SC Clarifies Stamp Duty and Registration Requirements for Sale Certificates in Court Auctions

The Hon’ble Supreme Court of India, in the case of the State of Punjab & Anr. v. M/s Ferrous Alloy Forgings Pvt. Ltd. & Ors. [2024 SCC OnLine SC 3372], dated November 19, 2024, ruled that a sale certificate issued to an auction purchaser pursuant to confirmation of an auction sale serves solely as evidence of title and does not constitute an instrument of transfer. Consequently, it does not require registration under Section 17(1) of the Registration Act, 1908. The Court further clarified that stamp duty would only apply when the auction purchaser presents the sale certificate for registration.

The case originated during the liquidation of M/s Punjab United Forge Ltd., where the Industrial Finance Corporation of India (IFCI) was authorized to sell M/s Punjab United Forge Ltd.’s mortgaged and hypothecated properties. IFCI invited tenders for the auction of movable and immovable assets of M/s Punjab United Forge Ltd., in response to which M/s Ferrous Forgings Limited, a sister concern of M/s Ferrous Alloy Forgings Pvt. Ltd., offered the highest bid, which resulted in the confirmation of the auction sale. Following the confirmation, M/s Ferrous Alloy Forgings Pvt. Ltd. requested the execution of the conveyance deed in its favour, as it had paid the entire sale consideration, and the Board of Directors and the Chairman for both the companies were the same, but this was initially denied. 

The Hon’ble High Court of Punjab and Haryana eventually allowed the Writ Petition and directed that the sale certificate be handed over to M/s Ferrous Alloy Forgings Pvt. Ltd., subject to the payment of stamp duty on the auctioned immovable properties, valued at ₹2.25 crore. The central issue in the case was whether the successful auction purchaser is required to deposit stamp duty for the sale certificate to be issued. The High Court had ruled that there was no requirement to fix stamp duty at the time of the issuance of the sale certificate. Aggrieved by this, the State of Punjab appealed to the Supreme Court.

After reviewing a series of judgments, the Apex Court clarified that a sale certificate issued following the confirmation of an auction sale serves merely as evidence of title and does not transfer ownership. Therefore, it is not subject to registration under Section 17(1) of the Registration Act, 1908. Ownership of the auctioned property is transferred upon confirmation of the sale by the competent authority under order xxi rule 92 of the Civil Procedure Code (CPC), 1908, following the resolution of all objections. Citing Municipal Corporation of Delhi v. Pramod Kumar Gupta, (1991) 1 SCC 633, dated December 17, 1990, and B. Arvind Kumar v. Govt. of India, (2007) 5 SCC 745, dated May 28, 2007, the Hon’ble Supreme Court of India explained that the issuance of a sale certificate is a procedural act formalizing the confirmation of sale, but it neither creates nor extinguishes title. Hence, it does not attract the stamp duty applicable to deeds of conveyance.

The Court further emphasized that a sale certificate issued pursuant to a court auction is exempt from compulsory registration under Section 17(2)(xii) of the Registration Act. Filing the certificate with the sub-registrar under Section 89(4) of the Registration Act satisfies the procedural requirements. The Court underscored that the procedural requirements for issuing a sale certificate should not be conflated with substantive ownership rights. Consequently, the registrar’s demand for stamp duty at the issuance stage was held to be unwarranted and inconsistent with the settled legal position. By reiterating that sale certificates are procedural documents distinct from deeds of conveyance, the Court affirmed the principles established in cases such as Inspector General of Registration v. G. Madhurambal, 2022 SCC OnLine SC 2079, dated November 11, 2022, and M/s Esjaypee Impex Pvt. Ltd. v. Canara Bank, (2021) 11 SCC 537, dated January 5, 2021.

The ruling of the Supreme Court provides a definitive interpretation of the Stamp Act, 1899, and the Registration Act, 1908, in relation to sale certificates. By holding that such certificates are procedural formalities and not instruments of transfer, the Court ensured that auction purchasers are not subjected to unnecessary burdens. This decision emphasizes the need to balance procedural efficiency with substantive rights, safeguarding the integrity of judicial auctions while protecting the rights of purchasers.