The Supreme Court of India ruled that High Courts cannot waive statutory penalties on deficient stamp duty, stating that such powers lie only with authorities under the Stamp Act
-1775566486832_d.png "Supreme Court rules High Courts cannot waive stamp duty penalties")
No judicial discretion to reduce stamp duty penalty, rules Supreme Court. File Pic
The Supreme Court has ruled that a High Court cannot waive the statutory penalty payable on deficient stamp duty, holding that such power lies exclusively with the competent authority under the relevant Stamp Act.
In a significant judgment, a bench of Justices Sanjay Kumar and K. Vinod Chandran set aside a Karnataka High Court order to the extent it had exempted payment of penalty while directing payment of deficient stamp duty on lease documents.
The apex court was dealing with an appeal arising out of a long-pending partition suit filed in 2008, where the admissibility of two lease documents was contested on the ground of insufficient stamping.
The Justice Sanjay Kumar-led Bench clarified that once an instrument is found to be insufficiently stamped, its impounding is mandatory under the Karnataka Stamp Act, 1957, and the statutory scheme leaves no room for courts to dilute penalty provisions in the manner adopted by the High Court.
"The High Court cannot, by itself, direct payment of stamp duty and absolve the penalty which is otherwise mandated under the statute," the top court observed, adding that the determination of deficit duty and imposition of penalty falls within the domain of the Deputy Commissioner under the statute under the Karnataka Stamp Act.
Clarifying the legal position, the Supreme Court held that when a party seeks to have an insufficiently stamped document admitted in evidence before a court, the imposition of a penalty is mandatory and not subject to judicial discretion.
"There lies no discretion on the Court in imposing a penalty less than ten times the deficit duty when the instrument is sought to be admitted in evidence," the judgment stated.
However, the bench also stated that if the document is transmitted to the Deputy Commissioner, the authority may exercise discretion to reduce or refund the excess penalty in accordance with law, though such discretion cannot be exercised by the High Court in its supervisory jurisdiction.
While granting liberty to the plaintiffs to choose between paying duty and penalty before the court or seeking adjudication by the Deputy Commissioner, it clarified that the liability to pay stamp duty and penalty in lease transactions rests on the lessee.
The Supreme Court also declined the plea for expeditious trial of the suit independent of stamp duty proceedings, making it clear that the documents can be admitted in evidence only after due compliance with the Stamp Act.
Setting aside the Karnataka High Court’s direction insofar as it waived the penalty, the apex court disposed of the appeal without expressing any opinion on the merits of the underlying civil dispute. The appeal was drafted and filed by Ayush Negi and argued by senior advocate Nachiketa Joshi, along with advocate Aarushi Gupta, appearing for the petitioner.
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