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Issues: (i) Whether an agreement to sell, treated as a conveyance because possession was delivered, could be admitted in evidence for a collateral purpose despite being insufficiently stamped. (ii) Whether the court was bound to impound the document and refuse its use unless proper stamp duty and penalty were paid.
Issue (i): Whether an agreement to sell, treated as a conveyance because possession was delivered, could be admitted in evidence for a collateral purpose despite being insufficiently stamped.
Analysis: Section 35 of the Indian Stamp Act, 1899 bars admission of an instrument chargeable with duty unless it is duly stamped, and the statutory language extends to use of the document "for any purpose whatsoever". The proviso to Section 49 of the Registration Act, 1908 cannot override that absolute bar, because the relaxation for collateral purposes applies only to unregistered documents and not to unstamped instruments. Once the agreement to sell, by virtue of the statutory explanation to Article 23 of Schedule I-A, was treated as a conveyance on transfer of possession, it attracted the stamp duty applicable to a conveyance.
Conclusion: The document could not be admitted or used for collateral purpose without compliance with Section 35 of the Indian Stamp Act, 1899.
Issue (ii): Whether the court was bound to impound the document and refuse its use unless proper stamp duty and penalty were paid.
Analysis: Section 33 of the Indian Stamp Act, 1899 casts a statutory duty on the authority receiving evidence to impound an instrument that appears not to be duly stamped. Section 35 then renders such a document inadmissible until the requisite duty and penalty are paid. Since the instrument in question was chargeable as a conveyance and had not borne adequate stamp duty, the court had authority to direct impounding and require payment before it could be acted upon.
Conclusion: The impounding order was valid and the document remained inadmissible until proper duty and penalty were paid.
Final Conclusion: The statutory scheme governing stamped instruments was applied strictly, and the challenge to impounding and inadmissibility failed.
Ratio Decidendi: An instrument chargeable with stamp duty cannot be admitted in evidence for any purpose, including a collateral purpose, unless it is duly stamped or the statutory conditions for payment of duty and penalty are satisfied.
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