Supreme Court clarifies stamp duty remission for co-operative societies in Kerala: Kerala Land Reforms & Development Co-operative Society Limited vs. The District Registrar (General) & Another (2022) INSC 912 (14 October 2022)

Date of the Judgment: 14 October 2022
Citation: (2022) INSC 912
Judges: Justice M.R. Shah and Justice Krishna Murari
Can co-operative societies in Kerala claim stamp duty remission on property transactions? The Supreme Court of India recently addressed this question, clarifying the scope of exemptions under the Kerala Co-operative Societies Act, 1969. The court examined whether a notification issued under repealed laws could be applied to current transactions and if the remission applied to transactions between the society and its members. This judgment clarifies the conditions under which co-operative societies can claim stamp duty benefits.

Case Background

This case involves a series of appeals by various co-operative societies in Kerala, all contesting the denial of stamp duty remission on property transactions. The core issue revolves around the interpretation of Section 40 of the Kerala Co-operative Societies Act, 1969, and its interplay with a previous notification, SRO No. 75/1960, issued under the repealed Travancore-cochin Co-operative Societies Act, 1951 and Madras Co-operative Societies Act, 1932. The societies argued that SRO No. 75/1960, which provided broader exemptions, should still apply. The District Registrars, however, contended that the new Act and its provisions limited the scope of remission. The dispute arose when the societies were denied stamp duty remission on sale deeds either executed by members in favor of the society or by the society in favor of its members.

Timeline

Course of Proceedings

The matter reached the Full Bench of the High Court of Kerala after the co-operative societies were denied stamp duty remission. The High Court, after interpreting the relevant provisions of the Kerala Co-operative Societies Act, 1969, and Section 110(2) of the same Act, held that the benefit of remission was available only for instruments executed by or on behalf of a society or by an officer or member thereof relating to the business of the society. Further, the High Court held that the remission could be claimed only if the society, officer, or member would have been liable to pay such stamp duty. This ruling led the co-operative societies to appeal to the Supreme Court.

Legal Framework

The core legal issue revolves around the interpretation of Section 40 of the Kerala Co-operative Societies Act, 1969, and its interaction with SRO No. 75/1960.

Section 40 of the Kerala Co-operative Societies Act, 1969, states:

“40. Exemption from certain taxes, fees and duties –
(1) The Government may, be notification in the Gazette, remit in respect of
any class of societies-
(a) the stamp duty chargeable under the Kerala Stamp Act, 1959 (17 of
1959), in respect of any instrument executed by or on behalf of a society
or by an officer or member thereof and relating to the business of such
society, or any class of such instruments, or in respect of any award or
order made under the Act, in cases where, but for such remission the
society, officer or member, as the case may be, would be liable to pay
such stamp duty.”

This section allows the government to remit stamp duty on instruments executed by or on behalf of a society, an officer, or a member, provided the instrument relates to the business of the society and the society, officer, or member would have been liable to pay the stamp duty otherwise.

SRO No. 75/1960, issued under the repealed Travancore-cochin Co-operative Societies Act, 1951 and Madras Co-operative Societies Act, 1932, provided a broader remission. Clause 1(a) of SRO No. 75/60 stated:

“The whole stamp duty with which under the Kerala Stamp Act, 1959 (Act 17 of 1959) instruments executed by or on behalf of any registered Co-operative Society or instruments executed by “any officer of such Society or member in his own capacity or/and in the capacity of a guardian of minor” and relating to the business thereof and decisions, awards or orders of the Registrar or the arbitrators under the said Co-operative Societies Act.”

Section 110 of the Kerala Co-operative Societies Act, 1969, deals with the repeal and savings of the previous Acts, stating:

“110. Repeal and Savings – The Madras Co-operative Societies Act,
1932 (VI of 1932), as in force in the Malabar District referred to in sub-
section (2) of S.5 of the State Reorganization Act, 1956 (Central Act 37 of
1956) and the Travancore-Cochin Co-operative Societies Act, 1951 (X of
1952) are repealed.
(2) Notwithstanding the repeal of the Madras Co-operative Societies Act,
1932 and the Travancore-Cochin Co-operative Societies Act, 1951 and
without prejudice to the provisions of Ss.4 and 23 of the Interpretation and
General Clauses Act, 1125 (VII of 1125).
(i) all appointments, rules and orders made, notifications and notices
issued, and suits and other proceedings instituted, under any of the Acts
hereby repealed shall, so far as may be, be deemed to have been
respectively made, issued and instituted under this Act;
(ii) any society existing in the state on the date of commencement of this
Act which has been registered or deemed to be registered under any of
the aforesaid repealed Acts shall be deemed to be registered under the
Act, and the bye-laws of such society shall, so far as they are not
inconsistent with the provisions of this Act, continue in force until altered or
rescinded.”

The key point of contention is whether SRO No. 75/1960, issued under the repealed Acts, continues to be valid under the new Act, and if so, to what extent.

Arguments

The appellants argued that SRO No. 75/1960, issued under the Travancore Act, 1951 and the Madras Act, 1932, is saved by Section 110(2) of the Kerala Act, 1969. They contended that the notification provides for remission of stamp duty on instruments executed by a co-operative society or a member in favor of the society. They also argued that since the sale deeds in question specified that the society was liable to pay stamp duty, remission should be granted. The appellants further submitted that denying the remission would defeat the purpose of providing exemptions to co-operative societies.

The respondents argued that Section 110(2) of the Kerala Act, 1969, only saves notifications issued under the repealed Acts to the extent they are consistent with the new Act. They contended that SRO No. 75/1960 is inconsistent with Section 40 of the Kerala Act, 1969. Specifically, the respondents pointed out that Section 40 of the Kerala Act, 1969, does not provide remission for instruments executed by a member in their own capacity or as a guardian of a minor, unlike SRO No. 75/1960. They also argued that since the society is not liable to pay stamp duty under Section 30 of the Kerala Stamp Act, 1959, there is no question of remission.

Issues Framed by the Supreme Court

The Supreme Court considered the following issues:

1. Whether SRO No. 75/60, issued under the Travancore Act, 1951 and the Madras Act, 1932, is saved by Section 110(2) of the Kerala Act, 1969.
2. Whether the benefit of remission of stamp duty is available only in respect of instruments executed by or on behalf of a society or by an officer or member thereof and relating to the business of the society.
3. Whether the benefit of remission can be claimed by the society only if, but for such remission, the society, an officer, or the member, as the case may be, would have been liable to pay such stamp duty.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Court considered the following legal provisions:

• Section 35 of the Travancore-cochin Co-operative Societies Act, 1951: This provision allowed the government to remit stamp duty for societies.
• Section 30(2) of the Madras Co-operative Societies Act, 1932: This provision was similar to Section 35 of the Travancore Act, 1951.
• Section 40 of the Kerala Co-operative Societies Act, 1969: This provision allows the government to remit stamp duty for societies under specific conditions.
• Section 110 of the Kerala Co-operative Societies Act, 1969: This section deals with the repeal and savings of previous Acts.
• SRO No. 75/1960: This notification provided for the remission of stamp duty for co-operative societies.
• Section 30 of the Kerala Stamp Act, 1959: This provision exempts certain documents executed by or on behalf of a co-operative society from stamp duty.

Judgment

The Supreme Court held that the appellants were not entitled to the benefit of stamp duty remission on the instruments/sale deeds in question. The Court agreed with the High Court’s view that SRO No. 75/60 is saved only to the extent that it is consistent with the Kerala Co-operative Societies Act, 1969.

The Court observed that clause 1(a) of SRO 75/60 is inconsistent with Section 40 of the Kerala Act, 1969, specifically regarding instruments executed by a member in their own capacity or as a guardian of a minor. The Court also noted that Section 40 of the Kerala Act, 1969, requires that the society, officer, or member would have been liable to pay stamp duty but for the remission.

The Court stated that the instruments/sale deeds in question could not be said to be executed by or on behalf of a society or by an officer or member thereof relating to the business of the society.

The Court quoted:

“Thus, as clause 1(a) of SRO 75/60 is inconsistent with the relevant provisions of the Kerala Act, 1969, more particularly Section 40 thereof, the said order is not saved and cannot be said to be deemed to have been issued under the Kerala Act, 1969 (Section 110(2) of the Kerala Act, 1969) as has been contended on behalf of the appellants.”

The Court further stated:

“Therefore, considering the express provision contained in Section 40(1)
(a) of the Kerala Act, 1969, a member of the society executing the
document in his own capacity or in the capacity of a Guardian or a minor
shall not be entitled to the benefit of remission of stamp duty.”

Finally, the Court concluded:

“Such instruments/sale deeds in question cannot be said to be executed by or
on behalf of a society or by an officer or member thereof relating to the
business of the society.”

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by a strict interpretation of Section 40 of the Kerala Co-operative Societies Act, 1969, and its interaction with the savings clause in Section 110. The court emphasized that the benefit of stamp duty remission was conditional on the instrument being executed by or on behalf of a society, or by an officer or member in the course of the society’s business, and that the society, officer, or member would have been liable to pay the duty otherwise. The court’s reasoning focused on the inconsistency between SRO No. 75/1960 and the current legal framework, particularly the absence of remission for instruments executed by a member in their individual capacity or as a guardian in Section 40 of the Kerala Act, 1969. The court also considered that the society is not liable to pay stamp duty in the first place.

Logical Reasoning

Key Takeaways

• Stamp duty remission for co-operative societies in Kerala is governed by Section 40 of the Kerala Co-operative Societies Act, 1969.
• Notifications issued under repealed Acts are saved only to the extent they are consistent with the Kerala Co-operative Societies Act, 1969.
• Remission is available only for instruments executed by or on behalf of a society, or by an officer or member thereof, relating to the business of the society.
• The society, officer, or member must be liable to pay the stamp duty but for the remission for the remission to apply.
• Instruments executed by a member in their own capacity or as a guardian of a minor are not eligible for remission under Section 40 of the Kerala Act, 1969.

This judgment clarifies that co-operative societies cannot claim stamp duty remission on transactions where the society is not primarily liable for the duty, or where the transactions are not directly related to the business of the society.

Directions

No specific directions were given by the Supreme Court in this judgment.

Development of Law

The ratio decidendi of this case is that the benefit of stamp duty remission is available only in respect of instruments executed by or on behalf of a society or by an officer or member thereof and relating to the business of the society and only if the society, officer, or member would have been liable to pay such stamp duty. This judgment clarifies that the remission would not be applicable if the instrument/sale deed is executed by a member in his own capacity or in the capacity of a guardian of a minor. This judgment has changed the previous position of law which was based on SRO No. 75/1960.

Conclusion

The Supreme Court dismissed the appeals, upholding the High Court’s decision. The court clarified that stamp duty remission for co-operative societies is subject to the conditions laid out in Section 40 of the Kerala Co-operative Societies Act, 1969, and that notifications issued under repealed Acts are valid only to the extent they are consistent with the current law. This ruling provides clarity on the scope of stamp duty exemptions for co-operative societies in Kerala and emphasizes the importance of strict adherence to statutory provisions.