Stamping instruments in the midst of COVID-19
While the world has come to a haul restricting physical movements, there is no stopping the internet and the ever growing technology. On the same lines, India is witnessing ongoing business and commercial transactions, though partially. Every formal business arrangement is undertaken and performed vide execution of instruments, which in business terms can be termed as “contracts” or “agreements”. The Indian Stamp Act, 1899 (the “Stamp Act”) lays down the law relating to tax levied in the form of stamps on instruments recording transactions. Under the Constitution of India, the power to levy tax on instruments is divided amongst union and state legislature. The central government can levy stamp duties on instruments enlisted in Entry 91 of the Union List and stamp duty by state government is levied as per Entry 63 of the State List.
During this unprecedented times, the physical stamping of instruments have become obsolete and yet again the internet has come to a rescue. But the facility of e-stamping can only be availed in few states/UTs in India like NCT of Delhi, Karnataka, Tamil Nadu, Himachal Pradesh etc. This simply means that in other states/UTs where the provision of e-stamping is not available, shall have to wait for the lockdown to be lifted in order to proceed for physical stamping of the instruments. But does that mean that the unstamped instruments so executed by businesses are illegal? The answer is no. As per Section 35 of the Stamp Act, an unstamped document is not illegal per se, but cannot be enforced in a court of law, i.e., it does not carry any evidentiary value in the eyes of law under the provisions of the Indian Evidence Act, 1872 and cannot be used in legal proceedings. But this irregularity can be cured by paying the stamp duty and the applicable penalty on the instrument. Therefore, an unstamped contract does not ipso facto becomes illegal and the parties can still enter into valid contracts as per the provisions of the Indian Contract Act, 1872 read with the provisions of the Information Technology Act, 2000 (“IT Act”). On the basic foundation of “offer” and “acceptance” with valid “consideration”, the parties can execute agreements vide putting their digital signatures instead of wet signatures and the same can be covered under the ambit of e-contracts under Section 10A of the IT Act, except the transactions in relation to conveyance of immovable properties because such transfers are regulated under the provisions of the Transfer of Property Act, 1882. The apex court of India in the case of Trimex International FZE Ltd. Dubai vs. Vedanta Aluminium Ltd., India (2010) 3 SCC 1, have upheld the validity of a contract executed over email offer and acceptance.
Having said the above, the significance of stamping an instrument cannot be overemphasized because there is no value of a promise if the same cannot be enforced. Therefore, the non- availability of e-stamping facility in a state is a stumbling block. The Government of Karnataka, NCT of Delhi, have adopted the service of Stock Holding Corporation of India Limited, an agency incorporated by the Government of India for the purpose of e-stamping. On the other hand, the Government of Maharashtra introduced the system of Electronic Secure Bank and Treasury Receipt (e-SBTR) system enabling citizens to make online payment of stamp duty and registration. The Maharashtra Stamp and Registrations Department vide its circular titled “Difficulties in payment of stamp duty on loan documents and notice of intimation during lockdown” dated 27th April, 2020 (“Circular”), has introduced certain relief measures for the residents. As per the Circular, in view of the provisions of the Maharashtra Stamp Act, 1958 read with General Clauses Act, 1897, for all instruments executed during the lockdown, the stamp duty can be paid on the first working day post the lifting of the lockdown and such document shall be treated as properly stamped under Section 17 of the Stamp Act. If for some reason the document could not be stamped on such first working day, the document can also be presented for adjudication before Collector of Stamps within one month from the lifting of the lockdown. With the help of online banking facilities, all the e-stamping online services are being made available through Government Receipt Accounting System to the residents of the state. In view of the above, it can be inferred that all hopes are not yet lost and the businesses can endeavor to continue their operations electronically without much hurdles.