Case Summary : Duncans Industries Ltd. v. State of U.P. (2000) 1 SCC 633 | Property Law

Bench: N.S. Hegde, B.N. Kirpal

Facts of the case:

1. ICI India Ltd. executed an agreement of sale wherein it agreed to transfer on an “as is where is” basis and “as a going concern” its fertilizer business of manufacturing, marketing, distribution and sale of urea fertilizer in favour of Chand Chhap Fertilizer and Chemicals Ltd. (“CCFCL”), also a company incorporated under the Companies Act, 1956 which company has since been renamed as M/s Duncans Industries Limited, Fertilizer Division, Kanpur Nagar (the appellant herein) for a total sale consideration of Rs 70 crores which was termed as “slump price” in the agreement.

2. Pursuant to the said agreement, a deed of conveyance was executed by the said ICI in favour of CCFCL, on the presentation of the said Conveyance Deed for registration. 

3. The Sub- Registrar made a reference to the Collector under Section 47-A(2) of the Stamp Act, 1899 (hereinafter referred to as the Act) stating that in the document under reference all the details required under Section 27 of the Act had not been given by the parties, hence valuation and examination is essential and requested the Collector to determine the value as required under the Act and the Rules and to take action to realise the deficit stamp duty and penalty. 

4. Collector after necessary inquiry related to above, levied stamp duty and penalty to which reference has already been made. 

5. Appellant aggrieved by said order of Collector, preferred a revision petition to the Chief Controlling Revenue Authority who, as already stated, by his order dated 9.6.1994 set aside the penalty and modified the duty payable to Rs.36,68,08,887.50 which order came to be challenged before the High Court unsuccessfully. 

6. Before the High Court the appellant had challenged the authority of the Sub-Registrar to make a reference to the Collector on the ground that there was no material to entertain any reason to believe that the market value of the property which was the subject-matter of the conveyance deed had not been truly set forth in the instrument.

6.1 High Court negatived the said contention after considering the arguments of the appellant in detail, and before us no argument has been advanced on this score. 

Contention before SC by appellants:

Appellant contended that HC committed an error in coming to the conclusion that the plant and machinery which were transferred by the vendor to the appellant, were immovable properties

He also contended that the High Court erred in relying upon paragraphs 10 and 11 of the conveyance deed to come to the conclusion that the plant and machinery were the subject- matter of the said deed. 

He also contended that the High Court failed to look into the intention of the parties who by an agreement dated 11.11.1993 had treated the plant and machinery as movables and have delivered possession of the said plant and machinery as movables on 11.12.1993. 

Hence, the said plant and machinery is neither immovable property nor the property which has been transferred by virtue of the deed of conveyance dated 9.6.1994. Therefore, the value of the said plant and machinery could not have been taken into consideration for the purpose of arriving at the correct and true value of the property conveyed under the deed of conveyance. He also contended that the valuation in regard to the plant and machinery made by the authorities and as accepted by the High Court is incorrect and contrary to law. 

Contention of State Counsel

State counsel contended that conveyance deed by ICI in favour of the CCFCL contemplated an agreement to transfer the business of manufacturing, marketing, distribution and sale of urea fertilizer that is fertilizer business itself with a stipulation that the first stream, second stream and the third-stream urea manufacturing plants as well as the Ammonia manufacturing plants would also be transferred as a part of the transfer of fertilizer business of the ICI as a going concern. 

He also contended that a reading of the document at Para 1(e)(i) which defines fertilizer business clearly shows that the intention of the vendor was to transfer all properties that comprised the fertiliser business. 

Learned counsel representing the appellant before High Court, had not seriously challenged the valuation made by the authorities, hence he contended that the challenge made to the valuation by the appellant before us should not be countenanced.

Legal Issues:

1. Whether by the conveyance deed dated 9.6.1994, the plant and machinery were also transferred; and if so, whether the High Court was right in accepting the valuation as made by the authorities for the purpose of stamp duty payable?

2. Considering the question whether the plant & machinery in the instant case can be construed as immovable property or not?

Judgement and Observation:

Observation of court on whether the property is movable or not? 

Looking at circumstances of the case Court held that description of the machines as seen in the Schedule attached to the deed of conveyance shows without any doubt that they were set up permanently in the land in question with a view to operate a fertilizer plant and the same was not embedded to dismantle and remove the same for the purpose of sale as machinery at any point of time. Facts show that machines were embedded was to use the plant as a factory for manufacture of fertiliser at various stages of its production. Hence, the contention that these machines should be treated as movables cannot be accepted.

While considering this question of transfer of plant and machinery being part of the conveyance deed or not, Court held that appellant in an application filed before income tax authority while disclosing the market value of the immovable property sought to be transferred the appellant himself has mentioned the value of the property so transferred as Rs.70 crores which is the figure found in the agreement of sale which agreement includes the sale of plant and machinery along with the land. A certificate issued by the appropriate authority under Section 269 UL (3) of the Income Tax Act evidences this fact.

For the reasons stated above, we are of the considered opinion that the vendor as per the conveyance deed dated 9.6.1994 has conveyed the title it had not only in regard to the land in question but also to the entire fertilizer business in as is where is condition including the plant and machinery standing on the said land.

We cannot accept the argument that the valuation accepted by the Collector and confirmed by the revisional authority is either not based on any material or a finding arrived at arbitrarily. Once we are convinced that the method adopted by the authorities for the purpose of valuation is based on relevant materials then this Court will not interfere with such a finding of fact. 

That apart, as observed above, even the counsel for the appellant before the High Court did not seriously challenge the valuation and as emphasised by the High Court, rightly so. Therefore, we do not find any force in the last contention of the appellant also. For the reasons stated above, this appeal fails and the same is dismissed with costs.

 


Summarized by - Tushar Bawa


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