2017 (8) TMI 1708 - HC - Indian Laws

Validity of notice under Indian Stamp Act post-SARFAESI auction clarified by High Court

The Inspector General of Registration and Ors. Versus  Kanagalakshmi Ganaguru

The High Court of Madras held that the notice issued under Section 47(A) of the Indian Stamp Act after an auction conducted under SARFAESI Act was valid. ... Appellant bound by auction being conducted publicly under SARFAESI Act or not - no reason to believe there is willful under valuation - initiation of proceedings under Section 47(A) of the Indian Stamp Act - HELD THAT:- The appeal deserves to be allowed on two grounds. Firstly, what is challenged is only a notice issued after a reference made by the Registering Authority under Section 47(A) of the Indian Stamp Act. Under the above said provision once such a reference is made, the Collector shall give notice to the parties giving a reasonable opportunity of being heard - the writ petitioner instead of giving his representation and allowing an order to be passed under Section 47(A) of the Act and if aggrieved, challenging it before the forum provided under the Statute, ought not to have filed the writ petition. Hence, we are of the view that the writ petition so filed is not maintainable. What has to be considered by an authority under Stamp Act is fixation of the value of an instrument on the basis of the market value of the property on the date on which the document was presented. Therefore it cannot be construed that such an authority would be diluted of his power in all the sales conducted publicly. The Registration Act mandates a separate Role being the duties assigned to a Registering Authority among others. Unless a Statute provides for such an exercise, Court cannot issue directions to accept the value fixed in an instrument merely because the sale was effected in pursuance of an open auction - the property must be sold by Public auction only by a civil or Revenue Court, or a collector or other revenue Officer. Therefore, even assuming a property sold by Public auction, such an exercise is to be done by a civil or revenue Court, Collector or Revenue officers as the case may be. Now the question for consideration is as to whether the authorised officer appointed by the bank in a proceedings initiated under SARFAESI Act, by itself could be called as a civil or revenue Court Collector or Revenue Officer. The answer will have to be a firm 'No'. Only an officer of the bank, which lend money to the borrowers, acts as an authorised officer, only for the purpose of bringing the property for sale. In other words such officers merely replace the secured creditors. Hence at best they can be termed as an agent of secured creditors. In other words the secured creditors cannot be termed as Collector or Revenue Officers. The SARFARESI Act merely provides for a mechanism. The lender uses the said mechanism to recover the money. Therefore it is only a mode of recovery. Lender can termed itself to a Civil or Revenue Court who's functions are purely judicial. Therefore, looking from any perspective, there are no error in the notice issued - appeal allowed. Issues:1. Validity of notice issued under Section 47(A) of the Indian Stamp Act after auction conducted under SARFAESI Act.2. Whether the authorised officer under SARFAESI Act can be considered as a civil or revenue court, collector, or revenue officer for the purpose of stamp duty valuation.Issue 1 - Validity of Notice under Indian Stamp Act:The respondent, an auction purchaser under SARFAESI Act, sought registration of the certificate issued in her favor. A notice was issued under Section 47(A) of the Indian Stamp Act to show cause on the market value fixed. The appellant challenged this, arguing that the officer under SARFAESI Act is not equivalent to a Collector or Revenue Officer as per the Indian Stamp Act. The Single Judge allowed the writ petition, leading to the present appeal. The appellant contended that the notice was premature as the Collector should have given a hearing before issuing it. The Court held that the writ petition was not maintainable as the appellant should have first represented before the Collector and then challenged the order through the statutory forum.Issue 2 - Classification of Authorised Officer under SARFAESI Act:The respondent argued that the authorised officer conducting the auction under SARFAESI Act should be considered under Article 18 of the Indian Stamp Act for stamp duty valuation purposes. The Court analyzed the role of the authorised officer and concluded that such officers are agents of secured creditors and not equivalent to civil or revenue court, collector, or revenue officer as required under Article 18. The SARFAESI Act is a mechanism for recovery, and the lender, acting through the authorised officer, does not transform into a civil or revenue court. Therefore, the notice issued for stamp duty valuation was deemed valid, and the writ petition was dismissed.In conclusion, the High Court of Madras ruled that the notice issued under Section 47(A) of the Indian Stamp Act after an auction conducted under SARFAESI Act was valid. The Court clarified that the authorised officer under SARFAESI Act cannot be considered as a civil or revenue court, collector, or revenue officer for stamp duty valuation purposes. The judgment emphasized the distinct roles and functions of the parties involved in the auction process and upheld the validity of the notice issued for stamp duty valuation.