Stamp Act | Agreements to Sell with Possession Clauses Are Conveyances and Must Be Stamped Separately: Supreme Court

Supreme Court of India in Shyamsundar Radheshyam Agrawal & Anr. v. Pushpabai Nilkanth Patil & Ors., upheld the Bombay High Court’s order affirming the impounding of six agreements for sale of immovable property for non-payment of stamp duty. The Supreme Court dismissed the appeal filed by the appellants and confirmed that the agreements to sell, which included transfer of physical possession, should be treated as conveyances under the Maharashtra Stamp Act, 1958, thereby requiring appropriate stamp duty and registration.

The case involved a series of agreements to sell immovable properties entered into by the appellants in Special Civil Suit No. 200 of 2008, which later resulted in a registered sale deed. The appellants contended that since the sale deed was duly registered and stamped, the prior agreements to sell, which were part of the same transaction, did not require separate stamp duty. The agreements, which transferred possession to the buyers, were not sufficiently stamped, prompting Defendant No.46 to file an application to impound the documents under Sections 33, 34, and 37 of the Maharashtra Stamp Act, 1958 and Section 17 of the Registration Act, 1908.

Both the trial court and the Bombay High Court ruled in favor of impounding the documents and sending them to the Collector for adjudication of stamp duty and penalty. Aggrieved, the appellants approached the Supreme Court.

The central issue in the appeal was whether the appellants were liable to pay stamp duty and penalty on the agreements to sell, given that the final sale deed was already registered and stamped. The appellants argued that Section 4 of the Maharashtra Stamp Act, 1958 allowed them to treat the sale deed as the principal document, and thus, the earlier agreements, which formed part of the same transaction, did not require further stamp duty.

The Supreme Court disagreed, emphasizing that Explanation I to Article 25 of Schedule I of the Maharashtra Stamp Act makes it clear that agreements to sell, where possession is transferred, are deemed conveyances and must be stamped and registered accordingly. The Court observed:

"The agreements included clauses for the transfer of possession, thereby satisfying the requirement to treat the documents as conveyance. Hence, these agreements ought to have been stamped and registered." [Para 14]

The Court further noted that Section 4(1) of the Maharashtra Stamp Act permits several instruments to be employed for completing a transaction, but only if those instruments form part of a single transaction. In this case, the agreements were between different parties and were executed over different periods. Therefore, the appellants' reliance on Section 4 was found to be misplaced.

Justice R. Mahadevan, writing for the Court, clarified that agreements to sell with a possession transfer clause require proper stamp duty even if a subsequent sale deed is executed:

"Even considering the contention that the sale agreements concluded in a sale deed on which stamp duty was paid, the primary liability of paying the appropriate stamp duty at the time of execution of the sale agreement remains."

The Court further relied on the precedent set in Veena Hasmukh Jain v. State of Maharashtra, (1999) 5 SCC 725, which confirmed that an agreement to sell with possession clauses is treated as a conveyance for stamp duty purposes.

"The subsequent sale deed cannot be construed as the principal transaction, and the agreements to sell must be treated as the principal conveyance." [Para 15]

The Supreme Court also ruled that while stamp duty already paid on a sale agreement can be adjusted against the final sale deed, the appellants had failed to fulfill their primary obligation of paying stamp duty on the agreements at the time of execution.

The Supreme Court upheld the decisions of the trial court and the Bombay High Court, directing that the six agreements to sell be impounded and sent to the Collector of Stamps for adjudication of the stamp duty and penalty. The Court reaffirmed that agreements involving the transfer of possession must be stamped and registered as conveyances, and Section 4 of the Maharashtra Stamp Act cannot be invoked to bypass this requirement.

Date of Decision: September 24, 2024

Shyamsundar Radheshyam Agrawal & Anr. v. Pushpabai Nilkanth Patil & Ors.