Amitava Lala, J.-- By way of this petition under Article 226, the petitioners seek the direction to the respondents to realize the stamp duty on their security deposit in terms of the Article 57 of the Schedule 1-B of the Indian Stamp Act.
Briefly stated, the petitioner no.1 is a proprietorship firm and the petitioner no.2 is its proprietor. The firm carry on business of civil construction in various departments of the State Government, the Local Bodies including the KDA, Kanpur. The petitioners tender/quotation for construction of road, drainage etc was accepted by the respondent no.2.
Consequent upon the Executive Engineer of the Kanpur Development Authority on 25.7.2005 issued a communication wherein the petitioners were informed that their bid for a sum of Rs. 4,10,282. 94p has been accepted and they were asked to submit the stamp paper within ten days for execution of necessary documents/agreements.
The petitioners case is that they were required to furnish security either in the shape of National Security Certificate or Fixed Deposit or in the shape of Bank Guarantee and on the aforesaid security amount of 10% the respondents were demanding the stamp duty @ 125/- per thousand. It is noteworthy the security deposit is refundable after completion of the work and the object of the said security is only to ensure that the work may be completed in terms of the contract/agreement.
We have heard learned counsel for the petitioner and the learned Standing counsel.
The respondents have preferred not to file counter affidavit and as such by the consent of the parties, we proceed to dispose of the writ petition on the basis of the pleadings of the writ petition.
The learned counsel for the petitioners submitted that the stamp duty is payable in terms of Article 57 Schedule 1-B of the Indian Stamp Act and not in terms of the Article 40 (A) of the Schedule 1-B of the Indian Stamp Act as demanded by the respondents.
Article 57 Schedule 1-B so far as material for the purposes of present matter is set out below :-
Description of instrument Proper stamp duty 57-Security bond or mortgage deed, executed by way of security for the due execution of an office, or to account for money or other property received by virtue thereof, or executed by a surety to secure the due performance of a contract or the due discharge a liability -
Learned counsel for the petitioner has relied on the judgments of this Court in the case of 1997 AWC 1029 Tajveer Singh and others v. State of U.P. and others; 2001 (92)RD 309 Mohd.Farman v. State of U.P. and others; 2005 (98) RD 662 M/s Strong Constructions through its partner Shesh Nath Singh v. State of U.P. and others.
Learned Standing counsel has urged that the stamp duty was rightly demanded by the respondents under Article 40 of the Schedule 1-B of the Act.
We have considered the rival submissions of the parties. The issue whether security Bond falls under Article 57 of the Schedule 1-B of the Stamp Act or under Article 40 has been settled in series of cases of this Court. In the case of M/s Hindustan Sugar Mills Ltd. v. State of U.P. and others AIR 1972 All. 8 this Court has laid down that the security bond is chargeable under Article 57 of the Schedule 1-B of the Act. In the aforesaid case the question arose whether a document as a whole is a security cum indemnity bond falling under Article 34 and 57 Schedule 1-B of the U.P. Stamp Amendment Act, 1958 and is liable to duty of a fixed stamp of Rs.18/- or whether the document in question was a bond chargeable with duty under Article 5 Schedule 1-B of the U.P. Stamp (Amendment Act 1958).
The Court further held that in view of the definition of contract of indemnity under section 124 of the Contract Act a party only promises to save the other from loss caused to him by the promiser himself. Such instrument/such contract is called a contract of indemnity. The said decision was followed by another Bench in Tajveer Singh and others v. State of U.P. and others 1997 (2) AWC 1029 ; M/s Strong Constructions v. State of U.P. and another 2005 (98) RD 662; and in a recent judgment 2011 (3) ALJ 250 Vipin Kumar Singh v. State of U.P. and others.
The following discussion and the conclusion is apt for and is relevant for the present case paragraph 11 is quoted below:-
"Considering what we have set out and a pointed out, the petitioner is not executing a bond as a surety. The petitioner is not an existing debtor. The bond is also not given for due execution of office or to account for money or other property. The petitioner is a contractor assigned to perform a contract and for the purpose of duly performing the contract has to give a security bond. In our opinion, in the absence of the document, it will not be possible to hold that Article 57 of Schedule 1B of the Act is not attracted. The respondents themselves have not disputed that the bond is for securing the due performance of the contract. The duty payable under Article 34 is the same as Article 57. The petitioner himself has proceeded on the footing that considering the judgment of Tajveer Singh (supra) he is liable to pay the stamp duty under Article 57 of Schedule 1B."
The Suprme Court in a recent case State of Uttarakhand and others v. Harpal Singh Rawat (2011) 4 SCC 575 had occasioned to consider the provisions of 2(16)(c) r/w Schedule 1-B and the Article 57 of the Stamp Act, 1899. In the said case the Supreme Court in paragraph 14 of the judgment has referred the judgment of this Court Tajveer Singh and M/s Hindustan Sugar Mills Ltd. case.
In this view of the matter we find ourselves in respectful agreement with the decision of the Vipin Kumar Singh case (supra).
To determine the nature of instrument it is necessary to analyse the contents of the documents/instrument. In the present case petitioner was asked to deposit 10% of the contract amount by furnishing security either by Fixed Deposit or Bank Guarantee or by other means. The said amount is refundable in the event of contract is completed successfully i.e. strictly in terms of the agreement. One of the objection of the security is to ensure faithful compliance of the term of contract and in case of default the security amount is liable to be forfeited.
The present writ petition was filed in the year 2005. This Court on 24th August, 2005 had issued a direction to the respondents that the stamp duty on security depsoit by the petitioner will be charged under Article 57 of the Schedule 1-B of the Stamp Act. The writ petition is allowed in terms of the same.
However, no order is passed as to costs.
(Justice Amitava Lala) I agree (Justice P.K.S.Baghel) Dated:22.2.2012 ssm