Agreement to sell held a deemed conveyance where possession was shown; stamp duty leviable and impounded document to be sent to Registrar of Stamps

A bench of Justices J.B. Pardiwala and R. Mahadevan heard the civil appeal against the Bombay High Court's dismissal of a writ petition challenging an order of the trial Court of Civil Judge (Senior Division), Ratnagiri that had impounded an agreement to sell and directed it to be sent to the Registrar of Stamps for recovery of deficit stamp duty and penalty. The appeal arose from a dispute over whether an agreement for sale dated 03.09.2003 in respect of a small residential property was liable to stamp duty as a "deemed conveyance" under Explanation I to Article 25 of Schedule I of the Bombay Stamp Act, 1958.

The Court held that the agreement was liable to stamp duty as a deemed conveyance under Explanation I where possession had been transferred or was evidenced to have been delivered, and that "the stamp duty is on the instrument and not on the transaction." The Court dismissed the appeal and upheld the impounding and referral to the Registrar of Stamps, while clarifying that if duty had already been paid on the agreement, it would be adjusted against duty payable on any subsequent sale deed. The Court, in its reasoning, observed: “Explanation I.—For the purposes of this article, where in the case of agreement to sell an immovable property, the possession of any immovable property is transferred or agreed to be transferred to the purchaser before the execution, or at the time of execution, or after the execution of such agreement without executing the conveyance in respect thereof, then such agreement to sell shall be deemed to be a conveyance and stamp duty thereon shall be leviable accordingly: Provided that, the provisions of Section 32-A shall apply mutatis mutandis to such agreement which is deemed to be a conveyance as aforesaid, as they apply to a conveyance under that Section: Provided further that, where subsequently a conveyance is executed in pursuance of such agreement of sale, the stamp duty, if any, already paid and recovered on the agreement of sale which is deemed to be a conveyance, shall be adjusted towards the total duty leviable on the conveyance.” The Court also emphasised that "until the defect is cured by satisfying the requirements under Section 34, the document impounded cannot be used in evidence."

Background

The appellant (Ramesh Mishrimal Jain) had filed a suit for specific performance of the agreement to sell dated 03.09.2003 for House No.78/B/8 and an adjoining room at Paiki Village, Kasaba Khed. The respondents contested the agreement and, by an application under Section 34 of the Bombay Stamp Act, 1958, sought impounding of the document on the ground that it was executed on Rs.50 stamp paper though stamp duty of Rs.44,000 and penalty of Rs.1,31,850/- were leviable for the municipality area concerned. The trial court allowed the impounding application and directed referral to the Registrar; the High Court dismissed the writ petition against that order.

The appellant contended that the agreement expressly stated his possession was as a tenant and that ownership-possession would be handed over only after execution of the sale deed, thus Explanation I did not apply. The respondents maintained that the agreement evidenced delivery of possession and that case law (including Veena Hasmukh Jain v. State of Maharashtra and Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil) supported levy of duty on such agreements as deemed conveyances. The Supreme Court examined the text of the agreement, related extension document and the pendency of competing suits (including an eviction suit) and found factual basis for treating the agreement as evidencing possession within the meaning of Explanation I. The Court therefore upheld the impounding and referral, clarified that any duty already paid on the agreement would be adjusted against duty on a subsequent conveyance and ordered that recovery of duty and penalty be limited to the deficit and to penalty accrued from execution of the agreement until payment. The appeal was dismissed with no costs and pending applications were closed.

Case Details: Case No.: CIVIL APPEAL NO. 2549 OF 2025 (Arising out of SLP (C) No. 13822 of 2020) Case Title: Ramesh Mishrimal Jain v. Avinash Vishwanath Patne & Anr. Appearances: For the Petitioner(s): Counsel not specified in the judgment For the Respondent(s): Counsel not specified in the judgment