Stamp Duty on DRT-Monitored Auction Sales To Follow Auction Price, Not Market Price: Bombay High Court

The Bombay High Court has reaffirmed that stamp duty on a sale certificate issued pursuant to a court-monitored auction, including auctions conducted by the Debt Recovery Tribunal, must be levied on the auction price and not on a higher market value independently assessed by stamp authorities.

A Single Judge Bench of Justice N.J. Jamadar held that once a property is sold through a transparent, court-supervised auction process, stamp authorities cannot reassess its value by applying independent valuation rules. The court said such reassessment would amount to stamp authorities sitting in appeal over a judicially supervised sale.

The case involved a property in Bandra (West), Mumbai, which was sold through an e-auction conducted by the Recovery Officer of the Debt Recovery Tribunal-I, Mumbai. The sale was carried out in execution of a recovery certificate issued in favour of Central Bank of India.

A sale proclamation was issued, a reserve price was fixed, and the property was eventually put up for online public auction. Shweta Aditya Malhotra emerged as the successful bidder with an offer of Rs 2.01 crore, after which a sale certificate was issued in her favour.

Once the sale certificate was rectified, Malhotra approached the Collector of Stamps, Andheri Division, for adjudication of stamp duty. She maintained that since the sale had taken place through a tribunal-monitored auction, stamp duty had to be calculated on the auction price. The Collector, however, passed an order under Section 31 of the Maharashtra Stamp Act, 1958, assessing stamp duty on a market value of Rs 8.35 crore and imposing a penalty. Aggrieved by this, she challenged the order before the High Court.

At the outset, the Court turned down the State's objection on maintainability, holding that the dispute raised a pure question of law relating to the correct application of settled principles.

On merits, the Court noted that the Recovery Officer had followed a structured and transparent process, which included publication of the sale proclamation, fixation of a reserve price, and sale through an online public auction.Such a process, the court said, was meant to facilitate discovery of fair market value.

While reaffirming this position, the court relied on the Supreme Court's decision in Registrar of Assurance v. ASL Vyapar Pvt. Ltd., which held that in a court-monitored auction, the price discovered through a transparent bidding process represents the true value of the property and cannot be reopened by stamp authorities.

In this backdrop, the Court categorically held,

“As the property was sold in a public auction through online bidding and the bid of the petitioner, which matched the reserve price, was accepted, it would not be permissible for the Authorities under the Stamp Act, 1958, to contend that the market value of the property would be determined in accordance with the Rule 4(6) and not on the basis of the consideration so fetched in the public auction.”

Holding that the Collector's approach was legally unsustainable, the court quashed the impugned order and directed that stamp duty on the sale certificate be adjudicated on the basis of the auction sale consideration of Rs 2.01 crore.

For Petitioner: Advocates Saurish Shetye along with Advocates Pavan Pandey and Devendra Agarwal, instructed by Prem Kumar Pandey

For Respondent: Additional Government Pleader J. P. Patil