1. This is a reference under Sec. 57 of the Indian Stamp Act, 1899. The following question has been referred to us for decision:
"Whether the document dated 13-8-1957 is an instrument given for consideration and authorising the attorney to sell any immoveable property falling under Art. 48(f) of Sch. 1-A (now Article 48(e) of Schedule (1) or a mere power of attorney falling under Article 48(d) of Schedule 1-A (now Article 48(c) of Schedule I of the Indian Stamp Act as amended)". Annamalai and Co. (Pvt.) Ltd., the respondent herein, borrowed several sums of money from Reliance Bank of India, Ltd., and hypothecated with the Bank immoveable properties as security for the loan. Thereafter, on 13-8-1957, Annamalai and Co. executed a document, described as an irrevocable power of attorney, which is the subject-matter of the present reference. The gist of the document is this.
(2) Annamalai and Co. to be described as the borrowers, agreed with the Board of directors of the Bank of 8-8-1957 to give to the Bank an irrevocable power of attorney in their favour to sell at the discretion of the Bank the scheduled properties and credit the sale proceeds therefrom to the account of the borrowers in the Bank and also to collect the rents from the properties, lease them out and to credit the income therefrom to the said account less taxes that may be paid thereon, till the dates of sales of the said properties. In pursuance of the above agreement the borrowers executed on 13-8-1957, the document under consideration, as an irrevocable power of attorney in favour of the Bank with authority to sell the properties mentioned in the schedule and to collect the rents therefrom and pay the taxes thereon till sales. Thereafter, the document catalogues the details of the power granted by the borrowers to the Bank in pursuance of the power of attorney, under four headings. They include the power to collect rents, the power to lease, the power to sell the properties, the power to prosecute of defend legal proceedings touching any of the matters aforesaid. The document concludes with the statement that the power shall be irrevocable till the scheduled properties were sold or till all the accounts were closed, whichever happened earlier.
(3) According to the Board of Revenue, the referring authority, this document has to be stamped under Article 48(e) of Sch. I of the Stamp Act, which is in the following terms--
"Power of attorney when given for consideration and authorising the attorney to sell any immoveable property: The same duty as a conveyance for the amount of the consideration".
On the other hand, the claim of the respondent, the borrower and executant of the document, about the proper article of the Stamp Act to be applied, was Article 48(e), which refers to a power of attorney authorising not more than five persons to act jointly and severally in more than one transaction or generally for, which document the stamp duty payable is Rs. 11-25.
(4) Before dealing with the question above mentioned, a brief reference to the history of Article 48(e) will not be out of place. This article was formerly Article 48(f) of Sch. 1-A of the Stamp Act introduced therein by an amendment. A commentator (K.J. Aiyar) on the Indian Stamp Act has observed that the addition of Section 48(f) of Sch. 1-A was made probably in consequence of an unreported decision of a Bench of this Court in R. C. No. 14 of 1891 (Mad). We sent for and perused this judgment. In that judgment it was observed that where a document on the face of it, was a power of attorney authorising the sale of certain immoveable property in consideration of a certain sum of money borrowed by the executant under a promissory note and of the deposit of the title deeds of the property, the document was held not to be a mortgage but only a power of attorney requiring one rupee stamp on the ground that no right to retain, the sale proceeds could be necessarily inferred. The same commentator observed that after the amendment of the Stamp Act incorporating Article 48(f) the same document would fall under Article 48(f) (now Art. 48(e)).
(5) However, the above prior history is now being referred to only incidentally, and the question at issue has to be answered after consideration of a few general principles. It is represented by the learned Government pleader appearing for the Government that the principles set out in Article 48(e) are derived from the notion of irrevocable agency in the law of contracts, where the authority granted by the principal to the power agent is coupled with an interest held by the agent. Well-known commentaries have explained this principle thus:--
1. "If a borrower, in consideration of a loan, authorises the lender to receive the rents of Blackacres by way of security, the authority remains irrevocable until repayment of the loan in full has been effected... This doctrine applies only where the authority is created in order to protect the interest of the agent; it does not extend to a case where the authority has been given for some other reason and the interest of the agent arises later". (Cheshire on the Law of Contracts, 6th Edn. page 421.)
2. Where the authority of an agent is given by deed, or for valuable consideration, for the purpose of effectuating any security, or of protecting or securing any interest of the agent, it is irrevocable during the subsistence of such security or interest" (Bowstead on Agency, 12th Edn. p. 301).
3. Adopting the classical statement of the rule given by Wilde C. J. in Smart v. Sanders, (1848) 5 CB 895 at p. 917 (Sic), on the Law of Agency, 2nd Edn. page 302 states:
"In such cases the authority is given for valuable consideration as a security, or as part of a security, in respect of a liability of the principal to the agent. The agent has, as it were, bought his authority in order to ensure the payment of a debt due from the principal".
(6) The principles thus set out above have been embodied in Section 202 of the Indian Contract Act, and in particular illustration (a) therefor, which is in the following terms--
"A gives authority to B to sell A's land, and to pay himself, out of the proceeds, the debts due to him from A. A cannot revoke this authority, nor can it be terminated by his insanity or death".
(7) There can be no doubt that in the present case, the authority given by the power of attorney of Annamalai and Co. to the Reliance Bank of India was to enable Reliance Bank to sell the scheduled properties, and out of the proceeds thereof, obtain repayment of the loan which they had already advanced to Annamalai and Co. The power of attorney is clearly irrevocable and also purports to be so irrevocable till the loan is repaid or the properties are sold. But the further question on which the parties are at variance is whether the document can be brought squarely under the definition in Article 48(e) of the Indian Stamp Act, which requires the following ingredients:
1. There must be a grant of a power to sell immovable property; (2) There must be consideration for the grant of the power. Such consideration must necessarily move from the agent to the principal; (3) In view of the method of valuation for stamp duty set down in the article itself, namely, the stamp duty to be calculated as for a conveyance for the same amount of the consideration, it is clear that the consideration must be one which can be ascertained precisely in terms of money.
(8) There is not doubt that requirement (1) is satisfied in this case. According to the respondent, the document lacks the element of money consideration and this is an essential requirement. It might be possible, that during the subsistence of the power of attorney the bank could be restrained from proceeding to enforce the security already effected for the loan, but such forbearance will not suffice for the purpose of money consideration. A forbearance on the part of a creditor to sue can operate as a sufficient consideration for a promise (vide The Alliance Bank v. Broom, (1864) 34 LJ Ch 256, p. (266)), but it is stressed by the learned counsel Sri R. Viswanathan, appearing for the respondent, that such forbearance cannot be valued in terms of money.
(9) It appears to us that this line of argument overlooks an important aspect of the Law of Contracts. When the Bank advanced the loan (on accounts) to the respondent, it was against a promise by the respondent to discharge the loan, if necessary on the security of certain immoveable properties offered for the purpose. But as long as the loan remains undischarged and the properties offered as security remained unsold, the promise of the respondent remained executory in character as against the executed promise of the bank in having advanced the loan. When the respondent subsequently executed the suit document as an irrevocable power of attorney to the bank, it must be considered as a step towards the discharge of the executory promise by empowering the bank to sell the properties in the schedule to the document, for the purpose of realising the loan. It will be perfectly legitimate to treat the consideration for the grant of this irrevocable power by the respondent to the Bank, as traceable to the loan which the Bank had granted earlier to the respondent, or at least that part of one loan which remained undischarged at the time when the power of attorney was granted. It is not correct to hold, as the learned counsel for the respondent seeks to do, that as against the advance of the loan by the bank, the counter obligation of the respondent had also become a completed or executed promise, when the respondent's properties were hypothecated to the Bank. Such hypothecation must be viewed only as a stage in the fulfillment of the promise to repay the loan, and the promise of the respondent remained executory in character as against the executed promise namely the grant of the loan by the bank. This aspect of the matter has come for attention before the Supreme Court in a decision reported in Union of India v. Chaman Lal and Co., the Supreme Court observed:--
"If the contract has been fully and completely performed on both sides, no question of any further rights and liabilities made under the contract is likely to arise. If, however, the contract is one in which the consideration is executed on one side, there will be a right on one side and an outstanding liability on the other. If the consideration is executory on both sides, there will be outstanding rights and liabilities on both sides."
These observations are based upon the principles set out in Ss. 2(d), (e) and (f) of the Indian Contract Act, dealing with reciprocal promises forming the consideration for each other in an agreement constituting a contract. As mentioned already, in the present case, on the part of the bank there is an executed promise in the from of a loan advanced. But the reciprocal consideration proceeding from the respondent for this promise was executory. As long as that reciprocal promise remained executory the respondent can take successive steps towards discharging the liability thereunder, and for each successive step so taken, the loan advanced earlier by the Bank or such part of it as remains undischarged or may be realisable under the power can operate as consideration. The execution of the present irrevocable power of attorney constitutes such a step in the discharge of the obligation. It appears to us that it will be perfectly legal to construe that, the consideration therefor was relatable to the loan advanced earlier by the Bank, (whether it be the entire loan or the part remaining undischarged) and that consequently the power of attorney was executable for valuable consideration. We, therefore, answer the question referred to us for decision, by deciding that the document in question falls under Article 48(e) of the First Schedule of the Indian Stamp Act. We have not been asked to decide what will be the amount of consideration, on which the duty has to be calculated. That will be for the consideration of the appropriate authorities of the Revenue, in accordance with law, and in the light of the principles we have indicated earlier in this judgment.
10. Answer accordingly.