Stamp Duty On NCLT-Liquidated Property Can Be Based On Auction Price, Not ASR Rates: Bombay High Court

The Bombay High Court has held that stamp duty on property sold through a liquidation auction conducted by an NCLT-appointed liquidator can be calculated on the auction value rather than the Annual Statement of Rates (ASR) value when the auction process is transparent and there is no basis to suspect deliberate undervaluation.

The Court rejected the Maharashtra Advocate General's argument that the National Company Law Tribunal (NCLT) could not be treated as a civil court for this purpose.

It held that the term “civil court” under Article 16 of Schedule I to the Maharashtra Stamp Act, 1958, should not be narrowly interpreted to exclude the NCLT when it acts as the adjudicating authority under the Insolvency and Bankruptcy Code (IBC).

“We do not intend to read the term 'civil court' under Article 16 to be restricted to a civil court, but a tribunal like the National Company Law Tribunal, constituted under Section 408 of the Companies Act, vested with certain powers of the civil court, and when it acts as an 'Adjudicating authority', under the IBC with the power being conferred to appoint a Liquidator to liquidate the properties/assets of the corporate debtor who has followed the procedure prescribed, in our view, we find no justification in the submission of the Learned Advocate General that the value mentioned in the sale certificate shall not be considered as the true market value,” a Division Bench of Justices Bharati Dangre and Manjusha Deshpande observed.

The court directed the authorities to levy stamp duty on the auction value of ₹8.03 crore and complete registration of the deed of assignment and conveyance. The property would then stand transferred to Bhadrashree Steel & Power Ltd.

The steel company had emerged as the successful bidder in an e-auction held on April 20, 2021, by the liquidator of Harneshwar Agro Products Power and Yeast (India) Ltd., whose assets were being liquidated under the IBC.

Bhadrashree paid ₹8.036 crore for the land and building and ₹4.9718 crore for the plant and machinery, taking the total consideration to ₹13.0078 crore.

The stamp authorities, however, initially valued the land and building at ₹41.96 crore and later revised it to ₹35.70 crore, demanding higher stamp duty based on the Annual Statement of Rates (ASR). Bhadrashree challenged the assessment, arguing that the auction had established the property's value.

The High Court noted that 16 bidders had expressed interest and the liquidator had kept the NCLT informed through progress reports. It found no reason to doubt the auction, which followed the prescribed procedure and fetched more than the assets' average liquidation value.

Relying on the Supreme Court's decision in ASL Vyapar, the Bench held that the transparent, regulated process justified using the auction value.

The court further observed that properties sold through liquidation and similar recovery proceedings may fetch less than their actual market value because they are distress sales. It held that the State's insistence on collecting stamp duty based on ASR rates, despite the price realised through a valid auction, was unjustified in the circumstances.

“Despite this, if the State claims that it must have its pound of flesh, irrespective of whether the property has fetched the market price as per the desire of the State and computed as per the ASR rates, in our view, the demand is completely unjustified,” the Court observed.

The Court clarified that stamp authorities may intervene in exceptional cases where there is good reason to believe that a property's true market value has been deliberately reduced or suppressed to evade stamp duty.

Finding no such basis in this case, it directed that stamp duty be calculated on ₹8.03 crore and that registration be completed

For Petitioner: Advocates Rahul Gaikwad a/w Nikita Abhyankar, Reshma Nair, Komal Singh & Prena Shah i/b Gravitas Legal 

For Respondents: Milind Sathe, AG a/w N.C. Walimbe, Addl, GP, Ketan Joshi, 'B' Panel & P.J. Gavhane, AGP, Advocates Fleur D'souza i/b Asahi Legal, Utkarsh R. Pondkule i/b Ms. Vrushali Maindad