Judgment:
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE A.V.RAMAKRISHNA PILLAI TUESDAY, THE 23RD DAY OF JULY 2013 1ST SRAVANA, 1935 OP (RC).No. 506 of 2013 (O) ---------------------------- (ORDER IN I.A.NO.278/13 IN RCP 13/2012 OF PRINCIPAL MUNSIFF-I, KOZHIKODE DATED 198 1.2013) PETITIONER: ----------- MOIDEEN KOYA, AGED 7 YEARS, S/O.(LATE)MAMMED, AYISHA MANZIL, VALIYIL HOUSE ELATHOOR AMSOM DESOM, KOZHIKODE TALUK KOZHIKODE-673001. BY ADVS.SRI.NIRMAL. S SMT.VEENA HARI RESPONDENTS: ------------ 1. K.GIRISH KUMAR, AGED 3 YEARS S/O.GANGADHARAN NAIR, KUNNUMMAL HOUSE, EDAKKULAM.P.O KOZHIKODE-673306.
2. DISTRICT COLLECTOR, CIVIL STATION, KOZHIKODE-673001. R1 BY GOVT. PLEADER SRI.R.PADMARAJ THIS OP (RENT CONTROL) HAVING BEEN FINALLY HEARD ON 23-07-2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: OP (RC).No. 506 of 2013 (O) APPENDIX PETITIONER'S EXHIBITS: EXT-P1 TRUE COPY OF THE LEASE AGREEMENT EXT-P2 TRUE COPY OF THE RCP.13/2012. EXT-P3 TRUE COPY OF THE ORDER IN I.A.278/2013 IN RCP.13/2012. RESPONDENTS' EXHIBITS: NIL //TRUE COPY// PA TO JUDGE Scl. "C.R." T.R. RAMACHANDRAN NAIR, & A.V.RAMAKRISHNA PILLAI, JJ.
------------------------------------- O.P.(RC) No.506 of 2013 -------------------------------------- Dated this the 23rd day of July, 2013 JUDGMENT T.R. Ramachandran Nair, J.
An order passed by the Rent Control Court holding the view that the petitioner/landlord is bound to pay stamp duty for security deposit given by the tenant, as per Article 33(c) of the Kerala Stamp Act, is under challenge in this original petition.
2. The petitioner had filed RCP No.13 of 2012 before the Rent Control Court, Kozhikode. Eviction was sought under Section 11 (4) (v) of the Act. Ext.P2 is the copy of the RCP filed by the petitioner. A lease agreement was executed between the landlord and the tenant on 29.9.2010, in which the monthly rent payable was fixed as 3,500/-. An amount of 50,000/- was given by the tenant as security deposit which was refundable on termination of the lease. The tenant was set as ex-parte and the case was posted for ex-parte evidence and O.P.(RC) No.506/2013 2 the petitioner filed the chief affidavit also. The Rent Control Court refused to mark the lease agreement for the reason that the same is under stamped and the court ordered to pay deficit of the stamp duty along with penalty for security and the rent payable as per the lease agreement. The said order is dated 4.1.2013. The petitioner filed I.A.No.278 of 2013 to review the said order and the present impugned order is passed on the said I.A.
3. We heard learned counsel for the petitioner Sri. S.Nirmal and learned Government Pleader Sri.R.Padmaraj. The first respondent tenant has not entered appearance.
4. A reading of the order shows that the Rent Control Court relied upon Article 33(c) of the Kerala Stamp Act, 1959 and held that the stamp duty has to be paid for a consideration equal to the amount for money advanced in addition to the rent reserved. The court was also of the view that when there is a clause providing for adjustment of security towards the defaulted rent, the payment of balance amount has to be regarded as O.P.(RC) No.506/2013 3 money advanced.
5. The legal question therefore raised is whether Article 33(c) will cover a refundable security provided in a lease agreement, even though the same is adjustable towards the defaulted rent.
6. The learned counsel for the petitioner relying upon a Full Bench decision of the Delhi High Court in Chief Controlling Revenue Authority, Delhi, Petitioner Vs. Marshall Produce Brokers Co. Pvt. Ltd, Delhi, Respondent [AIR 198.Delhi 249], submitted that on an interpretation of a similar provision to that under the Kerala Stamp Act, 1959, the Full Bench took the view that the amount of security deposit paid for the due performance of the contract of lease is chargeable under Article 57 of the Schedule read with section 5 of the Act. The learned counsel also submitted that the Full Bench was also of the view that even if there is a clause for adjustment of the security deposit towards rent, it will not make any difference.
7. We are also told by the learned Government Pleader O.P.(RC) No.506/2013 4 that the Government of Kerala through the Tax (E) Department by a letter dated 24.2.1983 addressed to the Inspector General of Registration, Trivandrum, had informed that duty is not chargeable under Article 35(c) of schedule IA of the Indian Stamp Act, 1899 and the amount of security deposit paid for the due performance of the contract of lease is chargeable under Article 57 of the Schedule read with section 5 of the Act. Government letter dated 24.2.1983 addressed to the Inspector General of Registration reads as follows: "In supersession of the instruction issued in Government Letter No.18769/E2/75/TD dated 15.12.1975 and in accordance with the decision of the Delhi High Court in A.I.R. 1980, Delhi 249, the following principles may be observed while classifying lease deeds. (1) Duty is not chargeable under Art, 35(c) of schedule IA of the Indian Stamp Act, 1899 on the amounts of security/deposit/advance, which is refundable on determination of the lease, in addition to the duty paid on the rent reserved under Article 35(a) of the Schedule. (2) It will not make any difference in the changeability of duty, if such deposit/advance is adjustable in rent/other charges/dues payable under the lease. O.P.(RC) No.506/2013 5 (3) The amount of security deposit paid for the due performance of the contract of lease is chargeable under Art. 57 of the Schedule read with section 5 of Act. I am to request you to issue necessary instructions to all Sub Registrars to classify lease deeds in accordance with the principle mentioned above." This is based on the decision of the Delhi High Court quoted earlier.
8. We therefore proceed to consider the matter since it requires an interpretation of Article 33(c) of the Kerala Stamp Act. Corresponding to Article 57 of the Indian Stamp Act, the provision herein is Article 50. For easy reference, it is also necessary to quote Articles 33(a) (i) & (c) and 50: "33. Lease- including an underlease or sub-lease and any agreement to let or sublet - (a) where by such lease the rent is fixed and no premium is paid or delivered - (i) where the lease purports to The same duty as a Bottomry be for a term of less than one Bond (No.14) for the whole year: amount payable or deliverable under such lease. O.P.(RC) No.506/201”
33. c): where the lease is granted The same duty as a conveyance for a fine or premium or for money (No.21 or 22, as the case may be) advanced in addition to rent for a consideration equal to the reserved: amount or value of such fine or premium or advance as set forth in the lease in addition to the duty which would have been payable on such lease if no fine or premium or advance had been paid or delivered: Provided that in any case where an agreement to lease is stamped with ad valorem stamp required for a lease and a lease in pursuance of such agreement is subsequently executed, the duty on such lease shall not exceed on rupee ninety-five paise." Article 50 reads as follows: "Security bond or mortgage deed, executed by way of security for the due execution of an office or to account for money or other property received by virtue thereof or executed by a surety to secure the due performance of a contract- (a) When the amount secured does not exceed Rs.1,000. (Five rupees for every Rs.100 or part thereof of the amount secured.] (b) in any other case: [One hundred rupees.] Exemptions Bond or other instruments, when executed- O.P.(RC) No.506/2013 7 (a) by any person for the purpose of guaranteeing that the local income derived from private subscriptions to a charitable dispensary or hospital, or any other object of public utility, shall not be less than a specified sum per mensem; (b) executed by persons taking advances from Government for agricultural purposes or by their sureties as security for the repayment of such advances; (c) executed by officers of Government or their sureties to secure the due execution of an office or the due accounting for money or other property received by virtue thereof." 9. A reading of Article 33(a), will show that it takes in cases where the rent is fixed and no premium is paid or delivered. Going by Article 33(c), the provision is attracted where the lease is granted for a fine or premium or for money advanced and the same will be in addition to rent reserved. Apparently, the Rent Control Court has treated the security deposit as money advanced for attracting 33(c) in addition to the rent. O.P.(RC) No.506/201”
10. The entire concepts under Section 105 of the T.P.Act, 1882 have been discussed by the Full Bench of the Delhi High Court in the above case. We find from paragraph 3 that three questions were referred for opinion of the Delhi High Court by the Chief Controlling Revenue Authority, Delhi and the questions Nos.1, 2 and 3 read as follows: "(1) Whether any duty is chargeable under Art. 35(c) of Sch. 1-A of the Indian Stamp Act, 1899 on the amount of security/deposit/advance, which is refundable on determination of the lease, in addition to the duty paid on the rent reserved under Art. 35(a) of the Schedule; (2) Will it make any difference in the changeability of duty, if such deposit/advance is adjustable in rent/other charges/dues payable under the lease? (3) Whether such amount of security deposit paid for the due performance of the contract of the lease can be charged under Article 57 of the Schedule appended to the Act?".
11. A discussion of the principles stated therein, will be complete only by reference to the facts of the said case also. Paragraph 1 of the judgment shows that the monthly rent fixed was 4,455/- and a sum of ` 53,460/- had been paid as advance O.P.(RC) No.506/2013 9 rent adjustable in twenty four equal instalments. In addition to the monthly rent, the lessees had agreed to deposit and always keep in deposit six months' rent towards security for due performance of the obligations of the lease and this amount was to be dealt with in the manner provided ( 26,730/-). We hereinafter extract the relevant clauses, which governed the said case: "4(3): In case the rent hereby reserved or any part thereof, or any other outgoing be in arrears for twenty one days after becoming payable (whether legally demanded or not) or if any covenant on the lessees part herein contained shall not be performed or observed, the landlords, notwithstanding any right herein contained will be entitled to absolutely appropriate the deposit mentioned in the provisions contained in Cl. 1(2) herein above, and not liable to pay the interest thereon without prejudice to their any other right to take legal action. 4(6): The deposit kept by the lessees as mentioned in the provisions contained in Cl.1(2) herein above shall be refunded to the lessees within seven days after the lessees have handed over the vacant possession with all its fixtures and fittings therein belonging to the landlords with the interest due against the receipt issued and signed by a person duly authorised in this behalf by the lessee, unless under Cl.4(3) herein above the said deposit has priorly been appropriated." 12. The Full Bench in paragraph 5 of the judgment has O.P.(RC) No.506/2013 10 elaborately explained the legal position under Section 105 of the T.P.Act, which is extracted below for easy reference: "5. Under S.105 of the T.P.Act, 1882, a lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity in consideration of a price paid or promised or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent. The consideration for the lease is thus of two types. First one is the price paid or promised. The price paid may be cash or may be an adjustment of an outstanding debt or its payment may be deferred or made payable in instalments. It is always in the nature of a capital income when the interest of the lessor is parted with for a price. This price is called premium. The second type of consideration is of recurring character on specified occasions, which is the indication of rent. The liability to pay rent arises at stated periods or specific occasions. When such a liability is met in advance, it will still be 'rent' and not advance in addition to rent reserved. For this reason the payment of O.P.(RC) No.506/2013 11 Rs.53,460 as advance rent under the lease of instrument is rent for which there is both a liability and covenant to pay. The revenue has treated this payment of Rs.53,460 as rent and rightly so in view of the Full Bench judgment in Union of India v. M/s. Caltex (India) reported in AIR 196.Punj 488. The deposit of Rs.26,730 is not rent or advance rent. Its payment or liability is not of a recurring character on specified occasions and thus not a revenue receipt. It cannot assume the character of price paid, because under the instrument of lease it is liable to be refunded to the lessees within seven days after the lessees have handed over the vacant possession." (emphasis supplied by us) 13. It was held in paragraph 6 that 'the consideration of lease is only two fold 'premium' and 'rent'. There is no third type of consideration when the interest of the lessor is parted with. None is provided in S.105 of the T.P. Act, 1882.' 14. We also notice that Article 33(c) herein, is corresponding to Article 35(c) therein. While interpreting the said provision, the Full Bench in the same paragraph has explained the matter as below: "6. The Legislature, therefore, was providing under Art. 35(a) for instruments of lease, including an underlease or sub- O.P.(RC) No.506/2013 12 lease and any agreement to let or sublet, whereby such lease the rent is fixed and no premium is paid or delivered according to the period of lease. Under Art. 35(b) proper stamp duty is provided where the lease is granted for a fine or premium or for money advanced and where no rent is reserved. Under Art. 35 (c) it provided where the lease is granted for a fine or premium or for money advanced in addition to rent reserved. Fine is not defined in either T.P. Act, 1882 or in the Indian Stamp Act, Fine in relation to leases is something which is to go irrevocably into the pocket of the landlord who requires it as a condition of consenting to a transfer of right to enjoy property. Fine is indistinguishable from premium and is money payment in consideration of a demise. Money paid as fine is money paid with the intention of passing over the property in it to the landlord so that it should become his. Fine is also given the name of "Salami" in some parts of this country. Such money payments are known by several other names, e.g, Nasrana, Pugree etc. The legislature must be aware of money payments in consideration of the lease, when it sought to cover "fine or premium or for money advanced" in Art. 35 (b) and (c). The words used here "for money advanced" do not connote any idea of repayment. Money advanced here is a condition for creation of an interest in the enjoyment of the property. Money advanced here is money which is not to revert to the lessee. If the advance is repayable, then it is a loan or deposit which word would have been used by the legislature in Art. 35(b) and ) instead of "for money advance", if it was intended to cover such payments. Money advanced here by the lessees to the landlords is with the intention O.P.(RC) No.506/2013 13 expressed by the parties that the landlords should keep the money till appropriated or refunded. Such transaction is a deposit. In my opinion, when the legislature used the word "for money advanced" after "fine or premium" it was intended that it is a sum of money in the nature of fine or premium which goes irrevocably in the pocket of the landlord. It is a rule of legal construction that general words following enumeration of particulars are to have their generality limited by reference to the preceding particular enumeration and to be construed as including all other things of the like nature and quality. Where general words immediately follow or are closely associated with specific words, their meaning has to be limited by reference to the preceding words and has to be presumed to be restricted to the same genus as those specific words. This is the rule of construction known as Ejusdem Generis and gives aid to the ascertainment of the true meaning of the statute." (emphasis supplied).
15. It is in paragraph 9, it was held that the security cannot be treated as money advanced. In fact, going by the above Full Bench decision, it can be seen that when there is a provision for advance, it implies that it is not refundable and it is a price which is fixed in terms of the provisions under Section 105 of the T.P.Act. Therefore, it will take the character as a premium. What is envisaged for the purpose of Article 33(c) is a O.P.(RC) No.506/2013 14 payment which is not refundable. Herein what is provided under the relevant clauses of the lease deed as far as the transaction is concerned are Clauses 3, 4, 5 and 6 of Ext.P1, which are extracted below: "3. The Lessee has hereby paid an amount of Rs.50,000/- (Rupees fifty thousand only) to the Lessor as security deposit for granting lease of the above said premises, the receipt of which is hereby confirmed and acknowledged by the Lessor.
4. It is hereby agreed that the amount of security deposit paid to the Lessor by the Lessee shall be repaid to the Lessee on the termination of the lease and the Lessee vacating the shop room demised to him.
5. It is further agreed that the Lessee shall not be entitled to ask for set off the monthly rent from the security deposit paid which shall be entitled to refund only after the expiry of the period of lease and the Lessee vacating the shop room.
6. The Lessor shall be entitled to settle their entire claim against the Lessee if any found due from the above said sum of security deposit and the balance amount alone shall be repaid to the Lessee at the time of termination of the lease." 16. Clause 3 will show that an amount of 50,000/- is paid as security deposit for granting the lease and Clause 4 provides for repayment of the same on the termination of the O.P.(RC) No.506/2013 15 lease. Clause 5 clearly provides that the lessee shall not be entitled to ask for set off the monthly rent from the security deposit paid and it shall be entitled to refund only after the expiry of the period of lease. Obviously, Clause 6 was relied upon by the court below, which provides for settlement of the entire claim by the lessor against the lessee if any found due from the above said sum of security deposit. The view taken by the Rent Control Court is that the same can be treated as money advanced. We are definitely of the view that, it cannot be as the character of the term "money advanced" in Article 33(c) of the Schedule is different. It is not a consideration which has passed irrevocably from the tenant to the landlord over and above the consideration for the lease, which is the payment of rent. Even if it is adjustable towards rent, the character is not changed. It is for due performance of the obligations of the lease. On termination of lease and on vacating the room, it is refundable. What is paid being the security deposit, it is refundable. Such an amount which is refundable will not get the O.P.(RC) No.506/2013 16 character of money advanced under Article 33(c). We respectfully agree with the view taken by the Full Bench of the Delhi High Court in that regard. In the light of the above, this original petition is allowed and the impugned order is set aside. We direct the Rent Control Court to pass a fresh order in the light of the legal position explained above. No costs. Sd/- T.R. RAMACHANDRAN NAIR JUDGE Sd/- A.V.RAMAKRISHNA PILLAI JUDGE Scl.