Class notes

Learning objectives: 1. To understand what stamping is and to know how stamp duty is calculated and
paid; 2. Impact on stamp duty when documents are brought from outside India or are moved from one
state to another; 3. Consequences of not paying or underpaying stamp duty; 4. Understand in which
cases registration of contracts is required and how it is done; and 5. Learn where attestation,
notarisation and apostillation of documents is required and how it is done. There are certain procedural
requirements to be observed for contracts to be legally enforceable under law. The most frequent legal
requirements to be observed to ensure your contracts are enforceable are stamp duty, registration and
in some cases apostillation and notarization. We will discuss each of them in detail below. Their
applicability with respect to loan and security documentation is explained in a subsequent module.
Stamp Duty What is stamp duty and why is it required? Stamping means the payment of stamp duty on
a document. Stamp Duty is a form of ‘tax’ required to be paid on documents. This payment can be made
by purchasing stamp paper or e-stamp paper from authorized vendors appointed by the government or
by means of online payment or by way of franking of documents. It may be noted that the applicability
of stamp duty flows from central as well as state legislation, since ‘stamp duty’ appears as an entry in
the Union and State lists in the seventh schedule to the Constitution of India. Rates of stamp duty in
respect of bills of exchange, cheques, transfer of shares etc. are in the Union list while instruments not
listed in the Union List are covered in the state list. How do you determine the state law which applies to
a particular document? Stamp duty is governed by the Indian Stamp Act, 1899. Schedule 1 of the Act
prescribes the rates of stamp duty on different kinds of ‘instruments’. For instruments within the state
list, most states have inserted their own Schedule 1 or Schedule 1A. For example, Delhi follows this
practice. Some states have passed their own stamp duty legislation. For example, Maharashtra and Goa
follow the Bombay Stamp Act, 1958 (with different schedules applicable to each state) and Karnataka
follows the Karnataka Stamp Act, 1957. However, sometimes, transactions can span multiple states. It is
possible that the p