Section 17(1) of the Registration Act, 1908, mandates the registration of certain documents related to immovable property to ensure transparency, authenticity, and legal validity. This includes documents such as sale deeds, leases and other instruments of transfer.
However, Section 17(2)(xii) of the Registration Act, 1908 explicitly states that a certificate of sale issued to a purchaser of property sold through a public auction by a civil or revenue officer is not classified as a non-testamentary document requiring registration under sub-section (b) and (c) of Section 17(1). The Hon’ble Supreme Court of India, in a recent judgment of State of Punjab vs. Ferrous Alloy Forgings Pvt. Ltd. (2024 INSC 890), reaffirmed that a sale certificate granted to the purchaser following the confirmation of an auction sale serves solely as evidence of ownership and does not necessitate registration under Section 17(1) of the Registration Act, 1908.
This decision ensures that auction purchasers can rely on sale certificates as valid proof of ownership without additional formalities, thereby promoting efficiency and certainty in property transactions. At the same time, it underscores the importance of legal compliance in auction processes to protect the rights of all parties involved.
FACTS:
In this case, M/s Punjab United Forge Limited was ordered to be wound up by the Company Judge of the High Court under the provisions of the Companies Act, 1956. The Industrial Finance Corporation of India (IFCI) was authorised to sell the mortgaged properties, along with those hypothecated to Andhra Bank. IFCI subsequently invited tenders, and M/s Ferrous Alloy Forging Pvt. Limited, sister entity of the Respondent Company, submitted the highest bid, leading to the confirmation of the auction sale.
The Respondent Company later requested the execution of a conveyance deed in its favour on the ground that the entire sale consideration was paid by it and also the Board of Directors and Chairman were the same for both the Respondent Company and sister entity, but the request was denied. However, the request was eventually accepted by the Division Bench of the High Court of Punjab and Haryana.
The Respondent Company filed an application for the issuance of the sale certificate in its capacity as the successful auction purchaser for both the movable and immovable properties. The application came to be disposed of by directing the Respondent Company to pay stamp duty based on the auction valuation of Rs. 2.25 crore, as specified in the tender.
The Respondent Company challenged this requirement through a writ petition, and the High Court of Punjab and Haryana ruled that stamp duty need not be fixed at the time of issuing the sale certificate and the Registry of the High Court was only required to issue the sale certificate and send a copy of the same to the Sub-Registrar in accordance with the mandate contained in Section 89(4) of the Registration Act. The High Court further observed that whether the certificate is to be stamped or not would be the responsibility of the successful auction purchaser.
Dissatisfied with this decision, the State appealed to the Supreme Court.
ISSUE:
The key question before the court was whether a successful auction purchaser must pay stamp duty for the issuance of a sale certificate as per the provisions of the Stamp Act and Registration Act.
PRECEDENTS CITED:
The Hon’ble Supreme Court of India examined the legal framework, previous precedents, and the specific circumstances of the case.
- In Municipal Corporation of Delhi v. Pramod Kumar Gupta (AIR 1991 SC 401), it was observed that a transfer is finalized when an order under Rule 92 of Order XXI of Code of Civil Procedure, 1908 is passed, and the issuance of a sale certificate under Rule 94 of Order XXI of Code of Civil Procedure, 1908 serves merely as a formal declaration of the confirmed sale. This certificate neither creates nor extinguishes any title, and therefore, does not attract stamp duty applicable to instruments involving the sale of immovable property.
- In Smt. Shanti Devi L. Singh v. Tax Recovery Officer and others (AIR 1991 SC 1880), it was held that a sale certificate issued during a public auction does not require registration under Section 17(2)(xii) of the Registration Act, 1908.
- In B. Arvind Kumar v. Govt. of India and others (2007 5 SCC 745), it was emphasized that the title to auctioned property vests in the purchaser upon confirmation of the sale, with the sale certificate serving merely as evidence of such title. While registration of the sale certificate was not mandatory, the issuance of the certificate was deemed sufficient to validate the purchaser’s title.
- In M/s Esjaypee Impex Private Limited v. The Asst. General Manager and Authorized Officer Canara Bank (2021 11 SCC 537), it was observed that the mandate of law that flows from a combined reading of Sections 17(2)(xii) and 89(4) of the Registration Act, 1908. The auction purchaser is entitled to receive the original sale certificate and a copy of the same is required to be forwarded to the Sub- Registrar for the purpose of filing in Book 1 as per the Registration Act, 1908.
- In Inspector General of Registration and Another v. G. Madhurambal and Another (2022 SCC Online SC 2079), the Court observed that a sale certificate is not subject to stamp duty unless it is used for purposes necessitating registration.
JUDGEMENT:
The Division Bench, in State of Punjab vs. Ferrous Alloy Forgings Pvt. Ltd. (2024 INSC 890) held:
“The position of law is thus settled that a sale certificate issued to the purchaser in pursuance of the confirmation of an auction sale is merely evidence of such title and does not require registration under Section 17(1) of the Registration Act. It is not the issuance of the sale certificate which transfers the title in favour of the auction purchaser. The title is transferred upon successful completion of the sale and its confirmation by the competent authority after all the objections against the sale have been disposed of.” The Hon’ble Supreme Court of India consolidated these principles to hold: “sale certificate issued by the authorised officer is not compulsorily registrable. Mere filing under Section 89(4) of the Registration Act itself is sufficient when a copy of the sale certificate is forwarded by the authorised officer to the registering authority. However, a perusal of Articles 18 and 23 respectively of the first schedule to the Stamp Act respectively makes it clear that when the auction purchaser presents the original sale certificate for registration, it would attract stamp duty in accordance with the said Articles. As long as the sale certificate remains as it is, it is not compulsorily registrable. It is only when the auction purchaser uses the certificate for some other purpose that the requirement of payment of stamp duty, etc. would arise.”
Accordingly, the appeal was dismissed, and all applications were disposed of.
CONCLUSION:
The Supreme Court’s judgment in State of Punjab vs. Ferrous Alloy Forgings Pvt. Ltd. (2024 INSC 890) is a landmark ruling that addresses the interplay between Section 17 of the Registration Act, 1908 and sale certificates issued to auction purchasers. By exempting sale certificates from registration, the Court has upheld the principle of statutory authority and simplified the procedural requirements for auction sales.
This article has been written by the Real Estate Team, AAK Legal, Advocates & Solicitors.
Disclaimer – This article is meant for informational purposes only. The contents of this article are not to be construed as legal advice. The views expressed in the article are those of the authors and do not necessarily reflect the views of the firm. The copyright to the article rests solely with the authors and the firm.