Validity of Inter-State Stamping and Notarisation of a Document

Summary: This article examines the validity and admissibility of a document where stamp paper is purchased in one State but the document is executed and notarised in another State, particularly where the applicable stamp duty differs between the two States. It explains the constitutional division of stamp-duty powers between the Union and States under Entry 91 of List I and Entry 63 of List II, and considers the relevant provisions of the Indian Stamp Act, 1899 and the corresponding State rules. The article discusses the Supreme Court decision in V.V.S. Rama Sharma v. State of U.P. and the Andhra Pradesh High Court decision in V. Giridhar Kumar v. Miss Sellammal (Died per LRs), concerning the use of stamp paper purchased in another State. It distinguishes instruments falling under the Union List from those falling under the State List and addresses whether use of an out-of-State stamp paper makes an instrument invalid or constitutes a curable defect. The article concludes that, where the relevant State requirement applies, use of stamp paper purchased in another State does not, by itself, invalidate the document and may constitute a defect as to form or description capable of being cured upon payment of the properly chargeable duty under the applicable statutory mechanism. The discussion is applied to the hypothetical example of a Power of Attorney executed and notarised in Karnataka on stamp paper purchased in Maharashtra.

Introduction

Imagine you have bought an stamp paper from state of Maharashtra and executed the same in state of Karnataka followed by Notarisation of the said document in Karnataka only. Now the question arises regarding the validity and admissibility of the document. The very question arises on the premise that the stamp duty varies from state to state and this can be understood with the help of following example.

Let’s assume the requisite stamp duty for a Power of Attorney is 500 Rs. in the state of Maharashtra and for the very same subject matter the stamp duty in the state of Karnataka is 800 Rs. A person have bought the stamp paper from Maharashtra and executed the same at Karnataka followed by Notarisation of the deed. Now the Karnataka’s stamp duty act requires the amount of the stamp duty to be 800 but the original one is of 500 however the latter is also as per the stamp duty act of one state rather than being inherently unlawful.

Here arises this dichotomy which this article intends to address and resolve with the help of statutory provisions, interpretation and judicial precedent.

Relevant Statutory Provisions

In India stamp duty falls under both the Union as well as the State list. List 1 Entry 91 of the Constitution of India lays down the subject matter on which the Central Government has the power to charge the stamp duty, followed by List 2 Entry 63 empowers the respective state governments to charge the stamp duty on the subject matter other than specifically mentioned in the List 1 Entry 91.

Section 37 of Indian Stamp Act, 1899 empowers the Union Executive to make rules on admissibility of improper stamped instruments which can be rectified via paying of the proper chargeable duty. For this matter the executive have laid down the rules in form of Indian Stamp Rules, 1925. Rule 18 says that in case of improper description of the stamp used, the same is curable upon the payment of the proper duty which the instrument is chargeable and can be certified by the stamp. The corresponding rule to this rule can be traced in various state stamp duty acts such as Rule 20 of The Maharashtra Stamp Rules, 1939 and Rule 15 of Karnataka Stamp Rules, 1958. Below is the table for the convenience.

Interpretation and Position

Now here comes the point to discuss on these two questions. What will be the scenario when the matter falls under Union List in case of Interstate Stamping and Notary, and what will be case in case of State List? Whether it is a matter of defect and if yes then how will it be cured?

A similar scenario came before the Hon’ble Supreme Court of India in the case of V.V.S. Rama Sharma v. State of U.P. and the ratio was followed by the Hon’ble Andra Pradesh High Court in the case of V. Giridhar Kumar v. Miss Sellammal (Died per LRs).

In V. Giridhar a promissory note was executed in Andhra Pradesh on stamp paper purchased in Tamil Nadu. The trial court held the note inadmissible, relying on Rule 3(iii) of the Indian Stamp Rules, 1925 (as applicable to Andhra Pradesh), which required stamps purchased in Andhra Pradesh alone to be used for instruments chargeable with duty in that State. The High Court set aside this finding in revision.

Answers to the Questions Raised

1. Admissibility

Where an instrument falls under Entry 91, List I (bills of exchange, promissory notes, insurance policies, share transfers, etc.), a State rule cannot mandate that only in-State-purchased stamps be used, since the State lacks legislative competence to regulate rate or usage for Union List instruments. The Court relied on the Supreme Court’s decision in V.V.S. Rama Sharma v. State of U.P. for the proposition that using stamps purchased in one State for execution of a document in another State does not, by itself, violate the law.

2. Curability, of general application (Applicable if falls under entry 63 List 2)

Even assuming a State rule requiring in-State-purchased stamp paper applies, the Court held that use of stamp paper purchased in another State does not render the instrument invalid; at most it is “a defect as to form or description,” curable under Section 37 of the Indian Stamp Act, 1899 (Admission of improperly stamped instruments) read with the corresponding State rule, on payment of the duty properly chargeable. The Court observed that the purpose of such State rules is primarily to protect the State’s share of stamp revenue, not to invalidate the document itself.

Way Forward

So the hypothetical case discussed at the starting on the Power of Attorney which under consideration, executed and notarised in Karnataka on stamp paper purchased in Maharashtra, Point 2 applies directly – even if a Karnataka rule analogous to Rule 3(iii) exists, non-compliance with it is a curable defect of form under Section 37 (and the corresponding Karnataka rule), and does not, by itself, invalidate the Power of Attorney.

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