J. Thomas & Company Pvt. Ltd. v. The District Registrar (General), Ernakulam, Kochi and The Sub Registrar, Kochi

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.N.RAVINDRAN FRIDAY, THE 9TH JULY 2010 / 18TH ASHADHA 1932 OP.No. 10606 of 2000(K) ----------------------- PETITIONER(S): - --------------- J.THOMAS & COMPANY PVT. LTD., NILHAT HOUSE, BRISTOW ROAD, KOCHI 682 003 REPRESENTED BY EXECUTIVE KURIAN PAUL BY SRI.M.PATHROSE MATTHAI, SENIOR ADVOCATE SRI.SAJI VARGHESE RESPONDENT(S): - --------------- 1. THE DISTRICT REGISTRAR (GENERAL), ERNAKULAM, KOCHI 682 016 2. THE SUB REGISTRAR, KOCHI GOVERNMENT PLEADER SMT.SMITHA SUKUMARAN FOR R1 & R2 THIS ORIGINAL PETITION HAVING BEEN FINALLY HEARD ON 22/06/2010, THE COURT ON 09/07/2010 DELIVERED THE FOLLOWING: ORDER ON C.M.P.NO.17646/2000 IN O.P.NO.10606/2000 DISMISSED. 9.7.2010 SD/- P.N.RAVINDRAN, JUDGE ## APPENDIX ## PETITIONER'S EXHIBITS: EXT.P1. TRUE COPY OF NOTICE DATED 30.6.1999 ISSUED BY THE 1ST RESPONDENT. EXT.P2. TRUE COPY OF LETTER DATED 16TH JULY 1999 SENT BY THE PETITIONER TO THE 1ST RESPONDENT. EXT.P3. TRUE COPY OF ORDER DATED 3.8.1999 ISSUED BY THE 1ST RESPONDENT TO THE PETITIONER. EXT.P4. TRUE COPY OF ORDER DATED 3.11.1999 ISSUED BY THE 1ST RESPONDENT. EXT.P5. TRUE COPY OF THE ORDER DATED 3.11.1999 ISSUED BY THE 1ST RESPONDENT. EXT.P6. TRUE COPY OF THE NOTICE DATED 23.3.2000 ISSUED BY THE 2ND RESPONDENT. EXT.P7. TRUE COPY OF REGISTERED DEED OF LEASE EXECUTED WITH THE COCHIN PORT AND HOTELS AND ALLIED TRADES (P) LTD. DATED 31.12.1998 EXT.P8. TRUE COPY OF DEED OF LEASE EXECUTED BY THE PETITIONER AND COCHIN PORT TRUST DATED 12.11.1998. EXT.P9. TRUE COPY OF LETTER DATED 7.6.2000 BY THE COCHIN PORT TRUST TO THE PETITIONER. / TRUE COPY / P.S. to JUDGE ## **P.N.RAVINDRAN, J. ----------------------------------------O.P.No.10606 of 2000 ----------------------------------------Dated this the 9[th] day of July, 2010** ## **JUDGMENT** The petitioner is a company incorporated under the Companies Act, 1956. It is carrying on business in a building erected on the lands leased out by the Cochin Port Trust. The Cochin Port Trust had leased out a parcel of land, 50.04 cents in extent, to the petitioner. The said lease expired on 3-6-1994. Thereupon, a fresh lease was granted in respect of the very same parcel of land and two lease deeds were executed on 12-11-1998 covering the period from 3-6-1994 to 31-121995 and the period from 1-1-1996 to 2-6-2024. In the lease deed dated 12-11-1998 relating to the period from 3.6.1994 to 31.12.1995 the annual rent payable was fixed at Rs.27,458/-. It was also recited that the lessee has paid an amount of Rs.27,458/-, representing one year's rent in advance. In the second lease deed dated 12-11-1998 relating to the period from 1-1-1996 to 2-6-2024 the annual rent payable was stipulated as Rs.54,944/-. It was also stipulated that the lessee (the petitioner) has deposited with the lessor an advance amount equivalent to one year's rent viz. Rs.54,944/-. It was further stipulated that the rent shall be paid on a half yearly basis on or before **O.P.No.10606 of 2000** ## -:2:- the 30[th] of June and 31[st] of December every year for the period January to June and July to December respectively. There is a further stipulation that if the lessor decides to increase the rate of rent applicable to the land falling in category III of the Willington Island Land Use Plan the lessee will have the right to increase the lease rent at the beginning of every block of seven years starting from 1[st] January 1996 by an amount not exceeding 100% of the then existing rent and that in addition to such revision, the rent payable by the lessee every year shall be increased by 5% of the existing rent. 2. Both the documents were presented for registration before the Sub Registrar, Cochin, the competent registering authority. In respect of the lease deed dated 12-11-1998 covering the period from 1-1-1996 to 2-6-2024 the petitioner had paid the sum of Rs.34,450/as stamp duty and in respect of the other lease deed the sum of Rs.2,160/- was paid as stamp duty. When the documents were presented for registration, the Sub Registrar impounded the documents under section 33 of the Kerala Stamp Act, 1959 and forwarded them to the District Registrar, Ernakulam as required under section 37(2) of the Act. The District Registrar, after examining the documents, came to the conclusion that the documents have not been properly stamped. Thereupon Ext.P1 notice dated 30-6-1999 was **O.P.No.10606 of 2000** ## -:3:- issued informing the petitioner that the stamp duty payable on the lease deed relating to the period from 1-1-1996 to 2-6-2024 is Rs.4,56,617/-. The petitioner was called upon to show cause why the sum of Rs.4,22,137/- being the deficit stamp duty and penalty should not be realised from them. A similar notice of even date was issued to the petitioner in respect of the lease deed relating to the period from 3.6.1994 to 31.12.1995. By that notice the petitioner was informed that the proper stamp duty payable on the said lease deed is Rs.5,137/- and the petitioner was called upon to show cause why the deficit stamp duty of Rs.2,977/- and penalty should not be recovered from them. 3. On receipt of Ext.P1 show cause notice the petitioner submitted Ext.P2 reply dated 16-7-1999 wherein the petitioner requested the District Registrar, Ernakulam to inform him of the basis on which the stamp duty as set out in the notices was arrived at. On receipt of Ext.P2 letter, the District Registrar sent Ext.P3 letter dated 3-8-1999 informing the petitioner of the basis on which the sum of Rs.4,56,617/- was determined as the stamp duty payable on the lease deed dated 12-11-1998 relating to the period from 1-1-1996 to 2.6.2024. Even after receipt of Ext.P3 letter, the petitioner did not file his objections. The District Registrar thereupon issued Ext.P4 order **O.P.No.10606 of 2000** ## -:4:- dated 3-11-1999 calling upon the petitioner to pay the deficit stamp duty of Rs.4,22,137/- together with penalty of Rs.250/-. The District Registrar also issued Ext.P5 order dated 3-11-1999 demanding payment of the deficit stamp duty of Rs.2,977/- in respect of the lease deed relating to the period from 3-6-1994 to 31-12-1995 together with penalty of Rs.150/-. The Sub Registrar thereupon issued Ext.P6 letter dated 23-3-2000 informing the petitioner that if the amount demanded in Ext.P4 order is not paid within seven days from the date of receipt of the said letter, steps will be taken to recover the same under the Kerala Revenue Recovery Act, 1968. This writ petition was thereupon filed challenging Exts.P4, P5 and P6 and to restrain the respondents from taking steps to recover the deficit amount of stamp duty and penalty. The petitioner contends that the method adopted by the District Registrar to determine the stamp duty payable on the aforesaid lease deeds is arbitrary and perverse. It is also contended that the District Registrar ought to have furnished a copy of the report submitted by the Sub Registrar to the petitioner before passing Exts.P4 and P5 orders. 4. The District Registrar (General) Ernakulam, the first respondent in the writ petition, has filed a counter affidavit. It is contended that the writ petition is not maintainable for the reason that **O.P.No.10606 of 2000** ## -:5:- an appeal lies to the Land Revenue Commissioner under section 54(1) of the Kerala Stamp Act, 1959. The first respondent has also justified the decision taken by him to levy stamp duty as determined in Exts.P4 and P5. In respect of the lease deed dated 12.11.1978 covering the period from 1.1.1996 to 2.6.2024 it is contended that the average annual rent was determined taking into account the 100% enhancement in rent at the beginning of every block of seven years starting from 1.1.1996. It is contended that in view of the stipulations in clause 10 of the lease deed the annual rent will stand increased by 100% once in every block of seven years starting from 1.1.1996 and therefore, the enhanced rent has also to be considered for arriving at the average annual rent payable by the lessee. 5. When the writ petition came up for hearing on 3-12-2008 this Court directed the learned Government Pleader to make available a copy of the report dated 28.1.1999 submitted by the Sub Registrar, Kochi to the District Registrar, Ernakulam, based on which the orders impugned in the writ petition had been passed. Pursuant to that order, the learned Government Pleader has filed a memo dated 20.2.2009 and produced along with it the reports dated 28-1-1999 submitted by the Sub Registrar, Kochi to the District Registrar (General), Ernakulam, while forwarding the originals of the lease deeds ## **O.P.No.10606 of 2000** -:6:- to that officer. The Sub Registrar, Kochi, has in his report dated 28.1.1999 stated that the stamp duty payable in respect of the lease deed dated 12.11.1998 relating to the period 1.1.1996 to 2.6.2024 is Rs.1,70,588/-. Likewise in respect of the lease deed dated 12.11.1998 in respect of the period from 3.6.1994 to 31.12.1995 the Sub Registrar had reported that the stamp duty payable on the instrument is Rs.5,087.50. The petitioner has filed I.A.No.7917 of 2010 and produced along with it a copy of the lease deed dated 12.11.1998 relating to the period from 1.6.1996 to 2.6.2024 as Ext.P8. The petitioner has also produced Ext.P9 letter dated 7.6.2000 sent by the Cochin Port Trust informing them that the advance amount of Rs.54,944/- is refundable without interest on the termination/ expiration of the lease, whichever is earlier. 6. I heard Sri.M.Pathros Matthai, learned senior counsel appearing for the petitioner and Smt.Smitha Sukumaran, learned Government Pleader appearing for the respondents. I have also gone through the pleadings and the materials on record. The Sub Registrar had in his report dated 28.1.1999 sent to the District Registrar (General) Ernakulam in respect of the lease deed relating to the period from 1.6.1996 to 2.6.2024 stated that the annual rent is liable to be revised every year by 5% and that calculated on that basis the **O.P.No.10606 of 2000** ## -:7:- average annual rent will be Rs.5,92,867/- and that if the advance amount of Rs.54,944/- is also reckoned for the purpose of determining the consideration for the lease deed, the stamp duty payable on the instrument will be Rs.1,70,588/-. Likewise he has in his report dated 28.1.1999 submitted in respect of the lease deed relating to the period from 3.6.1994 to 31.12.1995 stated that the average annual rent will be Rs.27,500/- and that the stamp duty payable in respect of the said instrument will be Rs.5,087.50. 7. It is evident from the report submitted by the Sub Registrar that he has arrived at the annual rent for the purpose of levy of stamp duty reckoning the advance rental paid by the lessee and also 5% increase in rent payable every year in respect of the lease deed covering the period from 1.6.1996 to 2.6.2024 The District Registrar has, however, taken into account the 100% enhancement in rent at the beginning of every block of seven years starting from 1.1.1996. The lease deeds in question disclose that in addition to the rent reserved to be paid, the lessee has paid an amount equivalent to one year's annual rent as advance. The lease deeds in question are admittedly governed by Article 33 (c) of the Schedule to the Kerala Stamp Act, 1959. As per the said Article where the lease is granted for a fine or premium or for money advanced in addition to the rent **O.P.No.10606 of 2000** ## -:8:- reserved, the proper stamp duty payable is the stamp duty as in a conveyance (No.21 or 22 as the case may be), for a consideration equal to the amount or value of such fine or premium or advance as set forth in the lease in addition to the duty which would have been payable on such lease if no fine or premium or advance had been paid or delivered. In the lease deed dated 12-11-1998 relating to the period from 3.6.1994 to 31.12.1995 the annual rent payable is Rs.27,458/-. The lessee had also admittedly paid the said sum as advance. Since the lease is granted for money advanced in addition to the rent reserved, Article 33(c) of the Schedule to the Kerala Stamp Act, 1959 is attracted. The land leased out to the petitioner is situated within the Municipal Corporation limits. Therefore, the stamp duty payable is as in a conveyance (Article 22 of the Schedule to the Kerala Stamp Act, 1959). Therefore, the lessee is liable to pay stamp duty as in a conveyance (Article 22) for the consideration equal to the amount or value of the advance as set forth in the lease deed in addition to duty which would have been payable on such lease, if no advance had been paid or delivered. The lease deed dated 12.11.1998 relating to the period from 3.6.1994 to 31.12.1995 is for a term exceeding one year but not exceeding five years and therefore, the stamp duty payable on such lease is governed by Article 33(a)(ii) which stipulates ## **O.P.No.10606 of 2000** ## -:9:- that the duty payable shall be the same duty as in a Bottomry Bond (Article 14 of the Schedule to the Kerala Stamp Act, 1959). Thus the stamp duty payable in respect of the lease deed dated 12.11.1998 relating to the period from 3.6.1994 to 31.12.1995 is stamp duty calculated applying Article 22 for the consideration equal to the amount of advance stipulated therein and stamp duty on the average annual rent reserved to be paid under the said lease deed applying Article 14 of the Schedule to the Kerala Stamp Act, 1959. Though, in the wake of the decision of the Delhi High Court in _**Chief Controlling Revenue Authority, Delhi v. Marshall Produce Brokers Co. Pvt.**_ _**Ltd.,**_ AIR 1980 Delhi 249, the Government have in letter No.14586/E3/82/TD dated 24.2.1983 ordered that duty is not chargeable under Article 35(c) of Schedule 1-A of the Indian Stamp Act, 1899 on the amount of security deposit/advance, which is refundable on determination of the lease, in addition to the duty payable on the rent reserved under Article 35(a) of the Schedule to the Indian Stamp Act, 1899, in the instant case the lease deed does not recite that the advance is refundable on the termination of the lease. The petitioner cannot therefore, be heard to contend that they are not liable to pay stamp duty on the amount of advance in terms of Article 33(c) of the Schedule to the Kerala Stamp Act, 1959. I am, **O.P.No.10606 of 2000** ## -:10:- therefore, of the considered opinion that in respect of the lease deed dated 12.11.1998 relating to the period from 3.6.1994 to 31.12.1995 the petitioner is liable to pay stamp duty for the average annual rent reserved therein, applying Article 33(a)(ii) and in addition to that stamp duty under Article 33(c) in respect of the amount of advance. I accordingly direct that on the petitioner remitting the requisite stamp duty calculated on that basis, the Sub Registrar shall make necessary endorsements on the original of the lease deed dated 12.11.1998, register it and return the original thereof to the petitioner. 8. I shall now deal with the lease deed dated 12.11.1998 relating to the period from 1.6.1996 to 2.6.2024. The lease granted as per the said lease deed is for a term exceeding 20 years but not exceeding 30 years and therefore, the stamp duty payable on the said lease deed is in terms of Article 33(a)(v) of the Schedule to the Kerala Stamp Act, 1959. The said lease deed also evidences deposit of one year's rent by the lessee with the lessor as advance. The said lease deed also does not recite that the money advanced shall be refundable on the termination of the lease though the petitioner has produced Ext.P9 letter dated 7-6-2000 wherein the lessor has clarified that the sum of Rs.54,944/- paid by the petitioner (lessee) as advance deposit is refundable without interest on the termination or expiry of lease ## **O.P.No.10606 of 2000** ## -:11:- whichever is earlier. Ext.P9 letter is dated 7-6-2000. The lease deed in question was executed on 12.11.1998 and was presented for registration before the date of Ext.P9. Therefore, in respect of the said lease deed also the petitioner is liable to pay stamp duty on the amount of advance. Then the only question is whether the petitioner is liable to pay stamp duty reckoning the probable increase in rent by 100% at the beginning of every block of seven years. The District Registrar has taken the stand that the average annual rent has to be calculated taking into account the 100% increase in rent during every block of seven years in addition to the increase in the rate of rent at 5% per annum. The Sub Registrar has however, taken the stand that the annual increase in rent alone need be taken into account. Clauses 10 and 11 of the lease deed dated 12-11-1998 relating to the period from 1-1-1996 to 2-6-2024 read as follows:- _“10. It is distinctly agreed between the parties that notwithstanding anything contained hereinbefore the Lessor has the right to increase the base lease rent at the beginning of every block of seven years starting from First January One Thousand Nine Hundred and Ninetysix by an amount not exceeding 100% of the existing rent provided in the meantime, it is decided to increase the rate of rent applicable to the land in Category III of the Willingdon Island land use plan._ ## **O.P.No.10606 of 2000** -:12:- _11. In addition to the revision of rent provided for in clause 10 above, the rent payable by the Lessee every year shall be increased by 5% of the then existing rent.”_ 9. As per clause 10 of the lease deed, the agreement between the parties is that if the lessor decides to increase the rate of rent applicable to the land in Category III of the Willingdon Island Land Use Plan, the lessor shall have the right to increase the base lease rent at the beginning of every block of seven years by an amount not exceeding 100% of the existing rent. That stipulation in clause 10 of the lease deed cannot, in my opinion, be taken into account for the purpose of determining the average annual rent reserved to be paid under the lease deed. The revision of rent contemplated in the lease deed in clause 10 is contingent on the lessor (Cochin Port Trust) deciding to increase the rate of rent applicable to the land in Category III of the Willingdon Island Land Use Plan. Even in that contingency it is not stipulated that the rent will stand increased by 100% in every block of seven years starting from 1.1.1996. The stipulation in clause 10, in my opinion, only empowers the lessor to increase the base rent by an amount not exceeding 100% of the existing rent. The lessor may decide to increase the rent by 10% or 20% or 30% or 40% or 50%. It may even go up by 100%. Therefore, the registering authority **O.P.No.10606 of 2000** ## -:13:- cannot, in my opinion, determine the average annual rent payable on the basis that the rent is liable to be increased by 100% in every block of seven years starting from 1.1.1996. However, the respondents are, in my opinion, right in the stand taken by them that the annual increase in the rent contemplated in clause 11 of the lease deed can be taken into account for determining the average annual rent reserved. The lease deed dated 12.11.1998 relating to the period from 1.1.1996 to 2.6.2024 is a lease of the land for a term exceeding 20 years but not exceeding 30 years. Therefore, the stamp duty payable is the duty as in a conveyance (Article 22 of the Schedule to the Kerala Stamp Act, 1959) for a consideration equal to three times the average annual rent reserved. In addition to that since the lease is granted for money advanced in addition to the rent reserved to be paid Article 33(c) also applies and therefore in respect of the amount of advance also the lessee is liable to pay stamp duty as in a conveyance (Article 22 of the Schedule to the Kerala Stamp Act, 1959). 10. I accordingly direct that in the event of the petitioner remitting the requisite stamp duty calculated on the above basis, the Sub Registrar shall make necessary endorsements on the original of the lease deed dated 12.11.1998, register it and return the original thereof to the petitioner. ## **O.P.No.10606 of 2000** -:14:- The writ petition is allowed to the extent indicated above. The parties shall bear their respective costs. **P.N.RAVINDRAN, Judge.** **ahg.** **P.N.RAVINDRAN, J. --------------------------O.P.No.10606 of 2000 ----------------------------** ## **JUDGMENT** **9[th] July, 2010**