BENGALURU: Once the absolute sale deed has been duly executed and stamped, the agreement of sale should no longer be independently subjected to stamp duty as it has merged into the absolute sale deed, the high court observed in a recent judgment.
Justice Sachin Shankar Magadum made this observation, while dealing with a petition, challenging a Haveri civil court’s order in a partition suit to pay the deficit stamp duty along with a penalty vis-a-vis the agreement of sale document. The petitioners, the plaintiffs in the partition suit, claimed that there is already a sale deed and they produced the agreement of sale only as evidence in support of their claim in that particular partition suit to demonstrate that they are in possession.
The agreement of sale, including possession, was executed with the intention to transfer the property on Dec 11, 2002. A duly stamped sale deed was executed with regard to the same property on Aug 29, 2005.
However, during the proceedings, when the opposite parties raised objections regarding the admissibility of the agreement of sale, the civil court at Haveri directed the petitioners to pay the deficit stamp duty along with a penalty.
After perusing Article 5(i) of the Karnataka Stamp Act, 1957, Justice Magadum pointed out that it specifies that if possession of the property is delivered or agreed to be delivered before executing a conveyance, such a document is liable for stamp duty as a conveyance.
“However, once a sale deed is executed, it absorbs the terms and conditions of the earlier agreement of sale, making the sale deed the governing document of the transaction,” the judge added.
“In the present case, 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… 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,” Justice Magadum further observed, while setting aside the order passed by the civil court.
“The plaintiffs’ reliance on the agreement of sale in the partition suit is acknowledged. However, it must be understood that the agreement of sale has merged with the sale deed. Therefore, while the document may be used only for collateral purposes, it cannot be subject to impounding,” Justice Magadum noted.
