1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION CIVIL WRIT PETITION NO.4738 OF 2009 Manish Mohanlal Rathod & Ors. .. Petitioners Versus Dilip Shantaram Vavre & Ors. .. Respondents Mr.G.S.Godbole i/by Ms.Pallavi W. Dabholkar for the petitioners. CORAM : A.S.OKA, J. DATE : 29 th July 2009. P.C.: . The submissions of the learned counsel appearing for the petitioners were heard on the last date. The challenge in this petition under Article 227 of the Constitution of India is to the order dated 25 th February 2009 passed by the learned trial Judge below application at Exhibit 65. By the said order the learned trial Judge has directed that the agreement which is subject matter of dispute be impounded. The learned Judge directed that the same should be sent to the stamp collector for recovery of deficit stamp duty and penalty thereon as per the rules. 2 2. With a view to appreciate the submissions made by the learned counsel appearing for the petitioners, it will be necessary to refer to the facts of the case in brief. The petitioner are the original 1 st, 3 rd and 4 th plaintiffs. The petitioners are relying upon an Agreement for Sale dated 23 rd August 2003 which was executed by the 1 st respondent in favour of the plaintiffs. According to the case of the petitioners, under the agreement total consideration of Rs.10 lacs was fixed and out of the agreed consideration, a sum of Rs.8 lacs was paid and remaining amount of consideration of Rs.2 lacs was payable subsequently and possession was to be delivered after payment of entire sale consideration. According to the case of the petitioners on 27 th August 2003 they paid remaining amount of Rs.2 lacs and possession receipt was executed by the 1 st respondent. 3. The case of the petitioners is that the 1 st respondent avoided to execute the sale deed and in fact on 22 nd October 2003 he executed a registered Gift Deed in favour of the 2 nd 3 respondent. The 2 nd respondent on 18 th December 2004 executed an Agreement for Sale in respect of property in favour of the 3 rd respondent. Ultimately, a suit for specific performance was filed by the petitioners. Various prayers were made by the petitioners including the prayers regarding the Gift Deed and transaction effected by the 2 nd respondent in favour of the 3 rd respondent. In the suit, an application for temporary injunction made by the petitioners was rejected. Thereafter, the 1 st respondent filed application at Exhibit 65 contending that the Agreement for Sale subject matter of the suit was insufficiently and inadequately stamped. The prayer in the said application was for impounding the said agreement. By the impugned order, the said application at Exhibit 65 has been allowed. 4. The learned counsel appearing for the petitioners has invited my attention to the pleadings in the suit. He pointed out that though a case has been pleaded by the petitioners in the plaint that the 1 st respondent had put the petitioners in possession of the suit property by 4 executing a possession of receipt, the said factual assertion has been disputed by the respondents in their pleadings. In fact he pointed out that 1 st and 2 nd respondents came out with a case in their written statement that the possession was never handed over to the petitioners. He submitted that issue whether possession was actually delivered or not can be decided only after the parties adduce evidence. He submitted that unless it was established on evidence that possession of the property subject matter of the agreement has been parted with in favour of the petitioners before execution of the conveyance, it cannot be said that the explanation I to Article 25 of Schedule I of the Bombay Stamp Act, 1958 (hereinafter referred to as the said Act) was applicable. He placed reliance on a decision of Division Bench of this Court in the case of Balwantgir Ganpatgir Giri Vs. Manasi Construction and Developers & Ors [2006(5) Maharashtra Law Journal 306]. He submitted that the learned trial Judge has committed a gross error by passing an order of impounding. He submitted that even before the 5 parties adduce evidence, the prayer made by the 1 st respondent for impounding could not have been considered by the learned trial Judge and therefore the impugned order is erroneous. 5. I have given careful consideration to the submissions. It is not in dispute that the Agreement for Sale is governed by Article 25 of Schedule I of the said Act. The explanation I to Article 25 is relevant for the purposes of this petition which reads thus: [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 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 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 adjusteed towards the total leviable on the conveyance.] 6 6. In view of the explanation I, in case of Agreement for Sale of an immovable property, if possession of any immovable property is transfered or agreed to be transfered to the purchaser before execution or at the time of execution or after execution of such agreement then such Agreement for Sale shall be deemed to be a conveyance. The explanation contains a proviso which lays down that provisions of section 32A shall apply to such agreement which is deemed to be a conveyance. The Explanation I applies in following contingencies: (a) Possession of immovable property is transfered to the purchaser before the execution of Agreement or; (b) at the time of execution of the agreement or; (c) after the execution of such agreement. 7. It will be necessary to refer to the decision of the Division Bench in the case of Balawantgir Giri (supra). In the case before the Division 7 Bench, an order of a single Judge of this Court was challenged. The contention before the Division Bench was that the agreement discloses that possession was to be delivered in terms of the said agreement and therefore, the agreement will be governed by explanation I to Article 25 of the said Act. In paragraph 5 of the said decision, the Division Bench has noted the question which arose for consideration. Paragraph 5 reads thus: 5. The point which arises for consideration is; whether the document in question discloses an agreement for delivery of possession in terms of agreement for sale and that, therefore, it is a conveyance within the meaning of said expression under Explanation I to Article 25 of Schedule I of the said Act? . 8. In paragraph 8 Division Bench dealt with an argument that expression after the execution of such agreement would include any period or any day after the execution of the agreement irrespective of the fact whether such possession is to be delivered prior to or after the execution of the actual sale deed. The rival argument was that the explanation was introduced 8 to safeguard the revenue interest of the Government. In paragraph 9 the Division Bench answered the question. Paragraph 9 read thus: 9. The fact that the agreement in question clearly contemplates delivery of possession only on execution of the sale deed being not in dispute, in fact, that itself is sufficient to reject all the contentions sought to be raised on behalf of the appellants. Besides, as rightly submitted on behalf of the respondents, the Explanation to Article 25, the delivery of possession which transposes an agreement into a conveyance in terms of the said Explanation is only in case of agreement to deliver the possession in terms of the agreement and not in terms of the sale deed agreed to be executed consequent to such agreement. Indeed, in case of execution of the sale deed it would carry the stamp duty which is required to be paid on a conveyance is accordance with the Article 25 of Schedule I. Being so, once the sale deed is executed by passing required stamp duty in terms of Article 25, the occasion to deprive the Government revenue cannot arise. For the said reason, once the agreement discloses that delivery would be on execution of the sale deed, it is needless to say that there could be no opportunity for the parties to defraud the Government. Being so, an agreement which restricts delivery of possession on execution of the sale deed cannot be by any stretch of imagination construed to be a conveyance within the meaning of the said expression under Explanation I to Article 25 of Schedule I of the said Act . (Emphasis added) 9. Thus, the Division Bench held that the Explanation I of Article 25 will not apply when 9 the agreement in question clearly contemplates delivery of possession only on execution of the sale deed. The Division Bench, therefore, observed that as possession was to be handed over only on execution of the sale deed, there was no opportunity to the parties to defraud the Government. Therefore, the Division Bench came to the conclusion that an agreement which provides for delivery of possession on execution of the sale deed cannot be by any stretch of imagination construed to be an agreement to which Explanation I of Article 25 will apply. 10. Therefore, it will be necessary to refer to the Agreement for Sale which is subject matter of this petition. The agreement does not provide that the possession will be handed over either at the time of execution of the conveyance or on execution of the conveyance. On the contrary clause 4 recites that the possession will be handed over on the purchaser paying the entire consideration within the time stipulated in clause 3. The Agreement does not provides that the possession will be handed over to the 10 purchasers at the time of execution of the conveyance. Apart from this, the case of the petitioners-plaintiffs is that payment of the balance consideration was made on 27 th August 2003 and on that day, the 1 st respondent handed over possession to them. Assuming that there is some dispute about the execution of possession receipt, on plain reading of the agreement it is crystal clear that the delivery of possession was not linked with the execution of the conveyance. As pointed out earlier, cases where possession is agreed to be transfered to the purchaser before execution or at the time of execution or after the execution of such agreement are covered by Explanation I. In the present case, the Agreement contains a stipulation that the possession will be handed over after execution of the Agreement but before execution of the conveyance. The applicability of explanation I will depend on the stipulations in the Agreement. Therefore, the contention that the Agreement could have been impounded only after the evidence was recorded cannot be accepted. It is the case of the petitioners made out in the plaint that they are 11 put in possession before the execution of the conveyance. It is their own case that they are put in possession on the basis of the said Agreement for Sale. In view of the mandate of section 34 of the said Act of 1958, the insufficiently stamped Agreement could not have been received in evidence. 11. The decision of the Division Bench will apply where there is a clear stipulation in the agreement that possession will be handed over either at the time of execution of the conveyance or after the execution of the conveyance. In the circumstances, the learned trial Judge was right in passing the order of impounding on the ground that the agreement was not adequately stamped as required by Article 25 read with Explanation I thereto. 12. In the circumstances, there is no merit in the petition and the same is accordingly rejected. (A.S.OKA,J)