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IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO(s).1894 OF 2011 (Arising out of SLP(C) No.7350/2007)

STATE OF UTTARAKHAND AND OTHERS ...Appellant(s)

                VERSUS

HARPAL SINGH RAWAT ...Respondent(s)

J U D G M E N T Delay condoned.

Leave granted.

What should be the stamp duty payable on lease agreement  

executed between appellant No.1 and the respondent entitling  

the latter to collect toll tax is the question which arises for  

consideration in this appeal filed against the order passed by  

the Division Bench of the Uttarakhand High Court whereby the  

writ petition filed by the respondent was disposed of in terms  

of the judgments of the Allahabad High Court in Tejveer Singh  

v. State of Uttar Pradesh 1997 (29) ALR 687 and the Uttarakhand  

High Court in Writ Petition No.1020 of 2004 (M/B) – Naresh  

Agarwal v. State of Uttaranchal.

The  respondent  participated  in  the  auction  held  by

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Executive  Engineer,  Construction  Division,  PWD,  Haldwani  

(appellant No.2 herein) for grant on lease collection of toll  

tax for using Haldwani Bye-Pass Road, 14 K.M. (Kathgodam) Gaula  

bridge.  The bid of Rs.22 lakhs given by the respondent was  

accepted  by  the  competent  authority.  Thereafter,  lease  

agreement dated 24.3.2006 was executed between the Governor of  

Uttaranchal  (now  Uttarakhand)  through  Commissioner,  Kumaon  

Division  and  the  respondent  whereby  the  latter  was  given  

exclusive right to collect toll from the vehicles using the  

road and Gaula bridge.  As a condition for execution of lease,  

communication dated 25.2.2006 was sent by appellant No.2 to the  

respondent  requiring  him  to  deposit  stamp  duty  of  

Rs.2,20,400/-.  However, instead of depositing the stamp duty,  

the  respondent  filed  Writ  Petition  No.204(M/B)  of  2006  for  

quashing the notice issued by appellant No.2 and also for issue  

of  a  direction  to  the  appellants  to  charge  stamp  duty  in  

accordance with the judgments in Tejveer Sing's case and Naresh  

Agarwal's case by asserting that the contract executed between  

the parties was only a security bond and stamp duty was payable  

as per Article 57 of Schedule I-B of Indian Stamp Act, 1899  

(for short, `the Act'), as amended by the State of U.P. and as  

applicable to the State of Uttarakhand.

The Division Bench of the High Court disposed of the writ

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petition by recording a cryptic order, which reads thus:

“By means of this writ petition, the petitioner  has prayed for writ of certiorari quashing the  order dated 25.2.2006 (Annexure No.2) passed by  Respondent no.2 and further a writ of mandamus  commanding  the respondent  not to  demand/realize  stamp duty on the earnest money/security deposit  the money of contract as demanded on the basis of  the  Government instructions  and the  respondents  may be directed to demand stamp duty in pursuance  of the direction in the case of Tejveer Singh Vs.  State of U.P. and others reported in 1997 (29) ALR  Page  687  as  well  as  judgment  passed  by  this  Hon'ble Court in Writ Petition No.1020/2004 (M/B),  Naresh Agarwal Vs. State of Uttaranchal.

2.A Division Bench of this Court has also followed  the aforesaid judgment, which is referred in the  prayer clause of the present writ petition.  The  controversy  raised  in  the  writ  petition  is  squarely covered by the aforementioned judgment as  submitted by learned Addl. Chief Standing Counsel.  Therefore, the writ petition is disposed of in  terms of the aforementioned judgment of Hon'ble  Allahabad High Court.”

Learned counsel for the appellants invited our attention  

to the contents of lease agreement dated 24.3.2006 to show that  

the respondent was given exclusive right to collect the toll  

from 31.3.2006 to 30.3.2007 against the consideration of Rs.22  

lacs and argued that stamp duty on such lease is payable under  

Article 35 of Schedule I-B of the Act and not under Article 57  

thereof.  In  support  of  this  argument,  the  learned  counsel  

relied upon judgments of the Special Bench of the Allahabad  

High Court in Banney Khan versus Chief Inspector of Stamp, U.P.

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AIR  1976  Allahabad  475  and  a  Division  Bench  of  the  Andhra  

Pradesh High Court in Uppalapati Durga Prasad and others versus  

Executive Engineer (R&B) N.H. Division, Srikakulam and others  

2001 (4) ALT 228.  Learned counsel then submitted that stamp  

duty was demanded from the respondent keeping in view the terms  

of the lease agreement, which enabled him to collect toll tax  

and not on the security given by him for due performance of the  

contract and the Division Bench of the High Court committed  

serious error by disposing of the writ petition in terms of the  

judgments in Tejveer Singh's case and Naresh Agarwal's case.

We have considered the argument/submission of the learned  

counsel. Section 2(16)(c), Articles 35(b) and 57 of Schedule  

I-B of the Act, which have bearing on the decision of this case  

read as under:

“2.(16)'Lease'  means  a  lease  of  immovable  property, and includes also-

(a) a patta;  (b) a  kabuliyat  or  other  undertaking  in  

writing, not being a counterpart of a lease, to  cultivate,  occupy  or  pay  or  deliver  or  pay  or  deliver rent for immovable property;

(c) any  instrument  by  which  tolls  of  any  description are let;

(d) any writing on an application for lease  intended  to  signify  that  the  application  is  granted;  

(e) any instrument by which mining lease is  granted in respect of minor minerals as defined in  clause (e) of Section 3 of the Mines and Minerals  (Regulation and Development) Act, 1957;

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Schedule I-B

35. Lease, including an  under-lease or sublease  and  any  agreement  to  let or sublet-

(b)  where  the  lease  is granted for a fine  or  premium  or  for  money  advanced  and  where  no  rent  is  reserved.-

(i)  where  the  lease  purports to be for a  term  not  exceeding  thirty years;

The  same  duty  as  a  Conveyance  [No.23  clause  (a)],  for  consideration  equal  to  the  amount  or  value of such fine or  premium or advance as  set  forth  in  the  lease.

(ii) where the lease  purports to be for a  term exceeding thirty  years;

The  same  duty  as  a  Conveyance  [No.23  clause  (a)].  for  a  consideration  equal  to  the  market  value  of the property which  is  subject  of  the  lease.

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57. Security Bond or  Mortgage-deed  executed  by  way  of  security for the due  execution  of  an  office, or to account  for  money  or  other  property  received  by  virtue  thereof,  or  executed by a surety  to  secure  the  due  performance  of  a  contract  or  the  due  discharge  of  a  liability -  

(a) xx xx xx xx xx xx

(b) in any other case One hundred rupees.

   xx xx xx  

(a) xx xx xx xx xx xx

(b) xx xx xx xx xx xx

(c) xx xx xx xx xx xx

(d) xx xx xx

(e) xx xx xx

xx xx xx

xx xx xx

The  definition  of  `lease'  contained  in  Section  2(16)  

consists of two parts.  The first part is applicable to any  

lease with respect to immovable property.  The second part,  

which is inclusive, applies to various kinds of instruments by  

which a title, or other rights may be conferred upon the lessee  

for  a specified  period in  respect of  immovable property  or  

otherwise.  The use of the words “includes also” implies that  

the definition of lease contained in Section 2(16)(c) is very

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wide and even if the transaction does not amount to a lease  

under Section 105 of the Transfer of Property Act, the same may  

nonetheless be a lease for the purpose of the Act.   

The  acceptance  of  the  argument  made  on  behalf  of  the  

appellants  will  largely  depend  on  the  contents  of  auction  

notice dated 27.10.2005 issued by appellant No.2 and the lease  

agreement executed between the parties, the relevant portions  

of which are extracted below:

“AUCTION NOTICE

This is for the information of the general  public  that  a  public  auction  will  be  held  in  Janpad  Nainital  under  construction  Division,  Public Works Department by the undersigned or its  authorised representative in the office premises  on  9.12.2005  at  12.00  for  giving  on  lease  collection of toll tax for using Haldwani Bye- Pass Road, 14 K.M. [Kathgodam] Gaula bridge.  The  tender documents can be collected from the office  of  the  undersigned  on  any  working  day  between  1.12.2005 to 7.12.2005 on payment of fixed price.

The tender documents can be obtained by post  on payment of additional cost of Rs.100/- but the  Department shall not be responsible for any delay  caused by postal department.

The persons interested in participating in  auction will be required to fulfill and complete  all requisite formalities alongwith certificates  and  the  tender  documents  alongwith  requisite  certificates/documents will have to be submitted  in  the  office  of  the  undersigned  by  3.00  p.m.  evening  on  8.12.2005.  A  list  will  be  prepared  after  scrutinizing  the  tender  documents.   Such

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persons,  who  fulfill  all  the  conditions  as  determined  will  be  allowed  to  participate  in  auction on 9.12.2005.

The details concerning auction are as under:

Sr.  No.

Road/Name of  the bridge.

Earnest  money

Price of  tender  

documents

Status of  Bidder  Rs.

Validity  of bid

Duration  of  

contract

1 2 3 4 5 6 7

1 Collection of  Toll  Tax  under  Haula  bridge  situated  at  Haldwani Bye- Pass, 14 K.M.  [Kathgodam]

4,00,000/ - in the  form  of  N.S.C./F. D.R.

30.00  +  Trade Tax

2,00,000/ -

3 months 1.4.06 or  from  the  date  of  Transfer  to  31.3.07

Note: Other conditions of bid/Rules can be seen  in the office of the undersigned.

E.V.C.  Binwal

    Executive  Engineer,

Construction Division P.W.D.,  Haldwani”

AGREEMENT

This agreement of lease is made today dated  24.03.2006  through  Public  Works  Department  between Hon'ble Governor Uttaranchal “hereinafter  will be called as lessor”, the first party and  the  contractor  of  bridge  hereinafter  will  be  called  as  lessee,  the  second  party  witnessing  where of that in lieu of the toll which has been  reserved in this lease later and in consequent  upon  covenants  made  by  lessee  which  have  been  prescribed  hereinafter  in  this  lease.   Lessor  through this lease gives the exclusive right to  collect the toll from all those vehicles whether

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rented  or  on  rent  “which  are  described  in  Schedule and not exempted of toll but with the  condition that lessor will have the right to have  the  control  of  said  bridge  and  its  existing  places and to run upto the extent of any period.  That if in respect of any serious situation in  relation  to  public  service  or  specific  need  arise,  only  such  officer  will  be  deciding  authority who works on behalf of lessor because  of this it was necessary for him to do that and  for which the compensation amount have to be paid  by Uttaranchal Govt., as by Govt. may issue order  in each case for utilizing for this.  Said lessee  will have the said right from the midnight 12' O  clock  of  31.3.2006  to  31.03.2007  against  consideration  of  Rs.22,00,000/-  [Twenty  two  lakhs]  annual  rent  in  monthly  installments  without any deduction in the office of Executive  Enginner of concerned division as prescribed in  clause-I  of  schedule  enclosed  with  this  lease.........

Schedule-1

Rs.22,00,000/-  which  has  been  reserved  through  this  lease  will  be  paid  by  lessee  in  twelve monthly installments on first date of each  month as per the details given below:-

Name of Month Due Date Amount

April, 2006 01.04.2006 Rs.183300/-

May, 2006 01.05.2006 Rs.183300/-

June, 2006 01.06.2006 Rs.183300/-

July, 2006 01.07.2006 Rs.183300/-

August, 2006 01.08.2006 Rs.183300/-

September, 2006 01.09.2006 Rs.183300/-

October, 2006 01.10.2006 Rs.183300/-

November, 2006 01.11.2006 Rs.183300/-

December, 2006 01.12.2006 Rs.183300/-

January, 2007 01.01.2007 Rs.183300/-

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February, 2007 01.02.2007 Rs.183300/-

March, 2007 01.03.2007 Rs.183700/-

 2. The Lessee will deposit the amount equal to  three  monthly  installment  with  the  Executive  Engineer  of  Construction  Division,  P.W.D.,  Haldwani, hereinafter will be called as Executive  Engineer  and  Executive  Engineer  will  keep  this  amount  with  him  as  partial  security  for  fulfilling and compliance of terms and conditions  of agreement prescribed in schedule and out of  which  he  can  take  such  amount  as  rent  which  becomes  due  and  payable  or  can  deduct  such  amounts  of  penalties  from  that  which  may  be  imposed upon lessee and provision of which has  been made hereinafter.”   A conjoint reading of the auction notice and the lease  

agreement makes it clear that tenders were invited from the  

public for grant on lease collection of toll tax for using  

Haldwani Bye-Pass Road 14 K.M. (Kathgodam) Gaula bridge and  

highest bid of Rs.22 lakhs given by the respondent was accepted  

by the competent authority.  The monthly amount payable by the  

respondent  was  lease  money  and  not  a  security  for  due  

performance of the contract.  Such an agreement clearly falls  

within the ambit of the term “lease” as defined in Section  

2(16)(c) read with Article 35(b) of Schedule I-B and not under  

Article 57 of Schedule I-B, which gets attracted only when a  

security bond or mortgage deed is executed for due execution of  

an office or to account for money or other property received by  

virtue thereof or for due performance of a contract or the due

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discharge of a liability.  Therefore, the demand of stamp duty  

of  Rs.2,20,400/-  from  the  respondent  cannot  be  termed  as  

illegal.

In Banney Khan's case, the Special Bench of the Allahabad  

High  Court  was  called  upon  to  consider  whether  the  lease  

executed  between  Municipal  Board,  Ujhani  and  the  appellant  

authorising the latter to collect toll from the premises known  

as “New Sabzimandi” was a lease falling under Section 2(16) of  

the Act was chargeable under Article 35(b) of Schedule I-B.  

The  Special Bench  referred to  the definition  of lease,  the  

judgments of the Full Bench in Burmah Shell Oil Storage and  

Distributing Co. Ltd. of India AIR 1933 All 735 and the Andhra  

Pradesh  High  Court  in  Panchayat  Samiti  v.  Smt.  Kethavarapu  

Kanamma AIR 1973 AP 72 and observed:

“................A  casual  reading  of  the  definition  of  “lease”  indicates  that  any  instrument by which tolls of any description are  let  comes  within  the  definition  of  this  term.  What  is,  therefore,  to  be  seen  is  whether  the  document is an instrument by which tolls of any  description are let.  In our opinion the agreement  before us comes clearly within the language quoted  above.  This is a document by which all lands and  buildings  known  as  “New  Subzi  Mandi”  have  been  made over by the owners thereof to the applicant  for  a  period  of  one  year.   He  is  entitled  to  realise  fee  from  occupiers  thereof  at  certain  rates in consideration of a sum fixed by public  auction.  This “letting of tolls” and the document  is covered by Section 2(16)(c) of the Stamp Act.  It is needless to say that the word “toll” used in

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this sub-section means any sum of money which is  taken  in  respect  of  some  benefit,  the  benefit  being the temporary use of land, that is, fares  and market tolls.  It includes all payments or  taxes made by persons who frequent the market for  the sale of any commodity or any thing which by  practice or custom is expected to be sold in the  market.   This  document  is  signed  both  by  the  lessor and the lessee.  Therefore, it can hardly  be  doubted  that  it  is  an  instrument  by  which  collection of tolls is let and is lease within the  meaning of Section 2(16) of the Stamp Act and is  chargeable  with  Stamp  duty  under  Article  35(b)  Schedule I-B of the U.P. Stamp (Amendment) Act,  1962.............”   

In  Uppalapati  Durga  Prasad  v.  Executive  Engineer  (R&B)  

(supra),  a Division  Bench of  the Andhra  Pradesh High  Court  

considered a similar question in the context of an agreement  

signed by the parties in the matter of collection of toll.  

While rejecting the argument of the writ petitioner that he was  

not liable to pay stamp duty under Article 35(b) read with  

Section 2(16) of the Act, the Division Bench observed:

“On bare reading of the section it becomes clear  that all leases with respect to immovable property  would be leases in terms of Section 2(16) but in  addition to leases of immovable property in other  three categories there would also be lease under  category  (c)  in  which  any  instrument  by  which  tolls of any description are let would be a lease  for the purpose of Section 2(16).  The instrument  by which right to collect toll is conveyed has to  be treated as lease for the purposes of Stamp Act.  Right  to  collect  toll  will  never  in  any  circumstances  involve  immovable  property.  Basically toll is collected for using a road or  bridge and as such neither the road nor the bridge  is leased out, only the right to collection is

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leased  out  and  this  right  of  leasing  out  the  collection is 'lease' for the purposes of Stamp  Act.............”   In our view, the aforementioned judgments of the Allahabad  

and Andhra Pradesh High Courts represents the correct legal  

position on the applicability of Article 35(b) of Schedule I-B  

of the Act.

In  Tejveer  Singh's  case,  the  Division  Bench  of  the  

Allahabad High Court considered the question whether the amount  

offered as security for due performance of the contract for  

construction  of  drains  culvert  etc.,  is  chargeable  under  

Article 57 of Schedule I-B.  The Division Bench relied upon the  

judgment of Special Bench in M/s. Hindustan Sugar Mills Limited  

v. State of U.P. AIR 1972 Allahabad 8 and of this Court in  

Board of Revenue v. A.M. Ansari (1976) 3 SCC 512 and held that  

the stamp duty on such agreement is to be paid under Article 57  

of Schedule I-B of the Act, as amended by the State of Uttar  

Pradesh.  The judgment in Tejveer Singh's case was followed by  

the Division Bench of the Uttarakhand High Court in the case of  

Naresh Agarwal.  These two judgments have no bearing on the  

issue  raised in  the writ  petition filed  by the  respondent.  

Therefore, it must be held that the Division Bench of the High  

Court committed serious error by disposing of the writ petition  

of  the respondent  by relying  upon the  judgments in  Tejveer

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Singh's case and Naresh Agarwal's case, and that too, without  

even  adverting  to  the  lease  agreement  executed  between  

appellant No.1 and the respondent.

In the result, the appeal is allowed, the impugned order  

is set aside and the writ petition filed by the respondent is  

dismissed.  The appellants shall now be free to recover stamp  

duty  from  the  respondent  in  terms  of  Notice  No.775  dated  

25.2.2006. Since  no  one  has  appeared  on  behalf  of  the  

respondent, the costs are made easy.

........................J. (G.S. SINGHVI)             

........................J. (ASOK KUMAR GANGULY)       

NEW DELHI, FEBRUARY 17, 2011.