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Supreme Court of India
Trustees Of H.C.Dhanda Trust vs The State Of Madhya Pradesh on 17 September, 2020Author: Ashok Bhushan
Bench: Ashok Bhushan, R. Subhash Reddy, M.R. Shah
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 3195-3196 OF 2020
(ARISING OUT OF SLP(C)Nos.10972-10973 OF 2020)
TRUSTEES OF H.C. DHANDA TRUST …APPELLANT
VERSUS
STATE OF MADHYA PRADESH & ORS. …RESPONDENTS
J U D G M E N T
ASHOK BHUSHAN,J.
Leave granted.
2. The appellant by these appeals challenges the
judgment of learned Single Judge of the High Court of
Madhya Pradesh, Bench at Indore in Writ Petition
No.8888 of 2011 dated 30.03.2017 dismissing the Writ
Petition of the appellant as well as the judgment dated
Signature Not Verified
Digitally signed by
04.09.2017 of the Division Bench dismissing the Writ
MEENAKSHI KOHLI
Date: 2020.09.17
15:31:32 IST
Reason:
Appeal filed by the appellant against the judgment of
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the learned Single Judge. The Division Bench has
dismissed the writ appeal vide its judgment dated
04.09.2017 holding it as not maintainable.
3. Brief facts of the case giving rise to these
appeals are:
Late Shri Harish Chand Dhanda, a Minister in
erstwhile Government of Maharaja Holkar of Indore
received the free gift of land measuring 108,900 sq.ft.
(one lac eight thousand nine hundred) situate at
Yeshwant Niwas Road, Indore by Order No.58 of
22.04.1946. Late Shri H.C. Dhanda got constructed in
the above piece of land, a building known as ‘Hotel
Lantern’. Another piece of land situate at 5, Ravindra
Nath Tagore Marg, Indore was gifted to Late Shri H.C.
Dhanda by his father-in-law late Col. V.B. Jadhav on
05.10.1948. Late Shri H.C. Dhanda possessed various
other movable and immovable properties in the city of
Indore with which we are not concerned in the present
appeals. Late Shri H.C. Dhanda executed his last Will
dated 26.10.2002. In his Will he mentioned his movable
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and immovable properties apart from the above two
immovable properties and by his Will he created a Trust
in which he appointed his son, Yogesh Dhanda as
Chairman of Trust, Shri B.J. Dave, Chartered
Accountant, Indore and one Shri Chhaganlal Nagar as
member. The above two immovable properties apart from
other properties were put in Trust under the aforesaid
Will. All Trustees under the Will were the executors of
the Will. Shri H.C. Dhanda died on 05.07.2003.
4. A meeting of Board of Trustees was held on
06.04.2005. A resolution was passed by
Executors/Trustees to transfer and vest area by
executing a Deed of Transfer with a site plan from the
trustees to beneficiaries by registering the same. On
21.04.2005 a Deed of Assent was executed between M/s
H.C. Dhanda Trust, a private trust as one part and
Jogesh Dhanda and others as other part. By Deed of
Assent the Trustees/Executors gave assent to complete
the title of the Legatees and vest absolutely and
forever in their favour both Lantern Hotel and Jahaj
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Mahal property. A notice was issued by the Collector of
Stamps, District Indore stating that in Deed of Assent
dated 21.04.2005 proper stamp duty has not been paid,
22.03.2007 was fixed for appearance. The notice further
stated that why deficit stamp duty of Rs. 1,62,82,150/-
on the document dated 21.04.2005, and ten times penalty
should not be imposed. The Trust appeared before the
Collector of Stamps and filed its objection. The
Collector of Stamps passed an order dated 22.09.2008
holding the Deed of Assent dated 21.04.2005 as a gift
deed. The Collector held that under Indian Stamp Act,
1899, the stamp duty payable on a gift deed would be 8%
of the market value, Municipal duty 1% and Janpad duty
1%. The Collector found deficit duty to the extent of
Rs.1,28,09,700/- and also imposed ten times penalty
i.e. Rs.12,80,97,000/-. The order called upon the Trust
to deposit amount of Rs.14,09,06,700/- within thirty
days. Aggrieved against the order of Collector,
Reference Application was filed by the appellant before
the Board of Revenue, Madhya Pradesh, Gwalior. Board of
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Revenue vide its order dated 25.10.2011 upheld
deficiency of stamp duty of Rs.1,28,09,700/- and ten
times penalty of Rs.12,80,97,000/-. The order called
upon the Trust to deposit amount of Rs.14,09,06,700/-
within thirty days. Board of Revenue vide its order
dated 25.10.2011 upheld the order of the Collector
dated 22.09.2008 and dismissed the Reference
Application. Challenging the order of the Board of
Revenue as well as the Collector of Stamps a Writ
Petition No.8888 of 2011 was filed by the appellant in
the High Court of Madhya Pradesh. Learned Single Judge
of the High Court vide its judgment dated 30.03.2017
dismissed the writ petition. Learned Single Judge
upheld the order of the Collector by which deficiency
in the stamp duty and ten times penalty was imposed.
5. An SLP was filed in this Court challenging the
order of the learned Single Judge by the appellant
which was withdrawn by the appellant on 4.5.2017
seeking liberty to file writ appeal in the High Court.
The writ appeal was filed by the appellant being Writ
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Appeal No.255 of 2017 which has been dismissed by the
Division Bench on 4.9.2017 holding the writ appeal as
not maintainable. Aggrieved against the aforesaid two
orders these appeals have been filed by the appellant.
6. This Court by its order dated 10.11.2017 issued
limited notice to the following effect:
“Issue notice, returnable in six weeks,
limited to the quantum of penalty that has been
imposed by the Collector (Stamps).
Subject to the condition that stamp duty
is paid within a period of one month, there
shall be stay of the order qua the penalty.”
7. In response to the above notice the respondents
have appeared.
8. We have heard Shri A.K. Chitale, learned senior
counsel, for the appellant and Shri Tushar Mehta,
learned Solicitor General, for the State.
9. Shri A.K. Chitale, learned senior counsel appearing
for the appellant submits that the Deed of Assent
executed on 21.04.2005 is referable to Section 331 and
332 of Indian Succession Act, 1925. Shri Chitale
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submitted that document in question is not a Gift Deed.
Shri Chitale submits that the penalty imposed by the
Collector of Stamps was wholly illegal. There was no
dishonest conduct on the part of the appellant, Deed of
Assent was executed bona fide on which there was no
deficiency in the stamp duty. Shri Chitale submits that
no reason has been given by the Collector of Stamps as
to why maximum penalty of ten times was imposed on the
appellant while determining the stamp duty. Shri
Chitale submits that the Collector of Stamps has not
exercised his jurisdiction in reasonable and fair
manner and imposition of ten times penalty on the
appellant deserves to be set aside.
10. Shri Tushar Mehta, learned Solicitor General
refuting the submission of counsel for the appellant
contends that nature of document having been found to
be gift the Collector has rightly determined the
deficiency in the stamp duty and imposed ten times
penalty. Shri Mehta submits that there was clear
intention of the appellant to evade the payment of
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stamp duty which clearly called for imposition of ten
times penalty. Shri Mehta referred to the order of
Board of Revenue and submits that Board of Revenue has
also upheld imposition of ten times penalty by holding
that the applicant has executed Deed of Assent
suppressing the facts intentionally due to which there
has been loss of stamp duty. This can neither be termed
as wrong nor illegal.
11. We have considered the submissions of the parties
and perused the records.
12. Only question to be determined in these appeals is
as to whether the imposition of ten times penalty by
the Collector of Stamps under Section 40 of the Indian
Stamp Act, 1899 was validly imposed or not.
13. The Collector of Stamps vide its order dated
22.09.2008 determined the nature of document dated
21.04.2005 as Gift Deed. The Collector of Stamps in his
order also proceeded to determine the market value of
property, Lantern Hotel situate at Yashwant Niwas Road
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and Jahaj Mahal situate in Ravindra Nath Tagore Marg,
on the market value of both afove properties stamp duty
payable was determined as Rs.1,28,09,900/-, stamp duty
of Rs.200/- only having been paid on the document
deficit duty was determined as Rs.1,28,09,700/-. The
Collector of Stamps by the same order also imposed ten
times penalty of Rs.12,80,97,000/-.
14. Before we proceed to consider the respective
submissions, it is useful to extract the order of the
Collector of Stamps which contains the discussion
regarding imposition of penalty, which is as follows:
“……In the above background, the deed in
question is classified in the category of a
gift deed. The total market value of the
property in question in the position of year
2005-06 under the document is fixed at market
value Rs.12,80,99,000/-, on which total stamp
duty of Rs.1,28,09,900/- is payable. Only
Rs.200/- stamp duty has been paid on the
document. Thus, remaining stamp duty
Rs.1,28,09,700/- and, since the party has not
mentioned the actual nature of the document
with an intention to escape the duty,
therefore, under Section 40 of the Indian Stamp
Act, 1899, ten times penalty Rs.12,80,97,000/-
is imposed. Thus, total Rs.14,09,06,700/- shall
be deposited in the treasure within 30 days.”
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15. Section 40 of Indian Stamp Act, 1899 provides for
Collectors power to stamp instruments impounded.
Section 40(1) which is relevant for the present case
which is as follows:
“40. Collectors power to stamp instruments
impounded. — (1) When the Collector impounds
any instrument under section 33, or receives
any instrument sent to him under section 38,
sub-section (2), not being an instrument
chargeable with a duty not exceeding ten naye
paise only or a bill of exchange or promissory
note, he shall adopt the following procedure: —
(a) if he is of opinion that such
instrument is duly stampeded or is not
chargeable with duty, he shall certify by
endorsement thereon 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 with duty and is
not duly stamped, he shall require the
payment of the proper duty or the amount
required to make up the same, together
with a penalty of five rupees; or, if he
thinks fit, an amount not exceeding ten
times the amount of the proper duty or of
the deficient portion thereof, whether
such amount exceeds or falls short of five
rupees:
Provided that, when such instrument
has been impounded only because it has
been written in contravention of section
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13 or section 14, the Collector may, if he
thinks fit, remit the whole penalty
prescribed by this section.”
16. According to Section 40(1)(b) if the Collector is
of opinion that such instrument is chargeable with duty
and is not duly stamped, he shall require the payment
of the of the proper duty or the amount required to
make up the same, together with a penalty of the five
rupees; or, if he thinks fit, an amount not exceeding
ten times the amount of the proper duty or of the
deficient portion thereof. The statutory scheme of
Section 40(1)(b) as noticed above indicates that when
the Collector is satisfied that instrument is not duly
stamped, he shall require the payment of proper duty
together with a penalty of the five rupees. The
relevant part of Section 40(1)(b) which falls for
consideration in these appeals is: “or, if he thinks
fit, an amount not exceeding ten times the amount of
the proper duty or deficient portion thereof.”
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17. The amount of penalty thus can be an amount not
exceeding ten times. The expression “an amount not
exceeding ten times” is preceded by expression “if he
thinks fit”. The statutory scheme, thus, vest the
discretion to the Collector to impose the penalty
amount not exceeding ten times. Whenever statute
transfers discretion to an authority the discretion is
to be exercised in furtherance of objects of the
enactment. The discretion is to be exercised not on
whims or fancies rather the discretion is to be
exercised on rational basis in a fair manner. The
amount of penalty not exceeding ten times is not an
amount to be imposed as a matter of force. Neither
imposition of penalty of ten times under Section 40(1)
(b) is automatic nor can be mechanically imposed. The
concept of imposition of penalty of ten times of a sum
equal to ten times of the proper duty or deficiency
thereof has occurred in other provisions of the Act as
well. We may refer to Section 35(a) in this context is
as follows:
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“35. Instruments not duly stamped
inadmissible in evidence, etc. — No instrument
chargeable with duty shall be admitted in
evidence for any purpose by any person having
by law or consent of parties authority to
receive evidence, or shall be acted upon,
registered or authenticated by any such person
or by any public officer, unless such
instrument is duly stamped :
Provided that—
(a)any such instrument shall be admitted
in evidence on payment of the duty with
which the same is chargeable, or, in the
case of any instrument insufficiently
stamped, of the amount required to make
up such duty, together with a penalty of
five rupees, or, when ten times the
amount of the proper duty or deficient
portion thereof exceeds five rupees, of
a sum equal to ten times such duty or
portion;
(b)… … … …”
18. It is relevant to notice that Section 35
contemplates that when ten times the amount of the
proper duty of or deficient portion thereof exceeds
five rupees, of a sum equal to ten times such duty or
portion is required to be deposited. Under Section 39
Collector is empowered to refund penalty. As noticed
above under Section 35(a) there is no option except to
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pay sum equal to ten times of such duty or deficient
portion but Section 39 empowers the Collector to refund
any portion of the penalty in excess of five rupees
which is expressed in following words: “if he thinks
fit refund any portion of the penalty in excess of five
rupees which has been paid in respect of such
instrument.”
19. The legislative intent which is clear from reading
of Sections 33,35,38 and 39 indicates that with respect
to the instrument not duly stamped, ten times penalty
is not always retained and power can be exercised under
Section 39 to reduce penalty in regard to that there is
a statutory discretion in Collector to refund penalty.
20. Section 39(1)(b) of the Indian Stamp Act, 1899 came
for consideration before this Court in Gangtappa and
another vs. Fakkirappa, 2019(3) SCC 788 (of which one
of us Ashok Bhushan, J. was a member). This Court
noticed the legislative scheme and held that the
legislature has never contemplated that in all cases
penalty to the extent of ten times should be ultimately
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realized. In paragraph 16 following has been laid down
by this Court:
“16. Deputy Commissioner under Section 38
is empowered to refund any portion of the
penalty in excess of five rupees which has been
paid in respect of such instrument. Section 38
Sub-section (1) again uses the expression “if
he thinks fit”. Thus, in cases where penalty of
10 times has been imposed, Deputy Commissioner
has discretion to direct the refund of the
penalty in facts of a particular case. 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.” 20.
The expression “if he thinks fit” also
occurs in Section 40 sub-clause (b). The same
legislative scheme as occurring in Section 39
is also discernible in Section 40(b), there is
no legislative intentment that in all cases
penalty to the extent of ten times the amount
of proper stamp duty or deficient portion
should be realised. The discretion given to
Collector by use of expression “if he thinks
fit” gives ample latitude to Collector to apply
his mind on the relevant factors to determine
the extent of penalty to be imposed for a case
where instrument is not duly stamped.
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Unavoidable circumstances including the conduct
of the party, his intent are the relevant
factors to come to a decision.
21. The purpose of penalty generally is a deterrence
and not retribution. When a discretion is given to a
public authority, such public authority should exercise
such discretion reasonably and not in oppressive
manner. The responsibility to exercise the discretion
in reasonable manner lies more in cases where
discretion vested by the statute is unfettered.
Imposition of the extreme penalty i.e. ten times of the
duty or deficient portion thereof cannot be based on
the mere factum of evasion of duty. The reason such as
fraud or deceit in order to deprive the Revenue or
undue enrichment are relevant factors to arrive at a
decision as to what should be the extent of penalty
under Section 40(1)(b).
22. We may refer to judgment of this Court in Peteti
Subba Rao vs. Anumala S. Narendra, 2002 (10) SCC 427.
This Court had occasion to consider in the above case
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provisions of Section 40 of the Indian Stamp Act, 1899.
Referring to Section 40 this Court made following
observation in paragraph 6:
“6………The Collector has the power to
require the person concerned to pay the proper
duty together with a penalty amount which the
Collector has to fix in consideration of all
aspects involved. The restriction imposed on
the Collector in imposing the penalty amount is
that under no circumstances the penalty amount
shall go beyond ten times the duty or the
deficient portion thereof. That is the farthest
limit which meant only in very extreme
situations the penalty need be imposed up to
that limit. It is unnecessary for us to say
that the Collector is not required by law to
impose the maximum rate of penalty as a matter
of course whenever an impounded document is
sent to him. He has to take into account
various aspects including the financial
position of the person concerned.”
23. This Court in the above case categorically held
that it is only in the very extreme situation that
penalty needs to be imposed to the extent of ten times.
24. The Collector by imposing ten times penalty in his
order has given the reason for imposition as “the party
has not mentioned the actual nature of the document
with the intention to escape the duty”. When the
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Collector found intention to escape the duty, it was
the case of imposition of penalty but whether the
reason given by the Collector is sufficient for
imposition of extreme penalty of ten times is the
question which needs to be further considered. The High
Court while considering the question of imposition of
penalty of ten times has also given almost same reason
in following words:
“………But in the present case the complete title
has been transferred by Trust to Jogesh Dhanda
and Ishan Dhanda in the name of Deed of Assent.
Therefore, there was intention to evade the
heavy stamp duty on such transaction.
Therefore, the Collector of Stamp has rightly
imposed 10 times penalty which is maximum under
the Act.
In view of the above, I do not find any
merit in this writ petition. The same is hereby
dismissed.”
25. No other reasons have been given either by the
Collector or by the High Court justifying the
imposition of maximum penalty of ten times. It is not
the case of Collector that the conduct of the appellant
was dishonest or contumacious. The High Court in its
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judgment has noticed that although the resolution was
passed on 06.04.2005 to execute the Deed of Transfer by
Trustees in favour of Jogesh Dhanda and Ishan Dhanda,
but later on they deliberately executed the deed in the
name of Deed of Assent on a stamp paper of Rs.200/-.
For the reason given by the Collector as well as by the
High Court that there was intention to evade the stamp
duty in describing the document as Deed of Assent the
imposition of the penalty was called for but in the
facts and circumstances and the reasons which have been
given by the Collector of Stamps as noticed above we
are satisfied that this was not a case of imposition of
extreme penalty of ten times of deficiency of stamp
duty. Taking into consideration all facts and
circumstances of the case, we are of view that ends of
justice will be served in reducing the penalty imposed
to the extent of the half i.e. five times of deficiency
in the stamp duty.
26. In result the appeals are allowed the order of the
Collector of Stamps dated 22.09.2008 is modified to the
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extent that penalty imposed of ten times of
Rs.12,80,97,000/- is modified into five times penalty
i.e. Rs.6,40,48,500/-. The appeals are partly allowed
to the above extent.
…………………J.
( ASHOK BHUSHAN )
………………….J.
( R. SUBHASH REDDY )
………………….J.
( M.R. SHAH )
NEW DELHI,
SEPTEMBER 17, 2020.
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