Report No. 67
Refund-Sections 49 to 55
While, the last chapter was concerned with the recovery of stamp duties in regard to instruments not duly stamped, occasions for refund may arise in regard to instruments duly stamped. The Act deals with this topic under the curious title of "Allowances for stamps in certain cases." The sections concerned deal with spoiled stamps, printed forms no longer required by Corporations, misused stamps, stamps not required for use, stamps in denominations of annas, and renewal of certain debentures, spread over sections 49 to 55.
20.2. Section 49-Introductory.-
Section 49 is a long section. The marginal note describes its subject as "allowance for spoiled stamps", but, as a matter of fact, the section does not relate to stamps "spoiled" in the physical sense, that is to say, a stamp which is covered with ink or the like. It deals with cases where, although expenditure has been incurred on a stamp, the paper has become useless by reason of one or more of the several circumstances enumerated in the section. Of the four clauses in the section-clauses (a), (b), (c) and (d)-clauses (a) and (b) are primarily meant to apply to instruments which are not executed by any person, while clauses (c) and (d) are primarily intended for instruments which are wholly or partly executed by some person but have failed in their object or become redundant because of some special circumstances.
Clause (c) is confined to bills of exchange and promissory notes-in respect of which a special provision was needed, having regard to the aspect of negotiability. Clause (d) which, in practice, is the clause most often resorted to, provides for stamps used for an instrument which is executed by a party but has failed in its object or become redundant. Such failure or redundancy may be due to a legal flaw rendering the instrument void ab in toto-sub-clause (1)-or error or mistake-sub-clause (2)-or death of a party-sub-clause (3)-or recalcitrance of a person-sub-clauses (4) and (5)-or other causes-sub-clauses (6), (7) and (8).
20.3. Proviso and hardship caused thereby in case under section 49(d)(i).-
Under the proviso appearing below clause (d) of section 49, the grant of refund is conditional. It postulates, as a condition, that in the case of an executed instrument, no legal proceeding has been commenced in which the instrument could or would have been given or offered in evidence, and that the instrument is given up to be cancelled. The condition that the instrument should not have been given in evidence creates some problems, where refund is applied for under clause (d)(1), which applies where the instrument "has been afterwards found to be absolutely void in law from the beginning".
Where an instrument is found by the parties themselves to be void without an order of the court, this proviso creates no problems? But, where a document is found by a court to be void, the document would have been given in evidence, and as the law now stands, the refund of the duty cannot be granted in such a case, because of the condition. The position is not accidental, but is a result of a decision taken at the time when the present Act was passed. It was then thought, that, in England, if a document is found by a court to be void, refund is not allowed.1
The English provision-section 9(7), Stamp Duties Management Act, 1891, reads-
"9. Subject to such regulations as the Commissioners may think proper to make, and to the production of such evidence by statutory declaration on otherwise as the Commissioners may require, allowance is to be made by the Commissioners for stamps spoiled in the cases hereinafter mentioned; (that is to say,)
(7) The Stamp used for any of the following instruments; that is to say,
(a) An instrument executed by any party thereto, but afterwards found to be absolutely void from the beginning."
1. Section 9(7), Stamp Duties Management Act, 1891 (54 & 55 Vict., C. 38).
20.4. Recommendation to modify the proviso.-
Whatever be the English law, the restriction in section 49 causes hardship, because a legal decision is, in most cases, necessary to determine that an instrument is void ad initio. In such cases, the document has to be given in evidence, but the claim for relief1 or the defence is based not on the document but on extraneous circumstances. The restriction has been criticised in England also. It stands to reason that in such cases, the Collector should be empowered to grant refund, and we recommend that the proviso should not apply to such a case, i.e., to a case falling under section 49(d)(1).
1. Mason v. Motor Traction Company, (1905) 1 Chancery 419.
20.5. Points in regard to void instruments.-
In support of the above discussion several points could be urged. The first point to be noted is that the case where the instrument is declared to be void by the court is not basically different from the case where it is found to be void by the parties themselves. Whether it is the parties which find that the instrument is void, or the court which holds it to be so, the consequence is the same, namely, the instrument does not operate by reason of a flaw recognised in law as having that effect. The objection could be raised that where the parties approach the court, the time of the court is spent on determining the validity of the instrument. But the answer to this objection is that, for the time of the court so spent, the fee is dealt with in the Court-fees Act.
20.6. The second point to be made is that, in the case of an instrument declared to be void, there is even a greater reason for relief than in the cases dealt with in section 49(d), clauses (3) to (8). In the other cases, it can be said that it is the conduct of some other person that made the instrument futile, and the revenue should not suffer for those accidental, or similar circumstances. In the case of a void instrument, however, there is no such circumstance, and even if all the events are favourable and all the parties cooperate, the instrument cannot serve its purpose.
20.7. Thirdly, it is to be pointed out that an instrument which is given in evidence for the purpose of declaring its invalidity, is not "acted upon" in the sense1 in which that expression is ordinarily used. Relief is given not in furtherance of the instrument, but in opposition to the instrument.
1. As to the expression "acted upon" in general, for judicial usage see Parashram v. Lakshmibai, AIR 1931 Born 399 (401).
20.8. Fourthly, the condition mentioned in the proviso should not be insisted upon where the instrument is declared void by the court. In cases falling under other clauses of section 49, the condition that the instrument should not have been admitted in evidence in a legal proceeding, causes no hardship because, in those other cases, the other legal proceeding could have proceeded without any specific adjudication about the question whether the instrument did, or did not, fall within section 49(d)(3), (4) etc. In the case of an instrument which is void and so declared, however, the condition causes peculiar hardship.
20.9. Fifthly, the question may be raised why a party should seek a judicial verdict of nullity. In answer, it may be pointed out that there are many situations where it is advisable to obtain a judicial verdict. It may be so advisable, for example, where one of the parties does not admit the invalidity, and the other party-to quote-the Specific Relief Act1-"has a reasonable apprehension that the instrument, if allowed to remain outstanding, will cause him injury."
1. Section 31, Specific Relief Act, 1963.
20.10. Sixthly, in most of the other cases dealt with in section 49(d), the object of the document has not been substantially carried out, while, in the case of a void instrument, not only has the object not been carried out but also it cannot be carried out.1
1. Samples of situations involving void documents-Appendix.