Kerala High Court
Sajan Varghese vs State Of Kerala on 24 February, 2025
Author: Kauser Edappagath
Bench: Kauser Edappagath
WP(C) No..28359/2024
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE DR. JUSTICE KAUSER EDAPPAGATH
MONDAY, THE 24TH DAY OF FEBRUARY 2025 / 5TH PHALGUNA, 1946
WP(C) NO. 28359 OF 2024
PETITIONERS/NA:
1 SAJAN VARGHESE
AGED 66 YEARS
S/O. LATE K.V. VARGHESE, NO. 9, SAJ HOUSE, KARIYAD
MATTOOR ROAD, SAJ EARTH RESORT, VAPPALASSERY P.O.,
ERNAKULAM, KERALA, PIN - 683572
2 MINI SAJAN VARGHESE
AGED 55 YEARS
W/O. K. SAJAN VARGHESE, NO. 9, SAJ HOUSE, KARIYAD
MATTOOR ROAD, SAJ EARTH RESORT, VAPPALASSERY P.O.,
ERNAKULAM, KERALA, PIN - 683572
BY ADVS. SANTHOSH MATHEW (SR.)
ANIL SEBASTIAN PULICKEL
ARUN THOMAS
VEENA RAVEENDRAN
KARTHIKA MARIA
SHINTO MATHEW ABRAHAM
LEAH RACHEL NINAN
MATHEW NEVIN THOMAS
KARTHIK RAJAGOPAL
KURIAN ANTONY MATHEW
JOE S. ADHIKARAM
APARNNA S.
RESPONDENTS/NA:
1 STATE OF KERALA
REPRESENTED BY THE INSPECTOR GENERAL OF
REGISTRATION, DEPARTMENT OF REGISTRATION, VANCHIYOOR
P.O., THIRUVANANTHAPURAM, KERALA, PIN - 695035
2 DISTRICT REGISTRAR
DISTRICT REGISTRAR OFFICE, 3RD FLOOR, PERIMBILLY
BUILDING, MG ROAD, SHENOYS,
ERNAKULAM, KERALA, PIN - 682011
WP(C) No..28359/2024
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3 SUSHIL VIJOY ARORA
S/O. LATE SRI. KRISHNA VIJOY ARORA, 47/95, 4A1, JM
TOWERS, PALLIKAVU TEMPLE ROAD,
VADUTHALA, KOCHI, PIN - 682023
4 SANGEETHA VIJOY ARORA
W/O. SUSHIL VIJOY ARORA, 47/95, 4A1, JM TOWERS,
PALLIKAVU TEMPLE ROAD,
VADUTHALA, KOCHI, PIN - 682023
5 DISTRICT COLLECTOR
COLLECTORATE, CIVIL STATION, KAKKANAD,
ERNAKULAM, KERALA, PIN - 682030
BY ADVS.
REJI GEORGE R3 AND R4
NASEER MOIDU(K/367/2004)
ANUPAMA JOHNY(K/000498/2004)
SAISANKAR.S(K/002188/2021)
MOHAMED RAYYAN ALI(K/899/2024)
JOSEPH RAJU MATHEWS(K/002036/2024)
SMT.DEEPA V. GOVT.PLEADER
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION
ON 19.11.2024, THE COURT ON 24.02.2025 DELIVERED THE FOLLOWING:
WP(C) No..28359/2024
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"C.R."
JUDGMENT
This writ petition concerns the scope and ambit of Sections
31, 33, 39, 40, and 41 of the Kerala Stamp Act, 1959 (for short, 'the
Stamp Act').
2. The petitioners are the directors of M/s.Saj Holdings Pvt.
Ltd., a company incorporated under the Indian Companies Act, 1956.
The petitioners entered into Ext.P5 agreement for sale with the 3 rd
and 4th respondents, whereby the former agreed to sell their share
in the company in favour of the latter. Ext.P5 agreement contained
an arbitration clause providing for arbitration between the petitioners
and the 3rd and 4th respondents in case of dispute. According to the
3rd and 4th respondents, certain sums are due to them from the
petitioners and the company in connection with the agreement.
Therefore, they invoked the arbitration clause in the agreement and
preferred AR No.150/2023 before this court, seeking the
appointment of an Arbitrator to adjudicate the dispute. The
petitioners herein were two of the respondents in AR No.150/2023.
The petitioners brought to the notice of this court in AR No.150/2023
that Ext.P5 agreement was an insufficiently stamped document. This
Court disposed of AR No.150/2023 appointing Justice.(Retd.)
T.R.Ramachandran Nair as the sole arbitrator to adjudicate the
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dispute. Relying on the Seven Judge Bench decision of the Supreme
Court in In Re: Interplay between Arbitration Agreements under the
Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899
[2023 SCC OnLine SC 1666], the question regarding the insufficiency
of the stamping was left open to be decided by the Arbitrator.
3. The Arbitrator issued notice to the parties to the
arbitration regarding the commencement of the arbitration. The
petitioners entered appearance before the Arbitrator and filed Ext.P2
application seeking a direction to the 3 rd and 4th respondents to
produce the original of Ext.P5 agreement, impound the same, follow
the procedure prescribed under the Stamp Act for insufficiently
stamped documents and proceed with the adjudication of the
arbitration case only after the 3rd and 4th respondents cured the
defect relating to the insufficient stamp duty. Thereafter, the 3 rd and
4th respondents filed their claim statement in the arbitration case.
Along with the claim statement, they produced only a copy of Ext.P5
agreement. The petitioners then filed Ext.P4 application before the
Arbitrator for the dismissal/ termination of the arbitration case on
account of the non-production of the duly stamped original of Ext.P5
agreement. While so, the 3rd and 4th respondents produced before
the Arbitrator the original of Ext.P5 agreement on 18/7/2024, which
bore a certificate dated 17/7/2024 issued by the 2 nd respondent
under Section 41(1) of the Stamp Act. The certificate stated that the
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deficit stamp duty of `1,50,000/- and fine of `10,000/- have now
been remitted. According to the petitioner, the certificate dated
17/7/2024 shown in Ext.P5 has been illegally and improperly issued
by the 2nd respondent only to help the 3rd and 4th respondents. The
writ petition has been filed to quash the certificate dated 17/7/2024
found in Ext.P5 and to give a direction to the 2 nd respondent to
reconsider the issue of stamp duty and penalty, if any, payable for
Ext.P5 agreement in accordance with law.
4. I have heard Sri. Santhosh Mathew, the learned Senior
Counsel instructed by Sri.Anil Sebastian Pulickel, the learned counsel
for the petitioners, Sri.Reji George, the learned counsel for the 3 rd
and 4th respondents and Smt.Deepa V., the learned Government
Pleader.
5. The learned Senior counsel Sri. Santhosh Mathew
submitted that the certificate issued by the 2 nd respondent under
Section 41(1) of the Stamp Act is legally unsustainable for the reason
that the 2nd respondent has no power to merely accept an
insufficiently stamped document given to him by a party to a
dispute, adjudicate it, accept stamp duty and penalty and certify that
sufficient stamp and penalty have been remitted. The learned
counsel further submitted that no notice or intimation has been
given to the petitioners who are the executants as well as the first
named party in Ext.P5 agreement by the 2 nd respondent before
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ostensibly undertaking the process of determining the stamp duty
and penalty payable in connection with the said agreement which
has caused prejudice to them. The petitioners, who have not been
given any notice of any proceedings before the 2nd respondent, have
thus been deprived of reasons for the stamp duty and penalty which
the 2nd respondent has ostensibly declared as payable. Such an
unreasoned exercise of power by the 2 nd respondent is unsustainable
in law, submitted the Senior Counsel. The learned Senior Counsel
further submitted that the 2nd respondent ought to have taken note
of the fact that the issue regarding the insufficiency of the stamp
duty of the agreement is pending consideration before the Arbitrator
appointed by this Court and, in such circumstance, ought not to have
adjudicated the sufficiency of the stamp duty without hearing the
petitioners. It is also submitted that the action of the 2 nd respondent
was without authority since the instrument was not presented before
him in the performance of any of his office functions, and
consequently, he was not empowered to adjudicate and certify the
instrument. The certificate issued by the 2 nd respondent under
Section 41(1) of the Stamp Act amounts to an unreasoned exercise
of power by him, added the learned Senior Counsel.
6. On the other hand, the learned counsel for the 3 rd and 4th
respondents Sri.Reji George submitted that the 2 nd respondent
impounded Ext.P5 agreement and passed an order directing the 3 rd
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and 4 th
respondents to pay the deficit stamp duty and endorsed the
certificate on Ext.P5 agreement strictly in compliance with the
statutory formalities and hence, the petitioners have no cause of
action for filing the writ petition. The learned counsel further
submitted that 3rd and 4th respondents have no intention to claim
any amount from the petitioners towards the payment of stamp duty
or penalty paid by them and hence the petitioners are in no way
prejudiced by the adjudication of the stamp duty and penalty by the
2nd respondent. The learned counsel also submitted that the
certification dated 17/7/2024 shown in Ext.P5 agreement under
Section 41(1) of the Stamp Act is valid in all respects. There is no
statutory requirement to issue notice to all parties to the instrument
before impounding or adjudicating the stamp duty payable, added
the Counsel.
7. It is not in dispute that Ext.P5 is insufficiently
stamped. Chapter IV of the Stamp Act provides how instruments not
duly stamped are to be dealt with. Section 33 specifically deals with
the examination and impounding of instruments not duly stamped.
Section 34 says that an instrument not duly stamped is inadmissible
in evidence. The proviso to the said section clarifies that any
instrument not duly stamped will be admitted in evidence on
payment of the deficit stamp duty together with penalty. Section 39
speaks of the Collector's power to stamp instruments impounded
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under Section 33. Section 40 gives an option to a person to produce
on his own motion any instrument not duly stamped before the
Collector within one year from the date of its execution to pay deficit
stamp duty in case the omission to duly stamp the instrument has
been occasioned by accident, mistake or urgent necessity. Section
41 provides for endorsement of instruments on which duty has been
paid under Sections 34, 39 or 40 of the Stamp Act. Section 31, which
falls under Chapter III, deals with an altogether different situation
where any person is permitted to produce any instrument, whether
executed or not and whether previously stamped or not, before the
Collector and seek his opinion as to duty, if any, with which it is
chargeable. Sections 31, 33 and 40 operate in different fields and
each Section is not controlled by the other.
8. The 2nd respondent issued the certification under Section
41(1) of the Stamp Act. Section 2(c) empowers the Government to
appoint any officer as "Collector" for identified purposes under the
Stamp Act. In exercise of the said power, the Government of Kerala
has appointed District Registrars as "Collectors" for the purpose of
Sections 31, 32, 37, 38(1), 39 and 41 of the Stamp Act as per Ext.P7
notification. Thus, the 2nd respondent has the power to issue a
certificate under Section 41(1) of the Stamp Act. However, as per
Section 41(1), such a certificate can be issued only when the duty
and penalty, if any, leviable in respect of any instrument have been
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paid under Sections 34, 39 or 40. Section 40 deals with a person
producing an insufficiently stamped instrument on his own motion
within one year from the date of execution of the agreement. In this
case, Ext.P5 was executed on 22/1/2022, and certification was made
on 17/7/2024, which is beyond one year. Hence Section 40 is
inapplicable. Similarly, Section 34 is also inapplicable. The provision
for paying duty and penalty under Section 34 is only as per provisos
(a) and (b) of Section 34. Proviso (a) of Section 34 is applicable only
when an instrument is sought to be admitted in evidence. Here,
Ext.P5 was not sought to be admitted in evidence before the 2 nd
respondent. Moreover, under proviso (a) of Section 34, the penalty
necessarily has to be twenty times the amount of the deficient stamp
duty. The quantum of penalty imposed by the 2 nd respondent, as
shown in Ext.P5, is only `10,000/- which makes it clear that the 2 nd
respondent did not act under Section 34. From a plain reading of
Section 39, it is clear that the said provision can be triggered only by
one of the following three situations; (i) When the Collector
impounds any instrument under Section 33, (ii) When the Collector
receives any instrument sent to him under Section 33A(2) and, (iii)
When the Collector receives any instrument sent to him under
Section 37(2). With respect to situation No. (ii), Section 33A(2) is
attracted only when an instrument is sought to be registered. Since
that is not the factual scenario in this case, situation (ii) is not
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applicable. Section 37(2) provides for a person impounding an
instrument under Section 33 to send its original to the Collector. That
is not the case here.
9. Section 33 consists of two parts. The first part empowers
the person having by law or consent of parties authority to receive
evidence to impound the instrument. The second part empowers a
person in charge of a public office before whom the insufficiently
stamped instrument is produced or comes in the performance of his
office functions, to impound the instrument. The first part does not
apply to the 2nd respondent. The learned counsel for the petitioners
submitted that the 2nd part also does not apply in this case since the
instrument was directly given to the 2nd respondent by the 3rd and 4th
respondents and such a direct presentation of the instrument will not
amount to a situation where the instrument has come to him "in the
performance of his functions". I cannot subscribe to the said
argument. A plain reading of Section 33 makes it clear that the
court/empowered person has the power to impound an insufficiently
stamped instrument when the said instrument is produced before it
or him. When an insufficiently stamped instrument comes to the
notice of the court/empowered person, it is incumbent upon it or him
under Section 33 of the Stamp Act to impound such an instrument,
irrespective of the purpose for which it was produced. In other words,
the mere production or casual appearance of an insufficiently
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stamped instrument before the court/empowered person is sufficient
for invoking the power of impounding envisaged under Section 33 of
the Stamp Act [See Ramachandran K.P v. District Registrar (General)
and Others 2019 (3) KHC 136].
10. As stated already, a person can voluntarily produce an
unduly stamped instrument before the Collector and offer to pay the
proper duty or deficit duty invoking Section 40 of the Stamp Act only
within one year from the date of its execution. However, in a case
where an instrument is produced by a person voluntarily beyond one
year, the Collector is not powerless. The Collector can very well
invoke the power under Section 33 of the Stamp Act in such a
situation and then proceed under Section 39 inasmuch as he has
every power under the said provision to impound the document
when it is produced before him, irrespective of the purpose for which
it was produced. The 2nd respondent impounded Ext.P5 agreement
under Section 33 of the Stamp Act, passed an order under Section 39
and directed the 3rd and 4th respondents to pay the deficit stamp
duty and penalty and endorsed a certificate on Ext.P5 agreement
invoking Section 41(1) of the Stamp Act. It cannot be said that the
said action of the 2 nd respondent was without any authority as
alleged by the petitioners. However, the crucial question is whether
the 2nd respondent could have exercised power under Section 33 to
impound the document and pass an order under Section 39 without
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giving notice and an opportunity of hearing to the petitioners who
are the executants of Ext.P5 agreement. The answer should be in the
negative for the simple reason that the petitioners raised a specific
contention before this court in AR No.150/2023 that Ext.P5 was an
insufficiently stamped document and also filed Ext.P2 application
before the Arbitrator seeking a direction to the 3 rd and 4th
respondents to produce the original of Ext.P5 agreement, impound
the same, follow the procedure prescribed under the Stamp Act for
insufficiently stamped documents and proceed with the adjudication
of the arbitration case only after the 3 rd and 4th respondents have
cured the defect relating to insufficient stamp duty. That apart, a
Division Bench of this court in Ramachandran (supra) has held that
when an instrument is received under Section 37(2) for imposition of
penalty under Section 39(1)(b), the District Collector shall issue
notice to the parties to the instrument, examine the question of who
is liable to pay the stamp duty and impose the penalty, if any, only
on that person who is so liable. It was observed that the Collector
under Section 39 could not merely impose the penalty on any
person, but there must be an adjudication of liability after issuing
notice to the parties to the instrument. Since the petitioners were
executants of Ext.P5 agreement and they have specifically
challenged the same on the ground that it was insufficiently
stamped, the 2nd respondent ought to have given notice to them and
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heard them before exercising the power under Sections 33, 39 and
41. Hence, the certificate dated 17/7/2024 issued by the 2 nd
respondent under Section 41(1) of the Stamp Act, as shown in
Ext.P5, is hereby quashed. The 2nd respondent is directed to
reconsider the issue of stamp duty and penalty payable for Ext.P5
agreement after hearing the petitioners as well as the 3rd and 4th
respondents. The 2nd respondent shall take a decision within two
months from the date of receipt of a copy of this judgment.
The writ petition is disposed of as above.
Sd/-
DR. KAUSER EDAPPAGATH
JUDGE
Rp
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APPENDIX OF WP(C) 28359/2024
PETITIONER EXHIBITS
Exhibit P1 TRUE COPY OF THE ORDER DATED 04.03.2024 IN
A.R. NO. 150 OF 2023 BEFORE THIS HON'BLE
COURT
Exhibit P2 TRUE COPY OF THE APPLICATION DATED
15.04.2024 REGARDING IMPOUNDING SUBMITTED
BY THE RESPONDENTS IN THE ARBITRATION CASE
Exhibit P3 TRUE COPY OF THE OBJECTION TO I.A. NO. 2
OF 2024 FILED ON 28.05.2024 BY THE
CLAIMANTS IN THE ARBITRATION CASE
Exhibit P4 TRUE COPY OF THE APPLICATION DATED
28.06.2024 REGARDING THE NON-PRODUCTION OF
THE ORIGINAL AGREEMENT FILED BY THE
RESPONDENTS IN THE ARBITRATION CASE
Exhibit P5 TRUE COPY OF THE AGREEMENT DATED
22.01.2022 BEARING THE CERTIFICATE DATED
17.07.2024 ISSUED BY THE SECOND RESPONDENT
UNDER SECTION 41 (1) OF THE KERALA STAMP
ACT, 1959
Exhibit P6 TRUE COPY OF THE OBJECTION TO I.A. NO. 4
OF 2024 FILED ON 23.07.2024 BY THE
CLAIMANTS IN THE ARBITRATION CASE
Exhibit P7 TRUE COPY OF THE NOTIFICATION DATED
10.03.1960, AS SUBSTITUTED BY THE
NOTIFICATION DATED 12.03.1962, ISSUED BY
THE GOVERNMENT OF KERALA UNDER SECTION 2
(C) OF THE KERALA STAMP ACT, 1959
RESPONDENT EXHIBITS
Exhibit R3(a) A TRUE COPY OF THE REJOINDER DATED
05.10.2024 FILED BY US BEFORE THE ARBITRAL
TRIBUNAL
