Stamp Act | Collector's Function Ends On Determining Deficiency, Can't Impose Penalty Or Direct Recovery: Punjab & Haryana High Court

The Punjab and Haryana High Court has held that where an instrument is referred to the Collector under Section 31 of the Indian Stamp Act, 1899, his function comes to an end once he determines the deficiency in stamp duty, and he is not competent thereafter to impose a penalty or direct recovery. [2026 LiveLaw (PH) 278]

Justice Kuldeep Tiwari held that Section 31 "does not contemplate any further action to be taken by the Collector", and that the imposition of penalty and the recovery direction were "beyond the scope of his statutory jurisdiction under Section 31."

The Court added that the position "would have been different" had the instrument been forwarded to the Collector under Section 38 of the Act, but the indisputable fact was that, after impounding, it had been sent under Section 31.

The Municipal Corporation, Chandigarh invited e-bids for the operation and management of 32 paid parking sites for three years, at a reserve price of ₹2.12 crore per annum. The petitioner bid ₹5,01,03,001 per annum, was the highest bidder, and was issued a Letter of Intent dated 16.01.2020.

He was required to execute a licence deed on stamp paper, after confirming the value from the Sub-Registrar within fifteen days, and to deposit the original with the licensor. He failed to do so, drawing a show-cause notice dated 08.07.2020 and a further communication dated 07.07.2021, before finally executing the deed with stamp duty of ₹3,34,020 and registering it on 16.07.2021.

The contract expired on 31.01.2023. During audit, the Audit Department of the MCC took the view that the petitioner had evaded proper duty by incorporating a recital computing the annual rent at approximately ₹1,67,01,000 on a three-year contract value of ₹5,01,03,001. On the authorities' calculation, the instrument being a lease, duty at 2% of the average annual value came to ₹10,02,060, besides ₹1,25,257.50 on the security amount of ₹41,75,250.

The Joint Commissioner impounded the deed under Section 33 on 16.05.2023 and referred it to the Collector, who by order dated 26.09.2024 assessed the deficiency at ₹7,93,298 and imposed a penalty of 50% thereof, ₹3,96,649, a total of ₹11,89,947 directed to be recovered.

The Court framed five questions: whether the instrument was a simpliciter operation and management agreement or in substance a lease deed; whether the Joint Commissioner had become functus officio on expiry of the licence; whether his opinion on insufficiency was anchored in reasons; whether he holds a public office within Section 33; and whether the Collector under Section 31 can impose penalty and enforce recovery.

 Rejecting the contention that the instrument attracted only ₹15 under Article 5(d), the Court held that Section 2(16) defines "lease" to include "any instrument by which tolls of any description are let", and that the definition is extensive rather than restrictive. Relying on Nasiruddin v. State of Uttar Pradesh, 2018 (1) RCR (Civil) 1004, where contracts for collection of tehbazari and parking fees were held to amount to leases, the Court held the parking sites were leased to the petitioner, and that the instrument "cannot, by any stretch of reasoning, be regarded as a simpliciter operation and management agreement."

 The Court held that neither the Audit Department nor the Joint Commissioner became functus officio on expiry of the licence, the annual audit exercise being an integral part of official functions and the reporting of an insufficiently stamped instrument to the competent authority being a duty. Beyond that, the Court held the doctrine "has no application in the sphere of administrative law", impounding under Section 33 being an administrative function while assessment by the Collector under Sections 31, 40 and 47-A is quasi-judicial. Reliance was placed on Orissa Administrative Tribunal Bar Association v. Union of India, 2023 SCC OnLine SC 309, which held that applying the doctrine to administrative decision-making would cripple executive power.

The petitioner's reliance on M. Chowdhury v. Collector of Stamps, Delhi, (1970) ILR 1 Delhi 606 was distinguished, that case concerning a Sub-Judge impounding a document after passing a decree.

The audit report and the instrument itself constituted sufficient material for the Joint Commissioner to form the opinion that the deed was inadequately stamped.

On the argument that no determination under Section 33(3) had been made by the State Government, the Court held that the sub-section opens with the words "in cases of doubt", so that a determination is required only where doubt exists. The office of the Joint Commissioner, MCC "cannot, by any reasonable construction, be regarded to be other than a public office", and non-determination does not curtail his power to impound.

The Court relied on Government of Uttar Pradesh v. Raja Mohammad Amir Ahmad Khan, AIR 1961 SC 787, where the Supreme Court held that Section 31 is complete in itself, ending with the Collector determining the duty with which the instrument is chargeable, and postulating nothing further. Where a person merely seeks the Collector's opinion, the scheme of the Act does not attract the penalty consequences that attend instruments sought to be used in evidence or acted upon.

Applying this, the Court concluded that the Collector's function ends on determining the deficiency, and set aside the impugned order to the extent it imposed penalty and directed recovery.

The Court rejected the argument that the proceedings were vitiated because the original instrument was never forwarded. On registration, the original licence deed had been deposited with the MCC in terms of the tender conditions and remained in its custody; moreover, neither Section 31 nor Section 33 mandates production of the original before the Collector, the object of impounding being to ensure the instrument is not put to further use.

Reliance on Hariom Agrawal v. Prakash Chand Malviya, AIR 2008 SC 166 was held misconceived, that decision concerning the evidentiary value of a photocopy tendered as secondary evidence where the original had been stolen, and holding that a copy cannot be validated by impounding.

The order dated 26.09.2024 was partly set aside insofar as it directs recovery of the deficient stamp duty and imposes a penalty of 50% thereof. Liberty was reserved to the MCC to take further steps for recovery of the assessed deficiency in accordance with law. The writ petition was partly allowed to that extent.

Case Title: Ram Sunder Prasad Singh v. U.T. Chandigarh through Additional Deputy Commissioner and others

Citation: 2026 LiveLaw (PH) 278

Appearances: Mr. Ashim Aggarwal, Advocate for the petitioner; Mr. Jaivir S. Chandail and Mr. Deepak Malhotra, Addl. Standing Counsel for respondent No. 1;

Ms. Ayushi Sharma with Mr. Ujval Mittal, Advocates for respondents No. 2 and 3.

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