Illegality Of Rule Of Court And Declaratory

ILLEGALITY OF RULE OF COURT AND DECLARATORY ILLEGALITY OF RULE OF COURT AND DECLARATORY DECREE IN RESPECT OF SALE OF URBAN PROPERTY By Ch. Muhammad Bashir, Advocate, Faisalabad The People, with the obvious object of evading payment of proper stamp duty leviable on sale‑deeds under the Stamp Act, 1899, resort to obtaining collusive Rules of Court and declaratory decrees from Civil Court. This urge became more' dominant and acute since the fixation of rates of market value of immovable properties situated in different localities of an urban area under section 27‑A of the Stamp Act by the District Collectors, with a rider that no conveyance deed will be registered by Sub‑Registrar under the Registration Act, 1908, if the valuation of the property is shown below that rate. The indulgence of some of the Presiding Officers in the said Rule of Court and declaratory decree business is so extensive and intense that they have attained the notoriety of being Sub‑Registrars or Revenue Officers. The Presiding Officers neither care for section 7(iv‑a) of Court Fees Act in passing declaratory decrees nor for Article 12 of Stamp Act, 1899 in making awards Rules of Court. Section 7(iv‑a) of the Court Fees Act requires that in a suit for declaration of title in immovable property on the basis of Alleged Sale, Mortgage, Gift or Exchange, the suit shall be valued for the purpose of court- fee, according to the value of the property. By the said provision, the intention of legislature is to procure court‑fee in such suits according to the value of the property, with a maximum ceiling of Rs.15,000. The Presiding Officers, in interested cases, ignore the value of the property and pass consent decrees on the meagre valuation put by the plaintiff and in this way, cause loss of court‑fee to the State. Article 12 of the Stamp Act, as amended by the Punjab Finance Act, 1990, requires stamp duty at the rate of 2% on award in respect of immovable property on the market value of the property, subject to minimum of Rs.50. The Presiding Officers, in interested cases, do not check the market value of the property involved in the award when making it a Rule of Court under the Arbitration Act. The loss of revenue in the shape of court‑fee and stamp duty, to the State, by the said practice in Faisalabad alone runs into millions of rupees. This practice is rampant in the whole of the Punjab and the quantum of loss of revenue to the State can very well be visualised. Even if court‑fee in the case of declaratory decree and stamp duty in respect of award is fully paid up under the respective Laws, still the declaratory decrees and Rules of Court are not legal in respect of Urban Immovable property in view of the applicability of section 54 of the Transfer of Property Act, 1882. Section 54 of Transfer of Property Act requires the transfer of immovable property of the value of Rs.100 or above, by means of sale, to be effected by registered instrument. The said section has been made applicable to Urban areas of Punjab by Notification No. 183 St. dated 27‑4‑35. After the enforcement of the said Notification no transfer of Urban Immovable Property by sale can take place except by means of registered instrument under Registration Act, 1908. No other means, including the rule of Court of award and declaratory decree, can be adopted to bring about change in the ownership of the Urban Property on the basis of sale. In support of my view I hereunder analyse the law relating to Rule of Court and declaratory decree. RULE OF COURT The Arbitration Act, 1940 provides machinery for making award a rule of Court. Awards may originate out of Court or through Court. Section 14 provides for filing of application for making out of Court award a rule of Court. It may be filed either by the Arbitrator or by a party, in whose favour the award is. If the application is filed by the Arbitrator then he is to file award, alongwith all documents, which have formed the basis of award and array both the parties to the award as respondents, therein. If it is filed by successful party in the award then he will require the Arbitrator to file award, alongwith all connected documents, in Court and the opposite‑party will be given chance to contest it. The party, against whom the award has been made, may challenge the award by filing an application for setting it aside within given time. If the award is not set aside on such an application or if no application for setting aside the award has been filed, then the award, if lawful, is to be made a rule of Court under section 17 of Arbitration Act. Similar treatment is meted out to an award which has been made through intervention of the Court. Though Arbitration Act covers all sorts of Awards, whether relating to the Immovable Property or otherwise, but the awards relating to the Immovable Property have been distinctively dealt with. Article 12, as aforesaid, deals v4th the stamping of an award at the rate of 2% of the market value of the property. When the award purports or operates, to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of 100 rupees and upwards, to or in Immovable Property then it is required to be registered by section 17 (1) of the Registration Act. It means that no award falling under the said section can be processed under the Arbitration Act until it is registered. Moreover, in spite of the generality of the said provision, Urban Immovable Property possesses a distinctive character because of its incapability of transfer by sale except by means of registered sale‑deed under section 54 of the Transfer of the Property Act. The effect of the said section is that it excludes the application of the Arbitration Act in respect of Urban Immovable Property. The Arbitration Act and section 17(i) (e) of Registration Act are to give way to section 54 of the Transfer of Property Act. The legal formalism of registration of sale‑deed in respect of Urban Immovable Property can in no case be dispensed with. It will be more appropriate to say that the sale of urban property can only be concluded and perfected by registered sale‑deed. So all the rules of Court made by Civil Courts in Punjab are coram non judice and a waste paper. DECLARATORY DECREES Section 42 of the Specific Relief Act, 1877, deals with powers of Civil Courts to pass a declaratory decree. It provides that any person entitled to any right as to any property, may institute a suit against any person, denying, or interested to deny such right and the Court may in its discretion, make therein a declaration that he is so entitled. The said section presumes that the plaintiff's right to suit property should pre‑exist the filing of the suit and all that the Court is to do is to shed off any doubt or challenge put by the defendant to such a right. The Civil Court, of its own, does not become a means to create right in the property. The right of the plaintiff in the property should be perfect and complete, according to the law of the land. If the plaintiff asserts that he is owner of the property then he should be so before he files the suit. Applying this principle to Urban Immovable Property a person can acquire ownership in property, by sale, only by means of a registered document, as, after application of section 54 of the Transfer of Property Act since 27‑4‑1935, no property can be sold out except through a registered sale‑deed. No consent, admission or compromise between the parties can enable a Court to declare plaintiff to the owner of the property situate in Urban area until the plaintiff holds a registered sale‑deed in his favour before the institution of the suit. Admission in pleadings, conceding statements, or compromises under Order XXIII, Rule 3 of the Civil Procedure Code, can only cover lawful admission or compromises. A defendant in a suit cannot concede plaintiff to be owner of the Urban Property if the plaintiff did not have registered sale‑deed in his favour before the filing of the suit. Section 7(iv‑a) of the Court Fees Act will cover suits relating to Immovable Property, other than Urban Immovable Property in matter of sale, because it could not be the intention of the legislature to subordinate section 54 of the Transfer of Property Act to the Court Fees Act. The latter Act belongs to the family of procedural law while the former Act to the family of substantive law. The substantive law is a dominant law and the procedural law is incidental or supplemental to the former, to give effect to it. Section 17(2) (vi) of the. Registration Act also cannot be pressed into service to claim validity to a decree or order of Court in respect of sale of Urban Property. In order to appreciate the said provision it is reproduced as under:‑‑ "Section 17(2)(vi).‑‑ Nothing in clauses (b) and (c) of subsection (i) applies to any decree or order of a Court except a decree or order expressed to be made on a compromise and comprising Immovable Property other than that which is the subject‑matter of the suit or proceeding." Apparent reading of the said section gives an impression that a decree or order of the Court expressed to be made on a compromise and comprising Immovable property other than that which is the subject‑matter of the suit or proceeding, requires registration but a decree or order, relating to the Immovable property which is the subject‑matter of the suit or proceeding, even though made on a compromise, does not require, registration. The first part of clause (6) is of general nature and does not make any distinction as to the nature of the property, by reference to its location in a rural area or an urban area, but it assumes that the decree or order of the Court must be within its competence, and in order to judge that aspect, we shall have to refer to section 42 of the Specific Relief Act which controls and regulates the passing of declaratory Act which controls and regulates the passing of declaratory decree in respect of Immovable Property. The said section, as aforesaid, requires the vesting of pre‑existing title in the plaintiff in respect of the property. When a plaintiff claims ownership to an Urban Immovable Property in a suit filed before a Civil Court, he has to show that he owns that property through a registered sale‑deed, Registration Act, 1908, like other procedural laws, is subordinate to Transfer of Property Act, which enjoins upon the observance of specific method of getting a sale‑deed registered in respect of Urban Property, if one wants to get an Urban Property by sale. There is no other way open to him. It is only to clear off a shadow of doubt to his title in property, cast by defendant that the necessity of filing suit arises. So a declaratory decree, if not founded on a registered sale‑deed, does not create right or title in an Urban Immovable Property and the incorporation of such decree in the Revenue Record is of no legal consequence and should be dealt with in the same manner as the rules of the Court. To undo the previous rules of the Court and declaratory decrees and to eliminate the said practice, in future, it will be proper for the High Court to call for lists of rules of Court and declaratory decrees from all the Civil Courts, in Punjab in respect of urban property since the enforcement of section 27‑A of the Stamp Act on 14‑6‑1986 by Punjab Finance Act, 1986 and set aside all of them in its revisional jurisdiction and take disciplinary action against all Presiding Officers involved in the said nefarious practice. The Government, at its own end, can get reviewed all mutations based on the rules of Court and declaratory decrees, based on sale, in respect of Urban Properties, since the enforcement of section 27‑A of the Stamp Act.