Author Name:   Akash Shah

My topic is penalty imposed on not duly stamped instrument. Their various provision in the Indian stamp Act regarding the penalty. The penalty is imposed by the collector as he is executive magistrate. When any instrument is not duly stamped penalty is imposed as per rules of law....

Effect of not Duly Stamped Instrument

My topic is penalty imposed on not duly stamped instrument. Their various provision in the Indian stamp Act regarding the penalty. The penalty is imposed by the collector as he is executive magistrate. When any instrument is not duly stamped penalty is imposed as per rules of law.

1.2 Research Problems:
The Indian Stamp Act is very wide topic to study and it is important for general public also because this law is applicable to each and every transaction made of any property whether it is exchange or sell or buy, etc on it stamp duty is to be paid to the government. If this duty is not paid then penalty is imposed.

This penalty can be maximum Rs.500 in general condition and if this penalty is not paid then person can be punished under this act by the collector. The word ‘penalty’ means ‘fine and forfeiture’ both, before the penalty imposed notice is given to pay insufficient duty and if then also not paid then only further action is taken.

The collector has got the maximum power in context of revenue at the district level. He has got power to punish, impose fine and forfeiture of the property. If punished in general way then no appeal is allowed.

1.3 Objectives of the Study:
In view of the foregoing discussion, the main purpose of the present work is to introduce the concept of Effect of Not Duly Stamping Instruments discuss its importance in the life of an individual. Keeping in view this aim, the researcher has analyzed the legal provision/regulatory framework dealing with Closure and concentrated on the practical aspects covering various judicial interpretations throwing a light upon the scope and application of the concept.

The researcher in the present study has attempted to highlight the object of the provision relating to Effect of Not Duly Stamping Instruments. The effort has been made to evaluate the efficacy and adequacy of the existing laws in combating/ providing relief/remedy; to examine the interpretation given by the Courts. While dealing with such a vast topic covering Effect of Not Duly Stamping Instruments

It is not possible to make the work exhaustive as the subject is holding ever-growing importance and scope. Nevertheless a line has to be drawn somewhere for accomplishing the present research work in an effective way. Accordingly, the present work covers the analysis and social investigation regarding factual status, paradigms of law on the Effect of Not Duly Stamping Instruments and laws dealing with ancillary issues which help to explain these areas. The work covers analysis. In addition to it, a variety of supplementary laws have been discussed at adequate and relevant places for reference purpose.

The main focus of the study is to undertake the evaluation of judgment and interpretation of Effect of Not Duly Stamping Instruments.

The objective of the study was to understand the Effect of Not Duly Stamping Instruments in India.

1.4 Aims :
The research project has been carried out with the following aims:
• To know the penalty imposed if stamp duty is insufficient.
• To know the power of collector regarding this issue.

1.5 Hypothesis :
There is payment of stamp duty on each and every transaction to the government. If this stamp duty is not paid to the government then the penalty is ordered by the Executive Magistrate.

1.6 Scope and limitations of present research :
The nature of the present research project is a doctrinal one. The subject matter of the study being “Penalty for Executing of Not Duly Stamping Instruments.” It would have been impracticable to carry out a non-doctrinal research project without analyzing the prevailing conditions across the India. Therefore researcher has opted for doctrinal research project.

1.7 Research Methodology applied :
The quality and value of research depends upon the proper and particular methodology adopted for the completion of research work. Looking at the vastness of the research topic - historical, doctrinal legal research methodology has been adopted. To make an authenticated study of the research topic “Effect of Not Duly Stamping Instruments” enormous amount of study material is required. The relevant information and data necessary for its completion has been gathered from both primary as well as secondary sources available in the books, journals, periodicals, newspapers, research articles and proceedings of the seminars, conferences, conventions and annual reports on environment, websites.

Introduction with Effect of Not Duly Stamping Instruments
First of all let us understand the definition of few words

2.1 Definition
Instrument –
“instrument” includes every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or recorded;

Duly stamped –
“duly stamped”, as applied to an instrument, means that the instrument bears an adhesive or impressed stamp of not less than the proper amount, and that such stamp has been affixed or used in accordance with the law for the time being in force in India.

Collector –
(a) means, within the limits of the towns of Calcutta, Madras and Bombay, the Collector of Calcutta, Madras and Bombay, respectively, and, without those limits, the Collector of a district; and
(b) includes a Deputy Commissioner and any officer whom the State Government may, by notification in the Official Gazette, appoint in this behalf ;

Penalty –
“penalty” means ‘fine and forfeiture’

Instrument not duly stamped –
From the above definition ‘instrument’ means ‘any right or liability is transferred’ and ‘duly stamped’ means ‘instrument bears an adhesive stamp of proper amount as per fixed by law’ so ‘Instrument not duly stamped’ means ‘instrument bear a stamp which of the lower amount as per fix by law’

Penalty on instrument not duly stamped –
When proper stamp duty is not paid on the instrument at that time certain penalty is imposed by the collector. This penalty may be of the payment of the insufficient stamp duty and fine of Rs. 500 or he may take the fine up to 10 time of the insufficient stamp duty.

The collector has got the maximum power in context of revenue at the district level. He has got power to punish, impose fine and forfeiture of the property.

2.2 Penalty for Executing Not Duly Stamping Instrument
This part of chapter will be dealing with the penalty imposed on not duly stamping instrument and it will also cover the power of collector regarding it.

Whenever word penalty comes in mind of the person with regard to the stamp duty section 32A and section 33A comes first. This section is dealing with the penalty on stamp duty which is paid less. Many time it happens that there is a mistake in calculating the stamp duty due to which less stamp duty is paid to the government. When less duty is paid at that time the process of registration of instrument is stopped or if done then noticed is issused to pay the duty, in this case they have to pay certain fine which is decided by the collctor. Now let us dicuss the bare provision of section 32A and section 33A.

Section 32A - Instrument of conveyance, etc. undervalued how to be dealt with.- (1) Every instrument of conveyance, exchange, gift, certificate of sale, deed of partition or power of attorney to sell immovable property when given for consideration, deed of settlement or transfer of lease by way of assignment, presented for registration under the provisions of Registration Act, 1908, shall be accompanied by a true copy thereof :

Provided that, in case of such instruments executed on or after the 4th July 1980, to the date of commencement of the Bombay Stamp (Amendment) Act, 1985, an extract of the instrument to be taken from the registration record shall be deemed to be the true copy accompanying the instrument, presented for registration for the purposes of sub-section (1).

(2)(a) If any officer registering such instrument has reason to believe, on the basis of the information available with him in this behalf, that the market value of the immovable property which is the subject matter of such instrument has not been truly set forth therein, he may, immediately after presentation of such instrument, give a notice to the person who is liable to pay the stamp duty under section 30, calling upon such person to pay the deficit amount of stamp duty and a penalty at the rate of 2 per cent of the deficient portion of the stamp duty, for every month or part thereof from the date of execution of such instrument. If such person is willing to pay the amount of the deficit stamp duty and penalty thereon, the registering officer shall accept the payment. The procedure laid down in sub-section (3) of section 10 shall, mutatis mutandis, apply to such payment;

(b) If such person does not make the payment within one month of receipt of the notice referred to in clause (a), then the registering officer shall, before registering the instrument, refer the true copy of such instrument to the Collector of the District for determination of the true market value of such property and the proper duty payable on the instrument;

(c) It shall be lawful for the registering officer to issue similar notices in respect of the instrument presented for registration before the date of commencement of the Maharashtra Tax Laws (Levy, Second Amendment and Validation) Act, 1996 where the true market value of the immovable property which is subject matter of such instrument has not been determined by the Collector of the District. On the receipt of such notice, if the person liable to pay the stamp duty makes such payment within one month from the date of such receipt, and also pays the fixed penalty of rupees 250, he shall not be liable to make any further payment of penalty at the rate of 2 per cent of the deficient portion of the stamp duty, for every month or part thereof from the date of execution and on such payment being made, the reference already made to the Collector of the District shall abate.

(3) If any person referred to in section 33, before whom any such instrument is produced or comes in the performance of his functions, has reason to believe that the market value of the immovable property which is the subject matter of such instrument has not been truly set forth therein, he may, after performing his function in respect of such instrument, refer the instrument along with a true copy of such instrument to the Collector of the District for determination of the true market value of such property and the proper duty payable on the instrument.

Provided that if the person, before whom any such instrument is produced or comes in performance of his functions, is an officer appointed as the Collector under clause (f) of section 2, and he has reason to believe that the market value of the immovable property which is the subject matter of such instrument has not been truly set-forth therein, he shall, for the purpose of assessing the stamp duty, determine the true market value of such property in the manner laid down in the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995;

(4) On receipt of the instrument or the true copy of the instrument as the case may be, under sub-section (2) or (3), the Collector of the District shall, after giving the parties concerned a reasonable opportunity of being heard and in accordance with the rules made by the State Government in that behalf, determine the true market value of the immovable property which is the subject matter of the instrument and the proper duty payable thereon. Upon such determination, the Collector of the District shall require the party liable to pay the duty, to make the payment of the amount required to make up the difference between the amount of duty determined under this sub-section and the amount of duty already paid by him and shall also require such party to pay in addition, a penalty of 2 per cent for every month or part thereof from the date of execution of the instrument on differential amount of stamp duty; and on such payment, the instrument received under sub-section (2) or (3) shall be returned to the officer or person referred to therein :

Provided that, no such party shall be required to pay any amount to make up the difference or to pay any penalty under this sub-section, if the difference between the amount of the market value as setforth in the instrument and the market value as determined by the Collector of the District does not exceed ten per cent, of the market value determined by the Collector of the District

Provided further that, in respect of references pending with the Collector of the District, before the commencement of the Maharashtra Tax Laws (Levy Second Amendment and Validation) Act, 1996, for determination of true market value of the immovable property which is the subject matter of the instrument, the person liable to pay the stamp duty under section 30 shall not be liable to pay penalty exceeding rupees 250 if, he makes the payment of the stamp duty and penalty within one month from the date of receipt of the order of the Collector of the District, by him.

(5) The Collector of the District, may, suomoto or on receipt of information from any source, within ten years from the date of registration of any instrument referred to in sub-section (1), (not being the instrument upon which an endorsement has been made under section 32 or the instrument or the instruments in respect of which the proper duty has been determined by him under sub-section (4) or an instrument executed before the 4th July 1980), call for the true copy or an abstract of the instrument from the registering officer and examine it for the purpose of satisfying himself as to the correctness of the market value of the immovable property which is the subject matter of such instrument and the duty payable thereon; and if, after such examination, he has reason to believe that the market value of such property has not been truly and fully setforth in the instrument he shall proceed as provided in sub-section (4).

(6) It shall be lawful for the Chief Controlling Revenue Authority or the Collector of the District to transfer to any other Officer, any reference received by the Collector of the District under this section, for disposal in accordance with the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995.

Under section 33A collector has got the power to impose 10 times penalty of which the stamp is less used. When any person pay less stamp duty on the amount which he has paid for the instrument and shown in the deed at that collector has to exercise his power under section 33A.

2.3 Impounding of instruments after registration.- When through mistake or otherwise any instrument which is not duly stamped is registered under the Registration Act, 1908, the registering officer may call for the original instrument from the party and, after giving the party an opportunity of being heard and recording the reasons in writing and furnishing a copy thereof to the party, impound it. On failure to produce such original instrument by the party, a true copy of such instrument taken out from the registration record shall, for the purposes of this section, be deemed to be the original of such instrument

2.4 Penalty for executing etc., instrument not duly stamped - (1) Any person-
(a) drawing, making, issuing, endorsing or transferring, or signing otherwise than as a witness, or presenting for acceptance or payment, or accepting, paying or receiving payment of, or in any manner negotiating, any bill of exchange payable otherwise than on demand or promissory note without the same being duly stamped, or

(b) executing or signing otherwise than as a witness any other instrument chargeable with duty without the same being duly stamped; or voting or attempting to vote under any proxy not duly stamped ; shall for every such offence be punishable with fine which may extend to five hundred rupees :

Provided that, when any penalty has been paid in respect of any instrument under section 35, section 40 or section 61, the amount of such penalty shall be allowed in reduction of the fine (if any) subsequently imposed under this section in respect of the same instrument upon the person who paid such penalty.

(2) If a share-warrant is issued without being duly stamped the company issuing the same, and also every person who, at the time when it is issued, is the managing director or secretary or other principal officer of the company shall be punishable with fine which may extend to five hundred rupees.

1. Legislative references: See section 61 of Act I of 1879, sections 29 and 30 of Act XVIII of 1869. Sub-section (2) is re-enactment of sub-section 35 of the Indian Companies Act 1882.

In clause (a) of sub-section (1), the word “cheque” has been omitted and after the words “bill of exchange” the words ‘payable otherwise than an demand’ have been inserted by Act v of 1927 by which duty on cheques and demand bills was abolished.

2. Sub-section (1)-“Person”-Liability of firm or corporation for Servants’ Act- The term ‘person’ includes a partnership firm and a corporation –see section 3(42) of the General Clauses Act. Where the servant of a trading partnership firm gave an unstamped receipt and refused to give a stamped receipt, all the partners of the firm were held criminally liable. In Attorne-General v. Carlton Bank a Bank was fined for the omission of its official to stamp receipts. Sub-section 2 makes the Company liable for issue of unstamped share certificates and implies that the company would be liable under sub-section (1) for the execution of any other unstamped document. Where criminal intention is an essential ingredient, there can of course be no such liability, unless the person is guilty of abetment in having employed his servant to do the act with a criminal intent. But such criminal intention is not necessary for an offence under this section- see cases cited infra on the point. The company is not liable for payment of duty if it registers a transfer of shares which is not duly stamped.

3. Sub-section (1), Clause(a).- ‘Issue’ means the first delivery of a bill or note to be a person who takes it as first holder. For stamp purposes a bill is not deemed to be issued until it has reached the hands of a holder for value.

The words ‘signing otherwise than as witness’ must be read together. A witness to an instrument does not draw, make or execute it.

The term “accepting’ does not mean receiving but executing as an acceptor. To receive a promissory note duly stamped and to put it in suit does not constitute an offence. The person in whose favour an unstamped promissory note is made is not subject to penalty. If an instrument is not duly stamped, the person subject to penalty is the person who makes it, not the person in whose favour it is made. The letter incurs the risk being debarred from producing it in evidence, but does not render himself liable to penalty. The receiver of the document is not also liable as abettor.

‘Receiving the payment of a promissory note’ means receiving the money due under the note and not receiving the note itself.

4. Instrument chargeable with duty- In one Patna case it is held that an agreement for a lease wherby no rent is reserved and no premium is paid or money advanced, is not and instrument chargeable to stamp-duty under the Stamp Act and the executants of such a document cannot be convicted under the said section. The court has apparently over looked the residuary provision in schedule 1 Article 5 C. An instrument which is an agreement exempted under Article 5 as a memorandum relating to the sale of goods is not chargeable with duty and the executants of document cannot be convicted.

The court ought not to be guided by the fact that the collector has decided that the duty and penalty are livable and ordered prosecution, and must decide for itself on the question of stamp duty.

Duly stamped – In order to determine whether an instrument is duly stamped, for the purpose of prosecution, the same rule must be observed as for admission in evidence, for which see under section 35, and section 2, clause (6) & (11). The execution of an instrument not stamped or written in the manner required by the stamp rules is an offence under this section in view of the definition of the words ‘duly stamped’. But a person purchasing a stamp from the treasury officer without obtaing the certificate reuired to be made by them under such rules has not committed an offence under this section.

Criminal intention- A prosecution can be instituted only after giving an opportunity to a person to pay a duty and penalty, when the duty and penalty have been paid, only if it should appear to the Collector that an intention to evade the duty existed. A conviction will be therefore illegal if the Collector had not adopted the procedure.

Proviso- penalty paid for validation of the document ought to be deducted from the fine imposed under the section. It is wrong to impose no fine or to impose a lighter fine in view of penalty having been already levied and paid the amount of fine to be imposed should be determine on the merits of the case and penalty previously paid should be allowed in reduction of fine.

Share warrant – section 35 of the companies Act of 1882 of which this provision is a reenactment use the word ‘forfeit’ and it was held that it ment the same as penalty and was not of civil nature the use of that word has been avoided in this section. The language of the present section also enable to magistrate to impose any fine up to the limit of Rs. 500, and dose not constraint him to impose the penalty of Rs. 500 in every case as under section 35 of companies act.

Some points of procedure – sanction of the collector is necessary for prosecution under the section. The offences under section 62 (B) and 64(A) are not respectively minor and major offence and it cannot be presumed that a sanction to the prosecution under section 64(A) is a sanction by implication to a procecution under section 62 (B).the collector required under section 43, when instituting a procecution under section 62(B) to consider whether their has been fraud. An express sanction would no doubt, be evidence that he had considered the question, but when the sanction was only for procecution for offence under section 64(A) it is possible that the question was never properly consider in the light of section 43. Where therefore the procecution was started against the accused under section 64(A), but the magistrate finding that there was no proof of intent to sustain of conviction under section 64(A), convicted the accused instead under section 62(B) the conviction was set aside the court also directed that no further proceeding were to be taken because on the magistrate’s finding that there was no fraud there ought never to have been a prosecution.
The Collector being primary responsible for the prosecution of offence under the Stamp Act should not himself try the person accused under the act as a magistrate.

Under Sectoin 25 of the General Clause Act, the fine are recoverable under the provisions of CRPC. In default of payment of fine simple imprisonment may be awarded. The mention of the world “penalty” in the marginal not is only in its generic sense including both fine and forfeiture.

It will be seen that case cited under the Section are not recent. Now a days there are provisions in most states for state recovery evaded duties by more direct procedure. The maximum penalty Rs. 500 is to seek of duties now obtaining in states under state legislation and would not be sufficient deterrent against evasion.

The table of stamp duty to be paid on different instrument

This chapter shows the conclusion as well as researcher’s opinion on the subject.
Real Estate Stamp Duty is a type of tax collected by the Government of India. The British Government introduced Stamp Duty in India by enacting the Indian Stamp Act, 1899. Stamp Duty is paid for the transaction performed by way of document or instrument under the provisions of Bombay Stamp Act, 1958 and Indian Stamp Act, 1899 to the Collector of Stamps. The proceeds of the Duty go to the State in which they are levied.

Stamp Duty is expected to be paid in full and on time. Penalty involves fine or even imprisonment. Delay in payment of property Stamp Duty will draw a penalty at the rate of 2% per month on the deficit amount of the Stamp Duty and a maximum penalty of 200% of the deficit amount of the Stamp Duty.

In so far as the orders of the Collector are concerned, an appeal lies to the Sub-Court having jurisdiction over the area within two months. However, the appeal shall be filed only after the entire amount of the deficit duty as determined by the Collector has been deposited.

My outcome of the hypothesis is positive. We have seen that penalty is imposed on not duly stamped instruments. But with this I have also come to know that sometime conviction is also done when instrument is not duly stamped.

If we talk about the present scenario of state of Gujarat then, we can say that section 32A is almost of no use. Now if stamp duty is not paid according to the government rate of the instrument than the registration of the deed or any such thing will not be allowed, they will immediately ask the person to get the stamp of remaining amount.

Bibliography
Review of Literature:
# For this project, I have referred K. Krishnamurthy’s “The Indian Stamp Act”,10th edition as a main source of research on instrument not duly stamped.
# I have also referred law dictionaries and other general dictionaries for understanding of legal words, phrases and terms. With all this I have also referered The General Clauses Act.
# I have also referred websites like www.delhi.gov.in, www.Dateyus.com. And few articles on the topic.
# I have also visited different sites like manupatra.com, indiankanoon.com, vakilno1.com, judis.nic.in, for the search of different cases.
# I have also referred many case laws on the topic. These case laws helped me a lot in understanding the basic concept and also to get deep into the topic.
# The book of K Krishnamurty is masterwork on the topic. It justifies the topic in a very nice manner. It presents an exhaustive and analytical exposition of the law as laid down in judicial decisions and revenue board’s ruling with their own comments.
# This book has cleared many doubts related to Indian Stamp Act and while reading the book, I have explored my knowledge regarding the subject.
# I have also referred many books of transfer of property act like of Mulla’s, Textbook on The Transfer of Property Act, 2nd Edn. (Paperback) By Avtar Singh, Transfer of Property Act By Abhinav Misra. But this was not helpful to me regarding this topic.
#  K. Krishnamurthy’s “The Indian Stamp Act”,10th edition

# Queen Empress v. Khetter Moham Chowdhry
# Jagdish mills Ltd AIR 1955 Bom 79
# Queen empress v. gulam hussain
# Sunder kuer v. emperor
# Mian bux v. emperor
# Empress v. dwarakanath chowdhury
# Queen empress v. trailokya nath baral
# Section 43 & 70
# U.P. Stamp Manual p. 93
# Maya Shah v. Emperor
# Cf. Reg. v. Ramachandrappa
# http://chandigarh.gov.in/citizen_regprop.htm last visited on: 28th july, 2011

The  author can be reached at: akashshah@legalserviceindia.com

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