2008 Supreme(Kar) 252

2008 (3) KLO 1753
IN THE HIGH COURT OF KARNATAKA
A.S. Bopanna, J.
WP No. 14321 of 2005
Residents of Chitrapur Co-Op. Housing Societies - Petitioner
Vs.
District Registrar, Bangalore Urban District, Bangalore and Another - Respondents
Decided on 11-4-2008

Headnote:(A) Karnataka Co-operative Societies Act, 1959 - Preamble - Types of societies - Tenant co-partnership society, tenant ownership and other housing societies - Act and rules does not provide for or recognize such categories of societies - Societies calling themselves as tenant co-partnership society or members calling themselves as tenant members cannot change complexion until law recognises same by way of statutory provisions or rules.

       (B) Karnataka Co-operative Societies Act, 1959 - Section 38 - Exemption under - Share certificate and loan stock certificate in the nature of debentures - Would not require registration.

       Held: If a co-operative society was formed with the intention of starting a co-operative factory and if the members subscribe to the shares and also contributions are made to the stock of the society by way of loan and by such amount and other finance, if immovable assets are possessed by the society and towards the shares subscribed and loan advanced, if the share certificate and loan stock certificate in the nature of debentures are issued, such documents would not require registration since such instrument is exempted under Section 38 of the KCS Act though relating to the immovable property belonging to the society since the society would continue to hold the immovable property as its asset and carry on with the activity for the benefit of all the members and the right of the member would be only to the extent of the shares and loan stock without any specific identification of a portion of the property belonging to the society. (Para 10)

       (C) Karnataka Co-operative Societies Act, 1959 - Section 38 - Exemption under - Society possessing immovable property - Constructing housing units - Society putting each unit into possession of members though without a deed of conveyance but only with a possession certificate coupled with loan stock certificate indicating a definite and distinct portion of immovable property - Cannot be treated on par with debentures to get exemption of registration as contemplated under.

       Held: If the documents in question are analysed, the fact that there IS a transfer of Immovable property cannot be in doubt, since apart from being a shareholder, the flat is put in possession of the member by way of possession certificate and the arrangement regarding holding and enjoying the property is well-defined in the bye-laws and the so-called tenancy agreement. The loan stock certificate Indicates the value of such property to which the member is entitled and commensurate to the same, the flat is put in possession. The possession would be to the entitlement of the member, successors, legal heirs, assignees and nominees. Though the learned Counsel for the petitioner contends that by the said documents, title is not claimed by the member and further insofar as Chitrapur Society, the land is a leased land, the nature of right exercised by the member would indicate that a member would be entitled to transfer the shares to another entrant member, who would in fact pay the appreciated market value of the flat as on the date of transaction and the said appreciated market value does not go towards the corpus or become the profit of the society, but the society only charges a fee for permitting the transaction and effecting the transfer of shares and the appreciated market value is the consideration received by the ‘outgoing member’, which indicates that the member is not in possession merely as a tenant member but had a greater interest in the property including the right of disposition. Though as per the bye-laws, the society had the right to accept or not, the incoming member, the decision regarding the sale, transfer and market value for finalising such transfer was with the member concerned which is nothing short of ownership right. No doubt, prior to the insertion of proviso to Section 38 of KCS Act, no document was being executed by the outgoing member to the incoming member except for transfer of physical possession and document through society. In respect of transactions subsequent to amendment dated 1-4-2001, the transfer deed have been executed and registered, one such deed indicates that the transfer of shares is made for a consideration.

       (Para 14)

       (D) Karnataka Stamp Act, 1957 - Section 2(1)(d) - Conveyance - It includes every ‘instrument’ by which property, whether movable or immovable or any estate is transferred to, or vested in, any other person, and which is not otherwise specifically provided for by the Schedule to the Act.

       (E) Karnataka Stamp Act, 1957 - Section 2(1)(i) - Instrument - Includes every document and record created or maintained in or by an electronic storage and retrieval device or media by which any right or liability is, or purports to be created, .transferred, limited, extended extinguished or recorded.

       (F) Karnataka Stamp Act, 1957 - Section 3 - Instruments chargeable with duty - Chapters II, IV, VII and VIII applies mutatis mutandis in respect of a copy of an instrument which requires registration whether certified or not.

       (G) Karnataka Stamp Act, 1957 - Sections 33, 67 and 67-B - Deputy Commissioner’s power to impound - Where, the power exercised is under Sections 67 and 67-B whereunder Deputy Commissioner is empowered under circumstances mentioned therein to impound under Section 33 to secure stamp duty.

       (H) Karnataka Stamp Act, - Section 39(1)(b) - Stamping of instruments impounded - Cannot be made without application of mind - If made, order liable to be quashed.

       Held: Proceeding contemplated under Section 39(1)(b) insofar as requiring payment of proper duty and penalty, the order impugned does not indicate application of mind. There is no reference to the period of transaction, the market value at that point, the manner in which it is computed, the exercise of discretion with regard to penalty etc. The respective orders instead disclose just a figure indicated as market value without any reference and 8% or 10% as the case may be of the same being charged as stamp duty and a similar amount as penalty. This process appears not only arbitrary but without proper basis. This portion of the order therefore cannot be sustained and the same is liable to be quashed so as to enable the authority concerned to redo the same in accordance with law.

       (Para 15)

       (I) Karnataka Stamp Act, - Section 46-A - Applicability - Proceedings initiated under Sections 67 and 67-B - Impounding done under Section 33 - Recovery not barred by time - Hence Section 46-A not attracted.

       Held: One other contention which requires to be noticed is that the learned Counsel for the petitioner contends that the recovery would be barred by time in view of the provision contained in Section 46-A of the Stamp Act. The learned Advocate General would dispute the same and contend that the same would arise only when the recovery is resorted to in the manner provided under the said provision and not otherwise. fu, rightly contended by the learned Advocate General, in the instant case, the proceedings were initiated under Sections 67 and 67-B of the Stamp Act, pursuant thereto the impounding was done under Section 33 and determination and demand under Section 39. If the said amount is not paid, it would be recovered under Section 46 and as such Section 46-A does not come into operation, which is an independent provision and the question of limitation would have to be considered only if the power is exercised under that provision. (Para 16)

       (J) Income Tax Act, 1961 - Section 2(47)(vi) - Transfer - Definition of.

       Held: Section 2(47)(vi) of the Income-tax Act, defines the transaction whether by becoming a member of or acquiring shares in a co-operative society, by way of any agreement or any arrangement or in any manner which has the effect of transferring or enabling enjoyment of immovable property as ‘transfer’. (Para 13)