Summary
The Supreme Court upheld the impounding of an agreement to sell executed in favour of a tenant already in possession, holding that under Explanation I to Article 25 of Schedule I of the Bombay Stamp Act, 1958 such an agreement is deemed a conveyance and attracts stamp duty, because stamp duty is levied on the instrument and possession had been handed over before the agreement. Any duty paid on the agreement is to be adjusted against the duty on the eventual sale deed.
Issues
- Whether an agreement to sell in favour of a tenant already in possession, stating that possession on ownership basis will be given only on execution of the sale deed, is a deemed conveyance under Explanation I to Article 25 of Schedule I of the Bombay Stamp Act, 1958 and liable to stamp duty and penalty.
- Whether the courts below rightly impounded the agreement under Section 34 of the Bombay Stamp Act and sent it to the Registrar of Stamps for recovery of deficit duty and penalty.
Provisions considered
- Schedule I, Article 25, Explanation I and its provisos, Bombay Stamp Act, 1958Read as deeming an agreement to sell immovable property a conveyance where possession is transferred or agreed to be transferred before, at, or after its execution without a conveyance. Applied because the tenant purchaser was already in possession before the agreement; the second proviso requires duty paid on the agreement to be adjusted against duty on the later sale deed. (¶¶ 9, 10, 11, 12)
- Section 34, Bombay Stamp Act, 1958The respondents' application to impound the agreement was filed under this section; the Court affirmed the impounding and noted that the impounded document cannot be used in evidence until the defect is cured as the section requires. (¶¶ 3, 12)
- Section 53A, Transfer of Property Act, 1882The Court reasoned that as possession was admittedly with the appellant before the agreement, the agreement implied possessory rights protected under Section 53A, which required payment of proper stamp duty. (¶ 11)
Held
- Stamp duty is levied on the instrument and not on the transaction, and for Explanation I to Article 25 it is immaterial whether possession was handed over at the time of the agreement to sell or was only agreed to be transferred; possession transferred before, at, or after execution without a conveyance makes the agreement a deemed conveyance. Veena Hasmukh Jain v. State of Maharashtra and Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil were followed. (¶¶ 9, 10)
- Although the agreement recorded that the appellant occupied the property as a tenant and that possession on ownership basis would follow the sale deed, possession had admittedly been with him before the agreement, implying possessory rights protected under Section 53A of the Transfer of Property Act; the agreement thus satisfied Explanation I, leaving only the formality of the sale deed, and was liable to stamp duty at the appellant's hands. The pending suits for specific performance and eviction confirmed his possession. (¶ 11)
- The courts below correctly impounded the agreement and sent it to the Registrar of Stamps for recovery of deficit duty and penalty. Under the second proviso to Article 25, duty paid or recovered on the agreement must be deducted from the duty payable on the sale deed when executed, recovery being limited to the difference in duty and the penalty from the date of the agreement to the date of payment; until the defect is cured under Section 34, the impounded document cannot be used in evidence. (¶ 12)
Result
Appeal dismissed; orders of the trial court and the High Court impounding the agreement to sell and sending it to the Registrar of Stamps upheld, with a clarification on adjustment of duty under the second proviso to Article 25; no costs.