The Supreme Court has referred to a larger Bench the question whether proceedings under Section 47-A of the Indian Stamp Act, 1899 can be initiated only when there is material indicating wilful undervaluation and fraudulent intent to evade stamp duty, or whether the provision permits a valuation enquiry regardless of the parties’ culpable state of mind.
The Bench of Justice Dipankar Datta and Justice Sheel Nagu expressed serious doubts over the correctness of the three-judge Bench ruling in V.N. Devadoss v. Chief Revenue Control Officer-cum-Inspector of Stamps, which held that wilful undervaluation accompanied by fraudulent intent was the basis for invoking Section 47-A.
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The Bench observed that the expressions “wilful undervaluation” and “fraudulent intention” are conspicuously absent from the language of Section 47-A(1). However, since V.N. Devadoss is a larger Bench decision, the Court said judicial discipline prevented it from ruling upon the correctness of that precedent.
The matter arose from Bharat Petroleum Corporation Limited’s purchase of land from the Government of India. The company paid the entire agreed consideration through cheques issued on different dates in 2014 and received possession of the property on January 21, 2014.
A transfer deed was subsequently executed by the Government of India in favour of BPCL on June 24, 2016. When the document was presented for registration, BPCL paid stamp duty and registration charges on the full consideration stated in the deed.
The registering authority, however, did not release the registered instrument. Instead, it referred the document to the District Revenue Officer under Section 47-A on the suspicion that the property had been undervalued.
A show-cause notice dated August 22, 2016 was then issued to BPCL, proposing the recovery of additional stamp duty. The company challenged both the reference and the consequential notice before the Madras High Court.
The proceedings were initiated because the guideline value of the property was stated to be â‚ą500 per square foot, while the deed had been presented for registration at a value of â‚ą168.30 per square foot.
A Single Judge of the Madras High Court allowed BPCL’s writ petition on September 8, 2022. Relying upon the Supreme Court’s ruling in V.N. Devadoss, the Single Judge held that Section 47-A could be invoked only when the registering authority had reason to believe that the property was deliberately undervalued with fraudulent intent to evade stamp duty.
The Single Judge noted that the entire consideration stipulated in the transfer deed had been paid and that there was no material suggesting payment of any amount over and above the consideration recorded in the instrument.
It was also observed that guideline values prepared by the revenue authorities for administrative purposes provide only a prima facie indication and cannot, by themselves, constitute conclusive evidence of a property’s market value.
Finding no material indicating deliberate undervaluation, the Single Judge quashed the notice and directed the registering authority to release the transfer deed within two months.
The revenue authorities challenged the Single Judge’s order before a Division Bench of the Madras High Court. By its judgment dated September 4, 2025, the Division Bench allowed the writ appeal and restored the Section 47-A proceedings.
The Division Bench held that once the registering officer entertained a doubt concerning undervaluation, the officer was competent to refer the matter to the Collector for determining the correct market value and stamp duty.
It also noted that Section 47-A provides a complete statutory mechanism, including an opportunity of hearing before the Collector and a statutory appellate remedy against the Collector’s determination.
According to the Division Bench, BPCL had chosen not to participate in the valuation proceedings and had instead challenged the show-cause notice at the threshold. It held that a writ petition against a mere show-cause notice was ordinarily not maintainable, particularly when the company could submit its defence and supporting documents before the competent authority.
BPCL then approached the Supreme Court against the Division Bench’s decision.
The Supreme Court clarified that the controversy at this stage was not about the actual market value of the property or whether BPCL was ultimately required to pay additional stamp duty. Those questions, it said, were entrusted by statute to the competent authority.
The principal question was whether the machinery under Section 47-A could validly have been set in motion and what consequences would follow when the existence of the condition precedent for exercising that power was challenged.
The Court observed that two narrow grounds are available for entertaining a writ petition against a show-cause notice: lack of jurisdiction and abuse or mala fide exercise of jurisdiction.
Where an authority has no legal power to commence an enquiry, the resulting notice would be non-existent in law. Similarly, constitutional courts may intervene where statutory power is exercised mala fide or in abuse of the legal process.
“These are engrafted as exceptions and not as routine measures to litigate every show cause notice under Article 226,” the Bench said.
In the present case, however, the District Revenue Officer was legally empowered to issue the notice and the dispute fell within the subject matter entrusted to that authority. The challenge concerned the manner in which an existing jurisdiction had been invoked, rather than a complete absence of jurisdiction.
BPCL argued that the instrument had been executed between the President of India and the company and that fraudulent intention could not legitimately arise in such a transaction.
The Supreme Court rejected this contention. It explained that the reference to the President of India as the transferor did not mean that the President personally executed or participated in the transaction.
Contracts and instruments entered into in exercise of the Union’s executive power are constitutionally expressed in the President’s name and executed by duly authorised officials. In this case, the deed itself recorded that the President was represented by the Deputy or Assistant Salt Commissioner.
The Court held that the mere presence of the President’s constitutional nomenclature in the instrument could neither bar an enquiry into whether the true market value or consideration had been stated nor make the possibility of fraudulent intent legally inconceivable.
Examining V.N. Devadoss, the Bench noted that the decision required material showing lack of bona fides and a fraudulent attempt to undervalue the property to evade stamp duty.
The present Bench, however, observed that Section 47-A does not expressly require the registering authority to possess material indicating a culpable mindset. The statutory provision requires only a reason to believe that the property’s market value or the consideration has not been truly stated in the instrument.
According to the Court, requiring relevant material before forming such a belief is fundamentally different from demanding additional material demonstrating wilful or fraudulent intent.
Reading fraudulent intent as an independent condition for invoking the provision, despite its absence from the statutory text, could amount to judicial legislation, the Bench remarked.
The Court referred to its decision in Ramesh Chand Bansal v. District Magistrate/Collector, which recognised that the Stamp Act’s object is to collect the appropriate duty on an instrument and protect government revenue. Under that ruling, guideline or circle rates constitute prima facie material assisting the authority in examining whether the valuation disclosed in a document is accurate.
It also relied upon Shanti Bhushan v. State of Uttar Pradesh to reiterate that the Stamp Act is a taxing statute and must be construed according to its express language, without importing equitable considerations or requirements not contained in the legislation.
The Supreme Court illustrated the difficulty by comparing an honest sale with a fraudulent transaction.
In an honest transaction, a property may be sold below the circle rate because of legitimate factors such as tenancy rights, limited road access or pending litigation. The actual market value may therefore be lower than the official guideline value without any fraud or concealed payment.
Under a valuation-based enquiry, the purchaser would only have to establish the property’s true market value. Under the V.N. Devadoss test, however, the enquiry could shift towards the purchaser’s state of mind and require an honest buyer to defend their conduct.
The Court observed that this approach converts a market-value enquiry into a quasi-criminal examination of the purchaser’s intention.
Conversely, in a fraudulent transaction, the parties may record a lower consideration in the sale deed while paying the remaining amount in unaccounted cash. Although fraudulent intent exists, the registering officer may have no access to direct evidence of it because such information remains exclusively within the knowledge of the parties.
If demonstrable fraudulent intention is treated as a jurisdictional precondition, the registering authority may be unable even to issue a notice in such cases. This, the Court said, could defeat the statutory objective of safeguarding government revenue.
“In the former, it is too harsh; in the latter, too lax,” the Bench observed while discussing the effect of the existing precedent.
The Supreme Court referred the following questions for consideration by a Bench of appropriate strength:
First, whether V.N. Devadoss, subsequently followed in Registrar of Assurances v. ASL Vyapar (P) Ltd., correctly holds that Section 47-A can be invoked only in cases of wilful undervaluation accompanied by fraudulent intent to evade proper stamp duty.
Alternatively, whether Section 47-A permits the registering authority to determine the real nature and value of the property, irrespective of the absence of any culpable mindset, without being bound by the consideration stated in the instrument.
Second, whether the Supreme Court’s decisions in Ramesh Chand Bansal and Shanti Bhushan, which support a valuation-centric and textual interpretation of the provision, do not lay down the correct law.
The Bench directed that the questions and case papers be placed before the Chief Justice of India for appropriate orders.
The Court clarified that if the larger Bench upholds V.N. Devadoss as correctly declaring the law, the Single Judge’s decision quashing the notice issued to BPCL would be justified. If the precedent is not upheld, the Single Judge’s decision would not stand.
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