Summary
The Official Liquidator sold all assets of a company in liquidation (land, buildings, plant and machinery and current assets) for Rs. 8.35 crores to an auction purchaser, but the sale deed in favour of its nominee showed only Rs. 1.01 crores as the value of land, buildings and civil works. The Division Bench of the High Court held that the purchaser could not be made to pay stamp duty on plant and machinery it did not seek to register. The Supreme Court reversed, holding that a conveyance of land passes everything attached to the earth under Section 8 of the Transfer of Property Act, that permanently embedded plant and machinery is immovable property chargeable to duty, and that under the Andhra Pradesh proviso to Section 27 and Section 47A of the Stamp Act the registering authority may go behind the recitals to ascertain the true transaction.
Issues
- Whether a sale deed conveying scheduled land 'with all rights, easements and interests which ordinarily pass on such sale', executed to complete a composite auction sale of all assets of a company in liquidation, also conveys the plant and machinery embedded in that land for the purposes of stamp duty.
- Whether the registering and stamp authorities in Andhra Pradesh may look beyond the recital and schedule of an instrument to the preamble, the auction sale and the parties' conduct to determine the chargeable value.
- Whether plant and machinery permanently fastened to the earth is immovable property under the Registration Act, the General Clauses Act and the Transfer of Property Act, and how Section 5 of the Stamp Act applies to an instrument covering several distinct matters.
- Whether the purchaser remains entitled to the 50% stamp duty concession under G.O.Ms. No. 103 dated 07.02.2001 for industrial units.
Provisions considered
- Sections 2(14), 3, 4 and 5, Indian Stamp Act, 1899Following Member, Board of Revenue v. Arthur Paul Benthall, Section 5 charges an instrument comprising several distinct matters with the aggregate duty; land, building and plant and machinery conveyed by one deed are distinct matters and the duty is the same as if separate instruments had been executed. (¶¶ 23, 24, 29, 35)
- Section 27 and its proviso, Indian Stamp Act, 1899 (Andhra Pradesh Amendment Act 8 of 1988)The consideration and all facts affecting chargeability must be fully and truly set forth; the Andhra Pradesh proviso empowers the registering officer to inspect the property, make local enquiries and examine connected records, conferring the power whose absence was noted in Himalaya House Co. (¶¶ 25, 26, 30, 39)
- Section 47A, Indian Stamp Act, 1899 (Andhra Pradesh Amendment)Provides an elaborate procedure for dealing with undervalued instruments, enabling reference to the Collector to determine market value; together with Section 27 it allows the authority to verify whether embedded plant and machinery was wrongly excluded. (¶¶ 27, 39, 40)
- Section 8 and Section 3 (definition of immovable property), Transfer of Property Act, 1882Unless a different intention appears, a transfer of land passes all things attached to the earth and, for machinery attached to the earth, its movable parts; read with the recital conveying all rights that ordinarily pass on sale, the deed conveyed the embedded plant and machinery. (¶¶ 28, 36, 37, 38)
- Section 2(6) of the Registration Act; Section 3(26) of the General Clauses Act, Registration Act, 1908 and General Clauses Act, 1897Both define immovable property to include things attached to the earth or permanently fastened to anything attached to the earth, so permanently embedded plant and machinery falls within the conveyance of the land. (¶¶ 28, 36)
- Notifications under Section 9(1)(a) of the Stamp Act and Section 78 of the Registration Act, G.O.Ms. No. 103, Revenue (Registration-II) Department, Andhra Pradesh, dated 07.02.2001Grants 50% reduction of stamp duty and registration fee on sales to industrial units; the purchaser's claim to it showed its intention to run the unit, and the State's objection that mini steel plants are ineligible under G.O.Ms. No. 9 of 2001 is left to the District Registrar to decide. (¶¶ 7, 12, 34, 42, 43)
Held
- The auction was of the entire assets of the company for Rs. 8.35 crores on an 'as is where is whatever there is' basis, and the preamble of the sale deed records this; showing only Rs. 1.01 crores for land, buildings and civil works was an attempt to avoid the stamp duty due in law on what was actually conveyed. (¶¶ 34, 37, 38)
- A recital conveying the scheduled land with all rights and interests that ordinarily pass on such a sale, read with Section 8 of the Transfer of Property Act and the statutory definitions of immovable property, conveys plant and machinery permanently embedded in that land even without express mention; the Division Bench erred in holding that duty could not be charged on machinery the purchaser did not seek to register. (¶¶ 36, 37, 38, 40)
- Following Duncans Industries, whether embedded machinery is immovable property depends on the intention to embed it permanently; the purchaser's conduct in seeking permission to overhaul the plant and claiming the industrial-unit concession showed it intended to run the unit as a going concern, not to remove the machinery as scrap. (¶¶ 12, 32, 34, 38)
- In Andhra Pradesh the proviso to Section 27 and Section 47A of the Stamp Act empower the registering authority to inspect the property, call for records and determine the true market value, going behind the ostensible instrument; the limited view in Himalaya House Co. does not apply after these amendments. (¶¶ 30, 39, 40)
- Only plant and machinery permanently embedded in the earth and answering the description of immovable property is chargeable along with the land; since no such inquiry was made, the District Registrar must ascertain which items qualify. (¶¶ 38, 40, 41, 43)
- The nominee vendee under the sale deed is the entity liable to pay the stamp duty, so dismissal of the SLP against the auction purchaser for non-service does not prevent an order against the vendee; no liability is fastened on the auction purchaser. (¶¶ 15, 41, 43)
Result
Appeal against Writ Appeal No. 1873 of 2005 allowed and appeal against Writ Appeal No. 2457 of 2005 partly allowed; Division Bench judgment set aside and the Single Judge's judgment restored, except the direction to extend G.O.Ms. No. 103 of 2001. The District Registrar to ascertain the value of plant and machinery that qualifies as immovable property and to decide whether the vendee is entitled to the stamp duty exemption. No liability on the second respondent. Parties to bear their own costs.