1. Mortgage deed executed in one state but bearing stamps of another — dispute over whether the instrument is duly stamped under state-specific stamp rules. (Para 1 , 2 )
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1963 Supreme(SC) 4
SUPREME COURT OF INDIA
B.P.Sinha, C.J.I., J.C.Shah, K.C.Das Gupta, K.N.Wanchoo, P.B.Gajendragadkar, JJ.
New Central Jute Mills Company Limited
Versus
State Of West Bengal
Case No. : 13 of 1962
Date of Decision : 1/17/63
Advocates Appeared: Agarwala C.B. : Bose P.K. : Daphtary C.K. : Dapthary C.K. : Dhebar R.H. : Hajela K.S. : Lal C.P. : Latachari T.V.R. : Maheshwari B.P. : Majumdar S.C. : Menon P.D. : Sea B. : Sen B. : Shastri M.S.K. : Shroff N. : Varma S.P.
Advocates:
B.P.MAHESHVARI, B.SEN, C.B.AGARWAL, C.K.DAFTARY, C.P.LAL, K.S.Hajela, M.S.K.Shastri, N.Shroff, P.D.MENON, P.K.BOSH, R.H.Dhebar, S.C.MAJUMDER, S.P.Varma, T.V.R.LATACHARI
B.P.MAHESHVARI, B.SEN, C.B.AGARWAL, C.K.DAFTARY, C.P.LAL, K.S.Hajela, M.S.K.Shastri, N.Shroff, P.D.MENON, P.K.BOSH, R.H.Dhebar, S.C.MAJUMDER, S.P.Varma, T.V.R.LATACHARI
An instrument executed in a state is "duly stamped" only if the liability arising from such execution is discharged using stamps prescribed by that state's laws and rules. Satisfaction of stamp duty in another state does not fulfill the legal requirement of the state of execution.
Headnote:(A) Indian Stamp Act - Sections 3, 19A, 74, 75, 76 - Stamp Rules - Rule 3 - Interpretation of 'duly stamped' - Execution of instrument in one state relating to property in another state - Requirement of state-specific stamps - Liability arising on execution - Discharge of liability in accordance with the law of the state where the instrument is executed - Effect of Section 19A regarding higher rates of duty in the state of receipt. (Paras 9, 10, 11, 15, 17, 20)
(B) 'Duly stamped' - Meaning - An instrument is duly stamped if it bears a stamp of the proper amount affixed in accordance with the law in force in the country - Where liability arises due to execution in a particular state, the law of that state, including rules regarding the type of stamps, must be followed. (Paras 11, 15)
(C) Multiple liabilities - Instrument executed in one state and received in another relating to property there - First liability arises on execution in the first state; second liability arises on receipt in the second state - If the second state's rate is higher, only the excess is payable under Section 19A using the second state's stamps; if the rate is same or lower, no further duty is payable. (Paras 16, 17, 19, 20)
Facts of the case:
A company executed a mortgage deed in one state relating to properties situated in another state. The deed bore stamps purchased from the state where the properties were located and was registered there. Later, when the document was presented before a public officer in the state of execution for a substitution of security, the officer held the instrument was not duly stamped because it did not bear stamps overprinted with the name of the state of execution, as required by that state's rules.
Findings of Court:
The public officer was correct in holding that the instrument was not duly stamped. The liability to stamp duty arose primarily upon execution in the first state, and this liability must be discharged using stamps prescribed by the laws and rules of that specific state.
Issues: Whether an instrument executed in one state but relating to property in another state is "duly stamped" if it bears stamps of the state where the property is situated, but not the stamps of the state where it was executed, despite the latter's rules requiring its own overprinted stamps.
Ratio Decidendi: Liability to stamp duty arises on execution in a particular state. For an instrument to be "duly stamped" under the law in force in the country, the liability arising in a specific state must be discharged in accordance with the laws and rules of that state, including requirements for specific overprinted stamps. While Section 19A allows for the payment of only the excess duty in a second state if the rate is higher upon receipt, it does not exempt the requirement to satisfy the initial liability of the state of execution using that state's prescribed stamps.
Result: The petitioners are not entitled to any relief. Parties will bear their own costs.
Legal Category Hierarchy
Table of Contents
2. Whether an instrument stamped according to one state's law is duly stamped in India — challenge to state rules requiring specific state-overprinted stamps as unconstitutional. (Para 3 , 8 )
3. State amendments to the Stamp Act make the state of execution the primary dutiable event, requiring compliance with that specific state's laws and rules. (Para 9 , 10 , 13 , 14 , 15 )
4. An instrument executed in a state is duly stamped only if it bears stamps of the amount and description required by that state's law. (Para 15 , 21 )
5. Petition dismissed — parties to bear their own costs. (Para 22 )
6. What determines if an instrument is duly stamped when executed in a state that has amended the Stamp Act?
An instrument is duly stamped only if it bears stamps of the amount and description required by the law and rules of the state where the liability arises, typically the state of execution. (Para 10 , 15 )
7. Does stamping an instrument according to the laws of one state satisfy the requirement of being duly stamped in India for an instrument executed in another state?
No. Because state amendments treat the state as equivalent to India, liability arising from execution in a specific state must be discharged according to that state's laws to be considered duly stamped in India. (Para 11 , 15 , 21 )
8. How is stamp duty handled when an instrument is executed in one state but relates to property in and is received in another state?
Liability arises first in the state of execution and second upon receipt in the second state. Under Section 19A, if the second state's rate is higher, only the excess duty is payable using that state's stamps. (Para 16 , 17 , 18 , 20 )
K.C.DAS GUPTA, J.
(1) WHERE an instrument executed in Uttar Pradesh and consequently liable to stamp duty under the Indian Stamp Act as amended in Uttar Pradesh but relating to property in West Bengal bears stamps overprinted with the name of West Bengal comes before a public officer of Uttar Pradesh, is such officer right in holding that the instrument is not duly stamped inasmuch as it does not bear stamps overprinted with the-name of Uttar Pradesh? That is the principal question which has arisen in this petition under Art. 32 of the Constitution.
(2) THE first petitioner, a Company incorporated under the Indian Companys Act with its registered office at Calcutta, is the owner of a factory at Varanasi. in the State of Uttar Pradesh. The petitioners numbers 2 and 3 are the shareholders of the first petitioner Company. The State of Uttar Pradesh having agreed to advance a loan of Rs. 1,45,000.00 on the mortgage of the Companys assets at its jute mills it Budge Budge and at Ghusuri, all situated in West Bengal, the deed of mortgage was executed at Lucknow in the State of Uttar Pradesh on 22/03/1957. To this deed the first petitioner affixed stamps of the value of Rs. 1,08,751.00 purchased from the Collector of Stamps, Calcutta. It was duly registered at Calcutta on 5/04/1957. Thereafter, on 23/03/1957 by a deed executed between the first petitioner and the State of Uttar Pradesh a part of the mortgage property in West Bengal was released and in its place and stead a part of some properties of Uttar Pradesh were substituted. The deed of substitution was duly stamped and registered in Uttar Pradesh. No objection was then taken to the stamp affixed on the original deed of mortgage. In 1960 the first petitioner made a request to the-state of Uttar Pradesh to release a further part of the mortgage properties included in the original mortgage deed and to accept in their place and stead the assets and properties of the Companys factory at Varanasi as substituted security. A draft deed for the substitution was sent by the first petitioner to the Collector of Varanasi for ascertaining the stamp duty payable on it and for getting the benefits of reduced rates of duty applicable in case of substitution of security. The Collector referred the matter to the Board of Revenue for adjudication of the Stamp duty on the document for substitution. Ultimately, the Board of Revenue, Uttar Pradesh, decided that as the original document had been executed at a place within Uttar Pradesh it must bear stamps issued by the Uttar Pradesh government. It rejected the argument that the document of 23/03/1957 was not an instrument and therefore could bear the stamps issued by the West Bengal government. The Board of Revenue held that the Company was liable to pay, Rs. 1,74,000.00 as stamp duty on the document dated 23/03/1957, before it can avail of the confessional rate provided for in substituted security. Thereafter, the Collector of Varanasi, by a letter dated 8/09/1961, informed the first petitioner that (a) that the draft deed submitted by it was a substituted security chargeable under Art. 40 (c) of Schedule 1-B of the Utttar Pradesh Stamp Amendment Act, 1958, with a duty of Rs. 7,554.00 , provided the original mortgage deed of 22/03/1957, was `first got properly stamped by payment of deficit duty of Rs. 1,74,000.00 `. The letter ended with a request for deposit of the deficit of Rs. 1,74,000.00 on the mortgage deed of 22/03/1957, and also for deposit of Rs. 7,554.00 for the deed of substitution to be executed. This letterfrom the Collector was followed by a letter dated 17/11/1961, from the Tehsildar, Chandauli, Varanasi, demanding payment of Rs. 1,74,000.00 within a week of the receipt of the letter. On November 30, the first petitioner replied to this letter asking for a months time. The present petition was filed on 22/12/1961.
(3) PRIMARILY, the petitioners case is that under the provisions of the Stamp Act a document cannot be said to be un
