Allahabad High Court: In a petition seeking to adjourn stamp recovery proceedings pending before the Collector/District Magistrate, the Single Judge Bench of Piyush Agrawal, J., held that there was no Supreme Court order restraining the stamp authorities from initiating proceedings when an agreement was found deficient in stamp duty. It was undisputed that an Arbitrator had already been appointed, and the matter was pending before the Arbitral Tribunal. The Court concluded that the stamp authority’s proceedings were not without jurisdiction.
The Court further clarified that the issuance of a show cause notice does not constitute an adverse order and is necessary to ensure the noticee is aware of the grounds for proposed action and has a fair opportunity to respond. Since the challenge to the show cause notice was premature, the Court declined to intervene and dismissed the writ petition.
Analysis and Decision
The Court found no observation or direction from the Supreme Court that had restrained the stamp authorities from initiating proceedings in cases where an agreement was found to be deficient in stamp duty. It was not disputed between the parties that an Arbitrator had already been appointed and that the matter was pending before the Arbitrator. Therefore, it was not a case involving the appointment stage of an Arbitrator. Accordingly, it could not be held that the proceedings initiated by the stamp authority against the petitioner were without jurisdiction.
The Court noted that, in the present case, the respondent authority had issued a notice to the petitioner, requiring him to show cause as to why an order determining deficiency of stamp duty should not be passed. This fact was not disputed. It was, however, argued that since the show cause notice explicitly specified the imputations against the petitioner, it indicated that the respondent authority had already made up its mind to pass an order against him. On this basis, it was contended that the notices were premeditated, and that the entire exercise proposed to be undertaken in furtherance thereof would amount to a mere formality.
The Court highlighted that the form and content of a show cause notice were crucial before deciding whether to impose a finding of deficiency in stamp duty. It stated that a show cause notice had to clearly mention that the imposition of stamp duty deficiency was proposed, in order to provide the noticee with an adequate and meaningful opportunity to respond. Accordingly, such a notice was required to include a statement of imputations, detailing the alleged breaches and defaults, so that the noticee was afforded a fair chance to rebut the allegations.
The Court further emphasised that it was essential for the notice to specify the particular grounds on which the proposed action was based, to enable the noticee to effectively respond to the case against him. In the absence of such particulars, a person could not be said to have been granted a reasonable opportunity of being heard, as required by the principles of natural justice.
The Court stated that a fair hearing to the party prior to the imposition of stamp duty thus became an essential precondition for the proper exercise of power and for a valid order to be passed pursuant thereto. The applicability of the principle of audi alteram partem and the requirement of issuing a show cause notice were also deemed imperative before the passing of any such order for the imposition of stamp duty.
To comply with the principles of natural justice, the Court held that a show cause notice had to clearly specify the consequences that might ensue if the noticee failed to satisfactorily respond to the grounds on which the proposed action was based. The notice not only needed to be adequate in content but also had to explicitly and unambiguously set out the reasons necessitating the proposed action. Particularly in matters involving the proposed demand for deficiency of stamp duty, the show cause notice was required to strictly adhere to the principles of natural justice. To fulfil this requirement, it had to meet the twin standards of clearly stating the grounds on which the stamp authorities sought action, and the specific action proposed, in the event that the noticee failed to provide an adequate response.
The Court stressed that procedural fairness necessitated that persons liable to be adversely affected by a contemplated administrative decision must have been given adequate notice of the proposed action, so that they were not taken unfairly by surprise, and were in a position to make submissions or representations against the proposed action, to appear at the hearing, and to effectively answer the charges they had to meet. A proper hearing, the Court held, must always have included an opportunity to be informed of the case against them.
The right to know and to effectively respond to the charges was recognised as a fundamental feature of any administrative adjudicatory process. It was a basic principle of fairness that a party should have had prior notice of the case against them and an opportunity to respond. The charges, the Court stated, were to be made known specifically and with particularity to ensure that the affected party was not taken by surprise and had an effective opportunity to present their defence.
The Court rejected the contention of the petitioner, that the issuance of the show cause notice was a mere empty formality on the ground that the imputations stated in the notice indicated that the authority had already made up its mind. The Court observed that the grounds/imputations specified in the notice were intended to elicit a response from the petitioner in respect of the grounds on which the proposed action was based.
It was open to the petitioner to rebut the allegations mentioned in the notice by submitting a reply, and it was incumbent upon the respondent authority to consider such a reply and thereafter pass an order only after affording a reasonable opportunity to the petitioner.
The Court reiterated that the mere issuance of a show cause notice did not amount to an adverse order that could be held to affect the rights of the parties. The necessity of issuing a show cause notice and the requirement of specifying the grounds on which the action was proposed were held to be essential prerequisites, intended to ensure that the noticee was made aware of the grounds and had an adequate opportunity to rebut the same. The Court observed that if the show cause notice did not clearly state the grounds and the proposed action, the noticee would be taken by surprise and would not have a fair opportunity to address the allegations during the subsequent proceedings.
Having regard to the facts and circumstances of the case, the Court held that the challenge raised against the show cause notices at this stage was premature.
Accordingly, the Court declined to exercise its extraordinary jurisdiction under Article 226 of the Constitution of India and dismissed the writ petition at this stage.
[Dlf Home Developers Pvt Ltd v. State of U.P, WRIT – C No. 13451 of 2025, decided on 09-05-2025]
Advocates who appeared in this case:
Counsel for Petitioner :- Mr. Pinaki Mishra, Sr. Adv. Mr. Shashi Nandan, Sr. Adv. Mr. Naveen Sinha, Sr. Adv. & Mr. Rohan Gupta
Counsel for Respondent :- C.S.C., Mr. Manish Goel, AAG, Mr. Jagat Bhushan, Sr. Adv. Mr. Anurag Khanna, Sr. Adv.
Buy Constitution of India HERE
