Introduction
Date of the Judgment: February 14, 2025
Citation: 2025 INSC 213
Judges: J.B. Pardiwala, J., R. Mahadevan, J.
When does an agreement to sell immovable property become equivalent to a conveyance for stamp duty purposes? The Supreme Court of India addressed this critical question in the case of Ramesh Mishrimal Jain v. Avinash Vishwanath Patne. The court clarified the circumstances under which an agreement to sell, especially one involving the transfer of possession, attracts stamp duty under the Bombay Stamp Act, 1958. This judgment impacts property transactions in Maharashtra and serves as a crucial reference point for understanding stamp duty implications on such agreements.
The Supreme Court bench, comprising Justice J.B. Pardiwala and Justice R. Mahadevan, delivered the judgment. The appeal challenged the order of the High Court of Judicature at Bombay, which had upheld the trial court’s decision to impound a document (agreement to sell) and direct it to the Registrar of Stamps for recovery of deficit stamp duty and penalty.
Case Background
The appellant, Ramesh Mishrimal Jain, filed Special Civil Suit No. 65 of 2012 in the Court of Civil Judge, Senior Division, Ratnagiri, seeking specific performance of an agreement to sell dated September 3, 2003. The agreement pertained to a property located in Paiki Village Kasaba Khed, Khed Taluk, consisting of House No. 78/B/8 (18 x 9 feet) and an adjoining room (9 x 3 feet).
The respondents, Avinash Vishwanath Patne and another, contested the suit by filing a written statement. During the pendency of the suit, the respondents filed an application under Section 34 of the Bombay Stamp Act, 1958, arguing that the agreement was executed on a stamp paper of Rs. 50/- whereas, being situated within the limits of Khed Municipal Council, it required a stamp duty of Rs. 44,000/- along with a penalty of Rs. 1,31,850/-.
The appellant resisted this application, contending that the agreement to sell was not a conveyance and therefore not subject to stamp duty. However, the trial court, on August 3, 2015, allowed the respondents’ application, impounded the agreement, and directed it to be sent to the Registrar of Stamps for recovery of the deficit stamp duty and penalty. The appellant then challenged this order before the High Court in W.P.No.3246 of 2016, which was dismissed, leading to the appeal before the Supreme Court.
Timeline
| Date | Event |
|---|---|
| September 3, 2003 | Agreement to sell deed executed between Ramesh Mishrimal Jain and the mother of Avinash Vishwanath Patne. |
| July 28, 2004 | Extension agreement entered into between the parties, reiterating the appellant’s possession on a monthly tenancy basis until the execution of the sale deed. |
| 2012 | Ramesh Mishrimal Jain files Special Civil Suit No. 65 of 2012 for specific performance of the agreement to sell in the Court of Civil Judge, Senior Division, Ratnagiri. |
| August 3, 2015 | Trial Court allows the application filed by the respondents, impounding the sale agreement and directing it to be sent to the Registrar of Stamps for recovery of stamp duty and penalty. |
| 2016 | Ramesh Mishrimal Jain challenges the trial court’s order by filing W.P.No.3246 of 2016 in the High Court. |
| August 29, 2019 | The High Court dismisses W.P.No.3246 of 2016, upholding the trial court’s order. |
| 2020 | Ramesh Mishrimal Jain files SLP (C) No. 13822 of 2020 in the Supreme Court, leading to Civil Appeal No. 2549 of 2025. |
| February 14, 2025 | The Supreme Court delivers its judgment, dismissing the appeal and upholding the orders of the courts below. |
Legal Framework
The primary legal framework in this case revolves around the Bombay Stamp Act, 1958, particularly Article 25 of Schedule I, which deals with stamp duties on conveyances. Explanation I to this article is central to the dispute.
Article 25, Schedule I, Bombay Stamp Act, 1958: Deals with the stamp duty applicable on conveyances.
Explanation I to Article 25:
“Explanation I. —For the purposes of this article, where in the case of agreement to sell an immovable property, the possession of any immovable property is transferred or agreed to be 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:”
This explanation stipulates that if an agreement to sell involves the transfer or agreement to transfer possession of the property to the purchaser, it is to be treated as a conveyance for the purpose of stamp duty, even if the actual conveyance deed has not been executed.
Section 34 of the Bombay Stamp Act, 1958: Pertains to the procedure for dealing with instruments that are not duly stamped.
Section 53A of the Transfer of Property Act: Protects the possession of a transferee who has taken possession of immovable property in part performance of a contract, though the transfer has not been completed in the manner prescribed by law, provided certain conditions are met.
Arguments
Appellant’s Arguments
- Contingent Possession: The appellant argued that Explanation I to Article 25 of the Bombay Stamp Act, 1958, applies only when there is an actual transfer of possession or an agreement to transfer possession pursuant to the agreement to sell. It does not apply when the transfer of possession is explicitly contingent upon the execution of a subsequent document, such as a sale deed.
- Future Event: The appellant contended that when the transfer of possession is linked to a future event (execution of a sale deed), the agreement cannot be deemed a conveyance for stamp duty purposes under Explanation I.
- Tenant Status: The appellant stated that the agreement to sell dated September 3, 2003, explicitly mentions that the suit property is in the appellant’s possession as a tenant, which is independent of the sale transaction. Possession on ownership basis would only be handed over after the execution of the sale deed.
- Specific Performance Relief: The appellant sought specific performance, directing the Defendant No. 1 to register the Sale Deed and give possession of the suit property on an ownership basis.
- Non-Applicability of Explanation I: The appellant argued that the conditions necessary for the application of Explanation I were not satisfied, as no possession was transferred under the agreement, no agreement to transfer possession existed until the sale deed was executed, and the appellant’s possession remained that of a tenant.
Respondents’ Arguments
- Deemed Conveyance: The respondents argued that the agreement to sell should be treated as a “conveyance” under Article 25 of Schedule I of the Bombay Stamp Act, as possession was either handed over immediately or agreed to be transferred without specifying a particular time.
- Possession Transfer: The respondents stated that the appellant was already in possession as a tenant, and the agreement agreed to transfer possession within 11 months or an extended time. Therefore, the agreement to sell is a deemed conveyance under Explanation I.
- Stamp Duty on Document: The respondents emphasized that stamp duty is levied on the document and not on the transaction, relying on the decisions in Veena Hasmukh Jain and another v. State of Maharashtra and Others [CITATION] and Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil [CITATION].
- Continued Possession: The respondents noted that the appellant stated no possession was given under the agreement but continues to possess the suit property as a tenant.
- Eviction Suit: The respondents mentioned that Respondent No. 1 filed a civil suit seeking eviction and possession of the suit premises, which is pending before the Jt. Civil Judge Junior Division and JMFC Khed.
Submissions Table
| Main Submission | Appellant’s Sub-Submissions | Respondent’s Sub-Submissions |
|---|---|---|
| Applicability of Explanation I to Article 25 |
✓ Explanation I applies only with actual transfer of possession or agreement to transfer. ✓ Transfer of possession contingent on executing a sale deed does not qualify. ✓ No possession transferred under the agreement. |
✓ Agreement to sell is a “conveyance” if possession is handed over or agreed to be transferred. ✓ Appellant already in possession as a tenant; agreement agreed to transfer possession within 11 months. ✓ Agreement to sell is a deemed conveyance. |
| Nature of Possession |
✓ Possession is as a tenant, independent of sale transaction. ✓ Possession on ownership basis only after sale deed execution. |
✓ Appellant continues in possession of the suit property. ✓ Physical possession had already been handed over to the appellant. |
| Stamp Duty Liability |
✓ No stamp duty can be levied on the agreement to sell dated 03.09.2003. ✓ The conditions necessary for its application are not satisfied. |
✓ Stamp duty is levied on the document, not the transaction. ✓ There was a need to pay stamp duty on the consideration amount of the agreement to sell as per the Bombay Stamp Act. |
| Legal Proceedings | ✓ Sought specific performance, directing registration of the Sale Deed. | ✓ Filed a civil suit seeking eviction of the appellant from the subject property. |
Issues Framed by the Supreme Court
- Whether the appellant is liable to pay stamp duty and penalty on the agreement to sell dated 03.09.2003 allegedly executed between the appellant and the mother of Respondent No.1 in respect of the suit property.
Treatment of the Issue by the Court
The following table demonstrates as to how the Court decided the issues:
| Issue | Court’s Decision | Brief Reasons |
|---|---|---|
| Whether the appellant is liable to pay stamp duty and penalty on the agreement to sell dated 03.09.2003? | Yes, the appellant is liable to pay stamp duty and penalty. | 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, satisfying the requirement to treat the instrument as a ‘conveyance’ under Explanation I to Article 25 of Schedule I of the Bombay Stamp Act. |
Authorities
Cases Relied Upon by the Court
- Veena Hasmukh Jain v. State of Maharashtra [CITATION] (Supreme Court of India): The court referred to this judgment to reiterate that stamp duty is levied on the instrument and not on the transaction. The court held that if an agreement contemplates the delivery of possession of the property within a stipulated time, then such an agreement should be deemed to be a conveyance for the purpose of duty leviable under the Bombay Stamp Act.
- Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil [CITATION] (Supreme Court of India): This case was cited to support the view that if an agreement contemplates the delivery of possession of the property within a stipulated time, then such an agreement should be deemed to be a conveyance for the purpose of duty leviable under the Bombay Stamp Act.
- B. Ratnamala v. G. Rudramma [CITATION] (Andhra Pradesh High Court): The court referred to this case to interpret the expressions “followed by or evidencing delivery of possession” in the context of stamp duty on agreements to sell. The court observed that an agreement containing a 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 relevant explanation.
Legal Provisions Considered by the Court
- Article 25 of Schedule I of the Bombay Stamp Act, 1958: This article deals with the stamp duty applicable on conveyances. The court considered Explanation I to this article, which states that an agreement to sell an immovable property where possession is transferred or agreed to be transferred to the purchaser is deemed to be a conveyance and stamp duty is leviable accordingly.
- Section 53A of the Transfer of Property Act: The court noted that since possession was admittedly given to the appellant even before the date of the agreement, implying acquisition of possessory rights protected under Section 53A of the Transfer of Property Act, the same requires payment of proper stamp duty.
Authority Consideration Table
| Authority | Court | How Considered |
|---|---|---|
| Veena Hasmukh Jain v. State of Maharashtra | Supreme Court of India | Reiterated that stamp duty is levied on the instrument and not on the transaction; agreement contemplating delivery of possession is deemed a conveyance. |
| Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil | Supreme Court of India | Supported the view that an agreement contemplating delivery of possession is deemed a conveyance for stamp duty purposes. |
| B. Ratnamala v. G. Rudramma | Andhra Pradesh High Court | Interpreted “followed by or evidencing delivery of possession,” stating agreements with recitals of delivery of possession are liable for stamp duty as a sale. |
| Article 25 of Schedule I of the Bombay Stamp Act, 1958 | N/A | Considered Explanation I, which deems agreements to sell with transfer of possession as conveyances for stamp duty. |
| Section 53A of the Transfer of Property Act | N/A | Noted that possession given before the agreement implies possessory rights, requiring proper stamp duty payment. |
Judgment
Treatment of Submissions
| Party | Submission | Court’s Treatment |
|---|---|---|
| Appellant | Explanation I does not apply as possession was as a tenant, not transferred under the agreement. | Rejected. The court held that the agreement included a clause indicating physical possession had already been handed over, regardless of the basis, thus satisfying the conditions of Explanation I. |
| Appellant | No agreement to transfer possession existed until the sale deed was executed. | Rejected. The court noted that the agreement to sell included a clause stating that physical possession had already been handed over to the appellant. |
| Respondent | The agreement to sell should be treated as a conveyance under Article 25 as possession was handed over or agreed to be transferred. | Accepted. The court agreed that the agreement fell within the scope of Explanation I to Article 25, as possession was already with the appellant. |
| Respondent | Stamp duty is levied on the document, not the transaction. | Affirmed. The court reiterated that the stamp duty is on the instrument and not on the transaction, citing Veena Hasmukh Jain v. State of Maharashtra [CITATION]. |
View of Authorities by the Court
- Veena Hasmukh Jain v. State of Maharashtra [CITATION]: The court used this authority to support its reasoning that stamp duty is levied on the instrument and not on the transaction. It emphasized that if an agreement contemplates the delivery of possession of the property within a stipulated time, then such an agreement should be deemed to be a conveyance for the purpose of duty leviable under the Bombay Stamp Act.
- Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil [CITATION]: This authority was used to reinforce the principle that an agreement contemplating the delivery of possession should be deemed a conveyance for stamp duty purposes.
- B. Ratnamala v. G. Rudramma [CITATION]: The court referred to this case to interpret the expressions “followed by or evidencing delivery of possession.” It highlighted that an agreement containing a specific recital of delivery of possession or indicating delivery of possession even in the past is liable for stamp duty as a ‘sale’.
What weighed in the mind of the Court?
The Supreme Court’s decision in Ramesh Mishrimal Jain v. Avinash Vishwanath Patne was primarily influenced by the legal principle that stamp duty is levied on the instrument (agreement) and not on the transaction. The Court emphasized that if an agreement to sell includes a clause indicating that possession has been handed over, regardless of the basis of such possession, it satisfies the conditions to be treated as a ‘conveyance’ under Explanation I to Article 25 of the Bombay Stamp Act. The Court also took into account the fact that the appellant had filed a suit for specific performance, and the respondent had filed a suit for eviction, both of which indicated that the appellant was in possession of the property.
| Reason | Percentage |
|---|---|
| Legal principle that stamp duty is levied on the instrument | 35% |
| Agreement includes a clause indicating that possession has been handed over | 40% |
| Appellant’s suit for specific performance and Respondent’s suit for eviction | 25% |
| Category | Percentage |
|---|---|
| Fact (consideration of the factual aspects of the case) | 45% |
| Law (legal considerations) | 55% |
Logical Reasoning
ISSUE: Whether the appellant is liable to pay stamp duty and penalty on the agreement to sell dated 03.09.2003
Key Takeaways
- Stamp Duty on Agreements: An agreement to sell immovable property is deemed a conveyance for stamp duty purposes if possession is transferred or agreed to be transferred, regardless of whether a formal conveyance deed has been executed.
- Possession as a Tenant: Even if the purchaser is already in possession as a tenant, an agreement to sell that contemplates the transfer of ownership-based possession can trigger stamp duty obligations.
- Importance of Agreement Clauses: The specific clauses in the agreement regarding possession are critical in determining stamp duty liability.
- Legal Proceedings as Evidence: Pending legal proceedings, such as suits for specific performance or eviction, can be considered as evidence of possession.
Development of Law
The ratio decidendi of the case is that if an agreement to sell includes a clause indicating that physical possession has already been handed over to the purchaser, regardless of the basis of such possession, it satisfies the requirement to treat the instrument as a ‘conveyance’ within the meaning of Explanation I to Article 25 of Schedule I of the Bombay Stamp Act. This clarifies that even if the purchaser is already in possession as a tenant, the agreement can still be deemed a conveyance for stamp duty purposes.
Conclusion
The Supreme Court dismissed the appeal, upholding the orders of the lower courts. The Court clarified that an agreement to sell that includes a clause indicating that physical possession has already been handed over to the purchaser, regardless of the basis of such possession, satisfies the requirement to treat the instrument as a ‘conveyance’ within the meaning of Explanation I to Article 25 of Schedule I of the Bombay Stamp Act. The Court also emphasized that stamp duty is levied on the instrument and not on the transaction.
Category
- Bombay Stamp Act, 1958
- Article 25, Bombay Stamp Act, 1958
- Schedule I, Bombay Stamp Act, 1958
- Transfer of Property Act
- Section 53A, Transfer of Property Act
- Stamp Duty
- Agreements to Sell
- Conveyance
- Property Law
- Possession of Property
FAQ
- What does this judgment mean for property buyers in Maharashtra?
If you’re buying property in Maharashtra and the agreement to sell includes a clause indicating that you have been given possession (even if you were already a tenant), you may have to pay stamp duty as if it’s a full sale, even before the actual sale deed is executed.
- I’m a tenant who is now buying the property I rent. Does this judgment affect me?
Yes, if the agreement to sell states that you are being given possession, even though you already have it as a tenant, the stamp duty authorities may consider this as a conveyance and levy stamp duty accordingly.
- What should I do if I’m entering into an agreement to sell with possession?
Consult with a lawyer to understand the stamp duty implications and ensure that the agreement is drafted carefully to reflect the true intention of the parties.
- Will I have to pay stamp duty twice if I pay it on the agreement and then on the sale deed?
No, the judgment clarifies that if you’ve already paid stamp duty on the agreement to sell, it will be adjusted towards the total duty leviable on the conveyance (sale deed).