For an instrument to partake the character of a bond an
obligation must have been created in the instrument itself. On such an understanding of the definition of bond, as given in the Act, the contents of Ext.P3 document need to be analysed. Clause (2) of Ext.P3 only states that both parties today settled the accounts involved in the said business transaction carried out during the last three years by mutual consent in full satisfaction. A reading of Clause (2) of the agreement will only show that the parties have settled the accounts involved in the business transaction on that day and not by the said agreement and the liability is not created by the same. Further in Clause (3) of Ext. P3 agreement it is admitted by the respondent that he owes Rs.53,57,000/- to the petitioner and that he admits and acknowledges that Rs.53,57,000/- is outstanding to be paid to the petitioner. The wording in Clause (3) of the said document makes it explicitly clear that it is only an acknowledgment of an amount that is outstanding to be paid to the petitioner as on the date of execution of the Ext P3 document. As per the said agreement, the respondent only undertook to repay the existing liability within a time frame.{Para 8}
9. In Mathai Mathew's case (supra) this Court held that the
distinguishing feature of a bond is that the obligation must have been created in the instrument itself and that if the obligation was a pre-existing one, it does not partake the character of a bond. This Court further held that one of the principles to be followed in interpreting a taxing statute is that if two interpretations are possible effect should be given to that which favours the citizen and not that which imposed a greater burden on them and that the said principle can be followed in construing the provisions of the Act where a citizen has to pay stamp duty on the instruments defined therein. In Krishnan Kutty's case (supra) this Court held that where an obligation is a pre-existing one, the subsequent document giving the nature of the obligation or the terms and conditions of the contract shall be a mere agreement. In Radha's case (supra) it is held that the distinguishing feature of a bond is that the obligation must have been created in the instrument itself and if the obligation was a pre-existing one, it does not partake the character of a bond.
10. As there is a specific acknowledgment in the agreement of an
amount that is outstanding to be paid to the petitioner as on the date of execution of Ext P3 document, the same can only be construed as an agreement and it does not partake the character of a bond as defined in Section 2(a) of the Act. The decisions referred to above are squarely applicable in the facts of the present case since Ext.P3 document only acknowledges a pre-existing liability of an amount to be paid by the respondent to the petitioner. In the facts and circumstances of this case, Ext.P3 can only be construed as an agreement and not as a bond.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
MR.JUSTICE VIJU ABRAHAM
O.P.(C) No.2748 of 2019
SAFIR,AGED Vs SAJID,
Dated: 13th day of October, 2021
The issue that arises for consideration in this original petition is
as to whether Ext.P3 is a bond as defined under Section 2(a) of the Kerala
Stamp Act, 1959 (hereinafter referred to as “the Act”) or an agreement.
2. This original petition is filed by the plaintiff in O.S. No.126 of
2017 on the files of the Additional Sub Court-I, Kozhikode and the
respondent herein is the defendant. The suit is one for realisation of a sum
of Rs.54,15,120/-. It is contended in the said suit that the plaintiff and
defendant have long-standing acquaintance and they had done several
business transactions in India and abroad including a business in mobile
phones and its accessories and that they decided to stop the same and on
settlement of accounts, it was found that a sum of Rs.53,57,000/- is
payable by the defendant to the plaintiff. Based on that Ext.A1 agreement
and Ext.A2 promissory note were executed on 16.01.2017, copies of which are produced as Exts.P3 and P4.
3. During the course of the trial of the suit, the court below as per
Ext.P5 order dated 14.10.2019 impounded Ext.P3 document upon entering
a finding that the obligation to pay money is created by Ext. P3 itself and
therefore the document has the character of a bond and directed the
petitioner to pay stamp duty and penalty. It is challenging Ext.P5 order of
the court below that the present original petition is filed.
4. The learned counsel for the petitioner would contend that a
reading of Ext.P3 would clearly show that no liability was created by the said document and the same was executed only to acknowledge and admit a liability which already existed and therefore he contended that a
document whereby the executor undertakes to clear a pre-existing liability
within the period provided is only an agreement and not a bond. It is also
contended that no transaction was done nor any passing of consideration
took place on the date of execution of Ext.P3 and that no liability has been
created by the said document. Therefore, Ext.P5 order directing to pay
stamp duty and penalty treating it as a bond is unsustainable and liable to
be set aside by this Court. Since sufficient stamp duty applicable for
execution of an agreement is already paid, Ext.P3 is not liable for
impounding and no penalty can be imposed. In support of the contention,
the learned counsel relies on the decision in Mathai Mathew v. Thampi (1989 (1) KLT 138); Krishnan Kutty v. Jayakrishnan (2005 (2) KLT SN.
26 Case No.32) and Radha v. Sankaranarayanan (2007 (1) KLT 20).
5. On the contrary, the learned counsel for the respondent would
contend that the account has been settled as per the said agreement and
the amount liable to be paid to the petitioner as per the settlement of
accounts is clearly stated in Clause (3) of Ext.P3. Based on the same, he
would contend that as the account has been settled as per Ext P3 and an
obligation to pay money has been created by the said document itself, Ext
P3 will come within the definition of a bond as defined in Section 2(a) of the
Act. Therefore, it is submitted that Ext.P5 order of the trial court treating
Ext.P3 document as having the characters of a bond and the direction to
pay stamp duty and penalty is perfectly legal and valid and therefore no
interference is called for.
6. I have considered the rival contentions of the parties.
7. The term "bond" is defined as per Section 2(a) of the Act and it
reads as follows:
"(a) "bond" includes-
(i) any instrument whereby a person
obliges himself to pay money to another, on condition
that the obligation shall be void if a specified act is
performed, or is not performed, as the case may be;
(ii) any instrument attested by a witness
and not payable to order or bearer, whereby a person
obliges himself to pay money to another; and
(iii) any instrument so attested, whereby
a person obliges himself to deliver grain or other
agricultural produce to another"
8. For an instrument to partake the character of a bond an
obligation must have been created in the instrument itself. On such an understanding of the definition of bond, as given in the Act, the contents of Ext.P3 document need to be analysed. Clause (2) of Ext.P3 only states that both parties today settled the accounts involved in the said business transaction carried out during the last three years by mutual consent in full satisfaction. A reading of Clause (2) of the agreement will only show that the parties have settled the accounts involved in the business transaction on that day and not by the said agreement and the liability is not created by
the same. Further in Clause (3) of Ext. P3 agreement it is admitted by the respondent that he owes Rs.53,57,000/- to the petitioner and that he admits and acknowledges that Rs.53,57,000/- is outstanding to be paid to the petitioner. The wording in Clause (3) of the said document makes it explicitly clear that it is only an acknowledgment of an amount that is outstanding to be paid to the petitioner as on the date of execution of the Ext P3 document. As per the said agreement, the respondent only undertook to repay the existing liability within a time frame.
9. In Mathai Mathew's case (supra) this Court held that the
distinguishing feature of a bond is that the obligation must have been
created in the instrument itself and that if the obligation was a pre-existing one, it does not partake the character of a bond. This Court further held that one of the principles to be followed in interpreting a taxing statute is that if two interpretations are possible effect should be given to that which favours the citizen and not that which imposed a greater burden on them and that the said principle can be followed in construing the provisions of the Act where a citizen has to pay stamp duty on the instruments defined therein. In Krishnan Kutty's case (supra) this Court held that where an obligation is a pre-existing one, the subsequent document giving the nature of the obligation or the terms and conditions of the contract shall be a mere
agreement. In Radha's case (supra) it is held that the distinguishing feature of a bond is that the obligation must have been created in the instrument itself and if the obligation was a pre-existing one, it does not partake the character of a bond.
10. As there is a specific acknowledgment in the agreement of an
amount that is outstanding to be paid to the petitioner as on the date of execution of Ext P3 document, the same can only be construed as an agreement and it does not partake the character of a bond as defined in Section 2(a) of the Act. The decisions referred to above are squarely applicable in the facts of the present case since Ext.P3 document only acknowledges a pre-existing liability of an amount to be paid by the respondent to the petitioner. In the facts and circumstances of this case, Ext.P3 can only be construed as an agreement and not as a bond. Therefore this original
petition (civil) is allowed by setting aside Ext.P5 order dated 14.10.2019 in
O.S.No.126 of 2017 on the file of the Additional Sub Court-I, Kozhikode
holding that Ext P3 is only an agreement and not a bond.
Sd/-
VIJU ABRAHAM
JUDGE
No comments:
Post a Comment