Report No. 67
43.22. Re-draft.-
We give below a rough draft of the amendments that will be required in the Stamp Act, in order to carry out the changes recommended above. We may add that some of the changes were put forth in our Questionnaire and such replies as were received to the particular question have been favourable.1
1. Q. 97 to 99.
Section 7 Stamp Act
In section 7, sub-section (4) shall be omitted.
Section 66, Stamp Act
To section 68, the following Exception shall be' added, namely:
"Exception.-Nothing in this section applies in relation to an insurance or a policy effecting an insurance if the insurance is such that a policy effecting it is exempt from duty under this Act."
Section 67, Stamp Act
In section 67, the words "or a policy of marine insurance" the words "or policies" and the words "or policy" shall be omitted.
Article 47-Division A, Stamp Act
In Article 47, for Division A, the following shall be substituted, namely,-
"A. Sea Insurance # One rupee
Exemption
The following shall be exempt from all stamp duties:
(a) cover notes, slips and other instruments usually made in anticipation of the issue of a formal policy of marine insurance;
(b) instruments embodying alterations of the terms or conditions of any policy of marine insurance;
(c) policies of marine insurance on baggage or personal and household effects only, it made or executed out of India: and an instrument exempted by virtue of paragraph (a) of this Exemption shall not be taken for the purposes of this Act to be a policy of insurance."
Article 47-General Exemption
In Article 47, in the General Exemption, after the words "a policy of insurance", the words "other than a policy of marine insurance" shall be inserted.
Amendments to sections 25(2) to 25(5) and section 27(2), Marine Insurance Act, 1963 (11 of 1963)
In the Marine Insurance Act, 1963,
(a) in section 25, sub-section (2) to sub-section (5) shall be omitted;
(b) in section 27, sub-section (2) shall be omitted.
43.23. Suggestion regarding stamp.-
It may also be added here that there are certain provisions in the English Stamp Law, namely, section 11 of the Finance Act, 1901 (regarding policies with a continuation clause) section 8 of the Revenue Act, 1903 (for builders' etc. risks) and section 8 of the Finance Act, 1912 (for increase in premium), which are relevant and important on the subject of stamp in marine insurance. The necessity of making similar provisions in the Indian Stamp Law requires to be considered.
43.24. Builder's risk policies.-
In England, the Stamp Act of 1891 does not include builders' risks insurance in the definition of "policies of sea insurance". The position was met by the Revenue Act, 1903 (3 Edw. VIII, c. 46), section 8 of which reads as follows1:
"Section 8.-A policy of insurance made or purporting to be made upon or to cover any ship or vessel, or the machinery or fittings belonging to the ship or vessel, whilst under construction or repair or on trial shall be sufficiently stamped for the purpose of the Stamp Act, 1891, and the Acts amending the Act, if stamped as a policy of sea insurance made for a voyage, and though made for a time exceeding twelve months, shall not be deemed to be a policy of sea insurance made for time."
1. Dover Handbook to Marine Insurance, (1937), pp. 134, 135.
43.25. The effect of these provisions is that Builders' risks policies, although invariably effected for time, are appropriately stamped as for voyage. As it may be difficult at the outset to fix with precision the time which must elapse before delivery of the vessel to her owners, such policies are usually arranged in the first instance for a period of time anticipated to be adequate, but a clause is normally inserted in the policy agreeing to hold covered any necessary extension. Strictly speaking, such extensions might be regarded as new contracts rather than as continuations, but in practice are endorsed on the original policies and signed before the period originally mentioned has expired; otherwise, the extension would need to be stamped as a separate contract.
43.26. After a policy has been effected, by an alteration of the risk the rate of premium may, by the imposition of an additional premium, be increased so as to bring the total rate of premium outside the concession: To meet this position, the Finance Act, 1912, provided as follows in England1:
"Section 8.-Where the premium or consideration for a policy of sea-insurance is expressed to be a sum not exceeding the rate of half-a-crown per cent. of the sum insured, and is subject to an increase (whether defined or not in the policy) in the event of the occurrence of a specified contingency, the premium or consideration shall, for the purpose of the Stamp Act, 1891, be treated as a premium or consideration not exceeding the rate of half-a-crown per cent. on the sum insured. But if, owing to the occurrence of the contingency which is the occasion for an increase of the premium or consideration, the premium or consideration, is increased so as to exceed the rate of half-a-crown per cent. of the sum insured, the policy or a new policy to be thereupon issued small be stamped with such an additional sum as is required to represent the additional duty payable, and may be so stamped without penalty at any time not exceeding thirty days after the date on which the increased premium or consideration becomes ascertained.
1. Dover Handbook to Marine Insurance, (1957), p. 135.
43.27. Anomaly in Stamp Act.-
Section 4(2), Marine Insurance Act, 1963 covers construction, building, and launching risks. There is one anomaly, namely, that while such insurances are treated as analogous to marine insurances, the policies themselves are stamped with the duty applicable to non-marine insurance. In England, builders' risks policies are under the Revenue Act, 1903 (3 Edw. VII, Ch. 46), section 8, to be stamped as if for a "voyage" and not deemed to be policies for time, even if made for more than a year. Other policies on adventures "analogous to marine adventures" would presumably be liable to stamp only as non-marine policies.1 In India, there is a no express provision, but entry 47 of the First Schedule to the Indian Stamp Act, sub-division 'A' relating to "sea insurance", could not in terms apply and a fixed duty under sub-division 'B' would be leviable, because such policies would not be "sea insurance policies" as defined in section 2(20) of the Indian Stamp Act.
1. See section 79, English Act.
43.28. The position is, in our view, anomalous. It is desirable that at least a provision requiring all policies governed by sub-section (2) of section 4 of the Marine Insurance Act to be stamped as marine insurance policies (for voyage) should be inserted in the Indian Stamp Act.
43.29. Insurance against construction risks.-
The point is mentioned in the 21st Report of the Law Commission (Report on Marine Insurance).1 Construction, building and launching of sea going vessels is a costly and lengthy process with attendant risks. It is customary to take out insurance policies against such risks.
1. 21st Report of the Law Commission (Marine Insurance).
43.30. Section 2(20) of the Stamp Act defines a "policy of sea-insurance", in terms under which policies taken out for these purposes will not be taken as "sea policies" for voyage.1
1. File No. 3(4)/37-L.C. Pt. I. (Precis of important points in Ministry of Finance, Department of Revenue, File No. 1/60/62-Cus. VIII, notings dated 28th December, 1962 and 21st March, 1963).
43.31. Recommendation to amend Article 47.-
We, therefore, recommend the insertion of the following proviso to Article 47 of the Stamp Act:
"Provided that all policies governed by sub-section (2) of section 4 of the Marine Insurance Act, 1963, shall be stamped as policies of sea insurance for voyage."
43.32. Policy underwritten by more than one company.-
Then there are policies underwritten by several persons. With reference to the discussion contained in the Report1 of the Law Commission on Marine Insurance, it is desirable2 that a policy underwritten by more than one company should be considered as only one contract for the purposes should be added to Aritcle 47.
"27. Voyage and time policies.-(1) Where the contract is to insurance the subject-matter at and from or from one place to another or others, the policy is called a "voyage policy", and where the contract is to insure the subject-matter for a definite period of time, the policy is called a "time polity". A contract for both voyage and time may be included in the same policy.
(2) A time policy which is made for any time exceeding twelve months is invalid.
28. Designation and subject-matter.-(1) The subject-matter insured must be designated in a marine policy with reasonable certainty.
(2) The nature and extent of the interest of the assured in the subject-matter insured need not be specified in the policy.
(3) Where the policy designates the subject-matter insured in general terms, it shall be construed to apply to the interest intended by the assured to be covered.
(4) In the application of this section regard shall be had to any usage regulating the designation of the subject-matter insured.
1. 21st Report of the Law Commission (Marine Insurance).
2. File No. F. 3(4)/57-L.C. Pt. I (Precis of important points in Ministry of Finance, Department of Revenue File No. 1/60/62-Cus. VII notings dated 28th December, 1962 and 21st March, 1963).
