Report No. 67
46.21. Article 55-Analogous.-
Article 55 levies duty on a release, that is to say, any instrument (not being such a release as is provided for by section 23A) whereby a person renounces a claim upon another person or against any specified property. The duty is as follows:-
|(a) if the amount or value of the claim does does not exceed Rs. 1,000;||The same duty as a Bond (No. 15) for such amount or value as set forth in the Release.|
|(b) in any other case Five rupees.||It needs no change.|
46.22. Article 56.-
Article 56 levies duty on respondentia bond, that is to say, any instrument securing a loan on the cargo laden or to be laden on board a ship and making repayment contingent on the arrival of the cargo at the port of destination. In maritime law, this represents a loan of money, on maritime interest, on goods laden on board of a ship, upon the condition that if the goods be wholly lost in the course of the voyage, by any of the perils enumerated in the contract, the lender shall lose his money; if not, that the borrower shall pay him the sum borrowed, with the interest agreed upon1. The loan is not recoverable if the ship is lost. The contract is called respondentia, because the money is lent mainly, or most frequently, on the personal responsibility of the borrower. It differs principally from bottomry, which is a loan on the ship, while respondential is a loan upon the goods2.
The Article needs no change.
1. Bouvier Law Dictionary, (1914), p. 22.
2. Canard v. Ins. Co., 1 Pet (US) 386: 7 L Ed 189.
Article 57 charges duty on a 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."
When the amount secured does not exceed Ks. 1,000, the duty is the same as on a Bond (No. 15) for the amount secured. In any other case, it is five rupees. There are certain exemptions, which exempt bond or other instrument, when executed- (a) by a headman nominated under rules framed in accordance with the Bengal Irrigation Act, 1876, section 99, for the due performance of their duties under that Act;
(b) by any person for the purpose of guaranteeing that the local income derived from private subscriptions to a charitable dispensary or hospital or any other object of public utility shall not be less than a specified sum per mensem;
(c) under No. 3A of the rules made by the State Government under section 70 of the Bombay Irrigation Act, 1879;
(d) executed by persons taking advances under the Land Improvement Loans Act, 1883, or the Agriculturists' Loans Act, 1884, or by their sureties, as security for the repayment of such advances; and
(e) executed by officers of the Government or their sureties to secure the due execution of an office or the due accounting for money or other property received by virtue thereof.
46.24. The article, thus, levies duty on two types of documents-(a) security bonds, or (b) mortgage deeds, provided, in their case, that they are executed by way of security for the specified purpose. There is another article-Article 40 dealing with mortgage deeds1, but that article expressly excludes from its scope a security bond governed by Article 57. Then, there is another article2- Article 15-which levies duty on a bond; that article also expressly excludes, from its scope, a bond which is otherwise provided for by the Stamp Act or by the Court Fees Act. It may be noted that the exclusion in Article 15 in respect of a bond provided for in the Court Fees Act3 was added4 in the Stamp Act of 1879 by a later amendment5.
1. Article 40.
2. Article 15.
3. Court Fees Act, Second Schedule, Article 6.
4. Amendment in the Stamp Act of 1879 (Article 13), by section 18(4) of Act 6 of 1889.
5. For previous law, see Kulwant v. Mahavir Parsed, 1888 ILR 11 All 16 (17).
46.25. First question-chargeability under Court Fee and Stamp Act.-
It may be pointed out that a similar exclusion-i.e., in respect of documents provided for by the Court Fees Act-has not been made in Article 40 or in Article 57. This creates certain problems. A document which falls under Article 40 or Article 57 would, in certain cases, be chargeable both under the Stamp Act and under the Court Fees Act. This leads to double taxation.
46.26. Second question-several articles in the Stamp Act applicable to security bonds and mortgage deeds.-
Secondly, a problem is created by the co-existence, in the Stamp Act, of several articles, conceivably applicable to security bonds and mortgage deeds1. These articles do contain words excluding each other; but what falls within one or the other remains undefined. In our view, it is desirable that the scope of each article should be indicated as precisely as possible.
1. Kuppuswamy (in re:), AIR 1949 Mad 567 (568) (reviews case law).
46.27. Security bonds executed under order of Court.-
It should, in this connection, be pointed out that the want of a precise definition of the scope of the relevant articles raises problems of great practical importance in relation to security bonds executed under an order of the Court. Hundreds of such bonds are executed daily on behalf of litigants-particularly, security bonds executed by a surety when a stay of execution of a decree is granted. The crucial question that has usually arisen is
(i) whether such bonds are executed "to secure the due performance of a contract", so as to fall within Article 57, or
(ii) whether they within Article 15 (unsecured bonds) or Article 40 (mortgage deeds) on the view that they do not fall within Article 57.
46.28. This controversy has arisen because, while one view taken on the subject is that an undertaking in compliance with the orders of a court imposes a contractual obligation, some courts have taken a contrary view. It is not necessary to refer here to all the cases. Some of them are conveniently reviewed in the Madras case of Kuppuswamy (in re:), AIR 1949 Mad 567 (568) (reviews case law).
46.29. Meaning of "contract" in Article 57.-
There appears to be some uncertainty on the question whether the word "contract" in Article 57 is appropriate for being applied to security bonds executed in the course of judicial proceedings in compliance with a statutory requirement. Generally speaking, there cannot be a contract between the court and a party to the suit, and this is the view taken by most High Courts with reference to this article1-4. On this view, a bond given by a surety under Order 41, rule 5 or Order 41, rule 6 of the Code of Civil Procedure, 1908, does not fall under Article 57. It is not a bond for the "due performance of a contract". These decisions would regard such bonds as falling under Article 40. The view taken in some case, however, is that a security bond given under Order 41, rule 5 or 6 of the Code of Civil Procedure, 1908, falls under Article 57. This view was taken by the Oudh Chief Court5, the Lahore High Court6, and by the Sind Chief Court7.
1. Reference, AIR 1931 All 189 (FB).
2. Abubacker v. Chinnathambi, AIR 1938 Mad 262: (1938) 1 Mad LJ 159.
3. Dadve Balaji v. Kanhailal, AIR 1947 Nag. 26.
4. Akshay Zamindari v. Ram Nath Burman, ILR (1937) 1 Cal 375 (380).
5. Board of Revenue v. Latta Bakshi Singh, AIR 1931 Oudh 91. See however, Hunter v. Emp., AIR 1942 Oudh 371 (373).
6. Tullah Shah v. Gulam Hassan, AIR 1933 Lah 1004.
7. Reference, AIR 1936 Sind 41.
46.30. U.P. Amendment.-
Presumably to settle the position on the above subject, there has been in the U.P. an amendment of Article 571, adding the words "or the due discharge of a liability" after the words "the due performance of a contract". Such an amendment, however, seems to go beyond what is needed, and might even cover bonds not executed in the course of civil and criminal proceedings. A similar amendment was made in Bengal in 1939.
1. Stamp Act Schedule 1A, Article 57, as inserted in the U.P.
46.31. Basic Principles.-
It appears to us that the position could be simplified if more attention is devoted to basic principles. Two basic principles should in this context be borne in mind. First, as far as possible, the articles should be mutually exclusive-(this is a question of drafting)-and secondly, a document which bears court fees should not also be liable to stamp duty-(this is a matter of policy). The second principle has been accepted when the legislature amended the 1879 Act1. There is no reason why the same principle should not be followed incharging duty under other articles which are possibly applicable. We are, moreover, of the view that bonds executed in pursuance of an order of a court cannot be regarded as creating a contractual obligation. They should be dealt with specifically, if considered necessary.
1. See supra.
46.32. Recommendation to amend Article 30 and Article 57. On the above principles, we recommend the following amendments in the various articles:-
(i) In Article 40 (mortgage-deed), the words "not being Security Bond" should be amplified by revising them as "not being such Security Bond or Mortgage Deed as is referred to in Article 57."
(ii) In Article 57, the words "or in pursuance of an order of a court or public officer" should be added after the Words "due performance of a contract".
(iii) In Article 57, the words "not being otherwise provided for by the Court Fees Act, 1870 should also be added, after adding the above words.
(iv) In Article 57, after the words "security bond or mortgage" (which occur in the title), the words "where such security bond or mortgage deed is" should be added.
46.33. Object of the suggested amendment.-
The object of the first amendment is to demarcate the scope of Article 40 more clearly, by indicating that not only a security bond but also a mortgage deed (if governed by Article 571) would be excluded from Article 40. The object of the second amendment2 is to put an end to the controversy as to the scope of the words "due performance of a contract" in Article 57. The object of the third amendment3 is to remove the liability to stamp duty under Article 57 where the Court Fees Act is applicable. The object of the fourth amendment4 is to make it clear that in Article 57, the words "executed by way of security contract" govern the words "security bond" as well as the words "mortgage deed".
1. See supra.
2. See Akshay Zamindari Ltd. v. Ram Nath Verman, ILR (1937) 1 Cal 375 (380).
3. Compare Article 15.
4. See Akshay Zamindari Ltd. v. Ram Nath Verman, ILR (1937) 1 Cal 375 (380).
46.34. The material part of Article 57 should, accordingly, be revised so as to read as under:-
"57. Security Bond or Mortgage Deed Where such security bond or mortgage deed-
(a) is 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
(b) is executed by a surety to secure the due performance of a contract or in pursuance of an order of a court or public officer, not being otherwise provided for by the Court Fees Act, 1870,-
|-902 to 911-|
|(a) when the amount secured does not exceed Rs. 1,000;||The same duty as a bond (No. 15) for the amount secured.|
|(b) in any other case||Five Rupees.|
|(Exemptions as at present).|