Indian Stamp Act | Registering Authority Cannot Mechanically Refer Sale Deed To Collector, Prima Facie Finding On Undervaluation Needed : Supreme Court

The Supreme Court recently observed that in case of undervaluation of property sale's price, the Registering Authority under the Indian Stamp Act, 1899 cannot mechanically make reference to the Collector (stamps) for determination of the correct market value of the property. Instead, an opportunity is to be provided to the party, and reasons have to be furnished by the Registering Authority for arriving at a conclusion that the property is undervalued.

“It is not permissible for the Registering Officer to undertake a roving enquiry for the purpose of ascertaining the correct market value of the property. 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. In such circumstances, 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 Court said.

The bench comprising Justices JB Pardiwala and R Mahadevan was hearing the appeal filed against the Madras High Court's decision which set aside Registering Authority's act of making reference to the Collector (Stamps) about ascertaining the correct market value of the property.

The respondent, P. Babu, purchased property, and sale deeds were registered. The Registering Authority claimed the property was undervalued and referred the matter to the Special Deputy Collector (stamps) for determining market value and additional stamp duty.

The respondent challenged the valuations and procedures followed by authorities in the High Court, which ruled in his favor.

Following this, an appeal was preferred before the Supreme Court by the Appellant- Chief Revenue Controlling Officer-cum-the-Inspector General of Registration.

Affirming the High Court's decision, the Court observed that the Registering Authorities were unjustified in directly referring to the Dy. Collector (Stamps) without enquiring about undervaluation in the sale price consideration. According to the Court, under the Stamp Act, an enquiry by the Registering Authority is a pre-condition for making reference to the Collector for determination of the market value of the property, and any determination of market value without Notice of hearing to parties is liable to be set aside.

“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 court observed.

The Court drew reference to the case of Mohali Club, Mohali v. State of Punjab, reported in AIR 2011 P&H 23, noting that the duty enjoined upon the Registering Authority under Section 47-A(1) to record reason to believe that the property's sale consideration is undervalued, “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 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.”, the court added.

Holding that no error was committed by the High Court in allowing the Respondent's plea as no reasons were recorded by the Registering Authority before referring the Dy. Collector (Stamps), thus the Court dismissed the Appellant's appeal.

Appearance:

Mr. Sabarish Subramanian, Adv. for the appellants

Ms. Rohini Musa, Adv. for the respondent.

Case Title: CHIEF REVENUE CONTROLLING OFFICER CUM INSPECTOR GENERAL OF REGISTRATION, & ORS. VERSUS P. BABU, CIVIL APPEAL NOS.75-76 of 2025

Citation : 2025 LiveLaw (SC) 40

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