The Supreme Court, in a recent judgment, clarified the procedure for determining the market value of properties under the Indian Stamp Act, 1899

The Court held that where there is an apprehension of undervaluation in a property sale, the Registering Authority cannot refer the case to the Special Deputy Collector (Stamps) for determination of market value without assigning any reasons.

This decision came after an appeal was filed against the ruling of the Madras High Court, which set aside the action of the Registering Authority of directly referring a property sale to the Collector for market value assessment.

Background of the Case

The case involved a property purchase by respondent P. Babu, wherein the Registering Authority held the sale to be undervalued and referred the matter to the Special Deputy Collector (Stamps) for assessment of market value and additional stamp duty. P. Babu objected to the proceedings and contended that no inquiry was held before the reference was made. The High Court held for P. Babu, by holding that the act of the Registering Authority was not justified without holding a proper inquiry.

Supreme Court's Observations

The Supreme Court, while affirming the decision of the High Court, observed that under the Stamp Act, the Registering Authority must first conduct an inquiry into the suspected undervaluation before making a reference to the Collector. Without this preliminary inquiry and the issuance of a notice to the parties involved, any determination of market value is invalid. The Court further emphasized that the duty of the Registering Authority is not to act mechanically or without due consideration. There must be a rational and material basis for the belief that the property is undervalued.

Reason to Believe

The Court also pointed out that the term "reason to believe" in Section 47-A(1) of the Stamp Act means actual, objective satisfaction based on relevant material. It is not a subjective opinion of the officer in charge. This judgment supports the requirement for transparency and fairness in the market value assessment process so that no party is saddled with more stamp duties.

Importance of Due Process

As the Supreme Court observes, the investigation conducted by the Registering Authority is an important process. It prevents any reference to the Collector being made arbitrarily or without evidence and thus prevents misuse of the system. The Court referred to the case of Mohali Club, Mohali v. State of Punjab (AIR 2011 P&H 23), where it emphasized that the reason to believe that a sale price is undervalued must be based on concrete facts and not speculative judgment.

This order shows the importance of following the due process and upholding justice in property-related transactions. With the Court of law ensuring the Registering Authority completes the inquiry in a proper and justifiable manner, it has enhanced the safety valves against any wrong assessment of property values through the Stamp Act.