The Bombay High Court has definitively held that the price discovered in a transparent, court-monitored auction constitutes the true market value for the purpose of stamp duty, rejecting the Collector’s authority to override such prices with independent valuations. This ruling reinforces the sanctity of judicial sales and curtails arbitrary revenue assessments under the Maharashtra Stamps Act, 1958.
Background & Facts
The Dispute
The petitioner, Shweta Aditya Malhotra, purchased a property at Bandra West, Mumbai, through an e-auction conducted by the Debt Recovery Tribunal-1 (DRT-1) under the SARFAESI Act, 2002. The property, originally a secured asset of Central Bank of India, was sold for Rs.2,01,31,000/- after a competitive bidding process. The petitioner obtained a sale certificate from the Recovery Officer and applied for adjudication of stamp duty on this consideration.
Procedural History
- October 2021: Property sold via e-auction at Rs.2,01,31,000/-
- December 2021: Sale certificate issued by Recovery Officer
- March 2025: Collector of Stamps issued interim order valuing property at Rs.8,34,91,500/- based on market valuation
- May 2025: Final order passed under Section 31 of the Maharashtra Stamps Act, 1958, imposing stamp duty of Rs.50,09,490/- and penalty of Rs.12,02,278/-
- 2025: Writ petition filed under Articles 226 and 227 challenging the order
Relief Sought
The petitioner sought quashing of the Collector’s order and direction to assess stamp duty solely on the auction consideration of Rs.2,01,31,000/-. She argued that judicial auctions, being transparent and court-supervised, reflect the true market value and must be accepted for stamp duty purposes.
The Legal Issue
The central question was whether the stamp duty on a sale certificate issued following a court-monitored auction must be calculated on the auction price, or whether the Collector of Stamps may override it using an independent market valuation under Rule 4(6) of the Maharashtra Stamp (Determination of True Market Value of Property) Rules, 1995.
Arguments Presented
For the Petitioner
The petitioner’s counsel relied on Registrar of Assurance and another v. ASL Vyapar Private Ltd. and Collector of Stamps, Mumbai City v. Pinak Bharat & Company to argue that court-monitored auctions are the most transparent method of price discovery. He contended that allowing the Collector to substitute the auction price with an independent valuation amounts to the Collector sitting in appeal over a judicial order, violating the separation of powers. He further cited Godrej Sara Lee Ltd. v. Excise and Taxation Officer to assert that where the issue is purely legal and involves no disputed facts, the High Court may entertain the writ petition despite an alternate remedy.
For the Respondent
The State, through the AGP, argued that the sale by the DRT Recovery Officer does not fall within the first or second proviso to Rule 4(6) of the 1995 Rules, which explicitly cover sales by government entities. The respondent relied on a circular dated 15 December 2021, directing that stamp duty be determined based on the Annual Statement of Rates (ASR), irrespective of auction price. It was further contended that the petitioner had an efficacious statutory remedy under Section 32B of the Stamp Act and should have exhausted it before approaching the High Court.
The Court's Analysis
The Court began by addressing the threshold issue of maintainability. It held that while an alternate remedy exists under Section 32B, the High Court retains discretion to entertain writ petitions when the matter involves a pure question of law without factual disputes. Citing Godrej Sara Lee Ltd., the Court emphasized that the rule of alternate remedy is one of policy and discretion, not a bar to jurisdiction.
The Court then turned to the substantive issue. It examined Article 16 of Schedule-I of the Stamp Act, 1958, which mandates stamp duty on sale certificates issued by courts or revenue officers to be based on the market value of the property. The Court noted that Rule 4(6) of the 1995 Rules permits the Collector to determine true market value only where the declared value is below the ASR or where extraneous evidence suggests under-valuation. Crucially, the Court observed that neither the first nor second proviso to Rule 4(6) applies to sales by DRT or other judicial authorities.
The Court then analyzed the Supreme Court’s ruling in ASL Vyapar, which held that a court-monitored auction is "possibly one of the most transparent methods by which the property can be sold." The Court quoted the Supreme Court’s observation: "To say that even in a court monitored auction, the Registering Authority would have a say on what is the market price, would amount to the Registering Authority sitting in appeal over the decision of the Court permitting sale at a particular price."
The Court further noted that the SARFAESI Act, 2002, mandates strict procedural safeguards - including valuation by approved valuers, reserve price fixation, and court confirmation of bids - ensuring the auction price reflects genuine market demand. The Recovery Officer’s compliance with Rule 8(5) of the Security Interest (Enforcement) Rules, 2002, confirmed the auction’s transparency.
"Once the court is satisfied that the bid price is the appropriate price on the basis of the material before it and gives its imprimatur to it, any interference by the Registering Authority on the aspect of price of transaction would be wholly unjustified."
The Court concluded that the Collector’s reliance on the 2021 circular was misplaced, as it could not override settled judicial pronouncements. The auction price, having been confirmed by the DRT and arising from a rigorous, transparent process, was the true market value for stamp duty purposes.
The Verdict
The petitioner won. The Bombay High Court held that the consideration paid in a court-monitored auction constitutes the true market value for stamp duty under the Maharashtra Stamps Act, 1958. The Collector’s order was quashed, and the respondent was directed to reassess stamp duty on the auction price of Rs.2,01,31,000/- within four weeks.
What This Means For Similar Cases
Auction Price Prevails Over Valuation Reports
- Practitioners must now argue that any attempt by stamp authorities to override auction prices with ASR-based valuations is legally unsustainable
- In cases involving SARFAESI, DRT, or other judicial sales, the sale certificate’s consideration is conclusive unless fraud or collusion is proven
- Valuation reports submitted by stamp authorities cannot be used to challenge auction prices absent evidence of procedural irregularity
Judicial Sales Are Presumed Transparent
- The burden now shifts to the revenue authority to prove that a judicial auction was not transparent or was manipulated
- Merely asserting that the auction price is below market value is insufficient; the authority must demonstrate procedural non-compliance under SARFAESI or DRT rules
- This principle extends to auctions conducted by Charity Commissioners, Debt Recovery Tribunals, and other statutorily empowered bodies
Writ Jurisdiction Is Available for Pure Legal Disputes
- Petitioners need not exhaust statutory appeals if the challenge is to the legal interpretation of stamp duty rules
- Where the issue is whether a statutory provision applies to a judicial sale, the High Court may intervene directly
- This empowers practitioners to seek immediate relief in cases of arbitrary stamp duty assessments, avoiding prolonged appellate delays
