Allowed

M/S. Hi-Lite Relators [India] LLP v. the State of Kerala

Kerala HC4 Jul 2018WP(C)/18320/2018

Case brief

AI extract

What is this about?

The Court held that a deed cancelling a memorandum of deposit of title deeds is chargeable to stamp duty under Article 15 of the Kerala Stamp Act. The amendment effective 1.4.2018 was not applicable to a deed executed on 8.2.2018. The registration fee is liable under clause 1(u) of the Table of fees.

What did the court decide?

The impugned order dated 4.4.2018 regarding stamp duty and registration fee is quashed. Petitioner directed to present the deed for registration based on Article 15 and clause 1(u).

M/S. Hi-Lite Relators [India] LLP Vs the State of… — Writ and Judicial Review | Kerala HC (2018)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT:

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THE HONOURABLE MR. JUSTICE ALEXANDER THOMAS

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WEDNESDAY, THE 4TH DAY OF JULY 2018 / 13TH ASHADHA, 1940

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WP(C).No. 18320 of 2018

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-----------------------

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PETITIONER

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M/S.HI-LITE REALTORS [INDIA] LLP,

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G-1003, II, “HILITE BUSINESS PARK”,

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"HILITE CITY" NH-17 THONDAYAD BY PASS, GARUVAYOORAPPAN COLLEGE P.O. KOZHIKODE 673014 REPRESENTED BY ITS MANAGING PARTNER SRI.SALAIMAN PUTHUKULANGARA

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BY ADVS.SMT.V.MIMITA SMT.K.P.SUSMITHA

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RESPONDENT(S):

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1. THE STATE OF KERALA, REPRESENTED BY ITS PRINCIPAL SECRETARY TO GOVERNMENT

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REGISTRATION DEPARTMENT, GOVERNMENT SECRETARIAT,

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THIRUVANANTHPAURAM-695001

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2. THE SUB REGISTRAR,

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SRO CHEVAYUR, KOZHIKODE 673017

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3. INSPECTOR GENERAL,

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DEPARTMENT OF REGISTRATION VANCHIYUR PO,

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THIRUVANANTHAPURAM KERALA-695035

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4. THE FEDERAL BANK LTD,

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MAVOOR ROAD, KOZHIKODE-673016

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R1 TO R3 BY STATE ATTORNEY SRI K.V.SOHAN

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R4 BY ADV SMT.LATHA ANAND

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 04-07-2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

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K.V.

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WP(C).No. 18320 of 2018 (L)

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APPENDIX

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PETITIONER(S)' EXHIBITS

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EXHIBIT P1: COPY OF THE REGD. MEMORANDUM OF DEPOSIT OF TITLE DEEDS NO.2039/2014 SUB-REGISTRAR OF CHEVAYUR DATED 23.03.2014 EXHIBIT P2: COPY OF THE DEED OF CANCELLATION OF REGISTERED DOCUMENT RELATING TO THE DEPOSIT OF TITLE DEEDS DATED 08-12.2018 EXHIBIT P3: COPY OF THE LETTER ISSUED BY PETITIONER TO RESPONDENT NO.2 DATED 14-03-2018 EXHIBIT P4: COPY OF THE PAY IN SLP OF REGISTRATION FEES PAID BY RESPONDENT NO.4 DATED 01.03.2018 EXHIBIT P5: COPY OF THE REJECTION ORDER DATED 04.04.2018

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RESPONDENTS EXHIBITS: NIL ---------------------

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/TRUE COPY/

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K.V. P.S.TO JUDGE 11.07.2018

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ALEXANDER THOMAS, J.

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W.P(C).No.18320 Of 2018

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Dated this the 4th day of July, 2018.

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J U D G M E N T

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The case projected in this Writ Petition is that the petitioner, which is a Limited Liability Partnership Firm, had availed a loan from the 4th respondent-Federal Bank with a limited liability of Rs.35 crores and as the security for the loan transaction, the petitioner has created equitable mortgage by depositing the title deeds on 19.5.2014. After such deposit of title deeds, the petitioner-firm had executed in favour of the 4th respondent-bank, Ext.P-1 memorandum of deposit of title deeds with an intention to create equitable mortgage in tune with the consistent banking practice in that regard. Ext.P-1 memorandum of deposit of title deeds has been registered as deed No.2039/2014 before the 2nd respondent-SRO, Chevayoor, Kozhikode. Later, the petitionerfirm had fully closed the loan transaction with the bank and as Ext.P-1 memorandum of title deed was registered, the petitioner and the 4th respondent had decided to cancel Ext.P-1 registered memorandum through Ext.P-2 deed of cancellation of the above said memorandum.

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W.P(C).No.18320 Of 2018

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The petitioner would contend that the stamp duty payable for registration of Ext.P-2 deed of cancellation of memorandum is covered by the legal principles laid down by this Court in the decisions as in Rema Suresh v. District Registrar (General), Palakkad & ors ., reported in 2017 (4) KLT 606, State of Kerala v. Sankar , reported in 2018 (1) KLT 195 (DB) and South Indian Bank Ltd. v. Ramachandran , reported in 2017 (2) KLT 705. Ext.P-2 deed of cancellation has been executed on 8.2.2018. According to the petitioner, going by the legal principles laid down in the aforecited judgments, the applicable stamp duty is in terms of Article 15 of the Schedule appended to the Kerala Stamp Act. Further that the petitioner had also paid the registration fee on that basis on 1.3.2018 as evidenced by Ext.P-4, which was the first step towards presentation of registration of Ext.P-2 cancellation deed. The petitioner has also submitted Ext.P-3 letter dated 14.3.2018 before the 2nd respondent-SRO requesting that Ext.P-2 cancellation be registered after imposition of stamp duty and registration fee in terms of the legal principles already laid down by this Court in the aforecited decisions. It appears that the 2nd respondent-SRO has taken the stand that the applicable stamp duty for registration of Ext.P-2 cancellation deed is in terms of Article 6(3) of the Schedule appended to the Kerala Stamp Act,

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W.P(C).No.18320 Of 2018

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on the basis of the amended provisions, which has been made effective

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from 1.4.2018 as per the amendment to the Finance Act, 2018, reads as follows:

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“6(3) Release, discharge or cancellation The same duty with which of any instrument specified such agreement [clause (1) under clause (1) or clause (2) or (2), as the case may be] is chargeable”

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The 2nd respondent-SRO has also taken the stand as per the impugned Ext.P-5 memo dated 4.4.2018 that the applicable registration fee in respect of registration of Ext.P-2 cancellation deed is the one prescribed

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in Article I(a)(1) appended to the Table of registration fees prescribed under Sec.78 of the Registration Act.

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Heard Sri.V.Mimitha, learned counsel for the petitioner, Sri.K.V.Sohan, learned State Attorney appearing for official respondents 1 to 3 and Smt.Latha Anand, learned counsel appearing for the 4th respondent-bank.

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It is relevant to note that similar transactions in question dealt with in the aforecited first two decisions of this Court were on the basis of documents executed prior to 1.4.2018. Therein, the petitioners-executants concerned had taken up the stand that for registration of similar memorandum of deposit of title deeds, stamp duty payable is under Article 15 of the Schedule to the Kerala Stamp Act

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W.P(C).No.18320 Of 2018

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whereas, the respondent-registration officials had taken the stand that the stamp duty imposable is in terms of Article 6(1) of the Schedule to the Kerala Stamp Act or in the alternative it is covered by Article 47 of the Schedule. Article 6(1) of the Schedule as it stood prior to 1.4.2018 reads as follows:

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“6. Agreement relating to deposit of title deeds, pawn or pledge, that is to say, any instrument evidencing any agreement relating to-

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(1) the deposit of title deeds of instruments constituting or being evidence of the title to any property whatever (other than marketable security), or

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(2) the pawn or pledge of movable property, where such deposit, pawn or pledge has been made by way of security for the repayment of money advanced or to be advanced by way of loan or an existing or future debt-

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(i) if the amount secured is up to rupees 5 lakhs

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0.5% of the amount

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(ii) if the amount secured exceeds

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rupees 5 lakhs but does not exceed rupees 20 lakhs

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0.5% of the amount subject to a maximum of rupees 5,000

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(iii) If the amount secured exceeds rupees 20 lakhs but does not exceed rupees 50 lakhs

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0.5% of the amount subject to a maximum of rupees 10000

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(iv) If the amount secured exceeds rupees 50 lakhs

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0.25% of the amount subject to a minimum of rupees 20,000 and a maximum of rupees 25,000.

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W.P(C).No.18320 Of 2018

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Article 15 of the said Schedule provides as follows:

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Cancellation - Instrument of Five hundred rupees (including any instrument by which any instrument previously executed is cancelled), if attested and not otherwise provided for.

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Article 47 of the Schedule provides as follows:

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47.	Reconveyance of mortgaged property-
(a)	if the consideration for	The same duty as a
which	the property was mortgaged	conveyance (No.21 or
does n	ot exceed Rs.1000	22, as the case may
		be) for the amount of
		such consideration as set forth in the reconveyance.
(b)	in any other case:	Two hundred rupees in the case ofimmovable properties situated in the areas referred to in Article 22 and One hundred and fiftyrupees in the case ofimmovable properties situated in other areas.

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This Court in the judgment in Rema Suresh v. District Registrar (General), reported in 2017 (4) KLT 606, has held that provisions in Sec.48, proviso to Sec.48 and Sec.58(f) of the Transfer of Properties Act specifically permit a mortgage even without a written document, that too without registration. It was also held that when title deeds are deposited with an intent to create a security, the law implies

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W.P(C).No.18320 Of 2018

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the creation of a mortgage and no registered instrument as provided under Sec.59 of the T.P Act or even a written instrument is required. In the facts of the case dealt with by this Court in Rema Suresh's case (supra), the memorandum is only a document evidencing deposit of title deeds and the declaration made as found in Ext.P-1 is of the deposit of title deeds, having been made previously to the execution of the document and hence it was held by this Court that the said instrument did not create any transfer of right over the property much less a mortgage and it is also not a compulsorily registerable document as per Sec.17 of the Registration Act and the registration was made under Sec.18 of the Act, a purely optional act, and this Court cannot countenance the arguments of the Government Pleader, since the release of the title deeds can neither be said to be a release of claim on a specified property or the re-conveyance of a mortgaged property. That title never passed to the mortgagee bank nor was the possession handed over and there was not even creation of a mortgage by Ext.P-1, which only evidenced the deposit of title deeds having been made prior to the execution. The mortgage was created by the deposit of title deeds and on satisfaction of the loan, the title deeds were released and what is essentially done is return of the deposited title deeds on the satisfaction

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W.P(C).No.18320 Of 2018

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of the loan, a cancellation of the earlier memorandum evidencing deposit of title deeds. It was held that there is no provision for stamping of such a document and hence the same has to be done under Article 15 of the Stamp Act, etc. It would be profitable to refer to paras 10 & 11 of the decision in Rema Suresh v. District Registrar (General) , reported in 2017 (4) KLT 606, which read as follows: (see KLT report).

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“10. The memorandum in this case, Exhibit P1, is only a document evidencing deposit of title deeds and the declaration made as found in Exhibit P1 is of the deposit of title deeds, having been made previously to the execution of the document. Hence, the said document did not create any transfer of right over the property much less a mortgage. It is also not a compulsorily registerable document as per S.17 of the Registration Act. The registration was made under S.18 of the Act, a purely optional act.

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This Court is unable to countenance both the arguments of the learned Government Pleader; since, the release of the title deeds can neither be said to be a release of claim on a specified property or the re-conveyance of a mortgaged property. Title never passed to the mortgagee bank nor was the possession handed over and there was not even creation of a mortgage by Exhibit P1, which only evidenced the deposit of title deeds having been made prior to the execution. The mortgage was created by the deposit of title deeds and on satisfaction of the loan, the title deeds were released. What is essentially done is return of the deposited title deeds on the satisfaction of the loan, a cancellation of the earlier memorandum evidencing deposit of title deeds. There is no provision for stamping of such a document and hence the same has to be done under Article 15 of the Act, which refers to instruments by which a previously executed instrument is canceled and not otherwise provided for.”

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A Division Bench of this Court in the judgment dated

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14.11.2017 in W.A.No.2063/2017 in the case State of Kerala v. Sankar ,

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reported in 2018 (1) KLT 195 (DB), has held that an instrument or deed

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W.P(C).No.18320 Of 2018

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cancelling a registered document relating to the deposit of title deeds falls only under Article 15 of the Schedule to the Act. Arguments raised by the State authorities that Article 6 would apply and not Article 15 and the deed of cancellation of a registered document “relating to the deposit of title deeds” falls only under Article 15 of the Schedule to the Act were overruled. Yet another Division Bench of this Court in the judgment dated 10.4.2017 in A.S.No.434/2001 in the case in South Indian Bank Limited v. Ramachandran , reported in 2017 (2) KLT 705, has held that if the document merely refers to the handing over of the title deeds or acknowledges that title deeds are deposited with the creditor, without inclusion of any further term or condition, it is not a document that requires registration, etc.

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In the instant case, Ext.P-2 deed of cancellation was executed on 8.2.2018 and was also presented for registration and the first step towards presentation of the document for registration was also effected by the petitioner on 1.3.2018 as evidenced by Ext.P-4 dated 1.3.2018, payment of registration fee. The petitioner had also submitted Ext.P-3 letter dated 14.3.2018 to the 2nd respondent-SRO raising the above said pleas that stamp duty chargeable is in terms of Article 15 and about the registration fee payable in that regard.

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W.P(C).No.18320 Of 2018

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It has been held by a Division Bench of this Court in the case State of Kerala v. Geroge Jacob , reported in 2005 (4) KLT 709 = AIR 2006 Ker 111, para 32 thereof, that for the purpose of determining the rate of stamp duty, the date of execution as defined in Sec.2(f) of the Act is the determining date and the date of presentation for registration or registration itself would not have any bearing whatsoever on the question. Therefore it was held by the Division Bench that compulsorily registerable documents, executed prior to 1.4.2005 and presented for registration subsequent to 31.3.2005, the rate of stamp duty applicable was that existing prior to 1.4.2005 and will be unaffected by the amendment made by the Finance Act, 2005. Therefore, in the light of these aspects, this Court is constrained to hold that as Ext.P-2 deed of cancellation has been executed on 8.2.2018, the stamp duty payable for its registration will be covered by the law as it stood on 8.2.2018 and not as now stated by the learned State Attorney, appearing for the respondent-SRO, on the basis of the amendment made to the Finance Act, 2018, made prospectively w.e.f 1.4.2018. Therefore, the amended provisions in Article 6(3) of the Schedule to the Stamp Act can have no application or bearing in respect of registration of Ext.P-2 document, which has been executed on 8.2.2018. It is not in dispute that the law that governed the field as on 8.2.2018 was the one covered by Article 15 of the Schedule to the Kerala Stamp Act, as

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W.P(C).No.18320 Of 2018

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quoted hereinabove. This is in view of the legal position well settled by law in the aforecited judgments.

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The 2nd respondent has now taken the stand as per the impugned Ext.P-5 memo dated 4.4.2018 that the registration fee applicable for the registration of the present Ext.P-2 deed of cancellation dated 8.2.2018 is the one as prescribed in terms of clause I(a)(1) of the Table of fees prescribed under Sec.78 of the Registration Act, as per the amended provision made effective from 1.4.2018. Clause (1)(a)(1) of the table of fees of the Registration Act is in relation to Article 6(3) of the amended provisions of the Schedule of the Stamp Act which stipulate fee at the rate of 2% of the value.

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Since the transaction is one which is covered by Article 15 of the Schedule to the Kerala Stamp Act, viz., cancellation of an instrument, the registration fee payable could be only in respect of registration of a deed of cancellation. Clause 1(u) of the Table of fees prescribed under Sec.78 of the Registration Act reads as follows:

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“I xxx xxx xxx

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(u) The registration fee for a deed of cancellation or revocation shall be the same as the fee leviable on the original document subject to a maximum of Rs.200/-.”

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Therefore, the fee for registration in respect of Ext.P-2 deed

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of cancellation is the one as prescribed under clause 1(u) of the Table

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W.P(C).No.18320 Of 2018

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and not in terms of clause I(a)(1) of the Table as stated in the impugned Ext.P-5 memo dated 4.4.2018. In the light of these aspects, it is ordered in the interest of justice that decision of the 2nd respondent-SRO in Ext.P-5 memo dated 4.4.2018 will stand quashed. It is ordered and declared that the stamp duty payable for Ext.P-2 deed dated 8.2.2018 is in terms of Article 15 of the Schedule appended to the Stamp Act and the registration fee will be covered by clause 1(u) of the Table of fees prescribed under Sec.78 of the Registration Act. Accordingly, it is ordered that it is for the petitioner to forthwith present Ext.P-2 deed of cancellation for registration before the 2nd respondent-SRO, who shall take necessary steps to register the said documents if it is otherwise in order and on the basis of the stamp duty rate and registration fee as aforementioned. Necessary steps in that regard should be taken by the 2nd respondent-SRO without any further delay on the presentation of Ext.P-2 deed of cancellation.

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With these observations and directions, the above Writ Petition (Civil) will stand finally disposed of.

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Sd/-

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ALEXANDER THOMAS, Judge.

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Bkn/-

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// True copy // P.A to Judge //

M/S. Hi-Lite Relators [India] LLP v. the State of Kerala

Case brief

What is this about?

What did the court decide?

M/S. Hi-Lite Relators [India] LLP v. the State of Kerala

Case brief

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