S. AHMED SARWANA, J.---By this common judgment we propose to dispose of four Constitution Petitions filed by the petitioners, namely Bayer Pakistan (Pvt.) Ltd., Metalex (Pvt.) Ltd., Pioneer Cement Ltd. And Abbott Laboratories (Pak.) Ltd against Member (RS & EP)/Chief Revenue Authority, Board of Revenue, Sindh (respondent No,1), Senior Inspector of Stamps/Assistant Collector Grade-1, Board of Revenue (respondent No,2) and Inspector of Stamps/Assistant Collector Grade-1, Board of Revenue, Sindh (respondent No,3). As the facts and the points of law involved in all the four petitions are common, we shall primarily refer only to the facts stated in the petition filed by Bayer Pakistan (Pvt.) Ltd. (hereinafter referred to as "Bayer"), which are as follows:
2. Bayer is a private limited company carrying on business of manufacture and distribution of pharmaceuticals. In the normal course of its business Bayer availed financial facilities from Deutsche Bank and Bank of America and in this respect executed, among others, an agreement for Financing for Short/Medium/ Long Term on Mark-up basis dated 1-9-1995 with Deutsche Bank in the sum of Rs,12.00 Million and a similar agreement dated 1-4-1996 with Bank of America in the sum of Rs,30.00 Million (hereinafter referred to as "Mark-up Agreement"). On 10-4-1996, respondent No,3 inspected the office records of Bayer which included the two Mark-up Agreements. About a month thereafter, Bayer received an Inspection Report, dated 9-5-1996 from respondent No,3 alleging deficiency of stamp duty, among others, in the two Mark-up Agreements in the sum of Rs,220,825 and Rs,517,150 respectively and requiring Bayer to hand over the original documents for impounding. As the original documents were in the custody of the respective banks, Bayer could not and did not hand over the same to respondent No,3 and informed him accordingly. It is alleged that a few days later Bayer received a copy of an Order dated 20-6-1996 passed by respondent No,2 demanding payment of the alleged deficit amount of stamp duty in the two Mark-up Agreements amounting to Rs,737,975 and a deficit of Rs,172,080 in respect of four Lease Agreements between Bayer as Lessee and various property owners thereby making a total of Rs,910,055 alongwith a penalty of an equal amount i,e, a total of Rs,1,820,110 only.
3. Being aggrieved by the aforesaid Order, Bayer filed a Revision Petition under section 56 of the Stamp Act, 1899 read with sections 7 and 8 of the Board of Revenue Act, 1957 before respondent No,
1. By Order dated 31-12-1996 respondent No,1 rejected the revision petition holding that the mark-up agreement is covered under the provisions of the notification of Government of Sindh, Finance Department No,PA/DS (B) Miscellaneous 1 of 1984 dated 1-1-1985 and is chargeable at the rate prescribed under Article 40(c) of Schedule I to the Stamp Act, 1899 and consequently, maintained the Order, dated 20-6-1996 passed by respondent No,2 to the extent of the deficit Stamp Duty of Rs,910,055 on the two mark-up agreements treating them to be conveyance deeds; however taking a lenient view, he reduced the penalty to Rs,10 only. Consequently, Bayer filed the present Constitution petition against the Order passed by respondents Nos.1 and 3 which was admitted for Regular Hearing as it involved important questions of law.
The facts and circumstances and the order passed in the Revisions relating to the other three Constitutional petitions are substantially similar.
4. Mr. Ijaz Ahmed, learned counsel for Bayer submitted the following arguments in support of the petition:
(i) That a perusal of the preamble and clauses (1) and (2) of the mark-up agreement, dated 1-9- 1995 executed by Bayer and Deutsche Bank clearly show that it is not a Conveyance Deed as defined in section 2(10) of Stamp Act, 1899. The said document at the most can be termed as an agreement of sale or an instrument recording a past transaction which cannot be termed as Conveyance Deed and referred to the following cases reported in PLD 1952 Baghdad-ul-Jadid 41, AIR 1932 Allahabad 291, AIR 1934 Allahabad 201, AIR 1918 Lahore 354 and AIR 1934 Lahore 530.
(ii) That the question before respondent No,1 was an intricate question of law involving interpretation of section 2(10) of the Stamp Act and added that treating a Mark-up Agreement as a conveyance deed would have a very strong impact on the entire Banking System of Pakistan and consequently respondent No,1 should have referred the matter for opinion of the High Court under section 57 of the Stamp Act and referred to the case reported in PLD 1959 Karachi 1 (DB) in this respect.
(iii) Under section 33 of the Stamp Act, the Collector has the power to impound any instrument if he is of the opinion that the such instrument is not duly stamped and requires payment of the proper stamp duty or the document requires further stamp duty to make up the deficit together with penalty thereon. To do so, he must be in possession of the original document whereas he had only seen a photocopy of the document and was not in possession of the original Mark-up Agreement alleged to be conveyance deed which was in fact in the possession of the bank and as such the Order of respondent No,2 and finally that of respondent No,1 are without jurisdiction and of no legal effect. He cited AIR 1958 Rajisthan 291 in this respect.
5. Mr. Muhammad Naeem, learned counsel appearing for Pioneer Cement Ltd. And Abbott Laboratories (Pak.) Ltd., submitted as follows:--
(1) The Mark-up Agreement is covered by Article 5, clause (d) of Schedule I of the Stamp Act. The document in question is neither an agreement nor a memorandum of an agreement and would therefore fall in the category of some other agreement which is "not otherwise provided for" and consequently liable to stamp duty of Rs,50 only. He submitted that if an instrument has been stamped for the principal purpose it is sufficiently stamped and all other impositions are subsidiary which should be overlooked and referred to PLD 1975 Karachi 861 in this behalf.
(ii) Under section 9-A of the Stamp Act, 1899, the Provincial Government is empowered, by Notification in the Official Gazette, to generally exempt from payment of the whole or any part of the duties on any instrument executed by or in favour of a banking company in the normal course of its banking business. By Notification in the Official Gazette, the Government of Sindh in exercise of the aforesaid powers exempted several instruments executed by or in favour of banking companies from payment of stamp duty. One such instrument is "Conveyance of any property to or by a banking company to or by its customer in pursuance of finance provided by such banking company under any mode of finance not based on interest" and the exemption granted is to the extent of "Duty in excess or duty under Article 40(c) of the Schedule I to Stamp Act, 1899".
(iii) He added that the Supreme Court has held that Mark-up which is being charged by the banks is interest and accordingly Un-Islamic (PLD 2000 SC 225 at 735) and therefore, the Mark-up Agreement does not fall within the definition of a conveyance.
6. Mr. Abul Inam, learned counsel appearing for Metalex (Pvt.) Ltd., added the following further argument in support of the petition:--
(1) He referred to clause 6 of the Mark-up Agreement dated 29-6-1994 executed between Metalex (Pvt.) Ltd. And Bank Al-Habib which states that the price for which the goods have been sold is reducible by the bank and consequently the document cannot be regarded as a sale or a conveyance of property. He further referred to several provisions in the above-referred Mark-up Agreement and submitted that the sale alleged in the document did not take place in fact but was only a paper transaction as the space for the Schedule of Goods had been left blank by the parties.
Further, as there was no mention of any goods it was only a notional sale of non-existent goods which does not attract any stamp duty.
7 Mr. Abbas Ali, learned Additional Advocate-General appearing for the Government of Sindh, submitted the following in reply:
(i) The definition of "conveyance" as given in section 2(10) of the Stamp Act includes a conveyance on sale and every instrument by which property, whether movable or immovable, is transferred inter vivos. The Mark-up Agreement, which forms the basis of the Constitution petition, is a conveyance by way of sale of movable property and therefore, liable to payment of stamp duty. He referred to the Division Bench judgments in the case of Ameen v. Haji Abdul Sattar and others 1998 CLC 1256 and Messrs Mehrban Fabrics (Pvt.) Limited v. Allied Bank of Pakistan PLD 1997 Lahore 654, in support of his contention.
(ii) Under section 33 of the Stamp Act, the original document is not required for the purpose of impounding as the word used in the section is instrument which includes any document. Further, if a party admits the actual amount of the stamp duty payable on the instrument which in the opinion of the Inspector of Stamps is insufficiently stamped, the latter is empowered to demand from the party, who is in possession of the non-original document, the deficiency in the stamp duty on the instrument and' also impose a penalty thereon.
(iii) Under Rule 6 of the West Punjab Stamp Inspection and Audit Rules, 1949, the Auditor is required to undertake the audit of various districts under his charge by rotation, in accordance with the circle tour programme which after approval by the Assistant Secretary to the Financial Commission is communicated to the Collector of the District concerned. The inspection of the petitioner's office by the Auditor was conducted under the programme duly approved in accordance with the Rules and the inspection of the documents at the office of the petitioner was carried out by him personally. As the audit was conducted in the presence of the petitioner, they had sufficient notice and should be deemed to have been given a hearing thereby complying with the principles of natural justice that no person shall be condemned unheard.
(iv) The impugned order, dated 31-12-1996 passed by respondent No,1 clearly states that the Mark- up Agreement is liable to stamp duty under Article 5(d) of Schedule I of the Stamp Act after giving exemption of the stamp duty as notified under section 9-A of the Stamp Act and consequently Bayer is liable to pay the deficit stamp duty as determined by him. He added that respondent No 1.
Had taken a lenient view and had reduced the penalty from Rs,9,10,055 to Rs,10 only."
8. We have heard the arguments of Messrs Aijaz Ahmed, Muhammad Naeem and Abul Inam, the learned counsel for the petitioners and Mr. Abbas Ali, learned Additional Advocate-General, perused the record and the provisions of the Stamp Act, 1899, the Rules and Notifications issued thereunder:-- 8-A. According to the arguments advanced by the learned counsel, the Court is required to decide whether the Mark-up Agreement would be subject to stamp duty as an agreement under Article 5(d) of Schedule I or as a conveyance as amended by Government of Sindh, Finance Department Notification No, PA/DS(B) Miscellaneous 1/84 dated 1-1-985 according to which the Mark-up Agreement is chargeable at the rate prescribed under Article 40(c) of Schedule I, Stamp Act, 1899.
8-B. Article 5 of Schedule-I reads as follows:-- "5. Agreement or memorandum of an agreement---
(a) if relating to the sale of a bill of exchange;One rupee
(b) if relating to the sale of Government SecurityFifty paisa for every Rs,10,000 or part thereof of the value of the security, subject to a maximum of fifty rupees.
(c) If relating to the sale of a share in an incorporated company or other body corporate;Twenty-five paisa for every Rupees 5,000 or part thereof of the value of the share.
(cc) if relating to the sale of an immovable property;One hundred rupees
(d) if not otherwise provided for Fifty rupees."
In exercise of the powers conferred under section 9-A of the Stamp Act, 1899, the Government of Sindh exempted various documents executed by or in favour of the banking companies from the payment of stamp duty to the extent specified against each, namely:-- "DESCRIPTION OF INSTRUMENT EXTENT OF EXEMPTION
1. Any instrument for redeemable Capital of a company as defined under the Companies Ordinance, 1984 (XLVII of 1984).In full.
2 Conveyance of any property to or by a banking company to or by its customer in pursuance of finance provided by such banking company under any mode of finance not based on interest.Duty in excess of duty under Article 40(c) of the Schedule I to Stamp Act, 1899 Consequently, respondent No,1 in the impugned order, dated 31-12-1996 has held that Mark-up Agreement is chargeable to stamp duty at the rate prescribed under Article 40(c) of Schedule I to the Stamp Act, 1899. Article 40 of Schedule I which reads as follows: "40. Mortgage-deed not being an agreement relating to Deposit of title-deeds, pawn or pledge (No,6), Bottomry Bond (No,16). Mortgage of a Crop (No,41). Respondent bond (No,56) or Security bond (No,57).
(a) .........
(b) .........
(c) When a collateral or auxiliary or additional or substituted security, or by way of further assurance of the abovementioned purposes were the principal or primary security is duly stamped-- For every sum secured not exceeding Fifteen rupees Rs,1,000 And for every Rs,1,000 or part thereof Fifteen rupees secured in excess of Rs,1,000."
9. While interpreting the provisions of Stamp Act, we must keep in mind that it is a fiscal statute and consequently, it must be construed liberally in favour of the citizen and against the Government and any substantial doubt be resolved in favour of the citizen.
10. Under section 33 of the Stamp Act, the Collector is empowered to inspect any instrument and if he is of the opinion that such instrument is chargeable with duty and is not duly stamped, he shall impound the same and under section 40(b) of the Stamp Act require the payment of the proper duty or the amount required to make-up the same together with a penalty not exceeding ten times the amount of the proper duty or of the deficient portion thereof. This he can do only if he impounds the instrument. The term "instrument" has been defined in section 2(14) of the Stamp Act as follows:-- "instrument includes every document by which any right or liability is, purports to be created, transferred, limited, extended, extinguished or recorded."
The term 'document' has not been defined in the Stamp Act. It will therefore have to be given the ordinary dictionary meaning. The Concise Oxford Dictionary, Ninth Edition, 1998 at page 398 defines "document" as "a piece of written or printed matter that provides a record or evidence of events." The Chamber Dictionary, 1994 Edition, on page 496 defines it as "a paper, esp.
Of official character, affording information, proof or evidence of anything". According to Black's Law Dictionary, Sixth Edition it means "An instrument on which is recorded, by means of letters, figures, or marks, the original, official or legal form of something, which may be evidentially used" (page 481). By use of the term "includes" in the definition, the Legislature has extended the meaning of the term "instrument" by including documents which would otherwise ordinarily be not included in the meaning of the term 'instrument'.
Now, Black's Law Dictionary Sixth Edition (1990) at .Page 801 defines "instrument" as "a formal or legal document in writing such as a contract, deed, will, bond, or lease. Anything reduced to writing a document of a formal or solemn character. A document or writing which gives formal expression to a legal act or agreement, for the purpose of creating, securing modifying or terminating a right."
According to Stroud's Judicial Dictionary, Fourth Edition (1971-72) at page 1368 "instrument" means
(1) a writing, and generally imports a document of a formal legal kind semble, the word may include an Act of Parliament... (7) "instrument" whereby any property is transferred to, or vested in, any persons" (Underlining added).
In the definition of "instrument" the Legislature has not stated that a copy of an instrument is a document which is included in the definition of an instrument. The meaning of the term "instrument" cannot be extended beyond what was intended by the Legislature. If the intention of the Legislature was to treat every kind of document to be an instrument it would not have included the words "by which any right or liability is, or purports to be created, transferred, extended, extinguished or recorded" in the definition and would have defined the term to include every document which evidences title in property. Every word in a Statute has to be given its plain and ordinary meaning and due weight must be given to every word used in the Statute. Therefore, the term "instrument" as defined in section 2(14) of the Stamp Act would include every document by which any right or liability is or purports to be created, transferred, extinguished etc. Consequently, the definition would not include those documents by which no right or liability is so created transferred or extinguished etc.
11. The term "conveyance" has been defined in section 2(10) of the Stamp Act as follows:-- "2(10) Conveyance: "Conveyance" includes a conveyance on sale and every instrument by which property, whether movable or immovable, is transferred inter vivo and which is not otherwise specifically provided for by Schedule I."
(Underlining added).
It is well-established that where there is a written instrument relating to a transaction between parties, one must look at its substance and not at its form for the purpose of determining its true nature. The verb used in the definition is in the present tense. It therefore, means that the transfer of the property must take place in the present by virtue of the instrument. The property in the goods must be transferred by the document itself and it should not be a record of a fact which has taken place in the past or a record of a past transaction between two or more parties.
In the case of Rustomji v. Emperor, AIR 1918 Lahore 354, a question arose whether a document which contained the fact of transfer of property fell within the ambit of section 2(10) read with Article 23 of Schedule I of the Stamp Act be subject to payment of stamp duty thereon as a conveyance. The wordings of the documents were as follows:-- "I am enclosing herewith the original sale-deed dated 22nd October, 1904, in respect of the land measuring 38 Kanals, 18 Marlas, Khasra No,3388 in Mauza Mozang situate on Jail Road, Lahore, which I have sold to you for the sum of Rupees 1,000 and in respect of which I have already received the purchase-money from you.
Your faithfully, J.
Rustomji."
The learned Division Bench after discussing the definition of conveyance given in the Stamp Act, held as follows:-- "The document is a mere letter, reciting an earlier sale and an earlier receipt of the consideration money and for that sale. It is at most a receipt for the consideration money and an admission of the sale, but it is not in itself the instrument of sale or conveyance. Had for the words 'which I have sold' the words 'which I hereby sell' been substituted, the document would have been the instrument of sale. In its present condition, the document A, we hold, is not a 'conveyance' and is not liable to be charged with stamp duty as a `conveyance'."
12. In another case reported as Bhola Barn and Sons, Ltd. v. Emperor, AIR 1934 Lahore 530, while discussing section 104 of the Companies Act, 1913, requiring, the particulars of the contract constituting the title of the allottee to be filed with the Registrar, the Court observed as follows:-- "It would appear from this definition that an actual transfer of property is an essential feature of a `conveyance'. Consequently an agreement to transfer property in the future cannot be treated as a conveyance'."
13. In the case of Muhammad Hasham v. Emperor, (1932) 139 IC 154, a question arose whether a document purporting to be a receipt for sale of land was a conveyance and liable to be Stamp Duty accordingly. The learned Full Bench of the Lahore High Court discussed the facts and the law relating thereto as follows:-- "The document is in Urdu and, as stated already, it purports to be a 'receipt'. It begins with the words: Tahrir Anke' and recites that the executant had sold land measuring 5 Marlas and 53 square feet to Muhammad Hasham son of Allah Ditta, and Muhammad Din, son of Suba, Caste Sheikh of Domeli for the Rs,1.038-15-3 for building purposes, at the rate of Rs,200 per Marla. Out of the purchase money, Rs,700 had been received in cash and for the balance another receipt would be given at the time when the payment is made. The document further stated that the possession of the land had been given to the purchaser and wound up with the words, 'is waste sanadan tahrir kar dete hain'."
After examining the wording of the deed and hearing both counsel, I am of the opinion that it is a "receipt" which it purports to be, and is not a "conveyance" and that it had been properly stamped I can find nothing in the document to show that title in the property was being conveyed by the vendor to the vendee by it. On the other hand, the document refers to the sale as a completed transaction under which possession had been delivered to the vendee. The primary object of the execution of Exh.P.3, appears to be to record the fact that out of the total purchase price of R.1,038- 15-3, a portion, namely, Rs,700 had been received by the vendor from the vendee and to safeguard the latter against a fresh demand for that sum, rather than to create title in the vendee as owner of the land, which had been done' already by an independent transaction altogether." (Emphasis added).
14. It would be appropriate to refer here to section 17 of the Registration Act, 1908, relating to documents of which registration is compulsory, which reads as follows:-- "17. Document of which registration is compulsory.---(1) The following documents shall be registered, if the property to which they are related is situate in a district in which, and if they have been executed on or after the date on which, Act No,XVI of 1864, or the Indian Registration Act, 1866, or the Indian Registration Act, 1871, or the Registration Act, 1877, or this Act came or comes into force, namely:--
(a) instruments of gift of immovable property;
(b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in the present or in future, any right, title or interest, whether vested or contingent of the value of one hundred rupees and upwards, to or in immovable property; Explanation.--In the case of an assignment of a mortgage the consideration for the deed of assignment shall be deemed to be the value for registration;
(c) non-testamentary instruments (other than the acknowledgment of a receipt or payment made in respect of any transaction to which an instrument registered under clause (o) relates) which acknowledge the receipt or payment of any consideration on account of the creation, declaration, assignment, limitation or extinction of any such right, title or interest; and (Emphasis added), The Privy Council in the case of Thakur Bageshwari Charan Singh v. Thakurain Jagarnath Kuari (1932) 136 Indian Cases 798, while discussing the meaning of the word "declare" used in section 17 of the Registration Act, 1908, wherein the document acknowledged of certain right in favour of a certain party observed as follows:-- "Their Lordships have no doubt that this track of decision is right though the word declare" might be given a wider' meaning, they are satisfied that the view originally taken by West, J., is right. The distinction is between a mere recital of a fact and something which itself creates title. The distinction has been acted on in cases connected with mortgages by deposit of documents of title.
A comparison of the case Ariff v. Dawood (6), with that of Subramonian v. Lutohman (7) will show that, according to this distinction, a document requires registration or not. In the present case the statement in the petition of the respondent did not create any right in the Thakur. It merely acknowledges as a fact that such right was his. There was, therefore, no necessity for registration.
(Emphasis added).
In Raghubur Dayal v. Emperor, AIR 1934 Allahabad 201, where the accused made purchase of gold ornaments from a client and got the client to make entry in the account book giving client's name and the description of the goods purchased and the price paid and got the same signed by the client, the learned Division Bench of the Allahabad High Court held as follows:- "It has been argued before us that the documents in question are not "conveyance" within the meaning of the Stamp Act but are merely memoranda of sales of goods already completed.
The term 'conveyance' is defined in the Stamp Act as including 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 I.
It is argued that the transaction of sale was completed by delivery of the goods and payment of the purchase money, quite apart from the entry in the account book signed by the seller and that such entry did not transfer any property as the transfer had already been completed. It is argued therefore, that these entries are merely memoranda of completed sales and it is urged that as memoranda of the sale of goods they are exempted from liability to stamp duty under Article 5, Exempt. (a) Article 5 provides a stamp duty upon an agreement or memorandum of an agreement but exempts from liability an agreement or memorandum of agreement for or relating to the sale of goods or merchandise exclusively. In the present case we think that the documents in question are memoranda of completed sales and that they do relate to the sale of goods exclusively. An agreement would include a complete agreement or contract of sale and we think that the applicant's contention is well-founded, He is supported by the authority of a ruling of the Madras High Court in Kyd v. Mahomed (1). This was a case of an agreement in which it was recited by the parties that one party had purchased certain goods from the other party at a specified price. The agreement also mentioned certain collateral or subsidiary incidents relating to the sale of the goods but it was held that the document primarily, evidenced merely a transaction of sale and that the intention of the Legislature was to exempt bona fide sales and purchases of merchandise from stamp duty. In the present case it is clear that the documents merely recite the terms of the contract of sale, describing the articles sold and the price given.
Insofar therefore, as the documents are merely memoranda of the sale' of goods, they are exempts from stamp duty."
(Emphasis added).
15. The principle which is deduced from the above judgments clearly indicates that neither a memorandum of a past transaction or a statement confirming that certain property was transferred in the past from one person to another nor a memorandum or an agreement stating the certain property would be transferred in future by executing another document come within the definition of conveyance as defined in the Stamp Act. Consequently, only that document whereby the property is in fact transferred by virtue of the instrument itself from one person to another would fall within the definition of conveyance and would be subject to stamp duty as specified in the Act.
16.It would not be out of place to mention here that the effort to eliminate "Riba" from the Banking System and shift over to the Islamic mode of financing started in mid 1984. Accordingly by BCD Circular No,13 dated 20-6-1984 the State Bank of Pakistan (SBP) informed all banks that from 1st January, 1985 all finances provided by a Banking Company shall be only in anyone of the modes indicated in Annexure I of the Circular. One of the several permissible modes of financing to customers indicated was by purchase of movable or immovable property by the banks from their clients with a buy-back agreement. Consequently, to avail credit facility of Rs,12 Million Bayer entered into an agreement for Financing for Short/ Medium/Long Terms on Mark-up Basis (Running Finance) with Deutsche Bank whereby the Bank purchased certain movable property from Bayer with an agreement that the latter shall buy back the same at a higher price which according to the Agreement Bayer did. The goods were not specifically described in the agreement but a general description was stated in order to prepare a document to comply with the mode of finance permitted by the State Bank of Pakistan. There was no real sale and purchase of the goods whatsoever. It was a paper transaction where no actual sale or purchase or transfer of title or passing of risk in the goods took place. The Bank took no risk whatsoever. The documents were prepared to comply with SBP requirements. Apparently several other documents were also executed including a Promissory Note, Letter of. Continuity, Letter of Hypothecation etc. As is evident from the record of the other three cases being decided with this one. The various documents executed by the parties including the Mark-up Agreement clearly indicate that the said agreement was used as a mode for providing finance to Bayer and cannot by any stretch of imagination be regarded as a conveyance of property as defined in the Stamp Act.
17. Further, according to the principles of conveyancing as described in the "The Conveyancer" by P.C. Mogha and N.S. Bindra's Conveyancing, 7th Edition, 1993, a document evidencing conveyance of property basically consists of "Recitals" which relate to the past history of the property transferred and sets out the facts and the instruments necessary to show the title and the relation of the parties to the subject-matter of the deed and the introductory recital which explains the motive for' the preparation and execution of the deed. It is followed by "Consideration for the Contract, "Acknowledgement of Receipt of Consideration", the Operative Words" which is the spirit of the document", the Description of the Property transferred "Exceptions and Reservations", "Habendem", "Covenants and undertakings" by the parties with their signatures and attestation.
The most important part of the deed are "the operative words" which express the intention of the persons executing the documents. They disclose the nature of the transaction. The operative word now commonly used is "conveys". Formerly the word "grants" was used as the word was always interpreted in a very large and general sense. The word "conveys" is no doubt quite sufficient but as this word has not been used in the Transfer of Property Act, 1882, lawyer in the Sub-Continent use the word "transfer" which is simple and equally clear and has been used in other statutes also.
Therefore, to make. The operative word more expressive of the transaction, lawyers often write "transfer by way of sale". This is often done by use of the words "AB by these present grants, sells, transfers, conveys" that the property described in the document is transferred from the seller to the buyer and the title and risk in the property passes from the seller to the buyer.
18. A bare perusal of the Mark-up Agreement shows that it contains the Recitals, the Consideration of the Agreement, undertaking, covenants and conditions etc. But it does not contain the operative words whereby the property in the goods mentioned in the agreement is transferred from the Bank to Bayer and vice versa. However, it contains a statement of confirmation of the sale and purchase of goods which took place in the past between the Bank and Bayer. The goods have been generally described as Raw Material, Packing Materials, Finished/Semi-Finished Goods". The agreement also contains several other terms and conditions of the Mark-up Agreement especially the provision whereby the Bank retains the absolute right to reduce the total sale price under the agreement from time to time. The Mark-up Agreement also refers to the effect that would result if at any point of time the total of the customers credit entries in the account are in excess of, or equal to the purchase price. Clause 4 of the agreement provides that if the customer "Bayer" fails to pay the purchase price due under and in terms of the Mark-up Agreement, the Bank shall be entitled and authorized to debit their account of purchase price. In addition the Mark-up Agreement provides that as security for payment of the purchase price Bayer shall give joint hypothecation over Stocks and book Debts and provide such other securities as the Bank may at any time require. From a reading of the provisions of the Mark-up Agreement and the fact that the Agreement confirms the Deutsche Bank had purchased from Bayer goods for a sum of Rs,12 Million and "Bayer" (the customer) has confirmed having immediately purchased the same from the Bank and the price of Rs,14,724,333 on the condition mentioned in the Mark-up Agreement some of which have been referred to above, it is apparent that the Mark-up Agreement is not a conveyance deed by an agreement whereby the Bank had agreed to provide to Bayer running finance facilities to the extent of Rs,12 Million for a period of 9 months at Mark-up/Charge of Rs,2,724,330 and if Bayer paid back the said amount to the Bank on time it would be entitled to Rs,1.4 Million Prompt Payment Bonus. The aforesaid agreement appears to be nothing but an agreement whereby the Bank agreed to provide and Bayer agreed to avail running finance facilities of 'Rs,12 Million from the Bank for a period of 9 months at a profit/mark-up of Rs,1,324.33 Million provided it paid back the loan on or before 31-5-1996.
19. Now, the significant and relevant clauses of the Mark-up Agreement, which are alleged to be a conveyance by the respondents, are as follows: "AGREEMENT FOR FINANCING FOR SHORT/ MEDIUM/LONG TERMS ON MARK-UP BASIS RUNNING FINANCE THIS AGREEMENT is made at Karachi this 1st day of September, 1995, between Deutsche Bank, a Banking company, incorporated in the ' Federal Republic of Germany...............................................
AND Messrs Bayer Pharma (Private) Limited, a company incorporated under the Companies Ordinance having its registered office at B-28, KDA Scheme No,1, Shahrah-e- Faisal, Karachi WHEREAS:
(i) The Customer has requested the Bank to purchase Raw Materials, Packing Materials, finished/ semifinished goods, work in process, etc. As per stock report (hereinafter described in the stock report furnished by the Customer to the Bank) for a sum of Rs, 12,000,000.00 (Rupees Twelve Million only) and
(ii) The Bank pursuant to the above and at the request of the Customer has agreed to sell back the said goods to the customer on the basis of the mark-up in price on terms and conditions hereinafter appearing: NOW THEREFORE, THIS AGREEMENT WITNESSETH:
(1) The Bank confirms having bought from the Customer, the aforesaid goods for a sum of Rs,12,000,000.00 (Rupees Twelves Million Only). The price to be paid by the Bank to the Customer (hereinafter referred to as "sale price") shall be made available for utilization by the customers by withdrawal from their Account No,9456-00-0 with the Bank and such withdrawal(s) from time to time shall constitute payment of the sale price.
(2) The customer confirms having immediately purchased the said goods from the Bank at a price of Rs, 14,724,333.00 (Rupees Fourteen Million Seven hundred Twenty Four Thousand Three Hundred Thirty Three Only) (hereinafter referred to as "Purchase Price") which is payable to the Bank in arms of this Agreement Deposits by the Customer from time to time in their account shall constitute payment towards Purchase Price.
(3) The Bank will not be liable under law or otherwise in respect of the goods sold under and in terms of this Agreement with regard to quality quantity value or otherwise fitness for use or on any other account whatsoever.
(4) Purchase price shall be payable by the Customer to the Bank on or before 31-5-1996. Provided that in the event of the Customer paying the entire purchase price on the date in terms agreed upon as above, the Bank will pay to the Customer a sum up to Rs,1,400,000.00 (Rupees One Million Four Hundred Thousand Only), as and by way of prompt payment bonus or grant adjustment of this amount. If the customer fails to pay the purchase price due under and in terms of this agreement the Bank shall be entitled and authorized to debit their account No,9456-0-0 with the amount of purchase price due in terms above and the Bank may in its discretion either debit the said account with the purchase price due under this agreement without prejudice to its claim for outstanding due as reflected in the said account or demand payment of the purchase price due under this agreement without prejudice to any other outstanding liability of the Customer for payment of other amounts due and payable to the Bank.
(5) At any point of time when the total of the Customer's credit entries in the account are in excess of, or equal to the purchase price (less prompt payment bonus) than in such event:
(i) This agreement and all documents executed in pursuance of or in connection with this agreement shall stand automatically renewed; and
(ii) ' The customers shall pay to the Bank such portion of the purchase price, as advised by the Bank in writing and if the customer fails to pay such amount the Bank is hereby authorized to debit the said amount to the customer's account and to appropriate and pay to itself the said amount as part payment of the ultimate purchase price due/owing to the Bank.
(6) The customer shall pay to the Bank such portion of the purchase price, as may be advised by the Bank in writing and if the customers fails to pay such amount the Bank is hereby authorized to debit the said amount to the customer's account and to transfer and pay to itself the said amount as part payment of the ultimate 'purchase price due/owing to the Bank. It is agreed between the parties that subsequent credit entries in the customer's account by deposit or otherwise of an amount equal to or in excess of the aforesaid debit pursuant to this clause shall operate to adjust the said debit entry.
(7) The Bank shall retain the absolute right to reduce the total Sale Price under this agreement from time to time. If due to this reduction, the Customer's outstanding in the account are in. Excess of the reduced Sale Price at the time, the Customer shall deposit/pay differential amount immediately without prejudice to the Customer's liability for payment of the entire purchase price as specified above. Failure to do this shall constitute a default under this Agreement and further withdrawals from the account by the Customer shall be stopped even if the account is in credit. Additionally, the Bank shall be entitled to demand immediate repayment of the entire Purchase Price.
(10) Notwithstanding anything contained hereinabove, it is hereby agreed that the Bank shall at all times, be at liberty and shall have the right to cancel the facilities under the agreement without assigning any reason, and demand immediate payment of the purchase price without assigning any reason thereof. The Customer undertakes in such event to pay the same within seven days of such demand. In default the Customer agrees and undertakes to pay to the Bank liquidated damages at 20% of the amount demanded by Bank and not paid by the Customer.
(11) As security for payment of the Purchase Price, the Customer undertakes to give the following security(ies) the terms and conditions of which shall be such as the Bank may determine:
(a) Joint Hypothecation over Stock and Books Debts. And such other securities as the Bank may at any time require.
(12) That it is further agreed between the parties that the Demand Promissory Note executed by the Customer and delivered to the Bank shall be a continuing security for the payment of the ultimate balance of the aforesaid Purchase Price remaining unpaid and that the Customer shall remain liable on the said Promissory Note notwithstanding the fact that by payments made to the Bank from time to time, the liability may be reduced or extinguished or even that the account may at any time have been in credit."
20. In the agreement of Financing for Short Term/Medium/Long Terms on Mark-up basis (Running Finance) dated 1-4-1996 entered into between Bayer and Bank of America, the provisions relevant for the present purpose are as under:-- "(i) The Customer has requested the Bank to purchase movable (hereinafter referred to as "Goods" more particularly described in the stock report furnished by the Customer to the Bank or in the Schedule hereunder as applicable for a sum of Rs,30,000,000 (Rupees Thirty million only) and
(ii) The Bank, pursuant to the above, has agreed to sell back the said goods to the customer on the basis of mark-up on terms and conditions hereinafter appearing. NOW, THEREFORE THIS AGREEMENT WITNESSTH:
(1) The Bank confirms having bought from the customer the aforesaid goods for a sum of Rs,30,000,000 (Rupees Thirty Million only) The price to be paid by the Bank to the customer (hereinafter referred as "sale price") shall be released by the Bank to the customer by withdrawal by the customer from its/their/his account and such withdrawal from time to time shall constitute payment of the sale price.
(2) The Customer confirms having immediately purchased the said goods from the Bank at a price of Rs,34,487,671 (Rupees thirty four million four hundred eighty-seven thousand six hundred and seventy-one only) (hereinafter referred to as "Purchase Price") which is payable to the Bank in terms of this Agreement Deposits by the Customer from time to time in its/their/his account shall constitute payable towards purchase Price.
(9) As security for payment of the purchase price, the customer undertakes to give the following securities the terms and conditions of which shall be such as the Bank may determine:
(a) Hypothecation.
(b) Pledge.
(c) Mortgage.
21. It may be noted that the first Agreement of Finance dated 1-9-1995 between Bayer and Deutsche Bank, a copy of which has been produced with the Petition and not denied by the respondent, is an agreement which is signed by Bayer only and does not contain the signature of Deutsche Bank and two witnesses as required under section 17 of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 and the Article 17 of the Qanun-e-Shahadat Order, 1984. Similarly the Mark-up Agreement, dated 1-4-1996 executed between Bayer and Bank of America is signed by Bayer only and does not contain the signature of the Bank and is devoid of the signature of two attesting witnesses as required by law. It is also interesting to note that the blank space for the "Schedule of Goods" which were alleged to have been sold and purchased and the "Repayment Schedule" are absolutely blank. It would not be out of place to state here that the Mark-up Agreement, dated 12-6-1994 executed between Metalex (Pvt.) Limited and Bank Commerce Al-Habib contain similar terms as those of the Mark-up Agreement between Bayer and its two banks. The copy of the Mark-up Agreement produced by Metalex contain the signature of the customer i,e, Metalex and one witness only. It has not been signed by the bank or the second witnesses as required by the provisions of Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997 and the Qanun-e-Shahadat Order, 1984, in respect of financial transactions. Further, under the provisions of the Contract Act; 1872 there must be two parties to make an agreement. The Mark-up Agreement which is the basis of the dispute is signed by one party only and therefore, cannot be termed as an agreement which requires the signatures of two parties for it to be enforceable as a contract under the provisions of the Contract Att. (See section 2(e) and (h) of the Contract Act, 1872). At best it can be regarded only as an acknowledgment or a confirmation of a past transaction signed by Bayer, the customer. Alternately, if the Mark-up Agreement is signed by both parties it would simply be an agreement between the bank and its customer confirming the terms and conditions agreed by the parties on the basis of which the bank would provide finance to the customer in one of the modes suggested by SBP by BCD Circular No,13 dated 1-1-1985 and not a conveyance deed.
The cases of Mehrban Fabrics (PLD 1997 Lahore 654) and Ameena (1998 CLC 1256) cited by Mr. Abbas Ali are distinguishable and not applicable to the facts and circumstances of the present case. The said two cases relate to Certificate of Sale of immovable property issued by a Court under Order XXI, Rule 94, C.P.C. In respect of which the learned Court held that the sale certificate has the effect of transferring and creating title in the property without which the purchaser does not become the owner and thereafter become entitled to demand rent or income of property from the date of confirmation of sale. No such situation arises in the present circumstances and the reference to these cases is not helpful.
22. Let us now examine the argument advanced by Mr. Ijaz Ahmed relating to the power of Collector to impound any instrument for the purpose of imposition of penalty thereon in case a photocopy of the instrument is found to be deficiently stamped. In the case of Hanuman Prasad v.
The State of Rajasthan AIR 1958 Rajasthan 291, while discussing the import of section 40 of the Stamp Act, 1899, a Full Bench of the said Court observed as follows:-- "(7) The power to demand proper duty and penalty is conferred upon the Collector by section 40, subsection (1), clause (b) of the Indian Stamp Act.
' That section, however, is applicable when the Collector impounds any instrument under section 33, or receives any instrument sent to him under section 38, subsection (2) of the Act. In the present case the original document had been taken away after registration and what the Inspector saw was the copy of the document in the register of the Registrar. The original document never came to be impounded and, therefore, section 40 had no application."
(Emphasis added).
23. The facts of the present case are not very different. In the aforesaid reported case the original had been taken away and what the Inspector saw was the copy of the document in the register of the Registrar. In the present case also respondent No,3 was not in possession of the original Mark- up Agreement but only saw a copy thereof in the office of Bayer. The argument of Mr. Abbas Ali, learned Additional A.-G. That possession of the original instrument is not necessary and if a party admits that the copy of the instrument is genuine and from the copy it is evident that it is insufficiently stamped, the Collector is empowered to demand the deficit stamp duty and impose a penalty for insufficient stamping is not spelt out from the wordings of sections 2(14) and 40 of the Stamp Act. He is reading in the provision something which is not there. There can be one thousand copies of an instrument which in the ordinary parlance can be termed or regarded as a document but it cannot be regarded as an instrument in the sense it has been used in the Act. If the photocopy of an instrument of conveyance is regarded as a document of title then there would be one thousand documents of title of the same property if one thousand photocopies of the same are made and thus there would be one thousand persons claiming to be the owners of one property on the basis of one thousand photocopies of the original document of title. Consequently, there could be infinite number of title holders of one property. Giving such a meaning to the word "instrument" would be preposterous and a blatant abuse of the word "instrument" used in the Stamp Act. There cannot be more than one title document M of ownership of one property. The original document is the only document which is the instrument of title which is intended and comes within the meaning of the term "instrument". No other document can replace it. It is this document which requires to be stamped under the provisions of the Stamp Act. It is therefore, apparent that the demand for payment of the alleged deficit stamp, duty on a photocopy of the Agreement of Finance is not warranted by the provisions of section 40 of the Stamp Act.
24. Mr. Abbas Ali learned Additional A.-G., vehemently urged that the inspection of the documents at the office pursuant to Rule 6 of West Punjab Inspection and Audit Rules, 1949, which requires that the auditor shall visit the public offices (the offices of the petitioner in the present case falls within the definition of a public office as given in the Stamp Act) after due notice to the Collector of the District concerned which was done in the present case. He also added that because the inspection was conducted in the presence of the officers of Bayer, the report whereof this communicated to them, it amounted to giving an opportunity of hearing to Bayer who cannot complain that they were condemned unheard. It may be mentioned here that the principle that no person shall be condemned unheard means that the person concerned should first be given a show-cause notice and thereafter a personal hearing before passing an order. It does not however, mean that if an inspection of certain document is conducted in a premises in the presence of a particular person it would be deemed that an opportunity of hearing has been given to the person. The requirements of an opportunity of hearing means that the person must be issued a letter/ notice informing him of the action proposed to be taken against him and asking him to explain why it should not be done so. After service of such notice, it is necessary that an opportunity be provided to the person to whom the show-cause notice has been issued to, appear in person and explain his position verbally or in writing. If he chooses not to appear in person and explain his position or does not send a written response, he does so at his own risk. Admittedly, neither a show-cause notice was issued by respondent No,3 nor Bayer appeared in person before him the latter determined the deficiency in the stamp duty and issued a notice for payment of the deficit stamp duty and a penalty thereon. However, on perusal of the file it transpires that a representative of Bayer had appeared before the Appellate Authority where he submitted his arguments which were duly heard and noted by the Appellate Authority and were discussed in the impugned order. The defect in not giving a hearing before passing the order thus stood cured (See Atta Muhammad Qureshi v.
Settlement Commissioner and others (PLD 1971 SC 61).
25. In view of the above discussion it is apparent that the alleged Mark-up Agreement is not a conveyance deed as urged by the respondents but is a photocopy of a document which at best can be regarded as an acknowledgement or confirmation of a past transaction and is not liable to Stamp Duty as a conveyance. Having reached this conclusion, it is not necessary to discuss the other contentions advanced by the learned counsel.
26. Consequently, the four Constitution petitions are allowed and the order, dated 20-6-1996 passed by respondent No,2 and the order, dated 31-12-1996 passed by respondent No,1 are hereby set aside and it is declared that the Agreement for Financing Short/Medium/Long Term on Mark-up Basis is not a deed of conveyance of property and is not chargeable to Stamp Duty under Article 40(c) but is subject to duty under Article 5(d) of Schedule 1 of the Stamp Act, 1899.
27. The petitioners shall be entitled to costs.