Asset Reconstruction Co. (India) Ltd. vs Chief Controlling Revenue Authority

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)

JUDGMENT

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.

Signature Not Verified Digitally signed by SWETA BALODI Date: 2022.04.26 16:39:46 IST Reason: 1

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 2 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 4 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 5 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 The same duty as is leviable consideration and on a conveyance under Article authorizing the 20 for the amount of the attorney to sell any consideration or, as the case immovable property 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 6 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

8 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)

9 ………………………………….J. (V. Ramasubramanian) New Delhi April 26, 2022

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