India: Highlights Of The Maharashtra Stamp (Amendment And Validation) Ordinance, 2021

1. INTRODUCTION

The Revenue and Forests Department has amended the Maharashtra Stamp Act, 1958 (the "Principal Act") on February 9, 2021, vide Maharashtra Ordinance No. I of 2021¹, by promulgating the Maharashtra Stamp (Amendment and Validation) Ordinance, 2021 (the "Ordinance") which shall come into force at once.

2. KEY AMENDMENTS TO THE PRINCIPAL ACT

2.1  Amendment to Section 5 of the Principal Act.

The key amendment by the Ordinance has been made under Section 5 of the Principal Act which is substituted by the newly inserted Clause 2 of the Ordinance, reproduced below:

"Any instrument comprising or relating to several distinct matters or transactions shall be chargeable with the aggregate amount of the duties with which separate instruments, each comprising or relating to one of such matters or transactions, would be chargeable under this Act."

The said substitution shall have a retrospective effect and will be deemed to have been substituted from August 11, 2015. The Ordinance has inserted 'or transactions' after the wordings 'several distinct matters' of Section 5 of the Principal Act so as to bring clarity and uniformity in levy of stamp duty on transactions rather than levying such stamp duty on the instrument.

2.2  Amendment to Articles of Schedule I of the Principal Act

(a) Increase in the stamp duty under Article 6 of Schedule I of the Principal Act

A key change has been brought by Clause 3 of the Ordinance which amends the stamp duty under Article 6(1)(b) and Article 6(2)(b) of Schedule I of the Principal Act. The Ordinance has increased the present stamp duty payable on agreement relating to deposit of the title deeds, pawn, pledge, or hypothecation in the cases where the amount secured through such deed exceeds INR 5,00,000 (Indian Rupees five lakhs only), from the erstwhile duty of 0.2% to 0.3% which will be subject to the existing cap of INR 10,00,000 (Indian Rupees ten lakhs only).

(b) Insertion of a new sub-clause under Article 6 of Schedule I of the Principal Act

The Ordinance has also inserted a new sub-clause 3 to Article 6 which provides for levy of stamp duty on such instruments which are executed as collateral or auxiliary or additional security and where the proper duty has been paid on the principal or primary security under Article 6. The stamp duty payable on such instruments shall be INR 500 (Indian Rupees Five Hundred only).

(c) Amendment to Article 40 of Schedule I of the Principal Act

The Ordinance, in addition, has amended Article 40(b) of Schedule I of the Principal Act by reducing the existing stamp duty on mortgage deed (not being an agreement relating to instruments as per Article 6 of Schedule I of the Principal Act), where possession is not given or agreed to be given under such mortgage deed, and for the amount secured by such deed where:

(i) the amount secured does not exceed INR 5,00,000 (Indian Rupees five lakhs only) it is to be charged with the duty of 0.1% of the amount secured by such deed and;

(ii) the amount secured exceeds more than INR 5,00,000 (Indian Rupees five lakhs only), the duty stands amended and reduced from the erstwhile 0.5% to 0.3% which will be subject to the existing cap of INR 10,00,000 (Indian Rupees ten lakhs only).

(d) Validation of the Ordinance

Clause 4 of the Ordinance provides for validation of proceedings including assessment, levy, and collection by the authorities under the Principal Act, and acting or purporting to act under Section 5 of the Principal Act and Article 6 and 40 of Schedule I of the Principal Act, which shall be deemed to be validly levied and collected in accordance with law as if the amendments brought through the Ordinance had been continuously in force.  In addition, no suit or other proceedings shall be maintainable or continued in any court against the authorities for the refund of the stamp duty so levied and collected. Consequently, no court or authority shall enforce any decree or order directing the refund of the stamp so levied and collected.

3 INDUSLAW VIEW

The objective of the Ordinance seems to clarify the levying of the stamp duty in respect of any instrument comprising or relating to several distinct transactions. The Ordinance seems to have brought clarity in relation to the observation given by Hon'ble Supreme Court of India in Chief Controlling Revenue Authority v. Coastal Gujarat Power Limited² ("Coastal Gujarat Judgement") wherein the instrument in question related to several distinct matters or distinct transactions, as the borrower availed distinct loan from 13 (thirteen) different lenders. On proper construction, it was regarded that all 13 (thirteen) transactions be safely regarded as 13 (thirteen) distinct transactions which fall under Section 5 of the Principal Act. It was opined that distinct transactions will attract stamp duty to be payable for each such transaction, by considering each transaction as an independent one. The Coastal Gujarat Judgment laid down interpretation of the words 'distinct matters' and 'distinct transactions' under Section 5 of the Principal Act and stated that the underlying transactions must be considered to calculate stamp duty. The Hon'ble Court also held that:

" while Section 4 of the Principal Act deals with single transaction completed in several instruments, whereas Section 5 deals only with the instrument which comprises more than one transaction and it is immaterial for the purpose where those transactions are same or different categories."

The Ordinance has effectively removed queries with respect to the applicability of Coastal Gujarat Judgment in the State of Maharashtra and provided a legislative effect to the observation made under the Coastal Gujarat Judgment. It is also to be noted that the Ordinance shall have a retrospective effect and any duty collected by the authorities pursuant to the provisions of the Principal Act as per the Coastal Gujarat Judgment shall be valid. In the event such underlying transactions are not stamped as per the proper stamp duty, the same needs to be impounded as per the relevant sections of the Principal Act for such defect to be cured.

Footnotes

1 Available at ( https://lj.maharashtra.gov.in/Site/Upload/Acts/Mah_Ord_No_1_of_2021.pdf)

2 Civil Appeal No. 6054 of 2015 dated August 11, 2015

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