Article 23A Of Schedule I-A Of Stamp Act Applies To Agreements To Sell Under Section 53A Of Transfer Of Property Act: Delhi High Court

Section 53A of the TPA is designed to protect a transferee who has part performed a contract for the transfer of immovable property. To avail of this protection, the transferee must demonstrate that the contract was in writing, signed by or on behalf of the transferor, that possession of the property was taken by the transferee, that some act was done in furtherance of the contract, and that the transferee has either performed or is willing to perform their part of the contract.

The High Court noted that Article 23A of Schedule I-A of the Stamp Act, which pertains to the stamp duty on documents related to the transfer of property, specifically covers agreements to sell. This provision mandates that an ATS, which falls under Section 53A of the TPA, must be properly stamped in accordance with the applicable Stamp Act provisions.

The High Court noted that the Article 23A of Schedule I-A to the Stamp Act applies to contracts for the transfer of immovable property under Section 53A of the TPA. Unlike the provisions in Andhra Pradesh and Punjab & Haryana which consider agreements to sell followed by or evidencing delivery of possession as chargeable sales, the High Court noted that Article 23A in Delhi does not incorporate these provisions by reference. Therefore, it specifically pertains to Section 53A of the TPA.

The High Court referred to its decision in Vinod Kumar v. Ajit Singh where it was held that Article 23A does not apply to ATS. However, this view was disagreed by the Division Bench of the High Court in Ajit Singh v. Vinod Kumar. The Division Bench noted that a plain reading of Article 23A shows its applicability to contracts for the transfer of immovable property under Section 53A of the TPA.

Therefore, the High Court held that Article 23A of Schedule I-A of the Stamp Act applicable in Delhi clearly covers ATS to which Section 53A of the TPA applies. It held that Section 53A of the TPA serves as a shield, not a sword, intended to protect a transferee in possession of immovable property from being dispossessed by the transferor.

Further, the bench held that every contract for the transfer of immovable property in the nature of part performance under Section 53A must bear stamp duty as prescribed by Article 23A regardless of its purpose.

Section 53A requires several conditions to be met: a contract to transfer immovable property for consideration, clear terms of the transfer, the transferee taking possession of the property, this act being in part performance of the contract, and the transferee performing or willing to perform their part of the contract. It held that possession need not be simultaneous with or immediately follow the ATS's execution. The phrase "in part performance of the contract" signifies a nexus between the taking of possession and the contract. Thus, the bench held that if the transferee acquires possession consequent upon the ATS's execution, Section 53A applies, even if possession is not immediate.

The High Court referred to the Supreme Court in Sardar Govindrao Mahadik v. Devi Sahai where it was held that part performance must be evidenced by a written contract and acts unequivocally referable to the contract. The High Court of Madras in Chinnaraj v. Shekh Davood Nachair reiterated that possession taken pursuant to a contract strongly evidences the contract.

In Nanjegowda v. Gangamma, the Supreme Court identified the essential elements of Section 53A. Firstly, the contract must be in writing and signed by or on behalf of the transferor. Secondly, the transferee must have obtained possession of the immovable property covered by the contract. Thirdly, the transferee must have performed some act in furtherance of the contract. Finally, the transferee must have either performed or be willing to perform their part of the contract. The Supreme Court held that obtaining possession of the property after the agreement and not referable to it does not constitute part performance. However, if the subsequent possession is clearly referable to the agreement Section 53A would apply. This principle was established in Fgp Ltd v. Saleh Hooseini Doctor where the Supreme Court stated that the act in question must be referable to the contract as alleged to have been partly performed.

Brief Facts:

Respondent No. 2 entered into a Collaboration Agreement with (Mukesh Aggarwal) Respondent No. 1 for the demolition and reconstruction of the property. The reconstructed property was to include a basement, ground floor, first floor, second floor, and third floor with a terrace. The agreement granted Respondent 1 the right to sell the second floor of the reconstructed property. Respondent 1 entered into an Agreement to Sell (ATS) with the Appellants and agreed to sell the second floor to them. The ATS stated that the Appellants would pay a consideration of ₹2.85 crore and noted that no exclusive rights would be conferred upon the appellants regarding common areas and facilities.

According to the ATS, the Appellants paid ₹2.10 crore on 14 November 2011, ₹25 lakhs on 26 November 2011, and ₹50 lakhs on 27 December 2011 which completed the sale consideration within the specified time. Consequently, the Appellants received possession of the property. Disputes arose between the Appellants and Respondent 1 which led the Appellants to approach the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996 for the appointment of an Arbitrator. The High Court appointed an advocate as the arbitrator and allowed Respondent 2 to be co-opted in the arbitration proceedings despite not being a party to the ATS.

During the arbitration, Respondent 2 filed an application under Section 16 read with Section 23 of the Arbitration Act contending that the ATS was insufficiently stamped. The arbitrator accepted Respondent 2's plea and held that the ATS was not adequately stamped as required by Article 23A of Schedule I-A to the Indian Stamp Act, 1899 as applicable in Delhi read with Section 53A of the Transfer of Property Act, 1882. However, the arbitrator decided that the plea for impounding the ATS could only be resolved when the original ATS was produced. Aggrieved by this finding, the Appellants appealed under Section 37(2)(a) of the Arbitration Act in the High Court.

The Appellants argued that Article 23A of Schedule I-A to the Stamp Act does not apply to the ATS as it only pertains to documents conveying immovable property which the ATS does not. They contended that the ATS should be stamped in accordance with Article 23 and cited the Master Table of Stamp Duties by the Government of National Capital Territory of Delhi which requires a "Sale Agreement" to be stamped at 5.4% ad valorem while a "Sale Agreement without Possession" should bear a stamp duty of only ₹100. They also argued that Section 53A of the Transfer of Property Act applies only when the possession of the property is simultaneous with the execution of the ATS.

Observations by the High Court:

The High Court held that every requirement of Section 53A was satisfied. There was a pre-existing ATS and possession of the disputed property was handed over to the petitioner pursuant to this agreement. The assumption of possession itself was evidence of the ATS. The agreement envisaged the grant of possession to the petitioner and the handover of possession was part performance of the ATS. The Possession Letter explicitly stated that the appellants obtained possession under the terms of the ATS. Therefore, it held that execution of the ATS, the payment by the petitioner, and the grant of possession were interconnected events forming a single transaction, thereby bringing the ATS within the scope of Section 53A.

Therefore, the High Court upheld the Arbitrator's interpretation of Article 23A of Schedule I as applicable to Delhi.

The appeal was dismissed.

Case Title: Sharad Bhansali & Anr. Vs Mukesh Aggarwal & Anr.

Citation: 2024 LiveLaw (Del) 855

Case Number: ARB.A. 2/2023

Advocate for the Appellant: Mr. Anshumaan Sahni.

Advocate for the Respondent: Mr. Pranshu Paul, Mr. Pulkit Gupta, Mr. Karan Jain and Mr. Himanshu Gupta, Advocates for R-2 with R-2 in person

Date of Judgment: 24.07.2024

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