Sale Certificates taken as evidence of title in auction Process

Sale certificates issued by courts or public authorities function as documentary evidence of title

The Supreme Court’s ruling in The State of Punjab & Anr. v. M/s Ferrous Alloy Forgings Pvt. Ltd. provides significant clarification regarding the issuance, registration, and applicability of stamp duty on sale certificates issued pursuant to court-ordered auctions. The Supreme Court’s recent judgment clarifies the legal position regarding the issuance, registration, and applicability of stamp duty on a sale certificate issued following a court-ordered auction. This decision simplifies the process for auction purchasers, emphasizing that sale certificates issued by courts or public authorities function as documentary evidence of title rather than instruments requiring immediate registration or stamp duty. Key takeaways from the judgment are as follows:

Stamp Duty on Sale Certificates:

A successful auction purchaser is not required to deposit stamp duty for the issuance of the sale certificate itself. Stamp duty becomes applicable only when the purchaser uses the certificate for purposes beyond its mere possession, such as presenting it for registration or transferring ownership rights. Stamp duty is not payable at the time of issuance of the sale certificate. It becomes applicable only if the auction purchaser presents the original sale certificate for registration or uses it for other purposes as outlined in Articles 18 and 23 of the Indian Stamp Act.

Jurisdiction of the High Court: The High Court’s use of its writ jurisdiction under Article 226 of the Constitution was upheld, despite the availability of alternate remedies. The Court cited Radha Krishan Industries v. State of H.P. (2021) to emphasize that the existence of an alternate remedy does not bar the High Court from exercising its writ jurisdiction.

Sale Certificate Issued After Court Auction Not Compulsorily Registrable; Auction Purchaser Needs Not Deposit Stamp Duty To Get It :

Nature of Sale Certificates:

• A sale certificate issued after the confirmation of an auction sale is evidence of title and does not transfer ownership by itself. Ownership is transferred upon the completion of the sale and its confirmation by the competent authority after resolving any objections.

Registration of Sale Certificates:

Sale certificates issued by authorized officers are not compulsorily registrable under Section 17(1) of the Registration Act, 1908. The mere filing of the sale certificate under Section 89(4) of the Registration Act suffices, where a copy of the certificate is forwarded to the registering authority. The Court emphasized that the sale certificate serves as evidence of title and does not by itself transfer ownership.

Transfer of Title: The transfer of title in favor of the auction purchaser occurs upon the confirmation of the sale by the competent authority, after the disposal of any objections, not upon the issuance of the sale certificate.

Applicability of Stamp Duty Articles:

Articles 18 and 23 of the First Schedule to the Indian Stamp Act specify that stamp duty is triggered when the sale certificate is presented for registration, aligning with its use beyond mere evidence.

Facts of the Case:

• The case arose from the winding-up of M/s Punjab United Forge Limited, with its properties auctioned by IFCI.
• Respondent company, the highest bidder, was issued a sale certificate after the auction’s confirmation. The High Court ruled that no stamp duty was payable at the issuance stage.
• The Supreme Court dismissed the State of Punjab’s appeal, affirming the High Court’s judgment.

Judicial Precedents: The Court cited earlier judgments, including:

• Radha Krishan Industries v. State of H.P. (2021): High Courts retain jurisdiction under Article 226 even when alternate remedies exist.
• Municipal Corporation of Delhi v. Pramod Kumar Gupta (1991), which established that sale certificates do not transfer title or attract stamp duty automatically.
• M/s Esjaypee Impex Pvt. Ltd. v. Canara Bank (2021)and Inspector General of Registration v. G. Madhurambal (2022), which reiterated the sufficiency of filing under Section 89(4) for registration.
• Case-Specific Context: In the case of M/s Punjab United Forge Limited, the Supreme Court upheld the High Court’s ruling that a sale certificate does not require stamp duty at the time of issuance. This was in response to the Registrar’s demand for stamp duty on a higher valuation, which was challenged by the auction purchaser.

Practical Implications:

Auction Purchasers: Do not need to pay stamp duty or register sale certificates immediately upon issuance unless they intend to use the certificate for specific legal or administrative purposes. Title to the auctioned property is confirmed by the competent authority, not through the issuance or registration of the sale certificate.

Registrar Authorities: Must comply with Section 89(4) and cannot demand immediate stamp duty for the issuance of sale certificates.

Conclusion :

Sale certificate issued post-auction serves as evidence of title without necessitating immediate stamp duty or compulsory registration

The Supreme Court dismissed the State’s appeal, reaffirming that the sale certificate issued post-auction serves as evidence of title without necessitating immediate stamp duty or compulsory registration unless explicitly used for further purposes. This judgment reinforces the procedural and legal clarity regarding sale certificates in court-ordered auctions, reducing the compliance burden on auction purchasers while ensuring adherence to the Stamp Act and Registration Act.

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