The Supreme Court of India has ruled that an agreement to sell specifying the delivery of possession of a property qualifies as a 'conveyance' under the Bombay Stamp Act and is liable for stamp duty. The judgment was delivered on February 14, 2025, in the case of Ramesh Mishrimal Jain vs. Avinash Vishwanath Patne & Anr.
The Court emphasized that stamp duty is levied on the instrument, not the transaction. Even if ownership is transferred only upon the execution of a sale deed, stamp duty becomes applicable if possession is granted under the agreement to sell.
A bench comprising Justices J.B. Pardiwala and R. Mahadevan upheld the decisions of the trial court and the Bombay High Court, which had ruled that the agreement to sell was liable for stamp duty since it granted possessory rights.
Case Background
The appellant, Ramesh Mishrimal Jain, was in possession of the disputed property as a tenant. An agreement to sell was executed between him and the respondent, stating that the property would remain in the appellant's possession as a tenant, and ownership-based possession would be transferred only after the execution of the sale deed.
The appellant argued that since his possession was as a tenant and ownership transfer was to occur later, the agreement should not be considered a conveyance and should not attract stamp duty. However, the Court rejected this argument.
"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," noted Justice R. Mahadevan in the judgment.
The Court referenced earlier rulings, including:
- Veena Hasmukh Jain & Another v. State of Maharashtra & Others [(1999) 5 SCC 725], where it was established that if possession is transferred or agreed to be transferred under an agreement to sell, it qualifies as a conveyance under the Bombay Stamp Act.
- Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil [(2024) 10 SCC 324], reaffirming that stamp duty is applicable based on the instrument, not merely on the actual transaction of ownership transfer.
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The Court ruled that the agreement to sell in this case satisfied the conditions of Explanation I to Article 25 of Schedule I of the Bombay Stamp Act, as it included a clause confirming that possession had already been handed over. This made the agreement a deemed conveyance requiring stamp duty payment.
"The agreement for sale 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 the Bombay Stamp Act."
Additionally, the Court noted that both the appellant and the respondent had filed separate suits—one for specific performance of the agreement to sell and another for eviction—further confirming that possession of the property was with the appellant.
Final Verdict
The appeal was dismissed, and the Court upheld the orders directing the impounding of the agreement to sell and sending it to the Registrar of Stamps for recovery of deficit stamp duty and penalty.
"Until the defect is cured by satisfying the requirements under Section 34, the document impounded cannot be used in evidence," the Court clarified.
- Agreements to sell that include possession clauses will be treated as conveyance and attract stamp duty under the Bombay Stamp Act.
- Stamp duty liability applies irrespective of whether actual ownership is transferred at the time of agreement.
- This ruling reinforces the importance of properly stamping property agreements to avoid legal disputes and penalties.
Case Title: RAMESH MISHRIMAL JAIN VERSUS AVINASH VISHWANATH PATNE & ANR.
