REPORTABLE  

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5876 OF 2009

State of Uttaranchal  (now known as State of Uttarakhand) & Ors.        ……  Appellants

   Vs.

M/s. Khurana Brothers          ……  Respondent

WITH

CIVIL APPEAL NO. 5878 OF 2009

CIVIL APPEAL NO. 5879 OF 2009

CIVIL APPEAL NO. 5880 OF 2009

JUDGMENT

R.M. LODHA, J.  

These  four  appeals  at  the  instance  of  the  State  of  

Uttaranchal  and the Officers of  its  Forest  Department  are directed  

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against the judgment dated December 27, 2007 passed by the High  

Court of Uttarakhand whereby the Division Bench allowed the review  

petitions filed by present respondents (writ petitioners) and reviewed  

its earlier judgment dated April 13, 2004 and thereby allowed the writ  

petitions filed by the writ petitioners holding that they were not liable  

to pay stamp duty on the documents pertaining to contract of sale for  

crude resin.  Since the facts and documents involved in this group of  

appeals are identical, for convenience, we shall refer to  the facts and  

documents in Civil Appeal No. 5876 of 2009. The controversy arises  

in this way.

2. The  Divisional  Forest  Officer,  Nainital  Forest  Range,  

Nainital  notified public auction of resin at Bhuwali Forest Rest House  

on  March  24,  2001.  The  writ  petitioner  (Khurana  Brothers)  

participated in that public auction. Its bid in the sum of Rs. 3,90,000/-  

being the highest bid was accepted by  the Divisional Forest Officer,  

Nainital and the formal contract of sale for crude resin was entered  

into between the competent authority of the State Government in the  

name of the Governor  and the writ  petitioner on March 24, 2001.  

Subsequently a letter  was issued on April  7,  2001 asking the writ  

petitioner to lift the contracted resin within 60 days therefrom.  

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3. The contract of sale for crude resin between the parties  

reads as follows :

               “FORM OF CONTRACT OF CRUDE RESIN

Lot No. 7 to 10/2001

Value  of  the  Deed  Rs.  3,90,000.00 (Rupees  Three  Lakh, Ninety Thousand Only)

This indenture made this 24th day of March 2001  between  the  Governor  of  the  Uttaranchal  (hereinafter  called  “Seller”  of  the  one  part  and  Shri  Khurana  Brothers,  Rishikesh  (hereinafter  called  the  “Buyer”  which expression includes its executors, administrators,  successors and assigns) of the other part witnessed as  follows :

The seller in considerations of payment to be made by  the buyer as hereinafter provided at the rate of 1950.00  (Rupees One Thousand Nine Hundred Fifty Only) per  quintal  calculated  at  per  quintal  naked  (without  container) and in addition the buyer shall have to pay  sale tax on the total sale value of the resin 79% or the  rate  applicable  at  the  time  of  sale  subject  to  the  following terms  and conditions :

(A) Approximately  1160  (One  Thousand  One  Hundred Sixty) tins 200 (two Hundred) quintals of crude  resin (net weight) will be delivered at resin depot Sultan  Nagri. The quantity may increase or decrease by 10% &  the  buyer  will  have  to  accept  the  quantity  made  available by the seller. The weight of resin will  be the  same as has been recorded in the books of the seller.  The seller reserves the right to reject the claim of the  purchaser for weighment at the time of taking delivery.   

(B) The resin sold will remain at purchaser’s risk from  date of acceptance of his bid and the seller will not be  

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responsible for any loss and damage which may occur  thereto from any cause whatsoever.

(C) All  the  resin  will  have  to  be  removed  by  the  purchaser within 60 days of the date of approval of the  sale. It will be removed in not more than 60 installments  as follows :

1. Within Days of approval of sale. 2. Within Days of approval of sale. 3. Within Days of approval of sale. 4. Within Days of approval of sale.

The purchaser can remove resin only with the written  permission  of  the  Divisional  Forest  Officer,  Nainital  Forest Division, Nainital and on payment is advance of  the full cost and sale tax of resin.

The seller does not take any responsibility for the quality  of resin contained in the tins and will not give any resin  in exchange.

2. The amount of sale price of the lot calculated on the  basis of per quintal bid at the time of auction shall be  payable by the buyer irrespective of the fact whether he  lifts the material or not.

3. Any resin or tin left within the depot after the last  date  of  lifting  shall  vest  in  the  Govt.  and  shall  be  confiscated and refund in lieu of such resin or tins shall  be due to the buyer.

4. No crude resin will be exported by the buyer from  the  resin  depot  specified  in  clause  I  accept  by  such  routes and via such chaukies as may be decided upon  and recorded in written by the Forest Office. The resin  tins may be counted and weighted by any Forest Officer  at any time during transit.

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5.  The  buyer  shall  furnish  the  Forest  Officer  in  writing with the names of all the agents and servants it  proposes employ for it  before they are employed and  the  Forest  Officer  shall  be  at  liberty  to  forbid  the  employment  of  any  person  whom  he  may  consider  undesirable.

6. The buyer shall not drag the resin tins from the  Sultan Nagri Depot.

7. In the event of a breach of any of the conditions  of this indenture by the buyer or by agents or servants  the M/s. Khurana Brothers, Rishikesh shall be liable  to  pay  of  fine  which  may  extend  to  fifty  rupees  at  the  discretion of the Forest Officer for each such breach.

8. In the event of breach of this agreement or of any  forest  law  or  rules  the  export  of  the  buyer  may  be  stopped under the orders of the Forest Office, pending  any investigation and decision of the case.

9. Nothing in this indenture shall be held to exempt  the  buyer  or  its  agents  or  servants  from  liability  to  criminal proceedings for breach of the forest laws and  rules committed by it or them.

10. In  the  event  of  dispute  concerning  any  of  the  terms of this indenture the same shall be referred to the  sole  arbitrator  appointed  by the  Chief  Conservator  of  Forest,  Uttaranchal  whose decision shall  be final  and  binding the parties.

11. The seller has received from the buyer the sum of  (Rupees 39,000.00 Thirty Nine thousand) only receipt of  which is hereby acknowledged as security for the due  fulfillment of all the covenants herein before contained.  The Forest Officer in empowered to deduct from such  security money any sum, which may be due from the  buyer whether in respect of any of the price payable by  it or any fine or liability incurred by it under the provision  of this indenture. The security money or such balance  

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thereof  as  may  be  after  making  the  deductions  aforementioned  will  be  returned  to  the  buyer  on  the  expiration or sooner determination of this agreement as  after the Forest Officer shall have satisfied himself that  all  the  terms  of  this  indenture  have  been  duly  and  faithfully carried out by the buyer.

12. The stamp duty payable on this deed and the fee  for registration of this deed shall be borne by the buyer.

13. Any tax imposed by any law on the present sale  shall be payable by the buyer.

14. Any sum of money, either of sale consideration or  fine or other kind of due, payable by the buyer under  this deed to the seller shall be recoverable as arrears of  land revenue.

In witness where of the Conservator of Forest, Southern  Kumaon Circle, Uttaranchal on behalf of the Governor  of  the  Uttaranchal  and  the  M/s.  Khurana  Brothers,  Gopal Mandir, Rishikesh aforesaid have there to set the  in signature.

Sd/- BUYER : CONSERVATOR OF FOREST  Khurana Brothers”

4. The letter issued by the Divisional Forest Officer to  

the writ petitioner on April 7, 2001 is as follows :

“Office of Divisional Forest Officer Nainital Forest Division Nainital

     Letter No. 4566/39-8.9 Dated Nainital 7-4-2001

To, Khurana Brothers Rishikesh

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Gopal Mandir Rishikesh

Subject  :  Acceptance  of  Lisa  lots  purchased  on  24-3-2001  in  the  public auction held at Bhuwali Forest Rest House.

Ref : Letter No. 2955/39-8 Dated 31-0-2001 of forest conservator,  southern Kumaun circle, Uttaranchal Nainital.

Sir,

The Bid given by you in the public  auction held at  Bhuwali  Forest  Rest  House  on  24-3-2001  for  the  following  resin  lot  is  accepted in your name.

Name  of  Division

Lot No. Resin PURCHASED Tin No.   Quantity                  In               Quintal

BID Accepted  Per QTL. In rupees

Total  price in  rupees

Name  of  Depot  from  where  is to be  lifted

1 2 3 4 5 6 7 East  Alimorah

314 to  

319/2001

1740 295

300

1956/- 586800 Sultan  

Nagri

You are therefore to arrange for lifting of aforesaid resin within  60  days  of  the  date  of  issuance  of  the  letter  after  having  the  following  conditions  of  auction  notice  completed  by  depositing  in  advance with the Depot, Sultan Nagri Kathgodam.

1.  Submitting challan of the total amount of purchased resin in  favour of concerned Divisional Forest officer.

2. Submitting certified the photocopy of certificate of registration  with  department  as  required  for  registration  in  accordance  with  section 10 of Uttar Pradesh Rosin and other Forest produce (Trade  Regulation) Act, 1976.

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3. Payment of total price of Rosin & Trade tax at the prevailing  rates at the date of auction shall be compulsory prior to lifting the  resin.

4. The  details  of  resin  obtained  from  all  sources  along  with  details concerning utilization fuel and further details of payment of  Trade tax on the products manufactured from previously obtained  rosin prior to lifting the rosin be submitted with Depot officer Rosin  Depot.

5. Stamp Duty shall be payable on such purchase as per rules  and Government order.

6. The contribution for District  Board at the rate of Rs. 5/- per  quintal on the purchased rosin shall be payable.

7. Prescribed Income tax and surcharge according to rules shall  be paid.

      Sd/- Divisional Forest Officer Nainital Forest Division”   

5. The short question that arises for consideration is whether  

the above contract of  sale for crude resin amounts to ‘conveyance’  

as defined under Section 2(10) of the Indian Stamp Act, 1899 (for  

short, ‘the Stamp Act’) and, if answer is in the affirmative,  whether  

stamp duty is chargeable thereon. In order to answer the aforesaid  

question,  the true and real  meaning of  the document needs to be  

ascertained.   When we look at the contract, it would be seen that in  

consideration  of  the  price  stated  in  the  contract,  the  State  

Government agreed   to deliver the specified quantity of the crude  

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resin  to  the  writ  petitioner  (‘purchaser’).  The  parties  agreed  that  

quantity may increase or decrease by 10% and the resin will have to  

be  removed  by  the  purchaser  within  60  days  from  the  date  of  

approval  of  sale   and  it  will  not  be  removed  in  more  than   60  

installments.   As per the terms of the contract,  the purchaser was  

required  to  pay  the  amount  of  sale  price  irrespective  of  the  fact  

whether the contracted quantity of resin  was lifted by it or not.  By a  

subsequent communication dated April 7, 2001, the purchaser was  

informed of the acceptance of the bid for the stated resin lot/s  in its  

favour and it was asked to arrange for lifting of the same within 60  

days of the issuance of that letter.  

6. Section  4  of  the  Sale  of  Goods  Act,  1930  reads  as  

follows:  

“S.4. Sale and agreement to sell. –  (1)  A contract of  sale of goods is a contract whereby the seller transfers  or agrees to transfer the property in goods to the buyer  for a price. There may be a contract of sale between  one part-owner and another.  

(2) A contract of sale may be absolute or conditional.

(3) Where under a contract of sale the property in the  goods is  transferred from the seller  to the buyer,  the  contract is called a sale, but where the transfer of the  property in the goods is to take place at a future time or  subject to some condition thereafter to be fulfilled, the  contract is called an agreement to sell.

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(4) An agreement to sell becomes a sale when the time  elapses or the conditions are fulfilled subject  to which  the property in the goods is to be transferred.”

7. The essence of sale is the transfer of the property in a  

thing from one person to another for a price.  As per Section 4, the  

contract of sale includes an agreement to sell.  It is not necessary  

that contract of sale must be absolute.  It may be conditional as well.  

The essential feature that distinguishes the contract of sale from an  

agreement  to  sell  is  that  in  a contract  of  sale the property  in  the  

goods is transferred from the seller to the buyer immediately whereas  

in an agreement to sell property is transferred on a future date/dates.  

An agreement to sell becomes a sale on fulfillment of the conditions  

or when the time provided in the agreement elapses.  

8. Section 2(10) of the Stamp Act defines ‘conveyance’ as  

follows :

“S.2(10).  –  ‘Conveyance’.—‘Conveyance’  includes  a  conveyance  on  sale  and  every  instrument  by  which  property, whether movable or immovable, is transferred  inter  vivos,  and  which  is  not  otherwise  specifically  provided for by Schedule I, Schedule I-A or Schedule I- B, as the case may be;

Explanation …….”.            

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9. Section 2(14)  as was existing at the relevant time prior to  

amendment vide U.P. Act 38 of 2001 reads as  follows:

“S. 2(14). — “instrument” includes every document by  which any right or liability is, or purports to be, created,  transferred,  limited,  extended,  extinguished  or  recorded.”

10. Section  3  is  the  charging  Section.   To  the  extent  it  is  

relevant, it  reads as follows:

“S.3.  Instruments chargeable with duty. – Subject to  the provisions of this Act and the exemptions contained  in  Schedule  I,  the  following  instruments  shall  be  chargeable  with  duty  of  the  amount  indicated  in  that  Schedule as the proper duty therefor, respectively, that  is to say—

(a)   . . . . . . . . . . . .

                  (b)         . . . . . . . . . . ..                      (c)         . . . . . . . . . . . .

Provided  that,  except  as  otherwise  expressly  provided  in  this  Act,  and  notwithstanding  anything  contained in Clause (a), (b) or (c ) of this section, or in  Schedule  I  or  I-A,  the  following  instruments  shall,  subject to the exemptions contained in Schedule I-A or  I-B, be chargeable with duty of the amount indicated in  Schedule  I-A  or  I-B  or  as  the  proper  duty  therefore,  respectively, that is to say-

                   (aa)  every instrument mentioned in Schedule I-A or I-

B, which,  not having been previously executed  by any person, was executed in Uttar Pradesh :

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(i) . . . . . . . . . . .  

(ii) in the case of instruments mentioned in   Schedule  I-B,  on  or  after  the  date  on  

which the  U.P.  Stamp  (Amendment)  act,  1952 comes into force:

 (bb)   every instrument mentioned in Schedule I-A or I-

B, which, not having been previously executed by  any person, was executed out of Uttar Pradesh :

(i)  . . . . . . . . . . . . .

(ii) in the case of instruments mentioned in   Schedule  I-B,  on  or  after  the  date  on  

which the  U.P.  Stamp (Amendment)  Act,  1952 comes  into  force  and  relates  to  any   

property situated,  or  any  matter  or  thing done or to be done in Uttar Pradesh, and  is received in Uttar Pradesh :

Provided also that no duty shall be chargeable in  respect of :

(i)  . . . . . . . . . . . . . .  

(ii)  . . . . . . . . . . . . . .

Explanation.—Where  the  amount  of  duty  prescribed in  Schedule  I-B contains  any fraction of  a  rupee,  below twenty  five  paise,  or  above  twenty  five  paise  but  below  fifty  paise,  or  above  fifty  paise  but  below seventy five paise, or above seventy five paise  but  below  one  rupee,  the  proper  duty  shall  be  an  amount  rounded  off  to  the  next  higher  quarter  of  a  rupee, as hereinafter appearing in the said Schedule.”   

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11. Schedule I –B appended to the Stamp Act provides for  

the  rates  of  stamp  duty  in  respect  of  instruments  described  

thereunder. Article 23 thereof provides for rate of stamp duty on the  

‘conveyance’ as defined by Section 2(10) which are not exempted  

under Article 62.  

Description of instrument   Proper stamp duty  23.  Conveyance  –  as  defined  by  

Section 2(10) not being a Transfer  charged  or  exempted  under  No.  62 –

         (a)   . . . . . . . .

         (b)  If  relating  to  moveable  property –  

                   [See item 136 Appendix II]  where the amount or value  of the consideration of such  conveyance,  as  set  forth  therein,  does  not  exceed  Rs.1000

                    and  for every Rs.1000 or  part  thereof  in  excess  of  Rs.1,000

Exemption           Assignment of a copy-right for  

musical  works  by  resident  of  or  first published in India  

Explanation :           For the purposes of this Article, in  

the case of an agreement to sell  an  immovable  property,  where  possession is delivered before the  execution,  or  at  the  time  of  

  Twenty rupees  

  Twenty rupees  

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execution,  or  is  agreed   to  be  delivered  without  executing  the  conveyance,  the agreement  shall  be  deemed  to  be  a  conveyance  and stamp duty thereon shall  be  payable accordingly:

         Provided that the provisions of  Section  47-A  shall,  mutatis  mutandis,  apply  to  such  agreement:

         Provided  further  that  when  conveyance in pursuance of such  agreement is executed, the stamp  duty paid on the agreement shall  be adjusted towards the total duty  payable on the conveyance.   

_______________________________________________________

12. The expression `document’  is  not defined in the Stamp  

Act.  However, the General Clauses Act, 1897 defines `document’ as  

under:-

“S.3(18).  –  `document’  shall  include  any  matter  written, expressed or described upon any substance  by means of  letters,  figures or  marks,  or  by more  than one of  those means which is  intended to be  used,  or  which  may  be  used,  for  the  purpose  of  recording that matter.”

13. Under Section 2(10), inter alia, every document by which  

movable property is transferred is   ‘conveyance’. Does the contract  

of sale for crude resin entered into between the parties amount to  

transfer of movable property? In our opinion,  it does. In the contract  

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under  consideration,  all essential conditions of transfer of movable  

property are satisfied.    By this document right in auctioned lot of  

crude  resin  has  been   created  in  favour  of  the   writ  petitioner.  

Correspondingly,   the  State  Government   is  under  obligation  to  

deliver  the  quantity  of  crude  resin  specified  in  the  document.  

Pertinently,  clause  1(B)  provides  that  resin  sold  will  remain  at  

purchaser’s risk from the date of acceptance of its bid and seller will  

not be responsible for any loss and damage which may occur thereto  

from any cause whatsoever. The document read as a whole leaves  

no manner of doubt  that property in the auctioned lot of crude resin  

vested in the purchaser as a result of the subject contract and, thus  

amounts to transfer of movable property.  Even if the document dated  

March 24, 2001 is  treated as an agreement to sell, in view of the  

acceptance letter dated April 7, 2001  whereby the writ petitioner has  

been informed that public auction is accepted in its name and that it  

must arrange for lifting of the auctioned resin within 60 days from the  

issuance of this letter, it is very clear that the contract of sale dated  

March 24, 2001 read with the letter dated April 7, 2001 amounts to  

‘conveyance’ within the meaning of Section 2(10) and is chargeable  

to stamp duty under Article 23,  Schedule I-B as admittedly there is  

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no  exemption  from  payment  of  stamp  duty  in  respect  of  such  

conveyance under Article 62.

14. It is true that the contract document dated March 24, 2001  

records the receipt of Rs. 39,000/- as security from the purchaser for  

due fulfillment  of  all  the covenants but  a clause like this does not  

make it a ‘Security Document’ as held by the Division Bench in the  

impugned order.   

15. The Division Bench travelled beyond scope of  review in  

reviewing the judgment dated April 13, 2004. In our view, the view  

taken in the judgment dated April 13, 2004 did not suffer from any  

error apparent on the face of the record justifying its review.  

16. The  appeals are, accordingly, allowed and the impugned  

judgment dated December 27, 2007 is set aside.  The parties shall  

bear their own costs.  

……………….. J.           (P. Sathasivam)

….……………. J.                                                                     (R.M. Lodha) NEW DELHI, OCTOBER  27, 2010.

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