Partly allowed

Shri Manjunath K v. Shri H R Ravichandra

Karnataka HC3 Apr 2024WP/14182/2020

Case brief

AI extract

What is this about?

This writ petition challenged a trial court order rejecting an application to impound an insufficiently stamped sale agreement. The High Court held that courts retain jurisdiction to collect stamp duty and penalty even after admission in evidence, distinguishing admissibility from acting upon the document, and directed payment of duty plus an equivalent penalty.

What did the court decide?

Impugned order set aside; application allowed in part directing plaintiff to pay applicable stamp duty and an equivalent amount as penalty.

Shri Manjunath K Vs Shri H R Ravichandra — Cheque Dishonour | Karnataka HC (2024)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 3^RD DAY OF APRIL, 2024

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BEFORE

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THE HON'BLE MR JUSTICE R. NATARAJ WRIT PETITION NO. 14182 OF 2020 (GM-CPC)

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BETWEEN:

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SHRI MANJUNATH K., S/O R.K. MURTHY, AGED ABOUT 62 YEARS, R/A NO.KUMAR NURSERY, NEW BANK COLONY, KONANAKUNTE, BENGALURU 560062.

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…PETITIONER

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(BY SRI. PRAKASH T. HEBBAR, ADVOCATE)

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AND:

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SHRI H.R. RAVICHANDRA S/O LATE RAJASHEKAR REDDY, AGED ABOUT 51 YEARS, R/A NO.748, 18^TH MAIN, 6^TH BLOCK, KORAMAGNALA, BENGALURU-560095.

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Digitally signed by MARKONAHALLI RAMU PRIYA Location: HIGH COURT OF KARNATAKA

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SHRI SRIDHAR L., S/O SHRI K.B. LAKSHMAN, AGED ABOUT 41 YEARS, R/A NO.KUMAR NURSERY, NEW BANK COLONY, KONANAKUNTE, BENGALURU-560062.

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…RESPONDENTS

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(BY SRI. H.S.DWARKANATH, ADVOCATE FOR RESPONDENT NO.1; SRI. H.R.RAGHU, ADVOCATE FOR RESPONDENT NO.2)

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THIS WP IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA PRAYING TO CALL FOR THE RECORDS ON THE FILE OF THE HON’BLE LXXV ADDITIONAL CITY CIVIL AND

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SESSIONS JUDGE AT BENGALURU ON IA NO.6 IN O.S.NO.2568/2013 AND PERUSE THE SAME, HEAR THE PARTIES AND GRANT THE FOLLOWING RELIEFS TO THE PETITIONER AS AGAINST THE FIRST RESPONDENT AND SET ASIDE THE IMPUGNED ORDER DATED 30.06.2020 PASSED BY THE HON’BLE LXXV ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AT BENGALURU ON I.A NO.6 IN O.S.NO.2568/2013 AS PER ANNEXURE-A AND ALLOW THE I.A AS PRAYED FOR.

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THIS PETITION, COMING ON FOR DICTATING ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The Defendant No.1 in O.S. No.2568/2013 on the file

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of the LXXV Additional City Civil and Sessions Judge, Bengaluru City, (henceforth referred to as ‘the Trial Court’) has filed this writ petition challenging an order dated 30.06.2020 passed therein by which it rejected an application (I.A. No.VI) filed by him under Sections 33 and 34 of the Karnataka Stamp Act, 1957 (for short, 'the Act, 1957').

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The parties shall henceforth be referred to as

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they were arrayed before the Trial Court. The petitioner herein was the defendant No.1 while the respondent No.1

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herein was the plaintiff and respondent No.2 was the defendant No.2 in the suit.

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The suit in O.S. No.2568/2013 was filed for

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specific performance of an agreement of sale dated 05.05.2008 allegedly executed by the defendants in favour of the plaintiff in respect of the suit schedule property.

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The defendant No.1 filed his written statement admitting the execution of the agreement dated 05.05.2008 but contended that the said agreement was not duly stamped as possession of the suit property was agreed to be delivered before the execution of the sale deed. He further contended that the defendants were always ready and willing to perform their part of the contract and the same was indicated to the plaintiff in terms of their reply notice but the plaintiff did not come forward to conclude his part of the contract. However, he claimed that after three years from the date of receipt of the reply, the plaintiff had filed the suit for specific performance. He contended that it was the plaintiff who

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was responsible for not concluding the transaction and hence, the plaintiff was not entitled to any reliefs in the suit. The defendant No.1 further referred to clause No.13 in the sale agreement dated 05.05.2008 which provided for refund of the earnest money paid along with interest stated therein. He therefore, contends that the plaintiff was not entitled to specific performance of the contract.

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The defendant No.2 also filed a separate written statement admitting the execution of the sale agreement dated 05.05.2008. He contended inter alia that under the sale agreement dated 05.05.2008, the possession of the suit property was to be delivered before the execution of the sale deed and therefore, the document was compulsorily registrable with effect from 24.09.2001. Therefore, he contended that the agreement of sale was unenforceable in law. He further contended that as per the agreement dated 05.05.2008, the plaintiff was given six months time to clear the pending litigation and since the plaintiff did not take any steps in that regard, the

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plaintiff has lost the right to seek for specific performance of the agreement of sale. The defendant No.2 raised several other contentions and claimed that the plaintiff was not entitled to any reliefs in the suit.

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Based on these contentions, the Trial Court framed issues and set down the case for trial. The plaintiff was examined as PW.1 and he marked several documents amongst which the agreement of sale dated 05.05.2008 was marked as Ex.P1, as the counsel for defendants was absent on the said date and no objection was raised against marking the document. Later, the defendants filed an application (I.A. No.VI) under Sections 33 and 34 of the Act, 1957 to impound the agreement of sale dated 05.05.2008 and to call upon the plaintiff to pay necessary duty and penalty on the said document. This application was opposed by the plaintiff who contended that once a document was marked in evidence, there was no question of revisiting the said document and the admissibility of the document cannot be questioned, even if sufficient stamp

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duty was not paid thereon. The Trial Court relied upon the judgment of the Hon’ble Apex Court in the case of

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Shyamal Kumar Roy v. Sushil Kumar Agarwal [AIR 2007 SC 637] where it relied upon its earlier decision in Javer Chand and others v. Pukhraj Surana [AIR 1961

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SC 1655] where it was held " Once a document has been

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marked as an exhibit in the case and the trial has proceeded all along on the footing that the document was an exhibit in the case and has been used by the parties in examination and cross-examination of their witnesses, Section 36 of the Stamp Act comes into operation. Once a document has been admitted in evidence, as aforesaid, it is not open either to the trial court itself or to a court of appeal or revision to go behind that order. Such an order is not one of those judicial orders which are liable to be reviewed or revised by the same court or a court of superior jurisdiction." The Trial Court relied upon a judgment of coordinate Bench of this Court in Sri R.

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Mahesh and Another v. Sri B.P. Venugopal [ILR 2018

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Kar 3029] where it was held that once a document is

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marked in evidence, there was no question of the defendants raising objections regarding sufficiency of the stamp duty paid thereon and to impound the said document. Consequently, the Trial Court rejected the application (I.A No.VI) in terms of the impugned order.

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Being aggrieved by the impugned order, the

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defendant No.1 is before this Court in this petition.

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Learned counsel for the petitioner contended that once a document is marked without objection, no doubt the question regarding the admissibility of the document on the ground that sufficient stamp duty was not paid thereon, cannot be raised. However, he contended that the Court does not loose jurisdiction to impound the document for collection of proper duty and penalty in view of Section 33 of the Act, 1957. He further contended that a Division Bench of this Court in Digambar Warty and others v. District Registrar, Bangalore Urban District and another [ILR 2013 KAR

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2099] had held that once a document which is

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insufficiently stamped is produced before the Court, the Court is bound to impound it and also collect penalty which is ten times the stamp duty payable. He contended that the Division Bench held that there was no discretion left with the Court to impose any stamp duty lesser than 10 times the stamp duty as penalty. He further relied upon the judgment of the coordinate Bench of this Court in Shri. K. Dinesh and others vs. Shri. Kumaraswamy and others [W.P. No.1428/2009 and connected cases decided on 30.08.2010] where it was held that the Court does not loose jurisdiction to collect the duty and penalty on a document which is marked in evidence.

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Per contra, the learned counsel for the plaintiff / respondent No.1 contended that once a document is marked in evidence, the question of going back and reconsidering the question whether proper stamp duty was paid or not does not arise. He contends that the right to collect duty and penalty arises once the document is produced before the Court and if the Court had failed to

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exercise jurisdiction, then it looses its right to call upon the person producing it to pay the stamp duty. In this regard, he relied upon judgments of coordinate Bench/es of this Court in Sri. Ninganagouda v. Smt. Kalaubai and others [ILR 2011 KAR 760] and Sri. H. Krishnappa v. Sri. M.D. Ashwathnarayan Singh [AIR 2011 Kar 128]. He also relied upon the judgment of the Hon'ble Apex Court in Javer Chand's case , referred supra and contended that the Court had lost its right to impound the document to collect duty and penalty on the said agreement.

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I have considered the submissions made by the learned counsel for the defendant No.1 / petitioner as well as the learned counsel for the plaintiff / respondent No.1.

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In the case on hand, the document in question is an agreement of sale dated 05.05.2008 in terms of which the defendants had agreed to sell the suit property for a total sale consideration of Rs.14,33,25,000/- and had received a sum of Rs.2,00,00,000/- as part of the agreed

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sale consideration. The agreement provided that the possession of the property would be delivered on the date of the agreement. This therefore meant that the possession of the property would be delivered before the parties entered into a deed of absolute sale and therefore the stamp duty was ordinarily payable under Article 5(e)(i)

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of the Act, 1957. Therefore, it was an insufficiently stamped document as it was drawn up on a stamp paper of Rs.200/-. It is not in dispute that the said agreement was marked in evidence as Ex-P1 and no objection was raised by the defendants against marking it. However, there is nothing to show that the Trial Court had applied its mind to consider whether the document was duly stamped or not. The seminal question is whether the Court has the power to direct payment of stamp duty and penalty, after a document is marked in evidence without any objection by the opposing side.

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In order to understand the scope, purpose and purport of the law relating to collection of deficit stamp

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duty on instruments in the State of Karnataka and how insufficiently stamped documents are to be dealt with, the provisions of the following Sections of the Act, 1957 deserve to be noticed.

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" 3 : Instruments chargeable with duty.- Subject to the provisions of this Act and the exemptions contained in the Schedule, the following instruments shall be chargeable with duty of the amount indicated in that schedule as the proper duty therefor, respectively, that is to say,—

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(a) every instrument mentioned in that schedule which, not having been previously executed by any person, is executed in the territories of the State of Karnataka on or after the commencement of this Act; and

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(b) every instrument mentioned in that schedule which, not having been previously executed by any person, is executed out of the State of Karnataka on or after that day, relates to any property situate, or to any matter or thing done or to be done, in the territories of the State of Karnataka and is received in the territories of the State of Karnataka:

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Provided that no duty shall be chargeable in respect of,—

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(1) any instrument, executed by, or on behalf of, or in favour of, the State Government in cases where, but for this exemption, the State Government would be liable to pay the duty chargeable in respect of such instrument;

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(2) any instrument for sale, transfer or other disposition, either absolutely or by way of mortgage or otherwise, of any ship or vessel, or any part, interest, share or property of or in any ship or vessel registered under the Merchant Shipping Act, 1958.

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Explanation. - Where no proper duty has been paid on the original of an instrument which is chargeable with an amount indicated in the Schedule as proper duty therefor, then a copy of such instrument whether certified or not and whether a facsimile image or otherwise of the original shall be chargeable with duty of an amount which is indicated in Schedule as proper duty for the original of such instrument, and all the provisions of this chapter and Chapters IV, VI, VII and VIII of this Act shall mutatis mutandis be applicable to such copy of the original.

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17. Instruments executed in the State of Karnataka. - All instruments chargeable with duty and executed by any person in the State of Karnataka shall be stamped before or at the time of execution.

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Provided that nothing in this section shall apply to an instrument in respect of which stamp duty has been paid under Section 10-A.

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31. Adjudication as to proper stamps.- (1) When any instrument, whether executed or not and whether previously stamped or not is brought to the Deputy Commissioner, and the person bringing it applies to have the opinion of that officer as to the duty (if any) with which it is chargeable, and pays a fee of one hundred rupees, the Deputy Commissioner shall determine the duty (if any) with which, in his judgment, the instrument is chargeable.

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(2) For this purpose the Deputy Commissioner may require to be furnished with an abstract of the instrument, and also with such affidavit or other evidence as he may deem necessary to prove that all the facts and circumstances affecting the chargeability of the instrument with duty, or the amount of the duty with which it is chargeable, are fully and truly set forth therein, and may refuse to

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proceed upon any such application, until such abstract and evidence have been furnished accordingly:

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Provided that-

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(a) no evidence furnished in pursuance of this section shall be used against any person in any civil proceeding except in any enquiry as to the duty with which the instrument to which it relates is chargeable; and

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(b) every person by whom any such evidence is furnished, shall, on payment of the full duty with which the instrument to which it relates, is chargeable, be relieved from any penalty which he may have incurred under this Act by reason of the omission to state truly in such instrument any of the facts or circumstances aforesaid.

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32. Certificate by Deputy Commissioner.- (1) When an instrument brought to the Deputy Commissioner under section 31, is in his opinion, one of a description chargeable with duty, and

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(a) the Deputy Commissioner determines that it is already fully stamped, or

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(b) the duty determined by the Deputy Commissioner under section 31, or such a

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sum as, with the duty already paid in respect of the instrument, is equal to the duty so determined, has been paid,

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the Deputy Commissioner shall certify by endorsement on such instrument that the full duty stating the amount with which it is chargeable has been paid.

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(2) When such instrument is, in his opinion, not chargeable with duty, the Deputy Commissioner shall certify in manner aforesaid that such instrument is not so chargeable,

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(3) Subject to any orders made under Chapter VI, any instrument upon which an endorsement has been made under this section shall be deemed to be duly stamped or not chargeable with duty, as the case may be; and, if chargeable with duty, shall be receivable in evidence or otherwise, and may be acted upon and registered as if it had been originally duly stamped:

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Provided that nothing in this section shall authorise the Deputy Commissioner to endorse,-

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(a) any instrument executed or first executed in India and brought to him after the expiration of one month from the date of its execution, or first execution, as the case may be;

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(b) any instrument executed or first executed out of India and brought to him after the expiration of three months after it has been first received in the State of Karnataka; or

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(c) any instrument chargeable with a duty not exceeding fifteen naye paise or a mortgage of crop Article 35 of the Schedule chargeable under clause (a) or (b) of section 3 with a duty of twenty-five naye paise, when brought to him, after the execution thereof, on paper not duly stamped.

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33. Examination and impounding of

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instruments.- (1) Every person having by law or consent of parties authority to receive evidence, and every person in-charge of a public office, except an officer of police, before whom any instrument, chargeable in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly stamped, impound the same.

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(2) For that purpose every such person shall examine every instrument so chargeable and so produced or coming before him, in order to ascertain whether it is stamped with a stamp of the value and description required by the law in force in the State

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of Karnataka when such instrument was executed or first executed:

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Provided that,—

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(a) nothing herein contained shall be deemed to require any Magistrate or Judge of a Criminal Court to examine or impound, if he does not think fit so to do, any instrument coming before him in the course of any proceeding other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898;

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(b) in the case of a Judge of the High Court, the duty of examining and impounding any instrument under this section may be delegated to such officer as the Court appoints in this behalf.

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(3) For the purposes of this section, in cases of doubt, the Government may determine,—

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(a) what offices shall be deemed to be public offices; and

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(b) who shall be deemed to be persons in charge of public offices.

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34. Instruments not duly stamped inadmissible

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in evidence, etc.- No instrument chargeable with

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duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon , registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped:

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Provided that,—

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(a) any such instrument not being an instrument chargeable with a duty not exceeding fifteen naye paise only, or a mortgage of crop Article 35 of the Schedule chargeable under clauses (a) and (b) of Section 3 with a duty of twenty-five naye paise shall, subject to all just exceptions, be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion;

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(b) where a contract or agreement of any kind is effected by correspondence consisting of two or more letters and any one of the letters bears the proper stamp, the contract

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or agreement shall be deemed to be duly stamped;

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(c) nothing herein contained shall prevent the admission of any instrument in evidence in any proceeding in a Criminal Court, other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898;

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(d) nothing herein contained shall prevent the admission of any instrument in any Court when such instrument has been executed by or on behalf of the Government, or where it bears the certificate of the Deputy Commissioner as provided by section 32 or any other provision of this Act and such certificate has not been revised in exercise of the powers conferred by the provisions of Chapter VI .

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35. Admission of instrument where not to be questioned.- Where an instrument has been admitted in evidence such admission shall not, except as provided in section 58, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped.

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36. Admission of improperly stamped instruments.- The State Government may make rules providing that, where an instrument bears a stamp of sufficient amount but of improper description, it may, on payment of the duty with which the same is chargeable, be certified to be duly stamped, and any instrument so certified shall then be deemed to have been duly stamped as from the date of its execution.

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37. Instruments impounded how dealt with.- (1) When the person impounding an instrument under section 33 has by law or consent of parties authority to receive evidence and admits such instrument in evidence upon payment of a penalty as provided by section 34 or of duty as provided by section 36, he shall send to the Deputy Commissioner an authenticated copy of such instrument, together with a certificate in writing, stating the amount of duty and penalty levied in respect thereof, and shall send such amount to the Deputy Commissioner or to such person as he may appoint in this behalf.

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(2) In every other case, the person so impounding an instrument shall send it in original to the Deputy Commissioner

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38. Deputy Commissioner's power to refund penalty paid under sub-section (1) of section

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37.- (1) When a copy of an instrument is sent to the Deputy Commissioner under sub-section (1) of Section 37, he may, if he thinks fit, refund any portion of the penalty in excess of five rupees which has been paid in respect of such instrument.

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(2) When such instrument has been impounded only because it has been written in contravention of section 13 or section 14, the Deputy Commissioner may refund the whole penalty so paid.

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39. Deputy Commissioner’s power to stamp instruments impounded.- (1) When the Deputy Commissioner impounds any instrument under Section 33, or receives any instrument sent to him under sub-section (2) of Section 37, not being an instrument chargeable with a duty not exceeding fifteen naye paise only or a mortgage of crop [Article 35 of the Schedule] chargeable under clause (a) or (b) of Section 3 with a duty of twenty-five naye paise, he shall adopt the following procedure:—

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(a) if he is of opinion that such instrument is duly stamped, or is not chargeable with duty, he shall certify by endorsement thereon that it is duly stamped, or that it is not so chargeable, as the case may be;

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(b) if he is of opinion that such instrument is chargeable with duty and is

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not duly stamped he shall require the payment of the proper duty or the amount required to make up the same, together with a penalty of five rupees; or if he thinks fit an amount not exceeding ten times the amount of the proper duty or of the deficient portion thereof, whether such amount exceeds or falls short of five rupees:

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Provided that, when such instrument has been impounded only because it has been written in contravention of Section 13 or Section 14, the Deputy Commissioner may, if he thinks fit, remit the whole penalty prescribed by this section.

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(2) Subject to any orders made under Chapter VI, every certificate under clause (a) of sub-section (1) shall, for the purposes of this Act be conclusive evidence of the matters stated therein.

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(3) Where an instrument has been sent to the Deputy Commissioner under sub-section (2) of Section 37, the Deputy Commissioner shall, when he has dealt with it as provided by this section, return it to the impounding officer.

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58. Revision of certain decisions of Courts regarding the sufficiency of stamps.- (1) When any Court in the exercise of its Civil or Revenue

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jurisdiction or any Criminal Court in any proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898, makes any order admitting any instrument in evidence as duly stamped or as not requiring a stamp, or upon payment of duty and a penalty under Section 34, the Court to which appeals lie from, or references are made by, such first mentioned Court may, of its own motion or on the application of the Deputy Commissioner, take such order into consideration.

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(2) If such Court, after such consideration, is of opinion that such instrument should not have been admitted in evidence without the payment of duty and penalty under section 34, or without the payment of a higher duty and penalty than those paid, it may record a declaration to that effect, and determine the amount of duty with which such instrument is chargeable, and may require any person in whose possession or power such instrument then is, to produce the same, and may impound the same when produced.

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(3) When any declaration has been recorded under sub-section (2), the Court recording the same shall send a copy thereof to the Deputy Commissioner and, where the instrument to which it relates has been impounded or is otherwise in the

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possession of such Court, shall also send him such instrument.

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(4) The Deputy Commissioner may thereupon, notwithstanding anything contained in the order admitting such instrument in evidence, or in any certificate granted under Section 41, or in Section 42, prosecute any person for any offence against the stamp law which the Deputy Commissioner considers him to have committed in respect of such instrument:

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Provided that,—

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(a) no such prosecution shall be instituted where the amount (including duty and penalty) which, according to the determination of such Court, was payable in respect of the instrument under Section 34, is paid to the Deputy Commissioner, unless he thinks that the offence was committed with an intention of evading payment of the proper duty;

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(b) except for the purpose of such prosecution, no declaration made under this section shall affect the validity of any order admitting any instrument in evidence, or of any certificate granted under Section 41."

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(emphasis supplied)

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A reading of Section 3 of the Act, 1957 makes it mandatory that stamp duty shall be paid on all instruments that are chargeable to duty as prescribed in the schedule. Section 31 of the Act, 1957 provides that if a person desires to get an opinion as to the correct duty payable on an instrument, he may apply to the Deputy Commissioner along with the prescribed fee and set out all reasons affecting the duty chargeable. On such application, the Deputy Commissioner shall give his opinion about the duty payable and also whether the duty paid thereon is sufficient and or that the instrument is not chargeable to any stamp duty. On payment of the full duty on the instrument as may be determined, the person applying would be relieved from payment of any penalty which he may incur under the Act, 1957. Under Section 32 of the Act, 1957, once the Deputy Commissioner gives his opinion and after the duty as determined by the Deputy Commissioner is paid, he would issue a certificate of payment of the actual duty paid or issue an endorsement that no stamp duty is payable thereon. Once

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such certificate is issued, then the instrument shall be received in evidence or otherwise, and may be acted upon and registered as if it had been originally duly stamped. This is however subject to the condition that if the instrument is executed in India, such endorsement shall be made within one month from the date of execution or if it is executed outside India within three months from the date of its receipt in the State of Karnataka. However, such endorsements shall not be made when the instrument is chargeable with duty not exceeding 0-15 paise or on a mortgage of a crop, chargeable with duty of 0-25 paise.

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Section 33 of the Act, 1957 imposes a duty on every person, who has the authority to receive evidence to examine every instrument so chargeable and so produced or coming before him, to ascertain whether it is stamped with a stamp of the value and description required by the law in force in the State of Karnataka when such instrument was executed or first executed. It therefore

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casts a compulsory obligation on such public officer to impound such insufficiently stamped document and proceed in accordance with law to collect the duty and penalty and forward the same to the Deputy Commissioner who could exercise power under Section 37 of the Act, 1957. The words 'to impound' ordinarily means

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'to retain possession of a document that is seized.' Therefore, the power of a Court to impound a document could be exercised only before the document is marked in evidence and once it is marked as an exhibit, the right to impound it is lost as, for all practical purposes the document belonged to the party marking it.

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Section 34 of the Act, 1957 imposes an embargo against any authority to receive any instrument as evidence, or allow such instrument to be acted upon unless such instrument is duly stamped. However, exceptions are carved out in respect of the mortgage of crop on which duty payable is 0-25 paise. Similarly the applicability of the general proposition, with which we are

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really not concerned in this petition and are therefore not adverted to. Under Section 35 of the Act, 1957, once an insufficiently stamped document is marked in evidence, such admissibility cannot be questioned except as provided in Section 58 of the Act, 1957.

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A coordinate Bench of this Court in the case of

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K.Amarnath v. Puttamma [ILR 1999 Kar 4634]

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recorded the degree of care and caution to be exercised by the Court and held:

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"11. A combined reading of Sections 33, 34, 35, 37 and 41 of the Karnataka Stamp Act requires the following procedure to be adopted by a Court while considering the question of admissibility of a document with reference to the Stamp Act: (a) when a document comes up before the Court, it has to examine and determine whether it is properly stamped. When the other side objects to it, the Court should consider such objection and hear both sides; (b) After hearing, if the Court comes to the conclusion that the document has been duly stamped, it shall proceed to admit the document into evidence; (c) on the other hand, if the Court comes to the conclusion that the document is not stamped

¶173

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or insufficiently stamped, it shall pass an order holding that the document is not duly stamped and determine the Stamp duty/deficit stamp duty and penalty to be paid and fix a date to enable the party who produces the document to pay the Stamp duty/deficit Stamp duty plus penalty; (d) if the party pays the duty and penalty the Court shall certify that proper amount of duty and penalty has been levied and record the name and address of the person paying the said duty and penalty and then admit the document in evidence as provided under Section 41(2); and the Court shall send an authenticated copy of the instrument to the District Registrar together with a Certificate and the amount collected as duty and penalty, as provided under Section 37(1); (e) if the party does not pay the duty and penalty, the Court will have to pass an order impounding the document and send the instrument in original, to the District Registrar for being dealt in accordance with law as per Section 37(2) of the Karnataka Stamp Act."

¶175

In Javer Chand's case referred supra relied

¶176

upon by the learned counsel for the respondent No.1, the Hon'ble Apex Court noticed that the document was marked in evidence and held, "..it is not, therefore, one of those

¶177

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cases where a document has been inadvertently admitted, without the court applying its mind to the question of its admissibility. Once a document has been marked as an exhibit in the case and the trial has proceeded all along on the footing that the document was an exhibit in the case and has been used by the parties in examination and cross-examination of their witnesses, Section 36 of the Stamp Act comes into operation. Once a document has been admitted in evidence, as aforesaid, it is not open either to the trial court itself or to a court of appeal or revision to go behind that order. Such an order is not one of those judicial orders which are liable to be reviewed or revised by the same court or a court of superior jurisdiction."

¶179

If we peruse Section 34 of the Act, 1957, a document not duly stamped shall not be "received in evidence" and "shall not be acted upon", "registered" or "authenticated".

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A coordinate Bench of this Court in the case of K.Dinesh referred supra dealt with the difference between admitting an “insufficiently stamped document as evidence” and allowing it “to be acted upon” and framed questions for its consideration, one of which was

¶182

"When a document which is chargeable with duty, under the Karnataka Stamp Act, 1957, but not duly stamped, has been admitted in evidence by a court, without any objection being raised, is the court obliged to act upon it for all purposes thereafter, without the requirement of payment of duty and penalty? As for instance, can the court direct the execution of a sale deed in specific performance of an agreement of sale, when the agreement is not duly stamped?"

¶183

It answered the above question as follows:

¶184

"A court is prohibited from admitting an instrument in evidence and a court and a public officer are prohibited from acting upon it. Thus, a court is prohibited from both admitting it in evidence and acting upon it. It follows that the acting upon is not included in the admission and that a document can be admitted in evidence but not be acted upon. If every document, upon admission, became

¶185

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automatically liable to be acted upon, the provision in Section 34 that an instrument chargeable with duty but not duly stamped, shall not be acted upon by the court, would be rendered redundant. To act upon an instrument is to give effect to it or enforce it. (See: Hindustan Steel Ltd. Case, supra and Bittan Bibi's case -ILR 1952(2) All 984 quoted with approval therein)."

¶187

Order XIII Rule 8 of the Code of Civil Procedure, 1908 fortifies this position.

¶188

"O XIII R 8: Court may order any - document to be impounded. Notwithstanding anything contained in Rule 5 or Rule 7 of this Order or in Order VII, the court may, if it sees sufficient cause, direct any document or book produced before it in any suit to be impounded and kept in the custody of an officer of the Court, for such period and subject to such conditions as the Court thinks fit."

¶189

It is thus clear that any document, produced in Court, may for sufficient reason, be impounded and dealt with as above. It may be before or even after a document is admitted in evidence. Therefore, on the above reasoning, though the admissibility of the document in question in WP 1428/2009, cannot be

¶190

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raised as rightly held by the court below however, the Court is precluded from acting upon it for any other purpose, unless duty and penalty are paid."

¶192

The Hon'ble Apex Court in the case of

¶193

N.N.Global Mercantile Private Limited v. Indo Unique

¶194

Flame Limited and Others [(2023) 7 SCC 1] has held as follows:

¶195

"93. The law, as contained in Section 33 read with Section 35 of the Stamp Act, would result in the following conclusions:

¶196

93.1. Every person having, by law or consent of parties, the authority to receive evidence, before whom, an instrument is produced, is duty-bound to immediately impound the same. This is upon his forming the opinion that the instrument is not duly stamped. In a case, where the instrument does not bear any stamp at all, when it is exigible to stamp duty, there can be little difficulty in the person forming the opinion that it is not duly stamped. No doubt, under Section 33(2), in cases of ambiguity, the person shall examine the instrument to arrive at the liability.

¶197

93.2. Apart from a person having authority to receive evidence, which, no doubt, would include a

¶198

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court and an arbitrator, every person in-charge of a public office, before whom, such instrument is produced or comes in the performance of his functions, has the duty to impound the unstamped or insufficiently stamped document, arises. This is no doubt after “examining” the instrument and ascertaining as to whether the instrument was stamped as required when the document was executed or first executed [see Section 33(2)]. One exception in Section 33 is an officer of the Police. In other words, the officer of the Police has no authority to impound an unstamped or insufficiently stamped document produced before him. No doubt, a criminal court is not under compulsion vide the proviso. Section 33, no doubt, authorises delegation of power.

¶200

93.3. Under Section 35, the law-giver has disabled the admission in evidence of an instrument not stamped or insufficiently stamped, for any purpose. This would include even a collateral purpose. This is in stark contrast with a document, which is compulsorily registerable but which is not registered. Under Section 49 of the Registration Act, 1908, an unregistered document may be used for proving a collateral transaction. Even this is impermissible, if the document is not stamped or insufficiently stamped. Section 35 further proceeds

¶201

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to declare that such an unstamped or insufficiently stamped document shall not be acted upon.

¶203

93.4. It is important to juxtapose the embargo cast on an unstamped document as aforesaid with Section 2(h) of the Contract Act. Section 2(h) of the Contract Act provides that an agreement, which is enforceable in law is a contract whereas Section 2(g), an agreement not enforceable is void. The words “enforceable in law” or “not enforceable in law”, understood in the context of Sections 33 and 35 of the Stamp Act, would mean that upon there being an occasion, which necessitates one of the parties to the agreement having to enforce the same through recourse to sanctions available in law, the same should be vouchsafed to him.

¶204

93.5. Ordinarily, agreements are enforced through actions in civil courts. Remedies may be sought before public authorities. Both the civil courts and the public authorities are tabooed from giving effect to an unstamped instrument. Section 33 does not give a choice to the person, who has authority by law, or with consent, to take evidence, or to any public officer, but to impound the agreement.

¶205

93.6. The unstamped or insufficiently stamped document cannot be used as evidence for any purpose. It would be inconceivable, as to how, it could be in the same breath, be found that an

¶206

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unstamped document is yet enforceable in law or that it is not enforceable in law. It is another matter that the parties may act upon it. Goods or services may change hands, for instance, under a document, which may be otherwise exigible to stamp duty. What is, however, relevant is that the State will not extend its protection, by appropriate sanctions. The rights, which would otherwise have been available, had the agreement been stamped, would remain frozen or rather they would not exist. We are further reinforced in our view, therefore, that the views expressed by this Court in Garware [Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ) 324] in para 22, following SMS Tea Estates [SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4 SCC (Civ) 777] , represent the correct position in law."

¶208

Therefore, though under Section 35 of the Act, 1957, the admissibility of the document cannot be questioned on the ground that sufficient duty was not paid, if a party is desirous to act upon it, he is bound to pay the stamp duty and penalty.

¶209

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A few other coordinate benches of this Court

¶212

were also of the same opinion and the same are referred below:

¶213

i) C.L.Harish Bhagavan v. Smt.Noor Ahmadi Khanum (WP No.1808/2012 decided on 05.03.2014);

¶214

ii) Syed Mohiddin v. Sonnappa and others (W.P.No.10947/2016 decided on 02.09.2022); and

¶215

iii) Zafarulla Khan v. Smt.R.K.Sujatha and others (W.P.No.47225/2016 decided on 29.08.2023).

¶216

However, as held by the Hon'ble Apex Court in

¶217

N.N.Global Mercantile Private Limited, referred supra,

¶218

admissibility of an instrument in evidence is different from acting upon it. The Court may refrain from acting upon an insufficiently stamped document and since the plaintiff in the instant case is suing for the specific performance of the agreement of sale dated 05.05.2008, he is bound to pay the duty and penalty as applicable. The judgment of a

¶219

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coordinate bench of this Court in Anil v. Babu [2023 (1) Kar.L.R 239] did not consider the purport of the words

¶221

“to act upon it” but held that “ the power to examine and impound the instrument is only when it is produced before the impounding officer and before the instrument is admitted in evidence. The power to impound the instrument is thereafter unavailable and this is clear from the wording of Section 35, which states the admission of the document cannot be questioned, except as provided under Section 58 of the Act ”. Therefore, in the light of the judgment of the Constitution Bench of the Hon'ble Apex

¶222

Court in N.N. Global Merchantile , referred supra, it is respectfully held that the judgment of coordinate Bench of this Court in the case of Anil referred supra, did not consider whether an insufficiently stamped instrument could still be acted upon.

¶223

In view of the aforesaid, it is held that once an insufficiently stamped document is admitted in evidence,

¶224

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the Court does not loose seisin over the document and it is

¶226

still entitled to collect the duty and penalty.

¶227

Now coming to the next question as to the amount of penalty that has to be collected, the Division bench of this Court in Digamber Warty referred supra held that the Court has no discretion but is bound to collect ten times the duty as penalty. However, the Hon'ble Apex Court in Gangappa and another v. Fakkirappa [(2019) 3 SCC 788] , considered a case of an insufficiently stamped agreement of sale with reference to the provisions of the Act, 1957 and upheld the view expressed by Division Bench of this Court in Digamber Warty referred supra . The Hon’ble Apex Court upheld the exercise of discretion of the Trial Court in relying upon the judgment of a coordinate Bench of this Court in K.Govinde Gowda v. Akkayamma [ILR 2011 Kar 4719] and held that levying double the amount of deficit stamp duty as penalty as done by the Trial Court would meet the ends of justice. Likewise, the Hon'ble Apex Court

¶228

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in Trustees of HC Dhanda Trust v. State of

¶231

Madhyapradesh and others [AIR 2020 SC 4349] held:

¶232

" 21. The purpose of penalty generally is a deterrence and not retribution. When a discretion is given to a public authority, such public authority should exercise such discretion reasonably and not in oppressive manner. The responsibility to exercise the discretion in reasonable manner lies more in cases where discretion vested by the statute is unfettered. Imposition of the extreme penalty i.e. ten times of the duty or deficient portion thereof cannot be based on the mere factum of evasion of duty. The reason such as fraud or deceit in order to deprive the Revenue or undue enrichment are relevant factors to arrive at a decision as to what should be the extent of penalty under Section 40(1)(b).

¶233

xxx

¶234

25. No other reasons have been given either by the Collector or by the High Court justifying the imposition of maximum penalty of ten times. It is not the case of Collector that the conduct of the appellant was dishonest or contumacious. The High Court in its judgment has noticed that although the resolution was passed on 06.04.2005 to execute the

¶235

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Deed of Transfer by Trustees in favour of Jogesh Dhanda and Ishan Dhanda, but later on they deliberately executed the deed in the name of Deed of Assent on a stamp paper of Rs.200/-. For the reason given by the Collector as well as by the High Court that there was intention to evade the stamp duty in describing the document as Deed of Assent the imposition of the penalty was called for but in the facts and circumstances and the reasons which have been given by the Collector of Stamps as noticed above we are satisfied that this was not a case of imposition of extreme penalty of ten times of deficiency of stamp duty. Taking into consideration all facts and circumstances of the case, we are of view that ends of justice will be served in reducing the penalty imposed to the extent of the half i.e. five times of deficiency in the stamp duty."

¶238

Though Hon’ble Apex Court was exercising its plenary power in imposing a lesser penalty, having regard to the fact that the transaction value under the impugned instrument was Rs.14,33,25,000/- and also having regard to the fact that discretion is vested with the Deputy Commissioner under Section 38 of the Act, 1957 to refund penalty in excess of Rs.5/-, this Court considers it

¶239

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appropriate to impose an equivalent amount of stamp duty as penalty as that would meet the ends of justice.

¶241

In view of the above, this petition is allowed in part and the impugned order dated 30.06.2020 passed by the LXXV Additional City Civil and Sessions Judge, Bengaluru, on I.A. No.VI in O.S. No.2568/2013 is set aside and the application (I.A. No.VI) filed by the defendant No.1 is allowed in part and the plaintiff is directed to pay the stamp duty as applicable and an equivalent amount of duty as penalty. Upon payment of stamp duty and penalty, the Trial Court shall proceed in accordance with Section 37 of the Act, 1957.

¶242

Sd/JUDGE

¶243

sma

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List No.: 1 Sl No.: 19

Shri Manjunath K v. Shri H R Ravichandra

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Shri Manjunath K v. Shri H R Ravichandra

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