ASSET RECONSTRUCTION CO. (INDIA) LTD. VS CHIEF CONTROLLING REVENUE AUTHORITY
ASSET RECONSTRUCTION CO. (INDIA) LTD. VS CHIEF CONTROLLING REVENUE AUTHORITY
Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3070 OF 2022
(@ SPECIAL LEAVE PETITION (CIVIL) NO. 34723 OF 2016)
ASSET RECONSTRUCTION CO. (INDIA) LTD. ...APPELLANT(S)
VERSUS
CHIEF CONTROLLING REVENUE AUTHORITY ...RESPONDENT(S)
J U D G M E N T
V. Ramasubramanian, J.
1. Aggrieved by the opinion rendered by the Full Bench of the
High Court of Gujarat in a Stamp Reference under Section 54(1)(a)
of the Gujarat Stamp Act, 1958 (hereinafter referred to as the ‘Act’),
made by the Chief Controlling Revenue Authority of the State of
Gujarat, the Asset Reconstruction Company (India) Ltd., has come
up with the above appeal.
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2. We have heard Mr. V. Chitambaresh, learned senior counsel
appearing for the appellant and Ms. Archana Pathak Dave, learned
counsel appearing for the State of Gujarat.
3. The Oriental Bank of Commerce (‘OBC’ for short) granted
certain facilities to a borrower and the borrower committed default
in repayment. Unable to recover the loan, the Bank assigned the
debt in favour of the appellant herein, which is an Asset
Reconstruction Company registered with the Reserve Bank of India
under Section 3 of The Securitisation and Reconstruction of
Financial Assets and Enforcement of Security Interest Act, 2002
(hereinafter referred to as ‘Securitisation Act 2002’). The assignment
made by the OBC was under an Agreement dated 18.11.2008. The
Assignment Agreement was registered with the SubRegistrar,
Bharuch, on 18.11.2008. In fact, the registration of the document
was preceded by an adjudication under Section 31 of the Act.
4. However, an audit objection was raised by the Office of the
Accountant General on the ground that the deed of assignment
contained a reference to a Power of Attorney (‘PoA’ for short) in
Schedule 3 and that the said PoA was chargeable to stamp duty
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under Article 45(f) of ScheduleI to the Act. A demand for deficit
stamp duty to the tune of Rs.23,53,800/ was raised pursuant to
the audit objection.
5. Thereafter, the Deputy Collector (Stamp Duty) referred the
matter to the Chief Controlling Revenue Authority, who in turn
issued a notice to the appellant herein. After considering the reply
submitted by the appellant, the Chief Controlling Revenue Authority
passed an order dated 04.01.2012 setting aside the order of
adjudication passed on 23.10.2008 and directing recovery of the
deficit stamp duty.
6. Aggrieved by the said order, the appellant submitted an
application under Section 54(1)(a) of the Act. On the said
application, the Chief Controlling Revenue Authority referred the
following two questions for the opinion of the Court:
“(A) Whether the objection raised by the Account
General, Ahmedabad in audit para, in the year 2008 is
proper or not, as per Article45(f) of the Bombay Stamp Act,
1958 or not?
(B) Whether the Asset Reconstruction Company (India)
Limited is liable to pay stamp duty of Rs.24,94,100/ i.e.
4.9% as per Article20(a) of the Bombay Stamp Act or not?”
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7. For finding an answer to the above questions, the Full Bench
of the High Court examined the recitals contained in the deed of
assignment and found that the Bank had agreed to execute an
irrevocable PoA in favour of the appellant herein, substantially in
the form set out in Schedule 3 of the deed of assignment. The form
set out in Schedule 3 contained recitals empowering the assignee,
as the agent of the Bank, to sell any immovable property.
Therefore, considering the fact that Article 45(f) of Schedule I to the
Act makes a PoA given for a consideration and containing an
authority to sell any immovable property chargeable to stamp duty
as a conveyance, the High Court came to the conclusion that the
appellant has to pay stamp duty as fixed by Article 45(f). The High
Court opined that merely because the power to sell, forms part of
the deed of assignment under Schedule 3, the appellant could not
escape the charge of duty and that the PoA is required to be
considered independently.
8. But we do not think that the above reasoning can be accepted.
First of all, what was presented for registration by the appellant was
a single document namely an “Assignment Agreement”. Clause
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11.12 of the Assignment Agreement contained recitals to the effect
that the seller (assignor, namely the OBC) had agreed to execute
simultaneously with the execution of the deed of assignment, an
irrevocable PoA, substantially in the form set out in Schedule 3.
What was contained in Schedule 3 to the Assignment Agreement
was the format of an irrevocable PoA.
9. The High Court overlooked the fact that there was no
independent instrument of PoA and that in any case, the power of
sale of a secured asset flowed out of the provisions of the
Securitisation Act, 2002 and not out of an independent instrument
of PoA. Section 2(zd) of the Securitisation Act, 2002 defines a
‘secured creditor’ to mean and include an Asset Reconstruction
Company. The appellant has acquired the financial assets of OBC
in terms of Section 5(1)(b) of the Securitisation Act, 2002. Therefore,
under subsection (2) of Section 5 of the Securitisation Act, 2002,
the appellant shall be deemed to be the lender and all the rights of
the Bank vested in them. In fact, under Amendment Act 44 of 2016,
subsection (1A) was inserted in Section 5 of the Securitisation Act,
exempting from stamp duty, any document executed by any bank
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under Section 5(1) in favour of an Asset Reconstruction Company
acquiring financial assets for the purposes of asset reconstruction
or securitization. Though the said amendment may not be
applicable to the case of the appellant, as the deed of assignment,
in this case, was executed long prior to the amendment, we have
just taken note of the amendment to show how far the Parliament
has gone.
10. Article 45(f) of Schedule I to Act, reads as follows:
(f) (i) when given for
consideration and
authorizing the
attorney to sell any
immovable property
The same duty as is leviable
on a conveyance under Article
20 for the amount of the
consideration or, as the case
may be, the market value of
the immovable property
whichever is greater;
11. For invoking Article 45(f), two conditions have to be satisfied.
They are, (i) the PoA should have been given for a consideration;
and (ii) an authorization to sell any immovable property should
flow out of the instrument.
12. In the case on hand, the consideration paid by the appellant to
OBC, was for the purpose of acquisition of the financial assets, in
respect of a particular borrower. The draft of the PoA contained in
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Schedule 3 of the deed of assignment was only incidental to the
deed of assignment. The deed of assignment has already been
charged to duty under Article 20(a) which deals with “conveyance”.
In fact Article 45(f) also requires a PoA covered by the said
provision to be chargeable to stamp duty under Article 20.
13. But what has happened in this case was that under a
Notification bearing No.GHM/20025M STP1020002749/H1
dated 25th January, 2002, the Government ordered the reduction of
stamp duty payable on an instrument of securitization of loans or
assignment of debt with underlying securities, to 75 paise for every
Rs.1000 or part thereof. This Notification reads as follows:
“In exercise of the powers conferred by clause (a) of
Section 9 of the Bombay Stamp Act, 1958 (Bom LX of
1958) and in supersession of Government Orders Revenue
Department No. GHM9822MSTP10962527H1 dated
26.02.1998, the Government of Gujarat hereby reduces
from the date of publication of this order the duty with
which an instrument of securitization of loans or
assignment of debt with underlying securities chargeable
under Article 20 (a) of Schedule I to the said Act to 75
paise for every rupees 1000 or part thereof the loan
securitised or debt assigned with underlying securities.
By order and in the name of the Governor of
Gujarat.”
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14. The above Notification was amended by a subsequent
Notification bearing No. GHM/2003/28/STP/102002/2065/H1
dated 1st April, 2003. The said Notification reads as follows:
“In exercise of powers conferred by clause (a) of
section 9 of the Bombay Stamp Act, 1958 (Bom LX of
1958), the Government of Gujarat hereby amends
Government Order No. GHM/2002/5/M/STP/102000/
2749/H1, dated 25th January, 2002 as follows, namely:
In the said order, for the words and figures “to
seventy five paise for every rupees 1000 or part thereof”
the words and figures “subject to maximum of rupees one
lakhs, seventyfive paise for every rupees 1000 or part
thereof” shall be substituted.
By order and in the name of the Governor of
Gujarat.”
15. In view of the Notification dated 01.04.2003 issued in exercise
of the power to reduce, remit or compound the duty, conferred by
Section 9(a) of the Act, the amount of duty chargeable in terms of
Article 20(a) was capped at Rs. 1,00,000/. In addition to the said
amount of Rs.1,00,000/, the appellant was asked to pay an
additional duty of Rs.40,000/ under Section 3A. The appellant
has thus paid a total amount of Rs.1,40,000/ with the instrument
having been charged as a conveyance under Article 20(a).
16. In all taxing Statutes, there are taxing provisions and
machinery provisions. Once a single instrument has been charged
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under a correct charging provision of the Statute, namely Article
20(a), the Revenue cannot split the instrument into two, because of
the reduction in the stamp duty facilitated by a notification of the
Government issued under Section 9(a). In other words after having
accepted the deed of assignment as an instrument chargeable to
duty as a conveyance under Article 20(a) and after having collected
the duty payable on the same, it is not open to the respondent to
subject the same instrument to duty once again under Article 45(f),
merely because the appellant had the benefit of the notifications
under Section 9(a). Since the impugned order of the High Court did
not address these issues and went solely on the interpretation of
Article 45(f), the same is unsustainable. Therefore, the appeal is
allowed and the impugned order is set aside. The demand made by
the Chief Controlling Revenue Authority is consequently set aside.
There will be no order as to costs.
………………………………….J.
(Hemant Gupta)
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………………………………….J.
(V. Ramasubramanian)
New Delhi
April 26, 2022
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