In a significant judgment, the Supreme Court of India in Chief Revenue Controlling Officer-cum-Inspector General of Registration & Ors. vs. P. Babu (Civil Appeal Nos. 75-76 of 2025), emphasized that procedural safeguards are critical in determining property valuations under Section 47A of the Indian Stamp Act, 1899. The court underscored that the phrase “reason to believe” cannot be based on arbitrary assumptions but must be supported by objective material and a transparent inquiry.
The decision, delivered by a bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan, upheld the Madras High Court’s ruling that quashed orders from revenue authorities seeking to revise property valuations and demand additional stamp duties. This judgment addresses procedural lapses and ensures accountability in stamp duty valuation cases.
Background of the Case
The case revolved around two sale deeds executed by the respondent, P. Babu, in September 2002, registering properties for Rs. 1,20,000 and Rs. 1,30,000, respectively. The documents were submitted to the Joint Sub-Registrar, Tindivanam, for registration. The Sub-Registrar suspected undervaluation and referred the matter to the Special Deputy Collector (Stamps) under Section 47A(1) of the Indian Stamp Act.
The Special Deputy Collector, after conducting an inquiry, revised the market values of the properties to Rs. 51,16,600 and Rs. 10,36,937, far exceeding the original declarations. He determined these values based on a spot inspection and local inquiries. The respondent challenged these revised valuations before the Inspector General of Registration, who dismissed the appeals. Aggrieved, P. Babu approached the Madras High Court.
The High Court allowed the appeals, observing procedural irregularities in the valuation process. It ruled that the absence of specific reasons for referring the sale deeds for revaluation rendered the proceedings unlawful. This led to the present appeal before the Supreme Court.
Legal Issues
1. Validity of Referral for Valuation:
The court examined whether the registering authority followed the procedural requirement of assigning specific reasons for suspecting undervaluation in the sale deeds. Section 47A mandates that a registering officer must have “reason to believe” that the property is undervalued before referring it for reassessment.
2. Procedural Compliance by Revenue Authorities:
The court analyzed whether the Special Deputy Collector complied with the prescribed rules, including issuing provisional orders, communicating reasons to the parties, and conducting a fair inquiry as required under the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968.
3. Role of Natural Justice:
The court scrutinized whether the revenue authorities adhered to principles of natural justice, ensuring the affected parties were given adequate notice and a chance to present their case.
Key Observations of the Supreme Court
The Supreme Court reaffirmed the High Court’s findings, focusing on the importance of procedural fairness and accountability. Some critical observations included:
1. “Reason to Believe Must Be Objective”: The court highlighted that “reason to believe” is not synonymous with subjective satisfaction. It must be supported by material evidence and not arbitrary assumptions. The court observed:
“Availability of material is the foundation or the basis for any authority to arrive at any decision whatsoever.”
2. Failure to Assign Reasons: The court noted that the Form I notices issued by the authorities lacked specific reasons for suspecting undervaluation. This omission violated the mandatory procedural requirements under Section 47A.
3. Collector’s Lapses in Inquiry: The Collector failed to follow Rules 4 and 6 of the Tamil Nadu Stamp (Prevention of Undervaluation of Instruments) Rules, 1968, which mandate issuing a provisional order and providing an opportunity for representation. The court remarked:
“The determination of market value without notice of hearing to parties is liable to be set aside.”
4. Natural Justice and Procedural Irregularities: The court emphasized that any valuation process must adhere to principles of natural justice, allowing parties to present objections and evidence.
Final Judgment
The Supreme Court dismissed the appeals filed by the Chief Revenue Controlling Officer-cum-Inspector General of Registration and upheld the Madras High Court’s decision. The bench concluded that the revenue authorities had failed to comply with the procedural safeguards prescribed under the Stamp Act and the relevant rules. The court observed:
“In such circumstances, if the document in question is straightway referred to the Collector without recording any prima facie reason, the same would vitiate the entire enquiry and the ultimate decision.”
