Madhya Pradesh High Court
Vinod Singh Parmar vs State Of M.P on 19 January, 2026
NEUTRAL CITATION NO. 2026:MPHC-GWL:2565
1 WP-3680-2012
IN THE HIGH COURT OF MADHYA PRADESH
AT GWALIOR
BEFORE
HON'BLE SHRI JUSTICE AMIT SETH
WRIT PETITION No. 3680 of 2012
VINOD SINGH PARMAR AND OTHERS
Versus
STATE OF M.P
Appearance:
Shri Kailash Narayan Gupta - Senior Advocate with Ms. Suhani
Dhariwal - Advocate for the petitioners.
Shri Kaushlendra Singh Tomar - Government Advocate for
the respondents/State.
Reserved on : 19.01.2026
Delivered on : 23.01.2026
ORDER
1. With the consent of parties, the matter is heard finally.
2. The instant writ petition filed under Articles 226/227 of the Constitution of India takes exception to the order dated 28.07.2011 passed by the Collector of Stamps, District Gwalior whereby, while maintaining the deficit stamp duty of Rs.4900/- on the agreement to sell dated 18.10.2006, ten times penalty amounting to Rs.49,000/- has been imposed, and the petitioners have been directed to pay a total amount of Rs.53,900/-.
3. The petition also challenges the order dated 08.02.2012 passed by the Board of Revenue, M.P. Gwalior whereby, the revision preferred by the Signature Not Verified Signed by: VANDANA VERMA Signing time: 23-Jan-26 6:04:30 PM NEUTRAL CITATION NO. 2026:MPHC-GWL:2565 2 WP-3680-2012 petitioners against the order dated 28.07.2011 has been dismissed.
4. Brief facts leading to filing of the petition are as under:-
4.1 A suit for specific performance came to be filed by one Rakesh Mishra against the father of petitioners, namely Devi Singh Parmar. In the said civil suit, the defendant No.1 i.e. Devi Singh Parmar submitted an agreement to sell, which was executed between the petitioners and Devi Singh Parmar on 18.10.2006. Since the agreement to sell was insufficiently stamped, the learned trial Court vide order dated 5.8.2010 directed the defendant No.1 to pay the deficit stamp duty along with penalty on the said agreement and the matter was fixed for 30.08.2010.
4.2 The order dated 5.8.2010 passed by the learned trial Court was challenged by Devi Singh Parmar in W.P. No.5484/2010, which came to be disposed of vide order dated 22.11.2010 (Annexure P/9) whereby, the learned trial Court was directed to pass an appropriate order on the aspect of deficit stamp duty either by adjudicating the stamp duty and penalty on the said document itself or by sending the said document for production to the Collector of Stamps in terms of the scheme for the said purpose contained in Sections 35 to 42 of the Indian Stamp Act, 1899.
4.3 The learned trial Court impounded the agreement to sell vide order dated 23.12.2010 and referred it to the Sub Registrar, Gwalior, for levying stamp duty as per rules. The Sub-Registrar, passed an order dated 26.02.2011 whereby, the deficit stamp duty on the agreement to sell was quantified at Rs.4900/- and the penalty thereon was quantified at Rs.4,900/-, and the applicant therein was directed to pay a total sum of Rs.9,800/- within Signature Not Verified Signed by: VANDANA VERMA Signing time: 23-Jan-26 6:04:30 PM NEUTRAL CITATION NO. 2026:MPHC-GWL:2565 3 WP-3680-2012 a period of 30 days.
4.4 It appears that the learned trial Court in compliance of the order dated 22.11.2010 passed by this Court in W.P. No.5484/2010, vide communication dated 21.04.2011 (Annexure P/11), again referred the matter to the Sub-Registrar for reassessment of stamp duty and penalty on the agreement to sell. It is thereafter, the respondent No.2 had passed the impugned order dated 28.07.2011, whereby, while maintaining the deficit stamp duty of Rs.4900/-, ten times penalty, amounting to Rs.49,000/- was imposed and the petitioners were directed to pay a total sum of Rs.53,900/- within a period of seven days.
4.5 Aggrieved by the said order, the petitioner No.2 filed a revision before the Board of Revenue, which came to be rejected vide order dated 8.02.2012. These are the orders under challenge in the instant writ petition.
5. The learned Senior Counsel appearing for the petitioners submits that the imposition of ten times penalty on the deficit stamp duty by citing Section 35 of the Indian Stamp Act, 1899 on the part of Collector of Stamps vide order impugned, is not in accordance with law. He submits that the Collector had placed reliance upon the judgment of the Apex Court in the case of Avinash Kumar Chauhan vs. Vijay Krishna Mishra, 2009 (3) MPLJ
289. However, the said judgment of the Apex Court does not lay down any such preposition to the effect that imposition of ten times penalty is mandatory or automatic.
6. He submits that Section 40 of the Indian Stamp Act, 1899 empowers the Collector of Stamps to levy penalty upto ten times the deficit Signature Not Verified Signed by: VANDANA VERMA Signing time: 23-Jan-26 6:04:30 PM NEUTRAL CITATION NO. 2026:MPHC-GWL:2565 4 WP-3680-2012 stamp duty. However, mechanically, ten times penalty cannot be permitted to be imposed. In support thereof, he places reliance on the judgment of the Apex Court in the case of Trustees of H. Dhanda Trust vs. State of M.P. and Others, 2020 Legal Eagle (SC) 560. He further submits that the stamp duty and penalty as ascertained by the Collector of Stamps vide initial order dated 26.02.2011 has been deposited by the petitioner No.2 vide treasury receipt dated 18.03.2011 (Annexure P/8).
7. The learned Senior counsel appearing for the petitioners further submits that in the instant writ petition, he is restricting his challenge only up to the extent of imposition of ten times penalty.
8. On the other hand, the learned counsel appearing for the State submits that as per the scheme of Section 35(A) of the Indian Stamp Act, 1899 (as it stood prior to amendment dated 23.10.2017), an instrument which is not duly stamped is inadmissible in evidence, however, the same can be admitted in evidence upon payment of ten times the proper duty, if paid thereon.
9. He further submits that as per the averments made in the return filed by the State, the power has been exercised by the Collector of Stamps in terms of Section 40 of the Act and in terms whereof, proper penalty has been levied.
10. No other point has been pressed by the learned counsel appearing for the parties.
11. Heard learned counsel for the parties and perused the record.
12. The perusal of the impugned order dated 28.07.2011 passed by Signature Not Verified Signed by: VANDANA VERMA Signing time: 23-Jan-26 6:04:30 PM NEUTRAL CITATION NO. 2026:MPHC-GWL:2565 5 WP-3680-2012 the Collector of Stamps indicates that he has relied upon Section 35 (A) of the Act, as it stood at the relevant time, for holding that imposition of ten times penalty was mandatory.
13. When the scheme of Sections 33, 38 & Section 40 of the Indian Stamp Act, 1899 is examined, it is evident that Section 33 deals with the impounding of an instrument whereas, Section 38 provides as to how the instrument impounded is to be dealt with whereas, Section 40 of the Act empowers the Collector of Stamps to ascertain the deficit stamp duty and to impose penalty thereon when he himself impounds any instrument under Section 33 or receives any instrument sent to him under Section 38 (2) of the Act.
14. Perusal of the communication dated 5.1.2011 (Annexure P/5) issued by the Fourth Additional Judge to the First Additional Sessions Judge, Gwalior (M.P.) addressed to the Sub-Registrar indicates that the agreement to sell dated 18.10.2006 was impounded vide order dated 23.12.2010 and was referred to the Collector of Stamps for levy of appropriate stamp duty and penalty thereon. It is thus abundantly clear that the power of impounding the document and referring it to the Collector of Stamps, as contained in Sections 33 & 38 of the Act, was exercised by the trial Court. Even the communication dated 21.04.2011 (Annexure P/11) issued by the trial Court affirms the said fact.
15. Thus, when the Collector of Stamps was in receipt of an impounded document in terms of Section 38(2) of the Act of 1899, the determination of deficit stamp duty and the levy of penalty thereon were Signature Not Verified Signed by: VANDANA VERMA Signing time: 23-Jan-26 6:04:30 PM NEUTRAL CITATION NO. 2026:MPHC-GWL:2565 6 WP-3680-2012 required to be done in terms of Section 40 of the Indian Stamp Act, 1899. The return of the State also states that the Collector of Stamps has exercised power under Section 40 of the Act of 1899. The issue as to whether, the Collector of Stamps has discretion to impose a penalty not exceeding ten times the amount of proper duty or whether the maximum penalty of ten times the deficit stamp duty is required to be imposed came up for consideration before the Hon'ble Supreme Court in the case of Trustees of H.C. Dhanda Trust Vs. State of Madhya Pradesh and others , reported in (2020) 9 SCC 510.
16. The Hon'ble Supreme Court, in the aforesaid decision, had an occasion to consider the provisions of Section 40 of the Act of 1899. In the said case the "deed of assent" was found to be improperly stamped and the Collector of Stamps imposed ten times penalty against the petitioner therein. In para-12 of the said decision, the Hon'ble Supreme Court formulated a question as to "whether imposition of ten times penalty by the Collector of Stamps under the provisions of the Act of 1899 was valid or not ?
1 7 . In paragraphs 16 and 17, the Hon'ble Supreme Court held as under:-
"16. According to Section 40 (1) (b) if the Collector is of opinion that such instrument is chargeable with duty and is not duly stamped, he shall require the payment of the proper duty or the amount required to make up the same, together with a penalty of five rupees; or, if he thinks fit, an amount not exceeding ten times the amount of the proper duty or of the deficient portion thereof. The statutory scheme of Section 40 (1) (b) as noticed above indicates that when the Collector is satisfied that instrument is not duly stamped, he shall require the payment of proper duty together with a penalty of five rupees. The relevant part of Section 40 (1) (b) which falls for consideration in these appeals is:Signature Not Verified Signed by: VANDANA VERMA Signing time: 23-Jan-26 6:04:30 PM
NEUTRAL CITATION NO. 2026:MPHC-GWL:2565 7 WP-3680-2012 "or, if he thinks fit, an amount not exceeding ten times the amount of the proper duty or deficient portion thereof."
(emphasis supplied).
18. The amount of penalty thus can be an amount not exceeding ten times. The expression "an amount not exceeding ten times" is preceded by expression "if he thinks fit". The statutory scheme, thus, vests the discretion to the Collector to impose the penalty amount not exceeding ten times. Whenever statute transfers discretion to an authority the discretion is to be exercised in furtherance of objects of the enactment. The discretion is to be exercised not on whims or fancies rather the discretion is to be exercised on rational basis in a fair manner. The amount of penalty not exceeding ten times is not an amount to be imposed as a matter of force. Neither imposition of penalty of ten times under Section 40 (1) (b ) is automatic nor can be mechanically imposed. The concept of imposition of penalty of ten times of a sum equal to ten times of the proper duty or deficiency thereof has occurred in other provisions of the Act as well."
19. Thereafter, in paragraph 22, it was further held as under:-
"22. The purpose of penalty generally is a deterrence and not retribution. When a discretion is given to a public authority, such public authority should exercise such discretion reasonably and not in oppressive manner. The responsibility to exercise the discretion in reasonable manner lies more in cases where discretion vested by the statute is unfettered. Imposition of the extreme penalty i.e. ten times of the duty or deficient portion thereof cannot be based on the mere factum of evasion of duty. The reason such as fraud or deceit in order to deprive the Revenue or undue enrichment are relevant factors to arrive at a decision as to what should be the extent of penalty under Section 40(1)(b )."
20. The similar view has been held by the Hon'ble Supreme Court in the case of Peteti Subba Rao Vs. Anumala S. Narendra , 2002 (10) SCC 427 .
21. The Hon'ble Supreme Court in the cases referred hereinabove has been pleased to hold that the purpose of penalty generally is a deterrence and not retribution. When a discretion is given to a public authority, such public authority should exercise such discretion reasonably and not in oppressive Signature Not Verified Signed by: VANDANA VERMA Signing time: 23-Jan-26 6:04:30 PM NEUTRAL CITATION NO. 2026:MPHC-GWL:2565 8 WP-3680-2012 manner. The responsibility to exercise the discretion in reasonable manner lies more in cases where discretion vested by the Statute is unfettered. Imposition of the extreme penalty i.e ten times of the duty or deficient portion thereof cannot be based on the mere factum of evasion of duty. The reason such as fraud or deceit in order to deprive the Revenue or undue enrichment are relevant factors to arrive at a decision as to what should be the extent of penalty under Section 40 (1) (b).
22. In the instant case, the agreement to sale dated 18.10.2006 was executed on a stamp of Rs. 100/-. In the given facts and circumstances of the case, the order passed by the Collector of Stamps dated 28.07.2011 does not indicate that there has been any mala fide attempt on the part of the petitioners in evading the stamp duty. In the absence of any finding regarding fraud, deceit or undue enrichment, the imposition of the maximum penalty of ten times the deficit stamp duty is not justified.
23. In view of the above, the instant writ petition stands partly allowed. The order dated 28.07.2011, passed by the Collector of Stamps, District Gwalior, in Revenue Case No.23/B-103/10-11/33, is hereby set aside only to the extent of imposition of ten times the penalty on the deficit stamp duty of Rs.4,900/-, amounting to Rs.49,000/-. Consequently, the order dated 08.02.2012 passed by the Board of Revenue, Madhya Pradesh, Gwalior, to the aforesaid extent, also cannot be sustained. The matter is remitted to the Collector of Stamps, Gwalior, to pass an order afresh for ascertainment of a just and proper penalty which is required to be imposed on the petitioners on the deficit stamp duty of Rs.4,900/-. The aforesaid exercise be completed by the Collector within a period of 90 days from the date of production of the certified copy of this order.
Signature Not Verified Signed by: VANDANA VERMA Signing time: 23-Jan-26 6:04:30 PMNEUTRAL CITATION NO. 2026:MPHC-GWL:2565 9 WP-3680-2012
24. The petitioners shall be at liberty to submit fresh representation and submissions before the Collector of Stamps on the question of levy of penalty. The Collector concerned shall consider the same and pass a reasoned and speaking order in the said regard within the time period as stated hereinabove.
25. With the aforesaid observations and directions, the present writ petition stands partly allowed and disposed of .
(AMIT SETH) JUDGE Van Signature Not Verified Signed by: VANDANA VERMA Signing time: 23-Jan-26 6:04:30 PM