WHY DO YOU NEED TO PRINT AGREEMENTS ON STAMP PAPERS?

Introduction

Printing agreements on a stamp paper is critical for its enforceability. It determines the legal value and validity of a document. Though the agreements printed on normal papers and not a stamp paper are valid and have evidentiary value in the eyes of law. However, if the agreement is required to be stamped and registered under Indian law, then agreement on a plain paper won't be of any help and has no evidentiary value. Section 35 of the Indian Stamp Act 1899 (hereinafter Stamp Act).

Stamp paper is a foolscap-size blank paper that is printed with a revenue stamp-like currency notes or postal stamps. It's issued by the Government and carries a stamp paper value of Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 or more.

E-Stamp Paper

These days, there is also an option to purchase electronic stamp paper directly from the government. It is not only:

  • A secure and time-saving method to purchase stamp paper
  • Unique-identification numbers printed upon these papers provide a safeguard against fake stamp papers
Types of Stamp Papers

There are two types of stamp papers:

  • Judicial:

    These stamp papers are used for legal processes or court work and are related to proceedings with court cases. When any person wants to sue any other party in court, then he must pay some fee to the govt. (apart from court fee) which then is collected by the govt. through these stamps. Stamp duty paid for judicial papers is covered under the Court Fees Act, 1870.

  • Non-Judicial:

    These stamp papers are generally used for agreements or documents like Contracts, Deeds, Property Sale-Purchase transactions, etc. Charges paid for availing stamp papers are collected by the govt. through these stamps. These stamps are used as per the rates determined by the government for recovery of the stamp duty.

How stamp papers are more valuable than normal papers?

According to the basic laws of the land like the Indian Contract Act, none of the sections provides for an agreement to be executed on a stamp paper. However, according to the Stamp Act, it makes stamping compulsory for several instruments including agreement. Section 35 of the Stamp Act specifically provides that an instrument which is chargeable with stamp duty upon which any person relies upon as a piece of evidence, cannot hold any evidentiary value if it's not duly stamped and unregistered.

Schedule I of Stamp Act, 1899 mandates few documents which are necessarily required to be stamped. However, this is not an exclusive list and stamping a document depends upon local laws. A document executed on proper stamp paper inspires confidence and lends credibility to the document which is required to be proved under Section 69 and 70 of the Indian Evidence Act.

The validity of a stamp paper

Stamp duty is the tax levied on the legal acknowledgment of documents. According to law, it is mandatory to pay stamp duty to the Central /State Government when a certain transaction takes place. Stamps value can either be fixed or may vary with the value of instruments.

Though every stamp paper carries a monetary value, it can be treated neither as a negotiable instrument nor as a currency note. Documents having legal implications like Lease Agreement, buying and selling of property, business/contract agreement, loan agreement, power of attorney, gift deed among others are executed on stamp papers to make them legitimate and legally enforceable.

Another outstanding feature of Stamp papers is with regards to its future usability. As per section 54 of the Indian Stamp Act, if a stamp is not damaged or the user has no use of such stamp in near future, one may return those stamp/s to the collector and seek a refund within a period of 6 months only after a deduction of 10 Paisa per Rupee. Since the state also has the power to regulate laws related to stamp paper, the amount of deduction may vary across states. In Thiruvengada Pillai v. Navaneethammal , it was held that a stamp paper is eligible to be used even beyond 6 months. It was further observed that Section 54 of the Stamp Act only bars the refund process and doesn't restrict the use of that stamp paper even after it's not used for years. In Short, there's no prescribed period of limitation for the validity of stamp paper. However, some states like Maharashtra and Gujrat have come up with laws that restrict the use of stamp paper beyond 6 months of its purchase and will be invalid.

It should also be noted that old stamp paper can be used for a new agreement but the purpose of using stamp paper should be the same. According to Section 29 of the Indian Stamp Act, Stamp vendor makes an entry in the government records which selling the stamps which includes details of the person buying the stamp and the purpose for which stamp is being bought. Such unused stamp paper can be used for executing a new agreement of the same nature. For example, if two parties have entered into an agreement for sale deed and but bought extra stamp papers. Such extra stamp papers can again be used by the same person in entering any other agreement for sale deed. If, however, the price of such stamp paper is of lesser value than prescribed, one is required to purchase stamp paper of the difference. Also, one can consider returning such unused stamp paper within a limited prescribed period. Further, an agreement of a prior date can also be executed on a stamp paper of a new date. For example, if an oral agreement was made on a prior date but later, it was later acknowledged through written agreement, the same can be executed with stamp paper of a new date.