I. Introduction
What is the legal validity of Unstamped or insufficiently stamped Agreements which are admitted as evidence to a suit or legal proceeding? Can a document once admitted in evidence before a Court still be impounded by the Court for being unstamped or insufficiently stamped? This interesting legal question had come for consideration before Hon'ble Delhi High Court ("Court") in M/s. Celebration Hotels & Resorts (P) Ltd v. M/s. Sartaj Hotels Apartments & Villas Pvt Ltd ("Celebration Hotels"). The Court held ruled that while the documents may have been admitted by the Defendants, but for an Instrument to operate as a document of transfer of the property, it requires to be duly stamped, in accordance with the Stamp Act, 1899 ("Act"). Thus, Court directed that the original document be impounded by the Registry and sent to the Collector of Stamps who shall direct the affixing of deficit stamp duty and penalty and return the documents so stamped.
In Celebration Hotels, Plaintiff had filed a suit for specific performance and permanent injunction and had placed on record the original Agreement to Sell, Memorandum of Understanding, and an Agreement. However, an application was filed under Section 33 of the Act on behalf of the Defendant No. 3, for impounding of the documents. The Petitioner had argued that Defendants once having admitted these documents cannot now question their admissibility by raising the question of these documents being insufficiently stamped. The ruling of the Court in Celebration Hotels, as mentioned above, is discussed in detail hereinbelow
Analysis
A. Conflict between Section 35 and Section 36 of the Indian Stamp Act, 1898
It is undisputed that Indian Stamp Act, 1899 is a fiscal legislation which is intended to raise revenue for the Government. The provisions of the Act would be interpreted in a manner that once the interest of the revenue is secured, the party seeking his claim on the instrument will not be defeated on the ground of the initial defect in the instrument. As such, defects on account of non-payment or insufficient payment of stamp duty on instrument is a curable defect and should not be interpreted so as to defeat either the interest of revenue or the interest and/or rights of the parties. In that regard, Section 17 of the Act provides that all instrument chargeable with duty and executed by a person in India shall be stamped before or at the time of its execution. Section 62 of the Act penalizes failure to comply with Section 17 of the Act, by way of imposition of fine, which may extend to Rs. 500/-. In case of unstamped or insufficiently stamped Instruments, Section 33 of the Act provides that any instrument, which is chargeable with stamp duty when produced before any public officer, is liable to be impounded, if not duly stamped. Section 35 of the Act provides that no instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of the parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped. However, there seems to be an interpretational issue when it comes to reconciling Section 36 with Section 35 of the Act. Section 36 of the Act provides that when an instrument has been admitted in evidence, such admission shall not, except as provided in Section 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped. Admitted in evidence means admitted after judicial consideration of the circumstances relating to its admissibility.1
B. Difference between Voidability and Inadmissibility under Stamp Act, 1899
In this backdrop, a literal interpretation of Section 36 of the Act would imply that if an instrument which is admitted in evidence cannot be impounded for non-payment or insufficient payment of stamp duty under Section 33 read with Section 35 of the Act. The said conflict between Section 33 read with Section 35 of the Stamp Act against Section 36 of the Act was reconciled by the Court in Celebration Hotels by adverting to the difference between difference in the nature of enquiry undertaken under Section 33 read with Section 35 as against Section 36 of the Stamp Act. In Gulzari Lal Marwari and Bootam Pitchaiah v. Boyapati Koteswara Rao2, the Calcutta High Court emphatically substantiated that the bar under Section 35 of the Indian Stamp Act is concerned with making an unstamped document inadmissible in evidence and for being unable to be acted upon by persons having authority to receive evidence. Admissibility of an instrument refers to whether or not it can be produced in evidence, specifically whether the instrument is capable of being received and worthy of being admitted as evidence. The Court in Celebration Hotels noted that Section 36 of the Stamp Act provides that a document insufficiently or not stamped once admitted in evidence by the either party shall be held admissible in evidence. However, even if such document is admitted, the question of it being an enforceable or a void document, continues to exist. Thus, Section 35 of the Stamp Act which renders a document inadmissible on account of insufficiency of stamp duty, may become admissible under Section 36 because of it being not objected by the party or the Court but the question of its voidability still remains. Section 35 of the Maharashtra Stamp Act confers finality to the order regarding the document's admission in evidence.3 Thus, the question of enforceability and voidability of instrument qua non-payment or insufficient payment of stamp duty continues to remain open and determination of such a question is not foreclosed by operation of Section 36 of the Act.
In N.N. Global, the Supreme Court observed that an agreement which is unstamped or insufficiently stamped is not enforceable, as long as it remains in the said condition. There is no bar against an instrument not duly stamped being acted upon after payment of stamp duty and penalty according to the procedure prescribed under the Act.4 The Courts have previously also held that the admissibility of a document into evidence and proof of the genuineness of such documents are different issues.5 Hence, the admissibility of an instrument is distinct from its validity or enforceability in law. In effect, Void and voidable Instruments are capable of being admitted as evidence. Correspondingly, a valid Instrument may be incapable of being admitted as evidence. Significantly, Bombay High Court in Puneet Satpal Malhotra & Ors v. Mukesh Satpal Malhotra & Ors,6 observed that when a document is admitted in evidence under Section 33, its admissibility cannot be questioned during the same proceedings but Section 35 operates in an independent sphere and does not take away the power of the Court, to impound the document during the pendency of the Suit on finding that it has not been sufficiently stamped.
C. Interpretation of Section 36 of the Stamp Act, 1899
Hence, what is evident that the function performed by Court under Section 33 read with Section 35 and Section 36 of the Act are entirely different. Hence, the duty under Section 33 of the Act is not circumscribed by Section 35 of the Act. In Puneet Satpal, the Bombay High Court also ruled that on an objection a party raises, the Court admitting document consciously apply its mind to the question of whether the document is admissible in evidence. It may happen in some cases that a document, which is not admissible for want of stamp, is allowed by the court to be admitted in evidence for want of objection at that stage. As the sphere of the two sections are different, there is no issue of decision under one section impeding the exercise of jurisdiction in another.
Section 35 is not meant to control the power to impound conferred under Section 33 of the Maharashtra Stamp Act. Section 35 of the Maharashtra Stamp Act was interpreted to hold that the Court cannot go behind the order of admission in evidence to again consider the admissibility of the document.7 The import of Section 35 of Maharashtra Stamp Act is that if the document required to be stamped but the Court as well as the parties missed to notice it and the document was admitted in evidence and marked as exhibit, it must be presumed that the document was marked and taken in evidence by the Court because the court did not see any ground not to take that document into evidence. This is no ways means that court had no power to pass an order for impounding the document under Section 33 of the Act. Section 35 of the Stamp Act only gives finality to the decision in regards to the admissibility of the document in evidence, it however does not operate as a bar of impounding of the said document.8
In N.N. Global Mercantile Private Limited v. Indo Unique Flaim Ltd & Ors.9, the Hon'ble Supreme Court had ruled that the Court should before admitting any document into evidence or acting upon such document, examine whether the instrument is duly stamped. However, In Shyamal Kumar Roy v. Sushil Kumar Agarwal10, Hon'ble Supreme Court held that Section 36 would operate even if a document has been improperly admitted in evidence and that it is of no consequence as to whether a document has been admitted in evidence on determination of a question as regards admissibility thereof or upon dispensation of formal proof therefor. If a party to the lis intends that an instrument produced by the other party being insufficiently stamped should not be admitted in evidence, he must raise an objection thereto at the appropriate stage If no objection has been made in regard to the admissibility of the document, then at a later stage, parties cannot be permitted to turn round and contend that the said document is inadmissible in evidence. In Javer Chand and Others v. Pukhraj Surana11, Supreme Court held that a question as to the admissibility of a document is raised on the ground that it has not been stamped, or has not been properly stamped, it has to be decided then and there when the document is tendered in evidence. However, in Puneet Singhal, the ruling of Javer Chand was interpreted to operate only regarding admission of such document in evidence. Section 36 prohibits questioning of admission of the document in evidence, and it in no way affects the power of authority or the Court to impound a document under section 33 when the insufficiently stamped document is produced before the Court. In Lothamasu Sambasiva Rao v. Thadawarthi Balakotiah,12 the Telangana High Court held that Section 35 is only a bar to the admissibility and not the validity of the unstamped or insufficiently stamped documents.
Conclusion
Thus, in Celebration Hotels, Court held that even if such document is admitted in the terms of Section 36 of the Act, the question of it being an enforceable or a void document, continues to exist. As such, the Court is empowered to impound the instrument wherein no stamp duty or insufficient stamp duty has been paid in terms of Section 33 of the Act. The judgment of the Court in Celebration Hotels provides clarity on not only on the power of the Court to impound the instrument in question but also on the tenability of challenge to the Instrument already admitted on the evidence before the Court.
Footnotes
1. Vemi Reddy Jkota Reddy v. Vemi Reddy Prabhakar Reddy, 2004 (2) ALD 627.
2. Gulzari Lal Marwari and Bootam Pitchaiah v. Boyapati Koteswara Rao, 1964 SCC OnLine AP5
3. Narayan Puthan v. Parushram Printers, (2019) 5 Mah.L.J. 678.
4. Hindustan Steel Ltd.
5. Thiruvengadam Pillai v. Navaneethammal, (2008) 4 SCC 530.
6. Puneet Satpal Malhotra & Ors v. Mukesh Satpal Malhotra & Ors, 2023 SCC OnLine Bom 2226.
7. Babybai W/o Pandurang Madankar vs. Ghelabhai Narayanji Sakariya, MANU/MH/0453/2020.
8. Priya Narayan Puthan v. Parshuram Printers and Others, W.P. No. 2810 of 2019.
9. N.N. Global Mercantile Private Limited v. Indo Unique Flaim Ltd & Ors, (2023) 7 SCC 1.
10. Shyamal Kumar Roy v. Sushil Kumar Agarwal, AIR 2007 SUPREME COURT 637
11. Javer Chand and Others v. Pukhraj Surana, MANU/SC/0036/1961.
12. Lothamasu Sambasiva Rao v. Thadawarthi Balakotiah, AIR 1973 AP 342.
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