Case: Dist. Registrar &amp; Coll.,Hyderabad  Vs. Canara Bank Etc

There were 25 writ petitions filed in the High Court. Out of these, 11 were by different banks. A few writ petitions were filed by institutions, corporate or incorporate bodies and a few were filed by sugar companies. The grievances arose because the documents executed between private and received and retained in the custody of the bank in ordinary course of their loan advancing transactions were inspected and then the banks were served with a request to remit the amount of deficit duty on the documents inspected and to recover the same from the parties concerned. The grievance of the sugar companies is that in the course of their business they were entering into agreements with the sugarcane growers selling sugarcane to the sugar companies in compliance with the provisions of A.P. Sugarcane Control Order, 1965 in the proforma prescribed by Control Order. Several agreements entered into in the prescribed proforma were treated as unstamped (though they were not liable to be stamped, in the submission of sugar companies) and therefore were sought to be impounded. The grievance of private persons is that the documents in their possession are sought to be inspected, impounded and levied with duty though they were not tendered in evidence nor produced before any public office.8. A perusal of the judgment of the High Court shows that in holding the impugned Section 73 of the Act ultra vires of the Constitution and other provisions of the Indian Stamp Act, the High Court has arrived at four findings: firstly, that the amended Section 73 is inconsistent with the other provisions of the Act; secondly, that the provision is violative of the principles of natural justice; thirdly, the provision is arbitrary and unreasonable and hence violative of Article 14 of the Constitution; and fourthly, there are no guidelines provided for the exercise of power by the authorized persons under the amended Section 73 which is either arbitrary and unreasonable or vitiated on account of excessive delegation of statutory powers.

Court's reasoning:
An instrument which is not duly stamped cannot be received in evidence by any person who has authority to receive evidence and it cannot be acted upon by that person or by any public officer. This is the penalty which is imposed by law on the person who may seek to claim any benefit under an instrument if it is not duly stamped. Once detected the authority competent to impound the document can recover not only duty but also penalty, which provision, protects the interest of revenue. In the event of there being criminal intention or fraud, the persons responsible may be liable to be prosecuted. The availability of these provisions, in our opinion adequately protects the interest of revenue. Unbridled power available to be exercised by any person whom the Collector may think proper to authorize without laying down any guidelines as to the persons who may be authorized and without recording the availability of grounds which would give rise to the belief, on the existence where of only, the power may be exercised deprives the provision of the quality of reasonableness. Possessing a document not duly stamped is not by itself any offence. Under the garb of the power conferred by Section 73 the person authorized may go on rampage searching house after house i.e. residences of the persons or the places used for the custody of documents. The possibility of any wild exercised of such power may be remote but then on the framing of Section 73, the provision impugned herein, the possibility cannot be ruled out. Any number of documents may be inspected, may be seized and may be removed and at the end the whole exercise may turn out to be an exercise in futility. The exercise may prove to be absolutely disproportionate with the purpose sought to be achieved and, therefore, a reasonable nexus between stringency of the provision and the purpose sought to be achieved ceases to exist.60. The abovesaid deficiency pointed out by the High Court and highlighted by the learned counsel for the respondents in this Court has not been removed even by the rules. The learned counsel for the respondents has pointed out that under the Rules the obligation is cast on the bank or any other person having custody of the documents though it may not be a party to the document, to pay the duty payable on the documents in order to secure release of the documents.