Allowed

V Prabhakar Reddy v. Palagiri Reddi Sarada and Another

Andhra Pradesh HC7 Dec 2022CRP/6524/2018

Case brief

AI extract

What is this about?

Revision petition allowed setting aside trial court order. Corrected stamp duty calculation direction under Article 35(a) and penalty collection under Section 35. Directed clear statement of collateral purpose for evidence.

What did the court decide?

Revision petition allowed; impugned order set aside with direction to recalculate stamp duty, collect penalty, and specify collateral purpose.

V Prabhakar Reddy Vs Palagiri Reddi Sarada and… — Property and Title | Andhra Pradesh HC (2022)

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THE HON’BLE MS JUSTICE B.S.BHANUMATHI

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C.R.P. No.6524 of 2018

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ORDER :

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This revision petition is filed under Article 227 of the Constitution of India against the order dated 29.11.2017 in O.S No.382 of 2011 on the file of the Court of Principal Senior Civil Judge, Madanapalli by which the trial Court held the document dated 14.10.2007 titled as ‘Swadeena Adamana Agreement’ as unregistered possessory mortgage agreement and the same can be used for collateral purpose only and its probative value can be decided later on.

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The suit was filed for permanent injunction by the plaintiff claiming that the first defendant who is the owner of the property and the second respondent/defendant who is the subsequent purchaser having obtained a sale deed dated 20.08.2011. It is the case of the plaintiff that when she approached the first defendant to take the house on rent, the first defendant stated that there is a loan pending on the said house in the Town Bank, Madanapalli and that the first defendant needs money to discharge the loan and for her other needs. Therefore, the first defendant agreed to give the plaintiff the plaint schedule house property on lease for an amount of Rs.5,00,000/- on interest free and rent free basis

Contd.,

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C.R.P.No.6524 of 2018

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for a period of 25 years i.e. from 14.10.2007 till 13.10.2032 and executed the document in question on 14-10-2007 in favour of the plaintiff on receipt of Rs.5,00,000/- on the same date. The first defendant denied the execution of the document dated 14.10.2007. When the suit was coming for arguments, the plaintiff filed I.A.No.743 of 2017 and 744 of 2017 to recall PW.1 and reopened the evidence of the plaintiff. Then, the plaintiff proposed to mark the document dated 14.10.2007 styled as ‘Swadhina adamana’ agreement which was executed on non-judicial worth Rs.100/-.

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The first defendant filed objections stating that the document cannot be marked as exhibit as the amount paid as stamp duty and penalty is insufficient. It is further contended that the plaintiff is liable to pay stamp duty under Article 31(a) (v) which deals with lease deed for a term exceeding 20 years but not exceeding 30 years and the stamp duty payable thereunder is 5% of the market value equal to the amount or value of 5 times of the average annual rent reserved.

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As per the office note dated 21.11.2017, the document is be found liable for stamp duty of Rs.9,890/-

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BSB,J

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C.R.P.No.6524 of 2018

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under Article 35 (b) R/w 23 of Schedule 1-A of Act 11 of 1899. The Court of Principal Senior Civil Judge, Madanapalle issued certificate that deficit stamp duty of Rs.9890/- under Article 35(b) r/w Article 23 of Schedule I-A of the Act II of the Stamp Act 1899 has been levied from the plaintiff. It discloses Challan No.13909, dated 21-11-2017. On 29.11.2017, the trial Court passed the order observing that the disputed document is treated as unregistered possessory mortgage agreement and that under Section 49(c) of the Registration Act, this document can be looked into for collateral purpose, but not for main purpose as it requires registration, but not registered. Therefore, it held that the plaintiff is entitled to mark the said document for collateral purpose only. The Court made it clear that mere admission of the document by itself does not automatically prove its contents as its probative value is altogether different.

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Subsequently on 26.12.2017 PW.1 was examined and disputed document is marked as Ex.A.7 and the plaintiff/PW.1 was cross examined on the same day.

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This revision petition is filed in September, 2018 challenging the order of the trial Court dated 29.11.2017

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BSB,J

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C.R.P.No.6524 of 2018

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contending that the unregistered lease deed cannot be marked as Ex.A.7 unless proper stamp duty is paid. It is further contended that the trial Court directed the plaintiff to pay an amount of Rs.9890/- only which is less than 1%, whereas 5% of the amount of the document shall be collected under Article 31 Schedule I-A(V) (sic Article 31(a)(v) ScheduleI-A which deals with leases proposed to be for a term exceeding 20 years but not exceeding 30 years, since the disputed document is purported to be for 25 years. Thus, the revision petitioner contended that the document ought not have been dealt with under Article 35(b) r/w Article 23 of Schedule I A. It is also contended that the document marked as Ex.A.7 ought to have been treated as an unregistered lease deed and collected stamp duty, but the trial Curt erroneously treated the document as unregistered possessory mortgage agreement. It is also contended that the document ought not to have been marked but due to change in the Presiding Officer of the Court on transfer, the document was marked as Ex.A.7 on 26.12.2017.

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BSB,J

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C.R.P.No.6524 of 2018

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Thereafter, the first defendant/petitioner filed C.R.P.No.3249 of 2018 and High Court granted interim stay on 27.08.2018.

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Learned counsel for the revision petitioner submitted that the contention is now limited to the provision of law under which the stamp duty is to be collected in accordance with the observation of the trial Court that the document in question is an unregistered possessory mortgage deed and that the revision petitioner gives up the contention that the document is to be treated as lease deed which attracts stamp duty under Article 31 of Schedule 1-A. He further submitted that the trial Court recorded that the relevant provision for collection of stamp duty in respect of mortgage with possession is Article 35 (b) of schedule 1-A, it must be Article 35 (a) of Schedule 1-A.

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For the purpose of clarity the relevant provision is extracted here below :-

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35. Mortgage Deed, not being an Agreement relating to Deposit of title deeds. Pawn or Pledge (No.7) Bottomry Bond (No.14) Mortgage of a crop (No.36) Respondentia Bond

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C.R.P.No.6524 of 2018

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(No.47) OR SECURITY Bond (No.48)

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(a) When possession of the property or any part of the property comprised in such deed is given by the mortgagor or agreed to be given :

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(b) When possession is not given or agreed to be given as aforesaid :

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The same duty as a conveyance (No.20) for a consideration or market value equal to the amount secured by such deed.

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The same duty as a Bottomry Bond (No.14) for the amount secured by such deed.

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Explanation : a mortgagor who gives or has given to the mortgage a power of attorney to collect rents or gives or has given to the mortgagee a lease, of the property mortgaged or part thereof, is deemed to give possession thereof within the meaning of this article :

(c) …

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C.R.P.No.6524 of 2018

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Under the disputed document allegedly an amount of Rs.5,00,000/- was paid with the understanding that the plaintiff would be in possession of the property for 25 years without paying any rent or interest. Therefore, the defendant considering it as lease deed for a period exceeding twenty years, but not exceeding thirty years, initially relied on Article 31-a (v) of Schedule 1-A. As per the said provision, stamp duty payable is based on average annual rent. In the present case, since no rent has been fixed, except receiving a lump-sum amount, the application of Article 31-a (v) is not possible. Considering the intention behind the transaction and the expression used in the document, the trial Court treated it as unregistered mortgage with possession. However, erroneously, the stamp duty was collected under Article 35(b) which deals with mortgage without possession, instead of collecting the stamp duty as per Article 35(a) which deals with mortgage with possession. Thus, the error is apparent on the face of the record.

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That apart, it could not be understood, for want of details, as to how an amount of Rs.9,890/- was arrived at as per Article 35 (b). Moreover, as per Article 35(b), the stamp duty payable is the same duty as an Bottomary bond (14) for the amount secured by such deed. As per Article 14 for Bottomary

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C.R.P.No.6524 of 2018

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bond, where the amount of value secured exceeds Rs.1000/-, the stamp penalty payable is ‘the stamp duty as under Clause (a) for the first Rs.1,000/- and for every Rs.500/- or part thereof in excess of Rs.1,000/- fifteen rupees. As per (a) three rupees for every one hundred rupees or part thereof. Therefore, even as per the above said provision also, the amount of Rs.9,890/collected appears to be insufficient.

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Since the document is liable for stamp duty as per Article 35(a) r/w Article 20, the following is the amount to be paid as stamp duty.

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Article 20:-

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(a) Where the amount or value of the consideration for such conveyance as set forth therein [or the market value of the property which is the subjectmatter of the conveyance whichever is higher] does not exceed Rs.50;

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Two rupees fifty paise

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(b) Where it exceed Rs.50, but does not exceed

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Five rupees for every one hundred rupees or part

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C.R.P.No.6524 of 2018

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Rs.1,000; thereof. (c) Where it exceeds The same duty as under Rs.1,000; Clause (b) for the first Rs.1,000 and for every Rs.500 or part thereof in excess of Rs.1,000, twenty five rupees. (d)…

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Section 35 of the Stamp Act prohibits an insufficiently stamped document to be received in evidence, but it provides remedy therein itself. As per the proviso (a) to section 35 of the Stamp Act, any such instrument (insufficiently stamped) shall be admitted in evidence on payment of the duty with which the same is chargeable or, in the case of instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of Rs.15/-, or when ten times the amount of the proper duty or deficit portion thereby exceeds Rs.15/-, of a sum of equal to ten times such duty or portion.

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In view of the mandatory nature, it is not only deficit stamp duty, but also penalty needs to be collected.

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C.R.P.No.6524 of 2018

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For collection of the deficit stamp duty, the procedure is contemplated under Section 38.

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Learned counsel for the respondent/plaintiff contended that the trial Court has rightly collected the stamp duty and that the document once marked, the same cannot be demarked on the ground of insufficiency of stamp duty as per Section 36 of the Stamp Act.

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A perusal of the impugned order indicates that order has been erroneously passed in the light of the forgoing discussion.

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Merely because, the document has been assigned an exhibit number without properly applying the judicious mind, it does not prohibit collection of necessary stamp duty. This view is fortified by the decision of this High Court in S.Mohan Krishna v. V.Varalakshmamma¹ and contended that merely because a document is given an exhibit number by affixing stamp and merely signing thereon, when nothing discloses about judicial determination of admissibility of the document, the bar under Section 36 of the Indian Stamp Act does not come in the way of the parties to raise an objection about the admissibility of the document.

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1 C.R.P.No.2126 of 2011, dated 04.06.2017

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C.R.P.No.6524 of 2018

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The trial Court has failed to disclose the collateral

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purpose for which the document is intended to be received in evidence. Ofcourse, section 49 of the Registration Act permits an unregistered document to be received in evidence for collateral purpose i.e., for a purpose other than the main purpose of the transaction covered by the document. However, when such document is received in evidence for any collateral purpose, the Court should indicate the limited purpose for which the document is being received in evidence or else, the parties cannot be put to notice of the use of the document enabling them to either examine a witness or cross-examine a witness on the said document relating to the purpose for which it is received in evidence. For this reason also, the impugned order is liable to be set aside with a direction to the trial Court to indicate collateral purpose for which the document is purported to be received in evidence.

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Learned counsel for the revision petitioner contended that a petition regarding the genuineness of the document may also be recorded as its genuineness as disputed. It is not required to be noted since when a document is disputed about its genuineness, it is a matter of appreciation of evidence and the pleading and evidence are sufficient to adjudicate the

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C.R.P.No.6524 of 2018

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same after the trial and there is no need to record any express objection when a document is marked or received in evidence, inspite of objecting the genuineness of the document.

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In the result, the revision petition is allowed and the order dated 29-11-2017 in O.S.No.382 of 2011 on the file of the Court of Principal Senior Civil Judge, Madanapallli is set aside with a direction to calculate the stamp duty required on the document dated 14-10-2007 as per Article 35-a of Schedule 1-A of the Indian Stamp Act, 1899 titled as possessory mortgage agreement and find deficit stamp duty, if any, and collect not only the deficit stamp duty, but also the penalty as required under Section 35 Proviso A of the said Act by following the procedure contemplated under Section 38 therein. The trial Court is further directed to indicate the collateral purpose, for which, the said document purported to be received in evidence.

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There shall be no order as to costs.

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Pending miscellaneous petitions, if any, shall stand closed.

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JUSTICE B.S.BHANUMATHI

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Date : 07-12-2022 SAB

V Prabhakar Reddy v. Palagiri Reddi Sarada and Another

Case brief

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V Prabhakar Reddy v. Palagiri Reddi Sarada and Another

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