Prakash Chand P. Jain vs B.S. Veerabhadraiah and Others

Aravind Kumar, J.—1. Heard Sri Vijaya Kumar, learned Advocate appearing for petitioner, Sri Chandra chood, learned Advocate appearing for respondents-1 and 2 and Smt. Shweta Krishnappa, learned HCGP who had been directed to appear on behalf of State and assist the Court since issue of stamp duty is involved in the present case. Perused the records.

Petitioner is the objector in Execution Case No. 1319/2014. Respondents-1 and 2 have obtained a decree for possession in O.S. No. 6281/2007 which has been affirmed in RFA No. 1320/2013 vide order dated 30.10.2013, which also came to be confirmed by the Apex Court in Special Leave to Appeal (Civil) CC 4615/2014 by order dated 28.03.2014. Respondents-1 and 2 filed execution petition in question on 03.05.2014 for recovery of possession. Writ petitioner has filed an application under Order 21 Rules 97 & 98 read with Section 151 CPC and have prayed the executing Court to adjudicate claim of objector before passing any orders on execution petition, contending inter alia that father of the objector, his brother and two others were doing wholesale textile business under the partnership in the name and style of M/s. M. Bharath Kumar and Company since November, 1969 and was paying Rs. 100/- per month towards rent of the schedule premises and said business came to be partitioned by them and father of the objector is stated to have received the business as his share in the partition and claims to have changed the name of business to M/s. Motiba''s. It is further contended that since father of the objector became old and was unable to look after the business, he handed over the business to the objector and as such he was running the business from the year 1994 as a proprietary concern without any disturbance from any parties. Hence, he objected to the decree being executed which had been obtained by the decree holder i.e., first respondent herein against third respondent -judgment and decree by filing an application -Annexure-C as referred to herein above.

Decree holder has filed objections to said application as per Annexure-D and Executing Court ordered for conducting an enquiry and during the course of enquiry, objector filed his affidavit in lieu of his examination-in-chief and tendered a document styled as ''rental agreement'' dated 03.01.1994 and sought for being marked. This was objected to by the decree holder by filing objections as per Annexure-F stating that since said document is not duly stamped and not duly registered, same cannot be marked. It was also contended that since it has been indicated in the said document that advance of Rs. 4,00,000/- has been paid and rent reserved as Rs. 500/- per month, annual rent would be Rs. 6,000/- and as such, said agreement is chargeable to duty under Article 5(d) of the Karnataka Stamp Act, 1957 (''Act'' for short) and correspondingly, Article 20 being attracted, 8% ad valorem stamp duty is required to be paid on Rs. 4,06,000/- which would be Rs. 32,480/- and since said agreement has been drawn on Rs. 100/- stamp paper, deficit stamp duty that would be payable would be Rs. 32,380/-. Hence, it was contended that penalty amounting to Rs. 3,23,800/- is to be paid and sought for appropriate orders being passed by directing the objector to pay stamp duty.

Executing Court after considering rival contentions, by impugned order, has held that document in question would reflect there has been payment of Rs. 4,00,000/- as advance by lessee to lessor, out of which Rs. 2,00,000/- is to be adjusted towards rent and balance Rs. 2,00,000/- is to be returned by lessor at the time of delivering possession and annual rent of Rs. 6,000/- is not required to be included for arriving at the deficit stamp duty payable and Article 30(c) deals with lease or for any premium or for money advanced in addition to the rent reserved and proper stamp duty payable would be as in the case of conveyance - Article 20 and as such stamp duty payable would be 10%. Hence, it has arrived at a conclusion that stamp duty payable on Rs. 4,00,000/- would be Rs. 40,000/- and since objector had paid Rs. 100/-, deficit stamp duty payable would be Rs. 39,900/- and accordingly, determined penalty at 10 times of duty which would be Rs. 3,99,000/- and directed the objector to pay duty of Rs. 39,000/- + penalty of Rs. 3,99,000/-, and in all Rs. 4,38,900/- was ordered to be paid on the rental agreement. On the issue of admissibility of document in question to be marked as exhibit, no opinion was expressed by the executing Court. On these grounds, impugned order came to be passed.

It is the contention of Sri Vijaya Kumar, learned Advocate appearing for petitioner that trial Court erred in not taking into consideration that out of Rs. 4,00,000/- which is paid under the agreement in question, Rs. 2,00,000/- was agreed to be adjusted towards monthly rent at the rate of Rs. 500/- per month and balance amount of Rs. 2,00,000/- was alone to be treated as security deposit which was to be returned at the time of handing over vacant possession and as such, in the light of the law laid down by the Full Bench of this Court in the matter of THE CHIEF CONTROLLING AUTHORITY v. M/S. TEXAS INSTRUMENTS INDIA LIMITED reported in , ILR 2003 Kar 4386, duty would be payable only on Rs. 2,00,000/-. He would also contend that finding of the Executing Court in the operative portion of the order that payment of deficit stamp duty will not enable the objector to get the instrument exhibited, is illegal and liable to be set aside.

Per contra, Sri Chandra Chood, learned Advocate appearing for respondent would support the impugned order.

Smt. Shweta Krishnappa, learned HCGP who had been requested by this Court to assist the Court since issue of payment of stamp duty and revenue of Exchequer was involved, she has appeared and assisted the Court contending inter alia that document in question being silent with regard to period of lease and no time having been specified under said instrument, she contends Article 30(1)(viiii) of the Act would be attracted insofar as stamp duty that would be payable for the value of the ''average annual rent'' reserved under the instrument and she would elaborate her submission by contending that document in question indicates that monthly rent reserved is at Rs. 500/- and thereby average annual rent would be Rs. 6,000/- and duty that would be chargeable would be the same as indicated under Article 20 for document styled as ''conveyance''. As such, she contends that stamp duty that would be payable under Article 31(1)(viii) on the average annual rent reserved under the instrument in question would be Rs. 500 x 12 months = Rs. 6,000/- per year. Rs. 6,000/- x 10 years = Rs. 60,000/- and at the rate of 10%, stamp duty payable would be Rs. 6,000/-.

She would further elaborate her submission by contending that insofar as advance or earnest money which is agreed to be refunded is concerned, would attract Article 30(1)(c) of the Act and there being no dispute to the fact that Rs. 2,00,000/- is to be refunded to the lessee by the lessor, it would attract stamp duty as per Article 20 i.e., conveyance and at the undisputed point of time i.e., when the instrument in question came into existence being 10%, stamp duty that would be attracted would be Rs. 20,000/- and thereby total stamp duty that would payable on the ''rental agreement'' is Rs. 26,000/- and on account of objector having paid Rs. 100/- on said instrument, deficit stamp duty that would be payable would be Rs. 25,900/- and penalty would be 10 times i.e., Rs. 2,59,000/-. Hence, she submits that suitable orders may be passed in this regard.

Having heard the learned Advocates appearing for the parties, this Court is of the considered view that it would be necessary to extract the relevant provisions of the Karnataka Stamp Act, 1957 as prevalent in 1994 which are pressed into service namely, Article 30(1)(a)(viii) and Article 30(1)(c).

"Article 30(1)(c)

Act No. 6 of 1999 (1-4-1999 to 31-3-2009)

Art. No.

Description of Instrument

Proper Stamp Duty

30.(1)

Lease of immovable property-Including an under lease or sub-lease and any agreement to let or sub-let-

(a) XXX

(i) To (vi) xxx

(b) xxx

(i) xxx

(ii) xxx

(c) where the lease is granted for a fine or premium or for money advanced in addition to rent reserved, - (i) where the lease purports to be for a term not exceeding thirty years-

(ii) where the lease purports to be for a term exceeding thirty years or in perpetuity or does not purport to be for any definite term

The same duty as a Conveyance for a term not exceeding thirty years. (Article No. 20), for the amount or value of such fine or premium or advance as set forth in the lease, in addition to duty which would have been payable on such lease, if no fine or premium or advance had been paid or delivered.

The same duty as a [Conveyance (Article 20(1) for the amount or value of such fine or premium or advance as setforth in the lease or for an amount equal to the market value of the property whichever is higher:

Provided that, in any case when an agreement to lease is stamped with the advalorem stamp required for a lease and a lease in pursuance of such agreement is subsequently executed, the duty on such lease shall not exceed rupees fifty:

Provided further that the duty in respect of an instrument of lease chargeable under Article 30(a)(iv), Article 30(b) (ii) and Article 30(c) (ii), effected by Bangalore Development Authority constituted under the Bangalore Development Authority Act, 1976 (Karnataka Act No. 12 of 1976), the Urban Development Authority Constituted under the Karnataka Urban Development Authorities Act, 1987 (Karnataka Act No. 34 of 1987), The Karnataka Housing Board Act, 1962 (Karnataka Act No. 10 of 1963), the Improvements Board constituted under the Karnataka Improvements Boards Act, 1976 (Karnataka Act 11 of 1976), Department of Mines and Geology, the Forest Department, Karnataka Industrial Areas Development Board established under the Karnataka Industrial Areas Development Board Act, 1966 (Karnataka Act 18 of 1966), the Karnataka Small Scale Industries Development Corporation, the Karnataka State Industrial Investment Development Corporation, Karnataka State Electronics Development Corporation, registered as a company under the Companies Act, 1956 (Central Act 1 of 1956), the Karnataka Agricultural Produce Market Committee constituted under the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 (Karnataka Act 27 of 1966) and other authorities as may be specified by the Government, shall be payable as a conveyance under clause (1) of Article 20 for a market value equal to the total rent to be paid through the lease period, or as a conveyance under clause (1) of Article 20 for a market value equal to the amount of premium or money advanced or fine where no rent is reserved, or as a conveyance under clause (1) of Article 20 for a market value equal to the amount of premium or money advanced or fine together with the total rent as set forth in the lease deed as the case may be:]

Provided further that the duty in respect of an instrument of lease chargeable under Article 30(a),(v) and (vi), Article 30(b) (ii) and Article 30(c) (ii), effected by Bangalore Development Authority constituted under the Bangalore Development Authority Act, 1976 (Karnataka Act No. 12 of 1976), the Urban Development Authority Constituted under the Karnataka Urban Development Authorities Act, 1987 (Karnataka Act No. 34 of 1987), The Karnataka Housing Board, constituted under the Karnataka Housing Board Act, 1962 (Karnataka Act No. 10 of 1963), the Improvements Board constituted under the Karnataka Improvements Boards Act, 1976 (Karnataka Act 11 of 1976), Department of Mines and Geology, the Forest Department, Karnataka Industrial Areas Development Board established under the Karnataka Industrial Areas Development Board Act, 1966 (Karnataka Act 18 of 1966), the Karnataka Small Scale Industries Development Corporation, the Karnataka State Industrial Investment Development Corporation, Karnataka State Electronics Development Corporation, registered as a company under the Companies Act, 1956 (Central Act 1 of 1956), the Karnataka Agricultural Produce Market Committee constituted under the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 (Karnataka Act 27 of 1966) and other authorities as may be specified by the Government, shall be payable as a case may be in the following manner:

(a) as per item No. (v) of sub­clause (a) of sub-clause (1), where by such lease the rent is fixed and no premium is paid;

(b)as per item No. (i) of sub-clause (b) of clause (1) where the lease is granted for a fine or a premium or a money advanced and where no rent is reserved;

(c) as per item No. (i) of sub­clause (c) of clause (1), where the lease is granted for a fine or premium or money advanced in addition to rent reserved.

Explanation: The term �money advanced�, in this article, means and includes the security deposit, whether refundable or adjustable towards the rent.

Provided also that the duty in respect of an instrument of lease executed in favour of the wife, husband, father, mother, son, daughter, brother or sister in relation to the person shall be Rs. 1,000/-.

Explanation: If, the advance is refundable, the duty shall be as per article 47.

Article 30(1)(a)(viii)

Act No. 9 of 1997 (1-4-1997 to 31-3-1999)

Art. No. 30(1)

Description of Instrument Lease of immovable property-Lease including an under lease or sub-lease and any agreement to let or sub-let,

(a) Where by such lease the rent is fixed and no premium is paid or delivered,

(i) XXX

(ii) XXX

(iii) xxx

(iii) xxx

(iv) xxx

(v) xxx

(vi) xxx

(vii) xxx

(viii) where the lease does not purports to be for any definite term

Proper Stamp Duty

The same duty as a Conveyance (No.20) for market value equal to three times the amount or value of the average annual rent which would be paid or delivered for the first 10 years if the lease continued so long.

A bare reading of Article 30(1)(a)(viii) would indicate that where lease does not purport to be for a definite term, duty that would be payable would be the same as a conveyance under Article 20(1) for a market value equal to three times the amount or the value of average annual rent which would be paid or delivered for the first 10 years if the lease continued so long. In the instant case, rental agreement dated 03.01.1994 - Annexure-E which was sought to be produced by the objector in evidence, indicates a security deposit of Rs. 4 lakhs by cash has been paid to the lessor by lessee, out of which two Rs. 2 lakhs is to be refunded by the lessor to the lessee at the time of tenant vacating and handing over possession of the schedule premises and balance Rs. 2 lakhs is adjusted towards monthly rent of Rs. 500/- payable with effect from 03.01.1994. Since the lease deed does not indicate that it is for any definite period, as rightly contended by Smt. Shweta Krishnappa, learned HCGP, Article 30(1)(a)(viii) is attracted and duty that would be payable insofar as average annual rent would be at the rate of 10% for the period of first 10 years. In other words, lease being for a indefinite period and rate of rent being Rs. 500/- per month, average annual rent for the first 10 years would be Rs. 500 x 12 x 10 = Rs. 60,000/- and duty that would be payable under Article 20 would be 10% as was prevalent as on the date of execution of said agreement. Thus, stamp duty that would be payable is Rs. 6,000/- on the average annual rent. Security deposit or advance which has been agreed to be refunded by the lessor to the lessee under the agreement being Rs. 2,00,000/-, stamp duty that becomes payable would fall within Article 30(1)(c) since lease is granted for money advance in addition to rent reserved and as such, it would attract same duty as a conveyance (No.20) or a value equal to the advance as set forth in the purported lease deed or rental agreement and it would be in addition to the duty which would be payable on such lease, if no advance had been paid. Money advanced under the lease agreement in question being Rs. 2,00,000/-, duty payable would be as a conveyance under Article 20 and stamp duty that becomes payable would be 10% on Rs. 2,00,000/- which would be Rs. 20,000/-. Thus, a total sum of Rs. 26,000/- would be the stamp duty payable. Undisputedly, a sum of Rs. 100/- has been paid by the objector and balance that becomes payable would be Rs. 25,900/-. This Court, in the case of DIGAMBAR WARTY AND OTHERS v. DISTRICT REGISTRAR, BANGALORE URBAN DISTRICT AND ANOTHER reported in , ILR 2013 KAR. 2099 having held that it is incumbent upon the Court to impound the document under Sections 33 and 34 of the Karnataka Stamp Act, 1957 and such exercise having been rightly undertaken by the Executing Court, since document was sought to be tendered in evidence, no error can be found in the exercise that has undertaken by the executing Court in this regard.

However, for the reasons indicated hereinabove, determination of stamp duty made by the Executing Court by the impugned order being not in consonance with the provisions namely, Article 30 of the Act and same having been re-determined by this Court as discussed herein above, duty and penalty that would be liable to be paid by the petitioner would be a sum of Rs. 2,59,000/- plus Rs. 25,900/- respectively. Thus, in all, objector - writ petitioner would be liable to pay a sum of Rs. 2,84,900/- towards duty and penalty. To this extent, impugned order requires to be modified.

Insofar as the contention with regard to admissibility of the document is concerned, Executing Court was fully justified in arriving at a conclusion that it is an inadmissible document inasmuch as, instrument in question being compulsorily registrable since period of lease having not been specified, Section 17(1) of the Indian Registration Act, 1908 mandates such instrument to be compulsorily registered and same not having registered, it would not be admissible in evidence. Finding recorded by the trial Court to that extent is affirmed.

It is also noticed that petitioner is not claiming any independent right over the property which is sought to be put into execution. On the other hand, he is claiming through judgment debtors who were carrying on business in partnership and said business is said to have been divided amongst family members and is claimed to have fallen to the share of objector and as such, objector claims to have continued as a tenant and as such, is claiming independent right over petition schedule premises. Hence, objector is contending that he cannot be evicted without any decree being passed against him.

Sri Vijaya Kumar, learned Advocate appearing for writ petitioner-objector has also fairly submitted before this Court that objector has already filed a suit in O.S. No. 1809/2016 on the file of City Civil Court, Bengaluru against decree holders i.e., respondents-1 and 2 and also judgment debtor i.e., third respondent from interfering with possession of plaintiff i.e., writ petitioner and not to be dispossessed without due process of law and to declare the judgment and decree passed in O.S. No. 6281/2007 as not binding on the writ petitioner. As such, the very maintainability of the application under Order 21 Rule 27 CPC would also be doubtful. However, no opinion is expressed in this regard by this Court, since same is squarely seized by the Executing Court.

It is also not in dispute that objector''s father and father of judgment debtor are uterine brothers and now in order to stave off the decree which is sought to be executed, objector is contending that there was a partition and the business run in suit schedule property fell to the share of the objector which was never the case of the objector at any point of time during the pendency of the suit O.S. No. 6281/2007 which decree for ejectment has since been affirmed by the Apex Court in Special Leave to Appeal (Civil) CC 4615/2014 by order dated 28.03.2014. Be that as it may. It would suffice if a direction is issued to the Executing Court to dispose of Execution Case No. 1319/2014 expeditiously.

For the reasons stated herein above, I proceed to pass the following:

ORDER

"(1) Writ petition is hereby allowed in part.

(2) Order dated 12.02.2016 - Annexure-A is hereby quashed and it is ordered that duty and penalty that would be payable on the instrument i.e., alleged "rental agreement dated 03.01.1994" is Rs. 25,900/- (stamp duty) and Rs. 2,59,000/- (penalty) and in all, Rs. 2,84,900/- within three days from today without waiting for certified copy of this order.

(3) Executing Court shall take up execution proceedings on the next date of hearing which is stated to be 01.04.2016 on day-to-day basis and dispose of the same expeditiously at any rate, on or before 15.04.2016.

(4) In the event of any of the parties were to seek for adjournment, without any justifiable cause to the satisfaction of executing Court, it shall be at liberty to impose costs on such of the parties who seek for adjournment."

This Court places on record its appreciation for the assistance rendered by Smt. Shweta Krishnappa, learned HCGP and directs the Karnataka Legal Services Authority to pay her a sum of Rs. 7,500/- as Honorarium.

Registry to furnish a copy of this order to Member Secretary, Karnataka State Legal Services Authority free of cost for doing the needful.