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PETITIONER:

DUNCANS INDUSTRIES LTD.

Vs.

RESPONDENT:

STATE OF U.P. & ORS.

DATE OF JUDGMENT: 03/12/1999

BENCH:

N.S.Hegde, B.N.Kirpal

JUDGMENT:

SANTOSH HEGDE, J.

A Deed of Conveyance dated 9.6.1994 executed by a

company named ICI India Ltd. in favour of Chand Chhap

Fertilizer and Chemicals Ltd. when presented for

registeration, the concerned Registrar referred the said

document under Section 47-A(II) of the Stamp Act to the

Collector complaining of the non compliance of Section 27 of

the said Act and praying for proper valuation to be made and

to collect the stamp duty and penalty payable on the said

document. The Collector after inquiry levied a stamp duty

of Rs.37,01,26,832.50 and a penalty of Rs.30,53,167.50. The

said order came to be challenged by the aggrieved party in a

revision under Section 56 of the Stamp Act before the Chief

Controlling Revenue Authority in Stamp Revision No.36/95-96

and the said Revisional Authority as per his order dated

4.4.95 partly allowed the challenge and so far as the

imposition of penalty was concerned the same was set aside

and slightly modified the stamp duty levied by the

Collector. Consequent to the order of the Revisional

Authority, the appellant herein became liable to pay stamp

duty on the said Deed of Conveyance amount to

Rs.36,68,08.887.50. This order of the Revisional Authority

came to be challenged before the High Court in Civil

Misc.Writ Petition No.9170/95 which came to be dismissed and

as against this order of the High Court of Judicature at

Allahabad dated 7.7.1997, the appellant has preferred the

above civil appeal. Briefly stated, the facts leading to

the controversy in question are as follows : ICI India

Ltd., a company registered under the Companies Act, 1956

executed an agreement of sale dated 11.11.1993 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.

(hereinafter referred to as the 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. The said agreement also

stated that the vendor would on the transfer date transfer

the fertilizer business by actual delivery of possession to

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the CCFCL in respect of such of the estates and properties

mentioned in the agreement as were capable of being

transferred by actual and/or constructive delivery and in

respect of the estates requiring transfer by execution of

necessary documents vesting the title thereof in CCFCL, and

it was further agreed and declared that the ownership in

respect of the assets and properties comprised in the

fertilizer business to be transferred as per the

agreement, would be deemed to be vested in CCFCL on and from

the transfer date which, according to the agreement means

1.12.1993 or such other date as may be agreed to by and

between ICI India and CCFCL. The term fertilizer business

was defined to mean and include the following other

properties :

(i) Demised land being plot nos. 2B and 5 and the

sub-divided portion of plot No.2 demarcated and admeasuring

in the aggregate an area of 243.4387 acres equivalent to

9,85,159.50 sq. mtrs. Being the unshaded portion shown on

the plan annexed hereto together with the buildings and

structures thereon forming part of the fertilizer business

as on the Transfer Date;

(ii) freehold land and residential building thereon

with the name Chandralok, situate at plot no.4/284,

Parbati Bangla Road, Kanpur comprising 94 residential flats;

(iii) freehold land and residential building thereon

with the name Chandrakala, situate at Navsheel Apartments,

56 Cantonment, Kanpur comprising a Guest House on the ground

floor and 3 residential flats on the first floor;

(iv) Plant and machinery relating to the Fertilizer

business including the Ammonia Manufacturing Plants, the

Captive power plant and all other movable capital assets

including vehicles, furniture, air-conditioners, stand-by

systems, pipelines, railway siding etc., as on the Transfer

Date and wheresoever situate, all of which relate

exclusively to the Fertilizer Business and are owned and in

the possession of ICI or are owned by ICI but in the lawful

possession of any third party for and on behalf of ICI:

Pursuant to the said agreement, a deed of conveyance

dated 9.6.1994 was executed by the said ICI in favour of

CCFCL, on the presentation of the said Conveyance Deed for

registration. 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. Consequent upon this reference made

by the Sub- Registrar, the Collector after necessary inquiry

as per his order dated 20.2.1995 referred to above, levied

stamp duty and penalty to which reference has already been

made. Being aggrieved by the said order of the Collector,

the appellant 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. Before the

High Court the appellant had challenged the authority of the

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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. The 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. Mr. M L Verma, learned senior

counsel appearing for the appellant, urged that the High

Court 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, attracting the

provisions of the Stamp Act and at any rate under the

conveyance deed dated 9.6.1994, the vendor had not conveyed

any title to the appellant in regard to these plant and

machinery. 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 contended that the

said paragraphs merely made a reference to an earlier

instrument and mere reference to some earlier transaction in

a document does not amount to incorporation in that document

of the terms and conditions relating thereto. It was 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.

Mr. Gopal Subramaniam, learned senior counsel appearing on

behalf of the State, in reply, contended that the document

dated 11.11.1993 (agreement of sale and transfer of

fertilizer business) 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. He also drew our attention to the observations of

the High Court which had in specific terms noted that the

learned counsel representing the appellant before it, 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

coutenanced. We have heard learned counsel for the parties

and the question that arises for our consideration is :

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 ?

Considering the question whether the plant & machinery in

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the instant case can be construed as immovable property or

not, the High Court came to the conclusion that the

machineries which formed the fertilizer plant, were

permanently embedded in the earth with an intention of

running the fertilizer factory and while embedding these

machineries the intention of the party was not to remove the

same for the purpose of any sale of the same either as a

part of a machinery or scrap and in the very nature of the

user of these machineries, it was necessary that these

machineries be permanently fixed to the ground. Therefore,

it came to the conclusion that these machineries were

immovable property which were permanently attached to the

land in question. While coming to this conclusion the

learned Judge relied upon the observations found in the case

of Reynolds v. Ashby & Son (1904 AC 466) and Official

Liquidator v. Sri Krishna Deo & Ors. (AIR 1959 All. 247).

We are inclined to agree with the above finding of the High

Court that the plant and machinery in the instant case are

immovable properties. The question whether a machinery

which is embedded in the earth is movable property or an

immovable property, depends upon the facts and circumstances

of each case. Primarily, the court will have to take into

consideration the intention of the parties when it decided

to embed the machinery whether such embedment was intended

to be temporary or permanent. A careful perusal of the

agreement of sale and the conveyance deed along with the

attendant circumstances and taking into consideration the

nature of machineries involved clearly shows that the

machineries which have been embedded in the earth to

constitute a fertiliser plant in the instant case, are

definitely embedded permanently with a view to utilise the

same as a fertiliser plant. The description of the machines

as seen in the Schedule attached to the deed of conveyance

also 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. The facts as could be found also show

that the purpose for which these machines were embedded was

to use the plant as a factory for the manufacture of

fertiliser at various stages of its production. Hence, the

contention that these machines should be treated as movables

cannot be accepted. Nor can it be said that the plant and

machinery could have been transferred by delivery of

possession on any date prior to the date of conveyance of

the title to the land. Mr. Verma, in support of his

contention that the machineries in question are not

immovable properties, relied on a judgment of this Court in

Sirpur Paper Mills Ltd. v. Collector of Central Excise,

Hyderabad (1998 1 SCC 400). In the said case, this Court

while considering the leviability of excise duty on

paper-making machines, based on the facts of that case, came

to the conclusion that the machineries involved in that case

did not constitute immovable property. As stated above,

whether a machinery embedded in the earth can be treated as

movable or immovable property depends upon the facts and

circumstances of each case. The Court considering the said

question will have to take into consideration the intention

of the parties which embedded the machinery and also the

intention of the parties who intend alienating those

machinery. In the case cited by Mr. Verma, this Court in

para 4 of the judgment had observed thus : In view of this

finding of fact, it is not possible to hold that the

machinery assembled and erected by the appellant at its

factory site was immovable property as something attached to

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earth like a building or a tree. The Tribunal has pointed

out that it was for the operational efficiency of the

machine that it was attached to earth. If the appellant

wanted to sell the paper-making machine it could always

remove it from its base and sell it." From the above

observations, it is clear that this Court has decided the

issue in that case based on the facts and circumstances

pertaining to that case hence the same will not help the

appellant in supporting its contention in this case where

after perusing the documetns and other attending

circumstances available in this case, we have come to the

conclusion that the plant and machinery in this case cannot

but be described as an immovable property. Hence, we agree

with the High Court on this point. The next question for

consideration is whether the vendor did transfer the title

of the plant and machinery in the instant case by the

conveyance deed dated 9.6.1994. Here again, it is

imperative to ascertain the intention of the parties from

the material available on record. While ascertaining the

intention of the parties, we cannot preclude the contents of

the agreement pursuant to which the conveyance deed in

question has come into existence. We have noticed that as

per the agreement it is clear what was agreed to be sold is

the entire business of fertilizer on an as is where is

basis including the land, building thereon, plant and

machinery relating to fertilizer business description of

which is found in the definition of the term fertilizer

business in the agreement itself which has been extracted

by us hereinabove. It is not the case of the appellant when

it contends that the possession of plant and machinery was

handed over separately to the appellant by the vendor that

these machineries were dismantled and given to the

appellant, nor is it possible to visualise from the nature

of the plant that is involved in the instant case that such

a possession de hors the land could be given by the vendor

to the appellant. It is obviously to reduce the market

value of the property the document in question is attempted

to be drafted as a Conveyance Deed regarding the land only.

The appellant had embarked upon a methodology by which it

purported to transfer the possession of the plant and

machinery separately and is contending now that this handing

over possession of the machinery is de hors the conveyance

deed. We are not convinced with this argument. Apart from

the recitals in the agreement of sale, it is clear from the

recitals in the conveyance deed itself that what is conveyed

under the deed dated 9.6.1994 is not only the land but the

entire fertilizer business including plant and machinery. A

perusal of Clauses 10, 11 and 13 of the said deed shows that

it is the fertilizer factory which the vendor had agreed to

transfer along with its business as a going concern and to

complete the same the conveyance deed in question was being

executed. There is implicit reference to the sale of

fertilizer factory as a going concern in the conveyance deed

itself. That apart, the inclusion of Schedule III to the

conveyance deed wherein a Plan delineating the various

machineries comprising of the fertilizer factory is appended

shows that it is the land with standing fertilizer factory

which is being conveyed under the deed, though an attempt to

camouflage this part of the property sold is made in the

recitals, in our opinion, the parties concerned have not

been able to successfully do so. While considering this

question of transfer of plant and machinery being part of

the conveyance deed or not, reliance can also be placed on

the application filed by the appellant before the

appropriate authority of the Income-Tax Department wherein

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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. In the said application made by the

appellant for obtaining the said certificate, the appellant

has in specific terms at serial No. (iv) of the Schedule

included plant and machinery, railway sliding and other

immovable properties as part of the fertilizer business

undertaking. It is also found on record that by a

supplementary affidavit dated 8.9.1993 filed before the

Income Tax department while filing Form 37-I prescribed

under the Income-tax Rules the petitioner has again shown

all these plant and machinery along with the Plan which is

now attached to the conveyance deed as part of the property

that is being conveyed. Merely because in some of the

relevant paragraphs of the Conveyance Deed the appellant has

tried to highlight the fact that what is being sold under

the conveyance deed is only the land and a reference is made

in regard to the handing over of possession of the machinery

on an earlier date does not ipso facto establish that the

vendor did not convey the title of the plant and machinery

under the conveyance deed dated 9.6.1994. Learned counsel

for the appellant has placed for our consideration a

judgment of this Court in the case of Himalaya House Co.

Ltd., Bombay v. The Chief Controlling Revenue Authority

(1972 1 SCC 726) to contend that a mere reference to an

earlier agreement does not amount to incorporation of the

terms and conditions of an earlier transaction or the

intention of the parties. We have carefully considered the

said judgment and, in our opinion, that judgment does not in

any manner lay down the law in absolute terms that a court

cannot look into prior agreements while considering the

intention of the parties for finding out what actually is

the property that is conveyed under the deed under

consideration. It is again based on facts of that case that

this Court came to the conclusion therein that the so called

terms and conditions which were found in an earlier

agreement were not intended to be incorporated in the

subsequent document. This is clear from the following

observations of this Court appearing in Para 10 of the said

judgment : From the language used in the Assignment

Deed, it is not possible to come to the conclusion that the

terms and conditions of the earlier transaction have been

made a part of that Deed. Further barring one particular

agreement, other agreements were not before the Court.

Therefore, it is not possible to know what the terms and

conditions of those agreements were. Before the terms and

conditions of an agreement can be said to have been

incorporated into another document, the same must clearly

show that the parties thereto intended to incorporate them.

No such intention is available in this case.

Hence we are of the opinion that this judgment also

does not help the appellant in his attempt to convince us

that we should not take into consideration the recitals in

the agreement dated 11.11.93 while considering the

conveyance deed of 9.6.1994. 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

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including the plant and machinery standing on the said land.

Therefore, the authorities below were totally justified in

taking into consideration the value of these plant and

machineries along with the value of the land for the purpose

of the Act. The next point to be considered is whether the

High Court was justified in accepting the valuation made by

the authorities in regard to the plant and machinery. Here

we must note that in the judgment of the High Court, the

learned Judge has noted as follows : In fact the finding

on valuation of plant and machinery was not seriously

challenged by Shri Shanti Bhushan during the course of

argument and, in my opinion, rightly. It is based on this

approach of the learned counsel appearing for the appellant

that the High Court did not go into the question of

valuation. However, since the learned counsel for the

appellant did question the correctness of the valuation made

by the authorities below, we have heard the arguments

addressed in this regard. We have also heard the arguments

on behalf of the State on this score. The question of

valuation is basically a question of fact and this Court is

normally reluctant to interfere with the finding on such a

question of fact if it is based on relevant material on

record. The main objection of the appellant in regard to

the valuation arrived at by the authorities is that the

Collector originally constituted an Enquiry Committee

consisting of the Assistant Inspector General

(Registration), General Manager, District Industries Centre,

Sub-Registrar and the Tehsildar. After the report was

submitted by the Sub-Committee for the reasons of its own,

the Collector reconstituted the said Enquiry Committee by

substituting Additional City Magistrate in place of

Sub-Registrar. This substitution of the Enquiry Committee,

according to the appellant, is without authority of law. We

are unable to accept this contention. Constitution of an

Enquiry Committee by the Collector is for the purpose of

finding out the true market value of the property conveyed

under the Deed. In this process, the Collector has every

authority in law to take assistance from such source as is

available, even if it amounts to constituting or

reconstituting more than one Committee. That apart, the

appellant has not been able to establish any prejudice that

is caused to it by reconstitution of the Expert/Enquiry

Committee. We have perused that part of the report of the

Collector in which he has discussed in extenso the various

materials that were available before the Committee and also

the report of the valuers appointed for the purpose of

finding out the value of the plant and machinery. These

valuers are technical persons who have while valuing the

plant and machinery taken into consideration all aspects of

valuation including the life of the plant and machinery.

The valuations made both by the Enquiry Committee as well as

the valuers are mostly based on the documents produced by

the appellant itself. Hence, 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

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costs.