RAWAT Vs. STATE

JUDGEMENT

(1.) This is a revision under sec. 56 of the Indian Stamp Act (hereinafter referred to as the Act) against an order of the Collector Jodhpur dated 18th November, 1954 imposing a penalty along with the recovery of the deficiency stamp duty on a sale deed under sec. 40 of the Stamp Act.

(2.) The facts of the case are not much in dispute. The applicant Shri Rawat, son of Sardulal Suthar of Jodhpur, mortgaged the property in dispute with Shri Narayandas Beju & Sons on 7 -11 -1947 for Rs. 20,000/ -. A stamp duty of Rs. 20/ - was paid on this mortgage. Subsequently on 26 - 8 -54 he executed a sale deed of this property in favour of the mortgagee for Rs. 9500/ - which was registered on 19 -8 -1954 and the consideration of this sale deed was to be deducted from the money outstanding and due under the mortgage. The Sub -Registrar subsequently realised that the case was governed by sec. 24 of the Act and he, therefore, impounded the document under sec. 33 of the Act and submitted the same to the Collector Jodhpur. An objection was raised before the Collector as regards the applicability of sec. 33 of the Act and it was pointed out that as the Sub -Registrar had registered the document he had become Functus officio in the matter and had no jurisdiction to impound the document. The Collector held this objection to be valid but was of the opinion that he was competent to take action under sec. 40 of the Act. As regards the merits of the case he was of the view that the case was governed by the explanation appended to sec. 24 of the Act and hence the deficiency in stamp duty amounting to Rs. 190/ - be made good by the applicant. A penalty of Rs. 20/ - was also imposed.

(3.) The learned counsel appearing for the applicant has stated before us that he was not prepared to challenge the decision of the Collector inasmuch as it related to the applicability of sec. 40 in the present case. His only contention before us is that as the sale in question was not subject to a mortgage, the explanation of sec. 24 of the Act was not applicable. I was replied by the Governm2nt advocate that as the sale wiped off a portion only of the mortgage while keeping in tact its residuary portion, the case was fully government by the explanation. This point was examined by a Full Bench of the Calcutta High Court in a case reported in A.I.R. 1931 Cal. 193. In that case the question was as to the amount of duty to be charged upon a conveyance dated 13 -12 -1928 whereby U.K. Janardhan Rao bought from Rama Raju certain immovable property known as 16, Ramesh Mittar Road, in Calcutta. On 23 -5 -1923 one person named Biswas and his wife had executed a mortgage over his property in favour of Hemlata for Rs. 15000/ - with certain interest. In 1925 Rama Raju in execution of money decree obtained by him against Biswas purchased the right, title and interest of Biswas in this property for a sum of Rs. 3233/6/ -. On 13 -12 -1928 when Janardan purchased the property from Rama Raju there was due and outstanding upon the mortgage of Hemlata a total sum of Rs. 25636/ - as interest and principle. The document was stamped with a stamp of Rs. 35/ - on the ground that the duty was to be calculated solely on the purchase price payable there under by Janardan to Rama Raju, namely Rs 1000/ -. The Board of Revenue in that case claimed that they were entitled to a stamp duty amounting to Rs. 405/ - upon the sum of Rs. 26636/ - i.e. upon the consideration of Rs. 1000/ - plus Rs. 25636/ - due for principal and interest of Hemlatas mortgage. It was decided in that case that stamp dut!y was payable on Rs. 26636/ - Rankin C. J. observed that - - "in my view the mortgage money is in the case of sale subject to mortgage to be deemed to be part of the consideration for the sale not because it is part of such consideration but because the legislature is determined to tax it. If the question be asked why in order to make it taxable the legislature has declared that it is to be deemed to be part of the consideration the answer will be clear enough to any one who pays attention to the lines upon which the statute is drafted, for example the language of Art. 20 Schedule I which is part of the machinery for carrying out the purposes of sec. 24. This is the proper stand point for purposes of construction of the statute though it is no doubt true that the motives of the legislature even when enacting Stamp Duty Act might be discovered to have some idea behind them." On behalf of the applicant reliance has been placed upon a decision of the Bombay High Court, reported in a A. I. R. 1924 Bombay 524. It was held therein that - - "to attract the provisions of explanation of sec. 24 of the Act it was necessary that the purchaser should undertake to pay off the mortgage in order to make the sale subject to a mortgage." This decision was examined in the Calcutta case and we would refer to the relevant observations of the learned Judges of the Calcutta High Court in due course. We may, however point out here that the language of illustration No 2 was examined in that case but was not made the basis of decision as it was considered to be a typical case of its kind. This illustration lays down that - - "where A sells property to B for Rs. 500/ -, which is subject to a mortgagee, to C for Rs. 1000/ - and unpaid interest Rs. 200/ - the stamp duty is payable on Rs. 1700/ -" Their Lordships of the Bombay High Court were pleased to observe that - - "the illustration is no doubt applicable to a case where the property is subject to a charge and the sale is apparently silent as to the charge..... but I am unable to accept the view that because the illustration refers to a case where the property is subject to a charge there could be no case of sale (free from the charge) of property which is subject to a charge at the date of the sale......It seems to me obviously unjust that where purchaser pays a full value of the property free from the incumbrance he should be required to pay duty on that value plus the amount of the incumbrance for which, ex - hypothesi, according to the contract the property in his hands is not intended to be rendered liable." This line of argument was examined at length in the Calcutta case and the remarks of the learned Chief Justice on the point may be quoted in extenso - - "The real question and the only question was whether when property is transferred subject to mortgage it is transferred subject either certainly, or contigently, to the payment of money? Madras said: No, not unless there is an undertaking by the purchaser to pay or to be liable for the mortgage money. Calcutta said: No, unless the payment of the mortgage money is a condition to be fulfilled by the purchaser he gets his conveyance."