Power Of Attorney Executed Along With Debt Assignment Deed Under SARFAESI Act Not Separately Chargeable Under Bombay Stamp Act : Supreme Court

The Supreme Court on Tuesday set aside a judgment delivered by a Full Bench of the Gujarat High Court which had held that stamp duty has to be independently paid for a Power of Attorney executed along with a deed assigning debt, even if stamp duty has been paid on the assignment deed.

In this case, the Oriental Bank of Commerce had assigned a debt to an Asset Reconstruction Company(ARC) under Section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002(SARFAESI Act). Along with the assignment deed, the Bank had executed an irrevocable Power of Attorney(PoA) in favour of the company, empowering the assignee, as the agent of the Bank, to sell any immovable property.

Though the assignment deed was registered and stamp duty was paid on it, an issue arose as to whether the PoA should be independently charged under the Bombay Stamp Act 1958. On a reference made, a Full Bench of the Gujarat High Court held that separate stamp duty has to be paid on the PoA as well. To reach this conclusion, the Full Bench relied on Article 45(f) of Schedule I to the Bombay Stamp Act Act 1958 which makes a PoA given for a consideration and containing an authority to sell any immovable property chargeable to stamp duty. The ARC approached the Supreme Court against the Full Bench verdict.

The Supreme Court held that the reasoning of the High Court cannot be accepted. It noted that for invoking Article 45(f), two conditions have to be satisfied : (i) the PoA should have been given for a consideration;and (ii) an authorization to sell any immovable property should flow out of the instrument.

In the case on hand, the consideration paid by the ARC to the Bank, was for the purpose of acquisition of the financial assets, in respect of a particular borrower.

Also, the authorization to sell immovable property did not flow out of the PoA but out of the provisions of the SARFAESI Act. In this regard, a bench comprising Justices Hemant Gupta and V Ramasubramanian observed :

"The High Court overlooked the fact that there was no independent instrument of PoA and that in any case, the power of sale of a secured asset flowed out of the provisions of the Securitisation Act, 2002 and not out of an independent instrument of PoA. Section 2(zd) of the Securitisation Act, 2002 defines a 'secured creditor' to mean and include an Asset Reconstruction Company. The appellant has acquired the financial assets of OBC in terms of Section 5(1)(b) of the Securitisation Act, 2002. Therefore, under sub­section (2) of Section 5 of the Securitisation Act, 2002, the appellant shall be deemed to be the lender and all the rights of the Bank vested in them".

The Court also noted that  under Amendment Act 44 of 2016, sub­section (1A) was inserted in Section 5 of the Securitisation Act,exempting from stamp duty, any document executed by any bank in favour of an ARC. Though the said amendment was not applicable to this case , as the deed of assignment was executed long prior to 2016, the Court said that it has taken note of the amendment to show how far the Parliament has gone.

Stamp duty on the assignment deed already paid

"The deed of assignment has already been charged to duty under Article 20(a) which deals with "conveyance". In fact Article 45(f) also requires a PoA covered by the said provision to be chargeable to stamp duty under Article 20", the Court noted.

The Court further noted that the Gujarat Government had ordered the reduction of stamp duty payable on an instrument of securitization of loans or assignment of debt with underlying securities. The ARC has paid the duty for the instrument charged as a conveyance under Article 20(a).

"In view of the Notification dated 01.04.2003 issued in exercise of the power to reduce, remit or compound the duty, conferred by Section 9(a) of the Act, the amount of duty chargeable in terms of Article 20(a) was capped at Rs. 1,00,000/­. In addition to the said amount of Rs.1,00,000/­, the appellant was asked to pay an additional duty of Rs.40,000/­ under Section 3­A. The appellant has thus paid a total amount of Rs.1,40,000/­ with the instrument having been charged as a conveyance under Article 20(a)", the Court noted.

A single instrument charged under a provison cannot be split and charged under a differet provision

The Court further observed :

"Once a single instrument has been charged under a correct charging provision of the Statute, namely Article 20(a), the Revenue cannot split the instrument into two, because of the reduction in the stamp duty facilitated by a notification of the Government issued under Section 9(a). In other words after having accepted the deed of assignment as an instrument chargeable to duty as a conveyance under Article 20(a) and after having collected the duty payable on the same, it is not open to the respondent to subject the same instrument to duty once again under Article 45(f), merely because the appellant had the benefit of the notifications under Section 9(a). Since the impugned order of the High Court did not address these issues and went solely on the interpretation of Article 45(f), the same is unsustainable".

Accordingly, the appeal was allowed and the demand of stamp duty on PoA was set aside.

Senior Advocate Mr. V Chitambaresh appeared for the appellant. Advocate Ms. Archana Pathak Dave appeared for the State of Gujarat.

Case Title : Asset Reconstruction Co (India) Ltd versus Chief Controlling Revenue Authority

Citation : 2022 LiveLaw (SC) 415

Bombay Stamp Act 1958 - Stamp duty not separately payable on Power of Attorney executed along with deed assigning debt under the SARFAESI Act.

Bombay Stampt Act 1958 - Once a single instrument has been charged under a correct charging provision of the Statute, namely Article 20(a), the Revenue cannot split the instrument into two, because of the reduction in the stamp duty facilitated by a notification of the Government issued under Section 9(a). In other words after having accepted the deed of assignment as an instrument chargeable to duty as a conveyance under Article 20(a) and after having collected the duty payable on the same, it is not open to the respondent to subject the same instrument to duty once again under Article 45(f), merely because the appellant had the benefit of the notifications under Section 9(a)- Paragraph 16

SARFAESI Act 2002 - The High Court overlooked the fact that there was no independent instrument of PoA and that in any case, the power of sale of a secured asset flowed out of the provisions of the Securitisation Act, 2002 and not out of an independent instrument of PoA. Section 2(zd) of the Securitisation Act, 2002 defines a 'secured creditor' to mean and include an Asset Reconstruction Company. The appellant has acquired the financial assets of OBC in terms of Section 5(1)(b) of the Securitisation Act, 2002. Therefore, under sub­section (2) of Section 5 of the Securitisation Act, 2002, the appellant shall be deemed to be the lender and all the rights of the Bank vested in them (Para 9)

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