Allowed

Mrs. Shuaiba Rahaman v. the State of Karnataka

Karnataka HC3 Mar 2023WP/32188/2019

Case brief

AI extract

What is this about?

Writ Petition challenging Deputy Commissioner's opinion that deed of indenture requires stamp duty as conveyance. Court held trust ended by operation of law upon beneficiary attaining age; deed merely records past event. Impugned opinion quashed, doshanded to Sub-Registrar to accept deed with fixed duty only. Disposition allowed.

What did the court decide?

Impugned opinion dated 07.03.2019 quashed. Direction to Sub-Registrar to accept document and levy fixed stamp duty of Rs.1,000/- under Article 54(ii).

Mrs. Shuaiba Rahaman Vs the State of Karnataka — Property and Title | Karnataka HC (2023)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 03^RD DAY OF MARCH, 2023

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BEFORE

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THE HON’BLE MRS. JUSTICE K.S. HEMALEKHA

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WRIT PETITION No.32188/2019 (GM-ST/RN)

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BETWEEN:

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MRS. SHUAIBA RAHAMAN D/O. LATE M.M.A. RAHAMAN, AGED ABOUT 41 YEARS, RESIDING AT 2A, SUNDALE APARTMENTS 55/56, OSBOURNE ROAD, ULSOOR, BANGALORE – 560 042. ... PETITIONER

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(BY SRI AJESH KUMAR S., ADVOCATE)

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AND:

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THE STATE OF KARNATAKA REPRESENTED BY ITS SECRETARY DEPARTMENT OF URBAN DEVELOPMENT VIDHANA SOUDHA, BANGALORE – 560 001.

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DEPUTY COMMISSIONER AND DISTRICT REGISTRAR STAMPS SHIVAJINAGAR REGISTRATION DISTRICT BENGALURU – 560 009. ... RESPONDENTS

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(BY SRI N. KUMAR, AGA FOR R-1 AND R-2)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE OPINION DATED 07.03.2019 AT ANNEXURE-A AND CONSEQUENTLY DECLARE THAT AS PER ARTICLE 52(d) OF THE KARNATAKA STAMP ACT 1957 NO STAMP DUTY IS REQUIRED TO BE PAID ON A DEED OF DECLARATION TO DECLARE THAT THE PETITIONER HAS BECOME THE OWNER OF THE TRUST PROPERTY BY VIRTUE OF THE OPERATION OF CLAUSE 9 OF THE TRUST DEED AT ANNEXURE-C; DIRECT THE DEPUTY

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REGISTRAR TO CHARGE STAMP DUTY ON THE DEED OF INDENTURE AT ANNEXURE-B AS PER ARTICLE 4 OF THE KARNATAKA STAMP ACT.

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THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED ON 22/02/2023 FOR ORDERS AND COMING FOR PRONOUNCEMENT OF ORDER THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:

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O R D E R

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Petitioner herein is called in question the

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proceedings dated 07.03.2019 bearing Reference No.SJN:JN:ADJ:639:2018-19/4052 dated 07.03.2019 passed by the 2^nd respondent-Deputy Commissioner and the District Registrar of Stamps whereby, the said respondent directed the payment opining that the stamp duty is leviable as per Article 52(d) of the Karnataka Stamp Act, 1957 (hereinafter referred to as ‘the Stamp Act, 1957’ for short) for registration of a deed of indenture in favour of the petitioner by the erstwhile trust.

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Brief facts leading to filing of this writ petition is that:

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The indenture of the Trust (hereinafter referred to as the Trust’) dated 04.03.1998 was constituted by

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name Sura Foundation and the Trust had come to an end upon the sole beneficiary who is the petitioner attaining the age of 40 years as per the Clause 9 of the Trust. The Trust had acquired the petition schedule property under the Sale Deed dated 17.04.1998 and the petitioner being the sole beneficiary under the Trust attained the age of 40 years on 14.09.2018 and in view of the Trust having come to an end as per Clause 9 and in order to avoid any future claim and to obviate any scope for future litigation, the petitioner filed an application on 06.02.2019 before the 2^nd respondent-the Deputy Commissioner under Section 31 of the Stamp Act, 1957.

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The Deputy Commissioner and the District Registrar of Stamps opined and treated the instrument of conveyance attracting levy of stamp

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duty advoleram in terms of Article 52 (d) of the Schedule of the Stamp Act, 1957.

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The respondents appeared and filed their

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statement of objections inter alia contending that the petitioner is the beneficiary under the Trust dated 04.03.1998 and the deed of indenture dated 18.01.2019 would fall under Article 52 (d) of the Stamp Act, 1957 as it is a case where the Trust property from one trust to another trust or from trust to trustee or beneficiary, or from trustee to trust or trustee to beneficiary and the same duty chargeable as a conveyance under Article 20 (1) on the market value of the property and accordingly, the stamp duty imposed is justified.

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Heard the learned counsel for the parties.

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This Court has considered the rival

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contentions urged by the learned counsel for the parties and perused the entire materials on record.

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Learned counsel for the petitioner

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contended that the question of levy of duty on the instrument of this kind is no longer res integra as held by the Co-Ordinate Bench of this Court in W.P. No.29645/2010 between Rastrothana Trust Vs. District Registrar and others decided on 05.01.2018 has observed at paragraph Nos.6 to 10

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as under:

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“6. At the outset, it is to be taken note that the document in question is dated 05.01.2004 and in that view, the provision providing for stamp duty as contained in the schedule prior to the subsequent amendment which was made on 01.04.2011 would have to be taken into consideration. The provision as contained in Article 52(d) of the Stamp Act would provide that in respect of a transfer, with or without consideration of any Trust property from the Trustee to another Trustee or from a Trustee to a Beneficiary, the stamp duty at Rs.200/-. Keeping in view the said provision, a perusal of the Deed of Merger which is the document in issue herein would indicate that the Jnana Bharathi Trust which

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held the properties in question in their name have merged themselves in the Rashtrothana Trust. The relevant clauses thereto is extracted as hereunder:

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“3. It is agreed by and between the parties that all assets and disclosed liabilities of the Merging Trust shall be the assets and liabilities of the Merged Trust as from the appointed day mentioned above.

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10. The Jnana Bharathi Trust–The Merging Trust, shall stand dissolved and the Trustees of the merging Trust stand relived of all their obligations under the Deed of Trust dated 17-041979 of Merging Trust subject to their fulfilling all their obligations set out herein above.”

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7. A perusal of the same would leave no doubt that Jnana Bharathi Trust which was a existing Trust has through the said document sought to extinguish itself and merge in the Rashtrothana Trust due to which the properties held by it was to be held by the Merged Trust viz., Rashtrothana Trust. It is no doubt true that as contended by the

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learned Government Advocate the declaration which was also sent by one of the Trustees was executed on the same day which refers to the details of the property. In that regard also, a perusal of the said document would indicate that the properties which had been acquired for the benefit of the Jnana Bharathi Trust was standing in the name of the Managing Trustee and it is in that view a declaration has been made by the Managing Trustee to the effect that the property which stood in his name was the property which in fact was purchased for and on behalf of Jnana Bharathi Trust which was said to extinguish itself and merge in the Rashtrothana Trust.

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8. If that be the position, the same is not in the nature of a ‘settlement’ to constitute a Trust as the transaction is merely a merger of one Trust with another Trust and the properties owned by the Merging Trust is being transferred to the name of Merged Trust. If that aspect of the matter is kept in view, the transaction would not fall within the definition as contained in Section 2(1)(q)(iii) of the Stamp Act. To more clearly arrive at this conclusion, what is also to be taken note is a consideration that had been made by Full

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Bench of this Court in the case of Chief Controlling Revenue Authority vs. H.Narasimhaiah Sub Registrar (ILR 1991 Kar 1041) : (AIR 1991 Kar 392 (FB). In the said case, though a question had arisen to consider as to whether the transfer of the property to the Trust would fall under Article 52 (d) of the Stamp Act or not, the situation being considered was where a society registered under the Societies Registration Act which continued to subsist was transferring a property to a newly created Trust. In that regard, this Court was of the opinion that the same would amount to settlement and had held that it would fall under Section 2(1)(q)(iii) of the Stamp Act.

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9. If that consideration is taken for guidance the situation is not similar in the instant facts since the nature of the transaction as has already been referred to above is merely the merger of one Trust with the other. In this regard it would also be appropriate to refer to the Full Bench judgment of Madhya Pradesh High Court in the case of Sri Digambar Jain and Ors. vs. Sub Registrar, Stamps Indore (AIR 1970 MP 23) relied on by the learned counsel for the

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petitioner. In the said case, the Hon’ble Full Bench after referring to the nature of the transaction and on a harmonious consideration of the documents therein, the transaction is noted to be considered as a merger and has held that a mere indication of certain words in the document taken out of contest cannot change the right that is created therein. The said decision was rendered while considering a similar provision arising under the Indore Stamp Act.

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10. Therefore, keeping in view the facts arising in the instant case and also the transaction that is referred to in the said documents, the conclusion as reached by the authorities in the orders impugned is not justified. They are accordingly quashed. It is held that the stamp duty as paid in respect of the Deed of Merger as at Annexure-A is in terms of the provision as contained in the Karnataka Stamp Act and no further duty is payable.”

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8. In support of his contention, learned

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counsel has relied upon the following judgments:

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1. W.P. No.38378/1998 in the case of Gowri Enterprises, Gowribidanur, Kolar District

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Vs. State of Karnataka and Others.

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W.P. No.22200/2010 in the case of

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K. Umashankar Vs. The Inspector General

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of Registration before the High Court of Judicature at Madras [Umashankar]

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3. W.P. No.8500/2020 in the case of New Horizon Educational and Cultural Trust and another Vs. the Senior Sub-Registrar, Bidarahalli at Bangalore [New Horizon Educational and Cultural Trust]

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At the outset, the clause in Trust dated

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04.03.1998 needs to be taken into consideration and Clause 9 of the said Indenture of Trust, reads as under:

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“9. Duration of the Trust:

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The Trust shall remain in force till the earliest of the following:

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(i) Till the beneficiary attains the age of 40 years and in the event, she fails to reach the above age, till the last of her child attains the age of 21.

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(ii) Till such period as the Board of Trustees in office may decide.”

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A perusal of the deed of indenture trust makes it clear that the petitioner was the sole beneficiary under the Trust Deed and as per Clause No.9, the Trust shall remain in force till the beneficiary attains the age of 40 years and in the event, she fails to reach the above age till the last of her child attains the age of 21 years. The petitioner had attained the age of 40 years on 14.09.2019 and the Trust came to an end as per Clause 9 stated supra. However in order to avoid any future litigation, the petitioner filed an application on 06.02.2019 before the respondentDeputy Commissioner to take an opinion as per Section 31 of the Stamp Act, 1957 seeking opinion of

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the officer has to determine the duty to which the instrument is chargeable.

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The Deputy Commissioner-respondent

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herein opined that the stamp duty is leviable as per Article 52(d) of the Stamp Act, 1957. Article 52(d) of the Stamp Act reads as under:

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“ Art. 52. Transfer –

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x x x

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(d) of any trust property from one trust to another trust or from Trust to trustee or beneficiary, or from trustee to trust or trustee or beneficiary, as the case may be.

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The same duty as a conveyance under Article 20 (1) on the market value of the property (which is the subject matter of such transfer) or consideration for such transfer, whichever is higher: Provided that for the public religious and charitable trusts, the duty for such transfer shall be rupees one thousand.

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If the said Article is taken into

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consideration and in view of the Trust having coming

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to an end upon the petitioner having attained the age of 40 years, the petitioner has been vested with the

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said property by operation of law. The deed of indenture by itself does not transfer any property to the petitioner and the petitioner does not independently get right, title and interest of the Trust property by the deed of indenture. The deed of indenture is nothing but a record of past event and therefore, the deed of indenture could not construed as a deed of conveyance and Article 52(d) of the Stamp Act, 1957 be applicable. Section 2(d) defines “conveyance” under Stamp Act, 1957, which reads as under:

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“ 2. Definitions.-

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xxxxx

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(d) “conveyance” includes,-

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(i) a conveyance on sale,

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(ii) every instrument,

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(iii) every decree or final order of any Civil Court;

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(iv) every order made by the High Court under Section 394 of the Companies Act, 1956 in respect of amalgamation of Companies,

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by which property, whether moveable, or immoveable or any estate is transferred to, or vested in, any other person, and which is not otherwise specifically provided for by the Schedule;”

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Section 2(j) defines an “instrument” to

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mean as under:

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“ 2. Definitions.-

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xxxxx

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(j) “instrument” includes every document and record created or maintained in or by an electronic storage and retrieval device or media by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded;”

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Admittedly, in view of the Indian Trust Act,

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the Trust came into force under the Indenture of Trust

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dated 04.03.1998 and has come to an end on 14.09.2018 on the petitioner attaining the age of 40

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years as per Clause 9 of Indenture of the Trust, the property of the Trust now gets devolves to the petitioner and the petitioner becomes the absolute owner of the right, title and interest over the said property.

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The deed of indenture in favour of the

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petitioner fall under Article 54 (ii) of the Schedule of the Stamp Act, 1957 which reads as under:

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“Article 54. Trust.-

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x x x

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(ii) When the Trust is Rupees one thousand” made for the management and custody of properties, for the purpose of distributing the benefits/profits of the property to the beneficiaries and where there is no transfer/disposition of property, in any way.

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There being no transfer/disposition of the property, in any way in deed of indenture, the

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petitioner would fall under Article 54 (ii) and not 52

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(d) of the Stamp Act, 1957 as held by the respondent.

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Under similar set of facts, in the Uma Shankar’s case stated supra, the Hon’ble High Court of Judicature at Madras at paragraph Nos.2, 3, 4, 5 has held as under:

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“2. Learned counsel appearing for the petitioner submitted that the 1^st respondent ought to have considered the fact that in terms of Clause 7 of the Trust Deed, after 1982, when K.Bhavani Shankar, had completed 25 years of age, the trust stood dissolved and therefore, the properties vested by it stood vested in favour of the beneficiaries.

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Secondly, it was contended that when the trust itself has been formed with a corpus of Rs.50,000/-, on dissolution of the trust, the trustees have decided to divide the properties only in terms of Clause 3 of the said Trust, therefore, passing an order directing the petitioner to pay a stamp duty of Rs.10,02,600/along with a penalty of Rs.1,000/-, is completely contrary to Article

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62(e) of the Indian Stamp Act and on that basis prayed for setting aside the impugned order.

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Learned counsel appearing for the respondents submitted that even though the petitioner and his siblings are the beneficiaries of the trust and the said trust dissolves on the attainment of 25 years of age by the last beneficiary, the properties of the trust do not automatically vest with the beneficiaries in terms of section 56 of the Indian Trust Act, 1882, unless the trustees transfers the same to the beneficiaries by deed of transfer duly registered.

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The argument advanced by the learned counsel for the respondents is completely misconceived in terms what is prescribed in Article 55(c) of the Act, which is extracted as under:-

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55-C. Release of Right in favour of coowner, that is to say, any instrument whereby a co-owner of a property renounces his claim in favour of another co-owner who is not a family member,

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on any specified property over which they have common right.

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The above said section applies only to the person who is not a family member. But, in the present case, all the trustees belong to one family. Therefore, Article 55(C) of Schedule-I to the Indian Stamp Act cannot be made applicable to the case of the petitioner.

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In this context, it is useful to refer to Article 62(e) of Schedule-I of the Indian Stamp Act:-

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62(e): Transfer whether with or without consideration of any trust property from one trustee to another trustee or from a trustee to a beneficiary.

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A mere reading of Article 62(e) of the said Act will clearly suggest in a given case where the trustees belong to the very same family, the question of consideration will not arise as the trust property is transferred from one trustee to another or to a beneficiary. Further, it is relevant to keep it in mind that the 1st respondent failed to consider the fact that in terms of Clause 7 of the Trust Deed, after

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1982, when K.Bhavani Shankar, had completed 25 years of age, the trust having stood dissolved, resultantly the properties vested on the trust automatically stood vested in favour of all the beneficiaries equally. Secondly, when the trust itself has been formed with a corpus of Rs.50,000/-, on dissolution of the trust, the trustees have decided to divide the properties only in terms of Clause 3 of the said Trust. Therefore, I do not know why the respondent failed to look into these aspects while passing the order directing the petitioner to pay a stamp duty of Rs.10,02,600/- along with a penalty of Rs.1,000/-, which is not only unsustainable, but also contrary to Article 62(e) of the Indian Stamp Act. Therefore, the impugned order directing the petitioner to pay a stamp duty of Rs.10,02,600/- along with a penalty of Rs.1,000/- is liable to be quashed and the same is accordingly quashed with a direction to the respondents to register and release the release deed dated 20.02.2008 bearing document No.P-14 of 2008 on the file of the 3^rd respondent herein without insisting upon payment of any deficit stamp duty or penalty and handover the same to the

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petitioner within a period of three weeks from the date of receipt of a copy of this order.”

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The Co-Ordinate Bench of this Court in the

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case of New Horizon Educational and Cultural Trust stated supra placing reliance on the Rastrothana Trust’s case has directed the authorities to accept the presentation and levy fixed stamp duty of Rs.1,000/- only in terms of Article 52 (d) of the Stamp Act, 1957.

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In view of this, the petitioner having become owner of the Trust Property, the provisions of Article 52(d) of the Stamp Act, 1957 is not attracted and the action on the part of the respondent-Deputy Commissioner to arrive at an opinion that the stamp duty is leviable as per Article 52(d) of the Stamp Act, 1957 for registration of Deed of Indenture in favour of the petitioner by the erstwhile Trust is liable to be quashed.

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20. Accordingly, this Court pass the following:

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ORDER

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i. The Writ petition is allowed. ii. The impugned Opinion No.SJN:JN:ADJ:639:2018-19/4052 dated 07.03.2019 by the 2^nd respondent-Deputy Commissioner and the District Registrar of Stamps at Annexure-A is hereby quashed.

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iii. The Sub-Registrar to accept the presentation of the document/re-executed deed of indenture in question for registration, if it is otherwise admissible and levy fixed stamp duty of Rs.1,000/- in terms of Article 54 (ii) of the Stamp Act, 1957 in accordance with law.

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Accordingly, the writ petition stands disposed

of.

SD/JUDGE

*Page No.21 Retyped and replaced V.C.O. dated 11.08.2023

Mrs. Shuaiba Rahaman v. the State of Karnataka

Case brief

What is this about?

What did the court decide?

Mrs. Shuaiba Rahaman v. the State of Karnataka

Case brief

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What did the court decide?

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