Supreme Court’s Clarification on Jurisdiction of Stamp Duty and Penalty Determination for Insufficiently Stamped Instruments
Case Title?– SEETHARAMA SHETTY V. MONAPPA SHETTY
Case No.?– Civil Appeal Nos. 10039-40 of 2024 (SLP (Civil) Nos. 7249–7250 of 2022)
Decided by?– Supreme Court of India ??
Dated on?– 2nd?September, 2024
Quorum – Hon’ble Justice Hrishikesh Roy & Justice S. V. N. Bhatti
Facts of the Case:
In this case, the Appellant had filed a suit seeking for a perpetual injunction to be granted to the Respondent from interfering into the peaceful enjoyment of the “plaint schedule property”, i.e., an agricultural land situated in Kavoor Village, Mangalore Taluk. This was based on the plea that the Respondent had entered into a sale agreement dated 29/06/1999 with the Appellant, wherein, the Appellant claims to have been put in possession of the such property as part performance of the sale agreement by the Respondent. While, the Respondent denies the execution of the sale agreement dated 29/06/1999, the Appellant claims the sale agreement to be treated as conveyance.
However, it was claimed that the agreement is insufficiently stamped and is thus, inadmissible as evidence unless the same is made in compliance with the requirements of the Stamps Act. Subsequently, the Respondent filed an application before the trial court for the collection of deficit stamp duty and penalty in accordance with the Act, due to which the trial court, by Order dated, 10/11/2016, sent the sale agreement to the District Registrar for determining the same. However, the District Registrar expressed his inability to determine the deficit stamp duty and penalty payable due to the vagueness in the name of the village, and, hence, returned the same to the trial court.
Thereafter, the Appellant filed a memo dated 26/04/2017 so as to clarify the name of the village with respect to the sale agreement, but was opposed by the Respondent, claiming to be an ex-post factor incorporation of information, which was agreed by the trial court, and thus rejected the memo filed. This decision was challenged by the Appellant before the High Court of Karnataka; wherein, the Writ Petition was disposed of, directing to send a copy of the memo filed by the Plaintiff to the office of the District Registrar, but clarified that this would not affect the merits of the case. Thereafter, the District Registrar, through report dated 10/11/2016, concluded that the deficit stamp duty payable was Rs. 71,200/-, and ordered the same to be payable by the Appellant, along with a ten times penalty on the same agreement, amounting to Rs. 7,83,200/. Subsequently, the Writ Petition filed by the Appellant against this order, before the Karnataka High Court was dismissed, and a Review Petition filed for the same was also dismissed. Therefore, the Appellant has challenged the orders dated 23/01/2019, in relation to the payment of stamp duty and penalty, and 14/09/2021, in relation to review petition, in the Present case before the Hon’ble Supreme Court.
Issues:
Legal Provisions:
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Contentions of the Appellant:
The Appellant, in the present case, contended that the sale agreement shall be considered valid for the purpose of the injunction suit prayed for, despite potential issues present with stamping. It was argued that the trial court ought not to have decided on the stamp duty and penalty, but instead, should have referred the matter to the District Registrar. Further, the Appellant noted the discretionary powers of the District Registrar for determining the quantum of penalty payable, however, contends that the decision of the trial court to determine stamp duty and penalty was incorrect. Herein, §34 of the act was exercised, wherein the District Commissioner had just sent a report on the stamp duty and penalty payable, and did not give the option of collecting the deficit amount on the sale agreement, thus stressing on the illegality committed by exercising jurisdiction under §34 instead of §37(2), wherein the trial court does not have the discretion to levy penalty. Lastly, the Appellant placed reliance on certain cases that held valid the scope of jurisdiction to receive evidence that has been insufficiently stamped.
Contentions of the Respondent:
The Respondents, in the present case, contended that, firstly, the sale agreement was insufficiently stamped, making the same inadmissible as evidence until an appropriate stamp duty and required penalties are paid. Secondly, it is argued that, the court has exercised its jurisdiction correctly under §34 of the Act to determine the deficit stamp duty and penalty, stating the accuracy of the trail court’s decision to determine penalties instead of referring the same to the District Registrar.
Court Analysis and Judgement:
The Supreme Court, analyzed and interpreted that, firstly, that the sale agreement between the Appellant and the Respondent referred to the delivery of possession in favor of the Appellant. Further, Art. 5 of the Schedule of the Act requires the payment of ad valorem stamp duty along with delivery of possession, if the instrument in question conforms to being a conveyance under §2(d) read with Art. 20(1) of the Schedule of the Act. It is on the basis of this delivery of possession is what the relief of injunction is based on. The court took into consideration various judicial precedents to decide the first issue, as mentioned above, and observed that the High Court has rightly distinguished the jurisdiction vested in different persons, and on the District Registrar, for the determination of penalty payable on insufficiently stamped instrument. Therefore, it was held that, the Appellant, must pay the stamp duty and the penalty, for being permitted to produce the sale agreement as evidence in the suit.
With respect to the second issue, it was noted that Chapter 1V of the act was mandatory and regulatory, stating that §33 mandates the impounding of the insufficiently stamped instrument is produced, i.e., to keep such instrument in custody of law. Besides, §34 of the Act prohibits the admission of evidence upon an insufficiently stamped instrument. The court considered various judicial precedents for the same, such as Re: Interplay Between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899?and Hindustan Steel Limited v. Dilip Construction Company, and looked into the object of §33 of the Act, and other related provisions, including §34 and §37. Thus, it was subsequently observed that, the Act, being a regulatory and remedial statute, only if the relevant party pays the stamp duty and penalty, in consonance with the provisions of the Act, the legal objection surrounding the admission of the instrument as evidence would be eliminated, otherwise the such option may not be available to the Party anymore.
With respect to the present facts at hand, it was noticed by the court that, at the stage of admission it was the Respondent who raised an objection on deficit stamp duty, who required the sale agreement to be impounded, and be sent to the District Registrar under §39 of the act. Furthermore, the imposition of the penalty of ten times was observed to be illegal, owing to the facts that the required steps were not fulfilled including the instrument to be sent to the District Registrar, and deciding on the quantum of stamp duty and penalty while exercising such jurisdiction. Therefore, since this option was denied to the Appellant, the penalty of ten times was set aside, and the trial curt was directed to send the sale agreement to the District Registrar for determining the deficit stamp duty and penalty payable.
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Judgement Reviewed By – Thanuja Anthiyur Aravindan