Holding

The appeal is allowed; the proceedings were misdirected and the correct procedure is under Sections 38 and 40 of the Indian Stamp Act, with the Munsif directed to reconsider the matter accordingly.

Summary

Chilakuri Gangulappa filed a civil suit to enforce a sale agreement that was found to be insufficiently stamped. The Munsif Court impounded the document and sent it to the Revenue Divisional Officer (RDO), who, after assessing market value, imposed a penalty of ten times the stamp duty deficiency. The appellant appealed to the Senior Civil Judge under Section 47A of the Indian Stamp Act, but the appeal was dismissed for lack of maintainability, and a subsequent revision petition was also dismissed by the High Court. The Supreme Court held that the proceedings were misdirected because the instrument had never been presented for registration, rendering Section 47A inapplicable; the correct procedure lies under Sections 38 and 40 of the Stamp Act. It clarified that a court may admit an insufficiently stamped document upon payment of duty and a penalty not exceeding ten times the deficiency, or impound it and forward it to the Collector, who decides the duty and penalty. The Court directed the Munsif to reconsider the matter under the proper provisions and allowed the appeal.

Issues considered

Whether an appeal under Section 47A is maintainable when the instrument was never presented for registration.
Whether the correct statutory procedure for handling insufficiently stamped documents is under Sections 38 and 40 of the Indian Stamp Act, not Section 47A.
Whether the penalty of ten times the deficiency under Section 40(1)(b) is mandatory or an upper limit.
Whether the lower courts erred in dismissing the appeal for non‑payment of stamp duty prior to filing the appeal.

Legislation cited

Indian Stamp Act, 1899s. 38(1), s. 40(1)(b), s. 47A

Subjects

Indian Stamp Actinsufficiently stamped documentSection 47ASection 38Section 40penaltycivil suitappealrevenue lawimpoundmentregistration

Judgment

CHILAKURI GANGULAPPA A
l v.
REVENUE DIVISIONAL OFFICER, MADANPALLE AND ANR.

MARCH 14, 2001

[K.T. THOMAS AND R.P. SETHI, J.I.] B

Stamp Act, 1899 :

Sections 38( /}, 40( /)and 47A-Pmcedure adopted when insufficiently
stamped document produced in cou11-lnsufficiently stamped agreement to sell
filed in a civil suit to enforce the san1e-Dociunent 1vas impounded and for-
c
warded to R.D.O. who imposed penalty-Civil Judge dismissed appeal as
deficient cou1t fees 1vas not deposited till then-Single Judge dismissed revision
petition on same g1vund--On appeal Held, entire proceedings got misdirected
1vhen the docurnent 1vas dispatched to R.D.O. as the same \Vas never presented
for registration-When document is fowul insufficiently stamped cou11 may D
impose penalty and admit the document or forivard the document to the
collector for taking adjudicatory steps, if the pa11y refuses to pay the deficient
stamp duty-Since one of the required proceedings1vere adopted, Muns1:fCouT1
to reconsider the matter and p1vceed as per the required p1vcedure.
- -t
E
Section 40{l)(b)-Penalty often times is the upper limit and collector

- shall consider all factors while deciding the proper amount.

Appellant had tiled an insufficiently stamped agreement to sell, in a
civil suit before the Munsif Court to enforce the same. The instrument was
impounded and forwarded to the R.D.O., who was empowered by the F
Collector, to take further action under Section 47A of the Indian Stamp
Act, 1899. A penalty equivalent to ten times of the deficient stamp duty

.. was imposed. Senior Civil Judge dismissed the appeal against the order as
not maintainable because the order was not passed by the registering
authority and the procedure requiring payment of deficient stamp duty
G
before preferring an appeal was not followed. Single Judge dismissed the
revision petition as the deficient duty remained unpaid and no further time
was given to deposit the same. Appellants approached this Court after
.....
depositing the deficient stamp duty.

Allowing the appeal, the Court H
419
420 SUPREME COURT REPORTS [2001] 2 S.C.R.
~-·
A HELD : 1. Unfortunately the entire proceedings got misdirected
from the stage of. the trial court dispatching the document to the R.D.O. f
Section 47A of the Stamp Act, 1899 consists of a procedure when a docu-
ment was found insufficiently stamped after it is presented for registra-
lion. The whole route followed hitherto was wrong as Section 47A would
not come into the picture at all since nobody bas a case that the instrument
B
concerned was ever presented for-registration. [422-H; 423-A-F]

2. It is clear from Sections 38(1) and 40(1) of the Act that the court )..
has a power to admit the document in evidence if the party producing the
same would pay the stamp duty together with a penalty amounting to ten
c times' the deficiency of the stamp duty. When the court chooses to admit
the document on compliance of such condition the court need to forward
only a copy of the document to the Collector, together with the amount
collected from the party for taking adjudicatory steps. But if the party
refuses to pay the amount aforesaid the court has no other option except to
impound the document and forward it to the Collector. On receipt of the
D document through either of the said avenues the Collector has to adjudi-
cate on the question of the deficiency of the stamp duty. If the Collector is
of the opinion that such instrument is chargea hie with duty and is not duly
stamped, be shall require the payment of the proper duty or the amount
required to make up the same together with a penalty of an amount not
E exceeding ten times the amount of the proper duty or of the deficient r
portion thereof. However, in the present case this procedure was not fol-
lowed. [424-C-E]

3. The penalty of ten times the deficiency as indicated under Section
-
~

40 (l)(b) is the upper limit and the Collector shall take into account all
F factors concerned in deciding as to what should he the proper amount of
penalty to be imposed. [425-B]

4. None of the required proceedings had been adopted by any of the
.
authorities including High Court. The Munsif is directed to consider first
whether the document is insufficiently stamped and if he finds that ques-
G tion in the affirmative be has to adopt further steps. [425-C]

CNIL APPELLATE JURISDICTION: Civil Appeal No. 1800 of 2001.

From the Judgment and Order dated 15.6.99 of the Andhra Pradesh >-
High Court in Cr.P. No. 2170 of 1999.
H
CHILAKURI GANGULAPPA v. REVENUE DIVISIONAL [THOMAS, J.] 421

..-
,. Mrs. B. Sunita Rao for the Appellant.

T. Anil Kumar, Venkat Reddy and K. Ram Kumar for the Respondents.
A

The Judgment of the Court was delivered by

IBOMAS, J. Leave granted.
B
When a document was found to be insufficiently stamped ·the further
proceedings were, unwittingly, diverted through a wrong track. After it
covered a long distance everybody concerned realised that the !is was
proceeding through a wroug course. It has now to be reversed and put in the
proper track. c
Appellant filed a civil suit before the Munsif Court, Madanapalle
(Andbra Pradesh) as early as 1988. The main relief claimed in the suit is
enforcement of an agreement executed on 26.6.1986 for sale of an innuovable
property. When the agreement was produced in court it was found to be
insufficiently stamped and the learned Munsif impounded it and forwarded D
the instrnment to the Revenue Divisional Officer (RDO) for the purpose of
taking further action on it(the Collector must have delegated his powers to
the R.D.O. in that behalf). He called for a report from a subordinate revenue
officer regarding the real market value of the property which is mentioned
in the document. E

-
. "i
On the strength of the said report the R.D.O. found that the market
value of the property was Rs.64,880 and hence the agreement of sale should
have been stamped with an additional duty of Rs.3,895. As the instrnment
was stamped only with a stamp of Rs.5 the R.D.O. imposed a penalty
equivalent to ten times of the deficiency which amounted to Rs.38,950. The F
order of the R.D.O. was passed on 4.7.1998.
·"4
Appellant challenged the said order by filing an appeal before the
Senior Civil Judge purportedly under Section 47A(4) of the Indian Stamp Ac~
1899. (The said section is included in the Stamp Act as per a State amendment
carried ont by the State of Andbra Pradesh). Learned Senior Civil Judge G
found that the appeal was not maintainable for two reasons. First is that the
order challenged before him was not passed by the registering authority nor
the procedure laid down in Section 47 A of the Stamp Act was followed. He
also found that appellant did not pay the amount of Stamp duty before
preferring an appeal which is a condition precedent for filing such appeal. H
422 SUPREME COURT REPORTS [2001] 2 S.C.R.
A On both premises the appeal was dismissed as not maintainable. The Senior
Civil Judge pronounced the judgment on 12.3.1999.

Appellant filed a revision petition before the High Court challenging
the judgment of the Civil Judge. A Single Judge of the High Court of Andhra
Pradesh pointed out that as per the proviso to Section 47A of the Act "no
B appeal shall be preferred unless and until the difference, if any, in the amount
of duty is paid by the person liable to pay the same, after deducting the
amount already deposited by him." Even though the appellant made a plea
before the High Court for giving him some time to pay the amount learned
Single Judge found that no such time can be granted at that stage since he
c has already preferred the appeal. Learned Single Judge did not consider
whether an appeal would otherwise have been maintainable before the Civil
Judge. Hence the revision petition was dismissed with the following obser-
vations:

"Deposit of amount is a condition precedent for filing the appeal. The
D Court has no power to grant any relaxation to any party in the matter
of deposit of amount as required under the proviso. In fact, a duty is
cast on the petitioner to deposit the amount in accordance with the
proviso at the time of filing of the appeal. If any appeal is filed
without deposit of the amount in accordance with the proviso, that
appeal is clearly not maintainable. For these reasons, I do not fmd any
E
merit in the petition. In the facts and circmnstances of the case, I do
not want to go into the question whether the learned Senior Civil
Judge had the jurisdiction to hear the appeal or not."

It is the aforesaid order which the appellant has challenged in this Court
-
F by special leave. When petition for special leave was moved learned counsel
for the appellant submitted on 22.11.1999 that the appellant was ready and
willing to deposit the differential amount in court. In fact notice was issued
to the respondent on the strength of the above submission.

The R.D.0. noted that the docmnent was executed on a stamp paper
G worth Rs.5 whereas the consideration involved was Rs.20,000. He also noted
that the market value of the property was Rs.64,880. On its basis the R.D.O.
directed the appellant to remit the stamp duty and penalty of Rs.42,845.

Unfortunately the entire proceedings got misdirected from the stage of
the trial court dispatching the docmnent to the R.D.O. Section 47A of the
H
CHILAKURI GANGULAPPA v. REVENUE DIVISIONAL [THOMAS, J.] 423
Stamp Act (as amended by the State of Andhra Pradesh) consists of a A
) procedure when a document was found i.nsufficiently stamped and when that
document is presented for registration. Sub-section (I) of that section says
that where the registering officer while registering any instrument has reason
to believe that the market value of the property which is a subject matter of
such instrument has not been truly set forth in the instrument, or that the value
B
arrived at by him as per the guidelines prepared by the Government, he may
keep such instrument pending and refer the matter to the Collector for
determination of the market value of the property.

Sub-section (2) of Section 47A of the Act says that the Collector shall
have the power to detennine the market value of the property which is the C
subject matter of such instrument and the duty payable thereon. Sub-section
(3) empowers the Collector to take action, suo motu, within two years from
the date of the registration. Sub-section (4) has to be read in this context.
"Any person aggrieved by the order of a Collector under sub-section (2) or
sub-section (3) may appeal to the appellate authority specified in sub, section
(5). All such appeals shall be preferred within such time and shall be heard D
and disposed at in such manner, as may be prescribed by rules made under
this Act." There is a proviso to sub-section (2) which contains a bridle on
the appellate provision envisaged in sub-section (4). Hence that proviso has
to be read:

"Provided that no appeal shall be preferred unless and until the E
difference, if any, in the amount of duty is paid by the person liable
to pay the same, after deducting the amount already deposited by
him."

We extracted the relevant sub-sections of Section 47 A for the purpose
F
of showing that the whole route followed hitherto was wrong as Section 47A
would not come into picture at all since nobody has a case that the instrument
concerned was ever presented for registration. In the context of this instru-
ment being presented before the Civil Court the relevant provision to be
noticed is Section 40 of the Stamp Act. Sub-section (I) of that Section says
that when the Collector impounds an instrument under Section 33, or receives G
any instrument sent to him under Section 38(2) he shall adopt the procedure
laid down in the sub-section. In this context Section 38 is to be looked into.
It is extracted. below:

38. Instruments impounded how dealt with.- (I) Where the person
impounding an instrument under section 33 has by law or consent of H
424 SUPREME COURT REPORTS [2001] 2 S.C.R.
A parties authority to receive evidence and admits, such instrument in
evidence upon payment of a penalty as provided by section 35 or of
duty as provided by section 37, he shall send to the Collector an
authenticated copy of such instrumen~ together with a certificate in
writing, stating the amount of duty and p~nalty levied in respect
thereof, and shall send such amount to the Collector, or to such person
B
as he may appoint in this behalf.

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

It is clear from the first sub-section extracted above that the court has
c a power to admit the document in evidence if the party producing the same
would pay the stamp duty together with a penalty amounting to ten times the
deficiency of the stamp duty. When the court chooses to admit the document
on compliance of such condition the court need to forward only a copy of
the document to the Collector, together with the amount collected from the
D party for taking adjudicatory steps. But if the party refuses to pay the amount
aforesaid the Court has no other option except to impound the document and
forward the same to the Collector. On receipt of the document through either
of the said avenues the Collector has to adjudicate on the question of the
deficiency of the stamp duty. If the Collector is of the opinion that such
instrument is chargeable with duty and is not dnly stamped "he shall require
E
the payment of the proper duty or the amount required to make up the same
together with a penalty of an amount not exceeding ten times the amount of
the proper duty or of the deficient portion thereof.

In the present case, an argument is raised that the instrument is not
F actually an agreement of sale as envisaged in the Schedule to the Stamp
Act(subject to amendment made by the State of Andhra Pradesh) but it is only
a deed of compromise entered into by two disputing persons. We refrain from
expressing any opinion on the said plea as it is open to the parties to raise
their contentions regarding the nature of the document before the trial court.
In the present case the trial court should have asked the appellant, if it fmds
G
that the instrument is insufficiently stamped, as to whether he would remit
the deficient portion of the stamp duty together with a penalty amounting to
ten times the deficiency. If the appellant agrees to remit the said amount the
court has to proceed with the trial after admitting the document in evidence.
Jn the meanwhile, the court has to forward a copy of the document to the
H Collector for the purpose of adjudicating on the question of deficiency of the
CHILAKURI GANGULAPPA v. REVENUE DIVISIONAL [THOMAS, J.] 425
stamp duty as provided in Section 40(1)(b) of the Act. Only if the appellant A
is unwilling to remit the amount the court is to forward the original of the
document itself to the Collector for the purpose of adjudicating on the
question of deficiency of the stamp dnty. Tue penalty of ten times indicated
therein is the upper limit and the Collector shall take into account all factors
concerned in deciding as to what should be the proper amount of penalty to
B
be imposed.

Inasmuch as none of the above proceedings had been adopted by any
of the authorities including High Court we set aside the impugned orders. We
direct the Munsif to consider first whether the document is insufficiently
stamped and if he finds that question in the alfmnative he has to adopt the C
next step indicated above.

This appeal is accordingly allowed.

A.Q. Appeal allowed.