In a significant decision of Dr. Prince John Edavazhikal v/s The Collector of Stamps & Joint District Registrar, Palghar & Others., regarding the payment of stamp duty on properties purchased through auctions under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), the Bombay High Court ruled in favor of a petitioner challenging the demand for additional stamp duty and penalty by the Maharashtra Stamping Authorities. The case highlighted the conflict between the valuation of the property in the Sale Certificate issued by the Bank of India (BOI) and the higher market value assessed by the Stamping Authorities.

The petitioner, having successfully purchased an immovable property located at Gat No. 379, Village Abitghar, Taluka Wada, District Palghar, Maharashtra, at a public auction held by BOI under the SARFAESI Act, challenged the demand of Rs. 29,97,200/- in stamp duty and an additional penalty of Rs. 1,19,900/- by the Stamping Authorities. The property, which was auctioned for Rs. 2,22,75,000/-, faced a higher stamp duty demand based on an assessed market value of Rs. 7,82,00,800/-. The petitioner argued that the stamp duty should be based solely on the value indicated in the Sale Certificate, which reflected the auction price.

The petitioner’s counsel, Senior Advocate Mr. Sen, contended that under Rule 4 of the Maharashtra Stamp (Determination of True Market Value of Property) Rules, 1995, the authorities should not have assessed the market value beyond the sale price mentioned in the Sale Certificate. He cited previous legal precedents, including the Supreme Court's ruling in Registrar of Assurances and Another vs. ASL Vyapar Private Ltd. and the Bombay High Court decision in Trident Estate Private Ltd. vs. The Office of Joint District Registrar, which supported the position that the stamp duty must be computed on the sale value as indicated in official documents, especially when the sale is conducted by a government body or a public sector undertaking like BOI.

On the other hand, the Stamping Authorities argued that since BOI, as a government undertaking, is required to conduct an independent valuation, the authorities were within their rights to reassess the market value and levy the duty accordingly. They maintained that the market value derived through their assessment was Rs. 7,82,00,800/-.

The court agreed with the petitioner’s position, relying heavily on the first proviso to Rule 4(6) of the 1995 Rules, which clearly stipulates that if a property is sold by a government or semi-government entity, or a local authority, at a pre-determined price, the sale price fixed by the said entity shall be considered the true market value for stamp duty purposes. Since BOI is a government undertaking, the sale price mentioned in the Sale Certificate should have been treated as the accurate market value.

Furthermore, the court noted that the SARFAESI auction process is highly regulated, with transparency ensured through various steps like valuation by empaneled valuers and fixing of the reserve price by a committee. It emphasized that the price obtained in such a public auction reflects the fair market value, and the Stamping Authorities should not have interfered with the declared auction price unless there was clear evidence of undervaluation or fraudulent activity.

In this case, the court found no such evidence and noted that the SARFAESI auction process itself provided a transparent and fair method of price discovery. Thus, the value mentioned in the Sale Certificate, Rs. 2,22,75,000/-, was determined to be the appropriate base for calculating the stamp duty, and the demand for additional stamp duty and penalty was unjustified.

The Bombay High Court quashed the demand notice issued by the Stamping Authorities for additional stamp duty and penalty. The court directed the authorities to register the Sale Certificate based on the stamp duty already paid by the petitioner, which was calculated at 4% of the value mentioned in the Sale Certificate (Rs. 8,91,000/-). Furthermore, the court ordered the refund of Rs. 10,53,100/- deposited by the petitioner in the court as part of the interim relief.

This ruling is significant in reinforcing the importance of the Sale Certificate issued in SARFAESI Act auctions as a primary document for determining the stamp duty, especially when the sale is conducted by a public sector bank or government entity. It ensures that the authorities respect the price obtained through transparent auction procedures and curtail arbitrary increases in stamp duty assessments.

This case highlights the legal importance of adhering to the value declared in official documents like Sale Certificates, particularly in government-conducted sales. It ensures that property buyers are not unfairly burdened with excessive stamp duty demands, and it emphasizes the need for transparency and fairness in the valuation and sale processes under the SARFAESI Act.