IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE S.S.SATHEESACHANDRAN FRIDAY, THE 6TH NOVEMBER 2009 / 15TH KARTHIKA 1931 WP(C).No. 30179 of 2008(P) -------------------------------------- OS.36/2003 of II ADDL.SUB COURT,TRIVANDRUM .................... PETITIONER(S): ------------------------ M/S.I.B.S. SOFT WARE SERVICES GROUP(P) LTD., HAVING ITS REGISTERED OFFICE AT 521-524/NILA, TECHNOPARK CAMPUS, THIRUVANANTHAPURAM, REP. BY ITS POWER OF ATTORNEY HOLDER, SOMY CHACKO, AGED 30, MR.BOBY J.MATHEWS, LEGAL EXECUTIVE. BY ADVS.MR.NAIR AJAY KRISHNAN MR.R.T.PRADEEP RESPONDENT(S): DEFENDANTS ------------------------- 1. LEO THOMAS, HOUSE NO.181, GANDHI NAGAR, VAZHUTHACAUD, THYCAUD P.O., TRIVANDRUM. 2. K.P.JOSEPH, T.C.15/734, C.M.S.NAGAR.3. EDAPAZHANIJI P.O. SASTHAMANGALAM, TRIVANDRUM. 3. REKHA LEO, HOUSE NO.181, GANDHI NAGAR, VAZHUTHACAUD, THYCAUD P.O., TRIVANDRUM. R2 BY ADVS.MR.V.SURESH, MR.G.SUDHEER. THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 22/10/2009, ALONG WITH WPC NO. 31295 OF 2008 THE COURT ON 06/11/2009 DELIVERED THE FOLLOWING: W.P.(C) NO.30179/2008 APPENDIX PETITIONER'S EXHIBITS P1:- COPY OF THE PLAINT DT. 18.1.03 IN OS. 36/2003 BEFORE THE SUB COURT, TRIVANDRUM. P2:- COPY OF THE BOND DTD. 2.7.01. P3:- COPY OF THE ORDER DTD. 26.9.08 IN OS. 36/2003 BY THE COURT OF IIND ADDL. SUB JUDGE, TRIVANDRUM. TRUE COPY P.A. TO JUDGE tss “C.R” S.S.SATHEESACHANDRAN, J. ----------------------------------- W.P.(C).Nos.30179 & 31295 of 2008 --------------------------------- Dated this the 6th day of November, 2009 J U D G M E N T Since common questions of law arise in these two writ petitions, though the orders impugned in the respective petitions arise from two different suits both pending for trial on the file of the 2nd Additional Sub Court, Thiruvananthapuram, after being heard together, the petitions are disposed as hereunder. 2. Petitioner in both the writ petitions is the same, a company engaged in software services. Petitioner has filed two suits for recovery of money against two of its employees and their respective sureties, who had left their employment under the company allegedly flouting the bonds executed by them to serve the company for the period fixed. Suits numbered as O.S.Nos.36 of 2003 and 549 of 2003 are pending before the 2nd Additional Sub Court, Thiruvananthapuram. Respondents in the writ petition W.P.(C).No.30179 of 2008 are the defendants in the W.P.(C).Nos.30179 & 31295 of 2009 - O 2 former suit and the respondents in the other W.P.(C).No.31295 of 2008, the defendants in the latter suit. Suit claim for recovery of money against respective defendants was based on the bond executed by the employees with their sureties when they were given employment in the company. At the stage of trial when the bond was tendered in evidence the defendants in the respective suits objected its admissibility contending that the bonds are insufficiently stamped. Negativing the plea canvassed by the petitioner company/plaintiff in the suits that the bonds fall under 'indemnity bonds' and they are sufficiently stamped, the court below upheld the objections of the defendants and passed the impugned orders holding that the bonds are insufficiently stamped. The learned Sub Judge has held that the documents produced and tendered in evidence fall within the definition of bond as defined under Section 2(a)(i) of the Kerala Stamp Act and the deficit stamp fee with penalty payable on such bond is liable to be realized under Section 34 of the Kerala Stamp Act. Propriety and correctness of those orders passed in the two suits are challenged in these writ petitions invoking the supervisory W.P.(C).Nos.30179 & 31295 of 2009 - O 3 jurisdiction vested with this Court under Article 227 of the Constitution of India. 3. Copies of the bonds executed by the employees with their sureties, the defendants in the respective suits are produced as Ext.P2 in the respective petitions. Ext.P2 in both the cases is similar in all respects. At the time of joining the petitioner/plaintiff company under Ext.P2 bond the employees with their sureties have bound themselves to complete service of three years in that company. The employees and their sureties bound themselves jointly and severally to pay a sum of Rs.2 Lakhs in case the employee sought relinquishment or demitting employment before the expiry of three years from the date of joining, and on completion of service of three years with the company the written bond and stipulation therein shall be void, or otherwise shall be in force. There is no dispute that Ext.P2 is a bond as defined under Section 2(a)(i) of the Kerala Stamp Act. That alone is not sufficient to hold that such a bond is liable to duty under Section 13 of the schedule of the above Act. If the character of the bond is shown to be falling under any other W.P.(C).Nos.30179 & 31295 of 2009 - O 4 category for which separate schedule for payment is fixed such stamp duty alone need be paid on the instrument. In State of Kerala v. McDowell Company Limited (1994 (1) KLT 802) it has been held by the Apex Court that Entry 13 is a residuary entry applicable to bonds which are not expressly provided for in the schedule of the Stamp Act. In the case of an indemnity bond, it is further held, Entry 13 has no application to that instrument. Such a bond is not to bear duty as provided under Entry 13. 4. The instrument Ext.P2 in the present case demonstrate that the employees have bound themselves to pay a sum of money to the company on condition that such obligation shall be void if a specified Act as to their continuance in the company for a period of three years is performed. When the executant of such instrument can be sued for a sum of money only upon the strength of that instrument, such instrument is a bond as covered under Section 2(a)(i) of the Kerala Stamp Act. Ext.P2 bond reads thus: W.P.(C).Nos.30179 & 31295 of 2009 - O 5 “WHEREAS IBS is in the business of providing offshore software development services for customers predominantly in Europe and America, AND WHEREAS the BOUNDEN is appointed as Software Engineer in the services of IBS, vide appointment offer No.Ref:IBS/OFF-SE/965/01 dated, 18th June 2001, AND WHEREAS IBS is rendering on the job training to the BOUNDEN utilising sophisticated computer systems and ancillaries, exposing him/her to international business ventures and environment, AND WHEREAS IBS is incurring heavy expenditure and cost for the training rendered to the BOUNDEN, AND WHEREAS if the BOUNDEN and other appointees leave the services before the expiry of a period of three years, serious business disruption will be caused to IBS which will result in loss of credibility and reputation in international market, and the time, energy and money incurred for the training and employment of the BOUNDEN will be a loss to IBS, AND WHEREAS in the aforesaid circumstances the condition amongst others in the appointment offered to the BOUNDEN is that the BOUNDEN shall continue W.P.(C).Nos.30179 & 31295 of 2009 - O 6 serving IBS for a continuous period of THREE years from the date of joining duty, AND WHEREAS the BOUNDEN has agreed to serve IBS for a minimum period of THREE years from the date of joining duty, AND WHEREAS the BOUNDEN has agreed to pay to IBS the sum of Rs.2,00,000/- (Rupees Two Lakhs only) in case the BOUNDEN leaves employment with IBS before completing THREE years of service, AND WHEREAS the SURETIES have agreed to pay to IBS the sum of Rs.2,00,000/- (Rupees Two Lakhs only) in the event of default by the BOUNDEN, AND WHEREAS the BOUNDEN is called upon to execute a BOND with 2 solvent SURETIES for the sum of Rs.2,00,000/- (Rupees Two Lakhs only) to indemnify IBS for recovery of the sum of Rs.2,00,000/- (Rupees Two Lakhs only), NOW THIS BOND WITNESSES That the BOUNDEN shall continue in the employment of IBS for 3 years from the date of his joining duty in IBS, AND THAT THE BOUNDEN shall pay to IBS the sum of W.P.(C).Nos.30179 & 31295 of 2009 - O 7 Rs.2,00,000/- (Rupees Two Lakhs only) in case he seeks relinquishment or resignation before the expiry of THREE YEARS from the date of joining, And that the SURETIES shall also be jointly and severally liable for the above said Rs.2,00,000/- (Rupees Two Lakhs only) to IBS, AND that the BOUNDEN and SURETIES together with all their assets, movable and immovable are jointly and severally liable to IBS for a sum of Rs.2,00,000/- (Rupees Two Lakhs only), And in the event of BOUNDEN completing service of THREE YEARS with IBS, or on paying the sum of Rs.2,00,000/- (Rupees Two Lakhs only), the above WRITTEN BOND and STIPULATION THEREIN shall be void and otherwise the same shall be in force.” 5. The terms of the bond clearly spell out that in view of the training imparted to the employees utilizing sophisticated computer systems and ancillaries incurring heavy expenditure and cost and also for the reason that if the bounden is to leave the service of the company before the expiry of the period of three years the credibility of the company which is doing W.P.(C).Nos.30179 & 31295 of 2009 - O 8 international business ventures and environment would be seriously jeopardized the bounden (employee) with the sureties has indemnified the company against the loss in the event of his leaving the company before the stipulated period of three years. The instrument in question is, no doubt, an indemnity bond. An indemnity bond is liable to stamp duty as per Entry 32 of the stamp Act as a security bond (No.50) for the same amount. Ext.P2 instrument shows that it has been executed on a 100/- rupee stamp paper. Duty payable on a bond covered by entry 50 where the sum exceeds Rs.1000/- is only Rs.100/-. When that be so, the indemnity bond executed by the defendants with their sureties in favour of the plaintiff company is properly stamped as covered by Article 32 of the Stamp Act, which is applicable to the present case. The orders passed by the court below produced as Ext.P3 in the respective petitions holding that the bonds produced are insufficiently stamped and they are liable to stamp duty under Entry 13 in the schedule of the Act are clearly unsustainable and liable to be set aside, and I do so. The court below is directed to receive the bonds produced in the respective W.P.(C).Nos.30179 & 31295 of 2009 - O 9 case in evidence and complete the trial of the suits and dispose them, as expeditiously as possible, at any rate, within a period of three months from the date of receipt/production of a copy of this judgment. Writ petitions are allowed. S.S.SATHEESACHANDRAN, JUDGE. bkn/-