No Registration Or Stamp Duty Required For Compromise Decree Acquiring Property With Pre-Existing Right : Supreme Court
The Supreme Court recently ruled that if a person already has a right to a property and acquires it through a compromise decree, they don't need to register it under the Registration Act of 1908. The Court also clarified that no stamp duty would be charged on such a decree, as it doesn't create any new rights and therefore doesn't qualify as a 'conveyance' under Section 3 of the Indian Stamp Act, 1899.
The bench comprising Justice JB Pardiwala and Justice R Mahadevan was hearing an appeal filed against the MP High Court's Indore Bench decision upholding the Collector of Stamps decision determining stamp duty at Rs.6,67,500/- payable by the Appellant for acquiring the subject matter property in the compromise proceedings in which he had pre-existing rights.
The case concerns the payment of stamp duty for a piece of land in Village Kheda, District Dhar, Madhya Pradesh, acquired by the appellant (Mukesh) through a compromise decree in a civil suit. In 2013, the Appellant filed a civil suit seeking a declaration and permanent injunction over the land. The suit was resolved through a compromise decree ordered by the National Lok Adalat.
However, the Tehsildar (Executive Magistrate) referred the case to the Collector of Stamps for mutation. The Collector determined a stamp duty of ₹6,67,500, treating the compromise decree as a conveyance under Article 22 of the Indian Stamp Act, 1899.
The Board of Revenue and High Court upheld the decision to levy stamp duty on compromise decree.
The judgment written by Mahadevan J. overturned the High Court's decision. It stated that the High Court had erred in supporting the Collector of Stamps' decision to impose stamp duty on property acquired through a compromise decree because the decree merely affirmed pre-existing rights and did not create any new rights in the property.
According to the Court, a compromise decree would not require registration if the below mentioned three conditions mentioned under Section 17(2)(vi) are fulfilled: -
"(i)There must be a compromise decree as per the terms of the compromise without any collusion;
(ii)The compromise decree must pertain to the subject property in the suit; and
(iii)There must be a pre-existing right over the subject property, and the compromise decree should not create a right afresh."
Upon noting that the aforesaid conditions were satisfied, the Court noted that no registration was required.
The Court also noted that since the compromise decree merely asserts a pre-existing right and creates no new rights, it does not fall under the documents listed in Schedule 22 I or I-A, in conjunction with Section 3 of the Indian Stamp Act, 1899, and is not subject to stamp duty.
“it is apparent that stamp duty is not chargeable on an order/decree of the Court as the same do not fall within the documents mentioned in Schedule I or I-A read with Section 3 of the Indian Stamp Act, 1899. Though the Collector of Stamps determined the stamp duty for the subject land as per Article 22 of Schedule IA of the Indian Stamp Act, 1899, which states about conveyance, in this case, we have already held that the compromise decree does not fall under the instruments mentioned in the Schedule and that it only asserts the pre-existing rights. Therefore, in the facts of the case, the consent decree will not operate as conveyance as no right is transferred and the same does not require any payment of stamp duty. Since the appellant has only asserted the pre-existing right and no new right was created through the consent decree, the document pertaining to mutation of the subject land is not liable for stamp duty.”, the Court observed.
“In the ultimate analysis, we find that the impugned order passed by the High Court, upholding the orders of the authorities below, has no legs to stand and is hence, set aside. Accordingly, this appeal stands allowed and the authority concerned shall make mutation of the revenue records in respect of the subject land in favour of the appellant. There is no order as to costs.”, the court held.
Accordingly, the appeal was allowed.
Appearance:
For Petitioner(s) Mr. Puneet Jain, Sr. Adv. Ms. Christi Jain, AOR Mr. Manna Arora, Adv. Ms. Akriti Sharma, Adv. Mr. Harsh Jain, Adv. Mr. Om Sudhir Vidyarthi, Adv. Mr. Ojusya Joshi, Adv.
For Respondent(s) Mr. V.V.V. Pattabhiram, D.A.G. Ms. Mrinal Gopal Elker, AOR Mr. Rajan Chourasia, Adv. Mr. Chinmoy Chaitanya, Adv.
Case Title: MUKESH VERSUS THE STATE OF MADHYA PRADESH & ANR
Citation : 2024 LiveLaw (SC) 1036