Report No. 67
Time of Payment-Sections 17-19
11.1. Section 17.-
The time of payment of duty is dealt with in sections 17 to 19 of the Act. Briefly speaking, the time of stamping is linked up with the time of execution, but special situations, such as an instrument executed out of India, may arise and have to be dealt with. The general proposition is to be found in section 17. All instruments chargeable with duty and executed by any person in India shall be stamped before or at the time of execution under the section. The expression "shall be stamped" means that the instrument should be duly stamped, that is to say, a stamp of the proper description and amount should have been used at the time and in the manner prescribed by law.1 "Executed", as defined in the Act, means signed2 So, stamping must precede or be simultaneous with signing.
1. (a) Moti Lal v. Jagmohandas, (1904) 6 Born LR 699. (b)jethibai v. Rama Chandra, 1899 ILR 13 Born 484.
2. Section 2(12), Indian Stamp Act, 1899.
11.2. Conflict as to time of stamping.-
There has been a conflict of views with respect to the phrase "at the time of execution" in section 17. In a Bombay case1, a promissory note was executed by A and B, a stamp was affixed afterwards and cancelled by A, by again signing it. The High Court held that the stamping must be held to have taken place subsequent to the execution, and therefore, it could not be said that the promissory note was stamped "before or at the time of execution", within the meaning of section 17.
In that case, the evidence clearly showed that defendant 1 wrote out the promissory note in suit, and defendants 1 and 2 put their signatures on it in the presence of the plaintiff's husband. It was then stamped. This, according to the Bombay High Court, was a clearly evidence to establish that the stamping of the promissory note took place after the execution was already complete. According to that High Court, section 17 requires that the stamping should be done sometime before the document is executed, or that a stamped paper must be placed before the executant who must execute it, or, he must first stamp it and then execute the document. But, if the executant has already finished the "execution" of the document (in the eye of the law) then any subsequent stamping, however close in time, could not be said to be stamping at the time of execution.
The High Court criticised an earlier decision of the Madras High Court2, holding to the contrary. In the Madras case, there was only one executant, and the promissory note was signed by him, and subsequently, it was stamped. The Madras High Court held, that the uncontradicted evidence of the plaintiff showed that the acts were "practically simultaneous", and the stamping was, therefore, done "at the time of execution" within the meaning of section 16 of the Stamp Act, 1879, corresponding to section 17 of the present Act. The Madras High Court, further, expressed the view that, even under the present Act, where execution is defined as meaning "signature",3 it would not make any difference if the stamp was affixed and cancelled immediately after the signature on the document, the signing and stamping being continuous acts in the same transaction. The Bombay High Court, however, observed that, it was difficult to understand the significance of the expression "practically simultaneous". Either the stamping is after execution, or before or at the time of the execution.
1. Rohini Chandrakant Vijaykar v. Al. Fernandes, AIR 1956 Born 421 (423), para. 4 (DB) (Chagla, C.J. and Dixit, J.).
2. Surjit Mull v. Hudson, 1900 ILR 24 Mad 259 (261) (DB).
3. Section 2(12), Stamp Act, 1899.
11.3. In a Kerala case,1 the Bombay view2 was dissented from, and the Madras view was followed.3 In that case, a promissory note was affixed with additional stamps after the second attesting witness pointed out that the note was insufficiently stamped. The High Court held that the execution of the promissory note was complete when additional stamps were affixed and defaced and delivery of the promissory note was effected. According to the Kerala High Court, the expression, "shall be stamped at the time of execution" must be interpreted in a reasonable manner, and it is sufficient if signing and affixing of the stamp are "practically simultaneous".
1. Kurivila Markose v. Varkey Varkey, AIR 1966 Ker 315 (T.C. Raghwan).
2. Rohini Chandrakanta v. A.I. Fernandes, AIR 1956 Bom 421 (para. 11, supra).
3. Surjit Mull v. Hudson, 1900 ILR 24 Mad 259 (DB), para. 11.2, supra.
11.4. Recommendation to amend section 17.-
From the above discussion, it appears that the existing phrase, "before or at the time of execution" in section 17, lands the courts in difficulty. It would, in our view, be better if the words "at the time of execution or immediately thereafter" are substituted, in place, of that phrase, and we recommend accordingly. We may note that such an amendment has been generally favoured in the replies to the Questionnaire issued by us.1
1. Q. 33.
11.5. Section 18.-
Instruments executed outside India are dealt with in sections 18 and 19. Under section 18(1), every instrument chargeable with duty executed only out of India and not being a bill of exchange or promissory note, may be stamped within three months after it has been first received in India under section 18(2), where any such instrument cannot, with reference to the description of a stamp prescribed therefor, be duly stamped by a private person, it may be taken within the said period of three months to the Collector, who shall stamp the same in such manner as the State Government may, by rule, prescribe, with a stamp of such value as the person so taking such instrument may require and pay for.
Thus, the instruments which are executed out of India and chargeable with duty,1 (not being bills of exchange or promissory notes) may be stamped within three months after they have been first received in India. If stamps of the required description are not available, the party should take the instrument to be stamped within the said period of three months to the Collector who will stamp the same with the stamp of proper description. It is, however, necessary to make an application to the Collector in this regard.2
1. Herbert Francis v. Md. Akbar, AIR 1928 Pat 134.
2. Section 31.
11.6. Instruments not chargeable with duty.-
Section 18 must be read with section 3(c). Section 3(c) makes it clear, that instruments executed out of India (other than bills of exchange or promissory notes) will not be liable to stamp duty unless they relate to property situate or to any matter or thing done or to be done in India and are received in India. Thus, a simple money bond executed out of India will not be liable to duty even when received in India, because it does not relate to any property situate, or to any matter or thing done or to be done, in India. If, however, the instrument in question related to some property situate in India, it would be governed1 by section 18. Deeds of partition, executed abroad, of property partly situate in India are also so governed as would appear from the decision in a Madras case.2
The same is the case with acknowledgments of debts.3
1. Herbert Francis v. Md. Akbar, AIR 1928 Pat 134.
2. Rajangam v. Rajamangamer, AIR 1920 Mad 149 (Document executed at Trivandrum).
3. Ali Mohamed v. Jagannath, AIR 1928 All 666.
11.7. Bills of exchange and pro-notes-Effect of non-stamping.-
If the instrument in question in not stamped within the prescribed period of three months as under section 18, but is stamped afterwards, it would be deemed to be unstamped, and would be governed by section 35 as regards the consequences of non-stamping. For example, instruments chargeable with the duty of one anna (now 10 paise) e.g.-an acknowledgment of a debt, if not stamped within the period of three months of their receipt in India, cannot be admitted in evidence even on the payment of duty and penalty, because section 35 does not provide for the admissibility on payment of duty and penalty.1
1. Ali Mohamed v. Jagannath, AIR 1928 All 666.
Again, section 18 does not make the copy of a document admissible by stamping if with the stamp required on its original. If the original instrument executed outside India requires to be stamped when brought in India, and is not stamped, then a copy of that instrument brought in India must be rejected as inadmissible, and cannot be placed on record, as the law now stands, for the reason that it cannot be stamped and no penalty can be realised on it under section 35. Section 18 applies only to original documents which, although executed out of India, attract duty in India and are brought in India.1
1. Co-operative Assurance Co., Ltd., Amritsar v. Lachman Singh Bhagat, AIR 1951 Pepsu 24.
11.9. No change.-
The above brief discussion would serve to illustrate the implications of the section. There being no conflict of decisions or obscurity in language or other difficulty in the working of the section, we have no further comments on it.
11.10. Section 19-Bills and notes drawn out of India.-
Under section 19, the first holder in India of any bill of exchange (payable otherWise than on demand) or promissory note drawn or made out of India shall, before he presents the same for acceptance or payment, or endorses, transfers or otherwise negotiates the same in India, affix thereto the proper stamp and cancel the same.
There are two provisos to the section, which read as follows:-
"(a) if, at the time any such bill of exchange, or note comes into the hands of any holder thereof in India, the proper adhesive stamp is affixed thereto and cancelled in manner prescribed by section 12 and such holder has no reason to believe that such stamp was affixed or cancelled otherwise than by the person and at the time required by this Act, such stamp shall, so far as relates to such holder, be deemed to have been duly affixed and cancelled;
(b) nothing contained in the proviso shall relieve any person from any penalty incurred by him for omitting to affix or cancel a stamp."