GANGAPPA AND ANR. versus FAKKIRAPPA on 14 December 2018

[2018] 13 S.C.R. 603

GANGAPPA AND ANR.

v.

FAKKIRAPPA

(Civil Appeal No. 11932 of 2018)

DECEMBER 14, 2018

[ASHOK BHUSHAN AND AJAY RASTOGI, JJ.]

Karnataka Stamp Act,1957 – ss.33, 34 and 38 – Appellants-plaintiffs entered into agreements to sell with respondent-defendant– Appellants filed suits for specific performance of contract –Principal Civil Judge impounded agreements to sell filed by theplaintiffs in the suits with direction to the plaintiff to pay deficitduty and penalty – Agreements to sell in question were admitted inevidence on payment of deficit duty and penalty which was doublethe deficit duty in both the suits – Respondent filed writ petition –High Court directed the court below to levy the penalty at 10 timesof the deficit duty – Propriety of – Held: Sections 33 and 34 clearlyindicate that penalty imposed has to be 10 times – High Courtcorrectly interpreted the provisions of s.33 in the impugned judgment–There is no discretion vested with the authority impounding thedocument in the matter of collecting duty u/s.33 – However, in thepresent case the order of the trial court was passed as early as on22.04.2013, i.e. more than five years ago – In view of impoundingthe documents and imposition of penalty, the suit must not haveproceeded further, and it must be at the threshold stage – Askingthe appellant to deposit 10 times of penalty and thereafter to invokethe jurisdiction of Deputy Collector u/s.38 to refund penalty shallbe a proceeding again taking considerable time – In the facts ofthe present case, ends of justice be served in closing the matter byconfirming the payment of deficit duty with the double penalty asimposed by the trial court.

Karnataka Stamp Act,1957 – ss.38, 39 – Discretion to DeputyCommissioner – Scope of – Discussed.

Karnataka Stamp Act,1957 – ss.33 and 39 – Contradistinctionbetween – Object of – Discussed.

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HELD: 1.1 The statute envisages that when the 10 timesof the amount of the proper duty or deficient portion thereofexceeds five rupees, a sum equal to 10 times of such duty orportion is the penalty. The language of Section 34, KarnatakaBStamp Act,1957 provides a flat rate of penalty when the amountof proper duty exceeds five rupees i.e. 10 times of such duty orportion. There is a clear contrast in the language of Section 34and Section 39 of the 1957 Act. Section 39(1)(b) indicates that ifthe Deputy Commissioner is of opinion that such instrument ischargeable with duty and is not duly stamped shall require theCpayment of the proper duty with a penalty of five rupees. Thelatter part of the provision states “or if he thinks fit an amountnot exceeding ten times the amount of the proper duty or of thedeficient portion thereof, whether such amount exceeds or fallsshort of five rupees”. Thus, discretion has been conferred onDthe Deputy Commissioner which is apparent from the words “ifhe thinks fit”. Deputy Commissioner has discretion of imposingpenalty of 10 times or lesser of the amount of duty or portionthereof. There is clear contradistinction between the power underSection 33 and 39. The object and purpose for suchcontradistinction in the provision and power is not far to seek.ESection 33 applies to every person having by law or consent ofparties authority to receive evidence, and every person in-chargeof a public office. Thus, Section 33 covers a host of authorities,persons before whom instruments are filed. The legislativescheme does not indicate any distinction between a court receivingFan insufficiently stamped instrument in evidence and otherauthorities. All have to impose penalty of 10 times of the duty ordeficit portion, if it exceeds rupees five. This provision is forpurpose of maintaining a uniformity in imposing a fixed penalty of10 times without adverting to any adjudicatory process regardingquantifying the quantum of penalty. The statute gives discretionGto Deputy Commissioner who is the authority envisaged by theAct in-charge of the revenue administration of a District.[Paras 12-14] [609-F-H; 610-B-G]

1.2 The amount of duty and penalty is required to be sentto Deputy Commissioner under Section 37. DeputyHCommissioner under Section 38 is empowered to refund any portion of the penalty in excess of five rupees which has beenpaid in respect of such instrument. Section 38 sub-section (1)again uses the expression “if he thinks fit”. Thus, in cases wherepenalty of 10 times has been imposed, Deputy Commissionerhas discretion to direct the refund of the penalty in facts of aparticular case. The power to refund the penalty under Section38 clearly indicates that legislature have never contemplated thatin all cases penalty to the extent of 10 times should be ultimatelyrealised. Although the procedural part which provides forimpounding and realisation of duty and penalty does not give anydiscretion under Section 33 for imposing any lesser penalty than10 times, however, when provision of Section 38 is read, thediscretion given to Deputy Commissioner to refund the penaltyis akin to exercise of the jurisdiction under Section 39 wherewhile determining the penalty he can impose the penalty lesserthan 10 times. [Paras 15, 16] [611-A-F]

1.3 The High Court correctly interpreted the provisions ofSection 33 in the impugned judgment. There is no discretionvested with the authority impounding the document in the matterof collecting duty under Section 33. The word used in the saidproviso is ‘shall’. Sections 33 and 34 clearly indicate that penaltyimposed has to be 10 times. [Paras 18, 21] [612-F-G; 613-G]

1.4 The order of the trial court was passed as early as on22.04.2013 that is more than five years ago. In view of impoundingthe documents and imposition of penalty, the suit must not havebeen proceeded further, and it must be at the threshold stage;asking the appellant to deposit 10 times of penalty and thereafterto invoke the jurisdiction of Deputy Collector under Section 38to refund penalty shall be a proceeding again taking considerabletime. In the facts of the present case, ends of justice would beserved in closing the matter by confirming the payment of deficitduty with the double penalty as imposed by the trial court whichshall obviate the proceeding of approaching the DeputyCommissioner for reduction of penalty under Section 38, whichin the facts of the present case and for the reasons noted by thetrial court was a relevant consideration for refund/reduction ofthe penalty. [Paras 19, 20] [612-H; 613-D-E]

Digambar Warty and Others v. District Registrar,Bangalore Urban District and another ILR 2013 KAR2099 – approved.

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[2018] 13 S.C.R.

ACIVIL APPELLATE JURISDICTION : Civil Appeal No. 11932of 2018.

From the Judgment and Order dated 17.07.2014 of the High Courtof Karnataka, Dharwad Bench in Writ Petition No. 78721 of 2013.

Sharanagouda Patil, Ms. Supreeta Sharanagouda, M/s S-legalBAssociates, Advs. for the Appellants.

Gaurav Agarwal, M. Khairati, Irshad Ahmad, Advs. for theRespondent.

The Judgment of the Court was delivered by ASHOK BHUSHAN, J. 1. This appeal has been filed againstCthe judgment of Karnataka High Court, Dharwad Bench dated17.07.2014 disposing of the writ petition filed by the respondent herein.2. Brief facts of the case necessary to be noticed for deciding thisappeal are:

The appellants/plaintiffs entered into agreements to sell withDrespondent-defendant dated 12.04.2005 and 16.05.2006 and earnestmoney of Rs.1,40,000/- was paid. The appellants filed Suit No.863 of2008 and Suit No.864 of 2008 praying for specific performance of contract.Another suit filed by the sister of the defendant being O.S.No.327 of2008 was also clubbed. The Principal Civil Judge impounded agreementsEto sell filed by the plaintiffs in Suit Nos.863 and 864 of 2008 with directionto the plaintiff to pay deficit duty and penalty vide order dated 27.09.2010.Plaintiffs challenged the order by means of Writ Petition Nos.69264-65/2010 and 69263/2010 which were disposed of by the High Court vide itsjudgment dated 14.03.2013 directing the Principal Civil Judge to permitthe plaintiffs to place written submissions. After the order of the HighFCourt, the Principal Civil Judge passed an order dated 22.04.2013 bywhich agreements to sell in question were admitted in evidence andmarked for the plaintiffs in O.S.Nos.863 and 864 of 2008 on payment ofdeficit duty and penalty. Deficit duty in both the suits was determined asRs.12013/- and Rs.20320/- respectively and the penalty imposed wasGdouble of the deficit duty in both the suits.

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3. Aggrieved by the judgment of the Principal Civil Judge,respondent-defendant filed a writ petition in the High Court. The HighCourt disposed of the writ petition relying on a Division Bench judgmentof Karnataka High Court in Digambar Warty and others vs. District H

Registrar, Bangalore Urban District and another, ILR 2013 KAR2099. The High Court directed the courts below to levy the penalty at10 times of the deficit duty as per judgment of Karnataka High Court inILR 2013 KAR 2099. Aggrieved by the judgment of the High Courtthis appeal has been filed by the appellants.

4. Learned counsel for the appellant submits that the High Courtcommitted an error in directing payment of penalty at 10 times. The trialcourt has rightly directed for payment of deficit duty and penalty at therate of 2 times which was a just and proper order. It is submitted by thelearned counsel for the appellant that when the Deputy Commissionercan reduce levy of penalty not exceeding 10 times of the amount ofduty, the trial court while determining the deficiency and penalty shallalso have such discretion. The trial court has rightly exercised thediscretion by imposing the penalty of two times.

5. Learned counsel appearing for the respondent submits that theinstruments waere not duly stamped. While admitting the insufficientlystamped documents the trial court has no discretion while levying thepenalty. The statute i.e. Section 34 of the Karnataka Stamp Act, 1957mandates penalty at the rate of 10 times. The Division Bench of theHigh Court in Digambar Warty and others (supra) has correctlyinterpreted Section 34 while holding that Court has no discretion to reducethe penalty from 10 times. The High Court has rightly followed the aboveDivision Bench Judgment.

6. We have considered submissions of the learned counsel for theparties and perused the records.

7. The issue which needs to be answered in the present case is asto whether the trial court which had admitted the agreements to sell inevidence could have exercised its discretion in imposing penalty at therate of 2 times of deficient amount of stamp duty or it was obligatory forthe trial court to impose the penalty at the rate of 10 times.

8. Before we proceed to consider the respective submissions ofthe parties, it is relevant to notice statutory provisions of the KarnatakaStamp Act, 1957. Section 33 requires every person having by law orconsent of parties authority to receive evidence, is obliged to impoundany instrument which according to him is not duly stamped. Section 33sub-section (1) is as follows:

“33. Examination and impounding of instruments.- (1) Every person having by law or consent of parties authority to receive A

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evidence, and every person in charge of a public office, except anofficer of police, before whom any instrument, chargeable in hisopinion, with duty, is produced or comes in the performance of hisfunctions, shall, if it appears to him that such instrument is notduly stamped, impound the same.”

B9. Section 34 provides that instruments not duly stamped areinadmissible in evidence. Section 34 sub-section (1) which is relevantfor the present case is as follows:

“34. Instruments not duly stamped inadmissible in evidence,etc.- No instrument chargeable with duty shall be admitted inevidence for any purpose by any person having by law or consentCof parties authority to receive evidence, or shall be acted upon,registered or authenticated by any such person or by any publicofficer, unless such instrument is duly stamped:

Provided that,-

(a) nothing herein contained shall be deemed to require anymagistrate or Judge of a Criminal Court to examine or impound,if he does not think fit so to do, any instrument coming beforehim in the course of any proceeding other than a proceedingunder Chapter XII or Chapter XXXVI of the Code of CriminalProcedure, 1898;”

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10. Section 38 empowers the Deputy Commissioner to refundpenalty paid under sub-section (1) of Section 37. Section 39 relates tothe Deputy Commissioner’s power to stamp instruments impounded.Section 38 and Section 39(1) are as follows:

“38. Deputy Commissioner]1’s power to refund penaltypaid under sub-section (1) of section 37.- (1) When a copy ofan instrument is sent to the Deputy Commissioner under sub-section (1) of section 37, he may, if he thinks fit, refund any portionof the penalty in excess of five rupees which has been paid inrespect of such instrument.

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(2) When such instrument has been impounded only because ithas been written in contravention of section 13 or section 14, the1[Deputy Commissioner]1 may refund the whole penalty so paid.

39. Deputy Commissioner’s power to stamp instrumentsimpounded.- (1) When the Deputy Commissioner]1 impoundsany instrument under section 33, or receives any instrument sent H

to him under sub-section (2) of section 37, not being an instrumentchargeable with a duty not exceeding fifteen naye paise only or amortgage of crop Article 35 (a) of the Schedule] chargeable underclause (a) or (b) of section 3 with a duty of twenty-five nayepaise, he shall adopt the following procedure:

(a) if he is of opinion that such instrument is duly stamped, or isnot chargeable with duty, he shall certify by endorsementthereon that it is duly stamped, or that it is not so chargeable,as the case may be; (b) if he is of opinion that such instrument is chargeable withduty and is not duly stamped he shall require the payment ofthe proper duty or the amount required to make up the same,together with a penalty of five rupees; or if he thinks fit; anamount not exceeding ten times the amount of the proper dutyor of the deficient portion thereof, whether such amountexceeds or falls short of five rupees:

Provided that, when such instrument has been impoundedonly because it has been written in contravention of section 13or section 14, the Deputy Commissioner may, if he thinks fit,remit the whole penalty prescribed by this section.”

11. Section 34 proviso provides for admitting in evidence aninstrument not duly stamped are on payment of duty and penalty. Withregard to penalty statute provides:

“in the case of an instrument insufficiently stamped, of the amountrequired to make up such duty, together with a penalty of fiverupees, or, when ten times the amount of the proper duty ordeficient portion thereof exceeds five rupees, of a sum equal toten times such duty or portion;”

12. The statute envisages that when the 10 times of the amountof the proper duty or deficient portion thereof exceeds five rupees, asum equal to 10 times of such duty or portion is the penalty.

13. The language of Section 34 provides a flat rate of penaltywhen the amount of proper duty exceeds five rupees i.e. 10 times ofsuch duty or portion. There is a clear Contrast in the language of Section34 and Section 39. Section 39 sub-section (1) sub-clause (b) is extractedfor ready reference:

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A“39(1)(b) if he is of opinion that such instrument is chargeablewith duty and is not duly stamped he shall require the payment ofthe proper duty or the amount required to make up the same,together with a penalty of five rupees; or if he thinks fit; an amountnot exceeding ten times the amount of the proper duty or of thedeficient portion thereof, whether such amount exceeds or fallsBshort of five rupees:”

14. The above provision indicated that if the Deputy Commissioneris of opinion that such instrument is chargeable with duty and is not dulystamped shall require the payment of the proper duty with a penalty offive rupees. The latter part of the provision states “or if he thinks fit anCamount not exceeding ten times the amount of the proper duty or of thedeficient portion thereof, whether such amount exceeds or falls short offive rupees”. Thus, discretion has been conferred on the DeputyCommissioner which is apparent from the words “if he thinks fit”.Deputy Commissioner has discretion of imposing penalty of 10 times orDlesser of the amount of duty or portion thereof. There is clearcontradistinction between the power under Section 33 and 39. The objectand purpose for such contradistinction in the provision and power is notfar to seek. Section 33 applies to every person having by law or consentof parties authority to receive evidence, and every person in-charge of apublic office. Thus, Section 33 covers a host of authorities, persons beforeEwhom instruments are filed. The legislative scheme does not indicateany distinction between a court receiving an insufficiently stampedinstrument in evidence and other authorities. All have to impose penaltyof 10 times of the duty or deficit portion, if it exceeds rupees five. Thisprovision is for purpose of maintaining a uniformity in imposing a fixedFpenalty of 10 times without adverting to any adjudicatory processregarding quantifying the quantum of penalty. The statute gives discretionto Deputy Commissioner who is the authority envisaged by the Act in-charge of the revenue administration of a District. The definition ofDeputy Commissioner is given in Section 2(dd) which is to the followingeffect:G“2(dd) ‘Deputy Commissioner’ means the Chief Officer in chargeof the revenue administration of a district and includes in respectof such provisions of this Act or rules made thereunder such officerin such area as the State Government may by notification in theOfficial Gazette specify;”

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15. The amount of duty and penalty is required to be sent toDeputy Commissioner under Section 37. Section 37 is quoted below:

“37. Instruments impounded how dealt with.-(1) When theperson impounding an instrument under section 33 has by law orconsent of parties authority to receive evidence and admits suchinstrument in evidence upon payment of a penalty as provided bysection 34 or of duty as provided by section 36, he shall send tothe Deputy Commissioner an authenticated copy of such instrument,together with a certificate in writing, stating the amount of dutyand penalty levied in respect thereof, and shall send such amountto the Deputy Commissioner or to such person as he may appointin this behalf.

(2) In every other case, the person so impounding an instrumentshall send it in original to the Deputy Commissioner.

16. Deputy Commissioner under Section 38 is empowered to refundany portion of the penalty in excess of five rupees which has been paidin respect of such instrument. Section 38 sub-section (1) again uses theexpression “if he thinks fit”. Thus, in cases where penalty of 10 timeshas been imposed, Deputy Commissioner has discretion to direct therefund of the penalty in facts of a particular case. The power to refundthe penalty under Section 38 clearly indicates that legislature have nevercontemplated that in all cases penalty to the extent of 10 times should beultimately realised. Although the procedural part which provides forimpounding and realisation of duty and penalty does not give any discretionunder Section 33 for imposing any lesser penalty than 10 times, however,when provision of Section 38 is read, the discretion given to DeputyCommissioner to refund the penalty is akin to exercise of the jurisdictionunder Section 39 where while determining the penalty he can imposethe penalty lesser than 10 times.

17. In the Division Bench judgment of the Karnataka High Courtrelied by the High Court in Digambar Warty and others (supra), afternoticing the provisions of Section 33 and 34 the Division Bench laiddown following in paragraph 36:

“36. This provision refers to the power of the Civil Court whichadmits the documents in evidence. The main Section is couchedin the negative. Unless the instrument is duly stamped, it isinadmissible in evidence. As an exception, the proviso providesfor payment of duty and penalty. In the matter of collection of A

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Aduty and penalty no discretion is vested with the authority admittingsuch an instrument in evidence. The duty payable on the instrumentis prescribed by statute. Therefore, there is no question of anydiscretion being vested with the authority impounding the documentin the matter of collecting the duty. Once the duty payable isascertained from the statute, no discretion is vested with theBauthority admitting the document in evidence, in the matter ofimposition of duty and penalty. The word used in the said provisois ‘shall’. It is mandatory. However, Section 35 makes it clear,that where an instrument has been admitted in evidence withoutthere being objection at the time of admitting the said instrumentCin evidence, then such admission shall not, except as provided inSection 58, be called in question at any stage of the same suit orproceeding on the ground that the instrument has not been dulystamped. Section 58 deals with the power of the Appellate Courtto review the finding recorded by the original Court under Section34 of the Act, either suo motu or on the application of the DeputyDCommissioner. Section 36 of the Act deals with admission ofimproperly stamped instrument. The State Government may makerules providing that, where an instrument bears a stamp ofsufficient amount but of improper description, it may, on paymentof the duty with which the same is chargeable, be certified to beEduly stamped, and any instrument so certified shall then be deemedto have been duly stamped as from the date of its execution.”

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18. The above view of the Karnataka High Court that there is nodiscretion vested with the authority impounding the document in thematter of collecting duty under Section 33, is correct. The word used inFthe said proviso is ‘shall’. Sections 33 and 34 clearly indicate that penaltyimposed has to be 10 times. The Division Bench of the Karnataka HighCourt in Digambar Warty and others (supra) has rightly interpretedthe provisions of Sections 33 and 34 of the Act. We, thus, are of theview that the High Court in the impugned judgment did not commit anyerror in relying on the judgment of the Division Bench in DigambarGWarty and others (supra). We thus has to uphold the above viewexpressed in the impugned judgment.

19. There is one more aspect which needs to be noted in thepresent case. We have seen that even though 10 times penalty has to becollected and imposed by the person impounding the document underHSection 37, Section 38 empowers the Deputy Collector to refund the duty. Learned trial court while imposing penalty at the rate of two timeshas given following reason:

“The plaintiffs of O.S. No.863/08 and 864/08 are stated to beagriculture and are residing at Sherewad village. The said fact isnot denied by the defendants therein. It appears that the agreementswere prepared by local villagers who are not experienced in thedocumentation. Looking to the status of the plaintiffs, their standardof having qualification of the document writers. I am of the opinionthat the ratio laid down by our Hon’ble High Court in ILR 2011KAR 4719 can be applied to the present facts and circumstanceslevying 10 times penalty in respect of said agreement will be harshon the plaintiffs. Therefore I am of the opinion that levying doublethe amount of deficit duty as penalty will meet the ends of justice.”

20. The order of the trial court was passed as early as on22.04.2013 that is more than five years ago. In view of impounding thedocuments and imposition of penalty, we are sure that the suit must nothave been proceeded further, and it must be at the threshold stage;asking the appellant to deposit 10 times of penalty and thereafter toinvoke the jurisdiction of Deputy Collector under Section 38 to refundpenalty shall be a proceeding again taking considerable time. In the factsof the present case, we are of the view that ends of justice be served inclosing the matter by confirming the payment of deficit duty with thedouble penalty as imposed by the trial court which shall obviate theproceeding of approaching the Deputy Commissioner for reduction ofpenalty under Section 38, which in the facts of the present case and forthe reasons noted by the trial court was a relevant consideration forrefund/reduction of the penalty.

21. In view of the foregoing discussion, we are, therefore, of theview that the High Court has correctly interpreted the provisions of Section33 in the impugned judgment but instead of prolonging the matterpermitting the appellant to deposit 10 times of penalty and thereafter totake recourse under Section 38, we in the facts of the present caseclose the proceedings regarding penalty on the agreements to sell byapproving the direction of the trial court for payment of entire deficitduty and double the penalty.

22. The appeal is disposed of accordingly.

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