A) ABSTRACT / HEADNOTE

The judgment in Ramesh Mishrimal Jain v. Avinash Vishwanath Patne & Anr., [2025] 2 S.C.R. 670 : 2025 INSC 213, addresses whether an agreement to sell executed on 03.09.2003 attracts stamp duty and penalty under the Bombay Stamp Act, 1958 by reason of Explanation I to Article 25 of Schedule I (which deems certain agreements evidencing or followed by delivery of possession to be conveyances). The appellant obtained and continued possession prior to the written agreement, described that possession in the instrument as being on a rental basis, and sought specific performance; respondents impounded the agreement under s.34 of the Stamp Act for recovery of deficit duty and penalty.

The trial court and the Bombay High Court upheld impounding; the Supreme Court, relying on established precedents (notably Veena Hasmukh Jain v. State of Maharashtra and Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil), affirmed that stamp duty attaches to the instrument if the agreement either transfers or evidences transfer of possession (even if styled as tenancy) or if possession had already been given and the agreement records that fact, thereby satisfying Explanation I.

The Court emphasised that stamp liability is on the instrument and looked to its terms and the jural change between parties (tenant → purchaser) rather than form. The impounding and direction to send the document to the Registrar of Stamps for recovery of deficit duty and penalty were held to be legally correct; the appeal was dismissed.

Keywords: agreement to sell; Explanation I to Article 25; Bombay Stamp Act, 1958; Section 53A, Transfer of Property Act, 1882; deemed conveyance; impounding under s.34.

B) CASE DETAILS 

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The dispute concerns an agreement to sell dated 03.09.2003 for a small residential unit in Khed (Ratnagiri). The appellant (occupant) sued for specific performance based on that agreement; respondents denied the instrument’s validity and sought to impound it under s.34 of the Bombay Stamp Act, 1958, alleging gross short payment of duty (agreement executed on Rs.50 stamp paper while duty under Article 25 would be substantially higher). The trial court allowed the impounding and directed referral to the Registrar of Stamps to recover deficit duty and penalty; the High Court dismissed a writ challenging that order.

The appellant contended that the document recorded only a tenancy possession and explicitly stated that ownership-possession would follow execution of the sale deed thus, Explanation I could not apply because no transfer or agreement to transfer possession arose from the agreement itself. The respondents relied on the instrument’s recitals and surrounding facts (possession already with appellant, a timeline for sale deed and handing-over, a subsequent eviction suit by respondent) to establish that the agreement either evidenced prior delivery of possession or contemplated transfer of possession within a stipulated period therefore attracting the deeming provision.

The Supreme Court’s intervention required resolution of the textual scope of Explanation I to Article 25, the proper focus for stamp liability (instrument v. transaction), and the legal effect of a change in jural relationship when a tenant in possession purports to become purchaser under an agreement. The Court examined earlier precedents which parsed the twin limbs of the Explanation agreements followed by vs. evidencing delivery of possession and applied them to the facts, giving primacy to the instrument’s terms and to the change in possessory rights under s.53A of the Transfer of Property Act as indicia of a conveyance-like transaction for stamp purposes.

D) FACTS OF THE CASE

The material facts, as recorded in the impugned judgment, are:

(i) an agreement to sell dated 03.09.2003 was produced as Exhibit 30 in the specific performance suit;

(ii) the instrument recorded that the appellant was already in occupation of the suit property “on rental basis” but contained clauses setting out consideration (Rs.11,00,000), an advance payment and a timeline for execution of the sale deed and handing over possession on an ownership basis;

(iii) despite the recital of tenancy, the appellant continued in possession thereafter and filed suit for specific performance (Special Civil Suit No.65 of 2012);

(iv) respondents filed an application under s.34 of the Bombay Stamp Act alleging inadequate stamping (stamp paper of Rs.50) and claimed duty of Rs.44,000 plus penalty;

(v) the trial court allowed impounding and ordered the document to be sent to the Registrar of Stamps for recovery;

(vi) appellant challenged that order by writ (W.P. No.3246 of 2016) which the High Court dismissed;

(vii) a separate eviction suit by respondent was pending both suits together indicated the contested possession and the jural contest;

(viii) appellant argued that the agreement expressly reserved transfer of ownership-possession until execution of sale deed and thus did not transfer or agree to transfer possession for the purposes of Explanation I;

(ix) respondents relied on judicial precedents holding that an agreement which either delivers possession, evidences prior delivery, or contemplates possession transfer within a stipulated period can be deemed a conveyance for stamp duty.

The Supreme Court analysed these facts against the statutory text and precedents, treating the apparent tenancy recital as insufficient to negate the agreement’s conveyance-like consequences where the instrument otherwise recorded delivery or acquisition of possessory rights and a change in the parties’ legal relationship.

E) LEGAL ISSUES RAISED

i. Whether an agreement to sell that records prior possession (even if described as tenancy) and contemplates transfer of possession within a stipulated period is deemed to be a conveyance under Explanation I to Article 25 of Schedule I of the Bombay Stamp Act, 1958?
ii. Whether stamp duty liability is to be determined by the instrument’s terms (instrument-based levy) or by the underlying transaction (transaction-based)?
iii. Whether impounding under s.34 of the Bombay Stamp Act and referral to the Registrar for recovery of deficit duty and penalty is justified where the instrument embodies recitals of possession and parties’ conduct indicates acquisition of possessory rights?
iv. How does Section 53A, Transfer of Property Act, 1882 (protection of person in possession under contract) influence stamp duty analysis under Explanation I?

F) PETITIONER / APPELLANT’S ARGUMENTS

i. The counsels for Petitioner / Appellant submitted that the agreement expressly records that the appellant’s occupation was on a rental basis and that possession on ownership basis would be delivered only upon execution of a subsequent sale deed; hence no delivery or agreement to transfer possession arose under the agreement itself.
ii. It was contended that Explanation I presupposes either actual transfer or an agreement to transfer possession under the instrument; where the instrument makes transfer contingent upon a future sale deed, the Explanation is inapplicable.
iii. The appellant argued that stamp duty is not leviable at the agreement stage if possession remains with the seller until execution of the conveyance the agreement was not the principal document of conveyance.
iv. Reliance was placed on the language of the agreement and the extension agreement dated 28.07.2004 which, per appellant, reaffirmed tenancy status until the sale deed.

G) RESPONDENT’S ARGUMENTS

i. The counsels for Respondent submitted that the instrument either evidenced prior delivery of possession or contemplated transfer within a fixed timeline, thereby satisfying the conditions of Explanation I and making it a deemed conveyance.
ii. It was urged that appellant’s continued possession and suit for specific performance and respondent’s own eviction suit showed the practical acquisition of possessory rights protected by s.53A, strengthening the case for stamp liability.
iii. Respondents relied on settled authority that the levy is on the instrument and the form (label as tenancy) cannot defeat the statutory deeming where the instrument’s terms effectuate transfer or record possession.
iv. They pressed for impounding and referral to the Registrar of Stamps for recovery of deficit duty and penalty in accordance with law.

H) JUDGEMENT

The Supreme Court granted leave and examined the twin limbs of Explanation I to Article 25 agreements followed by delivery of possession and agreements evidencing delivery of possession. The Court reiterated the foundational principle that stamp duty is levied on the instrument and that the Explanation brings within the scope of a conveyance any agreement which transfers or evidences transfer of possession absent a formal conveyance.

Applying the legal tests from Veena Hasmukh Jain v. State of Maharashtra and Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil, the Court analysed the agreement’s text: though it described the appellant’s occupation as tenancy, the instrument also stated that physical possession had already been handed over and provided timelines for execution of the sale deed and handing over on an ownership basis. The Court took note of the contemporaneous facts the appellant’s suit for specific performance and the respondent’s eviction proceedings as reinforcing that a change in possessory rights had occurred or was contemplated such that s.53A protection and a de facto acquisition of possessory rights existed.

The Court rejected the appellant’s narrow reading of the Explanation, holding that the Explanation contemplates possession transferred before, at, or after the execution of the agreement and covers agreements which record prior delivery of possession. The trial court’s impounding order and referral to the Registrar for recovery were upheld as legally correct. The Court clarified that, under the second proviso to Article 25, any stamp duty already paid on the agreement shall be adjusted against duty payable on subsequent conveyance, and recovery shall be limited to the deficit duty plus penalty from the date of execution until payment.

The Court further made clear that an impounded document cannot be used in evidence until Section 34 requirements are satisfied. The appeal was dismissed as devoid of merits.

a. RATIO DECIDENDI

The operative ratio is that Explanation I to Article 25 must be read purposively: if an agreement to sell either:

(i) effects or contemplates delivery of possession within a stipulated period, or

(ii) expressly evidences prior delivery of possession, then the instrument is to be deemed a conveyance for stamp duty purposes.

Stamp liability attaches to the terms and effect of the instrument, not to the nomenclature used (e.g., “tenant”), and the Legislature may validly equate such agreements with conveyances where the substantive conditions of a sale (consideration, delivery/acquisition of possession, intent) are effectively fulfilled leaving only the formality of executing a sale deed.

The presence of possessory rights protected under s.53A, Transfer of Property Act further supports treating the instrument as a conveyance for stamp purposes. Consequently, courts may impound instruments under s.34 and direct recovery of deficit duty and penalty where the Explanation applies.

b. OBITER DICTA 

The Court observed (obiter) that the pre-existing status of possession as tenancy does not ipso facto negate a substantive novation of jural relationship when an agreement records acquisition of possessory rights or contemplates transfer on defined terms; a symbolic or constructive change in possession can suffice to attract the Explanation. The bench reiterated fiscal policy considerations: stamp duty is a revenue measure and the Act’s language must be given a plain and practical construction in favour of recovery where the instrument itself demonstrates circumstances envisaged by the Explanation.

The Court also elucidated procedural consequences: when an agreement is impounded, recovery is limited to deficit duty and penalty limited to the period from execution of agreement until payment, and any duty already paid must be adjusted on eventual conveyance. Finally, the Court stressed that factual concurrency of proceedings (specific performance + eviction) may be relevant to infer the true nature of possession and the jural relationship.

c. GUIDELINES 

i. Read Explanation I to Article 25, Schedule I purposively: look to whether the instrument transfers, contemplates transfer, or evidences prior delivery of possession.
ii. Determine stamp liability by analysing the text of the instrument and surrounding conduct of parties; labels (e.g., “tenant”) are not decisive.
iii. Where an agreement is impounded under s.34, refer the document to the Registrar of Stamps for assessment; recovery should be limited to deficit duty and penalty from execution date until actual payment.
iv. If duty has already been paid on the agreement (deemed conveyance), adjust such payment against duty payable on subsequent conveyance per the proviso to Article 25.
v. An impounded document cannot be used in evidence until defect is cured in accordance with law.
vi. Consider s.53A, Transfer of Property Act and concurrent civil proceedings (e.g., specific performance, eviction) as relevant indicators of change in possessory rights.

I) CONCLUSION & COMMENTS

The judgment reaffirms established principles that stamp duty analysis proceeds from the instrument’s character and its practical effect on parties’ rights, not merely from how parties label their relationship. Where an agreement either records possession already handed over or contemplates transfer within a stipulated period, the state may treat it as a conveyance for fiscal purposes; this protects revenue and prevents artful drafting to avoid duty.

Practically, practitioners must ensure correct stamping at the agreement stage if the terms indicate transfer or acquisition of possessory rights (including situations of tenant-to-purchaser novation). Litigants seeking specific performance should be aware that pursuing civil remedies while occupying property may expose them to impounding and duty assessment. The Court’s clarification on adjustment of previously paid duty and the limits on penalty recovery provide procedural comfort but underscore the commercial importance of upfront compliance.

For counsel, the case is a caution: meticulously draft recitals to reflect true intent and ensure stamping consistent with the instrument’s substance. Finally, the decision maintains the balance between statutory revenue aims and procedural safeguards: impounding is permissible, but statutory provisos protect against double-duty by allowing adjustments on ultimate conveyance.

J) REFERENCES

a. Important Cases Referred

1. Ramesh Mishrimal Jain v. Avinash Vishwanath Patne & Anr., [2025] 2 S.C.R. 670 : 2025 INSC 213.

2. Veena Hasmukh Jain & Anr. v. State of Maharashtra & Ors., (1999) 5 SCC 725.

3. Shyamsundar Radheshyam Agrawal v. Pushpabai Nilkanth Patil, (2024) 10 SCC 324.

4. B. Ratnamala v. G. Rudramma, 1999 SCC OnLine AP 438.

b. Important Statutes Referred

1. Bombay Stamp Act, 1958 — Article 25, Explanation I; Section 34 (impounding procedure).

2. Transfer of Property Act, 1882 — Section 53A.

3. Registration Act, 1908 — (referred obliquely in judgments concerning registration/stamp consequences).