Agreement to Sell with Transfer of Possession Attracts Stamp Duty as Conveyance: Supreme Court

Background of the Case

The appellants had instituted Special Civil Suit No. 200 of 2008 seeking declaratory and injunctive relief. During the suit, Defendant No. 46 applied under Sections 33, 34 and 37 of the Maharashtra Stamp Act, 1958 read with Section 17 of the Registration Act, 1908 for impounding six original agreements for sale produced by the appellants.

The application was based on clauses in the agreements recording that physical possession of the properties had been transferred to the purchasers. The documents had not been stamped as conveyances.

Trial Court and High Court Decisions

By order dated 26 October 2016, the Trial Court allowed the application, impounded the six agreements and directed that they be sent to the Collector of Stamps, Thane for adjudication of the proper stamp duty and penalty, if any.

The Bombay High Court dismissed the appellants' writ petition on 3 March 2021. The matter thereafter reached the Supreme Court.

Why the Agreements Were Treated as Conveyances

The Supreme Court examined Explanation I to Article 25 of Schedule I of the Maharashtra Stamp Act, 1958. On the facts before it, the agreements for sale were accompanied by or recorded transfer of possession. The Court therefore agreed with the courts below that the agreements were to be treated as the principal conveyances for stamp-duty purposes.

Stamp Duty Already Paid on the Later Sale Deed

The Supreme Court also addressed the concern of double recovery. It noted that the State cannot recover stamp duty beyond what is legally due. Therefore, where stamp duty had already been paid or recovered on the later sale deed, recovery on the earlier agreement was to be restricted to the difference in stamp duty, together with the penalty applicable under the statute.

The Court explained that the second proviso to Article 25 permits adjustment of stamp duty already paid on an agreement when the sale deed is subsequently executed. It does not permit the original agreement to escape the stamp duty that was payable when it ought to have been duly stamped.

Effect of an Insufficiently Stamped Document in Evidence

The Court reiterated that until the defect in stamping is cured in accordance with Section 34 of the Maharashtra Stamp Act, the impounded document cannot be acted upon in evidence. This is important in civil litigation where an unstamped or insufficiently stamped agreement is relied upon to establish rights concerning immovable property.

Role of Section 17 of the Registration Act, 1908

Section 17 of the Registration Act, 1908 identifies categories of documents for which registration is compulsory. The stamp-duty question, however, is governed by the applicable stamp legislation. Accordingly, registration and stamp duty are related but distinct legal requirements, and compliance with one does not automatically cure non-compliance with the other.

Supreme Court's Final Decision

The Supreme Court found no reason to interfere with the Trial Court and Bombay High Court. It dismissed the appeal and left the impounded agreements to be adjudicated for the proper stamp duty and penalty in accordance with law.

Key Legal Points

• An agreement to sell that records or accompanies transfer of possession can be treated as a conveyance for stamp-duty purposes under Maharashtra law.
• A later sale deed does not retrospectively eliminate stamp-duty liability that arose on the earlier possession-linked agreement.
• Stamp duty already paid can be given appropriate credit so that the State does not recover more than the amount legally due.
• Penalty may still be payable for the period of deficient stamping, subject to adjudication under the Maharashtra Stamp Act.
• An insufficiently stamped document cannot be used in evidence until the statutory defect is cured.

Download the Supreme Court Judgment

The existing site PDF of the judgment dated 24 September 2024 is retained below.