The case involved P. Babu, who had purchased property and registered the sale deeds. The Registering Authority claimed that the property was undervalued and referred the case to the Special Deputy Collector (Stamps) for determining the market value and additional stamp duty.
NEW DELHI: The Supreme Court of India today (Jan 7th) clarified the procedure for dealing with undervaluation of property sale prices under the Indian Stamp Act, 1899. The Court emphasized that the Registering Authority cannot mechanically refer the matter to the Collector (Stamps) to determine the market value of the property. Instead, the party involved must be given an opportunity to present their case, and valid reasons must be provided by the Registering Authority for concluding that the property is undervalued.
The bench, comprising Justices JB Pardiwala and R Mahadevan, heard an appeal against the Madras High Court’s decision, which had annulled the Registering Authority’s act of referring a sale deed to the Collector (Stamps) for market value determination.
“It is not permissible for the Registering Officer to undertake a roving enquiry for the purpose of ascertaining the correct market value of the property. If the Registering Officer is bona fide of the view that the sale consideration shown in the sale deed is not correct and the sale is undervalued, then it is obligatory on the part of the Registering Authority as well as the Special Deputy Collector (Stamps) to assign some reason for arriving at such a conclusion. In such circumstances, if the document in question is straightway referred to the Collector without recording any prima facie reason, the same would vitiate the entire enquiry and the ultimate decision,”
the Court stated.
BRIEF FACTS:
The case involved P. Babu, who had purchased property and registered the sale deeds. The Registering Authority claimed that the property was undervalued and referred the case to the Special Deputy Collector (Stamps) for determining the market value and additional stamp duty.
Challenging these actions, P. Babu approached the Madras High Court, which ruled in his favor, stating that the procedures followed by the authorities were improper. Dissatisfied with the High Court’s decision, the Chief Revenue Controlling Officer-cum-Inspector General of Registration appealed to the Supreme Court.
The Supreme Court upheld the High Court’s decision, stating that the Registering Authorities had erred in directly referring the matter to the Deputy Collector (Stamps) without conducting an inquiry. The Court highlighted that an enquiry by the Registering Authority is a precondition for making such a referral and that parties must be given a notice of hearing.
“Under Section 47-A(1) and under Section 47-A(3), if the Registering Authority has reason to believe that the instrument of conveyance did not reflect the correct market value of the property, then the Registering Authority has the power to refer the same to the Collector for determination of market value of the property and the Collector, on reference, under Section 47-A(1), may determine the market value of such property in accordance with the procedure prescribed. Enquiry by the Registering Authority is a pre-condition for making reference to the Collector for determination of market value of the property. The determination of market value without Notice of hearing to parties is liable to be set aside. When the Registering Authority finds that the value set forth in an instrument was less than the minimum value determined in accordance with the Rules, in that event, the Registering Authority is empowered to refer the instrument to the Collector for determination of market value of such property and the Stamp Duty payable thereon,”
the Court explained.
Citing the case of Mohali Club, Mohali v. State of Punjab (AIR 2011 P&H 23), the Court remarked that the duty of the Registering Authority to record a “reason to believe” that the property’s sale consideration is undervalued “does not work as an engine of oppression nor as a matter of routine, mechanically, without application of mind as to the existence of any material or reason to believe the fraudulent intention to evade payment of proper Stamp Duty.”
“The expression ‘reason to believe’ is not synonymous with subjective satisfaction of the officer. The belief must be held in good faith; it cannot be merely a pretence. It is open to the Court to examine the question whether the reasons for the belief must have a rational connection or a relevant bearing to the formation of the belief and are not irrelevant or extraneous to the purpose of the section. The word ‘reason to believe’ means some material on the basis of which the department can reopen the proceedings. However, satisfaction is necessary in terms of material available on record, which should be based on objective satisfaction arrived at reasonably,”
the Court elaborated.
Advocates’ Appearances
- For the Appellant: Mr. Sabarish Subramanian, Advocate
- For the Respondent: Ms. Rohini Musa, Advocate
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