N GURUVA REDDY Vs. DISTRICT REGISTRAR HYDERABAD

JUDGEMENT

(1.) In this reference under Section 57 of the Indian Stamp Act the following question has been referred to us for our opinion. "Whether the document under reference is a deed of dissolution or partnership as also a Mortgage deed and also other points of law." The facts giving rise to this reference are as follows : Gurava Reddy, son of Chenchu Rami Reddy, and six other persons and legal heirs of Smt. P. Sreedevamma were carrying on a partnership business at Hyderabad in the name of M/s. Sudha Enterprises with the Trade name of Blue Moon Hotel. The legal representatives of Smt. P. Sreedevamma and five other partners expressed their desire to retire from the partnership and actually retired on 6/09/1973. A deed of dissolution of partnership was executed on 3/01/1973. The parties to the deed of dissolution were Sri n. Gurava Reddy and his wife, Smt. N. Sudaranamma, who were described in the deed as the continuing parties of the first part, and the remaining partners including the heirs of the deceased Smt. P. Sreedevamma of the other part. The parties of the other part were described in the document as outgoing parties. The deed of dissolution was executed on a stamp paper of the value of Rs. 32-50. According to the deed of dissolution, the partnership was dissolved with effect from 6/09/1973. Clause 4 of the deed of dissolution states, the accounts of the assets and liabilities of the partnership have been taken and duly audited and a final profit and loss account as well as a final balance sheet has been prepared after jointly assessing the stocks, securities, goodwill, actionable claims and all other assets, movable and immovable, and undertakings of the firm, which has been signed in triplicate by each of the parties. After adjusting the loans, various amounts which had to be paid to the outgoing partners, have been set out in clause 6 of the deed of dissolution. Under Clause 7, the outgoing partners had to transfer and assign to the continuing partners all the rights, title and interest in the shares of the said outgoing partners in the partnership and the business, property effects, assets and the book debts thereof and all other assets and liabilities of the partnership outstanding against other persons to hold the same to the continuing parties absolutely. Under Clause 8 the amounts payable to each of the outgoing partners were to be paid in the following manner; One half of the amount payable to each outgoing partner was to be paid on or before 30/06/1974, 25% was to be paid on or before 31/12/1974 and the balance of 25% was to be paid on or before 30/06/1975. The continuing parties had to pay interest at 12% per annum on the dues from 1/01/197 4/12/1974. That interest was to be paid along with the instalment amounts. The balance outstanding as on 1/01/1975 was to carry interest at 14% per annum till the date of payment. Clause 9 is material for the purpose of this judgment and is as follows: "The continuing parties to this agreement hereby create a charge on the assets of the partnership subject only to the first charge in favour of A.P. State Financial Corporation, Hyderabad, for the payment of the amounts mentioned above, to the various outgoing parties." It appears that, after the document was executed, it was presented for registration in accordance with the provisions of the Indian Registration Act to the Joint Sub Registrar, Khairatabad, Hyderabad, who impounded it as insufficient stamped and referred the matter to the District Registrar, Hyderabad. The District Registrar adjudicated it (1) as a release of partnership rights for a consideration of Rs. 2,10,000 by the legal representatives of the deceased partner, Smt. P. Srreedevamma. The District Registrar accordingly levied a deficient duty of Rs. 11,302-8- p under the relevant articles of Schedule 1-A of the Stamp Act read with Section 5 of the said Act. He also imposed a penalty of Rs. 25. Against the order of the District Registrar, a revision petition was preferred before the Board of Revenue under Section 56 (1) of the Stamp Act by Sri N. Gurava Reddy. He contended that the document is a deed of dissolution of partnership simpliciter and nothing else. The Board of Revenue heard the petitioner and examined the matter carefully, but could not give any finding as intricate questions of law were involved and ultimately referred the matter for a decision of this Court. Apart from the question hereinabove set out, two other points have also been referred to us viz. (2) If so, whether stamp duty has to be charged under the relevant articles of Schedule 1-A of the Stamp Act read with Ss. 5 and 6 of the said Act? and (3) Whether the document is only simple dissolution of p and nothing else and is chargeable with stamp duty only as a dissolution of partnership.

(2.) As to what exactly is the legal effect, when a partnership is dissolved, has been decided by the Supreme Court in Narayanappa v. Bhaskara Krishnappa, AIR 1966 SC 1300 and Commissioner of Income-tax v. Dewas Cine Corporation, 68 ITR 240 = (AIR 1968 SC 676). These two decisions were considered by a Full Bench of the Gujarat High Court in Velo Industries v. Collector, Bhavanagar, (1971) 80 ITR 291 (Guj). There, the Full Bench of which I was a member held :

(3.) It is in the light of these two decisions of the Supreme Court viz. Narayanappa v. Bhaskara Krishnappa, AIR 1966 SC 1300 and Commissioner of Income-tax v. Devas Cine Corporation, 68 ITR 240 = (AIR 1968 SC 676), and the decision of the Full Bench of the Gujarat High Court in Velo Industries v. Collector, Bhavnagar, (1971) 80 ITR 291 (Guj) with which we respectfully agree that we have to consider the legal effect flowing from the deed of dissolution.