010-SLLR-SLLR-2008-V-1-SEYLAN-BANK-LTD-v.-SAMDO-MACKY-SPORTSWEAR-PVT-LTD.-AND-ANOTHER.pdf

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within section 5 of the Stamp Duty Act, as amended, or (ii) notcontemplated by the Stamp Act altogether.
The type of “document” for which stamps must be affixed isdefined in section 71 of the aforementioned Act and includes aBond, and the question arises as to whether a Guarantee Bond isalso included as a “Bond” which has been referred to by theaforesaid regulations prescribed by the Minister of Finance andreferred to in subsection 7(a).
Needless to say, as the Stamp Duty Act imposes a pecuniaryburden on persons, it has be subject to strict construction. There isno room for intention, construction or equity about duites ortaxations. The explicit language of the Statute must be the yardstick which guides the imposition of the stamp duty, andassumption and presumptions must be strictly excluded. If theimposition of duty upon a particular instrument is not expresslycontemplated by the simple reading of the language of the statutethen the benefit of the exclusion must necessarily be afforded.
The simple meaning of subsection 7(a), finds clarity in both theEnglish version referred to above, and more so in the Sinhaleseedition of the Gazette which reads as follows:
SC Seylan Bank Ltd v Samdo Macky Sportswear (Pvt.) Ltd. and others 101
(Shirani Tilakawardane, J )
executed a certain sum of money and promises to pay the latter thesame with interest on demand and binds all his property generallyas security for the debt…”
“Bond” is defined in Stroud’s Judicial Dictionary of Words andPhrases as “an obligation by deed.” (3rd edition, Volume HI, at p.318)
In the case of a deed it is essential that a deed must benecessarily be under seal. A “deed” is defined in Wharton’s LawLexicon to mean “a formal document on paper or parchment dulysigned, sealed and delivered” (14th Edition, at p. 308). A documentwhich is not under seal cannot be a deed.
A bond in the context of the Stamp Duty Act is an instrumentwhere the primary or principal covenant is to create an obligation topay money, defeasible on the happening of the specified event andbinds his property, as security for the debt. In the case of DocumentP9, the terms providing for guarantor liability are not the principalcovenant between the parties, but merely a "condition subsequent”to a primary obligation. In other words, the obligation to pay is in theform of a penalty that comes into operation if, and only if, theprincipal obligation of the Principal Debtor is violated. Had thePrincipal Debtors complied with the principal convenant to pay,then the Guarantors’ obligations to pay would never have arisen.The arrangement contemplated by Document P9 is merely atransaction where the obligation to pay money arises as aconsequence of the commission of breach of the Principal Debtor'sobligation.
Inherent in the monetary obligation of a “bond” contemplated bysubsection 7(a) is that such obligation is for an ascertained sum ofmoney. Such a requirement is a necessity, given that the value ofthe stamp duty to be paid depends upon the slab of the amount orvalue secured. However, when Document P9 was executed, nofixed amount of money could be said to have been agreed aspayable, as the Guarantors’ respective obligations to pay inconnection with the loans, in fact, only arose upon the breach of therespective principal convenants to pay, with the owed amountsnecessarily determined only after the respective breaches actuallyoccurred. Given the inherently indeterminate nature of the
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Guarantors’ respective payment obligations under Document P9,such instrument cannot be construed as the type of Bond referredto in subsection 7(a).
In construing the meaning of the word Bond in the context ofsubsection 7(a), the accrual of the obligation to pay money shouldprecede the performance or non-performance of the specified actof payment. This is an essential distinction as even though theperformance or non-performance of the specified act is incumbentupon the obligor, the obligation to pay does not precede theperformance or non performance of the Act. Document P9 in thiscontext is just an agreement to pay and cannot be considered as abond as envisaged in terms of subsection 7(a) referred to above.Document P9 is merely an agreement to pay with consequencesfor default, with no attestation and no obligation by Deed. As such,Document P9 does not warrant stamp duty as a Bond under theStamp Duty Regulations.
The Learned High Court Judge arrived at his determination, itappears, solely on the finding that he was bound by the decisionin the case of Ceylease Financial Services Limited v Sriyalatha
and anotheri2) (hereinafter referred to as the "Ceylease Case"). Inthat case Justice Bandaranaike considered section 7 of the StampDuty Regulations in the context of a document entitled Guaranteeand Indemnity and executed in connection with a lease agreement,and held the document to be one contemplated by section 7. Theaforementioned case was used as legal authority by the LearnedJudge of the Commercial High Court, in order to substantiate thefact that Document P9 would also come within section 7 of theregulations of the Stamp duty Act, as amended.
However, the decision in the Ceylease Case is inappliable to,and therefore not determinative of, the present matter at hand asthe facts of the Ceylease Case are clearly distinguishable in a verymaterial and relevant manner from the facts of the present actionsbefore this Court . The Ceylease Case is distinguishable as thefinance company in that case had entered into a bond with thesecurity of the property – more particularly, a vehicle – that wasmortgaged and which could be considered movable property. Nosuch arrangements exist in the current actions that suggest their
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inclusion within section 7 of the Stamp Duty Regulations.
Accordingly this Court sets aside the said Commercial HighCourt Order dated 26.th July 2007 appeal is allowed no costs.
S.N. SILVA, C.J.-I agree.
SOMAWANSA, J.-I agree.
Appeal allowed.