IMPORTANT POINT
Suit for Specific Performance – Liability to pay stamp duty – Stamp duty is on instrument and not on transaction – It is immaterial, whether possession of property has been handed over at the time of execution of agreement to sell or whether it has been agreed to transfer possession.

JUDGMENT

R. MAHADEVAN, J.

Leave granted.

2. The challenge made in this appeal is to the order dated 29.08.2019, by which the High Court of Judicature at Bombay [Hereinafter referred to as "the High Court"] dismissed Writ Petition No.3246 of 2016. As a consequence thereof, the order dated 03.08.2015 passed by the Court of Civil Judge (Senior Division), Ratnagiri [Hereinafter referred to as “the trial Court”], was upheld. The trial Court in its order dated 03.08.2015 had allowed the application filed by the respondents and impounded the document (Exhibit 30) i.e., agreement to sell dated 03.09.2003 in respect of the property comprising House No.78/B/8 (18 x 9 feet) and an adjoining room (9 x 3 feet) situated at Paiki Village Kasaba Khed, Khed Taluk, and directed the same to be sent to the Registrar of Stamps for recovery of deficit stamp duty and penalty on it, as per law.

3. The appellant, originally, preferred a suit being Special Civil Suit No.65 of 2012 before the Court of Civil Judge, Senior Division, Ratnagiri, for specific performance of the agreement to sell deed dated 03.09.2003 and other reliefs. Repudiating the same, the Respondent Nos.1 and 2 filed their written statement. Pending the suit, the respondents filed an application under section 34 of the Bombay Stamp Act, 1958, for impounding the document stating that the agreement in question was executed on a stamp paper of Rs.50 /- and the suit property was situated within the limits of Khed Municipal Council and hence, stamp duty of Rs.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 the transfer of possession is linked to a future event, such as the execution of a sale deed, the agreement cannot be deemed to be a conveyance for the purposes of stamp duty under Explanation I; and in cases, where possession remains with the seller until the sale deed is executed, the agreement to sell cannot be equated with a conveyance, and no stamp duty can be levied as such. Therefore, Explanation I does not apply to agreements where the transfer of possession is to occur subsequently on the execution of a sale deed or conveyance deed and such agreements remain liable for stamp duty only at the stage of execution of the final conveyance.

4.1. Continuing further, the learned counsel submitted that in the present case, the agreement to sell dated 03.09.2003 explicitly states that the suit property is in the possession of the appellant in the capacity as tenant, and this possession is independent of the sale transaction. The agreement further clarifies that possession on ownership basis will only be handed over to the appellant, after the execution of the sale deed. The extension agreement dated 28.07.2004 entered into between the parties, also reiterates the same position and it expressly states that the appellant’s possession will continue to be on a monthly t