What happens if stamp duty evasion detected at the time of sarfesi auction

Dear Client,
The detection of stamp duty evasion during a SARFAESI auction can lead to a series of events, potentially leading to penalties, further investigation, and even the cancellation of the sale. Section 47A of the Indian Stamp Act, 1899, may be invoked if the Registering Authority has reason to believe that the market value of the property has not been truly set forth to fraudulently evade stamp duty. If the Sub-Registrar suspects undervaluation, they can impound the sale certificate and refer the matter to a higher authority, like the Collector of Stamps, for valuation. The Collector of Stamp Duty may impose penalties for under-declaration of the value of the property. They may also conduct a further investigation to determine if the under-declaration was intentional to evade stamp duty. In the case of State of Rajasthan and others Vs. Khandaka Jain Jewellers, reported in 2008 (1) CTC 60 (SC), the Hon'ble Supreme Court held that the stamp duty shall be payable on the market value prevailing at the time of registration of the sale deed. Further, in the case of R. Jayanthi Vs. Special Deputy Collector reported in 2014 SCC Online Mad 9452, the Hon'ble Madras High Court ruled that Section 47-A could be pressed into service only when the Registering Officer has reason to believe that the market value of the property has not been truly set forth and it is so done to fraudulently evade payment of proper stamp duty. So, if stamp duty evasion is detected during a SARFAESI auction sale, the Sub-Registrar may impound the sale certificate and refer the matter for investigation, and if the investigation reveals fraudulent practices or material irregularities in the auction process, the sale may be subject to cancellation. It is recommended to consult with an Advocate experienced in SARFAESI/DRT matters for tailored advice and steps.