Gita Power & Infrastructure Private Limited V. Inspector General Of Registration & Ors (W.A. No. 1609 Of 2024)

Facts of the case

• Gita Power & Infrastructure Private Limited (the Appellant) had executed an assignment agreement and presented it to the Sub-Registrar/Registration Authority for registration on 29 July 2021.
• The Registration Authority found that the stamp duty paid on the instrument was insufficient and referred the document to the District Registrar/Collector for determination of the deficit stamp duty.
• Seeing that a high duty would be levied, the company applied for the return of the document (i.e., sought to withdraw it) before registration. The application for return was dismissed, and the document was impounded pending collection of the deficit stamp duty.
• The company challenged this in writ proceedings, but the Madras High Court dismissed the petition and the appeal.

Issues:

• Whether the presenter of a document (i.e., the person who executes and presents the instrument for registration) can avoid liability for deficit stamp duty by withdrawing the instrument before its formal registration.

Held:

The Madras High Court heldthat, one cannot avoid the payment of deficit stamp duty simply by withdrawing the instrument after presentation and before registration. The court confirmed that once a document is executed and presented for registration, the statutory machinery under the Indian Stamp Act, 1899 and the Registration Act, 1908 gets triggered and liability for the duty arises.

The court Specifically observed that:

• When an instrument is presented for registration, the Registering Authority must scrutinise whether the stamp duty paid is correct. If it is found insufficient, the document must be impounded and sent to the Collector for determination of the correct duty.
• After the Collector determines the duty, the document is returned to the registering authority, who issues a notice to the presenter. Only then does the presenter get to choose whether to proceed with registration or seek the return of the instrument.
• The court emphasised that the execution of the instrument is sufficient to trigger the liability for deficit stamp duty irrespective of actual registration. The fact of non‐registration (because the presenter withdrew or sought return) is not a ground to evade payment of duty.
• The court thus found no infirmity in the decision of the lower court and dismissed the appeal.

The Court, referring to Sections 38(2), 40, 42, and 48 of the Stamp Act along with Rule 107 of the Registration Rules, explained that these provisions collectively outline the mechanism for examining, assessing, and recovering stamp duty on instruments presented for registration. It held that merely presenting the document for registration is enough to trigger liability for stamp duty meaning that withdrawing or withholding the instrument afterward does not absolve the presenter from payment. The obligation to pay arises upon execution and presentation, regardless of whether the document is ultimately registered.

Furthermore, the presenter’s option to either complete registration or request the return of the document arises only after the Collector has assessed the proper stamp duty and the statutory procedure under the Stamp Act has been completed. Until that process is concluded, the document cannot be returned without complying with the duty requirements.