Sale Certificate Is Merely Evidence Of Title And Not A Deed Of Conveyance Under Indian Stamp Act: Madras High Court
The High Court held that a sale certificate issued after a concluded auction is only a record of the transaction and not an instrument of conveyance, and therefore surcharge under Section 3 of the Tamil Nadu Duty on Transfers of Property (in Municipal Areas) Act, 2009, cannot be levied on its registration.
Justice G.R. Swaminathan, Madras High Court
The Madras High Court has held that a sale certificate issued upon completion of an auction is only evidence of title and does not operate as an instrument of conveyance capable of attracting surcharge under the Tamil Nadu Duty on Transfers of Property (in Municipal Areas) Act, 2009.
The Court was hearing a writ petition seeking a refund of the surcharge collected at the time of registering a sale certificate issued by the Official Liquidator after a public auction held during company liquidation proceedings.
A Single Bench of Justice G.R. Swaminathan examined the nature of a sale certificate under the Indian Stamp Act, 1899 and its relationship with the charging provision under the 2009 Act, and held: “A sale certificate is a record of what transpire at a concluded auction. Sale certificate is not the instrument under which the sale takes place. A sale certificate is a mere evidence of title. A sale certificate is not a deed of conveyance. That is explicitly acknowledged by the statute itself. Section 2(10) of the Indian Stamp Act defines “conveyance” as including a conveyance on sale and every instrument by which property, whether movable or immovable, is transferred inter vivos and which is not otherwise specifically provided for by Schedule I. If according to the law makers, sale certificate is also a deed of conveyance, there is no need to provide one article (Article 18) for certificate of sale and another article (Article 23) for conveyance”.
Advocate K. Sharath Chandran appeared for the petitioner. The respondents were represented by Additional Advocate General Ajmal Khan, assisted by Additional Government Pleader S. Shanmugavel.
Background
The petitioner had purchased immovable property in a court-conducted auction arising out of company liquidation proceedings and was issued a sale certificate after remitting the entire sale consideration. When the certificate was presented for registration, the registering authority demanded stamp duty, registration fee, and 2% surcharge.
The petitioner paid the surcharge under protest and sought a refund, contending that a sale certificate is not an instrument of sale and cannot attract a surcharge under the 2009 Act. The respondents relied on the charging provision in Section 3 of the Act, arguing that once the certificate is presented for registration, it acquires the character of a conveyance.
The dispute before the Court turned on whether a sale certificate is an instrument of sale for surcharge, despite being registered under Article 18 of the Stamp Act.
Court’s Observation
The Madras High Court examined Section 3 of the 2009 Act, which levies surcharges only on instruments relating to transfers of property of specified descriptions. Since the statute is a fiscal enactment, the Bench applied the principle of strict interpretation and held that no liability could be imposed unless the document fell clearly within the charging provision.
Referring to the Supreme Court’s decision in Municipal Corporation of Delhi v. Pramod Kumar Gupta, the Court reiterated that a sale certificate does not itself effect the transfer of property; it only records that the transfer has already taken place.
The Bench noted that Article 18 of Schedule I of the Stamp Act deals specifically with certificates of sale, while conveyances fall under Article 23, demonstrating the legislature’s clear intent to treat them as distinct instruments.
The Court emphasised that even if a sale certificate, upon presentation for registration, is subjected to stamp duty equivalent to conveyance duty on the purchase money, the nature of the instrument does not change. The levy of surcharge, the Court held, must be tied to the description of instruments expressly mentioned in Section 3, and a sale certificate is not included in that list.
The Bench further held that a surcharge is linked to the transfer of property and can be imposed only on instruments affecting such transfer. Since the transfer in an auction sale is complete upon confirmation and not upon issuance of the certificate, the certificate cannot be considered an instrument of sale.
The Court also noted that retention of surcharge collected without statutory backing would amount to unjust enrichment, impermissible under Article 265 of the Constitution.
Conclusion
The Court held that a sale certificate is not an instrument of sale or conveyance for the purposes of Section 3 of the Tamil Nadu Duty on Transfers of Property (in Municipal Areas) Act, 2009 and therefore cannot attract surcharge.
The respondents were directed to refund the surcharge collected from the petitioner within eight weeks. The writ petition was allowed with no order as to costs.
Cause Title: M/s Dugar v. Inspector General of Registration & Another
Appearances
Petitioner: Advocate K. Sharath Chandran
Respondents: Ajmal Khan, Additional Advocate General, assisted by S. Shanmugavel, Additional Government Pleader
