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SUPREME COURT OF INDIA
ASHOK BHUSHAN, R. SUBHASH REDDY, M.R. SHAH, JJ.
TRUSTEES OF H.C. DHANDA TRUST – APPELLANT
VERSUS
STATE OF MADHYA PRADESH AND Ors. – RESPONDENTS
Civil Appeal Nos. 3195-3196 of 2020 (Arising Out of SLP(C)Nos.10972-10973 of 2020)
Decided on : 17-09-2020
(A) Indian Stamp Act, 1899 – Section 40 read with Sections 33, 35, 38 and 39 – Quantum of penalty – Statutory scheme of Section 40(1)(b) indicates that when Collector is satisfied that instrument is not duly stamped, he shall require payment of proper duty together with penalty of five rupees – Statutory scheme vest discretion to Collector to impose penalty amount not exceeding ten times – Whenever statute transfers discretion to an authority discretion is to be exercised in furtherance of objects of enactment – Discretion is to be exercised not on whims or fancies rather discretion is to be exercised on rational basis in a fair manner – Amount of penalty not exceeding ten times is not an amount to be imposed as a matter of force – With respect to instrument not duly stamped, ten times penalty is not always retained and power can be exercised under Section 39 to reduce penalty in regard to that there is a statutory discretion in Collector to refund penalty. (Paras 16, 17 and 19)
(B) Indian Stamp Act, 1899 – Section 40 – Imposition of penalty on Gift-Deed – Validity of – Purpose of penalty generally is a deterrence and not retribution – When a discretion is given to a public authority, such public authority should exercise such discretion reasonably and not in oppressive manner – Responsibility to exercise discretion in reasonable manner lies more in cases where discretion vested by statute is unfettered – Imposition of extreme penalty i.e. ten times of duty or deficient portion thereof cannot be based on mere factum of evasion of duty – Reason such as fraud or deceit in order to deprive Revenue or undue enrichment are relevant factors to arrive at a decision as to what should be extent of penalty under Section 40(1)(b) – It is only in very extreme situation that penalty needs to be imposed to the extent of ten times – Collector by imposing ten times penalty in his order has given reason for imposition as “the party has not mentioned actual nature of document with intention to escape duty – No other reasons have been given either by Collector or by High Court justifying imposition of maximum penalty of ten times – It is not the case of Collector that conduct of appellant was dishonest or contumacious – This was not a case of imposition of extreme penalty of ten times of deficiency of stamp duty – Ends of justice will be served in reducing penalty imposed to the extent of half i.e. five times of deficiency in stamp duty – Ordered accordingly. (Paras 21, 23, 24, 25 and 26)
Facts of the case:
Only question to be determined in these appeals is as to whether the imposition of ten times penalty by Collector of Stamps under Section 40 of the Indian Stamp Act, 1899 was validly imposed or not.
Findings of Court:
No other reasons have been given either by Collector or by the High Court justifying the imposition of maximum penalty of ten times. It is not the case of Collector that the conduct of the appellant was dishonest or contumacious.
Result : Appeals Partly allowed.
JUDGMENT
Ashok Bhushan, J.
Leave granted.
2. The appellant by these appeals challenges the judgment of learned Single Judge of the High Court of Madhya Pradesh, Bench at Indore in Writ Petition No.8888 of 2011 dated 30.03.2017 dismissing the Writ Petition of the appellant as well as the judgment dated 04.09.2017 of the Division Bench dismissing the Writ Appeal filed by the appellant against the judgment of the learned Single Judge. The Division Bench has dismissed the writ appeal vide its judgment dated 04.09.2017 holding it as not maintainable.
3. Brief facts of the case giving rise to these appeals are:
Late Shri Harish Chand Dhanda, a Minister in erstwhile Government of Maharaja Holkar of Indore received the free gift of land measuring 108,900 sq.ft. (one lac eight thousand nine hundred) situate at Yeshwant Niwas Road, Indore by Order No.58 of 22.04.1946. Late Shri H.C. Dhanda got constructed in the above piece of land, a building known as 'Hotel Lantern'. Another piece of land situate at 5, Ravindra Nath Tagore Marg, Indore was gifted to Late Shri H.C. Dhanda by his father-in-law late Col. V.B. Jadhav on 05.10.1948. Late Shri H.C. Dhanda possessed various other movable and immovable properties in the city of Indore with which we are not concerned in the present appeals. Late Shri H.C. Dhanda executed his last Will dated 26.10.2002. In his Will he mentioned his movable and immovable properties apart from the above two immovable properties and by his Will he created a Trust in which he appointed his son, Yogesh Dhanda as Chairman of Trust, Shri B.J. Dave, Chartered Accountant, Indore and one Shri Chhaganlal Nagar as member. The above two immovable properties apart from other properties were put in Trust under the aforesaid Will. All Trustees under the Will were the executors of the Will. Shri H.C. Dhanda died on 05.07.2003.
4. A meeting of Board of Trustees was held on 06.04.2005. A resolution was passed by Executors/Trustees to transfer and vest area by executing a Deed of Transfer with a site plan from the trustees to beneficiaries by registering the same. On 21.04.2005 a Deed of Assent was executed between M/s H.C. Dhanda Trust, a private trust as one part and Jogesh Dhanda and others as other part. By Deed of Assent the Trustees/Executors gave assent to complete the title of the Legatees and vest absolutely and forever in their favour both Lantern Hotel and Jahaj Mahal property. A notice was issued by the Collector of Stamps, District Indore stating that in Deed of Assent dated 21.04.2005 proper stamp duty has not been paid, 22.03.2007 was fixed for appearance. The notice further stated that why deficit stamp duty of Rs. 1,62,82,150/-on the document dated 21.04.2005, and ten times penalty should not be imposed. The Trust appeared before the Collector of Stamps and filed its objection. The Collector of Stamps passed an order dated 22.09.2008 holding the Deed of Assent dated 21.04.2005 as a gift deed. The Collector held that under Indian Stamp Act, 1899, the stamp duty payable on a gift deed would be 8% of the market value, Municipal duty 1% and Janpad duty 1%. The Collector found deficit duty to the extent of Rs.1,28,09,700/- and also imposed ten times penalty i.e. Rs.12,80,97,000/-. The order called upon the Trust to deposit amount of Rs.14,09,06,700/- within thirty days. Aggrieved against the order of Collector, Reference Application was filed by the appellant before the Board of Revenue, Madhya Pradesh, Gwalior. Board of Revenue vide its order dated 25.10.2011 upheld deficiency of stamp duty of Rs.1,28,09,700/- and ten times penalty of Rs.12,80,97,000/-. The order called upon the Trust to deposit amount of Rs.14,09,06,700/-within thirty days. Board of Revenue vide its order dated 25.10.2011 upheld the order of the Collector dated 22.09.2008 and dismissed the Reference Application. Challenging the order of the Board of Revenue as well as the Collector of Stamps a Writ Petition No.8888 of 2011 was filed by the appellant in the
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