STATE OF KERALA AND ORS. versus MCDOWELL AND CO. LTD.

Citation: [1994] 1 S.C.R. 981 · Decided: 15-02-1994 · Supreme Court of India · Bench: S.P. BHARUCHA, N. VENKATACHALA

Judgment (excerpt)

T 
STATE OF KERALA AND ORS. 
A 
v. 
MCDOWELL AND CO. LTD. 
FEBRUARY 15, 1_994 
(S.P. BHARUCHA AND N. VENKATACHALA, JJ.] 
B 
Kera/a Abkari Act: 
Section 7-1.ndian made Foreign Liquor-Export of-Bond executed for • 
deferred payment of duty on such export in Fonn VI of the Distillery and C 
Warehouse Rules-Whether a bond within the meaning of Art. 13 of the 
Schedule to the Kera/a Stamp Act. 1939 or an agreement as defined in A1ticle 
5 thereof-Whether liable to stamp duty under Entry 32 of the Schedule. 
Kera/a Stamp Act, 1939: 
Articles 5 and 13 of the Schedule-Bond executed by manufacturers of 
Indian made Foreign Liquofk-ln Fonn VI of the Disti(lery and Warehouse 
Rules-Whether a bond under Art.13 or an agreement as defined in Anicle 
~Whether liable to Stamp duty under Entry 32 of the Schedule. 
Words & Phrases: 
"Bond''-Meaning of in the context of Kera/a Stamp Act. 1939. 
The manufacture, sale and supply of Indian made Foreign Liquor in 
D 
E 
the State of Kerala is governed by the Kerala Abkari Act under which a F 
distiller is permitted to export liquor manufactured by it outside Kerala 
after obtaining permission from the Excise Authorities. The State Govern~ 
ment issued notification levying concessional duty of Rs. 0.50 per proof 
litre on such export. In case the quantity exported did not reach the 
destination or if there was wastage, etc. then the liability to pay normal G 
duty arose. To ensure such payment, the distillers were required to execute 
a bond under cl.(b) of sub-section(l) of S.7 of the Kerala Abkari Act. 
In 1982 the Board of Revenue issued a Circular stating that such 
documents executed by the distillers were being treated as agreement1' 
when in fact they were bonds, and, therefore stamp duty be levied accord-
H 
981 
982 
SUPREME COURT REPORTS 
[1994) 1 S.C.R. 
A 
ingly and the short levy be recovered from the distillers. The High Court 
quashed the circular and directed the Board of Revenue to decide the 
matter afresh after affording opportunity of hearing to the distillers. The 
Board decided the matter accordingly and held that since obligation in the 
bond was to pay a fixed sum of money to Government on condition that 
B 
c 
the condition shall be void if a specified act was not performed, the 
document was a bond and not an agreement. The distiller challenged this 
order before the High Court and it held that since the bond executed by 
the distiller was an obligation incurred under S.7 of the Abkari Act it was 
not an obligation created under the bond and, therefore, not liable to 
stamp duty. Against this, State of Kerala preferred the present appeal. 
Allowing the appeal, this Court 
HELD : By the Court: 
1. The instrument executed by the distiller in Form VI of the Distill-
D 
ery and Warehouse Rules made under the provisions of the Kerala Abkari 
Act shall be liable to stamp duty under Entry 32 of the Schedule to the 
Kerala Stamp Act. [1001-C] 
2 .. fn pursuance of the interim order passed by the High Court the 
respondent has paid duty on the document to the State Government as 
E 
was payable under Art.13 of the Schedule to the Kerala Stamp Act. Since 
tbe amount of duty payable by the respondent was much less than what 
was paid by it, the appellant was directed to refund the excess amount paid 
by the respondent: [1001-D, E] 
F 
Per Majority (By Bharucha. J, for himself and Venkatachala. !.) 
1. The definition of bond in sub-clause (1) of clause (a) of section 2 
of the Kerala Stamp Act is clear and unambiguous. It must be read as it 
stands, nothing may be read in or implied. The word 'whereby' must be 
read as meaning what it ordinarily does, namely, by which. An instrument, 
G therefore, by which person puts himself under an obligation to pay sum of 
money to another on condition that the obligation shall be void if some 
specific act is, or is not, performed is a bond. If the executant can be sued 
for that sum of money only upon the strength of the instrument, the · 
instrument is a bond. [990-B-C] 
H 
2. The obligation of the respondents under the instrument in ques-
STATEOFKERALA v. MCDOWELLCO. 
983 
ti on is that if there be breach of all or any of its provisions or of the Rules A 
they would forthwith pay to the State of Kerala the sum of .money men-
tioned in it, representing the amount of the excise duty payable upon the 
quantity of Liquor to be exported, upon payment the obligation would be 
void and of no effect. By the instrument in question, therefore, t

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