Case Note & Summary
The petitioners, M/s Dharati Developers and its partners, filed a suit for specific performance of a Memorandum of Understanding (MOU) dated 24th January 2011. The respondent No.2 filed an application at Exh.53 in Special Civil Suit No.360 of 2013 before the 6th Joint Civil Judge Senior Division, Nashik, seeking direction to the petitioners to pay deficit stamp duty on the MOU. The trial court allowed the application, holding that the MOU was an agreement of sale and required proper stamping. The petitioners challenged this order by way of a writ petition under Articles 226 and 227 of the Constitution of India. The High Court examined the MOU and found that it did not involve payment of the entire consideration or delivery of possession of the suit property. The MOU clearly stated that an agreement to sell was to be executed subsequently. The court held that such an MOU cannot be treated as an agreement of sale under Section 2(g) of the Bombay Stamp Act, 1958, and therefore, the order to pay deficit stamp duty was unsustainable. The court set aside the trial court's order and allowed the writ petition.
Headnote
A) Stamp Duty - Memorandum of Understanding - Agreement of Sale - Section 2(g) and Section 34 of Bombay Stamp Act, 1958 - The court considered whether an MOU that neither involved payment of consideration nor delivery of possession could be treated as an agreement of sale for stamp duty purposes - Held that such an MOU is not an agreement of sale and cannot be impounded for deficit stamp duty (Paras 5-8).
Issue of Consideration
Whether a Memorandum of Understanding (MOU) that does not involve payment of consideration or delivery of possession can be treated as an agreement of sale requiring payment of deficit stamp duty under the Bombay Stamp Act, 1958.
Final Decision
The High Court allowed the writ petition, set aside the order dated 27th February 2015 passed by the 6th Joint Civil Judge Senior Division, Nashik, in Special Civil Suit No.360 of 2013, and directed that the MOU cannot be treated as an agreement of sale for the purpose of deficit stamp duty.
Law Points
- Stamp duty
- Memorandum of Understanding
- Agreement of sale
- Deficit stamp duty
- Specific performance
- Bombay Stamp Act
- 1958
- Section 2(g)
- Section 34
Case Details
2017 LawText (BOM) (12) 95
Writ Petition No. 1192 of 2016
Dr. Shalini Phansalkar-Joshi, J.
Mr. Sachin Gite for the Petitioners, Mr. R. D. Soni a/w V.R. Kasale i/by Ram & Co. for Respondent No.2
M/s Dharati Developers, Digambar Sadashiv Govardhane, Prakash Punaji Tidke
Madhukar Atmaram Patil, Rajendra Keshavchand Bora, Balasaheb Barku Kolhe
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Nature of Litigation
Writ petition challenging order directing payment of deficit stamp duty on MOU in a suit for specific performance.
Remedy Sought
Petitioners sought quashing of the trial court's order dated 27th February 2015 directing them to pay deficit stamp duty on the MOU.
Filing Reason
The trial court allowed respondent No.2's application at Exh.53, holding that the MOU was an agreement of sale requiring proper stamping.
Previous Decisions
The 6th Joint Civil Judge Senior Division, Nashik, in Special Civil Suit No.360 of 2013, allowed the application at Exh.53 on 27th February 2015.
Issues
Whether the MOU dated 24th January 2011 can be treated as an agreement of sale under the Bombay Stamp Act, 1958, when no consideration was paid and no possession was delivered.
Submissions/Arguments
Petitioners argued that the MOU did not involve payment of consideration or delivery of possession, and it clearly stated that an agreement to sell was to be executed subsequently, so it cannot be treated as an agreement of sale.
Respondent No.2 argued that the MOU was an agreement of sale and required proper stamp duty.
Ratio Decidendi
A Memorandum of Understanding that does not involve payment of consideration or delivery of possession and contemplates a future agreement to sell is not an agreement of sale under Section 2(g) of the Bombay Stamp Act, 1958, and cannot be impounded for deficit stamp duty under Section 34 of the Act.
Judgment Excerpts
Perusal of the said Memorandum of Understanding makes it clear that, on the basis of the same or in pursuance of the same neither the entire consideration amount was paid nor the possession of the suit property was delivered.
The MOU clearly states that the agreement to sale was to be executed subsequently and thereafter the sale deed was to be executed.
Procedural History
The petitioners filed Special Civil Suit No.360 of 2013 for specific performance of an MOU dated 24th January 2011. Respondent No.2 filed an application at Exh.53 seeking direction to pay deficit stamp duty. The trial court allowed the application on 27th February 2015. The petitioners challenged this order by filing Writ Petition No.1192 of 2016 in the Bombay High Court.
Acts & Sections
- Bombay Stamp Act, 1958: Section 2(g), Section 34
- Constitution of India: Articles 226, 227
