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Synopsis

The Supreme Court has said that a sale certificate issued to the purchaser in pursuance of the confirmation of an auction sale is merely evidence of such title and does not require registration under Section 17(1) of the Registration Act.

The top court said that it is not the issuance of the sale certificate which transfers the title in favour of the auction purchaser. The title is transferred upon successful completion of the sale and its confirmation by the competent authority after all the objections against the sale have been disposed of.

A bench of Justices J B Pardiwala and R Mahadevan explained the position of law which makes it clear that sale certificate issued by the authorised officer is not compulsorily registrable.

"Mere filing under Section 89(4) of the Registration Act itself is sufficient when a copy of the sale certificate is forwarded by the authorised officer to the registering authority. However, a perusal of Articles 18 and 23 respectively of the first schedule to the Stamp Act respectively makes it clear that when the auction purchaser presents the original sale certificate for registration, it would attract stamp duty in accordance with the said Articles," the bench said.

As long as the sale certificate remains as it is, the bench said, it is not compulsorily registrable.

"It is only when the auction purchaser uses the certificate for some other purpose that the requirement of payment of stamp duty, etc. would arise," the court said.

Acting on an appeal by the State of Punjab, the bench examined a short question of whether it is mandatory for the successful auction purchaser to deposit the stamp duty for the sale certificate to be issued to it in view of the provisions of the Stamp Act and the Registration Act.

The bench pointed out that the top court in Municipal Corporation of Delhi Vs Pramod Kumar Gupta (1991), after examining the relevant provisions of Order XXI of the Code of Civil Procedure, observed that the title to the property put on auction sale passes under the law when the sale is held. The owners and certain other interested persons are afforded opportunity under the CPC to assail the sale and make a prayer for setting aside the sale on certain enumerated grounds.

However, once such objections are disposed of without disturbing the sale, the sale stands confirmed under Order XXI Rule 92 of the CPC. Thereafter, the sale certificate is issued under Order XXI Rule 94. The court observed that this chronology of events made it clear that the transfer becomes final when an order under Rule 92 of Order XXI is made and the issuance of a sale certificate under Rule 94 is only a formal declaration of the effect of such confirmation, the bench pointed out.

Such issuance of certificate does not create or extinguish any title and thus would not attract any stamp duty which is applicable qua an instrument of sale of immovable property, the bench noted.

The bench also pointed out that in Smt Shanti Devi L Singh Vs Tax Recovery Officer and Others (1991), the top court observed that since the certificate of sale is not a compulsorily registrable document in lieu of Section 17(2)(xii) of the Registration Act, the transfer of title in favour of the auction purchaser would not be vitiated on account of non-registration of the sale certificate.

It also noted that in B Arvind Kumar Vs Govt Of India and Others (2007), the top court observed that when a property is sold by public auction in pursuance of an order of the court and the bid is accepted and the sale is confirmed by the court in favour of the purchaser, the sale becomes absolute and the title vests in the purchaser. A sale certificate is issued to the purchaser only when the sale becomes absolute. The sale certificate is merely the evidence of such title.

The bench also said that recently, a three-judge bench of the top court in M/s Esjaypee Impex Private Limited Vs the Asst General Manager and Authorized Officer Canara Bank (2021) observed that the mandate of law that flows from a combined reading of Sections 17(2) (xii) and 89(4) of the Registration Act respectively is that the auction purchaser is entitled to receive the original sale certificate and a copy of the same is required to be forwarded to the Sub- Registrar for the purpose of filing in Book 1 as per the Registration Act.

The bench pointed out that in Inspector General of Registration and Another Vs G Madhurambal and Another (2022), a two-judge bench of the court observed that the consistent position of law is that a certificate of sale cannot be regarded as a conveyance subject to stamp duty. The court further observed that once a direction is issued for the duly validated certificate to be issued to the auction purchaser with a copy forwarded to the registering authorities to be filed in Book I as per Section 89 of the Registration Act, it has the same effect as registration and requirement of any further action is obviated.

In the case, the court did not find any force in the contention of the appellant that the High Court should not have exercised its writ jurisdiction under Article 226 as Respondent no 1 had an alternate efficacious remedy of filing an appeal against the order of the Company Judge in pursuance of which directions came to be passed by the Registrar.

The bench pointed out the Supreme Court in Radha Krishan Industries Vs State of H P (2021) observed that an alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law. It was held that when a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution.

However, the top court clarified that this rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion and if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be interfered with, the bench pointed out.

The court dismissed an appeal by the Punjab government against the judgment and order of November 28, 2013, passed by the High Court of Punjab and Haryana wherein the writ petition filed by the Respondent No 1 M/s Ferrous Alloy Forgings P Ltd and others was allowed and the Respondent No 2 was directed to handover the original sale certificate to the Respondent No 1 and send a copy of the same to the Sub-Registrar under Section 89(4) of the Indian Registration Act, 1908. The High Court also held that the Respondent No 1 was entitled to a refund of the stamp duty deposited by it in pursuance of the order passed by the Company Judge of the High Court.

The counsel for the petitioners included Adv. Karan Sharma (AOR) and Adv. Abhishek Budhiraja, while the respondents were represented by Adv. Siddharth Batra (AOR), along with Advs. Rhythm Katyal, Samar Ahluwalia, Archna Yadav, Chinmay Dubey, Shivani Chawla, and Ayushmaan Bhutani.

Case Title: THE STATE OF PUNJAB & ANR. Appellant(s) VERSUS M/S FERROUS ALLOY FORGINGS P LTD. & ORS.