Dismissed

V.Sivakumar v. Inspector General of

Madras HC1 Apr 2011WA/2407/2010

Case brief

AI extract

What is this about?

The High Court dismissed writ appeals challenging the Sub-Registrar's direction to assess stamp duty on a sale certificate. The Court held the sale certificate did not stem from a Direct Court Auction Tribunal sale nor was it a public auction exempting Section 47A, as the sale involved assignments by the original bidder. Orders remitted the matter to look at prevailing guideline values.

What did the court decide?

Writ appeals dismissed; parties liable to pay stamp duty based on market value as determined by the Registry under Section 47A.

V.Sivakumar Vs Inspector General of — Landlord and Tenant | Madras HC (2011)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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DATED : 01-04-2011

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CORAM :

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THE HONOURABLE MR. JUSTICE D. MURUGESAN and THE HONOURABLE MR. JUSTICE B. RAJENDRAN

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W.A. No. 2407 and 2408 of 2010

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V. Sivakumar .. Appellant in WA 2407/
Petitioner
1. S.K. Sengoda Gounder
2. S. Jegadeesan .. Appellants in WA 2408/
Petitioner
Versus
1. The Inspector General of Registration
Mylapore, Chennai – 600 004
2. The Sub Registrar
Suramangalam Sub Registrar Office
Salem District .. Respondents in both
the appeals/Respondents
Appeals filed under Clause 15 of the Letters Patent against the
common Order dated 09.06.2010 made in W.P. Nos. 30398 and 30399 of
2008 on the file of this Court presented under Article 226 of the
constitution of India to issue a writ of certiorarified Mandamus,
calling for the records of the 2nd respondent in P.Nos.140/07 and
139/07 respectively dated Nil and quash the same, directing the
respondent to release the sale certificate No.5/2007 and 2/2007 dated
24.12.2007 respectively, duly registered to the petitioner.

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For Appellants : Mr. K. Alagirisamy, Senior Counsel for Mr. P. Sukumar in both the appeals

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For Respondents : Mr. P. Gurunathan Government Advocate in both the appeals

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COMMON JUDGMENT

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B. RAJENDRAN, J

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https://hcservices.ecourts.gov.in/hcservices/ Both the writ appeals arise out of the orders dated 09.06.2010 made in WP Nos. 30398 and 30399 of 2008 passed by the learned single Judge and therefore they are disposed of by this common judgment.

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The facts relate to both the writ appeals are that originally, the property in dispute was owned by one Jawahar Mills Limited, hereinafter referred to as 'Mill'. The Mill availed loan facility with Indian Overseas Bank, Salem by mortgaging the property in question. In view of the default committed by the Mill in repayment of the loan amount, Indian Overseas Bank had initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as SARFAESI Act) by issuing notice under Section 13 (2) and possession of the property was also taken over by the bank. Thereafter, on 29.03.2004, the bank issued a publication in newspaper inviting tenders for sale of the property on 30.03.2005. In the tender called for by the bank, one V.S. Murugesan submitted his offer for purchase of the property and he was declared as the highest bidder for Rs.7,00.70,007/-. On being declared as the highest bidder, the said V.S. Murugesan deposited 10% of the amount as earnest money deposit namely Rs.70,07,007/- with the bank. Thereafter, the said Murugesan did not pay the balance amount to the bank. Even as per the admission of the parties, the said V.S. Murugesan had entered into a contract for assignment of his right to purchase the property with one B. Sivakumar on 03.10.2005, appellant in W.A. No. 2407 of 2010. Thereafter, on 20.06.2006, the assignee B. Sivakumar in turn entered into another agreement assigning his right to purchase the property in favour of the appellants in W.A. No. 2708 of 2010. Thereafter, WP No. 37139 of 2005 was filed before this Court by the said V.S. Murugan seeking for a direction to deposit the balance sum of Rs.6,30,63,000/- together with interest at 19.5% per annum with monthly rest from 13.05.2005 till the final payment and to direct the Indian Overseas Bank, Salem to issue sale certificate in his favour. By order dated 16.11.2006, this Court passed an order directing the Indian Overseas Bank, Salem Branch to issue sale certificate in favour of the nominee of the said V.S. Murugan, whose tender was accepted by the bank. Subsequently, on 18.11.2006, a sum of Rs.9,30,00,000/- was deposited before the Indian Overseas Bank In the meantime, as against this order dated 16.11.2006 in WP No. 37139 of 2005, an appeal was filed by the Union of the Mill in W.A. No. 50 of 2007 before the Division Bench of this Court. Before the Division Bench of this Court, a compromise was entered into between the parties and pursuant to the same, it was informed before this Court that the bank would issue sale certificate in favour of the purchaser or his nominees, which was also accepted by the Division Bench of this Court as it was only a compromise. Pursuant to such compromise, on 24.12.2007, two sale certificates namely Certificate Nos. 5 of 2007 and 2 of 2007 respectively were issued in favour of the appellants by the bank. On the strength of the sale certificates, the appellants presented the sale certificates for registration before the Sub-Registrar, Suramangalam, the second respondent in these writ appeals. The second respondent, returned the sale certificate presented for registration on the ground that the document does not contain stamp duty for its face value and directed the holders of the sale certificate to pay stamp duty for the face https://hcservices.ecourts.gov.in/hcservices/ value. Challenging the same, the appellants herein have filed W.P. Nos. 30398 and 30399 of 2008 before this Court by contending that since the property was purchased by them in an auction sale, they

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need not pay stamp duty inasmuch as the sale certificate was issued as per the directions of this Court. Further, the second respondent, by the proceedings, which was impugned in the writ petitions, directed the appellants herein to pay stamp duty at 8% on the value of the property mentioned in the sale certificates, apart from that, it was indicated that the matter would be referred under Section 47A (1) of the Indian Stamp Act for determination of the correct value of the property for payment of the correct stamp duty. It was also contended that the appellants are not liable to pay any stamp duty on the sale certificates since they have purchased the property by way of Court auction. Further, the indication made by the second respondent that the matter will be referred to under Section 47A (1) of the Indian Stamp Act for determination of the correct market value of the property does not arise as there is no need or necessity to ascertain the market value of the property inasmuch as the property was purchased in public auction. It was further contended that if at all, the second respondent can, at the best, seek for stamp duty on the value mentioned in the document and cannot refer the matter under Section 47A (1) of the Act.

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The learned single Judge held that the present appellants are not the auction purchasers or persons who have been allotted any property in the auction, whereas, they have purchased the property from the original auction purchaser, therefore, it amounts to a sale. Under those circumstances, the correct market value of the property has to be determined by the second respondent and the impugned proceedings of the second respondent are valid. Aggrieved by the orders passed by the learned single Judge, the present writ appeals are filed.

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Mr. Alagirisamy, learned senior counsel appearing for the appellants would only argue on one point namely even though the appellants are liable to pay stamp duty on the basis of the value shown in the document, which is styled as sale certificates, for registration, the respondents have no legal right to refer the matter under Section 47 (A) of the Indian Stamp Act for determination of the alleged correct value of the property as there is no under valuation of the property. The property was purchased by the nominee of the appellants in the auction purchase and such nomination has also been considered by this Court. Therefore, the sale certificates were issued in the name of the nominee namely the appellants, as per the directions of this Court. The sale is nothing but a sale in favour of the original auction purchaser in the name of his nominees and once it is a Court auction sale, the respondents are estopped from making any reference to refer the matter under Section 47 (A) of the Indian Stamp Act for determination of alleged correct value of the property inasmuch as there is no suppression of the correct market value or undervaluation.

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The learned Government Advocate appearing for the respondents would contend that the impugned order is very clear that the sale certificates cannot be treated as sale certificates executed https://hcservices.ecourts.gov.in/hcservices/ either by the Debts Recovery Tribunal or by any other Civil Court. Whereas, it is only a sale of the property made by an auction by the

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Indian Overseas Bank and that too by way of tender. Further, the auction purchaser was not the person who actually wants to get the document registered, whereas, the third parties, who have obtained the right assigned in their favour from the auction purchaser, have come forward to register the sale certificates in their favour, that too after two years from the date of alleged sale. Therefore, the sale certificates can be treated only as a sale and in that event, not only stamp duty is payable by the appellants, but the matter has to be referred by the registering authorities under Section 47A of the Indian Stamp Act for determination of the correct market value of the property. The guideline value prevailing during the year 2007 has to be taken into account as the sale certificates were sought to be registered only in the year 2007, whereas the auction purchase cum tender took place during the year 2005. Therefore, as rightly pointed out by the second respondent, the sale certificates can be entertained for registration only on the basis of the guideline value prevailing at that relevant point of time when it was presented for registration. The learned Government Advocate also submitted that the second respondent had got powers under Section 47A of the Indian Stamp Act to refer the matter for determination of the correct market value of the property when he had reasons to believe that the market value of the property has not been truly set out in the sale certificates presented for registration.

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We have heard the counsel for both sides and perused the materials placed on record. At the outset, it is pertinent to point out the dates and events, which are relevant for disposal of the appeals. For non-payment of amount due by the borrower, the Bank issued the notice a under Section 13 (2). Subsequently, the notice under Section 13 (4) of the Act was issued by the bank on 29.03.2004 inviting tenders for sale of the property on 30.03.2005. In the auction convened by the bank, one V.S. Murugan had submitted his offer to purchase the property and he was declared as highest bidder on 30.03.2005 for a bid of Rs.7,00,70,007/-. At this juncture, it has to be pointed out that the sale was originally brought by Indian Overseas Bank, Salem Main Branch and not by the Debts Recovery Tribunal or any other Court or Forum. The Bank has also invited tenders from the public and it is a public auction. This Court is not informed as to how many persons have participated in the tender. The fact remains that one V.S. Murugan was declared as the highest bidder in the auction and he offered Rs.7,00,70,007/- for purchasing the entire property in auction.

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It is seen from the records that on 03.10.2005 i.e., after seven months from the date of auction or date of declaration of V.S. Murugan as the highest bidder in the auction on 30.03.2005, the said V.S. Murugan had admittedly entered into a contract for assignment of his rights to purchase the property with V. Sivakumar, appellant in W.A. No. 2407 of 2010. The said V. Sivakumar in turn entered into an agreement on 20.06.2006 to assign his right to purchase the property in favour of the appellants in W.A. No. 2408 of 2010. When we https://hcservices.ecourts.gov.in/hcservices/ consider these two dates, it is clear that after the said V.S. Murugan was declared as the highest bidder by the bank, but conveniently, he had gone out scouting for prospective purchasers to

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buy the property from him till such time he entered into an agreement on 03.10.2005 with the appellant in W.A. No. 2407 of 2010. As mentioned above, after seven months from the date on which V.S. Murugan was declared as the highest bidder, he entered into an agreement assigning his rights in favour of Sivakumar, which can be construed as a purely private agreement for purchase of the property. Subsequently, after eight months the date namely 03.10.2005, on which date V. Sivakumar was assigned with the right to purchase the property, who himself was a nominee or representative or assignor by the original tenderer, he entered into an agreement dated 20.06.2006 to assign his right in favour of the appellants in WA No. 2408 of 2006. After all these things, literally, the property right was passed on from one hand to another. Thereafter, conveniently, the said V.S. Murugan had filed WP No. 37139 of 2005 before this Court seeking to call for the records relating to the letter dated 23.8.2005 of the second respondent and quash the same and consequently forbear the respondents from issuing fresh tender cum auction notification in respect of their secured assets which were taken symbolic possession from the Mill and consequently confirm the bid in favour of the petitioner pursuant to tender notification dated 29.3.2005. In this writ petition, on 16.11.2006, an order was passed by this Court directing the petitioners namely the original successful tenderer to deposit the balance sum of Rs.6,30,63,000/together with interest at the rate of 19.5% with monthly rest from 13.05.2005 till the final payment and directed the bank to issue sale certificates. Thereafter only, the appellants, along with the original tenderer, deposited the balance sum of Rs.8,59,92,933/- on 18.11.2006 and of course, exclusive of the security deposit, the total amount deposited was Rs.9,30,00,000/-. Therefore, it is clear that the total amount deposited towards this transaction by the appellants was Rs.9,30,00,000/- and not Rs.7,00,70,007/- with the bank. The total consideration, which the bank had received was Rs.9,30,00,000/- which is including interest, as directed by this Court and not the tender amount. Thereafter, the mill and other two unions filed W.A. No. 50 of 2007 as against the order passed in WP No. 37139 of 2005 dated 16.11.2006. In that writ appeal, the appellants herein namely Sengoda Gounder and Jegadeesan were impleaded as fifth and sixth respondent in MP No. 2 of 2007 dated 10.08.2007. During the pendency of the appeal, a joint compromise memo was filed by the parties to the appeal. The first respondent in the appeal namely Murugan had handed over Rs.3,93,18,505/- towards the dues of the workmen, which are extracted in the judgment as mentioned below:-

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Sl.No.	Draft	Date	Name of the	Bank Amount
			Karur Vysya Bank	Limited Rs.1,94,46,100
1	12986	6/12/07		/-
2	12987	6/12/07	Karur Vysya Bank	Limited Rs.55,53,900/-
			Axis Bank Limite	d Rs.1,43,18,505
3	65349	8/12/07		/-

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s.ecourts.gov.in/hcservices/

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https://hcservice

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This Court, after the compromise memo was filed by the parties, passed an order dated 10.12.2007 in W.A. No. 50 of 2007 as follows:-

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"In view of the above, the interim order passed on 10.01.2007 stands vacated. Respondents 2 and 3 are at liberty to issue the sale certificates to the auction purchaser or his nominee/s.

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This writ appeal is ordered in terms of the Joint Compromise Memo filed by the parties. No costs. Consequently, connected miscellaneous petitions are closed."

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It is clear from the order passed by the Division Bench of this Court that only due to a compromise memo signed and filed by the parties to the writ appeal, the appeal was disposed of. Such a compromise memo was entered into between the parties because if the amount was not paid or settled to the Mill, the sale certificate could not be executed by the bank in favour of either the auction tenderer or his nominees. Therefore, the order passed by the Division Bench cannot be construed that pursuant to the directions given by this Court, the right of the auction purchaser was recognised. On a compromise arrived at between the parties, this Court recorded it and only based on the compromise arrived at between the original tenderer along with the subsequent nominees, assignees or purchasers, who have agreed to pay the bank, the original tender value of Rs.7,00,70,007/with interest at the rate of 19.5% per annum with monthly rest from 13.05.2005 till the final payment was made. The amount was paid with the bank on 18.11.2006 totaling Rs.9,30,00,000/- and thereafter, in the appeal, they have also paid a further sum of Rs.3,96,18,505/thus totaling the present appellant, who stepped into the shoes of the auction purchaser or tenderer, have totally paid Rs.13,26,18,505/- in respect of the properties covered under both the sale certificates together. But now, conveniently, the appellants would contend before this Court that the sale was only an auction sale or a public sale or a public auction and there is no apprehension regarding the suppression of the stamp duty and therefore, the matter need not be referred to under Section 47A of the Indian Stamp Act. Meticulously, the appellants also say that they are ready to pay the stamp duty on the basis of the value mentioned in the sale certificate, which are only to the tune of Rs.7,00,70,007/- in sale certificates, which cannot be accepted.

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In the application filed before the second respondent, the appellant in W.A. No. 2408 of 2010 had stated that the Sub-Registrar collected Rs.4,59,445/- only towards registration fee, which is including Rs.100 towards registration charges, thereby making the value of the document at Rs.4,59,44,156/-. Even though the highest bid amount in the auction was for Rs.7,00,07,007/-, in the sale certificate, the value mentioned including interest was Rs.9,30,00,000/- as per the order of this Court.

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https://hcservices.ecourts.gov.in/hcservices/

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As far as the sale certificates, the value of the document, as stated by the appellants shows Rs.2,29,29,993/-. When we read the sale certificates, the wording used was "out of which a sum of Rs.4,59,44,156/- was paid by the nominees of the purchasers" as against the total sum of Rs.9.30 crores as ordered by this Court in WP No. 37139 of 2005, on 16.11.2006, out of which a sum of Rs.29,69,776/- was paid by the nominee purchaser and this was shown to be the value of the sale certificate. Now, the appellants want registration to be done at this value. Whereas, in the sale certificates the value shown was Rs.4,69,54,136/-. When we add these two values namely Rs.4,59,44,156 and Rs.29,69,776/-, it would come to Rs.4,89,13,932/- only. Whereas, even according to the actual tender, the sale was Rs.7,07,70,007/- thereby as per the court direction, the interest paid at the rate of Rs.22,90,0993/- adding the total to Rs.9.30 crores. Whereas, now, the appellants carefully say that they are not going to pay stamp duty or ready to pay the stamp duty at 8% on Rs.4,89,13,932/-, whereas, the total amount paid by them, including all the amount paid in the appeal would Rs.13,23,18,505/-.

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As per the dates and events submitted by the appellant themselves, the original tenderer had conveniently sought help from the other people namely the appellants herein. The right of assignment was exchanged between the appellants. Ultimately, when the Mill demanded repayment of certain amount due to their employees before the Division Bench of this Court in the W.A. No. 50 of 2007, a compromise was entered into with the workers of the mill. These developments takes place, particularly after filing of W.P. No. 37139 of 2005 only when the bank itself cancelled the tender notification. Therefore, can this sale be called as a one of public auction and transparent one? This Court is not appraised of the fact as to how the transaction took place between Sivakumar and V.S. Murugan and thereafter between V. Sivakumar and the appellants namely Sengoda Gounder and another. What was the amount transacted between them is not known to this Court, but definitely, it will not be less than Rs.13 crores ultimately paid. Even as per the calculations worked out above, it will be Rs.13,23,18,505/-. But unfortunately, the sale certificates mentions only Rs.9,30,00,000/- for which alone, the appellants valued the property. Conveniently, the appellants also paid 1% of registration charges namely Rs.4,59,445/- and it is not known as to how this amount was arrived at. Therefore, the learned single Judge has correctly pointed out in para No.9 of the order that V.S. Murugan, though has taken part in the auction, cannot be called as an auction purchaser as he had entered into various agreement with different parties and they in turn entered into different agreements with third parties to get the sale certificates in the name of alleged nominees. Therefore, definitely, this is not a case where the property can be treated as purchased in public auction.

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In this connection, the learned senior counsel for the appellant relied on the decision reported in (V.N. Devadoss vs. Chief https://hcservices.ecourts.gov.in/hcservices/ Revenue Control Officer-cum-Inspector and others) 2009 (7) SCC 438 for the proposition that for the purpose of sending the instrument for determination of the market value under Section 47A of the Indian

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Stamp Act, there must be a reason to believe that the market value of the property has not been truly set out in the instrument and it is not a routine procedure to be followed in respect of each and every document of conveyance presented for registration without any evidence to show lack of bona fides of the parties to the document by attempting fraudulently to undervalue the subject of conveyance with a view to evade payment of proper stamp duty and thereby cause loss to the Government.

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This decision will not be of any help to the appellants. In this case, the original tender itself was called on 30.03.2005, the auction was confirmed, but till 2006, the bid amount was not paid. Even in the year 2006, the amount paid was not the original auction amount of Rs.7,00,70,007/- but an enhancement amount paid by way of adding interest, amounting to Rs.9,30,00,000/-. Thereafter also, the sale certificates were not presented for registration as the sale certificates were not issued by the bank. The sale certificates were issued after a compromise entered into between the appellants and the workers of the Mill by making a payment of Rs.3,93,18,505/to the workers of the Mill and only thereafter, the sale certificates were issued by the bank. The bank issued sale certificates not as per the directions of this Court, but by way of compromise entered into between the parties. As already stated, the auction was not conducted by the Debts Recovery Tribunal or civil Court and the sale certificate was issued pursuant to the compromise entered into between the parties. Subsequently, when the sale certificates were sought to be registered in the year 2007, necessarily, the guideline value prevailing during the year 2007 has to be taken note of by the registering authority for the purpose of determination of the market value.

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The Honourable Supreme Court held that In a suit for specific performance, after the dispute was ultimately decided by the Supreme Court, which took long time, when the sale deed was presented before the registering authority, the registering authority would insist on payment of the stamp duty as per the prevailing guide line value on the date of the presentation of the instrument for registration. The Honourable Supreme Court has also held that the stamp duty has to be paid as per the prevailing guideline value as on the date of registration even though the agreement to convey the property entered long back. By applying that theory in this case, necessarily, the holder of the sale certificates have to pay the stamp duty as per the guide line value prevailing as on the date of presentation of the sale certificates. The valuation of the property on the date of auction is totally different when compared to the value of the property on the date of presentation of the sale certificates for registration, especially, in this case, as per the dates and events mentioned above, the delay was only on the part of the purchasers and therefore, they are liable to pay the stamp duty as on the date of registration of the instrument. Consequently, the registering authorities are empowered to refer the matter under https://hcservices.ecourts.gov.in/hcservices/ Section 47A of the Indian Stamp Act for determination of the correct value of the property apart from collecting the actual stamp duty at Rs.9.30 crores being the total value of the property as stated in the

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sale certificates and the corresponding registration charges. Therefore, we hold that the appellants are liable to pay stamp duty on the actual value of the property apart from registration charges and the registering authority is empowered to refer the matter under Section 47A of the Indian Stamp Act for determination of the correct value of the property. Consequently, we find no reason to interfere with the reasoned order of the learned single Judge.

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Under those circumstances, we do not find any illegality or infirmity in the orders impugned in these writ appeals. The writ appeals are therefore dismissed. No costs.

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Sd/
Asst.Registrar
/true copy/
Sub Asst.Registrar
rsh
To
1. The Inspector General of Registration
Mylapore, Chennai – 600 004
2. The Sub Registrar
Suramangalam Sub Registrar Office
Salem District
+ 1 cc to the Government Pleader Sr.24142
WA No. 2407 and 2408 of 2010
KSK(CO)
Eu 19.4.11

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https://hcservices.ecourts.gov.in/hcservices/

V.Sivakumar v. Inspector General of

Case brief

What is this about?

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V.Sivakumar v. Inspector General of

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