Admission of improperly stamped instruments

Introduction

We come across promises given to us on a regular basis throughout our lives. The person in front of us will frequently try to highlight a point by saying something like, “Let me put it in writing for you.” However, such a contract is not legitimate in the eyes of the law unless certain requirements are satisfied. Stamping is an example of a legal gimmick. Documents are subject to stamp duty, which is a charge placed on them. Stamping is the process of paying stamp duty on a document. Stamp duty is frequently paid on transactional papers like real estate contracts. Only a ‘duly stamped’ instrument can be presented to a court of law as proof of contract execution. As a result, it’s critical to follow the rules.

The Indian Stamp Act of 1899 dealt with improperly stamped instruments

The Indian Stamp Act, 1899 (henceforth referred to as ‘the Act’) is the law in India which deals with stamp duty. Under this act there are various sections which describe how an event of an inadequately stamped instrument is to be dealt with.

These sections are included in the chapter of the act labelled “Instruments not Duly Stamped” (Chapter – V). There are a few additional portions in other chapters (such as sections 61, 62, and so on) that need to be examined as well. This article explains the law enacted by these sections in layman’s terms. [The term ‘instrument’ refers to legally enforceable papers such as contracts, deeds, and the like. This term is defined correctly under section 2(14) of the Act]. In terms of the content of this essay, two portions of the aforementioned chapter, notably sections 33 and 35, are crucial. They are, in fact, the essence of the dispute.

  • Instruments which are unduly stamped will get impounded(section 33): If an instrument is brought before an authority entrusted with the duty to examine such documents and the instrument is found to be unduly stamped then they are supposed to impound the instrument.[The word ‘impound’ means the seizing of documents which infringe law in some way. Impounding is usually done by a person who has the authority to examine deeds under law. Also, the words ‘unduly’, ‘insufficiently’ and ‘inadequately’ are used synonymously in the course of this article. The legal definition of a duly stamped is present in section 2(11) of the Act.]
  • Instruments not duly stamped are not admissible as evidence (section 35): Any instrument which is not duly stamped is not admissible as evidence. In order to make such an instrument admissible as evidence, the duty which is chargeable on the document will be levied or, in case of insufficient stamping, a penalty of ten times the value of duty has to be paid.

The following are the sections which help us understand the process of stamping and also list certain scenarios of inadequate stamping.

  • After the agreement has been accepted as evidence, objection can’t be raised as to its admissibility (section 36): After a document/instrument has been accepted as evidence, no objection can be raised in a court proceeding questioning the insufficient stamping of the instrument except under section 61. Section 61 will be discussed eventually in the course of this article.
  • State governments may make rules regarding ‘improperly’ stamped contracts(section 37): The state governments have been given the power to make rules regarding improperly stamped instruments under the Act. Any instrument which is “improperly” stamped(and not insufficiently stamped), after charging the requisite duty, may be certified as a duly stamped instrument.
  • Inadequate stamping due to accident (section 41): The gist of this section is that if you realize that your instrument is not sufficiently stamped ‘by accident’ then you can approach the collector within 1 year from the date of stamping and try to pay the remaining duty for the instrument. If the collector is convinced that it was an honest mistake, he shall receive the remaining duty without impounding the instrument. [‘Collector’ referred to here can be anybody from the district collector, Deputy Commissioner or anyone the government appoints on this behalf. See section 2(9).]

Prosecution of people trying to evade payment of stamp duty(section 43): This provision essentially states that if it seems that a person intended to avoid paying stamp duty, he will be prosecuted for violating the Stamp Law.

Finally, before we move on to making observations, we need to understand several additional parts of the Act concerning penalties on instruments.

  • Penalty shall be charged if you try to execute an inadequately stamped document(section 62): In this section, a person who tries to execute a document/instrument which is not duly stamped, shall be liable to pay a fine of upto 500 rupees.
  • Penalty for trying to defraud the government(section 64 & 27): This section deals with the penalties for failing to comply with Section 27. The duty determined from the value of the consideration in the transaction must be accurately indicated, according to Section 27. Otherwise, it will be regarded a fraud against the government. As a result, even if a document is overly stamped, it might be penalised under section 64. This clause carries a fine of up to 5000 rupees.

References

https://indiankanoon.org/search/?formInput=improperly%20stamped%20instruments

https://taxguru.in/corporate-law/validity-under-stamped-non-stamped-instrument-document.html

Aishwarya Says:

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