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Karnataka High Court · body

2009 DIGILAW 802 (KAR)

K. G. N. Enterprises v. Ashraf Ali

2009-10-23

ASHOK B.HINCHIGERI

body2009
Judgment : ASHOK B. HINCHIGERI, J 1. The petitioner has raised the challenge to the order, dated 5.8.2009 (Annexure-E) passed by the Court of the VII Additional City Judge, (CCH-19) Bangalore, On I.A.No.3 in O.S.No.10714/2006. 2. The facts of the case in brief are that the petitioner filed the O.S.No.10714/2006 against the respondent for the specific performance of the agreement of lease, dated 20.4.2005. In the said suit proceedings, the respondent filed I.A.No.3 and requested the Trial Court to impound the said lease agreement. The said I.A. was turned down by the Trial Court, by its order, dated 18.1.2007 holding that the stamp duty paid on the lease agreement is sufficient. It was made clear that the said order on stamp duty is subject to review in case the respondent produces any further material to support his contention at the time of evidence. When the endeavours to raise the objections did not lead him anywhere, he approached this Court in Writ Petition No.9145/2008. This Court, by its order dated 30.6.2008 disposed of the petition with a direction to the Trial Court to reconsider the matter by giving an opportunity to the respondent to produce the additional materials. The respondent to produce two photographs of the building. The Trial Court, by its order, dated 5.8.2009 allowed the respondent’s I.A.No.3 by acceding to his request for impounding the agreement, dated 20.4.2005. The petitioner was directed to pay the proper duty and penalty on advalorem basis. Aggrieved by the said order, this petition is presented. 3. Sri Chalapathy, the Learned Senior Counsel appearing for Sri V. Ramesh Babu for the petitioner submits that as the possession of the suit schedule property was not delivered to the petitioner under the agreement, dated 20.4.2005, the said agreement does not amount to the demise in the present. In support of his submissions, he read out the following Clauses of the agreement:- “6. The Lessor hereby agrees and undertake to deliver the Vacant Possession of the Schedule ‘B’ Property with all electric, water and sanitary connection to the Lessees on or before 1st June 2005. 7. The Lesees shall have all the rights as are available to the Lessor in the main Lease Deed/ Composite Deeds with the Onwer i.e., sub-let, under-let, assign, nominate, transfer to any other person/s and get the Lease Deed registered in such name. 8. 7. The Lesees shall have all the rights as are available to the Lessor in the main Lease Deed/ Composite Deeds with the Onwer i.e., sub-let, under-let, assign, nominate, transfer to any other person/s and get the Lease Deed registered in such name. 8. The Lessor hereby agrees to sign and execute the Lease Deed in favour of the Lessees or their nominees, assignees, transferees, etc. as per Clause (8) above before the payment of the entire amount. 9. All the cost of Lease Deed, Stamp Duty, Registration charges, legal fee etc., shall be borne by the Lessees. 10. Either party shall be entitled to enforce the specific performance of the contract.” 4. Sri Chalapathy submits that the possession of the suit schedule property was made over to the petitioner only on 29.4.2006 vide possession letter at Annexure-G. He also brought to my notice the Memorandum of Understanding, dated 26.3.2006 (Annexure-H) subsequent to the date of the agreement in question. He requested me to notice the contents of Clause 4 of the Memorandum of Understanding, which is extracted herein a below:- “4. The Second party shall register the lease agreement in respect of the Schedule A property in favour of the First party. The expenses in respect of registration etc. are to be borne by the First party” 5. Sri Chalapathy submits that the two documents, namely, the Agreement and the Memorandum of Understanding, if read together, would clearly go to show that the parties herein contemplated the execution of the separate lease deed and registration of the same. 6. Raising his argument with reference to Section 105 of the Transfer of Property Act, 1882, he contends that lease of a immovable property is a transfer of right to enjoy such property in consideration of a price paid or promised. As the agreement in question did not create the present demise, the provisions contained in Article 30(1)(c)(i) of the Schedule to the Karnataka Stamp Act, 1957, are not attracted. 7. The Learned Senior Counsel sought to draw support from the judgment of the Hon’ble Apex Court in the case of THE STATE OF MAHARASHTRA & ORS. vs. M/s. ATUR INDIA PVT. LTD (JT (1994) 1 SC 640)., to buttress his submission that agreement of lease has been consistently construed by the Indian Courts as an agreement which creates an immediate present demise in the property covered by it. vs. M/s. ATUR INDIA PVT. LTD (JT (1994) 1 SC 640)., to buttress his submission that agreement of lease has been consistently construed by the Indian Courts as an agreement which creates an immediate present demise in the property covered by it. As the immediacy element is absent in the agreement in question, the question of paying the stamp value, as prescribed by Article 30(2)(c), does not arise at all. 8. Nextly, Sri Chalapathy brings to my notice the Hon’ble Apex Court judgment in the case of TRIVENIBAI AND ANOTHER vs. SMT. LILABAI ( AIR 1959 SC 620 ) to contend that unless the document satisfies the test of immediate and present demise in respect of the immovable property, it cannot be treated as an agreement to lease. He also sought to draw support from the Hon’ble Supreme Court’s decision in the case of V.B. DHARMYAT (DECEASED) THROUGH LRS. vs. SHREE JAGADGURU TONTADARYA AND OTHERS ( (1999) 6 SCC 15 ). He relied on the following Head Note portion, which is extracted hereinbelow:- “The document in question was neither intended to, nor did it in fact, result in a demise in present in favour of the appellant. This agreement was nothing more than a promise to do something in future, namely, to execute a lease deed and hand over possession of the plot in question to the appellant after the same was vacated by the municipality. The document, in other words, was a sort of undertaking or a promise given by the Respondent 1 to the appellant that on the municipality vacating the plot, the same would be given to a 99 year lease to the appellant and the lease deed would be registered with the Sub-Registrar. Under no circumstances did this document amount to a memorandum of a demise in the present time.” 2. 9. The Learned Senior Counsel has relied on the Hon’ble Supreme Court’s decision in the case of FOOD CORPORATION OF INDIA AND OTHERS vs. BABULAL AGRAWAL ( (2004) 2 SCC 712 ). The portion contained in Head Note ‘E’ of the said decision on which he has placed reliance reads as follows:- “E. Registration Act, 1908-Ss.17(2) (v), 2(7) & 17(1) (d) – Agreement for securing another agreement or deed in future for the creation of rights (lease in this case) in immovable property. Held, is not a document which compulsorily requires registration. The portion contained in Head Note ‘E’ of the said decision on which he has placed reliance reads as follows:- “E. Registration Act, 1908-Ss.17(2) (v), 2(7) & 17(1) (d) – Agreement for securing another agreement or deed in future for the creation of rights (lease in this case) in immovable property. Held, is not a document which compulsorily requires registration. It is an executory agreement by which no right in property created in preasenti. Such situation would arise if the agreement is such which may amount to a present demise even though the document may be contemplated to be executed later on – Evidence Act, 1872-S.92-Admissibility of document not required to be registered.” 10. He also submits that the petitioner’s production of two photographs does not amount to production of any additional material warranting the reconsideration of the matter. 11. Sri Prabhuling K. Navadgi, the Learned Counsel appearing for the respondent submits that the document under reference is neither registered nor duly stamped. According to him, the document, dated 20.4.2005 constitutes the lease by itself. He pointedly brings to my notice the contents of Clauses 8 and 9, which are already extracted hereinabove. 12. The Learned Counsel submits that the aforesaid Clauses clearly indicate the transfer of right of the property from the lessor to the lessee. By Clause-9, the petitioner was permitted to sub-let the property in favour of any party and the respondent was required to register the same, if insisted for. 13. That some of the terms may commence at a future date does not mean that there is no present demise, so contends Sri Navadgi. He submits that the transfer of right to enjoy the property, as is evident from the induction of M/s.Arvind Brands Ltd., by the petitioner in the premises; further it has also been collecting the rent from the said tenant. 14. Sri Navadgi submits that assuming that there is no lease agreement between the parties herein as per the provisions of the Transfer of Property Act, the same is the lease agreement for the purposes of the Stamp Act. 15. The Learned Counsel further submits that the explanation to Article 36 of the Bombay Stamp Act, 1958 is not there to Article 30 of the Karnataka Stamp Act, 1957. 15. The Learned Counsel further submits that the explanation to Article 36 of the Bombay Stamp Act, 1958 is not there to Article 30 of the Karnataka Stamp Act, 1957. He brings to my notice the Explanation No.III to Article 36 of the Bombay Stamp Act, 1958, which is extracted hereinbelow:- “Explanation III.-An agreement of lease shall not be chargeable as a lease unless there is no immediate and present demise” 16. When the Karnataka State Legislature in exercise of its wisdom, has thought it fit not to have such an explanation to Article 30, the ratio laid in ATUR’S CASE (supra) arising under the Bombay Stamp Act, 1958 can have no application for the case on hand, so contends Sri Prabhuling Navadgi. 17. The Learned Counsel has relied on the judgment of the Hon’ble Supreme Court in the case of FOOD CORPORATION OF INDIA AND OTHERS vs. BABULAL AGRAWAL (Supra) for contending that if rent is made payable under an agreement from the date of its execution or other specified date, it may be said to create a present demise. 18. He sought to draw support from the Court’s judgment in the case of K. AMARNATH vs. SMT. PUTTAMMA (2000 (4) Kar.L.J.55), for canvassing the proposition that, if the Court comes to the conclusion that the document is insufficient stamped, the Court should determine the deficit stamp duty and penalty payable and direct the party to pay the same and thereafter admit the document. If no payment is made, the Court has to impound the document and sent it to the District Registrar for being dealth with in accordance with law. 19. The learned Counsel has further relied on the following judgments:- i) TOLARAM RELUMAL AND ANOTHER vs. THE STATE OF BOMBAY ( AIR 1954 SC 496 ) ii) ATYAM VEERRAJU AND OTHERS vs. PEEHETTI VENKANNA AND OTHERS ( AIR 1966 SC 629 ) iii) ICICI vs. STATE OF MAHARASHTRA AND OTHERS ( (1999) 5 SCC 708 ) 20. Sri Hanumantharayappa, the Learned Government Pleader who was put on notice, as the issue pertains to the payment of stamp value, read out the provisions contained in Sections 2(d), 3 and 3(A) of the Karnataka Stamp Act, 1957. He prays for the harmonious construction of the various provisions contained in the said Act and the schedule thereto. He submits that the surrounding circumstances are also to be taken into account. He prays for the harmonious construction of the various provisions contained in the said Act and the schedule thereto. He submits that the surrounding circumstances are also to be taken into account. He brings to my notice the possession certificate dated 29.4.2006 (Annexure-G) issued by the respondent to the petitioner plaintiff pursuant to the conditions set-out in the agreement of lease, dated 20.4.2005. 21. The Learned Government Pleader submits that while determining the liability to pay the stamp value, the concerned Authorities or the Courts have to go by the recitals found in the document and not by its nomenclature. Otherwise, the documents may be drafted so ingeniously so as to avoid the payment of stamp value. In support of his submission, he has relied on the decisions of the Apex Court in the case of MADRAS REFINERIES LIMITED vs. CIEF CONTROLLING REVENUE AUTHORITY ( 1977(2) SCC 308 ), and PRASAD TECHNOLOGY PARK PVT. LTD., vs. SUB-REGISTRAR AND OTEHRS (2005(128) Company Cases 996 SC), wherein it is held that the real and true meaning of the instrument must be ascertained to determine what stamp duty is to be charged. He submits that the decision of the Apex Court in the case of STATE OF MAHARASTRA (supra) has no application for the facts of the present case, as the provision contained in the Bombay Stamp Act and the Karnataka Stamp Act are not identical. To contend that the judgment rendered in a different situation, in a different setting and under a different statute can have no application for this case, he has relied on the judgment of the Supreme Court in the case of SHAMRAJU HEGDE vs. VENKATESH BHAT ( AIR 1987 SC 2323 ) 22. The question that falls for my consideration is, whether the Trial Court is justified in impounding the agreement of lease, dated 20.4.2005 and directing the petitioner to pay the duty and penalty under Article 30(1)(c)(i) of the Karnataka Stamp Act, 1957. 23. The perusal of the impugned order reveals that the respondent filed a memo dated 4.8.2005 producing the photographs. The photographs show that there is one shop on the ground floor and a show room on the first floor. On the ground floor, Mc.Donald Family Restaurant and on the first floor a cloth shop namely Woodland are being run. 23. The perusal of the impugned order reveals that the respondent filed a memo dated 4.8.2005 producing the photographs. The photographs show that there is one shop on the ground floor and a show room on the first floor. On the ground floor, Mc.Donald Family Restaurant and on the first floor a cloth shop namely Woodland are being run. Based on this, the Trial Court has come to the conclusion that the possession has been effectively handed over to the petitioner with full power to enjoy the property by subletting, etc. 24. Yet another development which has weighed with the Trial Court in holding that there is an immediate demise in the sub-leasing of the portion of the premises by the petitioner to M/s. Aravind Brands. If the possession was not made over and the right to enjoy the property was not transferred by the respondent to the petitioner, there would not have been any possibility for the petitioner to sub-lease it to M/s. Aravind Brands. 25. The judgments relied upon by the petitioner’s side do not come to its rescue in any way. In the case of STATE OF MAHARASTRA (supra) it was held that if an agreement to lease does not create an immediate demise, it does not require the registration and the payment of the stamp duty. But in the instant case, the document is chargeable to stamp duty because the recitals in the agreement dated 20.4.2005 and the sub-letting of a portion of the premises in question by the petitioner to M/s. Aravind Brands are clearly indicative of the document in question being the agreement of lease and not merely an agreement to lease. Similarly, the document, which was the subject matter of DHARMYAT’S case (supra) was only a promise to do something in future, which did not amount to the demise in the present time. 26. In case of FCI (supra), the demise of property was not there. The agreement in the said case was only to execute a lease deed after the completion of the construction. Some of the conditions stipulated were that if the structure was found to be defective of workmanship was faulty, the prospective lessee could refuse to take the possession of the premises and the earnest money was liable to be forfeited. The agreement in the said case was only to execute a lease deed after the completion of the construction. Some of the conditions stipulated were that if the structure was found to be defective of workmanship was faulty, the prospective lessee could refuse to take the possession of the premises and the earnest money was liable to be forfeited. The recitals of the document which fell for consideration in FCI case (supra) and those of the document dated 20.4.2005 in this case, are thus entirely different. 27. The materials placed on the record are clearly indicative of the possession of the premises in question being made over to the petitioner. As held by the Hon’ble Supreme Court in the cases of MADRAS REFINERIES LTD., AND PRASAD TECHNOLOGY PARK (supra). The real and true meaning of an instrument has to be ascertained for determining the liability of a party to pay the stamp duty. 28. The conferring of all the rights by the respondent on the petitioner as per Clause No.8 and the respondent agreeing to sign and execute the lease deed in favour of the petitioner or its nominees as per Clause No.9 of the agreement clearly show that the agreement operates as a present demise. Empowered by these Clauses, the petitioner has sub-leased a portion of the premises to M/s. Aravind Brands Ltd., 29. Under these circumstances, mere postponement of handing over of the possession and execution of a formal deed cannot constitute the justificatory reason for holding that there is no present demise. 30. For yet another reason too, this Court has no hesitation in holding that the decision in the case of STATE OF MAHARASHTRA (supra) has no application for the cases on hand. The explanation found to Article 36 of Schedule-I of the Bombay Stamp Act, 1958 is not found to Article 30 of Schedule-I of the Karnataka Stamps Act, 1957. Therefore, the judgment delivered in different situation and different setting cannot be made applicable to the case on hand. If the provisions of the two enactments are not in para materia, it would not be proper to decide this case based on the decision passed while examining the provisions of the Bombay Stamp Act, 1958. 31. The legislative intentment also cannot be ignored. If the provisions of the two enactments are not in para materia, it would not be proper to decide this case based on the decision passed while examining the provisions of the Bombay Stamp Act, 1958. 31. The legislative intentment also cannot be ignored. When the Karnataka State Legislature, in exercise of its wisdom, thought it fit not to have an explanation as found in the said Bombay enactment, this Court cannot import such an explanation into Article 30 of the Karnataka Stamp Act, 1957. 32. For all the aforesaid reasons, I answer the question, which I have formulated hereinabove in the affirmative. 33. This Court finds that the Trial Court has passed a well considered order. Not finding any error, much less, a jurisdictional error, this petition is dismissed. No order as to costs.