RAJASTHAN HIGH COURT

           State of Rajasthan

           Vs.

           Bhilwara Spinners Ltd.

             Civil Special Appeal No. 548 of 1998
           (Rajesh Balia and Sunil Kumar Garg, JJ.)

           27.11.2000

           JUDGEMENT

Balia, J.

1. The appellant is the State of Rajasthan which challenged the order passed by the
learned single Judge on 1-4-1998 in S.B. Civil Writ Petition No. 1480/97 (reported in
AIR 1998 Rajasthan 293) filed by respondent No. 1 M/s. Bhilwara Spinning Ltd. (for
short, 'BSL') and respondent No.2 Mr. D.L. Birla, President and Shareholder of BSL,
by which he allowed the writ petition and set aside the order dated 13th March, 1997
in case No. 65/97 raising a demand on account of deficiency in stamp duty and
imposing penalty on the petitioner in relation to the instrument executed on behalf of
the State of Rajasthan dated 25th March, 1988 and registered on 28th March, 1988 by
the Collector (Stamps), Bhilwara.
2. The instrument, which is focus of attention to this appeal, reads as under :-

"SUPPLEMENTARY LEASE DEED
"This Lease Deed is made on the 25th Day of March, 1988 BETWEEN
MESSRS BHILWARA SPINNERS LIMITED , (hereinafter called the 'Lessee')
which expression shall unless excluded by or repugnant to the context, include
his heirs, successors, executors, administrators and assigns of the FIRST PART
and the Governor of State of Rajasthan hereinafter called the 'Lesser'), which
expression shall unless excluded by or repugnant to the context include his
successors in office and permitted assigns of the SECOND PART.
Whereas the Lesser has granted the permission to transfer the lease hold rights
in the land measuring 104 Bighas 08 Biswa (56 Acres approx,) in favor of the
Lessee and the Lessee has agreed to accept the lease of a plot of land as
described in the Lease Deed dated 22nd Nov. 1968 which was executed by
Erstwhile Messer Rajasthan Spinning and Weaving MIlls Ltd., and which was
registered at Sub Registrar Office Bhilwara on 25-11-1988.
Whereas in compliance of Notification No. P4/59/U/1/83 dated 14th July, 1993,
the Lessee agrees to execute this Supplementary Lease Deed for the land 89
Bigha 03
Biswa (56 Acres Approx.) equivalent to 104 Bigha 08 Biswas situated in
Industrial Area, Bhilwara and more particularly described in the Schedule
hereto (hereinafter called the Plot) upon the terms and conditions vide
Notification dated 14th July, 1983.
NOW THIS INDENTURE WITNESSES AS FOLLOWS :
1. That the Lesser agrees to let the said plot and the Lessee agrees to accept the
said plot on lease for a balance period of SEVENTY TWO YEARS on rent.
The Lessee shall have an option to renew the said lease for a further period of
Ninety-nine years after expiry of the present terms of lease.
2. That the lessee shall be responsible for all the dues payable to the Lesser and
to the other institutions.
3. That the Lessee agrees to abide by the directions issued from time to time by
the State of Rajasthan.
4. That the lessee agrees not to transfer the part of this plot without the
permission of the State Government.
5. That the Lessee shall utilize the said plot of land for the Industries use.
6. That the Lessee shall pay the stipulated rent of Rs. 1680/- (Rupees One
Thousand Six Hundred Eighty Only) per year of the said plot to the Lesser.
IN WITNESS thereof the parties hereto have set respective hands on the dates
mentioned against their signatures.
Sd/-
//seal//
Signed for and on behalf
of the Governor,
State of Rajasthan.
Witness
1. Sd/-
//seal//
Sd/-Sd/-
//seal// //seal//
               Witness Signed by the said Lessee"

3. THE CONTROVERSY - Revenue contends it to be an instrument of conveyance of
properties comprised in Bhilwara unit owned by Rajasthan Spinning and Weaving
Mill Ltd. (RSWM) which includes plant, machinery buildings and fixtures along with
lease hold rights in land on which factory is situated to respondent Bhilwara Spinning
Ltd. hence Stamp Duty is payable as a conveyance ad valorem on entire value of the
property comprising all the aforesaid assets and not as a document of lease as it reads.

4. The controversy had arisen in the facts and circumstances to be narrated briefly
hereinafter and detailed in the order under appeal. The instrument in question
described as supplementary lease in respect of 56 acres of land executed between
State of Rajasthan as lesser and BSL as lessee for 72 years for consideration of rent of
Rs. 1680 per annum. The said 56 acres of land was originally held by Rajasthan
Spinning and Weaving Mills Limited (for short, 'RSWM' hereinafter') as agriculture
land which was given to the RSWM on 15-7- 51 for the purpose of setting up of an
industrial unit for establishing industry, thereon for manufacturing cotton and synthetic
yarn. The Khatedari rights in the agriculture land were surrendered and the land was
converted into industrial land on or about Nov. 26, 1968. The State Govt. executed a
lease deed conveying the lease hold rights of the said property to the RSWM. The said
lease was for a period of 99 years with an option of renewal for a further period of 99
years at the instance of the lessee. The said RSWM set up its factory at Bhilwara on
the aforesaid plot of land. For its own reasons, the RSWM decided to transfer its unit
at Bhilwara to its 100% owned subsidiary company to be incorporated, the RSWM, in
the Extra ordinary General Meeting of its Members, held on 24th January, 1983 gave
its consent to the Board in terms of Section 293 and other applicable provisions of the
Companies Act, 1956 to take effective steps for selling, transferring or leasing out the
Bhilwara unit of the company to a separate existing company whose name shall be
changed to Bhilwara Spinners Pvt. Ltd. or such other name as may be allowed by the
Registrar of Companies and the Central Govt., on the book value on the condition that
the vendor (RSWM) shall receive in part consideration 9,90,000 equity shares of Rs.
10 in BSL and the balance consideration payable by BSL in 8 half yearly installments.
The resolution further stipulated that the BSL at the time of transfer shall be a 100%
subsidiary of the Rajasthan Spinning and Weaving Mills Ltd. The case of the
petitioners in this connection has been that the transfer of the plant, building and
machinery of the RSWM to its subsidiary company, that is the petitioner BSL, was by
way of sale of shares of the petitioner company in accordance with the provisions of
Companies Act, 1956 i.e. the part of the transaction and BSL in connection with the
transfer of property from holding company to the subsidiary company which as per
resolution referred to above and produced as a part of the Annexure P/24-A was to be
100% subsidiary as on the date of the transfer. The fact about the resolution and the
transaction between the two companies is not disputed. In this connection the case of
the State is that the same was not in accordance with the provisions of law because as
per provisions of Section 17 of the Indian Registration Act as well as Section 56 of the
Transfer of Properties Act if immovable property having value of Rs. 100 and more is
transferred then the same can be done only through a registered transfer deed. Be that
as it may, the RSWM proposed to assign its interest in the land held under 99 years
lease from the State of Rajasthan (Annexure P/2) to the BSL. The lease Annexure P/2
contained the condition No. 7 that the lessee shall not sublet, underlet or sell its lease
hold rights under the lease deed without the written consent of the lesser, provided
however, that the lessee shall have the right to assign or to mortgage its lease hold
rights thereby demised in favor of a financial institution or institutions for the purpose
of availing of financial assistance etc. As the lease-hold rights have been created in
respect of industrial land, the aforesaid condition was in consonance with Rule 9 of
the Industrial Area Allotment Rules, 1959 framed under the Rajasthan Land Revenue
Act. As the transfer of its Bhilwara unit of the RSWM to its subsidiary company BSL
involved also the transfer of lease hold rights in land held by RSW M, on which the
unit was established, the RSWM applied for the consent of the State Govt. the
allotting authority. By communication dated 14th July, 1983, the State Govt..
conveyed its consent for transfer of the lease-hold rights of the RSWM to BSL for the
remainder period envisaging that the supplementary lease shall be executed for the
remainder period by the BSL in favor of State. In this connection, clause 3 of sanction
letter reads as under :-

5. After grant of this sanction, Collector Bhilwara for and on behalf of the Governor,
State of Rajasthan, executed the instrument in question described as supplementary
lease deed on 25th day of March, 1988 accepting the BSL as the lessee of the plot in
question for 72 years of the period of lease which was the remaining period of lease
granted in favor of the RSWM, for which the lesee was to pay stipulated rent of Rs.
1680/- per year. This instrument was also signed on behalf of the lessee BSL.
However, the RSWM, the original lessee, is not a party to this instrument in any
manner. Annexure P/14, the supplementary lease deed only enumerates the facts that
have happened prior to execution of supplementary lease deed namely that the lesser
is granted the permission to transfer the lease-hold rights in the land measuring 104
bighas 8 biswas (58 acres approximately) in favor of the lessee and the lessee (BSL)
agreed to accept the lease of the plot of land as described in the lease deed dated 22nd
Nov. 1968 which was executed by erstwhile M/s. Rajasthan Spinning and Weaving
Mills Ltd. and which was registered at Sub-Registrar's at Bhilwara on 25-11-1968 and
whereas in compliance of Notification No. P4/59/U/1/83 dated 14th July, 1983 (the
letter of sanction Ex. P/3 granting permission to the RSWM to transfer its lease-hold
rights), the lessee agreed to execute the supplementary lease deed for the land in
question. The stamp duty as payable under Article 25-A of the Schedule appended to
the Stamp Act, 1899 as amended for the State of Rajasthan was paid. This instrument
was registered by the Sub Registrar, Bhilwara on 28th March, 1988. Soon after the
aforesaid instrument was registered on 28-3-1983 as supplementary document, on 29 -
3-1988, th Sub Registrar made a reference to the Collector of Stamps that since it was
not correction of a clerical error, it was not supplementary instrument under Article
25-A of the Rajasthan Stamp Law Adoption Act, 1952 but is a fresh lease deed and
ought to have been stamped as a fresh lease deed. It also stated that it amounted to
material alteration in the existing lease, therefore, fresh stamp duty was payable. The
estimated stamp duty was stated to be Rs. 79 lakhs on the basis of market value of the
property. It also stated that since it is a fresh lease deed it ought to have been executed
in terms of the Rajasthan Industrial allotment Rules 1959 by charging premium and
development charges and that ought to have been included in consideration. It
estimated the value of the premium at about Rs. 79 lakhs, development charges at Rs.
2100 and therefore the stamp duty was calculated at Rs. 13,34,305. It also called for a
penalty at 10 times. The District Registrar wrote another letter to Collector (Stamps)
on 22-4-88 stating that under the Rajasthan Stamp Law Adoption Act as amended in
1982 the building machinery and furniture etc. which are existing on the land is also
conveyed with the lease as per the definition of conveyance and the stamp duty should
be payable as a conveyance under Article 23 ad valorem on market value. Referring to
the Annual Report of BSL, it valued the entire property at 14, 31, 17, 661 and
requested for initiating proceedings under Sections 3, 33, 38, 40, 47-C(1)(2)(3) and
47-A(1) (2)(3) of the Indian Stamps Act. On this reference being made on 22nd April,
1988 to the Collector (Stamps), the Collector (Stamps) (who also happened to be the
District Collector, Bhilwara) ordered for registering a case under Sections 3, 33, 38,
40, 47-C(1)(2)(3) and 47(1)(2)(3) against the respondent-petitioner company and to
obtain a valuation report from the DRDA, Bhilwara of the property existing at site on
the land in question. A notice was issued to the Managing Director, BSL on 26-4-88
informing that an enquiry in connection with the supplementary lease deed registered
on 28-3-88 is undergoing for which the Assistant engineer, DRDA, Bhilwara shall be
coming on site where the representative of the company may also remain present and
make all the facilities available to the said officer.
However, without waiting for the report from DRDA, the Collector (Stamps) on 28th
April, 1988 recorded that since the report about the market value of the property in
question from DRDA will take enough time, the notice may be issued to the BSL for
levying stamp duty of Rs. 14,31,17,661 by treating the document in question as
conveyance on the basis of the valuation shown in the audited accounts of the
company and for levy of 10 times penalty. Thus, recording an order, the notice dated
28th April, 1988 was issued by the Collector (Stamps) to the petitioner company.

6. The very same officer, who has granted approval to draft supplementary lease put
by the Joint Director of Industries before him as Collector and District Magistrate,
Bhilwara, and executed the supplementary lease deed for and on behalf of the
Governor of Rajasthan on 25th March, 1988 and the said document having been
registered on 28th March, 1988 in his capacity as Collector (Stamps), opined it to be
not a supplementary lease deed or a lease deed but a conveyance of the entire unit of
the RSWM to BSL and initiated proceedings for charging the stamp duty on that basis
and levying of penalty for non-payment of duty. Again in his capacity as Collector and
District Magistrate Bhilwara, by his order dated 30th April, 1988 he executed a
document cancelling the lease dated 25-3-88 vide Annx. P/11. The said cancellation
order recites that 'in accordance with Rule 9 of the Industrial Allotment Rules, 1959
the lease deed should have been executed between Rajasthan Spinning and Weaving
Mills Ltd., and Bhilwara Spinners, the lesser being only a formal party the
supplementary lease deed dated 25-3-1988 is hereby cancelled'.

7. This order led to filing of Writ Petition No. 1412/88 by the BSL challenging the
order of cancellation of the deed dated 25th March, 1988. The stand taken by the State
Govt. in the reply to the writ petition No. 1412/88 which replied on behalf of all the
respondents including the Collector (Stamps), was :

       ".................The lease was originally executed in favor of M/s. Rajasthan
       Spinning and Weaving Mills Limited and the lease hold rights could be
       transferred only by Rajasthan Spinning and Weaving Mills Limited. The State
Government after having rented the lease hold rights to M/s. Rajasthan
Spinning Weaving Mills Ltd. was not competent to execute a supplementary
lease in favor of M/s. Bhilwara Spinning Mills Ltd.
xxxx xxxxx
The supplementary lease executed in favor of petitioner does not create any
right in favor of the petitioner. The petitioner No. 2 had sought permission from
the State Government to transfer his lease hold rights to petitioner No. 1. The
State Government granted permission to the petitioner No. 2 to transfer its lease
hold rights to the petitioner No. 2. The State Government having granted lease
in favor of petitioner No. 1 was not competent to execute a supplementary lease
deed in favor of petitioner No. 2 and create fresh rights in favor of petitioner
No. 1. Unless and until lease hold rights in favor of the petitioner No. 2 were
cancelled and the land in question reverted back to the State Government the
lease deed in favor of the petitioner No. 1 could not be executed. Both these
situations in the instant case have not arisen, as such after grant of permission to
the petitioner No. 2 to transfer the lease hold rights, the petitioner No. 2 could
have transferred the lease hold rights to the petitioner No. 1. The State
Government was not competent to execute any supplementary lease deed in
favor of petitioner No. 1 and create fresh rights in favor of petitioner No. 1.
When rights have been created by State Government in favor of petitioner No. 2
it had no right to re-transfer the lease hold rights in favor of the petitioner No. 1
till the lease in favor of the petitioner No. 2 was not cancelled, expired and the
property had reverted back to the State Government."
xxxx xxxxx
However it is submitted that no rights have been created in favor of the
petitioner No. 1 by the said supplementary lease deed. The supplementary lease
deed cannot be considered to be a part and parcel of the earlier lease deed. Once
the petitioner No. 2 sought permission under Rule 9 to transfer lease hold rights
in favor of the petitioner No. 1 the same has to be governed by Rule 9 and the
transfer has to be made by existing lessee in favor of the prospective lessee.
Since the present lease deed was not executed by the petitioner No. 2 in favor of
the petitioner No. 1 no rights have been created by supplementary lease deed
dated February 27/1988.
xxxx xxxxx
If the transfer deed was executed by the petitioner No. 2 in favor of the
petitioner No. 1, the petitioners would have been required to pay proper stamp
       duty. There was a mistake on the part of the respondents State Government in
       executing the supplementary lease deed which is of no consequence as it does
       not create any right in favor of the petitioner No. 1".
8. Thus, the categorical stand taken on behalf of all the respondents which included
the State of Rajasthan, the Collector and District Magistrate Bhilwara and the
Collector (Stamps), Bhilwara, was that under the instrument in question, subject-
matter of the present writ petition, neither any rights were created or transferred in
favor of BSL by the State nor the State was competent to do so. The stand taken by the
respondents was to the extent that not even the leasehold rights in favor of the BSL
could be created by the State for the remaining period of the lease which was
subsisting between the State and the RSWM vide Annx. P/2 dated 22-11-68. In spite
of these assertions ultimately the order of cancellation of an instrument, which
according to respondents was of no consequence, was revoked, which is apparent from
the fact that the writ petition No. 1412 of 1988 was got dismissed by the counsel
appearing for the State of Rajasthan by making a statement that the impugned order
has been revoked.

9. Meanwhile, the present petitioner had approached the Board of Revenue,
challenging the reference dated 22nd April, 1988 and notice issued on 28-4-88. By its
order dated 20th May, 1988 (Annx. P/12), the Board of Revenue, stayed the
implementation of the aforesaid two orders. The revision filed before the Board of
Revenue, arising out of the proceedings No. 2 of 1988 on the record of the Collector
(Stamps), was dismissed by the Board of Revenue on 26-8-96 as pre-mature, holding
that the company shall raise all the objections before the Collector (Stamps).
Thereafter, on 6th March, 1997 by Annx. P/15, the Collector (Stamps) issued a notice
in the proceedings marked as 65/97 calling upon the petitioner to show cause why
stamp duty on the instrument in question be not imposed as conveyance amounting to
Rs. 2,43,21,965 and penalty in respect thereof. The petitioner was required to appear
on 7th March, 1997. The Collector (Stamps) was apprised by letter dated 6th March,
1997 itself that 7th March, 1997 is a Gazetted holiday and it appears that the date 7th
March, 1997 has been fixed inadvertently. The petitioner also demanded a requested
to fix the date of hearing giving a reasonable period. Apart from the written request by
registered A.D., an express telegram was also sent. Responding thereto hearing was
refixed on 10th March, 1997 for which notice was issued on 7th March, 1997 which
indisputably was a gazette holiday. The petitioner company also submitted a
preliminary objection raising the question about propriety of the proceedings taken in
a hot haste without giving the requisite copies and chance to the petitioner to enable it
to produce evidence and examine witnesses and also raised objections as to the
jurisdiction invoked under Sections 47-C and 47-A of the Indian Stamps Act. It was
also pointed out that against the rejection of revision, the petitioner has also filed a
review petition before the Board of Revenue which is pending as well as petition for
making a reference to the High Court under Section 57 of the Indian Stamps Act. The
petitioner has also produced the various applications made by it before the Collector
(Stamps) protesting against the denial of reasonable opportunity and non-recording of
the proceedings that transpired during the day which are Annx. P/19 submitted at 3.30
on 10-3-97. Annx. 20 dated 11th March, 1997, Annx. 21 dated 11th March 1997 at
4.45 p.m., Annx. 22 dated 11-3-97 at 5.10 p.m., Annx. P/23 dated 12th March, 1997
protesting against the closure of evidence and demanding sufficient time to call for
Power of Attorney residing at Delhi and to examine him. Annx. P/24 dated 12-3-97
was submitted at 2.30 p.m. demanding cross-examination of the Sub- Registrar on the
affidavit which was on record but was not presented during the presence of the
representative of the petitioner company or its counsel. The application dated 13th
March, 1997 filed at 4 p.m. requesting to adjourn the matter pointing out that in view
of the manner in which the proceedings are being fashioned, a writ petition has been
filed in the High Court of judicature for Rajasthan at Jodhpur on that date so as to
enable the petitioner to await its outcome and another application for seeking time to
enable the chairman of the company to appear before the Collector (Stamps) and
examine himself who was to return from abroad on 15-3-97. Yet another application
dated 13th March, 1997 was made alleging that the proceedings are being conducted
in breach of principles of natural justice by entertaining evidence on record in the
absence of the parties. The proceedings ultimately led to making of an order by the
Collector (Stamps) on 13th March, 1997 itself levying difference of stamp duty of Rs.
2,43,20,885 and registration fee of Rs. 871 on the instrument in question and penalty
Rs. 2,43,641 totaling to Rs. 4,86,42,641.

10. Aggrieved with the aforesaid order, the petitioner had filed the writ petition No.
1480 of 1997 on 1st April, 1997 inter alia on the ground that the proceedings
conducted by Collector (Stamps) were in violation of principles of natural justice and
were in mala fide exercise of the power, that the Collector (Stamps) had no jurisdiction
to invoke Section 47-A inasmuch as Section 47-A applies only in the case of
instruments relating to immovable property chargeable with ad valorem duty on the
market value of the property as stated in the instrument. The instrument in question is
a supplementary lease deed where by the land in question has been leased in favor of
the petitioner company on which stamp duty is not paid ad valorem on market value of
the property but only on the basis of annual rent reserved, that the State Govt. being
the owner of the land alone and not of the building and machinery thereon, no
question of transferring or conveying of the buildings, plant or machinery in favor of
the petitioner under the instrument would arise for determining stamp duty payable on
the instrument in question. It was also urged that no question of conveyance within the
meaning of Section 2(10) of the Indian Stamps Act arise in the present case under the
instrument in question so as to invite attraction of Article 23.

11. The respondents, apart from raising preliminary objection for not entertaining the
writ petition on the ground of availability of alternative remedy under Rule 73 of the
Stamps Act to file revision before the Board of Revenue, contended on the merit that
notwithstanding the nomenclature and apparent purport of the document, the
authorities under the Stamps Act are entitled to go behind the instrument to find out
the true nature of the transaction and levy stamp duty which is payable on execution of
a conveyance deed to give effect to such transaction by construing the instrument in
question as evidence of conveyance of the immovable property comprised in the
industrial unit owned by the RSWM at Bhilwara to BSL, the petitioner, and as the
Duty on conveyance is payable ad valorem on the market value, the question of
determination of the market value depends on consideration of evidence and
conclusion of fact, the matter should have been left to be decided by the authorities
under the statute.

12. The learned single Judge, considering the various aspects and facets of the case
was not inclined to accept the preliminary objection and non-suit the petitioner on the
ground of availability of alternative remedy. The learned Judge considered that the
alternative remedy under the rules could be availed only on deposit of 50% of the
demand raised, which condition in the present facts and circumstances was too
onerous, to be treated as equally adequate and efficacious alternative remedy, hence
the Court would be justified in entertaining the writ petition notwithstanding the
availability of enunciated in Himmatlal Harilal Mehta v. State of M.P.1 M.G. Abrol,
Addl. Collector of Cutsoms, Bombay v. M/s. Shantilal Chhotelal and Co.,2 M/s.
Filterco v. Commissioner of Sales Tax, M.P., 3 and Srikant Kashinath Jituri v.
Corporation of the City of Belgaum, 4 that when the condition precedent for filing an
appeal is deposit of substantial portion of demand raised and about which no
discretion vests in the authority for waiving the condition even in appropriate cases,
nor the deposit of demand is confined to the admitted sum of liability, the remedy of
appeal or revision cannot be said to be an alternative efficacious remedy. The learned
single Judge also considered the issue in the light of the decision of the Supreme
Court in A.V. Venkateswaran, Collector of Customs, Bombay v. Ramchand Sobhraj
Wadhwani,5 Referring to well known exception to the ordinary rule to avail the
alternative remedy. The two well known exceptions are that (1) where there is a
complete lack of jurisdiction in the officer or authority to take action impugned, or (2)
where the order prejudicial to the petitioner has been passed in violation of principles
of natural justice. The two exceptions to the normal rule as to the effect of the
existence of an adequate alternative remedy are by no means exhaustive, and even
beyond them a discretion vests in the High Court to entertain the petition and grant the
petitioner relief in appropriate cases notwithstanding the availability of an alternative
remedy. This must necessarily depend on a variety of facts that govern the proepr
exercise of the discretion by the Court in the matter which is pre-eminently one of
discretion, it is not possible nor desirable to lay down inflexible rules which must
apply in every case which comes before the Court. The Court also took into
consideration the fact that the petition was admitted on 11-4- 97, the respondent had
put appearance and filed detailed return and the matter was pending for considerable
period. The learned Judge also took into consideration the important questions of law
required to be determined in the case, which ultimately deserve to be decided by the
High Court. The petition was admitted after hearing present appellant who had entered
caveat. The learned Judge did not find it proper to dismiss the writ petition on the
preliminary objection.

13. On merit, the learned Judge found that where the law implies a surrender from the
unequivocal conduct of both the parties which is inconsistent with the continuance of
the existing lease, such a surrender is valid under Section 111(f) of the Transfer of
Property Act, there would be a implied surrender when the lesser executes a new lease
of some property at the request of the first lessee. In the present case, a supplementary
lease deed was executed on 25-3-88 on the request of the original lessee RSWM in
favor of the petitioner by the Govt. of Rajasthan after granting necessary permission
vide its order dated 14-7-83. The facts and circumstances clearly indicate that there
was implied surrender by the RSWM in favor of BSL and thereafter the lesser had
entered into a new lease agreement with BSL. The document dated 23-5-88 does not
in any way indicate that the transfer of lease is by way of an assignment by the
RSWM in favor of BSL so as to attract the provisions of Article 63 of Schedule I of
the Rajasthan Stamp Laws Adoption Act, 1952 to levy a duty as conveyance on
consideration equal to the amount of market value of the property. Thus finding that
the transaction in question for the purpose of stamp duty clearly covered under Section
35(a)(iii) of the Stamp Act as adopted and the Duty livable is the same as on
conveyance on the basis of the amount of value of average annual rent, the Collector
(Stamps) was clearly wrong when he assessed the stamp duty by treating the
supplementary lease deed executed by State of Rajasthan and BSL as conveyance of
Bhilwara unit of RSWM to BSL and although the plant, machinery and building are
not mentioned in the lease deed dated 25-3-88, they were treated subject-matter of the
instrument on which the petitioner is liable to pay stamp duty for transfer of the plant,
building and machinery. The order passed by the Collector (Stamps) was accordingly
set aside and the petition was allowed.

14. In the appeal, the appellant in the first instance contended that the learned Judge
ought to have dismissed the petition on the ground of availability of alternative
remedy of filing revision under Rule 73 of the Rajasthan Stamps Rules, 1973.
However, in the facts and circumstances narrated above, for the reasons already
noticed, we are of the opinion that the discretion exercised by the learned single Judge
in entertaining the petition in spite of availability of alternative remedy on the ground
of onerous nature of availability of the remedy, and keeping in view the facts and
circumstances of the present case, in the manner in which the proceedings have taken
place and the complexity of issues which is invoked, was justified and does not call
for interference in the appeal on that ground.

15. On the merit of the case, the thrust of the contention of the learned counsel for the
appellant is that notwithstanding the document apparently purports to be a document
of creating leasehold rights in favor of BSL by the State, it is in fact a conveyance of
Bhilwara unit of RSWM which includes leasehold rights also, along with plant and
machinery and constructions thereon. Hence Stamp Duty was payable on the market
value of property conveyed, it was contended by the learned counsel for the appellant
that Section 27 requires the parties to any document to give full and true consideration
and all other facts and circumstances affecting the chargeability of the document with
the duty or amount of duty with which it is chargeable and where the parties to
instrument have not set forth all relevant facts and circumstances affecting the
chargeability of the document with duty or the amount of duty with which it is
chargeable, it is open for the stamp authorities to go behind the instrument to unveil
the real transaction beyond the instrument and levy duty thereon. In this connection, it
was contended that the plants and machinery which were permanently embedded to
the earth with an intention of running an industry and while embedding this machinery
the intention of the party was not to remove for the purpose of any sale of the same
either as a part of the machinery or as a scrap, such machinery being fixtures would
themselves become part of immovable property and will form part of the land, subject-
matter of transfer. According to learned counsel merely because RSWM is not a party
to instrument it would not make any difference if the instrument in the background in
which it is executed results in transferring the interest of the RSWM under the scheme
of transferring its unit at Bhilwara to BSL under the resolution dated 24-1-83, and
therefore, a duty on the instrument, shall be chargeable as on conveyance of the said
property which includes the land building standing therein and machinery embedded
therein including development charges leviable which go to constitute the market
value of the entire property in question. For this proposition, the learned counsel relies
on a decision of Supreme Court in Duncans Industries Ltd. v. State of U.P., 6 that
where a factory is transferred as a going concern which the vendor conveys under the
deed of conveyance, the value of plant and machinery can be taken into consideration
for the purpose of stamp duty payable.

16. Learned counsel also refers to the decision of the Supreme Court in Thayyil
Mammo v. Kottiath Rammuni,7 to contend that mere nomenclature of a document is
not the conclusive proof of the nature of the document and if on the correct
construction of a document the stamp duty has not been paid in accordance with law,
the same can be recovered by invoking the provisions of Sections 47-A and 47-C of
the Act as adopted in Rajasthan. In this connection, reliance was also placed on a
decision of this Court in Bajaj Hindustan Ltd. v. State of Rajasthan, 8 laying down that
the valuation for the purpose of stamp duty is to be made on the basis of what was
sought to be really conveyed through the instrument presented.

17. Mr. Ray, Senior Advocate, appearing for the respondent company contended that
the document in question in any sense cannot be construed as an instrument of
conveyance of factory plant and machinery within the meaning of Section 2(10) of the
Stamps Act for the purpose of attracting applicability of Article 23. It was urged that
the instrument in question being not a document between RSWM and BSL, the nature
of transaction between RSWM and BSL cannot be subject-matter of an enquiry while
construing a document executed between the State Govt. and BSL. For the purpose of
construing instrument neither the transaction between the persons who are not parties
to the instrument nor the properties which are not mentioned in the instrument at all
can be included for consideration. The duty payable under the Indian Stamps Act is on
the instrument and not on any transaction. If the instrument neither creates nor
purports to create right in any particular immovable property, the instrument cannot be
chargeable as an instrument conveying any property not mentioned therein from a
person not party to such an instrument. A document of conveyance has to be inter
vivos between two living persons conveying interest of one to another. Mr. Ray
contends that there was existing lease between the State of Rajasthan and RSWM for
99 years which could be brought to an end by the act of the parties. If by the conduct
of the parties, the surrender of existing lease takes place then the lesser is free to
create fresh lease in favor of the third party. The transaction in such circumstances
would again be only between the lesser and the party in whose favor fresh lease or
purported to be created is created under the instrument in respect thereof the rights
impliedly surrendered by the lessee but it cannot reach the rights which were vesting
in the lessee as owner of other properties and do not form part of the surrender. In this
connection, it was pointed out that the original lessee has obtained a permission from
the appellant to transfer his leasehold rights in favor of BSL vide grant dated 14-7-83,
thus, there was no impediment on RSWM to transfer the lease hold rights vesting in it.
However, the transfer of leasehold rights by the RSWM would not result in destroying
the privacy of contract between the State and RSWM so as to absolve the RSWM of
its obligations under the said lease notwithstanding an assignment of lease. The
assignee may also be responsible for payment of rents and other obligations to the
lesser. Thereafter, once the permission was granted by the State as lesser to the
RSWM to transfer its lease-hold rights on same terms of the conditions and it was part
of the condition of the sanction that a supplementary lease deed for the remainder
period of the lease shall be executed between the lesser and the assignee, the
instrument of supplementary lease deed dated 25-3-1988 can only be construed in that
light. The transaction between RSWM and BSL do not come into picture at all.
Moreover, in furtherance of this background when the previous lessee RSWM walked
out of the possession of the leased property viz. the land by putting BSL in possession.
In furtherance of the terms contained in sanction letter dated 14-7-83 the lesser and
assignee executed the supplementary lease deed on 25-3-88 to create a privity of
contract between the lesser and assignee directly which was an act inconsistent with
the existing relationship of lesser or lessee between the State of Rajasthan and
RSWM, it amounted to surrender of the leasehold rights by the RSWM under the
lease in favor of the State and thereafter by executing supplementary lease deed the
State Govt. only acted as it purported to have acted to create a fresh lease in favor of
BSL on consideration of annual rent of Rs. 1680 for the period of 72 years mentioned
in the instrument. Therefore, the question of conveyance of any property from RSWM
to BSL under the instrument simply do not arise. With these premise, the learned
counsel contended that the appeal deserves to be dismissed.

18. We have carefully considered the rival contentions and perused the record. At the
outset we would invite our attention to definition of conveyance as given in the Indian
Stamps Act, 1899 and adopted in the State of Rajasthan, which reads as under :-

       "(10) "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."

19. An analysis of the aforesaid provision makes it clear; (1) it applies to transfer of
properties whether movable or immovable; (2) that such transfer has to be made inter
vivos and not by operation of law; (3) it expressly includes conveyance of transfer of
property by sale or other transfer of property and excludes such transfer which are
specifically provided for by Schedule I.

20. If we have a glance at it, the Schedule I refers to many modes of transfer like
transfer by way of exchange, gift, lease, mortgage, release, surrender of lease under
different specified articles. All those modes of transfer are therefore excluded from the
expression 'conveyance' for the purpose of Act, and an instrument of such other modes
of transfer is to be governed by such specific article and not by general category of
'conveyance' under Article 23 read with Section 2(10). The question in the present
case posed is whether the instrument is an instrument of property mentioned in the
document of 'lease' or assignment of lease or 'conveyance' by way of transfer of
property from RSWM to BSL, as referred to above envisaged in Resolution of RSWM
dated 24-1- 1983. Suffice it to state that instrument of lease is provided for under
Article 35 and an instrument of assignment of lease under Article 66. Both cannot be
construed as 'conveyance' for the purpose of the Act of 1899 as adopted by State of
Rajasthan. Apart from it, it has to be further noticed here that sub-section (10) of
Section 2 refers to 'transfer inter vivos' i.e. to say instrument of conveyance can only
be such instrument which refers toany transfer inter vivos. Thus, it makes clear that in
order that an instrument falls within the definition, it is necessary that it must effect a
present transfer of property, it purports to convey. It must be an instrument between
two living persons purporting to transfer the property which is the subject- matter of
instrument from one party to another. It cannot relate to a transfer of property which is
not a subject-matter to the instrument. Nor it can relate to transfer of an interest of a
person who is not a party to such an instrument. That is to say, an instrument of
conveyance liable to duty under Article 23 of the Schedule I of the Act is confined to
the transfer of immovable properties between the parties to the instrument and the
properties to which it relates. Within that precincts only, an enquiry as to the
construction of the instrument for the purposes of stamp duty could be undertaken
under the provisions of the Act to the extent permissible. However, it cannot traverse
beyond the parties who have executed or on whose behalf the instrument has been
executed by authorized agents and property mentioned in the instrument to find out
the intention of the person who is not party to the instrument in respect of transfer of
the property which is not subject-matter to the instrument.

21. The charge of the stamp duty is only on instrument and not on the transaction. The
subject-matter of duty is the instrument through which any property is transferred or
rights created, not any other transaction which may exist between the parties but are
not subject-matter of instrument, which is to be construed and subjected to levy in
respect of property it deals with. Nor duty is livable on any transaction that may exist
between one or more parties to instrument and other person or persons not party to the
instrument, by holding an enquiry whether such other transaction has been carried out
in accordance with law or not.

22. It becomes relevant to consider the meaning of expression instrument for the
purposes of the Act which has been defined under Section 2(14).

       "(14) "Instrument" includes every document by which any right or liability is,
       or purported to be created, transferred, limited, extended or extinguished or
       recorded."

23. The aforesaid definition makes it clear that a document which either creates any
right or liability is created, transferred, extended, limited, extinguished or recorded can
fall within the category of instrument. Even if no such right or liability is created,
transfer, limited, extended, extinguished or recorded in fact but purports to create
transfer or record any right or a liability it may invite attraction of stamp duty. But,
obviously, the right or liability referred to under above definition can only relate to the
right or liability in respect of which the instrument has been executed. If any
transaction has been carried out between two parties without execution of an
instrument, the provisions of the Stamp Act cannot be attracted on the assumption that
in order to create, transfer, limit, extend, extinguish or record validly what instrument
ought to be executed. In the absence of any document creating or purporting to create
any right or a liability, or purporting to create such right or liability no provision of
Stamp Act can be invoked for the purpose of levying Stamp Duty by assuming
existence of any document for the said purpose. Else, it would amount to duty on
transaction and not duty on the instrument. The instrument is chargeable even the
transaction which it recorded or purports to record cannot be effected. For example if a
person having no interest in any property which he could transfer executes a document
purporting to transfer such interest in immovable property, the document will attract
Stamp Duty. Conversely also, as the duty is on the instrument even though where the
parties have acted in furtherance of the agreement between them by conducting their
affairs accordingly but have not executed any instrument to that effect, in the absence
of any instrument to that effect between the parties, no duty under the Act can become
chargeable.

24. In connection with the aforesaid two definitions under the Stamp Act, it would also
be relevant to refer to some relevant provisions of the Transfer of Properties Act. As
the definition of conveyance under the Stamp Act refers to 'transfer of property inter-
vivos' but what is transfer of property inter vivos is not defined under the Stamp Act,
to consider general law of transfer of property inter vivos becomes relevant. Section 5
of the Transfer of Properties Act reads as under :-

       "5. In the following sections transfer of property means an act by which a living
       person conveys property, in present or in future, to one or more other living
       persons or to himself, or to himself and one or more other living persons and "to
       transfer property" is to perform such act.

In this section "living person" includes a company or association or body of
individuals, whether incorporated or not, but nothing herein contained shall affect any
law for the time being in force relating to transfer of property to or by companies,
association or bodies of individuals.

25. The word "inter vivos" according to Bouvier's Law Dictionary (Volume II) means
'between two living persons'. The illustration used is 'as a gift inter vivos which is
made by one person to another person'.

26. In the Blacks Law Dictionary, expression inter vivos has been explained :

       'Between the living, from one living person to another. Where property passes
       by conveyance, the transaction is said to be inter vivos, to distinguish it from a
       case of succession or devise. So an ordinary gift from one person to another is
       called a "gift inter vivos", to distinguish it from a gift made in contemplation of
       death or a testamentary gift'.

27. Thus, the expression inter vivos refers to transfer or conveyance of the property
from one living person to another. Thus it is an act between two living persons who
are parties to such transaction which takes place between the two. That also is the
thrust of Section 5 of the Transfer of Property Act. It significantly is more clear and
explicit when it says that "transfer of property" means 'an act by which a living person
conveys property to one or more other living persons'. It is also to be noticed that
Section 5 of the Transfer of Property Act also uses expression "conveys property"to
denote transfer of property. Therefore, the word "conveyance" of immovable property
inter vivos read in the aforesaid context clearly indicates that an instrument of
conveyance envisaged under the Stamp Act can only refer to such an instrument
transferring or purporting to the transfer or conveying property between two living
persons who are party to such instrument and not a stranger to instrument.

28. Lord Crains while referring to expression "conveyance" has opined :

       "There is no magical meaning in this word. It denotes an instrument which
       carries from one person to another person an interest in land".
29. From the chain of events noticed above, it is apparent that only the leasehold
interest in the land in question is demised by the State of Rajasthan, the owner and
lesser by executing a deed in 1968. The lesser in the demised property had no other
interest vesting in it at the time of grant of lease in favor of the RSWM nor at any time
it has acquired any interest in the industrial unit established over the said plot in terms
of the conditions of allotment by the RSWM. The industrial unit was a property
absolutely vesting in the RSWM. No interest in that unit as such vested in the State
Govt. which as a person it could convey on its own to anyone. That is not even
disputed by the appellant. Hence the instrument in question cannot be construed as an
instrument creating any right, which the conveying party to instrument viz. State of
Rajasthan itself did not have. What the document purports to convey obviously
depend only on what property and interest has been made subject of instrument and
not beyond it. It therefore cannot be an instrument of conveyance within the meaning
of Section 2(10) read with Section 2(14) of the Stamp Act.

30. RSWM, when it decided to transfer its interest in its Bhilwara unit to another
company to be incorporated as its subsidiary company had envisaged a transaction
between RSWM and BSL namely between the two companies, one of which was
holding company and the other was a subsidiary company. As per provision of Section
5 the two companies are to be deemed to be living persons and transaction of
transferring Bhilwara unit from RSWM, one living person to BSL, another living
person is a transfer or interest of RSM to BSL inter vivos. The Companies Act
envisages that any property in the company can be transferred by a resolution of
General Meeting of its members authorizing to transit the property. The transfer of
Bhilwara unit as a whole as going concern involved transfer of all interests of the
RSWM in the said unit including its leasehold rights in respect of land on which the
industrial unit was established. But for the condition under the lease deed dated 22-11-
1968 and the Industrial Allotment Rules, 1959 the lessee could have assigned its lease
hold rights in terms of Section 108(J) of the Transfer of Property Act which envisages
an implied authority in the lessee to transfer the lease absolutely or by way of
mortgage or sub lease the whole or any part of his interest in the property and any
transferee of such interest may again transfer it. It also envisages that the lessee shall
not by reason only of such transfer, cease to be subject to any of the liabilities
attaching to the lease. That is to say that the privity of contract between lesser and the
original lessee shall continue notwithstanding subsequent and successive assignments
of the leasehold rights of the original lessee.The result of assignment of leasehold
right could create privity of estate between the original lesser and the assignee but not
privity of contract which continues between the original lesser and the original lessee.
In such event original lessee alone continue to be reckoned as lessee and his transferee
only gets the status of assignee under an independent contract permissible under law.
If the leasehold rights are assigned in favor of the lesser, it results in extinguishment
of lease as the right of the lesser in the lessee merges into one. If on assignment of
lease in favor of a third party, the lesser executes a fresh lease in favor of assignee
from a lessee to his knowledge, it may bring to an end privity of contract between
original lesser and original lessee and the new contract results in fusion of privity of
contract once again between the lesser and assignee squeezing out the original lessee
from the scene inasmuch as the execution of new lease deed between the lesser and
the lessee's assignee result in extinguishment of rights and obligations of the original
lessee by implied surrender and grant of fresh lease by the lesser in favor of the
assignee. This position has been stated in Woodfall's Law of Landlord and Tenant 26th
Edition, Volume I page 914. The principle of surrender by operation of law. The term
"surrender by operation of law" or implied surrender (there being no distinction) is the
expression used to describe all these cases where the law implies a surrender from
unequivocal conduct of a both parties which is inconsistent, with the continuance of
the existing tenancy. Thus it is properly applied to cases where the owner of a
particular estate has been party to some act having some other object than that of a
surrender, but which object cannot be effected whilst the particular estate continues,
and the validity of which act he is by law estopped from disputing. Such surrender is
the act of the law, and takes place independently of, and even in spite of, the intention
of the parties. It is presumed to have preceded the act to which the tenant is party."

31. Section 111 of the Transfer of Property Act which envisages the contingencies in
which lease of the immovable property determines, includes 'determination of lease by
implied surrender' too is in consonance with above principles. In Mulla's Transfer of
Property Act 9th Edition the position has been explained :

       "Implied surrender or surrender by operation of law.
       (1) by the creation of a new relationship; or
       (2) by relinguishing of possession.
       xxxxxx
       The principle which governs the doctrine of implied surrender of a lease is that
       when a certain relationship existed between two parties in respect of a subject-
       matter and a new relationship has come into existence regarding the same
       subject-matter, the two sets cannot co-exist, being inconsistent and incompatible
       between each other, i.e. if the latter can come into effect only on termination of
       the former, then it would be deemed to have been terminated in order to enable
       the latter to operate.
       xxxxxx
       There can be an implied surrender if the lesser grants a new lease to a third
       person with the assent of the lessee of the existing lease who delivers the
       possession to such person or where the lessee directs his sub-tenant to pay the
       rent directly to a lesser".

32. The principle has been accepted by the Supreme Court in PMC Kunhiraman Nair
v. C. R. Naganatha Iyer, 9 (Para 10) :

       "Under clause (f) of Section 111 of the Transfer of Property Act, 1908, implied
       surrender is made for determination of a lease of immovable property. In
       English Law, delivery of possession by the tenant to a landlord and his
       acceptance of possession effects a surrender by operation of law. ....Just as
       under the Enslish Law, there can be an implied surrender under the law of
       transfer of property in India, if the lesser grants a new lease to a third person
       with the assent of the lessee under the existing lease who delivers the
       possession to such person or where the lessee directs his sub-tenant to pay the
       rent directly to a lesser."

33. The same view has been expressed by this Court in Noratmal v. Mohan Lal,10

34. In the light of aforesaid principle, it is clear that the RSWM had agreed to transfer
its Bhilwara unit which included the lease hold right in the land in question along with
his other assets which formed part of the Bhilwara unit to its wholly owned subsidiary
company BSL. The State Govt. as lesser has granted permission for such transfer of
lease-hold rights in favor of BSL for the land in question as required under the lease
deed of 1968. In pursuance of the agreement between the RSWM and BSL to convey
its interest in Bhilwara unit with stipulation of transfer of its leasehold rights in
absolute, BSL has been put in possession of the land in question after fulfilling
condition under lease agreement about which there is no dispute. This part of
transaction is between the RSWM and BSL. The instrument in question neither
creates any such right in BSL by transfer of any right of RSWM by State in fact, nor it
purports to create such rights. By the instrument in question dated 25th March, 1988
lesser has accepted the BSL as its lessee for the remainder of the period and it has
agreed to accept the rent directly from him. The assent of the original lessee for the
creation of new relationship between the lesser and his envisaged assignee is apparent
from the fact that it applied for permission of such transfers and the State Govt. has
agreed to grant such permission with the stipulation that a supplementary lease deed
shall be executed by BSL in favor of State Govt. acknowledging the State Govt. as its
lesser. Thus, the continuance of the existing lease between State of Rajasthan and
RSWM become inconsistent with the continuance of new lease between the State of
Rajasthan and BSL having come into existence with the assent of the original lessee,
the rights of the original lessee stood surrendered. The original lease deed Ex. P/2, in
favor of RSWM, permission letter dated 14-7- 1983 culminating into execution of
supplementary lease deed dated 25-3-88 in favor of BSL all relates to only one
property namely lease hold rights in the plot in question which originally stood created
in favor of the RSWM, now stood created between State Govt. and BSL vide Ex. P/4
resulting in surrender of lessee's right of the RSWM extinguishing privity of contract
between himself and the State Govt. on coming into existence new privity of
agreement between State of Rajasthan and BSL. Therefore, the instrument in question
which neither refers to any property other than the leasehold rights in the plot in
question neither purports to transfer any property other than property in question the
leasehold rights in the plot. It even does not convey any of rights of RSWM to BSL
through the instrument, but only the effect of creation of new right between the State
of Rajasthan and BSL is that existing privity of contract between State of Rajasthan
and RSWM which still holds RSWM bound to State, is extinguished.

35. The instrument in question cannot be instrument of conveyance for transfer of
property other than the property of State Govt. from State Govt. to respondent BSL.
There was no material or ground for the authorities acting under the Stamp Act to
assume it being an instrument of conveyance of property inter vivos from RSWM to
BSL on any principle of transfer or property from one living person to another living
person as a transaction inter-vivos either in the light of the definition of conveyance
under Section 2(10) of the Stamp Act or the transfer of property defined under
Transfer of Property Act. In our opinion, the transfer of property inter vivos under
Stamp Duty Act cannot be different and distinct from the transfer of property under
Section 5 of the Transfer of Property Act. Nexus between the two is clear. Section
2(10) refers the conveyance to mean transfer of property inter vivos by way of sale or
other methodology not specifically provided under Schedule I of the Act of 1899, and
Transfer of Property Act which deals with the substantive law on transfer of
immovable property too envisages transfer of immovable property mean conveying
the property from one living person to another living person i.e. transfer inter vivos.
36. The authorities under the Stamp Act apparently were laboring under the obsession
of the transaction of transfer of a going unit from RSWM to BSL without referring to
any instrument, if any executed between the two living person concerned viz. RSWM
and BSL creating or purporting to create rights in the properties constituting Bhilwara
unit of RSWM in favor of BSL. The question about levy and collect stamp duty in
respect of conveyance of any property from RSWM to BSL, could only refer to an
instrument of conveyance executed and existing between the said two companies and
not to any other instrument. The ground on which the proceedings have been
commenced against BSL in respect of instrument dated 25-3-1988, in our opinion
were non existing and no person reasonably instructed in law vested with authority to
exercise under the provisions of Stamp Act could have reason to hold that the
instrument dated 25-3-1988 was an instrument of conveyance of Bhilwara unit of
RSWM which includs the building, plant and machinery and other fixtures other than
lease hold rights in the plot in question from RSWM to BSL. The instrument could
have only been confined to any right or liability created or purported to have been
created between the parties to instrument in respect of the property or property
mentioned in the instrument. The authorities could not travel beyond the instrument to
include interest of persons not parties to instrument or properties not referred to in the
instrument. The exercise of construing the nature of transaction emanating from
instrument subjected to Duty could only be confined to creation of rights, liabilities
and obligation created or purported to be created between parties to the instrument and
to the properties mentioned in the instrument. If it were to be treated as conveyance, it
could be only conveyance from State of Rajasthan to the BSL in the property
mentioned in the instrument. It may again be pertinent to recall here that with
reference to the reasons stated above that the instrument of conveyance in question
should either create some rights in fact or purport to create rights which it really does
not or could not create. Obviously, the instrument in question does not purport to
create any right through transfer or conveyance of immovable property except by
creation of lease. It does not purport to transfer the land in question by sale from State
of Rajasthan to BSL. In fact, it cannot and does not create any other right between the
parties other than the lease in respect of any property other than plot in question
inasmuch at no point of time the property in the building, plant and machinery and
fixtures on the land in question in which the lease hold rights were held by the RSWM
became part of the ownership of the State of Rajasthan by any mode of conveyance or
by operation of law so as to become a part of the land which could be conveyed to the
BSL by State of Rajasthan.
37. By any stretch of imagination it cannot be suggested, nor it has been suggested ,
that State Govt. was a party to the instrument as an agent or attorney of RSWM, who
intended and did execute the instrument to transfer any property of RSWM to BSL or
a party to devise adopted to avoid Stamp Duty for the benefit of transferee. As a
matter of law State could not transfer any property of RSWM. As a matter of intention
the State did not purport to transfer property of RSWM. Hence the instrument in
question neither can be an instrument that created a conveyed property of RSWM to
BSL in law, nor it purported to do so. It, therefore, cannot be held an instrument of
'conveyance' on other count.

38. Even assuming that the implied surrender of the lease, the developments made on
the land in question became part of the land and reverted to the State, still it being not
a transaction from State to the BSL was only a transaction of lease of the land as it
stood which was the property of the State Govt. in favor of the lessee BSL and a lease
executed on 25-3-1988 which was only liable to duty under Article 35 on the annual
rating value. Article 35 reads as under :

       "Article 35 : Lease, including and under lease, or sub-lease and any agreement
       to let or sub - let --
       (a) where by such lease, the rent is fixed and no premium is paid or delivered;
       (i) x x x xx x x x
       (ii)x x x xx x x x
       (iii) where the lease purports to be for a term of not less than one year but not
       more than three years;The same duty as on a Conveyance (No.23) for a
       consideration equal to the amount or value of the average annual rent reserved.
       (iv)x x x xx x x x
       (v)x x x xx x x x
       (b) where the lease is granted for a fine or premium or for money advanced and
       where no rent is reserved.The same duty as on a Conveyance (No.23) for a
       consideration equal to the amount or value of such fine or premium or advance
       as set forth in the lease."

39. The stamp duty is payable for consideration equal to the amount or value of the
average annual rent reserved. As neither the original lease was granted for a premium
or for money advance nor under the instrument in consideration any premium or
money advance is payable as term of lease, the operation of sub-clause (b) of Article
35 does not arise. There was no room at any point of time to include the value of the
estimated premium which the State Govt. ought to have charged under the Industrial
Allotment Rules as have been envisaged in show cause notice referred to above. It is
significant to note that stamp duty is chargeable on consideration equal to amount of
value of fine, premium or advance as set forth in the lease. The stamp duty is payable
on an instrument of lease on premium on a consideration charged as set forth in the
instrument but not on consideration chargeable under the rules which in fact has not
been charged. Obviously, non charging of premium under the Industrial Allotment
Rules is another circumstance which goes to show that it was an execution of lease
simpliciter for creating privity of contract between the owner State of Rajasthan with
BSL, as a lessee. Nothing more nothing less. The State Govt. has not purported to
assign or transfer the lease hold rights of RSWM to BSL under the instrument in
question, nor it could, nor the documents actually results in assigning of rights of
RSWM to BSL by dint of the said instrument so as to construe assigning of lease
within Article 63.

40. The apprehension and anxiety behind the action taken by the Stamp Duty
authorities concerning the avoidance of payment of stamp duty on the conveyance
from RSWM to BSL also appears to be ill founded. It would be apposite to invite
attention to the provisions of Transfer of Property Act. Section 5 of the Transfer of
Property Act, Para 2 of which clearly envisages that the provisions of Transfer of
Property Act shall not affect any law for the time being in force relating to transfer of
property to or by companies, associations of bodies of individuals. That is to say,
special law for the companies in relation to the transfer of their properties shall prevail
over the Transfer of Property Act. Though the question whether the property of the
RSWM stood transferred to BSL in accordance with as an inter vivos transfer is not a
subject-matter of enquiry. However, it is relevant to consider that provisions of Section
5 of Transfer of Property Act envisages exclusion of applicability of Transfer of
Property Act in relation to the transfer of properties of the companies in accordance
with the Companies Act, if any special provisions are made there under.

41. Under the provisions of the Companies Act, the special methodology is provided
for entering into compromise which includes re-construction by amalgamation of two
companies or by having of the assets of the companies under the provisions of
Sections 391 to 394 of the Companies Act, 1956. If on result of scheme sanctioned by
the Court reconstruction of existing company, or amalgamation of two companies or a
compromise is sanctioned and implemented under which property of one company
stands transferred to another company by dint of the orders of the Court, and the
property of one company stands transferred to another by operation of law, such
transfer shall be governed by the provisions of the Companies Act. Whether the
conveyance of the Bhilwara unit of RSWM to BSL has taken place under any special
provision of the Companies Act is not the subject matter of enquiry in these
proceedings and could not be a subject matter of enquiry under the impugned notice to
hold and raise a demand on the premise that the RSWM could not have transferred the
property without execution of a registered deed in favor of BSL. We have noticed
above that so far as conveyance or transfer of property of RSWM to BSL is
concerned, the plea of the company has been that such transfer has taken place in
accordance with provisions of Companies Act by issuing shares, whether in fact a
valid transfer of Bhilwara Unit of RSWM to BSL has taken place in accordance with
law or not or any documentation between the two companies attracting Stamp Duty
has taken place or not can only relate while construing instrument, if any, to that
effect. But not while construing the instrument in question to which such transaction is
foreign. If no valid conveyance of property of RSWM to BSL has taken place, it will
have different consequence of its own on the affairs of the companies concerned when
the question arises while dealing with question whether such properties validly vested
in BSL.

42. Moreover, the requirement of registration and payment of stamp duty are two
different requirements. It is not necessary whether a document is required to be
necessarily registered is also required to be stamped necessarily. Under Stamp Act a
remission is operating on transfer of properties from holding company to its subsidiary
company. The transfer from RSWM to BSL was transfer to a 100% subsidiary
company. Under Section 9 of the Indian Stamp Act Notification No. 1 had been issued
on 16th January, 1937 by the Central Board of Revenue granting a general remission
on Stamp Duty chargeable on conveyance of any property from holding company of
its subsidiary company in the following terms :

       "(i) Where at least 90 per cent, of the issued share capital of the transferee
       company is in the beneficial ownership of the transferor company, or
       (ii) Where the transfer takes place between a parent company and a subsidiary
       company one of which is the beneficial owner of not less than 90 per cent , of
       the issued share capital of the other, or
       (iii) Where the transfer takes place between two subsidiary companies in each
       of which not less than 90 per cent of the share capital is in the beneficial
       ownership of a common parent company :
       Provided that in each case a certificate is obtained by the parties from the
       officers appointed in this behalf by the Local Government concerned that the
       conditions above prescribed are fulfilled."

43. That notification was designed to facilitate reconstruction of a Company or
amalgamation of two Companies which are more or less under same ownership so that
they may be able to rearrange their affairs without being saddled with liability for
payment of Stamp Duties. The Rajasthan State has by the Rajasthan Stamp Law
(Adaption) Act, 1952 has adapted the Indian Stamps Act subject to provisions made in
the Adaptation Act. For coming to conclusion whether Stamp Duty was at all livable
on the alleged conveyance of property from RSWM to BSL would have required
consideration of question about the consequence of adaptation of Indian Stamp Law
by providing that the Indian Stamp Act, 1998 of the Central Legislation as amended
from to time, shall apply to the whole of the State of Rajasthan w.e.f 1-4-1958, on the
applicability of such notifications under Indian Stamps Act prior to 1-4-1958 and were
in force, within the State of Rajasthan as on that date of particularly when no provision
to the contrary has been made in the Adaptation Act to affect the operation of
notification for relaxation of the provision of the Act, particularly in the cases of
general remission like the one under Notification dated 16-1-1937. It would also entail
an enquiry into question as to difference "between legislation by incorporation and
adaptation of an operative statute for continued operations subject to provisions made
to the contrary in Adaptation Act. Prima facie it appears to us that there is a vital
difference between legislation by incorporation, and adaptation of existing law to
operate in the given territory subject to adaptations made by the legislature adapting
the same to operate within the territorial region of its operative field. In the former it is
a case of enactment afresh to cover the field so far uncovered by the legislative field
open for the legislature, by bodily lifting the provision of another statute by
incorporating words by word as a part of enactment being made, resulting in repeal of
all previous laws operating in the field. In the case of adaptation, what is enacted is
the adaptation of provisions as implemented to continue to operate within the occupied
field, except to the extent adaptation made. In other words, adaptation is method of
legislation by which law in operation is adapted for continued operation as it is,
subject to the provisions made afresh in the adapting enactment. In such event, it
stands to reason that sub-ordinate legislation which is operative law, remains in
continued operation, unless independent or contrary provisions are made in adapting
statute. However, as the question about the levy of Stamp Duty from RSWM to BSL
was not at all subject matter of enquiry, nor was within the scope of enquiry in
construing the nature of instrument, we refrain from probing into this question further
and do not express any final opinion. This aspect has been noticed only to point out
that an enquiry into the question of levy of Stamp Duty on any conveyance from
RSWM to BSL would have entirely different scope than the construction of instrument
between State of Rajasthan and BSL which enquiry cannot travel beyond the right of
the parties to instrument in the property named and dealt with in the instrument and
nature of their dealing in the instrument so as to determine the true nature of business
transacted between the parties to the instrument in respect of property mentioned
therein.

44. That apart whether the deed of conveyance between RSWM and BSL of Bhilwara
Unit under the instrument dated 19th Jan., 1985, (produced along with the application
dated 23rd March 2000 in this appeal) creates or purports to create any right or
liability amounting to conveyance or subject to stamp duty under any provision and
whether any proper stamp duty has been paid thereon or not is not the subject of
enquiry here but the fact remains that the present petitioner-respondent claims to have
acquired interest of the RSWM in its Bhilwara Unit by dint of issuing shares. If the
Bhilwara Unit stood validly transferred by the act of transferor company RSWM to
transferee company BSL it would not change the character of the present instrument.
It is independent of the transaction between RSWM and BSL. The instrument in
question relates to creation of lease in favor of BSL by the appellant resulting in
fusion of privity of contract and privity of estate between the parties namely State of
Rajasthan and BSL. If there is no valid transfer of the Bhilwara Unit from RSWM to
BSL, the creation of leasehold right in the land in question would not result in creation
of any right in the properties of RSWM to BSL nor the instrument purports to create
such rights. Therefore, the instrument cannot be treated to be an instrument creating or
purporting to create interest in the property of RSWM in favor of BSL so as to invite
consideration of construing the instrument as conveyance from RSWM to BSL. It is
not even the case of appellant that instrument is a conveyance from State Govt. to the
transferee BSL. It would be suffice to refer to the stand taken by the State of
Rajasthan, Collector, Bhilwara and Collector (Stamps) in response to Writ Petition No.
1412 of 1988 quoted in extenso in narration of facts. It is the undisputed case of the
present appellant that a supplementary lease deed was not required and in fact did not
create any rights in favor of the BSL from the State Govt. inasmuch as the State Govt.
could not create any right in the property in question in favor of BSL. Therefore, when
admittedly, the one of the executants namely the State Govt. could not create any right
in the property of RSWM in favor of BSL, the document can only be read as what it
purports to be namely the creation of lease which, it purports to create at least, in favor
of BSL for a period of 72 years for which annual rent is reserved as Rs. 1680/-. The
stamp duty is chargeable only on that basis.

45. Section 2 (xiv) excludes from the purview of conveyance any transfer of
immovable property which is not otherwise specifically provided for by Schedule I.
Lease is mode of transfer specifically provided under Article 35 of Schedule I of the
Stamp Act and transfer of lease by way of assignment vide Article 63 of the Schedule
I of Stamp Act. Thus whether it be a lease or assignment of lease, it cannot be an
instrument of conveyance.

46. We are therefore, in agreement with the conclusion reached by the learned single
Judge for the reasons aforesaid that the instrument is a lease-deed and chargeable to
duty under Article 35(a)(iii) of the Rajasthan Stamps Act and the duty livable is the
same as on conveyance on the consideration equal to the amount of the average annual
rent reserved.

47. There is yet another aspect of the matter which may be noticed. It has been the
case of the appellant that by the methodology adopted by RSWM the property in
question has not been transferred and the transfer has been complete only by execution
of supplementary lease deed. If that is so, it becomes a case where there are several
instruments for completing the transaction. In that event under Section 4 only the
principal instrument is to be charged with the duty prescribed under Schedule I for the
conveyance of mortgage or settlement and each of the several instruments will be
chargeable with the duty of Rupee 1/- (now Rs. 2) only if any duty is prescribed in
that provision. Obviously, on the facts narrated above, as per the appellants the
instrument between RSWM and BSL, if any, does not complete the transaction;
between them and for completion of transaction, supplementary lease deed Ex. 3 was
also required to be executed by the State. In that event , the principal instrument of
sale or conveyance as a result of agreement between RSWM and BSL would be the
instrument executed between those two companies as parties to transaction. The
execution of supplementary lease deed to complete the transfer of leasehold rights in
the plot over which the Bhilwara Unit was existing is only a document incidental to
complete the formality of transfer of the lease-hold rights in land as component of the
property in its entirety, and therefore, only the instrument executed between the
principal parties to the transaction namely RSWM and BSL would attract the Duty as
conveyance, if the same is liable to stamp duty, which is alleged to be by the
respondent as annexure along with the application referred to above in this appeal and
the document in question Annexure P/3 can only be considered as an incidental
document chargeable with fixed fee of Rupee 1. Further, in such event, it is the option
of the parties to the transaction to determine between themselves which of the
documents shall for the purpose of Section 4 of the Stamp Duty Act be deemed to be
principal document. In the absence of any option exercised by the parties , incidental
instrument cannot be deemed to be principal document so as to attract the duty
chargeable on the principal document as conveyance.

48. It has been urged by learned counsel for the State that instrument in question
makes a mention of transaction between original lessee RSWM and its assignee BSL,
therefore the said transaction is subject-matter of the instrument in question. We are
unable to accept. Merely because a reference has been made in the instrument to the
original lease, and about the sanction granted in favor of the RSWM and the
transaction between RSWM and BSL, it does not amount to be incorporating, the
terms and conditions of transaction between RSWM and BSL, as the terms and
conditions of an agreement between State of Rajasthan and BSL as part of the
instrument in question. To draw any such inference, it must be clearly shown that the
parties to the instrument intended to incorporate them in the deed. In this connection,
attention may be invited to the decision of the Supreme Court in Himalaya House Co.
Ltd. v. Chief Controlling Revenue Authority , 11 It was a case in which a person
obtained a land on lease from the Govt. and constructed a building thereon consisting
of several flats, offices and shops. Under various agreements, he appears to have
assigned the right of occupation to several persons. The occupants formed a company
under the Companies Act. Lessee executed deed whereby he surrendered right in the
land in favor of the company for no consideration. The authorities under the Stamp
Act sought to levy the stamp duty on the said instrument executed between the person
holding leasehold rights from the Govt. and the company in whose favor these lease-
hold rights were assigned for no consideration as conveyance of the property. The
value of consideration was sought to be taken as the total amount received from the
occupants of the flats under agreements executed between the original lessee and the
occupants on the like plea as has been raised before us. The Court rejected the
contention of the revenue while allowing the appeal by the assignee and held that
there was no basis to hold that consideration is the total amount received under the
agreements between him and the persons to whom he had assigned certain rights in
the flats, offices and shops in the building, those persons had independent right of
their own, their rights did not flow from the impugned Assignment Deed. Whether the
title obtained by them was perfect or not, there is no denying of the facts that they had
acquired valuable rights even before the impounded deed was executed.

49. With the parity of reasoning's, it can be said that the consideration that was passed
from BSL to RSWM for conveyance of the property comprised in Bhilwara Unit from
RSWM, is, independent of the instrument in question. Whether the title obtained by
BSL from the RSWM was perfect or not is also independent of the instrument in
question and that cannot affect the Stamp Duty payable on construction of instant
document as executed between the State of Rajasthan and the BSL on the premises of
their respective position vis a vis the property described in the instrument.
50. The decision relied on by the learned counsel for the appellant namely Duncans
Industries Limited v. State of U.P., 12 in our opinion is of little assistance in the present
case. It was a case in which, ICI India Ltd. a company registered under the Companies
Act had executed an agreement of sale dated 11-11-93 wherein it agreed to transfer on
as "as is where is" and as "a going concern" its fertilizer business of manufacturing,
marketing, distribution and sale of urea fertilizer in favor of CCFCL renamed as M/s.
Duncans Industries Ltd. for Rs. 70 crores which was termed as "slump price" in the
agreement. It was in relation to an instrument between the parties to the transaction of
conveyance that a question arose whether the immovable property under the
conveyance on which stamp duty was payable ad valorem at market value would
include plant and machinery and land, building thereon because the agreement was to
transfer the immovable property was on 'as is where is' basis. It is apparent that the
conveyance of property under the instrument was not in dispute. What was in dispute
was which part of the transferred property consisted of immovable propety so as to
invite attraction of ad valorem stamp duty on its market value. We are not, here
concerned with a case where the question of market value of the property described in
the instrument itself is to be considered.
51. The other decision relied on by the learned counsel for the appellant is Bajaj
Hindustan Ltd., AIR 1997 Rajasthan 262. This decision rather helps the respondents
than the appellant. It was a case in which M/s. Bajaj Hindustan Ltd. had transferred its
factory to M/s. J.K. Udaipur Udhyog Ltd. in the year 1993. The plant and machinery
and EDPS of the cement undertaking were not mentioned in any of the documents as
property conveyed under the instruments in respect of which market value of the
property was enquired by the authority under the Stamp Act. On the aforesaid
omission being challenged in the Court, the Division Bench of the High Court found
that whereas the main contention sought to be made by the petitioners is that the plant
and machinery and electrical and EDP of the cement undertaking were separately
transferred by delivery of possession vide receipt dated 1-12-1993, the respondents
(Stamp Duty Authorities) in their valuation have purported to value such plant and
machinery and electrical and EDP in respect of which no document was presented or
lodged by the petitioners before the respondents for registration. The Court said (Para
23 of AIR) :

       "The said plant and machinery and electrical and EDP are extraneous to the five
       documents lodged for registration. The respondents while seeking to include the
       value of such assets in the value of the properties mentioned in the five
       documents lodged for registration have gone beyond the documents presented
       for registration in complete disregard of the charging Section 3 of the Indian
       Stamp Act as adopted in the State of Rajasthan. List of assets which were
       transferred separately by delivery of possession on 1-12-1993 was made over to
       the respondents on or about 4th Oct. 1994. The respondents thus while seeking
       to value those properties which were extraneous to the five documents lodged
       for registration are in fact seeking to re-write the documents presented for
       registration which is not permitted in law."

We are in respectful agreement.
52. The same view was taken in Mohd. Hussain v. District Registrar, 13 wherein it has
been held that it is only the instrument that is presented for registration that should be
charged with the stamp duty . The authorities cannot look into the various documents
that are connected with it with a view to judge the nature of the transaction that is
covered by this document read in conjunction with several others.

53. In view of our conclusion on the merit of the issue, we are not examining the other
issues raised before us by the learned counsel for the respondents namely whether
power under Section 47-A or 47-C could have at all been invoked in the present case
by the Collector (Stamps) when the stamp duty payable on the instrument was not as
per market value but was only on the consideration.

54. Even if it be treated as an assignment of lease as on the date the instrument was
executed, the stamp duty was payable not on the market value but on the consideration
at the rate applicable to the conveyance of such value.

55. Another contention raised by the learned counsel is that the power has been
invoked mala fide.
56. Having agreed with the conclusion reached by the learned single Judge about the
true nature of the instrument and its chargeability to the stamp duty under Article 35,
we are of the opinion that prima facie case of malice in law appears to have been
made out. The manner in which the proceedings have taken place, the fact that the
very same officer has accorded approval for execution of a supplementary lease deed
on behalf of the State of Rajasthan which was in consonance with the conditions of
permission granted vide Annexure P/3 dated 14-7-1983 and the said document having
been registered on 25th March, 1983, the Sub Registrar barely three days thereafter
makes a reference to treat it not as a supplementary lease under Article 25-A but a
fresh lease yet thereafter another reference is made by the Registrar of the stamp on
28th April, 1988 to the Collector (Stamps), who is the same officer as District
Collector who had executed the document in question stating to treat the
supplementary lease a documents of conveyance of the property from RSWM to BSL.
Taking notice of the said reference on the very date, the Stamp Collector made an
order for appointing DRDA for valuing the market value of the property which is
apprehended to be a subject-matter of conveyance. Then after directing the DRDA to
appoint a person and submit a report of valuation, the said officer without waiting for
the report, on the very same day decides to accept the valuation disclosed by the
Registrar in his communication dated 28th April, 1988 on the basis of Audited Annual
Accounts of the Company 1986 and issues a notice describing the amount of duty and
penalty to be levied thereon to show cause against it. Having issued this notice by
treating it to be a document of conveyance resulting in creation of right in property
subject matter of transaction between RSWM and BSL , in his capacity as District
Magistrate, Bhilwara, cancels the said lease by holding that it was not required to be
executed at all and when the order of cancellation is challenged, a categorical stand is
taken that the document in question does not puport to transfer any interest in favor of
BSL by the State Govt. inasmuch as State Govt. had no interest on that date and
persuades this Court to dismiss the writ petition. One fails to comprehend that when
all concerned viz. the State of Rajasthan, the District Collector, the Collector (Stamps)
unanimously held the view that the the State of Raj. the designated lesser or the
transferee under the instrument did not have any interest in property which it could
have transferred, and the document was a superfluous act, any belief at all could be
held by the Collector, Stamps at any time that it created an interest in property of
Bhilwara Unit by way of conveyance and construing the document to be a document
of conveyance which it did not ever purport to be. Then the order of cancellation of
lease has been revoked only in 1997 and thereafter the manner in which the hearing
has been fixed and adjudicated by the then Collector (Stamps) particularly keeping in
view that the date of hearing was fixed on a holiday and when pointed out that it was a
gazetted holiday, notice fixing next date was still issued on gazetted holiday as if even
delay of one day in fixing the date was not palatable. Ignoring the fact that until 1997
the proceedings were stayed under the orders of competent superior Court. He refused
to grant opportunity to the company for even producing relevant documents or calling
upon its senior executive to be examined as witness and refused to supply document
which formed the foundation for initiating the proceedings. The chain of events clearly
indicates that the decision to impose the stamp duty and penalty was a pre-determined.
We leave it at that.

57. As a result of above discussion, this appeal fails and is hereby dismissed. There
shall be no orders as to costs.

Appeal dismissed.

Cases Referred.

1. AIR 1954 SC 403
2. AIR 1966 SC 197
3. (1986) 2 SCC 103
4. (1994) 6 SCC 572
5. AIR 1961 SC 1506
6. AIR 2000 SC 355
7. AIR 1966 SC 337
8. AIR 1997 Raj 262
9. AIR 1993 SC 307
10. AIR 1966 Raj 89
11. AIR 1972 SC 899
12. AIR 2000 SC 355
13. AIR 1964 And Pra 43