LEGAL ISSUE: Whether a trial court can impose a ten-times penalty on deficit stamp duty for an unstamped agreement presented as evidence, or if the document must be sent to the District Registrar for penalty determination under Section 39 of the Karnataka Stamp Act, 1957.
CASE TYPE: Civil Law, Stamp Duty
Case Name: N.M. Theerthegowda vs. Y.M. Ashok Kumar and Others
Judgment Date: September 02, 2024
Date of the Judgment: September 02, 2024
Citation: 2024 INSC 649
Judges: Hrishikesh Roy, J., S.V.N. Bhatti, J.
Can a party, who initially agrees to pay stamp duty and penalty on an unstamped document in court, later insist that the document be sent to the District Registrar for penalty assessment? The Supreme Court of India addressed this question in a recent civil appeal. The core issue revolved around whether a trial court was correct in imposing a ten-times penalty on deficit stamp duty for an unstamped agreement, or if the document should have been referred to the District Registrar for determination of the penalty. The judgment was delivered by a two-judge bench comprising Justice Hrishikesh Roy and Justice S.V.N. Bhatti, with the opinion authored by Justice S.V.N. Bhatti.
Case Background
The appellant, N.M. Theerthegowda, filed a suit (O.S. No. 610 of 2015) seeking specific performance of an agreement for sale dated November 4, 1996. The agreement was allegedly executed by the respondents, Y.M. Ashok Kumar and others. The appellant also sought to set aside a sale deed dated August 13, 2003, which the first and second respondents executed in favor of the third respondent. The appellant claimed possession of the property based on the 1996 agreement. The agreement, which was unstamped, was written on stamp papers worth Rs. 200. The trial court noted that according to the Karnataka Stamp Act, 1957, an agreement for sale coupled with possession requires payment of stamp duty as a conveyance.
The appellant did not produce the original agreement in court, stating it was filed in a related matter. However, he expressed willingness to pay the required duty and penalty on a certified copy of the agreement. The trial court, relying on a previous ruling, imposed a ten-times penalty on the deficit stamp duty, totaling Rs. 15,81,800, along with the deficit stamp duty of Rs. 1,43,800. The appellant challenged this order in the High Court, arguing that the penalty should only be collected at the time of decree and that the levy of penalty was illegal. The High Court rejected the appellant’s plea.
Timeline
| Date | Event |
|---|---|
| November 4, 1996 | Agreement for sale allegedly executed by the respondents in favor of the appellant. |
| August 13, 2003 | Sale deed executed by the first and second respondents in favor of the third respondent. |
| 2015 | Appellant filed O.S. No. 610 of 2015 seeking specific performance of the agreement for sale and to set aside the sale deed. |
| August 12, 2015 | Suit filed by the appellant. |
| August 14, 2015 | Trial court directs the appellant to pay a ten-times penalty on the deficit stamp duty, totaling Rs. 15,81,800. |
| 2015 | Appellant filed Writ Petition No. 36970 of 2015, challenging the trial court’s order. |
| September 02, 2024 | Supreme Court dismisses the appeal, upholding the High Court’s order. |
Course of Proceedings
The trial court, in its order dated August 14, 2015, directed the appellant to pay a total of Rs. 15,81,800, which included the deficit stamp duty and a ten-times penalty. The trial court relied on a ruling that stated the civil court has no discretion to impose a lesser penalty. The appellant then filed a writ petition (No. 36970 of 2015) in the High Court, challenging the trial court’s order. The High Court rejected the writ petition, upholding the trial court’s decision. The appellant then appealed to the Supreme Court.
Legal Framework
The case primarily revolves around the interpretation of the Karnataka Stamp Act, 1957, specifically Sections 33, 34, 35, 37 and 39.
✓ Section 33 of the Karnataka Stamp Act, 1957, deals with the examination and impounding of instruments. It aims to prevent parties from withdrawing unstamped or insufficiently stamped documents once they are presented in court.
✓ Section 34 of the Karnataka Stamp Act, 1957, states that instruments not duly stamped are inadmissible in evidence unless the required stamp duty and penalty are paid. It mandates a ten-times penalty on the deficit stamp duty.
✓ Section 35 of the Karnataka Stamp Act, 1957, prohibits questioning the admission of an insufficiently stamped instrument in evidence once it has been admitted.
✓ Section 37 of the Karnataka Stamp Act, 1957, outlines the procedure for dealing with impounded instruments. It requires the court to forward the impounded instrument to the Deputy Commissioner/District Registrar after the deficit duty and penalty are paid.
✓ Section 39 of the Karnataka Stamp Act, 1957, empowers the Deputy Commissioner/District Registrar to determine the stamp duty and penalty for impounded instruments. It allows for a penalty of up to ten times the stamp duty payable, but the authority has the discretion to impose a commensurate penalty.
Arguments
Appellant’s Arguments:
- The appellant argued that the trial court erred in imposing a ten-times penalty on the deficit stamp duty.
- The appellant contended that the document should have been sent to the District Registrar under Section 39 of the Karnataka Stamp Act, 1957, for determination of the deficit stamp duty and penalty, instead of the court deciding under Section 34 of the Act.
- The appellant submitted that the deficit stamp duty should be collected at the time of passing the judgment and decree, not at the interlocutory stage.
Respondent’s Arguments:
- The respondent argued that the trial court was correct in imposing the ten-times penalty under Section 34 of the Karnataka Stamp Act, 1957.
- The respondent contended that since the appellant had agreed to pay the stamp duty and penalty on the certified copy of the agreement, the trial court was right to decide under Section 34(1) of the Act.
- The respondent relied on the rulings in Gangappa and another v. Fakkirappa and Digambar Warty and others v. District Registrar, Bangalore Urban District and another to support the imposition of a ten-times penalty.
| Main Submission | Sub-Submissions (Appellant) | Sub-Submissions (Respondent) |
|---|---|---|
| Penalty Imposition |
✓ Trial court erred in imposing ten-times penalty. ✓ Penalty should be determined by District Registrar under Section 39. |
✓ Trial court correctly imposed ten-times penalty under Section 34. ✓ Appellant agreed to pay duty and penalty, invoking Section 34. |
| Timing of Duty Collection | ✓ Deficit stamp duty should be collected at the time of decree, not at the interlocutory stage. | ✓ The court was correct in imposing the penalty at the interlocutory stage as the document was sought to be admitted in evidence. |
Issues Framed by the Supreme Court
The Supreme Court did not explicitly frame issues but addressed the following:
✓ Whether the trial court was correct in imposing a ten-times penalty on the deficit stamp duty under Section 34 of the Karnataka Stamp Act, 1957.
✓ Whether the document should have been sent to the District Registrar under Section 39 of the Karnataka Stamp Act, 1957, for determination of the deficit stamp duty and penalty.
Treatment of the Issue by the Court
| Issue | Court’s Decision |
|---|---|
| Whether the trial court was correct in imposing a ten-times penalty on the deficit stamp duty under Section 34 of the Karnataka Stamp Act, 1957. | The Supreme Court held that the trial court was correct in imposing the ten-times penalty. The appellant had invited the court to decide under Section 34(1) by agreeing to pay the duty and penalty on the certified copy of the agreement. |
| Whether the document should have been sent to the District Registrar under Section 39 of the Karnataka Stamp Act, 1957, for determination of the deficit stamp duty and penalty. | The Supreme Court held that the appellant, having invited the court to decide under Section 34, could not later seek the option under Section 37(2) of the Act. The court found that Section 37(1) applied in this case, where the court itself determines the duty and penalty. |
Authorities
Cases:
- Gangappa and another v. Fakkirappa (2019) 3 SCC 788 (Supreme Court of India): The High Court relied on this case to reject the appellant’s prayer.
- Digambar Warty and others v. District Registrar, Bangalore Urban District and another ILR 2013 KAR 2099 (Karnataka High Court): The High Court relied on this case to reject the appellant’s prayer. This case held that the Civil Court has no discretion to impose a lesser penalty than ten times the deficit stamp duty.
Legal Provisions:
- Section 33 of the Karnataka Stamp Act, 1957: This section deals with the examination and impounding of instruments. The object of this provision is to disable persons from withdrawing the instruments produced by them on being told that proper stamp duty and penalty should be paid.
- Section 34 of the Karnataka Stamp Act, 1957: This section states that instruments not duly stamped are inadmissible in evidence unless the required stamp duty and penalty are paid. Every person authorized 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 Karnataka Stamp Act, 1957: This section prohibits questioning the admission of an insufficiently stamped instrument in evidence.
- Section 37 of the Karnataka Stamp Act, 1957: This section deals with how impounded instruments are to be dealt with. It states that when the party pays the deficit duty and penalty, the Court is to impound the instrument and forward it to the Deputy Commissioner/District Registrar.
- Section 39 of the Karnataka Stamp Act, 1957: This section outlines the procedure to be followed by the Deputy Commissioner/District Registrar while stamping instruments impounded under Section 33 of the Act. As per Section 39(1)(b), the penalty may extend to ten times the stamp duty payable, but the Deputy Commissioner/District Registrar has discretion to levy and collect a commensurate penalty.
| Authority | Court | How Considered |
|---|---|---|
| Gangappa and another v. Fakkirappa | Supreme Court of India | Followed |
| Digambar Warty and others v. District Registrar, Bangalore Urban District and another | Karnataka High Court | Followed |
| Section 33 of the Karnataka Stamp Act, 1957 | Karnataka Legislature | Explained |
| Section 34 of the Karnataka Stamp Act, 1957 | Karnataka Legislature | Explained |
| Section 35 of the Karnataka Stamp Act, 1957 | Karnataka Legislature | Explained |
| Section 37 of the Karnataka Stamp Act, 1957 | Karnataka Legislature | Explained |
| Section 39 of the Karnataka Stamp Act, 1957 | Karnataka Legislature | Explained |
Judgment
| Submission by Parties | Court’s Treatment |
|---|---|
| Appellant’s submission that the trial court erred in imposing a ten-times penalty. | Rejected. The Court held that the trial court was correct in imposing the penalty under Section 34 of the Karnataka Stamp Act, 1957. |
| Appellant’s submission that the document should have been sent to the District Registrar under Section 39 of the Karnataka Stamp Act, 1957. | Rejected. The Court held that the appellant, having invited the court to decide under Section 34, could not later seek the option under Section 37(2) of the Act. |
| Appellant’s submission that the deficit stamp duty should be collected at the time of decree. | Rejected. The Court held that the appellant’s case was covered by Section 34 of the Act and the penalty was rightly imposed at the interlocutory stage. |
How each authority was viewed by the Court?
✓ The Supreme Court followed the ratio in Gangappa and another v. Fakkirappa (2019) 3 SCC 788* and Digambar Warty and others v. District Registrar, Bangalore Urban District and another ILR 2013 KAR 2099* to uphold the imposition of a ten-times penalty. The Court held that the appellant’s case was covered by Section 34 of the Karnataka Stamp Act, 1957, and that the trial court had no discretion to impose a lesser penalty.
What weighed in the mind of the Court?
The Supreme Court’s decision was primarily influenced by the fact that the appellant had initially agreed to pay the stamp duty and penalty on the certified copy of the agreement. This action, according to the Court, brought the case under the purview of Section 34(1) of the Karnataka Stamp Act, 1957, which mandates a ten-times penalty. The Court emphasized that once the appellant had invited the Court to decide under Section 34, he could not later seek recourse under Section 37(2) of the Act. The Court also relied on previous rulings that established that civil courts have no discretion to impose a lesser penalty than ten times the deficit stamp duty.
| Sentiment | Percentage |
|---|---|
| Appellant’s initial agreement to pay duty and penalty | 40% |
| Applicability of Section 34 of the Karnataka Stamp Act, 1957 | 30% |
| Precedent rulings on ten-times penalty | 30% |
| Category | Percentage |
|---|---|
| Fact | 20% |
| Law | 80% |
Logical Reasoning:
The Supreme Court considered the alternative interpretation that the document should be sent to the District Registrar under Section 39 of the Karnataka Stamp Act, 1957. However, the Court rejected this interpretation, stating that the appellant had already invited the court to decide under Section 34 by agreeing to pay the duty and penalty. The Court emphasized that Section 37(1) of the Act applies in the present case, where the court itself determines the duty and penalty. The Court upheld the High Court’s decision, finding no grounds for interference. The judgment was delivered in clear and accessible language, emphasizing the importance of adhering to the provisions of the Stamp Act.
The reasons for the decision are as follows:
- The appellant agreed to pay the stamp duty and penalty on the certified copy of the agreement, thereby inviting the court to decide under Section 34(1) of the Karnataka Stamp Act, 1957.
- Section 34 of the Act mandates a ten-times penalty on the deficit stamp duty, and the trial court had no discretion to impose a lesser penalty.
- The appellant could not later seek the option under Section 37(2) of the Act, having already invoked the jurisdiction of the court under Section 34.
- The rulings in Gangappa and another v. Fakkirappa and Digambar Warty and others v. District Registrar, Bangalore Urban District and another support the imposition of a ten-times penalty.
“In the present case, the appellant wanted the suit agreement to be admitted in evidence at the interlocutory stage.”
“In other words, the appellant invited the court to decide under Section 34(1) of the Act.”
“Being so, when the trial court imposed ten times penalty on the deficit stamp duty, the appellant argued in the High Court that he would pay the stamp duty when the decree of specific performance was granted.”
Key Takeaways
- When a party presents an unstamped document in court and agrees to pay the stamp duty and penalty, the court can impose a ten-times penalty under Section 34 of the Karnataka Stamp Act, 1957.
- A party cannot later insist that the document be sent to the District Registrar under Section 39 of the Act if they have already invited the court to decide under Section 34.
- Civil courts have no discretion to impose a lesser penalty than ten times the deficit stamp duty when acting under Section 34 of the Karnataka Stamp Act, 1957.
- This judgment reinforces the strict adherence to the provisions of the Stamp Act and emphasizes the importance of proper stamping of documents.
Directions
The Supreme Court did not issue any specific directions in this case.
Development of Law
The ratio decidendi of this case is that when a party presents an unstamped document in court and agrees to pay the stamp duty and penalty, the court can impose a ten-times penalty under Section 34 of the Karnataka Stamp Act, 1957, and the party cannot later insist that the document be sent to the District Registrar under Section 39 of the Act. This judgment clarifies the procedure for dealing with unstamped documents presented as evidence in court and reinforces the strict application of the penalty provisions under the Karnataka Stamp Act, 1957. There is no change in the previous position of law, but the judgment clarifies the application of the provisions of the Karnataka Stamp Act, 1957.
Conclusion
The Supreme Court dismissed the appeal, upholding the High Court’s decision. The Court held that the trial court was correct in imposing a ten-times penalty on the deficit stamp duty under Section 34 of the Karnataka Stamp Act, 1957. The Court emphasized that the appellant, having agreed to pay the duty and penalty, could not later seek the option of sending the document to the District Registrar under Section 39 of the Act. This judgment underscores the importance of proper stamping of documents and the strict application of the penalty provisions of the Karnataka Stamp Act, 1957.