Registering Officer Must Record Reasons Before Referring Documents for Stamp Valuation, Says Supreme Court; Appeals Dismissed

A bench of Justices J.B. Pardiwala and R. Mahadevan heard appeals by the Chief Revenue Controlling Officer-cum-Inspector General of Registration and two Revenue Officers challenging a Madras High Court order that quashed stamp valuation proceedings under Section 47-A of the Indian Stamp Act, 1899. The appeals arose from the determination of market value in two sale deeds (DOC Nos. 487/02 and 488/02) which the registering authority had referred to the Collector on suspicion of undervaluation.

The Court summarised that the High Court had rightly set aside the departmental orders because statutory procedure and minimum reasons were not recorded before referring the instruments for valuation. The Supreme Court held that a reference under Section 47-A could not be a "mechanical act" and that a Registering Officer must have a prima facie basis to form a "reason to believe". The Court, in its reasoning, observed: "It has been rightly held in the case of Mohali Club, Mohali v. State of Punjab, reported in AIR 2011 P&H 23, that the Registering Officer, after registration of the document, can refer the same for adjudication before the Collector, if he has reason to believe that there was deliberate undervaluation of the property. Such a reference is not a mechanical act, but the Registering Officer should have a basis for coming to prima facie finding of undervaluation of the property. Duty is enjoined upon the Registering Officer to ensure that Section 47-A(1) does not work as an engine of oppression nor as a matter of routine, mechanically, without application of mind as to the existence of any material or reason to believe the fraudulent intention to evade payment of proper Stamp Duty. The expression ‘reason to believe’ is not synonymous with subjective satisfaction of the officer. The belief must be held in good faith, it cannot be merely a pretence. It is open to the Court to examine the question whether the reasons for the belief must have a rational connection or a relevant bearing to the formation of the belief and are not irrelevant or extraneous to the purpose of the section. The word ‘reason to believe’ means some material on the basis of which the department can re-open the proceedings. However, satisfaction is necessary in terms of material available on record, which should be based on objective satisfaction arrived at reasonably." The Court further noted that "it is not permissible for the Registering Officer to undertake a roving enquiry" as part of forming such belief.

Background The dispute concerned two sale deeds executed in 2000 and 2002 for properties in Sakkarapuram, where nominal consideration (Rs.1,20,000 and Rs.1,30,000) appeared to be far lower than prevailing market value. The Joint Sub-Registrar declined to release the documents and referred them to the Special Deputy Collector (Stamps) under Section 47-A(1). Form I notices issued by the registering office indicated substantially higher tentative values and the Collector, after a spot inspection and local enquiry, fixed market values and demanded additional stamp duty. The purchaser, P. Babu, contested the valuation; the Inspector General of Registration dismissed his appeal, but the Madras High Court allowed civil miscellaneous appeals under Section 47-A(10), quashing the departmental orders.

The High Court found that Form I notices did not record any reasons for treating the instruments as undervalued and that the Collector's orders failed to indicate the basis of valuation and did not comply with the procedural safeguards in the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968 — specifically Rules 4 and 6 which required a provisional order stating the basis of valuation (Form II) and an opportunity to be heard. The High Court relied on its Full Bench decision in G. Karmegnam v. The Joint Sub-Registrar, Madurai and held that absence of material or recorded reasons rendered the reference and consequent determination arbitrary. The Supreme Court agreed, observed procedural lapses (including the failure to pass a provisional order under Rule 4(4) and to follow Rule 6 before passing final orders), and dismissed the appeals, thereby upholding the High Court's quashing of the impugned orders. The appeals failed and were dismissed on 3 January 2025.

Case Details: Case No.: Civil Appeal Nos. 75-76 of 2025 (SLP Nos.18676-18677/2018) Case Title: Chief Revenue Controlling Officer cum Inspector General of Registration & Ors. v. P. Babu Appearances: For the Petitioner(s): Mr. Sabarish Subramanian, Advocate For the Respondent(s): Ms. Rohini Musa, Advocate