Allowed

C. M. Smith and Sons Ltd. v. Chief Controlling Revenue Authority

Gujarat HC1 Oct 2019SCA/4011/2018

Case brief

AI extract

What is this about?

The High Court held that stamp duty paid on a mortgage deed where the other party (bank) refused to execute it due to NPA status falls under Section 47(c)(4) and (5) of the Gujarat Stamp Act, 1958, rendering it incomplete. Quashed refund-denying orders and directed the authority to refund the amount.

What did the court decide?

Impugned orders of the Additional Resident Collector and the Chief Controlling Revenue Authority were quashed; petitioner directed to receive refund of Rs. 3,76,500/- within three months.

C. M. Smith and Sons Ltd. Vs Chief… — Constitutional and Fundamental Rights | Gujarat HC (2019)

¶1

C/SCA/4011/2018 JUDGMENT

¶2

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

¶3

R/SPECIAL CIVIL APPLICATION NO. 4011 of 2018

¶4

FOR APPROVAL AND SIGNATURE:

¶5

HONOURABLE MR. JUSTICE BHARGAV D. KARIA

¶6

==========================================================

¶7

1 Whether Reporters of Local Papers may be allowed to see the judgment ?

¶8

2 To be referred to the Reporter or not ?

¶9

3 Whether their Lordships wish to see the fair copy of the judgment ?

¶10

4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?

¶11

==========================================================

¶12

C. M. SMITH AND SONS LTD.

¶13

Versus

¶14

CHIEF CONTROLLING REVENUE AUTHORITY & 2 other(s)

¶15

==========================================================

¶16

Appearance:

¶17

MR.ADITYA J PANDYA(6991) for the Petitioner(s) No. 1 MS SHRUTI PATHAK, AGP for the Respondent(s) No. 1,23

¶18

==========================================================

¶19

CORAM: HONOURABLE MR. JUSTICE BHARGAV D. KARIA

¶20

Date : 01/10/2019

¶21

ORAL JUDGMENT

¶22

1.Rule. Learned Assistant Government Pleader Ms. Shruti Pathak waives services of notice of rule on behalf of the respondents.

¶23

Page 1 of 13

¶24

C/SCA/4011/2018 JUDGMENT

¶25

By this petition under Articles 226 and 227 of the Constitution of India, the petitioner has challenged the order dated 4^th December, 2017 passed by the Chief Controlling Revenue Authority - respondent no.1 under section 53(1) of the Gujarat Stamp Act, 1958 (for short “Stamp Act”) confirming the order dated 8^th April, 2015 passed by the Additional Resident Collector, Kheda respondent no.2.

¶26

The petitioner is a limited company incorporated under the provisions of the Companies Act, 1956. The petitioner is engaged in the manufacturing of automotive equipment of various auto manufacturers and for its business requirement availed various financial assistance from different banks including consortium of four banks headed by the State Bank of India. The financial assistance granted by consortium headed by State Bank of India was extended from time to time and additional financial assistance was also granted by the consortium as and when required by the petitioner. The State Bank of India by sanctioned letter dated 25^th November, 2013 extended corporate loan-III amounting to Rs. 3.5 crores and one of the conditions for disbursement of corporate loan was that the petitioner was required to

¶27

Page 2 of 13

¶28

C/SCA/4011/2018 JUDGMENT

¶29

execute mortgage deed to create charge over the properties by way of mortgage.

¶30

It is the case of the petitioner that petitioner could not repay the loan amount regularly as the petitioner was facing financial crisis owing to factors beyond its control and the account of the petitioner was classified as Non Performing Asset (for short “NPA”) by consortium headed by the State Bank of India. As the petitioner was required to comply with the precondition of executing and extension of equitable mortgage deed for disbursement of amount sanctioned, the petitioner prepared a draft for extension of equitable mortgage deed and signed the same after affixing the stamp for an amount of Rs.3,76,500/- on 29^th November, 2014 by way of franking.

¶31

5.It appears that the petitioner was informed by the State Bank of India that there would not be any disbursement of the sanctioned financial assistance as the account of the petitioner was declared as NPA and the bank was in process of recovering of the outstanding dues from the petitioner by assigning debt to any asset reconstruction company.

¶32

Page 3 of 13

¶33

C/SCA/4011/2018 JUDGMENT

¶34

In such circumstances, extension of the equitable mortgage deed prepared by the petitioner which was duly stamped on 29^th November, 2014 was not executed by the State Bank of India. The petitioner therefore, filed an application dated 29^th December, 2014 before the Sub-Registrar, Nadiad for getting refund of the stamp duty amounting to Rs.3,76,500/- affixed on the extension of equitable mortgage deed since the document could not be executed and the benefit under the document could not be transferred to the petitioner. The petitioner also obtained and submitted certificate dated 10^th January, 2015 from Prime Cooperative Bank Ltd. to show that Rs.3,76,500/- was paid by the petitioner towards the stamp duty by franking the document.

¶35

Meanwhile, the State Bank of India had assigned its debts in favour of asset reconstruction company namely, Invent Securitization and Reconstruction Pvt. Ltd. vide assignment deed dated 28^th January, 2015. The petitioner also informed respondent no.2 about such assignment. However, respondent no.2 Additional Resident Collector and District Registrar cum Registration

¶36

Page 4 of 13

¶37

C/SCA/4011/2018 JUDGMENT

¶38

Officer, by order dated 8^th April, 2015 rejected the application for refund of the stamp duty filed by the petitioner on the ground that the petitioner is not entitled to refund of the stamp duty in view of the provisions of section 47(B) of the Stamp Act.

¶39

8.Being aggrieved and dissatisfied, the petitioner preferred an appeal under section 53 of the Stamp Act before respondent no.1 which was registered as Appeal No.50/2015.

¶40

Respondent No.1 Chief Controlling Revenue Authority without taking into consideration the provisions of section 47 of the Stamp Act, rejected the appeal by order dated 4^th December, 2017.

¶41

The petitioner has therefore, preferred this petition challenging both the orders passed by the respondent authorities.

¶42

Learned advocate Mr. Aditya J. Pandya appearing for the petitioner submitted that both the authorities below have misinterpreted the provisions of section 47 as the case of the petitioner falls within the purview of section 47(c)(4) and section 47(c)(5) of the Stamp Act. It was submitted

¶43

Page 5 of 13

¶44

C/SCA/4011/2018 JUDGMENT

¶45

that though the submissions of the petitioner were recorded by respondent no.1 but no reason is assigned to reject the same.

¶46

11.1) It was further submitted that section 47(c)(4) of the Stamp Act provides that in case any document for which stamp is used is not executed by the other part, the stamp duty is liable to be refunded. Therefore, in facts of the case, as the State Bank of India did not execute the agreement, document is of no use to the petitioner and therefore, the stamp duty used by the petitioner is liable to be refunded.

¶47

11.2) Learned advocate for the petitioner also placed reliance on section 47(c)(5) of the Stamp Act to submit that in the facts of the case as the State Bank of India refused to execute the document on the ground that no financial assistance can be given to the petitioner resulting into redundant document and therefore, as per the provisions of section 47(c)(5), the petitioner is entitled to refund of the stamp duty paid by it.

¶48

11.3) Learned advocate for the petitioner further submitted that respondent no.2 did not grant any opportunity of hearing to the

¶49

Page 6 of 13

¶50

C/SCA/4011/2018 JUDGMENT

¶51

petitioner and has passed a cryptic order by referring only to section 47(b) of the Stamp Act. It was further submitted that respondent no.1 has also not given any reason as to why provisions of section 47(c)(4) and 47(c)(5) of the Stamp Act would not be applicable and only provision of section 47(b) of the Stamp Act would be applicable to reject the refund application of the petitioner.

¶52

On the other hand learned Assistant Government Pleader Ms. Shruti Pathak submitted that provisions of section 47(b) of the Stamp Act provides that the stamp on any document which is written out wholly or in part and which is not signed or executed by any party thereto, then the stamp duty is refundable in respect to such document.

¶53

12.1) With regard to the contention of applicability of section 47(c)(4) and section 47(c)(5), it was submitted that provisions of sub-clauses(4) and (5) are not applicable as the State Bank of India has never refused to execute the document nor the State Bank of India has refused to act under such extension of equitable mortgage deed but in the facts of the case, when the account of the petitioner was declared as NPA by the State

¶54

Page 7 of 13

¶55

C/SCA/4011/2018 JUDGMENT

¶56

Bank of India as a lead bank of consortium, clauses (4) and (5) of section 47(c) would not come into play and as the petitioner has already signed the documents under section 47(b), no refund is liable to be paid. It was therefore, submitted that there is no infirmity in the orders passed by the authorities below for rejecting the claim of the refund made by the petitioner.

¶57

13.Having heard the learned advocates for the respective parties and having gone through the materials on record, it is not in dispute that the petitioner has paid the stamp duty by franking amounting to Rs.3,76,500/- on the equitable mortgage deed dated 16^th October, 2014 which was signed only by the petitioner and not by the State Bank of India. Moreover, it is also not in dispute that the State Bank of India has assigned the debts to Invent Assets Securitization and Reconstruction Pvt. Ltd. Therefore, extension of equitable mortgage deed prepared by the petitioner on which stamp duty was paid was not at all used by the petitioner nor signed by the State Bank of India. In such circumstances, whether the claim of refund made by the petitioner can be granted or not is required to be ascertained in view of provisions of section

¶58

Page 8 of 13

¶59

C/SCA/4011/2018 JUDGMENT

¶60

47 of the Stamp Act which reads thus :

¶61

“47. Allowance for spoiled stamps. - Subject to such rules as may be made by the State Government as to the evidence to be required, or the inquiry to be made, the Collector may, on application made within the period prescribed in section 48, and if he is satisfied as to the facts, make allowance for impressed stamps spoiled in the cases hereinafter mentioned, namely

¶62

(a) the stamp on any paper inadvertently and undersignedly spoiled, obliterated or by error in writing or any other means rendered unfit for the purpose intended before any instrument written thereon is executed by any person;

¶63

(b) the stamp on any document which is written out wholly or in part, but which is not signed or executed by any party thereto;

¶64

¶65

(1) has been afterwards found to be absolutely void in law from the beginning;

¶66

(2) has been afterwards found unfit, by reason of any error or mistake therein, for the purpose originally intended;

¶67

(3) by reason of the death of any person by whom it is necessary that it should be executed, without having executed the same, or of the refusal of any such person to execute the same, cannot be completed so as to effect the intended transaction in the form proposed;

¶68

(4) for want of the execution thereof by some material party, and his inability or refusal to sign the same, is in fact incomplete and insufficient for the purpose for which it was intended;

¶69

Page 9 of 13

¶70

C/SCA/4011/2018 JUDGMENT

¶71

(5) by reason of the refusal of any person to act under the same, or it to advance any money intended to be there by secured, or by the refusal or non-acceptance of any office thereby granted totally fails of the intended purpose;

¶72

(6) becomes useless in consequence of the transaction intended to be thereby effected by some other instrument between the same parties and bearing a stamp of not less value;

¶73

(7) is deficient in value and the transaction intended to be thereby effected had been effected by some other instrument between the same parties and bearing a stamp of not less value;

¶74

(8) is inadvertently and undersigndly spoiled and in lieu whereof another instrument made between the same parties and for the same purpose is executed and duly stamped;

¶75

Provided 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.

¶76

Explanation. - The certificate of the Collector under section 32 that the full duty with which an instrument is chargeable has been paid is an impressed stamp within the meaning of this section.”

¶77

14.On bare perusal of the above provision, it emerges that respondents no.1 and 2 have relied on clause 47(b) which provides that refund would be granted if the stamp on document which is written out wholly or in part but which is not signed or executed by any party thereto but in the facts of the case when the document is already signed by the petitioner, clause 47(b) would not be applicable but as per clause(c) of section 47

¶78

Page 10 of 13

¶79

C/SCA/4011/2018 JUDGMENT

¶80

the stamp used for an instrument executed by any party thereto as per clause (4) for want of execution thereof by some material party, and his inability or refusal to sign the same, is in fact incomplete and insufficient for the purpose for which it was intended, would be applicable and similarly sub-clause (5) of clause(c) of section 47 which provides that such instrument is by reason of the refusal of any person to act under the same or it to advance any money intended to be thereby secured or by the refusal of the non acceptance of any office thereby granted totally fails of the intended purpose would be entitled to be refunded.

¶81

15.Therefore, in the facts of the case, case of the petitioner would fall under sub-clauses (4) and (5) of clause (c) of section 47 and not under clause (b) of section 47 as relied on by respondents no. 1 and 2 as State Bank of India has refused to sign the document prepared by the petitioner and execute the same as the financial assistance given to the petitioner by the bank was notified as NPA and as such there was no need for execution of extension of equitable mortgage in favour of the bank. In such circumstances, the document on which the stamp duty was affixed

¶82

Page 11 of 13

¶83

C/SCA/4011/2018 JUDGMENT

¶84

by way of franking amounting to Rs.3,76,500/was incomplete and insufficient for the purpose for which it was intended as the bank refused to execute such document in facts of the case. Therefore, both the authorities have erred in applying provisions of section 47(b) of the Stamp Act instead of that of provision of section 47(c)(4)and (5) of the Act ought to have been applied so as to grant refund to the petitioner of the stamp duty paid on the instrument which was never executed to give any benefit to the petitioner and such document was incomplete and insufficient as per sub-clause (4) and was of no use to the petitioner and it totally failed of the intended purpose as provided in sub-clause (5) of clause (c) of section 47 of the Stamp Act.

¶85

In such circumstances, the impugned orders are required to be quashed and set aside as the same are contrary to the provisions of the Stamp Act.

¶86

17.The petition therefore, succeeds and is accordingly allowed. The impugned orders dated 8^th April, 2015 passed by respondent no.2 as well as order dated 4^th December, 2017 passed by respondent no.1 Chief

¶87

Page 12 of 13

¶88

C/SCA/4011/2018 JUDGMENT

¶89

Controlling Authority are hereby quashed and set aside and the respondent no.2 is hereby directed to refund the amount of Rs.3,76,500/- paid by the petitioner for the stamp duty affixed on the document which could not be used and utilized, within a period of three months from the date of receipt of writ of this order.

¶90

Rule is made absolute to the aforesaid extent with no order as to costs.

¶91

(BHARGAV D. KARIA, J)

¶92

RAGHUNATH R NAIR

¶93

Page 13 of 13

C. M. Smith and Sons Ltd. v. Chief Controlling Revenue Authority

Case brief

What is this about?

What did the court decide?

C. M. Smith and Sons Ltd. v. Chief Controlling Revenue Authority

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Muslim Kunza Farosh Jamat Trust Vs Charity Commissioner

Parmar Shaileshkumar Ishwarlal Vs State of Gujarat

Patel Pareshkumar Amrutlal Vs State of Gujarat

Pravinbhai Vrajlal Dogresia Vs State of Gujarat

Hamesh Mahendrabhai Patel Vs Chief Controlling Revenue Authority

Hasmukhbhai Chimanlal Patel Vs State of Gujarat