Kti Logistics And Services vs State Of Odisha And Others ... Opposite ...
2025 Latest Caselaw 7350 Ori

Orissa High Court

Kti Logistics And Services vs State Of Odisha And Others ... Opposite ... on 22 April, 2025

Author: G. Satapathy

Bench: G. Satapathy

     IN THE HIGH COURT OF ORISSA AT CUTTACK
                W.P.(C) NO.8711 of 2024

   (In the matter of application under Articles 226 and
   227 of the Constitution of India).

   KTI Logistics and Services    ...                  Petitioner
   Pvt. Ltd., Cuttack
                        -versus-

   State of Odisha and others        ...   Opposite Parties

   For Petitioner            : Mr. D. Mohapatra, Advocate

   For Opposite Parties      : Mr. S.K. Rout, ASC

       CORAM:
                   JUSTICE G. SATAPATHY

                   DATE OF HEARING :05.04.2025
                   DATE OF JUDGMENT:22.04.2025
G. Satapathy, J.

1. The petitioner by way of this writ petition

has invoked the extraordinary jurisdiction of this Court

under Articles 226 and 227 of the Constitution of India

praying to set aside the orders dated 29.11.2022,

21.12.2022,12.01.2023 and 05.04.2023 under Annexure-

1 series by which the claim of the Petitioner for refund of

the stamp duty and registration charges on security

amount paid to execute the lease under Annexure-3 has

been turned down.

2. The short facts as involved in this writ

petition are, the writ Petitioner is a Company registered

under the Companies Act, 1956 and the scheduled

property comprising of Plot Nos. 30 & 31 of Khata No. 5

of Mouza-Chhatisha No.2 and Plot No. 114/1316 of

Khata No. 186(AJA) of Mouza-Indranipatna, total area

measuring Ac. 56.430 decimal was originally leased out

by IDCO to M/s. Purvi Bharat Paper and Power Ltd. who

surrendered the leased property in the year 2019 and

thereafter, the scheduled property was again leased out

to the Petitioner Company for 90 years on 26.07.2019

for establishing an industry, however, the Petitioner

company sub leased the scheduled property to M/s.

InstaKart Services Pvt. Ltd(OP No.7) for 9 years w.e.f

01.12.2020 for a consideration of monthly rent of

Rs.26,85,366/- which shall be payable on 10th of every

month, in addition to a sum of Rs. 1,61,12,196/-

(Rupees One Crore Sixty One Lakhs Twelve Thousand

One Hundred Ninety Six) towards security deposit for

the performance of obligation of sub-lease for the

purpose of doing warehousing business. Accordingly, a

deed of sub-lease drawn up on a non-judicial e-stamp

paper with user charges of Rs.550/- containing the

covenants, conditions and agreement was presented for

registration before the Sub-Registrar, Jagatpur,

Cuttack(OPNo.5) who according to the Petitioner

erroneously included the security deposit in the

consideration amount while calculating for payment of

stamp duty and registration charges which eventually

led the parties to pay the excess stamp duties

inadvertently. According to the Petitioner, since the

security deposit which is advanced by OP No.7 for the

purpose of performance of sub-lease and the same

being refundable at the time of determination of sub-

lease, subject to adjustment of liability arising out of

sub-lease, no stamp duty is leviable on it and,

therefore, the Petitioner is entitled to refund of the

excess stamp duty levied on the security deposit, but

the authority concerned has refused to refund the

excess stamp duty levied on the security deposit by

rejecting the representations of the Petitioner. On the

aforesaid averments, the Petitioners has filed this writ

petition.

2.1. In response to the the notice of the writ

petition, OP Nos. 3 to 6 filed their joint counter

affidavits stating interalia the following:-

"the security deposit is one kind of money advance which may fully or in part be utilized in case of contingencies or be returned to the lessee on successful and litigation free completion of term of the lease"

On the above averments, it is contended

by OP Nos.3 to 6 in their counter affidavits that the

Sub-Registrar, Jagatpur, Cuttack has not committed

any mistake in calculating the stamp duty and

registration fees on the security deposit like all other

lease deeds registered in Odisha following the provision

of Article 35(c) Schedule-1A (Stamp Duty on

instrument) (according to the Orissa Amendment by

O.A. No.01/2003).

3. In the course of hearing of the writ petition,

Mr. Dayanand Mohapatra, learned counsel for the

petitioner has submitted that the security deposit being

mainly for the purpose of performance of the sub-lease

and the same being refundable in two situations; firstly,

after expiry of the lease period and secondly, when the

lease deed is terminated prematurely, and, therefore, the

security deposit being not a consideration amount, no

stamp duty is leviable on such security deposit amount. It

is further submitted by Mr. Mohapatra that according to

Section 105 of the Transfer of Property Act, 1882(In short

"the Act"), the consideration of lease is two folds; one is

'premium' and second is 'rent' and there is no third type

of consideration in lease and, therefore, the security

deposit is not chargeable and it is refundable which is an

admitted fact in terms of counter affidavit and thereby,

the excess stamp duty charged from the Petitioner should

have been refunded back on his representation, but the

authority concerned erroneously interpreting the

provision governing levy of stamp duty has refused to

refund the same giving rise to cause of action for writ

petitioner to file this writ petition and, therefore, OP No. 3

to 6 may kindly be directed to refund excess amount of

stamp duty charged from the parties to the sub-lease.

3.1. In reply, Mr. S.K. Rout, learned ASC,

however, has seriously refuted the submission advanced

for the Petitioner by contending interalia that since the

security amount is an advance of money in addition to

rent reserved, the same is chargeable and stamp duty is

payable thereon at the time of registration in view of the

provision under Article 35(c) Schedule-1A (Stamp Duty

on instrument) (according to the Orissa Amendment by

O.A. No.01/2003). Mr. Rout has accordingly, prayed to

dismiss the writ petition.

4. Having heard the rival submission upon

perusal of record, since OP Nos. 3 to 6 resist the claim of

the writ Petitioner to refund the excess stamp duty by

taking the umbrage of Article 35(c)Schedule-1A (Stamp

Duty on instrument) with Orissa Amendment vide O.A.

No.01/2003, this Court considers it proper to extract

the aforesaid provision. For clarity and better

appreciation, the aforesaid provision as referred to

above reads as under:-

Article Description of instrument Proper Stamp Duty

35(c) Where the lease is granted The same duty as for a fine or premium or for Conveyance under money advanced in addition Division (A) ,(B) or to rent reserved (C), as the case may be, of Article-23 for a consideration equal to the amount or value of such find or

premium,or advances as set forth in the lease, in addition to xx xx xx xx the duty which would have been payable on such lease, if no fine xx xx xx xx or premium or advance had been paid or delivered.

xx xx xx

A plain reading of above provision makes it

ample clear that in case of execution of lease deed,

stamp duty is leviable on fine, premium and money

advanced, but the specific plea of OP Nos.3 to 6 is that

the security deposit as paid in this case for sub-lease

between the Petitioner and OP No.7 is a kind money

advanced, which is chargeable to stamp duty, but the fact

remains that OP Nos. 3 to 6 even after contending the

security deposit to be one kind of money advance

chargeable to stamp duty have admitted in their counter

affidavit that the security deposit may be utilized in full or

part on certain contingencies or returned to the lessee on

successful and litigation free completion of the term of

lease. Further, the sub-lease entered into by the

Petitioner and OP No.7 contain a covenant of security

deposit specifically at Serial No. 6 of the agreement in

which both the parties have agreed for refund of security

deposit, which is Rs. 1,61,12,196/- (Rupees One Crore

Sixty One Lakhs Twelve Thousand One Hundred Ninety

Six) to OP No. 7 in this case, on expiry or earlier

termination of sub-lease and this covenant further

stipulates that the security deposit will be held by sub-

lesser (Petitioner herein) to secure due and faithful

performance of the sub-lease. It is, therefore, very clear

that security deposit is not the consideration money of

the sub-lease, however, it is to be seen whether is it a

kind of money advanced in addition to rent for the sub-

lease? This conundrum can be cleared by contextually

referring to the definition of lease and reading it in

juxtaposition with the covenants of the sub-lease in this

case. For clarity, the definition of lease as provided in

Sec. 105 of the Act, 1882 is extracted as under:-

" Sec. 105 of the Act: A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, expressed or implied, or in perpetuity, in consideration of a price paid or promised, or of money, or a share of crops, service or any other thing of value, to be rendered periodically or on a specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the lessee, the price is called the

premium, and the money, share, service or thing to be so rendered is called the rent."

The language as used in the definition of

lease U/S. 105 of the Act makes it as simple as, the

consideration in lease is two types "premium" and "rent"

and there is no third type of consideration. Thus, the

premium in the lease is the price paid or promised and

the price paid may be cash or may be an adjustment of

outstanding debt or its payment may be deferred to be

paid in future or made payable in installments or price

promised to be paid in future. The other type of

consideration for lease is "rent" which is recurring in

nature and paid periodically. It is, however, clear that the

rent paid in advance is still be "rent" and not an advance

in addition to rent. On examining the sub-lease in this

above context, clause no. 5 of covenants of sub-lease

refers for payment of rent of Rs. 26,85,366/- per month,

which according to the agreement shall be payable on

10th of every month with increase of 4% on completion of

every twelve months. In the aforesaid situation, since the

instrument of lease is chargeable only for "premium" and

"rent", which is the consideration of lease, the security

deposit being refundable and kept as security for the

performance of obligation of the sub-lease, by no stretch

of imagination can it be said as "money advance" in

addition to the rent reserved. Besides, on a cursory

glance of words used in Article 35(c)makes it apparently

clear that where lease is granted for a fine or premium or

for money advanced in addition to rent received, such

advance is chargeable to stamp duty, but in this case, the

sub-lease is not granted on security deposit as money

advance in addition to rent.

5. This Court, however, considers it useful to

refer to the decision in Chief Controlling Revenue

Authority, Delhi vrs. Marshal Produce Brokers Co.

Pvt Ltd.; 1978 SCC Online Del 157, wherein in a

similar situation, a Full Bench of Delhi High Court in

answering a reference as to whether security deposit on

lease is chargeable to stamp duty had held that:-

"The duty is not chargeable under Article 35(c) of Schedule-I-A of the Indian Stamp Act, 1899 on the amount of security/deposit/advance, which is refundable on determination of lease, in addition to the duty paid on the rent reserved under Article 35(a) of the Schedule. If such deposit/advance is adjustable in rent/other charges/dues payable under the lease, the amount of security deposit paid for the due

performance of the contract of lease is chargeable under Article 57 of the Schedule read with Sec. 5 of the Act."

On the above backdrop of facts and law, when

covenants of the sub-lease entered into by the petitioner

and OP No.7 are considered, it appears that a covenant

under the heading "security deposit" is found at Clause

No.6 which suggests that the parties to the sub-lease

have agreed for deposit with sub-lessor a sum of

Rs.1,61,12,196/- (Rupees One Crore Sixty One Lakhs

Twelve Thousand One Hundred Ninety Six) which shall

be equivalent to six(06) month's rent as a interest free

refundable security deposit, out of which

Rs.1,48,47,690/- (Rupees One Crore Forty Eight Lakhs

Forty Seven Thousand Six Hundred Ninety) only has

already been paid to the sub-lessor by the sub-lessee

at the time of complete hand over of the demise

premises. It is further stipulated therein that the

security deposit will be held by the sub-lessor to secure

the due and faithful performance by the sub-lessee of

the terms and covenants of the agreement and it is

mutually agreed by the parties that once the sub-lessee

issues the termination notice pertaining to the sub-

lease deed, the sub-lessor shall be authorized to adjust

the said security deposit amount proportionately

against the prevailing monthly rental amounts payable

during that time and the sub-lessee shall be liable to

remit the differential amounts to the sub-lessor. It is

also stated in the agreement of lease that on expiry or

earlier termination of the lease, the sub-lessor shall be

liable to refund the security deposit to the sub-lessee

on the simultaneous handing over the possession of the

premises to the sub-lessor. In the context, it is very

clear, although the security deposit is not chargeable

Article 35(c)Schedule-1A (Stamp Duty on instrument)

with Orissa Amendment vide O.A. No.01/2003, but the

security amount being adjustable in rent and other

charges dues payable under the lease, it is chargeable

under Article 57 of the Schedule-I-A of Stamp Duty on

instrument with Orissa Amendments which is same as

the Central Act, however, Article 57 of Schedule-I

Stamp Duty on Instrument, provides that 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, is chargeable with same duty as a Bond (No.

15) for the amount secured. In addition, Sec. 5 of

Indian Stamp Act provides that any instrument

compromising 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. The obvious result of this

discussion is that the security deposit as made in this

case is chargeable under Article 57 read with Sec. 5 of

the Indian Stamp Act.

6. A careful conspectus of facts involved in this

case together with the provisions of law and the rulings of

Delhi High Court makes it very clear that the authority

concerned had erred in calculating the stamp duties and

registration charges on security deposit by resorting to

Article 35(c) Schedule-1A (Stamp Duty on instrument)

with Orissa Amendment vide O.A. No.01/2003, since

the same is chargeable under Article 57 of the

Schedule-I-A of Stamp Duty on instrument with Orissa

Amendments read with Sec. 5 of Indian Stamp Act and,

therefore, the authority concerned are accordingly

liable to adjust the stamp duty and refund back the

differential amount, if any, after applying the same in

terms of observations made above to the parties in

terms of the terms and conditions of the agreement of

the lease.

7. In the result, the writ petition stands allowed

on contest, but in the circumstance there is no order as

to costs. Accordingly, Annexure-1 series are hereby

quashed and the authority concerned is directed to refund

the differential amount on stamp duty and registration

charges, if any, to the parties to the sub-lease.

(G. Satapathy) Judge

Location: HIGH COURT OF ORISSA

Orissa High Court, Cuttack, Dated the 22nd day of April, 2025/Priyajit