K.C. Huchappa vs K.M. Kemparaju

Mr. Aravind Kumar, J. - Petitioners, who are defendants in O S. No. 15 of 2011 have filed these writ petitions calling in question order dated 15-7-2013 passed by Senior Civil Judge, Kadur, Annexure-H, where under respondent/plaintiff has been directed to pay a sum of Rs. 5/- towards penalty for non-payment of deficit stamp duty quantified at Rs. 2,23,600/-.

Plaintiffs have filed the suit in question i.e., O.S. No. 15 of 2011 for the relief of specific performance of agreement of sale date 28-8-2002. Said document was sought to be tendered in plaintiff''s evidence. Memos came to be filed by the parties. On the one hand, plaintiff filed a memo on 15-1-2013, Annexure-F enclosing two demand drafts of Rs. 25,000/- and Rs. 49,000/- in all for a sum of Rs. 74,000/- towards deficit stamp duty and penalty. Defendants 2 and 3 filed a memo contending that under subject agreement dated 28-8-2002 possession of suit schedule property is claimed to have been delivered by the defendant in favour of plaintiff and as such, under Article 5(e)(i) read with Article 20 of the Karnataka Stamp Act, 1957 prescribed stamp duty is to be paid by treating the transaction as ''conveyance'' and to direct the plaintiff to pay stamp duty on the market value as reflected in the document together with ten (10) times penalty.

After considering rival contentions Trial Court by impugned order dated 15-7-2013 - Annexure-H partly allowed the memo filed by defendants 2 and 3 by relying upon the ratio laid down in the case of K. Govinde Gowda v. Smt. Akkayamma and others, 2011 (4) KCCR 2799 and directed the plaintiff to pay penalty of Rs. 5/- and Rs. 2,23,600/- towards deficit stamp duty on the sale agreement dated 28-8-2002. Said order is impugned in this writ petition.

I have heard the arguments of Sri G.S. Balagangadhar, learned Counsel appearing for the petitioners/defendants and Sri Sunil S. Rao, learned Counsel appearing for respondent/plaintiff.

It is the contention of Sri G.S. Balagangadhar, learned Counsel appearing for petitioners/defendants that Trial Court committed a serious error in directing the respondent/plaintiff to pay a penalty of Rs. 5/- only when Section 33 of the Karnataka Stamp Act, 1957 mandates imposition of penalty of 10 times the duty when such document is sought to be introduced in evidence before Court and is found to be insufficiently stamped. He would contend that in such an eventuality the only option left open to the judicial authority or the Court is to impose ten times penalty and collect the deficit stamp duty by resorting to proviso (a) to Section 34 of the Stamp Act and non-consideration of this vital aspect has resulted in an erroneous order being passed. Hence, he seeks for allowing the writ petition by setting aside the impugned order.

Per contra, Sri Sunil S. Rao, learned Counsel appearing for respondent would support the impugned order and contends that there is no error committed by the Trial Court and contends that very issue of delivery of possession of suit schedule property is under serious dispute between parties and would hasten to add that subsequent to impugned order an application has also been filed seeking leave of the Court to pay the stamp duty and penalty as directed under the impugned order and as such, he prays for rejection of the writ petition.

Having heard the learned Advocates appearing for parties and on perusal of records, this Court is of the considered view that issue regarding payment of stamp duty and penalty under Sections 33, 34 and proviso (a) to Section 34 of the Karnataka Stamp Act, 1957, is no more res integra.

A Division Bench of this Court in case of Digambar Warty and Others v. District Registrar, Bangalore Urban District, Bangalore and Another, 2013(4) Kar. LJ. 247 has held that Section 67 of the Stamp Act provides for impounding of the instrument under Section 33, whereas Section 67-B empowers the authorities to enter upon the premises, inspect certain documents and seize and impound them under Section 33. If the document is impounded under Section 67-B, sub-section (2) of Section 67-B provides that the authority shall require the person liable to pay the proper duty or the amount required to make up the same and also penalty'' not exceeding five times the amount of the deficit duty thereof if any leviable and in case of default, the amount of duty and penalty shall be recovered in accordance with Section 46. Therefore, the law'' makes a distinction insofar as payment of penalty is concerned, between the documents which are sought to be tendered by way of evidence and documents which are seized by the authorities under Section 67-B of the Act. It has been further held that, if a person wants the document to be admit in evidence or tendered in evidence, the penalty is 10 times, however, subject to reduction of the said penalty at the discretion of the Deputy'' Commissioner.

This Court in the case of Suman v. Vinayaka and Others, 2014 (1) Kar. L.J. 575 noticed that Trial Courts in recent times are not exercising the power vested under Section 34 for impounding the document, despite note of caution given by the Division Bench in Digambar Warty''s case. It has been held in Suntan''s case, that Trial Court is bound to impose penalty of ten times and collect the requisite stamp duty. It has been further held as under:

"21. Insofar as levy of stamp....deficient portion thereof. Hence, Point Nos. (ii) and (iii) is answered by holding that when the Court impounds document under Section 33 or 34 and when such instrument or document is tendered in the course of evidence, Court has to necessarily levy duty chargeable on such instrument together with penalty as prescribed under clause (a) of proviso to Section 34 without sending the same under sub-section (2) of Section 37 for being adjudicated by the Deputy Commissioner under Section 39. Section 33 can be invoked by Court as well as by every person in-charge of a public office. However, Section 34 can be invoked only by such person who by law or by consent of parties has authority to receive a document in evidence."

Keeping these principles in mind when the facts on hand are examined it would indicate that agreement in question which is the subject-matter of suit namely agreement of sale date 28-8-2002, Annexure-D, is said to have been entered into between plaintiff and defendant. Clause 5 of the agreement indicates that vendors have delivered physical vacant possession of the schedule property in favour of the purchaser under said document which is also duly acknowledged by the purchasers. Thus, Article 5(e)(i) of the Stamp Act is clearly applicable to said deed. Hence, stamp duty that becomes payable would be same as required to be paid under Article 20. In that view of the matter, the memo filed by defendants 2 and 3 as per Annexure-G was required to be accepted by Trial Court. However, Trial Court noticed in K. Govinde Gowda''s case that the penalty had been imposed to an extent of Rs. 5/- only and as such it has levied penalty of Rs. 5/- only on the document in question. The judgment of K. Govinde Gowda''s case relied upon by Trial Court has been held to be not good law in Digambar Warty''s case vide Paragraph 58, which was also in the light of a decision rendered by the Division Bench of this Court in the case of J.S. Paramesh v. Smt. Indramma, 2008(5) Kar. L.J. 502, where under it has been clearly held where a document which is insufficiently stamped is sought to be tendered in evidence, then such Court would be required to impose penalty of ten times the stamp duty. Hence, Trial Court was not justified in accepting the plea of plaintiff or refusing to accept the memo filed by defendants 2 and 3 its entirety.

In the background of above discussion, when the facts obtained in the present case are examined, it would indicate that during the course of the proceedings, plaintiff filed a memo dated 15-1-2013-Annexure-F enclosing therewith two demand drafts for Rs. 25,000/- and Rs. 49,000/- towards duty and penalty. Defendants 1 to 3 raised a plea that proper stamp duty has not been paid on the agreement of sale dated 28-8-2002 and therefore proper stamp duty and penalty is to be paid under Sections 33 and 34 of the Act. A memo dated 21-1-2013 - Annexure-G to the said effect was filed. The Trial Court by impugned order as noticed herein above, has directed the plaintiff to pay Rs. 2,23,600/- towards stamp duty and Rs. 5/- towards penalty. The agreement of sale dated 28-8-2002 was sought to be tendered in evidence of plaintiff-P.W. 1. A perusal of the recitals in the said agreement would indicate that first defendant has executed the said agreement for sale of suit schedule property for a total consideration of Rs. 14,00,000/- and it is specifically stated therein that possession is delivered. In the light of discussion made herein above, the stamp duty which would be payable under Article 5(e)(i) read with Article 20 would be the same duty payable for a deed of conveyance and same being 8% as on the date of agreement, the stamp duty that would be payable would be Rs. 1,12,000/-. Undisputedly, the document in question has been drawn on a stamp paper of Rs. 200/-, thus there is deficit stamp duty of Rs. 1,11,800/- and same would be liable to be paid together with ten times penalty i.e., Rs. 11,18,000/-. In the light of dicta laid down by the Division Bench in Digambar Warty''s case, that Court would not have any option other than levying penalty of ten times the duty payable, penalty of Rs. 11,18,000/- is required to be paid on the instrument in question. As such, the Trial Court was not justified in imposing a penalty of Rs. 5/- by relying upon K. Govinde Gowda''s case which has been held to be not good law in Digambar Warly''s case.

For these reasons indicated herein above, this Court is of the considered view that impugned order cannot be sustained to the extent of levy of penalty of Rs. 5/-. Hence, I proceed to pass the following:

ORDER

(i) Writ, petition is hereby allowed in part.

(ii) Order date 15-7-2013, Annexure-H, is hereby set aside to the extent of imposing penalty of Rs. 5/-.

(iii) Memo dated 21-1-2013 - Annexure-G filed by defendants 2 and 3 is hereby allowed.

(iv) Plaintiff is directed to pay deficit stamp duty of Rs. 1,11,800/- and penalty of Rs. 11,18,000/- and in all, a sum of Rs. 12,29,800/- less Rs. 74,000/- deposited as per memo dated 15-1-2013, Annexure-F, within an outer limit of 30 days from today.