1 1061.10-wp bgp IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 1061 OF 2003 Kirankumar U. Jain ..Petitioner Vs. The State of Maharashtra & Ors. ..Respondents Mr.Satyam Vaishnav with Mr.Anil Chouhan i/b. N.N.Vaishnava & Co. for petitioner. Mr.A.B.Ketkar, AGP for respondents. CORAM : D.K.DESHMUKH & N.D.DESHPANDE,JJ. DATE : NOVEMBER 19, 2010 P.C. 1. The petitioner, by this petition, challenges the notice issued under the Land Revenue Code for recovery of stamp duty on agreement dated 14th July, 1997. That agreement was entered into between the petitioner and the Builder M/s.Pach Construction for purchase of a flat in a building which was proposed to be constructed by the Builder. The petitioner has produced a document on record to show that as the Builder could not complete the construction of the building within time, that agreement was cancelled by a registered document. 2 1061.10-wp 2. A notice was issued to the petitioner asking him to pay an amount of Rs.5,18,190/- as a deficit stamp duty by notice dated 23rd August, 2001 issued by the Registrar of Assurance. That notice was replied by the Petitioner. The petitioner pointed out that he is not liable to pay any stamp duty. He also pointed out that, the agreement for purchase of a flat has been subsequently cancelled by a registered document. No adjudication order was ever made and straightway the matter was sent for recovery to the Tahasildar. The Tahasildar issued a notice for recovery of the amount of deficit stamp duty as arrears of land revenue. The petitioner, therefore, is before this Court challenging the recovery. 3. The learned Counsel appearing for the petitioner relying on the clauses of the agreement shows that even ignoring the fact of cancellation of the agreement, even if one goes by the agreement, under Article 25 of Schedule-I of the Bombay Stamp Act, 1958 the stamp duty on the agreement to sell cannot be recovered. He submits that an agreement to sell can be treated as conveyance only because of the explanation appearing below Article 25. He relied on the judgment of the Supreme Court in the case of Veena Hasmukh Jain and Anr. Vs. State of Maharashtra and Ors. (1999) 5 SCC 725 to submit that the explanation below Article 25 of the Bombay Stamp Act does not apply if an agreement to sell which contemplates delivery of possession only after execution of the conveyance and not before that. He relies on certain clauses in the agreement to claim that the agreement also contemplates handing over the possession only after execution of the conveyance. 4. The learned Counsel appearing for respondent Nos.1 and 2 on the other hand submits that since in some of the clauses of the agreement, a conveyance is contemplated to be executed in favour of a Cooperative Society of the flat 3 1061.10-wp purchaser, the petitioner cannot claim that the possession is to be handed over only after execution of the conveyance in his favour. 5. Now, it is clear that the petitioner is being asked to pay stamp duty on the agreement dated 14th July, 1997 treating it as a conveyance because of explanation appearing below Article 25 of the Schedule-I of the Bombay Stamp Act,1958. Explanation-I to Article 25 of Schedule-I to the Bombay Stamp Act reads as under: “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 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: Provided that, the provisions of Section 32-A 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.” 6. That explanation has been considered by the Supreme Court in the case of Veena Hasmukh Jain and Anr. referred above in its paragraph No.10 of the judgment. The said paragraph No.10 reads as under: 10. It is clear that the object of the Stamp Act is to levy stamp duty on different kinds of instruments. The legislature, in the present case, has chosen to levy a rate of duty equivalent to conveyance in respect of an agreement though the transaction may not have been completed 4 1061.10-wp because of certain instruments arising out of such agreement being executed and possession thereof being taken prior to or simultaneous with the document or subsequently. But in the Explanation, it is not clear that if the document provides that possession has to be taken without execution of the conveyance, certainly it would attract the appropriate duty. If the agreement provides that possession will be handed over on the execution of a conveyance as contemplated under Section 11 of the MOF Act, then the Explanation shall not be attracted at all. In the present case, it is clear that in the terms of the agreement, there is no provision made at all for execution of the conveyance. On the other hand, what is submitted is that the provisions of the MOF Act could be executed subsequently when it is not clear as to when the conveyance is to be executed and the stipulated time within which the possession has to be handed over. If that is so, it is clear that the document would attract duty as if it is a conveyance as provided in the Explanation. Thus we find no error in the view taken by the High Court. It is not necessary to examine in these appeals as to whether the instrument in question itself conveys a title or not. Therefore, we uphold the decision of the High Court made in this regard. The appeals are dismissed. 7. It is clear from the Supreme Court judgment quoted above that an agreement to sell the property cannot be treated as a conveyance if that agreement contemplates handing over the possession of the property which is a subject matter of the agreement after execution of conveyance under Section 11 of the Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act,1963 (hereinafter referred to as the “MOF Act”). Insofar as the present agreement is concerned, clause 1 of the agreement reads as under: “1. The parties agree that before giving possession of the flat referred herein by the Promoters to the Purchaser, a Sale Deed, will be executed and it would adequately be stamped and registered with the Registering Authorities by the parties hereto.” 5 1061.10-wp 8. The learned Counsel appearing for respondent Nos.1 and 2 invited our attention to clause 8 of the agreement, which reads as under: “8. Nothing contained in these presents shall be constructed to confer upon the purchasers any right, title or interest of any kind whatsoever in to or ever the said property or Building or any part thereof. Such conferment shall take place only upon the execution of Conveyance in favour of a Cooperative society or on Incorporated Body to be formed by the Purchaser of different premises in the said building as hereinafter stated.” 9. Perusal of this clause also shows that the purchaser was not to get any right in the flat including its possession before execution of conveyance in favour of the society of the flat purchaser. In our opinion, that conveyance is not to be executed in favour of the party to the agreement but in favour of the cooperative society of the flat purchaser does not make any difference to the explanation. What is contemplated by the explanation as construed by the Supreme Court is that the agreement should contemplate handing over of possession of the flat which is subject matter of the agreement before execution of conveyance. It may be either in favour of the person who is described as a purchaser in the agreement or his nominee. So far as the Supreme Court judgment is concerned, it clearly refers to the provisions of the MOF Act. The MOF Act contemplates execution of sale deed of the property in favour of a cooperative society of the flat purchaser. In our opinion, considering the clauses of the agreement, it was clearly covered by the judgment of the Supreme Court in Veena Hasmukh Jain and Anr. referred to above and therefore, the respondents could not have demanded the stamp duty on that document treating it as a conveyance. What is further to be seen that even that agreement has been cancelled by a registered Deed of Cancellation. In this view of the matter, therefore, in our opinion, petition will 6 1061.10-wp have to be allowed. Petition is accordingly allowed. Rule is made absolute in terms of prayer clause (a). No order as to costs. (N.D.DESHPANDE,J.) (D.K.DESHMUKH,J.)