Report No. 67
8.21. Section 6.-
This takes us to section 6. In order to appreciate the significance of that section, it is necessary to examine the scheme of the Act. The scheme of the Act as regards docuMents falling under different heads is as follows:-
The First Schedule to the Act specifies the duties which are chargeable upon certain descriptions of instruments. There may be instruments falling within more than one category. They have to be specifically dealt with, since the general rule in sections 4-5 would not yield a fully adequate test. Section 6 provides that in such a case the higher or highest duty is chargeable.
8.22. Gist of Section 6.-
Section 6-to put the matter very broadly-provides that an instrument so framed as to come within two or more of the descriptions in Schedule I, shall, where the duties chargeable thereunder are different, be chargeable only with the highest of such duties. This rule is, however, subject to an important qualification, which is expressed in the section by the words "subject to the provisions of the last preceding section"-i.e., section 5. Section 5, it will be recalled, provides that an instrument comprising or relating to several "distinct matters" shall be chargeable with the aggregate amount of the duties with which separate instruments each comprising or relating to one of such matters would be chargeable, under the Act. The qualification in section 6 dependent on section 5, is of importance. In fact, it may be noted that in the previous Stamp Act 1879,1 sections 5 and 6 were combined together. If a document is, in reality, one instrument, though different names are given to it, section 6 will apply. But if, in fact, it comprises several instruments, then section 5 will apply. In order to bring a document within the terms of section 6, it has to be read as a whole.2
1. Section 7, Indian Stamp Act, 1879.
2. (1916) 37 Indian Cases 984 (Mad).
8.22A. Provisions analysed.-
It may be convenient to analyse the relevant provisions.1
(1) A document which really contains more than one instrument must be stamped separately in respect of each. (This follows from section 3).
(2) An instrument which relates to several distinct matters must, except where express provision to the contrary is made, be separately and distinctly charged in respect of each matter, and, for this purpose, distinct provisions constituting together the consideration for an instrument liable in respect of one of them to ad valorem duty are treated as separate and district matters (section 5). But two other cases may arise.
(3) An instrument may relate to several matters which, nevertheless, cannot be regarded as distinct; (section 6), and
(4) An instrument, though relating substantially to one matter, may fall into one category, or another, according to the view adopted of its legal operation (Section 6). The Act has distinct rules for Group A, from Group B.
The line of division between classes (2) and (3) may sometimes be difficult to draw. But it is not possible to improve the position by any verbal amendments.
1. Analysis adapted from Donogh Stamp Act, (1935), p. 189.
8.23. Position in England.-
It is well established in England that where a document comes within each of two categories chargeable with duty under the (English) Stamp Act, 1891, the Crown is entitled to only one of the duties, but it may choose the higher. A case that went up to the House of Lords may be cited.1 The United States of Mexico had issued 'gold coupon treasury notes' with a promise to pay principal and interest to the bearer at fixed dates either abroad or, at the option of the holder, in London. There was evidence that the notes were saleable on the London and other Stock Exchanges. It was held: the notes being, in fact, both promissory notes and marketable securities within the Stamp Act, 1891, they were liable to the higher duty imposed by that Act upon marketable securities. Collins, M.R., in the course of his judgment in the Court of Appeal, observed that the cases established that a court has not only the right to treat, but is bound to treat, an instrument as assessable under that head which involves the higher stamp duty.
1. Speyer Brothers v. Comrs., 1908 AC 92, affirming (1907) 1 KB 246 (253).
Lord Loreburn, in the course of his judgment in the House of Lords, affirming this view, observed:-
"In my view, the document falls within both descriptions, and where a document is by its description chargeable under the Stamp Act as a promissory note, and is also chargeable under the statute as a marketable security, the Crown has a choice whether to charge under the one or under the other description. If the Crown does claim that the document shall be stamped at the higher rate within one part of the Act, it is no answer to say that there is another part of the Act under which the same document ought to be charged of a lower rate. It can only be charged once."
These observations of Lord Loreburn lucidly explain the significance and rationale underlying the statutory provision in section 6. Briefly, the gist is this:-
(i) Duty may be charged only once.
(ii) But it must be the higher, and not the lower of the two.
8.24. Section 6-Substance.-
This, in fact, is the substance of section 6. An instrument so framed as to come within two or more of the descriptions in the First Schedule, is to be chargeable with the highest of the duties. The proviso to the section deals with the special situation of a counter part or duplicate of any instrument chargeable with duty, where duty has been paid in respect of the (principal) instrument. There is not much scope for improvement in section 6. What remains to be noted is only the special provision, contained not in this Act, but elsewhere.
8.24A. Negotiable Instruments Act.-
We have in mind section 17 of the Negotiable Instruments Act,1 which gives a right to the holder of an "ambiguous document" to treat it as a promissory note, or as a bill of exchange. By "ambiguous document" is meant a document which can fall under either. According to judicial interpretation, this privilege cannot be taken away by anything contained is the Stamp Act, and in this sense, section 17 of the Negotiable Instruments Act must be read as overriding the Stamp Act.2
1. Section 17, Negotiable Instruments Act, 1881.
2. Alagappa Cheth v. Narayan, (1932) 63 Madras Law Journal 548: AIR 1932 Mad 765 (766).
8.25. Recommendation to amend section 6.-
In our view, it is desirable to codify this interpretation by adding a saving to section 6, to the effect that nothing in this section shall affect the provisions of section 17 of the Negotiable Instruments Act, 1881. We recommend that an Explanation should be added accordingly. Such an amendment has been generally favoured in the replies to the Questionnaire1 issued by us.
8.26. Section 7-Policies of sea-insurance.-We now come to section 7. Before 1963, section 7 was as follows:-
"7. (1) No contract for sea-insurance (other than such insurance as is referred to in section 506 of the Merchant Shipping Act, 1894, 57 and 58 Vict., c. 60.) shall be valid unless the same is expressed in the sea-policy.
(2) No sea-policy made for time shall be made for any time exceeding twelve months.
(3) No sea-policy shall be valid unless it specifies the particular risk or adventure, or the time, for which it is made, the names of the subscribers or underwriters, and the amount or amounts insured.
(4) Where any sea-insurance is made for or upon a voyage and also for time, or to extend to or cover any time beyond thirty days after the ship shall have arrived at her destination and been there moored at anchor, the policy shall be charged with duty as a policy for or upon a voyage, and also with duty as a policy for time."
After the passing of the Marine Insurance Act, 1963, only sub-section (4) survives.
8.27. Case law.-
There are only two reported cases on the section. A Bombay case1 dealt with one point as to whether mere initialing of a document was sufficient within the meaning of sub-section (3) of section 7, which provided that no sea policy shall be valid unless it "specifies" the names of subscribers or underwriters. The Court held, that initialing was sufficient to "specify" the names within the meaning of section 7(3). A Calcutta case2 has dealt with the scope of sub-section (1) of section 7 (now repealed), and held that a cover does not amount to a valid policy of marine insurance. These cases are no longer of importance for the Stamp Act, since sub-sections (1) to (3) have been repealed. So far as sub-section (4) is concerned, we are recommending its deletion, for reasons to be given3 under Article 47.
1. Tricamji Dambji Company v. Virji Kunji, AIR 1923 Born 142 (Shah, C.J. and Crump, J.)
2. Radhakrishan Dage v. General Insurance Society Ltd., (1968-69) 73 Cal WN 694 (964, 980, 981, 984) (Bijavesh Mukerji, J.). [Case governed by section 7(1), Stamp Act].
3. See discussion as to Article 47, infra.