2019 (11) TMI 1645 - HC - Indian Laws

Levy of Stamp duty on Indentures - exigible to stamp duty under Article 36 of the Bombay Stamp Act, 1958 or not - respondent submitted that the Indentures were not a lease and were simply an agreement - respondent claims that indenture is Agreement to Lease and not Agreement for Lease - HELD THAT - The covenant under which the interest is proposed to be transferred under the Indentures are set out. The first covenant records that for a period of four years commencing from the execution of the Indenture the Licensee has a license and authority to enter upon the said land for erecting a building or buildings. It is recorded that until the grant of lease as provided hereinafter, the Licensee shall be deemed to be mere Licensee of the land at the same rent and subject to the same terms including the liability for payment of service charges . Covenant 2 is a negative covenant and proclaims that Nothing in these presents contained shall be construed as a demise in law of the said land hereby agreed to be demised or any part thereof so as to give to the Licensee any legal interest therein until the lease hereby provided shall be executed and registered . The format of the Lease Deed required to be executed in terms of covenants 7 and 8 forms part of the Indenture and a perusal thereof would reveal that after the Town Planning Officer certifies that the buildings and the works have been erected in accordance with law, transfer of leasehold rights in favour of the writ petitioners in respect of the land in question as also the buildings erected thereon is to demise for a period of 60 years. Tested on the anvil of the definition of a lease and a license in the Transfer of Property Act, 1882 and the Indian Easement Act, 1882, a perusal of the two Indentures would show that the respondent No.1 were given a right under the Indentures to occupy the parcel of land referred to in the two Indentures and after obtaining sanction from the competent authorities and the grantor to construct buildings and expressly recorded in the Indentures is that no interest would be treated as having been transferred to the respondent No.1 - The format of the lease has been agreed upon and forms part of the Indentures. Thus, the Indentures in question are a license and not a lease as per the definition of lease under the Transfer of Property Act and license under the Indian Easement Act. We concur with the view taken by the learned Single Judge that the Indentures are a license and is not a lease. They envisage lease deeds to be executed upon the respondent No.1 complying with the obligations under the Indentures and reaching the stage where the right to have the lease executed is triggered - Appeals are dismissed.

Summary

Issues Involved:
1. Determination of whether the Indentures in question are leases or licenses under the Bombay Stamp Act, 1958.
2. Interpretation of the deletion of Explanation III under Article 36 of the Bombay Stamp Act, 1958.
3. Applicability of the New Bombay Disposal of Land Regulations, 1975 to the Indentures.

Detailed Analysis:

1. Determination of whether the Indentures in question are leases or licenses under the Bombay Stamp Act, 1958.
The court examined the nature of the two Indentures dated 2nd November 1995, executed by CIDCO in favor of the respondent. The Indentures were titled as "Agreement to Lease," and the respondent argued that they were not leases but merely agreements granting the right to have a lease executed in the future after fulfilling certain conditions.

The court noted that the definition of "lease" under Section 2(n) of the Bombay Stamp Act, 1958, includes various forms of agreements that transfer possessory interest. However, the court emphasized that it is the contents of the document, not its caption, that determine its nature. The Indentures described the respondent as a "Licensee" and explicitly stated that no legal interest would be transferred until the lease was executed and registered. The covenants within the Indentures provided the respondent with a license to enter the land and construct buildings, but not a leasehold interest.

The court also referred to Section 105 of the Transfer of Property Act, 1882, which defines a lease as a transfer of a right to enjoy property, and Section 52 of the Indian Easements Act, 1882, which defines a license as a right to do something on immovable property without transferring any interest. The court concluded that the Indentures were licenses and not leases, as they did not transfer any possessory interest to the respondent.

2. Interpretation of the deletion of Explanation III under Article 36 of the Bombay Stamp Act, 1958.
The Revenue Authorities argued that the deletion of Explanation III, which stated that an agreement of lease would not be chargeable as a lease unless there was an immediate and present demise, implied that agreements envisaging future demise would now be chargeable as leases. The court found this reasoning to be absurd and perverse.

The court held that the deletion of Explanation III did not change the fundamental nature of what constitutes a lease. The Indentures in question did not create an immediate and present demise of possessory interest; they only provided a license to enter and develop the land, with the lease to be executed in the future upon fulfillment of certain conditions. Therefore, the Indentures could not be considered leases under Article 36 of the Bombay Stamp Act, 1958.

3. Applicability of the New Bombay Disposal of Land Regulations, 1975 to the Indentures.
The appellants argued that under the New Bombay Disposal of Land Regulations, 1975, CIDCO could only transfer its interest in the land through a lease. The court responded that a license does not create any interest in the property and, therefore, does not violate the regulations.

The court noted that the Indentures explicitly recognized that CIDCO could only transfer interest through a lease and provided for a future lease to be executed upon fulfillment of certain conditions. Thus, the Indentures, being licenses with features of an Agreement to Lease, were in compliance with the regulations.

Conclusion:
The court concurred with the learned Single Judge's view that the Indentures were licenses and not leases. They envisaged future lease deeds to be executed upon compliance with the obligations under the Indentures. The appeals were dismissed, and costs were made easy. Pending Civil Applications, if any, were disposed of.