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M/S MSD Real Estate LLP v. Collector of Stamps

Civil Appeal · 2020 INSC 554Decided 17 Sept 2020
Civil Appeal No. 3194 of 2020
Justice Ashok Bhushan · Justice R. Subhash Reddy · Justice M.R. Shah

Background

A Trust owning the "Lantern Hotel" property in Indore was found liable for a deficiency in stamp duty and a heavy penalty on a 2005 deed, a liability that remained unresolved for years through separate litigation. The appellant, MSD Real Estate LLP, bought the property afterward, deposited the stamp duty, and offered to pay the penalty through post-dated cheques, but municipal and revenue authorities still issued recovery notices and rejected its building-permission application, which the appellant challenged before the High Court.

Decision Breakdown

The Supreme Court held that the High Court was right to reject payment of the penalty by post-dated cheques, and that the appellant, as a subsequent purchaser of the property, remained liable for the outstanding penalty attached to it. However, relying on its own order on the same day in a connected appeal that reduced the penalty from ten times the stamp duty to five times, the Court directed the parties to act on that reduced figure, and it noted the appellant was free to re-apply for building permission once the reduced penalty was paid, as the High Court had already directed. The Court declined to examine separate, later disputes over mutation and eviction notices, holding those fell outside the scope of this appeal and leaving the parties free to pursue separate remedies for them.

Lesson Learnt

When you purchase property, you can inherit the seller's unresolved tax or stamp-duty liabilities attached to that property: due diligence on pending dues before a purchase is essential, since a buyer cannot simply pay by post-dated cheque to sidestep a government recovery demand.

Official source (sci.gov.in)View Judgment (PDF)

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