The Inspector General of Registration, Tamil Nadu and Ors. vs K. Baskaran

Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968: r.7 – Whether r.7 of the Rules prescribing

3 months’ time for the Collector to pass an order determining the market value of the properties and duty payable on the instrument from the first notice, is directory or mandatory – Held: Under subsection (1) of s.47-A of the Stamp Act, if there is reason to believe that the market value has not been truly set forth in the Instrument tendered for registration, a reference can be made to the Collector, who (i) after giving the parties reasonable opportunity of being heard; and (ii) after holding an enquiry in such manner as may be prescribed by Rules, has to determine the correct value of the concerned property – The Section by itself does not lay down any period within which the entire process is to be completed by the Collector – It simply states that the enquiry be held in “such manner” as may be prescribed by Rules – If the stipulation or fixation of period of three months from the first notice in terms of r.6 or from notice in Form II is taken to be mandatory, it would lead to a situation of incongruity – The fact that Form II notice had been issued, would mean that on a prima facie view of the record and material, the value stated in the instrument was not the correct value; which in turn would mean that prima facie the Government Coffers were being denied the rightful dues – If for any reason, the proceedings are not completed within three months and, therefore, must be held to be vitiated, the public interest would suffer, and the persons who were prime facie responsible for suppressing real value would stand to gain – The amendment of r.7 incorporating the period of three months was essentially to guide the public officials to complete the process as early as possible but was not intended to create a right in favour of those who had prima facie conducted themselves prejudicing public interest – Pertinently, the concerned provision has not spelt out any consequence for non-adherence to said period of three months – The fixation of timeline of three months in r.7 is, therefore, purely directory – Stamp Act, 1899 – s.47A.

Stamp Act, 1899: s.47A – Whether the appellate authority has power under s.47A of the Act to enhance the market value of the property while deciding the appeal filed by the registrants – Held: Sub-section (6) of s.47-A of the Act empowers the Chief Controlling Revenue Authority, in exercise of suo motu power, to call for and examine the correctness of an order passed under sub-section (2) or sub-section (3) of s.47-A; and if the order is prejudicial to the interest of Revenue, the Chief Controlling Authority may make such enquiry or cause such enquiry to be made and either revise, modify or set aside such order and pass any order that it deems appropriate – There are some limitations on the exercise of said power, since no proceedings can be initiated against an order passed under subsection (2) or sub-section (3), if the time for preferring an appeal against that order has not expired, or if more than five years have expired after passing of the order – The intent is clear that if there be sufficient time to prefer a regular appeal challenging that order, the remedy of filing an appeal ought to be taken resort to – Further, if the period of five years has expired, no suo motu power can be exercised – Another limitation is prescribed by sub-section (8), in terms of which no order in exercise of suo motu exercise of power can be passed which may adversely impact a person, unless that person has had reasonable opportunity of being heard – Apart from these limitations, the statutory provisions do not impose any other restriction, and the power is conferred principally to ensure that no order passed under sub-sections (2) or (3) of s.47-A is prejudicial to the interest of the revenue – In the present case, while proposing to enhance the market value higher than what was determined by the Collector, the appellate authority had put the appellant-registrant to sufficient notice and had called for response with regard to the proposed enhancement – It was nobody’s case that as on the date when the proceedings were initiated in exercise of the power under sub-section (6) of s.47-A, the period for preferring the appeal had not expired, or that more than five years had expired after the passing of the order under sub-section (2) or sub-section (3) – In the circumstances, none of the limitations which the statute has imposed upon the exercise of power were present – It is not as if the assessment made by the appellate authority was either opposed to principles of natural justice, or was so palpably incorrect, that it could never be sustained – The exercise of power was definitely designed to obviate an obvious illegality and prejudice to the interest of the revenue – The exercise was, thus, absolutely correct, and there was no occasion to set aside the orders passed in pursuance thereof.

Allowing the appeals, the Court

HELD: 1.1 Rule 11A of theTamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968 empowers the appellate authority to call for any information or record from any public office, officer or authority or to examine and record statements from any member of the public office or authority. In line with the principles laid down by this Court, it can therefore be said that in exercise of such power, if the appellate authority calls for any information or calls for any record or any inputs, that by itself, will not amount to delegation of essential functions. Practical necessities and exigencies of administration demand that the appellate authority must be able to delegate certain tasks such as collecting information after causing inspection. So long as the essential function, that is to say of considering all the necessary factors and inputs and thereafter arriving at an informed decision is done by the appellate authority, the burden of performing ancillary tasks need not be shouldered by the appellate authority. [Para 15][375-F-H; 376-A]

1.2 The submission that powers that can be delegated are specifically provided under Section 76-A of the Act, and the power under Section 47-A is not one such power; and unless the power to sub-delegate is conferred expressly or impliedly under a statute, the power cannot be sub-delegated is completely misplaced and does not deserve acceptance. Section 76-A was inserted in the Principal Act vide the Decentralization Act, 1914 (Act No. IV of 1914). The legislative head in Entry 44, namely “Stamp duties other than duties on or fees collected by means of judicial stamps, but not including rates of stamps” is in the Concurrent List of Schedule VII to the Constitution. Section 47A was inserted in the Principal Act by the State Legislature by enacting the Tamil Nadu Act No.24 of 1967 which received the assent of the President on 29th March, 1968. The Rules including Rule 11-A were framed to effectuate the letter and spirit of Section 47-A. Section 76-A of the Principal Act enables the State Government to delegate some of the statutory powers conferred upon it by the Principal Act to the Chief Controlling Revenue Authority. Such empowerment has nothing to do with the legislative power exercised by the State in terms of which Section 47-A was inserted, or with the Rules promulgated to effectuate Section 47-A. For interpreting and considering the context of said Section 47-A or the Rules, the fact that certain other statutory powers in favour of the State Government are delegable, has absolutely no relation. Section 47-A was inserted by the State in its legislative power and the Rules framed thereunder have to be considered on their own and without being influenced by Section 76-A. Therefore, in observing that the inspection ought to have been carried out by the Inspector General of Registration himself, and such function could not have been delegated, the High Court failed to appreciate the principles laid down by this Court. Any report that was called for was essentially in the nature of rendering assistance to the appellate authority in discharge of its functions. The final order passed by the appellate authority, after considering all the necessary material, must be taken to be one rendered by the appellate authority on its own, and there was no delegation of any essential functions vitiating exercise of power. [Paras 8, 16, 17][367-B-C; 376-B, D-H; 377-A-B]

2.1 Under sub-section (1) of Section 47-A of the Act, if there is reason to believe that the market value has not been truly set forth in the Instrument tendered for registration, a reference can be made to the Collector, who (i) after giving the parties reasonable opportunity of being heard; and (ii) after holding an enquiry in such manner as may be prescribed by Rules, has to determine the correct value of the concerned property. The Section by itself does not lay down any period within which the entire process is to be completed by the Collector. It simply states that the enquiry be held in “such manner” as may be prescribed by Rules. According to the Rules, following steps are required to be undertaken to hold the enquiry: On receipt of reference as stated above, the Collector must issue notice in Form I to the persons by whom and in whose favour the Instrument is executed, informing such persons to produce all evidence to show that the market value has been truly set forth in said instrument. The notice must give such persons time of twenty one days from the receipt of notice to represent or respond. [Rule 4(1)] The Collector may record statement of any such noticee. [Rule 4(2)]. For the purposes of the enquiry, the Collector may call for information from any public office or examine and record statements or inspect the property after due notice as stated in detail in Rule 4(3). After considering the representations, if any, and the record and evidence, a provisional order determining the market value must be passed indicating the basis for such conclusion. [Rule 4(4)]. The provisional order must be communicated in Form II to all the concerned persons who must be given some time to prefer objections, if they so wish; and they must be heard on the day fixed in the notice or on such other day as may be fixed. [Rule 6] After considering the representations in writing and those urged at the time of hearing as well as all the relevant factors and evidence, the Collector must pass an order determining the market value of the concerned property and assess the element of duty payable on the instrument of transfer. Such order is required to be passed “within three months from the date of first notice”. [Rule 7] [Para 20][378-G-H; 379-A-G]

2.2 The expression “within three months from the date of first notice” is crucial. The description “first notice” is not referable to notice in Form I issued in terms of Rule 4(1). Form I notice itself must give 21 days to the concerned persons to respond. Depending upon their response, their statements would be recorded and/or certain information may be required to be called for, whereafter the Order in Form II is to be issued provisionally determining the market value. The concerned persons are entitled to raise objections in writing and must be afforded hearing. After fulfilling these requirements, the order in terms of Rule 7 can be passed. All these stages may not be completed in three months. Further, the reference in Rule 7 is to the “first notice” and not to “notice in Form I”. Considering the context and various stages preceding the stage of passing of the Order under Rule 7, the reference has to be to the first “notice in Form II”. There could possibly be more than one notices in Form II, specially when the hearing is to take place on an adjourned date and that is why the period must be reckoned from the first notice in Form II. The expression immediately following “first notice” in Rule 7 is “determining the market value of the properties….” That is also indicative that the reference to the notice is one in Form II in the immediately preceding Rule 6. [Para 21][379-H; 380-A-D]

State of Mysore and others v. V. K. Kangan and others (1976) 2 SCC 895 : [1976] 1 SCR 369; T. V. Usman v. Food Inspector, Tellicherry Municipality, Tellicherry (1994) 1 SCC 754; P. T. Rajan v. T.P.M. Sahir and others (2003) 8 SCC 498 : [2003] 4 Suppl. SCR 84; Mackinnon Mackenzie and Company Ltd. v. Machinnon Employees Union (2015) 4 SCC 544 : [2015] 4 SCR 45; State of UP v. Babu Ram Upadhyay AIR 1961 C 751 : [1961] SCR 679; Shrif Uddin v. Abdul Gani Lone (1980) 1 SCC 403 : [1980] 1 SCR 1177 – relied on.

2.3 Section 47-A by itself does not prescribe any timeline. If the stipulation or fixation of period of three months from the first notice in terms of Rule 6 or from notice in Form II is taken to be mandatory it would lead to a situation of incongruity. The fact that Form II notice had been issued, would mean that on a prima facie view of the record and material, the value stated in the instrument was not the correct value; which in turn would mean that prima facie the Government Coffers were being denied the rightful dues. If for any reason the proceedings are not completed within three months and, therefore, must be held to be vitiated, the public interest would suffer, and the persons who were prime facie responsible for suppressing the real value, would stand to gain. The amendment of Rule 7 incorporating the period of three months was essentially to guide the public officials to complete the process as early as possible but was not intended to create a right in favour of those who had prime facie conducted themselves prejudicing public interest. Pertinently, the concerned provision has not spelt out any consequence for nonadherence to said period of three months. The fixation of timeline of three months in Rule 7 is, therefore, purely directory. [Paras 25, 26][385-D-F, G-H; 386-A]

State of Mysore and others v. V. K. Kangan and others (1976) 2 SCC 895 : [1976] 1 SCR 369 – relied on.

3.1 Sub-section (6) of Section 47-A of the Act empowers the Chief Controlling Revenue Authority, in exercise of suo motu power, to call for and examine the correctness of an order passed under sub-section (2) or sub-section (3) of Section 47-A; and if the order is prejudicial to the interest of Revenue, the Chief Controlling Authority may make such enquiry or cause such enquiry to be made and either revise, modify or set aside such order and pass any order that it deems appropriate. There are some limitations on the exercise of said power, since no proceedings can be initiated against an order passed under subsection (2) or sub-section (3), if the time for preferring an appeal against that order has not expired, or if more than five years have expired after passing of the order. Further, if the period of five years has expired, no suo motu power can be exercised. Another limitation is prescribed by sub-section (8), in terms of which no order in exercise of suo motu exercise of power can be passed which may adversely impact a person, unless that person has had reasonable opportunity of being heard. Apart from these limitations, the statutory provisions do not impose any other restriction, and the power is conferred principally to ensure that no order passed under sub-sections (2) or (3) of Section 47-A is prejudicial to the interest of the revenue. [Para 30][390-D-G] Rajendran v. The Inspector General of Registration, Tamil Nadu and others 2012 (3) CTC 589 – relied on.

3.2 In the present case, adequate notice was issued to the concerned persons and, therefore, there was no infirmity on that count. It is nobody’s case that as on the date when the proceedings were initiated in exercise of the power under subsection (6) of Section 47-A, the period for preferring the appeal had not expired, or that more than five years had expired after the passing of the order under sub-section (2) or sub-section (3). In the circumstances, none of the limitations which the statute has imposed upon the exercise of power were present. [Para 30][391-A-B]

M/s Ram Kanai Jamini Ranjan Pal Pvt. Ltd. v. Member, Board of Revenue, West Bengal (1976) 3 SCC 369 : [1976] Suppl. SCR 110; State of Orissa and others v. Brundaban Sharma and another (1995) 3 Suppl. SCC 249; Vijayabai and others v. Shriram Tukaram and others (1999) 1 SCC 693 : [1998] 3 Suppl. SCR 54; Sree Balaji Rice Mill, Bellary v. State of Karnataka (2005) 4 SCC 21 : [ 2005] 3 SCR 12 – relied on.

3.3 For exercising revisional power “suo motu” or “on its motion”, the concerned authority must be satisfied that an order has been passed by the authority or officer subordinate to it which may be prejudicial to the interest of the revenue. If an infirmity or illegality is brought to the notice or knowledge of the revisional authority, through normal and regular process of reporting by the subordinate officer or authority, the power of revision can certainly be exercised. The requisite knowledge enabling the revisional authority to exercise the power vested in it, can also be gathered from the appeal preferred by the registrant himself. That may only be an occasion or a source which enables the authority to gather information about the possible infirmity or illegality in the process. Upon being so aware, the revisional authority would thereafter be exercising power vested in it. [Para 35][395-E, F-H]

3.4 There is nothing in the scheme of the Act which purports to restrict the exercise of suo motu power under Section 47-A, and confines it to cases where knowledge of any illegality or infirmity in the proceedings undertaken by the subordinate officers must be gathered from sources other than through a pending appeal. Unless the statute expressly or even by necessary implication restricts the exercise of power, there would be no occasion to read into the power, any other limitations. The High Court has not found the exercise of power to be invalid on any count, nor was any such submission advanced before the High Court. The High Court had simply gone on the existence of power rather than on the exercise of power. It is not as if the assessment made by the appellate authority was either opposed to principles of natural justice, or was so palpably incorrect, that it could never be sustained. The High Court completely erred in setting aside the exercise of power undertaken by the concerned authority. The exercise of power was definitely designed to obviate an obvious illegality and prejudice to the interest of the revenue. The exercise was, thus, absolutely correct, and there was no occasion to set aside the orders passed in pursuance thereof. [Para 36][396-C-F]

Sahni Silk Mills (P) Ltd. and another v. Employees’ State Insurance Corporation (1994) 5 SCC 346 : [1994] 1 Suppl. SCR 626; Pradyat Kumar Bose v. The Hon’ble the Chief Justice of Calcutta High Court [1955] 2 SCR 1331; Union of India and Anr. v. P. K. Roy and Ors. [1968] 2 SCR 186; State of Bombay (Maharashtra) v. Shivbalak Gourishanker Dube and others [1965] 1 SCR 211; Sidhartha Sarawgi v. Board of Trustees for the Port of Kolkata and others (2014) 16 SCC 248 : [2014] 14 SCR 1493 – referred to.