1. By this petition the petitioners challenge the order of the Additional Collector, Poona, dated July 22, 1971, holding inter alia that the instrument in question was chargeable to stamp duty under Art. 36 (c) of the Bombay Stamp Act, 1958. The facts giving rise to this petition which are not in dispute are briefly these :--
2. Petitioners Nos. 2 and 3 were the owners of a House bearing No. 50/A situate at Lonavla in Poona District, Petitioner No. 1 was the tenant of that building in respect of one galla or godown. The said building being in a dilapidated condition and the landlord-petitioners being not in a financial position to reconstruct the building, it was decided by the tenant-petitioner and the landlord-petitioners that the tenant-petitioner would construct a building at his own coat and that the cost so incurred would be adjusted towards future rent due from him. R was also agreed that after the construction of the new building, half portion of the building would remain with the tenant for his use as a godown and the remaining half would be given in the possession of the landlords. It was also agreed between the par ties that the rent for the first 10 years for the premises to be retained by the tenant would be Rs. 25/- per month and for the next 10 years it would be at the rate of Rs. 35/- per month and an agreement laying down these two stipulations was executed between the parties on Feb. 25, 1968.
3. Pursuant to that agreement the petitioner No. 1 actually constructed the build' ing and he incurred expenditure to the extent of Rs. 8078/- The parties having agreed after that construction that that much amount was in fact spent by the Petitioner No. 1 for the construction, it was agreed that he should deduct that amount from the future rent payable by him for the newly constructed portion of the premises which would remain with him as a tenant. The disputed document dated Aug. 20, 1968 was executed accordingly. It referred to the facts just stated about the earlier agreement dated Feb. 23 1968 and went on to state that the expenses of Rs. 8078/- already incurred by the petitioner No. 1 were to be deducted from the future rent and after repayment of the saidamount he was to pay rent at the end of each month. Accordingly, it was provided in para 3 of the instrument in question that the landlords had received the rent of the above mentioned premises for 22 years and 3 months and it stipulated inter se that during the said period the tenant was not liable to pay any rent and the landlords were also not entitled to demand any rent. It was provided that thereafter the tenant would become the monthly tenant. It was made perfectly clear by the said instrument that the rent was in fact received from the tenant as advance rent for a period of 22 years and 3 months.
4. The said instrument was presented for registration. After the infructuous earlier order which was set aside by the Chief Controlling Revenue Authority, the Additional Collector Ponna, by his order dated July 22, 1971 held that since the whole of the rent is paid in advance, obviously there could be no covenant to pay rent and there could be no reservation of rent. In that view of the matter he held that the rent paid in advance must be treated as premium paid within the meaning of Art. 36 (c) of Schedule I of the Bombay Stamp Act, 1958. He accordingly passed the impugned order. The petitioners carried an appeal to the Chief Controlling Revenue Authority, but as they had not deposited the money in time, the appeal was dismissed. It is as against that background that the petitioners have approached this Court.
5. Mr. Joshi who has appeared in support of the petitioners has contended that since even prior to the instrument in question there was relationship of landlord and tenant between the petitioner No. 1 on the one hand and petitioners Nos. 2 and 3 on the other and it was a monthly tenancy, no Article under the Bombay Stamp Act, 1958 is attracted and therefore the instrument is not chargeable to any stamp duty. As against that, Mr. Kanuga, the learned Assistant Government Pleader supported the order of the Additional Collector and he submitted that in any event, the instrument in question was liable to stamp duty under Art. 36 (b) of the Bombay Stamp Act, 1958.
6. We have already set out the substance of the instrument in question. Having regard to the unequivocal recitals in the instrument that the amount of Rs. 8078/- spent by ihe tenant petitioner is to be appropriated as rent for 22 years and 3 months, we find no substance in the submission of Mr. Joshi thatthe instrument in question is in effect a document creating only a monthly tenancy and is not liable to any stamp duty. That submission therefore has to be mentioned only to be rejected.
7. Mr. Joshi also relied upon an unreported decision of this Court in Civil Reference No. 11 of 1968 decided by Chief Justice Kotval and Mody and Kantawala JJ. On Aug. 4, 1970 where this Court has held that the instrument which they had to construe falls under Article 36 (a) (iii). It may be mentioned that the facts of that case are entirely different and have no application to the facts of our case. That was a case where initially there was an out and out only a loan transaction evidenced by the promissory note without any reference to the construction of the building. It was subsequently a year later that an agreement of lease was executed. The observations in that case therefore have no application to the facts of our case.
8. In order that Article 36 (c) of the Bombay Stamp Act, 1958 may be attracted, it must be a document of lease 'where the lease is granted for a fine or premium or for money advanced or to be advanced in addition to rent reserved.' Undoubtedly, the amount of Rs. 8078/- which was spent by petitioner No. 1 for the reconstruction of the building would be money advanced for the lease but then it is not enough that it is a case of money advanced, but in addition to that it must be also a case where there is rent reserved. A careful perusal of the instrument shows that there is no rent reserved. The expression 'rent reserved' would mean that there must be a liability to pay rent and that must be in addition to the payment of the money advanced. The document in unequivocal terms provides inter alia that during the period of 22 years and 3 months, there is no liability on the tenant-petitioner to pay any rent nor any right in the landlord-petitioners to claim or demand any rent. That being the position, notwithstanding the fact that it is a case of lease where money is advanced, since the other essential requirement under Article 36 (c) viz. 'rent reserved' is lacking, the learned Additional Collector was not right when he took the view that the instrument in question is covered by the provisions of Article 36 (c). We therefore reject the first submission of Mr. Kanuga.
9. With regard to the alternate submission of Mr. Kanuga, we find that there isconsiderable force. Undoubtedly the instrument in question is a lease where the lease is granted for money advanced. It is also clearly a case where no rent is reserved. The instrument as we have pointed out earlier while dealing with Article 36 (c) unequivocally provides that there is no liability for the tenant-petitioner to pay rent and there is no right in the landlord-petitioners to demand or claim rent during the period of 22 years and 3 months by which time it is provided that the amount of Rs. 8078/- already advanced by the tenant-petitioner for the construction would have been wiped off by appropriation of the rent due in future at the rate of Rs. 25/- per month for the first tea years and at the rate of Rs. 35/- per month for the next 10 years and thereafter. It is, therefore clearly a case where no rent is reserved, notwithstanding the fact that the rate of rent has been referred to in the instrument while working out the details as to how the amount of Rs. 8078/- expended by the tenant-petitioner would be taken to have been satisfied by appropriation of rent accruing thereafter during the period of 22 years and 3 months. In this connection we may refer to a decision of a Bench of three Judges reported in re Chief Controlling Revenue Authority : AIR1952Bom285 on a reference under the Stamp Act of 1899. That was a case where a lease of certain salt pans was executed for a period of five years on Dec. 9, 1949. In respect of that lease two amounts were paid, Rs- 33,000/- was paid on Nov. 2, 1945 and Rs. 22,000/- was paid on June 24, 1948. In the lease there was no covenant to pay rent but there was an appropriation of the amount actually paid to rent which was stated as being for certain fixed amounts spread over the period of the lease. On the question whether the lease fell under Article 35 (a) (iii) or Article 35 (b) of Schedule I to the Indian Stamp Act, 1899, this Court held that the lease fell under Article/35 (b) and not under Article 35 (a) (iii) as there was no reservation of rent under the lease. In that reference, Chagla, C.J. who delivered the judgment referred to the provisions of Section 105 of the Transfer of Property Act, inasmuch as neither 'rent' nor 'premium' is defined under the Stamp Act. It was contended by Mr. Khambata that all that the expression 'reserved' means is that the rent must be provided for under the document. This Court rejected that contention by observing as under:--'
''Rent reserved' in this context can only mean rent in respect of which there is a liability, rent in respect of which there is a covenant on the part of the lessee to pay the amount mentioned and stated in the document. When we turn to the lease we find that there is no covenant to pay rent and naturally there could be no covenant as the amount had already been paid but all that we find in the lease is that there is an appropriation of the amount actually paid to rent which is stated as being for certain fixed amounts spread over the period of the lease. If, therefore, there is no reservation of rent under this lease, the document cannot fall under Article 35 (a) (iii) of the Stamp Act.'
10. It was on the other hand pointed out that on the facts of the case, it was clear that the case would fall under Article 35 (b) because that sub-clause provides: 'where the lease is granted for a fine or premium or for money advanced and where no rent is reserved.' Having regard to the view that the rent reserved in the context of Article 35 of the Stamp Act could only mean rent in respect of which there is a liability, this Court held that since moneys were already advanced and they were to be appropriated and adjusted towards future rent there would be no liability and hence it was a case of an instrument where no rent is reserved. It may be mentioned that that was a decision which was given while interpreting the provisions of Articles 35 (a) (iii) and 35 (b) of the Indian Stamp Act, 1899. The Bombay Stamp Act, 1958 which has repealed the said Act of 1899, in so far as the provisions of Arts. 36 (b) and 36 (c) in the schedule I are concerned, is identical with the provisions of Arts. 35 (b) and 35 (c) in Schedule I of the Indian Stamps Act, 1899, except with the addition of the expression 'or to be advanced' which are of no consequence so far as the construction of the Articles are concerned. With respect, it would appear that the above reasoning is applicable to the instrument before us on all fours and we are therefore of the view that the impugned order of the Additional Collector must be quashed and he must be directed to proceed to levy the stamp duty not under Article 36 (c) but under Article 36 (b) in Schedule I of the Bombay Stamp Act, 1958. Rule made absolute accordingly. No order as to costs.
11. Ordered accordingly.