The Board Of Revenue, U. P. And Others vs Sardarni Vidyawati And Another

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 29 of 1958

Decision Date: 6 February 1962

Coram: K.N. Wanchoo, S.K. Das, A.K. Sarkar, N. Rajagopala Ayyangar

The Board of Revenue, Uttar Pradesh and other authorities filed a petition against Sardarni Vidyawati and another respondent. The matter was listed before the Supreme Court of India and the judgment was delivered on 6 February 1962. The judgment was authored by Justice K. N. Wanchoo, who was joined by Justices S. K. Das, A. K. Sarkar, N. Rajagopala Ayyangar and the bench was recorded as Wanchoo, Das, Sarkar, Subbarao, Ayyangar and Rajagopala. The citation for the decision is reported as 1962 AIR 1217 and 1962 SCR Supplement (3) 50, and it has been referenced in later reports such as RF 1966 SC 81 (5). The statutory provision that formed the basis of the dispute was Sections 33 and 56(2) of the Indian Stamp Act, 1899 (2 of 1899). The respondents had earlier obtained the Court’s permission to withdraw certain monies upon furnishing security, and they executed a security bond in which a house was offered as guarantee.

The Inspector of Stamps examined the security bond and reported that it had not been sufficiently stamped; consequently, the Inspector ordered the bond to be impounded and directed that a deficit stamp duty of Rs. 482,111 and a penalty of Rs. 4,826.14 be levied. Acting in the capacity of Collector, the Deputy Commissioner called for objections to this order. The judicial officer before whom the bond was filed impounded the bond and sent it to the Deputy Commissioner. After the respondents lodged additional objections before the Stamp Officer, the officer submitted a report supporting the Inspector’s view, and the Deputy Commissioner subsequently issued an order to realise the duty and penalty. The respondents challenged this order by filing a revision petition before the Board of Revenue. While the revision petition was pending, the Deputy Commissioner referred the matter to the Board of Revenue under Section 56(2) of the Stamp Act. The Board affirmed the Deputy Commissioner’s order. Dissatisfied, the respondents filed a writ petition under Article 226 of the Constitution in the High Court, alleging that they had not been afforded a hearing by either the Board of Revenue or the Deputy Commissioner. A single judge of the High Court dismissed the petition, holding that neither the Stamp Act nor the rules framed thereunder expressly required a hearing for the aggrieved person. On appeal, the Court treated the issue as a reference to the Revenue Board under Section 56(2) and observed that, although the Act and its rules did not stipulate a hearing, the authorities exercising powers under that provision were nevertheless bound to act according to the principles of natural justice. Accordingly, the appeal was allowed. The Court further held that Section 56(2) concerns situations where the Collector has a doubt regarding an instrument and the applicable provisions of the Act, indicating that such doubts involve difficult questions of law. Consequently, the authority referred to in the provision must decide the matter in a quasi‑judicial manner, respecting natural justice, even when the statute is silent on the need for a hearing.

It was held that section 56(2) of the Act applies when the Collector has a doubt about the construction of an instrument and about which provisions of the Act are applicable to it. The existence of such a doubt indicates that the matter presented to the Collector involves a difficult question of law. Consequently, the nature of the duty that must be performed under these circumstances requires the Chief Controlling Revenue Authority to decide the issue in a judicial manner, making the authority function as a quasi‑judicial tribunal. In situations where the Act is silent, the obligation to act judicially may be derived either from the language of the statute itself or from the overall effect of the rights that are affected, the objective criteria that must be applied, the specific wording employed, and other indicia supplied by the legislation. Because the questions referred to the Board under section 56(2) concern the interpretation of an instrument and the application of the Act—pure questions of law that could potentially result in the payment of substantial sums by the person executing the document—the Board must provide a hearing for the determination of such questions and must exercise its powers in a judicial fashion.

The case concerned Civil Appeal No 29 of 1958, filed against the judgment and order dated 3 May 1956 of the Allahabad High Court in Special Appeal No 48 of 1954. Counsel for the appellant and counsel for the respondents were instructed. The judgment was delivered on 6 February 1962. The appeal arose from a certificate granted by the Allahabad High Court. The material facts were as follows: certain decretal funds had been deposited in the then Chief Court of Oudh at Lucknow. The respondents applied to that Court for permission to withdraw the funds on the condition that they provide security, and such permission was granted. Consequently, a registered security bond was executed in Simla in 1949, whereby a house was offered as security for the withdrawal of the money. Before the withdrawal could take place, the Inspector of Stamps reported on 15 March 1950 that the alleged security bond was, in reality, a mortgage deed without possession and that it had been insufficiently stamped. The Inspector recommended that the document be impounded and that a deficit stamp duty of Rs 482 11/‑ and a penalty of Rs 4,826 14/‑ be levied. On 5 April 1950 the Deputy Commissioner of Kheri, acting as Collector, issued an order stating that any objections by the parties should be submitted in writing and would be referred to the Board of Revenue. On 5 July 1950 the respondents objected, asserting that the document was not a mortgage deed, that no duty or penalty was payable, and that, because the document had not yet been accepted by the Court, it was only a tentative instrument. On 3 August 1950 the judicial officer before whom the security bond was presented proceeded in accordance with the procedures outlined above.

The judicial officer who had originally received the security bond impounded the document pursuant to section 33 of the Indian Stamp Act, 1898, hereinafter called the Act, and subsequently transmitted the impounded paper to the Deputy Commissioner of Kheri under the authority of section 38 of the Act. After this transmission, in November 1950 the respondents lodged additional objections before the Stamp Officer, who is also the Treasury Officer, of Kheri. In response to these objections the Deputy Commissioner, who functions as the Collector for purposes of the Act, requisitioned a report from the Treasury Officer. The Treasury Officer complied and, in a report dated December 1950, affirmed that the opinion of the Inspector of Stamps was correct and that the stamp duty and the penalty specified by the Inspector were indeed payable. The respondents contended that the Treasury Officer had failed to afford them any opportunity of being heard before arriving at that conclusion. Relying on the Treasury Officer’s report, the Deputy Commissioner issued an order directing the realization of the duty and penalty, an order which, according to the record, was also rendered without granting the respondents a hearing.

In January 1951 the respondents filed a revision petition challenging the Deputy Commissioner’s order before the Board of Revenue. Although the revision was initially lodged, in March 1951 the Deputy Commissioner referred the matter to the Board of Revenue under section 56(2) of the Act. The Board considered the reference and, in July 1951, disposed of the case by upholding the Collector’s order. The respondents again complained that the Board of Revenue had not provided them with a hearing. As a result, they instituted a writ petition before the High Court in November 1951. The single judge who heard the petition dismissed it, holding that neither the Act nor its Rules required that the person liable for the deficit stamp duty and the penalty be given a personal hearing. The judge further observed that the Collector had already permitted the respondents to submit their objections in writing and that the Board of Revenue had examined the grounds raised in the revision petition; consequently, there was no statutory requirement for a personal or counseled hearing in such cases.

The respondents appealed this decision. The appellate court treated the proceeding before the Board as a reference made under section 56(2) of the Act. It noted, as the single judge had pointed out, that although the Collector’s order of December 1950 would ordinarily have been final, the Collector had elected to refer the dispute to the Board of Revenue under section 56(2). Accordingly, the appellate court proceeded on the assumption that the matter had been finally decided by the Board under section 56(2) and not by the Collector under section 40(1) or by the Board under section 56(1). The court further observed that sections 40 and 56 leave the entire issue to the discretion of the officer before whom an insufficiently stamped document is produced and that the statutes do not prescribe any specific procedure for calling upon the affected party to be heard.

In the appeal, the court observed that the authorities who acted under section 40 or section 56 of the Act were not exercising judicial or quasi‑judicial functions, yet they were nevertheless required to provide a hearing in accordance with the principles of natural justice, as dictated by the decision in Special Appeal No 291 of 1955, Ghanshyamdas Gupta v. The Board of High School and Intermediate Education, U. P. Consequently, the appellate court set aside the order of the Board of Revenue on the ground that the respondents had not been afforded any hearing. Following that decision, an application for leave to appeal to this Court was filed before the High Court, and the High Court granted that leave, bringing the matter before the present Court. The principal grievance of the appellant is that the High Court erred in concluding that, when the Board of Revenue proceeded under section 56(2) of the Act, it was bound by the principles of natural justice to grant a hearing to the respondents; in effect, the appellant challenged the correctness of the view expressed in Special Appeal No 291 of 1955. That earlier case was itself the subject of an appeal, identified as Civil Appeal 132 of 1959, Board of High School and Intermediate Education v. G. D. Gupta, the judgment of which is being delivered today. In that judgment, we held that the examinations committee was required to act judicially when acting under rule 1(1) of Chapter VI of the Regulations made under the U. P. Intermediate Education Act (No. 11 of 1921), and we did not uphold the High Court’s view that the committee acted merely administratively. A similar issue now arises: whether the Board of Revenue, when dealing with a proceeding under section 56(2) of the Act, functions administratively or quasi‑judicially. For the purpose of this appeal, we proceed on the premise that the matter before the Board was referred under section 56(2) by the Collector, and not filed under section 56(1) by an application of the respondents seeking the Board’s exercise of control. The respondents contend that when the Board acts under section 56(2) it performs a quasi‑judicial function. Accordingly, we first examine the statutory scheme that leads to a reference under section 56(2) of the Act, which provides that if any Collector, acting under section 31, section 40 or section 41, has doubt about the duty payable on any instrument, he may draw up a statement of the case and refer it, together with his own opinion, for decision by the Chief Controlling Revenue authority.

In the provisions of the Act, the Collector may refer a case to the Chief Controlling Revenue Authority when he has a doubt about the duty chargeable on an instrument. Section 31 deals with situations where an instrument is presented to the Collector and the person presenting it asks for the Collector’s opinion on the duty, if any, that is payable. The Collector must either determine the duty himself, if he believes the instrument is chargeable, or, if he harbours any doubt, refer the matter to the Chief Controlling Revenue Authority under section 56(2).

Section 40 applies when an instrument is impounded under section 33 or when the Collector receives an instrument sent to him under section 38(2), except in certain specific circumstances. Under this section the Collector is empowered either to certify that the instrument is properly stamped, to certify that it is not chargeable at all, or, if he is of the opinion that the instrument is chargeable but not duly stamped, to require payment of the proper duty together with a penalty. However, if the Collector is unsure about any of these determinations, section 56(2) again authorises him to refer the question to the Chief Controlling Revenue Authority.

Section 41 provides that if an instrument that should be chargeable with duty and not duty‑stamped (subject to certain exceptions) is produced by a person of his own motion before the Collector within one year of its first execution, and that person brings to the Collector’s notice that the instrument is not duly stamped and offers to pay the proper duty or the amount required to make up the duty, the Collector may, provided he is satisfied that the failure to stamp was due to accident, mistake or urgent necessity, accept the payment and, under section 42, endorse the instrument to certify that the duty has been paid. Even in such a case, if the Collector remains doubtful, he may still refer the matter to the Chief Controlling Revenue Authority.

These provisions make clear that section 56(2) is invoked only when the Collector experiences doubt concerning an instrument that has come before him under the foregoing sections. The doubt indicates that the issue raised for the Collector’s decision involves a difficult point of law, requiring construction of the instrument and determination of which provisions of the Act apply. Because the duty in such circumstances must be performed in a judicial manner, the Chief Controlling Revenue Authority is required to decide the matter in a quasi‑judicial way, effectively functioning as a quasi‑judicial tribunal. This conclusion was also articulated in the earlier decision of C.A. 132 of 1959, where the nature of the authority’s function was examined to determine whether it acts judicially.

In interpreting the statute, the duty to act judicially must first be derived from its explicit provisions. If the statute is silent on a particular point, that duty can still be inferred from the language of the law itself or from the overall effect of the rights that are affected, the method of disposal prescribed, the objective standards to be applied, the specific wording used, and any other indications provided by the legislation. Although the Act and the Rules made under it do not expressly require a hearing before the Board of Revenue when it is exercising its powers under section 56(2), the matter before the Board in such cases concerns the construction of an instrument and the application of the Act to that instrument. In many instances, a decision by the Board that opposes the person who executed the instrument may lead to the assessment of a substantial deficit stamp duty and, in addition, a considerable penalty. This is essentially a question of law. Considering the nature of the duty placed on the Board by section 56(2)—to interpret instruments and to apply the Act, which may result in heavy financial liabilities—it appears that the legislature intended the Board to give the person who executed the document an opportunity to be heard before imposing such liability. Because the issue before the Board is one of legal construction that can impose large sums, it would not be inappropriate to hold that the legislature envisioned a hearing for the affected party and that the Board should act in a judicial manner when resolving a pure question of law. The fact that the Board’s decision will be based on its own opinion does not alter the requirement that questions of law be decided through a judicial process. Moreover, section 57 supports this view; it authorises the Chief Controlling Revenue‑authority to state any case referred to it under section 56(2) or otherwise, to forward that case together with its own opinion to the High Court, where the matter must be decided by a bench of at least three judges. This provision demonstrates that questions referred to the Board under section 56(2) are of such a nature that they may require judicial consideration.

In the present case, the Court observed that the questions referred to the Board of Revenue under section 56(2) can be of such a complicated nature that the Board may be unable to reach a definite conclusion and may experience genuine doubt. The statute therefore authorises the Board, when faced with such uncertainty, to transmit the matter to the High Court together with its own opinion. The High Court is required to resolve the issue by a bench comprising at least three judges, and such a hearing by a larger bench is inevitably a judicial hearing. The Court reasoned that because the hearing mandated by section 57 is expressly judicial, it follows logically that a hearing conducted under section 56(2), which deals with analogous questions of law, must also be treated as judicial. Accordingly, after considering the entire context and the character of the matters that the Board is called upon to determine under section 56(2), the Court concluded that the Board must act in a judicial manner when it exercises its powers under that provision. Consequently, on the basis of the principles of natural justice, the Board is required to afford a hearing to the other party, identified as the executant of the instrument. By acting in this way, the Board of Revenue functions as a quasi‑judicial body under section 56(2), and the respondents were therefore entitled to a hearing. For these reasons, the Court affirmed the order of the High Court, albeit on a different ground, and dismissed the appeal with costs.