Stamp duty on property bought in IBC liquidation must be based on auction price, not ASR valuation, Bombay High Court rules

Harneshwar Agro Products Power and Yeast (I) Ltd. was ordered into liquidation by the NCLT, which appointed a liquidator under the Insolvency and Bankruptcy Code, 2016 (IBC).

Following valuations and an e-auction conducted under the IBC liquidation process, Bhadrashree Steel & Power Ltd. became the successful bidder.

The liquidator issued a sale certificate and agreed to execute a conveyance.

The Stamp Authorities assessed the land and building at a value substantially above the auction value and required duty to be paid on that higher assessment.

The petitioner’s appeal resulted in a remand, after which the authorities again assessed the property above the auction value.

The petitioner challenged that determination by writ petition.

1. Whether the price stated in a sale certificate issued following an e-auction conducted by an IBC liquidator under the supervision of the NCLT could be accepted as the true market value for stamp-duty purposes

2. Whether the Collector of Stamps could reassess the property’s value by reference to the ASR when the liquidator had conducted a valuation-based, transparent auction in accordance with the IBC and the applicable regulations

Section 3 and Section 2(na) of the Maharashtra Stamp Act, 1958 make instruments chargeable with duty under Schedule I and define market value, in relation to property, as the price it would fetch in the open market on the date of execution or the consideration stated in the instrument, whichever is higher.

Schedule I, Articles 16 and 25 govern duty on sale certificates and conveyances.

Rule 4(6) of the Maharashtra Stamp (Determination of True Market Value of Property) Rules, 1995 generally provides for verification against the ASR and referral to the Collector where the stated value is lower, subject to its provisos.

Under Sections 33–35 of the IBC and the Liquidation Process Regulations, 2016, a liquidator appointed by the NCLT must value and sell the corporate debtor’s assets in the prescribed manner, including by public auction.

The Court applied the principles in Registrar of Assurances v. ASL Vyapar Pvt. Ltd., 2022 SCC OnLine SC 1554, and the Bombay High Court decisions in Pinak Bharat and Company v. Anil Ramrao Naik, 2019 SCC OnLine Bom 527, and Spectrum Constructions and Developers LLP v. State of Maharashtra, 2022 SCC OnLine Bom 3693: a properly conducted, valuation-based public auction under judicial or tribunal oversight provides a reliable price-discovery mechanism, and the stamp authority should not displace that value without grounds to suspect suppression or deliberate undervaluation.

The Court found that the liquidator had obtained valuations in accordance with the liquidation regulations, set a reserve price, advertised the e-auction, and received participation from multiple bidders.

The auction and its progress were reported to the NCLT; challenges to the process before the NCLT and NCLAT did not establish any defect.

The successful bid exceeded the reserve price, and the State did not show that the auction price had been deliberately suppressed or that the process was collusive.

The Court held that the liquidator’s sale, conducted under the NCLT’s authority and in compliance with the IBC process, could not be excluded from the reasoning applied to court-supervised and other transparent auctions merely because the liquidator was not a civil or revenue court.

In those circumstances, reliance on the ASR alone did not justify replacing the auction value with a higher assessment.

It directed the petitioner to pay stamp duty on Rs. 8,03,60,000, the stated value of the land and building, and directed completion of registration of the deed of assignment and conveyance.

The writ petition was allowed, the Rule made absolute, and the pending interim applications disposed of, with no order as to costs.