Supreme Court On Stamp Duty for Agreement to Sell with Prior Possession

The Supreme Court in Ramesh Mishrimal Jain versus Avinash Vishwanath Patne & Anr. upheld the High Court's order, affirming the trial court's decision to impound an agreement to sell and direct the recovery of deficit stamp duty and penalty under the Bombay Stamp Act, 1958. The case arose from a suit for specific performance filed by the appellant. The respondents had contended that the sale agreement was inadequately stamped.

The appellant instituted specific performance against the respondents upon an agreement to sell. The respondents impounded the agreement on grounds of insufficiency of stamp duty. The trial court granted the order, which was affirmed by the High Court. This gave rise to the appeal to the Supreme Court.

The appellant argued that Explanation I to Article 25 of the Bombay Stamp Act, 1958, which considers certain agreements to sell as conveyances for the purpose of stamp duty, was not applicable since the transfer of possession of ownership was conditional upon a future sale deed, and his possession at present was as a tenant.

The Supreme Court, however, reaffirmed that stamp duty is charged on the instrument, and not on the transaction. The Apex Court held that the Explanation I to Article 25, which clarifies that a contract of sale where possession is delivered or is agreed to be delivered is construed as a conveyance for duty purposes. The Apex Court relying on its earlier judgments, in case of Veena Hasmukh Jain vs State of Maharashtra (Click to Download) and Shyamsundar Radheshyam Agrawal vs Pushpabai Nilkanth Patil (Click to Download), held that an agreement that entertains possession delivery attracts duty as a conveyance.

"Stamp duty is on the document, not the transaction."

As per the observation "The Explanation I to Article 25 of the Bombay Stamp Act treats an agreement to sell as a conveyance for stamp duty where possession is passed or agreed to be passed, and antecedent possession may operate Explanation I."

The Apex Court observed that possession was admittedly relinquished to the appellant prior to the agreement date, though the agreement indicated his possession as a tenant. The earlier possession met the provisions of Explanation I. The Apex Court thus rejected the appeal, upholding the order of impounding and the order for recovery of deficit stamp duty and penalty, with the clarification of the adjustment of any paid duty on the later sale deed.

Consequently, the Supreme Court found no infirmity in the orders passed by the Courts below in impounding the document and directing the recovery of deficit stamp duty and penalty. However, the Court clarified that as per the second proviso to Article 25, if stamp duty has already been paid or recovered on the agreement to sell, it shall be adjusted towards the total duty leviable on the subsequent conveyance, and the penalty recovery shall be limited to the difference in stamp duty from the date of the agreement until the date of payment. The appeal was accordingly dismissed.

Coram: Justice J.B. Pardiwala and Justice R. Mahadevan
Between: Ramesh Mishrimal Jain versus Avinash Vishwanath Patne & Anr 2025 INSC 213
Date of Judgment: 14-02-2025