The Supreme Court has referred to a larger Bench a significant question on the scope of Section 47-A of the Indian Stamp Act, 1899, raising doubts over whether authorities must have material indicating wilful undervaluation and fraudulent intention before initiating proceedings to determine the correct market value of a property.

Section 47-A of the Indian Stamp Act, 1899 is the provision that allows the registration/revenue authorities to investigate whether a property transaction has been undervalued for stamp-duty purposes. If the registering officer has reason to believe that the market value or consideration stated in a sale deed is not the true value, the officer can refer the document to the Collector for determination of the correct value and the stamp duty payable.

The Bench of Justice Dipankar Datta and Justice Sheel Nagu questioned the proposition in the Court's earlier judgment in V.N. Devadoss v. Chief Revenue Control Officer-cum-Inspector of Stamps, which held that the power under Section 47-A was linked to wilful undervaluation with fraudulent intent to evade stamp duty. The same approach was subsequently followed in Registrar of Assurances v. ASL Vyapar (P) Ltd.

Doubting these precedents, the bench observed :

“…in our considered opinion, “wilful undervaluation” and/or “fraudulent intention” cannot be read as an intra-sentential component into Section 47-A of the Stamp Act for its invocation, and any distinction, if purportedly demarcated between bona fide undervaluation and wilful undervaluation, is alien to the plain phraseology of the provision as well as the spirit of the statute.”

The Court referred the following questions to a larger bench, after recording its disagreement with the 2009 judgment:

"a. Whether, V.N. Devadoss (supra), since followed in ASL Vyapar (P) Ltd. (supra), correctly interprets and declares that the basis for exercise of power under Section 47-A of the Stamp Act is wilful undervaluation of the subject of transfer with fraudulent intention to evade payment of proper stamp duty? Or, whether on the very terms of Section 47-A, power thereunder can be and ought to be exercised by the registering authority, irrespective of absence of any culpable mindset of the parties to the sale, by truly deciding the real nature of the transaction and value of the subject property, without being bound by the apparent tenor of the instrument?

b. Whether the decisions in Ramesh Chand Bansal (supra) and Shanti Bhushan (supra) do not lay down correct law?"

The judgment authored by Justice Datta emphasized that reading the requirement of showing a fraudulent intention to the provision would amount to judicial legislation, when the provision of Section 47-A of the Stamp Act, specifically mentions that the registering authority only need to have a “reason to believe” that the market value of the property or consideration has not been truly set forth in the instrument.

According to the court, the provision focuses on whether the true market value or consideration has been stated, rather than on the culpable mental state of the parties.

In V.N. Devadoss, a three-Judge Bench had held that the basis for exercising power under Section 47-A was wilful undervaluation of the property with fraudulent intention to evade proper stamp duty. The bench led by Justice Datta, however, expressed serious reservations about this interpretation.

It observed that if “wilful undervaluation” and “fraudulent intention” are treated as independent jurisdictional requirements despite their absence from the statutory provision, it could amount to reading additional ingredients into the law.

The Court said that such an approach may transform a valuation enquiry under the Stamp Act into an enquiry into the parties' culpable mindset.

“We are, with respect, unable to agree with the approach adopted in V.N. Devadoss (supra) as well as in ASL Vyapar (P) Ltd. (supra), insofar as both decisions proceed on the footing of reading an element of fraudulent intention into the plain statutory provision without examining the provision in its full statutory milieu and the scheme underpinning the power conferred upon the registering/revenue authority.”, the Court said.

Court illustrates the problem with two contrasting sales

The Bench used two hypothetical situations to demonstrate what it considered the difficulties with making fraudulent intention a prerequisite for invoking Section 47-A.

In the first, described as an “honest sale,” a property with a high circle rate is sold at a lower price because of factors such as tenancy restrictions, limited road access and pending litigation. The Court observed that a valuation-based inquiry would require the purchaser to establish the property's actual market value. But if fraudulent intention were treated as a jurisdictional prerequisite, the purchaser would instead have to defend against an allegation of culpable intent despite there being no fraud.

The second example involved a fraudulent sale, where a property worth ₹2 crore is shown as being sold for ₹1.5 crore, with the balance allegedly paid in cash to evade stamp duty. The Court pointed out that if evidence of fraudulent intent were mandatory before a notice could be issued, the authority might be unable to initiate an inquiry precisely because such evidence could be within the exclusive knowledge of the parties.

The Bench concluded that the earlier test could be “too harsh” in genuine cases and “too lax” in cases involving concealed transactions.

Background

The case arose from the purchase by Bharat Petroleum Corporation Limited (BPCL) of a parcel of land from the Government of India, represented by the Deputy/Assistant Salt Commissioner.

The sale consideration was fixed and was fully paid through cheques in 2014. Possession was delivered to BPCL on January 21, 2014, while the sale deed was executed on June 24, 2016.

Although stamp duty was paid on the full consideration stated in the sale deed, the registering authority noticed a substantial difference between the value reflected in the instrument and the guideline value.

The property was valued in the instrument at ₹168.30 per square foot, whereas the guideline value was ₹500 per square foot.

The registering authority consequently made a reference under Section 47-A and issued a show cause notice dated August 22, 2016 seeking additional stamp duty.

A Single Judge of the Madras High Court placing reliance on V.N. Devadoss quashed the notice and directed release of the sale deed, holding that the jurisdiction under Section 47-A can be invoked only where the registering authority has reason to believe that the property has been deliberately undervalued with a fraudulent intent to evade payment of the requisite stamp duty.

However, the Division Bench reversed that order and restored the proceedings, prompting the BPCL to approach the Supreme Court.

It was in this context, the Court while expressing disagreement with the V.N. Devadoss judgment had referred the question to a larger bench.

Cause Title: BHARAT PETROLEUM CORPORATION LIMITED VS. THE DISTRICT REVENUE OFFICER (STAMPS) & ANR.

Citation : 2026 LiveLaw (SC) 907

Click here to download judgment

Appearance:

For Petitioner(s) :Mr. N. Venkataraman, A.S.G. Mr. T. Sundar Ramanathan, AOR Mr. Vivek Pandey, Adv. Mr. Krishan Singhal, Adv. Ms. Aastha Sardana, Adv. Ms. Anshika Singh, Adv. Mr. Shivkumar, Adv. Mr. Abshieke R, Adv.

For Respondent(s) :Ms. Haripriya Padmanabhan, Sr. A.A.G. Ms. Kanika Kalaiyarasan, AOR Mr. Shourya Das Gupta, Adv.