2009 (12) TMI 525 - HC - Companies Law

Whether the Official Liquidator must execute a sale deed or a certificate of sale, as and when the property of a company in liquidation, is brought to sale in public auction? Held that - By a combined reading of the provisions of the Transfer of Property Act, 1882, the Indian Stamp Act, 1899 and the Registration Act, 1908 is that by whatever name the instrument is called (whether certificate of sale or sale deed), the instrument is chargeable with stamp duty, under article 18, read with article 23 of Schedule I to the Stamp Act. While the Official Liquidator can leave the choice to the auction purchaser to choose the title to or the nomenclature of the document, neither he nor the purchaser has any choice with regard to the liability to pay stamp duty. This application is disposed of, with a direction to the Official Liquidator to issue a certificate of sale or execute a sale deed, as per the choice of the auction purchaser. But while doing so, the Official Liquidator shall indicate that the auction purchaser is obliged to, pay stamp duty for the sale value, calculated at the rate prescribed in article 18, read with article 23, of Schedule I to the Stamp Act, in the case of a certificate of sale or at the rate prescribed in article 23 in the case of a sale deed. The Official Liquidator shall also put the auction purchaser on notice that if they do not pay stamp duty and do not choose to have the document registered, it may become inadmissible in evidence, in view of section 35 of the Stamp Act and section 49 of the Registration Act. Henceforth, the Official Liquidator shall also indicate in the tender notifications and forms that necessary stamp duty is payable as per the provisions of article 18, read with article 23, of Schedule I to the Stamp Act.

Issues Involved:
1. Whether the Official Liquidator should execute a sale deed or a certificate of sale when the property of a company in liquidation is sold in a public auction.
2. Whether stamp duty is payable on a certificate of sale issued by the Official Liquidator.
3. The implications of the Indian Stamp Act, the Transfer of Property Act, and the Indian Registration Act on the sale of immovable property by the Official Liquidator.

Issue-wise Detailed Analysis:

1. Execution of Sale Deed or Certificate of Sale:
The Official Liquidator sought clarification on whether to execute a sale deed or a certificate of sale when the property of a company in liquidation is sold in a public auction. The court noted that the nomenclature of the document (sale deed or certificate of sale) is significant due to the implications of stamp duty. There is a trend among purchasers to prefer certificates of sale over deeds of sale, believing that certificates do not require compulsory registration under section 17(2)(xii) of the Indian Registration Act, 1908, and may not attract stamp duty. However, the court clarified that the choice of document title does not exempt the purchaser from the liability to pay stamp duty.

2. Stamp Duty on Certificate of Sale:
The court examined whether stamp duty is payable on a certificate of sale. It was noted that previous decisions, such as Shree Vijayalakshmi Charitable Trust v. Sub-Registrar, did not comprehensively analyze the provisions of the Transfer of Property Act, Indian Stamp Act, and Indian Registration Act. The court emphasized that the Indian Stamp Act is a fiscal measure to secure revenue, and the Registration Act deals with document registration, not transactions. The court concluded that stamp duty is payable on certificates of sale, as indicated in Article 18 and Article 23 of Schedule I to the Indian Stamp Act.

3. Implications of Various Acts:
The court analyzed the issue from the perspective of the Transfer of Property Act, 1882, Indian Stamp Act, 1899, and Indian Registration Act, 1908.
- Transfer of Property Act: Section 54 of the Transfer of Property Act mandates that sales of tangible immovable property valued at Rs. 100 and above must be made by a registered instrument. However, section 2(d) exempts transfers by operation of law or by or in execution of a decree or order of a competent court.
- Indian Stamp Act: Section 3 of the Indian Stamp Act lists instruments chargeable with duty, and Article 18 under Schedule I specifies the stamp duty for certificates of sale. The court highlighted that a certificate of sale issued by a civil or revenue court is chargeable with duty as per Article 18, read with Article 23 if the purchase money exceeds Rs. 50.
- Indian Registration Act: Section 17(2)(xii) of the Registration Act exempts certificates of sale granted by civil or revenue officers from compulsory registration. However, the court clarified that this exemption does not negate the requirement to pay stamp duty. The court also discussed the role of the Registering Officer under section 89, emphasizing that the officer must ensure compliance with the Stamp Act when a document is presented for registration.

Conclusion:
The court concluded that the Official Liquidator should issue a certificate of sale or execute a sale deed based on the auction purchaser's choice. However, the purchaser must pay stamp duty as per Article 18, read with Article 23, of Schedule I to the Indian Stamp Act. The court directed the Official Liquidator to inform auction purchasers of their obligation to pay stamp duty and the potential inadmissibility of the document in evidence if not duly stamped and registered. The court also instructed the Official Liquidator to include a notice about the stamp duty requirement in tender notifications and forms. The application was disposed of with these directions.

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