Registering Authorities Cannot Conduct Roving Inquiries Into Property Market Value: SC

"If the Registering Officer is bona fide of the view that the sale consideration shown in the sale deed is not correct and the sale is undervalued, then it is obligatory on the part of the Registering Authority as well as the Special Deputy Collector (Stamps) to assign some reason for arriving at such a conclusion," a bench of Justices J B Pardiwala and R Mahadevan said.

In such circumstances, the court explained, if the document in question is straightway referred to the Collector without recording any prima facie reason, the same would vitiate the entire enquiry and the ultimate decision.

The apex court dismissed a petition filed by the Chief Revenue Controlling Officer-cum-the-Inspector General of Registration and two other Revenue Officers, seeking to challenge the judgment and order passed by the High Court of Judicature at Madras.

The High Court by its order on September 2, 2015, allowed the civil miscellaneous appeals filed by the respondent under Section 47-A(10) of the Indian Stamp Act, 1899 and thereby quashed and set aside the order passed by the Chief Revenue Controlling Officer-cum-theInspector General of Registration with respect to the stamp valuation. In the case on hand, the bench said, it is not in dispute that the Form I notices did not contain any reason.

"It also appears that the Collector (Stamps) in his order also failed to indicate the basis on which the sale consideration shown in the two sale deeds was undervalued," the bench pointed out. Looking into another aspect, the bench said, the Special Deputy Collector (Stamps) failed to pass any provisional order as contemplated in Rule 4(4) of the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968.

"As per Rule 6 of the Rules 1968, after passing the provisional order, it is obligatory on the part of the Collector to communicate the market value of the property and the duty payable by the parties concerned in Form II. On receipt of the Form II as contemplated under Rule 7 of the Rules 1968, the Collector shall have to pass the final order," the bench said.

The court pointed out that it appears that in the case on hand, without following the Rules 4 and 6 respectively, the Collector (Stamps) directly passed the final order under Rule 7 of the Rules 1968.

"The scheme of the Stamp Act and the relevant rules makes it abundantly clear that the Collector is obligated to communicate the provisional order to the parties concerned in respect of fixation of the correct value of the property and also the duty payable in Form II," the bench said.

In the case on hand, the court found Form II was issued and to that extent, there is no dispute.

"However, after the issue of Form II, the parties concerned have to be given an opportunity to submit their representation in respect of determining the market value of the subject property. Thereafter, as contemplated in Rule 7 of the Rules 1968, the Collector, after considering the representation if received in writing and the submissions that might have been urged at the time of hearing or even in the absence of any representation from the parties concerned, proceed to pass the final order," the bench said.

The court again noted it appears from the material on record that in the case on hand, the Collector (Stamps) directly issued the final order without complying with sub-rules (2), (3) and (4) respectively of Rule 4 and also without following Rule 6 of the Rules 1968.

"This could be said to be in violation of the Rules 4 and 6 respectively of the Rules 1968. We are of the view that no error not to speak of any error of law could be said to have been committed by the High Court in passing the impugned order," the bench held.

The subject matter of the litigation was the valuation shown in the two sale deeds in year 2000.

The respondent purchaser got the two sale deeds executed through the original owner and showed the market of the property in sale deeds as Rs 1,20,000 and Rs 1,30,000. The Joint Sub-Registrar, Tindivanam on receipt of the two registered sale deeds declined to release the documents on the premise that the sale consideration shown in the two sale deeds was under-valued.

The matter was accordingly referred by the Joint Sub-Registrar to the Special Deputy Collector (Stamps) under Section 47-(A)(10)of the Act for the purpose of determining the correct market value of the property. It also issued notice in Form-I fixing the value of the properties at Rs 45,66,660 and at Rs.12,94,900.

The Special Deputy Collector (Stamps) on conclusion of the inquiry fixed the market value of the properties at Rs 10,36,937 and at Rs 51,16,600.

The respondent being dissatisfied with the order passed by the Special Deputy Collector (Stamps) preferred a statutory appeal before the Inspector General of Registration, which came to be dismissed.

In such circumstances, the respondent went before the High Court by filing civil miscellaneous appeals under Section 47(A)(10) of the Stamp Act.

The High Court allowed both the appeals and quashed and set aside the orders passed by the authorities.

Examining the appeal, the bench noted what weighed with the High Court was the fact that the Form I notices failed to assign any reasons as to why the documents could be said to be undervalued. In other words, what was the basis for the Special Deputy Collector (Stamps) to say that sale consideration shown in the two sale deeds was not correct.

According to the High Court, there was no basis or any relevant materials on record to take the view that the two documents were undervalued except the spot inquiry and local inspection.

The appellants contended that it is not mandatory to assign reasons in the notice issued in Form I.

The court noted under Section 47-A(1) and under Section 47-A(3), if the Registering Authority has reason to believe that the instrument of conveyance did not reflect the correct market value of the property, then the Registering Authority has the power to refer the same to the Collector for determination of market value of the property and the Collector, on reference, under Section 47-A(1), may determine the market value of such property in accordance with the procedure prescribed.

"Enquiry by the Registering Authority is a pre-condition for making reference to the Collector for determination of market value of the property. The determination of market value without notice of hearing to parties is liable to be set aside. When the Registering Authority finds that the value set forth in an instrument was less than the minimum value determined in accordance with the Rules, in that event, the Registering Authority is empowered to refer the instrument to the Collector for determination of market value of such property and the Stamp Duty payable thereon," the bench said.

The court also analysed when both the authorities viz., the Registering Authority and the Collector are vested with the discretion to decide regarding the market value of the property, by the expression ‘reason to believe’, then whether it reflects the subjective satisfaction of the authorities concerned or it reflects the objective determination of the market value of the property and what is meant by ‘reason to believe’ is the issue to be considered.

"Availability of material is the foundation or the basis, for any authority to arrive at any decision whatsoever. The basis of a thing is that on which it stands, and on the failure of which it falls and when a document consisting partly of statements of fact and partly of undertakings for the future is made the basis of a contract of insurance, this must mean that the document is to be the very foundation of the contract, so that if the statements of fact are untrue, or the promissory statements are not carried out, the risk does not attach," the bench said.

The court further said that the Registering Officer, after registration of the document, can refer the same for adjudication before the Collector, if he has reason to believe that there was deliberate undervaluation of the property.

"Such a reference is not a mechanical act, but the Registering Officer should have a basis for coming to prima facie finding of undervaluation of the property. Duty is enjoined upon the Registering Officer to ensure that Section 47-A(1) does not work as an engine of oppression nor as a matter of routine, mechanically, without application of mind as to the existence of any material or reason to believe the fraudulent intention to evade payment of proper Stamp Duty," the bench said, relying upon Mohali Club, Mohali v. State of Punjab, (2011) P&H.

The court noted the expression ‘reason to believe’ is not synonymous with subjective satisfaction of the officer. The belief must be held in good faith, it cannot be merely a pretence. It is open to the court to examine the question whether the reasons for the belief must have a rational connection or a relevant bearing to the formation of the belief and are not irrelevant or extraneous to the purpose of the section.

The word ‘reason to believe’ means some material on the basis of which the department can re-open the proceedings. However, satisfaction is necessary in terms of material available on record, which should be based on objective satisfaction arrived at reasonably, it pointed out.