In a landmark judgment delivered on September 24, 2024, the Supreme Court of India upheld the principle that agreements for sale which include a transfer of possession constitute a conveyance under the Maharashtra Stamp Act, 1958, and are subject to full stamp duty at the time of execution. The Court dismissed the appeal of Shyamsundar Radheshyam Agrawal & Anr. in Civil Appeal No. 10804 of 2024 (arising out of SLP (C) No. 5843 of 2021), affirming the Bombay High Court’s decision to impound documents for insufficient stamp duty.
Background of the Case
The appellants, Shyamsundar Radheshyam Agrawal and another party, had filed Special Civil Suit No. 200 of 2008 seeking a declaration and injunction regarding immovable properties. The dispute arose when the defendants objected that six agreements for sale, executed between 1994 and 2006, were not adequately stamped. These agreements also involved the transfer of physical possession to the purchasers.
Defendant No. 46 filed an application under Sections 33, 34, and 37 of the Maharashtra Stamp Act, 1958, seeking the impounding of these documents and assessment of appropriate stamp duty. The trial court accepted the application, directing the documents to be sent to the Collector of Stamps, Thane, for adjudication of the necessary stamp duty and penalties.
The appellants challenged this order in Writ Petition No. 4695 of 2017 before the Bombay High Court, arguing that since a registered sale deed had already been executed, the agreements for sale should not be treated separately for stamp duty purposes. However, the High Court dismissed the petition, which led to the present appeal in the Supreme Court.
Legal Issues
The crux of the case revolved around whether agreements for sale, which included the transfer of possession, should be treated as conveyances under the Maharashtra Stamp Act and whether full stamp duty should be paid on such agreements, even if a sale deed was subsequently executed and stamped.
The appellants argued that the sale deed, which was later executed and duly stamped, should serve as the principal document for stamp duty purposes. They relied on Section 4 of the Maharashtra Stamp Act, which allows the principal document in a transaction to bear the full stamp duty, with other related documents charged only nominally. They contended that the earlier agreements to sell should be treated as subsidiary to the sale deed.
On the other hand, the respondents maintained that since the agreements for sale contained a clause for the transfer of possession, they were effectively conveyances in themselves, necessitating the full payment of stamp duty at the time of execution.
Observations of the Supreme Court
The bench, comprising Justice Pankaj Mithal and Justice R. Mahadevan, examined the legal provisions under the Maharashtra Stamp Act. Referring to Explanation I of Article 25 of Schedule I of the Act, the Court noted that agreements for sale which include the transfer of possession must be treated as conveyances and are subject to stamp duty accordingly.
In its judgment, the Court observed:
“The agreement for sale was the principal document on which stamp duty was to be paid as per Article 25. Even considering the contention of the appellant that the sale agreements ultimately concluded in the sale deed on which stamp duty was paid, would not by ipso facto absolve the primary liability of paying the appropriate stamp duty at the time of execution of the sale agreement.”
The Court clarified that once an agreement for sale involves the transfer of possession, it cannot be treated merely as an incidental document. Instead, it must be considered the principal conveyance for which full stamp duty is payable. The subsequent execution of a sale deed does not negate this obligation but rather only entitles the appellants to a deduction for the stamp duty already paid on the agreement for sale.
The Court further emphasized:
“The second proviso to Article 25 only states that if the stamp duty is already paid or recovered on the agreement to sale, then the same shall be deducted while computing the stamp duty payable when the sale deed is executed.”
Decision of the Court
The Supreme Court upheld the decision of the Bombay High Court, confirming that the appellants were liable to pay the full stamp duty on the agreements for sale at the time of execution. The Court directed that the difference in stamp duty between the agreements and the sale deed, along with the applicable penalty from the date of execution, must be recovered. The appellants were not entitled to avoid stamp duty on the agreements to sell by relying on the subsequent sale deed.
The judgment also reiterated that the documents impounded cannot be used as evidence until the stamp duty requirements are fully satisfied, as mandated under Section 34 of the Maharashtra Stamp Act.
The appellants, represented by senior advocates Geeta Ahuja and others, will now have to comply with the ruling, ensuring payment of outstanding stamp duty and penalties as adjudicated by the Collector of Stamps.
This case was heard under Civil Appeal No. 10804 of 2024, with the judgment delivered on September 24, 2024, by a bench consisting of Justices Pankaj Mithal and R. Mahadevan.
