1906 (11) TMI 1 - HC - Indian Laws

Assignment of contractual rights to receive goods requires ad valorem stamp duty under Stamp Act

Nathu Gangaram Versus Hansraj Morarji

The Bombay HC determined that an assignment document transferring contractual rights to receive goods constituted a conveyance under the Stamp Act ... - 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered by the Court were:(a) Whether the document in question, an assignment of a contract for the delivery of goods, falls within the definition of 'conveyance' under Section 2, Clause (10) of the Stamp Act, thereby necessitating an ad valorem stamp duty.(b) Whether the document can be characterized instead as a mercantile agreement or memorandum relating exclusively to the sale of goods or merchandise, which would render it exempt from stamp duty.(c) Whether the document qualifies as a 'mercantile document of title to goods' under Clause (b) of Article 62 of the Stamp Act, potentially exempting it from stamp duty.2. ISSUE-WISE DETAILED ANALYSISIssue (a): Whether the assignment document is a conveyance requiring ad valorem stamp dutyRelevant legal framework and precedents: The Court examined Section 2, Clause (10) of the Stamp Act (Act II of 1899), which defines 'conveyance' as including every instrument by which property, whether movable or immovable, is transferred inter vivos and which is not otherwise specifically provided for by Schedule I. The Court also referred to the Transfer of Property Act provisions requiring assignments of choses in action to be in writing. English case law including Mortgage Insurance Corporation v. Commissioners of Inland Revenue (1888) 21 Q.B.D. 352 and In re Vernon [1901] 1 K.B. 297 was cited to support the interpretation of conveyance under the Stamp Acts.Court's interpretation and reasoning: The Court held that the document in question was not a mere agreement for sale of goods but an assignment of a chose in action, i.e., the contractual right to receive delivery of goods. The assignment transferred the legal right to the chose in action inter vivos from Sharifbhoy to the plaintiff. Since the document effected a transfer of property in the form of a legal right (chose in action), it fell within the definition of a conveyance under the Stamp Act.Key evidence and findings: The document comprised a contract for sale of gunny bags between the defendant and Sharifbhoy, with an endorsement in black ink assigning all rights and interests in the contract to the plaintiff. The assignment was signed by Sharifbhoy and bore a one anna stamp. The plaintiff's case was based solely on being the assignee of the contract, not on any direct sale of goods to him.Application of law to facts: Since the plaintiff sued as assignee of the contract (a chose in action), the document was an instrument transferring property inter vivos. The Court rejected the argument that it was merely an agreement relating to sale of goods. Consequently, the document required stamping with an ad valorem stamp as a conveyance.Treatment of competing arguments: The plaintiff contended that the document was an agreement relating exclusively to sale of goods and thus exempt from stamp duty. The Court found this untenable given the nature of the assignment and the plaintiff's case. The Court also distinguished the present case from earlier Indian precedent (Haribai v. Krishnarav) based on differences in statutory language.Conclusions: The document was held to be a conveyance of property under the Stamp Act, necessitating an ad valorem stamp. The plaintiff's tendered document was insufficiently stamped.Issue (b): Whether the document is a mercantile agreement or memorandum relating exclusively to sale of goods, exempt from stamp dutyRelevant legal framework and precedents: The plaintiff relied on the exemption under the Stamp Act for mercantile agreements relating exclusively to sale of goods or merchandise. The Court considered the nature and effect of the document in light of this exemption.Court's interpretation and reasoning: The Court rejected the characterization of the document as a mercantile agreement for sale of goods exclusively. It emphasized that the document was an assignment of the contractual right to receive goods, not a contract for sale itself. Since the plaintiff's cause of action was based on assignment of the chose in action, the document could not be considered an agreement solely relating to sale of goods.Application of law to facts: The document transferred the obligation of the defendant to deliver goods to Sharifbhoy to the plaintiff, representing a transfer of a legal right rather than a sale agreement. This placed the document outside the scope of the exemption.Treatment of competing arguments: The Court noted that accepting the plaintiff's argument would contradict the plaintiff's own case and undermine the legal basis of the suit.Conclusions: The document was not exempt as a mercantile agreement relating exclusively to sale of goods.Issue (c): Whether the document qualifies as a mercantile document of title to goods under Article 62(b) of the Stamp ActRelevant legal framework: Article 62(b) of the Stamp Act exempts certain mercantile documents of title to goods from stamp duty. The plaintiff sought leave to adduce evidence to prove that the document fell within this category.Court's reasoning and procedural decision: The Court did not decide this issue on the merits. It granted leave to the plaintiff to consider this position further and adjourned the case for this purpose, ordering the plaintiff to pay costs for the day.3. SIGNIFICANT HOLDINGS'The plaintiff is suing as an assignee of the benefit of the contract and the document in question is an assignment of a chose in action which must be in writing under the Transfer of Property Act. It is not an agreement for the sale of goods at all.''The contract, I apprehend, is nothing but a chose in action and you cannot say that this assignment of the contract effected a transfer of the goods or was an agreement to transfer the goods from Sharifbhoy to the plaintiff; for the very excellent reason that... this is not only not the plaintiff's case, but if it were the plaintiff's case he would not have any chance of succeeding at all in this suit which is based solely on the plaintiff being the assignee of the contract.''It is important to notice the words 'every instrument by which property whether moveable or Immovable is transferred inter vivos...' The property here is the right to get the goods delivered to him. It is property which I apprehend would have passed to the Official Assignee in the event of Sharifbhoy's Insolvency. That being so, I am of opinion that this document must be stamped with the ad valorem stamp.'Core principles established include the interpretation that an assignment of a chose in action, such as a contract right to receive goods, constitutes a conveyance of property under the Stamp Act requiring appropriate stamp duty. Documents that merely assign contractual rights are distinct from agreements for sale of goods and are not exempt from stamp duty as mercantile agreements relating exclusively to sale of goods. The classification of such an assignment as a mercantile document of title to goods remains an open question pending further evidence.Final determinations were that the document tendered was insufficiently stamped as it required an ad valorem stamp under the Stamp Act. The plaintiff's contention that it was exempt as a mercantile agreement was rejected. The question of exemption as a mercantile document of title was reserved for further consideration.