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Rajasthan High Court · body

2003 DIGILAW 1522 (RAJ)

Lake Palace Hotels v. Collector

2003-11-10

J.C.MOHANTY

body2003
MOHANTY, MEMBER–This revision has been filed under Section 56 of the Indian Stamp Act, 1899 against the order of Collector (Stamps) Circle Udaipur dated 27.6.2002. (2). Brief facts of the case are that the petitioner No. 1 entered into an agreement for operative contract dated 23.1.1999 with the Indian Hotels Company Limited, Bombay and the agreement contained 25 articles binding both the parties. Accountant General, Audit II, Rajasthan, Jaipur gave his finding that this operative contract was a lease, following which the lower court namely Collector (Stamps) Udaipur issued notice to the petitioners under rule 66-C of the Indian Stamps Rules 1955 read with Section 27 of the Indian Stamps Act, 1899. The petitioners replied to this notice stating therein that Lake Palace Hotels, Udaipur has not entered into any lease or license agreement with anybody and this operative contract was only to keep a record of the terms and conditions already in existence as per the previous agreement dated 25.2.1972, supplementary agreement dated 22.10.1981 and administrative arrangement dated 28.1.1967, in order to avoid any litigation in future. However, the lower court passed judgment dated 27.6.2002 with the finding that the said document was a lease and accordingly stamp duty and registration fee were levied along with penalty amounting to Rs. 60 Lac in total. This revision has been filed against this order of Collector (Stamps) dated 27.6.2002. (3). Heard the learned counsels for both the sides. (4). Learned counsel for the petitioners repealed the factual position mentioned above and argued that both the parties to this agreement dated 23.1.1999 were not given any notice. The Indian Hotels Company Limited Bombay should have been implied as a party. However, the company was not served any notice. Citing 1996 RRD page 503 (1), he argued that hearing both the parties was mandatory before passing any judgment regarding this agreement. (5). He further argued that operating contract between the parties did not have any of the ingredients of a lease agreement. The Lack Palace Hotels are the employers in this agreement and the Indian Hotels Company Limited have been engaged with a compensation of 3% of the gross income of the hotel and 12.5% of the gross operating profit of the hotel as operating fee subject to a ceiling of 8% of the gross income of the hotel. The Lack Palace Hotels are the employers in this agreement and the Indian Hotels Company Limited have been engaged with a compensation of 3% of the gross income of the hotel and 12.5% of the gross operating profit of the hotel as operating fee subject to a ceiling of 8% of the gross income of the hotel. Recruitment of the staff of the hotel is to be done by the petitioner No. 1 and the title of the hotel ownership of the hotel will also be with the petitioner No. 1. The operating company would be reimbursed expenditure for management of the hotel and the petitioner No. 1 would be entitled to inspect the books and records of the hotel. The operating company would be required to furnish monthly reports regarding the profit and loss of the hotel. The possession of the hotel would remain with the owning company also. Hence, the said document is not a lease document. The notice served upon the petitioner on 18.2.1999 did not specify that the petitioner was to establish that the disputed document was not a lease. So the petitioner did not get proper notice to explain his position. The judgment of the lower court has been passed by mechanically accepting the finding given by the Accountant General (Audit) in his letter dated 30.4.2001 and 3.5.2001. Section 29 of the Indian Stamp Act casts liability to pay stamp duty on the lessee. Hence, the lessee should have been specifically made a party serving notice upon him at his Bombay office. Hence, the impugned judgment should be quashed. (6). Learned Government Advocate argued that notice under rule 66-C were served upon the petitioners on 18.2.1999 and 5.4.1999 and the notice were served in the name of Company Secretary, Hotel Lake Palace as well as in the name of General Manager, Lake Palace Hotel. The reply was filed on 9.4.1999 by the Company Secretary of the Lake Palace Hotels and Motels Limited. The said document was executed in respect of the management of the hotel and so these notices were adequate as far as both the parties to the agreement are concerned. All ingredients of lease are available in this document and they have been systematically listed out in the judgment dated 27.6.2002 passed by learned Collector (Stamps), Udaipur. The said document was executed in respect of the management of the hotel and so these notices were adequate as far as both the parties to the agreement are concerned. All ingredients of lease are available in this document and they have been systematically listed out in the judgment dated 27.6.2002 passed by learned Collector (Stamps), Udaipur. The Judgment does not mechanically repeat the finding given by the Accountant General (Audit) Udaipur, but after analyzing the facts of the case in detail and the relevant legal provisions. (7). Lease implies transfer of rights to enjoy the property made for certain period, which should be either expressed or implied and it also involves consideration of some money promised to be paid. In this document all 5 important ingredients are available as have been mentioned in the page number 5 and 6 of the judgment passed by the lower court. Section 2 in the article 5 of the agreement mentions that the operating Company ``shall have the powers of recruitment of staff etc. and identifying the hotel as a member of Taj Group of Hotels. The use of word ``shall makes it obligatory for the owing company to allow various powers listed in section 2 and article 5, which in reality means a transfer of possession. Although the payment of rent to the owing Company has not been directly described, the owing company actually earns a rent, which is equal to the income of the hotel after deducting the fees payable to the operating company. This is an indirect description of the rent payable. Hence, the judgment passed by the lower court does not suffer from any legal error. (8). In rebuttal, learned counsel for the petitioner repeated that the operating company has not been given adequate notice. (9). Perused the contents of the files of the lower courts carefully and considered the arguments advanced by both the counsels. (10). From the perusal of the judgment passed by the lower court, it is seen that the ingredients of the lease agreement have been clearly discussed by citing Section 2(16) of the Indian Stamp Act, 1899. Lease means a lease of immovable property. It is a transfer of right to enjoy such property for certain period which may be either expressed or implied and the lease is required to be done in consideration of money promised to be paid. Lease means a lease of immovable property. It is a transfer of right to enjoy such property for certain period which may be either expressed or implied and the lease is required to be done in consideration of money promised to be paid. Payment of rent is an important ingredient of a lease. The circular of the Department of Registration and Stamps dated 1.10.1999 has specified five important ingredients of a lease agreement. From a perusal of the articles in the disputed agreement, there is no doubt that this involves two parties. Secondly, the subject matter is related to the rights over an immovable property. The owing Company has transferred the right of enjoyment of such property to the operating company and there is a definite description about the period of this agreement in Article 2. The provisions of Section 2 of Article 5 very clearly and expressly gives the operating company definite powers as mentioned in paras (a) to (f) which unambiguously imply transfer of enjoyment of rights over the disputed immovable property. As far as the ingredients regarding payment of rent is concerned, though there is no express provision guarantying any definite sum to be paid by the operating company, however, it is quite obvious that the owing company would be entitled to receive the amount which is equal to the income of the hotel after deducting the operating fee payable to the operating company. The provisions relating to operation of the hotels in Article 5 and finalisation of budgets in article 7 etc. give definite and enforceable rights to the operating company. In such circumstances, it cannot be held that the operating company and the owing company are in a relationship of employer and employee. The use of the word ``shall in various articles makes it obligatory for the owing company to allow the enjoyment of definite rights by the operating company in respect of the disputed immovable property. Indirect, round about way of description of the terms of a contract, however skillfully drafted, cannot exempt a document from stamp duty, if it fulfills the basic ingredients of a type of document or transaction. (11). Indirect, round about way of description of the terms of a contract, however skillfully drafted, cannot exempt a document from stamp duty, if it fulfills the basic ingredients of a type of document or transaction. (11). Regarding the argument advanced by the learned counsel for the petitioner relating to service of notice on the operating company, it is seen that the lower court has served notices dated 18.2.1999 and 5.4.1999 on both Company Secretary, Hotel Lake Palace, Hotels and Motels Limited, Udaipur as well as on the General Manager of Lake Palace Hotels, who are certainly the representatives operating company and therefore it cannot be said that the operating company has not been properly informed. Similarly, the letter written to company Secretary of Hotel Lake Palace dated 22.3.2001 gives the details of both the operating company and the owing company and the nature of the dispute over the agreement executed. Hence, the contention of learned counsel for the petitioner cannot be accepted that the operating company was not given adequate notice in this matter. (12). In view of the foregoing discussions, we find no legal error or material irregularity in the judgment passed by the lower court. Consequently, the revision petition is hereby rejected. (13). Pronounced in the open court.