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Tirlok Chand v. Chief Controlling Revenue Authority
Structured Summary of the Opinion (Reference under Section 57 of the Stamp Act)
Factual and Procedural Background
The Town Area Committee, Modinagar (Ghaziabad, district Meerut) decided to auction rights to realise fees for the Tonga stand and Rickshaw licences for the year 1960–61. An auction was conducted on 20 March 1960; the reserved price for sale of these rights was fixed at Rs. 10,000 (Annexure I). Various bids were recorded; the highest bid was made by Tirlok Chand (the applicant) for Rs. 6,200. The bidders and the officials who conducted the auction signed the bid-sheet on the day of the auction; the bid-sheet was later presented to the Chairman of the Town Area Committee and he signed it on 22 March 1960. After these events, Tirlok Chand exercised the right to collect the Tonga and Rickshaw fees within the Town Area.
The Inspector of Stamps and Registration, Meerut Circle (appointed as Collector under Section 40 of the Stamp Act by U. P. Government notifications), examined the bid-sheet and treated it as an "agreement to let tolls" chargeable under Article 35(b) of Schedule I‑B read with Section 2(16)(c) of the Stamp Act. The Inspector impounded the document and imposed a deficit duty of Rs. 195 and a penalty of Rs. 30. The Chief Controlling Revenue Authority referred the legal questions under Section 57 of the Stamp Act for the court's opinion.
Legal Issues Presented
- Whether the document (Annexure I) is an agreement to let tolls and falls within the meaning of a "lease" as given in Section 2(16)(c) of the Stamp Act read with Article 35, and therefore is chargeable under Article 35(b) of Schedule I‑B of the U. P. Stamp (Second Amendment) Act, 1958, with a duty of Rs. 195.
- If the answer to the first question is negative, whether the document (Annexure I) is chargeable with stamp duty under any other Article of the Stamp Act, and if so, under which Article.
Arguments of the Parties
Revenue / Standing Counsel's Arguments
- The Standing Counsel argued that the bid-sheet is an instrument by which tolls have been let out and therefore amounts to a lease (or an agreement to let) within the meaning of Section 2(16)(c) of the Stamp Act.
- Implicit in the administrative action was the view (taken by the Inspector of Stamps and by the Board of Revenue in its referring order) that the document was dutiable under Article 35 Schedule I‑B; the Board of Revenue referred to decisions it considered supportive (Amar Nath Khanna v. State Government and Mumtaz AH v. Town Area Committee) in taking that view.
- It was also contended (as an argument addressed in the opinion) that although the bid-sheet might not have constituted a lease on 20 March 1960, it became one on 22 March 1960 when the Chairman signed the bid-sheet in token of approval of the bid.
Applicant's Arguments
The opinion does not contain a detailed account of the parties' legal arguments from the applicant's side.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Rajanagram Village Cooperative Society v. P. Veerasami Mudaly, AIR 1951 Mad 322 | Support for treating auction records/bid-sheets as not constituting a lease/unenforceable when essential terms are absent (view cited by the court). | The court expressed respectful agreement with the view in this case and relied on it to support the conclusion that the bid-sheet was not a lease or an agreement to let. |
| Sir Rameshwar Singh Bahadur v. Shaik Kitab Ali, AIR 1926 Pat 487 | Similar principle to the Madras decision concerning the nature of auction documents and enforceability. | The court expressed respectful agreement with the view in this case as well, using it to bolster its conclusion that the bid-sheet did not create a concluded, enforceable contract. |
| Amar Nath Khanna v. State Government (Civil Misc. Writ No. 345 of 1956 decided on 21-3-1961 (All)) | Referred by the Board of Revenue as tending to support dutiability under Article 35 Schedule I‑B (specific rule/principle not detailed in the opinion). | The court noted the Board of Revenue relied on this decision, but observed that it did not deal directly with the precise question raised in the present reference. |
| Mumtaz AH v. Town Area Committee, Bharwari, 1970 All LJ 114 | Referred by the Board of Revenue as authority for dutiability under Article 35 (specific rule/principle not detailed in the opinion). | The court noted the Board of Revenue's reliance on this authority but held that it did not directly address the present question. |
Court's Reasoning and Analysis
The court proceeded through a structured analysis beginning with statutory definitions and the nature of the document:
- Statutory Starting Point: Section 2(16) of the Stamp Act defines "lease" and expressly includes "any instrument by which tolls of any description are let." Article 35 of Schedule I‑B taxes leases and "any agreement to let or sublet."
- Tax Consequence if Within Definition: If the bid-sheet were a lease or an agreement to let tolls, it would be taxable under Article 35 Schedule I‑B with the duty alleged.
- Instrumentality and Agreement Requirement: The court noted that even assuming the bid-sheet is an "instrument" (per Section 2(14)), a lease or agreement to let requires an agreement formed by an offer and acceptance. The court examined whether the bid-sheet itself effected that agreement.
- Reserved Price and Absence of Acceptance: The reserved price for the auction was Rs. 10,000. The highest bid was Rs. 6,200, below reservation. Because the officials of the Town Area Committee (acting as auctioneers on the day) could not legally finalise the auction at a bid below the reserved price, the bid of Rs. 6,200 could not have been accepted on 20 March 1960. Thus no concluded agreement arose on that date merely from signatures on the bid-sheet.
- Signatures as Authentication Only: The signatures of the bidders and conducting officers were characterized by the court as authenticating the auction proceedings, not as constituting acceptance of an offer that would create a binding contract.
- Chairman's Subsequent Signature: The court considered the contention that the Chairman's signature on 22 March 1960 converted the bid-sheet into a binding contract. The court found this unpersuasive for two reasons: (a) it was doubtful whether the Chairman could contract on behalf of the Committee without a formal resolution, and (b) even if he had signed, mere signature did not transform a memo of bids (which lacked essential terms) into a binding, enforceable agreement.
- Essential Terms Missing — Vagueness and Enforceability: The court highlighted that the bid-sheet lacked several essential terms that a lease or agreement to let would require, including (i) the maximum rate of tolls chargeable by the applicant, (ii) the duration of the lease, (iii) the mode, manner and time of payment of the auction money, and (iv) consequences of breach by the applicant. In absence of these, any putative agreement would be unenforceable for vagueness.
- Reliance on High Court Decisions: The court aligned itself with the reasoning in the Madras and Patna High Court decisions cited (Rajanagram and Sir Rameshwar Singh Bahadur) which supported the view that such bid-sheets do not necessarily constitute leases or agreements to let where essential terms and acceptance are absent.
- Alternative Classification — Bond or Conveyance Considered: Since the document was not a lease or agreement to let, the court examined whether it could be stamped under other items (notably "bond" under Section 2(5) and "conveyance" under Section 2(10)). Clause (b) of Section 2(5) requires the instrument to be attested by a witness and to be an obligation to pay; the bid-sheet was not attested by an independent witness and did not create a binding obligation to pay until acceptance. The bid-sheet also did not create enforceable rights or liabilities (offer could be withdrawn before acceptance). Similarly, it was not a "conveyance" as no movable or immovable property had been transferred and no agreement existed to support a conveyance.
- Conclusion of Analysis: On the combined statutory and factual analysis, the bid-sheet neither constituted a lease nor an agreement to let, nor did it qualify as a bond or conveyance under the Stamp Act provisions considered. Therefore it was not chargeable with stamp duty under Article 35 or any other article of the Act.
Holding and Implications
Holding: The court answered the first question in the negative — the document (Annexure I / the bid-sheet) is not a lease nor an agreement to let tolls within the meaning of Section 2(16)(c) read with Article 35. The court also answered the second question in the negative — the document is not chargeable with stamp duty under any other Article of the Stamp Act.
Implications:
- The direct legal consequence is that the impugned bid-sheet is not chargeable to stamp duty under Article 35(b) or any other Article of the Stamp Act, and the applicant is entitled to relief.
- The court awarded costs to the applicant in the sum of Rs. 200.
- The court observed that the decisions relied upon by the Board of Revenue (Amar Nath Khanna and Mumtaz AH) did not deal directly with the precise question in the present reference. The opinion does not assert or establish any broader new precedent beyond the decision on these specific facts; it relies on established principles concerning formation of contract, essential terms, and the formal requisites for bonds and conveyances under the Stamp Act.
Answered accordingly.
1. The Chief Controlling Revenue Authority, has under Section 57 of the Stamp Act referred, the following questions for our opinion: --
"1. Whether the document (a copy of which is Annexure I to this reference) is an agreement to let tolls and is included within the meaning of a lease as given in Section 2(16)(c) of the Stamp Act read with Article 35 thereof and is chargeable under Article 35 (b) of Schedule I-B of U. P. Stamp (Second Amendment) Act, 1958 with a duty of Rs. 195/-.
2. In case the answer to the above question is in the negative, is the document (Annexure I) chargeable with stamp duty under any other Article of the Stamp Act, and if so what?"
2. The Town Area Committee Modinagar decided to auction the rights to realise fee of Tonga stand and Rickshaw licence of Modinagar, Ghaziabad, district Meerut for the year 1960-61, and it held an auction on the 20th March 1960. This auction was Conducted by the officers of the Town Area Committee and the reserved Price for sale of these rights was fixed at Rs. 10,000/- (see Annexure I). Bids were made by various persons but the bid of Tirlok Chand, the applicant was the highest, being of Rupees 6,200/-. The signatures of the various bidders were taken on the bid-sheet, and after the bid was closed, there was an endorsement to the effect that the bid was closed, as there was no bid higher to the applicant. This bid-sheet was put up before the Chairman of the Town Area Committee on the 22nd March 1960 i.e. on the 3rd day of the bid, and he also signed the bid-sheet. Thereafter, Tirlok Chand exercised the right of collecting fee of Tonga stand and Rickshaw licence within the Town Area.
3. The Inspector of Stamp and Registration, Meerut Circle, who had been appointed as Collector for the purpose of Section 40 of the Stamp Act by U. P. Government Notification No. C-4135/X-525 dated 20th August 1928 and Rule 325 of the U. P. Stamp Rules framed under Notification No. M-528/X/503 dated 25-3-1942 examined this document and treating it to be an agreement to let tolls, chargeable with Stamp Duty under Article 35 (b) Schedule I-B read with Section 3(16)(c) of the Stamp Act, impounded it, and imposed deficit duty of Rs. 195/- and penalty of Rupees 30/-. The matter thereafter came up before the Chief Controlling Revenue Authority, which has now made the present reference.
4. It will be convenient to extract the relevant provisions of the Stamp Act. Section 2(16) of the Stamp Act reads as under;--
"2 (16). "Lease"--"Lease" means a lease of immovable property, and includes also --
(a) a patta;
(b) a kabuliyat or other undertaking in writing, not being counterpart of a lease, to cultivate, occupy or pay or deliver rent, for immovable property;
(c) 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:" Article 35 (b) Schedule I-B is as under:--
"35. Lease, including a under-lease or sub-lease and any agreement to let or sublet.
(b) Where the lease is granted for a fine or premium or for money advanced and where no rent is reserved:"
5. It will be seen that any instrument by which tolls of any description are let is a lease. It is not denied that the transaction in dispute relates to tolls. The controversy, however, is as to whether the bid-sheet is a lease as defined in Section 2(16) of the Stamp Act.
6. Now even if the document is not a lease but an agreement to let the tolls, it would be still taxable under Article 35 of Schedule I-B of the Act with the same duty as a lease. The question that arises for determination, is as to whether the bid-sheet can be said to be a lease or failing that an agreement to let. If it does not come within either of these two categories, it cannot be taxed under Article 35 Schedule I-B of the Act.
7. The Standing Counsel has urged that the bid-sheet is an instrument by which tolls have been let out. Section 2(14) defines 'an instrument as including a document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recorded. We may assume that the bid-sheet is an instrument, but that by itself would not make it a lease, because the tolls should have been let out by that instrument. Before, however, any tolls can be said to be let out, there must be an agreement. An agreement postulates the making of a proposal by a person and the acceptance of the said proposal by the other. After proposal has been accepted, an agreement between the parties is created. In the present case, it appears from the bid-sheet that the reserved price fixed by the Town Area Committee was Rs. 10,000/-. This meant that the officials of the Town Area Committee, who sanctioned the rights, could not finalise auction unless the reserved price had been bid at the auction. In the present case, the bid offered was much less than the reserved price. This being so, the officials of the Town Area Committee who acted as auctioneers could not possibly accept the proposal made on behalf of the applicant which consisted of an offer to pay Rs. 6200/- only. The mere fact that the highest bidder, and the officers of the Town Area Committee who conducted the auction, put their signature on the auction bid, would not alter the position in law, for the signature on the bid-sheet by these two parties were only for the purposes of giving authenticity to the auction proceedings which took place on that date. It is, however, contended that even if it can be said that the bid-sheet did not mature into a lease on the 20th March, 1960, it became such, on the 22nd March, 1960, when the Chairman signed the same in token of his approval of the bid. We are not impressed by this argument too. In the first place it is doubtful as to whether the Chairman of the Town Area Committee had any authority to enter into a contract on behalf of the Town Area Committee without a requisite resolution being passed by the Town Area Committee. It is however not necessary to express any final opinion on this matter for otherwise too the mere signing of the bid-sheet by the Chairman, Town Area Committee, would not convert it into a binding contract between the applicant and the Town Area Committee. It has been seen that the bid-sheet only contains a memo of the highest bids made by the various persons who participated in the auction. It does not contain any terms or conditions relating to:
1. The maximum rate of tolls chargeable by the applicant.
2. The duration of the lease.
3. The mode, manner and time of the payment of the auction money.
4. The consequences of any breach on the part of the applicant of the terms of the agreement.
In the absence of some of these conditions the agreement, if any, that came into existence would be unenforceable on the ground of vagueness. The bid-sheet as such cannot be treated as a lease of the tolls in question, as no concluded enforceable contract between the parties emerged by the mere signing of the bid-sheet. It cannot also be treated as an agreement to let out the tolls, inasmuch as it does not evidence any such enforceable contract. A similar view has been taken by the Madras High Court in the case of The Rajanagram Village Cooperative Society v. P. Veerasami Mudaly, AIR 1951 Mad 322 and also in the case of Sir Rameshwar Singh Bahadur v. Shaik Kitab Ali, AIR 1926 Pat 487 by the Patna High Court. We are in respectful agreement with the views expressed in these cases. The Board of Revenue, which is the Chief Controlling Revenue Authority, has in its referring order referred to two decisions of this Court one, in the case of Amar Nath Khanna v. State Government, (Civil Misc. Writ No. 345 of 1956 decided on 21-3-1961 (All)) and in the case of Mumtaz AH v. Town Area Committee, Bharwari, 1970 All LJ 114, on the basis of which it took the view that the document in question would be dutiable under Article 35 Schedule I-B of the Act. None of the cases referred deal directly with the question raised in the present reference. The answer to the first question must, therefore, be returned in the negative.
8. Coming now to the second question. The document in question not being chargeable as a lease, the question arises as to whether it is chargeable under any other item of the Schedule or the Act. The only possible item under which it could be brought is "bond" as defined in section 2(5) or a "conveyance" as defined in Section 2(10) of the Act. Clauses (a) and (c) of section 2(5) are clearly inapplicable. We are thus left with clause (b) of that sub-section which reads:--
"(b) any instrument attested by a witness and not payable to order or bearer, whereby a person obliges himself to pay money to another."
Clause (b), however, only applies if the document in question is (1) an instrument, and (2) attested by a witness. How the document in question, which is a bid-sheet of the auction held on 22-3-1960 has been signed by all the bidders who were parties to the auction and the officer concerned, who conducted the auction. There is no attestation of the document by a witness. It would as such not answer the description of "a bond". It also does not appear that it is "an instrument" as defined in Section 2(14) of the Act. The bid-sheet itself, did not create any right or liability in the applicant toll such time that the offer was not accepted by the Town Area Committtee. The applicant could withdraw the bid before its acceptance, and in that event, there would be no liability on him to pay the money bid at the auction. It did not also create any right, for till such time that the bid was accepted, the applicant could not enforce the offer. The position of the auction had stipulated that in the event of a bidder resiling from his bid, he would be liable to pay damages, for if that were so, the bid would create a liability and the document in question would than be "an instrument". There is, however, nothing on the record to warrant such a conclusion. It is also not "a conveyance" for no move-able or immovable property has been transferred by the bid-sheet, and a conveyance can only be executed after an agreement, and in the present case, it has been seen that no agreement had come into existence. The document as such is not chargeable to duty under the Act.
9. We, therefore, answer the first question in the negative and the second question by holding that the document is not chargeable with stamp duty under any other Article of the Stamp Act. The applicant is entitled to costs which we assess at Rs. 200/-. Answered accordingly.
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