Writ Petition No. 2586 of 1988

28th July, 1993

Respondent Counsel: S. M. Shah, .

Cases Cited:
AIR 1987 Del 36 (Rel. on) [Para 4]
AIR 1951 Nagpur 403 (Rel. on) [Para 4]

JUDGMENT

ORDER :-The writ petitioner along with one Chandrakant Gangaram Hatkar and one P. K. Vasudevan Nair jointly agreed to purchase a plot of land admeasuring 550 sq. meters situated at village Kirol, Taluka Kurla, Bombay, for a consideration of Rs. 25,000/-. The said agreement for sale was executed on 16th October, 1984 and it was lodged for registration on the same day under Sr. No. S-4483/84. The agreement was executed on a stamp paper of Rs. 5/- as at the relevant time the stamp duty under the Bombay Stamp Act, 1958 on an agreement of this type was Rs. 5/- only. There is no dispute in that regard. Subsequently, the petitioner was served with an order dated 24-9-1986 issued by the Deputy Collector Valuation and Stamp Duty, Bombay, asking the petitioner to pay the stamp duty applicable to conveyance of immoveable property along with penalty. The contention of the Deputy Collector was that the document dated 16-10-1984 lodged for registration by the petitioner was wrongly described as an agreement of sale whereas in effect it was a document of sale. In that view of the matter, according to the Deputy Collector the proper duty payable on such document was the duty applicable to "conveyance of immoveable property". The value of the immoveable property for that purpose was estimated at Rs. 1,77,000/- and the duty payable thereon after deducting a sum of Rs. 5/- already paid by way of stamp on the agreement of sale was determined at Rs. 22,545/-. Since the document was insufficiently stamped for registration, in addition to the above amount of stamp duty penalty in the sum of Rs. 45,090/- was also levied and demand in all aggregating to Rs. 67,635/- was raised on the petitioner. On 24th March, 1988 a notice was issued to the petitioner to show cause why the above amount should not be recovered. Aggrieved by the aforesaid order and the notice for recovery, the petitioner has approached this court by filing the present writ petition.

2. The question that arises for consideration is whether the document in question is an agreement for sale of immoveable property or it is a conveyance of immoveable property. For that purpose, it will be necessary to examine some of the recitals in the said agreement. I have gone through the agreement which is annexed to this petition as Exhibit-A. On a careful consideration of the same, it is clear that it is not only termed as an agreement for sale but, in fact, it is so. Clause 11 of it clearly provides :

"Subject to the completion of marketable title to the properties by the vendor and no objection certificate if necessary, being obtained from the Competent Authority (sic, by) either of the parties, the sale deed shall be registered as and when required by the purchasers."

It is also stated in clause 10 that the vendors shall give a General Power of Attorney in favour of the purchasers or any other person or persons as may be directed by the purchasers for the purpose of management and development of the said land as and when required by the purchasers. In clause 12 of the agreement, it is further stated that the parties have agreed that the expenses of that agreement and the deed of conveyance and other writings to be executed inclusive of stamp duty, registration charges etc. shall be borne and paid by the purchasers alone. A reading of the above clauses clearly goes to show that by this agreement the vendors have not conveyed the free-hold right to the purchasers. No doubt, they have handed over possession and given them certain rights to develop the same. They also agreed to execute power of attorney in favour of the purchasers or their nominees to enable them to carry out the management and other developmental activities. It is, however, clear from clauses 11 and 12 that after verification of the title of the vendor to the property and obtaining No Objection Certificate etc. from the competent authorities, a sale deed shall be registered, the expenses thereof including the stamp duty registration charges etc. would be borne by the purchasers. The fact that the agreement in question is only an agreement for sale and not a conveyance is also evident from clauses 9 of the agreement which provides that :

"The vendors hereby agree to execute a deed of conveyance and all other assurances in favour of the purchasers or in favour of such person or persons as the purchasers may direct."

The respondents, in their affidavit, have stated that the agreement of sale is a misnomer and in fact and reality the document in question is a document of sale. I do not find any basis or justification for such a conclusion. This finding appears to have been arrived at due to lack of proper understanding of the distinction between an agreement for sale of an immoveable property and sale of immoveable property. It may be pertinent to mention here that under S. 17 of the Indian Registration Act, documents of sale of immoveable property of the value of Rs. 100/- and upwards are compulsorily registerable. Under S. 17(1)(b) other non-testamentary instruments which purport or operate to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immoveable property are to be registered compulsorily. Section 54 of the Transfer of Property Act deals with sales of immoveable property. "Sale" has been defined under that Section as "transfer of ownership in exchange for a price paid or promised or part-paid and part-promised". Such transfer in case of tangible immoveable property of Rs. 100/- and upwards can be made only by a registered instrument. It is also stated in the said Section that a contract for the sale of immovable property is "a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or change on such property". It is thus clear that an agreement for sale is merely a document creating a right to obtain another document of sale on fulfilment of terms and conditions specified therein. It does not, of itself, create any interest in or charge on such property. On the strength of such agreement a buyer does not become the owner of the property. The ownership remains with the seller. It will get transferred to the buyer only on execution of the sale deed by the seller. What the buyer gets from an agreement for sale is only a right to obtain a sale deed executed in his favour. If the seller refuses to comply, the buyer is entitled to enforce that obligation by filing a suit for specific performance.

3. In the instant case, from a perusal of the document in question, it is clear that it does not itself create any interest in or charge on the property which is the subject matter o the agreement. It also does not itself purport

to create any right in the land in favour of the purchasers. It merely confers a right on the purchasers to obtain another document. That being so, it is clear that the agreement in question is a pure and simple agreement for sale which confers a right on the purchaser to obtain another document of sale of the land which is the subject matter of the agreement. Such a document cannot be termed as deed of sale on the ground that possession has already been given by the vendor to the purchaser and the consideration has also been received. Sale of immovable property is not completed by more delivery of possession and receipt of consideration. Such agreements, therefore, cannot be treated as a conveyance having the effect of transfer of tile in the immovable property.

4. This view gets full support from a decision of the Nagpur High Court in Amroo v. Baburao, AIR 1951 Nagpur 403 wherein it was held that where a document is described as an agreement and is stamped as such, and there are no words of conveyance therein but it clearly states that a sale deed will be executed in future, such document must be regarded as an agreement and not a conveyance. To the same effect is a decision of the Delhi High Court in Imtiaz Ali v. Nasim Ahmed, AIR 1987 Delhi 36 wherein also it was held that where no registered sale deed was executed in favour of the appellant he could not be said to be the owner of the shop premises under the agreement to sell or general power of attorney executed in his favour by the alleged vendor.

5. The learned counsel for the petitioner also brought to my notice the amendment made in the Bombay Stamp Act, 1958 by Maharashtra Act 27 of 1985 with effect from 9-12-1985. Schedule I to the Act was substituted by a new schedule. In Item 25 of the substituted schedule, which prescribes the rates of stamp duty chargeable on conveyances, an Explanation has been incorporated which provides that where in the case of an agreement to sell an immovable property, the possession of any immovable property is 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 conveyance and stamp duty thereon shall be leviable accordingly.

6. I have carefully considered the newly inserted Explanation. It reads as follows :

"Explanation - For the purposes of this article, wherein the case of agreement to sell an immovable property, the possession of any immovable property is 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 thereon, then such agreement to sell shall be deemed to be a conveyance and stamp duty thereon shall be leviable accordingly :

Provided that, the provisions of Section 32A shall apply mutatis mutandis to such agreement which is deemed to be a conveyance as aforesaid, as they apply to a conveyance under that Section :

Provided further that, where subsequently a conveyance is executed in pursuance of such agreement of sale, the stamp duty, if any, already paid and recovered on the agreement of sale which is deemed to be a conveyance, shall be adjusted towards the total duty leviable on the conveyance."

It is an agreed position that this Explanation came into force with effect from 9-12-1985 and that it has no retrospective effect and, as such, it is not applicable to the present transaction which was executed and registered before coming into force of the same. This Explanation, in my opinion, clearly supports the view I have taken for reasons more than one. First, it creates a legal fiction which is only for the purposes of Item 25 of the Schedule I to the Bombay Stamp Act i.e. for the purposes of determining the stamp duty applicable to conveyance. For that limited purpose, it provides that even agreement to sell in certain circumstances shall be deemed to be a conveyance and stamp duty shall be levied thereon accordingly. Second, the second proviso to this Explanation clearly goes to show that the legislature it self is fully conscious of the legal position that an agreement of sale is merely agreement to sell in

pursuance of which a conveyance is to be executed in future and it is in that light that it is provided that where subsequently a conveyance is executed in pursuance of such agreement to sell, the stamp duty, if any, already paid and recovered on the agreement to sell which has been deemed to be a conveyance, shall be adjusted towards the total duty leviable on the conveyance. The proviso itself recognises in no less clear terms the distinction between a conveyance and an agreement to sell. The only object of the Explanation is to make the rates of stamp duty prescribed for conveyances applicable, in certain cases, also to agreements to sell. To avoid the levy of duty again on the very same transaction when subsequently in pursuance of such agreement a conveyance is executed, provision has been made for adjustment of the amount of duty levied on the agreement to sell towards the duty payable on the conveyance. In any event, it is only after the amendment made with effect from 9-12-1985 that even on agreement to sell falling within the Explanation to Item 25, stamp duty is leviable at the same rate as applicable to conveyance. The above Explanation, in no way, even purports to obliterate the distinction between a conveyance and an agreement to sell.

7. In view of what is stated above, I am of the clear opinion that the agreement in question was an agreement to sell immovable property in pursuance of which a conveyance was to be executed subsequently. There is such a stipulation in clear terms in the agreement itself. Under the circumstances, the Collector was not correct in treating the same as a conveyance and demanding stamp duty at rates applicable to conveyance. Such a demand can be made only by taking resort to Explanation to Item 25 of Schedule I to the Bombay Stamp Act which, however, is not applicable to the present case.

8. Accordingly, the impugned order dated 24th September, 1986 of the Deputy Collector, Valuation and Stamp Duty, Bombay and the notice of demand issued in pursuance thereof are Set aside and quashed. Under the facts and circumstances of the case, I make no order as to costs. The learned counsel for the petitioner states that he has already deposited the amount demanded by the Deputy Collector in this court in pursuance of the interim order passed by this court which should be directed to be refunded to him. The learned counsel for the respondents submits that the refund should be deferred by two months. The prayer is allowed. The amount deposited in the court by the petitioner shall be refunded after two months from today. Certified copy expedited.

Order Accordingly