TRUSTEES OF H.C. DHANDA TRUST versus STATE OF MADHYA PRADESH & ORS.

Citation: [2020] 11 S.C.R. 268 · Decided: 17-09-2020 · Supreme Court of India · Bench: ASHOK BHUSHAN, M.R. SHAH, R. SUBHASH REDDY · Disposal: Case Partly allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2020] 11 S.C.R.
TRUSTEES OF H.C. DHANDA TRUST
v.
STATE OF MADHYA PRADESH & ORS.
(Civil Appeal Nos. 3195-3196 of 2020)
SEPTEMBER 17, 2020
[ASHOK BHUSHAN, R. SUBHASH REDDY AND
M. R. SHAH, JJ.]
Stamp Act, 1899: s.40(1)(b) – Imposition of maximum penalty
when instrument not duly stamped – Propriety of – In the instant
case, a resolution was passed by the Executors/Trustees of the
appellant-Trust to transfer and vest immovable properties to the
beneficiaries by executing a Deed of Transfer – However,
subsequently a Deed of Assent was executed between them on
payment of stamp duty of Rs.200 whereunder the Trustees gave
assent to complete title of the Legatees and vest absolutely in favour
of beneficiaries – Collector of Stamps held the Deed of Assent as
Gift Deed and demanded deficit duty to the extent of Rs.1.28 lakhs
and also imposed ten times penalty – Board of Revenue upheld the
order of Collector – Aggrieved appellant-Trust filed writ petition
which was also dismissed – In the instant case, the issue is whether
the ten times penalty was validly imposed by the Collector of Stamps
under s.40 – Held: The statutory scheme of s.40(1)(b) vest discretion
to the Collector to impose the penalty amount not exceeding ten
times – When statute transfers discretion to an authority,  the
discretion is to be exercised in furtherance of objects of the
enactment – Imposition of penalty of ten times under s.40(1)(b) is
neither automatic nor can it be mechanically imposed – Imposition
of such extreme penalty cannot be based on the mere factum of
evasion of duty – The Collector while imposing ten times penalty in
his order gave reason that the party had not mentioned the actual
nature of the document with the intention to escape the duty – No
other reason was given either by the Collector or by the High Court
justifying the imposition of maximum penalty of ten times – It was
not the case of Collector that the conduct of the appellant was
dishonest or contumacious – High Court noticed that although the
resolution was passed to execute the Deed of Transfer by Trustees
but later on they deliberately executed the deed in the name of Deed
[2020] 11 S.C.R. 268
268
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of Assent on a stamp paper of Rs.200/- - Thus, for the reason given
by the Collector as well as by the High Court that there was intention
to evade the stamp duty in describing the document as Deed of
Assent, the imposition of the penalty was called for, but in the facts
and circumstances and the reasons given by the Collector, it was
not a case of imposition of extreme penalty of ten times of deficiency
of stamp duty – In the ends of justice, penalty reduced to the extent
of half i.e. five times of deficiency in the stamp duty.
Penalty: Imposition of, by public authority – Held: The purpose
of penalty generally is a deterrence and not retribution – When
discretion is given to a public authority, such public authority should
exercise such discretion reasonably and not in oppressive manner
– The responsibility to exercise discretion in reasonable manner
lies more in cases where discretion vested by the statute is unfettered
– Stamp Act, 1899 – s.40(1)(b).
Partly allowing the appeals, the Court
HELD: 1.1 Section 40 of Indian Stamp Act, 1899 provides
for Collectors power to stamp instruments impounded. According
to Section 40(1)(b), if the Collector is of opinion that such
instrument is chargeable with duty and is not duly stamped, he
shall require the payment of the proper duty or the amount
required to make up the same, together with a penalty of the five
rupees; or, if he thinks fit, an amount not exceeding ten times
the amount of the proper duty or of the deficient portion thereof.
The statutory scheme of Section 40(1)(b) indicates that when the
Collector is satisfied that instrument is not duly stamped, he shall
require the payment of proper duty together with a penalty of the
five rupees. The relevant part of Section 40(1)(b) which falls for
consideration in these appeals is: “or, if he thinks fit, an amount
not exceeding ten times the amount of the proper duty or deficient
portion thereof.” [Paras 15, 16][275-F-G; 276-D-F]
1.2 The expression “an amount not exceeding ten times”
is preceded by expression “if he thinks fit”. The statutory
scheme, thus, vest the discretion to the Collector to impose the
penalty amount not exceeding ten times. Whenever statute
transfers discretion to an authority the discretion is to be
exe

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