In the present situation, where there has been a government-mandated nationwide lock-down, execution and stamping of documents have become very challenging.
The Office of the Inspector General of Registration and Controller of Stamps, Maharashtra has issued a Circular dated 27th April 2020 to providing clarifications with respect to payment of stamp duty on documents and filing of Notice of Intimation during the period of lock-down, in the State of Maharashtra for documents that are related to transactions undertaken by banks and financial institutions.
The Circular states that stamp duty on compulsorily register-able documents are usually paid by the banks through the Government Receipt Accounting System (“GRAS”) portal and generation of online e-challan. For eg: Mortgage Deeds. This option is however not available for documents which are not compulsorily register-able. However, keeping in mind the current circumstances, the GRAS portal has been made available for use by the banks even for payment of stamp duty on documents that are not compulsorily register-able. The various options available for using GRAS is as follows:
- Stamp paper is to be used for documents chargeable with stamp duty up to INR 500/-;
- Franking is to be used for documents chargeable with stamp duty up to INR 5,000/-; and
- Electronic Secure Bank and Treasury Receipt (“e-SBTR”) option is to be used for an amount exceeding INR 100/-.
Issue identified by the Authorities
Due to the ongoing lock-down, banks and their customers are unable to avail the facilities for stamping (read above). Owing to the unavailability of stamps, execution of necessary documents would not be possible which will result in delay/stoppage of financial operations of banks and this will not be in favour of public welfare. In response to queries by banks and financial institutions the authorities had come up with clarifications that are summarized below.
Clarification for current lock-down
- Taking into considerations the provisions detailed under Section 17 of Maharashtra Stamp Act, 1958, Section 10 of General Clauses Act, 1897 and Section 11 of Maharashtra General Clauses Act, 1904, if the stamp duty on the documents, executed during the lock-down period, is paid on the 1st working day after the lock-down lifts, such documents will be considered as documents duly stamped under Section 17 of Maharashtra Stamp Act, 1958.
- If the stamp duty is not paid as per the provisions mentioned hereinabove, then such documents can be presented for adjudication before the Collector of Stamp, in accordance with Section 40 of Maharashtra Stamp Act, 1958, for payment of stamp duty, within a period of 1 (one) month from when the lock-down lifts.
- All banks, financial institutions, customers, etc. have been advised to use the “Online Services” present on the GRAS portal, as much as possible, for payment of stamp duty; and
- The provisions of the General Clauses Act, 1897 mentioned hereinabove shall be applicable with regards to filing of Notice of Intimation. Therefore, the Notice of Intimation can be filed on the first working day after the end of lock-down. The Notice of intimation can also be filed online which has been made available under the “Online Services” category on the gov.in website.
Emerging Questions and Issues
Is the time period of 1 (one) working day sufficient?
Time period of 1 (one) working day is too less, given the fact that obtaining of physical stamp paper in itself is a big challenge. Such a short duration will cause unnecessary chaos and panic among the public, as it is not possible for people to come out of the lock-down and get a document stamped on priority, as there will be other pressing issues at hand to be dealt with.
Does the Government have sufficient infrastructure and workforce?
On the other hand, another pertinent question that arises is that whether the relevant authorities are even equipped to handle such workload on the first working day after the lock-down? Will the offices of the relevant authorities be open and operating around the clock to ensure that all execution and stamping related issues are addressed and closed on the very first working day after the lock-down lifts?
Adjudication is an extremely cumbersome and time-consuming process. Now, the question at hand is that whether mere submission of documents for adjudication suffice? Ideally, waiver of stamp duty on agreements/ documents requiring stamping of less than a threshold value of INR 5,000/- or such other value, should have been granted by the State Government, to mitigate the hardships being faced by the public. It appears that the Government is trying to take advantage of the present Covid-19 situation, by forcing adjudication of any and all documents even those that would not have been adjudicated ordinarily.
Non Bank and NBFC documents
There are numerous businesses which are struggling to pay stamp duty during the lock-down. Many of these may not be related to any banking transactions – for eg: IP agreements. The fate of these agreements is hanging in the balance as there is no clarity on whether such documents can also be stamped in post lock-down. Why such documents have been singled out and other documents left out from this list is not clear.
At present many businesses are executing e-contracts with an intention to re-execute a duly stamped contract in physical form after the lock-down.
It would have been beneficial for India Inc, if the circular had a wide scope, covering any and every document/ contract within its purview. However, this circular may be useful for stakeholders to interpret and understand the general benevolent stance that will be taken by the State Government, in case a document is executed during the lock-down period.
In the absence of any such clarification any document executed for whatever reason under the Indian Stamp Act or the relevant state act would be inadmissible in evidence. This definitely is required to be resolved.
-Archana Balasubramanian (Partner) and Charulata (Associate)