Canara Bank and Others vs Dist. Registrar and Collector, Registration and Stamps Dept. and Others

Y. Bhaskar Rao, J.—This batch of writ petitions is filed questioning the constitutional validity of amendment to Section 73 of the Indian Stamp Act, 1899 vide Andhra Pradesh Act 17 of 1986, which empowers the person authorised by the Collector not only to enter upon any premises and inspect registers, books, papers, documents, etc., in relation to any duty, but also to seize and impound them under proper acknowledgment, and challenging the orders passed by virtue of such power.

We will take up the facts stated in Writ Petition No. 10300 of 1989 for the present purpose. The petitioner-Bank states that the respondents inspected its branches at Abid Road and Chataparru in pursuance of powers vested in them u/s 73 of the (Indian Stamp Act as amended by) A.P. Act 17 of 1986. After inspecting certain documents, they found an amount of Rs. 3,84,250/- and Rs. 86,300/- as deficit stamp duty to be paid on those documents and instructed the said branches to collect the same. The contentions of the petitioners are: The authorities can inspect the documents, but the power to seize and to determine and collect deficit stamp duty as provided in amended Section 73 of the Act by the State is ultra vires the Indian Stamp Act, 1899. The authorities cannot classify and determine the nature of documents without notice to the persons affected by such actions. The amendment to Section 73 runs contrary to the procedure prescribed for examining and impounding the documents as provided in Sections 31 and 33 of the Act and that impounding of documents under amended Section 73 is ultra vires the provisions of the Act. Unilateral imposition of levy of duty amounts to arbitrary action. Thus, amendment of State to Section 73 is illegal, arbitrary, excessive and ultra vires the provisions of the Central Act. Amendment to Section 73 confers unguided and unbriddled power on the authorities and is therefore to be struck down as violative of Article 14 of the Constitution.

Counter-affidavits are filed by respondents denying the allegations. It is stated that before getting the documents validated, the aggrieved person is at liberty to represent his case before the proceedings of seizure are initiated. Section 33 deals with impounding of documents and Section 73 deals with inspection of records and determination of deficit stamp duty and thus both are not parallel. Amendment to Section 73 is legal and constitutionally valid and the writ petitions have no merits.

In some of the writ petitions, the orders directing the petitioners to pay deficit stamp duty on inspection, seizure and impounding of documents according to Section 73 of (as amended by) the A.P. Act 17 of 1986 are challenged:

"Whether the amendment incorporated vide Andhra Pradesh Act 17 of 1986 in Section 73 of the Indian Stamp Act, 1899, which empowers the person authorised by the Collector to seize and impound the instruments, is ultra vires the provisions of the Indian Stamp Act and violative of Article 14 of the Constitution of India."

To appreciate the above question, it is relevant to look at some relevant provisions of the Indian Stamp Act. The Indian Stamp Act, 1899 (for short ''the Central Act'') is a Central enactment to consolidate and amend the law relating to stamps and its object is to secure revenue for the State on certain classes of instruments. Section 2 of the Central Act deals with definitions. Section 2(9) defines ''Collector'' as:

" ''Collector'' means,

(a) within the limits of the towns of Calcutta, Madras and Bombay, the Collector of Calcutta, Madras and Bombay respectively and without those limits the Collector of a District; and

(b) includes a Deputy Commissioner and any officer whom the State Government may, by notification in the Official Gazette, appoint in the behalf;"

Section 2(11) defines ''duly stamped'' as under:

"Duly stamped as applied to an instrument, means that the instrument bears an adhesive or impressed stamp of not less than the proper amount and that such stamp has been affixed or used in accordance with the law for the time being in force in India."

Section 2(14) defines ''instrument'' and it reads:

"Instrument includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded."

Section 3 enumerates instruments chargeable with duty. Section 9 empowers the Government to reduce, remit or compound duties. Section 17 mandates that all instruments chargeable with duty and executed by any person in India shall be stamped before or at the time of execution. Section 31 empowers the Collector to determine the proper stamp duty with which instrument is chargeable when a person applies for determination of such duty. When any instrument -whether executed and stamped or not - is brought to the Collector, he shall determine the duty with which the instrument is chargeable. The Collector may require the party to produce an abstract of instrument, an affidavit or other evidence to enable him to determine the duty. After determination of stamp duty payable u/s 31, on payment of such duty the Collector certifies u/s 32 that deficit stamp duty is paid. Section 33 empowers every person having by law or consent of parties authority to receive evidence and every person in-charge of public officer before whom the instrument is produced or comes in performance of his functions and if it appears to him that such instrument is not duly stamped, to impound such instrument. If the instrument is not produced or not brought in evidence, the power u/s 33 cannot be exercised. Sections 31 and 33 do not empower the Collector or person authorised to receive evidence to call for any instrument from any person and impound it if found to be not duly stamped.

Section 73 of the Central Act, which is necessary to be looked into to examine the question in issue, reads:

"73. Books, etc., to be open to inspection:-Every Public Officer having, in his custody, any registers, books, records, papers, documents or proceedings, the inspection whereof may tend to secure any duty, or to prove or lead to the discovery of any fraud or omission in relation to any duty, shall, at all reasonable times, permit any person, authorized in writing, by the Collector, to inspect, for such purpose, the registers, books, papers, documents and proceedings, and to take such notes and extracts, as he may deem necessary, without fee or charge."

Section 73 of the Central Act, thus, casts an obligation on every public officer to permit the person authorised by the Collector to inspect registers, books, records, documents or proceedings and take notes or extracts of instruments which are not duly stamped. Section 75 empowers the State Government to make rules generally to carry out the purposes of the Indian Stamp Act. Section 75-A provides that the rules made by the State Government have to be laid before the State Legislature. Section76 deals with publication of rules in the Official Gazette. Section 76-A says that the State Government may notify delegating all or any of the powers conferred on it by Sections 2(9), 33(3)(b), 70(1), 74 and 78 to the Chief Controlling Revenue Authority and all or any of the powers conferred on the Chief Controlling Revenue Authority by Sections 45(1), (2), 56(1) and 70(2) to subordinate revenue authority.

Thus, it is evident that the intention of the Parliament in bringing out the Central Act is to regulate levy of stamp duty on instruments that are chargeable with duty. Different kinds of instruments and the duty leviable on them are provided in the Schedules. The instrument which is not duly stamped is inadmissible in evidence.

The State of Andhra Pradesh brought an amendment to Section 73 of the Central Act vide the Andhra Pradesh Act 17 of 1986. Section 73 as amended by the A.P. Act 17 of 1986, reads as under:

"73. Books etc., to be kept open for inspection:-

(1) Every public officer having in his custody any registers, books, records, papers, documents or proceedings, the inspection whereof may tend to secure any duty, or to prove or lead to the discovery of any fraud or omission in relation to any duty, shall at all reasonable times permit any person authorised in writing by the Collector to enter upon any premises and to inspect for such purposes the registers, books, records, papers, documents and proceedings, and to take such notes and extracts as he may deem necessary, without fee or charge and if necessary to seize them and impound the same under proper acknowledgement:

Provided that such seizure of any registers, books, records, papers, documents or other proceedings, in the custody of any Bank be made only after a notice of thirty days to make good the deficit stamp duty is given.

Explanation:- xx xx xx

(2) Every person having in his custody or maintaining such registers, books, records, papers, documents or proceedings shall, when so required by the officer authorised under sub-section (1), produce them before such officer and at all reasonable times permit such officer to inspect them and take such notes and extracts as he may deem necessary.

(3) If, upon such inspection, the person so authorised is of opinion that any instrument is chargeable with duty and is not duly stamped, he shall require the payment of the proper duty or the amount required to make up the same from the person liable to pay the stamp duty; and in case of default the amount of the duty shall be recovered as an arrear of land revenue."

Section 73 as amended by the State Act empowers the person authorised by the Collector to inspect the registers, books, records, papers, documents or proceedings in custody of every public officer or any person to secure duty and to take notes and extracts of such instruments and if necessary to seize and impound them. If the documents, papers, records, books, etc., are in the custody of the Bank, they can be seized only after notice of thirty days to make good the deficit stamp duty is given. On inspection, the authorised person if he is of the opinion that any instrument chargeable with duty has not been duly stamped, he shall receive payment of proper duty. The State Government framed Rules in G.O.Ms.No. 997, Rev. (U), dated 14-8-1986 for collection of duties secured in the course of inspection under the amended Section 73. Rule 1(b) of the said Rules defines ''Inspector General of Registration and Stamps'' to include the person authorised in writing by him as the Collector appointed u/s 73. Rule 1(e) defines ''any premises'' to include any public office or any place where registers, books, documents, etc., are kept under the custody of a person the inspection whereof may tend to secure any duty. Rule 3 provides that the Inspector General of Registration and Stamps shall seize and impound documents deficiently stamped and after giving an opportunity to the parties levy deficit duties and collect the same. If the parties are aggrieved by levy of duties, they may apply to the Inspector General of Registration and Stamps for revision. Thus, it is clear from the Rules that issuance of notice to the party affected before a document is seized and impounded and deficit stamp duty is levied has been contemplated. In case of documents seized from the Banks, no such notice is contemplated either under the Rules or the Act. On the other hand, when the documents are in the custody of the Bank, seizure of such documents can be made only after a notice of thirty days to make good the deficit stamp duty is given. If the Bank fails to make good the deficit stamp duty, instruments will be seized and impounded without there being any notice to persons concerned with the instruments.

From a perusal of Sections 31 and 33 of the Central Act, it is clear that when a party voluntarily files an instrument for adjudication of proper stamp duty, the Collector can determine whether the instrument is properly stamped or not and on payment of deficit stamp duty in respect of an instrument which is not duly stamped, he has to issue a certificate. Where an instrument is produced in evidence before a public officer or person authorised to receive evidence or comes in the course of his functions, then such person authorised or public officer is empowered to impound the instrument, if it is found to be not duly stamped. Section 38 of the Central Act provides for procedure to deal with the instruments impounded. Section 40 empowers the Collector to certify as to duly stamped instrument and if the instrument is not duly stamped, he is empowered to collect the deficit stamp duty and penalty and then issue a certificate. Section 73 of the Central Act obligates every public officer to permit the person authorised by the Collector to inspect registers, books, records, papers, documents or proceedings and take notes of instruments which are not duly stamped. According to Section 73 of the Central Act, the authorised person is not empowered to impound and seize the instruments which are in the custody of public officer, whereas, Section 73 as amended by the State Act, confers power on the person authorised by the Collector not only to take notes of papers, registers, books, records, documents or proceedings in custody of every public officer and the Bank but also seize and impound the instruments. In respect of the instruments which are in the custody of the Bank, the authorised person has to give notice of 30 days to the Bank to make good the deficit stamp duty before seizing the instruments. That means, the Bank is made liable to pay the deficit stamp duty in respect of instruments relating to third parties which are kept in custody of the Bank during the course of transactions and the deficit stamp duty is collected from the Banks. In respect of the instruments inspected in other places, if the authorised person comes to an opinion that they are not duly stamped, he has to require the person liable to pay deficit stamp duty. The instruments, which are in the custody of the Bank, are impounded without giving any notice or opportunity to the persons to whom the instruments belong while determining the nature of the instruments and deficit stamp duty, whereas in other cases such opportunity is being provided. It is settled principle of law that nature of instrument and stamp duty to be paid on the instrument have to be decided after giving notice to the party affected. Therefore, seizure and impounding of instrument and collection of deficit stamp duty without issuance of notice to the person connected with it is against the principles of natural justice.

The Government of Andhra Pradesh issued a Notification in G.O.Rt. No. 1177, dated 28-9-1995 authorising all the Sub-Registrars in the State as ''persons authorised by the Collector'' to inspect premises, books, documents in public offices to secure any duty and to seize and impound the documents which are not duly stamped. It is to be noticed that the person authorised by the Collector is only empowered to inspect books, documents, papers, etc., in custody of every public officer and the Government has no power to authorise any person to discharge those duties as per Section 73 of the Act. Thus, G.O. is in contravention of the provisions contained in Section 73 of the State Act as the State Government does not fall under the definition of ''Collector''.

Section 73 of (as amended by) A.P. Act 17 of 1986 and the Rules framed by the State Government thereunder do not provide any guidelines relating to seizure and impounding of instruments. The provisions of the Central Act empower the Collector only to impound the instruments, which are voluntarily produced or brought in evidence. But, no power is conferred to inspect documents in custody of Bank or any other officer to secure duty. A blanket and unguided power is conferred on the authorised person vide Section 73 of the A.P. Act. The power to seize and impound the instruments from the Banks and the power to demand deficit stamp duty from the Banks without any notice to the affected party is arbitrary and illegal. Further, the amendments made by the States of Uttar Pradesh, Kerala and Karnataka to Section 73 of the Central Act did not provide for seizure and impounding of instruments by the person authorised by the Collector, unless he has reason to believe that an instrument is not duly stamped. If he has reason to believe that a particular instrument is not properly stamped, then he can seize and impound the instrument and after giving notice, deficit stamp duty can be collected. Whereas, the amendment incorporated vide A.P. Act 17 of 1986 conferred unguided and unbriddled power on person authorised by the Collector. In Mrs. Maneka Gandhi Vs. Union of India (UOI) and Another, , the Supreme Court while considering the question whether the power conferred on the Passport Authority u/s 10 (3)(c) of the Passports Act is violative of Article 14 of the Constitution, observed:

"The discretion vested in the Passport Authority, and particularly in the Central Government, is thus unfettered and unrestricted and this is plainly in violation of Article 14. Now, the law is well settled that when a statute vests unguided and unrestricted power in an authority to affect the rights of a person without laying down any policy or principle which is to guide the authority in exercise of this power, it would be affected by the vice of discrimination since it would leave it open to the Authority to discriminate between persons and things similarly situated."

Further, in AIR India Vs. Nergesh Meerza and Others, , the Supreme Court has struck down the power conferred on the General Manager to retain an Air Hostess upto the age of 40 years only as invalid because it did not lay down any guidelines or principles. In the cases on hand, no guidelines are laid down and unrestricted and unfettered power is conferred on the person authorised by the Collector vide A.P. Act 17 of 1986. Therefore, Section 73 as amended by the A.P. Act 17 of 1986 is arbitrary and violative of Article 14 of the Constitution.

For the above reasons, we hold that Section 73 of (as amended by) the A.P. Act 17 of 1986 is ultra vires the provisions of the Indian Stamp Act and is violative of Article 14 of the Constitution and strike it down accordingly and all consequential orders passed u/s 73 of the impugned Act are declared to be void and illegal.

In the result, the writ petitions are allowed. There will be no order as to costs.