S.J. Vazifdar, J.
1. The petition is filed for a writ of certiorari to quash and set aside the order dated 30th September, 2002 passed by respondent No. 1 confirming an order dated 21-5-2002 passed by the Superintendent of Stamps.
2. The petitioner submitted in the office of the Superintendent of Stamps, Mumbai on 30th March, 1999, under the New Amnesty Scheme declared by the State Government on 26th September, 1998, a document for payment of proper stamp duty. The document referred to was executed on a non-judicial stamp paper of Rs. 20/- only. The Superintendent of Stamps by an order dated 21-5-2002 concluded that the document was a partnership deed attracting stamp duty under Article 47(1)(b) and 47(1)(c) of Schedule 1 of the Bombay Stamp Act, 1958 (hereinafter referred to as the said Act). The duty was assessed at Rs. 12,51,650/- along with a fine of Rs. 300/- and subject to the conditions laid down in the Amnesty Scheme. The petitioner preferred an Appeal against the said order before the first respondent. As stated above, the first respondent confirmed the order of the Superintendent of Stamps.
3. Before referring to the document, it is necessary to set out the Articles in Schedule I to the said Act. They are Articles 47(1)(b) and (c) and 5(ga):
'47. PARTNERSHIP -
(1) Instrument of partnership----------------------------------------------------------------------------------1 2----------------------------------------------------------------------------------(a) ......................... ...........................(b) where such contribution [brought in Five hundred rupees,by way of cash] is in excess of subject to maximum dutyrupees 50,000, for every rupees of rupees five thousand]50,000 or part thereof.(c) where such share contribution is The same duty as isbrought in by way of property leviable on a Conveyanceexcluding cash. under Clauses (a), (b), (c)or (d) as the case may be,of Article 25, on themarket value ofproperty.' '5. AGREEMENT OR ITS RECORDS OR MEMORANDUM OF AN AGREEMENT ;(ga) if relating to giving authority or Five rupees for every fivepower to a promoter or a developer, hundred rupees or partby whatever name called, for thereof of the marketconstruction on, development of or, value of the property.'sale or transfer (in any mannerwhatsoever), of, any immovableproperty. ---------------------------------------------------------------------------------
4. The document in question is titled as a Joint Venture Agreement. It is entered into between the petitioner and one Pushpaben Rasiklal Parikh and Rasiklal Manilal Parikh (HUF) on behalf of himself and as the karta of the HUF. For convenience, I will refer to them as the owners and I will refer to the petitioner as petitioner or the developer.
5. The owners own inter alia a large property, of which only a part viz. 726 sq. mtrs. is the subject matter of the said agreement. The parties to the agreement agreed to develop the land jointly with the benefits available and as sanctioned by the Municipal Corporation.
6. The petitioner has contended that the agreement is a development agreement and not a partnership agreement. The main question that falls for consideration is whether the agreement, whatever the parties may have described it as, constituted a partnership between the owners and the petitioner/developer. It is necessary therefore to refer to the relevant clauses of the agreement which are as follows :
'12. The objects of the Joint Venture shall be to develop the said property along with the balance TDR available and as per the permissions and sanctions, NOC etc. which are granted and which may be hereafter be granted by the authorities concerned including the competent authority under the provisions of Urban Land (Ceiling and Regulations) Act, 1976 (ULCRA), the Municipal Corporation of Greater Mumbai (MCGM) and to put up and complete construction on the said Oshiwara/Andheri property as per the plans and specifications which may be sanctioned by MCGB including in respect of FSI which may be available by way of Transfer of Development Right (TDR) and/or as the same may be amended and/or altered from time to time and to sell tenements etc. in the buildings to be constructed on the said Oshiwara/Andheri Portion on Ownership basis as set out herein and for that purpose to get the layout sanctioned. Obtain necessary permission, consent, NOC from ULC authorities, to obtain TDR, to get the plans and specifications, sanctioned to obtain IOD, CC to carry on and complete the construction, obtain occupation and/or building completion certificate and do all acts, deeds, things and matters as may be required or necessary for putting into complete effect the objects and intentions of the parties as reflected in these presents. All the costs and charges and expenses for carrying the aforesaid objects shall be borne and paid by the joint venture.'
'13. The Joint venture will deal with and dispose of including by way of allotment of units, shops, garages, godowns, car parking space whether covered or open, open, spaco, terrace, etc. (hereinafter for the sake of brevity referred to as the units) to be constructed on the said Oshiwara/Andheri property on Ownership basis or on any other basis and on such rates and on such terms and conditions as the parties hereto shall determine mutually from time to time. The Parties hereto will get the acquirers of such flats admitted as members of the said society. It will be the responsibility of the Party of the First/Second part to obtain confirmation of the said society for the said purpose.' '19. The share in the profit of the Joint Venture of the parties shall be in the following proportion :--
1) The party of the First Part....................... 50 %
2) The Party of the Second Part: ................. 50%'
'21. The Party of the First Part has agreed to bring into the Joint Venture the balance portion of the immovable property described in the Schedule hereunder written and for the purpose of their capital contribution/investment. The Party of the Second Part will be liable and responsible to bring initially maximum upto Rs. 25,00,000/- (Rupees Twenty five lakhs only) as its capital investment either directly or by making payments on behalf of the Joint Venture and only after the party of the Second part has brought the same the parties hereto will bring further finance jointly. And the Parties hereto agree to contribute such further capital/investment or as loan such further amount as may be required for the development of the Oshiwara/Andheri property. Such contribution towards capital or loan will carry interest at the rate of 21% per annum or at such rate as may be mutually agreed upon by the parties. In addition to the aforesaid amount brought in by the Party of the Second part, the Party of the second part will also be entitled to utilize funds received from the prospective purchasers of the tenements for carrying out construction activities on the plot to complete the project at the earliest.'
'22. Balance of net profits remaining after the payments in Clause 21 above and other payments which are required to be made by the Joint Venture for the purpose of this Joint Venture and after return of amounts invested and/or brought in by the Parties hereto will be distributed between the parties hereto on completion of the project as may be mutually decided by the parties hereto from time to time after paying and/or providing for the cost, charges, interest and expenses mentioned in these presents.'
'25. The parties hereto shall respectively execute or cause to be executed all deeds, documents, conveyance etc. which may be required and necessary for the purpose of carrying out the terms and conditions herein and for transferring their respective right, title and interest in the said property in favour of the acquirers of co-operative society of the acquirers of tenements, flats, shops etc.'
'27. The relationship established between the parties hereto shall be governed by the general law of contract and the provisions contained in these presents. This Agreement shall not be construed as a partnership and none of the parties hereto shall have the powers which a partner would be entitled to in law nor this agreement shall be governed by the provisions of the Indian Partnership Act, 1932 or any statutory modification, re-enactment or replacement thereof.'
7. The term 'partnership' is not defined in the Act. It is clear that the said Act uses the term 'partnership' in accordance with the meaning thereof in the Indian Partnership Act, 1932. There is nothing in the said Act that suggests otherwise. It is necessary therefore to refer to the provisions of the Indian Partnership Act, 1932. Sections 4 and 6 of the Indian Partnership Act, 1932 are important and read as under :
'4. Definition of 'partnership', 'partner', 'firm' and 'firm name'.--'Partnership' is the relation between persons who have agreed to share profits of a business carried on by all or any of them acting for all.
Persons who have entered into partnership with one another are called individually 'partners' and collectively a 'firm', and the name under which their business is carried on is called the 'firm name'.
'6. Mode of determining existence of partnership.-- In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together.'
8. It is settled law that three essential ingredients are necessary before the relationship between persons can be said to constitute a partnership. There should be an agreement between the parties, the agreement must be to share the profits of the business and the business must be carried on by all or any of them acting for all. The third ingredient relates to the existence of an agency between the concerned persons inter se. While establishing the first two ingredients, there is usually no real difficulty, it is the establishment of an agency that requires careful consideration. It is settled law that all the three elements must be present to conclude that the persons are partners.
9. The order correctly proceeded on the basis that in view of the absence of the definition of the term 'Partnership' in the Bombay Stamp Act, 1958 the scope of the term in that Act must be determined on the basis of the definition of the term 'Partnership' in the Indian Partnership Act, 1932. The conclusion in the impugned order that the clauses of the agreement establish that there was an agreement between the parties and that the agreement was to share the profits from the business is also well founded. This however establishes but two of the essential ingredients.
10. The first respondent relied upon Section 239 of the Indian Contract Act, 1872, was repealed by Section 73 of the Indian Partnership Act. This is the cause of the error in the first respondent's order for Section 239 of the Indian Contract Act. Section 239 is quoted thus in the impugned order :
'Partnership is the relation which subsists between persons who have agreed to combine their property, labour or skill in some business and to share the profits thereof.'
11. It will be noticed immediately that this definition differs substantially from the definition of partnership in Section 4 of the Indian Partnership Act, 1932. The reliance upon the repealed Section 239 of the Indian Contract Act was the reason why it completely escaped respondent No. 1 that one of the ingredients for persons to be held to be partners is that the business should be carried on by all or any of them acting for all.
12. It is settled law that the nomenclature given by parties to the relationship or documents makes no difference. Thus, for instance, merely because Clause 27 of the Joint Venture Agreement states that the agreement should not be construed as a partnership, if in fact all the three elements essential to constitute a partnership were present, the relationship between the parties to the same would be that of partners. Such a clause would be only one of the factors to be considered while determining whether the persons are partners or not. Conversely, even if the deed was termed as a partnership agreement, it would not necessarily constitute a relationship of partners between the parties thereto if it is found that any of the elements necessary to constitute a partnership were absent.
13. To reiterate, all three elements must be present. The mere fact that the parties have entered into an agreement and under that agreement they have agreed to share profits would not constitute a partnership between them. To constitute them as partners, it would be necessary to establish the third element viz. an agency. In Thota Komarayya Somayya v. Commissioner, Excess Profits Tax, Hyderabad AIR 1956 Hyderabad 87 the Division Bench held as under :
'(7) It will be observed from explanation (ii) to Section 6 of the Partnership Act that the mere payment of a share in the profits does not by itself make a person receiving it a partner with the person carrying on the business. The explanation goes on to particularise the instances of a servant or agent or other persons specified therein receiving remuneration or share in the profits as remuneration and lays down that the receiver of such remuneration is not a partner.
Though the receipt by a partner of a share in the profits of a business is an important element as to the existence of a partnership between him and the person carrying on the business, it is not conclusive evidence as explanation (ii) to Section 6 of the Partnership Act makes it clear.'
14. A Division Bench of this Court in Chimanram Motilal and Anr. v. Jayantilal Chhaganlal and Anr. AIR 1939 Bom 410 held as under :
'The question whether a transaction amounts to a partnership or not is often a difficult one. Under Section 4, Partnership Act, 'partnership' is defined as the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. I think the words 'acting for all' were inserted to emphasize that partners are agents, and not merely principals. Then Section 6 provides that in determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. It is quite clear that you may have a partnership in a single transaction, and it is also clear that sharing profits and contributing to losses are indications of a partnership, but by themselves they are not enough to constitute a partnership. One essential element of partnership, as is shown in the definition, is that there should be agency. One partner can always bind another partner in any manner which falls within the scope of the partnership business, subject to any limitation under Section 20 of the Act, and if the relationship constituted between parties in respect of a particular matter does not expressly or by necessary implication involve the right of one party to pledge the other as an agent, then there is no partnership. To my mind the defendants have failed here to prove that the two plaintiff firms were in any respect agents one for the other. All the expressions in Ex. Q and Ex. R confer rights or impose obligations on the pledgees. There is nothing to show that one pledgee could act on behalf of the other. For example, I see no reason to suppose that one of these two pledgees could have sold the pledged goods without consulting the other pledgee.'
15. Mr. Belosey fairly conceded that the impugned order does not hold that the parties to the documents were agents one for the other. Nor is there any evidence whatsoever to establish agency in the present case. The entire order is based on the finding that the parties agreed to conduct business with an intention to share profits and losses. There is no finding that any agency was constituted between the parties to the joint venture agreement. Thus, it cannot be stated that the joint venture agreement constituted a partnership between the parties.
16. On the other hand, Mr. D'Souza, the learned counsel appearing on behalf of the petitioner, rightly submitted that the facts militate against a case of a partnership. For instance, the owners of the property executed a power of attorney in favour of the petitioner. If, in fact, the parties to the joint venture agreement had constituted themselves as a partnership firm, the power of attorney would have been issued not by the owners but by the partnership firm itself. It may have been open for the respondents to contend that it was necessary for the owners to execute the power of attorney as they continued in the records to be shown as the owners of the plot. Nevertheless, if the property had been brought into a partnership firm, it would have been necessary for the partnership firm to also execute a power of attorney entitling one of them to sell the flats to be constructed.
17. Further, Clause 25 of the deed also refers to the 'respective right, title and interest in the property of the parties'. If the property belonged to a partnership, there would have been no question of the respective rights of the individual parties. No partner has a right in a particular property of the partnership. It is not necessary to dwell further on this aspect in view of the fact that the impugned order itself does not allege that there was an agency created between the parties.
18. In the circumstances, the impugned order is set aside. The petition is made absolute in terms of prayer (a).
19. The respondents are at liberty to direct stamping of the document as a development agreement. In any event, the respondents shall return the original document to the petitioner within a period of eight weeks from today.
20. The respondent shall refund the amount of Rs. 12,51,650/- or the balance amount in the event of the respondent opting to charge duty on the document as a development agreement within eight weeks from today together with interest thereon at 5% per annum as directed by the order dated 20th January, 2003.
There shall be no order as to costs.
Parties to act on an ordinary copy of this order duly authenticated by the Associate/Court Stenographer.