M/S. Kamal Wineries and Others Vs. the Sub-registrar of Assurances, Shadnagar and Others - Court Judgment

Excerpt:
indian stamp act, section 6 – the first petitioner is a partnership firm established in the year 1970 with 15 partners.  over the period, 12 of them retired up to 25.06.2004.  it is stated that on 27.08.2009, the 3rd petitioner herein joined as a partner and a fresh deed of partnership was executed. on the next day i.e., 28.08.2009, two existing partners i.e., respondents 4 and 5 retired, by receiving a sum of rs.4,00,00,000/- each. a deed of retirement executed on that day was presented for registration before the 1st respondent. it is stated that the stamp duty, as provided for under article   41-c of schedule i-a to the indian stamp act, 1899 (for short ‘the act’) was paid.  however, the 1st respondent took the view that the document is the one of conveyance and stamp duty under article 20 of schedule 1-a to the act must be paid.  the petitioners state that the stamp duty of rs.30,00,000/- was paid under protest. the 1st respondent sought opinion of the 2nd respondent.  through letter, dated 23.02.2010 the 2nd respondent informed that notices be issued to the petitioners requiring them to pay the stamp duty as per article 20 read with article 47-a of schedule i-a to the act and that the reply obtained from them be forwarded to him for further steps.  accordingly, the 1st respondent issued notice dated 26.02.2010 to the petitioners. hence, this writ petition. the petitioners contend that the view taken by the 2nd respondent that the deed of retirement is to be treated as a deed of conveyance; is contrary to law.  according to them, the consequences that flow from the retirement of partners cannot be equated to those of conveyance and that there was no justification for respondents 1 and 2 in demanding the stamp duty on that basis. counter affidavit is filed by the 1st respondent.  it is stated that the recitals in the document in question clearly discloses that the rights of the retiring partners were transferred by receiving the consideration and that the same amounts to a transaction of sale.  he submits that the relevant provisions of law were applied and that the petitioners cannot be said to have suffered any detriment.  it is also stated that the petitioners can avail the other remedies, provided for under law. sri b.chandrasen reddy, learned counsel for the petitioners submits that a separate article is incorporated in schedule 1-a to the act, to deal with the documents pertaining to partnership or retirement therefrom; and that the respondents were not at all justified in treating the simple deed of retirement, as a deed of conveyance, or sale deed.   he further submits that the receipt of consideration by the outgoing partners does not at all change the character of the transaction.  he has placed reliance upon certain decided cases. learned government pleader for revenue on the other hand submits that though the document is named as a deed of retirement, in effect, it is nothing but a deed of conveyance.  he submits that the recitals in the document, and in particular, the factum of receipt of consideration would clearly demonstrate that the title of the outgoing partners was conveyed to the remaining partners and thereby, the transaction of sale has taken place.  he made reference to sections 6 and 41-b of the act and has relied on certain precedents.the 1st petitioner, which was constituted in the year 1970 with 15 partners, has undergone changes over the past four decades.  by august 2009, there were three partners viz., 2nd petitioner and respondents 4 and 5.  the 3rd petitioner joined on 27.08.2009.  on the next day itself, respondents 4 and 5 retired.  a deed of retirement, dated 28.08.2009 was executed and presented for registration.  the petitioners paid the stamp duty, as provided for under article 41-c of schedule i-a to the act.  respondents 1 and 2 however plead that the stamp duty is payable under article 20 read with 47-a of schedule i-a to the act.the only question that arises for consideration is as to whether the document, dated 28.08.2009 presented by the petitioners for registration before the 1st respondent deserves to be treated as a deed of retirement, or as a deed of conveyance. the very concept of partnership contemplates two or more persons coming together, to carry out a common objective.  though the firm so constituted does not acquire an independent legal character, the contributions made by the partners be it in the form of capital or property, become the common property of the firm.  the entitlement of each partner vis--vis the property held by the firm is determined, in terms of shares, stipulated in the partnership deed.  in a given case, the share of a partner may reflect the actual contribution made by him and in other cases, it may not be so.  for instance, if the partners of a firm comprise of some who have invested skill and knowledge and others that have arranged capital, land etc., the former are also allotted shares, notwithstanding the fact that they did not contribute any capital or tangible assets.  obviously on account of this typical characteristic of a firm, the courts held that the interest of a partner in a firm deserves to be treated as movable property notwithstanding the content thereof.  it is also common that the share of a partner keeps on changing, with the addition or departure of the partners from time to time. the change in the nature of rights of a partner vis--vis the firm, either when he joins or leaves the firm, cannot be equated to sale or purchase simplicitor. it is so, even with the accrual or loss of interest of such partner is vis--vis the immovable property held by the firm.   it is for this reason, that the legislature has provided for a totally different legal regime, in the context of execution and registration of deeds of partnership, retirement or dissolution pertaining to a firm, compared to the one of transfer or conveyance of properties.a full bench of this court, in board of revenue, hyderabad vs. valivety rama krishnaiah air 1973 andhra pradesh 275held that a deed of release executed by a co-owner in favour of another, or a deed, evidencing retirement of partner from a firm, for consideration, cannot be treated as deed of conveyance.  however, different results would ensue, in case such release or retirement is favour of one or few out of many co-owners or partners. in board of revenue u.p., vs. m/s. auto sales, allahabad air 1979 allahabad 312, a division bench of this court held that the retirement of a partner, even while his share is determined and consideration is paid, does not amount to transfer of property, and cannot be treated as a deed of conveyance as defined under sub-section (10) of section 2 of the act.  to the same effect is the judgment of a division bench of the madras high court in this court in t.t.meenakshi achi and others vs. the district registrar, coimbatore and another air 1994 madras 317. reliance is placed by the respondents upon the judgment rendered by a full bench of this court in kothuri venkata subba rao and others vs. district registrar of assurances, guntur air 1986 andhra pradesh 42.  in that case, four out of the ten co-owners walked out of the joint venture.  they executed separate deeds of relinquishment on the same day.  question arose as to whether the deeds were to be treated as deeds of relinquishment or as those of conveyance.  the court held that when each retiring co-owner has transferred his share in favour of few, and not all the remaining co-owners, it deserves to be treated as a deed of conveyance.  in the instant case, the retirement of respondents 4 and 5 was not in favour of any specific partners.  they did not indicate as to whom the shares hitherto held by them, must accrue.  therefore, the principle laid down in kothuri venkata subba rao’s case (4 supra) does not have any application to the facts of this case. learned government pleader submits that where a deed is capable of being treated under various articles, the one which attracts the higher amount of stamp duty must be applied.  this plea is referable to section 6 of the indian stamp act.  it reads as under: 6. instruments coming within several descriptions in schedule i:-subject to the provisions of the last preceding section, an instrument so framed as to come within two or more of the descriptions in schedule i, [or in schedule 1-a, as the case may be] shall where the duties chargeable thereunder are different, be chargeable only with the highest of such duties: provided that nothing in this act contained shall render chargeable with duty exceeding [five rupees] a counterpart or duplicate of any instrument chargeable with duty and in respect of which the proper duty has been paid. the possibility or occasion for applying the principle underlying section 6 of the act would arise, if only a document is capable of being treated under two different provisions.  the document in question is the one of retirement from partnership and it is specifically dealt with under article 41-c of schedule 1-a to the act.  it cannot at all be treated as conveyance.  therefore, there does not exist any possibility to apply the principle underlying section 6 of the act. hence, the writ petition is allowed.  the impugned proceedings issued by respondents 1 and 2 treating the document dated 28.08.2009 as deed of conveyance, are set aside.  it is held that the stamp duty payable on the document is the one under article 41-c of schedule 1-a to the act.  the 1st respondent shall accordingly register the document, if other formalities are complied with.  if any amount in excess of that is levied, it shall be refunded to the persons or agencies that paid it.  the process shall be completed within two months from the date of receipt of a copy of this order.the miscellaneous petition filed in this writ petition also stands disposed of.  there shall be no order as to costs.