Supreme Court Clarifies Stamp Duty on Court Auction Sales: Registrar of Assurances vs. ASL Vyapar (2022)

Date of the Judgment: 10 November 2022
Citation: 2022 INSC 587
Judges: Sanjay Kishan Kaul, J., Abhay S. Oka, J., Vikram Nath, J.
Can a government authority independently assess the market value of a property sold through a court-monitored public auction for the purpose of stamp duty? The Supreme Court of India recently addressed this question, clarifying the extent of a Registering Officer’s powers in such cases. The core issue revolved around whether a court-approved sale price should be considered the final market value for stamp duty purposes, or if the Registering Authority could reassess it based on their own valuation. The judgment was delivered by a three-judge bench comprising Justices Sanjay Kishan Kaul, Abhay S. Oka, and Vikram Nath.

Case Background

This case arose from two separate matters. The first involved a partition suit where a property was sold through a court-appointed receiver. The second case concerned the sale of assets of a company undergoing liquidation, also under court supervision. In both instances, the Registering Authority sought to impose additional stamp duty, claiming that the properties were undervalued, despite being sold through public auctions.

In the partition matter, a property located at 20 to 20/14 Chetla Flat Road, Kolkata, was ordered to be sold by the court in Extraordinary Suit No. 32 of 1987. The Joint Receivers issued an advertisement on March 8, 2006, for the sale of the land. Sati Pvt. Ltd. won the bid at Rs. 1,88,500 per cottah and the sale was confirmed by the court on December 4, 2006. The sale deed was presented for registration on May 16, 2007, with a sale consideration of Rs. 78,69,875. However, on December 14, 2007, the Registrar of Assurances issued a notice under Section 47A(2) of the Indian Stamp Act, 1899, claiming the market value was Rs. 7,76,69,838 and demanding additional stamp duty.

In the company matter, M/s. Kayan Udyog Ltd. was ordered to be wound up on July 21, 2004. The Official Liquidator advertised the sale of the company’s assets on May 12, 2006. After multiple attempts, ASL Pvt. Ltd. purchased the assets for Rs. 87,00,000, which was confirmed by the Company Court on September 8, 2006. The conveyance deed was presented for registration on May 7, 2008. On August 6, 2008, the Additional Registrar of Assurance-II issued a demand notice claiming the market value was Rs. 1.70 crores and demanding additional stamp duty.

Both Sati Pvt. Ltd. and ASL Pvt. Ltd. challenged these notices, leading to a reference to a larger bench of the Calcutta High Court, which eventually led to the present appeal before the Supreme Court.

Timeline

Course of Proceedings

The Registrar of Assurances, after issuing notices for additional stamp duty, faced contempt applications and appeals. The Registrar’s application to recall the order dated 04.12.2006 was rejected. The Division Bench then referred the matter to a larger bench. Similarly, in the company matter, the Additional Registrar’s demand notice led to a writ petition, which was also referred to a larger bench. These referrals were made due to the conflicting interpretations of Section 47A of the Indian Stamp Act, 1899, and its applicability to court-monitored sales.

Legal Framework

The core of the dispute lies in the interpretation of Section 47A of the Indian Stamp Act, 1899, as amended by the Indian Stamp (West Bengal Amendment) Act, 1990, and further amended in 1998. Section 47A allows the registering officer to assess the market value of a property if they believe the value stated in the instrument is not correct. The relevant portion of the amended Section 47A reads:

“47A. Instruments of conveyance, etc. undervalued, how to be dealt with (1) Where the registering officer appointed under the Registration Act, 1908 (16 of 1908) has, while registering any instrument of a) agreement or memorandum of an agreement relating to a sale or lease-cum sale of immovable property, b) conveyance, (c) to (h) ……. reason to believe that the market value of the property which is the subject matter of any such instrument has not been truly set forth in the instrument ·presented for registration, he may, after receiving such instrument, ascertain the market value of the property which is the subject matter of such instrument in the manner prescribed and compute the proper stamp duty chargeable · on the market value so · ascertained and thereafter he shall, notwithstanding anything to the contrary contained in the Registration Act, 1908, in so far as it relates to registration, keep registration of such instrument in abeyance till 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.”

The court also considered Section 2(16B) of the Indian Stamp Act, 1899, which defines “market value” as:

“2(16B) – ‘Market Value’ means, in relation to any property which is the subject matter of an instrument, the price which such property would have fetched or would fetch if sold in open market on the date of execution of such instrument as determined in such manner and by such authority as may be prescribed by rules made under this Act of the consideration stated in the instrument, whichever is higher.”

The West Bengal Stamp (Prevention of Undervaluation of Instruments) Rules, 2001, particularly Rule 3, was also examined. This rule outlines methods for determining the market value of a property. The Court noted that none of the methods in Rule 3 explicitly refer to the value obtained in an open market sale.

Arguments

Appellant’s (State) Arguments:

• The State argued that Section 47A of the Indian Stamp Act, 1899, as applicable in West Bengal, is different from the provision in Tamil Nadu. The West Bengal amendment requires the matter to be referred to a prescribed authority for market value determination, unlike the Tamil Nadu amendment, which refers it to the Collector.
• The State contended that the “reasonable belief” under Section 47A is an objective assessment based on facts, not the intention of the parties.
• The State argued that the High Court incorrectly drew a similarity between Section 2(16B) of the Act as amended in West Bengal and the Explanation appended to Section 47A of the Act applicable in Tamil Nadu.
• The State submitted that there could be various reasons for the Registering Officer to believe that the market value is incorrect, even in a court sale, such as improper advertisement, frequent postponements, or cartelization among buyers.
• The State relied on the judgment in M/s. Kayjay Industries Pvt. Ltd. V . M/s. Asnew Drums (P) Ltd. & Ors. [CITATION], stating that a court sale is often a distress sale and may not fetch the best price.
• The State asserted that Rule 3 of the West Bengal Stamp Rules provides different ways to determine market value, and the term “or” indicates these are disjunctive. The Registering Officer is not bound by the value in the deed or determined by the court.
• The State argued that the word “shall” in the statute makes it obligatory for the Registering Authority to determine the market value based on the “highest price”.
• The State contended that the High Court’s interpretation limits the discretion of the authority, which is impermissible.
• The State argued that the Stamp Act, being a fiscal statute, should be interpreted strictly and literally. The High Court’s judgment creates an ‘exemption’ clause not found in the statute.
• The State argued that the decision in V .N. Devadoss v. Chief Revenue Control Office-cum-Inspector & Ors. [CITATION] is per incuriam in light of the judgment in M/s. Kayjay Industries Pvt. Ltd. V . M/s. Asnew Drums (P) Ltd. & Ors. [CITATION].
• The State argued that the High Court’s reliance on the doctrine of deemed fiction is misplaced.

Respondents’ (Purchasers) Arguments:

• The respondents relied on the judgment in The Inspector General of Registration v. K.P . Kadar Hussain [CITATION], arguing that questioning court auction sales undermines their sanctity and credibility.
• The respondents emphasized that the State Legislature intended to accept the market value as set forth in an instrument when the property is transferred by the government or any authority, as per Rule 3C(9) of the West Bengal Stamp Rules.
• The respondents argued that there is no intention to defraud or conceal the correct price in a court sale.
• The respondents argued that the Registering Authority cannot sit in appeal over the decision of a court, especially a Constitutional Court, and doubt the consideration determined in a court-authorized sale.
• The respondents contended that the reliance on M/s. Kayjay Industries Pvt. Ltd. V . M/s. Asnew Drums (P) Ltd. & Ors. [CITATION] was improper, as it observed that “court sales and market prices are distant neighbours.”
• The respondents argued that the ratio of Additional Distt. Sub-Registrar, Siliguri v. Pawan Kumar Verma [CITATION] does not apply as it concerns suit valuation, not market value for stamp duty.
• The respondents argued that the court stands on a higher footing and its decisions cannot be altered by the Registering Authority on the pretext of generating higher revenues.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame issues in a dedicated section but addressed the following key questions:

1. Whether Section 47A of the Indian Stamp Act, 1899, applies to public auctions conducted under court supervision.
2. Whether the Registering Authority can independently assess the market value of properties sold through court-monitored public auctions.
3. The interpretation of Section 2(16B) of the Indian Stamp Act, 1899, in the context of open market sales.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court relied on Govt. of Andhra Pradesh & Ors .v. P . Laxmi Devi [CITATION] to understand the purpose of Section 47A, emphasizing the prevention of revenue loss due to undervaluation, but distinguished its application to court-monitored sales.
• The Court cited V .N. Devadoss v. Chief Revenue Control Office-cum-Inspector & Ors. [CITATION] to highlight that Section 47A should not be used routinely without evidence of mala fide intention to undervalue, which is absent in court-monitored sales.
• The Court referred to Birendra Nath Manna & Anr. v. State of West Bengal & Ors. [CITATION], which upheld the constitutional validity of Section 47A, but distinguished its application to court-monitored sales.
• The Court acknowledged M/s. Kayjay Industries Pvt. Ltd. V . M/s. Asnew Drums (P) Ltd. [CITATION] that court sales are forced sales, but held that court-monitored auctions have a competitive element to realize the best possible price.
• The Court distinguished Additional Distt. Sub-Registrar, Siliguri v. Pawan Kumar Verma [CITATION] as it dealt with suit valuation and not market value for stamp duty.
• The Court relied on The Inspector General of Registration v. K.P . Kadar Hussain [CITATION], stating that court auction sales should not be questioned on pretext, to maintain their credibility.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle of transparency and fairness in court-monitored public auctions. The Court emphasized that these auctions are conducted under judicial supervision, ensuring that the sale price reflects the true market value obtainable under the prevailing circumstances. The Court also highlighted the purpose of Section 47A, which is to prevent undervaluation in private sales, not in transparent public auctions. The Court also considered the practical aspects of court sales, such as the existence of tenants or the need for multiple auction attempts, which can affect the sale price. The Court also considered that the Registering Authority cannot sit in appeal over the decision of the Court.

Fact:Law Ratio

Logical Reasoning

The Court considered alternative interpretations that would allow the Registering Authority to reassess the value even in court sales, but rejected them. The Court reasoned that such an interpretation would undermine the sanctity of court proceedings and create unnecessary hurdles in the process of selling properties through public auctions. The final decision was reached by emphasizing the transparency and fairness of court-monitored auctions and the limited scope of Section 47A.

The Court’s decision was based on several reasons:

• Court-monitored public auctions are transparent and ensure that the best possible price is obtained.
• Section 47A is primarily intended to address undervaluation in private sales, not in transparent public auctions.
• The Registering Authority cannot sit in appeal over the decision of the court.
• The court takes care of aspects such as cartelization.
• The court’s valuation is based on material before it.

The Court quoted the following from the judgment:

“…the provision of Section 47A of the Act cannot be said to have any application to a public auction carried out through court process/receiver as that is the most transparent manner of obtaining the correct market value of the property.”

“An auction of a property is possibly one of the most transparent methods by which the property can be sold. Thus, to say that even in a court monitored auction, the Registering Authority would have a say on what is the market price, would amount to the Registering Authority sitting in appeal over the decision of the Court permitting sale at a particular price.”

“In a court auction following its own procedure, the Registering Officer cannot have any reason to believe that the market value of the property was not duly set forth – a pre-requisite for a Registering Authority to exercise its power under the said Section.”

There was no dissenting opinion in this case.

Key Takeaways

• The Registering Authority cannot independently assess the market value of properties sold through court-monitored public auctions for stamp duty purposes.
• Court-monitored public auctions are considered transparent and fair methods of sale, reflecting the true market value of the property.
• Section 47A of the Indian Stamp Act, 1899, is primarily intended to address undervaluation in private sales, not in court-supervised auctions.
• This decision ensures that the sale price determined by the court is final for stamp duty purposes, preventing unnecessary delays and disputes.
• The Registering Authority cannot sit in appeal over the decision of the Court.

Directions

The Supreme Court did not issue any specific directions in this judgment.

Development of Law

The ratio decidendi of this case is that Section 47A of the Indian Stamp Act, 1899, does not apply to public auctions conducted under court supervision. This judgment clarifies that the sale price determined in a court-monitored auction is the final value for stamp duty purposes. This is a change from the previous position where the Registering Authority had the power to question the valuation even in court sales. This decision ensures that the sale price determined by the court is final for stamp duty purposes, preventing unnecessary delays and disputes.

Conclusion

The Supreme Court’s judgment in Registrar of Assurances vs. ASL Vyapar clarifies that the Registering Authority cannot independently assess the market value of properties sold through court-monitored public auctions for stamp duty purposes. This decision upholds the sanctity of court proceedings and ensures that the sale price determined by the court is final for stamp duty purposes. The judgment provides much-needed clarity on the applicability of Section 47A of the Indian Stamp Act, 1899, in the context of court-supervised sales, promoting transparency and fairness in property transactions.