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2009 DIGILAW 788 (KER)

P. M. Abdul Nazir v. Tahsildar, Kozhikode

2009-08-19

C.N.RAMACHANDRAN NAIR

body2009
Judgment : The petitioners are challenging Ext.P7 order issued by the Land Revenue Commissioner, confirming the order of the District Registrar (General), Kozhikode demanding additional stamp duty for the ‘release-cum-assignment deed’ executed by the Kerala State Financial Corporation Ltd. (for short ‘the K.F.C.’) in favour of the petitioners. 2. I have heard counsel appearing for the petitioners, Standing Counsel appearing for the K.F.C. and the Government Pleader for other respondents. 3. The facts leading to the writ petition are the following:- A partnership firm by name ‘Meena Palace’ was granted a loan by the K.F.C. against the security of equitable mortgage created on land by partners by deposit of title deeds with the K.F.C. Later part of the mortgaged property was sold by the partners in favour of the petitioners. On default by the borrowers, the K.F.C. initiated recovery proceedings by attachment and sale of the mortgaged properties. The petitioners tried to block the recovery proceedings by the K.F.C. by filing original suit (O.S.No.297 of 1999) before the Sub Court, Kozhikode stating that part of the mortgaged properties were purchased by the petitioners and so much so, the K.F.C. have no right to attach and sell the properties. However, the Sub Court dismissed the suit upholding the entitlement of the K.F.C. to proceed with the recovery. At this stage, obviously with the concurrence of the mortgagors, the petitioners discharged liability of the borrowers by depositing Rs.41,26,988/- to the K.F.C. The K.F.C. executed the ‘release-cum-assignment deed’ in favour of the petitioners. However, on registration the Sub Registrar noticed the stamp duty payable under Section 25 of the Kerala Stamp Act read with Article 48(b) of the schedule to the Act which is the actual stamp duty payable, was not remitted and on account of the deficiency in payment of stamp duty, he referred the document for adjudication by the District Registrar (General), who held that the stamp duty payable under Article 48(b) was Rs.5,57,185/- as against Rs.2,06,500/- remitted by the petitioners. The impounding of document and demand of additional stamp duty of Rs.3,50,645/- and penalty of Rs.1000/- were challenged by the petitioners in appeal before the Land Revenue Commissioner, who, vide Ext.P7 order dated 22.12.2003, dismissed the appeal upholding the order of the District Registrar (General). It is against this order, the petitioners have filed this writ petition. 4. The impounding of document and demand of additional stamp duty of Rs.3,50,645/- and penalty of Rs.1000/- were challenged by the petitioners in appeal before the Land Revenue Commissioner, who, vide Ext.P7 order dated 22.12.2003, dismissed the appeal upholding the order of the District Registrar (General). It is against this order, the petitioners have filed this writ petition. 4. The only question to be considered is the stamp duty payable on the ‘release-cum-assignment deed’ executed by the K.F.C.. Before proceeding to consider the exact stamp duty payable, I have to decide as to what exactly is the nature of transaction irrespective of naming of the document by the petitioners and the vendors. The petitioners have not made the partners of the borrower-firm who mortgaged the property to KFC, as parties in the writ petition. In fact, K.F.C. had only a mortgaged right over the property and on discharge of the debt, K.F.C. was bound to release the mortgage in favour of the partners, the original owners of the property. However, it appears that there was agreement for sale between mortgagors and the petitioners and therefore, the mortgagors kept themselves out of the subsequent transaction between the petitioners and the K.F.C. The K.F.C. accordingly, on remittance of the entire arrears, executed the ‘release-cum-assignment deed’ to the petitioners. The petitioners have no case that they have got any other document executed by the mortgagors after getting ‘the release-cum-assignment deed’ executed by the K.F.C. In other words, based on the document executed by K.F.C., the petitioners claim absolute right over the property and so much so, there can be no doubt that the document executed by the K.F.C. is not only a release deed, but a sale deed as well and the document is rightly styled as ‘release-cum-assignment deed’. The K.F.C., in exercise of their mortgaged right, was entitled to attach and sell the mortgaged property, is an undisputed position. So much so, the transaction is nothing, but a sale deed by the K.F.C. in favour of the petitioners after releasing their mortgaged right over the property. Therefore, I have to consider the stamp duty liability treating the document as a pucca sale deed executed by K.F.C. 5. So much so, the transaction is nothing, but a sale deed by the K.F.C. in favour of the petitioners after releasing their mortgaged right over the property. Therefore, I have to consider the stamp duty liability treating the document as a pucca sale deed executed by K.F.C. 5. The petitioners have a specific case that the document falls under Article 55(c)(ii) of the schedule to the Stamp Act whereas the case of the Registration Department is that the transaction entirely falls under Article 48(b) of the schedule to the Act read with Section 25 of the Kerala Stamp Act. For easy reference, Section 25 of the Kerala Stamp Act and Article 48 and 55(c)(ii) are extracted hereinbelow:- “25. How transfer in consideration of debt, or subject to future payment etc. to be charged.- Where any property is transferred to any person in consideration, wholly or in part, of any debt due to him or subject either certainly or contingently to the payment or transfer of any money or stock, whether being or constituting a charge or encumbrance upon the property or not such debt, money, or stock is to be deemed the whole or part, as the case may be, of the consideration in respect whereof the transfer is chargeable with as valorem duty: Provided that nothing in this section shall apply to any such certificate of sale as is mentioned in Article 16 of the Schedule. Explanation.- In the case of a sale of property subject to a mortgage or other encumbrance any unpaid mortgage money or money charged, together with the interest, if any, due on the same, shall be deemed to be part of the consideration for the sale: Provided that, where property subject to a mortgage is transferred to the mortgagee, he shall be entitled to deduct from the duty payable on the transfer the amount of any duty already paid in respect of the mortgage.” Articles 49 and 55(c)(ii) are as follows: “48. Release, that is to say, any instrument (not being such a release as is provided for by Section 24), whereby a person renounces a claim upon another person or against any specified property— (a) When such release operates in favour of his or her spouse or children – The same duty as Bottomry Bond (No.14) for such amount or value as set forth in the release. (b) in any other case – The same duty as a conveyance (No.21 or 22, as the case may be) for such amount or value as set forth in the release. 55. Transfer (Whether with or without consideration)---- (a) xxxxx xxxxx xxxxx (b) xxxxx xxxxxx xxxxx (c) of any interest secured by a bond, mortgage deed or police of insurance--- (i) if the duty on such bond, mortgage deed or policy does not exceed fifty rupees - The duty with which such bond, mortgage deed or policy of insurance is chargeable (ii) in any other case – Fifty rupees I am unable to appreciate the claim of the petitioners because if their argument that the transaction falls under Article 55(c)(ii) is correct, then they were liable to pay only stamp duty of Rs.50/-, whereas the actual stamp duty paid was Rs.2,06,500/-. There is no explanation on what basis the petitioners happened to remit the stamp duty of Rs.2,06,500/- as against their claim that the transaction attracts stamp duty of Rs.50/-. In my view, the transaction cannot be treated as a mere transaction of any interest secured by a bond, mortgage deed or policy of insurance because on facts, the K.F.C. was not transferring their mortgaged right infavour of the petitioners, but had, in fact, in exercise of their right to attach and sell the mortgaged property, sold the property to the petitioners after simultaneously lifting the attachment. Neither the petitioners nor the original owners, viz., the partners of the borrower-firm have a case that the document executed has not conferred the absolute title over the property on the petitioners. If the petitioner’ contention is correct, then, after release of mortgaged right held by the K.F.C., the original owners would retain their title over the property, which is not the case of the petitioners who claim title over the property based on the document executed by the K.F.C. Therefore, the transaction, in my view, was rightly found to be a release-cum-sale falling under Article 48(b) read along with Section 25, which attracts stamp duty at the rate applicable to conveyance referred to in items 21 and 22 of the Schedule to the Stamp Act. I, therefore, uphold Ext.P7 order of the Land Revenue Commissioner confirming the adjudication by the Registrar (General) demanding additional stamp duty. I, therefore, uphold Ext.P7 order of the Land Revenue Commissioner confirming the adjudication by the Registrar (General) demanding additional stamp duty. The writ petition is therefore dismissed with a direction to respondents 2 and 3 to immediately recover the balance stamp duty from the petitioners.