Himalaya House Co. Ltd. Bombay v. Chief Controlling Revenue Authority

V. !J. Desai and B. D. Sharma, for respondent No. 1 (in both ~e appeals).

The Judgment of tl1e Court was delivered by Hegde, l. Both these appeals, the former by certificate and the later by special leave arise from the decision of the High Court of Bombay in a reference under section 54 _of the Bombay Stamp Act.

I . When Civil Appeal No. 660 of 1967 came up for hearing on a previous occasion, objection was raised as to the maintainability of the appeal on the ground that the High Court was not compe-tent to grant a certificate in the case under Art. 133 of the Consti• tution. At that stage, the appellant sought a.n adjournment of the appeal so as to enable it to move this Court for special leave against the impugned decision. That prayer was allowed by this Court. Thereafter the appellant sought and obtained special leave of this Court to appeal against the decision in question. Hence Civil Appeal No. 58 of 1972 came to be filed. In view of this aPJlCI!]., we may now proceed on the basis that Civil Appeal No. 660 of 1967 stands withdrawn and the same is disposed of accordingly. Hereafter we shall only deal with Civil Appeal No. 58 of 1972.

The facts leading up to this appeal are as follows :- On November 18, 1950, plot No. 79 at Palton Road, Bombay, admeasuring about 1,368 square yards was leased by the Govern-ment of Bombay for a period of 999 years from June 26, 1942 to one Lily Investment Corporation Ltd. On December 11, 1950, the said Lily Investment Corporation Ltd, gave a sub-lease of the said plot of land to Uttamchand Tulsi\las for a term of 999 years J (less one day), from June 26, 1942. Thereafter Uttamchand con-structed a building called "Himalaya House" on that plot consist· ing of several flats, shops and offices. Under various agreements, he appears to have assigned the right of occupation in those flats, shops and offices t.o several persons. One such agreement was with one Motiram Shewarama Vallicha. That was in respect of one flat. That agreement is in the record. As the High Court has placed considerable reliance on that document, it is necessary to quote the relevant clauses therein viz. 2, 5 and 16. Those clauses read thus:

"2. That the Party hereto of the Second Part hereby

agrees to acquire the block bearing No. 12 on the ground floor of the said building for the total sum of Rs. 10,000 (Rµpees ten thousand only).

S. That the possession of the said block shall be deli-

vered to the party hereto of the Second Part provid-ed all the amounts due under this agreement and particularly indicated in condition No. 3 hereof are paid by the party hereto of 1jhe Second Part to the Party hereto of the First Part and upon the delivery of such possession the party hereto of the Second Part shall be entitled to the use and occupation of the said block without hindrance PROVIDED NEVERTHELESS that nothing contained in these presents shall be construed as a demise in law of the said leasehold lands or any part thereof or the build-ings thereon, such demise to take place only upon the transfer by a formal conveyance to a Co-opera-tive Society or Incorpora1)ed body to be formed as hereinafter agreed.

¶16That the party hereto of the First Part shall form a

co-operative society or any other incorporated body recognized in law and the partY hereto of the Second Part shall join such co-operative society or any other incorporated body. The party hereto of the First Part agrees to convey transfer or assign to the said society or any other incorporated body as the case may be the aforesaid lands and buildings provided that the costs and expenses in connection with the

requisition of such society or incorporated body, as well as the costs of preparing, approving, engrossing and stamping the Assignment, Transfer, or Deed of Conveyance required to be executed by the party hereto of the First Part shall be borne by such society, or the incorporated body as the case may be."

On June 28, 1955, the appellant company was incorporated and registered under the provisions of the Indian Companies Act, 1913. On December 30, 1955, Uttamchand purported to assign all his rights in the building to the appellant company under a deed. In the preamble to that Deed after tracing Uttamchand's tille to the property, it is recited "AND WHEREAS the Assignee Company has been formed for the better administration of the said building and for the protection of the interes.ts of the persons occupying flats, offices and shops therein AND WHEREAS the Assignor has agreed to assign to the Assignee all his interests in the said piece of land and building." Clause 1 of that Deed pro-vides as under :- ·

"l. The Assignor (i.e. Respondent No. 2) doth hereby

for no consideration assign into the Assignee (i.e. the Appellant Company) ALL THAT the piece of land comprised in the before recited Lease together with the buildings a!]d erections now standing and being thereon toge~her with all rights easements and appurtenances thereto belonging and together with all the right title and interest whatever of the Assig-nor in the building known as Himalaya House EX-CEPT AND RESERVED as in the before' recited Lease more particularly mentioned TO HOLD the same unto the Assignee or .all the residue now un-expired of the term of years granted by the before recited Lease SUBJECT to the rent reserved by and to the Agreements convenants and conditions con-tained in the before recited Lease henceforth on the part of the Assignee to be paid observed and per-forn1ed." .

The said document bore a stamp of annas 12 only. When the same was presented for registration, the Sub-Registrar of Bombay impounded the same and sent it to the Assistanf Superintendent of Stamps, Bombay .. That officer by his letter dated June 26, 1956 mfonned the appellant company that "as it was formed of and for the ~erson~ who had purchased the flats in lhe buildi'ng, the real cons1deral!on for the Assignment was made up partlv of what was paid by the flat holders and the status of the appellant company was t~at of the nominee of the flat holders so far as the Assignment was concerned." He further stated that in the absence of any mention of consideration in the document, the then value 9-887 Sup;CI/72 . ' of the premises was an index of the consideration. He purporting to act under section 40 of the Indian Stamp Act, determined the stamp duty at Rs. 95,997 after valuing the building at Rs. 16,00,000. Further he imposed a penalty of Rs. 20,000. He called upon the appellant company to pay the stamp duty as well as the penalty. On re~eipt of that communication, the appellant company applied to the Chief Controlling Revenue Authority to revise othe order of the Assistant Superintendent of Stamps or in the alternative refer the matter to the High Court for its opinion. Thereafter the Chief Controlling Revenue Authority made the reference referred to earlier to the High Court. He submitted two questions for the opinion of the High Court, viz :

"(!) Whether Himalaya House Co. Ltd. the Assignee

in the Assignment dated 30th December 1955 is tlie nominee of the several flat holders who have purchased the flats in the Himalaya House and whether the Assignment in queStion is a Conveyance or a sale for a price whkh has passed from the hand of the flat holders long be-fore t.he date of assignment.

( 2) Whether it was competent to the Assistant

Superintendent of Stamps, under section 40 of the Indian Stamp Act, 1899 (now section 39 of the Bombay Stamp Act, 1958) to go beyond the terms of the document when i4 is mentioned in the doc.ument that no. consideration is passed and assess the stamp duty in the manner men-tioned by him in his order dated the 26th June 1956."

The matter came up for hearing before a bench of Jihree Judges of the Bombay High Court presided 0ver by the learned Chief Justice. At the hearing, the learned Judges opined that the questions sub-mitted by the Chief Controlling Revenue Authority were not appropriate and, therefore, they recast those questions as follows:- '

"l. Under which article in Schedule I to the Stamp Act

should the "Assignment Deed in question be stamped?

¶2If Article 23 applies in this case, what is the consi-

deration for the Assignment Deed ?"

All the Judges unanimously held that the Article applicable to the case is Article 23 in the FirsU Schedule to the Indian Stamp Act, which will be !lereinafter referred to as "the Stamp Act". But while answering the second question, the learned Chief Justice and Naik. J. opined that "the consideration for the Assignment Deed is the total amount which was payable to the Assignor Tulsidas . under the agreements between him and the persons to whom he had, under those agreements, given the right to occupy the fiats, offices and shops in the building." But Mody J. differed from his colleagues and came to the conclusion that "the consideration is as mentio,ned in the Deed .of Assig11I11ent itself i.e. no considera-tion."

All the Judges unanimously came to the conclusion that the consideration mentioned in the document is nil. This conclusion is obvious because Cta)I_se 1 of \he Assig11I11ent Deed says that the Assignor assigns his rights 'for no consideration'. All of them were also unanimous in their conclusion that for finding out the consideration, the concerned authorities (who will be hereinafter referred to as 'Revenue') cannot tra•,'\ll outside the document;_ it should be 'as set forth therein'. But the majority took the view that the Revenue was not bound to accept the quantum of consi-deration mentioned in the document; it could determine the same by taking into consideration the facts available from the impound-ed document. They fur(her held that the impounded document incorporates into itself the various agreements ·entered into bet-ween Uttamchand and the various persons to whom he had assign-ed certain rights _in r~sQCct of flats, offices and shops referred to earlier. In their view, t;he consideration paid by those persons to Uttamchand formed part of the consideration for the Assignment Deed in question. Naik J. went a little further and held that alter-natively the Deed in question can be considered as a "gifti" under Art. 33 of Schedule I to the Stamp Act Mody J. opined that there is no basis to ho!d that the agreements entered into between Uttamchand and the various persons to whom the fiats, offices and shops had been assigned were similar to the agreement entered into between him and_ Motirmn Shewarama VaJlicha. He held that on the basis of the mate!ial before the Court, it was·not possi-I ble to cc;>me to the conclJ!SJ'?n that they had entered into agree-ments witl1 Uttamchand sumlar to the agreement , entered into between Uttamchan4 and Motiram Shewarama Vallicha. He further ~eld that on a P!ain reading of the Assignment Deed, it is ~ot Pc;>SS1ble to come to the con~lusion that !he terms and condi· lions Ill !he agreements entered mto by Uttamchand with those to ~horn he hll;d assigned fiats, offices and shops,.were incorporated mto. the Ass1gnl'llent D_eed. . ·

None of the Judges upheld the conclusi<>n of the Assistant Superintendent of Stamps that the appellant company is a nominee of the persons to whom !he flats, offices and shops had been assign-ed; nor did they agree with his conclusion that if in a document, the value of the rights assigned is not mentioned, it is permissible for the Revenue to assess their value independently.

The contention tha_t the appellant company is a nominee of the various persons to whom flats, offices and shops had been assigned was not pressed before us; nor was it urged before us that the Revenue is competent to make an independent assessment of the value of the rights assigned.

Though at one stage, it was feebly suggested that the Deed of Assignment may be considered as a giit but that contention was not elaborated; nor do we see any merit in that contention because in the first place, it does not purport to be a gift; secondly, the valuation of "gift" under Article 33 of the First Schedule has to be made on the same basis as the valuation of a "conveyance" under Article 23 of that Schedule. Article 3 3 specifically says 1;hat the duty payable on a gift deed will be "same as a conveyance for a consideration equal to the value of the property as set forth in such instrument."

For the purpose of this case, we shall proceed on the assump-tion, without deciding, that the charging words in Article 23 of the Stamp Act_ "where the amount or value of the consideration for such conve~ance as set forth therein" do net mean that the Revenue must have regard only to what the parties to the instru-ments have elected to state the considetation to be, but the duty must be assessed upon the amount or value of the consideration for the transfer as disclosed upon an examination of the terms of the instrument as a whole. We are of the opinion that the learned Chid Justice and Naik J. were not justified in holding tha~ the D"~u of Assignment incorporates into itself the various. agreements entered into between Uttamchand and the persons to whom he assigned flats, offices and shops. The only reference to tlhose pc.rsons in the Deed of Assignment is in the preamble .wherein it is stated ''AND WHEREAS the Assignor having erected a building known as Himalaya House on the said piece of land had granted to certain persons the right to occupy flats. offices and shops in the said building AND W~REAS llhe Assignee Company has been formed for the better administration of the said building and for the protection of the interests of the persons occupying the ilats. ofllces and shops therein." These clauses merely refer to the earlier transactions. · They do not' incorporate into the Assign-ment Deed the earlier agreements. with the persons referred to therein. Mere reference_ to some earlier transactions in a docu-ment does not amount to an incorporation in that document, of the terms and conditions relating thereto. From the language used in the Assignment Deed, it i~ not possible to come to the conclusion that the tem1s and conditions of the earlier transactions have been made a part of that Deed. Furllher barring one parti-cular agreement, other agreements were not before the Court. Therefore, it is not possible to know what the terms and conditions p[ those agreements were. Before the terms and conditions of an agreement can be said to have been incorporatd into another docu-ment, the same must clearly show that the parties thereto intended to incorporate them. No such intention ·in available in this case.

It was urged that in view of section 27 of the Stamp Act, it was permissible fo~ the Revenue to look into the terms and condi-tions of the agreements entered into by Uttamchand with the various persons to whom he had assigned fiats, offices and shops •. particularly in view of the fact that the impounded document makes reference to those agreements. We are not able to accept that contention. Section 27 prescribes that "The consideration (if any) and all other facts and circumstances affecting the churge-ability of any ins~rument with duty, or the amount of the duty with which it is churgeable shall be '.ully and truly set forth there-in." It is true that in view of this provision, the-parties to a docu-. ment are requireµ to set forth in the document fully and truly the consideration (if any) and all other facts and circumstances affect-ing the chargeability of that document with the duty or the amount of the duty with which ·it is chargeable. But a failure to comply with the requirements of that section is merely punishable under section 64 of the Stamp Act. No provision in the Stamp Acf em· powers the Revenue to make an independent inquiry of the value of the property conveyed for determining the duty chargeable. Article 23 is the Article that governs the charging of stamp duty on "conveyance". That Article' to the extent relevant for our pre· I sent purpose reads :

"23. Conveyance (as defined by section 2(10) no~ being

a transfer charge or exempted under section 52-Where the amount or value of the consideration for such conveyance as set forth therein .......... " This Article bas come up for consideration before various High 11 Courts on a number of occasions. In Ramm Chetty v. Mohamed

Ghouse( 1) the Calcutta High Court held that in determining whether a document is sufficiently stamped for the purpose of deciding upon its admissibility in evidence, the document itself as it stands, and not any collateral circumstances which may be shown in evidence must be looked at. In Sakharam Shankar and Others v. Ramchandra Babu Mohire, (') it. was held that in deter-mining the question whether a particular docwnent is sufficiently stamped, the Court should look at the instrument as ii stands. A Full Bench of the Allahabad High Court in the matter of Muhammad Muzaf]ar Ali(') held that if in a deed of gift the value of the property dealt with is not set forth, the deed does not re-quire any stamp, and it is not within the competence of the Collec-tor to have the said property valued in order to assess the duty

(I) (!LR 16 Cal 432). 2 (!LR 27 Bom 2791. Pl (!LR 44 All. 339).

payable. If, however, the value of the property is intentionally omitted with a view to defraud the Revenue, a prosecution will lie und~r section 64 of the Stamp ~ct. A Division Bench of the Patna High Court in Sri Sitaram Rama/ia and Another v. State oj Bihar(') held 1that die Collector had no power under section 40 of the Stamp Act to embark upon an inquiry with regard to the market value of the properties covered by the document! and re-quire the payment of further stamp duty in accordance with his finding as to valuation and, therefore, that the impugned orders of the Collector, Commissioner and the Board were ultra vires and were liable to be set aside under Article 227 of the Constitution. Therein the Court was c.!Jnsidering the scope of section 5 8 of the Stamp Act which requires ·that an instlrument of settlement should be stamped with the same <,luty asl a bond "for a sum equal to the mnount or value of th~. property settled as set forth in such settle-ment."' The Court observed that the words 'as set forth in the settlement" in the section refer back to the word "value" and not to the words "property settled". Recently the same view was taken by the A,ndhra Pradesh High Court in Bharpet Mohammad Hussain Sahib and Another v. District Registrar, Kurnool(2). No decision taking a contrary view was brought to our notice. The question arisin_g for decision in this case is settled by stare decisis. We are entirely in agreement with the view expressed in those decisions. Even if we had bleen inclined to place a different inter-pretation on Article 2}, we would have hesitated to do so in view of the long line of decisions to some of which we have already ma!le reference. The Legislature may have had good reasons for not empowering the Revenue to make an independent inquiry as regards the valuation of the right sought to .be assigned.

Under any circumstance, there was no basis to hold that the consideration for the impounded Deed is the total amount received by Uttamchand under the agreements, entered into between him and the persons (o whom he had assigned certain rights in the fiats, offices and shops in the building. Those persons had an indepen-dent right of their own. Their rights did not flow from the im-pounded Assignment Deed. Whether the title obtained by them was perfect or not, there is no denying of the fact thllt they had acquired valuable rights even before the impounded Deed was executed.

For the reasons menti,oned above, we allow this appeal and in place of the answers given by ihe High Court, we answer the ques-tion formulated by that Court 11hus :

"I. The Article applicable in this case is Article 23 in

the First Schedule to the Stamp Act, and

¶2the consideration is .as mentioned in the Deed of

Asslgome.nt itself i.e. no consideration."

The first respondent shall pay the costs·· of the appellant ip Civil Appeal No. 58 of 1972. There will be no order as to costs in Civil Appeal No. 660 of 1967.

CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 660 of 1967 and 58 of 1972. ·

Appeals by certificate/ special leave from· the judgment and decree dated August 11112, 1964 of the Bombay High Court in Civil Reference No. 6 of 1959.

S. T. Desai, P. C. Bhartari, J. B. Dadachanj{, 0. C. Mathur and Ravinder Narain, for the appellant (in both the appeals).