Deficient Stamp Duty – Cause for Imprisonment?

Introduction

Stamp Duty is the 2^nd largest
source of revenue for the Maharashtra Government. The fact that the Government
is becoming very vigilant to check stamp duty evasion is a good move so as to
ensure that there is no revenue leakage. However, having said that, does every
case of deficient stamp duty justify an imprisonment on the ground that there
was a fraudulent act or a forgery or a case of corruption between the assessee
and the Sub-Registrar? Shooting from the hip and arresting people at a drop of
the hat is something which should be avoided by the authorities at all costs!
There exist enough safeguards in all revenue statutes to tackle cases of tax
evasion. Let us consider one such case which travelled all the way up to the
Supreme Court – State of Maharashtra vs. Ravindra Babulal Jain, SLP (Cr.)
No. 1881/2016.

Facts of the case

Ravindra Jain and others,
respondents in the case, purchased a piece of land admeasuring 8 acres 4
gunthas situated at Aurangabad by way of a public auction and by following a
tender process. The consideration paid by them of Rs. 3.60 crore was the
highest of several bidders. Since the property fell within the green zone, the
price paid by them was optimum. They got a sale deed registered in respect of
the land by showing a market value of the said property as Rs.3,500/- per
square meter at a time when the market value of the said property was
Rs.4,100/- per square meter. Based on this fact, the Anti Corruption Bureau,
acting on a private complaint, lodged a case against them as well as the
concerned Sub-Registrar alleging that all of them in connivance caused a
revenue loss to the tune of Rs.12,76,000/- to the State Government. It was also
alleged that they completed the aforesaid transaction by preparing false
documents, false records and fraudulently and dishonestly used the said records
as genuine ones. The cases were registered under the Indian Penal Code read
with section13(2) of the Prevention of Corruption Act as well as sections 59
and 62 of the Maharashtra Stamps Act, 1958. Accordingly, all the accused in
this case as well as the Sub-registrar and his assistant were arrested and
later released on bail. Subsequently, the accused moved the Bombay High Court
for quashing the FIR lodged against them by filing Cri. Appln. No.
4614/2012. 

Allegations against the Accused

The Prosecution argued before the
Bombay High Court that the accused purchased the land for a consideration of
Rs. 3.60 crore. While presenting the sale deed for its registration in December
2008, they did not disclose the true market value of the aforesaid land which,
according to the prosecution, was Rs.4100/- per square meter as per the Ready
Reckoner rates declared by the Government in the year 2008. It was alleged that
the applicants showed the market value of the said property as Rs.3,500/- per
square meter which was the Ready Reckoner rate of the earlier year, i.e., of
2007.

According to the Prosecution, as
per Ready Reckoner rates of the year 2008, the market value of the subject
property was Rs.7.05 crore and the stamp duty payable on the same was Rs.35.26
lakh. The accused, declared the market value of the subject property as Rs.4.50
crore based on the Ready Reckoner rates of 2007 and accordingly paid stamp duty
of Rs.22.50 lakh only. Hence, it was alleged that the purchasers of the said
land paid less stamp duty to the extent of Rs.12.76 lakh and caused a revenue
loss to the Government to that extent.It was also alleged that while
registering the subject instrument, the accused used false and forged documents
as genuine one and conniving with the then in charge Assistant Sub Registrar,
cheated the Government by causing loss of Rs.12.76 lakh. It was further alleged
that not mentioning the zone number within which the property fell clearly
indicated the malafide intention of cheating the Revenue. Consequently, the
Prosecution invoked various provisions of the Indian Penal Code, 1860,
viz, section 119 (Public Servant concealing design to commit offence which
it is duty to prevent), section167 (Public Servant framing an incorrect
document with an intent to cause injury), section 418 (Cheating with
knowledge that wrongful loss may ensue to person whose interest offender is
bound to protect), section  468
(Forgery for purposes of Cheating), section 471 (Using as genuine a
forged document); section 13(2) of the Prevention of Corruption Act,
1988 (criminal misconduct by public servant) as well as section 59 (Penalty
for executing instrument not duly stamped) and section 62 (Penalty for
failure to set forth facts affecting duty in the instrument) of the Maharashtra
Stamp Act, 1958.

High Court’s Verdict

The Bombay High Court considered
the facts of the case. At the outset it noted that section 119 and section 167
of the Indian Penal Code (IPC), as well as section 13(2) of the
Prevention of Corruption Act can only be attracted against public servants. The
accused in the present case were private individuals (separate proceedings were
launched against the sub-registrar) and hence, these sections automatically
failed. Thus, the Court was only concerned whether a fit case against the
accused under sections 418, 471 and 468 of the Indian Penal Code survived?

It held that section 418 of the
IPC dealt with Cheating with knowledge that wrongful loss may ensue to person
whose interest offender is bound to protectand no such case was apparent from
the material on record. Hence, even that section did not survive.

It next considered the offences of
section 468 (Forgery for purposes of Cheating) and section 471 (Using as
genuine a forged document). In this respect, it observed that the Prosecution
had made the following specific accusations:

(i)   The applicants submitted the
in-put form which was not correctly filled.

(ii)  The applicants intentionally
did not mention the zone number within which the subject property was situated.

(iii) The ready reckoner rate and
zone number were not mentioned at the top of the document of sale deed.

(iv) The market value of the
subject property was deliberately shown less.

(v) The market value of the
property was fraudulently assessed as per the ready reckonerrates prevailing in
2007 when the same ought to have been assessed at the ready reckoner rates of the
year 2008. This was done with a view to confer pecuniary advantage to the
accused which resulted in wrongful loss to the Government.

(vi) The accused and the other two
accused officials had a common intention to cheat the Government.

The High Court observed that no
offence could be made under the IPC in the present case. Even if the in-put
form was incorrectly filed or the zone number was not mentioned or the market
value was incorrect it was not a case of using a false document or one of
forgery! Merely making a false claim in a document does not make the
document a false one. Further, making a false statement cannot amount to
forgery. It gave a precise definition of a forged document as meaning only one
which purports to be signed or sealed by a person who in fact never did so.
Thus, it quashed the allegations u/ss. 468 and 471 of the IPC also.

Lastly, the High Court analysed
the correctness and the legality of the allegation that the accused
deliberately, showed the market value of the property less with a view to make
a wrongful gain for them and cause wrongful loss to the Government. It stated
that there was a specific allegation against the accused that, they with a
fraudulent and dishonest intention did not disclose the true market value of the
subject property while presenting the deed of sale of the said property for its
registration before the Sub Registrar and thereby cheated the Government by
causing revenue loss. It considered the definition of market value u/s.2(na) of
the Stamp Act Market Value to mean in relation to any properly which is the
subject matter of any instrument means the price which such property would have
fetched if sold in open market on the date of execution of such instrument or
the consideration stated in the instrument whichever is higher.

Accordingly, the High Court held
that the whole approach adopted as by the Prosecution in determining the market
value of the subject property appeared erroneous. It relied on Jawajee
Nagnatham vs. Revenue Divisional Officer, Adilabad, A.P. (1994) 4 S.C.C. 595,
which held that the Ready Reckoner prepared and maintained for the purpose of
collecting stamp duty had no statutory base or force and it could not form a
foundation to determine the market value mentioned thereunder in instrument
brought for registration.

It further considered R.
SaiBharathi vs. J. Jayalalitha, 2003 AIR S.C.W. 6349 where the Supreme
Court held that, “… the guideline value will only afford a
prima-facie base to ascertain the true or correct market value. Guideline value
is not sacrosanct, but only a factor to be taken note of if at all available in
respect of an area in which the property transferred lies. In any event, for
the purpose of Stamp Act guideline value alone is not a factor to determine the
value of the property and the authorities cannot regard the guideline valuation
as the last word on the subject of market value.”

Similar Supreme Court decisions
not considered by the Bombay High Court but which are on the same lines
include, Mohabir Singh (1996) 1 SCC 609 (SC), Chamkaur Singh, AIR 1991
P&H 26.

Hence, the High Court concluded
that the very foundation of the charges that the market value was deliberately
shown less got uprooted. It went on to state that even if the market value was
shown less, the Sub-registrar could have referred the instrument for
adjudication to the Collector u/s. 32A(2) of the Stamp Act. Since this was not
done, it was implied that the Sub-registrar accepted the value. Considering
that the said property was bought under a public auction and tender process and
by paying the highest price, the Sub-registrar may have considered all these
facts in accepting the stated value.

The Court held that prima facie
it found no fault with the Sub-registrar’s approach. It noted that in any event
the Collector had suo moto powers of revision u/s. 32A(5) of the Stamp Act.
Further, this section empowered the Collector to levy a penalty of 2% per
month. This power was already exercised by the Collector in the present case.
The Court wondered that when this action was already availed, where was the
propriety in launching criminal proceedings under the IPC and more so when
there did not seem any cogent, concrete and sufficient material against the
accused. A similar case of alleged cheating was considered by the Bombay High
Court in Sanjay Shivaji Dhapse vs. State of Maharashtra (2014 All M.R.
(Cri.) 3617). There the Division Bench of the Court held that not
affixing stamp of adequate amount would amount to irregularity and it is always
subject to verification / check by the concerned Government Officer. However,
it held that a criminal complaint could not lie against such an irregularity.

Hence, on a holistic view, the
Court in Ravindra’s case concluded that there was no offence under any section
of the IPC. The only guilt if at all which could be attributed would be that of
applying the reckoner rates of 2007 instead of 2008. However, the correct
sections to penalise that offence would be sections 59 and 62 of the Stamp Act
and not the IPC. Section 59 provides a fine and an imprisonment for any person
who with the intention to evade duty executes any instrument. Further, section
62 levies a fine for not setting forth all facts and circumstances in the
instrument which affect the chargeability of stamp duty. It was pleaded by the
accused that even those offences might not be attracted in the instant case in
light of section 59A of the Stamp Act which provided that no person could be
prosecuted u/s. 59 for an instrument which was admitted in Court. In Ravindra’s
case, the instrument was admitted before the Civil Judge. However, the Bombay
High Court did not go into merits of the case and instead only focused on the
fact that there was no offence under the IPC.

Hence, the High Court dropped all
criminal complaints in the instant case.

SLP to Supreme Court

Aggrieved by the above order, the
State preferred an SLP before the Supreme Court. The Supreme Court dismissed
the SLP by stating that it did not find any legal and valid ground for
interference with the Bombay High Court’s Order.

Conclusion

The Stamp Duty Reckoner is fast
becoming a single point linkage for several revenue statutes. The 1% VAT
composition Scheme, the Fungible FSI Premium, the deemed sales consideration
u/s. 50C and section 43CA of the Income-tax Act, the buyer’s Income from Other
Sources u/s. 56(2)  of the Income-tax
Act, etc., are all connected with the stamp duty ready reckoner
valuation. At a time like this, treating every irregularity in computing stamp
duty as a criminal offence would have drastic consequences.