Eos No.32 of 1987 State of West ... vs Sati Enclave Pvt. Ltd. & Ors on 13 May, 2010

8/13/2019 Eos No.32 of 1987 State of West ... vs Sati Enclave Pvt. Ltd. & Ors on 13 May, 2010

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Calcutta High Court

Calcutta High Court

Eos No.32 Of 1987 State Of West ... vs Sati Enclave Pvt. Ltd. & Ors on 13 May, 2010

Author: Mr. Mohit Shah

IN THE HIGH COURT AT CALCUTTA

CIVIL APPELLATE JURISDICTION

ORIGINAL SIDE

G.A.No.1660 of 2008

APOT No.196 of 2008

C.C.No.4 of 2008

G.A.No.3417 of 2006

EOS No.32 of 1987

State of West Bengal

Versus

Sati Enclave Pvt. Ltd. & Ors.

with

W.P.NO. 1295 OF 2009

ALS VYAPAR PVT. LTD.

VERSUS

THE REGISTRAR OF ASSURANCE, KOLKATA & ORS.

For the appellant :Mr. Indrajit Sarkar with (in Item No.1) Mr. Reetobroto Mittra and Mr. Mrinal Kanti Sarda,

Advocates

For the respondents :Mr. Anindya Kumar Mitra, Sr.Advocate (In item No.1) Mr. R.K.Chowdhury, Mr.

A.K.Chowdhury

Ms. Dipali Mukherjee

Mr. D.K.Chandra and

Ms. Saswati Joardar, Advocates

For the appellant :Mr. Jayanta Mitra, Sr. Advocate (in Item No.2) Mr. Joydeep Kar, Mr. Mrinal Kanti Sarda,

Advocates


Indian Kanoon - http://indiankanoon.org/doc/1669443/ 1


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For Respondent/Writ :Mr. Sakya Sen with petitioner (In Item No.2) Mr. Priyankar Saha, Mr. Subir Ranjan

Ghosh and

Mr. Ashis Lodha, Advocates.

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C.C.No.4 of 2008

G.A.No.3417 of 2006

EOS No.32 of 1987

with

W.P.NO. 1295 OF 2009

BEFORE

The Hon'ble Chief Justice MOHIT S. SHAH And

The Hon'ble Justice SOUMITRA PAL

And

The Hon'ble Justice SANJIB BANERJEE

Heard on : 10.05.2010, 12.05.2010 & 13.05.2010

Judgment on : 13.5.2010.

MOHIT S. SHAH, C.J. : The question referred by the Division Bench for our opinion is :

"Whether the provisions contained in Section 47A of the Indian Stamp (West Bengal Amendment) Act read

with Rule 3 of the West Bengal Stamp (Prevention of Under-valuation of Instruments) Rules 2001 are

applicable to an instrument executed pursuant to an order of sale passed by a Civil Court in a suit for partition

which is conducted by a Receiver appointed by the Civil Court, by auction, after publication in newspapers."

2. Following the above reference, a learned single Judge of this Court has also referred the following question

for our consideration:-

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"Whether the consideration money fetched for sale of a property in course of liquidation proceedings before

the Company Court upon re-advertisement, falling short of the reserve price mentioned in the initial

advertisement, or the price so fetched although higher than the reserve price but in the opinion of the

registering authority is lower than the market value determinable under Rule 3 of the West Bengal Stamp

(Prevention of Undervaluation of Instruments) Rules, 2001, should be treated to be the market value for the

purpose of registration and stamp duty and thus provisions of Section 47A of the Stamp Act (West Bengal

Amendment) read with Rule 3 framed thereunder would have no application to such Court sale ?"

3. The facts giving rise to the appeal being APOT No.196 of 2008, broadly stated, are as under :

3.1 In a partition suit, being Extraordinary Suit No.32 of 1987, a learned single Judge of this Court passedorder dated 15th September, 1987 for sale of the land in question, being Premises No.20 to 20/14 (Except

20/10) Chetla Flat Road, Kolkata 700027. The land measures 41 cottahs and 21 chittacks, that is,

approximately 2800 square meters.

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APOT No.196 of 2008

C.C.No.4 of 2008

G.A.No.3417 of 2006

EOS No.32 of 1987

with

W.P.NO. 1295 OF 2009

3.2. On 8th March, 2006 the Joint Receivers appointed by the Court issued an advertisement in the leading

daily newspaper (The Telegraph) for sale of the plots abovementioned. At the auction several parties

participated and by order dated 5th September, 2006 the learned single Judge noted that as per the report of

the Joint Receivers, the offer made by one Priya Dutta at the rate of Rs.1,88,500/- per cottah was the highest,

but she had not paid the entire earnest money stipulated at the rate of 10% of the bid amount - the earnest

money accordingly required to be deposited was Rs.7,86,995/-. Respondent No.3 in the suit (respondent no. 1

in the appeal), another bidder, also offered to match the bid amount at the same rate of Rs.1,88,500/- and to

pay the entire earnest money within 3 days. The Court directed that if respondent No.3 did not pay the earnest

money within 3 days, the Joint Receivers shall proceed for conveying the property to the next highest bidder

whose bid was for Rs.1,88,000/- per cottah. In the event the earnest money was paid by respondent No.3 by

demand draft within 3 days as directed above, respondent No.3 shall be given further two weeks time to

deposit the consideration money in full, deducting therefrom the earnest money already deposited with the

Receivers. The Court also provided for default clause in case the earnest money was deposited but the




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consideration amount was not deposited within the time limit. 5

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C.C.No.4 of 2008

G.A.No.3417 of 2006

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W.P.NO. 1295 OF 2009

Respondent No.3 paid the earnest money within the stipulated time and also paid the consideration money by

matching the highest offer of Rs.1,88,500/-.

3.3. By order dated 4th December, 2006 the learned single Judge accepted the offer of respondent No.3 in the

suit (respondent No.1 in the appeal) and confirmed the sale in favour of the said party. The learned single

Judge further directed by the said order that the aforesaid consideration being the actual consideration for the

property would be treated as value of the property for the purpose of registration and stamp duty.

3.4. Accordingly, the Joint Receivers executed the conveyance in favour of respondent No.3 in the suit and

presented the same for registration on 16th May, 2007 for conveying the property in question for sale

consideration of Rs.78,69,875/-. Stamp duty of Rs.5,48,810/- and registration fee of Rs.86,650/- were also

paid. However, on 14th December, 2007 the Registrar of Assurances issued notice under section 47A(2) of

the Indian Stamp Act, 1899 calling upon the Joint Receivers and the other parties to the conveyance

intimating that the ma rket value of the above property was assessed by the regi stering officer atRs.7,76,69,838/- on which deficit stamp duty of Rs.48,85,888/- and deficit registration fee of Rs.7,67,800/-

were required to be paid. 6

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APOT No.196 of 2008

C.C.No.4 of 2008

G.A.No.3417 of 2006

EOS No.32 of 1987

with

W.P.NO. 1295 OF 2009

3.5. Thereupon contempt notice was issued by respondent No.3 in the suit to the Registrar of Assurances on

17th December, 2007 for having committed breach of the order dated 4th December, 2006 of the learned

single Judge. Ultimately, respondent No.3 filed contempt application on which the learned single Judge

passed order dated 15th April, 2008 issuing rule. The learned single Judge also passed order rejecting the

application of the Registrar of Assurances for recalling the order dated 4th December, 2006. Against the




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above order rejecting the application for recall of the order dated 4th December, 2006, the Registrar of

Assurances filed appeal before the Division Bench.

4. At the hearing of the appeal, respondent no.3 in the suit, (respondent no.1 in the appeal), relied upon two

decisions of the Learned Single Judge of this Court reported in AIR 1984 Cal 174 and AIR 2001 Cal 76 and

also upon the judgment of a Division Bench of this Court in Registrar of Assurances, Kolkata vs. A. I.

Champdany Industries Ltd. APOT No. 168 of 2002 taking the view that proceedings under Section 47A of the

Indian Stamp Act could be initiated only when the actual consideration was higher than the considerationmentioned in the document. It was contended on the basis of the said decisions that provisions of Section 47A

would not be applicable to court sales. Disagreeing with the view of the previous Division Bench rendered on

5th May, 2008 in A. I. 7

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Champdany Industries case, the Division Bench hearing the appeal referred the above question for decision by

a larger Bench.

5. The reference made by the Learned Single Judge arises from the following facts.

5.1 By order dated 21st July, 2004 ASL Vyapar Pvt. Ltd. was ordered to be wound up and the Official

Liquidator was directed to take necessary steps in accordance with law. Pursuant to the said orders of the

Company Court, the Official Liquidator published advertisements in the daily newspapers inviting offers for

purchase of assets and properties of the company (in liqn.) on "as is where is and whatever there is" basis with

a reserve price of Rs.1.20 Crores. In response to the said advertisement, the highest offer received by the

Official Liquidator was Rs.75 Lacs. Thereafter the Company Court issued a direction for revising the reserve

price and to issue a fresh advertisement. In the second advertisement published on 15th September, 2006, the

reserve price was fixed at Rs.1 Crore. In response to the same, the highest offer received was Rs.86 Lacs. It

was subsequently enhanced to Rs.87 Lacs when the auction was held in the Company Court. By order dated

8th September, 2006, the Company Court confirmed the sale in favour of the writ petitioner in W.P. No.1295

of 2009 at Rs.87 Lacs on fulfillment of certain conditions regarding the payments to be made within the

stipulated time limit. On payment of the entire consideration, the 8

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EOS No.32 of 1987

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deed of conveyance was executed by the Official Liquidator on 7th May, 2008 and was presented before the

Registrar of Assurances, Calcutta for registration.

5.2 On 6th August, 2008 the Additional Registrar of Assurance-II issued a demand notice to the petitioner

informing that the market value of the property in question was assessed at Rs.1.70 crores and requiring the

petitioner to pay deficit stamp duty of Rs.5.86 lacs and deficit registration fee of Rs.92,125/-. The petitioner,

therefore, filed a writ petition challenging the said notice. The learned single Judge has referred the

abovequoted question for opinion of the Larger Bench.

6. The learned counsel for the writ petitioners have at the outset invited our attention to two recent decisions

rendered by the Apex Court having a direct bearing on the question under consideration. Government of

Andhra Pradesh and Others vs. P.Laxmi Devi (Smt.) 2008 (4) SCC 720 arose under Section 47A as applicable

to State of A.P. In V.N.Devadoss vs. Chief Revenue Control Officer-cum-Inspector and Ors. reported in(2009) 7 SCC 438, a Bench of three Judges of the Apex Court dealt with Section 47A as applicable to the

State of Tamil Nadu read with Tamil Nadu Stamp (Prevention of Under-valuation of Instruments) Rules 1968.

9

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C.C.No.4 of 2008

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EOS No.32 of 1987

with

W.P.NO. 1295 OF 2009

7. In the Andhra Pradesh case (P.Laxmi Devi) (supra) the Apex Court referred to sub-Section (1) of section

47A of the Indian Stamp Act and made the following observations : "5. Experience showed that there was

large-scale undervaluation of the real value of the property in the sale deeds so as to defraud the Government's

proper revenue. In the original Stamp Act there was no provision empowering the Revenue Authorities to

make an enquiry about the value of the property conveyed for determining the correct stamp duty. Hence

amendments were made to the Indian Stamp Act from time to time in several States including amendments by

the Andhra Pradesh Legislature e.g. by Indian Stamps (A.P.Amendment) Act 22 of 1971. Indian Stamps (A.P.

Amendment) Act 17 of 1986 and ultimately by A.P.Act 8 of 1998 (with effect from 1-5-1998) . The scheme

of Section 47-A was to deal with such cases where parties clandestinely undervalued the property to evade

payment of the correct stamp duty." (emphasis supplied by petitioners)

8. In V.N.Devadoss's case (decided in 2009) the Apex Court considered a similar provision under Section

47A(1) of the Act, as applicable to the State of Tamil Nadu and held as under: "13. Sub-sections (1) and (3) of

Section 47-A clearly reveal the intention of the legislature that there must be a reason to believe that the

market value of the property which is the 10




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G.A.No.3417 of 2006

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subject matter of the conveyance has not been truly set out in the instrument. It is not a routine procedure to be

followed in respect of each and every document of conveyance presented for registration without any

evidence to show lack of bona fides of the parties to the document by attempting fraudulently to undervalue

the subject of conveyance with a view to evade payment of proper stamp duty and thereby cause loss to the

revenue. Therefore, the basis for exercise of power under Section 47-A of the Act is wilful undervaluation of the subject of transfer with fraudulent intention to evade payment of proper stamp duty." (emphasis supplied

by petitioners)

9. The learned counsel for the petitioners have also relied upon a judgment of the Full Bench of this Court in

Birendra Nath Manna and Anr. Vs. The State of West Bengal & Ors. 2000(1) CHN 173 upholding the

constitutional validity of Section 47A, as applicable to the State of West Bengal and, particularly, the law laid

down in paragraph 22 of the said judgment which reads as under : "As by reason of the said entry both the

Parliament as also the State Legislature have been conferred power to enact law relating to stamp duty, the

same must be held to have wide import. The power to legislate on the stamp duty includes a power to make a

provision to check evasion thereof and new process and procedural provisions may also be added for 11

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plugging the loopholes. By reason of the said provision only prohibition of evasion of stamp duty has been

made." (emphasis supplied by petitioners)

Reliance is also placed on the Statement of Objects and Reasons for enactment of the Indian Stamp Act (West

Bengal Amendment) 1990 which contains the following explanation for insertion of Section 47A:

"The Indian Stamp Duty Act, 1899, in its application of West Bengal provides the levy of duty on instrument

relating to transfer of immovable properties on the basis of prices agreed upon between the transferor and the




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transferee. Many States like Uttar Pradesh, Tamil Nadu, Rajasthan etc. have already amended the provisions

of the law as applicable to such States in order to charge stamp duty on the instruments relating to such

transfer on the basis of market value to combat the menace of under valuation of properties in a large number

of cases. West Bengal is no exception to this general phenomenon of under valuation of properties. In the

States where the basis of charging duty has been changed from the declared price or value of the properties to

the market value, the revenue from stamp duty has increased sharply" .

(emphasis supplied by petitioners)

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W.P.NO. 1295 OF 2009

10. It is the consistent view of several High Courts right from 1989(1) ALT 546, K. Sivaramaiah v. Special

Deputy Collector, Urban Cuddapah, AIR 1995 AP 233, Vidya Nagar Housing Co- operative Society Ltd. vs.

State of A.P and 1998(4) ALT 626, M. Venkata Ramana vs. Collector and District Registrar, Hyderabad, of

the Andhra Pradesh High Court; AIR 1997 Madras 296, S.P. Padmabati vs. State of Tamilnadu of the Madras

High Court and in Registrar of Assurances, Kolkata vs. A. I. Champdany Industries Ltd. decided by CalcuttaHigh Court on 5th May, 2008 where it has been held that the provisions of Section 47A do not apply to open

market sales. It is submitted that recently the Apex Court has also taken the same view in V.N. Devadoss's

case (supra). It is submitted that since the wilful under-valuation of the subject of transfer with fraudulent

intention to evade payment of proper stamp duty is the basis for exercise of power under Section 47A of the

Act, the registering officer cannot have any reason to believe that the market value of the property was not

truly set forth in the instrument of transfer, when such instrument was executed pursuant to the order of a

court when the property was sold at a public auction after publication of the advertisement in the newspapers.

11. Mr. Anindya Mitra, learned senior counsel for the respondents submitted that the property in question

consists of land measuring 41 cottahs but there are 98 sitting tenants on the 13

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said land for several decades and the total monthly rent in aggregate receivable by the landlord is Rs.8000/-

for entire the land and that apart, 80 vendors are occupying the land for their hawking business during

daytime. Hence, the price of Rs.78.69 lakhs was the best possible price that could be fetched under the

circumstances. There was an advertisement in the daily newspaper (The Telegraph) which is having very wide

circulation in the city of Calcutta and also in a Bengali daily newspaper Bartamann. Highest bid of Rs. 78.69

lakh was offered by the respondent and there was no higher offer available at the time when the sale wasconducted. It is submitted that the purchaser at the court auction has no option to return the property to the

court when the registering officer issues a notice informing that the value of property purchased by the

respondent at Rs.78.69 lakh was assessed at Rs. 7.76 crores and, therefore, the deficit stamp duty of Rs.48.85

lacs is payable over and above the stamp duty of Rs.5.48 lacs and registration fee of Rs. 7.67 lacs is payable

over and above Rs.86,650/- already paid by the respondent at the time of execution of sale deed by the Joint

Receivers in its favour.

12. Similarly, Mr. Sakya Sen, learned counsel for the other writ petitioner (in the reference arising from the

Company matter) submits that when no bidder was ready to offer the reserved price of Rs. 1.20 crores on the

first occasion and Rs. 1 crore on the second occasion and the secured creditors for whose benefit the 14

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property, company in liquidation was being sold agreed to accept the price of Rs. 87 lacs. The price paid by

the writ petitioner was the best possible price under the circumstances. According to Mr. Sen, the market

value of a property is not some hypothetical figure which the bidder must match. The market value is the

value which the highest bidder is prepared to pay in the facts of the given case under the prevailing

circumstances.

13. On the other hand, Mr. Jayanta Mitra, Learned Sr. Advocate and Mr. Indrajit Sarkar, learned Counsel for

the State have supported the order of reference made by the Division Bench and have made the following

submissions : ( i ) The provisions of the Indian Stamp Act, 1889 as applicable to the State of West Bengal are

not the same as the provisions of Indian Stamp Act, 1899 as applicable to the State of Tamilnadu and,

therefore, the principles laid down by the Apex Court in V.N.Devadoss case (supra) will not apply to the State

of West Bengal.

( ii ) In any view of the matter, the learned single Judge passing order dated 4th December, 2006 had no

jurisdiction to give a preemptive direction that the aforesaid consideration being the actual consideration for

the property would be treated as value of the property for the purpose of registration and stamp duty. The

Indian Stamp Act, 1899, particularly, sub-sections (3) and (5) of Sections 47A, 47B 15

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APOT No.196 of 2008

C.C.No.4 of 2008

G.A.No.3417 of 2006

EOS No.32 of 1987

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W.P.NO. 1295 OF 2009

and 47C provide a complete code regarding the remedies available to a person who does not accept the

assessment of market value of the property in question by the registering officer under sub-sections (1) and (2)

of Section 47A read with Rules 3 to 11 of the West Bengal Stamp (Prevention of Undervaluation of

Instruments) Rules, 2001 (hereinafter referred to as the Undervaluation Rules). As per the said statutory

provisions, the person not accepting the assessment of market value by the Registering Officer gets an

opportunity of hearing before the Collector in a reference under sub-sections (3) and (5) of Section 47A.

Thereafter, right of appeal under Section 47B and the further right of revision before the Chief ControllingRevenue Authority under Section 47C. Sub-section (3) of Section 47C provides that an order passed by the

Chief Controlling Revenue Authority shall be final and shall not be called in question in any civil court or

before any other authority. It is vehemently submitted that the learned single Judge passing the order dated 4th

December, 2006 was exercising powers of the civil court and the pre-emptive direction given in the said order

dated 4th December, 2006 ran counter to the aforesaid legislative prohibition contained in sub-section (3) of

Section 47C of the Act.

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14. We have carefully considered the rival submissions. Before dealing with the same, it is necessary to refer

to the relevant statutory provisions as applicable to the State of West Bengal and also to refer to the relevant

provisions of Indian Stamp Act, 1899 applicable to the State of Tamilnadu which are considered by the Apex

Court in V.N.Devadoss case (supra).

Indian Stamp Act, 1899 as applicable to State of West Bengal - "2(10) Conveyance - "Conveyance" includes a

conveyance on sale and every instrument by which property, whether movable or immovable, is transferred

inter vivos and which is not otherwise specifically provided for by Schedule I or by Schedule 1A, as the case

may be."




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Section 47A as initially inserted by the Indian Stamp (West Bengal Amendment) Act, 1990 read as under:

"47A - Instruments of conveyance etc. undervalued how to be dealt with - (1) Where the registering officer

appointed under the Registration Act 1908 (16 of 1908), has while registering any instrument of conveyance,

exchange, gift, partition or settlement, reason to believe that the market value of the property which is the

subject matter of such instrument has not been truly set forth in the instrument, he may, notwithstanding the

contrary provision in section 35 in so far as it relates to registration, register such instrument 17

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provisionally, subject to determination of the market value under sub-section (2), and, after registering such

instrument, refer the matter to such authority as may be prescribed for determination of the market value of

such property and the proper duty payable thereon." (emphasis supplied)

Sub-section (2) of Section 47A provided for an opportunity of making representation to the concerned party

and an enquiry to be held for determining the market value of the property. Sub-section (3) conferred power

on the authority to take in suo motu revision any instrument executed within two years from the date of

registration of the instrument for satisfying as to the correctness of the market value of the property and to

recover the difference in case the authority had reason to believe that the market value was not correctlydetermined. Sub-section (4) provided for an appeal against such decision of the authority.

15. Section 47A, as it presently stands, was substituted by the West Bengal Amendment Act of 1998 with

effect from 15th March, 2001. Sub-section (1) of Section 47A reads as under :- "47A. Instruments of

conveyance, etc. under-valued, how to be dealt with - (1) Where the registering officer appointed under the

Registration Act, 1908 (16 of 1908) has, while registering any instrument of - 18

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17. Section 47A as applicable to State of Tamilnadu is as under: "47A - Instruments of conveyance, etc.

undervalued how to be dealt with - (1) If the registering officer appointed under the Indian Registration Act,

1908 (16 of 1908) while registering any instrument of conveyance, exchange, gift, release of benami right or

settlement has reason to believe that the market value of the property which is the subject matter of

conveyance, exchange, gift, release of benami right or settlement, has not been truly set forth in the instrument

he may, after registering such instrument, refer the same to the Collector for determination of the market value

of such property and the proper duty payable thereon. (2) On receipt of a reference under sub-section (1), the

Collector shall, after giving the parties a reasonable opportunity of being heard and after holding an enquiry in

such manner as may be prescribed by rules made under this Act, determine the market value of the property

which is the subject matter of conveyance, exchange, gift, release of benami right or settlement, and the duty

as aforesaid. The difference, if any, in the amount of duty, shall be payable by the person liable to pay theduty.

The other sub-sections of Section 47A give a right of appeal to any person aggrieved of an order of the

Collector and a right of revision to any person aggrieved by an order of 21

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the appellate authority and a further right of the appeal to the High Court against the order of the revisional

authority.

18. Section 47A of the Indian Stamp Act as applicable in the State of Andhra Pradesh reads as under: "47A.

Instruments of conveyance, etc. how to be dealt with - (1) Where the registering officer appointed under the

Registration Act, 1908, while registering any instrument of conveyance, exchange, gift, partition, settlement,

release, agreement relating to construction, development or sale of any immovable property or power of

attorney given for sale, development of immovable property, has reason to believe that the market value of the

property which is the subject matter of such instrument has not been truly set forth in the instrument, or that

the value arrived at by him as per the guidelines prepared or caused to be prepared by the Government from

time to time has not been adopted by the parties, he may keep pending such instrument and refer the matter to

the Collector for determination of the market value of the property and the proper duty payable thereon:

Provided that no reference shall be made by the registering officer unless an amount equal to fifty per cent of

the deficit duty arrived at by him is deposited by the party concerned." (emphasis supplied) 22




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Under sub-clause (2) of Section 47A of the Stamp Act, on receipt of a reference under sub-section (1), the

Collector has to give opportunity of making a representation to the parties, and after holding such enquiry as

prescribed by the Rules, shall determine the market value of the property which is the subject matter of the

instrument, and the duty payable thereon.

19. Having carefully examined the provisions of Section 47A of the Indian Stamp Act, as applicable to the

State of West Bengal, State of Tamil Nadu and State of Andhra Pradesh, we find that all the relevant

provisions are in pari materia in so far as they confer power on the registering officer not to register an

instrument where the registering officer has reason to believe that the market value of the property, which is

the subject matter of conveyance, has not been truly set forth in the instrument. A Full Bench decision of this

Court in Birendra Nath Manna & Anr. (supra), while upholding the West Bengal Amendment Act of 1990

inserting Section 47A and the Apex Court also while considering the case from Andhra Pradesh in P. Laxmi

Devi (smt) (supra), (2008)4 SCC 720 and a three Judge Bench of the Apex Court in V.N. Devadoss (supra),

2009(7) SCC 438 while considering the Tamil Nadu case, have held that the power under Section 47A of the

Act can be exercised only when there is intention to evade payment of proper stamp duty. In P. Laxmi Devi

case (supra) the Apex Court has held that the power can be exercised only when the parties undervalued theproperty to 23

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evade payment of correct stamp duty. A three Judge Bench of the Apex Court has in terms held in Devadoss's

case (supra), that the basis for exercise of power under Section 47A of the Act is wilful undervaluation of the

subject of transfer with fraudulent intention to evade payment of proper stamp duty. Hence the registering

officer cannot exercise the power under Section 47A(1) of the Act, unless he has reason to believe that there is

wilful undervaluation of the subject of transfer with fraudulent intention to evade payment of proper stamp

duty.




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20. Keeping the aforesaid object of insertion of Section 47A in mind, we have to examine the definition of

market value in Section 2(16B) of the Act. The said definition reads as under :- "2(16B) - 'Market Value'

means, in relation to any property which is the subject matter of an instrument, the price which such property

would have fetched or would fetch if sold in open market on the date of execution of such instrument as

determined in such manner and by such authority as may be prescribed by rules made under this Act of the

consideration stated in the instrument, whichever is higher." (emphasis supplied)

Similar definition is to be found in Explanation to Section 47A of the Indian Stamp Act, as applicable to theState of Tamil Nadu (as amended by T. N. Act 24 of 1967) which reads as under : 24

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"Explanation.- For the purpose of this Act, market value of any property shall be estimated to be the price

which, in the opinion of the Collector or the Chief Controlling Revenue Authority or the High Court, as the

case may be, such property would have fetched or would fetch, if sold in the open market on the date of

execution of the instrument of conveyance, exchange gift, release of benami right or settlement." (emphasis

supplied)

21. In the oftquoted words of S.R. Das, J. in State of Trav-Co vs. Shanmugha Vilas Cashewnut Factory, AIR

1953 Supreme Court 333, when a legal fiction is created, for what purpose, one is led to ask at once, is it so

created ? His Lordship quoted with approval, the following words of James, L. J. in Ex parte Walton, In re

Levy, (1881) 17 Ch. D. 746 :

"When a Statute enacts that something shall be deemed to have been done, which in fact and in truth was not

done, the Court is entitled and bound to ascertain for what purposes and between what persons the statutory

fiction is to be resorted to."

Again in Bengal Immunity Co. Ltd., v. State of Bihar & Ors. AIR 1955 SC 66, S.R. Das Acting Chief Justice

held in no uncertain terms that legal fictions are created only for some definite purpose and that a legal fiction

is to be limited to the purpose for which it 25

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was created and should not be extended beyond that legitimate field.

22. The object of insertion of Section 47A by the Amendment Act of 1990 being the one indicated in the

Statement of Objects and Reasons and explained in the Full Bench decision of this Court and the aforesaidtwo decisions of the Apex Court, the definition of market value in Section 2(16B) as inserted by the same

Amendment Act of 1990 is required to be read in light of the said object. When the property is sold in a

private sale, the registering officer may have reason to believe that the actual consideration was not truly set

forth in the instrument and, therefore, the officer has been given power to determine the actual value of the

property. As the willing seller would ordinarily like to obtain maximum value of his property in the market,

the registering officer is empowered to determine the market value. Hence, Rule 3 of the Undervaluation

Rules 2001 provides for determining the market value of a property where the registering authority has reason

to believe that the market value of the property was not truly set forth in the instrument executed at a private

sale and the registering officer is to find out what price the property would have fetched or would fetch if sold

in open market on the date of execution of the instrument. But when the property is sold in the open market,

no such fiction is required to be provided for determining the price. It 26

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is thus obvious that the definition is not to apply if the property is actually sold in the open market.

23. The attempt made by the learned Counsel for the State to contend that the difference in the language of the

two definitions (the W.B. definition and the Tamil Nadu definition) is material cannot be accepted. Since

Explanation to Section 47A as applicable to Tamil Nadu already contains the name of the authority which is

to determine the market value, no further reference is made to the Rules.

24. The real point is that the legislature wanted to empower the registering authority to find out actual

consideration for transfer of property by ascertaining the market value of the property, that is the maximum

price which a willing seller would ordinarily like to obtain for his property. Hence, in case of a private sale,

the legislature wanted the registering authority to find out the market value of the property. Some rules were,

therefore, required to be made for determining the market value of the property at a sale other than open

market sale. It is for this reason that in Section 2(16B) of the Bengal Act and the Explanation to Section 47A

of the Tamil Nadu Act, the legislature provided for a fiction to find out what price the property would have

fetched (in the immediate past) or what price the property would fetch (in the immediate future) if sold in

open market on the date of execution of the instrument of 27

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conveyance etc. As regards the words 'whichever is higher' in Section 2(16B), it means the higher of the two

prices - (i) the price which such property would have fetched in open market on the date of execution of such

instrument (i.e. in the immediate past) or

(ii) the price which such property would fetch if sold in open market on the date of execution of such

instrument (i.e. in the immediate future)

25. If the legislature had intended that Section 2(16B) was to apply to open market sales also, the Legislature

would have made a separate or specific provision regarding the determination of the price of the property

being sold in open market. The expression "if sold in open market" pre-supposes that the property was not

sold in open market and, therefore, the Legislature made the provision of Section 2(16B). The language of

Rule 3 also buttresses the view being taken by us. None of the four methods of determining the value of the

property in question refers to value fetched at an open market sale. In our view, therefore, the legislative

scheme is very clear that Section 47A read with Section 2(16B) of the Act and the West Bengal (Prevention of

Undervaluation of Instruments) Rules 2001 are enacted/made to deal with cases where the property is not sold

in open market. Since Section 47A(1), 47B and 47C read with section 2(16B) of the Act are not to apply to

open market sale, as interpreted above, sub-rules (1), (7) and (8) of Rule 3 of the 28

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Undervaluation Rules made to implement the said provisions do not apply to open market sales.

While the Legislature is quite competent to create a legal fiction, in other words, to enact a deeming provision

for the purpose of assuming existence of a fact which does not really exist, a legal provision created by a

Legislature in an Act cannot be widened by rules made under the Act vide Agricultural Market Committee v.

Shalimar Chemical Works Ltd. (1997) 5 SCC 516.




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26. The submission of the learned counsel for the State that the ratio of the decision of the three-Judge Bench

of the Apex Court in Devadoss case (supra) is to be found in paragraph 16 of the judgment and that

observations made in para 13 of the judgment have to be read in light of the contents of paragraph 16 of the

judgment, cannot be accepted. Paragraph 13 of the judgment in Devadoss case contains the rat io of the

decision and the observations in paragraph 16 indicate that there was no scope for undervaluation in the facts

of that case. On the contrary, the discussion in paragraph 16 of the judgment indicates that the question of

applying the fiction of open market sale will not arise when there is actually an open market sale. 29

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27. Is Court Sale an Open Market Sale? 27.1. Coming to the next question as to whether the court sale as

contemplated by the question referred by the learned Division Bench as well as the learned single Judge can

be considered as open market sale, we are of the view that where an advertisement has been published in a

daily newspaper having wide circulation in the concerned city/town where the property is situate, the same is

to be considered as an open market sale. 27.2. We may add that the Court may be well advised to get the

valuation of the property made by a registered valuer for the purpose of fixing the reserve price before issuing

advertisement in the newspapers. But this cannot be insisted upon as a prerequisite or condition precedent, as

the facts of the sale by the Company Court in the second reference indicate that it is not always possible to getbids above reserve price or even matching the reserve price. 27.3. We also wish to add that the whole basis of

holding that a court sale after newspaper advertisement is an open market sale is the sanctity with which the

proceedings of the sale are conducted by the court and its officers. Therefore, if the purchaser of the property

is related to or associated with the authority/officer conducting the sale, it may not only invalidate the sale

itself under the appropriate Rules, but it could also undermine the sanctity of court sale as an open market

sale.

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27.4. In case the registering authority has any material to doubt the sanctity of the open market sale held by

the Court, it is open to the registering officer to move the court with a proper application pointing out such

materials for reviewing the order regarding determination of the price.

28. We may also note the apprehension of the learned counsel for the State that if the registering officer is

bound to accept the price fetched at a court sale as the market value, it will adversely affect the State

Exchequer in respect of other properties in the area, as others will quote the price fetched at the court auction

as the market value of the properties in the same or adjoining areas. This apprehension is sought to besupported by the following observations of the Apex Court made in M/s Kayjay Industries Pvt. Ltd. versus

M/s. Asnew Drums (P) Ltd. and others, (1974) 2 SCC 213 (para 7):

"......... A court sale is a forced sale and, notwithstanding the competitive element of a public auction, the best

price is not often forthcoming. The judge must make a certain margin for this factor. A valuer's report, good

as a basis, is not as good as an actual offer and variations within limits between such an estimate, however,

careful, and real bids by seasoned businessmen before the auctioneer are quire on the cards. More so, when

the subject matter is a specialised industrial plant, which has been out of commission for a few 31

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years, as in this case, and buyers for cash are bound to be limited. The brooding fear of something out of the

imported machinery going out of gear, the vague apprehensions of possible claims by the Dena Bank which

had a huge claim and was not a party, and the litigious sequel at the judgment- debtor's instance have 'scare'

value in inhibiting intending buyers from coming forward with the best offers. Businessmen make uncanny

calculations before striking a bargain and that circumstance must enter the judicial verdict before deciding

whether a better price could be had by a postponement of the sale."

The observations may certainly be relevant in order to show that the price fetched at a public auction

conducted by the Court may not be the best available price. However, when the authorities are considering

market value of the property, which is sold at a private sale, sale price of another property or even of the same

property fetched at a court auction without hearing the government is not to be taken as one of the materials to

be considered by the authority under Rule 3(1) of the Undervaluation Rules. Hence, even if the property at a

court sale does not fetch the highest or best available price, if there are other pieces of evidence of market

value of similar properties available in the area, while exercising the powers under Section 47A(1)(2) read

with Section 2(16B) of the Act and Rule 3 of the Undervaluation Rules of 2001 in relation to a 32

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private sale, the registering officer can always consider the other sale instances or any other material reflecting

higher value of the property.

29. In view of the above discussion, our conclusions are as under :

(1) On a correct interpretation of the provisions of Section 47A read with Section 2(16A) of the Indian Stamp

Act, 1899 as applicable to the State of West Bengal and the West Bengal Stamp (Prevention of

Undervaluation Instruments) Rules, 2001, the sale conducted by the Court or conducted by the Court through

its officers which qualifies to be an open market sale as contemplated in Section 2(16B) of the Act cannot be

the subject matter of exercise of powers by the registering authority under sub-sections (1) & (2) of Section

47A of the Act.

(2) For a Court sale to satisfy the requirements of an open market sale, the following conditions shall be

satisfied:- ( a ) There must be wide publicity of the proposed sale and particularly there shall be publication of

advertisement in at least one newspaper having wide circulation in the concerned city/town/district.

(b) The purchaser of the property must not be connected with or related to the authority/officer conducting the

sale.

(3) The above conclusions will equally apply to sales conducted by the Company Court after publication of

advertisement in a widely circulated newspaper.

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30. The answer to the question referred by the learned Division

Bench is in the negative, that is to say, the provisions contained in

Section 47A of the Indian Stamp Act, 1899 as applicable to West




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Bengal read with Rule 3 of the West Bengal Stamp (Prevention of

Under-valuation of Instruments) Rules, 2001 are not applicable to

an instrument executed by a Receiver pursuant to an order of Sale

passed by a Civil Court after publication in the newspapers.

31. The question referred by the Learned Single Judge stands

answered in terms of our answer as indicated above.

32. The matter shall go back to the concerned courts for hearing

in light of the answers given by us.

Urgent certified photostat copy of this order, if applied for, be

supplied to the parties upon compliance with all requisite

formalities.

( MOHIT S. SHAH, C.J.)

I agree.

( SOUMITRA PAL, J.)

I agree.

( SANJIB BANERJEE, J.)

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Eos No.32 of 1987 State of West ... vs Sati Enclave Pvt. Ltd. & Ors on 13 May, 2010

Documents

Transcript of Eos No.32 of 1987 State of West ... vs Sati Enclave Pvt. Ltd. & Ors on 13 May, 2010