Case: Board of Revenue Vs. A. M. Ansari

This bunch of Civil Appeals Nos. 67-122 and 238 of 1969 by certificate granted under article 133(1)(b) of the Constitution by the High Court of Judicature of Andhra Pradesh at Hyderabad by its order dated June 28, 1968, against its common judgment and order dated August 21, 1967, passed in Writ Petitions Nos. 489, 491, 537 to 541, 635, 684, 685, 687, 688, 830 to 832, 561, 1219, 715 to 719, 812, 813, 1216, 677, 638, 639, 695, 853 to 856, 636, 867, 870, 1146, 1285, 1260, 1261, 1284, 1292, 1293, 1294, 1309, 1310, 1340, 1447, 1697 and 1265 of 1967, which raise interesting questions of law relating to the interpretation of some of the provisions ofthe Indian Stamp Act, 1899, andthe Andhra Pradesh General Sales Tax Act, 1957, shall be disposed of by thisfacts giving rise to these appeals are : The forest department of the Government of Andhra Pradesh after giving a sale notice held, in accordance with the terms and conditions thereof, an auction in 1967 in respect of various items of forest produce, viz., timber, fuel, bamboos, minor forest produce, beedi leaves, tanning barks, parks mohwa, etc. Clause (23) of the notice, inter alia, required the contractors to pay within 10 days of the receipt of the confirmation orders of the competent authority : (a) the balance of the 1st instalment amount, as might be fixed by the Divisional Forest Officer; (b) 6 1/4 per cent of the bid amount as security deposit; (c) sales tax on the bid amount at the rates current at the time of the sale. Clause (60) of the notice provided that the contractors would at all times comply with the provisions of the Indian Stamp (Andhra Pradesh Extension and Amendment) Act (19 of 1959), andthe Andhra Pradesh Court Fees and Suits Valuation Act, 1956, and all the Rules that might, from time to time, be in force thereunder.The respondents herein being the highest bidders in respect of some items of the forest produce were called upon to pay in terms of the abovenoted conditions the stamp duty on the agreements to be executed by them as if they were leases of immovable property falling under article 31(c) ofthe Indian Stamp Act, 1899. They were also called upon to pay sales tax on the bid amount in terms of clause (23) of the sale notice. They were further called upon to pay stamp duty on the deposits made by them by way of security as mortgages, falling within article 35(c) of the Stamp Act. Aggrieved by the said notices, the respondents filed the aforesaid petitions under article 226 of the Constitution for issue of appropriate writs, etc., declaring the aforesaid demand notices as illegal and void and restraining the appellants from enforcing or taking any proceeding for the levy and recovery of the amounts mentioned therein. The respondents contended before the High Court that as the right to pluck, collect and take away beedi leaves and to cut and carry away bamboos, standing timber, etc., was not a right or interest in immovable property so as to attract article 31(c) of the Stamp Act, there could be no question of payment by them of the stamp duty. The respondents also challenged the demand made from them for payment of sales tax on the bid amount, on the ground that as the Government did not carry on any business of sale, the demand was illegal. They further challenged the demand of stamp duty under article 35(c) of the Stamp Act pleading that the security deposits were not mortgages so as to attract the provisions of the said article of the Stamppetitions were contested by the appellants herein who contended, inter alia, that pursuant to clause (6) of the terms and conditions of the sale notice, the respondents were bound to pay the stamp duties that were chargeable in view of the extension of the Indian Stamp Act to the whole of the State of Andhra Pradesh by the Indian Stamp (Andhra Pradesh Extension and Amendment) Act (19 of 1959) with effect from April 1, 1959, and the repeal of the Hyderabad Stamp Act, and the Rules, notifications, instructions, etc., made or issued thereunder; that the right acquired by the respondents was not merely a right to collect, appropriate and sell beedi leaves that had already grown but also the right to collect, use and sell beedi leaves that would subsequently grow on the standing trees and their branches taking nourishment from the land during the period of lease which showed that the respondents obtained under the agreements an interest in immovable property. The appellants further contended that the respondents were, according to the sale notice, liable to pay sales tax on the bid amount as also the stamp duty on security deposits which fell within the definition of mortgages as contemplated by the Stamp Act.On a careful consideration of the respective stands of the parties, the High Court negatived the contentions of the appellants and allowed the petitions. Aggrieved by the judgment and order of the High Court, the appellants applied for certificate under article 133(1)(b) of the Constitution which, as already stated, was granted to them. This is how the appeals are before us.

Reasoning: The conclusion arrived at by us gains strength from the judgment of this court in Firm Chhotabhai Jethabai Patel and Co. v. State of Madhya Pradesh [[1953] S.C.R. 476], where contracts and agreements entered into by persons with the previous proprietors of certain estates and mahals in the State under which they acquired the right to pluck, collect and carry away tendu leaves, to cultivate, culture and acquire lac, and to cut and carry away teak and timber and miscellaneous species of trees called hardwood and bamboos were held in essence and effect to be licences.There is, of course, a judgment of this court in Mahadeo v. State of Bombay [1959 S.C.J. 1021; A.I.R. 1959 S.C. 735], where seemingly a somewhat different view was expressed, but the facts of that case were quite distinguishable. In that case, apart from the bare right to take the leaves of tendu trees, there were further benefits including the right to occupy the land, to erect buildings and to take away other forest produce not necessarily standing timber, growing crop or grass and the rights were spread over manyview of the foregoing discussion, we find ourselves unable to hold that the Government of Andhra Pradesh by holding auction of forest produce carried on business in the sale of that class of goods. As such, the respondents could not be made liable to pay the sales tax.There now remains for consideration only the last question as to whether the security deposits made by the respondents were in the nature of mortgages so as to make the respondents liable to pay the stamp duty under article 35(c) of the Stampis nothing in the above clause to indicate that any right over or in the security deposits was created in favour of the State Government.In Reference under Stamp Act, section 46 [(1892) I.L.R. Mad. 134 (F.B.)], where a licence issued to an arrack renter expressly required as one of its conditions that the licensee should deposit a sum equal to three months rental as a security for the due performance of the contract and the licensee executed a muchalka stating that he agreed to all the terms and conditions mentioned in the licence, it was held that neither the licence nor the muchalka taken separately or together fulfilled the conditions of a mortgage as defined in the Stamp Act, i.e., neither thereby actually created an interest in the deposit in favour of theRishidev Sondhi v. Dhampur Sugar Mills [A.I.R. 1947 All. 190 (F.B.)], it was held that an instrument in which specific sums have been offered as security is not a mortgage deed within the meaning of section 2(17) as money is not "specifiedview of the above we have no manner of doubt that the respondents could not be called upon to pay the stamp duty under article 35(c) of the Stamp Act.