(1) This is a reference under Section 57(10(b) of the Indian stamp Act (to be hereinafter referred to as the Act).
(2) The letter of the Chief Controlling Revenue Authority Delhi, referring this case to this Court reads as follows:-
'The Chief Controlling Revenue Authority Respectfully Showeth
1 (a) That on 11-9-1964 Messrs. Hamdard Dawakhana (wakf), Delhi, executed an agreement in favor of the Institute of Medicines and Medical Research, Delhi. A copy of the agreement is submitted herewith as annexure A.
(b) That on the same date Messrs. Hamdard Dawakhana (Wakf), Delhi executed antoher agreement in favor of Messrs. Hamdard National Foundations (India), Delhi. A copy of this agreement is submitted herewith as annexure B.
2 That on 15-9-1964 buth the agreements were presented for registration before the Sub Registrar (I), Delhi. They had buth been executed by the respondent on a non-judicial stamp paper of Rs. 2-00 each.
3 That the Sub-Registrar impounded, the two documents under Section 33 of the Indian Stamp Act. He was of the opinion that these documents were chargeable under Section 25(b) read with Article 15, Schedule 1-A of the stamped with a higher rate of duty and as such the agreement annexure A was liable to be stamped with a stamp of the value 1200.00 and that the agreement annexure B required a stamp of the value of Rs. 14400.00 on the basis of the minimum royalties of Rs. 6000.00 and Rs. 72000.00 per annum respectively as provided in these agreements. The matter was forwarded by him to the collector of the stamp under Section 38(2) of the Stamp Act. The Sub-Registrar also desired it to be taken into consideration if the two agreements did nto amount to a sale of trade rights for the consideration of the royalties.
4 That proceedings under Section 40 of the Stamp Act were accordingly started in the case of two agreements and ntoices were issued to the respondent.
5 That the collector of Stamps being unable to resolve the doubt regarding the chargeability of these documents with duty, made a reference to the Chief Controlling Revenue Authority under sub-section (2) of Section 56 of the Stamp Act. 1899, on the following two points.
(i) Whether the documents were covered by Section 25? If so, whether they were chargeable under article 15 Schedule 1-A of the Stamp Act, 1899?
(ii) Whether the documents are bonds as defined in Section 2, sub-section (5) of the Indian Stamp Act? Or are simple agreements covered by Article 5 sub-clause (C) of schedule 1-A.
A copy of the reference order of the collector is submitted herewith as annexure C
6 That the matter was very carefully considered by your petitioner as the Chief Controlling Revenue Authority. The documents annexures A and b are covered by Section 25 as they operate to secure the payment of certain sums periodically and the stamp duty on the same as envisaged in Section 25 has to be calculated under Article 15 of Schedule 1-A, because documents of this nature are covered by the clause 'nto being toherwise provided for by the Act', as appearing in this Article The stamp Act, it is submitted contains no toher article dealing with a document covered by Section 25 and this section in clear terms provides for the as certainment of the amount which is to be taken into account for purposes of assessment of the Stamp Duties.
(b) That since the definition of bond contained in Section 2(5) is nto exhaustive, the document though nto strictly covered by this definition could also be treated as a bond for the purposes of the Stamp Act.
(c) That in the submission of your petitioner the agreements A and B are thus covered by Section 25 read with Article 15 of Schedule 1-A.
7 That, the matter, however, involves important points of law, it is considered to be desirable and proper by your petitioner to state the case and refer the same to this Hon'ble Court under the provisions of section 57(1) of the stamp Act on the following points :-
(a) Whether the documents annexures A and B are covered by section 25 of the Stamp Act, and if so whether they are chargeable under Article 15 schedule 1-A of the stamp Act. 1899?
(b) Whether these documents are bonds as defined in Section 2(5) of the Stamp Act or are simple agreements covered by Article 5(c) of the Schedule 1-A.
It is thereforee, prayed that the matter may be decided in accordance with law to enable further action.
Sd/- X X X
Chief Controlling Revenue Authority,
(3) On 11th day of September 1964, Hamdarad Dawakhana entered into two agreements one with Institute of History of Medicine and Medical Research, Delhi, and the toher with Hamdarad National Foundation (India), Delhi. buth these agreements are drawn up more or less in similar terms. thereforee, it will be sufficient if we qutoe the material clauses from the agreement entered into by the Hamdard Dawakhana with the Institute of History of Medicine and Medical Research, Delhi. The clauses in that agreement which are relevant for our present purpose read thus : -
'This Agreement witnesseth the Terms and Conditions on which the Institute of History of Medicine and Medical Research has agreed to permit and the Hamdard Dawakhana (Wakf), has covenanted to make exclusive use of the Trade Name, Trade Marks and Patents, within the territory of the Union of India in the manufacture and sale of the User's products within the territory of the Union of India. The terms and conditions are :
The owner shall have the right to charge to the User and the User shall be bound to pay to the owner the said royalty at the following rates : -
The royalty for the use of Trade Marks and Patents shall be five per cent (inclusive of Know-how) of the selling price of the said medicines and products subject to the Minimum of Rs. 6,000/- (Rupees six thousand) and Maximum of Rs. 25,000/- (Rupees twenty five thousand) per annum. In case the Turnover (inclusive of Free suppliers) of the said medicines and products exceeds Rupees ten laks (Rs. 10,00,000) in any Gregorian Calendar Year, the royalty payable on the turn-over in excess of Rs. 10,00,000/- will be at the rate of two and a half (2.5) per cent.
The selling price means the gross selling price less the trade discount and rebates at a half rate of twenty-five per cent in all and ntohing more, irrespective of the amount of discounts, rebates, commissions and/or any toher deductions, off the selling price, actually allowed by the user it its customers, agents, distributors and tohers. The Publicity and Advertisement, in all its aspects and kinds shall be paid for wholly and solely by the User and shall nto be deductible from the turnover.
The royalty shall normally be paid quarterly but the owner shall have the option of obtaining interim advances from the User.
For calculating the turnover (inclusive of free suppliers) also, the trade discount and rebates at the flat rate of twenty-five per cent as aforesaid will be deducted.
The aforesaid rate of royalty being inclusive of 'know-how' the owner shall nto claim any charge for 'know-how', nor for any goodwill.
In consideration of the payment of the aforesaid royalty, the user shall have the exclusive right, during the currency of this agreement, to use trade name, trade marks and patents in the manufacture and sale of the User's products within the territory of the Union of India, but the User shall nto have an right to export outside the said territory any of its products bearing the trade name, trade mark and patents, which, only the right of use is hereby covenanted for royalty consideration.'
This agreement shall subsist, so long as the Hamdard Dawakhana (Wakf) continues as a Wakf under the Mutawalliship of the Wakif (Hakim Haji Abdul Hameed) and thereafter, under the Mutawalliship of his heirs, successors or legal representatives, subject to the relevant provisions of the Trade and Merchandise Marks Act 43 of 1958 , and Patents and Designs Act Ii of 1911 in this behalf.
In the event of the said period exceeding the maximum period prescribed by the said Acts, the owner shall renew this agreement for such tenure(s) as is permissible under the said Acts. From time to time.
The User shall have the right to secure registration, for itself, as registered User, and to do such toher things and acts as it is entitled under the Trade and Merchandise Marks Act 43 of 1958 within the territory of the Union of India.'
(4) It is the contention of the Revenue that these documents are 'bonds' within the meaning of that expression found in section 2(5)(b) of the act. That Definition to the extent it is material for our present purpose, read as follows:-
'2 In this Act, unless there is something repugnant in the subject or context,- ...................................................
(5) 'Bond' includes- .................................................
(b) any instrument attested by a witness and nto payable to order or bearer whereby a person obliges himself to pay money to antoher.
(5) It is admitted that the instruments, that are before us, are attested by witness. They are nto payable to order or bearer. On a reading of those instruments, it is clear that the Hamdard Dawakhana and incurred an obligation to pay money to the toher parties to the agreements . Prima facie, the case before us falls within the scope of section 2(5)(b) of the Act.
(6) Section 25 of the Act provides that - '25. Where an instrument is executed to secure the payment of an annuity or toher sum payable periodically, or where the consideration for a conveyance is an annuity or toher sum payable periodically the amount secured by such instrument or the consideration for such conveyance, as the case may be, shall, for the purposes of this Act, be deemed to be---
(a) Where the sum is payable for a definite period so that the ttoal amount to be paid can be previously ascertained __ such ttoal amount;
(b) where the sum is payable in perpetuity or for an indefinite time nto terminable with any life in being at the date of such instrument or conveyance-the ttoal amount which, according to the terms of such instrument or conveyance, will or may be payable during the period of twenty years calculated from the date on which the first payment becomes due; and
(c) where the sum is payable for an indefinite time terminable with any life in being at the date of such instrument or conveyance-the maximum amount which will or may be payable as aforesaid during the period of twelve years calculated from the date on which the first payment becomes due.
(7) It is the contention of the Revenue that the facts of the case, before us, fall within the scope of section 25(b). It is said on its behalf that the instruments, that are before us, were executed to secure payments of sums of money payable periodically and those sums are payable for an indefinite time nto terminable with any life in being at the date of such instruments.
(8) Those instruments do nto prescribe the period during which they are to be in force. thereforee, it should be held that the amounts, which the Hamdard Dawakhana is required to pay under those instruments, are payable for an indefinite time. There can be no denying the fact that those instruments secure the payments of certain sums periodically.
(9) For finding out the true character of an instrument, one has to read the instrument as a whole, and then find out its dominant purpose. But what is relevant for the purpose of the Act, is the dominant purpose of the instrument. If we look at the instruments, that are before us, it is clear that their ;dominant purpose was to secure for the Hamdard Dawakhana the user of the trade mark mentioned therein in consideration for the royalty prescribed. The payment of the royalty by the Hamdard Dawakhana is one of the essential features of those instruments. The toher clauses in the instruments respecting the rights of Hamdard Dawakhana are merely ancillary in character.
(10) Shri R.L Aggarwal, learned counsel for the Hamdard Dawakhana, contended that before an instrument can be brought within the scope of section 25, there must be an unilateral undertaking by one of the parties to the instrument to pay money to the toher party, According to him, if that undertaking is given in consideration for something done or to be done by the toher party, then the case would nto come within the scope of section 25,. We are unable to accept that contention as correct. Consideration is an essential part of a contract. toherwise, it is a nudum pactum. But what brings an instrument within the scope of section 25 is the act of any party to that instrument obliging himself to pay money to the toher party to the instrument, which can only mean a legal obligation. For the purpose of determining the true character of the instruments before us, all that we have to see is whether under those instruments any of the parties thereto has obliged itself to pay money to tohers. If there is such an obligation, then those instruments are 'bonds'. The possibility of an instrument becoming ineffective on a future date, or the chance of its being avoided by one of the parties thereto, are wholly irrelevant circumstances for the purpose of determining whether that instrument is a 'bond' or nto. For the purpose of determining that fact, we have to take the instrument as it is and see whether any of the parties thereto obliges itself to pay money to antoher. If so looked at, we have no doubt that the instruments before us are 'bonds'.
(11) It is true that the rights conferred on the Hamdard Dawakhana under those instruments are subject to the provisions contained in sections 48 to 53 of the Trade and Merchandise Marks Act, 1958. But that circumstance, in our opinion, in no manner detract from the fact that those instruments are 'bonds'.
It is trite to say that every bond is an agreement. So is the case with a mortgage or sale or exchange. But what we have to see is whether that agreement has acquired the character of a 'bond'. We have already ntoiced the relevant clauses in the instruments in question. There is no dispute that under those instruments one of the parties thereto had obliged itself to pay moneys to tohers.
(12) The distinction between an 'agreement' and a 'bond' is well brought out by the decision of the Calcutta High Court in Gisborne & CO. V. Subal Bowri, reported in (1882) 2nd 8, Cal 284. Therein Garth, C. j., observed:-
' I am of opinion that the instrument in question is nto bond within the meaning of the Stamp Act of 1869; and that it requires (so far as I can see) an eight-anna stamp only.
The definition of a bond in s. 5 of the Act is precisely what we understand by a bond in England, and it is an obligation of a different character from a convent to do a particular act, the breach of which must be compensated in damages.
Whether a penal clause is attached to such as covenant or nto, the remedy for the breach of it is in form and substance a suit for damages; and by s. 74 of the Indian Contract Act, the English rule with regard to liquidated damages is abolished, and the plaintiff in such a suit has no tight under any circumstances to claim the penalty itself as such. He can only recover such compensation, nto exceeding the amount of the penalty, as the Judge at the trial considers reasonable; but he is entitled to that compensation whether he proves any actual damages or nto.
The remedy upon a bond is very different. The plaintiff in the case of a simple money bond recovers the sum named in the bond, or in the case of a bond conditioned for the performance of covenants he recovers the actual damage which can prove that he has sustained. In either case nto only is the bond a contract of a different form and nature from a covenant with a penal clause, but the remedy upon it, and the amount recoverable for the breach of it, is also different'.
(14) The test laid down by the learned Chief Justice for distinguishing a 'bond' from an 'agreement', is : In the former case, in the event of breach, the party the instrument, who had obliged to pay money to the toher, is liable to pay the sum stipulated in the instrument. In the latter case, the quantum of damages has to be fixed by the court. If we apply that test tto the factors of the present case, it is clear that the liability of Hamdard Dawakhana Is fixed. Its liability is to pay the same stipulated. There is no question of damages in this case.
(15) In the collector of Rangoon v. Maung Aung Ba 33 Ind Case 920 AIR 1916 Low Bur 100, the Lower Burma chief court accepted the ratio of the decision, referred to earlier. But on the facts of that case, their Lordships came to the conclusion that the instrument, that was before them was an agreement as in the said case the aggrieved party could have claimed only damages and nto any specific sum of money.
(16) We are unable to agree with Mr. R.L. Aggarwal that the Calcutta High Court in Lino type and Machinery Co. and Windsor Press, In re Air 1917 Cal 71 , a different view of the law. In that case, the Court was called upon to consider whether the instrument before them was a 'conveyance' or an 'agreement'. The instrument before them was a hire-purchase agreement. After examining the various clauses in that instrument, the court came to the conclusion that the same did nto evidence any transfer of property and, thereforee. It cannto be considered as a 'Conveyance' Their Lordships were nto called upon to decide whether the instrument in question could have been considered as a 'bond' or nto. Hence, they held that the instrument before them was an 'agreement'.
(17) In re, Dhampur Sugar Mills, Ltd. : AIR1956All25 , the court qutoed, with in(1882) 2nd 8 Cal 284 referred to earlier. Therein, the court was considering an instrument under which the Dhampur Sugar Mills Ltd., has agreed to pay certain commission and allowances to one Kanwar Marli Manohar, its Managing Agent. The Court had to consider whether that condition in the instrument amounted to an agreement or to a bond. On a reading of the various clauses in that instrument, the court came to the conclusion that the instrument in question evidenced and 'agreement' and nto a 'bond'. But in so doing, they did nto depart from the rule laid down by Garth, C. J. ntoiced earlier.
(18) For the reasons mentioned above, we are of the opinion that the instruments marked annexures A and B in the letter addressed to this court by the Chief Controlling Revenue Authority, Delhi, fall within the scope of section 25(b) of the Act, as 'bonds'. No costs.
(19) A copy of this judgment shall be sent to the Chief controlling Revenue Authority, Delhi.
(20) Reference answered.