Supreme Court Summarizes Principles On Impounding Of Instruments & Imposition Of Penalty Under Karnataka Stamp Act
The Supreme Court summarized principles on impounding of insufficiently stamped instruments and imposition of penalty under Karnataka Stamp Act,1957.
The Court was disposing appeal against the Karnataka High Court judgment that had upheld the penalty for the deficit stamp duty on the instrument instead of sending it to the District Registrar for determination and collection of penalty as may be applicable.
A Bench of Justice Hrishikesh Roy and Justice S.V.N. Bhatti observed, “Though the suit instrument is insufficiently stamped, still the penalty of ten times under Section 34 of the Act is imposed through the impugned orders. The imposition of penalty of ten times at this juncture in the facts and circumstances of this case is illegal and contrary to the steps summed up in paragraph 21. The instrument is sent to the District Registrar, thereafter the District Registrar in exercise of his jurisdiction under Section 39 of the Act, decides the quantum of stamp duty and penalty payable on the instrument.”
Advocate Parikshit P. Angadi appeared for the appellant while Senior Advocate Liz Mathew appeared as an amicus curiae.
The Court had to determine whether an agreement of sale, containing a clause about the delivery of possession, constituted a conveyance under the Act, thereby necessitating the payment of ad valorem stamp duty. The respondent challenged the validity of the agreement, claiming it was insufficiently stamped and, therefore, inadmissible in evidence unless the proper stamp duty and penalty were paid.
The trial court initially ordered the impounding of the agreement and sent it to the District Registrar to determine the deficit stamp duty. However, the District Registrar, due to lack of specific details, returned the instrument. The trial court, later on, imposed a penalty ten times the deficit stamp duty, which amounted to Rs. 7,83,200/-. This decision was subsequently upheld by the High Court, which dismissed the appellant's writ petition and review petition.
Section 34 of the Act bars the admission of an instrument in evidence unless adequate stamp duty and the penalty are paid. “Every person so authorised to collect deficit stamp duty and penalty has no discretion except to levy and collect ten times the penalty of deficit stamp duty,” the Court remarked.
The court summarised the law as follows:
The person who intends to rely on an insufficiently/improperly stamped instrument has option to submit to the scope of Section 34 of the Act, pay duty and penalty. The party also has the option to directly move an application under Section 39 of the Act before the District Registrar and have the deficit stamp duty and the penalty as may be imposed collected. In either of the cases, after the deficit stamp duty and the penalty are paid, the impounding effected under Section 35 of the Act is released and the instrument available to the party for relying as evidence. In the event, a party prefers to have the document sent to the deputy commissioner for collecting the deficit stamp duty and penalty, the Court/Every Person has no option except to send the document to the District Registrar. The caveat to the above is that, before the Court/Every Person exercises the jurisdiction under Section 34 of the Act, the option must be exercised by a party
Section 34 of the Act is titled instruments not duly stamped inadmissible in evidence. This provision bars the admission of an instrument in evidence unless adequate stamp duty and the penalty are paid. Every person so authorised to collect deficit stamp duty and penalty has no discretion except to levy and collect ten times the penalty of deficit stamp duty
Section 35 of the Act is titled admission of instrument where not to be questioned. Section 35 prohibits questioning the admission of an insufficiently stamped instrument in evidence.-. Section 37 of the Act is titled instruments impounded, how dealt with. This Section arises when the party pays the deficit duty and penalty, the Court is to impound the instrument under Section 33 of the Act and has to forward the instrument to the Deputy Commissioner/District Registrar. Subsection (2) of Section 37 of the Act deals with cases not falling under Section 34 and 36, and the person impounding an instrument shall send it in original to the Deputy Commissioner.
Being a regulatory and remedial statute, a party who follows the regulation, and pays the stamp duty and penalty, as per Sections 34 or 39 of the Act, the legal objection emanating from Section 33 of the Act alone is effaced and the document is admitted in evidence. In other words, the objection under the Stamp Act is no more available to a contesting party.
Section 39 of the Act is titled deputy commissioner’s power to stamp instruments impounded. This Section provides the procedure to be followed by the Deputy Commissioner/District Registrar while stamping instruments that are impounded under Section 33 of the Act. As per Section 39(1)(b) of the Act, the penalty may extend to ten times the stamp duty payable; however, ten times is the farthest limit which is meant only for very extreme situations. Therefore, the Deputy Commissioner/District Registrar has discretion to levy and collect commensurate penalty.
The above steps followed and completed by paying/depositing the deficit duty and penalty would result in the instrument becoming compliant with the checklist of the Act. The finality is subject to the just exceptions envisaged by the Act addressing different contingencies. -
The scheme does not prohibit a party to a document to first invoke directly the jurisdiction of the District Registrar and present the instrument before Court/Every Person after complying with the requirement of duty and penalty. In such an event, the available objection under Sections 33 or 34 of the Act is erased beforehand. The quantum of penalty is primarily between the authority/court and the opposing party has little role to discharge
“The appellant is denied this option by the impugned orders. It is trite law that the appellant must pay what is due, but as is decided by the District Registrar and not the Court under Section 34 of the Act,” the Court remarked.
Consequently, the Court held that “Hence, for the above reasons, the direction to pay ten times the penalty of the deficit stamp duty merits interference and accordingly is set aside.”
Accordingly, the Supreme Court partly allowed the appeal.
Cause Title: Seetharama Shetty v. Monappa Shetty (Neutral Citation: 2024 INSC 650)
Appearance:
Appellant: Advocates Parikshit Angadi and Srusthi Agadi; AOR Anirudh Sanganeria
Amicus Curiae: Senior Advocate Liz Mathew