The Chief Controlling Revenue Authority, Board of Revenue vs Mrs. Mangalam Iswaran L.R. of the deceased B.P. Eswaran

K. Veeraswami, C.J.—This is a reference u/s 57 of the Indian Stamp Act. The question is:

Whether on the facts and circumstances of this case the sale deed dated 7th April executed by Thirumathi Pattammal and Pushpavathi Ammal in

favour of the Respondent herein is absolutely void in law from the beginning and the refund of the value of stamps affixed on the instrument in

question can be allowed?

The facts stated by the Chief Controlling Revenue Authority are that after the conveyance, it was found that the vendor had no title to the property

covered by the document and, for that reason, the vendor executed another document conveying a different property. The first sale deed was

valued as a conveyance. The point is whether because the vendor had no title, it could be regarded as one found to be absolutely void in law from

the beginning within the meaning of Section 49(d) of the Stamp Act.

The sale deed contained, besides the operative part of the conveyance, covenants as to title and indemnity. It provides that if right in respect of

the property conveyed, is found vested in a third party, the vendor would, at his own expense, make good the consequent loss to the vendee.

Section 3 is the charging section and it says that the instruments specified therein shall be chargeable with duty of the amount indicated in the

schedule to the Act. The schedule gives the description of each instrument and the relative amount of duty payable in respect thereof. An

instrument is defined by Section 2(14) to include every document by which any right or liability is proposed to be created, transferred, limited,

extended, extinguished, or recorded. Where the instrument is a conveyance, it is charged accordingly, but where it is a composite document, as for

instance containing a conveyance by way of sale, mortgage, charge, or exchange or release, the instrument will be liable to duty on each one of

those transactions. In other words, by the definition of instrument it may be a document which creates rights or liabilities and it is with reference to

such rights and liabilities created by the document that the chargeability to duty will have to be decided, as to whether duty is payable as a

conveyance and also as on any other basis. Section 49 contemplates allowance for spoiled stamps and Clause (d) provides for allowance if an

instrument executed by a party has been afterwards found to be absolutely void in law from the beginning. Instrument has been defined in the Act

in the sense of a document which creates rights and liabilities with reference to which charge to stamp duty is determined.

Where an instrument is a document which is a conveyance simpliciter without anything more and the title to the property conveyed is found to be

wanting, it will, in our opinion, fall clearly within the meaning of Section 49(d). In that case as held by the Privy Council in Harnath Kunwar v. Indar

Bahadur Singh I.L.R.(1922) All. 179 (P.C.), the agreement would be manifestly void from its inception because its subject matter was incapable

of being bound in the manner stipulated. In that case the Courts in India had held the transfer as inoperative, as the vendor at the date of the

execution of the document had no interest capable of transfer but merely an expectancy. The suit by the purchaser was for possession of the

villages covered by the conveyance with an alternative prayer for payment of money. The Privy Council held that the Plaintiff was entitled to

recover u/s 65 of the Contract Act.

We are, however, of the view that while the principle of the decision of the Privy Council would doubtless be applicable to a case of

conveyance simpliciter in which title in the vendor was found to be totally wanting, it cannot be extended to the case of an instrument which is a

composite document creating not merely a right by way of conveyance which fails for want of title, but also stipulating for compensation or

indemnity for loss resulting from that cause. The sale deed in question while asserting that the title was with the vendor clearly set out that if any

right in respect of the property was found to in a third party, the vendor would make himself liable for the loss ensuing therefrom and such a loss

the purchaser could recover also from the other properties of the vendor. In the case of such an instrument, notwithstanding the fact that the

conveyance, which is of course the main purpose of the document, has failed, the instrument as a whole is not absolutely void from the beginning. If

it is a case of a mere conveyance without covenants for indemnity and the conveyance fails Section 65 of the Contract Act may well be the basis,

as was the case in the Privy Council decision. But where the instrument provided for liquidated damages or mode of recovery or indicated the

source from which the loss could be reimbursed, those stipulations notwithstanding the failure of the conveyance for want of title would still be valid

and would be actionable apart from the basis of Section 65 of the Contract Act. On that view, it is not possible for us to say that the instrument in

this case as a whole is void absolutely from the beginning. Section 49(d) does not contemplate allowance for spoliation of stamps, where a

composite instrument embodying rights and liabilities fails only in part and is good for the remaining part.

We are, therefore, of opinion that Section 49(d) of the Stamp Act cannot be invoked. We answer the question in favour of the Revenue.