No separate stamp duty required for power of attorney executed with assignment deed under SARFAESI Act: Supreme Court

The Supreme Court recently clarified that separate stamp duty need not be paid towards a power of attorney document signed along with an assignment deed executed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act, 2002. [Asset Reconstruction Co (India) Ltd vs Chief Controlling Revenue Authority].A Bench of Justices V Ramasubramanian and Hemant Gupta observed that the power of attorney (PoA) was an integral part of sale agreements executed under the SARFAESI Act. .The apex court, therefore, set side a judgement of the Gujarat High Court which had held that stamp duty has to be independently paid for a Power of Attorney executed along with a deed assigning debt, even if stamp duty has been paid on the assignment deed. "The High Court overlooked the fact that there was no independent instrument of PoA and that in any case, the power of sale of a secured asset flowed out of the provisions of the Securitisation Act, 2002 and not out of an independent instrument of PoA. Section 2(zd) of the Securitisation Act, 2002 defines a ‘secured creditor’ to mean and include an Asset Reconstruction Company. The appellant has acquired the financial assets of OBC in terms of Section 5(1)(b) of the Securitisation Act, 2002. Therefore, under subsection (2) of Section 5 of the Securitisation Act, 2002, the appellant shall be deemed to be the lender and all the rights of the Bank vested in them", the top court said in its judgement..The Court was hearing an appeal by Asset Reconstruction Company (India) Ltd. against a Full Bench judgement of the Gujarat High Court in a Stamp Reference under Section 54(1)(a) of the Gujarat Stamp Act (the Act).When the Oriental Bank of Commerce was unable to recover a loan, it had assigned the debt to appellant. However, the Office of the Accountant General raised an audit objection stating that the sale deed contained a reference to a PoA and the same was chargeable to stamp duty under Article 45(f) of Schedule-I to the Act.The Chief Controlling Revenue Authority directed the recovery of the alleged deficit stamp duty to the tune of ₹23,53,800. The same was later affirmed by the High Court which opined that that merely because the power to sell forms part of the deed of assignment under Schedule 3 of the Act, the appellant could not escape the charge of duty and that the PoA is required to be considered independently..The Supreme Court at the outset stated that the reasoning of the High Court cannot be accepted. The Court explained that to invoke Article 45(f) of the Act, two conditions have to be satisfied:the PoA should have been given for a consideration; andan authorization to sell any immovable property should flow out of the instrument."In the case on hand, the consideration paid by the appellant to OBC, was for the purpose of acquisition of the financial assets, in respect of a particular borrower. The draft of the PoA contained in Schedule 3 of the deed of assignment was only incidental to the deed of assignment," the top court underscored..The Court noted that the sale agreement had already been charged and further, a PoA needs to be covered by Article 45(f) to be chargeable to stamp duty under Article 20.Further, the Court noted that the State had issued notifications ordering the reduction and capping of stamp duty payable on securitisation instruments of loans or debt with underlying securities.Even so, the appellant had been asked to pay a stamp duty which was ₹40,000 more than the ceiling permitted.The apex court opined that the High Court had erred in holding that PoA can be separately subject to stamp duty under the provisions of the Gujarat Stamp Act, 1958 based on notifications issued under Section 9(a) altering stamp duty rates."In all taxing Statutes, there are taxing provisions and machinery provisions. Once a single instrument has been charged under a correct charging provision of the Statute, namely Article 20(a), the Revenue cannot split the instrument into two, because of the reduction in the stamp duty facilitated by a notification of the Government issued under Section 9(a)," the judgement stated.Since the High Court did not address these issues and went solely on the interpretation of Article 45(f), the Supreme Court allowed the present appeal and set aside the order of the High Court and the demand made by the Chief Controlling Revenue Authority..Senior Advocate V Chitambaresh appeared for the appellant while advocate Archana Pathak Dave appeared for the State of Gujarat..[Read Judgment]