While dealing with a petition challenging the order of the Trial Court on the ground that it had no jurisdiction to impose a penalty less than ten times and which had imposed only a one-time penalty on stamp duty on the ‘agreement for sale’ of the subject property, the Calcutta High Court held that when a Court impounded an instrument under Section 33 of the Indian Stamp Act, 1989, 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.

Adding further, the High Court held that Section 35 of the Stamp Act specified that the quantum of the penalty could only be ten times, as there was no provision under the Stamp Act, which authorized 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 observed that “When an instrument filed before the court is found to be insufficiently stamped the court can admit it in evidence, only if the party pays the stamp duty together with ten times of that stamp duty amount as penalty. If the person concerned is not satisfied with the decision of the court on the nature of the document, or with respect to the amount of duty and penalty payable thereon, he can apply to the court for sending the original document to the collector, which necessarily means that document will not be admitted in evidence at that stage”.

Accordingly, the Bench explained that if the party is not willing to pay ten times the penalty as mandatorily provided in section 35 of Stamp Act, the court however cannot compel the party to pay stamp duty and ten times the penalty and have it admitted in evidence.

Advocate Aniruddha Chatterjee appeared for the Petitioner, whereas Senior Advocate Kishore Dutta and Prabal Kr. Mukherjee appeared for the Opposite Party.

Going by the background of the case, the first Respondent had instituted a suit praying for specific performance of ‘agreement for sale’ wherein it was contended that he owned land as a tenant since 1955 and that the first to sixth Defendant of that suit had agreed to sell the subject property to the first Respondent at a consideration of Rs. 2,79,35,000/-. Such agreement also recorded a payment of Rs. 30 lakhs by the first Respondent to the original Defendant against the said agreed consideration. However, he was surprised to find in the newspaper that the Petitioners had purchased the subject property. Thereafter, realizing that the original Defendants had caused to deposit a sum of Rs. 35 lakhs in his bank account, Respondent send a legal notice to Defendant and subsequently filed a suit before the Civil Judge. Defendants vehemently denied all allegations and stated that they had previously filed an eviction suit against Respondent which was decreed in their favour. In a challenge to the decree, an application under order XIII Rule 8 of Civil Procedure Code along with sections 33 and 35 of the Indian Stamp Act 1989 was filed by Defendant praying to impound said unregistered and insufficiently stamped agreement for sale. 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 directed the Respondent to pay a sum of Rs. 67,64,800/- as stamp duty and an additional amount of Rs. 67,64800/- as a penalty.

After considering the submission, the Bench 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, the Bench elaborated that 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 when the amount of proper duty or deficient portion thereof exceeds Rs.5.

Thus, the High Court clarified that a document insufficiently stamped was a curable defect that may be cured by impounding it on payment of proper stamp and penalty.

The High Court observed that the terms of the proviso to Section 35 of the Stamp Act are mandatory and the Court must accept an instrument that was not duly stamped on payment of the requisite stamp duty and penalty if it was not one of the exceptional instruments mentioned in clause(a).

“In the present case, which was a suit for specific performance of the contract, the Court below sent the agreement to the collector for valuation and assessment of stamp duty after impounding it. In such circumstances, Civil Judge had no jurisdiction to impose 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”, added the Court.

The High Court also clarified that if the party was not willing to pay ten times the penalty as mandatorily provided in section 35 of the Stamp Act, the Court however could not compel the party to pay stamp duty and ten times the 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”, added the Court.

Accordingly, the High Court directed the Trial Court to call upon Respondent to pay and deposit stamp duty as assessed along with ten times of said amount towards penalty and on such payment, to act under section 38(1) of the Stamp Act and thereafter granted liberty to the Petitioners to seek jurisdiction of the Collector seeking refund of penalty (if any) by an appropriate proceeding.

Cause Title: Niyaz Ahmed Siddique and Anr. v. Sanganeria Company Pvt. Ltd. and Ors.

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Calcutta High CourtJustice Ajoy Kumar MukherjeeIndian Stamp Act

Pankaj Bajpai