In a pivotal ruling that underscores the principles governing property disputes, the Supreme Court of India clarified that compromise decrees affirming pre-existing rights over property neither require compulsory registration under the Registration Act, 1908, nor attract stamp duty under the Indian Stamp Act, 1899. This judgment, delivered in the case of Mukesh v. The State of Madhya Pradesh & Anr. (Civil Appeal No. 14808 of 2024), offers critical guidance on the interpretation of statutory exemptions related to judicial decrees.
Case Background
The appellant, Mukesh, initiated a civil suit (Civil Suit No. 47-A/2013) before the First Civil Judge, Class-2, Badnawar, seeking a declaration of ownership and a permanent injunction against Abhay Kumar (respondent no. 2) and the State of Madhya Pradesh (respondent no. 1). Mukesh asserted that he had been in continuous possession and cultivation of land in Village Kheda, District Dhar, Madhya Pradesh.
The dispute arose when Abhay Kumar, an adjacent landowner, attempted to sell the land to third parties, threatening Mukesh’s possession. The case was settled through a compromise, and the court issued a consent decree on November 30, 2013, recognizing Mukesh’s possession and his entitlement to have his name recorded in revenue records. The State of Madhya Pradesh did not object or appeal this decree, and it attained finality.
However, upon Mukesh’s application for mutation of the land, the Tehsildar referred the matter to the Collector of Stamps, who determined a stamp duty of ₹6,67,500 under Article 22 of Schedule IA of the Indian Stamp Act. Mukesh’s appeals to the Board of Revenue and the High Court of Madhya Pradesh were dismissed, leading to the present appeal before the Supreme Court.
Key Legal Issues
1. Whether a compromise decree affirming pre-existing rights requires registration under Section 17 of the Registration Act, 1908.
2. Whether such a decree is chargeable with stamp duty under the Indian Stamp Act, 1899.
3. Whether the compromise decree constituted collusion to evade stamp duty.
Supreme Court’s Observations
1. Registration Under the Registration Act, 1908
The bench, comprising Justice J.B. Pardiwala and Justice R. Mahadevan, held that registration under Section 17(2)(vi) of the Registration Act is not required for compromise decrees affirming pre-existing rights. The court noted that Section 17(2)(vi) exempts decrees that do not create new rights in immovable property but merely recognize existing ones. Justice Mahadevan observed:
“The appellant did not obtain any new right through the compromise decree but merely asserted his pre-existing title over the subject land.”
The judgment emphasized that this exemption applies unless the decree pertains to immovable property that is not the subject matter of the suit or creates new rights.
2. Stamp Duty Liability
Analyzing the provisions of the Indian Stamp Act, 1899, the court concluded that the consent decree was not chargeable with stamp duty. Section 3 of the Act specifies instruments liable for stamp duty, and compromise decrees asserting pre-existing rights do not fall within its purview. The bench stated:
“Since the appellant has only asserted the pre-existing right and no new right was created, the document is not liable for stamp duty.”
The court clarified that the decree did not operate as a conveyance or transfer of rights, which would have attracted stamp duty.
3. Allegations of Collusion
The State argued that the decree was collusive, designed to evade stamp duty. However, the court rejected this contention, noting the absence of any evidence or rival claims to the property. The bench remarked:
“No concrete evidence was placed to substantiate that the suit was collusive.”
The court also highlighted that the State had not challenged the compromise decree, which had attained finality.
Precedents and Legal Principles
The court referred extensively to landmark rulings, including:
– Bhoop Singh v. Ram Singh Major (1995): Established that compromise decrees creating new rights require registration.
– Ravinder Kaur Grewal v. Manjit Kaur (2019): Affirmed that adverse possession can confer ownership, supporting claims of pre-existing rights.
– Mohd. Yusuf v. Rajkumar (2020): Clarified the scope of Section 17(2)(vi) regarding compromise decrees.
The judgment emphasized that compromise decrees recognizing pre-existing rights are distinct from those creating rights afresh and must be treated differently under law.
Decision
The Supreme Court set aside the High Court’s decision and directed the authorities to mutate the revenue records in Mukesh’s favor without requiring registration or stamp duty. The bench concluded:
“The impugned order has no legs to stand and is hence, set aside.”
