Partly allowed

M/S. Marian Projects Pvt. Ltd. v. State of Karnataka

Karnataka HC8 Sept 2021WP/14246/2017

Case brief

AI extract

What is this about?

The High Court allowed W.P. No. 14246/2017, modifying the stamp duty and penalty order by calculating duty on 70% of the super built area and reducing the penalty to one times the duty, as non-deliberate. It dismissed W.P. No. 25062/2017, holding the reduced penalty was within the Deputy Commissioner's discretion.

What did the court decide?

W.P. No. 14246/2017 allowed in part: duty @ 1% on 70% of super built area and penalty equal to duty. W.P. No. 25062/2017 rejected.

M/S. Marian Projects Pvt. Ltd. Vs State of Karnataka — Cheque Dishonour | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 8^TH DAY OF SEPTEMBER, 2021

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BEFORE

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THE HON'BLE MR. JUSTICE R.NATARAJ

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WRIT PETITION NO.25062 OF 2017 (GM-ST/RN) C/W WRIT PETITION NO.14246 OF 2017 (GM-ST/RN)

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W.P.NO.25062/2017:

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BETWEEN:

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MR. WALTER O PINTO S/O LATE FRANCIS PINTO AGED ABOUT 63 YEARS, R/O GREEN FIELDS, MORU KAVERI, POST KINNIGOLI, MANGALORE TALUK, DAKSHINA KANNADA DISTRICT-575002

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…PETITIONER

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(BY SRI. S. RAJASHEKAR, ADVOCATE)

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AND:

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STATE OF KARNATAKA DEPARTMENT OF REVENUE, MULTI STORIED BUILDING, DR.AMBEDKAR VEEDHI, BANGALORE-560 001.

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THE DISTRICT REGISTRAR FOR STAMPS OFFICE OF THE DEPUTY COMMISSIONER, DAKSHINA KANNADA DISTRICT, MANGALORE-575001.

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M/S MARIAN PROJECTS PVT. LTD., A COMPANY REGISTERED UNDER PROVISIONS OF THE COMPANIES ACT, 1956, AND HAVING ITS OFFICE AT RAMA BHAVAN COMPLEX,

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3^RD FLOOR, KODIALBAIL, MANGALORE-575003 REPRESENTED BY ITS DIRECTOR AND AUTHRORIZED SIGNATORY MR. NAVEEN CARDOZA S/O JOHN LAWRENCE CARDOZA AGED ABOUT 40 YEARS, "CARDOZA" PARAMESHWARI NAGAR, 4^TH CROSS, SURATHKAL, MANGALORE TALUK-575014 DAKSHINA KANNADA DISTRICT.

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… RESPONDENTS

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(BY SRI. ARUN K.S., HIGH COURT GOVERNMENT PLEADER FOR RESPONDENT NOs.1 AND 2, NOTICE SERVED ON RESPONDENT NO.3 AND UNREPRESENTED)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 24.03.2017 PASSED BY 2^ND RESPONDENTDISTRICT COMMISSIONER OF STAMPS AND DEPUTY REGISTRAR D.K., MANGALORE ORDER NUMBER: COURT IMPOUND 23/2016-17 TO AN EXTENT OF REDUCING THE PAYMENT OF PENALTY FROM 10 TIMES TO 4 TIMES OF AGREEMENT DATED 30.01.2009 AND REDUCING THE PAYMENT OF PENALTY FROM 10 TIMES TO 3 TIMES ON AGREEMENT DATED 14.01.2010 VIDE ANNEXURE-A.

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W.P.NO.14246/2017:

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BETWEEN:

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M/S. MARIAN PROJECTS PVT. LTD., A COMPANY REGISTERED UNDER PROVISIONS OF THE COMPANIES ACT, 1956 AND HAVING ITS OFFICE AT RAMA BHAVAN COMPLEX, 3^RD FLOOR, KODIALBAIL, MANGALORE-575003 REPRESENTED BY ITS DIRECTOR AND AUTHORIZED SIGNATORY MR. NAVEEN CARDOZA AGED ABOUT 40 YEARS, S/O JOHN LAWRENCE CARDOZA,

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"CARDOZA", PARAMESHWARI NAGAR, 4^TH CROSS, SURATHKAL, MANGALORE TALUK-575003.

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…PETITIONER

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(BY SRI. AJITH A. SHETTY, ADVOCATE)

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AND:

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STATE OF KARNATAKA DEPARTMENT OF REVENUE, MULTI STORIED BUILDING, DR. AMBEDKAR VEEDHI, BANGALORE-560001.

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THE DISTRICT REGISTRAR FOR STAMPS OFFICE OF THE DEPUTY COMMISSIONER, DAKSHINA KANNADA DISTRICT, MANGALORE-575001.

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MR. WALTER O PINTO S/O LATE FRANCIS PINTO, AGED ABOUT 63 YEARS.

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MRS. WENDY ANN PINTO W/O MR. WALTER O PINTO, AGED ABOUT 64 YEARS, RESPONDENT NO.3 AND 4 ARE RESIDENTS OF R/O GREEN FIELDS, MORU KAVERI, POST KINNIGOLI, MANGALORE TALUK-575003 DAKSHINA KANNADA DISTRICT.

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… RESPONDENTS

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(BY SRI. ARUN K.S., HIGH COURT GOVERNMENT PLEADER FOR RESPONDENT NOs.1 AND 2, SRI. S. RAJASHEKAR, ADVOCATE FOR RESPONDENT NO.3)

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THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 24.03.2017 PASSED BY 2^ND RESPONDENTAUTHORITY UNDER SECTION 31 OF THE 'KARNATAKA STAMP ACT, 1957', VIDE PROCEEDING BEARING REFERENCE COURT/IMPOUND/23/2016-17, AS PER ANNEXURE-A TO THE WRIT PETITION, TO THE EXTENT OF CALCULATION OF

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QUANTUM OF DEFICIT STAMP DUTY AND THE RATE OF PENALTY IMPOSED THEREUPON AND ETC.

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THESE WRIT PETITIONS COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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**_W.P. No.14246/2017:_*

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This writ petition is filed challenging an Order dated 24.03.2017 passed by the respondent No.2 herein under Section 39 of the Karnataka Stamp Act, 1957 (henceforth referred to as 'Act of 1957') ordering the collection of duty and penalty of a sum of Rs.81,26,250/- on an agreement dated 30.10.2009 for developing and promoting an apartment building and a sum of Rs.5,98,000/- as duty and penalty on a Joint Development Agreement dated 14.10.2010. The learned counsel for the petitioner submitted that he would restrict the writ petition only insofar as the duty and penalty ordered in respect of the agreement dated 30.10.2009. Hence, the examination in the writ petition is restricted to the duty and penalty ordered in respect of the agreement dated 30-10-2009.

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* Corrected vide Court order dated 15.03.2023 passed in R.P.No.375/2021

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In a suit filed by the respondent Nos.2 and 3 herein in O.S.No.49/2011 before the Prl. Senior Civil Judge and CJM, Mangaluru, the petitioner furnished an Agreement For Developing And Promoting An Apartment Building dated 30.10.2009 and a Joint Development Agreement dated 14.10.2010. On the first agreement stamp of Rs.200/- was paid, while on the 2^nd agreement a sum of Rs.500/- was paid. When these documents were sought to be marked, it was objected by the respondent Nos.2 and 3 herein on the ground that the said documents were not duly stamped. The petitioner and defendant Nos.5 and 6 filed an application under Section 151 of CPC to refer the aforesaid documents for adjudication of proper stamp duty. The Trial Court in exercise of its power under Section 34 of the Act of 1957 passed an order dated 04.03.2017 and referred the documents to the respondent No.2 for adjudication of proper stamp duty. Upon such reference, and in response to the notice issued by the respondent No.2, the petitioner and defendant Nos.5 and 6 submitted their written explanations pointing out that the

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non payment of stamp duty was not deliberate but was unintentional.

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After reference by the Civil Court as aforesaid,

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the respondent No.2 took into account the value of the construction per square feet at Rs.1900/- mentioned in the agreement dated 30.10.2009 and arrived at a sum of Rs.16,25,45,000/- as the value of the construction and assessed the stamp duty payable @ 1% of the aforesaid amount and ordered the petitioner to pay duty of Rs.16,25,250/-. It also directed the collection of four times the duty as penalty in respect of the agreement dated 30.10.2009.

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In so far as the Joint Development Agreement dated 14.10.2010, the respondent No.2 noticed that the maximum stamp duty payable on a Joint Development Agreement as on 14.10.2010 was Rs.1,50,000/- and the petitioner had paid Rs.500/- as stamp duty. Therefore, the respondent No.2 ordered the collection of the deficit stamp

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duty of Rs.1,49,500/- and imposed 3 times of the duty as penalty.

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The petitioner has therefore presented this petition but restricted the challenge only insofar as it relates to the collection of duty and penalty on the agreement dated 30.10.2009.

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The learned counsel contended that as on the date when the agreement dated 30.10.2009 was entered into, Article 5(f) of the Act of 1957 provided the basis for

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determination of stamp duty which is as follows:

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(f) If relating to	One rupee for every one
construction or	hundred rupees or part
development or sale of an	thereof on the market
immovable property,	value of the property or
including a multi-unit	the estimated cost of
house or building or unit of	construction or proposed
apartment or flat or	construction or
portion of a multi-storied	development or proposed
building by a person	development of the
having a stipulation that	property, as the case
after construction or	may be, (which is the
development, such	subject matter of such
property shall be held	transfer under the
jointly or severally by that	agreement in accordance
person and the owner or	with the provisions of
lessee, as the case may be	section 28 of the
of such property, or that it	Karnataka Stamp Act,
shall be sold jointly or	1957) or on the
severally them or that a	consideration for such
part of it shall be held	transfer whichever is

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jointly or severally by	higher.
them and the remaining
part thereof shall be sold
jointly or severally by them.

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He, therefore, contended that the respondent

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No.2 must have either taken into consideration the market value of the property or the estimated cost of construction or proposed construction or development or proposed development of the property or on the consideration for such transfer whichever is higher. He contended that the respondent No.2 could not take all of them together to arrive at the relevant factor for determination of the stamp duty. He further contended that the sum of Rs.1,900/- per sq.ft. mentioned in the agreement dated 30.10.2009 was the cost that had to be paid for the shortfall in the owners constructed area and the sum of Rs.1900/- included the cost of the land, cost of construction of the building as well as other incidental costs. He, therefore, contended that the respondent No.2 must have taken into consideration either the amount paid under the agreement as refundable advance or the value of the owners constructed area at the

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rate of Rs.1,900/- per sq.ft. or the value of the landed property measuring 73 cents at the guidance value which was a sum of Rs.1,20,000/- per cent. He further contended that 30% of the total owner's constructed area was 14300 sq. feet and therefore 70% of the developers constructed area would be 33367 sq feet, which alone had to be taken into consideration for the purpose of determining the duty payable. Either way, he submitted that the petitioner was not liable to pay the stamp duty as assessed by the respondent No.2.

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The High Court Government Pleader,

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representing the official respondents submitted that the agreement dated 30.10.2009 itself indicated the cost per sq.ft. that was developed as Rs.1900/- and therefore, the respondent No.2 was justified in determining the stamp duty on that basis. The respondent Nos.2 and 3 herein reiterated the contentions of the learned High Court Government Pleader.

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I have considered the arguments canvassed by

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the learned counsel for both the parties.

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The agreement dated 30.10.2009 disclosed that the subject matter of the transaction was 73 cents of land. The respondent No.2 has found that the total area of construction was 7950.72 sq.mts. The typical floor plan which is part of the agreement, shows that the super built area of the flats in each floor adds upto 10750 sq.ft. The petitioner had proposed to construct seven (7) upper floors. Therefore, the total super built up area of the apartment was 75,250 sq.ft. In addition, there could be construction of the common areas and therefore, the respondent No.2 was right in holding that the total super built area was 7950.72 sq. mtrs. which must be based on the plan/licence that was admittedly sanctioned that was in force upto February 2010. The contention of the petitioners that the total constructed area was 47667 sq.ft. is belied by the Annexure-E enclosed with the writ petition which shows the super built up area of the flats as 50400 sq.ft. Curiously, the petitioner has not furnished the

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plan/licence to put up construction, which would have given a clear picture of the area of construction. The petitioner was required to disclose these details in the agreement dated 30.10.2009, in view of Section 28 of the Act of 1957. In that view, the reasoning of the respondent No.2 in adopting the cost of construction on the basis of the cost per sq.ft. mentioned in the sale agreement was just and proper. The contention that this price of Rs.1900/- per square feet included the cost of land/cost of construction/profit margin is palpably false as that price was agreed to be paid to the petitioner or the owners as the case may be in case of shortfall or excess in the owners constructed area. If the developer was compensating the owner, he would obviously not be paying him the cost of the land or the profit and when the owner was paying for the excess area, he would be paying only the cost and vice versa, the owner would not be paying for the cost of the land but only the cost of construction.

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Having held as above, the next question is the determination of the duty. In view of Article 5(f) of the Act

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of 1957, what is to be changed is the property 'transferred', which in the present case is 70% of the development/construction. Therefore, the stamp duty was to be determined on 70% of 7950.72 sq.mts. @ Rs.1900/per sq.ft. = Rs.11,37,81,163=00. The stamp duty payable was Rs.11,37,812=00. In the present case, the respondent No.2 has imposed four times the duty as penalty without any justification. It is not the case of the respondents that the petitioner had deliberately avoided to pay the stamp duty. On the contrary, the petitioner has volunteered to pay the duty as applicable. Hence, instead of remitting the case back to the respondent No.2 to justify the imposition of penalty of four times, this Court deems it appropriate to reduce the rate of penalty at an amount equal to the duty payable.

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Hence this writ petition is allowed in part. The impugned order passed by the respondent no.2 is modified and the petitioners are directed to pay duty of a sum of Rs.11,37,812-00 and an equal amount of Rs.11,37,812-00 as penalty on the agreement dated 30.10.2009. In so far

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as the Joint Development Agreement dated 14.10.2010 is concerned, the duty and penalty as imposed by the respondent No.2 is not altered.

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**_IN W.P.NO.25062/2017:_*

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This writ petition is filed challenging the extent of reduced penalty imposed by respondent No.2 on the documents dated 30.10.2009 and 14.10.2010, that are the subject matter of * W.P.No.14246/2017.

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The petitioner herein was the plaintiff in O.S. No.49/2011. It is his case that when the documents referred above was referred by the Civil Court to the respondent No.2, the latter ought to have collected the applicable duty with penalty of ten times the duty. The learned counsel appearing for the petitioner contended that the respondent No.2 had no discretion to impose reduced penalty and therefore, prayed that the penalty imposed by respondent No.2 may be enhanced.

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The learned counsel relied upon the judgment of a Division Bench of this Court in DIGAMBAR WARTY AND

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* Corrected vide Court order dated 15.03.2023 passed in R.P.No.375/2021

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OTHERS vs. DISTRICT REGISTRAR, BANGALORE URBAN DISTRICT AND ANOTHER, ILR 2013 KAR 2099. He also relied upon the judgment of the Apex Court in the case of GANGAPPA AND ANOTHER vs. FAKKIRAPPA, (2019) 3 SCC 788.

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Per contra, learned counsel appearing for the respondent No.3 contended that the respondent No.2 was entitled to exercise discretion to impose penalty that could extend upto ten times the duty. He contended that the petitioner has not challenged the order of the Civil Court in O.S. No.49/2011 referring the two agreements for determination of proper duty and penalty. He contended that the rule requiring imposition of ten times of duty as penalty was not inviolable but depended upon facts and circumstances of each case. In this regard, he relied upon a judgment of the Hon'ble Supreme Court in TRUSTEES

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OF H.C. DHANDA TRUST vs. STATE OF MADHYA PRADESH AND OTHERS in CIVIL APPEAL NOS. 31953196 OF 2020. He, therefore, contended that the

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respondent No.2 was justified in not imposing ten times of duty as penalty.

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The learned High Court Government Pleader, on the other hand, submitted that a legal conundrum prevailed between Section 34 and Section 39 of the Act of 1957 and that the efforts are on to reconcile this. He submitted that the respondent No.2 has the discretion under Section 39 of the Act of 1957 to impose lesser penalty than ten times of the duty.

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I have considered the submissions of the

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learned counsel for the parties.

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This Court is mindful of the fact that the petitioner has not challenged the order of the Civil Court referring the documents to the respondent No.2 for determination of proper duty and collection of duty and penalty. What is challenged in the present petition is the rate of penalty imposed.

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20. The Division Bench in DIGAMBAR WARTY

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(supra) was considering a case where the Deputy Registrar had initiated proceedings for determination of the stamp duty payable. This Court after considering all the relevant provisions of the Act of 1957 held as follows :

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"Therefore, it prescribes that after determining the duty payable on such instrument, to collect the duty with ten times penalty and then transmit the document to the Deputy Commissioner with duty and penalty so collected. Thereafter, a power is conferred on the Deputy Commissioner under Section 38 of the Act to hold an enquiry after giving an opportunity to the person who has paid duty and penalty to extend the benefit of reduction of penalty. Such a reduction in penalty is available to both the documents i.e., tendered before the Civil Court or produced directly before the Deputy Commissioner under Section 33."

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In the present case, the Civil Court had referred the documents for determination of duty and penalty, while in fact, it must have collected the duty and ten times the duty as penalty and must have then referred it to the respondent no.2, as provided under Section 37 of

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the Act of 1957. However, this Order is not challenged till date. Therefore, the respondent no.2 was vested with the jurisdiction under Section 38 of the Act of 1957 and waive off the penalty if it exceeded Rs.5/- or he could exercise power under Section 39 of the Act of 1957 and pass an Order imposing penalty that could extend upto ten times. Therefore, the respondent no.2 was well within his power in imposing penalty lesser than ten times. This Court has noticed in * W.P.No.14246/2017 that the petitioner did not deliberately attempt to avoid the stamp duty and this Court reduced the penalty from four times the duty to one time. Hence this writ petition is rejected.

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Sd/JUDGE

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hnm

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* Corrected vide Court order dated 15.03.2023 passed in R.P.No.375/2021

M/S. Marian Projects Pvt. Ltd. v. State of Karnataka

Case brief

What is this about?

What did the court decide?

M/S. Marian Projects Pvt. Ltd. v. State of Karnataka

Case brief

What is this about?

What did the court decide?

What the court decided

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