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1972 DIGILAW 30 (PAT)

Hardutta Rai Jhunjhunwala v. State Of Bihar

1972-02-03

AKBAR HUSAIN, S.N.P.SINGH

body1972
Judgment S.N.P.Singh, J. 1. In this writ application under Articles 226 and 227 of the Constitution of India the petitioner has challenged the validity of (i) a letter, dated the 28th ssJune, 1968, addressed by the Sub-Registrar, Giridih, to the Stamp Deputy Collector, Hazaribagh (Annexure 2), requesting the latter for realisation of the deficit stamp duty - and penalty from the petitioner in respect of a deed of dissolution of partnership; (ii) the note of the Stamp Deputy Collector, dated the 15/ 18th October, 1968, addressed to the Deputy Commissioner, Hazaribagh, with the order of the Deputy Commissioner thereon dated the 29th October, 1968 (Annexure 3), agreeing with the Stamp Deputy Collector and directing recovery of the deficit stamp duty and penalty and (iii) the notice of demand dated the 17th December, 1968 (Annexure 4) issued by the Stamp Deputy Collector calling upon the petitioner to deposit the amount of deficit stamp duty and penalty in the local treasury at Giridih, and has prayed for the quashing thereof. A further prayer has been made for a direction to the Deputy Commissioner to register the said deed, a copy whereof is annexure 1 to the writ application. 2. The material facts for the disposal of this application may be briefly stated as follows: petitioner Hardutta Rai Jhunjhunwala had been carrying on a partnership business with his brother Lalchand Jhunjhunwala, in the name and style of "Messrs. Rameshwar Das Hardutt Rai" under a registered deed of partnership dated the 17th of August, 1959. On account of some differences between the partners with regard to the method of carrying on the said business, the partners decided to close the partnership business with effect from the 15th of April, 1968. Accordingly, a deed purporting to be a deed of dissolution of the partnership was drawn up on the 26th of April, 1968 on a non-judicial stamp of Rs. 16/- and was presented for registration before the Sub-Registrar at Giridih. The respondent Sub-Registrar, taking the view that the document in question was a conveyance for Rs. 14,885-75 paise, so far as the assets of the partnership business were concerned, and also a sale of the goodwill for Rs. 2,000.00 and, as such, it ought to have been drawn up on a stamp of Rs. 408/-, impounded the document. The respondent Sub-Registrar, taking the view that the document in question was a conveyance for Rs. 14,885-75 paise, so far as the assets of the partnership business were concerned, and also a sale of the goodwill for Rs. 2,000.00 and, as such, it ought to have been drawn up on a stamp of Rs. 408/-, impounded the document. By his letter, dated the 28th of June, 1968, (Annexure 2) the Sub-Registrar sent the impounded document to the respondent Stamp Deputy Collector requesting him to recover the deficit stamp duty and penalty and thereafter to send the document for needful. It appears that the Stamp Deputy Collector placed the impounded document with his notes before the respondent Deputy Commissioner on the 18th of October, 1968; and the Deputy Commissioner, by his order, dated the 29th of October, 1968, agreed with the views of the Sub-Registrar and the Stamp Deputy Collector that the document in question had not been duly stamped. Accordingly, he passed an order that ten times of the amount of the proper duty should be realised from the petitioner. A copy of the order of the Deputy Commissioner with notes of the Stamp Deputy Collector is annexure 3 to the writ application. Thereafter, by memo No. 3297, dated the 17th of December, 1968, the petitioner was asked by the respondent Stamp Deputy Collector to deposit a sum of Rs. 392/- as stamp duty and Rs. 3,920 as penalty in the local treasury at Giridih. A copy of this notice is Annexure 4 to the writ application. 3. Mr. Hari Lall Agrawal, learned counsel appearing for the petitioner, contended before us that the document in question is a deed of dissolution of partnership simpliciter and it cannot be said to be a deed of conveyance. In order to decide the question, it will be necessary to examine the document in question in some detail. The document is described as a "Deed of dissolution of partnership". The preamble to the document recites that some differences arose with regard to the method of carrying on the partnership business and the partners decided to close the partnership business on and from the 15th of April, 1968. There is also a recital in the preamble that the accounts of the partnership had been made up to the 15th of April, 1968 and the balance sheet had been drawn up. There is also a recital in the preamble that the accounts of the partnership had been made up to the 15th of April, 1968 and the balance sheet had been drawn up. Then, there are three important paragraphs in the preamble which read as follows:- - "And whereas the party hereto of the second part the said Shri Lalchand Jhunjhunwala having agreed to take over the assets and liabilities including the closing stock of goods. And whereas the party hereto of the First Part the said Shri Hardutt Rai Jhunjhunwala having been paid Rs. 14,885.75 paise the amount of his capital along with his share of profit up to the said 15th April, 1968. "And whereas the parties hereto are desirous of putting on record the terms and conditions of the dissolution of the partnership deed dated the 17th August, 1959." The first four paragraphs of the terms of agreement are relevant. In the first paragraph it has been stated that the deed of partnership dated the 17th of August, 1959 under the name and style of "Messrs. Rameshwardas Harduttrai" at Giridih. had been determined and had been dissolved on and from the 15th of April, 1968. The remaining three paragraphs of the terms of agreement read as under: "2. That the party hereto of the second part the said Shri Lalchand Jhunjhunwala has agreed and has taken over all the assets and liabilities including the closing stock of goods." 3. That the party hereto of the First part has been paid Rs. 14,885.75 paise the amount of his capital along with his share of income- up to the 15th day of April, 1968. 4. That the party hereto of the Second part shall be entitled to have the exclusive use of the name and style of the Finn M/s. Rameshwardas Harduttrai for which he has separately paid Rs. 2,000/-(Rupees Two thousand) only being half share of the value of the goodwill of the said Firm Messrs. Rameshwardas Harduttrai to Shri Harduttrai Jhunjhunwala, which the said "Shri Harduttrai Jhunjhunwala hereby acknowledges". 4. From what has been stated in paragraph 4 of the terms of agreement it is clear that Lalchand Jhunjhunwala paid a sum of Rs. 2,000.00 to Harduttrai Jhunjhunwala for his half share of the value of the goodwill of the firm. The Sub-Registrar has rightly taken it to be a sale of goodwill. 4. From what has been stated in paragraph 4 of the terms of agreement it is clear that Lalchand Jhunjhunwala paid a sum of Rs. 2,000.00 to Harduttrai Jhunjhunwala for his half share of the value of the goodwill of the firm. The Sub-Registrar has rightly taken it to be a sale of goodwill. The only point, therefore, which requires consideration is whether the view of the Sub-Registrar that the document is a conveyance for Rs. 14,885.75 paise relating to the assets of the partnership business is correct. It is a well-settled principle of law that the substance of the transaction has to be considered in order to find out as to what is the real nature of the document. 5. A similar document came up for consideration before a Special Bench of the Allahabad High Court in Narendra Bahadur Singh V/s. Chief Inspector of Stamps, U. P., AIR 1972 All 1 (SB). The Special Bench took the view that the document in question was an instrument of dissolution of partnership, and not a deed of conveyance. Mr. Tara Kant Jha, learned Standing Counsel No. 2, appearing for the State, in course of his arguments, referred to the case In the matter of Hiralal Navalram, (1908) ILR 32 Bom 505. In that case, by the document in question the heirs of a deceased partner having four annas share in the partnership business relinquished all their claims to the said four annas for Rs. 17,341/- in favour of one of the partners. That document was held to be a conveyance on sale of property, namely, four annas share in the Pressing Factory belonging to the partnership. This case was considered and distinguished in the case of Board of Revenue V/s. V. M. Murugesa Mudaliar, AIR 1955 Mad 641 (FB), and it was pointed out that in the Bombay case there was a specific conveyance of the share of the partners to the other partner continuing the business. From the various recitals in the document under consideration in this case, it is clear that the said document is, in substance, an instrument of dissolution of the partnership, except paragraph 4 of the terms of agreement by which the half share of the goodwill of the firm was sought to be transferred to Lalchand Jhunjhunwala by the petitioner for a consideration of Rs. 2,000/-. 2,000/-. The rest of the document embodies adjustment of accounts between the partners of the dissolved firm. 6. For the reasons stated above, I am of the opinion that the petitioner can be called upon to deposit the deficit stamp duty and penalty only with respect to the sale of the goodwill for Rs. 2,000/-and he cannot be asked to pay the deficit stamp duty and penalty in respect of Rupees 14,885.85 paise, which according to the Sub-Registrar, was the consideration for the transfer of the assets of the partnership business. I, accordingly, allow the application in part with the modification indicated above and direct the respondent Deputy Commissioner to ask the respondent Sub-Registrar to register the document (Annexure 1) on payment of the deficit stamp duty and penalty with respect to Rs. 2,000.00 only, being the value of the goodwill transferred. Annexures 2, 3 and 4 are quashed to the above extent. There will be no order as to costs. Akbar Hussain, J. 7 I agree.