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Raj Sachdeva v. Board Of Revenue

Allahabad High Court

Mar 17, 1959

Judgment

Subsequent
References

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Structured Summary of the Court's Opinion

Factual and Procedural Background

The reference to the Court was made by the Chief Controlling Revenue Authority (the Board of Revenue) under Sec. 57 of the Indian Stamp Act. Sri Raj Sachdeva was the proprietor of a business carried on as Messrs Globe Travels. A company, Messrs Globe Travels (Private) Limited, was incorporated under the Indian Companies Act, and Sri Raj Sachdeva became its Managing Director.

In 1955 an oral agreement was made by which Sachdeva agreed to transfer his business to the company in consideration of allotment of fully paid shares. On 5 April 1955 the company allotted 720 shares to Sachdeva. On 11 January 1956 the company filed with the Registrar, pursuant to Sec. 75(2) / Sec. 104 (as referred to in the opinion) particulars of the contract in the prescribed form (a "particulars of oral contracts" form). That form was signed by Sachdeva as a Director and bore a stamp of Rs. 2/-, treating it as an agreement under Art. 5(c) of Schedule I-B to the Indian Stamp Act (as applicable in Uttar Pradesh).

The Board of Revenue, while inclined to the view that the document was duly stamped, referred the question to this Court for decision because of doubts raised: whether the document was merely an agreement chargeable at Rs. 2/- under Art. 5(c) or whether it was in the nature of a conveyance within Sec. 2(10) of the Stamp Act and thereby chargeable under Art. 23 of Schedule I-B with a duty of Rs. 15,912/-.

Legal Issues Presented

Whether the document dated 11 January 1956 (the particulars of the oral contract filed with the Registrar) is a mere agreement chargeable with a duty of Rs. 2/- under Art. 5(c) of Schedule I-B to the Indian Stamp Act (as applicable to Uttar Pradesh), or whether it is in the nature of a conveyance within the meaning of Sec. 2(10) of the Stamp Act and hence chargeable under Art. 23 of Schedule I-B with a much larger duty.
More precisely (as the Court reframed it): whether the prior oral contract, the particulars of which were specified in the form filed on 11 January 1956, would have been chargeable as an agreement or as a conveyance had it been reduced to writing — and therefore whether the particulars filed under Sec. 104(2) of the Companies Act were stamped correctly.

Arguments of the Parties

Contentions on behalf of Sri Raj Sachdeva

The entire transaction consisted only of a single oral contract: an agreement by which Sachdeva agreed, as proprietor of the private firm Messrs Globe Travels, to transfer the concern with all assets and liabilities to the company in consideration of Rs. 27,550 in cash and allotment of 720 fully paid shares (Rs. 72,000 valuation).
That oral agreement was an agreement to transfer in future (not a present transfer). The actual transfer of assets and liabilities was effected subsequently by delivery; because the assets were movable, no written instrument or deed of conveyance was required to effect transfer.
The particulars filed in the prescribed form were particulars of that single oral agreement. Had that agreement been reduced to writing it would have been stampable only as an agreement (i.e., under Art. 5(c)). Therefore the form filed could be stamped only as an agreement and the Rs. 2/- stamp was adequate.

View of the Board of Revenue / Other Observations

The Board of Revenue was inclined to the view that the document had been correctly stamped (i.e., as an agreement), but it had received conflicting arguments and therefore referred the matter to the Court under Sec. 57 of the Stamp Act.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Court's analysis proceeds from the statutory text and the facts before it. The principal statutory provision examined is Sec. 104 of the Companies Act, 1913 (as quoted in the opinion), particularly sub‑section (1)(b) and sub‑section (2).

Key points in the Court's step‑by‑step reasoning (as expressed in the opinion):

Interpretation of Sec. 104(1)(b): The section requires the company to produce, for inspection by the Registrar, the contract constituting the allottee's title to the allotment when shares are allotted otherwise than for cash. If that title is created by a written contract, that contract (and related contracts of sale or for services) must be produced and the copies filed duly stamped. If the title is constituted by an oral contract, the prescribed particulars of that oral contract must be filed.
Nature of the "earlier contract" contemplated by the section: The Court highlights that any earlier contract of sale or service (which may have preceded the contract constituting title) is distinct from the contract that constitutes the title to the allotment. The primary requirement of Sec. 104 is to file the contract that constitutes the allottee's title; earlier contracts (if any) are secondary and need only be filed if they are part of the title chain.
Legal fiction created by Sec. 104(2): When the contract constituting the title is oral, the prescribed particulars filed under the section are to be "deemed to be an instrument" for the purposes of the Indian Stamp Act and must bear the stamp duty that would have been payable had the contract been reduced to writing. The Court expressly labels sub‑section (2) as a statutory fiction converting particulars into an instrument for stamp purposes.
Application to facts — nature of the transfer: The Court found no suggestion in the referring order that any written or additional oral contract beyond the initial agreement existed. The transfer of assets and liabilities, consisting of moveable property (and possibly goodwill, contractual benefits, actionable claims), was effected by delivery. Under the law, transfer of moveable property need not be by instrument in writing, and delivery can complete the transfer.
Characterisation of the filed form: The Chief Justice concluded that the particulars filed were particulars of the agreement for sale which preceded completion of title by delivery. Had that agreement been reduced to writing, it would have been chargeable under Art. 5(c) of Schedule I‑B to the Stamp Act (i.e., as an agreement). Consequently, the particulars filed under Sec. 104(2) were correctly stamped with the duty appropriate to an agreement.
Srivastava, J.'s amplification: Justice Srivastava independently analysed Sec. 104's purpose, emphasizing that the statute's object is to ensure the Registrar has evidence of the allottee's title. He reiterated that sub‑section (2) creates a fiction deeming particulars to be the written contract for stamp purposes. He considered potential logical difficulties from Sachdeva's contention (for example, whether title could have vested without a contract constituting title and whether delivery alone could transfer items like goodwill), but noted that those wider consequences were not before the Court. On the available material, the admitted agreement (an agreement to transfer) was chargeable under Art. 5(c) and the particulars were therefore properly stamped.
Unanimous conclusion on the narrow question: The Court confined itself to the specific question referred (whether the particulars filed were sufficiently stamped) and, based on statutory text and the admitted facts, concluded they were duly stamped.

Holding and Implications

Holding (core ruling): We hold that the particulars filed by the Company under Sec. 104(2) of the Indian Companies Act, 1913 were duly stamped.

Implications and consequences:

Direct effect: The reference was answered in favour of the classification adopted by the company and the Board of Revenue — the particulars filed on 11 January 1956 were correctly treated and stamped as particulars of an agreement chargeable under Art. 5(c) (Rs. 2/-), rather than as a conveyance chargeable under Art. 23 (a much larger duty).
Scope: The Court limited its decision to the question referred — whether the particular form actually filed was sufficiently stamped. The opinion does not purport to resolve, and expressly declines to decide, broader consequences that might arise from alternative factual findings (for example, whether delivery alone could, in different circumstances, vest title to goodwill or other items without a contract constituting title).
Precedential note: The opinion does not announce or rely upon any judicial precedents and does not state that it is laying down a new broad principle beyond the statutory interpretation applied to the facts of this reference.

Decision delivered unanimously: Mootham, C.J., Dayal, J., and Srivastava, J. (Srivastava J. wrote a separate concurring opinion elaborating the statutory interpretation).

Show all summary ...

Mootham, C.J:— This is a reference made to this Court by the Chief Controlling Revenue Authority under Sec. 57 of the Indian Stamp Act.

2. The circumstances in which the reference is made are these: Sri Raj Sachdeva was the proprietor of a business carried on under the name of Messrs Globe Travels. A company was incorporated under the Indian Companies Act under the name of Messrs Globe Travels (Private) Limited, of which Sri Raj Sachdeva was the Managing Director. In 1955 an oral agreement appears to have been entered into between Sri Raj Sachdeva as proprietor of Messrs Globe Travels and the Company whereunder the former agreed to transfer his business to the Company in consideration of the allotment of fully paid shares. An allotment of 720 shares was made to Sri Raj Sachdeva on the 5th April, 1955. Thereafter the Company on the 11th January, 1956, filed with the Registrar, pursuant to Sec. 75(2) of the Indian Companies Act, 1956, particulars of the contract in the prescribed form. That form was signed by Sri Raj Sachdeva as a Director of the Company and bore a stamp of Rs. 2/-, as an agreement under Art. 5(c) of Schedule I-B to the Indian Stamp Act, as in force in this State. The question referred to this Court is “Whether the document dated January 11, 1956, executed by Sri Raj Sachdeva is a mere agreement chargeable with a duty of Rs. 2/- under Art. 5(c) of the Stamp Act as amended in its application to Uttar, Pradesh, or it is in the nature of a Conveyance within the meaning of Sec. 2(10) of the Act, chargeable under Art. 23, Schedule I-B of the Act with a duty of Rs. 15,912/-.”

3. The question is not very accurately framed for the question is not whether the document of the 11th January, 1956, is an agreement but whether the prior oral contract the particulars of which are specified in that document would have been chargeable with duty as an agreement or as a conveyance had it been reduced to writing. The Board of Revenue, which is the Chief Controlling Revenue Authority, was inclined to the view that the document was duly stamped, but as it entertained some doubt with regard to the matter it thought it proper to make this reference.

4. Now Sec. 104 of the Companies Act, 1913, so far as is material, reads thus:

“(1) Whenever a company having a share capital makes any allotment of its shares, the company shall, within one month thereafter,—

(a) ………………………….

(b) in the case of shares allotted as fully or partly paid up otherwise than in cash, produce for the inspection and examination of the Registrar a contract in writing constituting the title of the allottee to the allotment together with any contract of sale, or for services or other consideration in respect of which that allotment was made, such contracts being duly stamped, and file with the Registrar copies verified in the prescribed manner of all such contracts and a return stating the number and nominal amount of shares so allotted, the extent to which they are to be treated as paid up, and the consideration for which they have been allotted; and

(2) Where a contract such as above mentioned is not reduced to writing, the company shall, within one month after the allotment, file with the Registrar the prescribed particulars of the contract stamped with the same stamp duty as would have been payable if the “contract had been reduced to writing, and those particulars shall be deemed to be an instrument within the meaning of the Indian Stamp Act, 1899, and the Registrar may, as a condition of filing the particulars, require that the duty payable thereon be adjudicated under Sec. 31 of that Act”

5. The section requires evidence of the title of the allottee to the allotment being placed upon the register, and where that evidence is to be found in a contract in writing, that contract together with any contract of sale, or for services, or other consideration in respect of which the allotment is made, must be produced for the inspection of the Registrar and duly verified copies filed. Where however, the contract constituting the title of the allottee is not in writing, then, under sub-Sec. (2) the prescribed particulars of that contract must be filed, and these particulars must bear the same stamp duty which would have been payable if the contract had been reduced to writing.

6. Now in the present case it is not in doubt that the transfer of the assets and liabilities of the business to the company was effected by delivery and the only question is whether such delivery was given in pursuance of the oral contract for sale or was part and parcel of some subsequent oral contract of sale. There is however no suggestion in the order of reference that there had been in fact any such contract of sale. The vendor did not own any immovable property and the law does not require that a transfer of moveable property should be made by an instrument in writing. If the parties choose to transfer such property by delivery pursuant to a contract for sale they are free to do so. In the present case no deed of conveyance was executed, and the particulars furnished were in my opinion the particulars of the agreement for sale which preceded the completion of the purchaser's title by delivery. Had that agreement been reduced to writing it would have been chargeable with duty under Art. 5(c) of Schedule I-B to the Stamp Act and I am therefore of opinion that the particulars filed by the Company under Sec. 104(2) of the Companies Act were duly stamped. I would therefore, answer the reference accordingly.

7. Dayal, J.:— I have read the opinion expressed by my Lord the Chief Justice on the question referred for decision and agree with the answer proposed and the reasons stated for the answer.

8. Srivastava, J.:— This is a reference under Sec. 57 of the Indian Stamp Act. The question referred to us by the Board of Revenue is this:

“Whether the document dated January 11, 1956, executed by Sri Raj Sachdeva is a mere agreement chargeable with a duty of Rs. 2/- under Art. 5(c) of the Stamp Act as amended in its application to Uttar Pradesh, or it is in the nature of a Conveyance within the meaning of Sec. 2(10) of the Act, chargeable under Art. 23 Schedule 1-B of the Act with a duty of Rs. 15,912/-”

9. It appears that Sri Raj Sachdeva was the proprietor of a business carried on in the name of Messrs Globe Travels. Later a company was incorporated under the Indian Companies Act. It was called Globe Travels (Private) Limited, and Sri Raj Sachdeva became its Managing Director. In 1955 an agreement was entered into between Sri Raj Sachdeva as proprietor of the private firm Messrs Globe Travels and the incorporated company according to which the former agreed to transfer his business to the company in consideration of the allotment of 720 fully paid up shares of the company. On the 5th of April 1955 the company allotted 720 fully paid up shares to Sri Raj Sachdeva. Thereafter on the 13th April, 1955 the company passed the following resolution:

“Resolved unanimously that the firm Globe Travels, New Delhi be purchased as a going concern with all its assets and liabilities as on 31-3-1955 including its cash in hand and bank balance with effect from 1-4-1955 from its proprietor Mr. Raj Sachdeva who is also the Managing Director of the Company on such terms and conditions, as may be decided by the Directors.”

10. On the 11th of January 1956 a form known as particulars of oral contracts was filed by Sri Raj Sachdeva with the Registrar of Companies as required by Sec. 104 of the Companies Act, 1913. According to this document the concern known as Messrs Globe Travels was taken over by the company for a consideration of Rs. 6,63,000/- which was paid in the following manner:

(i) Allotment of 720 shares at Rs. 100/- each Rs. 72,000/- (ii) Cash Payment .. Rs. 27,550/- (iii) Liabilities of the firm taken over by the company .. Rs. 5,63,450/-

11. The form was signed by Sri Raj Sachdeva as Director of the company and a stamp duty of Rs. 2/- was paid in respect of it as it was treated as an agreement under Art. 5(c) of Schedule 1-B to the Indian Stamp Act, as applicable to the Uttar Pradesh. A question arose whether the document had been correctly stamped or whether it was liable to be stamped as a conveyance (as defined in Sec. 2(10) of the Stamp Act) with duty payable under Art. 23 of the Schedule. The Board was inclined to the view that the document had been correctly stamped but in view of the conflicting arguments advanced before it, it has referred the question to this Court.

12. The relevant portion of Sec. 104 of the Companies Act of 1913 reads as follows:—

“104(1) Whenever a company……makes any allotment of shares, the company shall within one month thereafter, file

(a) ………………………….

(b) in the case of shares allotted as fully or partly paid up otherwise than in cash produce for the inspection and examination of the Registrar a contract in writing constituting the title of the allottee to the allotment together with any contract of sale…… such contracts being duly stamped……

(2) Where such a contract as above mentioned is not reduced to writing the Company shall within one month of the allotment, file with the Registrar prescribed particulars of the contract stamped with the same stamp duty as would have been payable if the contract had been reduced to writing, and these particulars shall be deemed to be an instrument within the meaning of the Indian Stamp Act.

13. The obvious intention of the section appears to be that in any case where shares are allotted for consideration other than cash the Registrar must have before him the evidence of the title of the allottee to the allotment. If the contract constituting the title is in writing that writing itself must be produced. If it is oral the full particulars of the oral contract must be filed. If the contract in writing constituting the title to the allotment is preceded by any other contract of sale or of (service which is the consideration for the contract constituting the title that earlier contract or its particulars must also be filed. It is therefore clear that as contemplated by Sec. 104(1)(b) the title of the allottee to the allotment can be constituted only by a contract and cannot be constituted in any other way. The contract may be in writing or may be oral. In case it is in writing the writing itself must be produced. If the contract is oral its particulars must be filed. It is not necessary that in every case there should be an earlier contract of sale or service, but if there is one that contract too if it is in writing and its particulars if it is oral must be produced.

14. It is noticeable that it is not the earlier contract referred to in Sec. 104(1)(b) which is the contract constituting the title of the allottee to the allotment. That earlier contract is only a contract of sale or service which by itself does not create any title. The primary thing required by the section to be filed is therefore the contract constituting the title of the allottee to the allotment and not the earlier contract because it is not necessary that in every cases there must have been such a preceding contract.

15. Sub-Sec. (2) of Sec. 104 creates a legal fiction. If the contract constituting the title of the allottee to the allotment is in writing it must be stamped. If however, it is not in writing and is only an oral its particulars have to be filed in a prescribed form. That form is in law to be deemed for the purposes of stamp duty to be the contract in writing by which the title to the allotment is constituted and duty has to be paid on that form as if it was a contract made in writing.

16. The contention urged on behalf of Sri Raj Sachdeva in the present case is that in his case the entire transaction consisted of only one contract and that was oral. That was the contract by which he agreed as proprietor of the private firm Messrs Globe Travels to transfer his concern with all its assets and liabilities to the company and the company in return agreed to pay him Rs. 27000/- cash and to allot 720/- fully paid shares to him. That according to the learned counsel was not a contract by which either party was making any transfer in present. It was only an agreement to transfer in future. Subsequently in pursuance of it Sri Raj Sachdeva transferred to the company the assets and liabilities of his firm by delivery. As no immovable property was involved the transfer could be made by delivery alone without any contract oral or written. The company had also in pursuance of the same agreement allotted 720 fully paid shares to Sri Raj Sachdeva without there being any oral or written contract for that purpose. He has urged that the only contract entered into between the parties being an agreement to transfer the particulars filed in the prescribed form were of that contract. Had that contract been in writing it would have been stamped only as an agreement. The form of particulars filed could not, therefore be required to be stamped in any other manner. The logical consequences which appear to follow from the stand taken by the learned counsel may raise some difficulties, for instance. (1) as Sec. 104(1)(b) of the Companies Act contemplates that title of the allottee to the allotment of share can be constituted only by a contract whether oral or in writing no title to such allotment may have accrued to Raj Sachdeva on account of the absence of a contract. Admittedly the earlier agreement which was arrived at did not pass such a title.

(2) The assets of the firm may include good will, benefits to contract or actionable claims. It is seriously questionable if the company can claim title to them on the basis of delivery without any contract in waiting.

(3) The particulars which had to be filed under Sec. 104 of the Companies Act are the particulars of the contract constituting title to the allotment of shares and on the consideration of that contract. If no such particulars were filed on the pretext that no such contract was made and only the particulars of the earlier contract of sale were filed it may be possible to say that the requirements of the section had not been complied with at all and that every officer of the company was on that account liable to be prosecuted for the omission.

17. We are, however, not concerned in this case with any of these consequences. The only thing which we have to determine is whether the form of particulars actually filed by the company is sufficiently stamped. It is not necessary therefore to consider what stamp would have been payable on the form which ought to have been filed but was not actually filed. As has been pointed out by my Lord the Chief Justice, in the referring order there is no suggestion that any contract other than a contract for sale was entered into between the parties. Nor is there any material before us on the basis of which it can be held that any other contract of sale was in fact entered into. The contract which was admittedly made was only an agreement to transfer in future and was chargeable with duty under Art. 5(c) of Schedule I-B to the Stamp Act and must be held to have been properly stamped. I, therefore, agree that the reference should be answered as proposed by my Lord the Chief Justice.

18. By The Court:— We hold that the particulars filed by the Company under Sec. 104(2) of the Indian Companies Act, 1913 were duly stamped and answer the reference accordingly.