No discretion on court to impose less than 10 times of deficient stamps duty as penalty under Karnataka Stamp Act: SC

New Delhi: The Supreme Court said that there is no discretion vested in the court under the Karnataka Stamps Act from imposing less than 10 times of stamp duty as penalty on deficient stamp duty for admission of an instrument in a suit.

"Inadmissibility of insufficiently stamped instruments and impounding thereof; when it is brought before a person or authority empowered to take evidence, is a statutory mandate. The payment of deficit duty and a penalty of rupees five also is a statutory mandate which does not fall for any discretion,'' a bench of Justices Sanjay Kumar and K Vinod Chandran said.

The court pointed out that if an instrument is not duly stamped, it is inadmissible under Section 34 and if it is brought before any person or authority empowered to receive evidence, then, it shall be impounded.

It has also been recognised that on such impounding; for expedition of the suit, the party who produces the document can seek for determination of the insufficient duty by the court itself in which circumstance, the instrument can be taken in evidence on payment of the deficit duty as also 10 times the deficit duty determined as penalty, the court added.

"There is no discretion insofar as the quantum of penalty is concerned when the instrument is sought to be admitted in evidence before court without transmitting it to the District Commissioner,'' the bench said, referring to previous judgments in cases of Gangappa Vs Fakkirappa (2019) and Seetharama Shetty Vs Monappa Shetty (2024).

The bench said if the deficit and the penalty at 10 times is paid, after admission in evidence, a copy of the instrument has to be transmitted to the Deputy Commissioner under Section 37(1). The Deputy Commissioner on receipt of a copy of the instrument under Section 37(1) has the discretion to refund any portion of the penalty in excess of five rupees under Section 38.

The court also pointed out Section 39 also confers on the Deputy Commissioner a discretion to impose a penalty in excess of rupees five, but not exceeding 10 times the deficit duty.

"However, if the party producing the instrument opts under the first proviso to Section 34, there lies no discretion on the court in imposing a penalty less than 10 times the deficit duty,'' the bench said.

But when the copy of the duly stamped instrument, with penalty paid at 10 times, is sent to the Deputy Commissioner under Section 37(1), the Deputy Commissioner has the discretion to refund the penalty above five rupees fully or partially under Section 38. On the other hand, if the insufficiently stamped instrument is transmitted to the Deputy Commissioner under Section 37(2) then the discretion on the question of penalty kicks in under Section 39, the court added.

Dealing with a civil appeal filed by Krishnavathi Sharma, the bench said, the non-payment of stamp duty is a curable defect as held by a Constitution Bench in In Re: Interplay Between Arbitration Agreements under Arbitration Act, 1996 & Stamp Act, 1899 (2024).

The matter arose out of a suit for partition filed in 2008. The trial court rejected two applications filed by the first defendant to reject certain documents as inadmissible in evidence and impound those as per the Karnataka Stamp Act, 1957. The high court reversed the order and issued directions to pay the deficient stamp duty and exempted penalty.

The apex court allowed the appeal and clarified that the plaintiff would be entitled to produce a certified copy of this order before the trial court, which would act in accordance with the impounding as carried out by the high court and invoke the proviso to Section 34 or transmit the documents under Section 37(2) of the Act, at the option of the plaintiffs. The plaintiffs would be entitled to seek expeditious consideration under Section 39 of the Act before the Deputy Commissioner once the document is transmitted to the said authority, it said.