The petitioner by the present petition has approached this Court challenging the demand made by the respondents to pay Stamp Duty amounting to Rs.16,100/- instead of an amount of Rs.100/- as provided in Article 57 of Schedule 1B of the Indian Stamp Act (hereinafter referred to as 'the Act') for execution of a bond/agreement to carry out the contract granted to the petitioner by opposite party no.4.
2. The petitioner is a registered contractor with the Government of Uttar Pradesh in the field of Building and Road Construction work and the Government of Uttar Pradesh has issued a licence to the petitioner, which has been renewed from time to time. The petitioner made a bid pursuant to a tender, which was accepted by letter dated 10.2.2000. The petitioner was asked to deposit security of Rs.2,29,600/- as also to execute a bond of agreement to complete the work assigned to the petitioner in accordance with the terms and conditions agreed to.
3. According to the petitioner, as per the provisions of law as contained in Article 57 of Schedule 1B of the Act, a general stamp paper of Rs.10/- is to be supplied, where the amount secured does not exceed Rs.100/-, but in any other case a stamp paper of Rs.100/- is required. According to the petitioner, he is required to deposit a stamp paper of Rs.100/- only for the execution of the agreement to carry out the work allotted to the petitioner and hence, the demand of Rs.16,100/- is unreasonable and illegal.
4. Reliance has been placed on the judgement of Tajveer Singh and others Vs. State of U.P. & Others [1997 ACJ (1) 285/1997 (2) AWC 1029], wherein, according to the petitioner, it has been clearly laid down that security deposit/security bond is chargeable for stamp duty only in accordance with the provisions as contained in Article 57 of Schedule 1B of the Act. It is then pointed out that the judgement of Tajveer Singh (supra) has been followed by another Bench of this Court in the case of M/s Universal Engineers & Anr. Vs. State of U.P. & Others [Civil Misc. Writ Petition No.37536 of 2003]. Reference is also made to some other judgements. It is, therefore, submitted that the petition should be allowed.
5. The respondents have chosen not to file counter affidavit but have proceeded on the basis of the averments made in the petition, as the issue pertains to purely a question of law as to whether stamp duty could be demanded under Article 57 of Schedule 1B or Article 40 of Schedule 1B of the Act. Accordingly, by consent of parties, this petition has been heard finally.
6. We may firstly consider the two Entries in the Indian Stamp Act, being Entry 40, Entry 40-B of Schedule 1B and Entry 57 of Schedule 1B. We may also consider Section 2 (17) of the Act. Section 2 (17) of the Act defines the 'mortgage deed' and it reads as under:-
"2 (17). 'Mortgage deed'.- Mortgage deed includes every instrument whereby, for the purpose of securing money advanced, or to be advanced, by way of loan, or an existing, or future debt, or the performance of an engagement, one person transfers, or creates to, or in favour of another, a right over, or in respect of specified property."
It is not necessary to interpret the said definition as the language is clear. A mortgage deed is basically entered into for securing money advanced or to be advanced in any of the modes set out in the definition.
7. Now we may reproduce Entry 40 of Schedule 1B of the Act, which reads as under:-
Description of instrument Proper stamp duty "40. Mortgage deed- Not being an agreement relating to deposit of title deeds, pawn or pledge (No.6), Bottomary bond (No.16), mortgage of crop (No.41), respondential bond (No.56) or security bond No.57)-
(a) When possession of the property or any part of the property comprised in such deed is given by the mortgagor or agreed to be given;
(b) when possession is not given or agreed to be given as aforesaid Explanation A mortgagor, who gives to the mortgagee a power of attorney to collect rents or a lease of the property mortgaged, or part thereof, is deemed to give possession within the meaning of this Article.
(c) When a collateral or auxiliary or additional or substituted security by way of further assurance for the above mentioned purpose, where the principal or primary security is duty stamped, for every secured not exceeding Rs.1000.
And for every Rs.1000 or part thereof in excess of Rs.1000 The same duty as a conveyance [No.23, Clause (a)], for a consideration equal to the amount secured by such deed.
The same duty as a bond (No.15) for the amount secured by such deed.
Duty above 5 lakh remitted. (See item 151 Appendix II).
Ten rupees Ten rupees Duty above 5 lakh semitted or above (See item 151 Appendix II).
The definition of mortgage deed would include all mortgages except those excluded under the entry. In the instant case, the bond is not being entered into for securing money advanced or to be advanced, by way of loan, or an existing, or future debt. It will also not fall within the expression 'the performance of an engagement' as contained in the definition as that requires right over, or in respect of specified property. In the instant case, what the petitioner has to do, is to execute a Security Bond for due performance of the contract. It would thus not be a mortgage deed as no right over a specified property is involved. Therefore, Entry 40 of Schedule 1B of the Act is not attracted.
8. Next we come to Entry 57 of Schedule 1B of the Act, which reads as under:-
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 of a liability-
(a) When the amount secured does not exceed Rs.100.
(b) in any other case Ten rupees One hundred rupees Bond is defined in Section 2 (5) of the Act, which reads as under:-
"2 (5) 'Bond'.- 'Bond' includes-
(a) any instrument whereby a person obliges himself to pay money to another, on condition that the obligation shall be void if a specified act is performed, or is not performed, as the case may be;
(b) any instrument attested by a witness and not payable to order or bearer, whereby a person obliges himself to pay money to another; and
(c) any instrument so attested, whereby a person obliges himself to deliver grain or other agricultural produce to another."
A copy of the bond which has to be furnished is not annexed. The bond considering that it has to be given for securing due performance of a contract is in the nature of a 'performance bond' or 'security bond'. There is no liability as on the date of the bond. The bond will be for a liquidated damage, for a specified sum of money in the event the contract is not performed.
It would be clear from this Entry that to be covered by Entry 57, the bond has to be 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 of a liability. In the instant case, the bond is not executed by a surety. The expression 'surety' is as understood in the Indian Contract Act. It possibly could come within the expression or the due discharge of a liability. However, as pointed out at the time the person is called upon to furnish the bond there is no liability. It will also not fall in the other expressions. In the instant case, therefore, really speaking Entry 57 of Schedule 1B also may not be attracted.
9. In Tajveer Singh (supra) the petitioners there were called upon to supply the non-judicial stamps for execution of appropriate deed containing the offer of an amount as security. It was contended that the respondents were demanding stamp duty at the rate of Rs.125/- per thousand depending upon the nature of the deposit. The Bench noted that in M/s Hindustan Sugar Mills Ltd. Vs. State of U.P. and others [AIR 1972 Allahabad 8), it has been laid down that the security bond is chargeable with a duty under Article 57 of Schedule 1B of the Act. Reference was made to some other authorities and based upon that, the petition was allowed. It was held that the position is thus settled that a security bond is chargeable with duty under Article 57 of Schedule 1B and accordingly, the stamp duty would be payable.
10. As the judgment in Tajveer Singh (supra) is based on M/s Hindustan Sugar Mills Ltd. (Supra), let us consider that judgment. The Special Bench has considered the nature of stamp duty payable on the bond executed. The Board of Revenue had come to the conclusion that the document consisted of two distinct instruments, firstly, a bond liable to duty under Article 15 and the second document executed by the sureties, which was a surety bond falling under Article 57 of Schedule 1B of the U.P. Stamp (Amendment) Act, 1958. On a reference being made insofar as the Mills is concerned, they submitted to the decision of the Board that the document in question consists of two distinct instruments and that the second document was a surety bond falling under Article 57 Schedule-1B of the U.P. Stamp (Amendment) Act, 1958. The issue was in respect of the first of the two instruments. On behalf of the Mills, it was contended that the document is a security bond as contemplated under Article 57 Schedule-1B of the Stamp Act and in the alternative, an indemnity bond liable to the same amount of duty under Article 34 and, therefore, not liable for duty under Article 15.
On the other hand, on behalf of the Revenue, it was contended that the instrument in question is undoubtedly a bond and it cannot be described either as a security bond or as an indemnity bond and, therefore, is liable to duty under Article 15 of the Schedule. Article 15 is the duty payable on 'Bond' as defined in Section 2 (5), not being a debenture (No.27) and not being otherwise provided for by the Act.
Considering the various expressions and contentions, the Special Bench in para 18 observed as under:
"18. When can an instrument be said to be a bond was aptly stated in a decision of the Calcutta High Court in the case of Hira Lal Sircar v. Queen Empress. (1895) ILR 22 Cal 757 in the following words:--
"The important word in this definition is the word ''obliges', and no document can be a bond within it unless it is one which creates an obligation to pay money, as is the case with those documents which are known as bonds according to the common use of the word, but, is not the case with acknowledgement of advances or of the purchase and receipt of goods, the obligation to pay for which is not created by the instrument, but arises from the promises to repay advances and to pay for goods which the law always implies when money is borrowed or goods are purchased."
The Special Bench approved the view taken by the Calcutta High Court. After considering the recitals in the instrument, the Special Bench was pleased to hold that the instrument is a contract of indemnity and the bond to be executed is an indemnity bond liable to duty under Article 34 of the Schedule and falls outside the ambit of Article 15 of the Schedule. The issue was also considered in M/s. Strong Construction Vs. State of U.P. & Others [2005 (98) RD 662]. The Court held that the judgment in Tajveer Singh (supra) would apply.
11. Considering what we have set out and as 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.
12. In the light of that, this writ petition is allowed in terms of prayer clauses 1 and 2. No order as to costs.
Dt/-18.2.2011 RKK/-