Consent Decree Will Not Operate As Conveyance When No Right Is Transferred; Same Does Not Require Any Payment Of Stamp Duty: Supreme Court

The appeal before the Apex Court was filed challenging a Madhya Pradesh High Court Order dismissing the Miscellaneous Petition filed by the appellant herein. By the said order, the High Court upheld the order of the Collector of Stamps determining stamp duty at Rs.6,67,500 payable by the appellant qua land acquired by him by way of consent decree, as affirmed by the Board of Revenue.

The Division Bench comprising Justice J.B.Pardiwala and Justice R. Mahadevan said, “Since the appellant has only asserted the pre-existing right and no new right was created through the consent decree, the document pertaining to mutation of the subject land is not liable for stamp duty.”

AOR Christi Jain represented the Appellant while Deputy Advocate General V.V.V Pattabhiram represented the Respondents.

The case emanated from a Civil Suit filed by the Appellant before the Court of First Civil Judge for declaration and permanent injunction against one Abhay Kumar (Respondent No.2) and the State of Madhya Pradesh (Respondent No.1) stating that he is the owner of the subject land and is in long and continuous possession of the same by doing cultivation. It was alleged in the said suit that in the year 2013, the Respondent No.2, who is the adjacent land owner of the appellant, attempted to sell the subject land to third parties, thereby dispossessing the appellant from the same.

Pending the suit, both the parties entered into a compromise, based on which, the suit came to be decreed in favour of the appellant and the Respondent No.1 - State of Madhya Pradesh did not raise any objection nor filed any appeal against the said compromise decree.

When the appellant applied for mutation of the said land before the Tehsildar concerned, his case was referred to the Collector of Stamps and proceedings were initiated under Section 33 of the Indian Stamp Act, 1899. The Appellant was directed to pay a sum of Rs 6,67,500 towards stamp duty. Challenging the said order, the appellant preferred a revision, which was dismissed by the Board of Revenue. The appellant’s plea to quash the proceedings was dismissed by the High Court by relying upon the decision in Mohd. Yusuf v. Rajkumar (2020) wherein it was held that the consent decree obtained in the suit, through which, new right was created over the property, needs registration and for this reason, stamp duty is also required to be paid.

The Counsel for the Appellant submitted that the consent decree in favor of the appellant is not chargeable with stamp duty, as it does not create any new right, but it conveys the pre-existing title, right or interest over the subject land.

The two issues before the Bench involved registration of the document and payment of stamp duty. The Bench referred to sub-section (2) of section 17 which enlists documents that are not compulsorily registrable. The exemption for decree or order of the Court is covered under section 17(2)(vi) of the Act, 1908 with a rider. Under the said provision, any decree or order of a Court (except the decree or order expressed to be made on compromise and comprising immovable property other than that which is the subject-matter of the suit or proceedings) would not require compulsory registration.

“The compromise arrived at before the Lok Adalat and the award passed by the Lok Adalat thereto assume the character of a decree passed under Order XXIII Rule 3 and would also come within the ambit and purview of sub-section (2) of section 17 of the Act, 1908”, it said.

It was taken into consideration that the appellant preferred a Civil Suit against the respondents for declaration and permanent injunction claiming ownership and continuous possession over the subject land, and the same came to be decreed in favour of him. The Bench thus observed, “In view of the above, the appellant is entitled to possession of the subject land and the Respondent No.2 shall not interfere with the same; and the appellant is entitled to get his name recorded in the revenue records in respect of the subject land in the place of the Respondent No.2.”

The Bench further clarified that in order to fall under the exception of Section 17(2)(vi) of the Act, 1908, the following conditions must be satisfied:

• There must be a compromise decree as per the terms of the compromise without any collusion;
• The compromise decree must pertain to the subject property in the suit; and
• There must be a pre-existing right over the subject property, and the compromise decree should not create a right afresh

The Bench further said, “ It is settled law that revenue records are not documents of title. Any entry therein will not ipso facto confer ownership. In the present case, the possession is continuously with the appellant.” The Bench further stated that in view of the change in law with regard to the right accrued to a holder in adverse to be treated as a pre-existing right and since the order in Mohammed Yusuf’s case was subsequently reversed, the judgment of the High Court would not be sustainable.

“There is no finding of collusion between the parties in entering into the compromise by any Court as on date. Indisputably, the property is the subject matter of the suit. Thus, the appellant has satisfied the conditions enumerated in section 17(2)(vi) of the Act, 1908 and hence, the subject land acquired by him by way of compromise decree, requires no registration”, it held.

Further referring to Section 3 of the Indian Stamp Act, 1899, the Bench said, “From the above, it is apparent that stamp duty is not chargeable on an order/decree of the Court as the same do not fall within the documents mentioned in Schedule I or I-A read with Section 3 of the Indian Stamp Act, 1899. Though the Collector of Stamps determined the stamp duty for the subject land as per Article 22 of Schedule IA of the Indian Stamp Act, 1899, which states about conveyance, in this case, we have already held that the compromise decree does not fall under the instruments mentioned in the Schedule and that it only asserts the pre-existing rights. Therefore, in the facts of the case, the consent decree will not operate as conveyance as no right is transferred and the same does not require any payment of stamp duty.”

Thus, setting aside the impugned order passed by the High Court, the Bench allowed the appeal and ordered the authority concerned to make mutation of the revenue records in respect of the subject land in favour of the appellant.

Cause Title: Mukesh v. The State of Madhya Pradesh & Anr. (Neutral Citation: 2024 INSC 1026)

Appearance:

Appellant: AOR Christi Jain

Respondents: DAG V.V.V. Pattabhiram, AOR Mrinal Gopal Elker, Advocates Chinmoy Chaitanya, Chhavi Khandelwal, Shruti Verma, Rajan K Chaurasia

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