Disposed

M/s Sri Harsha Constructions v. The State of Telangana

Telangana HC21 Dec 2023WP/26611/2023

Case brief

AI extract

What is this about?

The Telangana High Court disposed of a writ petition challenging a Collector order demanding stamp duty on a Lok Adalat award. Treating the order as a show-cause notice, the Court granted liberty to petitioners to file objections after personal hearing before the final determination of the applicable stamp duty article.

What did the court decide?

Liberty to submit explanation/objections granted; Respondent directed to pass appropriate orders after personal hearing within two weeks.

M/s Sri Harsha Constructions Vs The… — Constitutional and Fundamental Rights | Telangana HC (2023)

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[³³⁰³¹

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HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction)

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THURSDAY, THE TWENTY FIRST DAY OF DECEMBER TWO THOUSAND AND TWENTY THREE

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PRESENT

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THE HON'BLE SRI JUSTICE J. SREENIVAS RAO

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WRIT PETITION NO: 26611 OF 2023

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Between:

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'1 . M/s Sri Harsha Constructions, A Partnership Firm bearing Regn No. 810/2005 Having its office at Flat No. G1, H.No. 12- 13 -12'15, Franklin Villa, Road No.'10, Tarnaka, Hyderabad Represenled by its Partner, A Vijaya Bhaskar

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1. A Venkatesh, S/o A. Peeraiah, Aged about 55 years, Business Rio H No. 1213-1215, Franklin Villa, St. No.^'10, Tarnaka, Secunderabad

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A Vijaya Bhaskar, Sio A. Peeriah, Aged about 48 years, Business Rl/o H. No. 1- B -4912, Plot No. 173, Street No. 8, Ravindra Nagar Colony, Lane No 5A, Habsiguda' Hyderabad

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...pETrroNERS

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AND

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The State of Telangana, Represented by its Principal Secretary, Stamps and Registration Department Secretariat, Hyderabad.

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Collector and District Registrar, Medchal - Malkaigiri ,, ,"0"n11*arpoNDENrs

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Petition under Article 226 of lhe Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to pass an order or orders or direction more particularly one in the nature of a writ of Mandamus declaring Notice No. 5961lEllMPl2023 dl. 1910912023 issued by the 2nd Respondent levying stamp duty of Rs. 1,O9,5O,3271- contrary to the directions of the Honourable High Court for the State of Telangana in WP 23056 of 2023 dl. OBlOgl2O23 whereby it was directed to collect stamp duty in terms of award passed by District Legal Services Authority, Medchal-Malkajgiri District in PLC No. 26 of 2023 dt.2210712023 i.e. to collect necessary stamp^duty and registration charges on settlement amount of Rs. 1,80,00,0001ⁱⁿ terms of Lok Adalat award dt. 2410712023^passed by the I Additional District and Sessions Judge Medchal-Malkajgiri District as^wholly illegal, arbitrary, unjust and contrary^to the provisions of lndian Stamp Act, 1899 and consequently to set-aside^NoticeNo. 5961lEllMP 12023 dt. 1910912023 issued by the 2nd Respondent levying^stamp duty of Rs. 1,09,50,3271- and further direct the 2nd Respondent to collect necessary stamp duty and registration charges on settlement amount of^Rs.

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1'80'00'000/- in terms of Lok Adarat award dt. 24/ort2o23 passed by r Additionar District and Sessions Judge Medchal_Malkajgiri District

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lA NO: 1 oF 2023

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Petition under section 151 cpc praying that in the circumstances stated in the affidavit fired in support of the petition, the High court may be preased to direct the 3rd Respondent to receive the stamp duty and registration charges on the settlement amount of Rs. 1,g0,0O,0001 in terms of Lok Adalat award dt. 2410712023 passed by r Additional District and sessions Judge Medchar-Markajgiri District and pass

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IA NO:2 oF 2023

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Petition under section 151 cpc praying that in the circumstances stated in the affidavit fired in support of the petition, the High court may be preased to stay the Notice No. 5961/E/rMpr2o23 dt. 1g/0gr2023 issued by the 2nd Respondent levying stamp duty of Rs.^.1.09,50,32 7l- conlrary to the direction of the 2nd Respondent to collect necessary stamp duty and registration charges on settlement amount of Rs. 1,g0,00,000i_ in terms of Lok Adalat award dt. 24ro712023 passed by rAdditionar District and sessions Judge Medchar-Markajgiri District

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Counsel for the petitionersi SRt CHALLA GUNARANJAN

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Counsel for Respondents: Gp FOR STAMPS AND REGISTRATION

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The Court made the following: ORDER

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THE HONOURABLE SRI JUSTICE J.SREENTVAS RAO WRIT PETITION No.2661L of 2023

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ORDER:

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This Writ Petition is filed seeking following relief

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"..-to pass an order or orders or direclion more parTicularlg one in the nature of a tttit of Mandamus declaing Notice No. 5961/E/IMP/2023 dt.19.O9.2O23 issued bA the 2"d Respondent leuging stamp duty of Rs. 1,O9,5O,327/ - contrary to the directions of the Hon'ble High Court for the State of Telangana in WP 23O56 of 2O23 dt.08.09.2023 wherebg it Loas directed to collect stamp dutg in tem6 of a utard passed bA Distnct Legal Seruices AuthoritA, Medchal-Malkajgirt Distict in PLC No.26 oJ 2O23 dt.22.O7.2O23 i.e. to collect necessary stamp dutA and registration charges on settlement omount of Rs. 1,8O,OO,OOO/^- in terms of Lok Adalat award dt.24.07.2023 passed by the I Addittonal District and Sessions Judge, Medchal-Malkajgii Distnct as uhollg illegal, arbitrary, unjust and. contrary to the prouisions of Indian Stamp Act, 1899 and consequentlg to se[ aside Notice No.5961/ D/ IMP/ 2023 dt.19.09.2023 issued by the 7d Respond.ent leuging stamp dutg of Rs. 1,O9,50,327/ - and further direct the 7d Respondent to collect necessary stamp duty and registration charges on settlement amount of Rs. 1,80,OO,000/ - in terms of Lok Adalat a u.tard dt.24.O7.2023 passed bg I Additional District and Sessions Judge, Medchal-Malkojgiri District."

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Heard Sri Challa Gunaranjan, learned counsel for the petitioners, and learned Government Pleader for Revenue (Stamps and Registration) for the respondents.

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Learned counsel for the petitioners submits that Mr.M.A.Raju, Mr.K.Uma Maheswara Reddy and petitioner No.2 have entered into partnership uide Deed dated 24.06.2O00 under the nam€ of petitioner No. 1 firm and after several changes to the constitution of the hrm, petitioner Nos.2 and 3 and Mr.M.A.Raju became the continuing

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partners of petition( No' I firm through partnership deed dated r8.o7.2OO3. petitio, 1er No. I firm, purchased differen t properties including the property i.e., to an extent of ot ',.o0 gts. through registered sare deed ur.de document No.5969 o , Ac.24.3o Bts. and ^"^{. .a :::":,:'" "".r 2oo5 dated 2e 08.2oo5,} t tt gts' through registered sale deed uzore document Nos.6o96 o, , 2005 and 13696 of 2OO6dated O1.O9.2005 and 27.06.2006 respectively, in the name of t he ab o vr rrc ?o Ve three partners with the amounts of petitioner ,^, - No'l firm' subsequently' the agricultural land to an extent of Ac. 40.25 gts. was converte( into non-agricurture land admeas uring r,96,62a " ,:-,-t":*"td vards throush proceedings dated l,.Os.2oo6rssued by ,r.':"t ^:t

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3.1. He further submits that petitioner N o o'I partnership firm also purchased the rands. r" --*::':":* "t^{extent of Ac'3'oo gts'} in Sy.Nos.739 and z4o through registered ".o Ie deed urde document No.22393 of 2OO6 dated 18.12.2006 and an extent of Ac.4.OO Bts. in Sy.Nos.739 and 74O through registered sale deed urde document No.3479 of 2OOZ dated 15.O3.2OO2. He submits that petitioner No. I firm, incurred hearry loss, as such, it could not repay the amounts and drro proceedings before the Debt Recovery Tribunal ,aro., .,.^^., .l:rr* authorized orncer or DHFLC, who took ,.. ,:":;:'.il:'""ffe Ie property mentioned therein. Subsequently, the parties have entered into compromise on 04.O4.2Orc for repayment of loans by the petit.ioners and compromise was recorded on 05.O4.2O13 and the Securitization Application before

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JSR. ,, lV.P.No.166l I of202l

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the DRT was closed. Thereafter, petitioner Nos.2 and 3 have deposited the title deeds of their personal assets in addition to the properties of petitioner No. 1 hrm for securing the outstanding loan amount.

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3.2. He further submits that Mr.M.A.Raju, voluntarily retired from the partnership firm, and in that regard a Deed of Retirement-cumReconstitution was executed. By virtue of the same, petitioner Nos.2 and 3 have became the continuing the partners w.e.f. 28.04.2013. They have agreed to pay an amount Rs. 1,80,OO,O00/ - towards repayment of amount due by the firm to Mr.M.A.Raju as on the date of retirement accordingly paid the same through cheque dated 22.06.2023 for an amount of Rs. 1,OO,OO,O00/- and three posr dated cheques for Rs.8O,OO,O0O/ - and the same was mentioned in the Deed of Retirement-cum-Reconstitution and subsequent to payment of the entire loan amount by petitioner Nos.2 and 3, petitioner No.I partnership firm became a profit making concern. Petitioner Nos.2 and 3 have requested Mr.M.A.Raju to execute declarations duly indicating the factum of his retirement and also receipt of the said amounts. However, some disputes were arose between the parties- At that stage, petitioners filed P.L.C.No .26 of 2023 before the District Legal Services Authority, Medchal-Malgajgiri District (herein after called 'DLSAJ against Mr. M.A. Raju. During pendency of the said case, the parties entered into compromise and Iiled memorandum of compromise and the same was referred to DLSA and the Lok Adalat was pleased to pass

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Awardon22.oT.2C)23andtheSamewasforwardedtorespondentNo.2 for collection of necessary^{stampduty and registrationchargesin terms} of Section 27 of the^{IndianStamp Act, 1899(for short,'the Act')'}

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3.3. He further submits^{that respondentNo'2 withoutproperly} verifying the documents^{passed order uide No'5961/ E/IMP /2023dated} O3.Oa.2O23, applying^{Article 41B(a)of Schedule I-A of the Act directing} the petitioners to^{pay the stampduryof an amount of Rs' 1'09'50'327/-} Questioning^{the saidorder, petitionersfrrled W'P'No'23056 of 2023 and} the same was allowed^{and set aside the said order anddirected} respondent No.2 to^{collect stamp duty in termsof the Award dated} 22.07.2Cl23 under^{the provisionsofthe Act, however, without} application of Article^{al B@) of the ScheduleI-A of the Act'}

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3.4. He vehemently^{contendedthat respondentNo'2withoutproperly} considering the orders^{passed by this Court in W'P'No'23O56of 2023} dated O8.O9.2023^{passed the impugnedorder dated 19 'O9 '2023} directing the^{petitioners to pay the verysamestamp duty of an amount} ofRs.l,O9,5O,327l-urlderArticle46ofSchedulel-AoftheActandthe same is contrary to^{the provisionsof the Act, as well as the orders} passed by this Court in^{W.P.No.23O56 of 2023} '

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3.5. Learned counsel^{furthercontendedthat this Court while allowing} W.P.No.23O56 of 2023 on^{O8.O9.2O23,observed that the property} belongs to^{petitionerNo.} I^{firm only, and the partners of the said firm}

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]SR,I \Y l' No 166l I ot?0ll

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have not brought^{any immovabtepropertyto the firm either at the time} of^joining in the firm or at any^{point of time thereafter' Thus' when} they have not contributed the^{share,provisionsof Article 46 of} Schedule I-A of the^{StampAct, are not applicable He further} contended that^{petitioner Nos.2 and 3 have not contributed any share} and petitioner No.1^{hrm onlyinvestedthe amount and purchasedthe} properties in the names of^{petitionerNos 2and 3} ln those circumstances,^{Article46 of Schedule I-B of the Act is alone applicable,} but not Article 46 of^{Schedule I-A of the Act Insupport of his} contention, he relied^{upon the judgment of this Courtin the Collector} under Section 47A^{ofIndianStamp Act,1899 and District} Registrar lR&St^{Department, Hyderabadand another v' M/s'Asrani} Inns & Resorts lPt^{Limited, rep. by its Director Sachin J'Joshi'} Secunderabadl.^{Hence,the impugned orderpassedby respondentNo'2} is contrary to the^{provisionsof the Act as well as [aw'}

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4 ' Per contra,learned^{GovernmentPleadersubmitsthat pursuant to} the orders dated^{O8.O9.2O23of this Court in W P'No'23O56ot 2C23} ' respondent No.2, after^{due verification of the instrumentand also} provisions of the^{Act, rightlyissued the impugned show cause notice} stating that the^{Award/instrumentfalls under the category of "release"} as defined under^{the provisions of Article 46 of Schedule I-A of the Act} and there is^{no illegalityor irregularity in the said order' He further}

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'^{(2013)l ALD 3ot}

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submits that the petitioners without submitting objections / reply to the impugned show cause notice, straight away approached this Court and f-rled the present writ petition and the same is not maintainable under law.

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. 5. Having considered the rival submissions made by the respective parties and a perusal of the material available on record, it reveals that the petitioners have filed P.L.C.No.26 of 2023 against Mr.M.A.Raju before DLSA and in the said case, both parties have filed compromise petition on O1.O7.2O23 and basing upon the same, the Lok Adalat Bench passed Award on 22.07.2023, and the said Award was forwarded to respondent No.2 for collection of stamp duty under the provisions of the Act. Respondent No.2 passed order on O3.Oa.2O23 holding that recitals of Award, comes within the ambit of Article 4lB(a) of Schedule I-A of the Act and directed the petitioners to pay an amount of Rs. I,O9,5O,327/- towards deficit stamp duty and penalty. euestioning the same, petitioners filed W.P.No.23O56 of 2023 before this Court and the same was allowed on O8.O9 .2023 and set aside the order and directed respondent No.2 to collect stamp duty in terms of the Award dated, 22.07 .2O23 under the provisions of the Stamp Act, without application of Article 4lB(a) of Schedule I-A of the Stamp Act. Thereafter, respondent No.2 issued impugned proceedings dated 19.O9.2023 invoking the provisions of Section 40 of the Act under the name and style "show-cause notice,, stating that the Award/lnstrument

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JSR ] W P No 166l I ofloll

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dated 22.O7.2023, falls under the category of "release" as dehned under Article 46 of Schedule I-A of the Act and directed the petitioner to submit objections as to why the stamp duty of an amount of Rs. 1,O9,50,327/- shoutd not be collected.

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The core contention of the petitioners is that respondent No.2 without verifying the documents and all the terms of memorandum of compromise he simply relied upon the clause (c) of terms of compromise, issued the impugned notice/order holding that the instrument/Award falls under the category of "release", especially petitioner Nos.2 and 3 and Mr.M.A.Raju have specihcally mentioned in the memorandum of compromise, that they have not invested any amount, while purchasing the properties and petitioner No.1 firm only invested the amounts and purchased the properties in their names and the same was reflected in the books of hrm and also clause (b) of the terms of compromise, and petitioner Nos.2 and 3 have agreed to pay an amount of Rs. 1,80,00,000/- towards the repayment of the amounts due by petitioner No. 1 firrm to the Mr.M.A.Raju and the said amounts were paid by petitioner Nos.2 and 3 to Mr.M.A.Raju and he retired from petitioner No. 1 firm accordingly retirement cum reconstitution deed was also entered and the petitioners are liable to pay stamp duty on the above said amount of Rs. 1,8O,OO,000/- only but on the market value of the properties and the said instrument/Award comes within the purview of Article 46 of Schedule I-B of the Act.

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J5| w.P No 2661

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That the impugned proceedings of respondent No.2 shows that he issued the same while exercising the powers conferred under Section 4O of the Act mentioning as a show-cause notice directing the petitioners to submit objections as to why the stamp duty of Rs. 1,09,50,327/- should not be collected. Though respondent No.2 has termed it as show-cause notice, he has already taken a decision determining the nature of the document i.e., instrument/Award, comes within the purview of "release" and Article 46 of Schedule I-A of the Act is applicable, even without giving any notice and opportunity to the petitioners and calculated the stamp duty and penalty and the same is clear violation of principles o[ natural justice.

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It is very much relevant to place on record that whether the nature of instrument/Award falls under purview of 'release" or release of Benami rights and whether the provisions of Article 46 Schedule I-A or Article 46 Schedule I-B of the Act applicable has to be adjudicated and to be decided by respondent No.2 after due verihcation of the records especially after giving opportunity to the parties. In the case on hand, respondent No.2 without giving any opportunity to the petitioners straight away passed the impugned order dated 19.09.2023 holding that the instrument/Award falls under Article 46 of the Schedule I-A of the Act; and the same is contrary to law.

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In view of the foregoing reasons, the impugned order passed by respondent No.2 is treated as a show-cause notice and the petitioners

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_-_7

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JSR, J W P No 26ll 04202]

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,1,

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are granted liberty to submit explanation/objections, by raising ail the grounds which are available in law along with documents, within a period of one (l) week from the date of receipt of a copy of this order. On receipt of such explanation/ objections, respondent No.2, is directed to pass appropriate orders in accordance with law after giving opportunity to the petitioners including personal hearing uninfluenced by any of the observations made in the impugned order/show cause notice, within a period of two (2) weeks.

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With the above directions, the writ petition is disposed of, accordingly. No order as to costs

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In view of disposal of main writ petition, interlocutory

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applications pending, if any, in this writ petition shall stand closed.

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//TRUE COPY//

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SD/. P. PADMANABHA REDDY ASSISTANT REGISTRAR v/

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SECTION OFFICER

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To, 1 The Collector and District Registrar, Medchal - Malkajgiri at Medchal 2 One CC to Sd Challa Gunaranjan Advocate [OPUC] 3 Two CCs to GP For Stamps And Registration ,High Court for the State of Telangana. [OUT] 4. Two CD Copies MBC GJP \v

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HIGH COURT

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DATED: 2111212023

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rH E STA r€'
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2 6 0EC 2023 P
* ut ::1. / +

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ORDER

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WP.No.26611 of 2023

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DISPOSING OF THE WRIT PETITION

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WITHOUT COSTS

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^\ 1;:A

M/s Sri Harsha Constructions v. The State of Telangana

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M/s Sri Harsha Constructions v. The State of Telangana

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