P.S. Kailasam, O.C.J.
1. This is a reference under Section 57 of the Indian Stamp Act by the Chief Controlling Revenue Authority, Board of Revenue, Madras. The Respondent, the State Bank of India, presented on 15th November, 1971 three draft documents, but we are concerned with only one for adjudication and levy of proper stamp duty under Section 31 of the Indian 'Stamp Act. The document with which we are concerned is a draft document styled as a deed of transfer proposed to be executed by the State Bank of India and the State Bank of Travancore by which the State Bank of India had agreed to transfer a sum of Rs. 50 lakhs to the State Bank of Travancore in view of cash credit advance sanctioned to XYZ Company Limited, called the 'borrower' under a hypothecation agreement dated 1st November, 1971 executed by the borrower in favour of the State Bank of India hypothecating the goods mentioned in the hypothecation agreement executed in favour of the State Bank of India as security for the repayment of the loan. At the time the deed of transfer was sought to be executed, a sum of Rs. 90 lakhs was due by the borrower to the State Bank of India under the hypothecation agreement. By the said deed of transfer which was sought to be adjudicated, the State Bank of India agreed with the State Bank of Tranvancore to transfer to the said Bank a sum of Rs. 50 lakhs out of the said sum outstanding and due to, itself by the borrower and the interest which will thereafter accrue at the rate of 2% above the State Bank of India advance rate of 101/2% per annum, with all the rights, benefits, advantages and facilities relating to the proportionate part of the aforesaid security as mentioned in the deed of transfer. The Collector was of the opinion that the document being for the transfer and re-transfer of money respectively would be chargeable under Article 62(c)(ii) of Schedule I to the Indian Stamp Act and that a sum of Rs. 22.50 would be leviable on each document. He was also of the opinion that if it were otherwise, the documents would have to be treated as agreements under Article 5(c) of Schedule I of the Stamp Act and the stamp duty chargeable would be only Rs. 2.25. As the Collector had some doubts, he referred the matter to the Board of Revenue and the Board of Revenue informed the Collector that the document would fall under Article 31 of Schedule I of the Indian Stamp Act. Acting on the instructions issued by the Board of Revenue the Collector by his proceedings dated 32nd May, 1972 adjudicated the document as an exchange deed under Article 31 and directed that a stamp duty of Rs. 2,25,000 plus surcharge of 21/2% which came to Rs. 5,625, totalling in all a sum of Rs. 2,30,625 had to be paid; on receipt of this order, the State Bank of India filed an application for referring the matter to the High Court under Section 57 of the Act for a decision. Accordingly, the Board has made this reference in the following terms:
Whether the document styled as 'deed of transfer' between the State Bank of India and the State Bank of Travancore by which the State Bank of India has agreed with the State Bank of Travancore to transfer to the State Bank of Travancore a sum of Rs. 50,00,000 out of the sum of Rs. 90 lakhs outstanding and due to the State Bank of India by a company called XYZ Company, Ltd. on the terms and conditions and consideration mentioned in the said document, is an exchange of property chargeable under Article 31 of the Indian Stamp Act, or a transfer chargeable under Article 62(c)(ii) of the Indian Stamp Act, or any other Article under the Indian Stamp Act?
2. Before answering the reference, it is necessary to consider the several provisions of the Stamp Act to determine whether the reference is competent at all as there is no case arising which can be referred to the High Court.
3. The power to adjudicate as to proper stamp is conferred on the Collector under Sections 31 and 32 of the Act. Section 31 enables a party to bring before the Collector any instrument whether executed or not, and whether previously stamped or not, for his opinion as to the duty that is chargeable. On payment of a fee, the Collector is required to determine the duty with which in his judgment, the instrument is chargeable. Section 32 enables the Collector to determine, when an instrument is presented under Section 31 and to certify by an endorsement on the instrument, the full duty with which it is chargeable and, if it had been paid, to make an endorsement to that effect on such instrument. If the instrument is not chargeable with any duty, he can certify in that manner. Section 32 also states the consequences of such an endorsement made by the Collector.
4. The important section with which we are concerned is Section 56. That section empowers the Collector to make a reference under certain circumstances to the Chief Controlling Revenue Authority.
Section 56(2) provides that
if any Collector, acting under Section 31, Section 40, or Section 41, feels doubt as to the amount of duty with which any instrument is chargeable he may draw up a statement of the case and refer it, with his own opinion thereon, for the decision of the Chief Controlling Revenue Authority.
5. Section 56(3) enables the Authority to consider the case and send a copy of its decision to the Collector, who shall proceed to assess and charge the duty, if any, in conformity with such decision. The right to state a case and refer it to the High Court is conferred on the Chief Controlling Revenue Authority under Section 57 of the Act. That section enables the Chief Controlling Revenue Authority to state a case referred to it under Section 56(2), or otherwise coming to its notice, and refer such case with its opinion thereon to the High Court. Section 59 empowers the High Court to deliver its judgment containing the grounds for such decision and to send to the Revenue Authority a copy of its judgment under the seal of the Court and the signature of the Registrar. On receipt of such judgment, the Revenue Authority shall dispose of the case conformably to such judgment.
6. The reference by the Collector to the Chief Controlling Revenue Authority is under Section 56(2). It may be noted that the Collector can refer, white-acting under Sections 31, 40 and 41. We have also referred to Section 31, which enables the Collector to receive any instrument whether executed or not and whether previously stamped or not and to determine the duty that is payable on such an instrument. It may be noted that, under Section 2(14) of the Act an instrument includes every document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recorded. To comply with the definition, the instrument must be executed. Though for the purpose of Section 31, an instrument whether executed or not could be received by the Collector for determining the duty, we have the word instrument defined in the Act and it would be understood in the manner in which it is defined. Though under Section 56 it is provided that if the Collector acting under Section 31 feels any doubt as to the amount of duty, he may draw up a statement of the case, the restriction is apparent as he can only send any instrument which is chargeable and in construing the instrument, we have to apply the definition, that is the document should have been signed by the concerned parties. Otherwise, even though the document would be one under Section 31 and the Collector can determine the duty with which it is chargeable, it may not be one under Section 56(2) to enable him to send it for the decision of the Chief Controlling Revenue Authority. Equally, the Chief Controlling Revenue Authority, while dealing with the case referred to under Section 56(2) can state a case and refer it to the High Court only if it is an instrument, namely one that is signed. Though Section 57(I) says that the Chief Controlling Revenue Authority may state a case referred to it under Section 56 and also 'otherwise coming to its notice', it can only be cases, that is, documents which are in dispute between the parties. It is also made clear by Section 59 that the High Court should deliver a judgment and that the Revenue authority should dispose of the case in conformity with that judgment. All these provisions clearly contemplate a case before the Court and a document which has been executed by the parties.
7. We are supported in our view by the decision of the Special Bench of the Calcutta High Court in In re Marine Insurance Policies : AIR1929Cal799 . There, the Board of Revenue, Bengal, referred to the opinion of the Court as to whether a certain type of document represented by a blank form attached to the statement of the case drawn up by the Board of Revenue should foe stamped with duty payable under Article 47(A)(i)(ii), Schedule 1, of the Stamp Act, or with duty under Article 62(c) of the said Schedule or with some other and what duty. The Court observed that without taking steps with reference to any particular document or seeking to make any person liable for duty upon any particular document, the Board of Revenue, Bengal, have attached to their case stated a specimen blank form of certificate and have asked for the opinion of the Court under Section 57 of the Act upon the question whether documents of the character disclosed by the blank form are liable to stamp duty, and if so, under what heading. The Special Bench held that the reference is entirely incompetent as it is not within the purview of Section 57 of the Stamp Act. It observed that that section did not provide a means by which the authorities concerned in collecting stamp duty could get advice from the Court by laying a case before it for the decision of a general question and pointed out that it provided the machinery by which, when an actual case was being dealt with a particular instrument being in question and a particular party being sought to be charged with duty upon that instrument, a question of doubt might be referred to the Court by the revenue authority setting forth the facts in the form of a case stated. The learned Judges observed that 'in the ordinary way, if the Government desires legal advice upon a general question it can obtain it by consulting the law officers of the State.' After referring to Sections 31, 40, 41, 56 and 57 Rankin, CJ. observed thus:
It is quite clear that...there must be a specific case, definite document, a definite person who is sought to be charged with duty not an abstract question of chargeability of documents of a certain kind...it is quite clear that the revenue authority on receiving the judgment of the Court has to dispose of the case conformably to the High Court judgment.
The Special Bench referred to the decisions in Fn the matter of Thomson Policy I.L.R.(1877) Cal. 347, Re : Reference under Stamp Act I.L.R.(1902) Mad. 752, Re : Stamp Reference I.L.R.(1915) All. 125 and Usuf Dadabhai v. Chand Mohomed : AIR1926Bom51 and held that the reference was incompetent. It will be sufficient if we refer to the Full Bench decision of the Allahabad High Court, In Re : Stamp Reference I.L.R.(1915) All. 125. The Court observed:.the reference made to us does not refer to a particular deed in existence, but to some deed which may or may not hereafter come into existence. Section 56 of the Stamp Act confers upon this Court power to deal with instruments which are already in existence and which have been made the subject of action by the Collector acting under Sections 31, 40 and 41 of Act No. II of 1899....We are of opinion that Section 57 contemplates a decision being given under circumstances and upon documents of the same nature as those referred to in Section 56 of the Act.
We may add that the instrument that is referred to in Section 56(2) is only an instrument that is executed, though under Section 31 an instrument which is not executed is also specifically included as being presentable. We find that this reference is totally incompetent.
8. It is also settled law that when an incompetent reference is made, the Court is not bound to answer it, as held in Income-tax Commissioner v. Sevugan : (1948)1MLJ157 . In a reference made under the Income-tax Act, it was contended on behalf of the Income-tax Commissioner that when a case had been stated by the Tribunal to this Court containing a question, this Court had no province other than to express its opinion and to give its answer to the question and that it could not consider the correctness or otherwise of the reference by the Appellate Tribunal. This contention was negatived and it was held that if the Tribunal improperly or incorrectly made a reference in violation of the provisions of the statute, this Court was capable of entertaining an objection to the statement of the case and if it came to the conclusion that it never should have been stated, the Court was not compelled to express an opinion upon the question referred.
9. We return the reference without answering the same.