This article is written by Jeeni Thirumalanadha Siva Seshu pursuing Certificate Course in Advanced Civil Litigation: Practice, Procedure and Drafting from Lawsikho.

Introduction

Evolution of stamp papers in India

Stamped paper is the invention of Spain and the Netherlands in the early 16th century. The British Empire adopted this stamp paper system, introduced it as the Stamps Act, 1765, and mandated all its colonies including India to implement the Act as a source of revenue generation in the form of stamp duty. The British East India Company through promulgating Regulation VI of 1797 bought the Stamps Act to India and implemented it in selected geographical locations. Later it extended to the whole of India by 1860 and then amended and became the Indian Stamps Act, 1899.

In India, the first postage stamps were placed on sale in 1854 with four values, they are; ½ anna, 1 anna, 2 anna, and 4 annas. The base rate was valued at ½ anna.

What is a stamp paper?

A stamp paper is an A4 (foolscap) piece of paper that is pre-printed with a revenue stamp same as the one printed in currency notes or postal stamps. These stamp papers are generally issued by the Government and usually carry the certain value of Rs. 10, Rs.20, Rs.50, Rs.100, Rs.500, and so on.

Every stamp paper carries a certain “Monetary Value”. For every person who has bought, sold, or involved in a property transition, the whole process shall record on a “Stamped Paper”. The stamp paper is barred from use as a negotiable instrument or to exchange like currency notes. Generally, stamps or specific valued stamp papers are bought by individuals for the execution of specific purposes based on the value of the commercial transaction. The State Governments make and sell the stamp papers to the public through registered vendors.

Objectives of the stamp paper

The objectives of the stamp paper are listed below:

1. Documenting business transactions or making a contract for an upcoming project, using Stamp Paper is a must. 
2. Relevant legal documents, such as Lease Agreement, Purchase and Sale of Goods, Business / Contract Agreements, Loan Agreements / Financial Offers, Power of Attorneys, Affidavits, Organizational Notes, Organization Memorandum, Indemnity Bond, Declaration, Loans and financial agreements ext, to have its enforceability in law it must be duly stamped as and when needed.

The provisions of the Indian Stamps Act, 1899 concern only monetary gain, and if the document is legally protected, the party claiming its claim on that instrument will not be defeated. Each state has its stamp duty law and in India, there is a central law that deals with the stamp. 

Who can enact stamp laws according to the Constitution of India?

The Constitution of India empowers Parliament and the State Legislature to make arrangements and rules for the operation of stamps within its ranks. The Indian Stamp Act, 1899 is the Central Legislation and the States have their stamp acts within the jurisdiction of that particular state.

Stamp paper is mentioned in the VII Schedule of the Indian Constitution 

• Entry 91 of List I (Union List) of the Constitution of India states that

“Rate of the stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of credit, policies of insurance, transfer of shares, debentures, proxies, and receipts”.

• Entry 63 of List II (State List) of the Constitution of India states that

“Rate of the stamp duty in respect of documents other than these specified in the provisions of List I with regard to rates of stamp duty.”

• Entry 44 of List III (Concurrent List) of the Constitution of India states that

“Stamp duties other than duties or fees collected through judicial stamps, but not including rates of stamp duty.”

Kinds of stamp papers

Stamp papers are of two kinds they are:

1. Judicial Stamp paper
2. Non-Judicial Stamp Paper

Judicial stamp paper

Generally, judicial stamp papers or court fee stamp papers are mainly used for legal and court work. Most of the cases will not be admitted without payment of court fees. To avoid cash transactions the court fees are paid through judicial stamp papers. 

In court matters the parties have to file various petitions, suits, and affidavits to meet the day-to-day expenses incurred by the court, it levy duty on these filings. According to provisions of the Court Fees Act, 1870 judicial stamp papers are used in courts and certain public offices.

Judicial stamp paper and its types

Suits

1. For movable property with no market value: For a movable property where the title does not have a market value, for example, in the case of title-related documents, sale deeds, etc.
2. Enforcement of the right to joint family ownership: Enforce the right to legal participation in any property which is a joint family property, for example in the case of Undivided Hindu Families, Partition deeds ext.
3. Remembrance of the declaration of proclamation and the subsequent release: To obtain the proclamation or decree, when the subsequent relief is granted in court,
4. For injunction: To obtain an order (maybe temporary),
5. For easements: A certain right arises out of the land,
6. On the accounts: On the accounts according to the amount at which the claim for relief is calculated on the plaint or in the memorandum of appeal

Money

For financial suits (including damages or compensation suits, or arrears, or other periodic amounts) – for the amount claimed.

Maintenance and other legal items

In maintenance suits or other amounts paid from time to time – depending on the value of the suit filed, where that amount will be estimated to be ten times more than the amount claimed next year.

For any other movable property with a market value

In suits for movable property other than cash, where the title may have a market value – depending on that value at the date of the appeal.

Non-Judicial Stamp Paper

All Non Judicial transactional arrangements between parties are carried on in the Non-Judicial Stamp Papers. For example, all types of property transfer agreements, lease agreements, affidavits ext. Every transaction will have a specific amount of stamp duty that is fixed by the state. Each state will have a separate stamp duty structure. It is one of the main sources of revenue for the states.

Important provisions of Indian Stamps Act, 1899  

There are specific provisions, which are very important from a legal perspective under the Indian Stamp Act, 1899. They are as follows:

• Duly stamped 

It means “proper stamping”, that the metal holds an impressive stamp or stamp which is not less than the correct value, and that the stamp is affixed or used under the law while operating in India as mentioned under Section 2(11) of the Act.

• Stamp  

“Stamp” means any mark, or authorization of any agency or person duly authorized by the State Government, and includes an affixing or impressive stamp, for a duty imposed under this Act.

• Instrument 

Section 2 (14) lays down:

(a) all documents in which a right or liability, or, which means, is to be constructed, transferred, limited, amplified, erased, or recorded; 

(b) a document, electronic or otherwise, made for a transaction in stock or stock where any right or liability, or which seeks to be constructed, transferred, restricted, extended, deleted or recorded; and 

(c) any other document referred to in Schedule I but does not include material that may be specified by the Government, by notice in the Official Gazette. 

Any instrument referred to in Schedule I to the Indian Stamps Act is liable for money shown in that Schedule as applicable (Section 3 of Indian Stamps Act). The list includes items such as an affidavit, lease, memorandum and company articles, exchange rate, mortgage, mortgage, transfer, receipt, debt, share, insurance policy, a title deed, proxy, shares, etc. listed, no stamp duty is paid.

• Instruments not duly stamped inadmissible in evidence, etc

It is a thumb rule, that in the event of a claim or proceeding, any dispute in respect of a document that is not adequately maintained or that matter on the admission of the same thing must be taken at the time of requesting the same as proof and failure to do so, if the document is marked as an exhibit, Section 35 of the Indian Stamps Act, 1899 to refrain from questioning that decision, in the course of a trial, or the higher courts. This is the case, as the Code of Civil Procedure or the Evidence Act, 1872 may not contain any provision of copyright. 

• Instruments under-valued 

If any person aggrieved by an order of the Collector under sub-section (2) may, within thirty days from the date of the order, prefer an appeal before the District judge and all such appeals shall be heard and disposed of in such manner as may be prescribed by rules made under this Act.

• Allowance for stamps not required for use

Section 54 lays down that if any person has a stamp or stamps that have not been damaged or defective, or useless for the intended purpose, but do not use them immediately, the Collector will reimburse the person for the value of such stamp or stamp, deduct ten from him or her in a certain case concerning when that person brings the money to be canceled and shows the Satisfaction of the Collector—

(a) that such stamps or stamps were purchased by that person for the sole purpose of using them; and

(b) to pay the full amount thereof; and

(c) to be purchased in bulk within six months before the date of delivery.

If, where a person is a licensed dealer, the Collector, if he deems it appropriate, may make a payment of the amount paid to the seller without any deduction as mentioned above.

• Jurisdiction of Magistrates

No Magistrate other than the Presidential Magistrate or a Magistrate, whose powers are subordinate to those of a second division Magistrate, shall try any case under this Act as stated under Section 71.

• Place of trial

Section 72 of the act states any lawsuit filed in respect of any item may be tried in any state or city of the presidency where the instrument is available, as well as in any state or city of the presidency where the case may be tried under the Criminal Procedure Act.

• Saving as to court-fees

Nothing in this Act bars the duties charged under any law currently in force relating to court fees.

Indian Stamps Act, 1899 and its evidentiary value

In the case of Sivalingam vs A.Suryanarayana & others’ (2017), the Hon’ble Madras High court pronounced by referring to the Hon’ble Supreme Court judgment in SMS Teas Estates Pvt. Ltd Vs Chandmari Tea Co Pvt.Ltd (2011) supra, that the unstamped and unregistered documents though marked as exhibit documents, those documents are inadmissible in evidence”.

Limitation Period of Indian Stamps Act, 1899 

In the case of Thiruvengada Pillai Vs. Navaneethammal and Anr. (2008), it was held by the High Court that stamp paper, even if it is more than six months old, is eligible for use. Section 54 of the Indian Stamps Act, 1899 is a restriction that takes a refund after six months of purchase but does not limit the use of such old stamp paper for agreement. Therefore, nothing prevents a person from using it even after years of purchase. It is not barred by any period of limitation.

An unedited or improperly stamped document is invalid and will be valid from the date of issue if it has been properly sealed, or with a stamp or penalty charged. 

Judiciary Perspective of Indian Stamps Act, 1899

1. Once a document or instrument has been filed in Court the Court must determine whether the stamp is properly stamped or not and is binding on the work of the Stamp or not. Once it has been determined that the stamp duty is due, and then compile the unstamped document namely; not stamped or insufficiently stamped. The penalty paid in such a case is ten times the amount of stamp tax payable above the actual amount as per Section 35 rule (a).
2. In “2001 (3) ALD 317” it was held that in a suit for specific performance on sale agreement as per decree sale deed to be executed, the stamp duty payable is as per market value on the date of sale deed and not the market value on the sale agreement.
3. In “1997 (3) ALD 261” it was pronounced that in determining the tax payable, the market value to be considered is not the amount of the date of the claim but the amount when the final order passed in the partition suit.

Indian Stamps Act, 1899 and its recent amendments

Amendments introduced in the Indian Stamp Act 1899 vide the Finance Act, 2019 would be effective from April 1, 2020. However, the Treasury Department Ministry of Finance, India has issued two Notices dated 30 March 2020 that postpone the implementation of Part I of Chapter IV of the Finance Act, 2019 namely Amendments to the Indian Stamps Act, 1899 (14) and the corresponding strengthening of the Indian Stamp (Collection of Stamp-Work by Stock Exchanges, Clearing Corporations and Depositories) Rules, 2019 (15) to July 1, 2020.

Amendment to the Indian Stamps Act is in line with the Finance Act, 2019 that is introduced to keep in mind the technological advances in the field of security trading through stock exchanges and deposits. Besides, the main objectives of the amendment are to-

1. Estimating the stamp duty payable on the production, sale, and transfer of security market tools. It does this by removing many instances of stamp duty, removing stamp duty, and removing the State Government’s power to impose tariffs or stamp charges in addition to the Act.
2. To establish a zero-evade central collection method where stamp work is to collect through a single agency, one location, and one security market transaction tool.

Conclusion

Under Section 58 Evidence Act,1872 the Court may not approve an unmarked instrument. The prime motive of imposing stamp duty is to generate revenue for both Central and State Governments. It is a financial law. However, the entire judicial stamp papers are mainly collected with the provisions laid in the Court Fees Act, 1870 and the High Courts of respective states determine the fee structure to be followed when filing the cases. No Court will entertain the suits and other petitions without payment of a proper court fee prescribed by them based on the value of the suit. No doubt, many amendments are needed for these age-old Acts, to meet the present social changes and to develop the infrastructure of the judiciary. 

References

• https://indiankanoon.org
• https://gharpedia.com
• https://itatonline.org
• https://indianlegalsolution.com

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.