Report No. 67
10.21. Introductory-section 14 and section 14A (New).-
It is a general rule that only one instrument can be written on the same stamp paper. Section 14 expresses the rule thus:-
"14. No second instrument chargeable with duty shall be written upon a piece of stamped paper upon which an instrument chargeable with duty has already been written:
Provided that nothing in this section shall prevent any endorsement1 which is duly stamped or is not chargeable with duty being made upon any instrument for the purpose of transferring any right created or evidenced thereby, or of acknowledging the receipt2 of any money or goods the payment or delivery of which is secured thereby". The main paragraph of the section raises no difficulty. It does not apply unless both the first and the second instrument are chargeable with duty. But the proviso to the section appears to deal with only one situation, while there are also other situations that require consideration.
1. See Article 62, as to endorsement.
2. See Article 53, as to acknowledging receipt.
10.22. Effect of alteration in an instrument on stamp duties.-
In this connection, it may be pointed out that on the general question whether an alteration in an instrument already written affects the stamp, the section is silent. On a study of the decided cases, both Indian1 and English2, it would appear that the principle is that where, by reason of an alteration made in an instrument, the instrument becomes a new one, a fresh stamp is required. The words "second instrument" have been so construed. The reason is that the original stamp is spent.3 The principle applicable is of a simple nature, though there may be difficulty in the application.
1. (a) Reference under Stamp Act, 1888 ILR 11 Mad 40. (b)Cox & Co. v. Pestonji, AIR 1927 Born 1315. (c) Pestonji & Co. v. Cox & Co., AIR 1928 PC 231.
2. For English cases, see para. 10.23, infra.
3. (a) Bowman v. Nichol, (1794) 5 Term Reports 537.
(b) London and Brighton Railway Co. v. Fairclough, (1844) 2 M&C 674.
10.23. Position in England.-
In England, it is well established that no further stamp is required if the alteration is:-
(a) immaterial1, or
(b) merely declaratory,2 or
(c) intended to reader certain a point which was left open,3 or
(d) made to correct a mistake,4 or
(e) made by a stranger.5
But, in the case of a bill of exchange6 executed in the country, the party suing on the bill must prove that the alteration does not vitiate the stamp.7
It has become necessary to discuss these points because the proviso to the section gives no guidance in the matter.
1. Hartley v. Manson, (1842) 4 IVIn & G 172.
2. Deo Waters v. Houghton, (1827) 1 Man & Rr KB 208.
3. Sadgrove v. Bryden, (1907) 1 Ch 318.
4. Cole v. Parking, (1810) 12 East 471.
5. Monfree v. Bromley, (1805) 6 East 309.
6. Knight v. Clements, (1838) 8 Ad&El 215.
7. Halsbury's, 3rd Edn., Vol. 3, p. 283, para. 502; and Vol. 3, p. 233.
10.24. Consent of Parties immaterial for purposes of stamp law.-
For the present purpose, a material alteration may be described as one which alters the legal effect of the instrument. A material alteration made without the consent of the parties may, of course, render the instrument void under the law of contract. The principle1 is that "no man shall be permitted to take the chance of committing a fraud without running any risk of losing by the event when the fraud is detected." The Negotiable Instruments Act2-3 has a specific provision on the subject. The law on the subject has been fully. discussed by the Supreme Court.4 Considerable discussion has also taken place as to the effect of alteration by accident5, in the general law. But we are not concerned with the effect of alterations in general law.
1. Master v. Miller, (1791) 4 Term Reports 320 (329): 145 ER 855 (Lord Kenyon, C.J.).
2. Section 87, Negotiable Instruments Act, 1881.
3. As to this aspect, see Halsbury's, 3rd Edn., Vol. 11, p. 367; as to material alterations in bills of exchange, Halsbury's, 3rd Edn., Vol. 3, p. 233.
4. Amirudhan v. Thonui Co., AIR 1963 SC 746.
5. Hongkong and Shanghai Banking Corpn. v. Loki Shi, 1928 AC 181, for comments, see 1928 LQR 406.
10.25. Practical difficulty.-
Having regard to the obscurity on the subject, in the Stamp Act, it is desirable that the position in this respect should be stated in the proviso. The matter is not of mere academic importance, because, in the case of a contract, the result of a rule requiring fresh stamp for a new agreement is that the old agreement cannot be sued upon as it has been superseded,1 and the new agreement is inadmissible if not stamped afresh. Thus, a practical difficulty can arise.
1. Royal Exchange Assurance v. Hope, 1928 Chancery 179 (Court of Appeal).
10.26. Recommendation to insert section 14A.-
In view of the importance of the principles mentioned above, and the practical difficulty likely to be caused as indicated above, it is desirable to make the law self-contained, by adding a provision to ensure that immaterial alterations, as enumerated above,1 do not bear duty but material alterations bear duty afresh. We may state that the suggested amendment has been generally favoured by the replies received to our Questionnaire.2
We recommend that the provision be inserted as section 14A. The following is a rough draft:-
"14A. Where there are material alterations made in an instrument by a party with or without the consent of other parties, the instrument shall require a fresh stamp according to its altered character."
1. See "Immaterial alterations", supra.
2. Q. 30-section 14.
10.27. Section 15.-
Section 15 provides that every instrument written in contravention of section 13 or section 14 shall be deemed to be unstamped. It may be recalled that section 13 deals with the manner in which the instrument stamped with an impressed stamp shall be written, and section 14 provides that only one instrument should be written on the same stamp. The effect of section 15, as read with section 13, was illustrated in a Lahore case,1 where a security bond taken on an order for stay of execution, was written on plain paper bearing a court-fee stamp of 7 annas, instead of on impressed stamped paper, thus contravening section 13. The, bond was held not to be properly stamped in view of section 15. As to the effect of section 15, read with section 14, a few reported cases will be referred to in due course.2
1. Guranditta Mal v. Firm Gurandittamal Ram Chand, AIR 1925 Lah 552 (554) (Martinequ, J.).
2. See "Case of two instruments", infra.
10.28. Verbal improvement needed.-
There is no controversy about the substance of section 15; but, the wording appears to be capable of improvement. The use of the expression "deemed to be unstamped" raises a about as to whether an instrument governed by the section-that is to say, written in violation of sections 13-14-can be admitted in evidence on payment of penalty under section 35 or validated by endorsement of the Collector under section 41. In one of the early Bombay cases,1 it was held that the Collector ought to refuse to make an endorsement in such cases. But this view was over-ruled in a later decision.2 A Madras case agrees3 with the later Bombay view.
1. Hammappa (in re:), 1888 ILR 13 Born 281.
2. Prahlad v. Vithu, 1892 ILR 17 Born 687 (FB).
3. 1888 ILR 11 Mad 40.
10.29. Recommendation to substitute the words "not duly stamped."-
It is, in our opinion, desirable to avoid the recurrence of such controversies, and this could be achieved by substituting the words "not duly stamped" for the word "unstamped", in section 15. The expression "duly stamped" is defined in the Act,1 and is used at many places in the Act. We recommend that the section should be amended as above. It is in harmony, for example, with the language used in the section dealing with the Collector's power to stamp instruments which are impounded.2 This clarification can usefully cover section 14A (new) also.
1. See section 2(11), "duly stamped."
2. Section 40(1)(a) and (b).