Adjudication of Stamp Duty and Registration Fees to be on basis of "Sale Certificate" issued by Court in public auction.

 

 REAL ESTATE UPDATE

Issue: Whether stamp duty and registration fees payable on an immoveable property (purchased through court-sale) is required to be assessed on the purchase consideration as per the Sale Certificate issued by the Court or as per the basis of the market value assessed by Registering Officer independently? 

Reply: The Supreme Court by a common Judgement in the matter of : 

(i) Civil Appeal No.8281 of 2022 - SLP (C) 21405 of 2010 - Registrar of Assurances & Anr. -Vs- ASL Vyapar Pvt. Ltd. & Anr. 

With

(ii) CIVIL APPEAL NO.8282 OF 2022 -  SLP (C) No. 22197 of 2010  

has held that that in case of a public auction monitored by the court, the discretion would not be available to the Registering Authority/Registering Officer under Section 47A of the Act.

 Analysis

The Appeals before the Supreme Court have been preferred by the Registering Authority of the State of West Bengal against the judgment dated 13.05.2010 in W.P. No. 1295/2009 passed by the High Court of Calcutta 

The three Judges Bench held that Section 47A of the Act as applicable to West Bengal read with Rule 3 of the West Bengal Stamp (Prevention of Undervaluation of Instruments) Rules, 2001  is not applicable to an instrument executed by a Receiver pursuant to an order of sale passed by a civil court, after publication in newspapers. The sale conducted by the court through its officers qualifies to be an open market sale subject to the following conditions:

a) there must be wide publicity of the proposed sale and particularly there shall be publication of advertisement in at least one newspaper having wide circulation in the concerned city/town/
district;

b) The purchaser of the property must not be connected with or related to the authority/ officer conducting the sale.

Registration Act  - 47-A. Instruments under-valued, how to be dealt with.--

 (1) If the Registering Officer, appointed under the Registration Act, 1908 (16 of 1908) while registering any instrument relating to the transfer of any property, has reason to believe that the market value of the property or the consideration, as the case may be, 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 or consideration, as the case may be, and the proper duty payable thereon.

(2) On receipt of reference under sub-section (1), the Collector shall, after giving the parties a 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 or consideration and the duty, as aforesaid, and the deficient amount of duty, if any, shall be payable by the person liable to pay the duty.

(3) The Collector may, suo moto or on receipt of reference from the Inspector General of Registration or the Registrar of a District, in whose jurisdiction the property, or any portion thereof, which is the subject-matter of the instrument, is situated, appointed under the Registration Act, 1908 (16 of 1908) shall, within three years from the date of registration of any instrument, 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 its market value or consideration, as the case may be, and the duty payable thereon and if, after such examination, he has reason to believe that the market value or consideration has not been truely set forth in the instrument, he may determine the market value or consideration and the duty, as aforesaid, in accordance with procedure provided for in sub-section (2), and the deficient amount of duty, if any, shall be payable by the person liable to pay the duty:

Provided that nothing in this sub-section shall apply to any instrument registered before the date of the commencement of the Indian Stamp (Himachal Pradesh Amendment) Act, 1988.

(4) Where for any reason the original document called for by the Collector under sub-section (3) is not produced or cannot be produced, the Collector may, after recording the reasons for its non-production, call for a certified copy of the entries of the document from the registering officer concerned and exercise the powers conferred on him under sub-section (3).

(5) Any person, aggrieved by an order of the Collector, under subsection (2) or sub-section (3), may, within thirty days from the date of the order, prefer an appeal before the District Judge and all such appeals shall be heard and disposed off in such manner as may be prescribed by rules made under this Act.

(6) For the purpose of this section "market value" of any property shall be estimated to be the price which, in the opinion of the Collector or the appellate authority, as the case may be, such property would have fetched, if sold in the open market on the date of execution of the instrument relating to the transfer of such property.

West Bengal Amendment - effective dated 15th March 2021 - 

 “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.”

When a property is sold in a private sale, the registering officer has the power to determine the actual value of the property. As legal fictions are limited for the purpose for which they are created and cannot be widened by Rules made under the Act and no such fiction is required to be provided for determining the price of the property when it is sold in the open market. Thus, the definition of “Market Value” as under Section 2(16B) of the Act would not apply to the property if actually sold in the open market.

“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.”

A court sale was opined to be an open sale. The whole basis of holding that a Court sale is an open
market sale is the sanctity with which the proceedings of the sale are conducted by the court and its officers. As such the manner in which the price is derived at in court sale has sanctity even though the same may not be market value price derived by the Assessing Officer. 

Finding

Para 22 - 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. 

Para 23 - It is no doubt true that in a court auction, the price obtainable may be slightly less as any bidder has to take care of a scenario where the auction may be challenged which could result in passage of time in obtaining perfection of title, with also the possibility of it being overturned. But then that is a price obtainable as a result of the process by which the property has to be disposed of. We cannot lose sight of the very objective of the introduction of the Section whether under the West Bengal Amendment Act or in any other State, i.e., that in case of under valuation of property, an aspect not uncommon in our country, where consideration may be passing through two modes – one the declared price and the other undeclared component, the State should not be deprived of the revenue. Such transactions do not reflect the correct price in the document as something more has been paid through a different method. The objective is to take care of such a scenario so that the State revenue is not affected and the price actually obtainable in a free market should be capable of being stamped. If one may say, it is, in fact, a reflection on the manner in which the transfer of an immovable property takes place as the price obtainable in a transparent manner would be different. 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.

Para 24 - It is not as if a public auction is carried out just like that. The necessary pre-requisites require fixation of a minimum price and other aspects to be taken care of so that the bidding process is transparent. Even after the bidding process is completed the court has a right to cancel the bid and such bids are subject to confirmation by the court. Once the court is satisfied that the bid price is the appropriate price on the basis of the material before it and gives its imprimatur to it, any interference by the Registering Authority on the aspect of price of transaction would be wholly unjustified.

Para 26 - We do not accept the contention that the mere wordings of these different provisions in any way take away the fundamental intent with which the provision was brought into force and specifies so in the same manner though albeit in a different language. 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.

Para 31 - We are, thus, of the view that this reference is required to be answered by opining that in case of a public auction monitored by the court, the discretion would not be available to the Registering Authority under Section 47A of the Act.