REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5876 OF 2009
State of Uttaranchal
(now known as State of Uttarakhand) & Ors. ...... Appellants
Vs.
M/s. Khurana Brothers ...... Respondent
WITH
CIVIL APPEAL NO. 5878 OF 2009
CIVIL APPEAL NO. 5879 OF 2009
CIVIL APPEAL NO. 5880 OF 2009
JUDGMENT
R.M. LODHA, J.
These four appeals at the instance of the State of
Uttaranchal and the Officers of its Forest Department are directed
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against the judgment dated December 27, 2007 passed by the High
Court of Uttarakhand whereby the Division Bench allowed the review
petitions filed by present respondents (writ petitioners) and reviewed
its earlier judgment dated April 13, 2004 and thereby allowed the writ
petitions filed by the writ petitioners holding that they were not liable
to pay stamp duty on the documents pertaining to contract of sale for
crude resin. Since the facts and documents involved in this group of
appeals are identical, for convenience, we shall refer to the facts and
documents in Civil Appeal No. 5876 of 2009. The controversy arises
in this way.
2. The Divisional Forest Officer, Nainital Forest Range,
Nainital notified public auction of resin at Bhuwali Forest Rest House
on March 24, 2001. The writ petitioner (Khurana Brothers)
participated in that public auction. Its bid in the sum of Rs. 3,90,000/-
being the highest bid was accepted by the Divisional Forest Officer,
Nainital and the formal contract of sale for crude resin was entered
into between the competent authority of the State Government in the
name of the Governor and the writ petitioner on March 24, 2001.
Subsequently a letter was issued on April 7, 2001 asking the writ
petitioner to lift the contracted resin within 60 days therefrom.
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3. The contract of sale for crude resin between the parties
reads as follows :
“FORM OF CONTRACT OF CRUDE RESIN
Lot No. 7 to 10/2001
Value of the Deed Rs. 3,90,000.00 (Rupees Three
Lakh, Ninety Thousand Only)This indenture made this 24th day of March 2001
between the Governor of the Uttaranchal (hereinafter
called “Seller” of the one part and Shri Khurana
Brothers, Rishikesh (hereinafter called the “Buyer”
which expression includes its executors, administrators,
successors and assigns) of the other part witnessed as
follows :The seller in considerations of payment to be made by
the buyer as hereinafter provided at the rate of 1950.00
(Rupees One Thousand Nine Hundred Fifty Only) per
quintal calculated at per quintal naked (without
container) and in addition the buyer shall have to pay
sale tax on the total sale value of the resin 79% or the
rate applicable at the time of sale subject to the
following terms and conditions :(A) Approximately 1160 (One Thousand One
Hundred Sixty) tins 200 (two Hundred) quintals of crude
resin (net weight) will be delivered at resin depot Sultan
Nagri. The quantity may increase or decrease by 10% &
the buyer will have to accept the quantity made
available by the seller. The weight of resin will be the
same as has been recorded in the books of the seller.
The seller reserves the right to reject the claim of the
purchaser for weighment at the time of taking delivery.(B) The resin sold will remain at purchaser’s risk from
date of acceptance of his bid and the seller will not be3
responsible for any loss and damage which may occur
thereto from any cause whatsoever.(C) All the resin will have to be removed by the
purchaser within 60 days of the date of approval of the
sale. It will be removed in not more than 60 installments
as follows :1. Within Days of approval of sale. 2. Within Days of approval of sale. 3. Within Days of approval of sale. 4. Within Days of approval of sale.The purchaser can remove resin only with the written
permission of the Divisional Forest Officer, Nainital
Forest Division, Nainital and on payment is advance of
the full cost and sale tax of resin.The seller does not take any responsibility for the quality
of resin contained in the tins and will not give any resin
in exchange.2. The amount of sale price of the lot calculated on the
basis of per quintal bid at the time of auction shall be
payable by the buyer irrespective of the fact whether he
lifts the material or not.3. Any resin or tin left within the depot after the last
date of lifting shall vest in the Govt. and shall be
confiscated and refund in lieu of such resin or tins shall
be due to the buyer.4. No crude resin will be exported by the buyer from
the resin depot specified in clause I accept by such
routes and via such chaukies as may be decided upon
and recorded in written by the Forest Office. The resin
tins may be counted and weighted by any Forest Officer
at any time during transit.4
5. The buyer shall furnish the Forest Officer in
writing with the names of all the agents and servants it
proposes employ for it before they are employed and
the Forest Officer shall be at liberty to forbid the
employment of any person whom he may consider
undesirable.6. The buyer shall not drag the resin tins from the
Sultan Nagri Depot.7. In the event of a breach of any of the conditions
of this indenture by the buyer or by agents or servants
the M/s. Khurana Brothers, Rishikesh shall be liable to
pay of fine which may extend to fifty rupees at the
discretion of the Forest Officer for each such breach.8. In the event of breach of this agreement or of any
forest law or rules the export of the buyer may be
stopped under the orders of the Forest Office, pending
any investigation and decision of the case.9. Nothing in this indenture shall be held to exempt
the buyer or its agents or servants from liability to
criminal proceedings for breach of the forest laws and
rules committed by it or them.10. In the event of dispute concerning any of the
terms of this indenture the same shall be referred to the
sole arbitrator appointed by the Chief Conservator of
Forest, Uttaranchal whose decision shall be final and
binding the parties.11. The seller has received from the buyer the sum of
(Rupees 39,000.00 Thirty Nine thousand) only receipt of
which is hereby acknowledged as security for the due
fulfillment of all the covenants herein before contained.
The Forest Officer in empowered to deduct from such
security money any sum, which may be due from the
buyer whether in respect of any of the price payable by
it or any fine or liability incurred by it under the provision
of this indenture. The security money or such balance5
thereof as may be after making the deductions
aforementioned will be returned to the buyer on the
expiration or sooner determination of this agreement as
after the Forest Officer shall have satisfied himself that
all the terms of this indenture have been duly and
faithfully carried out by the buyer.12. The stamp duty payable on this deed and the fee
for registration of this deed shall be borne by the buyer.13. Any tax imposed by any law on the present sale
shall be payable by the buyer.14. Any sum of money, either of sale consideration or
fine or other kind of due, payable by the buyer under
this deed to the seller shall be recoverable as arrears of
land revenue.In witness where of the Conservator of Forest, Southern
Kumaon Circle, Uttaranchal on behalf of the Governor
of the Uttaranchal and the M/s. Khurana Brothers,
Gopal Mandir, Rishikesh aforesaid have there to set the
in signature.Sd/-
BUYER : CONSERVATOR OF FOREST Khurana Brothers"4. The letter issued by the Divisional Forest Officer to
the writ petitioner on April 7, 2001 is as follows :
“Office of Divisional Forest Officer
Nainital Forest Division Nainital
Letter No. 4566/39-8.9 Dated Nainital 7-4-2001To,
Khurana Brothers Rishikesh6
Gopal Mandir RishikeshSubject : Acceptance of Lisa lots purchased on 24-3-2001 in the
public auction held at Bhuwali Forest Rest House.Ref : Letter No. 2955/39-8 Dated 31-0-2001 of forest conservator,
southern Kumaun circle, Uttaranchal Nainital.Sir,
The Bid given by you in the public auction held at Bhuwali
Forest Rest House on 24-3-2001 for the following resin lot is
accepted in your name.Name Lot No. Resin BID Total Name of PURCHASED Accepted price in of Division Tin No. Quantity Per QTL. rupees Depot In rupees from In where Quintal is to be lifted 1 2 3 4 5 6 7 East 314 to 1740 295 1956/- 586800 Sultan Alimorah 319/2001 300 NagriYou are therefore to arrange for lifting of aforesaid resin within
60 days of the date of issuance of the letter after having the
following conditions of auction notice completed by depositing in
advance with the Depot, Sultan Nagri Kathgodam.1. Submitting challan of the total amount of purchased resin in
favour of concerned Divisional Forest officer.2. Submitting certified the photocopy of certificate of registration
with department as required for registration in accordance with
section 10 of Uttar Pradesh Rosin and other Forest produce (Trade
Regulation) Act, 1976.7
3. Payment of total price of Rosin & Trade tax at the prevailing
rates at the date of auction shall be compulsory prior to lifting the
resin.4. The details of resin obtained from all sources along with
details concerning utilization fuel and further details of payment of
Trade tax on the products manufactured from previously obtained
rosin prior to lifting the rosin be submitted with Depot officer Rosin
Depot.5. Stamp Duty shall be payable on such purchase as per rules
and Government order.6. The contribution for District Board at the rate of Rs. 5/- per
quintal on the purchased rosin shall be payable.7. Prescribed Income tax and surcharge according to rules shall
be paid.Sd/-
Divisional Forest Officer
Nainital Forest Division”5. The short question that arises for consideration is whether
the above contract of sale for crude resin amounts to `conveyance’
as defined under Section 2(10) of the Indian Stamp Act, 1899 (for
short, `the Stamp Act’) and, if answer is in the affirmative, whether
stamp duty is chargeable thereon. In order to answer the aforesaid
question, the true and real meaning of the document needs to be
ascertained. When we look at the contract, it would be seen that in
consideration of the price stated in the contract, the State
Government agreed to deliver the specified quantity of the crude
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resin to the writ petitioner (`purchaser’). The parties agreed thatquantity may increase or decrease by 10% and the resin will have to
be removed by the purchaser within 60 days from the date of
approval of sale and it will not be removed in more than 60
installments. As per the terms of the contract, the purchaser was
required to pay the amount of sale price irrespective of the fact
whether the contracted quantity of resin was lifted by it or not. By a
subsequent communication dated April 7, 2001, the purchaser was
informed of the acceptance of the bid for the stated resin lot/s in its
favour and it was asked to arrange for lifting of the same within 60
days of the issuance of that letter.
6. Section 4 of the Sale of Goods Act, 1930 reads as
follows:
“S.4. Sale and agreement to sell. – (1) A contract of
sale of goods is a contract whereby the seller transfers
or agrees to transfer the property in goods to the buyer
for a price. There may be a contract of sale between
one part-owner and another.(2) A contract of sale may be absolute or conditional.
(3) Where under a contract of sale the property in the
goods is transferred from the seller to the buyer, the
contract is called a sale, but where the transfer of the
property in the goods is to take place at a future time or
subject to some condition thereafter to be fulfilled, the
contract is called an agreement to sell.9
(4) An agreement to sell becomes a sale when the time
elapses or the conditions are fulfilled subject to which
the property in the goods is to be transferred.”7. The essence of sale is the transfer of the property in a
thing from one person to another for a price. As per Section 4, the
contract of sale includes an agreement to sell. It is not necessary
that contract of sale must be absolute. It may be conditional as well.
The essential feature that distinguishes the contract of sale from an
agreement to sell is that in a contract of sale the property in the
goods is transferred from the seller to the buyer immediately whereas
in an agreement to sell property is transferred on a future date/dates.
An agreement to sell becomes a sale on fulfillment of the conditions
or when the time provided in the agreement elapses.
8. Section 2(10) of the Stamp Act defines `conveyance’ as
follows :
“S.2(10). – `Conveyance’.–`Conveyance’ includes a
conveyance on sale and every instrument by which
property, whether movable or immovable, is transferred
inter vivos, and which is not otherwise specifically
provided for by Schedule I, Schedule I-A or Schedule I-
B, as the case may be;Explanation …….”.
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9. Section 2(14) as was existing at the relevant time prior to
amendment vide U.P. Act 38 of 2001 reads as follows:
“S. 2(14). — “instrument” includes every document by
which any right or liability is, or purports to be, created,
transferred, limited, extended, extinguished or
recorded.”10. Section 3 is the charging Section. To the extent it is
relevant, it reads as follows:
“S.3. Instruments chargeable with duty. – Subject to
the provisions of this Act and the exemptions contained
in Schedule I, the following instruments shall be
chargeable with duty of the amount indicated in that
Schedule as the proper duty therefor, respectively, that
is to say–(a) ............ (b) . . . . . . . . . . .. (c) ............Provided that, except as otherwise expressly
provided in this Act, and notwithstanding anything
contained in Clause (a), (b) or (c ) of this section, or in
Schedule I or I-A, the following instruments shall,
subject to the exemptions contained in Schedule I-A or
I-B, be chargeable with duty of the amount indicated in
Schedule I-A or I-B or as the proper duty therefore,
respectively, that is to say-(aa) every instrument mentioned in Schedule I-A or I-
B, which, not having been previously executed
by any person, was executed in Uttar Pradesh :
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(i) ………..
(ii) in the case of instruments mentioned in
Schedule I-B, on or after the date on
which the U.P. Stamp (Amendment) act,
1952 comes into force:
(bb) every instrument mentioned in Schedule I-A or I-
B, which, not having been previously executed by
any person, was executed out of Uttar Pradesh :
(i) ………….
(ii) in the case of instruments mentioned in
Schedule I-B, on or after the date on
which the U.P. Stamp (Amendment) Act,
1952 comes into force and relates to any
property situated, or any matter or
thing done or to be done in Uttar Pradesh, and
is received in Uttar Pradesh :
Provided also that no duty shall be chargeable in
respect of :
(i) ..............
(ii) ..............
Explanation.–Where the amount of duty
prescribed in Schedule I-B contains any fraction of a
rupee, below twenty five paise, or above twenty five
paise but below fifty paise, or above fifty paise but
below seventy five paise, or above seventy five paise
but below one rupee, the proper duty shall be an
amount rounded off to the next higher quarter of a
rupee, as hereinafter appearing in the said Schedule.”
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11. Schedule I -B appended to the Stamp Act provides for
the rates of stamp duty in respect of instruments described
thereunder. Article 23 thereof provides for rate of stamp duty on the
`conveyance’ as defined by Section 2(10) which are not exempted
under Article 62.
Description of instrument Proper stamp duty
23. Conveyance – as defined by
Section 2(10) not being a Transfer
charged or exempted under No.
62 –
(a) . . . . . . . .
(b) If relating to moveable
property –
[See item 136 Appendix II]
where the amount or value
of the consideration of such Twenty rupees
conveyance, as set forth
therein, does not exceed
Rs.1000
and for every Rs.1000 or
part thereof in excess of Twenty rupees
Rs.1,000
Exemption
Assignment of a copy-right for
musical works by resident of or
first published in India
Explanation :
For the purposes of this Article, in
the case of an agreement to sell
an immovable property, where
possession is delivered before the
execution, or at the time of
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execution, or is agreed to be
delivered without executing the
conveyance, the agreement shall
be deemed to be a conveyance
and stamp duty thereon shall be
payable accordingly:
Provided that the provisions of
Section 47-A shall, mutatis
mutandis, apply to such
agreement:
Provided further that when
conveyance in pursuance of such
agreement is executed, the stamp
duty paid on the agreement shall
be adjusted towards the total duty
payable on the conveyance.
_______________________________________________________
12. The expression `document’ is not defined in the Stamp
Act. However, the General Clauses Act, 1897 defines `document’ as
under:-
“S.3(18). – `document’ shall include any matter
written, expressed or described upon any substance
by means of letters, figures or marks, or by more
than one of those means which is intended to be
used, or which may be used, for the purpose of
recording that matter.”
13. Under Section 2(10), inter alia, every document by which
movable property is transferred is `conveyance’. Does the contract
of sale for crude resin entered into between the parties amount to
transfer of movable property? In our opinion, it does. In the contract
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under consideration, all essential conditions of transfer of movable
property are satisfied. By this document right in auctioned lot of
crude resin has been created in favour of the writ petitioner.
Correspondingly, the State Government is under obligation to
deliver the quantity of crude resin specified in the document.
Pertinently, clause 1(B) provides that resin sold will remain at
purchaser’s risk from the date of acceptance of its bid and seller will
not be responsible for any loss and damage which may occur thereto
from any cause whatsoever. The document read as a whole leaves
no manner of doubt that property in the auctioned lot of crude resin
vested in the purchaser as a result of the subject contract and, thus
amounts to transfer of movable property. Even if the document dated
March 24, 2001 is treated as an agreement to sell, in view of the
acceptance letter dated April 7, 2001 whereby the writ petitioner has
been informed that public auction is accepted in its name and that it
must arrange for lifting of the auctioned resin within 60 days from the
issuance of this letter, it is very clear that the contract of sale dated
March 24, 2001 read with the letter dated April 7, 2001 amounts to
`conveyance’ within the meaning of Section 2(10) and is chargeable
to stamp duty under Article 23, Schedule I-B as admittedly there is
15
no exemption from payment of stamp duty in respect of such
conveyance under Article 62.
14. It is true that the contract document dated March 24, 2001
records the receipt of Rs. 39,000/- as security from the purchaser for
due fulfillment of all the covenants but a clause like this does not
make it a `Security Document’ as held by the Division Bench in the
impugned order.
15. The Division Bench travelled beyond scope of review in
reviewing the judgment dated April 13, 2004. In our view, the view
taken in the judgment dated April 13, 2004 did not suffer from any
error apparent on the face of the record justifying its review.
16. The appeals are, accordingly, allowed and the impugned
judgment dated December 27, 2007 is set aside. The parties shall
bear their own costs.
……………….. J.
(P. Sathasivam)
……………….. J.
(R.M. Lodha)
NEW DELHI,
OCTOBER 27, 2010.
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