The Indian Stamp Act, 1899, is a fiscal statute that governs the levy and collection of stamp duties on various instruments, documents, and transactions in India. Stamp duty is a form of tax levied by the government to validate legal documents and make them legally enforceable. Among the key provisions of the Act, Section 35 holds significant importance as it deals with the admissibility of instruments that are not duly stamped. This article provides a detailed analysis of Section 35, its implications, and its judicial interpretation.

Text of Section 35

Section 35 of the Indian Stamp Act, 1899, reads as follows:

> "No instrument chargeable with duty 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 public officer, unless such instrument is duly stamped."

In simple terms, this section prohibits the admission of an inadequately stamped document as evidence in any legal proceeding or for any purpose unless the requisite stamp duty is paid.

Purpose of Section 35

The primary objective of Section 35 is to ensure that the government receives its due revenue in the form of stamp duty. By making the payment of stamp duty a prerequisite for the admissibility of documents, the provision encourages compliance with the Act. Additionally, it serves the following purposes:

1. Revenue Protection: It safeguards the government's revenue by preventing the use of unstamped or inadequately stamped documents.

2. Legal Certainty: It ensures that only properly stamped documents, which are legally valid, are used in judicial or administrative proceedings.

3. Deterrence Against Evasion: It acts as a deterrent against the evasion of stamp duty.

Key Elements of Section 35

1. Instrument Chargeable with Duty: Section 35 applies to instruments that are chargeable with stamp duty under the Act. This includes documents such as agreements, deeds, conveyances, and promissory notes.

2. Admissibility in Evidence: An inadequately stamped document cannot be admitted as evidence in any court or before any authority empowered to receive evidence.

3. Acting Upon, Registering, or Authenticating: Apart from being inadmissible as evidence, an unstamped or inadequately stamped document cannot be acted upon, registered, or authenticated by any public officer or authority.

4. Duly Stamped: For a document to be considered "duly stamped," it must bear the appropriate stamp duty as prescribed under the Act.

Consequences of Non-Compliance

If a document is not duly stamped, the consequences under Section 35 are severe:

- The document cannot be admitted as evidence in any legal proceeding.

- It cannot be acted upon, registered, or authenticated by any public officer.

- The document becomes legally unenforceable until the requisite stamp duty and penalty (if any) are paid.

Remedies for Inadequately Stamped Documents

While Section 35 imposes strict restrictions, the Act also provides remedies to cure defects in stamping:

1. Payment of Deficient Stamp Duty and Penalty: Under Section 35 read with Section 42, an inadequately stamped document can be validated by paying the deficient stamp duty along with a penalty. The penalty is typically a multiple of the deficient duty (e.g., 2x, 4x, or 10x, depending on the time elapsed and the discretion of the authority).

2. Impounding of Documents: Under Section 33, any person in authority (such as a judge or public officer) who comes across an inadequately stamped document is required to impound it and send it to the Collector of Stamps for determination of the proper duty and penalty.

Judicial Interpretation of Section 35

Indian courts have extensively interpreted Section 35 to address various practical scenarios. Some key judicial principles include:

1. Strict Compliance: Courts have consistently held that the provisions of Section 35 must be strictly complied with. In Government of Uttar Pradesh v. Raja Mohammad Amir Ahmad Khan, the Supreme Court emphasized that an unstamped or inadequately stamped document cannot be admitted in evidence unless the requisite duty and penalty are paid.

2. Secondary Evidence: In Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao, the Supreme Court ruled that secondary evidence of an unstamped document is also inadmissible under Section 35. This means that even a copy of an unstamped document cannot be admitted as evidence.

3. Curing Defects: Courts have allowed parties to cure defects in stamping by paying the deficient duty and penalty. In Hindustan Steel Ltd. v. Dilip Construction Co., the Supreme Court held that once the deficient duty and penalty are paid, the document becomes admissible in evidence.

4. Partial Admissibility: In some cases, courts have allowed the admission of parts of a document that are adequately stamped while excluding the inadequately stamped portions. This principle was discussed in Rikhab Chand v. Sholapur Spinning and Weaving Co. Ltd.

5. Time of Execution: The Supreme Court, in State of Bihar v. Karam Chand Thapar & Bros. Ltd., clarified that the stamp duty applicable is the one in force at the time of the execution of the document, not at the time of its admission in evidence.

Exceptions to Section 35

While Section 35 is stringent, there are certain exceptions where an inadequately stamped document may still be admissible:

1. Documents Exempt from Stamp Duty: Certain documents, such as those executed by the government or those falling under specific exemptions, are not required to be stamped.

2. Documents Not Chargeable with Duty: If a document is not chargeable with stamp duty under the Act, Section 35 does not apply.

Practical Implications

1. Due Diligence: Parties to a transaction must ensure that all documents are properly stamped to avoid legal complications.

2. Timely Payment: Stamp duty should be paid at the time of execution of the document to prevent delays and penalties.

3. Legal Advice: Seeking legal advice on the stamp duty requirements for specific documents can help avoid disputes and ensure compliance.

Conclusion

Section 35 of the Indian Stamp Act, 1899, plays a critical role in ensuring compliance with stamp duty requirements. By prohibiting the admission of inadequately stamped documents, it protects government revenue and upholds the integrity of legal instruments. However, the strictness of the provision is balanced by the remedies available to cure defects in stamping. Judicial interpretation has further clarified the scope and application of Section 35, making it an essential tool for maintaining fiscal discipline and legal certainty in India. Parties involved in legal transactions must remain vigilant about stamp duty requirements to avoid the adverse consequences of non-compliance.