Dr. Prince John Edavazhikal v. Collector of Stamps and Joint District Registrar, Palghar & Ors.

1. The Collector of Stamps and Joint District Registrar, Palghar

2. The Office of Sub-Registrar of Assurances,

3. The Tahsildar, Tahsil Office Wada

4. The Talathi, Talathi Saja Abitghar

5. The State of Maharashtra

6. Bank of India, Asset Recovery Management Branch...Respondents Mr. J. P. Sen, Senior Advocate with Ms. Nidhi Chauhan, Mr. Shreyansh Desai i/b M/s. V. Deshpande & Co., Advocates for Petitioner. Ms. S.D. Vyas, Addl. GP with Ms. S.S. Bhende, AGP for Respondent Nos. 1 to 5-State. Mr. Prashant Shinde i/b Mr. Anant Shinde, Advocate for Respondent No. 6-Bank of India. CORAM: B. P. COLABAWALLA & SOMASEKHAR SUNDARESAN, JJ. Date: December 19, 2024 ORAL JUDGMENT [ B. P. COLABAWALLA, J ]:

1. Rule. Respondents waive service. With the consent of parties, Rule made returnable forthwith and heard finally.

2. The above Writ Petition under Article 226 of the Constitution of India is filed seeking a writ, order or direction to Respondent Nos. 1 and 2 to accept a sum of Rs. 4,45,000/- as stamp duty payable on the immovable property purchased by the Petitioner in an auction conducted by Bank of India (“BOI” or “Respondent No.6”) under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short, “the SARFAESI Act, 2002”). The immovable property purchased by the Petitioner is the land and property situated at Gat No. 379 (Part), Village Abitghar, Taluka Wada, District Palghar, Pin – 421 303, State of Maharashtra, admeasuring 4H.21.AR-0 (4-21-0), 10.40 acres approx. with constructed area 10,700 sq.ft. (for short, the “said property”) for a consideration of Rs. 2,22,75,000/-. The other relief sought in the above Writ Petition is to quash and set aside the demand notice dated 11th April 2023 issued by Respondent No. 1 demanding stamp duty of an amount of Rs. 29,97,200/- and a penalty of Rs. 1,19,900/-.

3. The short issue raised in the present Petition is that the market value of the said property [for the purposes of computing the stamp duty payable], ought to be the value mentioned in the Sale Certificate issued by BOI, namely, Rs.2,22,75,000/-, and the Stamping Authorities cannot go beyond that value and come to the conclusion that the market value is more than what is mentioned in the Sale Certificate. According to the Petitioner, since this is a sale that is conducted by a Government of India Undertaking (Bank of India), and that too under the provisions of the SARFAESI Act, 2002, there is no question of any other consideration flowing in the transaction, other than what is mentioned in the Sale Certificate. Once this is the case, the Stamping Authorities have no power to come to any other conclusion with reference to the market value of the said property. For bolstering this argument, Mr. Sen, the Learned Senior Counsel appearing on behalf of the Petitioner relied upon Rule 4 of the Maharashtra Stamp (Determination of True Market Value of Property) Rules, 1995 (for short “the 1995 Rules”) and the decision of the Hon’ble Supreme Court in the case of Registrar of Assurances and Another Vs. ASL Vyapar Private Ltd. and Another (for short “ASL Vyapar Private Limited”)1 and a decision of this Court in the case of Trident Estate Private Limited Vs. The Office of Joint District “Trident”) 2.

4. The aforesaid propositions were refuted by Ms. Vyas, the Learned Addl. GP appearing on behalf of the Stamping Authorities. According to the

Stamping Authorities, since this is a sale conducted by BOI, a private party, valuation etc. done by that party before the sale (under the provisions of the SARFAESI Act, 2002), would not bind the Stamping Authorities, who have the power and jurisdiction to independently assess the market value, and to levy stamp duty on such value. According to Ms. Vyas, this is exactly what was done, and the Stamping Authorities came to the conclusion that the market value of the said property (purchased by the Petitioner) was Rs. 7,82,00,800/and not the amount mentioned in this Sale Certificate. It is on this basis that the stamp duty @ 4% was levied and which comes to Rs. 29,97,200/-. Because of the delay in payment of the stamp duty, a penalty of Rs. 1,19,900/- was also levied under the provisions of the Maharashtra Stamp Act, 1958. Consequently, Ms. Vyas submitted that the above Writ Petition holds no merit and ought to be dismissed.

5. Since the sale was conducted by BOI under the provisions of the SARFAESI Act, 2002, this Court, by order dated 3rd October 2024, had directed the Petitioner to join BOI as Respondent No. 6 to the above Writ Petition. This Court had also requested BOI to file a detailed affidavit in this Court setting out what steps the Bank had taken prior to the sale conducted under the provisions of the SARFAESI Act, 2002, and more particularly, what valuation was carried out in relation to the said property, and by whom, along with the reserve price fixed. By the order dated 3rd October 2024, this Court, as and by way of interim relief, also directed that the Petitioner shall pay stamp duty of Rs. 8,91,000/- to the Stamping Authorities, which would be the stamp duty payable at the rate of 4% on the value mentioned in the Sale Certificate (Rs. 2,22,75,000/-). As far as the balance stamp duty of Rs.21,06,200/- was concerned, this Court directed that 50 % thereof shall be deposited in cash in this Court. If these conditions were complied with, the Sale Certificate was directed to be registered. To further secure the Stamping Authorities, this Court also directed that the Sale Certificate issued to the Petitioner shall be deposited in this Court after its registration, and the Petitioner shall also give an undertaking that in the event the Petition fails, the Petitioner shall pay the deficit stamp duty and penalty, or part thereof, as the case may be, within a period of six weeks from the decision in the above Writ Petition. We must mention here that pursuant to the interim order dated 3rd October 2024, the amount of Rs. 8,91,000/- (the stamp duty payable @ 4% on Rs.2,22,75,000/-) has been paid by the Petitioner to the Stamping Authorities. It is also not in dispute that 50% of the balance amount of stamp duty (i.e. an amount of Rs.10,53,100/-) is also deposited in this Court. However, the registration has not been effected yet, because the officer of BOI was unavailable for the purposes of registration. Hence, the registered Sale Certificate has not been deposited in this Court.

6. Be that as it may, pursuant to the directions given on 3rd October 2024, an affidavit dated 2nd December 2024 has been filed by BOI which sets out in great detail the steps taken to sell the said property by public auction [under the provisions of the SARFAESI Act, 2002]. The affidavit clearly sets out that the valuation of the said property was done through the Bank's empaneled valuers, and the reserve price was fixed from time to time by a three-member Committee headed by the Deputy General Manager. This property was sought to be sold as far back as on 26th November 2012 and was finally auctioned to the Petitioner on 11th January 2021 after seven failed attempts. It was on the eighth attempt that the said property was sold to the Petitioner. The valuation reports have also been brought on record by BOI.

7. Having perused the record and after hearing Mr. Sen, as well as Ms. Vyas, we find considerable force in the arguments canvassed by Mr. Sen. Rule 4 of the 1995 Rules talks about the Annual Statement of Rates of immovable property. Rule 4(6) stipulates that every Registering Officer shall, when the instrument is produced before him for registration, verify in each case, the market value of the land and buildings etc. in accordance with the Annual Statement of Rates and the valuation guidelines issued from time to time. If he finds that the market value as stated in the instrument is less than the market value determined as set out in Rule 4, he shall refer the same to the Collector of the District for determination of the true market value of the property [which is the subject matter of the instrument] and the proper duty payable thereon. However, the first proviso to Rule 4(6) stipulates that if a property is sold or allotted by the Government, or a Semi-Government Body, or a Government Undertaking, or a Local Authority on the basis of a predetermined price, then the value determined by the said body shall be the true market value of the subject matter property. It is not in dispute that BOI is a Government Undertaking. It is BOI who has auctioned the said property under the provisions of the SARFAESI Act, 2002, in which the Petitioner was the successful auction purchaser. Once this is the case, we find that the Stamping Authorities could not have independently assessed the market value of the of the said property in the teeth of the first proviso to Rule 4(6). On this ground alone, the Petition should succeed. However, to ensure that there was, in fact, a fair price discovery, as mentioned earlier, we had directed BOI to file an affidavit in this Court.

8. On perusing the affidavit of BOI, we are clearly of the view that there has in fact been a fair price discovery in relation to the said property. It is no doubt true that in a SARFAESI auction, the price obtainable may be slightly less, as any bidder has to take care of a scenario where the auction may be challenged, which could result in delay in obtaining perfection of title, also coupled with the possibility of it being overturned. But then that is the price obtainable as a result of the process by which the property has to be disposed of. The entire purpose of empowering the Stamping Authorities to determine the market value of the property, notwithstanding what is stated in the instrument, is to safeguard against undervaluation of the property in the instrument. It is not uncommon in our country, where consideration may pass through two different modes: one, the declared price in the instrument; and the other, the undeclared component. It is to ensure that the State is not deprived of the revenue, that the Stamping Authorities have been granted the power to go beyond what is stated in the instrument, if they come to the conclusion that the value declared in the instrument, is not the correct value. The objective is to take care of such a scenario, so that the State’s revenue is not adversely effected, and the price actually obtainable in a free market should be the value on which stamp duty must be paid. An auction of a property through the provisions of the SARFAESI Act, 2002 is one of the most transparent methods by which the property can be sold. In fact, the SARFAESI Act, 2002 puts strict rules into place on price discovery and ensures that the secured creditor follows those rules scrupulously. In such a scenario, without anything more being brought on record, it can hardly be contended that the declared price in the Sale Certificate issued under the provisions of the SARFAESI Act, 2002 is not the correct market value because there is also some undeclared component. In the view that we take, we are supported by the decision of the Hon’ble Supreme Court in the case of ASL Vyapar Private Limited (supra). In the facts of that case, though the sale was conducted by a Court, we are of the view that the ratio would equally apply even to an auction conducted under the provisions of the SARFAESI Act, 2002 and that too by a Nationalized Bank such as BOI, and which is a Government Undertaking. The relevant portion of ASL Vyapar Private Limited (supra) reads thus: