Apl International Ltd. Vs. State of Madhya Pradesh and ors. - Court Judgment

R.S. Garg, J.

1. The petitioner being aggrieved by the circular letter dated 31-5-1995 (Annexure P/l) addressed by the respondent No. 2 to all the District Registrars, Collector of Stamps and Sub Registrars in the State of Madhya Pradesh and also being aggrieved by the letter dated 24-3-2000 addressed by respondent No. 4 State Bank of Indore to the petitioner (Annexure P/2) is before this Court with a submission that provisions contained in Section 75 of Madhya Pradesh Panchayat Raj Awam Gram Swaraj Adhiniyam, 1993 (Panchayat Raj Act for short) are ultra vires the Constitution, the respondent No.2 i.e. Inspector General of Registration and Superintendent of Stamp had no authority to issue the circular letter No. 1964 dated 31-5-1995 (Annexure P/l) to other authorities to recover 1% duty in addition to stamp duty nor the respondent/ Bank had any authority under the law to deduct a sum of Rs. 6,97,000/-- from petitioners C.D. account towards cost of Panchayat duty on mortgage created in favour of the bank without issuing any notice to the petitioner or without affording any opportunity of hearing and without looking into the notification of the State Government issued on 29-12-1990 which was fixing a cap of Rs. 50,000/.

2. It is conceded before us that challenge to the vires of Section 75 amended so also un-amended of the Panchayat Raj Adhiniyam has been rejected by this Court in the matter of M/s. Vikas Concrete Industries v. State of M.P. 2003(1) MPJR SN 62 (W.P. No. 4854 of 1999 (Jabalpur) decided on 7-2-2003). In view of the said judgment Shri Shrivastava, Learned Senior Counsel fairly concedes that question of the vires does not survive for consideration as the matter is no more res Integra. Submission of Shri Shrivasvata however is that once the State Government exercising its powers Under Section 9(1)(a) of the Indian Stamp Act, 1899, reduced, remitted or compounded the stamp duty then such duty as reduced by the State Government shall only be revived. According to him the notification dated 29-12-1990 clearly provides that equitable mortgage by surrender of title deeds if is beyond the value of Rs. 50,00,000/- then the maximum stamp duty payable would be Rs. 50,000/-. He also submits that Section 75 though at one side provides that the duty imposed under the Indian Stamp Act shall stand increased by 1% on the value of such property or in the case of mortgage on the amount secured by the instrument but the first proviso clearly provides that such extra stamp duty levied in respect of mortgage shall not exceed the amount of stamp duty thereupon. According to him if the stamp duty cap is fixed at Rs. 50,000/- then the extra stamp duty to be recovered Under Section 75 of Panchayat Raj Act could not be more than Rs. 50,000/-.

3. Shri Samdarshi Tiwari, learned Counsel for the State conceded to the legal position and submitted that if the stamp duty stands reduced to Rs. 50,000/- then the additional stamp duty to be levied would not exceed the amount of the stamp duty which in this case would be Rs. 50,000/- only.

4. Shri Wajid Hyder, learned Counsel for the respondent No. 4 State Bank of Indore however submitted that the Registrar of Stamp had informed them to recover the additional duty at 1% and as the additional charge was created in the property somewhere in the year 1994 when the cap Under Section 75 of the Panchayat Act had not come in force they were obliged and duty bound to deduct the amount On being asked that what were the instructions and what document had been filed to support this tall claim learned Counsel for the Bank submitted that the respondent No. 4 Bank has not filed any reply, return or counteraffidavit.

5. Shri Wajid Hyder, learned Counsel however also submitted that as the additional charge was for an amount of Rs. 6,97,00,000/- (Rupees six crores ninety seven lacs only) was created in 1994 and as the maximum cap came in force under Act No.2 of 1997 w.e.f. 7-1-1997 Bank was absolutely justified in deducting the amount.

6. In the matter of M/s. Vikas Concrete Industries (supra) a Division Bench of this Court had clearly observed that the proviso to Section 75 only adds a further maximum cap to 1% which is an additional duty in the realm of rate. The Division Bench also observed that the notification issued Under Section 9 was a beneficial legislation putting a cap on the limit of payment of the stamp duty. The Division Bench also held that where the maximum leviable stamp duty was Rs. 50,000/- then the duty leviable Under Section 75 would not exceed Rs. 50,000/-. They also observed that amendment to Section 75 of Panchayat Raj Adhiniyam would have retrospective effect.

7. In view of the said Division Bench judgement it is clear that the maximum cap on recovery of the stamp duty is Rs. 50,000/-and recovery of the additional duty Under Section 75 of the Panchayat Act would also be limited Rs. 50,000/-.

8. In absence of any document asking the respondent No.4 to deduct the amount of 1% we are unable to accept the contention made by Mr. Wajid Hyder.

9. The submission that the loan was taken in the year 1994 or the limit was extended in the year 1994, therefore, the duty leviable in the year 1994 was chargeable. Unfortunately the argument raised by Mr. Wajid Hyder loses sight of the fact that the deduction was not made in the year 1994 or before 7-1-1997 before the first proviso was introduced to Section 75 of the Panchayat Act. If such was the case then the Bank had a reasonable reason and sufficient cause to say that they did not commit a lapse either in their work or in their service because prior to 7-1 -1997 the Bank was obliged to recover 1% additional duty on the valuation of the property or on the amount secured by the mortgage. The Bank in fact had debited the said amount of Rs. 6,97,000/- somewhere in the year 2000 and immediately informed the petitioner vide their letter dated 24-3-2000 (Annexure P/2) that they had debited the C.D. Account by an amount of Rs. 6,97,000/-.

10. In the year 2000 the first proviso to Section 75 was in operation. If the Bank wanted to recover 1% additional stamp duty even after amendment of Section 75 of the Panchayat's Act then they were obliged and duty bound to issue a notice to the petitioner that why such amount be not debited. In any case the action taken by the Bank was to lead to civil consequences and the petitioner's account was to be debited by a sum of Rs. 6,97,000/-. A Bank cannot act like a ordinary creditor. It cannot act like Merchant of Venice. When people bank upon a Bank, then the Bank must show that it is worth banking. Simply because money of some people or some account holder is lying with the Bank, the Bank has no authority either under the contractual law or under the Bank laws to deduct any amount without giving prior information to the account holder and a notice to show cause. Such adjustments without prior information to the account holder in fact and sometimes may amount to misappropriation and breach of trust. In a given case when a customer / account holder issues instruction to the Bank to do a particular act then the Bank is obliged to act in accordance with such instructions and if the Bank does not wish to observe such instructions then the Bank is obliged to inform the customer that for one reason or the other or because of the legal embargo the Bank would not observe the instructions. A customer may issue some standing instruction to the Bank to do some acts, such as collecting bills, making payment of the bills, deducting the amount for services provided by them etc. In case the instructions are issued to the Bank to deduct any amount as the Bank wants then such instructions would bind the customer otherwise ordinarily the Bank relations would bind the Bank and the customer. If the customer does not give any authority to the Bank to deduct a particular amount and pay to a third party then the Bank is not entitled nor authorized to deduct the amount and make the payment to the third party. It would altogether be a different thing that if under some Act or law an authority can direct the Bank to freeze the account or make payment to such authority then the Bank would be obliged to honour and observe the directions issued by such authority. In the present case unfortunately and for the reasons best known to the Bank they have not filed any document or instruction/letter to prove that the Registrar, or the Inspector General of Registration and Superintendent of Stamp ever asked the Bank to recover a sum of Rs. 6,97,000/- and make payment from the account of the Bank and pay the same to the State exchequer.

11. In the present matter the Bank also cannot take shelter under their ignorance that they did not know about amendment in Section 75 of the Panchayat Act. If the law says that everybody knows law then a Bank which is governed by different laws and has the assistance of battery of lawyers cannot be allowed to say that the law was not in their notice or was not brought to their notice or there was no law. If first proviso to Section 75 provided that extra stamp duty levied in respect of mortgage shall not exceed the amount of stamp duty on the document, then the Bank was not obliged even to honour the instructions issued to them by the Registrar. The money lying in deposit with the Bank did not belong to the Bank, it was money of the customer. The Bank was a trustee and care-taker of the same.

12. In view of the judgment in the matter of M/s. Vikas Concrete Industries supra we must hold that the maximum stamp duty leviable could not exceed Rs. 50,000/- and accordingly the extra stamp duty leviable Under Section 75 of Panchayat's Act could not exceed the amount of Rs. 50,000/-.

13. We must hold that the Bank acted in an highhanded manner and, without taking the customer in confidence debited the account by sum of Rs. 6,97,000/- and paid the said amount to the State exchequer.

14. Shri Wajid Hyder, learned Counsel for the respondent Bank submitted that the Bank would refund the amount to the petitioner only after the money is paid back to the Bank by the State Government. According to him the Bank acted bona fidely and, therefore, the Bank be not asked to refund the money.

15. Shri Shrivastava, learned Counsel for the petitioner however, submitted that the petitioner be not asked to recover the money from the State Government and if the illegal deduction was made by the Bank then the Bank must take steps to correct the wrong. According to him if the Bank had deducted the amount without any authority of law then the Bank must refund the amount along with interest over it with the rate on which the Bank recovers the money from the debtors.

16. After hearing learned Counsel for the parties we must accept the submissions made by Shri Shrivastava, learned Senior counsel for the petitioner. If the Bank had deducted the amount of Rs. 6,47,000/- in excess of the liability of the petitioner that too without any authority of law then Bank has to repay the money with interest at the rate of 9% with quarterly interest in favour of the petitioner either by refunding the amount in cash or by making a credit entry in the accounts of the petitioner if the petitioner still holds an account with the Bank. It is expected of the Bank that within a period of two months from today the Bank would take necessary steps. In case the Bank does not take appropriate action as directed aforesaid then the Bank shall be, liable to pay 15% compound interest from the date of this order till the amount is paid or entry-is made.

17. In view of the judgment in the matter of M/s. Vikas Concrete Industries supra as the State is not entitled to recover anything beyond Rs. 50,000/- Under Section 75 of the Panchayat's Act the Bank would be entitled to make an application to the concerned competent officer of the State Government for refund of the money. If such an application is filed by the Bank then the State Government and its officers without showing any undue lethargy shall dispose of the said application within a period of three months from the date of submission of the application along with a copy of this order. The petitioner shall also be entitled of its costs quantified at Rs. 5000/-.