2024 (10) TMI 1456 - HC - Indian Laws

Levy of deficit stamp duty and penalty - whether in a case where a sale is conducted by a Court or under the aegis of Court (like in the present case), the stamp authorities can embark upon a journey to determine the true market value of the property sold in an auction conducted by the Court or under the aegis of the Court and levy stamp duty thereon? - HELD THAT - The issue raised in the present Petition is squarely covered by a decision of a Division Bench of this Court in the case of SPECTRUM CONSTRUCTIONS AND DEVELOPERS LLP VERSUS STATE OF MAHARASHTRA THROUGH JOINT DISTRICT REGISTRAR, COLLECTOR OF STAMPS, RAIGAD 2022 (1) TMI 1469 - BOMBAY HIGH COURT as well as a decision of the Hon ble Supreme Court in the case of ASL Vyapar Pvt Ltd 2022 (11) TMI 1385 - SUPREME COURT . In the case of Spectrum Constructions also the Petitioner was a successful bidder for purchase of certain immovable property for an amount of Rs. 1,66,57,920/-. This property was purchased by Spectrum Constructions pursuant to a sale conducted by a Committee constituted by the Hon ble Supreme Court under the Chairmanship of the Hon ble Mr. Justice R. M. Lodha (former Chief Justice of India), to oversee the disposal of lands held by a company called PACL Ltd. The reserve price fixed for the property was Rs. 83,28,960/- and the bid of the Petitioner was higher than that. The Petitioner also paid full stamp duty on the consideration paid for purchasing the property in question. Thereafter, the Petitioner (i.e. Spectrum Constructions) received a demand notice from the Stamp Authorities for payment of deficit stamp duty and penalty. As laid down by the Division Bench in Spectrum Constructions, once the bid of the Petitioner was accepted by the Justice Lodha Committee, and the sale was confirmed at a price bid by the Petitioner, and which was above the reserve price, there was no question of the Stamp Authorities determining any other value. That would be taken as the market value. This issue has now been conclusively settled by the Hon ble Supreme Court in the case of ASL Vyapar Pvt Ltd. A three Judge Bench of the Hon ble Supreme Court has clearly opined that in a Court auction, often the price obtainable may be slightly less as any bidder has to take care of a scenario where the auction may be challenged which could result in passage of time in obtaining perfection of title, with also the possibility of it being overturned - The logic is that an auction of a property by the Court is possibly one of the most transparent methods by which the property can be sold. Thus, to say that even in a Court monitored auction, the Registering Authority would have a say on what is the market price, would amount to the Registering Authority sitting in appeal over the decision of the Court permitting sale at a particular price. Petition allowed.

Summary

Issues Involved:

1. Legality of the impugned demand notice for deficit stamp duty and penalty.
2. Determination of the true market value of the property in court-conducted sales.
3. Applicability of Rule 4(6) of the Maharashtra Stamp (Determination of True Market Value of Property) Rules, 1995.
4. Authority of stamp authorities to reassess market value in court-monitored auctions.

Issue-wise Detailed Analysis:

1. Legality of the Impugned Demand Notice:
The petition challenges the demand notice dated 7th February 2024, which required the petitioner to pay a deficit stamp duty of Rs. 83,60,550/- and a penalty of Rs. 23,41,000/-. The demand was based on the valuation of the property at Rs. 16,72,11,000/- by the Stamp Authorities, contrary to the auction price of Rs. 2,51,00,000/- accepted by the Sale-cum-Monitoring Committee constituted by the Supreme Court. The court concluded that the demand notice was unsustainable as it contravened the principles established in previous judgments, which held that the auction price in a court-monitored sale should be considered the true market value.

2. Determination of the True Market Value:
The core issue was whether the stamp authorities could independently determine the market value of a property sold under a court-monitored auction. The court referenced the Maharashtra Stamp Act, 1958, particularly Section 31, which allows the Collector to determine the duty chargeable on an instrument. However, the court emphasized that in a court-monitored auction, the auction price should be deemed the true market value, as reiterated in the Spectrum Constructions and ASL Vyapar Pvt Ltd cases. The court held that the auction process under court supervision is transparent and rigorous, making any further valuation by the stamp authorities unnecessary and unjustified.

3. Applicability of Rule 4(6) of the 1995 Rules:
The petitioner's counsel argued that Rule 4(6) of the 1995 Rules, which involves the valuation of properties sold at auctions, should not apply when the sale is conducted under court supervision. The court agreed, noting that court-conducted auctions inherently involve a transparent process, often with a reserve price, and are subject to court confirmation. The court found that the stamp authorities' attempt to reassess the market value contradicted the established legal framework and the purpose of Rule 4(6).

4. Authority of Stamp Authorities in Court-Monitored Auctions:
The court examined whether the stamp authorities had the power to reassess the market value of a property sold through a court-monitored auction. Citing the Supreme Court's decision in ASL Vyapar Pvt Ltd, the court concluded that the stamp authorities could not override the auction price determined by the court. The Supreme Court had opined that a court auction, being a transparent process, should not be subject to further valuation by the registering authority. The court reiterated that the auction price reflects the true market value, and any interference by the stamp authorities would be akin to sitting in appeal over the court's decision.

Conclusion:
The High Court quashed the impugned demand notice, affirming that the auction price in a court-monitored sale should be considered the true market value for stamp duty purposes. The judgment reinforced the principle that stamp authorities lack the authority to independently reassess the market value in such cases, aligning with precedents set by higher courts. The writ petition was allowed, and the demand notice was set aside, with no order as to costs.