GANGAPPA vs. FAKKIRAPPA

1 REPORTABLE    THE IN     SUPREME     COURT     OF    INDIA   CIVIL   APPELLATE     JURISDICTION   CIVIL   APPEAL     NO.11932      Of    2018  GANGAPPA AND ANR.       ...APPELLANT(S)  VERSUS FAKKIRAPPA    ...RESPONDENT(S) J  U  D  G  M  E  N  T   ASHOK   BHUSHAN,J. This appeal has been filed against the judgment of Karnataka   High   Court,   Dharwad   Bench   dated   17.07.2014 disposing of the writ petition filed by the respondent herein.  2. Brief facts of the case necessary to be noticed for deciding this appeal are: The   appellants/plaintiffs   entered   into   agreements to sell with respondent­defendant dated 12.04.2005 and 16.05.2006 and earnest money of Rs.1,40,000/­ was paid. The   appellants   filed   Suit   No.863   of   2008   and   Suit No.864   of   2008   praying   for   specific   performance   of 2 contract.   Another   suit   filed   by   the   sister   of   the defendant   being   O.S.No.327   of   2008   was   also   clubbed. The Principal Civil Judge impounded agreements to sell filed by the plaintiffs in Suit Nos.863 and 864 of 2008 with direction to the plaintiff to pay deficit duty and penalty   vide   order   dated   27.09.2010.   Plaintiffs challenged   the   order   by   means   of   Writ   Petition Nos.69264­65/2010 and 69263/2010 which   were disposed of by the High Court vide its judgment dated 14.03.2013 directing   the   Principal   Civil   Judge   to   permit   the plaintiffs   to   place   written   submissions.   After   the order   of   the   High   Court,   the   Principal   Civil   Judge passed an order dated 22.04.2013 by which agreements to sell in question were admitted in evidence and marked for the plaintiffs in O.S.Nos.863 and 864 of 2008 on payment of  deficit duty and penalty. Deficit  duty in both   the   suits   was   determined   as   Rs.12013/­   and Rs.20320/­   respectively   and   the   penalty   imposed   was double of the deficit duty in both the suits. 3. Aggrieved by the judgment of the Principal Civil Judge,   respondent­defendant   filed   a   writ   petition   in 3 the   High   Court.   The   High   Court   disposed   of   the   writ petition   relying   on   a   Division   Bench   judgment   of Karnataka High Court in   Digambar Warty and others vs. District   Registrar,   Bangalore   Urban   District   and another, ILR 2013 KAR 2099.  The High Court directed the courts below to levy the  penalty at 10  times  of the deficit duty as per judgment of Karnataka High Court in ILR   2013   KAR   2099.   Aggrieved   by   the   judgment   of   the High   Court   this   appeal   has   been   filed   by   the appellants. 4. Learned counsel for the appellant submits that the High Court committed an error in directing payment of penalty   at   10   times.   The   trial   court   has   rightly directed for payment of deficit duty and penalty at the rate of 2 times which was a just and proper order. It is submitted by the learned counsel for the appellant that when the Deputy Commissioner can reduce   levy of penalty not exceeding 10 times of the amount of duty, the   trial   court   while   determining   the   deficiency   and penalty   shall   also   have   such   discretion.   The   trial court has rightly exercised the discretion by imposing 4 the penalty of two times.  5. Learned   counsel   appearing   for   the   respondent submits   that   the   instruments   waere   not   duly   stamped. While   admitting   the   insufficiently   stamped   documents the   trial   court   has   no   discretion   while   levying   the penalty. The statute i.e. Section 34 of the Karnataka Stamp   Act,   1957   mandates   penalty   at   the   rate   of   10 times.   The   Division   Bench   of   the   High   Court   in Digambar   Warty   and   others   (supra)   has   correctly interpreted Section 34 while holding that Court has no discretion   to   reduce   the   penalty   from   10   times.   The High   Court   has   rightly   followed   the   above   Division Bench Judgment.  6. We   have   considered   submissions   of   the   learned counsel for the parties and perused the records. 7. The issue which needs to be answered in the present case   is   as   to   whether   the   trial   court   which   had admitted the agreements to sell in evidence could have exercised   its   discretion   in   imposing   penalty   at   the rate of 2 times of deficient amount of stamp duty or it was   obligatory   for   the   trial   court   to   impose   the 5 penalty at the rate of 10 times. 8. Before   we   proceed   to   consider   the   respective submissions of  the parties, it is relevant to notice statutory provisions of the Karnataka Stamp Act, 1957. Section   33   requires   every   person   having   by   law   or consent   of   parties   authority   to   receive   evidence,   is obliged   to   impound   any   instrument   which   according   to him is not duly stamped. Section 33 sub­section (1) is as follows: “ 33.   Examination   and   impounding   of instruments .­ (1) Every person having by law or   consent   of   parties   authority   to   receive evidence,   and   every   person   in   charge   of   a public   office,   except   an   officer   of   police, before whom any instrument, chargeable in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears   to   him   that   such   instrument   is   not duly stamped, impound the same.” 9. Section   34   provides   that   instruments   not   duly stamped are inadmissible in evidence. Section 34 sub­ section (1) which is relevant for the present case is as follows: “ 34. 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 6 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)   nothing   herein   contained   shall   be deemed to require any magistrate or Judge of a Criminal Court to examine or impound, if   he   does   not   think   fit   so   to   do,   any instrument coming before him in the course of any proceeding other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898;” 10. Section   38   empowers   the   Deputy   Commissioner   to refund   penalty   paid   under   sub­section   (1)   of   Section 37.   Section   39   relates   to   the   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 penalty paid under sub­section (1) of section 37. ­ (1) When a copy of an instrument is sent to the Deputy Commissioner under sub­ section   (1)   of   section   37,   he   may,   if   he thinks fit, refund any portion of the penalty in excess of five rupees which has been paid in respect of such instrument.  (2)   When   such   instrument   has   been   impounded only   because   it   has   been   written   in contravention of section 13 or section 14, the 1[Deputy Commissioner]1 may refund the whole penalty so paid. 7 39.   Deputy   Commissioner's   power   to   stamp instruments   impounded .­   (1)   When   the   Deputy Commissioner]1   impounds   any   instrument   under section 33, or receives any instrument sent to him under sub­section (2) of section 37, not being an instrument chargeable with a duty not exceeding   fifteen   naye   paise   only   or   a mortgage   of   crop   Article   35   (a)   of   the Schedule] chargeable under clause (a) or (b) of section 3 with a duty of twenty­five naye paise, he shall adopt the following procedure: (a)   if   he   is   of   opinion   that   such instrument   is   duly   stamped,   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 13 or 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 8 evidence an instrument not duly stamped are on payment of   duty   and   penalty.   With   regard   to   penalty   statute provides: "in the case of an 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;” 12. The statute envisages that when the 10 times of the amount of the proper duty or deficient portion thereof exceeds five rupees, a sum equal to 10 times of such duty or portion is the penalty.  13. The language of Section 34 provides a flat rate of penalty   when   the   amount   of   proper   duty   exceeds   five rupees i.e. 10 times of such duty or portion. There is a   clear   Contrast   in   the   language   of   Section   34   and Section 39. Section 39 sub­section (1) sub­clause (b) is extracted for ready reference: “39(1)(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 9 amount   of   the   proper   duty   or   of   the deficient   portion   thereof,   whether   such amount   exceeds   or   falls   short   of   five rupees:” 14. The above provision indicated that if the Deputy Commissioner   is   of   opinion   that   such   instrument   is chargeable   with   duty   and   is   not   duly   stamped   shall require the payment of the proper duty with a penalty of five rupees. The   latter   part   of   the   provision states “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”.   Thus,   discretion   has   been conferred on the Deputy Commissioner which is apparent from the words “ if he thinks fit ”. Deputy Commissioner has   discretion   of   imposing   penalty   of   10   times   or lesser of the amount of duty or portion thereof. There is   clear   contradistinction   between   the   power   under Section   33   and   39.   The   object   and   purpose   for   such contradistinction in the provision and power is not far to seek. Section 33 applies to every person having by law   or   consent   of   parties   authority   to   receive 10 evidence,   and   every   person   in­charge   of   a   public office. Thus, Section 33 covers a host of authorities, persons   before   whom   instruments   are   filed.   The legislative   scheme   does   not   indicate   any   distinction between   a   court   receiving   an   insufficiently   stamped instrument in evidence and other authorities. All have to impose penalty of 10 times of the duty or deficit portion, if it exceeds rupees five. This provision is for purpose of maintaining a uniformity in imposing a fixed   penalty   of   10   times   without   adverting   to   any adjudicatory process regarding quantifying the quantum of   penalty.     The   statute   gives   discretion   to   Deputy Commissioner who is the authority envisaged by the Act in­charge of the revenue administration of a District. The   definition     of   Deputy   Commissioner   is   given   in Section 2(dd) which is to the following effect:  “2(dd) ‘Deputy Commissioner’ means the Chief Officer   in   charge   of   the   revenue administration of a district and includes in respect   of   such   provisions   of   this   Act   or rules   made   thereunder   such   officer   in   such area   as   the   State   Government   may   by notification in the Official Gazette specify;” 15. The amount of duty and penalty is required to be 11 sent to Deputy Commissioner under Section 37. Section 37 is quoted below: “37. Instruments impounded how dealt with .­   (1)   When   the   person   impounding   an instrument   under   section   33   has   by   law   or consent   of   parties   authority   to   receive evidence   and   admits   such   instrument   in evidence upon payment of a penalty as provided by   section   34   or   of   duty   as   provided   by section   36,   he   shall   send   to   the   Deputy Commissioner   an   authenticated   copy   of   such instrument,   together   with   a   certificate   in writing,   stating   the   amount   of   duty   and penalty levied in respect thereof, and shall send such amount to the Deputy Commissioner or to   such   person   as   he   may   appoint   in   this behalf. (2)   In   every   other   case,   the   person   so impounding   an   instrument   shall   send   it   in original to the Deputy Commissioner.  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 sub­section (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 12 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.  17. In the   Division Bench judgment of the Karnataka High Court relied by the High Court in   Digambar Warty and   others   (supra),   after   noticing   the   provisions   of Section   33   and   34   the   Division   Bench   laid   down following in paragraph 36: “36. This provision refers to the power of the Civil Court which admits the documents in evidence. The main Section is couched in the   negative.   Unless   the   instrument   is   duly stamped, it is inadmissible in evidence. As an exception, the proviso provides for payment of duty and penalty. In the matter of collection of duty and penalty no discretion is vested with   the   authority   admitting   such   an instrument   in   evidence.   The   duty   payable   on 13 the   instrument   is   prescribed   by   statute. Therefore,   there   is   no   question   of   any discretion   being   vested   with   the   authority impounding   the   document   in   the   matter   of collecting the duty. Once the duty payable is ascertained from the statute, no discretion is vested   with   the   authority   admitting   the document   in   evidence,   in   the   matter   of imposition of duty and penalty. The word used in   the   said   proviso   is   'shall'.   It   is mandatory. However, Section 35 makes it clear, that where an instrument has been admitted in evidence without there being objection at the time   of   admitting   the   said   instrument   in evidence,   then   such   admission   shall   not, except as provided in Section 58, be called in question   at   any   stage   of   the   same   suit   or proceeding on the ground that the instrument has not been duly stamped. Section 58 deals with   the   power   of   the   Appellate   Court   to review   the   finding   recorded   by   the   original Court under Section 34 of the Act, either suo motu   or   on   the   application   of   the   Deputy Commissioner. Section 36 of the Act deals with admission   of   improperly   stamped   instrument. The State Government may make rules providing that,   where   an   instrument   bears   a   stamp   of sufficient amount but of improper description, it may, on payment of the duty with which the same is chargeable, be certified to be duly stamped, and any instrument so certified shall then be deemed to have been duly stamped as from the date of its execution.” 18. The   above   view   of   the   Karnataka   High   Court   that there   is   no   discretion   vested   with   the   authority impounding   the   document   in   the   matter   of   collecting 14 duty under Section 33, is correct. The word used in the said   proviso   is   'shall'.   Sections   33   and   34   clearly indicate that penalty imposed has to be 10 times. The Division Bench of the Karnataka High Court in  Digambar Warty   and   others   (supra)   has   rightly   interpreted   the provisions of Sections 33 and 34 of the Act. We, thus, are of  the view that  the High Court in the  impugned judgment   did   not   commit   any   error   in   relying   on   the judgment  of the Division Bench in   Digambar Warty and others (supra).   We thus has to uphold   the above view expressed in the impugned  judgment.  19. There is one more aspect which needs to be noted in the   present   case.   We   have   seen   that   even   though   10 times penalty has to be collected and imposed by the person   impounding   the   document   under   Section   37, Section 38 empowers the Deputy Collector to refund the duty. Learned trial court while imposing penalty at the rate of two times has given following reason: "The plaintiffs of O.S. No.863/08 and 864/08 are stated to be agriculture and are residing at   Sherewad   village.   The   said   fact   is   not denied by the defendants therein. It appears that   the   agreements   were   prepared   by   local villagers   who   are   not   experienced   in   the 15 documentation.   Looking   to   the   status   of   the plaintiffs,   their   standard   of   having qualification of the document writers. I am of the opinion that the ratio laid down by our Hon'ble High Court in ILR 2011 KAR 4719 can be applied to the present facts and circumstances levying 10 times penalty in respect of said agreement   will   be   harsh   on   the   plaintiffs. Therefore   I   am   of   the   opinion   that   levying double the amount of deficit duty as penalty will meet the ends of justice.” 20. The order of the trial court was passed as early as on 22.04.2013 that is more than five years ago. In view of impounding the documents and imposition of penalty, we are sure that the suit must not have been proceeded further, and it must be at the threshold stage; asking the   appellant   to   deposit   10   times   of   penalty   and thereafter   to   invoke   the   jurisdiction   of   Deputy Collector under Section 38 to refund penalty shall be a proceeding again taking considerable time. In the facts of the present case, we are of the view that ends of justice be served in closing the matter by confirming the payment of deficit duty with the double penalty as imposed   by   the   trial   court   which   shall   obviate   the proceeding of approaching the Deputy Commissioner for reduction   of   penalty   under   Section   38,   which   in   the 16 facts of the present case and for the reasons noted by the   trial   court   was   a   relevant   consideration   for refund/reduction of the penalty.  21. In   view   of   the   foregoing   discussion,   we   are, therefore,   of   the   view   that   the   High   Court   has correctly interpreted the provisions of Section 33 in the   impugned   judgment   but   instead   of   prolonging   the matter permitting the appellant to deposit 10 times of penalty and thereafter to take recourse under Section 38,   we   in   the   facts   of   the   present   case   close   the proceedings regarding penalty on the agreements to sell by   approving   the   direction   of   the   trial   court   for payment of entire deficit duty and double the penalty. 22. The appeal is disposed of accordingly.   ..........................J.     ( ASHOK BHUSHAN ) ..........................J. NEW DELHI, ( AJAY RASTOGI ) December 14, 2018.