1979 (7) TMI 260 - HC - Indian Laws

Board can refer instrument under s.57; agreement not lease or conveyance, liable to stamp duty under Article 5(c) Schedule I-B

Chief Controlling Revenue Authority Versus Anti Biotic Project Virbhadra, Rishikesh

The HC held the Board competent to refer the instrument under s.57. The instrument was not a lease (water not immovable) nor a conveyance (no transfer of ... - ISSUES PRESENTED AND CONSIDERED 1. Whether the Board of Revenue was competent to refer the instrument to the High Court under Section 57 of the Indian Stamp Act notwithstanding a prior determination by the Collector on a similar document. 2. Whether the instrument constitutes a 'lease' within Section 2(16) of the Indian Stamp Act and is chargeable under Article 35(a)(v) of Schedule I-B. 3. Whether the instrument is a 'conveyance' within Section 2(10) of the Indian Stamp Act, transferring property in consideration of Rs.16,50,000/-, and thereby liable under Article 23 of Schedule I-B. 4. If not lease or conveyance, whether the document is a mere agreement chargeable under Article 5(c) of Schedule I-B. 5. If none of the above categories apply, what is the correct nature of the deed and what stamp duty is payable. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Competence of the Board to refer the question under Section 57 Legal framework: Section 57 permits the Chief Controlling Revenue Authority to refer questions of law or importance arising on instruments to the High Court for decision. Precedent treatment: The obligation of the Chief Revenue Authority to state the case where questions of law arise was recognised in authority requiring proper compliance with the duty to state the case. Interpretation and reasoning: The Board found important questions of law regarding the nature of the instrument. No legal ground was shown to oust the Board's power merely because a Collector had previously fixed a duty on a similar instrument. The Board's referral was therefore within its statutory competence where a question of law arose. Ratio vs. Obiter: Ratio - the Board was competent to refer the case where a question of law arose despite a Collector's earlier assessment on a similar document. Conclusion: The Board's reference was maintainable and Question No.1 is answered affirmatively. Issue 2 - Whether the instrument is a 'lease' under Section 2(16) Legal framework: Section 2(16) defines 'lease' as a lease of immovable property (including specified instruments) and therefore requires the subject to be immovable property. The General Clauses Act includes benefits arising out of land within 'immovable property'; the Transfer of Property Act excludes standing timber, growing crops or grass from immovable property but does not otherwise define it for the Stamp Act. Precedent treatment: Authorities and legal dictionaries cited establish that running water is not land or tenement and is generally not capable of absolute ownership; prior decisions held rights to cut forest produce or pluck fruits to be licence-like rather than leases where no interest in soil was created. Interpretation and reasoning: The instrument granted the right to take specified quantities of running water from a river; it created no right in soil, no interest in the land or stream, and conferred no transferable estate in immovable property. Black's and other authorities establish that running water is movable and not a product of the soil; consequently the statutory definition of lease (which requires immovable property) is not attracted. Ratio vs. Obiter: Ratio - where an instrument confers only a right to take running water without creating any interest in land, it is not a 'lease' within Section 2(16). Conclusion: The instrument is not a lease; Question No.2 is answered in the negative. Issue 3 - Whether the instrument is a 'conveyance' under Section 2(10) Legal framework: Section 2(10) defines 'conveyance' as an instrument by which property (movable or immovable) is transferred inter vivos and not otherwise provided for by the Schedule; an essential feature is the actual transfer of title. Precedent treatment: Authorities emphasise that a conveyance must vest a complete title in the transferee and that an agreement to transfer in future or contingent obligations does not amount to a conveyance. Interpretation and reasoning: The instrument did not transfer any present title to water; it provided for future drawing of water and placed payment obligations contingent on future quantities actually drawn (and net of water returned). The law does not require writing for transfer of movable property which ordinarily passes on delivery; here there was no transfer or vesting of proprietary title. The document thus amounted at best to an agreement to sell or permit future extraction, not a conveyance effecting an immediate transfer. Ratio vs. Obiter: Ratio - where a document does not create or vest a complete title but only stipulates future or contingent rights to acquire or take movable matter, it is not a 'conveyance'. Conclusion: The instrument is not a conveyance; Question No.3 is answered in the negative. Issue 4 - Whether the document is an agreement chargeable under Article 5(c) of Schedule I-B Legal framework: Article 5(c) of Schedule I-B applies to agreements not otherwise specifically provided for in the Schedules. Precedent treatment: Where instruments do not create interests in immovable property or effect transfers inter vivos, such instruments have been treated as agreements for the purposes of stamp duty. Interpretation and reasoning: Having concluded that the instrument is neither a lease, nor a conveyance, nor a profits a prendre (see Issue 4 analysis below), the instrument constitutes an agreement to permit extraction and payment in respect of water in future, with contingent computation of liability. The document lacks immediate vesting or transfer; its character as an agreement is dominant when read as a whole and in light of the dominant purpose test for stamp classification. Ratio vs. Obiter: Ratio - the instrument is an agreement and is chargeable under Article 5(c) of Schedule I-B. Conclusion: The document is an agreement chargeable under Article 5(c); Question No.4 is answered in the affirmative. Issue 5 - Whether the instrument amounted to a profit à prendre Legal framework: Profit à prendre is an incorporeal right to enter another's land and take therefrom a produce or profit of the soil; it ordinarily confers an interest in land. Precedent treatment: Authorities and case law distinguish between rights to take produce of the soil (which may be profits à prendre and immovable) and rights to take running water or other non-soil products (which have been held not to constitute profits à prendre). Prior decisions on fishery and forest produce satisfied the dual requirements of interest in land and that the thing taken was produce of soil; those facts distinguished them from rights to running water. Interpretation and reasoning: Two necessary elements for a profit à prendre are absent: (1) no interest in the land was conferred, and (2) running water is not a produce of the soil. Authorities show that rights to take running water are not treated as profits à prendre. Accordingly the State's contention that the instrument created a profit à prendre fails. Ratio vs. Obiter: Ratio - where no interest in land is given and the subject taken is running water (not a produce of the soil), the right is not a profit à prendre. Conclusion: The instrument does not create a profit à prendre; Question No.5 (concerning alternate categorisation) does not arise for decision because the instrument is an agreement chargeable under Article 5(c). Costs and Miscellaneous The misstatement in the Board's statement of case about permission to construct a pump house was noted; the Court proceeded by ignoring that incorrect factual assertion without remitting the matter for a fresh statement as the agreement and documents show the misstatement to be incorrect. Final disposition: Board's referral maintainable; instrument is neither lease nor conveyance nor profit à prendre, but an agreement chargeable under Article 5(c) of Schedule I-B; consequential questions accordingly answered and parties to bear their own costs.