V.V.S. Rama Sharma Vs.
State of U.P. and Ors. [2009] INSC 775 (15 April 2009)
Judgment
IN THE SUPREME COURT
OF INDIA CRIMINAL APPELLATE JURISDICTION CRIMINAL APPEAL No. 730 OF 2009
(Arising out of SLP (Crl.) No. 1529 of 2007) V.V.S. Rama Sharma & Ors.
.....Appellants Versus State of U.P. & Ors. .....Respondents
Dr. Mukundakam
Sharma, J.
1.
Leave
granted.
2.
This
appeal arises out of the final order dated 3.8.2006 passed by the High Court of
Allahabad at Allahabad in Criminal Misc. Writ Petitions Nos. 8967, 10514 and
7227 of 2004 whereby the above three separate writ petitions filed by the
appellants herein were dismissed. In the said writ petitions the appellants
herein challenged the FIR registered against them under Sections 420 and 409 of
the Page 1 of 20 Indian Penal Code, 1860 (in short `IPC') and under Sections
64 and 69 of the Indian Stamp Act, 1899 (in short `Stamp Act').
3.
Brief
facts necessary for the purpose of disposal of present appeal are as follows:
Appellants herein
were working as officers in different capacities at relevant point of time in
the Life Insurance Corporation of India (in short `LIC') and were then posted
in different offices in the State of Uttar Pradesh. All the three appellants
have since retired from the service of the LIC.
1. It has been stated
that various branch offices of the LIC in the course of their business have to
purchase large quantity of adhesive stamps for affixation on their policies and
for issuing receipts etc.
While the stamps used
for receipts are the normal revenue stamps, the stamps used in respect of the
policies issued by LIC are special `insurance stamps' which are affixed at the
rates fixed under the Stamps Act.
2. For the purposes
of execution of insurance policies by the LIC, under the law at the relevant
point of time, on a sum of Rs. 1,000/- the rate of `stamp duty' is fixed at 40
paise on each policy. In order of to execute the insurance policies promptly,
from time to time, heavy purchases of insurance stamps are stated to be done by
the LIC. The LIC used to purchase the same from the Treasury in any district as
well as from authorised licensed stamp vendors.
3. On 30.07.2004, a
First Information Report (in short 'FIR') bearing Crime No. 271/04 was lodged
against the appellants at Police Station Bhelupura, Tehsil Sadar, District
Varanasi for the offences punishable under Sections 420/409 of IPC and under
Sections 64/69 of the Stamps Act in relation to the purchase of certain stamps.
A perusal of the FIR shows that it was lodged on the basis of a letter bearing
No. 11912/Stamps-693(P)/2002-2003(83- 84) dated 26.06.2004 written by the
Commissioner, Stamps, U.P., Allahabad and letter No. 237245-6 (2003-04) Mu, Ra,
La. dated 28.7.2004 written by the Commissioner, Varanasi Division, Varanasi.
It has been stated in the FIR that the Divisional Office of the LIC, Varanasi
has not purchased the Insurance Stamps from the Treasury office of U.P. but the
same was purchased from the Stamp Vendors, outside of State, which caused loss of
Rs. 1,67,21,520.00/- to the State Government.
4. The appellants
herein approached the Allahabad High Court for quashing of the aforesaid FIR.
However, the High Court on 03.08.2006 dismissed all the three writ petitions
vide three separate but identical orders holding that the FIR prima facie
discloses the commission of cognizable offence and there was no ground of
interference.
5. Aggrieved by the
said orders of the High Court, the appellants have preferred the present
appeal. It was contended by the appellants that the FIR was lodged only on the
directions of the higher authorities for the purpose of arresting the present
appellants so as to humiliate and harass them. It has been submitted that the
provisions of the Stamp Act and relevant provisions of Constitution clearly
indicates the untenability of the allegations made in the FIR.
6. It is the case of
the appellant that purchasing of stamps assumes urgency because the insurance
contract must be executed along with insurance policies at the earliest
possible time and immediately on receipt of the first premium and if there is
any delay in issuing the insurance stamps and if in the meantime there is a
death of life assured, then difficulties arise regarding payment of insurance
money/claim. As there are various sources for purchase of insurance Page 4 of
20 stamps viz. from the Treasury of any district throughout the State and also
from any duly authorised licensed stamp vendors, the LIC is entitled to
purchase the insurance stamps from any such stamp vendors throughout the
country. It has been submitted that there is no prohibition under the law and
in the Stamp Act which mandates that the LIC will purchase the insurance stamps
only from a particular district or from a particular State.
7. On the other hand,
it is the case of the respondent that if the stamps are permitted to be
purchased from any other State other than the State in which the instrument is
to be first executed, it shall not only cause huge loss of revenue to the State
in which the instrument is executed but would also render the rules framed by
the State Government for regulation of sale and supply of the stamps and the
administrative machinery established therein as futile and meaningless. It is
also the case that it would further prevent the State Government from examining
as to whether the stamps are fake or genuine.
8. The law which
governs the rate of payment of `stamp duty' in respect of policies of insurance
and certain other transactions has been dealt under Entry 91 of List 1(Union
List) of 7th Schedule to the Constitution of India (in short `Constitution').
It reads as follows:
"91. Rates of
stamp duty in respect of bills of exchange, cheques, promissory notes, bills of
lading, letters of credit, policies of insurance, transfer of shares,
debentures, proxies and receipts."
1. Our attention has
been drawn towards Entry 63 of List II (State List) of 7thSchedule which
provide for power to the State Legislatures in regard to the rate of `stamp
duty' other than those specified in List I (Union List).
"63. Rates of
stamp duty in respect of documents other than those specified in the provisions
of List I with regard to rates of stamp duty."
1. Other relevant
entry which has been cited is Entry 44 of List III (Concurrent List) which
excludes `rates of stamp duty'.
"44. Stamp
duties other than duties or fees collected by means of judicial stamps, but not
including rates of stamp duty."
1. The
above-mentioned various entries in the three lists are the fields of
legislation with regard to stamps. They are designed to define and delimit the
respective areas of legislative competence of the Union and State Legislatures.
Under Entry 44 of List III, the power to levy stamp duty on all documents, is concurrent.
But the power to prescribe the rate of such levy is excluded from Entry 44 of
List III and is divided between Parliament and the State Legislatures.
If the instrument
falls under the categories mentioned in Entry 91 of List I, the power to prescribe
the rate will belong to Parliament, and for all other instruments or documents,
the power to prescribe the rate belongs to the State Legislature under Entry 63
of List II.
Therefore, the
meaning of Entry 44 of List III is that excluding the power to prescribe the
rate, the charging provisions of a law relating to stamp duty can be made both
by the Union and the State Legislature, in the concurrent sphere, subject to
Article 254 in case of repugnancy.
2. With regards to
the polices of life insurance the rates of stamp duty have been stipulated by
Parliament in the Schedule I to the Stamp Act though the proceeds thereof are
assigned to the States under Article 268 of the Constitution. It reads as
follows:
"268. Duties
levied by the Union but collected and appropriated by the States.- Page 7 of
20 (1) Such stamp duties and such duties of excise on medicinal and toilet
preparations as are mentioned in the Union List shall be levied by the
Government of India but shall be collected- (a) in the case where such duties
are leviable within any [Union territory], by the Government of India, and (b)
in other cases, by the States within which such duties are respectively
leviable.
(2) The proceeds in
any financial year of any such duty leviable within any State shall not form
part of the Consolidated Fund of India, but shall be assigned to that
State"
1. Now, it would be
useful at this stage to discuss relevant provisions of the Stamp Act.
"27. Facts
affecting duty to be set forth in instrument - (1) The consideration (if any)
and all other facts and circumstances affecting the chargeability of any
instrument with duty, or the amount of the duty with which it is chargeable,
shall be fully and truly set forth therein.
64. Penalty for
omission to comply with provisions of section 27 - Any person who, with intent
to defraud the Government, - (a) executes any instrument in which all the facts
and circumstances required by section 27 to be set forth in such instrument are
not fully and truly set forth ; or (b) being employed or concerned in or about
the preparation of any instrument, neglects or omits fully and truly to set
forth therein all such facts and circumstances ; or (c) does any other act
calculated to deprive the Government of any duty or penalty under this Act,
shall be punishable with fine which may extend to five Page 8 of 20 thousand
rupees.
69. Penalty for
breach of rule relating to sale of stamps and for unauthorized sale- (a) Any
person appointed to sell stamps who disobeys any rule made under section 74,
and (b) any person not so appointed who sells or offers for sale any stamp
(other than a [ten naye paise or five naye paise] adhesive stamp), shall be
punishable with imprisonment for a term which may extend to six months, or with
fine which may extend to five hundred rupees, or with both."
1. Section 64 of the
Stamp Act provides for the penalty in case of omission to comply with the
provisions of Section 27. On the other hand, Section 69 deals with the penalty
to be imposed for breach of rule relating to sale of stamps and for
unauthorised sales.
2. Pursuant to rule
making powers given to States under Section 74 and 75 of the Stamp Act, the
State of U. P. has made rules called the United Provinces Stamp Rules, 1942 (in
short `Stamps Rules'. Our attention has been drawn towards Rule 3 of the Stamp
Rules which provides the description of stamps as follows:
"Rule 3.
Description of Stamps. - (1) Except as otherwise provided by the Indian Stamp
Act, 1899 or by these rules- Page 9 of 20 (i) all duties with which any
instrument is chargeable shall be paid and such payment shall be indicated on
such instrument by means of stamps issued by the Government for the purposes of
the Act, and (ii) a stamp which by any word or words on the face of it is
appropriated to any particular kind of instrument shall not be used for an
instrument of any other kind.
(2) There shall be
three kinds of stamps for indicating the payment of duty with which instruments
are chargeable, namely:- (a) impressed stamps, that is to say stamped papers
bearing the words `Indian non- judicial' printed thereon, which have been sold
by a person duly authorised in that behalf as hereafter provided to any person
for his use in accordance with these rules:
Provided that no
stamp shall be deemed to be sold unless it is clearly bears the name and
address of the authorised vendor thereof and of the person to whom it is sold;
(b) impressed stamps
bearing the word `Hundi' printed or embossed thereon; and (c) adhesive stamps
bearing the words `Special adhesive', `Insurance', `Foreign Bill', `Share
Transfer', `Notarial', `Brokers note', `agreement' or `revenue' printed
thereon:
Provided always that
the stamps of the above descriptions over-printed with the words `Uttar
Pradesh' or the letters `U.P.' shall continue to be used for payment of duty
till such time as the State Government does not prohibit their use."
(emphasis underlined)
1. Further, Rule
115-A of the Stamps Rules provides for the mode of sale of such stamps. It
reads as follows:
"Rule 115-A.
Stamps which are the property of the central Page 10 of 20 Government and
which are required to be sold to the public through post offices, e.g., Central
Excise, Revenue stamps, Defense/or National savings stamps, shall be obtained
by post offices from local and branches and depots and sold to the public in
the same manner as ordinary postage stamps.
Tobacco Excise duty
labels and insurance agent license fee stamps shall be sold to the public of
local and branch depots at which they are stocked."
1. Placing reliance
on the above-mentioned rules, it was contended on behalf of the State of U.P.
that the acts of the appellants of purchasing insurance stamps from outside the
State was contrary to above-mentioned rules. However, one cannot lose sight of
the fact that the Stamp Act being a central legislation is covered under List I
(Union List) of the 7th Schedule of the Constitution. Rule making power has
been given to the States under Section 74 and 75 of the Stamp Act which deals
with `power to make rules relating to sale of stamps' and `power to make rules
generally to carry out Act' respectively. The scope of such rule making power
of the State are only upto the extent as provided under the central law i.e.
Stamp Act.
2. In the case at
hand, the Stamp Rules were framed by the U.P. Government in the year 1942. A
perusal of the statement of object of the said Rules shows that the such Rules
was framed in exercise of the powers conferred by the Stamp Act and in
pursuance of the powers conferred by the notification of the Government of
India, Finance Department (Central Revenues) No. 9/Stamps, dated the 13th
November, 1937, and in supersession of all previous notifications of the
Government of India and the Provincial Government in this behalf. Undoubtedly,
when these Rules were framed the present constitutional scheme was not in
place.
3. As mentioned
earlier, Under Entry 44 of List III, the power to levy stamp duty on all
documents, is concurrent. But the power to prescribe the rate of such levy is
excluded from Entry 44 of List III and is divided between Parliament and the
State Legislatures. If the instrument falls under the categories mentioned in
Entry 91 of List I, the power to prescribe the rate will belong to Parliament,
and for all other instruments or documents, the power to prescribe the rate
belongs to the State Legislature under Entry 63 of List II. Therefore, the
meaning of Entry 44 of List III is that excluding the power to prescribe the
rate, the charging provisions of a law relating to stamp duty can be made both
by the Union and the State Legislature, in the concurrent sphere, subject to
Article 254 in case of repugnancy. So, in the case at hand, it is Entry 91 of
List I of the 7th Schedule which Page 12 of 20 would be applicable and the
States does not have the power to circumvent a central law.
4. As far as quashing
of FIR is concerned, the scope of power under Section 482 CrPC has been
explained in a series of decisions by this Court. In Nagawwa v. Veeranna
Shivalingappa Konjalgi, (1976) 3 SCC 736, it was held that the Magistrate while
issuing process against the accused should satisfy himself as to whether the
allegations in the complaint, if proved, would ultimately end in the conviction
of the accused. It was held that the order of Magistrate issuing process
against the accused could be quashed under the following circumstances: (SCC p.
741, para 5) "(1) Where the allegations made in the complaint or the
statements of the witnesses recorded in support of the same taken at their face
value make out absolutely no case against the accused or the complaint does not
disclose the essential ingredients of an offence which is alleged against the
accused;
(2) Where the
allegations made in the complaint are patently absurd and inherently improbable
so that no prudent person can ever reach a conclusion that there is sufficient
ground for proceeding against the accused;
(3) Where the
discretion exercised by the Magistrate in issuing process is capricious and
arbitrary having been based either on no evidence or on materials which are
wholly irrelevant or inadmissible; and Page 13 of 20 (4) Where the complaint
suffers from fundamental legal defects, such as, want of sanction, or absence
of a complaint by legally competent authority and the like."
1. In State of
Haryana v. Bhajan Lal, 1992 Supp. (1) SCC 335, a question came up for
consideration as to whether quashing of the FIR filed against the respondent Bhajan
Lal for the offences under Sections 161 and 165 IPC and Section 5(2) of the
Prevention of Corruption Act was proper and legal. Reversing the order passed
by the High Court, this Court explained the circumstances under which such
power could be exercised. Apart from reiterating the earlier norms laid down by
this Court, it was further explained that such power could be exercised where
the allegations made in the FIR or complaint are so absurd and inherently
improbable on the basis of which no prudent person can ever reach a just
conclusion that there is sufficient ground for proceeding against the accused.
It observed as follows in para 102:
"102. In the
backdrop of the interpretation of the various relevant provisions of the Code
under Chapter XIV and of the principles of law enunciated by this Court in a
series of decisions relating to the exercise of the extraordinary power under
Article 226 or the inherent powers under Section 482 of the Code which we have
extracted and reproduced above, we give the following categories of cases by
way of illustration wherein such power could be exercised either to prevent
abuse of the process of any court or otherwise to secure the ends of justice,
though it may not be possible to lay down any precise, clearly defined and
sufficiently channelised and inflexible guidelines or rigid formulae and to
give an exhaustive list of myriad kinds of cases wherein such power should be
exercised.
(1) Where the
allegations made in the first information report or the complaint, even if they
are taken at their face value and accepted in their entirety do not prima facie
constitute any offence or make out a case against the accused.
(2) Where the allegations
in the first information report and other materials, if any, accompanying the
FIR do not disclose a cognizable offence, justifying an investigation by police
officers under Section 156(1) of the Code except under an order of a Magistrate
within the purview of Section 155(2) of the Code.
(3) Where the
uncontroverted allegations made in the FIR or complaint and the evidence
collected in support of the same do not disclose the commission of any offence
and make out a case against the accused.
(4) Where, the
allegations in the FIR do not constitute a cognizable offence but constitute
only a non-cognizable offence, no investigation is permitted by a police
officer without an order of a Magistrate as contemplated under Section 155(2)
of the Code.
(5) Where the
allegations made in the FIR or complaint are so absurd and inherently
improbable on the basis of which no prudent person can ever reach a just
conclusion that there is sufficient ground for proceeding against the accused.
(6) Where there is an
express legal bar engrafted in any of the provisions of the Code or the
concerned Act (under which a criminal proceeding is instituted) to the
institution and continuance of the proceedings and/or where there is a specific
provision in the Code or the concerned Act, providing efficacious redress for
the grievance of the aggrieved party.
(7) Where a criminal
proceeding is manifestly attended with mala fide and/or where the proceeding is
maliciously instituted with an ulterior motive for wreaking vengeance on the
accused and with a view to spite him due to private and personal grudge."
1. This Court in the
case of Indian Oil Corpn. v. NEPC India Ltd., (2006) 6 SCC 736, at page 747 has
observed as under :
"12. The
principles relating to exercise of jurisdiction under Section 482 of the Code
of Criminal Procedure to quash complaints and criminal proceedings have been
stated and reiterated by this Court in several decisions. To mention a
few--Madhavrao Jiwajirao Scindia v. Sambhajirao Chandrojirao Angre, State of
Haryana v. Bhajan Lal, Rupan Deol Bajaj v. Kanwar Pal Singh Gill, Central
Bureau of Investigation v. Duncans Agro Industries Ltd., State of Bihar v.
Rajendra Agrawalla, Rajesh Bajaj v. State NCT of Delhi, Medchl Chemicals &
Pharma (P) Ltd. v. Biological E. Ltd., Hridaya Ranjan Prasad Verma v. State of
Bihar, M. Krishnan v. Vijay Singh and Zandu Pharmaceutical Works Ltd. v. Mohd.
Sharaful Haque.. The principles, relevant to our purpose are:
(i) A complaint can
be quashed where the allegations made in the complaint, even if they are taken
at their face value and accepted in their entirety, do not prima facie
constitute any offence or make out the case alleged against the accused.
For this purpose, the
complaint has to be examined as a whole, but without examining the merits of
the allegations.
Neither a detailed
inquiry nor a meticulous analysis of the material nor an assessment of the
reliability or genuineness of the allegations in the complaint, is warranted
while examining prayer for quashing of a complaint.
(ii) A complaint may
also be quashed where it is a clear abuse of the process of the court, as when
the criminal proceeding is found to have been initiated with mala fides/malice
for wreaking vengeance or to cause harm, or where the allegations are absurd
and inherently improbable.
(iii) The power to
quash shall not, however, be used to stifle or scuttle a legitimate
prosecution. The power should be used sparingly and with abundant caution.
(iv) The complaint is
not required to verbatim reproduce the legal ingredients of the offence
alleged. If the necessary factual foundation is laid in the complaint, merely
on the ground that a few ingredients have not been stated in detail, the
proceedings should not be quashed. Quashing of the complaint is warranted only
where the complaint is so bereft of even the basic facts which are absolutely
necessary for making out the offence.
(v) A given set of
facts may make out: (a) purely a civil wrong; or (b) purely a criminal offence;
or (c) a civil wrong as also a criminal offence. A commercial transaction or a
contractual dispute, apart from furnishing a cause of action for seeking remedy
in civil law, may also involve a criminal offence. As the nature and scope of a
civil proceeding are different from a criminal proceeding, the mere fact that
the complaint relates to a commercial transaction or breach of contract, for
which a civil remedy is available or has been availed, is not by itself a
ground to quash the criminal proceedings. The test is whether the allegations
in the complaint disclose a criminal offence or not."
1. This Court has
recently in R. Kalyani v. Janak C. Mehta and Others, (2009) 1 SCC 516, observed
as follows:
"15.
Propositions of law which emerge from the said decisions are:
(1) The High Court
ordinarily would not exercise its inherent jurisdiction to quash a criminal
proceeding and, in particular, a First Information Report unless the
allegations contained therein, even if given face value and taken to be correct
in their entirety, disclosed no cognizable offence.
Page 17 of 20 (2)
For the said purpose, the Court, save and except in very exceptional
circumstances, would not look to any document relied upon by the defence.
(3) Such a power
should be exercised very sparingly. If the allegations made in the FIR disclose
commission of an offence, the court shall not go beyond the same and pass an
order in favour of the accused to hold absence of any mens rea or actus reus.
(4) If the allegation
discloses a civil dispute, the same by itself may not be a ground to hold that
the criminal proceedings should not be allowed to continue.
16. It is furthermore
well known that no hard and fast rule can be laid down. Each case has to be
considered on its own merits. The Court, while exercising its inherent
jurisdiction, although would not interfere with a genuine complaint keeping in
view the purport and object for which the provisions of Sections 482 and 483 of
the Code of Criminal Procedure had been introduced by Parliament but would not
hesitate to exercise its jurisdiction in appropriate cases. One of the
paramount duties of the superior courts is to see that a person who is
apparently innocent is not subjected to persecution and humiliation on the
basis of a false and wholly untenable complaint."
1. In the case at
hand, it has been stated in the FIR that the Divisional Office of the LIC,
Varanasi has not purchased the Insurance stamps from the Treasury office of
U.P. but the same was purchased from the Stamp Vendors, outside of State, which
caused loss to the State exchequer to the tune of Rs. 1,67,21,520.00/- to the
state government. So, the sole allegation against the appellants is that they
have purchased the insurance stamps from outside the State of UP. However, as
we have already noted that the said act of the appellant cannot be said to be
inconsistent with any provisions of the Stamp Act or any other rules. So, the
allegation made in the FIR even if proved by the prosecution does not
constitute any offence.
2. Further, the
registration of FIR shows complete non-application of mind as the said FIR also
brings within its ambit purchase of insurance stamps done within the State of
U.P. There cannot be any dispute with regard to the insurance stamps which has
been duly purchased from the State of U.P. itself. As already noted, the State
of U.P. has sought to invoke Section 64 (c) of the Stamp Act to contend that
the action of appellants was `calculated to deprive the Government of any duty
or penalty', but there is no denial of the fact that appellants were indeed
paying the duties, and by no means `depriving the government of any duty or
penalty'. So, the act of the respondent is nothing but clear a case of its mala
fide intention to harass the appellants herein. It is wholly immaterial whether
appellants are purchasing the insurance stamps from the State of U.P. or from
any other State. In fact, as mentioned earlier, Rules 115-A of the U.P. Stamp
Rules itself declares that `Stamps which are the property of the central
Government'. That being the legal position, it is legally untenable to contend
that the insurance stamps must be purchased from the State of U. P. only.
Further, it must be kept in mind that Section 69 of the Stamps Act will also
have no application as, admittedly, the appellants are neither the stamp
vendors nor doing any unauthorised sale of the insurance stamps.
Keeping this in mind,
the High Court ought to have quashed the criminal proceedings launched against
the appellants.
3. Hence, the
decision of the High Court is liable to be set aside and accordingly, we set it
aside. The appeal is accordingly allowed.
.............................J.
[S.B. Sinha]
..............................J.
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