As the banking system continues to deal with the increase in defaults, it becomes imperative and puts the spotlight back on the underlying documentation to be used for enforcement. It is common knowledge that bank and financial institutions are mindful as to whether a document through which their rights flow are adequately stamped or not. Stamp duty (or stamp tax) plays a significant role in determining the structuring of a transaction and therefore the nature of document to be executed. Being a state subject, significant time also gets expended in evaluating the stamp friendly jurisdiction and establishing nexus for execution in that state. Even at the time of recovery and enforcement, the issue of enforceability and admissibility of a particular document hinges, inter alia, on whether the document has been properly and adequately stamped.
Insertion of Section 30-A to the Maharashtra Stamp Act (“Mah Stamp Act”) vide an amendment in May 2013 created a lot of noise in the industry. Section 30-A makes banks, non-banking financial companies, housing finance companies and such other financial institutions (“Banks/FIs”) liable to:
(a) pay proper stamp duty on instruments mentioned under Section 30 (a) to (g) of the Mah Stamp Act executed by it or in its favour;
(b) verify that adequate stamp duty has been paid on instruments executed prior to the amendment;
(c) impound the instruments falling under a) and b) on which proper stamp duty has not been paid and send the same to the relevant Collector of Stamps (“Collector”) for recovery; and
