ASSET RECONSTRUCTION CO. (INDIA) LTD. versus CHIEF CONTROLLING REVENUE AUTHORITY on 26 April 2022

1. Aggrieved by the opinion rendered by the Full Bench of theHigh Court of Gujarat in a Stamp Reference under Section 54(1)(a) ofthe Gujarat Stamp Act, 1958 (hereinafter referred to as the ‘Act’),made by the Chief Controlling Revenue Authority of the State of Gujarat,the Asset Reconstruction Company (India) Ltd., has come up with theabove appeal.

2. We have heard Mr. V. Chitambaresh, learned senior counselappearing for the appellant and Ms. Archana Pathak Dave, learnedcounsel appearing for the State of Gujarat.

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A3. The Oriental Bank of Commerce (‘OBC’ for short) grantedcertain facilities to a borrower and the borrower committed default inrepayment. Unable to recover the loan, the Bank assigned the debt infavour of the appellant herein, which is an Asset Reconstruction Companyregistered with the Reserve Bank of India under Section 3 of TheSecuritisation and Reconstruction of Financial Assets and EnforcementBof Security Interest Act, 2002 (hereinafter referred to as ‘SecuritisationAct 2002’). The assignment made by the OBC was under an Agreementdated 18.11.2008. The Assignment Agreement was registered with theSub-Registrar, Bharuch, on 18.11.2008. In fact, the registration of thedocument was preceded by an adjudication under Section 31 of the Act.

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4. However, an audit objection was raised by the Office of theAccountant General on the ground that the deed of assignment containeda reference to a Power of Attorney (‘PoA’ for short) in Schedule 3 andthat the said PoA was chargeable to stamp duty under Article 45(f) ofSchedule-I to the Act. A demand for deficit stamp duty to the tune ofDRs.23,53,800/- was raised pursuant to the audit objection.

5. Thereafter, the Deputy Collector (Stamp Duty) referred thematter to the Chief Controlling Revenue Authority, who in turn issued anotice to the appellant herein. After considering the reply submitted bythe appellant, the Chief Controlling Revenue Authority passed an orderEdated 04.01.2012 setting aside the order of adjudication passed on23.10.2008 and directing recovery of the deficit stamp duty.

6. Aggrieved by the said order, the appellant submitted anapplication under Section 54(1)(a) of the Act. On the said application,the Chief Controlling Revenue Authority referred the following twoFquestions for the opinion of the Court:- “(A) Whether the objection raised by the Account General,Ahmedabad in audit para, in the year 2008 is proper or not,as per Article-45(f) of the Bombay Stamp Act, 1958 or not?

G(B) Whether the Asset Reconstruction Company (India) Limitedis liable to pay stamp duty of Rs.24,94,100/- i.e. 4.9% as perArticle-20(a) of the Bombay Stamp Act or not?”

7. For finding an answer to the above questions, the Full Bench ofthe High Court examined the recitals contained in the deed of assignmentand found that the Bank had agreed to execute an irrevocable PoA inH

favour of the appellant herein, substantially in the form set out in Schedule3 of the deed of assignment. The form set out in Schedule 3 containedrecitals empowering the assignee, as the agent of the Bank, to sell anyimmovable property. Therefore, considering the fact that Article 45(f)of Schedule I to the Act makes a PoA given for a consideration andcontaining an authority to sell any immovable property chargeable tostamp duty as a conveyance, the High Court came to the conclusion thatthe appellant has to pay stamp duty as fixed by Article 45(f). The HighCourt opined that merely because the power to sell, forms part of thedeed of assignment under Schedule 3, the appellant could not escape thecharge of duty and that the PoA is required to be considered independently.

8. But we do not think that the above reasoning can be accepted.First of all, what was presented for registration by the appellant was asingle document namely an “Assignment Agreement”. Clause 11.12 ofthe Assignment Agreement contained recitals to the effect that the seller(assignor, namely the OBC) had agreed to execute simultaneously withthe execution of the deed of assignment, an irrevocable PoA, substantiallyin the form set out in Schedule 3. What was contained in Schedule 3 tothe Assignment Agreement was the format of an irrevocable PoA.

9. The High Court overlooked the fact that there was noindependent instrument of PoA and that in any case, the power of saleof a secured asset flowed out of the provisions of the Securitisation Act,2002 and not out of an independent instrument of PoA. Section 2(zd) ofthe Securitisation Act, 2002 defines a ‘secured creditor’ to mean andinclude an Asset Reconstruction Company. The appellant has acquiredthe financial assets of OBC in terms of Section 5(1)(b) of theSecuritisation Act, 2002. Therefore, under sub-section (2) of Section 5of the Securitisation Act, 2002, the appellant shall be deemed to be thelender and all the rights of the Bank vested in them. In fact, underAmendment Act 44 of 2016, sub-section (1A) was inserted in Section 5of the Securitisation Act, exempting from stamp duty, any documentexecuted by any bank under Section 5(1) in favour of an AssetReconstruction Company acquiring financial assets for the purposes ofasset reconstruction or securitization. Though the said amendment maynot be applicable to the case of the appellant, as the deed of assignment,in this case, was executed long prior to the amendment, we have justtaken note of the amendment to show how far the Parliament has gone.

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A10. Article 45(f) of Schedule I to Act, reads as follows:- B

11. For invoking Article 45(f), two conditions have to be satisfied.They are, (i) the PoA should have been given for a consideration; and(ii) an authorization to sell any immovable property should flow out ofthe instrument.C

12. In the case on hand, the consideration paid by the appellant toOBC, was for the purpose of acquisition of the financial assets, in respectof a particular borrower. The draft of the PoA contained in Schedule 3of the deed of assignment was only incidental to the deed of assignment.The deed of assignment has already been charged to duty under ArticleD20(a) which deals with “conveyance”. In fact Article 45(f) also requiresa PoA covered by the said provision to be chargeable to stamp dutyunder Article 20.

13. But what has happened in this case was that under aNotification bearing No.GHM/2002-5-M STP-102000-2749/H-1 datedE25[th] January, 2002, the Government ordered the reduction of stamp dutypayable on an instrument of securitization of loans or assignment of debtwith underlying securities, to 75 paise for every Rs.1000 or part thereof.This Notification reads as follows:- “In exercise of the powers conferred by clause (a) ofFSection 9 of the Bombay Stamp Act, 1958 (Bom LX of 1958)and in supersession of Government Orders RevenueDepartment No. GHM-98-22-M-STP-1096-2527-H-1 dated26.02.1998, the Government of Gujarat hereby reduces fromthe date of publication of this order the duty with which anGinstrument of securitization of loans or assignment of debtwith underlying securities chargeable under Article 20 (a) ofSchedule I to the said Act to 75 paise for every rupees 1000or part thereof the loan securitised or debt assigned withunderlying securities.

HBy order and in the name of the Governor of Gujarat.”

14. The above Notification was amended by a subsequentNotification bearing No. GHM/2003/28/STP/102002/2065/H-1 dated 1[st]April, 2003. The said Notification reads as follows:- “In exercise of powers conferred by clause (a) of section9 of the Bombay Stamp Act, 1958 (Bom LX of 1958), theGovernment of Gujarat hereby amends Government OrderNo. GHM/2002/5/M/STP/102000/ 2749/H-1, dated 25[th]January, 2002 as follows, namely:- In the said order, for the words and figures “to seventyfive paise for every rupees 1000 or part thereof” the wordsand figures “subject to maximum of rupees one lakhs, seventy-five paise for every rupees 1000 or part thereof” shall besubstituted.

By order and in the name of the Governor of Gujarat.”

15. In view of the Notification dated 01.04.2003 issued in exerciseof the power to reduce, remit or compound the duty, conferred bySection 9(a) of the Act, the amount of duty chargeable in terms of Article20(a) was capped at Rs. 1,00,000/-. In addition to the said amount ofRs.1,00,000/-, the appellant was asked to pay an additional duty ofRs.40,000/- under Section 3-A. The appellant has thus paid a total amountof Rs.1,40,000/- with the instrument having been charged as a conveyanceunder Article 20(a).

16. In all taxing Statutes, there are taxing provisions and machineryprovisions. Once a single instrument has been charged under a correctcharging provision of the Statute, namely Article 20(a), the Revenuecannot split the instrument into two, because of the reduction in thestamp duty facilitated by a notification of the Government issued underSection 9(a). In other words after having accepted the deed of assignmentas an instrument chargeable to duty as a conveyance under Article 20(a)and after having collected the duty payable on the same, it is not open tothe respondent to subject the same instrument to duty once again underArticle 45(f), merely because the appellant had the benefit of thenotifications under Section 9(a). Since the impugned order of the HighCourt did not address these issues and went solely on the interpretationof Article 45(f), the same is unsustainable. Therefore, the appeal is A

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[2022] 4 S.C.R.

Aallowed and the impugned order is set aside. The demand made by theChief Controlling Revenue Authority is consequently set aside. Therewill be no order as to costs.

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Ankit Gyan

(Assisted by : Rahul Rathi, LCRA)

Appeal allowed.

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