Sudeer Associates vs U.O.I & Ors
2009 Latest Caselaw 1913 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI



+                        W.P.(C) 18077-79/2006 & CM No. 9896/2007



        SUDEER ASSOCIATES                                       ..... Petitioner
                       Through:             Mr. V. Sudeer, Advocate.


                               versus


        U.O.I & ORS                                            ..... Respondents
                               Through:     Ms. Madhu Tewatia, Ms. Sidhi Arora
                                            and Mr. Amit K. Paul, Advocates for
                                            Respondent MCD.
                                            Mr. Nazmi Waziri, Senior Advocate
                                            with Mr. Shoaib Haider, Advocate for
                                            Respondent GNCTD.
                                            Mr. Rajiv Bansal and Mr. Prashant
                                            Mehra, Advocates for Respondent
                                            DDA.


CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE NEERAJ KISHAN KAUL

                               ORDER

% 06.05.2009

1. These writ petitions have been filed by the petitioners alleging

that the Central Government, Delhi Development Authority (in short

„DDA‟) and Municipal Corporation of Delhi (in short „MCD‟) are willful

mute spectators to the fraud amounting to several crores of rupees by

way of evasion of stamp duty perpetuated by the builders and

purchasers of the commercial properties built on land leased to

builders by the DDA for construction and sale of commercial

properties.

2. When the matter was listed before this Court on 5th March,

2008, the following order was passed:-

" The issue involved in this matter relates to registration of lease deedand also sale deeds. However, for being able to have a sale deed prepared, the land is to be converted from lease hold to freehold. Delhi Development Authority has to adopt a policy for simplifying the procedure for getting the leasehold rights converted to freehold rights. Counsel for the DDA states that effective steps are being taken in that regard and that in fact a modified conversion policy has already been conveyed by the Ministry to the DDA, which is being examined. It is also brought to our notice that the aforesaid policy of conversion is already in place, and that only the formula for conversion charges is to be prepared and notified by the Government of India. Let the same be done within eight weeks from today so that the aforesaid policy could be given effect to.

All the respondents shall file their counter-affidavits and rejoinders particularly dealing with the issue as to whether the property transferred to a third party should not be so transferred till after executing a lease deed, so that the stamp duty payable could be received by the competent authority. Four weeks time is granted to the respondents for filing their counter-affidavits and rejoinders, if any, could be filed before the next date.

Renotify on 21st May, 2008."

3. On 15th April, 2009, this Court passed the following order:-

" Mr. Waziri, learned standing counsel appearing for the Government of NCT of Delhi states that the necessary circular will be issued giving appropriate directions to MCD, NDMC and Delhi Cantonment Board as provided under Section 33 of the Indian Stamps Act, 1899 for impounding documents which are under stamped and that a copy of the circular will be placed on record.

Adjourned to 6th May, 2009."

4. Today, during the course of hearing, the learned counsel for

the Government of NCT of Delhi handed over to us in Court the

Minutes of the meeting held by the Government of NCT of Delhi

regarding the evasion of stamp duty by the builders/promoters. The

relevant portion of the Minutes of the meeting held on 27th April,

2009 is reproduced below:-

"3. Initiating the discussion, the Divisional Commissioner-cum-Chief Controlling Revenue Authority under the Indian Stamp Act 1899 briefed the contents of the said PIL about evasion of Stamp Duty by the builders/promoters and purchasers of commercial property on the land leased out by DDA, and threw light on their modus-operandi causing loss of Govt. revenue. It received its auction money/premium soon after the auction is over but no Lease Deed is executed for a long time and this is a temporary loss of revenue/Stamp Duty to the Government. They received the purchase price from the intending purchasers on installments, and on completion of the shops etc. they transfer to the purchasers, through different types of Deeds/Documents, which are neither registered nor stamped and also do not create or transfer title/ ownership of the property on the purchaser. The Lease Deed prescribes various terms and conditions while selling the built up properties to the purchasers and if these terms and conditions are properly adhered to, by the DDA, the evasion of Stamp Duty can be avoided. One of the such documents has been titled as „Flat Buyers Agreement" executed between the builders and buyers. Not only this but subsequent sales are also made through this Agreement by way of endorsement and assignment at the time of every transfer/ sale and the same is confirmed or allowed and signed by the builder. It means that the builder has full control even at the time of further sale/subsequent sale of the property in question, and by these acts huge amount of Stamp Duty is evaded every time.

4. Similarly, mutation of the property is done by MCD through such type of documents. The purchaser, as per the petition, gives a cheque/draft of requisite amount of Transfer Duty in the name of the Municipal Corporation on the basis of the amount of sale mentioned in the said agreement. MCD undertakes the mutation of the property in the name of the buyer in the absence of any registered Transfer Deed under the Registration Act, 1908 and in support of this the departmental instructions issued by the Assessor and Collector, MCD vide his letter No. Tax/A&C(PC)/PA/V/2002/199 dated 01.01.2003 referred. It permits the direct receipt of Transfer Duty for the purpose of mutation of property without registering the Transfer Deed. These instructions are also in contravention to the provision of Section 147(2)(a) of the Delhi Municipal Corporation Act 1957 and also against the orders of the IGR Delhi vide Order No.F.1(12)/Regn./Div. Commr./2001/3257 dated 28.09.2001. Apart from the huge loss of Stamp Duty and Registration Fee to the Government of NCT of Delhi, there is also substantial loss to the MCD of Transfer Duty because of under-valuation of the property in such un-registered and un- stamped documents.

5. The concern was appreciated and some corrective measures have to be taken to avoid the loss of legitimate revenue of Government Stamp Duty was emphasized. Provision of Section 33 of Indian Stamp Act prescribes that whenever a document is produced before the Court or before the Public Officer and he finds that document is under-stamped or not property stamped he would impound it and refer it to the Collector of Stamps for realization of deficient Stamp Duty, penalty and Transfer Duty as per the provision of Section 33 read with Section 35 of the said Act. The Collector of Stamps is not empowered under the Act to search door to door as to check whether any purchase/sale has been made through properly stamped document or not. Provision of Section 47- A of Indian Stamp Act states if someone has evaded the Stamp Duty on non-observance of the circle rates, the duty can be collected within two years of the date of registration of the document. The MCD, DDA, NDMC and other public offices including the Office of the Registrar of

Companies are legally bound to impound the deficiently/improperly stamped instruments and refer it to the concerned Collector of Stamps for realization of the deficient Stamp Duty, penalty and Transfer Duty on the transfer documents of immovable properties.

6. The Commissioner (H)/LD, DDA informed that all steps are taken to ensure that no evasion of Stamp Duty takes place and transfers are allowed after fulfilling the terms and conditions of the Lease Deed. It was also informed by her that the first sale of the built up premises on leasehold land is allowed by the lessor on the payment of Rs. 100/- for each flat, floor, space and for subsequent sale/transfer, the lessor may on payment of proportionate of 50% of the unearned increase grant permission to the sub-lease/transferor for subsequent sale as per Nazul Rules. A specimen of Perpetual Lease containing the terms and conditions, Conveyance Deed proforma "Form BA" was provided by her for further study and examination at the end of the CCRA/ Collector Office.

XXX XXX XXX

8. The matter was deliberated and Chief Secretary advised the MCD & DDA representatives to forward the under- stamped/un-stamped documents received during the mutation process of immovable properties to the Collector of Stamps/Revenue Department for realization of deficient Stamp Duty. For public awareness, advertisement may be placed in National Press about the necessity of the registered document for transfer of immovable property for better title and proof of ownership. An order in this regard may be drafted for circulation."

5. In view of this, nothing further survives in the matter. The

Government of NCT of Delhi is initiating necessary action and taking

appropriate steps with regard to evasion of stamp duty. The

respondents are directed to ensure strict and immediate compliance

of the decision taken in the meeting held on 27th April, 2009 and take

immediate steps to implement the decision at the earliest. These writ

petitions are accordingly disposed of in the above stated terms. The

pending application also stands disposed of.

CHIEF JUSTICE

NEERAJ KISHAN KAUL, J May 06, 2009 sb