A) ABSTRACT / HEADNOTE

The present judgment examines the liability of a subsequent purchaser to discharge outstanding stamp duty penalties attached to immovable property, and the legality of recovery proceedings initiated by revenue authorities when such penalties remain unpaid. The Supreme Court considered whether the acceptance of post-dated cheques towards penalty amounts could be treated as valid compliance under stamp law, and whether municipal authorities were justified in denying building permission on account of unpaid statutory dues.

The dispute arose from a deed of assent executed by trustees of a private trust, which was later adjudicated as a gift deed attracting deficient stamp duty and a penalty of ten times the deficit. Although the principal stamp duty was eventually paid, the penalty remained unpaid except through post-dated cheques submitted by the subsequent purchaser after acquiring the property. The Collector initiated recovery proceedings, which were upheld by the High Court. The High Court also declined to interfere with the municipal authority’s refusal of construction permission, while granting liberty to reapply after full compliance.

The Supreme Court affirmed the High Court’s reasoning, holding that post-dated cheques do not constitute payment under the Stamp Act, and that statutory liabilities attached to the property continue to bind subsequent purchasers. The Court further clarified that subsequent administrative actions taken during pendency of appeal could not be examined within the same proceedings. The judgment reinforces strict compliance under fiscal statutes, the doctrine of statutory charge, and limits judicial review over recovery actions where liability stands crystallized.

Keywords: Stamp duty, penalty recovery, subsequent purchaser liability, post-dated cheques, municipal permissions

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGMENT

The judgment arose from prolonged litigation concerning deficient stamp duty and penalty imposed on a deed of assent, which was adjudged as a gift deed by the Collector of Stamps. The controversy traces back to an order dated 22.09.2008, wherein the Collector determined substantial deficiency and imposed a penalty of ten times the deficit amount. The trustees of the private trust unsuccessfully challenged this determination before the High Court.

Subsequently, the matter reached the Supreme Court in earlier proceedings, where limited interim protection was granted subject to payment of stamp duty within a stipulated period. The failure of the trustees to comply resulted in lapse of interim protection. Eventually, the principal stamp duty was deposited, but the penalty remained unpaid.

During this interregnum, the appellant purchased the property through a registered sale deed. After purchase, the appellant attempted to regularize the liability by submitting post-dated cheques towards penalty and simultaneously sought development and construction permissions from the municipal corporation.

Revenue authorities initiated recovery proceedings for the outstanding penalty, while the municipal corporation cancelled construction permission on grounds of non-payment and alleged suppression. The High Court upheld both actions, leading to the present appeal.

The background reflects the intersection of fiscal compliance, property transactions, and municipal governance, raising questions about the extent to which statutory liabilities run with land and bind subsequent purchasers. The judgment also addresses procedural propriety in accepting deferred modes of payment under revenue laws and delineates the scope of appellate review in relation to subsequent administrative actions.

D) FACTS OF THE CASE

The property in dispute, known as Lantern Hotel, was subject to a deed of assent dated 21.04.2005 executed by trustees of H.C. Dhanda Trust. Upon examination, the Collector of Stamps held that the deed was effectively a gift deed and not an assent simpliciter. Consequently, an order dated 22.09.2008 determined a stamp duty deficiency of ₹1,28,09,700 and imposed a penalty of ten times amounting to ₹12,80,97,000.

The trustees challenged this order unsuccessfully before the High Court. A Special Leave Petition was later filed before the Supreme Court, wherein limited interim relief was granted conditional upon payment of stamp duty. Non-compliance led to cessation of interim protection.

The principal stamp duty was eventually deposited in November 2019. Shortly thereafter, the appellant purchased the property via a registered sale deed dated 27.11.2019. The appellant applied for mutation, paid property tax under protest, and obtained initial construction permission.

On 20.11.2019, the appellant submitted six post-dated cheques covering the penalty amount. However, the revenue authorities issued a recovery notice dated 04.06.2020 demanding ₹8.80 crores as outstanding penalty. On the same date, the municipal corporation cancelled construction permission citing non-payment and suppression of material facts.

The appellant challenged both actions before the High Court, which dismissed the writ petition, holding the appellant liable as a subsequent purchaser. During pendency of the appeal before the Supreme Court, additional municipal actions were initiated, which were sought to be challenged through interlocutory applications.

E) LEGAL ISSUES RAISED

i. Whether a subsequent purchaser of immovable property is liable to discharge outstanding stamp duty penalty attached to the property?

ii. Whether submission of post-dated cheques constitutes valid payment of penalty under stamp law?

iii. Whether municipal authorities are justified in denying construction permission due to unpaid statutory dues?

iv. Whether subsequent administrative actions taken during pendency of appeal can be examined in the same proceedings?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for the appellant submitted that the entire penalty liability had been acknowledged and covered through post-dated cheques, which were accepted by the Collector of Stamps. It was argued that partial encashment of cheques prior to issuance of recovery notice demonstrated implied acceptance of the payment mechanism.

It was further contended that cancellation of building permission was arbitrary, as permission had already been granted after scrutiny. The appellant asserted that municipal authorities acted mala fide by initiating coercive actions despite an interim stay granted by the Supreme Court.

The appellant also challenged subsequent municipal notices alleging eviction and cancellation of mutation, asserting that title was never under dispute and that such actions exceeded jurisdiction.

G) RESPONDENT’S ARGUMENTS

The counsels for the respondents submitted that no statutory provision permits acceptance of penalty through post-dated cheques. It was argued that until actual realization, the liability subsists, justifying recovery proceedings.

The State contended that stamp duty and penalty constitute a charge on the property, binding subsequent purchasers. The municipal corporation supported the cancellation of building permission on grounds of non-payment and suppression of facts.

Regarding subsequent actions, it was argued that such matters were outside the scope of the writ petition and could not be adjudicated in the present appeal.

H) JUDGMENT 

The Supreme Court upheld the High Court’s decision, affirming that post-dated cheques do not amount to payment under stamp law. The Court emphasized that fiscal statutes demand strict compliance and that statutory dues cannot be deemed discharged until actual realization.

The Court held that the appellant, as a subsequent purchaser, stepped into the shoes of the transferor and was bound by outstanding liabilities attached to the property. The liability arose from a duly adjudicated order which had attained finality except to the limited extent of penalty reduction.

The Court noted that while the penalty amount had later been reduced to five times, the obligation to pay subsisted and respondents were bound to act in accordance with the modified order.

With respect to municipal permission, the Court endorsed the High Court’s observation that the appellant was free to reapply after full payment. This was held sufficient to protect the appellant’s rights.

Regarding subsequent municipal actions, the Court declined to entertain them, holding that subsequent causes of action require independent remedies.

a) RATIO DECIDENDI

The ratio of the judgment is that statutory liabilities under stamp law attach to the property and bind subsequent purchasers. Payment through post-dated cheques does not extinguish liability unless realized. Revenue authorities are entitled to initiate recovery proceedings for outstanding dues, and municipal bodies may withhold permissions until statutory compliance is achieved.

b) OBITER DICTA

The Court observed that administrative authorities must act in compliance with judicial modifications of penalty orders and that parties remain free to pursue appropriate remedies against subsequent actions through independent proceedings.

c) GUIDELINES

i. Statutory penalties must be actually paid and not merely promised.

ii. Subsequent purchasers must conduct due diligence regarding fiscal encumbrances.

iii. Municipal authorities may reconsider permissions upon full statutory compliance.

iv. Subsequent administrative actions require separate legal challenge.

I) CONCLUSION & COMMENTS

The judgment reinforces the principle that fiscal statutes brook no equity. The Supreme Court’s approach underscores that liabilities arising from stamp adjudication are not personal but proprietary in nature. The ruling promotes certainty in revenue administration and discourages transactional attempts to defer statutory dues through informal arrangements. It also delineates clear procedural boundaries for appellate scrutiny, ensuring judicial discipline.

J) REFERENCES

a) Important Cases Referred

i. M/s. MSD Real Estate LLP v. Collector of Stamps & Anr., [2020] 6 SCR 1027

b) Important Statutes Referred

i. Indian Stamp Act, 1899
ii. Relevant provisions of the Madhya Pradesh Stamp Law