Report No. 67
Impounding and Connected Provisions-Sections 38-47
18.1. Section 38-Introductory.-
An instrument not sufficiently stamped is impounded under sections 33-35. After this is done, the question arises what further action should be taken. Section 38 is one of the principal sections providing for what is to be done with an impounded instrument. If the deficit duty and penalty are paid, the impounding officer is, under section 38(1), required to send to the Collector an authenticated copy of such instrument, together with a certificate in writing setting out certain particulars. Further action in regard to the copy of the instrument is then taken under section 39. If a party does not pay the deficit duty and penalty under section 35, the court has to impound the instrument under section 33, and forward it to the Collector under section 38(2). It is then for the Collector to give his decision under section 40 about the proper duty and penalty (if any) to be charged.
18.2. Case law.-
This, in general, is the scheme of the section. We have gone through the important1 cases under section 38; and find that they do not reveal any serious difficulty in the working of the section. However, one verbal point requires to be considered under section 38(1), and with reference to section 38(2) a suggestion will have to be dealt with.
1. (a) Peary Lid v. Sukhan Ram, AIR 1925 All 478.
(b) Sikdo Prasad (in re:), AIR 1934 All 1054.
(c) Manganese Minerals Ltd. v. State of West Bengal, AIR 1960 Cal 340.
(d) Jai Narain v. Yasin Khan, AIR 1955 Hyd 21.
(e) T.K. Rantharaj v. Md. Nazeer Khan, AIR 1959 Mys 172.
(f) Vasudevan v. Krishan Ramnath, AIR 1953 TC 559.
18.3. Section 38(1)-Recommendation for verbal change.-
The point concerning section 38(1) is this-At present, under section 38(1), when the person impounding an instrument under section 33 has by law or consent of parties authority to receive evidence and admits such instrument in evidence upon payment of "a penalty" as provided by section 35 or of "duty" as provided by section 37, he shall send to the Collector an authenticated copy of such instrument, together with the prescribed certificate. Our recommendation is that the words "duty and" should be added where section 38(1) refers to section 35.
18.4. Section 38(2)-Suggestion of State Government.-
As to sub-section (2) of section 38, a suggestion for an amendment, received from a, State Government1 may now be dealt with section 38(2), as already stated, provides, that in cases not falling under section 38(1), (that is to say, in cases other than those where the person impounding an instrument not duly stamped has authority to receive evidence and admits the instrument in evidence upon payment of a penalty), the person impounding the instrument shall send it in original to the. Collector. Under section 40, the Collector so receiving the instrument may either certify by endorsement on the instrument that it is duly stamped or not chargeable with duty, or, if he is of opinion that such instrument is not duly stamped, may require payment of the proper duty together with the penalty; and, after the Collector has so dealt with the instrument, he has to return it to the impounding officer after an endorsement to that effect under section 42(2), then the instrument shall become admissible in evidence, and shall be delivered to the person from whose possession it came into the hands of the officer impounding it etc.
If the instrument so sent in original2 is lost, destroyed or damaged before the Collector takes action under section 40, then it is not possible (under the Act as it now stands) to collect the stamp duty and penalty due, with the result that there is a loss of revenue to the Government. It has, therefore, been suggested that the person impounding the instrument should, before sending it to the Collector under section 38(2), keep an authenticated copy of the instrument in his custody. If the original which has to be sent to the Collector, is lost, destroyed or damaged, then the authenticated copy should, it is suggested, be treated as the original instrument for the purposes of levying the stamp duty and penalty due, and should be admitted in evidence on payment of such duty and penalty. An amendment of section 38(2), to achieve these two objects, has been proposed by the State Government.
1. Suggestion of the erstwhile Government of Madras, File No. F. 3(4)/57-Pt. I, L.C. S. No. 8.
2. Section 38(2).
18.5. Scheme of section 38(2).-
Before expressing our view as to the point raised in the suggestion, we should consider in detail the scope of section 38(2). There are two cases in which impounding of instruments not duly stamped is provided for by the Act, namely, (i) where a person has authority to receive evidence or (ii) where a person is in charge of a public office, provided (in both cases), the instrument chargeable with duty is produced before him or comes before him in the performance of his functions. In the first case, that, is to say, where a person impounding has authority to receive evidence, if the party pays the penalty, then the instrument impounded can be admitted in evidence, and need not be sent to the Collector. In that case the person impounding sends only a copy cases a Certificate (that is) to the Collector. In "other cases", he has to send the original to the Collector.1 Those "other cases" would appear to be the following-
(i) Where the person impounding has no authority by law or consent of parties to receive evidence;
(ii) Where he has such authority, but the party concerned does not pay the duty (or the deficiency in duty) and the penalty etc.;
(iii) Where, even if the party concerned is prepared to pay the duty or the penalty, the instrument cannot, by virtue of the exceptions given in the proviso to the relevant section2 be admitted in evidence,3 under the present law. In these cases, the person impounding must send the instrument in original. There is a provision4 for preparing a copy of the instrument, but even when a copy is prepared under that section, what is sent to the Collector is the original.
1. Section 38(2).
2. Section 35(1), proviso (a).
3. Compare (English) Stamp Act, 1891 (54 & 55 Vic., C 39), section 14(1).
4. Section 46.
18.6. Suggestion considered.-
Now, the suggestion is, that before sending the original, the person impounding should keep an authenticated copy. If the original is lost before action is taken under section 40(1), then (it is suggested) the copy should be treated as the original for the purpose of the levy of the penalty etc. and also for the purpose of the Indian Evidence Act, 1872. This suggestion of the State Government was circulated by the Government of India1 to other State Governments. It appears,2 that many State Governments were in favour of the suggested change. One State Government was not, however, in favour of the change suggested, on the ground, first, that the proposal would increase the work in the public offices concerned, and secondly, that the change was not necessary, as cases of original documents being lost or damaged were very few.
Another State Government suggested that the copy of the document be made at the cost of the person producing it. The comment of another State Government was, that the impounding officer should keep the original with himself, and should send only a copy to the Collector for the levy of duty and penalty.
1. Ministry of Finance (Revenue Division).
2. S. No. 8, File No. F. 3(4)/57-L.C., Pt. I.
18.7. Various alternatives.-
We have considered the suggestion, and the points made in the comments expressed thereon. While the object of the suggestion is good, we are of the view that certain considerations-such as increase in office work-cannot be brushed aside. Cases of loss of an instrument in transit would be rare. To meet those rare cases, we do not think that a copy should be prepared in every case. And, in our view, there is no case for a change in the present law. In response to our Questionnaire1 also, while many replies have favoured such amendment as is set out below, some do not think that, to meet rare cases, a change should be made in the section.
1. Q. 49.
18.8. However, if the Government does consider some change necessary, then, in our view, the alternative suggested by another State Government, namely, that the original should be kept by the impounding officer and a copy should be sent to the Collector, is preferable to other alternatives. If the original is sent to the Collector and lost in transit, and the question of proof of signature or thumb impression arises, then a copy kept by the impounding officer would not be of much utility, and there would be difficulties. Where the party interested or the person producing is not prepared to pay the cost of preparing the copy, we do not think that the person impounding the instrument should be required to prepare an authenticated copy. No doubt, if the original is lost in transit and the penalty cannot be levied, a loss is thereby caused to the revenue.
But, against this loss, should be offset the increase in work and cost that will arise if an authenticated copy is required to be prepared in every case. It should be remembered, that the acceptance of the suggestion of the State Government would mean that in every case an authenticated copy should be prepared even though the cases in which low of the instrument occurs in transit would be only a fraction of the cases in which action is taken under section 38(2). We think that the misting provision need not be disturbed where nobody comes forward to bear the cost of preparing the copy. Even in regard to the few case where loss may occur, an option may be left to the party.
We, therefore, recommend that if Government consider necessary that the section should be amended, the following1 proviso may be inserted in section 38(2):-
"Provided that where the person who produced the instrument, or any party interested, is prepared to pay the cost of preparing a copy of the instrument, then-
(a) an authenticated copy of the instrument shall be got prepared by the person impounding the instrument;
(b) only the authenticated copy shall be sent to the Collector;
(c) the Collector shall take action on the authenticated copy as if it were the instrument in original; and
(d) any certificate to be endorsed with reference to the instrument by the Collector under clause (a) of sub-section (1) of section 40 or under sub-section (1) of section 42 shall be endorsed on the authenticated copy; and when that copy received back by the person impounding the instrument2 that person shall copy the certificate on the original instrument and also authenticate such copy of the certificate."
1. Such consequential changes as may be necessary in other section, may be carried out.
2. As to return of the instrument to the person impounding, see section 40(2) and, cases cited in Mulla Stamp Act, (1963), p. 146, Footnote (x).
18.10. Section 38A (to be transposed from section 46).-
At this stage, it is necessary to depart from the sequence of sections and to refer to section 46. That section reads:-
"46. (1) If any instrument sent to the Collector under section 38, sub-section (2), is lost, destroyed or damaged during transmission, the person sending the same shall not be liable for such loss, destruction or damage.
(2) When any instrument is about to be so sent, the person from whose possession it came into the hands of the person impounding the same, may require a copy thereof to be made at the expense of such first-mentioned person and authenticated by the person impounding such instrument."