unrealisticin its working. 'I1it-.y. Com-
___mission's recommendation for amending provision, in one sense, liberalises the to
.--some extent but would. according tocthe Commission, ultimately facilitate better enfo_rcemt,a';tt_ oi

the Act. .

_t'nents__ to "grant concessions and r'_eductio_ns stamp duty. a virtual plethora or m
emerged.' Some or "these oosiiootiooshro-or gioot importanceflu on areafof
according to the Commission, the Act itself should incorporate exemptions"rath¢ti'

it to the rules and orders which, as is well-known, are not easily available to the public.

Commission has recommended it few ataﬁlldments which proceed on this' The _
recommendations relating to thoremisvsioll in regard to bills of exchailge .

The Commission noticed that, by of the power conferred on the appropriate Gﬁ'ern-

notescan be cited as instances in point.- if '

mission in the hope that Government will appreciate the magnitude and urgencyhfi

- Report. _

_. ' 5_ l I ll', . _ - I _f ;' 1'. ' '__[i!_[J' ''_{;:'_E'
I have deliberately mentioned some of the signiﬁcant recommenda1i.0ns._tII3!1ﬁl .r.

c.--'

and will soon undertake legislation on the lines recommended by the Commission it: oh _ .
e ' ' ' ' ' "-5 -..-:33.
I 'Let me"a'tld in g thede' lroeommj ' endatioiis we have a'vo'~ided..to
In any substantial manner bemuset we thought that the question about theﬁxation at C"
tntes a question of policy on which the would not like to and I

1 «: -'
« its

;'.i"' C

Before concluding, I would like to the Commission
1971, it has forwarded twenty-three reports} (numbering forty-ﬁve to sixty-seven)" the

present one ; and after the present Coprmksion was re--constituted in September 19?4. it ha: _
forwarded seven Reports including the present one. ' c

_ Having regard to the_m:_tny proble we_ faced in 1'_cvising the present 1
surprising that' the Report extend; ov" ' typeand _

(iii)
' In the end, let me repeat the suggestion which I have already made on two or three
previous occasions that, after the Report of the Commission is printed, copies of the report
should be circulated to the relevant academic and professional institutions so that it may stimulate

a debate on the questions considered by the Commission and that, in turn, may assist Govern-
ment in coming to its own conclusions on the relevant recommendations made by the Commission.

Wit]: warm personal regards,
Yours sincerely.

Sci]-
(P. B. GAIENDRAGADKAR)

.H0n'ble Shri H. R. Gokhale,

Minister of Law, Justice & Co. Aﬁairs,
t of India,

Sllliiri Bhavan,

New Delhi-110001.

REPORT ON 'I'HE INDIAN STAMP ACT, 1899

CHAPTER I
GENESIS OF THE REPORT

"L1. This Report relates to the Indian Stamp Act, 1899 which is a ﬁscal enactment of daily
importance to the citizens. A proposal for taking up'the Act for revision was announced by

Importance of
the Act

the Law Commission soon after its initial constitution'; but, somehow, this work was not taken a i

143 because the Commission was busy with other subjects. When the Connnission was reconstituted
in 1971, its terms of reference were widened, and revision of laws in the light of directive
principles was included within those terms.

Having dealt with several laws which were of importance from the point of view of directive
ttinciplie, the Commission took up the Stamp" Act. Meanwhile, on several occasions, sugges-
tioigﬁlhave been received by the Commission from various sources, for considering amendments
in sections of the Act. Those suggestions have been duly taken into account, as also

i received to our Questionnaire, in making thelrecommendations contained in the

.-F

.i'

Chapters.
l.'2. Of the corresp-onding_English Act, it has been stated by one reviewer"'--

"Of all the branches of revenue law, none, in -the experience of your reviewer, is
one-half so dull as stamp duties ; and there is none on which it is more diﬂioult
to express an opinion with any degree of certainty. The reason in each case is
that this subject has no underlying principles ; it springs basically from the Sche-
dule to the Stamp Act, 1891, which was accurately described by Lord Reid in
Inland Revenue Commissioners v. Henry Ansbaeher and C0,, (1963) A.C. 191,
204, as 'a mere conglomeration of unco-ordiniited provisions.' " '
shows the diﬁiculty of revising the Act.' '

.-
'.2';

_ Before we proceed to mention the broad lines on which revision of the Act could
Ta 'considered, we think it necessary to deal with certain preliminary questions, not
' way of introduction but also in order to draw attention to the constitutional position

i g legislation in respect of stamp duties, and other aspects of importanceii. -

T _'ls3:A. Stamp duties, as is evident from the Act, paid by a stamp, either

. irnpresaed, or, in some cases, adhesive, to the instrument required to be stamped. Under section

3, it is the instrument which is chargeable with duty. It follows, therefore, that it a legal
__ can be effected orally, no stamp is required, because there is nothing to which the
l be aﬂixed, and because the charging section levies a "duty on an irtstrnment only.
, therefore, it would be correct to say that "the which is made liable 'to duty is
en 'f,--as was observed with deference to 'the ,iEI1gl'ish law by Lord EsherMISR*
H _V' View was expressed by Rowlatt, .I.----_ia authority in tliailon law'
._ H' reiterated in the House of Lord". ' T i

r'. i';nrs5xr..c. 11 (Notes) (Note dated ms May,.'l95T); it. 3(s'aIL.c. 11. s. No. 1.

2. Booirrcview of Farrand. Stamp duties for the Conveynnaar (!963),lO7gSolicitors' Journal, 849.

3. SI!-rhcussion as to 'lines of revision', i.q,r'i'a.

4'. theme! Revenue Comma-sinner v. Angus. (1839) 23 Q. B. Div. 579, 583.

5. .ﬂl-n'Lrd., v. LR.C., (.1933) 1_ K3. H3, 179; 148 LT. I64, I66."

5. auutmur v. 1.12.6'. (1950) A.C. 205, 227, 231, 233; 1959 3 w.r..a.s9s, _ 399. 904, 910; ass-min; (1953) 2 All

"E3. 443.

Nature of

Stamp laws.

Intlglﬂuion of.

Sunet for the-

pma§l_urt

Inrnqrcuaioa.

2
This is what Rowlatt J. observed :--

"The Stamp Act deals not with 'the commercial eﬁect of the transaction,

but deals
with the vehicles ; and you look at the vehicle to see what it does." '"*

In the House of Lords, it was stated :--

"Yet the law with regard to liability to stamp duty is clear enough. The duty is
cliarged upon instruments, if they exist and cornc within any of the categories
prescribed by the Act."

"It is not charged upon transactions. Thus, property such as chattels"; by
law pass on delivery, can be transferred from one owner to another
attracting duty. Again, though "an agreement for sale may_be c1lige$b_ id
valorem, since the Act has so required, an oral agreement for the sale; of, '_ W' 'V
involves no charge to duty because no instrument is brought into itxis i
eﬁect or to record it.1". ' ' ' -

. f't6.
ti?' "fl _;
1.4. It is also well-established that if the charging provision does not, on a; : ,_;.
truction, apply to the particular instrument, then duty is not ieviablaa At the sanie; " _ j
charging provision applies, then duty is, leviable unless, of course, the citizen can bring
within a speciﬁoexception. About hundred and forty years ago, Taunton 1., out'
that "the law upon the subject of "stamp is altogether a matter posirivi iurrls. It invdves
of principle or reason, but dcpends altogether itpon the language of the Iiegislatitd."

1.43;. One of the major sanctions forensuring that instruments are duly '8
provision' that an unstamped document isnot to be admissible except in ﬂf
well established also that if a document is. not admitted for want of stamp duty;
evidence of its contents---even where otherwise permissible under the law of e" ' _
be given, and this shows the importance of the Stamp Act, not only as a measure cf ﬁscal-"I
legislation but also in relation to judicial proceedings. _ _'

1.5. Usually, legislation relating to shtmp duties has to provide for several ti.
detail as well as of substance. It is not at this stage to enumerate all T _ se
or even to analyse them. But it would be useful to point out here that such 1 _ "' _
indeed, any taxing statute----usual1y comprises two broad categories of proviﬁqrp, 1
charging provisions and macliincry provisions. The charging provisions lay ' "
of tax, while the machinery provisions; create the machinery and lay down
the assessment, collection and refund ofthemx. This distinction has not :ne1'B1! ._ 1 _ E
interest, because, under the Constituﬁ'on5,§ the legislative power i
(at) rates of stamp duty, and (b) stamp dunes. In the ensuing discussion. pmvisitms
to stamp duties other than the rates of"-starfnp duty will-be referred to as machinery
forthesalceofoonvenience. ' ' e "'-E"!

1.6. Principles for the intcrpretationpf stamp 13W-S f1T¢ l'J_1'D9-d1_l' 5.3319.
the interpretation of other taxing statutes, np.mely,_ an ambiguity m_ a charging prof t' e
narily resolved in favour of the citizens, but where the citizen claims the -f .
tion, he has toybring himself within it. major diﬂiculty which the "I -
construing the Stamp Act---apart' from those attributable to defective'draEti.ug:
arise out of the fact that often there is,no irational principle forming the'ha§s':of'
duty on a par1:icul/er document or the a' higher rate of duty on a -=' ' -' h *
contrast with smaller duties leviet] on other analogous documents.

I. {I957} 3 W.L.R. 898. 901 (I-I.L.'J per Lord

2. Gurr v. Scuddy, 11 Ex 190, 191 (Lord ChiefPolloch).
3. Morley v. Hull, {l834)2 Dowl. 494, 499. 49?. - '

4. Section 35. '

5. See mfra.

' - 3

1.17. The idea of raising revenue for the State from the transactionsof its citizens originated History of-
in Holland'. The first stamp law was passed in Holland in 1624. In England, it was ll1'5t ""1111? d'-"1°'-"'..-.--
adopted under Charles II but, under the reign of William and Mary, it assumed a definite shape I
and thereafter various statutes were passed requiring stamps on various instruments among the
English people".

1.8. In India, the ﬁrst stamp law was Regulation 6 of 179?, which was limited in its 5,,-3,!" D",-Q
extent to Bengal, Bihar, Orissa and Benaras. Various stamp Regulations were subsequently i]§t_Eli't1§;?_-'T13!
introduced in the sister provinces of Bombay and Madras. mm

By sections 16 and 2] of the Bengal Regulation 6 of 179?, all written obligatiorg, "except.

Bills of Exchange above Rs. 50 in value, were made chargeable with ad valorem duty, ranging

Viom four annas to one rupee. With a few exceptions, all other instruments as well as all

' copies" were made chargeable according to the quantity of matter engrossed on the stamp paper

(the stamp paper varied in size and value, from two annas to one rupee). The immediate

occasion for tl1is Regulation was the abolition of the tax for the maintenance of police estab-
lishments, leviable on "Indian Merchants and Traders."

1.9. Although the stamp duties under this Regulation were primarily intended tocompensate. - ' '
for the deficiency in the public revenue occasioned by the abolition of the tax on merchants
etc., this Regulation paved the way for a series of later actments relating to stamp duties.
Regulation 7 of 1300 introduced a fresh set of provisions as to stamp duties, and it may be of
interest to note,' that for the ﬁrst time, a speciﬁc provision was introduced for stamping an - V
acknowledgement for the receipt oi money at the same rate as the rate prescribed for an
instrn _ t creating an obligation. The stamp duty on many other deeds was doubled, and
a-poo '_' n was also introduced to enable the holder of an unstamped document to get the

to stamp rectiﬁed, by presenting it to the Collector. To check the practice of forging '
of stnmjss, Regulation 13 of. I806, Regulation 'T of 1809 and Regulation 12 of 1810 made
I' additions or modiﬁcations regarding the sale and -auﬂientication of stamp papers.
~Certain changes were made by Regulation 12 of 1812, Regulation 16 of 1813 and various
other Regulations, passed from I814 to 1829.

In -Madras, Regulation 8 of 1818 (sections 9, ID and 11), mainly modelled on Bengal
Regulation 7 of 1800, contained the principal provisions as to stamp duties, followed by Regu-
lation. 2 of 1813 and Regulation 13 of 1816 as modiﬁed by Regulation 2 of 1825. '

In Bombay, the ftrst enactment relating to stamp duty was Regulation 14 of 1815. followed '"
by Regulations passed in 1327 and 1831. -

1.10. So much as regards the Regulations. In 186.0, the first Act relating to stamp duties stlﬁp an
liﬁct '10 of 1860) was enacted in India. _ It repealed all the existing Regulations. Prior to this in India.
Act. these had been some amending Acts", adding to the law contained in the Regulations. The
Stan1]§,Act of 1860 was amended the same year, and repealed and replaced by Act 10 of
taésa. The Stamp Act of 1862 was amended in 1355 and -1367, and was ﬁnally repealed (as

. regards stamp duties) by Act 18 of 1869. The last mentioned Actwas replaced by the Stamp
Act (if 1879 (Act I of 1879),' which was the immediate predecessor of the present Stamp Act.

Tie' Stamp Act of 1879, during its short numerous alterations (it was
9 times),'_. and was ultimately repealed by the sump Act, 1399, which contains the
present law on the subject. M .

1.11. During theperiod that has elapsed "since lﬂ99,5the Stamp Act" has been arnendetr _
several times. The most important amendments were made' in 1904, 1905, 1910, 1923, 1927, I 4. . --
and 1955. The last mentioned amendment is the most important from the point of view of' -
the territorial application of the Act. I t.

l. HLN. Basu, Indian Stamp Act (1954), page (vii).

2. Position in England in detail is dealt with, :2-tfra.

3. nct14or1s4o;Act9or1's42;.a.c:tsor1ss9. .- -

4. Act9 of 1381; Act 1 of H388; Act 5 of 1838; Act 18 of 1339,' Act 6 of 1339: Act 20 ofl390:Act12'oflB9l1-KC!
96of1B-4; Act 13 of 1897.

' etc.' Opposition to this legislative measure in the American c

'the.sevc1'al articles in its Schedule became

The introduction of decimal coinage in 1958 necessitated extensive amendments in the
Act'.
No comprehensive revision of the Act has, however, been attempted so far.

1.12. In England, stamp duties were ﬁrst imposed at the end of the 17th centuryi; they
are nowgoverned primarily by two Acts of Parliament, one imposing the dutiesi, and the
other making numerous administrative provisions*. But it should be noticed that the Stamp
Actsin England have been repeatedly amended by subsequent Finance Acts and Revenue

Acts, and some of these amending Acts expressly direct that the relevant sections shall be

read "togther wit " or as."one with" the Stamp Act, 18915.

The fundamental principle on which the English Acts are based is the same as in India,
namely, "the thing which is made liable to duty is an instrument''." Exemptions from duty in
England are not given by notiﬁcation, but are contained in the relevant Act. And, of course,
it need not be stated that if a document does not fall under any of the enumerated categories,
it is not liable to stamp duty. Examples of such documents in England are---aﬁidavits, awards,
bills of lading, coupons for interest, proxy for one meeting only, receipt for an amount less
than two pounds, share certiﬁcates and statutory declarations'.

1.13. It is well-known that one of the causes of the American revolution was the Stamp

Actcf 1765, introduced by George Grenville. The Act levied a duty on every "skin or piece

of vellum or parchment or sheet or paper", used for legal documents, commercial transactions,
olonies was so strong, that the

expenses of collection of the duty exceeded the revenue realised.

1.14. We may now turn to the constitutional position in India. At the time when the
Indian Stamp Act, 1899 r.' a Central enactment) was enacted, the duties levied under each of
part of central revenues, no part of it being speci-
A change was, however, introduced into this system byithe

ﬁcally allocated to the provinces.
Government of India Act, 1919, enacted :

Montlord Reforms of 1919. Section 45-A of the
"rt-S--A. (1). Provision may be made by rules underthis Act:

lb) for the devolution of authority in respect of provincial subjects
Governments and for the allocation of revenues or other moneys

Governments."
Devolution Rules were framed under this provision and rule 14(1) read:

"l4(1]. The follon-ing sources of revenue shall, in the case of Governors' provinces,
be allocated to the local Government as sourcés of provincial revenue. namely :-'-

to local
to those

(f) the proceeds of any taxes which may be lawfully imposed for provincial

purposes."
Schedule 1 to these rules cl
and Provinci-al-- ---Part 1 and Part 11 respectively

ran in these terms:
_ ".20, Non--jua'i'ci'al stamps, subject to Legislation by the Indian legislature . . . . . . . ."

assiﬁed subjects of legislative power into two heads, Central
. Item 20 'of Ban 11--List of Provincial subject:s--

1. -no radian Stamp (Amendment) AS}, 1953 (19 of 1953).
2. In 1964.

3. Sang: Act. 1391 (Enﬂand).

4_ -stuﬁ Duties Management Act, 1891 (England). . _
5. .l'u!UId "Revenue Commissioners v. Angus, 23 Queens Bench Division 5'r'9, 589 (Lord Eshcr, lv1.R.).
5 c__f_ ggction 1, Stamp Act, 1891 (England). ' -

1. The list is not exhaustive.

8. Eneyelopaedia Britannica, Vol. 2|, page 306.

Stamp Duniis
In England.

Hlslvo of
relevhnt

cons
pro ions.

Section 80--AI.'3) laid down the formal requirements with which the Provincial Legislatures
should comply before enacting these laws :

"SO-A(3). The local Legislature of any province may not, without the previous
sanction of the Governor-General, make or take into consideration any law (at)
imposing or authorising the imposition of any tax unless the tax is a tax sche-
duled as e:{e-rnpted from this provision by rules made under this Act ; or . . . . . . . ."

in pursuance thereof, the Scheduled Taxes Rules were framed which speciﬁed the taxes
which might be imposed by the provinces either for their purposes or for the purposes of local
authorities within them without the previous sanction of the Governor--General. In regard to
stamp duties, item 8 of Schedule I to these rules enabled provincial legislation without previous
sanction only in regard to------ '

"8. A stamp duty other than duties of which the amount is ﬁxed by Indian
legislature."

The result of this Scheme was that by virtue of the main provisions in section 80-31(3) [a],
th local legislature could legislate for the levy of stamp dutieson the instruments included in
the Stamp Act, 1899, only after obtaining the previous sanction of the Governor-General.
Seﬂféral Provinces took advantage of these provisions and enacted legislation on the subject
of stamps after obtaining the previous sanction of the Governor-General under section 80-A(3},
ruling the proceeds part of Provincial revenues and amending the rates of. duties imposed by
Schedule 1 of the Indian Stamp Act, 1899.

¢_',/""P.-15. The Government of India Act, 1935, effected a substantial" change in the law in Aggg['1935,
relation to stamp duties, carrying to its logical result the provision of the Devolution Rules and
ﬁmyngtice that prevailed thereunder. It also introduced a dichortomy, so far as the-. provinces

'were concerned, between the substantive law relating to the levy and collection of the duties
the machinery therefor on the one hand, and the rate of levy on the other hand. The
White Paper proposals started this cleavage by listing "Stamp duties which are the subject
of legislation hy the Indian Legislature at the date of the Federation" in the exclusively Federal
List I, and "stamp duties other than those provided for in List I" as a, source of Provincial
Revenue. This rather vague form received clariﬁcation in the report of the Joint Parliamentary
Committee. In their revised lists, "Fixation of. rates oﬂstamp duty in respect of bills of
exchange, hills of lading, cheques, letters of credit, promissory notes, policies of insurance,
proxies and receipts", was made exclusively Federal (Item 53 of List I), while "ﬁxing of
rates of stamp duty in respect of instrurnents other than those mentioned in item 53 of List I"
was put in as item 32 in List ll--~the exclusively Provimial List. The legislative power. to
enact Stamp Laws in general, as distinguished from the "ﬁxation of rates of duty", was assigned
to the Concurrent List (Item 10), which read "Law of non-judicial stamps, but not including
the fixation of rates of duty." These recommendations of. the Joint Parliamentary Committee
were adopted by the framers of the Government of India Act, 1935. The instruments men-
tioned in item 53 of List 1, set out above, were allocated to the exclusively Federal List I
(item 5":')--«-but instead of the words "ﬁxing of rates of stampduty", the expression "rates or
stamp duty" was used.

1.16. The Constitution of India followed, in this respect, the pattern of the Government 3_,*j;.ﬁ,._,,
of India Act, 1935. Entry 9] of the Union List reads: "rates of stamp duty in respect: oi': EnI1'i°I-
bﬂls of exchange, cheques, promissory notes, bills of lading, letters of credit, policies at.
insurance, transfer of shares, debentures, proxies and receipts", while Entry 63 of the State
List provides for legislation in regard to "rates of stamp duty in respect 'of documents other
thin those speciﬁed in the provisions of List I with regard to rates of stamp duty". Entry 44'_
of the Concurrent List deals with the power to make a law in relation to stamp duties as
distinguished from the rates of stamp duty in these terms. "Stamp duties other than duties
or fees collected by means of judicial stamps, but not including rates of stamp duty."

14 M of t.awz'7?----2

L17. The Constitution has a number of other provisions relevant to stamp duties-. Of
these, article 246 and the !~?eventl1 Schedule are relevant in regard to the legislative power to
levy stamp duties. Articles 265, 268 and 269(e) are relevant mainly as regards the distribution
of the revenues. The former is more important, for the purposes of a consideration of the
Stamp Act.

1.1%. Brieﬂy, the scheme provided for in the Constitution is as follows :

Present
constitutional
positron.

ta) Under article 246, such stamp duties as are mentioned in the Union List' are
levied by the Union, but, under article 268, each State in which they are levied,
collects and retains the proceeds (except in the case of Union Territories).

The documents are specified in Entry 91, Union List:

"91. Rates of stamp duty in respect of hills of exchange, cheques, promissory notes,
bills of leading, letters of credit, policies of insurance, transfer of shares, deben-
tures, proxies and receipts."

(b) Other Stamp duties are levied and collected by the States, by virtue of the legis»
lative entry in the State List, already quoted below' :-- _

"63. Rates of stamp duty in respect of documents other than those in the
provisions of List 1 with regard to rates of stamp duty." '

"44. Stamp duties other than duties or fees collected by means of judicial stamps,
but not including rates of stamp duty." '

. This entry deals with the general subject of stamps. Provisions other than' those relatingh
to rates of duty are, thus, within the legislative power of both the Union and the States.
id) Broadly speaking, therefore, except as regards Union Territories, Pa':lia1trsnt's*;,
legislative power extends to :-- '
ti) rates of stamp duty on the speciﬁed documents ;
i ii) machinery provisions, in respect of all documents.

1.19. The position can he stated in the" form of 3. Chart as follows:

THE (_':QNS'1_"ITUTIONAL PROVISIONS _
CONCERNING STAMP DUTIES , E

State List

Concurrent List

Union list
Entry 91. Entry 63. Entry 44.
Rates of Stamp duty iii R"?-'-' 03' Stamp 53931? dt"-*9-'5'

other than duties
or fees collected

respect of bill of duo in resvwt

exchange, cheques, of docllrrlﬂﬂt

promissory notes, bills other than those by means of

of lading, letters of speciﬁed in the Judicial stamps.
but not including

credit, policies of provisions of list

rates of stamp
duty.

I with regard to
rates of stanip
duty.

insurance, transfer
of shares, debentures,

proxies and receipts.

1. Schedule 7, List 1, cntry 91.
2. Schedule 7, List 2, entry 63'

3., schedule 7, List 3, entry 44.

4 For convenience, provisions not relating to rates may he referred to as "machinery provisions".

1.20. Thus, the power of the Union. extends to the whole field ct stamp duties, except
that as regards :-ates of star-I.'p duty in the States, it is conﬁned to the speciﬁed documents. It
is plenary as regards machinery provisions.

Full use, however, has not so far been made of Parliaments legislative power in relation
to machinery provisions. ;

1.21. Having dealt with the important preliminary aspects, we now proceed to state brieﬂy 3330:'
the lines on which revision of the Act would be desirable. ' '

1.22. The defects which were described in the Act of 1879 at the time of introduction of
the Bill in Council, and the improvements which were suggested to remedy those defects, can
be said to provide the justiiication for revising the present Act also. First, there are cases in which,
for want of clarity, the law has failed in its intention. The Stamp Act is left very largely to a sort
of "automatic operation", inasmuch as it is applied to citizens themselves to their own transactions
as evidenced by the instruments; and the burden of its interpretation rests, not only upon the
lawyer, but also upon the layman. It is all the more necessary, therefore, that the Act should,
its expression, be as clear as possible, so that people who desire to pay proper duty on their
documents and who have no intention of evading the duty in any way, may clearly understand
the obligations which rest upon them.

ﬁifhen, there are cases where the provisions of the law, though clear, can he, and have been,

"evaded by carrying out the transactions in a fraudulent manner.

Thirdly, there are cases where greater facility could be given to the public to avoid petty
harrlsliips, without making any serious inroads on the revenue. '

Fourthly, there is need to introduce uniformity where divergence has arisen owing to conflict
Of Jﬁﬁcisions. .

Finally. notice has to be taken of statutory and other developments which have a hearing
otutamp duties.
_ - _l.23. The Stamp Act is a taxing statute. It is not purely a "lawyer's law"; and a revision of Soon? for
the tax structure raises important matters of policy. Moreover, even if revision of the rates of gﬂﬂﬁitm
duty were to be embarked upon, constitutional competence of the Union in that respect is limited

to the documents mentioned in entry 91 of the Union List, (except as regards Union territories).~

There is, however, [as already stated), considerable scope for revision of the Act in other
respects, without materiaiiy affecting the rates of tax. Without claiming to be exhaustive, it may be
said that even after keeping the above limitation in mind, revision is possible in respect ot--

(a)- the structure and arrangement of the Act;
(b) the legal labels employed in the Act, to denote the various kinds of documents;

(cl rectification of the unsatisfactory position, arising from conflicting decisions or
otherwise, in regard to the charging section and connected provisions;

(cl) improvement of the machinery provisions;

(e) reducing the multifarious variety of rates of stamp duty,--of course to the
minimum extent, so as not to aifect the States' revenues; and e

(f) incorporating. in the Act itself, many of the remissions granted by notiﬁcations'
under section 9. - ----5

;_ 'We are satisﬁed that revision on the above lines. would considerably simplify the
_h'in[,_it. up-to-date from the legal point of view, and would also contribute to the removal of
practical diﬂiculties felt by reason of some of the drastic provisions of the Act'. ' ' '

1.24. At this stage, therefore, it would be proper to mention that in our consideration of conidﬂnﬁn-M
the Art, we have kept before ourselves certain broad guidelines which it may be convenient to keptttnrml.
set out. -

1. E2;-., see discussion as iE-t1)---r---'bill of radii-lg and article 14.
2. E. g.,section 35.

In the ﬁrst place, we have considered it legitimate to recommend such changes as were
necessary to rationalise the law or to simplify its working, and generally to avoid difliculties in
its implementation.

Our general approach in this regard is based on our ﬁrm belief that the smoother the
working of the law, the better will it be for all concerned. We do not, in this context, postulate
a conﬂict, between the interests of the revenue and the convenience of tax payers.

Secondly, in the interests of easy accessibility of the law, we have, where the circumstances
an justiﬁed. suggested amendments to incorporate in the section exemptions of long standing.

Thirdly, wliere we found that the provisions of the Act---in particular, what can be con-
veniently described as the machinery provisionsA--have led to serious inconveniences or to
unnecessary controversies in the courts or otﬁcial circles or to avoidable delay, we have not
shrunk from recommending suitable amendments. We believe that even thougi it may, at the
first sight, appear that a particular amendment proposed by us with this object liberalisec the
law in favour of the citizens, yet, ultimately, the revenue will also beneﬁt, inasmuch ascignoritnce
-or misunderstanding of the law as well as the temptation "to evade the law will be
Moreover, it is legitimate to point out that ordinarily speaking, a. taxation law ought not to be so
formulated as to encourage the raising of dishonest defences by litigants, particularly where the
interests of the revenue can be safeguarded by other provisions.

We are making this observation particularly with reference to the changes which we are
recommending in the law relating to instruments not duly stamped and in the provisions as to
the levy of penalty. Sections 13 to 15 and section 35 are instances in point. These amendments no
doubt make the law more liberal than at present; but they are not, in our view, likely to lead

, 1 'lit

to a serious increase in the evasion of stamp duties--if at all they are likely to lead to any -increase

in the scope for evasion.

-n.._. - '
Fourthly, apart from the convenience of citizens, there are situations where wider consi-

derations of public interest may have to override a very rigid enforcement of the revenue law.
For example, the importance of detection of crime in an efficient manner and without delay
justifies the legislature in making a relaxation of the ordinary rule that an unstamped 'document
shall not be acted upon by a public oﬂicer. Acting on this principle, we have considered it proper
to recommend certain amendments to section 33(1). The section imposes an obligation to impound
documents not duly stamped but there is an exception. Our amendment seeks to widen -'the excep-
tion to this obligation-----an exception which is, at present, conﬁned to police oiﬁoersl. : .

Fifthly, we have not undertaken a review, as such, of the rates of stamp duty." '1'nc'1dentalIy,
we note that as regards most of the documents to which the Act applies, the rates of stamps duty
are within the State Legislative List. But even as regards other documents, our amendments are
not based on any need for increase or decrease in the rates. This general approach is. of course,
subject to what we have stated above.

Finally, it is our view that, as far as possible, the provisions of 2 stainm.-shouhtl as so trained

as to maintain logic and consistency with basic juristic principles. It may not always be easy to -

discover or to maintain a logical structure in every provision of the revenue laws. But that
certainly should be the ideaJ,----at least in regard to machinery provisions; these provisions do
not affect the rate of tax, and are intended to deal with details of its implementation._ Lest this
should sound to be too abstract a statement, 'let us illustrate it by stating that where lilo

to pay stamp duty rests with a par-ticularperson who thus carries the primary dutyg '

consider it proper that the law should, overlooking this primary duty, impose at 'ieI':'.'i§§"
sanction on some other person'-'. We have home this consideration in mind in -dealing with the
vexed question of the person on whom stamp duty can be compulsorily levied under 48
read with section 40.

1. Set: section 33(2), infra.
2. Section 40, infra.

CHAPTER 2
SECTION 1 : TERRITORIAL APPLICATION

2.1. We propose to deal in this chapter with the territorial application of the Act--ﬁrst,
the intra-territorial application, and next, the extra--territorial application.

By virtue of the proviso to section 1(2), the Act, as it stands at present, does not apply to
areas which were previously comprised in Part B States, except in respect of rates of stamp duties
on documents mentioned in the Constitution, Seventh Schedule, Union List, entry 91. This is
'the position-emerging by reason of the narrow lines on which the Amendment Act of .1955, which
extended the Act to areas of the erstwhile Part B States, was drawn. In this connection history of
the Act is of interest.

2.2. Section 1, sub-section (2), as originally enacted, ran thus :

"It extends to the whole of British India, inclusive of British Baluchistan, the Santhal
Parganas and the Pargana of Spiti. The term "British India" was held to include
the Agency Tracts included in the Scheduled Districts."

Certain later amendrnents extended the Act to Scheduled districts and scheduled areas;
but they are not material for the present purpose.

22A. By the India (Adaptation of Existing Indian Laws) Order, 1947, the expression "the
whole or British India" in section 1(2) was replaced by the expression "all the Provinces of India".
Expressions like "Brtt1s|1 Baluchistan" etc. were dropped by the Indian Independence (Adapta-
tion Elentral Acts and Ordinances) Order, 1948.

, By the Adaptation Order, 1948, the words "all the Provinces" were substituted for the
words "British India". The Adaptation Order of 1950 also made certain verbal changes in this
part of section 1(2). The clause as substituted by the Adaptation of Laws Order, 1950. read
as follows : "It extends to the whole of India except Part B States." Paragraph 8 of the Adapta-
tion of Laws Order, 1950 enacted that notwithstanding the amendment about the extent of
hit, the law should not be deemed to have been extended to any area to which it did not
extend immediately before the appointed day (26th January, 1950).

ﬂy the Merged States (Laws) Act, 1949 (59 of 1949), the Act was extended to certain
areas; but that extension is not material for the present purpose. By the Part C States
(Laws) Act, 1950, the Act was extended to Manipur, Tripura and Vindhya Pradesh. To the
ﬂliitiiiﬂ territory -of Cooch--Bihar, the Act was extended by the Cooch-Bihar (Assimilation
Eflﬂﬁﬂ, 1950.

2.23. The Amendment Act of 1955 extended the Act to Part 13 States to the very limited
extent indicated by the section as it now stands.

_ 2.3 In 19545, on the re.orga.nisation of States, the proviso was adapted. The expression
'Tart .B.States" in that proviso was replaced by the words "the territories which 'immediately
1-st November, 1956, were comprised in iPart'B States", by the Adaptation of Indian
(2) Order, 1956. '

The proviso now reads -as follows :

"Provided that it shall not apply to the territories which, irnmdiately before the
1st November, 1956, were comprised in Part B States excluding the State of
Jammu and Kashmir except to the extent to which the provisions of this Act
relate to rates of stamp duty in respect of the documents specihd in entry 91 of
List I in the Seventh Schedule to the Cortstitution."

if caumor of Vfzagrrputrztrrit \'. r.c.1r. Pm'.-:cu'.t'. I.L-.R. 52 lvlad. 1; .at,1.a. 1923 Mad. 1131 (1213,).

Introductory.

Section h-- _
Intra_-territorial
application

History of
section 1(2)

Adaptations

Amendment of
1955- ,
Part 3 States.

Part B States

Stat_;e_w ice
positron
analysed

I-i

The territories which were comprised in Part B States before the 1st November, 1956

were :--
(1) Hyderabad, now forming parts of Andhra Pradesh State, Mysore State and Maha-
rashtra State;
(2) Madhya Bharat, now forming parts of the Madhya Pradesh State and the F.ajas~
than State ;
(3) Mysore, forming part of the bigger State of Mysore as reorganised now re-designated
as Karnatal-ta;
{4} Patiala and East Punjab States Union, now forming part of the Punjab State ; _

(5) Rajasthan, now forming part of the Rajasthan State as reorganised and.Madhya
Pradesh State ;

(6) Saurashtra. now forming part of the Gujarat State;

(7) 'l1'atrancorc-focliin, now forming parts of the Tamil Nadu State am: the Kerala
State;

2.4. Thus, to areas formerly comprised in Part B States, the Act applies only to the extent"
to which its provisions relate to rates of stamp-ditty on documents speciﬁed in the Union List,
entry 91, i.e., promissory notes, bills of exchange, proxies etc. The Part B States' areas are,
soifar asrnachinery provisions' of the Act are concerned, left to be dealt by the '1aws"for the
time being in force in the particular areas. It is assumed by the Legislature that some law or
other will always be in, force containing the machinery provisions to govern stamps: (i) on dorm»-
ments mentioned in the Union List, as well as (ii) on other documents.

2.5. Now, it should be stated here, that under the Constitution', Parliament, when it dealt
with the territorial extent of the Act in 1955, (Le. when the Act was extended to Part B States),
could have extended the machinery provisions of the Act to stamps on----- - ''

ti) documents mentioned in the Union List; and

(ii) other documents.
But this has not been done. i t

The present position as to the application of the Act to various local areas, as deducible
from section 1(2) of the Act, is, therefore, as follows 2- '
(1) In the whole of India except the State of Jammu and Kashmir, the Act.-extends
so far as it deals with rates of stamp duties on documents in. the_Union LitIt,,
entry 91. . - . a
(2) In the whole of India except the State of Jammu tit Kashmir and except the
areas in former Part B States, the Act, subject to what is stated below, extends an
_' far as it deals with---- _ _ S
(a) rates of stamp duty on other documents; and
(b) machinery provisions in respect of all documents.
"{3} But proposition (2) above ispsubject to important qualiﬁcations :" _ 1 __ I uﬂ
' (a) In some States, there have been extensive 'local an1end1t1ents"i1'1i'
the rates of stamp dutjr on other documents,' the usual
insert a separate Schedule in lieu of the entries' in the existiﬁ Schedule',
or to increase the duties in the existing Schedule"; and _ _, ,

. See discussion under "-Constitutional-.p-osition1'---Para. 1 .1?' supra.

2. (it) Andhra Pradesh; _.
{blBih31'; . .
(c) Hat-yana and Punjab; '
{:1} Madlnra Pride-sh;
le) Orissaz
ti') Rajasthan;
lg) U.P.; and
(11) West Bengal

3. la) Assam; and
(b) Tamil Nadu.

-s

(b) Some States have enacted :1 self-contained Stamp Act of their own, to deal
with -the rates of stainp-duty on documents in the State List and also Wlth
the machinery provisions as to documents in the State List'. '

(cl Some States have, white enacting a self-contained law of their own govern-
ing the rates and machinery provisions for documents in the State List,
applied the Indian Stamp Act as regards machinery provisions in respect
of documents in the Union List. Thus, Kerala, which comprises mostly
areas of the former Part B State of Travancorc, Cochin and the Malabar
district of the former Madras State, has, enacted a Stamp Act" of its own,
but as regards documents in the Union List, the machinery provisions of
the lndian Stamp Act are made applicable. The gap has, thus, been closed.

2.6. The Amendment Act of 1955 could have gone further, and extended the provisions

of the Act even to the areas previously comprised in Part B States, in so far as the provisions k

relate to matters mentioned in the Constitution, seventh Schedule, Concurrent List, entry 44
[stamp-duties other than duties or fees collected by means of judicial stamps, but not including
rates 0! stamp duty"), that is to say, machinery provisions. However, that has not been done,
so that "rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills
of lading, letters of credit. policies of insurance, transfer of shares, debentures, proxies and
receipts'? constitute the only subject in respect of which the Indian Stamp Act applies by virtue

if its own force to the areas of what were previously Part B States-".

tfegar_ds the areas of former Part A States, the Indian Stamp Act, 1899, applies to those
areas, except where, by separate laws or amendments introduced by a particular State, its appli-
ca' as been modiﬁed or abrogated. At this stage", it is not proposed to enter into details of
- tate laws.

.»'';is' .
' 2.7. In the Union territories, of course, there is no restriction on the competence of

Parliament.

It is not necessary for the purposes of the present discussion to notice the position in
detail inregard to Union territories. To areas in Union territories which were Part of British
India, -Indian Stamp Act, 1899 extended of its own force and this position continued except
whenaitgwas altered by legislative developments after independence relevant to the particular

Union territory.
To the Union territory of Goa, Daman and Diu, the. Act was extended by Regulation 11
of 1963, and further amended in 1968.

Pondicherry, section 3 read with Part II of Schedule of the Pondicherrv (Ex-
tensipii of Laws} Act, 1968 (XXVI of 1968) extended the Indian Stamp Act, 1899 as in force

Union _
Territories.

in eistwhile State of Madras to the Union Territory of Ponlzliclierry, subject to certain n:io-di-

The Act came irrto force? in the Union Territory of Pbndicherry on 9th Ianuary, I969.

In relation to Manipur and Tripura, which were previously Union territories (now States),
the "Uhicin Territories Stamp & Court Fees Laws Act, 19621 (33 of 1961), section 5, dealt with

the matter.

1. EG. fa] Bombay Stamp Act,l9S8-sections T4 and 75 and Schedule 2 (for Maharashtra and Gujarat);
' fh) Mysore Stamp Act, 1957---section T2.

2. Kent: Stamp Act, 1959~sections 72 and 73. '

3. See also discussion as to section 1(2), fnﬁa.

4. Constitution. Seventh Schedule, Union List, entry 91.

. Section I.

. See :1-gﬁ-a.

'-ulﬂiui

'January. 1969.

Notiﬁcntion of the Adminis-trator, Pondiclierry published in Pondicherry Gazette Extraordinary 4. dated 9th '

Observations
retarding
mirth _
temtonnl
application
of the Act

Recommendation
as to intra-
territorial
application
unﬁt' section
1(1), H'o\n'ao

_ Parliamentary legislation relevant to Stamp duties in some Union territories was passed'
In 1971. It introduced what is known as the surcharge for "Refugee relief". It was repealed? in
1973, in so far as it applied to the Union territories of----

(i) Andaman and Nicobar Islands.

(ii) Chandigarh;

(iii) Dadra and Nagar Haveli.

[iv] Delhi.

(v) Goa, Daman and Diu.

(vi) Laccadive Minicoy and Amindivi Islands.
(vii) Pondicherry.

2.8. To revert to section 1(2), the provision in section 1(2) regarding the extent of ['18:
Act. creates a somewhat confusing picture. The matter may be re-stated as follows": -

(a) In some cases', the Cental Act is the governing Act, not only for: rates at .
stamp duties for documents in the Union List, but also for rates of duty"--fa: this '
documents mentioned in the State List {there having been no local variatimlx in:
the stamp duties), as weil as for machinery provisions for all documents.

(b) In some cases', the Central Act applies for the purposes of determining the rates
of stamp duty in respect of documents mentioned in the Union List', errtry 91,'
and as regards the machinery provisions in respect of all documents. But it does
not apply for rates for documents in the State List, these having been dealt with
by a separate Schedule----usually, Schedule IA inserted locally. h_

(c) In some States which have enacted their own separate Stamp Acts"=7,. the.
of the Central Act is more iiinited, and is conﬁned to the rates of duty
machinery provisions for the documents mentioned in the Union List- entry" 91.
The self-contained Stamp Acts of the States concerned apply in regard to 60911--
ments mentioned in the State List, both for deterniing the rate of stamp duty and
for ascertaining the machinery provisions applicable to those documents.

It should be mentioned that in States which comprise Part B areas (i.c.-, areas
viously comprised in Part B States), the Indian Stamp Act, 1899. has been or-j
tended, for matters excluded by section 1(2), by State anlendment in
to those areas. "

(cl) The-oratically, States could even apply their own machinery provisions: chair to
documents in the Union List. -

2.9. In our opinion, this position is vent unsatisfactory. We are unable to. sw any justifi-
cation for continuing the present state of the law under which the machinery prcwisiona
from document to doeumentt' (within a State) and from. State to State". In respectgof a__n

like the present, uniforiznity of machinery provisions is, in- our opinion, of considerable,

tance. Since we attach importance to the introduction of uniform procedure in regard" to
nery provisions, we have thouglit it appropriateeto deal with the problem. _

Accordingly, we recommend to the Union Government that it shouid take uuflyr.

towards achieving uniformity in regard to machinery provisions. Of course, this 1js.'.':

I. Act 73 of 1771.

2. A.ct14 oi'19'!3. _, _
3. Also see para. 2.5, supra. _ _ _ _
4- This discussion is confined to "States" proper.

5. E. g., Andhra Pradesh, Bihar, Madhya Pradesh.

6. See below. "State Acts".

7. E.g., the erstwhile State. of Bombay. Also Kerala and Mysore.

8. Calnegotjr (C). supra.

9. categories (a) to (d). -supra.

{i} repeal of State Stamp Acts, i.e. portions of those Acts which relate to machinery provisions, and
(ii) Parliamentary action adopting uniform machinery provisions applicable to the whole of
India. In making this recommendation, we do not wish to dispute the fact that State laws can
and should properly deal with the rates of duties.

As is evident, States are at liberty to pass their own Stamp Act, by exercising the power
cumulatively conferred by State List, Entry 63, and Concurrent List, entry 44. This has already
been done in some States'. (Of Course, those Acts cannot deal with the rate of Stamp duty for
documents mentioned in the Union List). But uniformity in respect of machinery provisions
would be a better course, and there does not appear to be any constitutional hindrance in that

regard.

We may mention that the point was raised in our Questionnaire, and by and large opinion
is favourable to what we have recommended above'.

2.10. So much as regards the intra-territorial application of the Act. Extra-territorial appli- Bxtrgl-territorial
cation of the Act is a matter on which the position now seems to be fairly certain, in view of f',,';P',,'§,,,",',',,'?,',',
the precise wording ofthe charging section'. The scheme of the Act is that, subject to certain
special provisions {to be presently noticed), only an instrument executed in India' is chargeable
with duty. The special provisions relate to {i) bills of exchange' payable otherwise than on de-
mend: or promissory notes which, though drawn or made out of India, are accepted or paid or
presented or endorsed or negotiated in India", and (ii) other instruments'? executed out of India
which relate to any property situate or to any matter or thing done or to be done in India and
vthiria are received in India, for various matters, arising out of or concerning these special pro-
viiitiah t'e.g., the time of stamping etc.), the Act has provided a detailed scheme'.

2.11. It would appear that in this respect, the position is not so clear in England, and it gggﬁnmﬂ

Ii is nowhere stated in the (English) Stamp Act, 1891, in the charging provision that foreign docu-

men'! do not require to be stamped. It is only when one comes to the section providing the
sanction' that the English Act speaks of an imztrumcnt executed in the United Kingdom etc.
Of course iudicial decisions in England do take the view that the Act is so conﬁned. This view
hu Men taken in deference to the "comity of nations". In the case of Nettie 8: Co." Danckwerts

T. observed 2--

"Tlic comity of nations requires that a government must tax only those people who are
under the control ct its own laws." '

Hence, an agreement entered into between persons living abroad with regard to property
abroad doe not require an English stamp if it does not relate to a matter or thing to be done

in the United Kingdom".

It would also appear that, in England, a contract for the sale of immovable property situate
outside the U. K. is not chargeable with duty". e '

1;" Bombay Stamp Act, 1953 (in force in the States of Maharashtra and Gujarat, subject to amendments
mbsequently made in those States): '
(b) The Kemla Stamp Act. 1958.

. tﬁcjflln Mysore Stamp Act, 195?.

r is not necessarily exhaustive).

2.' I of the Questionnaire.

3. 's.oo't:i'oo 3, clauses (a). (in) and (cl.

4. Section 3(a).

5., 30;). See also section 32{3}(b) and section I1(b).

6. rough gist of the provision.

7. Section Me).

3. Section 11' to 20.

- 9. Sedion 14(4). Stamp Act, 1591 (E35).
I . N It Ce. L: V. Internal Reverme Commissioners, 1952 I All B. I 8 , 1 _ ,

.0 "gig €95' ( ) R. 33 392 (Dauckwerts J) oneppeul
11. Giieirfs! V. Herbert, (1871) 26 Law Times 381, cited in I-Ialsbury. 3rd ed., Vol. 33, page 269. footnote {c}.

12. Section 59(1), Stamp Act, 1891 {Eng.). 5 7

2.4M of I..aw!T7--3

Sen-tin 1(1),
[Q-"Imam"

CHAPTER 3
DEFINI'I'IONS--SECTIC|N 2(1) to 2(4)

3.1. Section 2 of the Act contains, in all, 28 deﬁnitions. of which the deﬁnitions in sub-
sections (ISA), (USA) and (19A) were inserted by later amendments. The expressions deﬁned
in the scction---which need not be enumerated at the present stage--fa11 into the following broad
categories.

In the first place, there are deﬁnitions which deﬁne particular kinds of instruments for
the purposes of the Act in a self-contained manner. The deﬁnitions of "bond", "conveyance",
"instrument of partition", "lease", "mortgage deed", "policy of insurance", "power of atto1'ne5"",
"receipt" and "sett1en:|ent" fall in this category. '

Secondly, there are definitions which, while also relating to certain kinds of instrument,
adopt. with or without additions, the deﬁnitions given in other Acts. They are, thus, not self-
contained. The deﬁnitions of "hill of exchange", and "bill of exchange payable on demand"
and "cheque" fall in this category, because the basic concept of bill of exchange relies heavily
on the Negotiable Instruments Act, 1381, though some of the deﬁnitions do include certain
other documents also.

Thirdly, there are deﬁnitions of expressions which do not relate to classes of imzrurnenu,
but are, at the same time, of importance for the purposes of the Act, since the expressions
deﬁned occur frequently in the Act; (that is to say, in the body of the Act as distinguished
from the Schedule]. The deﬁnitions ot the expressions "chargeable", "duly stamped", "ex "
"execution", "impressed stamp" and "instrument" fall in this category.

Finally, there are other deﬁnitions which are of a minor importance.

The deﬁnitions in the ﬁrst category are of the highest importance, and are those which
have led to the largest volume of case-law. With these introductory observations, -we pm-cud
to deal with each deﬁnition.

3.2. Section 2(1) deﬁnes "banker", as including a bank and any person acting as a banker.
The expression "ba'nlrer" is used in the following sections1 of the Act :--- a

(a) Section 2, clause [7], "cheque" ;
(b) Section 51, allowance in case of printed forms no longer used by a banker.
The importance of the deﬁnition of "banker" has diminished, in view of the in

the importance of the deﬁnition of " eque"*. The latter has lost its importance the
removal of the stamp duty on cheques in 1927.

It should be pointed out that the deﬁnition of 'banker' tells us nothing about the

of a banker.

In England, bankers are given special exemption from stamp duty when giving idnfts
or orders for payment from one banker to another. The deﬁnition given of a in
the English Stamp Act, says that it means "any person carrying on the business. of
in the United Kingdom". I I

3.3. Strictly speaking, the mention of ban]: as including a "banker" would not , _';
.

because a bank is really a place where money is deposited for certain purposes.

I. See article 13. as amended in 192?.

3., Section 2(7).
3. Section 29. and Schedule l--Exernpﬁon 2, "Bill of Exchange", Stamp Act, 1891 (Eng).

of the present deﬁniton, it could be said that it is useful as covering cases where on irnpersonal
banker is involved (such as, a corporation). On this reasoning, a distinction could be made
between a bank and a banker, so that the former is conﬁned to impersonal bankers and the
latter to individual bankers. A bank could then be regarded as an establishment for the
custody of money received from or on behalf of its customers, a banker as a person who is
in charge of an establishment. Whether any such subtle distinction forms the basis of the
preheat deﬁnition is, however, extremely doubtful. Apart from this, however, the major defect
in the present deﬁnition is that it begs the question, as it does not tell us what the concept
of ''banking'' implies. Not much help can be derived in this respect from the Negotiable
Instruments Act'. A banker, as deﬁned in that Act, includes also persons or a corporation
or company acting as bankers. Under the General Clauses Actﬂ, the expression "person"
includes any company or association or body of individuals, whether incorporated or not.
Obviously, these deﬁnitions are not helpful for the present purpose.

3.4. There are several characteristics usually found in bankers today'': (i) They accept
money ﬁ'OrI1, and collect cheques for, their customers and place them to their credit; (ii) '
They honour cheques or orders drawn on them by their customers accordingly. These two
characteristics carry with them also a third, namely : (iii) They keep current accounts or
something of that nature, in their books in which the credits and debits are entered.

These three characteristics are much the same as those stated in Paget's Law of Banking' :

"No. one and nobody, corporate or otherwise, can be a 'banker' who does not
(i) take current accounts; (ii) pay cheques drawn on himself; (iii) collect
cheques for his customers."

'3.5. It has been stated" that it is notoriously diﬂicult to deﬁne the business of banking, _I_)cﬁnit_icq_of

-3»-slat'! no statute has attempted it. Perhaps, a very good deﬁnition is that stated in by the Privy

camel in Bank of Chatfinad Ltd. of Colombo v. Commissioner of Income Tax, Colombo".
The deﬁnition is as follows :

"A company which carries on as its principal business the accepting of deposits of
money on current account or otherwise, subject to withdrawal by cheque, draft
or or ."

_ It may also be stated that the concept of banking has changed' in the course of history.
In the eighteenth century, before cheques came into common use, the principal characteristics
were that the banker accepted the money of others on the terms that the persons who deposited
it could have it back again from the banker when they asked for it, sometimes on demand,
at other times on notice, according to the stipulation made at the time of deposit; and mean-
what: the banker was at liberty to make use of the money by lending it out at interest or lnvesﬁng
i on mortgage or otherwise. Thus, Dr. Johnson" in 1755 in his dictionary deﬁned a "bank"
M a "place where money is laid up to be called for occasionally" and a "banker" as "one
Hnttraﬂics in money, one that keeps or manages a bank."

3.6. Some controversy seems to have arisen with reference to the question whether the cag,.1,.,.
word "bank" in the Negotiable Instruments Act connotes the business of utilising money for
37$: of profit, and whether the business must have a commercial side to it. The Madras
High Court answered this question in the aﬂirmative", and held that the mere fact that the
Government Treasury received money from the District Board and respected orders issued tr

:1: Social: 3. Negotiable Instruments Act, 1331.

9. ﬁeuion 309), General Clauses Act, 189?.

3. $0 LED. Trust Ltd. V. Kirkwood, (1966) 2 W.L.R. 103.

4. Puget, (H.L.) Law of Banking (1961), page 8.

5. U.D. Trust Ltd. v. Kirkwood, (1966) 2 W.L.R. 1083, 1090.

6. Bank of Cherished Ltd of Colombo v. Conunissioirers ofiacome Tax, Colombo. (1948) AC. 378, 333 (P.C.).
7. United Do.-ru'm'on Trust Ltd. v. It't'rkwood, (1966) 2 W.L.R. 1083, 1090.

8. Lbﬁtcd Dominion True'! Ltd. V. Kirkmood, (1966) 2 W.L.R. I033.

9, Ram-cswa.-at v. Sankoralingam, A.l.R.. 1920 Madras 1011.

it for payment would not constitute the Treasury into a bank. This controversy, however,
has not much practical importance now, because the stamp duty on cheques' was abolished

in 1927.

t§ 'i°" 3.7. The above discussion shows that the deﬁnition of 'banker' in the Stamp Act is not

deﬁnition of very expressive in itself, and serves no useful purpose, as it aﬁords no guidance whatever.

'banker'

. We may note that under the Banking Regulation Act", "banking" means 1116 IIGOGPHTIS
for the purposes of lending or investment of deposits of money from the public repayablc" on
demand or otherwise, and withdrawable by cheques, draft or order or otherwise.

We are of the view that for the purposes of the Stamp Act, it would be convenient to
adopt the deﬁnition in the Banking Regulation Act, 1949. We may add that on this point'
a speciﬁc question was included in our Questionnaire, and opinion generally supports this course.
Rucommﬂldﬁtiﬂll 3.8. Accordingly, we recommend that section 2(1) should be revised as follows:
"banker" means a person who accepts, for the purposes of lending or investment,
deposits of money from the public repayable on demand or otherwise, and
withdrawable by cheque, draft or order or otherwise. "
§$t1'o(}n2(2), 3.9. The second deﬁnition relates to "Bill of Exchange" deﬁned as follows' :---
Emchanae "Bill of Exchange" means a bill of exchange as deﬁned by the Negotiable Instru-

ments Act, 1881, and includes also a hundi, and (i) any other document,
(ii) entitling or purporting to entitle, (iii) any person, whether named therein or

not, to payment by (iv) any other person of, or to be drawn upon any other
person for, (v) any sum of money.

The deﬁnition of "Bill of Exchange" in the Negotiable Instruments Act" is as followslfi

"5. A 'bill of exchange' is an instrument in writing containing (i) an unconditional
order, (ii) signed by the maker, directing (iii) a certain person to pay (iv) a

certain sum of money only to, or to the order of, (v) a certain person or to the
bearer of the instrument."

"A promise or order to pay is not 'conditional' within the meaning of this section and
section 4, by reason of the time for payment of the amount or any instalment thereof being
-expressed to be on the lapse of a certain period after the occurrence of a speciﬁed 'event

which, according to the ordinary expectation of mankind, is certain to happen alghougi the
time of its happening may be uncertain.

"The sum payable may be 'certain' within the meaning of this section and 4,
although it includes future interest or is payable at an indicated rate of exchange, or is

according to the course of exchange, and although the instrument provides that, on default
of payment of an instalment. the balance unpaid shall become due.

"The person to whom it is clear that the direction is given or that payment is 'to"be
made may be a 'certain person', within the meaning of this section and section 4. ' _
he is misnamed or designated by description only".

In the Law Commission's Report' on the Negotiable Instruments Act, the foﬂowing
revised deﬁnition of 'bill of exchange' has been suggested :-- ' :

"A 'bill of exchange' is an instrument in writing containing an unconditional - __
signed by the drawer, directing a certain person to pay on demand g as :i.

. Amen.-13. ' L ' '

. Section 5(bJ, Banking Regulation Act, 1949.

Question 2 of the Questionnaire.

Numbers indicating it have been added.

. Section 5, Negotiable Instruments Act.

Numbers indicating iterns have been added.

. 11th Report {Negotiable I11SlI|'l.1I1'l¢l1TS Act), page 15, Clause 4{7)(ii).

-J_autn-In:-DM-

1'?
}'i.ted for determinable fufure time a certain sum of money only to, or to the
order of, a certain person or to the bearer of the Instrument.

3.10. The deﬁnition in the English Stamp Act1 is in similar, though not identical,» terms.
It is quoted below : '

"32. For the purposes of this Act the expression 'bill of exchange' includes draft,
order, cheque, and letter of credit, and any document or writing (except a bank
note) entitling or purporting to entitle any person, whether named therein or
not, to payment by any other person of, or to draw upon any other person
for, any sum of money ; and [ ......... . .. .......... ..] inc1udes---

tfa) an order for the payment of any sum of money by a bill of exchange or
promissory note, or for the delivery of any bill of exchange or promissory
note in satisfaction of any sum of money, or for the payment of any sum of
money out of any particular fund which may or may not be available, or
upon any condition or contingency which may or may not be performed or
' happen ; and
{bl an order for the payment of any sum of money weekly, monthly, or at any
other stated periods, and also an order for the payment by any person at
any time after the date thereof any sum of money, [ .....................

3.11. The judgment in a Calcutta case? does point out that the words "......
.:nn'Iling or purporting to entitle any person, whether named therein or not, to payment by

i any dthea; person of any sum of money" (in the extended portion of the deﬁnition in the Stamp

:Aét),_'i:'ainnot be taken literally, because the language is so wide that it might include all sorts

gtfﬁqmnents not capable of being classed as a bill of exchange. Even a mortgage or lease
"may be a document "entitling any person to payment." T '

3.12. It may be stated that the wide and vague language of the English and Indian provision
in -the inclusive part of the deﬁnition of "Bill of Exchange", has created considerable difficulty.

It has been held in some cases that even for the purposes of the extended deﬁnition, the
document should possess the essential characteristics of a bill of exchange, and it must, in
effect, he in the nature of an order or direction for the payment of money",','5 which _is the
characteristic of a bill of exchange. But this amounts to adding to the section.'

3-13 In England, it has also been he1d°,7 that the document need not contain any express
order the payment of money. But, on this point, the Indian case law is to the contrary.
It; was held by the Punjab Chief Court" that whatever may be the private understanding
the banker and the customer, the court must be guided by what is expressly stated
ia._tln.-.docun1ent. - ea

3.14. It would appear, that sometimes, on one and the same document, conﬂictiug views
bait ihiien taken in the same court on the question whether the document did or did not fall
extended part of the deﬁnition. ' .

3.15. 1: is sometimes stated that the limitations to be read should be in the nature or
the deﬁnition to documents anatogous to bills of exchange and hundis. If so, it would
be.-butter to conﬁne the section by suitably changing the wording in that manner. I 7"

1. Section 32, Stamp Duties etc. Act, 1891.

2. In the matter afrhe Stamp Act, A.I.R. 1928 Cal. 566 (F.B.).
3. Back V. Robson, (1378) 3 Queens Bench Divn. 536, 691.

4. Inner v. Calvert, (1319) 27 W.R. 804 (Eng).

5. Mandy. Young, (1190) 100 English Reports 876, 378. .
6. Midland Bank Ltd. V. Irdand Revenue Cammimbners, (1927) 2 Kings Batch, 465, 41%,
7. AE San Rofftsclitdd Y. C.I.T. (1394) 2 QB. 142.

s. In R: Stamp Act, (1912) 13 Indian Cases 330 {Full Bench) (Chief Court of Punjab).

'Section 2(2)-
'Bill

Eait1sio1' '
in

1-019--
Introductory

Express order
if required

Conﬂi ' views
on one . the
same dueiunent.

Limitations--
Vagucneu of.

Casei_awasto_ 3.16. By way of illustrating the vagueness of the present deﬁnition, it may he noted
:"?]h"°'l,,,,.:,-iv'in,',j,5s that the question whether attested hundis known as Shahajog hundis fall within the deﬁnition
vagueness. of "promissory note" or "bill of exchange", raised considerable controversy in the Calcutta

High Court. In Asha Ran1's ease} Fletcher 1., held such a document to be an attested spro-
missory note. In a later case? Mookerjee, J., held it to be a bond, and held that it did not
lall within the wider deﬁnition of bill of exchange in the Stamp Act. However, in a. later
case," Rankin, (3.1, while criticising the language of the deﬁnition of "hill of exchange", pointed
out that, taken literally the deﬁnition in the Stamp Act might cover the document in question.

;',=;|a§{°|:_:,,Dn 3.17. In England, in reviewing the provisions of section 43 of the English Stamp Act of
43,En¢|is1-. I870, which were almost identical, Jessel, M.R., expressed the opinion* that the section could
"-°"'"37°- never have been intended to include every document coming literally within the meaning of

the words used. If that were so, almost every kind of written document could be included
as a bill of exchange, and great injustice and confusion would arise, as they could not be
stamped subsequently and would be altogether void. It was quite plain. therefore, that the
draftsman must have intended that the words used should be read with some _limitation. The
nature of the instrument must be looked at in each case, and its precise nature ascertained.

deﬁnition or 3.172%. We may, however, point out that the precise nature of the limitations to be read
;;e0,f_D'ﬁ°".V has always caused difficulty. In this connection, we may refer to the criticism of the alteration

introduced by the English Act of 1370, section 49, in ihe diﬁnition of "Promissory note", by
Pollock B. (This criticism applies to "Bill of Exchange" also) :--

"It is unfortunate, I think, that in a statute dealing with revenue matters ﬁ«ﬁl«H'ﬂ::'ﬁl'ﬂ_I,I'_ s.
have been enlarged so as to create a sort of legislative document, other
different to the document which is commonly known by the term used . I the
section we have to construe," here the legislature have taken a term ofnv;IlT"\
known meaning, and have then said it is to mean something else".

It has been suggested, with reference to the corresponding provision in the English
Stamp Act of 1870, namely, section 48, that it will not apply to documents otherwise speciﬁ-

Ed-aw, cally provided for by the Act". But, with respect, this does not remove the vagueness.

3.155. A few English cases may he noted.

In Rothschild and Sons v. Commissiorters of Inland Revenue' the Hungarian Gunn-
ment had issued certain bonds, in regard to certain loan transactions. Along with each bond
were issued coupons for the payment of interest. These coupons were payable to Bearer at
the various places therein speciﬁed. It was held that the coupons were bills of exchange.
1: was pointed out that in considering the effect of a document, the Court need not conﬁne
itself to the words actually used in the document, but may go behind it and consider the
purpose for which the document has been issued, so that aefual words of an order or rilnlldfe
in pay are not indispensable. Hence, thou the interest coupons merely stated tint interest
would he paid at a certain time and place a were 11ot bills of exchange wi:hin the 5 _'
of that phrase, nevertheless they came within the more general language of the Stamp
may incidentally be noted that such coupons were exemp"ed by later amendment. ' i

In Commiltee of London Clearing Bankers v. Commissioner of Inland Revenue,' it was
held that an order to a bank to transfer a sum of money from the customer's aoobiinﬂtit the
account of another customer ofrhe bank was bill of exchange. Such a

. /isho Ram v. Kern' Chaud. (1912) 33 Indian cases, 14? (Ca|.). . g
. Kesri Clrarid v. Ashe Ram, (1915) 19 C.W.N. 1326. ' '
. Re. Imperial Bank of].-nrlia, (1928) 32 C.'W.N. 1015.

. Fisher v. Calvert, 27 W.R. 30] (Eng).

. Mortgage Insurance Corporation V. Coennulrsiouerr -L.R., 2D Q.B.D. page 65].

Adams v. Morgan, (1833) 14 LR. Ir. 14-0.

Rothschild &. Sons V. Commissioners of Inland Revenue. (1594) 2 QB. 142, H6, 141'; 70 L.T. 657,

. Committee of Lonzﬁm Clearing Bmlcers V. Comnifssioners of Inland Revenue, (1395) 65 L.J. (1.13. 372, 376';
I Q.B. S42. 74 L.T. 209. '

"°l"'.°"'-'|-Full'-)*'*

a person to "draw on" the bank. It was held in this case that the. document was a bill of

exchange payable on demand.
These cases do not furnish any detailed guidance as to the exact scope of the extended part.

3.19. To make matters clearer, one alternative would be to amend the section by express
words limiting the extended part to orders for the payment of money which are regarded as nego-
tiable otherwise than under the Negotiable Instruments Act.

Any instrument containing a contract to pay money,' or any other negotiable security repre-
senting money which is in a form which renders it capable of being sued on by the holder
of it pro--te-mpore in his own name and which is transferable, by custom of trade. by delivery like
cash," is a negotiable instrument."

3.20. Thus. in England, dividend warrants.' and share warrants' have been held to be negoti-
able instruments." as they involve the characteristics of a negotiable instrument.

The following are the characteristics of negotiable instruments r----

(1) Property passes by mere delivery ;

(2) The transferee can sue in his own name :

(3) The transferee, if a. holder in due course. is not affected by the defect in title of
his transferor or his previous holder : and

-[4] The transfere is not affected by defences that may 'be available against previous
holders'.

3.21. Since a promissory note is an "undertaking", while a bill of exchange is an "order",
documents which merely amount to an undertaking should be excluded even from the extended
.part"-of the deﬁnition of Bill of Exchange. There 'should be a tripartite transaction, namely. the
who signs the document. the person to whom it is addressed and the person in whose
fa?oIt-'it- is written. A bilateral document cannot be a bill of exchange under the Negotiable
Act3, and should not be a bill of exchange for the purposes of the Stamp Act. This
is.be¢suse the theory on which an order is based is that the person to whom it is addressed
has in his hands moneys of the person who draws it, on terms of 'paying' such money according
to the direction of the drawer".

' ' 122. The other alternative would be to delete the extended part of the deﬁnition. Its vague-
ness may be illustrated : - '

In an English case", a ﬁrm of bankers, having an account at the Bank -of England
for the purpose of enabling a customer to pay customs duties on goods otherwise
than in cash. issued a document addressed to the cashiers of the Bank of England,
directing them to transfer from the account of the bankers to the account of the
Commissioners of Customs a sum named therein. When such a d_oc'ument was
issued, the practice was to deal with it in one of the following two ways :

(I) It was handed by the bankers to their customer. in exchange for his cheque
for the same amount, and given by him to the Commissioners of Custom.-w
handed it to the Bank of England ; or - -

1. saemmnv. Boyfi, (13553 3 Maoo. 1.
2. .-ct-um.-1. 1», crew: Faner'er,_(l 313) 13.12. 3 on 374. 381. Mare: v. Race, (1?58)1 Smith LC. (13th Ed.) 534;
. _ v. sans: Chandra.46Cal. 331, 337.
;:3u21 County Banlcing Co. v. me London River rare Banli Lu. uﬂirrned in mass) 21 Q.B.D. 53-amass;

4. {l.)Gaadu-rin v. Roberts, (1875) L.R. 10 Ex. 33?.

(b}Pnr.tridge -.r. Bank afﬁngfarad. 11345) 9 ms. 396; S ' )1 v. wesxnun-ma» Bank. (1931) 1 KB. 173-.
5. Hal: 1!: Co. v. Afexamiria water Cn.. (I905) 93 L. _. 339. Seeilso S. 114 of the Cmnpanin! Ac, 1956.
6. Ccmpuresection 114. I 3
7. sbnnm -.r. London Jr. Stock Bank, (1391) 1 (11,270, 234. on appetl (1892) A.C. 201, 215.

3. A. to the Negotiable Instruments Act, see Haﬁz Uma.-adds' v. Akbar aim. A.I.R. 1934 Peshawar 1.

9. I%(§o5r2:bburn (3.1. in Buck -.r. Robson, wars) 3 QB.D. 5115, cited in Nwxiubaiv. Gear. (1903) 1.L.1t. 21

10. The Cornmirfee afLcmdon Clearing Bwrkers v. Canvnissiarrers of Inland Revenue. (1396) 1 Q3. 54?. -

Possible
alternatives-
ﬁrst alternative-
limitation oi' the
extended pan.

aim-antin-
deletinn of the
extended pm

Whether drawer
and drama
should be same
DE-TSOD.

(2) It was handed direct by the bankers to a Custom Oﬂieer in exchange for that
customers cheque, and subsequently handed by the Comrnissioners of Customs
to the Bank of England. It was held that the document was a hill of exchange
payable on demand within the meaning of section 32 of the Stamp Act, 1891,
an.d that it was not exempt from duty as being a "bill drawn in the United
Kingdom for the sole purpose of remitting money to be placed to any acodunt
of public revenue" within the meaning of the 10th Exemption under the head
"Bill of Exchange" in the First Schedule to the Act. The Courts were, more-
over, of the opinion that, having regard to the history of the exemption clause,
the word "remit" only applied to the placing to its proper account money which
was already public money}

3.229.. The wide scope is illustrated by the uncertainty as to whether the drawer and the
orawee to a bill must be diﬁerent persons in order that the bill may be a "bill of exchange" within
the deﬁnition in the Stamp Act. In a Calcutta case,' it was held that a demand draft bynone branch
of a Bank on another branch of the same Bank payable on demand to a third party, is a"'bill of
.::.change within the Stamp Act. In this case, Rankin, CJ. expressed the view that ,even under
the deﬁnition of a bill of exchange in section 5, Negotiable Instruments Act, diﬁcrent persons are
not required. But, in any case, such a demand draft fell within the inclusive portion of the deli-
nition of bill of exchange in the Stamp Act. .

As it was held to be a bill of exchange payable on demand, no duty was leviable under arti-
cle 13, Stamp Act (as amended in 1927).

3.23. In a Patna case,' it was held that the drawer and the drawee need not necessarily

be different persons. . \_g

This speciﬁc aspect will be dealt with later. But the more important defect is the uncertainty' -

discussed in the judgment of Rankin, CJ.4. The present deﬁnition, if taken literally, is unduly hide'.
it was,.therefore, suggested to us that the deﬁnition should be conﬁned to a Bill of Exchange as
deﬁned in the Negotiable Instruments Act, as there is no great consideration of revenue"'necess'i-

rating a charge of tax on other documents.
Lay the suggested amendment. Mention of 'hhmdi' should, no doubt, be retained. It wssalso

suggested that it would be convenient if, as regards each of the ingredients of a bill of exchange,
as deﬁned in the Negotiable Instruments Act, a decision is taken as to which of thcl'l1.Sh|}_li.lH be

dispensed with in -the Stan1p_Act.

.324. While we have carefully considered the suggestion, we have come to the conclusion
mat instead of amending the deﬁnition, it is better to mitigate the consequences its vaguenem
uy amending section 35. By narrowing down the deﬁnition, one might exclude documents intended

L0 be covered by the extended part.

While we do not recommend any amendment in the deﬁnition of 'bill of ex_eha.nge',.we do

recommend that in section 35. Proviso ._(a),
promissory note as deﬁned in the Negotiable
Is retained at all.

3.25. There is another question to be considered in connection with bills of
docmnent can fall both under bill of exchnngeand under a promissory note, as d ,
Negotiable Instruments Act}. '-'

dsclzongsa

1-3.'?
mm v. Bannirmer, (ism 3 Q.B.D.. 569. - L __ "I
act}. (napkin

. See also Buck v. Robson. nets) 3. can 636: . _.
66. (S.B.) (Reference under section 57, Stamp I" _

In the matter of the Stamp Act, A.I.R. 1928 Cal. 5

CJ.).
Bibi Kaz.-rd Begum v. Lachman La! San and Others. A.I.R. 1930 Pat 139- ' i

In the matter ofrhe Stamp Act, A.I.R. 1923 C'al.'56Ei, supra.
For action under section 35, pra\riso(a).
. Section 17, Negotiable-Instruments Act.

"-7*'.-'|:F':" !*""

The law, it was stated, will gain in simplicity of fern: _

the exception should be conﬁned to bill of id'. -5
Insrrumenis Act or 'hundi"'----even if the exemption

'Where an instrument may be construed, either as a promissory note or bill" of exchange,
the holder may at his election treat it as either, and the instrument shall be thence-forward treated

accordingly.
The relevant section in the Negotiable Act reads---

"l7. Where an instrument may be construed either as a promissory note or bill of
exchange, the holder may at his election treat it as either, and the instrument shall
be thence-forward treated accordingly." .

3.26. This privilege is not taken away by section 6 of the Stamp Act; and if the holder
treats the documents as a bill of exchange, then that election governs the position for the
purposes of the Stamp Act also. This should be made clear, and we recommend accordingly.

3.27. We may now discuss the question of demand drafts. It appears that with reference
to the Negotiable Instruments Act { which deﬁnes the expression "cheque"), there is some con-
troversy as to whether a demand draft drawn by a banker on his own branch is or is not a bill
of exchange and a cheque. This controversy has arisen because, while sections BSA and 131A of
that Act make limited provisions in regard to demand drafts for the protection of bankers, the
{let does not contain any comprehensive provision as to drafts. ' T

This has led to a controversy. The High Court of Bombay' has, for example, taken the view
that a demand draft issued by a bank on its branch or vice verse is not a cheque or a bill of
eschangc. Some other High Courts' have, however, held that it is a hill of exchange, and is very
nearly allied to a cheque.

_/3.23. It would appear that, in England, the House" of Lords' held, in 1903, that since the
..__,ik is both drawer and drawee. the draft drawn by acountry branch of the Bank 'on the head
ofﬁoe cannot be treated as a bill of exchange, as deﬁned in section 3 of the Bills of Exchange
Act, 1882, as it then stood. This judgment of the House of Lords dealt with other points also, and
led tothe enactment of the Bills of Exchange (Crossed Cheques) Act, 1906.4 It is because of
this aspect of the case that the Bombay High Court made a distinction between a bank draft
on another bank and a bank draft on another branch of the same bank.

_ In this connection, it would be of interest to note that in the English Stamp Act,' a bill of
exchange is deﬁned as including a draft, order, cheque and letter of credit" and certain other
tloctitllents. This suggests a useful improvement in the deﬁnition of "bill of exchange" in the
Act, namely, that it should include a draft. We recommend that the deﬁnition should include
I E _ .

__ 3.29. In the light of the above discussion, we recommend that the deﬁnition of "bill of
exchange" should be revised-- ' ' ' '

(1) by including drafts, and
(ii) by adding the following Explanation.
"Explanation :

The provisions of section 17 of the Negotiable Instruments Act, 1881, apply forth:
purposes of this Act as they apply for the purposes of that Act."

1. (I) .":'a'nya.m!ingam K7712 Exchange Bank of Imfia, AIR 1948 Born. 1 {Cornice 1.).
{b}Ha.ranaaI v. Noreen Mudoiiar, A.I.R.. 1959 Bent. 261' (Mudholhar. 1.).
2. (:1 suuanchand v. Arahmayya, A.I.l-'L 1951 Mad. 91o {o.n.).
{it} Sfdita Nat}: v. Punjab Nattonat Bank. A.l.R. 1960 All. 233.
(c) State Bank of India v. Mazm:-rdar. A.I.R. 19?!) Cal. 503.
3. Cqpiraf and Counties Bank v. Gordon, (1900) All ER. (Reprints) 1017, 1024 (I-I.L.). _ _ ' '
4. See Underwood' Limited v. Bank of Liverpool, (1904) All. E.R. (Reprints) 203, 241; 131 Law Times 211: 63733115!-
torIJournal'i'l6. - " ' ' " " *
S.Soction32,Stan1pAct,lB9l, __ _- c '.- ': ,1'
24 M of Law,t7T-4.

Reeounnendatlon

Rccoinmelsdatiou
rogardtng section
35, proviso (I).

parabhnn

Meanin; of the
expression "on
demand" in the
O
Instrmum Act.

Need to Insect
tetascpce to
Negotuhle
. . Ml-

not '
Reomnuntadation.

Enlhnd.

§°°"°':3:'33'
ause
coodlionll

orslerfor

We may add that these two changes have been mostly favoured' in the replies to'
the relevant question in olur Questionnaire. ' ' ' -' '-

3.30. We are further of the view, for reasons already stated,' that in section 35, proviso (a),
the exception should be conﬁned to bill of exchange or promissory note as deﬁned in the Nego-
tiable Instruments Act or a hundi,'-------if at all the exception is retained.

I This recommendation also bears the support of the majority of the replies to our Question-
naire. .
3.31. While section 2( 2) deﬁnes a hill of exchange, section 2(3) deﬁnes "a hill of exchange
payable on demand". The first is generic; the second is speciﬁc. The distinction between a bill
of exchange payable on demand and a bill of exchange not so payable is material for -the
purposes of stamp duty." As from 1st July, 192?, bills of exchange payable on demand are
not chargeable with any stamp duty, the relevant portion of article 13 having been deleted
in 1927. Bill of exchange payable otherwise than on demand are chargeable with the duty
speciﬁed in article 13. ' '2

3.32. The deﬁnition of "bill of exchange" in section 2(2) refers to the Negotiable Irlstru-'
ments Act. But section 2(3) does not refer to that Act. Under the Negotiable Instruments Act.
a bill of exchange payable on demand is one" which is expressed to be so payable. or in which
no time is ﬁxed for payment. This is not provided in the deﬁnition section. but in section 19
of that Act. Further, the expressions "at sigh " and "on presentment" in a bill of exchange mean
"on demand"!

3.33. It is to be borne in mind that section 2(3) does not expressly provide in vyhatcases
a bill of exchange, as defined in sub-section { 2), becomes payable on demand. Apparently, in
seeking the answer to this question, one has to draw up the concept of "on demand" in the ﬂage-
tiable Instruments Act, mentioned above. This is because the deﬁnition in the Stamp Act}, "_"
tion 2(3), is merely intended to include certain other documents which may or may not to M
under the generic concept of "bill of exchange" as deﬁned in sub-section (2).

In a sense, this is a defect in the Stamp Act, inasmuch as one is driven to consulting the
Negotiable Instruments Act without any express direction to that eﬁect. This defect should" be
removed by suitably referring to section 19 of the Negotiable Instruments Act.

deﬁnition of bill of exchange' in the
other peculiarities, does not suﬁer
Stamp Act referring to the

3.33A. It may be stated that in England, the
Stamp Act is a self-contained deﬁnition which, whatever its
from the anomalous situation of the generic deﬁnition in the
tiable Instruments Act and the speciﬁc deﬁnition
Instruments Act.

3.34. Section 2, sub-section (3), provides that ('bill of exchange payable on demartd" in-
cludes the documents mciﬁed in clauses (a), (b) and (c) of that sub-section. This does not.
of course, mean that the enumerated documents fall within the general deﬁnition of bill of ex-
change. All hat sub-section (3) achieves is the limited result of bringing
of "bill of exchange payable on deman "'.

335. As regards the documents speciﬁcally mentioned in the section. it is to be noted that
clause (a) extends the concept "of "bill of encliange" "payable on demand" in respect of a slow-
ment for the payment of a sum of money out of a particular fund which may or may I10! -50
available or upon an "uncertain condition or contingency.

1. Question 3 of the Questionnaire.

2. See supra.

3. For action under section 35, proviso {a}.
it. Question 3 of the Questionnaire. .

;S;- Seearticle 13.

5. Section 19, Negotiable testament; Act, tssi.
1. Section 21, Negotiable Instruments Act, 1331.
8. Section 32, Stamp Act, 189]. as amended by the Finance Act, 1961.

in the Stamp Act not referring to the '

them within the deﬁnition T

The deﬁnition of "bill of -fexelrilagltii :_'

in the Nogotiable Instruments Act' is, on the other hand, conﬁned to documents which are pay-
able in all events,--see the words "unconditional order" used in that deﬁnition. This shows the
contrast between section 2(3), clause (a), on the one hand, and the Negotiable Instruments
Act on the other hand.

3.36. 'I'hen, section 2(3), clause (b), includes an order for the payment of a sum of money
at weekly, monthly or any other stated period. The expression "bill of exchange", as deﬁned in
the Negotiable Instruments Act, may not cover such documents,---though that Act has been in-
ccrporated to cover an order for payment in instalments.'

3.37. Lastly, clause {c} of sub-section (3) includes a letter of credit,-----"tl1at is to say,
any instrument by which one person authorises another to give credit to the person in whose
favour it is drawn". As regards stamp duty on letters of credit of credit, the matter is governed
not by the article prescribing the duty tor a bill of exchange,' but by a separate and speciﬁc
provision'-'.

According to Story," a letter of credit, "is a letter of request, whereby one person (usually
a banker) requests some other person to advance moneys or give credit to a third person, named
therein, for a certain amount and promises that he will repay such sum to the person advancing

tnexsame or accept bills drawn 'upon himself for the like amount. It is called a 'general [or open)

letter of credit', when it is addressed to all merchants or other persons in general ; and it is
called 'a 'special letter of credit' when addressed to a particular person, requesting him _to make
such advance to a third person". _ c
"3t3'?A. For the purposes of stamp duty, letters of credit were, prior to Act 5 of 1927.
by Article 13I.'a)e which speciﬁed a charge of one anna on them. But there is now a
and speciﬁc provision in Article 37, under whichithae duty payable on a letter of credit
is the rupee.' The inclusion of such letters in the deﬁnition of "Bill of Exchange payable on

-'ié:|and" is, thus, of no eﬁect as regards the rate of stamp duty. 'The higher duty under Article 3?

is payable on such letters. In this connection, section dis quite clear.

_ _ ,3_,38..B|.1t a letter of credit has to be treated as a bill of exchange for the purposes of
section 35,_with the result that it is rendered inadmissible in evidence even on payment of penalty,
'became of the bar under that section.' Thus, the result of its being included in the deﬁnition or
laiﬁ-ct exchange payable on demaud--section 2, sub-section (3]--is that it attracts the prohibi-
contained elsewhere in the Act, under which an instrument which is a bill of exchange
cannot be admitted even on payment of penalty, if it is originally unstamped.

3.39. The present position as regards letters of is not satisfactory. It is likely to-

nﬁhad, as it creates the impression that the duty thereon, is the same as on a bill of excmnge,
unlessnne bears in mind a number or provisions to above. If at all deﬁnition of
"bill of exchange payable on demand" is to be retained, thcn---- '
' "I (i) "letter of credit" should be excluded from tlnst deﬁnition; and
(ii) in section 35, Proviso (a), 'fletter of credit" should be expressly mentioned.'

; _ = . This will simplify the law. The replies to our Questionnaire also generally favour it."

It should be pointed out that our recommendation in_,relat:ion to letters of credit is conﬁned
to the Stamp Act, and we do not express any opinion on the question whether, for the
of the Law of Negotiable Instruments or for the purposes of any other branch of the law,
letlus of credit should or should not be regarded as bills of exchange. A

I. Station 5, Negotiable Instruments Act. 1331. .
1 Iahhntfﬂass v. Leirlur Ram. A.I.R. 1935 AIL 410.
3. kick 13.

4. Article 37.

5. SH lh.i"m.

6. $11; on Bills ofExchange,section 479.

7. Article 3735 amended byAct 36ofl9'.i'6.

8. Section 35. Proviso (tr).

3. To be carried out under section 35, Proviso (3).
10. Question 4.

Eﬂcct of_seetion
35, pr-ov1co(a).

Recommend: 3.39A. To sum up our recommendations concerning "matters arising out of the
'*°'"- of "hill of exchange payable on demen "-- ' '

(a) the deﬁnition' should refer to section 19. Negotiable Instruments Act. 1381, as to
the meaning of "on demand" ;

(b) letters of credit' should be excluded irom the deﬁnition, and should be included
in section 35, proviso (a). Exception. if the Exception is to be retained.

Section 209- 3.40. Section 3(4) deﬁnes a "bill of as including a through bill of lading, but as

quad-£93k' not including a mate's receipt. A bill of lading is a document acknowledging the shipment of goods,
signed by or on behalf of the carrier.' It serves three functions'---
(i) it is a receipt for goods delivered to the carrier ;
(ii) it normally embolies the terms of the contract of carriage;
(iii) itactsasadocumentoftitletothegoods.' . _

A through bill of lading denotes a bill of lading issued in cases where goods are to be
carried for a_ portion of the journey by land, upon conveyance belonging to some person other
than the ship-owner.

Subject to certain exoeptions,-- a bill of Iading is conclusive evidence of the shipment of
goods as against the master.

A mate's receipt is a less formal document than a bill of lading. 'When the goods are
shipped, the acknowledgement ﬁrst' given is a less formal receipt, known as the,rna_tq'_s uﬁ.
It is afterwards exchanged for a bill of It is not a document of title, while a lid! of
-lading is a document of title.' r _ . 2

Starnp day. -

3.41. In England. there is no stamp duty on a bill of lading.'

In India, under. article 14. a bill of ladmg, including a through bill of hiding, is chirﬁéd
with a'duty of 25n.P. There is. however, a remission granted by notiﬁcation made under section 9,
in respect of inland bills of hiding.' and there are also two exemptions under artcle I4 itself.

. - A bill of lading need not be necessarily in respect of carriage by a
can be in respect of inland navigation also." But. as already stated. the duty on an HI-of
iading has been reniitted," by a notiﬁcation" issued under section 9. .

3.42. In view of the likely increase in inland water transport in the future, thisfremhsinn
I4_ unit?!" a granted by notiﬁcation should be incorporated in article 14 of the Schedule (relating to lie

amount of duty on the bill of Iading). The replies to our Questionnaire also favour itt"

But the wording of the notiﬁcation'! granting the remission is not accurate in one request.
The notiﬁcation retain: the duty in respect of "a receipt or bill of ladingissued by a rainy
company or administration or an Inland Steamer Company for the fare for the 'conveyance all
passengers or goods or both. or animals, or fa any charges incidental to the Y
or given to such Company or Administration or Inland Steamer Company for the refund -0! -; '
an overcharge made in respect of such fare or charges." i ' ' ' ' -

' 1. Para. 3.33. supra.

2. Para 3.39,.u.pra. _
3. Gladwelf v. Vail. (I736) I.T.L. 216. cited in Stcvums, Mercantile Law (1969).. pale 340.
4. Smiths: Keenan, Mercantile Law (196 page 284.
5. Stevens. Mercantile Law (1969). page 1.
6. Stevens. Ma-cantiic Law (1969), page 344.
1. Monroe. Stamp Duties (1964). D39 195.
3. See Below, for discussion about the notiﬁcation granting remission.
9. Raﬁ:-once under the Stamp Act. {I903} IJ...R. 30 Cal.

10. Government of India, Notiﬁcation No. 6. dated 1-I-B-1937.

11. Thexelevant portion ofthenotlﬁcationis quotedlate.

12. Questions ofthetlnestionnsire.

13-. Government of India, Notiﬁcation No. 6, dated M-8-193?.

The emphasis on fares is not required, in relation to a bill of hiding. A bill of lading is
not concerned primarily with the fare. It records the contract of shipment, evidences the
receipt of goods and is a document of title. Fare iememely an incident of the contract. Hence,
while incorporating the substance of the notiﬁcation as an exemption under article 14, the defect
In the language should be attended to. - '

3.43. In the result, no changes are needed in the deﬁnition of "bill of lading"; But a name -tig|:{
change is recommended in Article 14, as stated above.' e

I. To becuried out under article 14.

3.?f'i'.:t'.'i'..:.'.'

lain H5)(a].

CHAPTER 4
DEFINITIONS IN SECTION 2(5) TO 2(lO)

4.1. The deﬁnition of _''bond" in section 2(5) is as follows :
"(SJ "hood" i11cIudcs--

' (a) any instrument whereby a person obliges hirnself to pay money to another,
on condition that the obligation shall be void if a speciﬁed act is performed,
or is not performed, as the case may be;

(1)} any instrument attested by a witness and not payable to order or heater,
whereby a person obliges himself to pay money to another; and

(c) any instrument so attested, whereby a person obliges himself to deliver grain or
other agricultural produce to another." '

4.2. This deﬁnition consists of three parts, which may appear somewhat heterogeneotn. '

The common element in the three clauses of the deﬁnition appears to be that of an "obligation".
because the word "obiiges" appears in each of the clauses. It can also be said that the obligation
should be either to pay money or to deliver grain or other agricultural produce. Ciauses (b)
and (c) also reqhiire attestation. which is not required in clause (a). At this stage, we are
mentioning these salient features in order to bring out the general idea of the deﬁnition and such
characteristics as can be usefully emphasised.

-1.3. It can be stated that a bond is a kind of agreement, and but for the speciﬁc provision
charging duty on a bond,' such instruments would have been chargeable under the generic
relating to agreements? It is only because of the speciﬁc provision charging a higher duty"
on bonds that a bond has to be distinguished from an agreement, and it is from that point of
new that the deﬁnition of "bond" assumes considerable practical importance.

It may be convenient to mention here that clause (a) of the deﬁnition refers to what
are known in England as double or conditional bonds.

clause (in) of the deﬁnition reﬁers to simple money bonds. Clause (c) refers to simple
commodity bonds.

So much by way of introduction. We shall now proceed to deal with speciﬁc points con-
cerning each of the clauses.

4.4. As regards clause (a) of the deﬁnition,_ questions arise as to in what circttmstancas
agreements with penalty clause can be regarded as "bonds", particularly because. of_ the provi-
sions of section 74, Contract Act, which give relief against penalty. Some decisions' take the

view that a covenant with a penal clause cannot be a "bond" under clause (8)-

Against this view, it can be argued that Illustrations _ _ _ T
Indian Contract Act do use the word "bond", thus indicating that a "bond" to the genml sale
can have a penal clause. The true test under the Stamp Act'. however. is. Whether WW3"

' ' and inunedialae aim, or whether that is only a sanction to done
to pay money is the Puma" Apart iromicasaa wltlti

. ' ' which d t relate to the payment of moire?' _ _ .
another obligation oes no In my mi

turn on their special facts,' this seems to he the general position.

1. Article 15.

2. Article 5.
3. (I) Gtrborue at Co. v. subatnnm. (1882) I.L.R. s_ on. 284. 186.

(la) Colieczar ofllanlvaon 1'. Haunt Jun: Ba. A111. 1916 L3. 100, 101.
4. E. .p., Nandhiv. Koran C'han4.1L.I.R. 19101.-Ih. 4'31-

(£1) and [E] to sedtim 7!-oi

discuss the positive conditions. s

eh I
,tien"lge's'nor itself create a fresh obligation and therefore, air the -purposes -or ate' saws: stamp,

'wit

portance of clause (a) is small, -having regard to the comparatively infrequent use of such"

iorrn of bonds in Indian conveyancing practice.

4.5. It has been suggested to us that in clause (a) also, attestation should be required
as in clauses (bit and (c). The common elements of a bond, it was stated, would be (i). an obli-
gation. and (ii) a formal element of attestation, -and it was stated that there was no reason why,
In clause-(a) also, the formal element should not appear. - ' e '

In this connection, reference was also "made to a Lahore judgment' and the observations
made therein while considering the question whether a certain document was a "bond" within
the Act. The Limitation Act' deﬁnes a "bond" as follows:

"(d). 'bond' includes ansr instrument whereby _a person obligeshirnself to pay money
to another, on condition that the obligation shall be void if a specified act" is
performed, or is not performed. as the case may be."

Lal, C.J'., examined the deﬁnition in the Stamp Act also. and made the foﬂowing
cornri1tsnte:-- ' - " -

-"From the foregoing. itis clear that the deﬁnition of the term "bond".even in the
present Stamp Act is not exhaustive. and that the term in the course of years_l1as
been extended so as to include instruments which might not have fallen under
the earlier deﬁnition. Indeed, it is diﬁiculr to understand why in the irt.st_rt_¢ment.s-
described in clam-'i'r'.s (ti) and (c). artestoﬁon .s-horrid be regarded as essential and
not so in the instruments described in ciause t'a)."' = e . '

"I We have 'carefully considered the shaaestion. But." as no practical difliculty has

teased by the present position. we do not think it necessary to accept the suggestion.

" I-3. This takes us to clause (b) of the deﬁnition of "bond". That clame includes "any
attested by a witness and not payable to order' or bearer. whereby -a-person obliges
15%-' to pay money to another." This clause requirw two. positive ;:oI.3.di'i9"5s:'9."ii:49i'F
negltitie condition. The positive conditions are that the instrument---

ti) must be one whereby a person obliges himself to pay money to aﬂothertand V
t'ii)_must be attested. ' _ s _ __
"The negative condition is that it must not be payable to order or heater.
IThe.'c:rucial word in clause (b) of the de_ﬁnitiot1.is the word "obliges". and. therefore.
no document can be a "hond" unless it is one which,'by itself, creates-the -ohliga'ficn1to'p'ey

- the money.

I _ obligation. it is generally held. _Si'lv'J.lJ1[i not, thereforeebe a pre-existing
already exists, a subsequent document merely reproducing the -nature of the oblig-

it an "agreement"; and does not come within the deﬁnition of "hond".'-

_ '(«'l:.§._On the same principle, that is to say. in theiabscnoe of words expressly;cteqgi_ng_;tgn
<73 courts generally take the View that an-cnt-ry in lioolzs of account at the
'ilcknawledges a debt and is signedhy the debtt'.-t','ls not necessarily a bond. Zlf .-it,-iis
a mere balance struck, it is an acknowledgment; if it is: folhtwed by words like "bald dena'?.;it

I. HWICIII Mai V. Karim Baksfr, A.l.R. 1925 Lahore 41,5 (Siﬁdi Lal,_C.J.).

2. Section 2(a). Limitation Act, 1963. i i ' '

3. Emphasis added.

4. Birds! v. Queen Empress, (1395) I.L.R. Calcutta 75?.

5. {all Md Dlzar: Gupta V. Board afkewenue, E1969) Allahabad Law Jonmll 333: ' '

(Is) West Coast Etecrmptarnxg Company Ltd. v. Sreedtrama. {l9?1)Ke1-Ala Law Times 383."

Whether
attestation
Bilﬂﬂll Kiwi}

Chanae not
suggested.

Section 2(5),
clause (Ia).

tl-nesmrd

r in
promtionf-note.

Built: oi'
Iilﬂlrity.

imam" ' 'not

"tion '2(5}(b). stamp Act, (i.e. the

amounts to an agreement; and if it embodies a promise to pay, it is chargeable as a bond'-U
if the other formalities required by the deﬁnition of bond are present. The other positive
condition is of attestation--a solemn formality.

4.10. So much as regards the two positive conditions in clause (b). The negative condition
requires that the instrument should not be payable to order or bearer', the object of this require-
ment being that if the instrument is payable to order or bearer, it could fall under the deﬁnition
of "promissory note", which is govemed by special charging provisions and other special pro-
visions. ' ' '

A comparison with the deﬁnition of "promissory note" would be useful at this stage. -Under

the Stamp Act,' a promissory note means a promissory note as deﬁned by the Negotiable .

Instruments Act, 1881. 'The deﬁnition also contains an inclusive portion, but that portion is
not relevant for the present purpose. Under the Negotiable Instruments Act,' a promissory
note is an instrument In writing, containing an unconditional undertaking to pay a certain sum
of money only to, or to the order of, a certain person or to the bearer of the instrument. .No
doubt, there are some instruments which do not amount to bonds within the
they are not attested as required by clause '
rvhieh do _not amount to 'promissory notes' under the Negotiable "Instrument": Actgbecause the
sumis not certain or the undertaking not unconditional.

4.11. There are differences as well as similarities between moods and promissory-nolef
In the ﬁrst place, a promissory-note,'in its proper and legal form, could not well be '
with a bond under clause (a),'i.e., a bond witha condition, for such a promissory note ml":
be "an unconditional undertaking"; nor could it be mistaken for a bond under clause (c) to
deliver grain, as the subject of a promissory-note can be "money only". . E

As" to simple bonds for money
for pr-omiory-notes executed in the ordinary form, i.e., payable to 'order' or to 'bearer', which
constitutes their uegotiability. because instruments so worded are expressly excluded by clarne (b).

4.12. A further distinction between a bond' as described in clause (b) and a promissory-
note which is not eitprmsed so as to indicatenegotiability is sometimes thus stated. The language
of a bond indicates an "obligation", while that of a note constitutes a "promise" or-undertaking
topay. Butthis distinction, though easy to formulate in theory, proves diiﬁcult in practice.
The distinction between these instruments when losely worded, is often difficult to trace. There
are situations where a document can fall under boh. If there is, in an instrument, on unendi-
tional undertaking to pay money to a speciﬁed person. and the instrument is awaited: it Will-
pn-,m gm-_.t¢,.f331 under. both the, at-,ﬁniﬁons_. i.e. the deﬁnitions of 'promissory note' and

4.13. An objection could be raised that since the instrument is not expressed to'be peynbﬁ
to order or bearer, it falls within the deﬁnitions 'bond, thc.mega_t1Vt_= : 1: il.
that deﬁnition is not fulﬁlled. nut, *5 to ma °b1=ct1°n. attention must be Invited.

otthertegctiablelnstrumentAct.'0neo£theExplanaﬁonstothats€cﬁ0niB8'. .,
1919) provides {in effect), that a bill of Exchange, pronote or cheque payable Id 3 . f
person is to be regarded as payable to his order, unless there are provisions _ " its
u-an5f._.,mbmty,- It is this provision which has caused some controversy. Is - '_ in

section 13 of the Negotiable Instruments Act to be read for 1116 PWPOSCS Of

is it to 'be disregarded for the purpmes of the Stamp Act ?

. Dania v. Gouda. 35 Punjab 3°"-W55 "'53 {Fm B°F"h)' . -

. Gufab cam: v. Bhanra Naiic. (1972) Medium Pradesh Law hum! 63-
_ ﬁufabh v, Rallmarr, I.L.R. I4 Bombay 511.

. Section 2(3-'3} -

, section 4. Negotiable Instnuuents Act. W31-
_ seem" 13, Negotinbl e Instruments Act (as amended in 1919').

U'\uuJh.mM---

(b). There are,on the other hand,son|edocI%I H"

falling under clause (b), such bonds could not be mistaken .

pm-tie: referring to 'not payable to ordel:-or

Thus, a pronote payable to X is, under the amendment, to be regarded as payable to 'X
or order' (by virtue of the Explanation), if there are, in the instrument, no words prohibiting
transfer or indicating an intention that it shall not be transferable} A promissory not 'payable
to A' was not negotiable before the amendment.
Explanation, the words 'payable to A' mean 'payable to A', or order, and such a note is thus
rendered negotiable, unless it is expressly made 'payable to A only', thereby prohibiting its
transfer.

4.14. The history of section 13 of tho Negotiable Instruments Act, referred to above, is of
interest. To be negotiable, a promissory-note, a bill of exchange or a cheque must be n1ad.'e payable
to order or bearer under the section. Even if it was not made expressly payable "to order or
bearer', the custom and usage of merchants in Bombay recognised a cheque from which the word
'bearer' was struck out, and the word 'order' was not substituted therefor, as an 'order' cheque
and, as such, negotiable. In a Bombay case,' however, the High Court refused to recognise
'custom as, if recognised, it would have the effect of overriding the express provisions of
law"in section 13 of the Negotiable Instruments Act, (as it then stood]. This decision caused
a great deal of hardship to the mercantile community, and to remove the hardship, an Explana-
tion was added to section 13 of that Act, by an amending Act (Act 8 of 1919} to the following
eﬁeet :--

"E.rplanat.r'on 1.----A promissory--note, bill of exchange or cheque is payable to order
which is expressed to be payable to a particular person, and does not contain
words prohibiting transfer or indicating an intention that it shall not be transfer-
able."

_4.I5. The question whether this provision :'i.e., the amendment in section 13 of the
Hegﬁable Instruments Act) is to be read for the purposes of the Stamp Act also, has caused

7 1 of opinion amongst the High Courts,' as also amongst the Judges in the same High

The documents involved in the cases before the various High Courts did not contain
'or order'. The question arose whether the provision (that the instrument must not
be fxlyable in order or heater), was satisﬁed. Answer to the question depended on whether
aliove provision of the Negotiable Instruments Act, as amended, was, or was not, to be
talccilﬂinto account for the purposes of the Stamp Act also.

Several shades of view seem to be current on the subject-

___(_1) Section 13, Negotiable Instruments Act (as amended in 1919), is to be read for
the purposes of the Stamp Act also, and, therefore, an instrument containing an unconditional
trnderlnking to pay to a speciﬁed person, if there is noexpress restriction on transfer, is to be
excluded from the deﬁnition of 'bond', as it is to be treated as payable to order, though not so

expressed."

(23 Section 13, Negotiable Instruments Act is not to be so read, as the section is intended
to dame what is a 'negotiable instrument', and is not relevant to the deﬁnition of 'bond' for

the purposes of the Stamp Act.'

I. (a) Bibi' Kazmi Begum v. Lachman La! San, A.I.R. 1930 Fat. 239. 240.
{I3} Guiabgir v. Narhmal, A.I.R. 1932 Nag. 23, 25.
{C} Baukidas v. Tanabai, AIR. 1929 Nag. 274, 2?5_
fd] Forbes, Forbes, Campbeﬂ and Co. v. Oﬂiciol Assignoe. Bombay, A.I.R. I925 B-om 171.
2. Derabhai v. Vz'rchnnd, A.I.R. 1919 Born. 73.
3. See the case-law reviewed in-
tfa} Kadarila! v. Strkhlai, A.l.R. 1968 M.P. 4, 8, 9, paragraphs 10 to 12 {Golwallrar and Bhave .TJ.).
{El}. .7. Sahab v. M.H. Gaadiv. A.l.R. 1773 Bom. 27. _
4. E6. Rnja Rajerhwnrf Debi, A.l.R. 1959 All. 583 (F.'B.].
5. Kadori-lal V. Sukfilal, A.l.R. 1968 MP. 4 (D.B.).
6. (5,) Iﬂretra Mohan v. Jan-n'm' Krmm Devan. l.L.R. 54 Cal. 445; A.I.R. 193? Cal. 472;
{b} Ram .7\.T:2ra_t-an. A.l.R. 1962 Pat. 325, 329 (Ramaswarni, CJ. and Chnudhary, J.).
(c) A.I.R.19'.r'3 Born. 27.
24 M of Lani'.-'77"5

But, after the amendment, by virtue of the _

Section 13,
Negotiable
Instruments
Act-----History.

Question of
appllcablllty

to Stamp Act _
of amended sectlon
13-shades of
view. '

(3) The matter must be determined on a consideration of the intention of the parties.
Pid the parties intend the instrument to have the commercial character of a pronote, or was
it the intention only to record the obligation by the party undertaking to pay ? In a case which
went up to the Privy Council,' this test was applied, and, in his usual forceful way, Lord Atltin
described the anomaly that would arise if the net of negoriabilily were cast wide."

(4) Negotiability is not a pre--requisite of the document being regarded as a pronotc, for
the purposes of the Stamp Act." Section 13 of the Negotiable Instruments Act (as amended)
should be taken into account, for the purposes of the Stamp Act also.

From the discussion in a Gujarat case,' and in a Bombay case," it would appear that this
controversy is still subsisting. A clariﬁcation is, therefore, desirable.

Remmnlmdauon 4.16. In order to clarify the position, we recommend that the words "expressed to be",
1é?%a){I€)ll'lg section should be added in clause (h), before the words "payable to order or bearer". Thong: it couldbe
' argued that to treat such a document as a bond. would create disharmony between the Stamp

Act and the Negotiable Instruments Act, we are deliberately making this recommendatirm, in

view of the fact that if the document is regarded as a promissory note, then" the document

cannot be admitted in evidence under the existing law, even on payment of the deﬁciency and

penalty. We do not see any strong reason why the category of documents not admissible on
payment of penalty should be enlarged.

Reoonymmdation 4.1'? We, therefore, recommend that clause (b) of the deﬁnition of "bond" should be
'°3"d '*5 revised so as to read as follows :--

clause (13).
"(b) any instrument attested by a witness and not expressed to be payable to order
or bearer, whereby a person obliges himself to pay money to another."
swim. imM_ 4.18. Clause (c) of the deﬁnition of "bond" includes any instrument attested by a witness
Etilpulatiori ror "whereby a person obliges himself to deliver grain or other agricultural produce to
"my in There is a conﬂiet of decisions on the question whether an attested instrument

pursuance of an _ I _ _ _ __
agreement. stipulation for the delivery of grain or other agricultural produce in pursuance of an agreement

for the sale of such article is a "bond" within this clause. The majority view is tint such an
instrument will be a "bond", and chargeable as such.7 Thus, in a Bombay case," it was held,

following an earlier decision," that an ordinary agreement for a sale of a crop or mortgage ' oi
The attestation is a necessary characteristic

a crop becomes a bend it it is attested by witnesses.
of the bond, but it is not an essential characteristic of a document incorporating tnortgige of

crop or sale of crop, as the validity of these transactions does not depend upon theattestatioii
of the document, and they can be carried out by documents which are not attested. Add the
bond is the basis of transaction over which is superimposed a transaction of mortgage or sale and
in such a case, the document shares and retains the character of a bond along with the cha:rIieteris-

' tics of mortgage or sale respectively.

at the obligation to pay money and the obligation to deliver crops is
the mortgage of crop or of the sale of crop respectively,
the element of bond. if there being.

The other view is th
incidental to and is a necessary part of
and, in a transaction of mortgage of crop or of sale of crop,

i. Eh}: :*llrlinr riot': Arm; sing, .»{.Ti. "1935 P._C. l71J(-Lord Atkin).
See also Guupaldcrs, A.l.R. I941 Nag. l. _
Jagjii-anrlas v. Gtrnranbhai. A.l.R. 1968 Guj. 1. 5. 6. paragraph 5tBhaawat1 and Shah, JJJ.

Par3_l;of!ﬂIﬂ v. Iriiwnr Blmi. A.l.R. l9'i'1 Gujarat 252 (AD. Desai and l}.P. Desai, JJJ.

. A.I.R. 19T3;Bom. 27.
. Section 35, Proviso ta).
_ (3) 1,, ,.-g Ball: Bros, (1905) 3 Born. I..R. 234, 238 (S3,).

([3) Rupclram-I v. Barker, {[8841 Bent. P..'l. 25?:

lo') In re Gnjrcij Sirigh. (IE8?) 1.[..R. 9.5.11. 585, 539; I _ _ _ _

my Lg' Sugar fhcfg-y_p' pijibm v_ Man', A.I.R. 1941 All. 243, 247, 257, 253 [Majority view--BaJpaI and Verrn

J.l. central:

{cl Collector Nr'i-nor v. Lr:rkslrirrr'r'harirlra. A.l.R. 1
3. In re Halli smrsm, (19-05) R Bum. LR. 234.
9. .Ru_rrr:hnndv. Barkir, (139.4) Bom. R]. 257 (S33.

-|:nur§;.'_,,!\,

927 Nag. 12, 73, 74.

gesilggfli tSrl;l:1mEI;ged 1? the transaction of sale or mortgage, audit is unnatural language to

sac ion 0 a sale or mortgage of a crop as a bond, simply because there happens
to be an attestation of the document, and in such a case attestation may well be regarded as
surplusage. The obligation to pay money and to deliver crops are exclusively referable to sale
and mortgage transactions, and they should not be treated as independent covenants furnishing
Elie b3l.:lS ot a bond. lhere 1S high Judicial authority in support of either of these contentions.
.11 3 _ U11 Bench case of the Bombay High Court} after expressing a doubt whether the real
intention of the Legislature was being carried out by interpreting the transaction in the manner
in which it did, it has been held that a document recording a sale of goods if attested becomes
a bond, and ceases to be exempt from duty and becomes liable to pay duty as on a bond.

' The judgment of the Court (which was delivered by Sir Lawrence Jankins) contains no
discussion of law, and is based upon a previous authority of the Bombay High Court, to which
the Court held. itself bound.

The I-ull Benches of the Madras High Court? and Bombay High Court" have heldhthat a
document resembling a promissory note, if attested, becomes 3 bond_

4.19. It should, however, be noted that the Bombay High Court has, in a later decision,
held that the agreement in order to come within the deﬁnition of bond, must constitute a debt,
and must be capable of speciﬁc performance. That case related to an agreement to lend money
to a partnership. It was held that such an agreement does not create an obligation to pay money
within clause (b). The reasoning was that an agreement to lend money is not capable of
speciﬁc performance. and it creates no debt though its breach may give rise to a claim for

damages.

The matter has come up more than once before the Allahabad High Court. In a case"
decided in 1936, the executant. who had received money from the other party, had mortgaged his
sugarcane. There was another stipulation that the execntant would supply the sugarcane
exclusively to the sugar works of the mortgagee. The latter stipulation was regarded as a bond,
being wholly apart and separate from the mortgage. In the same case, however, a stipulation
to deliver in pursuance of sale, contained in another docurnent--which was the third document
in the case----was excluded from the deﬁnition of "bond".

4.20. In a case," decided by the Allahabad High Court in 1941, the document in issue (being
attested) was, on the facts-. held by a rnojority of the judges? to be a bond. The minority' dis»
sented, on the ground that the obligation" to deliver grain was only incidental. According
to the majority, however, this test was irrelevant."

The same view (holding such document t.o be a bond) has been taken in a later Full

Bench case of the Allahabad High Court" T

In many of the cases cited above, the question whether the document would -be exempt
under article 5 by virtue of the exemption under that article in respect of an agreement for
the sale of goods, has also been debated. That controversy was (no doubt, of importance
for the actual decision in each case; but that controversy should be kept apart for the present
purpose, because. even if the document is exempt under article 5, the main question to be
first determined is about the scope of section 2(5)(c)--"bond".

In re Ba!!:'Bro.r.,(19U6) 8 am L-'L 334-

. In re Reference under STHFNP 3"" "3871 1'1"'
- Veriulcrr Rrinchnndrﬂshéf V- lsimram Pandumﬂg'

R. in Mad. 153 tP.B._i.
(P905) l.L.R. 29 Hom, S2; 6 Born. L..R. E41 U~.B.].

1 _

- _ .. ' 33 3 _4g5 3.; tr_ C_J.'), Batchelor and Heinuin -1-)

4. Hiramrdfmk Comm Mill.» V, Pgorrgvig (slﬁoatgil :2 (S gngf 3 Jutdgpn portion mating m mst documnh

'5. In re Board of Revermc, AJ. . l - a - - 3 267 in 277. '

I5. LH. Sugar Factory V. M011 A-I-K 194] Au' 243' 247' 25 ' ' '
i. Iqbal Ahmad, Ag. C.J.. Muiia and Dan. 33- -
s. Verma and Bairrai, 33-
9

ll]

_ Sec, particularly'. Iqbal Ahma
RB. Singh, A.l.R. 195

ii A .C.J,'siU¢lEmﬁ1'|hDﬂ8e 147-
Rci-emre Board v_ , g 7 All- 39!: 393: P'-"a 22 {F33

Rccqmmeﬂdaﬁﬁﬂ 4.21. Here, one does ﬁnd oneself in a dilemma. If an obligation to deliver grain etc.

£:i?t'"gt°°1au"' arising under an agreement on sale is excluded, then there is very little scope left for clause (c).
An agreement to deliver grain under a hypothecation bond would, of course, still fall within
clause (c) (if the document is attested), but an instrument containing such an obligation
would be chargeable as a "mortgage of a crop",1 and would not raise controversy in practice.

It is desirable that the legislative policy on the subject should be indicated more clearly.
One alternative would; be to modify clause (c) so as to exclude cases where the obligation is
in pursuance of an agreement to sell the grain or produce. The opposite alternative would
be to include such cases. Attestation will, of course, be required, as at present. Which-
ever alternative is preferred, the position regarding chargeability of the document would not be
governed entirely by the deﬁnition of bond. Reference will also have to be made to article 15,
and to the case law on art.icle 5. The object in suggesting an amendment of section 2(5) (c)
is only to clarify the position with reference to the deﬁnition of "bond".

4.22. We are of the view that the first alternative should be preferred, since it is unrealistic

Recommendation.
to include such agreements within "bonds". An Explanation should, therefore, he added to
clause (c), to the eﬁectz that an agreement containing a stipulation for delivery of grain or
other agricultural produce in pursuance of an agreement for the sale of such article does not
amount to a bond whim: the deﬁnition in the Stamp Act.

S'=°¢I'0n_3-(5) and 4.23. Section 2t'5)(b) and 2(5) (c) use the expression "attested", but there is no deﬁni-

a"esm'°"' tion of that expression in the Stamp Act. There is a deﬁnition of "attestation" in section 63(c),

Indian Succession Act, 1925 (39 of 1925). This is a reproduction of the deﬁnition of the term
as given in the earlier Succession Act."-4

The deﬁnition of "attested" in the Indian Succession Act is as follows" :--

"{c) The will shall be attested by two or more witnesses, each of whom has seen
the tcstator sign or aﬂix his mark to the will or has seen some other person
sign the will in the presence and by the direction of the testator, or has received
from the testator a personal acknowledgement of his signature or mark, or of
the signature of such other person; and each of the witnesses shall sign the

will in the presence of the testator, but it shall not be necessary that more than-

one witness be present at the same time, and no particular form of attestation
shall be necessary."

4.24. In the Transier of Property Act, there is a deﬁnition of "attestation". The deﬁnition
in the Transfer of Property Act" is quoted below :---

"attested", in relation to an instrument, means and: shall be deemed always to have
meant attested by two or more witnesses each of whom has seen the executant

sign or aiiix his mark to the instrument, or has seen some other person sign .

the instrument in the presence and by the direction of the executant, or has
received from the executant a personal acknowledgement of his sigrature or
mark, or of the signature of such other person, and each of whom has 'signed the
instrument in the presence of; the executant; but it shall not be that

more than one of such witnesses shall have been present at the same time,

no particular form of attestation shall be necessary."

. Article 41.

. This is not a draft.

. Indian Succession Act, 1865 {ID of lﬂdilmsection 50(3).

. See---(a) D. Fernandez v. R. Alives, (I878) I.L.R. 3 Dom. 332:

(b) Nirya Gopal v. Nagendra Nara, (1885) '.l.L.R. ll Cal. 429.

. Section 630:), Indian Succession Act, 1925.

. Section 3, Transfer of Property Act. 1882.

ON'-I Q-l-0%-3|-'

4.2.5. It may be desirable to have deﬁnition adopting one of the two precedents reierred R°€°mm=nﬁa35°ﬂ-

to above. We prefer that co-ntainecl in the Transfer of Property Act--ol course, with the
modiﬁcation that one witness should do. We may add that the change recommended by us
have generally found favour with most of the replies to our Questionnaire,' wherein we had
included speciﬁc queries as to the points which we have discussed above concerning s. 2th)
and s. 2{c).

4.26. The following rough draft is recon1mendcd--

"E.rpl.'ar:a(ion.--ln this clause, "'attcsted", in relation to an instrument, means attested
by at least one witness who has seen the execntant sign or afﬁx his mark to the
instrument, or has seen some other person sign the instrument in the presence
and by the direction of the executant, or has received from the executant a
personal acknowledgement of his signature or mark, or of the signature of such
other person, and has signed the instrument in the presence of the executant;
but no particular form of attestation shall be necessary."

4.27. Section 3(6) deﬁnes the expression "chargeable", and needs no change.
4.23. Section 2(7) deﬁnes "cheque" as meaning a hill of exchange drawn on a speciﬁed Section 2n)_

banker and not expressed to be payable otherwise than on demand. The deﬁnition of "cheque" "Ch|:que"_
in the Negotiable Instruments Act is identical? In England} the Bills of Exchange Act deﬁnes
"cheque" as a bill of exchange drawn on a banker payable on_ demand. The English Stamp

Act does not deﬁne a "cheque". The word 'specitied" occurring in our Negotiable Instruments

Act, is not to be found in the Bills of Exchange Act, and the requirement of demand is expressed

in positive terms. It may be noted that the deﬁnition in the (English) Bills of Exchange Act,

is itself based on a judicial decision.' -

. We are not, hovt-'ever, concerned with these minute differences between the Negotiable

"Instruments Act and the Bills of Exchange Act as regards the deﬁnition of "cheque". If, in

finite, the Negotiable instruments Act is revised, the deﬁnition in the Stamp Act could be
reconsidered if that is regarded as appropriate.

4.29. In England, cheques are subject to Stamp Duty ;" but the person to whom the Stamp D_uI.y on
chnque is presented may, if it is unstampedﬁ aﬂix thereto an adhesive stamp of the requisite ° ::f1_'"
amount.'

It may be noted that stamp duty is not leviablc in India on cheques now, because article 13
which levies a duty on a bill of exchange was so amended in 1927 as to remove the duty.
What, then, is the signiﬁcance of the deﬁnition of "cheque" in the Indian Stamp Act ? So far
as could be ascertained, and apartfrom the articles, there isone section of the Stamp Act5----
sdctien 30---which now uses the expression "cheque".--Tliat section provides that any person
receiving any money exceeding twenty rupees in amount, or any bill of exchange, cheque or
promissory note for an amount exceeding twenty rupees--shall, on demand, give a duly stamped
receipt for the same. The expression "cheqne" appears "in a few articles also. Thus, the
-illefmitiaon has very limited utility. However, no changes appear to be necessary i'n this
deﬁnition» _A
4.30. Section 2(9) deﬁnes the expression "Collector", and needs no change. 5,930" 3(9)_.
4.31. Section 2{lﬂ) deﬁnes a "conveyance" as follows :-- "C°u°°'°""

"(ID) 'Conveyance includes a conveyance on sale and every instrument by which zlm-*7
properly whether movable or immovable IS transferred inter vzvos, and which
is not otherwise speciﬁcally provided for by Schedule 1."

. Question 6.

Section 6, Negotiable Instrument Act, 1882

Section '73, Bills of Exchange Act, 1382 (Eng).

I-Iupkinson vs'. Foster (1874) L. R. Eq. T-'4.

. The Stamp Duty is a Fixed one of 2 pence.

. Section 33(2), Stamp Act, 1891.

. As to drafts, see discussion relating to section 2{3)---"bill of exchange".
Section 30.

---.ImLn:p.g.»'tu....

The broad divisions of this inclusive deﬁnition are two t------
(a) Conveyance on sale; and
(la) Other instruments.

A "conveyance on sale" is not deﬁned in the Act.

A conveyance on sale is deﬁnedl in England as including" "{1} every instrument, and
every decree or order of any court or of any commissioners, (2) whereby any property, or

any estate or interest in any property (3) on the sale thereof (4) is transferred to or vested
in a purchaser or any other person on his behalf or by his direction."

Requirement. 4.32. Conveyances on sale present no problems. As regards "other instruments", three points
must be noted 2
( i) There must be transfer (inter vivos) ;
(ii) All property is eovered--movable or immovable ;
(iii) But an instrument otherwise speciﬁcally provided for, is not a conveyance.
As regards the ﬁist requirement, it is to be noted that it is immaterial whether the transfer
is for or without consideration except that gifts are speciﬁcally covered separately. Nor are the

circumstances of transfer of any consequence. For example, a transfer on amalgamation of
companies, would be covered".

4.33. As regards the second requirement. what is to be noted is that transfer "of any
"property" is covered. The property may be----

[a] a debt', _

(b) good-wi115, which has been described by Lord Mecnaghten as the beneﬁt and good Ki"

advantage of the name, reputation and connection of a business, and "the attrac-
tive force which brings in custom" ;

(d) patent";

(e) beneﬁt of a contract? ;

(f) a share in a company" ;

tg] goods.
(Goods can be transferred by delivery. But, it the transfer takes the form cl an.
instrument, duty is payable.).

Thus, under the present Act, all transfers of property movable or immovable on sale or
otherwise and not otherwise specially provided for by the schedule, are chargeable as'
ya:-_-ces". The transfers oth-zzrwise provided for in the Schedule are -- ' "

Agreement relating to deposit of title deeds etc. (Art. No. 6).
Composition Deed (No. 22); -
Equitable Mortgage (N0. 30) ;

.___......

_ Stamp Act, 189], section 54. _
The numerals in brackets are not found in the English Act, but are added here for convenience.
I ransler of assets on amalgamation etc.

There is, however, executive remission for t
As to assignment of debts, see~-- Dorain-mm' Mudaltar, A.I.R. 1925 Mad. _753 {Ramesam 1.)

Reference wider the Stamp Act, (1896) ll--B» 23 C3]- 283-

I.R.C. v. ilafrriler, (1901) A.C. 217; (1900-1903) All ER. Rep. 413.
Bmjanrhr Brooke cl': Ca. V. l'.R'.C., U395) 2 Q-E 355- 359 (C-A-J'

, 5m..g:.rm,.;» Ca, of.-rm-aria, (1397) 1 Q.B. 175, 180. 181 (CA).
Nadia v. Ham'm_:', (190?) 9 Born. LR. 119, [31 (R|-135311'-l-)-

. Coats V. .E..R.C., (1897) 2 QB. 423.

F'
GE°°'°.'-'.5'E".*'.""'-""

Exchange of property (No. 31) ;
Gift (No. 33,: ;

Lease (No. 35) ;

Mortgage deed (No. 40) ;
Mortgage of Crop (Art. 41) ;
Partition' (Article 45) ;
Recorrveyancc (No. 54) ;
Release (No. 55) ',

Settlement (No. 58) ;

Transfer of share etc. (No. 62);
Transfer of [case (No. 63) ;
(Declaration of) Trust (No. 64).

4.34. Duty on a conveyance is subject to the exemption under article 23. In determining Du'?-

the stamp duty, the substance of the transaction, as disclosed by the whole of the instrument, has
to be looked to, and not merely the operative part of the instrument" 7'. The use of any particular
words like "release", "relinquish", "assign" or "transfer" in any instrument does not conclusively
determine the nature of the instrument. T

4.35. The question whether a document is a conveyance or a release often proves a diiﬁcult
one to decide. This is so when the transferee has already a share, or a semblance of a share. in
the property in which a share is transferred. The duty on a deed of release is lower than that
on a oonveyancc for the same arnount5. A few cases will illustrate the diﬂieulty.

in a Bombay case", the executant of the document, purporting to be entitled to a share in

. a" going pressing factory. transferred absolutely the whole of that share to the other person

interested in the factory, in consideration of a certain sum. It was held "that the document was a
oorrveyance on sale of property.

In at Mysore ease', by mutual agreement, one partner retired from business, and he executed
a document whereby he gave up his share in favour of the other partner, in consideration of a
certain sum of money. It was held that the deed could be classiﬁed as a conveyance, and hence it
was unnecessary to consider whether the deed might also be regarded as a release. This Mysore
case dissented from an earlier Madras Full Bench case", which itself had sought to distinguish
the Bombay case". The Madras case held that a document by which one co-owner purports to
abandon or relinquish his claim to the share to which he would be entitled, is in the nature of
agrelease. The Court had remarlred that a document under which one Hindu co-parceruer purported
to give up right in the family property in favour of the remaining eo-perceners would not be a
deedof conveyance, but a deed of release. On this point, the Mysore High Court observed" :

"I am unable to see any material distinction between the share of a co-owner in a
particular imrnovable property and a co-owner's rights and interests in the assets
of the partnership. for the purpose of determining whether the instrument is a
conveyance or release. Nor have their Lordships (i.e. the Madras High Court)
stated why the extinguishrnent of the interest of the releasing co-owner and the

1. On one view, rtﬂfflilﬂﬂ is 3 transfer; on another view. it is not: See cases under section 10, 53 etc. Transfer of
Property Act. ' s '

2. lBd1?i.Ilnta Bihari v. Board of Revenue, I-I.P._. A.I.R. I9?0 M.P."l'4 (F.B.),

3. Yauiatadmleparhi v. State of'My.rore, A.l.R. I966 Mys. 323 (RR).

Asto release, see infra.

Article 55.

In the matter of Hirrrlnl Nrrvrrlrarn, (I908) I.L.R. 32 Born. 5435 (F.B.).

Yenkarachaiaparhi v. State of Mysore, A.I.R. 1966 Mys. 323 (FR).

Board afﬂevemre v. Marygesa Mudaiirrr. A.I.R. 1955 Mad. 641.

In the nrarrer ofﬁiraiaf Nrrvr2i'rrrm, (I903) LLR. 30 Bom. 505.

10. Venkafaehaiparfzt v. State ofll-fysore, A.I.R. 1966 Mys. 323, 33-0.

Conveyance or
release.

Conflict.

enlarge-ment_of the interest of the release co-owner, cannot amount to a conveyance
of the undivided interest of the former to the latter."

In a Mysore case of 1'-NO', it was observed :

". . . .Whatever may be the name given to a document by the parties, the docu-
ment will have to be examined in the light of the language employed in it and
the objects sought to be achieved before any decision in regard to its elfect can
be arrived at. It is no doubt true that in ordinary circumstances or in a mojority of
cases, a release deed is executed by one or more co--shares of a property in favour
of the remaining eo--sharer or co-sharers whereby the ﬁrst--narned release their
interest of the second--I1amed9. But, as pointed out by the Supreme Court", although
a deed described as a release deed can be usefully employed as it form of conve-
yance by a person having some right or interest to another having a limited estate
e.g. by a remainderman to a tenant for life, and the release then operates as an
enlargement of a limited estate, it can also be made by using words of suﬂi-cicnt
amplitude to transfer title to one having no title before the transfer."

In the Mysore case, the brothers who were members of a joint Hindu family transferred
their interest in the joint family property to their father, but without consideration. This was
interpreted by their Lordships as a gift, as the intention of the parties was to effect a transfer
of title (and not a release).

4.36. A recent Madras case* shows that this conflict between the two High Courts still
seems to persist. The facts were as follows : By a deed dated 15th June, 1959. the mother gave
up her life interest in property in favour of her son and grandson, and in lieu thereof it was

provided that she would he paid a monthly amount which was charged on some other pro- _

party. The deed was described as a "partition-deed", and was stamped as such. On a reference
to the High Court by the Revenue authority raising the question whether it was not a conveyance,
it was held that 'the document, in so far as the mother gave up her life-interest," was
not a conveyance, but operated only as a "release deed".

The fact that such a release was for consideration made no difference in its character
as such. The Court reviewed its earlier cases, and observed :--

"The essential difference between a conveyance and a release l.ies in the faotthat
in the latter, there is no transfer of an interest or right to another who hat! no
pre-existing right in it to any extent. A release of a right or of a claim can only
be in favour of a person who; had a preexisting right or claim and by reason 'of
the release the latte1"s right or claim is enlarged' or is made fuller in its content."

4.37 This view of the Madras High Court is in direct eonﬂict with that of the Mysore

High Court in the case already referred to", where it was held that where the release h by 1'
co--owner of his share in the common property which is legally capable of being transferred'

in favour of another cc-owner, in a consideration of a. sum ofgmoney coming from outside the
common property, the transaction amounts to a sale of the undivided share.

It may also be pointed out that the decision of the Supreme Court" itself does. not support
the statement made by the Madras High Court in the 1970 case referred to The

1. Rajanna v. Dhornﬁrsa, A.l.R. 1970 Mys. 270, 276 {Pai, JJ.

2. Naniunda Se-try v. State of Mm-ore. A.I.R. 1964 Mys. I24; Med. 641. -

. Kuppzrswami v. Arimmgam, A.l.R. l9-ST S.C. 1395, 13-97, paragraph 6.

Board' ofkevemre v. Lakshmarzcm. A.l.R. 1970 Mad._3=l~8, 349, Para. 3 {F.B.). . Verikaraehninparhf v. The Store, A.l.R. 1966 Mys. 313, 327, .r!l1Jra. . Kttppuswami V. Arrrmugam, A.l.R.. 1967 S.C. 1395, 1397; (1967) l S.C.R. 275.

Board' of Revenue v.Murugeso Mrmbifnr, is\.I.R. £955 J!l\l-'I-F-'-Lu 37' Supreme Court refused to hold "that a deed styled a deed of release cannot in law, transfer to one who before the transfer had no interest in the property". On the facts of the case, there- fore, it was held that though the deed was called a release deed, the words used were sufficiently clear to transfer title to one having no title before the transfer. There was no question of stamp duty in the Supreme Court case.

4.38. The Madras easel of 1955 was a case of one of the co-owners releasing his right in favour of the rest of the co-owners. The High Court held that the document relating to it was a release, and not a conveyance. In expressing that view, Rajarnannar, C.J., who spoke for the Court, observed -.--

"]n such a case there need be no conveyance as such by one of the co--owners in favour of the other co--owners. Each co-owner in theory is entitled to enjoy the entire property in part and in whole. It is not, therefore, neoemary for one of the co--owncrs to convey his interest to the other co-owner. It is suﬁicient if he releases his interest. The result of such release would be the enlargement of the share of the other-co-owner. There can he no release by one person in favour of another, who is not 'already entitled to the property as a co-owner."

The Madras case" of 1968 tool: .a. similar view. Both these cases related to release of a co- owner's right in favour of the rest of the co--owners.

$.39. So much as to release. Some difiiculty is created also by the words "and which is not otherwise speciﬁcally provided for by Schedule I." Do these words qualify also the ﬁrst category indicated by the words "conveyance on sale", or are they conﬁned to the second cate- gory indicated by the words "every instrument by which property is transferred" etc.?

In the Mysore case, the latter view was taken. As a matter of interpretation, it is possible togtake a different view and to regard the Words "conveyance on sale" as unqualiﬁed by the Wortls "and which is not otherwise speciﬁcally provided for". In fact, none of the other articles which tax a transfer of property would, in ordinary parlance, he described as a "conveyance.

on sale". So this question should be academic. But it is better to make it clear that only the latter half of the clause is qualiﬁed by the words "and not otherwise speciﬁcally provided for etc'.".' 4.40 History of the words does not throw much light on this point. i In a Calcutta case'-', where the Maharajah of Darbhanga, by a deed of family arrange-

-tnllt. conveyed a Pargana and a sum of two and a half lakhs of rupees to his younger borther totrlooliltion that the latter should release certain family properties .on which 'he had claims,

-tilt"!-ligh Court held that the deed was neither a conveyance nor a settlement nor an instru- mere partition within the meaning of the Stamp Act of 1879. The deed, not having been modaby way of sale, was in its nature a deed of arrangement, by which a sum of money was paid absolutely and a maintenance grant made by the Maharajah of Darbhanga to his younger brother, by way of discharge and satisfaction of all claims by way of maintenance or other- It was considered that such documents should not thus escape the duty altogether, and hence the deﬁnition in the present Act has been 'altered so as to make it include all transfers inn gatvos which were not speciﬁcally provided for in the Schedule*. The Select Committee _onrih}.Etamp Bill, 1898, observed thus : - .

"We have altered this deﬁnition so as to make it include all conveyance 'inter' viva:

which are not speciﬁcally provided for in Schedule I and thus to meet the 'di.ﬂi- cnlty in I.L.R. 7 Cal. 21, where it was held that the instrument intquesﬁon

1. Dnlrdofﬁcrerure v. Mrrrugasa Mzafalrar, A.I.R. 1"9'ss Mad. 641 {F.ZB.)

2. Gﬁ_fCbrtﬂoHfng Authority v. Patel, AILR. 1968 Mad. I59.

3. In N Moira-ajoh afﬂarblranga, (1880) I.L.R. 7 Cal. 21.

4. In Enﬁmd, also prior t the ' of th F' Act, 191 secti it 14, ' chaxgaa mngfm vhnr. it was held in Deng: dem1.3aiifJ5::I;'i!!_rb!d v.e (4 B & CD.' 2431?: 1' .&mR. B) that a '-M frrrtiig to son in consideration of natural love and atlection-, -and the bond-oft]: -son to augrnent his sister': portion; by ﬂhﬂo, was a deed of family arrangement and not a conveyance on saJe;_s :al_rcMas.rey v. Nanney, 3 Ring. no, 24 M in i.awm_--e Madras else of 1955.

Scope of the words "and which is not otherwise apeelﬁcall provided Schedule I."

11011.

was neither a 'conveyance nor a 'settlement', not an 'instrument of partition' but an 'arrangement' for the transfer of property." -

3°°°m'"°"d"' . 4.41. It is desirable that the conﬂict of opinions between the Madras and Mysore I-Iiﬂi Courts on the question of release, as also the obscurity as to the words "What is not otherwise speciﬁcally provided for", should be clariﬁed.

In particular. the fact situations of a co-owner transferring his share in the common pro- perty for a consideration to another co-owner, needs speciﬁc consideration.

Three classes oi transactions may be considered in connection with release---

{1} Sales wh."r:h do not involve a reIease.--For example, a sale between two persons who had no prior common interest in a property sold, does not involve a release, as a release pre-supposes the existence of common interest of the parties to the transaction.

(2) Sale irrvohuing relea.-re.----For example, if the seller and the purchaser have a prior common interest in the property, there is, in a sense, a release by the seller of his interest in the property. But the transaction is also a sale.

.(3) Rerlease not-resulting in sale.---For example----

(a) a release relating to a settlement of a doubtful claim ;

(b) a release of a right which is not capable of being transferred in law, iike the right to maintenance, or the mere right to sue ; '

(c) a release of a debt by the creditor (here the debt is not transferred the creditor to the debtor). ' ' '{d) a double or multiple release accompanied by the acquisition of right by each co-owner in the portion of the property allotted .to Irina, which may amount to a partition between the co-owners.

As against this, where "release" is by a eo--ovrner of his share in the common property which is legally capable of being transferred in favour of another co-owner, for a consideration in the shape of a sum of money coming from outside the common property, the transaction amounts to a sale of the undivided share.

Amendment. 4.42. In our view, it would be useful to add an Explanation in the deﬁnition of: _"con- veyance", to cover an instrument whereby a oo--owner transfers a share to another co-cannula The intention is that this should apply whether or not the transfer is for consider:_rion,.._Man;y of the replies to our Ouestionnairel have expressed agreement with such a view.-The charging article on "Release" also lends "some support to such an approach". Some have raised objection that this amounts to levying a tax for the first time. but we -would point out tint it is not so, as will be apparent from some of the reported cases referred to a_bove.. - r, .-

Doﬁnltion of 5°°*i"n mo'-"' . . 4.43. While on the subject" of 'conveyance', we may also discuss_the "DDI_I?'N=93D¢W»I1d arrangements. - . -- a .-1.

""'"9"'"°"'"' There appear to be two senses in which the expression "family at-range'me_iit" is it family arrangement in the narrower sense is the horns ﬁde settlement of a claim' or some-ea, in claim or dispute which has arisen or may arise). by the members of 5,1 »-familyf, for the beneﬁt. peace orseeurity of the family generally or, for preserving its property or honour'. In the wider sense, it means any arrangement between members of the same family" -for the beneﬁt of the. . __,,,_,' family.

Iv'.

1. Question 7 in the Questionnaire.

2. Article 55.

3. {a} Bdchar Singh v. aura.-r, LL.-R. 52 Al]. 7.16: , , rs) Amber Ham v. Md'. Ejaz Kym, aA.l'.R.__ I929 134;

' ' (cl seat sings mranm Singh. a.r_=.n. 1931 'oust: "433. 434.

4. 'am: Krrmrzr ... Lola Ram Sankar, I.L.R. 59 Cal. s59.

5. See infra.

As Cheshire and Fifoot observe' :

"The e:tp1'es'sion 'family arrangement' covers a multitude of agreements made between re- latives and designed to preserve the harmony, to protect the property or to save the honour of . the family". It comprises such diverse transactions as the following : a resettlement of land made between the father as tenant for life and the son as tenant in tail in remainder; an agreement to abide by the terms of a will that has not been properly executed, or to vary the. terms of a valid will the release of devised property from a condition subsequently imposed by the testator ; or an agreement by a younger legitimate son to transfer family property to an illegitimate elder son."

_, _4-.44. Family arrangements are specially favoured by the substantive law, in certain res- pects--e.g., no separate consideration is requiredi' :

T The courts view any such arrangement with favour and will uphold it unless there are strong reasons for doing otherwise'.

Again, the Speciﬁc Relief Act, 1963", section 15(c), corresponding to section 23'(c.] of the Speciﬁc Relief Act, 187?, allows, in the case of a family arrangement, a suit by beneﬁciaries who are not parties to the arrangement.

We have referred to these rules relating to family arrangement by way of illustration. It is not necessary, for the present purpose, to enumerate all the rules of the substantive law applies-

able to family arrangements.

4.45. We now revert to the two senses of the expression "family arrangement" mentioned .al_:ove._ It is stated that a deed in the nature of family settlement may be "based on the assump-

ﬁ1n't_imt there was an antecdent title of some kind in the parties, and the agreement acknowledges and deﬁnes' what that title is"". Here, the narrower sense of the expression is intended.

In Mr. Him: Bibi V. Mt. Soimn Bibi", the Privy Cuneil, approving its earlier decision in Kftuni Let V. Gobirtd Krishna Narnia", held that a compromise by way of family settlement is in, no sense, an "alienation" by a limited owner of property. Here again, the narrower sense is It would appear that this is so because no new title is created, and the antecedent title is clarified by such compromise. Hence, where a family arrangement is based upon an assump- tion that there was an antecedent title of some kind", it is not a transfer. In other words, if a family arrangement is for the settlement of disputes--existing or future1°,--it is not a "transfer".

4.46. In the wider sense, a family arrangement, as already stated, is a transaction between members of the family which is for the beneﬁt of the family generally". So viewed, it goes beyond a mere compromise.

It follows that a family arrangement in the wider sense can amount to a conveyance. Thus, where a document was executed in favour of a widow, whereby the exeeutant, in pursuance of I. Chuhire and Fifoot, Law of Contract, 18th Ed. (1973) page 277.

2. Cheshire and Fifoot, Law of Contract, (8th Ed.) (1973) page 277.

3. {a} Muhammad Ham v. Abbas Bamii, (1932) 59 LA. 236, 246 (EC);

(b) Ciiznruiirry Ahmad Azim V. Chandhry Suﬁ Jan. I.L.R. (192.6) 2 Lucia. 335.

(c) Lniifiaixan v. Moiianzmad Nobi, (1932) 30 All. LJ. 9; I {I1} {Shalom Mohammad v. Gfinlam Hussein, (1931) 59 LA. "T4, 3?, 88 (RC).

4. Williams V. 'Williams, (1867) LR. 2 Ch. 304.

5. Section l5(c), Speciﬁc Relief Act, 1963.

6. (lg Rem' M'ewa Kwrwn-r_v. Rani Hales Krmwar, (1874) 1 IA. 157, 1:66 .0). fl: Khunni La! V. Gobind Krisiian, (I911) 33 LA. 87, 103;_I.L.R. 33 356 (l_'.C.).

7. HI. H1':-en Bibi V. Sohan Bibi, A.I.R. 1914 P.C. 44. V

8. KTIIEME La! v. GnbindKr'i's}1m1, (1911) I.L.R. 33 All. 356 (P.C.).

9. .ldmdu.r V. Debi Smile. A.l.R. 1966 S.C. 292, 295.

10. Ram Charon V. Gfrjn Na.-rdimﬁ AIR. i956 S.C. 323, 319.

ii. on Medina Dos ~.-. Midcrmd Ra n, A.I.R. 1955 so. 431,1-490, 1491; 1955 2 s.-on. 22- . an KS{ﬂp££3l1-'ﬂf.|'l.f\«'. Ammirgam, 3.1.11. 1961' Sc. 1395. l J ' Multitude of arrangements » cmﬂttﬁ-:-'. ' I---I' Assurnptionof antecedent mie-

hanee no transfer.

Family amnio-

ment In the wider acme.

a rafinama ﬁled in a suit for maintenance brought by the widow, transferred to the widow a piece of land valued at a certain sum in satisfaction of her claim, it was held', to be a oouveyance". Elfettﬁlélﬁﬁlliigl; 4.47. On the question whether a family arrangement does or does not amount to a "con- wh¢t],,,"f,m;]y veyance" for the purposes of the Stamp Act, the answer must, therefore, be sought in the nature :: ;mp_ of the instrument. What is called by the parties a family arrangement, may be a conveyance, or ed," a partition, or a release-'*--'*, or some other category of instrument. If an instrument operates as G°m'°3'"1°°- a conveyance, it does not matter whether it is described as a memorandum or a release. It is in this context that one must distinguish between a family arrangement in the narrower sense (a compromise), and a family arrangement in the wider sense. *''m''''h'°"' 1"" 4.48. Broadl s eakin , if a famil arran ement merel rcnounces a claim or declares or con- nwmary' Y P 8 3' 8 I Y ﬁrms rights, it is not a conveyance. If it transfers rights, it is a conveyance'5. We have discussed these as cts conoernin familv arran ements in order to brin out oer-i P3 S . E S tain important elements. We do not. however, consider any amendment on the subject to be necessary.

§5 ﬁ3'i°" 4.49. In the light of the above, we recommend the following re-draft of subsection (10):

mo}. "{10} 'Conveyance' includes---

(a) a conveyance on sale ;

Cb} every instrument by which property whether movable or immovable, is trans- ferred inter vivos and which is not otherwise speciﬁcally provided for by Schedule I :

13xplam;rion.----.4n instrument whereby rt co-owner of a property tr'an.'.-'fer: his interest to another co-owner of the property, is, for the purposes of this clause, rm. iarszrtrrrzent by which property is Iransfer'red."

T Reference wider the Stamp Act (1393) I.L.R. 21 Mar]. 422, 425.

2. See also Blraia Ram v. Emp.. A.I.R. 1934 Lab. 530, 532.

3. In Re Him Lat, (1908) I.L.R. 32 Bom. "505. 532.

4. Khudma: Hubraji v. Deputy commrsnaner. A.I.R- 1943 Oudh 169. 172.

5. See, especially-

(a) Marquess ofﬁrii-Io! (1901) 2 }{.B. 336;

(hi A.I.R. 1955 S.C. 481:

go) A.I.R. 1966 S.C. 2920;

on A.I.R. 1965 s.c. 323.

(e) A.I.R. 1967 S.C'.. 1395.

CHAPTER 5 DEI-7INIT[€JNS IN SECTION 2(1l) to 2{l8)

5.'l. Section Ztl 1) deﬁnes the expression "duly stamped", as applied to an instrument. There gm,-,,,, gm]... are three broad requirements under the deﬁnition. First, the instrument must bear a stamp ot "dI1|1'stampcd"~ not iess than the proper amount; secondly, the stamp must be an adhesive or impressed stamp;

and, thirdly, such stamp must have been aiﬁited or used in accordance with "the law for the time being in force in India."

Though no change in this deﬁnition is needed, two observations are in order. First, the de- ﬁnition, like any other deﬁnition, should be taken as subject to the context, and construed in harmony with other provisions. For example, where duty has been remitted by notiﬁcation under section 9 or a speciﬁc exemption is provided for under the relevant article, stamp need not be attired. This aspect becomes material for the purposes, for example, of section 30, under which I person receiving money exceeding twenty rupees in amount etc. is bound to give a "duly-stamped receipt" for the same. Obviously. where an exemption has been granted by or under the Act lot aparticular class of receipts, there can be no obligation to afﬁx a stamp on the receipt,. and the giving of an unstarnped receipt should be regarded as suﬂicient compliance with section '30. Secondly, the deﬁnition of 'duly stamped' speaks of adhesive or impressed stampsl only. This is in conformity with sections 10 and 11 ; but it will be worthwhile considering the use of frank- ing machines. This point will be considered at the appropriate place?

5.2. In England, it has been observed in one casei' that an instrument--in that case, a Position in secu_rity------is duly stamped "either if it has actually home the correct amount of stamp duty that E"3'""d-

it attracts or if it is exempt for stamp duty."

The expression "duly stamped" would seem to mean not only bearing a stamp of the pro-

per value'. but also stamped at the right time", in the proper manner", with the proper descrip- tion of stamp? under the Stamp Rules, and duly cancelleds.

Thus, in the deﬁnition of the expression "duly stamped", a number of ingredients are im- plied, such as, provisions of the Act relating to description of the stamp, mode of afﬁxing stamp and the like. A diiﬁculty may arise where the amount of the stamp satisﬁes the law, but, In other respects, the instrument is not "duly stamped" as explained above. Under section 35, proviso, a deﬁciency in the amount of the duty can be rectiﬁed. But the situation where there is no deﬁciency in ditty is not speciﬁcally covered by the proviso, though it would appear that ' tho!-hngtiage of the proviso to section 35 is wide enough to cover such cases. Having regard to

-the-lint that this is a recurring situation, it appears to be desirable to amend section 35, proviso (1), by a speciﬁc provision in this regard. This point will require consideration when section 35 ii ﬂied'.

, 5.3 As regards the case of use of a stamp of improper description, it is covered separately"

tﬁer section 37. which allows the defect to be rectified by applying to the Collector. ' '

-I. ._For deﬁnition of 'impressed stamp', see section 203). '2. 3:: recommendation as to section 'IDA (proposed). , _ f'3i i'.a.c. v. Henry Enabacfterdr ca.,(19s3) A.C. 191, 209, 210 (1962) 3 W.L.R. 1292; (1952) 3 All Ea. s43, 34:; (per Lord Morris oi'Borth-y-Gest). '

4. Suction 3, er. seq.

5. Bunion 3,17. 48 and I9.

6.-ﬁgalons 13 and 14.

7. lilztions 1-D and II.

9. Sections 12 and I3.

9. To be considered under section 35.

10. Section 37.

41- Section 2{l2)--

"Exocuted"and "Execution".

Section K1 3]-

"Impressed stamp".

Section 2(l3A}----

II l!-

sccnpn acme IIInaB!I' I "I.'ndia"'. We are recommending the T of-"'IJ1tlJ'a", 42 5.4. Section EH2) deﬁnes the expression "executed" and "execution" used with reference to instruments, as meaning 'signed' and 'signature'. The meaning of 'sign' is explained in the the General clauses Act'.

" [JI1I.'IE"1' section 3 of the Stamp r'i:LCt, an instrument is chargeable with duty only if it is executed . But, an ackno-wledgerncnt IS, under article 1, chargeable with duty, if it is "wt-iu.=_-41"

Dr_"signec1" layer on behalf of the debtor. A discrepancy, thus arises between um 'deﬁnition of "cxccution" (read with sectior1~3) on the one hand, and article 1 on -the other hand This gvtll requirei consideration, when we consider article 1.

5.5. The deﬁnition of "impressed starup" in section 2(]3) needs no comments 5.6. The expression "India" is deﬁned in section 2(l3A) as meaning "the territory of India excluding the State of Jammu and Kashmir". The object of the deﬁnition is to-"indicate that the sections concerned refer only to the territories to which the Act extends. To carryout this, it was suggested3 that it should be revised as under : - ' "(13A) "India" means the territory of India to which this Act extends".

We, however, prefer an alternative course---deletion of the definition of "India". that would involve extensive consequential changes in nlumerous sections where the' expésion "India" occurs," we are of the view that it is a preferable course. We shall presently -indicate our reasons for this.

5.7. The word 'India' appears in the following sections :--

Section 2(6), Section 2(11), Section 2(13), Section 2(16A), Section 3(b), 3(c), Section 17, Section 18, Section 19, Section 20, Section 32(3), proviso.

Section 33(2), Section 50, proviso. . . I _ W 5.8. We are of the view that the deﬁnition of "India" should be deleted, since, '!t,'B..-not appropriate that such an artiﬁeial_deﬁnition shouldcontinue on the statute ,-At pcepent, the deﬁnition has been inserted as a technical device because several sections use the -expzegnion substitution, in the substantive sections-,1o_f -the "territory to which the Act extends" in all cases where the substantive provision, is -intended -to apply-oo1y_e__t_o the ;_territories.. new a.:tiﬁ<:_ia1ly- .t1e_ﬁned. as We may mention that most of with the view that the deﬁnition should be deleted. , I I p _ I I _ I 2«:&)--"%csa:seah1s:e:-st1il'.sec-

Let us now come to the consequential changes. In section modiﬁed by. subatiII1tir¢."tcn'i-

tion 2{l1)~"du1y starnped"----the expression "India" should be tories to which this Act extends."

In section 2{16A), the expression "India' "marketable security" sold in any stock market in the State o ___#i ' may be retained. The effect will-.

f Jammu- and;-V

1. Section 366), General Clauses Act, 1897'-

2. For consideration under article 1.

3. Minutes of 20th December, 197-4.

4. Sections 2(6), 201), 2(13A}, 2{15AJ, 3l'b):

5. Question 8 of the Questionnaire.

3(c), 19, 18, 17 , 20, 32:13} Proviso.33(3i. and 50 Proviso the replies' .- received to our Questionnaire;'heV.é._'.ﬂ1$9.,l§'fP°d I" I EVE!' 7 43

- With reference to section 3(b) and section 3(c), which relate to certain negotiable in- struments and certain other instruments" executed outside "India" and brought into "India", the- deletion of the deﬁnition _in s. 2(13A) of "India" will mean that instruments executed outside India" will not be required to be stamped, and "India" will, of course incllude the State of Jammu &'Kashmir. This consequence is intended. Hence, "In:iia" occurring for the ﬁrst time in section 3(b) and 3(c) should be retained. But the word "India", where it occurs for the second time in sections 3(b) and Me), should be modiﬁed by substituting the expression "territories to which this Act extends", since that portion refers to things to be done within theterritories to which the Act extends.

In section 17, in the phrase "instruments executed in India", the expression "India" may be modiﬁed by substituting "territories to which this Act extends".

'In section 13(1) (time of stamping), the word "India" may be retained where it occurs f.nr;1;h_e.ﬁrst time. But it may be modiﬁed where it occursfor the second time. This section is theconverse of section 1?. I section 1_9, (bills etc. made out 0-f India), the expression "India" may be modiﬁed where it occurs for the ﬁrst time, third time and fourth time, and retained where it occurs for the second time--"drawn or made out of India".

._.-In section 20, the word "India" may be retained. The section relates to money expressed in any currency other than that of India.

_ In section 32(3), proviso (21), the word "India" may be modiﬁed, since it refers to instrurnents executed in the territories to which the Act extends. Documents executed in & Kashmir should fall outside section 32(3), proviso (a).

In section 32(3), proviso, clahsc (b), where the word "India" where it occurs for the sound time. it may be modiﬁed. Where it occurs for the ﬁrst time, it may be retained.

_ In section 33(2), the expression "India" may be modiﬁed.

- _= In s. 50, proviso (a), it may be modiﬁed at both the places.

Section 2(1-4) gives "a deﬁnition of "instrumen" as including every document by §=cﬁ0n1(1*ﬂ- whiclygany right or liability is or purports to be created, transferred, limited, extended, e.x- Instrument' tiiiguished or recorded. ' ' ' Attention should be drawn to the last word. "recorded", which does not udunlly "1'=°0I'd¢d' '- in' provisions" relating to instruments in other enactments.' The words "records" is-obvi-

ously needed, in the Stamp Act, as otherwise the duty on "acknowledgement" and the duty '-_'=nx_:morandum of ag,reement"~----to take only two exan::ples--would not be a duty on an .1-'.inItrument'.'. And, since it is well-known that "the thing which is made liable to duty is the

-Il,¢1'uI':nt",3 this ampliﬁcation in the deﬁnition iswelcorne.

On the other hand-, however, it is not to be overlooked that every doctmient "recording" 1"-Eaiisaetion isnot taxable. Apart from cases where an, express provision exists,--as in the two examples of acknowledgement and memorandum of agreement referred to above---a docu- mm.' does not itself deal with the right in the partidular manner, but merely records :"deaIing with the right",,would not, merely -because it records such dealing, be regarded asfan instrument containing a transaction of that type-' This aspect becomes material in of a few instruments--e.g., an instrument of partition.' 5.11. "Instrument of partition" is deﬁned in section 2_(l5), as meaning any instrument, §.g;,m;(;5)... T whereby co-owners of any property divide or agree to divide such property scveralty and as 1, See,e.g:(section 17, Registration Act. H' -V -- - I I

2. I.R.C. v. Angers, uses) 23 Q.B.D. 579, 589 (Lord Esher, M.R.).

3. Section 2(15}--"Instrurnent of partition".

including also a ﬁnal order for ettccting a partition passed by any revenue-authority or any C_1\'Il Court, and an award by an arbitrator directing 'vi partition. There are, thus, four types of instruments with which the deﬁnition concerns itseli--

{a} any instrument whereby co-owners of any property divide such property in severalty;

(b) any instrument whereby co--owners agree ro divide the property in severally;

civil court ; and

(d) an award by an arbitrator directing a partition.

g§li ﬂ*5 5.12. Instruments between ca-owners dividing property in severalty, present few problems---. pertylnseveraity.

NI¢]Il0I_'a._nd'I.l111, 5.121%. The familiar question whether a particular document mcmely records a °fF"'~""*'°"- already orally effected, or itself divides the property,---so often arising under the Registration Act,--has arisen under the Stamp Act also. The _question is one of construction of a parti- cular document. The abstract rule is clear, namely, that a document recording a past parti- tion is not chargeable with d"'uty.1 "

The Legislature, no doubt, can levy duty on such documents also, and it appears that by a State amendment, Ra_iasthan9 has added a provision3 whereunder "instrument of partition'? 1ncIudes----

"(iiifr when any partition is effected without executing any such instrument, any instrument or instruments signed by the co-owners and recording, whether by way of declaration of such partition or otherwise, the terms of such pardtion amongst the co-owners."

There seems, however, some possibility of harshness reslulting from such a wide amend- ment which might take in even incidental reference to past partitions. -

5.13. It should be noted that under the general law, to constitute a "partition", there need not be an actual partition by metes and bounds. An agreement to divide in equal share is sufficient to constitute partition.' In fact, even an intimation is enough, if unequivocal. Whe-

ther the same principles apply for the Stamp Act, is not very clear. The words "agree to divide" in the clause seem to refer to an agreement to divide on some future date which does not operate to create any right in the property. Thus, it has been held' that a partition ﬁst, which does not itself effect division but is merely an agreement for effecting a _ﬁ1ture pnrtltton on terms agreed, is not an instrument of partition, and is liable to stamp duty only as an agreement. ' (cl Finalorder 5.14. The third category of instruments of partition comprises orders eﬁecting a. §,',';,'ﬁ..';°,"",.,,,",, passed by a revenue authority or civil court. Some controversy seems to exist as to :'the cause- quenees of non-stamping of a decree of a "vil court for partition. The matter, howewt_,"ptI'-

to byaruvenue ' _ _ __ _ ::,'f_';.,°_""°'°""' tains more appropriately to section 35, which deals with the consequences of failure tostunp.

{,1} Awash, 5.15. Awards by arbitrators directing partition, constituted the fourth eat='»S°l'Y Raf "instru-

"1. "i"f_g';_ﬂi_ ment of partition". No changes areneeded in this part of the deﬁnition. ' I .» ''°°' ' 5.15. In the deﬁnition, the words used in connection with an award or arbit.rtton,ue---

..di1.ecﬁng a pa,,1ition", and not "eﬁec:h'ng a partition",--which is the wording deﬁnition in connection with a ﬁnal order of a Revenue authority or Civil Court-

ﬁl. In re Tirarhraj, A.I.R. 1942 All. 220 (S.B.).

'2. Rnjasthan Stamp Amendment Act, 1986 (16 of 1966).

'3'. Onlythe relevant portion is quo .

4. Anantlaa Bhazrachm-:1-c v. Damadar Mukimd, I.L.R. 13 Born. 25.

5_ Gmigaiyn v. Chinna Lingaiyya. A.I.R. 1933 Med. 162.

'2 'H31. ?"'l7lTF3l0T-'~"l1ii'~'t' 11" power to do more than to direct a partition. Therefore. even if t L arbitrators go. turthcr and deﬁne the manner in Wl'1lCl'l the partition should be made, it-_h_a_s 110 mﬂfﬁ llllldlnge-force.' and for the purposes of Stamp, it remains an instrument of partition."

' 5.17. Section 2t' 16) provides that "lease" means a lease of immovable propertv and §°°*l°n3(15l-- includes also--- ' L""°"e'-"

ta] a patta ;

(b) a kahutiyat, or other undertaking in writing, not being a counterpart of a lease to cultivate, occupy or pay or deliver rent for, immovable property;

to) any instrument by which tolls of any description are let ;

(d) any writing on an application for a lease intended to signify that the application is granted.

In the Transfer of Property Act,-" a lease of immovable property is deﬁned as a transfer of a right to enjoy such property, made for a certain time expressed or implied, or in perpe- tuity-, 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 tcrrm.

The English Act does not contain any deﬁnition of a ''lease'', and it is to be assumed "that itavhas -the same meaning as under the general law.' ' 5.13. The deﬁnition in the Indian Stamp Act can be divided into two parts. First, it says "pm pm,_ that"'Ieasc" means aiease of immovable property. While conﬁning the scope of the expression "to "immovable property", this part of the deﬁnition does not indicate what is intended by "lease". Secondly, certain instruments are, by the second part of the deﬁnition which is inclu-- sive, brought within its scope.

5.19. As regards the ﬁrst part, it is pertinent to. point out that courts have, in-deciding cases,' referred to the deﬁnition of "lease" in the Transfer of Property Act. A ques- tion to be considered is, hether we should now provide that "lease" means a lease as. deﬁned _i11.thn Transfer of Property Act. While that Act does not apply to the whole of. India, and provisions as to leases do not, in their entirety, apply to agricultural leases, it seems__nsefill to adopt the deﬁnition in that Act by reference, so as to have precision. We recommend that it should be adopted. The replies to our Questionnaire' have also, in general, agreedwith this.

- -5.20. Both under the Stamp Act, and 'under the Transfer of 'Property'Act, the-term,'-ilease" "1!11t1.1°'!Igr*,., is' restricted to lease of imrnovable property; but nowhere in either of these Acts islitlie, ex; preuion "immovable property" deﬁned. Section 3 of the "Transfer of Property Act sin1pI_y.'s_ay_s ' that "immovable property does not include standing timber, growing -crops, -or F H Act" is silent about the expression "immovable. prop_erty", the deﬁnition of that expression General Clauses Act can be used. That deﬁnition' includes "land, beneﬁts to arise" out of hand lass things attached to the earth, or permanently fastened to anything attached',"toI_ the 1;-,-qrth"--"a deﬁnition large enough to include growing grass." ' ~ e

- 1 l. Kaidns v. Tribhuwaruias, (190?) I.L.R. 31 Born. 68, 71.

1. Sci: also Emperor v. Burro Lai. T3 LC. 336 (Oudlﬂ.

3. Soetion 105, Transfer of Proprty Act. 1831. . ' . 7

4. See Jones v. LR_:§'..' Sweermear Amromartc Delivery Co. v.'I.R.C'.. (1ti95)'l-Q.B. 484, where an agtfeeinent licensing in installation of automatic rnachincrs on railway platforms was held not to be a lease for stamp duty purpgsgs.

- 5. 121., Ag. .secy., Board of nanway v. South India liailwny, a.t.'a. Isis 'Man. 434, 438 (FJ1). (Kﬂshniﬂia ta.

6. Qustion 9 of the Questionnaire. -.

7. Section M26), General Clauses Act. 1397.

s. be re Hormusji front. pass) I.L.R. 13 Borni 37, sec.

:4 M or Lawm--7 Second part of the deﬁnition considered.

Tolls.

The more restrictive provision in the Transfer of Property Act and the Registration Act. should not, it has been observed, be imported into the Stamp Act.' We are of the View that the deﬁnition of "immovable property" in the General Clauses Act should he adopted, by repeating it in the Stamp Act.

3.21. The second part of the deﬁnition of "lease-" in the Stamp Act has four clauses. These deal with particular classes of instruments. The main object of these is-'--(i)" to check avoidance of duty by not executing a lease, and (ii) to extend the deﬁnition to the letting out of "tolls", which are not "immovable property" in the stricter sense.

5.22. The sub-clauses do not' seem to have raised such controversy. But sub-clause (c), which relates to a toll, could be explained in some detail. A toll is an imposition for the pri- vilege of using a bridge, road, ferry, or market, or for catching ﬁsh, cutting and appropriating trees for fuel etc.' A tax paid for some liberty, particularly for the privilege of passing over a bridge or on highway, the tax paid for the use of a ferry} or the tax paid for selling in a market or fair,' or the tax paid for the right of ﬁshing in a river, is a toll." .

Sub-clause {c)- has, thus, extended the meaning of the term "lease"; 'for, the right -to levy tolls, though concerning the user of land or water, is not regarded in law as an "interest III immovable property. An ijardar of tolls .does not acquire any interest in the land or ,water concerned." Toll is distinguished from octroi which is a duty levied on good entering acertuin area, town or territory.

There are several Central Acts relatingto tolls----

(a] The Indian Tolls Act, 1851 (an Act for enabling on public roads and bridges) ;

(b) The Indian Tolls Act, 1864 ; - ..

(d) The Indian Tolls {Army and Air Force) Act, 1901.

be noted that the entry in the Schedule to the Stamp Act' charges shall deal with this at the appropriate place.

5.24. We may, at this stage, refer to the distinction between "lease" and "licence". "A person may lawfully enter on land either in':,.exercise of right as owner of an intere_$t_in land, or because the owner has given him permission. The owner might have granted hint a an inter-est_oonfe1_'1'ing the right of exchsive possession;--or he might merely have '-a licence,' permitting him to enter the la'ndrir'use' it for speciﬁed purposes. _, __l";' H T; was propounded by Vaughan, _C. I. in the "a dispensation orlieenee properly pasuﬂi but only makes an -'hwfd Government to --levy" tolh 5.23. It should, lastly.

duty on an agreement of lease also. We 5.25. The classic deﬁnition of a '-licence' seventeenth century in Thomas v. Sorre-ll." He said no interest nor alters or transfers property in any thing, which without it had been unlawful!' ' ' , . . _

1. InreHarmu.:jI'tg-=au1,(1S86)I.L.R.l3Bgi;1.81;iig9._'.ﬁtI'NanaH1ait;I':1];rida5nE3i-frhcmﬂlﬂfitﬂsliiz ' f, I1ov.vever,tha ta' usﬁon, w, I. . ¢C€.I'|1?35t'|-F _8I'°l!ﬂ - _ . numberofslie bul§.3.iJ11:o::atl§'ge1(-atainmmeperhmd?::?notaleese,becauseposaesmonhodnc¢l=e=IIl!!'!9¢ .

2. (3) Goodrich V. Venkanna. (1373-81) I.L.R. 2 Mad. la;

(b) Financial Commissioner of the Puziab's.Circnlar No. 35, nual, Part I-13, Chap. 3. para. 2.

(C) Ram Pritam V. Shoobufchwrder, (1338) I.L.R. 15 2.59. _ Deputy Collector. Rom' v. Daniel. (1833) Ram. P..l.§ 1!. Madras Stamp Manual, {I958} 101-15. President ofthe Tniuk Board v. Lek , . (tips) 1.1.9. 31 Mad. 54. . msupm Zamindirry Co. v. Trailok ,.A.I.R. mt tel. 562. ' St'audard Coal' Co. v. C'.C.R.A. Banal. {_19Ii3II.L.R.ﬂ Cal. 313.

Article 35, Stamp Act.

For history of licences. see I-loldsworth H.E.C. 'Vol. '1'. page 327, 323.

Thomas 1'. Sorrell. U573) Vaughan 351- D ":99°."'P'*S-"'."*'4-' dated 13th August, 1333; (1934:: runjaii 47 The expression "licence" is not deﬁned in the Stamp Act, or in the Transfer of Property Act. The Easements Act, deﬁnes it as follows :1 "S2. Where one person grants to another, or to a deﬁnite number of other persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, 'be'u11lawfttl, and such right does not amount to an easement or an interest in the property, the right is called a licence."

5.26. In the law of property. lease and licence are distinguished by stating that I lean transfers an interest in land, which a licence does not. Where exclusive occupation is mt given, the right is only of licence.'~' A licence is merely a personal right, and does not amount

- to an interest in property."

5.27. As Denning, L.J. (as he then was) observed,' the difference between a tenancy and a licence is, therefore, that in a tenancy, an interest passes in the land, whereas, in a_ licence, it does not. He, however, added, "In distinguishing between them, a crucial test has sornetimes been supposed to be whether the occupier has exclusive possession or not". "If he was let into exclusive possession. he was said to be a tenant, albeit only a tenant at will, Illleseas if he had not exclusive possession he was only a licencee. This test has, however, .

oﬁur given rise to misgivings because it may not correspond to realities... .. The test of cxciusive possession is by no means decisive."

"In the context of the deﬁnition of 'lease' in' the Stamp Act, the distinction between lease and licence becomes material. because, if the document not a lease, the charge for leases under the ﬁrst part of the deﬁnition of lease would not be attracted. At the same time. it shqukl be noted that the inclusive part of the deﬁnition of 'lease' is not conﬁned to leases ' ' , and may cover documents which are not teases as deﬁned in the Transfer of Property ' Act. In particular, clause (b), which relates to "ltahuliyat or other undertaking in nqpbeing a counterpart of a lease, to cultivate, occupy or pay or deliver rent for immovable J H " is somewhat widely worded. No doubt, a licence does not become a lease merely a "ten " is reserved, the licences like exploring and prospecting licences (in of minerals] are not regarded as leases for the purposes ofthe deﬁnition in the Stamp Act. Here, the general test of' transier of interest as indicated by sole and exclusive occupa- tion' could be utilised.

5.28. But it is to be noted that in clause (b), the words used are not rate and. excittstve occupation, but an undertaking to occupy irnrnovable property." A case could, therefore arise where, even though the document speciﬁcally says that it should not be construed to create a tenancy, the rights conferred by the document on the party by the -owners are of. such a nature that it would fall under clause (bl. -

5.29. In the light of the above discussion, weirecommend that the deﬁnition oi tau should be revised as follows :--

"{16) 'lease' means a lease of immovable property as deﬁned in section 105 of the Transfer of Property Act. 1382, and il1clut1es'also----

(a) a patta ;

(b) a kabuliyat, or other undertaking in writing, not being a counterpart of a "lease", to cultivate, occupy or pay or deliver rent, for, immovable property.

(c) any instrument by which tells of any description are let ;

(d) an)' 'Writing on an application _for_au_lease intended to signify that the . cation is granted. . -

1. 52, Indian Easements Act. 1332-

2. A-.I.R. 1959 S.C. 1262. 1269.

3. ALR. 1963 SJC. 175; {I963} ] 5.011. 23.

4. ﬁg-ﬁraan v. Errtitgton, (1952) 1 K.B. 290.

5, Baa;-dofkevenue v. South Indian Railway Co.. I.L.R. 43' Mad. 355'; _.u.n. 1925 _ Mad. 434.

s. Barmafr fJt'!Ca., I.L.R. 55 All. s-:4; ALR. 1933 A1l.735 CF-.B.); ' . ' e -

Section 2{l6A}--

Markntablc Security.

Explanation.-4:1 this section, "immovable property" includes ttmd,. beneﬁts to arise out of land and things attached to the earth, or permanently fastened to any- thing attached to the earth."

5.30. Under section 2(16A), "marketable security" means a security of such a descrip- tion as to be capable of being sold in any stock marketin India or in the United Kingdom. The deﬁnition was added in 1904, when this deﬁnition and section 23:'; were added and arti- cle 6 (agreement relating to deposit of title dcogl) etc. was amended. The object of the amend-

" ment was to save instruments of deposit of marketable securities from the ad valorem duty tion. . - _ Section 2{1'!)--

ilmortnp deed»:

Section 2(l8)---

upawrui under article 6.

There are no Indian cases on this deﬁnition, though there are a number of English cases on the corresponding provision in the English Act? -

_ 5.31. We recommended that the mention of 'United Kingdom' in this deﬁnition should be omitted, having regard to changed political conditions. There have been suggestions? to omit "in India" also, but we do not think that the clause need be so widened.

5.32. Section 2(l7) deﬁnes a "mortgage deed" as including every linstrurnent lwherebyn, tor the purpose of securing money advanced, or to be advanced, by way of loan, or existing or future debt, or the performance of an engagement, one person transfers, or creates, to or in favour of another, a right over or in respect of speciﬁed property. It may be noted that a mortgage of movable property is also covered by the deﬁnition} Another point to be noted is that this deﬁnition includes charges also,' as the words "over or in respect" of property are wide. - .M:.;,_;. 3, The body of the Stamp Act maltesnno distinction between legal and equitable mortgages.

But the charging provision" makes a distinction. The duty is different, the shape of an agreement by way of deposit of title deeds.' A deed which contains all the provisions which one would normally ﬁnd in a mortgage deed, would, however, be chargeable as a legal mortgage. The mere fact that the document also contains the bargain with regard to deposit of title deeds, will not make it an agree» ment for the deposit of title deeds,' within the meaning of article 6. The above points do not indicate a need to change the deﬁnition.

5.33. In section 2(l8), "paper" isudelined as including vellum, parchment or any other material on which an instrument may be written. . . ..

It needs no change.

.' This is necessary in order to avoid any argumt that the deﬁnition in tho.-."Trausfer 'of PIOPEITY 4'80' b'-'- SIUIGM» . Section 122.,.St:u:nr: Act, .1391 (Ens-J- _ _ _ i in reply to the Questionnaire issued by us--Qucation 10. _ ' " ' " ' ' ' '. ' Miran Ba-ksh v. Emperor, A.l.R. 1945 Lab. I59, '72 (F.B.}- ' As to charges, see section 100, Transfer of Property Act. . Article 6, as contrasted with article 40Cb].

. As to the position under the Registration Act. sec A.l.R. 1939 RC. I67. . In re Indian Stamp Act, A.I.R. 1954 Born. 462, 463, para_grap|1_ 2 ('F.B.}.

oo--I::z>.g.a_o-r_.-atu--

if the mortgage is in CHAPTER 6 DEFINITIONS IN SECTION 2t"l9J AND 2(20j .6.l. Section 21119) deﬁnes "policy of insurance" as including-

_. "{a] any instrument by which one person, in consideration of a premium, engages to indemnify another against loss, damage or liability arising from an unknown or contingent event;

(h) a life-policy and policy insuring any person against accident or sickness, and

-;-:, ._ v any other personal insurance." a .6.2. It may be pointed outthat clause (a) of the deﬁnition is not conﬁned to 'policies'. andincludes any instrument by which oneperson engages to indemnify another. If there is an'i1rdmnnity undertaken in the document. then it is a policy for this purposepeycn though, in bt_1s_i.ﬁ_e7Is'woIld, the document may be distinguished from a "policy". "

";_6.3-. In relation to one class of documents, nalmelynletters of acoyer or engagement to islle-aapolicy of insurance, the position requires detailed exarnination. The need for discussion arises out of the charging article,---article 47.

6.4. The principal paragraph of article 47 levies duty on various policies. Considerable confusion is created by the "general exemption" under the article, quoted below' :-----

_ "General Exemption".

"letter of cover or engagement to issue a policy of insurance."

"Provided that, unless such letter or engagement bears the .',tn_mp prescribed by this Act 3'-Jr such policy, nothing shall be claimahle thereunder, nor shall it be avail- able for any purpose, except to compel the delivery of the policy therein men- tioned."

This exemption is anomalous, because, as will be shown presently, there is considerable rlﬂueuce between a letter of cover etc. and a policy. In fact, the very language of the exemp- tion 'makes a distinction between an 'engagement' and a 'policy'.

6.5. The exemption tor letters of cover etc. would suggest that a letter' of cover etc. would otherwise fall under the expression "policy of insurance". But, as stated by the Supreme Court in Rm Rattle! and C05-, while a letter of cover contains a contract of insurance, it is not a "policy Of insurance" in the common understanding of that word in the trade?'-

_ E6.6..In the'Supren:te Court case (which relate'd"t_«_:5' ﬁre insurance);'the letter of coveriwas not pumped, but_' the p_laintifl' was prepared to 'pay the penalty punderiseetion 35; and had ' _done.so. The "question to be,de_cide_d__was whether, _e_\_ven'*on payinent- of "penalty, the be ad_rnitt_ed in evide'u_oe__. This qugti}on_ arosebecause contention of the--tine " lccmpany was that sinoe'the_ex_en1ption unde_r_ §.1ft_iclKe':4-'1' uses the' irofds-"beari -the tramp iﬁd b__3.-_.rhr'.r Art for such policy", the stamppshouldﬂhave been'afﬁi:ed'-ur"if:e- nine of the at-"".. .. . . . _. . ..

.'lti$__f":iT;dd _ihe'_ pr'o_vis_ion_ in" section 35 "for subsequ_ent_paynnrnt'aef_penaltyi'could"not be rnartvea the special language of the e:ternpfti<_i1_1._'_'l'his"'iaiais}_ iiegatiired "by the "Supreme ' " ':;by_afn1ajorityjudge.m_ent*.. According toi_the'n1_ino1ity'ivicw-, honjveiger, in yievrof the_e;tpri:ss its insurance].

3. Emphasis supplied. ' I

4. Serial' and Shah JJ.,- Raghbar Dayal, J. dissented.

2...R...lg:ri!a1 8;.I.Za._:.:._.Nerfoncf,.Sr§£ri!.V.:'!~*3'¢{""-'FE'? Cv.-...7:.=~'i- 49-1.: !i.-3?§5'i§'-_C:_l,35F"- _'_??3.: ,PE'F"3"3P'1' 5""° Wat' 'ti.

Section 2(]9}--

"Policy of Insurance"-

introductory.

Article 47 of the Act----Contro-

versy created by the exemption.

Judgment of the Supreme Court Is to ﬁre inun-once.

er the exe1np_t:iion_ to article 47, the pletter_"coilld._hot*be_ rénbsertjtientlyestampedaitider . I. This discussion applies to all policies, and is not conﬁned to sea insurance policies. ' ' ' "

50..

section 35. If the letter is intended by a person to be used for making a claim thereunder, and, therefore, to be treated as a policy, then. according to the minority view, it is incttmbent on the person so intending to have the letter properly stamped for that policy from the very beginning. If it is not so stamped, it can only be used to compel the delivery of the policy, and not as a basis of the claim. If subsequent stamping of the document to convert the letter into a policy is allowed at the sweet-will of the party standing to gain, then, according to Raghbar Dayal, J. (who was in the minority), the law would lead to anomalies. _ 6.7. We are not so much concerned with the meaning of the expression ".be:.a1. slam ", as with the question whether it is proper to equate a cover note with a policy. On this point, the majority as well as the minority took the same view.

The following is from the majority judgements':

"(16 The learned trial Judge held that the instrument was 13': a letter of cover but it was in reality a policy of insurance, because it contained a _cont!act pf ﬁne surance. It is not in dispute that if this view is correct, then onpaytneﬁl ti the duty and the penalty the instrument would be admissible in evidmicenupde; section 35. The Appellate Hench of the High Court, i'1oweve.r,_ was to sweep: the view of the learned trial Judge and, we think, in this the Bench was right. The fact that a letter of cover contains a contract of cannot make it a policy of insurance". As the learned Judge of the Appellate Bench rightly pointed out, the letter of cover was granted a general from the liability to the duty speciﬁed in Article 4?, that is to -say, it was exernpted from duty which would, but for such exemption, have been payable on it Imdet that article." _ ' "

"Now, under article 47, duty was payable on various policies of insurance. 'It would follow that a letter of cover would have been liable to duty as a policy of insurance if the exempﬁrnt had not been granted? The letter of cover had, therefore, to contain a contract of insurance, for ' ' it would not otherwise have been liable to duty under article 47,- But it did not thereby became a policy of insurance only for then the exemption and the article would have been in conflict with each other."- We may also mention that the word 'cover' itself indicates"-that property is held"

insured or covered by it against certain risks. ' ' (7) "What then is a letter of cover ? How is it to be distinguished from o._oaIir:y of frustrated? The Act contains no deﬁnition of it or of an 'engagement to issue a policy of insurance', terms are well known in trade. The Act is dealing with businessmen and with mercantile docu- ments well known to them. _ ' ' H "It may be shortly stated that a letter of cover no doubt contains a contract oﬁ inﬁlrtllee; but it is Hot n. policy of insurance in the common. understanding of the: worn! in the 3raIle..:It.is well known that in order to obtain an insurance against the risk of ﬁre the assured has ﬁrlt to send a proposal to the insurer and then the insurer takes a little time in making: , _' u whether it would accept the proposal and undertake the obilgation of __ .

issues a policy only after he is satisﬁed that it would be a prudent business. to' .

Experience of trades people has, however, ishown that some kind of protecti_on_' _- period when the insurer is making the enqlnrjes is necessary. This protection is 'gt _ called a letter of cover. It is expratsiy a contract granting insurance for the __ '_ g - _ date and until a policy is prepared and dc'. .' Péd 3'0"? 53 '-"t"-"""'*'H3' 555"" 0" 'm'§'!'_I*~'3, .' ,' date nienttoned in it, inst as a period elltliirty days is mentioned in the I_i;tte_i;in1.Pr ' " ' issued in his case; see Citizens Irtsurnnce Co. of Canada it William F!!!'-50"':

present Interim Protection Note satisﬁed the conditions which would make it' 'a ._ I this sense. _ " _' _'

1. R. Rn-rile! & 02.. A112. 1954 so 1396. 1398. 1399; Para. 6'----10lmaiotitrviewl- " = = ' __

2. Emphasis supplied.

3. This observation, with respect, is obscure.

. Emphasis is supplied. 5

5. Citizens Insurance Co. of Canada v. iﬁliia.-n*Parson.r, (1391) '3 AL. 96.

'It gives protection for a period of thirty days or the period upto the date of the mice of the policy. An engagement to issue a policy means, it seems to us, more or less the same thing as it letter of cover. A letter of cover, therefore, cannot be admitted in evidence under section 35 as a policy of insurance."

The above passage shows that the Supreme Court. made a clear distinction between the two concepts (cover note and policy). Some confusion was, no doubt, created by the general exemption, because the exemption itself is anomalous. We shall revert to this aspect later.

The minority agreed with the view. Raghbar Dayal, 1., expressly stated in his dissenting judg- ment that it was agreed that a cover more was not a policy.

It may be mentioned that in the case before the Supreme Court, duty and penalty had_a.h_'ea_I1y been paid in the court below, pending determination of the legal questions. The legal objection by the insurance company was that since the letter of cover did not "bear stamp", it could not be subsequently validated. The Supreme Court observed on this point :-- ' "[8-) The next question is whether a letter of cover is itself an instrument chargeable with duty under the Act. It is not disputed that if it is not so chargeable, it cannot be admitted in evidence under section 35 by subsequent payment of duty and penalty. New, section 3 speciﬁes instruments which are chargeable with duty under the Act. It says, "subject to the provisions of this Act and the exemptions contained 11] Schedule I, the following instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty therefor 'respectively, that is to s:y,'_----(1) every instrument mentioned in that Schedule which . . . . . .is executed in India on or after the day of July 1399." July 1, 1899 is the date on which the Act came into force. .

"{9} Now the contention of the respondent is that a letter of cover is not an instrument chargeable, with duty, because the General Exemption in Article 4? of the Schedule exempts it from such duty. This contention was accepted by the learned Judges of the Appellate Bench of the High Court who pointed out, "It is signiﬁcant that the words used are not that such letter is chargeable with duty. The words used are "bears the stamp prescribed by the Act for such policy".

On a proper interpretation this means that such letter ofcover is not chargeable with duty as such under the Act but if it beats the stamp prescribed by the Act for a policy of insurance. then it will shed its inability and will become a_ competent document __on which a claim for loss could be made." They further observed, "as no stamp is ﬁxed for such a letter of cover being not a document chargeable with duty, the statute uses the signiﬁcant words 'or hearing the stamp' and indicates the rate by saying that the stamp must be the same for 'such a letter of cover which is prescribed for a policy of insurance under the Act." ' ' "In this Court Mr. Chattetiee for the respondent also advanced the same argument.

"(l0) We are unable to accept the view which found favour with the Appellate Bench 0! the High 'Court. The matter wasput in 'two ways. The first was that-an instrument which is exempted from duty by Schedule I is not chargeable with 'dnty'under- su 3-and a letter at cover is so expressly exempted. No doubt, i£.an__instrument is exempted by_ the Schedule from duty.

then it cannot be chargeable. But we do npt. think Exemption clause is that the exemption is -to apply only if the letter of cover is used for corn- pelling the delivery of the policy mentioned -in it'. If it is used for. any other purpose, then it is not exempted. That is why a proviso has been employed in the provision and the eﬂect i that is to take the letter of cover out of theexeinption in all other cases. If it is taken cm of tin exemption, then, of course, the present argumenttfails. 'we are unable to see how a bitter of cover can be said to have been exempted 'for all purposes, if certain things be under it for the sole reason that it does not bear a stamp. If it were exempted for all pmnun. it would be fully enforceable even without a stamp. When then nothing is claimable under it except the delivery of a policy.

prescribed for the appropriate policy, 1 claim can be made under it. It seems to is tht if at

1. Emphasis supplied.

_ that a letter_c_f cover is forall purposes ex- -

erupted front duty by the General Exemptihn. We think the proper construction of" the Genenl -

"a letter of cover is not . ' IE, however, it bets "

7 instrument bears a stamp it has incurred the liability for-the stamp duty. lt has not then been 1 _. _ - - exempted. Therefore, it cannot be said that a leltereof cover -is exempted from duty in all cases.

- a 'When It is not exempted. it is -an instrument--chargeable to duty." - - -

0'h°" l'°"°i°5' 6.8. This judgement is conﬁned to Fire insirrance. Before this judgement. generally on the

-question whether a "slip" for marine insurance is a policy for the purposes of the Stamp Law ]udicial decisions' did not help in creating certainty. .

The importance of the above point does not survive? as regards marine insurance policies, because of specific statutory provisions governing therrﬁ. But, the point is of importance in re- gard to other insurance policies.

"'"°'""'5" 6.9. In view of the above position, it was suggested to us that the present scheme of the Act is anomalous and the anomaly should be remedied. Really speaking, a letter of cover is not to be regarded as a "policy", though it may be evidence of a contract of insurance. This is clear from the relevant passage quoted frornthe judgement of the Supreme Court'. This being the basic nature of a cover note, a cover note, it was suggested, should not be regarded as a policy, and the deﬁnition of "policy of insurance" should be amended so as to exclude cover-notes. This would not lead to any loss of revenue, because, after the nationalisation of the general in- surance business, tlie possibility of insurers not executing a formal policy in order to avoid stamp is almost nil. .

ﬁgm 6-10. to 6.14. In concrete terms and in detail, the suggestion made to us was as follows:--

(a] A letter of cover etc. should be excluded from the deﬁnition of "policy of in- surance", by an express provision amending that deﬁnition. The reasons have _ been given already in the above discumion. In brief, a policy and a letter of cover are different from each other. "

(b) The general exemption to article 4?, as at present worded, then becomes r and can be omitted.

to) A provision to the effect that if, at the time of its execution, a letter of c engagement to issue a policy of insurance bears the stamp required by the Act for such policy, then, it shall not be necessary to stamp the policy again, should be inserted. The reasonableness of such a provision is obvious.

(d) Under article 5 (agreement). anrexemption in respect of letter-of cover etc. should be inserted. The intention is that such letters should be totally exempt from stamp duty under any article of the Act.

tel These amendments would lead to no loss of revenue in the present circumstances.

We have, however. after carefully considering the suggestion, come to the conclusion that"

the matter may be left as it is, the provisions having stood for a long time.

6.15. to 6.18. The above 'discussion was concerned with a suggestion "made duriq our discussions. We have not received any suggestion from the public for amendment" of the tion in response to our Questionnaire.

#1. (a) ' Surqimaf v. 'l"i-iron Irmtrarnce Co.. Ala. 1925 Inc. 33, 34. p ' - .- {b} In re Marine Assurance Cerriﬁcaxe, (1895) I.L.l. 19 Born. I30, 132 (Document which does not contenqslato another format document}. - . 3 (cl Trtcamji v. Birji, A'.I.R. 1923 Bom. I42, I43; 24' Born. L.R. 820. (Distinction between cover note and policy) (cl) Ahmed San}: v. Grtmifrry 3: Co.. ALE. 194-fsind 93, 103. (Certiﬁcate of Insurance]. _

(e) Reference (1903) I.L.R. 30 Gal. SQS, 575. ' (Maclnnn, C.J.)--"A contract for sea insurance is one thing and ap0llC}fDfS€ainSu1'ﬂ_.I_10¢8nﬂtl:I¢l'.'._ ' ' ' e' ' ' '-

.2. Soy.-. discussion as to section 2&0}-'-"t'_5ca policies". trivia. 3_ Sections 24, 21(2) and 23," Marino'Insufance set. ms.' at. Para. 6.7.ru_prn. ' '

5. Q. 11 ofnae Questionnaire.

6.19. "Polic_\' wt" f._'_i'l>'ltP insurancc.." is tlL'llI]L'tl in section lllll.-"H as meaning any instrument covering not less than Filly or such smaller nuntber as the Central Ciovcrttmcnt may approx-e, either generally or trilll rel'.;'I'enc-: to any ]'I'rl.I'lii.il.ll£l':' case by whiclt an insurer'. in c.ons.idct'.'1lion of a premium paid by an employer or by an employer and his employee jointly, engages to cover. with or without meelical examination and for the sole beneﬁt of persons other than the employer, the lives of all the employees or of any class of them, determined by conditions pertaining to the employment. for amounts of insurance based upon a plan which precludes individual selection.

It needs no cluinge.

6.20. Under section 2t_2llfl. a policy of sea insurance. or sea policy»

(a) means any insurance made upon any ship or vessel (whether for marine or inland riat-igationl, or upon the machinery. tackle or furniture of any ship or vessel, or upon any goods, merchandise or property of any description whatever on board of any ship or vessel. or upon the freight of, or any other interest which may be lawfully insured in, or relating to, any ship or ycsscl, and lb) includes any insurance of goods, merchandise or property for any transit which includes. not only a sea ri-sk within the meaning of clause (a), but also any other risk incidental to the transit insured from the commencement of the transit to the ultimate destination covered by the insurance :_ "Where any person, in consideration of any sum of money to be paid for additional freight or otherwise, agrees to take upon himself any risk attending goods, merchandise, or property of any description whatever while on board of any ship or vessel, or engages to indemnify the owner of any such goods, merchandise or property from any risk, loss or damage, such agree- ment or engagement shall be deemed in be a contract for sea--insurance.

6.21. The stamp duty on such policies is chargeable under article 4'3. Questions exclusively concerning the rates of stamp duty will be dealt with under that articlcl. But, at this stage, it should be noted that the subject of marine insurance has been dealt with by 1egisIation--Thc Marine Insurance Act, 1963. Its important provisions will he noticed in due course.

6.2lA. In England, from 1605, legislative measures were passed from time to time relat- ing to particular aspects of marine insurance. We need not mention all of them here, but it shoud be noted that since H95, it has been obligatory in England to record the contract of marine insurance in a policy which is duly stamped. The effect of non--compliance. with such a provision has been dillerently expressed from time to time. but, in substance, the position--so far as the statute law since 1795 is concei-ncd,--has always been -that if there is no written policy duly stamped, the contract cannot be admitted in evidence, and until 1959, the contract was not valid also.

6.22. It was maily due to the eiforts of aBirmingham County Court Judge. (Sir) M. D. Chailrrlers, in collaboration with practising underwriter, (Sit) Douglas UWETL that in 1394, =1 Billientitled the "Marine Insurance Codiﬁcation Bill" was introduced by Lord Herschel] in the

-In-louse of Lords. Judge Chalmers had for a considerable time given his attention to marine cases in the Courts, and had interpreted the law, as it then was, in a careful and lucid manner. He dlaﬂed the Bill. He took the View that no code could provide for every case that might arise or always use absolutely accurate language. He accepted that the cases coming before lawyers were those in which a code was defective. Eventually, the measure was placed on the statute Book in 1906. The Act of 1906 does not set out to remodel the law relating to marine insurance, but merely to codify previous decisions and customary practice.

6.23. The concept of protection against loss by maritime 'perils has been traced back to 215 '.B.C., when the Roman Government was required. by the suppliers of military stores, to accept "all the risk of loss, arising from the attacks of enemies or from storms," to the supplies _,,_'r ,..____.a ___..

1. see article 47. infra.

2, Do}-er, A Handbook to Marine Insurance (1957), page 2. 24 M ut".I:awl'l7--3 _ Section E( I 9-A}-

j'Poltcy of group insurance"

l'olicy of' sea insurance.

Stamp duty under article 4?.

Marine insurance in England.

History of protectionagainst marine perils.

which the supplier placed in the ships. Round about 50 AD. Emperor Claudius issued guaran- tees to importers in respect of losses arising from storms. The practice of issuing bottomry bonds (on the security of a vessel) is supposed to have commenced even much earlier. Professor Trenerryl has traced its origin as early as 2250 B.C. léggdian law and 6.24. The "Rhodian" law has a lucid statement of the principle of "general average", Jum-";':J5m_ which is one of the most important principles of marine insurance. in fact, the earliest enuncia- tion of the principle of general average is itself known as the Rhodian Law, and is so designated «in the Sententiae of Paulus, 200 AD. the salient points of which state? :

"Let that which has been jettisoned on behalf of all, be restored by the contribution of all."

"A collection of the contributions for jettison shall be made when the ship is saved."

The principle of "general average" received further sanction in the Codex Justinian. The ﬁrst relevant principle of this Codex is as follows:

"The Rhodian Law decrees that, if goods are thrown overboard to lighten the ship, all shall make good by contribution. that which has been given for all."

Em and 6.25. Marine insurance was well known to traders in Venice, Genoa and Florence, and the 190.5 A¢¢_ history of marine insurance in Lombardy has become familiar to all those who have to deal with the subject in the West. The House of Lloyds in London, which, for about two centuries. has been associated with marine insurance, has contributed greatly to the development of the law on the subject. In England, the Marine Insurance Act, 1906, is the principal statute on the subject, but the principles were laid down long before that Act was passed. Continental codiﬁca- tions--oﬂﬁcial and others--are much earlier.

of 6.26. The word 'policy' is, in modern times, used to indicate the formal instrument incorpo- P°]'°' ' rating a contract of insurance. The word is derived" from Latin "pollicitatio", {as promie], through Italian "polices" or French "police". Oddly enough, in an English policy of insurance, the promise to pay in case of loss is implied. not expremed. Continental policies, however, contain an express promise to pay, within so many days after notice of loss.

6.27. Marine insurance is, in its essence, a protection against the risks of marine adventure, though the concept can be extended to certain non-marine adventures also.

6.28. The contract of marine insurance is a contract of ,indenmity;'and this lumps in the doctrine of subrogation described as a doctrine in which lies the romance of marine j Position before 6.29. Before 1963, Indian courts usually followed principles of the English law as laid down 1963' in judicial decisions on the subject.

' 3 st 24, 6.30. In 1963, the Marine Insurance Act was passed in India Section 3 of the Act' reads--- ._ "mm "3. A contract of marine insurance is an ageernent whereby the insurer ,1» -

indemnify the assured, in the manner and to the extent thereby marine losses, that is to say, the losses incidental to marine adventure." .

Section 24 of the Act' provides as follows : _ y

-«A conga" of marine insurance shall not be admitted in evidenceunless itlis_e_:in_borlied in a marine policy in accordance with this Act. This policy may be igsucd either at the time when the contract is concluded, or afterwarch." "' _ "

swim 4 or am 6.31. The Act contains, in a schedule, the standard form of policy which may used» H"

1953 'Aer------Form This is based on the Lloyd's policy. Section 4 of the "Act provides---- _- ' . I ' of "my. "[1] A contract of marine insurance may, by its express terms. or by image be extended so as to protect the assured against losses on inland waters ' land risk which may be incidental to any sea voyage. - _ ~

1. C_F.T1\a11er'1'y',ReSc5.l'ches into the Origins of Marine Insurance, cited by Dover, A Handbook to trams (1957), page 3. . . .

2. Dover, A Handbook to Marine Insutlmce (1957). D393 4- .

3. Chalmers, Marine Insurance Act (1966). case 1-

4. Section 3, Marine Insurance Act, 1963.

5. Section 24, Marine Insurance Act, 1963.

(2) Where a ship in course of building, or the launch of a ship, or any uciventure analogous to a marine adventure is covered by a policy in the form of a marine policy, the provisions of this Act, in so far as applicable, shall apply thereto, but, except as by this section provided, nothing in this Act shall alter or aliect any rule of iavv applicable to any contract of insurance other than a contract of marine insurance as by this Act deﬁned.

ExpIanation.----an adventure analogous to a marine adventure, includes an adventure where any ship, goods or other movables are exposed to perils Incidental to local or inland transit."

I 6.32 Some of the other important provision of the Act are in sections 25-26.1 Section 25 enacts what a marine policy must specify.

Section 26(1) provides that a marine policy must be signed by or on behalf of the insurer.

6.33. So much as regards the important provisions contained in tne body of the Marine Insurance Act. The Schedule to the Act contains the form of the policy. Its use is permissible, not mandatory.

6.34. It may be of interest to refer to history of the policy of marine insurance. The form or policy usually employed in marine insurance is generally known as the S.G. Form? The words "S.G." mean "ship-goods" indicating that the policy is adapted for the insurance of any interest which is not itself a tangible physical object, as long as such interest 15 pecuniary."

Sir Douglas Ovvan. an authority on marine insurance in the nineteenth century, said of the Lloyd's policy--'aln1ost every clause is consecrated by centuries of usage'. Though the policy is clumsily expressed, its meaning is clear, because it has 'generations of legal interpretation hanging almost to every word. and almost certainly to every sentence'. r_\s the Marryat Committee of 1311 reported, the 'doubtful points have been so repeatedly discussed and decided upon in Courts of _law mat their true legal import is ascertained.' 6.35. It may be stated that Lloyd's policy was settled in its present form in 1,779, and some of the provisitns are even of much older date.' Though, in the beginning, the English Judges tﬁlﬂibod it as strange instrument, the mercantile community has clung to it, and, in fact, all Bnﬁﬂr insurance law has been developed through cases arising on the policy. This policy appears as a "schedule to our Marine Insurance Act also, as already stated. ' 6.36. Besides, the standard form of policy, certain clauses are added, where required by the 'circumstances of the case, in a marine insurance policy. Even in such cases, standard forms evolved by Institutes are in force, such as, the Institute of London Undervvriters Clauses, the American Institute Cargo Clauses, and what have come to be known as the "York-Antwerp Rules", which represent a code for voluntary adoption in contracts oftaffreightment to govern gnerll-average loss and contribution. ' I 6.37. These clauses are also of great practical importance, and many of them have come up an construction before English Courts during the last 150 years. Reference may be made," in tilbteonncction, to a lecture to the Insurance Institute of London, delivered by Lord Chorlcy in November, 1957.5 Lord Charley said,---

"If the Institute Clauses are the core of modern insurance, their construction is the wrapping, round the core, and without dealing with the wrapping, that is. without construction, we cannot get at the core."

1. Sections 2.5-26, Marine Insurance Act, 1963.

2. Ship and Goods Form.

3. Deva', Analysis of Marine Insurance Clauses (1961), page 4.

4. Raynes, History of British Insurance (1964), page 159.

5. Lord Chorley, Lecture on "The Construction of the Marine Policy".

Sections 25-2-6, Marine Insurance Act.

U ual Policy-

S.sG. Form.. .

I..lo'yd's other standard clauses.

Various types oi' policies--Tirne 'Voyage, Mixed Floating Valued and unvalued.

Deﬁnition in the Stamp Act, section 2(2).

Likely consequences of be' referred to the arine [nsuranoa Act»-

Informal notes in insurance business.

Position as to slip.

' 6.3.8. The classic exposition of this important matter is contained in a lecture delivered by Sir Patrick DB\'liﬂ,1 ( when he a Judge of the High Court of Justice] to the Norwegian Mari-

timc Law Association on 4th July, 1952. ' 6.39 It may he stated that marine policies arc of many ki11(ls"»--

(1) for a voyage, ale. where the contract is to issue the subject--matter "at and from"

or "From one piece to another or others".

(2) For time, :.c., where the contract is to insure the subject--matt.cr for :1 rleﬁiiite period of fame.

£3) cular voyage and the loss must also occur within that time speciﬁed.

(4)

A ﬂooring policy. This describes the insurance in general terms, but leaves the name of the ship or ships and other particulars to be speciﬁed later.

(5) A I-clued policy. This speciﬁes the agreed value of the 'subject-matter, and the value so fixer} is, as between the insurer and thc assured, conclusive of the value of the suhject--rnatter insured.

I' 6) An. rmvnlucd or open policy. This does not specify the value of the subjccbmattcr, but, subject to the limit of the sum assured, leaves it to be subsequently determined.

6.40 Reverting, now, to the Stamp Act, we may note that the deﬁnition o' "policy of insurance" in the Act is based on section 92, Stamp Act, 1891 (Eng.} as it then stood. It may, however, be stated that since l959,3 there is, in England, no separate stamp duty on policies of marine insurance and these policies share the ﬁxed duty of 6 pence in common with all policies of insurance except life insurance.

In fact section 92 of the English Act of I89] and succeeding provisions were repealed in 1959.

6.41. It was suggested to us, that, in View of the fact that marine insurance is now thc_ subject matter of Icgislation in India, it is appropriate that the deﬁnition in the Stamp Act should make a reference to that Act.

6.42. This suggestion raises the question whether, by referring to the substance. of the deﬁnition in the Marine Insurance Act, any documents which are liable to stamp duty under the present deﬁnition in the Stamp Act, will escape duty. The question can be discussed in two aspects.

6.43. In the first place, there are informal documents. such as, slips, and cover notes, usually handed over in marine insurance business pending the execution of a formal policy. The informal note or memorandum which is drawn when the contract is entered into, is called the slip or covering note.' It would appear that while such a slip is clearly a "contract for marine insurance", it is equally clearly not a 'policy' for the purposes of the mrrrine inszrrrmce law. If the policy is duly stamped, then reference may be made to the cover note for certain evidentiary purposes."

6.44 It was pointed out that though on the question whether a slip is a policy for the purposes of the Stamp Law, there is a controversy,' this controversy is not important-ia.the context of marine insurance. Sections 24 to 26 of the Marine Insurance Act, 1963, now"Iay :'"Thc Principles oi' Constructions of Chai';r_-I'kartics. Elills of Landingiand Marine Policies". address to the Norwegian Maritime Law Association (1952).

Based on Smith. Mercantile Law, and Stevens, Mercantile Law.

. Section 30, Finance Act, 1959 (Eng).

See Maignen 6'; Co. v. .'~'an'nna.i' Beneﬁt A.s5urnnce Co.. (1922) 38 Times Law Reports 257.

fonides v. Pacific :'m.'m'ance C'n., (1871) Law Report 6 QB'! at page 535 (L011! Bl'ﬁCl'lbUT11l-

Section 83, Marine Insurance Act, 1963.

. See discussion as to policy of insurance.

,_.

"-'?"I-".""-'-'."*' For i»'o_vage and for time (Mixed). in this case the loss is covered only on a parti-

5'?

down detailed provisions governing the form of the policy of marine insurance, and if these provisions are not complied with, the policy is unenforceable. Therefore, there is not much likelihood of dtity escaping, whether or not a slip is regarded as a policy. If the assured does not care to obtain a formal policy, then the speciﬁc provisions in the Marine Insurance Act will render the slip inadnfssible.

6.45 It is now well established in England that no action can he maintttincd in the United Position in Kingdom upon the irnplicti promise to grant a policy when the slip is initiated.' It' the insurers_ England' go into liquidation, the liquidator cannot issue policies on outstanding slips}. It is otherwise in countries where revenue or other laws do not interpostﬁ But the statutory provision" will apply to policies issued abroad which are sucd upon in England.-'"' 6.46. This is often described as a curious and important instance of an imperfect oh1iga- i!'1'lQ3N*_5L'1 tion, arising out of special conditions imposed on the formation of a complete contract found. °b]'ga"°"' In parctice, the agreement is concluded between the parties by a memorandum called a slip, containing the terms of the proposed insurance and initiallcd by the underwriters." it is the practice of some insurers always to date the policy as of the date of slip} At common law, the slip would constitute a binding contract. This, however, is not allowed in case of marine insurance."

6.47. l\'lUt'C-O'r'Cl'; in India, after the natioltalisation of general insurance business, it is unlikely that those who carry on general insurance business will dispense with the practice of issuing policies in order to escape stamp duty. Thus, the fact that informal or temporary docu- ments do not fall within "'policy" in the Marine Insurance Act should not matter.

6.48 The second question to he considered relates to insurance in respect of inland 1H1,-,_,1,1¢,-ans,-_.o.-g_ transport. The deﬁnition in the Stamp Act----vide the words that appear in hrackets--speciﬁ- cally cover transport by inland waters. In this connection, it is to he pointed out that under the Marine Insurance Act" also, a contract of marine insurance "may be extended" to cover transport on inland waters.

6.48A. On a comprison of the deﬁnition of "sea insurance" in the Stainp" Act and that of Inland risks.

"Marine insurance" in sections 3, 4 and 5 _of the Marine Insurance Act, 1963, it appears that, broadly speaking, the only kind of risk which may not conceivably be covered by the provision in the Marine lnsuranee Act is a risk arising from an adventure which is carried on purely on inland waters and not as incidental to a marine -voyage. It could, for example, be argued that the tnsurance of a steamer carrying goods only on a particular river and not touching the sea at all at any point may not fall within the deﬁnition in section 4 of Marine Issurance Act, 1963", though it falls within the deﬁnition in the Stamp Act. Even the existence of this point of dilfcrence is doubtful, because it is hardly likely that the draftsman in 1899, when using the expression "sea insurance", was concerned with purely inland navigation.

_ 6.4-BB. Moreover, Vt-'llEl|Zt3'."t.'1' be the scope of section 2(2{)) which deﬁnes "policy of sea Tums"-m_y_.r insurance", it is to be noted that the taxing entry in article 47' speaks only of "sea insurance" sea insurance. and makes a reference to section '3'. The expression "sea insurance" should be given its ordinary meaning. Section '.-'(_l)----now repealed--provides that no "contract for sea insurance" (other than such, insurance as is reterred to in section 506 of the Merchant Shipping Act, 1394), shall be

1. ﬂilur V. Liverpool Mar. Ins. Co. '{1374) LR. 9 QB. 418, Ex. Ch. (13) Gen_.ﬁJr.s-r'krr'ngu- & Ca. V. Da Costa, (1911) 1 K.B. 137 {open covers of re-insurance}.

2. Re Clyde Mar. Ins. Co. (1924), 1'! Li. LR. 28?; 1924 S.C 113; Re City Epuirabie Fire Iris. 0)., (1930) 2 Ch. 295.

3. Bhugimndars v. Alerire-ricna's Sea Ins. Co.. (1388), 14 App. Cas. 83, RC. (Rangoon Foreign Policy}.

4. Section 22, Ma.rine'Ins. Act, 1906 (Eng.].

5. Royliﬂrchange Ass-ce. Corp. v. Vega, U90]; 2 KR. 567; (1902) 2 KB. 384. C.A.

6. Fnrthe form of this, see L11. 8 QB. 471; LR. 9 QB.

7. See LR. 8 Es. 199.

8. As to ﬁre insur-.u1cc, fl policy is not compulsory. 'Timrn,ri.von V. Adam. (1399) 23 q.B.D. 36!.

9. Section-4, '.V[arincIns1trancc.1\ct, 1963 (mpra).

10. Para. 6. 30, Sl'tp."z':'.

11. Para. 6.30 5l'tp."tI.

§é'.'£i='f"

l:i53._i.' '_;

an, S8 valid unless the same is expressed in a "sea policy". The taxing entry in article 4-'? refers to section 7, and since neither section '3 nor article 47 deﬁnes "sea insurance", as such recourse should be had only to its ordinary meaning.

Now, the expression "sea insurance", according to ordinary parlance, would not cover a risk purely of river nevigation. Since there is no deﬁnition of "sea insurance", it can be taken in its ordinary meaning. On that approach, it would not include purely inland navigatiorf The result is that though the deﬁnition of "policy of sea insurance" in section 2(20) of the Stamp Act is wide in regard to inland navigation (as explained above), the charging provision in article 47 does not appear to he so wide.

6.4812. Therefore, the fact that the deﬁnition in the Marine Insurance Act does not include pure inland adventures, is ol no consequence. Of course, as a matter of commercial practice, policies of insurance of vessels on inland navigation are sometimes executed in the form normally used for marine policies. But even that fact would not attract section 7(1) of the Stamp Act or Article 4?. Thus, the adoption of the deﬁnition in the Marine Insurance Act and the deletion of the present deﬁnition will make no radical change in the tax.

6.4-SD. Even it' the above exposition of the position is n.ot correct, the practical aspect should not be over--looked.

6.49. Thus, there should he no seriousohjection if the Marine Insurance Act is referred to in the deﬁntion in the Stamp Act. It may be emphasised that that Act is the principal enact- ment of relevance to marine policies.

6.50. The following rough draft indicates the main lines on which the deﬁnition should be revised,' if the above approach 'is accepted---

"-ZZD) 'Policy of marine insurance which satisﬁes the requirements of the Marine Insu- rance Act, 1963." » 6.51. As regards section 24, Marine Insurance Act, 1963, it may be noted that the latter part of the section does not allow a suit. It merely recognises the fact that there may be an interval between lhe conclusion of the contract and the issue of a policy of marine iinsirancc.

6.52._ The statutory provisions could be analysed into-

(i) those regulating stamp duties, and

(ii) others-

Section 3.4-, Marine Insurance Act is in the second category. .

The proviso to the General Exemption below article 47, Stamp Act, also does- not substantive right to sue for. a policy..- If.-such a right exists by the substantive. iavr,-then the want of full stamp duty should not come in the way- That in all that the proviso 6.53. We have already referred to the relevant provisions of the Marine Insurance Act, 1963.2 The insurance Act, 1938, which regulates the business of Insurance, provides tl:ifaI'.3 "Marine, Insurance business"---rneans "the biisinnrr of eﬁecting contracts of Insurance u E any description, including cargoes, freights ,and_other interests which may be le y "

in or in relation to such vessels, cargoes, and heights, goods, wares, merchandise a di I"

of whatever description insured for any transit by land or water, or both, and whﬁher for "

including warehouse risks or similar risks in addition o-r as incidental to such transit, and any other risks customarily included among the risks insured against in Marine [amines policies'? ' Normally, under the law relating to the carriage of goods by sea, the person issuing aghilloi lading does not undertake liability in respect of loss of goods by maritime (I. Some consequential changes may be neoessar? in Sﬁltiﬂn 7(4). Bfticlﬁ 47 etc-

2. Para. 6.30, supra. I

3. Section 2H3-A}, Insurance Act, l93E. -'

4. See Alliance Asruramse Co. Ltd, v. The Union of India, (1957-58) 62 C.W.N. 539; A.I.R. 1959 190.

6.54. The last paragraph of the deﬁnition in the Stamp Act may now be iconsiiitiereiifu 59 may undertake this liability if he is paid additional freight. This is one of the situations to which section 20.0). last paragraph of the Stamp Act, is addressed. in the Indian Carriage of goods by Sea Act. 1915, the Eichcditle, Article IV, paragraph 2, constitutes the relevant provi- sion on the subject, and the material portion is quoted bclow----

"2. Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from---» (:1) Act, neglect, or default of the master, mariner, pilot, or the servants of the carrier in the navigation or in the management of the ship ;

tb) Fire, unless caused by the actual fault or privity of the carrier;

(c) Perils, dtmger.r and accidents of the sea or other ntwigable waters ,-

id) Act of God ;

(e) Act of war;

1' E) Act of public enemies; ~

(g) Arrest of restraint of princes, rules or people, or seizure under legal process."

The payment of "additional freight" (or other sum) referred to in section 2(2D), Stamp Act, last paragraph, constitutes the consideration for the ship owner undertaking this liability speciﬁcally.

6.55. The present wording of the last para of section 2{20), has lost its utility, because the expression 'contract for sea insurance' has now lost its importance after repeal of section 7.

6.56. On a consideration of the various points made above, we recommend that the deﬁni- tion of policy of sea insurance should be revised as indicated above?

APPENDIX 1 Section 2{20) ----i'{ew'.red deﬁrrirron of "Policy of Sea Insurance" as already decided.

"20(1]. 'Policy of Sea Insurance' 01' 'Sea Policy'----

[a] mean any insirirment of insurtmce against loss, damage or liability arising from a_ sea risk, made upon--

(i) any ship or vessel (whether for marine or inland navigation), or {ii} machinery, tackle or furniture of any ship or vessel, or

(iii) any goods, merchandise or property of any description whatever on board of any 6 ship or vessel, or

(iv) the freight of, or any other interest which may be lawfully insured in, or relating _ to, any ship or vessei, and

(b) includes any inst:-tin:enr.of insurance of. goods, merchandise or prqaernr for any transit which includes not only a sea risk within the meaning of clause (in) bu also any other risk incidental to the transit insured from the commencement at the transit to the ultimate destination covered by the insurance.

(2) Where any person, in consideration of any sum of money paid or to be -paid additional freight or otherwise,----

(i) agrees to take upon himself any risk attending goods, merchandise or proputy 7 of any description whatever while on board of any ship or vessel, or '

(ii) engages to indemnify the owner of any such goods, or against any risk, loss or damage, such agreement or engagement shall be deemed to be a contract for sea insurance.

_1:-The remaining clauses are not material.

2. Peru 6. 50. supra.

A PPE.-W)!.5t' 2 EXTRAVFS FRONT THE E'I.-'N2-RNCE AC1'. I959 (ENG) (7 and 3 Eliz. 2, o. 58].

''3t}. Stamp duty on policies of insurance.--

(1) in the ﬁrs: Schedule to the Stamp Act, 1891, before the head of charge "Policy of Life Insurance" there shall be inserted the following---

"Policy of insurance other than Life Insurance 093 0s 6d", and the head of charge.

"Policy of Sea insurance" and the head of charge beginning "Policy of Insurance against Accident" shall be omitted.

(2) The following shall be exempt from all stamp duties :

1' a) cover notes. slips and other instruments usually made in anticipation of the issue of a formal policy, not being instruments relating to life insurance;

(bl instruments embodying alterations of the terms of conditions of any policy of insurance other than life insurance ;

tc) policies of insurance on baggage or personal and household eﬁects only, if made or executed out of Great Britain.

and an instrument exempted by virtue of paragraph fa) of this sub-section shall not be taken for the purposes of the Stamp Act, 1891, to be a policy of insurance."

APPENDIX 3 Sl.'EClMEN SLIP1 OF I'vIAR'lNE INSURANCE Insurance Brokers, Ltd.

Maria s.s.

No., 12 months Noon, March 30, 19:-.

Ship . . . . . . . . . . . . . . . . £40,000 Machinery . . . . . . . . . . . .--£1U,00O Inst. Clauses.

Inst. Warranties.

Average payable on each valuation separately or on any tvro Valuations together on the whole.

£3,500 15. 305. per cent 7/12 (Subscription of LS. for £3,500 dated December 7, 19. . . .. The other subscriptions follow and are written on the back of the slip}.

Charley, Shipping Law, (1950) Page 355- CHAPTER 7 DEFINITIONS IN SECTION .2(2l) TO 2(?.5) 7.1. Section 2(21] deﬁnes the expression "power of attorney" as follows :--

":21. 'Power of attorney' includes any instrument (not chargeable with a fee under the law relating to court-fees for the time being in force) empowering a speciﬁed person to act for and in the name of the person executing it" ;

The duty on a power of attorney is chargeable under article 43.

The deﬁnition of "power of attorney" in section 3(16) of the Stamp Act of 1879, read as follows :-

"Power of Attorney means any instrument (not chargeable with a fee under tl1e law relating to court fees for the time being in force) empowering a speciﬁed person to act in the stead of the person executing it."

The deﬁnition in section 304) of the Act of 1869 ran as follows :--

"Power of Attorney" includes every instrument except a proxy empowering a person to act in the stead of the person executing it".

The material change in the deﬁnition in the present Act is the addition of the words as to the speciﬁed person being employed to act in the name of the person executing the instru- ment. In the remarks about this clause in the Statement of Objects and Reasons, it has been said that the amendment has been made in order to make it clear that the deﬁnition "relates only to powers--of-attorney and does not include all contracts creating the relationship of principal and agent".

12. 'There is a Central Act entitled, "The Powers of Attorney Act"1, but that Act does not-contain a deﬁnition of "power of attorney". In fact, that Act does not purport to deal comprehensively with the subject of powers of attorney. hut deals with certain aspects thereof, which are not material [or the present purpose."

7.3. Briefly speaking, a power of attorney: is the formal appointment of an agent by a deed. It usually runs thus :----

"Know all men that l. AB, have appointed CD my true and lawful attorney, in my name or otlierwfse and on my behalf to do and execute the following acts and deeds . . . . in witness etc . . . . . . . . . "

7.4. The authority created by the power of attorney may be general, or it may be special. For this reason, a power of attorney is usually classiﬁed as general or special. This distinction is reﬂected in article 48. It is also indirectly recognised in the Indian Contract Act, section 188, which reads'--

"I88. An agent having an authority to do an act has authority to do every lawful thing which is necessarily in order to do such act.

An agent having an authority to carry on a business has authority to do every lawful thing necessary for the purpose, or usually done in the course of conducting such business."

1. The Powers of Attorney Act,'l S82.

2. That Act wil1_be examined separately.

3. Section 138, Indian Contract Act, 1372.

24 M of Lawm--9.

Section 2(2l)---

"Powcr of attorney".

Powers of Attorney Act, 1882.

Deﬁnition.

General and special power.

Story quoted.

Forlnalities when required in England.

Fornnlities when required in India.

15. Story, in his work on Agency, section 1'7, says :--

"A special agency properly exists, when there is a delegation of authority to do a sirrgle act,' a general agency properly exists where there is a delegation to do all acts connected with a particular trade, business or employment- Thus, a person, who is authorised by his principal to execute a particular deed, or to sign a particular .~ contract, or to purchase a particular parcel or merchandise, is a special agent. But a person, who is authorised by his principal to execute all deeds, sign all contracts, or purchase all goods, required in a particular trade, business, or em- ployment, IS a general agent."

In persons on Contracts, volume 1, page 39, a special agent is deﬁned as one authorised "to do one or two particular things" and a general agent as one authorised "to transact all his principa1's business or his business of a particular kind."

tn Bouvier's Law Dictionary,' Volume 2, page 714, the statement is.----"a general power authorises an agent to ac: generally in behalf of the principal: a special power is one limited to a particular act". ' Wharton' deﬁnes a power of attorney as "a writing given and made by one person authorising another, who, in such case, is called the attorney of the: person (or donee of the power), appointing him to do any lawful act in the stand of that person, as to receive rents, debts, to make appearance and application in court, before an ofﬁcer of registration and the like. it may be either general or special, i.e., to do all acts or to do some particular Act." Stroud' deﬁnes it as an authority whereby one is "set in turn, stead or place" of another to act for him.

ln an English case," Coltman J. observed as follows 2--

"Where one is authorised, in writing, on behalf of another and in his naml toqdo an act, that is an appointment of an attorney within the meaning of the Stamp Act."

7.6. The delinilion in -our Act also lays emphasis on the use of name. Thus, if a person writes a letter to his brother, authorising ]I1l.l11 to sell their joint property, the letter is sufficient authority for the sale, but is not a power of attorney for the purposes of the Stamp Act." The reason is that the use of the n»:;«rn.o of the sender of the letter is not expressly authorised in the letter.

7.7. Apart from statute, an agency can be created orally, but statute may require writing, and there may be special rules apart from statute. Thus. for example, in England, an appointment under seal is necessary to enable an agent to execute a deed on behalf of his principle. One person cannot authorise another to execute a deed for him except by deedﬂ 7.8. Under the Indian Contract Act," an agent is a person employed to do any act for another, or to represent another in dealings with third person? As a rule, an agent may be appointed without any special formality. in India also. .

'33. Indian statute, law, excepting for a few scattered provisionsﬁ" does not provide in what cases a written power of attorney is required.

1. Story, cited in V. yer v. Nnrasiniha Rae. I.L.R. 38 Mad. 134, 136.

2. Bouvier, cited in 1". {war 1:. Narasimha Ran, I.L.R. 33 Mad. 134, I36.

3. 'Wharton, Law Lexicon (I953), page 784.

4. Stroud, Judicial Dictionary (1953), page 2257.

5. Walker v. Remmerr. (1896) 135 E.R. 118i.

6 7 8 9

'WI . Kala Khan v. Narhu Khan, A.l.R. 1926 Lahore 229.

. Berkeley v. Hardy, (1826) SB&C.355.

. Section 182, Indian Contract Act, 18':'2.

. Section 182.

10. Order 3, rule 4, Code of Civil Procedure, 1908: sections 32, 33 and 34: Indian Registration Act. 1908.

7.10. Under the Evidence Acti, the Court shall presume that every document purporting to be a power of attorney, and to have been executed, before, and authenticated by, a Notary Public, or any Court, Judge, Magistrate, Indian Consul or Vice-Consul, or representative of the Central Government, was so executed and authenticated. The Registration Act also requires certain powers of attorney to be authenticated? Registration of a power of attorney may become compulsory in certain cases?

7.11. So much as regards the concept of power of attorney and the formalities, if any, requisite for such powers. Reverting to the deﬁnition in the Stamp Act, we may note that an instrument chargeable with court-fees is outside the deﬁnitic-n--vide the words in brackets. Docu-- ments chargeable with court--fees have been excluded, for the reason that otherwise they would be subject to double liability.' Since an advocate appearing or acting for his client does all his work in the name of his client," the usual Valtalatnarna would, but for the excluding words, be regarded as a power of attorney.

7.12. The principal enactment relating to court-fees is the Court Fees Act. Schedule II, Article 10, of that Act is material for the present purpose. It relates to Mukhtearnama or Vakalatnama for the conduct of a case. ' 7.13. There is a difference of opinion on the question whether a inukhtcarnama or vakalat- name executed in favour of a person who is not a certiﬁcated mtikhtear or pleader should be stamped under the Stamp Act or under the Court Fees Act.

According to the Allahabad High Court," the documents referred to in Schedule 11, Article 10, of the Court Fees Act, are restricted to documents given to and presented by duly certiﬁed Jnukhtears or pleaders under the Legal Practitioners Act, and therefore, a mulchtearnarna in favour ti -3 person who is not a certiﬁcated mukhtear falls within the deﬁnition in the Stamp Act and is chargeable with a stamp duty under this Act. A contrary view has, however, been taken in a Full Bench decision of the Punjab High Court.' 7.14. Thus, there appears to be diﬁerence of judicial opinion on this point. In our view, if a person who is not a legally qualiﬁed practitioner conducts a case on behalf of a party, the power of attorney should he chargeable under the Stamp Act.

We recommend that the Act should be amended for the purpose. We may note that the suggested amendment has been generally favoured in the replies to the questionnaire issued by us."

7.15. The next deﬁnition is of 'promissory note! deﬁned in section 2(22) as under :----

"{22l 'Proniissory note' means a promissory note as deﬁned by the Negotiable Instru- ments Act, 1881 ;

It also includes a note promising the payment of any sum of money out of any particular fund whicli. may or may not be available or upon any condition or contingency which may or may not be performed or happen." ' 7.16. The deﬁnition is more elaborate than the one in an earlier Stamp Act. In section 3(25] of the Stamp Act of 1369, "promissory note" was deﬁned as including every' instrument whereby the maker engages absolutely to pay a speciﬁed sum of money to another at a time therein speciﬁed or on demand or at sight. The deﬁnition was omitted in the Stamp Act of 1879.

1. Section 85, Indian Evidence Act, 1372.

2. Sections 32(c), 33(1), 33(4), Indian Registration Act, 1908.

3. See A.I.R. 1954 T.C. 10. - -

4. itamdev v. Lulu Nath, A.I.R. I937 Nag. 65.

5. Hornmsji v. Name Baby, A.I:R.- i934 Bom. 299, 302.

6. Permarrtznd V. Sn'! Pernod, H911) I.I_..R. 33 All. 487, 439 {F.B.}.

',r_ Gaga: v. Pram Singh (1923) I5 ind. Can. 122. 124 l[F.B.J _{Lah.] dissenting from I.L.R. 33 All. 487.

8. Question 13, section 2{21}----Court fees. - i Question oi' instrumentsliahle to court fees.

Recommendation.

Section H22}-

"Promissory note", History.

Negotiable Instruments Act Two parts of the deﬁnition.

Second half.

Promise to pay how far required.

7.17. Under the Negotiable Instruments Act,1---

"A promissory note is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument."

7.18. The present deﬁnition in the Stamp Act consists of two parts. The earlier halt simply refers to the deﬁnition in the Negotiable Instruments Act, 1881. The latter half includes notes promising the payment of any sum of money out of a particular fund which may or may not be available, or upon 2 condition or contingency which may or may not be performed or happen.' 7.19. It may be noted that the deﬁnition in the English Stamp Act, section 33(1), is rather wide.-" It has been pointed out' that the Indian Stamp Act, unlike the English Stamp Act, does not ignore the deﬁnition in the Act relating to negotiable instruments. In the earlier half, it adopts the deﬁnition of 'promissory note' in the Negotiable Instruments Act.

7.20. So far, there is no difficulty. But the second half of the deﬁnition in our Act, which is similar to English sub--section (2), raises problems. It includes many documents not covered by the Negotiable Instruments Act. Should the legislature go beyond the deﬁnition in the Negotiable Instruments Act, for the purposes of the Stamp Act? Is there any compelling consideration that would justify the extended part of the deﬁnition? This is the question that ' we have to consider.

7.21. A brief analysis based on comparison with the Negotiable Instruments Act! will be helpful-

{i) According to the deﬁnition in the Negotiable Instruments Act, the note must be signed by the maker. This requirement does not expressly appear in the latter half ol the deﬁnition in the Stamp Act. However one can disregard this difference as a very minor one.

(ii) Secondly, according to the Negotiable Instruments Act, the note nitlst be in favour of a certain person or bearer; this requirement does not expressly appear in the latter half of the deﬁnition in the Stamp Act.

(iii) Thirdly, both the Acts require a promise to pay in substance, though the Negotiable Instruments Act uses the expression "undertalcing", while the extended part of the deﬁnition in the Stamp Act uses the expression "promise".

(iv) Fourthly, under the Negotiable Instruments Act, the sum of money must be certain, while in the extended part of the deﬁnition in the Stamp Act, "any sum of money" will do. _ (V) Fifthly, under the Negotiable Instruments Act, the undertaking to pay must be unconditional," while, under the extended part of the deﬁnition in the Stamp Act, it need not be so, and it also provides that the particular fund out of which money is to be paid may or may not be available.

The fourth and ﬁfth points are of importance.

7.22. Thus, under the deﬁnition in the Stamp Act, latter half. it is not necessary that the document must be a promissory note within the Negotiable Instruments Act. Even then, has been held that it is an essential characteristic of the definition in the Stamp Act that there should be a promise to pay to some person or persons or to order or to the bearer of the note. A promise to pay the amount in one event, with a provision in another event to deposit it in court, does not make the document a promissory note.' . Section 4, Negotiable Instruments Act, 1831 (Illustration not quoted).

, Compare the deﬁnition of 'bill of exchange on demand' in section 2(3), supra.

. Section 33, Stamp Act, 1891 (English).

Mohammad Akbar Khan v. Afar Sing}: (1936) I.L.R. 1'! Lab. 557, 556; A.l.R. 1936 RC. I71, 173. Para 7.17., supra.

. Smdcarrarr Namboodiripad v. Abraham. Al-R. 1973 K01'. 22- . Kutta Marla Verzlrararnrtom V. Pail Cherry. A.I.R. I933 Madras 306, 303.

-..:a~.5..n;e-mqu....:

7.23. It has been held in a Madras case,' that the question must be decided by adopting the test whether there was an unconditional undertaking to pay a sum of money. In that case, it was held to be an unconditional undertaking. 011 the other hand, the Allahabad High Court has held' that a document containing a promise to pay on a contingency can fall within the Stamp Act. Thus, a promise by A to pay B Rs. 500 "seven days after my marriage with C"

is not a promissory note under the Negotiable Instruments Act," but may be so under the Stamp Act.

7.24. These points, it was stated, show the diﬁiculty caused by the extended part of the deﬁnition.' 7.25. In order to improve the position in this regard, two alternatives were put forth before us. One alternative would be to conﬁne the extended part of the deﬁnition to documents analogous to promissory notes.

The other alternative would be to omit the extended part altogether.

We appreciate the difficulty caused by the present vague deﬁnition. We have, after some discussion, come to the conclusion that the deﬁnition, wide as it is, should not be disturbed, since it has stood for a long time and revenue is involved and no Compelling reason exists. But"

we are recommending an amendment of section 35 (the principal sanction), for mitigating the hardship.

7.26. We now deal with another question--thc question of charging duty on attested promissory» notes. Here, one has to determine whether the document is a bond or a promissory note.

?.2'}'. As already stated", the deﬁnition of 'promissory note' consists of two parts, namely, the portion referring to the Negotiable Instruments Act and the portion not so referring but added by the Stamp Act. For the moment, we are concerned with a point arising out of the earlier half of the deﬁnition of promissory note, which refers to the Negotiable Instruments Act. A controversy has arisen as to attested documents. In order to appreciate the controversy, it will be convenient ii the relevant part of the deﬁnition of "bond" in the Stamp Act is quoted.

It reads thus :--

"{5} 'bond' includes, . . . . . . . . . ..(b) any instrument attested by a witness and not payable to order or bearer whereby a person obliges himself to pay money to another-.".

It is now proposed to add, in this part of the deﬁnition of bond," the words "expressed to be", so that the revised deﬁnition of this part will read as follows :------

" 'bond' includes---

(b) any instrument attested by a witness and not expressed to be payable to order or heater whereby a person obliges himself to pay money to another.

. u a u - . . . a . . . . . . .

1.28. This amendment, however, will not solve the following question, which arises out 0! the requirement of attestation. The question is this. If a document is not attested, but an obligation to pay money, is it chargeable as a promissory note or as a bond '? It is assumed that the document contains an undertaking to pay money to a certain person etc.

1. Km-uriuuzpa Rowdies v. Bava Moideeri. (1913) I.L.R. 36 Madras 370, 3?2 {Sundara Ayyar and Phillips, .l.l.).

2. Sudlﬂ Chandra v. Voiiyuiia. A.I.R. 194] All. 155, 158, 160.

3. Section 4, illustration (f), Negotiable Instruments Act.

4. Q1 See discussion relating to section 2----Bil1 of Exchange (Supra).

5. See reconimendation as to s. 35, Proviso ta), Enﬁva.

6. Section 2(5)-"bond".

1. See recommendation relating to section 2(5'J(b)--"bond".

Whether required.

Two alternatives.

Arrested promissory notes.

Question of attestation.

Requirement of attestation.

Controversy.

and is, in all respects, a document which satisﬁes the req'u'iren:ients of -a promissory note as deﬁned in section 4 of the Negotiable Instruments Act, which is as follows :-

"4. Pronn'5s'ory r.-ore.--A 'promissory note' is an instrument in writing (not being a bank. note or a currency note) containing an unconditional undertaking signed by the ntaker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument."

7.29. This controversy arises because the deﬁnition of 'bond' is incite;-it-'e. In a Patna case} it has been held that an unattcsterl document promising repayment of loan on demand after a stipulated date is :1 bond only, and is chargeable as a bond under article 15. The document in the Patna case was not attested. and was not expressed to be payable to order or bearer, and stated that the two debtors who had aﬂixed their thumb impressions and signatures in the margin had taken the money mentioned in the letter and written letter on demand. The Patna High Court held, in the first place, that since the payment could not be enforced within a stipulated period, and the expiry of the stipulated period had to be followed by a demand, the document was not a promissory note. A demand was a condition precedent to payment, and therefore, there was no "unconditiona1" undertaking. It was not a promissory note. On this point, it followed an earlier Madras case." But it may be noted that that case has been overruled ._by the High Court in a recent judgment." _ Secondly, the Patna High Court pointed out that the deﬁnition of "bond" in the Stamp A is not exhaustive, and does not exclude an unattested document if it is not covered by the two clauses of article 49 {promissory note].

7.30. In a Mysore case,' Malimath. J. observcd--

"It was next urged by Shri Joshi that as the document is attested, the same is-not a protnissory note. It is no doubt true that a promissory note does not require attestation. At -the same time, it is necessary to note that there is nothing in the Negotiabe Instruments Act to indicate that an attestation of a "document like the promissory note is prohibited. Atmtation of a document is usually get done for the sake of abundant caution even though.

attestation is not the requirement of law. Merely because the document in question which is otherwise a promissory note, has been attested, it does not lose its character as a promissory note.' I have, therefore, no hesitation in holding that the document in question is a promissory note.". ' 7.31. in the later Madras case,''' it was held that a document in the following terms was not conditional :--- . ' E _ "I have already received Rs. 15,000 from your Colombo A.S. shop for doing business of my own. 1 shall pay it after two years on demand by you with interest at two aunas per month per Rs. 100 to you or to your order and receive back this promissory note."

7.3lA. The Court pointed out that, in the earlier cases", section 5, second paragraph, of the Negotiable lnstrurnents Act had not been discussed. ' ' ' ' T he fact that the payment postponed did not make any diﬁerencc, because of section

5. Hence, a tlocument in this case was held to be a promissory note under article 49(1)) of- the Stamp Act, and inadmissible, since it was not suﬁiciently stamped. The question of attestiatiorr was not in issue.

Dew' v. Dhrrnik Lat, A.I.R. 1971 Patna 378, 380, paragraph 6.

2. Mnrhn Gum-infer v. Perumayammai. A.I.R. 1961 Madras 347 (Ramachandra Iyer, 1.). i 4 _. The.-muppa Cherfinr v. Andiappo Cirerrfnr, (1971) 1 M.L.J. 2l4'(D.B.). ' ' _ . Rngirrrnnrh V. Bﬂrarri La-I. A.I.R. 1972 Mys. 159-161, para 4, dissenting from Rom Nrrrnym v. Ram Citnrtd. Athll... 1962 Pat. 325. ' ' = .

5. Tftemrppa Cfierfinr v. Andr'_t-'appa Cfrcrtiar, (1971) I M.L-.J. 214. ﬁ_ Marker Gclunder 1.'. Perrortayan-tirim', A.I.R. 1961 Mad. 347.

£7 ":'.__32. It was suggested to us that an amendment should be made in the deﬁnition of "'prornis- sorgr note" to exclude attested documents from the scope of that deﬁnition, for the purposes of the Stamp Act. This would clarify the position, and avoid needless controversies. We have, after careful consideration, accepted the suggestion. We may note that. the suggestion had been included in our Questionrmire,' and has received substantial support.

7.33. Accordingly, we recommend that attested documents should be excluded from the deﬁnition of "promissory note" in the Stamp Act, so as to avoid controversy. The controversy is illustrated by the case law cited above. Without such an amendment, the" citizen's dirliculty would continue, since it is not easy to determine whether a particular document is a bond or promote. ' '

134. We shall new deal with one expression not deﬁned. in the Act---"public officer". It would, in our 'view, be desirable to deﬁne the expression "public oﬁicer" as having the same rrteaning as in the Code of Civil Procedure. The want of a deﬁnition of this expression in the Stamp Act renders section 73 of the Act incomplete. It also renders? seciioilh 35 incﬂnlplcte.

7.35. We, therefore, recommend that a new sub-section (22.-K) should be inserted in section 2, on the following lines':--

"(?.2A) 'public officer' means a public officer as deﬁned in subsection (17) of section 2 of the Code of Civil Procedure, 19%."

We may note that the suggested amendment has been generally fax-'oured the rt:pli=:s to the Questionnaire issued by us."

7.36. Section 2{23} mil}-' now he considered.

rr(23) (Hi It says-

'Receipt' includes any note. memorandum or writing :--~ whereby any money, or any bill of exchange, cheque or promis or}: note is acknowledged to have been received, or {b} whereby any other movable property is acknowledged to have been received in satisfaction of a debt. or (C) whereby any debt or demand, or any part of a debt or demand. is acknowledged to have been satisﬁed or discharged, or (cl) which signiﬁes or imports any such acknowledgement, and whether the same is or is not signed with the name of any person."

7.37. The principal question to he considered relates to cash memos. It has been held" that ordinary cash memo, issued by a shop-keeper to a purchaser of goods is not a receipt unless it contains an aclmowledgement of receipt of the money. Such a memo does not become chargeable by virtue of initials of the seller subscribed to a warranty written at the foot of it. Even if the initials are taken as amounting to -"cxe-ctizion", the memo. would not be a "receipt" within section M23). as it is not addressed to rI.'T}' pnrrictrlrir ne-won and the name of the customer to whom it is given is not mentioned in it.

7.38. In an Australian case,' the court ruled against liability on a cash memo. where the jnemo. contained no srmrvncnt that the purchase price had been pain', though the practice was to give such a document only against payment.

The same view prevails officially in Great Britain!'

1. Question l4(b'] of' the Questionnaire. V

2. Question l5--Publie Oiﬁcer.

3. FE.-raner'm" (' omm1'.r.w'orrer v. Innb Burma Watch Co., I.L.R. 12 Rang. 174: A.I.R. 1934 Rang. 49.

. Commissioner of Stamp Duties {N.S. W31 v. Swan & Co. Pty.. (1960) S.R.N.S.W. 141 and 182 [sub. mm. Woods v. Email it: Co. P.r_v.. (1960) Australian Law Reports 333] referred to in Monroe. Stamp Duties, (19611). pam 38, in. 15.

5. See the statement of the Chancellor of the Exchequer (made in 1949), H. C. Debates, Vol. 466 (Written Answers] cols. l36-137.

Recommendation to exclude attested Instruments.

Section 2(22-A}-

Deﬁnition of "public oﬁioer"

(Now).

Recommendation.

Section 203}-

Receipt.

Cash Memo.

Nature of Cash Memo.

Recommendation.

Section 2(25}-

Ilgddicrll' Exemption under article S3---- _ History of.

In 1949, Mr. A. Evans asked the Chancellor of the Exchequer whether his regulations still prescribed stamp duty on receipts of £ 2 and upwards and how far it is applicable to retail cash sales.

Sir S. Gripps replied: "The stamp duty of two pence upon receipts for sums of £2 or more is still in force. The form of voucher commonly given by retail shops in cash transactions where the whole of the goods purchased are taken away by the customer on payment of the price, being primarily a document used for internal bool-:--keeping purposes, does not constitute a receipt, and is not liable to stamp duty even though' it relates to a payment of .£ 2 or more, provided that it contains no words stating or implying receipt or payment of money. The customer is, however, entitled to demand a receipt, and the Stamp Act imposes a penalty for issuing a receipt liable to duty but not duly stamped, or for refusing to give a duly stamped receipt."

7.39. Generally speaking, buying and selling is not complete with the cash memo,,but with the payment. Payment is usually subsequent to the cash memo ; but, even if it is antecedent, what a "cash memo" indicates is that the goods had not been delivered on credit.

7.40. It may be useful to codify the position laid down judicially, by inserting a suitable Explanation, say, on the following lines :--- ' "Explana:ion.--A cash memorandum, that is to say, ti memorandum which records particulars of goods sold or services rendered is not a receipt, if it does not acknowledge that any money or any bill of exchange, cheque or promissory note has been receiverl, notwithstanding that it mentions the consideration for the sale or for r'ertder'ing the seri=ice.r."

We recommend the above amendment.

We may note that the suggested amendment has been generally favoured in the replies to the Questionnaire issued by us} 7.4!. The next clause deals with "settlement". We shall consider at length the deﬁnition of "settlement" and the charging provision in article 64 relating to declaration of trust?

7.42. Section ?.(25) deﬁnes a ''soldier'' as including any person below the rank of non- oomrnissioned oﬂiccr who is enrolled under the Indian Army Act, 1911. The deﬁnition was inserted by the Repealing and Amending Act, 1928 (18 of 1928]. That Act, by amending article 53, gave statutory ef'r'eet3 to exemptions from stamp duty which had previously been granted by notiﬁcations, and also introduced this deﬁnition. As we shall see later', while the scope of the deﬁnition of "soldier" has remained unchanged, the scope of the exemption in arti-

cle 53 was widened.

7.43. There does not appear to be any section in the Act using the expression 'soldier'. But it seems to have been employed in some notiﬁcations, granting remissi'on._--i'or example, in respect of documents chargeable as a 'power of attorney'. It also occurs in one article", as already stated.

7.44. Under article 53, clauses {d}, (e) and (fl. certain documents executed by soldiers etc. are exempt from the stamp duty on receipts. The reasons for granting this exemption from stamp duty is not very easy to discover: but it can be presumed that the decision to exempt such receipts was taken as a matter of public policy. It would be of interest to note in this connection that concessions to soldiers in the matter of taxes have been known since the period of Roman law.

For example, soldiers were exempt from inheritance taxes under Emperor Augustus.

1. Q. 16--Receipt--Cash Memo.

2. Article 64.

3. Article 53(rl), (e) and (fl-{'Receipt.).

4. See i.I'tﬁ't-J.

5. Article 53rd), {e)(t"-1 (Receipt).

Clause (cl) oi article 53 corresponds to, and is a modiﬁcation of, Notiﬁcation No. 1101 dated the 13th February, 1874-, and clauses (e) and (1') contain exemptions which were first announced by the same Notiﬁcation of 13th February, 1374. It would appear that this Notiﬁcation was extended, by Notiﬁcation No. 10 dated the 30th July, 1927, so as to cover persons who are not technically "soldiers" but are, nevertheless, below the rank of non-commissioned oﬂicers and are enrolled under the Indian Army Act, 1911.

7.45. It should be noted that the deﬁnition of "soldier" in the Stamp Act refers only to man in the army,--and that too only to non-commissioned oﬂicers. When enactments relating to navy. and air force were passed subsequent to the passing of the Stamp Act, the deﬁnition of soldier was left untouched, but changes were made in Article 53{d), (e) and (f) by adding 'soldiers' and 'airmen', so as to cover persons appointed under those enactments. Certain verbal changes were also made by the Adaptation Order of 1950.

7.46. incidentally, it may be mentioned that the Indian Army Act, 1911, has been repealed and re-enacted in the Army Act, 1950. There were substantial additions when the Act was re- enacted; but these additions are not material for the present purpose. It is obviously desirable that the deﬁnition in the Stamp Act should now refer to the Act of 1950. ' 7.4".-'. The deﬁnitions of "oﬂicer" in the Army, Air Force and Navy Acts are only inclusive, are not relevant for the present purpose. In the army, the jnnior--most oﬂicer among the non'- ooiiiitrissioned ofﬁoers is a Lance Naik. Below Lance-Naik, there are persons who are called 'sepoys'. Thus, sepoys appear to be the only persons covered by the deﬁnition of the word 'soldier', as contained in section 2(2S) of the Stamp Act. The words 'sailor' and 'airman"are words of common use. The technical terms, however, seem to be 'aircraft hand, and 'searnan'. According to the Navy Act}, for example, a seaman is a 'person in the naval service other than an ofﬁoer'.

7.48. So much as regards the present deﬁnition. In View of the passing of later enactments relating to armed forces, it is, in our view, desirable to revise the deﬁnition of 'soldier' as Bndér :--

"25) 'Soldier' includes a member of the armed force: of the Union other than an o[Tcer.''. , . 149. This would not only enable the shortening and simpliﬁcation of articles 53{d), (e) and (fl, but also cover armed forces" of the Union other than rnilitary, naval and air forces. At present, only members of the three forces are covered,--the military by the deﬁnition of 'soldier', and the naval and air forces, by speciﬁc mention in article 53. For the purposes of the Stamp Act, other armed forces also stand on the same footing, and should be similarly treated. We Iioiioiﬁiend accordingly.

We may note that the suggested amendment has been: generally favoured in the replies to the issued by us".

1. Section ﬂit; Navy Act, 1957.

2. To be considered under article 53{d). (el and (0-

3. Q. 1%-"Soldier".

;-,4 M of Lawm--1o Anny Act. 1950.

Recommendation.

Roaounsninsiu section 3- Iauodnuticn.

section 3- General condilsoufor charge of duty.

Uﬂﬂiﬁlﬂa' ' CHAPTER 8 THE CHARGE OF TAX : SECTIONS 3 TO I' 8.1. We have concluded our consideration of the deﬁnitions, and now proceed to a consi~ deration of the charging section and connected provisions. The principal section levying the charge is section 3. As already stated'. in the scheme of the Act, the duty is levied on the instrument, and not on the transaction. However, where the transaction is effected by more than one instrument or where the instrument relates to several distinct matters or falls within more than one category, the principle that duty is levied on the instrument must need reﬁnements. For these special situations, special provisions are needed. In the scheme of the Act, the general proposition for the charge of tax is to be found in section 3, while sections 4, 5 and 6 are devoted to the special situations referred to above. Section 7 contains a provision intended to ensure pavnrent of duty on certain policies.

8.2. Section 3 is the charging section. The section is a long one, and deals with various matters. Its provisions are fundamental in the scheme of the Act. Before we proceed to consider in detail the various parts of the section, it would be convenient to emphasise certain general conditions for the charge of duty which are incorporated in the section. In general, theme is no charge of Stamp duty under the section unless the following conditions are satisﬁed :-- .

(i) There must be an instrmnent.

(ii) The instrument must be one mentioned in the Schedule to the Act.

(iii) The instrument must he "executcd"'.

(iv) The instrument must be executed in India,-----clause [a)-----or must he received in India in the manner speciﬁed in clause (hi or clause (c). 1 ,

(v) If the instrument is not executed in India and is not a bill of exchange or note, etc._. it must relate to anvproperty situated in India or to any matter of thing done or to be done in India. This is provided in clause (cf! of section 3.

8.3. Even where the general conditions of chargeability, as mentioned above, are satisﬁed, the instrument may be exempt from duty. Such excrnption may arise by reason of--- . -- '

(a) the proviso to section 3, or

(b) some other section of the Act, or _ In

(d) a notiﬁcation issued under section 9 of the Act, or

(e) A special law-»-for example', section 115, Presidency Towns Insolvencgi 1909, section 51, Land Acquisition Act, 1394, section 28, Co-operative Societies Act, 1912, or section 29, Rwerve Bank of India Act, 1934.

The principal provision---i.c., the charge-----is to he found in clauses (a), (b) and (c) of the section. The provisos grant exemption for two cases.

8.4. The first proviso to the section relates to instruments executed by the Governmcm, etc. The scope of the exemption has been narrowed down by successive Stamp Acts.

1. Chapter 1. supra _

2. The list is not cxhaustrve.

3. Ramaswcmy v. P. Appa Raddy, (mo) 1 Mad. l"Iish~CoI.II't RGIJGPIH. I90.

Act of 1360, all instruments in which the Government was a party, were exempt'. U _ tlin-,Agg=:.,:

of 1862, instruments executed by or on behalf of the Government were exempt from stamp duty Under the Act of 1379, the exemption was practically in the same words as the present proviso.

The second proviso, relating to registered ships, was inserted at the Select Committee stage in the present Bill, in order to bring the Indian law in line with the English law': Act 19 'of 1338, mentioned in the second proviso, is the Bombay Coasting Vessels Act, 1838, which provides for the registration of vessels which are trading coastwise and also ﬁshing vessels and a harbour draft. Act 30 of 1841 also mentioned in the proviso, is the Registration of Ships Act, 1841. We shall deal later? with the eﬁect of repeal of these Acts on section 3.

8.5. The place of execution of an instrument is of importance with reference to the charge P13°°?' 'mi of duty as well as with reference .to the time of stamping. The provisions applicable to the gigging, ".33 following three broad categories of instruments (assuming, in each case, that the instrument is ﬂllfl-'_.ﬂll1 charpable to duty under the Schedule), are as follows :--

(:1) Instruments executed totally in India are governed by section 3(a) and section 17. They are charged under section 3. The general rule3 is that they must be stamped at the time of

(b) Instruments executed totally outside India are governed by section 3_(b) or section 33:), as the case may be, and section 18. They are chargeable under section 3th) or 3(a). The auroral rule', except in the case of promissory notes, etc. is that they must be stamped, within its pracribed time limit, alter they are received in India. But it must be remembered that this applies only where the instrument (besides being chargeable under a speciﬁc article in the Sdledule) relates to property within India or to some act or thing done or to be done in India.

Otherwise, there is no obligation to stamp the instrument, even if the instrument is received in Ilﬁin, if it is not subsequently ''executed'' in India'. I

(c) Instruments executed partly outside India and partly in India are governed by section ' 3(1). and section 17. They are chargeable under section tin). It is to be noted that they fall section 18, because section 18 applies only where the instrument is executed totally indict. Such instruments must be stamped at the nine of their (ﬁrst) execution in India'. ' ' - "there are, thus, three principal points of iinic..,--cicccu'iicn, bringing into India, or am execuﬁbra in India----whicb may become relevant to the charge of duty and the time of stamp- .l?iom this charge of duty. there is an exclusion, contained in the ﬁrst proviso to_ section 3. ' '3__i.6. Under the ﬁrst proviso, no duty shall be chargeable in respect of-- 3, an:

"(i) any instrument executed by or on behalf or in favour of the Government in F . ' cases where, but for this exemption, the Government would be liable to pay the duty chargeable in respect oi such insﬂumen ".

'A' question of practical importance arising out of: this proviso is this. What are the case:

for this exemption the Government would be liable to pay the duty. chargeable", ' t of an instrument? The answer may appear to be simple, but it is not really so. This there is no speciﬁc section in the Act rleaiing _'with the question--who is liable to python? _ .

Under section 29', in the absence of an agfeement to the contrary, "the expenses of pros proper stamp shall be 'home" by the speciﬁed persons. This section, as the words

1. 121, Merchant Shipping Act, 1394 and the (English) sinnis Act, 1391, Pin: Schedule, Second general

1. louﬁ-a(Pnra8.9).

3.-lultuntv. ' 41 18¢ 1'. :

5. F-it'hlaterexecutedinIndia, category (clinour analyst: beeomesrelpvnnt.

6.£hIvlnrr(b}.:ur=ra- - " .- g -- -

'J. Bicliulﬂ.

8. Sodium 29.

Sectipn 3. llcond promo.

Section 3-A Emnption.

quoted above show, does not state that the speciﬁed persons "shall pay the duty",----- though the marginal note to the section resds---"Duti by whom pays hie".

8.7. The question then an-ises----Can section 29 be utilised for the purposes of the ﬁrst proviso to section 3, when the Government, as a party to an instrument, undertake; to hear the expenses of the stamp dtrtﬁv, and is the case to be regarded as falling within the first proviso to section 3 so as to have the effect provided therein, namely. that "no duty shall he charge- able" on the document concerned ?

The position in this respect cannot be said to be beyond doubt. One view on the subject' is that the exemption under the ﬁrst proviso will not apply in such a case. Apparently, how- ever, the contrary paractice seems to he followed in the Government of India.

8.8, It is desirable that the position on this point, which is of a frequently recurring nature, should be indicated more clearly. _ We, therefore, recommend the insertion of the following words at the end of the first proviso---- ' "or where the Government has undertaken to bear the expenses of the stamp duty". Such an amendment will avoid controversies arising from the fact that the langltage of section 29 is not identical" with that of section 3.

The proviso speaks only of the ''Government'', but the view has been taken" that where I local body acts as a Government agency for the transactioneof duties (levoloving upon Govern- ment as part of its ordinary administration, such as making roads, erecting Government build- ings, etc., then this proviso would apply. We do not consider it necessary to suggest any amend- ment on this point.

8.9. Section 3, second proviso, is as folloms :--

"Providcd that no duty shall he chargeable in respect of---

{2) Any instrument for the sale, transfer or other disposition, either absolutely or by way of mortage or otherwise. of any ship or vessel, or any part. interest, share or property of or in any ship or vessel registered underﬂie Merchant Shipping Act, 1894, or under Act XIX of 1.833, or the Indian Registration of Ships Act, 1841, as amended by subsequent 14:13."

Of the three enactments, referred to in the proviso, the Merchant Shipping Act, 1394 [Eng.) has been replealcd by the Merchant Eiipping Act, 1958. The Coasting Vessel AH (19 of 1838) has been repealed, in so far as it applies to sea-going ships ﬁtted means of propulsion and to sailing vessels, by the Merchant Shipping Act, 1958. The Indian Registration of Ships Act, 1841, has also been repealed by the san1e.A,ct. ' 8.9.4.. It is now appropiiate if reference to the Merchant Shipping, Act, 1958, is sub- stitnted in place of the first and the third of 31% enactments referred to in the prov'n'o. A _ 3.10. This disposes of section 3. We would, at this stage, refer to a_ nevi: point Iluicltﬂfli the effect of exemption. A doubt sometimes arises' as to whether the exemption given' article in the First Schedule is to be regarded as valid only for the purposes of that rutmbt H thehtm whether the exemption is to be treated as a general one. In most cases, the latter is thin, and a speciﬁc provision to that eﬂect could be umfullst added. .

1. s (1933 M am Sta p Manual, page is thisnfaoarct Prcceclents) ass, Mia. sum train-uarr. lﬂlfuc 'II; lv:eMis.. isthéaprn. 1354. cited in chtalar. Stamp Act (195.1). vast 223- _ _

2. Para 3.6. supra. _ _ _ I

3. (1934), Punjab Stamp Manual, Part I-B. Ch. 3, paragraph 3, (Citing Financial Commissioner 5 dated 13.9.1334), cited in Chitaley's comn1e11t;;yXo)|,1 thcmestarnp ilctf (13:25 pang t21_:8.ofan bﬁwﬁm'_.= . | in t tion it in ccntex O_ a consis 8 D 1'3 4' :3a7i.:f0:m?avIiiin°'rereer§n5n£eui'$'ti1ieY att:1ei?n:'.IFnn under article 5. exemption {a}--Aa-eerncnt for sale at¢-.«'- . -

(a) Ra;-kubwbayaf v. Eivnp.. A.LR. 1934 All. 201: - - = . on A.I.R. 1936 All. 4153; ReJ"e'reJu:e--Calfecmr aim" "- I-shims! Chard.-

{(1) mm Begum. A.I.R. 1935 uh. :22.

.73 Where the exemption is intended to be applicable only in respect. of the chargeability of an ilstrltment under the particular article, a speciﬁc provision to that effect could be inserted in that exemption. . : e. - ' Such a provision would he in harmony with the opening words of section 3 also. 8.1!. We, therefore, recommend the insertion of a new section on the following lines :------ Rqcomtygqndgyign, "SA. Where, by virtue of an exemption provided for under an article in Schedule 1, Md", an instrument is exempted ﬁroni duty, the instrument shall, in the absence of an nu article in the express provision to the contrary; be exempt from duty under every other article Fm" S°h°d"l'°' 8150-51 8.12. A document executed outside lndia ts, at present, liable to stamp duty, even if it is swam 33...

already stamped with the duty chargeable under the law of the foreign country where it was :':"''"'''''''"I .l executed, provided the document is received in India'. There are special provisions for bills of A exchange payable otherwise than on demand, and for promissory notes, drawn or made out of India, and accepted or paid or presented or endorsed, transferred or otherwise negotiated in India". But, in general, the document has to be stamped within the prescribed time after being received in India, it the other conditions of chargcahility are satisﬁed. , 8.13. We are of the view that some provision is needed for relief in respect of documents 3.515;; mm; which have already been stamped under the law of a foreign country where the document was d°'-'NE "H50!!- execnted. 'With the growth of international commerce, such occasions are likely to increase, and, while it may not be necessary to grant an exemption for all cases, a limited exemption as to transactions with or between Indian citizens in respect of documents executed outside India and properly stamped under the law of the foreign country, could be inserted.

a 8.14. The Indian legal system has several laws provisions relating to relief against Preoadamj, dvcublc mention. A precedent, for example, is furnished by the Income-tax Act". In that Act, ' i there are two provisions dealing with double taxation,----c.uc he conﬁned to cases oi -Est?'-meat with foreign countries, while the other is not so conﬁned. The former---eection 90-is-as foHomi:---- -

e- '$50. Agreement with foreign countries .-----Thc Central Government may enter into an ' {a) with the Government of any country outside India for the granting of relief in respect of income on which have been paid both income-tax under this Actrand income--taJt in that country, or

(b) with the Government of any country outside India for the avoidance of double taxation of income under this Act" and under the corresponding law in force and may, by notiﬁcation in the Oﬂicial Gazette, make such provisions as maybe necessary for implementing the agreement".

In the Estate Duty Act' also, there is a provision for avoidance or relief of "double taxation. Irlttespact to estate duty, as follows :----- ' ' "30. The Central Government may enter into an. agreement with the Government of any reciprocating country for the avoidance or relief of double taxation with res- pect to estate duty leviable under this Act Ind under the corresponding hiw in force in the reciprocating country and may, by notiﬁcation in the Official Gazette, make such provision as may be necessary for implementing theagteemcnh : 1; 'him 3(c} (See stairs).

2. Section 3{h).

3. Sections 90 and 91, Income-tax Act. 1961.

4:. section 30, Estate Duty Act, 1953.

' Need "tor "relief.

CU". I. I3], Trade Marks Act, i958.

50613034.."

ii says' :--i 1'4 Explanation.---The expression "reciprocating country" for the purposes of this Act means any country which the Central Government may, by notiﬁcation in the Oﬂicial Ga:iette,__dec1u_e to be 11 reciprocating country. , _ _ _ ;

There is another precedent in section 131 of the Trade Marks Actl.

8.15. In the light of these precedents. and also on principle, we have carefully considered the suggestion, and we are in broad agreement with it. We do not, however, think that the pro- posed provision shonlil be conﬁned to transactions with or between Indian citizens. It could. extend to all docuinsnts. At the same time, we are of the view that the grant of such relief should be an die basis of rtciprocity only, and in pursuance of an agreement,------as in the Trade Marks Act'. -

We, therefore, recommend the insertion of the following section in the Act :--

''3B. (1) with a view to the fulﬁlment of a treaty, convention or arrangeinpntl country outside India which. affords to instruments executed in India concessions as can be granted under this section in respect of instrumqits _. _ __ outside India, the Central Government may, by notiﬁcation in the Gazette. declare such country to be convention a country for the purposes or this Act.

(2) Where an instrument is eitecuted in a convention country and is brought into the territories to which this Act extends, theiinstrunient shall, if duly stamped in the convention country under the law of that country, be deemed, for the of this Act, also to be duly stamped". ' ' . E I 3.16. The simple case of one instrument eliectuating a transaction is dealt with by the general provision in section 3; but there might be cases where there are several eﬂiectuating a transaction. The ordinary role is that stamp duty is levied on. an gt on a transaction. But, if this rule is and Without ¢l0¢Pli0I|_i ', practical hardship and unnecessary inconvenience. To deal with such it situation, provisions are usually considered desirable in the Stamp laws of all countries. In' our .

situation of several instruments used to effectuate a single transaction is dealt with in The section is, however, conﬁned to transactions of sale. mortgage or settlement. The braid rule is chargeable with the duty prescribed in the First Schedule, and each of the ' is chargeable with a duty of one First-Schedule.

Under sub-section (2), the parties may determine for themselves which or iiie_ as employed shall, for the purposes of sub-section (1), be deemed to the _ , there is a proviso to the eﬁeot that the dutynchargcable on the instrument so the highest duty which would be chargeable in respect of any of the said instruments so 8.17. In England, the princip';le is the but is not conﬁned to conveyances. the situation where a single transaction is effected by more than one instrun':ient,.an Bglnh Ii.-= rupee, instead of the duty, if any, prescribed for it in the .! ' ' m in these cases (which is sometimes stated expressly "The general rule _ and that ﬁxedﬁlty is that ad valorem -duty is more than once.

paid more than once where because it is R deetli'.

_ 1. seciioniii. Trade Marks Act. 1953. '

2. Section 131. Trade Marlrs Act. 1956- i 3_ Th. ° pgfﬁgn speaks of "sale". The latter portion speaks of "conveyauce", became-the duty . '.'s...iz' rt'.-

4. Monroe. Stamp Dutles.l1954). pane 31- efaeh instrument taken by itself attraqs I stqirp.

_ i _ discussion, seeﬁtppcndix. T T " "

Thus, in England, in a case of a contract comprising an offer and acceptance'-9 under hand, one 61. amp is suﬂicient, "which logically should be aﬁixed to the acceptance" i 8.18. Having considered all aspects of the matter. we see no reason why the principle Rmmmmhﬁom enacted in section -1 should not be extended to all transactions. Such cases may not be many ; but the example of a gift or partition should be cited.' The section should, in our opinion, be extend to all cases where several instruments are employed for completing any transaction. This view has been generally favoured in the replies to our Questionnaire.

Also, in our view, there is no need to charge duty on the supplementary instrument. On this point, we accept a suggestion made to us" by the Gujarat Bar Council. If this approach is accepted, it will be necessary to make other consequential changes also.

'We, therefore, recommend that section 4 should be revised as follows :---- Revived Section 4

4. (I). Where, in the case of any transaction, several instruments are employed for corn- pleting the transaction, only the principal instrument should be chargeable with the duty prescribed for it in Schedule I, and each of the other instruments shall, instead of being charge- able with the duty prescribed for it in that Schedule, be exempt from duty.

(2) The parties may determine for themselves which of the instruments so employed shell, for the purposes of subsection (1), be deemed to be the principal instrument:

that the duty chargeable on the instrument so determined shall he the highest duty which would he chargeable in respect of any of the said instruments employed. .

_8,_19.. So much as regards section 4. Its converse is to be found in the next section. Section 5. Llnderlsection 5, any instrument comprising or relating to several distinct matters shall be chargeable with the aggregate amount of the duties with which separate instruments, each com- or relating to one of such matters, would he chargeable under this Act. This section is the converse of section 4. and deals with cases where one instrument comprises or relates to several distinct matters. Here again, the general rule that stamp duty is levied on an instnrment and not on a transaction has had to he explained----this time, in the interests of providing that such instrument will 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 the Act.

T, _I_tTis,5again, in the interests of revenue that it overr_ides_the next section', which deals with hstrurncnts coming within several descriptions in t:l1e;First Schedule.

_» No.douht, the apparently simple provision in section 5 is not devoid of difiiculties Criticism apnea. in iuippiication. A writer on the law of Stamps' says : '_'Scardely any subject, the range of the Stamp Laws, is of so embarrassing a nature, in practice, as that which falls under iﬁiiﬁonnf 'Instruments' relating to several distinct parties or. matters'."

. r" - : = . - i . . .

.:_ ,'-ﬂnwever, such difficulties cannot be solved byaan amendment of the law, and it is diiticult .19 better and more precise formula. T . T ' T T . .'='i_$,T2_I.'.'T:'l'his takes us to section 6. In order to appreciate signiﬁcance of that section, Seating 5. ii to examine the scheme of the Act. The sciiemc of the Act as regards documents diﬁerent heads is as follows :-- ' ' , '-'_1~ ._-' ' ' , _ ant-,: accepted orally or by conduct requires no stamp: Carbofic Snrokebaii Ca.. [1392] 1a.]! T T ppeal (1393) 1 QB. 256. 'T , _ _ "ii. 1aeiiuTe.'stamp_Duﬁea.(1964)pase 31- ' ' T T 4 _ cg: Hmﬁwg v. Perry, (1828) 2 Moo page 375. cited in Halsbury. 3rd Ed.,Vol. 33, page 295, para 513. f.n. F): _ -

5. Qadlon 22. ' r

6. s. No. 74 (Gujarat Bar Council) under Q. 22 of the Questionnaire issued-Vby the Dommiuiorl. _ 1, see the opening words of section 6--"Snbject to the provisions of theilast preceding section." B. The late Mr. Tilsley, quoted by Donogh, Stamp Act, (1935), page 183. T ' Gist o {Section 6.

Provisions analysed.

Position Blind in 76 The First Schedule to the Act speciﬁes the duties which are chargeable upon certain descriptions of instruments. There may be instruments falling within "more than ass category. They have to be speciﬁcally dealt with, since the general rule in sections 4-S would not yield a fully adequate test.- Section 6 provides that in such a case the higher or highest duty is chargeable.

8.22. Section 6,--_to put the matter very b-road1y,----provides that an instrument so framed as to come within two or more of the descriptions in Schedule I, shall, where the duties charge- able thereunder are different, he chargeable only with the highest of such duties. This rule is, however, subject to an important qualiﬁcation, which is expressed in the section by the words "subject to the provisions of the last preceding section"--i.e., section 5. Section 5, it will be recalled, provides that an instrument comprising or relating to several "distinct matters"

shall be chargeable with the aggregate amount of the duties with which separate insiruments each comprising or relating to one of such matters would be chargeable, under the Act. The qualiﬁcation in section 6 dependent on section 5, is of importance. _In fact, itrnay be noted that in the previous Stamp Act 1879', sections 5 and 6 were combined together. If a document is, in reality, one instrument, though dilierent names are given to it, section 6 will apply. Bill if, in fact, it comprises several instruments, then section 5 will apply. In order to bring 5 document within the terms of section 6, it has to be read as a whole.' 8.22A. It may be convenient to analyse the relevant provisions-3 Group A. (1) A document which really contains more than one instrument must be stamped separately in respect of each. ( This follows from section 3).

(2) An instrument which relates to several distinct matters must, eircept wfhere express:

provision to the contrary is made, be separately and distinctly charged in respect of each tnrittetr, and, for this purpse, distinct provisions constituting together the consideration for an instru-

ment liable in respect of one of them to ad valor-em duty are treated as separate and distiiibt matters {section 5). But two other cases may arise.

Group B'.

(3) An instrument may relate to several matters which, nevertheless, camio! be regarded as distinct ,- (section 6). and (4) An instrument, though relating substantially to one matter, may fall into one category.

or another, according to the view adopted of its legal operation (Section 6). rue Act has distinct rules for Group A trom Group B. -

The line of division between classes (2) and (3) may sometimes be diﬁcult to' draw. But it is not possible to improve the position by any verbal amendments. ' 8.23. It is well established in England that where a document comes within; each get two categories chargeable with duty under the {English} Stamp Act, 1891, the Crown is entitled to only one of the duties, but it may choose the higher. A case that iii to the House of Lords may be cited.' The United States of Mexico had issued 'geld iiclilﬁﬁ Ebﬁy notes' with a promise to pay principal and interest to the bearer at ﬁxed dates 'eitbe_r_abtood or, at the option of the holder, in London. There was evidence that the notes were. saleable on the London and other Stock Exchanges. It was held; the notes being, in fact, "both go- missory notes and marketable securities within the Stamp Act, 1891, they were liable to he higher duty imposed by that Act marketable securities. M.R., iii -the his judgment in the Court of Appeal, observed that the cases established tbiii E HI not only the right to treat, but is bound to treat, an instrument as assessable under which involves the higher stamp duty.

1. Section 'J, Indian Stamp Act, 1879.

2. (I916) 37 Indian Cases 984 (Madras).

3. Analysis adapted from Donogh. Stamp Just, (135); Page 189.

I Speyer Broriias v. C'om'r.r., (1908) A.C. 92 aﬁrming{19D7) 1_ K_.,l1. 146, 253.;

Lord Lorebum, in the course of his judgment in the House of Lords, aﬂirming this view, observed :---

"In my view, the document falls within both descriptions, and where a. document is by its description chargeable under the Stamp Act as a promissory note, and is also chargeable under the statute as a. marketable security, the Crown has a choice whether to charge under the one or under the other description. It":

the Crown does claim that the document shall be stamped at the higher rate within one part of the Act, it is no answer to say that there is another part of the Act under which the same document ought to be charged of a lower rate. It can only be charged once."

These observations of Lord Loreburn lucidly explain the signiﬁcance and rationale under- lying the statutory provision in section 6. Brieﬂy, the gist is this :---

(i) Duty may be cltatged only once.

(ii) But it must be the higher, and not the lower, of the two.

8.24. This, in fact, is the substance of section 6. An instrument so framed as to come within two or more of the descriptions in the First Schedule, is to be chargeable with the highest of the duties. The proviso to the section deals with the special situation of a counter- part or duplicate of any instrtrrnent chargeable with dutv, where duty has been paid in respect of the (principal) instrument.

There is not much sco e for int roventent in section 6. What remains to be noted is P P only the special provision, contained not 1|] this Act, but elsewhere.

8.242%. We have in mind section 1? of the Negotiable Instruments Act', which gives a right to the holder of an "ambiguous document" to treat it as a promissory note, or as a bill of exchange. By "ambiguous document" is meant a document which can fall under either. According to judicial interpretation, this privilege cannot be taken away by anything contained in the Stamp Act, and in this sense, section 1'? of the Negotiable Instruments Act must be read as overriding the Stamp Act."

8.25. In our view, it is desirable to codify this interpretation by adding a saving to section 6, to the effect that nothing in this section shall affect the provisions of section 1'? of the Nego- liable Instruments Act, 188]. We recommend that an Explanation should be added accordingly. Such an amendment has been generally {avourcd in the replies to the Questionnaire" issued by ea.

8.26. We now come to section 7''. Before 1963, section 7 was as follows :--

"7. (1) No contract for sea-insurance (other than such insurance as is referred to in section 506 of the Merchant Shipping Act, 1894] shall be valid unless the same is expressed in the sea-policy.

No sea-policy made for time shall be made for any time exceeding twelve months. - -

No sea-policy shall be valid unless it speciﬁes the particular risk or adventure, or the time, for which it is made, the names of the subscribers or underwriters, and the amount or amounts insured. .

Where any sea--insurance is made 'for or upon a voyage and also {or time, or to extend to or cover any time beyond thirty days after the ship shall have arrived at her destination and been there moored at anchor, the policy shall be charged with duty as a policy for or upon a voyage, and also with duty as a policy for time." a . ' (2) (3) (4)

1. Section 1?, Negotiable Instruments Act, 1381.

2. ..-ﬂagappa Cher}: v. Namyan, (1932) 63 Madras Law Journal 548; ALR. 1932 Med. 765, 766.

3. Q. 23.

24 M of I..awj7'l'--ll.

Section 6- Substance.

Negotiable Instruments Act.

Recommendation to amend section 6.

Section ?--

lielicies of mea-

insurance.

57 and 53 Viet.

c. 60.

Case law.

After the passing of the Marine Insurance Act, 1963, only sub--section (4) survives.

8.27. There are only two reported cases on the section. A Bombay case' dealt with one point as to whether mere initialling of a document was suﬁicient within the meaning of sub--section {3} of section 7', which provided that no sea policy shall be valid unless it "speciﬁes"

the names of subscribers or iniderwriters. The Court held, that initialling was suliicient to "specify" the names within the meaning of section 7(3).

A Calcutta case? has dealt with the scope of sub--section (1) of section 7 (now repealed], and held that a cover does not amount to a valid policy of marine insurance. These cases are no longer of importance for the Stamp Act, since sub-sections (1) to (3) have been repealed.

So far as stilt-section (4) is concerned, we are recommending its deletion, for reasons to be given3 under Article 4?.

APPENDIX I Section. 4-----English lmv as to two instruments used to effectuate one transaction The general rule in England is that ad valorem duty is not paid more than once. and that fixed duty is paid more than once only where each instrument taken by itself attracts a stamp, e.g., because it is a deed. This. in a case of a contract comprising an offer and accep-

tance under hand one 6 ti. stamp is sufficient, which logically should be affixed to the acceptance.

As regards conveyance, it is expressly provided by statute, that where there are several instruments of c.-nr1t=e_t=nnce, the principle instrument only is to be liable to ad vaiorem duty, and the others to such duty as they may be liable, not exceeding the ad valorem duty.' Section 58(3), Stamp Act, 1891, is as fol1ows4:--_-- _ : f"5,$,.._(3)_-ilW.h'crep..tliere, a{re'_.s,evr;ra1','instrutitents oi. conveyatioe. for conigleting the "..'Pu.r¢.hss=r's-. this-«-ts--.pr.0Psttn»s0l9is '.hi-?;.-PT5n9iRa1,-i§1~3'4"tTF'§1l1.°f ¥>°"'~.'-i'¥ﬂ"¢¢ oniv . _is tgybﬂ-QhatE¢d'=t'h'iﬂ1'ﬂd., Yiillﬂr-f;mt.,_duty', and=__t1ie other ,instrume.nts are to be respectively charged with such other duty as _t_hey_.,_may.5be liable -to, but such lastmentioned duty shall not exceed the ad valorem duty payable in respect of the principal instrument?' Section 61 is as follows : --

"61. (1) in the cases hereinafter speciﬁed the principal instrument is to he ascer- tained in the following manner :

(:1) (b) [Repealed by Finance Act, 1949, s. 52 and Schedule XI].

(c) Where in Scotland there is a disposition or assignation executed by the seller, and any other instrument is executed for completing the title, the disposition or assignation is to be deemed the principal instrument. ' (2) In any other case the parties may determine for themselves which of several instruments is to be deemed the principal instrument, and may pay the ad vaim-em " duty thereon accordingly.

"I11: position for other instruments is the same," though there are no statutory provisions.

As the Revenue have in England never insisted on double ad valorem duty in cases where two instruments are used to eﬁect one transaction, there is very little authority on the point, as no one cares to contest the matter.' T_V:f'_r";c:;--;y1_j;WDambjfand Company v. Virji KII.'ifr',AIR 1923 Bom 142 (Shah, c. J. and Crump, J.) 2 Radhakrirftarr Dag: v. The General In rurance S'oc:'et_v Lrd., (1968-69) 73 Cal. W. N. 694, 964, 930, 931, 984 (Bijavesh ldukerji, 1.). [Case governed by section 7(1), Stamp Act] 3, See discussion as to article 4?, inﬁd-

4. Sections 58(3) and 61(2). Stamp Act, 1391- f_. Monroe, Stamp Duties (1964). D356 31- 79 There appears to be an exception to this general rule where two securities are given for the same debt. Thus, if a person gives a bill ot sale and a promissory note, to secure a debt, a separate ad valorem duty is payable on each.'-2 This exception has received statutory recognition, inasmuch as, under the heads of charge "Bond, Convenant} etc.", a separate and lower rate of ad valorem duty is provided for colla- teral securities. The ad vatorem duty on the collateral securities is, in some cases by statute' and in others by extra--statntory concession--lirnited to 10s. But there are, still, cases where two ad rtrtorern duties are payable.

APPENDIX 2 Points coucwnmg g.-'_f.rs, exchanges, trusts, etc. under section 4

(a) Conditional gifts"

Though a gift is usually unconditional, it can be conditional. It is to be noted that a gift is a species of transfer, and is, therefore, subject to all the provisions of the law of transfer of property relating to conditional transfers. Like other transfers, :1 gift, therefore, may be subject to a condition precetlentﬁ If the condition is not invalid," the condition will be recog- nised by law. A gift to two sisters on the condition that they should live apart is valid.' If A gives Rs. 500 to B on condition that B shall marry C, the condition is valid. But, if the condition is inntoral or illegal, then it is void?

Similarly, a gift may be subject to a condition subsequent." In a Madras case,"-' a gift was made by a person sentenced to transportation for life to :1 relation, on the condition that the land gifted should be gl\'(:r1 back if the donor retttrned to his village.

In fact, section 126 of the Transfer of Property Act even provides that the donor and donee may agree that on the happening of any speciﬁed event not depending on the will of the donor, a gift shall be .$ttt5';.1£'Ud£!'t.i or revoked. A condition can, therefore, even go to the extent of providing {or revocation.

Apart from the 'I'ranst'er of Property Act, conclitions are recognised in respect of gifts by Muslim law also"-'2 Though the Transfer of Property Act, section 123. dealing with the acceptance of a gift, does. not require the acceptance to be in writing, and though the acceptance can be inferred or oral, there can be :1 written nr..-'.'.€pfrm('c by the donec, and, in case of conditional gifts, it is pru- dent to have a written acceptance.

A gift to which a condition is attached is not a "sale", because, as deﬁned in the Transfer of Property Act,13, a "sale" must be only for a price. and "price" here means money only." It has been speciﬁcally held" that a transaction which is in consideration of the transfesror's regard for the transferee, nho agreed to maintain the transferor, is not a "sale".

,_ M,,,,_.,,,,,,. ,.,,g,.,,,.ce Ca, V. Cater', (I883) 20 Q.B.D. 735, 783.

2. Promissory notes are no longer liable to ca' valor:-in duty in England.

3. -Stamp Act, 1891, Schedule 1.

4. Revenue Act, 1903, section 7, limiting the duty on collateral securities to 105.

5. Section 21, Transfer of Property Act.

6. Section 25, Transfer of Property Act. See particularly illustration (b).

17,- Rodgmnry v. Woodimuse, (1844) T Beav. 437, 49 ER. 1134, cited in Mulla, Transfer of Property Act (1966), page 732, footnote {Z}.

3. Ram Sn-amp v. Bela, {I884} I.L.R. 6 Allahabad 313.

9. Section 31, Transfer of Property Act.

10_ y€,,k,,;,,,-a,»,,a,., 1,-_ AD.-35;,-gmy, A.1.R. 1933 Madras 67 43 Madras Law Journal 340. 1 1. Tvabji. Muslim Law (1968), page 305, page 366, illustration (1), and page 406, illustration (1) and cases there cited.

2. Also the leading case of Nnwab Umjad Ally Khan, 11 M.I.A. 517. 543. 547. as explained in A-I-R 1932 P-C- 331-

13. Section 54, Transfer of Property Act.

14. 1 adﬂﬂ Piitaiv. Bfzarihakaii, A.i.R. 1922 Madras 311. _

15. Run" Rant v. Mum Cftcrtd. A.l.R. 1959 Puniab 117. (Case relating to right of pre-emptton).

Even if conditional gifts are not regarded as gifts, they are certainly not "saies". So they do not, at present, get the beneﬁt of section 4, Stamp Act, which is conﬁned to sales, mortgages and settlements.

(I3) Two documents Coltsliéuthtg :2 gift.

If there are two documents relating to a transaction of gift, the case does not, at present fall under section', unless the document is a "settlement". in an Allahabad case} T- in consideration of love and aﬁection and the promise to be maintained by his brother M. executed a deed of gift of all his property in favour of M, and M executed another deed whereby M promised that during the life time of T he would pay T's expenses. The High Court held that the second deed executed by M was one which came within section 4, because the transaction may fairly be said to come within "settlement". As to the unity of the transaction, the Court observed that the two instrument were intended by the parties to be employed in completing one transaction. la that case, the Court held the transaction to be one of settlement (no detailed reasons are given discussing this aspect of the matter). if. however, the parties had not been brothers, the document would not be regarded as a settlement, and the transaction would be substantially one of gift,-- ---hut not covered by section 4. The case is referred to here to Show how section 4 could be usefully extended to gifts.

In a Bombay case,' the document marked A was a document on a three rupees stamp paper, and was one of conveyance of immovable property absolutely for Rs. 275. On the same deed of sale, the individual nephew of the executant endorsed his consent to the sale. It was held that the endorsement of consent and the conveyance were several instruments employed to complete a transaction within section 6 of the Act of 1379 (present section 4), and the consent ought to have been written on a separate stamp paper of the value of one rnpee. This case is cited here to show how, in. reality, the situation could arise in relation to gifts also, namely, where A executes a gift and B, who is his undivided nephew, indicates his consent. At present, the case could be outside section 4, but the transaction of gift is but one, and it is fair that there should be only one duty.

Then, there is the case of trusts, the machinery of trust can be employed to eﬁeet a transfer for the beneﬁt of certain persons who are not related to the author of the trust. The Trust Act does not require that there should be only one physical instrument of trust. The case would be outside present section 4, but ought to be covered by it, there being no reason why double duty should be charged on two deeds of trust and not on two deeds. of settlement.

(d) Exchange.

There is also the case of exchange. When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an exchange." A transfer of property in completion of an exchange can be made only in the manner provided for the transfer of such property by sale.' This is what the Transfer of Property Act provides. But this provision does not necessarily attract the beneﬁcial provisions of section 4 of the Stamp Act. It merely deals with the rules as to registration etc.

(e) Partnership.

Then, there are also cases of partnership, where the stamp duty is higher than in case of an ordinary agreement.

1. Stamp reference. (1915) I.L.R. 37 Allahabad 264 {Full Bench).

2. Hanumappa, (1888), I.L.R. 13 Bombay 281.

3, Section 118, Transfer of Property Act.

4 Section IlS, Transfer of Property Act CHAPTER 9 MODE OF PAYM.ENT----S-ECTIONS 8 TO 10A

9.] The mode of payment of duty is the subject matter of the next sections with which we shall now be concerned. In general, of course, the stamp duty is indicated by "stamp", as is obvious from the scheme of the Act and its very little. But certain special situations require special provisions; and to meet those special situations, special provisions are enacted in section 8 and the succeeding sections.

9.2. Section 8 is a special provision applicable to bonds, debentures or other securities issued on loans under the Local Authorities Loans Act, 1879. The provision was originally introduced, it seems, in 1897.1 to give facilities to local authorities for issuing debentures upon payment of composition duty. Section 8 (English), Finance Act, 1899, is in similar terms.

The Local Authorities Act, 1879, referred to in the section, has since been replaced by the Local Authorities Loans Act, 1914 ; and the section should, therefore, be amended to sub- stitute a reference to the latter Act. We recommend accordingly. We may add that the replies received to our Questionnaire? have favoured such an amendment.

9.3. Section 9 deals with the power of the Government to reduce, remit or compound stamp duties. It is one of the most important sections of the Act, and certainly one of the most frequently used sections. Whether duty should be remitted or reduced in a particular case, depends on a variety of factors, which are too numerous and fluctuating to permit codiﬁ- cation. That is the principal justification for the section.

9.4. While the conferment of such a power can hardly be objected to in modern times, it becomes necessary to point out that the power is very Wide in its ambit.

Under the section, the Government may, by an order published in the Oﬁicial Gazette, grant reduction or remission. Such reduction or remission can be granted (1) prospectively, or (ii) retrospectively. The reductions and remissions can apply in (i) the whole or (ii) any part of the territories under the 'administration' of the Government. They can apply to the duties with which (i) any instrument, or (ii) any particular class of instruments, or (iii) any of the iustrtunents belonging to such class, or (iv) any instruments when executed by or in favour of any particular class of persons, or by or in favour of any membrs of such class, are charge-

able.

Government can, by similar rule or order, also provide for the composition or consolida- tion of duties in the case of issues by any incorporated company or other body corporate of debentures, bonds or other marketable securities.

The expression "the Government" in the section means,--

(a) in relation to stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares. debentures, proxies and receipts, and in relation to any other stamp duty charge- able under this Act and falling within entry 96 in List I in the Seventh Sche- dule to the Constitution, the Central Government ;

(bl save as aforesaid, the State Government.

9.4.3.. As to this expression, it may be noted that before 1937, the Governor General-no Council was the only authority empowered to remit or reduce or compound duty under the section. The Adaptation Order of 1937 substituted the words "the collecting government" for

1. The Indian Stamp Act (1379), Amendment Act, 1897 (13 of 1897).

2. Question 24.

S1 Introductory.

SectionB-- _ Recommendation.

Section 9.---

Width of the power.

History Delegation.~-- Vali-

dity of.

Recommendation to add the criterion of pub-

lic Section 9A (1-New.) interest.

Recommenda-

tion.

Section 10.

the words "Governor General-in-Council"'--and also inserted a deﬁnition of "collecting Gov- ernment". The Adaptation Order of 1950 substituted the words "the Government" in section 9, and also added sub-section (2), deﬁning the expression "Government". It also removed the deﬁnition oi""collecting Government".

9.413. Reverting to the present section, we are of the view that since the power dete- gated by the :-'cation in very wide, some sateguards are needed. In one case decided by tile Supreme Court,1 which is very relevant to the point of delegation, the Court, while declaring sections 4- and 7 of the Travancore--Cochin Land Tax Act, 1955 (15 of 1955) to be uncon- stitutional, ol'=servv..-d---

" . _ . . . .Furti-ier, section 7 of the Act quoted above. particularly the latter part, which vests :he Government with the power wholly or parriafiy to exempt any band jrom the provi'.w'on.s' oi the Ac!,'~' is clearly discrirruhatory in its effect; and, therefore, infringes Article 14 ot the Constitution. The Act does not lay down any principle "or policy for the guidance of the exercise of discretion by the Got-ernment in respect of the selection contemplated by section 7."

The Supreme Court. in this connection also referred to the Dalmia case", and quoted from the judgement in that case.

9.5. While the validity of section 9 has not been contested so far, it appears to us desir- able that in order to preserve its validity, some criterion regulating the exercise of the power delegated thereby should he added. 'We, therefore, recommend the insertion of the criterion of "public interest" in relation to the grant of a reduction or remission by notiﬁcation under section 9. This could be achieved by adding the words "if satisfied that it is necessary in the public interest" after the words "the Government", in section 9(1). We recognise that this is not a very precise test, but even then, it will give some indication of the legislative policy and lessen the possibility of a successful attack on the validity of section 9(1).

We may mention that such an amendment has been supported by most of the replies [0 our Questionnaire.' ' Case law on the section reveals no conflict of views, obscurities or other difficulties in the working of section 9; Hence no other change is necessary. ' 9.6. At this stage, we would also like to deal with the question of consolidation of duties in respect of receipts. In the State of Maharashtra,5 the following new section has been in- serted, conferring power on the State Government to consolidate duties in respect of receipts.

"9A. The State G-overr_1n1ent may, by order published in the Oilicial Gazette, provide for consolidation of duties in respect of any receipts or class of receipts given by any person [in- cluding any Government} subject to such conditions as may be speciﬁed in the order-"

9.6A. It would, in our opinion, be useful to have a similar provision in the Act Such a change has been approved by most of the replies." to our Questionnaire. We recommend accordingly.

9.7. Section 10 deals with the mode of payment of duty. Duty is ordinarily paid in stamps; but in exceptional cases, it can be received in cash under certain special provisions of the Act.

We have received a suggestion to provide for payment in cash in certain' oiher cases.

Its genesis is as follows :

. Kmrnariznr Th.v!Fztmm' M'oopr'i_. Nair Vs. State offeraia, A.l.R. 1961 S.C. 552 ; (1961) 3 S.(,'.R.77. I . . Emphasis Supplied.

. Ram Krishna Dalmio V. Jiistfce SIR. Tondaiirar, A.l.R. 1958 S.C. 538, 548-49.

. Question 26.

. Maharashtra Act I of 197i.

. Question 25 of our Questionnaire.

'-7\'JI-I-'-L-lI~J-I 83 9.8. A proposal1 had originated in the Ministry of Finance to the effect that there is need for an enabling provision in the Stamp Act and the Court Fees Act for permitting levy of the stamp duty or Court fee in cash, in the event of a shortage in the availability of non-judicial stamps and court fees stamps respectively. This suggestion was sent to various State (.'i-.n-'ern-

ments by the Ministry of Finance for their comments in the matter. The State Governments, including the Union 'I'errilory Ariministrations, mostly expressed themselves in favour of the suggestion.

9.9. It may also be stated in this connection that in Gujarat, the State Government, some time ago, had prepared a Bill-'-' to amend section 10. it was stated in the Statement of Objects and Reasons that owing to inadequate supply of non--judicial stamps from the Controller of Stamps, Nasik, acute shortage of stamps was felt frequently in different parts of the State. To meet this situation, it had been found necessary to amend section 10 of the Act so as to enable the State Government and the Collector to direct payment of stamp duties in cash in such con- tingencies. (The Bill does not seem to have become law).

9.10. We have given careful consideration to the matter, and are of the View that as the problem is of frequently recurring nature. it should be solved by adding the following new 10 sub-sections, to section 10, which we recommend :

Section 10(3) and {4)------1'to be added] "{3} Notwithstanding anything contained in suh--section (1), where-

(i) the State Government, in relation to any area in the State, or (_ ii) the Collector, in relation to any area in the district under his charge, is satisﬁed that on account of temporary shortage of stamps in any a=.'ea__ duty cannot be paid.

and payment of duty cannot be indicated on instrurncnts, by means of stamps, the 'State Gov- ernment, or, as the case may be, the Collector, may, by Notiﬁcation in the Official Gazette, direct that, in such area, the duty may be paid in cash in any Government treasury or sub-

T treasury, and certify by endorsement on the instrument in respect of which the st-amt) duty is paid, that the duty has been paid, and state in the said endorsement the amourn of the duty so paid (4) An endorsement made on any instrument under sub-section (3) shall have the same eﬂcct as if the duty of an amount equal to the amount stated in the endorsement had been paid in respect of, and such payment had been indicated on such instrurncnt by means of

-stamps, under sub-section 171)."

9.11. This disposes of section 10. A1; this stage, we may discuss a new point concerning the mode of payment. At present, the usual mode of payment of duty on documents is by affor- ing stamps." In our view. an innovation worth considering is the use of franking machines. It is Well-known that such machines are allowed for postal stamps} It appears" that the laws in Malaya and Singapore provide for issuing licences, authoris- ing persons to pay the required duty on cheques, bills of exchange {not including promissory notes) and receipts, by postal franking machines. Apart from that, however, the utility of such a provision is obvious.

9.12. Practical experience of a similar provision in the Post Otlicc Act shows that such a provision would not lead to serious evasion. The provision in the Post Oﬁice Act. as to Postal franking (Section 17, Post Office Act), is quoted below 2"

1. S.N. 132 in Law Commission File-Extract from File No. =*%'.r'l,'ti1,i';'l-Cus.'VlI. Min. of Finance (Revenue & Insurance Department.)

2. SN. 132 in law Commission ﬁle.

3. Sections wand 11, Stamp Act.

4. Section 17, Indian Post Ofﬁce Act, 1398.

5. Sheridan, "Malaya and Sigapc-reAThc Development of Laws and Constitution" (1961) Page 232.

6, Section 17, Post Oﬂice Act.

Payment of stamp duty and court fees in cash in the event of Shortage in the availability of non-judicial stamps and court fees stamps.

Recomrnendaﬁon to amend section Section IDA (New)---

Franking rnachines.

Pastas:

to to bestampe for the purpose.

stamps 45 of 1860 45 of 1860.

Recommendation 84 "1?. (1) Postage Stamps provided under section 16 shall be deemed to be stamps issued by Government for the purpose of revenue within the meaning of the Indian Penal Code, and, subject to the other provisions of this Act, shall be used for the payment of postage or other sums chargeable under this Act in respect of postal articles, except where the Central Govern~ ment directs that pre--pa}'ment shall be made in some other way.

(2) Where the Central Government has directed that prepayment of postage or other sums chargeable under this Act in respect of postal articles may be made by prepaying the value denoted by the impressions of stamping machines issued under its authority, the impres- sion of any such machine shall likewise be deemed to be a stamp issued by Government; for the purpose of revenue, within the meaning of the Indian Penal Code."

9.13. We recommend that some such provision should be inserted in the Stamp Act. Some of the replies to our Questionnaire? favour it. Some have raised queries about the likeli- hood of misuse. We have dealt with that aspect already. The new section could be numbered as section 10A.

1. Questions 2?.

I CHAPTER 10 STAMPS AND THE MODE OF USING THEM:

SECTIONS 1 l--16 10.1. The instruments v-lticlt "may be stamped" with adhesive stamps are enumerated in section 11. These are--

"raj! instruments chargeable with a duty not exceeding ten naya paise, except parts of bills of exchange payable otherwise than on demand and drawn in sets;

"(b) bill of exchange drawn. or rrtnde our of India, and promissory notes so drawn

(c) entry as an advocate, vakil or attorney on the roll of a High Court;

(d) notarial acts ; and

(e) transfers by endorsement of shares in any incorporated company or other body corporate."

10.2. We begin with opening line of the section, which says----"the following instruments may be stamped with adhesive stamps". It has been held' that the use of adhesive stamps under this section is permissive and not obligatory, so that if an impressed stamp is available and suitable, it can be used instead of an adhesive stamp. In our opinion, it is desirable that this interpretation should be codiﬁed, so that the section is made selfcontained. This could be achieved by inserting an Explanation to the above effect.

10.3. In clause (a), the amount ten naya paise should now be increased to twenty (see Article 53}. As to clause {b}, it has been hcld2 that the words "drawn or made out of India"

govern the entire clause and are not conﬁned to promissory notes. This is not, at ﬁrst sight, apparent from the section, and it would, therefore, be useful to re-frame clause (1)) as follows, so as to bring out its true scope :

"(b) bills of exchange drawn. or made out of India, and promissory notes so drawn or made."

10.4. Section lltfc) provides that entry as an advocate vakil or attorney on the roll of a High Court may be stamped with an adhesive stamp We are going to recommend deletion of the charging article on such instrttment-sit We, therefore, recommend that section 110;) should be deleted.

The remaining clauses need no change.

1D.4A. In the" light of the above discussion, our recornmendaton is to revise section 11 as under :

"II. The following instruments may be stamped with adhesive stamps, namely-- {a} instruments chargeable with a duty not exceeding twenty poise, except parts of hills of exchange payable otherwise than on demand and drawn in sets ;

(b) bills of exchange drawn or made out of India, and promissory notes so drawn or made ;

[(12) is omitted] [d] notarial acts ; and

(e) transfers by endorsements of shares in any incorporated company or other body corporate."

-1 to Katya» Sing}: 'I'. atﬁiiuar Sing}: I.L.R. tisséfts Ra.i- 231.

(b) Sam Dun' v. Ahab! Rashfd. A.I.R. 1868 Raj 45.

2. Devon' P. Ramakrishrrfrrh, (1380) I.L.R. 2 Madras 173, 174 (case on section 10 (b),

3. Article 30, Infra.

1379 Act].

24M or Law;'TJ'--11'.

Section 11.

Section 11 and the use of the we "may"

SectionlI(a)and 31 (bl Section 11 {c) to be deleted Recommendation Section 12.

Principle.

Section 12(3).

I of llsnnn.

E.rpiam:m'on--To be added as recommended.

10.5. Section [2, deals with the important topic of cancellation of adhesive stamps. Under sub-section (1), clause (a), whoever aﬁixes any adhesive stamp to_any instrument chargeable with duty which has been executed by any person shall, when aiﬁxing such stamp, "cancel the same so that i.t cannot be used again ;"

Clause (b) of the sub-section enacts that whoever executes any instrument on any paper bearing an adhesive stamp shall, at the time of execution, unless such stamp has been already cancelled in the manner aforesaid, cancel the same so that it cannot be used again.

-9.-r.» Under suh-scction (2), any instrument bearing an adhesive stamp which has not been cancelled so that it cannot be used again, shall, so far as such stamp is concerned, be deemed tJ- be unstatnped.

The mode of cancellation is indicated in greater detail by sub-section (3). It provides that the person required by sub-section (1) to cancel an adhesive stamp may cancel it by on or across the stamp his name or initials or the name or initials of his ﬁrm with the true date of his so writing, "or in any other effectual manner".

10.6. The principle underlying the section is fairly clear. As was observed in a Bombay case1--- = -

"The Stamp Act of 1899. (_ clause 3 of section 12) points out as a guide how the cancella-

tion may be effected . . . . ..the law being that a used stamp cannot be used again--lhe object of the legislature in making cancellation obligatory is that the used stamp should bear on it

-some effective mark to show that it has been used." ' The principle was further explained in a Lahore case? in these words :

"The principle underlying section 12 is that the possibility of a stamp aﬁixed to an instru- ment being used again should be precluded." ' 10.7. The application of sub-section (3), however, is not totally free from part of the sub-section (3) indicates one mode of cancellation as suﬂicient, namely, the writing on the stamp of the executanfs name or initial and the true date. But the sub-section does not lay down3 any special manner which must be rigidly followed in every case-

_l0.3. Where the cancellation is by inscribing on the stamp the ex_ecutant's name or initial! and true date, as provided in the section, thereis no dilficulty.

As to the other methods of cancellation of stamp, indicated in sub-section ii)-bywthe words "or in any other eﬂectual manner", the question often arises whether the method- em-

" ployed is sufficient to prevent the stamp from being used again. that the degree of cancellation required is _ Thus, the Allahabad High Court has held' not such as to make it absolutely impossible for a fraud to be committed ; and, it hag, accord- ingly, held that the stamp was effectually cancelled when a single horizontal line was drawn across it. . . _ Similarly, where signature without date was written across, it was held as effeptivea can-

ccllation.

stamp under direction of the illiterate executor, ing lines in different directions and extended on the paper, cellation in an Allahabad case.'

1. Vrrabﬁmlrapa bin Adharsliapa v. Bhirnagf Ba!ajiSara_;?' (190436 Born. L.R.. 436 ;I.L.R. 2830111. 432 lfchandavarliar 3: Aston JJ}.

. Snhtm I.-cl Nihaf C'hmm'vRag}r.unn'.rh .S'r'ng}r.A.I.R. 1934 Lab 606, 607 (Shadi La] C.J. &Rangi La} GA. Haven v. Sultan Khan, ALI.R. 1936 Ouclh 176 (Srivastava and Nanavutty J3.) A Maﬁadeo Kori v. Shear} Ram Tali, (1919) I.L.R. 41 -All. 169. 180, 131, I82 (Piggott and Walsh, J1.) Kirpa Ram v. Bum Mat, 3 All. LJ. 326. , Iiiakari Mullah v. Ram Tubal Tewari , A.I.R. 1931 All. 57(1) ibliamutullab, J.) , Mohammad Amir Aﬂrza Beg V. Babu Kedar Nafh, 15 LC. 203 (And was regarded as eﬁective Cancellation. Draw-

were held to be an eﬁeptive can-

rewewm diﬂiculty. _ ﬁrstg In another case", the signature of the executant made by the scribe on the adhesive 87 10.9. In" this context, parallel lines create problems. The Bombay High Court, in as ear-- P""n"l 15""-

lier case', held that two parallel lines drawn across a stamp means no effective cancellation in another Bombay caseg, a small part of the first letter of the executaI1t's signature, consist- ing of a slightly curved line, appeared on a stamp, and this was held not to effect such a can- cellation of the stamp as was provided by section 11, of the Stamp Act, 1879. But the earlier View has been criticised in a later Bombay case?

I The Lahore High Court has held that drawing diagonal lines across the face of the adhe- sive stamp was cflective eaneellationl In another Lahore case," drawing a line across the stamp was treated as elfectual cancellation, since the intention to cancel was clear from what had been done. But, drawing a line across the stamp in a manner which leaves the stamp capable of being used a second time" was not regarded as an effective cancellation.

The Oudh view was that signatures of the executant, if run across the whole stamp, was eﬁectivel cancellation. But if there are several adhesive stamps which make up the required stam , all such stamps should be cancelled, and on failure to do so, the instrument should be deemed" unstamped under section 12(2), as regards the uncancelled stamps.

Jinn:

According to the Andhra Pradesh High Court," the drawing of two long perallel lines is _ suiﬁcient to effectively cancel three stamps.

These decisions reveal a good deal of controversy.

10.10. Under the English Stamp Act, 1891 (54 and 55 Vict. c. 39), section 8 of which Entgish Law, is in similar terrn-.-:3" it fras been held that the writing of the name or the date alone or other marks such as lines or cross-rnarlc on the stamp, is sulﬁcient cancellation."

10.11. Though cancellation is a question of fact, it appears to be desirable to make some specific provision in the section about a particular mode of it--cancellation by drawing a line across the stamp, so as to avoid such controversies as have been referred to above."

Recommendation We, therefore, recommend that in section 12(3), before the words "or in any other effect- ual manner", the words "or by drawing a line across the stamp or", should lmeadded, for this We may state that the suggested amendment has been generally favoured by the replies . received to our Questionnaire.'-'5 10.12. So far we were concerned with adhesive stamps. As to impressed stamps, section 13 provides that every instrument written upon paper stamped with an impressed stamp shall Instmnmts be_written in such manner that the stamp may appear on the face of the instrument and can- stamped with not be used for or applied to any other instrument. The principal object of the section is to how to be mi;

protect the revenue, and to avoid the frauds which may be facilitated if the instrument is tten. written in such manner that the stamp can be used for purposes of another instrument when so desired. This general rule is sound enough. But, in applying what is enacted in the section, ' certain problems have arisen in paretice. .

l. Vimbfzadra Din Adrr;rs.I'ra1Ja V. Blnmnjr' Bmlttjf Snraﬂ; (I 904} ._I.L.R. 28 30111. 432.

2.. See In re Tam Iran xi Steel Co. (1926) A.[.R. 1928 Born. El}; 30 Dom. L.R. 197. 216 (Crimp I.) _3.- See also Pm-an Dion (1903) 108 P.R. 1903.

4. Mela Ram v. Brij Lnl, A.I.R. 1920 Ian. 374 (Broadway 1), following Molid Amir, (1912) 15 LG 202.

5. Krhhorf Ln! Bamrsi Dns v. Ram Ln! Tek Chnmf, A.I.R. 1921 Lab. 120 (D.B.) "25." Haﬁz Allah Barn v. Dost Mohammad, A.I.R. 1935 Lall. 115; (Addison . and Sale JJJ. '*1. ea. Haven v. Sultan Kfuzn , .-mat 1935 Oudh _=I76 (Srivastava and Nanavatty JJ.) '8.---Babe Lal v._Durga Prn.-ran', A.I.R. 1940 Oudh 308 (Radhalcrishna J.).

9. ta} dd-']r.3-. Smtderrzmum v. I/enkntarn.-9, AIR, I963 Andh. Pm-desli 442, 44$, 445, Paras 13 and 19, (Ananuirayaa Aver, . . -

(bl Nnrayan v. Snrojini Dew', A.I.R. 1963 A.P. 373, 319, para 4 (Nhrasimham, JJ.

10. Section 8, Stamp Act, 1391 (Eng.}.

11. M. l'-fallen v. Ai'ﬁ'ed Hickninn Stenitm'-zl_n Ltd'. (1902) 17 LJ. Ch. 766, 767. I2. Para 10.9, Snpm.

13. Question 28--5ection 12.

Writing reverse.

Rule 7.

Use P393"-

onthe of Plain 88 10.13. The first question that has arisen relates to the point whether the reverse of the stamp paper could be used. The section itself does not say that only one side may be written upon; and the Bombay High Court' has held that the reverse of the stamp paper can also be used. In the Bombay case, the document commenced on the reverse of the side on which the stamp was impressed, and terminated on the side impressed with the stamp. It was observed that the stamp was not, in any way, defaced, nor was the paper so written as to admit of the stamp being used again. On these facts, the High Court held the document was properly stamped.' A Government notiﬁcation prohibiting writing on the reverse of an impressed stamp paper was noted, but it had been issued after the bond in question, and it was not, therefore, material.

This prohibition (imposed by the notiﬁcation) referred to above, was withdrawn in 1881, but in 1882 a rule was made which provided that when a single sheet is found insuﬁicient to admit of the entire instrument being written on the side of the paper which bears the stamp, so much plain paper may be sub-joined as may be necessary for the complete writing of the instrument, pro- vided that in every such case the side which bears the stamp must be covered by a substantial part of this instrument before any part of the instrument can be written on the plain paper joined to such sheet. With reference to this rule also, the Madras High Court held,3 that it was an enabl- ing rule, authorising the use of plain paper; but, it did not prohibit writing an the reverse side.

10.14. One would think that since the controversy as to writing on the reverse of the paper had arisen more than once, the rule on the subject would have been revised to make the position more liberal. However, when the rules were revised in 1925, no such clariﬁcation was made, and the rule now in force' is silent on the subject of writing on the reverse. Indirectly rule 7(2) disallows it. We are of the view that it is desirable to make the section speciﬁc on the subject, and to allow writing on the reverse by an express provision.

10.15. The following rule of the Stamp Rules, to which we have already made a reference, raises a few other questions.

7. Provision where single sheet of paper is insuﬂicient.---(I) Where two or more sheets of paper on which stamps are engraved or embossed are used to make up the amount of duty chargeable in respect of any instrument, a portion of such instrument shall be written on each sheet so used.

(2) Where a single sheet of paper, not being paper bearing an impressed hundi--stan1p, is insuiftcient to admit of the entire instrument being written on the side of the Paper which bear! the' stamp, so much plain paper may be snbjoined thereto as may be necessary for the com-

plete writing of such instrument. _ "Provided that in every such case a substantial part of the instrument Shall behwrit- ten on the sheet which bears the stamp before any part is written on the plain paper subjoined."

10.16. We have already referred to the question of writing on the reverse of the stamp paper. Then, there is another matter which requires attention. Section .13 itself does not give any guidance as to the use of plain paper, but the rule" provides that where the singlesheet is insulﬁcient, a plain paper may be subjoined, but in every such case a substantial part of the instrument shall be written on the sheet which bears the stamp before any part is on the plain paper subjoined. It may be noted that -rule 5(e) of the Rules made under the Stamp Act of 1879 contained a further proviso, namely, "that the part of the instrument written on-

the plain paper must be attested by the signatures or marks of all persons executingtthc docu- ment and witnesses to the same." This part of the rule was, however, held to be rtirrrrtvrrer,

1. Darwin! Ram v. Vitiao Radi:ojz',_ (1819) I.L.R. 5 Bum. 138.195. 197-

2. At that time, section 12 of the Stamp Act of 1379. W35 the relevant provision.

3. Reference regarding Stamp Act, (1880) I.L.R. 7 Mad. 116 (Full Bench).

4. Rule 7, Indian Stamp Rules, 1925 (infra)

5. Para l0.l5, Supra.

5a. Rule 7(2), Indian Stamp Rules 1925 (Supra).

as going beyond the parent Act,' as it imposed a more stringent requirement than the Act, and. ultimately, it was rescinded by notiﬁcation in 1891.

Here again, it appears to be desirable to provide speciﬁcally that it is not necessary that the plain paper should be signed by the parties. This will make the position explicit on the subject.

10.17. We now come to the situation of use of more than one stamp papers. The scctiﬂn is, again, silent as to this, but the matter is dealt with by the same rule, that is to say, rule 1' of the lndian Stamp Rules." 111 substance, the rule provides that a part of the instrument must be written on each sheet so used, the idea being that the stamp paper should not he used for writing any other instrument. An instrument offending against the rule would not be duly stamped.

Now, this may be a good rule in general, b-ut, in practice, some difﬁculties arise because one single stamped sheet denoting the entire duty is often not available, so that, although the text of the instrument is a short one, it has to be spread out over a number of stamp papers in order to comply with the section, as read with the rule. The requirement that the instrument must appear on each of the a-ttacheci sferrnp papers, if taken literally, is not convenient, in the case to which we have referred above.

10.18. No doubt, the public has found a way out by adopting the practice of mating a suitable endorsement on the attached paper, but the attached paper does not contain any "substantial matter" relating to the transaction and, therefore, its validity is in doubt. In general, in the case of instruments stamped with impressed stamps, the riumlbcr of .ttam_p_t' which may be used can be regulated by rule.-'* But it appears to be desirable to provide that the text need not appear on each stamped sheet, and that an endorsement stating that the stamped paper is attached to another stamped paper containing the text, will do.

10.19. It would be convenient if the section is made self-contained, as far as possible, on the points discussed above, so that the citizen may clearly know from the Act the position in this respect. It is for this reason that we recommend an amendment of the section, to be presently mentioned.

We may state that principle of suggested scheme has been favoured by many of the replies received to our Out-:stioni1aire.'* 10.20. Our recommendation in the light of what we have stated above is that section 13 should-be revised as follows :--

"13. Every instrument written upon paper stamped with an impressed stamp shall be written in such Iuunner that thestanlp may appear on the face ar_rcverse of the instrument and cannot be used for or applied to any other instrument.

Exploitation i.---Where two or more sheets of paper stamped with impressed stamps are tired to make up the amount of duty chargmbfe in respect of any insrrurnenr, either a portion of such instrument shall be written on each sheet so used, or the sheet on which no such portion is written shall be signed by the cxecutrrnt' or one of the executants, with an emiorscmsnr indicating that the sheet is attached to another sheet on which the instrument is written.

Explanation 2.-----«Where (1 single sheet of paper, not being paper bearing an impressed hurtdi-stamp, is in.stiﬂic."eni to admit of the entire tirzsfrwnenr being written on the stamped paper, so much piain paper may be sub-joined thereto as may be rteccssary for eorhplciing the writing of such instrument. provided a substantial part of the irmrtmreri: is written on the sheer which bears the stamp before any part is written on the plain paper sub-foined, but the fact that the plain paper is not signed by the cxecutanis shall not render the insrrrunerr-I not duly stcmpc .".

1. Reference on the Stamp Act, (1884) I.L.R. 3 Mad. 532, 540.

2. Para 10.15 srrpm.

3. Section l0(2)l[b).

4. Q. 29-section 13.

More ttim one stamp paper.

Need for Change Reccupnendaﬁon to revise section

13. Introductory Section 14 Section {New}.

Eﬁect of altera-

tion in an instru-

ment on stamp duties.

Position in England.

Consent f e Parties imma-

terial for pur-

gases of stamp in.

10.2.1. It is a general rule that only one instrunlent can be written on the same stamp :3.' paper. Section 14 expresses the rule thus :--

"14. No second instrument chargeable with duty shall be written upon a piece or stamped paper upon which an instrument chargeable with duty has already been Written :

Provided that nothing in this section shall prevent any endorsement} which is duly stamped or is not chargeable with duty being made upon any instrument for the purpose of transferring any right created or evidenced thereby, or of acknow- ledging the receipt'-' of any money or goods the payment or delivery of which is seemed thereby".

The main paragraph of the section raises no difflculty. It does not apply unless both the first and the second instrument are chargeable with duty. But the proviso to the section appears to deal with only one situation, while there are also other situations that require consideration.

10.22. In this connection, it may be pointed out that on the generalquestion whether an alteration in an instrument already written affects the stamp, the section is silent.

On a study of the decided cases, both Indian3 and English'*, it would appear that the principle is that where, by reason of an alteration made in an instrument, the instrument becomes :2 new one, a fresh stamp is required. The words "second instrument" have been so construed.

The reason is that the original stamp is spent.-3 The principle applicable is of a" simple nature, though there may be difficulty in the application. ' 10.23. In England," it is well established that no further stamp is required if the alteration 1S :-- -

(a) immaterial", or

(b) (E) (E1)

(e) made by a stranger."

But-, in the case of a bill of exchange" executed in the country, the party suing on the bill must prove that the alteration does not vitiate the stamp."

merely declaratory,' or intended to render certain 21 point which was left open} or made to correct a mistake," or It has become necessary to discuss these points because the proviso to the section gives no guidance in the matter.

a material alteration may be described as one which 10.24. For the present purpose, A material alteration made without the consent of alters the legal effect of the instrument.

I. See article 62, as to endorsement.

2. See article 53, as to acknowledging 1'50'-'viii

3. (a) Reference under Stamp Act, (1888) I.L.R. 11 Mad. 4-0- tb) Cox &:Co. Tn'. Restonii, A.I.R. 1927 Bean. 1315.

4. For English cases, see para 10.23. Wm-

5_ (a) Bowman 1;. Nieiiol, (1794) 5 Tenn Reports 537.

(b) London and arrgm-on Railway co., v. Farmtaush. (1344) 2 M & C 574- Hhrtley V. Manson. (1842) 4 Matt I51 5- 172- Deo Waters v. Houghran (132?) 1 Man «I: Rt'. K3 205- . Sadgrore V Bryden, 1907} 1 C11. 313.

Cole v. Parking. (1810) 12 East 471-

10. Monﬁree V. Bromley, (1305) 6 Est. 309.

11. Kmﬁghr 1:. Ctements (1333) 3 A'-'1 55 EL 315- I 12_ Haisbmyi 3;.;] E41,, Vol, 3, Page 283, para 502 ; and Vol. 3, Page 233.

509°!'-'9' vening section 13.

the parties may, of course. render the instrument void under the law of contract. The princtplel is that "no man shall be permitted to take the chance of committing a fraud without running any risk of losing by the event when the fraud is detected." The Negotiable Instru- ments Act" has a speciﬁc provision on the subject. The law on the subject has been fully discussed by the Supreme Court} Considerable discussion has also taken place as to the effect of alteration by accident', in the general law. But we are not concerned with the effect of alterations in general law.

10.25. Having regard to the obscurity on the subject, in the Stamp Act, 1t is desirable that the position in this respect should be stated in the proviso. The matter is not of more academic importance, because, in the case of a contract, the result of a rule requiring fresh stamp for a new agreement is that the old agreement cannot be sued upon as it has been superseded,"

and the new agreement is inadmissible if not stamped afresh. Thus, a practical difficulty can arise.

, 10.26. In view of the importance of the principles mentioned above, and the practical diﬁiculty likely to be caused as indicated above, it is desirable to make the law sclf--contained, by adding a provision to ensure that immaterial alterations, as enun1eratctl~ above,' do not bear duty but material alterations bear duty a fresh.

We my state that the suggested amendment has been generally favoured by the replies received to our Questionnaires We recommend that the provision be inserted as section 14A. The following is a rough draft':--- ' "HA. Where there are material alterations made in an instrument by a party with

-or without the consent of other parties, the instrument shall require a fresh stamp according to its altered character."

10.21 Section 15 provides that every instrument written in contravention of section 13 orseétion 14 shall be deemed to be unstamped. It may be recalled that section 13 deals with the manner in which the instrument stamped with an impressed stamp shall be written, and section 14 provides that only one instrument should be written on the same stamp.

eﬁeot of section 15, as read with section 13, was illustrated in a Lahore essay where a security bond taken on an order for stay of execution, was written on plain paper bearing _a. court-fee stamp of 7 annas, instead of on impressed stamped paper, thus contra- The bond was held not to be properly stamped in view of section 15.

As to the cﬂect of section 15, read with section 14, a few reported cases will be referred to in due course?"

10.28. There is no controversy about the substance of setcion 15 ; but, the wording appears to be capable of improvement. The use of the expression-"deemed to be unstamped" raises a doubt as to whether an instrument governed by the section--«that is to say, written in violation of sections 13-14----can be admitted in evidence on payment of penalty under section 35-or validated by endorsement of the Collector under section 41.

I. Minter v. Miller'. (l79l) 4 Term Reports 320, 329, 145 13.11. 855 (Lord Kenyon, CJ.)

2. Section 37. Negotiable Instruments Act, 1881. .

3. Asagjssas EtinseseVI;I:lisl?:uryl;,agIierd_23?]":Edn., Vol. 11, page 367; as to matcrialaltcrnations in bills of exchange,

4. Aniﬂuﬁarz v. Tlromu Co., A.I.R. 1963 S.C. 746.

5. ﬁtgagkarag andS.Fza:rgirm' Bartking Corpra, v. Loki' Sm', (1928), A.C. 131. For comments, see (1928) L.Q.R. at Page

6. Exchange Assurance v. Hope, (1928) Chancery 179 (Court of Appeal).

7.-Su$"!i11materiaI alterations", supra."

8. Q. 30--scction 14.

9. G'urmd:'.'I'a Ma! v. Firm Gurandfrralnal Ram Chane', A.I.R. 1925 Lab. 552, 5S4(Ma.1rtinequ, J.)

10. See "Case of two instruments", infra.

Practical diﬂ-i-

cultv.

Recommendation to insert section 14A.

Section Verbal '_ meat I 5.

In one of the early Bombay cases,' it was held that the Collector ought to refuse to make an endorsement in such cases. But this view was over--ruled in a later decision." A Madras case agrees" with the later Bombay view.

Rmmmendaﬁon 10.29. It is, in our opinion, desirable to avoid the recurrence of such controversies, and to subsititute this could be achieved by sul;-stituting the words "not duly stamped" for the word "unstamped", 31$? ggﬂgcgﬁf in section 15. T he expression "duly stamped" is deﬁned in the Act,' and is used at many places in the Act. We recommend that the section should be amended as above. It is in harmony, for example, with the language used in the section dealing with the Collector's power to stamp instruments which are impounded.'-" This clariﬁcation can usefully cover section 14A (new) also.

_Cas¢ of two 10.30 We shall new deal with another question arising out of section 15. It is to be '"St"u"°ms' noted that where two instruments are written on one paper, it is the second instrument which is to be treated as "unstarnped" within the meaning of section 15, and not the first one. Thus, in a Madras case," a deed of release was endorsed on a deed of conveyance for Rs. 100. The conveyance bore an impressed stamp for one rupee, but the endorsement of release was 'unstampcd. It was held that the conveyance was valid, and the release could be validated on payment of the deficient stamp duty and the penalty under section 39 of the old Act I of 1879 (section 40 of the present Act}.

10.31. A similar view (-regartling the admission of a document in evidence on payment of deﬁcient stamp and penalty), was taken in another Bombay case," where an endorsement of transfer written on a duly stamped simple money bond, was in issue. The question to be considered was whether the case fell under that part of section 14 (old section 13) which forbids a second instrument being written upon a paper on which an instrument has already been written. it was held, that the endorsement was chargeable with duty, but could be stamped under old section 3-Z-----present section 35.

Rocotnmendation 10.32. In our opinion, it is desirable to codify the proposition emerging from the above t,§a',"akE,:t5e§:,°:§ cases, in so far as they hold that it is the second instrument which is to be deemed. to be instrument is not duly stamped. The clariﬁcation will be conﬁned to instruments falling under existing secr-

immded' tion 14 and will not extend to new section 14-91. We may state that the suggested amendments have been generally favoured by the replies received to our Questionnaires -

Recommendation 10.33. Accordingly, we recommend that section 15 should be revised as under :-

Revised section 15 "15. Every instrument written in contravention of section 13 or section 14 or S£I.'.'l'."0:'1 14A shall be deemed to be unstamped".

Explanation.---.Tn rhelcnse to which section 14 applies', 1': shall be the second r'mIm- me.-it whirl: shall be deemed to be unsfnmped.

swoon 15, 10.34. Section 16 is as follows :---

"lﬁ. Where the duty with which an instrument is chargeable, or its exemption from Denoting duty' duty, depends in any manner upon the duty actually paid in respect of another E In the matter afHammappa, (1888) l'.L.R. 13 Born. 281.

2. Prahlad v. Vitku. I.L.R. (1892) 17 Born. 63? (RE)

3. In the matter ofReferenee etc, (1838) I.L.R. 11 Mar]. 40.

4. See section 2(1I), "duly stamped."

5. Section 40 (1) (3) and (bl ' * 1, Cal}/ac s ,Madr .(1sss), LLR. 11 Med. 40; (Co liins, C.J., Kc:-nan. M at 6't£n:-jig °§ﬁf§$'"§7 gar-ker, fI(itt)oirCais£emti':dcided'i1Jnder old section 14, corresponding to pr escnt-audio 11

15). _ -

7. Prahlad Laksmanrau Nikane v. Vithu, (1893) I.L.R. 17Born. 68? (Parsons, Telang and Candy, JJ.)

8. (a) Q.3l--section 5. ' (la) Q.32--section 15 and second instrument.

instrument, the payment of such last-mentioned duty shall, if application is made in writing to the Collector for that purpose, and on production of both the instruments, be denoted upon such ﬁrst-mentioned instrument, by endorse- ment under the hand of the Collector or in such other manner (if any) 'as the State Government may by rule prescri ."

Sometimes, the duty payable on some instruments depends upon the duty paid on other instruments that have already been executed and stamped. Examples of such instruments a1'e»---- subsidiary instruments, as opposed to the principal ones under section 4, the counter-parts or duplicates of instruments under Article 25, leases under the proviso to Article 35, instruments of partition under proviso la) in (c) to Article 45, and instruments of settlement under the proviso to Article 58. Similarly, at times, the exemption from duty in favour of some instrmnents, [for example, the entry of an advocate or attorney on the roll of a High Court when he has previously been enrolled in a High Court] depends on the duty paid on another instalment.

10.35. In order to render these instruments as either partially stamped or totally exempt from stamp duty, because of the principal documents having been fully stamped, section 16 lays down that on production of both the instruments and on an application to the Collector, an endorsement would be made by the Collector on the Subsidiary instruments, denoting the payment of the duty actually paid in respect of the principal instrument.' 10.36. The necessary endorsement will he made by the Collector, only if an application has been made in writing to him, for the purpose. If the party interested does not apply for the necessary endorsement and, therefore, does not obtain it, then he has to produce, when required, both the instruments, in order to render the partially stamped or exempted instrtunent admissible in evidence.

No change is needed in this section.

1. Compare section 1], Stamp Act. 1891 fling.) EM of Law,l7'7--l3.

17. (_'Jon!ict as to urnaofltampiug.

CHAPTER 11 TIME OF PAYMENT----SECTIC|NS 17--19 11.1. The time of payment of duty is dealt with in sections 17 to 19 of the Act. Brieﬂy speaking, the time of stamping is linked up with the time of execution, but special situations, such as an instrument executed out of India, may arise and have to be dealt with. The general proposition is to he found in section 17. All instruments chargeable with duty and executed by any person in Imtira shall be stamped before or at the time of execution under the section.

The expression "shall be stamped" means that the instrument should be duly stamped, that is to say, a stamp of the proper description and amount should have been used at the time and in the manner prescribed by law.' "Executed", as deﬁned in the Act, means signed.' So, stamping must precede or be simultaneous with signing.

11.2. There has been a conﬁict of views with respect to the phrase "at the time of execution" in section 17. In a Bombay casei', a promissory note was executed by A and B, a stamp was aiﬁxed afterwards and cancelled by A, by again signing it. The High Court held that the stamping must be held to have taken place subsequent to the exectiﬂon, and therefore, it could not be said that the promissory note was stamped "before or at the time of execution", within the meaning of section 17.

In that case, the evidence clearly showed that defendant I wrote out the promissory note in suit, and defendants 1 and 2 put their signatures on it in the presence of the plaintiffs hus- band. lt was then stomped. This, according to the Bombay High Court, was a clearly evidence to establish that the stamping of the promissory note tool: place after the execution was already complete. According to that High Court, section 17 requires that the stamping should be done sometime before the document is executed, or that a stamped paper must be placed before the executant who must execute it, or, he must ﬁrst stamp it and then execute the document. But, if the executant has already ﬁnished the "execution" of the document {in the eye of the law) then any subsequent stamping, however close in time, could not be said to be stamping at the time of execution.

The High Court criticised an earlier decision of the Madras High Court'*, holding to the contrary. In the Madras case, there was only one executant, and the promissory note was signed by him, and subsequently, it was stamped. The Madras High Court held, that the uucontradicted evidence of the plaintiff showed that the acts were-"practically simultaneous", and the stamping was, therefore, done "at the time of execution" within the meaning of section 16 of the Stamp Act, 1879, corresponding to section 17 of the present Act. The Madras High Court, further, expressed the View that, even under the present Act, where execution is deﬁned as meaning "signature"',5 it would not make any difference if the stamp was aﬂixed and cancelled immediately after the signature on the document, the signing and stamping being continuous acts in the some tremcction. The Bombay High Court, however, observed that, it was diﬂicult to understand the signiﬁcance of the expression "practically simultaneous". Either the stamping is after execution, or before or at the time of the execution.

l. (3') Mon' La} V. Jogmohandas, (1904) 6 Bom. L.R. 699. {bl Jerhtbai v. Rama Cfmadra. (1899) I.L.R. 13 Born. 434.'

2. Section 2(I2}, Indian Stamp Act, 1899.

3. Mrs. Rahfni Cimmfrakanr Fijaykar v. Al. Fer:-uznaies, A.I.R. CJ. and Dixit, J.)

4. Surji Mu}! v. Hudson. (1900) I.L.R. 24 Mad. 259. 261 t"D.B.) , 5. Section 202), Stamp Act, 1899.

1956 Born. 421, -1-23, para 4 (D.B.) ($313, 94 95 11.3. In a Kerala case,' the Bombay view? was dissented from, and the Madras view was followed.3 in that case, :1 promissory note was affixed with additional stamps after the second attesting witness pointed out that the note was insufficiently stamped. The High Court held that the execution of the promissory note was complete when additional stamps were aftixed and defaced and delivery of the promissory note was effected. According to the Kerala High Court, the expression, "shall be stamped at the time of execution" must be interpreted in a reasonable manner, and it is sullicient if signing and aﬂiting of the stamp are "practically simultaneous".

11.4. From the above discussion, it appears that the existing phrase, "before or at the time of execution" in section 17, lands the courts in diﬂiculty. It would, in our view, he better if the words "at the time of execution or immediately thereafter" are substituted, in place of that phrase, and we recommend accordingly. We may note that such an amendment has been generally favoured in the replies to the Questionnaire issued by us.' 11.5. Instruments executed outside India are dealt with in sections 18 and 19. Under section 18(1), every instrument chargeable with duty executed only out of India and not being a bill of exchange or promissory note, may be stamped within three months after it has been ﬁrst received in India. Under section 18(2), where any such instrument cannot, with reference to the description of a stamp prescribed therefor, be duly stamped by a private person, it may be taken within the said period of three months to the Collector, who shall stamp the same in such manner as the State Government may, by rule, prescribe, with a stamp of such value as the person so taking such instrument may require and pay for.

Thus, the instruments which are executed out of India and chargeable with duty," (not being bills of exchange or promissory notes] may be stamped within three months after they have been first received in India. If stamps of the required description are not available, the party should take the instrument to be stamped within the" said period of three months to the Collector who will stamp tlze same with the stamp of proper description. It is, however, necessary to make an application to the Collector in this regard."

11.6. Section 13 must be read with section 3(c). Section 3(c) makes it clear, that instruments executed out of India (7 other than bills of exchange or promissory notes) will not be liable to stamp duty unless they relate to property situate or to any matter or thing done or to be done in India and are received in India; Thus, a simple money bond executed out of

-India will not be liable to duty even when received in.-India, because it does not relate to any property s'it*uate, or to any matter or thing done or to be done, in India. If, however, the instru- ment in question related to some property situate in India, it would be governed' by section 18. Deeds of partition, executed abroad, of property partly situate in India are also so governed as would appear from the decision "in a Madras case."

The same is the case with acknowledgements of debts."

11.7. If the instrument in question is not stamped within the prescribed period of three months as under section 18, but is stamped afterwards, it would be deemed to be unstamped, and :would be governed by section 35 as regards the consequences of -_non-stamping. [For example, instruments chargeable with the duty of one anna (now 10 paise) e.g.--an acknow- ledgement of a dcbt,- --it not stamped within the period of three months of their receipt in India, cannot be admitted in evidence even on the payment of duty and penalty, because section 35 does not provide for the admissibility on payment of duty and penalty."

1. Kauivila Markers v. Vnrkey Varkey, A.I.R. 1966 Ker. 315 (T. C. Raghwan).

1. Mr; Raixini Ciimzdrakama v. AJ. Fer.-render. A.l.R. 1956 Born. 421 (para 1], supra.)

3. Su.-fir Mail v. Hudson, (1930) l.L.R. 24 Mad. 259. (D.B.), para 11.2, supra.

..4.-. Q-.33» ;

5. Herbert Fmrtci: v. Mdyikbcr, A..1.R. 1928, Patna 134.

6. Section 31.

"1'. Herbert Framiis it. man'. Akbar A.I.1t'.. 1923 Patna 134.

3. Rajangam v. Rajama.-rgarricr, A.I.R. 19.10 Mad. 149. (Document executed at Trivandrurn).

9. All' Mohamed v. Jqganmh. A.I.R. 1928 All. 666. V 10 Al1'Moira.medv. Jagan maxi: A.I.R.. 1923 All 666.

Recomnrendaﬁon to amutds. 17.

Section. 18.

IrIstl'l.ln1ant3 not chargeable with duty.

Bills of cabana:

and Eﬂ'ect_ of non-

Copies.

No change Section 19*-

Bills and notm drawn out of India.

Proper time of carulletiocn.

Recommendation to adopt 'the HllhpWVi51DIfI.

'\ 11.8. Again, section 18 does not make the copy of a document admissible by stamping it with the stamp required on its original. If the original instrument executed outside India requires to be stamped when brought in India, and is not stamped, then a copy of that instru-

ment brought in India must be rejected as inadmissible, and cannot be placed on record, as the law now stands, for the reason that it cannot be stamped and no penalty can be realised on it under section 35. Section 18 applies only to original documents which, although executed out of India, attract duty in India and are brought in India} ' 11.9. The above brief discussion would serve to illustrate the implications of the section. There being no conﬁict of decisions or obscurity in language or other dilliculty in the working of the section, we have no further comments on it. -

11.10. Under section 19, the first holder in India of any bill of exchange, (payable other- wise than on demand) or promissory Ilote drawn or made out of India shall, before he presents the same for acceptance or payment, or endorses, transfers or otherwise negotiates the same in India, aﬂix thereto the proper stamp and cancel the same.

There are two provisos to the section, which read as follows :------

"(a) if, at the time any such bill of exchange, or note comes into the hands of any holder thereof in India, the proper adhesive stamp is aﬂixed thereto and can-

celled in manner prescribed by section 12 and such holder has no reason to believe that such stamp was aﬁixed or cancelled otherwise than by the person and at the time required by this Act, such stamp shall, so far as relates to such holder, be deemed to have been duly aiﬁxccl and cancelled ;

(b) nothing contained in the proviso shall relieve any person from any penalty in-

curred by him for omitting to aﬂix or cancel a stamp."

11.11. A number of points arise on this section. We shall take them up one by one. ' The ﬁrst point relates to the proper time of cancellation. The section makes it' obligatory on the lirst holder to ailix a stamp on the foreign bill or note and to cancel the name before he does any of the acts set out in the section. It the stamp is not cancelled at the proper time, it cannot be cancelled afterwards. Thus, where a stamp was alﬁxed to a ltundi which was drawn at Indore before it was presented ior payment in British India, but was not cancelled before presentation, it was, in a suit on the basis of the hundi, held that in the face of the imperative words "of this section, it was impossible to accede to the suggestion that the stamp could be cancelled in the court.' .

11.12. On this point, the English law" is, however, different. The (English) Stamp Act of 1891, section 35, Proviso (b), enables a bona ﬁde holder to cancel the stamp itself, if it was not cancelled when the foreign bill came into his hands; and upon' his so such bill is deemed to be duly stamped and as valid and available as if the stamp had" been duly cancelled by the person by whom it was aﬁxed.

bill, in order to be admissible _ _ __ 35355.4 Co,,5;,-ﬂing this proviso, Blackburn, I. expressed an oplmon that the J may be made in open Court at any time before the Vﬁtdict-5 11.13. It would, in our view, he an improvement. if _.

Eng1and 15 adopted, The primary object of the requirement of cancellation is to" that the stamp is not used again. This object is achieved as much by the English protli:-non:u.by the Indian section. The present = _ _ holder. We recommend that the section should be Sﬂltably "E33555- . C __ Ltd" Amritsar v. LachmanS.ﬁ1ghB.hrzgm'. A.I.R. 1951 Pepsu 24. i' giififfafsfiiiizwfirirrrn Brzlmzdcu.-uf, (1925):? cam. La. 1122. 1126»

3. Section 35. Proviso (bl Stamp Act» 1391'-En!-3 4_ Mm. -4, Rovy, t1s14)31 1.1'. 372,374 :23 'W-R. (Ens1-)89-

5. was v. Michael, (1374:. so Law Times 463. 464.

Under the English law, therefore, a . -' in evidence, requires only that the proper stamp should; ha" 1 the position which h.

holder should not be penalised for the faults of 9'5' 11.14. The second point relates to the important opening words in section 19, _viz., d "ﬁrs: holder in India". The Act is not concerned with the possession of the bill or promissory note before then. On this point no clariﬁcation is required.

11.15. The third point is important. According to the Madras High Court, the Legis-I lature does not appear to be interested in whether a promissory note has or has not been outside. stamped outside India with the marl: that a note stampett outside Irrdia will have to be stamped again before cndorsemertti Thus, when a bill of exchange not payable on demand drawn out of India or a pronote made out of India has been duly stamped abroad with Indian stamps of the proper amount and description, and the stamps have been cancelled, the question of its being stamped in India arises, because section 19 compels the ﬁrst "holder" thereof to stamp it before he does any of the acts mentioned therein.

The same View was talccn in another c.a.~'.c3 of the Madras High Court_.--"It1 the interests of judicial comity",----and quite apart from any consideration of the correctness of the decision therein. The facts of the C350 appear, however, to have been reported meagerly. It is also not clear whether the "ﬁrst holder of the prono-te in India" in this case was the promisee himself or his transferee.

The Punjab High Court has, however, taken a contrary view.' According to that High ' Court, if an Indian Stamp is already aﬂixed on the promissory note, then, a fresh stamp will not be needed, because, to do so would be to charge double duty.

11.16. Whatever he the correct interpretation of the existing language of section 3(b) Rammmgndmim read with section 19, it appears to us that there is no reason why an instrument bearing an 1'01' Inimi- Indian stamp should again be stamped with an Indian stamp when it is presented for acceptance mm' or payment or endorsement etc. as contemplated by section 19. Indian revenue law has already been complied with, by althcing the Indian stamp.

If this approach is correct, it would be desirable to add an Explanation to section 19 to the eﬂect that where the promissory note already bears an Indian stamp, it shall not be necessary to stamp it again. Such an amendment has been favoured by almost all the replies

-to our Questionnaire also."

11.17. The last; proposition to which attention should be drawn while discussing section 5,," 1., 19 is "that where a promissory note is executed outside India, it is admissible here if the suit is 111% 1iﬂNIitJ'- brought to enforce the liability created by the promissory note. The requirement of stamp under section 19 arises only when a ﬁrst; holder in India does one of the speciﬁed acts, namely, pre-

' Scimtion for acceptance, presentation for payment, endorsement, transfer or otherwise negotiab-

tion in India. In an early Madras.' It was clearly stated, that the provisions of section 19, Indian Stamp Act, are applicable to a holder only where there is one of those acts set out in the section and that an instrument need not be stamped in the manner provided when it was not ﬁll htlth in any of the ways set out.

Thus," even if a pronote exeduted out of India is not stamped, a. suit can be brought on the promote as between the promise: and promises.

No amendment is required on this point.

1. .5'i'va Subromania. v. Kolonkoroyon,A.I.R. 1941 Mad. ass.

2. .S':'Ita Subromdrtzh V. Ifoianii'-2r:7_t':rrt,, A.I.R. 1941 Mad. 868, 869', 87G (Mochett, J.)

3. LD. Labo v. Marnjal Dagger, A.I.R. 1953 Mad. 424. -

35:1,}? Btrooram v. L. Mmarortrant Nandlal, ALR. 1955 Part] 88, 90, para 5-6. ti. Q-35. - -

1'. Lid. Rawfhan v. Md. Hussein Rourtfton, (1899) I.L.R. 22 Mad. 337.

3- Sim Ssbmmmh v- Kalankaraian. A.I.R.1941 Mad ass [case law reviewed).

stamped Indian name, I. Introductory.

Section 20.

Section 21.

Section 2.2.

Eﬁcct of State-

ment of rate of Section 23 CHAPTER 12 COMPU'I'ATION OF AD VALDREM DUTY--SEC'I'IONS 20 TO 26 12.1. Duty under the Act is of two 1tinds--ﬁxed and ad vaiorem. The computation of duty where it is fixed presents no diﬂicult problems, once it is determined that the instrument belongs to that particular category. But the computation of duty ad vnlorem sometimes presents probicnls, either because the amount1 or consideration is contingent? or unascertained or is expressed in 1tind,3 or because it is expressed in other currency,' or because of other special cir- cu1nstances,---e.g., incumbrancesﬁ and periodical payments.

12.2. Under section 20, where an instrument is chargeable with ad valorem duty in respect of any money expressed in any currency other than that of India, such duty shall be calculated on the value of such money in the currency of India according to the current rate of exchange on the day of the date of the instrument.

For this purpose, the Central Government may, from time to time, by notiﬁcation in the Oiiécial Gazette, prescribe a rate of exchange for the conversion of British or any foreign currency into the currency of India for the purposes of calculating stamp--duty. The section needs no change.

12.3. Section 21 provides that where an instrument is chargeable with ad valorem duty In respect of any stock or any marketable or other security. such duty shall be calculated on the value of such stock or security according to the average price or the value thereof on the day of the date of the instrument.

It needs no change.

12.4. Under section 22, where an instrument contains a statement of current rate of exchange or average price, as the case may require, and is stamped in accordance with such statement, it shall, so far as regards the subject--matter of such statement, be presumed, until the contrary is proved, to be duly stamped.

It needs no change.

12.5. Section 23 deals with interest expressly made payable by the terms of an instrument. It provides that such instrument shall not be chargeable w1'th duty higher than that which it would have been chargeable had no mention of interest been made therein.

compound interest also. Therew.

stamped The section is not conﬁned to simple interest, it applies to fore, a stipulation in an instrument to pay compound interest need not be separately as a separate instrument."

Under the English law also, stamp duty is calculated on instrument, irrespective of any sum which may become due as interest under the instrument.' the principal sum secured by an terms of the . E.G. Royalty (section 26).

Interest (section 23.) E.g. stock {section 21 and section 23A)-

. Foreigncurrency (section 20 and sectirm 22].

. Sections 24-25 . (a) Bairsal Rindan Sarniti v. Sital Chandra, A.I.R. I930 Ca'. 630, 631 (F..'B.)

(b) Also, Gomez 1:. Young, (1359) 2 Beng. LR. (0.42. 155.)

7. En) Pntessirtgfv. Ing. , (1829) 106 E.R. 912.

an Doc a serum 9. snetm. (I832) 131 E-F» 356. 359- (cj pmdgm-ta! Mr.-ma! Assurance Imrestmem ti': Loan etc. Jlssaciarian V. Cm-zen, (1352) 155 13.11. 1275.

GNU!-'5-':m3!\Jh-1 98 99 12.6. The judgment in Pruessing V. Ing.,'-' the leading English case, may be quoted :--

"Abbott C. 1.: The Stamp Act imposes upon every promissory note for the pan ENE" I'"' ment at any time exceeding two months after date, of any sum of money exceeding 205., and not exceeding 305, a duty of 2s.6d. and other duties upon other notes in proportion to the sums thereby secured. The object of the Legisla- ture was to impose a pro rata stamp duty upon the sum actually due at the time of taking the security, and not 'upon what might become due in future for the use of the money. The question, therefore, in this case, is, what was the sum due at the time when the note was taken 'I For, that is the sum secured. I am quite satisﬁed that the words "sums of money" in the Act, mean the principal rum men- tioned in the note, and not a sum compounded of principal and interest. A con-- trary decision would be most mischievous, and have the effect of avoiding many securities; for it has been the constant practice, under similar provisions appli- cable to bonds in this and former Stamp Acts, to measure the stamp duty by the principal sum secured, although interest is always made payable from the date of the bond. I think, therefore, that this rule ought to be refused. Rule refused."

12.7. Where, however, the consideration of the instrument is at lump sum made up of two catrsﬁtuents, namely, the principal and the interest that might accumulate during a given period, a question may arise whether the instrument will be chargeable for the principal, or whether the instrument will he chargeable for the lump sum. In a Calcutta case," a bond for a loan of Rs. 100 stipulated that the obliger should "pay twice the amount, including Rs. 100 for interest, total Rs. 200 in eight years from 1301 B.S. to 1308 B.S. according to 'lcists' (instalments) given in the schedule." It was held, that the amount secured by the bond was Rs. '200 and the bond must be stamped accordingly. The High Court added that an earlier Full Bench ruling' of the Allaha- bad High Court cited in the reference had no bearing on the matter.

12.8. In a Bombay case.' the material portion of the Bond was as follows :-

"I have taken from you in cash a loan of Rs. 9-4-0 to which 12 aunas have been added for 'Kasar', total Rs. 10; interest on this sum amounts to Rs. 2-3-D; total Rs. 12-8-0. This debt will be repaid by 25 monthly instalments of eight annas each. Instalments in default will carry future interest at the rate of two rupees per mensem."

The question arose whether stamp duty was leviable on Rs. 10 or on Rs. I2-8-0. It was held that the bond should be liable as to stamp as one for Rs. 10 only, and that the provision about interest should be left out of consideration under section 23.

The Calcutta High Court's view' was dissented from by the Bombay High Court. The iudgrneut does not indicate the reasons for dissent. According to the Bombay High Court, if the interest is expressly made payable by" the terms of the instrument, then the mere mention of the interest as a lump sum will not render the instrument liable to stamp duty for the total sum of the principal and the interest payable.

12.9. One can distinguish between the Calcutta and the Bombay cases on the ground that in the Calcutta case, the sum of Rs. 100, though described as (derived from) "iuteres ", was merged with the principal, so as to bring into being a new principal amount of Rs. 200. In the Bombay case, the amdunt of Rs. 2-3-D retained its character as interest. If this explanation is correct, no clariﬁcation on the point is needed.

It is also to be remembered, that, where a provision for interest changes the category of the instrument itself, section 23 would have no application. Thus, an account written on a sheet of paper signed by the debtor and addressed to the creditor and also containing a stipulation to

-_ la. Prices-rm' v. Ing. (182.9) 106 13.11 912, 23 R.P. 253.

2. Shambhu Cfzandr-a Bepari 'V. Krishna Cliara.-r Bepari, (1899) I.L.R 26 Cal. 179 {F'.B.)

3. In the matter 0fGafra} Sfngh. U334), I.L.R. 9 All 585 (E33

4. Wﬂm I. Nathzi, (1901) 3 Born. LR. l33, I34.

5. _Slnnmb!zu Clzandra Bepari v. Krmlzna Charon J5'epnn','{l899) I.I_.R. 26 Cal. l'l9 (above).

100

pay interest, is not a mere "aclmowledgemeut of a debt", within article 1, but is an agreement, under article 5(1)) .1 Section 23A 12.10. According to section 23A,--

(1) Where an instrument (not being a promissory note or bill of exchange) ~---

(a) is given upon the occasion of the deposit of any marketable security by way of security for money advanced or to be advanced by way of loan, or for an existing or future debt, or

(b) makes redeemable or qualiﬁes a duty stamped transfer, intended as a security, or any marketable security, ' it shall be chargeable with dirty as if it were an agreement or memorandum of an agreement chargeable with duty under Article No. 5{c) of Schedule 1.

(2) A release or discharge of anysuch instrument shall not be chargeable with the like duty.

The section was introduced by Act 15 of 1904, and is a "reproduction of section 23 of the (English) Stamp Act, 1891. The object of the innovation in sub--scction (1) appears to have been to make provision for equitable mortagages, where the advance is made on the deposit of marketable securities." The section prevents the levy of a higher duty otherwise chargeable under article 6 (or in certain circumstances, of a still higher duty under Article 40).

12.11. A promissory note would be chargeable under Article 6(2), and a Bill of Exchange would be exempt under Article 40, Exemption 2. That, apparently, is the reason why those two documents are excluded from the scope of the section.

12.12. Sub-section (2) applies to instruments which seek to extinguish the rights created by the instruments given under sub-section (1) and makes a release or discharge of any such instruments given under subsection (1) also taxable as an agreement, i.e., with the like duty.

There seems to be no reported case law on the present section.' The section needs no' change.

14 12.13. We now proceed to section 24. It will facilitate an understanding of the section. Dr it before we go into details, the broad scheme of the section is dealt with. The section could be divided into four parts, namely, the main paragraph, the proviso to the main paragraph, the Explanation, and the proviso to the Explanation.

12.14. Under the main paragraph, stamp duty on the transfer of P1'0P€F*Y. where it '3 charged and va-lorem, is ordinarily calculated on the consideration, subject to certain special provisions which are not material for the present purpose. In determining the amount of comi- deration, the normal case where the consideration is paid at the time of the transfer in the form or cash or cheque--that is, in the direct rna1:|ner----presents no diﬁiculty. But, wlrefe tion is paid indirectly, the question may arise how it is to be calculated. There are two situations which may require to he considered, namely, (i) the transfer may be in consideration. of a debt, or no secondly, the transfer may be subject to the payment or trarriﬁer 'at our money or stock. The main paragraph of section 24, which focusses attention on thﬁlt '-319 situations, provides that in such cases, sud: debt, money or stock is to be deemed the rehab or part of the consideration. Of course, this rule becomes of importance only where the trlﬁiiﬂf is chargeable with ad valorem duty.

t it E 5 24- 12.15. The proviso to the main paragraph enacts that nothing in the section'. shil wwaph_ to any such certiﬁcate or sale as is mentioned in article 13 of the first Schedule. ﬂat uttldﬂ. 'ii iii

1. Murcaandran v. Kass: Buffer Bistros, (19cm I.L.R 35 Cal. 1u.ranowins Luxmf Baiv-Gamk--1199'!-In I- 25 Born. 313. '

2. The expression "marketable security" is deﬁned in section 2 (Il_iA). _ _

3. rm: decision in I.L.R 15 Mad . 134 was pronounced before the mtmductmn of the mica In 190*» 101 will be noted, relates to a certiﬁcate of sale granted to the purchaser of any property sold by public auction by it civil or revenue Court of Collector or other revenue oﬂicer.

A special case where property is sold subject to mortgage or other encumbrances, requires be dealt with, and that is what the Explanation to section 24 seeks to do. We shall discuss later certain points of interpretationrelating to some of the words used in the Explanation. But, for the present it will suﬂice to say that the principal object of the Explanation is to ensure that the consideration which passes indirectly by the vendor being relieved of his obligation in respect of unpaid mortgage money or unpaid money charged on encumbrances, should be taken into account. ' The proviso to the Explanation to section 24 makes a limited provision whereuuder, where property subject to mortgage is transferred to the mortgagee, he shall be entitled to deduct, from the duty payable on the transfer, the amount of duty to be paid in respect of the mortgage. This is understandable, because what the mortgagee acquires afresh is merely the diﬁerence between the value of the property and the value of the mortgage money. He is, therefore, now required to pay stamp duty only on the difference--provided, of course, the duty has already been paid in respect of the mortgage.

We may new deal with each of these in detail.

12.16. The principle underlying the main paragraph of the section is fairly intelligible. The debt in consideration whereof {or subject to payment whereof) the transfer takes place, is, by fiction of law, to be added to the cash consideration. This fiction is 'understandable. because the amount was indirectly paid to the vendor in the past, or will be paid in the future.

The proviso to the main paragraph also creates no problems.

12.17;'. The"Eirplanation~ may sound curious at the first sight. The object. of the correspond- ing English provision was thus described :1 ' ..r-um

- - ,7 u-.--..s..--=-at n.~.

"The scope and object of the enactment is clear," namely, that upon every purchase ad vaiorem duty shall be paid on the" entire consideration which either directly or indirectly represents the value of the free and unencumbered corpus of the subjectqnatter of the sale."

The Supreme Court? has quoted with approval the following observations in a Scottish case' :--

"ll any other rule was adopted, it is. quite plain that the fair incidence of this tax would be altogether frustrated and defeated. A proprietor has an estate worth .451 20,000. There is bond 'upon it for £ 10,000. He sells that estate; and the purchaser pays to him a difference between the amount of the bond and the value of the estate, so that the bond being for £ 10,000 he pays £ 10,000. The day after he obtains instrument, he pays oﬁ the bond. 'Well, he pract:ical'resu1t-of that is that he has paid aE'. 20,000 as the purchase money of this estate, and he has obtained a conveyance with an ad vaiorem stamp of the value of £ 10,000. That is a simple defeating of the purpose and intention of the Legislature as expressed in this clause, and, therefore, I think, upon the plain meaning of this section, that there was no intention whatever to go back upon the enactment of the 16 and 17 Vi-ct., and to restore the enactment of the 55 Geo.' III, which is w'h.a.t the liquidators are contending for. the contrary, it seems to me-that the 73rd section is plainly intended to continue the provisions of the statute I6 and 17 Vict."

1. Molrtimore v. L.R.C. (1864) 2 H & C838 :38 L.J. Ex. 253, rcfared toin A.I.R. 1931 Cal. 193, 191'.

2. Beam' afﬁevemze v. Sidfznrrtlr. A.I.R. 1965 S.C. 1092, at-1094-1095, paragraph 7.

3. C§;'lmE§5'l'ar1'€r qffnfnna' Ret=ermt.> V. Lfqrn'r&1rar's of City of Glasgow 'Bank (1331) 3 CL Of Sessions cases 4th s3_ .

24 M of Law,l'.'7----14.

Principle ofmail parIsrIph-

Explanation 102 Ilgilisgtlllésaii prmdsmfinf 12.18. In Engand, the corresponding provision in the English Stamp Act of 1815 (55 Geo.

Act of 131; Ill, Ch. 184} runs as follows:

"Where any lands or other property shall be sold or conveyed in consideration, wholly or in part, of any sum of money charged thereon by Way of mortgage, wadset or othenvisc, and then dine owing to the purchaser or shall be sold and conveyed subject to any mortgage, wadset, bond or other debt, or to any gross or entire sum of money to be aﬁerwards paid by the purchaser, such sum of money or debt shall be deemed the purchase or consideration money, or part of the pttrchase or consideration money, as the case may be, in respect whereof the said azl wzlorern duty is to be pai ." -

Interpretation of " _ _ words "money 12.19. The words money to be afterwards paid by the purchaser" l1_'1 the above provision gig" aﬁ§;W"[,'f: in 55 Geo. Ill, Ch. 134, were explained in Marquis of Clumdos V. C0mmr's.u'ongr of Inland purchaser." Rm-'ritual-as follows :-

"ln the clause which is to deﬁne what is the consideration or purchase-money, the term 'to be paid by the purchaser' mean where it is stipulated that he is to pay it ; I and the provision applies only to those cases, where, in consideration of the con- veyance of the estate the vendee agrees to pay a certain sum to the mortgagee or incumbrancer. Where the purchaser does not bind himself to pay it, but is left' to pay it or not as he pleases, it cannot be a part of the consideration money."

ED511511 act gf 12.20. In consequence of this decision, an amendment was made in 1853. The amended 1353- section ran as follows :---~ "Where any lands or other property shall be sold and conveyed subject to any mort-

gage, wadsct or bond, or other debt, or to any gross or entire sum of money, such sum of money or debt shall be deemed the purchase or consideration money or part of the purchase or consideration money, as the case may be, in respect whereof the said an' vulorem duty shall be paid, notwithstanding {lent the .:mrcMrer__ shall not be or become personally liable, or shall not rmdertake or agree to pay .

the same, anything in any Act or otherwise to the contrary notwithstanding'.

Later English "Am - held that there was no intention to make a change."

History of 12.22. The history of the section in our Act was discussed in a Calcutta ease." Under section "°°ﬁ°" 24' 34th) 'of the Stamp Act, 1869 (18 of 1369), where any property was sold and conveyed sub- ject to any mortgage or bond or other debt or to any gross or entire sum of money, such debt or sum was deemed the consideration money or part of the consideration money as the case may be, in respect whereof duty should be paid, nonvfthrlanding that the purchaser was not' or did not become personally liable for such debt or sum, or did not agree to pay the some or llt£l€I1"£i'il]l)' the seller against the same. In;the Stamp Act of 1879, in re--enacting this section, the last portion (above referred to) was omitted;

property subject to a mortgage or debt was 12.21. The words underlined above do not occur in later English Acts; but, it has been .

This resulted in a conflict of _deeisions.;W_hm'. ' 5-:

sold, the High Courts- of Calcutta,-5 Madras' and ,e.1]a}1abad6. held that ad valorem duty was payable in respect of such sum or debt in mitt-' when the purchaser bound himself pea-sonally to pay the some or indemnify the vendor

-- Inland' ' Revenue, U851} 5 Es. 454 (481): 155 an. 624 (case) z._o. LJ.

1. iﬁwfarcrds of Chanclos v. Commissioner of E3169: 17L.T. as.) 123 (Quotedi.nA.I.R. 1931 Cal. 193 :53 Cal... 33 (F.B.).

2. Liqtlidarors etc. '9'. C'.l'.R. (I881) 18 Scott. L R. 240;.

lb) Wayne v. C.I.R. (1900) 1 QB. I72. -

3. U.K. Jana-rdmt Run v. Secretary nfState, AJR. 1931 Cal. 1'93 (Rankin, C-1)

4. In the matter of reference ﬁam the Board of REVE-W18. (1334) I-L-R 1'" cal 92:

Act in case No. 111331' 1:32) Ill.-..R. s ' _ Ref f D.J. S nth Malabar under 49,' General Slam? _ 5 Mad..:1le8!-l('Jl€§'.l;?lns1|nd refoorence from Board of Revenue in case No. 3,-' 1884 under section 445. In an Stall}! Act nus (18S4)I.L.R. 7 Mad.421 (F.n.).

6, Jwrzla Prasad v. aim Nnraln (1882) I.1..R. 15 All. 107.

103

against the same. But the Bombay High Court held} that in all cases stamp duty was payable on the total of the purchase money and the mortgage debt. We shall revert to this controversy . later."

12.23. Another diﬂidulty arose from the language of section 23. According to some Bombay decisions, a transferee of a property subject to mortgage need not pay duty on the interest due on the mortgage, through he would have to pay such interest before redeeming the property.

But now the express language of the Explanation to section 24, makes the mortgage debt or money charged, together with the interest due upon it, as part of the consideration for sale.

12.24. As to sale subject to- encumbrances and sale not so subject, the question may be raised whether this distinction, even if relevant for the purpose of the law of transfer of property,"

has any relevance in regard to the charge of duty under section 24, Explanation. The answer is that the distinction is relevant, because the Explanation is intended to apply only where the seller purports. to sell the equity of redemption. It is only where such a sale is n1ade----a sale subject to encurnbrances----that the need for adding the amount due to the mortgages can arise. in other cases, the purchaser would have calculated the price on the unincumberecl value.

' In Horlimore V. Inland Revenue Commissioners} _Baron Martin, explaining the provision then in force in England, put the matter thus :

"The scope and subject of the enactment" is clear, namely, that upon every purchase, an' vaiorem duty shall be paid on the entire consideration which either directly Question of _in--

terest not of un- portanoc.

Relevance of distinction bet-

ween sale subject to encumbrance and other or r'ndz'recIty :-epr-erenrs the value of the free and unincumbered corpus of the subject-matter of the sale." ' In the case where the sale is not subject to incumbranoes, the purchaser wouid already have paid the full value, and the need for applying the enactment does not remain.

12.25. If the Explanation to section 24 is regarded as applicable even where the sale is free otriucumbrances, there will be double charge of duty. A sells to B certain property, without stating the inctumbrances. Since B was not told of any incumbranoes, he would, one may assume, have paid to A the normal priceas for property not encumbered. In such cases, the "property"

is subject to mortgage, though the sale is not. Should the Explanation apply 'E Should it be rea~ sonable to apply it '.7 ' The mortgage money is added (for stamp duty), because, indirectly, the seller is beneﬁtted by the fact that discharge of the incumbrance is now at the cost of the purchaser.

12.26. In construing the proviso to the Explanation, Mclood C.J.'3 observed in the Bombay case : T ' t _.

"The proviso belongs to and must be read with the Explanation which is to the eiiect that if a mortgagor sells the equity of redemption, the amount due by him to "the mortgagee for principal and interest shall be?dee-med to be part of the considera- tion for the sale"? ' ' As Rankin CJ. observed in a Calcutta :

"The first question which can be put is whether the phrase "subject'r'o "a "ruler-.tg'sge?iii other incumbrance", qualiﬁes the word" "property" or qualiﬁes the word "sale".

1. (a) Shah Nagindmzd J'a_vnr'frana' v. Naikara Nanlzwn Cizegala, (1881) I._L.R. 5 Born. 470. _[b) Meer Kaiser Khan v. Ebrafrim Maw: (1391) I. L. R. 15 Born. 532. '

2. See "Comment on the Explanation", z'n_ﬂ'a.

3. Section 55 (1) (g), Transfer of Property Act.

4. Monfnwre V. I.R.C'. U864) 33 L.J. Ex. 253, 266; 133 R.R. 5'. Stamp Act, 1815 (Eng) _

6. In re Frank Porroiocit (1925) 1.1..n. so Boni. 540, A.I.R. 1925 Born. 542 Mclood C.J.

7. In tliejndgment, by slip the word "mortgage" is used in place of "sale"'.

815 : 159 ER. 347.

' 3. Janardi'1rnzRao v. Secrerezr_v'o}'St-are, A.I.R. 1931 Cal. 193, I95.

Possibility ' ' double char-5;, sale.

CW.

Fnmtt J.

faith bl' reliev-

104

If the former is the correct meaning, then property which is, in fact, subject to a mortgage will, if it is sold, attract the consequences set forth in the Explanation, whether or not the property is sold on the terms that the vendor is to clear all' the mortgage and give to the purchaser a clean title. In Women Martami V. Com- missioner, Cerural Division,' this question was raised and it was held that the clause "subject to a mortgage or other incumbrance" governs "sale of property"

and not "property", that property may be subject to a charge and yet the sale may not be subject to it and that where a bargain between the vendor and the purchaser is that the vendor "will_u1al-Le a good title free from all incumbrances, the Explanation does not apply. I am clearly of opinion that this is the correct view. To begin with, an instrument is to be stamped according to the nature of the bargain. That is the general principle in the light of which a question of this character must be approached. The language of the main clause shows that the question is whether the property is transferred subject to the payment of money. The Explanation is in my -judgment entirely consistent with the language of the main clause. If property is Subject to a mortgage but the vendor, in return for the purchase price, is to give a clear title free from all incmnbronces, the Explanation does not apply? Nor does Illustration 2 apply, for, the case there put is clearly not a sale free from the incumbrance. It is dangerous to rest one's view of a clause in the Stamp Act upon reasons of justice or fairplay. Still, it would require very clear words to induce one to think. that where the purchase price is given as the full value of the property and -the vendor as part of the considerations therefor-

undertakes to clear off all incumbrances the amount of the incumbrance was in--

tended to be added tothe whole value of the property and stamp duty assessed -

upon the same thing twice over." _ 12.27. Favrcett J. observodi i nth: Bombay case :--

"The E.rplanatz'ora and Hin.rtrarion (2) to section 24 of the Indian Stamp Act have brsra rather loosely xi.-ufred. But I am satisﬁed that the intention is that the Explanation should only cover cases where the purchaser tmdertaices to pay the mortgage debt."

We shall refer to the view of Marten J. lmeer' 12.28. Opinions can vary as to the ratio decidendi of the above Bombay case. The deci-

wkum. sion could be construed as resting solely on the ground that though the property was subject toithe charge, the vendor undertook to clear off the incumbrance and to perfect the title of the vendee treeefrom all encumbrances.' The opinion expressed by Marten 1.. however goes beyond that.' Awarding to him, the Explanation must be conﬁned to cases where, as part of the consi- deration which the vendor gets for the transfer, the Vendor is to be relieved, expressly or impliedly from the burden of the mortgage as between himself and the purchaser.

'12.28A. If the latter proposition is to be regarded as the basis. of the judgntentuin the Bombay case, then it must be noted that it has not been accepted by the Calcutta High Court,' . where Rankin CJ. observed, [with reference to the Bombay case)--"No such qualiﬁcation is' to be found in the Explanation itself or in the illustration which is given by the legislature. to throw light upon its meaning."

Woman 1|-farrami v. Cammirrthner, Centre! Divirzhn, A'.I.R. 1924 Bonr. 524.

Emphasis supplied.

Woman Marmrrd Harlerne v. Comntissrbner, Central Dn.. A.l.R 1924 Born. 524, 516, 527 (Fawoett J). . Para 12.33, infra.

see shah Ag. C.J.s, Judgment.

. Sec Para 12.33, tnﬁ-a. -

U.K. Janardcm Roe v. Secretary of Srote,A.I.R 1931 Cal. I93-201 (Rankin C.J.] ;-.ra~y».h-_...:p.;o--.

In the Calcutta case, the vendor had purchased the property ' in a court auction, and sold it to the vendor for Rs. 1,000. There was a mortgage 'on .

105

property, on which a suit had been instituted by the mortgagee against the mortgagor. A sum of Rs. 25,636 was outstanding on that mortgage. The fact of the mortgage suit having been instituted was mentioned in the sale deed. The instrument was stamped as a conveyance for Rs. 1,000 only. It was held, that as the property was sold subject to the encumbrance, the conveyance was liable to stamp duty on Rs. 1,000 plus the er:t'tmvbrnr:ce. Examining the meaning of the phrase "subject to a mortgage or other incumbrance", the court held that the phrase governs the words "sale of property", and not the word "property". Where the sale is not subject to a mortgage {though the property concerned may be so subject), the Explana- tion has no application. 'Thus, if the property is subject to a mortgage, but the vendor, in return for the purchase--money, is to give a clear title free front all encumbrances, then the Explanation does not apply. The unpaid mortgage money in the case of a sale subject to a mortgage, is to be deemed to be part of the consideration for the sale, not because it is part of such consideration, but because the legislature is determined to tax it. Consequently, an enquiry into the question whether the mortgage amount, in fact, proved part of the considera-- tion, is wholly irrelevant. ' 12.29. in an Allahabad ease,' the High Court maintained that where an immovable property, which is encumbered by a charge or a mortgage, is sold but not rubies: to the inc-unibrance, then the amount of money constituting the charge or mortgage need not be

-added to the consideration mentioned in the conveyance as the value of the property sold.

The words of section 24 beginning with "subject either" and ending with "property or not", apply to the word "trar1sfcrred", and not to the word "property".

12.30. The Supreme Court,'-' in an appeal from the Allahabad case, held the view that the phrase "subject to a mortgage or other encumbrance" qualiﬁes the word "sale", and not the Word "property". If the mortgaged property is sold subject to a mortgage, then and then only the Explanation applies; the phrase does not mean that whenever mortgaged property is sold, then Explanation is to apply. It is plain from the Explanation that it is only the unpaid mortgage money that is deemed to be part of the consideration."

12.31. While the judgment of the Supreme Court settles, in general, the meaning of the words "subject to", it does not concern itself with the major controversy, namely, is it necessary that the vendor should have been relieved of his obligation ?

12.32. It appears that the difficulty on the above point seems to survive even now, and the Explanation to section 24 should be made more speciﬁc than at present. The question that remains unsettled is----Is the Explanation applicable only where the purchaser undertakes to pay the nzurmbrance, or is it wide enough to cover other cases where the incurnbranceis outstanding '? We do not think that the applicability of the Explanation should be limited to cases where thepurchascr undertakes to redeem the ineumbrance expressly or byimplieation. Once it is proved that the incurnbrance is outstanding, its value ought to be added to the consideration paid, because the vendor has beneﬁted by the sale being subject to incurnbrance.

12.33. In the Bombay ease} Marten 1. observed :----- _ "This Explanation must be read along with the main portion of section 24, which refers, in my opinion, to the consideration payable to or moving towards vendor' and not to that payable by or moving from him .... ..I think, therefore, that the Explanation on its true construction must be confined to cases where, ' as part of the consideration which the vendor gets for his transfer, he is-to -be. relieved e.rprr=s.s-l_v or implicitly from the burden of a mortgage as between himself a and the purchaser." _ The question to be considered is "whether this is the correct view. - _

--I. Sldhrrnrli Mehr-arm v. Board oflieve.-rue, A.l.R. 1959 All 655, alﬁrmed in Boardof Revenue v. Stdimarh, A.I.R. 1965 S.C. 1092.

2, The Board ofRe1'entte U.-l'. v. Sfdhrmtlz Mehrofm, A.l.R. 1965 S.C. 1092.

3. See also Collector Abuesrrurion v. Deepak Texriieplndurtries, AJR. 1966 Gujarat 227 (F.B.)

4. Woman .'t-farts-ncl v. C'orrirm'rsr'orzcr, Cenrmf Dftrisiart, A.I.R. 1924 Bom. 524, 526.

3. Emphasis supplied.

106

Explanation 3139- 12.34. It is settled by Supreme Court,' that the Explanation would apply where the licabie only , _ I whm 53;: sub. sale of property is subject to a mortgage, i.e., where the vendor does not purport to give a ' t to ' - ' ' - . . . _ . .

1" "1'v'Um good title tree from the incunibnmce. But, on the question whether the test is to see wheth 1' the purchaser IS or is' not saddled with the bu_rde.rt, the Supreme Court did not express a view. eC;;i;1it'ication sug2- 12.35. Hence a ciarilication is needed, and it should be by way of widening the section.

Lines on Wm-uh . 12.36. in our view, it would be convenient if the correct position discussed above is amendment needed incorporated into the section. What is needed is--(iJ to indicate that it is the gala which 15 Subject to mortgage; (ii) to also indicate that there need not be an undertaking by the pur- chaser to pay the amount, in order that the section may apply; and (iii) to revise illustration 2, in view of the criticism thereof in the Bombay case," by Fasvcett. ' We may add that such an amendment has been generally favoured by the replies to our Qitestionnaire."

Recommendation 12.37. We recommend the following re-draft of section 24, in the light of the above ,'§,';""§4 t" 5"' discussion. -

Revhed section 24 "24. Where any property is transferred to anyperson :-----

(a) in consideration, wholly or in part, of any debt due to him, or (to) subject either certainly or contingently to the payment or transfer to him or any other person of any money or stock, whether the money constitutes a charge or incutnhrance upon the property or "not, such debt, money or stock is to be deemed the whole or part, as the case may be, of the consideration in respect whereof the transfer is chargeable with ad vat'orem_duty :

Provided that nothing in this section shall apply to any such certiﬁcate of sale as is men:

tioned in Article No. 13 of Schedule 1. I i Explanan'on.-----Where property is sold' and the sale is subject to a mortgag or other incnmbrance, any unpaid mortgage money or money charged together with the interest (if any) due on the same, shall be deemed to be part of the consideration, for the sale, whether or not the purchaser expressly undertakes with the seller to pay the some or to imieinnify the seller if the seller has to pay the atone :

Provided that where any property subject to a mortgage is transferred to the mortgagee, he shall be entitled to deduct from the duty payable on the transfer the amount of any duty already paid in respect of the mortgage.

Illustrations (1) A owes B Rs. 1,000. A sells a propertyto B, the consideration being Rs. 560 and the release of the previous debt of Rs. 1,000. Stamp duty is payable on Rs. 1,500.

Rs. The property is suliiecr to a mortgage to C (2) A sells a property to B for Rs. 200. The sale is snbiect to the iiiorrgnge. Stamp for Rs. 1,000 and unpaid interest for duty is payable on Rs. 1,700.

(3) A mortgages a house of ' buys the house from A. Stamp d already paid for the mortgage.

wine. ':'%?h; ' 1, Boardqf Revemre V. Sidhririrh A.I.R. 1955 SC. 1093-

2. Woman M'nrtana' v. Com:-nisstcner, Certtr|:!Di'v:'.si'on, ment). 7

3. Question 36 uty is" payable on Rs. 10,000 less the-amount of st_am.p duty A.l.R. 1924 Born. 524 52B(See Fawcett..l.'s Judge-

the value of Rs. 1o,oe0 to B for Rs. 5,000 B afterwards ', t 10'?

12.38. Section 25 deals with stipulations for payment of annuities or other periodical payments. Such payments, since they are spread over a number of years, raise questions of the basis for calculation of stamp duty. The section makes detailed provisions in that regard. It deals with two situations :-~-- ' {i} where an instrument is. executed to secure the pu__wnem of an annuity or other sum payable periodically, or

(ii) where the consideration for a conveyance is an annuity or other sum payable periodically.

.The section provides that the amount secured by suehinstrument or the consideration for such conveyance, as the case may he, shall, for the purposes of this Act, be deemed :--

(a) where the sum is payable for a deﬁnite period so that the total amount paid can be previously ascertained----sue11 total amount ;

(b) where the sum is payable in perpetuity or for an indeﬁnite period not terminable with any life in being at the date of such instrument or conveyan-:e,--the total amount which, according to the terms of such instrument or conveyance, will or may be payable during the period of twenty years calculated from the date on which the first payment becomes due ;

(c) where the sum is payable for an indeﬁnite time terminable with any life in being at the date of such instrument or conveyancr3,--.the maximum amount which will or may be payable as aforesaid during the period of twelve years calculated from the date on which the first payment becomes due.

""1239. As regards situation {a]1, it is to be noted that the sum total (of the periodical tiiylnents) will be treated as the consideration for the purposes of valuation for stamp, even if, by a stipulation, the parties are entitled to terminate the periodical payments. Where, therefore, a lease of mines was given for a deﬁnite period (99 years), but the lessee was given an qatlon to terminate the lease at any time Cilltlllg the ﬁxed period or in the' event of the mines getting exhausted before expiry of the period, it was held" that the lease fell under section 25(3). The Court referred to the deﬁnition of '1ease'3 in the Transfer of Property Act, under which the right to enjoy the property is to be given for a certain period, express ' or implied or in perpetuity and emphasised that the mere fact that the interest is terminable before the expiry of the time ﬁxed or after expiry of the time ﬁxed, does not make the transac- atljt less a lease. , 12.40. Clause (11) of section 25 applies when the payment is in perpetuity or for an inddnite period. Here, the total amount payable for a period of twenty years is the valuation.

12.41. We may refer to an Indian ruling' relevant to clause (b).. By a dodument, a person botmtl. himself and his posterity, on the security of some immovable property, for. the annual payment to a temple of Rs. 21-4-0 and 3 'hadus' of oil; the Madras Board held, applying so_c'_tion'25(b], that it was a mortgage deed chargeable 7with duty calculated on 20 years' of oil at Rs. 15 and Rs. 21-4-D in cash per annum. ' ' 12.42. Clause (c) of section 25 applies to cases where the sum is payable for an indeﬁnite ﬁttminable with any life in being at the date of the instrument. The maximum amount whiclrwitl or may be payable during the period,of twelve 'years will be treated asthe amount of consideration for the instrument in question. Thus, an 'award by which a certain sum was made payable to a certain person, without any mention as to whether the sum was secured or intended to be secured to the heirs or representatives of the person, was held to be chargeable under this clause. as document securing an annuity.-" Similarly, where, on retiring from a

1. Para 12.38. '

2. Dararkhnnd Cement Co. Lml, v. The Secretary ofsrare A.l.R. 1939 Born. 215 (Rangnekar. I.) 214-222, 192.

3. Section 105, Transfer of' Property Act, 1882.

4. Madras Board' Petition 2| (R) ; Misc, dated 30-1-1908 Madras Stamp Manual (1933), Page 122.

5, Rgjbreme under the Stamp Act {I896} 16 A.W.N. 199.

Section 25.

Section 26- Introductory.

Rationale the section Duty on bonds--

Article 15.

103

ﬁrm, one of the two partners assigned his interest in the ﬁrm to his partner in consideration of Rs. 6,000 plus an allowance of Rs. 35 per month, is was held that for the purposes of stamp valuation, the conveyance must he treated as for a consideration for Rs. £3,000 plus Rs. 5,040, total Rs. 11,040} We may conclude our discussion of section 25 by stating that the cases illustrating the working of the section, mentioned above, do not suggest any need for amendment.

12.43. The computation of stamp with ad vuiorem duty presents also problems where the amount or value of the subject--matter is indeterminate. According to section 26, where the amount or value of the su'oject--matter of any instrument chargeable with ad valorem duty, cannot be, (or in the case of an instrument executed before the cominencemeut of this Act could not have been}, ascertained at the date of its execution or ﬁrst execution, nothing shall be "claimahle" under such instrument more than the highest amount or value for which, it stated in an instrument of the same description, the stamp actually used would, at the date of such execution, have been suﬂicient.

Under the proviso to the section, in the case of the lease of a mine in which royalty or a share of the produce is received as the rent or part of the rent it shall be sufﬁcient to have estimated such royalty or the value of such share for the purpose of stamp duty,-

(a) when the lease has been granted by or on behalf of the Government, at such amount or value as the Collector may, having regard to all the circumstances of the case, have estimated as likely to be payable by way of royalty or share to the Government under the lease, or '

-I ' »--n4-.«:-n.mn. I-.-;..n.j12 when the lease has been granted by any other person, at twenty thousand rupees a year; and the whole amount of such royalty or share, wherever it may he, shall be claimable under such lease.

(13)

Under another proviso, where proceedings have been taken in respect of an instrument under section 31 or section 41, the amount certiﬁed by the Collector. shall be deemed to he the stamp actually used at the date of execution.

12.44. As has been observed? "unlike the evidence Act, the Stamp Act does not base its rules on the theories of relevancy or public policy. _ certain documents shall pay :1 contribution. to the State according to the purpose for which In regard to certain documents which create a right to money, it prclcribcs they were executed. '7 _ he valuation of the claim, the document ihall be 1:1- that unless the stamp is proportionate to t admissible. in evidence, and where the intention of the parties is that the valuation; should be unlimited, it enacts, by section 26, that the" claimant will be entitled to realise 'a sum propor- tionate to the stamp fee paid, subject to certain exceptions in the case of royalties. It follows that wherever the claim exceeds the amount proportionate to the stamp, the document _is.not , ' duly stamped for the purpose for which it was executed within the meaning of sectisll 35, and the provisions of this section have to apply thereto.

A typical instance of instruments whereithe value is indeterminate is a lease of This case is expressly mentioned in the section. 'In such leases, the amount which will -be realised I y is altogether uncertain.

In regard to other instruments, a few cases have arisen under the section. These maynow be referred to.

12 44A. Article 15 relating to bonds provides that ad valorem duty should 'be paid on ' the bond. An instance of a bond for an indetenninate value the amount _or value secured bl' _

--?i_I? n 1=ueT1}3.' 'i73;25', (1945) Page 53. ' ' __ 1 Kmm, Bmjpmhqn Sing}: v. Lacizminarain Agarwal. A.I.R. 1920 Fat. 50.

It is purely ﬁscal, and insists' that p 109 is to be round in an Allaliabad case} relating to a bond by a grower of sugarcane to deliver some quantity of rah {unreﬁned sugar), at a price to be ﬁxed at the meeting of growers.

12.45. The Calcutta High Court has held that for bonds for delivery of grain, if proper stamp duty is paid o11 the value ot: the grain secured as ﬁxed in the instrument, the document is properly stamped under Article 1.5, and section 26 would not operate to prevent the recovery of a higher amount as the value of such grain on account of subsequcm rise in prices.'-' 12.46. in the case of rnortgagcdceds executed to secure future 5 advance on a running Dutrou rnortnap account, or containing otherwise :1 stipulation of the maximum amount of liability under the ' document, stamp duty would be payable on the amount fixed as the maximum limit of liability, though the amount might not have been actually advanced. If such stamp duty has been paid, then an amount upto thet limit mentioned in the deed can be recovered in a court of law, notwithstanding that more than that limit was privately realised by the mortgagee on different occasions.

In another Calcutta case," a mortgag-e--bond, intended to secure future advances upto the sum of. Rs. 10,000 at n time, was executed on a stamp paper of Rs. 50, and, under it, altogether more than Rs. 10,000 had been privately realised by the mortgagee on different occasions. It was held that there was nothing in section 26 to prevent the mortgagee from suing to recover the balance of the debt due on the mortgage. Even if the stamp is deficient, section 26 has no application to the case, and the full amount due on it can be claimed on payment of deﬁcient stamp duty and penalty under section 35.

12.47. If such maximum is not mentioned, and if the document purports to secure an amount without limit, then it appears that section 26 would operate to restrict the amount cllimabk under it to the maximum amount covered by the stamp} 12.48. There are decisions pointing out," that section.26 applies only where the amount or value of the snbject--matter of any instrument chargeable with ad valorem duty cannot be ascertained at the date of its execution. Thus, if in an instrument, the value of the subject- mutter is determinable on a reasonable basis, then, section 26 has no application."

The circumstances governing the applicability of the section were examined in a Madras case." in which a certain land was leased out for ten years, for being planted with a certain rninilllilln number of casuarina trees, on the condition that at the end 'of the time, the trees phntcd should be cut and sold, and the proﬁt of sale proceeds of the trees so reared divided equally, deducting the expenses of cutting etc. It was held that clearly, the subject-matter wt: in" ascertainable item at the date of contract, it being a certain number of casuarina trees on their equivalent value. The contention, that the value of the trees at the end of 8 or 10 not asccrtainable at the time of the contract was rejected.

'_12.48A. We now proceed to consider the question whether section 26 is subject to, and governed by, section 35. Section 35 prohibits the admission in evidence of any unstampcd document,' but, under the proviso to that section, an instrument not sulﬁciently stamped-can be admitted on payment of penalty.

, Under section 26, "nothing shalt be claimable" under the instrument in question beyond the amount or value for which the stamp is suﬁicient. The section is silent as to whether this pmhibitirnn can be relaxed where the claimant is prepared to supply the deﬁciency in stamp.

I. In the Matter nfGrrjra,l Singh (1337) I.L.R. 9 All.5B5 (F.B.).

2. Hncimb Cimruira Choir-ciﬁarf v. dink Jan (1886) LLR. 13 Chi. 268.

3.' Ha-audera Lat Ray Chowdimry v. Tartar' Charon Cfrnkrabarty, (1904) I.L.R. 31 Cal. 307-

4. A.L..M..-1..L. Cherry v. Marmg Atmg Ba. A.I.R. 1919 Lower Burma 3?.

5. In the matter ofﬁajraj Sfngh, (1B8'}')I.L.R. 9 All. 585 PB. _ 6 Bllairrab Chandra Citowdlwrt v. Alak Jan (1336) 13 Cal. 268 ;a1:td also Soadamam Patter v.

11394) 4. M.L.J.201.

7. Random' Shesayya v. Venkar Subbayya A.I.R. I918 Mad. 1066. 1068.

Sonia Sundara.

14..M of Lawf7?--l 5 Intel-rehtlcn be-

tween -sueuon 36 and section

35. Case law.

Need for ﬁcation.

clari-

No justiﬂcation for penalty.

levying 110 12.49. However, notwithstanding the stringent phraseology of the section, it has been held' that there is nothing in section 35 which necessarily excludes its operation from cases covered by section 26. As a matter of fact, it would be a strange result if an instrument bearing no stamp and, therefore, not admissible in evidence for want of stamp. could be validated by payment of penalty under the proviso to that section {section 35), whereas a similar instrument bearing a deﬁcient stamp and, therefore, admissible and enforceable to a limited extent, could. in no case, be fully enforced even by paying the penalty. I1 is, therefore, reasonable to read section 26 as subject to section 35.

12.50. Thus, where a mining lease bears a stamp3 of a certain value, the lessons right to recover royalty under the lease is not conﬁned to the amount covered by the stamp. ll it is found that he is entitled to a greater amount, he can be given a decree for the sum to which he is entitled on compliance with the provisions of section 35. This is the position even where the second proviso to the section is not applicable. l 12.51. In our opinion, it is desirable to clarify the position as to the inter-relationship of sections '26 and 35, particularly because in section 26, the words "nothing shall be claimable"

do not reﬂe-ct the true intention of the judicial construction. It is desirable to replace the- words "nothing shall be claimable" by words which will ensure that the deﬁciency in stamp can be supplied. The major source of the present trouble is the disharmony in wording between the two sections. Section 26 uses the words "Nothing shall be clairnable" but section 35, main paragraph and proviso (a), use the words "admitted in evidence". This disharmony ought to be rectiﬁed.

-The amendment of section 26 as to applying section 35, has. in principle, been approved by the replies to our Questionnaire.' 12.52. Besides this clariﬁcation, we would also like to recommend a change of substance. The precise question to which we have addressed ourselves is this. Is there any justiﬁcation for the levy of a penalty in the case to which section 26 relates ? As the position is now understood, this cannot be avoided, because a, relaxation of the stringency of section 26 can be sought only from section '35, and that section contemplates payment of duty as well as of penalty. The question is whether this is just and equitable. _ - .

Though this point was not put in our Questionnaire, it came up for elaborate discussion. We are satisﬁed that the point is important enough to require examination.

In this connection, we cannot faﬂ to notice that the situation dealt with in section 26 is in a class by itself. In the normal case for which section 35 is intended, the duty chargeable either was known, or at least could have been known with reasonable diligence, at the time of execution. in the very special situation to which section 26 applies. however, the duty could not have been known with any amount "of reasonable diligence, at the time of gexecution. Prima facie therefore, it would appear to be legitimate to make a distinctionbetween case to which section 35 applies and the exceptional case for which section 26 is- intended. We do not think that if such a distinction is made, there is possibility of any serious abuse, To repeat in a different form, what we have stated above, the levy of penalty is irieqaﬁhble in such cases, since there has been no default. The interests of the revenue are suﬁicimtly protected by the levy of the deﬁcient amount of duty. In our opinion, there is no justification for levying penalty in addition. The situation in section 26 can hardly be regarded as an analogous to the normal situation under section 35, which assumes that :--

(i] that instrument is chargeable, and

(ii) that it is chargeable 'with duty'---which seems to postulate a deﬁnite amount.

7 1. {aft Kr:-mr Bra]? Mohair Singh v. LoxmlNarar'n Agoniral. A.I.R. 1920 Fat. 50, 55 (Dawason Miller C.J.und -I I J.) aiﬁrnied in. .

(bl L-achmi -Narian v. llajeshwar, A.I.R 1924 P.C.'221. _ _ ' _

2. BrajMoha:: Singb v. Lack-r1iNaraf.-1. A.I.R. 1920 Patna S0, 55, aﬁrmed in Lacirmir Narnia V, ﬁg-5.".

--A.[.R. 1924 RC. 22!. _ "'

3. Question 37.

111

It is on this logic that we consider it proper to recommend that in relation to section 26, While so much of section 35 as relates to payment of the deﬁcit may be adopted, it is not necessary that the penalty should also be levied. For the purposes of. section 26, therefore, the penalty portion in section 35 should not be adopted. We may state that in so far as the amount claimed under the instrument can be ascertained only when the claim is made, the case is more analogous to com': fees, where the penalty is levied than to- the normal situa- tion under section 35. In the Court Fees Act, in suits for accounts, deﬁciency can be made up.

12.53. We, therefore, recommend that section 26 should be revised as follows:

"26. Where-----

(a] the amount or value of the subject--matter of any instrument chargeable with ad 1'alm-em duty cannot be, or (in the case of an instrument executed before the commencement of this Act) could not have been, ascertained at the date of its execution or ﬁrst execution, and what is claimed water such instrument exceeds the highest amount or value for which, if state.) in an instrument of the some description, the .'riamp actually used would, at this date of such execution, have been szqﬁcienr.

(bl the instrtiment shall be rlecrncd to be insuﬂicienrly stamped as regards the excess and I.'.=e pro- visions of section 35 shall accordingly apply in relation to the admission in evidence of the irarrrument :

P:-ovided that for the piirposes of such application of section 35, to such an in.s:rumenr, it shall be snﬁicient if the deﬁciency in the duty is paid, and no penalty shall be levied.

Provided further that, in the case of the lease of a mine in which royalty or a share of the produce is received as the rent or part of the rent, it shall be suflicient to have estimated such royalty or the value of such share, for the purpose at stamp-duty,---

{a) when the lease has been granted by or on behalf of the Government, at such ' amount or value as the Collector may, having regard to all the circumstances of the case, have estimated as likely to be payable by way of royalty or share to the Government under the lease, or

(b) a year; and the lease shall be deemed to be suﬂiciently stamped as regards the whole amount of such royalty or share whatever it may be. ' .

Provided also that, where proceedings have been taken in respect of an instrument under section 31 or 41, the amount certiﬁed by the Collector shall be deemed to be the stamp actually used at the date of execution- -

when the lease has been granted by any other person, at twenty thousand rupees.

Kecomrnendation.

CHAPTER 13 FACTS TO BE STATED IN INSTRUMENTS---SECTIONS 2'?-23 gallon 27- 13.1. Section 27 provides that the consideration {if any) and all other facts and circums-

"°d"""°""' tances affecting the chargeability of any instrument with duty, or affecting the amount of the ' duty with which it is chargeable, shall be fully and truly set forth therein. Failure to do so is punishable, under another provision---section 64.1 What facts and Ciniumslanccs aliect the chargeahillty of the instrument or theamount of the duty, depends on the scheme as to the charge of duty and, in particular, on the article applicable to the instrument in relation to which the question arises. Conﬁning ourselves to instruments dealing with property, we may state that there are four possible alternatives which could be thought of, for arriving at the amount of the duty chargeable, namely :--

{a) amount or value of the property as set forth in the instrument,' or its equivalent?

(Ia) value of the property, but not conﬁned to the value as set forth in the instrument ;4

(c) consideration as set forth in the instrument ;' lfd] consideration for which the transfer is made, e.g., rent' cmnwﬁon with 13.2. Thus, the manner in which section 27 operates in relation to a particular instrument C'3"F7|¢ "'55- largely depends on how the charging article is worded, that is tosay, which of the various alternatives enumerated above is taken as the governing criterion in the charging article. For this reason, amendments made in section 27 by some of the States cannot be commented upon unless the criterion adopted in the charging article is sought to be revised. In fact, it is the charging article' which will he the principal subject for consideration, and an amendment of section 27 would really be consequential on the change to he made in the charging article.

In regard to section 27, tlreretore, the discussion will be conﬁned to those amendments which can be considered independently of the charging articles.

org... Am,,,d_ 13.3. In some States, an amendment been made empowering the Registrar to hold "'°°'"- i an inquiry. The Orissal amendment 'is an example. Section 47A [0r1ssa) reads---

"47-A. {1} If the registering oﬂicer appointed under the Indian Registration Act, 1903, _ while registering any document relating to transfer of property, has reasons to believe that the value of the property or the consideration, as the case may be, has not been truly set forth in the instrument, he may, after registering such instrument, refer the same to the Collector for determination of the value or consideration, as the case may be, and the proper duty payable thereon.

(2) On receipt of a reference under sub-section (1), the Collector shall, after the parties a reasonable opportunity of being heard and after.-_ holding an enquiry in such manner as may be prescribed by rules madeiunder this Act, determine the value or and the duty as aforesaid and the deﬁcient amount of duty, if any. shall be payable by the' person liable to pay the duty. .

"i."s3EiES3i4T<o. '

2. ac. Articles 12(3), 23. 31. 55. SS and 64.

3. Article 33 (sift).

4. This is hypothetical.

5. Article 23 (Conveyance).

6. 116. Articles 35 and 63. ' .

7. Section 4'.?A inserted in Orissa by Orissa State Act, 1962 (35 of 1962), as amended by Oriana Act, I35 {11 of 19455).

112 113

"(2-A) The Collector may sud morn, within two years from the date of registration of any instrument not already referred to him under sub-section (1), call for and examine the instrument for the purpose of satisfying himself as to the correctness of its value or consideration, as the case may be, and the duty payable thereon and if after such examination, he has reasons to believe that the value or consideration has not been truly set--forth in the instrument, he may determine the value or consideration and the duty as aforesaid in accordance with the 'procedure provided for in sub-section (2); and the deﬁcient amount of duty. it any, shall be payable by the person liable to pay the duty.

(3) Any person aggrieved by an order of the Collector under sub-section (2) or sub-

section (2-A) may, within thirty days from the date of the order, prefer an appeal before the District Judge and all such appeals shall be heard and disposed of in such manner as may be prescribed by rules made under this Act."

13.4. In order to facilitate consideration of the question whether such an amendment should be recommended, it is desirable to examine the scope of section 27. The scope would be better understood it the following propositions are borne inmind :

{ 1) The revenue of the Government is protected by requiring the parties to make a _ and full disclosure of all facts and circumstances having any bearing on the duty payable.

which they must suﬁer the consequences of their false and defective statements.

{2} If it be found that the omission to state the value of the property or the under valua- tion was intended to defraud the Government, then a prosecution would protect "the Govern- menragainst the attempted fraud.' (3) In determining whether a document is sufﬁciently stamped, the document itself as it stands, and not any collateral circnmsatnces which may be shown in evidence, must be looked (4) For the purpose of stamp duty, the valuation given in the instrument (where the value' as set-forth is the test) would have to be accepted. If there was an-intentional under-

valuation, the fear of prosecution would protect the Government against the attempted fraud. There is no provision in the law-3 authorising the Collector to ascertain the value of the property with a View to causing the instrument to be stamped with reference to the value thus ascer- tained.' If a document--e.g., a rnortgage--deed,--is silent regarding the consideration, or if it does not set-forth the circurnstances from which it could be gathered that how much stamp duty E to be paid, then the Collector has no power to take any evidence to ﬁnd out the considera-9

-ticn. The only thing left for him is to prosecute the executant for not complying with the provisions of section 2?."

13.5. In Himalaya House Co': care," the Supreme Court held :--

"It is true that in view of section 2'! (of the Indian Stamp Act), the parties to a document are required to_ set forth in the document fully and truly the considera- tion (if any) and "ali other facts and circumstances affecting the chargeabiﬁty of that document with the duty or the amount of the duty with which it is charge- able. But a failure to comply with the requirements of that section is merely punishable under section 64 of the Stamp No provision in the Stamp Act empowers the Revenue to make an independent inquiry of the value of the property conveyed for determining the duty chargeable."

1; (a) Board ofﬂeverwer. M'adra.r v. KR. Venkotarama Ayyar A;I.R. l§5{l Madras 738. (la) In re Vcnknrslvotni, A.l.R. I953 Mad. 941.

. Rama Cherry v. Mnimnrcd Choose and another, (1899) l.L.R. 16 Cal. 435.

. Except for local amcndntenls--c.g. Orissa amendment.

. In the nrnﬂerof .-'lfra'.v'n:.vmrreo' .-'l«fr.tzqﬁ'itr Alt'; A.I.R. 1922 Ali. 82 (2) (F.B.] , Rrﬁran Halts}: ct; atlters V Comp; AIR. 1945 Lah. 69.

. Hitnaiya House Co... V C.C'.R.A.., A.I.R. 19372 5.13. 899, 904, 905.

ON?-A-F-Q31-J Scope of present section.

Allahabad case.

Madras view.' 114 After reviewing the High Court decisions, the Supreme Court observed :--

"The legislature may have had good reasons for not empowering the Revenue to make an indepatittent inqtdry as regarair the valuation of the right sougitt to be rt.ssigned.".

In this case, it was held that there was no basis for holding that the consideration for the impounded assignment deed, vvliich had declared that there was no consideration, was the total amount received by the assignor under the agreements entered into between him and the persons to whom he had assigned certain rights in the ﬂats, oﬂices and shops in the building. It was held that those persons had an independent right of their own, and that their rights did not ﬂow from the impounded assignment deed. it was, therefore, held that the considera-

- tion to be taken into account under article 23 (conveyance) was .nil, as the assignrnent deed itself mentioned that there was no consideration, and there was no intention to incorporate the other agreements into 1his deed which, therefore, could not be taken into account for the purpose of calculating the duty on the impounded document'.

13.6. In one Allahabad case,' the Godavari Sugar Mills, being the owner of property consisting of land, buildings and machinery, purported to sell these to the Somaiya Organics for a certain consideration. The sale-deed recited that the land and buildings were conveyed for a certain amount X, while the balance represented the price of machinery, vehicles, stores and other goods which were treated as movable items and the transfer of which had been completed by manual delivery. The Advocate General, on behalf of the State, argued that the intention of the sale-deed was to transfer the entire properties of the Godavari Sugar Mills and that the machinery, vehicles etc. were also transferred by the deed, and the value of these"

properties too should be taken into account. The High Court did not accept this contention. It held that the deed was intended to transfer only the property mentioned in [Schedule A and the buildings situated titer-stat, and not the movable properties, The High Court observed "The authorities constituted under the Act have to adjudge the duty chargeable on a.-deed as pre- sented by the eaecutants. it is not permissible for them to embark upon an -enquiry as to what the intention of the parties was when executing the deed, and then to iii; a duty on such items of property which in their opinion the parties contemplated to transfer. The fact that the sale-deed contains recitals in respect of other transactions between the parties would not aliect the duty, in case the deed which is sought to be registered does not afiect transfer of these properties."

Therefore, the addition of the balance amount representing the price of the machinery, vehicles etc. for purpose of caldulating the duty, was uncalled for. -

13.7. In earlier Madras decisions," it had been held th at"the value of an instrument creat-I -

ing a settlement of propertiesvras the value set forth in the instrument, and not the market-

value of the property. In a later _decision,3 the Madras High Court reviewed its earlier cases,"

and said that 'value', unless tlfe term in any enactment suggests the contrarytnlrlst of course; -_ mean the real value, the real value of property of the nature of land and houses being ordiitaﬁly . ' and not suitably estimated by determining what the property would fetch, it sold in the open market. In other words, value ordinarily meant 'market value'. .

However, the High Court held that no machinery was set up in the Stamp Act for asoer;-_ taining the true value of the property or the consideration, as the case may be, and it would _ be clearly impracticable to can the burden on the Registrar in each case 1'0 asceriainwltar the true rnaricer value is. Since the Registrar is not empowered to conduct an enquiry _hin_rseJf as '-

to the market value, the value must be set out in the document itself.

1. Santaiya Organics v. C.C.R. Authority, A.l.R. 1972 All. 252

2. (a) Reference I.L.R. 7 Mad. 350.

" Cb] Rennce I.L.R. 3 Mad. 453 {F.B.} (:3) Reference I.L.R. 20 Mad. 27. -

3. Hi: Joint Secrerarzt-' Board of Re:-ems, .Madra.r v." PER Venkatarama. Ayyar, A.I.R. 1950 Mai 733 (EB-L 115 13.3. Although the Registrar cannot embark on an independent enquiry regarding the value Courses open to of property. yet he has power, under section 36 of the Stamp Act, to refuse registration if the thc R°9'5"'"' document is not duly stamped, from which it would follow that he can require the person seeking registration to furnish the particulars required for the calculation of the duty payable.

In other words, as the law stands} two courses are open when a document is sought to be registered on an under-valuation. First of all, if the Registrar, either from his own informa- tion or otherwise, suspects that the valuation given is an under-valuation with intent to cheat : the-Government of the legitimate duty, he can ask for particulars from the party and if satisﬁed its under-valuation, can refuse to register the document unless proper duty was paid. Secondly, in cases where the document gets registered and the information is subsequently received that the valuation shown is an under-valuation and that the legitimate stamp duty has been intentionally evaded to defraud the State, it will be open to the Registrar to move for a prosecution under section 27, read with section 64, Stamp Act."

13.9. The question that arises is whether it is necessary to introduce any amendment in the Change not lawto empower the registering officer to hold a formal inquiry on the lines on which some '°°°"""°"d°'l- States have done} On the one hand, it can be argued that the scope for evasion of stamp duty should be checked by giving such a power. On the other hand, it should he remembered that such an inquiry will prolong the proceedings for registration, and, while, in some cases, there may be fruitful result, there might be many cases where the inquiry may result in nothing useful.

Having regard to the fact that there may be complications resulting from a provision for elaborate inquiries on the lines of the Oﬁssa amendment, we are not inclined to suggest such amendment of the Stamp Act. -

13.10. We may note that in our Questionnaire' a question was included on the subject. smion 2-,__ l ' The question was put in these terms--- Fat-'13 and cir- cumstances "The question has been raised whether the law should be amended to empower the register- catﬁﬁy ing oiﬁcer to hold an inquiry "on the question whether the consideration stated in the instru-- gzﬂgtlruﬁéﬁl in men: was the true value? Have you any suggestion in this regard?"

The replies reveal a sharp difference of view. The important replies may be thus summarised.

1' a] One State Government' was of the view that the registering officer should he so crnpowered. and that the stamp duty should' he charged not on the considera- tion but on the value of the property. One High Court" sluggested that an inquiry of the nature contemplated may be authorised.

(b) Some of the replies did not go so far. For example, one High Court Judge' was of the view that the decision of the registering officer in the proposed inquiry should not he ﬁnal.

One State Government" was opposed to giving any power to the registering oﬂicer _to.hold an inquiry. That Government would merely like section 27 to be amended to incorporate "in- cluding, where rslevant. the market vaiue of the subjevctmatter-'~'.' ' 'ﬁne Union Territory Administration" suggested that in section 27, the words "as set forth in the instrument" should be deleted. Duty should he made chargeable on the market value, and

1. See In- re- Vt-trftarsworni, A.l.R. 1953 Mad. at P. 942. 1 On this point see Mnhabroma', AIR. 1960 Pat. 470 and Sirnram, A.I.R. 1960 Fat. 210.

3. Porn 13.3., Supra.

4. Q38.

5. 5.1%. 88.

I5. S.No. 108.

7. S.No. 90.

8. 5.140. 122.

9. 5.1%. 100.

28. 116 not on the value set forth in the instrument. For determining the value of the property, however, it would prefer rules to he made.

One Administrationl would limit the powers of the registering oflicer to hold an inquiry regarding the consideration, but it suggested that the property should be subject to valuation by persons to be authorised by Government.

(c) Two District Judges?-3 were opposed to giving the Registrar the power. They were of the view that if necessary the Registrar should report to the Collector if he feels that the true valuation has not been stated. They expressed an apprehension that an inquiry by the Registrar would give chance to unhealthy practices and would delay the transaction and Would, therefore, be undesirable. Registration should be made immediately, an inquiry may follow in due course where necessary.

One State Government' was opposed to any inquiry by the Registrar. ' Two Bar Councils"-' were strongly opposed to the suggested change, and so also is one Incorporated Law Society.' The Incorporated Law Society stated that a procedure of the nature contemplated in the question would complicate, and thereby delay, the registration of the docu~ tncnt. One of the Bar Councils' pointed out that if under-valuation is discovered which alfects ..

the amount of stamp, section 64 can always be invoked. However, it has suggested that a section such as section 47A of the Andhra Pradesh Stamp Act could be incorporated.

We may state that we ﬁnd considerable weight in some of the objections put forth"

and are not inclined to recommend any aniendment.

13.11. So much as regards section 27. According to section 28(1), where. a property has been contracted to be sold or purchased for one consideration {i.e. a consideration for the whole of the transaction), and is conveyed to the purchaser in separate parts by different instrua rncnts, then the consideration for each part as decided by the parties has to be set forth in the instruments concerned respectively, and each of the said deeds is chargeable with ad valorem duty in respect. of the distinct considerations mentioned therein.' For example, A contracts to sell to B his property consisting of a house and certain lands adjoining to the house for Rs. 10,000 and, in terms of the contract, transfers it by two scpa- rate sale deeds in respect of the house and lands for Rs. 7,000 and Rs. 3,000 respectively. A is lawfully permitted to convey his property by two distinct deeds, provided the stamp duty is paid on the deeds separately in proportion to the considerations which are distinctly set forth.

In a sense, this is a qualiﬁcation to the general rule in section 4 that, where several instru- ments are employed for carrying on a transaction. than only the principal is chargeable.

13.12. 'Further, according to section 28(2), where property contracted to be purchased for one consideration by two or more persons jointly, or by any person for himself and othﬁrsi, , or wholly for others, is conveyed in parts by separate instruments to the persons by, mﬁfor, the same was purchased, then the conveyance of each part of the property is chargcllﬁe vaforgm duty in respect of the distinct part of the ocnsideration to be set forth in each in respect of the portion of property conveyed. This also seems to constitute a quslﬁicatison to.

the general rule in section 4.

1. S.Nt.'r. 119.

2-3. S.No. 90.

4. SING. 66.

546. S.No. 74. 5.No. 61.

1. S.No. 69.

S. S. No. 61.

9. Section 28(1) 117 13.13. Then also, under sub-section (3) of section as, where a person, having contracted for the purchase of any property but not having obtained a conveyance thereof, contracts to sell the same to any other person, and the property is, in consequence, conveyed to the sub-

purchaser (by the original owner), then the conveyance has to be charged with an ad valorem duty in respect of the consideration which the middleman has received from the §ub--puIchaSe=r In a Bombay easel under this snb--section, it was held that a purchaser from an ofﬁcial assignee in insolvency, who has not taken an actual conveyance, can also insist that the oﬁicial assignec should execute the conveyance in favour of his sub--purchascr. There is no reason why the pur-

chaser from the oiﬁcial assignee should be deprived of the beneﬁt of section 28(3) of the Stamp -

Act.

13.14. Then, under section 23(4), where an intermediary contracts to sell property or any part of it to any other person or persons, and the property is, in consequence, conveyed by the origtlal owner to the ultimate purchaser or purchasers, by means of different instruments, then each of the said deeds of conveyance will be chargeable with ad valorem duty on the basis of the consideration received by the intermediary inlrespect of the particular part of the property conveyed. The amount or value of the original consideration. as agreed between the original owner and-the intermediary, would be relevant only in respect of the conveyance of the residue, if any, in favour of the intermediary as a purchaser ; and such deed would be chargeable with ad valorem duty on the basis of the excess, if any, of the original consideration over the aggregate of the considerations paid by the said sub-purchasers. But the duty on such last mentioned con- veyance shall in no case be less than one rupee.

13.15. Finally, under subsection (5), if a suh--purcl1ascr takes an actual conveyance of the interest of tbe'intern1ediary. and the conveyance has been duly stamped with ad-valor-em duty in respect of the consideration paid by the sub-purchaser, then any conveyance in his favour of the same property will be chargeable with a duty on the basis of the consideration' obtained by the original seller. Where the duty payable on this last mentioned conveyance exceeds ﬁve rupees, then the maximum duty chargeable thereon will be only ﬁve rupees.

13.16. There is no conflict of decisions with regard to the section. The language may appear to be involved. But the section bears very little practical importance. and may be left as it is.

-'1. Rahimrnlla Lowjt' Damon' v. Oﬁicfal Assignee. A.I.R. 1935 Born. 340 (Beaumont C.J. and Rangnckar 2-I Mol'I..aw]'7?--16 -

APPENDIX STATE AMENDMENTS TO SECTION 27 In the U.P.,1 sub--section {2} has been added in section 27, the original section being num- bered as sub-section (1). 'l he new sub-section is as follows :--

"[2] In the case of instruments relating to immovable property chargeable wih an ad vaiorem duty on the value of the property, and not on the value set forth, the instruments shall fully and truly set forth the annual land revenue in the case of revenue-paying land, the annual rental or gross assets, if any, in the case of other immovable property, the local rates, munici- pal or other taxes, if any, to which such property may be subject, and any other particulars which may be prescribed by rules made under this Act"?

The Orissa amendment has been already referred to.3 Then, there is a Madras amendment which adds market value in section 27, and substitutes that test in article 33. ' ' ' The validity of the Madras amendment was challenged before the Madras High Court, » under articles 14 and l9(l)(f] of the Constitution. on the ground that this becanie a tax on pro- perty} The challenge failed.

The Act at issue was the Indian Stamp (Madras Amendment) Act, 1967, sections 8 and 10, which required the mention of the "market value" in an instrument and provided for its determination where IL is suspected to be understood. The attack was based on the ground that the duty under the amendment would fall not on the instrument, but on the market value and market value was uncertain. It would, therefore, be unreasonable. ' The High Court, however, held that the stamp duty even under the amended Act, was a duty on an "instrument" as deﬁned in the' Stamp Act. The charge was on the instrument, and not on the amount or consideration indicated in the document, which was but a measure of, or the basis for the computation of the extent of, liability to stamp duty and not on the market value any more than on the consideration mentioned therein. The Court held that."

" ....... ..the object of the amending Act being to avoid large--scale evasion of stamp duty, ' it is not meant to be applied in a matter of fact fashion and in a haphazard Way. Market value itself, as we already mentioned, is a changing factor and will depend on various circumstances and matters relevant to the consideration. No exactitude. is, in the nature of things, possible. In working the Act, great caution should be taken in order that it may not work as an engine of oppression. Having regard to the object of the Act, we are inclined to think that normally the consideration stated as the market value in a given instrument brought for registration should be taken to be correct unless circumstances exist which suggest fraudulent evasion. Even in such a case, we trust that disputes will not be raised in petty sums. Unless the ditference is consider-

able or sizable and it appears patent thatlthc amount mentioned in the document is a gross' under-valuc no disputation as to 'value is expected to be started."

The Court held that the amendment had not shifted the chargeable event from an instru- ment to market value and the duty after the amending Act was still on the instrument, and that the amending Act was within the competence of the State Legislature. "

U.P. Act. 18 of 1938.

See also Rujasthan Act 16 of 1966.

P 13 . 3 S .

?'.EirIsaS:ate oj'!"gi.?\I'. v. C}irznr.fra.re)'r}n:lr'a'm, (1973) 2. M.L.J'. 89 (D.B.]I (M.L..l. issue 26th July, 1973). The State of T.N. v. Chandraseklinmm. (1913) 2 M.L.J. 89 at 91 , 92.

118

weave CHAPTER 14 LIABILITY AS REGARES STAI-NIP DUTY :

SECTIONS 29-30 AND SECITDN 30A (NEW) 14.1. We now come to an important question--who is liable to pay the duty '2' The matter is Inﬂodudmpi dealt with in the Act very indirectly or in a fragmentary manner. We shall ﬁrst dispose of such provisions as now exist, and then discuss the need for adding to them.

1-4.1A. Section 29 lays down that the onus of bearing the expenses of providing the proper Section 29-11:-

stamp in the matter of particular instruments will, in the absence of an agreement to the contrary, "'°"'-'°'°"-f"-

-lie on the particular party or parties as speciﬁed therein.

The parties in-ter Se may, of course, enter into an agreement to the effect that the expenses of stamp duty will be borne by a particular party. Thus, where a deed contemplated that the defendant should bear the costs incidental to the preparation of the deed of trust, the plaintiffs wereheld to be entitled to claim the stamp duty paid by thernl. But disputes regarding payment of stamp duty on deeds of transfer which were not an essential part of the contract, cannot affect the completed agreement already arrived at3_ 14.2. Section 29 is applicable only where the document is not produced before the court. Section is not Once the document has been produced before the court and tendered in evidence, the right of :£' recovery of duty is only by virtue'°' of section 44, and not hinder section 29. In order to entitle the-plaintiff to recover under that section (section 44), the amount of the duty must have been incliiﬁd in the costs at the time of passing the decree; otherwise, he has no right to institute any proceedings in regard - thereto'.

fit-".3. One point concerning instruments of partition may be noted. Section 29t_'g) provides Instrrimenta of that in "the absence of any agreement to the contrary. the expense of providing the proper stamp pmm°"' is to be borne by the parties thereto. in proportion to their respective shares in the property com- prieﬂgtlnrein, or, when the partition is made in execution -of an order passed by a Revenue autho- rity, -drﬂivil Court or arbitrator, then in such proportion as:-such: authority cdllrt, or arbitrators directs. In the old Act also, section 29 (e) declared that the expenses of providing proper stamp, (in of" _an instrument of partition] would be borne by the parties thereto in proportion to their res- per:_i'.iye'_shares in the property comprised in the instrument or partition. By the expression "parties thereto", used in the section, must be understood not merely the party or parties applying for parti- tion, but the whole co-share:-s who must necessarity be parties in the partition proceedings and eqilllyslxar the propel stamp duty; because the elfect of partition proceedings is that the-property thejtbwloses its identity as "a previously undivided property, and there is nothing unreasonable in any instrument of partition chargeable with stamp duty pertaining to the value of the wholeueien though the division is limited. This was the decision in an Allahabad case".

\ . . . .. .

_ - I,1r4._4-I. In.the same case, Pearson I. observed.' that in his opinion, the entire property was . matter of partition, and the stamp duty should be calculatedpupon its value and not on the value of the portion assigned to the appligantifor partition: The portion assigned to the npplieant could only be separated and allotted to him in severally by a process which dealt with the entire pmperry and separated and 'allotted the remainder of it to another party.

1. Dobaan and Barlow Ltd. v. Berrga! Spinning and Weaving Ca., (189?) I.L.R. 21 Bom. 125. 135-

2. Jdinrain Ram Ltmdia V. Surajmuﬂ Sc-garmufl, A.I.R. 1949 RC. 211, 215, 216 -

3. Pmakala Run V. Permganda Numaraswarnf. A.I.R. 1937 Mad 7'63, 7'64.

4. Pannkala Ra v. Pemrgonda Kwmrrr wan-u', AIR. 1937 Mad. 763.

5. Reﬁerence by Board of Revenue (1880) I.I..R. 2 All. 654, 664, 6545 (per Sturart. C-1) 119 Agreement by Government Section 30--0b_li-

utlon to give racdpt in certain cases.

PIrIal- iliosrisions Dbligation Con.

ﬁned tomovablc

-- PYOQH1?

from European' duty--GIf0ct of.

120

The opinion, he further said, appeared to be supported by the terms of clause (e) of section 29- uow section 29{g)--which provided that the stamp duty shall be payable, in the case of an instrument of partition, not by the applicant for partition but by the parties thereto, and the other co-sharers in the entire undivided property must be parties to the partition of it equally with "the applicant for pa1'tition,--in proportion to their respective shares in the property comprised therein, and it cannot be denied that the partition comprises the entire undivided property.'-9 14.5. The position regarding cases where the Government agrees to pay the duty and the eﬁect of that agreement on section 3, has been already considered."

The above resume does not show any need for change in section 29. As regards instruments not mentioned in section 29, agreement usually governs the liability to bear expenses of stamps. In the absence of material regarding commercial usage, we recommend no change in the section. - -

14.6. A very special case of liability to pay duty is deait with in the next section----section'

30. Under that section, any person receiving any money exceeding twenty rupees in'am-aunt, or any bill of exchange, cheque or promissory note for an amount exceeding twenty rupees. or receiving in satisfaction or part satisfaction of a debt any movable property exceeding twenty rupees in value, shall, on demand by the person paying or delivering such money, bill, cheque note or porperty, give a duly stamped receipt for the same.

Under the same section, any person receiving or taking credit for any premium or conside-

ration for any renewal of any contract of ﬁre-insurance, shall, within one month after receiving or .

taking credit for such premium or consideration, give a duly strnped receipt for the same.

14.7. The penal provisions relevant to section 30 may be noted. Under section 65, if the person concerned refuses or neglects to give the receipt when a demand has _ been made, as provided by section 30, he is punishable with ﬁne which may extend to one hundred rbpeesﬂ But the obligation to give a receipt arises under section 30 only when a demand is made.

Under section 62, whether a demand has been made or not, if a receipt has been givengit must be a duly stamped one". An unstamped receipt renders the giver punishable with a ﬁne which may extend to ﬁve hundred rupees.

The oﬁence under section 65 consists in not giving a properly stamped receipt The oﬁenee under section 62(1)(b} consists ir1- passing a receipt unstamped, whether one is the payer or not'.

If a person required under section 30 to give a duly stamped receipt gives an receipt, (or a receipt not duly stamped), then he would be guilty of both the offences. i.e. under section 65 and under section 62.7 ' 14.8. It should be noted that under section 30, it is only when a movable property exceeding' Rs. 201- in value has been received in satisiaction of a debt (and a demand for receipt has lieu; made), that the question of granting a duly stamped receipt arises. The section has not lwhere an immovable-property exceeding Rs. 20,i'- in value is madeiover a debtordeo a creditor, in satisfaction of a pre-existing liability'. ' H p 14.9. Several kinds of receipts have, by the exemption in the Schedule or by' under section 9, been exempted from the obligation. to stamp. A question which would mice is whether, even in such cases, the obligation to give a receipt imposed by section 30iB|1ﬂ'iV¢8{}i\ ' _ Reﬁererrre by Board ofRevenue. r1ssmr.L.n.- 2 All 654,664, 557 (per Pearson J.) _ Also see Reference under Stamp Act, Section 46 (I892) T.L.R. 15 Med. 164 (F.B.}. See discussion as to section 3.

. Section 65(a), Stamp Act.

. Section I52(l),_Starnp Act.

Girdkardas v. Emp., AIR. 1933 Born. 462.

. (al Girdizardas v. Emperor A. I. R. (19-33L B0ﬂ1- 457-« (la) Qr.re'e'n--Emp.I"'PS.t' v. Kiierrur Malian-, (1900). I.L.l1. 27 Cal. 324

8. Emperor v. Sukhdas, A.I.R. 1932 Nag. 172.

'--l_d'\'~.rt-lb-t_.0Ntv--I 121 similar question can arise where a receipt has been given. but is unstainped because the situation is one- where the exemption applies.

In an Allahabad case', the document at issue was a receipt signed by the payee in duplicate, on the Post Oﬁce form, for money remitted by money order. No stamp was put on it, as the necessity for stamp was obviated by a notiﬁcation. The person who remitted the money thereafter demanded from the payee a duly stamped receipt which should mention that the payment was re- ceived on account of a certain speciﬁed debt. The payee refused to do so, and was presecuted and convicted under section 65. The High Court set aside the conviction. and held that since a proper receipt had been given to the Post Ofﬁce which was an agent of the rcmitter, the remitter could not demand a second receipt. Further, section 30 did not require the person receiving to specify the particular purpose for which money was paid. -- -

14.10. To avoid the recurrence of such eontroversies,----'--_which could arise from the present wide provision----it is desirable that the position should be clariﬁed. The object of the law of stamps is to ensure that duty is paid where payable. The obligation requiring receipt is intended merely for such cases. We, therefore, recommend the addition of the following exception to section 30. a -

"Exceptr'on.--Nor}n'ng in this secfioiz shall apply to cases---- i (a) where the receipt, if given, would no! require stamp, or

(b) where a receipt has been given but doernor require slump".

' 14.10A. We also recommend that the amount should be increased? to one hundred rupees, for reasons which we shall indicate under Article 53."

14.11. At this stage, it becomes necessary to deal with one matter which is not adequately dealt with in the Act. The question whether a person from -whose possession a document comes before a public otIicer--section 33----and who does not pay the duty and penalty--section 35------can be compulsorily ordered to pay it by the Collector--section 40(1)(b) and section 4B--has led to a difference of views as to the scope and ambit of sections 40 and 48. We shall revert to the matter when we consider section 48, but a few important points may be referred to. > Section 48 provides that "all duties, penalties and other sums reqluired to be paid under this Chapter may be recovered by the Collector by distress and sale of the movable property of the "person from whom the same are due", or by anyother process for the time being in force for the recovery of the arrears of land-revenue.

As to the "person from whom the duty is due" within the meaning of section 48, the sec- tion itself is silent, and the answer has to be sought from other provisions.

Unfortunately, the other provisions are also sketchy. As a result, there is considerable ohrscurity in this respect, and the obscurity arises prignarily from the fact that, excepting in _a very limited number of cases? the Act does not give any 'specific and comprehensive guidance as to the person who is to be regarded as the one liable to pay stamp duty.

14.12. The very limited number of cases speciﬁcally dealt with in this regard are contained "in---[i) section 19, which relates to bills and notes drawn out of India, (ii) section 29, which, in the case of certain instruments, provides as to who shall bear the burden of proper stamp, and (iii) section 30, dealing with receipts." '

1. -.r. Bah-n..i:und, (1901) I.L.R. 34 /All. 192.

2. See discussion as to Article 53, infra.

3. Sections 19. 29 and 30.

Reccmvnendation to amend section

30. Recommendation to .1ncrea.se the al1'IOl'|.'IIL Section (New) .

30A.

Recommendation.

Section 30 A. (New) 122 Section 29 is a somewhat general provision--though not exhaustive. And even that section does not very clearly indicate whether it is «to operate as between the parties, or whether it is to operate also between the State on the one hand, and the private party on the other hand, so as to be available for interpreting section 48.

In VlBW of the obscurity and uncertainty as to the inter-relationship of section 29 and similar sections on -the one hand, and section 48 on the other hand, we are of the view that the matter should be put beyond doubt, as it istneither in the interests of the State nor in the interests of the citizen that liability to bear the tax should be left in doubt.

14.13. Our recommendation, in concrete terms} is that the provisions of section 48 should be enforccab1e--

ta) against persons who are liable by virtue of section 19, agreement or section 29 or section 30, as the case may be; and where none of the above-mentioned sections applies, then against the person executing the document in question.

(b) It may be mentioned that most replies to our Questionﬂ have agreed with the need for an amendment on the above lines. ' 14.14. In the light of the above discussion, we recornntend the insertion of a new section on the following lines :-- -

"BOA. For the purposes of this Act, the person from whom duty on an instrument is due 'is---

(a) the person liable under sections 19, 29 or 30, or 'under an agreement, or

(b) where clause (a) does not apply, the cxccutant of the instrument".

.._?._~ ----

1. See discussion relating to section 48, infra. .

2. Q. 56. (concerning sections 4!) and 48).

CHAPTER 15 ADJUDICATION AS TO STAMPS--SECTIONS 31-32 15.1. The Act recognises that it is not always' easy for the citizen to determine the precise [mmdum.m.3,_ category in which a particular instrument falls. To enable the citizen to seek oﬂicial advice in the matter, it has considered it proper to make suitable provisions.

_15.2. The principal provision-~--sc-rction 31--enables a_ person to seek the determination of sgmjou 31, the Collector as to the proper stamp with which an instrument is chargeable. We need notgo into its details, since there is no serious controversy on the section.

There was, for some time, some uncertainty as to whether the Collector can impound an instnmtent under section 33 when it is produced before him under section 31. The Supreme Court1 has now held, that when an executed instrument is submitted to the Collector under section 31 for adjudication as to the proper duty payable on the instrument, the Collector be- contles "fnnctus oﬁicio" as soon as he determines the duty payable on the instrument, and has no authority to impound the instrument under section 33 if the duty so detennined is not paid. . -

After careful consideration, we recommend that it should be accepted. The scheme of the section, including its provision for taking evidence, makes it desirable that the party present- ing be heard. It is only fair that the party presenting be heard. so that the Collector may be able to decide with a full knowledge of the facts. The principal object of the law ought to be to encourage correct orders. Whether or not_there is a lie, this would appear" to be a wise CGBISB. -

, 15.3. In a Madras Case} it was held that the Collector's determination (under section 31) ps_,'to__ stamp duty payable on an instrument 'would be ﬁnal and conclusive only in cases where Collector followed up his order under section 31 by It relative endorsement on the instru- .1rieirt'itself under section 32 to the eliect that proper duty had been fully paid, or in cases where he had expressed the opinion that no duty was payable and made an endorsement to that effect ' on the instrument itself. Where, however, the Collector: had not certiﬁed by endorsement on "thelinttmnent either in terms of section 32(1) or in terms of section 32(2), his adjudication as to stamp duty on the instrument brought before him under section 31 could not be a bar to an examination by the other Authorities competent under the Act of the question of proper stamp duty.

515.4. Under section 32, the Collector may make any endorsement of stamp duty on an instrument brought before him under section 31. The general view is that an endorsement made ' __p;t__nn instrument by the Collector under section 32 is ﬁpal, and cannot be questioned by a "oo1irt,----even if it "was erroneous or was made out of time} 15.5. We have received a suggestion5 that the Collector should specify the article of the S I. under which he calculates the duty, it havingbeen said that this will facilitate registr_a-- ﬁbhlof the document. We accept the suggestion. Though the Collector's decision will not be ."- i iﬁdiifas 'to the nature of the instrument on the registering authority, it will be convenient 'if :i litiﬂﬁtes "What the Collector decides.

- I. ' ' 'i_J_..,3G9iyernn1¢::rofU.P.V. rm. mm. A-.l.R. 1961 so. 737; (1962) 1 s,c.R_. 9?.

2. Sugestion of Incorporated Law Society, Calcutta, accepted. -- - .

3. Chief Canrrolting Revenue AurFrtm'ry_. Board of Reiremre Madras V. Dr. K. M-mjmurrha Rm', (1916) 2 M.L.J.2T9.

- 3.1;") Mar-gayya V. Bajgopal A.l.R. 1942 Mad. 381 ; _ ' . {bl Firm Parasrum Hirji V. -Fr'rm Parorram. A.I.R. 1926 Sind 211-.

5. Suggestion of the Incorporated Law Society of Calcutta (in reply to our Questionnaire).

133

CHAPTER 16 INSTRUMENTS NOT DULY -STAMPED--IMPOUNDING BY PUBLIC OFFICERS SECTIONS 33-34 16.1. Section 33 requires persons in charge of public offices to impound unstamped docu- ments produced before them, or coming before them in the performance of public Eunctions. The object oi' the section is to prevent the parties from withdrawing instruments produced by them, when 'n In iound that stamp duty and penalty have to he paid on the instruments.

Section 33. -

The section reads--

Examination and "33. 1' 1) livery person haying by law or consent of parties authority to receive evi-

Imppunrling dence, and every person in charge of a public office, except an oﬁicer of police, °r """'"'"°"t5' before whom any instrument, chargeable, in his opinion, with duty, is pro'-.dl10Bd or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly starnped, impound the same.

(2) For that purpose every such person shall examine every instrument so charge- able and so produced or coming before him, in order to ascertain whether it is stamped with a stamp of the value and description required by the law hi force in India when such instrument was executed or that executed :

Provided that-

Ifa) nothing herein contained shall be deemed to require any Magistrate or Judge of Criminal Court to examine or impound, if he does not think ﬁt so to do, buy instrument coming hefore him in the eourseof any proceeding other than it pro4 ceeding under Chapter XII or Chapter XXXVI of the Code of dure, 1898; _

(b)inthecaseofaJut1geofaHighCcnJ1t,thedutyofez;aminingandinpoun&g any instrument under this section may be delegated to such oﬂicer as the Court appoints in this behalf. -

(3) For the purposes of this section, in cases of doubt_.--

(a) the State Government may determine what ofﬁoes shall be deemed to he paws:

oflices ; and '

(b) the State Government may determine who shall be deemed to he person in charge of public oﬂices. - "

ﬁmﬁ: 16.2. Several questions have arisen on thp section. The first question is this : Isjt mm: slnuid be that the document of transfer which can he impounded under this section is valid in raw '_!_ """' *" '"'' has been :1 diﬁerence of opinion between the Madras rngii coins and the Andhra _ Court,' in regard to the question whether the document should be valid in law. A 15:13, "of" the Madras High Court' was dealing with 'an unattested and unregistered document "tilted 22-3-1948, one of the clauses ofuwhich was construed as creating a mortgage over the=borre}iwar's ﬂoating assets etc.

1. Crampbarr Errgfneering Ca. v. c.c. Rev Authority. A.I_R. 1953 Med. 154. 766, para 21 c.r., ' Rajgopalan and Venkataraman Aiycr JJJ. '

2. Hazr-amt' Chngaram V. Kam£r:bniA.L.R. I968 A.P. 113 [RE] (5 Judges), izsﬁ-a.

3. Crommu Engirteering Ca. V CC'. Rev. Atn'horiry.'A.I.R. 1953 Mad. 764,766, para 11 (F.'B.).

124' 125 In deciding the question whether this document was a mortgage deed, the full Bench held that the transfer provided in section 2-." Hi of the Stamp Act is a 'transfer' which is vahdgin law, and there can he no transfer by way mortgage unless the requirements of section 59 of the Transfer of Property Act are satisﬁed. Where the speciﬁed immovable property is worth Rs. 10!) or upwards, a document purporting to be a mortgage deed of such property requires attestation and registration. Where it is neither attested nor registered, it is not liable to stamp duty. The Court pointed out that the document was neither attested nor registered. and the impounding authority could not have enforced registration, and that, in any case, it could not cure the failure to attest, which by itself was enough to invalidate the document as an instrument of mortgage. It further held, that the document might be an "instrument", but it was not an hstnnnent chargeable with duty as a "mortgagc--deed" as deﬁned in section EH7) of the Stamp Act. The Very diﬂcrence hctwe'eI1 the deﬁnition of "iIJstrun1ent" in section 2[ 14) and the deﬁnition of "mortgage deed" in section 2( 17) showed that the transfer must be valid 'in law. To nuke a document liable to stamp duty as a mortgage, iris not enough if the document purports to eject a transfer. .It must "transfer".

16.3. The Andhra Pradesh High Court.' has, however, disagreed with the View of the Madras High Court, and held that there is no warrant for the importation of the requirements of either the Transfer of Property Act or the Registration Act, in construing documents or instruments under the Stamp Act, as the Stamp Act itself speciﬁcally deﬁnes the terms used therein. Further, to hold that an instrument must be ayalid one under law before it is liable to stamp duty, will be wﬁore the requirements of the deﬁnition and to make .them otiose. In that case, the docu- nmrt was an unregistered mortgage deed. The High Court held that it was chargeable to duty." If the document was to require registration for its legal validity before it can be considered whether it is liable to stamp duty or not, then the Registrar cannot impound it before registration though in is #l:Ioriaed to impound it under section 33 read with section 35 of the Stamp Act. If an Iltlﬂlmcut is not duly stamped, then it cannot be registered or "received in evidence. The dlﬂtklns in the Act and the terms of every section of the Act indicate clearly that an instrument nail not be valid in law or meet the requirements of law as a valid document, before it is clilrylhle to stamp duty under the Act.

16.4. In our view, it is desirable to settle this conflict. The Andhra view is, in our opinion,' more persuasive. and should be adopted. There is no reason why liability _to_ stamp d1!ty'shuuld depend on the validity of a document. That is: an extraneous and irrelevant consi- deration. A suitable Explanation incorporating the Andhra Pradesh view should be inserted, and We recommend accordingly.

We may mention that the suggested amendment has been favoured by most of the replies to run' Questionnaire.'-* .

Rscomrnondltion .-_ o 1_6.5. There is another matter pertaining to section 33, which has proved to he" cont_c9versial_. mi} pow'. I; In a Full Bench decision of the Madhya Pradesh High Court,' the majority were of the opinion rcaﬂleril 05":

' ' ' ' ID ililllllﬁd after the registration of a document, the registering authority has no power to hold an enquiry regarding the value of the property covered by the,t;l«eed and to call upon the egecutapt to pay the deﬁcit stamp duty. The minority, however, took a contrary view. According to the mjpﬁty, the power to impound an instrument l.__l'._ld€I' section 33(1) can he e_xBl'C_i$${I only when the instrument is produced before the register'in,g_aut};I:-_ritit_=/5 in the performance of their

-that is, only so long as the' function is not performed or completed and not a,§terwa1_ﬁs. as the registering ofﬁcer registers a document préented to him for registration, tho. in the performance of which the document was produced before him is over; 'he becomes 'functus oﬂicio'. and has no power under section 33 to impound the instrument.

'1. H'az.-amt' Gangaramt V. Kamiiczhal A.l.R. Isss .-s..r>. 213 o=.'a.lT('S' Judges".

2. Question 40. .

3. Iamai Cimmi V. State of M.P., A.I.l{. 1966 MP. 20 (F.'B.'1 '22, 23, 'Para 3, 11, 1'1, (PB) 24 M of Law,t'.".'--l 7' document Pool" ' unckr Section 33' mi) | ['33 m question may be eonsideredpwhether this exception should not be extended also to other oﬁoers ' Exception re-

sardine oﬂicers of police whe-

'thar to be extended; '

(iv) Meaning of "production".

1245

16.6. This was the majority view. But Golwalker J. dissented from the majority opinion. He observed' that the expression 'functus oiiicio' means having llulliiled the function, having discharged the duty, having discharged the office, or acconiplished the purpose and, therefore, of no further force or authority. The safe function of the r€giSi£'?f!l_£,' auiimrity is to receive an instrument when duly presented as required by the Registration Act, and to proceed to register the same in the manner provided therein. It" is true that after presentation of the instrument before the registering authority, it can examine the same and see whether it is duly stamped or not, and, if it is not dulystamped, defer its registration till it is impounded and either validated in that respect or certiﬁed as duly stamped by the authority concerned. This examination of the instrument, "however, would not have been a part of its sfaiumry fiincrions under the Regis- tration Act.

bars to registration provided in the Registration Act. be validly registered under the Registration Act.

affected by the inﬁrmity in the matter of stamp duty, or by any other inﬁrmity not ousting the jurisdiction of the registering authority.

matter of stamp duty on any instrument has no hearing one way or the other on the function of the registering authority, it cannot be said that the registering authority, becomes -'fttncrus oﬁﬁcio' as soon as it registers the instrument. It is true that under rule 4 of the Rules-framed under section 69 of the Registration Act, the registering authority shall examine the instrument with a view to seeing if it is-duly stamped o-r not, bu: the very fact that the Act itself lays down no such provision, and does not debar the registering authority from registering the instrument not duly stamped, rather supports the view that it is not by way of any function'- or part of function which the registering authority as sue}: performs under the Registration Act. Moreover, there was no question of any authority being 'functns oﬁcio'-.

An instrument not 'duly stamped can 16.7; It is, with due respect to the minority view in the Madhya Pradesh case, suggested that this view is wrong. If it is not part of the registering oﬁicers' legal duty to see that the document is duly stamped, then it would not be proper for him to- impound the document in any case. The minority view is not, therefore, logical. The point is that once the registering. oiﬁcer has registered the instrument. his function {of registration) is over. and that is all that the majority view emphasises. Practical considerations, also support the majority view. We think that the section should be amended to clarify the position. ' We may mention that the suggested amendment has been favoured by most of the replies to our Questionnaire.' 16.8. Another point concerns the exception in subsection (1) for officers of police. The connected with the investigation' of oﬁences. Such extension appears to be desirable. because"

lnnder the present provision. impounding of the document is obligatory on the persons "mentioned in the section, and the section leaves no option in this respect? The result is that a law enforce- ment ofﬁcer--e.g., :1 Customs Inspector----'--is_ also burdened with this duty, with the conseqilencc that his ordinary work of investigation might suffer. There is no reason why such ofEo_eIs not be treated on the same footing as police oliieers, in this context. We recommend '_-such", amendment, which is favoured by. the replies also.' ' ' i 16.9. The word "produced" .in the section has also come up for consideration. It has emphasised that it is not sufficient for the purposes of the section that the document should so=n1e--.. how be produced' or come before a pubiic oﬁicer. In order that this section may it ip essential that it should be produced ' or come before the public officer the perfornumee of his functions.' and a mere production in compliance with an illegal demand' will

1. "Kama! Chand v. 5'ma'e of M.P., 'A.I.l_?.. 1966 MP. 20 to 23.

2. Question 41. 3

3. Pyareia! v. Sukanrlram, A.I.R. 1926 Allahabad 478.

4. Question, 49. ' Moreover, the insufficiency of stamp duty paid on an instrument is not one of the- The registration of the instrument is not_ Thus, since the invalidity or unsuiiiciency in the-7 reenacted in the Code of 1914.

12'?

not confer authority on him to take action under the section.' A registrar requiring the production of a document on the ground that it is not duly stamped, after it has been registered and delivered to the party concerned, cannot be said to be acting "in the perforniance of his functions." A Full Bench of the Lahore High Court" has held that a document ordered to be returned because it is not proved, can no longer be considered to be part of the judicial record, and cannot, therel'ore, properly come before the court again in the performance of iLS functions, and cannot be impounded.

16.10 The word 'produced' has a technical meaning, and means either produced in response to a summons, or produced voluntarily for some judicial purpose." A document which falls acci- dentally or incidentally into a judge's hand, cannot be said to be "produced". In a Madras case,' it was reiterated that a more handing over of a document, even if it is as a result of a summons from the coiurt, cannot be said to be 'production'. There must be [volition on the part of the person bringing it to the court. to use it for some purpose.

These points of detail, however, do not call for an amendment of the section, as the position with reference to the meaning of 'produced' is fairly clean. ' 16.11. A verbal point may now be mentioned. There is, in section 33(2), proviso (at), a reference to proceedings under Chapter 12 or Chapter 36 of the Code of Criminal Procedure, 1898.

Chapter 12 of that Code related to disputes as to immovable property, and Chapter 36 related to maintenance of wives and children. The Code of 1898 has now been repealed and It is, therefore, necessary to substitute reference to The corresponding chapters of the Code of 1974 in section 33(2), Proviso (a) "accordingly we reoommend that section 33(2), Proviso (a) should be amended so as to refer to Chapter '9 and sections 145 to 148 of the_Cc-de of 1974, which new deal with the two matters mentioned above.

16.12. There is an important question pertaining to section 33(3). Under that sub- section, the State Government has the power to determine, in caseof doubt, 1' a) what are public _olﬁces,_'and (bl who are deemed to be persons in charge" of public oﬂices. The power given to the State Government is not limited to State Government oﬂices, andiinchrdes even Central __Government offices. The question is whether this is proper.

The point will be appreciated if the history of the sub'--section is considered. As originally enacted_in 1899, section. 33(3) read as follows : ' ' '_'(3) For the purposes of this section, in cases of doubt,--_'-_ _ _ T

(a) the Govcmo.-'-General-in-Cotmcii may determine what oﬁicesshall be deemed.' to be public oﬁices; and

(v) Section 33 (2) Proviso (al-

(Refercnoes to Chapters of the Code of Cr. P.C.) {vi} Secﬁon 33(3) Power to declare Public oﬁocs. V.

(b) the local government may determine who shall be deemed tolibelpcrsonsi in charge '__ 7 ' of public oﬁices."

.'.'By the Adaptation Order of'1937_. in clause t'-a-)., the _.worlds "'the collecting_.gover_nment"

were 'substituted,' and in clause (b) nlsothe words "the collecting government" were substituted. 1! deﬁnition "of "collecting government" was inserted by the same Adaptation prd_er,___as _asect_i_o_n i2(l-2A). By the Adaptation Order of 1950, the words "the State Government" 'were substituted in place of the words "collective government" in both the clauses and the deﬁnition of "collecting governlnent" omitted. The power is now vested in the State Government in both cases. _-l.':t:'tJ M... Dos V. Emperor, A..I.R. 1932 Lah.495 (s.B.) ' C " ' ' "i C ' ' '

-- (hi Collector Alzmetfabad v. Ramﬁhan, A.l.R. l93D B0111 392 (F.B.) [cl mam' Chandv. Paramartd', AIR. 1942 Lab. 265. , ;

2. Puran Clmrmt v. Emperor, A.l'.R. 1942 Lab. 25?. -

3. Irrre Mtrrayandar .'\'a2'Im-ram, A.I.R I943 Mag. 91''.

4. S. Rangaraju v. 215. Rameshani A.I.R. 1953 Mad. 698.

' : s3--

00 powers on stamp Auditors not 128 16.13. The question to be considered is whether the power to determine what oﬁces shall be deemed to be public offices should be left to the State Government even in cases whme the public office is connected With, or under the control of, the Central Government. It would appear that in 1937 all functions of the Central Government under or in relation to section 33 were entrusted to provincial governments by the Government of lndial. of this delegation already made in 193?, it was, in 1950, considered proper to substitute "State Government" in both the clauses.

However, it "must be stated that the provision as it now stands cannot escape criticism, because, in the case of an oﬁice having an apparent connection with the Central Government, it is anomalous that the State Government should determine whether it is or it is not. a ofﬁce". If, for example, a question arises whether a person holding an election under a Gemml Act is oris not holding a public oﬂice;the question should be decided by the Content Goverjit and not by the State Government. In this connection, it may be noted that in 1920, when clause

(a) gave the power to.the Governor-General--in4Council, the question whether the oﬂice of a returning oliicer appointed for the purposes of an election to a lcgisiative body constituted under the Government of India Act arose, the rhling that it was not a public oiﬁce within 'section 33(3) was given by the Government of India} If a similar question arises today, the decision will have _ to be given by the State Government,----which is not a very satisfactory position. _Mo1'eover, conﬂicting decisions may be given by different State Governments in respect of the same oliﬁoe.

16.14 In view of what is stated above, we are of the view that the provision in clauses (a) and (b) should be revised so as to substitute the expression "appropriate govenl_'ne'ﬂt" for "State Government". The expression "appropriate government" could, for this purpose, be so deﬁned that it means the Central Government in relation to oﬁices whose expenses ni-e'paid from the Consolidated Fund of India, and the State Government in other cases.

We may mention that the suggested amendment has been favoured by most of the replies to our Questionnaire." ' 16.15. There has been a suggestion to amend the section to confer powers' on Stamp Auditors for impounding documents of local authorities. We have considered it carefully. but are unable to accept it. ' Stamp Auditors of Corporations should exercise their functions before execution. If the Stamp Autﬁtor is an oﬂicer of the Administration. and if the document is "produced", the case iscovered by section 33. After impotmding, he can then take action under section 38(2). The Corporation (if an executant), can also be prosecuted, in case there is found to be a deﬁciency and if the other conditions for penal liability are satisﬁed.

On the other hand, if the Stamp Auditor is a Corporation Ofﬁcer, then the suggestion cannot be accepted, since the Corporation is itself a party. It may also be stated that in -doubtful cases, section 31 can be resorted to.

16.16. In the light of the above discussion, we recommend that section 33 should be revised as follows :-- ' ..

"33- (1) Every person having by law or consent or parties authority to receive evidence, _I and every person in charge of a public oﬂice, except an officer of police or has empowered by law to investigate oﬁérnees, before whom any instrument-, chargeable, in his "0]&n, with duty. is produced ct comes in the petforntrance of -'his tllunetions, "shall, if ltirﬂ to him that such instrmnent is not duly 'stam1aed:ttirpound_the same, whether or not the tiisbhoshartr is valid inlnw. ' ' A . g (2) For that purpose every 'such person shall examine every instrument so and so produced or coming before him, in order to ascertain whether it is stamped ﬂth e

1. Government of India, Finance Department (Central Revenues) Notiecss-an No. 9 dated no rtavujtu. am

2. Government of India, Finance Department Notiﬁcation No. 29662 Fdated 19th November. 1910. - *-

3. Question 43.

4. Suggestion of the Delhi Administration.

Apparently, in view ' 129 stamp of the value and description required by the law in force when such instrument was executed or ﬁrst executed :

Provided that--- / (at) nothing herein contained shall be deemed to require any Magistrate or Judge of a Criminal Court to e.v.amine or impound, if he does not think fit so to do. any instrument coming before him in the course of any proceeding other than a proceeding under Chapter IX or sections 145 10 148 of the Code of Criminal Procedure, 1973; W in the case of a J utige of a High Court, the duty of examining and impounding' anyinstrumcnt under this sccfion may be delegated, to such oiﬁcer as the Court appoints inthls behalf ;

tc) itorhing herein contcirscd shall apply to any registering oﬁicer aﬁ'-E!' ?'€$'£'StFGT!'0t?-

{hi (3) For the purposes of this section, in cases of doubt, the appropriate Government may determine-

{a) what oiﬁoes shall be deemed to be public ofﬁccs ; and lb] who shall be deemed to be persons in charge of public oﬁices. Explanarion.---In this secfion, "appropriate Government" means-»--

('1) in relation to offices the expenses whereof are paid air? Fund of India, the Central Government, and

(ii) in refarion to other cufﬁces, the State Government."

of the Consolidated 16.17. Section 34 contains a special provision as to tlnstamped receipts in the following terms:

. "Where any receipt chargeable with a duty not exceeding ten naya praise is "tendered to or prfilﬁtdlbﬂ before any oﬂicer unstarnpcd in the course of the audit of any public account such iﬂdsr may in his discretion, instead of impounding the instrutncnt, require a duly stampedircccipt to 'b'e1i1iss"tituted therefor". - ' The section provides an alternative to impounding.

The statement of objects and reasons said :

"This section has been added, because under the present law (Act I of 1879) an audit oﬁcer of public accounts, before whom an unstalnped receipt is produced, must impuiind the hanrumenr, and has no power to require the substitution of a duly stamped receipt".

Tins, receipts' chargeable with duty? are governed by this section. _Tl§e section needs no change. There is hardly any cajse-law on the section.

--1.-riitsiment of Objects and Reasons to the 18?') Bill. K ' _ 2. Sﬂtﬁﬂn 2(6) section 2 £23) and article 53.

Section Introductory.

Section 35.

Proviso (at.

Exception in re-

gard to instru-

ments clnrgeablc with duty not exuding to parse, CHAPTER '1?

ACTION UPON INSTRUMENTS NOT DULY ST AMPED---SECTIONS 35 T0 3?

J'.-'.1. With reference to "Instruments not duly stamped" we have discussed one set of provisions. With section 35 begins another important group of provisions also concerned with such instruments. They regulate t}1e use of such instruments in evidence or "acting upon"

them by public Oﬁicers.

17.2. The princinpal provision is contained in section 35, prohibiting the admission in evidence of an unstamped document, as also "acting" on such document or its authentication or registration, where" the document is required by law to be stamped and is not stamped or is not sufficiently stamped. This rigid provision is subject to certain exceptions, contained in the proviso to the section.

l7.2A. The proviso has several clauses but the most important is clause (a), which reads-

*'ta) any such instrument not being an instrument chargeable with a duty not exceed- ing ten naya 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 insufliciently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when tentimes the amount of the proper duty or deﬁcient

-portion thereof exceeds ﬁve rupees, of a sum equal to s-'ten times such duty or portion." _ . - -

17.3. Thus, while the payment of penalty under the proviso relieves a document iron: the prohibition imposed by the main paragraph, the relaxation under the proviso is not applicable to certain instruments. The basic question to be considered is whether. in the case of those' instruments, there is need to continue the present rigid provision. The instrumentsin question are-

not including a receipt) ;1 {iij bill of exchange or promissory note.

1.7.4. Taking up, first, the instruments" chargeable with duty not exceedinglﬂ paise, ' possible reason for the rigid attitude adopted by the legislature in respect of these instruments could be that the duty is so negligible that; a.n infraction of the law is considc1'od'as deserving of no sympathy. While there may be some force in this reasoning, we _must.a_ls_o note that in practice the rigid provision leads to hardship. It excludesifroru_'__evidence docu1n_e'nts"ijelevam to the case, or even nauerial to the case, merely on considerations 'of revenue. The exeeutant of the document might have failed to aﬁix the stamp because of ignorance of law, t'nisocaii'trtic- tion of the relevant provision of the Stamp Act, -diiﬁculty in purchasing stamp, and so on--- all factors which do not show an intent to evade the law. Moreover, it is one thing tolevy a penalty, and another to exclude a document from evidence by a categorical provision admitting.

of no relaxation. I 17.5. It should also be pointed out that the legislature has already recognised thehardship in the case of receipts, and allowed them to be admitted in evidence,' in certain limited circums- tances, even though they were chargeablei with a duty of ten paise.

1. As to "receipts, see section 35, proviso (b).

2. Section 35, Proviso (b).

3. Article 53 {before amendment of 19?6).

130

(1) any instrument chargeable with a'duty not exceeding ten naya paise only (but _ 131 17.6. In our view, it is desirable that the exception in regard to documents chargeable with "a duty not exceeding 10 -naya paise should be removed from section 35, proviso, clause if a). We had included a speciﬁc question on the subject, and we may add that most replies to our Questionnaire favour such an amendment.' lT.'T. In fact, long before we issued our Questionnaire, several suggestions were made for reducing the stringency of section 35. It was, for example, stated in one suggestion that the "prohibition as regards instrurnents chargeable with a duty of one anna or half an anna only or a bill of exchange or a promissory' note had resulted in great hardship to people in India, who are totally unacquainted with the technicalities of the Law Merchant in England. It was stated that the stamp duty payable on other documents, which are made admissible on payment of penalty under this Act, is many times greater than the stamp duty on the promissory notes and Other documents referred to in section 35. Also, the number of documents of the former class is on a par with, if not greater than, that of pronotes. Yet, when the former class of "documents is made admissible on payment of penalty, the latter are totally prohibited from admission in evidence even on payment of any amount as penalty. The argument that it is an eﬁective check on evasion of stamp duty equally applies to the latter class ofdocuments as well. -Thus, this distinction does not appear to be fair. Whatever might be the state of cincumstances in the commercial world at the time of passing oi the Act, it can conﬁdently be said -"that, with the advent of banking faci]lties,- pronotes, as 'marina -of iaegotiarion, hare become otiose and scarce in the commercial circles while they have become the common instrument of transaction amongst ignorant. villagers. It was, therefore, suggested that proviso (a) to section 35 should be amended by deleting the words "not being an instru- ment chargeable with a duty of one anna or half an arms only, or -a bill of exchange or note." ' It was stated in another suggestion-" that the proviso (a) to section 35 should be suitably amended for admitting promissory notes in evidence on payment of the proper stamp duty and penalty, eirice experience had shown that in/several genuine cases in which_ there" wasgnot the least" intention to evade duty, the unstamped promissory notes had been "excluded. from _ evidence much to the hardship of the party.

-There was yet another suggestion to the elfect that the exception for bills and pronotcs should be deleted". A similar suggestion-" was made by a judicial ofﬁcer thatsection 35, which negotiable instruments, should be amended in such a way that a suit on an unstamped promissory note can also lie on payment of due penalty.

17.8. in view of what is stated above, we recommend that the exception regarding instru- ments--chargeable upto 10 paise should be deleted from section 35, proviso (a). ' _ 17.IlA'. We now discuss that part "I proviso (a) to section 35 which excludes promissory notes and bills of exchange.

(but not in the earlier laws relating to stamp duties). The provision seems to have been bor- rowed from the English Act. In England,' a promissory'- note "or bill of exchange cannot be sued-'upon, if unstamped. In 1961, the Stampeduty on these instruments was simpliﬁedin England,' but the above position remains unaltered. - . - . - - - .- -

17.9. English text boolrs do not give any guidance as _to why promissory--n'otes and bills of_,exchan_2_e have been selected for this harsh treatment. .One can think of a _possi_ble reason,

1. 0. 4-4.

' K. F. 3(4,],'5'l-L.C.l (regarding _Revision of Stamp -,.-Act), of Jmadhra Pradesh). . .

3. File No. F. 3(4) J5?-L.C.l( Vol. I, S.No. 37, (Law Department, Government of Orissa).

4. sub-Registrar. P.O. Sil-zandra Road, Aligarh District {File No. F. 3{4)!57-L.C. 1, vol. I, Page 22).

5. Shri H.B._ Vaishnav, Asstt. Judge, Porbandar (File No. F. 3H) [57 LC. 1., Vol. I, Page 45).

6. Section 33 (I), Stamp Act , 1891 (Er_Ig.), Which overrides, section 14(4) of the same Act.

7. See discussion relating to articles 13 and 49.

Pages No. 13-79 (Law Departm-e.n_t..Gqvt.

views on Qustionnaire Earlier l10'll!.

51.13368 -

Reoormnondnﬁpn as is} mﬂrumantc 10 p.

,.n ..

This had a counterpart in section 34 of the Stamp Act, 187.9 nrunmsoor and bills exchange.

pmvnu |'$l'd1|5U clut-

"MO 35a.nd notes of 132 namely, that these instruments are negotiable and pass quickly from hand to hand, thereby facilitating a successive-1},' large number of transactions. Assuming that this argument is sound. should the law go to the extent of ru.-'ally barring the reception in evidence of the instruments ? After all, the law relating to stamp duties is concerned with revenue. The object of section 35 is to ensure eﬁective realisation of the duty. The sanction need not be made drastic than is necessary. The object of realising the duty can be equally effectively "achieved by levying a penalty. The hardship caused to the citizen by non-reception of the instrument is entirely unnecessary.

Recommendation. 17.10. There is sufficient justification for modifying this part of section 35 also. There have been suggestions also to iiiodify the regour of section 35, in relation to hills and promotes, and the matter requires to be considered.

17.11. Even if promotes and hills can be justiﬁably picked out for a specially rigid provision, one should also weigh the inconvenience caused to small traders as well-as to nationalised hanks who advance money against pro-notes.

Another aspect of the matter", which may be relevant in this connection, is that total exclu- sion from evidence encourages dishonest defences. With the main security for the debt rendered useless, the debtor is induced to deny the debt itself. .

17.12. We may add that most replies' to our Questionnaire favour a change' on the lines Views expressed.

discussed above.

. 1113. A few reported cases illustrating the practical" working of this part at the nation E:.':'minJ:ywnu::, show, that (i) the present provision has been criticised as causing undue hardship, and (ii) to l.|l'$'_Sc'tl0ﬂ 35 avoid undue hardship, courts are sometimes driven to construing the docuiiient as not falling i within the category of "pronote", and (iii) in many cases it is always a matter of difficulty to decide whether a document is or is not a pronote. ' 17.14. In a Madras case? for example, Schwahe CJ. and Ramesnm I. held: '-'The question is whether or not in particular; docannent) is an acknowledgement within the deﬁnition of 'acknowledgement' in the §tamp Act, for-I it is, it has to be stamped. and if it is not sthmd, it cannot be admitted in evidence and in such a case the legislature has thought fit to what to my mind is an appalling penalty of the plaintiﬁ losing his claim altogether, because there is no penalty provided by the payment of which to Government, the document an be admitted. Perhaps, in view of this provision, the draftsrnan of the Schedule has so worded it that it has left many loopholes, and given rise to a conﬂict of judicial opinion when it was to interpretation. The-words are 'acknowledgement of a debt, exceeding Rs. 20 in amount or value, written or signed by or on behalf of a debtor in order to supply evidence of such debt'. The ﬁrst question that arises is nfnettmr any: particular document is given to supply gyidpnce of the debt. 1 . . . , 1115. In another Madras case," the question was whether a parsvon who hlclrihﬁ . on a promissory note can sue to recover! the debt apart. from the noise, when inadmissible in evidence, owing to a defect in the stamping- Counsel for tho that the principle which applied in Eng1and~_-----that the credit is a different cause of ,i.CI_1ﬂ3 from the promissory r.ote----shouId be held applicable in India, and that section 91 of 'tie Egidenee;

Act was no bar to the action on the loan. As to this, the Chief Justice observ_Ed,*""'l'hea'i__s is no statutory provision in England- as section 91 of the Indian Evidence Act here: In; they strain the common law rule of evidence to get over the stamp law in cases N-1%. You cannot do that in India". ' ' i . Q. 44 A. = . Suraimol Mnrﬁidhor v. Ana.-are Ln.lA.l.I1.'1924 Mod. 352, 353.

. Perumol-Cherrfar v. Karnmlrshi Ammaf, I.L.R. (1938) Mad 933; A.'I.R. 1938 Mad '.135 (R3,) _ Per-nmal Cherrinr v. KQHW kshi Ammal, l'.L.R. (1938) Mad 933, 937; A.I.R. 1938 Mad. 785 (F.E.};

3-'-u4N--

..+ a.,__._ 133 In the judgment, he also ubsarved :1 "' . . . . . . "The Engiish mics of cvidcmtc are not statutory, but Judge-made, and in the second place, the tendency in England has always been to ignore, as fat as possihlc, stamp objections, as is painted out in Taylor an Evidmcag. In india, the }aw is statutory and the courts are given no knitude in matters of this nature". , .

Stodand .3. in his dissenting judgment, said :--3 "To me, it appears that when a man gives another a promissory note in satisfaction at 2: debt or for some other consideration, he gives at the same time a warranty that the note is a good and enforoeablc instrumtnt. If the note is badfor want at a proper stamp, it is diﬁimlt to see haw it can operate as a discharge of the debt any more than the gving of a ccmmerﬁct currency note could so operate. am mt am: to subscribe tn the view that because the consideration is recited is: the instrument, no evidence can be given of it except the instrumemi itself. 'Pb: ccsnsideration, that is to say, the man for which the promissory note is given, is the subject matter of the contract and not :1 aerm at the contract within the: maaning of secticm 91 of the Indian Evidence Act. in the mttcr of the loan the lender consents to it cmly on cpnditimx that We hﬁrmwér gives him a negotiable instrument in the shape {If at pmmissary héste containing {If retarding more, though of course they may state the oansidetation. Receipts and agreements generally are no; intended :9 be negotiable, and serious embarrassment would be caused in commerce if the negotiable net were cast mo widc. This document plainly is n receipt for money containing the terms on which it is to be repaid Being prima_r':}§; a receipt even if coupled with a promise to pay it is not a promissory note".

11.1?' There is another Privy Ce-until caseé reie-van: it} the paint. In. a suit hand on a rim: car an agreement of safe, the meaning of which was cshscum, the ciaim was éupported by copies of two docusneqts, which were as foﬂcrws :-----

"Received from 'you this day. . . . . . . . . . . . .. a cheque for Rs . . . . . . ' , . . . . . . . The ammmt wauld be repaid with interest ihercon at the rate of .. . . . . per cent. Time ten months. , . . . . L . . . . . The "principal-ammmt will 'ha paid with inttfﬁtﬁt after tea mcmzbs from this date".

The deﬁendants pieaded that thz documents were promissory notes, and, not being sfampid, they were inadmissibia in evidence. Ii was held, fsallowing an earlier Privy Council case,'-'*-

that these documents were "elem-ty never _:'n:e:zded to be negotiable a':2strz:ment.r",' and were not promissory notes and were not, thetefone, inadmissible in evidence for want of a. stamp.

1117A. It appcars that the Privy Council, when referring to tha 'imcntiou' that the, docu-_ ments were not maant to 1:»: prcemissery mates, seams ta be (Suing as 'm carrier ta avhid the has:

imposad by section '35. T . - -

17.13. In a Bombay case,' Beaman I. said that "effect should be given to the maxim wt rrmgis vateat zgmtxm parent (it is bettcr for _a thing to have effect than to be made. votid},' in any diiﬁczulty ands: the Stamp Act. so that 'where there is a raasonafde dﬁoubt whether a paper .

is subiect ta stamp at 3}}, the courfzs shbuid decide strictly against the Excbeqtlet and bﬁneﬁnimatiy _ Permrrm' Cizertzkzr V. Riamakxlri Amid. 1.L.R,.(1E'38) Mad 933, 945; AIR. 1958 Mad. 3'85 CF33.) .

'Taylgy an Exridg-nae, V03. I, "Pagr.-. 2'76 12%}! $31!.) "

Perumal Cl1et1ia1' V. Kamakshi Ammai, I.L.R.'(1933} Mad. 933, 965,967; :9L.LR. W33 MSILTBS.

Karmtﬂamd v. Firm Miw: Mir Ahmad, A_I.!-'L: 1933 RC. izl, 123- . Md. Akbar Khan v. Ana S:'ragi:.'zk.I.R. I935 IN.

. Emphasis supplied.

_ sggﬁm v. Mfr-aa Mafzanned Sﬁeraﬁ, U93?) 9 Bum. Law Reporter 11334. _ Osborn, A ('xaqﬁiaé Law Qigtiuqary. Am: Eci. thoggh the word "rt-»sr" is #130 U , 'ihings'. ' ' ' ' ' ' * ' ' 24 M of Law{77-!8 ~IG"V0_$.<_.wf--.I-'-w--

sad her: am: ':11?' which 1313;:

U3:

Defect of present law.

Recomntendation as to pronotes.

Se-r.1:ion'35 and letters of credit.

Duly 134 in favour of the subject. The principle -loses force where the .question is not so whether a "paper is liable to stamp, as whether it is liable to stamp in one character, or another, and it has no application at all, where the words of the statute directly cover the case".

17.19. In that case, it was held that, under the Stamp Act, 1399, a promissory note, unless it is payable to order or bearer, is to be deemed to be a bond, if attested.

17.20. The present law, in our view, encourages dishonesty, and causes hardship. More- over, the proposed amendment will help the Government revenue, -as has been pointed out by one State Government.' 17.2]. Since the hardship to the lender caused undersection 35 of the Stamp Act has been noted by several persons, it is high time that this section was amended so as to "advance substantial justice", which under the present section the courts are unable to do,'-' however much they may like. We, therefore, recommend that pronotes and bills also should be included within proviso (a) to section 35.

If this recommendation is accepted, it will not be necessary to carry out our recommend- ation to limit the bar relating to pronotes to pronotes as deﬁned in the Negotiable Instruments Act."

17.22. A point relating to "Letters of credit" has been discussed under an earlier section.' The recommendation made there was as follows :--

(1) the mention of "letter of credit" should be_ removed from the deﬁnition of "bill of exchange payable on demand", and

(ii) in section 35, "letter of credit" should be expressly mentioned.

The second amendment, which conoernsusection 35, may be carried out, if our recommenda- tions to delete. hills of exchange from section 35, Proviso (a) is not accepted.

17.23. Under section 35, proviso, a deﬁciency in the amount of the duty can be rectified. But the situationwhere there is no deﬁciency in the amount of the duty' is not specifically covered by the proviso, though it would appear that the language of the proviso 'to' section 35 is wide enough to cover such cases. a 17.24. In the deﬁnition of the expression -"duly stamp-ed", a number of ingredients are implied, such as, provisions of the Act relating to description of the stamp, mode of affixing stamp and the like. As we have pointed out while discussing the deﬁnition of that expression,"

a diﬂiculty may arise where the amount ofithe stamp satisfies the law, but, in other respects, the in.r:rumer_rt is not "duly an.-mped" as explnahsd above. As' this is a recurring situajdon, it appears to be desirable" to add in section 35,- proviso (a), an Explanation on--'the point.

We recommend that section 35, proviso (a), should be amended for the purpose. by adding such an explanation. We may note that most replies to otur Questionnaire favour it."

17.25. As regards the case of use of a stamp of improper descniption, -itiis covered separately under section 37, which allows the defect to be rectiﬁed by applying to the Collector.

17.26. Where the full duty has been paid but irregularly stamped, no penalty except Re. 1, Where part duty is paid but irregularly-stamped, then also Re. 1. Though this concerns rate, to avoid undue hardship, it is necessary. Mere irregularity should not be visited with a severe penalty.

. Government of Maharashtra's reply to the Law Qommission Quesﬁoﬂﬂtlife 15- ND- 8.33. . See Peru-ma! v. Karrmkslrf Animal, I.L.R. (1938) Med. 933. 91-6 (F.B.) (Varad.acl1ar1'a.r,J.).' 2

3. See discussion as to section 2-"Promisso1'.'i' ﬂDt€"- - ' ~ ' - .

4. See discussion as to section 2(3) "bill of exchange payable on demand''- (supra). . . See discussion as to section 2{1l) "duly 5taI'|111Bd"- ' ~ - -

6, Q. 45.

135

'-«I127. If the above line of reasoning is accepted, clause (a) of the proviso to section 35- should be revised on the followingelines :--

"(a) any such instrument .................. ..shall, subject to all just exceptions, be admitted in evidence, on payment ct :---

(i) the duty with which the same is chargeable, or, in the case of an instrument

-insuﬂieiently stamped, of the amount required to make up such duty, and

(ii) a penalty of five rupees, or, when ten times the amount of the proper duty or deﬁcient portion thereof exceeds ﬁve rupees, of a sum equal to ten times such duty or portion. -

Expianaﬁ-on.--Whei'e an instrument bears stamp of a certain amount but is not other- wise duty stamped, than for the purposes of this proviso, the instrument shall be deemed to be duly stamped to the amount of the stamp which it bears if a penalty of one rupee is paid into court." a "1123. Section 35, Stamp Act, read with section 91 of the Evidence Act, excludes both original instrument and secondary evidence of the contents of the instrument, if it is unstamped or insuﬂiciently stamped} ' ' 17:29. Lord Watson stated in Rain of Babbitt' v. Inugairti China Sitaramaswami Gary," that, under the terms of section 34 of the Indian Stamp Act of 1879, as the copy could not be stamped, the original having been lost, it could not be admitted in evidence. This decision was followed by the Madras High Court3 in a case where the facts were these :---

Before the trial cornuieneed, the plaintiff produced an unstamped document purporting to his claim to certain lands. Later on, a mob invaded the Court, and set ﬁre to it in wIiich'tl_1e record of the case was destroyed, among other things. When the trial commenced, the' plaintiff sought to put in a copy of the document arid paid the penalty into Court;

It was held that the copy of the document was not admissible in evidence, even on payment o'£"the'penaity. The fact that the original document was destroyed by the action of the mob "put the plaintiﬁ in no better position.

17.30; In another Madras case} it was held that where a deed of partition is inadmissible in: evidence for want of registration, the partition cannot be proved apart irom the deed. The Iowa} beairt had. held in this case that the partition could be proved by evidence apart from which was not registered. On appeal, the Madras High Court (following an earlier 'cg?;;,;i-=:_;i.;:id that where a deed of partition is '1nadinis'siblie' by reason of the fact that' it had not'been registered, the court can only regard the propertfv as being still belonging to the joint faJ:nil_*,r. ' i l'?.3l. These cases illustrate the hardship caused by the present position. The beneﬁt of being allowed to prove the document onpenalty should be extended to copies also. '

1. (ad rsqiiaeebi v. Ti'ramu.ia:'ppa I.L.R. so Mad. 386.

(b) Lachmareahfl-I v. Sham Raw, (1966) 2 An. W.R, 251.

(d) Ming? Po Hrcn v. Ma Ma Gye, A.I.R. 1927 Rang. 109.

(3) [mike Ram 'of. Hart' Chand, A.I.R. 1938 Lab. 90, 92. (D Chanda Sting}: v. Amritsar Bank Ca., A.I.R. 1922 Lah. 307. . fg) Jkamia Sirrgh V. Harnam Sﬁrgh A.I.R. 1926 415, 416. (It) Nalam Rama)-'ya v. Nnlam Achamma,_(l_942) 2. M.L.J. 164 ; I.L.R. (I945) Mad. 160 (F.B.}. (1') Subbu Naidlt v. Varadarajmiu Nafdu, (194711 M.L.J. 90.

2. _li'.qIa of Babbitt v. Inuganri China Siraraezaswami Garu, (1899) I.L.R. 13 Mad'49 fP.C.).

3. Glidnmbaram v. .M'ay_vappan, A.I.R. 1946 Mad 293.

4. Ranznyya v. Acirarnnia. I.L.R. (1945) Mad. 160 (R8,) (case law

5. Veera Raghava Rao v. Gapalarao, (I9-4|] 2 M.LJ. 707 (Patanjali Sajsu-1, J,), Recommendation to amend section

35.. proviso(a) Secondary ' Recommendation to_adrnit secondary evidence.

R.eOOl'I_1lJ!El1dE|.tiCIlJ Omiaton of the word "naya"

Section _ 35- Power _ to require , security.

Propositions laid down incaselaw 136 17.32. The present position leads to the adoption of various tricks and devices bylitiﬁlnts.

If the plaintiﬁ can establish his case without proof of a written contract, he succeeds. And, that';

is what he tries to do.

1133. The defendant on the other hand, exploits the legal prohibition by suppressing the document and by stating that it was unstamped.' 17.34. Even an oral admission of the contents of the document by the defendant' is not admissible,-' if the instrument is not stamped, unless' the admission is made for the purposes of the proceedings."

In our view, this lacuna should be rectified.

17.35. While on section 35, we may state that the wor "naya" before the word "paisa" should now be "omitted, having regard to current usage. .

1136. It has been suggested" with reference to section 35 that provision should be made to require deposit. It will, however, increase work, and we are not inclined to accept it.

113?. Under section 36, where an instrument has been admitted in evidence, such admis- sion shall not, except as provided in section 61, be called in question at any stage ofthe same suit or proceeding on the ground that the instrument has not been duly stamped. ' 17.38. With reference to this section, courts have laid down a few propositions, of which the following are noteworthy :------

(1) When a court passes an orderwthat the document does not require any stamp' or is cl stamped, the order should be treated as ﬁnal.' -

(2) The section is mandatory. Once a document is admitted in evidence, rightly-or wrongty, Whether with or without objection from any party, it is not permissible to the court, whether it is a Court of appeal, revision or trial court, to reject it on the ground that it has not. been duly stamped.'-1° Stamp matters are no concern of the parties, and if, notwithstanding an objection, the trial Court admits the document, the matter stops there, and the Court cannot subsequently order the deﬁciency to be made up and penalty paid or, on failure -to do In, reject that document." ' (3) The section is not limited in its application to cases in which an instrument not duly stamped has been admitted in evidence by the trial court. The admission in evidence -of an instrument by an appellate court is equally a bar to- a subsequent objection to its admissibility."

(4) The words "admitted in evidence" refer to the act of letting the document in of the evidence, either as a result of judicial determination of the question "whether it for want at stamp, or because no objection was taken to its admissibility."-1' ' " '

1. See St.-b!a'.s!: Pillar' v. Murhaﬁm! Am', A.I.R. ms Mad. 457.

2. Section 22, Evidence Act.

. (a) I.L.R. 1938 Mad. 933, 954 (Varadachmiar, J.).

(In) I.L.R. 14 Bomb. , 102, 111 '

. I.L.R. 1933 Mad. 933, 954 (Varadachariar, D Section 58, Evidence Act.

. S.No. 119 (Chandigarh Administration). ' Hrmiaz v. Jagntalrandas, A.__r.R. 1951 M.P. 206.

. Ma Pwa May v. S.R.H.M.A. Chiettiar Firm, A.l.R. 1929 RC. 279,28]. . l/.E.A. Amramafai Chetriar v. Veerappa Chefttar, A_.I.R. 1956 SC. 12. '

10. Javer Cliand v. Puklrr-aj Surana, A.I.R. 1961 SC. 1565. 1656, para 4.

1]. La! Chand v. Dizaram Chadd. A.I.R.., 1655 M.P. 10 .

I2. Rasanji Bhtrgwanji v. Ram Shankar. A.I.li. 1938 Al 619.

13. (a) Rate» La! v. Jamfas. A.I.R.l954_RaJ. 173;

(b) Lodf v. Zirt-ul-hag', A.l.R. 1939 All 538. _

14. ,4..P. Sahib v. Sarnkaian Mamlhavan, A.I.R. 195?, Ker. 105. -

L9 \OO5_--lO'\_Ln-I-"L J1 137 Once the Court, rightly or wrongly, decides to admit a document in evidence, then, so far as the parties are concerned, the matter is closed, and the admission cannot be called In question at any stage of the suit or proceeding on the ground that the instrument had not been duly stamped.' (5) What section 36 prohibits is the calling in question at any stage of the admission of a document on the ground of its not being duly stamped."-3 17.39. In a Rajasthan case,' there was a diﬁerence of opinion about the interpretation of controvegsy 5:5 the words "admitted in evidence". The majority were of the view that a document can be ;3id::g:1,§"°d "1 said to be admitted in evidence only when it is formally proved and rendered in evidence. A ' mere ﬁnding that the document is admissible does not bring section 36 into operation. The High Court conﬁrmed the view expressed on this point in an earlier Rajasthan case)'

17..39A. The minority (Bhargava L}, however, took the view that once the duty is paid I and document regarded as admissible section 36 should apply.

17.40. We are of the opinion that the majority view in the Rajasthan case is correct, and that there is no need to amend the section.

17.41. Section 37 empowers the State Government to make rules providing that where section 37- an instrument bears a stamp of snﬂicient amount but of improper description, the instrument I"'°"i"°*°"' may, on "payment of the duty with which the same is chargeable, be certiﬁed to be duly smlpedz may instrument so certiﬁed shall then be deemed to have been duly stamped as from the date of its execution. The object of the section is to enable instruments bearing stamp of improper description to be validated without payment of penalty, the assumption being that the party has not been guilty of an attempt to defraud government revenue. The validation is done by the Collector under the Rules. The section does not mention the authority that can validate the instrument, and leaves it to the mics.

17:42. -We are of the view that the concession should be mandatory, and that no duty Dut not to he should be chargeable. We may mention that many replies" to" our questionnaire agree with "'54 l' "'1°°'1' this view.' ' - $353?" '"°""

l'_r'.43. Several points require discussion, with reference to the section 37. First, on the Mm"-as at word qtlesﬁon whether the words "stamp of improper description". .-include also stamps appropriate "stamp of im- to a purpose outside the Stamp Act {such as, a court fee stamp or a postage stamp), there was P'ﬁ',',up'.'. """"iP' some obscurity. The Allahabad High Court, in a case' in which a postage stamp was . used, "held that these words are not to be interpreted as including a description of stamp appro- priate' for purposes outside the Stamp Act, andimust be conﬁned to a stamp which is used purpose of denoting the Stamp duty chargeable on' an. instrument. Thus, according to the -'JR'-Ehabad High Court, a postage stamp used for an acknowledgement cannot amount to,_a "stamp ofimproper description", but should be regarded as not a stamp at all within the mean- irigeioﬁtlte Act and the rules. In the judgment, there were observations that even a court-fee stamp would not fall within the section. ' .

H :F'l3.44. But "this view, at least as regards court--fee -stamps, must be taken as overruled by I the Privy Council,' which has held that it is not correct to say that 'the section has no-reference to stamp except a revenue stamp pure and simple. The Privy Council case involved a revenue stamp surcharged "court fee", and this was held to be a stamp of improper description . Ghsi Pam: v. Brahma Tabor!' A.I.R. 1962 Orissa 35.

. Emdlaaro Wnrrier v. Raciumarayan Merton A.I.R. I962, Ker. 265. Sbllﬂnrirf v. I/aralakasflmi. A.I.R. 1962, 231.1'. 398.

ilkluu v. Diian.-n'al', A.I.R. 1962 Raj. 68-78, para 36 (F.B.) Godwin Sirzgfi v. Sewer La! A.I.R. I959 Raj 156.

9.48. ' Rd'erc'nce under the Stamp Act (1901) I.L.i{. 23 All. 213 (Postage stamp]. . Mir: Pa May v. .S'.R.M.M'.A. Chertinr Firm, A.I.R. I929 P.C. 279, 232.

WﬂPH?PM-

Amendment nee-

ded to cover another stamp.

Elﬂect of certi-

ﬁcate.

Amendment need-

ded to override section 35, proviso.

No. neeirte-cover cases of stamps of lesser amount.

Recommendation to revise section

37. 138 within the meaning of the section. Even a postal, forest or telegraph stamp, which istotalljr Outside -the purpose of the Stamp Act, has been regarded as covered by the section.' 1145. In our opinion it would be useful to amend the section, so as to_ir1corporau'.e_the' wider judicial construction of the phrase "stamp of improper description".

We may note that many replies to our Questionnaire favour such an amendment.'-' 17.46. The second point concerns the relationship of sect.ion 37 with section 35. in an Andhra Pradesh case," a promissory note on an impressed stamp, tholugh certiﬁed by the _ Collector under section 37, was nevertheless held to be outside the scope of section 37. The reason given was, that the exception to the proviso to section 35 was a bar to the admissibility of the note, and that the certiﬁcate under section 37 could not prevail against the speciﬁc-

With great respect, section 37 does not neowsitate such at provisions of section 35, proviso.

If the certiﬁcate cures the defect in stamp, it should be narrow view of the scope of the section.

taken as curing it for all purposes.

17.47. We are of the view that having regard to the beneﬁcial object of section 37, it should be made clear that it will override the proviso to section 35. Such a course has been favoured' by most of the replies to our Questionnaire.

I7.-48. We note that section 37 is conﬁned to instruments bearing suﬁtciem stamp. Should it be extended to instruments bearing stamp of wrong description but of lesser amount' than that chargeable '?

We have considered this aspect, but are not inclined to recommend a change;

17.48A. in the" light of the above discussion we recommend the following re--dra'ft :'---- _ Revised section 37

37. (1) Where . . . . . . .. an instrument bears a stamp of sufficient amount but of im- proper description, the tnszrumem shall,' without payment again of the duty with which the same is chargeable 'be certiﬁed to be duly stamped, subject to such rules as -the State Genre- ment may make as to the procedure for the grant of such certiﬁcates. ' (2) Any instrument so certiﬁed shall then be deemed to have been dulylstamped asfrom is the date of its execution, notwithstanding: a-n;eth¢'ng to. the contrary contained inarection 35 or in any other section. . .

ExpIannt:'on.--For the prtrposes of tfusscctforli 9' -5'?_¢1mP' RS831 f0!' I'i°ld?W5'5ﬂ3' 5'59 or postage paid is also a smmp of improper dewcﬁption. ' * In making this recommendation, we' are conscious that the constitutional 1'-ﬁl-' 1119 distribution of the proceeds of traces is cnotl identical in regard to court-fees and eltiln-illdiﬁiiil stamps and postage stamps.

We presume that the Central Government will have no objection to the of instruments hearing court--fee stamps.

3. E'm.rma '|.«'. Maidappa. A.I.R. 1963 A.P. 451 distinguished in

4. Q48.

1, (1911;.1u1.c.7o2 (Nagpur), cited in 1IanjitSin3-Ilvlﬂaia-craft', are-. 1951 Madhyaiﬂharal-181} -13:; pan 5. (Chaturv-edi,J.) ' - 2

2. Q.-47. V .

Arman Chsand v. Narhmai. A.l.R. 1 , 114'.

_ CHAPTER is IMPOUNDIDIG AND CONNECTED PROVISIONS-- sncrron 38--47 T 18.1. An instrument not stiﬂlciently stamped is impounded under sections 33-35. Batter g.,.;mn- 38- this is done, the question arises what further action should be taken. -Section 38 is one of the principal sections providing for what is to be done with an impounded instrument. If the deﬁcit duty and penalty are paid, the impounding oﬂicer is, under section 38(1), required to send to the Collector an authenticated copy of such instrument, together with a certiﬁcate in writing setting out certain particulars. Further action in regard to the copy of the instrument is then taken under section 39. ' If a party does not pay the deﬁcit duty and penalty under section 35. the court has to impound the instrument under section 33, and forward it to the Collector under :-ection 38(2). It is-then for the Collector to give his decision under section 40 about the proper duty and Nnﬁkﬁl (if any') to be charged. . .. " ' 1 s * "T i ; "

18.2. This, in general. is the scheme of the section. We have gone through the. important! cases under section 38; and ﬁnd me' they do not reveal any serious difficulty in the working of the section. -

' However, one verbal point requires to be considered" under section 33(1), and with refer- cum: to section 38(2), a suggestion will have to be dealt with.

I83. The point concerning section 38(1) is this.----At present, under section 33(])_ when the person im-pounding an instrtinient under section 33 has by law or consent of parties authority to {genres evidence and admits siich instrument in evidence upon payment of "a penalty" -.15 pmwded by section 35 or of ''duty' as provided by section 37, he shall send to the Collector an authenticated copy of such instrument-, together .-with'the"3n'escribe.d 'Ce['[iﬁcate_= .

, recommendation is that the words "duty and" should be added where section 33(1) refers to section 35. . - - _ l ,_ 18.4. As to sub--section (2) of section 38, a suggestion for an arnendntent, received from a Stﬁe ,Ci'=overnment'* maynow be dealt with Section 38(2), as already stated, provides, that i,r1._pq§es_uot.fall.ing under section 38(1). {that is to say, in cases other than those when the impounding an instrument not duly stamped has authority to receive evidence and admits, the 'instrument in evidence upon payment of a penalty], the person impounding tlse;iJ.1'5tl1II.l'lCnt shall send it in or-iginof to the Collector. Under section 40, the Collector so receiving th_e___inst[-u- men: either certify by endorsement on the'instri1nierit'th11t'it'is dnlystampedl551t"not"chargg- able with duty. or, if he is of opinion that such instrument is not duly' stamped, may require paymeutiof the proper duty together with the penalty; and. after the Collector has so dealt with the instrument, he has lo return it to the impoundingtafﬁcer after an-endorsement to that client under section 42(3). then the instrument shall become admissible in evidence, and 553]] be delivered to the person from whose possession it came into the hands: ofthe oﬂicer impound- ing it etc. ' 1 (3) P641?) Lat V. Sukhnn Ram. A.I.R. 1925 All. 478.

(b) In re Sikdo Pm.»-ad, AIR. 1934 All. 1054.

(c) Manganese Minerals Ltd. v. State of West Bengal. A.I.R. 1960 Ca]. 34:11 (:1) Jai' Nat-din v. Yasin Khan . AIR. 1955 Hjtd. 2!.

(E) T.K. Rrmthnrnj v. Md. Nazeer Khan A.l.R. 1959 Mys._ ['31

(f) Vgjudevdn v. Krislrarr Ramnatlz. Alli. 1953 "EC. 559. ' I sriggestion of the erstwhile Government of Madras, We No. _F. 3:;-W57-Pt. I. [_.C. S. No_ s_ __._.._.., ,_ _. __ ' V I7' 139 lntroducton-.

caselaw.

Section 33(1) Recommendation for verbal change.

Sect!'-on_ V' suggmtlon of state Gowrument.

Scheme of section 33(2).

' can be admitted in evidence, and need not be sent to the Collector.' Stﬁtion consi-

s i ti. - . , 140 If the instrument so sent in original' is -lost, destroyed or damaged before the Collector tubes action under section 40, then it is not possible (under the Act as it now stands) to collect the stamp duty and penalty due, with the result that there is a loss of revenue to the Govern- ment. it has, therefore. been suggested that the person impounding the instrument should, before sending it to the Collector under section 38(2), keep an authenticated copy of the instrument in his custody. if the original which has to be sent to the Collector, is lost, destroyed or damaged, then the authenticated copy should, it is suggested, he treated as the original instrument for the purposes of levying" the stamp duty and penalty due, and should be admitted in evidence on payment of such duty and penalty. An amendment of section 38(2), to achieve these two objects, has been proposed by the State Government.

38.5. lefore expressing our view as to the point raised in the suggestion, we should consider in detail the scope of section 38(2). There are two cases in which impounding of instruments not duly stamped is provided for by the Act namely, (i) where a person has authority to receive evidence or (ii) where a person is in charge of a public oﬂice, provided {in both cases}, the instrument chargeable with duty is produced before him or comes beﬁore him in the performance of his functions. ln the first case, that. is to say, where a person impounding has authority to receive evidence, it the party pays the penalty, then the instrument impounded In that case the person impounding sends only a copy cases a Certiﬁcate (that is) to the Collector"-' In "other cases", he has to send the original to the Collector.' Those "other cases" would appear to be the following.--

ti) Where the person impounding has no authority by law or consent of parties to receive evidence ;

if ii) Where he has such authority, but the party concerned does not pay the duty (or the deﬁciency in duty) and the penalty etc. ; .

(iii) Where, even if the party concerned is prepared to pay the duty or the penalty, the instrument cannot, by virtue of the exceptions given in the proviso to th relevant section" be admitted in evidence," under the present law. --

In these cases, the person impounding must send _the instrument in original. There is a provision' for preparing a copy of the instrument, but even when a copy is prepared under that section, what is sent to the Collector is the original.

18.6. Now, the suggestion is, that before sending the original, the_ person impoundingtishould keep an authenticated copy. If the original is lost before action is taken under section 40(l], then {it is suggested) the copy should he treated as the original for the purpose of the levy of the penalty etc. and also for the purposeof the Indian Evidence Act, 1872.

This suggestion of the State Government was circulated by the Government of India' to other State Governments. It appears," that many State Governments were in favour of the suggested change. One State Government was not, however, in favour of the change suggested, on the ground, first, that the proposal would increase the work in the public oﬂicea concerned, and secondly, that the change was not necessary, as cases of original documents being lost or damaged were very few.

Another State Government suggested that the copy of the document be made at the cost I of the person producing it.

. Section 33 (2) . Section 33 fl] . Section 38 (1).

. Section 38 (2) . Section 35(1). proviso la}. _ _ Compare (English) Stamp Act, l89|, (54 & SS Vic. C 39}. Section 14 ll) . Section 46.

. Ministry of Finance {Revenue Division').

S. No. 3 File No. F' 3 {4)I5'?-L.C. Pt. I. ""'""='*o-uu-u-

141

The continent of another State Government was, that the impounding oﬂicer should keep the original with himself, and should send only a copy to the Collector for the levy of duty and penalty.

18.7. We have considered the suggestion, and the points made in the comments expressed V31'i°"3 theerou. While the object of the suggestion is good, we are of the view that certain considera- tions----such as increase in oiiice wor}<-- --cannot be brushed aside. Cases of loss of an instrnnient in transit would be rare. '1'o meet "those rare cases, we do not think that a copy should be prepared in every case. And, in our view, there is no case for a change in the present law.

in response to our Questionnaire' also, while many replies have favoured such amendment as is set out below, some do not think that,- to meet rare cases, a change should be made in the section. a i _ 18.8. However, if the Government does consider some change necessary, then, in our view, the alternative suggested by another State Government, namely, that theoriginal should be kept by the impounding officer and a copy should be sent to the Collector, is preferable to other alternatives. If the original is sent to the Collector and lost in transit, and the question of proof of signature or thumb impression arises, then a copy kept by the impounding oﬁicer would not be of much utility, and there would be diﬁicultiea. 'Where the party interested or the person producing is not prepared to pay the cost of preparing the copy, we do not think that the person impounding the instrument should belrequired to prepare an authenticated copy.

"No doubt, if the original is lost in transit and the penalty cannot be levied, a loss is thereby caused to the revenue. Bur, against this loss, should be offset the increase in work and cost that will arise if an autlienticated copy is required to be prepared in every case. It should be remembered, that the acceptance of the suggestion of the State Government would mean '_thai'-..I'u every case an authenticated copy should btrpreparpd even though the cases in which loss at the instrument occurs in transit would be only a fraction of the cases in which action is tiken under section 38(2). We think that the existing provision need not be disturbed where nobodyicomes forward to bear the cost of preparing the copy. Even in regard to the few cases where loss may occur, an option may be left to the party.

18.9. We, therefore, recommend that if Goyermnent consider necessary that the section I be amended, the following' proviso may he insertediiii [section 38(2) :-- ' "Provided that wliere the person who produced the instrument, or_any party interested, is prepared to puythe cost of preparing a copy oi the instrument, then--

(a) an uurhenzicuwd copy of the instrument shall he got prepared by the «person intpounding the fustrumerit ,'

(b) only the autlaeiiticutrd copy shall be sent to the Collector ,- lie) the Collector Shall take action on the artihenticured copy as if it wereihc instrument in original ; and

(d) any certificate to be endorsed with reﬁerence to the instrument by the Collector of section 42 shalt'. be endorsed on the authenticated cop)': and when that copy ES received back by the person impoti.rzdi.ug the insirmncru' iizur person shall copy the certiﬁcate on the original instrument and also authenticate such copy of the certificate." ' ' ' ' Q49.

3. such consequential changes as may be necessary in other section, may he carried out.

:_ M10 remm of the instrument to the person impounding, see Section 4ar2i and cases cited in Mulls, Stamp Act, (1963) page 146. Footnote (it). ' ' ' . .

as M of Lowm_19 _ _ alter-

natives.

Recommendation. -

uiuler clause (a) of sub-section (1) of section 40 or under sub-section -('1) T _ Section 40.

142

Section 33A- 18.10. At this stage, it is necessary to depart from the sequence of sections and to refer to set] . .

(fl-$3,: s:%?,:p°45)_ section 46. That section reads :---- ' "'46. { 1) If any instrument sent to the Collector under section 38, sub-section" (2), is lost, destroyed or damaged during transmission, the person sending the same shall not be liable for such loss, destruction or damage. i (2) When any instrument is about to be so sent, the person from whose possession it came into the hands of the person impounding the same, may require a copy thereof to he made at the expense of such fu'st--n1ention-ed pers.on and authntir cated by the person impounding such instrument."

gW;a ﬁ°" 13.11. In our opinion, section 46 should be transposed after section 38, since its subject mm," 45 as matter is connected with section 38. Accordingly, we recommend that new section 38A shotlltl. be 5'°°"°'1-°'3*'*- inserted, incorporating the substance of section 46. -

Certain verbal changes are needed in section 46, if section 38(2) is revised on the lines discussed above.' -

(i) In section 46(1), the words "or authenticated copy", should be added, if section 33(2) is revised. -

(ii) Section 4612) becomes redundant-, if section 38(2) is revised.

San-on 39' 18.12'. Section 39 deals with the power of the Collector to refund" the penalty in respect of an instrument, a copyzwhetaof is sent to him under section 38(1), that is to say, an instrument impounded by retom oﬁ deﬁcimcy in stamp.

It needs no change.

18.13. Section 413' deais with the Colic-etor's power' to stamp instruments impotmdeiunritr the Act. Usually, the impounding of the instrument is by some other oiﬁs:e1'.,_ who with it"

to the Collector under section 33(2). But.-=-it could be by the Collector himselﬁiii the. thou- ment is produced before him in the perioruanee of his ordinary functions The pmcerhnt to be followed by the Collector in both the cases is laid down in section 40.

If the Collector is of opinion that the instrument is duly stamped or is not chageable 'with duty. he certiﬁes. accordingly by. endorsenlent. under section 40{1)s(a). Undo; 40(2), this certiﬁcate is conclusive evidence of the matters stated therein, for the" porpoises or the Act. if the Collector thinks that the instrument ischargcable, and not properly stamped, he shall. require payment under section 40(1)i('l:r}.

_ _ 13.14. While section 0, sub-section (1.) (11), empowers the Collector to "require" the 3:§':"£h:' cg: stamp duty or deﬁciency to be paid, it is silent as to the person or persons who can be be required to required to pay the same. There is no distinctprovision in sections 40, or anywhere else in ""3" the Act, e-mpowering the Collectorto demand the proper stamp duty a:nd'penahy" Erom the person -

who produces in Court. . _ According to the High Court of Allahabad," it is the person who wishes a document to. be admitted in evidence in Court, who is primarily the person from whom the requisite duty and penalty' should be rec'o'.'ered in the ﬁrst instance, and if it is due from a third person, he can recover it under section 44. .

The Lahore High Court, has dissented from the} above view. Acoooding to it. the Court or the Collector cannot compel such person {i.e-., a person. not origiualiy bound to bear the _ expenses of providing the duty), to pay the duty and penalty. If he 'chooses to 1:13', j 44 enables him to recover the same. But the stamp duty and penalty can-coznpulsodly he recovered only from the person liable to pay the proper stamp duty in the ﬁrst inst1:tnc0._vThe, I. See discussion as to section'33t'2l-

2. Secretary ofSrote v. Bliasharor Uilah, I.L.R. 30 All. 27].

143

person not so liable is not subject to compulmry recovery under section -48. It was also observed that if, in a particular case, the Stamp Act did not fix the liability for payment on any particular person, then the Collector should keep the impounded document in his custody, and no person interested in the deed would be able to make any use of it unless -and until the necessary duty and penalty were paid. ' 18.15. The Lahore view appears to us to be more logical, and should be" adopted. We R_HlQIl:I.tTIll'.Ii.'I~ shall deal with the matter in detail' under section 48. mm' l 18.16. Intentional omission to stamp an instrument is dealt with strictly by the Act, sI°§::'£uﬁt1i;1-_ particularly section 40; but there may be cases where the omission to duly stamp on einstru~ i mom; has been occasioned by accident, mistake or urgent necessity. To provide for such cases, section 41 enacts that a person may produce the instrument within one year irom the date of its execution or ﬁrst execution, and bring to the notice of the Collector the [act that it is not duly stamped, and oiler to pay the deﬁciency. If the Collector is satisﬁed that the omission to duly stamp such instrument has been occasioned by one of the causes enumerated above, the Collector may receive such amount (i.e., the amount oﬂerod "by the person pro-

dming the instrument), and proceed as provided in later sections of the Act.

No points of substance require to be discussed in connection with' section 41. But reading of the section would be facilitated if it is split up into paragraphs. It is also desirable that the fact that the omission was due to accident etc. should he brought in the forefront in the section.'

- 13:17. section 42 reads thus---- 5°'''_''" *3' .

"42(1) when the duty and penalty (if any), leviable in respect -of any instrument have been paid under section 35, section 40 or section 41, the person admitting such instrument in evidence or the Collector, as the case may he, -shall certify by endorsement thereon that the pnopenduty or, as the case may he, the props:

-duty and penalty {stating the amount of teach; have been levied in respect tltereof, and the name and residence of the person paying 'them.

(2) Every instrument so endorsed shall thereupon be admissible in evidence, and may be registered and acted upon and. authenticated as if .it had been duly stamped, and shall be delivered on his.appli'pation in this behalf to the person from whose possession it came into the hands of the oﬂioer impounding it. or tt5'..Stld1 person may direct 5 Provided that--

(a) no instrument which has been admitted in evidence upon ptiyment of duty and a penalty under section 35, shall be' so delivered before the expiration of one month from the date or such impounding, or if the his certiﬁed that its further detention is 'necessary and has not icancelleii 'such certiﬁcate; I ' (bl nothing in this section shall'affect"tl:e=.Code'af . 144, clause 3." . t ' 18.18. In the proviso, clause (Is), there is a reference' to section 1.-t4,_iolause-3, Code inf. ' I i (1832),-which related to the return of docutnents. Thentatter is..now ,governed . -

ha,-..o:_de1-.13, rule 9, of the Code of Civil Procedure, 19(}8.VReie1:ence thereto should be suhsl:itute'd.

18.19. We are also of the view that section 42 should' be placed before section 411, sinoeT . ' '" :15 the action taken under section 41 is independent of the preceding sections. The subject matter ' afuclion 42 is, in some way, conected with sections .3540.

1. To be considered under section 48.

--. For re-draft of section 41. see discussion as to section 42.

Re-drafts.

Endorsement of instruments 0D which duty has ' ' section 42(1) in part]. i fﬁxisung' " "section 42(2) in part].

{Existing-sh section 4!).

[Section 42(1) in pan].

[Section -4242) in part]-

144

18.20. Accordingly, we recommend that sections 41-42 should be revised as follows t-----3 . Revised nrcriorrs 41-42, renumbered and transposed ' 'H 4]. (1) when the duty and penalty (if any}. leviable in respect of any instrument- have been paid under section 35, or section 40, the person admitting such instrument in evidence or the Collector, as the case may be, shall certify by endorsement thereon that the proper duty or, as the case may be, the proper duty and penalty (stating the amount of each) have been levied in _respect thereof, and the name and residence of the person paying them. -

[2] Every instrument so endorsed shall thereupon be admissible in evidence, and may be registered and acted upon and authenticated as if it had been duly stamped, and shall be' delivered, on an application in this behalf made by the person from whose possession it came into the hands of the olﬁcer impounding it, to that person or according to his directions:

Provided that--

(a) no instrument which has been admitted in evidence upon payment of duty and a penalty under section 35, shall be so delivered before the expiratirur of one month from the date of such impounding, or if the Collector has certiﬁed that its further detention is necessary and has not cancelled such certiﬁcate;

(b) nothing in this section shall aﬁect the provisions of rule 9 of oirder XIII in the First _Scitrdu!e to the Code of Civil Procedure, 1908. ' .

42. (l)(a] If any instrument chargeable with duty and not duly stamped is produced by any person of his own motion before the Collector within one year from the date of its execution or first execution,

(b) such person brings to the notice of the Collector the fact that such instrument is not duly stamped and the omirsiorr to duly stamp such insfrument was occasioned by accident, mistake or urgent necessity. and offers to pay to the Collector the amount of the proper duty, or the amount required to make up the same, and

(c) the Collector is satisﬁed- that the omission to duly stamp such instrument has been occasioned by accident, mistake or urgent necessity, the Collector may, instead of proceeding under sections 33 and 40, receive -such amount and proceed as next hereinafter prescribed.

(2) [Wren rite duty icviablc in respect of any instruntent has been paid under strb-Section (1), the Collector shall certify by endorsement thereon that the proper duty has been levied in respect thereof, and the name and re.ir'dencc of rho person paying rherti. ' ' -

, (3) Every instrument so endorsed_-sl1alI~thereupon.be admissible in e'v,idence,.an'din1ay becregistered and acted upon and authenticated as if. it had been_ duly stamped. and shall be delivered on his application in this behalf to the person who produced it or according to in':

directions.

18.21. No change is needed. in section 43.

18.2.2. Under section 44(1), when any duty 'or penalty has been paid under section 35.

section 3?, section 40 or section 41, by any person in respect of an instrurnernit, and, by ""3" agreement or under the provisions of section '29 or any other enactment in foroe'_ at idle such instrument was executed, sonic other person was bound to bear the expense the proper stamp for such instrument, ihe-'-ﬁrst-mentioned person shall be entitledto . from such other person the amount oi the duty or penalty so paid.

Sub-section (2) provides that for thepurposes of such recovery, any certiﬁcate gtmtrﬁ in respect of such instrument under this Act shall be conclusive evidence of the matters tj_-herein certiﬁed. ' 145 According to sub-section (3), such amount may, if the Court thinks ﬁt, be included in any order as to costs in any suit or proceeding to which such persons are parties and in which such instrument has been tendered in evidence. If the Court does not include the amount in such order, no further proceedings for the recovery of the amount shall be maintainable.

18.23. (a) In View of the proposed re-numbering of sections 41 and 42, consequential Section _44 changes should be made' in section 44(1) ; Ch"'9°' ""

[b] In section 44(3), second sentence, (power to include costs), it is desirable to add the words "for reasons to be recorded", before the words "include the amount in such order".

We recommend that section 44 should be amended as above.

13.24. Section 45 reads------ Se=ﬁ0I145-- T ' Power to Re-

"'45.(l) Wllere any penalty is paid under section 35 or section 40, the Chief :|:t;;_";&1thoI'lEy.

Controlling Revenue--authority may, upon application in writing made within of mm dutylﬁl one year from the date of the payment, refund such penalty wholly or in part. certain cases.

(2) Where, in the opinion of the Chief Controlling Revenue-authority, stamp-duty in excess of that which is legally chargeable has been charged and paid under section 35 or section 40, such authority may, upon application in writing made within three months of the order charging the same, refund the excess."

18.25. In section 45(2), we recommend the substitution of "one year" for "three months". Rgwmmmdaﬁum The period should be uniform under both the sub-sections.

13.26. We have already considered? section 46. p . Sagan 4,5_ 13.21'. Under section 47, when any bill of exchange or promissory note chargeable with swim a___ a duty not exceeding ten naye paise is presented for payment unstamped, the person to whom Power of payer it is an presented, may patﬁx thereto the necessary adhesive stamp, and, upon cancelling the and mum" ' sung. "in manner hereinbefrure prov.-'ded." may pay the stmz payable upon such bill or note, nous 1-waived by and may charge the duty against the person who ought to have paid the same, or deduct it from the sum payable as aforesaid, and such hill or note shall, so far as respects the duty, beideemed good and valid.

Under the proviso, the section shall not relieve any person from any penalty or proceeding to which he may be liable in relation to such bill.

We recommend that in section 47, the Word "the" should be added before the word dim"!!-

11:3; discussion as to sections 41 and 42. lsuprct) '.'-SQ reaction 33A Supra.

Introduction.

Section 43 Obscurity.

oammry.

Cass speciﬁcally doll with sections CHAPTER 19 RECOVERY FROM PERSON FROM WHOM DUTY IS DUE 19.1. A very important topic, which comes up again and again before the courts but which, unfortunately, is not dealt with directly and speciﬁcally in the Act, now requires to be considered. -

19.2. Section -48 provides that all duties, penalties and other sums required an be paid' under this Chapter may be recovered by the Collector by distress and sale of the movable property of the "person from -whom the same are due", or by any other process for the-time being in force for the recovery of the arrears of land--revenue.

As to the "person from whom the duty is due" within the meaning of this section, the section is silent.

'While ti-iscussingl section 40, we had said that the matter will be considered under section 48, i.e. the question as to who is the person liable to pay the duty etc. for the purposes of recovery under the Act, where the" duty etc. -is not paid by the party producing-' the document. The difficulty is created by the words "under this Chapter". Do they include section 4D(1],(b) '?

The order under section 40(1) (13) need not be addressed to any person. mination that the instrument is---

(i) chargeable with a panticular-duty, and

(ii) not duly stamped. ' It 3 'a deter;

The order is an order in the abstract. It determines the payability, "but not the "person liable to pay. The person producing theoocrrment pays, but the order 'under section :4-GU21 (he)- does not say that he should pay. The order is an impersonal order. There 'n am of compulsion, inasmuch as, vrithout payment, the Collector would not -return t1n':'»dn¢«IaeI! under section 40(3). But there is no decision as to the person liable.

19.3. There is considerable obscurity in this respect, and the obscurity arises"

from the fact that, excepting in a very limited number 'of cases} the Act does norgivcg any '1 speciﬁc and comprehensive guidance as to the person who is to be regarded as one to pay stamp duty. There are elaborate provisions in the Act as to the instruments .=whid'.l are chargeable to duty3 and as to the time of stamping,' and also as to the mode using ﬁunpf However, excepting for a few cases, it is not easy to ascertain from the prbvisitilfls 'of"'tlie Act the person who is bound to pay the duty within the meaning of section 48.

19.4. The cases speciﬁcally dealt with are contained in--(i) section 19, which relates to bills and notes drawn out of India, (ii) section 29, which, in the case of certain instruments, provides as to who shall bear the burden of proper stamp, and (iii) section 30, dealing with receipts. Section 29 is a somewhat general provision. though not exhaustive And even' that ' section does not very clearly indicate whether it is to operate as between the parties, or whether it is to operate also between the State on the one hand, and the private party on the other hand, ' so as to be available ior interpreting section 4%.

1. see discussion as to section 40, supra.

'. Sections 19, 29, 30 See infra.

'. Section 3.

'. Sections17,lE and 19.

'. Sections 10 to 16.

146 147

l9i.4A. When the question of production of an instrument before a court or public oiﬁcer arises; section 35 steps in, and provides ..the-. machinery. for the recovery ..of_ stamp and penalty. But, here again, it is not clear whether the person who is interestedein producing the document _ _ ' in evidence under section 35 is also the person against whom section 43 can be applied, if 11: does: not deposit in court the duty and penalty. ' The cxeeutant, who is the person bringing the document into existence, would appear to be primarily liable to the State under section 17, which says that all instrun1ents.chargeabl'e witﬂduty and executed by any person in India, shall be stamped, before or at the time of execution. Under section 62 also, in most cases, the executant is liable to be prosecuted. and punished for executing or signing. otherwise than- as a witness, an instrument chargeable with duty, without the same being duly stamped. -

_ Thus, even assuming that they can be pressed into service for the purposes of section 4-'_B,+-the provisions referred to above do not yield a uniform answer as to the question, who .. is the person liable ?

¥9t5. Judicial' decisions are also not unanimous. The conﬂict of views on the question mm_mmi I. inﬁtetlter persons liable to pay the duty under an agreement or under section 29 are also ofnection 29 with pdrhons to be regarded as liable under section 48 as the persons from whom the duty is s°°"°?' *3".

. _ _ Conﬂiet of views.

dim, cl-I1--be thus summarised.

£1) Oneview on the subject is that such persons are not liable under section 48, and the r-xecutant of the :'n5u'ument can be called upon to pay the duty under section 43.1 Another view is that only the persons liable under section 29'or under any agreement . ar§rj_E[j;,'persons from whom the duty can be recovered" in-ider section 43. According to this _h -cases not covered by section 29, the instr1u:ner1't"can merely be impounded, but no 'o'p: 'ii5"__liabi'e to be called upon to pay the duty and penalty until it is sought to use the _ an Orissait case, there was a demand ior additional duty on the vendor. No ﬁnding _ that there was 'agreement to the contrary' was recorded. It was held titat the demand. was Section 290:} illegal." The vendee (and not the vendor) was liable. Septiou 29(c) was relied' upon. .'.l?his ' case illustrates the view taking section 29 as the criterion.

, , _&.]_0n the liability or the person producing, there is a conflict of decisions.' One view_ ran tlnjubject is that the duty can be recovered under section #8 from the person producing the document also.5 But this view has been dissented. from."-' - - - 3 -5 ' ' {:11}? A fourth view is that both the executant and the parties. liable under section 29 or :hy.;.g1it:ment, can be called upon to pay the duty under section 48.. This was the view of Bliliiamn J., in an An-dhra case." ' ' _ ._j g In view of the obscurity and uncertainty of the position in regardetoflthe ﬁtter- of section 29 and similar sections on the onejhand, and section 48 on the other Iced forgh-ma. it;-,is desirable that the matter should be pitt beyond iloubt. It is neither in iaenuepasts mm . of theistate nor in the interests of the citizen that liability tofhear the tax should be left in .

' '-'ll Cherrﬂzr v. Revenue Diwisianal Oﬁicer, A.I--.R. 1956 Mat.L'454. : 2.3 ' mama. Secretary of.S'.ta2'e, (1939) Nag. L.J. 364, mrema to in' M. iramam-am: v. Stafeaf rmmcm. _ , I951 Travancore-Cochin 251, 252, para 6. » ' -_ ' ' Rag v. Additional District" l\!agr'.rri'¢zte', l'ornpr.ri", 1915 Orissa ' ' '41" law reviewed in Mohamed H'rr.r.s-airr- v. Emperor, A.I.R.. 19-I0 I.ah.:3l5. See also A.I.R. l9'l'O'M.P._'l4. .' Si Sﬂerctry qfstata v. Bararsruﬂab, (1903) LLR. 30 M1271. ' ' ' ' ' ' . 6: ' Hussein v. Emperor, A.I.R. 1940 Lah. 315. ' ' -- --

'.I. As lojoint and several liability, see A.I.R. 1962 Mad. 425 aI1d,'(1?ﬁ7) 2 M.L..J. 567 and A.I.R. ]9'l'0 MP. 74.

_ 3. Board' of Revenue v. Appalo Narasimhairz, (I957) Andhra Weekly Repeater 288 (1-'.'B.)'{Bi:ii'rnasanltal'an 3.).

Linns.nnvrl:ich am " t 143 19.7'. As to the lines on which the section should be amended, we are in broad agree-

shomuldmmd be mad, men: with What Iihide J. said in the Lahore High Court in Muhammad Hussein': case. In view of Bhide 1- the Lahore case} Iihide J. observed :

quoted.

Objections answered.

Basic question.

"It the intention of the Legislature was that the necessary duty or penalty should be recovered from the person who wishes to have the document admitted in Court, one would have expected to ﬁnd some provision to that effect in the section" itself or at least somewhere else in the Act. But no such provision has been made." The reason is, I think, not far to seek. When a person wishes to have a document admitted in Court for the purpose of his case, it may often be to his interest to pay the duty and penalty at once in order to get the document admitted in evidence, as the person who was originally bound to bear the expense of providing the stamp duty may not be traceable at the time or may not be prepared to pay the duty or penalty voluntarily.

"If he does so to suit his convenience, the provisions of section 44 enable him to recover the same iron: the person who was originally bound to bear the expense of providing the duty. But there is nothing in section 35 or section 40 to enable either the Court or the Collector to compel the person who wishes to have the document admitted in evidence in Court to pay the duty or penalty. "The only reasonable inference in the circumstances seems to be that the payment of such duty or penalty is left to his choice under these sections.

There seems, in fact, no good reason why '3 person, who merely wishes to have a document "

admitted in evidence, should be compelled to pay the duty or penalty thereon, when he is not the person who was originally bound to bear. the expense of providing the duty. If he does not choose to -pay the duty and penalty under section 35 or section 40, he has to take the consequence of not being able to use the document. But it would be obviously hard and unfair to compel such aiperson to pay the duty on the document merely because heattempted to produce it in evidence. The stamp duty may be heavy and he may not be even in is position to pay it, or it may not be worth his while to do so, for the purposes of his case. The Legislature therefore seems to have advisedly left the matter to his choice. It is true that me Collector may not be able to trace easily the executaut or the person bound to pay the duty on the document in such cases and there may be some inconvenience as a- result in collecting the stamp duty or penalty. But this can scarcely justify penalizing a person who was not responsible for paying the stamp duty at the time of theiexecution of the _document.'* 'I We ﬁnd ourselves in broad agreement with this view.

19.8. The objection that ii the person producing the document is not made liable, then there is no other method of recovery, was answered in the Lahore case.' It was am there that the document can be impounded. ' 19.9. There is also the basic question to be considered, namely, is it- logical to compel the person producing the document to P31' fthe duty and penalty_whcn_-the printary obligation was not his? After all, provisions by way of sanctions are Secondary. and are bandied .10 enforce an original liability that has been separately created. Since sections 40 and, 43 are silent as to the person from whom the dill? i5 due» it WW" 531513' be 3PPf°P!'53"-'r W' 'P1113'.

the sanction under section 48 against the person. producing the document merely he happens to have produced the docu.u_1ent, when the original liability was not created apintt him by any other provision. ' 19,10, The point may be raised that section 40_is mentioned in section 44, and this must have some meaning. The answer is that part of section 44} can come _iuto.§p1n3t;.:ghero the person producing the document but not paying the duty etc. 111 court later 19 Pl? the duty in his own interest. Exigeucies DE litigation force him to do so, and, m tltt auction.

he must have a remedy against the person bﬁlmd '60 Pal' the '3'-W3!'-_ 5*'-'€503 44 5°55 I, ﬁclltharmnad Hussein V. EWP£'?'&'P'- A~I-1:?» 1940 I-'95 315- _3"' 2 M'ahumed'Hu.vsai'n. V. Emperor, A.I.R. 1940 Lahore 315 ('S1lP'¢7- I49 with the right of the State to levy the stamp duty and.penalty'under sections 40 and 48:' . The bB5iC Cluﬂstion to be examined is;-on whom is.thc duty imposed ?' Whatever may be lite" correct answer to this question, it is certainly not to be answered from sections 40 and 44, which are themselves ambiguous.

_ 19:11 Thus. apart from (i) the juristic itnproprietyof enforcing a'.-rtmcfion against 'a person not primarily liable, and (ii) the fact'that' section 44 can be satisfactorily explained otherwise. there is also the question of hardship, The person from whose possession the doc1J~ ment came cannot be used as an instrument for recovery of the penalty merely by saying that he himself can recover it under section 44. If A _is not liable to pay a tax, it would not be equitable to force A"to do so and give him a rcinedy to"rec'over it from B who is the person liable to pay the tax.

19.12. Making the person 'producing the instrument liable has the merit [that thefollector can easily recover the duty from him. But such' a' Provision has several defects-

('a} it is not in furtheranceisof the scheme of the Act regarding liability to bear the ' There is no provision in the Act-making: acp-ersone. whoﬁmerely presents an insufficiently stamped document for being admitted in evidence, liable for payntentoftthe requisite stamp duty or penalty on the document. He cannot, therefore, be considered to be a "person from Whom the stamp duty or penalty is due", and consequently the same cannot be recovered from him under s.- 48. If the stamp duty or penalty has to be recovered compulsorily, it can be legally recovered, under s. 48, only from the person from whom the same is due.

('0) It is against the view of majority of the High Courts. Hence such :1 provision means a radical change.

It is juristically wrong, when the original liability is not of the person producing. it is juristically incorrect to apply a sanction against him.

to)

(d) It is unjust also to do so. He had no hand in the execution of the instrument and, therefore, could not have avoided the default in duty.

It is poor consolation that he can, recover it in his turn, from the person "bound to bear the expenses". Imposition of an obligation without proper grounds is not excused by providing a remedy for re-imbursement which may consume expense and time.

to)

(f) Moreover, the person who is bound to bea; the expenses may not be traceable. In that case, the person ordered will not be in a better position than the Collector.

(g) It'is even doubtful whether the remedy under section 44 will be available in cases outside section 29.

(h) Thus, to make him liable is against the scheme of the Act, against generallegal principles, against equity and against convenience.

The alternative' is to make the executant liable. Section 17 says :

"An instrument chargeable with the duty and executed by any person in India, shall be stamped Iieic.-re or at the time of execution."

Section 62 says that the £.'J"€L'liIﬂ.'Il' of such instrument shall, for every such oﬁence, be with ﬁne which may extend'-to--Rs. 506, p1'ovidI:d- thatwhen any__penalty_l_p_gs;:bgen mid in respect of any instrument under Ss. 35, 40 or 61, the amount of 'such

1. Subrmmuia v. R.D.0.. A.I.R. 1956 Mad. 454, 458, para 13. 24 M of I..aw;'7'7---20 Various points considered.

Amendment-

lines of.

150

be allowed in reduction of the ﬁne, it any, subsequently imposed under this section in respect of the same instrument upon the person who has paid such penalty.

- Thus, these sections read together indicate, that the execurmrt of such d0CL1IJ'|Cl'lt.iS the person against whom the Collector should proceed under S5. 40 and 48 for collecting the stamp duty and penalty. It is signiﬁcant that the proviso to s. 62 makes mention also about the penalty levied under s. 40, and makes a provision for its deduction from the ﬁne.

19.13. We are, therefore, of the opinion that the provisions of section 43 should be enforceable-

(a) against persons who are liable by virtue of section 19. agreement. or section 29 or 30, as the case may be, and

(b) where none of the above mentioned sections apply, then againsththe person executing the document in question.'-' g 19.14. We recommend that the Act should be amended on the above lines. We may state that most replies to our Questionnaire have favoured such an amendment. The appro- priate place for it appears to he in the Chapter containing sections 29-30. It is for these

-reasons that we have recommended the insertion of a new section? 'I__'hat will solve questions arising under section 43 also.

71.. Section62('b)-' T . T ' ' ' '-' '.2. Q. 55-58. ' '

3. Section 30-19., supra.

CHAPTER 20 REFUND---SECTIONS 49 T0 55 e ' g.

20.]. While, the last chapter was concerned with the recovery of stamp duties in regardui I""°d""°"' instruments not duly stamped, occasions for refund may arise in regard to instruments duty stamped. The Act deals with this topic under the curious title of "Allowances for stamps in . a certain cases." The sections concerned deal with spoiled stamps, printed forms no logger required by Corporations, misused stamps, stamps not required for use, stamps in denominations ofannaa, and renewal of certain debentures, spread over sections 49 to 55. ' . ' -

20.2. Section 49 is a long- section. The marginal note dcscribesits subject as "aIlor'vance fﬂfﬁon 49- .for spoiled stamps", but, as a matter of fact, the section does not relate to stamps "spoiled? "

in_ the physical sense, that is to say, a stamp which is covered with inlr or the like. It deals with ages where, although expenditure has been inctnred on a stamp, the paper' has " become useless by reason of one or more of the several circumstancw enumerated in the "section. '-1- _ Of the four clauses in the scction,--clauses (a), (b), (c) and (d),---'clauses ray "and

(b) are primarily meant to" apply to instruments which are not executed by any person, while dunes Le) and (d) are primarily intended for instruments which are wholly or partly executed by some person but have failed in their object or become" redundant because of some special Clause (c) is conﬁned to bills of exchange and promissory notes,--in respect otewhiti a special provision was needed, having rega.ni- to the aspect of. uegotiability. ..Clause (43; Which. in practice, is the clause most often resorted to, provides for starmpt used for"anj strllﬂmt which is executed by a party but has failed in its object or become redundant. _Suc_I_i failure or redundancy may be due to a legal iiaw rendering the instrument void ab r'ru't:'o---subi {1)---or error or mistake----sub-clause (2)--or death of a party--sub-clause (3)---or of a person-- --sub-clauses (4) and (5),--or other causes---sub--clauses (6), (7) and'r(8)'.-' 20.3. Under the proviso appearing below clause (ti) of section 49, the grant of refund is '~' pmyiso and cnllliisnal. It postulates, as a condition, that in the case of an executed instrument, no"le'giri WW9 hag:

been commenced in which the instrument could or would have been given or "Dana mu-on Oiilnd '3 evidence, and that the instrument is given up to be cancelled. The condition that 49('33ﬁl- t1l.:.inIl'un:tent should not have been given in evidence creates some problems, where ureftmd is: agplied for under clause (d) (1), which applies where the instrument "has been afterwards' ﬁlﬂito be absolutely void in law from the beginning". Where an instrument is found Yby,-rite"

themselves to be void without an order of the court, this proviso creates'no' problems?' But, 'ﬂare a document is found by a court to be VOW, the document ,WC_0l.1Id have been s

-in etiﬂce. and as the law now stands, the refund of the duty cannot be 'granted in such it of the condition. : The position-is not accidental, but is a result of n_.,deeision than at the time when the present Act was passed. It was then thought, that,' in England, ifjlsﬂlgment is fbtmd by a court to be void, refund is not allowed} ' _' V Engli_sh_ provision"----scct:ion 9(7), Stamp Duties iMana_gcmen_t._.Act_', _1_8_91,_,1-'ends- ' "9. Sub_iect'_ ti» such regulations as the 'may thiilk pmpe:-rts.:as_1ta+ and to the production ct. -such stInutory.dee1aracton.-'on;.uﬂ1crw;i§p,~,-- as the Commissioners may require, allowance is to be sinners for stamps spotted in the cases hereinafter mentioned; (that is to 's_a}g,)'t-1:} "[7] The Stamp for any of the instruments;

(a) An instrument csecuted by any party ﬂsémtu, 'but afterwards found to be-abso; lately void {rum the beginning g". . _ E . , -

1. section 9 (7). Stamp Duties Management Act, 139: (54 & 55 Vic. 933}.

151 152

l 2&4. 'iwtatever be the English law, the restriction in s. 49 causes hardship, because 13,. "mm, a legal decision is, in most cases, necessary to determine that an instrument is void all initio. In such cases, the document has to be. given i1.1.¢i-fidence, but the claim for relief" or the defence is based not on the document but on extraneous circumstances. The restriction has been criticised in England also. It stands to réasort that in' such-'cases, the Collector should be empowered togrant refund, and we recommend that the proviso should not apply to such noose, i.e., lo a case falling under s.eetion_49(d) (1). ' Points in regard 20.5. In support of the above discussion several points could he urged{ The ﬁrst-'point "° "°" '"'"'"' to be noted is that the case where the' instrument is declared to be" void by the court is not basically different from the case where it is foundtohc void by' thoparties themselves. Whether it is the parties which find that the instrument is void, or the courtiwhich holds it-to-"i:re so, the consequence is the some, namely, the instrument does not operate by reason-_oi a ﬂaw recognised in law as having that cﬁec.t.- e -- - -- e .

. 'I-'he objection could be raised that ---whcrc.1l1e:pn;r1__ies approach the court, the time the court is spent -on determining the vclidityof the instrument. But the answer tofthis objection is that, for the tiine of the court so spent, the __fee is dealt with in the C.'ou1't--_fees Act. ' "

20.6. The second point to he made is that, in the case of'an instruttient declared to be void, there is even a greater reason for"-relief" than-in the cases dealt with in section Ilﬁtdl; clauses (3) to (8). In the' other cases,'it'can _Ee"said that it' is the contluct:'of -sornefbthol' person that made the instrument futile, and theercveuue should not suffer for'thcse'«.-tceiﬂeulilg or simlar circumstances. ' In the case of a-*"v'oid instrument, however, there"is do such cincams-é tance, and even it all the events_'are- favourable andiall the-parties cooperate, the instrument caunotscrveits purpose. ' i * ' ' "' ' 23?. Thirdly, it is to be pointed out that an instrument which is given in,,evid_e_nce forgthe purpose of declaring its invalidity, .is not "acted. upon?' in the sense? in which that ('expression is ordinarily used. Relief is given not.in jutherance of the tnst'r_utnc11t,__ but opp0sif_t'_§rd'to the instrument. , _ _ _ A, T p _ _p 1 _ 20.8. Fourthly, the' ccn_ditio1_'-t'. ment_ifo£usd_ in the proviso should 'niit{be insistcdiopon-Where the instrument is declared void by the joou1"t.' In cases falling under other'c_l'nirsesJ of 49, the condition that the ittsuumcnt shotdd not have admit.ted'in etiideneé' lh"I'"!¢si'-I proceeding, causes no haIEl$llip_bECaI15E.;7L iii' those other cases, the oth_er_" legal could have proceeded without anigri speciiicﬁdjudication about the question Whether'-"that-"

meat did, or did not, fall within section _49_(_d) (3), '(_-'1] etc. 3' In theecase "of an iostr'1rii1ettt"wI'l8t is void and so declared, however, tliejdonditlion causes peculiar hnrd.ship._ '4 A' 1-"-'5 i' V53

--- to-I--. ., .'. .t_..<. ,_.

'_ 20.9. Fiithly, the" question ntafy bciraisiede-whji a party should» seek aoiudicialewﬂliﬂtiii nul1it)'- A in I" "I"! i ""7 ii " Z "

"e -' »- ' -- H -'.'.f-'T- ..'t5"'£'.'.'.£TJ'"-'§l--'_-'i ii In answer, it mav'ibe'ip-ointézi out '-tﬁit there-Fore runny .situatiD1ts-'.i,vhere.it_--is; to obtain at judicial' vedict. Et -mnyhybe ..iP1'~.'.3331l1P1,€s- Where onc,gf_:%' rues does .. A: ::':.:'.v.:.'' not admit the invalidity, ancl.-the other-.;9§r$1z---g'g0;-,qu0t6_--.=Lh§=Spﬁ¢iﬁc Rei1¢L£...A .'--''has a;

mu' « __

-- . r.:.-.-- . , ., , ._ __;_r_','', _'*__- '_*_-«I-;_*.r:._ _ 20.10. 5ixthIy,_ in most of the ottterceses-pdea_lt_with in section .49[d,'I, the object of the document has not is'u'bst"einl5oiijri "while, inthe': 'case ot.o.<§voi:t'insnument. not any has the object not-been r.arri=d.out-irot- a_1-vcit cos.-not br:,._9,a_r-_1:I1_es1 91J.t_.;*_,..._.._._..

1. Mason v. Motor Traction Coo1Daui'.(1905J 1 Cbmcery 4195. T-:51-' ii-'-':"'i :.'.1- -'

2.. As tothe expression "acted upon" in forjudicial usage soc Para.rbrnrn,Y.,Laks#J_vtr})df. _4t_1t_sg,__t_ry_p-r»n,:_,.

3. S. 31, Speciﬁc Relief Act. 1963. _- _

4. Samples of situations involving void documents-Appendix.

reasonttﬁlc 'apprehension that--the. .-£0 I.*°--!!1.ii71.!1',1i=§tI;1_£$'_1ii-'!LI13?l_i-I;I£3:i"-'31' ""55 bim-

153

20.11. The following re-draft of the relevant portions of section 49[d)(l) and the proviso, indicates roughly the amendment which could be made to implement the point made above:-- -

Re-draft recommended "(1) has been afterwards found by the parties to be absolutely void in law from the I beginning :

(IA) has been afterwards found Why the court to be absoiuieiy void in law _fram- the beginning, under section 31 of the Speciﬁc Reiief Act, 1963.

C It II * 3 it "Provided that--

ii} in the case oi an executed instrument other than one failing tinder -sitb-clause (IA) of clause (of), no legal proceeding has been commenced in which the instrument could or would have been admitted or offered in evidence, and

(ii) the instrument is iven n to be cancelled, or has been airecriy given at to 3 P P _ lite court to be cancelle ."

We may mention that the suggested amendment has been favoured by most of the replies tonal' Questionnaire.' ' 20.12. Section 50 provides that the application for relief under section 49 (refund in respect of spoiled stamps) shall he made within the period speciﬁed in section 50. The periods are two months and" 6 months respectively,-----two months if refundis claimed on the ground of refusal of a party to act under an instrument or to advance money thereunder or to -accept any oﬂice thereunder, and 6 months in other cases. There is 21 detailed provision in the proviso for computing the starting point of the period of 6 months, in certain spcicale cases.

20.13. It should be pointed out that although the section prescribes the time limits men- tioned above, in practice they were found to cause considerable hardship. In the beginning, the Central Government, by executive orders, permitted the local governments to grant refund within one year, but even this concession was not found to be adequate, and, in 1908, by a Resolution, Local Governments" were authorised to allow, irrespective of any' time limit, or renewals of spoilt or useless non-judicial stamps, or the repurchase of non_-judicial stamps no longer required in cases in which holders of such stamps had, without any fraudulent m_ot't've,'been unavoidably prevented from making application within the period prescribed by M. .

20.14. We are of the opinion that in view of what is stated above, thcftirne lin:tit'i__n smtion 50" should be made more liberal. Section 49 already empowers the State Government tifniilte rules 'as to the evidence to be requiredcr the enquiry to be made before ref_un_d can under that section. Dishonest clairnstfor refund are thus provided against.-_AVtig, centers, think that section 50 should be made._n1ot'e _libc1'al. We may state at large-'nt_1._I_nbc,r at the' -replies"to our Questionnaire" agree.3 we recommend that th_c period;-und_er-.sect:t;n 50 should be one year from the date of discovery of circumstances giving»-rise,-to thc..u_:l_a_i_§n for refund. This will avoid hardship in many situations and is, in any case, a rational course:

. . .-229.15. It sometimes-happens that. bankers or companies or other corporations fgcttaf number of faults printed in respect of instruments frequently 'used.by them, and suchtfortnssare p'_r_i_1gt'_ed o1..cpuped:.papers- "because -the instrument are chargeable with duty._ '.Lat,er,__itsoch for-ir_|s'_'_t:;_'c_-.'§tf,°._,i_=. to_be=roqu_ired by the banker-or con1pany..o1' .corporation, andthe money spentfon goesawaste. This may patiticularly _happen where business is to be wound up. i_ Section 51 provides for such cases, by empowering the Chief Controlling Revenue Authority to aﬂowance for the stamp papers so used, if satisﬁed that the duty in respect of -such stamp

1.. (SBCﬁ.C|lIl _ ' '_ : ' _ -, __:__:_ -_ r_

2. Resolution of the Gov'ert'_m'1ent'of India in the Finance hie. 4333-Exc.. dated the ]_4r.h_August,-l__9l'l3.

3. Question 53 (section 50}. -' " ' "' Section 50-

Introductory.

Hardship caused 1'? "ii"?! '_ Scenes 51.

Section 52.

iii?

to"?

154

papers has been duly paid. This power can be delegated to the Collector by the Chief Controlling Revenue Authority.

No changes are required in the section.

20.16. Stamps are sometimes inadvertantly used in situations where, notwithstanding the expenditure on the stamp, the stamp does not serve the purpose for which it is intended. This situation arises, for example, where the stamp used is of a description other than that prescribed for such instrument by the rules made under the Act, or where a stamp of greater value than was necessary is used, or where the instrument is not chargeable with any duty, or where the stamp has been rendered useless under section 15 by reason of the fact that the instrument was written in contravention oi' the provisions of sections 13 and 14, dealing' with the mode in which an instrument should be written and prohibiting the use of a stamp paper for more than one instrument. I-"or -stamps so misused, an allowance can be made under section 52 by the Collector, on an application made within the prescribed period.

As regards stamps of an improper description, :1 party has an alternative remedy, namely, getting the instrument certiﬁed under section 37. If he does so, then the. procedure under section 52 will not apply. We are recommending an amendment of section 3? whereby it will not be necessary for the applicant to pay the duty again1 where he resorts to that section.

The case under section 52, however, stands on a different footing, because, under section 52, .

the applicant will get back the money value of his misused stamps of improper description?

"It is not, therefore, necessary to amend section 52 on this point.

tion is'?

20.17. It is, however, desirable to widen the scope of section 52 in relation to stamps Ii improper description, as recommended" under section 37. M We may mention that such an amendment has been favoured by many of the replies to our Questionnaire.' -

20.18. Although the Act contains elaborate provisions as to refund of stamp duty in certain cases, an important case----duty paid by .rnistake----seems to have been left "to implication. A recent decision reveals this lacuna, which, it seems to us, requires consideration. ' It has been held by the Andhra Pradesh High Court5 {Majority viewlthat a case of voluntary or mistaken payment of stamp duty does not fall under the Act. It is not covered by any provision in the Stamp Act, empowering the Board of Revenue to refund the excess stamp' duty paid, voluntarily or by ntistuke, by a party. The Chief Controlling Revenue Authority, which is the Board of Revenue, is not, therefore, competent to direct refund of the excess stamp duty paid voluntarily or under a mistaken impression of law by the party at the time of the registration of a document. _. ' 20.19. This ruling was given on at": reference made by the Board. In order to appreciate the scope of the reference in the Andhra case, it is necessary to state the facts that gave. till.'- to the question. Sri Jasti V'cn1."ntaratnam- and his sons had executed a documcrl _s "sale deed" on June 12, 1962, in favour of Shri Manganti Suryanarayana (-thepunitiriner) respect of a land for a consideration of Rs, 53980. _ . .. i _" ' F : T.

-- The "purchaser?-pa'id a sum of -Rs. 1,000 as advance, and agreed to pay the balance of the sale consideration with interest on 'lube 11, complete the transaction. '11_ie "purchaser was put in possession of the document was registered as document Nb. 13114/I52 in the Sub-Registraris Oﬂice, the requisite stamp duty for a sale deed. In accordance with theterms stipulatediir -Ikeahuﬂ '1.' See recommendation as to section 3?.

'Z. See section 53.

3. cf. recomnlcndalionas to s. 37.

_-1g._Qt1e_sticn 59 (section 52}.

5. S' I Mmrgontl Surgiaraoroyano V. The Board of (itfearly Digest for March, 1976, column 533); A.I.'R. 197-6 A.P. 150 (May, Gourrrme.-it ofAndkro rmdesh. t_19z5) 2_A.P.LJ_-

1976 par-t----ma.tor1tr rm). .

znieésni toss and to obtain another deed Isofas ta.

155

' dated June 12, 1962, another document was executed on September 2, 1963, whereunder the executant-vendor acknowledged the full consideration (i.c., the intended sale amount and the interest thereon). It also indemniﬁed the claims against a loss to an extent of Rs. 2,700. The document was executed on a stamp paper worth Rs. 4-4 only, treating it as a "supplemental deed" conﬁrming the original sale deed which was registered as document No. 20l4.;"62. The Sub--Rcgtstrar, Kaikalur, before whom the second instrunlentwas presented for registration, impounded it as deﬁciently stamped. On a dispute raised by the petitioner with regard to the nature of the second document, the District Registrar, Krishna adjudicated the document as a regular deed of sale for a cash consideration of Rupees 6,492 and ordered the collection of the deﬁcient stamp duty of Rs. 475 together with a penalty of Rs. 5. Aggrieved by the decision of the District Registrar, the petitioner ﬁled a revision petition under section 56(1) of the Act before the Board of Revenue which framed the following two issues for its own consideration and order:

(1) Whether the earlier document executed and registered as document No. 2014,16?

of S.R.0. Kaikalur was a sale deed for a consideration of Rs. 5,980 or an agree- ment to sell 'E' and

2) Whether the subsequent document executed on 2-9-1963 is a sale deed for Rupees 6,492 or a supplemental deed conﬁrming the earlier sale with an indemnity for a sum of Rs. 2,700 ? .

2.0.20. The Board of Revenue, on a consideration of 'the facts aﬁd circumstances, held that the first document which was styled as a sale deed, was only an agreement of sale, executed to record the receipt of a portion of the purchase. price in order to safeguard the pa-chaser against fresh demand as the purchaser was put in possession of the land, and that ' the second document was a regular sale deed for a case consideration of Rs. 6,492 and, therefore, the ailing: duty as a Sale deed was leviable on it.. Inthe result, the Board of Revenue upheld the decision of the District Registrar and allowed the revision petition on March 9, 1965, observ- ing-thit "since stamp duty leviahle on a sale deed was collected on the earlier document, the pity is at liberty to seek refund of the excess duty paid under section 45 of the Stamp Act and that the party may approach the District Collector, Krishna under section 45 with a "refund 'o9Pt!1!4=ﬁﬁ°ﬁ '£10.21. The Inspector General of Registration and Stamps, Andhra Pradesh, Hyderabad however pointed out to the Board of Revenue that stamp duty on the first document was paid It had not been paid either under section 35 or section 40 of the Act.

Section 45 of the Act was conﬁned to the refund of stamp duty charged either under scction=35 or section 4-D, and so the petitioner was not at all entitled to the refund. The Board of Revenue, after examining the entire material on record, realised the mistake committed by it on being apprised by the Inspector General, Registration and Stamps, and rectiﬁed its earlier order dated 9-3-1965 in so far as the observation relating" to the refund of stamp duty on document No. 20l4f62 of S.R.O. Kaikalur was concerned, aﬁer affording reasonable opportunity gtoﬁae petitioner A. Writ Petition ﬁled by the petitioner to quash the aforesaidorders of the of Revenue was rejected by the High Court 'on 22,1963. ' A Division Bench .al|bIiqd -the Writ Appeal preferred by the petitioner the order of dismissai of the-'writ directed the Board to make _a reference to the High under section 57 of as, in ILS opinion, a substantial question of law ﬁose. Hence this reference to Highfourt. ' ' 9 ' _ The High Court held by a majority that there was no provision in the Act empowering the Board to direct refund of duty pald voluntarily or under mistake.

_ 20,22. One need not examine the correctness sofithe conclusion reached by the High Ccurtron the present law. But the resultant position is hardly satisfactory. - o 7 Where tan is not legally leviable and yet has _been paid, it. ought to be r'efunded,----snhject, of course, to such safeguards of limitation and deduction for ctiice expenses as_ are To Nee¢Iﬁ:'Irﬁ$.

Position under the Income Tax Act-

Reoounmendation ' twice m .

sectim 521:).

-- .1

2. 1 for spoiled or misused stamps, the Collector may V4.

' 6. G£i'l'& Ca. 1'.

156

adhere to the old doctrine that money paid under mistake of law cannot be recove1'cd...ia inequitable. There ought to be some provision empowering the Board to grant refund in such cases. One could even construe the expression "inadvertantly" in section S2(a). as covering the permit the citizen to do so, we situation, but, since the judicial construction now does not should be added after the word recommend that the words "or by mistake of fact or law"

"inadvertantly" in section 52(a) at both the places.

20.23. it may be noted that under the Income--tax Act' if any person satisﬁes the ll1COIl1B- tax Oﬂiccr that the amount of tax paid by him or on his behalf or treated as paid 'by.him or on his behalf for any assessment year exceeds the amount with which he is properly charge- able under the Act for that year, he shall be entitled to a refund of the excess. In the actual administration of this section, or in the case law reported thereon, one does not ﬁnd any limita- tions to the effect that the overpayment must have been made in particular circumstances or for a particular reason. There are, no doubt, procedural formalities and also a period of limita- tion ( current period is 2 years). But. there is no substantive restriction on .the right to refund. If the Income-tax Oilicer does not grant the refund within three months from the prescribed date, there is even a provision for interest.

M According to thepContract Act', a person to whom money has been paid, or anything delivered. by mistake or under coercion, must repay or return it. This section is wide enough to cover mistake of law.' ' ' ' 20.24. The settled position in law, as tax levied by mistake as laid down by the Supreme Court,*--''-" is that where tax is levied "by mi:-' ~ take of law, then ordinarily it is the duty of the State, subject to any provision of the law relating to sales -tax,_to refund the tax.

it could have been argued that even in the absence who paid the duty could have claimed refund may have thought that the general principles, were conﬁned to a -tax' collected unit:

In the Andhra Pradesh case, therefore, of a speciﬁc statutory provision, the person on general. principles. Perhaps, however, counsel illustrated_by'the judicial decisions referred to above, a positive order of a taxing oflicerand may not his own calculations. Section 72, Contract Act (money 20.25. In the light of the above discussion, we recommend that section 52(a} should he paid under mistakes was not discussed)..

revised as follows :--

"S23 (a) When any person has inadvertently or by mistake of fact or law--'-

(i) used for an instrnrnent' chargeable with duty, a stamp of a description other than that prescribed for such or

- (ii) used a stamp of greater value than was necessary, or

(iii) used any stamp for an instrument not chargeable with any duty ;-or".-e _,,-_,'.«' royirled for allowance for spoiled stamps, or if 20.26. Sections 49 to 52 having p forms no longer required or misused stamps, this allowance is to be made. The section enacts that in any case in which allowance gt ' ' ' give in lieu thereof,----(a} other "stamp _' "iii the saute description and value; or (b) if required and (if) he thinks ﬁt, stamps er ' .' Section 237. Income Tax Act, 1961.

Section 72, Indian Contract Act, 1872.

. Sir snag Pros-ad v. Mnharaha smr. Clmnci-a (1949) 15 LA. 244, 52 Born. La. 17, s.1.n. 19:9 I':-I3. ma Pannanlal v. Pmducc.E:Itchang: Corporation (1945) 2 Cal. 41. A.I.R. 1946 Cal. 245.

l' approving Iagadish Prasad , , _ Industries, (1965) 16 S.'!'.C. 689 (s.c.), referred to in the Yearly Bigeut fl96$}'K.L.R. State of K.-zraia v. Aiumirrfum 52.3

5. Static ofildadhya Pradesh :2. Sheila! Biol'. A.I.R. 1964 S.C. 1000, 1010, para 14 to 1?. Cam.-nerciol tax Oﬁicer. Civil Aippial No 1580-1595 1968 22 S.T.-C. 524'{S.C.l regards the liability of the State in regard to sales be applicable to a taxﬁwhich a citiren pays on instrument by the rules made under this -A12, _ section 53 'contains a precise pmiiisisaoas a crisis'), dated?-.2-1968 (1953) SC» line 80, .

157

description to the same amount in value; or (c) at his discretion, the same value in money, deducting 10 naye paise for each rupee or fraction of a. rupee.

There are several points of rlctail which require discussion.

_ (i) It is not very clear whether this section applies also where the allowance is made in case of printed forms under section 5 l, and we think that that should be brought out, by providing tliat. the section applies.

(ii) Secondly, so far as clause {e} is concerned, the grant of refund in cash is discretionary with the Collector, but we are of the view that it should be mandatory, because a party will have no use for other stamps if given 'under clause fa). In fact, a party cannot, in general, sell stamps.' tiii) Thirdly, when refund in cash is granted under clause (c), the present section requires a deduction of 10 naye paise for each rupee or fraction of a rupee which, we think, is rather on the high side. The amount was originally one anna per rupee and was, in 1958, on the intro- duction of decimal coinage, relaced by H) nayc paise as a routine. There is, however, in our view, scope for a more lenient provision in so far as refund under section S3(c) is concerned.

(iv) Fourthly, there seems to be some obscurity? as to whether the deduction of ID paise per rupee under section 53 is to be applied in respect of the totalled up value of the stamps of the instruments, or whether it is to be applied in respect of each stamp. This obscurity should be removed by adopting the first alternative.

--('I') Fifthly, so far as refund in the situation dealt with in section 51 (printed forms no longer required) is concerned, justice requires that there should be no deduction, because here it is by reason or cirdumstances beyond the control of the party that the printed forms have -

become useless.

- (vi) Sixthly, in other situations, the deduction can be said to represent ofﬁce expense, in- curred on applications for petty amounts which may be ﬁled with some frequency. But, here ayin, iris fair that there should be a suitable maximum in respect of the deduction on each transaction, say, 5 rupees. Oﬁice expense on a particular transaction is not, in the generality of cases, likely to exceed ﬁve rupees. - ' ' :_(vii] Having regard to our viewi that the action under clause (c), i.e. refund in cash, sllmﬂd be the rule rather than the exception, that clause should appear before the other clauses.

. e (viii) Finally, as to clause (b) which deals with refund in the form of stamps of other description, we are of the view that the Collector shouldjhave no discretion. If the applicant that form, it should be allowed.

20.27. In the light of the above discussion, we recommend that section 53 should be revised as follows : ' Revised section 53 ' 53. if 1) In any case in which allowance is made for spoiled or misused stamps under section 4901- section 52, or in respect of printed' forms no longerl required under section 51, the Col- ler_:_tor_ may give, in lieu thereof,---

(a) the same value in money, deducting, subject ro the provisions of sub-.5.'ection- (33:

five pairs for each rupee or fraction of a rupee, or

(b) if the applicant so requires, other stamps of the same description and value ; _or_

(c) if the applicant so requires, stamps of any other description to the same amount in value. '

1. Section 69.

2. See the differing directions given in the various Stamp Manuals.

3. See discussion, supra point (ii).

14 M of Law}T.t--7S Recommendation.

158

(2) T he deduction under clause (it) of subsection (1)-

(i) shat! be caicuiated on the total value of the stamps ,-

{ii) shaft not exceed five rupees; and

(iii) shall not be made where the aifowance is granted under Section 51.

We may mention that the suggested amendment has been favoured by most of the replies to our Questionnaire.' Secﬁcn 54- 20.28. Section 54 rcads--

"54. When any person is possessed of a stamp or stamps which have not been spoiled or rendered unﬁt or useless for the purpose intended, but for which he has no immediate use, the Collector shall repay to such person the value of such stamp or stamps in money, dedncting- ten naye praise for each rupee or portion of a rupee, upon such person delivering up the same to be cancelled, and proving to the Collectors satisfaction--

(a) that such stamp or stamps were purchased by such person with a bone ﬁde intention to use them ; and

(b) that he has paid the full price thereof ; and

(c) that they were so purchased within the period of six mcﬂtths next preceding the date on which they were so delivered :

Provided that, where. the person is a licensed vendor of stamps, the Collector may, if he thinks ﬁt, make the repayment of -the sum actually paid by the vendor without any such deduction as aforesaid."

In "this section also, the provision as to deduction should be amended on the same lines as? in section 53, as recommended. ' We may mention that the suggested amcntfment has been favoured by most of the replies to our Questionnaire.' ' 20.29. According to section 54A, notwithstanding anything contained in section 54, when any person is possessed of a stamp or stamps in any denominations, other than in denominations of annas four or multiples thereof and such stamp or stamps has or have not been spoiled, the Collector shall repay to such person the value of such stamp or stamps in money calculated in accordance with the provisions of sub-motion (2) of section 14 of the Indian Coinage Act, 1906, upon such person delivering up, within six months from the commencement of the Indian Stamp (Amendment) Act, 1953,. such stamp or' stamps to the Collector.

Section_ sol.

The section needs no change.

swﬁ°n_55_ 20.30. According to section 55, when any duly stamped debenture is renewed by the issue month, rcpayto the person issuing such debenture, the value of the stamp on the original or on the new debenture, whichever shall be less': ' The proviso requires that the original debenture should be produced before the Collector and cancelled by him in such manner as the State Government may direct.

of a new debenture in the same terms, the Collector shall, upon application made within one H Under the Explanation, a debenture shall be deemed to be renewed in the same terms within the meaning of this section notwithstanding the following changes :-- s

(a) the issue of two or more debentures in place of one original debenture, the total I amount secured being the same ;

1. Question 60 (Section 53).

2. See recon-u-nendation as to section 53.

3. Question 61 (Section 54).

'.........'

----ow DO---l_a\t.n.p.tp[gi---

159

(b) the issue of one debenture in place of two or more original debentures, the total _ amount secured being the same ;

(d) the alternation of the rate of interest or the dates of payment thereof. No changes are needed in this section.

APPENDIX 'Ti Some sample situations where an instrument would be void1

1. An agreement by a minor is void." In general, a transfer by him is also void.3 If the parties knew that one of the parties is a minor, the need for applying section 49(d] (1) would hardly arise, because the agreement is not "found to be void". But cases can arise where one of the parties does not know that the other party is a minor, and a suit is ﬁled to obtain a. declaration that the instrument is void. .

2. An agreement which defeats the provisions of any law is void} A transfer defeating a law is also void?' At the time of the formation of the agreement or execution of the instnnnent, the parties may not know that the agreement violates some law. For example, it is agreed by a charter party 'that a ship then in country X should go with a_cargo of bay to Before the date of charter party, an order is made and published under legislation relating to Contagious Diseases of animals, prohibiting the landing of hay from country X to Y. The parties did not know of this notiﬁcation, and the master learnt it for the ﬁrst time on arriving in country Y. Nevertheless, the charter party wduld be void. Where a contract is to do a thing which cannot be performed without a violation of the law, it is void, whether the parties knew the law or not."

3. An agreement may be void by reason of a mistake of fact common to both the parties. There is the familiar situation of an agreement relating to a subject matter contemplated by the parties as existing, which, in fact, did not exist. There is the illustration given in the Contract Act," where A agrees to sell to B a speciﬁc cargo of goods supposed to be on way from England to Bombay. It turns out that before the day of the bargain the ship carrying the goods had been cost away and the goods lost. Neither party was aware of this fact. The agreement is void.' The decision in such cases of mistake, as Lord Wright has said," turns on.-the_.gqge§§i9u whether the mistake was "suﬁiciently basic". The case of Belt V. Lever _Brori_F1ers"' derhﬁaihﬂns how it may not always be easy to- determine whether the agreement is void by reason of in such cases,--thereby illustrating why it is often advisable for a party to obtain a judicial verdict as to nullity. . ' ' -

4. A minor himself may challenge an agreement as void,;hecause...it-'_-was entered by a person who was not his guardia_n,'1 or -by a guardian but without legal competence to enter into the particular transaction."- - ' -- ' . These cases did not involve stamp duties, but relate to the validity of the transactions. . Section 11, Indian Contract Act. - . . .-- - -

. Section 7, Transfer of Property Act. - ' . Section 23, Indian Contract Act.

. Section 6 Ch}, Transfer of Property Act. _ See discussion in Waugh v. Morris; (1373) LR. .3 QB". 202. . Section 20, Contract Act. ' -- : ' - ' " .

. Compare Couturier V. Hearts. (1856) 5 House of Lords cases GT3, and EB. Lawson (1236) 52 L.Q.B. 79, article "Error in Subs:ann'a". .' . '- ' ' ' ' ' ' ' . -. F. t -

. Lord Wright, Legal Es5ays,page 214. _ - -

. Beii v_. Lever Brothers, (1932) All 161. ' , . Cf. (a) Imambartdi v. Haji Marsaddi, A.I.R. 1918 RC. 11, 13.

(b) Kammscmi v. Rabin:-H Amman', A.I.R. 1933 Mad. B06, B13. . Jafar Ah' V. Standard Co., A.I.R. 1923 RC. 762.

r---

h) Introductory.

Sectiouiﬁ.

swlilsl SHI-

CHART ER 21 REFERENCE AND REVISION SECTIONS 56--61 21.1. From the sections which we have so far considered, it would have been evident that the Collector is the most important public officer vested with primary responsibility for the administration of the stamp laws. The manifold functions exercisable by him render it necessary that there should be some authority which can control the exercise of his function not only to correct errors of judgment blut also to secure improvement in the administration of the Act. That authority, again. can conceivably commit mistakes on questions of law. It is desirable that such questions should, so far as the particular State is concerned, be decided by the High Cdurt, since, in the Indian legal system, the High Court is the chief judicial tribunal for questions of law. The provisions which we proceed to considcr--sect.ions 56 ct seq--are important from the point of View just now mentioned, even though they may not interest the ordinary citizens who has had no occasion to litigate before public officers questions of stamp duties.

21.2. It is for this reason that section 56 makes detailed provisions whereunder the supervision of the Chief Controlling Revenue Authority over the Collector is ensured in all important cases. Under section 56(1), the powers exercisable by a Collector under Chapter IV 'and Chapter V and under clause (a) of the ﬁrst proviso to section 26 shall in all cases be subject to the control of the Chief Controlling Revenue Authority. These provisions embrace several im- portant functions. ' Further, section 56(2) provides that if any Collector, acting under section 31, section 40 or section 41, feels doubt as to the amount of duty with which any instrument is chargeable. he may draw up a statement of the case, and refer it, with his own opinion thereon for the decision of the Chief Controlling Revenue Authority. t According to section 56(3), such authority shall consider the caseanrl send a copy of its decision to the Collector, who shall proceed to assess and charge the duty (if any) in con- formity with such decisions. ' t 21.3. On sub-section (2), a Supreme Conrtl case may be referred to. It was held in that case that the Chief Controlling Revenue Authority is a quasi-judicial tribunal when a reference is made to it under section 56(2). It was, therefore, necessary that the executant of the document should be heard in such a reference. 'I'h.c--Sapreme Court pointed out, that the question to be decided by the Chief Controlling Revenue Authority would be one of law, and may result in the payment of large amounts by executants of a document. This judgment should be deemed to-

have overruled an earlier decision of the Allahabad High Court? which was to eﬁect that there is no provision in the Stamp Act forsending a notice of hearing to the executant. The clariﬁcation

- by the Supreme Court is welcome. It may be stated that the position in this respect was, to say the least, obscure before the judgment.

For example, in :1 Madras casc,""it was held, that there was no right to any oral hearing when the Chief Controlling Revenue Authority was seized of a matter under section 56(1). It was stated that it is enough if suﬂicient opportunity to state their case is given." The discussion in another Madras case' seems to consider hearing necessary, under section_56(1). Be. the question of oral .':earz'ng was not in issue.

1. Board of Revenue v. Vidyawatf, A.I.R. I962 S.C. 1217, 1220. para 5-6 fwanchoo, J.)

2. Karav Prarad v. Citiefconrrqlffng Revenue Authority, 'A.I.R. 1955 N.U.C. 3561 (ML. Chaturvedi, 1.).

3. In re Siliarimuglra .'l»t'url'-criliar. (1950) 2 M.L.J. 399 (Rajaroannair C..l. and Balakrishna Ayyar J.).

4. Aminmalat v. Dr'.sm'cr Registrar, A.I.R.. 1966 Mad. 36, '37, 39 {Paragraphs 3 and '9).

160 161

_/ 21.4. In our opinion, it would be useful, if in section 56(3), after the words "such authority", the words "after giving the parties a reasonable opportunity of being heard" are added, in order to codify the position resulting from the judgment of the Supreme Court.' We may mention that the sugested amendment has been favoured by most of the replies to our Questionnaire." We, therefore, recommend that section 56(3) should be amended as above.

21.5. Section 57 provides that the Chief Controlling Revenue-authority "may state any case" referred to it under section 56, suh~section (2), or otherwise coming so its notice, and refer such case, with its own opinion thereon, to the High Court speciﬁed in that section. It further provides that every such case shall be decided by not less than three Judges of the High Court to which it is referred, and in case of diﬁerence the opinion of the majority shall prevail.

21.6. Though the word used in section 5?, sub--section (1) is "may", it has been held by the _St1prcine Court that" a reference is mandatory. The sub-section thtis imposes a ri'ui'_v on the authority to state the case, if a substantial question of law is raised.

21.7. It has further been held4 by the Supreme Court that this duty to make a reference is notaﬁected by the question whether the case is pending before the Authority or not. The Supreme Court has observed that the Authority is in a similar position as the Income--tax Appelktte Tribunal under the analogous provisions in the Income-tax Act. ' 2'1-8. In our view, it is desirable to codifythe proposition judicially laid down"' about the duty to make a reference. It is also proper to emphasise that the reference can only be compelled on a substantial question of law.

21._£A. In cases where the reference under section 5'! is heard by a High Court consisting of_glicss'-than tlirec Jtitiges" or by the court of a Judicial Commissioner? having less than three Comnziissioriers, the present provision for hearing by a minimum number of three Judges is imptssible of compliance. Such cases should therefore -be excluded from sub-section (2), for obvious reasons. ' 21.9. The question may be raised whether the presentprovision for. three Judges should . be retained at all.' We are, however, of the view that the. importance, frequency and universality of questions artsing under the Act renders desirable retention' of the present scheme. Moreover, there hasbeen no practical diﬂiculty resulting from the present scheme. We, therefore. prefer .to' "retain the present provision,----of course with certain changes to be presentlynoticed or "already noticed.' _ 21.10. Though the Act does not speciﬁcally state that the "Chief Controlling Revenue Authority should formulate the question on which the opinion of the High Court is sought,

-judicial decisions hold that the question should be formulated.' Since the High Court cannot express its opinion on matters not referred to it, it is advisable that there should be a provision in the.Act for the formulation of questions." We recommend an amendment of the section for the present purpose.

,..--

1 Para 21.3. Supra.

' Question 62 (section 56).

3 Vanarnrhi Des v. Chief Controlling Revenue Srqar Miflr case. ALR. 1950 S.C. 218.

3 Bar-iamsi Dar v. Clrfefconrrolling Revenue Authority, Delhi, 5 Pare 21.6, supra.

Authority, Delhi', A.1.1_L 196$-s.c. 497,352, para 9 citing 'i'iiraiiai;isiiim' A.l.R. I958 S.C. 4'97, 502, para 9.

_ 6 For example, Sikkim.

T As to Judicial Cornrnissi-oni:rs( see also discussion) infra. ' Para 21 .SA. SHPV-=1 ' Whey Construction and Dei-elopnienr Conipany v. In 91, para 6.

1" Cf. Order 46, rule 1, Code of Civil Procedure, 1908.

specter Genera! of Stamps, A.'l.R. 1967 Andhra Pradesh 90, Recommendation as to section 56(3).

Section 57'-

Introduction.

Word "rnIy" in sub-action (1).

Section not limited to pending cases.

Recommendation as to duty to make a reference. .

Number of .

Judges.

Forrrlulaticn of questions by the Chief Controlling ' Ailhorit-y.

Meaning of "High Court".

Present practice of enumeration not convenient.

r_-klternativm for improving the position.

Case of Union Tcrritory.

162

We may mention that the, suggested amendment has been favoured by most of the replies to our Questionnaire."

21.11. We next come to the court to which a reference can be made under section 57. The section contains a long list enumerating the various High Courts. There was need for such an enumeration at a time when British India comprised a few areas where there were no High Courts but only Courts of Judicial Commissioners; and, apparently, the intention .

was that in relation to areas where there were only Courts of Judicial Commissioners, the reference should be made to the speciﬁed High Court. For example, in relation to Ajmer and Merwara, it was provided that the reference under section 57 should be made to the High Court at Allahabad. It may be of interest to know that after a long enumeration, there was a residuary clause whereunder, in other cases, the reference was to be made to the High Court at Fort William (Calcutta).

21.12 This general structure of the section has so far been maintained, though the textual details have changed from time to time, and the legislative practice has been to substitute the name of the appropriate High Court whenever constitutional changes necessitated such a substitution. The result of this practice has been that every time when a new High Court is created or the jurisdiction of a High Court is extended over a Union Territory or a new Union Territory is created, an amendment of the section becomes necessary. In this process, the enumeration sometimes becomes incomplete also. For example, the ofﬁcial text of the Act, as modiﬁed upto 1st March, 1970, does not mention anything about Pondicherry, though it appears that" as regards Pondichcrry the mention of the Madras High Court has been added separately. The Union Territoryof Goa, Daman and Diu also does not ﬁnd a place in the present enumeration. Thus, the present, practice is cumbersome, and if a simpler method could be substituted, the change would be worth considering. a 21.13 For improving the position in this regard, two alternatives could be considered. Either the enumeration of High Courts may be totally omitted, leaving the matter to be governed by the general provision in the General Clauses Act'; which provides thtat "High Court", used with reference to "civil proceedings", shall mean the highest civil court of appeal (not iuciucling the Supreme Court) in the part of India in which the Act or Regulation containing the expression operates. Another alternative would be to insert, for the purposes of section 57, a suitable deﬁnition of the expression "High Court". Here a precedent is furnished by the Contempt of Courts Act*, which provides that "High Court" means the High Court for a State or a Union Territory, and includes the Court of the Judicial Commissioner in any Union --

Territory. We prefer the latter alternative, since the ﬁrst alternat.ive~--namely, relyingon the General Clauses Act-----n1ay lead to a controversy whether proceedings by way of reference are or are not "civil proceedings". There is no doubt that they are: but a controversy should be avoided.

2l.l3A. The question may be raised whether the adoption of either of the two .aIternatives§ would not mean :1 change in substance as regards those Union Territories in regard to. which they are Courts of Judicial Commissioners.

21.14. In reply to this objection, it may be stated that the present sectionpis silent as to such Union Territories, so that even now it can be 3-T3116'-'1' that the C0011 05313 hldlcial Commissioner is: by virtue of the General Clauses Act)" to be regarded as the High Court However, even if this view is not correct, we do not see any for the purposes of section 5?. _ _.

strong reason why as reference under the Stamp Act Should will be matdﬁ '00 F115 C0'-11'.l. €55 the Taucstion 63 (Section 57} - _ _ '_ = Pondichcrry (Extension of Laws} Act (25 o["1963l.S-chcdule. Part-2. msertms section 57 (set, as follows =---

"(so if it arises in the Union Tc-rritoI'Y 0f P°""ichcrrr. to the High Cvurt of Mamas-"

3 Section 385), General Clauses Act, 1897.

" Section 2(d), Contempt of Courts etc. Act, 1971.

5 Para 2|-12, supra.

6 Section 2{i3}, General Clauses Act, I397.

163

Judicial Commissioner. These Courts decide various questions of law under the Code of Civil Procedure and other laws,' and can be safely entrusted with the duty of deciding references glider the Stamp Act. Incidentally, at present, the only such case is the Union Territory of on.

21.15. Accordingly, we have come to the conclusion that in section 57, a suitable deﬁnition of the expression "High Court" should be substituted, on the lines of the definition in the Contempt of Courts Act.

of 21.16. in the light of the above discussion, we recommend the following re-draft section 5?.

Re-draft of section 57 (I) The Chief Controlling Revenue Authority may state any case referred to it under sub-section (2) of section 56 or otherwise coming to its notice, and refer such case, with its own opinion thereon, to the High Court, for:-nuiartng precisely the question on which opinion of the High Court is requested :

Provided that where the case involves a substantial question of law, and a party interested makes an appiication 2'.) the said authority without unreasonable delay for making such reference, the said amhority shall make such reference."

ExpIanation_----in this Chapter, "High Court" means the High Court having iurisdiction over the State or Union Territory, and, in relation to a Union Territory, includes the court ofa judicial cor-nnn'.9.vioner.

(2) Every such case shall, where the High Court consists of three or more Judges, be decided by not less than three Judges of the High Court to which it is referred, and in case of difference, the opinion of the majority shall prevail? --

21.17. Section 58 provides that, it the High Court is not satisﬁed that the statements contained in a case forwarded under section 57 are sufficient to enable it to determine the questions raised thereby, the Court may refer the case back to the Revenue Authority by which it was stated, to make such additions thereto, or alternations therein, as the Court may direct in that behalf.

21.18. Under the scheme proposed* by us in regard to section 57, a reference can also be made to the Judicial Contrnissionefs Court. However, the deﬁnition of " Igh Court"

' in"that' section (as proposed) will apply to section 58 also. No further comments are needed with reference to section 58.

21.19. The procedure to be followed in disposing of a case stated under section 57. is dealt with in section 59.

of any such case, shall decide the questions raised thereby and shall deliver its judgment thereon containing the grounds on which such decision is founded. the Court shall send to the Revenue Authority by which the under the seal of the Court and the signature of "on receiving such c0135', dispose of the case Under sub-section (2), case was stated a copy of such judgment the" Registrar; and the Revenue Authority shal, conformably to such judgmen ".

21.20. It appears to us that in sub-section (2), the words "dispose of the case" are inappropriate in regard to cases where the matter has been already disposed of by the lower auﬂmrity. Having regard to the wide scope5 of section 57, such a situation can conceivably a arise. _ 1 Sec:ionHi(d), Cotempt of Courts Act, 1971, Para 21.13, .ru_ara. ' Cf. section 259, Income Tax Act, 1961. ' 3 Cf. section 96 (2), Code of Criminal Procedure, 1973.

' Sac recommendation as to section 57.

5 Para 21 .7 supra.

Recommendation Re-draft as recormnended.

Section 53.

Section 59-

-Sub-section (1) provides that the High Court, upon the hearing I1"1'°'3"'-'t°1'Y-

Section SH2).

Recommendation to amend section 59(2).

Sect'toni50---

Introductory.

Points for inter-

pretatiou.

lilkcfaeuce not competent after impo.mding _a

(ii) 'Reﬁt:-en_ce mutter section 5'7' 3°' °'i'"P"""' section 60. It can, however, proceed under sub-section (2) Of SB'-'--Ti013 51- i 2 at appell stage.

164

21:21. Although it can be stated that the reference to the High Court implies that" the matter is at large, it is desirable to amplify section 59(2) to make the language appropriate for a situation where the principal case has been already disposed of by the lower authority.

The direction in sub--section (2) to the effect that the Revenue Authority should "dispose of a case conformably to the judgment of the High Court", becomes inappropriate when no case is pending before the Revenue Authority, and the case referred by the Board relates to one already disposed of by a lower authority. The procedure for a reference to the High Court by the Chief Controlling Revenue Authority applies equally when a case is not pending, as where it is pending' Hence, it is desirable that section 59, sub-section (2), should be amended by using language more ﬁtted to the case. Unless the revenue authority has still resting upon it the duty of disposing of a case, the present words are not appropriate. They are more appropriate to an actual and concrete case pending before the revenue authority.

We therefore recommend that these words should be replaced by the words "shall pass such orders as are necessary for disposal of the case confonnably to the judgmen".

In this connection, we may cite the precedent contained in the Income-tax Act,"-' quoted below.

"Z60 ( 1) The High Court or the Supreme Court upon hearing any such case shall decide the questions of law raised therein, and shall deliver its judgment thereon containing the grounds on which such decision is founded, and a copy of the judgment shall be sent under the seal of the Court and the signature of the Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conforniably to such judgment. .

(2) The costs of any reference to the High Court or the Supreme Court which shall not include the fee for niaking the reference shall be in the discretion of the Court".

21.22. This takes us to sectiofi 60. In the case of courts other than those mentioned in section 57, if the Court feels a doubt as to amount of duty to be paid in respect of any instrument under proviso (a) to section 3.5. the Judge is, by section 60. empowered to draw up a statement of the case and refer it, with his own opinion, for the decision of the High Court to which, if he were the Chief Controlling Revenue Authority, he would refer the same under section 57. This is the main proposition enacted in sub--section (1) of section 60, while sub--scctions (2) and (3) deal with matters of detail.

21,223.. There seems to be a certain amount of obscurity as to the precise stage at which such reference could be made. Some of the points in this connection have COEUC up for decision before the High Courts and, on those points, the relevant judicial decisions furnish some guidance. But it must he stated that the position on those points is not very apparent from the language of the section ; and in order to make the section self--eontained, it is desirable to insert necessary clariﬁcation on the various points, which are enumerated below.

21.23. In the first place, the Judge desiring to make the reference must entertain a_ doubt as to the amount of duty to" be paid before making the reference. It follows that cannot do so where he already considers the document not fully stamped and impounds it. In such a case, he has to send the in_strument3 under section 38 to the Collector, and it IS for the Collector' to certify that the document is duly stamped, if the Collector takes that V3CW-

Therefore, it is not competent for the Judge who impounds a document I0 T930351 *0 93*.

procedure for reference under section 60. 'I'hisshould be made clear. - .

21.24. In the second place, the Appellate Court cannot resort to section 60. The.AppeIlat Court is bound by section 36, and, therefore, cannot proceed to make a rctere§i1_cc5£,unde_,1':

1 Section 57.

9 Section 260, Income Tax Act, 1961.

3 Section 38.

' Section 40. _ 5 {3} Reference, (1388) l.L.R. 11 Mad, 33.

(b) Somayya v, Anjaneyulu, A.I.R. 1935 Med. 332.

165

21.25. Thirdly, after the levy of penalty, a reference _will not be competent under this .s_es':_tio'r,1 even at the instance of the trial Judge. _The case is.diiiercn_t_ where the Judge had alrcadjtldctcrmined, to'm"al-re the reference before' thclevy' of'thc"penalty. though the actual reference was framed after such levy} ' i -

:2l'.26. In the result, the section should be amended on the three points mentioned above?

21.27- We, therefore, 'recommend that the following sub-sections should be added in

- section 60. .

"{4} No court shaii take action under this section where the case is one to which section 36 nppiies ; bur nothing in this .rub--secrion shat! affect the provisions of section 61. ' (5) No action 5114:!!! be taken under this section where the imrrimreny hr.'s already been impounded or a penalty ievied in respect thereof under pror;'vo (a) In section 35". ' We may add that most replies to our questionnaire" are in favour of such an amendment.

. 2_1.28.y The provisions so far discussed related to references under the Act. Powers of "courts are dealt with in section 61(1). It is concerned with two sit1.1ations--(a) where, in the'enu'rt of ﬁrst instance, an order admitting an instrument in evidence is passed because the instrument is regarded as duly stamped or as not requiring a stamp, and (b) where such order ispassed because there has been payment of duty and penalty under section 35.

"Section" 61(2), which is concerned with the powers of t_h_eAppellate Court (or Court of Reference), is also intended to deal with both these situations, namely, (a) where the Appellate ﬁgure i;s'of_ opinion that such instrument should not have been admitted in evidence without the. payment of duty and penalty under section 35, and (b) where the Appellate Court is of opinion that the instrument should not have been admitted without" the payment of cl' higher duty and penalty than the duty and penalty paid in -the court of ﬁrst instance. -

2l.29. Thus, both sub¥section (I) and sub'-'s'ection (2) of sections 61'"-can be. divided into two parts, dealing respectively with the two situations mentioned" above.' In the present oi' the two sub--sections, this aspect is not brought out clearly. We are of the opinion ' that'-it would be useful if both the sub-sections are split up into clauses, so as toiindicate that 'cacl1"pd1'ti applies to one or other (but not both) of the two situations: Such re-"structuring has been favoured by most replies to our Questionnaire also.' . |- -

21.30. We, therefore, recommend that section 61(1) shouldbe revised as follows :

i"ﬁ1i('1]'. When any court in the exercise of its civil or revenue, jurisdiction or any Criminal Count in any proceeding under Chapter 'IV, or sections 145 to 143 of srhe Code of Criminal Procedure, 1973, makes any order admitting any instrument in evidencc---- T 7 "

(a) as duly stamped or as not requiring a "stamp, or ' Tb)" upon payment of duty and a penalty under section 35, 'the Court to which appeals lie from, or references are H-niade by, such first- mentioned Court" may, of its own motion. or' on the application of the Collector, take such order into considercation for the purpose speciﬁed in_snb-section (2).'' '--{A ;similar amendment to be made in subsection (2) will be indicated at the appro- priate plaoe). ' ' ' ' ' 1 ,3_ Mojunidnr v. M. sarkai, s.1.n. 1922 Calcutta 452, 453.

- Parl21.23to 21:25 supra. -

I Question 64.

¢ Question 65.

24 M of I..aw,'77--2?.

(iii) Reference notﬁomplnlmt '.

after penalty.

Recommdation Recommendation.

Section 6].

Recommendation. .

61(2).

Recommendation.

f Section 61(3).

166

21.31. The above scheme involves certain structural changes in section 61(2) also. Certain other points may be considered, with reference to sub-section (2). It has been" suggested that if a party wants to pay penalty, he should be allowed to do so, and not be driven to the Collector, as at present. The present provision for mandatory impounding should, it was sug- gested, be modiﬁed, to provide as above. As against this, it has been stated that such amendment would create practical problem. In pursuance of the decision of the appellate Court, the Collector should be allowed to realise the penalty, as at present. If the above change proposed purely for convenience of the citizen, is carried out, the apprehension has been expressed that the judicial function of the appellate Court and the proposed administrative work of realising the amount-, may get jumbled up. It is the stamp revenue in issue, having nothing to do with the appeal. We have, after careful consideration come to the conclusion that it may be worthwhile to carry out the suggestion. ' Replies to our Qucstionnairel also mostly favour the change, We recommend it. We also propose a slight restructuring of section 61 (2), for the reasons already indicated.'-' 2.1.32. We, therefore, recommend that section 61(2) should be revised as follows :--

"(2) If such Court, after such consideration, is of opinion--

(a) in the case referred torn clause (a) of sub-section (1), that suck fnslrunaqrrl should not have been admitted in evidence without the payment of, penalty under section 35, or . .

lb) in rllr case referred to in clause (la) of .rub--section (2), that such instrtnnient -

should not have been admitted in evidence without the payment of a higher duty and penalty than those paid, ' - , .-

if may record a declaration to that eﬁect, and determine the amount of duty with which such instrument is chargeable, and may require any person inwhose possession or power such instru- ment then is, to produce the same, and may impound the same when produced. _ Provided that rvlzere such person is prepared to pay the duty and penalty, the Court shall Jacéept the some and shall not lrnpound the instrument."

21.32A. In section 61(3), it would be necessary to deal with the situation when, lbesids the declaration by the court, the penalty has also been recovered, in consequence of su_h-sectinjn (2) as proposed to be amended. Accordingly, sub-section (3') should be revisetlr and -new. sections added, as follows :---- - r -;

"{3} When a declaration has been recorded under sub-section (2)-.--- _

(a) the court recording the same shall send a copy thereof to thetlollector, and lb) where the instrument to which it relates has' been impounded or is otherw'me_ in the possession of that court, shall alsousend him the instrument, and mlzere the cmmm! of and penalty has been paid under the prmiro ta srrb-section (2), shall Sdnd to the Collector an authenticated copy of instrument, rogerlrcr with a certiﬁcate in writing, storing the _amj_o1,m£ of duly lo) and penalty levied in respect thereof, and shall send such amoral! to the C93-_ lector. or to such person as he may appoint in rkzlr beizalf.' (SA) When the duly and penauy levlable in rupee: of any instrument have as'. ' paid under ml:-section (3), the Court shall also certify by errdoruemau than-' -

on mat the proper duty or the proper duty and penalty strztﬁrf 'rise amoﬂ of each have lie'!!! levied in respect thereof, and the rtanie and the person paying them. _ H 2 1 Question 66.

' Para 21.29. supra.

3 Compare section 33.111).

resiknce 01 16?

(313) Every instrument so endorsed shall thereupon be delivered on his application in this behalf to the person from whose possession it come into the hands of the Court, or as he may direct a person outohrised by him."

21.33. Section 61(4), it would be noted, while empowering the Collector to prosecute any person. in respect of whom an order has been passed by the appellate court by section 61(2), enacts, in proviso [a], that "no such prosecution shall be instituted where the amount (including duly and penalty which according to the determination of the court, court, was wyable in respect of the instrument under section 35, is paid to the Cotlecior, unless he thinks that the offence ' was committed with an intention of evading payment of the proper duty". r This will require modiﬁcation in order to deal with cases where the duty and penalty have beenalroady paid in court, under the new provision recommended by us to be inserted by way-ot proviso to sub section (2).

21.3#. In section 61(4), and in proviso (b). the reference to section 42 will require to be changed into a reference to section 41, having regard to our recommendation" to transpose sections 41-42.

APPENDIX Provisions for hearing by Judges of £1 particular nmnber. occurring in selected enactments Indian Divorce Act. 1869, section 17 mi mlion 3_ (Conﬁrmation of di-

valﬂ printed by district court].

c_.;ai.ur Criminal Procedure, 1913, ﬂilhni 95(2)' and' section 211:) [1 _ _ p to High Court to set.

i Illsiaration of forefeiture of . }-

-2 Sacﬁon 369, Code of Criminal Pro-

ouim. I973 (Conﬁrmation of death sentence).

(a) Three Judges where the number-

of Judges is three or upwards Majority to prevail.

(b) Two judges where the number of Judges is two--View of Senior judge to prevail.

Section 96(2) provides that every such application shall, "whereithe High Court oonsits of three or more Judges, be heard and ' by a 5 Court composed of and "whom the I-Fgh sists of less than three such special Bench shall ppsedofall thcdtldatsofthat igh Court."

Conﬁrmation of death sentence, or passing of any new sentence r order of High Cottt "Shel, such Court consists of two or more Judges, be made,-' passed and signed by them."

do-

peehlBcachot'Il,igh.

Act Provision for 'minirnurn'numbor of Deﬁnition of "High Court"

- Judges

- Imotsu-mt Act, 1961. section 259 Not less than two Judges of -the "High Court" is deﬁned in terms " of reference made by High Court which exclude Judicial Commis- ' ]. sinners (See section 269).

"High Court" is deﬁned in terms which exclude Judicial Commis-

' sioners.

Section 2(e} deﬁnes "High Cottrt".

In relation to a Union terntory other than the territory of Delhi, it means the highest Court of Criminal Appeal of that terri-

tory other than the Supreme Courrof India. -

See above,-'under Code of Criminal Procedure, 1973, section 96(2).

1. t'f§£'."5_;:tion'3s{1).

1 Egg" I tion as to sections 41-42, supra.

Section 61(4) Introdultory Section 62--

. Intnaductortr Mealaing of.

needed.

tion CHAPTER 22 OFFENCES: SECTIONS 62 TO 69 22.1. We now come to the provisions of the Act relating to oﬁences.

The provisions relating to offencees may appear to be heterogeneous and are, in fact, .«so'._' to some extenL There are provisions dealing with speciﬁc conduct, such as failure to-cancel an adhesive starnp (S. 63), refusal to give a receipt (s. 65), failure to make out :1 policy is. 66}, drawing post-dated'l*-ills or marine policies (s. 67), and breach of" rules relating to "sale of stamps" (s. 69).

The ﬁrst is section 62, which imposes a penalty for executing an- instrument not duly stamped? and -for certain other action taken in relation to an instrument not adequately stamped. A more serious oifence is constituted by section 64, which punishes certain act$_'.I:loI1'¢.ﬁvilh. intent to defraud the Government. Those acts may consist in failure to set out the facts" and circumstances in an instrument or--vide clause (c)------"any other act calculated to deprive"

the Government of any duty or penalty under this Act."

Then there is section I33, under which not only the post--dating of a hill is punisl1ed_-- this is a speciﬁc act-----but any person 'who, with intent to defraud the Government. of duty "practises or is concerned in any act, contrivanoe or device not specially provided for by this, Act or any other law for the time being in force" is also punished. _This statrds midway between sections 62 and 64- It is obvious that the same act may fall under severalsections with varying penalties,+a situation which is by no means satisfactory.

While it is not our intention to suggest: -a radical re--arrangem'ent of the sections, we do consider it necessary that the overlapping between some of the provisions should be removed. 22.2. To begin with, section 62(1) punishes any person---

(a) drawing, making, issuing, endorsing or transferring, or" signing otherwise. than' as a witness, or presenting for acceptance or payment, or accepting,'_pojIng or receiving payment -of, or in any manner n_egotiating,'an'y bill of exchang'e,'-jsay- able otherwise than ondemand or promissory note without the same being duly stamped; or - H

(b) executing or signing otherwise than asia_w'itn,i.-ss any other instrument chargeable with duty without the some being duly stamped ; or _ ' I (c) voting or attemptingto votelunder. any .proity not dulystarnpedz' 7 "T ' ' The punishment is line which": may extend to 'ﬁve--hundced rupees for every such oﬁence.

tinder theproviso, when any penalty has been paid -in respect of any instrument under section 35, section 40 or sectionﬁi, the amount of such' penalty shall 'be al1owed;'iti_,1;e_t1:_|ctitnr:

of the ﬁne 1' if any) subsequently imposed under this section in respect of the. salute-

upon the person who paid such penalty. --

We shall deal with sub-section (2) later.

22.3. lt has been held'. that in section 62(i](a), the word 'accepting' does not mean 'receiving'. It means "executing as an acceptor". Therefore, a person who merely receives an unstamped promissory note and puts it in a suit, is not guilty of an olfence under section _

62. It is desirable to bring out this aspect more clearly, by a suitable amendment. Only the person who makes the hit] of exchange. or promissory note, and not the person in whose favour it is made, should be liable? under section 62(1) (a).

1. Wﬂueen £;':1_1p-re.;vi oimram Hu.rsa:'n, (1334: I.L.R. 7. Mad; 771, 713'.

, 2_ Queen Enrpremr v. .»'Wulr.:r.I' Clzrnrd, (I398) I_L.R. All. 440.

168

Three sections in this Chapter, however, are of a_ more general chajracter-.' 169 22.4. The above point deals with questions concerning promissory notes and bills of'ex- Whether DEISDB change in the context of section 62. A controversy in a more genera] form has also arisen mumpgdm under this section, namely, whether receiving an unstarnpcd instrument amounts to abetment i!'3-t1'|1l'4""-'-T"

of an offence. So far as section 62 is concerned, the question has now been answered by all '5 °' High Courts' in the negative, except by the Madras High Court.'-' This also appears to be the English law.-"' 22.5. It is desirable to make suitable clariﬁcation on this general point' also, by codifying Desirability the majority view. Mere receipt of an unstainped instrument should not be regarded as abet- g';riﬁca,ion_ n_1en_t, where there is no instigation or other prositive act by the receiver. Of course, where, on the facts, incitement can be proved, the conduct will amount to abetment. For example, a creditor prrzrruring the signing of an improper entry in his account book may be guilty of abetment, by reason of such procuration.

22.6. We may borrow an example from Oliver Twist? In that novel, Fagin, after getting Siltcs to say that. he (Sikes) would murder. any one who" should betray him, wakes up Noah Ciaypole, Fagin rnakesyhirn (Slaypole) tell Sikes that the girl Nancy had betrayed him." As Sikssrusltes out in a passion, Fagin says, "You won't be too violaut, Bill; I mean not toqviolcnt for safety". Discussing the legal signiﬁcance of these facts, Stephen' says, "I think that the,1_\t_l_i_ole conversation taken together would be evidence to go to a jury, that Fagin did 'counsel' or fprocure' the murder committed by Sikes, which would make him an accessory before the fact: but if he had conﬁned hiniseif to nierefy telling Sikes what Claypole said he had" heard, it would not have been enough."

_ This hypothetical illustration shows the distinction between active instigation (on the one hand) and passive inaction (on the other hand}.

21,7. So much on the question of abetrnent. Clause (b) of section 52 uses both the Sm,-0n_53,[b)_ egtpressions "executed"' and "sign"- The expression ''executed'', with referenc to instruments, is deﬁned'-'_ in the Act, as meaning "signed". The word "excuting", in section 62, clause (1) (b), must mean very much the same as 'signing", and it must: be held to mea.n."signing" so as to complete the document so that it may have full legal effect"

32.8. Where-certain parties to an arbitration signed an unstamped award, not as witnesses but by way of assent, (though this was unnecessary), it was held'! that they were not liable ' under section o2( 1) lb). The High Court observed--

"It is impossible to say that every person who writes his name on a_ document of this nature otherwise than as a witness has committed an offence under the Act, because, ii that was so, even a Judge who signed the document as an exhibit would be liable to _a fine. It is a pity.' _No. deﬁnition isgiven in the Act as to the rneaning of the expression 'signing o erwise than as a witness'.".

This point does not necessitate an amendment.

E T '2'2.9.l But there is another matter which needs amendment. The Act speciﬁcally provides" P535 9f in section 43, proviso, that a prosecution cannot be started -in the absence of pi-"r-of of a. dishonest inmﬂ

1. (R) v. Janki, -(1333) I.L.R. 7 Born. 32,-33.

"an _ Qiceen Empress v. Mirhulaf, (1335) I.L.n.s A11, 18.

2, -I.L.R. 23 Mad. I55, 158 (Case under old section 67----Observations as to old section 62). 3_._. Litre. v Magpie, (1907,) 77 L_J._ ten. 55, 59. _ .

4; 'sg'é'uses-listed in Chhangnnlnl v'. Emp. A.I.R. 1934 Nag. 251, 2'63. i.-'ott'vi-it C11aptcr,4-7. -

. Ollie: Twist, Readers' Enrichment Edition (1966) p. 397.

Sltcphen. Digest of Criminal Law, 3rd Ed. page 152, note.

. See Howells v. Wyime, 15 C.B.b{l.S. 3.

. Section 2(12].

. Emperor v. Brig' Pa! Saran. (1910) I.L.R. 32 All. 198 (per Richards, J.) I1. Emperor V. Err)" Pat' Saran U910) [LR 32 Al'! 1.98.

12. See section 43, proviso.

hi GVDQU;--ION Vicarious Liabi|ity--

Subsection (2).

'Vicarious liability In general.

Recommendation.

17!), intention to evade the payment of stamp duty,' where penalty has been paid. This, in our view, should be expressly stated in section 62 also. In fact, we are of_ the opinion that intention to evade payment of duty should be an essential ingredient of the offence, in every case under section 62, and we recommend the insertion of a proviso to that etiect. If this recolm-' ntendation is carried out, obviously it will not bepnecessary to refer to section 43, provisof 22.10. As regards vicarious liability under the section, one particular case of vicarious tiability---cotnpanies---is dealt with speciﬁcally in sub-section (2), (in relation to the issue of share warrants). That sub--section is as follows :----- _ "t2) it a share warrant is issued without being duly stamped, _the cornpa1_iy_ issuing the same, and also every person who, at the time when it is issued, is the managing director or secretary or other principal officer of the company, shall be punishable with ﬁne which may extend to ﬁve hundred rupees'? _ _ 22.11. The position regarding vicarious liability in general, i.e., in cases not dealt wi in sub-section (2), is outside the section. It was held in a Calcutta case," that where a servant.

in the course of his employment gives an unstamped receipt for an amount exceeding Rs. 20]-, the master also can be held guilty of an offence under this section. Prime facie, itappears to- us that this view may require reconsideration.' In fact, we may note that a different view was taken in a later case' of the same High Court, where a sole surviving partnerof a "ﬁrm was- held not liable for the clerlr's failure to given stamped receipt. "We have carefully considered the matter, and are not inclined to recorrimedd any widening of the scope" of the present pro- vision. . -

22.12. ln the light of the above discussion, we recommend that section 62 should be revised as follows :----- ' e "62. (1) Any person-

(.a) drawing, malring, issuing, endorsing or transferring, or signing otherwise than as a witness, or presenting for acceptance or payment, or e.tecut:'ng' as an acceptor, paying or receving-_payment of, or in any manner negotiating, any bill of exchange (payable otherwise than on demand) or promissory without the same being duly stamped ; or ' ' - "

eitecutingior signingotherwisc 'than as a witness any' other instrument charge~ able with duty without the sameheing duly stamped 3; or . .'

(c) voting or attempting to vote under any proxy not duly stamped ; ' ' ' l -on "' shall, for every such nﬁ'cnce,*be pinishable with fine which may extend to live hundred" rupees. _ I "Provided that, when any": penalty hits been paid in respect of any instmrnent under section 35, section 4t'J_ or section 61, the amount of such penalty shall be allowed in reduction of ﬁne {if any) subsequently imposed under this section in respect of the same instrument upon the person who paid such penalty. 2 ' "i"row'dedji.rmc_r that norizitzg. in this" section shall apply unless the net IS ,doncp'with' . the Intention of e,i_rua'mg the of stamp duty. . , N I Exploitation.----A pt*r.son who receives' an tmstamped instrument does not. :ne_r¢rly by become guilty of trbetmenr of an offence under git':

a reason of such receipt, sec:a':'ori. .

(2) If a share-warrant is issued Without being duly stamped, the cornpan the same, and also every person who; at the time when it is issned,_i.s,the' ,:

. (a) Knmhai}-a Lo! v. Emperor, (1919; 54 Indian cases 405 (Allahabad), distinguished in nszs) at A-'.L.'1. _j

(b) Compare (1933) 146 Indian cases 1055 (Lahore). - -

. Compare section 35, Companies Act, 1882 (repealed). . _' Queen Eirzprggs v. Khetfer Molten, (19{lJ) I.I..R. 27 Cal. 324, 332, 333; 4 C.W.N. (Prinsep and Hill _- ' . Golom Horror}-2 v. Emperor, (1904) B C.W.'N. 3'i"S,'380.

U\l:._L4ot-«J . See para 22 (9). . If this wide change is made, a savingfor section 43, proviso need not be introduced.

171

director or secretary or other principal ofﬁcer of the company, shall be punishable with fine which-may extend to hve hundred rupees." ' ' - ' ' " "

22.14. We may mention that the suggested amendment as to section 62(1)(a), and -the added Explanation, and the added proviso saving section 43, proviso. has been favoured by most of the replies to our Questionnaire.' 22.15. 'Ibis disposes of section 62. It will be convenient at this stage to deal with one new provision which appears to be necessary. In our .view, where the court of ﬁrst instance had. admitted an instrument after a speciﬁc decision that the instrument was duly stamped or that it did not require any stamps, there should be no prosecution. Such a provision should be inserted in the Act, say, as section 62A. What we have stated in this paragraph represents what we contemplate as the gist of the new provision. There should, we hope, he no dilﬁculty in putting it in precise legislative language. Such a provision is needed because the very fact that one court has decided that the instrument did not require stamp aﬁords very cogent pounds for assuming not only that the parties did not wish to evade duty, but also that their legal understanding was prima fncic justiﬁed. In such circumstances, :1 prosecution is, in our opinion not justiﬁed. t ' 22.16. Under Section 63, any person required by section [2 to cancel an adhesive stamp. and failing to cancel such stamp "in manner prescribed by that section", shall be punishable with ﬁne which may extend to one hundred rupees. The only change required is addition of the article "the" before the word ''manner'', which we recommend.

.-22.17. Section 54 is one of the important penal provisions of the Act. Clause (a) of the section punishes a person who executes an instrument which does not fully and truly set forth the circumstances which are, by section 2?, required to be set forth. Clause (b) punishes a pﬁson who, while employed or concerned in the preparation of any instrument, neglects or units -to set forth those facts and circumstances." Clause (ac) punishes a person who, with intent _to defraud the Government, "does any other act calculated to deprive the Government of any penalty under this Act." - e 22.18. The ambit of clauses in) and {b) is obviously limited, being, speaking broadly, ﬂnﬁied to a lull and true statement in the instrument of the relevant facts. But clause {c) is wide. and the question that has arisen is whether clause (C1 is to be construed ejusdem ganeris with the preceding clauses (a) and (b) 2, or whether it is not to be so construed." The actual controversy has arisen in respect of a person who receives an unstampcd instrument; but it could arise in many other situations. - i * l 22.19. The marginal note to the section would seem to support a narrower view. No doubt, the wording of clause 1' c) is capable of a wide construction; but, if taken literally, it would take in almost every case which falls within another sections--sectioil 62,, Of course, 62 does not require an intent to deir' :1, while section 64 requires such intent. But would' he overlapping as regards the' co uct punishable under the two sections. Again iiilnishment under section 62 (fine up: to live rupees') is milder than that under section 64 (ﬁne up to ﬁve thousand rupees) ,--apparently because section 62 does not require men: rea at present. It can, therefore, be argued that clause (c) of section 64 should be given ya entitle construction in order to cover cases where intentional evasion of duty has taken place. Even then, it appears reasonable to exclude, from clause (cl, cases not analogous to clauses (a) and (is). Under the present wording, section 64, clause (cl overlaps not only section 52, but also section 68, as is explained below. ' t " T "

_ 22.20. Section «:4, clause (cl overlaps clause {is} of section ti8,------which punishes a _ _ 11, who, with intent to defraud the Government of duty, "practises or is concerned in any _iia?eﬁ"it§ontrivauce or device not speciﬁcally provided lor_by'this Act 'or any law for the time T: "in force." (Punishment is fine upto one tiicusaild rupees). The ingredients are so that most cases which fall under one will alsollfall under theother. '"

1 Quantansv. " ' t ' Cldmkmal v. Emperor, (l9l6) l.L.R. 44 Cal. 32}; AIR. 1967 Cal. 655.

' [1934) 153 Indian cases 952 (Nagpur).

Section 62A (New).

Section 63-I-Re commendation, Section 64- Introductory.

Controversy as to clause to).

Ovwlnppine hstweeliaetion .

ﬂtclnudrueqiup 6U{cJ. ' ' 172 In fact, section 64(c} would even cover many. acts covered by specific laws. .. For example-_, the act of manufacturing or selling fictitious stamps wouldfall under section 64_(c'), thougl1_J-t_l_sat act is an oﬁence under the Indian Penal Code. It would not fall under section 68(0), because the acts speciﬁcally cox ered by the Penal Code are excluded by section 68(e). In this respect, section I34(c) creates an anomaly. ' i ' ' i ' 22.21. In view of the wide scope of section 64(c) as explained above, and the overlapping between section 64-(c) and section 63{_c] as mentioned above, as also the anomaly referred to above, it appears to be desirable to conﬁne section 64(c) to acts analogous to violations of section 27, say, false statements If whether made in an instrument or not), calctilateid toideprive the Government of duty or penalty. e ' R=¢0mU1"="d3"P" 22.22. In the light of the above discussion, we recommend that section ﬁnite) should be to amend section . _ 549:1 revised as follows : -

Revised sectiorr '54-f c)

64. Any person who, with intent to defraud the Government,-----

III it til It 9|! it

shall be punishable with ﬁne which may extcndto ﬁve thousand rupees.

We may mention that the suggested amendment has been favoured 'by most of the replies to our Questionnaire.' ' - ' swim 55.. 22.23. Section 65 punishes person who,--

A and t. ' ' i m mm (a) being required under section 30 to give a receipt, nefuses or neglects to give the same ; or - i ' 5

(b) with intent to defraud the Government of any duty, upon a payment of or delivery of properlgs exceeding twenty rupees in amount or value, gives a receipt , for an amount or value not exceeding twenty rupees, or separates or divides-the money or pwl erty paid or delivered. a The punishment is this which may extend to one hundred rupees.

The amount "twenty rupees" should be replaced by "one hundred rupees"? in view "of 30 as proposed. . -

e 22.24. According to section 66, any person who,--'

(a) receives, or takes credit for, ' y premium or consideration for. any of insurance and does not]. one month after receiving, "or for, such premium ,.or. consideration, make out and execute a. stamped policy of such instlrance ; or . . . _ , . .

(b) makes, 'executes or deliver: out any policy which is not duly stamped, or-jiys or allows in account, or agrees to pay or allow in account, any'n1oney51'apon, or in respect of", any -such policy, i ' . i " ' shall be punishable with ﬁne which may extend to two hundred rupees. We have no comments on this Section 51 . 22.25. Section 67 punishes any p=rson_i1ra\,vingi.or eiiecuting a tiiil: of exchantd;

otherwise than on demand) or a policy of marine 'insurance purporting t0_bc drawn are _ fit a set of two._or more, and not at the same time drawing 0I..B.secuting..on 'Question 68 [Section 64(c)].

' Cf! amendment as to section 3-0.

173

stamped the whole number of bills or policies of which such bill or policy purports the set to consist. The punishrnent is line which may extend to one thousand rupees.

Though the language is somewhat involved, the substance is clear, and needs no charge. :22.26. Section 68 is important, and may be quoted in full.

"68. Any.-"person who, ~--

(a) with intent to defraud the Government of duty, draws, metres or issues any bill of exchange or promissory note bearing a date subsequent to that on which such bill or note is actually drawn or made ; or {bi luiowing that such hill or note has been so post--dated, endorses, transfers, presents for acceptance or payment, or accepts, pays or receives payment of, such bill or note, or in any manner negotiates the same; or

(c) with the like intent, practises or is concerned in any act, contrivance or device not specially provided for by this Act or any other law for the time being ill force;

shall be punishable with ﬁne which may extend to one thousand rupees."

With reference to this section, we have olfered our comments under section 64.' It may be noted that clause {cl is new, and seems to have been modelled on section 21 of the Stamp Duties Management Act, 1891 (Eng). which reads as follows."

"2I. Any person who practises or is concerned in any fraudulent act, contrivance or device not specially provided for by law, with intent to defraud Her Majesty of any duty, shall incur a ﬁne of 50 pounds."

No change .5 needed in the section.

22.27. Section 69 punishes---

{a) any person appointed to sell stamps who disobeys any rule made under section

74. and lb) also any person not so appointed who sells or offers for sale any stamp other than 10 naye paise or 5 naye paise adhesive stamp.

The punishment is iinprisnnmcnt upto six months or ﬁne upto Rs. 500 or both.

In so far as the section relates to private persons dealt with in clause (13), the prohibition against the sale of stamps by a private person is, in our opinion, too widely worded, inasmuch as a person having surplus stamps which he purchases ham: ﬁde, is prohibited from passing them on for consideration to another person who requires them. It is, in our view desirable that the prohibition in clause tb), should be restricted to persons who sell stamps as b:ts.I'm;s.r, and not to persons who have to sell a stamp in an isolated transaction.

22.28. It may be noted that in England, the penalty is not for unauthorised sale of stamps or private sale of stamps, but only for unauthorised dealing in star-i-ipr. S The relevant provision-'* is quoitcdbelow :

"4. ii) If any person who is not duly appointed to sell and distribute stamps deals in any manner in stamps. without being licensed so to do, or at any house, shop, or place not speciﬁcd in his licence, he shall for every such offence incur a ﬁne of twenty pounds.

(2) If any person who is not duly appointed to sell and distribute stamps, or duly licensed to deal in stamps, has, or puts upon his premises either in the inside a See discussion is £3"s'.'Is4, g;,.;};;,' ' ' Section 21, Stamp Duties Management Act, 1891 (Eng.).

' Section 4(1), Stamp Duties Management Act, 189] (5-1 3: $5 Victoria c. 33).

24 M of Law,'77--23 Section 68.

:Penalty for post-

dating bills. and for other devices to defraud the revenue.

Section 69.

Position in England.

174

or on the outside thereof, or upon any board or any material whatever exposed to public view, and whether the same be aﬁxed to his premises or not, any letters import in or intending to import that he deals in stamps, or is licensed so to do, he shall incur a ﬁne of ten pounds."

Need for 22.29. We are of the view that since there can hardly be an serious abuse when 'the """°"d'"°'"' sale is conﬁned to isolated transactions, the English provision is perferable in substance. In ﬁre d present scheme of the Act, a person who has unused stamp has to approach the Collector :1__ Obtain refund under section 49 or section 50. This procedure is cumbersome. and it also involves a deduction of percentage. Further, section 54(2) imposes a limitation of ti mortthst for grant of such refund. This position causes hardship to a person who happens to have.'*_ in his possession, unused stamps where there is a person ready and willing to purchase them. ' We do not think that there will be any loss of magnitude to Government if such persons are 3 permitted to transfer such stamps. Nor do we think that such an am.-mclrnent will create 3' any serious scope for sale of forged stamps. ' We therefore recommend that section 69(1)) should be revised so as to read» -

"(b) any person not so appointed who carries on the busing.-.'s of dealing in stamps other than 10 naya paise or S naya paise adhesive stamps".

CHAPTER 23 PROCEDURE IN REGARD TO OFFENCES--SECTION.'s' 70~----?2 211- There are three sections dealing with procedure in regard to offences-- --sections which constitute modiﬁcations of, or additions to, the general provisions of the Code of Criminal Pro-

cedure, 1973. They deal v.=ith----

{i) the conditions requisite for the initiation and continuance of proceedings.

(ii) the Court competent to try the oﬁence, and

(iii) the venue.

23.2. The conditions i'er.;uisite for the initiation and continuance of proceedings are to be found in section 70. A large number of matters are mixed up in that section. Under sub- section (1), no prosecution in respect of any offence punishable under this Act or any Act hereby repealed, shall be instituted without the sanction of the Collector or such other othcer as the State Government generally, or the Collector specially, authorises in that behalf.

Under sub-section (2), the Chief Controlling Revenue Authority, or any oilieer generally or specially authorised by it in this behalf, may "stay any such prosecution or compound any such offence". It may be noted that this sub--section really comprises two topics: (i) corn-

pounding and [ii] stay.

Under sub-section {'3}, "the amount of any such composition shall be recoverable in the manna: provided by section 43".

23.3. We have no comments on section ?0(l). As regards section 70(2), we think that the authority competent to initiate and the authority competent to compound under sub-section (2) should not be diﬂerent', and, therefore, the Collector should also have power to compound an offence under sub--section (2), since he is the person who ordinarily sanctions prosecutions. He is in the know of facts, and is conversant with the general policy for the initiation of pro- secutions. He should, logically, be empowered to determine whether or not the offence should be compounded. It is, there1,o1'e, desirable that the Collector should be added in tiﬂb-5BCLlOﬂ (2), while retaining the present aiitliorities.

23.4. While we see no objection to the power given to the Chief Controlling Revenue Authority and others regarding the institution of prosecutions and compounding, we have serious objection to the present provision as to "stay" in sub-section (2). The word "stay" in this sub- section has led us to a consideration of the important principle involved. We do not think that in this context, the power of "staying the proceedings" is appropriately vested in an executive officer. It is for the court to adjourn its proceedings from time to time when the exigencies of its business or other considerations of justice require. An executive oﬂicer should not be given the power of staying judicial proceedings. Perhaps, what the legislature intended was withdrawal oi the prosecution. lf so. the word "stay" is inappropriate and in any case. such withdrawal can be safely left to be dealt with by the general provision in the Code of Criminal Procedure, 1973.

We may mention that the suggestion put in our Questionnaire" was that the stay under section 70 shouldbe by the court, and not by the Collector. and that section 70(2) should be amended for the purpose. That has received general approval in the replies to the Questionnaire. Although what we are recommending is slightly different from what we put in the Questionnaire, there is identity of approach between the two.

T-Eﬁ section 2.79, Income Tax Act, 1961.

3 Q. 69.

i...

--..' Ll:

Introductory.

Section 'F0.

Section 70(2) to be amended.

Criticism of Provision as to stay in Section 70(2).

1'36 Reooﬂd 23.5. In the light of the above discussion. we recommend that section 70 should be revised 1° at as under :

' "TO. (1) No prosecution in respect of any offence punishable under this Act1 . . . . . . . . . . . . . . . . . . . . . . ..shall be instituted without the sanction of the Collector or such other oﬂicer as the State Government generally, or the Collector spe- cially, authorises ln that behalf.

(2) The Chief Controlling Revenue-authority, or the Collector or an oﬁicer specially authorised by the Chief Controlling Revenue Authority in this behalf, may. . . .

. . . . . . . . . . . . .compound any such olfence.

(3) The amount of any such composition shall be recoverable in the manner provided by section 48".

Recommendation 23.6. It is provided by section 71 that no Magistrate other than a Presidency Magistrate §';c'E°g;"E,1_ or a Magistrate whose powers are not less than those of a Magistrate of the second class, shall try any offence under this Act.

The net effect of this section is that a Magistrate of the third class cannot try an Offence under the Act. Under the revised Code of Criminal Procedure," there are no third class Magis- trates. We therefore recommend that the section should be omitted.

se¢ﬁo,1-,r;_ 23.7. Under section 72, "every such offence" (offence under the Act) committed in respect In"°d"°¢°FY- of any instrument may be tried in any district or presidency-town in which such instrument: is found, as well as in any district or preside-ncy--town in which such offence might be tried under the Code of Criminal Procedure for the time being in force.

The words "such offence" refer to "an oﬁence under this Act",--the words used in section

71. As section 71 is proposed to be omitted", these words will require a slight verbal change. It is also desirable to substitute "metropolitan area" for "presidency town" in View of the phraseology adopted in the new Code of Criminal Procedure.' R I Edam)" 23.8. We, therefore, recommend that section 72 should be revised as follows:

§',c§f§§.°$2_ "72. Every oﬁence under this Act committed in respect of any instrument may be tried in any district or metropolitan area in which such instrument is found, as well as in any district or metropolitan area in which such offence might be tried under the Code of Criminal Procedure for the time being in force."

We? may state that the proposed change has been approved by all replies' received on this question.

1 Reference to repealed Act is omitted.

' The Code of Criminal Procedure, 1973.

5 See discussion as to section 71, supra ' See the Code of Criminal Procedure, 1973.

5 Q. 71.

CHAPTER 24 RULES : SECTIONS 74 to 76 24.1. Departing slightly from the sequence of the sections, we would, at this stage, like to deal with, the rule--making power as contained in sections 74 to 76. At the outset, we would like to state that we do not see any need at the present day for dealing with this topic in three sections. When the Act was originally enacted, this scheme was considered necessary, presumably because at one stage section 74 vested the power in the local government (later, the provincial government), subject to the control of the Governor General--in--Council, while section 75 vested the power in the Governor General--in-Council. This is no longer the case now. It is, therefore, proper to combine section 7'4 (rule relating to the sale of stamps) and section 75 {rules generally to carry out the Act). As regards section 76 (publication of rules), it refers to "rules made under this Act", and it can be argued that it is wider than the subject matter of section 74 and 75, inasmuch as it may, to cite one example,' take in rules under section 9. Even if that is so, there is hardly any strong reason for retaining it as a separate section, particularly because, in View of the recommendation which we are going to make concerning that section", its text will be considerably shortened.

24.2 So much as regards the arrangement of the sections. As to the amendment to be made therein, we have comments to offer only on section 76(2), which provides that rules made hinder the Act shall, upon their publication, "have effect as if enacted by this Act." According to current doctrine on_ the subject, the quoted words can add nothing to the validity of the rules. The}; are out of tune with current legislative usage. Being unnecessary verbiage, they should be omitted. In fact, they create confusion. 'Whatever may have been the earlier assumptions, today it cannot be asserted that rules not consistent with the parent Act can be valid.

Accordingly, we recommend the substitution of one section for all the three sections, as under :--

"74( 1) The State Government may, by notiﬁcation in the Oﬂicial Gazette, make rules to carry oiut generally the purposes. of this Act, and may by such rules prescribe the ﬁnes, which shall in no case exceed ﬁve hundred rupees, to be incurred on breach thereof.

In Ilo 74(2). Without prejudice to the generality of the power conferred by Sub-section (1), and in particular, rules made thereunder may regulate,

(a) the supply and sale of stamps and stamped papers,

(b) the persons by whom alone such sale is to be conducted, and

(c) the tfuties and remuneration of such persons:

Provided that such rules shall not restrict the sale of ten naye paise or ﬁve paise adhesive stamps.

' Seealaosections 10, 16 and I8.

' See section 76, infra.

1??

Desirahiiity of combining the sections.

Section 76(2) to be deleted.

Existing section 75 and section 76(1).

Existing section 76(2) omitted.

Existing Section '14.

Introductory'.

Section 73.

Meaning of "Public oﬂicer".

Authority by whom to be given.

Reooruntendation to revise section 73.

Sections 74-3'6.

Section 76A.

Section 77.

Section'J"!A ' Act.

CHAPTER 25 MISCELLANEOUS SECTIONS 73 and 7? to 73A 25.1. l"'he remaining four sections of the Act are concerned with miscellaneous matters, such as lItS['.'Ccii0Il, delegation of powers, savings and sale of copies of the Act. These are inostly a(l1ninist:'ative matters, involving no questions of principle.

25.2. Under section 73, every public otﬁcer having in his custody any registers, books, records, papers. documents or proceedings, the inspection whereof may tend to secure any duty, or to prove or lead to the discovery of any fraud or omission in relation to any duty, shall at all reasonable times permit any' person authorised in writing by the Collector to inspect for such purpose the registers, books, papers, documents and proceedings and to take sluch notes and extracis as he may deem necessary, without fee or charge.

This section was inserted for the first time in 1899, and has been taken from the (English) Stamp Act,' 1891.

The expression "public ofﬁcer", which occurs in this section, has been deﬁned in the Evidence Act, section 74, and in the Civil Procedure Code, section 2, but not in the Stamp We are separately? recommending the insertion of a deﬁnition of that expression.

25.3. It is not understood why authority to inspect records under section 73 could be sought only from Ila: Collector," and not Erorn an oﬁicer authorised by the State Government, 2.31., from the Inspector--Get1era1 of Stamps (if so authorised). The section is defective in this respect.

25.4. We, therelore, recommend that section "I3 should be revised as follows :--

"73. Every public officer having in his dustody any registers, books, records, papers, documents or proceedings, the inspection whereof may tend to secure any duty, or to prove or lead to the discovery of any fraud or omission in relation to any duty, shall at all reasonable times permit any person authorised in writing by the Slate Gm-'er.Irmem or by the "Collector to inspect for such purpose the registers (rest as in present section) ."

We ntay ztdtl liitil Ni-2 uraciitlinent has been favoured by almost all the replies to our Questionnaire.' 25.5. We have already dealt" with sections 7'4 to 76 which relate to rules-

25.6. Section ?6A, which was inserted by the Decentralisation Act, 1914, empowers the State Government to delegate certain powers, and needs no comments.

25.7. Section 7'7 provides that nothing in this Act contained shall be deemed to affect 1he duties chargeable under any enactment for the time being in force relating to court fees.

The section requires no change.

25.8. Under section 'TIA, all stamps in denominations of annas four or multiples thereof shall be deemed to be stamps of the value of twenty--ﬁve naye paise or, as the case may be, multiples thereof and shall, accordingly, be valid for all the purposes of this Act. It requires no change.

1 Section 16, Stamp Act, 1891 (Eng).

' See discussion as to section 2(22A).

* Section 2(9) deﬁnes "Col]wtor".

' Question 72.

5 Chapter 24, supra.

178 179

25.9. Section 78 reqiiires every State Government to make provision for the sale "of Section 78tobe translations of this Act. "in the principal vernacular l:_-ingunge oi the territories administered by ammdci it" [at a price not exceeding twenty ﬁve nave poise per copy).

The only change required in the section is substitution of "languages of the States"' for the words "vernacular tanguages of the territories administered by it", and we recommend .iccortiingI'_i-'. The present phraseoiog}; is inappropriate. Suck it change has been favoured by all the replies" received on this questionnaire.

25.[U. The Act does not contain any provisions for the rounding off of fractions of a Scgction TEA rupee. In this connection attention may be invited to provisions on the subject inserted by '§},'u'ﬂ,3,g oﬁof State amendntents." The utility of such a provision is obvious. After taking into consideration fractions. various State arnendrnents, we had, in our Quesfionnaire,' suggested that the toiiwing new section should be inserted :

"In determining the amount of duty payable or of allowances to be made under this Act, an); fraction ot ﬁve paise shall be rounded off by treating it as equivalent to ﬁve paise."

We are now of the View that a fraction of paisa, if less than 2-1/'2 paisa, should be treated as zero, and in other cases, it Shottid be equated to 5 paisa. We recomrnend the insertion of a new section on those fines.

1 Cf. sections 95.97, Eiupiog-"sea State Insurance Act, 1948. 3 Question T4.

3 S3-Jtiﬂl 'NB, imrte-1 i-i i\-I2.t'i;i-a Pradesti; Section 7'8 substituted in Tamil Nadu and in Antlhra Pratiesh. ' Question T-'5.

Introductory.

Grouping.

Economics value.

Selction of duty.

CHAPTER 26 SCHEME OF THE ARTICLES 26.1. Having concluded our consideration of the sections, we proceed to a discussion of the articles in the First Schedule to the Act.

The First Schedule to the Stamp Act contains the arithmetic of stamp duties. The Schedule is to be read with section 3, clauses (a) and (C) of which speciﬁcally refer to this Schedule. The rates of duties on various instruments are given in articles arranged alphabetically. These articles (65 in number) levy a duty either of a ﬁxed sum or according to value or, in some :ases, according to the duty leviable on some other instrument under another speciﬁc entry. The last mentioned category could raise nice problems, for example, where the duty on the other instrument is raised.

26.2. It is not easy to trace the rationale underlying the rate of stamp duty prescribed in each article However, the classiﬁcation attempted below might throw light on some of the featires of the scheme of eaxation.

The charging articles can be divided into two principal groups, namely, those charging duty ad valarem and those charging a ﬁxed duty. In regard to ad valorem. duties, again, there are three principal patterns which may be noticed. There is, first. the group of instruments falling inder the category of bonds. Secondly, there is the group of instruments falling under the cate- gory of conveyances. Thirdly, there is the group of instruments which are chargeable ad vnlorem in some other manner, for example, bills of exchange, debentures, mortgage deeds in certain cases and policies of insurance. in fact, the charging entry as to Mortgage Dced--Entry 40-itself illustrates, in its three clauses (a), (b) and (c), the three different patterns of ad vulnrem duty.

26.3. Apart from this possible classiﬁcation of instruments on the basis of ad valarem duly and ﬁxed duty, there are other considerations which enter into the picture. As to the division between cm' irnlorem duty and ﬁxed duty, the selection seems to depend primarily on the econo- mice value of the rights created or transferred by the instrument. On this principle, many instru- ments relating to immovable property or creating a charge thereon are selected for ad valorem duty. Similarly (even where the instrument does not relate to immovable property), if it is possible to predicate with reasonable certainty that the right created is of a certain monetary value, ad vulorem duty is adopted. as in the case of mortgage deeds of movablcs. On the other hand, where the proprietary or monetary aspect is not prominent or easily ascertninable and the principal object of entering into the instrument or executing the instrument is not directly one of a proprietary or monetary character, then ﬁxed duty is adopted. This is illustra- ted by the charge an adoption deed. aflidavit, agreement, articles of association of a company, award and the like.

This is not to say that in every case where the monetary or proprietary element is directly involved. the legislature has necessarily selected the irnpositio-n of an ad valorem duty. Conside- rations of prompt execution of business or other aspects of convenience might have induced a different ci1oice,--as is illustrated by the articles charging duty 0 npromissory notes.

26.4. Assuming that the case is one where a ﬁxed duty would be appropriate, the amount of duty to be selected could vary in theory. In fact, the duty does vary from one anna (now 10 paisa) to Rs. 500. What particular amount should be chosen, must not have been a very easy matter for the legislature, but here also certain broad principles seem to have been borne in mind. For example, much depends on the question whether the document merely furnishes evidence of a transaction, or whether it goes further and creates a right. This consideration 180 18! seems to have regarded as relevant in ﬁxing the duty on acknowledgments and agreements, so that an acknowledgment is chargeable with a duty only of one anna, while an agreement is chargeable with a duty of 8 annas. That documents constituting more evidence receive a sym- pathetic treatment is also illustrated by the charging article relating to certiﬁcate (article 19), share warrant I article 65) and the like.

Again, it is on the principle that a document which really evidences a certain fact need not be chargeable with Bid valorem duty, that a receipt carries only a ﬁxed duty, not fluctuating with the value of the money or other property the receipt whereof is acknowledged. ' 26.5. Of course, "agreement" is a very wide term, and depending on the nature, value. extent or duration of the right created or transferred, the legislature naturally decided to impose, on speciﬁc types of agreement, a higher ﬁred duty- It is apparently on this principle that an Jpprenticeship deed is made chargeable with a duty of Rs. 5, because the rights created there- under may be expected to endure for a long time and would increase considerably the earning capacity of the beneﬁciary. The nature of the right created or potentially created scents to have been regrded as relevant in charging a duty of Rs. 25 on the articles of association of a com- pany. Here a number of persons are interested, and a new corporate entity is brought into being, representing a pooling of resources and talent. The nature of the right created might also have been one of the considerations for charging a duty of Rs. 500 for entry as an advocate.

26.6. Even within the category of instruments appropriate for ﬁxed duty, considerations of convenience or the urgency of the matter might have induced the legislature to adopt a liberal view, as is illustrated by the comparatively small amount of duty ﬁxed for bills of lading. pro- test of Bill or Note, protest by the Master of a ship, and the like.

Apart from these legal and commercial considerations, and economic aspects, the legisla- ture may also regard, as relevant. certain matters of policy. It is on this basis that an assignment of copyright is exempted from the duty. Otherwise chargeable as on a conveyance and, again, it is on this principle that numerous exemptions have been granted by the legislature in respect of documents otherwise chargeable as receipts.

26.7. From this discussion. it is clear that a host of considerations enter into the legislative determination of the amount of stamp duty to be properly charﬁ. This discussion may appear _to be academic; but unless one is conscious of these aspects, one is likely to miss the point in the scheme for charging tax under the Act.

26.8. The articles themselves are numerous, and might appear to have been devised meti- culously. The alphabetical arrangement is undoubtedly convenient. and there is suﬂicient cross- referencing--a feature not often noticed in legislative measures. Notwithstanding this scaffolding of categories created by the legislature for building up its own scheme of taxation, disputes do arise in practice as to whether a particular instrument falls in one category or the other. In so far as such disputes arise from the unavoidable fact that human relationships are of an inﬁnite variety and people do not always enter into transactions with the articles of the Stamp Act in mind, such disputes may be difficult to avoid. But, in so far as the disputes arise byreason of obscurity or ambiguity in the description of an instrument in a particular article or by reason of avoidable overlapping. with a view to considering whether any improvement could be devised. so that disputes might be reduced in frequency and complexity, even if they cannot be totally eliminated. Such amendment would reduce the occasions for resorting to the provisions in sections 4 to 5 of the Act--provisions which might be described as designed to operate in the last resort when the court must decide the dispute one way or the other in order to determine the proper amount of duty chargeable.

26.9. Since the rates. of stamp duty on many of the instruments mentioned in the Schedule fall within the State l..egisla1:ive List, it is not our intention to suggest any substantial changes regarding the rate structure in respect of those instrurnents. Apart from this. even in respect of instruments falling in the Union Legislative List, it is not our intention to suggest any sub- stantial changes in the rate structure. This is, however, subject to the qualiﬁcation that such 14 'NI of Lawf'7'i'--2=1'-.

Nature of the right.

Convenience.

Number of considerations Scope for Improvement Dtrecdonhr Ineniawillho considered.

182

rationalisation as appears to be necessary, and as can be achieved without aﬂecting the rate structure basically, will be considered in both cases.

The desirability of considering verbal improvements in many of the articles will also be borne in mind.

When the Act was revised in 1899, several changes were made in the Schedule. First, the alphabetical order was improved. Secondly, the legislature removed exemptions from their position in a separate "schedule of exemptions", and placed them in the schedule of duties under the articles to which they referred. Thirdly, the ascertainment of duty was made more direct and more easy. For example, the three t'ables of duty under the heads of bill of exchange, bond and conveyance were, at that time, drawn up in a very curtailed form. When considera- ble amounts were involved, it was impossible, without the aid of paper and pencil, to make out from the dilferent tables, the duty payable on a particular instrument. By expanding the tables, the legislature made it easy for a person by a reference to the schedule to ascertain directly What the particular duty was.

Nevertheless, there was no attempt made to go into each article from the point of view of public convenience or case of understanding.

It will be our endeavour to suggest improvements wherever practicable, bearing in mind the limitations to which we have already referred.

CHAPTER 27 ARTICLE 1 27.1. Article 1 is as follows :

"Acknowledgement of debt exceeding twenty rupees in amount or value, written or signed by, or on behalf of a debtor to supply evidence of such debt in any book (other than a banker's pass book) or on a separate piece of paper when such book or paper is left in the creditor's possession : provided that such acknowledge- ment does not contain any promise to pay the debt or any stipulation to pay interest or to deliver any goods or other properiy...'.... .Dne annal-

The proviso did no-t occur in the Act of 1879.

212. A brief historical discussion of the article may be useful.

Prior to the Act of 1369, there was no provision for charging stamp duty on an acknowledge- ment. The Act2 of 1869 provided for such stamp duty. The article in that Act rcad--

"Note or Memorandum written in any book or written on a separate paper whereby any account, debt or demand therein specified, and amounting to twenty rupees or upwards, is expressed to have been balanced or is acknowledged to be due."

27.3- Thus, the article in the Act of 1869 did not contain the requirement as to the instru- ment having been given for the purpose of supplying evidence of the debt.

27.4. Thus, in order to fall within the scope of this article, it was necessary that document should either balance an old account or should show that the sum acknowledged was due.

In 1879 the High Court of Calcutta was called upon to determine the applicability of the above noted article in the case of seven advance entries in a document called a hattachhitra having two sides : "amount advanced," and "amount received". And they rightly held that none of the entries taken singly denoted that the sum mentioned therein was due and could be hit by the provisions' of Article 5. It was observed that in order to ﬁnd whether a particular sum was or was not due at a particular date it was necessary to look to both sides of the document, since the entries on one side controlled those on the other. To quote the relevant observations :

"Now, if any one of the entries in the hattachhitta had stood alone and had been inten- ded by the parties to form an isolated entry in the book, it might have been contended with considerable force that it fell within the description of document mentioned in Article 5, as requiring a stamp. We think however that the entries cannot be detached from the account of which they form a part. That account .has two sides to it, the one headed 'amount advanced' and the other 'amount receive '."

The amount due varies from time to time and depends upon the relation-of the amount advan-

ced to the amount received. In the present case, no sum is entered under the head of "amount received," but that is an accident and makes no difference in considering the question as to what 'E oﬂered in evidence. The intention of the parties in requiring the -signature or seal of the borrowers to each sum advanced is strictly speaking, to secure under their hands an acknow- ledgment that the sum is advanced, whether or not that sum is due or a larger sum or a less

1. The duty of one anna should now he read as ten naya paise. 2, Indian Stamp Act (18 of 1869), Schedule H, article 5.

3. Brojendra v. Brcmomoyee, (1379) l.L.R. 4 Cal. 335.

- 133'' Article 1.

History.

Judge Plowderfs view .

184

sum, depends upon the state of account. In determining whether a document comes _within the description of a document upon which a stamp is imposed by the Stamp Act, we must look at the entire document, and see whether it fairly falls within the description.

"The document in this case which is oliered as evidence is not a note or memo, acknowledging a debt or part of a debt to be due-nor a series of such entries and memos, but an account between the parties of the character above men- tioned and as such did not in our opinion require a stamp." ' 27.5. In 1879, an Act (1 of 1879) was made "to consolidate and amend the law relating to stamps," and Article 1 (which corresponded to Article 5 of the previous Act) was recast as under :

"Acknowledgement of a debt exceeding Rs. 20 in amount or value written or signed by or on behalf of a debtor in order to supply evidence of such debt in any book (other than a Bankers Pass Book) or on a separate piece of paper when such book or paper is left in the creditors' possession."

This Act, therefore, by omitting the words "amounting to Rs. 20" and "is expressed to have been balanced or is acknowledged to be due", brought about two material changes in the law, namely : (1) That the debt must exceed Rs. 20, and (2) the document need not show that it is a balance entry or that the sum mentioned therein is really due.

27.6. It appears that the original proposal in the Bill of 1878 was to have an article in the following form' :--

"46. NOTE OR MEMORANDUM OF entry made in any book, or written on a separate paper, whereby any account, debit or demand, or any part of any account, debt or demand, therein speciﬁed and exceeding twenty rupees is ack- nowledged to have been balanced or tube due."

Some Members of the Select Committee, however, objected to this article at the preliminary stage.'-' Mr. G. H. P. Evans said that this article must be 'further altered or struck out altogether'. Whitley Stokes said, "On consideration I agree with Mr. Evans. The clause as it stands would apply to the statement of the balance in a banker's pass book not signed by the con- stituent", 27.7. It may also be noted that Mr. Plowden, Judge of the Punjab Chief Court, in hh comment" on the Stamps and Court Fees Bill, 1818, made a suggestion relevant to acknowledge- ments, in the following terms 1--

"In this connection, I venture to make another suggestion, not without some hesi- tation and doubt as to whether it is practicable to devise a remedy. The native custom of taking acltnowiedgments of debts coupled with a promise to pay by an entry in a book of account: is of daily or even hourly occurrence, and is eminently convenient to the persons directly concerned. Cannot any method be defmed, consistent with due regard to ﬁscal interests, by which such promises, which cannot . invariably be regarded as promissory notes (the term itself when translated is mere jargon to 99 out of 100 persons in the Punjab who make their wrﬁten promises in account book), might be stamped with adhesive stamps, at least when the accounts are small, if not in ill cases. The alternatives as it seems to me flow are that the debtor must be induced to write a formal tamnssuk on paper, or the book must be talren to be stamped by the Collector and ate: a! it may turn out (See Schedule II. 7, note (a), and section 28} that the prnmilitly portion of a book entry is void, because it requires an additional one-anna

1. Stamp Bill, ISTS, Second Schedule, Article 46 .

2. See Report of the Select Committee, 28th August, 1878. 3- Proceedings of the Legislative Department, No. l to 16? [Fcbruary, 1819 (National A:r.l1lve8)l.

185

In its ﬁnal Report,' the Select Committee said :

"We have, with reference to the opinions expressed by many of the authorities consulted and to the dissents appended to our preliminary report, recast (in article 1 of the first Schedule as now settled), the 46th article of the same Schedule in Bill No. II ....... ..".

The Select Committee did not, however, indicate why the words "in order to supply evidence 0}' such deb!" were added.

27.8. The article in the Act of 1879 (First Schedule, article I), as utlimately enacted, was as follows :--

"ﬁtcknowledgmeiit of a debt exceeding twenty rupees in amount or value, written or signed by or on behalf of a debtor in order to supply evidence of such debt in any book (other than a banker's pass book) or on a separate piece of paper when such book or paper is left in the creditofs possession".

27.9. The proviso was added when the Act was revised in 1899. In the Report of the Select Coanmittee2, on the 1898 Bill, the following reasons were given for adding the proviso :--

Schedule I----No. 1 Acknowledgement.»-

We have reverted to the old duty of one anna for all acknowledgements, and have added words to make it clear that the provision relates only to mere acknowledgements and does not include acknowledgements containing in addition any promise or agreement".

27.10. in addition of the proviso, however, did not prove to be an improvement, as will be shown later."

27.11. So much as regards the history of the article-----history which shows how certain dith-

culties were anticipated even at that 'Li1I16. In order to fall within the purview of Article I, a docllnlmt must fulﬁl the following conditions :

(1) The debt must exceed Rs. 20.

(2) The document must be written or signed by or on behalf of the debtor.

(3) It must be intended to supply evidence of the debt.

(4) It must he left with the creditor.

(5) It must not contain any promise to pay the debt or any stipulation to pay interest.

27.12. The English law may be contrasted. Under English law, a bare acknowledgement of liability is not chargeable with duty. Thus an I. O. U. or a bare acknowledgement of a loan 01' (E indebtedness, containing no provision as to payment or other evidence of the terms of an agreement, does not require any stamp' in England.

27.ll2A. The article in the Indian Stamp Act appears '[0 be simple enough at ﬁrst sight. But the words "in order to supply evidence of such debt" and the proviso relating to promise to pay, have been found to create diﬁlcult problems of application. Since, under proviso (a) to section 35, an unstamped acknowledgement cannot be admitted even on payment of penalty (as section 35 does not apply to documents chargeable with a duty of one anna----now ten naya paisa), hardship arises in practice.

27.123. In competition with bonds and agreements, an acknowledgment bears a lower duty. But agreements and bonds (if unstamped) can be admitted 'under section 35, on payment

1. Final Report of the Select Committee. 31st December, 1373.

2. Report ofthe Select Committee on the Indian Stamp Bill, 1898, para 13.

3. See discussion below, relating to promise to pay.

4 . (8.) Cldiderr v. Boa-Innis. (1822) 111 ER. 893 {I.O.U.). {bl Ewier om v. Lesue, (1795) no ER. 407.

(e) am: v. times, uses) 170 an. 1035.

id) Goodyear V. Simpson. (1345) 153 E-R- 742. 743; {Statement of accotmt containing balance being duefi-om the defendant to the plaintiﬁi.

admission of a certain English law.

Words "in order to supply evi-

dence of such debt".

186

of penalty. An acknowledgement cannot be admitted in evidence if unstamped. This causes hardship.

27.13. As Schwabe, C.I., observed in a Madras case'--

"This question is whether or not that is an acknowledgement within the deﬁnition of acknowledgement in the Stamp Act, for if it is, it has to be stamped, and if not stamped. it cannot be admitted in evidence, and in such a case the legis- lature has thought ﬁt to impose what to my mind is an appalling penalty of the plaintiﬁ losing his claim altogether, because there is no penalty provided, by the payment of which to Government, the document can be admitted (see section 35). Perhaps, in view of the seriousness of this provision, the draitsman of the Schedule has so worded it that it has led many loopholes, and has given rise to a conflict of judicial opinion when it comes to interpretation."

Prornisetopay. 27.14. There is another point which needs to be considered. Under the proviso to article 1, it is necessary that an acknowledgement should not contain any promise to pay the debt or any stipulation to pay interest or to deliver any goods etc. Diﬁiculty is created by the qiuestion how far an express promise is required in order that the proviso to this article may come into play. It is generally stated that the question whether an instrument is an acknowledgement containing a promise to pay the debt is one of construction of the document."

27.15. The question must be decided with reference to the language used in, and not to the legal obligation arising item, the instrument". This is, no doubt, a sound test. But, as a study of the decided cases shows,' the application of the test is not an easy afiair. And, if some other alternative could be adopted, which wohld reduce this diﬁiculty, it would be an improve-

ment.

G,m,iuwrm-ng 27.16. In illustration of the obscurity as to what is and what is not a promise to pay, obscurity. we may refer to the Allahabad case of Abdul Rnﬁqf' in which the Judges were incﬁned to take opposite views regarding the unconditional acknowledgement implying a promise to pay. Even if the interpretation that an express promise to pay is required in order to exclude an instrument from article I is adopted, it is not, in practice, easy to come to a conclusion whether the words used in the particular instrument do or do not amount to an express promise to pay. Besides the cases already cited, the under--mentioned cases may be referred to in this connection."

27.17. Sometimes. the question also arises whether a memorandum of the rate of interest to be payable in future, when appended to an acknowledgement, is to be regarded as s stipu- lation to pay interest within the meaning of the proviso to article 1. In general, the," Courts hold that mere mention of the rate of interest without more is as good as an express stipulaltionﬂ-;' Sometimes. nice questions have arisen also by reason of the placing of the signature of the debtor in relation to the stipulation for interest."

27.18. In a Patna easel", Courtney Terrell, C.J. observed that the policy of the 'article seems to be to provide for cases where the debtor and the creditor came to an agreement between themselves, that. in consideration of grant of some time to the debtor. the creditor demand! omen: v. Anama La! Damani, (1923) I.L.R.. 45 Mad. 943 (per schwabe. OJ.)-

2. Donate v. Gan.-zda (I903) Punj. Rec. No. 35, pages 111-1131' F.B.).

3. Shiv Ram Punrmrn Ram v. Faiz, A.I.R. 1942 Lab. 50, 54, 56 (F.B.).

4. See" Decided cases," infra.

5. Abdul Ruﬁq v. Bhrrja, A.I.R. 1932 Allahabad 199; 1932 Allahabad Law Journal 77.

6. (a) Manila! v. Narwnrlai, AIR 1947 Born. 33?

(in) Jog-tundra Chandra Bcmerjee v. Sachindra Kumar 40 Calcutta Weekly Notes 399.

Ed.) Jeerraj v. La! Cizand, A.I.R. I969 Rajasthan 192.

7. Mahndev v. Sbivrqf I.L.R. 4] Allahabad 169 (F.B.).

on . Lakshmi Bat' v. Ganesfr, I.L.R. 25 Bombay 3?3.

9. gﬁntrast Ram Prascd v. Parsizorram. A.I.R. 1937 Allahabad 256 (Full Bench, with Saidilan v. Dam, A.I.R. 1931 ore 4.). _ '

10. Hablbuiﬁaimman v. Anwar Dhan, AIR 1934 Pat. 629 630 (D3,).

137

as a condition that the debtor shall relieve him from the apprehension that the debt nzay be barred 393-' h'mz'mtr'an or that the evidence upon which he would be able to rely may not be available at the time of the suit; and it refers, therefore, to the special bargain where the debtor agrees to give the creditor evidence upon which he may rely to enforce the debt, as a condition of :1 concession by the creditor to the debtor.

27.19. But it may be noted that according to the Nagpur view} mere intention to extend limitation is not enough.

-Where the acknowledgement relates to the balance of an account, a nice distinction is often made between an admission of the correctness of an account and an acknowledgement for the purpose of stipplying evidence of a debt. Thus, a Bombay case2 holds that a debtor's ad- mission as to correctness of an account, taken in writing in order that he may not subsequently dispute its correctness, cannot be regarded as an acknowledgement inteirded to supply evhience of debt. ' An acknowledgement of the correctness of account does not (for its validity) require a stamp." The debtor's admission of correctness of account taken on a memo, so that he might not subsequently dispute its correctness cannot, according to a Nagpur case,' be regarded as an acknowledgement under Article 1 executed to "supply evidence of" the debt.

These decisions rest on a distinction which, at least, is a ﬁne one and which is worth avoiding in a taxing statute.

27.20. To remove the diﬂidulties referred to above, one or more of the following possible alternatives could be considered' :

(i) The article may be improved on speciﬁc points, so as to reduce the diﬂiculty caused in its application by the ingredients relating to (i) intention to supply evidence ; and (ii) absence of promise to pity.

(ii) The provisions of section 35 may be applied to acknowledgements, so as to mitigate the hardship caused by the present position.

(iii) The article itself may be deleted, thus, bringing the position in line with English law."

27.21. Alternative (iii) above may be considered too drastic. But both alternatives (i), and (ii) have much to commend themselves. As regards (i), enough has been said above to bring out the diﬂiculties caused by the present working, which, though well-intentioned, causes unnecessary controversies and suffering. The words "in order to supply evidence of such debt", as well as the proviso excluding a promise to pay, are intended, perhaps, jun to indicate broadly the description of the instrument. But these have been over--emphasised, and require to be deleted. Their deletion will create less diﬁiculty than their retention. If the instrument amounts to a bond or agreement. it will be chargeable accordingly.

27.22. At the same time, alternative (ii) above should also be adopted', and the provisions of section 35, main paragraph, should be extended to acknowledgements. If our recommendation to libcralise section 35, Proviso is accepted, then, of course, no further change is needed. What we would like to say is that even if article 35, Proviso is not liberalised by accepting our recommendation in .1010, what we have stated in this Chapter as to article 1 and the application of section 35 should be carried out on its own erits.

1 Pmnhiracﬂ Gulab v. Krisfmaji, A.I.R. 1947 Nag. 145, 150 ' Maﬁa! v. Nanmrlai. A.I.R. 1947 Born. 337, 333.

3 Rargamblaa Ojlia v. Bislrrrnath Oja, A.I.R. 1938 Fat. 139. 140.

* Haaluvroa v. Hanmmlt. A.I.R. 1941 Nag. 707.

I These are not necessarily mutually exclusive.

' See under "English law," supra.

" This, of course. involves amendment of section 35, roviso (a). See recommendation as to that section.

Alternatives for Improvement considered.

Recmnmendation to chleto the words "111 order to supply evi-

dence' etc. and to amend section 35, proviso (a).

renoetosecﬁonﬁ.

Expression "Written or signed".

Reoonmgendation to substitute the word "executed."

Increase ct' amount.

Recommendation.

188

2123. We had in our Questionnaire' put a Question whether article should not be totally deleted, having regard to the practical dilﬁculties caused. While some replies have expressed agreement with the suggestion for deletion, some have not. We appreciate that this would be too radical a course.

But we do consider it necessary to recommend such modiﬁcations as would take the case outside the stringent provision in section 35, proviso fa).

2'i'.23A. Let us now deal with a verbal point. Article 1 levies duty on an acknowledgement "Written or signed" by the person acknowledging. There is a small discrepancy between this article and the charging section. Section 3 is the charging section, and an instrument is chargeable thereunder with duty if it is "executed". "Executed" and "execution" are deﬁned in section 2(l2) as "signed" and "signature" respectively. A document, though not executed, may yet be an instrument2; but is not chargeable with duty. Article 1 refers to acknowledgement as being "written or signed by or on behalf of the debtor". Now. an acknowledgement which is "signed by or on behalf of the debtor", is duly "executed", and, in this respect, the reference to "signed" does not create any substantial discrepancy,---though there is no reason for not employing the expression "executed". But, in so far as mere "writing" attracts duty in respect of an acknowv ledgement [article 1), there is a discrepancy between section 3 read with section 2(12] {on the one hand) and article I ( on the other hand).

27.24. This discrepancy should be rectiﬁed by substituting, in article 1, for the words "written or signed", the word "execu1ed"3. An acknowledgement which is only written by or on behalf of the debtor should not become liable to stamp duty until it' is signed. It may, in this connection, be noted that the word "executed" is used in some other articles", and, for the sake of uniformity of language, wherever the word "signed" is used, it should be changed to "executed"-5. We may note that such an amendment has been approved by most replies to our Questionnaire".

2'i'.24A. We also recommend that the amount "twenty rupees" should be increased to hundred rupees, having regard to the present purchasing power of the rupee.

27.25. The following re-draft of article 1 is recommended, in the light of the above discussion and subject to what we have stated above relating to the points that should not be carried out if section 35, proviso is revised according to our recommendation.

Proper Stamp duty |',"l. ACKNOWLEDGEMENT of a debt exceeding one hundred rupees Ten mzye pain.

' inamount or value, executedby, or on bcI'I8Jfof,a debtor. .. . . . ..m any 33 book (other than a banker'.-fpassbook] or on a separate piece of :5'; paper when such book or paper IS left in the Creditors possession. . . .

1. Question 'i'6(a).

2. In re the Application of Chet Pa (1903). 22 LC. 75, 16 (ER) (Lower Burma.)

3. Compare recommendations as to articles 28 and 42.

4. Article 22 and 43.

5. Seealso reeommendationas to artlcleszli and 42.

6. Q. 75(5).

CHAPTER 28 ARTICLES 2 TO 4- 28.1. Article 2 levies a duty on an administration bond. The article does not deﬁne the Artiele2 expression "Administration Bond" ; Mulla deﬁnes' it as "a Bond with one or more sureties I'm°d"""°'-V' [unless sureties are dispensed with), which must be given for the due collection, getting in and administration of the estate of the deceased, by any person to whom letters of administration are granted". It should, however, be noted that an administration bond can he demanded even otherwise than proceedings for the grant of letters of administration. For example, there may be a suit for aCllI1ll1lSt1'at.i0l12--3. Forms of plaints in such suits are given in the Code of Civil Procedure'.

There does not appear to be any case law on this article, raising doubts.

23.2. The reference in the Article to section 256 of the Indian Succession Act, 1865, to § mn 05]] Ill .

section 73 of the Probate and Administration Act, 1861, and to Sections 9 and 10 of the refﬁmmtotm succession Certiﬁcate Act, 1889, must now be read as a reference to the Indian Succession Act, Indian Succession 1925, and to sections 291, 375 and 376 of that Act respectively. *"°" 1915' Administration bonds include, therefore, bonds under sections 291, 3'5 and 376 of the Indian Succession Act, 1925, and section 6 of the Government Savings Act, 1573. The article should be so amended.

28.3. Article 3 levies a duty on an adoptionldeed, that is to say, an instrument (other ="i1'ﬂd=3- than _a will) recording an adoption or conferring or purporting to confer an authority to adopt.

History of the article is of interest. In the previous Stamp Act of 1879', the relevant article provided that "an instrument (other than a will) conferring or purporting to confer IJ1 authority to adopt", was liable to stamp duty. Under the 1879 Act, thus, the record of an adaptfm was not chargeable with stamp duty. In two Bombay cases" decided under that Act, the document declared that the adopted son was to be the heir to the interest of the adoptive father in the undivided family property, but the court held that no stamp duty was chargeable on this instrument.

As regards the present Act, the following extract from the proceedings of the Legislature is of interest'.

"It has been pointed out, that adoption is a religious ceremony, and under these circum- stances it ought to be free from any duty. We perfectly admit it, but what I desire to point out is, that we do not in any way levy a duty upon adoption. So far as adoption is a religious ceremony, it goes free, naturally and inevitably, but if a deed of adoption is drawn up which is to be used as a document of title to property, it is then, and only then, that the duty is levied, not upon the adoption but upon the deed which records it, and which is meant to be eﬁective as an instrument creating a. right to property".

1, Mulls, Indian Stamp Act (6th Edition), 1:. 202.

2, Order 20, Rule, 13, Code of Civil Procedure, 1908, 3, GE. ..'Hmvprasad'v. Prayag Kumar, A.I.R. 1936 Cal. 39'.

4. Code ofCivil Procedure, tans, Schedule 1, Appendix A, Forms 41--43. 5, Stamp Act, 1379, Schedule 1, Article 33.

6. (1) In the matter of Atnbai, (I839) I.L.R. 13 Born. 280; [b] In the matter of Hanmappa, (18393 13 Born. 281.

'7. Sir James West1and's Speech (1898).

189

2,4 M of Lawm--2s Case-L 1w.

No change.

Article 4- Aﬂidavit.

Meaning of "aﬁdavIt"-- _ recommendation for amendment.

190

23.4. There are not many reported cases on the section. The expression "recording". as used in this article, means, according to one Lahore case1,---

"cornrnitting to writing an authentic evidence of a matter having legal importance, evidence of which is thus preserved and may be appealed to in case of dispute. It is not legally necessary that the matter and the record thereof should be con- temporaneous; there may be cases in which a fact is reduced to writing as authentic evidence thereof long after it came into existence."

The deed in this case referred to the adopted son as the successor of all the property of the adoptive father, but no reference to this part of the deed was made by the court in deciding whether stamp duty was payable on the deed.

28.5. Article 3, of course, does not assume that a deed of adoption, or an authority to adopt, is required by law. In fact, under the Hindu Adoptions Act, a deed is not required-- nor is it suﬁicicnt. It is, therefore, in very rare cases that article 3 will be attracted. However, it is not necessary to disturb the article on this ground.

28.6. Article 4 levies a duty of one rupee on an affidavit, including an aﬂirmation or dec- laration in the case of persons by law allowed to aﬂirm or declare instead of swearing. It provides for the following exemptions :

Aiﬁdavit or declaration in writing when made---

"(a.) as a condition of enrolment under the Indian Army Act, 1911, or the Indian Air Force Act, 1932 ;

(1)) for the immediate purpose of being ﬁled or used in any Court or before the oﬁicer of any Court ; or

(c) for the sole purpose of enabling any person to receive any pension or charitable allowance".

The Act does not deﬁne the expression "affidavit".

28.7. In the U.P. amended article 4 runs as below' :---

"Aiﬁdavit, including an atﬁrmation or declaration allowed to aiﬁrm or declare instead of swearing-

(a) for the immediate purpose of being ﬁled or used in any Courtor before an officer of any Court . . . . . . . . . .one Rupee ;

(b) in any other case . . . . . . . . . .1-Tour Rupees and ﬁfty paisa.

in the case of persons by law Exe|nptions--Aﬂ:"tdavit or declaration in writing when made---

(a) as a condition of enrolment under the Army Act, 1950, the Air Force Act, 1950 or the Navy Act, 1957, or

(b) for the sole purpose of enabling any person to receive any pension or charitable.

allowance'; _ 28.8. In this article, the words "including an aﬁirmation or declaration in case of persons by law allowed to afﬁrm or declare instead of swearing", seem to have been modelled on the of the present deﬁnition of "affidavit" in the General Clauses Act'. We have, in our Re- port on the General Clauses Act", discussed at length, how the deﬁnition in the General Clauses Act is inaccurate. An 'aﬂ'idavit' really means a written statement made on oath or solemn etc. and not the atﬁnnation itself. For this reason, in our Report on that Act, we have

1. Labh Singh V. Mehr Singh, A.I.R. (1932}Lal1. 113, I20 (S.B.)

2. U.P. Taxation Law Amendment Act [U.P. Act 11 of 1969)

3. See Rwnasﬁanker v. Coliecror, A.I.R.. 197] All 237

4. Section 3(3), General Clauses Act, 1397.

5. 60th Report. General Clauses Act, paragraphs 3.4 to 3.8, relating to section 3(3)-'amdavit.' 191 recommended a revised deﬁnition of "atﬁdavit", as meaning 'a statement in writing purporting to be a statement of fact, signed by the person making it and conﬁrmed by him on oath'. Similar phraseology should be used in article 4 of the Stamp Act also, and we recommend accordingly.

28.9. Exemption (a) below the article refers to the Indian Army Act, 1911, and the Indian Air Force Act, 1932, in place of which references to the relevant current Acts should be substituted. These are~--the Army Act, 1950, and the Air Force Act, 1950. The Navy Act, 1957, should also be mentioned.

28.10. Exemption (b) below article 4 exempts, from stamp duty, afﬁdavits for immediate use in court. When the aﬂidavit is ﬁled in support of an application, the application has usually to bear court fees.

With reference to the expression "'immediate" it has been held that', by virtue of exemption aiﬁdavits made with the intention of ﬁling in court are not subject to stamp duty, even though they are sowrn at a diﬂerent place {i.e. not in the place where the court is situated), and are ﬁled in the court on a later date. The word 'immediate' refers to the purpose of the aﬂidavit, and not to time. Thus, in an Allahabad case', an afﬁdavit tor a pending proceeding in Meerut, sworn at Bombay and ﬁled in a Meerut Court after three weeks, was held to be exempt.

28.11. In Bihar and Andhra Pradesh, however, this exemption has been deleted,--i.n the former with eﬁect from 31st March, 1958, and in the latter, by Act 26 of 1965. In the U.P. the exemption has been removed and duty levied, although the duty is less. In an Andhra (11).

I Pradesh case=°', the High Court made the deletion of this exemption for aﬂidavits, -sworn or declared for the immediate purpose of ﬁling in court, liable to stamp duty under article 4. The High Court, however, agreed with counsel's argument that this would make litigation costly, and would also cause practical difficulties and hardship to the litigant public and lawyers.

We agree with the observations of the Andhra Pradesh High Court. The exemption should not, therefore, be deleted.

We are further of the opinion that in view of the difficulty caused by the word "irnmediate".

in eitemption (b), that word should be replaced by "sole". When the afﬁdavit is ﬁled in court, it will usually accompany an application, and the application will be chargeable with court fee.

28.12. In the light of the above discussion, we recommend that the article should be re-- vised as under :

"4. Al*F1DA'v'l'l'. that is to say, a statement in writing purporting to be a statement of fact, signed by the person making it and conﬁrmed by him by oath, or, in the case of person by law allowed to affirm instead of swearing, by aﬁirmation.

"Exemptions Alﬁdavit or declaration in writing when made---

(a) as a condition of enrolment under the Army Act, 1950, the Navy Act, 1957 or the Air. Force Act, 1950;

(b) for the sole purpose of being ﬁled or used in any court or before the officer of any court ; or

(c) for the sole purpose of enabling any person to receive any pension or charitable allowance."

We may mention that the proposed amendment has been approved by most replies to our Questionnairet.

.__._. .........._.__._-, #- ._._.__- ., .._ . ._.__.._..__..._ ._, , .....___.._._.._ "f}}i--:.I:j:}EEcT:a"t;-iii L:}_§:E}E§m7né7t'1lss§ii.ﬁHE Born. 276.

2. .5'irr"Ki.5'l'IarI Das v. Jlrfahd. Nazir, A.l.R. 1947 All. 37 (F.B.)

3. Sambasiya raju v. C'I1cmdr.r_v)'r:, A.I.R. 1967 A1'. 87

4. Q. 7?.

Exempti-311(3):-

recommendation to substitute reference to current Act and to add Navy Act, 1951'.

Exemption (b) to be deﬁned.

I-leeomrnendation.

192_ Appendix to Chapter on Article 4~---"Aﬁ;1davit'-' Regarding exemption {a}.

The Army Act, 19501 and the Air Force Act, 19509 provide for the form of oath or "affirmation of allegiance and obedience to be taken by a person who is reported ﬁt for duty or has completed the prescribed period of probation after enrolment. Under the Army and Air Force Acts, the oath or aiﬁrmation is taken by a person who is to he enlisted, r'.e., (a) all persons enrolled as combatants, (a) all persons of non-commissioned or acting non-commissioned rank and (C) all other persons prescribed by the Central Government. ' They Navy Act, 19573 provides for the oath of allegiance and obedience that every oﬂioer and every scaman has to take before the Commanding Oﬂicer of the ship to which he belongs, as soon as may be after appointment or enrolment.

The nature of the oath is the same under all the three Acts, via, allegiance to the Con- stitution and obeying orders of the superior oﬁcer.

The oath of affirmation to be taken by a person under the Navy Act seems to be for every oﬂicer or seaman who is appointed or enrolled. In this respect, thus the Navy Act would be wider than that under the Army or Air Force Acts, as under the latter two Acts, oath or _ aﬂinnation has to be taken only by those persons who are to be attested after he is reported ﬁt for duty or after the period of probation.

_.-

K1.-'Section 17(2), Army Act, 1950.

2. Section 17(2), Air Force Act, 1950.

3. Section 13, Navy Act, 1951.

CHAPTER 29 ARTICLE 5 _29.1. Article 5 levies duty on an agreement or a memorandum of agreement. There are Introductory three clauses in the article, and three exemptions. The exemptions are important.

29.2. The expression "agreement", used in the article could have a wide scope. In ahdeanins of Lahore case', the Court held that a written promise to pay a timebarred debt coming within "33"°'me"t" section 25(3) of the Contract Act is not a "l:1ond". The High Court had, l1I'.,'IWC'v'C1', no occasion to consider whether it was an "agreement". In a Calcutta case", the defendants had executed a document which stated the amount due, and the rate of interest, and "stipulated time for paymen". The Court held that though this was not a promissory note, it was an agreement to pay, and therefore, chargeable with duty under article 5. .

29.3. These points may not recur often, and therefore, do not call for any clariﬁcation. Exempti0I1(R;--

But there are certain points relating to Exemption (a), which should he considered. This exemp~ ii':§ﬂ',"5P3 °f tion relates to the "sale" of goods or merchandise. The Sale of Goods Act3 deﬁnes a "contract ' of sale of goods" as a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. Thus, even where property in the goods is actually transferred to the buyer, the transaction is called a contract of sale of goods. Apparently, for this reason, article 3 assumes that an instrument relating to a completed sale is also an agreement,--see exemption ta}. Although such a contract may not be an agreement "for the sale" of goods, it will clearly be an agreement relating to the sale of goods within exemption ta). Such an instru-

ment is assumed to come under article 5, but it will be covered by Exemption ta} and will, thueﬁore, be exempt from duty'. Such an instrument will also he a "conveyance", as a con-

veyance on sale is expressly included in the deﬁnition of a "conveyance"? But, since it is otherwise provided for, article 23 relating to "conveyance" will not apply to it.

Where the document is a memorandum of a completed sale, it will be a memorandum of an agreement relating to the sale of goods, and, as such, will be" within exemption (at), even if it is chargeable as "agreement".

29.4. A more important question arises from the words "for or relating to the sale of Dmkmg, "goods or merchandise exclusively", which occur in the exemption (a). The question to be ootn- caus=I,i_ b3Hhe_ sidered here is, whether the word "exclusively" governs the entire clause in the exemption, E ]:g?

or only the words "goods or merchandise".

Diﬂiculty arises when the same instrument combines a -sale of goods and a mortgage. The majority of the full Bench of the Allahabad High Court in one case' has held, that the Word "exclusiyely" governs the phrase "goods or merchandise", and, therefore, an agreement for the sale of goods or merchandise is exempt hem stamp duty, even though the instrument evidences certain other transactions also pertaining to goods or merchandise (e.g., a mortgage). Verma J. in his dissenting judgment however, held that the exemption applied only if the instru- ment is so framed as to amount to a more agreement to sell goods and has not got any other

1. David Sutherland Clerk v. Rose Crimshew, A.I.R. 1923 Lab. 481, 433.

2. Prmamlﬁumor V. Ponaulia, A.I.R. 1923 Cal. 659, 661 (D.B.).

3. Section 4, Sale of Goods Act, 1930.

4. A acmratc recommendation is being made as regards the effect of speciﬁc exemptions in one article on chargcahility under another article.

5. Section ?.(]0), Stamp Act.

6. Raghubar Darya! v. Emperor. A.I.R.. 1934 All. 201. .

7. L.H. Sugar Factory \-'. Mon', A.l'.R. 1941 All. 243 (RE).

193

Recommendation to amend Esemption (a) so as to the word n¢eIcl".si,vdy.1I 194 characteristics. Agreeing with the minority view in this case, the Patna High Court has held' that a similar document is not covered by the exemption, and is chargeable as an agreement. In the Patna case, the document combined the characteristics of a sale as well as of a mortgage. It was held that the word "exclusively" governs the entire clause, and not only the words "goods or merchandise."

29.5. In the Allahabad case, the facts were somewhat complicated, because, by the same document, the executant executed a hypothecation of the sugarcanecrops and also promised to sell the sugarcane at a speciﬁed sum as advanced on interest by the Sugar Factories Ltd. The price of the sugarcane supplied was to be set off against the loan, and the surplus of the loan was to be paid by the executant, interest free. The majority took the view that the document did not lose _ its character of "agreemen " or the right to claim exemption under exemption (a) merely because it also contained the hypothecation, of course, in so far as it contained the hypothecation, it was chargeable with duty. But the minority (Varma and Mulla JJ.) tool: the view that the exemption would apply only if the instrument is so framed as to amount to a mere agreement to sell goods or merchandise and possesses no other characteristics. The majority pointed out that if the exe- cutant had executed two agreements separately, he would have to pay the stamp duty only on the instrument of mortgage. There is no reason why the position should be worse for the executant when he combines the mortgage and the sale in one instrument. As to this, the answer of the minority was that the frame of the instrument does matter in stamp law. -

29.6 The Patna High Court has agreed" with the minority view of the Allahabad High Court as already stated.

The Rajasthan High Court has held3 that a document which did not exclusively relate to the sale of goods did not come within this exemption and was chargeable with duty. Here, the document relating to the sale of a truck provided for payment of price in instalments, and _ also for interest on the unpaid price. It also entitled the seller to seize the truck, if instalments were not paid in time, and to sell it thereafter, The document was held not to be exempt, be- cause the right to seize the truck was not a statutory right of the seller, and such terms were in addition to the agreement relating to the sale of goods. It was therefore taxable as an agree-

ment.

29.7. Thus, there is a conﬂict of views, and the need for clariﬁcation is obvious.

A decision on the question, what should be the law, requires an examination of the policy of the exemption. In our opinion, the policy of the legislature appears to be not to tax an amoe- ment which is for the sale of goods or merchandise. Such sales should be capable of being effected without any formality like stamping, and the loss of revenue that might be entailed by the exemption is oﬁset by the convenience of speedy transfer of the goods or merchandise.

This reason holds good equality where there is one instrument, as where there are two instruments.' - T ' It will be proper to observe that if the Legislature intended to conﬁne the operation of the exemption only to agreements simpliciter for the sale of goods or merchandise, the proper place for the word "exclusively" would not have been at the end. It would have been before the phrase "argeement or memorandum of agreement" and not words in juxtaposition with '-'goods or merchandise". Further, the phrase "agreement or memorandum of agreemen" used in the opening portion of the "cxemptions" in Article 5, control the three clauses _{a), _(b] and

(c) of the "exemptions". It the other View is well--founded, the word "exclusively" .would have been used not only in one of those clauses, viz. in clause (a), but would have been used an con- junction with the opening words of the "exemptions" quoted above. To give effect to the other view would be to hold that the word "exclusively" controls the opening words agreement or 11.2. San: Mum Sugar Man Ltd. v. .S'uga.m' Pandas. A:I.R. 1961

3. Poorramchand v. Basriram Deakisiian, A.l.R. l969 Ray. 313.

4. Para 29.5, supra.

Pat. 9, 1o, paras 4 andHtl'(Rai a stnha. JJJ.

195

memorandum of agreement" and thus governs all the three clauses of the exemptions. This is not permissible, having regard to the phraseology of the "exemptions". The opposite View fur- ther leads to an obvious anomaly that is illustrated by the following example. Take a case in which a person executes an agreement for the sale of crop and, by a separate instrument of even date, mortgages the same crop. The former instrument will, in that case, admittedly fall within the "exemptions" and he will have to pay stamp duty only on the latter instrument. But if he joins the two transactions in one and the same instrument he will, according to the argument, have to pay the stamp duty provided for not only by Article 41. but also by Article 5{c). This obviously could not have been intended by the Legislature.

Having regard to these considerations, we recommend that Exemption (3.) should be amended by revising the last few words as "sale of only goods or only merchandise". This will make the exemption applicable even where the instrument combines as sale and some other transaction, so long as it does not purport to deal with imrnoveable or intangible property. Of course, even as regards tangible moveable property, it will not include a pure transaction of hypothecation, gift, exchange and the like. But the controversy created by the word "exclusively" will not recur.

We may mention that the suggested amendment has. in substance, been favoured by most of the replies to our Questionnaire.' Introductory.

Transactions by way of security.

Pledge .

CHAPTER 3-0 ARTICLE 6 30.1 'While agreements, in general, are dealt with by article 5, special agreements are dealt with in the subsequent article. Article 6 levies duty on an agreement relating to (i) deposit of title--deeds, (ii) p-awn. or (iii) pledge. Duty is chargeable on an instrument evidencing an agreement relating to such deposit, pawn or pledge where the deposit etc. has been made by way of security [i] for money, advanced or to be advanced by way of loan, or (ii) for an existing or future debt. If it is an agreement relating to deposit of title deeds, the title deeds must relate to property other than a marketable security'-. If it is an instrument of pawn or pledge, the pawn or pledge must be of movable property.

The article is 'not conﬁned to loans on security of movable property. But, in practice, most instruments falling under the article relate to movable property.

30.2. The principal legal transactions as a result of which a person may create a security in favour of another, so far as movable property is concerned, are mortgage, charge, piedgc and hypothecation. In mortgage, there is a conveyance of an interest' in property as security for the payment of a debt or for the discharge of some other obligations. In a charge, there is no conveyance of interest in the property, but the charge simply confers upon the charge--holder certain rights over the property. Mortgages are separately dealt with by article 40.

30.3. A pledge is a species of bailment. In the leading English case on bailments,--Coggs- v. Bemm-d4--Holt, C.I., enumerated various types of bailments, of which the fourth was vadium, that is, delivery of goods by a debtor to his creditor, to be kept by him until the debt is dis- charged. A pledge is to be distinguished from a mortgage, inasmuch as there is no transfer of property in the goods and, accordingly, no incidental right of foreclosure. This distinction was strikingly illustrated in one of the English cases', where the pledge of a picture of Madonna and the child, attributed to a famous painter , was refused a foreclosure order, there being no mort--

gage.

performance of a promise is called a pledge'. It should be pointed out that that Act uses the expressions "pawn" and "pledge" as equivalents of each other. In fact, in the deﬁnition of ' "pledge" in that Act, the bailor is called the pawnor, and the bailee is called the pawnee. The element: of bailment (transfer of possession) is an essential element of pledge'.

A "pawn" is really another name for a pledge, though it is sometimes taken as indicating these transactions of pledge where the person taking pledge does so as a matter of business. In England, legislation relating to pawn-brokers imposes certain restrictions on this kind of business.

30.4. A mere license to take possession, given to the creditor, is not a pledge'. though it may amount to hypothecation. The twin elements requisite for a pledge--(i) security, and (ii) delivery of posses-sion--furnish a basis for distinguishing it from other allied transections.

1 As to deposits of marketable securities, see section 23A.

' Compare the deﬁnition of "mortgage deed" in section 20?).

' Lord Chorley, Law of Banking (1974). page 289.

' Caggs. v. Befnard. (1703) 2 Ltd. Rayni, 909.

' Frazer v. Eyes. (1895) 11 Times Law Reports 481.

i Section 112, Indian Contract Act, 1872.

' Laiian Prasad v. Rdhmﬂl Ali, A.I.R. I967 S.C. I322; (1967) 2 S.C.R. 233 ' Ex parts Persons. 16 Q.B.D. 532.

196

Under the Indian Contract Act, the bailment of goods as security for payment of a debt or -

197

30.5. In his judgment in Hn_Ilday v. Holgnte',i-t/files, 1., described a pledge as a security intermediate between a lien and a mortgage. By contract, a deposit of goods is made a security for a debt. but the right to the property 'rests in the pledge only so far as is necessary to secure the debt. ' - " ' charge and pledge were well known to common law lawyers. other hand, is a. civil law institution. The _.word -is derived El'D!Il "i13?p0I1'lBCa". it Was introduced in England through international-trade." it was treated as effective in equity, being regarded as the equivalent of a charge. It is a legal transaction as a result of which goods are made available as security for a debt wthout transferring either the property in them t'.1' the possession to the lender? It_ may, in brief he described as a

-security for a debt, which security remains in the possession of a debtor.

30.6. Mortgage, Hypothecation on The security is granted by means of a letter of hypothecation. There are two principal situations where hypothecation is convenient. because a pledge is not practicable. The ﬁrst is when the goods are temporarily in the custody of third parties". The second is where the goods are stored in the customer's own warehouse, which cannot be sealed off in such a way as to enable the bank to become a pledgec. Where it is practicable to seal off -the godown. the practice _ is'to_ hand over the keys to the bank, in order to -give the bank constructive possession of the gmds,~--~thereby creating a pledge'.

30.7. A lien, answering to the Incite hypotheca of the Ciyil Lawnis in right conferred by law, and not by contract, upon one man to retain possession of, or to have a charge upon. property real or personal belonging to another, until certain demands are satisﬁed": ' ' ' 30.8. We have adverted to the distinction between -h)'po'thecation and pledge. This has has noted in -a few Indian decisions", and is of"nnportance for the stamp law, the "precise-'charg- irtg article being different in the case of a hyp-othecation without delivery of 'possession.-Tlms;

in"an'="Ail!al1abad case', it was contended -that the instrument in question'was_' a'hypothecatioi_1.of-~ movable property, falling within the notiﬁcation" remiting the duty on an unattested deed"'of .' hypqthecation, and not a pledge falling within Article 6. The contention Was, however, negatived, on ,t.lie ground that the goods were handed' over to the Bank=in,whose'iavour the document. was _ executed, and there was. therefore, a pledge and not a mere hypothecation.__ ' - , _ _ _ 'S5039. This distinction has ﬁgured in the history of the Act also. In"the corresponding Article 29 of the Stamp Act of 1879, the word "hypotl1ecation'° was used. awhile-'in-the'prese'nt:

ar{j;;le,t]1e words "pawn or pledge" occur. The article in the 1379 Act could, .on its language.

Pledge Intermediate between lien and mortgage.

Hypothecation.

Lien.

Distinction between 5 hypothecation

- and pledge.

History of the article.

he; ﬁljghle even where possession. was not deliv_ered..- But 'a._I:[.2ale11tta ca__se',_t_ook the nzrjesir ,that__, the; yard "hypothecation" was used only in the sense of'a, pledge, 'a_n_d'_he_nce', in' _l_he',_abs'en'eeZ"_ ofq.§.,j1P[qyiSlOn for.delivery of possession, that article would _not apply. The. words"'paurn"of,'~ plpdg" were substituted in article 6 when the Act _Was,reﬁ'i§§,etlﬂin .18_99;_,ThllS,,_§t_»h)?12Q§T1¢C&iif2I1_,,_ of movable property, where possession is not given to the creditor," doesnot fall 'under-inst-1i'iit:i=f' 6 t_hougl1 it may fall under "mortgage" (article 40). _ I: D. An amendment of 1904, relevant to_ another point under article-6,_-rnayﬁ also be Article 6(2) (as amended in 1904) includes 7not'"onl§r"loaris' *vi.'hi2:li-are"c'bhtén1'po't'a'rietfvI!s' nah' " 'agreement (as held to be the case under" tlm-'original' article where-the words "'loa'n-1 Sceurizyfcir "

-_-'future Loans-

_.Amand.rnent of 7 I904.

mi&e"irrere used), but applies also to the case where theseeurity i'sfo='r"'money to be-a_dvan'ced.'in "

future. The eﬁect of the amendment is to place all such instruments on the same footin'g,-'whether "1 irrhrirday v. Hui!gare,"{l36S)l1aW'Rt3Apt!'l:i5 3 Ex-ch. 399- ' Lord Clmrlcy, Law of Banking (1974), page 291.

s 5% Kg Hamafhon Young and Gun. (1905) 2 Kir1g's Bench 772. -- ___ 7 _ _ _ 4- Lod Charley, Law of Banking (1974), page 322. - - ' - ' - " . 1 ' ' I Fishu-, law of Mortgage (6th Ed), para 5 cited by Donough, Stamp Act, Commentary on Article 5. _' _=.

" (a) Nader Bank Lrd. v. Canada Bank Ltd, A.I.R. 1961 Mad. 326.

{la} Sfmla Banicing Co. V. Pritamr. A.I.R. 1960 Puuj. 42.

1 Sn' Harm': Chandra V. Punjab Nan-'anal' Bank Ltd" A.I.R. 1958 All. 864.

9 See para 30.11, inﬁ-a.

9 K0 Sh!-Pay Atmg V. Srrarag Steel & Cr:-., (1894) I.L.R. 21 Cal. 244-.

1" Queen Empress V. Debendrn Rrisfrrra Mfﬂer, (I390lI.L.R. 2? Cal8T :34 of I_,awfT7.----26 Effect of reductions and remissions.

Effect of the notiﬁcation.

in article 6.

Reoorum eodntian 198 or not their execution is simultaneous with the loan advanced. On this point, of course, no modi- ﬁcation of the article is required.

30.11. For a complete statement of the position relevant to article 6, the clicct of certain reductions and remissions should also be taken into account, though they ostensibly relate to article 40. The levy of duty on hypothecation under "rnortagage" (article 40) created hardship and Government had to issue certain remissions and reductions, now consolidated in a notiﬁcation of 1931. The following reductions and remissions should, therefore, be noted' :--

"'98- Arrested inrtrurnent evidencing an agreement relating to the hypothecation of movable property Where such hypothe-cation has been made by way of security for the repayment of money advanced or to be advanced by way' of loan, or of an existing or future debt----'---Duty reduced to the amount chargeable on a bill of exchange under article No. l3(b) of Schedule I of the Stamp Act, 1899, for the amount secured, if suchloan or debt is repay-able on demand or more thanjhroe months from the date of the instrument; and to half that amount if such loan or debt is repayable not more than three months from the date of the instrument.

99. Unarterted instrument evidencing an agreement relating to. the hypothecation of movable property, Where such hypothocation of movable property, has been made .

by way of security for the repayment of money advanced or to be advanced by way of loan of an existing or future debt. .

30.12. The notiﬁcation deals with two cases. In the first case, the duty is reduced, white in the second case, it is remitted.

The net result of these reductions and remissions is that an instrument of hypotheoation. with- out delivery of possession, though ostensiblyunder the article relating to mortgapa,--ti) if attested, is leviable with the duty on aIpiedge,--that is the practical effect, since the term of article 6 are identical with the terms as in the notiﬁcation mentioned above ; (ii) if unltested, is totally exempt by virtue of the notiﬁcation. ' In other words, a person 'concerned with an attested instrument of hypothecatioil has:

to read article 40, and then to read the notiﬁcation referred to above, and then he back to article 6. Such instruments are nominally chargeable under article 40, acfllllly under article 6. This is a somewhat complicated" position. (An unattested instrument of hypothe- cation without delivery is exempt from duty]. -

30.13. To simplify the position, we recommend that' (a) an instrument of without delivery of possession should be added to article 6, (h) an instrument of without delivery of possession, if uncrresled ,shpuld be addedin the exempt.-i_on under '6.' attested, it should be chargeable as in the notiﬁcation. No change of substance will such an amendment, which will merely help -the citizen by enabling him to ascertain the one place.

30.14. We, therefore. recommend that, after the words "pawn or pledge", the hypothecation" be added at four places (three places) in the main article, and one in tion. Consequential charges' will he needed in Article 40. Exemption (2), and it __ _ 'advisable to provide expressly in that article that hypothecation of movables shall not c as a mortgage. ' ' _ We may mention that the suggested amendment has been favoured by most of 1th to our Questionnaire'. , , 3 any-, 1 Government of India, Notiﬁcation of193l, items 98-99. - 'N Z; ., ' Duty remitted. :

' Article 40.

* Article 40 to be amended.

5 Question ')9 worth, "er CHAPTER 31 ARTICLES 7--l2

31.1 Article 7 deals with two kinds of powers, vi;t., ti) power to appoint trustees, and (ii) power Article 7- to appoint property. It provides that an instrument, not being a will, by which such power is .cx.erciscd, is chargeable with a duty of ﬁfteen rupees.

Where a person is invested with power to determine the disposition of property of which he is not the owner, he is said to have power to appoint such property} The case law on this article reveals no serious diiﬁculty. An Allahabad case'? decides what is an "appointment".

A Bombay case" holds that where the executors of a will, holding property in trust for a charity, execute a deed appointing the property to an orphanage, the deed is chargeable under this A Calcutta case' decides that where the Panch of a community is given power to remove 8 lhrhnit and to appoint new Shebaits, duty is chargeable, when a new Shebait is appointed. We have no further comments on the article.

31.2 Article 8 levies duty on appraisenacnt or valuation. An appraisernent is distinguished ,ami¢1¢s_ kg',-an ward' though the duty is the same on both. An award requires a judicial determination, whiﬂpnn appraisemcnt does not.

Exemption (a) to the article is based on an early Englishdecisioo". that an agpraisﬁmeent for the information of one party only and not in any manner binding between the parties is no! liable to stamp duty. In the same case' Lord CJ. said : ' "An 'appraiser' is a person who values or appraisos any estate or property real or personal, or any interest, in possession or otherwise in any estate or property, or any goods, merchandise or effects, for or in expectation of any hire, gain, fee or reward (46 Geo. III, e. 43, S. 4). This has been interpreted to mean a person who bears the character _ or follows the calling or occupation of an appraiser." ' i I changes are required in this section on which thereyis very little Indian case-law.

_ 31.3 Under article 9, an apprenticeship deed is chargeable to duty (5 rupees). It includes ,amtq1¢g_._. . every writing relating to service or tuition of any apprentice or. servant, placed with any master §'DP£[1'""°°'h'P ttrlcnm any profession, trade or employment. - '- - a A deed of articles of clerkship by which a person is articles to any attorney, ischargeablc with a graph higher duty' (Rs. 250}. T '* exemption under article 9 refers to the Apprentices Act, 1850, which h_as been replaced. R=°°I1lﬂ1=ﬂﬂﬁ5°'1 The reference should be substituted by the Apprcoticels Act, 1961. Magistrates no longer wortas apprentices, and this part of the exemption should be omitted. We recommend that the article should be so amended. 2 E - ' ' '3'.'t.-'l- Article ID levies duty on the articles of association of a Company. It has buf-h:ld*,.-'\T|5¢'«_|¢1D- that I. special resolution altering the articles of association on'. I. company is not lialicio duty, even 1 See section 69, Explanation, Indian Succession Act. 1925. _ _ ' In rerqﬁrence trader section 5?, Stamp Act, A.l'.R. 1956 All. 25 l_'5.lI.}.

= In is Amara Haj! Do-mod namza Orphanage, (1911) I.L.R. 35 Born. «:44.

* .-inn-ssarv. Gassoirt Gaspar, A.I.R. 1919 Cal. 130, 735, 737.

5 Arﬂﬂ 12;

' Jlﬂlllou V. Fe", ([860) 5 M & S 240; also stocjackrou V. Stopherd, (1834) 3 Law Journal Ex. 95.

" Atkinson V. Felf. (1860) 5 M & S 240.

' Article 11.

' In the nu'rt'c.- of N-_-:1: £'_gr.=3r-run .-'Li'i'i'i's', (1901)) [.L.R. [2 All. 13].

199

Recommendation.

Article 11 to be deleted.

Article 12.

Recommendation.

200

if the special resolution supersedes all the articles, and substitutes another set of articles in their place.

Another article in the Schedule levies duty on a memorandum o-f association'. That article prescribes a lower rate of duty when the memorandurn ofassociatioo is accompanied by articles of association.

31.5. The exemption below article it] refers to "Articles of any Association not formed for proﬁt andregisrered under section 26 of the Indian Companies Act, 1382.". This should now refer to section 25, Companies Act, 1956, which is the provision corresponding to section 26. Compa- nies Act, 1882. We recommend that article 10 should be so amended. . _e 31-6. Article 11 levies a duty of 250 rupees on Articles of clerkship or contract whereby any person ﬁrst becomes bound to serve as a clerkin order to his admission as an attorney in any High Court. Now that the system of attorneys is being abolished, this article should be deleted. We recommend accordingly".

31.7. Article 12 levies duty on an "Award", that is to say, any decision in writing an arbitrator or umpire, not being an award directing a partition, on a reference "made other_wisc,'.than by an order of the Court in the course "of a suit".

The article is silent on the question whether a written agreement at arbitration. is required. It would be of interest to note that section 2(a) of the Arbitration Act, 1940, deﬁnes' an arbitration agreement as a written agreement to submit present orfuture diﬁerences to arbitration, whether an arbitrator is named thereunder or not. Section 2(1)) of the Arbitration Act deﬁnes an "award" .as meaning an arbitr-at:'ion_ award. Thus, under the Arbitration Act, t11er:.:"E:'an be no award without an agreenient for arbitration is'writing3. Every decision by an arbitrator is not an award. It must be :2. decision oln a written arbitration agreement. ' This aspect of the matter is not brought out very clearly in article 12 and the result is that controversy arises as to whether an arbitrator's award in writing, given on an oral agrecrnent for reference, falls within the article. This question usually arises where there is a family arrangement as aresult of an award'. It is pr r.t.hat the expression "award" in article 12 should be given the same meaning as under the Arbitration Act. That in fact, has been the judicial interpretation' in a recent case.

by an order of the Court in the course of '3. suit" govern the whole article, and are not to be read merely with "award directing a partitiolnl". . . .- = .

31.8. In the light of the above discussion, we recommend that article 12 sl1'ould:'be'i'evised I as under :

"12. Award, that is to say, any decision in writing by an arbitrator or" un'1'pire,aon' -a reference made otherwise than by an order of the Court in the course of a_suit,1bei'rrg an award mode cs 6! result ofa written agreement to submit present cr'fuim{e_ diﬁenw cos to arb:'.'raIi'orr and not 'béing'an award directing a partition.''. ' T " 1 Most replies to our Questionnaire favour such an amendment.' 'ii--.

1 stateless.' ' - 1 . _ *' * Latest ameudmentto the Advocates FAST, 196i. ' _ - - - , ' ' ' " -' * -' ' Makaniai v. B1'.s'ha.:r'tar Lat'. A.I.R. I947 Born. 253. , ' See G. Cizirlna Karadaiaiz V. G. Redda Kmdainh, i_A.I.R. 1914 A.P.,238_(issu_e)." _ '_ 5 Q. 80 of' the Questionnaire.

It is also obvious that in article 12 the words "on a reference made otherwise than -

Cl-lAP'I'ER 32 ARTICLES 13-14

32.1. Article 13 levies duty on a'hill of Exchange (other than one payable on demand). The *'"i'3"= 13- duty varies according to the period within which the Bill is payable (after date or sight). It also varies according to the value. -

I It is not necessary to go into details of the scheme prescribed by the article for calculation ofduties. But even a cursory reading of the article will show that, in the first place-. there is a difference in the duty depending on whether the bill is payable within 3 months after date or sight, or whether it is payable within 6 months after date or sight, or whether it is payable within 9 months after date or sight, or whether it is payable within one year atter date or sight, or whether it is payable at more than one year after date or sight. After the date of payability is so ascertained, the next step is to have a look at the amount of the bill. The amount of "the" duty vggics "according as the bill is for Rs. 500 or less, Rs. 1000 or less, and more than rupees one tho_usnu_d.' In the ﬁrst two cases (Rs. 500 or less, or one thousand or less), the duty is fixed, while inthe last mentioned cases, the duty is ad valorem. -

Primn fucie, this appears to be a complex scheme. A bill of exchange is a conimereial docu- and negotiable. It', therefore, a. simple provision could be devised 'which would reduce the calculations and labour necessitated by the present compleilty, the attempt would be worthwhile. Itswas with this ohieet in visrvv that we put, a speciﬁc question in our Questionnaire', setting out the scheme which, we thought, could be considered. Since many of the replies received agree the-- scheme which-, we thought, could be considered. '. Since many of the replies received agtee with the scheme proposed by us, we think that it is proper that the suggestion put by usm our -Questionnaire should be pursued and carried out.

32.2. it may be noted that in England, now, the duty on an inland bill of exchange or a Position in promissory note has been simpliﬁed" as follows" .-- E"3"'"d' W"Bill of Exchange or Promissory Note of any kind whatsoever (except a bank note)---drawn . o-r expressed to be payable, or actually paid or endorsed, or in any manner negotiated, in the United Kingdom." ' -

s. d. (The duty is 2d) . _ 2d 'i" 32d.--3. We, therefore. recommend that in article 13, in clnusestb) and (c) respectively, a duty Recoiomeitdntiou T of-2 rupees SD paise and 5 rupees for every one thousand rupees should be substituted (for the present duty). A ﬂat duty would be still better, but, _will, perhaps, be unacceptable. (The duty _ has already been reduced by a Government notiﬁcation/to _1=,t2 of that given in the Act)'.

«,,,_.;32-3A." It would appear that by a very recent notiﬁcation? the remission of stamp duty that 'ltlsiﬁanted so far in regard to stamp duty on Bills of'Exchange and ptornissory-notes has been uniﬁed. The remission tmder the previous notiﬁcation reduced the duty from what is mentioned in article 13(b)(c) to 1»'5tl1 thereof. In modification of this remission, the recent notiﬁcation adopts the proportion of U2 of the rate given in" the Act. " Certain proposals were made in our Ques- in. regard to these ins_t1'uments in order to simplify the rate structure so as to avoid elabo- l' :_'cai_lculations. The ratesmoiv require revision in vievv=of_'the notiﬁcation which Wm issued i'tlieQuestionnaire. ' '- - T 5 . . I 4 "e - ' 'Io.a1.

' Finance 'Act, 1961. section 33(1) (Eng).

| _'1'!ie duty (expressed in the previous currency), is 2d.

' Saa1'eduction'ol' duty notiﬁed under SD. 199 (E), dated 16th March, l9?6.

" Notiﬂieat|o'u'No. S.R.0. 199(5), dated 16th March, 1976.

201

Article 13'. [b} Article i3. {C} 202 Hence the rates which should now be recommended for these instruments should be as in the table below. A fresh notiﬁcation for "usance" notes issued by certain institutions (mentioned in the notiﬁcation of March 1976) will be necessary.

We may state that principle of suggested scheme has been favoured by many of the replies to our Questionnaire} 3233. We would have been happy to have the comments of the Ministry oi Finance on this particular point, but as they have not been recovered", we have wnsidered it proper to make our recommendations as best as we could. Those comments would have enabled us to work out the imglications in greater detail.

This avoids the elaborate calculations which were required in England under the law 'before the 1961 amendment, and which are still required in India under article l3(b) and 13(cJ. We see every reason for simplifying the scheme of calculating duty on bills of exchange. The effect of the proposed change can be thus illustrated by a comparative table. (This is not a draft).

Congpnratire table Preset: Act-'! Propouﬂ 4-5

(i) If payable within three months.

my ifthc but does not mus R:-.500 . . . Rs. 9.62;, Rs. 2.50 uplu Rs. Leno . _ . . . . . . Rs. 1.25 Rs. 2.50 for Rs. 24100 . . . . . . . Rs. 2.50 Km. 5.00 for Rs. 5,011) . . . . . . . Rs. 6.25' Rs. 11.50

(ii) If payable between 3-6 months. _ _ if the bill does not emceed Is. 500 . . . . Rs. I .25 Rs. 2.50 for Rs. 1,000 . . . . . . . . Rs. 2.50 ls. 2.50 for Rs. 2,000 . . . . . . . . Rs. 5 .00 R5. 5 for Rs. 5,000 . . . . . . . .' Rs. 12.50 Rs. 32.50

(iii) If payable between 6-9 months. . . " = if the bill does not exceed Rs. 500 . . . . Rs. 1 .87; Rs. 2.50 for Rs. 1,000 . . I . . . . . . Rs. 3.7! Rs. 2.50 for Rs. 2,000 . . . ._ . . . . Rs. 7.50 Rs. 5.00 for Rs. 5,000 . . . . . . . . Rs. 13.75 Rs. 12.50 {M if oayablc between 9-12 months.

if the bill does not exceed Is. 500 Rs. _ 2. 50 Rs. 2.50 for Rs. Loco . . Rs. 5 .00 Rs. 2.50 for Rs. 2,000 . . . . . . . . 11:. 10.00 RI. 5 .W for Rs. s,oou- . . -. . T_ . . . . Rs-. 25.09 in. 12,59.

if payable at more than one _ _ -' ' if the bill does not exceed Rs. "130 R3. 5 -99 It 5 .3 59,35? Lmo _ , ., . Rs. 10.00 _'.5.tI3 ﬁn» B_s_ 2.000 _ . Rs. 20.00 .101!) for Rs; 5,900 _ Rs. 30.00 -ﬁn!' Artusuotx f .

. _. ,. .

Nmiﬁggun 5}:-__(}_.199{E.]. 16th 19'ii5.'.----In exercise of the powers couitrt ll _ (3) of subsection (1) of section 9 of the lndian stamp Act. 1899 (2 of 1899) an<i._i=} . 0 1 Question 31. _ _ _ 3 our Questionnaire was sent to that Minn:-0'3. _' ' _ ' ' .

' In calculating the present duty. the notiﬁcation of 1976 :s_t_o be borne in mind. _. 4 The proposed rate is Rs. 2.50 for every I,0ﬂ'J1-npusor part In {B}. and Rs. Shrew? L909 1111156 " A fresh notiﬁcation for usance notes issu6d_53' "ﬁll" i"3ﬁt"ﬁ01'I5 lﬁﬁhiiﬂntﬂ 50 ﬂlb 710555315053 09 H. ' 'J95 -. will be required.

203

of the notiﬁcations of the Government of India in the Ministry of Finance (Department. of Revenue) No. 15, dated the 15th May, 1957, and No. 6, dated the 14th July. 1961, the Central Government hereby directs that with effect from the 1st June. 1976 the proper stamp duty charge- able on 131115 of Exchange speciﬁed in items (13) and ic) in article 13 of the First Schedule to the said Act and promissory notes speciﬁed in item (b) of article 49 of the said Schedule shall be re- duced to one-half of the rates speciﬁed against the said items (b) and (C) in the said article 13 :

Provided that the rates of stamp duty mentioned above shall not apply to usance Bills of Eléhﬂnge or promissory notes drawn or made for securing ﬁnance from the Reserve Bank Oflndia, Industrial Finance Corporation of India, Industrial Development Bank of India, State Financial Corporation, Commercial banks and co-operative banks for (a) bona--ﬁde commercial or trade transactions, (bl seasonal agricultural operations or the marketing of crops, or {c} production or marketing activities of cottage and small scale industries and such instruments shall continue to bear the rates of stamp duty at one-ﬁfth of the rates speciﬁed against the said items {in}. and (C) in the said article 13. _ Explanation 1.--For the purposes of the proviso--

(a) the expression "agricultural operations" includes animal husbandry and allied acti-

vities jointly undertaken with agricultural operationsg: '

(b) "crops" include products of agricultural-operations;

(c) the expression "marketing of crops" including the processing of crops prior to marketing by agricultural producers or any organisation of such producers. Explanation" 2.-----The duty chargeable shall, wherever mcessnry, be rounded oﬁ ﬁve pulse.

to the next [No. 16-F. No. 47I,Iil7/'76-Cus. VII]

0. P. MEI-IRA, Dy. Secy.

32.4. Article 14 imposes :1 duty on a bill of lading [inchrding a through Bill of lading), subject to certain exemptions. A bill of lading in respect of inland navigation also falls within this artlcie.' ' . -

There is an important remission granted by the Government which, as already pointed out,9 should be incorporated in article 13, in so far as it relates to a hill of lading. We, there;tore,_ re- coihauad that the following exemption should be added below article 14 :'---

: "'Exemption.----BiIl of hiding issued by a railway company or administration oruan Inland' Steamer Company for the conveyance of goods or' animals." , Iﬁxcmption (a) to article 14 also requires change. At present. it reads---

! lifts) Bill of landing when the goods therein described pre received at a place within th_c__. , ' port as deﬁned under; the Indian Ports Act,.1BB9, and are toibc "

limits of any A T _ delivered at another place within the limits ofthe home port."

5 jIti'ﬂIotild'be pointed out that the Indian Ports Act, 1389 was replaced in 1908 by the Indian Pork 1908 (15 of 1908). Apart from that, certain Acts dealing with major 'ports, have Ilsa In view of the above position, we rccominend that Exemption (a) should be re-

worded as follows :

"raj am of lading when the goods therein describediare received at a place within the'.

limits of any port as deﬁned under the India 'Porta3Act, 1908 or any other Act to ports, and are to be delivered at another place within the limits of the same poi'-if We may mention that the suggested amendment has been favoured by most of the replies to our_Ouestionnaire3.

'1 Rdaema under the smmp Atcr. (1904) I.L.R. so Cal. 565. a 5.5 dlsapsion relating to section 2(4), deﬁnition oi' '.'hill at' Incline".

' Question 32.

Article 14--

in tion mnddemaption.

I CHAPTER 33' ARTICLE 15 Acgiﬁiied ft_--_ 33.1. Article 15 levies duty on a bond. We are not concerned n_ow with the case law 'as "N" to the meaning of this e;;pression-- -a matter which we have already dealt with while considering Is In _word.s"not _ _ _ A ,_ otherwise 1' the deﬁnlticns. Nor do we pause to consider the details of the rate structure as given in*thl*{ mm" {'3' ' article. ' ' - i ' 7 . A Conﬁning ourselves to the test of the article, we note that there is a difference of opinion. as to the interpretation of the words "not.being.otherwise provided for by this Act," which occur in this article. According to one view,' thesewords mean "not being provided for by any other prov.".rr'on at this Act dealing with bonds". According to this view, it is only where the other provision of the Act { under which the instrument falls) deals with bonds, that the appli- cability of this article to the instrument is excluded. ' It may be noted that there are, -in" the Schedule, articles dealing with bonds of speciﬁc types e.g., Administration-bond (No. .2], Bot-

tomry bond (No. 16), etc. Accordingto. this view, it is only where the instrument" falls under one of those articles dealing with speciﬁc types of bomis that it can be held to be "otherwise provided for" within the meaning of article' 15. .

The other view takes the words ','not otherwise provided for'_' in an unrestricted sense,_and simply as meaning, "not providedlfor in any other part of the'Ae ." According to this view. article 15 will not apply to an instrument falling within any other article, irrespective of the question whether such other article deals with bonds or not." .9:

33.2. To. illust.Iate..th_u;-,. controversy, let us take an instrument which amounts to a bond as deﬁned by section 2(5) and also to a mortgage deed ( article 40). According to the first view.

_ _ such an instrument is not "otherwise provided for by this Act", and can, therefore, fall ._--nnder . article 15, while, according torthesecond view, the instrurnent must be regarded as "otherwise .-

' ' provided for by this Act" and, therefore, as not being within the scope of article 15. . ._ Although the express exenaptionof' "debenture" and 'the Note at the end-of the article would seem to support_ the first view, we are of_the 'opinion tha't"t11'e second "view?-15$ preferable, because if a document is covéfedlby a speciﬁc entry,----'--in whatever-forn1'--«:i--it. should .. not be regarded as a bond. Such a construction is n1ore._in_co;1so_nance with the ger_te__ra1,seherne and intendment of the Act. and with the rule of construction that the speciﬁc 'n1}is't' exclude the general. ' ' ' ' ' ' , 33.4 It is, in our opinion, desirable to clarify the position, by giving effect to the shcond view. We, therefore, recommend Iitiattor the words, "not being otherwise provided for by this Act or by the Court Fees Act. 1870", the words "not_being_ otherwise 'provided-'for by any provinon of this Act wliefher or not reIafz'ng't'o particular types of "bonds or by the'Court Fees Act, l370,_'m' any enactment corresportdingto that Act in force in any p«;Irt.offInd_:'a" . ,.sh,qu!d be substituted in article 15. .. .» _ _ p. - I. . T'. ,1 .4 Recommendation.

We may add that the views expressed in response to our Questionnaire'! rave', gains! favoured such an amendment. ' " ' 1 i. ,L. H. sugar F¢'u'(.'.C,t1|t'_}-',_'f"'l'i'.i;i!.?'if\'. Mon', .g|..T._R_. 1.941111; :43; 355, 26§"rp£;i'v:nE§:{'a 'Mute;

2. L. H. Sr.-gar Factory. Pilibhif v. Mari, AIR. W41 xiii. 2-43,' 34, 274 {per Bajnai and Dar; JJ.]."' "

3. Question 33. * 264 CHAPTER 34 ARTICLES l6--2l 34-.l. Article 16 levies duty on "bottoniry bonds", (so named after the ''bottom'' or keel of a ship).

A bottomry bond is a contract in the nature of hypothecation of a ship, as a security for money lent or expended upon her without reserving any claim against the owner in person, and usually made by the master-abroad, stipulating that the money advanced, together with the agreed premium, shall be paid within a stipulated number of days after the safe arrival of the vessel at a named port of discharge. The master of a ship has, as an agent of necessity, under certain circumstances, authority' to pledge or hypothecate the ship and its cargo as security for the money advanced to be expended upon her. The contract is called "bottomry", and the bond 3 "hottomry bond".

From the language of the article, it appears that it is conﬁned to a bond executed by the master only. Hypothecation of the cargo is called a "respondentia bond".

34.2. The money is lent only upon the security of the ship. Hence, where the owner undertook a personal liability which was to subsist for a period of about ﬁve months from the date oi the bond, it was held, that it was not a bottomry bond.' 34-.2A. It should be noted, that there is no such provision as article 16 in the (English) Stamp Act, 1891. The English Act expressly exempts "instruments for the sale, transfer, or other disposition, either absolutely or by way of mortgage, or otherwise, of any ship or vessel, or any part, interest, share, or property of or in any ship or vessel". This would cover botto- mry--bonds. In India also, a similar exemption has been introduced by section 3(2). Article 16 must, therefore, be read with and subject to section 3(2), the effect of which will be to exclude, from its purview, bonds on all ships registered in the manner indicated by section 3(2), though not others.

34.3. It may be noted, that bottomry bonds were in vogue before the days of submarine cables and wireless cornrntmications. Authority had to be given to the masters to act on behalf of the owners and cargo owners when, in emergency, they could not communicate with them. B.a!tomry--bonds and respondentia bonds are now obsolete'. The article however may be left as it is since it may be useful for those exceptional emergencies where wireless fails.

33.4. Article 17 levies a duty of ﬁve rupees on instruments of cancellation, (if attested and if not otherwise provided for}, including an instrument by which an instrument previously executed is cancelled. The inclusive portion is unnecessary, and should be omitted. We recommend accordingly. ' ' We are also of the view that an instrument cancelling a will should be exempted from tax.

34.5. It should be noted, that an instrument cancelling a will has by notiﬁcation' been expressly exempted from the duty under Article 17. This is an important exemption, and should ﬁnd place in the Act. As regards the phraseology to be used for incorporating the substance of the notiﬁcation, the word "cancellation" is used in the notiﬁcation and could be adopted, though the Indian Succession Act, in its provisions relating' to wills, uses the word "revoked"! l. Chorley, Law of Shipping (1960), page 178.

2. Amrn Katha Sahib Mercoyar v. Mamannthon Chem'. (I399) I.L.R. 22 Mad. 26; 8 M.L.J. 159.

3. Charley, Law of Shipping (1960), page 32.

4. Notiﬁcation of 1931, item No. 112.

5. Section 62, Indian Succession Act, 1925 (unprivileged wills} and section 1'2 (privileged wills).

205

24 M of Law,f7'l'-27.

Bottom:-y bond.-

scction 16.

No duty in English law.

Bottomry bomb now absolcte.

Article I?

Article 18- Introductory.

Posiﬁon regarding incumbrances.

Article 19.

206

We recornrnend that the article should be amended on the above points. We may note that such an amendment has been favoured by many replies' to our Questionnaire.

34.6. Under article 13, stamp duty is levied on a certiﬁcate of sale (in respect of each pro- perty put up as a separate lot and sold), granted to the purchaser of any property sold by public ' auctio11 by a civil or revenue court or Collector or other revenue ofﬁcer.

34.7. Before 1394, there were conflicting decisions as to whether incumbrances should be included in the computation of stamp duty under this article. The majority view was that where property was sold in execution of a decree subject to an incumbrancc, the amount of stamp duty payable on the sale certiﬁcate would be calculated only on the amount of the purchase money, and not on the amount of the purchase money plus the incumbrancef-' But the Bombay High Court took the view that where property was sold at a court sale subject to a charge, the certiﬁ- cate of sale should bear duty calculated ad valorem for the amount of the purchase money, plus the principal mortgage money charged upon the amount." A subsequent case' of the same 'High Court discusses the question how far mortgages should be entered in the certifican.-.--the deci- sion being that they should be entered only if the mortgage is admitted by the party or had been established by a decree or had been declared under section 282 of the Code of 1882 and the sale had been subject to them. The case does not discuss the question of stamp.

To overcome these conﬂicting views, Act 6 of 1894 added the word "only", after the words "purchase money", in the second column, opposite to clause (c) of the article, and thereby accept-

ed the majority view.

34.8. There is, however, still some diﬁerence of opinion in a few Bombay decisions with respect to a second certificate for sole, issued when the ﬁrst certiﬁcate is found to be-deﬁcient in stamp. Thus, in one case,~'* where a certiﬁcate of sale was granted on insufﬁcient stamp, and the insuﬂicient stamp and penalty were ordered to be recovered from the grantee, who wanted a fresh certiﬁcate of sale from the civil court, it was held that the civil court having granted a certiﬁcate was not bound to grant. a fresh certiﬁcate so that the grantee might escape the penalty. But in a later case" the court said that the earlier case merely decided that the court was not obliged to grant a second certiﬁcate. It did not hold that the court could not do so.

34.9. As to the decision in the earlier Bombay case, it is difﬁcult to see how penalty can, with any propriety, be recovered from the grantee when the certiﬁcate is prepared and signed by a government oflicer. The stamp has to be borne by the grantee according to section 29 (E), but, in practice, the stamp too is purchased according to the advice tendered by some oflicer of the CO1II'l.

As the point is not found in" any recent case, an amendment on the point is not required.

34.10. Article 19 levies a duty on certiﬁcate or other document evidencing the right or title of the holder thereof or any other person, either to any shares, scrip or stock in or of any incor- porated company or other body corporate or to become proprietor of shares, stock or scrip of any such company or body.

'Share' means share in the share capital of a company, and includes stock except when a distinction between stock and share is expressed or implied. '

1. Q. 84.

2. (a) Jurainprosad *5'. Ram Nara-r'n, (1893) I.L.R. 15 All. 107.

(b) Refcrcnceﬁrom the Board ofﬂcvemze. {[384} I.L.R. 10 Cal. 92.

(d) Reference under Stamp Act, s. 46 (1834) I.L.R. 7 Mad. 42].

3. (a) Meer Kcrisur Khan Ma:-ad Khan v. Emgraiu'.-n Khan Musakiran. (I391) I.L.R. 15 130111. 532. (I3) Sim Nagir: dos Jay Chane' v. Hnlalkarc Nathawa Gkecrfa (1881) I.L.'R. 5 Bom. 471 (F.B.).

4. S. C. Cfxedambarays v. Srrbmo Ram Chandra Yeﬂapur. (1894), I.L.R. 18 Born, 1975.

5. Nandram Matiram v. Rocha Biron, (1385) l'.L.R. '9 Bom. 526.

6. Collector ofdlrmedabao' v. Ra-motion, A.l.R. 1930 Born. 392. 394- 207 Scrips are also in the nature of certiﬁcates. when debentures are allotted to subscribers upon terms that the same shall be payable by instalments, a provisional scrip is issued to the subscribers, to be exchanged for a regular debenture after all the instalments are paid up.

34.11. In a Bombay case,' a certiﬁcate of membership issued by a provident society, insuing the payment of money on the death of the member of the society, was held to be chargeable under article 47 (Policy of insurance), and not under article 19.

There does not appear to be any conﬂict of decisions or obscruity of language or other serious difficulty with respect to this article. ' 34.12. Article 20 deals wth a Charter-party, which is any instrument (except an agreement for the hire of a Tug-steamer], whereby a vessel or some speciﬁed principal part thereof is let for the speciﬁed purposes on the charter, whether the instrument include, rt penalty clause or not. A charter party is a contract made between the freighter {i.e. the person who charters or hires the ship or a part for the carriage of his goods) and the owner (or the masters or their agent) (the master generally having antlrority written or implied, from the terms of his employment), contain- ing the terms for freight, and, in this contract, the owners or masters bind themselves, the ship, tackle and furniture that the goods freighted shall be delivered (dangers of the sea excepted), at the place of consignment : and they also covenant to provide seamen, rigging etc. and then equip the ship completely which they also warrant seaworthy. The freighter, on his part, stipulates to pay the freight. A charter party is distinguishable from a bill of lading, inasmuch as the charter--party relates to the entire ship where as the bill of lading only ascertains the contents oi the particular cargo.

34.13. The word "chartcrparty" is derived from the expression "carta partita", which, in medieval latin, meant an instrument written in duplicate, on a single sheet and then divided by indented edges so that each part ﬁtted" the other. ' There are three types of charter party :--

(a) Voyage charter party ;

(to) time charter party ;

to) charter party by demise, i.e. lease of the vessel.

A voyage or a time charter party confers simply the right to have the goods carried by a particular vessel, while, in the case of charter by demise, the possession and control is also trumferred to the charterer3.

34,14. It may be of interest to note that in England, the duty on charter parties has been abolished, having been found to be unproductive,' we put in the Questionnaire" a questson whether a similar course would not be useful for facilitating the development of shipping in this country. Thu": has been considerable support for such a course in the replies. We, therefore, recommend, deletion of Article 20.

Article 21 Article 21 was omitted in 1927.

1. In re Himmnr Provident Society Ltd, (1901) I.L.R. 25 Born. 376.

2. B. C. Mitra. Carriage by Sea (1972). page 8.

3. Payne. Carriage of Goods by Sea (1968), page 9.

4. Finance Act. 1949 (Eng).

5. Question 85- Article 20.

Article 20 to be deleted.

Article 22- Intmductory.

Qperation bankruptcy law.

CHAPTER 35 ARTICLE 22 35.1. Article 22 levies a duty, under the head of "composition-deed", on four kinds of instruments by which a debtor arrives at some agreement with his creditors for the discharging of his debts, namely :--

(1) an instrument whereby a debtor conveys his property for the beneﬁt of his credi-

tors.' This is often referred to as an assignment." It covers what is known in England as a clausio bonorumf but, in England, it is expected that it should require the creditors to accept less than the ftdl amount ;

(2) an instrument whereby payment of a composition or divide-nt on their debts is secured to the creditors" ;

(3) an instrument, whereby a debtor is allowed to continue his business, under the supervision of inspectors, for the beneﬁt of his creditors ;

(4) an instrument whereby a debtor is allowed to continue his business, under letters of licencee, for the beneﬁt of his creditors.

The duty is ten rupees in each case.

35.2. Ordinarily, the article operates before adjudication. Independently of bankruptcy law, an insolvent debtor, that is, a debtor who is not able to pay his debts in full or as they become due and payable, can enter into a valid arrangement with his creditors by which, without paying his debts in full, he obtains a release from the claims of the arranging creditors. These arrangements usually take the form either of a composition with creditors, or of an assignment of the arranghg debtor's property to a trustee for their beneﬁt.' The England, there exists legislation prcscrifmg certain formalities for such deeds of arrangement." There is no such restriction in India.

35.3. A debtor who is unable to pay his debts in full may arrange his affairs with his credi- tors without having recourse to a petition for his own adjudication." Arrangements between debtors and creditors are known as composition agreements. A composition agreement may take the form of an agreement by which the creditors agree to abandon their claims in consideration of receiving a composition on their debts, that is. a smaller sum bearing an agreed proportion to the amount of their respective clairns.1° Or it may take the form of an assgment by which the debtor assigns the whole of his Property to a trustee for the realisation and rate-able distribution of the proceeds amongst all his creditors, or amongst those who assent to and take the beneﬁt of the assignment, and the creditors, in consideration of such assignment, release their original claims and ocean; the dividend payable under the agreement in discharge of their debts." The diiferenoe between these two methods is that while a simple composition agreement does not, of itself, operate -as an act of insolvency, an assignment amounts to an act of ins-olvency."-13 ' ' . Subbarcya v. VyI'}rz'h'.v:ga, (1893) I.'.L.R. 16 Mad. 35, B9.

. Cirandrnsfrankar v. Bar' Magma, (1914) I.L.R. 38 Born. 576; A.I.R. 1914 Born. 55, 55. 57. Compare section Itf2'_|{a), Deeds of Arrangement Act. 1914.

Reg. v. Cooban, (1886) 18 Q.B.D. 169, referred to in I.L.R. 38 Born. STE. Chandrcrirnnkar v. Bar' Megan, (1914) I.L.R. 38 'Bum. 575, 590.

See below, point relating to article 38.

See Halsbury, 3rd Ed., Vol. 22, pp. 383-89.

. See infra.

. Mnlla, Insolvency Law (1958). page 341.

. Mulla, Insolvency Law (1958), page 341.

. See (a] Maiackchand v. Manifal. (1904) I.L.R. 28 Born. 354, 367-363;

(b) Re Hanan, (1872) LR. 1' Ch. App. 723, 726.

12. Section 9(a), Presidency-towns Insolvency Act:

Section 6(a). Provincial Insolvency Act.

13. Section 1(1)-ta). Baulcruptcy Act, 1914 "conveyance or auignrnent".

208

|--|l--

--t:~.cno;..ig\5n;t-.5nu--

209

But it is not open to every creditor to base an insolvency petition upon it. Thus, a creditor who has been a party or privy to the assignment is estopped from setting it up as an act or insolvency. It should he noted that the assignment must be for the beneﬁt of all creditors; other- wise it may, amount to a fraudulent preference, which is an act of insolvency on which any other creditor may base a petition.

35.4 Composition agreements of both the classes' are covered by the article in the Stamp Act. In addition, it covers instruments providing for inspectors and for continuance of business under letters of licence.

An analogous article? levies a duty of it) rupees on a "letter of licence,"'--i.e. an, agreement that the creditors shall, for a speciﬁed time, suspend their claims and allow the debtor to carry on business at his own discretion. In England, letters of licence are, by the Deeds of Arrangement Act," required to comply with certain formalities prescribed by statute.

35.5. After this preliminary discussion, we shall proceed to consider the various instruments to which article 22 applies.

35.6. Out of the four categories mentioned above,* assignments and compositions may be tﬂen together. In a Madras case5, a debtor and the ﬁrm of which he was a member had been adjudimled banlcrupts in Mauritius, and a receiver appointed by the court. Subsequently, the creditors met, and resolved that if the adjudication was annulled, a composition payable by instalments be accepted in full satisfaction of their debts, and that the bankrupfs estate be assigned to that firm, and the plaintiff be appointed trustee to carry out such agreement. An instrument was executed to give effect to this resolution, which was also approved by the insolvency court. The court ordered that the bankrupfs estate should vest in the plaintiff, who was appointed trustee to carry out the composition, with full powers of realisation. The plaintiff now sued to recover the nrovt able and immovable property of the bankrupt in lndia. The Court held that the transaction substantially amounted to a transfer by the debtors of their property for the beneﬁt of their creditors, and had been duly stamped as a composition deed.

In a Bombay case," it was held that the deed in question fell under the first class. In this case, the debtor, with the consent of the creditors, executed a deed making over all the speciﬁed

-assck to certain named creditors. The creditors coming in by a particular date under the deed . Iﬁﬂd that after all the goods and properties had been made over to the trustees, no other claims with regard to the amounts due to them should remain outstanding against the dehtor- The dead also provided that the trustees were to manage the properties for the beneﬁt of the creditors, and the money realised from time to time was to be distributed among such creditors in proportion to their claims. Subsequently, in a suit brought by the trustees to recover possession of a house comprised in the deed, the question arose whether the deed was a composition deed. The Courtheldthatthe deedwasacontpositiondeethasitfcllwithinclass (U ofthe deﬁnition in article 22 as an instrument executed by a debtor whereby he conveys his property for the beneﬁt of his creditors.

35.7. The third and fourth categories of instruments mentioned above can be distinguished thus. In the case of the inspectors mentioned in article 22, though the article is silent as to who should appoint these inspectors, it is presumed that the inspectors are nominated by the <21-editors. In the letter of licence, the claims of the creditors are suspended for a speciﬁed tine, arid the debtor is allowed to carry on his business at his own di.s'r:r-extort.' I. Para 35.3 supra.

2. Article 38.

3. Section l(2)(c) and (d), Deeds of Agreement Act, 1914 (Eng), William on Bankruptcy (-1953).-PEI! 368-.

4. Para35.l. supra.

5. Subbaraya v. Vytﬁioiinga. (1893) I.L.R. 16 Mad. 85.

6. C!lrana'ra.rhonIt-ar v. Bar' Mayan, (I914) I.L.R. 3-S Born. 576. A.I.R. 1914 Born. 55, 56.

7. Cf. Article 38.

Analogous article-

Article 38- Letter of Licence.

(1) .3115 (3) Assignment: and compositions.

Article 38.

Position" after adjudimtion.

Procedure under Insolvency Acts.

Meaning of "Inspectors" in Article. 11.

Practical utility limited.

Recommendation to amend article 22.

210

35.3. Where it is a deed falling under article 38 as a letter of licence, the business is carried on at the discretion of the debtor. It is doubtful how far such a deed is of practical importance, as presumably the debtor has already mis-managed his business earlier, thus incurring the debts, and -one wonders if the creditors would allow him to "manage his business further at his own discretion.' ' 35.9. Under the Insolvency Acts," after adjudication, the court appoints the insolvent to manage the trade or his property in such. manner as the CONT: directs. In such cases, the discretion of the insolvent is controlled by the court. Therefore, where it is a deed whereby provision is made for the continuance of the debtor's business "under the supervision of inspectors", it can be assumed that the inspectors would be nominated by the creditors.

35.10. As regards the procedure for inspecLion,_the relevant provisions in the Insolvency Actsi provide for a committee of inspection for the purpose of superintending the administration of the insolvenfs property by the oﬂicial receiver. Under the Insolvency Acts, the committee of inspection are the creditors themselves or those who hold general powers of attorney from the creditors. The court has to aua'.':or.".se the appointment of such a committee.

35.11. The question whether, under the Stamp Act, Article 22, 'inspectors' means those appointed from among the creditors themselves to supervise the debtor's business, and whether they have to be approved by the court (as under the Insolvency Act): is not beyond doubt. However, one general comment that can be made with respect to deeds of inspectorship (similar to the comment already made with regard to letters of licence), is that such deeds do not appear to be commonly used. No case law on these two types of composition deeds is available.

35.12. With regard to the practical use of these deeds, it isinteresting to note the history of section 67A of the Provincial Insolvency Act, 1920. This section was added by section 5 of the Act of 1926. Before the amendment, there was no such provision in this Act, though there were, in the Presidency towns Insolvency Act, sections 88 and 89, which provided for the setting up of a committee of inspection by the creditors for the purpose of superintending the administration of the insolvenfs property by the receiver. In 1924, the Civil Justice Com- mittee made a recommendation for the addition of such a section, making the following observa- tions :--

"So little use is made of these sections in the Presidency Towns Act that one hesitntﬁ to recommend their introduction into the mofussil. In principle, however, it seems hopeless to expect good administration of a fund which really belongs to the creditors, unless the are given a means whereby they may have a. proper voice in superintending the There does not appear to be any case law under these sections providing for a cornn:I.il:tee of inspectors under the Insolvency Act also.

35.13. If these two types of composition deeds are retained in the Stamp Act, than the following changes are recommended for the improvement of the relevant parts of the article :--_--

(I) In the case of instruments for the continuance of business under inspectors. the article should make it clear that they are appointed by the creditors.' (2) Since article 38 denies a letter of licence, reference should be made in article 22 to that article.

We may add that such an amendment has been favoured by most replies to our Question- nairc."

1. See also Mulls, The Indian Stamp Act, (6th ed.) page 292.

2. (a) Section 66 of the Provincial Insolvency Act, 1920; Mulls Law of Insolvency (1958),

(b) Section T5 of the Presidency Towns Insolvency Act, 1909:

(c) Compare sections 57-58, Bankruptcy Act, 1914 (Eng).

3. (9.) Section 67-A, Provincial Insolvency Act. 1920.

(b) Sections 88 and 89, Presidency Towns Insolvency Act, 1909.

4. Para 35.10 Supra.

5. Para 35.7.5-upra.

6. Q. 86.

pops 699 and 714:-

21 1 APPENDIX Extract of Section 1. Deeds of Arrangements Act, 1914' (Eng).

1. (1) A deed of arrangement (Eng) to which this Act applies shall include any instru-

ment of the class hereinafter mentioned whether under seal or not-

(a) made by, for or in respect of the affairs of a debtor for the beneﬁt of his creditors generally ;

(13) made by, for or in respect of the affairs of a debtor who was insolvent at the date of the execution of the instrument for the beneﬁt of any three or more of his creditors : ' otherwise than in pursuance of the law for the time being in force relating to bankruptcy.

2) The classes of instrument referred to are--

(a) an assignment of property;

lb} a deed of or agreement for a composition ;

and in cases where creditors of the debtor obtain any control over his property or business---

(e) a deed of inspectorship entered into for the purpose of carrying on or winding up a business ;

(d) a letter of licence authorising the debtor or any other person to manage, carry on, realise or dispose of a business with a View to the payment, of debts ; and

(c) any agreement or instrument entered into for the purpose of carrying on or winding up the debtor's business, or authorising the debtor or any other person to manage, carry on, realise or dispose of the debtor's business with a View to the payment of his debts.

Article 23- tntroduetion.

No clung:

CHAPTER 36 ARTICLES 23--------25 36.1. Article 23 levies duty on a conveyance. There are many other instruments analogous to conveyance, but we need not enumerate them here. As to instrument of release. we have already discussed the position.' 36.2. In the discussion relating to section 27,' we have referred to certain State amend-

w'"bm3""'-mo'°fc% l1'lt?l1lS which alter the basis of the charge under article 23 from the amount of the consideration State Amendments as to copyright.

' 1914.

(which is the present basis). to the value of the property. Such an amendment basically affects the' rate of duty. We do not propose to consider the merits or demerits of such an amendment having regard to the fact that the question is one of policy, and no difficulties resulting from complexity of law arise.

36.3. There is. in this Article, an exemption from duty in respect of nssigmnentr of copyright by r=J'ltr}' made under section 5 of the Copyright Act, 1847.

It should be pointed out that the Copyright Act, 1847 was repealed by the Copyright Act, That Act has, in its turn, been repealed by the Copyright Act, 1957. Both the Act of 1914 and the Act of 1957" prohibit assignments of copyright by entry in the register, and the exemption under article 23. in the form in which it appears, is obsolete.

There can be an assignment of a copyright in a different form, under the Copyright Act, 1957, section 18. However, section 19 of that Act is material, and provides as follows' :--

"l9. No assignment of the copyright in any work shall be valid unless it is in writing signed by the assignor, or by his duly authorised agent."

This section corresponds to the Act of 1914. First Schedule, section 5(2). Thus, the assignment of a copyright must. under the present Act, be in writing, and signed by the assignor.

36.4. Reverting to the article in the Stamp Act, we may note that State Amendments of article 23, while taking note of the fact that the Copyright Act of 1847 has been repealed, run on divergent lines. Brieﬂy. the position is as follows :---

ta? In Gujarat and Maharashtra, a reference to the Copyright Act of 1957 has been substituted, in place of the reference to the Act of 1847. But adequate notice does not seem to have been taken of the details of the scheme in the Act of 1957.

(bl In Andhra Pradesh. Madhya Pradesh. Madras (now Tamil Nadu), Mysore and Puniab. all assignments under section l8 of the 1957 Act have been exempted.

(c) In Uttar Pradesh, the exemption appears to be limited to assignments of copyright in musical works by a resident in India or first published in India.

(ii) In Bihar. the exemption has been deleted with effect from 31st March, 1958.

36.5. Having taken note of the divergent approaches adopted by State Legislatures, and after a careful consideration of the merits, we have come to theﬂconclusion that all assignments of copyright ought to be exempted. The assignment of literary. musical or artistic works should he treated differently from the transfer of other property. We need not elaborate the reasons.

I. See discussion relating to section 2(IO)--"Conveyance".

2. See discussion regarding section 27.

3. Section 13. Copyright Act, 1957.

4. Section 19. Copyright Act. 1957.

212. 213 It will be enough to say that barring a few exceptions, artists and musicians must assign their copyright if they are to eke out their living. It is then only that they can put their products before the public. It is hardly proper to treat the sale of a house and an assignment of a copyright on an equal footing.

36.591. Deletion of the exemption should, in our view, be regarded as a retrograde step. Nor is it proper to restrict the exemption to assignments of musical works. Creative activity, whatever he the medium, ought to be treated on a special footing. There is no reason why only musical works should be granted protection, and not paintings or sculptures or literary works or choreography.

The primary reason for which the law has, in the ﬁeld of stamp duties, made a distinction between material property and what is conveniently described as intellectual property, would appear to be that the latter represents man's journey into spheres bordering on the region of the spirit. To nourish that laudable endeavour ought to be an object of the law. This is not to say that if proﬁt is made out of the pursuit of such activity, such proﬁts should never be taxed.

The point to be made is that in the context of the stamp law, the assignment should not be subjected to tax. ' Another aspect also ought not to be ove-rloolred.

Brandeis J. observed :--- _ "The general rule is that the noblest of human production, knowledge, truth ascer-

tained, conception and ideas become, after valuntary communication to others, free as the air to common use."

In the case of Imemafional News Service,' Freedom from taxation places the work of art at the disposal of many more persons than would be possible if there were no exemption.

36.6. We, therefore, recommend that the present exemption should be retained, after sub- stituting a reference to sections 18-19, Copyright Act, 1957 {which deal with assignments), in place of the reference to assignment under section 5 of the Copyright Act, 1847.

We may mention that the suggested amendment has been favoured by most of the replies to our Questionnaire.' 36.6A. Article 24 levies duty on a copy or extract certiﬁed to be a true copy or extract by or by order of "any public ofﬁoer" and not chargeable with court--fee. The article applies to all copies certiﬁed to be true copies by pubiic otﬁcers, whether the original was or was not chargeable with stamp duty. The duty is eight annas if the original was not chargeable with duty or if the duty on the original does not exceed one rupee. In other cases, the duty is one rupee. It should be noted that the article applies also to copies of documents which do not create rights' or liabilities

-36.7. There are two exemptions. Their details are not material for the comments that we are going to make on the article. But we may note that. Exemption (h) under the article exempts, from duty, copies of registers of births and deaths,--which are all docm-nents which do not create a right or liability. This exemption itself shows that in other respects the article 'a wide, as stated above.' 36.8. We shall ﬁrst dispose of a minor point. We may point out that with reference to the expression "public oﬂicer", which is used in the article but not deﬁned in the Act, the Ibnence of a deﬁnition was regretted by Edge CJ." who observed---

". . . .a ﬁscal Act, which imposes the payment of duty on the subject, ought to contain deﬁnitions of all terms which have to be considered in apply the Act and which are not accepted as well recognised terms of universal application."

1. Inrenmrional News Service v. Associated Press, (1913) 348 U.S. 215, 25. '--'

2. Question 87 {Article 23}.

3. Sedtion 2(24), deﬁnition oi' "instrument" {inclusive deﬁnition).

4. Para 36.6, supra.

5. Reference, (1897) I.L.R. 19 All. 293, 294.

24 M of Law!77--28 special fooling.

Recommendation".

214

He pointed out (by way of example), that under the Indian Penal Code} apparently, the Secretary of 5: Municipal Board would be a "public servant" but he would not be a "public officer" according to the term as deﬁned in the Code of Civil Procedure." Referring to sections 74, 76 and 78 of the Indian Evidence Act, 1872, he held that the record of the proceedings of 1 Municipal Board is a "public document" and the officer who is authorised by the ordinary course of his oﬁicial duties to give copies of public documents, is. for these purposes, a "public Oiﬁcer". Hence, a copy of an order passed by 51 Municipal Board on a petition presented to it, certiﬁed as a title copy by the Secretary to the Board, came within article 24, and required to be stamped.

This particular difﬁculty will not survive if our recommendation to insert a definition of "public officer" is accepted.

gﬁguﬁ E',g|"d_ 36.9. It may, incidentally, he noted that in England, the entries in the Schedule to the Stamp Act, 1391 relating to copies and extracts were repealed in 1949.3 $E 36.10. In one respect, it is still' desirable to deﬁne the scope of the article more precisely to_sactim 76, than at present. Certiﬁed copies of public documents are issued under section 76. Evidence E"d"°°° Act Act, and that is the principal provision of signiﬁcance for the purposes of article 24. We. therefore, recommend that after the words "public oﬂicer". the words and ﬁgures "under section 76 of the Indian Evidence Act, 1872" should be added in this article; the Stamp Act will then be brought into harmony with the Evidence Act.

We are separately recommending the insertion' of a deﬁnition of "public ofﬁcer", but an amendment is also needed in article 24, as suggested above.

Amendment 36.11. Another point relevant to this article raises certain issues of substance. At present.

duty is leviable on a certiﬁed copy or extract given by a public officer, even if the Origirﬂi was mm! tall . . . . . .

req-airy}, not chargeable with duty, by virtue of article 24(1). The rationale of charging duty on such copies is not readily understandable. No doubt, taxing provisions are meant to collect revenue, and one cannot always ﬁnd their rationale. But, in this case, the provision obviously causes hardship and inconvenience. If, for example, a student seeking admission to a college gets copies of his academic diplomas certiﬁed by a public oﬁicer, the copies so certiﬁed would become chargeable with stamp duty on a literal reading of the article. Again, where copies of miscellane- ous correspondence in a pending case are certiﬁed. each of them becomes chargeable, thus making their use in a proposed litigation costly. Even copies issued for private use, or for private record, become chargeable. This causes considerable hardship. We are of the View that this is a situation where the considerations of revenue should yield to those of convenience, and there should be no duty on a copy if the original is not chargeable.

Rocomtnundntino 36.12. In the light of the above discussion, we recommend that the charging portion in ::},,n&"_ 'mg article ?.4f.i} and (ii) should be revised, so as to read as follows :-- _ I i) if the original was chargeable with at duty not exceeding one rupee. .FiﬁY ' _paise.

(ii) if the original was chargeable with a duty exceeding one rupee. ' ' . " One ' rupee.

Exemption

(a) if the original was not chargeable with dairy.

(Other Exemptions as at present, after suitable re-lettering).

1. Section 21, Indian Penal Code.

2. Section 2(1'l), Code of Civil Procedure, 1882. ,

3. T116 Finalltx Act. 1949, Sections 35 and 52"). and Eight Schedule, Part 1. entry 12, and Eleventh Schedule; Monroe, Stamp Duties (1964), page 261, 262.

4. Sea discussion as to section 2, deﬁnition of "public otﬁcer' (new).

215

We may mention that the suggested amendment has been favoured by most of the replies to our Questionnaire} -

36.13. Article 25 deals with the counterpart or duplicate of an instrument. This is of particular importance to leases. A lease is generally prepared in two identical forms, called the lease and the counterpart respectively. The lease is executed by the lessor alone, and the counterpart is executed by the lessee alone, then, the lease and the counterpart are exchanged. Sometimes, the lease is in duplicate. The counterpart or duplicate is chargeable with duty if the original is chargeable with duty. Where the proper duty has not been paid on the original, the intention of the law is that the counterpart itself should bear duty.

Where article 25 applies, the counterpart which is stamped under the article would not be admitted in evidence, unless the original is produced to' show that it was duly stamped or the Collector certiﬁes" the duty paid on the original.

In this article, the exemption relating to the counterpart of a lease granted to a cultivator which is itself exempt from duty" is, strictly speaking, redundant, because the Article itself would apply only if the original is chargeable with duty. However, the exemption is harmless, and need not be disturbed.

1. Question as (Article 24}. _

2. Section 16.

3. Article 35, Exemption (a). as to leases to cultivators.

A1-tlclelé.

ﬁon 16 ms Article 28.

CHAPTER 37 ARTICLES 26--29 37.1. Article 26 levies duty on a customs-bond. It needs no change. 37.2 Article 27 levies duty on debentures. It needs no change.

37.3. Article 28 (Delivery order in respect of goods) refers to the "instrument being signed by or on behalf of the owner of such goods" ........ . . . Obviously, in this article, the instrument described as "signed" is one "executed", for the purpose of section 3. It would be desirable to substitute the word "executed" for the word "signed", in this article. We recommend that the article should be so amended. We may note that such an amendment has been favoured by almost all the replies to our Questionnaire.' 37.4. Article 29 levies a duty of one rupee on an instrument of divorce, that is to say, any instrument by which any person eﬁects the dissolution of his marriage. Of course, so far as the law of domestic relations is concerned, such instruments can have legal effect only in cases where extra-judicial divorce is permitted by law and the scope for the application of the article is, thus, limited. The article needs no change.

1. Question 90.

216

CHAPTER 38 .

ARTICLE 30 . . . _ Arti le 30- 38.1. Article 30 levies duty on entry as an Advocate 1n the following terms : Iuu-:du._-;tjon_ Description of lnstrurnent - Proper Stamp-duty EEi{§"I{s';.it'AT:.i£ac,s.Te, VIKIL on A'['1'DRNEY o1~:'¥'nsh6r1T I [W W I in . OF ANY HIGH COURT UNDER the lndian Bar Councils Act. 1926, or in exercise of powers conferred by Letters Patent or by the Legal Practitioner 5; Act, 1884- (al in the case of an advocate or Vakil . . . . . . . Five hundred rupees. (bl in the case of an attorney . . _ . . . . . . Two hundred and ﬁfty rupees. Exemption ' Entry of an advocate, vakil or attorney on the roll of any High Court when he has previously been enrolled in a High Court.

3-8.2. It should, at the outset, be pointed out that the article has become obsolete, with posjﬁcnunder the cooling into force of the Advocatm Act, 1961, which has practically supersededl the various WW AC! enactments relating to advocates referred to in the a.rticIo----that is to say, the Bar Councils ' Act. and the Legal Practitioners Act. Even as regards attorneys, recent amendment abolished the system.

A certiﬁcate of enrolment as Advocate is now issued under section 22 of the Advocates Act,' which reads---

"22. There shall be issued a certiﬁcate of enrolment, in the prescribed form--

(i) by the State Bar Council to every person whose name is entered in the roll of advocates maintained by it under this Act ; and

(ii) by the Bar Council of India, to every person whose name is entered in the common roll without his name having already been entered in any State roll."

Under the same Act,' an enrolment fee of tvvo hundred and ﬁfty rupees is to be paid to the State Bar Council, before enrolment as an advocate. Section 20'of the Act provides for a ccnmmn roll, and section 46 provides for the payment of a part of the enrolment fees to the Bar Council of India by all State Bar Councils.

After the passing of this Act. the article in the Stamp Act has become practically out of date.

38.3. Taking note of the passing of the Advocates Act. 1961, many States have dealt Sm:

with the Stamp duty in this respect by speciﬁc provisions. r Ammgmma.

Below, an attempt has been made to summarise the position with regard to the levy of Stamp duty for enrohnent as an advocate under the various stamp laws vis-a-vis the Advocates Act, 1961.

(1) In the following States, the duty under the stamp law has been speciﬁcally repealed] omitted. .nrl only the fee under the Advocates Act, 1951. is now payable:

via) Madhya Pradeslz.---Article 30, relating to entry as advocates etc. on the roll of any High Court, has been omitted by Madhya Pradesh Act 11 of 1962.

-1. See section 22, Advocates Act, 1951. 1' '

2. Section 22. Advocates Act, 1961.

3. Section 24(1)(f'J, Advocates Act, 1961.

217

(b) Mahara.s.htra.--Article 31 of the Bombay Stamp Act, 1958, relating to 215 entry as advocates etc., has been deleted by Maharashtra Act 10 of 1965.

(2) In the following States, the duty under the Stamp law continues to be leviable and the Stamp Act has been speciﬁcally' amended after the passing of the Advocates Act. The fee under the Advocates Act, 1961, is also chargeable :

(a) (1?)

(c) Andhra Prades.h.--Article 26 (substituted by Al'. Act 26 of 1965) levies, for entry as advocate in conformity with tl1e Advocates Act, 1961, a Stamp duty of Rs. 250,-*'--.

Mysore.--Ar1icle 17 (new) of the Mysore Stamp Act, 1957 as amended by entry as advocate in conformity with the Advocates Act, l96l, a stamp Mysore Act 29 of 1962, levies on certiﬁcate of enrolment in the roll of advocates under the Advocates Act, 1961, a duty of Rs. 250,':

Utrar Pradesfw.-«----Article 30 of Schedule IR, inserted by U.P. Act 28 of 1952, as substituted by Act 25 of 1962, levies, on entry as an advocate on the State roll under the Advocates Act, 1961, a stamp duty of Rs. 5001-.

(3) In some States (Bihar, Gujarat, Haryana, Kerala, Punjab and West Bengal)', the pro-

vision as to duty on entry as advocate iunder the various Stamp Acts, in the form prior to the Advocates Act, 1961, has not been speciﬁcally revised or repealed".

Recommendation to data:

article 39.

33.4 Having carefully considered the position resulting from the Advocates Act, 1961, and after giving due thought to the State Amendments, we have come to the conclusion that the article in the Stamp Act relating to entry as advocate should be deleted. In our view, it is not proper to continue the stamp duty after the imposition of the fee mentioned above by the Advocates Act.

1. The enumeration is not intended to be exhaustive.

2. See K1-ishnamui-thy, Indian Stamps Law (3rd ed.) pages 453. 630, 3'32.

CHAPTER 39 ARTICLES 31--34

39.l. Article 31 levies stamp duty on an instrument of exchange of property. No changes Article 3]. are needed in this article.

39.2. Article 32 levies stamp duty on an instrument of further charge. It needs no change. AIﬁ°1¢33- 39.3. Article 33 levies duty on an instrument of gift, not being a settlement, will or transfer. Article 33. We have no comments on this article.

39.4. Article 34 levies duty on an indemnity bond. The duty is the same as on a security .sn1c1e3_.¢-- bond {Article 57). It may he noted that the duty on a security bond is lower than that on a bond Egﬁgﬁiggd in general. Bonds in general are chargeable with duty ad valor.-2m without any maximum { Article

15). while security bonds (and consequentially, indemnity bonds) are subject to a maximum.

The article applicable to bonds in general------Articlc 15------app1ies only to a "bond" as deﬁned in section 2(l5), not being a debenture (No. 27) and not being otherwise provided for by the Stamp Act or by the Cou1't--fee Act. Since, in respect on an indemnity bond or a security bond, provision has been made in article 34 and 57, the duty on these bonds would be payable {I1 accordance with those articles. and not in accordance with article 15.

39.S.'Articlc 34 does no': define an indemnity bond. The Indian Contract Act deﬁnes a ﬁggggrofi "contract of indemnity" as follows :-- ' "124. A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a. contract of indemnity."

In general. this deﬁnition is utilised by the Courts in interpreting the Stamp Act also."

39.6 While article 34 does not require any amendment, a few points arising out of the case Case law. law may be brieﬂy referred to.

It has been emphasised" by the Bombay High Court that the article applies only when the contract of indemnity is in the form of a bond. An indemnity note passed by a consignee to the Railway company, in respect of goods for which the railway receipt was lost, was, therefore. held to be chargeable only as an agreement' and not as an indemnity bond.

Then, there is an Allahabad case' relating to an agreement by a company for compensation to be paid to the Managing agent, on the happening of one of the events speciﬁed therein. This provision for compensation was a term of the Managing Agency Agreement. It was held that the term could not be treated as a separate contract of indemnity, as" there was no separate con- sideration for it. The provision for compensation was not a distinct matter, but was part and parcel of the agreement as a whole, and it was not, therefore, liable to duty as an indemnity bond. The agreement was an ordinary service agreement, chargeable with stamp duty as an agreement, and was not a bond.

39.7. The cases discussed above illustrate the application of the article. They do not,'how- ever. call for an amendment of the article.-

I. Section 124, Indian Contract Act.

2. Hbxdmran .5'u;ga.r Milt: v. Stare of U.P., A.I.R 1972 All. 8 {S.B.]. ,

3. Reference from the Chief Commi.-nioner of Central Provinces, I'L.R. 5 Born. 418 (F113,).

4. Article 5.

S. In re Dinmpur Sugar Mills. A.I.R. 1956 All. 25. {Special Benchl.

2.19 Article 3 5- Introductory.

Sub-lease and under-lease and agreement to let.

Meuningot "ﬁn.-."

Recommendation for Explanation.

schuna analysed.

.a lease, the duty on the subsequent lease is not to exceed eight annas.

CHAPTER 40 ARTICLE 35 40.1. Article 35 levies duty on a lease, including an under-lease or sub-lease and any agree- ment to let or sub~let. The duty varies according to the nature of the consideration for the lease. We shall deal with this aspect later, in detail. The duty also varies according to the duration of the lease. The amount of duty is linked up either with the duty on a bond, or with the duty on a conveyance.

Under the proviso to the article, where an agreement to lease is stamped with a duty as on The exemption to the article exempts certain leases executed in the case of a cultivator and for the purpose of cultiva- tion.

40.2. As already stated, the article aho levies a duty on a. sub-lease, and under-lease, and an agreement to let or sub-let. Ordinarily, the expression "sub-lease" is understood as denoting a lease granted by the lessee who remains liable to the lessor. The expression "under--leas-e" is usually understood' as indicating :1 lease by a lessee for a period less than rhe residue of the term.

As regards agreement to let or sub--let, it should be noted that, with reference to the Registration Act, it is now well-settled that only an agreement which creates a present demise is compulsory registrahle as a lease. We shall revert to this point later."

40.3. The word "ﬁne" used in clauses (b) and (C) of the article does not mean any pecu- niary penalty, but appears to be intended to denote the amount paid by the lessee on entry 3 . e .

or the fee paid for renewal of the lease. This appears to be the senoe in which it IS used In England. Since this word is not intelligible to the layman, we recommend that the word "ﬁne" should be explained by a suitable Explanation!' We may note that such an amendment has been approved, in substance. by most replies' to our Questionnaire. -

We may state that in Fnglandnhe Law of Property Act provides that "Fine" includes pre- mium or fore--gift, and any payment. consideration or beneﬁt in the nature of a fine, premmm or fore--g1'ft.*' Again, under General Rate Act," "ﬁne" means ﬁne, prernium, or fore--gift, or other payment or consideration in the nature thereof.

It has been held'? that the "ﬁtness" referred to in Schedule A, No. II, r. 6, of the Income Tart Act, 1918 [S and 9 Geo. 5, C. 40) are indistinguishable from premium, and are money payments in consideration of a demise.

40.4. The scheme of the article, in one of its aspects, deserves somewhat detailed exami- nation. The article is divided into three clauses----(a), (b). (c) ----and the mode of Calclllﬁllﬂtl Of the duty varies according to the clauses under which the instrument of lease falls. Clause (3) applies where, by the lease, "the rent is ﬁxed and no premium is paid or delivered". Claluse Eb} applies where the lease is granted "for a ﬁne or premium or fﬂt moi'!-33' dd'-'ﬂ""-'€d and ""h°"1_ 11° rem: in reserved". Clause lc) applies where the lease is granted, again, "for :1 ﬁne 0!' P13511915 for money advanced in addition the rent reserve ".

1. Meals? and 'Whiteley, Law Dictionary (1970), page 372.

2. Para 40.11. take.

3. Explanation to be added.

4. Q. 92.

5. Law of Property Act. 1925, section 2051f Ijltxxiii).

6. General Rate Act, 1967, section 36.

7. Urrlng (B. G.) and Co. V. Htrgﬁes, (1939) 2 KB. 231.

220 221

40.5. Broadly, the scheme is based on the principle that where the consideration for the lease is "rent" i.e., a sum to be calculated on the basis of a period'--then clause (a) should apply; where the consideration is not a periodical payinenz' as above but a lump sum. clause (b) should apply; and where the lease partakes of the character of both, clause

40.6. Some diﬁlculty, however, is created by the discrepancy in wording between the various clauses. While the phrase used in clause (a) is "rent is ﬁxed", the wording used in clauses lb) and (c) is "rent . . .reser\-"ed". The two expressions not being identical, an obscurity arises. It often happens in practice that while the lease provides for a monthly or annual rent, a substantial part of the rent is paid by the lessee in advance, in order to comply with "the demand which the lessor might have made at the time of the negotiations for the lease. Now, the question that falls to be determined is whether such a case comes within (a) of article 35-

"rent" is ﬁxed,----or whether it falls under clause (b) or clause (e)~----"advanee of money". It may also be noted that clause (b) applies only where "no rent is reserved".

40.7. The reported cases on the subject reveal a conﬂict of views between the Bombay High Court and the Punjab High Court. Although the Punjab case (to be presently referred to) seeks to distinguish the earlier Bombay judgment, it would, with due respect, appear that the two judgments cannot be really reconciled.

In the Bombay case} a certain amount was paid to the lessor in respect of a lease before the execution of the lease. The lease was executed on 9th December, 1949. The lessor demis- ed unto the lessee for a period of ﬁve years the salt pans and land known as Horrnuzed Salt Pans near Vadala Station in Dadar Taluka. In respect of this lease, two amounts were paid :

Rs. 33,000 on 2-11-1945, and Rs. 22,000 on 24-6-1948, and the question that arose was wltetbcr this lease fell under Article 35(a) (iii), or whether it fell under Article 35th). In order to determine that question, the Court had to decide whether these two amounts paid constituted "rent reserved", or whether they constituted a "ﬁne or premium or money advanced". If they constituted "rent reserved", they were outside clause (b).

There was no covenant to pay the rent, but there was an appropriation of the amount actually" paid towards rent, which was stored' as being for certain ﬁxed amounts spread over the period' of the lease.

It was held that there was no "reservation of rent", but that whatever was paid i11 advance was "money advanced" within the meaning of clause (b), and the instrument taxable accordingly. Ii the lessee pays the amount in respect of the rent prior to the liability arising under the lease, the payment is nothing more than an advance paid by the lessee to the lessor. This was the reasoning of the Bombay High Court, which pointed out that a proper case of "rent reserved"

could only mean rent in respect of which there is (I convene.-it on the part of the lessee to pay the amount mentioned. If there is no eonvenant as there could be none because the amount had already been paid--then there is no "reservation of rent".

, 40.3- In the Punjab case" the lease was for a term of ﬁve years from the date of occupation. the monthly rent being Rs. 700.

Clause 1 of the lease deed was as follows:

"Provided always and it is hereby mutually agreed as follows:

i l) A sum of Rs. 25,500 shall be paid to the lessor on the date of occupancy, as advance rental for the ﬁrst 36 months from the date of occupancy at the rate above mentioned, namely, Rs. 700 per month."

The question to be considered was whether the case fell under clause (a] or clause to) of article 35.

1. In re Ciaief Coiztroliingilei-enue 4-'lIJu!'i'hS|i'J'l_1»', .=tl.l.R. 1952 Bombay 235 (Chagia CJ. and Gajendragadkar, 1.).

2. Union offrrdin v. (felts-.1: Lrd., A.I.R. 1956 Punjab 48$ (F.B.). . 21 M o" L1w,-'7 7'~29.

Period.

Rent paid in advance.

Case Jaw on the subject.

Need for change.

Reoornrnendation to substitute the word "ﬁat-ed" for Article 35- Agreement tolet.

222

It was held tltat the sum of rupees 25,000 and odd, which was agreed to be paid to the lessor on the date of occupancy as advance rental for 36 months, was rent; and merely because the rent was paid in advance under a covenant, its character did not change. The Bombay case was distinguished on two grounds, ﬁrst, that in that case the payment by the lessee was prior to the liability for rent arising, and, secondly, that the Bombay High Court was concerned with Clause ('3). which does not contain the words "in addition to rent reserved"--words which occur in clause (c). In the Punjab case, the lessee was required to pay the amount as rent for 36 months, and the liability was, therefore, to pay rent. and not the money advanced in addition to rent reserved. ~ 40.9. Even assuming thlt the situation in the Punjab case can be distinguished from the situation in the Bombay case, there is, in our opinion, scope for re-defining the various cate-

gories in a neater form. Essentially, the question is this--where an amount is paid in advance, a not as premium but M the sum total of the periodical payments of rent. attributable to a part to the period of the lease, should it be treated as a case of rent reserved or as a case of "money advanced"? On this basic question, the two judgments show a conﬂict of approach.

40.10. It would appear that on the language of the article, there is much tobe said for the Bombay view, since clauses (ti) and (c) use the word "reserved". However, so far as the question what might Io lie the Inn' is concerned, in our view, the law will be simpler if the case where the rent is paid in advance is also treated as falling within clause (a), because, essen- tially, what the lessee pays is "rent". The lessee, instead of paying the rent during occupation, pays it at the initial stage. Though the lessor gets it in lump, the case is distinct from "premium", because, unlike premium, the rent apportioned period-wise. If this suggestion is accepted, the object could be achieved by replacing the word "reserved" by the word "ﬁxed", in clauses

(b) and {c), on the lines of clause (a). This will remove the disharmony between clause (ti) on the one hand and clauses {b) and (c) on the other hand and will eliminate the possibility of die view being taken that where the amount is paid in advance, though it is apportionable, it ceases to be rent.

40.11. There is another point requiring consideration with reference to this article. 'While 'lease', as defined in section 2, does not cover an agreement of lease, Article 35 makes an agreement of lease chargeable as a lease, by an express inclusive provision. What, then, is the precise scope of the article in relation to an "agreement"'? Does article 35 cover every such agreement, or is it to receive a narow construction ? The question came up recently before the Delhi High Court} The premises in dispute were held by the plaintiﬁ in the suit as a tenant from the defendant. By an agreement "entered into between the parties, it was provided that the defendant (landlord) would set up, in place of the premises, a multi-storeycd building on the side, and in consideration of the plaintiff delivering vacant possession of the leased premises to the defendant, the defendant would give to the plaintiff a ﬁat on the ninth floor (with certain speciﬁed dimensions), in the multi--storcyed building, on terms and conditions, set out in the agreement. In case the work on the proposed multi-storeyed building was 'not commenced before a certain date, the defendant would hand over to the plaiutitf vncantip0sses- -

sion of the premises on the same terms and conditions on which it had hitherto been held by the plaintiff. It was further provided that the agreement shall be valid for a period of it) years from the date on which the ﬂat in the proposed multi-storeyed building was handed" over.

to the plaintiﬁ. -

40.12. Pursuant to this agreement, the plaintiﬁ delivered vacant possession of the premises to the defendant, but the defendant did not pursue the project for constructing the multi-store-yed building. The plaintiff ﬁled the present suit for enforcement of the agreement and return of the premises. The defendant took the plea that the agreement was inadmissible in evidence because, being a lease, it was insufficiently stamped. The agreement was on a paper of Rs. 2. 'The lower court rejected this contention of the plainliﬁ, and the ﬁled the present revision before the High Court. \

1. Mrs. Btrender Amarjir Singii v. General Marketing ti MfE- C-1 U0'-. Catt'!-'ﬂa. A.l.R. 1976 Delhi 15. 16, para 3 (H. L. Anand, J.}.

223

The High Court held that the agreement could not be said to be either a lease or an agreement to lease and was not, therefore, liable to be stamped under Article 35. In the opinion of the High Court, in order to be treated as a lease, an agreement must satisfy the test of immediate and present demise in respect of the property covered by it, and an agreement to lease was no exception to this rule. Reference was made on this point to the two cases mentioned in the footnotes.'-3 Further, the right conferred by this document on the respondent was contingent on a number of imponderehles, and, at best, would be a right to ask for a lease of the flat after one comes into existence.

In our view, the interpretation placed in this case on the scope of the expression "agree- nﬁnt of lease" is, with respect, sound, and it should be codiﬁed in order to indicate the true scope of the article. We may note that independently of this judgment of the Delhi High Court, a Bar Council" has suggested to us that the scope of Article 35 should be so conﬁned. The object could be achieved by inserting an Explanation that an agreement shall not be charge~ able as a lease unless there is an immediate and present demise. We recommend that the article should be so amended. What we have stated above is the gist of the provision that we would like to be inserted.

1. Ifemarlra Ku.man' Devi' v. ildidnapur Znmindarf Co. Lrd., A.I.R. 1919 P.C. 79. ED, 8] . Z. 'I'rI1-mu' Ba! V. Smt. Li'."a Bar', A.I.R. 1959 S.C. 620.

3. Susaastion ofthe Andhra Pradesh Bar Council (S. No. 61).

Article 36- Allotmcnt of .

charm.

Article 31'---

_I.ettcr of credit.

lrkrlicle 38- Ixttefof licence.

Article 39- Mcmorandum of association.

Article 40- Mortaase deed.

Exctnption.

llu-than 41- Mortnae of crop.

CHAPTER ARTICLES 36----45 41 41.1. Article 36 levies a duty on a letter of allotment of shares, and needs no change.

41.2. Article 117 levies a duty on a letter of credit, and needs no change. Certain palms relating to letters of credit have been discussed while dealing with the deﬁnition of "bill of exchange payable on dcn1a.nd.".1 41.3. Article 38 levies :1 duty on a letter of licence. Certain points relevant to this article have been discussed earlier under "Composition" The article itself needs no change.

41.4. Article 39 levies duty on a Memorandum of Association of a Company. The duty is ﬁfteen rupees it the Memorandum is accompanied by articles of association under section 37 of the Indian Companies Act, 1382. The duty is forty rupees, if it is not so accompanied. The exemption exempts a "Memorandum of any association not formed for proﬁt and under section 26 of the Indian Companies Act, 1882." ' We recommend substitution of reference to me relevant sectionsa of the Companies Act. 1956, in this article.

415. Article 40 levies duty on a mortgage-deed, not being an agreement relating to deposit of title-deeds, pawn or pledge (No. 6], Bottomry Bond (No. 16], Mortgage of a crop (No.

41), Respondentia Bond (No. 56), or Security Bond (No. 5?). Under clause (a), the duty is linked up with the duty on a conveyance where possession of the property or any part oi the property comprised in such a deed is given by the mortgagor or agreed to be given.

When possession is not given or agreed to be given as aforesaid, the duty' is linked up with the duty on a bond. This is provided in clause (b).

However, when the mortgage deed constitutes a collateral or auxiliary or additional or substituted security, or is executed by way of further assurance for the above-mentioned purpose, and the principal or primary security is duly stamped, the stamp duty is levied at a much lesser rate, under clause (c).

Under an Explanation below the article, a mortgagor who gives to the mortgagee a power- of-attorney to collect rents or a lease of the property mortgaged or part thereof, is deemed to give possession within the meaning of the article.

41.6. There are two exemptions below the article, which exempt from duty-

(1) instruments, executed by persons taking advances under the Land Improvement Loans Act, 1883,'or the Agticulturists' Loans Act, 1884, or by their sureties as security for the repayment of such advances ;

(2) a letter of hypothecation accompanying a bill of exchange.

The second exemption relating to a letter of hypothecation should now be to article 6, in view of the amendment proposed in article 6 {pawn or pledge), where we have recommended that that article should be applied to instruments of hypothecation aiso.

41.7. Article 41 levies duty on the mortgage of a crop, including any instrument evidencing an agreement to secure the repayment of a loan made upon any mortgage of a crop, whedaer the crop is or is not in existence at the time of the mortgage. It needs no change.

1. See discussion as to section 2(l2)(c)-"'I_=i!1 01' ¢H°1'l1E'= P393519 '"1 d°m3"'1"'

2. See discussion as to article 22--composItw=n--de=d-

3. Sections 245 and 23, Companies Act. 1956- 9-2-'t 225 41.8. Article 42 levies duty on certain notarial acts. In doing so, it refers to the "instru- mcnt . . . . . . . .made or signed by a Notary public' in the execution of the duties of his olﬁce. . . ﬁm IIJIAIGIOII .

We recommend that in this Article, for the words "made or signed", the word "executed" should be substituted, in order to maintain harmony with the language of the charging section (section 3). The legislature perhaps avoided the word "executed" in the present article for reasons of euphony-~ thinking that the word "execution" which follows later, would then jar on the cars. If so, that word could be replaced by the word "pcrformance". Incidentally, it may be stated that in India, notaries are appointed under the Notaries Act, 1952.

41.9. Article 43 lciies duty on a note or memorandum by a broker or agent to his princi- A1-ﬁg]: 43.. pal, intimating the purchase or sale on account of the principal--- Note 013"'. "3 _ _ a broker.

{a) of any goods exceeding in value twenty rupees ;

(b) of any stock or marketable security exceeding in value twenty rupees.

We recommend that the amount "twenty rupees" should now be increased to one hundred rupees, having regard to the fall in the purchasing power of the rupee.' 41.10. Article 44 levies duty on a note of protest by the master of a ship. The "protest" made by the master is chargeable separately5--Art.icle 51. Article 44 deals with the note made of such protest. The "note" is usually made by a notary public, or by a consular oi':Eu:er.3 Article 44.

In England, a "protes " is a declaration made by the master when damage has been caused to a ship or her cargo, made before a notary or British Consul at the first port of call.' The object of the protest is to record promptly, in an authentic form, the circumstances in which loss or damage occurred so as to exonerate the master or his crew from blame.

41.11. In England, a protest is not obligatory, but, in many countries abroad, the swearing U, [,1-P,,m,¢,_ ot protest is a condition precedent to the establishment of legal rights." When a claim for marine insurance is made, the practice is to "exhibit" the protest."

Protests are not receivable in evidence in English Courts, although they may be used in don.'-5-°-

Explaining the importance of protests, Dr. Lushington observed--

"Protests are important for this purpose, and this only to state the damage which has occurred, and that it has taken place, for the sake of supporting a claim against the 'tinder-writers ; not that the owner of the ship would be debarred from claim- ing against the undcr--writers, but, of course, unless it is stated-in the protest, suspicion arises that the damage did not occur?"

41.12. The object of requiring the protest to be "noted" by a notary public is that his Noobuul oﬁee is universally recognised not only in the Courts of this country, but also in those of every mm' civilind nation. By the law of nations, he has credit everywhere."

We have no changes to recommend in this article.

1. Compare discussion as to article 53, Receipt, infra.

2. Sec article 51.

3. Dover, Handbook to Marine Insurance (1957), page 54-8.

at. Halsbtn-y, 3rd Edn., Vol. 35, page 133.

5. Dover, Handbook to Marine Insurance (1957), page 548.

6. Dover. Handbook to Marine Insurance {l95'?), page 56?.

7. ta} 1!. v. Scrivener Ca., (1830)! B as C:

{b} Brown v. Thornton, (1837) 6 Ad & El 135,

3. Haisbnry. 3rd Edn., Vol. 35. page 134.

9. Abbot on Shipping, 13th Edn., page 54?, cited in Bouvicr, Law Dictionary [I914], page 275?,

10. 1'3: Santa Anna. (32 L 1., P.M.A., page 200) (per Dr. Lushington}, '_ ll. Hurcin.-on v. Warrbrgmn, (1802) 6 Yes. 323. (per Lord Eldon, L.C.).

Artierealﬁ 22:13 41.13. Article 45 levies duty on an instrument of partition as deﬁned by section 2(15}.

41.14. A Bar Council has made a suggestion?' that even an instrument recording the terms of a pas: ti-ansactioia should be taxed as a partition. We have given due consideration to the I suggestion, but are unable to accept it. Such a provision, if inserted, is bound to cause harassment in a very large number of cases. It may, for example, take in even casual correspondence in which a partition is referred to. An instrument which falls short of the creation of a separate status, ought not to be regarded as a partition, merely because it "i'ecurds" a partition that took place in the past. To do so is to disregard the distinction between a vestitive fact and a mere piece of evidence. The legal efiect--and therefore the economic value---of the two dliier.

In the result, no change is needed in article 45.

3. Andhra Pradesh Ber Eotzneil.

CHAPTER 42 ARTICLE 46 42.1. Article 46 levies duty on an instrument of partnership.

42.2. In the law of partnership a question which is often debated is whether there can be a partnership between two ﬁrms. In the Partnership Act a partnership is described in 'terms of relationship between "persons". According to the deﬁnition of "person" in section 3[42), General Clauses Act, a ﬁrm is not regarded as a person for the purposes of that Act.' J;Ience, a ﬁrm as such is not entitled to enter into partnership with another ﬁrm, or with a Hindu tmdivided family or with an individual." It has been observedi' that "the real partnership is constituted not between the individual and the firm, but between the individual and the aggregate of the persons who constitute the ﬁrm".

On this point, no change is considered necessary.

42.3. The Supreme Court has, in D:t!r'ehr:nd's ca.te,'*--5 traced the history of the law of partnership in India, which is based on the English law and mercantile usages relating to a ﬁrm. Under the English common law, a firm, not being a legal entity, could not sue or be sued in the ﬁrm name, or sue or be sued by its own partner, for one cannot sure oneself. Later on, this rigid law of procedure, however, gave way to considerations of commercial convenience, and the law permitted a ﬁrm sue or be sued in the ﬁrm name, as if it were a corporate body." In the absence of such special provisions. the general rule that a firm is not a legal entity operates.

42.4. The second qutbslion under this article concerns conveyances. Questions: sonletiints arise whether an instrument is a conveyance or a partnership deed. in one case,' the Madras High Court has dealt with the difference between a partnership deed and a conveyance." In that case, the parties to a protracted partition suit, in which the assets of a trading joint Hindu family were involved, ertecuted an instrument styled as a "partnership deed". By virtue of the decree in the suit, one of the parties to the litigation agreed to take over the assets on payment of a certain amount in court. and those assets were declared as properties of the partnership ﬁrm. The court held that this instrtnncnt was not a "conveyance", but was a deed of partnership, and, therefore, there was no presumption that the partner "sold" his property to the partnership came into cxtstcticc under the 'doci_.=im'nr.

There were no words which nprcssly or by implication amounted to a 1:-rm.-i_t'er of interest as between the partner who threw his property in the partnership and the rest of the partners, and, therefore, there was no presumption that the partner ''sold'' his propery to the partnership ﬁrm. The doctnnent was letid to he an instrument of partnership.

42.5. Of course, the case does not call for an amendment of the law, since the question is one of applying the legal principle, which appears to be this--that a conveyance transfers assets from one person to another, while a partnership pools them togctlter. '

1. (a) Barn.-m' v. Babs: Ln]. A.I.P.. 193:, All. 225:

(b) In re Mes.si's Jni Daynl, A.I.R. 1933 All. i"."'.

2. Dnlfchmld V. I. T. Commr'.r.\'ioner. A.l.R. 1956 S.C. 354, 358, para 15-

3. Chhatalal Der-ichnnd v'. J'. T. Commi'.s.n'onei', A.l.R. I959 Born. I52, 154 [per Chagla C.J.).

4. Dniichamf v. I. T. Comrnrirsioner, ([956] A.l.R. S.C. 354, followed in A.I.R. 1967 Mad. 449, 45] , para 5 (D.B.). 5_ Sn also ﬁhagwanji v. Afembic Cfrermi-at' Works. A.l.R. I948 P.C'. 100.

6. Cf. order 30, Rule 9. Code of Civil Procedure. 1908.

7. State v. Ckfdnmbnrnm. A.I.R. I9?!) Mad. 1'.

3. Article 23.

227

Question as to whether a deed is a oonveyartcc or partnership deed.

Present position to a duty.

No change.

2'.-".8 42.6. It may be noted that at present, under article 46, an instrmnent of partnership is chargeable with a duty of two rupees eight annas if the capital of the partnership does not exceed rupees ﬁve hundred, and with ten rupees in any other case. A partnership between ﬁrms, if it does not fall under article 46 because of the stricter view taken in the law of partnership, would fall solely under "agreement" [article 5, clause (c)}, for which the duty is eight annas. Of course, it is not our direct object to impose 3. higher duty as such on instru- ments of partnership. The principal object is to take note of business reality, for the limited purpose of the stamp law, and to state the position clearly so as to avoid controversies.

42.7. Article 46 therefore needs no change.

CHAPTER 43 ARTICLE 47---POLICIES OF MARINE INSURANCE 43.1. Article -1-? levies duty on policies of insurance.

The duty varies according to the nature of the policy, the article having been divided into dilfenent divisions------A.B.C. and so on----for the purpose. We shall discuss only those portions Of the article which require consideration having regard to the need Ior amendment in the particular portions or suggestions made for amendment of those portions.

43.2. We begin with the question of stamp duties on policies of marine insurance (des- cribed in the Act as policies of sea insurance). A suggestion for amendment of the law on the subject was received from the Insurance Companies Association of India, and the suggestion was forwarded by the Ministry of Finance to the Law Commission for its consideration. The suggestion is to substitute duty for a ﬁxed amount in place of the present duty, which is ad In valorem in most cases. The duty suggested by the Association is as follows :--

50 Paise.

1 Rupee.

(:1) if the amount of the policy does not exceed Rs. 5,000 ('0) in other cases.

43.3. Although general insurance business has now been nationalised, we think that that would not make any difference as to the points raised and discussed below on the basis of tile above suggestion.

43.4. The present law on the subject of stamp duties on policies of marine insurance is contained in Article 47---Division A, read with section 2(20) and section 7(4) and sections 66-6? of the Act.

43.5. Existing section 2(20)' deﬁnes a "sea policy" as follows :--

Section 2(2U) "(20) "Policy of sea-insurance" or "sea-policy'?-

(a) means any insurance made upon any ship or vessel (whether for marine or inland navigation), or upon the machinery, tackle or furniture of any ship or vessel, or upon any goods, merchandise or property of any description whatever on board of any ship or vessel, or upon the freight of, or any other interest which may be lawfully insured in, or relating to, any ship or vessel, and

(b) includes any insurance of goods, merchandise or property for any transit which includes, not only a sea risk within the meaning of clause (a), but also any other risk incidental to the transit insured from the commencement of the transit to the ultimate destination covered by the insurance:

Where any person, in consideration of any sum of money paid or to be paid for additional freight or otherwise, agrees to take upon himself "any risk attending goods, merchandise or property of any description whatever while on board of any ship or vessel, or engages to indemnify the owner of any such goods, mer- chandise or property from any risk, loss" or damage, such agreement or engage- ment shall be deemed to be a contract for sea-insurance;"3

1. Suggestion of the Insurance Companies Association of India (Regional Councils of Delhi and Calcutta). Law Commission File No. F. 3(4); 57--L.C. Part I, S. No. 24; Finance Ministry File No. F. l;'64g'63-Cust. VII, S. No. 1.

1. Certain drafting changes are proposed in the deﬁnition in section 2:120). (See Appendix 2).

3. For revised section 2&0), please see Appendix 2.

229

24 M of Law,i'.'7--3U.

Introductory.

Policies of marine insura.11oe--

Suggestion of the Insurance Association of dia.

Pt-meat law.

Policy of sea-

sea-polisy.

Penalty for not _ utpolicy or one not duly stamped.

Penalty for not drawing full number_ of bills 230 43.6. Section 7 (4) reads----

"{4} Where any sca--insurance is made for or upon a voyage and also for time, or to extend to or cover any time beyond thirty days after the ship shall have arrived at her destination and been there moored at anchor, the policy shall be charged with duty as a policy for or upon a voyage, and also with duty as a policy for time."

43.7. Article 47, Division A reads--

4?. POLICY OF INSURANCE If drawn in duplicate for each part I If drawn singly:

A. Sea-insurance section 7-)";-

(I) For or upon any voyagc--

(i) where the premium or consideration does not exceed the Ten naye paise rate of ﬁfteen naye paise or one-eighth per centum of the amount insured by the policy;

(ii) in any other case. in respect of every full sum of one thousand ﬁve hundred rupees and also any fractional part of one thousand five hundred rupees insured by the policy;

Five nay: paise Ten naye paise Five naye paise (111 For time-

(iii) in respect of every full sum of one thousand rupees and also any fractional part of one thousand rupees insured by the policy--

whcre the insurance shall be made for any time not Fifteen nay: paise exceeding six months;

where the insurance shall be made for any time exce- Twenty-ﬁve naye eding six months and not erceeding twelve months. paise Ten naye paisc Fifteen naye paise 43.8. Sections 66-67 teat ---

'-es. Any person who-----

(a) receives, or takes credit for, any premium or consideration for any contract of insurance and does not, within one month after receiving, or taking credit for, such premium or consideration, make out and execute a duly stamped policy of such insurance ; or makes, executes or delivers out any policy which is not duly stamped, or pays or allows in account, or agrees to pay' or allows in account, any money upon, or In respect of, any such policy ;

shall be punishable with ﬁne which may extend to two hundred rupees.

"oil. Any person drawing or executing a bill of exchange payable otherwise than on demand or a policy of marine insurance purporting to be drawn or executed in a set of two or more, and not at the same time drawing or executing ion paper duly stamped the whole number of bills or policies of which such bill or policy purports the set to consist, shall be punishable with ﬁne which may extend to one thousand rupees."

43.9. and 43.10. Mention may also be made of sections 25 and 27 of the Marine Insu- rance Act,' which have a bearing on the subject.

- 43.11. The main point of the suggestion* lies in the proposal for reduction of the prwent stamp duty which [except in the case covered by Article 47A(lJ (in is calculated dd wziorem on the sum insured. The suggestion is to reduce the duty to a ﬁxed amount.

lb)

1. The Marine Insurance Act. 1963 (11 of 1963)-

2. See para. 43.2, supra.

23L 43.12. The suggestion further says that it the duty is not reduced to a ﬁxed amount, then many statutory provisions winch were in force in England before 1959 on the subject of stamp duties on marine insurance' should be incorporated. If, on the other hand, the duty is to be reduced to a ﬁxed amount, then those provisions need not be incorporated.

43.13. it may be mentioned that the pre-1959 statutory provisions in England were prin- cipally intended to mitigate hardships felt in certain cases.

43.14. The Finance Act, 1959 (Eng), made important changes in the English law as to stamp duties on policies of marine insurance." The alteration made in 1959 was mainly due to the reduction of the duty to a ﬁxed amount of six pence. The principal question to be considered by us is, whether there should be a similar reduction in the duty on marine insurance policies under our law, as is the suggestion.

43.15. The reasons for the passing of the Finance Act, 1959 (in England) have been thus stated" :

"Stamp duties were ﬁrst levied in the reign of Charles II, but for a time were allowed to lapse, being re-established in the reign of William III to raise revenue required to carry on the war with France. As far as marine policies were concerned, the duties were levied ad' valorem and payment thereof was denoted by a stamp on the policies. In the years which followed, the scale of duties was varied from time to time, but throughout successive generations continued on a basis regarded as'oppiessi~.'e by the mercantile community. Repeated pressure on govern- ments one after another for long failed to secure a remission of these duties, although it was evident that they had deleterious effects upon the operations of British underwriters. A2' best, they represented a tax on exports and on prudence.' Abroad. objection was raised by foreign nationals to the necessity of contributing substantially to British taxation. At the same time, British underwriters were at a competitive disadvantage as compared with these markets where taxation requirements in respect of marine insurance were less onerous. The disabilities under which marine insurances suilered were accentuated by the statutory requirement that, to be valid in the Courts, contract of marine insurance needed to be expressed in policies in due form. In respect of reinsurance business, the stamp duty provisions in effect imposed double taxation, in that separate stamp duty had to be paid on policies of re-insurance notwithstanding that duties already would have been paid on the original business when the policies thereon were issued to the assured. A considerable volume of reinsurance business is aranged by treaty. It was impracticable to stamp re-insurance treaties, if only for the reason that it would have been impossible at the outset to caldulate the sum insured. Thus, the re-insured under 'end:

a contract of reinsurance was unable to sue the original underwriters unless in possession of a duly stamped policy covering the particular insurance in respect of which the dispute had arisen. Whereas solvent insurers would not have sought to escape their moral obligations in such circumstances, and would undoubtedly have insured that a policy in due form was issued to the re-insurer, a receiver or liquidator would have been impelled to refuse to issue anv policies after the date of the bankruptcy or liquidation order.

"In very great degree, the disabilities were removed by the Finance Act, 1959. This replaced the ad vnlorem scale of marine stamp duties previously applicable with a stamp of six pence per policy, thus bringing marine policies into line with other indemnity policies. Further, the Act provided that the following shall be exempt from all stamp duties:

(a) cover notes, slips, and other instruments usually made in anticipation of the issue of a formal policy, not being instruments relating to life insurance;

(In) instruments embodying alterations of the terms or conditions of any policy of insurance other than life insurance ;

1. See Appendix 3 for pre-I959 Englishl aw. K 7

2. Appendices 4--5.

3. Dover, Analysis of Marine and other Insurance clauses (1961), page 557.

4. Emphasis added.

gkltcrnatiw point in suggest!-on-

to adopt pro-1959 statutory provisions.

Position in England after 1959.

Reasons for the English Act.

Simitar reasons applicable in India.

Recommendation to substitute ﬁxed duly.

ﬁm Article 47 Division A 232

and an instrument exempted by virtue of the provisions of this sub-section shall not be taken for the purposes of the Stamp Act, 1891, to be a policy of insurance.

' "Aln instrument shall not be charged with duty exceeding six pence by reason only that it contains or relates to two or more distinct matters each falling within the head of charge.

"At the same time, certain amendments were made in the Marine Insurance Act, 1906. Thus, no longer is there any statutory provision to the eﬁect that a policy of marine insurance shall not be eiicctive for a period of time exceeding twelve months. Although the Continuation Clause will still be retained in those current clauses in which it was previously incorporated, no longer will the inclusion of this clause call for the payment of an additional stamp duty of six pence as was requisite under the provisions of the Finance Act, 1901, which validated the use of this clause. Moreover, all that by statute a policy of marine insurance is now bound to specify is the name of the assured or of some person effecting the insurance on his behalf, this retained provision containing the long-standing prescriptiono of issuing policies of marine insurance "in yblank". No longer is it necessary, although in practice this will continue to be done. to specify in the policy the subject-matter insured and the risk insured against, the voyage, or period of time, or both, as the case may be, covered by the insurance; thﬂ sums or sum insured ; and the name or names of the insurers.

"The relevant provisions of the Finance Act, 1959, became operative as from 1st August. 1959. One consequence was that re--insurance treaties executed after that date have the same standing as policies of insurance and must be stamped accordingly. They now become legally binding. ' "With regard to marine policies executed outside the United Kingdom but in any manner enforceable within the jurisdiction thereof, other than policies on personal household effects, it is to be assumed that these must be duly stamped within ten days of arrival here. In any case, an unstamped policy may be legally stamped after the execution thereof for the purpose of its production in evidence by the payment of a line of £ 100 in addition to the stamp duty attracted."

43.16. and 43.17. So much as regards the English Act of 1959. It appear to us that, of the reaons which led to the passing of the Act of 1959 in England, many apply to India. In particular, a tax upon insurance policies is a tax upon prudence, and a proposal for reduction of the stamp duty thereof deserves careful consideration. Moreover, Indian insurers are at a disadvantage, in that they pay more stamp duty than the insurers of other countries where the duty has been reduced. These considerations would seem to justify a reduction of the duty to a ﬁxed one.

43.18. No doubt, any proposal for alteration in the rate of stamp duties usually raises questions of policy, but here, in our view, there are strong reasons why we should recommend a change.

43.19. To the reasons already stated, we may add that heavy penalty (as in England) fmg policies unstamped and brought into the country is not needed for India, since the magnitude is not comparable.

4320. After very careful consideration, we have come to the conclusion that the stamp duty on marine insurance policies should be reduced to a small ﬁxed amount, say, one rupee, i1-xegpective of the question whether it is a voyage policy or time pohcy. We. 'Eh=1'6f0TG:

recommend that in Article 47, Division A, the rate of stamp duty should be reduced 10 0116 rupee as indicated above.

1. Sea para 43.15. supra-

233

the following 43.21. If this recommendation' (substitution of ﬁxed duty) is accepted, amendments are required in the Stamp Act and in the Marine Insurance Act :

(1) Section 25(2) to 25(5), Marine Insurance Act, 1963 [corresponding to repealed section 23(2) to (5), (English Marine Insurance Act, 1906)] should be- repealed [See section 30(5), Finance Act, 1959 (Eng.)] (2) Section 27(2), Marine Insurance Act, 1963 (11 of 1963) [corresponding to- repealed section 25(2), (Eng) Marine Insurance Act] should be repealed. [See section 30(5). Finance Act, 1959 (Eng.)].

It may be noted that the corresponding provisions in the (English) Marine Insurance Act (before 1959) were intended to safeguard revenue. This is evident from the fact that, since the introdluction of stamp duties in 1795 (35 Geo. 3 Ch. 63), the requirements as to writing have been in existence.-9 (3) Section 7(4), Indian Stamp Act, 1399 [corresponding to repealed section 94 (English). Stamp Act, 1891] should be repealed. [See section 30(4) (a), Finance Act, 1859]. The reason is that section 7 (4) becomes useless if the distinction between "voyage" and "time policies" is abolished, in relation to stamp duties.

(4) Article 47, Division A, should be amended in order to exclude from liability, slips, cover notes etc?-5 for marine insurance unconditionaﬂy. This would not affect the provisions in the Marine Insurance Act}? 'The present exemption is conditional, but should be made absolute, in view of proposed less stringent approach as to duty. (See -section 30(2), Finance Act, 1959).

(5) In consequence of (4) above, the general exemption, at the end of Article 47, should be amended so as to exclude marine policies from that exemption, as these would be governed by a speciﬁc exemption, under our recommendation.

(6) In View of item (4) above, section 66, of the Stamp Act, should be amended so as to exclude. cases where the poiicy of insurance is totally exempt. The object of section 66 is to prevent the loss of revenue that would occur if insurance business were done on slips unstarnped. As the stringent provisions as to policies in section 7 are repealed or proposed to be repealed, and as the duty is to be reduced, the provision in section 66 is not required for marine insurance policies. 2 [Cf. section 30(4), second paragraph, Finance Act, 1959, amending section 100 (English), Stamp Act, 1891, which corresponds to section 66, Indian Stamp Act].

(7) Article 47, Division A, Stamp Act should be amended by substituting a ﬁxed duty of one rupee for every marine insurance policy whatever he the amount.

(8) In consequence of (7) above, section 67, Stamp Act (sets of policies) shouldwhe suitably amended, as the duty will now be a small and ﬁxed amount. There was no exactly corresponding provision in the English Act, even before 1959. But there was a somewhat similar provision in section 97(3), Stamp Act, 1891, now repealed.

[See section 30(4), Finance Act, 1959].

43.22. We give below a rough draft of the amendments that will be required in the Stamp Act, in order to carry out the changes recommended above. We may add that some of the changes' were put forth in our Questionnaire and such replies as were received to the particular question have been favourablei

1. See Supra

2. See Dover, Hand Book to Marine Insurance (1957), pages 3], 129, 333.

3. See para 43.20, supra.

4. As to existing law, see A.I.R. 1964 S.C. 1396, on appeal from Naﬁarzai Sec:.r.ri'r_r Assurance Co. v. R. ﬁariiai 6: Co.

A.I.R. 1961 Cal. 48, 50, 51, 53, paragraphs 11, 13, 16 and 26.

5. Also see Mulla Stamp Act (1963), pages 41, 74 and 317.

6. Sections 2435(1) and 33, Marine Insurance Act, 1963 (ll of 1963), corresponding to sections 21,22 (1) and B9 of the Cﬁlltlish.) Ma tine Insurance Act, 1906.

7. Q.97to99.

Changes needed 10 bring stamp duties on marine insurance in India in line with the position in England as resulting from the Finance Act, 1959.

Re-draft.

234

Section 7 (Stamp Act) In section 7, suh--set:éioI1 (4) shall be omitted.

Section 66, Smrnp Act To section 68, mo following Exception shall be added, namely :--

"Exception.--Notlu'ng in this section applie sin relation to an insurance or a policy effecting an insurance if the insurance is such that a policy effecting it is exempt fron ririty under this A ct."

Section 57, Stamp Act In section 67", the words "or a policy of marine insurance" the words "or policies" and the words "or policy" shall be omitted.

Article 47-Division A, Stamp Act In Article 47, for Division A, the following shall he subtituted, namcly,--

"A. Sea Insurance one rupee Exemption The following shall be excnzpt from all stamp duties :

[a] cover notes, slips and other instruments usually made in anticipation of the issue of a formal policy of marine insurance ;

lb) instruments embodying alterations of the terms or conditions of any policy of marine insurance.' (C) policies of marine insurance on baggage or personal and household effects only, if made or executed out of India ;

and an instrument exempted by virtue of paragraph (a) of this Exemption shall not be taken for the purposes of this Act to be a policy of insurance." Article 47----General Exemption In Article 4?', in the General Exemption, after the words "a policy of insurance", the words "other than a policy of marine insurance" shall be inserted. Amendments to Sections 25(2) to 25(5) and section 27(2), Marine Insurance Act. 1963 In the Marine Insurance Act, 1963,---

(a) in section 25, sub-section (2) to subsection (5) Shall be Omittﬂd .'

(b) in section 27, sub-section (2) shall be omitted.

sugmﬁon 43.23. It may also be added here that there are certain provisions in the English Stamp ream-din: stamp. Law, namely, section 11 of the Finance Act, 1901 (regarding policies with a continuation clause) section 3 of the Revenue Act, 1903 (for builders' etc. risks) and section 3 of the Finance Act, 1912 (for increase in premium), which are relevant and important on the subject of stamp in marine insurance. The necessity of making similar provisions in the Indian Stamp Law requires to be considered.

Buﬂdm, risk 43.24. In England, the Stamp Act of 1891 does not include builders' risks insurance in " ' the deﬁnition of "policies of sea insurance". The position was me: by the Revenue Act, 1903 {3 Edw. VIII, C. 46], section 8 of Which fﬂads 33 follows':

"Section 3. A policy of insurance made or purporting to be made upon or to cover any ship or vessel, or the machinery or ﬁttings hclonglng to the ship or vessel, whilst under construction or repair or on trial shall be sufficiently stamped for the purpose of the Stamp Act, 1891, and the Acts amending the Act, if stamped as a policy' of sea insurance made for a voyagc. and though made for a time exceeding twelve months, shall not be deemed to be a policy of sea insurance made for time."

11 of 1963.

1. Dover, Handbook to Marine Insurance (1937). 135393 134: 135- 235 43.25. The effect of these provisions is that Builders' risks policies, although invariably effected for time, are appropriately stamped as for voyage. As it may be diﬂicult at the outset to fix with precision the time which must elapse before delivery of the vessel to her owners, such policies are usually arranged in the ﬁrst instance for a period of time anticipated to be adequate, but a clause is normally inserted in the policy agreeing to hold covered any necessary extension. Strictly speaking, such extensions might be regarded as new contracts rather than as continuations, but in practice are endorsed on the original policies and signed before the period originally mentioned has expired; otherwise, the extension would need to be stamped as a separate contract.

43.26. After a policy has been effected, by an alteration of the risk the rate of premium may, by the imposition of an additional premium, be increased so as to bring the total rate of premium outside the concession: To meet this positio-n, the Finance Act, 1912, provided as follows in England?' "Section 8. Where the premium or consideration for a policy of sea insurance is expressed to be a sum not exceeding the rate of half--a--crown per cent of the sum insured, and is subject to an increase (whether deﬁned or not in the policy) in the event of the occurrence of a speciﬁed contingency, the premium or consideration shall, for the purpose of the Stamp Act, 1891, be treated as a premium or consideration not exceeding the rate of half-a crown per cent on the sum insured. But if, owing to the occurrence of the contingency which is the occasion for an increase of the premium or consideration, the premium or consideration, is increased so as to exceed the rate of half--a--crown per cent of the sum insured, the policy or a new policy to be thereupon issued small be stamped with such an additional sum as is required to represent the additional duty payable, and may be so stamped without penalty at any time not exceeding thirty days after the date on which the increased premium or consideration becomes ascertained.

43.27. Section 4(2), Marine Insurance Act. 1963 covers construction, building, and launching risks. There is one anomaly, namely, that while such insurances are treated as analogous to marine insurances, the policies themselves are stamped with the duty applicable to non-marine insurance. In England, builders' risks policies are under the Revenue Act, 1903 (3 Bdw. VII, Ch. 46), section 8, to be stamped as if for a "voyage" and not deemed to be policies for time, even if made for more than a year. Other policies on adventures "analogous to marine arlventures" would presumably be liable to stamp only as non-marine policies.' In India, there is a no express provision, but entry 47 of the First Schedule to the Indian Stamp Act, sub-division 'A' relating to "sea insurance", could not in terms apply and a ﬁxed duty under sub-division 'B' would be leviable, because such policies would not be "sea insurance policies" as deﬁned in section 2(20] of the Indian Stamp Act.

43.28. The position is, in our view, anomalous. It is desirable that at least a provision requiring all policies governed by sub--section (2) of section 4 of the Marine Insurance Act to be stamped as marine insurance policies (for voyage} should be inserted in the Indian Stamp Act.

43.29. The point is mentioned in the 21st Report of the Law Commission (Report on Marine Insurance)? Construction, building and launching of sea going vessels is a costly and lengthy process with attendant risks. It is customary to take out insurance policies against such risks.

43.30. Section 2(20) of the Stamp Act deﬁnes a "policy of sea insurance", in terms under which policies taken out for these purposes will not be taken as "sea policies" for voyage.'

1. Dover, Handbook to Marine Insurance (1957), page 135.

2. See section 79, English Act.

3. 21st Report of the Law Commission (Marine Insuraneel. page 49. paras 2-3.

4. File No. 3{4).I'5'l-L.C. Pt. I. [Precis of important points in lwnistry of Finance, Department of Revenue. File No. 1.f6D!62 . Cus. VIII, notings dated 23th December, 1962 and 21st March. 1963-}.

Anomaly in Stamp Act.

Insurance against eonstmetion risks.

236

f:°°mm°°dﬂ"'°11 43.31. We, therefore, recommend the insertion of the following proviso to Article 47 of amend 35¢], 41 the Stamp Act 2 "Provr'den' that all policies governed by sub-section (2) of section 4 of the Marine Insurance Act, 1963, shall be stamped as policies of sea insurance for voyage."

Policy under- 43.32. Then there are policies underwritten by several persons. With reference to the $33" by mg; discussion contained in the Report' of the Law Commission on Marine Insurance, it is desirable' company. that a policy underwritten by more than one company should be considered as only one contract for the purposes should be added to Aritcle 4?.

Voyage and time 2?. (1) Where the contract is to insurance the subject-matter at and from or from one place p°1""°5' to another or others, the policy is called a "voyage policy", and where the contract is to insure the subject-matter for a deﬁnite period of time, the policy is called a "time policy". A contract for both voyage and time may be included in the same policy.

(2) A time policy which is made for any time exceeding twelve months is invalid.

Dssignaﬁon and :28. (1) The subjecbmatter insured must be designated in a marine policy with reasonable subject-matter. certainty.

(2) The nature and extent of the interest of the assured in the subject-matter insured need not he speciﬁed in the policy.

( 3) Where the policy designates the subject-matter insured in general terms, it shall be const- rued: to apply to the interest intended by the assured to be covered.

(4) In the application of this section regard shall he had to any usage regulating the designa- tion of the sulJject--matter insured.

APPENDIX 2.

Section 2(20)--Rew'sen" deﬁnition of "Policy of Sen Insurance".

"ED. (4) 'Policy of Sea Insurance' or 'Sea Policy'---

I a) means any instrument of insurance against loss, damage or liability arising from a sea risk. made upon-----

{i) any ship or vessel (whether for marine or inland navigation), or

(ii) machinery, tackle or furniture of any ship or vessel, or

(iii) any gogdg, merchandise or property of any description whatever on board of any ship or vessel, or

(iv) the freight of, or any other interest which may he lawfully insured. in or relating to, any ship or vessel, and

(b) includes any instrument or insurance of goods, merchandise or property for any transit which includes not only a sea risk within the meaning of clause (a) but also any other risk incidental to the transit insured from the commencement of the transit to the ultimate destination covered by the itISllIﬂI1Ci'~ (2) Where any person, in consideration of any sum of money paid or to be paid for additional freight or otherwise,---

('1) agrees to take upon himself any risk attending goods, merchandise 01' 1Jl'DP£'«!'1? Of any description whatever while on board of any ship or vessel, or 1 gm Report of thg Law Commission (Marine Insurance) page 63, notes to clause 31. ' . _ pr.'-£55 r ' ram ' ts in Ministry of Finance, Department of Revenue File 2' ll;-2_3:§'E.i'_5%".§'.,ii.§; Iaircs 2331 ii'$1o'e9rmbe:,FiEi1i'2 and 215: March, 1963}. , _-.-..

23'? ,

(ii) engages to indemnity the owner of any such goods, Ine.rcl1andise or property against any risk, loss or damages, such "agreement or engagement shall be deemed to be a contract for sea insurance.

APPENDIX' 3 Statement showing law 0)' Stamp Duty in England before 1959 regarding marine insrrrance. The Stamp (Con.sof:'a'at:'on) Act, 1891 [54 5: S5 Vict. Chap. 39) Section 92(1), Act of 1391 (1) Deﬁned policy of marine insurance to mean any insurance (including re-insurance) made upon any ship or vessel or upon machinery, tackle or furniture of any ship or vessel or any goods on board of any ship or vessel so as to cover the risk from the commencement of the transit to _the_-ultimate destination.

Section 92(2), Act' of "1391 Deﬁned a contract of sea insurance to mean an agreement whereby any person in consideration of any sum of money takes upon himself any risk attending goods, merchandise, or property of anykinri while on "board of a ship or vessel or engages to indemnify the owner of any such goods, merchandise or property from any risk, loss or damage.

Section 93(1), Act of 1891 Section 93(1) says that a contract of sea insurance, excepting the one referred to in section 55 of the Merchant Shipping Amendment Act, 1862, shall not be valid unless expressed in a policy of sea insurance.

Section 93(2), Act 0} 1891 It says that a policy of sea insurance for time shall' not be for a period exceeding 12 months. Section 94, Act of 1891 _It says that a policy of sea insurance, if made for voyage and also for time or to cover a time beyond 30 days after arrival at the destination and having been moored shall pay the duty asapolicy for voyage and also duty as policy for time.

Section 95, Act of 1891 _ It provides how a policy of sea. insurance, if not stamped at the time of exedution, is to be stamped. _ _ ' Section 96, Act of 1391 . I Section 96 permits alteration of the policy after it has been undenvritten, provided the alternation is done before notice for determination of the risk originally insured, and does not extend the period beyond; six months (in case of policies shorter than six months), or beyond 12 months (for policies of over six months). ' , Provided further that the property remains the property of the same person, and the altera- tion does not extend the amount of the sum insured. ' -

Section 93(1), Act of 1891 Provides for penalty of one hundred pounds as fine, if one becomes an insurer or enters into a contract of sea insurance in any manner without issue of a duly stamped sea insurance policy, or it one is concerned in a fraudulent contrivance or device or any wilful act or neglect with an intent to evade stamp duty. _ _ T 24 M of Law,-'77--3| .

238

Section 9'1'(2),Acto}' 1891 Provides for a ﬁne as above. it a broker, agent or other person transects a sea insurance contrary to the true meaning any intent of this Act, or writes any policy upon "material not duly stamped. Further, he shall lose the commission or brokerage or agency, any money paid to him shall be deemed to be paid without consideration, and shall remain the property of his employer.

.__. . _ Section 97(3), Act of 1891 Provides for a ﬁnc as above, if one makes a copy of the policy of sea insurance without there being, in existence, any duty stamped.' policy.

Section 11(1), Finance Act, 1901 (1 Edw. 7, ch. 7) The_ Act of _l 891 {section 91) was i11te11_ded to insure a, regular revenue, and to minimise taiievasion. _ But it caused hsrdehipto the assured where the previous policy expired, when the ship was encumbered with bad weather or due to some casualty. This was sought to be met by a "conti- nuation clause", but the same was held invalid, as it extended: the period of insurance beyond 12 months. This disability was removed by the Finance Act, 1901.

The Act of 1991 section 11(1) provided that notwithstanding anything contained in the Stamp Act, 1891, a policy of sea insurance made for time may contain a continuation clause: and same" shall not be invalid on the ground that it makes the policy available beyond 12 months.

Act of 1901, section 11(2) The same Act provided that an additional duty of six pence shall be chargeable on a policy having a continuation clause.

' ' Act of 1901, section 11(3) The Act also provided for payment of separate duty without penalty, if the risk covered by the continuation clause attaches and the duty is paid within 30 days after the risk has so attached.

Act of 1901, section 11(4) It deﬁnes "continuation clause" to mean that the subject of insurance shall stand covered until its arrival if the voyage is not completed within the time of the policy, or for a reasonable time not exceeding 30 days after arrival.

" ' ' ' Revenue'Ac?, 1903 : (3 Edw. 7c. 46) _ The deﬁnition of policy of sea insurance as given in the Act of 1391, did not include7bt1il-' dcrs' risk, and hence that position was dnet by the Revenue Act of 1903. Act of 1903, section 8 A policy of insurance made or purporting to be made upon or to cover any ship or vessel or the machinery or ﬁttings belonging to the ship or vessel, while on construction, repair or trial, shall be suﬂiciently stamped for the purposes of Stamp Act 1891 as a policy for voyage, and, though made. for a period exceeding 12 months, shall not be deemed to be a policy of sea insuranccfor time.

Finance Act, 1912 ' . _ . -.The Act of 1891 had provided for a concession in stamp duty where the prerninum did not exceed 25. 6d. But a practice started of availing the concession, and then, after the concession was availed of, of altering the policy by increasing the premium. To meet this situation, the Finance Act, 1912 was enacted. ' i _ j Act of 1912,' section 3 -

.sec1inn§_s. of the Act is 1912 .pro__vides for paymentof addiiioné1'stanip_duty, i_f "more was payable on account of increase of premium on th 1: original premium. No penalty was 'payable if the additional duty was paid within 30 days. -

239

Finance Act, y'reJ (10: & ll. Geo. c. 18} The Act of 1920 revised the scale of stamp duty, and the same is now in force except Whcre repealed by the Act of 1959. It did not increase the stamp duty wherethe 'pIE1II.ll.l]I1 did not ergeeed 2s. 6d. per cent of the sum insured (gross), nor did it interfere with the preyrous law relating to builders' risks and the continuation clause. ' ' The Finance Act, 1959 (7 ' 8 Eiiz. 2 c. 53).

Section 30(5) of the 1959 Act says that paragraphs (2) to (5) 'hi section 23 subr§s_:c- tion (2) of section 25 of the Marine Insurance Act, 1906 shall cease to have ettect} APPENDIX 4 . . _ . .

Provision: of the Finance Act, 1959 ('7 ' 8 Eliz. 2 c. 58) relevant to stamp duties on Marine _ Insurance Policies. L ' I In I" I Hint"

"Finance Act, 1959 (7 ' 8 Eliz. 2 c. 58) Part IV . _ Stump Duties Stamp duty on policies of insurance

30.---(1) In the first schedule to the Stamp Act, 1391, before the head of charge 'fPolicy of Life Insurance" there shall be inserted the following----- . ._ . . "Policy of Insurance other than Life Insurance I £._ 5. cl. A 0 0 6".

and the head of charge "Policy of Sea Insurance" and the head of charge beginning "Policy of Insurance against Accident" shall be omitted. ' (2) The following shall "be exempt from all stamp duties :

{3} cover notes, slips and other instruments usually made in anticipation of the issue of a formal policy, not being instruments relating to life insurance ;

(la) instruments embodying alterations of the terms or conditions of any policy. of insurance other than life insurance;

(c) policies of insurance on baggage or personal and household effects only, if rnade or executed out of Great Britain; " ' ' ' and an instrument exempted by virtue of paragraph (a) of -this sub-section shall not be talten'-for the purposes of the Stamp Act, 1391, to be a policy of insurance. - e .

. {3} .An instrument shall not be charged with duty exceedinggsix pence by re-ason"'onIy that it eonhins or relates to two or more distinct matters each falling within the head of charge inserted by sub-section (1) of this section. a . = e . _ --

_(4-) In consequence of subsection (1) of this section, the Act, 1891, shall be'aii'1endi:d ta) sections 92 to 97 (which make special provision for policies of sea 'ms_uranee_) shall eeaseto have effect ; . -- . ' ' (In) section 100 (which imposes penalties in cases where there is nqduly stan:|ped_ policy of insurance) shall have effect as if the exceptions therein as to sea insurance 'were omitted; i ' ' ' ' ' i 1 For detailed discussion of each provision of the Marine Insurance Act', see Dover, Handbook. of Marine Insurance. (1957), pages l2§|--l36.

240

(c) section 116 (which enables composition to be made for stamp duty on accident policies} shall apply in relation to all policies of insurance other than life, insurance, and the second part of the Second Schedule shall have effect accordingly;

and the said section 100 shall not apply in relation to an insurance or a policy effecting an insu- rance if the insurance is such that a policy effecting it is exempt from all stamp duties. "

(5) Paragraphs (2) to (5) of section 23 of the Marine Insurance Act, 1906, and sub-

section (2) of section 25 thereof (which are derived from provisions contained in section 93 of the Stamp Act, 1891) shall cease to have eﬁect.

(6) Notwithstanding the repeal of section 93 of the Stamp Act, 1891, a contract for such insurance as is mentioned in section 506 of the Merchant Shipping Act, 1894, shaltcontinize to be admissible in evidence although not embodied in a marine policy as reqkrired by section 23 of the Marine Insurance Act, 1906.

(T) This section shall apply in relation to instruments made or executed after the beginning of August, 1959."

"EIGHTH SCHEDULE Part II Repeals Relating to Stamp Duty on Insurance Policies V V :1 --------rm Of Repeal rsoction and Chapter 7 Short Title Sit rt. 55 Vict. The Stamp Act, Sections 92 -9?. .

c. 39. 1S91._ In section 98, in sub--section (1). the words from "against accident ;and" to "a policy of insurance"

and from "or as compensation'_' to the ent1._a.nd and sub-section (2). In section 99. the words "sea' insuranceor". In section 100,] the words "other than sea Insurance" and the words "other than a policy of sea insurance". . - _ -

In the First Schedule, the head of charge "Policy of 5a Insurance" and the sea of cha:-"Q: beginning "Policy of Insurance against Accident".

S8 6:. 59 Vict. The Finance Act, 1895. Section 13.

c, 16.

59 & 60 liter. The Finance Act, 1896. Section 13.

c. 28 52 J-, 63 Vic,-t. The Finance Act, 1399. Section 11.

G. 9.

1 Edw. 7. 6;. 7. The Finance Act, 1901. Section 11.

3 Enter. '7, c. 46. The Revenue Act, 1903. Section B. 6 Edw. '7 c. 41. The Marine Insurance In section 23, the words "although it be _ur_tstarnged".

Act, 1906. In section 23, paras. (2) to (5). In section 25, _ sub-section (2). ' - 3 - ' _- ~ '1' Edw. 7 c. 13. The Finance Act, 1907. Section 3. . , . .

2 r& 3 Gen. 5. c. S. The Finance Act, 1912. Section 3. 7 _ __ \ . . __ . _ . ' .. '\ _"

10 at 11 Geo. 5, c. 18. The Finance Act, mu. In section 40. sub-secuon (1). and In sub-sq-t1cu.t2) . the words "ninety-eight". " " -' -

_ _ _ Section-#1. ,. . _ _ __ ._ ' 22 . 5, . 2. Th Gun :1 In met) In section 3,'i_n s1.tb--section(l)'tl1_c words from 'jbe 21 & G60 C ARI:-enreriitr nix. $11930. ins-slid" to "Sea Insurance, ctr'-'. and sub-suction:

. . - (33-. .. ..

12,136t14Geo. 6,c. 47. The Finance Act, 1949. , In section 35,.s_ub-'section"{3)'.' _ ' 1.5 .5; 16 Geo. 6 at Elia. The Marine and Aviation In section 7, in subsection (1), thewords from "be 2¢_ 51 Insurance (war Risks) invalid" to "seal insurance, or, 'and in subsection Act, 1952 (3) the words "ninety-seven or'_' and -the words from "or be liable" to be end.

241

APPENDIX 5 English law as to Stamp Duties on Marine Insurance Policies after 1959. (1) Certain provisions as in force in England in 1959 have now been altered'.

_ (2) The present position in England is this. The following provisions have been repealed by the Finance Act, 1959*.

section 3 f Finance Act, 1912 (increase in premium} Section 11 Finance Act, 1901 {continuation clause} section 3 Revenue Act, 1903 (Builders Risk) the Finance Act, 1959, section 30(1) the previous ad valorem duty was replaced by" a ﬁxed ofsiilr. pence in the case of all policies of insurance other than life insurance.

The -Finance Act, 1959,.section 30(2) exempts £1'oi:n.all stamp duties cover notes, slips and other instruments usually made in anticipation of the issue of a formal policy, and- instruments alterations in the terms or conditions ofianyi"policy of insurance and policies" of insurance on baggage or personal and household effects only, if 'made out of Great Britain.

There is no corresponding section in the lndian Stamp Act. ' _ (The repealed provisions of the 1906 Act correspond to section 25(2) to (5) and section 27(2) of. the (Indian) Marine Insurance Act, 1963 (11 of 1963).

- {4} The Finance Act, 1959, section 30(4) has also repealed sections 92-97 of the Stamp Act, 1391. [Section 94 of the Stamp Act, 1891 correspond to section 7(4) Indian Stamp Act] Section 97(3) correspond to some extent to Section 61' Indian Act.

(5) The Finance Act, 1959 also amends section of the Act of 1891 (penalties). {Section 100 corresponded to section" 66, Indian Stamp Act).

(6) Further, the Finance Act, 1959 amends section 116 of the 1891 Act (composition of Starnp duty) on accident policies by extending it to all policies other than life. (There is no corresponding to section 116 in the Indian Stamp Act).

Til?) Section 30 of the Finance Act, 1959 read with the Stamp Act, 1391 now governs -stamp dunes in England on marine insurance policies. The position in England now is discussed, in the uudermentioned books'?

1 A5 to position in 1959, see 21st Report of the Law Commission (Marine Insurance), page 62.

' See Finance Act. 19591'? & 8 Eliz. 2 c. 58), section 30. _ ' See-ta) Dover. Analysis of Marine and other Insurance Clauses (1961), pages 215 at 93

(b) Chalmers, Marine Insurance Act (1966) Pages 165-166. where the Finance Act, 1959 is quoted.

CHAPTER 44 ARTICLE 47 AND ACCIDENT POLICY 44.1. This Chapter deals with the question of stamp duty on policies or insurance ngcnrm Introductory.

accident and sickness. A suggestion for reducing the duty on such policies was made by the Indian Insurance Companies' Association, Bombay,' and the suggestion has been referred to the Law Corninission by the Ministry of Finance.' 44.2. The subject of rates of stamp duty on policies of insurance falls within the competence of the Union', The duties are levied by the Govominent of India', but they are collected by the State' within which the duties are respectively leviable'. The proceeds of the duty leviable within a State are assigned to the States'.

44.3. The existing provisions relating to Stamp Duty on ﬁre insurance, etc. and accident ll'lSut'al'lCE.' i.e., Entries 417-3 and 47-C the First Schedule to Indian Stamp.Act, 1399--gare_quoted below :-

Doseription of Instrument Proper stamp-duty "47-B. _ Fire_Insuijance and other classes ofinsurance. not elsewhere in-

cluded in this article. covering goods. merchandise, personal eﬁects. crops, and other property against lose or dsinaae---

(1) in respect of an original policy

(i) when the sum insured does not exceed Rs. 5,000 ; Fifty naye paise

(ii) in any other case ; and One rupee (2) in respect of each receipt for any payment of an premium on any re- One half of the duty payable in respect of news] of an original policy. ' the original policy addition no thearnouat.

. . if any. chargeable under No. 53."

"47-C. Aceidenqand sickness Insurance

(a) against railiigay accident, Ten nay: pulse.

valid for a single Jouriiey only. ' Elelllptilln When issued to a passenger travelling by the intermediate or the third class in any railway.

(ti) In any other case-for the maximum which may become payable in Fifteen naye pajse : Provided that, in case the case of any single accident or sickness where such amount does of a policy insurance against death_ by not exceed Rs. 1,000, and also where such amount exceeds Rs. 1,000, accident when the annual, preiniuin for every Rs. ].tI)0 or part thereof. payable does not exceed Rs. 2.50 11¢!' 1,000, the duty on such instrument shall be ten naye paise for every Rs. 1.0!!) or part thereof or the rinxlmurn amount which may become payable under it."

Article 41 Division cc _ , _ .

CC.-INSURANCE BY WAY OF _INDEMNITY against liability to pay damages on account of aceideng to workmen employed by or .

underthe insurancccrr against liability to pay coinpensatwn under T-'J1 H3313' 133153» the Workmen's Compensation Act, 1923, for every Rs. 100l- or part thereof payable as premium.

Question raised 44.4. The suggestion that has been forwarded to us for considerations raises two major ques-

Elgg 3I1lﬂ;:h¢i1'_';1 ti-ons, ﬁrst. reduction of the stamp duty on original policies of accident insurance, and, secondly, mm' 1. For details of the stlsﬂﬁsiiﬁﬂl 563 ?'Nﬁ'4- _ _ _ _ _ 2_ Filg NO, P. 3(4)-[57-L.C. Part LS. No. 35, being a copy of the suggestion in the Ministry of Finance (Deptt.

of Revenue) Cus. VII Section, File No. F. 1]'l7l6-Stamp.

3. Union List, Entry No. 91 of the Constitution.

4. Article 268 (1) of the Constituti-31I._ . Article ass (1) lb) of the Constitution- _ . In the case of Union territories, may are collected by the Government of India. . Article 263 (2) of the Constitution.

SCOL 33?"?

90-«Ia-iv:

24-2 2'43 clariﬁcations regarding stamp duty on renewal of such insurance of stamp duty is not only on point the suggestion points out (giving illustrations], that the rate of stamp duty is '-not only on the high side but is also out of proportion to the premium charged by the companies. ' It states tlnt in view of the hardship caused to Insurance Companies, the stamp duty under Article 47-(B) should be reduced and brought in line "more or less with that under Article 4'?-B".

445- As regards the second point, the suggestion states that in article 47-C and 47-CC there is no provision (as in article 47--B) for renewal, so that the proper stamp duty for renewal "could be nil, one half or anything". It is stated, that it is dil'I'icul1; for Insurance Companies to follow a uniform practice in the absence of a clear--cut provision for their guidance in this behalf. It is also stated, that the omission should be made good by prescribing a speciﬁc duty payable on rene- wals, "which any case could not be more than half the stamp duty payable on original policies-"

44.6. Before dealing with the merits of the suggestion, we shall try to deal with the history of the existing law, the English law on the subject, the contract of insurance and the meaning and scope of accident insurance, and other related matters, This is necessary, because without such a study some important legal aspects are likely to be overlooked, and also because the nature of the subject is such that a mere reading ofthc provisions of the Stamp Act may 'not give a full and concrete view of the problem which we have to deal with.

Comments of State Governments, received by the Ministry of Finance on the suggestion in question, will be considered lataerz.

44-7. The history of the particular provision regarding policies of insurance may be referred to. In the Act of 1860, Schedule A. entries 43 and 44 levied stamp duty on a policy of insurance on life or upon ship etc. or goods on ship etc. or freight of ship etc. (There was no deﬁnition of "policy").

44.8. The Stamp Act (10 of 1862), Schedule A, entries 55 and 56, levied a duty_on certain policies of insurance [roughly speaking, life insurance, insurance against loss or damage by ﬁre upon any building or property (not being ship etc.) and policy of insurance upon any ship etc. or goods or board or freight etc.] The Stamp Act of 1869, First Schedule, item 3, levied a duty on "Policy of life insurance". but the deﬁnition of "policy" in that Act?' stated that it did not include a policy of life insurance'. The Act of 1879 contained a deﬁnition of "policy of insurance" which included, inter alia a life Policy". Life Insurance Policies, thus became chargeable under "other insurances" by Article 49(c) of the Act of 1879.

44.9. Upto 1879, 'policy of accident insurance was not speciﬁcally mentioned. It was charge- able (if at all) only on the assumption that the duty on a "policy of insurance" covered accident insurance policies also, by reason of the deﬁnition in the Acts of 1869 and 1879.

44.10. Thus, in the Stamp Act of 1879, section 3(15) (so far as is relevant to accident insurance) read as follows :-- ' "('15) 'Policy of Insurance' means any instrument by which one person in consideration of a premium, engages to indemnify another against loss, damage or liability aris- ing from an unknown or contingent event. It includes a life policy .... .." -

[Schedule II, exemption 1-1-(a) of the Act of 1379 exempted-a letter of cover or engagement to issue a policy of insurance. subject to a proviso].

44.11. Fire insurance became a separate clause under Act 1 of 1888, which amended the Act of 1879.

l. Analogyof Article 47-3 is in the suggestion given in this context].

2. See Infra

3. c.f. The Stamp Act, 1370 (33 «Er. 34 Vic. c.

4. Section 11 (23), Act 18 M1869.

5. Section 3 (15), Act 1 of 1819.

97).

Scheme of the Report.

History.

English Law.

Schedule to the English Act.

244

The Act of 1883 added a clause as to the renewal of a policy of ﬁre insurance, which was remitted to Article 47 by Act 5 of 1906. Act 6 of 1894 added two clauses including a policy-. of sea. insurance, whether of ship or of cargo, which now forms part of section 2{20)'. . . ~ 44.12. Accident Insurance became a separate clause under the Art of 1899 (i.e- the present Act). ' The proviso relating to policies wherein the annual premium for accident insurance does not exceed Rs. 2.50 per Rs. 1,000, was introduced by the Repealing and Amending Act 18 of 19.281 to give statutory recognition to a reduction. of duty granted previously" by notiﬁcation No. dated the 4th February, 1928. . , ..

44.13. The article was rearranged in the Act of 1899, and the words in Division D--"Life insurance or other insurance not speciﬁcally provided "for" were added to include all other forms of insurance".

44.14 Act 43 of 1923 transferred some of these to Division B, by adding therein the words "and other clauses of insurance not elsewhere included in this Article, covering goods, merchandise, personal, effects, crop and other property against loss or damage." .

44.15. Division CC of Article iilivas inserted by Act 15 of 1925, providing for stamp duty"

on the policy of indemnity insurance under the Workmen's Compensation Act, 1923. It was in-' troduccd in consequence of the passing of the Workmcrfs Compensation Act. 1923.

44.16. A speciﬁc provision for the levy of stamp duty on a policy of "group insurance" was made in the Act 43 of 1955, by substituting, in Division D_ of Article 47, the words "or group insurance or other insurance" for the words_"or other insurance". , I 44.17. Certain amendments, not itnportant for the present purpose, were made in 7.196]; besides the amendment made in 1958 to implement decimal coinage. -

44.18. The law in England niay now be summarised.

In the (English) Stamp Act, 1891," as originally enacted, there were three heads;-of. charge relating to policies of insurance, namely, "Policy of Life Insurance", "Policy of Sea Insurance" and "Policy of Insurance against Accident". The stamp duty for accident policy. was one pence. By the Act of_1920._" the duty on accident policies was increased to six pence".

But, by the Act of 1959,? the separate heads of "Sea Insurance", and "Insurance against-accie dent" were omitted. Consequential changes in the provisions in the nature of deﬁnition were also made.

44.19. The Schedule to the English Act now reads thus" :---_--

'¥I1:,3'|;,;_.; Sfrillgl:-gnoe mher_f1-,an}if'eiu5m-an°c ' all I I-_ H ' I 7 6 ' Policy of Life Insurance---

'Where the sum insured does not exceed £10 1 Exceeds £10 but does not exceed £3 . .

Exceeds £25 but does not exceed £500 . . . . . . . . . . .

For every full sum of £50, and also for any fractional part of' £50, of the sum insured . . . . . 5 Exceeds £500 but does not exceed £1000 for every full sun: of £100, and also for any fractio-

nal part of £100, of the amount increase - . . . l 0 Exceeds £1000 :

For every full sum of £1,000 and also for any fractional part of £1,000, of the amount . insured . . . . . . . . . . . . . 10 0 1 See Mulla, Stamp Act (1963). page 4-0.

' See Done-gh's Indian Stamp Law, edited by R.ustornji,(I935), pages 693-699. -

' The Statement of Objects and Reasons appended to the Bill, says (under Article 47,1, "I'l1edraf'tr'ng of this am'- - cle has been altered to make its provisions clearer."

' As to the suggestion made in 1898 to reduce the duty on accident insurance. see parauaph 33, inﬁ-a.

' Stamp Act, 1391 (54 «Sr. 55 Vict. c. 38) First Schedule, head of charge "Policy of Insurance etc."

' The Finance Act, 1920 (10 &. 11 Geo. OSC. l8). , ' Finance Act, 1959 (7 & Eliz. 2:. 58), s. 30.

' Stamp Act, 1891, (54 at 55 Vic. c. 38) as amended up-to-date. 213-214.

See Monme, Stamp Duties (1964), pages 245 SPECIAL EXEMP'I'lONS Policies under the Friendly Societies Act, 1896, section 33, are exempt from stamp duty."

44.20. We shall now deal with insurance and its various classes. Insurance is a contract contract of whereby o-ne person, called the "insurer", undertakes to indemnify another person, called the insurance.

"assured", against a loss which may arise or to pay a sum of money on the happening of a speciﬁed event} t is a contract whereby, for an agreed premium, one party undertakes to compensate the other for loss on a speciﬁed subject by speciﬁed events? "Insurance is indemni- ﬁcation against the risk of loss, by distributing the loss over a group."

44.21. The two major types of insurance are marine and non-marine.' For convenience, non-marine insurance mav be studied in its various species.

44.22. In the classiﬁcation of insurance against main types of non-rnarine risks, as given Pctsonalinguxangg by I-Ialsburyii permim! insurance is thin described :-- and A°"id°""

Insurance.

"(l) Personal insurance in which the event insured against effects the assured in relation to his life and limb and physical well-being. This class includes life insurance, endowment and retirement annuity insurance, persona! accident insurance and sickness insurance?"

- Accident policies insure against the contingency of accidental injury or accidental death. Accident insurance, liability insurance and automobile insurance, all share this feature;-«-that the insurance covers loss or damage resulting from accident or unanticipated contingencies except fire and the elements.

44-23. Every insurance, whatever its nature, postulates that a sum of money will be paid Contingency and by the insurer on the happening of a speciﬁed event.' In one sense, all categories of insurance indemnity. are related to a "'contingency".3 But, as a distinction is sometimes made between an "indemnity insurance" and "contingency insurance", it would be desirable to discuss "indemnity"9 in some detail.

44.24. The question of indemnity is thus dealt with in Halsbury" :--

"Most contracts of insurance" belong to the general category of contracts of indemnity in the sense that the liability of the insurers is limited to the actual loss which is in fact proved"?

Indemrdty.

The happening of the event does not of itself entitle the assured to payment of the sum stipulated in the policy?" the event must in fact result in a pecuniary loss to the assured" amt 1 Slater, Merchantile Law, (19563. 13336 275. See also 'Stevens. Merchantile Law (1965), page 319. ' Bout-ier, Law Dictionary (1914), Vol.1, page 1613 ' Levine, Modern Business Law (1959). page 350.

'- I-Ialsbury, 3rd Edn. Vol. 22. pages '7 et seq. and 179 ct' seq. deal with the two separately.

' I-Ialsbury, 3rd Edi-L, Vol. 32, page 184, para 353(a'J. ' Emphasis added.

7 Halsbury, 3rd Edn. Vol. 22, page 180, para 34.1.

" See Halsbury. 3rd Edn. Vol. 22, p.394, para 803.

' As to how far insurance is a contract of indemnity, see the opinion of the Judges in If'P£I'i;g' v. Manning, (1847) I H.L.C. 237, 307; 6 CB. 391 (Case of marine insurance). _ 1' Halsubry, 3rd Edn. Vol. 22, pages 180, 181, 182 paragraphs 343, 349.

, 11 Exceptions are life insurance. personal accident and sickness insurance, and some for l' ti insurance; see Halsbnry, 3rd Edn. Vol. 22, pages 131, 132, 394, 395. ms 0 C 0" "gem?

Mmczkspre e.g..a3agegay.(_ 560, GA. Casteflain 1'. Preston (1883), II Q.B.D. 380, C_A, 1' Dane V. Mortgage Ins-uranee Ccrpm. (1894) 1 Q.B. 54, (LA. at p. 6|, L d E h , M.R.' Wm Price at Co. v. chug, (19545) 3 A.E.R. 821. at p. 325, per Devlin J. per or 5 er ' 5°' 315° W"

1' Garden v. Ingram (1852) 23 LJ. Ch. 478. at p. 4?9 per Lord St. Loonards. 24 M of Law,"i":'--32. , D 246 the assured then and then only becomes entitled to be indemnified, subiect to the limitation of his contract.' "He cannot recover more than the sum insured, for that sum is all that he has stipu-

lated 1'01 by his premium and ﬁxes the maximum liability of the insurers". EVE" Within that limit, however, he cannot recover more than What he establi- shes to be the actual amount of his loss;3 the contract being one of the indemnity, and of indemnity only, he can recover the actual amount of his loss and no more,' whatever may have been his estimate of what his loss would be likely to be, and whatever the premiums he may have paid, calculated on the basis of that estimate."

"In the strict sense previously indicated,' contracts of life insurance," personal accident and sickness insurance' and some forms of contingency insurance" are not contracts of indemnity. in the case of contracts of this class there is normally no nece_rs:'r_v to prove a pecuniary loss'.

If the assured chooses, for example, to value a leg or an eye at £50,000, and to pay premium accordingly, he is entitled to recover the stipulated sum in the event of his losing the member in question.

"His estimate of his possible loss is, in eﬁect, regarded as genuine and acceptable, ' even if not agreed. because no one is likely "deliberately to inﬂict such damage on himself, and no one can in fact foresee, even at the date of loss of the mem- ber, what the full pectmiary loss is likely to be. Similarly a person can value his life at any ﬁgure that he can afford, particularly as he is unlikely to be able to foresee, at the date when he taken out the policy, what at the date of his death his ﬁnancial obligations to dependants may be. Indeed, as has been said," such an insurance is really a form of investment." ' 44.25. As, however, we shall show later" there are many points of difference between life insurance and accident insurance. _ History of acci-

44.26. We shall now trace in brief the history of accident insurance. We would like to dem imuranm quotd a passage from the judgment in an Australian case," where the history is lucidly stated.

"Personal accident insurance began with railways. Many companies were formed between 1845 and 1850 to insure passengers against the consequences of railway accidents. From this beginning, personal accident insurance was extended to death or disahlement resulting from other accidents, and then to various forms of insurance against incapacity from sickness. But all this occurred long after life insurance policies had become well-known distinctive instruments. And origi-- nally accident insurance was transacted by companies not engaged in other forms '. Dalby v. India and London Life Assurance C'a., (1354), 15 C3. 365. '. Wes.fmz'n.srer Firs Oﬂfce V. Glasgow Pruviczlear Investment Society, H388'), 13 ADD. Cars. 699, HJ. at p.711, per Lord Selborne, L.C.; of: Curtis :5': Sons v. Mathews (1918), asreporhed in 35 'l".L.R. 139, CA.

F. Chapman v. Pole PD. (1870) 22 L.T. 305, at 11- 307, P61' C0CklJuI'I1. C-1- '. Carrellain v. Preston (1883), 11 Q.B.D. 38-D, C.A., at p.386. per Brett, L.J. |. See Halsbury, page 120 ante.

'. Daﬁy v. Indian and Loaalon Life Assurance £70.. (1354), 15 C-3. 3155- ". Theobald v. Raﬂway Passengers Assurance 130., (I854), 10 Each. 45. at page 53, per Alderson, B. A Policy insuring a third person against personal accident is, however. a oontract of indemnity (B.larcheek v. Bmsell, U915}, 33 T.L.R. 51; 3 B & S. 579).

'. Halsbury. page 394 et seq'.. _

9. Dolby v. Iredfarr and London Life Assurance C-'a.. (1854), 15 GB. 365: Law V- LOPWW IP15-1'-9' urabfe Lil? 'Policy Co. (1855), l K. 3: J, 233, Gar.-id v. Curtis, (1913) 3 K.B., 34, C.A.. at page 95. per Buckley, L.J. 1'. Gould v. Curtis, (191231 KB. 635, at p. 640. per I-Iamiltcm J; alfrmed. i191 3) 3 K-3. 34 CA.

". Paragraph 29, !n)'i'a.

1*. National Mutual L..{fe Association v. Federal Commissioner for Taxation (1959-60) 33 Australian Law Journal Reports, 16, 21-22 (Windeyer .I.).

247

of insurance. It was only towards the end of the nineteenth century that com- panies which had been engaged in tire insurance began to undertake accident insurance.' The separate and late origin of accident insurance emphasises its distinctive character, and emphasises, I think, that in a strict sense the term lite policy is not appropriate for modern forms of combined insurance. Insurances against accidental death do in some ways resemble life policies; and they are within the Act of 17'.-'4.9 Yet ordinary accident policies providing for payment on accidental death have been held not to be life policies for the purposes of provision~; in bankruptcy and similar legislation by which life policies are prolecteLl."'3 44.27. The inception of accident insurance is bound up with the industrial Revolution.' With the use of mechanical transport, the whole outlook changed. Serious accidents upon rail- ways occurred with frequency in the early days and the demand for accident insurance was manifest. Travel by air also increased the demand. With the passing of the Employer's Liabi- lity Act, 1830, which placed a burden on the employers, a demand came for shifting that bur- den. The advent of motor vehicles led to the further development of insurance. Further {in respect of motor vehicles) legislation made third party insurance compulsory.' lithe past history is any indication, it would seem that with the passage of time, the scope of insurance against accidential risks is bound to increase.

44.23. The scope cf "accident insurance''", in insurrz;-ice brtsiness practice. seems to bcrather wider than more "personal. accident" insurance?-9. The scope of accident insurance will be best understood from its classiﬁcation, which has been thus given".

"Accident Insurance for the purpose of classiﬁcation may be divittcd into the following main clauses, vis., :

(a) 1'n.w.rctnce cf the per.m::.----Personal accident and sickness risks, with which must be considered coupon and similar facilities.

(b) Insurance of p.r-o,rm!_~.- against personal loss, of which burglary and plate glass are good examples. _ (-3) Insurance of liability, such as employers' liability and public liability risks where the insured is not the claimant with whom settlement has to he made.

(cl) Insurance of fJti(:'."t'I'.', such as ﬁdelity guarantee.

Certain types of accident business represent a combination of two or these classes, while others include no less than three. Comprehensive motor policies (private cars] embrace (a),

(b) and (c) under the one policy, as do Household Policies."

44.29. It has been said that the business transacted by the Accident Department of a composite otficc comprises all these sections of Insurance business for winch provision is not made by a Marine, Life and Fire Department". The variety of its scope will be evident from the contents of the Accident Section of one of the year Books on Accident Insurance", which covers persons accident, disease and sickness insurance, burglary insurance, "All Risks" In-

'. See 'Ra:/nos "History of British Insurance", pages 233-299, 373-376. '. Skiilirygv V. Accidental Death Inmmnce Co., (1857) 2 HI & N, 43; (1853) I F. & F. 116. '. In re Cartoon, (1941) \-'.L.R. 254:1.-1 re Farley (I933) V.I...R. 271 ; In re Kerr {I 943) S. 5.11. S: Re Packer (Clyne, .!.--not yet reported}.

'. See Stone and Cox. Accident Insurance You Book, (1963). Dan: 7.

'. See Stone and Cox. Accident Insurance Year Book, {I963}, page 8-9. . '. As to ''accident'', see Chitty, contracts, {[961}, Vol. 2. para 83?.

". deﬁnition in section 98(2), Stamp Act, 1891 (now partly repealed), was narrower. as it was conﬁned to per.

sons] accidents. _ '. See also Lancasfrirc, Insurance V. Infant! Revenue (1899) 1 (2.11. 535.

'. Stone and Cox, Accident Insurance Year Book, (1963).. page 12.

1'. Stone & Cox, Accident Insurance Your Book, ([963), page 11.

1'. Stone & Cox, Accident Insurance Year Book, (1963), Table of Couten,t_e,_ Industrial Revol-

lution.

Accident insura-

rancc scope of.

Business.

Object' of p_erso~ nal accident unsu-

rancc.

248

surance, Insurance of Money, luggage Insurance, "Combined Travel" Insurance, Storm & Tem- pest Insurance, I-louseowners' Insurance, Subsidence Insurance, Glass Insurance, Public Liability Insurance, Product Liability Insurance, Personal Liability Insurance, Motor Insurance, etc. M" 44.30. In England, policies on motor vehicles are witterl than required by the Road Traffic Act", and may cover (a) damage to the vehicle, [to] liability for damage to property, (cl death or, or injury to, the assured and (sometimes) his or her spouse, {besides liability to third parties)" ' 44.31. We shall new deal more specifically' with personal accident insurance. Ihc object, of personal accident instwttttee is to make provision for payment of a stun of money in the event of the insured sustaining accidental injury.

"I: :'esr--rmbIcs life tam.-rcu;-cs, and differs from other types of insurance in that it is not a contract of indemnity-1; it is merely a contract to pay a sum of money on the happening of a speciﬁed event"; namely, the sustaining by the assured of personal injury by such accidental means as may be deﬁne-$1 in the policy". The event may involve the death of the insured, but the insurance is not _lor that reason :1 contract of life iriSurr1mf'e7. In the case of life insurance, L113 assured is bound to the some day, the uncertainty being as to the date when the death will take place". In the case of personal accident insurance, on the other hand, no accident may ever happen; and, even if it does, there is no certainty that it will result in death of disable- ment of the assured".

44.32. Halshury, further, states") :--

"584. Need for 51mnnh.'e inIerest.--As in life insurance, an insurable interest is re- quired by statute", the interest normally being the potential pecuniary loss of the assured as a result of the disahlement, either of l]i1'l1.'-ielf, or of the third party if at third party is insured."

Halsbury acids, -'In fact, persnnal_ accident insurance devclo-pcd out of life insurance", but it is necessary now to regard it as a different kind of insurance, and It IS in fact generally so regarded."

It may be added that the distinction is recognised in England in the Assurance Companies Act".

44.33. Personal Accident insurance is ordinarily effected by policies. But there is also a system of "coupon insurance" prevalent in England-

1. Chitty on Contracts (1961) Vol. 2, paragrc'lPl'l 903- '. Road Traffic Act, 1960 (8 St 9 E12 2 C. 16)-

5. See also analysis in Halsbury. 3rd Edn., Vol. 22, pages 353. 354. Dﬂ1'a- 735(7) and 727- ~. Theobald V. Railway PCi.l'st£'?£§'€'3'-5' Amrance'co.. (18541 10 Em 45. at v- 53, -er Aimee: 9- frolic! mm:

the accused againsﬁoss arising fmm any accident to a third person is, however, a contract of 1ndomm'|'.y (Bhs-check v. Basset}, (1916), 33 T.L.R. 51; alﬁnned, 33 T.L.R. 74 CA.) s_ 3,-adburn V' G,-gm We3[ern Rail C9,, (1974), LR. 10 Ex-ch. 1, at p. 2, per Bramwell, B., (1874-1B30)A1l. E..R..

Rep. 195. .. . . . .

. I C' .. Ltd. 1961) 1 All. ER. 914 (insurance against personal uuuncs held iii iﬁbiiﬁgillftiizricoiigiliI;i'lEi:i€[r|?e'§1E1ix£n;Si'l'iI£Td""'fBfIhf For iorm of Personal aecidenl P°ll°5'~ 5" 7 E"°1'-e F'"'"'' 5'"

Procedents (3rd Eda.) 532- _ 3, General Accident Assurance Corp.-1. V. Ireland' Revenue Commissioners (1905), '. See Halsbury, 3rd Edn. Vol. 22, page 372.

'. Genera! Accident Assurance Carpn. v. Inland Rem! Lrznt-ashfre Insurance Co. v. Inland Revenue Commissioners. (1890) 1 1u_ Hgtg-bury, 3rd Erin. Vol. 22 page 293-, para 534.

11._ Life Assurance Act, 1774 (14 Gen. 3 c. 48), section I ; Slailffng v. Act-ideriral Death Insurance Co. (185?) H. &.

42. , , 1'. The Assurance Companies Act, 1909 (9 EdW- 7 '-7- 49)» "CH0" 1' 3 F. (Ct. of S055.) 477.

he Commissioners (1906). s F. (Ct. of seas.) 477; of. ' Q.B.--353, at p. 359. per Bruce J.

N. 249 44.34. The nature of "coupon insurance" is thus described in Halshuryli' :--- "6tJ-1-. Nnfnre of coupon i:.I.5m'nnt'c.

The purchase of a newspaper or other article frequently confers upon the purchasﬁr the right to an insnratlce against personal accident. The insurance arises by virtue of some arrangement made by the proprietors of the newspaper or article sold with insurers, and the position of the purchaser is do-iinetl in a document or coupon which is annexed to the article or, in the case of a newspaper, printed as part of it, and in some cases nothing beyond the purchase is necessary to corn- plcte the insurance". in other cases the coupon has to be ﬁlled up, and it may, further, have to be registered with the insurers. The protection given by the coupon is usually in a narrow compass, being limited to accidents to vehicles in which the holder of the coupon is a passenger, or accidents to pedestrians.

(105. I-'nyment in rose of a'.r.'at.-"t.

Provision is usually made, in the event of a fatal accident, for payment of the sum insured to a specitied person, such as the holder's wife or next of kin. Where the coupon is issued by a newspaper, power is usually reserved to znalte the pay- ment to the person adjudged by the editor or some other person to be holder's next of kin, in which case his "decision is ﬁnal."

44.35. As to stamp duty on instruments by way of coupon insurance, the relevant Stamp on :oupons section in the English Act is section 116*. Where any person issuing policies so carries on the business as to render it impracticable or inexpedien-'. that the duty of six pence be charged upon the policies, the section empowers the Commissioners to enter into an agreement with such person. T he agreement provides for the delivery of quarterly accounts of sums received as premium on such policies. Duty is charged on the aggregate (of the sums recovered), at the rate of ﬁve pounds per cent, as stamp duty. This section, and the Second Schedule, (Second Part) to the Act, make other detailed provisions, which need not be gone into.

44.35. We shall now discuss the meaning of the expression "policy". The term "policy is borrowed from the Italian merchants. who introduced insurance into England." The Italian "poli2:za""', it is statedl, may be derived from the word "polythcha"--a tablet of several l:'olds----- ' used in late Latin for an account memorandum book. The expression "policy" may be used to describe any contract of insurance, however, informal'?-9. A policy must he issued within a certain time after the receipt of premium'°--".

The deﬁnition of "policy" in the Indian Stamp Act" is not very helpful for a consideration of the question which we have to discuss.

1. Halshury, 3rd Edn., Vol. 22, pages 302, 308. paras, 604-605. '. Matter in footnotes not important for the present purpose is not reproduced.

'. See Carbiﬂ v. Carbolfc Smoke Bail! Co.. (1893) 1 (1.3. 255, CA. Payment is not essential {Shanks v. Sun Life Assurance Co. aflndia. 4 S.L.T. 65).

._ Section 116, Stamp Act, 1391 (54 & 55 Vic. C. 39).

. Chitty on Contracts (1961), Vol. 2, pages 344, 345, para 303, 804 and f.n. 5.

. The full word is "polizza cl' assocurazione". See' Arnould, Marine Insurance (1961), Vol. 1, page 9. . Chitty on Cont:-arts (I961) Vol. 2, page 344, 345, para 803 804 and f.n. 5.

. Forsikriqg Sakriesed Skaber v. Attorney General, (1925) AL'. 639, 642.

and fgbtlggiedpgailcd discussion, see I-Ialsbury. 3rd E,dn., Vol. 22, page 209, paragraphs 393, 395, "Meaning of Po1icy''_ 1". Section'66, Indian Stamp Act, 1899.

". Lt". sccnon 100, Stamp Act, 1891 (54 & 55 Vic. c. 39).

1'. Section 2(l9J and 2(19A), Indian Stamp Act, 1399.

I I I 'I I Policy.

2.50 E|1BliShl:1w- 44.37. The deﬁnition of policy in the English Act of 1891 (as amended in 195.9), relevant to the topic under discussion, may be quotcdl :~--

"P0li'cr'e.s of Insurance"

"M. For the purposes of this; Act the expression 'policy of insurance' includes every writing whereby any contract of insurance is made, or agreed to be made or is evidenced, and the expiression "insurance" includes assurance."

44.38. Policy of life insurance has been thus deﬁned in English Act of 1891 {as amended in 1959).

93. Policies of lnsurarice (.'.t'r.'£-pf policies of sea insurance (1) For the purposes of this Act the expression "policy of life insurance" means a policy of insurance upon any life or lives or upon any event or contingency relating to or depending on any life or lives except a policy of insurance for any payn1er.:t9 agree-d to be made upon the death of any person only from accident or violence or otherwise than from a natural cause. . . . . .. ' The stamp duty is thus prescribed in the Act of 1891 (as amended in 1959).

"Q9. The duty of six pence' upon a policy of insurance (other than policy of .......... .."life insurance) may be denoted by an adhesive stamp which is to be cancelled by the person by whom the policy is ﬁrst executed."

I)°ﬂ'1jtionnf 44.39. The deﬁnition of "policy of insurance against accident" which was given in section rnolirrrof insufam?-G 98(1) of the {English} Stamp Act, 1391 is useful. The deﬁnition has now been repealed by "amt accident" the Finance Act, 1959, which places all policies other than life insurance policies in one class. The deﬁnition, so far as is relevant, was as follows" :--

" . . . . ..the C'.'{pi'E'FSJO[l 'policy of insurance against accident' means a policy of in- surance for any payment agreed to be made upon the death of any person only from accident or violence or otherwise than from a natural cause, or as com- pensation for pcrsmial injury, and includes any 11otit,'e or advertisement in a newspaper or other publication which purports to insure the payment of money upon the death of or injury to the holder or bearer of the newspaper or publi- cation containiug the notice only from accident or violence or otherwise than from a natural causel."

Rgsemblancg bet- 44.40. There are, no doubt, some points of resemblance between life insurance and accident :'cl1*j3emlil'*in_ "Pad insurance. A policy of insurance against accidents, as usually drawn, is not a contract of indem- iu nityﬁ It is a contract to pay a certain ﬁxed sum per week in case of injury, and a oertain other nee.

ﬁxed sum in case of death."

44.41- The position regarding indemnity in regard to accident has been thus stated" by a writer on mercantile law:

. Section 91, Stamp Act, I891 (54 & 55 Vic. c. 39]; Monroe, The Law of Stamp Duties, (1964), page 229. Omitted words were repealed by Finance Act. 1959, section 37, and Schedule VIII. . Omitted words were lepealcd by Finance Act, 1959, section 37, and Schedule VIII. _ "gig.--, p,-meg" -,«,- as. substituted f or "one penny" by the Finance Act, 'H320, section 40(2). See also the Finance Act, 1959, section 30(1).

_ Omitted words were repealed by the Finance Act, 1959, section 37, and Schedule VIU.

. Halsbury, 3rd Edn., vol. 22, page 229. footnote (0)-

Stamp Act, 1391 (54 Si: 55 Vict. c. 39), section 98(1), before its amendment by the Finance Act, 19.19. . Chitty, Contracts, (1961), Vol. 2, Paragraphs 856-357. . Chitty, Contracts, (1961), Vol. 2, Paragraph 357.

_ Slater, Mercantile Law, (1956), pages 230-231- 0'C°°;~Ja\u- .t=mt~.1»---

251

"ACCIDENT INSURANCE-

An accident insurance can be a contract of indeituiity, but it can also be a contract for the payment of speciﬁed mm in the event of accidental death of the assured or of his losing, say an eye or a limb. This kind of accident insurance is similar to the valued policies which are common in mating insurance and in the insurance of art treasures against ﬁre.

"Where, in the event of an accident, the insurers pays the sum named in the policy, he is not subrogated to the rights of the insured. Accordingly, the assured, o-r in the case of his death his personal representative, can claim damages against the person who has caused the death or the injury, for the insurance has been effected against this very contingency."-

44.42. The distinction between "inde1:nnity insurance" and "contingency insurance" is recog- nised in some decisions.'~1' The observations of Bramwcll, B in Bradburn's case, state the posi-

tion accurately-" :--

"A man pays the premiums upon these accident policies upon this kind of footing, namely, that his right to an indemnity in case of an accident shall be an equiva- lent for the mischief or injury that happens to him. He gets more, no doubt, if the mischief happens than all the premiums which he has paid would amount to; but he runs the chance that he will not get any thing at all ; and therefore it is, I say, that he ought to have this sum in addition to the damages that he may have sustained at the hands of the defendants by reason of the accident itself;

for otherwise he would be a loser by insuring against accidents in a case where the railway company was in the wrong. I am, therefore, clearly of opinion that the verdict stands at present for the right amount."

44.43. The distinction between life insurance and accident insurance, is equally important. This is very well elaborated in an Australian case.' It points out, ﬁrst, that marine, ﬁre burglary, personal accident, motor vehicle and other miscellaneous insurances indemnity the insured against loss from events which may or may not occur, while life insurance is related to a con- tingency which must occur, the only uncertainly being about its time. Secondly, life policies are capable of advance calculation. while in other forms of insurance the determination of pro- babilities would seem to have a less scientiﬁc basis. Thirdly, accident and sickness policies are ordinarily annual contracts, (like ﬁre etc.), and have no surrender value.

44.4-4. We shall now proceed to consider the speciﬁc question which forms the subject- Inatter of this Chapter. The point that we have to consider has a history." It would appear that on 18th February, 1398, the Chamber of Commerce, Bombay, sent a representation? to the Government regarding stamp duty on accident insurance policies, for bringing the law inline with the English Act. (This was with reference to the Draft Bill to amend and consolidate the Stamp Act].

44.45. The Select Committee' which examined the 1898 Bill, considered this representa« tion.'. (The representation is mentioned in its Report, in the marginal list of papers considered).

The Select Committee did not, however, adopt the suggestion in Toto, but stated :

"No. 47. Policy of Insi.rrrmce------We have provided a reduced duty for insurance against accident or sickness which is at present chargeable on the -sanrie footing as life insurance."

. or can Wake Price & Co. v. Citing, (1951) 1 W.L.R. 45, 51. _

2. As to "indemnity-"', see In re Miller, Gibb is; Go. Li':!., (1957) I W.L.R. T03, 703.

3. .g'UdbHf'7l v. Great Western Rail' C'o., (I8'i"4) LR. it) Erich. 1; (1874-1830), A.E.R. Rep. 195, 196(1):! Bramwoll 5-:

. National Mitten! Life Association v. Federal Commi's.si'oner of Taxation, (1959-60) 33 Australian Law Journal Reports 16, 21-22 (Windeycr J.).

. Paragraph 5, supra.

For history of the provision itself, see paragraphs 7 to 9, supra.

Papers of Act 2 of 1899, Vol.2 {National Archives). "

. Repmft o_Jf the Select Committee, dated 19th March, 1898. [Papers of Act 2 of 1899, Vol.2) (National Ives .

. Soc Supra.

-ht W:-laxtn VD Distinction bet.

ween lifeinsuranoe and accident insurance.

Question of reductionofduty---

previous discus-

SIOTE, Art. 6, Sch. '2 Notiﬁcation No. 5199-S.R., dated 1st November.

1895.

Art.l2(b).Sch.II.

Notiﬁcation No. 5199-S.R., dated 1st November, 1895.

Art. I2, Sch. II, Notiﬁcation No. 5l99~S.R., dated 1st November, 1895.

Considerations to be borne in mind in recommending chimps.

Comments of State Govern-

ments regarding duty on Original policy.

252

44.46. The draft as suggested by the Select Committee on the Bill of 1898 was as follows' :

"47. Policy of Insurance-

C--Accid~cnt and Sickness Insurance----

{'3} against Railway Accident, valid For a single journey only Proper Stamp duty _ One ant-ta.

EXEMPTIOA' class in any When issued to El passeiiger travelling by the intermediate or the third Railway. .

"(b} in any other case-»--for the maximum amount which may become payable in the case of any single accident or sickness where such amount does not exceed Rs.1,000_."-, and also where such amount exceeds Rs. l,ﬂD0 forcvcry Rs. 1,000,-' or part thereof. Two annas. Dr-_Lil'e Insurance or other insurance not specifically provided for, except such a re- insurancc as is described in Division E' of this article. _ _ .for every sum insured not exceeding Rs. 1,000 and also for every Rs. 1,000 or part thereof insured in excess of Rs. 1,000

ii) if drawn single 31; anngg,

(ii) if drawn in duplicate, I' or each part Three anuas.

Exemption "Policies of life insurance granted by the Director General of the Post Ofﬁces of India in accordance with rules for Postal Life Insurance issued under the authority of the Government of India."

4_4.4'.-'. We have now to consider whether the law on the subject should be changed. For this purpose, a consideration of the rationale of the existing law appears to be desirable. Now, it is not always easy to discover the rationale of the provisions of a taxing law.' For that reason, it is not easy to formulate the considerations which should be taken into account while coming to a conclusion whether a change should: be made in such provisions or not.

On the one hand, from the point of view of the insurance corporation, a policy of insurance is a business document. It brings proﬁt, and its tasability is supportable on that ground.

44.48. On the other hand, from the point of view of the insured; the poiicy is merely a protection against apossible risk; there is no motive of proﬁt, and it is not a commercial transac- tion so far as the assured is concerned. He does not view it as such. It is not even an irient', i.e., the conversion of money into some species of property from which income or profit is expected to be derived in the ordinary course of trade or business.' It may be noted that in cont- rast, some forms of life insurance---eg., endowmcnt----a1'e investments.

44.49. Again, in modern times, with the increasing risk of accidents, in the factory, tram transport, from the complexity of urban life and other similar factors, there is every need to encourage accident insurance, so that the loss is not borne by one person, but is distributed amongst many. From that point of view, there appears to be ample justiﬁcation for keeping the stamp duty to the minimum. -

44.50. We shall now consider the comments received by the Ministry of Finance tron:

State Governments on the two points raised in the suggestion of the Indian Insurance Com- panies Associatioei." The points made in these comments may be thus summarised.

1. 'This draft seems to have been adopted without further discussion.

2_ The pfintgd copy speaks of Division F, but this seems to be a slip for Division B. (Division E listed to Re~Insura.nce'). ' . "

. Ranking C.J.----". . . . _ _ . . . .the legislature may have reasons and good reasons which do not appear upon the surface"--Jaiia:-dhan v. Secretary of State, A.I.R. 1931 Cal. 193, 200.

. See Chamber': Encyclopaeaiﬁa (1951), Vol. 1', Page 609.

. See, siipra.

_ The summary is based on S. No. 35 and 36 in the Law Commission File No. F.3(4l-'37iLC Part I, V-ol.II.

Lil mm."

'invest-i --

253

(I) Duty on original policy.

One State Government and the Administrations of most Union Territories agreed to the proposed change. Two State Governments and the Administration of one Union Territory, had no comments.

Nine State Governments were opposed to the proposed change. The reasons for oppos- ing the change, as stated in the various replies taken together, were-----

(i) that the rate is not high when compared with life insurance policies;

(ii) that any concession in respect of policies under article 47--C and 47--CC will give rise to similar requests by persons interested in policies governed by articles 47--A and 4-7-D;

(iii) that accident and sickness insurance premia are paid by well--to--do people either for themselves or for their workmen, and there can be no hardship involved in paying the present rates; '

(iv) that no reduction of Government revenue can be contemplated during the present emergency} (vi that the Insurance Companies Association has not been able to furnish points of similarity between policies under article 47-13 and those under article 47--C;

(vi) that looking to the huge amount insured for comparatively small amounts or premiums, the stamp duty under article 47-C(b) is not likely to affect the insurance business;

(vii) that under section 29, it is the person taking out the policy who bears the duty, and insurance companies "are not directly concerned with the incidence of this stamp duty."

One State Government," which was opposed to the reduction, suggested that has journey may be included alongwith railway accidents, for exemption under rule 47-C(a), "which may lead to greater popularity of accident insurance among the less weIl--to--do classes."

44.5]. As regards the duty on renewal, two State Governments were of the view that renewals are chargeable at the same rates as for the original, and that a speciﬁc provision tr- that eﬁect may be inserted to remove confusion. One State Government expressed this view-

"Reduced rates in regard to renewals under item 47--B of the article have been prescribed with a view to encourage insurance against ﬁre and damage of property. Accident and sick- ness insuranoe prernia are paid by wel1--to-do people either for themselves or for their work-

I'! l11€l'I. .

One State Government stated that in the absence of any provision, the duty for renewal will be the same as on originals. Three other State Governments were opposed to the suggested reduction.

Two State Governments, and the Administrations of several Union Territories agreeable to the reduction of the duty on renewal to one-half of the duty on the original.

44.52. We have given anxious consideration to the points made in the comments sent earlier to the Ministry of Finance. We think, that while likelihood of reduction in the revenue of States-has to be taken into account, it should also, at the same time, be remembered", that there is a strong need for popularising accident insurance. The similarity of accident insurance with life insurance is mainly historical. A person taking out an accident policy has no motive

1. This was a reference to the emergency of 1962.

2. S. No. 36 (Enclosures), in Law Commission's File No. F. 3(4),l57.lLC Part I, Vol. II. 24 M of Law,l'T'l'---33.

were 1 Comments of State Govern-

ments regarding Duty on renewaL Classiﬁcation of Insurance with reference subject matter.

In 254 of proﬁt, and any proﬁt that he makes is incidental. There are many points of diﬁerence etwecn lite and accident policies'. It is therefore legitimate to make a dis-tinction between the two in regard to the scheme of taxation, particularly if other relevant considerations present themselves. 1:; l=?"'3' .5-;'.\.lQl 4453- The limited similarity" between life and accident insurance in respect of the ﬁxed amount payable, appears to be due to the nature of the loss insured against.

1: has been pointed out' that when an individual's life or earning power is aﬁected, no accurate measure of its value is possible. The insurance contract therefore assigns the risk a ﬁxed value, which is all that the insured recovers when the policy falls clue."

To put the matter differently, in a personal accident policy, the ﬁxed sum dispenses with the proof of the extent of the loss, by specifying the nature and eﬁect of the injury sustained.' 44.54. A classiﬁcation of the various types of insurance" from the point of View of the subject-matter would be helpful for appreciating the relevant points.

Insurance PROPERTY PERSONAL {Loss fr0m_Impair1'nent {Loss of income or or destruction_ of increased expenditure, DI0P¢1't3'---wluch may bc--) due to--) I | i ' i 4 Tangible property Intangible Death Survival Impaired Loss of oportunity to (la) property (lb) (2a) (213) health contribute Dnc's (2c) skill, labour and kuowlcdgeﬂdl 44.55. Examples of each category given in the above classiﬁcation" are :--

I la. Marine, Automobile, Fire, Flood, etc. Insurance. lb. Compensation and liability insurance. Credit insurance. Insurance against interruption of business, Mortgage insurance. Title insurance. Re-insurance. 2a.

2b. Endowment Insurance.

20.

Life Insurance.

Sickness Maternity, Accident and Invalidity, Insurance.

2d. Unemployment Insurance.

44.56 Though both accident insurance and life insurance fall under "personal" insurance, yet, in fact, accident insurance stands much nearer to the other classes of insurance than to life insurance. Assuming (as is stated in one comment)' that accident insurance is taken out at present by only well-to-do people, there is no reason. why others should not be encouraged... to do so.

See supra.

. See supra.

. Bncycloapedia of Social Sciences (l'-'Iac'ilIan) (1951-Reprint}, Vol. 8, page 96. Cl'. Ivarny. General principles of insurance law (1956), page 3 and 357. This is based mainly on Encyeloapedia of Social Science . See supra.

. S66 supra.

. See supra.

ﬂ0*--.ltl\[-l'I:lLu}hl:--

255

44.57. As regards the objection1 that similar requests will be made by other persons {in respect of other types of policies), we can only say, that any request by a person interested in other policies--for example, policies governed by article 4'?-A and 47-D---can be considered on the merits when it is put-forth.

44.53. Lastly, the fact that the stamp duty is paid by the Insured and not by the com-

pany, does not mean that a suggestion" made by an Association of the Insurance Companies should not be accepted, if it is in the general interest.

44.59. At this stage, we would like to elaborate the proposition that the policy does not bring proﬁt3. Accident insurance may not be "indemnity" in the strict sense'. But the amount recoverable under the policy is regulated.

As has been stated by Halsburyﬁ' the policy usually provides for payment of a lump sum in the event of the assured's death by accident, and of other sums, varying in amount according to the nature and extent of the injury. The speciﬁed amount is payable in the event of the assured sustaining certain speciﬁed injuries, such as the loss of sight in one eye or total loss or night."

Sometimes, the policy provides for increased compensation for certain forms of accident. Thus, in one case', a double beneﬁt was payable if the assured, at the time of the accident, was a passenger on a public conveyance.

Halsbury observes", "Where. the policy provides for payment of compensation in the event of non-fatal injury, but makes no special provision for its amount, the assured is entitled to receive compensation for his pain and suffering of and expenses incurred to an amount not ex-

ceeding the amount payable in case of death."

44.60. (a) Having regard to the considerations summarised above", and also to the fact that the premium in respect of policies of accident insurance is low", we think that there is a case for reduction of the stamp duty as follows. Under article 47, Division C, pargarph (b}." in respect of an original policy, (of insurance against accident and sickness), when the maxi- mum amount which becomes payable in a case of any single accident or sickness does not exceed Rs. 5,000, the duty yhould be 10 paise for every Rs. 1,000 or a part thereof, and when the maximum amount which may become payable in the case of any single accident or sickness exceeds Rs. 5,000 the duty should be Re. 1 irrespective of the amount which may become payable. If this change is made, then the existing proviso to article 47, Division C, paragraph (b), added by Act 18 of 1928, will become superﬂuous, and may be omitted.

(b) We have considered the suggestion" regarding bus journeys. We think that policies of insurance against accidents in course of journey by bus, if valid for a singie journey, should be exempt, where the amount does not exceed Rs. 5,000. We are, further, of the view that this exemption should extend to journeys by all conveyances including rail or air.

We are of the view that policies for single journey or voyage above Rs. 5,000 should bear duty of only 10 paise whatever he the mode of conveyance.

We are further of the opinion that aircraft should be treated in the same category as railway, since the article is dealing with accidents.

1. See supra.

2. Sea supra.

3. See supra.

:1. See supra.

. >5. I-Ialsbury, 3rd Edu., Vol. 22. page 299, para 59?.

"-6. Bawderi v. Landon Edﬂxbairgh dz Glossgow Assurance C'o.. (1892) 2 (2.13. 534 (C.A.]-. 1'. Fidelity and Casuaftry Co. of New Tonic v. Mitchell. (1917) A.-C. 592, 594 (P.C.).

8. Halsbury, 3rd Edn., Vol. 22, page 299.

9. Theobald v. Railway Passe.-rgers Assm-mice Co., (1 S54) 10 Batch. 45.

10. Paragraphs 36, 3'! . 40 to 4'], supra.

11. Sec supra.

12.. See Appendix 1 (Draft Amendment. to article 4?, Division C).

13. See supra.

Compensation for loss--posilion regarding Recommendation regarding duty on original policy.

Duty on renewal.

256

We should mention that in the Questionnaire, in putting forth a re-draft, we ad made' 3 limited suggestion for amendment of the article. But, after fuller consideration, we are of the View that certain other changes are required, for reasons already stated.

44.61. The next point to be considered relates to stamp duty on renewal. The existing provi- sion (it is stated) is not speciﬁc on the point and the suggestion" is that it should be clariﬁed by inserting a speciﬁc provision, as in the case of ﬁre insurance.

44-62. Now, in thcory9, renewal is a fresh contract, at least where the po-licy expressly sti- pulates that it is not to continue beyond the period of insurance unless renewed by mutual consent. But, in practice, a fresh proposal for renewal is not used in accident insurance', and the original proposal is treated as repeated.-" It seems, that the usual practice in England is to get an accident insurance policy for one year'-7, with a provision for renewal.

44.63. In this connection. we may refer to the observations of Sir James Westland while presenting the Report of the Select Committee on 21st March, 1898"-

"A difficult question arises in connection with insurance policies. It arises from the fact that the system of transaction of business in Bombay is diﬁerent from the system of transaction of business in Calcutta. The duty upon insurance is by law levied upon the issue of the original policy. We levy no duty upon renewals. The consequence is, when an insurance policy is renewed, that is to say, if the original insurance policy is extended, then it bears no new duty, but if a person cancels his policy, and takes another policy in the same terms from another Company, he has to pay the additional duty."

He stated, that in Calcutta, the insurer transacted their business directly with the oiﬁces. so that the policy was renewed year by year with the same Company and bore no duty. But, in Bombay, the business was done through brokers, who might take policies with a new Company, so that it was a new policy.

44.64. It should, further be noted. that stamp duty under article 47 is chargeable only if there is a 'policy'". A "receipt" for renewal premium cannot, as such, be charged as ''policy""', in case of insurance accidentil. It is necessary to consider whether it is chargeable as a "1'eceipt""3.

44.65. As regards stamp duty on renewal, therefore, the correct position (under the exisﬁng law) is uncertain". Perhaps, it can be stated that if a policy is issued, it would be chargeablewith full duty". If a receipt only is issued, article 47 does not apply"'-'''. The position needs clariﬁcation We recommend, that in respect of each receipt for any payment of a premium or renewal of an = accident policy, one half of the duty chargeable on the original should be chargeable, (in addition ' to the duty, if any chargeable, under article 53). This is on the analogy" of article 47, division B . Question 98.

. Paragraph 5, supra . See Halsbury, 3rd Edn., Vol. 22, pages 248, 249.

. Srokefl V. Heywood, (1897) 1 Ch. 459.

. Halsbury, 3rd Edn. Vol. 22, page 249. para 434.

See Stone & Cox, Accident Insurance Year Book (1963), Form of Policy at page 66. . Halsbury, 3rd Ecln., Vol. 22, page 206, Footnote Ch).

. Donogh's Indian Stamp Law, Edited by Rustomji (1935). page 1'7 and page 19.

. Indian Stamp Act, 1399, Article 4?, speaks of "Policy of Insurance".

. As to the meaning of "policy", see paragraphs 26-23, supra. ' '_ . Contrast Indian Stamp Act, 1899, Article 47, Division "B', which mentions both an "original policy" and I "receipt" for renewal.

. Indian Stamp Act, 1399, Article 53, "Receipt".

. See supra.

. See paragraph 52, supra.

. Article 53, Indian Stamp Act, 1899, may apply if a receipt is issued. . As to article 4?, Division B, see para 4, supra.

i--I-I|---i---n_n:_n |.-1...:

'-IG\¥.II-P-béb-J I-I-©'~D5l'-'l"-7lf.'l\I.h.;.~t.u_,;t\_;._..

25?

{Fire Insurance} This will clarify the position. It will also make receipts chargeable under article 47; and to that extent, it is a new burden. But a policy, at present, appears to be chargeable with the full rate, and to that extent, the proposed change will reduce the burden.

44.66. Article 4?, Division CC, inserted1 in 1925 deals with stamp duty on "insurance by way of indemnity against liability to pay damages on account of accidents to workmen em-

ployed by or under the insured or against liability to pay compensation under the Workmen's Compensation Act, 1923."

44.67. Article 47, Division CC thus. deals with insurance against two kinds of liability, namely :--

(a) liability to pay damages on account of accident, to workmen, and

(b) liability to pay compensation under the Workmen's Compensation Act, 1923.

Liability under the ﬁrst head would be mainly at common law'-'. This ordinarily depends on the proof of negligence. It may be either due to the employer's personal fault {for example, a dangerous machine}, or to the fault of a fellow-workmen'.

[The liability may even be under statntc,----e.g., under factories legislation,--and may be absolute liability in some cases).

Liability under the second head is statutory. In both cases, the insurance is by way of "indemnity".

In both cases again the rate of stamp duty is Ten naya paise for every Rs. 100 or part thereof payable as premium.

44.68. Although the suggestion' which we are considering mentions article 47, Division CC, it does not suggest any change in that article, except that the position regarding renewal may be clariﬁed. We recommend' that in article 47, Division CC, so far as renewal is concerned, a provision similar to that which we have recommended" for renewal under article 47, Division C, may be inserted.

44.69. lo the light of the above discussion, we recommend the following re-draft of the relevant portions of article 47. We may add that the suggested amendments were included in our Questionnaire' and have been generally favoured by the replies on this particular question.

Re-draft of Article 4?, Division C "C. ACCIDENT AND SICKNESS INSURANCE (1) In respect of an original Policy

(a) against accident on any conveyaizce valid for a single journey or voyage only, when the maximum amount which may become payable under tlzepolfcy exceeds Rs. 5,090, if the policy is issued to any passenger in: veilirw on such conveyance.

Exemption when issued to a passenger travelling by the second' class in any railway.

against accident valid for more than a singlejourney or voyage oragainst sickness, where _the maximum amount which may become payable under the policy 11] the case of any single accident or sickness does not exceed Rs. 5,000.

Ten poise ('3) Ten nnya paise for every Rs. l,([l0 or part thereof sue}:

niaximum amotan'.

against accident valid for more than a sin le joume or voyage or ainst sickness. where the maximum amount which may bezcome payahble under the pltlaglicy in the case of any single accident or sickness exceeds R5.5,000.

1. See Act 15 oi'192S.

2. As to liability at common law, see 1-Ialsbury, 3rd Edn., Vol.22, pages 3-l-t~3-45, paragraphs 104.105.

3. Munkman, Employers' Liability, (1952), page 1. .

4. Paragraph 5, supra.

5. See Appendix 1, Article 47, Division CC.

6. 'Para 53, supra.

1. Q. 97 to 99.

8. For "inter-i11ediate" and third, the word "seoond"

adopted by railways.

(6)

One rupee.

has been substituted, in view of the changed nomenclazul-¢ Article 47- Division CC-

Employcrs liabi-

lity.

Two kinds of liability covered.

Recommendation regarding Article 47CC .

253

(2) in respect a each recelprfor any payment afa premium on any renewal afar: One half of the payabie in respect of orifinafpo icy.

the original policy, in addition in the amount, if any. chargeable un- der Na. 53."

Revised A.rl;iI:le 4?, Division CC "CC. INSURANCE BY WAY OF INDEMNITY.

against liability to pay damages on account of accidents to workmen employed by or under the insurer or against liability to pay compensation under the Workmen's Compensatton Act, 1923.

(1) In respect of an original policy. Ten naya poise.

for every Rs. 100 or part thereof payable as premium.

(2) in respect afeaciz receipt for any payment afa premium on any renewal afar: arx'gr'i-zal 0rze--}i-ab" of the duty policy. payable in rexpau of ' the orawinal policy.

in addfgrhn to amannt, __ nay.

chargeable unﬂrr No. 53."

The changes recommended are summarised below.

Article 47-C. (E) for original policy.

(3) in respect of insurance against accidents on any conveyance, including air- craft, complete exemption upto Rs. 5.000 (for single Journey policies).

0:) in other cases-

{i) where the maximum amount payable does not exceed Rs. 1,000; Duty rednced ti-om 15 amp. to 10 up.

(ii) where the maximum amount exceeds Rs. 1,000 but does not exceed Duty reduced ﬁcm I 15 mg. per 1.1100 Rs. 5,000 , Rupees 3o10n._l.per -

1.000 Rupeet.

(iii) where the maximum amount exceed Rs. 5,000 ; Duty rea'ueed'ﬁvem _ I5 r.I.p. per 1.

Rupees to 1 Rupee (irrespec-

tive of the ameum').

(2) In respect of the duty on renewal-

. the position is - ' :1.

Article ¢I7--CC Position as to duty on renewal is clariﬁed.

CHAPTER 45 ARTICLES 48 to 50 45.1. Article 48, which deals with powers of attorney', is divided into seven clauses, srlrich Article 43- prescrihe a stamp duty ranging from 50 P- to Rs. 10 and over. The material diﬁerenoe between I"'"°d"°'°'3'- some of the categories of instruments provided for in these clauses, and the actual range of duty,--for example, between clauses la) and (c)-~--is so small (50 P.) that it would be con-' venient if some of these clauses could be combined. A suggestion for such re-grouping will be made at the proper place. I 45.2. To some extent, the diﬁerences in stamp duty as prescribed in the various clauses of the article are based on the difference? between general powers of attorney. and special powers G-enlﬂraland special of attorney. In Halsbury, the following explanation of these powers is given under Dowcrs.

"agents". A special agent is one who has authority to act for some special 'occasion or- purpose which is not within the ordinary course of his business or profession. A general agent is one who has authority arising out of, and in the ordinary course of, his business or profession to do some set or acts on behalf of his principal in relation thereto or one who is authorised to act on behalf of the principal generally in transactions of a particular kind or incidental to a particular business. In Bouvier's Law Dictionary', it is stated that "a general power authorises an agent to act gen- erally on behalf of the principal, a special power is one limited to a particular_act."

45.3. Some of the various clauses, if examined minutely, reveal a few common features. Clauses la) and The common feature in clauses [a] and (c) is that of "single transaction". Clause [at] relates §'3;,';E,iP3k'""' to an authority for procuring the registration of a document or documents in relation to a ' ' single transaction or admitting the execution of one or more of such documents {for registra- tion)_. Clause (c) relates to acting "in a single transaction" otherwise than und_er clause

(a). _ The expression "a single transaction", according to the Madras High Court', applies "either to a single act or to acts so related to each other as to form one juridical transaction, such as, all-the acts necessary to perfect a mortgage or a sale of a particular property," This inter- piptation would be in accordance with the distinction between a special agent and a general lﬁeﬁi. as set forth in the authorities already referred to'.

In View of the connnon features mentioned above, itlmay be convenient to merge clause

(a) and clause (c).

45.4. Clause (b) of the article charges duty on Instruments which are required for pro- C1ause(b). oeedings under the Presidency Small Cause Courts Act, 1832 Under that Act, such Courts are set up in Calcutta, Madras and Bombay.'

-Under section 2t_'2l) of the Stamp Act, such powers of attorney as are chargeable with court-fees, such as, Valralatnainas under the Court Fees Act, 18-70, are exempted from stamp duty. But the Court Fees Act" did not apply to Presidency Small Cause Courts, and there- fore such instruments relating to these particular courts are chargeable under the Stamp Act.'

1. For deﬁnition, see section 2(21).

2. See I/'enicutaramuna Iyer V. Narsinga Rao, (1915) l.L.R. 33 Med. 134. I36.

3. Halsbury, 3rd E:cln.. Vol.1, pages 150-151. _ , -

Mm 'Bc:ltp'Sier's Law Dictionary, Vol. 2, page 714, quoted in Vertkafarmlam Iycr v. Narsiaga Ran. (l9l5),I.L.R. 38

5. Venkararantana Iyer v. Narasinga Rec. (1915) 'l.L.R. 38 Mad. 134. 13?.

6. Halsbury, 3rd Ed:-1., Vol.1, pages 150-151.

7. Section 5, Presidency Small Cause Courts Act, 1882.

3. Section 3(3). Court Fees Act.

9. Hornzusiji K. Bﬁabira V. Nana Apps, A.I.R. 1934 Born. 299.

259 260

But, in the State of Maharashtra, under the Bombay Court Fees Act, 1959, Court fee has been imposed on these instruments; and hence the instruments would not be chargeable under the Stamp Act.

Since clause (b) appears to he of a special character, and the individual States can (by State Acts) levy duty on such instruments covered by the Presidency Small Cause Courts Act.' there 15 no need to have this clause separately in the Central Stamp Act. Clause (13) should, therefore, be omitted, leaving the States concerned to deal with the matter in the Court Fees Act in the manner they think proper. This will simplify article 48.

45.5. Clause (cl) speaks of an authority given to not more than live persons "to act Clause id} and jointly or severally in more than one transaction or generally". Clause tje) relates to a similar °'""'°(°i' authority to more than five but not more than ten persons. Both the clauses relate to general powers of attorney. Taking advantage of this common feature, one could conveniently com-

" blue the two clauses.

It may he noted that these clauses talc: no account of the number of persons executing a power of attorney.' ' .-' -' '5.

The Explanation to clause (e) provides that more than one person belonging to a ﬁrm will be deemed to he one person.

45.6. Clause (1?) deals with a power of attorney given for consideration, authorising the Attorney to sell immovable property. We shall later make a recommendations concerning the dutyto be charged on the sale deed which may be executed in pursuance of the power of attorney. -

45.7. Clause {S} deals with {powers-of attorney in other cases. This clause has to be read with clause to). When so read, it means that if there are more than ten persons authorised mm (3). to act jointly or severally in more than one transaction or generally, then the stamp duty pay- able is according to the number of persons. (The duty is, at present, one rupee for each person authorised] I This clause needs no change, in substance.

45.8. On the basis of the above discussion, we recommend the following changes in the grouping of the clauses of article 48.

fa; (1) Clauses {al and (c) should be combined into one clause, which wdl apply when 95 °'3"9°''- one or more persons are authorised to act in a single transaction,---whether the transaction consists of a single act or of acts so related to each other so as to form one jural transaction.' Clause lb) should be omitted".

(ii) Clauses id] and (e), which relate to a general power of attorney, should be combined.' The diﬁereuce in duty imposed under each of the two clauses at present depends on the number of persons appointed, i.e., Rs. 5 for ﬁve persons and Rs. 10 for ten persons. The duty should be revised, so that one duty is imposed for a general power of attorney given to not more than, say, ten per- sons, (the rate being one rupee per person).

(iii) Clauses (fl and (g) may be retained.' Clause (fl may he modiﬁed, on thc lincﬁ indicated helow'. Clause {3} needs no modiﬁcation of substance."

. Constitution, Tth Schedule, State List, item 63.

. Jog-I Ram v. Mobammed Raﬁ, A.I.R. 1925 Dudh 172.

Para -45.12, infra.

Para 45.3. supra.

Para 45.4, supra.

Para 45.5, supra.

. Para 45.6, supra.

. Para 45.9 to 45.12, infra.

9. Para 45.7. -fttprn.

mvee+w~--

261

45.9. A few points of detail relating to individual clauses may now be discussed.

Points of detail-

(i) Meaning "cons1derat|on"

Clause (f) contemplates a power of attorney which is given for the purpose of sale of in clause (f).

any immovable property and for consideration. The duty on a conveyance 'under Article 23' for the amount of the consideration charged is the same. The Allahabad High Court has held' : " .... ..a consideration in relation to power of attorney can only mean a valuable con- sideration and not good consideration". In that case, the executants of the power of attorney were indebted to a certain Bank on account of two equitable mortgages. The Bank ﬁled suits for the recovery of the amo-unt by sale of the property mortgaged. After the ﬁling of the suit, there was a compromise between the parties, and a power of attorney was executed in favour of the Bank in compliance therewith Under the instrument, the Bank was authorised to sell the property covered by the mortgage decrees, for the purposes of appropriation of the sale proceeds towards the decretal amount. The balance (after such appropriation) was to be paid to the execurants. The question before the court was whether this instrument was a power of attorney given for consideration. It was held that the compromise was for a good consideration so far as the contract of agency or attorney was concerned. But it was not a valuable consideration. It was held that "consideration" in relation to clause (f) of Article 43, means a valuable consideration, and not a good consideration as it may mean in relation to any other contract. In these circumstances, it was held that the power given was for the appointment of an agent, and not for any valuable consideration. Therefore, the instrument was not chargeable under Article 43(f). It was also held that there was no transfer of any property in consideration of any debt under section 24, and, therefore, there was no stamp duty chargeable on the amount of the consideration on account of the two equitable mortgages.

45.10. It would appear, however, that there was valuable consideration in this case, consti- tutod by the compromise of litigation which raised triable issues.

In any case, the instrument » would fall under Article 48, clause (c), as the Bank was authorised to sell the immovable _ property by public auction for payment of the amount due, to grant a receipt for the purchase money paid by the auction purchase, to appropriate from the sale proceedings so received a sum representing the total dccretal amount and to pay the balance to the executants. All this

-could be considered as belonging to one jural transaction, namely, the appropriation of sale proceeds towards the decretal amount; and on this basis, Re. 1 ought to have been charged as stamp duty. e 45.11. 'With reference to article 486'), the following explanation was given in the State- ment of Objects and Reasons'-' :---

"It has been found that sales and mortgages were sometimes effected through the medium of power of attorney and thus the stamp duty, payable as a conveyance was evaded. A pro- vision is, therefore, introduced in this article to charge such powers as a conveyance."

The Select Committee limited the clause to cases of powers authorising sales of immovable"

property'.

Sir James Westland, in his speech presenting the report of the Select Committee to be _ Legishtive Council in 1398, explained the object of his clause as follows :--

can .

. . . . .'I'he reason of this was that it was found as a fact that what amounted to a conveyance was sometimes eﬁected by means of a power of attorney. A, in selling B property, instead of conveying itito him by a regular deed of con- veyance, simply transferred it to him without any conveyance at all, but gave. him a power of attorney authorising him to sell the property. This. so far as B is concerned, enabled him to dispose of the property to the same extent as if he were the owner of it. We, therefore, provided that if a power-of-attorney was

1. Cﬁfeffnspectar of.S'1'amp.s v. Murftdlmr, A.I.R.l 970 All. 599, 603. Para 9.

2. Statement of Objects and Reasons of the Billtfl 8970}. Article 48.

3. Report of the Select Committee (1898), Article 48.

24- M of I..awf'l7--34 of Recommendation I! to article 4Btf).

Flltlhﬁf Con.

veyanee.

Iii} Prairies.

(iii) R9-vocation.

Revlrnft.

262

given for a consideration and gave authority for the sale of the property affected, the duty should be levied in the same way as upon a conveyance. In the objections that have been made to this provision, apparently some persons have thought that we levy this duty upon a power-of--attorney given for affecting a sale, and they fail to observe that it was levied purely upon a power-of-attorney 'given for a consideration."

45.12. We are of the view that the conveyance subsequently executed in pursuance of the power of attorney referred to in clause (f) should not be chargeable, except for the excess consideration that is received, We recommend an amendment of the article accordingly.

4S.l2A. Accepting a suggestion made by a Law Society1_ we recommend that there should be no duty on a further conveyance after the levy of duty under article 43(f) except where extra consideration is received by the person as the seller.

It is our intention that the proposed exemption should cover all sales in pursuance of the power, as also a sale between the parties to the power, i.e.,

(i) sale deed between the principal and the agent, and also

(ii) sale deed between the agent and third persons.

In our opinion, the principle ought to be that the transfer having been subjected once to tax, should not be taxed again, except insofar as further monetary gain accrues after the execution of the power of attorney. We regard the power of attorney as, in substance, though not in form, a transfer of the property. That in fact, is the rationale underlying the ad valorem duty.

45.13. The next point concerns proxies. In a Madras case," it was held that a proxy which empowered a person to vote at a particular meeting of a company "or at any other meeting"

fell within Article 4B(g). Assuming that a proxy is a general power of attorney, the Court considered the question whether clauses (d), (e) and (g1 of Article 48 would apply. First, it was said that clause (g) had to be read with clause (e). Then, clause (cl) applies when the authority is given to not more than ﬁve persons, and relates to "more than one transaction or generally". Following an unreported judgment,' the Court held a proxy which empowered a person to vote at a particular meeting and then at any other meeting during that year would fall under clause (g) of Article 48. It was stated that if such a construction were not adopted, "a power of attorney 'in favour of one person, in respect of more than one transaction, would escape stamp duty altogether."

It is suggested that it is possible to take the view that the instrument would fall under clause (d), and not under clause (g). The opposite view is based, perhaps, on the words "jointly and severally" in clause rd), which are not quite appropriate for one person. This misunderstanding could be removed by a slight verbal change in clause (:1).

45.14. There seems to be no speciﬁc entry in the Schedule as to the revocation of is power of attorney. The revocation would, if attested, apparently, fall under the entry relating to Instrument of cancellation.' 45.15. In order to simplify and amend the provisions of article 43 on the lines discussed above, we recommend the following re-draft of the article :

"43 . Power of attorney [as deﬁned by section 2(2l}, not being a proxy (No.S2)]-- . =-(5,) when authorising one person or more to act in a single transaction, including' a power of attorney -

executed 101' the sole purpose of procuring the registration of one or more dOGLl!I13'Bntl-' in relation to a single transaction or for admitting execution of one or more such documents . . . .

1, Law Society. Calcutta.

2, Narayan v. Kamaieswar Mills Ltd, I.L.R. (1952) Med. 218. 256.

3. Refen-ed case No. 15 of 1905. cited intho Mu'-ran Stamp Manual.

4. Article 17.

5. The speciﬁc mention of power of 'attorney in relation to registration etc. contained in the pllﬁlt that my be desirable, inoo more than one document is involved. , 263

(b) whenlauthorising one person to act in more thou one transaction o1_'g¢r¢e- One rupec for each person authori-

raliy, or not more than ten persons to act yomtly and severally In more sed but not less than five rupees.

than one transaction or generally;

(:2) when given for consideration and authorising the attorney to sell any The same duty as a conveyance 'ﬂ'1|?l'10Vﬁbl€ PFUDEFIY; (No.23) for the amount of the consideration.

One rupee for each person autho-

(d) in any other case,

- - . - rised.

Explanation l.--§--For the purpose of this Article, more persons than one when belonging to the same ﬁrm shall be deemed to be one person.

Explanation 2.----'Ihe term 'registration' includes every operation incidental to registration under the Indian Registration Act, 1908.

Explanation 3.---Where, under clause (42), duty has been paid on :1 power of amamgy relating to any giroprarry, no out); shall be chargeable on o conveyartce of that property executed in'pur.s'uan.ce of the power of attorney or between the granter of the power and the grantees, except in so for as the consideration for the conveyance exceeds the consideration for the power of attorney."

45.16. It may be convenient to summarise the salient points affecting the rate of duty with reference to the re--draIt; recommended by us :

(i) Under the re--draft, there will be an increase of duty from 50 NP to one rupee, in cases covered by article 48(a), i.e., power of attorney executed for the sole purpose of procuring registration, etc. Though arithmetically the duty will be doubted, the burden will not, it is hoped, he resented by the class of persons who have to bear it.

{ii} In the case of a general power of attorney in favour of six, seven, eight or nine persons, the stamp duty, at present, is, under article 48(e], ten rupees, while, under the proposed re- tlratt, it will be six, seven, eight and nine rupees respectively» But such cases will be rare, and the reduction in duty is not likely to aﬁect the revenue substantially.

(iii) A special provision will govern conveyances executed in pursuance of, or alter the power to sell, referred to in article 43(f).

45.17. This takes us to article 49. Under article 49, the stamp duty on a promissory note is regulated by two sets of provisions. If the note is payable on demand, then, under sub- article (3,) ﬁxed rates {as given in the sub--a.rticle] apply, depending on amount of value {entered in the promissory note). This part of the article presents no diﬁiculty. otherwise than on demand, the duty is the same as the able otherwise than ondemaud. Now, a very complicated scale'. If the duty than it would indirectly

-'I-5.18. But, if the note is payable duty for a Bill of Exchange for the same amount pay the duty for such Bills is to be calculated according to on Bill of Exchange can be simpliﬁed----a.s we have recommended', fcsult in a simpliﬁcation of the application of article 49 also. It: may be noted that in England, now, the duty on an inland bill of exchange or a promis- sory note has been simpliﬁed', as follows :---

"BILL OF EXCHANGE OR PROMISSORY NOTE of any kind whatsover (except a bank note)---drawn, or expressed to be payable, or actually paid of endorsed, or in any manner negotiated in the United Kingdom."

The duty is two pence.

1. This case is even now regarded as fallinﬂ within article 4381); hilt thﬁ 'Words ".ioi.utl)' and 95V¢|'l"Y'' 33 3°' p|.'i|t:o. Hence a speciﬁc provision.

1. Article 13(b).

3. See discussion relating to article 13, supra.

4. Section 33, Finance Act, 1961 (Eng).

.....__._._..

[E1ti§tll'It'§}I'I.l.|I Iﬁxistingﬂcllpuso [Existing clsuee|'_;)] Difference in duty under existing section and revised section.

Article 49----Pro-

'Notes.

Reoommmrhtion as to article 13.

Recommendation to make the article self-contai-

ned .

Article 50.

2.64 45.19. Even if our recommendation to simplify the duty on a bill of exchange is not accepted, we would emphasise the fact that the present ﬁgures of duty as mentioned in the Act, in Article 4903), do not reﬂect the real position. This is for the reason that there have been important reductions. , 45.20. In our view, it is desirable that article 49 should, in the interests of simplicity, be revised and made self-contained. We, therefore, recommend that the substance of the relevant notiﬁcations should, in a suitable form, be incorporated in the article. This recommendation is in addition to our recommendation for simplifying article 13.

45.21; Article 50 levies duty on a protest of a bill or note. This is a notarial actl, but has been excluded from the general article'--articIe 42--dealing with notarial acts. The duty charged under article 42 (notarial act) and article 50 [protest of hill or note) is, however.

the same, vi:e:., Re. 1.

Under thciblegotiahle Instruments Act', where a promissory note or bill of exchange has been dishonoured by non-acceptance of non-payment, the holder may, within a reasonable time, cause such dishonour to he noted and certiﬁed by a notary public. Such certificate is called a protest.

Such noting and protest is not made compulsory but is left to the option of the holder, except in the case of foreign bills'.

No diﬂiculty appears to have been caused by article 50, which needs no change.

1.-'Section S(d), Notaries Act, 1952.

2. The articles in the Stamp Acts of 1879 and 1860, corresponding to the present article 42, included protests falling under persent article 50.

3. Section 100, Negotiable Instruments Act, 1881.

4. Section 104, Negotiable Instruments Act.

CHAPTER 46 ARTICLES 51 TO 57 46.1. Article 51 levies a duty of one rupee on protest by the master or' a ship, attested or Article 51-"

certiﬁed by a notary public or other person lawfully acting as such. We have, while discussing an earlier article', dealt with the circumstances in which a protest can be ﬁled. We have no further comments on this article.

46.2. Article 52 levies a duty of 15 naye paisc on a proxy in certain cases. The duty Article 52- Proxy--Introduc-

is chargeable on a proxy empowering any person to vote at any one election of the members tom of 3 district Or local board or of El body of municipal commissioners, or at any one meeting of,--- (B) members of an incorporated company or other body corporate whose stock or funds is or are divided into shares and transferable, (b) a local authority, or (c} proprietors, members or contributors to the funds of any institution.

Meaning of 46.3. In legal parlance, the expression "proxy" is used in two senses. It may (1) denote -~pmx,--+_ the person appointed by the share--holder (or other person) to appear at a meeting and cast the share-holder's vote, or (ii) it may denote the form (usually a printed copy), in which such an appointment is made".

The word "proxy" is a contracted form of the word 'procuracy', procurator'. A proxy is deﬁned by Lord Hanworth M. R. in Cousins V. International Brick Co.*, as--

"a person representative of the shareholder who may be described as his agent to carry out a course which the shareholder himself has decided upon."

This is the first meaning of the expression "prcxy".

I, In article 52, however, the word "proxy" is used in the second sense, that is, the instru- ment by which a person 15 appointed so to act.

In the Companies Act", the Form of Proxy is thus prescribed- [See Article 62 of the Table A and also section 176(6)}.

"General Form .. ................ ..Name of Company, I/We ............................. . ..of...... . . . . . . . . -. in the district of. .................................. ..being a memberjmembers of the above-named Company hereby appoint ........................... ._ ..... . .of ................ .. . I in the district of .............................. ..or failing hnn, ..................... ..of . . . . . . . -

3 ....................... ..as my/our proxy to vote for me/us on my,/our behalf at the annual general meetingfgeneral meeting (not being an annual general meeting) of the Company to on the . . . . . . . , . . . . . . ..day of . . . . . . . . . . . . . . . . . . .. and at any adjournment thereof.

46.4. It is well-known that proxy voting has become the dominant mode of shareholders' Impormm of .1ecision--malring in public companies. There are a number of reasons for this". Share-holders Proxies. in such corporations are often geographically dispersed. so that 3 Ei'v"~'ﬂ Sh31'3-l1°1d¢1' 1113? 110'!

1. Sec discussion as to article 44-Note of protest.

2. Bisenberg. "Access to Proxy Machinery (May, 1970), 83 Harv. Law Review 1489. 1490-

3. Bouvier, Law Dictionary, (1914), page 2'l62.

4. Causrirsr V. Irifemational Brick Co.. (1931) 2 Ch. 90.

5. Companies Act, 1956, Schedule IX.

.5_ Bjs|:nbc1'g_ "Access to proxy Machinery," (May 1970) 83 Harv. L.R. 1489,1490.

265 266

be living near the place where the meeting is held. Again, share-holders often have some principal business other than investing. Physical attendance at a share-holders' meeting is, for many reason, uneconomic use of time when they can vote by proxy.

Four kinds of 46.5. Coming, now, to the text of the article, we may note that it really deals with four P"""°5' lcinds of proxies. in the lirst place, it charges duty on a proxy which empowers any person to vote at any one election of the members of a district local board or a body of municipal commissioners. Secondly, it charges duty on a proxy empowering any person .to vote at any one meeting of members of an incorporated company or other body corporate whose stock or funds is or are divided into shares and are transferrable.

Tltirdly, it charges duty on a proxy empowering any person to vote at any one meeting of:

a local authority. Finally, it charges duty on a proxy empowering any person to vote at any one meeting of proprietors, members or contributors to the funds of any institution.

Recommendation 46.6 So far as the ﬁrst portion is concerned, the question may be raised why it should :'fe°':L°"'L§;':,?;;: mention only certain local authorities and leave out others. The reason for this appears to o_f_alI local autho-- be primarily historical. The Stamp Act of 1879 did not contain the words "any one election "ms" of the members of a district or local board or of a body of municipal Commissioners". By a notiﬁcation of the Government, a proxy executed by a female empowering any person to vote at any one election of the members of a local board held under the provisions oi the Bombay Local Boards Act, was made chargeable with a one-anna stamp duty-----a. reduced duty compared with the duty on a power of attorney. The present Act has gone a step forward, and had made the article applicable to proxies executed even by males, in respect of the election of the authorities mentioned therein. In doing so, however, the question of extending this part of the article to the election of every local authority does not appear to have been considered. Such proxies might, perhaps, be taken as chargeable under the article relating to power-of-attorney'. It should be noted, however, that the duty under that article is much higher than the duty on,a proxy, and moreover, that article is expressed in somewhat complicated terms". We are of the view that proxies in respect of elections of all local authorities should be brought within the scope of article 52. No doubt, a person to whom a member gives a proxy is that member's agent for the purpose of votmgt. However, since the legislature has, in this article, already dealt with a proxy in respect of elections of local bodies speciﬁcally, there is no reason why all proxies in respect of local bodies should not be brought within its scope. We, therefore, recommend that this part of article 52 should be extended to a proxy empowering any person to vote at any one election of the members of a local authority. It may be noted, that that portion of the article which refers to a proxy in respect of meetings, speciﬁcally mentions "a local authority", -words which were substituted by the present Act in place of the words "municipal commissioners"

which occurred in the Act of 1879.

Recunmnmaation 46.7. The article does not mention proxies to be used at a meeting of creditors, a.nd--such '° ""°°'"h°""i°1"' instruments would apparently fall under article 48--power of attorney. However, it should hlieetinﬁgcredif be stated that by a notiﬁcation' issued by the Government of India, the duty on such poetics ""5" has been reduced to the duty chargeable under article 52. In view of this, and in order to make the article self-contained, we recommend that such proxies should also be brougtt within article 52.

Proxies which do not fall under the article, as amended, will continue to be governed the article applicable to a power of attorney.

1. Emerson and Latcham. Shareholders'. Democracy (1954) pages 14-15, cited by Bisenberg, "Aceﬁs in Proxy Machinery". (May, 1970) 83 Harv. Law Review, 1439, 1490.

2. Article 43.

3. See discussion as to article 43, sapw-

4. In re Tara Iron and Steel C'a.-macros A.I.R. 1923 80, 86 (Crump JJ.

5. Government of India, Notiﬁcation No. 6. dated 14th August, 1937.

6. Cf. Na-rain Cftetrair v. Rarnlarwar Mills, A.I.R. 1952 Mad. 515, 528.

26'.-' 46.3. It may he noted that in England, no duty is chargeable on an instrument of proxy for use at one meeting at which votes may be given by proxy, whether the number of persons named in the instrument he one motel. The Finance Act, 1949', so provided, by amending the Schedule to the Stamp Act, 1891, entry relating to letter or power of attorney, by inserting exemption (5). The Exemption is in these terms : ' "{5} Letter of power of attorney for the sole purpose of appointing or authorising a proxy to vote at any one meeting at which votes may be given by proxy, whether the number of persons named in such instrument be one or more."

We are not, of course, sugesting adoption of this English provision.

46.9. We now come to :1 very important article, levying duty on receipts. Article 53 levies

8. duty of 20 nave paise on receipt as deﬁned by section 2(23}, for any money or other property, the amount or value of which exceeds 20 rupees. There are 8 exemptions to the article, to be found in clauses [' a) to (11) of the Exemption.

46.10. Before we proceed to discuss matters of detail, we may record our view that the amount should be increased from Rs. 20 to Rs. 100. We may mention that some States have, in their replies to our Questionnaire'-', agreed to the proposed increase to Rs. 100. In this particular matter, we would have been glad to have comments from the Ministry of Finance, which We have not received'. However, we may add that we are malcing this recommendation after a careful consideration of all aspects and we think that there is a strong justification for it, having regard to the purchasing power of the rupee at the present day in contrast with what it was in 1899. i It appears to us that in the present Act, the amount of Rs. 20 must have been ﬁxed on some {logical basis. That basis, as we conceive it, seems to he that for amounts less than Rs. 20, the aspect of revenue is over-ridden by the aspect of convenience and the aspect of P0VB1"5Y-

Although we have no material for calculating the present amount corresponding to what was Rs. 20 in 1899, Rs. 100 would seem to be proper on a rough calculation. In any case, Rs. 20 appears at the present dag; to he too low an amount in a provision for taxing receipts.

46.11. So much as regards the main article. We new deal with the exemptions. Exemp- tion (3) to the article relates to a receipt endorsed on, or contained in, (1) any instrument duly stamped, or (ii) any instrument, exempt under the proviso to section 3 (instruments executed by the Government etc.), or (iii) any cheque or bill of exchange payable on demand, acknow- ledging the receipt of the consideration money therein expressed, or the receipt of any prin- cipal money, interest or annuity or other periodical payment thereby secured. The principle on which this exemption is ha:-'ed is that, (a) the receipt is incidental to the main transaction, and the instrument is not executed with the primary object of acknowledging the receipt of money, and (b) the primary instrument is itself duly stamped or exempt from duty. The exemption does not, however, mention instruments exempt from stamp duty by virtue of the exemptions contained below other crrricles in the Schedule to the Act, or insrrurrients exempt by virtue of a notiﬁcation under section 9, or by virtue of any other law. We are of the opinion that a receipt endorsed or contained in any such instrument, it it aclrnowledges the receipt at the consideration money there expressed, or the receipt of any principal money, interest or annuity, or other periodical payment thereby secured, should also be exempt from the duty under article 53.

1. Finance Act, 1949.. St]: Schedule, Part 1, item 18.

2. Q. 106.

3. The Questionnaire was sent to the Ministry of Finance.

Yositiosr in England.

Article Introductory.

53- Increase to 115.100 recommen-

dad.

Article 53- Re:aipt--Exemp-

tion (a).

Article 53 Exemption (a).

Exemption (I3).

Exemption (c).

Exemptions (LI), ' (e) and (f}--Rc-

co1'urn,endation.

Exemption (g).

Exemption (11).

Recommendation to revise the 3ﬂ1DUDtiﬂAI[IC1%

53. Article 54.

268

Most replies' to our Questionnaire have favoured such amendment, which we recommend.

46.12. Exemption" (a) to Article 53 should, therefore, be revised as above. Loss of revenue--a point made in one rcp1y---cannot be a valid argument, when the main instrument is itself exempt. The principle on which this exemption is based is that, (a) the receipt is incidental to the main transaction, and the instrument is not executed with the primary object of aclmowleding the receipt of money, and (b) the primary instrument is itself duly stamped of exempt from duty.

46.13. Exemption (b) exempts a receipt for ""any payment of money without considera- tion". There is no such exemption in English law. In general, the exemption is meant for voluntary payments, or payments made in consideration of natural love or affection, of more gifts. Internal payments within an oﬂice, or payments by book transfer, are also treated as falling within this exemption'--'5. It appears however, that a payment of house-tax to the munici- pality does not fall" within the exemption; it is not treated as a payment "without consideration". This view receives support from the fact that exemption (g) was considered necessary to provide for one speciﬁc case of receipt of tax. The exemption needs no change.

46.14. Exemption (cl relates to a receipt for payment of rent by a cultivator on account of rem assessed to Government revenue, or in the States of Andhra Pradesh, Bombay and Madras, as they existed before lst November, 1956, of Inam lands. It is obvious that the exemption is not conﬁned to receipts by the Government-----these will be exempt even under the proviso to section 3---but also covers receipts given to raiyats by the holders of revenue paying land. The exemption, however, ceases to operate where a decree for such rent is passed and payment is made out of court, under such decree? The exemption needs no change.

46.15. Exemptions (cl), ((3) and (f) relate to receipts given by armed forces in respect of certain payments. In this connection, our discussion relating to the definition of "soldiers" ntay be seen. In these exemptions, "soldier" should be substituted. We may state that such an amendment has been generally favoured by the replies to our Questionnaire.

46.16. Exemption {g} relates to a receipt given by a headman or iumberdar for land revenue or taxes collected by him. This needs no comment.

46.17. Exemption (11) exempts receipts given for money or securities for money deposited 4 in the hands of any banker, to be accounted for. The exemption needs no change.

46.13 'lhere are two provisos to the exemption, which are not material for our purpose. The principle of this exemption seems to be that the money received is to be accounted for; and, unlike other receipts the receipt is not issued for something to be retained permanently by the person receiving. In other words, it does not discharge any liability, but merely evidences a transaction of deposit. The factum of deposit itself may create a liability to return the money or securities. But the deposit receipt is merely a receipt, and nothing more.

46.19. As regards the figure Rs. 20, we repeat our recommendation that it should be increased to Rs. 100, having regard to the fall in the purchasing power of the rupee.

46.20. Article 54 levies duty on a reconveyance of mortgage . Question 104. _ _ _ . Point raised by S. No. 11 (Delhi Administration).

. General Council ofthe Bar v. Inland Revenue Camnzisafoners, (19073 1 K-11 452- 473- . (l9l0) I.L.R. 37 Cal. 534, 540.

. In re Secretary to the Commissioner ofsalt, Madras, (1911) 9 Indian Cases 342 {F .13.), Madras. . In re Karachi Municipality, (1388) I.L.R. 12 Bom. 103, 104.

Emp. v. Doorzgar Singit. (1909) I-L-Fm 31 A]-L 36, 37- . See recommendation as to section Z----"soldieI"'-

Q. 105.

t-ﬂan:-IchLn.ht,,..t§g...

269

If the consideration for which the property was mortgaged does not exceed Rs. 1,000 the duty is the same as on a Conveyance (No. 23) for the amount of such consideration as set forth in the Reconveyance.

ln any other case, it is ten rupees.

It needs no change.

46.21. Article 55 levies duty on a release, that is to say, any instrument (not being such a release as is provided for by section 23A) whereby a person renounces a claim upon another person or against any speciﬁed property. The duty is as follows :--

(al if the amount or value ofthe claim does not exceed The same duty as a Bond (No. 15) for such amount or Rs. 1,000; value as set forth in the Release.

(b) in any other case Fl-me rupees.

It needs no change.

46.22. Article 56 levies duty on respondentia bond, that is to say, any instrument securing a loan on the cargo laden or to be laden on board a ship and making repayment contingent on the arrival of the cargo at lhe port o-f destination.

In maritime law, this represents a loan of money, on maritime interest, on goods laden on board of a ship, upon the condition that if the goods be wholly lost in the course of the voyage, by any of the perils enumcrated in the contract, the lender shall lose his money; if not, that the borrower shall pay him the sum borrowed, with the interest agreed upon'.

The loan is not recoverable if the ship is lost.

The contract is called respondentia, because the money is lent mainly, or most frequently, on the personal responsibility of the borrower. It differs principally' from bottomry, which is a loan on the ship, while respondential is a loan upon the goods'.

The Article needs no change.

46.23. Article 57 charges duty on a security bond or mortgage deed "executed by way of security for the due execution of an oﬂiee, or to account for money or other property received by virtue thereof or executed by a surety to secure the due performance of a contract."

'When the amount secured does not exceed Rs. 1,000, the duty is the same as on a Bond (No. 15} for the amount secured. In any other case, it is ﬁve rupees.

There are certain exemptions, which exempt bond or other instrument, when executed--

ta} by a heatlman nominated under rules framed in accordance with the Bengal Irrigation Act, 1.876, section 99, for the due performance of their duties under that Act ;

(b) by any person for the purpose of guaranteeing that the local income derived from private subscriptions to a charitable dispensary or hospital or any other object of public utility shall not be less than a speciﬁed sum per mensem;

(d) executed by persons taking advances under the Land Improvement Loans_ Act, 1883, or the Agriculturists' Loans Act, 1884, or by their sureties, as security for thc repayment of such advances; and

(e) executed by ofﬁcers of the Government or their sureties to secure the due execution"

of an oﬁice or the due accounting for money or other property received by virtue thereof.

1. Bmnrier, Law Dictlonaf]-' (1914). page 2.2.

2. Canard v.1'.-tr. Co., 1 Pet. (U.S.) 386, 7 L. Ed. 189.

24 M of Laow,1'77--35 Article 55.

Analogous Article 56.

Introductory.

270

46.24. The article, thus, levies duty on two types of document%(a) security bonds, or

(b) mortgage deeds, provided, in their case, that' they are executed by way of security for the speciﬁed purpose. There is another artieIe--article 40 dealing with mortgage deeds', but that article expressly excludes from its scope a security bond governed by article 5?. Then, there is another article9----ai'ticle 15--which levies duty on a bond; that article also expressly axcludes, from its scope, a bond which is otherwise provided for by the Stamp Act or-by the Court Fees Act. It may be noted that the exclusion in article 15 in respect of a bond provided for in the Court Fees Act' was added4 in the Stamp Act of 1879 by a later amendment".

gzig 46.25. It may be pointed out that a similar exclusion--i.e.. in respect of documents provided underéourtpge for b the Court Fees Actﬂhas not been made in article 40 or in article 57. 3' and Stamp Act.

This creates certain problems. A document which falls under article 40 or article 57 would, in certain cases, be chargeable both under the Stamp Act and under the Court Fees Act. This leads to double taxation. -

Second [question 46.26. Secondly, a problem is created by the coexistence, in the Stamp Act, of several fgsetvlfgal agttﬂneﬁ articles, conceivably applicable to security bonds and mortgage deeds". These articles do contain Act applicable to words excluding each other; but what falls within one or the other remains undeﬁned. In our mnty moﬁcggz view, it is desirable that the scope of each article should be indicated as precisely as possible. deeds.

security bonds 46.27. It should, in this connection, be pointed out that the want of a precise deﬁnition of executed under the scope of the relevant articles raises problems of great practical importance in relation to °'d°"' °f C°""' security bonds executed under an order of the Court. Hundreds of such bonds are executed daily on behalf of litigai1ts,----particularIy, security bonds executed by a surety when a stay of execution of a decree is granted. The crucial question that has usually arisen is-

(i) whether such bonds are executed "to secure the due performance of a contract", so as to fall within article 57, or

(ii) whether they within article 15 (unsecured bonds) or article 4!} (mortgage deeds} on the view that they do not fall within article 57.

46.28. This controversy has arisen because. while one view taken on the subject is that an undertaking in compliance with the orders of a court imposes a contractual obligation, some courts have taken a contrary view. It is not necessary to refer here to all the cases. Some of them are conveniently reviewed in the Madras case of In re Kuppuswamy?

Meaning of 46.29. There appears to be some uncertainty on the question whether the word "contract"

''C'.''''''*''-''*'' in in article 57 is appropriate for being applied to security bonds executed in the course of judicial Article 57. . . . . . .

proceedings in compliance with a statutory requirement. Generally speaking, there cannot be a contract between the court and a party to the suit, and this is the view taken by most High Courts with reference to this articles-11. On this view, a bond given by a surety under Order 41, rule 5 or Order 41, rule 6 of the Code of Civil Procedure, 1908, does not fall under article 57. It is not a bond for the "due performance of a contract". a ' . These decisions would regard such bonds as falling under article 40.

. Article 443.

. Article 15.

. Court Fees Act, Second Schedule, Article 6.

. Amendment in the Stamp Act of 1379 (Article 13), by section 1501} OF A3'! 5 01.1339- . For previous law, see Kulwant V. M"dF1t1v:'r' Par.-rad, (I383) I.L.R. 11 All. 15, 17 . In re. Kuppuswcmy, A.I.R. 1949 Mad. 56?, 568 (reviews case law).

. In re. Kuppuswamy. A.I.R. 1949 Mad. 56?, 568 (reviews case 131*')-

. Reﬁrence, A.I.R. 1931 All. 189 (rm. _ , . Atmbacker v. Cfitrinarfxambt. A.I.R. 1933 Mad. 252; (1938) 1 Mad. Law Journal 159- . Datfve Balafi V. Kanliailaf, AIR. 1947 Nag. 25. ' _ ' ' -

. Aksimy Zamindari V. Ram Nat}: Barman, I.L.R. (1937'] 1 Cal. 375, 330.

>-I-i---

'-I-C)'-Dole--.:|a\l..rIi_g,_u-,N,,___ 2?] The view taken in some case, however, is that a security bond given under Order 41, rule a 5 or 6 of the Code of Civil Procedure, 1903, falls under article 5?. This view was taken by the Ouch Chief Court', the Lahore High Courtﬂ, and by the Sim] Chief Court'.

46.30. Presumably to settle the position on the above subject', there has been in the U.P. an amendment of article 5?", adding the words "or the due discharge of a liability" after the words "the due performance of a contract". Such an amendment, however, seems to go beyond what' is needed, and might even cover bonds not executed in the course of civil and criminal proceedings. A similar amendment was made in Bengal in 1939.

46.31. It appears to us that the position could be simpliﬁed if more attention is devoted to basic principles. Two basic principles should in this context be borne in mind. Firsf, as far as possible," the articles should be mutually cxclu'sive----(this is a question of drafting),--and secondly, a document which bears court fees should not also be liable to stamp duty--(this is a matter of policy]. The second principle has been accepted when the legislature amended the 1879 Act". There is no reason why the same principle should not be followed iucharging duty under other articles which are possibly applicable. We are, moreover, of the view that bonds executed in pursuance of an order of a court cannot be regarded as creating a contractual obligation. They should be dealt with speciﬁcally, if considered necessary.

46.32. On the above principles, we recommend the following amendments in the various articles :--

{i)In article 40 (mortgage-deed ), the words "not being . . SECURITY BOND"

should be ampliﬁed by revising them as "not being. . . .sucl1 SECURITY BOND OR MORTGAGE DEED as is referred to in article 57."

' (ii) In article 57', the words "or in pursuance of an order of a court or public officer"

should he added after the words "due performance of a contract".

(iii) In aricle 57, the words "not being otherwise provided for by the Court Fees Act, 1870 should also be added, after adding the above words.

(iv) In article 57, after the words "security bond or mortgage" (which occur in the title), the words "where such security bond or mortgage deed is" should be added. _ 46.33. The object of the first amendment is to demarcate the scope of article 40 more ' clearly, by indicating that not only a security bond but also a mortgage deed (iii governed by article 57') would be excluded from article 40.

The object of the second amendment" is to put an end to the controversy as to the scope of the words "due performance of a contract" in article 57.

The object of the third amendment" is to remove the liability to stamp duty under article 5? where the Court Fees Act is applicable. The object of the fourth 3.t'I1EI1{'lIIlIBI|i.1° is to make it clear that in article 57, the words "executed by way. of security. . . . .contract" govern the words "security bond" as well as the words "mortgage deed".

1. ofﬂet-came v. Latin Bakslaf Sirzgh, A.l.R. 1931 Oudh 91. See, However, Hunter v. E:-np., A.I.R. 1942 Oudh 3'71 7

2. TtrHaJ1.S}zat'I V. Gulam Hnssrm. A.l.R. 1933 Lab. 1004

3. Reference A.I.R. I936 Sind. 41

4. Stamp Act Schedule IA, Article 5?, as inserted in the U.P.

5. Se: Supra. -

6. To be carried out uttdre article 40

7. Sea Supra.

8. See Alcshay Zamindari Ltd. v. Ram Nam Vermﬂrl, I.L.R. (1937) lCal. 375, 380.

9. Compare Article 15. ' II). See Akshny zgmrhdari V} Ram Nor}: Barman, I.L.R. (1937) 1 Cal. 375, 330.

U.P. Amend rnent.

Basic principles.

Recommendation to amend article 30 and article Object of suggested amendment.

57. the 272

46. 34. The material part of article 5'? should, accordingly, be revised so as to read as under :---

"57. SECURITY BOND OR MORTGAGE DEED Where such security bond or mortgage deed--

(a) is executed by way of security' for the due execution of an oﬁice, or to account for money or other property received by virtue thereof, or

(b) is executed by El surety to secure the due performance of a contract or in pursuance of an order of a court or public officer, not being otherwise provided for by the Court Fees Act, 1870, -

--902 to 911- (s.) when the amount secured does not exceed Rs. 1,000; The same duty as a bond (No. 15) for the amount secured.

I (b) in any other case. . . . . . , Fm; Rupeg5_ {Exemptions as at pres-ant):

CHAPTER 47 ARTICLES 58 T0 60

47.1. Article 58 lcvics duty on an instrument of settlement. The deﬁnition of "settlement" as. given in the Act 'emphasises the occasion or purpose of the gift, that being the feature distinguishing it from other transfers. Having regard to this special purpose, the legislature has ﬁxed a lower rate of duty on settlements. But for this speciﬁc article, the instrument would have been taxable as a gift, thereby attracting the rate of duty leviable on a conveyance. Certain questions relating to settlements and trusts will be considered when we come to article 64. (Trusts).

412. 'There is, in article 58, an exemption in respect of a deed of dower executed on the occasion of a marriage between Muhammadans. This requires discussion.

The exemption was previously notiﬁed by Notiﬁcation No. 855 dated 19th February 1886. The principle of the exemption appears to be that in the case of a Muslim marriage, dower is obliga- tory and is not a matter of bounty. Dower is a legal right 01' the wife and hence ought not to be taxed. ' As Mahammcod J. observed in Abdul Kaa'z'r'.r case' "Dower is not the exchange or considera- tion given by the man to the woman for entering into the contract ; but an effect of the contract. imposed by the law on the husband as a token of respect for its subject, the woman."

47.3. This aspect of the concept of dower is brought out more clearly in the systems of Islamic law in certain other countries which have codiﬁed the law on the subject of personal status. Accor- ding to the law as enacted in the Ottoman Law of Family Rights", dower and maintenance of the wife become binding on the husband on the conclusion of the contract of a valid marriage.

A similar provision is contained in the law Iraq'--5, according to which a woman is "entitled" to the dower speciﬁed in the contract ; if it has not been specified, she shall get the proper dower.

47.4. The essential nature of dower came up for consideration in an English case in the rather unfamilar setting of a libel action". The Muslim plaintiﬁ in that case complained that he had been held up to ridicule and contempt by an article that appeared in the defendant's newspaper under the heading "Child Wife bought for £1800." The article had gone on describ- ing the marriage of the plaintiff with a Moroccan girl in Casablanca in terms of a purchase. The defendants put forth the plea of "Iustiﬁcation" (truth of' the libel). It was their plea that they were justilied in describing the marriage as a sale, because the negotiations for marriage had been concluded between the plaintiﬁ and the girl's uncle and 'because a sum of money was involved. This plea was rejected, and it was held that the defendants had grossly mis- represented the nature of the proceedings involved in a Muslim marriage. The marriage guar- dian was in no sense acting as a vendor. It was the bride herself who received the dower. The bride's uncle had concluded the contract as a representative of the bride and acting upon l:Icr_wishes, because the Malilri law required him to do so. The plaintiff was awarded £750

- as damages.

1. Section 20.4}.

2. Abﬂldfadir v. Salima, (1386) I.L.R. 8 All. 149, 157.

3. Ottoman Law of Family Rights (1917), section 69.

4. I1'aqi,I..aw of Personal Status (1959), section 19(1).

5. J.N.D. Anderson, Changes in the Law of Personal Status in Iraq (19453) 12 I.C.L.Q. 1026.

6. Safe)! v. Odirams Press, London Times (27th June, 1963]; Coulscn, Conflicts and Tensions in Islamic Jurispru-

dence. (University of Chicago Press') (1965), page 27; Current Law Year Book (1963). item 2006 [Stevenson J.).

2173

Article 53.

Exemption for dg WEI'.

Dower in other countries.

Essential of dower.

II.BI;l.I1'G Minimum dower. ' No maximum.

Word: "as set forth".

Meaning of the words "occasion ot'themarnage".

274

The points discussed above would seem to show that dowel' is (i) a right of the wife, and (ii) it is obligatory by law to provide for it in the case of a Muslim marriage.

415. It is, presumably, for this reason that under the l-Ianaﬁ law, the wife is entitled to claim as her dower 21 minimum amount', notwithisanding any express agreement not to claim doweri or an agreement to accept a smaller sum. This is fairly clear from the original texts cited by Karamat Husain J. in A-sma Bibi"s case?

47.6. Dower is often fixed at a high amount in order to prevent the husband from divor- cing the wife'. Payment of a portion of the dower could be postponed by agreement until ter- mination of the niarriage, and if the amount stipulated were high enough, it would obviously provide an effective brake upon the capricious exercise of the right of repudia-:ion by the husband-".

47.7'. The matter has been considered at length in a very learned judgment of the Punjab Chief Court". It may be noted, that apart from cases where speciﬁc statutory provisions of local application restrict the amount of dower7, there is no legal limit of maximum regarding the amount of dower under Muslim Law. This has been speciﬁcally held by the Privy Councils. In an unreported case of the Bombay High Court", a decree for dower amounting to Rs. 13 lakhs was upheld. * 47.8. This being the principle underlying the exemption regarding deeds of dowel', no modiﬁcation of substance is suggestedin the exemption. We have, however, a point of phraseo- logy to consider, which will be discussed later. .

419. Reverting to the main article, the words "as set forth in such settlement" are to be construed with 'value', and not with the word 'property. Turner C]. had these observa- tions to make ----'lf the terms as set forth in such settlement' refer to the property settled, the duty is chargeable not on the value of the property which may be mentioned in the settlement, but on the value of the interest or interests created by the instrument which may not be co--equal to the value of the property. But if this was intended, the intention might have been less clumsity expressed".

"We are, however, of opinion that the terms apply not to the interests created by the instrument, but to the value set forth in the settlement, and the law suggests that the settler should insert the value. It is obvious that it must often be diﬂicult and sometimes impossible. to value the interests created by a settlement, and the legislature has, we imagine, on this ground amended by law by the introduction of the words we are considering" ' It is to be pointed out that the Madras view has been followed in ltkllahabad". and in a la'er case of the Madras High Court"-

47.1D. In the exemption, the words "executed on the occasion of a marriage" have constructed by the Bombay High Court to mean "at the time of a marriage". According to this construction, a deed oi dower executed a week before the marriage would not fall within the ' exemption".

. 10 Dirhams (Hanaﬁ Law}.

The agreement is called a tafweez.

. Asmn Bibi' v. Abdul Samuel, (1909) I.L.R. 32 All. 16?, 16B.

Zakeri Begum V. Sakirarz Begum. (1892) I.l...R. 10 Ind. App. 15?, 165.

. Coulson, A History of Islamic Law (1964), pages 207, 208.

Sahebmdiv. Saidulnissa, (1880) 15 Punjab Record 297 (No. 123).

. Section 5, Oudh Laws Act.

. Zakeri v. Snkina. (1392) I.L.R. 19 Cal. 689, 698 tP.C.]. '_ .

. Arm all v. Ba.-ma Begum, (OOCJ Appeal No. 1472). decided in September 1907; Tyabjin, Mohammedan (1968) page 111. _"

10. Emphasis added.

11. Reference, 8 Mad. 453 (Turner C.J.}.

12. In the matter ofMo!:ammad Muzafzr Ala', 1922 I.L.R. 44 All. 339.

13. Board afﬂevenue. Venkatammmi Afyar. A.I.R. 1950 Mad. T38.

14. Bar' Ameena 'in'. Arab Abdul Talfb, 60 Born. LR. 1206; A.I.R. 1959 Bom. .108 (DIV. Vyas, 1.').

\DOa-.|§J'\LnfIi.|.;a_}._:_.i 2.75 To us, with due respect, this interpretation appears to he one which might require re- consideration. In its judgment, the High--Court made a distinction between a deed of dower which is, purely and simply, a deed in consideration of marriage and a deed of dower "executed on the occasion of the marriage". The assumption seems to be that the latter phraseology is narrower than the former. It was held that the words "on the occasion" mean "at the time".

47.ll. We are of the opinion that this is not a reasonable construction. In our view, the legislature did not use the words "on the occasion" with any intention of emphasising the exact identity in point of time; the primary object may have been to indicate that the marriage must be between the Muslims and that there must be a connection between the marriage and the deed. Apart from this question oi'. construction, we may also state that the Bombay view would cause a lot of practical inconvenience since, in practice, parties do not necessarily execute the deed of dower on the very day of marriage or at the very time of marriage. The deed might precede the marriage or, if convenience so requires it might be executed even after the marriage.

47.12. Should it, as a matter of policy, matter whether the deed is or is not simultaneous with the marriage? We do not think so. Since the exemption in question incorporates a remission granted previously by a Notiﬁcation of the Government of India} the available historical material does not throw light on the precise scope which was intended for the exemption. But, viewing the matter from the angle of principle, we do not see any reason why the fact that the deed preceded the marriage or followed it should deprive it of exemption under the Stamp ' Law. If, as we have pointed out above," the principle underlying the exemption is that in the case of a Muslim marriage, dower is a matter of obligation and not one of bounty, then the distance in point of time should not be material, provided, of course, it is established that the deed Tisone of dower and that it has a connection with the marriage. Of course, it may be difﬁcult to draw a line but no one would say that one week is too long an interval. -To avoid recmrence of controversies and to put in the statute what we consider to be the proper policy, weirecommend that the words "whether the deed was executed before or after the marriage"

should be added in the exemption at the end, and that the words "on the occasion of the marriage" be replaced by the words "in connection'with the marriage", so as to eliminate the construction that the marriage and the deed must be simultaneous.

47.13. Article 59 levies duty on share warrants to bearer, issued under the "Indian Com- Act, 1882". ' i A share warrant is a negotiable instrument. A company limited by shares may, if autho- rised by its articles, issue share warrants under its common seal in respect of fully paid shares,' ' or stock.' A share warrant certiﬁes that the bearer of it is entitled to the share represented by the warrant.

The legal title to the shares is transferred by mere delivery of the warrant from one -person to another with the intention of passing that title. Where a share warrant is outstanding, the register of members bears a note of its issue. The bearer of the warrant may surrender it back to the company at any time and be registered on the-register of members, and receive ah" share certiﬁcate instead."-'3 47.14. We have no arnendment of substance to recommend in the article. But the refer- ence to the provision of the Companies Act should now be to "section 114 of the Companies Act, 1956". This is only a verbal amendment. We recommend that the article should be amended so as to substitute those words.

4115. Article so levies duty on a shipping order, for or relating to the conveyance of goods on board of any vessel. it needs no change.

1. Para 412. supra-

2. Para 47.6, supra.

3. Webb. Haie and Company V. Aiexmtdria Water Co. ([905) 21 Times Law Reports 572.

4. Section 11¢. Companies Act, 1955 '

5. I-Ialsbury. 3rd Edn. Vol. 6, page 249.

6. Pilicfnrron v. United Railway, (1930) 2 Chancery 108; (1930) All ER. Reprint 649.

Article 59;.

Introductory.

Recommendation Arﬁcla 50.

CHAPTER 48 ARTICLES 6l--63 Article 61_ 48.1. Proprietary rights may be transferred directly, e.g., by conveyance or gift,----or may Im°d"'°t°"" be enlarged indirectly. One mode of such enlargement is the surrender of a lesser interest in favour of a larger one. The surrender of a lease falls in this category. In the Stamp Act, it is dealt with in article 6|. The distinction between a pure transfer and a surrender appears to be that a transfer could be to a third person and creates in the transfers an absolutely now right, while a surrender is in favour of a person who already holds some interest in the property. though that interest is not the same as that now surrendered.

Article 61 applies to express surrenders by an agreement,' and would not apply to implied surrenders.'-' An implied surrender arises without any speciﬁc instrument for that purpose.' There is an exemption as regards a surrender in cases where the lease itself is Kemp-ted' from duty.

Sometimes, a document may embody two transactions. Thus, a document by which the lessee surrendered the lease, but in which the lessee also transferred certain moveable and busi- ness assets which were not subject to the lease, was considered chargeable both as a surrender of lease and as a conveyance of rnoveables."

as to 48.2. The article does not tell us whether the surrender should be total or partial. It 1331031 !lIl'f¢ﬁdBI- has been held in Madras" than it is immaterial that the surrender is only as regards the unexpired part of the term, or is with regard to only a portion of the property. While the artide nook no change of substance, it appears to us that it would be useful to codify what has been held in the Madras case, as such questions are likely to arise elsewhere also. i 48.3. Accordingly, weirecommended that the following Explanation should be inserted Recommendation _ to add an E.xp1a- below Article 61 nntwn: _ T "E:rptam.rtion.----For the purposes of this article it is immaterial that the -surrender of the lease is only as regards the unexpired par: of the term, or is with regard to only a portion of the property."

48.4. Article 62 levies duty on certain transfers with or without consideration. The various".

Article 61'---

[nu-oductory, kinds of transfers listed in the article seem to constitute a heterogeneous collection. Clauses (a), {b} and (c) can, however, be grouped together broadly as transfers of "actionable claim", such as, shares, debentures and interests created by bonds, mortgage deeds and policies. Clause (d) deals with the transfer of property under a particular provision of the Administrator General's Act, dealing with transfer by an executor. Clause (e) deals with the transfer of '£1 t1'lIst property witout 'considerotiorﬁ from one trustee to anoter trustee or from a trustee to a beneﬁciary. There is one feature commo-n to clauses (d) and (e)--the transferor has no bene- ﬁcial interest.

. Section ll1(e), Transfer of Property Act, 1882.

. Section llltff), Transfer of Property Act, 1882.

. See section 111, Transfer of Property Act.

. For example, article 35, Exemption (:1).

. The Ci:iefControIi't'ng Revenrte Authority V. Bil"??? Lakshmi, A.I.R. 1958 Mad. 535 (F.B.). . Madras Board of Revenue, ruling, cited in Krishnamurthi, Stamp Act (1968), page 551.

. The anomaly created by clause (e) is discussed, i:u"ra.

--JOHUI-J:-K:-|lNl*-* 276 . Bombay case,' 2.7?

It should be noted that all these transfers would, but for this speciﬁc article, have been chgrgeable either as "conveyance" in view of the wide deﬁnition of that expression as given in the Act,' or as gifts or under some other entry appropriate to the nature of the right transferred. The duty under article 62 is lower than that on a conveyance or on a gi.ft,----wl1ich shows the signiﬁcance of the article. A lower duty seems to have been chosen either because what is transferred is an actionable claim and not property in possession, or because the beneﬁcial inttrcst remains unaffected. There are certain aspects of business convenience also, relevant to some instruments.

43.5. Taking up the clauses themselves, clause (a) deals with the transfer of shares in an incorporated company or other body corporate. The duty is 75 p. for every 100 rupees of the value of the share. A few reported cases on this clause may be referred to. In an early the question was raised how an instrument executed in the following circum- stances was to be stamped.

A Hindu joint family consisting of three brothers owned shares in a limited company, wind: stood in the name of the eldest brother. The three brothers came to be divided in interest. The shares remained in the name of the eldest brother, though dividendson the shares were divided amongst the three brothers. This fact was subsequently recorded in a deed of The eldest brother then executed two deeds under which he transferred to his brothers the number of shares that fell to their shares. It was held that the deeds in question were chargeable as instruments of partition under article 45, and did not fall either under Article 62in) or under article 62{e).

sMulla, who was one of the three Judges who decided the case, later seems to have revised his opinion." He has expressed the opinion that in such a case, after an oral partition, whereby lnrnprty continues in the name of the one brother and is subsequently tranﬁerred to the otltlers entitled to-it under the partition, the instrument would fall under article 62(e)---(transfer of trust property} The reasoning seems to be that the partition has already been effected, and the persons in whose names the shares continue to remain are not the beneﬁcial owners.

In the same Bombay case,' it was remarked that the possession of the one co-owner of ioint property in his own name is not that of a trustee for the other co-owems. But, as pointed out one author." the title of the co-owner who is registered holder, can be regarded as that

-of a'trustee in regard to the shares of the other co--owners, and the instrument of transfer would, on that view, be chargeable under clause (cl.

$8.5A. In another Case" decided under article 62(3), it was held that if a company register:

an insmunent of transfer of shares which is not properly stamped, it would be doing something which is not lawful. But there was no provision in the Companies Act, 1913 (which was then

-in force], or in the Stamp Act", whichwould make the company liable for payment of the proper stamp duty. If the document is brought before the revenue authority, the revenue authoa rities will impound it, but the only right given to them to proceed for the recovery of the duty _ 'itI'iIninst the person who was liable to pay the duty, i.e., the executantf 48.6. The case-law so far discussed calls for no amendment of the clause, but we may note that the singular word "share" in clause (a) [in the column relating to the amount) may *1. section 2:10).

2.' 1'kl'Super£nrende.rrt ofS'ram-pr, Bombay v. Chimonlai, (I923) I.L.R. 17 Born. 32] : A l'_R_ 1923 Bo,-n_ 237 Ag. C.J._. Crump & Mulla 31.).

. Sec Mulls. & Pratt. The Indian Stamp Act (6th Ed.. page 359), 1st Ed. was published in 1924.

4. Superintendent oJ"'Sramps V. Clrmanlal, (I923) I.L.R. 47 Bom. 321, 326: A.l'.R. 1923 Bo . 237, 2 _ c.1.. Crurnp and Mulla. JJ.). ' '" 39 'Shh ""

5. Krishnamurthy, Indian Stamp Act. 1972. page 569.

6. fit I: Jagdldr Mills Ltd, A.I.R. I955 Born. 79.

7. See also Mrs. Parry v. Union cflndia, A.l.R. 1961 Fun}. 123. 24 M of Law,u'7'l'---36.

(Shah Clause (0--

Transfer or shares.

Useoflinslllhr singular "Sharc"

in clause (a).

Verbal change in clause (a) recent-

mended to subsu-

tute the plural "sllares".

Clause (b)---

trausfer of deben tures--No change.

Clause to)-

transfer of inte-

rest secured by a bond etc.-No ' hange.

278

give rise to some problems. Here, we may refer to an Allahabad case} which, though falling under clause (c) of the article, discusses clause (a) also. In that case, a person was the obligee of each of 29 bonds and mortgage deeds executed by different persons in his favour. I-Ie transferred his interest in all these bonds and mortgage deeds to another person, by executing one document comprising them all. The consideration for the transfer was one lump sum. On the question of the proper stamp duty payable, it was held by the majority, that section 5 of the Act, dealing with instruments comprising or relating to several distinct matters, did not apply to the case, and that under article 62(c) read with section 13 of the General Clauses Act, the stamp duty chargeable on the deed in question was rupees ﬁve [under article 62(c) (ii]].

Niarnatullah. I. (dissenting) held that while section 5 of the Stamp Act did not apply, under article 62(c) itself and without recourse to section 13, General Clauses Act, the proper stamp duty payable was the sum of all the duties paid on the bonds and rnortpge deeds, Subfect to the maximum of Rs. 5 for any one band or mortgage deed.

Bonnet J. (dissenting) was of the view that section 5 and article 62(c) each applied to the case, though with the same result, namely, that the proper duty on the instrument in question was the aggregate of the amounts of duty payable on each of the 29 transfers contained in the instrument. Both the dissenting Judges {Niamatullah and Bonnet 3].) expressed the opinion that the rule that the singular includes the plural (contained in" section 13' of the General Clauses Act} did not apply to the case. ' 48.7. We are not, at the moment, concerned with the decision on clause (c). But the majority of the Judges in the Allahabad case discussed clause la), which is of interest. They referred to the language of article I52(a), by way of example. 'They said : "This lays down that the proper stamp duty on a transfer of shares (plural) shall be one half of the duty payable I on a conveyance (No. 23} for a consideration equal to the _value of the share (singular). Now, in this case, it is beyond controversy that the word 'share' in the second column. must be construed as inclmiing the plural, because that plural 'shares' is used in the first c0lurrm."' The majority has treated the use of the singular 'shares' in item 62{'a) in the second column re a grammatical error.

4-8.7A. The maiority view as to clause .(a), with respect. appears to be correct. ' We recommended that that view should be adopted and in article 62in), for the singular "share", the plural "shares" should be substituted, so as to bring out the correct position.

48.8. Clause (b) of article 62 deals with the transfer of debentures, being marketable securities,' whether the debenture is liable to duty or not,' except debentures provided for by section 8. Section 8 deals with debentures issued by local authorities raising a loan. Debentures payable to bearer would be transferable by delivery, and not by assignment. This clause needs no change. ' i 48.9. Clause (c) levies duty on the transfer of any interest secured by a bond, meme deed or policy of insurance. This clause also takes out of "conveyance" a case which could possibly fall under it. Thus, the sale of a bond, by endorsement on the back of it was held, in an Oudh case'. to fall under this article, and not under article 23 (conveyance). The duty under article 621' c) For the bond in question was 'Re. 0-8-0 and if it had been regarded as falling under article 23. the duty would have been Re. 1/-. The endorsement on the back of the' bond read, "sold to .......... ..", d the lower court held that this amounted to a ale dead. The Chief Court did not give any reasons for holding that the document in quesﬁon was I. Ran: Sump v. J__varr' Terr'. (I933) l.L.R. 55 All.'463, 473; A.I.R. 1933 All. 321.

2. Emphasis sunplierl.

3. See section 2{l6A'l.

4. As to the duty on debentures. see article 27.

5. Jung Bahadur v. Bﬁaggoo, A.l.'R. 1934 Oudh 344.

279

chargeable under article 62 and not under article 23. But, since article 23 is a residuary article, and the document in question can be regarded as a "transfer", the Chief Court was. with respect, right in its conclusion.

48-10. There are a tow cases on the transfer of a mortgage,' and one case3 of transfer of 0"" °""°" ' the interest secured by an equitable mortgage which were held to he chargeable under article 62(c).

It may be noted that if :1 policy of insurance is transferred by a separate instrument, it must be stamped under article 6212:); if the transfer is by endorsement, it is exempt under Exemption (c) to the article. It would, thus, appear, that the transfer of El policy of insurance by endorsement would be cheaper method, involving no stamp duty.

The case law and points referred to above do not call for any change in clause (c).

48.11. Clause id) levies duty on a transfer under the Administrator Gen:-:ral's Act, 1874, Clause (:1)- section 31. This Act was replaced by the Administrator GeneraI's Act, 1913. The corres-- f,{°,,',',§f§§,",,';°,';f,'"° pending section in that Act was section 25. In 1963, a revised Act was passed, and the General': Act--- corrtesponding section in that Act is section 22. _ This section refers to the transfer, by a pri- ,','§',§,',*f,,,';',',:3'j"' m' vate executor or administrator, of interest under a probate or letters of administration to the Arhninistrator-General, by an instrument in writing.' This section is quoted below ;

"22. [1] Any private executor or administrator may, with the previous consent of the Administrator-General of the State in which any of the assets of the estate, in respect of which such executor or administrator has obtained probate or letters of administration, are situate, by an instrument in writing under his hand notiﬁed in the Oﬁficial Gazette, transfer the assets of the estate, vested in him by virtue of such probate or letters to the Administrator-General by that name or any other sufficient description.

(2) As from the date of such transfer, the transferor shall be exempt from all liability as such executor or administrator, as the case may be, except in respect of acts done before the date of such transfer, and the AdrninistraLor--GeneraI shall have the rights which he would have had, and be subject to the liabilities to which he would have been subject, if the probate or letters of administration, as the case may be, had been granted to him by that name at the date of such transfer."

48.12. We recommend that article 62, clause (:1), should be revised so as to substitute a reference to the Admini-strator--General's Act, 1963, section 22, in place of the reference to the earlier section.

48.13. Clause (e) levies duty on the transfer of any trust property winhcut consideraripn chm m_ from one trustee to another trustee or from a trustee to a beneﬁciary. In this clause, the Transfer of trust wads "without consideration" are inconsistent with the words "with or without consideration" g$:"""ﬂ:", A, ,'"""d'l occurring at the beginning of the article. If these words are regarded as limiting the opening words, ded. tlian a transfer of property for consideration would be outside this clause. and would be charge- able as a conveyance under article 23 or as a transfer under article 62, clauses (a) to (cl).

This was the old law-' But, under the present article, there is now some uncertainly, in view d_ the wide opening words of the article.

48.14. We recommend that this matter should be clariﬁed, by removing the words "with- Rmammmdmoa out consideration" from clause {e). A transfer for consideration by a trustee to a beneﬁciary as to clause (re).

1. {1} Me Dowel! a Co. v. Rqfave Cherry. (1904) LLR. 27 Maui 'II. (In) Hitwardhak Carton Mire v. sombre (19091 I-L-R- 33 B°m- 426- 2, In pg Kamla Rmijan Ray, I.L.R. (1937) Cal. 435.

3. section 22, Administrator-Gene1'aI's Act, 1963 (46 of 1963). 4 Simnp reférertce, (1834) l.L.R. 7 Mad. 350, 351 U1-I'ﬁCl¢ 50. Stamp Act, 1879).

Exemption analysd.

Doubt as to chnrsausbility.

Article 63e-

Transfer of lease.

280

or to another trustee would then clearly fall within article (e).

Since the beneﬁcial interest is not transferred, this is justiﬁahlc also. -

48.15. This disposes of the clauses of the principal article. Under the Exemption to the article, transfers by endorsement of certain documents are exempt. The documents listed are certain commercial documents---as in Exemptions (a) and lb), or policies of insuranoe--- exemption [C], or securities of the Central Government----exempt'1on (d).

48.16. It should be pointed out as regards some of the transfers provided for in the Exemption, that their chargeahility under the main arI:'cIe--as it now stands--- is not very clear. Of the various transfers dealt with in the Exemption, the transfer of only one-type of docu-

ment (policy of insurance]--mentioned in Exemption (c),--is speciﬁcally taxable under ; the -

main article. Transfers of other instruments mentioned in the eJremption- -{a} transfer of bill of exchange etc., {I3} and transfer of securities of the Central Governrrrent,------are not .speciﬁc.all_v taxable under the main article, though they can become taxable under general provisions of the main article, clauses (:1) and (c). For all practical purposes, clauses (d) and (e) would hardly be invoked in relation to transfers of pro-notes etc. The better course, therefore, would be to make transfers of these instruments taxable, by adding them in main1 articleiﬁz, ant! to retain the present exemption for their transfer by an endorsement. ' i ' 48.17. In the light of the above discussion, we recommend that the followings clauses' should be added in article 62 :--

"(D of a bill of exuhorage, cheque or promissory note;

(g) of a bill of trading, delivery order, warrant for goods, or other merccmriie docu-

ment of title fa goods,'

(h) of securities of the Central Government."

The duty should---on the analogy of clause 62(a}------be 75 paises for every hundred rupees as part thereof of the value of. the property transferred.' T _.

43.18. Article 63 levies duty on a transfer of a lease by way of assignment. Article 35 governs under-leases or sub-leases. Where the lease is itself exempt from duty, the transfer thereof is also exempt from duty, as also transfers of leases on which duty has been remitted by the Government under section 9. This article does not present any diﬂiculties requiring any change. .

1. To be carried out under article 62, main paragraph.

2. For other suggested amendments, see supra, under article 62, clauses (a), (d) and (e).

3. Compare article 62(a)~----Transfer of shares.

CHAPTER 49 ARTICLES 64-65 49.1. Article 64 levies duty on a declaration of trust. The duty is a ﬁxed one, which is Article Gil»-

much less than the duty on a conveyance or on a bond. There is considerable overlapping l"'1'°d'|-'°*°='!-

"between the entries taxing settlements and trusts. This nautrally raises a few questions of importance. What is the precise scope of "declaration of trust" and "settlement"? ls a "settlement" to be taken as conlined to a direct transfer? These and other connected uestions _ CI IIISC.

There is also considerable obscurity as to what is to be regarded as a "declaration of trust". Does it cover dispositivc documents? If so, can a person adopt the device of trust and tltereby avoid the duty that would otherwise be lawfully leviable as on "conveyance" or rm "aettlemcnt"? ' _ ' ' The deﬁnition of "conveyancc" excludes instruments otherwise expressly provided for. 33:11 _t_his_wculd, if taken literally, mean that every declaration of trust is chargeable with ﬁxed :dl'.I:l._")":C'Il¢l1' if it amounts to a conveyance.

419.2. "Settlement" is defined in section 2(24) in these terms :--

" 'Settlement' means any non--testamentary disposition, in writing, of movable or im- movable property made--

- (a) in consideration of marriage.

Lb) for the purpose of distributing property of the settler among his family or those for whom he desires to provide, or for the purpose of providing for some person dependent on him, or

(c) for any religious or charitable purpose; and includes an agreement in writing to make such a disposition and, where any such disposition has not been made in writing, any instrument recording, whether by way of declaration of trust or olherwise, the terms of any such disposition."

'There are four ingredients of this definition which arernatcrial for our purpose--{il there 'must be a disposition, (ii) it must be non-testamentary, (iii) it must be of property, and (iv) it must be made on the speciﬁed occasion or for the speciﬁed' purpose. But no particular machinery is required for effecting the disposition. ' ' - 'V-7-V deﬁnition, for example, seems to be wide enoughtce cover a-disposition-by way of The last paragraph is. in fact, speciﬁc on the point. 7 - - -- - - i - ;. _., t 19.3. It may be noted .that the deﬁnition of settlement in the Act is not identical with the concept" 'of' settlement in conveyancing. A writer' on conveyancing has said--- _ , "A settlement is an instrument whereby property or-the enjoyment of it is litnitetl to ..

several persons. Unlike the assurance deal: in the earlier chapters which have for their Cbject alienation of property eitherabsolutely or temporarily, a settle- ment, as also a trust, seeks to prevent alienation of property tc.tl'te extent the law will allow. Family settlement are very common in India and 'are -freely made by deeds {titer vh-0.5 as well as by wills. Marriage settlements and post-

"i ".'aTiaTtErﬁ ﬁbm I:i'Et{EtI&.§:ﬁi Eng it i 950).

281

Deﬁnition settlement.

of Settlements other documents.

settlement and n-tents and Izrusts.

and 282 nuptial settlements, which latter variety is mostly voluntary, both so common in England, are known to Indian Law- Every settlement is effected by means OJ' trusts, and there is practically no diﬁereme in form and in substaitce between a ..trust and a settlement that we have."

We have quoted the above passage in order to show the similarity between a settlement and a trust.

49.4, Coming to the deﬁnition of settlement in the Stamp Act, we may note that clause

(a) wiil include deeds ot dower as well as marriage settlements. An English case' illustrate':

this aspect. Where an instrument, after reciting a previous settlement and a revocation, went on to declare certain speciﬁc trusts upon which the property was to be held after the death of the intended husband, there being a power of appointment given to the husband and wife, or the survivor of them, in favour of child-ten or remoter issue of the marriage, and in default of appointment trusts in favour of children declared, it was held to be a "marriage settlement", being clearly an instrument by which property was settled or agreed to be settled.

Clause (b) of the deﬁnition suggests the creation of separate interests in favour of who may have a legal or moral claim on the settler, or for whom he may desire to make ' I provision -It need not embrace the whole property of the settlor.' -- .. -

In a Madras case' before the Board of Revenue A assigned to daughter B _a certain landfl house and some trees, to be enjoyed by her during her life-time. The question was whether this document was a settlement, a deed of gift or an assignment- The Board of Revenue, Madras, held, that it was a settlement It would appear from these and other decisions that the object is the paramount consideration. In this case, the object was to provide for a dependant of the executant of the deed.

A Bombay case" relates to clause (c). A deed of settlement disposed of two distinct funds, one composed of the subscriptions raised by one of the settlers for a charitable object, and the other oi a fund bequeathed to the other settlors with an absolute discretion' for disposal in a like manner. It was held that the instrument in question was chargeable as a 'sertleinenf (Article 58) in respect of the first disposition, and as a power of appointment (Article 7) in respect of the second. The High Court described the ﬁrst disposition "as an instrument recor- ding, by way of declaration of trust, the terms of the disposition."

49-5. It may be noted that a document may be both a settlement and a gift. Gifts" are chargeable with a higher duty than settlement.' The article relating to gift,' however, ex- pressly excludes a settlement from its scope. It would appear that the primary consideration in deciding whether a document is a settlement, is the occasion mentioned in clause (3). or iii ' object of the person giving as mentioned in clause (b) or clause (c) of the d 'settlement'. ' - - - --_;j ';t - ;

While 'this testis, in'-general, enough to-'distingtiish--between 'a. gift and'a.'setthn:tent,' the position is not so simple when one comes to deﬁning'.the'relative scopenf set_tIem.ent."a'nd't'ruat.

49.5. The deﬁnition of _'sétuen;¢si' _i departs from -' the ordinary _br_'s'-

and gives it a wider scope. For the present, we shall assume that there is iustiﬁcatidn' for giving'-it such a widefscope. on . considerations ' of revenue'. ' - - -e . . .- t ' '. Emphasis supplied.' " ' . " i ' . Rhsseﬂ v. Commissioners. (I902) I.N.B. 14 .

. Reference, I.L.R. 7 Mad: 349. -

. Madt'as)R.evenue Board's Proceedings No. 16, 6th January, 1830 (Madras Stamp Manual, 1:. 163). (Object 'I im-

portant . _ ' . In re Abduila Haji, {I911} I.L.R. 35 Bom. 444, 447 (Scott C.J. Russell and Rao JJ.).

. Article 33 {Gifts}. .

. Article 53 (Settlement).

. Article 33 (Gifts).

. See Madras Board Case, supra.

|¢w~.1.g,u« .IauJt».t'-

uaruawwn 233 But, in practice, nice questions arise whether a document is a trust or a settlement. This diﬁcdty is primarily due to the fact thatthe deﬁnition of settlement is -so wide that one and the-same instrument can be a gift, a trust and a settlement. No doubt, where a document falls under two or more articles, it should bear the higher duty.' That general provision in the Act will take care of the duty, and the object of levying the duty is achieved. But occasions for the application of this general rule should, in the interest of the common man, be as few as possible,----even if they cannot be totally eliminated. If something can be done to reduce the occasions for such controversies, by an amendment of the law, the amendment would be worth the trouble.

_ 49.7. It would appear that the case law shows some uncertainty and obscurity." . For ex- ample, the Calcutta High Court held in one case" that a document styled "settlement deed'-', by which all the executanfs properties were given to certain deities, could not be regarded as a settlement or deed of trust, but only as a deed of gift. Mitter J. observed as follows :----

"The word 'settlement', as it is generally understood, refers to a disposition of succes- sive interests in immovable property} and is generally couched in the form of a trust; and it is such a settlement which is in the nature of disposition of mova- ble and immovable property either in consideration of marriage or for one or more of the objects speciﬁed, namely, religion, charity, or provision for family, dependants or others, that is contemplated by clause (24) of section 2. . . . . . .. Underlying the idea of settlement, there is the notion or conception of trust. It is diﬂicult to say that when a gift is made to a deity, the deity is to_ be regarded as a trustee. This is also the view taken by a full Bench of the Nagpur High Court-"

But this view was dimented from in a later Calcutta case," where it was held that a similar document by which the executanf property was given to certain deities is a settlement deed for the purposes of the Stamp Act, notwithstanding that there was no trust and no disposition of successive interests in The property. It was there remarked that the express meaning given to the word 'settlement' in the Act cannot be controlled by reference rtothe meaning given to the word by .'the Speciﬁc Relief Act (which had been relied on in the earlier Calcutta case) where a statute gives a deﬁnition for an instrument, that deﬁnition cannot be controlled by the meaning commonly attributed to the instrument."

49.3. On the speciﬁc question as to the meaning of "settlement", what is more important to note E that some misconception appears to prevail on the question of inter-relationship of the two taxing entries. The following extract from an Allahabad case' will show how the High Court had to take pains to explain the true position.

Prar:ticaI_ impor-

tance as Illustrated "by case law.

Mis-conception.

"We may at the outset mention that it appears to us that inframing the questions .

for our opinion the Chief Controlling Revenue Authority appears to have proceed- ": on fﬁp rm.-o,-rec: basis that the instrument under the Stamp Act can be .ez'tl:_er a deed of trust or a deed of settlement only and not both!' The word 'Settle- ment" is deﬁned in section 2(24'_J of the Act as follows : ' ' (The deﬁnition is quoted).

. "This deﬁnition of the word "settlement" itself makes it clear that even instruments which are erecured' containing a declaration of" trust can be settlements. prov-'den! sxtlun 6.' 5w Allahabad case, B-input'! Nari: Ciaakravarrhy v. Barnum Kumara Devi. AIR. 1935 Cll 5515 (D-B-L Deﬁnition of "settlement" in section 3 of the Speciﬁc Relief Act. 1877 was referred to. Cﬂcfca-[trailing Revenue Arrrhority V. Sarju Eat, I.L.R. 1944 Nag. S1; A.I.R. 1944 Han. 33 {F.B.}. Upaldra Nan': Padder v. Ana! Chandra Lorﬂz. l.L.R. (1951) 1 Cal. 665, 669, are (Bachawat 1.).

. All. 1964 All. 538.' -

, Emphasis supplied-

234

the ocmciin'on.t laid down earlier in that deﬁrzfzion are satisﬁed} The question in these circumstances that falls for our opinion is whether this particular instrument, to which this Reference relates,_ is a "settlement" or not, even though it may, on the- face of it, be a deed of Trust. Under section 6 of the S amp Act, if a deed of Trust also amounts to a settlement, the stamp duty will be chargeable on it as an instrument of settlement under Article 58 of the Sch. I.B. of the Act, and not as an instrument of Trust under Article 64 of Sch. I.B. of the Act."

49.9. Even disregarding the case law. an important query that suggests itself in this context Dispositive_ _ and is, how does one distinguish a settlemenﬁ' from a trust" (for the purpose of the stamp Act) ? §':£'I's"-"")"""t""H' The deﬁnition of "settlement" in the Act stresses the element of disposition of property. The Act ' " ' " '* contains no deﬁnition of "trust". but article 54 speaks of a "declaration of trust" without a dispositive clause. It is, then, the intention that an instrument should fall under "declaration ed ' trust", only where it contains no dispositive clause '? A trust ca.n arise without a tlilposititxt in' praesenti where the trust is by will or whether the author of the trust is the trustee; in such cases, atransfer in praesenti of the property is not required. In other cases, a disposition is necessary to create a valid trust'. This may be a possible distinction between a bare declaration of trust and a settlement. If -so, it is desirable that the relevant article should express the position more clearly. It may be noted that Indian Law does not recognise distinction between legal and equitable ownership.

49.10. lt should be noted that the provisions of the Indian Trusts Act, 1882, do not deal with the distinction between a settlment and a trust. In fact, the Act isprimarily concerned with how a trust can be created and what are the legal consequences of its creation. It does not deal with the various descriptions of instruments that can or cannot fall under the head of trust. In any case, that Act contains nothing inconsistent with the approach adopted inthe present dis cussion. namely, that an instrument of trust can also amount to a settlement as deﬁned in the Act, if the principal object or occasion is one speciﬁed in the deﬁnition of settlement.

Ordinarily, a trust is created by transferring the property to the trustee, but this is not neces- sary if the trustee is none other than the author. In that case, it is enough if the author of the trust declares himself to be the trustee.

Where, however, the owner transfers the property to the trustee, there is a "disposition" of his interest and this disposition could amount to a settlement, if the purpose or occasion is" one speciﬁed in section 2(2-4). Should it make a diﬁerence that the machinery employed is that of trust rather than of a direct transfer 'F We have, while analysing the deﬁnition of settlement in this Chapter', pointed out that the deﬁnition does not require the employment of a particular machinery?"

for effecting the disposition. -

49.11. The same query arises in relation to a conveyance and a trust. A dispositive instru- Couveyance and - . - . . . 1 ,,.,,,;_ ment, not for a purpose or on an occasion speciﬁed in section 2(..4). would amount to a conveyance. Should it make a difference that the instrmnent employs the machinery of trust, and not a direct transfer '.3 49.12. It is to resolve all these queries that we propose. a scheme, of which the salient features d.

Scheme propose m_°___ (1) A trust amounthig to settlement should be made so chargeable, by an express amend-

ment of article 64 (An Explanation could be added). At present, there is a misconcep- tion on the subject.' Emphasis supplied.

. Article 58.

. Article 64.

. Section 6. Trusts Act.

. Para 49.2, supra.

. Board of Revenue v. Sreedhar, A.l.R. 196% All. 537.

at'-'|-F'-Hi'-'."

2'35 (2) A trust amounting to conveyance should be made so chargeable, by an express amend-

ment of article 64. (Another Explanation could be added). Reasons for this amend- ment may be listed as under :-----

(a) Ambiguity of the expression "declaration of trust".

(b) Words "not otherwise provided for" occurring in the definition, of "conveyance".

A trust for a single person not in need (i.e., who is not to be "provided for"), and who is not dependant, would (on the contrary view), he chargeable only with a ﬁned duty (article 64), while': trust for a minor son would be chargeable with duty as on a bond as it would amount to a settlement. (Article 58). Really, the ﬁrst-mentioned trust should be chargeable as a conveyance.

(3) Trusts not falling under (1) and (2) above, fall under article 64.

Our recommendation is that the scope of article 64 should be deﬁned as above, and the meaning of "Declaration of Trust" indicated more clearly, in view of the ambiguity of the exprelsion "declaration of trust" and the Overlapping-With settlement and conveyance.

'#9.i'3. The scheme recommended is based on the following propositions :-- p,,,pO,i,;,,m_

(i) The article relating to 'trust'1 is conﬁned to nomdispositive trusts (non-testamentary}; (i.e. Wherethe author is himself to be'the trustee and there is no dispositive clause). The duty is as on a bond, subject to a maximum of ﬁfteen rupees.

(ii) That article (Trust) seems to apply also in relation to public trusts, where the author is the trustee and there is no dispositive clause. This can be deduced from the fact that the deﬁnition of "settlement" does not apply where there is no "disposition".

(iii) Private dispositjve trusts bear duty as on a conveyance", unless they are settlements.

Private dispositive trusts which are for religious purposes, or are in consideration of marriage or for the members of the family, etc-, i.e., those falling under section 2.(24)--bear duty as on a bond.' Formally, these are charged as settlements, but the duty on a settlement is the same as that on a bond.

(iv) Public dispositive trusts also hear duty as on a bond' if the trust is for religious or charitable purposes, because they fall within section 2{24], ('Deﬁnition of "settlement"].

This is the scheme recommended by us, as put in the form of propositions. For ease of under- standing the propositions as set out disregard minor points of detail and also employ rough descrip- tions ct instruments.

1. Attidl: 64.

1. See article 23. regarding conveyance.

3. dgfccticn 2(24), {5} & (b) and article 58 {Settlements in consideration of marriage or for the beneﬁt of dependants, 4- 390 Sﬂcﬁﬂﬂ 3943(0) and article 53 (Settlements for I:eIigi'tus or charitable purposes). 24 M (if LlW;'77---37, 286 49.14. To put the matter in the form of a chart showing how trusts will be 'taxed.

Tmsts Dispusiaiw.-e 2 Non-dispositive I 4 1 4 1 1(3) Pub1ic---(Duty as on a 1(b) Private--Duty as on a 2(a) Public---{Du1y as on a 20:) Private»-'-{,Du1y as _' bond) (Article 53) conveyance {Article 23)- bond, subject to a maximum on a bond, subject to but if it is on marriage of Rs. 15}- (Article 64) a maximum of Rs. 15 or for dependants, then ~--"Trust". (Article 64)---"'1"nn1:". duty as on a bond (Article 58).

We my state Ihat such a restructuring has been favoured by most replies to our Questionaire! ' . $9.15. We recommend that article 64 should be amended to implement the above scheme. Recommendation.

M-ﬁg; _ 5.5_. 49.15. Article 65 relates to warrant for goods. A Warrant for goods is given by the hnilee Wi"'"'""'°" 39°55 of goods, and acknowledge the title of the transferee to the goods as between the transferee and the bailee, who is the warehousemanf There is no diiﬁcrﬂty caused by this Article, and it requires no change.

I. The caitegowries-, 2(a) and 2(b) bear the same duty but-are shown as separate categories for maintenance of symrnetnr with ](a] and 1(b).

1. Question relating to section 2(24),--"Settleme.nt". '3. See Stroud's Judicial Dictionary, 3rd Ed. Vol. 4, p. 3153.

CHAPTER SD CONCLUSION 50.1. We have concluded our consideration of the Act, and would now like to say a few words about the recommendations made in this Report.

50.2. It would be apparent from the contents of the preceding chapters that we have not conﬁned outselves to tidying up a few technical anomalies in the Act. Our recommendations are aimed at improving the substance, form and working of the Act, within the limitation that we set . out in the first Chapter.' ﬁroarily speaking, the changes which we have recommended seek to achieve the following obtects :--

I {a) improvement in the tax structure----ﬂ1ough to a very limited extent' (e.g. our recom- mendation as to powers of attorney}.

(la) improvement in the practical working of the Act, by amending provisions that cause diﬂiculty. delay or inconvenience (cg. our recommendation as to the mode of cancella-

tion of stamps.).

to) improvement in the drafting of the provisio11s--in particular, removing uncertainty caused by conﬂicting views.

(d) securing consistency with juristic principles (e.g. our recommendation as to the inclu~ sive portion of the charging article on lease and our recommendation as to liability to bear the duty.

(e) giving proper recognition to sociological considerations relevant to the subject [e.g. our recommendations as to assignment of copyright and insurance policies" for acci- dent).

(1') providing for uniform interpretation of the Act within a State by strengthening the procedure for reference (sections 56-57). i

(g) avoidance of injustice, 'hardship or inconvenience to the citizens, in court as well as elsewhere (e.g. our recommendation as to the deﬁnition of promissory note, and as to section 35], where the requisite amendment could be made without a serious eﬂect on the revenue.

I 50.3. As to the ques-tion_of hardship and convenience we would like to point out that many of the instruments with which the Act is concerned are of an international character. Bilh of lading, Bills of Exchange, promissory notes and other documents relating to maritime law or the law merchant are examples. Modem conditions or trade render it desirable tilt! in regard to such instruments, the law should be simple and easily ascertainable.

For the purpose of academic treatment and other purposes, of course, the corpus of the law is divided into compartments. But the 'businessman does not, when he enters into a particular transaction, view the matter as such.

The international character of maritime law is of peculiar interest. It has been said that' English maritime law is one part of English law upon which Roman law has had a direct

1. Chapterl.

2. Solﬂhapter 1.

3. F1'lcdn1snI1.1.e58lThco1'1'(195"H. mo 526- 23?

24 M of Lew]??-38.

Introductory.

Object _of recom-

mendntlons.

Yatlotl 238 impact. Lord Mansﬁeld took many of the principles of maritime law from the Roman Law. Again, negotiable instruments are essentially interuationai institutions--which also renders it desirable that, as far as possible, the law relating thereto should be simple rather than com- plex.

The international character of some instruments has a long history. Bottomry bonds seem ' to have been in vogue in Rome at least as early as 530 All because in that year an edict of Justinian restricted the interest on money advanced on such bo-nds to 12 per cent.' In the Narratives of Demosthenes, it is stated that about the year 400 RC. Grecian mer- chants practised the negotiation of large loans to ﬁnance commercial maritime ventures----a statement for which support is to be found in the writings of Plutarchf.

In India, there are cases of advances similar to bottomry being made for ﬁnancing trade as early as 660 B.C.' It is, therefore, appropriate that in the preamble to the first English enactment relating marine insurance,' it was stated that "it has been time out of mind a usuage among merchants. both of this nation and of foreign nations, when they make any great adventures ( specially into remote parts) to give some consideration of money to other persons (which commonly are in no small numbers) to have from them assurance made of their goods merchandise shipsandthingsa'dveutured..........."

50.4 India is no stranger to international trade. Pre»hi-storic remains discovered at several places in India in archaeological excavations show that trade on rivers and oceans was carried on by boats. 'The Rig Veda refers to the ship wreck of Bhujyu and the subsequent rescue by the Ashvvins; these incidents give a deﬁnite indication of maritime trade. Later, in tire pre-Maiurayan and Maurayan periods, such commercial -activities seem to have become quite common." In fact, when the Roman Empire was as its height, Indo-Roman trade also seen to have attained its climax. This is evident from' the histories} accounts available in regard to Gupta period, when India's internal and foreign trade reached great heights.

In the first century after Christ, India had a favourable balance of trade with Rome.' The Mann Smriti has an interesting verse which makes boatmen collectively responsible for loss caused by their negligence.'-' a With such a volume and richness of international trade, it is axiomatic that contracts must have been entered into and recorded in writing, even though the writings themselves may not be traceable at the present day. ' 50.4.-R. We have said enough to indicate that even a taxing statute like the Act aﬂch we are concerned involves the consideration of a number of theoretical and practical F The rate structure could bear improvement, the practical working should be remedied ;_ difﬁctilty is caused by the defect in the content of the statute ; avoidable uncertainty ought to be attended to ; fundamental juristic principles should not be overlooked ; sociological considera- tions may not be totally irrelevant ; interpretation of the law ought to be uniform : thc kind

1. Dover, Handbook to Marine Insurance (1951), page 2.

2. Dover, Handbook to Marine I11su1'ance{195'i'), page 3.

3. Dover. Handbook to Marine Insurance (1957), page 3.

4. An Act touching the policies of assurances usedarnoltgst merchants (1601). (43 Elizabeth Chépter 12).

5. See in general R.K. Moolterjee "Indian Shipping" Bombay [2nd Ed. (1957) page 37-54] '

5. See-- ' fa': R.K. Moolcei-_ii_ Indian Shipping {Bombay} and Ed. 1957). Dﬂzes 31-54, 57, 62. TD. [bl M.C. Bandophadhya, Economic Life and Progress in Ancient India (Calcutta 1945), Vol. I_.

Mann 8 :4-08-409. _ _ RX. Mookerji, Indian Shipping (Bombay), (1957), page 36, citing Pliny, Natural History. Vol. 2.18 55''?' 289 of audience to which the law is addressed, and the class of citizens who will primarily be called upon to comply with it, as well as the nature of the transactions which will normally fall within its purview, are matters legitimately to be taken into account; above all, a well drafted law, easy of application and not too difﬁeult to understand, would ultimately result in beneﬁt to the State as well as to the citizens.

_ 50.5. Unfortunately, some of the aspects which we have olutlined above are not properly appreciated. Taxation law is often regarded as a technical branch of the law, not worthy of academic study of capable of being subjected to juristic discussion. The Stamp Act, if we may say so, is the Cinderlla of the law. One hardly ﬁnds, except in judicial decisions relating to particular controversies or in official documents dealing with particular problems, studies discussing or exploring the basic principles underlying the taxing provisions of this particular Act. It is appropriate to make this observation in order to explain why, at some places, we have found it necessary to consider the fundamentals of 'a particular provision and have not limited our discumion to the contours of the relevant problem as they appear on the surface.

50.6. It is this broad perspective from which we have approached the subject. We would like to record our hope that the Governnicnt will view our recommendations in the spirit in_which we have made them.

At the cost of repetition, we would say that we have approached the task of revising the Act not in a narrow pedantic manner, but from a broader perspective embracing a variety of considerations. Unlike many other taxing measures, the Stamp Act is a self-executing Act, in the sense that it is left to the party chargeable with tax to calculate the duty and then to put the proper stamp according to that calculation. The fact that there is no machinery to oversee the operation of the Act, or to watch how far the citizens have complied with the Act may, to a certain extent, justify stringent provisions. But it must, at the same time, be renwnle.-T bored that the very fact that the duty is to be calculated by the 'assessee' throws a veryheavy and onerous burden on the Legislature, inasmuch as this part of the task of the citizen is often difficult. If the legislative scheme is not indicated in clear and precise term in the Act, it becomes still more diﬂicult. It is only occasionally that the citizen faces the authorities entrusted with the enforcement of the Act--the Courts, public oﬂicers. the Collector, the Board of Revenue and others. Cases of compliance or non-compliance with the provisions of the Act also-'come up before the authorities only occasionally.

However, whether or not a particular case comes up before the a'uthorities_,mentioned above, the law always operates and the citizen must decide for himself what, if any, is the Importance not appreciated.

spirit of the rocomniendationr amount payable as stamp duty. This renders it desirable that the substance and form of the law and the manner of its implementation should maintain a certain quality.

50.7. In this context, we attach the greatest importance to the easy accessibility of the statutory material. In the course of our study" of the Act, we have found that a plethora of notiﬁcations has been issued under the Act, particularly under section 9 which confers upon the appropriate Government power to issue reductions and remissions of duty. We are not suggesting any radical change in this power, except the insertion of certain criteria' in order to preserve the validity of the section against an attack on the ground of excessive delegation oi, the legislative power. But-we wish to it to the notice of the Gov.ernme_nt the ordinary citizen must be ﬁnding it difficult, and _sometimes impossible, to acquire accurate information about the notiﬁcations issued from time to time under this. section. To some extent we are recommendingthe incorporation of the substance of certain notiﬁcations'in' the-cone corned articles, but even then a large mass of material contained in the notiﬁcations will 'survive and retain its validity. To us, it appears desirable that some machinery must be devised of making these notiﬁcations easily available to the public.'No doubt, there-is. a practice in the Central Government of bringing out various statutory rules and' orders in volumes arranged .

1. Sue recommendation as to section 9, supra.

Notiﬁcations.

Constitutional positron.

Meaning "rates".

Allahabmdcaseas toenrolmentof Advotalies.

290

subject--wise, but the dilﬁculty is that those volumes deal with a large number of subjects in all of which a particular citizen may not be interested. It will, in our view, be better if a handy volume containing the upto date text of the notiﬁcations is also brought out at regular intervals--- sav, every three yea.rs._The fact that the Stamp Act affects a large number of citizens and not merely those whose cases some up before the courts or whose controversies happen to be reported in the published law reports, becomes material in this context. The inconvenience actually experienced in practice by reason of ambiguity in the statutory materials or their in- accessibility, is very inadequately reﬂected in the case law that comes to the notice of those whose business it is to advise the Government on the revision of the laws. We are, therefore, attaching the greatest importance to the need for re--publication. in a suitable form, of the noti- fications and rules made under the Act. Of course, this problem is not peculiar to the Stamp Act. But, at the moment, we are concerned only with that Act.

50.8. We are conscious that many of the recommendations which we have made relate to documents other than those mentioned in the Union List. Some of the reoomrnertdations touch the rates of stamp dots in regard to documents mentioned in the State I..ist--e.g.. our recommendations as to article 64 (trust). However, we would like to make it clear: that we desire that our recommendations should be carried out even where subject-matter of a particular recommendation may, in some respects, fall within the State List. Our intention is that the change recommended will still be useful in regard to Union Territories, as improving and reform- ing the law in relation to those territories. We are making this observation here, as we have not discussed, underleach provision, the constitutional position as to the precise legislative entry applicable to the particular provision under consideration.

50.9. At this stage, a discussion of the constitutional position would not be So far as is material, and without entering into details, we may say that under the Constitution one must consult all the three legislative lists in the seventh Schedule for ascertaining the legis- lative power on the subject. The topic "stamp duties" falls in the concurrent list,---but with the very important exception that "rates otstamp duty" do not fall within that entry. As regarm' rates, the legislative power is partitioned between' the Union and the States--'1t is, again unnecessary to enumerate the documents placed in each list. But the broad scheme is as indicated above. This brings to the forefront the precise scope of the expression "rates or stamp duty".

Although the expression "rates" would, at 'first sight, seem to be conﬁned to the arithmetical ﬁgures of duty, the ensuing discussion will show that a diﬁerent view would be better in. the particular circumstance of this case. ' . 50.9A. In the first place, the case law' shows that the article regarding duty on entry as Advocate is regarded as within State List, entry 63.

It was, for example, held in State v. Bar Council, Allahabudg, that section 3(iii) of the (LP. Taxation Laws Amendment Act, amending Article 30 of Schedule [B of the Stamp Act, was prinra-jacie, intro vires the State Legislature, for the subject-ntattgr of this particular gpﬁgcfngnj falls within Entry 63 of the State List. It so happened that the Act in that case had received the assent of the President. But that does not meet the position that the subject-matter' of the Act was held to fall within the State List. That the Act received Presidential assent was an aspect that was discussed presumably to repel the objection of repugnauoe to the Advocates Act, 1961.

50.10. Similarly, in a Mvsorc Case', the High Court uphold the of validitvrof Mymre At! No. 29 of 1962'. From the Gazette, it appears that the Act received the assent of the on the twenty-ﬁfth day of September, 1962 and it had not been submitted for the assent -of the President.

'i'.':7i}7£ """'" "'"

2. State v. Bar Council. Allahabad. A.I.R. 1911 AIL 186 [S._.H. Dwlvedi and CD. Psrekh . JJ.).

3. 3.11'. Virtal v. State ofﬁtfysare, A.I.R. 1966 Mysore 138. paras 17-18.

4. The Act wan first published in the Mysore Gazette on the twenty-ﬁfth day of September, 1962.

291

It was held that amended Article 17 of the Mysore Stamp Act was not rcpugucnt to the provisions of section 24 of the Advocates Act. 1961. There was no oonﬁict between the two provisions. The Mysore Act prescribed rate of stamp duty in respect of any entry on the roll of Advocates, the Advocate Act deals with the admission of Advocates on the roll of the State Bar Council. The former was enacted by the State Legislature in pursuance of the -legislative power conferred on it under entry 63 of the State List'. That ﬁeld is exclusively reserved for the stain: Legislature.

The power exercised by Parliament is general legislative power. The power exercised by the State Legislature is a taxing power. The two powers are independent powers and do not collide with each other. Parliament is incompetent to encroach on that ﬁeld, directly or indirectly. The question of repugnance can only arise in matters where both Parliament and the State I..eg'3ll.mres have legislative competence to pass laws. If any repugnancy arises as a result of encroachment by one legislature over the ﬁeld reserved for the other, then the rule of ultra vires steps in, and the law enacted by the legislature having no competence becomes void. In such matters there is no question of superior and inferior legislature.

50.1]. It may be noted that the Mysore Stamp (Amendment) Act, 1962 (Mysore Act 29 of 1962] amended the Mysore Stamp Act, 1957, in detail, and one of the amendments was con- cerning what is article 30 in the Central Act, namely. stamp duty on enrolment of Advocates. In the Mysore Stamp Act, 1957, by virtue of the 1962 amendment, the duty is levied " on a certiﬁcate of enrolment in the roll of an advocate, prepared and maintained by the State Bar Council under the Advocates Act, 1961," the amount of the duty being 250 rupees The Act of 1962 was not submitted to the President for his assent. And yet, the validity of the Act of 1962 was upheld by Hedge J. as he then was) and I-Ionniah J1. Several points were in issue,-- some have been stated above. But we are concerned with only one of the propositions laid down in the judgment, namely, that the High Court held specifically that the law in question fcllwithin State List, entry 63. The argument that the Concurrent List, entry 44, would be attracted, and that Parliament having evinced interest in the ﬁeld, the 'state legislature had no competence to enact the impugned provision, was not pressed, and the Court also speciﬁcally held that there was no substance in that argument-

5£l.12 Secondly, apart from the case law mentioned above,somc support is also lent to the above approach by the fact that adaptations of section 9 of the Act have all been based on a sinilar Issumption, namely, that a modiﬁcation of the text of the charging article even a modiﬁ- cation not affecting the arithmetic of stamp duties----is for the states. ' 50.13. Thirdly. it should also be pointed out that the creation of new exemptions under an article, or substantial modiﬁcations in the description of the instrument in the article, 'would, in modify the rate of stamp duty, because if a new exemption is created under an article then me rate on the exempted instrument becomes nil- At least, the old rate disappears when a new exemption is created. Conversely, when an existing exemption is taken away, the rate appli- cable under the main article becomes applicable to the instrtnnent now made taxable by removing the exemption. In this sense, _a change i nthe left hand column of the Schedule of duties--tex- lnally in the main article or in the exeuiption---aﬁ'ects the right hand column (which denotes the me). ' 50l14. Fourthly, it may also be noted that the legislatve practice (in the centre] so far has been to avoid amendment of exemptions, where the exemptions are contained below an article concerning documents in the State List. L $0.15. It is also not to be overlooked that if a wider View is taken of the entry in the Con- current List, then the result would be that Parliament would be competent to reduce the duty on the document mentioned in the State List to a zero, but it cannot partially reduce the rate "i. pin. Mm: v.E.»Lue ofil-fysarc. .a..1.a. 1966 Mys. 13s, 141. 142. Paragraphs 17 and is (Head: and I-Ionniah, Mysore case.

Adaptations.

Eliact or exemp-

tions.

292

of duty on the document. It can adopt the first mentioned course {total abolition ol the duty either by tcxtually deleting from the schedule the entry in the left hand column {description of the instrument) or by providing that no tax shall be levied on the particular instrument-

If a wider construction of the entry in the Concurrent List, is taken, then, from a strict legal point of view, it would be open to Parliament to freeze the taxing power of the States on Stamp duties-

[i) by not mentioning in the stamp Act any other instruments other than those men- tioned in the Union entry, and utfii) by providing further that no other instrument shall be subject to.stamp duty.

Such a system does not seem to have been adopted in the case of any other tax. A perusal of the taxing entries in the Constitution shows no such bifurcation in relation to the power to tax _ on a given subject--matter. -

In the very nature of things, the legislative arrangement regarding stamp duties presents complex problems. As every aspect relating to stamp duties, except the mic of stamp duties, falls under the Concurrent List, the concurrent power assumes importance, if taken literally. The mode and manner of collection of stamp duties, the pullishmcnt for the violation of the Stamp Act and evasion of the stamp duties and other consequences ﬂowing from non-stamping etc. can, with- out much controversy, be regarded as ﬂowing from it. But does it extend to such a vital matter as the selection of the instrument for charging tax ?

Ra . 1 50.16. Sixthly, it would be incomplete, if not meaningless, to speak of rates withdut the tea income at: . . . . .

'without charge. charge of tax, ]llS'i. as It would be incomplete to speak of rates without the tax cl1arged- Such a position is rather unusual in taxation legislation in India, to put it at the mildest.

50.17. It is for these reasons that there is, in our view justiﬁcation for readingthe entry- in the Concurrent List more narrowly than a literal construction would suggest, and for reading the Entry as to rate more widely than literal construction would suggest. No doubt, some of the"

anomalies indicated above can be answered by arguing that when the Union or a State levies tax on a particular document by way of stamp duty, it does so by a combined and simultaneous exercise of its power in the Concurrent List read with its power in the Union List or the Slate List, as the case may be. But what requires to be pointed out is that such simultaneous and combined recourse to both the Lists is rather unusual in the general scheme of the Constitution, inregardto1hepowertotax.- '. 1 W ' - ..':

Therciorc, so tar as the constitutional position is concerned, we are of the view that it not be within the competence of the Parliament to implement some of the recommendations made by us in this Report in so far as their application to the States is concerned. We donut, m thir "S context, pause to consider how far article 252 of the Constitution can be utilised. ' -

5D.l8- Notwithstanding what we have stated above, it is our intention, as already stated';"'ﬂ1att'* tbo,se,recomn1endation should be impiemented, so that at least in regard to the Union"-Ten'i-'-' tories the-law would be reformed. Further, as regards States, we hope that the Union ment will be able to persuade the States to make similar amendments in regard to the areas or' the States. c 50.19. Finally, we may state that we are aware that no-tax can be perfect. As a said' : » - T _ "Whoever hopes a faultless tax to see-,': Hopes, what-never was, oris, or"e'er'shal1 b'a,g'Q":

"But it should not be difficult to introduce a certain element of rationality and eclguityﬂ in provisions of the taxing law. ' . __r _ I _ V _ _ 7 A .

T "1. Para--5G.3;-supra. at - - ' -

' ' - 2. M. Cyﬂock. Adaptation of Pope. quoted by Mathrubhutham and Srinivasan, Law. of Sales" TS}: in India (1954), page . _ _ . . _ , _ I M . 1. o--24 t.awm--1s-:2-13-2200 c 293 We would liko to place on record our warm appreciation of the valuable assistance we have received from Shri Bakshi, Member-Sccretaxy of the Commission in tho prepara-

tion of this Report.

P.B. Gajcndragardkar ....

P.K. Tripathi ....

S.S.I§havan. .....Me~mber.

S.P.Scn-Vorma . . . . .Member.

B.C.Mitra .... . Member.

P.M.Ba.kshi . . .. . Member-Secretary.

Dated New Dclhi.

the 1st March. 1977'.

MGIPRRND--Sac . D-1--24M of Law,?77--19-12-75-2200

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The Indian Stamps Act,1899