Insufficiently Stamped Documents Admissible In Cheque Bounce Cases Under Karnataka Stamp Act: Karnataka HC

The Karnataka High Court has held that under the Karnataka Stamp Act, 1957, an insufficiently stamped document can be admitted in evidence in criminal proceedings, including complaints under Section 138 of the Negotiable Instruments Act, even if the applicable stamp duty or penalty remains unpaid.

The Court clarified that a Magistrate or Judge has no discretion to deny its admissibility in proceedings outside the specifically excluded chapters of the criminal procedure law.

"In a case where the Magistrate or the Judge by exercising the discretion conferred under clause (a) of the proviso to Section 33(2) of the Act, 1957, chooses to impound the instrument for want of sufficient stamp, even then, in a criminal proceeding not falling under the chapters specifically named in Sections 33 or 34 of the Act, 1957, the document though insufficiently stamped is admissible in evidence.", Justice Anant Ramanath Hegde ruled.

The Court dismissed a criminal petition filed by Erigala Ram Pula Reddy challenging orders of the Magistrate and the Sessions Court which had allowed a Memorandum of Understanding to be admitted in evidence in a Section 138 NI Act complaint filed by Grind Stone Crusher LLP.

The dispute arose after the complainant produced a Memorandum of Understanding dated September 19, 2021 marked as Exhibit P1, to support its complaint. Reddy objected to its admissibility on the ground that it was insufficiently stamped under the Karnataka Stamp Act, 1957 and sought its rejection. The Magistrate rejected his application and the Sessions Court upheld that decision in a revision petition.

The High Court explained that the provisions dealing with examination and impounding of insufficiently stamped documents and those governing their admissibility in evidence, operate in distinct fields and serve different purposes.

While the former enables examination of a document's stamping and its impounding, the latter determines whether it can be admitted in evidence in criminal proceedings.

"The question is whether the two provisions are inconsistent with the each other and does it make either of the provision redundant. The answer is no. Both provisions operate in different fields and serve different purposes. Section 33(1) aims at ascertaining whether the instrument is insufficiently stamped, impounding it if it is so.", the Court said.

The Court further clarified that even where an insufficiently stamped document is impounded, that does not automatically render it inadmissible in every criminal proceeding. In proceedings outside the specifically excluded chapters, the document remains admissible even if the applicable stamp duty and penalty have not been paid.

The Court also observed that references to the corresponding chapters of the repealed Code of Criminal Procedure, 1898, must now be read as references to the corresponding chapters of the 1973 Code and, following its repeal, the Bharatiya Nagarik Suraksha Sanhita, 2023.

It added that the legally leviable stamp duty or penalty could be recovered under the Karnataka Stamp Act but payment could not be made a precondition for admitting the insufficiently stamped document in evidence.

Finding no error in the Sessions Court's decision to uphold the document's admissibility, the Court dismissed the petition.

For the Petitioner: Senior Advocate Jayakumar S Patil, Advocate Anjaneya AB

For the Respondent: Advocate Irshad Ahmed K