BILL FORGE PRIVATE LIMITED Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) The writ petitioner in 10203/2006 is a private limited Company registered under the Indian Companies Act,1956 carrying on the business in manufacturing components for automobiles. It obtained a credit limit from 4th respondent bank by depositing the original title deeds pertaining to immoveable properties. Thereafter a request was made for additional credit limit. The same was granted on deposit of title deeds. The State brought about an amendment to the Karnataka Stamp Act by Act No. 7/2006 with effect from 1-4-2006. By virtue of the Explanation to Article 6 of the schedule, the respondent-bank is demanding the stamp duty on the deposit of title deeds for the purpose of creation of security in respect of the credit facility given to the petitioner. It is the case of the petitioner that it is not liable to pay any stamp duty on deposit of title deeds. That the impugned amendment is not sustainable in law and liable to be set aside. Therefore it filed writ petition No.10203/2006 seeking for a declaration that the impugned legislation namely, Act No.7/2006 in so far as adding an Explanation to Article 6 in the schedule to the principal Act is unconstitutional, void and consequently to issue a writ of mandamus to restrain the respondent State and their officers from enforcing or giving effect to the provisions of the impugned amendment. It was contended by the petitioners that a similar attempt was made to levy duty in respect of such transactions which were the subject matter of litigation which ultimately ended in the Judgment dated 22-11-1973 rendered by the Full Bench in the case of MURUGHARAJENDRA COMPANY vs. CHIEF CONTROLLING REVENUE AUTHORITY, 1974 1 KarLJ 177. The Hon'ble Full Bench held that a letter that was the subject matter of the Judgment which had been construed as a mortgage deed and liable to duty under Article 6 to the Schedule to the Act was not one such and therefore no duty was required to be paid on such a letter. That in the present case also, there is no mortgage deed and as such there is no instrument and hence the petitioners are not liable to pay stamp duty. That the amendment is in violation of the very definition of instrument as it occurs in Section 2(1)(j) of the Karnataka Stamp Act. That what is sought to be subjected to duty in view of the explanation that is added is on a note or letter or the memorandum which is not even an instrument within the meaning of Section 2(1)(j) of the Act. Therefore the amendment in so far as it relates to the introduction of explanation to Article 6 requires to be declared as unconstitutional. The learned Single Judge was of the view that there was no liability fastened on the petitioner. Whether the liability is created or not in respect of a particular transaction is essentially dependent on the fact situation, nature of the transaction and the nature of the instrument as to whether it can be presumed as an instrument or otherwise and so forth. The learned Single Judge was also of the view that there was no need to examine the Full Bench Judgment of this Court. That the petitioner not being a person on whom the liability is sought to be fastened in respect of a transaction prior to the date of the amendment, it is not necessary to examine such questions. That no arguments were addressed with regard to the legislative competence or being violative of any provisions of the Constitution. With these reasoning the learned Single Judge dismissed the writ petition. Aggrieved by the said order, the petitioner has filed writ appeal No.1412/2012.

(2.) The writ petitioners in writ appeal No. 4195/2009 is a software company. It has the benefit of credit facility with the bank. An enhanced loan was sought for to the existing credit limit already granted on the same immoveable property which was offered earlier as a continuing guarantee. That in view of the amendment to the Karnataka Stamp Act, the petitioner was asked to pay the stamp duty on the transaction. Under these circumstances, the petitioner filed the instant writ petition No.12723/2007 seeking to strike down and declare as unconstitutional and void the explanation to Article (6) in the Schedule to the Stamp Act and other consequential reliefs. The learned Single Judge by the impugned order was of the view that the intention of the Legislature was a blatant act to nullify the effect of the Full Bench Judgment of this Court as well as the Apex Court wherein it was held that a transaction of the nature involved in the present petition, would attract stamp duty, notwithstanding the judicial pronouncements to the contrary. Therefore this being frowned upon by the Supreme Court, such a legislation could not be upheld or permitted to remain on the Statute book. Accordingly, the explanation to Article 6 of the Schedule to the Karnataka Stamp Act, 1957 as incorporated by amendment Act 7/2006, was declared as unconstitutional, void and the same was struck down as ultra vires. Aggrieved by the same, the State has filed writ appeal No.4195/2009 and WA.No.314/2010.

(3.) Since both the appeals arise out of the orders passed by the respective learned Single Judges concerning the very same issue at challenge, namely, the constitutional validity of the explanation to Article 6 of the schedule to the Stamp Act, at the request of learned counsels, both the appeals are taken up for consideration together.