Madras High Court
Official Assignee, High Court vs The Inspector General Of Registration ... on 23 September, 1991
Equivalent citations: (1991)2MLJ455
ORDER Lakshmanan, J.
1. M/s. G.V.K.C. and Company and three others were adjudicated as insolvents on a creditor's petition by an order of this Hon'ble Court, dated 5.10.1976.
2. Consequent on the vesting of the property in the Official Assignee, the properties of the second insolvent, G. Venkatasubba Rao measuring about 11 acres and 09 cents of agricultural lands situated at Kodavallivaripalam Village, Chirala Taluk, Prakasam District, Andhra Pradesh and a house bearing Assessment No. 2835 in Vetapalam Village, Chirala Taluk, Prakasam District, Andhra Pradesh were brought to public auction on 12,6.1980 and again on 31.10.1984 for the second time. But the sale was not concluded. The second insolvent's son, Murali Mohan, the fourth respondent herein filed a partition suit in O.S. No. 46 of 1980 on the file of the Sub Court at Chirala, Andhra Pradesh and after mutual deliberations and discussions, the fourth respondent had agreed to purchase the insolvent's undivided half share in those two properties for Rs. 1,40,000. By order dated 21.1.1991, this Court directed the Official Assignee to accept the offer of Murali Mohan for the sale of the undivided half share of the insolvent in the property mentioned above for Rs. 1,40,000, granting lime till 30.4.1991. The fourth respondent has agreed to withdraw the partition suit filed by him on the file of the Sub-Court, Chirala and accordingly, the fourth respondent withdrew the suit and the same had been dismissed as not pressed on 25.6.1991. The fourth respondent has also paid the entire sale consideration of Rs. 1,40,000 as on 22.4.1991. The Official Assignee executed a sale deed on 10.7.1991 in favour of the fourth respondent. By letter No. 262/76-B1 in I.P. No. 7 of 1975, dated 11.7.1991, the Sub Registrar, Chirala the third respondent had been requested to register fhe Deed of Conveyance, dated 10.7.1991. When the fourth respondent presented the Deed of Conveyance before the third respondent Sub Registrar, Chirala, the fourth respondent was directed by the second and third respondents herein to pay surcharge at 5 per cent on the stamp duty, even though the stamp duty was exempted under Section 115 of the Presidency Towns Insolvency Act, herein after referred to as the Act. According to the respondents 1 to 3 stamp duty at 7 per cent atone has been exempted and as such, the fourth respondent was required to pay the surcharge at 5 per cent on the stamp duty or to get an order from this Court, exempting him from the payment of surcharge as well. Under these circumstances, the Official Assignee has filed the present application to direct the respondents 1 to 3 to register all the sale deeds executed by him, including the sale deed dated 10.7.1991 executed in favour of the fourth respondent in respect of the lands and the house mentioned above free from stamp duty and surcharge whatsoever, as provided for under Section 115 of the Act.
3. The District Registrar of Assurances, Prakasam District has filed a counter affidavit on behalf of the respondents 1 to 3 on 8.9.1991. He has contended that the surcharge at 5 per cent on the market value of the schedule property has to be paid under Section 120 of Andhra Pradesh Municipalities Act, 1965 as surcharge is not automatically exempted, if the stamp duty is exempted by the Sub Registrar or sale consideration, whichever is higher in accordance with the provisions of Andhra Pradesh Municipalities Act. He has further contended that no provision has been made for exemption of Surcharge even by the Government and irrespective of exemption of stamp duty the surcharge has to be collected from the vendees of the document and that the surcharge collected in Andhra Pradesh by the Sub Registrar in the shape of stamps will be allocated to the credit of local bodies concerned as governed under separate enactments.
4. It is relevant to extract the last paragraph of page 2 of the counter affidavit filed on behalf of the Respondent 1 to 3:
It is true that the conveyance deeds executed by the Official Assignee, Madras for relief of insolvent debtors are exempt from stamp duty as provided under Section 115 of the Insolvency Act. However, this exemption is confined to the duty leviable under the Indian Stamp Act only and it does not extend to the duty on transfer of property which is leviable under different local bodies Act.
It is thus clear that there is no quarrel or dispute with regard to the exemption granted from stamp duty as provided under Section 115 of the Act. However, according to the third respondent, this exemption is confined on the duty leviable under the Indian Stamp Act only and it does not extend to the duty on transfer of property which is leviable under different local bodies Act. Strong reliance was placed on the Full Bench decision of Andhra Pradesh High Court in K.K. Rao v. District Registrar Assurances and Collector . This is a case in which the scope of Section 120 of Andhra Pradesh Municipalities Act, 1965, authorising the levy of duty on transfer of property was explained. Another decision in a similar matter was rendered by the Division Bench of the Andhra Pradesh High Court in their Judgment in W.P. No. 6803 of 1989, dated 15.12.1990. The relevant paragraphs relied on by the Registration Department in the writ petition is re-produced hereunder:
We have to bear in mind that the stamp duty charged and collected under the Indian Stamp Act is credited to the State Fund whereas the tax on transfer of immovable property is the tax levied and collected for the benefit pf the Municipal Corporation of Hyderabad under the provisions of the Hyderabad Municipal Corporations Act, 1955. It is credited to the Municipal Fund.
Therefore, the Order granting exemption from payment of Stamp Duty cannot be said to be applicable to tax on transfer of property.
Therefore, though no stamp duty is chargeable on those instruments, tax on transfer of property can be levied and collected.
Surcharge generally means 'additional duty' The said expression merely indicates the mode and description of the levy namely that it is collectable as on additional stamp duty on an instrument. It does not indicate that the levy of tax on transfer of property is dependent upon the levy and collection of stamp duty.
5. Learned Counsel appearing for the respondents 1 to 3 has argued that according to the provisions of Section 29 of the Indian Stamp Act, the stamp duty on the sale deed is to be borne by the claimant i.e., the fourth respondent herein unless and otherwise provided for by a separate agreement entered into and that since the Official Assignee is not under an obligation to pay the stamp duty under Section 29 of the Indian Stamp Act and since there is no agreement to provide otherwise, the Official Assignee should have no grievance at all as regards the payment of surcharge. Thus, it was contended that the fourth respondent may be directed to present the sale document with required surcharge at 5 per cent on the market value of the schedule property or on the sale consideration, whichever is higher.
6. The short question that arises for consideration in this application is whether the sale deed executed by the Official Assignee in favour of the fourth respondent of the property measuring about 11 acres and 09 cents of agricultural lands and a house bearing Assessment No. 2835 in Kodavallivaripalam Village, Chirala Taluk, Prakasam District, Andhra Pradesh District respectively is liable to be exempted from stamp duty as well as the surcharge as claimed by the respondents under the provisions of the Andhra Pradesh Municipalities Act.
7. I have heard the arguments of Mr. T.P. Parameswaran, learned Official Assignee of Madras and the learned Counsel appearing for the respondents 1 to 3.
8. Section 115 of the Act reads as under:
115. Exemption from duly of transfers, etc., under this Act: (1) Every transfer, mortgage, assignment, power of attorney, proxy paper, certificate, affidavit, bond or other proceedings, instrument or writing whatsoever before or under any order of the Court, and any copy thereof, shall be exempt from payment of any stamp or other duty whatsoever.
(2) No stamp duty or fee shall be chargeable for any application made by the Official Assignee to the Court under this Act, or for the drawing and issuing of any order made by the Court on such application.
It is therefore clear on the language of Section 15 of the Act that in the case of a transfer of a property that is vested with the Official Assignee, no stamp duty need be paid as per the provisions of the Stamp Act. It is also conceded by the respondents 1 to 3 as seen from their counter-affidavit filed that the Conveyance Deeds executed by the Official Assignee, Madras for relief of insolvent debtors are exempt from Stamp Duty as provided under Section 115 of the Act. However, they say that this exemption is confined to the duty leviable under the Indian Stamp Act only and it does not extend to the duty on transfer of property which is leviable under different local bodies Act.
9. There is nothing in the Act to say that the provisions of the Act do not extend to areas situate outside the Presidency Towns. Therefore, when Section 115 speaks of a transfer by the Official Assignee under orders of this Court, it can only mean transfer of the property of the insolvent which had vested with the Official Assignee. Therefore, on the very face of it, Section 115 takes within its ambit the transfer of properties of the insolvent wherever situate and which has become vested with the Official Assignee, consequent on the order of adjudication. In this view, the transfer effected by the Official Assignee of a property situate outside the Presidency Towns shall be exempt from Stamp duty under Section 115 of the Act. There is no provision under the Act which limits the applicability of the provisions of the Act only to the Presidency Towns. In this connection, Section 17 of the Presidency Towns Insolvency Act can be usefully referred to : Section 17 of the Act is reproduced as under:
17. Effect of order of adjudication: On the making of an order of adjudication, the property of - the insolvent wherever situate shall vest in the Official Assignee and shall become divisible among his creditors, and thereafter, except as directed by this Act, no creditor to whom the insolvent is indebted in respect of any debt provable in insolvency shall, during the pendency of the insolvency proceedings, have any remedy against the property of the insolvent in respect of the debt or shall commence any suit or other legal proceeding except with the leave of the Court and on such terms as the Court may impose.
Provided that this section shall not affect the power of any secured creditor to realise or otherwise deal with his security in the same manner as he would have been entitled to realize or deal with it if this Section had not been passed.
The said section provides that on the making of an order of adjudication, the property of the insolvent shall vest in the Official Assignee and shall become divisible among his creditors. It follows that consequent on the passing of an order of adjudication, the properties of an insolvent situate outside the limits of the Presidency Towns also vest in the Official Assignee. Section 7 of the Act deals with the power of the Court to decide all the questions arising in Insolvency. It confers on the Court to decide all questions whatsoever whether of law or fact, which may arise in any case of insolvency coming within the cognizance of the Court, or which the Court may deem it expedient or necessary to decide - for the purpose of doing complete justice or making a complete distribution of property in any such case. Two decisions of our High Court can be usefully referred in this connection:
They are : 1. Abdul Khader v. The Official Assignee of Madras I.L.R. 40 Mad. 810 : 36 I.C. 524; and 2. Kancherla Krishna Rao In re. I.L.R. 51 Mad. 540. In Abdul Khader's case I.L.R. 40 Mad. 810 : 36 I.C. 524, a Division Bench of our High Court, consisting of the Officiating Chief Justice Seshagiri Ayyar, it was held that:
Under Section 7 of the Presidency Towns Insolvency Act (III of 1909), the High Court of Madras in the exercise of its Insolvency Jurisdiction has jurisdiction to adjudicate on claims relating to immovable property situate outside the limits of its Ordinary Original Civil Jurisdiction; the jurisdiction which existed under Sections 26 of 11 and 12 Vict., Cap. 21, has not been cut down by the Presidency Towns Insolvency Act.
The jurisdiction conferred by Section 7 of the Act is of a discretionary character, and it is seldom that the Insolvency Court will deem it expedient to try difficult questions of title; the Judge in such cases would ordinarily ask the Official Assignee in Insolvency to establish his title in an ordinary Civil Court.
In Kancherla Krishna Rao's case I.L.R. 51 Mad. 540, a Full Bench of our High Court has held that Section 7 of the Act confers jurisdiction on the High Court in garnishee proceedings even when the garnishee lives outside the territorial jurisdiction of this Court.
10. It is therefore clear that the claims as regards the property situate outside the jurisdiction of this Court could be decided by this Court.
11. Section 68 of the Act in so far as it is relevant for the present case reads as follows:
68. Duty and power of Official Assignee as to realization : (1) Subject to the provisions of this Act the Official Assignee shall with all convenient speed, realize the property of the insolvent, and for that purpose may-
(a) sell all or any part of the property of the insolvent;
(b) give receipts for any money received by him;
and may, by leave of the court, do all or any of the following things, namely:
(c) carry on the business of the insolvent so far as may be necessary for the beneficial winding up of the same;
(d) institute, defend or continue any suit or other legal proceedings relating to the property of the insolvent;
(e) employ a legal practitioner or other agent to take any proceedings or do any business which may be sanctioned by the Court;
(f) accept as the consideration for the sale of any property of the insolvent a sum of money payable at a future time or fully paid shares, debentures or debenture stock in any limited company subject to such stipulations as to security and otherwise as the Court thinks fit; (g) mortgage or pledge any part of the property of the insolvent for the purpose of raising money for the payment of his debts or for the purpose of carrying on the business;
(h) refer any dispute to arbitration, and compromise all debts, claims and liabilities, on such terms as may be agreed upon;
(1) divide in its existing form amongst the creditors according to its estimated value, any property which from its peculiar nature or other special circumstances cannot readily or advantageously be sold.
(2) The Official Assignee shall account to the Court and pay over all monies and deal with all securities in such manner as is prescribed or as the Court directs.
For our present purpose Clauses (a) and (g) of Sub-section (1) of Section 68 of the Act are relevant to be noticed. Under Section 68 of the Act, the Official Assignee has got the power to sell or mortgage or pledge the whole or any part of the property of the insolvent wherever situate for the purpose of realising the property of the insolvent. In these circumstances, the transfer, mortgage or assignment referred to in Section 115 of the Act relates to a transfer, mortgage or assignment of the insolvent's property, wherever situate and which have become vested with the Official Assignee. Section 115 of the Act cannot be so interpreted as to mean that only such transfer, mortgage or assignment of properties of the insolvent situate within the Presidency Towns shall alone be exempt from stamp duty.
12. I am therefore definitely of the view that under Section 115 of the Act, all transfers, mortgages or assignments of insolvent's property wherever situate within the Presidency Towns or outside, shall be exempt from stamp duty or other duty whatsoever. However, the situation becomes complicated by reason of the fact that the Andhra Pradesh Municipalities Act, 1965 which provides for the payment of surcharge at 5 per cent on the market value of the value of the schedule property arrived at under Section 120 of the Andhra Pradesh Municipalities Act, 1965 as surcharge is not automatically exempted, if the stamp duty is exempted by the third respondent Sub Registrar or sale consideration which ever is higher in accordance with the provisions of the Andhra Pradesh Municipalities Act, wherein no provision has been made for exemption of surcharge even by the Government. The question that arises therefore is whether the Act shall prevail over the Andhra Pradesh Municipalities Act. Learned Counsel appearing for the respondents 1 to 3 reiterated the contentions stated in the counter affidavit filed.
13. Learned Official Assignee contended that item No. 9 of the concurrent list related to Bankruptacy and Insolvency. Consequently, he has contended that there cannot be any repugnancy between the Andhra Pradesh Municipalities Act and the Presidency Towns Insolvency Act. Though Section 115 of the Act dealt with the grant of exemption from payment of stamp duties in the case of transfer mortgage and assignments of land by the Official Assignee, the pith and substance of the legislation being bankruptcy and insolvency, the fact that in some respect the Act entrenches upon item No. 44 of the concurrent list which has been occupied by the State of Andhra Pradesh will not render it invalid. In my view, the provisions contained in Section 15 of the Act granting exemption from stamp duty in respect of transfers executed by the Official Assignee falls within the law of bankruptcy and only incidentally touches item No. 44 in the concurrent list which related to stamp duties other than duties or fees collected by means of judicial stamps, but not including rates of stamp duty. Viewed in this light, there is no repugnancy at all between the Presidency Towns Insolvency Act and the Andhra Pradesh Municipalities Act, 1965. Both operate in different fields. I am therefore of the view that no stamp duty or surcharge is liable to be paid as per the provisions of the Andhra Pradesh Municipalities Act on the sale deed executed by the Official Assignee in favour of the fourth respondent for the properties which are the subject matter of this application.
14. The Full Bench decision strongly relied on by the learned Counsel for the respondents 1 to 3 in K.K. Rao v. District Registrar Assurances and Collector , and the Division Bench decision of the Andhra Pradesh in W.P. No. 6803 of 1989, dated 15th December, 1990 have no relevance to the facts and circumstances of the present case and they are distinguishable. Two questions were referred to the Full Bench by the Board of Revenue, acting as the Chief Controlling Revenue Authority under Section 57 of the Stamp Act, 1899. The first question is whether the document No. P-2 of 1968 pending registration before the Sub Registrar's Office, Bhimavaram is one of cinema hall and machinery chargeable with surcharge under Section 120 of the Andhra Pradesh Municipalities Act, 1965, in addition to stamp duty payable under Article 20 of Schedule 1-A of the Indian Stamp Act,. 1899 even though it does not involve the transfer of any right or interest in the land. The second question was whether the document is a simple conveyance chargeable with a stamp duty under Article 20 of Schedule 1-A of Indian Stamp Act, 1899. On the facts and Circumstances of the said case, the Full Bench of Andhra Pradesh High Court held thus:
The question of applicability of Section 120 of the Andhra Pradesh Municipalities Act, 1965 to the present transaction does not depend upon whether the site on which theatre and machinery are located is sold or leased out to the purchaser or not. We have already noticed that the vendors who are the owners of the cinema theatre and the machinery sold that immovable property alone to the purchaser. The sale deed in question therefore is that of immovable property of the description mentioned in Section 120 of the Andhra Pradesh Municipalities Act, 1965. It would therefore, be subject to surcharge under Section 120 apart from the stamp duty already paid under Article 20 of Schedule 1-A of the Indian Stamp Act.
15. The question that arises for consideration in the present case is entirely different. In the present case, all the transfers, mortgage or assignments made on the insolvent's property wherever situate within the Presidency Towns or outside are exempt from stamp duty or other duty whatsoever under Section 115 of the Act. When once stamp duty a self is not payable, the question of payment of surcharge does not arise at all, which is only consequential to the payment of the stamp duty. Hence, the Full Bench Judgment will be of no assistance lo the respondents 1 to 3 in deciding the dispute between the parties in the present case. Likewise the Division Bench Judgment reported in W.P. No. 6803 of 1989, dated 15th December, 1990 is also not applicable to the facts and circumstances of this case and the same is distinguishable. Hence, I reject the contention of the respondents 1 to 3 and direct them to register all the sale deeds including the sale deed dated 10.7.1991 executed in favour of the fourth respondent in respect of the lands situate at Kodavallivaripalam Village and the house situate at Vetapalam Village, free from stamp duty and surcharge, whatsoever, as provided under Section 115 of the Act.
16. This application stands allowed. No costs.