2024 (9) TMI 1406 - SC - Indian Laws

Liability to pay stamp duty and penalty on the agreements to sell executed prior to the sale deed executed in favour in respect of two properties - determination of real and true meaning of the instrument by ascertaining the intention of the parties from the contents and the language employed in the whole instrument - HELD THAT - 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. 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 - Even considering the contention of the appellant that the sale agreements ultimately concluded in the sale deed on which stamp duty 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 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. 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. There are no reason to interfere with the orders passed by the Courts below. Accordingly this appeal fails and is dismissed.

Summary

Issues Involved:

1. Liability of the appellants to pay stamp duty and penalty on agreements to sell executed prior to the sale deed.
2. Interpretation and application of Section 4 of the Maharashtra Stamp Act, 1958.
3. Determination of principal instrument for stamp duty purposes.
4. Applicability of Explanation I to Article 25 of Schedule I of the Maharashtra Stamp Act.
5. Impounding of documents and adjudication of stamp duty and penalty.

Detailed Analysis:

1. Liability of the appellants to pay stamp duty and penalty on agreements to sell executed prior to the sale deed:

The primary issue was whether the appellants were liable to pay stamp duty and penalty on the agreements to sell executed before the sale deed in their favor. The trial court and the High Court both held that the appellants were liable for the stamp duty and penalty on these agreements. The Supreme Court upheld this view, stating that the agreements for sale, which included clauses about the transfer of physical possession, required proper stamp duty as they were deemed conveyances under the Maharashtra Stamp Act.

2. Interpretation and application of Section 4 of the Maharashtra Stamp Act, 1958:

The appellants argued that under Section 4 of the Act, the sale deed executed in relation to the same immovable properties, upon which stamp duty was paid, should cover the earlier agreements to sell, which are part of the same transaction. The Court, however, clarified that Section 4(1) stipulates that the principal instrument alone shall be chargeable with the duty prescribed, and each of the other instruments shall be chargeable with a fixed duty. The Court determined that the agreements to sell did not form part of a single transaction and thus required separate stamp duty.

3. Determination of principal instrument for stamp duty purposes:

The Court examined the six documents and concluded that they were not part of a single transaction between the same parties. The agreements were executed at different times and between different parties. Therefore, each document required separate stamp duty. The Court emphasized that the duty is on the instrument, not the transaction, and the agreements to sell were principal documents requiring proper stamp duty.

4. Applicability of Explanation I to Article 25 of Schedule I of the Maharashtra Stamp Act:

Explanation I to Article 25 states that an agreement to sell immovable property, where possession is transferred, shall be deemed a conveyance and stamp duty shall be levied accordingly. The Court noted that the agreements included clauses for possession transfer, making them conveyances under this provision. The Court referenced the decision in Veena Hasmukh Jain v. State of Maharashtra, which supported the view that agreements with possession transfer clauses are deemed conveyances for stamp duty purposes.

5. Impounding of documents and adjudication of stamp duty and penalty:

The trial court's decision to impound the documents and send them to the Collector for adjudication of stamp duty and penalty was upheld. The Court affirmed that the agreements to sell, being principal documents with possession transfer clauses, required proper stamp duty and registration. The High Court's dismissal of the appellants' writ petition was also upheld. The Court further clarified that the state could only recover the difference in stamp duty and the entire penalty from the date of execution of the agreements until the payment of stamp duty.

Conclusion:

The Supreme Court found no reason to interfere with the orders passed by the lower courts. The appeal was dismissed, affirming the liability of the appellants to pay the appropriate stamp duty and penalty on the agreements to sell. The pending applications, if any, were also closed.