Case Note & Summary
The petitioner, a developer partnership firm, entered into two development agreements dated 20.08.1987 and 27.03.1987 with a co-operative housing society for construction of residential flats on the society's land. The petitioner was to construct 60% of the built-up area for society members and retain 40% of the saleable area for its own disposal, with authority to sell flats and shops to prospective incoming society members at its own discretion and consideration. The original agreements were lost in a monsoon deluge; xerox copies were lodged with the Collector of Stamps in September 2008 for adjudication. The Collector adjudicated the documents as conveyance under the Bombay Stamp Act, 1958, charging stamp duty of Rs.5,11,300 and Rs.11,39,400 with 2% penalty in each case. The petitioner's appeals to the Chief Controlling Revenue Authority were dismissed on 18.12.2010, confirming the adjudication. The writ petitions were filed in 2011, admitted with stay subject to deposit of differential stamp duty. The main legal issues were whether the development agreements constituted 'conveyance' under the Bombay Stamp Act, 1958, and whether Article 5(g-a), inserted w.e.f. 07.02.1990, could be applied to agreements executed before that date. The petitioner contended the agreements were mere construction contracts, that Article 5(g-a) was prospective, and that no title passed. The respondents argued that the agreements granted full control and authority to sell, possession was transferred, and the documents were conveyances under Article 5(h) with Explanation-I to Article 25. The court found that the authority itself had accepted non-applicability of Article 5(g-a). It held that under Sections 2(g) and 2(l) of the Act, conveyance includes every instrument creating rights or liabilities; the development agreements created rights in favour of the developer and fell within the definition. Explanation-I to Article 25, in force since 10.12.1985, deems as conveyance any agreement giving right to specific performance coupled with transfer of possession. The court examined the clauses and found that the developer had been given possession and unfettered authority to sell 40% of the development at its own discretion, thus establishing a conveyance. The substance over form doctrine was applied, and the court dismissed the petitions, upholding the impugned orders.
Headnote
A) Stamp Act - Applicability of Article 5(g-a) - Bombay Stamp Act, 1958, Article 5(g-a) - Article 5(g-a) was inserted with effect from 07.02.1990, and the development agreements in question were executed in 1987; therefore, Article 5(g-a) had no application, a point conceded by the Chief Controlling Revenue Authority in the impugned order (Para 13). B) Stamp Act - Definition of Conveyance - Sections 2(g) and 2(l) of Bombay Stamp Act, 1958 - Conveyance includes every instrument by which any right or liability is created, transferred, etc., and the development agreement creating rights and liabilities in favour of the developer falls within this inclusive definition, subject to specific exceptions not applicable here (Paras 15-16). C) Stamp Act - Interpretation of Development Agreements as Conveyance - Explanation-I to Article 25, Bombay Stamp Act, 1958 - Explanation-I, inserted with effect from 10.12.1985, provides that an agreement giving right to specific performance coupled with transfer of possession is deemed to be a conveyance, and the development agreements here meet these criteria as they grant definite rights, possession, and authority to sell to the developer (Paras 14, 17-18). D) Stamp Act - Substance over Form in Classification - Bombay Stamp Act, 1958, Section 2(g), 2(l) and Article 25 - For stamp duty purposes, the substance of the document prevails over its form and title; an agreement titled as such but containing clauses transferring rights, possession, and unfettered sale authority is a conveyance, not merely a construction contract, and the court must examine the document as a whole to determine its true character (Paras 17-19). E) Stamp Act - Rejection of Developer's Arguments - Bombay Stamp Act, 1958 - The petitioner's reliance on cases like Vaidehi Akash Housing and Suhas Damodar Sathe was distinguished on facts, and the argument that purchasers from the developer would become society members did not negate the conveyance nature, as the developer retained full control over sale of 40% inventory at its own discretion; held that the agreements were rightly adjudicated as conveyances (Paras 9-10, 18-19). F) Writ Jurisdiction - Dismissal of Petitions - Bombay Stamp Act, 1958, Articles 226, 227 of Constitution of India - No error found in the impugned orders of the Chief Controlling Revenue Authority; the petitions were dismissed after noting that the differential stamp duty had been deposited and the stay vacated (Para 20).
Issue of Consideration
Whether the development agreements executed in 1987, granting the developer authority to construct and sell flats, are chargeable to stamp duty as 'conveyance' under the Bombay Stamp Act, 1958, particularly under Article 5(h) read with Explanation-I to Article 25, and whether the insertion of Article 5(g-a) with effect from 07.02.1990 affects the classification of agreements executed prior to that date.
Final Decision
Writ petitions dismissed. The impugned orders of the Chief Controlling Revenue Authority confirming the adjudication by the Collector of Stamps were upheld, holding that the development agreements are chargeable as conveyance under the Bombay Stamp Act, 1958.
Law Points
- Definition of conveyance under Section 2(g) of Bombay Stamp Act
- 1958 includes every instrument creating rights or liabilities
- Explanation-I to Article 25 of the Schedule deems agreements granting specific performance with possession as conveyance
- Article 5(h) covers agreements not otherwise provided for
- substance over form principle in classification of documents for stamp duty
- mere title as agreement does not preclude it from being a conveyance
- authority to sell flats at developer's discretion indicates conveyance
- Article 5(g-a) of Bombay Stamp Act applies only from 07.02.1990 not to prior agreements
