Document Presented For Registration Can’t Be Impounded By Registering Authority For Being Insufficiently Stamped: Kerala HC [Read Judgment]

‘Deficit stamp pointed out, if the presenter refuses to pay the due amount, the Sub-Registrar shall refuse to register the instrument, record the reasons under Section 71 of the Registration Act, and return the document to the presenter.’

The Kerala High Court, in Dr. Abdul Rasheed v. State of Kerala, has held that a registering authority cannot impound insufficiently-stamped instruments/documents presented only for registration.

Background

A company executed a settlement deed in favour of three children of its managing director. The Sub-Registrar impounded them since the instruments were insufficiently stamped. The District Registrar and Land Revenue Commissioner affirmed this order impounding the deeds. A single bench of the high court, before which the petitioner challenged these orders, refused to interfere.

In the writ appeal, before a bench headed by the former Chief Justice Antony Dominic and Justice Dama Seshadri Naidu, the issues raised were the following:

• Can an artificial person, say a company, execute a deed of settlement?


• Can the executant ask the registering authorities for the return of the document if he does not desire to complete the transaction? Or once a document, incomplete, is presented for registration, should the executant be compelled to complete the transaction or face the consequences of impounding?

Corporate Entities Can Execute Settlement Deeds

As regards the first issue, the Registration Department contended that a settlement deed must have been executed in favour of the members of a family, while a company can execute a gift.

Referring to relevant articles of the Stamp Act, the bench said: “Settlement of property predominantly takes place among the members of a family, though it can be “for some person dependent” on the settlor. Unless we read down “some person dependent” to mean only a relative, a settlement can be between non-relatives, too………...If the deed cannot be a settlement, we fail to understand how it can be a gift. Besides mentioning near relatives, both the Articles mention “in any other case”. This expression in either article permits both the settlement and gift to be a device for inter-vivos transfer beyond the family and, for that matter, covering even artificial personalities, such as corporate entities.”

Registering Authority cannot impound

With regard to the second issue, the bench said: “Here, Dr. Rasheed has not used an insufficiently stamped document for any purpose. He does not want to rely on the document to prove any transaction or to derive any advantage out of that document. He wants to complete that document, so he could gain from it: convey some property.”

Then it observed: “Even in the grossest of crimes, mere preparation is no offence. A civil transaction cannot be much worse. Here, a person wants to settle property on his children. Or a company wants to gift property to some persons, as is held by the registering authorities. Let us remove the veil, for our narrative purpose. After executing the deed, that person contemporaneously presents the document for registration.”

Taking notice of the fact that, in this case, the registering authority has not unearthed or discovered an insufficiently stamped document when it is sought to be used for its intended purpose, the bench said: “If we hold that any document presented for registration cannot be taken back, and if the transaction cannot be resiled from, it destroys a person’s contractual freedom, and his decisional independence. A person can opt out of a transaction any time before the transaction is completed and his act becomes irrevocable—that is he acted on it for his benefit.”

The court then said: “All the provisions bearing upon impounding spring into action only when the document is sought to be used as if it had been duly stamped. When the authorities have received the document for the primary purpose—that is, registration—but find that the stamp is insufficient, they can point it out. The party can decide either to go ahead with the transaction or to withdraw from it. Better sense may prevail.”

The bench then concluded that producing a document for registration does not amount to the producer using an insufficiently-stamped document for a purpose not attainable without sufficient stamp on the instrument.
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