Courts have no Discretion to Impose Lesser Penalty while Admitting Insufficiently Stamped Documents

In the case of case of Gangappa and Another (“Appellants”) v. Fakkairappa (“Respondent”), the Supreme Court, while interpreting a provision in the Karnataka Stamp Act, 1957 (“Act”), observed that, while admitting insufficiently stamped documents, trial courts have no discretion to decide the quantum of penalty to be levied on such documents.


The Appellants entered into ‘agreement to sell’ with Respondent which was not stamped adequately as per Karnataka Stamp Act, 1957. Thereafter, on denial by the Respondent to abide by the terms of agreement to sell, the Appellants filed suits, praying for specific performance of contract. The Principal Civil Judge impounded the ‘agreement to sell’, under the powers given to it by Section 33 of the Act, and directed the Appellants to pay the deficient portion of the stamp duty along with the penalty, which was decided by the Principle Civil Judge to be twice the deficient portion of the stamp duty. However, as per Section 34 of the Act, an amount equivalent to 10 times the value of the deficient portion of stamp duty, was required to be paid as penalty.

Aggrieved by the above judgment of the Principal Civil Judge, Respondent filed a writ petition in the High Court. The High Court directed the courts below to levy the penalty at 10 times of the deficient portion of the stamp duty. Aggrieved by the judgment of the High Court, this appeal was filed by the Appellants before the Apex Court.


Whether the trial court can exercise its discretion in imposing penalty on the deficient amount of stamp duty, at the rate less then what is prescribed under the provisions of the Act?


The Supreme Court said that under Section 33 of the Act, the power is given to every person who has authority by law or by the consent of the parties to receive the evidence, or to any public officer, that if a deficiently stamped document is produced in front of them, they can impound such documents. A further power is conferred on such person or public officer under Section 34 of the Act, to order the payment of deficient amount of stamp duty along with a penalty of 10 times the deficient amount of stamp duty payable on such instrument.

The Supreme Court, while deciding upon this matter, held that the trial courts will fall under the ambit of Section 33 and 34 of the Act and cannot use their discretion to decide the quantum of penalty which is to be paid on deficiently stamped instruments. They have to impose a penalty of 10 times the deficient amount of stamp duty and cannot levy a penalty less then this. Though, the person paying the stamp duty has a right to approach the Deputy Collector to get a refund of the penalty under Section 38 of the Act.

However, in this particular case, keeping in mind the ends of justice and in the interest of time, the Supreme Court closed the matter by confirming the payment of deficit duty with the double penalty as imposed by the trial court which shall obviate the proceeding of approaching the Deputy Commissioner for reduction of penalty. The Court said that, ‘the High Court has correctly interpreted the provisions of Section 33 but instead of prolonging the matter permitting the Appellant to deposit 10 times of penalty and thereafter to take recourse under Section 38, we, in the facts of the present case, close the proceedings regarding penalty on the agreements to sell by approving the direction of the trial court for payment of entire deficit duty and double the penalty’.