Stamp Duty on Power of Attorney: Supreme Court Clarifies When It Becomes a Conveyance

The case of M/S. Z. Engineers Construction Pvt. Ltd. & Anr. vs. Bipin Bihari Behera & Ors. deals with an important legal question concerning the applicability of stamp duty on power of attorney documents when they include possession rights. The Supreme Court ruled that the admissibility of such documents depends on whether possession of the property was transferred before, at the time of, or after the execution of the power of attorney. The ruling clarifies the interpretation of the Indian Stamp Act, particularly in cases where state amendments redefine the classification of certain documents.

Background of the Case

The dispute arose when the respondents, through their power of attorney holder, filed a suit for partition. The appellants challenged the validity of the power of attorneys (Exts. 4 and 5) on the grounds that they were insufficiently stamped and should be classified as conveyance deeds under the Indian Stamp Act, 1899, as amended by the Orissa Act No. 1 of 2003. The appellants contended that these documents could not be admitted in evidence unless the required stamp duty and penalty were paid.

The trial court and the Orissa High Court rejected the appellants’ argument and admitted the documents into evidence. The appellants then approached the Supreme Court, arguing that the lower courts failed to consider whether possession had been transferred under the power of attorney, which would make it a conveyance under the Stamp Act.

Arguments of the Petitioner (M/S. Z. Engineers Construction Pvt. Ltd. & Anr.)

The appellants argued that the power of attorneys in question should be classified as conveyance deeds under the Orissa amendment to the Stamp Act.
They contended that if possession was transferred before, at the time of, or after the execution of the power of attorney, the documents would attract the same stamp duty as a sale deed.
They cited the case of Ram Rattan (Dead) by LRs. vs. Bajrang Lal & Ors. (1978) to support their argument that an insufficiently stamped document cannot be admitted in evidence.
They further referred to Omprakash vs. Laxminarayan & Ors. (2014) to argue that a document must be properly stamped before it can be considered as evidence.

Arguments of the Respondent (Bipin Bihari Behera & Ors.)

The respondents argued that the power of attorneys were properly stamped and registered, making them admissible in evidence.
They contended that the question of whether possession was transferred should not affect the admissibility of the documents.
They relied on the judgment in R.V.E. Venkatachala Gounder vs. Arulmigu Viswesaraswami & V.P. Temple & Anr. (2003), which held that objections regarding mode of proof must be raised when the document is admitted.
They also cited Bipin Shantilal Panchal vs. State of Gujarat & Anr. (2001), where the Supreme Court discouraged unnecessary delays in trials due to evidentiary objections.

Supreme Court’s Judgment

A bench comprising Justice S. Abdul Nazeer and Justice Hemant Gupta ruled in favor of the appellants, setting aside the orders of the trial court and the High Court. The Court held that the issue of whether the power of attorneys should be classified as conveyance deeds required a factual determination based on evidence.

“The question whether possession was transferred at the time or after execution of such power of attorney is a question of fact which is required to be decided by the Court at the time of final decision being adjudicated, after evidence is led by the parties and not merely on the basis of recitals in the power of attorney.”

The Court emphasized that in cases where a power of attorney grants possession, it may be deemed a conveyance under the Stamp Act. However, this determination must be made based on factual evidence, not just on the language of the document.

The Court further held:

“If the possession was transferred, the document is liable to be impounded and cannot be admitted unless an appropriate stamp duty is paid.”

The matter was remitted to the trial court to decide whether possession had been transferred and, accordingly, whether the documents required additional stamp duty.

Key Takeaways from the Judgment

Stamp duty classification depends on possession: If a power of attorney includes possession rights, it may be classified as a conveyance and subject to higher stamp duty.
Determination of possession requires factual evidence: Courts must consider all available evidence, not just the language of the document.
Admissibility of documents can be challenged later: The ruling clarifies that evidentiary objections can be deferred to the final stage of trial if they require factual determination.
Judicial restraint in policy matters: The Supreme Court upheld the legislative intent behind state amendments to the Stamp Act, reinforcing the principle that statutory requirements must be adhered to.

Impact of the Judgment

This judgment has significant implications for property transactions and legal documentation. It affirms that:

Power of attorney documents that transfer possession must be carefully examined for stamp duty compliance.
Courts must assess factual circumstances before determining whether a document falls under the definition of conveyance.
Stamp duty laws must be strictly enforced to prevent revenue loss to the state.

The ruling will likely influence future cases where property transactions involve power of attorney holders.

Conclusion

The Supreme Court’s decision in M/S. Z. Engineers Construction Pvt. Ltd. & Anr. vs. Bipin Bihari Behera & Ors. establishes a critical precedent on the interpretation of stamp duty laws. The judgment reinforces that courts must determine whether possession was transferred under a power of attorney before deciding on its classification. This decision provides clarity for property transactions and ensures compliance with stamp duty regulations.

Petitioner Name: M/S. Z. Engineers Construction Pvt. Ltd. & Anr..
Respondent Name: Bipin Bihari Behera & Ors..
Judgment By: Justice S. Abdul Nazeer, Justice Hemant Gupta.
Place Of Incident: Orissa.
Judgment Date: 14-02-2020.

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