P L D 1953 Lahore 575 (PLP)

KAYANI, J‑--This is a reference by the Financial Commissioner, Revenue, under section 57 of the Stamp Act, 1899, for a decision by the High Court whether a certain agreement should be stamped under Article 5 of the First Schedule as a mere agreement or under Article 23 as a conveyance. The deed in question purports to have been executed on the 24th of March 1949, between Messrs Geoffery Manners & Co. Ltd. of Bombay, as the vendor company, and Messrs Geoffery Manners 8r Co. (Pakistan) Limited of Lahore as the purchaser company. In para. No. 1 it is stated that "the vendor company shall sell and the purchaser company shall purchase"‑ (1) the leasehold interest in certain premises, (2) office furniture etc., (3) debts, (4) benefit of all pending contracts etc., (5) cash, bills and notes, and (6) all other property to which the vendor company is entitled in connection with its business in Pakistan. According to para. No. 2 the consideration for the sale shall be such sum as shall be ascertained from the audited balance sheet of the vendor company "as on 30th April 1949, and as may be agreed upon between the parties". This consideration was either to be paid in cash or kept as a deposit. In para. No. 3, the purchaser company undertakes to pay and satisfy all the debts and liabilities of the Lahore branch of the vendor company "up to the time of completion of the said purchase". In the final and fifth paragraph it is stated that the "purchase shall be completed on the 1st day of May 1949, when possession of the premises agreed to be sold shall be, as far as practicable, given to the purchaser company and the consideration aforesaid shall be paid and satisfied in the manner mentioned in clause (2) hereof and thereupon the vendor company shall, at the expense of the purchaser company, execute and do all assurances and things for vesting the said premises in the purchaser company." This provision in the last paragraph clearly means that the execution of a proper sale‑deed was contemplated. For a decision of the case the following provisions of the Stamp Act are relevant:‑ Section 2 (10).‑"Conveyance includes a conveyance on sale and every instrument by which property, whether movable or immovable, is transferred inter vivos and which is not otherwise specifically provided for by Schedule

1. Section 3.‑Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in that Schedule as the proper duty therefore respectively, that is to say‑ (a) every instrument mentioned in that Schedule which, not having been previously executed by any person, is executed in the Provinces and the Capital of the Federation on or after the 1st day of July 1899. (With the other clauses of this section we are not concerned here.) Schedule I, Article

5. Agreement or memorandum of an agreement‑ (a) if relating to the sale of a bill of exchange; Eight annas. (aa) if relating to the sale of a Government security; Subject to a maximum of Rs. 40, four annas for every Rs. 1,000 or part thereof of the value of the security. (b) if relating to the sale of a share in an incorporated company or other body corporate; Four annas for every Rs. 5,000 or part thereof of the value of the share. (c) If not otherwise provided for Two rupees (Then follow certain exemptions.) Article

23. Conveyance (as defined by section 2 (10) not being a transfer charged or exempted under No. 62‑ where the amount or value of the consideration for such conveyance as set forth therein does not exceed. Rs. 50 Etcetra. Rupee one Now the deed which is under examination and which was executed on the 24th of March, 1949, clearly purports to be an agreement to sell and purchase at a future date, namely, the lat of May, 1949, when according to the 5th paragraph, the purchase was to be completed and a deed executed. Whether a deed was subsequently executed or not, is irrelevant. If a deed purports to be an agreement of sale and the law recognises a distinction between such an agreement and an actual sale, the document should be stamped as an agreement and not as a conveyance. What section 2 (1) understands by conveyance is an instrument by which property is transferred, and we cannot say, upon reading the terms of the present document, that there was a transfer on the 24th of March, 1949. Section 54 of the Transfer of Property Act recognises a clear distinction between sale and a contract for sale, defining the latter as being "a contract that a sale . . . . . . shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property". The agreement before us is exactly of this nature and there is a clear provision for such an agreement in Article 5 (c). It will be noticed that under that clause certain agreements are exempted from stamp duty, one such agreement being an agreement for the sale of goods or merchandise exclusively. The fact that an agreement for the sale of goods or merchandise is shown as an exemption, makes it clear that other agreements for sale fall under clause (c) of Article

5. It would thus be evident that the Act prescribes a different stamp duty for an agreement to sell and for a conveyance and if the present document is not an agreement to sell, it is difficult to visualize such an agreement in some other form. The learned Assistant Advocate‑General did not deny that an agreement to sell would be in the same form as the present document, but he relied on an affidavit tiled by the Manager of the Company under section 31 of the Act and the statement con tained in para. 2 of that affidavit that "by the above‑mentioned agreement dated the 24th day of March, 1949, the above‑named Geoffrey Manners & Co. Ltd., sold the business of their Lahore Branch to the said Geoffrey Manners & Co. (Pakistan) Ltd., for the consideration and upon the terms and conditions therein con tained", and argued, perhaps with some reason, that the document should consequently be regarded as a sale. This affidavit, it should be remembered, was made by a layman to whose mind the distinction between a sale and an agreement to sell could not be present and who spoke merely like the man in the street and rightly thought that his title was derived from the instrument of the 24th March, 1949; for what he said was that the business bad been sold "for the consideration and upon the terms and conditions therein contained", and according to those conditions the sale was not to be deemed completed until the 1st of May 1949. The words "sold the business" should, therefore, be read in this context. Further the charging section is section 3 and it makes only "instruments" liable to duty, not "transactions". Even if the transaction, therefore, was intended to be a sale, the instrument itself was an agreement of sale, not a conveyance. If a sale deed had subsequently been executed, it could not be argued logically B that with the same contents and conditions the present document should in that event be regarded as an agreement to sell and not a sale because there could not have been two documents about the same transaction. The matter is so clear that no authority is required to support this view but; we might refer in passing to Bhola Ram & Sons Ltd. v. The Crown (1934 I L R 15 Lah. 504), and In re the Incorporation of Swadeshi Cotton Mills Co. Ltd. (A I R 1932 All. 291). We might also quote with admiration the following remarks of Lord Esher, M. R. in Commissioners of Inland Revenue v. Angus (23 Q B D 589): "If a vendor can convey the property sold to the purchaser without the execution of any instru ment, he can convey it without paying any stamp duty under section

70. The subject may have the good fortune to escape the stamp duty, if he can get a conveyance of property sold to him without the execution of any instrument. But it is said that if the appeal be decided against the Commissioners, purchasers will rest satisfied with an agreement of which specific performance would be decreed, and will not go on to execute a conveyance, and so the Crown will lose the stamp duty, and it is rather suggested that this would be cheating the Crown and committing a fraud. The Crown, however, must make out its right to the duty, and il there be a means of evading the stamp duty, so much the better for those who can evade it. It is no fraud upon the Crown, it is a thing which they are perfectly entitled to do. The Crow cannot have the stamp duty unless the parties to the sale chose to effectuate the transaction by an instrument which of itself conveys the property, and, if they chose to be satisfied with something less, the matter is not brought within section 70". Section 70 of the Stamp Act of England, 1870 defines "conveyance on sale" as including "every instrument whereby any property upon the sale thereof is legally or equitably transferred to or vested in the purchaser". ("A conveyance on sale" was one of the means on which a duty was imposed in the Schedule to the Act, "agreement" being another). We are, therefore, of the view that this instrument should be stamped as provided in Article 5 of the First Schedule, There will be no order as to costs since the state ment in the affidavit of the manager did give rise to some confusion. K. M. A. Reference answered.