The Bombay High Court recently delivered a landmark judgment in Dr. Prince John Edavazhikal vs. The Collector of Stamps and Others (Writ Petition No. 15420 of 2023), addressing the stamp duty payable on properties sold through auctions conducted under the SARFAESI Act, 2002. The decision, pronounced on December 19, 2024, offers critical insights into the calculation of market value for stamp duty purposes and its implications for property buyers in SARFAESI auctions.
The petitioner purchased a property in a public auction conducted by the Bank of India (a government undertaking) under the SARFAESI Act, 2002. The sale certificate issued by the bank valued the property at ₹2,22,75,000. However, the Collector of Stamps demanded stamp duty on an independently assessed market value of ₹7,82,00,800, leading to a dispute. The petitioner contested this demand, arguing that the valuation in the sale certificate should be the basis for stamp duty calculation.
The dispute hinged on Rule 4(6) of the Maharashtra Stamp (Determination of True Market Value of Property) Rules, 1995. This rule allows the Stamping Authorities to independently assess market value unless the property is sold or allotted by a government body or undertaking at a pre-determined price. The petitioner contended that the Bank of India, being a government undertaking, falls within this exception, and the sale certificate value should be deemed the true market value.
Court’s Observations and Ruling
The court ruled in favor of the petitioner, holding that:
- The valuation in the sale certificate issued under the SARFAESI Act, 2002, should be treated as the true market value when the sale is conducted by a government undertaking.
- The SARFAESI Act ensures transparency and fair price discovery in property auctions. The court emphasized that the purpose of empowering Stamping Authorities to assess market value is to prevent undervaluation and loss of state revenue. However, auctions conducted under SARFAESI are already transparent and regulated, leaving little room for undervaluation.
- Referencing the Supreme Court’s decision in ASL Vyapar Pvt. Ltd., the court affirmed that valuations in public auctions by government undertakings should not be second-guessed by Stamping Authorities.
This judgment reinforces that properties sold through SARFAESI Act auctions enjoy legal protection from arbitrary reassessment of market value for stamp duty purposes. It provides clarity for buyers in such auctions, ensuring that their stamp duty liability aligns with the auction value.
Conclusion
The Bombay High Court’s decision underscores the importance of transparency in public auctions and the protection of buyers from excessive fiscal demands. This ruling will likely influence future cases involving stamp duty on properties sold by government undertakings, fostering confidence in SARFAESI Act auctions.
