Report No. 67
48.1. Article 61-Introductory.-
Proprietary rights may be transferred directly, e.g., by conveyance or gift-or may be enlarged indirectly. One mode of such enlargement is the surrender of a lesser interest in favour of a larger one. The surrender of a lease falls in this category. In the Stamp Act, it is dealt with in Article 61. The distinction between a pure transfer and a surrender appears to be that a transfer could be to a third person and creates in the transfers an absolutely new right, while a surrender is in favour of a person who already holds some interest in the property, though that interest is not the same as that now surrendered. Article 61 applies to express surrenders by an agreement,1 and would not apply to implied surrenders.2 An implied surrender arises without any specific instrument for that purpose.3
There is an exemption as regards a surrender in cases where the lease itself is exempted4 from duty. Sometimes, a document may embody two transactions. Thus, a document by which the lessee surrendered the lease, but in which the lessee also transferred certain moveable and business assets which were not subject to the lease, was considered chargeable both as a surrender of lease and as a conveyance of moveables.5
1. Section 11(e), Transfer of Property Act, 1882.
2. Section 111(f), Transfer of Property Act, 1882.
3. See section 111, Transfer of Property Act.
4. For example, Article 35, Exemption (a).
5. Chief Controlling Revenue Authority v. Bhagya Lakshmi, AIR 1958 Mad 535 (FB).
48.2. Case law as to partial surrender.-
The article does not tell us whether the surrender should be total or partial. It has been held in Madras1 that it is immaterial that the surrender is only as regards the unexpired part of the term, or is with regard to only a portion of the property. While the article needs no change of substance, it appears to us that it would be useful to codify what has been held in the Madras case, as such questions are likely to arise elsewhere also.
1. Madras Board of Revenue, ruling, cited in Krishnamurthi Stamp Act (1968), p. 551.
48.3. Recommendation to add an Explanation.-
Accordingly, we recommended that the following Explanation should be inserted below Article 61:
"Explanation.-For the purposes of this article it is immaterial that the surrender of the lease is only as regards the unexpired part of the term, or is with regard to only a portion of the property."
48.4. Article 62-Introductory.-
Article 62 levies duty on certain transfers with or without consideration. The various kinds of transfers listed in the article seem to constitute a heterogeneous collection. Clauses (a), (b) and (c) can, however, be grouped together broadly as transfers of "actionable claims", such as, shares, debentures and interests created by bonds, mortgage deeds and policies. Clause (d) deals with the transfer of property under a particular provision of the Administrator General's Act, dealing with transfer by an executor. Clause (e) deals with the transfer of a trust property without consideration1 from one trustee to another trustee or from a trustee to a beneficiary. There is one feature common to clauses (d) and (e)-the transferor has no beneficial interest.
It should be noted that all these transfers would, but for this specific article, have been chargeable either as "conveyance" in view of the wide definition of that expression as given in the Act,2 or as gifts or under some other entry appropriate to the nature of the right transferred. The duty under Article 62 is lower than that on a conveyance or on a gift which shows the significance of the article. A lower duty seems to have been chosen either because what is transferred is an actionable claim and not property in possession, or because the beneficial interest remains unaffected. There are certain aspects of business convenience also, relevant to some instruments.
1. The anomaly created by clause (e) is discussed, infra.
2. Section 2(10).
48.5A. Clause (a)-Transfer of shares.-
Taking up the clauses themselves, clause (a) deals with the transfer of shares in an incorporated company or other body corporate. The duty is 75 p. for every 100 rupees of the value of the share. A few reported cases on this clause may be referred to. In an early Bombay case,1 the question was raised how an instrument executed in the following circumstances was to be stamped, A Hindu joint family consisting of three brothers owned shares in a limited company, which stood in the name of the eldest brother. The three brothers came to be divided in interest. The shares remained in the name of the eldest brother, though dividends on the shares were divided amongst the three brothers. This fact was subsequently recorded in a deed of partition. The eldest brother then executed two deeds under which he transferred to his brothers the number of shares that fell to their shares. It was held that the deeds in question were chargeable as instruments of partition under Article 45, and did not fall either under Article 62(a) or under Article 62(e). Mulla, who was one of the three Judges who decided the case, later seems to have revised his opinion.2
He has expressed the opinion that in such a case, after an oral partition, whereby property continues in the name of the one brother and is subsequently transferred to the others entitled to it under the partition, the instrument would fall under Article 62(e)-(transfer of trust property). The reasoning seems to be that the partition has 'already been effected, and the persons in whose names the shares continue to remain are not the beneficial owners. In the same Bombay case,3 it was remarked that the possession of the one co-owner of joint property in his own name is not that of a trustee for the other co-owerns. But, as pointed out by one author,4 the title of the co-owner who is registered holder, can be regarded as that of a trustee in regard to the shares of the other co-owners, and the instrument of transfer would, on that view, be chargeable under clause (e).
1. Superintendent of Stamps v. Chimanlal, 1923 ILR 47 Born 321 (326); AIR 1923 Born 237 (239) (Shah Ag C.J., Crump and Mulla, JJ.).
2. Krishnamurthy Indian Stamp Act, 1972, p. 569.
2. Superintendent of Stamps, Bombay v. Chimanlal, 1923 ILR 47 Born 321: AIR 1923 VIN 237 (Shah Ag. C.J., Crump & Mulla JJ.).
3. See Mulla & Pratt The Indian Stamp Act, (6th Edn., p. 359). 1st Edn. was published in 1924.
48.5. In another case1 decided under Article 62(a), it was held that if a company registers an instrument of transfer of shares which is not properly stamped, it would be doing something widen is not lawful. But there was no provision in the Companies Act, 1913 (which was then in force), or in the Stamp Act, which would make the company liable for payment of (he proper stamp duty. If the document is brought before the revenue authority, the revenue authorities will impound it, but the only right given to them to proceed for the recovery of the duty to against the person who was liable to pay the duty, i.e., the executant.2
1. Jagdish Mills Ltd. (in re:), AIR 1955 Born 79.
2. See also Parry v. Union of India, AIR 1961 Punj 123.
48.6. Use of singular "share".-
The case-law so far discussed calls for no amendment of the clause, but we may note that the singular word "share" in clause (a) (in the column relating to the amount) may give rise to some problems. Here, we may refer to an Allahabad case1 which, though falling under clause (c) of the article, discusses clause (a) also. In that case, a person was the obligee of each of 29 bonds and mortgage deeds executed by different persons in his favour. He transferred his interest in all these bonds and mortgage deeds to another person, by executing one document comprising them all. The consideration for the transfer was one lump sum.
On the question of the proper stamp duty payable, it was held by the majority, that section 5 of the Act, dealing with instruments comprising or relating to several distinct matters, did not apply to the case, and that under Article 62 (c) read with section 13 of the General Clauses Act, the stamp duty chargeable on the deed in question was rupees five [under Article 62(c)(ii)]. Niamatullah. J. (dissenting) held that while section 5 of the Stamp Act did not apply, under Article 62(c) itself and without recourse to section 13, General Clauses Act, the proper stamp duty payable was the sum of all the duties paid on the bonds and mortgage deeds, subject to the maximum of Rs. 5 for any one bond or mortgage deed. Bennet J. (dissenting) was of the view that section 5 and Article 62(c) each applied to the case, though with the same result, namely, that the proper duty on the instrument in question was the aggregate of the amounts of duty payable on each of the 29 transfers contained in the instrument. Both the dissenting Judges (Niamatullah and Bennet JJ.) expressed the opinion that the rule that the singular includes the plural (contained in section 13 of the General Clauses Act) did not apply to the case.
1. Ram Sarup v. Jyoti Teti, 1933 ILR 15 All 468 (473): AIR 1933 All 321.
48.7. Singular "Share" in clause (a).-
We are not, at the moment, concerned with the decision on clause (c). But the majority of the Judges in the Allahabad case discussed clause (a), which is of interest They referred to the language of Article 62(a), by way of example. They said: "This lays down that the proper stamp duty on a transfer of shares (plural) shall be one half of the duty payable on a conveyance (No. 23) for a consideration equal to the value of the share (singular). Now, in this case, it is beyond controversy that the word 'share' in the second column, must be construed as including the plural, because that plural 'shares' is used in the first column. "1
The majority has treated the use of the singular 'shares' in item 62(a) in the second column of a grammatical error.
1. Emphasis supplied.
48.7A. Verbal change in clause (a) recommended to substitute the plural "shares".-
The majority view as to clause (a), with respect, appears to be correct We recommended that that view should be adopted and in Article 62(a), for the singular "share", the plural "shares" should be substituted, so as to bring out the correct position.
48.8. Clause (b)-transfer of debentures-No change.-
Clause (b) of Article 62 deals with the transfer of debentures, being marketable securities,1 whether the debenture is liable to duty or not,2 except debentures provided for by section 8. Section 8 deals with debentures issued by local authorities raising a loan. Debentures payable to bearer would be transferable by delivery: and not by assignment. This clause needs no change.
1. See section 2(16A).
2. As to the duty on debentures, see Article 27.
48.9. Clause (c)-transfer of interest secured by a bond etc.-No change.-
Clause (c) levies duty on the transfer of any interest secured by a bond, mortgage deed or policy of insurance. This clause also takes out of "conveyance" a case which could possibly fall under it. Thus, the sale of a bond, by endorsement on the back of it was held, in an Oudh case1, to fall under this article, and not under Article 23 (conveyance). The duty under Article 62(c) for the bond in question was Re. 0-8-0 and if it had been regarded as falling under Article 23, the duty would have been Re. 1. The endorsement on the back of the bond read, "sold to ", and the lower court held that this amounted to a sale deed. The Chief Court did not give any reasons for holding that the document in question was chargeable under Article 62 and not under Article 23. But, since Article 23 is a residuary article, and the document in question can be regarded as a "transfer", the Chief Court was, with respect, right in its conclusion.
1. fang Bahadur v. Bhaggao, AIR 1934 Oudh 344.
48.10. Other cases.-
There are a few cases on the transfer of a mortgage,1 and one case2 of transfer of the interest secured by an equitable mortgage which were held to be chargeable under Article 62(c). It may be noted that if a policy of insurance is transferred by a separate instrument, it must be stamped tinder Article 62(c); if the transfer is by endorsement, it is exempt under Exemption (c) to the article. It would, thus, appear, that the transfer of a policy of insurance by endorsement would be cheaper method, involving no stamp duty. The case law and points referred to above do not call for any change in clause (c).
1. (a) Mc Dowell & Co. v. Ragave Chetty, 1904 ILR 27 Mad 71. (b) Hitwardhak Cotton Mills v. Sorobji, 1909 ILR 33 Born 426.
2. Kamla Ranjan Ray (in re:), ILR 1937 Cal 486.