Report No. 67
Chapter 34
Articles 16-21
Article 16 levies duty on "bottomry bonds"; (so named after the "bottom" or keel of a ship).
A bottomry bond is a contract in the nature of hypothecation of a ship, as a security for money lent or expended upon her without reserving any claim against the owner in person, and usually made by the master-abroad, stipulating that the money advanced, together with the agreed premium, shall be paid within a stipulated number of days after the safe arrival of the vessel at a named port of discharge. The master of a ship has, as an agent of necessity, under certain circumstances, authority1 to pledge or hypothecate the ship and its cargo as security for the money advanced to be expended upon her. The contract is called "bottomry", and the bond a "bottomry bond".
From the language of the article, it appears that it is confined to a bond executed by the master only. Hypothecation of the cargo is called a "respondentia bond".
1. Chorley Law of Shipping (1960), p. 178.
34.2. The money is lent only upon the security of the ship. Hence, where the owner undertook a personal liability which was to subsist for a period of about five months from the date of the bond, it was held, that it was not a bottomry bond.1
1. Asam Kutha Sahib Mercoyar v. Mamanathan Chetti, 1899 ILR 22 Mad 26: 8 MLJ 159.
34.2A. No duty in English law.-
It should be noted, that there is no such provision as Article 16 in the (English) Stamp Act, 1891. The English Act expressly exempts "instruments for the sale, transfer, or other disposition, either absolutely or by way of mortgage, or otherwise, of any ship or vessel, or any part, interest, share, or property of or in any ship or vessel". This would cover bottomry-bonds. In India also, a similar exemption has been introduced by section 3(2). Article 16 must, therefore, be read with and subject to section 3(2), the effect of which will be to exclude, from its purview, bonds on all ships registered in the manner indicated by section 3(2), though not others.
34.3. Bottomry bonds now absolute.-
It may be noted, that bottomry bonds were in vogue before the days of submarine cables and wireless communications. Authority had to be given to the masters to act on behalf of the owners and cargo owners when, in emergency, they could not communicate with them. Bottomry-bonds and respondentia bonds are now. obsolete1. The article however may be left as it is since it may be useful for those exceptional emergencies where wireless fails.
1. Chorley Law of Shipping, (1960), p. 32.
34.4. Article 17.-
Article 17 levies a duty of five rupees on instruments of cancellation, (if attested and if not otherwise provided for), including an instrument by which an instrument previously executed is cancelled. The inclusive portion is unnecessary, and should be omitted. We recommend accordingly. We are also of the view that an instrument cancelling a will should be exempted from tax.
34.5. Recommendation.-
It should be noted, that an instrument cancelling a will has by notification1 been expressly exempted from the duty under Article 17. This is an important exemption and should find place in the Act. As regards the phraseology to be used for incorporating the substance of the notification, the word "cancellation" is used in the notification and could be adopted, though the Indian Succession Act, in its provisions relating to wills, uses the word "revoked".2
We recommend that the article should be amended on the above points. We may note that such an amendment has been favoured by many replies3 to our Questionnaire.
1. Notification of 1931, item No. 112.
2. Section 62, Indian Succession Act, 1925 (unprivileged Wills) and section 72 (privileged Wills).
3. Q. 84.
34.6. Article 18-Introductory.-
Under Article 18, stamp duty is levied on a certificate of sale (in respect of each property put up as a separate lot and sold), granted to the purchaser of any property sold by public auction by a civil or revenue court or Collector or other revenue officer.
34.7. Position regarding incumbrances.-
Before 1894, there were conflicting decisions as to whether incumbrances should be included in the computation of stamp duty under this article. The majority view was that where property was sold in execution of a decree subject to an incumbrance, the amount of stamp duty payable on the sale certificate would be calculated only on the amount of the purchase money, and not on the amount of the purchase money plus the incumbrance.1 But the Bombay High Court took the view that where property was sold at a court sale subject to a charge, the certificate of sale should bear duty calculated ad valorem for the amount of the purchase money, plus the principal mortgage money charged upon the amount.2
A subsequent case3 of the same High Court discusses the question how far mortgages should be entered in the certificate-the decision being that they should be entered only if the mortgage is admitted by the party or had been established by a decree or had been declared under section 282 of the Code of 1882 and the sale had been subject to them. The case does not discuss the question of stamp. To overcome these conflicting views, Act 6 of 1894 added the word "only", after the words "purchase money", in the second column, opposite to clause (c) of the article, and thereby accepted the majority view.
1. (a) Jwalaprasad v. Ram Narain, 1893 ILR 15 All 107.
(b)Reference from the Board of Revenue, 1884 ILR 10 Cal 92.
(c) Reference under Stamp Act, s. 49, 1882 ILR 5 Mad 18 (FB).
(d)Reference under Stamp Act, s. 46, 1884 ILR 7 Mad 421.
2. (a) Meer Kaisur Khan Marad Khan v. Emgrahim Khan Musakhan, 1891 ILR 15 Bom 532.
(b) Sha Nagin Das Jey Chand v. Halalkare Nathawa Gheesla, 1881 ILR 5 Bom 471 (FB).
3. S.C. Chedambarays v. Subrao Ram Chandra Yellapur, 1894 ILR 18 Bom 1975.
34.8. There is, however, still some difference of opinion in a few Bombay decisions with respect to a second certificate for sale, issued when the first certificate is found to be deficient in stamp. Thus, in one case,1 where a certificate of sale was granted on insufficient stamp, and the insufficient stamp and penalty were ordered to be recovered from the grantee, who wanted a fresh certificate of sale from the civil court, it was held that the civil court having granted a certificate was not bound to grant a fresh certificate so that the grantee might escape the penalty. But in a later case2 the court said that the earlier case merely decided that the court was not obliged to grant a second certificate. It did not hold that the court could not do so.
1. Nandram Matiram v. Kacha Bhan, 1885 ILR 9 Bom 526.
2. Collector of Ahmedabad v. Rambhan, AIR 1930 Bom 392 (394).
34.9. As to the decision in the earlier Bombay case, it is difficult to see how penalty can, with any propriety, be recovered from the grantee when the certificate is prepared and signed by a government officer. The stamp has to be borne by the grantee according to section 29(f), but, in practice, the stamp too is purchased according to the advice tendered by some officer of the court. As the point is not found in any recent case, an amendment on the point is not required.
34.10. Article 19.-
Article 19 levies a duty on certificate or other document evidencing the right or title of the holder thereof or any other person, either to any shares, scrip or stock in or of any incorporated company or other body corporate or to become proprietor of shares, stock or scrip of any such company or body. 'Share' means share in the share capital of a company, and includes stock except when a distinction between stock and share is expressed or implied. Scrips are also in the nature of certificates. When debentures are allotted to subscribers upon terms that the same shall be payable by instalments, a provisional scrip is issued to the subscribers, to be exchanged for a regular debenture after all the instalments are paid up.
34.11. In a Bombay case,1 a certificate of membership issued by a provident society, insuring the payment of money on the death of the member of the society, was held to be chargeable under Article 47 (Policy of insurance), and not under Article 19. There does not appear to be any conflict of decisions or obscurity of language or other serious difficulty with respect to this article.
1. Himmat Provident Society Ltd. (in re:), 1901 ILR 25 Bom 376.
34.12. Article 20.-
Article 20 deals with a Charter-party, which is any instrument (except an agreement for the hire of a Tug-steamer), whereby a vessel or some specified principal part thereof is let for the specified purposes on the charter, whether the instrument include a penalty clause or not. A charter party is a contract made between the freighter (i.e. the person who charters or hires the ship or a part for the carriage of his goods) and the owner (or the masters or their agent) (the master generally having authority written or implied, from the terms of his employment), containing the terms for freight, and, in this contract, the owners or masters bind themselves, the ship, tackle and furniture that the goods freighted shall be delivered (dangers of the sea excepted), at the place of consignment: and they also covenant to provide seamen, rigging etc. and then equip the ship completely which they also warrant seaworthy. The freighter, on his part, stipulates to pay the freight. A charter party is distinguishable from a bill of lading, inasmuch as the charter-party relates to the entire ship where as the bill of lading only ascertains the contents of the particular cargo.
34.13. The word "charter party" is derived from the expression "carta partita", which, in medieval latin, meant an instrument written in duplicate, on a single sheet and then divided by indented edges so that each part fitted1 the other.
There are three types of charter party:-
(a) Voyage charter party;
(b) time charter party;
(c) charter party by demise, i.e. lease of the vessel.
A voyage or a time charter party confers simply the right to have the goods carried by a particular vessel; while, in the case of charter by demise, the possession and control is also transferred to the charterer2.
1. B.C. Mitra Carriage by Sea, (1972), p. 8.
2. Payne Carriage of Goods by Sea, (1968), p. 9.
34.14. Article 20 to be deleted.-
It may be of interest to note that in England, the duty on charter parties has been abolished, having been found to be unproductive,1 we put in the Questionnaire2 a question whether a similar course would not be useful for facilitating the development of shipping in this country. There has been considerable support for such a course in the replies. We, therefore, recommend, deletion of Article 20.
Article 21.-Article 21 was omitted in 1927.
1. Finance Act, 1949 (English).
2. Question 85.
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