Court Auction Sale Is Most Transparent ; Registering Authority Cannot Sit In Appeal On The Aspect Of Transaction Price: Supreme Court

The Supreme Court observed that a Registering Authority cannot sit in appeal over the decision of the Court permitting sale at a particular price. 

Public auction carried out through court process/receiver is the most transparent manner of obtaining the correct market value of the property, the bench comprising Justices Sanjay Kishan Kaul, Abhay S. Oka and Vikram Nath observed.

The bench observed thus while answering a reference by a two judges bench regarding the scope Section 47A India Stamp Act (as applicable to West Bengal).

Section 47A Indian Stamp Act (as applicable to West Bengal).

Section 47A the procedure to deal with Instruments of conveyance, etc. that are undervalued. It reads as follows: Where the registering officer appointed under the Registration Act, 1908 (16 of 1908) has, while registering any instrument of a) agreement or memorandum of an agreement relating to a sale or lease-cum sale of immovable property, b) conveyance, (c) to (h) ....... reason to believe that the market value of the property which is the subject matter of any such instrument has not been truly set forth in the instrument ·presented for registration, he may, after receiving such instrument, ascertain the market value of the property which is the subject matter of such instrument in the manner prescribed and compute the proper stamp duty chargeable · on the market value so · ascertained and thereafter he shall, notwithstanding anything to the contrary contained in the Registration Act, 1908, in so far as it relates to registration, keep registration of such instrument in abeyance till property which is the subject matter of conveyance, exchange, gift, release of benami right or settlement, and the duty as aforesaid. The difference, if any, in the amount of duty, shall be payable by the person liable to pay the duty.

High Court Judgment

In the impugned Judgment by the Full Bench of the Calcutta High Court it was held that that Section 47A of the Act as applicable to West Bengal read with Rule 3 of the West Bengal Stamp (Prevention of Undervaluation of Instruments) Rules, 2001 is not applicable to an instrument executed by a Receiver pursuant to an order of sale passed by a civil court, after publication in newspapers. The sale conducted by the court through its officers qualifies to be an open market sale subject to the following conditions: a) there must be wide publicity of the proposed sale and particularly there shall be publication of advertisement in at least one newspaper having wide circulation in the concerned city/town/ district. b) The purchaser of the property must not be connected with or related to the authority/ officer conducting the sale, it was observed.

Reference

While considering the appeal, the two judges bench doubted the decision in Additional Distt. Sub-Registrar, Siliguri v. Pawan Kumar Verma which held that a Registering Authority cannot be compelled to follow the value fixed by the court for purposes of suit valuation.

Answering the reference, the three judges bench made the following observations:

public auction carried out through court process/receiver ais the most transparent

We have not the slightest hesitation in upholding the view that the provision of Section 47A of the Act cannot be said to have any application to a public auction carried out through court process/receiver as that is the most transparent manner of obtaining the correct market value of the property...It is no doubt true that in a court auction, the price obtainable may be slightly less as any bidder has to take care of a scenario where the auction may be challenged which could result in passage of time in obtaining perfection of title, with also the possibility of it being overturned. But then that is a price obtainable as a result of the process by which the property has to be disposed of.

Objective of amendment

We cannot lose sight of the very objective of the introduction of the Section whether under the West Bengal Amendment Act or in any other State, i.e., that in case of under valuation of property, an aspect not uncommon in our country, where consideration may be passing through two modes – one the declared price and the other undeclared component, the State should not be deprived of the revenue. Such transactions do not reflect the correct price in the document as something more has been paid through a different method. The objective is to take care of such a scenario so that the State revenue is not affected and the price actually obtainable in a free market should be capable of being stamped. If one may say, it is, in fact, a reflection on the manner in which the transfer of an immovable property takes place as the price obtainable in a transparent manner would be different. An auction of a property is possibly one of the most transparent methods by which the property can be sold. Thus, to say that even in a court monitored auction, the Registering Authority would have a say on what is the market price, would amount to the Registering Authority sitting in appeal over the decision of the Court permitting sale at a particular price

Any interference by the Registering Authority on the aspect of price of transaction would be wholly unjustified

It is not as if a public auction is carried out just like that. The necessary pre-requisites require fixation of a minimum price and other aspects to be taken care of so that the bidding process is transparent. Even after the bidding process is completed the court has a right to cancel the bid and such bids are subject to confirmation by the court. Once the court is satisfied that the bid price is the appropriate price on the basis of the material before it and gives its imprimatur to it, any interference by the Registering Authority on the aspect of price of transaction would be wholly unjustified...In a court auction following its own procedure, the Registering Officer cannot have any reason to believe that the market value of the property was not duly set forth.

Forced sale, but has a competitive element 

No doubt a court monitored auction is a forced sale, but then it has a competitive element of a public auction to realize the best possible price. In many court cases, this is the process followed by the court to get the best obtainable price taking due precaution. We are, thus, of the view that this reference is required to be answered by opining that in case of a public auction monitored by the court, the discretion would not be available to the Registering Authority under Section 47A of the Act

Independent determination by a Registering Officer would not apply to a court sale but to a private transaction

The Registering Authority cannot be permitted to doubt the liquidation proceedings as having some superior knowledge when it is a court monitored process where the court would take care of aspects such as cartelization; the Registering Authority can hardly be said to be the only authority with knowledge of the subject to the exclusion of the court; the independent determination by a Registering Officer would not apply to a court sale but to a private transaction; the Stamp Act being a fiscal statute, while being interpreted strictly and literally would not imply some kind of absolute power.

Case details

Registrar of Assurances vs ASL Vyapar Private Limited | 2022 LiveLaw (SC) 942 | CA 8281 of 2022 | 10 Nov 2022 | Justices Sanjay Kishan Kaul, Abhay S. Oka and Vikram Nath

For Parties Ms. Astha Sharma, AOR Mr. Ravinder Singh, Adv. Ms. Raveesha Gupta, Adv. Ms. Mantika Haryani, Adv. Mr. Sanjeev Kaushik, Adv. Mr. Shreyas Awasthi, Adv. Mr. Partha Sil, AOR Mr. Tavish B. Prasad, Adv. Ms. Sayani Bhattacharya, Adv. Mr. Gaurav Kejriwal, AOR Mr. Arjun Agarwal, Adv. Mr. Sanjoy Kumar Ghosh, Adv. Mrs. Rupali Samanta Ghosh, AOR

Headnotes

Indian Stamp Act, 1899 (West Bengal amendment) ; Section 47A - Public auction monitored by the court, the discretion would not be available to the Registering Authority under Section 47A - Public auction carried out through court process/receiver as that is the most transparent manner of obtaining the correct market value of the property - Registering Officer cannot have any reason to believe that the market value of the property was not duly set forth - Independent determination by a Registering Officer would not apply to a court sale but to a private transaction (Para 22-31) 

Indian Stamp Act, 1899 (West Bengal amendment) ; Section 47A - Objective of amendment - In case of under valuation of property, an aspect not uncommon in our country, where consideration may be passing through two modes – one the declared 22 price and the other undeclared component, the State should not be deprived of the revenue. Such transactions do not reflect the correct price in the document as something more has been paid through a different method. The objective is to take care of such a scenario so that the State revenue is not affected and the price actually obtainable in a free market should be capable of being stamped. If one may say, it is, in fact, a reflection on the manner in which the transfer of an immovable property takes place as the price obtainable in a transparent manner would be different. (Para 23)

Indian Stamp Act, 1899 (West Bengal amendment) ; Section 47A - The "reason to believe" of a Registering Officer has to be based on ground realities and not some whimsical determination. (Para 29)

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