Andhra High Court

Chintam Kantam vs Dhulipudi Venkateswara Rao And ... on

17 October, 2003

Equivalent citations: 2004 (1) ALD 380

Author: P Narayana
Bench: P Narayana

ORDER P.S. Narayana, J.

1. Chintam Kantam, the revision petitioner herein is the 2nd defendant in O.S.
No. 296/96 on the file of Principal Senior Civil Judge, Kakinada. Respondents
1 and 2 herein are the plaintiffs and the 3rd respondent herein is the 1st
defendant in the suit.

2. The revision petitioners aggrieved by an order dated 30-6-2003 made in

O.S. No. 296/96 on the file of Principal Senior Civil Judge, Kakinada relating
to the admissibility of a document dated 27-9-1994 had preferred the present
civil revision petition under Article 227 of the Constitution of India. The suit
O.S. No. 296/96 on the file of Principal Senior Civil Judge, Kakinada was filed
praying for the relief of specific performance of an agreement of sale dated 27-
9-1994 directing the 1st defendant to execute a registered sale deed for the
plaint schedule property in favour of the plaintiffs in terms of the said
agreement, for recovery of vacant possession of the plaint schedule property
after ejecting the 1st defendant and for certain other appropriate reliefs.

3. When respondents 1 and 2/plaintiffs filed their affidavits relating to the

chief-examination of PW-1 and PW-2 with a memo and made an attempt to
mark the agreement of sale dated 27-9-1994 as Ex.A-1, the learned Counsel
representing the 2nd defendant in the suit - the present revision petitioner,
had raised an objection to the marking of the said document on the ground
that the same is inadmissible in evidence and unless respondents 1 and 2/
plaintiffs pay the stamp duty and penalty, the same cannot be marked.

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Aggrieved by the same, the 2nd defendant had preferred the present Civil
Revision Petition.

4. Sri Subba Reddy, the learned Counsel representing Sri V.L.N.G.K. Murthy,
the learned Counsel for the petitioner had made the following submissions.
The learned Counsel would maintain that as per the endorsement dated 17-4-
1995 on the backside of the front page of the agreement of sale dated 27-9-
1994, there is a recital of delivery of possession and in view of the same, the
said document should be treated as conveyance for the purpose of payment of
stamp duty. The learned Counsel also had taken this Court through Article 47-
A and also Article 20 of Schedule 1-A of Indian Stamp Act, 1899, hereinafter in
short referred to as "Act" for the purpose of convenience. The learned Counsel
pointed out that the learned Principal Senior Civil Judge, Kakinada had
definitely gone wrong in holding that the said agreement of sale falls outside
the scope of Explanation to Article 47-A of the Act. The learned Counsel also
contended that the mere fact that recovery of possession had been prayed for
and the mere fact that the plea was taken in the plaint that in fact possession
was not delivered, will not in any way help the plaintiffs so as to avoid the
payment of stamp duty, especially in view of the clear recital in the
endorsement. The learned Counsel also with all vehemence had contended
that the learned Principal Senior Civil Judge, Kakinada had totally erred in
placing reliance on the judgment of a Single Judge of this Court in Penkey
Suryakantham v. Shaik Sillar, , which in fact is contrary to the judgment of the
Division Bench in B. Ratnamala v. G. Rudramma, (DB). The learned Counsel
made elaborate submissions relating to pleadings of the parties and also the
recitals of the document in question and concluded that for the purpose of
deciding liability to pay the stamp duty and penalty, the recitals of the
document in question alone may have to be looked into and the pleadings may
not be material at all in this context.

5. Per contra, Sri A. Krishnam Raju, the learned Counsel representing the
Respondents 1 and 2/plaintiffs had taken this Court through the averments

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made in the plaint in general and para-4 of the plaint in particular, and had
submitted that there is a specific plea taken that though in the endorsement it
was recited relating to delivery of possession, in fact, there was no delivery of
possession and hence the disputed document does not fall within the purview
of Article 47-A of the Act. The learned Counsel also had made an attempt to
distinguish the decision of the Division Bench referred, in B. Ratnamala's case
(supra) and placed strong reliance on the decision referred Penkey
Suryakantham's case (supra). The learned Counsel further maintained that
the facts in the present case are just akin to the facts in the decision referred in
Penkey Suryakantham's case (supra) and hence the impugned order does not
suffer from any illegality or legal infirmity and ultimately prayed for dismissal
of the Civil Revision Petition.

6. Heard both the Counsel at length.

7. Respondents 1 and 2 herein as plaintiffs instituted the suit O.S. No. 296/96
on the file of the Principal Senior Civil Judge, Kakinada for specific
performance of an agreement of sale dated 27-9-1994, for recovery of
possession and other reliefs. The case of Respondents 1 and 2nd plaintiffs, in
short, is that the 2nd plaintiff is the younger brother of the 1st plaintiff and the
1st defendant is their sister's husband. The 1st defendant is the absolute owner
of the schedule property and his mother and sister executed a registered
relinquishment deed dated 21-7-1986 relinquishing their rights in the plaint
schedule property in favour of the 1st defendant and the 1st defendant offered
the plaint schedule property for sale and the plaintiffs negotiated with him for
the purchase of the same. After negotiations it was agreed that the 1st
defendant should sell the plaint schedule property to the plaintiffs for a total
consideration of Rs. 2,25,000/- and Rs. 50,000/- was agreed to be paid as
advance on the date of execution of the agreement of sale and accordingly the
1st defendant executed agreement of sale dated 27-9-1994 in favour of the
plaintiffs agreeing to sell away the plaint schedule property for a total
consideration of Rs. 2,25,000/- having received an amount of Rs. 50,000/-as

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advance. In the said agreement of sale, it was stipulated that the loan of the 1st
defendant in Andhra Bank is to be discharged by the plaintiffs on his behalf
and the 1st defendant agreed to execute the registered sale deed either in the
name of the plaintiffs or their nominees as and when requested after receiving
the balance of sale consideration.

8. It may be appropriate to have a look at para-4 of the plaint on which strong

reliance was placed. It was pleaded in para-4 of the plaint as under:

"One Kamana Seethamahalakshmi, w/o. Gangaraju filed a suit O.S.No. 89/93

on the file of Subordinate Judge Court, Bhimavaram against the 1st defendant
for recovery of the amount due to her and obtained a decree in her favour. She
got it transferred to Kakinada and filed E.P. 238/94 on the file of II Addl.
Subordinate Judge Court, Kakinada for realizing the said decree amount, by
sale of the plaint schedule property. The 1st defendant approached the
plaintiffs and requested them to negotiate with her and to settle the amount
and pay to her from out of balance of sale consideration and see that full
satisfaction is recorded towards the said decree debt. Accordingly, the 1st
plaintiff and 1st defendant approached the said decree holder and negotiated
with her and after negotiations she agreed to receive Rs. 70,000/- in full
satisfaction of her decree debt. On 17-4-1995 the plaintiffs paid Rs. 70,000/-
to the 1st defendant as part payment of balance of sale consideration who in
turn paid the said amount to Kamana Seethamahalakshmi and obtained a
receipt from her and handed over the same to 1st plaintiff She also got filed
full satisfaction memo into Court on the same day and the full satisfaction was
recorded and the attachment was raised on 19-4-1995. The plaintiffs asked the
1st defendant to deliver possession of the plaint schedule property to them
and he agreed to deliver possession of the same on that date that is on 17-4-
1995 and accordingly got made an endorsement on the back of the sale
agreement acknowledging that he received Rs. 70,000/- from out of balance
of sale consideration. But he did not deliver possession of the plaint schedule
property as mentioned in the said endorsement and he is still continuing in

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possession of the same. As he is none other than their brother-in-law the
plaintiffs did not press him to vacate and handover possession of the plaint
schedule property immediately and therefore even though an endorsement
was made on 17-4-1995 no possession was delivered to the plaintiffs and the
1st defendant is continuing in possession of the plaint schedule property. The
1st defendant also got taken certified copy of the E.P. proceedings and handed
over the same to plaintiffs. Thus the plaintiffs so far paid Rs. 1,20,000/- to 1st
defendant from out of total consideration."

On the strength of this pleading, an argument had been advanced by the

Counsel representing the Respondents 1 and 2/ plaintiffs, that though the
recital relating to delivery of possession had been incorporated in the
endorsement dated 17-4-1995, in fact, no possession had been delivered and
the close relationship of the parties also may have to be taken into
consideration and hence the agreement of sale in dispute does not fall within
the purview of Article 47-A of the Act.

9. The endorsement dated 17-4-1995, read as hereunder:

It is not in controversy that the endorsement clearly recites delivery of

possession. Explanation I and the proviso to Article 47-A of Schedule 1-A of
the Act, read as hereunder:

"An agreement to sell followed by or evidencing delivery of possession of the

property agreed to be sold shall be chargeable as a "sale" under this Article :

Provided that, where subsequently a sale deed is executed in pursuance of an

agreement of sale as aforesaid or in pursuance of an agreement referred to in
Clause (b) of Article 6, the stamp duty, if any already paid or recovered on the
agreement of sale shall be adjusted towards the total duty leviable on the sale
deed."

The Proviso to Article 20 of Schedule 1-A of the Act reads as hereunder:

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"Provided that where an agreement to sell an immovable property is stamped
with the advalorem stamp required for a conveyance on sale under Article 47-
A and a conveyance on sale in pursuance of such agreement is subsequently
executed, the duty on such conveyance on sale shall be the duty payable under
the article less the duty already paid under Article 47-A subject to a minimum
of five rupees;

In Madras Refineries v. Board of Revenue, Madras, , the Apex Court at para-5

observed :

"In Lim or Asphalte Paving Co. v. I.B.C. (1872)7Ex. 211 it was stated:

"In order to determine whether any, and if any, what stamp duty is chargeable
upon an instrument the legal rule is that the real and true meaning of the
instrument is to be ascertained; that the description of it given in the
instrument itself by the parties is immaterial, even although they may have
believed that its effect and operation was to create a security mentioned in
the Stamp Act, and they so declare."

This appears to be a correct statement of the law. We have therefore to

determine the real and true meaning of the Guarantee Agreement and to
decide whether it could be said to be the principal and primary security."

In Veena Hasmukh Jain v. State of Maharashtra, , while dealing with a similar

question in a slightly different context relating to agreement of sale executed
in terms of Section 4 of Maharashtra Ownership Flats (Regulation of the
Promotion of Construction, Sale, Management and Transfer) Act, 1963, the
Apex Court at Paras 7 and 8 held :

"Under Entry 44 of List III - Concurrent List of the Seventh Schedule to the
Constitution any State as well as the Central Government levy stamp duties
other than duties or fees collected by means of judicial stamps, but not
including rates of stamp duty and in respect of such instruments mentioned in

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Entry 91 of List I - Union List of the Seventh Schedule to the Constitution. A
duty is leviable under Section 3 of the Bombay Stamp Act which indicates the
instruments executed in the State or those outside the State but brought into
the State for the first time relating to any property situate or to any matter or
thing done or to be done in the State shall be chargeable to stamp duty
prescribed under the Bombay Stamp Act. Article 25 of Schedule I refers to
conveyance and the amount of conveyance as sought to be explained by the
Explanation. Explanation 1 toArticle 25 of Schedule I to the Bombay Stamp
Act reads as follows :

"Explanation I. For the purpose of this article, where in the case of agreement
to sell an immovable property, the possession of any immovable property is
transferred to the purchaser before the execution, or at the time of execution,
or after the execution of such agreement without executing the conveyance in
respect thereof, 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 32-A shall apply mutatis mutandis to
such agreement which is deemed to be a conveyance as aforesaid, as they
apply to a conveyance under the section:

Provided further that, were subsequently ? conveyance is executed in

pursuance of such agreement of sale, the stamp duty, if any, already paid and
recovered on (he agreement of sale which is deemed to be a conveyance, shall
be adjusted towards the total duty leviable on the conveyance."

The duty in respect of an agreement covered by the Explanation is leviable as

if it is a conveyance. The conditions to be fulfilled are if there is an agreement
to sell immovable property and possession of such property is transferred to
the purchaser before the execution or at the time of execution or subsequently
without executing any conveyance in respect thereof, such an agreement to
sell is deemed to be a "conveyance". In the event a conveyance is executed in

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pursuance of such agreement subsequently, the stamp duty already paid and
recovered on the agreement of sale which is deemed to (be) a conveyance shall
be adjusted towards the total duty leviable on the conveyance. Now, in the
present case, the agreement entered into clearly provides for sale of an
immovable property and there is also a specific time within which possession
has to be delivered. Therefore, the-document in question clearly falls within
the scope of the Explanation I. It is open to the Legislature to levy duty on
different kinds of agreement in different rates. If the Legislature thought that
it would be appropriate to collect duty at the stage of agreement itself if it
fulfils certain conditions instead of postponing the collection of such duty till
the completion of the transaction by execution of a conveyance deed inasmuch
as all substantial conditions of a conveyance have already been fulfilled such
as by-passing of a consideration and delivery of possession of the property and
what remained to be done ins a mere formality of execution of a sale deed, it
would be necessary to collect duty at a later stage itself though right, title and
interest may not have passed as such. Still by reason of the fact that under the
terms of the agreement there is an intention of sale and possession of the
property has also been delivered, it is certainly open to the State to charge
such instruments at a particular rate which is akin to a conveyance and that is
exactly what has been done in the present case. Therefore, it cannot be said
that levy of duty is not upon the instrument but on the transaction. Therefore,
we reject the contention raised on behalf of the appellants in that regard."

In the same decision, the Apex Court had further clarified at para-10 as
hereunder:

"It is clear that the object of the Stamp Act is to levy stamp duty on different
kinds of instruments. The Legislature, in the present case, has chosen to levy a
rate of duty equivalent to conveyance in respect of an agreement though the
transaction may not have been completed because of certain instruments
arising out of such agreement being executed and possession thereof being
taken prior to or simultaneous with the document or subsequently. But in the

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Explanation it is not clear that if the document provides that possession has to
be taken without execution of the conveyance certainly it would attract the
appropriate duty. If the agreement provides that possession will be handed
over on the execution of a conveyance as contemplated under Section 11 of the
MOF Act, then the Explanation shall not be attracted at all. In the present
case, it is clear that in the terms of the agreement there is no provision made
at all for execution of the conveyance. On the other hand, what is submitted is
that the provisions of the MOF Act could be applied to the agreement and,
therefore, a conveyance could be executed subsequently when it is not clear as
to when the conveyance is to be executed and the stipulated time within the
possession has to be handed over. If that is so, it is clear that the document
would attract duty as if it is a conveyance as provided in the Explanation."

In the decision referred in B. Ratanmala's case (supra), the Division Bench of

this Court had overruled the view expressed in M.A. Gafoor v. Mohd. Jani, ,
and held as follows:

"The expression "followed by or evidencing delivery of possession" in Article

47 Expl.1 cannot be read in isolation and one has to find the true meaning by
reading the entire Explanation and more so in conjunction with the earlier
expression i.e., "agreement". Even if these two expressions are looked
independently, it means an agreement to sell followed by delivery of
possession and an agreement to sell evidencing delivery of possession. In the
first case, i.e., "followed by delivery", possession cannot be disjuncted from the
basic source i.e., agreement to sell. Therefore, the expression followed by
delivery of possession should have a direct nexus to the agreement and should
be read in juxtaposition to the word 'agreement' and it cannot be independent
or outside the agreement. Therefore, the delivery of possession should follow
the agreement i.e., through the agreement. It takes in its sweep the recital in
the agreement itself that delivery of possession is being handed over. It will
also cover cases of delivery of possession contemporaneous with the execution
of agreement, even if there is no specific recital in the Agreement. In other

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words, the delivery of possession should be intimately and inextricably
connected with the agreement. And in the second type, i.e., agreements
evidencing delivery of possession, if the document contains evidence of
delivery of possession by a recital in that behalf, that is sufficient. Such
delivery of possession can be prior to the date of agreement and need not be
under the agreement. If the Agreement records the fact that the possession
was delivered earlier and such recital serves as evidence of delivery of
possession, though prior to the Agreement, it falls under the second limb.
Therefore, on a proper interpretation of the said expressions, it would follow
that an agreement containing specific recital of delivery of possession or
indicating delivery of possession even in the past is liable for stamp duty as a
'sale' under the said Explanation. In conclusion the expression "followed by"
should be read in conjunction with the earlier expression "agreement" and in
the latter case, any agreement recording delivery of possession should invite
the stamp duty as a sale deed, even though the possession had been delivered
in the past."

In fact, the learned Single Judge in the decision referred in M.A. Gafoor's case
(supra) had expressed the view that where a vendee was already in possession
of property as tenant before the agreement of sale and the agreement of sale
was followed only by a notional delivery and not by actual delivery of
possession after execution of the said agreement of sale, it is not liable to be
stamped as a sale deed. As already referred to supra, this view expressed by
the learned Single Judge was not accepted by the Division Bench in the
decision referred in B. Ratanmala 's case (supra). In the decision referred in
Penkey Suryakantham's case (supra), another learned Judge after referring to
the decisions in Mekapathula Linga Reddy v. Durgempudi Gangi Reddy
and Anr., , and Ramachandra Rao v. Venkata Ramana, , had arrived at a
conclusion that where from the plaint pleading it can be seen that the plaintiff
came into possession of the land as a tenant and not as an agreement holder
and the defendant in his written statement disputed the agreement of sale
stating that the plaintiff is the cultivating tenant and inducted in possession

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and possession was not delivered to the plaintiff under the agreement of sale
and the plaintiff also prayed for the relief of possession, such suit agreement
stands outside the scope of Explanation I to Article 47-A of the Act. It is
pertinent to note that learned Single Judge in the decision referred in M.A.
Gafoor's case (supra) had expressed a similar view and the said view did not
find favour by the Division Bench in the decision referred in B. Ratnamala's
case (supra). It is also pertinent to note that the Division Bench also had
placed reliance on the decision of the Apex Court in Veema Hasmukh Jain's
(supra). In the decision referred in Mekapathula Linga Reddy's case (supra), it
was held that where an agreement of sale stipulates delivery of possession on
payment of certain amount and possession is delivered as per the stipulation,
Explanation I to Article 47-A of the Act gets attracted and the document has to
be stamped as a regular sale deed. In fact, the learned Judge had discussed the
background of the introduction of Explanation to Article 47-A of the Act while
deciding this question and the said decision was followed in the decision in
Ramachandra Rao's case referred (supra).

10. As can be seen from the facts of the case, in the decision referred in Penkey
Suryakantham's case (supra), on the reverse of the stamp paper on
acknowledging receipt of balance amount it was specified that the property is
in the possession of the said party. However, in the present case, there is a
specific recital relating to the delivery of possession made in the endorsement.
The learned Principal Senior Civil Judge, Kakinada had placed strong reliance
on the decision referred in Penkey Swyakantham's case (supra), though, in
fact, a contrary view was expressed by the Division Bench of this Court in the
decision, in Penkey Suryakantham's case (supra) and by the Apex Court in the
decision referred in Veena Hasmukh Jain's case (supra).

11. While deciding the question relating to the payment of stamp duty and
penalty on a particular document, the recitals of the document may have to be
looked into and not the pleadings of the respective parties. The pleadings of
the parties may be in deviation of the document in question. The levy of the

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stamp duty and penalty is always in relation to the document which is to be
marked before the Court and such levy cannot depend upon the pleadings of
the parties. At any rate, in view of the decision of the Apex Court referred in
Veena Hasmukh Jain's case (supra) and the decision of the Division Bench of
this Court referred in B. Rathamala's case (supra) I am of the considered
opinion that the learned Principal Senior Civil Judge, Kakinada had definitely
committed an illegality in placing reliance on the decision of a learned Single
Judge of this Court referred in Penkey Suryakantham's case (supra). Hence, I
have no hesitation in holding that the impugned order suffers from legal
infirmity and is liable to be set aside.

12. In view of the forgoing discussion, the order dated 25-7-2003 made by the
learned Principal Senior Civil Judge, Kakinada in O.S. No. 296/96 is hereby
set aside and the civil revision petition is accordingly allowed. However, in
view of the close relationship between the parties, this Court makes no order
as to costs.

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