The State of Kerala, Rep. by District Collector, Kottayam and Others Jino Joseph - Court Judgment

1. Under challenge in this petition is Ext.P2 order passed by the learned Additional District Judge, Kottayam in CMA No.70 of 2008 filed by the respondent against the order of the second petitioner directing the respondent to pay Rs.1,04,650/- as deficit stamp duty and Rs.16,746/- as registration fees.

2. The respondent purchased 1.69 percent undivided interest  in 19.36Aresof  property in Muttambalam Village with right to construct an apartment  having a super built up area of 113.87 sq. metres along with one covered parking area. The value set forth in the instrument is Rs.1,61,645/-.For determination of deficit stamp duty, reference under Section 45B of the Kerala Stamp Act, 1959 (hereinafter referred to as the 'Act') was made by the third petitioner to the second petitioner. On objection being taken to the sufficiency of stamp duty and registration fee, the second petitioner held that the value of the property covered by the instrument is Rs.10 lakhs and directed the respondent to pay deficit stamp duty and registration fee as above.

3. The respondent filed Ext.P1 appeal before the District Court, Kottayam under Sub Section 4 of Section 45B of the Act. The learned Additional District Judge, who heard the appeal along with other appeals, set aside the final order passed by the second petitioner by the impugned order.

4. I have heard the learned Government Pleader and the learned counsel appearing for the respondents.

5. The argument advanced by the learned Government Pleader was that the second petitioner had acted only in accordance with the provisions of the Act and only within the purview of the statutory powers conferred on him. It was also contended that the court below had substantially interfered with the policy decision of the State
Government and if the same is allowed to be implemented, it will adversely affect the revenue of the Government.

6. The learned counsel for the respondent, per contra, argued that neither the second petitioner who referred the matter under Section 45B nor the second petitioner who found that the property covered by the instrument was undervalued had reason to believe that the value of the property has not been duly set forth in the instrument. The document itself as it stands has to be looked into and not any collateral facts or circumstances for determining whether a document is undervalued or not; it was so submitted by the learned counsel for the respondent. It was further argued that the authorities have not taken into account the various criteria laid down in Rule 5 of the Kerala Stamp (Prevention of Undervaluation of Instruments) Rules, 1968 in fixing the value of the property.

7. The learned counsel for the respondent drew our attention to the decision of the Apex Court in Himalaya House Company Ltd. v Chief Controlling Revenue Authority and another (AIR 1972 S.C. 899) where the provisions of the Central Stamp Act were considered. In that case, the Apex Court referring to a series of decisions took the view that in order to see whether a document had been sufficiently stamped, the document itself has to be looked into and not any collateral facts or circumstances.

8. However the learned Government Pleader submitted that in the Central Act which was considered by the Apex Court in the aforesaid decision, there was no provision which empowered the revenue to make an independent enquiry of the value of the property conveyed for determining the duty chargeable and that was the reason why the Apex Court has rendered such a verdict. On the other hand the Kerala Stamp Act empowers the District Collector to hold an independent enquiry and to determine the value or the consideration as well as the duty payable; it was argued by the learned Government Pleader. A view similar to the one taken by the Apex Court in the aforesaid case was taken by a Division Bench of this Court in District Collector, Trivandrum v Ittiyavira John and another (1975 KLT 486) where Article 21 of the Kerala Act as it stood then which corresponded with Article 23 of the Central Act was considered. There, a deed of conveyance executed by the respondent for consideration of Rs.3500/- was stamped for the purpose of stamp duty under Article 21 of the Kerala Stamp Act on the amount or value of consideration at the rate specified in the Article. On a reference, the District Collector held that stamp duty had to be levied on the market value of the property as assessed by the Tahsildar in his report. In appeal preferred by the respondent to the District Court, the Collector's action was held to be unjustified. The view of the District Court was upheld by this Court finding that stamp duty had to be paid on the amount or value of the consideration of conveyance and it was not open to the District Collector to direct payment of stamp duty on the market value assessed. The Division Bench also noticed the decision of the Apex Court in Himalaya House Company's case. It was also held that it might have been open to the Collector to find that the consideration had not been duly and correctly stated as required by the Act and to direct an investigation and to take action accordingly.

9. The aforesaid decision of the Division Bench was followed in Ramachandra Shambogue v District Collector (1987(2) KLT 474), wherein it was held that though it is open to the Collector to make an enquiry as to whether the consideration has been correctly stated or not, it has to be directed to the question whether the amount shown as consideration in the document represents the real consideration paid for the conveyance or a lesser amount is shown as consideration to defraud revenue. However, as the document under consideration was a gift deed, the consideration of which was only natural love and affection, it was held that there was no scope for such an enquiry.

10. The rival contentions raised can be best appreciated in the light of the relevant provisions of the Act. Section 28A of the Act which was inserted by the Kerala Finance Act, 1994 empowers the Revenue Divisional Officer to fix the fair value of the lands situate within the area of his jurisdiction for determining the stamp duty chargeable at the time of registration of instruments involved in lands. It reads as follows:

"28A. Fixation of fair value of land. - (1) Every Revenue Divisional Officer shall, subject to such rules as may be made by the  Government in this behalf, fix the fair value of  the lands situate within the area of his jurisdiction, for the purpose of determining the duty chargeable at the time of registration of instruments involving lands.

(2)The Revenue Divisional Officer shall, in fixing the fair value of a land under sub section (1) have regard inter alia to the following matters, namely:-

(a) development of the area in which  the land is situate such as the commercial  importance, facilities for water supply, electricity, transport and communication;

(b) proximity of the land to markets, bus  stations,  railway   stations,   factories, educational institutions or other institutions;

(c)   the geographical lie of the land, the nature of the land such as dry, waste, wet or  garden land, fertility, nature of crop, yielding  capacity and cost of cultivation; and

(d) such other matters as may be  provided in the rules made under this Act.

(3)The fair value of land fixed under sub section (1) shall be published in such manner as may be  provided in the rules made under this Act.

(4)Any person aggrieved by the fixation of fair value under sub-section (1) may, within thirty days of its publication under sub-section (3), appeal to the Collector."

11. Certain   powers are   conferred on the registering officer under Section 45A which was inserted by Act 19 of 1994. It reads as follows:

"45A. Instrument not bearing stamp of sufficient amount as per fair value of land how to be dealt with. - (1) Notwithstanding anything contained in this Act, the registering officer shall, while registering an instrument transferring any   land,   other than   an instrument of partition, settlement or gift among the members of a family, chargeable with duty verify whether the value of land or the consideration set forth in the instrument is the fair value of that land.

(2) Where on such verification, the registering officer is satisfied that the value of the land or the consideration set forth in the instrument is not less than the fair value of the land, he shall duly register the instrument.

(3) Where, on verification the registering officer finds that the value of the land or the consideration set forth in the instrument is less than the fair value of the land fixed under Section 28A, he shall, by order, direct the payment of proper stamp duty on the fair value of the land fixed under Section 28A within a period of seven days from the date of the order and on payment of the deficit stamp duty, the instrument shall be duly registered.

(4) Any person aggrieved by an order under sub-section (3) may, within thirty days from the date of that order, appeal to the Collector within whose jurisdiction the land is situate. (5) The Collector shall hear and dispose of the appeal in such manner as may be prescribed by rules made under this Act in that behalf and his decision thereon shall be final."

12. Section   45B states   how instruments undervalued are to be dealt with. It runs as under:

45B. Instruments undervalued how to be dealt with.- (1) If the Registering Officer, while registering any instrument transferring any property, has reason to believe that the 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 determination of the value or consideration, as the case may be, and the proper duty payable thereon.

(2)On receipt of a 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, by order, determine the value of the property or the consideration and the duty aforesaid; and the deficient amount of duty, if any, shall be payable by the person liable to pay the duty and, on the  payment of such duty, the Collector shall endorse a certificate of such payment on the instrument under his seal and signature.

(3) The Collector may, suo motu, within two
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 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 value or consideration has not been truly set forth in the instrument, he may determine the value or consideration and the duty aforesaid in accordance with the 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 and, on the payment of such duty, the Collector shall endorse a certificate of such payment on the instrument under his seal and signature.

(3A) xxxxxxx

(4)Any person aggrieved by an order of the Collector under sub-section (2) or sub- section (3) may appeal to the District Court within whose jurisdiction the property transferred is situate.

(5)An appeal under sub-section (4) shall be filed within thirty days of the date of the order sought to be appealed against.

(6)The District Court shall hear and dispose of the appeal in such manner as may be prescribed by rules made under this Act."

13. A combined reading of Section 45A and Section 45B would reveal that those two Sections deal with two different situations. Under Section 45A, the registering authority, while registering an instrument, can verify whether the value of land or consideration set forth in the instrument is the fair value of the land or not. If the value of the land or the consideration set forth is not less than the fair value of the land fixed under Section 28A, he has no option but to register the instrument forthwith. However, if the registering authority finds that the value of the land or consideration set forth in the instrument is less than the fair value of the land fixed under Section 28A, he shall order payment of proper stamp duty on fair value and on payment of the deficit stamp duty he is bound to register the document.

14. However, circumstances are bound to occur where the actual consideration passed is higher than the fair value fixed under Section 28A. Section 45B states how such cases are to be dealt with. In such cases, if the registering officer has reason to believe that the value of the property or consideration has not been duly set forth, after registering such instrument, he can refer the same to the Collector for determination of the value or consideration and proper duty payable. Section 45B(3) also empowers the Collector to initiate suo motu action within two years from the date of registration of an instrument which was not referred to him under Sub Section (1) of Sec.45B to call for and examine the correctness of the value or consideration set forth in the instrument and if he has reason to believe that the value or consideration has not been truly set forth in the instrument, to determine the value or consideration.

15. The learned Government Pleader would argue that the word 'value' appearing in Sec.45B is the market value and the District Collector is empowered to go into the question whether the amount set forth in a document for registration is less than the market value or not. Even by stretch of imagination, such a meaning cannot be attributed to the word 'value' made mention of in Section 45B of the Act. There can be no quarrel against the proposition that the registering officer shall always have the power to refer the instrument to the Collector under Section 45B(1) if he has reason to believe that the value or consideration has not been truly set forth in the instrument. This Court in Rahim Baker v Sub Registrar (2001(3) KLT S.N.18, Case No.24) has held that the parties cannot escape from the clutches of this provision. Had it been the legislative intention to see that stamp duty is levied on the market value, the same would have been reflected in Section 45B. If the word 'value' which appears in Section 45B is interpreted to mean as market value, Section 28A of the Act would become redundant. The legislature intended, that for the purpose of imposition of stamp duty, a fair value has to be fixed. That is the reason why Section 28A has been introduced. However, as observed earlier, there may be circumstances where the actual consideration passed would be more than the fair value fixed under Section 28A.In such circumstances the parties shall not be allowed to defraud the State Revenue by showing a lesser value or consideration in the instrument. In order to remedy such situations, powers are given under Section 45B for a reference to the Collector. Section 45B also envisages suo motu action by the Collector. That being the case, the market value of the property cannot have any bearing on the question. The material to determine whether stamp duty levied is proper or not is the consideration which actually passed. So, when a reference is made under Section 45B, the Collector has to decide the true consideration which passed by virtue of the document under consideration and if on such enquiry, it is found that the true consideration which passed is more than what is stated in the document, the District Collector can levy duty. Under no circumstance the District Collector can take into account the market value of the property involved. Only on satisfaction that something more than what was stated as consideration in the document has passed from one party to other is the District Collector justified in directing to pay additional stamp duty. Assessment of stamp duty on the basis of market value is not at all envisaged by the legislature and a direction to pay stamp duty on the market value is incompetent as it is without jurisdiction and is liable to be interfered with.

16. The learned Government Pleader placed reliance on two decisions, one by the Apex Court and another by this Court; to substantiate the case of the petitioner. Reliance was placed on R.Sai Bharathi v J.Jayalalitha and others (2004) 2 SCC 9) rendered by the Apex Court while interpreting the explanation to Section 47A of the Stamp Act as amended by Tamilnadu Act 24 of 1967.The aforesaid decision was rendered in the context of assessing the true market value of properties in question to ascertain whether the transaction has resulted in any offence so as to give a pecuniary advantage to one party or the other. That being the case, the decision in Sai Bharathi's case cannot be quoted as an authority in the context of interpreting Section 45B of the Stamp Act which empowers the District Collector to consider whether the true value or consideration has been set forth in an instrument.

17. The next decision relied on by the learned Government Pleader is Suseela Nair v Sub Registrar (2006(3) KLT 768) where the question involved was whether the order of the District Court issued under the Guardian and Wards Act is conclusive evidence of sale at market value. This Court, after examining the facts and circumstances of that case, found that it is not the conclusive proof and if the registering authority has reason to believe that the value or consideration is not truly set forth in the instrument, proceedings can be initiated for undervaluation. In that case, this Court had no occasion to consider the question as to how far the enquiry of the District Collector be extended while exercising powers under Section 45B of the Act. In that case also, a direction was given to the District Registrar to issue fresh notice to the petitioner therein conveying grounds on which the respondent proposed to demand additional stamp duty and give an opportunity to the petitioner therein to file objections.

18. The learned counsel for the respondent submitted that the order of the District Court cancelling the direction of the second petitioner to remit additional stamp duty is justified for other reasons also. It was pointed out that the provisional order determining the value of property did not contain the basis on which the provisional value of  consideration was arrived at. It was argued that in the absence of the same, it was not possible for the respondents to give an effective reply. On going through the impugned order, it is evident that the order passed by the second petitioner suffers from infirmities as pointed out by the learned counsel for the respondent. The respondent has purchased only an undivided share in the land and there was no transfer of any apartment as shown in the final order given by the second petitioner. It is observed in the impugned order that the figures are filled up in a printed stereo typed form which shows that there was no application of mind with reference to the facts of the present case. Even in the provisional order, the second petitioner had not scored off the unnecessary clauses, with the result that the order does not specifically show which clause is applicable.

19. Rule 4 of the Kerala Stamp (Prevention of Undervaluation of Instruments) Rules, 1968 prescribes the procedural formalities to be followed by the District Collector while proceeding under Section 45B of the Act. It is unfortunate to note that the petitioners could not produce any record to show that the procedural formalities have  been complied with. In District Registrar v Lake Paradise (2001(3) KLT 521), it was held by this Court that it is always necessary that the registrar while proceeding under Section 45B of the Act should pass a formal order giving the basis of conclusion whether tentative or final as otherwise it would not be possible for the affected parties to file an effective reply. Even after such directions from this Court, the same procedural irregularities are repeated by the authorities concerned, while exercising the powers under Section 45B of the Act. The result is that innocent
persons who correctly state the value or consideration in  the instrument are unnecessarily dragged to litigation. It also gives sufficient elbow room to the parties who do not correctly set forth the true value or consideration in the document, to escape from the liability of paying additional  stamp duty on account of the procedural irregularities committed by such authorities.

20. It is the responsibility of the State to implement the provisions of a statute properly to fulfil the objects sought to be achieved by its enactment. Before I part with this judgment, I express the hope that the first petitioner shall prevail upon the authorities concerned to follow the procedural formalities envisaged by the Stamp Act and allied rules properly through appropriate methods.

21. The net conclusion, however, that can be drawn from the aforesaid discussion is that the order of the second petitioner directing the respondent to pay additional stamp duty and the registration fee was incompetent and unjustifiable and it was rightly viewed by the Additional District Judge by Ext.P2 order and it does not warrant interference by this Court. Accordingly, I dismiss the petition, but without costs.