Stamp Duty – Bombay Stamp Act, 1958 – Agreement to Sell Deemed as Conveyance When Possession Delivered – Courts Impounded Document for Recovery of Duty and Penalty

Impounding and Recovery of Deficit Stamp Duty Upheld. Appellant Liable to Pay Deficit Stamp Duty & Penalty. Adjustments Allowed if Duty Already Paid Upon Execution of Sale Deed. Appeal Dismissed – No Costs.

Held:

Stamp Duty Is on the Instrument, Not the Transaction: The nature of possession (rental or ownership) does not affect liability under Article 25.

Agreement Deemed as Conveyance Under Explanation I:  The agreement stated that possession would be transferred after the sale deed but also acknowledged the appellant’s continued possession. The clause implied possessory rights under Section 53A of the Transfer of Property Act, triggering stamp duty liability.

Trial Court and High Court Correct in Impounding:  Since possession was not explicitly excluded, the document attracted conveyance duty, making impounding legally valid.

Acts & Sections Discussed:

• Constitution of India – Article 136 (Special Leave Petition)
• Bombay Stamp Act, 1958 – Section 34 (Impounding of Instruments), Article 25 (Conveyance – Explanation I)
• Transfer of Property Act, 1882 – Section 53A (Doctrine of Part Performance)
• Registration Act, 1908 – Section 17 (Compulsory Registration of Certain Documents)

Keywords

Stamp Duty – Agreement to Sell – Impounding – Possession Clause – Deemed Conveyance – Specific Performance – Tenant to Owner – Deficit Stamp Duty – Penalty Recovery

Nature of Litigation

• Appeal under Article 136 of the Constitution against the dismissal of W.P. No. 3246 of 2016 by the Bombay High Court, which upheld the Trial Court’s order impounding the Agreement to Sell dated 03.09.2003 for deficit stamp duty and penalty.

Relief Sought

• Appellant sought to quash the High Court order and set aside the impounding of the Agreement to Sell, arguing that the document was not liable for stamp duty under Article 25 of Bombay Stamp Act, 1958.

Reason for Filing the Case

• The Trial Court (03.08.2015) ruled that the Agreement to Sell was executed on insufficient stamp paper and directed it to be sent for stamp duty and penalty recovery.
• The High Court (29.08.2019) dismissed the challenge, upholding the trial court’s view that possession was agreed to be transferred, making the document a deemed conveyance.

What Has Already Been Decided?

• Both the Trial Court and High Court upheld the impounding of the Agreement to Sell under Article 25, Explanation I of the Bombay Stamp Act, 1958.

Issues Before the Court

(a) Whether the Agreement to Sell, where the buyer was already in possession as a tenant, could be deemed as a conveyance under Article 25, attracting stamp duty?
(b) Whether the courts below correctly directed the impounding and recovery of stamp duty and penalty from the appellant?

Submissions & Arguments

Appellant’s Contentions

1. Possession Clause Interpretation

   • The agreement stated that the tenant’s possession was independent of the sale transaction, and ownership possession was to be transferred only upon execution of the Sale Deed.
   • Since possession was not transferred under the agreement, the deemed conveyance clause did not apply.

2. No Immediate Possession Transfer

   • The possession clause explicitly mentioned that transfer would happen after execution of the sale deed, hence stamp duty was not applicable at the agreement stage.

3. Reliance on Judicial Precedents

   • Cited Veena Hasmukh Jain v. State of Maharashtra (1999) 5 SCC 725 and Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil (2024) 10 SCC 324, arguing that possession must be immediately transferred for an agreement to be deemed a conveyance.

Respondents’ Contentions

1. Stamp Duty on Instrument, Not Transaction

   • Article 25, Explanation I applies where possession is handed over or agreed to be transferred, whether immediately or later.
   • Since the agreement stipulated transfer within 11 months, it was deemed a conveyance, attracting stamp duty.

2. Possession as a Factor for Duty

   • The appellant, already in possession as a tenant, remained in possession under the sale agreement.
   • Courts correctly held that mere change in capacity (tenant to owner) was a deemed transfer, making stamp duty recoverable.

3. Precedents Supporting the Impounding

   • Cited Veena Hasmukh Jain (1999) 5 SCC 725 and B. Ratnamala v. G. Rudramma 1999 SCC OnLine AP 438, where agreements containing possession transfer clauses were held liable for stamp duty.