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Judgment
Rangavittalachar, J.—The petitioner-Hoovina Huklu Estates is a registered partnership firm. The firm represented by all the partners purchased several items of agricultural lands and coffee estates under a registered sale deed dated 27.11.1972 - Annexure-B from one DC Kothari and his family members. Later, on account of differences among the partners, the firm was dissolved by a Deed of dissolution dated 15.11.1995. This Dissolution Deed was presented for registration by paying a stamp duty of Rs. 500/-. The Sub-Registrar holding that since the dissolution deed has the effect of transferring immovable property from one partner to another, directed the petitioners to pay proper stamp duty of Rs. 6,74,5007- on the market value of the property assessed at Rs. 67,50,000/- as per Article 40C (a) of the Stamp Act. This order was questioned by filing an appeal before the 2nd respondent herein. The 2nd respondent has dismissed the appeal. These two orders are under Challenge.
The contention of Sri Nanjundaswamy, learned Counsel for petitioner before this Court is that, both the Sub-Registrar and the Appellate Authority have misconstrued the relevant Article of the Stamp Act while making a demand. According to the learned Counsel, proper stamp duty payable for registration of dissolution of partnership is as per Article 40C (b) of the Stamp Act which is only Rs. 500/- and not what has been demanded by the Sub-Registrar.
Per contra, learned Government Advocate defended the order.
The relevant Article under the Stamp Act under which stamp duty is payable for registration of deed of dissolution of partnership is Article 40. Article 40 reads as under:
A. Instrument of :
a. Where the capital of the partnership does not exceed rupees 5000
One hundred rupees
b. In any other case:
Five hundred rupees
B. Reconstitution :
a. Where immovable property contributed as share by a partner or partners remains with the firm at the time of outgoing in whatever manner by such partner or partners on reconstitution of such partnership firm.
The same duty as conveyance (No. 20) on the market value of the immovable property remaining with the firm.
b. In any other case
Five hundred rupees.
C. Dissolution of :
a. Where the property which belonged to one partner or partners when the partnership commenced is distributed or allotted or given to another partner or partners.
The same duty as conveyance (No. 20) for a market value equal to the market value of the Property distributed or allotted or given to partner or partners under the instrument of dissolution, in addition to the duty which would have been chargeable on such dissolution if such property had not been distributed or allotted or give.
b. In any other case.
Five hundred rupees.
Evidently, the Sub-Registrar has relied on Article 40C (a) for levying the stamp duty for raising the demand. By a reading of the sub-clause, it is clear that it applies only to cases where any one or some of the partners of the Firm bring into the stock of the Firm any property as his or their share of capital at its inception and if such property is sought to be transferred from the name of original owners to the name of other partners by any arrangement of the partners of the Firm, like by reconstitution of the Firm or dissolution of the Firm, etc., In other words, for the sub-clause to apply, there must necessarily involve an element of transfer of title to property from one person to the other through the medium of ''partnership'' and not to other cases.
In the facts of this case, there is no dispute that long after the firm was established and stated functioning, all the partners of the firm purchased the immovable property from strangers and this immovable property did not originally belong to anyone of the partners nor as such was brought into the stock of the firm at the time of its formation as their contribution which later was sought to be allotted or adjusted or transferred towards the share of other partner/partners by the deed of dissolution of the firm. Thus, it cannot be said that Article 40C(b) will apply. This essential distinction was lost sight of by both the Authorities.
Since Article 40C(a) does not apply, the only other sub-clause that can be said to apply to the facts of this case is Article 40C(b) of the Act which provides for levying a sum of Rs. 500/- as stamp duty which is paid by the petitioners, and the Dissolution Deed also has been registered.
In the light of the discussion made above, the order of the Sub-Registrar as well as the Appellate Authority are clearly unsustainable in law and are accordingly quashed.
Petition is allowed. The Sub-Registrar is directed to return the registered document to the petitioner within three months from the date of receipt of the order.