This question was put up by a Co-operative Society, who objected to accept a document signed outside state on Maharashtra Stamp paper. Than our office researched the law and came across a Judgment of Division Bench of Bombay High Court. It was filed in the year 1988. Matter went up to Supreme court, it was remanded back to Bombay High Court for hearing and final disposal. Let us see what happened in the said matter.
Recently a group of matters came up for final disposal before division bench of Bombay High Court namely Indian Hume Pipe Company Limited and Others Versus State of Maharashtra and Others
In Writ Petition No.2519/1988, a declaration is sought that the provisions of sections 3, 7 and 19 of the said Act to the extent to which the same seek to levy stamp duty on the copies of the instruments executed outside the State of Maharashtra are null and void. It is stated in the said petition that a Debenture Trust Deed dated 6th April 1987 (for short “the deed”) was executed by the first petitioner company in the State of Gujarat. The first petitioner and the State Bank of India are the parties to the said deed. The State Bank of India is a trustee. A mortgage of the immovable properties of the first petitioner company was made under the deed with a view to secure the issue and allotment of the debentures of the first petitioner. As a substantial part of the mortgaged property was situated in the State of Gujarat, the deed was executed in the State of Gujarat and was stamped as per the law prevailing in the State of Gujarat the Bombay Stamp Act, 1958 as applicable to the State of Gujarat). As the registered office of the first petitioner company is situated in Mumbai, the charge of mortgage was required to be registered with the Registrar of Companies in Mumbai pursuant to the provisions of the Companies Act, 1956 (for short “Companies Act”). In response to the query made by the second respondent the Superintendent of Stamps, the petitioners contended that the said original deed is not received in the State of Maharashtra.
In Writ Petition No.2488/1988, a similar deed was executed by the first petitioner company in the State of Gujarat. Stamp duty was paid and it was registered in the State of Gujarat. A copy of the said deed was filed with the Registrar of Companies in Mumbai for registering the charge as the registered office of the first petitioner is in the State of Maharashtra. A demand for the difference in the stamp duty payable in the State of Maharashtra and the stamp duty paid in the State of Gujarat was made by the second respondent. That is how this writ petition is filed challenging the demand. Even in this petition, there is a challenge to the constitutional validity of the relevant provisions of the said Act in so far as they permit levy and recovery of stamp duty in respect of copies of instruments.
In Writ Petition No.2534/1988, a similar deed was executed and registered in the State of Gujarat. A copy of the said deed was filed in the office of the Registrar of Companies in Mumbai for registration of charge as the registered office of the first petitioner is in Mumbai. Even in this case, a demand is made by the second respondent for payment of differential duty. The demand is for payment of difference between the duty payable on the said deed in the State of Maharashtra and duty paid in the State of Gujarat. In the petition, there is a challenge to the demand and, in the alternative, to the constitutional validity of the provisions of the said Act as in other petitions.
In Writ Petition No.2194/1988, none has appeared for the petitioners for pressing the petition on merits. But Court found that the challenge is similar as in the other petitions.
In Writ Petition No.2280/1988, a similar deed was executed by the first petitioner company in the State of Gujarat. Stamp duty was paid and the deed was registered in the State of Gujarat as in other cases. A verified copy of the said deed was filed with the office of the Registrar of Companies at Mumbai pursuant to the provisions of the Companies Act for the purpose of registration of charge as the registered office of the first petitioner is in Mumbai. In this petition, the challenge is to the similar demand of difference in the duty. A prayer is made in the petition for making a reference under section 54 of the said Act on the question whether any stamp duty is payable in the State of Maharashtra on the copy of the deed which is registered in the State of Gujarat. There is similar challenge in Writ Petition No.215/1989.
Now let us see the relevant provisions of the Maharashtra Stamp Act,1958.
Sections 3, 7 and 19, Maharashtra Stamp Act,1958 which read thus: “3. Instruments chargeable with Duty: Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in Schedule I as the proper duty therefore respectively, that is to say (a) every instrument mentioned in Schedule I, which not having been previously executed by any person, is executed in the state on or after the date of commencement of this Act; (b) every instrument mentioned in Schedule I, which, not having been previously executed by any person, is executed out of the state on or after the said date, relates to any property situate, or to any matter or thing done or to be done in this State and is received in this State: Provided that no duty shall be chargeable in respect of (1) any instrument executed by or on behalf of, or in favour of, the Government in cases where, but for this exemption, the Government would be liable to pay the duty chargeable in respect of such instrument or where the Government has undertaken to bear the expenses towards the payment of the duty;
(2) any instrument for the sale, transfer or other disposition, either absolutely or by way of mortgage or otherwise, of any ship or vessel, or any part, interest, share or property of or in any ship or vessel registered under the Bombay Coasting Vessels Act, 1838, or Merchant Shipping Act, 1958.” (emphasis added)
“7. Payment of higher duty in respect of certain instruments. (1) Notwithstanding anything contained in section 4 or 6 or it any other enactment, unless it is proved that the duty chargeable under this Act has been paid, (a) on the principal or original instrument, as the case may be, or (b) in accordance with the provisions of this section, the duty chargeable on an instrument of sale, mortgage or settlement other than a principal instrument or on a counterpart, duplicate or copy of any instrument shall, if the principal or original instrument would, when received in this State have been chargeable under this Act with a higher rate of duty, be the duty with which the principal or original instrument would have been chargeable under section 19.
(2) Notwithstanding anything contained in any enactment for the time being in force, no instrument, counterpart, duplicate or copy chargeable with duty under this section shall be received in evidence unless the duty chargeable under the section has been paid thereon: Provided that any Court before which any such instrument, duplicate or copy is produced may permit the duty chargeable under this section to be paid thereon and may then receive it in evidence.”
“19. Payment of duty on certain instruments liable to be increased duty in Maharashtra State. Where any instrument of the nature described in any article in Schedule I and relating to any property situate or to any matter or thing done or to be done in this State is executed out of the State and subsequently received in the State, (a) the amount of duty chargeable on such instrument shall be the amount of duty chargeable under Schedule I on a document of the like description executed in this State less the amount of duty, if any already paid under any law in force in India excluding the State of Jammu and Kashmir on such instrument when it was executed; (b) and in addition to the stamps, if any, already affixed thereto such instrument shall be stamped with the stamps necessary for the payment of the duty chargeable on it under clause (a) of this section, in the same manner and at the same time and by the same persons as though such instrument were an instrument received in this State for the first time at the time when it became chargeable with the higher duty; and (c) the provisions contained in clause (b) of the proviso to subsection (3) of section 32 shall apply to such instrument as if such were an instrument executed or first executed out of this State and first received in this State when it became chargeable to the higher duty aforesaid, but the provisions contained in clause (a) of the said proviso shall not apply thereto.”
Entry 91 of List I reads thus: “91. Rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies and receipts.” Entry 66 of List-II reads thus: “63. Rates of stamp duty in respect of documents other than those specified in the provisions of List -I with regard to rates of stamp duty.” Both the entries do not contain the word “instrument”. It is true that the Apex Court in the case of Bar Council of UP vs. State of UP has observed that Entry 91 of List-I refers to “instruments”. There are judicial pronouncements which hold that the word “instrument” occurring in the definition clauses of both the Indian Stamp Act and the said Act refers only to an original instrument and not to a copy of an instrument. The argument is that both the above entries in Schedule VII relate only to instruments and not the copies thereof and therefore, the provision of section 7 of the said Act lacks legislative competence in so far as it seeks to levy stamp duty on copies of instruments. 22. In several decisions, the Apex Court has laid down the law relating to the interpretation of various entries in the Lists in the Schedule VII.
The Apex Court in the case of State of Gujarat v. Akhil Gujarat Pravasi V.S. Mahamandal, (2004) 5 SCC 155, in paragraph 10 held thus: “10. In interpreting the scope of various entries in the legislative lists in the Seventh Schedule, widest-possible amplitude must be given to the words used and each general word must be held to extend to ancillary or subsidiary matters which can fairly be said to be comprehended in it. The entries should, thus be given a broad and comprehensive interpretation. In order to see whether a particular legislative provision falls within the jurisdiction of the legislature which has passed it, the Court must consider what constitutes in pith and substance the true subject-matter of the legislation and whether such subject-matter is covered by the topics enumerated in the legislative list pertaining to that legislature.” In the case of Offshore Holdings (P) Ltd. v. Bangalore Development Authority, (2011) 3 SCC 139, the Apex Court held thus: “67. The entries in the legislative lists are not the source of powers for the legislative constituents but they merely demarcate the fields of legislation. It is by now well-settled law that these entries are to be construed liberally and widely so as to attain the purpose for which they have been enacted. Narrow interpretation of the entries is likely to defeat their object as it is not always possible to write these entries with such precision that they cover all possible topics and without any overlapping.
A Constitution Bench of this Court in Ujagar Prints (2) v. Union of India [(1989) 3 SCC 488] described these entries and also stated the principles which would help in interpretation of these entries. While enunciating these principles, this Court held as under: (SCC pp. 512-13, para 48) “48. Entries to the legislative lists, it must be recalled, are not sources of the legislative power but are merely topics or fields of legislation and must receive a liberal construction inspired by a broad and generous spirit and not in a narrow pedantic sense. The expression ‘with respect to’ in Article 246 brings in the doctrine of ‘pith and substance’ in the understanding of the exertion of the legislative power and wherever the question of legislative competence is raised the test is whether the legislation, looked at as a whole, is substantially ‘with respect to’ the particular topic of legislation. If the legislation has a substantial and not merely a remote connection with the entry, the matter may well be taken to be legislation on the topic.” 70. This Court, while referring to the principles of interpretation of entries in the legislative lists, expanded the application to all ancillary or subsidiary matters in Jijubhai Nanabhai Kachar v. State of Gujarat [1995 Supp (1) SCC 596] and held as under: (SCC p. 609, para 7) “7. It is settled law of interpretation that entries in the Seventh Schedule are not powers but fields of legislation. The legislature derives its power from Article 246 and other related articles of the Constitution. Therefore, the power to make the Amendment Act is derived not from the respective entries but under Article 246 of the Constitution. The language of the respective entries should be given the widest scope of their meaning, fairly capable to meet the machinery of the Government settled by the Constitution. Each general word should extend to all ancillary or subsidiary matters which can fairly and reasonably be comprehended in it. When the vires of an enactment is impugned, there is an initial presumption of its constitutionality and if there is any difficulty in ascertaining the limits of the legislative power, the difficulty must be resolved, as far as possible in favour of the legislature putting the most liberal construction upon the legislative entry so that it may have the widest amplitude.” This line of interpretation had been stated in Hoechst Pharmaceuticals Ltd. v. State of Bihar [(1983) 4 SCC 45] and followed in different judgments of this Court including the judgments cited above.” (emphasis added) In the case of Indian Handicrafts Emporium v. Union of India, (2003) 7 SCC 589, in paragraph 62, the Apex Court held thus: “That the appellants used to trade in ivory stands admitted. They, thus, would come within the purview of the definition of trader also is undisputable. The manner in which despite legal ban on trade a person may not take recourse to illegal trading is a matter which squarely falls within the purview of the legislative competence. It is now well settled that Parliament can not only enact a law for avoidance or evasion of commission of an illegal trade but also may make law to see that the law is not evaded by taking recourse to machination or camouflage. The loopholes, if any, in such matters can and should be plugged. “Means affecting means” principle as adumbrated in United States v. Darby [312 US 100 : 85 L Ed 609 (1941)] is an illustration on the point. Both substantial and procedural provisions can be made to make a law in furtherance of the object for which the Act has been enacted and to see that what is sought to be prohibited directly may not be achieved by the traders indirectly”. (emphasis added)
Firstly, we are dealing with the question whether the copies of the deeds which are the subject matter of these petitions were liable for payment of stamp duty under the said Act. In the present case, we were dealing with the said deeds styled as Debenture Trust Deeds which are executed in the State of Gujarat in respect of immovable properties in Gujarat. Under the deeds subject matter of these petitions, a mortgage of immovable properties was created in favour of a bank or a consortium of banks by way of security for the debentures and the interest payable thereon. Stamp duty was paid on the deeds in the State of Gujarat. We may note here that Chapter-II of the said Act has the heading “Stamp Duties”. Chapter-II has five subheadings. Under subheading (A) styled as “Of the Liability of Instruments to Duty”, Sections 3 to 9 are included. Section 3 which we have quoted above specifically states that subject to the provisions of the said Act and the exemptions contained in Schedule-I, the instruments set out in clauses (a) and (b) are chargeable with duty of the amounts indicated in Schedule-I as the proper duty therefore respectively. It is true that Section 3, at the relevant time, did not refer to a copy of an instrument and it referred to only an instrument. It is also true that at the relevant time, the proviso to Section 3 which deals with the copies of the instruments was not on the statute book. Section 4 provides that where, in case of any sale or mortgage or settlement, several instruments are employed for completing the transaction, only the principal instrument is chargeable with duty prescribed in Schedule-I and each of the other instruments shall be chargeable with a duty of ten rupees instead of the duty prescribed for it in the Schedule-I. Section 5 provides that any instrument comprising or relating to several distinct matters shall be chargeable with the aggregate amount of the duties with which separate instruments, each comprising or relating to one of such matters, would be chargeable under the said Act. Section 6 provides that subject to the provisions of Section 5, an instrument so framed as to come within two or more of the descriptions in Schedule-I shall be chargeable only with the highest of such duties when the duties chargeable are different. Section 7 has a title “Payment of higher duty in respect of certain instruments”. Subsection (1) of section 7 starts with a non obstante clause which seeks to override Sections 4 and 6 or any other enactment. Thus, in a way, this Section is by way of an exception to Sections 4 and 6. It provides that unless it is proved that the duty chargeable under the said Act has been paid, (a) on the principal or original instrument, as the case may be, or (b) in accordance with the provisions of this section, the duty chargeable on instrument of sale, mortgage or settlement, other than a principal instrument or a copy of any instrument shall, if the principal or original instrument, when received in the State would have been chargeable under the said Act with a higher rates of duty, be the duty with which the principal or original instrument would have been chargeable under Section 19. In the present case, the deeds have been executed and stamped in the State of Gujarat and, therefore, admittedly, the stamp duty chargeable under the said Act has not been paid on the original deeds. As stated earlier, the deeds create a mortgage in respect of immovable properties of the first petitioner Companies in Gujarat. It is also not in dispute that the deeds subject matter of these petitions, if received in the State, would have been chargeable under the said Act with a higher rate of duty. Subsection (1) of Section 7 provides that in case of a copy of any such instrument, stamp duty under the said Act will be payable which is equivalent to the duty with which the principal or the original instrument would have been chargeable under Section 19. Subsection (2) of Section 7 provides that a copy of the instrument chargeable with duty as provided in sub-Section (1) shall not be received in evidence unless the duty chargeable under the said section has been paid thereon. Section 7 is also a charging section which comes under subheading (A) “Of the Liability of Instruments to Duty”. Subsection (1) of Section 7 specifically provides for payment of duty on a copy of the instrument. The duty is payable, provided if the principal or the original instrument executed outside the State, when received in the State, would have been chargeable for stamp duty under the said Act with a higher rate of duty. It is true that Section 19 by itself does not provide for payment of stamp duty on a copy of the instrument. But subsection (1) of Section 7 which is a charging section, by a legal fiction makes Section 19 applicable to a copy of an instrument to which clause (b) of subsection (1) of Section 7 is applicable. That is how, in the case of a copy of the instrument to which provisions of clause (b) of subsection (1) of Section 7 are applicable, the duty as provided under Section 19 will be chargeable. Section 19 comes under the subheading (C) “Of the time of Stamping Instruments”. Section 19 is applicable to an instrument of the nature described in any article in Schedule-I and relating to any property situate or to any matter or thing done or to be done in the State is executed out of the State and is subsequently received in the State. In such a case, an amount of duty chargeable on such instrument shall be the amount of duty chargeable under Schedule-I on a document of the like description executed in this State less the amount of duty, if already paid under any law in force in India. As stated earlier, Section 7 which is a charging section specifically provides that the duty under Section 19 will be payable on a copy of the instrument to which provisions of clause (b) of subsection (1) of Section 7 are applicable.
While rejecting arguments that deeds are invalid or void Hon’ble Division Bench held as under:
We are dealing essentially with a deed/an instrument which is executed and stamped in another State where the stamp duty payable is less than the stamp duty payable on a similar deed executed in the State of Maharashtra. The said deed is used in the State of Maharashtra for registering a charge by lodging a verified copy of the deed in the office of the Registrar of Companies in accordance with sections 125 read with 130 of the Companies Act. The deeds were chargeable in the State of Gujarat as the same are executed in the said State. Copies of the same are received in the State of Maharashtra for registering a charge in the office of the Registrar of Companies. The entries in the Schedule VII extend to all ancillary or subsidiary matters which can fairly and reasonably be comprehended in it. If the entry 63 applies to instruments, it will extend to all subsidiary and ancillary matters connected with the said entry. Section 7 of the said Act which deals with copies of the instruments has a direct and substantial connection with the said entry 63. The said entry cannot be given a restricted meaning and interpretation which is contrary to the law laid down by the Apex Court. Liberal construction will have to be put so that it can be of a wide amplitude. The entry 63 will encompasses in itself even copies of instruments.
Documents executed outside state of Maharashtra are valid and when the same is brought back only requirement is payment of differential Stamp Duty if any.