Procedural History:
On the 27th July, 1945, the respondent filed a suit against the Central Bank contending that the document was not a mortgage with possession. It was alleged that since a doubt had arisen as to whether the document giving effect to the common intention of the parties the Court’s directions were sought for and if the Court found that the document as framed did not give effect to the said common intention of the parties the instrument may be rectified.
On the 25th of January, 1946, the suit filed by the respondent was disposed of by the Court and the rectification as prayed was ordered.
A petition on behalf of the respondent to the appellant was filed on the 5th of February 1946, in which it was prayed that either the order of the Assistant Superintendent of Stamps be rescinded or in the alternative, a case may be referred under Section 57 of the Stamp Act for the opinion of the High Court. This petition was rejected on the 4th July, 1946.
The respondent thereupon filed a petition in the High Court on the 19th of July, 1946, praying that a writ of certiorari may be issued against the appellant, or an order may be made against him under Section 45 of the Specific Relief Act, to cancel the levy of the stamp duty and penalty, as claimed on behalf of the appellant or in the alternative the appellant, may be ordered under Section 57 of the Stamp Act to refer the matter to the High Court for its opinion.
The matter came for hearing before Mr. Justice Blagden who did not grant the first relief but directed the appellant to state a case under Section 57 of the Stamp Act to the Court for its opinion.
The appellant filed an appeal at the High Court but failed.
Facts of the Case
Maharashtra Sugar Mills Ltd. required a loan from the Central Bank of India, located in Bombay. In order to receive the required loan amount, a document was executed on 22ndMarch 1945 with a stamp of Rs.1680.
It was received by the bank on the pretext that it was a deed of hypothecation. Thus, the deed was sent to the sub-registrar for registration, he then impounded the same and sent it to the Stamp Office. The Assistant Superintendent of Stamps wrote to the respondent that the document was a mortgage without possession and therefore chargeable with duty as under article 40 (a) of Schedule 1of The Stamp Act and inquired the reason for not being stamped before execution?
The respondent’s solicitors replied that the document was not and was never intended by the parties to be a mortgage with possession. They pointed out that no possession of the property had been given or was intended to be given except in certain contingencies and therefore the document was properly stamped.
To this, the assistant superintendent intimated that the document was chargeable with a duty of Rs.56,250 and a penalty of Rs.5,000 had been imposed. The respondents were asked to pay the due amount.
On 27th July 1945, the respondent filed a suit against the Central Bank contending that the document was not a mortgage with possession and alleged that since a doubt had arisen as to whether the document giving effect to the common intention of the parties the Court’s directions were sought for and if the Court found that the document as framed did not give effect to the said common intention of the parties the instrument may be rectified.
On 9th August 1945, the respondent’s solicitors informed the assistant superintendent that such a suit had been filed and requested postponement of the stamp duty payment and penalty.
In the further correspondence, on behalf of the appellant, the demand was reiterated and resort to the coercive procedure of Section 48 of the Stamp Act was threatened. The Collector thereafter sent a letter to the respondents on the 17th January 1946, demanding payment.
On the 25th January 1946, the suit filed by the respondent was disposed of by the Court and the rectification as prayed was ordered.
The respondent’s solicitors immediately intimated the result of the suit to the assistant superintendent and sent a copy of the deed showing the rectifications made in the original document.
A similar letter was also sent to the Collector of Bombay.
On 1st February 1946, the respondent’s solicitors enquired of the assistant superintendent of Stamps whether he was willing to make a reference under Section56 (2) of The Stamp Act, for the appellant as the question of liability to pay the stamp duty and penalty, involved an important question of the law.
Issues
- Whether under Section 57 of the Stamp Act there was an obligation on the appellant to state a case, and if not whether the High Court had jurisdiction to give a direction to that effect.
- Whether having regard to the terms of Section 226(1) of the Government of India Act, 1935, the High Court had jurisdiction to order the appellant to state the case, it being a matter relating to the revenue.
Observations of the Bench
The appellant’s contentions were observed as unsound on grounds that the first contention, i.e. under Section 57 of the Stamp Act gives only discretion and does not provide space to the appellant to cast a reference only when doubtful of its decision or conclusion.
As in the present case, the question under what particulars stamp duty is leviable may depend on the true construction of a document. It also involves the question as to what the decision of the Court directing rectification of the instrument entails.
It does not appear, on principle, sound to hold that these difficult questions should be left under the Stamp Act to the final decision of the appellant, and if the party affected by the assessment has a grievance there is no relief at all in law for him.
The construction of a document is not always an easy matter and on the ground that it is a substantial question of law, parties have been permitted to take the matter up to the highest Court. If so, it appears difficult to start with the assumption that because this is a Revenue Act the decision of the appellant should be considered final and conclusive. The provisions of Section 56 (2) and Section 60 giving power to the Collector and the Court to send a statement of the case to the appellant and the High Court respectively, in our opinion, instead of helping the appellant, go against his contention.
In those two Sections, this power is given when the referring authority has a doubt to solve for himself. The absence of the words “feels doubt as to the amount of duty to be paid in respect of an instrument” in Section 57 supports the view that the reference contemplated under that Section if not for the benefit of the appellant only but ensures for the benefit of the party affected by the assessment.
In our opinion, the power contained in Section 57 is in the nature of an obligation and is coupled with an obligation that, under the circumstances, can be demanded to also be used by the parties affected by the assessment of the stamp duty.
Rationale
The court draws reference from the decision of the Judicial Committee of the Privy Council in Alcock, Ashdown & Co. Ltd. v. Chief Revenue Authority, Bombay. The case dealt with witnesses’ right to ask the Commissioner of Income Tax to state a case for the opinion of the Court under Section 51 of the Indian Income Tax Act, 1918.
The high court observed that if the assessee applies for a case, the Authority must state it unless he can say that it is frivolous or unnecessary. He is not to wait for the court to order him to do so for it will be misfeasance and a breach of the statutory duty if he does not do it. The judgment projected a broader accommodation by harmonizing with Section 51(1) of the Indian Income Tax Act, 1918 where the words ‘it shall be lawful’ those of compulsion. The only power is bestowed.
But when a capacity or power is given to a public authority there may be circumstances that couple with the power a duty to exercise it. This was established while referring to
the language of Lord Cairns in the case of Julius v. Bishop of Oxford “ There may be something in the nature of the thing empowered to be done, something in the object for which it is to be done, something in the conditions under which it is to be done, something in the title of the person or persons for whose benefit the power is to be exercised, which may couple the power with a duty, and make it the duty of the person in whom the power is reposed to exercise that power when called upon to do so.”
In their Lordships’ view, always supposing that there is a serious point of law to be considered, there does lie a duty upon the Chief Revenue Authority to state a case for the opinion of the Court, and if he does not appreciate that there is such a serious point, it is in the power of the Court to control him and to order him to state a case.
The court further added that in ‘the present case the power to make a reference under Section 57 is not only for the benefit of the appellant but it is coupled with a duty cast on him, as a public officer to do the right thing and when an important and intricate question of law in respect of the construction of a document arises, as a public servant it is his duty to make the reference. If he omits to do so it is within the power of the Court to direct him to discharge that duty and make a reference to the Court.
Dicta
The court established that the respondent seeks the Court’s intervention to make the appellant perform his statutory duty to state a case and that is extra-vires of the original jurisdiction of the Court. The court further adds that the proceedings, in this case, had passed beyond the stage of assessment and had reached the stage of enforcing payment is again irrelevant because by the relief granted by the High Court no attempt is made to obstruct the Revenue Authority in the discharge of his duties and also highlights that at one stage an injunction was granted against the appellant but that had been cancelled and calls this aspect of the discussion is only academic because if payment is enforced and the opinion of the Court, on the statement of the case is against the appellant, he will have to act in conformity with that opinion under Section 59 (2) of the Stamp Act and refund whatever may be held to be recovered in excess. Thus dismissing the appeal
Party’s Arguments:
On behalf of the appellant, it was affirmed that the very words of Section 57 of the Stamp Act stated that it is a power given to the appellant to state a case and it is not obligatory. The Section is framed and worded only to give the benefit thereof to the appellant and it is not for the benefit of any other party. The word “may” used in the Section was deliberately used for that purpose. It was pointed out that under Section 56 (2) of the Stamp Act if the Collector felt doubt as to the amount of duty with which the instrument was chargeable “he may draw up a statement of the case and refer it with his opinion for the decision of the Chief Controlling Revenue Authority.” Similarly under Section 60 if any Court felt doubt as to the amount of duty to be paid it was given the power to draw up a statement of the case for the opinion of the High Court. It was argued that both these Sections gave only power to the Collector and the Court to make a reference for their own benefit. Section 57, it was argued, was on the same lines for the benefit of the appellant. In none of these, any other party had any right to insist on a reference. It was pointed out that under the Stamp Act a Collector could certify that the document was properly stamped, although it was not sufficiently stamped on a true construction, and when such a certificate was given the Controlling Authority could do nothing. He had not even the power to refer that case to the Court to levy a higher stamp duty. For these reasons, it was contended that the scheme of the Stamp Act was materially different from the scheme of the Income Tax Act.
Comments:
Summing up; Mr. Daphtary on behalf of the appellant attempted to strengthen this case on grounds that the scheme laid down by the Income Tax Act was different from the scheme of the Stamp Act. It was observed and quoted that the principles underlying the same are applicable to the duty cast on the appellant under Section 57 of the Stamp Act and minor points of distinction between the schemes of the two Acts are immaterial for the present discussion.
The words of Lord Cairns help in fostering the nature of the powers bestowed upon the appellant and the conditions under which he is obligated to fix the amount of the duty. The provisions of Section 51 (1) and (a) run on the same lines as Section 59 of the Stamp Act.
Mr. Daphtaryargues that there was a difference in the scheme of the Act, because when the Collector issued a certificate under Section 32, even though his assessment might be faulty and against the interest of the State, the State or the appellant had no remedy. This was found to have overlooked the provisions of the Section that empowered the Collector to issue the certificate.
The scheme of the Stamp Act may be briefly noticed. Chapter II contains provisions about the liability of instruments to duty, of the time of stamping instruments, of valuations for duty and provisions as to the person by whom duty is payable. Chapter III which contains only two Sections deals with the adjudication as to stamps. The first (Section 31) is where an instrument, whether executed or not and whether previously stamped or not, is brought to the Collector with an application to have his opinion as to the duty with which it is chargeable. For obtaining that opinion the applicant has to pay a fee. The Collector may call for information and take evidence. After he has done so he determines the amount of the stamp duty and certifies under Section 32 that the full duty with which it is chargeable has been paid. It is obvious that the party applying is interested in obtaining the opinion and therefore he cannot object to the certificate of the Collector. If the Collector himself is in doubt he has the power under Section 56 (2) to ask for the opinion of the appellant. It is therefore clear that in respect of these two provisions under Chapter III no grievance could exist on either side. From Section 33 and Chapter IV onwards there are provisions in which the opinion of the Stamp Officer and of the party interested in paying the stamp duty may come in conflict. The Sections in Chapters IV, V and VI ending with Section 61, deal with situations arising from such difference of opinion. Section 57 (1) falls under this heading.
Therefore, contentions of the appellant failed.
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