019-NLR-NLR-V-41-BARTLEET-&-CO.-v.-COMMISSIONER-OF-STAMPS.pdf
82
Bartleet & Co. v. Commissioner of Stamps.
1939Present: Keuneman and de Kretser JJ.
BARTLEET & CO. v. COMMISSIONER OF STAMPS107—D. C. (Inty.) Special
Stamps—Sale of property under mortgage decree—Sale under secondarymortgage—Primary mortgage satisfied after sale—Secondary mortgage—Purchaser gives credit for amount of primary mortgage—Consideration for conveyance—What is the true consideration—StampOrdinance. No. 22 of 1909, Schedule A, part I.. item 23 (1)(b),
(Cap. 289).
The appellants who were the plaintiffs in D. C. Colombo, No. 52,344,obtained a decree for Rs. 148,714.82, which included a sum ofRs. 79,078.38 due upon a secondary mortgage bond, hypothecating thehalf share of Soranawallie estate. The primary mortgage bond inrespect of the same estate was for the sum of Rs. 40,000 and interestin favour of another person.
In D. C. Colombo, 52,344, on April 19, 1934, the appelants appliedfor an order to bid and an order giving them credit in a sum not exceedingtheir claim and costs. This was allowed subject to the condition thatthey were allowed to purchase at any value, on agreeing to entersatisfaction of the decree for a sum of Rs. 5,000. The District Judgein making the order took into consideration the fact that the primarybond was for Rs. 40.000 and that the half share of the estate wasvalued by the auctioneer at Rs. 42.500.
Thereafter the premises were sold by the auctioneer on April 28. 1934.At thic sale the premises were bought by the" appellants for Rs. 1,000.
On May 21, 1934, the appellants applied to the Court for an orderconfirming the sale.
Bartleet & Co. v. Commissioner of Stamps.
83
In doing so, the appellants’ Proctor stated that they were willing togive credit for the amount of Rs. 42,500, the appraised value of theestate as it had been ascertained that the primary mortgage had beendischarged. The District Judge confirmed the sale.
On June 12, 1934, the transfer deed was executed. In the recitalsall the above-mentioned facts were mentioned. A copy of the DistrictJudge’s order of May 21 was annexed to the deed.
The operative words of the deed were as follows : —“ Now know yeand these presents witness that the Secretary of the District Court,Colombo, in pursuance of the said authority and in consideration of thesaid sum of Rs. 1,000 credited as aforesaid doth hereby grant ”.
Held, that the real consideration for the deed was the agreementby the appellants to give credit to the judgment-debtor to the amount ofRls. 42.500 and that the deed was liable to stamp duty on that basis.
It is competent for the Commissioner of Stamps to insist on beingsatisfied that the property, which is the subject-matter of the deed,has been correctly valued.
In arriving at this adjudication, the Commissioner is entitled toconsider matters not expressed in the deed.
Gunawardene v. Gunasekera (1 Times of Ceylon Law Report 90)followed.
N appeal from an order of the Commissioner of Stamps under
xjL section 31 of the Stamp Ordinance. The facts are stated inhead-note.
N. Nadarajah (with him F. C. W. VanGeyzel), for appellants.—According to Schedule A, part I., item 23 (1) (b) of the Stamp Ordinance(Cap. 189), the “consideration expressed” is Rs. 1,000. Item 23 (1) (b)receives a certain amount of support from the proviso in section 22.Schedule F, Miscellaneous, also throws light.
M.T. de S. Amerasekere, K.C., Acting S.-G. (in reply to question fromCourt).—The Commissioner of Stamps has acted on the footing thatRs. 42,500 is the true consideration. It is the fact that the appellantgave credit for Rs. 42,500 which entitled him to the conveyance.Alternatively, the deed itself states that the purchase is subject to themortgage for Rs. 40,000. Add to this figure the Rs. 5,000, for which theappellants agreed to enter satisfaction, and the total is Rs. 45,000. . Theconsideration, therefore, is either Rs. 42,500 or Rs. 45,000.
N.Nadarajah.—To deal with the alternative submission first, theoperative part of the deed does not convey subject to the mortgage. Evenif it does, it would create no obligation. See Donogh on The Indian StampAct (1929 ed.) pp. 269 and 274. Where property is sold subject to amortgage, the payment of such mortgage forms no part of theconsideration money for the purchase. The stamp duty payable on atransfer conveying such a property is an ad valorem duty on the amountof the money paid as consideration for the sale—Reference from the Boardof Revenue1; The Marquis of Chandos v. The Commissioner of InlandRevenue1 ; Waman Martand v. The Commissioner, C. D.3 ; Reference underStamp Act, S 464.
* J. L. R. (JSS3) 10 Calcutta 92.5 I. L. R. (1924) 49 Bombay 73.
A
J (1851) 6 Exch. 404.
* 1. L. R. (1884) 7 Madras 421.
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KEUNEMAN J.— Bart lee t & Co. v. Commissioner of Stamps.
The actual consideration was Rs. 1,000. The appraised value of theproperty, viz., Rs. 42,500, is not a governing factor. The appellants gavecredit for that sum only out of generosity. The purchase price as set outin the conditions of sale should determine the amount of consideration.The order of Court is to confirm the sale at Rs. 1,000 and not at Rs. 42,500.The value of a property should be its market value, i.e., the value obtain-able at a public sale.
M. T. de S. Amerasekere, K.C., Acting S.-G. (with him S. J. C. Schokman,C.C.), for Commissioner of Stamps.—To arrive at the true consideration,the instrument of conveyance should be considered as a whole—In reChettyar Firm'. The real consideration is that on which the Courtpermitted the conveyance. The consideration of Rs. 42,500 was the amountfor which the plaintiffs gave the defendant credit and can be described as"other than pecuniary”—item 23 (1)(b). “Consideration” must be
given the meaning it has in English law—Waharaka Investment Co., Ltd.v. Commissioner of Stamps".
Extrinsic evidence is admissible under section 29 (2) of the StampOrdinance to ascertain the true consideration—Gunawardene v. Guna-sekera *; Croos v. Attorney-General'. This view is in consonance withConybear v. British Briquettes, Ltd." The present case should be distin-guished from Application of A. K. Chellappa *.
In a sale subject to a mortgage, the amount due under the mortgagebond should be regarded as part of the consideration, except where thevendor expressly undertakes to pay the mortgage—Janardhan Rao v.Secretary of State' where the Indian cases which have been cited on behalfof the appellants are reviewed. The instrument should be stamped accord-ing to the true intent and meaning of the bargain which it represents—In re Trimbak Madhao Kshirsagar ’.
N. Nadarajah, in reply.
Cur. adv. wit.
July 11, 1939. Keuneman J.—
This is an appeal under section 31 of the Stamp Ordinance from anorder of the Commissioner of Stamps under section 30 determining thatthe duty payable in respect of deed No. 170, dated June 12, 1934, andattested by D. J. Boniface Gomes, Notary Public, is Rs. 801.
The deed in question is a transfer executed by the Secretary of theDistrict Court of Colombo in favour of the appellants of (a) an undividedhalf share of the estate known as Soranawallie and (b) an undividedone-fourth of the estate known as Madulla. The only matter in disputein this appeal is the duty payable in respect of the half-share of Sorana-wallie. No question arises about the quarter share of Madulla.
The facts are as follows : —The appellants in D. C. Colombo, No. 52,344,obtained a decree for Rs. 148,714.82 ; this sum included Rs. 79,078.38
*(1935) Rangoon. A. I. R. 243.
» {1932) 34 N. L. R. 269 at 272.3 (1922) 1 Times Law Rep. 90.
(1930) 32 N. L. R. 7S.
5 (1937) 4 A. E. R. 191.
(1916) 19 N. L. R. 116.
T (1931) Calcutta A. I. R. 193.
(1937) Nag. A. I. R. 57.
KEUNEMAN J.—Bartleel & Co. v. Commissioner of Stamps.
89
due upon a secondary mortgage bond hypothecating the half share ofSoranawallie, No. 1358, dated July 23, 1927. The primary mortgagebond in respect of the same estate was No. 1,258 of May 14, 1926, for thesum of Rs. 40,000 and interest in favour of some other person. In D. C.Colombo, No. 52,344, on April 19, 1934, the appellants applied for anorder to bid and an order giving them credit in a sum not exceedingtheir claim and costs. This was allowed on April 25, 1934, subject tothe condition that they were allowed to purchase at any value, onagreeing to enter satisfaction of the decree for a sum of Rs. 5,000. TheDistrict Judge took into consideration the fact that the primary bond wasfor Rs. 40,000. Further, the half share of the said estate was valued atRs. 42,500 by the auctioneer appointed to conduct the sale (Mr. J. G.winder Smagt).
Thereafter the premises in question was sold by the auctioneer onApril 28, 1934. At this sale the appellants made the highest bid, viz.,Rs. 1,000, and the premises was knocked down to them.
On May 21, 1934, the plaintiffs applied to Court for an order confirmingthe sale. The journal entry of that date reads as follows : —
“ The plaintiffs having purchased the mortgage property sold in thecase, viz., an undivided half part of Soranawallie alias Panwila-
watta …. for the sum of Rs. 1,000the Proctor
for plaintiffs move that the plaintiffs may be given credit in the saidsum and that the sale be confirmed.
“ They also move that the Secretary be directed to execute thenecessary conveyance in favour of the purchasers. Mr. Rowan forplaintiffs states that the plaintiff is willing to give credit for the amountof the appraised value of Soranawallie estate, viz., Rs. 42,500, as ithas now been ascertained that the primary mortgage has been dis-charged, although the discharge has not been registered ….The sale>will now be confirmed
It is not in evidence when the primary mortgage was discharged,except that this happened before the application for confirmation of thesale. It is clear, however, that the conditions originally imposed by theCourt as regards the order to bid and the order for credit had been basedupon the supposed existence of the primary mortgage, and the orderswere allowed upon that footing. Either the primary mortgage had noexistence at all at that date, or had been extinguished thereafter. Underthe circumstances, it may have been open to the Court to refuse toconfirm the sale, and it is difficult to think that the Court was notmaterially influenced in confirming the sale by the offer of the plaintiff’sProctor to give credit in the sum of Rs. 42,500.
Thereafter on June 12 the transfer now in question, No. 170, wasexecuted. In its recitals, all the facts which I have mentioned were setout. The recitals stated that the secondary bond No. 1,358 was subjectto the primary mortgage No. 1,258, and that the decree in D. C. Colombo,No. 52,344, as far as the hypothecation of Soranawallie estate wasconcerned, was subject to the said bond No. 1,258. The order of theDistrict Judge allowing order to bid and order for credit was set out,
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KEUNEivIAN J.—Bartleet & Co. v. Commissioner of Stamps.
though not in full. It was also recited that the plaintiffs had made thehighest bid at the auction, namely, Rs. 1,000, and that the Court hadconfirmed the sale. A copy of the District Judge’s order of May 21,1934, was annexed to the deed.
The operative words in deed No. 170 are as follows :—" Now know yeand these presents witness that the …. Secretary of the DistrictCourt, Colombo …., in pursuance of the said authority, and in
consideration of the said sum of Rs. 1,000 credited as aforesaid doth herebygrant ….”
In the attestation clause the notary makes no reference to the con-sideration. Stamp duty was paid upon the footing that the considerationfor the purchase of the half share of Soranawallie was Rs. 1,000.
Thereafter on February 17, 1938, the Commissioner for Stamps calledupon the appellants to pay the sum of Rs. 664, being the deficiency in theduty paid, together with a penalty of Rs. 25 later reduced to Rs. 5.After some correspondence the appellants applied to the Commissionerunder Chapter 3 of the Stamp Ordinance (section 29) for an adjudicationas to the proper stamp. The present appeal is from the Commissioner'sadjudication.
For the appellants it is contended that stamp duty should be calculatedon the basis that the consideration on the deed in question was Rs. 1,000,and that this was “ the purchase or consideration money ” expressedin the deed [vide Schedule A, part I., item 23 (1) (b) and that no furtherinquiry could be made by the Commissioner. That Acting Solicitor-General contends on the contrary that under section 29 (2) the Com-missioner was entitled to call for affidavit^ or other evidence “ necessaryto prove all the facts and circumstances affecting the chargeability of theinstrument with duty ”. He further argues that in any event the termsof the deed in question sufficiently showed that the consideration for thedeed was the sum of Rs. 42,500 for which credit was given, and the factthat this consideration appeared in the recitals and not in the. operativewords did not affect the question. He further urges that the considera-tion either wholly or in part was not a pecuniary consideration, and thataccordingly the basis of assessment should be the value of the property,under the later words of item 23 (1) (b), and that the value of the propertyis Rs. 42,500.
In expanding his argument the Acting Solicitor-General stated thatwhether we took the original order for credit or the subsequent arrange-ment made at the confirmation of the sale as operative, the result wouldbe the same. The original order for credit included an agreement to givecredit in the sum of Rs. 5,000, and even if we regarded the bid of Rs. 1,000as pecuniary consideration, the credit to be given for the balance of theRs. 5,000 was not pecuniary consideration. A similar result would bearrived at if we took into account the arrangement to give credit inRs. 42,500.
For the appellants it was contended that in any event the considera-tion was pecuniary, whether it consisted in the payment of money or thegiving of credit. It was further argued that the giving of credit inRs. 42,500 was an act of voluntary generosity, and could not be regardedas forming part of the consideration.
KEUNEjVIAN J.—Bartleet & Co. v. Commissioner of Stamps.
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As regards the question whether the Commissioner in arriving at hisadjudication was entitled to consider matters not expressed in the deed,the Acting Solicitor-General has referred us to two authorities. InGunewardene v. Gunasekera1 Bertram C.J. who has dealt very fully withthis point, has considered our own as well as English authorities, and hasheld that it is competent for the Commissioner of Stamps to insist uponbeing satisfied that the property which has been the subject-matter of adeed has been correctly valued. He rejected the argument that “dulystamped ” means “ stamped in accordance with what appears on the faceof the instrument ”. Although this is an obiter dictum, it is a valuableone. Again, in Crcos v. Attorney-GeneralJ this Court held that theCommissioner, if he was not satisfied with the consideration stated, wasentitled to call for affidavits, and to utilize the 'information so obtainedfor the purpose of making his adjudication.
In this particular case, however, I do not think it is necessary to resortto the affidavits, as in my opinion the recitals in the deed No. 170 sufficient-ly contain all the facts which are necessary for the determination of thisquestion of consideration. I am of opinion that we are entitled to takeinto account not only the operative clause but also the recitals for thispurpose. I do not think the affidavits add anything material to what iscontained in the deed in question.
Now, it is of great importance that the District Judge’s order of May21, 1934, confirming the sale has been annexed to the deed in questionand forms part of that deed. That order shows that before the; confirma-tion of the sale the Proctor for the plaintiffs quite properly pointed out toCourt that it had been discovered that the, primary mortgage had beendischarged, although the discharge had not been registered. The Proctorwent further and expressed his willingness to give credit for the appraisedvalue of Soranawallie estate, viz., Rs. 42,500. Can this be regarded asmerely an act of voluntary generosity on the part of the plaintiffs? Ithink not. As I said before, it was capable of influencing the DistrictJudge in his decision either to confirm the sale or to refuse the confirma-tion, and I have no doubt that this offer had an important effect in inducingthe District Judge to confirm the sale.
Can this offer be regarded as the consideration for the deed in question ?Now it has been held in Waharaka Investment Co., Ltd. v. Commissionerof Stamps3 that the word “ consideration ” in the Stamp Ordinance mustbe given the meaning it has in English law, where it has been definedthus :—“ a valuable consideration in the sense of the law may consist insome right, interest, profit or benefit accruing to one party, or some for-bearance, detriment, loss or responsibility given, suffered or undertakenby the other”.
The “ profit or benefit ” accruing to the defendant in D. C. Colombo,No. 52,344, was that his debt was to be diminished to the extent ofRs. 42,500. The Proctor’s statement that the plaintiffs were “ willing togive credit ” to that amount has, in my opinion, the important result of
– 1 Time# Law Rep. 00.2 32 -V. L. R. 78.
1 31 X. L. R. 260.
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KEUNEnIAN J.—Bartleet & Co.* v. Commissioner of Stamps.
influencing the District Judge to confirm the sale, and I do not think itwas open to the plaintiffs thereafter to resile from that position and torefuse to give credit to that amount. I think the position is equivalentto the plaintiffs having entered into an agreement with the defendantto give credit up to the amount of Rs. 42,500. This formed the realconsideration for the deed No. 170.
I am of opinion that my finding on this point is in keeping with section22 of the Stamp Ordinance. I hold that the property was transferredin consideration of the debt due to the plaintiffs to the extent of Rs. 42,500.I incline to the view that this is not a pecuniary consideration, but it isunnecessary, in view of this finding, to decide this point. If it is apecuniary consideration, it must be taken as the basis of the assessment.If it is not a pecuniary consideration, the value of the land must be takenas the basis, and that value has been held to be Rs. 42,500.
Counsel for the appellants asked for an opportunity to lead evidencethat the value of the half share of Soranawallie estate was not Rs. 42,500.but I think it is too late to grant his request. The valuation of Mr. Vander-smagt has not been challenged at any time before the Commissioner, andin fact it was accepted as “ the appraised value ” by the Proctor for theplaintiffs on May 21, 1934.
I am of opinion that the arrangement of May 21, 1934, superseded theagreement to give credit to the extent of Rs. 5,000, which was the footingon which the order for credit was issued. It is unnecessary in this caseto consider how the instrument in question had to be stamped, if that wasthe only arrangement in operation at the date of the deed. It is alsounnecessary to consider the further argument addressed to us, namely,that it was necessary in any event for the purposes of the assessment toadd to the price the amount of the primary mortgage bond, in view ofthe explanation to section 22 of the Stamp Ordinance. A number ofIndian authorities were quoted to us, which were not all in accord. It is.however, clear that at the date of deed No. 170 the primary mortgagebond had been discharged and nothing was due in respect of it.
The appeal fails and is dismissed with costs.de Kretser J.—I agree.
Appeal dismissed.