Andhra Pradesh High Court - Amravati
Muniranthnam Reddy Kamasani vs The District Registrar on 7 October, 2020
*HON'BLE SRI JUSTICE D.V.S.S. SOMAYAJULU
+ W.P.No.7312 of 2020
% 07-10-2020
# Munirathnam Reddy Kamasani and another
... Petitioners
Vs.
$ The District Registrar,
Chittoor District and 3 others.
... Respondents
! Counsel for the petitioner: Sri P.Badrinath
! Counsel for the Respondents: G.P. for Registration and
Stamps
< Gist:
> Head Note:
? Cases referred:
1
(2007) 5 SCC 745
2 (1991) 3 SCC 588
3 AIR 2008 Madras 108 = 2008 (1) CTC 660
4 (2019) 4 CTC 839
5 AIR 2020 MP 201
6 AIR 1992 SC 1264
7 1983(4)SCC 45
2
HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU
W.P.No.7312 of 2020
ORDER:
This writ petition has been filed by the petitioners seeking the following relief:
"To issue a writ, order or direction one more particularly in the nature of a Writ of Mandamus declaring the action of l and 2nd Respondents in collecting Rs.60,005/- towards Transfer Duty 1.5% as contrary to Article 16 of Indian Stamp Act 1899 in respect of Sale Certificate dated 16.08.2018 registered vide Document No.3577/2018 before the Sub- Registrar, Tirupati Rural and consequently direct 1st and 2nd Respondents to refund Rs.60,005/ paid by the petitioners and ....."
The petitioners before this Court are purchasers of the property in a public auction conducted by a Nationalized Bank under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (for short 'the SARFAESI Act). The auction was confirmed in their favor and a Sale Certificate was also issued. Physical possession of the property was also delivered. The petitioners presented the Sale Certificate for registration but the 2nd respondent refused to receive the document on the ground that transfer duty is not paid. The case of the petitioners is that they tried to reason with the respondent stating that the sale was conducted by auction by the State Bank of India under the SARFAESI Act, and hence, the same does not amount to transfer of property and that 3 transfer duty is also not payable. Despite the same, it is stated that the 2nd respondent insisted on payment of the transfer duty. Petitioners state that under these circumstances they were compelled to pay the amounts as demanded. After the registration was completed, they made a number of representations seeking refund of the transfer duty paid at "1.5%". The respondents did not agree for the same and the representations were un-answered. Therefore, the writ was filed seeking the relief of refund of the excess 1.5% that has been collected. Since the submissions were made in this writ petition orders are being pronounced in this petition and the same will apply to the other two writ petitioners in WP.Nos.7308 and 7310 of 2020, who have raised identical legal issues in their writs.
The learned Government Pleader appeared for the respondents and filed a counter affidavit wherein it was stated that the petitioners are not entitled to the refund; for the reasons mentioned therein.
Sri P.Badarinath, learned counsel for the petitioners argues that when a sale is conducted by public auction by a Court or other Officer the same cannot be treated as a transfer of property to attract stamp duty/registration/ transfer duty etc. It is his contention that the Sale Certificate issued in this case does not even require registration, but petitioners by way of caution have opted for the registration. 4 He also contends that a Certificate of Sale cannot be treated as a document actually affecting a transfer of property and therefore, the collection of transfer duty at 1.5% is contrary to law. He relies upon the judgments of the Hon'ble Supreme Court of India reported in B.Arvind Kumar v. Government of India1 and a judgment of a learned single Judge of the combined High Court in WP.Nos.17600 of 2011 and 32791 of 2013 and argues that as there is no "sale" in the strict sense of the word through the instrument, and that transfer duty is not payable. He, therefore, seeks for refund.
In reply to this, learned Government Pleader for Registration and Stamps argues that there is a clear case of under valuation under section 47-A of the Indian Stamp Act, 1899. He also states that the provisions of Article 16 of Schedule 1-A of the Indian Stamp Act are not applicable to the case on hand as the sale is under the SARFAESI Act by an authorized officer and not by a Civil Court/Revenue Officer. He also relies upon a Government memo dated 22.06.2012 which states that sale of an asset under the SARFAESI Act by a secured creditor is a "sale" of property only and that Article 16 will not apply. Therefore, it is his contention that as there is a sale, the transfer duty also has to be paid and that the petitioners are not entitled to a refund 1 (2007) 5 SCC 745 5 of 1.5% and that the levy and collection of transfer duty are as per law only.
COURT:-
After hearing both the learned counsel, this Court notices that there are two questions of law in this case -
1) whether the certificate of sale requires to be stamped and registered by payment of the requisite charges and 2) whether transfer duty is payable on the certificate of sale.
REGISTRATION OF A CERTIFICATE OF SALE:-
Section 17 (1)(b) of the Registration Act stipulates that registration is compulsory for non-testamentary instruments which create, declare, assign, limit or extinguish any right or interest in property of a value of Rs.100 or more. The exceptions to Section 17 (1) (b) namely the various types of documents which do not require registration are mentioned in Section 17(2) of the Registration Act. In the facts of this case, Section 17(2)(xii), which deals with and exempts from registration a certificate of sale is important :
"17 (2) (xii): any certificate of sale granted to the purchaser of any property sold by public auction by a Civil or Revenue Officer."
The property in this case is sold under the provisions of the SARFAESI Act, which is a special enactment which has been brought into force to facilitate recovery of money due to Nationalized Banks, financial institutions etc. Section 13 sets 6 out the manner in which the Bank/Authorized Officer can take possession, transfer the assets etc., that are mortgaged and bring them to sale. Section 13(6) of the SARFAESI Act, (which is as follows) is important:
"13(6) Any transfer of secured asset after taking possession thereof or takeover of management under sub-section (4), by the secured creditor or by the manager on behalf of the secured creditors shall vest in the transferee all rights in, or in relation to, the secured asset transferred as if the transfer had been made by the owner of such secured asset."
The right, title and interest in the purchaser are thus transferred as if the transfer has been made by the owner of the asset himself.
Under the Security Interest (Enforcement) Rules, 2002, what are important for this case are Rules 8 and 9. In Rule 8, the procedure for bringing an immovable property to sale is stipulated. Rule 9 deals with the issue of Sale Certificate and the delivery of possession. Rule 9.6 which is to the following effect talks of the certificate of sale:
"19 (6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorised officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the Form given in Appendix V to these rules."7
The Sale Certificate is to be issued in accordance with the Appendix V, and is described in the Act itself.
A reading of all these sections in conjunction shows that the SARFAESI Act gives the power to the secured creditor through the authorized Officer to bring the property to sale without the intervention of a Court. Once the sale has been affected, the authorized Officer is given the power to issue a Certificate of Sale. The section itself makes it clear that the transaction in such a case shall be treated as a transfer made by the owner himself. Therefore, a reading of these sections would make it clear that the transaction is completed without the intervention of the Court.
Certificate of sale under SARFAESI Act :
The first question whether Certificate of Sale that is issued in such a case, in fact, requires registrations or not does not really arise for determination in this case as the Sale Certificate was in fact registered and the stamp duty was also paid. Nevertheless, as both the counsel argued this point, and as it has a bearing on the issue of transfer duty it is being considered.
Section 17(2) (xii) of the Registration Act, states that registration is not compulsory for any Certificate of Sale granted to the purchaser of any property sold by a public auction by a Civil or a Revenue Officer.8
A related issue fell for consideration before the Hon'ble Supreme Court of India in B.Arvind Kumar's case (1 supra), wherein it was clearly held that when a property is sold in a public auction, the bid is accepted and the sale is confirmed by the Court in favor of the purchaser, the sale becomes absolute and title vests in the purchaser. The Sale Certificate as held by the Hon'ble Supreme Court of India is merely "evidence" of such title which is given when the sale becomes absolute. The Sale Certificate is evidence of title and the transfer of title or the passage of title is completed when the sale is held to be absolute by the Court. Hence, a further deed of transfer is not contemplated or required. In fact, in the judgment before the Supreme Court of India (like in the present case), the Sale Certificate was also registered. The Hon'ble Supreme Court of India after considering the provisions of section 17(2) (xii) of the Registration Act, held that in such a case, the document is non-testamentary document which does not require registration. This case is relied upon heavily by the Learned Counsel for the Petitioner.
The vesting of title in such cases is by operation of law and the moment the sale is completed and determined to be absolute, the transfer as it is understood in common parlance is completed. The Sale Certificate that is issued is merely evidence of the completed transaction. In fact in Sagar 9 Mahila Vidyalaya, Sagar v. Pandit Sadashiv Rao Harshe2 in para 14 it was held that the granting of a Sale Certificate is a ministerial act only and not a judicial act.
The judgment of a Division Bench of the Madras High Court in K.Chidambara Manickam v. Shakeena3 was also mentioned in the writ petition. The Division Bench relying upon the law on the subject including the judgment of B.Arvind Kumar's case (1 supra) held that Sale Certificate issued in such a case under the SARFAESI Act does not require registration as it has been issued pursuant to the sale held in a public auction by the Authorized Officer under the SARFAESI Act. However, this judgment is no longer good law in view of the decision of the Full Bench of the Madras High Court in Dr. T.Thiagarajan v. Inspector General of Registration4. The Full Bench held that the exemptions under Section 17(2) (xii) will not apply as the Authorized Officer under the SARFAESI Act is not a Civil or a Revenue Officer. The Full Bench held that the Authorized Officer is not a Civil or a Revenue Officer for the exception under Section 17(2)(xii) of the Registration Act to apply. This decision of the Full Bench is of great persuasive value and has noticed the difference in the terminology between the SARFAESI Act and the Registration Act. To a similar effect is 2 (1991) 3 SCC 588 3 AIR 2008 Madras 108 = 2008 (1) CTC 660 4 (2019) 4 CTC 839 10 the judgment of a single Judge of the Madhya Pradesh High Court in a judgment reported as M/s Mid India Power and Steel Ltd v MP Audyogik Kendra Vikas Nigam5, wherein in para 12 it was held as follows:
"12. In the circumstances when the property of a borrower is sold by public auction by the Authorised Officer of the Bank who is neither a Civil nor a Revenue Officer, one cannot claim that the sale-certificate issued on the basis of such sale will be covered under Section 17 (2) (xii) of the Registration Act and its registration is not compulsory. The term 'Authorised Officer' has not been included in Section 17 (2) (xii) of the Registration Act by way of amendment after coming into force of SARFAESI Act. The definition of term Authorised Officer under the Rules of 2002 also does not give it a meaning of Civil or Revenue Officer the terms which find place in Section 17(2) (xii) of the Registration Act. In the circumstances, the sale-certificate issued by the Authorised Officer cannot be construed so as to hold that it is by a Civil or Revenue Officer and, therefore, its registration is not compulsory. Hon'ble Shri Justice G.P. Singh in his book Principles of Statutory Interpretation Volume II at page 65 while dealing with the topic 'causus omissus' has observed that a matter which should have been, but has not been provided for in a statute - cannot be supplied by Courts as to do so will be legislation and not construction. In this view of the matter the term Authorised Officer cannot be read in Section 17 (2) (xii) of the Registration Act."
(emphasis supplied) 5 AIR 2020 MP 201 11 This Court agrees with the judgment of the learned single Judge of the Madhya Pradesh High Court. Bringing the Authorized Officer into the definition of a Civil or Revenue Officer would amount to "judicial legislation" which is not legally permissible. The contention of the Learned Government Pleader that the Authorized Officer under the SARFAESI Act, is not a Civil or Revenue Officer is therefore upheld.
However, in the opinion of this Court, Section 47-A of the Stamp Act will not apply to the facts. There is no whisper of any willful or deliberate avoidance of stamp duty by undervaluation. The sale is also by public auction. In such cases a greater burden is cast on the state to plead and prove the "intention" to avoid stamp duty and the undervaluation. The said burden is not at all discharged. As per settled law the value mentioned in the certificate alone is to be considered. This Court does not find any willful undervaluation for section 47-A to be attracted. PAYMENT OF TRANSFER DUTY:-
This issue is the essence of the dispute in this case. Transfer duty is a source of revenue for the Municipal Corporations, Municipalities and the Local Panchayat. This is a duty levied under the applicable enactments by the Corporation, Municipality or Gram Panchayat as the case may be on certain transfers of property within their territorial 12 jurisdiction. Under section 261 of the Hyderabad Municipal Corporation Act the Corporation is entitled to levy a tax in the form of surcharge on the duty imposed by the Indian Stamp Act on the 5 types of documents/instruments described therein. This is clear from section 261 (1) (a) & (b) of the said Act. In addition, Section 261 (3) states "No registering authority shall accept any instrument for registration unless the amount of transfer tax is paid in cash". This transfer duty is credited to the municipal fund. Similarly, Section 82 & Section 120 of the Andhra Pradesh Municipalities Act deal with the levy of transfer duty. The Duty on Transfer of Property Rules 1965 deal with a manner in which the duty is to be collected, consolidation of account, returns to be maintained etc. The Andhra Pradesh Grama Panchayat Act, 1964 also has a similar provision under Section 69(2) which enables the Panchayat to levy a tax on the transfer of property. Section 73 of the said Act deals with the actual levy duty in the form of a surcharge on the duty imposed by the Indian Stamp Act. As stated earlier this "transfer duty or tax"
levied under the above mentioned enactments is a major source of revenue for the local bodies from certain types of enumerated transfers effected within their jurisdiction and is apportioned as per section 73 (3) of the A.P.Gram Panchayats Act, 1964 amongst the Panchayat, Mandala Praja Parishad and Zilla Praja Parishad etc. 13 As far as the present case is concerned, it relates to the property situated in Avilala, Vedanthapuram Panchayat.
Therefore, this transfer duty is payable as a surcharge as per Section 73 (1) (a) of the A.P.Gram Panchayats Act, 1964. The relevant portion of section 73(1) (a) is reproduced here:
73. Duty on transfers of property:
(1) The duty on transfers of property shall be levied by the Government-
(a) in the form of a surcharge on the duty imposed by the Indian Stamp Act, 1899, as in force for the time being in the State, on every instrument of the description specified below, in so far as it relates to the whole or part of immovable property as the case may be, situated in the area under the jurisdiction of a Gram Panchayat;
Thus, this transfer duty or tax is a surcharge on the existing duty imposed by the Stamp Act on the various instruments described therein including an instrument of sale of immoveable property. It is incidental to or over and above the stamp duty already imposed and is an extra duty or an additional duty mandatorily payable on the duty that is already levied on the instrument by the Indian Stamp Act 1899. Once the stamp duty is payable the surcharge or transfer duty is also payable.
14
The Hon'ble Supreme Court of India in Sarojini Tea Co.(P.) Ltd., v. Collector of Dibrugarh, Assam and others6, at para 17 held as follows while dealing with a "surcharge":
17. From the aforesaid decisions, it is amply clear that the expression 'surcharge' in the context of taxation means an additional imposition which results in enhancement of the tax and the nature of the additional imposition is the same as the tax on which it is imposed as surcharge. A surcharge on land revenue is an enhancement of the land revenue to the extent of the imposition of surcharge.
The nature of such imposition is the same viz., land revenue on which it is a surcharge.
Earlier also, the Hon'ble Supreme Court in Hoechst Pharmaceuticals Ltd. and Ors. v. State of Bihar7 at para 79 held as follows:
79. There is no ground whatever for holding that Sub-section (3) of Section 5 of the Act is arbitrary or irrational or that it treats 'unequals as equals', or that it imposes a disproportionate burden on a certain class of dealers. It must be remembered that Sub-section (1) of Section 5 of the Act provides for the levy of a surcharge having a gross turnover of Rs.
5 lakhs or more in a year at a uniform rate
of 10 per centum of the tax payable by
6 AIR 1992 SC 1264
7
1983(4)SCC 45
15
them, irrespective whether they are
dealers in essential commodities or not. A surcharge in its true nature and character is nothing but a higher rate of tax to raise revenue for general purposes. The levy of surcharge under Sub-section (1) of Section 5 of the Act falls uniformly on a certain class of dealers depending upon their capacity to bear the additional burden.......
In the present case, this Court holds that both in fact and in law the petitioner cannot claim refund of the duty. The petitioner admits in his writ affidavit that stamp duty is payable specifically under Article 16 of the Stamp Act on the certificate of sale and he has in fact paid the same (para 8). His entire challenge is based on the plea that the sale certificate does not require registration and consequently transfer duty is not payable. The vires of the charging Section are not challenged. In view of the current state of the law this plea is also not available to the petitioner and the sale under the SARFAESI Act cannot be equated to a sale by the civil court or revenue officer. The sale certificate issued under the SARFAESI Act has to be registered by paying the duty fixed and the stamp/registration charges. Transfer duty which is a surcharge on the "existing stamp" duty is also consequently payable.
Therefore, as the sale certificate issued by authorized officer under the SARFAESI Act is not exempt from registration charges or stamp duty as per the prevalent law 16 on the subject, this Court holds that the petitioner is not entitled to any relief of refund of the transfer duty which is a surcharge on the existing stamp duty.
The Writ petition is therefore dismissed. No order as to costs.
As a sequel, the miscellaneous petitions if any shall stand dismissed.
_______________________ D.V.S.S.SOMAYAJULU,J Date : 07.10.2020 Note: L.R. copy be marked.
KLP