Mandatory stamp penalty under Karnataka law applies on admission of insufficiently stamped instruments, with reduction powers confined to the Deputy Commissioner.

Admission of an insufficiently stamped instrument attracts a mandatory penalty of ten times the deficit duty under Section 34 of the Karnataka Stamp Act, 1957, and the court admitting the document has no discretion to impose a lesser amount. Any power to reduce or refund penalty lies with the Deputy Commissioner under the statutory machinery in Sections 38 and 39. On the facts recorded by the trial court, however, the Supreme Court sustained the lesser penalty imposed to avoid further delay and because of the special circumstances of the case.

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Issues: (i) Whether, on admitting an insufficiently stamped instrument in evidence, the court had discretion under Section 34 of the Karnataka Stamp Act, 1957 to impose penalty at less than ten times the deficit duty; (ii) whether the double penalty imposed by the trial court should be sustained in the facts of the case.

Issue (i): Whether, on admitting an insufficiently stamped instrument in evidence, the court had discretion under Section 34 of the Karnataka Stamp Act, 1957 to impose penalty at less than ten times the deficit duty.

Analysis: Section 33 requires impounding of an instrument not duly stamped. Section 34 bars admission of such an instrument in evidence unless duty and penalty are paid, and the proviso, in the relevant situation, fixes the penalty at ten times the proper duty or deficient portion. The scheme of Sections 33 and 34 indicates a mandatory levy at that rate when the instrument is admitted in evidence. The discretion to reduce or refund penalty is found in Sections 38 and 39, which operate at the level of the Deputy Commissioner and not the court admitting the document.

Conclusion: The court admitting the instrument had no discretion under Section 34 to impose a lesser penalty.

Issue (ii): Whether the double penalty imposed by the trial court should be sustained in the facts of the case.

Analysis: Although the statutory scheme contemplates ten times penalty, the Court took note of the circumstances recorded by the trial court and the practical delay that would follow if the matter were sent through the statutory route for recovery and possible refund. In order to avoid prolonging the proceedings and having regard to the facts, the Court approved the course adopted by the trial court.

Conclusion: The double penalty imposed by the trial court was sustained.

Final Conclusion: The legal position on mandatory penalty under Section 34 was affirmed, but the appeal was disposed of by retaining the trial court's lesser penalty in the special facts of the case.

Ratio Decidendi: Under Section 34 of the Karnataka Stamp Act, 1957, admission of an insufficiently stamped instrument attracts a mandatory penalty of ten times the deficit duty, while any discretion to reduce or refund penalty lies with the Deputy Commissioner under Sections 38 and 39.

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