Addu Achiar vs The Custodian, Evacuee Property

This application for the issue of a writ of CERTIORARI is directed against the order of the Custodian, Evacuee Property, who refused to confirm the sale of an Ice Factory in favour of the Petitioner. The brief facts relating to this case are that Messrs. Jehangir Hormusji, a firm carrying on business in Secunderabad owned premises 106/A Alexandra Road. This firm erected an Ice factory in the premises. Later on this Ice Factory was agreed to be sold by the firm to one Abdul Majeed Paul for a sum of Rs. 1,20,000/- and the vendee paid Rs. 60,000/-as. earnest money and this is evidenced by Document No. 7 dated the 23rd February 1947 forming part of the record in this case. It was agreed that the vendee was to pay the balance of a purchase price by 15-8-1947 on which date a regular sale deed was to be executed. The vendor Abdul Majid Paul took the premises on rent and ran the factory there. On the 19th November 1948 Abdul Majeed Paul, entered into an agreement with the present Petitioner agreeing to sell the Ice factory to the Petitioner for a sum of Rs. 80,000/- and received from the Petitioner a sum of Rs. 25,000/- as earnest money and the understanding was that the balance of the consideration, namely, the sum of Rs. 55,000/- was to be paid and the sale completed by 5-12-1948. Along with this agreement of sale was attached a list of the properties that were agreed to be sold, and this list contains 33 items. The balance of Rs. 55,000/- was paid on the 13th of December 1948 by the Petitioner to the vendor. The vendor, Abdul Majeed Paul, passed a receipt in favour of the Petitioner for Rs. 55,000/-. This document is Exhibit 2. On the same day the vendor addressed a letter to the vendee the Petitioner stating that he had received Rs. 80,000/- the full sale price of the Ice Factory, and that the ''Ideal Ice Factory'' had been sold and delivered to the Petitioner. On the same day Abdul Majeed Paul wrote to Messrs Hormusjee and Co., informing them that he had sold the Ice Factory to Addu Achiah and that thenceforward he would run the factory in their premises and continue to be their tenant herein Majeed Paul also requested that the necessary transfer or change of tenancy might be recorded. Simultaneously with this, the Electricity Department was also addressed by Abdul Majeed Paul stating that the electricity charges which hitherto were being paid by him would be paid by Addu Achiah as he had purchased the ice factory. A similar communication was addressed to the Municipality stating that the business hereafter would be conducted by Addu Achiah. In March 1950 Abdul Majeed Paul left for Pakistan and he was declared an evacuee and all his properties declared evacuee properties.

The present Petitioner, Addu Achiah, filed an application before the Custodian for confirmation of the sale of the Ice Factory in his favour by Abdul Majeed Paul. On the 14th August 1950, the Deputy Custodian confirmed the sale but the Custodian under his re-visional jurisdiction issued a notice to the petitioner to show cause why the order of the Deputy Custodian confirming the sale should not be set aside.

After the party appeared, the Custodian inspected the premises and made his inspection notes. The Custodian finally hold that the machinery installed there could be regarded'' only as immovable property having regard to the fact that the factory "consists of two sets of big condensing plant with a number of masonry vats for freezing ice all fixed in the ground", and held that as the document evidencing the sale had not been registered as required by law no title passed to the Petitioner and therefore the sale could not be confirmed. It is this order of the Custodian that is being challenged before us.

There can be no doubt that under the provisions of Section 17 of the Registration Act where immovable property of the value of more than Rs. 100/- is conveyed? such sale could only be effected by a document of sale duly registered. So the whole question will not turn upon as to whether it was immovable property that was sold to the Petitioner and as such whether the document evidencing the sale-required registration. In order to determine as to whether the property sold was immovable-property, it would be necessary to know what the subject matter of the sale was and for this purpose it would be advisable to know that the agreement of sale dated the 19th November 1948 purported to convey. The first paragraph of the agreement reads as under :

The Vendor will sell and the purchaser will buy the Majeed Paul Ice Factory (formerly known as the Ideal Ice Factory) situate in No. 106, Parklane, Secunderabad with all the rights belonging or appurtenant thereto.

The previous document in favour of Abdul Majeed Paul dated the 23rd February 1947 reads as under:

The Vendors will sell and the purchaser will purchase the Goodwill and the Ice Plant Machinery situate in 106-A, Alexandra Road, Secunderabad, belonging to the" vendors in the condition and the state in which the plant and machinery remain this day and the said plant machinery etc., shall be put in possession of the purchaser on the 1st March 1947 in order to avoid further controversy about the condition of the machinery ....

A reading of the relevant portions in the aforesaid agreements of the sale to Abdul Majeed Paul and by Paul to the Petitioner would show prima facie that what was conveyed was only the Ice factory located in building No. 106, Alexandra Road (Park Lane) Secunderabad

It is the case of both the parties that it was only the machinery that was sold and not the bungalow. The schedule to the agreement of sale also makes it clear that it was the machinery relating to the manufacture of ice, and pertaining to the Ice factory that was sold. Section 8 of the Transfer of Property Act indicates what would pass to the vendee on a transfer being effected of a particular kind of property and it says that where the property transferred in machinery attached to the earth, the movable parts thereof pass to the vendee. The whole argument of the learned Advocates centered round the point as to whether the Ice factory that was sold is to be regarded as movable property or not. If the machinery and other articles pertaining to the factory are in the nature of permanent fixtures then certainly they would be regarded as immovable property.

What would be regarded as permanent fixture'' has been the subject of judicial decisions. The word ''immovable property'' has been defined in the General Clauses Act and the Registration Act. ''Immovable property'' has been defined negatively in the Transfer of Property Act. In Section 3 of the Act, it has been defined as under : ''Immovable property'' does not include standing timber, growing crops or grass." The word ''Immovable property'' has been defined in Section 2, Clause 20 of the Hyderabad General Clauses Act, (for we would be governed only by the Hyderabad General Clauses Act). According to this definition, so long as a thing is attached to the earth and fastened to it, it would be regarded as immovable property. In the Indian Registration Act, ''Immovable property'' has been defined in Section 2 Sub-Clause (6) as follows:

Immovable property includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or permanently fastened to anything .which is attached to the earth, but not standing timber, growing crops nor grass.

We are here concerned with those permanently attached to the earth or permanently fastened to anything which is attached to the earth. Things attached to the earth correspond to what are known as ''fixtures'' in English Law.

The law governing fixtures in England is enunciated by the Maxim ''Quicquid plantatur solo, solo cedit that is to say, whatever is affixed to the soil becomes part of the soil. In India, however, this. maxim has been held to have only a limited application. A thing attached, to the earth does not necessarily become part of the land to which it is attached, �even though it may by virtue of its being attached to the land, be immovable property, thus, for example, a superstructure of land is immovable property no doubt. The. land on which it is constructed may belong to a third party and the person who has put up a structure can always remove the structure from the place. A certain person owned certain land. A Railway Company built upon such land before a declaration was made for acquiring it under the Land Acquisition Act. The Plaintiff relying upon the English maxim referred to above, that whatever is affixed to the soil becomes part of the soil claimed compensation not only for the land but also for the building which the Railway Company had erected. The Privy Council held that the English Law did not apply to this case and under the Mohammedan Law which applied, the owner of the land on which another constructed a building, was not entitled to the building, vide- the case of the Secretary of State for Foreign Affairs v. Charlsworth Pilling and Co. 26 Bom 1 (PC) .

The test as to whether a thing would be regarded as being imbedded in the earth in order to constitute immovable property is whether it rests by its own weight on earth Sand whether it can change places and can a change hands and can be removed from one place to another. The law of Fixtures has received a liberal construction in the case of Trade Fixtures. Thus, for example, if a lessee for years makes a furnace fixed with mortar for his advantage or where a fire engine is erected to work a colliery the pieces of machinery would be regarded only as accessories to the carrying on of the trade, and they would be regarded as fixtures in the nature of trade fixtures. Trade fixtures and fixtures for ornament and convenience have always been regarded as the two exceptions to the general rule that they would go with the land. This is based on the principle that whatever is fixed to the soil becomes, In the contemplation of the law, a part of it. The English doctrine of fixtures did not prevail in India and what the Transfer of Property Act substantially reproduced was what was recognised as the law relating to fixtures by the Hindu and Mahomedan jurisprudence. This has been made very clear by Justice Mukerjee in the case of Mofis Sheikh v. Rasiklal Ghosh 36 Cal 815, wherein Mukherjee J., observed that the law relating to fixtures in India is the one recognised by the Hindu and the Mohomedan jurisprudence and not the law of England.

The two leading cases in England are the eases of Hobson v. Gorringe (1897) 1 Ch 132 and Reynolds v. Ashby (1904) AC 466 Lord Lindley observed in the case of Reynolds v. Ashby quoted above, that in determining whether that which once has been a chattel has become annexed to (SIC) attention should be paid to the nature of the, thing itself, the mode of its attachment and the circumstances in which it came to be attached. The correct test would be to ascertain whether it was to create a permanent improvement to the premises or was it merely a temporary annexation for the enjoyment of the chattel by the tenant.. Applying the above test to the facts of the present case, it cannot be said that when Abdul Majeed Paul purchased the Ice Factory from Messrs. Jahangir Hormusji, his intention was to make a permanent improvement to the Immovable property, the premises belonging to Jehangir Hormusji, it can only be regarded as Abdul Majeed Paul intending to run the business of an Ice factory for his own profit and instead of buying the necessary machinery and installing the same in some premises he purchased a factory which had already been installed in the premises belonging to Jehangir Hormusji. From the fact that Messrs. Jehangir Hormusji owned the premises as well as the Ice factory it could not be contended that the Ice factory was there with a view to improve the Immovable property, namely, the premises. They owned the premises and ran the Ice. factory as a business concern and when they thought that it was not worthwhile running the Ice factory they sold it to Abdul Majeed Paul. Abdul Majeed Paul in his turn sold it to the Petitioner, when he found that he could not run the same. Where therefore a tenant running the factory in the premises of another, instals machinery it will always be presumed that he instals the same with the intention of removing the same whenever he chooses to vacate the premises. As has been observed above, the test to be applied in order to determine as to whether they are permanent fixtures or not would be to find out whether those fixtures are for the beneficial enjoyment of the property. Another factor also would be taken into consideration as to what the object of the annexation was.

A. L. Smith M. R. observes:

There is no doubt that the general maxim of the law is that what is annexed to the land becomes part of the land, but it is very dimcult, if not impossible, to say with precision what would constitute an annexation sufficiently for this purpose. The question which has to be considered in such a case is whether having regard to the character and the circumstances of the particular case the article in question was intended to be annexed to the inheritance or to continue a mere not become part of the free-hold Monti v. Barnes (1901) 1 QB 205. The amount of the degree of annexation is also a matter which will be taken into consideration in coining to a conclusion as to whether it is a permanent fixture or not. If the degree of annexation is such that the fixture cannot be taken away without destroying the principal it would be regarded as permanent fixture. This is on the principle that you cannot destroy the principal thing by taking away the accessories to it. The lessee can always remove the thing if he leaves the property intact.

In all these cases intention is a very important factor to be taken into consideration. Suppose for example a machine is fixed to the earth in an exhibition for demonstration purposes, the idea being only to keep it there till the exhibition is over and to dispose it of, jf there is a purchaser. However much it may be imbedded to the earth, it cannot be regarded as a permanent fixture and therefore Immovable property. The Government Advocate was not able to satisfy us nor are we satisfied on the materials before us that the installing of the Ice factory was for the beneficial enjoyment of the house. It is also clear from the document of sale between Messrs. Jehangir Hormusji and Abdul Majeed Paul and the document relating to the sale by Abdul Majeed Paul to Addu Achiah that it was only the Ice factory that was intended to be sold and not the house.

It was urged by the learned Government Advocate that there is a presumption that where any property which is attached to the earth, is Immovable property and the onus is upon the party alleging that it; is not and for this he relied upon the case already referred to and reported in Hobson v. Gorringe (1897) 1 Ch 182. We are unable to agree with this contention of the Government Advocate because the determination of the question as to whether it is a permanent fixture or not, will depend on, as has been pointed out by us before, the intention, the object of the degree of annexation which will have to be decided on the particular facts and circumstances of each case. The learned Government Advocate invited our attention to a decision of the Madras High Court, in the case of Mohammed Ibrahim Vs. Northern Circars Fibre Trading Co., and contended that in that case also it was a Bone crushing Mill that was installed and their Lordships regarded that as ''Immovable property''. It would be clear from what has been stated by Their Lordships that the object of ''annexation'' was an important factor to be taken into consideration and this had to be determined by the circumstances of each case (Vide p. 495, column 2 and column 1 of Page 496 of the above report). This ruling far from supporting the contention of the learned Government Advocate supports the view that we have taken that the fact whether it is a permanent Fixture or not would depend upon the intention of the party making the annexation. We have come to the conclusion that from the facts and circumstances of this case the intention of Addu Achiah tenant as he is was not to make an annexation so as to be permanently fastened to the earth.

Above all Abdul Majeed Paul was only a tenant and when he purchased the Ice factory from the owners, by no stretch of imagination could it be said that he intended the Ice factory to be a permanent fixture to the I953 Hvd/3&4 house which did not belong to him. That was the case with regard to Abdul Majeed Paul, and Addu Achiah has merely stepped into the shoes of Abdul. ''Majeed Paul continuing to be a tenant of Messrs. Jahnngir Hormusji. Wo find that Addu Achiah has also executed a. rental agreement in favour of the owners of the premises.

Having regard to the facts of this case and the evidence on record, we are of opinion that the Ice factory which has been sold to Addu Achiah cannot be regarded as immovable property. As our finding is that it is not Immovable property it does not require Registration. Therefore we hold that the title in the property passed to Addu Achiah by the document of the 13th December 1948. We, therefore, quash the order of the Custodian. We make no order as to costs.

Srinivasachari, J.

During the course, of the argument the Advocate for the Petitioner relied on two documents amidst other documents, in support of his title to the Ice Factory. The first document is dated 19-11-1948 which is an agreement of sale executed by Paul in favour of the Petitioner. The next document is a receipt for Rs. 55,000/- dated 13-12-48 executed by Abdul Majeed Paul acknowledging receipt of the balance of purchase price. The third document which is also dated 13th December 1948 purports to be a letter addressed by Abdul Majeed Paul to the Petitioner wherein Abdul Majeed Paul says that he has sold that day the Ice Factory to the Petitioner. There are other letters addressed by the vendor to the Municipality and the Electricity Department intimating these departments about the transfer of ownership of the factory. Among these documents, the document that is really of importance, so far as the transfer of ownership is concerned, is the letter dated 13-12-1948. Admittedly if that document is the document which solely evidenced the sale transaction it must be stamped as a conveyance under Art. 16 of the Hyderabad Stamp Act, which is in force here. The Advocate for the Petitioner contended that that document could not be regarded as a conveyance and at the worst it could be regarded only as an Indemnity bond and was stamp able only as a bond of Indemnity. The Government Advocate urged that it was a conveyance. We heard the arguments of the learned Advocate for the Petitioner and the Government Advocate on this point.

''Conveyance'' has been defined in Section 2, Clause (9) of the Hyderabad Stamp Act as follows:

Conveyance includes every instrument by which any person transfers any property inter vivos and which is not otherwise specifically provided by the annexed schedule.

In determining what, provision of the Stamp Act is applicable to a particular instrument, attention should be paid to the real nature of the instrument and not to the title which has been given to the document. We have gone through the letter of 13-12-1948 and after reading the document carefully, we are of. opinion that it is by means of this document that the vendor sought to transfer the ownership in the Ice Factory to the Petitioner before us. The above conclusion is well supported by the documents filed by the Petitioners and on record. Taking the various documents in their order of date the first is an agreement of sale. This agreement of sale was entered into between the parties on the 19th November 1948by which Abdul Majeed Paul agreed to sell the Ice Factory to the Petitioner for a sum of Rs. 80,000/- and the vendee paid the vendor a sum of I. G. Rs. 25,000/- as earnest money agreeing to pay the balance of Rs. 55,000/- at the time of the execution of the sale deed. This document of agreement of sale is on a stamp paper of Re. 1/-. It was stipulated in this document that the sale would be completed by 5th December 1948 and the balance of the purchase money paid then but by the mutual consent of the contracting parties, this period was extended further. On 13th December 1948 as per the subsequent agreement the vendee paid the balance of Rs. 55,000/- to the vendor and got a letter written by the vendor stating that he had sold to him the Ice Factory, known as " The Majid Paul Ice Factory".

The question to be determined now is as to whether this letter is to be regarded as the document'' evidencing the sale of the property, and as such liable to be stamped as a conveyance. It was argued by the learned Advocate for the Petitioner that the document merely recounted a past event and the sale had been effected already and delivery of the property given. He contended that the Ice Factory had been made over to the Petitioner long before this letter was written and this letter merely made mention of a sale transaction which had already taken place. No doubt if this letter merely mentioned about a past sale transaction then it could not come within the definition of conveyance under Art. 16: Art. 23 of the Indian Stamp Act. Surely it was open to the contracting parties to have effected the sale without a document, by merely delivering the property to be sold to the vendee; then the arm of the law could not reach them. As was observed by Lord Esher M. R. in Commissioners of Inland Revenue v. G. Angus & Co. (1889) 23 QB D 579

it is not the transaction of purchase and sale which is struck at, it is the instrument whereby the purchase and sale are effected which is struck at.

We have to consider as to whether it is this letter of the 13th December 1948 by means of which the transfer of ownership has been effected. So far as we can see the first document in this connection is only an agreement to sell property and the property was not conveyed or transferred till this date. The agreement of sale clearly states that when the balance of Rs. 55,000/- is paid at the time of the execution of the sale deed, ''the possession of the factory would be given to the purchaser because the words therein are :

The balance of I. G. Rs. 55,000/- shall be paid at the time of the execution of the sale deed when the possession of the said Majid Paul Ice Factory.... shall be given to the purchaser.

This is clearly indicative of the fact that at the time when the agreement of sale was executed the possession of the property did not pass to the purchaser. The document of 13th December 1948 now under consideration, says: "I have this day received the full sale price of I. G. Rs. 80,000/- .... I have delivered to you the contracted Majid Paul Ice Factory situated in 106, Park Lane, Secunderabad, as per agreement to sell." It further states: " ''You are absolute owner of the said property from this day'' and shall enjoy the same." This also would show that the possession of the property passed to the vendee only on this day. Therefore the argument of the learned Advocate that possession had been given already to the vendee and this letter merely reiterated that fact can have no force. If this document is the document by which ownership passed to the vendee, then it is liable to be stamped as a conveyance under Art. 16 of the Hyderabad Stamp Act.

It was argued by the learned Advocate for the Petitioner that the document had already been admitted in evidence by the Deputy Custodian and as such under the provisions of Section 34 of the Stamp Act where a. document had been admitted in evidence such admission could not be called in question except as provided for in Section 59 of the Hyderabad Stamp Act. There can be no doubt about this question that the Deputy Custodian was a person who had been authorised by law to receive evidence and this document was produced before him and he admitted the same in evidence. The question is are we debarred from determining about its liability to stamp duty. We must say that there is no legal bar against our declaring about the nature of the document and its liability to stamp duty. The fact that the Deputy Custodian admitted the document can only mean that its admissibility cannot be called in question at a later stage. For the protection of the revenue, power is always given to the appellate Court u/s 59 of the Hyderabad Stamp Act to revise the decision of the lower Court as regards the Stamp duty and act in accordance with the provisions of the aforesaid Section . u/s 59 Sub-Section (2), if the court is of opinion that an instrument in question should not have been admitted without payment of Stamp duty and penalty a declaration to that effect while at the same time determining the duty payable might be made in impounding the document.

We have come to the conclusion that, the document in question is a conveyance falling within Article 16 of the Hyderabad Stamp Act and the Stamp duty payable on the same at the rate of 2 per cent is Rs. 1,600/-. We therefore, declare that the document dated the 13th December 1948 Ex. No. 3 on the record, the letter addressed by Majeed Paul to Addu Achiah, is a conveyance and requires to be stamped with a stamp of Rs. 1,600/-. The document is impounded and sent to the Collector for collection of the Stamp duty.

Palnitkar, J.

I agree.