Sanchayita Lahkar

The High Court of Judicature at Bombay Single Bench of Justice Jitendra Jain dismissed a writ petition seeking to quash penalty proceedings arising from delayed payment of stamp duty. The Court confirmed the imposition of a penalty amounting to Rs. 9,76,03,385/- under Section 31(4) of the Maharashtra Stamp Act, holding that the Petitioner failed to pay the admitted stamp duty within the statutory period of sixty days. The Court directed the Petitioner to pay the penalty within four weeks and authorized the Respondents to initiate recovery proceedings if the payment is not made.

On 11 April 2008, an order sanctioning a scheme of arrangement under Sections 391 to 394 read with Sections 78 and 100 of the Companies Act, 1956 was passed by the Company Court, demerging the undertaking of the original company into a resulting entity. Subsequently, on 17 May 2008, the Petitioner submitted this scheme to the Collector of Stamps for adjudication under Section 31 of the Maharashtra Stamp Act.

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Respondents, on 16 April 2010, requested several details from the Petitioner regarding the adjudication process. It is an admitted fact, accepted by counsel in court, that the Petitioner did not respond to this requisition.

On 23 December 2013, an interim demand letter was issued to the Petitioner requiring a payment of Rs. 7,07,27,090/- as stamp duty under clause 25(da) of the Bombay Stamp Act and Rs. 9,76,03,385/- as penalty under Section 31(4), calculated for a period of 69 months at a rate of 2% per month from the date of the Company Court’s order. The demand letter provided a 30-day window to contest the demand.

The Petitioner, by letter dated 15 January 2014, sought a personal hearing, which was granted. On 7 July 2014, the Petitioner submitted written objections specifically disputing the penalty and not the stamp duty amount.

Further, on 19 December 2014, the Petitioner reiterated willingness to pay the stamp duty while continuing to dispute the penalty. A revised demand was requested, excluding the penalty. On 31 December 2014, the Respondents issued a final demand confirming both the stamp duty and penalty. This notice referenced an earlier demand dated 22 February 2011, the receipt of which the Petitioner disputed. The Respondents were unable to produce the said notice.

The Petitioner challenged the final demand notice before the Chief Controlling Revenue Authority on 14 January 2015. The appeal acknowledged the stamp duty liability but contested the penalty. Interim relief was sought to stay the penalty upon depositing the stamp duty. On 25 March 2015, interim relief was granted, allowing for deferment of penalty adjudication upon payment of stamp duty, which was subsequently made on 27 March 2015.

However, the appeal was dismissed on 25 April 2017 as non-maintainable, prompting the Petitioner to file the present writ petition.

The Court stated "The only issue involved in the present petition is justification for levy of penalty since the Petitioner has accepted the quantum of stamp duty."

Justice Jain recorded that "in the course of the hearing, no submissions were made by the Petitioner as to how the stamp duty arrived at in the impugned demand notices were erroneous." The Court noted a clear and consistent acceptance of stamp duty liability by the Petitioner in communications dated 7 July 2014 and 19 December 2014.

The Court stated "In the appeal filed before the Chief Controlling Revenue Authority on 14 January 2015, the prayer sought was setting aside of the impugned demand notices dated 23 December 2013 and 31 December 2014 only insofar as the same relates to the levy of the penalty."

Further, "The Petitioner did not challenge the stamp duty charged and challenge was only limited to the penalty amount imposed upon the Petitioner," as noted in the updated list of dates and events submitted by the Petitioner.

The Court rejected the argument that the interim order dated 25 March 2015 constituted the date of demand for purposes of Section 31(4), stating, "The interim order passed by the Chief Controlling Revenue Authority whereby the adjudication of penalty was deferred on payment of stamp duty cannot be considered as a notice of demand."

Justice Jain concluded that "even assuming that 23 December 2013 is not taken as a starting date, then also on 19 December 2014, the Petitioner agreed to make the payment of stamp duty." Therefore, 60 days from either date had lapsed before payment was made on 27 March 2015.

"Once there is a failure to pay the stamp duty within 60 days from the date of service of the notice of demand, the penalty provision gets triggered and the quantum of penalty starts and the period for which penalty is to be calculated from the date of execution of the instrument," the Court recorded.

The Court found the Petitioner's reliance on delays by the Respondents unpersuasive, stating, "The penalty under Section 31 (4) of the Act is imposed if the payment of stamp duty is not made within 60 days from the date of demand notice."

The Court held that the writ petition must fail and passed the following order:

"Petition is dismissed and Rule granted on 29 November 2017 is discharged."

"Interim stay granted in terms of prayer clause (e) of the Petition on 29 November 2017 stands vacated."

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"The levy of penalty on the Petitioner of Rs. 9,76,03,385/- is confirmed and same to be paid by the Petitioner within 4 weeks from today."

"The Respondents to take steps for recovery of the penalty if not paid within four weeks from the date of uploading of the present order."

At the conclusion, the Court declined the Petitioner’s request for a stay of the order, stating: "The said prayer is rejected."

Advocates Representing the Parties:

For the Petitioner: Mr. Aditya Pimple along with Mr. Ranjit Shetty and Ms. Avina Karnad instructed by Argus Partners

For the Respondents: Ms. Jyoti Chavan, Additional Government Pleader along with Himanshu Takke, Assistant Government Pleader

Case Title: IL & FS Financial Services Ltd. vs. State of Maharashtra & Ors.

Neutral Citation: 2025: BHC-OS:8921

Case Number: Writ Petition No. 2358 of 2018

Bench: Justice Jitendra Jain

[Read/Download order]