Insufficiently Stamped Document Is Not Admissible As Evidence Even If It Was Earlier Exhibited And Deficiency Remains Uncured

Summary:

[1]A Two-Judge Bench comprising Hon’ble Justices Vikram Nath and Prasanna B. Varale addressing the dispute over the admissibility of an agreement to sell dated 29.03.1999. The Plaintiff sought specific performance of the contract for the sale of a property owned by Defendant No.1, who had already sold the property to Defendants Nos. 2 and 3. The critical issue was that the agreement to sell was insufficiently stamped under the Stamp Act, 1899, which led to the Trial Court dismissing the suit, as the Plaintiff had failed to pay the necessary stamp duty and penalty. The High Court initially allowed the agreement to be considered as evidence, subject to payment of the deficient stamp duty. However, the Supreme Court disagreed, ruling that the document could not be admitted into evidence unless the stamp duty issue was resolved by the plaintiff. The Court emphasized that under the Stamp Act, documents must meet statutory requirements before being considered in legal proceedings, and without compliance, the Plaintiff’s claim for specific performance was unenforceable.

Facts:

The case revolves around a dispute over the specific performance of an agreement to sell dated 29.03.1999 between the plaintiff and Defendant No. 1, who was the original owner of the disputed property. According to the plaintiff, Defendant No. 1 had agreed to sell the property for a consideration of Rs. 3,00,000, with Rs. 10,000 paid as an advance. The plaintiff was responsible for developing the property, dividing it into plots, and selling it within a year. After collecting the sale proceeds, the plaintiff would pay the remaining Rs. 2,90,000, upon which the defendant would execute a sale deed in favour of the plaintiff or his nominees. However, when the plaintiff learned that Defendant No. 1 had already sold the property to Defendants Nos. 2 and 3 on 03.05.1999, he filed the suit for specific performance of the original agreement.

Defendant No. 1, in his defence, claimed that the agreement with the plaintiff was executed under duress and that he had already entered into a valid agreement to sell with Defendants Nos. 2 and 3 on 10.03.1999, which culminated in the registered sale deed on 03.05.1999. He also alleged that the plaintiff was a land speculator attempting to illegally take over the property. Both Defendants Nos. 2 and 3 denied any knowledge of the plaintiff’s agreement and asserted that they were bona fide purchasers.

The Trial Court examined various issues, including the validity of the agreement to sell, the bona fide purchaser status of Defendants Nos. 2 and 3, and the plaintiff’s readiness to perform his part of the contract. While these issues were largely decided in favor of the plaintiff, a key focus was on the admissibility of the agreement to sell dated 29.03.1999. The defendants argued that the agreement was not properly stamped, and under the Indian Stamp Act, 1899, this rendered the document inadmissible. The Trial Court accepted the defendants’ objections, holding that the agreement could not be enforced due to insufficient stamping, and as a result, dismissed the suit.

Aggrieved by the dismissal, the plaintiff appealed to the Calcutta High Court under Section 96 of the Code of Civil Procedure, 1908. The Division Bench of the High Court upheld the Trial Court’s findings on other issues but disagreed with the ruling on the stamp issue. The High Court held that since the plaintiff had agreed to pay the deficient stamp duty and penalty, the Trial Court erred in dismissing the suit based on the insufficient stamping of the agreement. The High Court allowed the appeal, holding that the agreement was admissible after the plaintiff complied with the stamp duty requirements, and the case could proceed for specific performance.

Issues:

Whether the agreement to sell dated 29.03.1999 could be admitted as evidence in the suit for specific performance, despite being insufficiently stamped under the Indian Stamp Act, 1899. The court had to determine whether the plaintiff could enforce the contract without having first paid the requisite stamp duty and penalty, which is a statutory requirement for admissibility of such documents in court.

Judgement:

The Supreme Court upheld the dismissal of a specific performance suit based on an insufficiently stamped agreement to sell, reinforcing the strict adherence required under the Indian Stamp Act, 1899. The Court ruled that an insufficiently stamped document is inadmissible in evidence unless the deficiency in stamp duty, as assessed by the Collector, is cured and any associated penalties are paid.

The High Court had previously overturned the Trial Court’s decision based on the plaintiff’s willingness to pay the deficient stamp duty, but the Supreme Court found this reasoning flawed. It emphasized that mere willingness does not substitute for the actual payment and legal certification required.

Since the Trial Court marked the agreement as an exhibit “with objection”, its admissibility hinged on paying the required stamp duty, which the plaintiff failed to do. The Supreme Court rejected the plaintiff’s reliance on Section 36 of the Stamp Act, which allows documents to be admitted even if insufficiently stamped, noting that this provision does not apply when formal objections are left unresolved.

Referencing the precedent set in Ram Rattan vs. Bajrang Lal (1978), the Court reaffirmed that an instrument remains inadmissible if stamp deficiencies are not cured. Consequently, the Supreme Court upheld the Trial Court’s dismissal, rejecting the High Court’s contrary ruling.

Analysis:

The judgment reinforces the critical importance of adhering to the Indian Stamp Act, 1899, by affirming the dismissal of a specific performance suit based on an insufficiently stamped agreement to sell. This decision emphasizes that legal documents must satisfy statutory requirements for admissibility, thereby protecting the integrity of contractual obligations and promoting a disciplined approach to legal proceedings. By ruling that mere willingness to pay deficient stamp duty is insufficient, the Court encourages litigants to proactively rectify deficiencies, fostering accountability and diligence in contractual matters.

[1]https://api.sci.gov.in/supremecourt/2009/15273/15273_2009_7_101_55101_Judgement_28-Aug-2024.pdf

BEFORE THE HON’BLE SUPREME COURT

Bidyut Sarkar & Anr. Versus Kanchilal Pal (Dead) Through Lrs. & Anr.

CIVIL APPEAL NO. 10509-10510 OF 2013

Order dated 28th August, 2024