Once A Sale Deed Has Been Duly Executed & Stamped, Agreement Of Sale Must No Longer Be Independently Subject To Stamp Duty: Karnataka HC
The Karnataka High Court held that once a sale deed has been duly executed and stamped, an agreement of sale should no longer be independently subject to stamp duty.
The Dharwad Bench held thus in a writ petition challenging the order of the Additional Senior Civil Judge passed in the context of a partition suit filed by the plaintiffs.
A Single Bench of Justice Sachin Shankar Magadum observed, “Consequently, Article 5(e)(i) does not apply to the agreement of sale once a sale deed has been executed, as the agreement of sale merges into the sale deed and ceases to function as an independent document for the purposes of stamp duty. Therefore, the imposition of stamp duty under Article 5(e)(i) of the Act, on the agreement of sale in this context is not applicable, as the sale deed is the primary legal instrument reflecting the property transaction. … Thus, the agreement of sale, once a sale deed has been duly executed and stamped, should no longer be independently subject to stamp duty as it has merged into the sale deed.”
Advocate N.P. Vivek Mehta appeared on behalf of the petitioners while Advocate A.B. Patil appeared on behalf of the respondents.
Factual Background -
The case arose from a partition suit where the plaintiffs contended that the suit schedule properties were joint family ancestral properties with no partition having occurred. They relied on the agreement of sale to demonstrate that the mother-in-law of the first plaintiff and grandmother of other plaintiffs had offered to sell the land to one person. This agreement which included possession, was executed with the intent to transfer property. The plaintiffs intended to use the document to demonstrate that family members were in possession of specific portion of lands, there was no severance, and they wish to place reliance on the document executed by mother-in-law of the plaintiff.
During the proceedings, the agreement of sale was tendered in evidence and the defendants raised objections, claiming that the agreement was insufficiently stamped. The Judge upon reviewing the objections, impounded the document and directed the petitioners to pay the deficit stamp duty along with penalty, saying that the document did not meet the necessary stamping requirements. Being aggrieved, the plaintiffs approached the High Court and argued that since the agreement of sale is coupled with possession, the document should not independently attract stamp duty given that a sale deed was executed subsequently.
The High Court in the above context of the case noted, “In the present case, the agreement of sale dated 11.12.2002 was followed by the execution of sale deed on 29.08.2005. The sale deed, which was duly stamped and registered, effectively supersedes the agreement of sale. Since the sale deed has been properly executed and bears the appropriate stamp duty, it becomes the operative document governing the transfer of title.”
The Court said that the impugned order fails to account for the principle of merger, which dictates that the sale deed being executed effectively renders the earlier agreement of sale redundant. It also emphasised that since the sale deed was executed with appropriate stamp duty and registration charges paid, it becomes the primary legal document evidencing the property transfer.
Furthermore, the Court said that the decision of the Judge to impound the agreement of sale does not consider that the agreement’s legal significance has been superseded by the sale deed.
“The agreement of sale dated 11.12.2002, having merged into the sale deed, should not be subject to independent impoundment. The records in the present case reveal that the entire stamp duty is paid on the sale deed and sale deed is registered. Therefore, though sale agreement still remains valid, but the sale deed will supersede the terms and conditions mentioned in the sale agreement and therefore, the sale deed has to be treated as a final ownership document. The impugned order disregards this principle and the legal precedent that governs the transaction”, it added.
Accordingly, the High Court allowed the writ petition and set aside the impugned order.
Cause Title- Nagamma & Ors. v. Rudrayya & Ors.
