Padmanabhan V. Menon vs Inspector General of Registration and Others

V. Giri, J.—A novel and interesting question involving interpretation of the provisions of the Provisional Collection of Revenues Act, 1985

(hereinafter referred to as ""the Act"") comes up for consideration in this writ petition.

Petitioner, along with his mothbeing extracted herein.er, brothers and sister, jointly holding an extent of approximately 40 cents of land in R.S.

No. 21/44/1040 part in Panniyankara Village of Panniyankara Desom of Kozhikode Taluk, decided to partition the said property. The deed was

executed in relation to the above, on 22-6-2006. The value of each share was fixed at Rs. 5,65,800.

Stamp duty is leviable on a partition deed under Article 42(i) of the Kerala Stamp Act, 1959. Prior to 1-4-2006 (and as a matter of fact even

now), the stamp duty payable for a partition deed is the same as Bottomry Bond as provided under Article 14 of the Stamp Act. Stamp duty

leviable on a Bottomry Bond is Rs. 5 per every 100. Thus, if the partition deed had been executed prior to 1-4-2006, statnp duty should have

been levied for an amount of Rs. 5,65,800. But the executants took note of the amendment to Article 42(i) of the Stamp Act introduced by the

Finance Bill No. 355/2006; in the 11th Kerala State Legislative Assembly, deemed to have been introduced with effect from 1-4-2006. Clause 2

of the said Finance Bill No. 355/2006, proposed an amendment to Act 17 of 1959 in the Kerala Stamp Act in the following manner:

Amendment of Act 17 of 1959, in the Kerala Stamp Act. 1959 (17 of 1959) in the Schedule in Serial No. 42 of the entry in column (3) against

item (1) in column (2), the following entry.

The same duty as a Bottomry Bond (No. 14) for the amount of value of the separated share of shares of the property subject to maximum of

rupees one thousand.

The Finance Bill No. 355/2006 also contained a declaration under the Kerala Provisional Collection of Revenues Act, 1985, in the following

manner:

DECLARATION UNDER THE KERALA PROVISIONAL COLLECTION OF REVENUE ACT, 1985 (ACT 10 OF 1985)

It is hereby declared that it is expedient in the public interest that all the provisions of this Bill shall have effect from the 1 st day of April, 2006

under the Kerala Provisional Collection of Revenue Act, 1985 (Act 10 of 1985).

Thus, the partition deed executed, between the Petitioner and the co-owners on 22-6-2006 was on stamp paper valued at Rs. 1,000 and it was

presented for registration on 10-8-2006, within the time permissible under law.

On 28-12-2006, the executants were served with Ext. P-1 notice issued by the second Respondent the District Registrar (General),

Kozhikode, requiring them to show cause why an amount of Rs. 27,290 should not be levied on the document. Petitioner was also served with the

communication, Ext. P-2, which was one sent by the Inspector General of Registration to the District Registrar (General) informing the subordinate

officers that the amendment proposed under the Finance Bill No. 355/2006, was a nullity in as much as that the said Bill had lapsed on the

dissolution of the 11 th Legislative Assembly and the provisions of the Stamp Act remained intact, even after the passing of the Finance Act of

2006, pursuant to a fresh Finance Bill introduced in the 12th Legislative Assembly having been passed by the legislature and the same having

received the assent of the Governor on 24-10-2006. The Finance Act of 2006 was published in the Gazette on 24-10-2006. The provisions of

the said Act came into force on different dates. But what is of immediate significance is that the Finance Act of 2006, did not propose an

amendment to the Stamp Act, 1959. Respondents therefore, took up the stand that the amendment to Article 42(i) of the Stamp Act, which

contemplated a ceiling of Rs. 1000 on the stamp duty, leviable on a partition deed, whatever be the value of the share, never became law, as the

Bill had lapsed on the dissolution of the 11 th Legislative Assembly. Though the document in question had been executed on 22-6-2006, since the

provisions in the Finance Bill No. 355/2006 never became law, it must be a case where Article 42(i) of the Kerala Stamp Act, as it currently

obtains, was the charging section that was prevailing on the date of execution of the partition deed. It is contended that consequently the stamp

duty ought to have been levied on the said instrument at the rate of 5%, as was done and is continued to be done even now.

It is this stand taken by the Respondents that have been challenged in this writ petition. Petitioner prays for a declaration that stamp duty payable

on the partition deed executed by the Petitioner and co-owners on 22-6-2006 is only Rs. 1,000.

Counter-affidavit has been filed by the Respondents affirming the stand mentioned above.

I heard Mr. P.A. Harish, learned Counsel for the Petitioner and Smt. Sudha Devi learned senior Government Pleader.

It would be appropriate to refer to the relevant provisions of the Constitution dealing with the legislative procedure that is followed in the matter

of introduction and passing of Bills and lapsing of such Bills. Article 196 of the Constitution provides for introduction and passing of Bills. Same

reads as follows:

Article 196: Provisions as to introduction and passing of Bills.-(1) Subject to the provisions of Articles 198 and 207 with respect to Money Bills

and other financial Bills, a Bill may originate on either House of the Legislature of a State which has a Legislative Council.

(2) Subject to the provisions of Articles 197 and 198, a Bill shall not be deemed to have been passed by the Houses of the Legislature of a State

having a Legislative Council unless it has been agreed to by both Houses, either without amendment or with such amendments only as are agreed

to by both Houses.

(3) A Bill pending in the Legislature of a State shall not lapse by reason of the prorogation of the House or Houses thereof.

(4) A Bill pending in the Legislative Council of a State which has not been passed by the Legislative Assembly shall not lapse on a dissolution of

the Assembly.

(5). A Bill which is pending in the Legislative Assembly of a State, or which having been passed by the Legislative Assembly is pending in the

Legislative Council, shall lapse on a dissolution of the Assembly.

Article 196(1) refers to Article 198 and 207, in the matter of Money Bills and other Financial Bills. Finance Bill No. 355/2006 introduced in

the 11th Legislative Assembly was no doubt, a Financial Bill and therefore, the provisions of Articles 198 and 207 apply to the same. Article 198

deals with the Special Procedure in respect of Money Bills and Article 207 deals with the Special Provisions as to Finance Bills. The essential

difference in the case of the Finance Bill and Money Bill on the one hand and the other Bills on the other, in the context of Article 196 seemed to

be only that the Money Bill or a Finance Bill cannot be introduced in the Legislative Council but will have to originate in the Legislative Assembly.

Article 196(5) which provides for the lapsing of the Bill really does not postulate any distinction between the Money Bill and the Finance Bill

on the one hand, and any other Bill on the other. A Bill, without there being any distinction drawn in that behalf, pending in the Legislative

Assembly of a State or having been passed by the Legislative Assembly is pending in the Legislative Council, shall lapse on the dissolution of the

Assembly. It may be noted that a Bill pending in the Legislature of a State shall not lapse by reason of the prorogation of the House or Houses

thereof [Article 196(3)].

It is an undisputed fact that the 11 th Legislative Assembly in the State wherein Bill No. 355/2006 was introduced was dissolved with effect

from 12-5-2006. By virtue of Article 196(5) of the Constitution the Finance Bill, Bill No. 355/2006, therefore lapsed with effect from 12-5-2006.

The normal consequences of the lapsing of the Bill is that the provisions of the lapsed Bill would therefore, never assume the characteristics of

law. It is only when a Bill is passed by the Legislative Assembly and it receives the assent of the Governor, that it becomes law, for all purposes

including Article 13 of the Constitution. Provisions in a lapsed Bill could never aspire for the status of law and therefore, provisions in the Finance

Bill including one which proposed an amendment to Article 42(i) of the Stamp Act, could never be relied upon by any person as a law which is

binding on all its subjects. The stand taken by the Respondents that the levy of stamp duty on the partition deed executed by the Petitioner and

other sharers on 22-6-2006, should be governed by the provisions of the Stamp Act, as it stood on 1-4-2006 and as it stands now and that the

said partition deed must be subjected to levy of stamp duty at the rate of 5% should normally, have been unimpeachable and impeccable. But there

are two different aspects which have been highlighted in this regard, as peculiar and therefore leading to a different inference and conclusion.

The first contention stems from the provisions of the Provisional Collection of Revenues Act. It is contended that the Finance Bill of 2006 that

is, Bill No. 355/2006 introduced in the 11th Legislative Assembly contained a declaration under the Act to the effect that it is expedient in public

interest that all the provisions of the Bill shall have effect from the 1st of April, 2006. Section 3 of the Provisional Collection of Revenues Act,

1985, is relevant in this context and is extracted herein.

Power to make declarations under this Act. Where a Bill to be introduced in the Legislative Assembly on behalf of the Government provides for

the imposition or increase of any tax, duty, cess, fee or other revenue, the Government may cause to be inserted in the Bill a declaration that it is

expedient in the public interest that any provision of the Bill relating to such imposition or increase shall have effect from the 1st day of April

following the date of introduction of the Bill.

A plain reading of Section 3 would therefore, straight away suggest that it has implication only in cases where the Bill which is to be introduced

in the Legislative Assembly on behalf of the Government either provides for imposition of any tax, duty, cess, fee or other revenue or provides for

the increase of any tax, duty, cess, fee or other revenue. In those cases, it is open to the Government to introduce a declaration in the said Bill that

any provision of the Bill relating to such imposition or increase shall have effect from 1st day of April following the date of introduction of the Bill.

The declaration made in the present case, in the Finance Bill of 2006, was to the effect that the provisions of the Bill shall have effect from 1st day

of April, 2006, Such declaration obviously, on a plain reading of it, would take in Clause 2 of the Finance Bill No. 355/2006 proposing an

amendment to the Stamp Act, 1959. Learned Counsel for the Petitioner Mr. Harish contends that Section 4 of the Provisional Collection of

Revenues Act, 1985, provides the effect of a declaration under the Act and the duration thereof. Section 4 reads as follows:

Effect of declarations under this Act and duration thereof.- (1) A declared provision shall have the force of law on the 1st day of April following

the date on which the Bill containing it is introduced in the Legislative Assembly.

(2) A declared provision contained in a Bill shall cease to have the force of law under the provisions of this Act-

(a) when it comes into operation as an enactment with or without amendment; or

(b) when the Government, in pursuance of a motion passed by the Legislative Assembly, directs, by notification in the Gazette, that it shall cease to

have the force of law; or

(c) if it has not already ceased to have the force of law under Clause (a) or Clause (b), then on the expiry of one hundred and twenty days from the

1st day of April following the date on which the Bill containing it was introduced.

It is contended that the declared provision shall have the force of law on the 1st day of April following the date on which the Bill is introduced

in the Legislative Assembly, which in the present case is 1st of April 2006. It shall cease to have the force of law under the provisions of the Act,

under three contingencies. Firstly, when the said provision comes into operation as an enactment, in which case the provisions may or may not

have undergone an amendment at the time of passing of the same. It shall also cease to have the force of law when the Government, acting on the

basis of motion passed by the Legislative Assembly, issues a notification in the Gazette providing that it shall cease to have the force of law. The

third is the case where it practically abates on the expiry of 120 days from the 1st of April following the date on which the Bill containing the

declaration, was introduced. It is contended that the first two contingencies provided u/s 4(2)(a) and 4(2)(b) of the Act had no application in the

present case. In other words, this provision proposing an amendment to the Stamp Act of 1959, can be considered as having ceased to have a

force of law only on the expiry of 120 days from the 1st day of April, 2006. It is contended that the document in question was executed on 22-6-

2006 and since the taxable event attracting the provisions under the Stamp Act, is the actual execution of the document which took place on 22-6-

2006, the proposed amendment to Article 42(i) of the Stamp Act providing for a maximum amount of Rs. 1,000 as the levy of stamp duty on any

partition deed, should be deemed to have been in force on 22-6-2006. Learned senior Government Pleader resists the submission on several

grounds.

I find it difficult to accept this contention for more than one reason. Firstly, a declaration u/s 3 of the Act, to be operative in relation to any

provision of the Finance Bill, should be relatable to those features in respect of which a declaration can be made u/s 3 of the Act. A perusal of

Section 3 of the Act will show that a declaration by the Government that it is expedient in the public interest that any provision in the Bill should

have effect from the 1st day of April following the date of introduction of the Bill must be a provision which provides for the imposition or increase

of any tax, duty, cess, fee or other revenue. Therefore, the provision in a Bill which is deemed to be effective from the 1st day of April namely, the

first day of the financial year in question, by virtue of a declaration under the Provisional Collection of Revenues Act must be a provision which

either provides for the imposition of tax or a duty or an increase in the tax, duty or other revenue, as the case may be. The Government cannot

seek the aid of a declaration u/s 3 of the Act, except in relation to a provision which either provides for an imposition of a tax or an increase in tax

which is already imposed, as the case may be.

The declaration u/s 3 of he Act made by the Government, in the Finance Bill No. 355/2006 introduced in the 11th Legislative Assembly, could

have been a valid declaration only in relation to those provisioris in the Bill which provide for an imposition of a tax or increase in the tax. A

declaration made by the Government, will have to be construed in terms of the provisions ofthe statute which empowers the Government to make

such a declaration and if an omnibus declaration has been made by the Government, as has been done in the present case in the Finance Bill No.

355/2006, it should be construed as valid only in relation to those aspects which are contemplated u/s 3 of the Act.

In the present case, Clause 2 of the Finance Bill No. 355/2006 did not provide for the imposition of any fresh levy under the Stamp Act,

1959. Nor did it contemplate an increase in the rate of levy of stamp duty. It contemplated quite the converse. Had Clause 2 in the Finance Bill

No. 355/2006 become law, by the passing of the said Finance Bill, it would have resulted in a reduction in the rate of stamp duty leviable on a

partition deed by providing for a ceiling of Rs. 1,000 irrespective of the value ofthe share. The present case is a typical illustration. The stamp duty

that is to be levied on the partition deed where the value of the share is Rs. 5,65,800, is 5% of the same, namely Rs. 27,290. If Clause 2 in the

Finance Bill No. 355/2006 had become law, it naturally would have brought into force a reduction in the rate of stamp duty. The power of the

Government to make a declaration in terms of Section 3 of the provisional collection of Revenues Act, would not enable the Government to make

a declaration to attach the deeming effect to any provision which did not provide for either the imposition of a new levy or for that matter, increase

in an existing levy.

There is yet another reason why the deeming provision under the Act would not come to the aid of the Petitioner. A declaration under the Act,

qua the provision contained in a Bill would not operate in the case of a Bill which lapses by virtue of Article 196(5) of the Constitution. After all,

the provisions contained in a statute, which is passed by the Legislative Assembly, will have to be read subject to the provisions contained in the

Constitution and the power to make a declaration u/s 3 of the Act and the consequent effect of such declaration made by the Government, under

Sections 4 and 5 of the Act, cannot be given effect to overriding the provisions of Article 196(5) of the Constitution. Thus, the power of the

Government to make a declaration u/s 3 and the statutory consequences which flows there from under Sections 4 and 5 of the Act, would be

available, either for the Government or for the citizen as the case may be, only subject to the provisions of Article 196(5) of the Constitution. In

other words, these provisions cannot have effect by themselves, if the Bill wherein the declaration is made, lapses by reason of the dissolution of

the Assembly, under Article 196(5) of the Constitution.

To construe the provisions otherwise, in my view, may lead to disastrous consequences. Government could introduce a Finance Bill proposing

a new levy or an increase in the levy in a fiscal statute. Government might even know that the said provision in the Bill as such may not be passed

by the Assembly. The Bill is not passed by the Legislative Assembly. It is always open to the Government which has introduced the Bill, to defer

consideration. The Bill may also have a declaration in terms of Section 3 of the Act. Such a Bill which contains a declaration, lapses on the

dissolution of the Assembly and for a moment it may be assumed that the Bill has lapsed on account of the dissolution of the Assembly. If a

pedantic interpretation is given to Sections 3 and 4 of the Act, de hors Article 196(5) of the Constitution, it could mean that the Government would

be entitled to assert the position that the provisions in a Bill which has lapsed and, which therefore, did not become law, nevertheless provided for

a new levy, or an increase in an existing levy, for a short interregnum from the 1st of April of the concerned year till the dissolution of the Assembly,

notwithstanding the fact that the Bill did never become law. This in my view, would lead to completely unforeseen consequences. At any rate, all

the provisions in a plenary legislation would have to yield to the provisions of the Constitution. Therefore, the provisions contained in the Act will

also have to be read subject to the provisions of the Constitution, which in this case, is Article 196(5) of the Constitution.

The aforementioned discussion and the view that I have taken would have entailed a repelling of the challenge mounted by the Petitioner. But,

apparently the saga does not stop here. My attention has been invited to Section 6 of the Finance Act of 2006, Act 22 of2006. The Kerala

Finance Act of 2006, was passed to give effect to certain proposals of the Government of Kerala for the financial year 2006-07. This Act was

resultant upon the Finance Bill of 2006 introduced in the 12th Legislative Assembly. Finance Bill of 2006, which was introduced in the 12th

Legislative Assembly, significantly did not propose an amendment to the Stamp Act, 1959, and therefore, the Finance Act of 2006 left untouched

the provisions of Article 42(i) of the Stamp Act. Section 6 of the Finance Act, 2006, provided for a different scenario and in this context, the same

being relevant, Section 6(1) is being extracted herein.

Section 6(1). Notwithstanding the lapse of the Kerala Finance Bill, 2006 (Bill No. 355 of the XI Kerala Legislative Assembly) (hereinafter called

the said Bill), anything done or any action taken, including levy and collection of tax, during the period from the 1st day of April, 2006 to the 30th

day of June, 2006, by virtue ofthe declared provisions of the said Bill, under the Kerala Stamp Act, 1959 (17 of 1959) or under the Kerala Tax

on Luxuries Act, 1976 (17 of 1976) or under the Kerala Tax on Entry of Goods into Local Areas Act, 1994 (15 of 1994) or under the Kerala

Value Added Tax Act, 2003 (30 of 2004) (hereinafter called the respective acts), as they stand amended by the said Bill, shall be deemed to be

and to have always been, for all purposes, validly and effectively done or taken under the provisions of the respective Acts, as if the said

amendments had been in force at all material times.

It could be seen from Section 6(1) of the Finance Act of 2006 that it expressly took care of the lapse of the Finance Bill of 2006, namely the

Bill No. 355 of the 11th Kerala Legislative Assembly, which contained a proposal for the amendment of Article 42(i) ofthe Stamp Act, 1959. It

took note of the declaration under the Provisional Collection of Revenues Act contained in the said Bill. It also expressly refers to the provisions of

the Kerala Stamp Act. Section 6(1) of the Finance Act specifically declares that anything done or any action taken, including levy and collection,

by virtue of the declared provisions of the said Bill shall be deemed to be valid and to have always for all purposes validly and effectively done or

taken under the provisions of the respective enactment as if the said amendment had been in force at all material times. In other words, it deems

and compels all persons concerned to deem that the amended provisions of the Stamp Act, as proposed in the Finance Bill of 2006, should be

treated as a valid provision, bringing in its wake all consequences arising there from, for the period from 1st of April, 2006, till 30th of June, 2006.

Thus, the levy of stamp duty under the provisions ofthe Stamp Act as proposed in the Finance Bill No. 355 of 2006, which is related to the levy of

stamp duty in respect of a partition deed in terms of Article 42(i) of the Stamp Act, should have been done in terms of the provisions of the

amendment as proposed and if it had been so done, it should be treated as having been validly done for all purposes concerned. In other words,

Section 6(1) of the Finance Act, 2006, gives life to the provisions contained in the Finance Bill No. 355 of 2006, for a limited period from 1st of

April, 2006, till 30th June, 2006, and validates all actions taken during the said period. Effect of this provision would be that the proposed

amendment in the Stamp Act, 1959, providing for a ceiling on the stamp duty that could be levied on a partition deed be treated as a valid

provision having force of law during the period from 1st of April, 2006, till 30th June, 2006. If that be so, the partition deed executed during the

said interregnum could have been subjected to a levy of stamp duty but subject to a ceiling of Rs, 1,000. Consequently the payment of Rs. 1,000

as stamp duty on the partition deed executed by the Petitioner and his brothers on 22-6-2006, has to be treated as adequate for the purpose of

Stamp Act, 1959.

One finds it difficult to understand as to how a declaration u/s 3 of the Provisional Collection of Revenues Act, which is intended only to give

effect to a levy which is introduced for the first time or a levy which brings about an increase in the rate of tax for a limited period till the Bill gets

translated into an Act, is construed in the manner as has been done u/s 6(1) of the Finance Act of 2006, for the purpose of the Stamp Act, 1959.

It discloses either a lack of understanding of the provisions u/s 3 of the Provisional Collection of Revenues Act or unawareness of the fact that a

validating provision, as is seen to have been effected u/s 6(1) of the Finance Act need not and should not have comprehended the provisions of the

Stamp Act, as sought to be amended by the Finance Bill No. 355/2006. But this Court is bound to accept an Act passed by the Legislative

Assembly as law and this Court is also therefore, bound to declare the effect of the law. But this Court is left with the lurking suspicion whether the

intention of the legislature, which passed the Finance Bill introduced in the 12th Legislative Assembly leading to the Finance Act of 2006, in the

context of Section 6(1) of the Finance Act of 2006, was also to validate the levy of stamp duty, proposed in a Finance Bill No. 355 that had

lapsed by virtue of Article 196(5) of the Constitution.

As stated above, effect of Section 6(1) of the Finance Act of 2006, is to validate the levy of stamp duty on the partition deed executed by the

Petitioner and his brothers on 22-6-2006. Payment of an amount of Rs. 1,000 as stamp duty for the said partition deed is therefore, eligible to be

treated as sufficient and consequently, the demand made by the Respondents for additional stamp duty on the said document is illegal and

unsustainable.

In the result, writ petition is allowed. Exts. P-1 and P-6 demands made for additional stamp duty under Article 42(i) of the Stamp Act, 1959,

are quashed. Third Respondent is directed to treat the payment of an amount of Rs. 1,000 as stamp duty on the partition deed executed between

the Petitioner and his co-owners on 22-6-2006 as adequate payment of stamp duty and proceed to register the same in accordance with law.

I place on record my appreciation for the studiousness with which Mr. Harish and Smt. Sudha Devi prepared their respective cases and presented

the same before the Court.