INDIAN DYESTUFF INDUSTRIES LIMITED Vs. MEHTA TRANSPORT COMPANY

JUDGEMENT

(1.) TWO important questions of law pertaining to proper stamp duty applicable to a marine insurance policy for carriage of goods by rail or road and to a letter of subrogation from the insured to the Insurance Company fall for determination in this case.

(2.) THE material facts are as follows : the first petitioner obtained an open marine insurance policy for a period of one year from 1 April, 1979 to 31 March, 1980 from the second petitioner to recover the transit risk of consignments despatched by it. During this period, certain consignments were entrusted for carriage by the petitioner to respondent Mehta Transport Company. As the respondent carrier failed to deliver the said consignments, the first petitioner preferred claim with second petitioner-the Insurance Company. The said claim was settled by the second petitioner in terms of the above policy of insurance and a sum of Rs. 38,016. 48 was paid to the first petitioner in settlement of the claim. On receipt of the said amount, the first petitioner executed a letter of subrogation in favour of the second petitioner authorising it to recover from the respondent-carrier the amount of loss suffered by the first petitioner. Thereafter the first petitioner filed a suit against the respondent-carrier for recovery of a sum of Rs. 38,016. 48 with interest and cost. The second petitioner-insurance company also joined the first petitioner as a plaintiffs in the said suit. In the course of evidence, the petitioners witness produced before the trial Court the marine insurance policy and a letter of subrogation dated 17 February, 1981. The production of the above two documents was objected to by the respondent on the ground that the said documents were insufficiently stamped. According to the respondent, the appropriate stamp duty leviable on a marine insurance policy was the one provided under Article 47-A of the Indian Stamp Act, 1899 ("the Act") and not 50 paise. Similarly it was contended that the appropriate stamp duty for the letter of subrogation was the duty applicable to conveyance which was specified under Article 25 of the Bombay Stamp Act, 1958. The contention of the petitioners, on the other hand, was that both the documents were properly stamped. According to the petitioners, stamp duty of 50 paisa only was chargeable on the policy of insurance in the instant case as it was covered by Article 47-B of the Indian Stamp Act and not Article 47-A as contended by the respondent. It was further submitted that the letter of subrogation was properly stamped with stamp of Rs. 5/- as it was an agreement and not a conveyance. The trial Court accepted the contention of the respondent and held that the insurance policy as well as the letter of subrogation were inadequately stamped and therefore impounded the same. He calculated the stamp duty chargeable on the insurance policy at the ad-valorem rate specified in Article 47-A of the Indian Stamp Act and the stamp duty applicable on the letter of subrogation at the rate applicable to conveyance as provided under Article 25-A of the Bombay Stamp Act. He determined the stamp duty payable on the marine insurance policy at Rs. 76,625/- and imposed a penalty of Rs. 7,66,250/ -. Similarly, the appropriate stamp duty payable on the letter of subrogation was calculated at Rs. 1,155/- and after deducting the amount of Rs. 5/- already paid, the deficit was determined at Rs. 1,150/ -. A penalty amounting to Rs. 11,500/- calculated at the rate of 10 times the amount of deficit stamp duty was also levied. The above order of the trial Court is the subject matter of challenge in this revision application.

(3.) THE contention of the petitioners is that both the documents viz. the insurance policy as well as the letter of subrogation are adequately stamped as required by the provisions of Indian Stamp Act, 1899 and the Bombay Stamp Act, 1958 respectively. It is contended that the insurance policy in the instant case was intended to cover the risk of loss and damage etc. to the goods while in transit by "lorry/tanker/rail". In terms of the policy, the insurance was to commence from the time the goods were loaded on the ship or vessel i. e. lorry/tanker/rail, and continued till their safe delivery to the insured. It is contended that Article 47-A of the Indian Stamp Act prescribes the rates of stamp duty applicable to "sea insurance" only. Other classes of insurance covering goods etc. against loss or damage, fall under Article 47-B.