TMI Blog2022 (11) TMI 1385X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of property, an aspect not uncommon in our country, where consideration may be passing through two modes - one the declared price and the other undeclared component, the State should not be deprived of the revenue. Such transactions do not reflect the correct price in the document as something more has been paid through a different method. The objective is to take care of such a scenario so that the State revenue is not affected and the price actually obtainable in a free market should be capable of being stamped. It is trite to say that the mere existence of tenancy results in a considerable decline in the market value of the property as they may have their statutory rights and even otherwise, the purchaser would be acquiring the property hardly in an ideal scenario and would be left with the burden to take legal processes for the eviction. In such a scenario, there is actually a great depression in the market value of the property as even if a fair transaction without an auction takes place with full reflection of price, the transacted value would be half or less of a vacant property. The tenancy aspect can hardly be said to be an aspect which could be ignored in the det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failure to pay the earnest money or consideration amount, such as, if Sati Pvt. Ltd. did not pay the earnest money within 3 days, the joint receivers could proceed to convey the property to the next highest bidder whose bid was for Rs. 1,88,000 per cottah. 3. Vide order dated 04.12.2006, Ld. Single Judge accepted the offer of Sati Pvt. Ltd. and confirmed the sale in its favour. It was further directed that the aforesaid consideration being the actual consideration for the property would be treated as value of the property for the purpose of registration and stamp duty. The Joint Receivers executed the conveyance in favour of Sati Pvt. Ltd. and presented the same for registration on 16.05.2007 for sale consideration of Rs. 78,69,875. Stamp duty of Rs. 5,48,810 and Registration Fee of Rs. 86,650 were also paid. 4. However, on 14.12.2007, the Registrar of Assurances issued a notice Under Section 47A(2) of the Indian Stamp Act, 1899 ( the Act ) intimating that the market value of the land was assessed by the Registering Officer at Rs. 7,76,69,838 on which deficit Stamp Duty of Rs. 48,85,888 and deficit Registration Fee of Rs. 7,67,800 were required to be paid. Sati Pvt. Ltd. file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of conveyance etc. undervalued how to be dealt with - (1) Where the registering officer appointed under the Registration Act, 1908 (16 of 1908), has while registering any instrument of conveyance, exchange, gift, partition or settlement, reason to believe that the market value of the property which is the subject matter of such instrument has not been truly set forth in the instrument, he may, notwithstanding the contrary provisions in Section 35 insofar as it relates to registration, register such instrument provisionally, subject to determination of the market value Under Sub-section (2), and, after registering such instrument, refer the matter to such authority as may be prescribed for determination of the market value of such property and the proper duty payable thereon. Section 47A was further amended by the Indian Stamp (West Bengal Amendment) Act, 1998 with effect from 15.03.2021, and reads as under: 47A. Instruments of conveyance, etc. undervalued, how to be dealt with (1) Where the registering officer appointed under the Registration Act, 1908 (16 of 1908) has, while registering any instrument of a) agreement or memorandum of an agreement relating to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he property was not truly set forth in an instrument of transfer executed pursuant to the order of a court, when the property was sold at a public auction after the publication of the advertisement in newspapers. 9. The Respondents then relied upon the judgment in Birendra Nath Manna and Anr. v. State of West Bengal and Ors. 2000 (1) CHN 173 , which upheld the constitutional validity of Section 47A as applicable to West Bengal. The Respondents also submitted that the Statement of Objects and Reasons for enactment of the Indian Stamp Act (West Bengal Amendment) 1990 contained the explanation for insertion of Section 47A. It was stated that West Bengal is no exception to the general phenomenon of under valuation of properties and the revenue from stamp duty has increased sharply for states where the basis of charging duty was changed from the declared price or value of properties to the market value. 10. In the aforesaid context it was pleaded that the best possible prices were obtainable through a transparent method and that is what was the price of the transactions. In the partition matter, there were 98 tenants on the land and the total monthly rent was Rs. 8,000 for the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as they confer power on the Registering Officer not to register an instrument when the Registering Officer has reason to believe that the market value of the property has not been truly set forth in the instrument. The difference in language of the Section was not significant. When a property is sold in a private sale, the registering officer has the power to determine the actual value of the property. As legal fictions are limited for the purpose for which they are created and cannot be widened by Rules made under the Act and no such fiction is required to be provided for determining the price of the property when it is sold in the open market. Thus, the definition of Market Value as Under Section 2(16B) of the Act would not apply to the property if actually sold in the open market. 2(16B) - 'Market Value' means, in relation to any property which is the subject matter of an instrument, the price which such property would have fetched or would fetch if sold in open market on the date of execution of such instrument as determined in such manner and by such authority as may be prescribed by Rules made under this Act of the consideration stated in the instrument, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eby creating an apprehension that it will adversely affect the State Exchequer in respect of other properties in the area. However, even if the property at a Court sale does not fetch the highest or best available price and there are other pieces of evidence of market value of similar properties available in the area, the Registering Officer can always consider the other sale instances or any other material reflecting higher value of the property Under Sections 47A(1)(2) read with Section 2(16B) of the Act and Rule 3 of the Undervaluation Rules of 2001. The Occasion for Reference: 16. On consideration of the matter on 6.2.2020, it was opined that the impugned judgment had traversed certain areas over which the Court had reservations: a. the interpretation of Section 2(16B) of the Act as set out in para 24 of the impugned judgment (referring to the higher price in the immediate past or immediate future), is contrary to the wordings of the statute; b. para 27.4 of the impugned judgment (giving Registering Officer the liberty to move the court with proper application in case of doubts on sanctity of the open market sale) sought to give the Registering Authority a ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There could be diverse reasons for the Registering Officer to have 'reason to believe' that the market value is incorrect, including in a court sale or liquidation proceedings, the advertisement was not made properly to elicit buyers; the sale of the property was frequently postponed; or cartelization among buyers. As per Kayjay Industries (supra) case, it was held that in a court auction sale, there is more likelihood of a distress sale at a lower value. The Registering Officer has the requisite experience in this behalf, namely their knowledge of market values of different areas and circle areas based on sales in the immediately preceding 5 years, and the discrepancy between the market value and value disclosed in the instrument. Rule 3 of the W.B. Stamp Rules enlists the different ways in which the market value of a property can be determined. The term or as used in Rule 3 denotes that the ways mentioned therein are disjunctive with the primary objective being to devise a mechanism that brings the highest price or whichever is greater . Therefore, the Registering Officer is not bound by only what is specified in the deed or determined by the court and ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) case is per incuriam in view of paragraph 7 of Kayjay Industries (supra) case which held that a court sale is a forced sale notwithstanding the competitive element of a public auction, and the best price is often not forthcoming. The impugned judgment relies on the doctrine of deemed fiction to conclude that the object of the Act is to prevent fraudulent undervaluation. Unlike the authorities relied upon in the impugned judgment, the application of the doctrine of deemed fiction is misplaced. Submission of the Respondents: 19. Learned Counsel for the Respondents sought to support the view of the High Court by relying upon the judgment of this Court in The Inspector General of Registration v. K.P. Kadar Hussain 2014 SCCOnline Mad 3503 to the effect that sale deeds executed by the court auctioned sales are allowed to be questioned by a party on some pretext, the sanctity, finality, and credibility of such court auctioned sales and execution of the sale deeds will come under cloud and the same should not be permitted. 20. In the Company matter, emphasis was placed on the intention of the State Legislature, i.e., to accept 'market value' as set for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration may be passing through two modes - one the declared price and the other undeclared component, the State should not be deprived of the revenue. Such transactions do not reflect the correct price in the document as something more has been paid through a different method. The objective is to take care of such a scenario so that the State revenue is not affected and the price actually obtainable in a free market should be capable of being stamped. If one may say, it is, in fact, a reflection on the manner in which the transfer of an immovable property takes place as the price obtainable in a transparent manner would be different. An auction of a property 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. 24. It is not as if a public auction is carried out just like that. The necessary pre-requisites require fixation of a minimum price and other aspects to be taken care of so that the bid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise, the purchaser would be acquiring the property hardly in an ideal scenario and would be left with the burden to take legal processes for the eviction. In such a scenario, there is actually a great depression in the market value of the property as even if a fair transaction without an auction takes place with full reflection of price, the transacted value would be half or less of a vacant property. The tenancy aspect can hardly be said to be an aspect which could be ignored in the determination of the price. 28. In the company matter, repeated auctions were held and it is in the negotiated bid that the higher price was obtained. It was court monitored. There would be no occasion for the court to accept the bid if it was not satisfied with the process and the valuation. A correct value of a property is the one where there is a purchaser and a seller ad idem on the price (the actual price). The market value is, thus, the value which the highest bidder is willing to pay in the facts and prevailing circumstances and not a notional price. 29. We find hardly any rational in adopting the submissions on behalf of the Appellant. The provisions are not dissimilar in the different en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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