Fair valuation of property before sale through court to be used as market value

The Bombay high court has held that when there is a sale of property by the court, stamp duty be computed on the fair valuation obtained by the court, if sold at or below the valuation and the collector need not spend time and money to assess afresh its current market value.

Justice Gautam Patel, directed that as a general practice, when there is a sale by the court, through Sheriff’s office or by court receiver in execution, and is by public auction, following a valuation previously obtained, then, the valuation will serve as the market value, even if sold at lower price, but if sold at a higher bid, that higher amount will be treated as the market value for stamp duty. If multiple valuations were obtained, the highest most recent one has to be considered.

The HC placed on par sale of land by government at predetermined prices and public auction through court at valuation obtained by it. It said “Any other approach that does not maintain parity between Court-supervised sales and sales by the government is anathema to public administration and without intelligible differentia,’’ after analysing stamp duty rules and an exception that does not allow any verification of market value, when government sells or allots property at a predetermined price.

“It is not open to the adjudicating authority to suggest, directly or indirectly, that a sale that carries the imprimatur of the court, one that is confirmed by the court, is liable to be set aside or not given effect to,” said Justice Gautam Patel in the judgment on March 27. “When it confirms a sale, the court never determines the stamp duty payable. It always leaves that to the stamp adjudicating authority, and that is the only thing the stamp adjudicating authority can do, nothing more and nothing less. It cannot, therefore, question the sale in any manner,” said the ruling after the collector of stamps had revalued the price of a Dadar property sold through a court supervised auction.

The auction was of a plot of land at Dadar near Portuguese Church, in a commercial dispute to enforce a decree. The court’s valuation pegged the plot at Rs 32 crore. After two failed auctioning attempts, it was finally sold for Rs 15.3 crore, covering the claim due. But when the successful bidder went to pay stamp duty, armed with a sheriff’s letter for registration at the auction price, the collector placed the market value at Rs 155 crore. Alarmed, the buyer went to the HC, as it meant his stamp duty would be a percentage of Rs 155 crore. The HC asked the collector remain present on March 27. The steep assessment was “tentative’’ and is being revised to Rs 35 crore after additional information confirmed that the plot has tenants, government lawyer Jyoti Chavan informed the Judge. The HC’s valuation had already factored in the sitting tenants.

The question before the HC was how was the stamp duty to be assessed in such a situation, for sale through public auction by courts?

The HC analysed rules governing stamp duty and market value. One existing exception was that when plots or properties were sold by government bodies at predetermined prices it fixed, such prices would be considered as the current market value and no further verification was necessary by stamp duty authorities, who were otherwise permitted to verify market value in cases of private sales.

The rules failed to carve out an important exception, by failing to mention “sales through courts’’ observed the HC judgment. “Why should a sale through a Court by public auction on the basis of a valuation obtained, by following a completely open and transparent process, be placed at any different or lower level than the government entities…?’’ Justice Patel said adding that the court perhaps follows a “much more rigorous’’ process, than the government.

The HC said its “judicial discretion cannot be circumscribed’’ when Chavan submitted valuations routinely done by the town planner’s office should be used in court conducted public auctions. The court may use such valuation or services of empaneled or even independent valuers, said the judgment.

For the Dadar plot, thus, the stamp duty office has to proceed on court’s authenticated valuation, said the HC, not on the lower auction price.

Source: Times of India

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