Madhya Pradesh High Court
Shiv Kumar Saxena And Ors. vs Manishchand Sinha And Anr. on 2 August, 2004
Equivalent citations: 2004(4)MPHT475
Author: R.V. Raveendran
Bench: R.V. Raveendran
ORDER R.V. Raveendran, C.J.
1. The appellants fifed Civil Suit No. 6-B/2001 before the Fifth Additional District Judge, Chhindwara for recovery of Rs. 1,40,000/- with interest. The plaint averments in brief are :--
1.1. The first respondent is the legal heir of late Smt. Jugnoo Bai, and adjudicated insolvent. A composition scheme was filed by the first respondent before the Insolvency Court for acceptance under Section 38 of the Provincial Insolvency Act, 1920. The Court fixed the matter for consideration of the said scheme on 9-4-1991.
1.2. The first respondent expecting that the composition scheme would be accepted and that he would be appointed by the Court as the "Appointee" (person in whom the properties of the insolvent would vest with power to sell the properties of the insolvent and deposit the proceeds in Court for distribution among the creditors), entered into an agreement to sell the immovable properties of the insolvent measuring 1,63,936 sq. ft. (less lands already sold to others by the receiver) to the appellants herein for a consideration of Rs. 8 lakhs and received Rs. 1,40,000/- as advance.
1.3. The said agreement was reduced into writing and was duly executed and attested, one week prior to 9-4-1991 on a white paper, but was not stamped. The date of the agreement and the date of the order of the Insolvency Court permitting the sale, were left blank in the agreement. The said agreement recorded that 50,000 sq. ft. of open land to be sold was delivered to the intending purchasers under the agreement (appellants).
1.4. On 9-4-1991, the Insolvency Court accepted the compositior scheme submitted by the first respondent. However, it appointed One Prasun Shrivastava, Advocate and Ex-Receiver, and not the first respondent as the Appointee to sell the properties. As a consequence, the properties of the insolvent did not vest in the first respondent, nor was the first respondent able to execute the sale-deed in pursuance of the agreement. Consequently, the first respondent, it was alleged, was liable to refund the advance of Rs. 1,40,000/- received by him with interest, in all Rs. 1,89,000/-, but failed to do so, necessitating the suit.
2. In the said suit, the appellants made an application under Section 33 read with Section 38(2) of the Indian Stamp Act, 1899 (as applicable in Madhya Pradesh, hereinafter referred to as 'Stamp Act') for impounding the said agreement and sending it to the Collector for determining the nature of the document and validating it. The application was opposed by the first respondent. On considering the said application, the learned Additional District Judge passed an order dated 31-3-2003. Relying on the decision of this Court in Vimla Devi V. Dhanraj Singh [2000 (I) MPWN 82], the Court held that the agreement was chargeable to duty as a conveyance under Article 23 of Schedule 1-A to Indian Stamp Act, 1899 having regard to the fact that possession of the immovable property (50000 sq. ft. out of the area agreed to be sold) was transferred to the purchasers under the agreement. He, therefore determined the amount payable by the appellants towards stamp duty as Rs. 60,000/- and the penalty payable as Rs. 6,00,000/- in all Rs. 6,60,000/-, for admitting the said document in evidence under Section 35(1). He also directed that if the amount was not paid, the instrument shall be impounded and sent to the Collector.
3. The said order was challenged by the appellants in Writ Petition No. 27490/2003. The learned Single Judge who heard the matter, dismissed the said writ petition by order dated 12-9-2003. The order of the learned Single Judge is challenged in this Letters Patent Appeal.
4. The learned Counsel for the appellants contended that the document is a draft agreement and not an 'agreement', and, therefore, it is not exigible to stamp duty. Alternatively, he contended that as the vendor under the said agreement (first respondent) did not have any title to the property when the document was executed and the agreement was to come into effect only when the Court passed an order appointing the vendor as Appointee, it was at best a contingent contract, which would only attract stamp duty of Rs. 10/- under Article 5(b) of Schedule 1-A to the Stamp Act.
5. The following cardinal principles laid down by Courts should always be kept in view, before considering any question relating to stamp duty:--
(i) Stamp duty is leviable on the instrument and not the transaction.
(ii) The substance of the transaction embodied in the instrument determines the stamp duty and not the form or title of the instrument.
(iii) In order to determine the nature of document and whether it is sufficiently stamped, the Court shall only look to the contents of the document as it stands and not any collateral circumstances which may be placed by way of evidence. In other words, for purposes of stamp duty, the intention of the parties is to be gathered only from the contents of the instrument and not any outside material. (But where the stamp duty depends on the market value, outside material can be considered in the manner provided in the relevant stamp law).
(iv) To find out the true character of an instrument for purpose of stamp duty, the document should be read as a whole and the dominant purpose of the instrument should be identified.
(v) The instrument must be stamped according to its tenor though it can not be given effect for some independent cause.
(vi) The Revenue can not contend that the object of the transaction was to achieve a purpose not disclosed in the document and, therefore, the document should be stamped as per such deemed, but undisclosed purpose. Similarly, the party liable to pay stamp duty can not contend that the purpose disclosed in the instrument is not the actual purpose and therefore, he is not liable to pay stamp duty on the apparent tenor of the instrument.
(vii) Once a document containing effective words of disposition is executed, it attracts stamp duty. The taxable event can not be postponed by contending that it was intended to come into effect on a future date, on the happening of a particular contingency.
6. Article 23 of Schedule 1-A of the Indian Stamp Act, 1899 (as amended in Madhya Pradesh) relates to conveyance. At the relevant point of time (April, 1991), Article 23 reads thus:--
Description Stamp Duty Conveyance not being a transfer charged Seven and half per or exempted under No. 62 irrespective of cent of such market the market value of the property which is value .................. ...... the subject matter of conveyance. Explanation :-- For the purpose of this article, where in the case of agreement to sell immovable property, the possession of any immovable property is transferred to the purchaser before execution or after execution of such agreement without executing the conveyance in respect thereof, then such agreement to sell shall be deemed to be a conveyance and stamp duty thereon shall be leviable accordingly: Provided further that where subsequently a conveyance is effected in pursuance of such agreement of sale, the stamp duty, if any, already paid and recovered on the agreement of sale which is deemed to be a conveyance shall be adjusted towards the total duty leviable on the conveyance, subject to a minimum of Rs. 10/-.
It is clear from the Explanation to Article 23 (which was inserted by M.P. Act No. 22 of 1990 with effect from 15-10-1990), that where possession of any immovable property is transferred to the purchaser under the agreement of sale, before the execution of the sale-deed, the agreement shall be liable to stamp duty as a conveyance.
7. In Veena Hasmukh Jain V. State of Maharashtra [(1999)5 SCC 125], the Supreme Court considered a provision in part materia (Explanation I to Article 25 of Schedule I to Bombay Stamp Act, 1958), and clarified its effect thus :--
"8. The duty in respect of an agreement covered by the Explanation is leviable as if it is a conveyance. The conditions to be fulfilled are that if there is an agreement to sell immovable property and possession of such property is transferred to the purchaser before the execution or at the time of execution or subsequently without executing any conveyance in respect thereof, such an agreement to sell is deemed to be a "conveyance"........ ......... ......... ......... ......... .........
It is open to the Legislature to levy duty on different kinds of agreements at different rates. If the Legislature thought that it would be appropriate to collect duty at the stage of the agreement itself if it fulfils certain conditions instead of postponing the collection of such duty till the completion of the transaction by execution of a conveyance deed ..... it would be necessary to collect duty at agreement stage itself........"
8. We have carefully gone through the agreement keeping in view the aforesaid principles relating to stamp duty and the provisions of Article 23. The agreement is not dated. The column relating to date of execution is left blank. There is also a blank in regard to the date of the order of the Insolvency Court granting permission for sale. But the agreement is duly signed by the vendor and the purchasers and duly attested by two witnesses. It is put forth as a regular agreement executed on 2-4-1991 (one week prior to 9-4-1991) and is relied on as proof of payment of advance of Rs. 1,40,000/- return of which is claimed in the suit. Therefore, the Civil Court was justified in treating it as an agreement liable to stamp duty under Article 23.
9. The appellants are estopped from contending that it is a draft agreement, as they continue to contend that it is a regular agreement, for purposes of recovering the advance allegedly paid under it. In the plaint, the appellants clearly stated that an agreement was executed by the respondent in favour of appellants, and a sum of Rs. 1,40,000/- was paid under the said agreement. In the writ petition also the appellants have categorically stated thus:--
"About a week before 9-4-1991, M.C. Sinha entered into an agreement to sell the immovable properties measuring 1,63,936 sq. ft...... It has been mentioned that out of aforementioned area only 50,000 sq. ft. of open land has been delivered to the prospective purchasers."
Therefore, the appellants' case is that the document in question was a duly signed agreement and not a draft agreement. If the appellants themselves (plaintiffs in the suit) chose to describe the document in the plaint, as a duly executed agreement and not a draft agreement, the Court will proceed on the basis that it is a duly executed agreement. If such agreement refers to delivery of possession, necessarily the Court is bound to subject it to stamp duty and penalty, by treating it as a conveyance.
10. We could have appreciated the contention of the appellants that the document was only a draft agreement, if they had described the document as a 'draft agreement' in the plaint. If the document was described as a 'draft agreement' in the plaint, it was likely that the Trial Court might have taken a different view in regard to stamp duty. But by describing the document as an 'agreement' duly signed by the parties and witnesses, and that Rs, 1,40,000/-was paid under the agreement, the appellants left no choice to the Trial Court, but to hold that it is an agreement; and as possession was delivered under the agreement, the Court had to direct payment of stamp duty as a conveyance. If the duty and penalty is not paid, the Court will deal with the document as provided in Section 38(2) of the Act.
11. It is true that the Court has to ascertain the nature and substance of the transaction effected by the instrument, to determine whether it falls within the charge of stamp duty. The substance has to be ascertained from the contents of the document and not outside the document material. But one aspect requires to be noticed in this context. There is a need for the Court to ascertain the substance of a transaction to find out whether the document falls under any of the entries in the Schedule and if so under which entry, only if the party producing the document claims that it is not what it purports to be. For example, if a document is titled as a 'mortgage deed', but the party contends that it is a lease deed and the contents show that it is only a lease deed', the Court will examine the matter and if the contention is found acceptable, hold that the document has to be stamped as a 'lease' and not a mortgage. Similarly, if the title of the deed describes it as 'lease for ten years', but in the plaint, the respondent contends that it is merely an 'agreement to lease for 11 months', it will be open to him to request the Court to examine the contents of the document to establish that it is only an agreement to lease for a period of 11 months. On the other hand, if the document purports to be a lease deed for ten years, and the plaintiff avers in the plaint that the deed is a lease for ten years and files a suit based on the lease deed, he can not subsequently contend, only for purpose of stamp duty, that it is an 'agreement to lease for 11 months' and is not liable to stamp duty as a lease deed for ten years. A party can not be permitted to approbate and reprobate. One can not claim the 'benefits' under a document by contending that it is a duly executed document, but at the same time contend that the 'document' is not executed but only a 'draft' for purposes of stamp duty. So long as the appellants continue to claim in the plaint that the document is a duly executed agreement, the appellants can not escape liability to pay duty and penalty, nor request the Court to examine the document and hold that it is only a draft agreement for purposes of stamp duty.
12. In this case, the appellants had described the document in the plaint, as an agreement and hot a draft agreement. The said document is executed by parties. The contents of the document make it clear that it is an agreement which falls under the Explanation to Article 23 in Schedule I-A of the Indian Stamp Act (as amended in M.P. at the relevant point of time). The question whether it is a 'contingent' contract or not is not relevant for the purposes of Stamp Duty. As already stated above, the liability to pay stamp duty does not depend on a valid title or the legal enforcibility of an instrument. Therefore, the document will have to be stamped as a conveyance.
13. We, therefore, find no merit in the appeal. The appeal is accordingly dismissed.