Introduction
In a crucial ruling that clarifies the law on the stamp duty and registration requirements for compromise decrees, the Court in Mukesh v. State of Madhya Pradesh & Anr. reaffirmed that a consent decree recognising pre-existing rights over suit property does not require payment of stamp duty or compulsory registration. The judgment has significant implications for landholders who secure their rights through decrees rather than sale deeds.
Factual Background
Mukesh, the appellant, filed Civil Suit No. 47-A/2013 for a declaration of title and a permanent injunction, asserting that he was the owner in long, continuous possession of agricultural land in Village Kheda, District Dhar, Madhya Pradesh. His claim was based on actual possession and cultivation, even though the revenue records showed his neighbour, Respondent No. 2, as the recorded owner.
During the pendency of the suit, the parties reached a compromise, and on November 30, 2013, the matter was settled before the National Lok Adalat. A consent decree was passed, restraining the respondent from interfering with Mukesh’s possession and entitling him to seek mutation of land records in his name.
However, when the appellant applied for mutation, the Tehsildar referred the case to the Collector of Stamps. The Collector, by order dated August 23, 2016, determined that Mukesh was liable to pay ₹6,67,500/- as stamp duty under Article 22A of Schedule IA of the Indian Stamp Act, 1899. This was affirmed by the Board of Revenue on February 12, 2019, and later by the High Court on December 6, 2019. Mukesh challenged these findings in the present appeal.
Legal Issues
The case involved two distinct legal questions:
- Whether a compromise decree relating to immovable property requires registration under the Registration Act, 1908.
- Whether such a decree is chargeable with stamp duty under the Indian Stamp Act, 1899.
Appellant’s Arguments
Mukesh contended that:
- The compromise decree recognised a pre-existing right based on long-term possession and was not a device to transfer new rights.
- The decree was based on suit property and thus fell within the exception under Section 17(2)(vi) of the Registration Act, 1908.
- There was no collusion between the parties, nor was the compromise challenged by the State.
- A decree is not listed in Schedule I or IA of the Stamp Act as an instrument liable for stamp duty unless it creates new rights.
- Relied heavily on Mohd. Yusuf v. Rajkumar, (2020) 10 SCC 264 and Ravinder Kaur Grewal v. Manjit Kaur, (2019) 8 SCC 729.
Respondents’ Contentions
The State argued:
- The decree was collusive, designed to evade payment of stamp duty.
- Since the appellant was not recorded as owner in the revenue records, the decree created a new right, requiring registration and stamp duty.
- Relied on Bhoop Singh v. Ram Singh Major, (1995) 5 SCC 709, which held that where new rights are created by compromise, registration and stamp duty are mandatory.
Reasoning and Case Law Analysis
Registration Under the Registration Act, 1908
The Court reviewed Section 17(2)(vi), which exempts court decrees from compulsory registration provided they relate to the subject matter of the suit. The exclusion does not apply where a compromise decree concerns property outside the suit or creates a new right.
Citing Som Dev v. Rati Ram, (2006) 10 SCC 788, and Mohd. Yusuf v. Rajkumar, the Court concluded that the decree in question did not fall under the exception clause that would require registration.
The appellant had asserted a pre-existing title, and the decree only affirmed his possession. There was no creation of a new right, and hence, registration was not required.
Stamp Duty Under the Indian Stamp Act, 1899
Section 3 read with Schedules I and IA lists the instruments chargeable with stamp duty. The Court clarified:
- A compromise decree is not a conveyance when it does not create new rights.
- Citing Khushi Ram v. Nawal Singh, (2021) 16 SCC 279 and Ripudaman Singh v. Tikka Maheshwar Chand, (2021) 7 SCC 446, it was reiterated that only instruments transferring property for the first time are liable to duty.
- As the decree reaffirmed possession and pre-existing rights, it was not liable to stamp duty.
Finding on Collusion
The Court held there was no evidence of collusion or any rival title claim by a third party. The decree was binding and final, and the State had not challenged it. Thus, the allegation of collusion was dismissed.
Final Judgment
The Court allowed the appeal, set aside the orders of the Collector, Board of Revenue, and the High Court. It held:
- The compromise decree does not require registration under Section 17(2)(vi) of the Registration Act.
- Stamp duty is not chargeable, as no new rights were created.
- The revenue authority was directed to mutate the appellant’s name in land records without demanding registration or stamp duty.
Conclusion
This judgment affirms a clear distinction between affirmation of pre-existing rights and creation of new rights through decrees. It offers critical clarity for landholders, lawyers, and revenue officials dealing with consent decrees, ensuring that mere procedural enforcement of lawful possession is not burdened with unnecessary fiscal obligations.
Stay informed with insights that matter. Follow us for more updates on key legal developments.
FAQs:
Q1: Do I have to pay stamp duty if I win a land case through a compromise decree?
If the decree confirms your pre-existing right over the land and does not create a new right, then stamp duty is not required.
Q2: Is registration necessary if my land dispute ends with a court-approved compromise?
No, if the compromise relates to land mentioned in the suit and confirms existing possession or rights, registration is not required.
Q3: Can the government demand stamp duty after a Lok Adalat land decree?
Not if the decree is based on pre-existing ownership or possession and does not involve new transfer of rights. This was clarified in the Mukesh judgment.