SUPREME COURT HOLDS BUYER LIABLE TO PAY STAMP DUTY AND REGISTRATION CHARGES ON THE VALUE OF THE ENTIRE PROPERTY INCLUDING MOVABLE ASSETS ATTACHED THERETO

In a recent case of The Sub Registrar, Amudalavalasa & Anr. Vs M/S Dankuni Steels Ltd. & Ors. Civil Appeal No(S). 3134-3135 of 2023, a two Judge Bench of the Supreme Court comprising of Justice K.M. Joseph and Justice Hrishikesh Roy passed a Judgment dated 26-04-2023 and observed that a transfer of property passes to the transferee all the interests thereof including the movable assets attached to the said property and hence, the buyer would be liable to pay stamp duty and other Government charges on the value of the entire property including the movable assets attached thereto.

Facts

(i) In the present case, on an Application made by the Board for Industrial and Financial Reconstruction (BIFR) in BIFR vs M/s. Mid-West Iron and Steel Company Ltd. RCC/10/2001, M/s. Mid-West Iron and Steel Company Ltd. (Company), having its registered office in Hyderabad, Telangana, was wound up, vide Order dated 13-06-2002 passed by the High Court of Andhra Pradesh.

(ii) The Official Liquidator of the Company made all efforts to sell the properties of the Company in an auction for a consolidated sale, in which, the Respondent No. 2, namely, M/s. SMC Marketing Private Ltd. emerged as the highest bidder and successful auction purchaser (Successful Bidder).

(iii) The Successful Bidder had bid for the Company’s properties consisting of land, building, plant and machinery, current assets, etc for Rs. 8.35 Crores.

(iv) But at the instance of the Successful Bidder, the Ld. Company Judge accorded permission to the Official Liquidator in A. No. 1203 of 2004 to execute the sale deed in favor of the Respondent No. 1 herein, namely, M/s. Dankuni Steel Ltd. (Buyer), a nominee of the Successful Bidder.

(v) Accordingly, the Liquidator executed a Sale Deed dated 05-08-2004 in favor of the Buyer and the latter purchased the entire property and assets of the Company in one lot.

(vi) The Buyer made full payment to the Liquidator of Rs. 8.35 Crores including the sale consideration in respect of an immovable property of Rs. 1.01 Crores and further agreed to pay the stamp duty and registration charges at the time of registration of the immovable property.

(vii) The Buyer also claimed 50% exemption on stamp duty and registration charges based on a G.O.M. No.103 dated 07.02.2001 issued by the Government of Andhra Pradesh (AP), which allowed such exemption to entities that purchase sick industrial units under Government auction and thereby, run the industrial unit on the said land.

(viii) In this case, the Buyer contended before the Sub-Registrar, Amudalavalasa, Srikakulam District, AP (SRO), the Appellant No. 1 herein, that as the Buyer has purchased the immovable property of a Company undergoing liquidation, thus, it was entitled to the aforesaid exemption in respect of the immovable property.

(ix) However, the SRO kept the registration pending on the grounds that (a) although the sale occurred in respect of the entire property of the Company for Rs. 8.35 Crores, but the Buyer claimed that only the immovable property of the Company was being transferred and registered in favor of the Buyer, (b) when in fact the entire property including the movable properties attached thereto are subject to transfer and registration in favor of the Buyer and (c) thus, the Buyer is liable to pay the stamp duty and registration charges in respect of the whole property including plant and machinery, land and buildings, immovable property, etc attached thereto.

(x) Aggrieved, the Buyer and the Successful Bidder (Respondents No. 1-2) filed Writ Petition No. 16104 of 2004 and P. No. 19900 of 2004 before the High Court, which was disposed off, vide Common Order dated 12-07-2005 on the following grounds:

(a) As per Section 3 of the Transfer of Property Act 1882 (TP Act), an “immoveable property” does not include standing timber, growing crops or grass;

(b) As per Section 2 (6) of the Registration Act 1908, an “Immovable Property” includes land, buildings, hereditary allowances, rights to ways, lights, ferries, fisheries or any other benefit to arise out of land, and things attached to the earth, or permanently fastened to anything which is attached to the earth, but not standing timber, growing crops nor grass.

(c) As per Section 3 (26) of the General Clauses Act 1897, an “immovable property” shall include land, benefits to arise out of land, and things attached to the earth, or permanently fastened to anything attached to the earth;

(d) Thus, on a collective reading of the aforesaid definitions of an immovable property, it is clear that plant and machinery of the Company, purchased by the Buyer in auction, also form part of the land and building in or on which they are located.

(e) Further, the Sale Deed dated 05-08-2004 executed by the Liquidator in favor of the Buyer was in respect of the entire property including the plant and machinery of the Company.

(f) Thus, based on the aforesaid observations, the High Court held that along with the market value of the land located in Srikakulam, the value of the movable assets, plant and machinery located at the said industrial unit / land, would also be considered for assessment and payment of stamp duty and registration charges. Further, as the Buyer intended to run the unit as an industry, hence, it would be eligible to the grant of 50% exemption on stamp duty and registration charges under the aforesaid G.O.M.

(g) The Ld. Single Judge remitted the matter to the SRO to determine the value of the assets and the land and collect the stamp duty and penalty, if any, by extending the benefit under the aforesaid G.O.M.

(xi) Aggrieved by the Common Order dated 12-07-2005 passed by the Single Judge of the High Court, the Buyer and the Successful Bidder filed Writ Appeal No. 1873 of 2005 and the SRO filed Writ Appeal No. 2457 of 2005 before the High Court.

(xii) A Division Bench of the High Court passed a Common Order dated 18-07-2017 in the said Writ Appeals and held that the Buyer cannot be forced to register and pay stamp duty on the value of plant and machinery, when they have only sought registration of land and building before SRO.

Supreme Court Observations

Being aggrieved by the Common Order dated 18-07-2017 passed by the Division Bench of the High Court, the SRO filed Civil Appeal No(S). 3134-3135 of 2023 before the Supreme Court. The Apex Court passed a Judgment dated 26-04-2023 and made the following observations:

(1) That the Buyer had purchased the entire property of the Company with a view to operate it as a going concern and not to dispose off the plant and machinery therewith as scrap.

(2) That the plant and machinery would constitute ‘distinct matters’ under Section 5 of the Stamp Act 1899, which have been dealt with under one instrument i.e. Sale Deed dated 05-08-2004 and each such distinct matter would be chargeable to stamp duty. Section 5 of the Stamp Act is reproduced below for easy reference:

5. Instruments relating to several distinct matters

Any instrument comprising or relating to several distinct matters shall be chargeable with the aggregate amount of the duties with which separate instruments, each comprising or relating to one of such matters, would be chargeable under this Act.

(3) That as per Section 8 of TP Act, a transfer of property passes to the transferee all the interests thereof including the property and machinery attached to the earth and moveable parts thereof.

(4) Further, the Sale Deed specifically mentioned that upon sale of the property, all the rights, easements, interests, etc thereof would also be transferred.

(5) Thus, on a conjoint reading of the Sale Deed and Section 8 of TP Act, it is clear that the intention of the Liquidator-Seller was to convey all things that stood attached to the land to the Buyer, which impliedly, included conveyance of rights over the plant and machinery as well, which was comprised in the land scheduled in the Sale Deed. Hence, the same would also be subject to assessment and payment of stamp duty and other charges under the law.

Conclusion

Thus, based on the aforesaid observations, the Supreme Court held that the entire property including plant and machinery attached thereto would be considered for assessment of the value of stamp duty and registration charges, etc by the Appellant-SRO. Further, the SRO would determine whether the Buyer is eligible for grant of exemption on such charges.

As a result, the Apex Court allowed the Appeal filed by the SRO and upheld the Common Order dated 12-07-2005 passed by the Single Judge of the High Court and thereby, set aside the Common Order dated 18-07-2017 passed by the Division Bench of the High Court.

Harini Daliparthy

Senior Associate

The Indian Lawyer