Ballyfabs International Limited ... vs The State Of West Bengal And Others
2021 Latest Caselaw 1473 Cal

                        In the High Court at Calcutta
                       Constitutional Writ Jurisdiction
                                Appellate Side

The Hon'ble Justice Sabyasachi Bhattacharyya

                             WPA No. 7006 of 2020
                                     With
                             IA No: CAN 1 of 2020
                Ballyfabs International Limited and another
                                     Vs.
                    The State of West Bengal and others

For the petitioners      :     Mr. Dhruba Ghosh,
                               Mr. Rupak Ghosh,
                               Mr. Pradip Kumar Sarawagi

For respondent no.4      :     Mr. Surajit Auddy,

Ms. Swapnalekha Auddy

For the State : Mr. Abhrotosh Majumdar, Mr. Ayan Banerjee, Mr. Avra Mazumder

Hearing concluded on : 02.02.2021

Judgment on : 19.02.2021

Sabyasachi Bhattacharyya, J:-

1. IA No: CAN 1 of 2020 is disposed of in view of the urgency involved and

the writ petition is taken up for hearing.

2. The question which arises in the present writ petition is whether the e-

auction sale, in which the petitioners purchased the property-in-

question, was an open market sale within the purview of Section 16B of

the Indian Stamp Act, 1899 (as amended in West Bengal), thus,

exempting the instrument of such sale from assessment by the

registering officer under the Registration Act, 1908, under Section 47A of

the Indian Stamp Act (as amended in West Bengal).

3. Admittedly, the petitioners purchased the property in a public e-auction

conducted by the IDBI Bank under the provisions of the Securitization

and Reconstruction of Financial Assets and Enforcement of Security

Interest Act, 2002 (hereinafter referred to as "SARFAESI Act") for a

consideration of Rs.14,01,00,000/-.

4. In view of the Bank not being willing to execute a conveyance in the

format suggested by the petitioners, petitioner no.1 filed a suit bearing

CS No. 64 of 2018 for declaration and mandatory injunction to approve

of the draft conveyance forwarded by the petitioners. In the suit, the

Bank agreed to execute the conveyance and the learned Single Judge

taking up the suit and connected application directed execution of the

conveyance by the Registrar of Assurances.

5. Subsequently, the Registrar claimed that he was entitled to re-evaluate

the property. Upon hearing the Registrar, the Trial Judge declined to give

any further directions in the suit, since the Registrar was not a party

thereto.

6. The petitioners preferred an appeal from the said order. The matter was

ultimately referred on a question of law to a Division Bench of this court

on August 14, 2020, which observed that the primary question raised

regarding the stamp duty payable for such sale was not gone into and

the petitioners were left free to avail other remedies.

7. The present writ petition has been filed for a direction on the Registrar of

Assurances to accept the value mentioned in the sale certificate issued

by the IDBI Bank Limited (respondent no.4), that is, Rs. 14,01,00,000/-

and to assess the stamp duty and registration fee accordingly without

initiating a fresh enquiry for re-evaluation.

8. Learned counsel for the petitioners cites a Special Bench judgment of

this court, rendered in State of West Bengal vs. Sati Enclave, reported at

(2010) 3 CHN 651. In the said case, a question arose whether the

provisions contained in Section 47A of the Indian Stamp Act (As

Amended in West Bengal), read with Rule 3 of the West Bengal Stamp

(Prevention of Under-valuation of Instruments) Rules, 2001, are

applicable to an instrument executed pursuant to an order of sale passed

by a civil court in a suit for partition, which was conducted by a receiver

appointed by the civil court, by auction after publication in newspapers.

While deciding the said case, the Special Bench considered V.N.

Devadoss vs. Chief Revenue Control Officer-Cum-Inspector and others,

reported at (2009) 7 SCC 438. The Special Bench went on to hold that the

provisions of Section 47A do not apply to open market sales. The Bench

considered Section 2(10) and Section 47A as well as Section 2(16B) of the

Stamp Act and held that if the legislature had intended that Section

2(16B) was to apply to open market sales also, the legislature would have

made a separate or specific provision regarding determination of the

price of the property being sold in open market.

9. Learned counsel argues that the said judgment was rendered on the

premise that open market sales are exempted from scrutiny under

Section 47A, although, in the particular case, a court sale was under

consideration. As such, it is contended that the ratio of the said report

cannot be restricted merely to court sales but applies to all open market

sales.

10. The Supreme Court, in V.N. Devadoss's case (supra), considered Section

47A and observed that there must be a reason to believe that the market

value has not been properly set forth in the instrument, to initiate an

enquiry under the said section. It is not a routine procedure to be

followed in respect of each and every document of conveyance presented

for registration, without any evidence to show lack of bona fides of the

parties by attempting fraudulently to undervalue the subject of

conveyance with a view to evade proper stamp duty and thereby causing

loss to the revenue.

11. The Supreme Court, thus, went on to observe that the properties, which

were disposed of in the said case by orders of the BIFR and AAIFR on the

basis of value fixed by an Assets Sales Committee, were offered for sale in

the open market and bids were invited. Thus, the market value which

could have been fetched, if sold in the open market on the date of

execution of the instrument of conveyance, was the yardstick followed

and there was no possibility of any under-valuation. In the absence of

any scope for entertaining a doubt of under-valuation, Section 47A would

have no application, it was held.

12. Learned counsel for the petitioners further submits that the Registrar of

Assurances, in seeking to undertake an exercise under Section 47A,

relied on two Single Bench decisions of this court, being the judgment

dated February 18, 2020 passed in APO No. 226 of 2017 [Sudipta Traders

Private Limited & Anr. vs. State of West Bengal & Ors.], and the judgment

dated January 25, 2017, passed in WP No. 1236(W) of 2017 [Vitarich Agro

Food India Limited & Anr. vs. The State of West Bengal & Ors.]. Learned

counsel submits that the said judgments proceeded on the basis that the

judgment of Sati Enclave (supra) was restricted to court sale by a

receiver. However, it is argued that such ratio is not borne out by Sati

Enclave (supra), which refers to open market sales and dealt with court

sales in such context. The learned Single Judge, in the said judgments,

held that sales under the SARFAESI Act are on the same footing as

transactions between two private individuals, which ratio does not hold

true, it is contended, in view of the principles enunciated in V.N.

Devadoss (supra) and Sati Enclave (supra).

13. Learned counsel for the State-respondent submits that the sale-in-

question took place within the purview of Section 13(4)(a) of the

SARFAESI Act, which provides that in case a borrower fails to discharge

liability in full within the period specified in Section 13(2), a secured

creditor may take recourse to take possession of the secured assets of

the borrower including the rights to transfer by way of lease, assignment

or sale for realizing the secured assets to recover its secured dues.

14. Rule 8(5) of the SARFAESI Rules provides that before effecting sale of

immovable property, referred to in Rule 9(1), the Authorized Officer shall

obtain valuation of the property from an approved valuer and, in

consultation with the secured creditor, fix the reserve price of the

property and may sell the whole or any part of the immovable

property/secured assets by any of the methods provided therein. The

first proviso to Rule 9(2) clarifies that no such sale shall be confirmed if

the amount of sale price is less than the reserve price. It is argued that

the reserve price is fixed merely on the basis of valuation of the property

by an approved valuer in consultation with the secured creditor. In the

present case, the reserve price stood reduced from Rs.17 crore to Rs.14

crore, as appearing from the three relevant tender notices.

15. Learned counsel for the State argues that the petitioner had quoted an

amount which was basically an aggregate of reserve price and the

minimum bid increment amount. As such, it is argued, the minimal

extent of public participation in the bid is required to be looked into.

16. It is reiterated by the State that the minimum price at which the property

could be sold was substantially scaled down. Reserve price cannot be

treated as market value for the purpose of determination of stamp duty,

since it is not synonymous with valuation of the property.

17. Learned counsel argues that a sale made by an Authorized Officer under

the SARFAESI Act and Rules cannot be treated as a sale made by the

court.

18. Learned counsel submits that, in Sati Enclave (supra), the Special Bench

was considering a court sale and stipulated that the sale must be

conducted by a court through its officers and that the sale must be made

in open market.

19. A co-ordinate Bench, in Anil Kamal Singh vs. The State of West Bengal &

Ors. [2016 SCC OnLine Cal 7460], held that an Authorized Officer, acting

under the provisions of the SARFAESI Act, cannot be said to be a court

and that the evil of under-declaring the actual sale price at the time of

registration and, therefore, evading the actual stamp duty payable, is

sought to be arrested by the introduction of Section 47A.

20. The learned Single Judge, in Anil Kamal (supra), also considered Sati

Enclave (supra) and held that the judgment is not applicable to a sale

made by an Authorized Officer under the SARFAESI Act and Rules.

21. A similar view was taken by the co-ordinate Bench in case of Vitarich

Agro Food India Limited vs. The State of West Bengal [W.P. No. 1236(W) of

2017] as well as in Glovi Infracon LLP vs. Inspector General of Registration

& C.S.R. & Anr. [2017 SCC OnLine Cal 9368] and in VPH Real Estate Pvt.

Ltd. & Anr. vs. Directorate of Registration & Stamp Revenue, Finance Dept.

& Ors. [W.P. No. 1069 of 2015].

22. In Devadoss (supra), the value of the property was fixed by the Asset Sale

Committee (ASC), which consisted of members such as representatives of

IDBI, debenture holders, Government of West Bengal and Special

Director of BIFR. Thus, the ratio laid down therein cannot assist the

petitioner, it is submitted.

23. In the judgment rendered by the Division Bench in Sudipta Traders

Private Limited vs. State of West Bengal and others [APO No. 226 of 2017]

on February 18, 2020, it was held that since the sale of the asset was

made pursuant to an auction conducted by the Recovery Officer attached

to the Debts Recovery Tribunal, a sale certificate obtained by a purchaser

at such a sale becomes the veritable deed of conveyance which may be

registered under Section 89(4) of the Registration Act, 1908. In the said

case, the sale was not made by an Authorized Officer of a bank under the

SARFAESI Act.

24. Learned counsel for the State contends that the reserve price stood

substantially reduced from Rs. 17 crore to Rs. 14 crore, upon which the

petitioner emerged as a successful bidder by quoting an amount which is

an aggregate of the reserve price and the minimum bid increment

amount. It is argued that the valuation of the subject property could not

have been scaled down by Rs.3 crore within a period of five months

under normal circumstances. Thus, it is argued that the principle of

"open market sale" cannot be invoked in the facts and circumstances of

the case. The consideration at which the subject property was sold did

not match the valuation made by the bank.

25. Thus, it is submitted that the writ petition ought to be dismissed.

26. As far as the judgments relied on by the parties are concerned, Glovi

Infracon LLP (supra) did not lay down any ratio as such but merely

followed a previous judgment of the same co-ordinate Bench, rendered in

VPH Real Estate (supra).

27. In VPH Real Estate (supra), on the other hand, the learned Single Judge

merely observed that the Authorized Officer under the SARFAESI Act is

not a court and distinguished Sati Enclave (supra) on the ground that the

said judgment was rendered in respect of a court sale. The Division

Bench judgment in Sudipta Traders (supra) was considering the question

as to whether the sale certificate issued by a Recovery Officer under the

Recovery of Debts due to Banks and Financial Institutions Act, 1993 was

to be registered without calling into question the quantum of the

purchase money. The Division Bench held that it was not necessary to

have any deed of conveyance prepared for the purpose of perfecting the

sale, since the certificate of sale was conclusive proof of such sale. As

such, the said Division Bench judgment is not directly relevant for the

present context, particularly since the parties agreed to the execution of

a sale deed, which agreement was crystallized in the order passed by this

court in a suit.

28. In Anil Kamal Singh (supra), the learned Single Judge the view of the

Registering Authority that, as the property was not sold by a court or by

a Collector or a Revenue Officer, stamp duty was chargeable on

assessment under Section 47A. The premise on which the judgment in

Anil Kamal Singh (supra) was rendered was that Sati Enclave (supra)

referred to a court sale and an Authorized Officer acting under the

provisions of the SARFAESI Act cannot be said to be a court.

29. The respondents rely on Ram Kishun and others vs. State of Uttar

Pradesh and others, reported at (2012) 11 SCC 511 in support of the

proposition that the word "value" means intrinsic worth or cost or price

for sale of a property. It was observed that the concept of reserve price is

different from valuation of the property. Since an invitation to tender is

not an offer, but an attempt to ascertain whether an offer can be

obtained with a margin, it cannot be equated with valuation, which is a

question of fact to be fixed on relevant material.

30. There cannot be any quarrel with such proposition.

31. The entire arguments of the parties, as well as the judgments of the co-

ordinate Bench relied on by the State-respondent, hinge around the

interpretation of Sati Enclave (supra) and V.N. Devadoss (supra).

32. In Sati Enclave (supra), the Special Bench was considering the

applicability of Section 47A of the Indian Stamp Act to a court sale in a

suit for partition and a sale in course of liquidation proceedings before

the company court, respectively by auction and advertisement. The

Special Bench, in paragraph no.14 of the judgment, carefully considered

the rival submissions as well as the ratio laid down in V.N. Devadoss

(supra). The Bench considered the definition of "conveyance" as stated in

Section 2(10) of the Stamp Act, Section 47A of the Stamp Act (as

amended in West Bengal) and the scope of operation of such provisions.

33. In paragraph no. 16 of Sati Enclave (supra), the provisions of Section

2(16B), Section 27, Section 47A and Section 75 of the Indian Stamp Act

were considered, along with Rule 3(1) of the West Bengal Stamp

(Prevention & Under-valuation of Instruments) Rules, 2001 (hereinafter

referred to as "the 2001 Rules"). It was noted that Rule 3(1) of the 2001

Rules lays down the manner of determination of market value and

furnishing of particulars relating to any property.

34. In conclusion, keeping in mind the object of insertion of Section 47A, the

Special Bench held that Rule 3 of the 2001 Rules provides for

determining the market value of the property where the Registering

Authority has reason to believe that the market value of the property was

not truly set forth in the instrument executed at a private sale and the

Registering Officer is to find out what price the property would have

fetched or would fetch if sold in open market on the date of execution of

the instrument; but when the property is sold in the open market, no

such fiction is required to be provided for determining the price; it is thus

obvious that the definition is not to apply if the property is actually sold

in the open market.

35. The Special Bench, in paragraph nos.24 and 25, compared between a

private sale, where the legislature wanted the Registering Authority to

find out the market value of the property, and an open market sale.

36. The Special Bench categorically found that, if the legislature had

intended that Section 2(16B), of the Stamp Act was to apply to open

market sales also, the legislature would have made a separate or specific

provision regarding the determination of the price of the property being

sold in open market. The expression "if sold in open market" pre-

supposes that the property was not sold in open market and, therefore,

the legislature made the provision of Section 2(16B). The language of

Rule 3 of the 2001 Rules also buttresses the view, as per the Special

Bench. None of the four methods of determining the value of the

property, it was held, refers to value fetched at an open market sale. On

such premise, the Special Bench relied on Devadoss's case (supra) and

held that the legal fiction created for ascertaining the market value in

respect of private sales did not apply to open market sales.

37. Hence, the pre-dominant ratio in Sati Enclave (supra) was that Section

47A is not attracted to open market sales, even without reference to

court sales. Only consequently, in paragraph no.27 of Sati Enclave

(supra), the Special Bench held that a court sale, being an open market

sale, also did not attract Section 47A.

38. In fact, the Special Bench stipulated that, for a court sale to satisfy the

requirement of an open market sale, two conditions shall have be

satisfied:

(a) There must be wide publicity of the proposed sale and particularly

there shall be publication of advertisement in at least one

newspaper having wide circulation in the concerned

city/town/district;

(b) The purchaser of the property must not be connected with or

related to the Authority/Officer conducting the sale.

39. The above conclusions would equally apply to sales conducted by the

company court after publication of advertisement in a widely circulated

newspaper, the Special Bench held.

40. In V.N. Devadoss (supra), the Supreme Court held that market value is a

changing concept. In the said case, the property was offered for sale in

the open market on a value fixed by the Assets Sales Committee

pursuant to orders of BIFR and AAIFR. Thus, it was observed, there is no

question of any intention to defraud the revenue or non-disclosure of the

correct price.

41. Thus, both the Special Bench and the Supreme Court went on to lay

down the ratio that an open market sale, by its implicit nature, cannot

create a doubt as to the consideration of the property, thus excluding

Section 47A of the Stamp Act.

42. Even the language of Section 47A of the Stamp Act indicates that the

pre-requisite of the exercise of ascertainment of market value of the

property was that the Registering Officer must have reason to believe

that the market value of the property has not been truly set forth in the

instrument presented for registration.

43. Section 2(16B) of the Stamp Act (as amended in West Bengal) defines

market value in relation to any property which is a subject-matter of any

instrument as the price which such property would have fetched or

would fetch if sold in open market on the date of execution of such

instrument.

44. Thus, a conjoint reading of the provisions of the Stamp Act clearly point

in the direction that the exercise under Section 47A merely creates a

fiction of the actual market value. Such ascertainment by the Registering

Officer, under Section 47A, would only be occasioned if there was a

reason to believe that the market value had not been truly set forth in

the instrument presented for registration. Only in case of such doubt

would the Registering Officer resort to the yardsticks stipulated in the

said section, to arrive at a market value on the basis of a fiction, derived

from contemporaneous sales in nearby properties.

45. However, if the sale-in-question, in the first place, is an open market

sale, upon due publication of notice and advertisement in newspapers, it

is obvious that the consideration obtained for the sale was actually the

"market value" of the property in the true sense of the term. Thus, there

would not arise any requirement to resort to a legal fiction on the basis of

other contemporaneous transactions to justify an assessment under

Section 47A.

46. Hence, with utmost respect and humility, the decisions arrived at by the

learned Single Judge in Anil Kamal Singh (supra), Vitarich Agro (supra),

VPH Real Estate Private Limited (supra) and Glovi Infracon LLP (supra)

were based on a misdirected interpretation of the ratio laid down in Sati

Enclave (supra), relying on V.N. Devadoss (surpa).

47. What was laid down in Sati Enclave (supra) was clearly that Section 47A

was not attracted to an open market sale, irrespective of whether the sale

was ordered by a court or in respect of a Company Act proceeding. The

conclusion, that the said section is not applicable to a court sale, was

only a corollary to the finding that a court sale is also an open market

sale, thus, justifying the finding that Section 47A also did not operate in

case of court sales. However, as per the chain of logic followed in Sati

Enclave (supra), the first deduction was that Section 47A of the Stamp

Act is not attracted in case of any open market sale and, consequentially,

that a court sale, being an open market sale, also gets similar benefit.

However, with due respect, the co-ordinate Bench judgments adopted a

converse line of reasoning.

48. In the present case, the materials on record clearly show that not only

one but three public e-notices were issued for sale of the subject

property, respectively on August 25, November 3 and December 31,

2017. Such notices were published in two widely circulated newspapers

in the city and the State in all the three cases.

49. As pointed out by the State-respondent itself and vindicated in Ram

Kishun (supra), valuation of a property is not synonymous with reserve

price. The reserve price is fixed on an appropriate assessment by a

valuer, while valuation is the actual market price which might be derived

from the market itself. Thus, the disputed sale, being a widely circulated

open market sale as envisaged in Sati Enclave (supra) and V.N. Devadoss

(supra), there arose no question of resorting to any further legal fiction,

on the basis of contemporaneous transactions regarding nearby

properties, in an exercise of ascertainment under Section 47A. Such an

assessment would be superfluous and uncalled for, amounting to beating

about the bush whereas the bird itself was at hand, the market value

having been determined by the market itself.

50. The reduction of reserve price cannot be a valid ground for challenge to

the consideration price in the present case; rather, the Authorized Officer

was compelled to so reduce in view of no bid being offered in the market

for the property-in-question despite widely circulated public e-auctions.

This is only a commentary on the demand for such property in the

market, which is the ultimate determinant of the market price. As argued

by the State-respondent itself, quite correctly, the reserve price was

entirely different from market value. Thus, the reserve price or reduction

therein could not have any bearing on the actual market price obtainable

for the property in the open market. Hence, the only determinants as

stipulated in Sati Enclave (supra) being wide circulation in more than one

newspaper (in the present case) and absence of relation between the

purchaser and the Authorized Officer (no such relation has been pleaded

or proved in the present case), were fully satisfied in the present case.

51. It may be noted here that, relying on the ratio decidendi of Sati Enclave

(supra), not only court sales and company sales but any open sale by any

authority by public e-action on sufficiently wide circulation worth the

name, including sales under the SARFAESI Act, come within the purview

of "open market sales", thus excluding such sales from the scrutiny

contemplated in Section 47A of the Stamp Act.

52. Hence, the view taken by the learned Single Judge in Anil Kamal Singh

(supra), Vitarich Agro (supra), VPH Real Estate Private Limited (supra) and

Glovi Infracon LLP (supra), being contrary to the ratio laid down in Sati

Enclave (supra), I am constrained to respectfully disagree with the same.

53. Accordingly, the matter may be referred to a larger Bench, to be

constituted by the Hon'ble the Chief Justice, on the following question of

law:

Whether a sale conducted by an Authorized Officer under the

SARFAESI Act, 2002 is an open market sale and is thus excluded

from the scrutiny contemplated in Section 47A of the Indian Stamp

Act, 1899 (as amended in West Bengal).

54. The matter be sent to the Hon'ble the Chief Justice for assignment before

an appropriate larger Bench for resolution of the above question under

reference.

55. Final judgment is reserved in WPA No.7006 of 2020, till a decision is

rendered on the question under reference by the appropriate larger

Bench.

56. Urgent certified copies of this order shall be supplied to the parties

applying for the same, upon due compliance of all requisite formalities.

( Sabyasachi Bhattacharyya, J. )