A) ABSTRACT / HEADNOTE

Chief Revenue Controlling Officer Cum Inspector General of Registration & Ors. v. P. Babu, [2025] 1 S.C.R. 576 : 2025 INSC 44, considers the scope and procedural limits of Section 47-A of the Indian Stamp Act, 1899 and the Tamil Nadu Rules framed thereunder when a Registering Officer refers a registered instrument to the Collector on a “reason to believe” that the instrument is undervalued. The Court reiterates that the power to refer is not mechanical: a prima facie basis rooted in relevant material is a pre-condition to referral.

Reason to believe demands more than a bare subjective inkling; it requires objective material that bears a rational connection to the belief. The Registering Officer may consult guideline registers but cannot conduct a roving valuation enquiry; if satisfied that undervaluation exists he must record the reasons that inform that satisfaction. The Collector, on receipt of a reference, is bound to follow the multi-step procedure in the Tamil Nadu Rules (Form I notice, provisional order with reasons, communication in Form II, opportunity for representations and a final order).

Failure to record reasons at the stage of referral or to issue provisional orders and afford the statutorily mandated opportunities of hearing renders the valuation process and resultant demand for additional duty liable to be quashed. The High Court’s annulment of the enhanced valuation in this case is held to be legally sustainable. Keywords: reason to believe; Section 47-A; Stamp Act, 1899; Form I; Form II; provisional order; prima facie; undervaluation; natural justice; rules of procedure.

Keywords: reason to believe; Section 47-A; Stamp Act, 1899; Form I; Form II; provisional order; undervaluation.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The dispute arose from two sale deeds executed in September 2002 where the sale consideration recorded by the parties was substantially lower than values later fixed by revenue authorities. The Joint Sub-Registrar at Tindivanam, after registration, refused to release the documents alleging undervaluation and referred them to the Special Deputy Collector (Stamps) under Section 47-A(1). Notices in Form I set out very high provisional valuations.

The Special Deputy Collector conducted an inquiry and fixed much higher market values and demanded additional stamp duty. On appeal to the Inspector General of Registration the valuation was confirmed and the purchaser (respondent) challenged the revenue orders in the Madras High Court. The High Court allowed the appeals, quashing the enhanced valuation and the demand for additional duty primarily because the Form I notices and subsequent orders did not record reasons or the material basis for the view that the instruments were undervalued, and because statutory procedural steps (notably the provisional order with reasons and the full opportunity in Form II) were not properly followed. The revenue authorities appealed to this Court.

This Court framed the legal question around the meaning and reach of “reason to believe” in Section 47-A, and whether the Registering Officer must record reasons before referral. It scrutinised the statutory scheme and the Tamil Nadu Rules (1968) that prescribe the quasi-judicial process the Collector must follow, including issuance of provisional orders with the basis of valuation, communication in Form II and the provision for representations and hearing before final fixation. The bench relied on precedent stressing that referrals cannot be routine or oppressive and that both Registering Officer and Collector must act on tangible material and according to laid down procedures.

D) FACTS OF THE CASE

The respondent purchased two contiguous properties and executed two sale deeds: Doc No. 487/2002 (land considered at Rs.1,20,000) and Doc No. 488/2002 (land at Rs.1,30,000). The Joint Sub-Registrar suspected undervaluation, withheld delivery and referred both documents to the Special Deputy Collector (Stamps) under Section 47-A. The Registrar issued Form I notices fixing reservationary values of Rs.45,66,660 and Rs.12,94,900 respectively. The Special Deputy Collector’s final computation fixed market values substantially higher (Rs.51,16,600 and Rs.10,36,937 respectively) based on spot inspection and local enquiry.

The purchaser objected and appealed to the Inspector General who confirmed valuation (altered per sq.ft rates later). The purchaser then moved the Madras High Court under Section 47-A(10) which quashed the valuations. High Court found absence of recorded reasons in Form I, lack of material to justify disparate per-sq.ft rates between adjacent parcels, absence of notice of spot inspection/local enquiry and that the Collector failed to pass a provisional order clearly stating the basis of valuation as required by Rule 4(4). The High Court held that the department bore the onus to establish undervaluation and had not discharged it.

E) LEGAL ISSUES RAISED

i. Whether a Registering Officer may refer a registered instrument under Section 47-A(1) without recording any reasons for his “reason to believe” that the instrument is undervalued?
ii. What is the legal import of “reason to believe” in Section 47-A — subjective satisfaction or an objective prima facie basis?
iii. Whether the Collector, on receipt of a reference, can determine market value without issuing a provisional order stating the basis of valuation and without affording the parties the opportunities mandated by Rules (Forms I & II, Rules 4,6,7)?
iv. Whether failure to follow the procedural requirements vitiates the valuation and demand for additional stamp duty?

F) PETITIONER / APPELLANT’S ARGUMENTS

i. The Registering Officer’s referral under Section 47-A(1) is discretionary and it is not mandatory to set out detailed reasons in Form I; brevity is acceptable.
ii. Spot inspection and local enquiry legitimately informed valuation; administrative officers are entitled to apply local knowledge and guideline registers.
iii. The Collector did conduct enquiries and the ultimate values are within the revenue’s domain; courts should be slow to interfere with revenue valuation arriving out of material on record.

G) RESPONDENT’S ARGUMENTS

i. The referral was a mechanical act without recording any material basis thereby breaching statutory pre-conditions and principles of natural justice.
ii. The Collector did not pass a provisional order recording the basis as required by Rule 4(4) and did not afford a proper hearing under Form II/Rule 6, rendering the process and final order vitiated.
iii. The department bore the onus of proving undervaluation and failed to produce relevant material to justify the sharp increase in per-sq.ft valuations for adjacent lands.

H) RELATED LEGAL PROVISIONS 

i. Section 17, Indian Stamp Act, 1899 — stamping obligation.
ii. Section 47-A(1), (2), (3) — power of Registering Officer to refer; Collector’s duty to hold enquiry and determine market value within five years.
iii. Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968 — Rules 3, 4(4), 6, 7; Form I and Form II procedural templates.

I) JUDGEMENT 

The Court dismissed the revenue appeals upholding the High Court. It held that reason to believe is not a synonym for unfettered subjective satisfaction; it implies the existence of material on record which objectively justifies a prima facie suspicion of deliberate undervaluation. The Registering Officer’s function is limited he must not undertake a roving enquiry; nevertheless, before referral he must record at least brief reasons showing the material basis for the belief.

The Court endorsed the Full Bench of the Madras High Court in G. Karmegnam v. The Joint Sub-Registrar that a Registering Officer must give reasons, however short, and must not mechanically refer documents. The Court emphasised that the Collector is a quasi-judicial authority: Rule 4(4) mandates a provisional order in writing indicating the basis for provisional market value, Rule 6/ Form II requires communicating the provisional order and affording an opportunity for representations/hearing, and Rule 7 requires finalization after considering representations.

In the present case Form I did not indicate reasons, the Collector’s orders lacked clear material basis and the Collector failed to follow the sequence: issuing provisional order with reasons and giving hearing before final order. The valuations were rooted in unexplained spot inspection and local enquiry and produced inconsistent per-sq.ft rates for adjacent parcels without on-record justification.

Reliance on Dawsons Ltd. v. Bonnin (foundation of material basis) and Mohali Club v. State of Punjab (standard for reason to believe) supported the proposition that the belief must be reasonably grounded. Consequently, the High Court rightly quashed the enhanced valuation and demand for additional duty. Appeals dismissed.

a. RATIO DECIDENDI

The dispositive legal principle: a referral under Section 47-A(1) is permissible only when the Registering Officer, on available material, forms an objectively tenable reason to believe that the instrument understates market value; such reason(s) must be recorded (even briefly) before referral. The Collector must then follow the procedural safeguards in the Rules provisional order stating the basis, communication in Form II, opportunity for representations/hearing and then a reasoned final order. Breach of these pre-conditions and procedural steps vitiates the valuation and demand.

b. OBITER DICTA 

The Court observed that Guidelines Registers assist prima facie determination but cannot substitute for market evidence; Registering Officers should not use Section 47-A as an engine of oppression or routine; belief must be in good faith, not a mere pretence. The Court reiterated administrative limits, insisting on rational connection between material and belief.

c. GUIDELINES

i. Registering Officers shall record brief reasons and the material basis before referring any instrument under Section 47-A(1).
ii. Registering Officers must not conduct detailed valuation inquiries — that function belongs to the Collector.
iii. Collectors must issue provisional orders in writing specifying the factual/methodological basis for provisional market valuation (Rule 4(4)).
iv. Provisional valuations must be communicated in Form II and parties must be afforded opportunity to file representations and be heard (Rules 6 & 7).
v. Valuations based solely on unexplained spot inspections or unexplained guideline entries are legally vulnerable.
vi. Administrative discretion must be exercised in good faith and supported by material logically connected to the valuation conclusion.

J) CONCLUSION & COMMENTS

The judgment reinforces procedural and substantive restraints on revenue powers to reassess stamp valuation. It balances the revenue interest in preventing undervaluation against individual rights to fair procedure. For practitioners, the lesson is twofold: for revenue officers meticulously record the material basis before referral and strictly follow Rule 4(4), Form II and subsequent steps; for litigants challenge referrals or final orders where the statutory sequence or reason-recording is absent or the basis of valuation is not disclosed.

The decision promotes transparency, insists on objective material for administrative belief, and preserves the quasi-judicial character of Collector’s proceedings. The Court’s reliance on precedent (including Mohali Club and G. Karmegnam) aligns with principles of administrative law and natural justice, ensuring that revenue reassessments are justifiable, documented and procedurally fair.

K) REFERENCES

a. Important Cases Referred

1. Chief Revenue Controlling Officer Cum Inspector General of Registration & Ors. v. P. Babu, [2025] 1 S.C.R. 576 : 2025 INSC 44.

2. Mohali Club, Mohali v. State of Punjab, AIR 2011 P&H 23.

3. G. Karmegnam v. The Joint Sub-Registrar, Madurai, 2007 (5) CTC 737.

4. Dawsons Ltd. v. Bonnin, 1922 (2) AC 413.

b. Important Statutes Referred

1. Indian Stamp Act, 1899 — Sections 17, 47-A.

2. Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968 — Rules 3, 4(4), 6, 7; Form I; Form II.