In a major ruling reinforcing statutory supremacy over executive directions, the Supreme Court of India has held that the State cannot impose additional verification requirements for cooperative societies seeking stamp duty exemption when such conditions are not provided under the law. The judgment quashes a 2021 Memo issued by the Jharkhand Government, which required cooperative societies to obtain a recommendation from the Assistant Registrar before claiming exemption under Section 9A of the Indian Stamp (Bihar Amendment) Act, 1988.
The decision, delivered in ADARSH SAHKARI GRIH NIRMAN SWAWLAMBI SOCIETY LTD. v. State of Jharkhand, will have sweeping implications for property transfers executed by cooperative societies and for executive overreach in fiscal matters.
Background: Stamp Duty Exemption Under Section 9A
Section 9A of the Indian Stamp (Bihar Amendment) Act, 1988 provides exemption from stamp duty to cooperative societies when they transfer immovable property to their members. This exemption is a legislative recognition of the functioning of housing and welfare societies, and is meant to facilitate affordable housing through cooperative structures.
However, in an attempt to curb alleged misuse of this exemption, the State of Jharkhand issued a Memo requiring:
- A recommendation from the Assistant Registrar, Cooperative Societies
- As a pre-condition for registering such transfers without stamp duty
This additional requirement was challenged as illegal, ultra vires, and contrary to the statute, ultimately leading to the Supreme Court’s intervention.
Supreme Court: Executive Cannot Add Conditions Not Contained in the Statute
A bench comprising Justices P.S. Narasimha and Atul S. Chandurkar struck down the Memo as illegal, superfluous, and based on irrelevant considerations. The Court held that the executive cannot create new conditions that the statute itself does not prescribe.
The Court observed:
“The requirement of recommendation by the Assistant Registrar as a pre-condition for claiming stamp duty exemption is an irrelevant consideration leading to illegality in action.”
The bench noted that Section 9A contains no such requirement, and therefore the State could not impose extra procedural hurdles under the guise of preventing misuse.
Certificate of Registration Is Conclusive Proof of Existence of a Cooperative Society
A crucial part of the judgment rests on Section 5(7) of the Bihar and Jharkhand Cooperative Societies Act, which states that:
- Once a cooperative society is registered,
- And a registration certificate is issued,
- It is conclusive proof of the society’s existence and continuation as a body corporate.
The Supreme Court emphasised this statutory finality:
“Once a certificate of registration is issued, the State and its instrumentalities are bound by it, and no further question should arise about the existence or authenticity of the cooperative society.”
The Court held that the Assistant Registrar’s additional certification or recommendation adds no value and is not contemplated by law.
Judgment Criticises Overreach and Incorrect Executive Reasoning
The State had argued that the additional verification mechanism was introduced to prevent fake or shell societies from misusing stamp duty exemption. The Court rejected this justification, stating that:
- The purpose of the verification is already fulfilled by statutory certification.
- The Memo was based on irrelevant considerations, since the statute itself provides the mechanism for confirming authenticity.
- Preventing misuse cannot justify adding unauthorized conditions that restrict statutory rights.
The bench further observed:
“Executive actions that mandate unnecessary and excessive requirements must equally be set aside as illegal.”
This principle reinforces judicial scrutiny over executive decisions that create obstacles without statutory basis.
Executive Cannot Override Statutory Scheme
The Supreme Court categorically held that the Principal Secretary, who issued the Memo, acted without authority. When a statute provides a complete mechanism for verification and eligibility, the executive:
- Cannot create parallel conditions
- Cannot restrict statutory benefits
- Cannot supplement the law without legislative mandate
This strengthens the constitutional principle that executive instructions cannot override statutory rights.
Setting Aside the High Court Judgment
The Jharkhand High Court had previously upheld the government’s Memo. However, the Supreme Court reversed the High Court ruling, holding that:
- The High Court failed to consider the statutory effect of Section 5(7)
- It did not examine the illegality of adding extra-statutory conditions
- It overlooked the fact that stamp duty exemption is a statutory entitlement, not a matter of executive discretion
Accordingly, the Supreme Court allowed the appeal and restored the exemption for the cooperative society.
Key Takeaways From the Judgment
1. Statutory Rights Cannot Be Restricted by Executive Orders
Stamp duty exemption is a statutory benefit. Any extra condition not provided by the Act is unenforceable.
2. Registration Certificate Is Final Proof
Once a cooperative society is registered, the State cannot question its legitimacy through additional verification.
3. Executive Overreach Will Be Checked
Courts will intervene where the government imposes unnecessary, oppressive, or unauthorized requirements.
4. Preventing Misuse Cannot Justify Illegal Conditions
The State must rely on existing statutory mechanisms, not inventive administrative hurdles.
5. Important Precedent for Cooperative Housing Sector
The judgment strengthens cooperative societies’ right to smooth property transfers without facing arbitrary barriers.
Implications for Cooperative Societies
This ruling brings enormous relief to thousands of housing cooperative societies across Jharkhand, Bihar, and potentially other States with similar frameworks. Key implications include:
- Faster registration of property transfers
- Reduced bureaucracy and paperwork
- Protection from arbitrary rejection by sub-registrars
- Strengthened legal certainty in cooperative transactions
- Prevention of harassment or delays under the guise of “verification”
The judgment also signals to State authorities nationwide that executive instructions must strictly conform to statutory language.
Conclusion
The Supreme Court’s judgment in Adarsh Sahkari Grih Nirman Swawlambi Society Ltd. v. State of Jharkhand is a landmark affirmation of statutory supremacy and cooperative society rights. By striking down an executive Memo that imposed unauthorized verification requirements, the Court has ensured that stamp duty exemptions under Section 9A cannot be diluted by bureaucratic overreach.
This ruling will help streamline property transactions and prevent unwarranted interference, ensuring that cooperative societies can fully enjoy the legal benefits conferred upon them by the legislature.
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