HIGH COURT OF JUDICATURE AT ALLAHABAD A.F.R. Reserved Case :- WRIT - C No. - 22880 of 2010 Petitioner :- Kayess Flour Mills Pvt. Ltd. & Another Respondent :- State Of U.P. & Others Petitioner Counsel :- Vinod Sinha,Manesh Sharma Respondent Counsel :- C.S.C. Hon'ble Pankaj Mithal,J.
Extraordinary writ jurisdiction of the court has been invoked by the petitioners so as to challenge the order dated 12.1.2010 passed by the Chief Controlling Revenue Authority in Stamp Revision No.243 of 2008-09 arising from proceedings under Section 47-A of the Indian Stamp Act, 1899 (hereinafter referred to as Act) decided on 23.8.02 by the District Magistrate/Collector, Chandauli.
Petitioner No.1 is a Joint Stock Company within the meaning of Section 566 of the Companies Act, 1956 (hereinafter referred to as Companies Act) whereas petitioner No.2 is one of its directors.
A partnership firm having seven parters owned a flour mill in the name and style of Kanudia Flour Mills at Dulhaipur, Mughalsarai, Chandauli and other properties. The aforesaid partnership was converted into a Joint Stock Company under Part IX of the Companies Act with the new name Kayess Flour Mills Pvt. Ltd. and a certificate of incorporation was duly issued to it on 3.8.98 by the Registrar Companies at Calcutta. Thus, by virtue of Section 575 of the Companies Act all properties belonging to or vested in partnership firm became the properties of the company by operation of law.
In view of above vesting, the petitioner company moved an application under Section 34 of the Land Revenue Act, before the Tehsildar on 25.11.99 for substituting its name in place of the partnership firm in revenue records against certain agricultural plots of land situate in Village Mahmoodpur, Pargana Rasoolpur, Tehsil and District Chandauli. On the receipt of the above application, which was registered as Mutation Case No.144 of 1999 under Section 34 of Land Revenue Act, the Tehsildar on 6.3.2000 wrote to the A.D.M. (Finance and Revenue) that mutation as aforesaid has been sought but no stamp duty appears to have been paid and therefore, it does not appear to be legal to transfer the name, therefore, the original application is being sent for determination of proper stamp duty payable so that further proceedings of mutation may be completed thereafter.
On the said report A.D.M. (Finance and Revenue) called for a report from the Deputy Registrar who vide report dated 1.3.02 recommended the market value and the stamp duty payable thereon.
Petitioners' filed objections stating that the proceedings for determination of market value are not maintainable. There is no transfer of any property and the transfer by operation of law would not attract payment of stamp duty.
The above objections of the petitioners were not dealt with and therefore, petitioners made repeated applications dated 16.8.02 and 23.8.02 for consideration of the objection with regard to the maintainability of the proceedings inasmuch as mutation proceedings were not proceedings with regard to transfer or conveyance of any property.
The District Magistrate/Collector Chaundali ultimately on 23.8.02 passed an order under Section 47-A of the Act holding that the application for mutation is an instrument of conveyance as it transfers the property from partnership to the Joint Stock Company and as such is chargeable to stamp duty under Article 23(a) of Schedule 1-B of the Act. He determined the deficiency to be Rs.56,29,300/- and imposed a penalty of Rs.5,00,000/-.
The above order was challenged by the petitioners by filing Writ Petition No.39057 of 2002 which was initially entertained and an interim order staying the operation of the order dated 23.8.02 was passed but finally the writ petition was dismissed vide order dated 29.7.08 on the ground of alternative remedy of a revision under Section 56 of the Act.
Consequently, petitioners' filed Revision No.243 of 2008-09. The said revision has been decided by the C.C.R.A vide impugned order dated 12.1.2010 without adjudicating the controversy regarding the maintainability of the proceedings and the chargeability of stamp duty on the mutation application, directed the District Magistrate to redetermine the market value of the property after affording opportunity of hearing to the petitioners.
Challenging the above order the submission of Sri Navin Sinha, Senior Advocate assisted by Sri Vinod Sinha, learned counsel for the petitioners is that the transfer of property is by operation of law and as such no stamp duty is payable. The application for mutation is neither an instrument nor a deed of conveyance which could be subjected to payment of stamp duty. No document much less any instrument or deed of conveyance was presented for registration and as such powers under Section 47-A of the Act could not be invoked and the entire proceedings are without jurisdiction.
Sri Nimai Das, learned Standing Counsel on the basis of the counter affidavit filed has submitted that in view of definition of instrument and conveyance contained in Sections 2(14) and 2(10) of the Act no error has been committed in determining the deficiency in stamp duty and directing for its realisation.
In view of above submissions, the following questions of law falls for consideration:-
(i) Whether the application for mutation is an instrument or a deed of conveyance which can be subjected to payment of stamp duty?
(ii) Whether such mutation application which was not presented for registration before the Sub-registrar could be the subject matter of determination of stamp duty under Section 47-A of the Act?
(iii) Whether the transfer of any property by operation of law could be subjected to payment of stamp duty more precisely when there is no instrument executed to witness such a transfer?
It may be important to note that the proceedings were initiated under Section 47-A of the Act and the order passed in respect of deficiency in stamp duty is also specifically under Section 47-A of the Act. The said proceedings pertain to the application for mutation moved by the petitioners under Section 34 of the Land Revenue Act. The proceedings were not initiated either under Section 31 or 33 of the Act. They were not even initiated in respect of Articles of Association of the Company. Further more the application for mutation was not presented for registration before the Sub-registrar of the Company.
The application for mutation is undoubtedly a document. 'Document' is defined under Section 3(18) of the General Clauses Act, 1897 to include any matter written, expressed or described upon in substance by means of letters, figures or marks or by more than one of those means and is intended to be used for the purposes of recording that matter. Anything written by means of letters, figures or marks as such is a document. Therefore, the application for mutation is a document but the question is whether it falls within the ambit of an 'instrument.' Section 2(14) of the Act defines 'instrument' to include every document and record created or maintained by which any right or liability is or purports to be created transferred limited, extended, extinguished or recorded. Identical is the definition of the instrument contained in Section 2(b) of the Notaries Act, 1952.
The above definition of the instrument provides that a document and record created or maintained so as to create transfer, limit, extend, extinguish any right or liability would be an instrument. No right or liability is created transferred or extinguished by simply moving an application for mutation. It may be other thing that a document on the basis of which mutation is being sought may be covered by the definition of an instrument but that is not the position as here only the application for mutation is under consideration and no other document.
About a century ago in the case of Corea vs. Appu Hamy 1912 Appeal Cases 230 it was observed that mutation proceedings are in the nature of fiscal inquiries instituted in the interest of the State for the purposes of securing better revenue. The aforesaid decision was followed by the Privy Council in Thakur Nirman Singh and others vs. Thakur Lal Rudra Pratab Narain Singh and others AIR 1926 Privy Council 100 and it was observed as under:-
"(Mutation proceedings) are much more in the nature of fiscal inquiries instituted in the interests of the State for the purpose of ascertaining which of the several claimants for the occupation of certain denominations of immovable property may be put into occupation of it with the greater confidence that the revenue for it will be paid. It is little less than a travesty of judicial proceedings to regard the (mutation) orders as judicial determinations expelling proprio vigore individual from any proprietary right or interest he claims in immovable property."
In Smt. Sawarni vs. Inder Kaur and others AIR 1996 S.C. 2823 : 1996 (7) JT SC 580 it was held as under:-
"Mutation of a property in the revenue record does not create or extinguish title nor has it any presumptive value on title. It only enables the person in whose favour mutation is ordered to pay the land revenue in question."
Similarly in another case reported in JT 1996(10) SC 43 State of U.P. vs. Amar Singh etc. it has been held that mutation entries are only for the purposes of enabling the State to collect land revenue from the person in possession but it does not confer any title to the land. The title would be derived from an instrument executed by the owner in favour of an alienee.
In another case reported in AIR 1997 S.C. 2719 Balwant Singh and another etc. vs. Daulat Singh and others : JT 1997(5) SC 703, it has clearly been ruled that mutation entries do not convey or extinguish any title and these entries are relevant only for collection of land revenue.
The aforesaid view has been followed in R.V.E. Venkatachala Gounder vs. Arulmigu Viswesaraswami and V. P. Temple and another AIR 2003 S.C. 4548 and in Suman Verma vs. Union of India and others (2004) 12 SCC 58.
To sum up the position as regards mutation is that such entries in revenue records are not documents of title. Mutation does not create or extinguish title in any property. These entries are only fiscal in nature to enable the State to collect revenue from the person recorded. They do not convey any rights or title in any property. When mutation entries have not been regarded as documents of title, the application for mutation in no way can be described as a document likely to create or extinguish title. Therefore, an application for mutation cannot be an instrument within the meaning of Section 2(14) of the Act.
Section 2(10) of the Act defines a conveyance to include a sale and every instrument by which property is transferred inter vivos and which is not specifically provided for by Schedule 1-, 1-B and 1-B of the Act. Mutation application has not been specifically mentioned any of the above schedules to the Act, but it is neither a sale nor an instrument of transfer of property. It is not a document of sale as defined under Section 54 of the Act Transfer of Property Act. There is no exchange of price. The transfer is by operation of law.
The mutation application is not a instrument as held above. Therefore also it is not even a transfer. Accordingly, the mutation application cannot by itself be regarded as a document of transfer, sale or an instrument or conveyance.
A similar question has cropped up before the Division Bench of the Andra Pradesh High Court wherein also a partnership firm was converted into a registered company. The Division Bench in the case of Vali Pattabhirama Rao and another vs. Sri Ramanuja Ginning and Rice Factory (P.) Ltd. and others AIR 1984 Andra Pradesh 176 held that the provisions of Section 575 of the present Companies Act are mandatory and the properties of the partnership firm vests statutorily in the company so incorporated. In such circumstances, where partnership is converted into a registered company there is no conveyance.
The aforesaid decision has been followed with approval by the Supreme Court in Jai Narain Parshuram Puria vs. Puspa Devi Sarain 2006 (7) S.C. Cases 756.
Section 3 of the Act provides for the instruments which are chargeable to stamp duty.
The aforesaid section does not cover within its ambit an application for mutation. Secondly, for charging stamp duty the basic requirement is that it has to be an instrument. The application for mutation not being an instrument as such cannot be subjected to stamp duty.
The affidavit in support of the mutation application is an instrument which is chargeable to stamp duty at a fixed rate provided under Article 4 of Schedule 1-B of the Act. It is not the case of the respondents that on the said affidavit proper stamp duty has not been paid. In fact the respondents are imposing stamp duty on the mutation application itself that too on the market value of the property against which the name of the petitioners is being sought to be mutated which is not permissible in law.
The next point which arises for consideration is whether the mutation application can be subjected to determination of deficiency in stamp duty under Section 47-A of the Act.
A plain reading of Section 47-A of the Act reveals that it is applicable where the instrument is under valued. The mutation application not being an instrument is ex facie out of purview of Section 47-A of the Act.
Secondly Section 47-A of the Act comes into play when an instrument chargeable to stamp duty is presented for registration and not otherwise. The mutation application even if for the sake of arguments is accepted to be an instrument for the time being, it was never presented for registration before the Sub-registrar and as such it could not have been referred for determination of deficiency in stamp duty at any stage.
Sri Nimai Das, learned Standing Counsel at this stage advanced an argument that the Articles of Association of the petitioner company is in the nature of an instrument which conveys the property and as such no illegality has been committed in subjecting the petitioners to payment of stamp duty.
The argument is more attractive than sound.
The Articles of Association of the Company are not the subject matter of determination of deficiency in stamp duty. The Tehsildar has not referred the Articles of Association to the A.D.M. (Finance & Revenue) but only the mutation application. There is nothing on record which could establish that the Articles of Association were substituted and made the subject matter of determination of stamp duty in place of the mutation application. The impugned order relates to the mutation application and so is the stand of the respondents in the counter affidavit. There is no reference to the Articles of Association of the Company in the defence set up of the respondents in the counter affidavit.
Apart from above, Article 10 of Schedule 1B of the Act specifically provides for a fixed stamp duty of Rs.500/- on the Articles of Association of the Company. Therefore, also stamp duty on Articles of Association of the Act cannot be charged on the market value of the property which have come to be vested with the company and the Articles of Association of the Company cannot be treated differently than described in the Act so as to make it an instrument of conveyance.
In view of aforesaid facts and circumstances, I am of the opinion that the entire proceedings initiated under Section 47-A of the Act in respect of mutation application dated 25.11.99 filed by the petitioners under Section 34 of the Land Revenue Act are wholly without jurisdiction, such an application is not an instrument or a deed of conveyance which can be subjected to payment of stamp duty under the Act.
Accordingly, the writ petition succeeds and is allowed. The impugned order dated 12.1.2010 passed by the C.C.R.A. is quashed in so far as it purports to remit the matter to the Collector for determination of deficiency in stamp duty in connection with the above application for mutation. The Tehsildar is directed to proceed and to decide the mutation application in accordance with law most expeditiously.
Order Date :- 5. 7. 2011 piyush