Document Not Subject To Stamp Duty May be Admitted as Secondary Evidence Even if Unstamped

The Hon’ble Supreme Court, in Vijay v. Union of India [2023 INSC 1030], held that, for Section 35 of the Stamp Act, 1899, to be applicable, the instrument in question must be chargeable with duty and an instrument so chargeable must not have been duly and adequately stamped. It was also held by the court that a document not chargeable with duty under the Stamp Act, 1899, cannot be denied admissibility under Section 65 of the Indian Evidence Act, 1872, for deficiency in stamp duty.


In this case, the plaintiff and defendant had entered into an agreement to sell. When the defendant denied the existence of such an agreement, a suit was brought by the plaintiff for specific performance of the contract wherein, the plaintiff filed an application to file a copy of the impugned agreement to sell as secondary evidence. While initially this application was allowed, when the defendant sought a review of the order passed in the case, the Court, in its review order, held that an agreement to sell that was not executed on a proper stamp could not be admitted as secondary evidence. The Plaintiff subsequently filed a writ petition before the High Court of Madhya Pradesh challenging this review order and questioning the constitutional validity of Section 35 of the Stamp Act, 1899. The present case is the result of an appeal brought against the order of the High Court.


The plaintiff contended that Section 35 of the Stamp Act, 1899, was not applicable to the case at hand since there was no requirement for either party to pay stamp duty for an agreement to sell at the time of its execution and therefore the plaintiff argued that they should have been permitted to file a copy of the said agreement to sell as secondary evidence under Section 65 of the Indian Evidence Act, 1872.


The defendant argued that a copy of an original document that may either be unstamped or deficiently stamped cannot be impounded, validated or admitted as secondary evidence under the Stamp Act, 1899. It was further argued that where the original document itself is inadmissible, a copy of the same cannot be allowed as secondary evidence.


The Court thoroughly examined whether the case at hand would be subject to the admissibility restriction outlined in Section 35 of the Stamp Act, 1899. It was observed by the Court that, as per Article 23 of Schedule 1A of the Stamp Act, 1899, which addresses conveyances, at the time of executing the agreement to sell in 1988, the conveyance was subject to stamp duty in accordance with Article 23. An explanation was subsequently added in 1990 by way of an amendment, stating that if there is an agreement to sell immovable property and the possession of the property is transferred to the purchaser before or after the execution of the agreement without executing the conveyance, it shall be considered conveyance and subject to the levying of stamp duty. On this basis, the Court held that the aforementioned explanation imposes a new obligation on the party, and as a result, it cannot be applied retroactively. Therefore, it was held by the court that the amendment and its accompanying explanation will not have any impact on agreements that were made before these amendments were implemented. Further, it was also stated that the fact that any clarification or explanation should not result in the imposition of an unforeseen obligation or the deprivation of an expected advantage is a firmly established legal principle.


The Court held that for the applicability of Section 35 of the Stamp Act, 1899, the documents must fulfill two criteria i.e., that the instruments in question must be chargeable with duty and that such instruments that are chargeable must not have been duly stamped. Therefore, in the present case the court determined that since the document was not subject to duty, it was not necessary to have a stamp, and so no penalty could be imposed for its lack of proper stamping.


With regards to the admissibility of the document as secondary evidence as per the provisions of Section 65 of the Indian Evidence Act, 1872, the Court reiterated that if a document that is legally obligated to have a stamp is not adequately stamped, then a duplicate of said document as secondary evidence cannot be presented. However, in the present facts, since the document in question was not subject to stamp duty at the time it was executed, they may be admissible as evidence.