Rajinder Kumar vs State of J&K and Ors.

These two petitions call in question the power of the audit party to seek recovery of some arears in payment of stamp duty and also the

warrants of demand issued by the SubRegistrar in consequence to the findings of the audit party.

In writ petition No:327/1981, the petitioner received an overdraft facility of Rs. 15,000 from the Jammu and Kashmir Bank Ltd. Kishtwar

(hereinafter called the bank). The petitioner under an agreement hypothecated his stocksin trade to the bank and executed a hypothecation deed

dated 8.10.1979 in favour of the bank as primary/ principal security. In addition to this hypothecation deed, the petitioner also mortgaged the

property by way of a mortgage deed dated 8.10.1979. The petitioner calls this mortgage to be a collateral Security. The mortgage deed was

registered by the SubRegistrar, Kishtwar, on 9.10.1979 Under Article 14 (c) of Schedule to the Stamp Act. 1977. Same was duly accepted and

registered by the SubRegistrar Kishtwar. An audit party conducted an inspection of the Court of SubRegistrar (SubJudge), Kishtwar. The party

held that the collateral Security fell within the amplitude of Art. 40 (d) and not Art. 40 (c) of the Schedule to the Stamp Act and was required to be

stamped as a bond. It was held that the instrument was insufficiently stamped to the tune of Rs. 234.90.

Similarly, SubRegistrar (Munsiff), Nowshehra, issued recovery warrants against the petitioner in writ petition No. 195 of 1982 to the tune of Rs.

4147.50 again basing the same recovery on the test check made by the audit party.

The simple question raised in both these petitions is as to whether or not an audit party is competent to order the recovery of a deficit amount of

stamp duty or whether the SubRegistrars are competent to issue warrants of recovery for the said amounts as indicated by the Audit party.

Chapter III of the Stamp Act relates to adjudication and recovery of stamp duties. Having a birds eye view of the scheme of this chapter,

adjudication of insufficiency of documents has been entrusted to the Collectors for all times and registering officers at the [SIC] time of registration

of the documents.

Registrable documents embody agreements, transfers and bequests and other which confer property rights upon persons in favour of whom they

are drawn, those persons should necessarily be interested in seeing that these documents are free from any lacuna. This perception seems to form

the mental background in which the Act has been formulated. By making an unduly or insufficiently stamped document in admissible in evidence

and incapable of being acted upon, the Act impliedly wants the beneficiaries of these instruments to be guarded. Because in case of such

insufficiency they are running a risk. It is because of this that is case of an inadvertence such beneficiaries can in terms of section 41, within a period

of one year from the execution of the document, on their own motion produce the document before the collector to adjudge the exact amount of

stamp duty chargeable.

No doubt that apart from streamlining documentation of instruments, the main object of the Act was also to being revenue to the State. Chapter

IV ""of the Act has made room for taking care of the object. Section 33 empowers every person authorized to receive evidence and every person

incharge of a public office (except a Police Officer) to impound an insufficiently stamped document when the same is produced or comes before

him. May, rather SubSection 2 of section 33 makes it obligatory upon every such officer to examine every instrument so chargeable and so

produced.

The question as to who is empowered to adjudge as to whether the instrument is not properly stamped? What is the proper duty and above all

who is empowered to make recoveries, forms the sheet anchor of these two cases.

Section 33 of the Act not only empowers, but also makes it obligatory upon an authority or an officer (other than a police officer) to ascertain

whether a document, which comes up or is produced before him is properly stamped. In case the document is not properly stamped, such

authority or officer is called upon to impound .the document. The impounded document shall be sent to the Collector. The collector while acting in

terms of Sec. 40 of the Act, shall in case of deficiency in Stamp duty require the payment of proper duty, or the amount required to make up the

same together with penalty. The recoveries can be made by the Collector even by distress and sale of the property while taking recourse to section

48 of the Act.

The Act makes it clear that it is the Collector only to whom, such impounded document shall be referred and who shall determine ""the exact

amount of stamp duty chargeable and such finding is supposed to be final on the issue.

The Audit party could while the documents covered by these petitions, came up before them in the performance of their official functions,

impound the documents in terms of section 33, and refer the same for adjudication to the Collector after taking recourse to section 48.

Rules for the Inspection of Stamp Duties have been promulgated in 1936. These rules provide for the method to be adopted while inspecting

different office's. These rules shall be referred to as 'The Rules' hereinafter. According to these rules a Commissioner of Stamps for the State and

two stamp officers for two provinces are ordained to be appointed.

A Stamp Officer, while inspecting a registration office can exercise power in terms of Rule 8. This rule empowers the Stamp Officer only to

draw the attention to Presiding Officers and the Court and Heads of Offices [SIC] towards the documents which are before them and are

insufficiently stamped. Stamp Officer shall advise them to take recourse to the provisions of stamps Act, in impounding these documents under

section 33.

I had given sufficient time to the learned counsel for the State to show that any of the members of the Audit party was a stamp officer under the

Rules, but he failed to do so.

Whatsoever the position; whether or not any member of the audit party was a stamp officer, that makes no difference. Because, any officer

(except a Police Officer) while acting in official capacity, can impound such a document in terms of section 33 when it comes before him. Audit

party or the Accounts Officer could not have passed orders of recovery of the deficit amount of stamp duty themselves as has been done in these

cases.

Coming to the power of Registering Officers, we find that the Act. does not invest any power of recovery of deficiency in stamp duty with

them after registration, once they register a document, and regular it to the party, their job is over and they become functous officio. They do not

have any further power to call for its production. This point has been exhaustively dealt with in Donoghs Indian Stamp Law IX Edition

(by K.J. Rustam Ji). But the Power of the Stamp officer under rule 8 Supra does mark a. difference in our State.

In the present two cases the SubRegistrar as soon as they received an audit note issued writs of demand for the recovery of the amount by

which according to Audit party the stamp duty fell short.

On the anvil of law discussed above, I come to the following findings:

(a) That an audit party can conduct an inspection of the office, in case they have any statutory power including one under the Inspection of Stamp

Duty Rules.

(b) That the only power such officers could exercise was one under section 33 of the Stamp Act.

(c) That the officers/Audit party can indicate as to which documents are insufficiently stamped and ask the registration officers to act under section

33 of the Act and impound the document.

(d) This implies that the SubRegistrar would refer the documents to the concerned Collector, who would after following the procedure laicf down

in Chapter IV of the Act make recovery if any under the provisions of the act including Section 48.

(e) That neither tfcc Audit party nor any accounts Officer himself has any power to order for recovery of any amount by which Stamp duty falls

short.

(f) That the SubRegistrars are not bound to comply with the orders of Audit parties, in asking for recovery of the amount. They on the other hand,

on receiving such audit reports should act in terms of Section 33 of the Act. The very reference of the document by Stamps Officer/Audit party to

the SubRegistrar shall bring him and a registering officer shall be competent to ask for production of the document and impound it in terms of

section 33,

While laying down the above proposition of law, I have all along been assuming that audit party worked, under the rules supra although nothing

to indicate the same was shown. However, to safeguard the fiscal interest of the State, it is necessary to presume so. let me also observe that in

case, not yet done, the State should be enacting rules make room for bringing the inspections of an Audit party within the mischief of power

exercisable by a Stamp Officer under Rule 8 of the Rules Supra.

In the result the petitions are allowed and both the orders impugned are quashed, the respective Subregistrars shall after impounding the

documents refer them to the concerned Collectors for adjudicating the exact amount of Stamp duty and for recovery of deficit amount, if any under

law. There shall, however, be no order as to costs.

Connected C.M.Ps shall also stand disposed of thereby vacating the interim directions.