Court rules document not deed of release but deed of dissolution cum-three mortgages. Applicant awarded costs.

The court determined that the document in question, involving a dissolution of partnership and three mortgages, was not a deed of release but a deed of dissolution cum-three mortgages. It was held that the document was not an instrument of conveyance and not subject to additional duty. The applicant was awarded costs of Rs. 100/-, and a copy of the judgment was to be sent to the Board of Revenue.

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Issues Involved:
1. Whether the document is a dissolution of partnership-cum-three mortgages-cum-three releases.
2. Whether the document amounts to a dissolution of partnership-cum-three mortgages-cum-three conveyances chargeable with the aggregate duties of three conveyances under Article 23 of Schedule 1-B of the U.P. Stamp Amendment Act 1958 read with Section 6.

Issue-Wise Detailed Analysis:

1. Whether the document is a dissolution of partnership-cum-three mortgages-cum-three releases:
The document in question, dated 15th September 1960, was executed by four partners who dissolved their partnership. The third party took over all stocks, assets, and liabilities, and agreed to pay specific amounts to the other three partners in full satisfaction of their respective shares. To secure these payments, the third party hypothecated and charged certain properties.

The Board of Revenue opined that the document was not only an instrument of dissolution of partnership but also a conveyance as the three partners transferred their shares to the fourth partner against cash payment. However, the court noted that the Supreme Court had established that during the subsistence of a partnership, firm properties vest in all partners collectively, and no partner can deal with specific properties as if they were his own.

Upon dissolution, partners are entitled to have the firm's property applied to pay debts and liabilities, with the surplus distributed among the partners. The Supreme Court had held that the distribution of surplus does not amount to a transfer of assets. In the present case, cash payments to the three partners by the fourth partner were an adjustment of rights and liabilities, not a transfer of shares for a price.

The court concluded that the document is not a deed of release but a deed of dissolution cum-three mortgages.

2. Whether the document amounts to a dissolution of partnership-cum-three mortgages-cum-three conveyances chargeable with the aggregate duties of three conveyances:
The document was argued to be deficiently stamped by Rs. 1575/- according to the Revenue Authorities, who viewed it as a conveyance. The document stated that the partnership was dissolved, and the third party took over all assets and liabilities. The amounts payable to the other partners were secured by hypothecating properties.

The court examined the provisions of the Indian Partnership Act, noting that a firm continues to exist for the purpose of winding up its affairs even after dissolution. The partners' rights to the firm's property are realized only after paying off all debts and liabilities. The court referred to Supreme Court decisions which negated the contention that such an instrument is one of conveyance.

The court emphasized that an instrument of dissolution of partnership is liable to be stamped under Article 46 of Schedule I of the Stamp Act, with the maximum duty being Rs. 100/-. The document in question recorded a special mode of adjustment and settlement of accounts between the partners, which is permissible under the Partnership Act.

The court concluded that the document is not an instrument of conveyance and is not chargeable to additional duty as such. It is an instrument of dissolution of partnership-cum-three mortgages, separately chargeable with stamp duty under Articles 46 and 40 respectively.

Conclusion:
1. The document is not a deed of release. It is a deed of dissolution cum-three mortgages.
2. The document is not an instrument of conveyance and is not chargeable to additional duty as such.

The applicant is entitled to costs assessed at Rs. 100/-. A copy of the judgment shall be sent to the Board of Revenue.

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