ISSUE: - STAMP DUTY APPLICABILITY ON DEMAT POWER OF ATTORNEY

IN RAJASTHAN,

APPLICABLE LEGAL PROVISIONS: - Indian Stamp Act, 1899, Rajasthan stamp

Act, 1998, Registration Act, 1908

OBSERVATIONS: -

Article 44 of Rajasthan Stamp Act, 1998 deals with Power of Attorney and the same
is reproduce hereunder:

Article Power of Attorney Stamp Duty

44 (a) when executed for the sole purpose of procuring the 100 rupees
registration of one or more documents in relation to a
single transaction or for admitting execution of one or
more such documents;
(b) when authorizing one person or more to act in single 100 rupees
transaction other than the case mentioned in clause (a);
(c) when authorizing not more than five persons to act 200 rupees
jointly and severally in more than one transaction or
generally;
(d) when authorizing more than five persons but not more 200 rupees
than ten persons to act jointly and severally in more than
one transaction or generally
(e) (i) when given for consideration and authorizing the 5% of the
attorney to sell any immovable property; consid1eration
(ii) when given for consideration and authorizing the 5% of the
attorney to sell any immovable property; (Female consid1eration
SC/ST/BPL)
(iii) when given for consideration and authorizing the 5% of the
attorney to sell any immovable property; (Female other consid1eration
than SC/ST/BPL)
(ee) when power of attorney is given without
consideration to sell immovable property to –

(i) the father, mother, brother, sister, wife, husband,

son, daughter, grandson or grand daughter of 2000 rupees
the executant

(ii) any other person 2% of the

market value
(eee) When given to promoter or developer by whatever 5% of the
name called for construction on, or development of, or sale market value
or transfer (in any manner whatsoever) of, any immovable
property,
(f) In any other case - 50 rupees for
each person
authorised.

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Article 44 of Rajasthan Stamp Act has categorized Power of Attorney into 8 different
categories, i.e. Clause ‘a’ to ‘e’, ‘ee’, ‘eee’ and ‘f’. We are not concerned with Clause
‘e’, ‘ee’ and ‘eee’ as the same pertains to immovable property. Clause ‘a’ of Article 44
deals with Power of Attorney for registration of documents. Thus, Clause ‘a’ is also
not applicable to the matter under consideration.

Clause ‘b’ to ‘d’ of Article 44 deals with Power of Attorney authorizing to act in
certain transactions. We shall now deal with Clause ‘b’ to ‘d’ in more details.

Clause ‘c’ of Article 44 provides as under:

“when authorizing not more than five persons to act jointly and severally in more than one
transaction or generally”

Clause ‘d’ of Article 44 provides as under:

“when authorizing more than five persons but not more than ten persons to act jointly and
severally in more than one transaction or generally”

By using the term “generally” together with “in more than one transaction”, in
Clause ‘c’ and ‘d’ of Article 44, the intention of the legislature appears to be to
include Power of Attorney to do various acts on behalf of the executant or to give
general authority, i.e. General Power of Attorney. Thus, given that fact that our
client executes Power of Attorney only for the purpose of security transactions,
Clause ‘c’ and ‘d’ is not applicable.

However, Clause ‘b’ of Article 44 provides as under:

“when authorizing one person or more to act in single transaction other than the case
mentioned in clause (a)”

By conjoined reading of Clause ‘b’ and Clause ‘c’ & ‘d’, an inference may be drawn
that use of the term “single transaction” in Clause ‘b’ means one particular nature of
transaction and not various nature of transactions or general authority (i.e. General
Power of Attorney).

Accordingly, Power of Attorney issued by the client authorizing the company for
transactions pertaining to his account maintained with ARSSBL would fall under
Clause ‘b’ of Article 44 and shall be subject to stamp duty of Rs. 100/-.

It is also noteworthy to mention here that under Article 44, stamp duty of Rs. 500/-
is not chargeable in any category of Power of Attorney. It is the Registration fee
which is Rs. 500/- for Power of Attorney under Clause ‘a’ to ‘d’ of Article 44. The
same is reflecting in the applicable fees structure as on 06.04.2016 available on the
official site of Government of Rajasthan, Registration & stamp Department (fees
schedule annexed herewith).

It is further worth to take note that Legal counsel Shri N. K. Maheshwari in their
letter/opinion dated 05.05.2016 erroneously consider that Article 44 (a) is applicable
for the stamp duty payable on Demat power of attorney and the rate of stamp duty
payable on Demat POA is Rs. 100/-. However Article 44 (a) is not applicable in our
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case as the same deals with the POA which intent to be executed for the purpose of
procuring the registration.

Registration & Notary of POA

Registration of POA is optional under Article 44 (c) of Rajasthan Stamp Act as well
as under Registration Act, 1908, however the Registration fees for power of attorney
prescribed by Rajasthan government in exercise of power conferred under Section 78
(1) (a)is Rs. 500/-. Further, as per CDSL Operating instruction 3.4.4, “The POA
should be duly stamped. Notarization thereof, is at the discretion of DP. NSDL
Operation manual and SEBI Master Circular for Depository are silent on the said
point.

Penal Provision for non-payment of adequate stamp duty

Section 37 (1) of Rajasthan Stamp Act, 1998, (hereinafter referred to as “the Act”)
provides that every person having by law or consent of parties, authority to receive
evidence, before whom any instrument chargeable with duty is produced or comes
in the performance of his functions, shall necessarily impound the same, if it appears
to him that such instrument is not duly stamped.

Moreover, Section 39 of the Act, inter alia mandates that no instrument chargeable
with duty under the Act shall be admitted in evidence for any purpose by any
person having by law or consent of parties, authority to receive evidence, or shall be
acted upon, registered or authenticated by any such person or by any such public
officer, unless the said instrument be admitted in evidence on payment of the duty
with which the same is chargeable or in the case of an instrument be admitted in
evidence on payment of stamp duty with which the same is chargeable or in the case
of an instrument insufficient stamped, of the amount required to make up such duty
and a penalty of one hundred rupees or ten times amount of deficient portion
thereof, whichever is higher.

Furthermore, as far as imposition of penalty is concerned, Section 44 of the Rajsthan

Stamp Act provides ad-infra:-

Collector’s Power to stamp Instrument impounded

(1) When the Collector,-

(a) Impounds any instrument under Section 37, or
(b) Receives any instruments sent to him under sub-section (2) of Section 42,
and such instrument is chargeable with a duty under this Act, he shall
adopt the following procedure,-
(i) If he of opinion that such instrument is duly stamped or is not
chargeable with duty, he shall certify by endorsement thereon that
it is duly stamped, or that it is not so chargeable, as the case may be;
(ii) If he is of opinion that such instrument is chargeable with duty and
is not duly stamped, he shall require the payment of proper duty or
the amount required to make up the same, together with a penalty
of one Hundred Rupees; or, if he thinks fit and amount not
exceeding ten times the amount of proper duty or of the deficient

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 portion thereof, whether such amount exceeds of falls short of one
hundred rupees”

Thus under the purview of the aforesaid Section of the Rajasthan Stamp Act, a
discretion is vested in collector to levy a penalty of Rs. 100/- or an amount not
exceeding 10 times the amount of proper duty.

PLACE OF EXECUTION AND OUR RECOMMENDATION

There is various judgement of Hon’ble Supreme Court (one of the same is annexed
herewith), stamp duty is calculated & payable as per the rates applicable in the state
wherein the document is first executed. As Power of Attorney is not a bi-party
document (i.e signed and executed by the client only), factually stamp duty is
payable in the state where the client resides and affix his signature. However in
order to eradicate complexity of payment of stamp duty on basis of place of
execution in POA taken from the client, we should mention the place of execution of
as “JODHPUR RAJASTHAN”.