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Kasturi Lal Vs. Bharat Finance Co. and anr. - Court Judgment

LegalCrystal Citation
SubjectArbitration;Civil
CourtJammu and Kashmir High Court
Decided On
Case NumberCivil Revn. No. 104 of 1977
Judge
Reported inAIR1981J& K6
ActsJammu and Kashmir Stamp Act, 1977 - Sections 2(11), 5 and 35
AppellantKasturi Lal
RespondentBharat Finance Co. and anr.
Appellant Advocate R.C. Nanda, Adv.
Respondent Advocate V.K. Gupta, Adv.
DispositionRevision allowed
Cases ReferredPooran Chand v. Sudarshan Kumar
Excerpt:
- .....the consideration. the question of admissibility of a document and the sufficiency of the stamp duty chargeable must necessarily depend upon the scope of the trial or the enquiry as the case may be which a court proposes to hold in a particular cause.'3. section 3 is a charging section and provides that subject to certain exceptions every instrument mentioned in schedule i to the act shall be chargeable with duty prescribed therein. section 35 enacts that an instrument chargeable with duty shall not be admitted in evidence for any purpose, or otherwise acted upon, unless it is duly stamped. unlike section 49 of the registration act, which permits a document compulsorily registerable under section 17 to be admitted in evidence for collateral purposes. section 35 creates a complete.....
Judgment:

Kotwal, J.

1. Two questions have been referred to this Bench, as according to one of us, who initially heard this revision petition, the view taken by this Court in Gupta Private Loan Committee v. M. Ganesh Dass Kudyar & Sons, 1975 Kash LJ 272 upon which the order impugned in this petition is based, was open to question. These are :

1. Whether an instrument, which is sufficiently stamped, can be used for enforcing one of its terms where it is single document or one of the matters contained therein, where it consists of two or more distinct matters, if the stamp duty referable to such term or matter is sufficient ?

2. In particular, where an insufficiently stamped document also contains an arbitration clause, whether such clause can be enforced under Section 20 of the Arbitration Act if the document bears the stamp duty requisite for an arbitration agreement ?

2. The factual background in which these questions have arisen is like this :

The first respondent, Bharat Finance Co., brought an application under Section 20 of the Arbitration Act against the petitioner and the second respondent in the court of City Judge, Jammu, for referring certain disputes to the named arbitrator, which was opposed by the party inter alia on the ground that there was no valid agreement between the parties to refer the disputes to an arbitrator. Respondent No. 1 relied upon two documents viz : agreement of loan and agreement of guarantee, both of which contained an arbitration clause. While statement of one of the witnesses for respondent No. 1 was being recorded to prove these documents, an objection was raised that these documents which were in fact bond and agreement of guarantee respectively, being insufficiently stamped, were inadmissible in evidence, even to prove the arbitration clause contained therein. The trial court overruled the objection and held that even though the documents were insufficiently stamped as bond and agreement of guarantee, yet they were sufficiently stamped as agreements containing the arbitration clause. While holding so, it relied upon the following observations made by a learned single Judge of this court (D. D. Thakur, J. as he then was) in 1975 Kash LJ 272 (supra) :

'The document in question was not required to be admitted to provide an evidence of the liability of the petitioner to pay the amount undertaken to be paid by the said document but was intended to prove the existence and the validity of the arbitration agreement. Under these circumstances, therefore, the portion of the document unconnected with the arbitration clause had to be excluded from the consideration. The question of admissibility of a document and the sufficiency of the stamp duty chargeable must necessarily depend upon the scope of the trial or the enquiry as the case may be which a court proposes to hold in a particular cause.'

3. Section 3 is a charging section and provides that subject to certain exceptions every instrument mentioned in Schedule I to the Act shall be chargeable with duty prescribed therein. Section 35 enacts that an instrument chargeable with duty shall not be admitted in evidence for any purpose, or otherwise acted upon, unless it is duly stamped. Unlike Section 49 of the Registration Act, which permits a document compulsorily registerable under Section 17 to be admitted in evidence for collateral purposes. Section 35 creates a complete prohibition against permitting a document to be used for any purpose, including a collateral purpose, unless the requirements of the proviso to this section are fulfilled. This inference becomes irresistible, once the words 'for any purpose' used in Section 35 are given their plain and natural meaning. (See Ram Rattan v. Parma Nand, AIR 1946 PC 51, and Sanjeeva Reddi v. Johanputra Reddi, AIR 1972 Andh Pra 373). Duly stamped under Section 2 (11), as applied to an instrument means that the instrument bears stamp of proper description of not less than the proper amount affixed or used in accordance with the law for the time being in force in the State. Unless, therefore, an instrument bears stamp not less than the proper amount, it cannot be said to be duly stamped, and consequently cannot be admitted in evidence for any purpose under Section 35, unless the proviso to the section can be made applicable to it. The stamp which an instrument is required to bear has to be calculated in accordance with Schedule I read with certain sections, as the facts of a given case may warrant. Section 4, for instance, provides that when in the case of a sale, mortgage, or settlement, several instruments are used to complete the transaction, only the principal shall be chargeable with duty mentioned in the Schedule, whereas all other instruments shall be chargeable with duty of one rupee each. Similarly, Section 6 lays down that if an instrument falls within two or more of the descriptions given in Schedule I, it shall be chargeable only with the highest of the duties, where the duties chargeable under it are different. Section 5, which is material, reads as under :

'5. Any instrument comprising or relating to several distinct matters shall be chargeable with the aggregate amount of the duties with which separate instruments, each comprising or relating to one of such matters would be chargeable under this Act'.

4. This section speaks of a single instrument relating to distinct matters and provides that the instrument shall be chargeable with such amount of duty as would be the sum total of different amounts chargeable on each instrument, in case of a separate instrument were to be drawn for each such matter. Merely because an instrument comprises several distinct matters, Section 5 on its plain terms, does not permit reading into it a separate instrument relating to each such matter, and consequently does not warrant splitting of the instrument into different parts, each part relating to one such matter, and thereby render the instrument duly stamped within the meaning of Section 2 (11) at least for that part on which the duty chargeable under the Schedule has been paid, even if the instrument does not bear the aggregate amount of duty required to be paid on it under the section. The instrument has to be read as a whole and treated as a single instrument for the purposes of stamp duty. Furthermore, 'distinct matter' in Section 5 connotes a transac should be chargeable only with the highest of such duties.'

5. To the same effect is another Bench decision of the same court viz; P. Nageswara Rao v. M. Narayanamurthi, AIR 1938 Mad 75. In this case the court overruled its earlier decisions taking a contrary view and held that a promissory note which was not duly stamped could not be split into two parts so as to render its that part admissible in evidence which related to acknowledgment of liability. (Also see Mt. Biboo v. Rai Saheb Gokaran Singh, AIR 1937 All 101, and Ratanji Bhagwanji & Co. v. Prem Shankar, AIR 1938 All 619).

6. In 1975 Kash LJ 272 (supra), the learned single Judge appears to have been influenced by certain observations made by their Lordships of the Supreme Court in R. N. Ganakar & Co. v. Hindustan Wires Ltd., AIR 1974 SC 303 in taking a contrary view. In this case an , application for perpetual injunction restraining the opposite party from proceeding with the arbitration proceedings was made without either questioning the existence or validity of the arbitration agreement or desiring to have its effect determined. The court held that such an application was not maintainable, even though made ostensibly Under Section 33, of the Arbitration Act, as it neither challenged the existence or validity of the arbitration agreement, nor sought to have its effect determined, which were the only three purposes for which such an application could lie. It was clearly not a case dealing with any provision of the Stamp Act. Reliance of the learned single Judge on this decision was, therefore, clearly misplaced. The authorities relied upon bv Mr. Gupta also do not support his contention that a document can be split UD to render it admissible in evidence for that part or matter at least for which it already bears requisite stamp, as in none of these cases such a question actually fell for determination. In re, Secretary to the Commissioner of Salt Akbari and Separate Revenue, Madras, AIR 1920 Mad 225 (FB) for instance, the only question involved was whether covenant in a sale-deed relating to the mortgage of vendors other property for due performance of the sale transaction was a distinct matter within the meaning of Section 5, requiring additional stamp duty to be paid on it. Similarly, the member Board of Revenue v. Arthurs Paul Benthall, AIR 1956 SC 35 merely dealt with the distinction between the expressions 'distinct matters' and 'two or more descriptions' occurring in Sections 5 and 6 respectively. Pooran Chand v. Sudarshan Kumar, AIR 1966 All 539 was a case where the only question involved was whether the instrument according to its terms, was an instrument of partition or merely an agreement appointing arbitrators. We are, therefore, clearly of the opinion that the view taken by this court in 1975 Kash LJ 272 (supra) is not correct, and must be overruled. Our answer to question 1 is in the negative.

7. Assuming that appointment of an arbitrator is a matter distinct from loan transaction or obtaining guarantee for repayment of loan, our answer to question No. 2 would still be in the negative.

8. No other point being involved in the petition the same is allowed and the order impugned in it is set aside. We leave it to the trial court to determine whether or not the documents can be admitted in evidence under the proviso to Section 35. No costs.

Mufti-Baha-Ud-Din Farooqi, Ag. C.J.

I agree.


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