IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED 16.08.2011 CORAM THE HONOURABLE MR.JUSTICE R.SUBBIAH CIVIL MISCELLANEOUS APPEAL NO.29 OF 2009 Ceebros Developers rep.by its Managing Partner C.Subba Reddy, "Sukriti", No.19/1, III Cross Street, R.A.Puram, Chennai-600 028. ..Appellant ..vs.. State of Tamil Nadu, rep.by The Inspector General of Registration, Santhome, Chennai-600 028. .Respondent Civil Miscellaneous Appeal filed under Order 47(A) of the Indian Stamp Act, against the Order in Proceedings No.26164/N5/2005 dated 17.11.2008 on the file of the respondent. For Appellant : Mr.P.B.Ramanujam For Respondent : Mr.S.Pattabiraman, G.A., (C.S.) JUDGMENT This appeal is filed as against the order dated 17.11.2008 passed by the respondent in Proceedings No.26164/N5/2005, whereby the respondent has fixed the market value of the subject property at Rs.25,02,915/- on the basis of Rs.3,400/- per sq.ft. and directed the appellant to pay the deficit stamp duty. 2. The case of the appellant, in brief, is as follows: The subject property, namely, land bearing door No.4, Bishop Garden Extension, Raja Annamalaipuram, Chennai, measuring to an extent of 2 acres 11 grounds 792 sq.ft. together with the buildings thereon, comprised in O.S.No.11, R.S.No.39598/1, C.C.No.28 of Mylapore Revenue Division, Mylapore-Triplicane Taluk, Chennai District, originally belonged to M/s.Spencer & Company Limited, Chennai and they purchased the same from Mr.Stanley Wilson Edwards and his wife Esther Marjorie Edwards in and by an absolute sale deed https://hcservices.ecourts.gov.in/hcservices/ dated 18.09.1957, registered as Document No.3070/1957 on the file of Registrar of Madras-Chingleput. They also applied for ceiling clearance and the Urban Land Ceiling Authorities issued a certificate that their holdings are not affected by the provisions of the Tamil Nadu Urban Land (Ceiling and Regulation), Act, 1978, vide Proceedings dated 28.12.1990. Subsequently, on 27.07.1995, M/s. Spencer Company Limited entered into an agreement with M/s.Sterling Horticulture and Research Limited for sale of the said property for an apparent consideration of Rs.19.75 lakhs. In accordance with the provisions of Chapter II-C of the Income Tax Act, 1961, the parties to the said agreement duly filed a statement in Form 37-I of the Income Tax Rules for scrutiny/issuance of a No Objection Certificate by the appropriate authority, Income Tax Department, by their application dated 19.08.1995. During the course of proceedings of the issuance of pre-emptive purchase order, a show cause notice dated 02.11.1995 was issued to the transferor and transferee, namely, M/s.Spencer & Co.Ltd., Madras and M/s.Sterling Horticulture and Research Limited. 3. Subsequently, for the reason recorded by the appropriate authority in their pre-emptive purchaser order dated 27.11.1995 under section 269 (UD(1) of the Income Tax Act, 1961 and in exercise of the powers vested by the Act, the Government of India decided to purchase the property for a consideration equal to the apparent consideration stated in the said agreement of sale and under section 269(UE(1) of the Income Tax Act, the property vested absolutely with the Central Government free from all encumbrances. Consequent to the order passed by the appropriate authority, the Income Tax Department in terms of Order dated 27.11.1995, took possession of the subject property. Questioning the acquisition of the property by the appropriate authority, the transferee, namely, M/s.Sterling Horticulture and Research Limited filed W.P.No.16777 of 1995 for quashing the order of appropriate authority dated 27.11.1995; but the said writ petition was dismissed by this court on 11.02.1997 holding that the appropriate authority, functioning under the Income Tax Act, was well within the authority to acquire such property. Aggrieved over the said order, a writ appeal was also filed in W.A.No.245 of 1997 and the same was also dismissed on 03.11.2000. Aggrieved over the same, SLP was filed before the Hon'ble Supreme Court, which was also dismissed and thus, the order of the appropriate authority was confirmed. 4. Thereafter, the property was put up for sale in public auction by the Commissioner of Income Tax, Headquarters Office of the Chief Commissioner of Income Tax-II, Chennai-34. In the said auction, the Managing Director of the appellant firm participated and successfully completed the bid for Rs.22.15 crores, which was accepted by the Income Tax Department on behalf of the Central Government and the purchase consideration was remitted by the appellant to the vendor on various dates. Consequently, the sale deed was also executed in favour of the appellant on behalf of the https://hcservices.ecourts.gov.in/hcservices/ President of India by the duly authorised officer, viz., Shri.Mohanish Verma, Director (Other Taxes), Central Board of Direct Taxes, Ministry of Finance, New Delhi, on 30.03.2004. 5. The appellant has paid a sum of Rs.1,77,20,000/- as the stamp duty for the sale consideration of Rs.22.15 crores. Subsequently, under section 47-A of the Stamp Act, the said document was referred to the District Revenue Officer for proper valuation, stating that he has reason to believe that the market value of the property which is subject matter of conveyance has not been truly set forth in the document, who, in turn, has passed an order dated 25.04.2005 fixing the market value of the property at Rs.3,400/- per sq.ft.and directed the appellant to pay the deficit stamp duty of Rs.1,35,94,864/-. Challenging the said order, the appellant has filed an appeal before the respondent, wherein the respondent confirmed the order passed by the District Revenue Officer and dismissed the appeal, by his order dated 17.11.2008. Aggrieved over the same, the present appeal has been filed. 6. The only ground raised by the learned counsel for the appellant is that the property was purchased in public auction, which was held at the instance of the income tax department and the upset price fixed by the department itself would amount to the market value of the property. Under such circumstances, it cannot be said that the market value of the property has not been truly set forth since the property was sold in public auction by the income tax department and hence, there is no possibility for wilful under valuation of the property with an intention to fraudulently evade payment of stamp duty by the appellant. Under such circumstances, the order passed by the respondent is not legally sustainable. In support of his contentions, the learned counsel has also placed reliance on the decisions reported in DEVI NARAYANAN HOUSING DEVPT.P.LTD. .vs. IG OF REGISTRATION ((2007) 5 MLJ 1337, M.D.DILLI BABU .vs. CMDA ((2007) 7 MLJ 416), V.N.DEVAD0SS .vs. CHIEF REVENUE CONTROL OFFICER-CUM- INSPECTOR AND OTHERS ((2009) 7 SCC 438) and A.J.MAPILLAI MOHADEEN . vs. THE SUB-REGISTRAR, REGISTRATION DEPARTMENT (2008(5) CTC 239). 7. Per contra, the learned Government Advocate appearing on behalf of the respondent has made his submissions, by supporting the order passed by the respondent. 8. In view of the submissions made by the learned counsel on either side, the question that arises for consideration is, When the subject property had been purchased in public auction held at the instance of the income tax department, whether the respondent has power to direct the appellant to pay the deficit stamp duty on the ground that there is deliberate under-valuation of the property with an intention to fraudulently evade payment of proper stamp duty ? https://hcservices.ecourts.gov.in/hcservices/ 9. At this stage, it is appropriate to rely the judgments relied on by the learned counsel for the appellant, which are giving a fit answer to the said question. In (2009) 7 SCC 438 (supra), the Hon'ble Supreme Court has held as follows: "15. The Stand of the State is that what has been disclosed is clearly a sale value and the same cannot be termed as market value. There is fallacy in this argument. 16. Market value is a changing concept. The explanation to Sub-rule (5) makes the position clear that value would be such as would have fetched or would fetch if sold in the open market on the date of execution of the instrument of conveyance. Here, the property was offered for sale in the open market and bids were invited. That being so, there is no question of any intention to defraud the revenue or non disclosure of the correct price. The factual scenario as indicated above goes to show that the properties were disposed of by the orders of BIFR and AIFR and that too on the basis of value fixed by ASG. The view expressed by the Assets Sales Committee which consisted of members such as representatives of IDBI, Debenture Holders, Government of West Bengal and Special Director of BIFR. That being so, there is no possibility of any under valuation and, therefore, Section 47A of the Act has no application. It is not correct as observed by the High Court that BIFR was only a mediator. 17. Sale has been defined under Section 54 of the Transfer of Property Act, 1882 (in short "the TP Act"). Although the Act has not included the definition of sale, Section 2(10) of the Act defines "conveyance" as including a conveyance on sale. Every instrument and every decree or final order of any civil court by which property whether immovable or movable or any estate or interest in any property is transferred to, or vested in or declared to be of any other person, inter vivos, and which is not otherwise specifically provided for by Schedule I or Schedule I-A, as the case may be. 18. On the facts of the case it cannot be said that Section 47-A has any application because there is no scope for entertaining a doubt that there was any undervaluation. That being so, the High Court's order is clearly unsustainable and is set aside. The registration shall be done at the price disclosed in the document of conveyance. There is no scope for exercising a belief that the market value of the property which is the subject-matter of conveyance has not been truly set forth with a view to fraudulently evade payment of proper stamp duty". 10. In (2007) 5 MLJ 1337 (supra), this Court has held as follows: https://hcservices.ecourts.gov.in/hcservices/ "12 A harmonious construction and interpretation of the provision of Section 47-A and also the rules has made it clear that the value fixed by the Court cannot be deviated. When a property is purchased in a court auction, the value fixed thereon should be the value truly fixed based on material consideration. If any value other than the value fixed by the court is taken into consideration, then, it tantamounts to exceeding the jurisdiction made under the law. The authorities concerned cannot sit on appeal over the court's decision unless an appeal is preferred from such an order. Therefore, the value of the property in question for the purpose of determining the stamp duty to be paid by the purchaser is the value fixed in the court auction purchase which is arrived at after an offer and acceptance and the amount offered during the auction and accepted by the Court would represent the real market value of the property. In the instant case, the authority concerned has exceeded his jurisdiction by going beyond the value fixed by the Court. In the absence of any other principle contrary to the above settled proposition of law, I am obliged to follow the proposition laid down by this Court in the case referred to above. 13. Admittedly, the property for registration was purchased by the petitioner in a public auction conducted in the open court and the petitioner company was declared as the highest bidder and the offer made by the petitioner was Rs.13.55 crores for the property including land, buildings and superstructure and the offer was accepted and the petitioner too purchased the same and remitted the sale consideration of Rs.13.55 crores in two instalments. Since the amount fixed by the court is to be taken as the real value of the property, the petitioner presented the document for registration indicating the value of the document as Rs.13.55 crores. However, in the impugned order, the respondent has fixed the guideline value as Rs.15,24,60,000/- contrary to the settled principle that the property purchased in court auction is the value determined by the court and no authority can fix any other value taking note of the surrounding circumstances....". 11. This Court in (2007) 7 MLJ 416 (supra), has held as follows: "In the present case, admittedly, the allotment of plot is made by the first respondent, which is a a Government Agency and in such circumstances, there is absolutely no question of concealment of consideration by the petitioner. In view of the same, there is absolutely no justification on the part of the 2nd respondent in refusing to register the document on the ground that the stamp duty should be paid on the guideline value of the property". https://hcservices.ecourts.gov.in/hcservices/ 12. Yet another decision relied on by the appellant is 2008 (5) CTC 239, wherein this Court has held as follows:- "12. Section 47-A of the Act states that if the Registering Officer appointed under the Indian Registration Act, 1908, while registering any instrument of conveyance, exchange, gift, release of benami right of settlement has reason to believe that the market value of the property of which is the subject matter of conveyance, 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. ... 14. Power under Section 47-A of the Act can only be exercised when the Registering Officer has reason to believe that the market value of the property, which is the subject of conveyance, has not been truly set forth, with a view to fraudulently evade payment of property stamp duty. Mere lapse of time between the date of agreement will not be the determining factor that the document is undervalued and such circumstance by itself is not sufficient to invoke the power under Section 47-A of the Act, unless there is lack of bona fides and fraudulent attempt on the part of the parties to the document to undervalue the subject of transfer with a view to evade payment of proper stamp duty. ... 17. The law is well settled and this Court, in a number of decisions, has held that unless there is a fraudulent attempt on the part of the parties to the document to evade payment of proper stamp duty and a determining factor that the document is undervalued for some reasons, the authority cannot exercise his power arbitrarily without any basis. The power should be exercised with great caution and care should be taken to ensure that it does not operate as an engine of operation. It has also been further observed that normally the consideration stated as the market value in an instrument brought for registration should be taken to be correct, unless the circumstances exist to suggest fraudulent evasion..." 13. A reading of the above judgments would show that only when the registering officer has reason to believe that the market value of the property has not been truly set forth in the instrument with a view to evade stamp duty, he may refer the same to the Collector for determination of the proper stamp duty payable thereon. When the property is sold in a public auction held by the Government Department, certainly there is no possibility for not setting forth the true market value in the instrument. Under such circumstances, there is no justification on the part of the registering officer to insist for the stamp duty to be paid, as claimed by them. Hence, in https://hcservices.ecourts.gov.in/hcservices/ my considered opinion, the order passed by the respondent insisting deficit stamp duty to be payable by the appellant is liable to be set aside and when the property is purchased by the appellant in an auction held at the instance of the income tax department, the value fixed thereon should be the value truly fixed based on material consideration. Therefore, the impugned order passed by the respondent is hereby set aside. Consequently, the civil miscellaneous appeal is allowed. No costs. Sd/ Asst. Registrar /true copy/ Sub Asst.Registrar gl To The Inspector General of Registration, State of Tamil Nadu, Santhome, Chennai-600 028. 1 cc To M/S.P.B.Ramanujan, Advocate, SR.50424 1 cc To The Government Pleader, SR.50479 judgment in C.M.A.No.29 of 2009 NR(CO) RH (7.9.11) https://hcservices.ecourts.gov.in/hcservices/