2018 (12) TMI 2000 - SC - Indian Laws

Trial courts must impose 10 times penalty for deficient stamp duty under Section 33, not 2 times discretionary amount

Gangappa and Ors. Versus Fakkirappa

The SC held that trial courts must impose penalty at 10 times the deficient stamp duty amount under Section 33, not 2 times as exercised by the trial ... Discretion of the trial court in imposing penalty on insufficiently stamped documents - quantum of penalty - whether the trial court which had admitted the agreements to sell in evidence could have exercised its discretion in imposing penalty at the rate of 2 times of deficient amount of stamp duty or it was obligatory for the trial court to impose the penalty at the rate of 10 times? HELD THAT:- There is clear contradistinction between the power Under Section 33 and 39. The object and purpose for such contradistinction in the provision and power is not far to seek. Section 33 applies to every person having by law or consent of parties authority to receive evidence, and every person in-charge of a public office. Thus, Section 33 covers a host of authorities, persons before whom instruments are filed. The legislative scheme does not indicate any distinction between a court receiving an insufficiently stamped instrument in evidence and other authorities. All have to impose penalty of 10 times of the duty or deficit portion, if it exceeds rupees five. This provision is for purpose of maintaining a uniformity in imposing a fixed penalty of 10 times without adverting to any adjudicatory process regarding quantifying the quantum of penalty. The statute gives discretion to Deputy Commissioner who is the authority envisaged by the Act in-charge of the revenue administration of a District. The power to refund the penalty Under Section 38 clearly indicates that legislature have never contemplated that in all cases penalty to the extent of 10 times should be ultimately realised. Although the procedural part which provides for impounding and realisation of duty and penalty does not give any discretion Under Section 33 for imposing any lesser penalty than 10 times, however, when provision of Section 38 is read, the discretion given to Deputy Commissioner to refund the penalty is akin to exercise of the jurisdiction Under Section 39 where while determining the penalty he can impose the penalty lesser than 10 times. In view of impounding the documents and imposition of penalty, we are sure that the suit must not have been proceeded further, and it must be at the threshold stage; asking the Appellant to deposit 10 times of penalty and thereafter to invoke the jurisdiction of Deputy Collector Under Section 38 to refund penalty shall be a proceeding again taking considerable time. In the facts of the present case, the ends of justice be served in closing the matter by confirming the payment of deficit duty with the double penalty as imposed by the trial court which shall obviate the proceeding of approaching the Deputy Commissioner for reduction of penalty Under Section 38, which in the facts of the present case and for the reasons noted by the trial court was a relevant consideration for refund/reduction of the penalty. The High Court has correctly interpreted the provisions of Section 33 in the impugned judgment but instead of prolonging the matter permitting the Appellant to deposit 10 times of penalty and thereafter to take recourse Under Section 38, the proceedings regarding penalty on the agreements to sell is closed by approving the direction of the trial court for payment of entire deficit duty and double the penalty. Appeal disposed off. Issues Involved:1. Discretion of the trial court in imposing penalty on insufficiently stamped documents.2. Interpretation of Sections 33 and 34 of the Karnataka Stamp Act, 1957.3. Applicability of the Division Bench judgment in Digambar Warty and others v. District Registrar, Bangalore Urban District.4. Authority of the Deputy Commissioner under Sections 38 and 39 of the Karnataka Stamp Act, 1957.Detailed Analysis:1. Discretion of the trial court in imposing penalty on insufficiently stamped documents:The primary issue was whether the trial court could exercise discretion in imposing a penalty of two times the deficient stamp duty or if it was mandatory to impose a penalty of ten times. The trial court had initially directed the plaintiffs to pay a penalty at the rate of two times the deficient stamp duty, considering the plaintiffs' status and the circumstances of the agreements being prepared by local villagers.2. Interpretation of Sections 33 and 34 of the Karnataka Stamp Act, 1957:Section 33 mandates that any person with the authority to receive evidence must impound instruments that are not duly stamped. Section 34 states that such instruments are inadmissible in evidence unless duly stamped, and it prescribes a penalty of ten times the deficient duty. The Supreme Court noted that Section 34 provides a flat rate of penalty when the amount of proper duty exceeds five rupees, i.e., ten times the duty or deficient portion.3. Applicability of the Division Bench judgment in Digambar Warty and others v. District Registrar, Bangalore Urban District:The High Court relied on this Division Bench judgment, which held that there is no discretion vested with the authority impounding the document in the matter of collecting duty and penalty under Section 33. The Supreme Court upheld this interpretation, agreeing that Sections 33 and 34 mandate a penalty of ten times the deficient duty without discretion.4. Authority of the Deputy Commissioner under Sections 38 and 39 of the Karnataka Stamp Act, 1957:Section 38 empowers the Deputy Commissioner to refund any portion of the penalty in excess of five rupees, indicating discretion in reducing the penalty. Section 39 allows the Deputy Commissioner to impose a penalty not exceeding ten times the deficient duty. The Supreme Court highlighted the distinction between the mandatory penalty under Sections 33 and 34 and the discretionary power of the Deputy Commissioner under Sections 38 and 39.Conclusion:The Supreme Court concluded that the High Court correctly interpreted the provisions of Section 33, affirming that the trial court had no discretion to impose a penalty lesser than ten times the deficient duty. However, considering the specific facts and circumstances, including the plaintiffs' status and the delay in proceedings, the Supreme Court decided to close the matter by confirming the trial court's imposition of a double penalty instead of prolonging the proceedings further. This decision was aimed at serving the ends of justice and avoiding further delays.Final Judgment:The appeal was disposed of by confirming the payment of the entire deficit duty and double the penalty as imposed by the trial court, thus obviating the need for the appellants to approach the Deputy Commissioner for a reduction of the penalty under Section 38.