WPC Nos.2663 & 427/2005 Page 1 REPORTABLE * IN THE HIGH COURT OF DELHI AT NEW DELHI + WRIT PETITION (CIVIL) NOS. 427 AND 2663 OF 2005 Reserved on : 27th July, 2009. % Date of Decision : 27th August 2009. WRIT PETITION (CIVIL) NO.427 OF 2005 ASHOK KAMAL CAPITAL BUILDERS .... Petitioner. Through Mr.Milanka Chaudhary, Mr.Abhishek Sharma, advocates. VERSUS STATE & ANOTHER .... Respondents. Through Ms.Zubeda Begum, Ms.Sana Ansari, Advocates for respondent no.1. Ms.Mamta Tandon, Mr.Vivek Tandon, advocates for respondent no.2. WRIT PETITION (CIVIL) NO.2663 OF 2005 M/S. DYER‘S STONE LIME COMPANY PVT. LTD. ….Petitioner. Through Mr.Milanka Chaudhary, Mr.Abhishek Sharma, advocates. VERSUS COLLECTOR OF STAMPS …..Respondent. Ms.Mamta Tandon, Mr.Vivek Tandon, advocates. CORAM: HON'BLE MR. JUSTICE SANJIV KHANNA WPC Nos.2663 & 427/2005 Page 2 1. Whether Reporters of local papers may be allowed to see the judgment? 2. To be referred to the Reporter or not ? YES. 3. Whether the judgment should be reported in the Digest ? YES. SANJIV KHANNA, J.: As identical issues arise for consideration, Writ Petition (Civil) No. 427/2005 filed by M/s. Ashok Kamal Capital Builders Pvt. Ltd. and Writ Petition (Civil) No. 2663/2005 filed by M/s.Dyer‘s Stone Lime Company Pvt. Ltd. (hereinafter referred to as Capital Builders and Dyer‘s Stone respectively, for short) are being disposed of this by this common judgment. 2. Dyer‘s Stone purchased property no.10, Alipur Road, Civil Lines, Delhi (herein after referred to as the property, for short) from the erstwhile owners vide sale deed dated 3rd December, 1956. 3. On 30th October, 1985 Dyer‘s Stone obtained permission from Delhi Administration (Land & Building Department) to develop the property as a group housing project. On 23rd December, 1987, Dyer‘s Stone entered into an agreement with the Capital Builders for development and construction of dwelling units. The dwelling units were constructed and sold to various third parties on execution of registered sale deeds. Requisite stamp duty has been paid on these sale deeds. WPC Nos.2663 & 427/2005 Page 3 4. A portion of the property was requisitioned for Delhi Metro Rail Project w.e.f. 5th February, 2002 for a period of three years. Dyer‘s Stone received notice dated 24th December, 2002 from Sub Divisional Magistrate, Civil Lines to discuss the question of payment of compensation for the requisitioned land. By letter dated 15th January 2003, Dyer‘s Stone was asked to submit details of expenses incurred with regard to the requisitioned property and also to file lease deed, conveyance deed, etc in support of their ownership rights. On 23rd January, 2003 Dyer‘s Stone submitted photocopy of the agreement dated 23rd December, 1987 between them and Capital Builders. 5. Dyer‘s Stone and Capital Builders thereafter received two show cause notices both dated 19th August, 2003 stating that the agreement dated 23rd December, 1987 between Dyer‘s Stone and the Capital Builders amounted to conveyance under Article 23 of Schedule IA of the Indian Stamps Act, 1899 (hereinafter referred to as the Act, for short) and therefore the petitioners should be asked to pay deficient stamp duty and penalty under Sections 33 and 35 of the Act and show cause why penal action should not be taken against them under Sections 62 and 64 of the Act. The relevant portion of the show cause notice dated 19th August, 2003 issued under Sections 33 and 35 of the Act reads : ―No.F./Temp./Req./SDM/CL/07/422 Dated 19/8/2003 ―Whereas the said documents is definitely under stamped and thus cannot be taken as evidence in support of the ownership WPC Nos.2663 & 427/2005 Page 4 of the said property till stamp duty plus penalty is paid in full. In view of the above you are directed to deposit the original agreement of sale in the office of the undersigned and also show cause as to why deficient stamp duty along with penalty under section 35 of Indian Stamp Act should not be deposited by you before the documents is taken into evidence in support of your claim of the ownership of this property. You are therefore directed to appear on 25.8.2003 3 P.M. in person or through your representative along with your reply failing which necessary action under the stamp act and other relevant law of land will be taken to recover the deficient stamp duty, penalty and other penal action.‖ (emphasis supplied) 6. From the above, it is clear that the Sub Divisional Magistrate who was also the Collector of Stamps did not have before him the original agreement dated 23rd December, 1987 and the petitioners were called upon to deposit the original document before the Sub Divisional Magistrate in case they wanted to rely upon the same in support of their claim. 7. A similar show cause notice was issued for action under Sections 62 and 64 of the Act on 19th August, 2003. The relevant portion of the notice reads; ―No.F./Temp./Req./SDM/CL/07/429 Dated 19/8/2003 x x x x x Since the intention to evade stamp duty on this document is established after going through the document i.e. agreement of sale, the action under section 62 and 64 under the Indian Stamp Act along with other relevant WPC Nos.2663 & 427/2005 Page 5 provision of Indian Penal Code for prosecution is required to be taken against all the person involved in this act. Before any action is taken you are served a show cause notice to explain as to why action under the above mentioned provision for intentional evasion and avoidance of legitimate govt. revenue to the govt. should not be taken against you. A separate action to deposit the deficient stamp duty plus penalty has already been initiated against you and this show cause notice is issued as an opportunity to explain as to why proposed action for prosecution should not be taken against you. You are directed to appear before the undersigned on 25.8.2003 3 P.M. along with your reply failing which it will be presumed that you have nothing to say in the matter and proposed action will be taken against you accordingly.‖ 8. Dyer‘s Stone submitted detailed replies dated 24th September, 2003 to the two show cause notices. The relevant portion of the reply to the notice under Sections 33 and 35 of the Act reads: ―1. The purported ―document‖ which, in terms of your notice is being termed as an ―Agreement of Sale‖ between us and Ashok Kamal Capital Builders Pvt. Ltd. (―Builder‖) is only a photocopy of a property development Agreement executed between us and the Builder. (The said photocopy is hereinafter referred to as the ―Disputed Document‖). Since the Disputed Document is only a photocopy, we are advised that it is not an ―instrument chargeable with duty‖ under Section 33 or any other provision of the Indian Stamp Act 1899 and cannot be impounded under Section 33. 2. Without prejudice to the above, it is submitted that we are advised that there is no power or jurisdiction in the Collector of Stamps under the Indian Stamp Act, 1899 to direct any person to file an original document either under Section 33 or under Section 35 or otherwise, and as such your said show cause notice, to the extent it directs us to ―deposit the original Agreement for WPC Nos.2663 & 427/2005 Page 6 Sale‖, is without any jurisdiction. In any event, the original document is not in our possession. 3(a) Without prejudice to the above it is submitted that the Disputed Document was filed by us under cover of our letter dated 21.1.2003 only to provide you with background information and not either as evidence or as a document in support of ―ownership of the property‖ mentioned in your said notice. We do not tender the Disputed Document as evidence of our ownership of the said Property and you may disregard it completely for the same and we do not rely on it as proof or evidence of our ownership of the said Property. In law, ownership of immovable property can only be established by a registered instrument of title. In this case the title document is the Sale Deed dated 3.12.1956 in our favour, a photocopy whereof was also filed under cover of our aforesaid letter dated 21.1.2003 at S.No.4. Since the said Disputed Document has neither been tendered by us nor intended to be submitted by us, as proof of ownership of this Property, the question of its impounding and/or any additional stamp duty or penalty thereon as contemplated by Sections 33 and 35 does not arise. x x x x x 5(a) Without prejudice to the above and in- spite of the fact that the Disputed Document is only a photo-copy and cannot constitute and has not been submitted as evidence of ownership, a perusal of the same will clearly show that, in any event, it does not purport to be a document by which any part of the said Property has been sold or transferred by us to the Builder. The said Disputed Document is a photo-copy of a property development Agreement by which the entire Property No.10, Alipur Road became the subject matter of a development project in which the entire development and construction work was to be carried on by the Builder at its own cost on a portion of the Property which was termed as the ―Builder‘s Site‖, and on the balance (termed as the ―Owner‘s site‖) the Builder was to construct residential accommodation for the owner as an independent contractor against payment. An Agreement of this nature is a mere license granted to the Builder to enter upon owner‘s property and to develop the same on payment of license fee, WPC Nos.2663 & 427/2005 Page 7 with an opportunity in the Builder to make profit from sale of the construction made on the Builder‘s Ste specifically allocated to the Builder. The Builder does not acquire any right in the said Property and no right in the said Property or in any portion thereof, is transferred to the Builder. In this behalf your attention is invited to a Division Bench Judgment of the Hon‘ble Delhi High Court in the matter of ―R.K.Apartments Pvt. Ltd. & Anr Vs Smt. Aruna Bahree & Ors‖ (77 (1999) Delhi Law Times (193) DB) where the Hon‘ble Delhi High Court has exhaustively examined the nature of such Agreement and Builder‘s right in the property thereunder, and has clearly held that a Builder‘s possession of the property or a portion thereof under such Agreement ―was only by way of temporary measure for undertaking the construction work by them and the exclusive possession thereof in legal sense remained with the executants (owners) of the said Agreement.‖ The said judgment further goes on to state that the Builder is not even entitled to any protection under Section 53A of the Transfer of Property Act, implying thereby, that there is no element of an agreement to transfer any rights in the Property to a Builder under such an arrangement.‖ (emphasis supplied) 9. Similar response was given to notices under Sections 62 and 64 of the Act. Capital Builders also filed their response raising objections. 10. The two show cause notices in the case of Capital Builders and Dyer‘s Stone were disposed of by common Order dated 29th November, 2004. Common Order notices the contentions raised by Dyer‘s Stone and it was observed: ―In response to the above notice M/s.Dyer‘s Stone Lime Co. (P) Ltd. replied vide its letter dated 24.9.2003 that the copies of document are not liable to be called instrument and the document is not deficiently stamped and they don‘t have the original document with them. It is a mere licensee to the Builder and not a conveyance/sale and have WPC Nos.2663 & 427/2005 Page 8 concluded that, it is not deficiently stamped and notices be withdrawn.‖ (emphasis supplied). 11. However, the Order dated 29th November, 2004 does not specifically deal with the contention of the Dyer‘s Stone, quoted above, that the photocopy of an agreement/ document is not an ―instrument‖ and cannot be subjected to impounding or penalty. Order dated 29th November, 2004 goes on to hold that the agreement dated 23rd December, 1987 is a conveyance deed which was under-stamped and therefore liable to be impounded and the two petitioners should be asked to pay stamp duty of Rs. 3.66 lacs and also be subjected to penalty equivalent to ten times the deficient stamp duty i.e. Rs.36.60 lacs. Thus penalty of Rs.40.26 lacs was imposed. In addition the Collector of Stamps/Sub Divisional Magistrate has directed that the two petitioners are liable to pay 5% transfer duty to Municipal Corporation of Delhi (hereinafter referred to as MCD, for short) amounting to Rs.6.10 lacs. The last portion of the said Order records as under:- ―Keeping in view the ill intention of the executants to evade the stamp duty and transfer MCD duty, it is a fit case for imposing penalty to the highest extent as provided U/s. 35 of Indian Stamp Act, 1899 and therefore considering the whole issue, a penalty equivalent to 10 times of deficient stamp duty is imposed i.e. Rs.3.66 X 10 = Rs.36.60 lakhs. The total stamp duty including penalty and transfer MCD duty thus comes to Rs.3.66 Lakhs + Rs.36.60 Lakhs = 40.26 lakhs + Rs.6.10 as transfer MCD duty. Under Section 29 of Indian Stamp Act and as WPC Nos.2663 & 427/2005 Page 9 per clause 5 of article XIII of the agreement the duty etc. is to be paid by the builder i.e. M/s.Ashok Kamal Capital Builders (P) Ltd. The Promoters/Directors/Owners of Ashok Kamal Capital Builder (P) Ltd. at the first instance are directed to deposit the said amount of Rs.46.36 Lakhs within 1 month of receipt of this order with the direction to both the parties i.e. M/s.Dyer‘s Stone Lime Co.(P) Ltd. and Ashok Kamal Capital Builder (P) Ltd. to deposit the original agreement within the above period. In case they fail to deposit the said amount within stipulated period, the amount will be recovered U/s48 of Indian Stamp Act, 1899 as an arrear of land revenue and in addition to the above action U/s. 62/64 of Indian Stamp Act read with relevant provision of I.P.C. and Cr.P.C. will be initiated against all concerned and all executants.‖ 12. Section 2(14) of the Act defines an ―instrument‖ as under:- “Instrument”.- ―Instrument‖ includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished, or recorded.‖ 13. Relevant portions of Section 33, Section 35 and Section 36 of the Act read as under:- ―S.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 WPC Nos.2663 & 427/2005 Page 10 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: x x x x x ― ―S.35. Instruments not duly stamped inadmissible in evidence, etc.- No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped: Provided that – (a) any such instrument not being an instrument chargeable with a duty not exceeding ten naye paise only, or a bill of exchange or promissory note, shall, subject to all just exceptions, be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion; (b) where any person from whom a stamped receipt could have been demanded, has given an unstamped receipt and such receipt, if stamped, would be admissible in evidence against him, then such receipt shall be admitted in evidence against him on payment of a penalty of one rupee by the person tendering it; (c) where a contract or agreement of any kind is effected by correspondence consisting of two or more letters any one of the letters bears the proper stamp, the contract or agreement shall be deemed to be duly stamped; (d) nothing herein contained shall prevent the admission of any instrument in evidence in any proceeding in a Criminal Court, other than a proceeding under Chapter XII or Chaper XXXVI of the Code of Criminal Procedure, 1898; (e) nothing herein contained shall prevent the admission of any instrument in any Court when such instrument has been executed by or on behalf of the Government or where it bears the certificate WPC Nos.2663 & 427/2005 Page 11 of the Collector as provided by Section 32 or any other provision of this Act.‖ S. 36. Admission of instrument where not to be questioned.- Where an instrument has been admitted in evidence, such admission shall not, except as provided in section 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not duly stamped.‖ 14. Section 33 applies when an ―instrument‖ is produced before, a person having by law or consent of the parties the authority to receive evidence, or a person in charge of a public office. The said person is required to examine the ―instrument‖ to ascertain whether it is properly stamped in terms of value and description required by law in force in India at the time when it was executed. If the same is not duly stamped, the person should impound the said instrument. However, an instrument once admitted in evidence, cannot be impounded later on (Section 36 of the Act). 15. The question whether photocopy/copy of a document is as an ―instrument‖ under Section 2(14) of the Act and can be impounded or subjected to penalty and validated, was examined by the Supreme Court in the case of State of Bihar versus Karamchand Thapar and Bros. Ltd., AIR 1962 SC 110 and it was opined: ―6. It is next contended that as the copy of the award in court was unstamped, no decree could have been passed thereon. The facts are that the arbitrator sent to each of the parties a copy of the award signed by him and a third copy also signed by him was sent to the court. The copy of the award which was sent to the Government would appear to have been insufficiently stamped. If that had been produced in court, it could have been validated on payment of the deficiency and penalty under Section 35 of the Indian Stamp Act, 1899. WPC Nos.2663 & 427/2005 Page 12 But the Government has failed to produce the same. The copy of the award which was sent to the respondents is said to have been seized by the police along with other papers and is not now available. When the third copy was received in court, the respondents paid the requisite stamp duty under Section 35 of the Stamp Act and had it validated. Now the contention of the appellant is that the instrument actually before the court is, what it purports to be, ‗a certified copy‘, and that under Section 35 of the Stamp Act there can be validation only of the original, when it is unstamped or insufficiently stamped, that the document in court which is a copy cannot be validated and ‗acted upon‘ and that in consequence no decree could be passed thereon. The law is no doubt well settled that the copy of an instrument cannot be validated. That was held in Rajah of Bobbili v. Inuganti China Sitarasami Garu where it was observed: ‗The provisions of this section (Section 35) which allow a document to be admitted in evidence on payment of penalty, have no application when the original document, which was unstamped or was insufficiently stamped, has not been produced; and, accordingly, secondary evidence of its contents cannot be given. To hold otherwise would be to add to the Act a provision which it does not contain. Payment of penalty will not render secondary evidence admissible, for under the stamp law penalty is leviable only on an unstamped or insufficiently stamped document actually produced in court and that law does not provide for the levy of any penalty on lost documents. ‖ (emphasis supplied) 16. The Supreme Court in the aforementioned case held that a copy or secondary evidence of the original document is not an ―instrument‖ within the meaning of the Act. Copy of a document which is unstamped or not duly stamped cannot be validated by payment of stamp duty and penalty. 17. The Supreme Court again examined Sections 33 and 35 along with other provisions of the Act in the case of Jupudi Kesava Rao WPC Nos.2663 & 427/2005 Page 13 versus Pulavarthi Venkata Subbarao (1971) 1 SCC 545. In the said case, one of the parties wanted to lead oral evidence by way of secondary evidence, to prove terms of a lease which was in writing and duly executed, but was not duly stamped. The contention was rejected after making reference to Indian Evidence Act, 1872 and the provisions of the Act. It was observed that the Indian Evidence Act, 1872 does not purport to deal with the admissibility of documents, which are required to be stamped under the Act. It was held: ‖13. The first limb of Section 35 clearly shuts out from evidence any instrument chargeable with duty unless it is duly stamped. The second limb of it which relates to acting upon the instrument will obviously shut out any secondary evidence of such instrument, for allowing such evidence to be let in when the original admittedly chargeable with duty was not stamped or insufficiently stamped, would be tantamount to the document being acted upon by the person having by law or authority to receive evidence. Proviso (a) is only applicable when the original instrument is actually before the Court of law and the deficiency in stamp with penalty is paid by the party seeking to rely upon the document. Clearly secondary evidence either by way of oral evidence of the contents of the unstamped document or the copy of it covered by Section 63 of the Indian Evidence Act would not fulfil the requirements of the proviso which enjoins upon the authority to receive nothing in evidence .except the instrument itself. Section 25 is not concerned with any copy of an instrument and a party can only be allowed to rely on a document which is an instrument for the purpose of Section 35. ―Instrument‖ is defined in Section 2(14) as including every document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recorded. There is no scope for inclusion of a copy of a document as an instrument for the purpose of the Stamp Act. WPC Nos.2663 & 427/2005 Page 14 14. If Section 35 only deals with original instruments and not copies Section 36 cannot be so interpreted as to allow secondary evidence of an instrument to have its benefit. The words ―an instrument‖ in Section 36 must have the same meaning as that in Section 35. The legislature only relented from the strict provisions of Section 35 in cases where the original instrument was admitted in evidence without objection at the initial stage of a suit or proceeding. In other