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PETITIONER: DUNCANS INDUSTRIES LTD.

       Vs.

RESPONDENT: STATE OF U.P.  & ORS.

DATE OF JUDGMENT:       03/12/1999

BENCH: N.S.Hegde, B.N.Kirpal

JUDGMENT:

     SANTOSH HEGDE, J.

     A  Deed  of  Conveyance dated 9.6.1994 executed  by  a company  named  ICI  India Ltd.  in favour  of  Chand  Chhap Fertilizer   and   Chemicals  Ltd.    when   presented   for registeration,  the  concerned Registrar referred  the  said document  under  Section  47-A(II) of the Stamp Act  to  the Collector complaining of the non compliance of Section 27 of the said Act and praying for proper valuation to be made and to  collect  the stamp duty and penalty payable on the  said document.   The Collector after inquiry levied a stamp  duty of Rs.37,01,26,832.50 and a penalty of Rs.30,53,167.50.  The said order came to be challenged by the aggrieved party in a revision  under Section 56 of the Stamp Act before the Chief Controlling  Revenue Authority in Stamp Revision No.36/95-96 and  the  said Revisional Authority as per his  order  dated 4.4.95  partly  allowed  the  challenge and so  far  as  the imposition  of penalty was concerned the same was set  aside and  slightly  modified  the  stamp   duty  levied  by   the Collector.   Consequent  to  the  order  of  the  Revisional Authority,  the appellant herein became liable to pay  stamp duty   on   the   said  Deed   of   Conveyance   amount   to Rs.36,68,08.887.50.   This order of the Revisional Authority came  to  be  challenged  before the  High  Court  in  Civil Misc.Writ Petition No.9170/95 which came to be dismissed and as  against  this order of the High Court of  Judicature  at Allahabad  dated  7.7.1997, the appellant has preferred  the above  civil  appeal.  Briefly stated, the facts leading  to the  controversy  in  question are as follows :   ICI  India Ltd.,  a  company registered under the Companies  Act,  1956 executed  an  agreement of sale dated 11.11.1993 wherein  it agreed  to  transfer on an as is where is basis and as  a going  concern  its fertilizer business  of  manufacturing, marketing,  distribution  and  sale of  urea  fertilizer  in favour   of  Chand  Chhap   Fertilizer  and  Chemicals  Ltd. (hereinafter  referred  to  as the CCFCL) also  a  company incorporated under the Companies Act, 1956 which company has since  been  renamed  as M/s.  Duncans  Industries  Limited, Fertilizer Division, Kanpur Nagar (the appellant herein) for a  total sale consideration of Rs.70 crores which was termed as  slump price in the agreement.  The said agreement also stated that the vendor would on the transfer date transfer the  fertilizer business by actual delivery of possession to

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the  CCFCL in respect of such of the estates and  properties mentioned  in  the  agreement  as   were  capable  of  being transferred  by  actual and/or constructive delivery and  in respect  of  the estates requiring transfer by execution  of necessary  documents vesting the title thereof in CCFCL, and it  was  further agreed and declared that the  ownership  in respect  of  the  assets  and properties  comprised  in  the fertilizer   business  to  be   transferred  as  per   the agreement, would be deemed to be vested in CCFCL on and from the  transfer date which, according to the agreement means 1.12.1993  or  such  other date as may be agreed to  by  and between ICI India and CCFCL.  The term fertilizer business was  defined  to  mean  and   include  the  following  other properties :

     (i)  Demised  land being plot nos.  2B and 5 and  the sub-divided  portion of plot No.2 demarcated and admeasuring in  the  aggregate an area of 243.4387 acres  equivalent  to 9,85,159.50  sq.  mtrs.  Being the unshaded portion shown on the  plan  annexed  hereto together with the  buildings  and structures  thereon forming part of the fertilizer  business as on the Transfer Date;

     (ii)  freehold  land and residential building  thereon with  the  name  Chandralok,  situate  at  plot  no.4/284, Parbati Bangla Road, Kanpur comprising 94 residential flats;

     (iii)  freehold land and residential building  thereon with the name Chandrakala, situate at Navsheel Apartments, 56 Cantonment, Kanpur comprising a Guest House on the ground floor and 3 residential flats on the first floor;

     (iv)  Plant  and machinery relating to the  Fertilizer business  including  the Ammonia Manufacturing  Plants,  the Captive  power  plant and all other movable  capital  assets including  vehicles,  furniture, air-conditioners,  stand-by systems,  pipelines, railway siding etc., as on the Transfer Date   and   wheresoever  situate,   all  of  which   relate exclusively  to the Fertilizer Business and are owned and in the  possession of ICI or are owned by ICI but in the lawful possession of any third party for and on behalf of ICI:

     Pursuant  to the said agreement, a deed of  conveyance dated  9.6.1994  was executed by the said ICI in  favour  of CCFCL,  on the presentation of the said Conveyance Deed  for registration.   The  Sub- Registrar made a reference to  the Collector  under  Section  47-A(2) of the  Stamp  Act,  1899 (hereinafter  referred to as the Act) stating that in  the document  under  reference  all the details  required  under Section  27  of the Act had not been given by  the  parties, hence  valuation and examination is essential and  requested the  Collector to determine the value as required under  the Act  and the Rules and to take action to realise the deficit stamp duty and penalty.  Consequent upon this reference made by the Sub- Registrar, the Collector after necessary inquiry as  per his order dated 20.2.1995 referred to above,  levied stamp  duty and penalty to which reference has already  been made.   Being aggrieved by the said order of the  Collector, the  appellant  preferred a revision petition to  the  Chief Controlling Revenue Authority who, as already stated, by his order  dated 9.6.1994 set aside the penalty and modified the duty  payable  to Rs.36,68,08,887.50 which order came to  be challenged before the High Court unsuccessfully.  Before the High Court the appellant had challenged the authority of the

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Sub-Registrar  to  make a reference to the Collector on  the ground  that there was no material to entertain any  reason to  believe that the market value of the property which was the subject-matter of the conveyance deed had not been truly set  forth in the instrument.  The High Court negatived  the said  contention  after  considering the  arguments  of  the appellant  in  detail,  and before us no argument  has  been advanced  on  this  score.  Mr.  M L Verma,  learned  senior counsel  appearing  for the appellant, urged that  the  High Court  committed  an error in coming to the conclusion  that the plant and machinery which were transferred by the vendor to  the appellant, were immovable properties, attracting the provisions  of  the  Stamp  Act and at any  rate  under  the conveyance  deed dated 9.6.1994, the vendor had not conveyed any  title  to  the appellant in regard to these  plant  and machinery.   He also contended that the High Court erred  in relying  upon paragraphs 10 and 11 of the conveyance deed to come to the conclusion that the plant and machinery were the subject-  matter  of the said deed.  He contended  that  the said  paragraphs  merely  made  a reference  to  an  earlier instrument and mere reference to some earlier transaction in a document does not amount to incorporation in that document of  the terms and conditions relating thereto.  It was  also contended  that  the  High  Court failed to  look  into  the intention  of  the  parties  who   by  an  agreement   dated 11.11.1993  had treated the plant and machinery as  movables and  have  delivered  possession  of   the  said  plant  and machinery  as movables on 11.12.1993.  Hence, the said plant and machinery is neither immovable property nor the property which  has  been  transferred  by  virtue  of  the  deed  of conveyance dated 9.6.1994.  Therefore, the value of the said plant  and  machinery  could  not   have  been  taken   into consideration for the purpose of arriving at the correct and true  value  of  the  property conveyed under  the  deed  of conveyance.   He also contended that the valuation in regard to  the  plant and machinery made by the authorities and  as accepted by the High Court is incorrect and contrary to law. Mr.   Gopal Subramaniam, learned senior counsel appearing on behalf  of the State, in reply, contended that the  document dated   11.11.1993  (agreement  of   sale  and  transfer  of fertilizer  business)  by  ICI  in   favour  of  the   CCFCL contemplated  an  agreement  to  transfer  the  business  of manufacturing,  marketing,  distribution  and sale  of  urea fertilizer  that  is  fertilizer   business  itself  with  a stipulation  that  the first stream, second stream  and  the third  stream  urea  manufacturing  plants as  well  as  the Ammonia  manufacturing plants would also be transferred as a part  of the transfer of fertilizer business of the ICI as a going  concern.   He  also contended that a reading  of  the document at Para 1(e)(i) which defines fertilizer business clearly  shows  that  the  intention of the  vendor  was  to transfer  all  properties  that   comprised  the  fertiliser business.  He also drew our attention to the observations of the  High  Court which had in specific terms noted that  the learned  counsel  representing the appellant before it,  had not   seriously  challenged  the   valuation  made  by   the authorities,  hence he contended that the challenge made  to the  valuation  by  the appellant before us  should  not  be coutenanced.   We have heard learned counsel for the parties and  the  question  that arises for our consideration  is  : whether by the conveyance deed dated 9.6.1994, the plant and machinery  were  also transferred;  and if so,  whether  the High  Court was right in accepting the valuation as made  by the  authorities  for  the purpose of stamp duty  payable  ? Considering  the  question whether the plant & machinery  in

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the  instant case can be construed as immovable property  or not,  the  High  Court  came  to  the  conclusion  that  the machineries   which  formed  the   fertilizer  plant,   were permanently  embedded  in  the earth with  an  intention  of running  the  fertilizer factory and while  embedding  these machineries the intention of the party was not to remove the same  for  the purpose of any sale of the same either  as  a part  of a machinery or scrap and in the very nature of  the user  of  these  machineries, it was  necessary  that  these machineries  be permanently fixed to the ground.  Therefore, it  came  to  the  conclusion that  these  machineries  were immovable  property  which were permanently attached to  the land  in  question.   While coming to  this  conclusion  the learned Judge relied upon the observations found in the case of  Reynolds  v.   Ashby & Son (1904 AC  466)  and  Official Liquidator v.  Sri Krishna Deo & Ors.  (AIR 1959 All.  247). We  are inclined to agree with the above finding of the High Court  that the plant and machinery in the instant case  are immovable  properties.   The  question whether  a  machinery which  is  embedded in the earth is movable property  or  an immovable property, depends upon the facts and circumstances of  each case.  Primarily, the court will have to take  into consideration  the intention of the parties when it  decided to  embed the machinery whether such embedment was  intended to  be  temporary  or permanent.  A careful perusal  of  the agreement  of  sale and the conveyance deed along  with  the attendant  circumstances  and taking into consideration  the nature  of  machineries  involved  clearly  shows  that  the machineries  which  have  been  embedded  in  the  earth  to constitute  a  fertiliser  plant in the  instant  case,  are definitely  embedded permanently with a view to utilise  the same as a fertiliser plant.  The description of the machines as  seen in the Schedule attached to the deed of  conveyance also  shows  without  any  doubt   that  they  were  set  up permanently in the land in question with a view to operate a fertilizer  plant and the same was not embedded to dismantle and  remove the same for the purpose of sale as machinery at any  point  of time.  The facts as could be found also  show that  the purpose for which these machines were embedded was to  use  the  plant  as a factory  for  the  manufacture  of fertiliser  at various stages of its production.  Hence, the contention that these machines should be treated as movables cannot  be accepted.  Nor can it be said that the plant  and machinery  could  have  been   transferred  by  delivery  of possession  on  any date prior to the date of conveyance  of the  title  to  the  land.  Mr.  Verma, in  support  of  his contention   that  the  machineries  in  question  are   not immovable  properties, relied on a judgment of this Court in Sirpur  Paper  Mills Ltd.  v.  Collector of Central  Excise, Hyderabad  (1998  1 SCC 400).  In the said case, this  Court while   considering  the  leviability  of  excise  duty   on paper-making machines, based on the facts of that case, came to the conclusion that the machineries involved in that case did  not  constitute immovable property.  As  stated  above, whether  a machinery embedded in the earth can be treated as movable  or  immovable property depends upon the  facts  and circumstances  of each case.  The Court considering the said question  will have to take into consideration the intention of  the  parties which embedded the machinery and  also  the intention  of  the  parties   who  intend  alienating  those machinery.   In the case cited by Mr.  Verma, this Court  in para 4 of the judgment had observed thus :  In view of this finding  of  fact,  it  is not possible  to  hold  that  the machinery  assembled  and  erected by the appellant  at  its factory site was immovable property as something attached to

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earth  like a building or a tree.  The Tribunal has  pointed out  that  it  was  for the operational  efficiency  of  the machine  that  it was attached to earth.  If  the  appellant wanted  to  sell  the paper-making machine it  could  always remove  it  from  its  base and sell  it."  From  the  above observations,  it  is clear that this Court has decided  the issue  in  that  case based on the facts  and  circumstances pertaining  to  that case hence the same will not  help  the appellant  in  supporting its contention in this case  where after   perusing   the  documetns    and   other   attending circumstances  available  in this case, we have come to  the conclusion  that the plant and machinery in this case cannot but  be described as an immovable property.  Hence, we agree with  the  High Court on this point.  The next question  for consideration  is whether the vendor did transfer the  title of  the  plant  and  machinery in the instant  case  by  the conveyance   deed  dated  9.6.1994.    Here  again,  it   is imperative  to  ascertain the intention of the parties  from the  material  available on record.  While ascertaining  the intention of the parties, we cannot preclude the contents of the  agreement  pursuant  to which the  conveyance  deed  in question  has come into existence.  We have noticed that  as per  the agreement it is clear what was agreed to be sold is the  entire  business of fertilizer on an as is  where  is basis  including  the  land,  building  thereon,  plant  and machinery  relating to fertilizer business  description  of which  is  found in the definition of the  term  fertilizer business  in the agreement itself which has been  extracted by us hereinabove.  It is not the case of the appellant when it  contends that the possession of plant and machinery  was handed  over separately to the appellant by the vendor  that these   machineries  were  dismantled   and  given  to   the appellant,  nor is it possible to visualise from the  nature of  the plant that is involved in the instant case that such a  possession de hors the land could be given by the  vendor to  the  appellant.   It is obviously to reduce  the  market value  of the property the document in question is attempted to  be drafted as a Conveyance Deed regarding the land only. The  appellant  had embarked upon a methodology by which  it purported  to  transfer  the  possession of  the  plant  and machinery separately and is contending now that this handing over  possession of the machinery is de hors the  conveyance deed.   We are not convinced with this argument.  Apart from the  recitals in the agreement of sale, it is clear from the recitals in the conveyance deed itself that what is conveyed under  the deed dated 9.6.1994 is not only the land but  the entire fertilizer business including plant and machinery.  A perusal of Clauses 10, 11 and 13 of the said deed shows that it  is the fertilizer factory which the vendor had agreed to transfer  along with its business as a going concern and  to complete  the same the conveyance deed in question was being executed.   There  is  implicit  reference to  the  sale  of fertilizer factory as a going concern in the conveyance deed itself.   That  apart, the inclusion of Schedule III to  the conveyance  deed  wherein  a Plan  delineating  the  various machineries comprising of the fertilizer factory is appended shows  that it is the land with standing fertilizer  factory which is being conveyed under the deed, though an attempt to camouflage  this  part of the property sold is made  in  the recitals,  in  our opinion, the parties concerned  have  not been  able  to successfully do so.  While  considering  this question  of  transfer of plant and machinery being part  of the  conveyance deed or not, reliance can also be placed  on the   application   filed  by   the  appellant  before   the appropriate  authority of the Income-Tax Department  wherein

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while  disclosing the market value of the immovable property sought to be transferred the appellant himself has mentioned the  value  of the property so transferred as  Rs.70  crores which  is  the figure found in the agreement of  sale  which agreement  includes  the sale of plant and  machinery  along with  the  land.   A certificate issued by  the  appropriate authority  under  Section  269 UL(3) of the Income  Tax  Act evidences  this  fact.  In the said application made by  the appellant  for obtaining the said certificate, the appellant has  in  specific terms at serial No.  (iv) of the  Schedule included  plant  and  machinery, railway sliding  and  other immovable  properties  as  part of the  fertilizer  business undertaking.   It  is  also  found  on  record  that  by   a supplementary  affidavit  dated  8.9.1993 filed  before  the Income  Tax  department  while filing Form  37-I  prescribed under  the  Income-tax Rules the petitioner has again  shown all  these plant and machinery along with the Plan which  is now  attached to the conveyance deed as part of the property that  is  being  conveyed.  Merely because in  some  of  the relevant paragraphs of the Conveyance Deed the appellant has tried  to  highlight the fact that what is being sold  under the conveyance deed is only the land and a reference is made in regard to the handing over of possession of the machinery on  an  earlier date does not ipso facto establish that  the vendor  did not convey the title of the plant and  machinery under  the conveyance deed dated 9.6.1994.  Learned  counsel for  the  appellant  has  placed  for  our  consideration  a judgment  of  this Court in the case of Himalaya  House  Co. Ltd.,  Bombay  v.  The Chief Controlling  Revenue  Authority (1972  1  SCC  726) to contend that a mere reference  to  an earlier  agreement  does not amount to incorporation of  the terms  and  conditions  of  an earlier  transaction  or  the intention  of the parties.  We have carefully considered the said judgment and, in our opinion, that judgment does not in any  manner lay down the law in absolute terms that a  court cannot  look  into  prior agreements while  considering  the intention  of  the parties for finding out what actually  is the  property  that  is  conveyed   under  the  deed   under consideration.  It is again based on facts of that case that this Court came to the conclusion therein that the so called terms  and  conditions  which  were   found  in  an  earlier agreement  were  not  intended  to be  incorporated  in  the subsequent  document.   This  is clear  from  the  following observations  of this Court appearing in Para 10 of the said judgment  :     From the language used in  the  Assignment Deed,  it is not possible to come to the conclusion that the terms  and  conditions of the earlier transaction have  been made  a  part of that Deed.  Further barring one  particular agreement,  other  agreements  were not  before  the  Court. Therefore,  it  is not possible to know what the  terms  and conditions  of those agreements were.  Before the terms  and conditions  of  an  agreement  can  be  said  to  have  been incorporated  into  another document, the same must  clearly show  that the parties thereto intended to incorporate them. No such intention is available in this case.

     Hence  we  are of the opinion that this judgment  also does  not  help the appellant in his attempt to convince  us that  we should not take into consideration the recitals  in the   agreement  dated  11.11.93   while   considering   the conveyance  deed of 9.6.1994.  For the reasons stated above, we  are of the considered opinion that the vendor as per the conveyance deed dated 9.6.1994 has conveyed the title it had not  only in regard to the land in question but also to  the entire  fertilizer  business in as is where  is  condition

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including the plant and machinery standing on the said land. Therefore,  the authorities below were totally justified  in taking  into  consideration  the value of  these  plant  and machineries along with the value of the land for the purpose of  the Act.  The next point to be considered is whether the High  Court was justified in accepting the valuation made by the  authorities in regard to the plant and machinery.  Here we  must  note that in the judgment of the High  Court,  the learned Judge has noted as follows :   In fact the finding on  valuation  of  plant  and machinery  was  not  seriously challenged  by  Shri  Shanti Bhushan during  the  course  of argument  and, in my opinion, rightly.  It is based on this approach  of the learned counsel appearing for the appellant that  the  High  Court  did  not go  into  the  question  of valuation.   However,  since  the learned  counsel  for  the appellant did question the correctness of the valuation made by  the  authorities  below,  we have  heard  the  arguments addressed  in this regard.  We have also heard the arguments on  behalf  of  the State on this score.   The  question  of valuation  is basically a question of fact and this Court is normally  reluctant to interfere with the finding on such  a question  of  fact  if it is based on relevant  material  on record.   The  main objection of the appellant in regard  to the  valuation  arrived  at by the authorities is  that  the Collector   originally  constituted  an  Enquiry   Committee consisting    of    the     Assistant   Inspector    General (Registration), General Manager, District Industries Centre, Sub-Registrar  and  the  Tehsildar.  After  the  report  was submitted  by the Sub-Committee for the reasons of its  own, the  Collector  reconstituted the said Enquiry Committee  by substituting   Additional  City  Magistrate   in  place   of Sub-Registrar.   This substitution of the Enquiry Committee, according to the appellant, is without authority of law.  We are  unable  to accept this contention.  Constitution of  an Enquiry  Committee  by the Collector is for the  purpose  of finding  out the true market value of the property  conveyed under  the  Deed.  In this process, the Collector has  every authority  in law to take assistance from such source as  is available,   even   if  it   amounts  to   constituting   or reconstituting  more  than one Committee.  That  apart,  the appellant  has not been able to establish any prejudice that is  caused  to  it by reconstitution of  the  Expert/Enquiry Committee.   We have perused that part of the report of  the Collector  in which he has discussed in extenso the  various materials  that were available before the Committee and also the  report  of  the valuers appointed for  the  purpose  of finding  out  the value of the plant and  machinery.   These valuers  are  technical persons who have while  valuing  the plant  and machinery taken into consideration all aspects of valuation  including  the life of the plant  and  machinery. The valuations made both by the Enquiry Committee as well as the  valuers  are mostly based on the documents produced  by the  appellant itself.  Hence, we cannot accept the argument that  the valuation accepted by the Collector and  confirmed by  the  revisional  authority is either not  based  on  any material  or a finding arrived at arbitrarily.  Once we  are convinced that the method adopted by the authorities for the purpose  of  valuation is based on relevant  materials  then this  Court will not interfere with such a finding of  fact. That  apart,  as  observed above, even the counsel  for  the appellant  before the High Court did not seriously challenge the  valuation and as emphasised by the High Court,  rightly so.   Therefore,  we  do  not find any  force  in  the  last contention  of  the appellant also.  For the reasons  stated above,  this  appeal  fails and the same is  dismissed  with

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costs.