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Uppalapati Durga Prasad v. Executive Engineer (R & B) N.H Division, Srikakulam And Others
Factual and Procedural Background
Multiple writ petitions raising the same question were heard together and disposed of by a common judgment. The controversy concerns the meaning of the term "lease" in the context of the Indian Stamp Act, 1899. The petitioners had been conferred the right to collect tolls by the appropriate authorities after an auction process; the agreements granting those rights were described as "leased out" to the petitioners. After execution of the agreements, the respondents (acting on directives of the Inspector General of Registration and Stamps) demanded deposit of additional stamp duty, treating the agreements as leases subject to stamp duty under the Stamp Act. The petitioners' primary contention was that the agreements were licences (not leases) and therefore not chargeable as leases under the Stamp Act. In one representative petition (Writ Petition No. 6631 of 1999) the constitutional validity (vires) of Section 2(16) of the Stamp Act was also challenged; the other petitions did not challenge Section 2(16).
Legal Issues Presented
- Whether an instrument conferring the right to collect tolls amounts to a "lease" under Section 2(16) of the Indian Stamp Act, 1899 (in particular Section 2(16)(c)).
- Whether the definition of "lease" in Section 2(16) of the Stamp Act must be read or imported in light of Section 105 of the Transfer of Property Act (i.e., whether the Transfer of Property Act's definition should govern the Stamp Act's meaning).
- Whether Section 2(16)(c) of the Stamp Act is ultra vires (arbitrary or beyond legislative competence), including arguments that it is inconsistent with Section 105 of the Transfer of Property Act or not relatable to entries in Schedule VII of the Constitution.
Arguments of the Parties
Petitioners' Arguments
- The term "lease" in Section 2(16) of the Stamp Act should be understood with reference to Section 105 of the Transfer of Property Act; because Section 105 limits "lease" to leases of immovable property, the agreements granting toll collection rights (which do not transfer immovable property) are not leases.
- Section 2(16)(c) is based on an erroneous assumption that agreements to collect tolls can be leases; on that basis it was argued that Section 2(16) (or subsection (c)) is ultra vires and arbitrary and, therefore, should be struck down.
- It was also argued (briefly) that Section 2(16) is not relatable to entries in Schedule VII of the Constitution; an assertion was made that subsection (c) was introduced by a State amendment (a point the petitioners could not establish to the court's satisfaction).
Respondents' Position
- The respondents took the position (through letters issued on directives of the Inspector General of Registration and Stamps) that the agreements were leases for the purposes of the Stamp Act and that additional stamp duty was payable. The respondents relied on Section 2(16)(c) (which expressly includes "any instrument by which tolls of any description are let") and on prior judicial decisions construing that provision to include instruments granting the right to collect tolls.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Peddinti Venkata Murali Ranganatha Desika Iyengar v. Government of A.P. | Relied on by petitioners to contend Section 2(16)(c) represented an erroneous assumption that agreements to collect tolls are leases. | Court noted the judgment was pressed into service by petitioners but did not accept that it assisted them; the court did not consider it decisive for the petitioners' case under Section 2(16)(c). |
| Chief Controlling Revenue Authority v. A.B. Project (Allahabad High Court) | Considered an agreement concerning allotment of water (11 cusecs); held that since water is not immovable property the instrument could not be a lease under Section 2(16). | Court accepted that the Allahabad High Court was correct in that context but held the decision was distinguishable because the present cases concern tolls, which fall under Section 2(16)(c). |
| R. Venkatadri v. I.G. of Registration and Stamps, A.P. (Full Bench) | Instrument for allotment of a house under a hire-purchase system was held not to be a lease (case governed by Transfer of Property Act). | Court found that case inapplicable to the present matter as it was governed by the Transfer of Property Act; it did not assist petitioners on the Stamp Act definition. |
| Board of Revenue v. A.M. Ansari (Supreme Court) | Agreement granting rights to pluck and appropriate forest produce was treated as licence rather than lease. | Court observed it was not relevant to the present case for reasons previously explained (different subject-matter and context). |
| Ch. Srinivas v. Government of A.P. (Single Judge of this Court) | Held respondents' collection of stamp duty on instruments granting toll collection rights was not supported by any provision of the Stamp Act or Registration Act (single judge was apparently unaware of Section 2(16)(c)). | Court disagreed with the single judge's conclusion because Section 2(16)(c) had not been considered; the present court did not follow that decision. |
| Associated Cement Company Limited v. Government of A.P. | High Court had noted Section 2(16)(c) and held respondents were right to collect stamp duty treating the instruments as leases. | Court cited this earlier judgment as supporting the respondents' position that instruments conveying toll collection rights are leases for Stamp Act purposes. |
| Banney Khan v. Chief Inspector of Stamps (Allahabad Full Bench) | Held the definition of "lease" in the Stamp Act is wider than Section 105 of the Transfer of Property Act; an instrument by which tolls are let falls within Section 2(16)(c) and is chargeable as a lease. | Court relied on this Full Bench reasoning to support the proposition that instruments granting the right to collect tolls are leases under the Stamp Act. |
| In re: Burmah Shell Oil Storage and Distributing Company Limited of India (AIR 1933 All. 735) (Full Bench) | Earlier Full Bench decision relied upon by Banney Khan to support a broad construction of "lease" in Stamp Act context. | Cited as antecedent authority underpinning the Full Bench view that the Stamp Act definition is broader than the TP Act definition. |
| M.Y. Khan v. Chief Controlling Revenue Authority | Held that an instrument conveying the right to collect toll tax was a lease within Section 2(16) of the Stamp Act. | Court noted this decision as directly supporting the respondents' position that toll-collection instruments are leases for stamp duty purposes. |
Court's Reasoning and Analysis
The court's analysis proceeded from the text of Section 2(16) of the Indian Stamp Act. The court reproduced the statutory language which defines "lease" as a "lease of immovable property, and includes also" four categories (a) to (d), among which clause (c) is "any instrument by which tolls of any description are let."
Key analytical steps taken by the court:
- Literal and contextual reading: The court emphasized the plain and unambiguous language of Section 2(16). The presence of the word "includes" indicates that the statutory definition in the Stamp Act is wider than the definition in Section 105 of the Transfer of Property Act.
- Scope of "lease" under the Stamp Act: The court held that leases with respect to immovable property fall within Section 2(16), and additionally instruments described in subclauses (a)–(d), including (c), are also leases for Stamp Act purposes. In particular, an instrument conveying the right to collect tolls is an instrument by which tolls are let and therefore is a "lease" under Section 2(16)(c).
- Definition of "instrument": The court noted subsection (14) of Section 2 (definition of "instrument") which covers documents by which rights are created, transferred, limited, etc., and concluded that the documents granting toll-collection rights are "instruments" within that statutory meaning.
- Distinguishing contrary decisions: The court analyzed earlier authorities cited by petitioners and explained why many of those decisions were inapplicable (different subject-matter such as water or hire-purchase allotment of houses, or governed by the Transfer of Property Act). The court accepted some reasoning of other courts where applicable (e.g., Allahabad High Court where water was involved) but found those decisions distinguishable from the toll-collection context specifically covered by Section 2(16)(c).
- On constitutional and vires challenges: The court found no persuasive precedent or reason to declare Section 2(16)(c) ultra vires. It observed that the legislature intended a broader meaning for "lease" in the Stamp Act and that overlap between two statutes (Stamp Act and Transfer of Property Act) operating in different fields does not, by itself, render a provision ultra vires. The court also rejected the unestablished assertion that subsection (c) was introduced by a State amendment. Regarding Schedule VII entries, the court indicated that even if not relatable to a specific entry the matter could fall under Entry 97 of List I (Union List), and therefore did not pursue that constitutional argument further.
Holding and Implications
Holding:
The writ petitions are dismissed. The court held that the instruments by which the right to collect tolls was let are "leases" for the purposes of the Indian Stamp Act, 1899 (specifically under Section 2(16)(c)).
Immediate implications and consequences:
- The respondents were entitled to collect stamp duty treating those instruments as leases; the petitioners' contention that the agreements were mere licences and not chargeable as leases was rejected.
- With respect to an additional dispute in one petition (WP No. 4136 of 1995) about the rate of tax, the court left it to the respondents to fix the rate in accordance with the schedule of the Indian Stamp Act, and clarified that, since the instruments are to be treated as leases, they must be stamped at the rates prescribed for leases in the Schedule to the Stamp Act.
- No order as to costs was made.
Broader precedent or law-making effect:
The opinion interprets Section 2(16)(c) to include instruments granting toll-collection rights and relies on earlier authorities that have taken a similar view; it therefore affirms the position that the Stamp Act's definition of "lease" is broader than the Transfer of Property Act's definition. The court did not indicate it was creating a novel legal principle beyond construing the statute and following/confirming relevant precedents.
ORDER Bilal Nazki, J.
1. All these writ petitions raise same questions. They have been heard together and are being disposed of by this common judgment. The controversy is very short and revolves around the meaning to 'lease' in the context of the Indian Stamp Act, 1899. All the petitioners were conferred right by the appropriate authorities to collect the toll in terms of the Stamp Act. After inviting the bids the petitioners for different premises were the highest bidders and the right to collect the toll tax was leased out to them. The terms and conditions almost in all the transactions are same. We are not referring to the facts of each case but as a sample we are taking Writ Petition No.6631 of 1999 as this is the only writ petition within the batch in which the vires of Section 2(16) of the Stamp Act has also been challenged, in other writ petitions there is no challenge to Section 2(16) of the Stamp Act. After the agreement was signed the respondents asked the petitioners to deposit the deficit stamp duty as according to the respondent the agreement entered into between the parties was a lease and was subject to stamp duty as lease in terms of the Stamp Act. These letters were issued on the directives of the Inspector General of Registration and Stamps. The case of the petitioners is that the agreement entered into between the parties was not a lease but a licence, therefore, they could not be asked to pay stamp duty for the agreement treating the agreement to be a lease. This is the only argument which has been advanced in other writ petitions but in the present writ petition vires of Section 2(16) has also been challenged.
2. Only two arguments were advanced by the learned senior Counsel appearing for the petitioner in this case in connection with challenge to Section 2(16) of the Stamp Act. He contended that the term 'Lease' has to be understood with respect to Section 105 of Transfer of Property Act. The learned Counsel has not however submitted as to why it will be necessary to refer to the definition of 'lease' as it appears in Transfer of Property Act when the 'lease' has been defined for the purposes of Stamp Act in Section 2(16) of the Stamp Act. He however relied on some judgments.
3. The judgment in Peddinti Venkata Murali Ranganatha Desika Iyengar v.
Government of A.P, , is pressed into service to contend that Section 2(16)(c) is one erroneous assumption that an agreement to collect toll would amount to lease. In this connection the learned Counsel for the petitioner also relied on a judgment of the Allahabad High Court in Chief Controlling Revenue Authority v. A.B. Project, . This judgment is in a different context. In this case the agreement was in respect of taking of 11 cusecs of water by the respondent company. The Court after examining Section 2(16) of the Stamp Act found that, in order to come to a conclusion that the transaction was a lease one had to find out whether the subject-matter was an immovable property and in this case subject-matter was water which could not be described to be immovable property. The learned Judges of the Allahabad High Court were right because the language of Section 2(16) is very plain and unambiguous which defines 'lease' as :
"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 a 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."
On bare reading of the section it becomes clear that all leases with respect to immovable property would be leases in terms of Section 2(16) but in addition to leases of immovable property in other three categories there would also be lease under category (c) in which any instrument by which tolls of any description are let would be a lease for the purpose of Section 2(16). The instrument by which right to collect toll is conveyed has to be treated as lease for the purposes of Stamp Act. Right to collect toll will never in any circumstances involve immovable property. Basically toll is collected for using a road or bridge and as such neither the road nor the bridge is leased out, only the right to collection is leased out and this right of leasing out the collection is 'lease' for the purposes of Stamp Act. This was not the question before the Allahabad High Court. Supply of water could not fall in any of the subsections of section 2(16). Therefore, the Allahabad High Court was right to say that since water was not an immovable property the instrument could not be treated as lease for the purposes of Stamp Act. But, this judgment cannot come to the rescue of the petitioners whose case is directly covered by Section 2(16)(c).
4. The learned Counsel relied on another judgment in R. Venkatadri v. I.G. of Registration and Stamps, A.P.. . This is a judgment of Full Bench where the instrument executed was in connection with allotment of a house by Andlira Pradesh Housing Board under hire purchase system. The Court found that it was not lease. This judgment is not at all relevant for the purpose of the present case. That case was squarely covered under Transfer of Property Act. We agree with the learned Counsel for the petitioner that if there is a lease under Transfer of Property Act there must be lease within the meaning of Section 105 of the Transfer of Property Act which would mean that the instrument should be with respect to immovable property. But, lease under Indian Stamp Act is altogether a different specie, 'Lease' under the Transfer of Property Act is included in the definition of 'lease' under the Stamp Act. Besides leases which are leases within the meaning of Section 105 of Transfer of Property Act there can be other instruments also which would have to be construed to be leases for the purposes of Stamp Act alone. Therefore, this judgment also does not help the petitioners.
5. Another judgment of Supreme Court referred is Board of Revenue v, A.M. Ansari, . This was a judgment concerning an agreement by which the Government had granted rights to pluck, collect, carry away and appropriate the forest produce. The Supreme Court rightly found that this was not lease but a licence. The Case is not relevant for our purposes for the reasons given hereinabove. There is however, a judgment of learned single Judge of this Court in Ch. Srinivas v. Government of A.P., , which is directly on the point and in which the learned single Judge has held that, collection of stamp duty as lease for instruments with respect to collection of toll was not a lease. We will quote two paras of the judgment:
"These four writ petitions raise a common point with regard to right of collection of 9% towards stamp duty and registration charges by the respondents from the respective petitioners for the grant of right to collect the toll fee on the bridges viz., Kanakadurgamma varadhi, Keesara bridge on National High Way No.9 and Vadapally bridge in Nalgonda district.
2. In the counter filed by the respondents, the right to collect the said amount has been asserted. The said assertion is not traced to any of the provisions of the Stamp Act or the Registration Act. I have scanned through all the provisions of the Stamp Act as also the Registration Act, but nowhere I could find any provision authorising the respondents to collect stamp duty and registration charges at 9%."
The learned single Judge was under the impression that there was no provision either in the Stamp Act or in the Registration Act which would give the respondents the right to collect the stamp duty. Obviously Section 2(16)(c) was not shown to the learned single Judge. Therefore we are not able to agree with the views expressed by the learned single Judge as he quashed the action of the respondents of collection of stamp duty on the ground that there was no provision either in the Stamp Act or the Registration Act authorising the respondents to collect stamp duty. On the other hand there is an earlier judgment of this High Court in The Associated Cement Company Limited v. Government of A.P., . That judgment had taken note of Section 2(16)(c) and held that the respondents were right in collecting the stamp duty treating the instruments as lease. There are two other judgments of Allahabad High Court which are also directly on the point, one is Banney Khan v. Chief Inspector, Stamp, . This is a judgment of Full Bench. However, this judgment is based on another Full Bench judgment of same High Court In re: Burmah Shell Oil Storage and Distributing Company Limited of India, AIR 1933 All. 735 (FB). The Full Bench in Banney Khan's case after reproducing Section 2(16) of the Stamp Act in Para 6 found;
"6. This section while presumably borrowing the definition of "lease" as contained in the T.P. Act adds thereto a provision that "lease" shall include among other things, documents described in clauses (a) to (d). The use of the words "include also" obviously implies that the definition of "lease" as contained in the Stamp Act is wider and more comprehensive than the definition of it in Section 105, T.P. Act. It would follow that even if a transaction does not amount to a lease under Section 105 of the latter Act, it may nonetheless be a lease for the purposes of Stamp Act. We are supported in this view by the Full Bench decision of this Court in re : Burmah Shell Oil Storage and Distributing Company Limited of India, (AIR 1933 All. 735) (FB). A casual reading of the definition of "lease" indicates that any instrument by which tolls of any description are let comes within the definition of this term. What is, therefore, to be seen is whether the documents is an instrument by which toll of any description are let. In our opinion the agreement before us comes clearly within the language quoted above. This is a document by which all lands and buildings known as "New Subzi Mandi" have been made over by the owners thereof to the applicant for a period of one year. He is entitled to realise fee from occupiers thereof at certain rates in consideration of a sum fixed by public auction. This is "letting of tolls" and the document is covered by Section 2(16)(c) of the Stamp Act. It is needless to say that the word "toll" used in this sub-section means any sum of money which is taken in respect of some benefit, the benefit being the temporary use of land, that is, fares and market tolls. It includes all payments or taxes made by persons who frequent the market for the sale of any commodity or any thing which by practice or custom is expected to be sold in the market. This documents is signed both by the lessor and the lessee. Therefore, it can be hardly doubted that it is an instrument by which collection of tolls is let and is lease within the meaning of Section 2( 16) of the Stamp Act and is chargeable with Stamp duty under Article 35(b) Schedule I-B of the U.P. Stamp (Amendment) Act, 1962."
Another judgment is M.Y. Khan v. Chief Controlling Rev. Authority, , which also held that the instrument conveying the right to collect the toll tax was lease within the meaning of Section 2(16) of the Stamp Act.
6. The learned Counsel, however, submits that on erroneous assumption that there could be lease of immovable property Section 2(16) has been incorporated in the Stamp Act and therefore it should be held ultra-vires and arbitrary. We do not find any precedent or any reason for agreeing with the learned Counsel for the petitioner. It is the will of the Legislature and the Parliament wanted that a certain transaction should be 'lease' for the purposes of Stamp Act, we wonder how can this Court quash it. The learned Counsel further stated that since Section 2(16)(c) was ultra vires to Section 105 of the Transfer of Property Act, therefore it should be struck down. He has not been able to show us any precedent on the basis of which this argument could be accepted. Even without a precedent no reasons were advanced which could be considered by this Court as to whether one Act can be declared to be ultra vires to the other Act. Both the Acts are operating in two different fields. May be there is some overlapping somewhere. The "lease" within the meaning of Stamp Act has much wider meaning than the "lease" defined in Transfer of Property Act and the definition of "lease" in Transfer of Property Act cannot be imported into definition as it is in the Stamp Act. May be recourse could be taken to the Transfer of Property Act if the "lease" has not been defined in Stamp Act. As the "lease" has been defined in the Stamp Act, there is no need for us to go to the Transfer of Property Act. In this context there is settled law that, when the word begins with "includes" it must be given an exhaustive meaning. Besides this, "instrument" has also been defined under sub-section (14) of Section 2 and "instrument" includes every document by which any right or liability is, or purports to be, created transferred, limited, extended, extinguished or recorded.
Therefore, the document by which the right to collect the toll has been given to the petitioners is an "instrument" within subsection (14) of section 2 and therefore all instruments by which tolls of any description are let are leases within the meaning of Stamp Act.
7. A feeble attempt was made to show that Section 2(16) of the Stamp Act is ultra vires as it is not relatable to any of the lists under Schedule-VII of the Constitution. References were made to certain entries in Schedule-VII but we are not going to that question in detail because even if the legislation is not relatable to any of the entries even then it would be covered under Entry 97 of List (1) of Schedule-VII. However, the contention of the learned Counsel for the petitioner that Section 2(16)(c) was brought into statute by a State amendment was not established by the learned Counsel. From all the books and the Acts it appeared to us that the provision has not been brought by way of an amendment by the State Legislature. For these reasons, this argument cannot be accepted.
8. In other writ petitions there is no basis laid down for challenging the action of the respondents, as a matter of fact the arguments advanced by the learned Counsel in this writ petition have been adopted by the other Counsels.
9. For the reasons given hereinabove, we dismiss the writ petitions and hold that the instruments by which the toll has been let are leases for the purposes of Stamp Act.
10. There is an additional controversy in WP No.4136 of 1995 with regard to the rate of tax. We leave it to the respondents to fix the rate in accordance with the schedule of the Indian Stamp Act, but we make it clear that since the instruments in question are to be treated as leases, therefore, they will have to be treated as leases for all purposes and they will have to be stamped on the rates prescribed for leases in the Schedule to Stamp Act.
11. No order as to costs.
Transfer of Property Act.Alert