Supreme Court Confirms; Agreements for Sale Involving Transfer of Possession Are Conveyance Instruments Subject to Stamp Duty Payment

Court’s Decision:
The Supreme Court dismissed the appeal filed by the appellants challenging the orders of the High Court and the Trial Court, both of which directed impounding of six documents for non-payment of stamp duty under the Maharashtra Stamp Act, 1958. The Court upheld the finding that the agreements to sell were the principal documents and should have been duly stamped and registered, making them liable for adjudication of stamp duty and penalty. The Court ruled that the failure to pay appropriate stamp duty on the agreements to sell, which constituted conveyance under Explanation I of Article 25 of Schedule I of the Act, could not be excused, even though a sale deed was subsequently executed.

Facts:
The appellants had originally instituted a suit in Special Civil Suit No. 200 of 2008, seeking declaration and injunction. The dispute revolved around six agreements for sale executed between the appellants and various other parties. The respondents (Defendant No. 46) filed an application under Sections 33, 34, and 37 of the Maharashtra Stamp Act, 1958, seeking impounding of the documents on the grounds that they were not duly stamped and registered, despite having clauses for the transfer of possession of immovable properties. The Trial Court allowed the application, ordering the documents to be sent to the Collector of Stamp for adjudication of stamp duty and penalty. The High Court affirmed this decision, dismissing the writ petition filed by the appellants, which led to the present appeal.

Issues:

• Whether the appellants were liable to pay stamp duty and penalty on the agreements to sell executed prior to the sale deed.
• Whether the agreements, which included a transfer of possession, required payment of stamp duty as conveyance.

Petitioner’s Arguments:
The appellants contended that the sale deed for the same immovable properties was subsequently executed and registered with payment of stamp duty, which should absolve them from paying additional stamp duty on the prior agreements to sell. They also argued that Section 4 of the Maharashtra Stamp Act allowed multiple instruments to be treated as part of a single transaction, with only the principal instrument being liable for full stamp duty.

Respondent’s Arguments:
The respondents argued that the agreements for sale clearly involved the transfer of physical possession to the appellants, making them conveyance instruments under the Maharashtra Stamp Act. The lower courts were correct in impounding the documents for non-payment of the required stamp duty.

Analysis of the Law:
The Court analyzed the provisions of the Maharashtra Stamp Act, particularly Section 4 and Explanation I of Article 25 of Schedule I. It held that the agreements for sale, which involved the transfer of possession, should be treated as conveyance instruments, subject to payment of stamp duty. The Court also emphasized that the duty is levied on the instrument, not the transaction. Section 4(1) allows parties to determine which instrument will be the principal one for the purpose of stamp duty, but in this case, the agreements to sell were treated as the principal instruments since they transferred possession.

Precedent Analysis:
The Court referred to earlier judgments, including Veena Hasmukh Jain v. State of Maharashtra (1999), where similar issues regarding the classification of agreements as conveyances were discussed. The Court reiterated that any agreement involving the transfer of possession, even if a subsequent sale deed is executed, must be duly stamped.

Court’s Reasoning:
The Supreme Court reasoned that the agreements to sell, which included a clause for the transfer of possession, constituted conveyances under the Maharashtra Stamp Act. The appellants’ argument that the sale deed executed later should absolve them from paying additional stamp duty on the agreements was rejected. The Court further held that the impounding of documents by the lower courts was justified, and the appellants were liable to pay the difference in stamp duty along with penalties.

Conclusion:
The appeal was dismissed, and the Court upheld the impounding of the documents for non-payment of stamp duty. The appellants were directed to comply with the requirements under the Maharashtra Stamp Act, including payment of stamp duty and penalties. Pending applications, if any, were also closed.

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