Clause 3 will show that an amount of 50,000/- is
paid as security deposit for granting the lease and Clause 4
provides for repayment of the same on the termination of the
lease. Clause 5 clearly provides that the lessee shall not be
entitled to ask for set off the monthly rent from the security
deposit paid and it shall be entitled to refund only after the
expiry of the period of lease. Obviously, Clause 6 was relied upon
by the court below, which provides for settlement of the entire
claim by the lessor against the lessee if any found due from the
above said sum of security deposit. The view taken by the Rent
Control Court is that the same can be treated as money
advanced. We are definitely of the view that, it cannot be as
the character of the term "money advanced" in Article 33(c) of
the Schedule is different. It is not a consideration which has
passed irrevocably from the tenant to the landlord over and
above the consideration for the lease, which is the payment of
rent. Even if it is adjustable towards rent, the character is not
changed. It is for due performance of the obligations of the
lease. On termination of lease and on vacating the room, it is
refundable. What is paid being the security deposit, it is
refundable. Such an amount which is refundable will not get the
character of money advanced under Article 33(c).
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR
&
THE HONOURABLE MR. JUSTICE A.V.RAMAKRISHNA PILLAI
TUESDAY, THE 23RD DAY OF JULY 2013
OP (RC).No. 506 of 2013 (O)
MOIDEEN KOYA,
V
1. K.GIRISH KUMAR,
T.R. Ramachandran Nair, J.
An order passed by the Rent Control Court holding the
view that the petitioner/landlord is bound to pay stamp duty for
security deposit given by the tenant, as per Article 33(c) of the
Kerala Stamp Act, is under challenge in this original petition.
2. The petitioner had filed RCP No.13 of 2012 before
the Rent Control Court, Kozhikode. Eviction was sought under
Section 11 (4) (v) of the Act. Ext.P2 is the copy of the RCP
filed by the petitioner. A lease agreement was executed
between the landlord and the tenant on 29.9.2010, in which
the monthly rent payable was fixed as 3,500/-. An amount of
50,000/- was given by the tenant as security deposit which
was refundable on termination of the lease. The tenant was set
as ex-parte and the case was posted for ex-parte evidence and
the petitioner filed the chief affidavit also. The Rent Control
Court refused to mark the lease agreement for the reason that
the same is under stamped and the court ordered to pay deficit
of the stamp duty along with penalty for security and the rent
payable as per the lease agreement. The said order is dated
4.1.2013. The petitioner filed I.A.No.278 of 2013 to review the
said order and the present impugned order is passed on the said
I.A.
3. We heard learned counsel for the petitioner Sri.
S.Nirmal and learned Government Pleader Sri.R.Padmaraj. The
first respondent tenant has not entered appearance.
4. A reading of the order shows that the Rent Control
Court relied upon Article 33(c) of the Kerala Stamp Act, 1959
and held that the stamp duty has to be paid for a consideration
equal to the amount for money advanced in addition to the rent
reserved. The court was also of the view that when there is a
clause providing for adjustment of security towards the defaulted
rent, the payment of balance amount has to be regarded as
money advanced.
5. The legal question therefore raised is whether Article
33(c) will cover a refundable security provided in a lease
agreement, even though the same is adjustable towards the
defaulted rent.
6. The learned counsel for the petitioner relying upon a
Full Bench decision of the Delhi High Court in Chief Controlling
Revenue Authority, Delhi, Petitioner Vs. Marshall Produce
Brokers Co. Pvt. Ltd, Delhi, Respondent [AIR 1980 Delhi
249], submitted that on an interpretation of a similar provision
to that under the Kerala Stamp Act, 1959, the Full Bench took
the view that the amount of security deposit paid for the due
performance of the contract of lease is chargeable under Article
57 of the Schedule read with section 5 of the Act. The learned
counsel also submitted that the Full Bench was also of the view
that even if there is a clause for adjustment of the security
deposit towards rent, it will not make any difference.
7. We are also told by the learned Government Pleader
that the Government of Kerala through the Tax (E) Department
by a letter dated 24.2.1983 addressed to the Inspector General
of Registration, Trivandrum, had informed that duty is not
chargeable under Article 35(c) of schedule IA of the Indian
Stamp Act, 1899 and the amount of security deposit paid for the
due performance of the contract of lease is chargeable under
Article 57 of the Schedule read with section 5 of the Act.
Government letter dated 24.2.1983 addressed to the Inspector
General of Registration reads as follows:
"In supersession of the instruction issued in
Government Letter No.18769/E2/75/TD dated 15.12.1975
and in accordance with the decision of the Delhi High
Court in A.I.R. 1980, Delhi 249, the following principles
may be observed while classifying lease deeds.
(1) Duty is not chargeable under Art, 35(c) of
schedule IA of the Indian Stamp Act, 1899 on the
amounts of security/deposit/advance, which is refundable
on determination of the lease, in addition to the duty paid
on the rent reserved under Article 35(a) of the Schedule.
(2) It will not make any difference in the
changeability of duty, if such deposit/advance is
adjustable in rent/other charges/dues payable under the
lease.
(3) The amount of security deposit paid for the
due performance of the contract of lease is chargeable
under Art. 57 of the Schedule read with section 5 of Act.
I am to request you to issue necessary instructions
to all Sub Registrars to classify lease deeds in accordance
with the principle mentioned above."
This is based on the decision of the Delhi High Court quoted
earlier.
8. We therefore proceed to consider the matter since it
requires an interpretation of Article 33(c) of the Kerala Stamp
Act. Corresponding to Article 57 of the Indian Stamp Act, the
provision herein is Article 50. For easy reference, it is also
necessary to quote Articles 33(a) (i) & (c) and 50:
"33. Lease- including an
underlease or sub-lease and any
agreement to let or sublet -
(a) where by such lease the
rent is fixed and no premium is
paid or delivered -
(i) where the lease purports to The same duty as a Bottomry
be for a term of less than one Bond (No.14) for the whole
year: amount payable or deliverable
under such lease.
O.P.(RC) No.506/2013
6
33(c): where the lease is granted The same duty as a conveyance
for a fine or premium or for money (No.21 or 22, as the case may be)
advanced in addition to rent for a consideration equal to the
reserved: 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:
Provided that in any case
where an agreement to lease is
stamped with ad valorem stamp
required for a lease and a lease in
pursuance of such agreement is
subsequently executed, the duty on
such lease shall not exceed on
rupee ninety-five paise."
Article 50 reads as follows:
"Security bond or mortgage deed, executed
by way of security for the due execution of
an office or to account for money or other
property received by virtue thereof or
executed by a surety to secure the due
performance of a contract-
(a) When the amount secured
does not exceed Rs.1,000. (Five rupees for every
Rs.100 or part thereof of the
amount secured.]
(b) in any other case: [One hundred rupees.]
Exemptions
Bond or other instruments, when executed-
O.P.(RC) No.506/2013
7
(a) by any person for the purpose of
guaranteeing that the local income derived
from private subscriptions to a charitable
dispensary or hospital, or any other object of
public utility, shall not be less than a specified
sum per mensem;
(b) executed by persons taking advances
from Government for agricultural purposes or
by their sureties as security for the
repayment of such advances;
(c) executed by officers of Government or
their sureties to secure the due execution of
an office or the due accounting for money or
other property received by virtue thereof."
9. A reading of Article 33(a), will show that it takes in
cases where the rent is fixed and no premium is paid or
delivered. Going by Article 33(c), the provision is attracted
where the lease is granted for a fine or premium or for money
advanced and the same will be in addition to rent reserved.
Apparently, the Rent Control Court has treated the security
deposit as money advanced for attracting 33(c) in addition to
the rent.
10. The entire concepts under Section 105 of the T.P.Act,
1882 have been discussed by the Full Bench of the Delhi High
Court in the above case. We find from paragraph 3 that three
questions were referred for opinion of the Delhi High Court by
the Chief Controlling Revenue Authority, Delhi and the questions
Nos.1, 2 and 3 read as follows:
"(1) Whether any duty is chargeable under Art. 35(c) of
Sch. 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 paid on the rent reserved
under Art. 35(a) of the Schedule;
(2) Will it make any difference in the changeability of
duty, if such deposit/advance is adjustable in rent/other
charges/dues payable under the lease?
(3) Whether such amount of security deposit paid for
the due performance of the contract of the lease can be
charged under Article 57 of the Schedule appended to the
Act?".
11. A discussion of the principles stated therein, will be
complete only by reference to the facts of the said case also.
Paragraph 1 of the judgment shows that the monthly rent fixed
was 4,455/- and a sum of ` 53,460/- had been paid as advance
rent adjustable in twenty four equal instalments. In addition to
the monthly rent, the lessees had agreed to deposit and always
keep in deposit six months' rent towards security for due
performance of the obligations of the lease and this amount was
to be dealt with in the manner provided ( 26,730/-). We
hereinafter extract the relevant clauses, which governed the said
case:
"4(3): In case the rent hereby reserved or any part
thereof, or any other outgoing be in arrears for twenty one days
after becoming payable (whether legally demanded or not) or if
any covenant on the lessees part herein contained shall not be
performed or observed, the landlords, notwithstanding any
right herein contained will be entitled to absolutely appropriate
the deposit mentioned in the provisions contained in Cl. 1(2)
herein above, and not liable to pay the interest thereon without
prejudice to their any other right to take legal action.
4(6): The deposit kept by the lessees as mentioned in
the provisions contained in Cl.1(2) herein above shall be
refunded to the lessees within seven days after the lessees
have handed over the vacant possession with all its fixtures
and fittings therein belonging to the landlords with the interest
due against the receipt issued and signed by a person duly
authorised in this behalf by the lessee, unless under Cl.4(3)
herein above the said deposit has priorly been appropriated."
12. The Full Bench in paragraph 5 of the judgment has
elaborately explained the legal position under Section 105 of the
T.P.Act, which is extracted below for easy reference:
"5. Under S.105 of the T.P.Act, 1882, a lease
of immovable property is a transfer of a right to enjoy
such property, made for a certain time, express or
implied, or in perpetuity in consideration of a price paid
or promised or of money, a share of crops, service or
any other thing of value, to be rendered periodically or
on specified occasions to the transferor by the
transferee, who accepts the transfer on such terms.
The transferor is called the lessor, the transferee is
called the lessee, the price is called the premium, and
the money, share, service or other thing to be so
rendered is called the rent. The consideration for the
lease is thus of two types. First one is the price paid or
promised. The price paid may be cash or may be an
adjustment of an outstanding debt or its payment may
be deferred or made payable in instalments. It is
always in the nature of a capital income when the
interest of the lessor is parted with for a price. This
price is called premium. The second type of
consideration is of recurring character on specified
occasions, which is the indication of rent. The liability
to pay rent arises at stated periods or specific
occasions. When such a liability is met in advance,
it will still be 'rent' and not advance in addition to
rent reserved. For this reason the payment of
Rs.53,460 as advance rent under the lease of
instrument is rent for which there is both a liability and
covenant to pay. The revenue has treated this payment
of Rs.53,460 as rent and rightly so in view of the Full
Bench judgment in Union of India v. M/s. Caltex (India)
reported in AIR 1966 Punj 488. The deposit of
Rs.26,730 is not rent or advance rent. Its payment or
liability is not of a recurring character on specified
occasions and thus not a revenue receipt. It
cannot assume the character of price paid,
because under the instrument of lease it is liable
to be refunded to the lessees within seven days
after the lessees have handed over the vacant
possession." (emphasis supplied by us)
13. It was held in paragraph 6 that 'the consideration of
lease is only two fold 'premium' and 'rent'. There is no third type
of consideration when the interest of the lessor is parted with.
None is provided in S.105 of the T.P. Act, 1882.'
14. We also notice that Article 33(c) herein, is
corresponding to Article 35(c) therein. While interpreting the
said provision, the Full Bench in the same paragraph has
explained the matter as below:
"6. The Legislature, therefore, was providing under Art.
35(a) for instruments of lease, including an underlease or sub-
lease and any agreement to let or sublet, whereby such lease
the rent is fixed and no premium is paid or delivered according
to the period of lease. Under Art. 35(b) proper stamp duty is
provided where the lease is granted for a fine or premium or for
money advanced and where no rent is reserved. Under Art. 35
(c) it provided where the lease is granted for a fine or premium
or for money advanced in addition to rent reserved. Fine is not
defined in either T.P. Act, 1882 or in the Indian Stamp Act, Fine
in relation to leases is something which is to go irrevocably into
the pocket of the landlord who requires it as a condition of
consenting to a transfer of right to enjoy property. Fine is
indistinguishable from premium and is money payment in
consideration of a demise. Money paid as fine is money paid
with the intention of passing over the property in it to the
landlord so that it should become his. Fine is also given the
name of "Salami" in some parts of this country. Such money
payments are known by several other names, e.g, Nasrana,
Pugree etc. The legislature must be aware of money payments
in consideration of the lease, when it sought to cover "fine or
premium or for money advanced" in Art. 35 (b) and (c). The
words used here "for money advanced" do not connote
any idea of repayment. Money advanced here is a
condition for creation of an interest in the enjoyment of
the property. Money advanced here is money which is not
to revert to the lessee. If the advance is repayable, then it is
a loan or deposit which word would have been used by the
legislature in Art. 35(b) and ) instead of "for money advance", if
it was intended to cover such payments. Money advanced
here by the lessees to the landlords is with the intention
expressed by the parties that the landlords should keep
the money till appropriated or refunded. Such transaction
is a deposit. In my opinion, when the legislature used the word
"for money advanced" after "fine or premium" it was intended
that it is a sum of money in the nature of fine or premium
which goes irrevocably in the pocket of the landlord. It is a rule
of legal construction that general words following enumeration
of particulars are to have their generality limited by reference to
the preceding particular enumeration and to be construed as
including all other things of the like nature and quality. Where
general words immediately follow or are closely associated with
specific words, their meaning has to be limited by reference to
the preceding words and has to be presumed to be restricted to
the same genus as those specific words. This is the rule of
construction known as Ejusdem Generis and gives aid to the
ascertainment of the true meaning of the statute." (emphasis
supplied).
15. It is in paragraph 9, it was held that the security
cannot be treated as money advanced. In fact, going by the
above Full Bench decision, it can be seen that when there is a
provision for advance, it implies that it is not refundable and it is
a price which is fixed in terms of the provisions under Section
105 of the T.P.Act. Therefore, it will take the character as a
premium. What is envisaged for the purpose of Article 33(c) is a
payment which is not refundable. Herein what is provided under
the relevant clauses of the lease deed as far as the transaction is
concerned are Clauses 3, 4, 5 and 6 of Ext.P1, which are
extracted below:
"3. The Lessee has hereby paid an amount of
Rs.50,000/- (Rupees fifty thousand only) to the Lessor as
security deposit for granting lease of the above said premises,
the receipt of which is hereby confirmed and acknowledged by
the Lessor.
4. It is hereby agreed that the amount of security
deposit paid to the Lessor by the Lessee shall be repaid to the
Lessee on the termination of the lease and the Lessee vacating
the shop room demised to him.
5. It is further agreed that the Lessee shall not be
entitled to ask for set off the monthly rent from the security
deposit paid which shall be entitled to refund only after the
expiry of the period of lease and the Lessee vacating the shop
room.
6. The Lessor shall be entitled to settle their entire
claim against the Lessee if any found due from the above said
sum of security deposit and the balance amount alone shall be
repaid to the Lessee at the time of termination of the lease."
16. Clause 3 will show that an amount of 50,000/- is
paid as security deposit for granting the lease and Clause 4
provides for repayment of the same on the termination of the
lease. Clause 5 clearly provides that the lessee shall not be
entitled to ask for set off the monthly rent from the security
deposit paid and it shall be entitled to refund only after the
expiry of the period of lease. Obviously, Clause 6 was relied upon
by the court below, which provides for settlement of the entire
claim by the lessor against the lessee if any found due from the
above said sum of security deposit. The view taken by the Rent
Control Court is that the same can be treated as money
advanced. We are definitely of the view that, it cannot be as
the character of the term "money advanced" in Article 33(c) of
the Schedule is different. It is not a consideration which has
passed irrevocably from the tenant to the landlord over and
above the consideration for the lease, which is the payment of
rent. Even if it is adjustable towards rent, the character is not
changed. It is for due performance of the obligations of the
lease. On termination of lease and on vacating the room, it is
refundable. What is paid being the security deposit, it is
refundable. Such an amount which is refundable will not get the
character of money advanced under Article 33(c).
We respectfully agree with the view taken by the Full Bench
of the Delhi High Court in that regard. In the light of the above,
this original petition is allowed and the impugned order is set
aside. We direct the Rent Control Court to pass a fresh order in
the light of the legal position explained above. No costs.
Sd/-
T.R. RAMACHANDRAN NAIR
JUDGE
Sd/-
A.V.RAMAKRISHNA PILLAI
JUDGE
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