Case Note & Summary
The appellant, Jay Kirtikumar Ashani, filed a Commercial Suit (No. 161 of 2022) for specific performance of an agreement to sell dated 15th October 2021, by which the respondent, Kewalram Khetpal, agreed to sell a flat to the appellant for a consideration of Rs. 1,20,00,000. The appellant paid an advance of Rs. 25,00,000. The respondent failed to execute the sale deed. The appellant also impleaded his father, Rajesh Chimanlal Ashani, as a defendant, alleging that the father had conspired with the respondent to defeat his rights. The respondent filed an application under Order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC) for rejection of the plaint on the ground that the agreement to sell was not duly stamped and therefore void and unenforceable under Section 35 of the Bombay Stamp Act, 1958. The learned Single Judge allowed the application and rejected the plaint. The appellant appealed. The Division Bench of the Bombay High Court held that an unstamped agreement is not void but is inadmissible in evidence until the deficit stamp duty and penalty are paid. The court clarified that the plaint cannot be rejected under Order VII Rule 11 CPC on the ground of non-payment of stamp duty, as the defect is curable. The court also held that the plaint disclosed a cause of action for specific performance and that the defence of the defendant cannot be considered at the stage of Order VII Rule 11. The court set aside the order of the Single Judge and restored the suit, directing the appellant to pay the deficit stamp duty and penalty within four weeks. The appeal was allowed.
Headnote
A) Stamp Act - Agreement to Sell - Non-payment of Stamp Duty - Section 35 of the Bombay Stamp Act, 1958 - The court held that an agreement to sell which is not duly stamped is not void ab initio but is inadmissible in evidence until the deficit stamp duty and penalty are paid. The plaint cannot be rejected under Order VII Rule 11 CPC merely because the agreement is unstamped, as the defect is curable. (Paras 10-15) B) Civil Procedure - Rejection of Plaint - Order VII Rule 11 CPC - The court held that for rejection of plaint under Order VII Rule 11 CPC, the court must look only at the plaint averments and the documents filed by the plaintiff. The defence of the defendant cannot be considered. The plaint disclosed a cause of action for specific performance, and the non-payment of stamp duty does not make the plaint liable to be rejected. (Paras 16-20) C) Specific Relief Act - Specific Performance - Agreement to Sell - The court held that a plaintiff seeking specific performance of an agreement to sell can be directed to pay the deficit stamp duty and penalty as a condition for proceeding with the suit. The suit is not barred by the provisions of the Bombay Stamp Act, 1958. (Paras 21-25)
Issue of Consideration
Whether an agreement to sell which is not duly stamped is void and unenforceable, and whether the plaint for specific performance based on such agreement is liable to be rejected under Order VII Rule 11 of the Code of Civil Procedure, 1908.
Final Decision
The appeal is allowed. The order of the learned Single Judge rejecting the plaint is set aside. The suit is restored to its original number. The appellant is directed to pay the deficit stamp duty and penalty within four weeks from the date of the order. The suit to proceed in accordance with law.
Law Points
- Agreement to sell is not void for non-payment of stamp duty
- Specific performance can be granted subject to payment of deficit stamp duty and penalty
- Section 35 of the Bombay Stamp Act
- 1958 does not bar enforcement of unstamped agreement if stamp duty and penalty are paid
- Order VII Rule 11 CPC for rejection of plaint must be based on plaint averments alone
- Commercial suit for specific performance maintainable despite non-payment of stamp duty
