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Board Of Revenue v. Padum Bahadur Singh
Structured Summary of the Opinion (Srivastava, J.)
Factual and Procedural Background
On 1 December 1950 Kunwar Padum Bahadur Singh executed a document in favour of Ramesh Chandra describing the former as "seller" and the latter as "buyer." Clause 1 set out a sale of standing trees (excluding certain species and up to a specified girth) over specified compartments and an approximate area of 886 acres; Clause 2 provided for payment of Rs. 50,000 by instalments on specified dates; other clauses governed cutting/removal and authorised the seller to stop export of forest produce if the buyer's exported produce equalled or exceeded the price paid, and declared the instalment amounts to remain a charge on the produce. The document bore a stamp of Re. 1 and was attested by two witnesses.
The Collector considered the document to be a deed of conveyance within Sec. 2(10) of the Indian Stamp Act and therefore chargeable under Article 23 of Schedule I. He referred the matter to the Board of Revenue as deficiently stamped. The Board of Revenue doubted whether the document was chargeable as a conveyance under Art. 23 or exempt under exemption (a) of Art. 5 of the Schedule, and referred the question to the Court under Sec. 59 of the Act. The Court was required also to consider whether the document should be stamped as a bond under Art. 15 or as a mortgage under Art. 40 of the Schedule.
Legal Issues Presented
- Whether the document is a "conveyance" within the meaning of Sec. 2(10) of the Indian Stamp Act and therefore chargeable under Article 23 of Schedule I.
- Whether the document falls within Article 5 of Schedule I (agreements or memorandum of agreement), specifically clause (c), and whether it is exempt under exemption (a) to Article 5 as an agreement relating to sale of goods or merchandise.
- Whether, alternatively, the document is a "bond" under clause (5)(b) of Sec. 2 and thus chargeable under Article 15 of the Schedule.
- Whether the document creates a charge such that it is a "mortgage deed" under clause (17) of Sec. 2 and thus chargeable under Article 40 of the Schedule.
- If the instrument falls within more than one category in Schedule I, whether it is chargeable with multiple duties or only the highest/comparative duty (interaction of Sec. 5 and Sec. 6 of the Stamp Act).
Arguments of the Parties
Collector's Position
- The Collector took the view that the document was a deed of conveyance transferring property in standing timber inter vivos and therefore was chargeable with duty as a conveyance under Article 23 of Schedule I.
Opposite-party's Arguments (as advanced by learned counsel)
- The document did not evidence a transaction of sale at all but merely recorded terms agreed between the parties; thus it was covered by clause (c) of Article 5 (agreements or memorandum of agreement) and was correctly stamped as an agreement.
- Even if the document were treated as transferring standing timber, it could not be required to be stamped as a conveyance or even as an agreement because it was exempt from stamp duty under exemption (a) of Article 5 (relating to sale of goods or merchandise).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| L.H. Sugar Factories, Pilibhit (Applicant) v. Moti… (Opposite Party), A.I.R. 1941 All. 243 | Where an agreement for sale of goods or merchandise contains an undertaking to pay money and is attested, it becomes a bond and is not wholly exempt as an agreement for sale of goods; attestation can convert such agreement into a bond. | The Court relied on this decision to support the view that the present attested instrument, containing an undertaking to pay and being attested, becomes a bond and therefore is chargeable under Article 15 rather than being wholly exempt under Article 5. |
| Full Bench decision of the Madras High Court in Reference under Sec. 46 Stamp Act (as cited) | Holds that a promissory note not payable to bearer or order, if attested, becomes a bond. | Cited in support of the proposition that attestation converts certain instruments (here an undertaking to pay) into bonds for stamp-duty purposes; this assists the Court in treating the present attested instrument as a bond. |
| Full Bench decision of the Bombay High Court in Re. Ralli Bros. (as cited) | Holds that an agreement for sale of cotton between merchants, when attested by a witness, becomes a bond within the meaning of the Stamp Act, 1889. | Cited to reinforce the principle that attestation transforms certain sale agreements with covenants into bonds; used to justify stamping the present instrument as a bond rather than as an exempt agreement. |
Court's Reasoning and Analysis
The Court proceeded through a stepwise legal analysis, applying statutory definitions and Schedule classifications to the text and terms of the instrument.
- Definition of "conveyance": The Court quoted Sec. 2(10) (conveyance includes instruments transferring property inter vivos and not otherwise specifically provided for by Schedule I) and observed that although the instrument effects a sale (parties styled as buyer and seller; price of Rs. 50,000; clause 1 expressly sells the trees), falling within the ordinary notion of sale does not automatically make it a conveyance for stamp purposes if Schedule I otherwise specifically provides for that kind of instrument.
- Agreement under Art. 5: The Court examined Article 5 (agreements or memorandum of agreement) and concluded the document, insofar as it records mutual promises between the parties, qualifies as an "agreement" within the meaning of the Contract Act (agreement = promise accepted). Since it does not fall under Art. 5(a) or (b), it prima facie falls under clause (c) of Art. 5 as a residuary agreement classification.
- Bond under Sec. 2(5)(b) and Art. 15: The Court noted that the instrument contains an obligation by Ramesh Chandra to pay Rs. 50,000, is not made payable to order or bearer, is signed and attested by witnesses, and therefore meets the statutory definition of a "bond" (cl. (5)(b) of Sec. 2). Citing L.H. Sugar Factories and the Full Benches, the Court emphasised that attestation of an agreement containing an undertaking to pay converts it into a bond for Stamp Act purposes. Consequently, the instrument is chargeable under Article 15.
- Mortgage aspect under Sec. 2(17) and Art. 40: Clause 6 created a charge on the produce for unpaid instalments; the price was not paid in cash and the vendee's undertaking to pay created a debt which the parties secured by a charge over the specific property. Therefore, the instrument also fits the statutory definition of "mortgage deed" as creating a right over specified property to secure a debt, and thus falls under Article 40 as well.
- Exclusion from "conveyance" and interplay between heads: Because the instrument clearly falls under at least three specific Schedule I items (agreement under Art. 5(c), bond under Art. 15, and mortgage under Art. 40), it cannot be treated as a document "not otherwise specifically provided for by Schedule I" and therefore is excluded from the conveyance definition in Sec. 2(10). The Collector's view that it was chargeable as a conveyance under Art. 23 was therefore incorrect.
- Single charge vs. multiple charges: The Court considered whether the instrument could be charged both as a bond and as a mortgage (i.e., as comprising two distinct matters) so as to attract aggregate duties. It held that the charge created was meant to secure the same underlying undertaking to pay — the very debt that made the instrument a bond. Hence the instrument could be stamped either as a bond or as a mortgage deed, but not both for aggregate duties. Sec. 6 (charging only the highest where duties differ) was considered, and the Court observed that in this case the duty payable as a mortgage deed appeared to be the same as that payable as a bond; consequently there was no differing duty issue to resolve.
- Attestation effect and precedent application: Applying the precedent that attestation converts an agreement containing an undertaking to pay into a bond, the Court concluded the present attested instrument containing an undertaking to pay is chargeable as a bond (Art. 15).
- Quantum of duty: The Court concluded that the duty actually payable was not the Re. 1 stamp affixed but a duty of Rs. 206. The Court therefore answered the reference by holding the instrument is not chargeable as a conveyance under Art. 23, nor entirely exempt under Art. 5(a), and that the proper duty is that of a bond under Art. 15 read with Art. 40.
Holding and Implications
Holding: The Court's final decision may be summarized as follows:
- The instrument is not chargeable as a conveyance under Article 23 of Schedule I.
- The instrument is not entirely exempt from stamp duty under exemption (a) to Article 5 of Schedule I.
- The proper duty payable on the instrument is the duty on a bond under Article 15 read with Article 40 of Schedule I (the Court calculated the duty as Rs. 206, not the Re. 1 stamp that had been affixed).
Implications
Direct consequences for the parties and administration:
- The Collector's assessment that the document was chargeable as a conveyance under Art. 23 was incorrect; the reference is answered against that view.
- The document must be treated and stamped as a bond (and, by its nature, also as creating a mortgage charge), and the correct stamp-duty amount is Rs. 206 rather than the Re. 1 that was paid.
- No broader or novel legal principle was pronounced beyond the application of existing definitions and the cited precedents (the Court applied established authority that attestation converts certain agreements with undertakings to pay into bonds). The opinion resolves the classification and quantum issue for this specific document rather than establishing a new general doctrine.
This summary is strictly limited to information contained in the provided opinion and does not add or infer facts beyond that text.
Srivastava, J.:— This is a reference by the Board of Revenue under Sec. 57(1)(a) of the Indian Stamp Act.
2. On the 1st of December, 1950, Kunwar Paclum Bahadur Singh executed a document in favour of Ramesh Chandra. In this document Kunwar Padum Bahadur Singh was described as the seller, while Ramesh Chandra was described as the buyer. Clause I of this document is in these words:—
“The seller in consideration of the payment by the Buyer as hereinafter provided of the price of Rs. 50,000 (Rupees Fifty thousands) sells to the buyer, subject to the conditions hereinafter appearing, all the trees excepting sal sain, shisham and Khair upto 15 inches girth measured at a height of 6 inches from the surface in Compartment Nos. 1, 2, 3, 4, 5, 8, 9 and 11 including the part commonly known as Majhara in part of Village Rynorpur Grant, Pargana Eastern Doon, District Dehradun, approximate area 886 acres.” Then comes clause 2 which provides as follows:—
The Buyer shall pay the said sum of Rs. 50,000 (Rupees Fifty thousands) to the seller by the following instalments, namely:—
1. Rs. 5,000 (Rupees Five thousands) on or before 3-1-1951.
2. Rs. 15,000 (Rupees Fifteen thousands) on or before 15-4-1951.
3. Rs. 10,000 (Rupees Ten thousands) on or before 15-9-1951.
4. Rs. 10,000 (Rupees Ten thousands) on or before 3-1-1952.
5. Rs. 10,000 (Rupees Ten thousands) on or before 15-3-1952.
3. The other clauses lay down the conditions under which the trees sold were to be cut and removed. The seller was authorised in case the forest produce exported by the buyer equalled or exceeded the price paid by him to stop further export until the buyer had paid an additional amount and it was also provided that the amount of instalments provided by clause 2 was to remain a charge on the produce sold. The document was stamped with a stamp of Re. 1 only and was attested by two witnesses Shiam Singh and Brijesh besides being signed by the two parties to the transaction.
4. The document came to the notice of the Collector who was of the opinion that it was deficiently stamped. He thought that it was a deed of conveyance as defined in Sec. 2(10) of the Stamp Act and was as such chargeable with duty under Art. 23 of the schedule of the Act. He, therefore, made a reference to the Board of Revenue, which is the Chief controlling Revenue Authority within the meaning of the Stamp Act, for its opinion. The Board of Revenue felt doubtful as to whether the document was liable to duty as a conveyance under Art. 23 or whether it was exempt from duty altogether under exemption (a) of Art. 5 of the schedule. It has, therefore, referred the question to this Court for decision under Sec. 59 of the Act.
5. Though the Board has referred only to Arts. 23 and 5 of the schedule, keeping in view clauses (2) and (6) of the document it has also to be considered whether the document was to be stamped as a bond under Art. 15 or as a mortgage under Art. 40 of the Schedule.
6. Now Sec. 2(10) of the Act defines a conveyance as follows:—
“‘Conveyance’ includes a conveyance on sale and every instrument by which property, whether moveable or immoveable, is transfered inter vivos and which is not otherwise specifically provided for by schedule I”.
7. Art. 5 is in these words:—
“Agreement or Memorandum of An Agreement—
(a) if relating to the sale of a bill of exchange; Annas two. (b) if relating to the sale of a Government security or share in an incorporated company or other body corporate; Subject to a maximum of Ten Rupees, one anna for every Rs. 10,000 or part thereof of the Value of the security or share. (c) if not otherwise provided for Annas eidht.
Exemptions.
8. Agreement or memorandum of agreement—
(a) for or relating to the sale of goods or merchandise exclusively, not being a NOTE or MEMORANDUM chargeable under No. 43;
(b) made in the form of tenders to the Central Government for or relating to any loan;”
9. A bond is defined in clause (5) of Sec. 2. The clause has three sub-clauses. Sub-cl. (a) and (c) are not relevant for our purposes. According to cl. (5) sub-cl. (b), a bond “includes any instrument attested by a witness and not payable to order or to bearer whereby a person oblige himself to pay money to another.”
10. A “mortgage deed” is defined in cl. (17) of Sec. 2 as including “every instrument whereby for the purpose of securing money advanced, or to be advanced, by way of loan, or an 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”.
11. The Collector took the view in respect of the document in question that it was a conveyance as by it the property in standing timber was transferred inter vivos.
12. The learned counsel who appeared for the opposite-party urged against the view of the Collector that the document in question did not evidence a transaction of sale at all and was therefore not liable to be stamped as a conveyance. It only incorporated certain terms agreed between the parties and was, therefore, covered by cl. (c) of Art. 5 of schedule 1 of the Stamp Act. It had, therefore, been properly stamped as an agreement. He went one step further and contended that even if the document was considered to be one by which the standing timber was transferred it could not be required to be stamped as a conveyance or even as an agreement. It was really exempt from stamp duty altogether because it fell under exemption (a) of Art. 5 of the schedule.
13. Another view which appears to be possible is that as by this document Ramesh Chandra obliged himself to pay Rs. 50,000 to Kunwar Padum Bahadur Singh and the document was attested by witnesses and was not payable to order or bearer it amounted to a bond. By this very document a charge had been created in respect of the amount which Ramesh Chandra had agreed to pay over the properties which had been sold to him. On that account the document could also be considered to be a mortgage deed.
14. It is difficult to accept the contention that the document before us does not evidence a transaction of sale at all. We have already quoted the first clause of the document which clearly shows that it was by this document that the transaction of sale was being effected. The two parties described themselves as buyer and seller, and the sum of Rs. 50,000 was described as the price.
15. Clause 6 of the document is in these words:
“The ownership of the produce hereby sold shall vest in the Buyer but any amount of the instalments provided for under Article 2 of this Indenture, remaining due against the Buyer shall remain a charge on the said produce.”
16. This shows that the document was intended to transfer ownership of the property which was being sold and the property in the timber sold vested immediately in the buyer as a result of the sale.
17. Clause 7 of the document reiterates the same position. It is in these words:
“The forest produce sold to the Buyer under this indenture will remain at the Buyer's risk from the date hereof, and the seller will not be responsible for any loss or damage which may occur thereto from any cause whatsoever.”
18. Thus the terms of the document make it perfectly plain that it is a document by which the property was sold by one person to another.
19. That alone will, however, not necessarily make the document a “conveyance.” In spite of being a document by which a sale was being effected it will fall outside the definition of conveyance if it is one which is otherwise specifically provided for in schedule I. This follows from the last few words of the definition of the conveyance itself. It is urged that such a specific provision is to be found in Art. 5 of the schedule.
20. The Article which provides for agreements or memorandum of agreements has three clauses. Clauses (a) and (b) of the Article mention two particular kinds of agreements, but clause (c) is a residuary clause which covers agreements or memoranda of agreement which do not fall under clauses (a) (b) and are, therefore, not otherwise provided for. If the document in question is an agreement or memorandum of agreement it will fall under cl. (c). The word agreement in this connection must be taken in the sense in which it has been defined in Sec. 2 of the Contract Act. There, an agreement is equivalent to promise and a promise tantamounts to a proposal or offer which has been accepted. An agreement must therefore be held to be a proposal accepted by the person to whom it is made. The document in dispute which is a bilateral document was obviously intended to be a record of the matual promises which the parties had made to each other as a result of negotiations or proposals made and accepted. It cannot, therefore, be seriously questioned that the document so far as it is a record of terms agreed upon is an agreement. As it does not fall within clauses (a) and (b) of Art. 5 it must naturally fall within cl. (c) of it.
21. Art. 5 is, however, not the only Article of Schedule I, Stamp Act under which the document can fall. By this instrument, Ramesh Chandra agreed to be liable to pay and obliged himself to pay Rs. 50,000 to Padum Bahadur Singh. The instrument was not made payable to order or bearer. It was duly signed by Ramesh Chandra and has been attested by two witnesses. It, therefore, falls within the definition of the word ‘bond’ as given in sub-cl. (b) of cl. (5) of Sec. 2 of the Act, and has been provided for in Art. 15 of the First Schedule of the Act.
22. By clause 6 of the document a charge was created in respect of the amount of unpaid instalments over the forest produce which was being sold by the vendor to Ramesh Chandra. The price was not being paid in cash. Ramesh Chandra was undertaking to pay it in future. It, therefore, became a debt for which he was undertaking liability. The parties considered it necessary that the debt should be secured. A charge was therefore created in respect of it in favour of the vendee. The charge was created over the property which was being sold and which was specified in the deed. From this point of view the document in question must be held to be a “mortgage deed” as defined in cl. (17) of Sec. 2 of Act.
23. As a bond, the document will fall under item no. 15 of the schedule and as a mortgage deed it will fall under item no. 40 of the schedule.
24. There are thus at least three items in the first schedule under which the document can fall. It obviously cannot be held to be a document “not otherwise specifically provided for by schedule 1” and must on that account be held excluded from the purview of the definition of “conveyance” as given in Sec. 2(10) of the Act. The Collector was, therefore, not justified in his view that the document was chargeable to duty as a conveyance under Art. 23 of the schedule.
25. Though the document in question falls under cl. (c) of Art. 5 because it is an agreement it does not appear to be necessary to go into the further question whether it falls under exemption (a) of Art. 5 because it relates to the sale of goods or merchandise. As it falls under the definition of a bond also it cannot be exempt from duty altogether and has to be stamped as a bond. In the case of L.H Sugar Factories, Pilibhit…(Applicant); v. Moti…(Opposite Party).* . A.I.R 1941 All. 243. it was pointed out by Iqbal Ahmad, acting C.J, that if an agreement for the sale of goods or merchandise contained an undertaking and happened to be attested it would become a bond and would not remain a mere agreement for the sale of goods or merchandise. The document in that case had three aspects. By it the executants sold some sugarcane to a mill. They also agreed to pay back the amount they were taking or were to receive in a specified manner. They at the same time hypothecated the sugar cane crop for the advance which they had obtained. The agreement was duly attested. It was therefore held that it was not altogether exempt from stamp duty as an agreement for the sale of goods or merchandise, but was liable to be stamped as a bond. Iqbal Ahmad, Acting C.J, observed in this connection:
“Agreements for the sale of goods or merchandise contemplated by Art. 5, schedule 1 do not require attestation and therefore such agreements, if unattested, would remain mere agreements even though there is a covenant as to the delivery of the goods agreed to be sold. But the moment such an agreement is attested it becomes a bond. This view is in accord with the Full Bench decision of the Madras High Court in Reference under Sec. 46 Stamp Act.2 It was held in that case that a promissory note not payable to bearer or order, if attested, becomes a bond. To the same effect is the Full Bench decision of the Bombay High Court in Re. Ralli Bros.3 It was laid down in that case that an agreement for sale of cotton between two merchants, when attested by a witness, becomes a bond within the meaning of the Stamp Act, 1889.”
26. The view that on account of being attested the document which contained an I undertaking to pay money became a bond was shared by the other learned Judges also who were constituting the Full Bench.
27. The document before us also fulfils all the conditions of a bond as defined in sub-cl. (b) of clause (5) of Sec. 2 and is duly attested. On that account it cannot be held to be a mere agreement for or relating to sale of goods, and becomes chargeable under Art. 15 of schedule 1. It cannot, therefore, be held to be entirely exempt from liability for stamp duty.
28. The document certainly creates a charge in respect of the amount payable; on specified property and it can therefore be said that it is liable to be stamped as a mortgage deed too. But these two aspects of the document do not appear to be such as can make it a document comprising or relating to two distinct matters as contemplated by Sec. 5 of the Stamp Act so as to make it chargeable with the aggregate amount of duties payable on a ‘bond’ and a “mortgage deed”. The charge that has been created was meant to secure the very amount which the vendor was undertaking to pay—the undertaking on account of which the document is being held to be a bond. The document could therefore, be stamped either as a bond or as mortgage deed and not as both.
29. Sec. 6 of the Stamp Act which provides that instruments so framed as to come within two or more of the descriptions in Schedule 1, shall, where the duty is chargeable thereunder are different, be chargeable only with the highest of such duties cannot affect the document in question as the duty payable on it as a mortgage deed appears to be the same as that payable on it as a bond. In the present case there fore there is no difference between the duties chargeable in respect of document whether it falls under one description or the other.
30. The proper duty which should, therefore, have been paid in respect of it was not the duty of one rupee which has been paid but a duty of Rs. 206. Our answer to the reference, therefore, is that the document in question is not chargeable as a conveyance under Art. 23 of the schedule of the Stamp Act nor is it exempt from stamp duty altogether under the exemption (a) to Art. 5 of the schedule. The proper duty payable in respect of it is a duty on a bond under Art. 15 read with Art. 40 of the schedule. We answer the reference accordingly.
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