Delhi District Court
Icici Bank Ltd vs Bijender Kumar on 15 December, 2025
BEFORE THE COURT OF SH. SURINDER S. RATHI, DISTRICT JUDGE
(COMM.)-11 CENTRAL, THC, DELHI
CS (Comm.) No. 5511/2021
ICICI Bank Ltd.
Registered Office at:
Near Chakli Circle, Padra Road
Vadodaram, Gujarat- 390 007
Branch Office at:
E-3, Jhandewalan, Extension
New Delhi .............Plaintiff
Vs.
Bijender Kumar
S/o Sh. Jairam
R/o H. No. H - 3/362, Ground Floor
Sector 16, Rohini, Delhi-110085
Also at:
Shop No. 1, G-6/100
Sector 16, Rohini, Delhi-110085 ............Defendant
Date of Institution : 23.12.2021
Date of Final Arguments : 15.12.2025
Date of Judgment : 15.12.2025
Decision : Dismissed
Judgment
1. The suit is filed by plaintiff, a private bank, for recovery of Rs.4,45,206/-
alongwith interest @ 24% per annum as unpaid dues of loan amount.
2. Short case of the plaintiff as per plaint and the documents filed is that it had
granted a loan of Rs.4,05,000/- to the defendant for purchase of a WAGON
1.0/LXI CNG car on 27.10.2020 after execution of loan documents and
Hypothecation Deed. The loan was repayable in 60 Equated Monthly
Installments (EMIs) of Rs.8,295/-.
CS (Comm.) No. 5511/2021 Page No. 1 of 56
ICICI Bank Ltd. Vs. Bijender Kumar
3. When the defendant did not adhere to financial discipline the loan was recalled
and demand notice dated 29.04.2021 demanding Rs.9,35,646/- was issued.
Defendant was served by substituted mode by publication in national daily "The
Hindu" & "Haribhumi" edition 11.01.2025. However, defendant did not file any
WS within 30 days or thereafter. Thereafter plaintiff led evidence and PW1
Rajneesh Kumar, its AR was examined. In his evidence plaintiff has relied and
exhibited only following documents:
1. Power of Attorney is Mark A.
2.Preliminary Credit Facility Application Form is Ex.PW1/2.
3. Credit Facility Application Form is Ex.PW1/3.
4. Unattested Deed of Hypothecation is Ex.PW1/4.
5. Disbursement Memo is Ex.PW1/5.
6. Foreclosure of Statement of Accoutn dated 09.09.2021 is Ex.PW1/6.
7. Statement of Account dated 09.09.2021 is Ex.PW1/7 (Colly.).
8. Certificate under Section 65 B of Indian Evidence Act, 1872 is Ex.PW1/8.
9. Certificate under Section 2A of Banker Book Evidence Act is Ex.PW1/9.
10. Loan Recall Notice dated 29.04.2024 is Ex.PW1/10.
11. Postal Receipt is Mark X.
4. When the matter reached the final arguments stage this Court found that several
documents filed and relied by the bank were unstamped/understamped. After
the issue was flagged on 03.05.2025 detailed arguments were heard from the
bank side as well as from the side of Sh. Abhijat, Ld. Senior Advocate appointed
as Amicus Curie. In this backdrop the detailed order was passed by this Court
on 12.11.2025 as under:
BEFORE THE COURT OF SH. SURINDER S. RATHI, DISTRICT JUDGE
(COMM.)-11, CENTRAL, THC, DELHI
CS (Comm.) No. 5511/2021
ICICI Bank Ltd. ........Plaintiff
Vs.
Bijender Kumar .......Defendant
12.11.2025
'INDEX'
Sr. No. Description Page
1 Brief facts of the case 2
2 Evasion of Stamp Duty by way of Un-Stamping/Under-Stamping of loan documents 3
3 Objective behind Indian Stamp Act, 1899 and legal position 7
CS (Comm.) No. 5511/2021 Page No. 2 of 56
ICICI Bank Ltd. Vs. Bijender Kumar
4 Collation of Pleas raised by the Banks/NBFCs to justify Un-Stamping/Under-Stamping of Loan 14
Documents
5 Appointment of Ld. Amicus Curie and his questionnaire for the Banks/NBFCs 15
6 Evaluation of pleas raised by the Banks and NBFCs 17
7 Why Banks and NBFCs are indulging in and facilitating evasion/theft of Stamp Duty by way of 41
Un-Stamping and Under-Stamping
8 Effect of Un-Stamping/Under-Stamping on the admissibility of loan documents as evidence in 44
the Court
9 Un-Stamping/Under-Stamping of Loan Documents is a curable defect 45
10 Financial impact of Un-Stamping/Under-Stamping of loan documents on the Exchequer 46
11 Stand taken by Govt. of NCT of Delhi indicates lack of Supervisory Mechanism to detect and 49
contain Un-Stamping and Under-Stamping of Loan Documents by Banks and NBFCs
12 Suggestions for remedifying the menace of Un-Stamping and Under-Stamping of Loan 60
Documents by Banks and NBFCs so as to plug loss of revenue to the Exchequer
Order on Un-Stamping/Under-Stamping of Loan Documents by Banks/NBFCs
This suit seeking recovery of Rs.4,45,206/- alongwith interest @ 24% per annum as unpaid
dues of loan amount. During the course of trial this Court found that the documents filed and relied by the
Bank on record were found to be Un-Stamped/Under-Stamped. The issue was flagged by this Court on
03.05.2025 and Ld. Counsel for the plaintiff was invited to address the Court on the same.
Vide this order this Court shall dispose of various specific and random pleas raised by Ld.
Counsel for the plaintiff Bank as also similar pleas raised by other Banks/NBFCs in order to justify the Un-
Stamping and Under-Stamping of Loan Documents filed. This Court has collated and enlisted these nine
submissions which were made generally by Ld. Counsels for the Banks/NBFCs in the matters bunched
together.
1. Brief facts of the case:-
1. Brief factual matrix of the case in hand are that plaintiff Bank has filed the suit in hand for seeking
recovery of Rs.4,45,206/- alongwith interest @ 24% per annum. As per plaint, Plaintiff is a public
limited banking company running one of the largest private banks in the country i.e. ICICI Bank
Ltd. It is pleaded that plaintiff is operating as per guidelines issued by Reserve Bank of India. In
the course of business it is engaged in providing Auto Loans to its clients. Defendant is said to
have submitted a Credit Facility Application Form for availing a loan of Rs.4,05,000/- for purchase
of a car, namely, WAGON R 1.0/LXI CNG. Upon due processing, the loan was sanctioned and
disbursed on 27.10.2020 respectively after execution of loan documents including Loan
Agreement, Hypothecation Deed. The loan was payable in 60 Equated Monthly Installments
(EMIs) of Rs.8,295/-.
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ICICI Bank Ltd. Vs. Bijender Kumar
2. When the defendant did not adhere to financial discipline and started defaulting just after one EMI
in auto loan, plaintiff recalled the loan and issued legal notice dated 29.04.2021. The plaint is silent
qua compliance of Section 12A of Commercial Courts Act, 2015 pertaining to Pre-Institution
Mediation as mandated by Hon'ble Supreme Court of India in Patil Automation Limited Vs.
Rakheja Engineering Private Ltd., 2022 Latest Caselaw 645 SC, dated 17.08.2022. However,
record reveals that plaintiff had moved an application under Order 40 Rule 1 r/w Section 151
CPC for appointment of receiver for repossession of the hypothecated vehicle. This application
was allowed by Ld. Predecessor on 07.07.2022.
3. In this backdrop suit in hand has been filed by the plaintiff bank for recovery of Rs.4,45,206/-
alongwith interest @ 24% per annum. Summons of the suit was issued to the defendant who was
served by substituted mode by publication in national daily "The Hindu" & "Haribhumi" edition
11.01.2025. However, defendant did not file any WS within 30 days or thereafter. It was followed
by leading of evidence by plaintiff bank through PW1 Rajneesh Kumar, its AR. In his evidence
plaintiff has relied and exhibited only following documents:
1. Power of Attorney is Mark A.
2.Preliminary Credit Facility Application Form is Ex.PW1/2.
3. Credit Facility Application Form is Ex.PW1/3.
4. Unattested Deed of Hypothecation is Ex.PW1/4.
5. Disbursement Memo is Ex.PW1/5.
6. Foreclosure of Statement of Accoutn dated 09.09.2021 is Ex.PW1/6.
7. Statement of Account dated 09.09.2021 is Ex.PW1/7 (Colly.).
8. Certificate under Section 65 B of Indian Evidence Act, 1872 is Ex.PW1/8.
9. Certificate under Section 2A of Banker Book Evidence Act is Ex.PW1/9.
10. Loan Recall Notice dated 29.04.2024 is Ex.PW1/10.
11. Postal Receipt is Mark X.
4. Thereafter the matter reached the final arguments stage.
2. Evasion of Stamp Duty by way of Un-Stamping/Under-Stamping of loan documents
5. During the course of final arguments, this Court found that the plaintiff Bank has indulged in
seeking recovery of certain sums of money which were neither borne out of the loan agreement nor
they could be justified as per guidelines issued by Reserve Bank of India and relevant judgments
passed by Hon'ble Supreme Court and Hon'ble High Court of Delhi. e.g. a sum of Rs.7,416/- was
sought under the head "Late Payment Penalty" even though loan agreement does not provide for
levying of any such penalty.
6. RBI Guidelines titled Fair Lending Practice - Penal Charges in Loan Accounts (Reference
Circular: DoR.MCS.REC.28/01.01.001/2023-24 dated 18.08.2023 and
DoR.MCS.REC.61/01.01.001/2023-24 dated 29.12.2023) held as under:
"4..... Such penal charges shall be reasonable and levied by the lenders only on the
amount under default in a non-discriminatory manner as per their Board approved
CS (Comm.) No. 5511/2021 Page No. 4 of 56
ICICI Bank Ltd. Vs. Bijender Kumar
policy. Further, it must be ensured that there is no capitalization of the penal charges
i.e., no further interest computed on such charges."
7. The highlights of the above guidelines are:
i. Penalty imposed on non-compliance of material terms of the loan by the borrower
should be in the form of "penal charges". Hence, REs cannot levy the said penalty in
the form of "penal interest", which is currently added to the applicable rate of interest
applicable to the loan. Additionally, the REs should not compute further interest on the
"penal charges" if the borrower fails to pay such "penal charges" as per agreed
terms.
ii. No additional component should be introduced in the applicable rate of interest for the
loan.
iii. The REs should formulate a board-approved policy on levying the penal charges.
iv. REs should ensure that the quantum of penal charges is reasonable and based on the
non-compliance with the material terms of the loan. Further, the penal charges should
not be discriminatory within a particular loan/loan category.
v. Penal charges applicable on loans availed by individual borrowers, for purposes other
than business, should not be higher than the penal charges applicable to non-
individual borrowers, for similar non-compliance.
vi. The quantum and reason for penal charges should be disclosed to the borrower, in the
loan agreement and most important terms & conditions/key facts statement (as
applicable), in addition to the same being displayed on REs' website under interest
rates and services charges category.
vii. REs should communicate the applicable penal charges to the borrowers (including
impositions of penal charges along with reasons thereof) while sending them reminders
for non-compliance of material terms.
viii.Prior to the occurrence of the effective date, adequate policies have to be implemented
by REs to ensure compliance with the Notifications.
8. The above instructions apply to "regulated entities" (Res), namely:
i. all commercial banks (including small finance banks, local area banks and regional rural
banks) excluding payments banks;
ii. all primary (urban) cooperative banks;
iii. all non-banking finance companies (including housing finance companies); and
iv. all India financial institutions [Exim Bank, National Bank for Agriculture and Rural
Development, National Housing Board, Small Industries Development Bank of India (SIDBI)
and National Bank for Financing Infrastructure and Development (NaBFID).
9. In case titled Union of India v. Assn. of Unified Telecom Service Providers of India, 2021
Latest Caselaw 288 SC it is observed by Hon'ble Supreme Court that :
"Penal interest is an extraordinary liability incurred by a debtor on account of him
being a wrongdoer by having committed the wrong of not making the payment when it
should have been made, in favour of the person wronged and it is neither related with
nor limited to the damages suffered". The Supreme Court has further observed that
CS (Comm.) No. 5511/2021 Page No. 5 of 56
ICICI Bank Ltd. Vs. Bijender Kumar
capitalisation of penal interest is against public policy as it goes beyond its character of
being implemented as a means of deterrent".
10. In case titled Punjab & Sind Bank Vs. M/s Allied Beverage Company Pvt. Ltd. & Ors., 2010
(10) SCC 640, Hon'ble Supreme Court held as under:
"38. However "penal interest" has to be distinguished from "interest". Penal interest is an
extraordinary liability incurred by a debtor on account of his being a wrongdoer by having
committed the wrong of not making the payment when it should have been made, in favour of
the person wronged and it is neither related with nor limited to the damages suffered. Thus,
while liability to pay interest is founded on the doctrine of compensation, penal interest is a
penalty founded on the doctrine of penal action.
Penal interest can be charged only once for one period of default and therefore cannot be
permitted to be capitalized."
11. In case titled Central Bank of India Vs. Ravindra and Ors., 2001 Latest Caselaw 657 SC,
decided by Five-Judge Constitution Bench on 18.10.2001 Hon'ble Supreme Court held as under:
Though interest can be capitalised on the analogy that the interest falling due on the accrued
date and remaining unpaid, partakes the character of amount advanced on that date, yet
penal interest, which is charged by way of penalty for non-payment, cannot be capitalised.
Further interest, i.e. interest on interest, whether simple, compound or penal, cannot be
claimed on the amount of penal interest. Penal interest cannot be capitalised. It will be
opposed to public policy.
12. In case titled Kottayam District Co-operative Bank Vs. Annie John (2002) SCC Online KER
184 of Hon'ble Kerala High Court it is observed that:
".....Penal interest cannot be included with the contractual rate of interest for awarding future
interest from the date of the suit."
13. When the bank was asked to justify the above claims, plaintiff neither filed any application under
Order 6 Rule 17 CPC nor filed any affidavit in that regard.
14. During the course of trial, this Court found that the documentation carried out by the plaintiff Bank
while extending the auto loan of Rs.4,05,000/- to the defendant is marred with Un-Stamping and
Under-Stamping of loan documents. Attention of Ld. Counsel for plaintiff bank was drawn to
Indian Stamp Act, 1899 r/w Delhi Province Stamp Rules, 1934 and Delhi Stamp (Prevention
of Under-Valuation of Instruments) Rules, 2007.
15. Vide a detailed order of this Court dated 03.05.2025, this Court had flagged aspect of Un-Stamping
and Under-Stamping of loan documents by the Bank and invited Ld. Counsel for plaintiff to
address the Court on the same. In so far as the issue of Un-Stamping and Under-Stamping of loan
documents was found to be rampant with almost every nationalised Bank, Private Bank and NBFC
which has cases before this Court and this menace has the potential of evasion/stealing of Stamp
Duty at a colossal level and can have deliritious effect on the Exchequer and the nation's economy
this court appointed Sh. Abhijat, Ld. Senior Advocate, High Court of Delhi as Amicus Curie to
assist the Court.
CS (Comm.) No. 5511/2021 Page No. 6 of 56
ICICI Bank Ltd. Vs. Bijender Kumar
16. The assistance of Ld. Amicus was sought also as an Expert for the reason that as per Delhi High
Court Rules and Orders, Volume 4, Part F titled "Instructions applicable to both Civil and
Criminal Courts in Delhi", Chapter 4 titled "Court Fees and Stamps" carries under Part B a
set of instructions whereby strict directions have been issued that compliance of provisions of
Indian Stamp Act are mandatory and not discretionery. Civil Courts have been assigned a duty
to closely "examine every instrument chargeable with duty" as a part of its judicial work and
in case it is found that the such document in Un-Stamped or Under-Stamped, the same shall be
impounded and dealt with as per Law which include imposition of penalty as per Section 35 of the
Indian Stamp Act, 1899. The same chapter also draws attention of all Civil Courts that in case
of evasion of Stamp Duty under Court Fees Act as well as Indian Stamp Act there is absolute
prohibition on receipt of such documents.
3. Objective behind Indian Stamp Act, 1899 and legal position
17. Before appreciating, evaluating and deciding the pleas raised by Ld. Counsel for the Bank it would
be appropriate to have a glance at the objectives behind promulgation of Indian Stamp Act, 1899
and related rules and guidelines.
18. While the Indian Stamp Act, 1899 precedes promulgation and adoption of Constitution of India
in 1949 but it carries specific reference in the Constitutional Framework of India under Article
246, Article 268 and the 7th Schedule as well under Entry 91 of the Union List, Entry 63 of the
State List and Entry 44 of the Concurrent List. These Constitutional provisions empower
Parliament and the State Legislatures to legislate, fix rates of stamp duty on interests and security
and collect the proceeds of the same. Section 1 of Indian Stamp Act also carries a reference of its
Constitutional grounding.
19. Generally speaking Stamp Act is a fiscal enactment and is a major source of revenue for the State
and its evasion or partial compliance has the capacity of causing tremendous loss to the exchequer
given the fact that the documents/instruments which attract payment of stamp duty as per Schedule
1 prepared under Section 3 of the Act are so widely created, executed and utilised for commercial
and legal purposes that India as a nation earns around Rs.1 lakh crore annually only from sale of
stamp duty under Indian Stamp Act, 1899.
20. As such the main objective of Indian Stamp Act is to generate revenue while simultaneously
granting authenticity and legal validity to various documents and transactions. The "Objectives of
Stamp Act" can be understood under following heads:
Revenue Generation - The Stamp Act creates an important source of revenue to the exchequer for
both Centre and the State Governments by providing for payment of ad valorem/fixed stamp duty
as per Schedule 1 on legal, commercial and financial instruments/documents.
CS (Comm.) No. 5511/2021 Page No. 7 of 56
ICICI Bank Ltd. Vs. Bijender Kumar
Legal Validity and Evidentiary Value- A properly stamped instrument/document becomes legally
valid and binding. Such a document is able to stand the scrutiny of the court by creating binding
obligations which can be got enforced in the Court of Law.
Uniform Regulation of Documents- Duly stamped document/instrument as per the Stamp Act
brings around uniformity and regulates their execution, drawing and registration and consequently
aids in reducing disputes and fraudulent transactions
Legal compliance and deterrence against evasion- The Indian Stamp Act makes it mandatory for
stamping of documents and instruments as per Indian Stamp Act and the duties notified by various
States/UTs. The Act provide for strict action against any evasion and carries a provision in the form
Section 62 that any Act of Un-Stamping or Under-Stamping is a punishable criminal offence.
Stamp Act brings economic stability- Due compliance of provisions of Stamp Act in creation and
execution of instruments listed in Schedule 1 supports and aids in economic stability and growth by
strengthening fair and transparent transactions between the parties/entities.
21. Coming back to the case in hand, since the transaction involved is that of grant of a secured Auto
Loan by the plaintiff bank to the defendant, it does involve execution of various loan documents as
provided under Banking Regulation Act, Guidelines laid by Reserve Bank of India and
Banking Division of Minsitry of Finance, Govt. of India. By way of following graphic
representation, Ld. Counsel for plaintiff was apprised that the documentation carried out by
Bank/NBFC while granting any unsecured or secured loan attracts mandatory payment of Stamp
Duty.
Loans
Unsecured Loan Secured Loan
Loan/Guarantor's
Loan/Guarantor's
Agreement
Agreement
Stamp Duty payable as Stamp Duty payable as
per Article 5 of Indian per Article 5 of Indian
Movable Immovable
Stamp Act, 1899 @ Stamp Act, 1899 @
Property Property
Rs.50/- Rs.50/-
Hypothecation
Letter/Deed Mortgage Letter/Deed
(including Equitable
Mortgage)
Stamp Duty Payable per Article
40 of Indian Stamp Act, 1899 @
3% or 2% of the value
Stamp Duty Payable per
Article 6 of Indian Stamp
Act, 1899 @ 0.5% of the
value
CS (Comm.) No. 5511/2021 Page No. 8 of 56
ICICI Bank Ltd. Vs. Bijender Kumar
22. Evidently Loans issued by bank and financial institutions can be classified into two categories. The
first being 'Unsecured Loans' and the second being 'Secured Loans'. In the first category of
loans an agreement is entered between the Bank and the Borrower and such a contract attracts
mandatory Stamp Duty as per Article 5 of Indian Stamp Act, 1899.
23. For the second category of secured loan, again a loan agreement is entered between the lender and
the borrower which attracts mandatory stamp duty as per Article 5 of Indian Stamp Act, 1899.
Likewise, any agreement with co-borrower or a Guarantor also attracts stamp duty akin to
agreement with principal borrower under Article 5 of Indian Stamp Act, 1899. Simultaneously,
under the category of secured loan, Deed of Hypothecation/Mortgage is also executed which in
case of hypothecation of movable property attracts stamp duty as per Article 40 of Indian Stamp
Act, 1899 while for equitable mortgage it attracts stamp duty as per Article 6 of Indian Stamp
Act, 1899.
24. The discussion qua loan ageement does not pertain to case in hand and is reproduced hereunder for
academic purposes for the sake of other Banks/NBFCs in the bunched matters.
25. It would be appropriate to have a glance at the relevant portions of Schedule 1A of Stamp Duty
applicable to NCT of Delhi. For ready reference Article 5, Article 6 and Article 40 of Indian
Stamp Act, 1899 are reproduced hereunder:
Description of Instrument Proper Stamp-duty
5. AGREEMENT OR MEMORANDUM OF AN
AGREEMENT-
(a) if relating to the sale of a bill of exchange; One rupee for every Rs.10,000 or part thereof of
the value of the security or share subject to
(b) if relating to the sale of a Government Security or maximum of Rs.1,000.
share in an incorporated Company or other body
corporate;
(c) if not otherwise provided for. Fifty rupees.
Exemption
Agreement or memorandum of agreement-
(a) for or relating to the sale of goods or merchandise
exclusively, not being a Note or Memorandum
chargeable under No. 43;
(b) made in the form of tenders to the Central
Government for or relating to any loan.
[6. AGREEMENT TO LEASE .- See Lease (No.
35)
Agreement relating to Deposit of Title Deeds, pawn
or pledge, that is to say, any instrument evidencing an
agreement relating to --
(1) the deposit of title-deeds or instruments
constituting or being evidence of the title to any
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ICICI Bank Ltd. Vs. Bijender Kumar
property whatever (other than a marketable security),
or
(2) the pawn or pledge of movable property, where
such deposit, pawn or pledge has been made by way
of security for the repayment of money advanced or
to be advanced by way of loan or an existing or
future debt--
0.5 per cent of the amount secured by such deed.
a) if such loan or debt is repayable on demand
subject to a maximum of fifty thousand rupees.
or more than three months from the date of the
instrument evidencing the agreement;
b) if such loan or debt is repayable in not more Half the duty payable under sub-clause (a).
than three months from the date of such instrument.
Exemption
Instrument of pawn or pledge of goods if unattested.
40. MORTGAGE-DEED, not being an agreement
relating to Deposit of the Title deeds, Pawn or Pledge
(No. 6), Bottomry Bond (No. 16), Mortgage of a Crop
(No. 41), Respondentia Bond (No. 56), or Security
Bond (No. 57)-
(a) when possession of the property or any part of the Same duty* as Conveyance Deed No. 23 property comprised in such deed is given by the mortgagor or agreed to be given;
2 percent with a monetary ceiling of Rs. 2 lacs.
(b) when possession is not given or agreed to be given as aforesaid;
Explanation.-- A mortgagor who gives to the mortgagee a power of attorney to collect rents or a lease of the property mortgaged or part thereof, is deemed to give possession within the meaning of this article.
(c) when a collateral or auxiliary or additional or substituted security, or by way of further assurance for the above mentioned purposes where the principal or primary security is duly stamped-
Two rupees for every sum secured not exceeding Rs. 1,000 or part thereof.;
Two rupees per thousand or part thereof.
and for every Rs. 1,000 or part thereof secured in excess of Rs. 1,000.
Exemption (1) Instruments executed by persons taking advances under the Land Improvement Loans Act, 1883, or the Agriculturists' Loans Act, 1884, or by their sureties as security for the repayment of such advances.
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ICICI Bank Ltd. Vs. Bijender Kumar
(2) Letter of hypothecation accompanying a bill of
exchange."
26. It would be appropriate to have a glance at the definition/legal meaning of various terms used hereinabove vis-a-vis Indian Stamp Act.
The terms Secured Loan and Unsecured Loan are defined under Section 5 (n) of The Banking Regulation Act, 1949. For ready reference the same is reproduced hereunder:
"Secured loan or advance" means a loan or advance made on the security of assets the market value of which is not at any time less than the amount of such loan or advance; and "Unsecured loan or advance" means a loan or advance not so secured.
Term "Hypothecation" is defined under Section 2 (n) of SARFAESI Act as:
"Hypothecation" means a charge in or upon any movable property, existing or future, created by a borrower in favour of a secured creditor without delivery of possession of the movable property to such creditor, as a security for financial assistance and includes floating charge and crystallization of such charge into fixed charge on movable property.
Term "Mortgage Deed" is defined under Section 2 (17) of Indian Stamp Act, 1899 as:
"Mortgage-deed" includes every instrument whereby, for the purpose of securing money advanced, or to be advanced, by way of loan, or an existing or future debt, or the performance of an engagement, one person transfers, or creates to, or in favour of, another, a right over or in respect of specified property.
The term Mortgage is also defined under Section 58 (a) of Transfer of Property Act, 1882. Same is reproduced hereunder:
58. "Mortgage", "mortgagor", "mortgagee", "mortgage-money" and "mortgage- deed" defined.--
(a) A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.
The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being arc called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage -deed.
27. Section 58 Transfer of Property Act, 1882 further defines various kinds of mortgage which are reproduced as under:
Simple Mortgage:
The mortgagor doesn't deliver possession but binds themselves to pay the mortgage- money, and the mortgagee can have the property sold to recover the debt.
Mortgage by Conditional Sale:
The property is "sold" with a condition that if the loan is repaid by a certain date, the sale is void, or if the loan isn't repaid, the sale becomes absolute.
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ICICI Bank Ltd. Vs. Bijender Kumar
Usufructuary Mortgage:
The mortgagee is given possession of the property and is entitled to receive the rents and profits from it to pay off the mortgage debt.
English Mortgage:
A specific type where the mortgagor transfers the property to the mortgagee absolutely, with a covenant that the property will be re-transferred to the mortgagor once the debt is repaid.
Mortgage by deposit of title:
It is a specific type of Mortgage applicable only in Notified Towns where Borrower delivers Title Deeds of His immovable property to the Lender with intent to create Security.
Anomalous Mortgage:
A mortgage that combines features of two or more of the above types or presents unique conditions not covered by the standard types.
Terms "Pledge", "pawnor", and "pawnee" are defined under Section 172 of Indian Contract Act, 1872 as under:
172. "Pledge", "pawnor", and "pawnee"defined.
The bailment of goods as security for payment of a debt or performance of a promise is called "pledge". The bailor is in this case called the "pawnor". The bailee is called the "pawnee".
28. With the assistance of case titled State Bank of India Vs. M/s Victory Export Import Syndicate And Ors., 1978 SCC OnLine J&K 6, it is submitted by Ld. Counsel for the plaintiff that the Deed of Hypothecation filed by the banks qua Auto Loan cannot be regarded as a Deed of Pawn or Pledge in so far as they do not accompany delivery of the property which is pre-requisite in Pawn and Pledge. It is submitted that as such it can be safely concluded that the bank loans are not covered under Article 6 of Stamp Duty in Delhi.
4. Collation of Pleas raised by the Banks/NBFCs to justify Un-Stamping/Under-Stamping of Loan Documents
29. While addressing this Court on the preliminary observations made by the Court regarding Un- Stamping and Under-Stamping of Loan Documents, Ld. Counsels for the Banks/NBFCs raised several specific and random pleas in order to justify the Un-Stamping and Under-Stamping of Loan Documents filed and relied by the Banks/NBFCs. This Court has enlisted these submissions which were made generally by Ld. Counsels for the Banks/NBFCs in the bunch matters.
30. Out of the 9 collated submissions enlisted hereunder, some of the submissions were made only by private Banks/NBFCs viz. non-execution of any loan agreement while granting loan but nationalized banks have taken a stand that they do execute loan documents. However, despite CS (Comm.) No. 5511/2021 Page No. 12 of 56 ICICI Bank Ltd. Vs. Bijender Kumar taking slightly divergent stands one thing is common in all these commercial disputes involving grant of various types of loans and that is they all involve similar questions of fact and law qua evasion and theft of Stamp Duty.
31. Pre-dominantly, the stand of ICICI Bank is that they do not constitute Loan Agreement and pay Stamp Duty of Rs.50/- over the loan agreement but co-incidentally in the case in hand, on 'Loan Agreement' Ex.PW1/2 plaintiff has paid Stamp Duty of Rs.50/-.
32. Ld. Counsels for Banks and NBFCs raised several pleas which are collated as under:
Sl. Pleas raised by Banks and NBFCs
No.
1 No loan agreement was actually entered between the parties, hence question of paying Stamp
Duty does not arise.
2 No document titled "Loan Agreement" signed by both the sides and hence, no stamp duty is
payable under Article 5 of Indian Stamp Act, 1899.
3 No Agreement of Hypothecation or Mortgage entered between the parties, hence question of
paying Stamp Duty does not arise.
4 No document titled "Deed of Hypothecation" signed by both the sides and hence, no stamp
duty is payable under Article 40 of Indian Stamp Act, 1899.
5 The Letter of Hypothecation/Mortgage signed by the defendant does not qualify to be a Contract,
hence question of paying Stamp Duty does not arise.
6 No Stamp Duty is payable by the Bank on such document under Indian Stamp Act, 1899, a
liability if any, is only of Borrower.
7 In the absence of objection from defendant, this Commercial Court can not flag any objection
qua Un-Stamping/Under-Stamping.
8 Evidence already concluded and documents exhibited, hence Un-Stamping/Under-Stamping
stands waived now.
9 Defendant is ex-parte, hence Un-Stamping/Under-Stamping cannot be raised now at the final
arguments stage.
5. Appointment of Ld. Amicus Curie and his questionnaire for the Banks/NBFCs
33. Considering the gravity of the matter and alarmed by the pleas of Ld. Counsels for the Banks and NBFCs which show that they have been evading payment of stamp duty in the routine course of their business, this Court was constrained to seek assistance of Ld. Amicus Curie, Sh. Abhijat, Ld. Senior Advocate, Delhi High Court as an Expert. Upon appearing in the Court Ld. Amicus, in order to assist the Banks and the NBFCs in assessing their Stamp Act compliances by their client in documentation of loan transactions as per directives and guidelines issued by RBI, prepared following questionnaire for them. It was clarified to all the Banks and NBFCs that it is just a voluntary exercise and that none of the Bank or NBFC was bound to participate in the same.
A. Query qua Loan Agreements CS (Comm.) No. 5511/2021 Page No. 13 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
1. Do you execute an Agreement with your borrowers when advancing loans, either secured or unsecured?
2. If your answer to Question No. 1 is yes, please provide the standard format of the Loan Agreement.
3. If your answer to Question No. 1 is yes, are such Agreements stamped in accordance with the Indian Stamp Act?
Or
4. If your answer to Question No. 1 is No, what documents/instruments [Section 2(14)] are executed, filed and relied in Courts or Arbitration to show relationship of Lender- Borrower.
5. Please provide standard Format of all documents mentioned in your answer to Question No. 1 above.
6. In your understanding does the application received by you seeking a loan, the processing of such application, the issuance of Sanction Letter specifying inter-alia, the rate of interest which the loan carries and other terms and conditions and the disbursal of the loan, signify a concluded contract enforceable in law between the borrower and you?
7. Are the documents mentioned in answer to Question No. 4 above stamped in accordance with the Indian Stamp Act, 1899?
8. If your Answer to Question No. 7 above is that such Agreements/documents are not required to be stamped, please specify the provision of law on basis of which you premise your answer.
B. Query qua Movable Property and Immovable Property
9. Where loans advanced are secured, is a Deed of Hypothecation or any other instrument [Section 2(14)], by whatever name called, having semblance to a Deed of Hypothecation required to be executed by the borrower?
10. Where loans advanced are secured, is a Deed of Mortgage or any other evidencing agreement, by whatever name called, having semblance of a Deed of Mortgage required to be executed by the borrower?
11. If your answers to Question Nos. 9 & 10 are in the negative, what is the nature of documents/instruments required to be executed by the borrower in order to create a charge in your favour over the security furnished?
12. Please provide sample formats of all documents which are executed by the borrower to secure the loan advanced to him?
13. Are the Deed of Mortgage/Hypothecation or other documents executed for creating charge/rights over immovable security duly stamped in accordance to the Indian Stamp Act, 1899?
14. If your answer is that Deed of Mortgage/Hypothecation or other documents executed for creating charge/rights over immovable security are not required to be stamped in accordance to the Indian Stamp Act, 1899, please specify the provision of law which dispenses with such stamping?
CS (Comm.) No. 5511/2021 Page No. 14 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
15. Is there an internal policy followed by you regarding the payment of stamp duty on Secured Loans? If Yes, please provide a copy thereof.
16. In case you do not insist on execution of Agreements/Deed of Mortgage/Hypothecation/other documents to secure loans, kindly delineate, the step-by- step process followed by you while advancing a loan, either secured or unsecured, commencing from application seeking loan and ending at disbursal?
17. Provide the number of Loan Transactions entered during the last three financial years in NCT of Delhi. Also whether your institution has paid Stamp Duty on Loan Agreements and Hypothecation Deeds/Mortgage Deeds on instruments [Section 2(14)] onevidencing agreement in this regard executed in Delhi alongwith details of Stamp Duty paid and at what rate?
C. Query qua sharing data or compliance of Indian Stamp Act, 1899 with Revenue Department/Collector of Stamps, Govt. of NCT of Delhi
18. Does your institution share data with Revenue Department or any other department of Delhi qua compliance of Indian Stamp Act, 1899?
19. Do you share data of all the loan transactions with the loan disbursal department?
6. Evaluation of pleas raised by the Banks and NBFCs Now, I shall individually evaluate the submissions made by the plaintiff bank on the basis of facts available on record, legal position based on statutory laws and binding judgments on this subject and able assistance provided by Ld. Amicus Curie Sh. Abhijat, Senior Advocate, High Court of Delhi.
Plea No. 1 and 2:
No loan agreement was actually entered between the parties, hence question of paying Stamp Duty does not arise.
No document titled "Loan Agreement" signed by both the sides and hence, no stamp duty is payable under Article 5 of Indian Stamp Act, 1899.
In order to appreciate these submissions, it has to be seen as to what constitutes a "Contract".
Black's Law Dictionary defines Contract as an agreement between two or more parties to do or not do a particular thing which creates obligations that are enforceable or otherwise recognisable at law.
Maryam Webster Dictionary defines Contract as a binding agreement between two or more persons or parties, particularly one that is legally enforceable.
Section 2 (h) Indian Contract Act, 1872 defines the term Contract as an agreement enforceable by law is a contract.
CS (Comm.) No. 5511/2021 Page No. 15 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
The above definition introduces several legal terms which are significant to understand as to what constitutes a contract and are of utmost relevance to counter the plea of Ld. Counsel for plaintiff that no loan agreement/contract was entered between the parties in this matter. These terms are proposal, promise, promiser, promisee, consideration, agreement and enforceability of an agreement. Section 2 of Contract Act is reproduced as under:
2. Interpretation-clause. -- In this Act the following words and expressions are used in the following senses, unless a contrary intention appears from the context: --
(a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal;
(b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise;
(c) The person making the proposal is called the "promisor", and the person accepting the proposal is called the "promisee";
(d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise;
(e) Every promise and every set of promises, forming the consideration for each other, is an agreement;
(h) An agreement enforceable by law is a contract;
Section 10 of Indian Contract Act, 1872: What agreements are contacts "All agreements are contracts if they are made by the free consent of parties competent to contact, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.
Nothing herein contained shall affect any law in force in India and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents."
Plain reading of the above shows essentials of a valid contract as under:
For an agreement to be a valid contract, certain elements must be present, including:
Offer and Acceptance: A clear proposal by one party and a complete acceptance by the other.
Contract need not be a single document: A contract can consist of several documents which includes emails and other modes of communication. Collectively they are referred to as integrated contracts.
Consideration: Something of value exchanged by each party, forming the basis of the agreement.
Intention to Create Legal Relations: Parties must intend for their agreement to have legal consequences.
Legal Capacity: Parties must be of sound mind, of age, and not disqualified by law.
CS (Comm.) No. 5511/2021 Page No. 16 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
Meeting of Minds: a lawful contract can be deduced from the documents executed and exchanged between the parties which indicate and signify meeting of their minds.
Free Consent: Consent must be given voluntarily and not due to coercion, fraud, misrepresentation, undue influence, or mistake.
Lawful Object: The purpose of the agreement must be legal and not against public policy.
34. Applying the above principles on the factual matrix and the methodology adopted for grant of loans by the Banks and NBFCs, it is not denied by Ld. counsel for the plaintiff that a preliminary credit facility application form/loan application is filed by the prospective borrower with the Bank/NBFC. This ex-facie constitutes a "Proposal". This proposal is processed by Bank/NBFC and thereafter it signifies its assent to the proposal and the same is accepted and as such it become a "Promise". Now the intending borrower becomes a "Promissor" and the Bank/NBFC becomes a "Promisee".
35. In so far as this promise and every set of promises owns a consideration for each other it acquires the stature of an "Agreement". The acceptance of the proposal of the Promissor by the Promisee i.e the bank is conveyed through a loan sanction letter which contains the terms of consideration and constitutes a "Contract". Even the act of the Bank/NBFC of appending endorsement of sanction on the loan application or disbursement of the loan amount in the account of the borrower also constitutes acceptance of the proposal and becomes a binding Contract.
36. Be that as it may the sheer fact the plaintiff Bank/NBFC, as the case may be, files a suit for recovery of unpaid dues of the loan amount is primarily a suit based on Breach of Contract. In cases where the borrowers have defaulted in payment of Equated Monthly Installments in term loan, the lender have a right to foreclose/recall the loan by treating such defaults as Breach of Contract. In case the breach of contract emanates from an unsecured loan the suits which can be filed by such lenders i.e. Banks and NBFCs are covered under Section 9 CPC r/w Section 74 of Indian Contract Act, 1872. For ready reference the same are reproduced hereunder:
Section 9. Courts to try all civil suits unless barred.--
The Courts shall (subject to the provisions herein contained) have jurisdiction to try all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred.
[Explanation 1].--A suit in which the right to property or to an office is contested is a suit of a civil nature, notwithstanding that such right may depend entirely on the decision of questions as to religious rites or ceremonies.
[Explanation II].--For the purposes of this section, it is immaterial whether or not any fees are attached to the office referred to in Explanation I or whether or not such office is attached to a particular place.] Section 74 Indian Contract Act, 1872: Compensation for breach of contract where penalty stipulated for CS (Comm.) No. 5511/2021 Page No. 17 of 56 ICICI Bank Ltd. Vs. Bijender Kumar When a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach, or if the contract contains any other stipulation by way of penalty, the party complaining of the breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken the contract reasonable compensation not exceeding the amount so named or, as the case may be, the penalty stipulated for. Explanation.-- A stipulation for increased interest from the date of default may be a stipulation by way of penalty.] Exception.-- When any person enters into any bail-bond, recognizance or other instrument of the same nature or, under the provisions of any law, or under the orders of the [Central Government] or of any [State Government], gives any bond for the performance of any public duty or act in which the public are interested, he shall be liable, upon breach of the condition of any such instrument, to pay the whole sum mentioned therein.
Explanation.--A person who enters into a contract with Government does not necessarily thereby undertake any public duty, or promise to do an act in which the public are interested. Illustration
(a)......
(b)......
(c)......
(d)......
(e)......
f) A undertakes to repay B a loan of Rs. 1,000 by five equal monthly instalments, with a stipulation that in default of payment of any instalment, the whole shall become due. This stipulation is not by way of penalty, and the contract may be enforced according to its term.
37. It would be pertinent to mention here that the bouquet of statutory enactments which governs the money suis filed by lenders against the borrowers in case of "Unsecured Loans" are covered under
a) Code of Civil Procedure, 1908,
b) Indian Contract Act, 1872 and
c) Recovery of Debts due to Banks and other Financial Institutions (RDB) Act, 1993
d) Insolvency and Bankruptcy Code (IBC), 2016 However in case of "Secured Loans" role of two additional statutes comes into picture namely:
e) Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002
f) Specific Relief Act, 1963
38. In cases where loan is secured by way of collateral security i.e. either mortgage of an immovable property or hypothecation of a movable property like automobiles, machines, stock inventory, shares and debentures etc., Banks/NBFCs seek to enforce its civil rights qua those collaterals emanating from the contract entered between the parties. Almost in every automobile loan or a home loan or loan against property Banks/NBFCs invoke their civil rights by moving application for appointment of receiver under Order 40 Rule 1 of CPC or an application under Section 14 of the SARFAESI Act, 2002.
39. In case the submissions of Ld. Counsel for the plaintiff that there is no contractual relationship between the plaintiff and defendant is accepted then the first fallout of such a plea would be that CS (Comm.) No. 5511/2021 Page No. 18 of 56 ICICI Bank Ltd. Vs. Bijender Kumar the plaintiff Bank/NBFC will lose its cause of action to approach the Court for seeking the reliefs on account of breach of contract and the suit would fail.
40. In so far as this Court is exploring and deliberating on the above aspects to check whether the Banks/NBFCs are indulging in evasion/theft of mandatory Stamp Duty, another facet which needs to be explored is whether the Banks/NBFCs can award oral contracts.
41. No doubt the Indian Contract Act, 1872 does not ipso facto prohibit entering of oral contracts between the parties but with an exception that wherever law mandates that a contract has to be made in writing the same is required in law to be reduced in writing. Reference can be made to Section 10 of Indian Contract Act, 1872 as reproduced supra.
42. Now the question which arises for consideration is whether the Banks and NBFCs can receive oral applications for loan, can process them and sanction them orally and disburse the loans orally without execution of any document whatsoever? The answer to this question is a strict No. The loan business carried out by the Banks and the NBFCs is highly regulated by Reserve Bank of India, the financial regulator of the country created by Parliament under the Reserve Bank of India Act, 1934.
43. Extract of relevant provision which indicate that loan agreements cannot be oral and has to necessarily involve "Execution of Loan Contracts for Banks" vide circular May 5, 2003 bearing no. DBOD. Leg. No.BC. 104 /09.07.007/2002-03 for All Scheduled Commercial Banks / All India Financial Institutions (Excluding RRBs and LABs) as under:
RBI's Guidelines on Fair Practices Code for Lenders On the basis of the recommendations of the Working Group on Lenders' Liability Laws constituted by the Government of India, we have examined, in consultation with Government, select banks and financial institutions, the feasibility of introducing the Fair Practices Code for Lenders. The guidelines have since been finalised and banks/ all India Financial Institutions are advised to adopt the following broad guidelines and frame the Fair Practices Code duly approved by their Board of Directors.
2. Guidelines
(i) Applications for loans and their processing
(a) Loan application forms in respect of priority sector advances up to Rs.2.00 lakhs should be comprehensive. It should include information about the fees/charges, if any, payable for processing, the amount of such fees refundable in the case of non acceptance of application, pre-payment options and any other matter which affects the interest of the borrower, so that a meaningful comparison with that of other banks can be made and informed decision can be taken by the borrower.
(b) Banks and financial institutions should devise a system of giving acknowledgement for receipt of all loan applications. Time frame within which loan applications up to Rs.2 lakhs will be disposed of should also be indicated in acknowledgement of such applications.
(c) Banks / financial institutions should verify the loan applications within a reasonable period of time. If additional details / documents are required, they should intimate the borrowers immediately
(d) In the case of small borrowers seeking loans up to Rs. 2 lakhs the lenders should convey in writing, the main reason/reasons which, in the opinion of the bank after due consideration, have led to rejection of the loan applications within stipulated time.
(ii) Loan appraisal and terms/conditions
CS (Comm.) No. 5511/2021 Page No. 19 of 56
ICICI Bank Ltd. Vs. Bijender Kumar
a) Lenders should ensure that there is proper assessment of credit application by borrowers. They should not use margin and security stipulation as a substitute for due diligence on credit worthiness of the borrower.
b) The lender should convey to the borrower the credit limit along with the terms and conditions thereof and keep the borrower's acceptance of these terms and conditions given with his full knowledge on record.
c) Terms and conditions and other caveats governing credit facilities given by banks/financial institutions arrived at after negotiation by lending institution and the borrower should be reduced in writing and duly certified by the authorised official. A copy of the loan agreement along with a copy each of all enclosures quoted in the loan agreement should be furnished to the borrower.
d) As far as possible, the loan agreement should clearly stipulate credit facilities that are solely at the discretion of lenders. These may include approval or disallowance of facilities, such as, drawings beyond the sanctioned limits, honouring cheques issued for the purpose other than specifically agreed to in the credit sanction, and disallowing drawing on a borrowal account on its classification as a non-performing asset or on account of non-compliance with the terms of sanction. It may also be specifically stated that the lender does not have an obligation to meet further requirements of the borrowers on account of growth in business etc. without proper review of credit limits.
e) In the case of lending under consortium arrangement, the participating lenders should evolve procedures to complete appraisal of proposals in the time bound manner to the extent feasible, and communicate their decisions on financing or otherwise within a reasonable time.
(iii) Disbursement of loans including changes in terms and conditions Lenders should ensure timely disbursement of loans sanctioned in conformity with the terms and conditions governing such sanction. Lenders should give notice of any change in th terms and conditions including interest rates, service charges etc. Lenders should also ensure that changes in interest rates and charges are effected only prospectively.
(iv) Post disbursement supervision
a) Post disbursement supervision by lenders, particularly in respect of loans upto Rs.2 Lakhs, should be constructive with a view to taking care of any" lender-related" genuine difficulty that the borrower may face.
b) Before taking a decision to recall / accelerate payment or performance under the Agreement or seeking additional securities, lenders should give notice to borrowers, as specified in the loan agreement or a reasonable period, if no such condition exits in the loan agreement.
c) Lenders should release all securities on receiving payment of loan or realisation of loan subject to any legitimate right or lien for any other claim lenders may have against borrowers. If such right of set off is to be exercised, borrowers shall be given notice about the same with full particulars about the remaining claims and the documents under which lenders are entitled to retain the securities till the relevant claim is settled/paid.
(v) General
a) Lenders should restrain from interference in the affairs of the borrowers except for What is provided in the terms and conditions of the loan sanction documents (unless new information, not earlier disclosed by the borrower, has come to the notice of the lender).
b) Lenders must not discriminate on grounds of sex, caste and religion in the matter of Lending. However, this does not preclude lenders from participating in credit-linked schemes framed for weaker sections of the society.
c) In the matter of recovery of loans, the lenders should not resort to undue harassment viz. persistently bothering the borrowers at odd hours, use of muscle power for recovery of loans, etc.
d) In case of receipt of request for transfer of borrowal account, either from the borrower or from a bank/financial institution, which proposes to take- over the account, the consent or otherwise i.e, objection of the lender, if any, should be conveyed within 21 days from the date of receipt of request.
3. Fair Practices Code based on the guidelines outlined in the paragraph 2 above should be put in place in respect of all lending prospectively, but not later than 01 August 2003. Banks and financial institutions will have the freedom of drafting the Fair Practices Code, enhancing the scope of the guidelines but in no way sacrificing the spirit underlying the above guidelines. For this purpose, the Boards of banks and financial institutions should lay down a clear policy.
CS (Comm.) No. 5511/2021 Page No. 20 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
4. The Board of Directors should also lay down the appropriate grievance redressal mechanism within the organization to resolve disputes arising in this regard. Such a mechanism should ensure that all disputes arising out of the decisions of lending institutions' functionaries are heard and disposed of at least at the next higher level. The Board of Directors should also provide for periodical review of the compliance of the Fair Practices Code and the functioning of the grievances redressal mechanism at various levels of controlling offices. A consolidated report of such reviews may be submitted to the Board at regular intervals, as may be prescribed by it.
5. The adoption of the Code, printing of necessary loan application forms and circulation thereof among the branches and controlling offices should also be completed latest by end of June 2003. The Fair Practices Code, which may be adopted by banks and financial institutions, should also be put on their website and given wide publicity. A copy may also be forwarded to the Reserve Bank of India.
Likewise, A master circular containing guidelines issued by the RBI titled as "Guidelines for Fair Practices Code for NBFCs" which was issued on 28.09.2006 and was notified for a mandatory compliance. It is updated periodically, including update dated 01.07.2015. Lastly a RBI's Fair Practice Code for lenders was issued on 29.04.2024 which was applicable to both Banks and NBFCs qua interest charged by them. Extract of relevant provision which indicate that loan agreements cannot be oral and has to necessarily involve "Execution of Loan Contracts for NBFCs" vide circular bearing no. DNBR (PD) CC No.054/03.10.119/2015-16 dated 01.07.2015 are reproduced hereunder:
2. RBI's Guidelines on Fair Practices Code for NBFCs A. (i) Applications for loans and their processing
a) All communications to the borrower shall be in the vernacular language or a language as understood by the borrower.
b) Loan application forms should include necessary information which affects the interest of the borrower, so that a meaningful comparison with the terms and conditions offered by other NBFCs can be made and informed decision can be taken by the borrower. The loan application form may indicate the documents required to be submitted with the application form.
The NBFCs should devise a system of giving acknowledgement for receipt of all loan applications. Preferably, the time frame within which loan applications will be disposed of should also be indicated in the acknowledgement.
(ii) Loan appraisal and terms/conditions The NBFCs should convey in writing to the borrower in the vernacular language as understood by the borrower by means of sanction letter or otherwise, the amount of loan sanctioned along with the terms and conditions including annualised rate of interest and method of application thereof and keep the acceptance of these terms and conditions by the borrower on its record. As complaints received against NBFCs generally pertain to charging of high interest / penal interest, NBFCs shall mention the penal interest charged for late repayment in bold in the loan agreement.
It is understood that in a few cases, borrowers are not fully aware of the terms and conditions of the loans including rate of interest at the time of sanction of loans, either because the NBFC does not provide details of the same or the borrower has no time to look into detailed agreement. Not furnishing a copy of the loan agreement or enclosures quoted in the loan agreement is an unfair practice and this could lead to disputes between the NBFC and the borrower with regard to the terms and conditions. NBFCs are, therefore, advised to furnish a copy of the loan agreement as understood by the borrower along with a copy each of all enclosures quoted in the loan agreement to all the borrowers at the time of sanction / disbursement of loans.
B. NBFC-MFIs CS (Comm.) No. 5511/2021 Page No. 21 of 56 ICICI Bank Ltd. Vs. Bijender Kumar (i) General
g) The KYC Guidelines of RBI shall be complied with. Due diligence shall be carried out to ensure the repayment capacity of the borrowers,
(ii) Disclosures in loan agreement / loan card
(a) All NBFC-MFIs shall have a Board approved, standard form of loan agreement. The loan agreement shall preferably be in vernacular language.
(b) In the loan agreement the following shall be disclosed:
(i) all the terms and conditions of the loan,
(ii) that the pricing of the loan involves only three components viz; the interest charge, the processing charge and the insurance premium (which includes the administrative charges in respect thereof),
(iii) that there will be no penalty charged on delayed payment,
(iv) that no Security Deposit / Margin is being collected from the borrower,
(v) that the borrower cannot be a member of more than one SHG / JLG,
(vi) the moratorium period between the grant of the loan and the due date of the repayment of the first installment(as guided by the NBFC-MFIs(Reserve Bank) Directions, 2011),
(vii) an assurance that the privacy of borrower data will be respected.
(c) The loan card should reflect the following details as specified in the Non-Banking Financial Company - Micro Finance Institutions (Reserve Bank) Directions, 2011:
(i) the effective rate of interest charged,
(ii) all other terms and conditions attached to the loan,
(iii) information which adequately identifies the borrower and acknowledgements by the NBFC-MFI of all repayments including installments received and the final discharge,
(iv) The loan card should prominently mention the grievance redressal system set up by the MFI and also the name and contact number of the nodal officer,
(v) Non-credit products issued shall be with full consent of the borrowers and fee structure shall be communicated in the loan card itself,
(vi) All entries in the Loan Card should be in the vernacular language.
44. Combined reading of the above statutory provisions on the Guidelines laid by Reserve Bank of India shows that the objective behind the Fair Practices Code issued by the RBI is to implement the letter and spirit of the statutorily binding laws and to focus on transparency, fairness, and accountability in lending by banks and NBFCs to protect borrower interests. Below is a summary of the essential provisions:
Key RBI Fair Practices Code Provisions Transparency in Loan Terms: Clear disclosure of all loan terms and conditions at the time of sanction, including interest rates (fixed or floating), processing fees, repayment schedule, prepayment options, and penalties.
Explanation of the rationale for interest rate changes during the loan tenure.
Fair and Ethical Lending Practices: Conduct thorough assessment of the borrower's repayment capacity before sanction.
Avoid undue influence or coercion to compel borrowers to take loans.
Documentation and Communication: Provide borrowers a copy of the loan agreement, sanction letter, or key fact statement.
Use plain language for all documentation to ensure borrower understanding.
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Timely and Responsive Grievance Redressal: Designate a nodal officer for grievance handling. Respond promptly and transparently to borrower complaints.
Privacy and Confidentiality: Maintain confidentiality of borrower information except as required by law or for credit reporting.
Secure borrower data and seek consent for sharing information.
No Harassment in Recovery: Prohibit coercive, intimidating, or deceptive methods of loan recovery.
Follow legal processes and guidelines for loan default cases.
Reasonable Charges and Refunds: No hidden or excessive fees. Refund of any excess interest or charges where applicable.
Digital Lending Transparency (Recent Emphasis): Disclose all charges and terms clearly in digital loan disbursals.
Ensure borrowers receive key fact statements digitally.
Responsible Lending and Recovery Practices: Avoid over-lending and ensure loans are affordable for borrowers.
Use amicable, non-coercive recovery methods.
These provisions collectively foster fair treatment, transparency, and ethical conduct in lending practices, enhancing borrower protection and trust in financial institutions.
45. Applying the above stautory provisions and the RBI's Fair Practice Code and Guidelines shows that the Banks and NBFCs are mandatorily supposed to receive loan applications and enter into a written Loan Agreement containing details of terms and conditions governing the loan in question. It is also mandated that copy of the loan agreement is supposed to be delivered to the borrower. Hence this Court has no hesitation in concluding that no Bank or NBFC is permitted in India to sanction and disburse loans without execution of a Loan Agreement and other related documents.
46. Having concluded that execution of Loan Agreement is mandatory, it has to be seen as to whether the same attracts Stamp Duty as per Article 5 (c) of Indian Stamp Act, 1899.
47. As per Articles reproduced supra and the graphic representation of stamp duty attracted by various loan documents it is evident that the loan agreement and for that matter even guarantor's agreement attracts fixed stamp duty of Rs.50/- as per Article 5 (c) of Schedule 1A of Indian Stamp Act, 1899 as applicable to Delhi.
Plea No. 3 to 5 No Agreement of Hypothecation or Mortgage entered between the parties, hence question of paying Stamp Duty does not arise.
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No document titled "Deed of Hypothecation" signed by both the sides and hence, no stamp duty is payable under Article 40 of Indian Stamp Act, 1899. The Letter of Hypothecation/Mortgage signed by the defendant does not qualify to be a Contract, hence question of paying Stamp Duty does not arise. These pleas were not raised by plaintiff bank but were rather raised by other Banks/NBFCs in the bunched matters.
48. Another important facet of the issue in hand is that according to Ld. Counsel for plaintiff they do not execute any mortgage deed or a hypothecation deed/agreement and as such no question of payment of stamp duty arises qua the same.
49. As reproduced and discussed supra the terms Mortgage Deed and Hypothecation Deed have a legal meaning and aimed at creating a charge/right/lien in favour of the lendor on a immovable/movable property of the borrower. The purpose of executing these documents is only to secure the loan extended by the Bank/NBFC. Evidently when the document creates a charge over immovable property it becomes a mortgage. In a city like Delhi it is the mortgaged by deposit of title deed popularly known as Equitable Mortgage as per Section 58 (f) of Transfer of Property Act, 1882 which is more prevalent. Although this type of mortgage and aspects related to payment of stamp duty are applicable only to such cases where the lendor pleads creation of Equitable Mortgage as a security. Even though this is not applicable in many of the cases in the bunch matters but the same is being discussed in brief for contextual advantage.
50. In case titled United Bank of India Ltd. vs. Lekharam Sonaram and Co. and Ors., 1965 Latest Caselaw 309 SC Hon'ble Supreme Court held as under:
7. A mortgage by deposit of title deeds is a form of mortgage recognised by Section 58(f) of the Transfer of Property Act which provides that it may be effected in certain towns (including Calcutta) where a person " delivers to a creditor or his agent documents of title to immovable property with intent to create a security thereon." In other words, when the debtor deposits with the creditor title deeds of his property with an intent to create a security, the law implies a contract between the parties to create a mortgage and no registered instrument is required under Section 59 as in other classes of mortgage. It is essential to bear in mind that the essence of a mortgage by deposit of title deeds is the actual handing over by a borrower to the lender of documents of title to immovable property with the intention that those documents shall constitute a security which will enable the creditor ultimately to recover the money which he has lent. But if the parties choose to reduce the contract to writing, this implication of law is excluded by their express bargain, and the document will be the sole evidence of its terms. In such a case the deposit and the document both form integral parts of the transaction and are essential ingredients in the creation of the mortgage. It follows that in such a case the document which constitutes the bargain regarding security requires registration under Section 17 of the Indian Registration Act, 1908, as a non-
testamentary instrument creating an interest in immovable property, where the value of such property is one hundred rupees and upwards. If a document of this character is not registered it cannot be used in the evidence at all and the transaction itself cannot be proved by oral evidence either.
(Emphasis Supplied)
51. In case titled Rachpal Mahraj vs Bhagwandas Daruka and Ors. 1950 Latest Caselaw 10 SC, Hon'ble Supreme Court held as under:
CS (Comm.) No. 5511/2021 Page No. 24 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
4."A mortgage by deposit of title deeds is a form of mortgage recognised by section 58 (f) of the Transfer of Property Act which provides that it may be effected in certain towns (including Calcutta) by a person "delivering to his creditor or his agent documents of title to immovable property with intent to create a security thereon." That is to say, when the debtor deposits with the creditor the title deeds of his property with intent to create a security, the law implies a contract between the parties to create a mortgage, and no registered instrument is required under section 59 as in other forms of mortgage. But if the par- ties choose to reduce the contract to writing,the implica- tion is excluded by their express bargain, and the document will be the sole evidence of its terms. In such a case the deposit and the document both form integral parts of the transaction and are essential ingredients in the creation of the mortgage. As the deposit alone is not intended to create the charge and the document, which constitutes the bargain regarding the security, is also necessary and operates to create the charge in conjunction with the deposit, it requires registration under section 17 of the Indian Registration Act, 1908, as a non-testamentary instrument creating an interest in immovable property, where the value of such property is one hundred rupees and up- wards. The time factor is not decisive. The document may be handed over to the creditor along with the title deeds and yet may not be registrable."
But the question is whether mortgage by deposit of title-deeds is required to be done by an instrument at all. In our opinion, it may be afected in specified town by the debtor delivering to his creditor documents of title to immovable property with the intent to create a security thereon. No instrument is required to be drawn for this purpose. However, the parties may choose to have a memorandum prepared only showing deposit of the title-deeds. In such a case also registration is not required. But in a case in which the memorandum recorded in writing creates right, liability or extinguishes those, same requires registration. In our opinion, the letter of the Finance Commissioner would apply in cases where the instrument of deposit of title-deeds incorporates terms and conditions in addition to what flow from the mortgage by deposit of title-deeds. But in that case there has to be an instrument which is an integral part of the transaction regarding the mortgage by deposit of title-deeds. A document merely recording a transaction which is already concluded and which does not create any rights and liabilities does not require registration.
52. The celebrated case of State of Haryana Vs. Navir Singh, 2013 Latest Caselaw 718 SC is often cited and relied. The relevant portion is reproduced for ready reference:
"After the deposit of the title deeds, the creditor and borrower may record the transactiion in a memorandum, but such a memorandum would not be a mortgage instrument. A memorandum reducing other terms and conditions about the depoit in the form of a document, however, shall require registration under Section 17 (1) (c) of the Registration Act, but in a case in which such a document does not incorporate any term and condition, it is merely evidential and does not require registration."
53. In case titled Balwant Singh vs Union Of India & Anr., 2016 Latest Caselaw 171 Del dated 11.01.2016, Hon'ble High Court of Delhi held that:
23. Judicial notice can be taken of the fact that the notified circle rates in Delhi in the past -
including the period when the land in question was acquired, were substantially lower than the actual prevailing market rates. It is common knowledge that sale transactions were being registered on the notified rates, whereas the balance consideration would be paid either in cash, i.e. from unaccounted wealth or, even if paid by cheque/ pay order, i.e. through banking channels, would not be disclosed as part of the consideration in the sale document with a view to minimize the liability towards stamp duty. It was the low circle rates notified by the Government which led to generation and utilization of black money in real estate transactions. It is in recognition of this lacuna that in recent times the circle rates have been raised substantially to bring them in tune with the actual market rates so as to minimize the loss of revenue earned through stamp duty, and also to prevent generation and utilization of black money in Delhi. Reference may be made to the observations made in paragraph 32 by the Supreme Court in State of Haryana & Others Vs. Manoj Kumar, (2010) 4 SCC 350:
"32. It is not disputed that the commercial plot of 788 sq.yards located at Delhi- Mathura Mewla Maharajpur, Faridabad was valued by the Circle rate at Rs.4,200 per sq. yard fixed by the Collector of Faridabad meaning thereby that after the CS (Comm.) No. 5511/2021 Page No. 25 of 56 ICICI Bank Ltd. Vs. Bijender Kumar notification, no sale deed can be registered for an amount lesser than Rs.4,200/- per sq.yard. It may be pertinent to mention that, in order to ensure that there is no evasion of stamp duty, circle rates are fixed from time to time and the notification is issued to that effect. The issuance of said notification has become imperative to arrest the tendency of evading the payment of actual stamp duty. It is a matter of common knowledge that usually the circle rate or the collector rate is lower than the prevalent actual market rate but to ensure registration of sale deeds at least at the circle rates or the collector rates such notifications are issued from time to time by the appellants."
(Emphasis supplied)
54. In case titled The State of West Bengal Vs. Subrata Saha, 2017 SCC Online DB Cal 10368 Hon'ble High Court of Calcutta held that:
13.......Stamp duty is a revenue earned by the State and the State cannot be deprived of such revenue since the name of the Board appears as the vendor.
19. "The object of the Indian Stamp Act is to collect proper stamp duty on an instrument or conveyance on which such duty is payable. This is to protect the State revenue. Stamp duty is a revenue earned by the State. The contents of the notification dated 23 rd March, 2012 granting remission of stamp duty are to be strictly construed and the same can neither be tinkered with nor diluted. There cannot be any addition or subtraction from the contents of the said notification.
55. In case titled Indian Hume Pipe Ltd. Vs. State of Maharashtra, 2018 SCC Online Bom 452 Division Bench of Hon'ble High Court of Bombay dealt with a situation where stamp duty was being evaded/stolen by the companies by getting the instruments and deeds executed and registered in a neighboring State Gujarat and copies thereof were being used in the State of Maharashtra and thereby causing loss of revenue to the State of Maharashtra. While upholding the stand of State of Maharashtra the Division Bench observed, "Moreover, Clause b of Sub-Section 1 of Section 7 is intended to ensure that no one evades the stamp duty payable on an instrument under the said Act by executing and stamping the original in another State where a lesser stamp duty is payable and thereafter, bring a copy thereof within the State for doing something on the basis of the rights and liabilities created by it. The legislative intent is to ensure that there is no evasion of duty on such instruments."
(Emphasis Supplied)
56. It is observed that a memorandum of entry regarding the deposit of title deeds by the Borrower with the creditor without specifying other terms and conditions would not be an instrument of mortgage and, hence, not liable to be stamped or registered.
57. Rather in this type of mortgage, legally there is no need to create any document at all since Equitable Mortgage is also understood as Mortgage by Conduct. However, in order to create a proof of delivery of original Title Deeds a practice of MoE i.e. Memorandum of Entry is prevalent which only records that Title Deeds of a particular property is delivered by the borrower to the lender and it acts as aide-de-memoire. Parallelly, another document evidencing this which is created as MoDT i.e. Memorandum of Deposit of Title Deed.
58. In order to gauge the applicability of Indian Stamp Act on MoE and MoDT it has to be seen whether the contents or the text of these documents are simply evidencing delivery of Title Deeds only of its content travel beyond and contains terms and conditions by enumerating the rights of CS (Comm.) No. 5511/2021 Page No. 26 of 56 ICICI Bank Ltd. Vs. Bijender Kumar the borrower over the property so as to bring it within the ambit of Section 17 of Registration Act, 1908. The CADLE Formula i.e. a document which Create, Assign, Declare, Limit or Extinguish a Right, Title or Interest in a immovable property. This aspect has been discussed at length in cases titled "Rachpal Mahraj Vs. Bhagwandas Daruka", 1950 AIR 272 & "Bejoy Ranjan Dass Vs. Ajeet Kumar Dutta", AIR 1974 CAL 319. Thus, aspect of payment of Stamp Duty on the mortgage instrument and applicability of Indian Stamp Act on such cases depends upon the close scrutiny and factual analysis qua nature of document created by the parties in each individual case.
59. Now, coming to the Deed of Hypothecation or Hypothecation Agreement, as discussed supra, it is created when loan is desired to be secured through a movable property which can be a automobile, machine, stock inventory or shares and debuntures, etc. In all the auto loan cases, invariably the automobile in question is hypothecated by the borrower in favour of the lender by execution of a agreement/deed/letter. As discussed supra, a Deed of Hypothecation is covered under Article 40 of Schedule attached to Indian Stamp Act and attracts 2% Stamp Duty with a ceiling of Rs.2,00,000/- in Delhi.
60. A plea is raised by Ld. Counsel for the plaintiff that pre-dominantly no hypothecation document is created or signed by both the sides and as such when no Deed of Hypothecation is created question of payment of Stamp Duty does not arise. Record reveals that the hypothecation document filed and relied by the Bank/NBFCs is cleverly refereed to as Letter of Hypothecation or Unattested Deed of Hypothecation as against Hypothecation Agreement. As discussed and concluded supra, not necessary that each and every document has to be signed by both the lender and the borrower simultaneously. However, the intent of both the sides of creating rights and liabilities in favour of each other are sufficient to legally bind them in an enforceable contractual relationship.
61. In case titled Namburi Basava Subrahmanyam Vs. Alapati Hymavathi and Ors., 1996 Latest Caselaw 296 SC Hon'ble Supreme Court ruled that nomenclauture of a document is never conclusive rather the contents of the document and intention of the parties is supreme The Bench observed, "The nomenclature of the documents is not conclusive. The recitals in the document as a whole and the intention of the executant and acknowledgement thereof by the parties are conclusive. The court has to find whether the document confers any interest in the property in presenting so as to take effect intra vinos and whether an irrevocable interest thereby, is created in favour of the recipient under the document, or whether the executant intended to transfer the interest in the property only on the demise of the settlor. Those could be gathered from the recitals in the document as a whole."
(Emphasis Supplied)
62. In case titled Yellapu Uma Maheswari & Anr vs Buddha Jagadheeswararao & Ors, 2015 Latest Caselaw 679 SC Hon'ble Supreme Court observed
17. It is well settled that the nomenclature given to the document is not decisive factor but the nature and substance of the transaction has to be determined with reference to the terms of the documents and that the admissibility of a document is entirely dependent upon CS (Comm.) No. 5511/2021 Page No. 27 of 56 ICICI Bank Ltd. Vs. Bijender Kumar the recitals contained in that document but not on the basis of the pleadings set up by the party who seeks to introduce the document in question.......
(Emphasis Supplied)
63. Applying the above position on the factual matter, it is found that once the Letter of Hypothecation and Unattested Deed of Hypothecation carries all the terms and conditions available under Hypothecation Agreement, question of non-payment of mandatory 2% duty on the secured amount does not arise. Any instance of Under-Stamping and Un-Stamping by using camouflage nonmenclature is nothing but an attmept to evade/steal stamp duty which is an offence punishable under Section 62 of Indian Stamp Act, 1899.
Plea No. 6No Stamp Duty is payable by the Bank on such document under Indian Stamp Act, 1899, a liability if any, is only of borrower-
64. Reference has to be made in this regard in Section 29 of Indian Stamp Act, 1899. Section 29 is reproduced hereunder:
29. Duties by whom payable. --In the absence of an agreement to the contrary, the expense of providing the proper stamp shall be borne --
(a) in the case of any instrument described in any of the following Articles of Schedule I, namely:--
No. 2. (Administration Bond), [No. 6 (Agreement relating to Deposit of Title-deeds, Pawn or Pledge),] No. 13 (Bill of exchange), No. 15 (Bond), No. 16 (Bottomry Bond), No. 26 (Customs Bond), No. 27 (Debenture), No. 32 (Further charge), No. 34 (Indemnity-Bond), No. 40 (Mortgage-deed), No. 49 (Promissory-note), No. 55 (Release), No. 56 (Respondentia Bond), No. 57 (Security-bond or Mortgage-deed), No. 58 (Settlement), No. 62 (a). (Transfer of shares in an incorporated Company or other body corporate), No. 62 (b). (Transfer of debentures, being marketable securities, whether the debenture is liable to duty or not, except debentures provided for by section 8), No. 62 (c). (Transfer of any interest secured by a bond, mortgage-deed or policy of insurance), by the person drawing, making or executing such instrument:
[(b) in the case of a policy of insurance other than fire-insurance--by the person effecting the insurance, (bb) in the case of a policy of fire-insurance-- by the person issuing the policy;]
(c) in the case of a conveyance (including are-conveyance of mortgaged property:) by the grantee: in the case of a lease or agreement to lease--by the lessee or intended lessee:
(d) in the case of a counterpart of a lease--by the less or:
(e) in the case of an instrument of exchange--by the parties in equal shares, CS (Comm.) No. 5511/2021 Page No. 28 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
(f) in the case of a certificate of sale--by the purchaser of the property to which such certificate relates: and,
(g) in the case of an instrument of partition--by the parties thereto in proportion to their respective shares in the whole property partitioned, or, when the partition is made in execution of an order passed by a Revenue-authority or Civil Court or arbitrator, in such proportion as such authority, Court or arbitrator directs.
(h) in the case of sale of security through stock exchange, by the buyer of such security;
(i) in the case of transfer of security otherwise than though a stock exchange, by the seller of such security;
(j) in the case of transfer of security through a depository, by the transferor of such security;
(k) in the case of transfer of security otherwise than through a stock exchange or depository, by the transfer of such security;
(l) in the case of issue of security, whether through a stock exchange or a depository or otherwise, by the issuer of such security; and
(m) in the case of any other instrument not specified herein, by the person making, drawing or executing such instrument.
65. While it is true that Stamp Duty on Hypothecation/Mortgage Deed has to be made by the borrower who is executing the same in favour of Banks/NBFCs but it is these very institutions which are filing and relying on these Un-Stamped/Under-Stamped documents in the Court and are desirous of seeking a relief on the basis of these documents. Even otherwise, Banks and NBFCs are juristic entities created under statutory provisions for specific purposes and are in the business of banking and money lending under the Regulations and Guidelines laid by Reserve Bank of India. Accordingly, it is their paramount duty to ensure that no loss is caused to the Exchequer by way of evasion/theft of Stamp Duty.
66. Importantly, it is not the case of any Bank or the NBFC that they demanded Stamp Duty from the borrower or that the borrower refused to pay it despite demand. A lame plea was raised during the course of arguments that in case the Banks/NBFCs started demanding the Stamp Duty, the loans would become costlier and this would harm their business interest. Strong objection is taken on such pleas and reasonings in so far as each and every Bank and NBFC is permitted to do financing business only as per practices duly establised by law and not in their derrogation. Moreso, when such illegal practices tend to steal the valuable revenue from the Exchequer and is also a punishable offence.
Plea No. 7 to 9 In the absence of objection from defendant, this Commercial Court can not flag any objection qua Un-Stamping/Under-Stamping.
Evidence already concluded and documents exhibited, hence Un-Stamping/Under-
Stamping stands waived now.
CS (Comm.) No. 5511/2021 Page No. 29 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
Defendant is ex-parte, hence Un-Stamping/Under-Stamping cannot be raised now at the final arguments stage.
67. As discussed supra, once it is found by a Court of Law that a document sought to be filed and relied by Banks/NBFCs in order to seek an equitable relief suffers from Un-Stamping and Under- Stamping which is a punishable offence, it does not lie with the wrong doer to object when the Court points out that the document is hit by Section 35 of Indian Stamp Act, 1899. The same is reproduced hereunder:
35. Instruments not duly stamped inadmissible in evidence, etc. --
No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped : Provided that--
a) any such instrument [shall] be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of any instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion;
b) where any person from whom a stamped receipt could have been demanded, has given an unstamped receipt and such receipt, if stamped, would be admissible in evidence against him, then such receipt shall be admitted in evidence against him on payment of a penalty of one rupee by the person tendering it;
c) Where a contract or agreement of any kind is effected by correspondence consisting of two or more letters and any one of the letters bears the proper stamp, the contract or agreement shall be deemed to be duly stamped;
d) nothing herein contained shall prevent the admission of any instrument in evidence in proceeding in a Criminal Court, other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure 1898 (V of 1898);
e) nothing herein contained shall prevent the admission of any instrument in any Court when such instrument has been executed by or on behalf of the Government, or where it bears the certificate of the Collector as provided by section 32 or any other provision of this Act.
68. A plea is raised that since the defendant in the matter did not object to the Un-stamping/Under- Stamping of loan documents by virtue of Section 36 of Indian Stamp Act, 1899 the same deserves to be accepted even without curing off the defects.The same is reproduced hereunder:
36. Admission of instrument where not to be questioned. --
Where an instrument has been admitted in evidence, such admission shall not, except as provided in section 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped.
69. Combined reading of the above two provisions show that mere marking of a Un-stamped/Under- stamped document as exhibit in the affidavit-in-chief, specially when the defendant is ex-parte does not ipso facto mean that it stands admitted by a Civil Court beyond reproach. It is pertinent to mention here that Section 35 of the Act categorically lays that no instrument chargeable with duty shall be admitted in evidence unless such instrument is duly stamped.
70. It is pertinent to mention here that as per Section 62 of Indian Stamp Act, 1899 drawing of a Un- Stamped/Under-Stamped instrument is a criminal offence punishable with fine of up to Rs.500/-
CS (Comm.) No. 5511/2021 Page No. 30 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
over and above the penalty of up to 10 times the deficiency. In the celebrated case of Bipin Shantilal Panchal Vs. State of Gujarat and Anr., 2001 Latest Caselaw 100 SC, a Three Judge Bench of Hon'ble Supreme Court has ruled that mere marking of an exhibit on a document while tendering the affidavit in chief does not ipso facto mean that the document stands admitted and proved on record. The Three Judge Apex Court ruled that admissibility of a document produced before the Court during trial has to be adjudicated only at the judgment stage instead of at the time of marking exhibits. The relevant text is reproduced as under:
13.It is an archaic practice that during the evidence collecting stage, whenever any objection is raised regarding admissibility of any material in evidence the court does not proceed further without passing order on such objection. But the fall out of the above practice is this: Suppose the trial court, in a case, upholds a particular objection and excludes the material from being admitted in evidence and then proceeds with the trial and disposes of the case finally. If the appellate or revisional court, when the same question is re-canvassed, could take a different view on the admissibility of that material in such cases the appellate court would be deprived of the benefit of that evidence, because that was not put on record by the trial court. In such a situation the higher court may have to send the case back to the trial court for recording that evidence and then to dispose of the case afresh. Why should the trial prolong like that unnecessarily on account of practices created by ourselves. Such practices, when realised through the course of long period to be hindrances which impede steady and swift progress of trial proceedings, must be recast or re-moulded to give way for better substitutes which would help acceleration of trial proceedings.
14. When so recast, the practice which can be a better substitute is this: Whenever an objection is raised during evidence taking stage regarding the admissibility of any material or item of oral evidence the trial court can make a note of such objection and mark the objected document tentatively as an exhibit in the case (or record the objected part of the oral evidence) subject to such objections to be decided at the last stage in the final judgment...."
(Emphasis Supplied)
71. This Court do not find any strength in the plea that the matter has reached to final arguments stage and the aspect of evasion/theft of stamp duty is not open for decision. Rather it is only at the final arguments stage that a Civil Court or for that matter a commercial Court is supposed to apply its mind on the admissibility and legal implications of the documents sought to be relied. Un- Stamping/Under-Stamping of a document goes to the root of the matter and not only makes a document inadmissible in evidence but also leads to evasion/theft of revenue from the Exchequer.
72. Although, in the Bipin Shantilal Panchal case supra, it is impressed that objections qua Un- Stamping and Under-Stamping of instruments needs to be decided by a Court with promptitude but it is a settled legal proposition that if for any reason a document is exhibited without inviting Court's attention to the aspect of Un-Stamping and Under-Stamping, the same does not prohibit or estop the Court from raking up the issue of evasion of Stamp Duty even at the stage of final arguments.
73. In case titled Ram Rattan Vs. Bajrang Lal & Ors., 1978 Latest Caselaw 109 SC, Hon'ble Supreme Court held as under:
"where a document has been inadvertently admitted without the Court applying its mind as to the question of admissibility, the instrument could not be said to have been admitted in evidence with a view to attracting Section 36 of the 1899 Act"
CS (Comm.) No. 5511/2021 Page No. 31 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
74. In case titled G.M.Shahul Hameed vs Jayanthi R.Hegde, 2024 Latest Caselaw 398 SC, Hon'ble Supreme Court ruled that a Civil Court can always invoke its inherent power under Section 151 CPC for taking action against an insufficiently stamped instrument despite the fact that it has been admitted and marked as exhibit. While interpreting Section 36 of Indian Stamp Act, 1899 and Section 35 of Karnataka Stamp Act, 1957, the Apex Court ruled, "9....The court has marked the document as an exhibit and has put the seal for having marked the document as to who has produced the document and admitted through which witness and marked for plaintiff. No doubt, there is mention that the document is admitted through PW1 and Ex.P2, but the court has not applied its mind while marking the document as to whether document is sufficiently stamped or insufficiently stamped.............
We have no hesitation to hold that for all purposes and intents the Trial Court passed the order dated 19th October, 2010 in exercise of its inherent power saved by section 151, CPC, to do justice as well as to prevent abuse of the process of court.....
We appreciate the approach of the Trial Court in its judicious exercise of inherent power.......
We may not turn a blind eye to the fact that the revenue would stand the risk of suffering huge loss if the courts fail to discharge the duty placed on it per provisions like section 33 of the 1957 Act. Such provision has been inserted in the statute with a definite purpose. The legislature has reposed responsibility on the courts and trusted them to ensure that requisite stamp duty, along with penalty, is duly paid if an unstamped or insufficiently stamped instrument is placed before it for admission in support of the case of a party. It is incumbent upon the courts to uphold the sanctity of the legal framework governing stamp duty, as the same are crucial for the authenticity and enforceability of instruments. Allowing an instrument with insufficient stamp duty to pass unchallenged, merely due to technicalities, would undermine the legislative intent and the fiscal interests of the state. The courts ought to ensure that compliance with all substantive and procedural requirements of a statute akin to the 1957 Act are adhered to by the interested parties. This duty of the court is paramount, and any deviation would set a detrimental precedent, eroding the integrity of the legal system. Thus, the court must vigilantly prevent any circumvention of these legal obligations, ensuring due compliance and strict adherence for upholding the rule of law."
(Emphasis Supplied)
75. In the light of the above discussion this Court has no hesitation in concluding that none of the 9 submissions generally and collectively made by Banks and NBFCs on the aspect of Un-Stamping and Under-Stamping of Loan Documents holds water. Civil and Commercial Courts are Courts of Equity and any party approaching the Court for an equitable relief is bound in law to act and behave in an equitable manner. Duty of such a litigant is enhanced manifold when such a party approaching the Court is a juristic entity i.e. a duly incorporated company running a Bank/NBFC under licence from Reserve Bank of India.
76. It is pertinent to observe here that in order to evade the payment of Stamp Duty the ICICI Bank has adopted another illegal methodology i.e. by camouflaging qua the loans disbursed in several North Indian States including NCR as if they have been executed at their Videocon Tower, Jhandewalan, Central Delhi office. Evidently, this is being done to evade the higher Stamp Duty applicable in adjoining States i.e. ad valorem 0.25% of the loan amount as against fixed Rs.50/- in Delhi. This can be better understood through this illustration that a loan of Rs.1 crore attracts a Stamp Duty of Rs.25,000/- in Rajasthan and other States covering the NCR while in Delhi a loan CS (Comm.) No. 5511/2021 Page No. 32 of 56 ICICI Bank Ltd. Vs. Bijender Kumar of Rs. 1 crore garner a fixed Stamp Duty of Rs.50/-. The irony is that ICICI Bank is not even appending the Stamp Duty of this miniscule amount of Rs.50/-.
7. Why Banks and NBFCs are indulging in and facilitating evasion/theft of Stamp Duty by way of Un-Stamping and Under-Stamping
77. It is found by this Court that both nationalized and private banks as well as NBFCs are largely indulging and encouraging Un-Stamping and Under-Stamping of mandatory Stamp Duty payable instruments in the course of their day to day business activities. What is disturbing to observe is that these fiscal institutions which are not only bound by the Law of the Land but are also bound by the terms of the licence granted to them by the Reserve Bank of India to carry out retail finance and related activities are still carrying out the acts of misfeasance even though they are not supposed to incur expenditure of a single rupee in payment of Stamp Duty. As reproduced supra, Section 29 of the Stamp Act casts the duty of payment of Stamp Duty on the borrower and the executor of the documents like Hypothecation Deed and Mortgage Deed.
78. A lame excuse was put forth by a section of certain lawyers representing these institutions that asking their borrower i.e. their client to pay up the Stamp Duty would increase the cost of the loan product and would discourage the borrower from taking the loan. This plea is not only legally untenable but is also atrocious. It is ironical that on the one hand these banks and NBFCs force the borrowers to cough up a large sum of money in the name of loan application processing fees by adding fancy subheads under the same. But when the duty to pay Stamp Duty on the documentation arises, they help and collude with the borrower and apparently encourage them to not to pay the Stamp Duty apparently because it goes to the Exchequer and has no monetary value for these institutions. In order to facilitate this evasion/theft they have indulged into clever drafting by camoflaging the simple loan agreements, Hypothecation and Mortgage Deeds by changing their nomenclature and form.
79. A follow up submission was made which was found to be much more shallow. It was raised by some counsels that while on the one hand they try to comply with the Schedules of Indian Stamp Act, their loan products become costlier than the other Banks and NBFCs who indulge in evasion/theft are able to offer same loans at a much less initial cost and it becomes difficult to retain such customer. It goes without saying that in case any Bank or NBFC is indulging in such activity, the same shall be reported to the District Collector/Stamp Collector or the Reserve Bank of India either directly or through Indian Banks Association. However this submission is unacceptable that when some people are indulging in theft and they get away with it, it should become a norm and should encourage those who wish to comply with the law.
80. In the fitness of things instead of encouraging and facilitating the loss to the Exchequer as they are found to be doing so currently the Banks and NBFCs should have adopted SOPs and Strict CS (Comm.) No. 5511/2021 Page No. 33 of 56 ICICI Bank Ltd. Vs. Bijender Kumar Guidelines that they do not facilitate or encourage evasion/non-payment of Stamp Duty. More so when doing this is a punishable criminal offence under Section 62 of Indian Stamp Act, 1899 since all the documentation qua the secured and unsecured loans are carried out by the employees of the Banks and NBFCs such institutions and their employees deserves to be prosecuted for each such loss to the Exchequer.
81. Just a couple of months ago, in the RBI's Annual Report 2024-25 released in June 2025, the Reserve Bank of India imposed a penalty of Rs.54.78 crores on Banks, NBFCs, HFCs and other FIs for contraventions and non-compliance of RBI's regulatory directions and guidelines including Stamp Duty evasion. Recently, on 01.04.2025, RBI/2025-26/13 Reserve Bank of India has issued a master circular to all Commercial Banks consolidating guidelines which emphasise proper documentation, compliance and adherence to statutory obligations including Stamp Duty payments. This is in continuation of earlier RBI's Master Directions issued to NBFCs on 19.10.2023 in exercise of its powers under Reserve Bank of India Act, 1934 and Factoring Regulation Act, 2011 which too emphasise on strict documentation and compliance including adherence to Stamp Duty laws.
82. Lately, Government of the State of Gujarat issued a strict ultimatum to the Banks and NBFCs indulging in evasion of Stamp Duty with a strict warning of legal action. Individual notices were issued to the Banks, NBFCs and other institutions as also to District Collectors of Stamps on 29.10.2023 that either they should fall in line or they would face legal consequences since their inaction is causing loss of income to the Government.
83. Another reason of non-compliance of Stamp Laws which comes to the mind is triviality of the penalty. While Section 62 of Indian Stamp Act, 1899 makes it a criminal offence but maximum penalty/punishment is only payment of Rs.500/- which does not cause any alarm to stamp duty violators since the amount of money they save is much more than the penalty. Another reason can be that it is a curable defect and can be cured at any point of time even after dispute has arisen and matter has reached the trial stage. For example a bank or a NBFC which might be dolling out one lakh loans of Rs. 10 lakhs each per month which comes to Rs.10,000 crores and needs to pay around 1% Stamp Duty which comes to Rs.100 crores. Now if such a bank decides not to pay any stamp duty on loans at all Rs.100 crores is saved and if only 1% of their cases go to the Court only 1,000 litigations are generated. Most of such litigations go ex-parte and no objection to exhibition of Un-Stamped documents is raised. Even if penalty is imposed on half of them during evidence it would be just a fragment of the duty evaded/saved by non-payment.
8. Effect of Un-Stamping/Under-Stamping on the admissibility of loan documents as evidence in the Court CS (Comm.) No. 5511/2021 Page No. 34 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
84. As discussed and reproduced supra an instrument which is Un-Stamped and Under-Stamped is inadmissible in evidence by virtue of Section 35 of Indian Stamp Act, 1899. In case titled S N Mathur Vs. Board of Revenue/C.C.R.A and Ors., 2009 Latest Caselaw 998 SC Hon'ble Supreme Court ruled that:
The principles relating to charging stamp duty are well settled. They are:
(i) The object of the Stamp Act is generation of revenue. It is therefore a fiscal enactment and has to be interpreted accordingly.
(ii) Stamp duty is levied with reference to the instrument and not in regard to the transaction, unless otherwise specifically provided in the Act.
(iii) Stamp duty is determined with reference to the substance of the transaction as embodied in the instrument and not with reference to the title, caption or nomenclature of the instrument.
(iv) For classification of an instrument, that is to determine whether an instrument comes within a particular description in an article in the Schedule to the Act, the instrument should be read and construed as whole.
(v) Where an instrument falls under two or more descriptions in the Schedule to the Act, the instrument shall be chargeable with only one duty, that is the highest of the duties applicable to the different description. But where an instrument relates to several distinct matters, it shall be chargeable with the aggregate amount of duties to which separate instruments would be chargeable.
Merely because an instrument answers the definition of a trust deed it does not cease to be a settlement deed for the purpose of stamp duty, if it answers the definition of `settlement' also. It is well settled that all trusts are not settlements, and all settlements are not trusts, but a deed of trust can also be a deed of settlement.
85. The Seven Judge Constitution Bench of Hon'ble Supreme Court of India in Re: Interplay Between Arbitration Agreements under The Arbitration & Conciliation Act, 1996 and Indian Stamp Act, 1899, 2023 Latest Caselaw 922 SC, decided on 13.12.2023, mentioned that "agreements which are not stamped or are inadequately stamped are inadmissible in evidence".
86. Accordingly by virute of Section 35 of the Indian Stamp Act, 1899 and above celebrated judgments it can be fairly concluded that an Un-Stamped/Under-Stamped loan documents are in admissible in evidence.
9. Un-Stamping/Under-Stamping of Loan Documents is a curable defect
87. Evasion of stamp duty by Un-Stamping and Under-Stamping of documents does have a deleterious effect on the legal admissibility of a loan document and renders inadmissible in evidence as per Section 35 of the Act but is also an offence punishable under Section 62 of the Act. However combined reading of Section 35 and Section 40 shows that this defect is a curable one and the Court can grant an opportunity to the party relying on the document to make good the deficiency apart from imposition of penalty of up to ten times the deficiency. The Seven Judge Constitution CS (Comm.) No. 5511/2021 Page No. 35 of 56 ICICI Bank Ltd. Vs. Bijender Kumar Bench of Hon'ble Supreme Court of India in Re: Interplay Between Arbitration Agreements as detailed supra held that this is a curable defect. The relevant text is as under:
6. Justice Hrishikesh Roy relied on the scheme of the Stamp Act to hold that an unstamped or insufficiently stamped document is not rendered invalid or void ab initio because the failure to stamp an instrument is a curable defect.......
48. Section 35 of the Stamp Act is unambiguous. It stipulates, "No instrument chargeable with duty shall be admitted in evidence..." The term "admitted in evidence" refers to the admissibility of the instrument. Sub-section (2) of Section 42, too, states that an instrument in respect of which stamp-
duty is paid and which is endorsed as such will be "admissible in evidence." The effect of not paying duty or paying an inadequate amount renders an instrument inadmissible and not void. Non-stamping or improper stamping does not result in the instrument becoming invalid. The Stamp Act does not render such an instrument void. The non-payment of stamp duty is accurately characterised as a curable defect. The Stamp Act itself provides for the manner in which the defect may be cured and sets out a detailed procedure for it.......
224. The conclusions reached in this judgment are summarised below:
a.........
b. Non-stamping or inadequate stamping is a curable defect;
(Emphasis Supplied)
10. Financial impact of Un-Stamping/Under-Stamping of loan documents on the Exchequer
88. While discussing the objectives of Indian Stamp Act in the earlier part of this Order has been observed that it is one of the pivotal source of revenue for the nation.
89. The instruments which attracts payment of Stamp Duty can be enlisted as under:
Instruments that relate to conveyance and property transfer; Instruments that are connected with loans and advances;
Instruments that related to capital market transactions; Instruments that are used in daily business and commercial transactions; and Instruments that are executed under other statutes for record- keeping purposes.
90. As per data available online the stamp duty under the Act which was collected during the FY 2023- 24 was around Rs.1.18 lakh crore (as per TheHinduBusinessLine.com). A major portion of the same around 80%-85% comes from stamp duty purchased for transfer, sale and registration of immovable properties as per circle rates.
91. A significant portion of the same i.e. around 15%-20% comes from Stamping of commercial documents as well as under:
Type of Transaction Percentage of Total Approximate Amount (Rs. in crore) Property Transfers 80-85% 94,400-1,00,300 Loan Transactions 15-20% 17,700-23,600
92. As far as the size of secured and unsecured loans granted by Banks and NBFCs in the country annually is concerned, the data is approximately Rs.41 lakh crore. The broad classification of the CS (Comm.) No. 5511/2021 Page No. 36 of 56 ICICI Bank Ltd. Vs. Bijender Kumar above corpus is two-third for the secured loans (home loan, auto loan, MSME etc.) which is around Rs.28 lakh crore while for the unsecured loan (personal loan, micro finance etc.) it is around Rs.13 lakh crore during FY 2023-24.
93. The above corpus of around Rs.41 lakh crore is estimated to be covered in 22-24 crore loan transactions during FY 2023-24. This means the secured loan transactions are around 16 crores while the unsecured ones are around 8 crores.
94. As concluded supra no Bank or NBFC can grant a loan unless there is properly executed Loan Agreement. Article 5 of Schedule attached to Stamp Act provides for ad valorem stamp duty @ 0.25% of the loan amount in majority of the big States including Karnataka, Rajasthan, West Bengal. In Tamil Nadu it is 0.20% and in Maharasthra it is 0.18%. Unfortunately in Delhi the same is a meagre fixed amount of Rs.50/- only. Meaning thereby that a retail loan of Rs.1 crore in other States attracts Stamp Duty of Rs.25,000/- but in Delhi it is only Rs.50/-. Even this Rs.50/- is being not paid. Upon calculating and approximate mean earning @ 0.25% on Rs.41 lakh crores the revenue under Article 5 of the Act comes to Rs.10,250 crore.
95. Out of 24 crore odd loan transactions around 16 crores are secured ones. The stamp duty payable as per Article 6 is 0.5% in case of mortgage and 2% in case of hypothecation as per Article 40.
While this rate may vary in different States and Union Territories even if we estimate by taking mean of 1%, for secured loan amount of Rs.28 lakh crore @ 1% comes to Rs.28,000 crore. Thus roughly the total income of the Exchequer from Indian Stamp Act through loan transactions ought to be a minimum of Rs.38,250 crore (Rs.10,250 crore + Rs.28,000 crore) as compared to Rs.17,700-Rs.23,600 crore. Thus one can estimate evasion/theft of Stamp Duty of around Rs.18,000-Rs.20,000 crore per annum by Banks and NBFCs collectively. As per reports in leading newspapers namely Hindu Business Line and Economic Times in October, 2025 citing data extracted from RBI's quaterly statistics on deposits and credit of schedule Commercial Banks/NBFC, monthly statistical supplements apart from mandatory and liquidatory reports, India's combined outstanding credit as on date stands at Rs.270 Lakh Crores. Assessing the quantum of Stamp Duty evasion/theft in the same manner it is found that the Banks and NBFCs caused the loss to exchequer to the tune of around Rs.1.26 Lakh Crores to Rs.1.40 Lakh Crores, which to say the least is colossal and mind-boggling.
Response filed by ICICI Bank
96. A written response to the above queries was voluntarily filed by ICICI Bank wherein it reiterated its stand taken in the suit that they do execute Loan Documents but did not mention that they execute a Loan Agreement as well even though it is mandatory as per RBIs Fair Practice Code for Banks. They took a clever stand that all the terms and conditions of loan are contained in the loan application itself and that they treat the loan application itself as a concluded contract CS (Comm.) No. 5511/2021 Page No. 37 of 56 ICICI Bank Ltd. Vs. Bijender Kumar enforceable in the Court of Law. It is claimed that no contract is entered since in retail loan they deduce contractual relations in offer and acceptance basis without any formal agreement or contract. The ICICI Bank submits that the loan application containing contractual terms is not considered by them as in instrument as per Section 3 of Indian Stamp Act, 1899 and as such no Stamp Duty is attracted since it is a unilateral undertaking by the loan applicant/borrower. They maintain that they do not need to pay any Stamp Duty on Loan Contract because they do not execute any document by this name.
97. It is claimed that they charge stamp duty on hypothecation deeds as per Article 5 (c) i.e. Rs.50 while ignoring Article 6 which provide for Stamp Duty of 0.5% of the secured value. The Bank responded that they have no particular internal policy for compliance of Indian Stamp Act, 1899. The bank stated that it is ready and willing to share the data with the Government Department on request but did not disclose if this exercise is being carried out by them as on date.
11. Stand taken by Govt. of NCT of Delhi indicates lack of Supervisory Mechanism to detect and contain Un-Stamping and Under-Stamping of Loan Documents by Banks and NBFCs
98. During the course of hearing it was per se found by the Court and also submissions made by Ld. Counsels for the Banks/NBFCs that they never share any data with the Ministry of Finance, Govt. of NCT of Delhi or its Collector of Stamps. Court is also apprised that never ever any visit is paid by any Official or Auditor from Govt. of NCT of Delhi to carry out any inspection in terms of Section 73 of Indian Stamp Act, 1899. For ready reference the same is reproduced hereunder:
Section 73. Books, etc., to be open to inspection. --
Every public officer having in his custody any registers, books, records, papers, documents or proceedings, the inspection whereof may tend to secure any duty, or to prove or lead to the discovery of any fraud or omission in relation to any duty, shall at all reasonable times permit any person authorized in writing by the Collector to inspect for such purpose the registers, books, papers, documents and proceedings, and to take such notes and extracts as he may deem necessary, without fee or charge.
99. Consequently, this Court had issued Notice to Chief Secretary, Govt. of NCT of Delhi to apprise the Court about the mechanism in place in NCT of Delhi to ensure that there is no evasion/theft/Un-Stamping/Under-Stamping of instrument as provided in Schedule attached to Indian Stamp Act, 1899. A written response was submitted on behalf of GNCTD. Copy of the same was shared with the parties as well as Ld. Amicus. Perusal thereof shows that the written response is nothing but reiteration of statutory provisions.
100. It shows that there is a glaring lacuna on the part of GNCTD in ensuring strict compliance of Stamp Act by banks and NBFCs in so far as there is no mechanism or guidelines or any rule which can be said to be have been complied under Section 75 and 76 of the Stamp Act, 1899 for periodical inspection/scrutiny/audit of non-stamping and under-stamping by banks and NBFCs at CS (Comm.) No. 5511/2021 Page No. 38 of 56 ICICI Bank Ltd. Vs. Bijender Kumar the time of creation/execution of the documents. The plea of the Government that Chapter 4 of the Stamp Act from Section 33 onwards constitutes an independent mechanism to impound Un- Stamped/Under-Stamped instruments followed by imposition of penalty. Evidently, these cited provisions are triggered only when such a Un-Stamped/Under-Stamped instrument is produced before a Court or an authority which is empowered to record evidence. By conservative estimate not even 1% of stamp duty payable documents reach the Court as payment of stamp duty is not a necessity for litigation rather it is a mandate which has to be followed and adhered to at the time of creation/execution of documents. These cited provisions do not address the 99% stamp duty payable documents where Un-Stamping and Under-Stamping is rampant. As concluded supra lame excuses have been set up by the Banks and NBFCs viz. Non-execution of loan agreement and changing the nomenclature by camouflaging the hypothecation deeds and mortgage deeds as letters of hypothecation and letters/memorandum of mortgage.
101. During the course of researching on the subject this Court found that Delhi High Court Rules and Procedures at Volume IV Part F Chapter 4 (D) as applicable to the Trial Courts as well as Appellate Jurisdiction in Delhi contain statutory mandate for addressing the issue of evasion/theft of stamp duty. The above chapter is titled Instruments not duly stamped under the Indian Stamp Act, 1899 and it addresses the duty of the Court to deal with Un-Stamped/Under-Stamped documents produced during evidence and categorically rules that Section 33 to Section 35 of Indian Stamp Act are mandatory and not discretionary. The Rule further casts duty that all public officers are required to examine every instrument chargeable with duty which comes before them in performance of their official functions and to impound any instrument which appears not to be duly stamped. Every Court impounding an instrument must forthwith note it as "impounded", such note being dated and signed with ordinary full signatures of the Impounding Officer.
102. Even Chapter 4 (E) titled Stamp Duty on Copies and Petitions mandates that whenever a Un- Stamped/Under-Stamped document is produced, "every such document should be returned to the sender/presenter. A petition enclosing copy not duly stamped should, ordinarily, if the consideration of the Un-Stamped document is essential, be returned to the sender or presentor with a direction that orders cannot be passed unless it is resubmitted with a copy dutly stamped."
103. The High Court Rules and Procedures further contains "The Punjab Stamp Audit Instructions 1933" issued by Governor of Punjab, The Punjab High Court and the Financial Commissioner. For ready reference the same is reproduced hereunder:
1. Title--These rules shall be termed "The Punjab Stamp Audit Instructions, 1933."
2. Appointment of stamp auditors--There shall be appointed stamp auditors for the purpose ofthe audit of every document requiring a stamp which is presented to a Court of law other than the High Court or a public office.
3. Controlling Authority--The Financial Commissioner as the Chief Controlling Authority will determine the districts within thejurisdiction of each auditor and fix his CS (Comm.) No. 5511/2021 Page No. 39 of 56 ICICI Bank Ltd. Vs. Bijender Kumar headquarters. The auditors shall be under the direct control of the Commissioner of the division in which they are from time to time operating and shall be authorised by the Collector in writing in the term of Section 73 of the Indian Stamp Act.
4. Tour programme of auditors--The auditor shall prepare a bi-monthly programme of his tour by districts and after obtaining the approval of the Financial Commissioner give due notice to the Collector of the district concerned and the Commissioner of the division of his forthcoming visit.
The auditor shall spend the least possible time on travelling and more time on actual audit work. He shall visit each district in his charge once a quarter and spend about eight days at the headquarters of a district and two days at each tahsil.
5. Scope of audit--The auditor shall, on visiting a district, audit all fresh institutions, documents and files pending or otherwise in all Courts and registration and other offices including record-rooms; such inspection shall be from the date on which the last audit terminated.
The auditor shall, in particular, see that the stamps used are genuine and have not been removed from files and re-used.
6. Registers of stamp deficiency--Every person described in Section 33 of the Indian Stamp Act and every public official referred to in Section 6 of the Court-fees Act shall maintain a record of stamp deficiencies in Civil Register XVIII. The Collector shall, in addition to the said register maintained by him inrespect of his own Court, maintain a register in Form S.A. 5, of documents sent to him under Section 38 of the Stamp Act. These registers shall be maintained in respect of all deficiencies whether found in audit or independently.
7.Auditor to check these registers--The auditor shall examine the register No. XVIII maintained by the Court or office with a view to seeing that it is properly maintained and that collections are made not only on account of deficiencies detected in audit but on account of deficiencies detected independently. He shall also examine the register maintained by the Collector in form S.A. 5.
8. Deficiencies in stamps to be notified to the Collector--Once a case has been decided and consigned to the record-room, deficient Court-fees are not recoverable under the existing law; instances, therefore, of such short recoveries in Court-fees as may be brought to light in the general record-room will merely serve the purpose of educating readers and moharrirs or taking disciplinary action againstthem. But deficiencies in stamp duty may be brought to the notice of the collector of the district with a view to action under Section 61 of the Stamp Act.
9. Help to be rendered to the auditor by the Courts and officials--The presiding officers of all Courts and heads of offices will give the auditor access to all records and accounts, etc., and, so far as lies in their power, assist him in the performance of his duties.
10. Auditor to draw attention of officers as to their powers and duty re, insufficiently stamped documents--In the course of his audit the auditor shall draw the attention of presiding officers of Courts and heads of offices to documents before them which are insufficiently stamped, and shall advise them where necessary in relation to their powers and obligations as follows :--
(i) Under the Stamp Act--
(a) To impound documents under Section 33 of the Stamp Act.
(b) To admit unstamped documents in evidence under Section 35.
(c) To dispose of impounded documents under Section 38. The Collector may also ask the auditor to note on cases coming before him under Sections 39 to 43 and also seek any other assistance which he may consider necessary.
CS (Comm.) No. 5511/2021 Page No. 40 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
(ii) Under the Court-fees Act:--To determine correct fee leviable on any document. The auditor, if necessary, will discuss the point at issue with the presiding officer and if required by him be present at the discussion in Court before order are passed.
11. Register S.A. 1.--The auditor will maintain for each district a register in Form S.A. 1, in which he will note as it is discovered, each deficiency in stamp duty and Court-fees.
12. Officers to whom copy of audit note is to be sent--After discussion of his preliminary notes with the presiding officer or head of the office, the auditor will prepare a formal audit note and send typewritten copies to the presiding officer or the head of the office, as the case may be, and to the Collector of the district concerned. This note will include a statement in Form S.A. 3 of deficiencies discovered, and columns 1 and 6 to 15 be left blank.
Copies of audit notes on revenue Courts and offices, including Sub-Registrars, should also be sent to the Commissioner of the division. In the case of Civil Courts, where the audit discloses some serious defects, a copy of the audit note should be sent to the District and Sessions Judge through the Collector of the district.
13. Action to be taken Audit Note, Form S.A. 3--The presiding officer of the Court or the head of the office shall transfer columns 2 to 5of Form S.A. 3 to Civil Register XVII and proceed to take necessary action on the note. In cases where he does not agree with the auditor or where he considers it necessary to hear the party concerned before passing orders, he shall, where possible, discuss the matter with the auditor. The presiding officer or head of the office will return the Form S.A. 3 to the auditor after completing columns 1, 6 to 8 and noting in column 15, the cases, if any, in which he disagrees with the auditor, but without necessarily completing columns 9 to 14. The auditor after completing his register will return the form to the Court or office report to the Collector any case in which the presiding officer or head of the office has been unable to take the advice of the auditor.The Collector (if he thinks fit and after consulting the Financial Commissioner, if necessary) will take action under Section 61 of the Stamp Act, or in the case of the Court- fees Act, draw the attention of the appellate Court, or take other appropriate action in the case of other offices.
14. Posting of recoveries in proper register and writing off irrecoverable items--All Courts and offices shall, in addition to the account of recoveries effected by them in Civil Register XVIII, show recoveries effected at the instance of the stamp auditor in columns 10 and 11 of the said register and also S.A. 3. Irrecoverable loss of stamp revenue is required to be written off under paragraph 20.19 of the Book of Financial Powers, and shall be entered in columns 18 and 19 of register XVIII and columns 11 and 12 of Register S.A. 3. They shall also send to the auditor at the end of each months their copies of Form S.A. 3, so that he may complete his returns of recoveries made at his instance from time to time and irrecoverable items written off, after which he will return the form to the Court or office. If the Court or office has sent a document to the Collector under Section 38 of the Stamp Act, it will have no concern with columns 9 to 12.
15. Action to be taken by auditors re:pauper suits. Register S.A.5--Special attention shall be paid by the auditors to pauper suits and all their stages carefully watched while they are pending in Courts. After their disposal the auditors shall draw the attention of the Collector to theCourt-fees realizable, and shall suggest to him what steps will ensure early realization. When a Court fails to pass an order for costs, the auditor shall advise the Collector to move the Court concerned under Order 33, Rule 12, Civil Procedure Code. Theauditor shall keep a register of all such cases in Form S.A. 5.
16. Auditor to check applications for refund of value of stamps and registers of stamp vendors--The auditor shall, at the time of his visit to a district, inspect the applications for grant ofrefund of the value or renewal of spoilt and unused Court-fee and non-judicial CS (Comm.) No. 5511/2021 Page No. 41 of 56 ICICI Bank Ltd. Vs. Bijender Kumar stamps and register maintained by the Refund Clerk and report the result of his inspection to the Collector of the district.
The auditor shall also inspect the registers of stamp vendors and check their stock of stamps.
17.Defects in the vend be brought to arrangements to the notice of the Collector--The auditor shall bring to the notice of the Collector defects in the vend arrangements and make suggestions where necessary for improvement of the arrangements.
18. Monthly reports by auditors Form S.A. 4--The auditors shall monthly submit report by districts to the Assistant Secretary to Financial Commissioners through the Collector and Commissioner.
In these reports the auditors should give details of the period spent, and of the work done on each day. They should also state the total number of cases examined by them and note separately for each district the total number of deficient stamp duty discovered and recovered at their instance under the following heads :--
(1) On plaints;
(2) On copies;
(3) On applications, etc.;
(4) On process fees;
(5) On objection petitions;
(6) On powers of attorney;
(7) On security bonds, etc., filed in Courts;
(8) On miscellaneous petitions in the English record; and (9) On documents filed by the parties.
The report shall be accompanied by a statement in Form S.A.4 showing district totals and also copies of the audit notes on the Courts and offices audited.
19. Certificate in Form S.A. 6 to be attached to travelling allowance, bills by auditors-- In support of their claims for travelling allowance the auditors will obtain from the presiding officers of Courts and Collectors a certificate in Form S.A. 6 and attach it to their monthly travelling allowance bills.
20. Review of stamp audit system by Financial Commissioner--The Local Audit Department is relieved of the audit of stamp duty and Court-fees. A brief account of the work done under this system shall be included by the Financial Commissioners in their annual note on the Stamp Administration. (Punjab Government U.O. No. 418-P. F-47-S, dated the 19th May,1933).
2. The forms prescribed in these rules may be obtained on indent from the Controller of Printing and Stationery, Punjab.
104. Thereafter in Chapter 4 (G) titled Audit and Control of Stamp Revenue in Delhi also contains Rules titled "The Delhi Stamp Audit Instructions, 1939" issued by Chief Controlling Revenue Authority in consultation with Hon'ble Judges of the High Court. For ready reference the same is reproduced hereunder:
1. Title--These rules shall be termed "The Delhi Stamp Audit Instructions, 1939".
2. Appointment of Stamp Auditors--There shall be appointed a stamp-auditor for the purpose of the audit of every document requiring a stamp which is presented to a Court of law other than the High Court, or to a public officer.
3. Controlling authority--The auditor shall be under the direct control of the Chief Controlling Revenue Authority and shall be authorised by the Collector in writing in the terms of Section 73 of the Indian Stamp Act.
CS (Comm.) No. 5511/2021 Page No. 42 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
4. Monthly programme of auditor--The auditor shall prepare a monthly programme of audit and after obtaining the approval of the Chief Controlling Revenue Authority to it, give due notice to Presiding Officers of Courts and heads of offices of the work which he proposes to do.
5. Scope of audit--The auditor shall audit all fresh institutions, documents, and files pending or otherwise in all Courts and registration and other offices including record rooms. Such inspection shall be from the date on which the last audit terminated.
The auditor shall, in particular, see that the stamps used are genuine and have not been removed from files and re-used.
6. Registers of stamp deficiency--Every person described in Section 33 of the Indian Stamp Act and every public official referred to in Section 6 of the Court-fees Act shall maintain a record of stamp deficiencies in Civil Register No. XVIII. The Collector shall, in addition to the said register maintained by him in respect of his own Court, maintain a register in Form S.A. 5 of documents sent to him under Section 38 of the Stamp Act. These registers shall be maintained in respect of all deficiencies whether found in audit or independently.
7. Register to be checked by auditor--The auditor shall examine the Register No. XVIII maintained by each Court or office with a view to seeing that it is properly maintained and that collections are made not only on account of deficiencies detected in audit but on account of deficiencies detected independently. He shall also examine the register maintained by the Collector in Form S.A. 5.
8. Deficiencies in stamps to be notified to the Collector--Once a case has been decided and consigned to the record-room, deficient Court-fees are not recoverable under the existing law, instances, therefore, of such short recoveries in Court-fees as may be brought to light in the general record-room will merely serve the purpose of educating readers and moharrirs or taking disciplianry action against them. But deficiencies in stamp duty may be brought to the notice of the Collector with a view to action under Section 61 of the Stamp Act.
9. Facilities to be afforded to the auditor--The presiding officers of all Courts and heads of offices will give the auditor access to all records and accounts, etc., and, so far as lies in their power, assist him in the performance of his duties.
10. Auditor to draw attention of officers to their powersand duties re : insufficiently stamped documents--In the course of his audit the auditor shall draw the attention of presiding officers of Courts and heads of offices to documents before them which are insufficiently stamped, and shall advise them where necessary in relation to their powers and obligations as follows--
(i) Under the Stamp Act--
(a) To inpound documents under Section 33 of the Stamp Act.
(b) To admit unstamped documents in evidence under Section 35.
(c) To dispose of impounded documents under Section 38. The Collector may also ask the auditor to note on cases coming before him under Sections 39 to 43 and also seek any other assistance which he may consider necessary.
(ii) Under the Court-fees Act--
To determine correct fee leviable on any document. The auditor, if necessary, will discuss the point at issue with the presiding officer and, if required by him, be present at the discussion in Court before orders are passed.
11. Register S.A. 1--The auditor will maintain a register in Form S.A. 1, in which he will note as it is discovered, each deficiency in stamp duty and Court-fees.
CS (Comm.) No. 5511/2021 Page No. 43 of 56 ICICI Bank Ltd. Vs. Bijender Kumar
12. Officers to whom copy of audit note is to be sent--After discussion of his preliminary notes with the presiding officer or head of office, the auditor will prepare a formal audit note and send typewritten copies to the presiding officer or the head of the office, as the case may be, and to the Collector. This note will include a statement in Form S.A. 3 of deficiencies discovered, and columns 1 and 6 to 15 will be left blank. Copies of audit notes on revenue Courts and offices, including Sub-Registrars, should also be sent to the Chief Controlling Revenue Authority, Delhi.
In the case of Civil Courts, where the audit discloses some serious defects, a copy of the audit note should be sent to the District and Sessions Judge through the Collector.
13. Action to be taken on audit note Form S.A. 3--The presiding officer of the Court or the head of the office shall transfer columns 2 to 5 of Forms S.A. 3 of Civil Register No. XVIII and proceed to take necessary action on the note. In cases where he does not agree with the auditor or where he considers it necessary to hear the party concerned before passing orders, he shall, where possible, discuss the matter with the auditor. Thepresiding officer or head of the office will return the Form S.A. 3 to the auditor after completing columns 1 and 6 to 8 and noting in column 15, the cases, if any, in which he disagrees with the auditor, but without necessarily completing columns 9 to 14. The auditor after completing his register will return the form to the Court or office and report to the Collector any case in which the presiding officer or head of the office has been unable to take the advice of the auditor. The Collector (if he thinksfit and after consulting the Chief Controlling Revenue Authority, if necessary) will take action under Section 61 of the Stamp Act, or in the case of the Court-fees Act, address the appellate Court or take other appropriate action in the case of other offices.
14. Posting of recoveries proper registers and writing off irrecoverable items--All Courts and offices shall, in addition to the account of recoveries effected by them in civil register XVIII, show recoveries effected at the instance of the Stamp auditor in columns 10 and 11 of the said register and also in register S.A. 3. Irrecoverable loss of stamp revenue is required to be written off under Article 227 of Civil Account Code, Volume I, and shall be entered in columns 18 and 19 of register No. XVIII and columns 11 and 12 of Register S.A.
3. They shall also send to the auditor at the end of each month, their copies of Register S.A. 3. So that he may complete his returns of recoveries made at his instance from time to time and irrecoverable items written off, after which he will return the form to the Court or office. If the Court or office has sent a document to the Collector under Section 38 of the Stamp Act, it will have no concern with columns 9 to 12.
15. Action to be taken by ancestors re:pauper suits Register S.A.5--Special attention shall be paid by the auditor to pauper suits and all their stages carefully watched while they are pending in Courts. After their disposal the auditor shall draw the attention of the Collector to the Court-fees realizable, and shall suggest to him what steps will ensure early realiztion. When a Court fails to pass an order for the auditor shall advise the Collector to move the Court concerned under Order 33, Rule 12, Civil Procedure Code. The auditor shall keep a register of all such cases in form S.A. 5.
16. Auditor to check applications for refund of value of stamps and also register of stamp vendors--The auditor shall also inspect the applications for grant of refund of the value or renewal of spoilt and unused Court-fee and non-judicial stamps and register maintained by the Refund Clerk and report the result of his inspection to the Collector. The auditor shall also inspect the registers of stamp vendors and check their stock of stamps.
17. Defects in the vend Managements for sale of stamps--The auditor shall being to the notice of the Collector defects in the vend arrangements and make suggestions where necessary for improvements of the arrangements.
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18. Monthly reports by auditors Form S.A. 4--The auditor shall monthly submit report to the Chief Controlling Revenue Authority through the Collector.
In these reports the auditor should give details of the period spent, and of the work done on each day. He should also state the total number of cases examined by him and note the total number of deficient stamp duty discovered and recovered at his instance. The report shall be accompanied by a statement in Form S.A. 4.
19. Certificate to be attached to travelling allowance bills--In support of his claims for travelling allowance the auditor will obtain from the presiding officers of Courts and Collector a certificate in Form S.A. 6 and attach it to his monthly travelling allowance bills.
20. Review of stamp Audit System--The total Audit Department is relieved of the audit of stamp duty and Court-fee.
A brief account of the work done under this system shall be included in the Annual Administration Report.
105. Plain reading of the above Rules indicate that a duty is casted on the Presiding Judges of the Civil Courts to ensure that there is no loss of revenue on account of Un-Stamping and Under- Stamping of instruments and documents however these Rules only provide for audit of Un- Stamped/Under-Stamped documents alongwith the suits and petitions in the Civil Courts and does not provide for audit of such Un-Stamped and Under-Stamped being created by the Banks and NBFCs at the time of granting of secured/unsecured loans. Thus there is a policy lacuna and ex- facie this is leading to loss of valuable revenue to the Exchequer apart from perpetuity lawlessness in contractual relations in the fiscal world which has a direct negative bearing on the legitimacy of the contracts and adds to avoidable compliactions in related litigations in Commercial as well as Civil Courts.
106. It is pertinent to mention here that during the course of researching on this aspect this Court came across a communication exchanged between the Office of Divisional Commissioner GNCTD and Indian Banks Association as also with Reserve Bank of India on 05.12.2014. Apparently this is a response shared by Govt. of NCT of Delhi through Collector of Stamp (HQs) on representations received by it from Indian Bank Association seeking clarification over applicability of Indian Stamp Act, 1899 and payment of stamp duty on hypothecation deeds and hire-purchase agreements executed in Delhi by Banks and NBFCs during financing of vehicles, machineries etc. The stand taken by the GNCTD is that the hypothecation and hire-purchase agreements are duly covered under the definition of mortgage as defined under Section 2 (17) of Indian Stamp Act, 1899 and are mandatorily Stamp Duty payable as per Article 40 of Schedule 1A as notified for Delhi. The response further clarifies that by virtue of Section 29 of the Act it is the person who is drawing and executing such instrument who is supposed to bear the cost of stamp duty, unless agreed otherwise.
107. The Govt. of NCT further directed all concerns to comply with the statutory provisions by collecting the due revenue and help the government in plugging the leakage of revenue. For ready reference the responses are reproduced hereunder:
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ICICI Bank Ltd. Vs. Bijender Kumar
Conclusion:
108. Having discussed this matter at great length hereinabove this Court has no hesitation in concluding that Banks and NBFCs are not only not adhering to the letter and spirit of the Indian Stamp Act, 1899 and various judgments passed by Hon'ble Supreme Court and Hon'ble High Court of Delhi CS (Comm.) No. 5511/2021 Page No. 46 of 56 ICICI Bank Ltd. Vs. Bijender Kumar but are also not adhering to the RBIs Fair Practice Code for Banks and NBFCs and specific directions issued by the Collector of Stamps, Govt. of NCT of Delhi to them on their own query.
109. This is high time that all stakeholders viz. Central Govt., RBI & Govt. of NCT of Delhi should analyse the situation and take remedial steps to contain this menace of Un- Stamping/Under-Stamping of documents in so far as it is leading to loss of valuable revenue to the Exchequer which runs into Thousands of Crores annually.
12. Suggestions for remedifying the menace of Un-Stamping and Under-Stamping of Loan Documents by Banks and NBFCs so as to plug loss of revenue to the Exchequer Having discussed the subject at quite some length this Court humbly proposes certain suggestions for consideration and adoption if deemed necessary and found useworthy by the stakeholders.
I. Necessity for updating of Fair Practices Code issued by Reserve Bank of India (RBI) qua nationalised/private banks and Fair Practices Code formulated for NBFCs-
There is a dire need to revisit the Fair Practices Code formulated by Reserve Bank of India separately for Banks, Private Banks and NBFCs so that they are updated and upgraded. A copy of this order be sent to Office of Governor, Reserve Bank of India so that RBI can have an opportunity to assess the situation of non-stamping and under-stamping of loan documents by Banks and NBFCs and consequential loss of revenue being caused by them in NCT of Delhi and other areas. The RBI may call for the Sample Loan Documentation being carried out by the Banks and NBFCs for secured and unsecured loans since, as concluded supra, it is found that these institutions are indulging in clever drafting and camouflage nomenclature to evade payment of stamp duty.
As mentioned supra the plea by the Bank that they are disbursing loans without any loan agreement and hence not liable to pay any Stamp Duty as per Article 5 of the Schedule indicates the extent of the malice and perverted interpretation. Likewise, terming a hypothecation deed as letter of hypothecation or a mortgage deed as a letter/memo of mortgage is another method being adopted by them for evasion of stamp duty.
II. Necessity for NCT of Delhi to invoke its inspection powers under Section 73 by framing of rules under Section 75 of Indian Stamp Act, 1899- As discussed supra while there is sufficient statutory provisions for inspection, audit, impounding and imposition of penalty on Un-Stamped and Under-Stamped documents when they are produced in the Court but there is a serious lacuna in statutory framework in the CS (Comm.) No. 5511/2021 Page No. 47 of 56 ICICI Bank Ltd. Vs. Bijender Kumar absence of rules when it comes to carrying out periodic inspections/audit of loan documents created by Banks and NBFCs and other similar financial institutions at the stage when they are created/executed. There is a need if found appropriate GNCT of Delhi can frame rules on the lines of Delhi Stamp Audit Instructions, 1939 which is meant for audit of stamp duty payable documents filed in Courts during trial.
In this regard Chief Secretary, GNCTD may consider constituting a committee of Principal Secretary Finance, Principal Secretary Law, Collector of Stamps as Member Secretary apart from inviting representation from Indian Banks Association or any other stakeholder as deemed fit.
III. Role of Comptroller and Auditor General (CAG) in implementation of Indian Stamp Act, 1899- On a macro level, it is the CAG which conducts regular revenue audits of stamp duty collections and revenue loss caused by misclassification of documents, incorrect valuations leading to Uns-Stamping and Under-Stamping of documents. While several pathbreaking steps have been taken in this regard nationally which included introduction of e-stamping and sale of e-stamps through various companies like Stockholding Corporation of India Ltd. (SHCIL) including e-registration of stamp duty payable documents in case of transfer of property. This development coupled with facility of online verification using QR code has dramatically improved the oversight mechanism met to prevent evasion of stamp duty in property transactions.
Likewise, a similar mechanism can be devised and put in place to supervise, check and audit the stamp duty payable documents created by the Banks and NBFCs for both secured and unsecured loans so that instances of evasion of stamp duty by Un-Stamping and Under- Stamping of loan documents can be identified at the threshold itself. This will go a long way in helping to contain the instances of evasion/theft of revenue of more than Rs.20,000 crore annually. Moreover, it will strengthen the Rule of Law in the country by adding credibility to contractual Stamp Duty payable documents. CAG may consider try and bring functional uniformity in Stamp Rates across States and Union Territories or at least try reduce stark disparity. A copy of this order be sent to Office of Comptroller & Auditor General (CAG) so that CAG can have an opportunity to assess the situation of non-stamping and under- stamping of loan documents by Banks and NBFCs and take remedial steps.
IV. Role of Indian Bank Association (IBA) as a umbrella body of all nationalized and private banks-
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IBA can play a critical role in guiding and educating its member constituents so that none of them falter in strict compliance of binding statutory laws promulgated by the Parliament and State Legislatures and guidelines issued by the Reserve Bank of India as also the judgments passed by Hon'ble Supreme Court and Hon'ble High Courts on the aspect of mandatory payment of Stamp Duty in banking/finance industry. As discussed supra it is the IBA which in December 2014 reached out to Collector of Stamps, GNCTD to seek clarification qua payment of Stamp Duty in case of hypothecation of movable articles viz. automobiles, machines and like. While this proactive action of the IBA is appreciated but a sheer fact that none of its constituents is complying with the law and clarity which IBA had sought shows that IBA needs to be more proactive so that its member Banks and constituents do fall in line. IBA has a collective responsibility to ensure that no loss is caused to the revenue and the Exchequer of the country more so when the Banks are not supposed to pay any Stamp Duty but are only expected to ensure that requisite Stamp Duty is paid by the borrower when the documentation is carried out by the Bank in the course of their business activity. As such copy of this order be sent to Chairman and Secretary, Indian Bank Association for information and issuance of requisite internal advisories as found necessary.
V. Updation of Format/Template of Check List filed by petitioner/plaintiff in Civil Courts with fresh suits-
In the year 2010-2011 this Court had found that there is rampant evasion/theft of Court Fees by the lawyers and litigants in filing civil suits in so far as a large section of them had no clarity or interplay between Suit Valuation Act, 1887 and Court Fees Act, 1870. Even though the purpose of suit valuation is only to ascertain the pecuniary jurisdiction of the Court of first instance and no Court Fees is supposed to be paid on the valuation of the suit for the purpose of jurisdiction except in cases covered under Section 8 of Suit Valuation Act, 1887 where jurisdictional value and court fees value can be same. Likewise, a section of the bar and litigants was found to be having no clarity that in terms of Section 7 of the Court Fees Act, 1870 they are not supposed to compute the payable Court Fees at the cumulative value of all reliefs but are supposed to pay Court Fees individually on each relief as per formulation provided in Section 7 of the Court Fees Act, 1870.
In order to address this situation undersigned had devised and suggested a Template titled Check List to the Registry of Hon'ble High Court of Delhi. This Court believes that this suggestion was accepted by the Registry and adopted in the Rules/Practice Directions which led to utilisation of the said Check List mandatorily in all the civil/commercial suits filed in Delhi.
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ICICI Bank Ltd. Vs. Bijender Kumar
Check-list originally designed in 2010
1 VALUATION OF
SUIT
JURISDICTION
2 NAME &
ADDRESS OF
ADVOCATE
3 NATURE OF
SUIT
4 AGE OF Plaintiff
PARTIES
Defendant
5 WHETHER ANY
EARMARKED
COURT
6 CAVEAT
7 COURT FEE Sl. No. Relief Valuation of Valuation of Court fee
AFFIXED Sough Relief for the Relief for the paid on each
t purpose of purpose of court relief
jurisdiction fee individually
1.
2.
3.
4.
5.
6.
7.
Total Court
Fee Paid
Total Valuation of Suit for (Sum of
above)
The purpose of Jurisdiction Rs._______ Rs._______
Please attach more sheet, if required
8 CONNECTED
CASES IF ANY &
NAME OF THE
COURT WHERE
PENDING
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ICICI Bank Ltd. Vs. Bijender Kumar
New Check-list now proposed for adoption as a Practice Direction 1 VALUATION OF SUIT JURISDICTION 2 NAME & ADDRESS OF ADVOCATE 3 NATURE OF SUIT 4 AGE OF PARTIES Plaintiff Defendant 5 WHETHER ANY EARMARKED COURT 6 CAVEAT 7 COURT FEE AFFIXED Sl. No. Relief Valuation of Relief Valuation of Court fee paid on Sought for the purpose of Relief for the each relief jurisdiction purpose of individually court fee 1 2. 3. 4. 5. 6. 7. Total Court Fee Paid Total Valuation of Suit for (Sum of above) Rs._______ The purpose of Jurisdiction Rs._______ Please attach more sheet, if required 8 CONNECTED CASES IF ANY & NAME OF THE COURT WHERE PENDING 9 STAMP DUTY Sl Particulars of Monetary value Relevant Stamp duty paid AFFIXED No. Contractual/sta of the Article of on each mp duty instrument Schedule under instrument payable Indian Stamp instrument Act, 1899 for (NCT, Delhi 1 2 3 Total Stamp Duty Paid:
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110. In the light of the conclusions arrived hereinabove that lawyers and litigants are routinely filing Un-Stamped and Under-Stamped documents, a need is felt that the above Check List may be updated so as to include the details of the stamp duty payable documents, particulars of the Articles invoked from the Schedule of Indian Stamp Act, 1899 and Stamp Duty paid thereon. In case the above Template is approved and updated by the Registry of Hon'ble High Court of Delhi and adopted in rules by way of Practice Direction, it will go a long way in containing and plugging the loss of revenue to the Exchequer by way of Un-Stamping and Under-Stamping of mandatory stamp duty payable documents. Copy of this order be sent to Registrar General, Hon'ble High Court of Delhi with a request to consider the same by placing it before the Rules Committee of Hon'ble Judges of High Court of Delhi for consideration.
Before parting with this order this Court would like to place on record its sincere appreciation for the able assistance and guidance provided by Ld. Amicus Curie Sh. Abhijat, Senior Advocate High Court of Delhi and his team including Sh. Harkirat Singh, Advocate.
Directions in the suit in hand
111. Now coming back to the facts of the case in hand the plaintiff bank is desirous of relying on several loan documents which, as concluded supra, collectively constitute a Loan Agreement Ex.PW1/2 and has paid Stamp Duty over the same as per Article 5 (c) of Indian Stamp Act, 1899 i.e. Rs.50/-. The plaintiff bank is relying on a Hypothecation Deed Ex.PW1/4 which attracts Stamp Duty as per Article 40 (b) which is 2% of the monetary value of the movable property secured. The value secured is Rs.4,05,000/- but no Stamp Duty has been paid as against payable amount of Rs.8,100/-. As mentioned supra, such deficiency is curable under Indian Stamp Act, 1899.
112. In case titled Hindustan Steel Limited V. Dilip Construction Company, 1969 Latest Caselaw 47 SC Hon'ble Supreme Court held that the Indian Stamp Act, 1899 is a fiscal measure intended to raise revenue, and the stringent provisions of the Stamp Act cannot be used as a weapon to defeat the cause of the opponent. The relevant paragraph reads thus:
"7. The Stamp Act is a fiscal measure enacted to secure revenue for the State on certain classes of instruments: it is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. The stringent provisions of the Act are conceived in the interest of the revenue once that object is secured according to law, the party staking his claim on the instrument will not be defeated on the ground of the initial defect in the instrument. Viewed in that light the scheme is clear."
113. In a recent case titled Seetharama Shetty Vs. Monappa Shetty, 2024 Latest Caselaw 547 SC on 02.09.2024 Hon'ble Supreme Court discussed at length the provisions of Indian Stamp Act and ruled that the Statute empowers the Civil Court to admit a Un-Stamped/Under-Stamped document after collecting the deficient Stamp Duty and 10 times amount of such Stamp Duty. In this case when a Civil Court came across a Under-Stamped document, it decided to send the same to District CS (Comm.) No. 5511/2021 Page No. 52 of 56 ICICI Bank Ltd. Vs. Bijender Kumar Registrar for determination of requisite Stamp Duty and penalty payable on the same. Instead of allowing the District Registrar to impose penalty, the Court itself ordered for payment of deficient Stamp Duty and 10 times penalty. While finally ruling that once a matter is referred by a Civil Court to the District Registrar, it was later's duty to seek recovery of deficient Stamp Duty and impose the penalty. Hon'ble Supreme Court has summed up the law in this regard in Para 21 ruled that a person who intends to rely an insufficiently/improperly Stamped document has Two Options. The First Option is to submit to the scope of Section 34 and Section 35 by paying deficient duty and the requisite penalty before a Civil Court. The Second Option is take recourse to Section 39 of the Act by directly moving before District Registrar for payment of deficient Stamp Duty and penalty. But when such party does not approach the District Registrar and rather adopts the First Option before the Civil Court, Hon'ble Supreme Court ruled:
21.1 Section 33 of the Act is titled examination and impounding of instruments. The object of the provision is to disable persons from withdrawing the instruments produced by them on being told that proper stamp duty and penalty should be paid.
21.1.1. The person who intendsto rely on an insufficiently/improperly stamped instrument has option to submit to the scope of Section 34 of the Act, pay duty and penalty. The party also has the option to directly move an application under Section 39 of the Act before the District Registrar and have the deficit stamp duty and the penalty as may be imposed collected. In either of the cases, after the deficit stamp duty and the penalty are paid,the impounding effected under Section 35 of the Act is released and the instrument available to the party for relying as evidence. In the event, a party prefers to have the document sent to the deputy commissioner for collecting the deficit stamp duty and penalty, the Court/Every Person has no option except to send the document to the District Registrar. The caveat to the above is that, before the Court/Every Person exercises the jurisdiction under Section 34 of the Act, the option must be exercised by a party.
21.2 Section 35 (mentioned as Section 34 in the judgment) of the Act is titled instruments not duly stamped inadmissible in evidence. This provision bars the admission of an instrument in evidence unless adequate stamp duty and the penalty are paid. Every person so authorised to collect deficit stamp duty and penalty has no discretion except to levy and collect ten times the penalty of deficit stamp duty.
(Emphasis Supplied)
114. As discussed supra at length in case titled G.M.Shahul Hameed vs Jayanthi R.Hegde, 2024 Latest Caselaw 398 SC, Hon'ble Supreme Court has categorically ruled that despite statutory provision of Section 36 of Indian Stamp Act, 1899 a Civil Court is not powerless to address instances of evasion/theft of Stamp Duty and can always invoke its inherent power under Section 151 CPC for taking action against an insufficiently stamped instrument despite the fact that it has been admitted and marked as exhibit.
115. As far as the Hypothecation Deed is concerned, the Stamp Duty payable under Article 40 (b) which is 2% of the monetary value secured. This Court is desirous of invoking Section 33 and 35 of Indian Stamp Act, 1899 as directed by Hon'ble Supreme Court.
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116. Accordingly, in compliance of statutory directives placed on this Court by Delhi High Court Rules and Procedures, binding directives of Hon'ble Supreme Court in Hindustan Steel Case supra, Seetharama Shetty Case supra and more specifically G. M. Shahul Hameed Case supra this Court would like to invoke its inherent power under Section 151 CPC solely with an aim to undo the loss caused to the Exchequer by the plaintiff Bank by Un-Stamping/Under-Stamping of loan documents. In the case in hand, on 'Loan Agreement' plaintiff has paid Stamp Duty of Rs.50/-.
117. As regards the Un-Stamping of Hypothecation Deed plaintiff has not paid Stamp Duty of Rs.8,100/-. In terms of directives of Hon'ble Supreme Court in Seetharam Shetty case as detailed supra plaintiff is directed to pay fixed penalty of 10 times the deficiency i.e. (Rs.8,100 x 10) i.e. Rs.81,000/- over and above the payable Stamp Duty of Rs.8,100/- which takes the cumulative value to Rs.89,100/- qua Hypothecation Deed. As such, the total Stamp Duty payable by the plaintiff is Rs.89,100/-.
118. Plaintiff Bank is granted time to do the needful. Now come up for compliance and final arguments on 15.12.2025.
119. Copy of the order be given dasti as prayed for.
(SURINDER S. RATHI) District Judge Commercial Court-11 Central District, THC Delhi/12.11.2025(P)
5. In terms of the above order, plaintiff was granted time to pay the penalty of Rs.89,100/-.
6. In the light of the above, once all the loan documents filed by the bank including loan application and hypothecation deed are rendered inadmissible by virtue of Section 35 of Indian Stamp Act, 1899 this Court has no hesitation in concluding that the plaintiff bank has failed to prove its case of grant of loan to the defendant and its plea of breach of terms of contract and its right to seek recovery thereof emanating out of the loan agreement/hypothecation deed.
7. As discussed supra, as per Fair Practices Code issued by Reserve Bank of India for the bank as well as NBFCs none of them is permitted to grant loans without execution of a loan agreement. A loan agreement even if executed but CS (Comm.) No. 5511/2021 Page No. 54 of 56 ICICI Bank Ltd. Vs. Bijender Kumar which remains unstamped/understamped and that needful deficiency in Stamp is not made good despite opportunities, it is evident that the bank is not interested in relying on the loan documents including the documents which constitute loan agreement as well as hypothecation deed in support of the suit claim. It is a choice made by the bank which is apparently a conscious choice. As such in the absence of loan agreement, the loan in question is rendered an oral loan which is not envisaged for entities running bank under licence granted by Reserve Bank of India. It goes without saying that Civil Courts under Section 9 of CPC are Courts of equity and one who seeks equity must do equity.
8. The entities like ICICI Bank Limited which is one of the largest private banks in the country, cannot do a shut eye to the guidelines issued by the RBI despite the fact that this company is running bank only under a licence of the RBI. Whenever a licence is issued, it does carry a explicit undertaking by the licencee that it shall abide by all the laws, rules, regulations and directions issued by the licencer. In the case in hand not only the ICICI Bank is violating the guidelines of its licencer the RBI but is also aiding and abating in the loss of revenue to the Exchequer by not abandoning in payment of requisite stamp duty in its business of banking.
9. At the cost of repetition it is mentioned as per latest data released by the RBI the credit overload in this country is Rs.270 Lakh Crores and as per conservative estimates calculated by this Court the loss of revenue caused to the Exchequer by the banks like the plaintiff herein is to the tune of mamooth is Rs.1.40 lakh crore. It is ironical that a bank like ICICI Bank is found to be indulging in this loss to the Exchequer when not a single rupee is supposed to be paid by the bank in the name of Stamp Duty. As per Section 29 of Indian Stamp Act, 1899 unless agreed otherwise it is borrower who has to pay the Stamp Duty in this manner the ICICI bank appears to have committed offence CS (Comm.) No. 5511/2021 Page No. 55 of 56 ICICI Bank Ltd. Vs. Bijender Kumar punishable under Section 62 of Indian Stamp Act, 1899 qua which Collector of Stamps can file complaints before the competent Magisterial Court as per Section 70 and 71 of Indian Stamp Act, 1988.
10. There are under instructions to neither comply and there is no move to challenge the order. In similar two other cases titled as "ICICI Bank Vs. Md. Motibul Rahman" and "ICICI Bank Vs. Akash Agarwal", more than 60 days have been granted. Court is apprised that ICICI Bank has neither challenged the order of this Court in all the cases nor to complied with them. In the light of the above, this Court has no hesitation in concluding that plaintiff bank has failed to discharge the onus proving its entitlement to receive a decree of Rs.4,45,206/- with interest. Accordingly, the suit of the plaintiff is dismised without cost.
11. Decree Sheet be prepared accordingly. File be consigned to Record Room after due compliance.
Digitally signed by SURINDER S RATHI SURINDER Date: S RATHI 2025.12.19 14:58:02 +0530 (SURINDER S. RATHI) District Judge Commercial Court-11 Central District, THC Delhi/15.12.2025 CS (Comm.) No. 5511/2021 Page No. 56 of 56 ICICI Bank Ltd. Vs. Bijender Kumar