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Report No. 67

Chapter 39

Articles 31-34

39.1. Article 31.-

Article 31 levies stamp duty on an instrument of exchange of property. No changes are needed in this article.

39.2. Article 32.-

Article 32 levies stamp duty on an instrument of further charge. It needs no change.

39.3. Article 33.-

Article 33 levies duty on an instrument of gift, not being a settlement, will or transfer. We have no comments on this article.

39.4. Article 34-Indemnity Bond-Introductory.-

Article 34 levies duty on an indemnity bond. The duty is the same as on a security bond (Article 57). It may be noted that the duty on a security bond is lower than that on a bond in general. Bonds in general are chargeable with duty ad valorem without any maximum (Article 15), while security bonds (and consequentially, indemnity bonds) are subject to a maximum. The article applicable to bonds in general-Article 15-applies only to a "bond" as defined in section 2(15), not being a debenture (No. 27) and not being otherwise provided for by the Stamp Act or by the Court-fee Act. Since, in respect on an indemnity bond or a security bond, provision has been made in Articles 34 and 57, the duty on these bonds would be payable in accordance with those articles, and not in accordance with Article 15.

39.5. Indemnity-Meaning of.-

Article 34 does not define an indemnity bond. The Indian Contract Act defines a "contract of indemnity"1 as follows:-

"124. A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a contract of indemnity."

In general, this definition is utilised by the Courts in interpreting the Stamp Act also.2

1. Section 124, Indian Contract Act.

2. Hindustan Sugar Mills v. State of Uttar Pradesh, AIR 1972 All 8 (SB).

39.6. Case law.-

While Article 34 does not require any amendment, a few points arising out of the case law may be briefly referred to. It has been emphasised1 by the Bombay High Court that the article applies only when the contract of indemnity is in the form of a bond. An indemnity note passed by a consignee to the Railway company, in respect of goods for which the railway receipt was lost, was, therefore, held to be chargeable only as an agreement2 and not as an indemnity bond. Then, there is an Allahabad case3 relating to an agreement by a company for compensation to be paid to the Managing agent, on the happening of one of the events specified therein.

This provision for compensation was a term of the Managing Agency Agreement. It was held that the term could not be treated as a separate contract of indemnity, as there was no separate consideration for it. The provision for compensation was not a distinct matter, but was part and parcel of the agreement as a whole, and it was not, therefore, liable to duty as an indemnity bond. The agreement was an ordinary service agreement, chargeable with stamp duty as an agreement, and was not a bond.

1. Reference from the Chief Commissioner of Central Provinces, ILR 5 Bom 478 (FB).

2. Article 5.

3. Dhanpur Sugar Mills (in re:), AIR 1956 All 25 (Special Bench).

39.7. The cases discussed above illustrate the application of the article. They do not, however, call for an amendment of the article.

Indian Stamp Act, 1899 Back

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