Agreement to Sell with Possession Deemed a Conveyance for Stamp Duty: Supreme Court Of India

1. Introduction

In Ramesh Mishrimal Jain v. Avinash Vishwanath Patne & Anr. (2025 INSC 213), the Supreme Court of India addressed the pivotal question of whether an agreement to sell immovable property—where possession has either already been transferred or is agreed to be transferred—should be treated as a “conveyance” for the purpose of stamp duty under the Bombay Stamp Act, 1958. The appellant, originally in possession of the disputed property as a tenant, argued that such possession could not be equated with ownership-based possession under the agreement to sell. The apex court, however, upheld earlier judicial pronouncements and clarified that the nature of the agreement to sell and the fact that the occupant is already in or will be in possession can trigger the liability of paying stamp duty akin to a conveyance.

The decision is significant as it clarifies the legal position under Article 25 of Schedule I of the Bombay Stamp Act. It impacts both buyers and sellers of immovable property, emphasizing that agreements to sell which contemplate or record delivery of possession—whether expressly or by implication—may attract full stamp duty and penalty, even before a formal conveyance deed is executed.

2. Summary of the Judgment

The appellant had filed a suit for the specific performance of an agreement to sell dated September 3, 2003, in respect of a property located in Maharashtra. The respondents contested this agreement and filed an application to impound the document under Section 34 of the Bombay Stamp Act, asserting that the agreement should be treated as a conveyance due to the possession of the property allegedly being linked to the sale transaction.

The trial court allowed the respondents’ application, ordering the document to be impounded and sent to the Registrar of Stamps for the recovery of deficit stamp duty and penalty. The High Court subsequently dismissed the appellant’s writ petition challenging that order. On appeal, the Supreme Court agreed with the lower courts, concluding that where an agreement to sell contemplates or records delivery of possession, it is deemed to be a conveyance for stamp duty purposes. The Court therefore affirmed that stamp duty, along with any applicable penalty, must be paid before such a document could be used as evidence in any court proceeding.

3. Analysis

a) Precedents Cited

The Supreme Court drew on two principal precedents to reinforce its decision:

Veena Hasmukh Jain v. State of Maharashtra (1999) 5 SCC 725: This judgment established that if an agreement to sell includes or contemplates delivery of possession, it must be treated as a conveyance for calculating stamp duty. The Court explained that stamp duty is levied on the instrument rather than on the transaction itself.
SHYAMSUNDAR RADHESHYAM AGRAWAL v. PUSHPABAI NILKANTH PATIL (2024) 10 SCC 324: Reiterated the principle that an agreement to sell containing a clause referring to possession should be stamped as a conveyance, as the instrument effectively vests the purchaser with possessory rights safeguarded by Section 53A of the Transfer of Property Act.

The Court also considered older judgments from various High Courts that consistently held an agreement to sell could be deemed a conveyance if it records or provides for transfer of possession, whether that possession is delivered at the time of execution or has already been delivered under another arrangement (e.g., a tenancy).

b) Legal Reasoning

The Supreme Court’s legal reasoning centered on the plain language of Article 25, Schedule I of the Bombay Stamp Act and the factual matrix indicating that the appellant was already in possession on a rental basis. The agreement’s clause stated that the future possession as owner would only be delivered upon execution of the sale deed, but the Court highlighted:

Stamp duty attaches to the instrument rather than the form or timing of its execution. Whether possession is delivered before, during, or after the date of the agreement, if the parties so contract, it constitutes a deemed conveyance.
The distinction between “possession as tenant” and “possession as owner” did not shield the transaction from liability for stamp duty. Since the occupant (appellant) remained in physical possession—even though initially on tenancy—this satisfied the statutory test under Explanation I to Article 25.
The second proviso to Article 25 allows for any stamp duty fully or partially paid on the agreement to be adjusted later when a formal conveyance deed is executed.

Consequently, the Court concluded that the lower courts rightly ordered impounding of the agreement and sending it to the Registrar of Stamps for assessment and payment of the requisite duty and penalty.

c) Impact

This judgment reinforces the established principle that an agreement to sell—with clauses referring to possession, whether immediate or prospective—can be classified as a conveyance. Its impact is threefold:

Increased Diligence in Drafting: Parties entering into agreements to sell immovable property must carefully draft possession-related clauses. Even a tenant holding over or a subsequent promise of possession may bring the agreement within the ambit of a deemed conveyance.
Earlier Incidence of Stamp Duty: Buyers and sellers should expect to pay full stamp duty at the agreement stage if the agreement contemplates or evidences the buyer’s possession, reducing the ability to defer these costs until the execution of a sale deed.
Greater Certainty for Dispute Resolution: Courts will now have clearer guidance in impounding under-stamped documents, which may expedite resolution and discourage attempts to bypass stamp duty obligations.

4. Complex Concepts Simplified

A few key legal concepts and their simplified explanations:

Stamp Duty: A government levy on legal instruments (such as agreements, deeds) based on the instrument’s nature and value. In this context, even though title does not fully pass at the agreement-to-sell stage, if the agreement involves or contemplates possession akin to ownership, full stamp duty is payable.
Deemed Conveyance: If an agreement to sell includes or implies that the purchaser will have possession before or without executing a formal conveyance (sale deed), the law treats that agreement as a “conveyance” for determining stamp duty.
Section 53A of the Transfer of Property Act: This provision protects the rights of someone who has paid consideration under a written contract for the sale of immovable property and has taken possession, even if the conveyance deed has not yet been executed. The Supreme Court often interprets this to mean that such possession triggers full stamp duty liabilities.
Impounding: When a court or competent authority finds a document insufficiently stamped, it is “impounded.” The document cannot be used as evidence until the applicable stamp duty and penalty are paid.

5. Conclusion

The Supreme Court’s decision in Ramesh Mishrimal Jain v. Avinash Vishwanath Patne underscores the principle that an agreement to sell an immovable property, if it conveys or contemplates the right of possession to the purchaser, is deemed to be a conveyance for calculating stamp duty. In reaffirming that the instrument’s form and express or implied transfer of possession is key, the Court has signaled the judiciary’s consistent approach to ensuring that no attempt to bypass appropriate stamp duty will stand.

The ruling serves as a reminder to both litigants and legal practitioners that the liability for stamp duty arises at the earliest point of an instrument that functionally transfers an interest in property, not merely upon the final transfer of title. Such clarity encourages more precise drafting of agreements to sell, ensures that parties are aware of their stamp duty obligations from the outset, and ultimately provides a robust legal framework for addressing disputes over property transactions.

Agreement to Sell with Possession Deemed a Conveyance for Stamp Duty