The Collector has the authority to levy penalty at rates less than ten times the assessed stamp duty under Section 40 of the Indian Stamp Act, 1899.

JUDGMENT

Sabyasachi Bhattacharyya, J. - The common petitioner in the two writ applications have challenged the assessment of penalty regarding two agreements for sale, both dated May 25, 2020, entered into by the petitioner, respectively with M/s Chetki Properties Pvt. Ltd. (In WPO No.108 of 2020) and Auckland Properties Pvt. Ltd. (in WPO No.109 of 2018) by the Collector of Stamp Revenue, Kolkata. Pursuant to arbitration clauses in the said instruments, the matters were referred to an Arbitrator. The documents were produced before the Arbitrator, who impounded the documents and sent those to the Collector for assessment of stamp duty. The Collector assessed the stamp duty and imposed penalty at rates much below the maximum leviable amount as per Section 35 of the Indian Stamp Act, 1899 that is, ten times the stamp duty. In the document between the petitioner and M/s Chetki Properties Pvt. Ltd., the stamp duty was assessed at Rs.23,69,640/- and penalty at Rs.1,30,360/-. In the agreement between the petitioner and Auckland Properties Pvt. Ltd., the stamp duty was assessed at Rs. 32,81,040/- and penalty at Rs.2,18,960/-.

2. The petitioner is a party to the said arbitration proceedings and challenges the levy of penalty at less than the maximum amount permissible under Section 35 of Stamp Act.

3. Learned counsel appearing for the petitioner contends that the Arbitrator having impounded the agreements and sent the documents to the Collector for assessment of stamp duty, the Collector was bound by Section 35, proviso (a) to impose penalty of a sum equivalent to ten times such duty. It is contended that the reference was not under Section 38 of the Stamp Act. As such, the Collector did not have the liberty, granted under Section 40(b) of the said Act, to fix penalty at an amount less than the maximum rate provided in law.

4. By placing reliance on Gangappa and another vs. Fakkirappa, (2019) 3 SCC 788 , it is submitted that no discretion is vested with the authority impounding the document in the matter of collecting duty under Section 33 of the Stamp Act, in view of the expression "shall" in the proviso thereto.

5. Learned counsel appearing for the private respondents, on the other hand, argues that the reference to the Collector by the Arbitrator took place only after impoundment, as appearing from the relevant order of the Collector, which is Annexure R-2 to the affidavit-in-opposition filed by the private respondent. It was specifically recorded in the Arbitrator's order dated March 8, 2017 that, by consent of all parties, the original agreements were to be sent to the Arbitrator for impounding and, in turn, to the Collector, Kolkata for being stamped in compliance of Section 35 of the Indian Stamp Act.

6. Even from the communication of the Arbitrator in that regard, dated September 13, 2017, which is annexed to the writ petitions, it appears that the Arbitrator sent the agreements to the Collector only after impounding those.

7. Learned counsel argues that the Collector's powers of impounding an instrument and imposing penalty can only be exercised under Section 31, Section 40 or Section 41 of the Stamp Act. Section 40, it is argued, encompasses impoundments under Section 33 as well as assessment on reference under Section 38(2) of the Stamp Act.

8. In the present case, in view of the prior impounding by the Arbitrator, the reference to the collector was evidently under Section 38.

9. Learned counsel cites Peeteti Subba Rao vs. Anumala S. Narendra, (2002) 10 SCC 427 to argue that Section 35 falls under Chapter IV of the Indian Stamp Act and empowers the Trial Court to direct the party, who wants the document to be acted upon, to pay stamp duty of ten times the amount of the proper duty. This is for the purpose of enabling the document to be admitted in evidence. In such a situation, the document would be admitted only on payment of the said sum. In a case where the party is not willing or cannot afford to pay the sum, the court ha