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REPORTABLE IN     THE      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

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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

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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

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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

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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

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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.

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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

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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

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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

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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

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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

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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

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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

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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

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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

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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.