# R. RATILAL & CO v. NATIONAL SECURITY ASSURANCE CO. LTD. Dec • 5 S.C.R. SUPREME COURT REPORTS 1047 Jaw. It would, we think, be inappropriate for the High Court exercising its writ jurisdiction to consider the evidetice for itself and reach its own conclusions in matters which have been left by the legislature to the decisions of specially constituted Tribunals. In the result, the appeals are allowed, the orders passed by the High Court in the two writ petitions filed by the respondent are set aside and the said writ petitions are ordered to be dismissed with costs. T. Prtm Sagar v: The Standard Vacuum Oil Company Madras and Others · Appeals allowed. Gajendragadkar J. R. RATILAL & CO. 1963 v. NATIONAL SECURITY ASSURANCE CO. LTD. Dec • 5 S.C.R. SUPREME COURT REPORTS 1047 Jaw. It would, we think, be inappropriate for the High Court exercising its writ jurisdiction to consider the evidetice for itself and reach its own conclusions in matters which have been left by the legislature to the decisions of specially constituted Tribunals. In the result, the appeals are allowed, the orders passed by the High Court in the two writ petitions filed by the respondent are set aside and the said writ petitions are ordered to be dismissed with costs. T. Prtm Sagar v: The Standard Vacuum Oil Company Madras and Others · Appeals allowed. Gajendragadkar J. R. RATILAL & CO. 1963 v. NATIONAL SECURITY ASSURANCE CO. LTD. Dec. We R. Ratilal & Co. think that the present Interim Protection Note satisv. fies the conditions which would make it a letter of National Security cover in this sense. It gives protection for a period Assurance Co. of thirty days or the period upto the date of the issue Ltd. of the policy. An engagement to issue a policy means, it seems to us, more or less the same thing as a letter Sarkar J. of cover. A letter of cover, therefore, cannot be admitted in evidence under s. 35 as a policy of insurance. The next .question is whether a letter of cover is itself an instrument chargeable with duty under the Act. It is not disputed that if it is not so chargeable. it cannot be admitted in evidence under s. 35 by subsequent payment of duty and penalty. Now s. 3 specifies instruments which are chargeable with duty under the Act. It says, "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 therefor respectively, that is to 1 say,-(a) every instrument mentioned in that Schedule which ..................... is executed in India on or after the first day of July 1899". July 1, 1899 is the date on which the Act came into force. Now the contention of the respondent is that a letter of cover is not an instrument chargeable with duty because the General Exemption in Art. 47 of the Schedule exempts it from such duty. This contention was accepted by the learned Judges of the Appellate Bench of the High Court who pointed out. "It is significant that the words used are not that such letter is chargeable with duty. The words used are 'bears the stamp prescribed by the Act for such policy'. On a proper interpretation this means that such letter of cover is not chargeable with duty as· such under the Act but if it bears the stamp prescribed by the Act for a policy of insurance, then it will shed its inability and will become a competent document on which a claim for loss could be made." (1) 7 A.C. 96. (. • ' 5 S.C.R. SUPREME COURT REPORTS 1053 They further observed, "as no stamp is fixed for 1963 such a letter of cover being not a document charge- - able with duty, the statute uses the significant words R. Ratilal & Co. or 'bearing the stamp' and indicates the rate by saying v. that the stamp must be the same for such a letter National Security of cover which is prescribed for a policy of insurance Assurance Co. under the Act". Jn this Court Mr. Chatterjee for Ltd. the respondent also advanced the same argument. We are unable to accept the view which found favour with the Appellate Bench of the High Court. The matter was put in two ways. The first was that an instrument which is exempted from duty by Schedule I is not chargeable with duty under s. 3 and a letter of cover is so expressly exempted. No doubt, if an instrument is exempted by the Schedule from duty, then it cannot be chargeable. But we do not think that a letter of cover is for all purposes exempted from duty by the General Exemption. We think the proper construction of the General Exemption clause is that the exemption is to apply only if the letter of cover is used for compelling the delivery of the policy mentioned in it. If it is used for any other purpose, then it is not exempted. That is · why a proviso has been employed in the provision and the effect of that is to take the Jetter of cover out of the exemption in all other cases. If it is taken out of the exemption, then, of course, the present argument fails. We are unable to see how a Jetter of cover can be said to have been exempted for all purposes, if certain things cannot be claimed under it for the sole reason that it does not bear a stamp. If it were exempted for all purposes, it would be fully enforceable even without a stamp. When a letter of cover is not stamped, then nothing is claimable ·under it except the delivery of a policy. If, however, it bears the stamp prescribed for the appropriate policy, a claim can be made under it. It seems to us that if an instrument bears a stamp, it has incurred the liability for the stamp duty; it has not then been exempted. Therefore it cannot be said that a Jetter of cover is exempted from duty in all cases. When Sarkar J. 1054 SUPREME COURT REPORTS [1964] 1963 it is not exempted, it is an instrument chargeable - to duty. R. Ratilal & Co. v. The other way in which the contention was put National Security is bas~d on the. use ?f the word~ 'bear~ the .stamp · Assurance Co. prescnbed by this Act . It was said that 1f an mstruLtd. ment is made to bear a stamp, it is not thereby made chargeable to stamp duty. We are wholly unable Sarkar J. to see how an instrument can bear a stamp prescribed by the Act unless it is chargeable to duty under the Act for the Act deals only with instruments chargeable to duty under it. It is difficult to appreciate the argument that what the proviso meant by the use of the words 'bears the stamp prescribed by this Act for such policy' was only to indicate the amount of the duty. No doubt the rate is there, but the instrument has to bear a stamp of that rate. The Act nowhere says anything as to how an instrument is to bear a stamp. Section 17 says that all instruments chargeable with duty shall be stamped before or at the time of execution. If the letter of cover was not chargeable to duty but has only to bear a stamp as the respondent contends, s. 17 would not apply to it. There would then be no provision to prevent an instrument which is not chargeable to duty but is required to bear a certain stamp, from having that stamp affixed to it at any point of time. The result would then be that where an instrument has only to bear a stamp, the stamp can be affixed even at the hearing before the instrument is tendered. That, of course, would not assist the respondent at all and would, in our view, introduce an anomaly in the Act which would be the result of putting an unnatural construction on the words 'bears the stamp'. We think that by the use of the words 'bears the stamp' the legislature intended to convey that a letter of cover would be chargeable to duty in all cases except for compelling delivery of a policy. A letter of cover is, in our opinion, therefore, an instrument chargeable to duty under the Act and so admissible in evidence on payment of the requisite duty and penalty under s. 35 of the Stamp Act as l \ ' - { (, .. '\ ' • 5 S.C.R. SUPREME COURT REPORTS 1055 it is neither an instrument chargeable to duty not 1963 exceeding ten naye paise nor a bill of exchange or - a promissory note. R. Ratilal & Co. It seems to us, though we do not base our judg- M . ~s . ment on it, that the idea of exempting a letter of cover Aationa ecucrzty f t f d t . h fi . 'd ssurance o. rom paym~n o .i y m t e rst msta~ce was to av01 Ltd the hardship of payment of duty twice over on the · same insurance, for the policy issued after the letter Sarkar J. of cover had to insure the goods from the time that the letter of cover itself insured them and the policy had to be stamped. If the policy insured the goods from a date after the expiry of the insurance by the letter of cover, the latter would then be an independent policy of insurance, may be for a shorter time; it would not then be an interim cover and, therefore, not a letter of cover at all. It may also be stated that in very few cases it would be necessary to enforce the letter of cover as an insurance for it is unlikely that in many cases the fire would have occurred during the period covered by it. We have now to state that the appellant had paid the duty and penalty as required by s. 35. There is no objection any more to the admissibility of the letter of cover in evidence. The only defence that was taken by the respondent to the claim of the appeUant, therefore, fails and the appeal should succeed .. We wish, however , to observe that we have in this judgment dealt only with a letter of cover concerning fire insurance and our remarks on the interpretation of the proviso in the General Exemption in Art. 47 of Schedule I to the Act have been made in that context only. Whether those remarks would apply in the case of a letter of cover concerning other varieties of insurance was not a matter for our considerati.oi: and on that question we have expressed no opmton. We would for these reasons allow the appeal and pass a decree in favour of the plaintiff-appellant for Rs. 93,628/8/- and costs with interest thereon from the date of the judgment of the learned trial Judge at six per cent. 1056 SUPREME COURT REPORTS [1964] • 1963 RAGHUBAR DAYAL J.-I agree that the iuterim - protection note does not amount to a policy of inR. Rati!al & Co. surance. and that it is a letter of cover or engagement v. to issue a policy of insurance. I do not agree that National Security it can be subsequently stamped in view of the proviso Assurance Co. (a) to s. 35 of the Indian Stamp Act, hereinafter Ltd. called the Act. Raghubar Dayal The interim protection note, being a letter of J. cover, .is exempted from stamp duty under the general exception to art. 4 7 of Schedule I of the Act. It can be used to base a claim, or for any other purpose, · only if it bears the stamp prescribed by the Act for the policy which is to be issued in pursuance of the letter of cover. The trial Court admitted this letter of cover on the appellant's paying the requisite duty and penalty under s. 35 of the Act. The High Court has held that this could not be done as the provisions of s. 35 of the Act were not applicable to documents which were not chargeable with duty under the Act. The correctness of this view is challenged for the appellant. The general exception, together with the proviso reads: "Letter of cover or engagement to issue a policy of insurance: Provided that, unless such letter or engagement bears the stamp prescribed by this Act for such policy, nothing shall be claimable thereunder, nor shall it be available for any purpose, except to compel the delivery of the policy therein mentioned." Section 35 of the Act, omitting the provisos other than (a), reads: "No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by public officer, unless such instrument is duly stamped: ( - • L 5 S.C.R. SUPREME COURT REPORTS 1057 Provided that1963 (a) any sue~ instrument not being ~n instrument R. Ratilal &: Co. chargeable with a duty not exceedmg ten naye v ~·-- .. paise only, or a _bill of exch.ange or pr?missory National Security note, shall,· subject to all Just exceptions, be As ra Co admitted in evidence on payment of the duty su L;~e · with which the same is chargeable, or in the · case of an instrument insufficiently stamped, Raghubar Dayal of the amount required to make up such duty, 1 together with a penalty of five rupees, or, when · ten times the amount of the proper duty or deficient portion thereof exceeds five rupees of a sum equal to ten times such duty or portion·" , It is clear that an unstamped letter of cover or engagement to issue a policy of insurance can be used only for compelling the delivery of the policy therein mentioned, and can neither be used for any other purpose nor can any claim be based on it. A claim can be based on it if it bears the stamp pres- -: cribed by the Act for the policy contemplated by the letter of cover or engagement. The question then is whether the proviso contemplates the letter of cover to bear the stamp prescribed for the policy at the time it is executed or can take in a letter of cover which is not so stamped at the time of its execution but is subsequently stamped by any person interested in stamping it or under any orders under the Act. I am of opinion that it contemplates letter of cover μ' to bear the necessary stamp at the time of execution and that any subsequent affixing of requisite stamps on an unstamped letter of cover will not make it a document which can be used for any purpose including the basing of a claim. The various provisions of the Act provide for the subsequent stamping of the document only when that document is chargeable with duty, under the provisions of ·s. 3 of the Act. The Act does not, and naturally, could not have dealt with orders for subsequent stamping of documents which at the time of execution are not liable to stamp duty. They l/SCI/64-67 1058 . SUPREME COURT REPORTS [1964] 1963 are good valid documents without any stamp duty . and therefore no question can arise in future about \; Ri Ratilal & Co. their being stamped under the orders of Court or ,,.,_,,_ v. a public officer. There is no such provision either National Security in the Act, though a number of se~cions deal with Assurance Co. the subsequent charging of the deficit duty and penalty Ltd. as well. No penalty can be contemplated on account .::..;:__:_ of a document being not stamped when it required Raghubar Dayal· no stamp under the provisions of the Act and was thereJ, fore not chargeable with stamp duty. ( It is pertinently remarked in. Narayanan Chetti v. Karuppathan. offe ing to make an insurance to be used for making a daim thereunder and therefore to be treated as a pqlicy, it is incumbent on that person to have the letter of cover properly stamped with the requisite sta~p for that policy. If they do not so intend and desi e the letter of cover to remain as a letter of cover on t e basis of which only the delivery of the policy mentioned therein can be enforced, they may take the <1tdvantage of the general exception and need not ' stalll' it. The decision to stamp it or not to stamp it is ~o be taken at the time when it is to be executed. I · If it ,is not then stamped, it is a mere letter of cover whicn requires no stamp duty .. It is a valid and I i I 1060 SUPREME COURT REPORTS [1964] ~ 1963 complete document. No provision of the Act for its "---' -. - being stamped subsequently either by any of the parties R. Rafi/al & Co. Jo it or by any public servant exists. The provision , Y· in the proviso to the general exception about the letter National Security of cover being used to found a claim or for any other Assurance Co. purpose when it bears the stamp prescribed by the Ltd. Act for such policy, cannot be construed to mean - that subsequent to its execution any party standing Raghubar Dayal to gain thereby may just put the requisite stamp J. on it and thereafter use it for enforcing any claim { or for any purpose. Such a construction of the proviso would be against public policy and may defeat one of the objects of the Act. It is true that the '~ Act is a revenue measure, but at the same time the stamping of documents gives a certain formality to the transaction and to the preparation of the document. Th<: letter of cover is exempted from stamp duty because as unstamped it cannot be used for any purpose except for enforcing delivery of the policy. If subsequent stamping of such document, in order _i., to convert the Jetter of cover into a real policy, be\.- left at the sweet will of the party standing to gain \ · on account of the uncertain event having occurred, it would be against public policy because thereby a party who is sure to gain by fixing the requisite stamp, whose value is bound to be negligible compared to the monetary gain it stands to gain, will not mind • the fixing of the necessary stamp and parties in general would like to avoid payment of the stamp duty in the first instance when the document is executed.i:_( Further, the letter of cover is issued by the insurer and, on the happening of the uncertain event, it would be the person insuring who would like to affix the requisite stamp and thereafter claim the amount of damages incurred within the limits of the policy. The executant of the letter of cover may thus be forced to abide by the terms of the document as a policy when he, at the time of executing the document, did not intend to be so bound. When a letter of cover is not stamped at the time of execution, both the parties stand to lose what they are to gain monetarily • on its basis. The person insuring stands to lose the ... - - I i I 5 i:;.C.R. i SUPREME COURT REPORTS 1061 · rei:;overy of any loss he may incur prior to the issue 1963 of, the policy. The insurer-company stands to lose - the recovery of the premium for the limited period, R. Ratilal & Co. i.e., the period between the date of the cover note v. and the date when loss occurs to the proposer. Both National Security the parties take risk of loss by not stamping the letter Assurance Co. of cover and thus not making it a document on which Ltd. the claim other than the delivery of the policy can -- be based. Raghubar Dayal In this connection, reference may be made to s. 47 of the Act which provides for a subsequent stamping of certain documents in certain circumstances. But this too deals with certain documents which, though chargeable with duty, are not covered by proviso (a) to s. 35. Section 62(1 )(b) makes it penal to execute or ·• sign otherwise than as a witness, any instrument chargeable with duty and not included in cl. (a), without it being duly stamped. Any subsequent stamping of a letter of cover with the requisite stamp ·--1 would lead to the parties avoiding the penalty prescribed by s. 62(1 )(b ), as the letter of cover is not chargeable with duty and the subsequent stamping would mean that it becomes a .policy of insurance, a document which could be enforced on account of being properly stamped. Section 29 provides that in the absence of an agreement to the contrary, the expenses of providing the appropriate stamp shall be borne in the case ~ of a policy of fire-insurance by the person issuing the policy. Though there is no definite provision in the Act as to who should stamp the document, in view of the provisions of s. 62, the person to suffer for non-stamping a document chargeable with duty is the executant. The insurer will not like to stamp the letter of cover subsequently and specially when the uncertain event had taken place. Subsequent stamping by the assured in such circumstances, could not have been contemplated by the Legislature. Further, in view of the proviso to the general exception to art. 47, nothing could be claimed under J. ' 1062 SUPREME COURT REPORTS [1964] ( 1963 an unstampl:d letter of cover. This means that no 1 suit can be instituted for the recovery of any amount R. Ratilal & Ca. alleged to be due to the plaintiff. When the suit v. itself cannot be instituted, no question of taking action National Security under s. 35(a) of the Act can arise , as that action is Assurance Ca. to be taken subsequent to the institution of the suit Ltd. and at the time of admitting the document in evidence. Raghubar Dayal . 1 It 1s suggested for the appellant that the provi- . sions of the general exception indicate that the letter f of cover was exempted from stamp duty as th~ Legislature did not intend that the stamp dutv be paid twice over, once on the letter of cover and a second -- time when the policy was issued. If the Legislature had really intended so, it could have simply provided that if a letter of cover bears the requisite stamp, the policy need not be stamped. The Legislature, however, spoke differently. It exempted the letter of _., cover and provided that a letter of cover without stamp could be used only for enforcing the delivery of the policy mentioned therein. The object behind the exemption therefore appears to be the very limited ~ - purpose for which the letter of cover can be used. The Legislature was aware of a letter of cover usually containing material which would make it a policy for a limited period and therefore further provided - that it can be used to found a claim or for any other ,. purpose if it bears the requisite stamp for a policy. - The reasonable inference is that the Legisfature left it to the discretion of the parties concerned to have '-./ the letter of cover stamped or not according to the ' use they intended to make of it, and therefore it would be wrong to construe the provision to the effect that any subsequent stamping of the document in any circumstance would change the nature of the document and make it available for purposes for which it was not intended to be used at the time of execution. Reliance has been placed for the appellant on the case reported asTricamji Damji & Co. v. Virji Kanji\1J. (1) [1922] 24. B.L.R. 820. 4 - - 5 S.C.R. SUPREME COURT REPORTS 1063 In that case the plaintiff had claimed damages on 1963 the bases of an unstamped protection note with respect - to a contract of sea-insurance. Marten J., held thatR· Ratilal & Co. the expression 'unless such letter or engagement bears v · the stamp prescribed by this Act for such policy' in National Security the general exception to art. 47 meant affixation of Assurance Co. the stamp before or at the time of execution, as Ltd. provided bys. 17 and thats. 35(a) must be read subject - to the express direction in the proviso to the general Raghubar Dayal exception in art. 47. His view was not accepted, J. wrongly I think, by the Appellate Bench, which held the protection note to be a policy which could be received in evidence after necessary action under s. 35 of the Act is taken. We have already held the protection note in the present suit to be not a policy. I am therefore of the opinion that the High Court was right in holding that the interim protection note, not properly stamped as a policy at the time of its execution, cannot be subsequently stamped with the requisite stamps in pursuance of the provisions of s. 35(a) of the Act and that the appellant cannot base his claim on the interim protection note in suit. I would, accordingly, dismiss the appeal with costs of this Court and the High Court and modify the decree of the High Court to the effect that the suit for Rs. 93,628-8-0 be dismissed with proportionate costs in the trial court. ORDER ,,_ In accordance with the opinion of the majority, • the appeal is allowed, decree in favour of the plaintiffappellant for Rs. 93,628/8/- is passed, and costs with interest thereon from the date of the judgment of the learned trial judge at six per c~nt.