In C.O 3906 OF 2019 - CAL HC- Stamp Act - Civil Judge has no jurisdiction of imposition of penalty at a lesser amount for an insufficiently stamped agreement of sale: Calcutta High Court emphasises that section 40(b) of the Act provides for discretion only with Collector instead of  Court, hence penalty imposed had to be 10 times of stamp duty
Justice Ajoy Kumar Mukherjee

Read Order: Niyaz Ahmed Siddique v Sanganeria Company Private Limited

Simran Singh

New Delhi, June 12, 2023: The Calcutta High Court, while dealing with a petition challenging the order of the Trial Court on the ground that it had no jurisdiction to impose penalty less than ten times and which had imposed only one time penalty on stamp duty on the ‘agreement for sale’ of the subject property, held that when a Court impounded an instrument under Section 33 of the Indian Stamp Act, 1989 (Stamp Act), it could admit such instrument in evidence upon payment of penalty as provided by section 35 of the Stamp Act which was further required to be sent to the Collector  with a certificate in writing, stating the amount of duty and penalty levied in respect thereof.

The High Court held that in view of the same, Section 35 of the Stamp Act specified that the quantum of the penalty could only be ten times. There was no provision under the Stamp Act, which authorised the Court to either reduce the quantum of penalty after impounding the document or call upon the party to pay penalty less than what was specified in section 35(a) of the Stamp Act.

The Single Judge Bench of Justice Ajoy Kumar Mukherjee was of the view that the only option left for the Trial Court was to call upon respondent 1 to pay and deposit in the Court ten times of the stamp duty as penalty as contemplated under section 35(a) of the Stamp Act and upon receipt of such penalty together with stamp duty, send the said collected amount of the stamp duty and penalty to the Collector together with the authenticated copy of the instruments. “Once the duty payble was ascertained from the statue no discretion was vested with the court in the matter of imposition of duty and penalty as it was mandatory.”

The Bench stated that “When an instrument filed before the court was found to be insufficiently stamped the court could admit it in evidence, only if the party payed the stamp duty together with ten times of that stamp duty amount as penalty. If the person concerned was not satisfied with the decision of the court on the nature of the document, or with respect to the amount of duty and penalty payble thereon, he could apply to the court for sending the original document to the collector, which necessarily meant that document would not be admitted in evidence at that stage.”

It was contended that, previously respondent 1 had instituted a suit praying for specific performance of ‘agreement for sale’ dated 01-11-2010 wherein it was contended that he was in possession of land as a tenant since 1955 and that defendant 1-6 of that suit had agreed to sale the subject property to respondent 1 at a consideration of Rs. 2,79,35,000/-and such agreement also recorded a payment of Rs. 30 lakhs by respondent 1 to the original defendant no. 1-6 against the aforesaid agreed consideration. However, he was surprised to find in the newspaper notice on 11-12-2010 that the petitioners herein had purchased the subject property. Thereafter on 2012-2010, respondent 1 had further realised that the original defendants no. 1 to 6 had caused to deposit a sum of Rs. 35 lakhs in his bank account which led him to send a legal notice to defendant 1-6 and subsequently filed a suit before the Civil Judge.

Defendants 1-6 vehemently denied all allegations and stated that they had previously filed an eviction suit against respondent 1 which was decreed in their favour and was subsequently challenged by respondent 1. In the said challenge to the decree, an application under order XIII Rule 8 of Civil Procedure Code (C.P.C.) along with section 33 and 35 of the Indian Stamp Act 1989 (Stamp Act) was filed by defendant no. 1 to 6 praying to impound said unregistered and insufficiently stamped agreement for sale dated 01.11.2010 produced before the Court so as to keep the same in the custody of the court.

The said prayer was allowed and the Court subsequently issued a letter to the Collector requesting him to supply the market value of the suit property. After perusing the report submitted by the Collector, the Trial Court, by the impugned order, was pleased to direct the respondent 1 to pay a sum of Rs. 67,64,800/- as stamp duty and additional amount of Rs. 67,64800/- as penalty.

The Court noted that Section 33 of the Stamp Act stated that all public officers with certain exceptions were required to examine every instrument chargeable with duty which came before them, in the performance of their official functions and to impound any instrument which appeared not to be duly stamped. Further, Section 35 of the Stamp Act, provided that every such instrument would be admitted in evidence in Civil Court if the party desiring to use it would pay the amount necessary to make up the proper stamp duty together with a penalty of Rs. 5 or ten times when the amount of proper duty or deficient portion thereof exceeds Rs.5. Further, Section 42 of the Stamp Act required that Civil Court would certify by endorsement on every instrument admitting such instrument in evidence that the proper duty and penalty had been levied in respect thereof and would also state the name of the residence of the person paying them. Further, Section 38 of the Stamp Act required every Civil Court to send to the Collector an authenticated copy of such impounded instrument admitted in evidence with a certificate in writing stating the amount of the duty and penalty levied in respect thereof and would send such amount to the Collector or in other cases the Court impounding instruments would send it in original to the Collector under section 38(2) of the Stamp Act and the endorsement required by Section 42 of the Stamp act would be transcribed on such a copy.

The Bench relying upon the aforesaid provision stated that it was clear that a document insufficiently stamped was a curable defect which may be cured by impounding it on payment of proper stamp and penalty. The penalty to be levied by Court was ten times the deficient duty (subject to a minimum of Rs 5/-), the Collector only may refund the penalty in excess of Rs 5/- under the provision of Section 39 of the Stamp Act.

Further, the Court stated that Section 33 of the Stamp Act provided that all instruments unstamped or deficiently stamped were to be impounded by Court. If the instrument happened to be one of the excepted instruments mentioned in the proviso, the Court had no option but to send it to the Collector under section 38(2) of the Stamp Act who would destroy it. “In the cases, if the deficient stamp duty and penalty were offered before offering them in evidence, they would be admitted and copies thereof would be sent to the collector under section 38(1). If the duty and penalty were not paid, they would be sent in original to the collector under section 38(2).”

The Bench was of the view that the terms of the proviso to Section 35 of the Stamp Act were mandatory and the Court was to accept an instrument which was not duly stamped on payment of the requisite stamp duty and penalty, if it was not one of the exceptional instrument mentioned in clause(a). “If the party producing the document wanted adjudication by the collector, the Court must follow the procedure prescribed in section 33 and 38(2) and cannot impose court’s own decision upon a party. However the demand of duty and penalty by Court under section 35 is provisional order liable to be altered by the procedure prescribed by section 39 and 40 and by subsequent sections.”

The Bench stated that the duty chargeable on an insufficiently stamped document must be decided with reference to the requirements of the law in force at the time of the execution, but the penalty leviable was determined in all cases by Section 35, proviso (a) of the Stamp Act. “In the present case, which was a suit for specific performance of contract, the Court below sent agreement to the collector for valuation and assessment of stamp duty after impounding it. In such circumstances, Civil Judge had no jurisdiction of imposition of penalty at a lesser amount. Under section 40(b) of the Act of 1899 that discretion lies with the collector and not with the court.”

The Court further stated that Section 38 of the Stamp Act provided the procedure in which instruments impounded were to be dealt with ie., the Court could collect the duty and penalty and send that amount, along with an authenticated copy of the instrument together with a certificate in writing stating the amount of duty and penalty levied in respect of instrument. As per the section 38(2) of the Stamp Act, in other cases instrument impounded would be sent to the Collector who would exercise his power as provided under Section 40 of the Stamp Act and would return the instrument to the impounding officer after collecting the duty in case of instrument chargeable with duty was not duly stamped after issuing a certificate to that effect.

The Bench stated that if the party was not willing to pay ten times penalty as mandatorily provided in section 35 of the Stamp Act, the Court however could not compel party to pay stamp duty and ten times penalty and have it admitted in evidence. It was for the party to have the documents admitted in evidence by paying stamp duty and ten times penalty or leave it to the court to take action as provided in section 38(2) of the Stamp Act. “Accordingly, it is quite clear that since the word “shall” had been used in section 33 and 35, the same clearly indicated that penalty imposed had to be 10 times. Here in the present case the court below has imposed one time penalty without assigning any reason and the order is also cryptic in nature.”

In view of above, the petitions were disposed of with a direction upon the Trial Court to call upon respondent 1 to pay and deposit stamp duty as assessed along with ten times of said amount towards penalty and on such payment, to act in accordance with section 38(1) of the Stamp Act and thereafter liberty was given to the petitioners herein to pray for invoking the jurisdiction of the Collector seeking refund of penalty (if any) by an appropriate proceeding.