On May 26, 2025, the Kerala High Court delivered a significant judgment regarding the applicability of stamp duty on asset reconstruction agreements under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The court clarified that there is no blanket exemption from stamp duty for such agreements, even when read in conjunction with Section 8F of the Indian Stamp Act.

The case involved J.C. Flowers Asset Reconstruction Pvt. Ltd., which had entered into asset reconstruction agreements with two banks. The company attempted to register these agreements, which were executed on stamp paper worth INR 1 lakh, and offered to pay a registration fee of INR 25,000. However, the registering authority refused registration, citing incorrect stamp duty and registration fees. The company approached the High Court seeking directions to register the agreements.

• **Section 5(1)(b) of the SAR … **: This section pertains to the acquisition of rights or interests in … by an asset reconstruction company through agreements.
• **Section 5(1A … **: This provision exempts documents executed by banks or financial institutions in favor of asset reconstruction companies from stamp duty, provided the acquisition is for asset reconstruction or securitization purposes.
• **Section 8F of the Indian … **: This section outlines the stamp duty exemptions applicable to certain documents executed by banks or financial institutions.

The Kerala High Court examined the interplay between these provisions and concluded that:

No Complete Exemption: There is no comprehensive exemption from stamp duty under Section 8F of the … when read with Section 5(1A

Interpretation of Non-Obstante Clauses: The court applied the “golden rule” of interpretation, emphasizing that non-obstante clauses do not automatically override other statutory provisions unless explicitly stated.

Strict Construction of Exemptions: Provisions granting exemptions must be strictly construed, and the court cannot expand the scope of such exemptions beyond their clear intent.

Consequently, the court directed that the asset reconstruction agreements be registered in accordance with the stamp duty and registration fee rates specified in Government Order (Ms.) No. … , which caps the stamp duty at INR 1 lakh and the registration fee at INR 25,000. However, this direction is subject to any future amendments to the Stamp Act that may alter these provisions.

This ruling underscores the importance of adhering to the specific stamp duty and registration fee requirements for asset reconstruction agreements, even when statutory exemptions are in place. Asset reconstruction companies must ensure compliance with the applicable provisions to avoid challenges during the registration process.

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