Supreme Court clarifies powers of appellate authority under Section 47A of the Indian Stamp Act in property valuation disputes.

Introduction

Date of the Judgment: 15 June 2020

Citation: Civil Appeal No.2586 of 2020 @ SLP (C)No.15790 of 2019 etc.

Judges: Uday Umesh Lalit, J., Indu Malhotra, J.

When a property is registered, can the appellate authority enhance the property’s valuation beyond what the Collector determined? The Supreme Court of India recently addressed this question, clarifying the powers of the appellate authority under Section 47A of the Indian Stamp Act, 1899, in cases of undervaluation of property during registration. This judgment is crucial for understanding the scope of authority and the process involved in property valuation disputes.

The Supreme Court bench, comprising Justice Uday Umesh Lalit and Justice Indu Malhotra, delivered the judgment. The court examined the interpretation of Section 47A of the Indian Stamp Act, 1899, and the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968, as amended. This case is significant for property owners and legal professionals dealing with stamp duty and property valuation issues.

Case Background

The case originated from a dispute over the valuation of two properties purchased by the Respondent in Tiruppur Taluk, Erode District, Tamil Nadu. The Respondent had purchased:

• ✓ A property admeasuring 46,216 sq. ft. for Rs. 4,78,000 (Rs. 10.34 per sq.ft.) vide Sale Deed dated 21.02.2000.
• ✓ A property admeasuring 47,960 sq. ft. for Rs. 4,96,000 (Rs. 10.34 per sq.ft.) vide Sale Deed dated 18.02.2000.

The Sub-Registrar, Dharapuram, found that the values declared in the Sale Deeds were significantly lower than the Guideline Value of Rs. 58.30 per sq.ft. Consequently, the matter was referred to the Special Deputy Collector (Stamps), Coimbatore, under Section 47-A of the Indian Stamp Act, 1899.

The Special Deputy Collector issued notices to the Respondent, seeking an explanation for the difference in valuation and proposing a provisional valuation at the guideline rate of Rs. 58.30 per sq.ft. After the Respondent failed to respond, final orders were issued, determining the market value of the properties at Rs. 26,95,400 and Rs. 27,97,100, respectively, and demanding deficit stamp duty.

The Respondent’s statutory appeal was rejected by the Inspector General of Registration. The Inspector General of Registration had called for a report from the District Registrar, Erode, who recommended that the value be fixed at Rs. 58.30 per sq.ft. because the properties were incorporated into the municipality after the date of registration.

Aggrieved, the Respondent filed a Civil Miscellaneous Appeal (CMA) in the High Court of Judicature at Madras, challenging the order of the Inspector General of Registration. The High Court allowed the appeal, stating that the Inspector General of Registration had delegated his duty to the Deputy Inspector General of Registration, violating the principles of delegation of power and Rule 6 of the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968. The High Court also observed that the procedure under Rule 6 was not followed.

Timeline

Course of Proceedings

The Sub-Registrar, Dharapuram, initially referred the matter to the Special Deputy Collector (Stamps), Coimbatore, due to the discrepancy between the declared value and the guideline value. The Special Deputy Collector issued notices to the Respondent, seeking clarification on the undervaluation. When the Respondent failed to respond, the Special Deputy Collector issued final orders, assessing the market value based on the guideline value.

The Respondent’s appeal to the Inspector General of Registration was rejected, with the appellate authority relying on a report from the District Registrar, Erode. The District Registrar had recommended the value of Rs. 58.30 per sq.ft. since the properties were incorporated into the municipality after the date of registration.

The High Court of Judicature at Madras, allowed the appeal, stating that the Inspector General of Registration had delegated his duty to the Deputy Inspector General of Registration, which was against the decision of the High Court in the case of S. Santhi vs. Chief Revenue Controlling Authority. The High Court also observed that Rule 6 of the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968 was not followed.

Legal Framework

The core of this case revolves around Section 47-A of the Indian Stamp Act, 1899, which deals with instruments of conveyance that are undervalued. This section empowers the Registering Officer to refer a document to the Collector if they believe that the market value of the property has not been truly set forth. Section 47A is reproduced below:

“Section 47-A. Instrument of conveyance etc., undervalued how to be dealt with.- (1) If the Registering Officer appointed under the Indian Registration Act, 1908 (Central Act XVI of 1908), while registering any Instrument of conveyance, [exchange, gift, release of benami right or settlement] has reason to believe that the market value of the property of which is the subject matter of conveyance, exchange, gift, release of benami right or settlement, has not been truly set forth in the instrument, he may, after registering such instrument, refer the same to the Collector, for determination of the market value of such property and the proper duty payable thereon.
(2)On receipt of reference under sub-section (1), the Collector shall, after giving the parties reasonable opportunity of being heard and after holding an enquiry in such manner as may be prescribed by Rules made under this Act, determine the market value of the property which is the subject matter of conveyance, exchange, gift, release of benami right or settlement, and the duty as aforesaid. The difference, if any, in the amount of duty, shall be payable by the person liable to pay the duty.
(3) The Collector may, suo motu, or otherwise, within five years from the date of registration of any instrument of conveyance, exchange, gift, release of benami right or settlement, not already referred to him under sub-section (1), call for and examine the instrument for the purpose of satisfying himself as to the correctness of the market value of the property which is the subject matter of conveyance, exchange, gift, release of benami right or settlement, and the duty payable thereon and if after such examination, he has reason to believe that the market value of the property has not been truly set forth in the instrument, he may determine the market value of such property and the duty as aforesaid in accordance with the procedure provided for in sub-section (2). The difference, if any, in the amount of duty, shall be payable by the persons liable to pay the duty;
Provided that nothing in this sub-section shall apply to any instrument registered before the date of commencement of the Indian Stamp (Tamil Nadu Amendment) Act, 1967.
(4) Every person liable to pay the difference in the amount of duty under sub-section (2) or sub-section (3) shall, payable such duty within such period as may be prescribed. In default of such payment, such amount of duty outstanding on the date of default shall be a charge on the property affected in such instrument. On any amount remaining unpaid after the date specified for its payment, the person liable to pay the duty shall pay, in addition to the amount due, interest at one per cent per month on such amount for the entire period of default.
… ……
(5) Any person aggrieved by an order of the Collector under sub-section (2) or sub-section (3), may appeal to such Authority as may be prescribed in this behalf. All such appeals shall be preferred within such time, and shall be heard and disposed of in such manner, as may be prescribed by rules made under this Act.
… ……
(6)The Chief Controlling Revenue Authority may, suo motu, call for and examine an order passed under sub-section (2) or sub-section (3) and if such order is prejudicial to the interests of revenue, he may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may initiate proceedings to revise, modify or set aside such order and may pass such order thereon as he thinks fit.
(7)The Chief Controlling Revenue Authority shall not initiate proceedings against any order passed under sub-section (2) or sub-section (3) if, –
(a) the time for appeal against that order has not expired; or
(b)more than five years have expired after the passing of such order.
(8) No order under sub-section (6) adversely affecting a person shall be passed unless that person has had a reasonable opportunity of being heard.
(9) In computing the period referred to in clause (b) of sub-section (7), the time during which the proceedings before the Chief Controlling Revenue Authority remained stayed under the order of Court shall be excluded.
(10) Any person aggrieved by an order of the Authority prescribed under sub-section (5) of the Chief Controlling Revenue Authority under sub-section (6) may, within such time and in such manner, as may be prescribed by rules made under this Act, appeal to the High Court.
Explanation.- For the purpose of this Act, market value of any property shall be estimated to be price which, in the opinion of the Controller or the Chief Controlling Revenue Authority or the High Court, as the case may be, such property would have fetched or would fetch, if sold in the open market on the date of execution of the instrument of conveyance, exchange, gift, release or benami right or settlement.”

The Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968, provide the procedural framework for determining the market value of properties. Key rules include:

• ✓ Rule 4: Procedure on receipt of reference under Section 47-A.
• ✓ Rule 5: Principles for determination of market value.
• ✓ Rule 6: Procedure after arriving at provisional market value.
• ✓ Rule 7: Final order determining the market value.
• ✓ Rule 11-A: Decision of the appellate authority.

These rules outline the steps to be followed by the Collector and the appellate authority in determining the market value of properties and the duty payable.

Arguments

Appellants’ Submissions:

• ✓ The Appellants argued that under Rule 11-A of the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968, the appellate authority (Inspector General of Registration) has the power to call for information from any officer or authority and can direct any officer to inspect the property, collect information, and submit a report.
• ✓ They contended that directing an officer to conduct a site inspection and collect information does not amount to a delegation of the appellate authority’s core functions.
• ✓ The Appellants emphasized that it is practically impossible for the appellate authority to personally inspect every property in each appeal.
• ✓ They also argued that the time limit of 3 months for the Collector to pass an order under Rule 7 is directory, not mandatory.
• ✓ The Appellants further submitted that the appellate authority has the power to enhance the market value of the property while deciding an appeal filed by the registrants.

Respondents’ Submissions:

• ✓ The Respondents argued that the powers that can be delegated are specifically provided under Section 76-A of the Indian Stamp Act, 1899, and the power under Section 47-A is not one of them.
• ✓ They contended that unless the power to sub-delegate is conferred expressly or impliedly under a statute, the power cannot be sub-delegated, relying on the decision in Sahni Silk Mills (P) Ltd. and another vs. Employees’ State Insurance Corporation.
• ✓ The Respondents argued that Rule 7 of the Rules mandates that the Collector shall pass an order within 3 months from the date of first notice, and this timeline is mandatory.
• ✓ They further contended that the appellate authority does not have the power to enhance the market value of the property while deciding an appeal filed by the registrants.

The Appellants argued that the appellate authority’s actions were within the scope of their powers under the Act and Rules. They emphasized the practical difficulties in requiring the appellate authority to personally conduct all inspections. The Respondents, on the other hand, argued for a strict interpretation of the rules, asserting that the appellate authority had exceeded its powers and violated the principles of delegation.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues for consideration:

1. Whether the directions issued by the appellate authority, namely the Chief Controlling Revenue Authority (Inspector General of Registration), in asking the Deputy Inspector General of Registration, or any other officer, to conduct the site inspection, amounted to delegation of his functions and violated Rule 11-A of the Rules and thereby vitiated the entire proceedings?
2. Whether Rule 7 of the Rules prescribing 3 months’ time for the Collector to pass an order determining the market value of the properties and duty payable on the instrument from the first notice, is directory or mandatory?
3. Whether the appellate authority has power under Section 47A of the Act to enhance the market value of the property while deciding the appeal filed by the registrants?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases:

• ✓ Pradyat Kumar Bose vs. The Hon’ble the Chief Justice of Calcutta High Court, (1955) 2 SCR 1331: The Court held that a statutory functionary can depute a responsible official to enquire and report without delegating his functions.
• ✓ Union of India and anr. vs. P.K. Roy and ors., (1968) 2 SCR 186: The Court ruled that if a statutory authority retains the power to approve or disapprove a decision, it is valid even if a delegate undertakes preparatory work.
• ✓ State of Bombay (Maharashtra) vs. Shivbalak Gourishanker Dube and others, (1965) 1 SCR 211: The Court held that a delegate can direct subordinate officers to collect material relevant to an enquiry.
• ✓ Sahni Silk Mills (P) Ltd. and another vs. Employees’ State Insurance Corporation, (1994) 5 SCC 346: The Court discussed the limitations on sub-delegation of powers.
• ✓ Sidhartha Sarawgi vs. Board of Trustees for the Port of Kolkata and others, (2014) 16 SCC 248: The Court stated that a decision-making authority can delegate ancillary tasks.
• ✓ State of Mysore and others v. V.K. Kangan and others, (1976) 2 SCC 895: The Court discussed the criteria for determining if a provision is mandatory or directory.
• ✓ T.V. Usman vs. Food Inspector, Tellicherry Municipality, Tellicherry, (1994) 1 SCC 754: The Court held that procedural provisions are not always mandatory.
• ✓ P.T. Rajan vs. T.P.M. Sahir and others, (2003) 8 SCC 498: The Court stated that statutory duties performed within a prescribed time are generally directory.
• ✓ Mackinnon Mackenzie and Company Ltd. vs. Machinnon Employees Union, (2015) 4 SCC 544: The Court held that statutory provisions for notice of closure are mandatory.
• ✓ M/s Ram Kanai Jamini Ranjan Pal Pvt. Ltd. v. Member, Board of Revenue, West Bengal, (1976) 3 SCC 369: The Court discussed the essence of revisional jurisdiction.
• ✓ State of Orissa and others v. Brundaban Sharma and another, (1995) Supp. 3 SCC 249: The Court discussed the exercise of suo motu power.
• ✓ Vijayabai and others V. Shriram Tukaram and others, (1999) 1 SCC 693: The Court expressed caution in the exercise of suo motu power.
• ✓ Sree Balaji Rice Mill, Bellary v. State of Karnataka, (2005) 4 SCC 21: The Court discussed the powers of the revisional authority.
• ✓ S. Santhi vs. Chief Revenue Controlling Authority (CMA No. 2820 of 2012): The High Court had held that the Inspector General of Registration cannot delegate his duty to the Deputy Inspector General of Registration.
• ✓ Rajendran v. The Inspector General of Registration and others, 2012(3) CTC 589: The High Court had held that the appellate authority cannot enhance the market value of the property in an appeal by the registrant.

Legal Provisions:

• ✓ Section 47-A of the Indian Stamp Act, 1899: Deals with undervalued instruments of conveyance.
• ✓ Section 76-A of the Indian Stamp Act, 1899: Deals with delegation of certain powers by the State Government.
• ✓ Rule 4 of the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968: Procedure on receipt of reference under Section 47-A.
• ✓ Rule 5 of the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968: Principles for determination of market value.
• ✓ Rule 6 of the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968: Procedure after arriving at provisional market value.
• ✓ Rule 7 of the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968: Final order determining the market value.
• ✓ Rule 11-A of the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968: Decision of the appellate authority.

Judgment

The Supreme Court analyzed the submissions made by both parties and the legal authorities. The court’s findings are summarized below:

How each authority was viewed by the Court:

• ✓ The Supreme Court followed the principles laid down in Pradyat Kumar Bose vs. The Hon’ble the Chief Justice of Calcutta High Court, Union of India and anr. vs. P.K. Roy and ors., and State of Bombay (Maharashtra) vs. Shivbalak Gourishanker Dube and others, which establish that delegating tasks for information gathering does not amount to delegation of core functions.
• ✓ The Court distinguished Sahni Silk Mills (P) Ltd. and another vs. Employees’ State Insurance Corporation, stating that it dealt with sub-delegation, which is not the case here.
• ✓ The Court relied on Sidhartha Sarawgi vs. Board of Trustees for the Port of Kolkata and others, which supports the idea that ancillary tasks can be delegated.
• ✓ The Court followed State of Mysore and others v. V.K. Kangan and others, T.V. Usman vs. Food Inspector, Tellicherry Municipality, Tellicherry, and P.T. Rajan vs. T.P.M. Sahir and others, to conclude that the time limit in Rule 7 is directory and not mandatory.
• ✓ The Court distinguished Mackinnon Mackenzie and Company Ltd. vs. Machinnon Employees Union, stating that the case dealt with a provision that had a specific penalty for non-compliance.
• ✓ The Court relied on M/s Ram Kanai Jamini Ranjan Pal Pvt. Ltd. v. Member, Board of Revenue, West Bengal, State of Orissa and others v. Brundaban Sharma and another, Vijayabai and others V. Shriram Tukaram and others, and Sree Balaji Rice Mill, Bellary v. State of Karnataka, to establish that the appellate authority has the power to correct errors and enhance the market value.
• ✓ The Supreme Court overruled the High Court’s decision in S. Santhi vs. Chief Revenue Controlling Authority, which held that the Inspector General of Registration cannot delegate his duty to the Deputy Inspector General of Registration. The Supreme Court clarified that calling for a report is an ordinary mode of exercising the power vested in the appellate authority.
• ✓ The Supreme Court overruled the High Court’s decision in Rajendran v. The Inspector General of Registration and others, which held that the appellate authority cannot enhance the market value of the property in an appeal by the registrant. The Supreme Court held that the appellate authority can exercise its suo motu power to correct errors, even when the knowledge comes from an appeal.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to ensure that the revenue is protected and that the true market value of properties is accurately assessed. The Court emphasized that the procedures under the Stamp Act and Rules are meant to prevent undervaluation and ensure that the government receives its due share of revenue. The following points weighed in the mind of the court:

• ✓ The practical necessities of administration require that the appellate authority be able to delegate certain tasks, such asconducting site inspections, to other officers. The Court recognized that it would be impractical for the appellate authority to personally conduct all inspections.
• ✓ The Court was concerned that if the time limit in Rule 7 was considered mandatory, it would create a loophole for those who undervalue properties. The Court noted that the object of public interest and revenue would be defeated if the time limit was interpreted as mandatory.
• ✓ The Court also emphasized that the appellate authority has the power to correct errors and ensure that the correct market value is assessed. The Court observed that the appellate authority can exercise its suo motu power to correct errors, even when the knowledge comes from an appeal.
• ✓ The Court’s sentiment was clearly in favor of upholding the integrity of the revenue collection process and preventing the evasion of stamp duty. The Court’s reasoning was grounded in practicality and the need to ensure that the law is applied in a manner that serves its intended purpose.
• ✓ The ratio of fact to law was heavily skewed towards legal analysis. The Court primarily focused on interpreting the relevant provisions of the Indian Stamp Act, 1899, and the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968. While the facts of the case provided the context, the Court’s decision was driven by its interpretation of the law and the principles of administrative law.

Final Decision

The Supreme Court allowed the appeal filed by the Inspector General of Registration and set aside the judgment of the High Court. The Supreme Court held that:

• ✓ The appellate authority’s action of directing an officer to conduct a site inspection and submit a report does not amount to delegation of essential functions.
• ✓ The time limit of 3 months in Rule 7 is directory, not mandatory.
• ✓ The appellate authority has the power to enhance the market value of the property while deciding an appeal filed by the registrants.

The Supreme Court’s decision has significant implications for property valuation disputes under the Indian Stamp Act. It clarifies the scope of powers of the appellate authority and provides guidance on the interpretation of the relevant rules. The key implications are:

• ✓ Clarity on Delegation: The judgment clarifies that the appellate authority can delegate certain tasks, such as site inspections, to other officers without it being considered a delegation of its core functions. This allows for a more efficient administrative process.
• ✓ Time Limits: The decision that the time limit in Rule 7 is directory provides flexibility in the process and prevents technicalities from hindering the assessment of true market value.
• ✓ Power to Enhance Value: The ruling that the appellate authority can enhance the market value of the property, even in an appeal by the registrant, ensures that undervaluation is effectively addressed and revenue is protected.
• ✓ Overruling of High Court Decisions: The Supreme Court overruled the High Court’s decisions in S. Santhi vs. Chief Revenue Controlling Authority and Rajendran v. The Inspector General of Registration and others, thereby establishing a clear and consistent legal position on these issues.

Flowchart of Property Valuation Process