HINDUSTAN STEEL LTD. versus M/S. DALIP CONSTRUCTION COMPANY

HINDUSTAN STEEL LTD.

M/S. DALIP CONSTRUCTION COMPANY

February 18, 1969

[J. C. SHAH, V. RAMASWAMI AND A. N. GROVER, JJ.]

bufion Stamp Act, ss. 35, 36 ~ 42r-Unstamped document filed in .::oUTt-lmpounded-Whether can be acted upon after payment of duty and. penalty.

The dispute between the appellant and the respondents in relation to c:Pntract were referred in accordance with their contract to arbitration. The award was filed in the District Court and notice of filing was given to the parties. The appellant applied to the Court under ss. 30 and 33 of the Indian Arbitration Act, 1940 to have the award set aside on the around inter alia that it was unstamped. The District Judge ordered the doannent to be impounded and directed that an authenticated copy of the instrument be sent to the Collector together with certificate in writ-ing •tatin.g the receipt of the amount of duty and penalty. Against tha\, order the appellant moved the High Court of Madhya Pradesh in exercise of ita revision3.i jurisdiction. The High Court rejected the petition. By special leave appeal was filed in thill Court. Relying on the difference ia tho phraseology between ss. 35 and 36 it was urged that an instrument which is not duly stamped may be admitted in evidence on payment of duty and penalty, but it cannot be acted upon because s. 35 operates as bar to the admission in evidence of an instrument not duly stamped as well u to its being acted upon, and the Legislature has by s. 36 in the conditiona set out tbeuin removed the bar only aaainst admission in evidttlce of the instrument.

HELD: The appellant's argument ignored the true import of s. 36. By that section an instrument once admitted in evidence shall not be oalled in question at any stage of the same suit or proceedings on the ground that it bas not been duly stamped. S:ction 36 does not, prohibit challenge against an instrument that it shall not be acted upon becau.e it is not duly stamped, but on that account thc*'e is no bar against an in-strwnent not duly stamped being acted upon after payment of the stamp dnty and penalty according to the procedure presc!pbed by the Act. The doubt if any is resolved by the terms of s. 42(2) which enact in terms unmistakable, that every instrument endorsed by the Collector under s. <42(1) shall be admissible in evidence and may be acted upon as if it l>ae been duly stamped. [740 C-EJ

The Stamp Act is fiscal measure enacted to secure revenue for the State on certain classes of instruments : it is not enacted to arm litigant with weapon of technicality to meet the case of his opponent. The stringent provisions of the Act are conceived in the interest of the revenue. Once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of the initial defect in the instrument. Viewed in that light the scheme is clear. Section 35 of the Stamp Act operates as bar to an unstamped instrument being admitted in evidence or being acted upon, s. 40 provides the procedure for the instrument being impounded, sub... (I) of s. 42 provides for certifying that an instrument is duly stamped, and sub-6. (2) of s. 42 enacts the consequences resulting from such certification. [740 F-G]

Ob.ervations of Desai, J. in Mst. Bittan Bibi and Anr. v. Kantu Lill •n« Anr., l.L.R. [1952) 2 All, 984, disapproved.

Civn, APPELLATE JURISDICTION : Civil Appeal• 'No, 2425 ot 1968.

Appeal by special leave from the judgment and order daled August 30, 1968 of the Madhya Pradesh High Court in Civil Revision No. 764 of 1967.

C. K. Daphtary, and /. N. Shroff, for the appellant.

Rameshwar Nath and Mahinder Narain for the respondent.

The Judgment of the Court .. was delivered by Shah, J. The respondents entered into contract witJa Hindust!lj]l Steel Ltd. for 'raising, stacking, carting natl load-i-.g into wagons limestone at Nandini Mines". Dispute whicJa arose between the parties was referred to arbitration, pursaant to cl. 61 of the agreemQ!J!. The arbitrators differed, and the dispute was referred to an umpire who made and published his award on April 19, 1967. The umpire filed the award in the Caurt of the District Judge, Rajnandgaon in the State of Madhya Pradesh and gave notice of the filing of the award to tbe parties to the dispute. On July 14, 1967 the appellant filed aD. application for setting aside the ward under ss. 30 and 33 of the Indian Arbitration Act, 1940. One of the contentions railed by the appellants was that the award was unstamped and on that account "invalid and illegal 3llld Hable to be set aside". The respondents then applied to the District Court that the award be impounded and validated by levy of stamp duty and penalty. By order dated September 29, 1967, the District Judge directed that the award be impounded. He then called upon the respondents to pay the appropriate stamp duty on the award aind penalty and directed that an authenticated copy of tac instrument be sent to the Collector, Durg, together with certificate in writing stating the receipt of the amount of duty and penalty. Against that order the apoe!Jant moved the High Court of Madhya Pradesh in exercise of its revisional jurisdic-tion. The High Court rejected the petition and the appellant. appeals to this Court with special leave.

It is urged by Co~! for the appellant that an instrument wllich is not stamped as required by the Indian Stamp Act, may, Oil payment of stamp duty and penalty, be admitted in evidence, but cannot be acttd upon, for, "the instrument has no existence • the eye of law". Therefore, counsel urged, in proceeding to entertain the application for filing the award, the District JudiC, Rajnandgaon, acted without jurisdiction.

The relevant provisions of the Stamp Act may be summaris-ed. Section 3 of the Act provides :

[1969] 3 S.C.R.

SUPREMI! COURT Rl!PORTS

"Subject to the provisions of this Act . . . . . the following instruments shall be chargeable with duty of the amount ~icated in that Schedule as the pro-per duty therefor, respectively, that is to say-

( a) every instrument mentioned in that Schedule which, not having been previously executed by any person, is executed in India on or ll after the first day of July, 1899; "Inatrument" is defined m s. 2(14) as including "every docu-ment by which any right or liability is, or purports to be, creat-ed, transferred, limited, extended, extinguished or recorded". An instrument is said. to be "duly stamped" within the meaning of the Stamp Act when the instrument bears an adhesive or im-C prOiSOCI stamp of. not less than the proper a.tnount and that such stamp has been affixed or used in accordance with the law for the time being in force in India : s. 2 ( 11). Item 12 of Sch. I . pr~ribes the stamp duty payable in respect of an award. Section 33 ( l) provides, insofar as it is relevant :

" ( l) Every person having by law or consent of parties authority to receive evidence. . . . . before 'lfhom any instrument, chargeable. . . . . with duty, ill produced or comes in the perfom1ance of his func-tions, shall, if it appears to him that such instrument ill not duly stamped, impound the same."

Sectioo 35 of the Stamp Act provides, insofar as it is relevant : "No instrument chargeable with duty shall be ad-mitted in evidence for any purpose by any person having by law or consent of parties authority to re-ceive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such imistrument is duly stamped:

Provided that .................... "

Section 36 provides :

"Where an instrument has been admitted in evi-dence, such admission shall not, except as provided in section 61, be called in question at any stage of the aame suit or proceeding qn the ground that the instru-ment has not been duly stamped."

Section 38 deals with the impounding of the instruments : it prcmdes:

" ( l ) When the person inlpounclif1g an instrume~t 11Dder sectiQD 3 3 has . . . . . . authonty to receive evi-dence and admits such instrument in evidence upon payment of penialty as provided by section 3 5 or

........ , he shall send to the Collector an authenti-cated ·copy of such instrument, together with certi-ficate in writiJig, stating the amount of duty and penalty levied in respect thereof, ........ "

By s. 39 the Collector is authorised to adjudge proper penalty and to refund any portion of the penalty which has been paid in respect o.f the instrument, sent to him. Section 40 prescribes the procedure to be followed by the Collector in respect of an i;nstrument impounded by h!m or sent to him under s. 38. If the Collector is of the opinion that the instrument is chargeable with duty and is not duly stamped, he shall require the payment or proper duty or the amount required to make up the same together with penalty of five rupees; or, if he thinks fit, an amount not exceeding ten times the amount of the proper dut) or of the deficient portion thereof. Section 42 provides :

" ( 1) When the duty and penalty (if any), Jevi-able in respect of a,ny instrument have been paid under section 3 5, section 40 or ...... , the person admitting such instrument in evide;nce or the Collec-tor, as the case may be, sha]J certify by endorsement thereon that the proper duty or, as the case may be, the proper duty and penalty (stating the amount of each) have been levied in respect thereof, ..... .

(2) Every instrument so endorsed shall thereupon be admissible in evidence. and may be registered and acted upon and authenticated as if it had been duly stamped, and shall be delivered on his application in this behalf to the person from whose possession it came into the hands of the officer impoundin~ it, or as such person may direct :

Provided !;hat-

........... ; ; . ; ; . ; ........... . "

The award, whidh is an "instrument" within the meaning\ oe the Stamp Act was required to be stamped. Being unstamped, the aw.ard could not be received in evidence by the Cami, nor could 1~ be acted upon. But the Court was competent to im-pound 11 and to send it to the Collector with certificate in writing s~ating the amount of duty and penalty levied thereon. On the instrument so received the Collector may adjudge whe-ther it. is duly stamped and he may require penalty to be paid thereon, j,f in his view it has not been duly stamped. If th( duty and penalty are paid, the Collector will certify by endorse ment on the instrument that the proper duty and penalty hav• been paid.

An instrument which is not duly stamped cannot be received in evidence by any person who has authority to receive evi-dence, and it cannot be acted upon by that person or by any public officer. Section 35 provides that the admissibility of a• instrument qnce admitted in evidence shall not, except as pro-vided in s. 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped. Relying upon the difference in the phraseology betweein ss. 35 and 36 it was urged that an instrument whiclt is not duly stamped may be admitted in evidence. on pa)ment of duty and penalty, but it cannot be acted upon because s. 35 operates as bar to the admission in evidence of the instrument not duly stamped as well as to its being actcti upon, and the Legislature has by s. 36 in the conditions set out therein removed the bar only against admission in evidence of the instrument. The argument ignores the true import of s. 36. By that section an instrument once admitted in evidence shall not be called in question at any stage of the same suit or prt:>· ceeding on the ground that it has not been duly stamped. Sectio• 36 does not prohibit challenge against an instrument that it shall not be acted upon because it is not duly stamped, but on. that account there is no bar against an instrument not duly stamped being acted uporr after payment of the stamp duty and penalty according to the procedure prescribed by the Act. The doubt, if any, is removed by the terms of s. 42(2) which enact, in terms unmistakable, that every instrument endorsed by the Collector under s. 42 ( 1) shall be admissible in evidence and may be acted upon as if it had been duly stampoo.

The Stamp Act is fiscal measure enacted to secure revenue for the State Ol!l certain classes of instruments : it is not enacted to a'1ll litigant with weapon of technicality to meet the case of his opponent. The stringent provisions of the Act are conceived in the interest of the revenue. Once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of the initial de.feet in the instrument. Viewed in that light the Scheme is clear : s. 35 of the Stamp Act operates as bar to an unstamp-ed instrument being admitted in evidence or being acted upon; section 40 provides the p~ocedure for instruments being im· pounded, sub-s. ( 1) of s. 42 provides for certifying that an ins-trument is duly stamped, and sub-s. (2) of s. 42 enacts tho cQ\llsequences resulting from such certmcation.

Our attention was invited to the statement of law by M.C. Desai, J., in Mst. Bittan Bibi and Another v. Kuntu La~ ami 14.nother(') that : ----

(1) I.LR . .' 195:1 2 All. 9€4.

"A court is prohibited from admitting an instru-ment in evidence ainkl Coun and public officer both are prohibited from acting upon it. Thus Court is prohibited from both admitting it in evidence and acting upon it. It foilows that the acting upon is not included in the admission aUld that document can be admitted in evidence but not be acted upon. Of course it cannot be acted upon without its being admitted, but it can be admitted and yet be not acted upon. 1f every document, upon admission, became automatically liable to be acted upon, the provision in s. 35 that an instrument chargeable with duty but not duly stamped, shall not be acted upon by the Court, would be rendered redundant by the provisio11. that it shall not be admitted in evidence for adv pur-pose. To act upon an instrument is to give effect to it or to enforce it"

In 011r judgment, the learned Judge attributed to s. 36 meanin~ wlLich the Legislature did not intend. Attentiqn of the learnca Judge was apprently not invited to s. 42(2) of the Act which expte!sly renders an instrument, when certified by endorsement that proper duty and penalty have been levied i.'l respect thereof. capable of being acted upon as if it had been duly stamped.

The appeal fails and i~ dismissed with costs.

Appeal dismissad.