Supreme Court confirms, sale certificates from confirmed auction sales do not require mandatory registration
Barsha Dikshit and Neha Malu | resolution@vinodkothari.com
In the context of an auction sale conducted during liquidation or by a secured creditor, the sale certificate serves as a critical document, evidencing the transfer of title to the purchaser upon confirmation of the sale. Its legal nature and the procedural requirements such as registration and the payment of stamp duty have often been a subject of scrutiny and debate.
The Hon’ble Supreme Court in the matter of State of Punjab & Anr. v Ferrous Alloy Forgings P. Ltd. & Ors. reaffirmed the principle that a sale certificate issued by the authorised officer is not compulsorily registrable under section 17(1) of the Registration Act, 1908. The Court further clarified that compliance with Section 89(4) of the Registration Act, which provides for forwarding of a copy of the sale certificate by the authorised officer to the registering authority, is sufficient to satisfy the statutory requirements. However, in instances where the purchaser voluntarily presents the original sale certificate for registration or uses the same for some other purpose, the document is liable to attract stamp duty as prescribed under the Indian Stamp Act, 1899, or the relevant state enactments governing stamp duty.
This article examines the legal framework governing sale certificates in auction sales, analyzing the procedural and practical nuances associated with their registration and the evolving interpretations rendered by courts in the context of SARFAESI Act and Insolvency and Bankruptcy Code, 2016.
Understanding the requirements under the Registration Act, 1908
The Registration Act, 1908 provides specific exemptions and procedural guidelines concerning the registration of sale certificates:
- Exemption from Registration:
Section 17(2)(xii) of the Registration Act, 1908 exempts a certificate of sale granted to the auction purchaser of any property sold in public auction by a “Civil or Revenue Officer”, from mandatory registration. It specifically provides that such certificates do not constitute non-testamentary documents requiring registration under Sections 17(1)(b) and (c). This exemption underscores the evidentiary nature of the sale certificate, which itself is sufficient to establish the purchaser’s title without requiring additional formalities.
- Statutory filing u/s 89 (4):
Section 89(4) provides that every revenue officer granting a certificate of sale to the purchaser of immovable property sold by public auction shall send a copy of the certificate to the registering officer within the local limits of whose jurisdiction the whole or any part of the property comprised in the certificate is situate, and such officer shall file the copy in his Book No. 1.
Interplay Between Registration Act and Stamp Act in the context of sale certificate
While the sale certificate is exempt from mandatory registration, the voluntary presentation of the certificate for registration triggers the obligation to pay stamp duty. Articles 18 and 23 of the Indian Stamp Act, 1899, and the corresponding state laws governs levy of stamp duty. This duality highlights the balance between statutory exemptions and the responsibilities attached to voluntary actions by purchasers.
Discussion in the context of SARFAESI Act
In the context of SARFAESI Act, rule 9(6) of the Security Interest (Enforcement) Rules, 2002 provides that:
(6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorised officer exercising the power of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the Form given in Appendix V to these rules.
The above cited provision casts upon the “authorised officer” a statutory duty to issue sale certificate in the prescribed format, to the purchaser in whose favour the sale was confirmed/ who has complied with the payment terms.
However, in light of the provisions of section 17(2)(xii) of the Registration Act which exempts registration of sale certificate granted by a “Civil or Revenue-Officer”, the question that requires to be addressed at this juncture is whether a sale certificate issued by the “authorised officer” under the provisions of the SARFAESI Act read with Security Interest (Enforcement) Rules, 2002 requires payment of stamp duty and subsequent registration thereof?
This question was raised before the Division Bench of the Madras High Court in K Chidambara Manickam v Shakeena. Considering the relevant provisions of the Registration Act, 1908, the Madras High Court was of the view that sale of the secured asset in public auction as per section 13(4) of the Act, which ended in issuance of sale certificate under rule 9 is a complete and absolute sale for the purposes of the SARFAESI Act, 2002 and the same need not be registered as per section 17(2)(xii) of the provisions of the Registration Act, 1908.
Further, in the case of L Sangeetha v The Sub Registrar, Pollachi, Madras High Court held that as per section 17(2)(xii) of Registration Act, 1908, a certificate of sale issued by a Civil or a Revenue Officer in evidence of a sale conducted by way of public auction is not compulsorily registrable. It would be sufficient, if the document is lodged with the Registrar under section 89(4) to be filed by him in the Book-I maintained by him.
In the case of Gnanavadivu v Abdul Azeez Son & Co also, the Madras High Court held that:
90. It is to be pointed out that the sale of secured assets in public auction as per Section 13(4) of the SARFAESI Act which resulted in issue of sale certificate as per Rule 9(7) of the Rules is an absolute sale for the purpose of SARFAESI Act and the same need not be registered.
Next dealing with the question whether the “authorised officer” can be treated as the “Revenue Officer” for the purpose of sale as carried out under the provisions of the SARFAESI Act, the Tripura High Court in Mantosh Deb v State of Tripura held that:
“…this court does not have any hesitation to hold that in view of the precedents as placed before this court, the recovery officer or the authorized officer under the SARFAESI Act can be termed as the revenue officer for purpose of attract- ing the exemption as provided by Section 17(2)(xii) of the Registration Act…”
See also Bell Tower Enterprises LLP v State of T.N wherein the Madras High Court held that:
“…the law as it stands today is that an Authorized Officer, who conducts a sale under the provisions of the SARFAESI Act , would be a Revenue Officer and the certificate issued by him in evidence of such sale, would be a document which is not compulsorily registrable under Section 17(2)(xii) of the Registration Act. It would be sufficient, if the document is lodged with the Registrar under Section 89(4) to be filed by him in the Book-I maintained by him…”
Sale during liquidation under IBC
Similar concerns arise in case of sale under IBC. Regulation 33 of the IBBI (Liquidation Process) Regulations, 2016, specifies the modes of sale during liquidation, permitting either auction or private sale. Schedule I of these Regulations deals with the steps to be taken by the liquidator for the sale of assets. Para 13 of the said Schedule provides that:
“(13) On payment of the full amount, the sale shall stand completed, the liquidator shall execute certificate of sale or sale deed to transfer such assets and the assets shall be delivered to him in the manner specified in the terms of sale.”
However, there is no specific provision under the law addressing the implications of stamp duty on sales conducted during liquidation under IBC. As a result, reliance must be placed on judicial precedents for clarity.
Notably, in several judgments, the NCLT and NCLAT have held that they lack jurisdiction to adjudicate on decisions made by statutory authorities in the exercise of their duties. A relevant case in this regard is Imelt Extrusions Private Limited v Sub-Registrar and Others, wherein this position was reaffirmed.
In State of West Bengal vs. Sati Enclave Pvt. Ltd. and Others, Hon’ble High Court of Calcutta held that- “(1) On a correct interpretation of the provisions of section 47A read with section 2(16A) of the Indian Stamp Act, 1899 as applicable to the State of West Bengal and the West Bengal Stamp (Prevention of Undervaluation Instruments) Rules, 2001, the sale conducted by the Court or conducted by the Court through its officers which qualified to be an open market sale as contemplated in section 2(16B) of the Act cannot be the subject matter of exercise of powers by the registering authority under sub-sections (1) & (2) of section 47A of the Act.”
Regarding the question of whether a sale certificate issued in such cases requires registration, the NCLAT clarified in the matter of Nitin Garg v SBI, as follows:
“25. It is well settled that when an auction purchaser derives title on confirmation of sale in his favour, and a sale certificate is issued evidencing such sale and title, no further deed of transfer from the court is contemplated or required. Further, it does not require registration under Section 17(2) (xii) of the Registration Act.”
Despite these judicial clarifications, ambiguity persists regarding the status of liquidators appointed under the IBC as “authorized officers” and whether sales conducted during liquidation require registration. In the absence of explicit statutory guidance, these questions remain subject to interpretation by courts and tribunals on a case-by-case basis.
Closing thoughts
In light of the relevant statutory provisions, judgments and the analysis done above, the position of law in case of SARFAESI Act now seems to be settled that a sale certificate issued to a purchaser in pursuance of the confirmation of an auction sale is merely evidence of such title and does not require registration under section 17(1) of the Registration Act. However, in case of IBC, while the judicial precedents provide significant guidance on aspects of stamp duty and registration in liquidation sales, legislative amendments or authoritative clarification from higher courts would be instrumental in addressing the outstanding uncertainties under the IBC framework.
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