In Mumbai Metropolitan Region (MMR), there was an ambiguity regarding the payment of stamp duty on the past documents of the property. This is in relation with the arbitrary practice followed by the stamp authorities to levy the stamp duty on past documents of any property at the time of registration of its subsequent sale document. However, there was no clear cut provision in law as regards levy of stamp duty retrospectively.
Finally, this age-old practice of collecting stamp duty retrospectively (on resale properties) has been put to rest in a landmark judgment which came as a great sigh of relief to the resale home buyers. The court also wriggled out hefty penalties for anterior instruments that used to be treated as insufficiently stamped or not registered.
The Hon’ble High Court in its recent verdict in Lajwanti G. Godhwani & Anr Vs. Vijay Jindal (Notice of motion (L) No. 1918 of 2018 in the Suit No. 3394 of 2008) held that the antecedent document is merely an accompaniment to trace history of the title of the property and not to effectuate a transfer. While deciding the dispute, Justice Gautam Patel, took an apt stand and held that the stamp duty is attracted by the instrument, not the underlying transaction, and not by the historical narrative in the instrument.
The aforesaid ruling was passed by the court during hearing of a petition involving resale of a posh 3,300 sq. ft. apartment in Tahnee Heights Cooperative Housing Society at Napean Sea Road. A lady named Lajwanti Randhawa had inherited the flat which was originally bought in 1979 and an unregistered agreement was executed on a stamp paper of Rupees 10 back then. The flat was auctioned in the year 2018 which was purchased by Vijay Jindal who approached the sub-registrar office for registration of his sale deed.
The collector of stamps/sub-registrar refused to register the sale deed on the pretext of a past document being inadequately stamped and unregistered and accordingly demanded stamp duty on the anterior instrument. As the property was bought through a court receiver auction, the buyer approached the Bombay High Court, to direct the sellers to bear the liability on past documents, as one of the sellers had refused to bear the cost.
The judgment said that as to how far the stamp authority can travel by front-loading a current taxing regime on historically concluded transactions and that too transactions that are in every sense complete and not yet being effectuated. He also held that stamp duty cannot be recovered at the present rate, with respect to past instruments which were executed at a time when the instrument was not liable for stamp duty, as these documents could not be treated as ‘unstamped’ or ‘inadequately stamped’ at the relevant time.
The court also observed that even if the instrument was subject to stamp duty, the same has to be at the rate applicable at the time of execution of the instrument and in no case can the same be required to be stamped at the rate applicable at the time of its subsequent sale or current stamp duty rates.
So, effectively, the stamp duty authorities cannot refuse to register the agreement for properties being purchased now under resale, even in cases where the earlier instrument/agreement was unregistered or not properly or insufficiently stamped as per the prevailing rate at the relevant time. It is important to mention that the stamp duty on agreement for sale prior to 10-12-1985 is rupees five only which was further clarified by the Law and Judiciary Department of the Government of Maharashtra in its clarification on 24th January, 1995.
This is a much awaited and a welcome judgment especially in a time when the real estate industry is at its rock bottom with Mumbai being no exception. This judgment will certainly uplift the sentiments of the buyers and might be a game changer for resale property located especially in South Mumbai where most of the flats/apartments are old with agreement stamped with Rs.5 or Rs.10.
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