Supreme Court of India
Shyamsundar Radheshyam Agrawal vs Pushpabai Nilkanth Patil on 24 September, 2024
Author: Pankaj Mithal
Bench: Pankaj Mithal
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2024 INSC 730 REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 10804 OF 2024
(Arising out of SLP (C) No.5843 of 2021)
SHYAMSUNDAR RADHESHYAM AGRAWAL & ANR. ...APPELLANT(S)
VERSUS
PUSHPABAI NILKANTH PATIL & ORS. ...RESPONDENT(S)
JUDGMENT
R.MAHADEVAN, J.
Leave granted.
2. This appeal is filed assailing the final order dated 03.03.2021 passed by
the High Court of Judicature at Bombay (hereinafter shortly referred to as “the
High Court”) in Writ Petition No.4695 of 2017, by which, the High Court has
dismissed the said writ petition, thereby affirming the order dated 26.10.2016
passed by the Court of 4th Joint Civil Judge (Senior Division), Thane,
(hereinafter shortly referred to as “the trial Court”) in allowing the application
filed by the Defendant No.46 for impounding the six documents produced by
Signature Not Verified
Digitally signed by
geeta ahuja
Date: 2024.09.24
the appellants herein.
17:03:06 IST
Reason:
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3. Originally, the appellants instituted a suit in Special Civil Suit No.200 of
2008 seeking declaration and injunction. Denying the plaint averments, the
defendants filed their written statements. Thereafter, the Defendant No.46 took
out an application under Sections 33, 34 & 37 of the Maharashtra Stamp Act,
1958 r/w Section 17 of the Registration Act, to impound the six original
agreements for sale viz., Exh.145/3 dated 20.07.1994, Exh.145/9 dated
20.07.1994, Exh.145/15 dated 12.10.1994, Exh.145/19 dated 12.10.1994,
Exh.145/23 dated 27.04.2006 and Exh.145/25 dated 19.09.2004 produced by
the appellants, so as to get them registered, on the premise that the said
documents include a clause that the physical possession of the properties
mentioned therein, was transferred to the purchasers; however, they were not
duly stamped; and hence, the documents require the payment of stamp duty of
the conveyance. By order dated 26.10.2016, the trial Court allowed the said
application, thereby impounding the documents and directing to send the same
to the Collector of Stamp, Thane, for adjudication of stamp duty and penalty, if
any, payable by the appellants. Aggrieved by the same, the appellants herein
filed the aforesaid writ petition, which was dismissed by the High Court, by the
order impugned in this appeal.
4. Referring to Section 4 of the Maharashtra Stamp Act, 1958 (hereinafter
shortly referred to as “the Act”), the learned counsel appearing on behalf of the
appellants contended that the agreements to sell in relation to the same
immovable properties ultimately resulted into a sale deed in favour of the
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appellants and the said sale deed was also duly registered, upon payment of the
required stamp duty and therefore, the prior agreements to sell are not required
to be registered and stamped. Further, one of the agreements in respect of 2.550
sq. meters of land was executed in favour of Mira Bhayandar Municipal
Corporation and hence, no separate stamp duty is required to be paid by the
appellants. However, misinterpreting the said provision, the trial Court allowed
the application filed for impounding the documents and directed to send the
same to the Collector for adjudication of stamp duty and penalty, which was
also erroneously affirmed by the High Court.
5. Per contra, the learned counsel appearing on behalf of the respondents
submitted that on a detailed analysis of the agreements to sell, wherein, there
was a specific clause about the transfer of physical possession to the purchasers
therein, the courts below have rightly allowed the application filed for
impounding these documents and, therefore, the same need not be interfered
with by this Court.
6. We have heard the learned counsel appearing for the respective parties
and perused the material on record, more particularly, the documents in
question.
7. The issue involved herein is, whether the appellants are liable to pay stamp
duty and penalty on the agreements to sell executed prior to the sale deed
executed in their favour, in respect of two properties viz., (i) S.No.165/4
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admeasuring 2,550 sq. mtrs. and (ii) S.No.208/3 admeasuring 860 sq. mtrs. and
S.No.208/4 admeasuring ,5650 sq. mtrs.
8. In order to determine the stamp duty that is chargeable upon an
instrument, the legal rule is that the real and true meaning of the instrument is to
be determined by ascertaining the intention of the parties from the contents and
the language employed in the whole instrument and the description or the
nomenclature given to the instrument by the parties is immaterial.
9. According to the appellants, the sale deed having been executed in
relation to the same immovable properties and stamp duty having been paid, the
earlier agreements to sell which are part and parcel of the same transaction, got
merged with the said sale deed and hence, separate stamp duty is not required to
be paid on the earlier agreements to sell. To buttress the same, reliance was
placed on Section 4 of the Act, which is quoted below for ready reference:
“4. Several Instruments used in single transaction of development
agreement, sale, mortgage or settlement:
1) Where, in the case of any development agreement, sale, mortgage or
settlement, several instruments are employed for completing the transaction,
the principal instrument only shall be chargeable with the duty prescribed in
Schedule –I for the conveyance, development agreement, mortgage or
settlement, and each of the other instruments shall be chargeable with a duty
of one hundred rupees instead of the duty (if any) prescribed for it in that
Schedule.
2) The parties may determine for themselves which of the instruments so
employed shall, for the purposes of sub-section (1), be deemed to be the
principal instrument.
3) If the parties fail to determine the principal instrument between
themselves, then the officer before whom the instrument is produced may, for
the purpose of this section, determine the principal instrument:
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Provided that the duty chargeable on the instrument so determined shall be
the highest duty which would be chargeable in respect of any of the said
instruments employed.”
10. The aforesaid provision, especially, Section 4(1), makes it clear that
where several instruments are executed for completing a transaction, the
principal instrument alone shall be chargeable with duty prescribed in Schedule
I. The proviso makes it clear that the duty chargeable on the instrument so
determined shall be the highest duty which could be chargeable in respect of
any of the said instruments forming part of the same transaction. Each of the
other instruments is chargeable with a fixed duty. That apart, sub-section (2)
also gives an opportunity to the parties to determine for themselves, which of
the instruments shall be deemed to be the principal instrument. We shall
therefore look into the documents in question and determine whether they are
required to be stamped and registered.
11. The documents sought to be impounded at the instance of one of the
defendants are:
(i) Exh.145/3 dated 20.07.1994 – agreement for sale-cum-development
executed by Vinayak Kashinath Gharat and others in favour of Naresh N.Jain,
Sunita P.Jain and Kalawati N. Jain, which is on the stamp paper of Rs.20/-;
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(ii) Exh.145/9 dated 20.07.1994 – agreement for sale-cum- development
executed by Vinayak Kashinath Gharat and others in favour of Naresh N. Jain,
Sunita P. Jain and Kalawati N. Jain, which is on the stamp paper of Rs.20/-;
(iii) Exh.145/15 dated 12.10.1994 executed by Naresh N. Jain and others
in favour of M/s.Chedda Enterprises, which is on the stamp paper of Rs.20/-;
(iv) Exh.145/19 dated 12.10.1994 – agreement for sale-cum-
development executed by Naresh N. Jain and others in favour of M/s.Chedda
Enterprises, which is on the stamp paper of Rs.20/-;
(v) Exh.145/23 dated 27.04.2006 – agreement for sale executed by
M/s.Sunshine Builders and Developers in favour of the appellants, which is on
the stamp paper of Rs.100/-; and
(vi) Exh.145/25 dated 19.09.2004 – agreement for development -cum-
sale executed by M/s.Sunshine Builders and Developers in favour of the
appellants, which is on the stamp paper of Rs.100/-.
12. On a reading of all these six documents, it could be seen that the
instruments /documents were not forming part of a single transaction between
the same parties and they were different transactions between different vendors
and purchasers. Further, for several documents to form part of a single
transaction, there must be a transaction in furtherance of which several other
documents are executed to complete that transaction and then it becomes
imperative to charge stamp duty on the principal instrument/document. The
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language used in the provision is very clear, whereby the stamp duty is on the
instrument and not on the transaction. It will be useful to refer to Explanation 1
to Article 25 of Schedule I of the Maharashtra Stamp Act, which would read as
under:
“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.”
13. It will be apropos to mention here that the agreements were not only
between different parties but also were executed during different periods, by
which time the Explanation I to Article 25 of Schedule I underwent a change.
The words “without executing the conveyance in respect thereof” was deleted
with effect from 17.08.1994 by Maharashtra Act 38 of 1994. The above
Explanation I makes it lucid that an agreement for sale is to be treated as a
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“conveyance” if either possession is handed over immediately or if it is agreed
to be handed over within a particular time. A reading of the above Explanation I
along with Section 4 makes it clear that the duty is levied only on the instrument
and not on the transaction. This court, in Veena Hasmukh Jain v. State of
Maharashtra, (1999) 5 SCC 725 : 1999 SCC Online SC 78 while dealing with the
question as to whether the agreement to sell can be treated as document of
conveyance, liable to stamp duty held as follows:
“4. On examination of these terms, the High Court took the view that the
agreement in question could be construed to be a conveyance falling under
Section 2(g) of the Bombay Stamp Act inasmuch as the right, title and interest
in the flat stands transferred in favour of the purchaser on payment of
instalments as provided therein.
5. The High Court also examined the scope of Explanation I to Article 25 of
Schedule I of the Bombay Stamp Act and held that the same was attracted to
the case. Under the agreement, there is an obligation to hand over the
possession even before execution of a conveyance and, therefore, it was a
“conveyance” for the purpose of duty payable under the Bombay Stamp Act
and there was no obligation in the agreement to enter into a conveyance at a
later stage and clearly it was a case which attracted the said Explanation.
Handing over of the possession on the very date of execution was not relevant
for determining the nature of the document. On that basis, the High Court
upheld the stand taken by the State in the matter of levy of duty. Other
questions raised in the writ petition are not the subject-matter of these
appeals and, therefore, we do not advert to those questions. On the conclusion
reached by the High Court, the writ petition stood dismissed.
6. The learned counsel appearing for the appellants urged before us that the
conclusion reached by the High Court either on the question of construction
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of the agreement amounting to a “conveyance” or on the applicability of
Explanation I to Article 25 of Schedule I to the Bombay Stamp Act is
incorrect. It was submitted that the agreement in question had been executed
only in terms of Section 4 of the MOF Act and that under the scheme of the
Act, a deed of conveyance had to be drawn in terms of Section 11 thereof.
Therefore, it was submitted that the document executed in terms of Section 4
of the MOF Act cannot be construed to be a “conveyance”. He also submitted
that under the same Act, duty can be levied only on the “instrument” and not
on any “transaction”. Here, in the present case, by Explanation I to Article
25 of Schedule I, what has been done is to provide for levy of duty on a
“transaction”, namely, handing over possession and not on the “instrument”
as such and hence the provision is ultra vires the Constitution.
7. Under Entry 44 of List III-Concurrent List of the Seventh Schedule to the
Constitution, any State as well as the Central Government can levy stamp
duties other than duties or fees collected by means of judicial stamps, but not
including rates of stamp duty and in respect of such instruments mentioned in
Entry 91 of List I-Union List of the Seventh Schedule to the Constitution. A
duty is leviable under Section 3 of the Bombay Stamp Act which indicates the
instruments executed in the State or those outside the State but brought into
the State for the first time relating to any property situate or to any matter or
thing done or to be done in the State shall be chargeable to stamp duty
prescribed under the Bombay Stamp Act. Article 25 of Schedule I refers to
conveyance and the amount of conveyance as sought to be explained by the
Explanation. Explanation I to Article 25 of Schedule I to the Bombay Stamp
Act reads as follows:
“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 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:
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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.”
8. The duty in respect of an agreement covered by the Explanation is leviable
as if it is a conveyance. The conditions to be fulfilled are that if there is an
agreement to sell immovable property and possession of such property is
transferred to the purchaser before the execution or at the time of execution
or subsequently without executing any conveyance in respect thereof, such an
agreement to sell is deemed to be a “conveyance”. In the event a conveyance
is executed in pursuance of such agreement subsequently, the stamp duty
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. Now, in the present case, the agreement entered into clearly
provides for sale of an immovable property and there is also a specific time
within which possession has to be delivered. Therefore, the document in
question clearly falls within the scope of Explanation I. It is open to the
legislature to levy duty on different kinds of agreements at different rates. If
the legislature thought that it would be appropriate to collect duty at the stage
of the agreement itself if it fulfils certain conditions instead of postponing the
collection of such duty till the completion of the transaction by execution of a
conveyance deed inasmuch as all substantial conditions of a conveyance have
already been fulfilled such as by passing of a consideration and delivery of
possession of the property and what remained to be done is a mere formality
of execution of a sale deed, it would be necessary to collect duty at a later
(sic agreement) stage itself though right, title and interest may not have
passed as such. Still, by reason of the fact that under the terms of the
agreement, there is an intention of sale and possession of the property has
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also been delivered, it is certainly open to the State to charge such
instruments at a particular rate which is akin to a conveyance and that is
exactly what has been done in the present case. Therefore, it cannot be said
that levy of duty is not upon the instrument but on the transaction. Therefore,
we reject the contention raised on behalf of the appellants in that regard.
9. The learned counsel for the appellants urged that the character of an
instrument cannot be determined by reason of a subsequent event to take
place such as handing over of possession. But a close examination of the
provisions of the Explanation will make it clear that in the case of an
agreement to sell immovable property possession is transferred at any time
without executing the conveyance in respect thereof and such an instrument is
deemed to be a “conveyance”. The object of the Explanation is clear that if
an agreement is entered into and that agreement itself contemplates the
delivery of possession of the property within the stipulated time, then such an
agreement should be deemed to be a conveyance for the purpose of duty
leviable under the Bombay Stamp Act.
10. It is clear that the object of the Stamp Act is to levy stamp duty on
different kinds of instruments. The legislature, in the present case, has chosen
to levy a rate of duty equivalent to conveyance in respect of an agreement
though the transaction may not have been completed because of certain
instruments arising out of such agreement being executed and possession
thereof being taken prior to or simultaneous with the document or
subsequently. But in the Explanation, it is not clear that if the document
provides that possession has to be taken without execution of the conveyance,
certainly it would attract the appropriate duty. If the agreement provides that
possession will be handed over on the execution of a conveyance as
contemplated under Section 11 of the MOF Act, then the Explanation shall
not be attracted at all. In the present case, it is clear that in the terms of the
agreement, there is no provision made at all for execution of the conveyance.
On the other hand, what is submitted is that the provisions of the MOF Act
could be applied to the agreement and, therefore, a conveyance could be
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executed subsequently when it is not clear as to when the conveyance is to be
executed and the stipulated time within which the possession has to be handed
over. If that is so, it is clear that the document would attract duty as if it is a
conveyance as provided in the Explanation. Thus we find no error in the view
taken by the High Court. It is not necessary to examine in these appeals as to
whether the instrument in question itself conveys a title or not. Therefore, we
uphold the decision of the High Court made in this regard. The appeals are
dismissed.”
14. In the instant case, in the documents, though there was a clause for
conveyance between the vendors and purchasers in relation to the respective
properties, the value of the properties were above Rs.100/- and there was also a
clause by which possession was admittedly handed over on the date of the
agreement, implying acquisition of possessory rights protected under Section
53A of the Transfer of Property Act, which requires payment of proper stamp
duty and registration as mandated under Section 17 of the Registration Act.
Further, as per Section 4(2) of the Maharashtra Stamp Act, the parties are at
liberty to parties to determine as to which of the document shall be principal
document. As noted above, the agreement for sale consists of a clause whereby
the possession was handed over to the purchaser satisfying the requirement to
treat the instrument as conveyance and what remained was only the formality of
execution of the sale deed. Therefore, it can be safely concluded that 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
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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 as it was
the principal document. Therefore, we are of the opinion that Section 4 of the
Act cannot come to the aid of the appellants. Therefore, all these six documents
ought to have been necessarily stamped and registered.
15. Taking note of the facts and circumstances of the case and legal position,
the trial Court rightly observed that the subsequent sale deed cannot be
construed as a principal transaction and the agreements to sell would be treated
as the principal conveyance as per Explanation I of Article 25 of Schedule-I of
the Act and impounded all these documents and directed to send the same to the
Collector for adjudication of stamp duty and penalty. After, a detailed analysis,
the High Court held that no case for interference was made out by the
appellants, which, we affirm, to be correct.
16. In addition, we wish to further record that 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; the proviso does not contemplate a
situation similar to this case, where the document ought to have been registered
with payment of stamp duty on the agreement for sale initially and only the
balance, on the deed of sale after deduction of the duty already paid ought to
have been collected. Since, the state cannot recover by way of stamp duty in
excess of what it is entitled to, the recovery shall be restricted only to the extent
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of difference in stamp duty and the entire penalty from the date of execution of
the agreement for sale till the date of payment of stamp duty. Needless to say,
that until the defect is cured by satisfying the requirements under Section 34, the
documents impounded cannot also be used in evidence.
17. In view thereof, we find no reason to interfere with the orders passed by
the Courts below. Accordingly, this appeal fails and is dismissed. Pending
application(s), if any, shall stand closed.
………………………..J
[Pankaj Mithal]
………………………..J
[R.Mahadevan]
NEW DELHI
SEPTEMBER 24, 2024.