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M/s Somdutt Builders v. State of U.P. and others - WRIT - A No. 5738 of 1995  RD-AH 364 (7 February 2005)
Civil Misc. Writ Petition No. 5738 of 1995
M/s Somdutt Builders Ltd. vs. State of U.P. and others
Hon'ble Vineet Saran, J.
A Nazul plot no. 10, Block 15, Civil Lines, Kanpur measuring 6910 Sq. meters had been put to auction by the Kanpur Development Authority on 28.4.1987. The bid of the petitioner for Rs.6.10 Crores was highest and had been accepted. Thereafter an agreement was executed between the petitioner and Kanpur Development Authority on 11.6.1987. The said document was executed on a stamp paper of Rs.7/- only. After seven years, in October, 1994 Kanpur Development Authority sent a complaint to Additional District Magistrate (Finance & Revenue), Kanpur Nagar (A.D.M. (F & R)) Respondent no.3, along with a photo copy of the agreement dated 11.6.1987 stating that the said document had been under-stamped and proceedings may be initiated against the petitioner under the provisions of Indian Stamps Act for not paying appropriate stamp duty. In response, on 31.10.1994 the Respondent no.3 A.D.M. (F & R) wrote to the Kanpur Development Authority and summoned the original agreement dated 11.6.1987. On 1.11.1994 the Vice Chairman, Kanpur Development Authority supplied the agreement to the Respondent no.3, which, the petitioner contends, was not the original but merely a photocopy of the original. A show cause notice dated 14.11.1994 was thereafter issued to the petitioner by the Respondent no. 3, to which a reply was filed by the petitioner on 29.11.1994. In its reply, the petitioner raised three objections, namely, that the document did not attract any stamp duty; that the proceedings could not be initiated against the petitioner as the same were barred by limitation; and that the A.D.M. (F & R) had no authority or power to summon the document to initiate the proceedings. After filing of the reply, the petitioner on 28.12.1994 deposited a sum of Rs.60 lacs towards the estimated stamp duty on the document and thereafter again filed detailed objections before the Respondent no.3 on 1.2.1995. By his order dated 6.2.1995, the Respondent no.3 determined the stamp duty payable by the petitioner to be Rs. 72,25,450/- and further imposed a penalty of Rs.50,57,815/-. Being aggrieved by the said order, the petitioner challenged the same by filing a revision before the Chief Controlling Revenue Authority (CCRA), Respondent no.2, on 16.2.1995 along with an application for stay. On the same date the CCRA passed an order of status quo and fixed 6.3.1995 for filing of objections by the opposite parties and hearing. However, since despite the stay order granted by the CCRA the Respondent no.3 was proceeding to execute the order dated 6.2.1995 by putting seals on certain rooms and halls of the petitioner's property, the petitioner filed an application on 18.2.1995 with a prayer for a direction to the Respondent no.3 to remove the said seals on the rooms of their property. Another application was filed on 22.2.1995 with similar prayer, which was directed to be taken up on 25.2.1995. On 25.2.1995 when, according to the petitioner, only arguments were heard in respect of the applications of the petitioner, the CCRA, to the utter surprise of the petitioner, passed the order finally deciding the revision itself stating that an oral request for reviewing the order dated 16.2.1995 had been made by the Respondent-State, although in fact 6.3.1995 had been fixed for the hearing of the revision. By the said order dated 25.2.1995 the penalty was reduced to Rs. 42,45,368.75 paise since admittedly the area of the land had been found to be reduced from 6910 sq. meters to 5974 sq. meters. Aggrieved by the aforesaid order dated 6.2.1995 passed by Respondent no.3 and the order dated 25.2.1995 passed by Respondent no.2, the petitioner has filed this writ petition.
I have heard Sri V.K.Singh, learned counsel for the petitioner and Sri Sanjay Goswami, learned Standing Counsel appearing for the State-respondents at length and have perused the record.
Sri V.K.Singh, learned counsel for the petitioner submitted that by the agreement dated 11.6.1987, no rights had been transferred in favour of the petitioner. The petitioner had merely been authorized to be in possession, and mere permission had been granted to the petitioner to raise construction. Although the same had been termed as an ''agreement to lease', it was actually nothing but only a license and thus no stamp duty would be payable on the same. Learned counsel has further submitted that the dispute had arisen for the first time on 31.10.1994 after a lapse of more than 7 years and that too on a complaint of the Kanpur Development Authority which was itself a signatory to the said agreement, and as such no cognizance could have been taken by the respondents on the said complaint.
After hearing learned counsel for the parties the issues to be determined by this Court could be summarized in the following manner :-
(i) In view of the first proviso to Section 33 of the Indian Stamp Act, 1899 (hereinafter referred to as the Act), the A.D.M. (F & R), Respondent no.3, could not have initiated action under section 33(4) of the Act after expiry of four years.
(ii) The A.D.M. (F & R) had no right and jurisdiction to initiate proceedings on a photocopy of the document dated 11.6.1987 by summoning the original document for the purposes of ascertaining the liability of stamp duty under the Act.
(iii) The document dated 11.6.1987 would not be chargeable with stamp duty as no rights pertaining to the land in question had been transferred in favour of the petitioner.
(iv) No penalty could be imposed as the lease deed had not been executed and the petitioner was always ready and willing to pay the determined stamp duty on the document to be executed, and it could not be said that the petitioner ever intended to evade any stamp duty.
For proper appraisal of the submissions and determination of the questions raised, a perusal of section 33 of the Act would be necessary and thus the same is reproduced below:-
"33. Examination and impounding of instruments.-(1) Every person having by law or consent of parties authority to receive evidence, and every person in charge of a public office, except an officer of police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly stamped, impound the same.
(2) For that purpose every such person shall examine every instrument so chargeable and so produced or coming before him, in order to ascertain whether it is stamped with a stamp of the value and description required by the law in force in India when such instrument was executed or first executed :
Provided that -
(a) nothing herein contained shall be deemed to require any Magistrate or Judge of a Criminal Court to examine or impound, if he does not think fit so to do, any instrument coming before him in the course of any proceeding other than a proceeding under Sections 125 to 128 and Sections 145 to 148 of the Code of Criminal procedure, 1973;
(b) in the case of a Judge of a High Court, the duty of examining and impounding any instrument under this section may be delegated to such officer as the Court appoints in this behalf.
(3) For the purposes of this section the State Government may in cases of doubt, determine what offices shall be deemed to be public offices and who shall be deemed to be persons in charge of public offices.
(4) Where deficiency in stamp duty paid is noticed from the copy of any instrument, the Collector may suo motu or on a reference from any court or from the Commissioner of Stamps or an Additional Commissioner of Stamps or a Deputy Commissioner of Stamps or an assistant Commissioner of Stamps or any officer authorized by the Board of Revenue in that behalf, call for the original instrument for the purpose of satisfying himself as to the adequacy of the duty paid thereon, and the instrument so produced before the Collector shall be deemed to have been produced or come before him in the performance of his functions.
(5) In case the instrument is not produced within the period specified by the Collector, he may require payment of deficit stamp duty, if any, together with penalty under Section 40 on the copy of the instrument :
Provided that no action under sub-section (4) or sub-section (5) shall be taken after a period of four years from the date of execution of the instrument :
Provided further that with the prior permission of the State Government an action under sub-section (4) or sub-section (5) maybe taken after a period of four years but before a period of eight years from the date of execution of the instrument."
(Note: The last proviso has been inserted w.e.f.1.9.1998)
The dispute between the petitioner and the Kanpur Development Authority with regard to the area for which lease had to be granted in favour of the petitioner remained pending. Although the auction had been for an area of 6910 sq. meter but the dispute was finally resolved only on 22.11.1995 (which was even after the passing of the impugned order by the CCRA) and it was only in pursuance thereof that on 31.1.1996 the Kanpur Development Authority wrote to the A.D.M.(F & R), Respondent no.3, that the lease deed between the petitioner and the Kanpur Development Authority would now be executed for a reduced area and for a reduced amount of approximately Rs. 5.5 Crores on which stamp duty may be determined. Such position has not been denied in the pleadings or by the learned Standing Counsel at the time of arguments. It has also not been disputed that in pursuance of the aforesaid letter a lease deed has now been finally executed on 5.2.2003 for an area which is substantially lesser than the original area shown in the agreement dated 11.6.1987 for which auction had been granted in favour of the petitioner. On the total amount paid by the petitioner for the said area (which included the interest paid to the Kanpur Development Authority) the stamp duty determined by the Respondent no.3 came to about Rs. 84 lacs and has already been paid.
In the backdrop of the aforesaid facts I now proceed to decide the issues as summarized by me above.
As regards the first issue, although the agreement had been executed on 11.6.1987, action was first sought to be initiated only on 31.10.1994, which was after a lapse of more than 7 years. Admittedly the said action was initiated on the basis of a photo copy of the document dated 11.6.1987, by summoning the original document. The first proviso to section 33 of the Act makes it clear that no action can be taken under section 33(4) of the Act (which deals with the cases where copy of the document is produced and the original instrument is called for) after a period of four years from the date of execution of the instrument. Since admittedly action was being taken on the basis of a document executed on 11.6.1987 and more than four years had elapsed, the provision of section 33(4) of the Act could not be attracted. The second proviso to section 33 of the Act having been inserted only w.e.f. 1.9.1998 would not be attracted in this case.
As regards the second issue that the Additional District Magistrate had no jurisdiction to initiate proceedings on a photo copy of the document by summoning the original document for the purposes of ascertaining the liability of stamp duty under the Act, even if the notice dated 31.10.1994 and the action taken by the respondents in pursuance thereof could be said to be covered under section 33(1) of the Act (although the petitioner disputes the same), still the said action would also be illegal and without jurisdiction. In response to the letter dated 31.10.1994 written by the Additional District Magistrate to the Kanpur Development Authority, the Kanpur Development Authority on 1.11.1994 is said to have sent the document in question to the Respondent no.3. According to the petitioner the document so sent was only a copy of the original and not the original, which was and still remains in the possession of the petitioner. Specific assertion to that effect has been made in paragraph 31 of the writ petition that the original agreement is with the petitioner and the same has not been denied by Kanpur Development Authority or the State of U.P. in their counter affidavits. The learned Standing Counsel had also placed the original records of the case before me and the original agreement was not found there. The learned Standing Counsel could also not justify as to on what basis it has been claimed by him that the original document had been placed before the Additional District Magistrate on which action has been taken. At the time of hearing, the original document was actually placed before me by the learned counsel for the petitioner to show that the same was and still is in the possession of the petitioner. As per section 33(1) of the Act, once the document or instrument appears to be under-stamped, the officer concerned shall impound the same. In the present case, the original document had never been impounded. The procedure for impounding a document has been laid down in section 40 of the Act and it is no one's case that the same had been followed in the present case. Further, the said document was never produced nor came before the Additional District Magistrate in the performance of his official functions and hence the provisions of section 33(1) of the Act could not have been attracted. In the case of R. A. Remington vs. Deputy Commissioner & Collector, Pithoragarh 1966 A.L.J. 514 the Apex Court has held that the authorities have no power under section 33(1) of the Act to summon the document for the purposes of finding out whether it had been properly stamped or not. Thus the submission of the petitioner, that the case of the respondents for imposing penalty on the document would also not be covered under the provisions of section 33 (1) of the Act, has force.
For deciding the third issue that the document dated 11.6.1987 would not be chargeable with stamp duty as no rights pertaining to the land in question had been transferred in favour of the petitioner, what is to be considered for determining the nature of the document is not the title of the document, but its contents. It is true that the document in question was titled as "agreement to lease" but since no proprietary rights had been transferred in favour of the petitioner and only the possession had been handed over to the petitioner with permission to raise construction along with a large number of stipulations and conditions as well as contingencies on the occurrence of which, even the agreement itself could be terminated, and also the fact that a further provision had been made in the said document/agreement for execution of lease deed on a future date, as such in my view the same could not have been treated in law as an agreement to lease but merely as a license. The Apex Court in the case of Associated Hotels of India Ltd. vs. R.N.Kapoor A.I.R.1959 SC 1264 has held that "it is not the form but substance of the document has to be seen to gather the intention of the parties for determining whether the document/transaction is a lease or licence." For determining the same, what was held to be considered was:
"(1) To ascertain whether a document creates a licence or lease, the substance of the document must be preferred to the form;
(2) the real test is the intention of the parties whether they intended to create a lease or a licence;
(3) if the document creates an interest in the property, it is a lease; but, if it only permits another to make use of the property, of which the legal possession continues with the owner, it is a licence; and
(4) if under the document a party gets exclusive possession of the property, prima-facie, he is considered to be a tenant; but circumstances may be established which negative the intention to create a lease."
In the case of ICICI vs. State of Maharashtra JT 1999(8) 233, while dealing with a case of an agreement to create a lease in future and the person having been given an authority only to enter upon the land for the purposes of erecting a building or buildings for the purposes of housing its offices and no other purpose and until the grant of a lease, and the document gave only a right to use the property in a particular way or under certain terms, while it remains in possession and control of the owner, it was held that such document would be a licence.
In the present case also, the document in question refers to creation of lease in future. The possession had been handed over on stipulation of a large number of conditions and contingencies mentioned in the agreement. No proprietary right had been transferred and no interest on the land had been conveyed when the petitioner was put in possession and was allowed only to make constructions. The terms and conditions show that the land remained in the ownership of the Kanpur Development Authority. As such in my view, the document dated 11.6.1987 could not be taken to be a lease and no such stamp duty could be chargeable as no right pertaining to the land in question had been transferred in favour of the petitioner.
Now we come to the last question with regard to the imposition of penalty. Learned counsel for the petitioner has urged that the petitioner was always ready and willing to pay stamp duty as and when the same was determined or called for from the petitioner. The document dated 11.6.1987 was executed between the petitioner and the Kanpur Development Authority. It was only in October, 1994 that the Kanpur Development Authority itself made a complaint to the District Magistrate that the agreement (which was signed by them also) had been under-stamped. It was on such complaint that the Additional District Magistrate summoned the original document from the Kanpur Development Authority. On receipt of the notice dated 14.11.1994 and immediately after giving a reply on 29.11.1994, the petitioner made a provisional deposit of Rs. 60 lacs on 28.12.1994. As such the submission of the petitioner has force, that had the petitioner been informed earlier that any stamp duty is to be paid on the agreement executed on 11.6.1987, the petitioner would have paid the same. According to the petitioner, they were not liable to pay any stamp duty till the lease deed was executed in their favour, still a deposit of Rs.60 lacs had been made by them and thereafter in pursuance of an interim order granted by this Court, they have deposited a further amount of Rs. 6 lacs towards stamp duty, which has not been denied by the learned Standing Counsel. As already stated above, the dispute between the petitioner and the Kanpur Development Authority with regard to the area of land to be transferred and the final price remained pending besides the suit relating to the said land which was pending before the Civil Courts at Kanpur. All such disputes were resolved only in November, 1995 and it was only then that in 1996 that the Kanpur Development Authority for the first time, wrote to the Additional District Magistrate that the lease deed between the petitioner and the Kanpur Development Authority could now be executed for a certain reduced area and for a reduced amount than that shown in the agreement in question dated 11.6.1987. Thus it cannot be said that any finality regarding the execution of the lease deed had been arrived at the time when the impugned order dated 6.2.1995 had been passed by Additional District Magistrate (F&R), Respondent no.3, or when the order dated 25.2.1995 had been passed by CCRA, Respondent no.2. By order dated 6.2.1995 the Additional District Magistrate had imposed a penalty of Rs.50 lacs and odd which had been reduced by the CCRA, Respondent no. 2, to about Rs. 42 lacs and odd, after taking into consideration that the area of which possession had been delivered to the petitioner, had been substantially reduced from 6910 sq. meters to 5974 sq. meters. It was itself stated in the impugned order dated 25.2.1995, that the penalty amount would be subject to the final outcome of the decision of the Civil Court or under the arbitration clause, and the penalty amount and stamp duty paid would accordingly be adjusted in the background of the final decision. Thus, in the circumstances, when the lease deed had not even been executed and the final decision with regard to the price and area of the land for which lease deed was to be executed, had been taken as late as in November, 1995, and even prior to that date, the petitioner had immediately at the first instance of having received the notice in 1994 itself deposited a provisional amount of Rs. 60 lacs and thereafter another sum of Rs. 6 lacs, the bonafide of the petitioner cannot be doubted. The penalty amount, which is in question in the present writ petition, itself could not be finalized even by the impugned order dated 25.2.1995 and was left subject to the decision of the Civil Court as well as final decision as per the arbitration clause. When the respondents themselves could not finalize the amount of stamp duty which was payable, the petitioner cannot be said to be at fault for not paying the same. However, now during the pendency of this writ petition the lease deed has been executed on an amount received by the Kanpur Development Authority that included the principal amount and the interest paid thereon. Accordingly, the stamp duty of about Rs. 84 lacs has already been paid, which is more than the stamp duty assessed by the impugned orders dated 6.2.1995 and 25.2.1995. As such the dispute relating to payment of stamp duty has now been resolved only during the pendency of this writ petition. Thus the penalty could not be levied prior to the assessment of the stamp duty on the document, which was finalised only after the passing of the impugned orders. The bonafide of the petitioner, thus, cannot be doubted and the stamp duty amount when called for from the petitioner had been paid by him partially in 1994, and thereafter finally when the lease deed was executed.
As such in my view, in the facts and circumstances of this case, and in view of the discussion here in above, under law, the penalty could not have been imposed on the petitioner. The impugned orders dated 6.2.1995 and 25.2.1995 passed by Respondent nos. 3 and 2 respectively thus deserve to be quashed.
The petitioner has also challenged the impugned order dated 25.2.1995 on the ground that the same could not have been passed on a date prior to 6.3.1995 fixed for hearing of the case (as 25.2.1995 was fixed only for deciding the stay matter); and that the date had been preponed without notice, merely on an oral request made by the respondents. But this argument of the petitioner is not being gone into in view of the fact that I have heard and decided the issues involved in this writ petition on merits itself.
The writ petition is, accordingly, allowed. The order dated 6.2.1995 passed by Respondent no.3 and the order dated 25.2.1995 passed by Respondent no.2 are thus quashed. No order as to cost.
Dt/- February 2,2005
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