Chief Controlling Revenue Authority, Board of Revenue, Madras vs Tvl. Inca Cables (Pvt.) Ltd., Madras

Gokulakrishnan, Offg.C.J.

This is a reference under S. 57 of the Indian Stamp Act, 1899 (Central Act 11 of 1899). The short facts are that the Indian Cable and Wire

Industries, a registered partnership firm, was carrying on business with Thiru Vrajlal N. Sanghvi and eight others as its partners. In pursuance of an

agreement dated 12-4-19,73, between the partners of the aforesaid partnership firm it was decided to promote a private limited company and to

transfer and convey all the properties as well as liabilities of the partnership firm to the limited company for consideration of Rupees 8,40,000.

Accordingly, Inca Cables Pvt. Ltd was incorporated under the Companies Act on 5-5-1973. The limited company offered to pay the said sum of

Rupees 8,40,000, in the form of fully paid up shares. Out of 1500 shares in its capital, the company allotted 840 fully paid up shares to the nine

partners of the partnership firm and their family members. All these nine partners took 45 shares in the capital of the company. Of the nine partners

of the erstwhile partnership firm, six were appointed as first directors of the company and one as the first Chairman of the company. By the

document dated 26-6-1973, Tv1 Indian cable and Wire Industries represented by all their nine partners, relinquished their rights and liabilities in

the properties of the firm worth about Rs. 16,24,000, in favour of Tv1 Inca Cables Pvt. Ltd. The said document was presented for registration

before the Sub Registrar, Tambaram, who felt some doubt and referred it to the District Registrar Madras (South) for instructions regarding the

nature and chargeability of the document. There upon the District Registrar made a reference to the Board of Revenue u/s 56(2) of the Stamp Act,

and the Board of Revenue after examining the case with connected records, held the document as a deed of conveyance. Tv1Inca Cables Pvt.

Ltd., preferred a petition to the Board of Revenue to reconsider the matter and the said petition was dismissed on the ground that the Board had

no power of review under S. 56(3) of the Indian Stamp Act, The private limited company preferred W. P. No. 1597 of 1977 on the file of this

Court, and this Court by judgment, dated 25-7-1979, directed the Board of Revenue to refer the matter to this Court under S. 57 of the Indian

Stamp Act, Hence this reference. The reference is as under:-

Whether the document dated 26-6-1975 executed by Tvl. Indian Cable and Wire Industries and others and purporting to be a release deed is

just a release deed and liable to be stamped as such under Article 55 of Schedule I to the Stamp Act, or is a conveyance deed as defined under S.

2(10) of the Stamp Act, and therefore liable to be stamped as such under Art. 23 of Schedule I to the Stamp Act.

The document which is styled as a release deed, clearly states as follows:-

Whereas all the releasors have sworn to an affidavit of declaration dated 19-51973 declaring the ownership of the releasors and the absence of

any rights in the releasors over the said properties. Whereas the releasors has since its incorporation been in possession and enjoyment of the said

properties.... Whereas the releasee is thus the full and absolute owner of the said properties, and ......... Now this Indenture witnesseth that the

releasors do hereby declare and acknowledge that the releasors is the absolute and full owner of the properties set out in the schedule hereunder

and that the releasors have no right over or interest in the said properties and even if the releasors have any right or interest, they do hereby

release, relinquish and abandon the same"".

It is clear from the deed that the Indian Cable and Wire Industries, a registered partnership firm, carrying on business at Chingleput district in

releasing the properties mentioned in the schedule to the release deed in favour of Tvl Inca Cables Pvt. Ltd. incorporated under the Companies

Act 1956, having its registered office at Chingleput Dt. Mr. K. Venkataswami, learned Government Pleader submitted that there is no preexisting

right in the releasee in the properties released and whatever may be the nomenclature given to the document, it is a conveyance and as such the

document comes under the definition of S. 2(10) of the Indian Stamp Act, 1899, and therefore chargeable to duty under Art. 23 of the Sch. I to

the Stamp Act. S. 2(10) of the Indian Stamp Act defines ''conveyance'' as follows-

Section 2(10): ''Conveyance'' includes conveyance on sale and every instrument by which property, whether movable or immovable, is transferred

inter vivos and which is not otherwise specifically provided for by schedule I.

Art. 55 of Sch. I to the Stamp Act deals with ''release''. It reads as follows-

Release, that is to say, any instrument (not being such a release as is provided for by S. 23-A) whereby a person renounces a claim upon another

person or against any specified property ...........

Hence, according to Mr. Venkataswami, the learned Government Pleader, to bring the document within the ambit of a ''release'' both the releasor

and the releasee must have a pre-existing right in the property released. As far as the present case is concerned, both the releasor and the releasee

are separate juristic entities and the releasee which is a public limited company has no pre-existing right in the properties sought to be released

under the deed. The learned Government Pleader cites the decision reported in The Chief Controlling Revenue Authority, Board of Revenue,

Madras Vs. Rm. L. Rm. L. Lakshmanan Chettiar, to which one of us was a party. In this decision, the Full Bench has specifically held as follows

(at p. 349)-

The essential difference between a conveyance and a release lies in the fact that in the latter, there is no transfer of an interest or right to another,

who had no pre-existing right in it to any extent. A release of a right or of a claim can only be in favour of a person who had a preexisting right or

claim and by reason of the release the latter''s right or claim is enlarged or is made fuller in its content. Kuppuswamy Chettiar Vs. A.S.P.A.

Arumugam Chettiar and Another, , quoting from K. Hutchi Gowder Vs. H. Bheema Gowder, and Senthathikalai Pandiya Chinnathambiar and

Others Vs. Varaguna Rama Pandia Chinnathambiar and Another, accepted the proposition as correct that a release can only feed title, but cannot

transfer title or that renunciation must be in favour of a person, who had already title to estate, the effect of which is only to enlarge the right;

renunciation does not vest in a person a title where it did not exist.

Mr. Venkataswami also cited the decision in the matter of Hiralal Navalram, ILR(1908) 32 Bom 505 wherein a Full Bench of the Bombay High

Court has held that where by a document, the executing party, purporting to be entitled to a share a in a going Pressing Factory, transfers

absolutely the whole of that share to the other person interested in the factory in consideration of a certain sum, the document is a conveyance on

sale of property. The principle of the two decisions cited supra will clearly apply to the facts of this case and as such, we do not find any difficulty

in construing the document as a conveyance.

Mr. S. Adaikalam, amicus curiae, appearing for the respondent cites the decision reported in Board of Revenue, Madras Chief Controlling

Revenue Authority, Madras Vs. N. Narasimhan and Another, and submits that the parties have a right to select a particular form of transaction to

minimise the expenses and that in the present document, it has been clearly stated that the transaction is only a release. No doubt, in this Full Bench

decision, it has been stated as follows (head note):-

There can be no legal impediment to a party selecting and adopting a particular form of transaction to minimise the expenses of stamp duty. The

revenue authorities cannot say that the object of the transaction was to achieve a purpose not disclosed in the document and that, therefore, the

document should be deemed to be that which it was not.

The true scope of the rule of substance prevailing over the form with reference to a document chargeable to stamp duty is that the recitals therein

should not be lost sight of merely because the parties gave a particular description of the nature of the document"".

Reading as a whole, it is very clear that it is not the nomenclature that is given to a document that determines the character of the document but

the substance of it must be looked into to decide the nature of the document. There can of course be no legal impediment to a party selecting and

adopting a particular form of transaction to minimise the expenses of stamp duty. But what exactly is the document is the question to be decided.

Considered in the light of the decisions reported in The Chief Controlling Revenue Authority, Board of Revenue, Madras Vs. Rm. L. Rm. L.

Lakshmanan Chettiar, and in the matter of Hiralal Navalram ILR (1908) 32 Bom. 505, it is clear that the document in question cannot by any

stretch of imagination be a release deed and it can only be a conveyance within the meaning of S. 2(10) of the Indian Stamp Act and as such stamp

duty has to be levied under Art. 23 of Sch. I to the Stamp Act. The reference is answered accordingly.

The assistance rendered by Mr. S. Adaikalam amicus curiae is recorded.

Reference answered.