A larger bench of the Supreme Court will examine whether stamp authorities can initiate proceedings over alleged undervaluation of property even though there is no proof showing fraudulent intention to evade stamp duty (BPCL Vs DRO).
A Bench of Justices Dipankar Datta and Sheel Nagu expressed serious doubt over the correctness of the three-judge Bench ruling in VN Devadoss v. Chief Revenue Control Officer-cum-Inspector of Stamps.
That ruling held that the basis for invoking Section 47-A of the Indian Stamp Act, 1899 is wilful undervaluation coupled with fraudulent intent to evade proper stamp duty.
Since VN Devadoss was decided by a three-judge Bench, the present two-judge Bench said judicial discipline requires it to follow the precedent unless the issue is reconsidered by a bench of appropriate strength.
Hence, the bench directed that the matter be placed before the Chief Justice for constitution of larger bench.
The issue arose in an appeal by Bharat Petroleum Corporation Limited (BPCL) against a Madras High Court judgment concerning stamp duty on land purchased from the Union government.
BPCL had paid the full sale consideration and later paid stamp duty and registration charges on the value recorded in the transfer deed. However, the registering authority referred the matter under Section 47-A after noticing a difference between the stated value and the guideline value, leading to a demand for additional stamp duty.
A single-judge of the Madras High Court quashed the proceedings by relying on VN Devadoss. A division bench of the High Court later reversed that order and directed BPCL to participate in the statutory proceedings.
This led to appeal before the Supreme Court.
The apex court noted that Section 47-A itself only requires the registering authority to have “reason to believe” that the market value or consideration has not been truly set out. It does not expressly make fraudulent intent a prerequisite.
Reading such a requirement into the provision could amount to judicial legislation, the top court stated.
The Court also said the VN Devadoss test could turn a valuation exercise into a “quasi-criminal enquiry” by forcing an honest purchaser to defend his character merely because a property was sold below the guideline value.
At the same time, requiring proof of fraud at the threshold could prevent authorities from probing transactions where part of the consideration was secretly paid in cash.
Therefore, the bench referred the following issues for consideration by a larger bench:
1.Whether VN Devadoss, later followed in Registrar of Assurances v. ASL Vyapar (P) Ltd., correctly held that Section 47-A can be invoked only in cases of wilful undervaluation with fraudulent intent to evade stamp duty; or whether the provision can be invoked even in the absence of a culpable mindset, based on the real nature and value of the transaction.
2.Whether the decisions in Ramesh Chand Bansal v. District Magistrate/Collector and Shanti Bhushan v. State of Uttar Pradesh lay down the correct law.
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