REGISTRATION AND STAMPING OF CONTRACTS

For agreements to be enforceable, they have to be made in accordance with the

procedure given under the Indian Stamp Act 1889 and the Registration Act, 1908.

INDIAN STAMP ACT 1889

What is stamp duty?

According to Black’s Law Dictionary, stamp duty means an additional charge

levied on certain legal documents by purchasing a stamp to be placed on said
document. So from the above definition, it can be interpreted that stamp duty is a
charge, it can be either fixed or variable, which is levied on certain legal
documents, which means that certain documents can be excluded by law from
stamping.

Law relating to Stamps in India

Stamp duty in India is governed by two legislations, i.e. a stamp Act legislated
by the Parliament and a stamp Act legislated by the state legislature. According
to Article 246 read with Schedule VII of the Constitution, Parliament can enact
laws relating to rates of stamp duty of bill of exchange, cheques, promissory
notes, bill of lading, letter of credits, policies of insurance, transfer of shares,
debentures, and receipts, whereas the state legislature can legislate on all those
matters which are not mentioned above.
Scheme of the Act

Section 3 of Stamp Act is the charging section which provides for the levy of
stamp duty on specified instruments upon their execution. Relevant provision of
section 3 is reproduced below:

3. Instruments chargeable with duty- Subject to the provisions of this Act and the
exemptions contained in Schedule I, the following instruments shall be chargeable with
duty of the amount indicated in that Schedule as the proper duty therefore respectively,
that is to say—

(a) every instrument mentioned in that Schedule which, not having been previously
executed by any person, is executed in India on or after the first day of July, 1899;

(b) every bill of exchange payable otherwise than on demand or promissory note drawn or
made out of India on or after that day and accepted or paid, or presented for acceptance or
payment, or endorsed, transferred or otherwise negotiated, in India; and

(c) every instrument (other than a bill of exchange, or promissory note) mentioned in that
Schedule, which, not having been previously executed by any person, is executed out of
India on or after that day, relates to any property situate, or to any matter or thing done
or to be done, in India and is received in India.

As per the above provision, broadly, two things are required for chargeability of
stamp duty:

 There must be an instrument as mentioned in the schedule I of Stamp Act.

 The instrument must be executed.

What is Instrument?

The word ‘instrument’ is defined in section 2(14) of Stamp Act. There has been
certain ambiguousness in the interpretation of definition of Instrument. Recent
amendments have been made in the Stamp Act by Finance Act, 2019 which will
come in force from 1st April, 2020.

Prior to the amendment, section 2(14) read as:

2(14) “Instrument includes every document by which any right or liability is, or
purports to be, created, transferred, limited, extended, extinguished or recorded”.

However, after the amendment, the scope of the definition given in section 2(14)
has been widened by the inclusion of clause (b) and clause (c) which states that:

(14) “instrument” includes—

(a) every document, by which any right or liability is, or purports to be, created,
transferred, limited, extended, extinguished or recorded;

(b) a document, electronic or otherwise, created for a transaction in a stock exchange or

depository by which any right or liability is, or purports to be, created, transferred,
limited, extended, extinguished or recorded; and

(c) any other document mentioned in Schedule I,

but does not include such instruments as may be specified by the Government, by
notification in the Official Gazette;

The aforesaid amendment is only with respect to the electronic document created
for a transaction in a stock exchange or depository, but (a) of the aforesaid
section is unaltered.
Apart from the Indian Stamp Act, many states have their own legislation with
respect to stamp duty. Majority of state specific stamp duty laws also do not
specifically include electronic records within their ambit, however, some state
stamp duty laws do refer to electronic records. For instance, Section 2(l) of
the Maharashtra Stamp Act, 1958 defining instrument, specifically refers to
electronic records. It states that:

“instrument includes every document by which any right or liability is, or purports to
be, created, transferred, limited, extended, extinguished or recorded, but does not include
a bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of
insurance, transfer of share, debenture, proxy and receipt;

Explanation. – The term “document” also includes any electronic record as defined in
clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000.”

This makes clear that, Maharashtra Stamp Act imposes stamp duty on electronic
agreements as well. This justifies that even electronic agreements come under the
scope of Stamp Act, thus need to be stamped.

What is execution?

Section 2(12) of Stamp Act defines the terms “executed” and “execution”, which
is also widened by the recent amendment to take into account, attribution of
electronic records. It states that:

“2(12). “Executed and execution”- executed and execution used with reference to
instruments, mean signed and signature” and includes attribution of electronic
record within the meaning of section 11 of the Information Technology Act, 2000.”
Thus the execution means putting signature on the instrument by the party to the
agreement. Attribution of electronic record will also be treated as execution. It
can be concluded from the above definition that, the specific instrument would
attract payment of stamp duty upon their execution i.e. when it is signed or bears
a signature, even if the execution takes place electronically.

Time and Manner of Stamping

As discussed, an e-agreement is required to be stamped according to State

specific stamp laws. Section 3 of the Indian Stamp Act and the stamp legislation
of several other States in India specify that an instrument to be chargeable with
stamp duty must be “executed”.

Section 17 of Stamp Act stipulates when an instrument has to be stamped. It

states that:

17. Instruments executed in India- All instruments chargeable with duty and executed
by any person in India shall be stamped before or at the time of execution.

Thus, the stamp duty is to be paid before or at the time of executing the e-
agreement and cannot be paid after execution.

However, one may also refer to section 17 of the Maharashtra Stamp Act which
allow payment of stamp duty on the next working day following the day of
execution.

There are some of the e-agreements such as click wrap agreements where
execution does not takes place by the customer. Click-wrap agreements are the
agreements where the customer accepts the terms and conditions of the contract
by clicking on “OK” or “I agree” or such other similar terms. In case of such e-
agreements, while the agreement can be said to be executed by the originator (by
way of attribution), there is no signature of the customer which means such
agreement does not get executed. Since, execution does not take place, such
agreements need not be stamped.

As regards the manner of stamping, same can be done in three ways:-

1. E-stamping: Some states like Maharashtra provide specific provisions for

e-stamping. In such case, both the party can digitally sign the document
and get it stamped electronically on the same day. For
instance, Maharashtra E-Registration and E-Filing Rules, 2013 facilitates
online payment of stamp duty and registration fees. Rule 10 of the said
rules states that:

Rule 10. For online registration, Stamp duty and registration fees shall be paid
online to Government of Maharashtra through Government Receipt Accounting
System (GRAS) (Virtual Treasury) by electronic transfer of funds or any other
mode of payment prescribed by the Government.

Further, as per Rule 3 of The Maharashtra ePayment of Stamp Duty and

Refund Rules 2014, the stamp duty required to be paid under the act, may be
paid online into the Virtual Treasury through Government Revenue and
Accounting System (GRAS).

2. Physical Stamping: Where the facility of e-stamping or franking is not

available, a print of the e-agreement may be taken and the same may then
be adequately stamped with adhesive stamps or impressed stamps before
 or on the date of execution by the parties as per section 10 of Indian Stamp
Act.

However, the liability to pay stamp duty will be upon either of the party to
contract as per the agreement entered between them. In the absence of any such
agreement, liability to pay stamp duty shall be upon such person as may be
determined under section 29 of the Indian Stamp Act.

Consequences of Non- stamping

Non-payment of stamp duty in respect of documents would attract similar

consequences for both physical instruments as well as electronic instruments,
unless specific consequences have been prescribed for electronically executed
instruments under the respective stamp duty laws.

Inadmissibility as an evidence:

In terms of the Indian Stamp Act and most State stamp duty laws, instruments
which are chargeable with stamp duty are inadmissible as evidence in case
appropriate stamp duty has not been paid. Section 35 of Indian Stamp Act deals
with the consequences of non-stamping of documents. It states that:

35. Instruments not duly stamped inadmissible in evidence, etc.-No instrument

chargeable with duty shall be admitted in evidence for any purpose by any person
having by law or consent of parties authority to receive evidence, or shall be acted
upon, registered or authenticated by any such person or by any public officer,
unless such instrument is duly stamped.

However, the inappropriately stamped instruments may be admissible as

evidence upon payment of applicable duty, along with prescribed penalty.
Other Liability:

Every person who executes or signs, otherwise than as a witness, any

instruments which is not duly stamped but the same was chargeable with stamp
duty, can be held liable for monetary fines. In case of an intentional evasion of
stamp duty, criminal liability can also be imposed.

Liability of paying stamp duty

Liability can be imposed by agreement on either of the parties of the agreement

for payment of the stamp duty. Section 29 of the Stamp Act provides the power
to the parties of agreement to decide who among the parties of the agreement
shall be liable to pay the stamp duty imposed on the concerned agreement,
which, in absence of an agreement, imposes on certain persons the liability of
paying stamp duty.

Penalty for non-compliance

The Act provides that an unstamped or inadequately stamped document will not
be enforceable in a court of law as evidence. The following provisions highlight
the effect of an inadequately stamped document:

 Section 33 of the Act provides that if it came into the notice of an

authorized person that any instrument or agreement is inadequately
stamped, then such authorized person can take in custody such agreement
or instrument.
  Section 35 provides that an inadequately stamped instrument or
agreement is not enforceable in a court of law as evidence

 Section 36 provides that such an instrument be taken on record as evidence

if only the deficient stamp duty has been paid alongwith the penalty
prescribed under the Act.

REGISTRATION ACT 1908

The Registration Act, 1908 deals with the enactments relating to the registration
of documents. Registration is the procedure through which all the documents are
recorded by a recognized officer along with other necessary information to
ensure its transparency and authenticity.

Section 17(1) of the Act provides for mandatory registration of certain documents
which are as follows:

a) gift deed of immovable property.

b) non-testamentary documents signifying any operation, declaration,

assignment, limitation and extinguishment of any right, title or interest in
immovable property worth rupees one hundred and above.

c) non-testamentary instruments granting receipt or payment of any

consideration on account of creation, limitation, assignment, declaration or
termination of such right, title or interest.

d) leases of such immovable property for a term exceeding one year or

reservation of yearly rent.
e) non-testamentary documents conveying or assigning any decree or award of
the court involving creation, declaration, assignment, limitation or
extinguishment of any right, title or interest in an immovable property worth
rupees one hundred and above.

f) The documents of contracts regarding transfer of any immovable property for

consideration for the purpose of section 53 A of The Transfer of Property Act,
1882 that has been executed on or after the inception of Registration and Other
Related Laws Amendment Act, 2001.

However, it must be noted that The State Government has the right to exclude
any lease executed in any district or part of a district, the terms granted by which
do not exceed five years and annual rents which do not exceed fifty rupees.

Optional registration of documents

Section 18 of this Act lists the following documents that may be registered under
this Act :-

a) Adoption Deed

b) Instruments which relate to share in Joint Stock company

c) Debenture issued by Joint Stock Company

d) Endorsement upon or Transfer of Debenture, which is issued by Joint Stock

Company.

e) Decree or order of the court involving creation, declaration, assignment and

extinguishment of any right, title or interest in an immovable property of value
less than one hundred rupees.
f) Document of Past transaction

g) Wills

h) Grant of immovable property by the Government.

i) Instrument of Collateral Security

j) Power of Attorney

k) Agreement to Sell

l) Agreement of Mortgage

m) Certificate of Sale

n) Counterpart of Lease

o) Promissory Note

p) Leases of immovable property not exceeding one year and leases excluded
under section 17.

When to register documents?

According to section 23 of this Act no documents except will shall be allowed for
registration unless it’s presented within four months from the date of its
execution. If the document is executed by several persons at different times, then
such document has to be furnished for registration and re-registration within
four months from the date of each execution (Section 24).

If any document executed or decree made is not presented for registration within
the prescribed time period due to any unavoidable accident or urgent necessity
then the registrar may direct to present such document for registration within
four months with a payment of fine not exceeding ten times the amount of
registration fees (Section 25). An application must be made to the sub-registrar
who shall forward it to the Registrar to whom he is the subordinate. If a
document, has been executed by any of the parties outside India for registration
after the expiry of the given time period, then such document must be presented
to the Registering Officer for registration within four months after it’s arrival in
India.

Where to register documents?

According to section 28 of this Act all the documents in relation to immovable

property must be presented for registration in Sub registrar’s Office within
whose sub-district the whole or part of the property is situated. The officer may
on special circumstances attend at the residence of any person who desires to
deposit a will or present a document for registration (s.31).

Who can apply for registration?

According to section 32 of this Act all documents to be registered under this Act
must be presented at the proper registration office by :

1. some person executing or claiming under the same or incase of a copy of a

decree or order, claiming under the decree or order;

2. representative of that person;

3. representative or assignee of such person who is authorized by power of

attorney executed and authenticated in manner hereinafter mentioned.
Every person presenting any document shall affix his passport size photograph
and fingerprints to the document provided that such document is in relation to
transfer of ownership of immovable property. Photographs and fingerprints of
both buyer and seller of the property must be mentioned in the document.

A will or authority presented by the testator or the donor for registration shall be
registered in the same manner as any other document provided that 1) the will
was executed by the testator or donor, 2) The testator or donor is dead, 3) The
person presenting the will or authority u/s 40 is permitted to present the same.

Effects of non-registration of documents

Section 49 of this act states that :

1. No document required to be registered under section 17 of this Act shall be

valid for creation, operation, declaration, limitation and assignment of any
right, title or interest in any immovable property unless it’s registered
within the specified time period.

2. The document shall not confer any power to adopt.

3. The document cannot be received as an evidence of any transaction

affecting such property or conferring such power.

Registration fees

The required amount of fees must be paid while presentation of documents.

(Section 80)