[14/10, 07:58] sekarreporter1: Object of impounding is to collect Revenue and to make document admissible in evidence – Party cannot be compelled to pay deficit Stamp Duty and proceed with Registration Right of parties to seek return of document without proceeding with Registration cannot be denied – When parties to Instrument decided to abandon Contract, Authorities cannot compel registration and performance of same
2024 (5) СТС 495
IN THE HIGH COURT OF MADRAS
Cybercity Builders and Developers Pvt. Ltd.,Vs Inspector General of Registration
[14/10, 08:11] sekarreporter1: IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on Delivered on
30~07~2024 02~08~2024
CORAM
THE HONOURABLE MR. JUSTICE N. SATHISH KUMAR
W.P.No.13012 of 2024 and W.M.P.No.14170 of 2024
Cybercity Builders and Developers Private Limited
Cyber City, Green Hills Road
Near Hi Tech City MMTS
IDL Road, KPHB
Hyderabad – 500 033, Telangana
Rep by its Authorised Signatory,
Murugesan Ramasamy .. Petitioner Versus
1.The Inspector General of Registration
100, Santhome High Road, Chennai – 600 028
2.The District Registrar
Nandanam, Chennai – 600 035
3.The Sub Registrar
Kundrathur, Chennai – 600 069
4.M/s.Tanbhu Enterprises
Registered Office at H.No.8-2-293/82/NL/13-A
MP and MLAs Colony, Jubilee Hills Shaikpet, Hyderabad – 500 033
Telangana .. Respondents Petition filed under Article 226 of the Constitution of India praying to issue a Writ of Certiorarified Mandamus by calling for the records of the 1st respondent with respect to Letter No.K.Dis.No.43596/P1/2023 dated 01.12.2023 and quash the same as being illegal and prejudicial and lacking application of mind and direct the 1st respondent to return the document bearing No.328/2023 pending before the SRO, Kundrathur and without payment of further stamp duty.
For Petitioner … Mr.Sharath Chandran
Mr.K.R.Ananda Gomathy
For Respondents … Mr.B.Vijay for R1 to R3
Additional Government Pleader
ORDERChallenge has been made to the impugned proceedings dated 01.12.2023, quash the same and direct the first respondent to return the document bearing No.328/2023 pending on the file of third respondent.
- It is the case of the writ petitioner that the petitioner company sold
land admeasuring an extent of 1 acre 12 cents to the 4th respondent. The 4th respondent entrusted the development of the property into a mall to the petitioner and for that purpose a leave and license agreement was entered into between the petitioner and the fourth respondent. The said leave and license agreement stipulated that the object of th deed was about a future lease on a building which would come up in the future with the lease commencing after completion of Building (Estimated completion time-line is Two years from the date of agreement) at a monthly rental of Rs.1,22,50,000/- for a period of nine years starting from 10.08.2026. According to the petitioner, the building itself is intended to be taken on leave and license has not come into existence and the agreement is only a promise to enter into lease once the buildings are put up. The agreement is only for a future transaction between the petitioner and the fourth respondent. When the said leave and license agreement was presented for registration before the 3rd respondent a sum of Rs.41,300/- was paid towards registration charges and a sum of Rs.4,00,000/- towards stamp duty. - The 3rd respondent impounded the leave and license agreement stating that the terms of the agreement were found to be in the form of lease agreement and sought for payment of stamp duty of Rs.1,63,13,725/-. A show cause notice was issued on 04.09.2023 and it was replied on 11.09.2023 pointing out that there did not exist any demised premises and that the premises would come into existence only at a future date and therefore, the deed was not that of a lease deed but a deed of agreement for a future lease. However, the respondent has passed the impugned order and the petitioner has sought cancellation of the document and sought for refund of the amount paid. Challenging the same, this writ petition is filed.
- In the counter, it is the stand of the second respondent that the leave and license agreement dated 10.08.2023 executed between the petitioner and the fourth respondent for a period of 9 years was presented fore registration on 10.08.2023. The said document provides that the rent payable for the first 3 years is Rs.12,25,000/- and for the second 3 years is Rs.1,40,87,500/- and for the third 3 years is Rs.1,62,00,625/- and advance deposit as Rs.10,00,00,000/-. The third respondent impounded the same as it is not duly stamped. A show cause notice was issued on 04.09.2023 claiming deficit stamp duty and after considering the reply furnished by the petitioner, by order dated 18.10.2023 confirmed the order of the third respondent to the tune of Rs.1,92,59,800/-. The petitioner presented a representation seeking to cancel the document and refund the stamp duty. It is their contention that without exhausting the revision under Section 56(1) of the Indian Stamp Act before the Chief Controlling Revenue Authority cum Inspector General of Registration, thus, this writ petition is not maintainable. The question of canceling the document is not at all envisaged in the statute. According to them, once the document is impounded, the document cannot be returned unless the deficient stamp duty is paid. Thus, opposed this writ petition.
- Mr.Sharath Chanrdan, learned counsel for the petitioner submitted that the issue is no longer res integra. This Court in the case of Purushotham Nath Rallan vs. Inspector General of Registration reported in 2018 (1) CTC 309 has held that when the document is impounded and the executant is not willing to pay the stamp duty and go for registration, the document should be released. According to him, the said judgment has been upheld by the Division Bench of this Court in W.A.No.1763 of 2019, by judgment dated 06.06.2019. Appeal was made in S.L.P.(Civil)D.No.23160 of 2022 which was also dismissed on 17.03.2023. In Purushotham Nath Rallan’s case, this Court has held that as per Rule 107 of the Registration Rules, when the document is received back from the Collector after adjudication of the stamp duty, registering authorities shall immediately give notice in writing to the presentant to take delivery of the document either to take steps to complete the registration of the document or to take delivery of the document. From Rule 107, it is clear that even after adjudication of the stamp duty, the Registering Officer should give notice in writing to the executant either to take steps to complete the registration of the document by paying the adjudicated stamp duty or to take delivery of the document. The above judgment was also followed by this Court in W.P.(MD).No.6310 of 2012 in the case of B.Sri Ramulu vs. The Inspector General of Registration and two others.
- The learned counsel for the petitioner would mainly submit that the lease and license agreement was registered on payment of proper duty, the document has been impounded on the ground that it should be treated as only the lease deed. According to the learned counsel, the building was not in existence at the relevant point of time. It is only an agreement to create further jural relationship later. The demised premises come into existence only at a future date, Therefore, the deed was not that of a lease deed but a deed of agreement for future lease.
- That apart, he also brought to the notice of the judgment of the Apex Court in the case of The Government of Uttar Pradesh and others vs.
Raja Mohammad Amir Ahmad Khan reported in AIR 1961 SC 787; the judgment of this Court in P.Kamalakannan and others vs. Chief Controlling
Revenue Authority and Inspector General of Registration reported in (2024)
4 MLJ 244; the judgment of Kerala High Court in the case of Abdul Rasheed vs. State of Kerala reported in 2018 (3) KLT 137; the judgment of the High Court of Andhra Pradesh in the case of Prajay Engineers Syndicate Limited vs. The District Registrar reported in 2012 SCC OnLine AP 26 and the judgment of the Madhya Pradesh High Court in the case of Suryamukhi Devi vs. Shiv Prasad and others reported in 2002 (5) M.P.L.J 159. - Mr.B.Vijay, the learned Additional Government Pleader is not disputing the above judgments in this regard, however, he would submit that once the adjudication is made after impounding the document under Section 33 of the Stamp Act, Section 38(2) gets attracted. According to him, once the document is impounded, the same shall be sent to the Collector as per Section 38(2) of the Stamp Act.
- He submitted that Section 40(b) of the Indian Stamp Act makes it
clear that if the Collector is of opinion that such instrument is chargeable with duty and is not duly stamped, he shall require the payment of the proper duty or the amount required to make up the same, together with a penalty of the five rupees, or, if he thinks fit, an amount not exceeding ten times. Similarly, Section 42(2) makes it clear that after payment of such duty determined by the authorities, endorsement shall be made, only on such endorsement, the document will be admissible in evidence. Therefore, according to him, Stamp Act mandates that duty adjudicated after impounding the document are payable. Therefore, Rule 107 of the Registration Act will not supersede the Stamp Act. In support of his submissions, he placed reliance on the following judgments:
(a) Raja Mohammad Amir Ahmad Khan vs. The Deputy Commissioner, Sitapur and others reported in 1956 SCC Online ALL 35.
(b) The Government of Uttar Pradesh and others vs. Raja Mohammad Amir Ahmad Khan reported in AIR 1961 SC 787.
(c) Mohamed Nachiar vs. The District Registrar, Chidambaram reported in 1981 SCC OnLine Mad 217.
(d) Government of Andhra Pradesh and others vs. P.Laxmi Devi reported in 2008 (4) SCC 720.
(e) Tirupathi Developers vs. The State of Uttarkhand and others reported in 2013 (9) SCC 332. - Heard both sides and perused the materials placed on record.
- The fact in question involved in this case is when the petitioner presented the leave and license agreement, proper duty has been paid, however, the document has been impounded treating it as lease deed and determining the same demanded a sum of Rs. 1,92,59,800/-. Thereafter, petitioner sought to cancel the deed itself and demanded return of stamp duty.
- It is relevant to note that on the date of presentation of the document, terms said to have agreed between the parties to the effect the building to be completed later, it is only a mere agreement to construct contract the building in future. The contract is contingent on completion of the building, the building is not available at the relevant point of time. Unless the building is completed, the said document cannot be treated as a lease. The lease will arise only when the building is put on use, then the rent reserved is liable for stamp. Therefore, when the demised premises is not in existence on the date of agreement, it cannot be said that such document is lease. What was agreed between the parties is only terms how to proceed further and put up the construction. In the event, the construction is not put up and terms has not been enforced by the parties, such document will never be construed as a lease deed.
- In this regard, the Hon’ble Apex Court in the case of ICICI vs. State of Maharashtra and others reported in (1999) 5 SCC 708 has held that unless the buildings are completed, there can be no lease and until then it can only be a license. However, the document has been impounded and the duty has been fixed treating it as a lease deed. In the meanwhile, the petitioner has submitted a representation that since the construction itslef has not been commenced and the lease itself is contingent upon completion of building, they wanted to cancel such document and requested the refund stamp duty paid on that, however, the impugned order has been passed rejecting the request.
- Section 33(1)(a) & (b) of the Stamp Act deals with impounding ofinstruments, the same reads as follows:-
- Examination and impounding of instruments.- (1) (a) Every person having by law or consent of parties authority to receive evidence, and every person in charge of a public office, except an officer of police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly stamped, impound the same.
(b) Notwithstanding anything contained in section 31, but without prejudice to the provisions of clause (a), the Collector before whom any instrument is brought under section 31 for determining the duty with which the instrument is chargeable, shall, if it appears to him that such instrument is not duly stamped, impound the same. - When any instrument is produced before the registering
authorities, such authority including registering authority is of the view that the instrument has not been properly stamped, impound the same. It is relevant to note that only leave and license agreement has been presented for registration on the date of presentation, demised building is not in existence on the date of agreement to treat the document as lease deed. - The very Lease as defined under Section 105 of the Transfer of
Property Act makes it clear that the lease is a transfer of right to enjoy such property, made for certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. Therefore, for valid lease, the transfer of right to enjoy the immovable properties is a sine qua non. Leave and License agreement has been entered between the parties settling certain terms for putting up construction wherein it is agreed to create future lease on completion of construction. Therefore, on the date of leave and license agreement presented for registration, there was no building existence to transfer a right to enjoy to construe that document is a lease deed. - The very act of impounding by the authorities on the basis of power under Section 33 is not valid in the eye of law for the simple reason that Section 33 can be invoked only when the unstamped instrument has been produced before the registering authorities or such document comes before him while performing his official duty to use that document for any purpose for enable to lay a claim. The very instrument as defined under Section 2 (14) of the Stamp Act makes it clear that only a document on which any right purports to be created, transferred, limited, extended, extinguished or recorded, only those document is unstamped and produced before the authorities, such document could be impounded. A mere contract for settling terms for future building in the name of contingent contract, such document will not transfer any right or liability immediately. If the contract is contingent on specific events which has not happened within a specific date, the contract is valid only in the event the specific event has happened within a time. If it has not happened in the time, the contract becomes void.
- Thus, this Court is of the view that the very impounding the document treating it as lease when specific event of construction of building has not materialized and treating it as a lease deed cannot be valid in the eye of law. The impounding is permissible only when the document itself transferred the right to enjoy the property on certain terms when the document not been properly stamped, in such situation, the document can be impounded, not mere agreement creating future right that too without the happening of the certain event namely construction of building. Admittedly, the building was not in existence and not been constructed in the present case. Such situation, impounding the very document is not permissible in the eye of law. It is also to be noted that the very purpose of proper stamp on the document is to use that document admissible in evidence to claim any right over the property. If the relevant stamp duty has not been paid, the party cannot use that document to establish any right over the property. Therefore, the very object of the Stamp Act is to make that document admissible to claim any right on the basis of the document if the stamp is not properly stamped, then such document cannot be used for any purpose.
- The Hon’ble Supreme Court in the case of Interplay Between
Agreement under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, In Re reported in (2024) 6 SCC 1, while dealing with the arbitration agreement, in paragraphs 44 to 48 has held as follows:
“44. In terms of Section 35, an instrument which is not duly stamped is inadmissible in evidence for any purpose and it shall not be acted upon, registered, or authenticated. [ Subject to the proviso to Section 35.] Clause (a) of the proviso to Section 35 stipulates that the bar contained in the provision is removed upon the payment of duty and the penalty (if any). The party or parties may pay the duty chargeable to the person who has the authority to receive evidence by law or by consent of parties. Section 35 is significant because it gives teeth to the Stamp Act by ensuring that stamp duty is paid before rights and obligations arising from an agreement are enforced. - Section 38(1) indicates how an instrument which is impounded is to be dealt with:
“38. Instruments impounded how dealt with.—(1) Where the person impounding an instrument under Section 33 has by law or consent of parties authority to receive evidence and admits such instrument in evidence upon payment of a penalty as provided by Section 35 or of duty as provided by Section 37, he shall send to the Collector an authenticated copy of such instrument, together with a certificate in writing, stating the amount of duty and penalty levied in respect thereof, and shall send such amount to the Collector, or to such person as he may appoint in this behalf.
(2) In every other case, the person so impounding an instrument shall send it in original to the Collector.” - The Collector is conferred with the power to impound an instrument under Section 33. If any other person or authority impounds an instrument, it must be forwarded to the Collector under clause (2) of Section 38. Once the Collector receives an instrument, he has the power to stamp it under Section 40, if it is not a bill of exchange, a promissory note, or an instrument that is chargeable with a duty that exceeds ten naye paise. The Collector may:
(a) Certify by endorsement that the instrument is duly stamped, if they are of such an opinion;
(b) Certify by endorsement that the instrument is not chargeable with duty, if they are of such an opinion;
(c) Require the payment of the proper duty or the amount required to make up the proper duty, if they are of the opinion that the instrument is chargeable with duty and is not duly stamped.
The Collector may also levy a penalty, as provided by Section - If the instrument has been sent to the Collector under Section 38, it must be returned to the impounding officer after it is dealt with as described above.
- In terms of Section 42 of the Stamp Act, an instrument is admissible in evidence once the payment of duty and a penalty (if any) is complete. It stipulates that either the person admitting the instrument in evidence or the Collector, as the case may be, shall certify by endorsement that the proper duty has been paid.
- The procedure contemplated by the Stamp Act facilitates the collection of revenue. It permits instruments to be impounded not only by persons in charge of a public office or those who are empowered by law to receive evidence but also by any person who is empowered to receive evidence by consent of parties. The statute then sets out the procedure to be followed upon impounding a document. This procedure ensures that stamp duty is paid. After the payment of the appropriate amount under the appropriate description in Schedule I and the penalty (if any), the Stamp Act provides for the certification of such payment by an endorsement by the appropriate authority. Once an instrument has been endorsed, it may be admitted into evidence, registered, acted upon or authenticated as if it had been duly stamped.”
- The above judgment makes it clear that once the Collector has passed the order determining the stamp. When the stamp has been paid, he himself can certify by endorsement or require the payment of proper duty. Once the payment of duty or penalty is complete, then the document can be either registered and endorsement is made, it may be admitted into evidence, registered, acted upon or authenticated as if it had been duly stamped. The above judgment also makes it clear that the very purpose of the impounding is to collect the revenue and make the document admissible.
- The learned Additional Government Pleader relied in the case of
Tirupathi Developers vs. The State of Uttarkhand and others reported in 2013 (9) SCC 332, the Hon’ble Supreme Court in paragraph 13 has held as follows:
“13. Last attempt of Ms Makhija was that no adjudication was permissible at all because of the reason that these agreements for sale were subsequently cancelled, that too within two months of the execution thereof. We are of the opinion that the subsequent conduct of the parties in cancelling the agreements cannot be a reason for not taking action under Sections 33/38 of the Act. That action was necessitated when the documents were produced before the Deputy Registrar and he found the same to be deficient. The subsequent cancellation would be of no avail. In any case, keeping in view this aspect the High Court reduced the penalty to 15% of the deficit stamp duty, thereby giving sufficient succour to the appellant.” - The above judgment has to be seen in the context which delivered, wherein, the above judgment is arising out of the Stamp Act as applicable to the State of Uttarakhand as per 5(b-1) of Schedule 1-B. In the above case, the purchaser presented the sale deeds on the strength of the agreement of sale which was not sufficiently stamped. The above judgment is not applicable to the case in hand. The impugned order has been passed in the given case based on the promise the building was existence which was not even existence on the date of the leave and license agreement. When the building has not been constructed and the contract is purely a contingent contract which has not culminated into the building, claiming stamp as lease itself cannot be sustained in the eye of law. In such situation, when the contract itself has been frustrated and not been acted upon and parties given up that contract question arises still the authority can compel the parties to enforce the contract when the parties themselves abandoned the contract.
- Similarly, the Registration Act also makes certain documents compulsorily registrable to make it as admissible in evidence. Such being the position, when the contract is totally depending on the certain events and creates only future right and there was no demised building existence on the date of contract, it cannot be said that irrespective of any party claim any right over the document or not, stamp is payable. No doubt, the very purpose of impounding and levying of stamp duty with penalty is to make the document admissible in evidence. If the party does not wish to use that document any more or not willing to proceed further on the basis of the contract still merely on the basis of impounding, party cannot be compelled to perform the part of the contract. It is for the parties to decide whether they are relying upon the document to claim any right or not. If any party wishes to proceed on the basis of such instrument, then it can be said that without proper stamp duty as adjudicated is paid, the parties cannot rely upon the document. For instance, if the party decide not to proceed further and make any claim over the subject matter of agreement, in such situation, it cannot be said that the stamp duty has to be paid compulsorily.
- It is the right of the parities either to rely upon the document to establish further right, if the contract parties are not willing to establish any right on the basis of such document and give up the right, such case, still insisting the amount merely on the basis of impounding may not arise at all. For that reason only, Rule 107 of the Registration Rules is brought into place. The same reads as follows:
“107. When an impounded document is received back from the Collector after adjudication of stamp duty, the registering officer shall immediately give notice in writing to the presentant or to the person authorised by the presentant to take delivery of the document either to take steps to complete the registration of the document or to take delivery of the document. - In this regard, this Court in Purushotham Nath Rallan’s case (cited supra) has held that when the parties to the document are not willing to register after adjudication, as per Rule 107, they are entitled to get back the document without payment of amount. This judgment has been approved by the Division Bench of this Court in W.A.No.1763 of 2019. Appeal against the said judgment is also dismissed in S.L.P.(Civil).D.No.23160 of 2019 vide order dated 17.03.2023. Similarly, this Court in the case of B.Sriramulu vs. The Inspector General of Registration made in W.P.(MD).No.6310 of 2024, order dated 15.03.2024 has followed the above judgment.
- There is a difference between collection of stamp duty and creating charge over the property under Section 47-A of the Stamp Act, since, under Section 47-A, the very act of registration is complete, execution and registration is already over and in that event when the document is undervalued, the determination of the market value can be made and deficit stamp duty can be recovered and in the event the same has not been paid, there is a special mechanism for recovery of amount also. For the deficit stamp duty, charge will be created on the subject property, whereas, with regard to the impounding is concerned, if the impounding has been made and the party gave up and the document is not proceeded, on the said document the authorities cannot insist the parties to pay the adjudicated amount and compel them to act according to the contract or document.
- This Court in Kamalakannan’s case (cited supra) considering the judgment of the Hon’ble Apex Court in Government of Uttar Pradesh vs. Mohammad Amir Ahmad Khan reported in (1962) 1 MLJ has held as
follows:
” 25. In the case of Govt. of Uttar Pradesh v. Mohammad Amir Ahmad Khan, [AIR 1961 SC 787] the Hon’ble Supreme Court has held as under:-
“5. After an inordinately long delay, the Collector determined the amount of duty payable and impounded the document. Power to impound is given in Section 33 of the Act. Under that section any person who is a Judge of is in-charge of a public office before whom an instrument chargeable with duty is produced or comes in the performance of his functions is required to impound the instrument if it appears to him not to be duly stamped. The question is does this power of impounding arise in the present case? The instrument in dispute was not produced as a piece of evidence nor for its being acted upon e.g. registration, nor for endorsement as under Section 32 of the Stamp Act but was merely brought before the Collector for seeking his advise as to what the proper duty would be. The words ?every person? before whom any instrument? is produced or comes in the performance of his functions? refer firstly to production before judicial or other officers performing judicial functions as evidence of any fact to be proved and secondly refer to other officers who have to perform any function in regard to those instruments when they come before them e.g. registration. They do not extend to the determination of the question as to what the duty payable is. They do not cover the acts which fall within the scope of Section 31, because that section is complete by itself and it ends by saying that the Collector shall determine the duty with which, in his judgment, the instrument is chargeable, if it is chargeable at all. Section 31 does not postulate anything further to be done by the Collector. It was conceded that if the instrument is unexecuted i.e. not signed and the opinion of the Collector is sought, he has to give his opinion and return it with his opinion to the person seeking his opinion. The language in regard to executed and unstamped documents is no different and the powers and duties of the Collector in regard to those instruments are the same, that is, when he is asked to give his opinion, he has to determine the duty with which, in his judgment, the instrument is chargeable and there his duties and powers in regard to that matter end. Then follows Section 32. Under that section the Collector has to certify by endorsement on the instrument brought to him under Section 31 that full duty has been paid, if the instrument is duly stamped, or it is unstamped and the duty is made up, or it is not chargeable to duty. Under that section the endorsement can be made only if the instrument is presented within a month of its execution. But what happens when the instrument has been executed more than a month before its being brought before the Collector? Section 31 places no limitation in regard to the time and there is no reason why any time limit should be imposed in regard to seeking of opinion as to the duty payable.?
[Emphasis supplied] 26. From the above dictum, it is very clear that the powers under Section 33 of the Indian Stamp Act, 1899 does not extend to the determination of the question as to what the duty payable is? It is relevant to note here that if the registering authority while registering any instrument of conveyance, exchange, gift, release of benami right or settlement, has reason to believe that the market value of the property which is the subject matter of conveyance, exchange, gift, release of benami right or settlement, has not been set forth in the instruments, he may, after registering such instrument, refer the same to the
Collector for determination of the market value of such property and the proper duty payable thereon.” - It is also relevant to note that the Division Bench of Kerala High
Court in Abdul Rasheed’s case (cited supra), in paragraphs 42, 47, 49, 50,
51, 52, 54, 57, 67, 69 & 80 held as follows:
“42. We must, nevertheless, observe that the document to be impounded need not have been presented only “in evidence or in such related proceedings.” In fact, Section 33 employs the expression “is produced or comes in the performance of his functions”. Even Section 34 goes beyond admitting a document in evidence. Insufficiently stamped instrument shall not “be acted upon, registered or authenticated” by any such person or by any public officer, unless such instrument is duly stamped. - Here, Dr. Rasheed has not used an insufficiently stamped document for any purpose. He does not want to rely on the document to prove any transaction or to derive any advantage out of that document. He wants to complete that document, so he could gain from it: convey some property. And no conveyance is effective involving property, as Section 54 of the Transfer of Property Act mandates, worth more than Rs.100/- if it is not registered. So he wanted to register the document. Up to here the march of events is clear. We can view the case in the perspective of either the presenter or the registering authority. The presenter’s perspective, the Sub Registrar refused to register the document; from the registrar’s perspective, the document contained deficit stamp—so the refusal.
- We reckon the whole concept of deficit stamp duty and the stringent—almost draconian—penalty clause play a deterrent role: to discourage persons from evading stamp duty. Even in the grossest of crimes, mere preparation is no offence. A civil transaction cannot be much worse. Here, a person wants to settle property on his children. Or a company wants to gift property to some persons, as is held by the registering authorities. Let us remove the veil, for our narrative purpose. After executing the deed, that person contemporaneously presents the document for registration.
- Important it is to note that the registering authority has not unearthed or discovered an insufficiently stamped document when it is sought to be used for its intended purpose—a purpose it could serve only as a completed document. In Tirupati Developers, the petitioner wanted a sale transaction on the strength of an insufficiently stamped agreement of sale. In other words, the agreement of sale formed the basis for the next transaction. Here, we are afraid, no such contingency arises. 51. If we hold that any document presented for registration cannot be taken back, and if the transaction cannot be resiled from, it destroys a person’s contractual freedom, and his decisional independence. A person can opt out of a transaction any time before the transaction is completed and his act becomes irrevocable—hat is he acted on it for his benefit.
- We may reiterate that All the provisions bearing upon impounding spring into action only when the document is sought to be used as if it had been duly stamped. When the authorities have received the document for the primary purpose —that is, registration—but find that the stamp is insufficient, they can point it out. The party can decide either to go ahead with the transaction or to withdraw from it. Better sense may prevail.
- To dispel the notion that these two enactments—the Stamp Act and the Registration Act—are cognate enactments, complementing each other. Under both acts, the same set of officers function. Granted, both the enactments aim at achieving different objectives: the Stamp Act is fiscal and the Registration Act social. The latter notifies the society at large about a transaction. Which Provision Applies – Section 33 or 34 of the Stamp Act?
- Section 34 (b) provides the answer. Any such instrument, when presented to a Registering Officer for registration, shall be registered, if the party agrees to pay the duty any penalty due thereon as decided by the Registering Officer and pays the same within seven days from the date of such decision. The document can be registered once the presenter agrees to pay the duty due along the penalty prescribed by the registering officer. The expression used in this provision is “if the party agrees.” When impounding leads to compulsory exaction, the question of the party agreeing does not arise.
- In Tirupati Developers, the petitioner had eleven agreements of sale executed in his favour. The Deputy Registrar concerned impounded all these documents as he felt that the documents were not sufficiently stamped. After the initial statutory departmental-challenge, the petitioner unsuccessfully took the matter to the High Court of Uttarakhand and later to the Supreme Court. Concurrently it is held that Deputy Registrar’s action is unassailable.
- To determine the precedential value of Tirupati Developers, we have read the judgment rendered by the Uttarakhand High Court, delivered on 29th September, 2011.[7] Though it does not explicitly emerge from the judgments, we reckon that the petitioner in Tirupati Developers approached the registering authorities to have sale deeds on the strength of the agreements of sale. As these agreements of sale formed the base for the next transaction, the Sub Registrar impounded them.
- Execution and presentation for registration are contemporaneous, within the period provided under the Registration Act for presentation. So the presenter producing the document for registration does not amount to his using insufficiently stamped document for a purpose not attainable without sufficient stamp on the instrument.”
- Similarly, the Andhra Pradesh High Court in Prajay Engineers
Syndicate Limited’s case (cited supra), held as follows:
An exercise under Section 47-A of the Act can be
undertaken only when a party insists on a document being registered and the registering authority takes the view that the proper stamp duty and registration fee are not paid. In case the party, that presented the document gives up the idea of getting the document registered, the registering authority or the Registrar cannot insist on payment of the amount found to be deficit.
Take for instance, a case, where an owner of agricultural land in a village agrees to sell it to his immediate neighbour, or to gift it in favour of his kin. If on account of sudden spurt of industrial or other developmental activity in the locality, the basic value of the lands in the entire village is enhanced by the Registering Authority on square yard basis. The proposed purchaser, or the beneficiary under other transfer, may find that the stamp duty and registration charges are prohibitive. If the parties do not intend to proceed with the transaction after the document is presented, the Registering Authority cannot compel them to pay the deficit Court fee, much less take coercive steps to recover the amount. - Similarly, the Hon’ble Supreme Court in the case of Government of Andhra Pradesh and others vs. P.Laxmi Devi reported in (2008) 4 SCC
720, in paragraph 16 has held as follows:
“16. A perusal of the said provision shows that when a document is produced (or comes in the performance of his functions) before a person who is authorised to receive evidence and a person who is in charge of a public office (except a police officer) before whom any instrument chargeable with duty is produced or comes in the performance of his functions, it is the duty of such person before whom the said instrument is produced to impound the document if it is not duly stamped. The use of the wordshall in Section 33(1) shows that there is no discretion in the authority mentioned in Section 33(1) to impound a document or not to do so. In our opinion, the word shall in Section 33(1) does not mean may but means shall. In other words, it is mandatory to impound a document produced before him or which comes before him in the performance of his functions. Hence the view taken by the High Court that the document can be returned if the party does not want to get it stamped is not correct. - It is relevant to refer Section 49(d)(5) and proviso to Section 49 of the Indian Stamp Act, 1899, which reads as follows:
” 49. Allowances for spoiled stamps. — Subject to such rules as may be made by 4 [the 5 [State Government]] as to the evidence to be required, or the enquiry to be made, the Collector may, on application made within the period prescribed in section 50, and if he is satisfied as to the facts, make allowance for impressed stamps spoiled in the cases herein after mentioned, namely: —
(a) the stamp on any paper inadvertently and undesignedly spoiled, obliterated or by error in writing or any other means rendered unfit for the purpose intended before any instrument written thereon is executed by any person:
(b) the stamp on any document which is written out wholly or in part, but which is not signed or executed by any party thereto:
(c) in the case of bills of exchange payable otherwise than on demand or promissory notes—
(1) the stamp on any such bill of exchange signed by or on behalf of the drawer which has not been accepted or made use of in any manner whatever or delivered out of his hands for any purpose other than by way of tender for acceptance: Provided that the paper on which any such stamp is impressed, does not bear any signature intended as or for the acceptance of any bill of exchange to be afterwards written thereon:
(2) the stamp on any promissory note signed by or onbehalf of the maker which has not been made use of in any manner whatever or delivered out of his hands:
(3) the stamp used or intended to be used for any such bill of exchange or promissory note signed by, or on behalf of, the drawer thereof, but which from any omission or error has been spoiled or rendered useless, although the same, being a bill of exchange may have been presented for acceptance or accepted or endorsed, or, being a promissory note, may have been delivered to the payee:
Provided that another completed and duly stamped bill of exchange or promissory note is produced identical in every particular, except in the correction of such omission or error as aforesaid, with the spoiled bill or note;
(d) the stamp used for an instrument executed by any party thereto which—
(1) has been afterwards found to be absolutely void in law from the beginning:
(2) has been afterwards found unfit, by reason of any error or mistake therein, for the purpose originally intended:
(3) by reason of the death of any person by whom it is necessary that it should be executed, without having executed the same, or of the refusal of any such person to execute the same, cannot be completed so as to effect the intended transaction in the form proposed:
(4) for want of the execution thereof by some material party, and his inability or refusal to sign the same, is in fact incomplete and insufficient for the purpose for which it was intended:
(5) by reason of the refusal of any person to act under the same, or to advance any money intended to be thereby secured, or by the refusal or non-acceptance of any office thereby granted, totally fails of the intended purpose;
(6) becomes useless in consequence of the transaction intended to be thereby effected being effected by some other instrument between the same parties and bearing a stamp of not less value:
(7) is deficient in value and the transaction intended tobe thereby effected has been effected by some other instrument between the same parties and bearing a stamp of not less value:
(8) is inadvertently and undesignedly spoiled, and in lieu whereof another instrument made between the same parties and for the same purpose is executed and duly stamped:
Provided that, in the case of an executed instrument, no legal proceeding has been commenced in which the instrument could or would have been given or offered in evidence and that the instrument is given up to be cancelled. - The above provision makes it clear that if the person is not willing to rely upon the document for any purpose and refused to pay that amount, in such case, no liability arises for payment of stamp duty on an instrument.
In the present case, when the person is not willing to act under the
Instrument or not seeks to use that Instrument for any purpose that Instrument has to be cancelled. The proviso also makes it clear that as long as no legal proceedings has been commenced in which the instrument could or would have been given or offered in evidence and that the instrument is given up to be cancelled. Therefore, when the substantive provision of the Stamp Act itself provides for cancellation of the document and no liability arises when the party refused to act under the document and the document is totally out of the intended purposes it cannot be said that still the authority can compel the parties to enforce the contract and pay the stamp duty. The Tirupathi Developers’s case (cited supra) by the learned Additional
Government Pleader arises out of the Stamp Act as applicable to the State of Uttarakhand, wherein, the stamp duty has not been properly paid. - The Hon’ble Apex Court in the case of Bano Saiyed Parwaz vs. Chief Controlling Revenue Authority and Inspector General of Registration and Controller of Stamps and Others reported in 2024 SCC OnLine SC 979 dealt with the similar provision in pari materia to Section 49(d)(5) of the
Stamp Act has held as follows:
” 14. In Committee-GFIL v. Libra Buildtech Private Limited, wherein the issue of refund of stamp duty under the same Act was in question, this Court has observed and held inter alia as under:
“29. This case reminds us of the observations made by M.C. Chagla, C.J. in Firm Kaluram Sitaram v. Dominion of India [1953 SCC OnLine Bom 39: AIR 1954 Bom 50]. The learned Chief Justice in his distinctive style of writing observed as under in para 19: (Firm Kaluram case, SCC OnLine Bom)
“19. … we have often had occasion to say that when the State deals with a citizen it should not ordinarily rely on technicalities, and if the State is satisfied that the case of the citizen is a just one, even though legal defences may be open to it, it must act, as has been said by eminent Judges, as an honest person.”
We are in respectful agreement with the aforementioned observations, as in our considered opinion these observations apply fully to the case in hand against the State because except the plea of limitation, the State has no case to defend their action. xxxxxxxxx - In our considered opinion, even if we find that applications for claiming refund of stamp duty amount were rightly dismissed by the SDM on the ground of limitation prescribed under Section 50 of the Act yet keeping in view the settled principle of law that the expiry of period of limitation prescribed under any law may bar the remedy but not the right, the applicants are still held entitled to claim the refund of stamp duty amount on the basis of the grounds mentioned above. In other words, notwithstanding dismissal of the applications on the ground of limitation, we are of the view that the applicants are entitled to claim the refund of stamp duty amount from the State in the light of the grounds mentioned above.”
- Similarly, the Allahabad High Court in the case of Mohd. Jahir @
Shah Alam vs. State of U.P and another reported in 2013 SCC OnLine All 11729 dealt with the similar provision in pari materia to Section 49(d)(5) of the Stamp Act has held as follows:
“… for stamps spoiled by the reason of the refusal of stamp papers for the purposes of execution of the sale deed; the sale deed was typed out and executed on 18.09.2007 but later on vendor detracted and refused to pursue further so as to register it. The court while quashing the order of the authority below directed for the refund the stamp duty” - Similarly, the Bomby High Court in the case of Sanman Trade
Impex Pvt. Ltd. Vs. State of Maharashtra and others reported in 2005 (1)
Mh.L.J., dealt with the similar provision which is in pari materia to Section
49(d)(5) of the Stamp Act has held as follows:
“12. The expressions “the stamp used for an instrument executed” and “totally fails of the intended purpose” disclose that the “purpose” spoken of in sub-clause (5) of clause (c) of section 47 of the said Act relates to the utility of the stamps for the matter for which the same was required to be used. Once the transferor fails to comply with the conditions in the agreement for sale and to deliver the possession of the property, obviously the instrument is rendered ineffective and useless, unless of course, the transferee seeks for specific performance of such agreement. Otherwise, the purpose having failed, the party investing the money for purchase of the stamp in relation to the spoiled stamp papers, would be entitled to claim refund of the stamp duty, albeit, subject to other conditions specified in the said Act and the said Rules. - Considering the provisions of law referred to above, the contention on behalf of the respondent that payment of entire consideration price under the deed dated 27th March, 2003 would render the instrument to be a deed of conveyance and not an agreement and, therefore, would not be entitled to claim refund under section 48(1) read with 47(c)(5) is totally, devoid of substance. Clause (c)(5) of section 47 nowhere distinguishes between agreement of sale and the deed of sale. It applies to all instruments irrespective of the fact whether it is a deed of sale or a mere agreement for sale. What it provides is that the instruments should be rendered ineffective and unenforceable in the sense that the purpose for which it was executed should “totally fail”. Once the party is able to establish that the purpose for which instrument was executed has totally failed, certainly the case would fall within the parameters of the provisions comprised under section 47(c)(5) of the said Act. Indeed, this is also clear from plain reading of section 48(1) along with proviso thereof. In fact clause (1) of section 48 does not distinguish between the sale deed and agreement for sale. Such a differentiation is to be found only under the proviso to the said clause. Explanation 1 to Article 25 of Schedule I of the said Act nowhere provides that the mere payment of entire consideration amount would transform the agreement for sale into deed of sale. On the contrary it specifically refers to delivery of possession and not the payment therefor. In other words, even under the agreement for sale with part payment of consideration, if the possession of property is delivered, it would warrant stamp duty which is payable in respect of conveyance of such property in view of provisions of law contained in explanation 1 of Article 25 of
Schedule I of the said Act.”
Emphasis supplied - As discussed above, as long as the party is not acting on the contract and never intended to use such document to establish any right over the subject property of the contract merely because the authority impounded such document, the authorities cannot impose condition to the parties to abide by the contract or document. It is absolutely prerogative of the parties either to chose the document or give up the document. If the contracting parties are not willing to take forward the contract to establish their respective rights, the authorities under the pretext of impounding the document, cannot compel the parties to pay the stamp duty compulsorily and register the document. In the present case, the very building was not in existence on the date of agreement, it is only contingent contract depending on the construction of the building which has not happened so far. The parties have given up the contract, still the parties cannot be demanded for payment of deficit stamp duty on the basis of adjudication made under Section 33 of the Indian Stamp Act.
- As the document has been registered and kept as a pending document, as the parties are not willing to pay the stamp duty, the impugned order stands quashed. Accordingly, if the party has not paid the amount, the document can be refused to be registered with an endorsement that it cannot be used for any other purpose in future and refund the amount already paid.
- Accordingly, this writ petition stands allowed. No costs.
Consequently, connected miscellaneous petition stands closed.
02.08.2024
Index : Yes/No
Internet : Yes/No Neutral Citation :Yes/No dhk
To
1.The Inspector General of Registration
100, Santhome High Road, Chennai – 600 028
2.The District Registrar
Nandanam, Chennai – 600 035
3.The Sub Registrar
Kundrathur, Chennai – 600 069
N. SATHISH KUMAR, J.
dhk W.P.No.13012 of 2024
02.08.2024