Collector Becomes Functus Officio Once Duty Is Determined: Punjab & Haryana High Court Quashes Penalty On Stamp Duty Deficiency

"Section 31 does not postulate anything further to be done by the Collector. After giving his opinion under Section 31, the duties and powers of the Collector under Section 31 come to an end." Punjab and Haryana High Court, in a significant ruling, held that the Collector lacks the statutory competence to impose a penalty or enforce the recovery of deficient stamp duty when an instrument is referred purely for adjudication under Section 31 of the Indian Stamp Act, 1899.

A bench of Justice Kuldeep Tiwari observed that the Collector’s mandate concludes strictly upon determining the proper duty, rendering any subsequent penal order unsustainable.

Parking Contract Attracts Stamp Duty As Lease

The case arose from a tender floated by the Municipal Corporation Chandigarh for operating 32 paid parking sites. The petitioner emerged as the highest bidder at over ₹5 crores per annum and executed a licence deed after paying a stamp duty of ₹3,34,020. During an internal audit, it was discovered that the petitioner had incorporated a misleading recital understating the annual rent calculation to evade proper stamp duty.

The primary question before the court was whether a parking site contract operates as a simpliciter management agreement or constitutes a lease deed under the Stamp Act. The court was also called upon to determine whether the Joint Commissioner could impound the document after contract expiry and if the Collector could levy penalties under Section 31 adjudication.

Parking Contracts Create Right To Collect Tolls Court Rules Parking Contract Is A Lease Deed

Analyzing Section 2(16)(c) of the Stamp Act, the court emphasized that a "lease" explicitly includes any instrument by which tolls of any description are let out. Citing the Supreme Court precedent in Nasiruddin v. State of Uttar Pradesh, the bench reiterated that municipal contracts for collecting parking fees or local taxes partake in the character of a lease.

"By fiction, any instrument by which tolls of any description are let is considered as lease for the purpose of payment of stamp duty."

The bench dismissed the petitioner's argument that the document was a simpliciter operation and management agreement attracting nominal stamp duty. The court affirmed that municipal parking contracts create extensive rights and liabilities, attracting higher stamp duty as lease deeds.

Administrative Impounding Is Valid Post-Expiry Joint Commissioner Competent To Act On Audit Objections

Addressing the contention that authorities became functus officio after the parking contract expired on January 31, 2023, the court held that administrative scrutiny by an audit department is an ongoing statutory duty. The bench clarified that the doctrine of functus officio applies strictly to judicial and quasi-judicial finality, not to executive and administrative decision-making.

"If the doctrine of functus officio were to be applied to the sphere of administrative decision-making by the state, its executive power would be crippled."

The court further ruled that the Joint Commissioner of the Municipal Corporation holds a public office within the meaning of Section 33 of the Stamp Act. The statutory requirement for State Government notification arises only in cases of doubt, and a municipal joint commissioner's public authority cannot be reasonably questioned.

Collector Cannot Levy Penalty Under Section 31 Adjudication Mechanism Excludes Enforcement Powers

Revisiting the landmark Supreme Court ruling in Government of Uttar Pradesh v. Raja Mohammad Amir Ahmad Khan, the High Court underscored that Section 31 of the Stamp Act is a complete and self-contained code. When an instrument is brought to the Collector solely for an opinion on duty, the Collector’s powers end the moment the proper duty is determined.

"Section 31 does not postulate anything further to be done by the Collector. After giving his opinion under Section 31, the duties and powers of the Collector under Section 31 come to an end."

The bench distinguished between a reference made under Section 31 for opinion and an instrument forwarded under Section 38 for penal recovery. Because the Municipal Corporation forwarded the impounded deed specifically under Section 31, the Collector exceeded jurisdiction by slapping a 50% penalty and ordering coercive recovery.

Relief Granted To Petitioner Partly

Partly allowing the writ petition, the High Court quashed the portion of the Collector's order imposing the 50% penalty and directing direct recovery. However, the court reserved liberty for the Municipal Corporation to pursue recovery of the assessed deficient stamp duty through proper legal channels.

Date of Decision: 10 August 2026