Response

In India even oral agreements are valid and enforceable, so an agreement made on white paper can surely be valid if it fulfills all other conditions under the law and as per the law. However, if the agreement requires to be stamped and registered then it cannot be used as an evidence of proof before a Court of law.

Under the Indian Stamp Act, 1899, Section 35 [1] specifically provides that a document which any person relies upon to be used as an evidence cannot do so if the same is not duly stamped and unregistered.

To make it enforceable and valid, you will be required to pay the deficit stamp duty alongwith penalty, if any, imposed by the collecting authority. The amount of penalty can be maximum upto 10 times of the deficit penalty amount. Imagine if the authorities pass orders stating that you have to pay an amount of Rs. 5 lacs as deficit stamp duty and impose penalty in addition upto 5 times the deficit amount which will come to Rs. 25 lacs and imagine the worse case where the penalty is 10 times.

Also it increases the litigation, delaying the process and adds up to your headache. So, to avoid any hassels you should make the agreement on a stamp paper and pay the required duty. And like a good citizen of the country abide by the law.

Reference: Section 35 in The Indian Stamp Act, 1899
35. Instruments not duly stamped inadmissible in evidence, etc.ÑNo 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: Provided thatÑ
(a) any such instrument 65 [shall], be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion;
(b) where any person from whom a stamped receipt could have been demanded, has given an unstamped receipt and such receipt, if stamped, would be admissible in evidence against him, then such receipt shall be admitted in evidence against him, then such receipt shall be admitted in evidence against him on payment of a penalty of one rupee by the person tendering it;
(c) where a contract or agreement of any kind is effected by correspondence consisting of two or more letters and any one of the letters bears the proper stamp, the contract or agreement shall be deemed to be duly stamped;
(d) nothing herein contained shall prevent the admission of any instrument in evidence in any proceeding in a Criminal Court, other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898 (5 of 1898);
(e) nothing herein contained shall prevent the admission of any instrument in any Court when such instrument has been executed by or on behalf of 66 [the 67 [Government]] or where it bears the certificate of the Collector as provided by section 32 or any other provision of this Act.

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