Karnataka High Court
M/S. Safeguard Packaging Systems vs State Of Karnataka And Others on 31 October, 1994
Equivalent citations: AIR1995KANT336, ILR1995KAR315, 1995(2)KARLJ442, AIR 1995 KARNATAKA 336, (1995) ILR (KANT) 315 (1995) 2 KANT LJ 442, (1995) 2 KANT LJ 442
Author: R.V. Raveendran
Bench: R.V. Raveendran
ORDER
1. Sri Ganachari, learned HCGP is directed to take notice on behalf of the respondents.
2. The Karnataka Industrial Area Development Board (hereinafter referred to as the 'Board' or 'KIADB") is a statutory body established and incorporated under the Karnataka Industrial Area Development Act, 1966. The main functions of the said Board is to establish and develop industrial areas and make available industrial sites to industrial undertakings to establish themselves for the rapid and orderly establishment and growth of industries in Karnataka and to maintain, develop and manage industrial estates within industrial areas. The Board allotted Plot No. 2A of Dyavasandra, II Phase, Industrial Area, Bangalore, measuring 5110 sq. mt. to the petitioner under an Agreement dated 26-3-1980 subject to performance and observance of the conditions of the said agreement.
3. After the petitioner fulfilled the conditions of the said agreement, the Board conveyed the said site to the petitioner under a registered sale deed dated 25-11-1992 for a value of Rs. 76,717/- (made up of Rs. 56,260/- which was the initial price fixed in the year 1980 plus Rs. 570/- paid as rent plus Rs. 19,887/- towards difference in cost). The said Deed of Conveyance has been registered in the office of the second respondent as Document No. 6459 of 1992-93. The second respondent, after registering the instrument, referred the same to the third respondent under S. 45-A of the Karnataka Stamp Act, 1957 ('Act' for short) for determination of the market value of the said property and the proper duty payable therein. The third respondent has issued a notice dated 12-9-1994 (Annexure-C) calling upon the petitioner to be present for a hearing with document/ evidence to prove the market value.
4. The petitioner feels aggrieved by initiation of proceedings under S. 45-A. It contends that the vendor (KIADB) being a statutory body, the second and third respondents could not doubt the correctness of the price for which the property was conveyed and there cannot be any proceedings relating to 'undervaluation' in regard to the deeds of conveyance executed by statutory authorities; and therefore the registering authority has no jurisdiction to refer a sale deed executed by a statutory authority, for determination of market value and payment of proper duty; and the Deputy Commissioner for Detection of Undervaluation of Stamps has no jurisdiction to hold an enquiry and assess the market value of a property conveyed by a statutory Authority. Hence petitioner has filed this petition seeking a direction to second and third respondents, to deliver the Registered Sale Deed immediately, without proceeding with the proceedings under S. 45-A.
5. The question that arises for consideration is whether the Registering Authority has jurisdiction to refer Deeds of Conveyance under S. 45-A and the Deputy Commissioner for Detection of Undervaluation of Stamps has jurisdiction to initiate proceedings for determination of market value under S. 45-A, in regard to Deeds of Conveyance executed by Statutory Authorities.
6. To find an answer, it is necessary to refer S. 45-A of the Karnataka Stamp Act which provides how undervalued instruments of conveyance etc. have to be dealt with and Art. 20 of the Schedule to the said Act which specifies the Stamp Duty on Deeds of Conveyance and Rule 5 of the Karnataka Stamp (Prevention of Undervaluation of Instruments) Rules 1977 which lays down the principles for determination of market value.
6.1 Relevant portion of S. 45-A is extracted for ready reference:
"45-A. Instrument of conveyance, etc., Undervalued how to be dealt with :--
(1) If the Registering Officer appointed under the Registration Act, 1908 (Central Act XVI of 1908) while registering any instrument of conveyance, exchange, gift, settlement, partition or dissolution of partnership, having regard to the estimated market value notified by the State Government, if any or otherwise has reason to believe that the market value of the property which is the subject matter of conveyance, exchange, gift, settlement, partition or dissolution of partnership has not been truly set forth in the instrument, he may, after registering such instrument, refer the same to the Deputy Commissioner for determination of the market value of such property and the proper duty payable thereon.
[Sub-sections (2) to (5) omitted as unnecessary].
Explanation : For the purpose of this Act, market value of any property shall be estimated to be the price which in the opinion of the Deputy Commissioner would have fetched or fetch, if sold in the open market, on the date of execution of the instruments of conveyance, exchange, gift, settlement, partition or dissolution of partnership."
6.2 Relevant portion of Article 20 is extracted below :
"Article 20 : Conveyance, as defined by clause (d) of S. 2, not being a transfer charged or exempted under No. 52, where the market value of the property which is the subject-matter of conveyance :
xxx xxx xxx where it exceeds Rs. 900/- but does not exceed Rs. 1000/- .. Rs. 100/- and for every Rs. 500/- or part thereof in excess of Rs. 1000/- .. Rs. 50/-
Provided that the duty in respect of any instrument of Conveyance effected by the Bangalore Development Authority constituted under the Bangalore Development Authority Act, 1976 (Karnataka Act 12 of 1976), the City Improvement Trust Board, Mysore constituted under the City of Mysore Improvement Act, 1903 (Mysore Act 3 of 1903), the Karnataka Housing Board constituted under the Karnataka Housing Board Act, 1962 (Karnataka Act 10 of 1963), the Improvement Boards constituted under the Karnataka Improvement Boards Act, 1976 (Karnataka Act 11 of 1976), House Building Co-operative Societies registered under the Karnataka Co-operative Societies Act, 1959 (Karnataka Act 11 of 1959), in so far as it relates to allotment of building sites to its members and such other authorities as may be specified by the Government shall be payable at the rates specified above on the amount or value of consideration for such conveyance as set forth in the instrument.
Provided further that in any case where a lease-cum-sale agreement is executed and is stamped with the ad valorem stamp required for such agreement under Item (d) of Article 5 and in furtherance of such agreement a conveyance is subsequently executed, the duty on such conveyance shall not exceed rupees ten or the difference of the duty payable on such conveyance and the duty already collected on the security deposit under Item (d) of Article 5 whichever is greater".
7. A careful reading of sub-sec. (1) of S. 45-A read with the Explanation thereto, shows that undervaluation can arise on account of several factors and in different circumstances. Let me illustrate the cases where there can be undervaluation :
(i) Where a property is conveyed for an agreed consideration, but the parties deliberately specify in the Deed of Conveyance, a price which is less than the agreed consideration and market value, with the intention of evading stamp duty, capital gains tax, etc. there is undervaluation.
(ii) Where a property is settled under a Deed of Settlement, or partitioned under a Deed of Partition, or gifted under a Deed of Gift, or exchanged under a Deed of Exchange, no consideration by way of money, passes from one party to the other. The parties are however required to specify the market value for purpose of stamp duty and registration. Not having the benefit of any formulae or standard methods of valuation, the parties will assess and specify the value to the best of their ability, for purposes of stamp duty. However, having regard to the principles of determination of market value under Rule 5 of the Rules, the Registering Authority or the Deputy Commissioner may find that the value specified is not the market value on the date of execution of such deed. Thus, even though there may be no intentional suppression of the real value nor any intention to evade stamp duty, it may still be treated as a case of undervaluation.
(iii) Where there is a considerable time lag between the date of Agreement of Sale and the date of actual execution of the Deed of Conveyance though the price mentioned in the Deed of Conveyance may be the true and agreed price, it may not be the 'market price' on the date of conveyance due to increase in prices and having regard to the explanation to S. 45-A give rise to a case of undervaluation, unless exempted under the Statute itself. Such delay in execution of Deed of Conveyance may occur-- (a) due to non-receipt of required clearances required for effecting the sale; (b) on account of the parties agreeing for a long period for performance; and (c) on account of the sale being on lease-cum-sale basis by a Statutory Authority and actual sale being postponed by several years till the expiry of the lease period and fulfilment of several conditions by the intending purchaser.
(iv) Where applicants who fulfil certain eligibility conditions, are allotted sites by a Statutory Body or Society set up for a specific purpose, at cost price or at a subsidised/ concessional price, which is less than the market price, there may be undervaluation. Though the cost of allotment may be the true consideration or sale price, it will not be the prevailing market Value. Consequently, unless exempted, it will be considered as a case of undervaluation.
8. In the first category, there is an 'undervaluation' in the real and accepted sense, that is, a deliberate suppression of the consideration with an intention to evade stamp duty or taxes. In the second category, though there may not be any intentional suppression of the market price with the intention of evading stamp duty or tax, nevertheless, there may be an undervaluation, on determination of market value as specified in the Rules. In the third and fourth categories, the undervaluation is created by fiction of law. This is because 'sale price' or 'consideration' has ceased to be the basis for payment of stamp duty in the case of a conveyance. In its place, the 'market value of the property' has been made the basis for calculating the stamp duty payable. Article 20 in the Schedule which provides the stamp duty on instruments of conveyance, as it originally stood, provided that instruments of conveyance were chargeable to stamp duty at the rate specified on the 'amount or value of the consideration for such conveyance as set forth therein". The Karnataka Stamp (Amendment) Act, 1975 (Act 12 of 1975), amended Art. 20 by substituting the words "market value of the property which is the subject matter of conveyance" in place of the words "amount or value of the consideration for such conveyance as set forth therein". Thus, under Art. 20, the stamp duty is chargeable on the market value of the property and not the sale price. By the very same Amending Act, S. 45-A was also introduced, the explanation to which provides that the market value of a property shall be estimated to be the price which the property would fetch, if sold in the open market, on the date of execution of the instrument. Thus the stamp duty is payable on the market value of the property on the date of execution of sale and not on the consideration mentioned in the Instrument of conveyance.
9. The Legislature has however thought fit to extend a concession (by requiring payment of the stamp duty only on the consideration mentioned in the instrument and not on the market value) in regard to deeds of conveyance executed by some Statutory Authorities like BDA, KHB and Co-operative Societies described in the proviso to Art. 20. The Deeds of Conveyance executed by other Statutory Authorities like KIADB or Agricultural Produce Market Committees, which also form layouts and allot sites have not been named in the said proviso. The omission may be on account of the fact that the Legislature wanted to extend the said concession only to siteless or houseless persons acquiring sites/houses for residential purposes and did not deem it necessary to extend such concession to persons who got sites allotted for industrial or commercial purposes. There is much to be said in favour of extension of the said concession under Proviso to Art. 20, to Deeds of Conveyance executed by all Statutory Authorities, with-
out exception. But that is a matter for the Legislature to consider. It is for the Statutory Authorities, which are omitted from the Proviso to Art. 20 and the affected parties to take up the matter in an appropriate manner if they feel that the omission is unjustified. As the law now stands, the concession, that is payment of stamp duty on the consideration mentioned in the deed, instead of on the market value, is not available to deeds of conveyance executed by KIADB or other Statutory Authorities not mentioned in the first Proviso to Art. 20.
10. The petitioner proceeds on the basis that there can be an 'undervaluation' only if there is a deliberate misrepresentation Or suppression in regard to the real price, with the intention of evading stamp duty and not otherwise. If the petitioner's contention is to be accepted, then only cases falling under category (i) mentioned in para (7) above, could be treated as cases of undervaluation and where there is no suppression or intention to evade duty or tax, there cannot he undervaluation. Petitioner also contends that a finding that there has been undervaluation would caste a slur on the parties and where the seller is a Statutory Body, suppression or evasion is unthinkable. The fallacy in these contentions is that they proceed on the basis that 'evasion of stamp duty/tax' or 'suppression of the real consideration' is the sine qua non for undervaluation. But having regard to S. 45-A and Art. 20, such contentions are untenable. There can be undervaluation, even when there is no suppression of the real value or where there is no intention to evade stamp duty or taxes as illustrated by cases falling under categories (ii), (iii) and (iv) in para (7) above.
11. The petitioner relied on the decision of a learned single Judge of this Court in Prakash Engineering Co. & Iron Foundry v. Sub-Registrar, Rajajinagar (W. P. 28821 of 1993 decided on 25-8-1993) wherein this Court while dealing with a similar matter relating to a sale deed executed by the very same Board, that is, KIADB, held that there cannot be proceedings for undervaluation in respect of a deed executed by a Statutory Authority on the following reasoning:
"When the sale deed is executed by a Statutory Body (KIADB), the second respondent (Deputy Commissioner for Detection of Undervaluation of Stamps) owes it not only to himself but also to the general public to act in a befitting manner not by indulging in speculative venture of unearthing the alleged undervaluation. In the circumstances, the sale deed cannot be doubted as undervalued. There is no occasion for a body like third respondent (KIADB) to undervalue the sale deed at all,"
11-A. The said decision in Prakash Engineering Company was rendered without referring to the Explanation to S. 45-A of Art. 20 in the schedule to the Karnataka Stamp Act. The said decision is contrary to the provisions of S. 45-A and Art. 20. A decision which is rendered without reference to and contrary to statutory provisions, will be a decision per incuriam and therefore, not a binding precedent. Reference may be made to Salmond on Jurisprudence (12th Edition, page 151) :
"The Rule apparently applies even though the earlier Court knew the Statute in question, if it did not refer to, and had not present to its mind the precise terms of the Statute. Similarly, the Court may know of the existence of a Statute and yet not appreciate its relevance to the matter in hand; such a mischief is again such incuria as to vitiate the decision."
Hence the said decision is of no assistance to the petitioner.
12. Hence even though the price mentioned in the Deed of Conveyance executed by KIADB is the true and correct consideration for the conveyance, it will not be the market price as on the date of sale. The Court can take judicial notice of the fact that there was a steady and considerable rise in the prices of real estate and the price fixed in the year 1980, when the site was allotted to the petitioner, could not obviously be the market value in the year 1992 when the sale deed was executed. The point for consideration is therefore answered in the affirmative. Second respondent did not act without jurisdiction in making a reference under S. 45-A of the Act, and the notice issued by the third respondent initiating a proceeding for determination of the market value is valid. Hence reserving liberty to the petitioner to file objections and contest the proceedings initiated under S. 45-A and reserving liberty to approach the second respondent for release of the instrument subject to filing of required undertaking regarding payment of duty on determination of market value, this petition is rejected.
13. Petition dismissed.