|
Under the general law an agreement to transfer a property in future cannot be treated as conveyance. Sec. 54 of the Transfer of Property Act provides that an agreement for sale does not create in favour of the purchaser any interest or even charge on the property as there is no transfer of ownership, but a deed of sale effects in favour of a purchaser a transfer of ownership or interest therein and conveys a legal title to the purchaser.
Stamp duty payable on the conveyance has been laid down in Article 25 of Schedule I and stamp duty payable on agreement or memorandum of agreement is laid down in Article 5. Stamp duty payable on an agreement is generally Rs. 20/- whereas the stamp duty payable on conveyance is generally 10% of the market value. With effect from 10-12-1985 Explanation 1 has been added to Article 25 titled conveyance which reads as under :
Explanation 1 - For the purposes of this article, where in the case of agreement to sell an immovable property, the possession of any immovable property is transferred (or agreed to be transferred) to the purchaser before the execution, or at the time of execution, or after the execution of such agreement, then such agreement to sell shall be deemed to be a conveyance and stamp duty thereon shall be levied accordingly.
Provided that, the provisions of section 32A shall apply mutates mutandis to such agreement which is deemed to be a conveyance as aforesaid, as they apply to a conveyance under that section.
Provided further that, where subsequently a conveyance is executed in pursuance of such agreement of sale, the stamp duty, if any, already paid and recovered on the agreement of sale which is deemed to be a conveyance, shall be adjusted towards the total duty livable on the conveyance.
This explanation adds one more category of conveyance, namely, agreement for sale of an immovable property the possession of which is transferred or agreed to be transferred to the purchaser before the execution of the conveyance or at the time of execution thereof or thereafter. Such an agreement shall be deemed to be a conveyance for the purpose of stamp duty though it is not a conveyance and does not involve any transfer of property. Such an agreement will also be a conveyance for the purposes of determination of market value u/s 32-A of the Stamp Act. Thus even on agreement for sale the stamp duty will be payable on the market value of the property.
Explanation is applicable to the following types of agreement for sale -
a) Only land,
b) Only building,
c) Land and building,
d) Flat in a building,
e) Undivided interest in any immovable property and
f) A flat proposed to be constructed on any land.
In fact, Explanation I is inconsistent or contrary to the definition of conveyance appearing in Sec. 54 of Transfer of Property Act and also Definition contained in Definition 2(g) of the Bombay Stamp Act. Legally speaking, agreement can be terminated either by mutual consent or on account of breach thereof, whereas a conveyance once executed cannot be cancelled or terminated by the parties. Sometimes agreement may not be capable of performance. All these factors are ignored by Explanation I and the only criteria which is being applied is that of possession. Even the Explanation I does not make any provision for the refund of the stamp duty paid if the agreement to sale is terminated or becomes incapable of performance or is frustrated for any reason whatsoever.
According to the present practice the owner of the property agrees to sell the property to a developer who after constructing a new building forms a co-operative housing society. Thereafter the property is conveyed to the co-operative housing society and on the deed of conveyance full stamp duty is paid. Before executing the sale deed the developer enters into various agreements for sale of flats. Such agreements now require full stamp duty. Since Explanation 1 to article 25 treats the agreement for sale as a conveyance, it must be registered as a conveyance under the India Registration Act. Incidentally, agreement for sale of flat is also required to be registered u/s 4 of the Maharashtra Ownership Flats Act, 1963, not as conveyance but only as an agreement for sale. Unfortunately, this legal position has become more complicated by the decision of High Court in the case of State of Maharashtra vs. Mahavir Lalchand Rathod reported in 94 BLR 110: 1992(2) Bom. C.R.I. In this case it was held by the Division Bench of Bombay High Court that the flat purchase agreement between the builder and flat purchaser was a conveyance within the meaning of Sec. 2(g) of the Bombay Stamp Act by the virtue of Explanation I to article 25 of Schedule I of the act.
Section 4 of the Maharashtra Flat Ownership Act, 1963 provides that a promoter who intends to construct a building on ownership basis shall before accepting any sum of money as advance must enter into written agreement for the same and that agreement should be registered under the Registration Act, 1908.
As per Sec. 4(A) of the said Act provides that while an agreement for sale of flat is not registered it can still be received as evidence of a contract in a suit for specific performance. It shows that in respect of registration the agreement is being treated as an agreement and not a conveyance. Agreement for sale of a flat by a developer is deemed to be a conveyance under the Stamp Act and yet it continues to be treated only as an agreement under the Maharashtra Ownership Flats Act.
If such an agreement is a conveyance, then it must have the effect of transferring and vesting the flat agreed to be purchased by the flat purchaser and if so then when all the flats are thus sold, in a building all the flat purchasers would be owners of their respective flats and other premises in the building. In that case what remains to be transferred by the owner and the builder to the co-operative society of the flat purchasers? In such a case all flat owners will be apartment owners under the Apartment Ownership Act of 1970 and no separate apartment deed shall also be required.
Top |
