IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED :: 31-07-2008 CORAM THE HONOURABLE MR. JUSTICE V. DHANAPALAN W.P. No.2359 of 2008 A.J.Mapillai Mohadeen, represented by Power of Attorney Holder K.Asokan ... Petitioner vs. 1. The Sub-Registrar, Registration Department, Sub-Registrar Office, Arakandanallur. 2. The Special Deputy Collector (Stamps), Cuddalore. 3. The Inspector General of Registration, Registration Department, No.20, Santhome High Road, Santhome, Chennai 600 028. ... Respondents Petition under Article 226 of the Constitution of India praying for issuance of a writ of Declaration. For Petitioner : Mrs.Radha Gopalan For Respondents: Mr.N.Senthil Kumar, Government Advocate O R D E R This writ petition is filed praying for a declaration declaring that the petitioner is liable to pay and the respondents are entitled to claim the stamp duty only on the value recited in the sale deed document No.1620 dated 04.04.2007 executed by TIIC, a public authority, in favour of the petitioner herein in respect of property measuring 1.23 acres with building in R.S.No.77/4 and also 0.05 cents out of 0.85 cents in R.S.No.77/6 situated in Kuladeepamangalam Village, Tirukovilur Taluk, Villpuram District. 2. With consent of the parties, the Writ Petition is taken https://hcservices.ecourts.gov.in/hcservices/ up for final disposal. 3. The case of the petitioner is as under : (i) The property originally belonged to M/s.Sri Raghavendra Splints Industries, Tirukoilur Taluk, a partnership concern having its Head Office at Tirukoilur and factory at R.S.No.77/4 Kuladeepamangalam Village, Tirukoilur Taluk. The said property was mortgaged with the Tamil Nadu Industrial Investment Corporation (hereinafter called TIIC). As the said Sri Raghavendra Splints Industries had committed default, TIIC foreclosed the loan by taking possession of the property under Section 29 of the State Financial Corporations Act, 1951, and conducted the tender-cum-public auction on 29.11.2006 bringing the property for auction. The petitioner had offered the highest bid amount of Rs.4 lakhs in the tender-cum-public auction and TIIC accepted the offer of the petitioner and agreed to sell the properties viz., property measuring 1.23 acres with building in R.S.No.77/4 and also 0.05 cents out of 0.85 cents in R.S.No.77/6 situated in Kuladeepmanagalm Village, Tirukovilur Taluk, Villupuram District. The auction was confirmed on 06.03.2007. (ii) In view of the acceptance of the offer, TIIC executed sale deed over the properties by a sale deed dated 05.04.2007 and pursuant to the said sale deed, possession was also handed over to the petitioner. In order to register the sale deed, as the value of the property was Rs.4 lakhs, the petitioner paid Rs.32,000/- towards stamp duty. But, the 1st respondent, without accepting the same, sent the document to the 2nd respondent for proper valuation and notification. Thereafter, the 2nd respondent has fixed the stamp duty at Rs.2,16,000/- taking into account the market value of the property and issued the proceedings to the effect that the petitioner has to pay Rs.2,16,000/-, else the documents will not be released. Aggrieved over the same, the petitioner preferred an appeal dated 23.01.2007 before the 3rd respondent stating that he purchased the property from TIIC, which is a public authority and, therefore, he is not liable to pay more than what is stated in the sale deed and the said appeal is pending. (iii) It is not the case of the respondents that the petitioner has paid consideration more than what has been recited in the deed of conveyance executed by TIIC; moreover, it is beyond one's apprehension that TIIC, a statutory body, would receive excess amount that what has been actually paid and recited as sale consideration in the https://hcservices.ecourts.gov.in/hcservices/ deed of conveyance executed by it in favour of the auction purchaser; merely because the market value is high, the 1st respondent cannot have any reason whatsoever to doubt about the consideration paid by him to TIIC. (iv) Since the document has not been released, the petitioner is put to serious loss and irreparable hardship and having no other alternative remedy, he has approached this Court. 4. In the counter affidavit filed by the respondents, the sale consideration of Rs.4,00,000/- paid by the petitioner to the TIIC is not denied. They have stated that the value of the property, as per Guideline, worked out to Rs.23,43,936/- and hence it was referred to the Collector for determination of the value of the property in question and the petitioner has also consented to refer the document to the Collector in his letter dated 27.06.2007. According to the respondents, they have acted in accordance with the provisions of The Indian Stamp Act and The Prevention of Undervaluation of Instrument Rules. 4.1. With regard to the grounds raised by the petitioner, the respondents in their counter affidavit have submitted as under: (i) As per Section 47A(1) of The Indian Stamp Act, the 1st respondent and the 2nd respondent determined the value of the property as Rs.31,00,000/- (site value - Rs.20,09,088/-; Building value – Rs.10,90,912/-) and the required Stamp Duty is Rs.2,48,000/-; the petitioner paid the Stamp Duty of Rs.32,000/-; the deficit Stamp Duty of Rs.2,16,000/- was directed to be paid by the petitioner and the same is correct, legal and well within the rules and regulations of Prevention of Undervaluation of Instrument Rules. (ii) Section 47(A) of the Indian Stamp Act clearly states that while registering any instrument of conveyance, if there is reason to believe that the market value of the property which is the subject matter of conveyance has not been truly set forth in the instrument, the said document may be referred to the Collector under Section 47(A) of the Indian Stamp Act for determination of the market value of such property. (iii) The petitioner had purchased the property in the auction conducted by TIIC and the sale deed was also executed by the statutory authority. When it was presented for registration, the registering authority, i.e. the 1st respondent had reason to believe that the market value of the property had not been truly set forth in the instrument, https://hcservices.ecourts.gov.in/hcservices/ and, therefore, the same was sent to the Collector for determination of the correct market value. Hence the Collector determined the market value and directed the petitioner to pay the deficit stamp duty. 5. In the counter filed by the second respondent, it is stated as follows: (i) The market value of the building is determined at Rs.2,50,000/- and the house site value is determined at Rs.1,50,000/- and the age of the building is noted as 18 years. The petitioner has purchased the land for a sum of Rs.4,00,000/- and paid the stamp duty of Rs.32,000/-; since the house site value of the land in R.S.Nos.77/4 and 77/6 in Kuladeepamangalam Village has been fixed at Rs.42/- per sq. feet in the Guideline Value Register maintained by the Sub-Registrar's Office, the Sub-Registrar, Arakandanallur, has worked out the house site value at Rs.23,43,936/- and promptly referred the matter to the Special Deputy Collector (Stamps), Cuddalore, requesting to fix the value of the building thereon as instructed by the Inspector General of Registration vide his Order No.40931/B1/2001-1 dated 19.08.2002 and to take action to recover the deficit stamp duty from the purchaser in accordance with the provisions laid down under Section 47-A (1). (ii) The petitioner was issued a notice in Form I under Section 4 of the Prevention of Undervaluation Rules, 1968 by the Special Deputy Collector (Stamps), Cuddalore to file his claim and objections if any, in the collection of the deficit stamp duty. The petitioner in his letter dated 20.08.2007 has stated that the market value of the land in question was fixed at Rs.42/- per sq. feet by the Sub- Registrar concerned and requested to fix the value after field inspection. Accordingly, the property was inspected on 14.09.2007 and an open enquiry was conducted. The petitioner was also present and objected to fix the value of the land at Rs.42/- per square feet as the land is cultivable, whereas the village public suggested to fix the value of the land at Rs.35/- per square feet. (iii) The land had also been inspected by the Special Deputy Collector Stamps, Cuddalore and it was found that Sarguru Nagar Layout has been formed on the eastern and western side of the property in question and north to Manalurpet Road. Further, in the adjacent area nearby Tiruvannamalai Road, house site layout has also been formed. During the subsequent sale made on 05.02.2007, a site measuring 4360 sq. ft. in R.S.No.84/5 was sold for Rs.1,83,120/- at the rate of Rs.42/- per sq. ft. The land https://hcservices.ecourts.gov.in/hcservices/ in question was found to be lying waste and the petitioner adduced a copy of the Adangal for fasli 1416. In view of these facts, the rate at Rs.42/- per sq. ft. as fixed by the Sub-Registrar may be high. However, taking the view of the village public that the value of the land may be fixed at Rs.35/- per sq. ft., the rate of the land per square feet has been considered and fixed at Rs.36/-, just Re.1/- high to the suggestion of the village public. (iv) As regards the value of structure on the property, the nature of the building, its age, trees and other accessories have been taken into account and after deducting the depreciation value, the net value is fixed at Rs.10,65,852/- and the total value of the house site and building is fixed at Rs.30,75,000/-; the stamp duty at 8% is fixed at Rs.2,46,000/- and since the petitioner has paid a sum of Rs.32,000/- towards stamp duty, the deficit stamp duty is Rs.2,14,000/-. The Special Deputy Collector (Stamps), Cuddalore in his proceedings in M.R.No.307/07-08 dated 14.09.2007 has passed an order directing the petitioner to pay the deficit stamp duty of Rs.2,14,000/- and to file an appeal before the Inspector General of Registration, Chennai within a period of 60 days from the date of the order. The order was sent to the petitioner by RPAD and it was duly received by him on 29.09.2007. But, on behalf of the petitioner, one K.Asokan, who is said to be the Power of Attorney Holder of the petitioner has filed the present writ petition. (v) The averments of the petitioner are not maintainable in law and it is not true that the petitioner has offered the highest bid amount of Rs.4,00,000/- in the Tender-cum-Public Auction; since the sale of the property has been made under the Tamil Nadu Registration Act, the sale is liable for charging stamp duty under the Indian Stamp Act. TIIC is a Company registered under the Indian Companies Act, 1913 and the document is liable to be assessed under the Prevention of Under Valuation Rules, 1968 and under Section 47-A(1) of the Indian Stamp Act and therefore, the petitioner is liable to pay the differential cost of stamp duty together with interest accrued thereon. Accordingly, he prayed for dismissal of the Writ Petition. 6. Heard Mrs.Radha Gopalan, learned counsel for the petitioner and Mr.N.Senthil Kumar, learned Government Advocate for the respondents. 7. Learned counsel for the petitioner has submitted that the action of the 1st respondent in referring the matter to the 2nd respondent and the 2nd respondent directing the petitioner to pay a https://hcservices.ecourts.gov.in/hcservices/ sum of Rs.2,14,000/- towards deficit stamp duty is illegal and arbitrary. It is her further contention that merely because there is an increase in the market value, it cannot be assumed that the statutory authority received more consideration and in fact, the Inspector General of Registration, the 3rd respondent, has directed all the Registrars in the State to release the documents without insisting on further payment of stamp duty, even if such instruments had already been referred to Special Deputy Collector (Stamp Duty) for the purpose of valuation/verification. The learned counsel has also submitted that the petitioner has purchased the property in the auction conducted by the public authority-TIIC and the sale deed has also been executed by the statutory authority and, hence, the petitioner cannot be compelled to pay more stamp duty based on the guideline value, especially when the valuation is based on the allotted price from a public authority and when there is no need for valuation. In support of her case, learned counsel for the petitioner has relied on the following decisions : (i) 1997 (II) CTC 617, S.P.Padmavathi vs. The State of Tamil Nadu and others : "10. ... The underlined words contained in sub- sections (1) and (3) of Section 47-A clearly reveal the intention of the Legislature in inserting the aforesaid section 47-A of the Act. The basis for exercising the power under Section 47-A is that there must be a reason to believe that the market value of the property, which is the subject matter of the conveyance, has not been truly set forth in the instrument. It is not a routine procedure to be followed in respect of each and every document of conveyance presented for registration, without any evidence to show lack of bonafides on the part of the parties to the document by attempting fraudulently to under-value the subject of conveyance with a view to evade payment of proper stamp duty and thereby cause loss to the Revenue. Therefore, the basis for exercise of the power under section 47-A of the Act is wilful under-valuation of the subject of transfer, with fraudulent intention to evade payment of proper stamp duty. 11. ... Having regard to the object of the Act, we are inclined to think that normally the consideration stated as the market value in a given instrument brought for registration should be taken to be correct unless circumstances exist which suggest fraudulent evasion. Even in such a case, we trust that disputes will not be raised for petty sums. Unless the difference is considerable or sizable and it appears patent that the amount mentioned in the document is in gross undervalue, no disputation as to https://hcservices.ecourts.gov.in/hcservices/ value is expected to be started. ... The power should be exercised with great caution and care should be taken to ensure that it does not work 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 which suggest fraudulent evasion. The Division Bench has also further stated that in such a case, the disputes should not be raised for petty sums unless the difference is considerable or sizeable and it appears patent that the amount mentioned in the document is gross under-valuation. We are of the firm view that Section 47-A of the Act came to be inserted by the Tamil Nadu Amendment Act 24 of 1967 with a view to check fraudulent evasion of stamp duty payable on the documents while registering any instrument of conveyance, exchange, gift, release of benami right or settlement. The question as to fraudulent evasion of capital gain tax and the purpose of Chapter XX-C of the Income Tax Act, preventing such fraudulent evasion of capital gain tax by making under valuation came up for consideration before the Supreme Court in C.B.Gautam vs. Union of India and others, 1992 (6) J.T. 678. While considering the purpose of Chapter XX-C of the Income Tax Act, the Supreme Court specifically pointed out that although a presumption of an attempt to evade the tax may be raised by the appropriate authority concerned, but it has to determine that in a given transaction of an agreement to sell there might be several bona fide considerations which might induce a seller to sell his immovable property at less than what might be consideration as a air market value. 15. We accordingly, answer Point No.1 as follows: " ... 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 view to fraudulently evade payment of proper 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. https://hcservices.ecourts.gov.in/hcservices/ 26. Therefore, we are of the view that in the case of instrument of conveyance executed pursuant to the decree for specific performance passed by the Civil Court, in which there is no allegation of under-valuation or lack of bona fides, the mere fact that there is a time gap between the agreement of sale and the execution of the document, is not sufficient to the Registering Officer to invoke his power under Section 47A of the Act, unless there are reasons to believe that there is an attempt on the part of the parties to the instrument to deliberately undervalue the subject of transfer with a view to evade payment of proper stamp duty. 30. Learned Government Pleader also relied on the decision of this Court in R.Thiagasundaram vs. State of Tamil Nadu, AIR 1991 Mad. 82 in which it has been held that the value as accepted by the Civil Court is not binding on the Registering Officer. However, this is the circumstances to be taken into consideration. We are not testing our decision on the ground that value mentioned in the agreement is accepted by Civil Court. We are of the view that the transaction in question does not suffer from lack of bona fide and that there are no reasons to believe that the true value of the property is not set forth in the document. 31. For all the above reasons, we answer pursuant to the decree for specific performance passed by the Civil Court, in which there is no allegation of deliberate under- valuation or lack of bona fides in valuing the subject of transfer with a view to evade payment of proper stamp duty, the mere fact that there is a time gap between the agreement of sale and the execution of the document by itself is not sufficient for the Registering Officer to invoke his power under Section 47A of the Stamp Act, unless there are reasons to believe that there is an attempt on the part of the parties to the instrument to undervalue, with a view to evade payment of proper stamp duty. 32. Point No.2: In the light of the findings recorded on Points 1 and 2 in view of the fact that the order of the learned single Judge has proceeded on the basis that it is the market value of the property on the date of execution will be the determining factor for determining the amount of stamp duty payable on the document and the Registering Officer has also not stated any circumstances which led him to believe that there was deliberate or fraudulent under valuation of the subject of transfer with a view to evade payment of proper stamp duty, https://hcservices.ecourts.gov.in/hcservices/ the order of the learned single Judge which is also reported in 1993 (1) L.W. 629 and also that of the Registering Officer require to be interfered with. This point is answered accordingly." (ii) 2002 (2) CTC 329, R.Sukumaran and seven others vs. State of Tamil Nadu and seven others : "21. ... Merely because there has been an increase in the market value due to the passage of time, it cannot be assumed that the Housing Board has received consideration more than what has been recited in the document. The over anxious Registrar, who is also conscious to collect more revenue cannot have any inkling or reason, doubt or to believe that there is under-valuation or evasion of stamp duty. Therefore, it has to be held that absolutely the Registrar cannot have any ground or reason or rhyme or basis or reason whatsoever to doubt about the consideration paid by the transferee to the Housing Board, the transferor. The same is the legal position even in respect of commercial plot/flat as well and there could be no difference in that behalf nor there could be any discrimination." (iii) 2008 (1) CTC 60 (SC), State of Rajasthan and others vs. Khandaka Jain Jewellers : "13. ... If any doubt arises in the mind of the Registering Authority that the instrument is under-valued then as per Section 47-A of the Rajasthan (Amendment) the instrument can be sent to the Collector for determination of the correct market value. Under Section 47-A read with Sections 3, 17 and 27, it becomes clear that the Registering Authority has to ascertain the correct valuation given in the instrument regarding market value of the property at the time of the sale. 14. ... A taxing statute has to be construed as it is all these contingencies that the matter was under litigation and the value of the property by that time shot up cannot be taken into account for interpreting the provisions of a taxing statute. As already mentioned above a taxing statute has to be construed strictly and if it is construed strictly then the plea that the incumbent took a long time to get a decree for execution against the vendor that consideration cannot weigh with the Court for interpreting the provisions of the taxing statutes. Therefore, simply because the matter have been in the https://hcservices.ecourts.gov.in/hcservices/ litigation for a long time that cannot be a consideration to accept the market value of the instrument when the agreement to sale was entered. As per Section 17, it clearly says at the time when registration is made, the valuation is to be seen on that basis. " (iv) (2008) 4 SCC 720, Government of Andhra Pradesh and others vs. P.Laxmi Devi : "28. We may, however, consider a hypothetical case. Supposing the correct value of a proper is Rs.10 lakhs and that is the value stated in the sale deed, but the registering officer erroneously determines it to be, say, Rs.2 crores. In that case, while making a reference to the Collector under Section 47-A, the registering officer will demand duty on 50% of Rs.2 crores i.e. duty on Rs.1 crore instead of demanding duty on Rs.10 lakhs. A party may not be able to pay this exorbitant duty demanded under the proviso to Section 47-A by the registering officer in such a case. What can be done in this situation? 29. In our opinion in this situation, it is always open to a party to file a writ petition challenging the exorbitant demand made by the registering officer under the proviso to Section 47-A alleging that the determination made is arbitrary and/or based on extraneous considerations, and in that case it is always open to the High Court, if it is satisfied that the allegation is correct, to set aside such exorbitant demand under the proviso to Section 47-A of the Stamp Act by declaring the demand arbitrary. It is well settled that arbitrariness violates Article 14 of the Constitution vide Maneka Gandhi vs. Union of India. Hence, the party is not remediless in this situation." 8. Per contra, learned Government Advocate for the respondents has stated that the action of the respondents 1 and 2 in determining the value of the property at Rs.30,75,000/- and the stamp duty at Rs.2,46,000/- and directing the petitioner to pay a sum of Rs.2,14,000/- as deficit stamp duty is correct and well within the rules and regulations of Prevention of Undervaluation of Instrument Rules; though, it is true that the petitioner has offered the highest bid amount of Rs.4,00,000/- in the Tender-cum-Public Auction, the sale of the property has been made under the Tamil Nadu Registration Act and, therefore, the sale is liable for charging stamp duty under the Indian Stamp Act. The learned Government Advocate has further stated that the property under the sale deed has been inspected by https://hcservices.ecourts.gov.in/hcservices/ the authorities concerned and proceedings have been taken under the