Mohd. Farman vs State of U.P. and Others

A.K. Yog, J.—Petitioner, Mohd. Farman, claimed to be a Registered Contractor and General Order Supplier with the Public Works Department of Uttar Pradesh and other Corporations, contends that the Respondents (authorities of U.P. Public Works Department, Rural Engineering Services) published an advertisement inviting tenders from Registered Contractors in order to execute certain work. The contractors were required to furnish tenders form quoting rates. On accepting the tenders, contractor (Petitioner) was required to execute an agreement with the Respondents and also to deposit the contract amount as earnest money apart from certain amount as security with an object to ensure that contract work was executed as per terms and conditions of agreement between the concerned parties. In case of default of any of the conditions of the contract on the part of either party, amount of security, apart from other consequences was to be forfeited; Petitioner alleges that the stamp department issued instructions to all the concerned departments to charge stamp duty apart from stamp duty over other heads, on security deposits under agreements entered into between the department and said contractor. In paragraph 5 of the petition, It is alleged that vide letter dated 15th February, 1996, Respondent No. 5/Executive Engineer, Rural Engineering Service (R.E.S.), Division Meerut, expressed acceptance of the tender and required the Petitioner to deposit a sum of Rs. 15,663 as security amount (Annexure-1 to the writ petition).

Petitioner is aggrieved due to the instructions contained in the aforesaid letter dated 15th February, 1996 (Annexure-1 to the writ petition) directing the Petitioner to pay stamp duty on security deposit by prescribing higher rate of stamp duty and not to treat the said refundable security deposit under Article 57, Schedule 1B of Indian Stamp Act. According to the Petitioner, Respondents illegally want to charge stamp duty treating said deposit of refundable security under Article 40, Schedule 1B.

Petitioner thus claimed writ of mandamus directing the Respondents not to realise stamp duty from the Petitioner on the deposit of security amount on the basis of order contained in letter dated 15th February, 1996 (Annexure-1 to the writ petition).

No counter-affidavit has been filed on behalf of the Respondents as per record before the Court.

Heard learned Counsel for the Petitioner as well as learned standing counsel on behalf of the Respondents.

According to the Petitioner, the short controversy required to be decided in the present petition is that the Petitioner, who is a Registered Contractor, has to pay stamp duty on the refundable amount of security under Article 57, Schedule 1B as the deposited refundable security amount is not a mortgage. Consequently, Petitioner alleges that the demand of stamp duty over and above the rate prescribed under aforesaid provision of Indian Stamp Act is illegal and cannot be legally justified.

Learned standing counsel has submitted ''written arguments'' stating that the only question; to be adjudicated in the case is - ''whether the security bond/deposit is chargeable with stamp duty as per Article 57 of Schedule 1B or under Article 40 of Schedule 1B? In the written argument, learned standing counsel points out that this very question has already been referred by a learned single Judge in Writ Petition No. 25706 of 1999 Sharma Build-tech (Pvt.) Ltd. v. State of U.P. and Ors. vide order dated 30th June, 1999. It appears that this controversy had arisen in large number of writs filed in the Court and one of such case, being Writ Petition No. 47964, has been referred to a larger Bench.

Perusal of the referring order indicates that the Court was considering the scope and extent of Government Order dated April 1, 1999, issued by Principal Secretary, Tax and Institutional Finances, U.P. Government. The learned single Judge has referred to the decision of Tajveer Singh and Ors. v. State of U.P. and Ors. 1997 (2) AWC 1029 . We well as Supreme Court decision in Board of Revenue and Others Vs. A.M. Ansari and Others, .

The learned single Judge (S.R. Singh, J.) observed:

The answer to the question is interwoven with the interpretation of the term mortage deed'' as defined in Section 2(17) of the Act and interaction of Article 40 with Article 57 of Schedule 1B of the Act as well as terms and conditions of contract as stipulated in the tender notice. In Tajveer Singh (supra) a Division Bench has placed reliance on Supreme Court decision in A.M. Ansari and held "the position is thus settled that the security deed is chargeable with duty under Article 57 of Schedule 1B. I have my reservations about the correctness of the proposition laid down by the Division Bench in the case aforestated. As a matter of fact, the view so taken by the Division Bench purports to be based on Supreme Court decision in A.M. Ansari (supra) but to me, it appears that the Supreme Court decision in A.M. Ansari is not intended to lay down the proposition that in each and every case the stamp duty on security as per the deed of agreement to be executed for due performance of contract is chargeable with duty under Article 57 of Schedule 1B only. In the case of A.M. Ansari, the question that begged consideration before the Supreme Court was "as to whether the security deposits made by the Respondents savoured of the nature of mortgages so as make the Respondents liable to pay the stamp duty under Article 35C of the Stamps Act." The Supreme Court after noticing the definition of ''Mortgage Deed'' as embodied in Section 2(17) of the Act held bearing in mind Clause (17) of the said notice in that case thus "there is nothing in the above clause to indicate that any right over or in the security deposit was created in favour of the State Government.

Further the learned single Judge observed:

On a careful consideration of the decision in A.M. Ansari, it would transpire that in case, any right over or in the security deposits is created in favour of the State Government, in that event, the instrument may be termed as ''Mortgage Deed'' leviable to stamp duty under Article 40 of Schedule 1B and by that reckoning the Government order dated April 1, 1999 being Annexure-3 to the writ petition, cannot be discounted. In the above perspective, therefore, it would be in the fitness of things if a larger Bench is constituted to delve into the question.

Learned single Judge referred the matter to larger Bench in view of Government Order dated April 1, 1999 (referred to above). This contingency, however, does not arise in the present case since as the Government Order dated April 1, 1999 (annexed as Annexure-3 to the Writ Petition No. 25706 of 1999 Sharma Build tech (Pvt.) Ltd. v. State of U.P. and Ors. was not in existence when the demand order dated 15th February, 1996, (impugned in the present petition) was issued.

To justify the imposition of stamp duty under Article 40, Schedule 1B of the Act and to establish that under its terms - reading the document as a whole - renders the security deposit - a mortgage as defined under relevant Act, it was incumbent upon the Respondents to file a copy of the agreement in question to satisfy the Court that the deed in question required deposit of security, and though refundable, it is covered by the definition ''mortgage''. This has not been done. Respondents have miserably failed to bring on record even by way of pleading a simple fact that deed in question requiring deposit of security is in effect a mortgage and, therefore, their stand requiring stamp duty under Article 40, Schedule 1B is justified.

There is nothing on record of this case, as it stands today, to indicate that the any interest is being created in the security amount as such and the deed sought to be executed between the parties is in the nature of mortgage deed. The Respondents have failed to support their claim of charging higher stamp duty under Article 40, Schedule 1B of the Indian Stamps Act vide impugned order dated 15th February, 1996 (Annexure-1 to the writ petition).

In absence of the above, decision in the case of Tajveer Singh and Ors. squarely applies to the facts of the present case.

Our view is supported by the Judgment and order dated 18th March, 1996, passed by Division Bench comprising B.M. Lal and R.K. Mahajan, JJ., in the case of Shri Pal Goel v. Deputy Director (Construction). Rajya Krishi Utpadan Mandi Parishad U.P. and Ors. (copy filed as Annexure-2 to Writ Petition No. 31866 of 1996).

As a consequence thereof, writ petition deserves to be allowed. It is already noted above that there has been no interim order. One can presume that Petitioner has paid stamp duty under the impugned order while executing his contract agreement. In that situation, Petitioner cannot be granted relief as claimed, but the Petitioner is entitled to the relief being appropriately moulded by the Court.

Consequently, the writ petition stands allowed. A writ of mandamus is issued directing Respondents to refund excess amount charged as stamp duty on security deposit provided Petitioner files requisite application under Indian Stamps Act within two months of receipt of certified copy of this judgment and if such an application is being filed, as contemplated above, the excess amount shall be refunded to the Petitioner within three months of filing of the application.

No costs.