2005 (12) TMI 283 - SC - Companies Law

Whether execution of a supplementary agreement entered into by and between the appellant and the third respondent herein would amount to a transfer so as to attract stamp duty payable in terms of article 5(d) of the Schedule appended to the Karnataka Stamp Act, 1957, consequent upon the change of the name of the erstwhile company to the appellant-company? Held that - Appeal allowed. It is now well-settled that for the purpose of levy of stamp duty, the real and true meaning of the instrument must be ascertained. The High Court held that the supplementary lease agreement cannot be said to be an instrument whereunder the appellant-company claims certain leasehold from the Board but having done so, the High Court was not correct in holding that it is liable to pay the stamp duty. Thus as by a reason of the supplementary agreement, no fresh transaction has been entered into, the impugned judgment cannot be sustained, which is set aside accordingly.

Summary

Issues involved:
1. Whether the execution of a supplementary agreement amounts to a transfer attracting stamp duty?
2. Interpretation of the Karnataka Stamp Act, 1957 regarding payment of stamp duty.
3. Validity of the Deputy Commissioner of Stamps' order regarding stamp duty payment.
4. Dismissal of writ petition by Karnataka High Court.
5. Dismissal of intra court appeal against the High Court's decision.

Issue 1:
The main issue in this case is whether the execution of a supplementary agreement between the parties constitutes a transfer triggering the payment of stamp duty under the Karnataka Stamp Act, 1957. The appellant argued that no element of transfer was involved in the agreement, while the Deputy Commissioner of Stamps held that stamp duty was payable based on the changes in the legal effect of the instrument. The High Court dismissed the appellant's writ petition, stating that the supplementary agreement incorporated terms from the earlier lease deed. However, the Supreme Court found that no fresh transaction occurred due to the change in the company's name, and the appellant did not transfer its leasehold interest.

Issue 2:
The interpretation of the Karnataka Stamp Act, 1957 was crucial in determining the applicability of stamp duty in this case. The Act defines an "instrument" as a document creating, transferring, or recording any right or liability. The execution of an instrument attracting stamp duty under article 5(d) must involve property transfer or the creation of a right or liability. In this case, as the supplementary agreement did not amount to a lease or sale deed under the Transfer of Property Act, the stamp duty provision of article 5(d) did not apply, and the appellant had paid stamp duty under the residuary clause of article 5(f)(i).

Issue 3:
The validity of the Deputy Commissioner of Stamps' order demanding stamp duty payment based on the changes in the instrument's legal effect was challenged. The Deputy Commissioner relied on precedents and held that the entire stamp fee was required due to alterations in the supplementary agreement. However, the Supreme Court disagreed, emphasizing that no fresh transaction occurred, and the appellant did not transfer its leasehold interest, overturning the lower court decisions.

Issue 4:
The dismissal of the writ petition by the Karnataka High Court was based on the belief that the supplementary agreement incorporated terms from the earlier lease deed, justifying the stamp duty payment. The High Court's decision was overturned by the Supreme Court, which clarified that the change in the company's name did not constitute a new transaction, and the appellant's liability for stamp duty was unfounded.

Issue 5:
The intra court appeal against the High Court's decision was also dismissed, upholding the requirement for stamp duty payment under the supplementary agreement. However, the Supreme Court found that the appellant could not be held liable for stamp duty as no transfer of interest occurred due to the company name change. The appeal was allowed, and the appellant was granted costs.

In conclusion, the Supreme Court ruled in favor of the appellant, stating that the execution of the supplementary agreement did not amount to a transfer triggering stamp duty payment. The Court emphasized that no fresh transaction occurred due to the change in the company's name, and the appellant did not transfer its leasehold interest. The decision overturned the lower court judgments and clarified the interpretation of the Karnataka Stamp Act, 1957 regarding stamp duty payment in such cases.