DELHI HIGH COURT REITERATES THAT INADEQUATE STAMPING OF AGREEMENT TO SELL OF IMMOVABLE PROPERTY IS A CURABLE DEFECT

The Hon’ble Delhi High Court comprising of Justice Neena Bansal Krishna passed a Judgment dated 10-06-2024 in the matter of M/s Celebration Hotels & Resorts (P) Ltd. Vs M/s Sartaj Hotels Apartments & Vilas Pvt Ltd. and Others, CS(OS) 612/2012 and observed that insufficient stamping of instruments of transfer created in part-performance such as an agreement to sell, is a curable defect, which can be rectified on payment of the requisite stamp duty.

Facts

i) In the present case, the Plaintiff, M/s Celebration Hotels & Resorts (P) Ltd. filed a Civil Suit (Original Side) seeking Specific Performance and Permanent Injunction bearing CS (OS) 612/2012 before the Delhi High Court against the Defendants M/s Sartaj Hotels Apartments & Vilas Pvt Ltd. and Others based on an Agreement to Sell dated 23-04-2009, a Memorandum of Understanding dated 08-10-2022 (MOU) and the Agreements dated 18-11-2010 (Documents).

ii) In the said Suit, the Defendants filed an Application bearing A. 17902 / 2022 under Section 33 of Stamp Act, 1899 (Examination and impounding of instruments) on the ground that the aforesaid Documents were either insufficiently stamped or unstamped and hence, such Documents are liable to be impounded and be sent to the Collector of Stamps for determination and payment of the stamp duty by the Plaintiff.

iii) The Plaintiff filed its Reply to the aforesaid Application stating that the Agreement to Sell and other Documents were not in the nature of a conveyance deed, whereby the pieces of land in question would get transferred to the Plaintiff and hence, stamp duty is not payable on such Documents.

High Court Observations

1) That Article 23A of the Stamp Act provides that contracts for conveyance / transfer of immovable property in the nature of part performance under Section 53A of the Transfer of Property Act 1881 (Part performance)[1], must have the stamp duty paid to the extent of 90% of the duty as payable for a conveyance deed.

2) Thus, the aforesaid Documents that are instruments of transfer created in part-performance as defined under Section 53A of the Transfer of Property Act, have to be adequately stamped in terms of Article 23A of the Stamp Act. Failing which, the said Documents, being unstamped, cannot be received in evidence by the Court and cannot be acted upon, in view of Section 35 of the Stamp Act (Instruments not duly stamped inadmissible in evidence, etc).

3) But as per the observations made by the Hon’ble Supreme Court in N. Global Mercantile Private Limited vs. Indo Unique Flaim Ltd. & Ors., (2023) 7 SCC 1 and the observations made by the High Courts in several other cases, the insufficient stamping of an instrument is considered to be a curable defect, which can be rectified on payment of the requisite stamp duty.

“Once the duty is paid, the document becomes admissible in evidence. Section 35 of the Act, therefore, ensures that stamp duty is paid before obligations of the parties arising under that instrument are enforced.”

The detailed observations made by the Hon’ble Supreme Court regarding parameters for admissibility of insufficiently stamped documents in N.N. Global Mercantile Private Limited vs. Indo Unique Flaim Ltd. & Ors., (2023) 7 SCC 1 are discussed in the following link:

https://theindianlawyer.in/supreme-court-holds-that-an-unstamped-arbitration-agreement-is-not-enforceable-under-law/

Conclusion

Thus, based on the aforesaid observations, the High Court held that the aforesaid Documents require to be duly stamped before either Party can claim right, title and interest on such Instrument. Hence, the Court directed that the original Documents be impounded by the Registry and be sent to the Collector of Stamps for affixing of deficit stamp duty and penalty and to return the duly stamped Documents within two months thereafter to the Court.

 

Harini Daliparthy

Lead Senior Associate

The Indian Lawyer & Allied Services

 

[1] Section 53A of the Transfer of Property Act 1881: Part performance

Where any person contracts to transfer for consideration any immoveable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty,

and the transferee has, in part performance of the contract, taken possession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract,

then, notwithstanding that, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract:

Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof.