Impounding of Instruments, and Admissibility in Evidence

Proviso (a): the cure. Any such instrument shall, subject to all just exceptions, be admitted in evidence on payment of:

(i) the duty with which it is chargeable, or, where it is insufficiently stamped, the amount required to make it up; and

(ii) a penalty at the rate of 2 per cent of the deficient portion of the stamp duty for every month or part of a month, from the date of execution, provided that in no case shall the penalty exceed four times the deficient portion.

Three figures to remember: 2 per cent per month, running from execution, capped at four times the deficiency.

Proviso (b): correspondence. Where a contract or agreement is effected by correspondence consisting of two or more letters and any one of them bears the proper stamp, the contract is deemed duly stamped.

Proviso (c): criminal proceedings. Nothing in the section prevents the admission of an instrument in a Criminal Court, other than a proceeding under the chapters named.

Proviso (d): Government and adjudicated instruments. Nothing prevents the admission of an instrument executed by or on behalf of the Government, or one bearing the Collector's certificate under section 32.

That last proviso is the practical reward for adjudication: an adjudicated instrument is immune from this section.

Sections 35 to 46: the machinery

Section 35: admission of an instrument not to be questioned. Where an instrument has been admitted in evidence, the admission shall not, except as provided in the Act, be called in question at any stage of the same suit or proceeding on the ground that it was not duly stamped.

This gives finality. Once a document is in, the point cannot be reopened later in the same proceeding, and a party who wanted to object had to do so at the time.

Section 36: an instrument impounded is dealt with as the following sections provide.

Section 37: the person impounding sends it to the Collector. Where an instrument has been impounded, the person impounding it sends it, in the manner prescribed, to the Collector, or, where duty and penalty have been paid before him, sends an authenticated copy with a certificate and the amount.

Section 38: the Collector's power to refund the excess where duty and penalty have been paid.

Section 39: the Collector's power to stamp instruments impounded. When an impounded instrument comes to him, the Collector may, if the instrument is not duly stamped, require payment of the proper duty and a penalty, and on payment certify by endorsement that the proper duty and penalty have been levied, stating the amount. Where he is of opinion that the instrument is duly stamped or not chargeable, he certifies that.

Section 40: an instrument so certified is admissible in evidence and may be registered and acted upon, as if it had been duly stamped.

Section 41: instruments unduly stamped by accident. Where a person, within one year of the execution of an instrument, or, if it was not executed by all parties, within one year of the last execution, brings it to the Collector and states truly that it was through mistake or accident not duly stamped, and pays the deficient duty and the prescribed amount, the Collector may certify it as duly stamped. This is the honest-mistake route, and it is cheaper than proviso (a) to section 34.

Section 42: endorsement of instruments on which duty has been paid under sections 34, 39 or 41, and their effect.

Section 43: prosecution for offences. Nothing in the Chapter prevents prosecution for an offence against the stamp law.

Section 44: persons paying duty or penalty may recover it. A person who has paid duty or penalty in respect of an instrument which another was bound to bear may recover it from that other.

Section 45: power of the Chief Controlling Revenue Authority to refund penalty or excess duty in certain cases.

Section 46: recovery of duties and penalties as arrears of land revenue, and by the other means the section provides.

A worked example

Kavita sues Lalit on a written agreement. The agreement bears no stamp.

In court. The judge is a person having authority to receive evidence. Under section 33, the document appearing to him not duly stamped, he must impound it, whether or not the agreement is valid.

Can Kavita use it? Not as it stands. Section 34 bars its admission for any purpose and prevents it being acted upon.

How does she cure it? Under proviso (a) she pays the duty, plus a penalty of 2 per cent of the deficient duty for every month or part of a month from the date of execution, subject to a maximum of four times the deficiency. The document is then admitted, subject to all just exceptions.

Work the penalty. If the deficient duty is Rs. 50,000 and eighteen months have passed, the penalty at 2 per cent a month is Rs. 1,000 a month, so Rs. 18,000. The cap of four times, Rs. 2,00,000, is not reached.

If sixty months had passed, the arithmetic would give Rs. 60,000, but the cap at four times Rs. 50,000, that is Rs. 2,00,000, is still not reached; the cap bites only after two hundred months, which is why the practical constraint is usually the 2 per cent rather than the cap.

Suppose the agreement was made by an exchange of three letters and one bears the proper stamp. Proviso (b): the contract is deemed duly stamped.

Suppose Kavita had adjudicated the document under section 31 and it bears the Collector's certificate. Proviso (d): its admission cannot be objected to.

Suppose the judge admits the document without objection and Lalit raises the stamp point at final arguments. Section 35: the admission cannot be called in question at any stage of the same suit on that ground.

Suppose Kavita realises the defect on her own, within a year of execution, and goes to the Collector saying it was left unstamped by accident. Section 41 lets the Collector certify it on payment of the deficient duty and the prescribed amount, which is a cheaper course than waiting to be caught.

Lalit was the person bound to bear the duty under section 30, but Kavita paid it. Under section 44 she may recover it from him.

What it does NOT mean

An unstamped document is not void. The transaction stands; the document cannot be used until cured.

The defect is curable. Payment of duty and penalty makes the instrument admissible.

The penalty is not unlimited. It is 2 per cent a month of the deficiency, capped at four times the deficiency.

Impounding is not discretionary for most officers. Section 33 says "shall impound", though a Criminal Court has the limited discretion in the proviso.

Police officers do not impound. They are excepted, as is any officer empowered to investigate offences.

A document once admitted cannot be attacked later in the same proceeding on the ground of stamp, by section 35.

Section 41 is not the same as proviso (a) to section 34. It is a one-year, honest-mistake route through the Collector, and it is cheaper.

Distinctions

Quick revision

• s.33: every person with authority to receive evidence and every person in charge of a public office, except police and investigating officers, shall impound an instrument appearing not duly stamped, whether or not it is valid in law, testing it against the law in force when it was executed.
• s.34: no such instrument is admitted in evidence for any purpose, or acted upon, registered or authenticated, unless duly stamped.
• Proviso (a): admitted on payment of the duty or deficiency plus a penalty of 2 per cent per month or part from execution, capped at four times the deficiency.
• Proviso (b): a contract by correspondence is duly stamped if any one letter bears the proper stamp. (c): criminal proceedings excepted. (d): Government instruments and those bearing the s.32 certificate excepted.
• s.35: once admitted, the admission cannot be questioned at any stage of the same proceeding on that ground.
• ss.37 to 40: the impounded instrument goes to the Collector, who may levy duty and penalty and certify, after which it is admissible and may be registered and acted upon.
• s.41: within one year, an instrument left unstamped by mistake or accident may be certified by the Collector on payment of the deficiency and the prescribed amount.
• s.44: a person who pays duty another was bound to bear may recover it. s.46: duties and penalties are recoverable as arrears of land revenue.

Test yourself

1. Who must impound an insufficiently stamped instrument, and who need not? Every person having by law or consent of parties authority to receive evidence, and every person in charge of a public office, must impound it. An officer of police, and any other officer empowered by law to investigate offences, is excepted, and a Magistrate or Judge of a Criminal Court has a limited discretion under the proviso.

2. What is the effect of section 34? No instrument chargeable with duty may be admitted in evidence for any purpose, or acted upon, registered or authenticated, unless it is duly stamped.

3. How may the defect be cured in the proceeding, and at what cost? By paying the duty, or the amount required to make it up, together with a penalty at 2 per cent of the deficient portion of the duty for every month or part of a month from the date of execution, subject to a maximum of four times the deficient portion.

4. A contract is made by four letters and one bears the proper stamp. Is it duly stamped? Yes. Under proviso (b) to section 34, where a contract or agreement is effected by correspondence consisting of two or more letters and any one of them bears the proper stamp, the contract is deemed duly stamped.

5. Can a party object to a document's stamping after it has been admitted? No. Section 35 provides that where an instrument has been admitted in evidence, the admission shall not, except as provided in the Act, be called in question at any stage of the same suit or proceeding on the ground that it was not duly stamped.

6. What relief does section 41 give, and within what time? Where a person brings an instrument to the Collector within one year of its execution, or of the last execution where it was not executed by all parties at once, and states truly that it was through mistake or accident not duly stamped, the Collector may certify it as duly stamped on payment of the deficient duty and the prescribed amount.

7. A plaintiff pays duty which the defendant was bound to bear. What can he do? Recover it from the defendant under section 44, which entitles a person who has paid duty or penalty in respect of an instrument that another was bound to bear to recover it from that other.