Supreme Court Endorses Hefty Penalty for Deficit Stamp Duty in Karnataka

Introduction: In a significant judgment, the Supreme Court has upheld the imposition of a tenfold penalty for deficit stamp duty on an insufficiently stamped document under the Karnataka Stamp Act, 1957. This ruling reinforces strict compliance with stamping requirements for admitting documents as evidence in court proceedings.

Factual Background: The appellant sought to admit a document at an interlocutory stage, which was insufficiently stamped. Under Section 34 of the Karnataka Stamp Act, the trial court directed the appellant to pay a penalty ten times the deficit stamp duty. The appellant contested this imposition, arguing that the deficit should only be paid at the final judgment stage, claiming the penalty was excessive and premature. The High Court upheld the trial court’s decision, leading the appellant to appeal to the Supreme Court.

Arguments Presented by the Appellant: The appellant argued that the penalty levied under Section 34 was illegal. He contended that the court should collect only the deficit stamp duty at the time of issuing the final judgment, and imposing the full penalty at the admission stage was erroneous. According to the appellant, Section 34 did not mandate such a severe penalty for insufficient stamping and sought the court’s discretion to reduce or postpone the penalty.

Supreme Court's Reasoning: The bench, comprising Justices Hrishikesh Roy and SVN Bhatti, rejected the appellant’s contentions. They held that Section 34 of the Act clearly rendered documents not duly stamped inadmissible in evidence. The penalty for insufficient stamping is mandatory, and there is no scope for judicial discretion to reduce or defer the penalty. The Court referenced Gangappa v. Fakkirappa (2018), affirming that trial courts must levy the statutory tenfold penalty without exceptions when admitting insufficiently stamped documents.

Key Legal Takeaways:

• Mandatory Penalty: The ruling establishes that under Section 34, documents with insufficient stamp duty cannot be admitted in court unless a tenfold penalty is paid.
• No Judicial Discretion: The court emphasized that lower courts have no discretion to reduce the penalty imposed under the statute, reinforcing the binding nature of statutory penalties.
• Policy Implication: The decision reflects the judiciary’s commitment to upholding statutory mandates and ensuring that parties comply with stamping requirements, crucial to preserving the legal integrity of documents used in judicial proceedings.

Conclusion: This ruling solidifies the application of strict penalties for non-compliance with stamp duty requirements in Karnataka. It underscores the importance of proper stamping for legal admissibility and highlights the court's role in enforcing statutory provisions without leniency. The appeal was dismissed, and the original order to impose the tenfold penalty on the appellant was upheld.

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