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TMI Blog2025 (2) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the date of agreement, implying acquisition of possessory rights protected under Section 53A of the Transfer of Property Act, the same requires payment of proper stamp duty. The agreement to sell includes a clause stating that physical possession had already been handed over to the appellant, regardless of the basis of such possession. This satisfies the requirement to treat the instrument as a 'conveyance' within the meaning of Explanation I to Article 25 of Schedule I of Bombay Stamp Act, with only the formality of executing the sale deed remaining. Pertinently, it is to be pointed out that the appellant filed a suit for specific performance of the agreement to sell against the respondents; Respondent No.1 filed a suit seeking eviction of the appellant from the subject property; and both the suits are pending, which clearly establish the possession of the property by the appellant. Therefore, the said document is liable for payment of stamp duty at the hands of the appellant. The Courts below impounded the document and directed the same to be sent to the Registrar of Stamps for recovery of deficit stamp duty and penalty as per law, by the orders impugned herein, which is pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44,000/- was required to be paid, besides penalty of Rs.1,31,850/-. The said application was resisted by the appellant by stating that the agreement of sale was not an agreement of conveyance and hence, no stamp duty was payable on the same. However, by order dated 03.08.2015, the trial Court allowed the said application, impounded the sale agreement dated 03.09.2003 and directed the document to be sent to the Registrar of Stamps for recovery of the stamp duty and penalty on it as per law. Challenging the same, the appellant preferred W.P.No.3246 of 2016, which was dismissed by the High Court, by the order impugned in this appeal. 4. According to the learned counsel for the appellant, Explanation I to Article 25 of the Bombay Stamp Act, 1958, applies only in cases, where there is either an actual transfer of possession or an agreement to transfer possession pursuant to the agreement to sell; and it does not apply to cases where the transfer of possession is explicitly contingent upon the execution of a subsequent document, such as, sale deed or conveyance deed. Further, Explanation I presupposes an immediate or agreed transfer of possession under the agreement to sell itself. When ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssession of the appellant remains that of a tenant, which is legally distinct and independent; and hence, no stamp duty can be levied on the agreement to sell dated 03.09.2003. However, the trial Court erred in holding that Explanation I applies to the present case and directed the document to be sent to the Registrar of Stamps for recovery of stamp duty and penalty from the appellant; and the same was also affirmed by the High Court by the order impugned herein. Therefore, the learned counsel prayed to allow this appeal by setting aside the order of the High Court. 5. On the contrary, the learned counsel appearing for the respondents submitted that the subject property was jointly owned by the Respondent No.1 and his mother and after her demise, the Respondent No.1 became the absolute owner of the same. The Respondent No.1 stoutly denied the execution of the agreement to sell dated 03.09.2003 between the appellant (tenant) and his mother (landlord) for a consideration of Rs.11,00,000/- out of which, an advance payment of Rs.1,00,000/- was made by the appellant, and the timeline provided in the agreement for execution of the sale deed and also handing over the possession. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sell dated 03.09.2003 allegedly executed between the appellant and the mother of Respondent No.1 in respect of the suit property. 8. It is the specific case of the appellant that the agreement to sell clearly states that the possession of the appellant is on a rental basis and the same will not form part of the sale transaction; that, possession on ownership will be given only upon completion of the sale transaction and execution of the sale deed; and therefore, the question of treating the agreement as a deemed conveyance does not arise. It is also stated that the decisions referred to on the side of the respondents are not applicable to the present case as they are factually different and distinct. 9. However, the legal position is very clear that the stamp duty is on the instrument and not on the transaction. Furthermore, it is immaterial, whether the possession of the property has been handed over at the time of execution of the agreement to sell or whether it has been agreed to transfer the possession. In this regard, it will be useful to refer to Explanation 1 to Article 25 of Schedule I of the Bombay Stamp Act, which reads as under: "Explanation I.-For the purposes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Referring to the aforesaid judgment, this Court in Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil (2024) 10 SCC 324, held that 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. The relevant paragraphs of the same read as under : "16. 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 53-A 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 determine as to which of the document shall be principal document. 17. As no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollow the agreement i.e., through the agreement. It takes in its sweep the recital in the agreement itself that delivery of possession is being handed over. It will also cover cases of delivery of possession contemporaneous with the execution of agreement, even if there is no specific recital in the agreement. In other words, the delivery of possession should be intimately and inextricably connected with the agreement. And in the second type, i.e., agreements evidencing delivery of possession, if the document contains evidence of delivery of possession by a recital in that behalf, that is sufficient. Such delivery of possession can be prior to the date of agreement and need not be under the agreement. If the agreement records the fact that the possession was delivered earlier and such recital serves as evidence of delivery of possession, though prior to the Agreement, it falls under the second limb. Therefore, on a proper interpretation of the said expressions, it would follow that an agreement containing specific recital of delivery of possession or indicating delivery of possession even in the past is liable for stamp duty as a 'sale' under the said Explanation. 11. Mohd. Gafo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :- For the purpose 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". Interpreting the said explanation, it was held: "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 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 a conveyance shall be adjusted towards the total duty leviable on the conveyance. Now, in the present case, the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... session should invite the stamp duty as a sale deed, even though the possession had been delivered in the past. The expression "evidencing delivery of possession" applies to the situation with which we are concerned in the present case." 11. In the instant case, the agreement to sell executed between the appellant and mother of the Respondent No.1, specifically states that "this property is in your occupation on rental basis and it will not be part of the sale transaction. After completion of sale transaction, the possession of the said property will be given to you on the ownership basis. This makes it very clear that the suit property was occupied by the appellant on a rental basis and it would not be a part of the sale transaction. Further, there was a clause, by which, timeline was given for execution of sale deed. Since the possession was admittedly given to the appellant even before the date of agreement, implying acquisition of possessory rights protected under Section 53A of the Transfer of Property Act, the same requires payment of proper stamp duty. As indicated above, the agreement to sell includes a clause stating that physical possession had already been handed over ..... 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