In a significant judgment delivered on July 19, 2024, the Supreme Court of India partially allowed a group of appeals challenging the imposition of stamp duty on Build, Operate, and Transfer (BOT) agreements in Madhya Pradesh. The bench comprising Justice Vikram Nath and Justice Ahsanuddin Amanullah upheld the Madhya Pradesh High Court’s decision that BOT agreements are leases subject to stamp duty but clarified the method of calculating the duty.
Case Background:
The case, led by Civil Appeal No. 8985 of 2013 (M/s Rewa Tollway P. Ltd. vs. The State of Madhya Pradesh & Ors.), along with 11 other appeals, originated from a 2002 amendment to the Indian Stamp Act in Madhya Pradesh. This amendment imposed a 2% stamp duty on BOT agreements, treating them as leases. The appellants, various companies engaged in road construction projects, challenged this imposition, arguing that their agreements were not leases and should not be subject to stamp duty.
Key Legal Issues:
1. Whether BOT agreements constitute leases under the Transfer of Property Act and Indian Stamp Act.
2. The validity of the 2002 amendment to the Madhya Pradesh Stamp Act.
3. Applicability of promissory estoppel and legitimate expectation doctrines against legislative actions.
4. Method of calculating stamp duty on BOT agreements.
Court’s Decision:
1. Nature of BOT Agreements: The Court upheld the High Court’s finding that BOT agreements are leases as defined under the Indian Stamp Act and Transfer of Property Act. Justice Nath observed, “We do not find any perversity at all in the reasoning given by the High Court to uphold the Concession Agreement to be a lease”.
2. Validity of 2002 Amendment: The Court rejected the challenge to the 2002 amendment, stating it merely prescribed the rate of stamp duty and did not alter the definition of ‘lease’.
3. Promissory Estoppel and Legitimate Expectation: The Court emphatically ruled that these doctrines cannot be invoked against legislative actions. Justice Nath noted, “There can be no promissory estoppel against the legislature in the exercise of its legislative functions”.
4. Calculation of Stamp Duty: The Court partially allowed the appeals by directing a recalculation of stamp duty based only on the amount spent by the lessee, not the entire project cost. The judgment stated, “The stamp duty would be chargeable @ 2% on the amount likely to be spent under the agreement by the lessee”.
The Court ordered the concerned Revenue Officers to recalculate the stamp duty within two months and refund any excess amount collected or demand any deficit within two months thereafter.
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Lawyers and Parties:
– Appellants were represented by Senior Advocate Dushyant Dave and other counsels.
– Respondents (State of Madhya Pradesh) were represented by Additional Advocate General Saurabh Mishra.
