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Refers to Larger Bench Whether Fraudulent Intent Needed for Section 47-A Against BPCL
A two-judge Bench of the has expressed "serious doubt" about a long-standing interpretation of , and referred to a larger Bench the fundamental question of whether fraudulent intent must be proved before authorities can investigate alleged property undervaluation.
The Bench, comprising Justice Dipankar Datta and Justice Sheel Nagu, found itself unable to accept the proposition laid down in the three-judge Bench decision of
V.N. Devadoss v. Chief Revenue Control Officer-cum-Inspector of Stamps
(
), which had held that the power under Section 47-A could be invoked only where there was
"
of the subject of transfer with
to evade payment of proper stamp duty."
The Government Land Sale That Raised a Legal Storm
The dispute arose when purchased a parcel of land from the for a fixed consideration of ₹168.30 per square foot — fully paid through cheques in . After possession was delivered on , a transfer deed was executed on , naming the President of India as the transferor, represented by the Deputy/Assistant Salt Commissioner.
Although BPCL paid stamp duty on the full sale consideration recorded in the instrument, the registering authority noticed a significant disparity: the guideline value for the property stood at ₹500 per square foot. Concluding that the instrument may have been undervalued, the authority made a reference under Section 47-A and issued a demanding additional stamp duty.
A Single Judge of the quashed the notice, relying on V.N. Devadoss to hold that no material suggested deliberate undervaluation with fraudulent intent. However, a Division Bench reversed that order, restoring the proceedings and observing that a writ petition against a mere was ordinarily not maintainable when an existed.
Plain Text Versus Judicial Interpretation
The core legal question that captivated the
was whether Section 47-A of the Indian Stamp Act — which requires the registering authority to have
"
that the market value of the property or the consideration has not been truly set forth"
— also demands evidence of a
before proceedings can commence.
The Court noted that the provision, on its own terms, does not contain the expressions "
" or "
." Writing for the Bench, Justice Datta observed that reading such additional requirements into the statute would amount to
"
under a provision, de hors the precincts of the
."
"On its own terms, Section 47-A does not require the registering authority to issue notice having '
' of a
being the motive behind the transaction; it merely requires
that the market value of the property has not been truly set forth in the instrument presented before him for consideration,"
the Court stated.
Two Competing Visions of Section 47-A
The appellant, represented by , argued that the Single Judge had correctly followed the binding precedent in V.N. Devadoss , and that in a transaction involving the President of India as the transferor, the element of fraudulent intent could not legitimately arise. The Court rejected this latter submission outright, noting that instruments made in the exercise of the Union's executive power are expressed in the President's name but executed through authorised officials, and that such constitutional nomenclature cannot preclude an enquiry into whether the market value has been truly set forth.
, appearing for the respondents, contended that the Single Judge should never have interdicted the proceedings at the show-cause stage. She argued that this was neither a case of nor — the only two narrow exceptions recognized by this Court for entertaining a challenge to a under .
The 'Too Harsh, Too Lax' Test
In a strikingly illustrative passage, the Court demonstrated the practical difficulties with the V.N. Devadoss test through two hypothetical scenarios.
In the first — an "honest sale" — a property with a high circle rate is legitimately sold below that rate because of encumbrances such as tenancy restrictions, poor road access, and pending litigation. Under a pure valuation enquiry, the purchaser need only establish the property's actual market value. But under a fraud-centric test, the same honest purchaser would be forced to defend his character against an implied allegation of intending to cheat the exchequer.
"The ratio of V.N. Devadoss , by importing into a provision which, on its own terms, is about true market value, converts a market value enquiry into a ," the Bench observed.
In the second — a "fraudulent sale" — a property worth ₹2 crore is shown as ₹1.5 crore in the instrument, with the balance paid in cash. Though exists, the registering authority may have no material to prove it at the threshold. If demonstrable were made a jurisdictional pre-condition, the enquiry would be "still-born" — defeating the very object of protecting government revenue.
"The test propounded in V.N. Devadoss fails to do justice in either situation,"the Court concluded."In a genuine sale of encumbered property, it exposes an honest purchaser to a roving enquiry for no fault of his; in a case of a clandestine cash consideration, it disables the registering authority from even initiating an enquiry for want of material which, by its very nature, lies within the exclusive knowledge of the parties. In the former, it is too harsh; in the latter, too lax."
Why the Larger Bench Became Necessary
The Bench acknowledged that V.N. Devadoss was a decision of three judges, and that judicial discipline required them to follow it unless the issue was reconsidered by a Bench of greater strength. They also noted that the same approach had been followed in Registrar of Assurances v. ASL Vyapar (P) Ltd. (), another three-judge Bench decision.
"Judicial propriety and discipline require us to follow a binding decision of a larger Bench. Nonetheless, if the proposition in V.N. Devadoss does not commend our acceptance and we strongly feel that it requires reconsideration, the appropriate course is to leave the question for consideration by a Bench of appropriate strength," the Court stated.
Key Observations from the Judgment
"On its own terms, Section 47-A does not require the registering authority to issue notice having '
' of a
being the motive behind the transaction; it merely requires
that the market value of the property has not been truly set forth in the instrument presented before him for consideration."
"We are, with respect, unable to agree with the approach adopted in V.N. Devadoss (supra) as well as in ASL Vyapar (P) Ltd. (supra), insofar as both decisions proceed on the footing of reading an element of
into the plain statutory provision without examining the provision in its full statutory milieu and the scheme underpinning the power conferred upon the registering/revenue authority."
"The latter proposition, if sought to be pressed as an independent ingredient for the invocation of power under the said provision, would be tantamount to
under a provision, de hors the precincts of the
."
The Question for a Larger Bench
The referred the following questions to a larger Bench:
First, whether V.N. Devadoss correctly interprets Section 47-A as requiring with , or whether the power can be exercised irrespective of the parties' , by truly deciding the real nature and value of the transaction.
Second, whether the decisions in Ramesh Chand Bansal v. District Magistrate/Collector () and Shanti Bhushan v. State of U.P. () — both of which emphasised that a must be interpreted according to its plain language without implying additional requirements — do not lay down correct law.
The Court clarified that if V.N. Devadoss is ultimately upheld, the Single Judge's decision quashing the notice would be entirely justified; otherwise, it would not be sustainable. The papers were directed to be placed before the Chief Justice of India for appropriate orders.
The Bench did not determine the actual market value of the property or BPCL's ultimate liability for additional stamp duty — matters that remain entrusted to the statutory authority under Section 47-A.
