'Agreement For Assignment' Label Cannot Bar Stamp Duty Refund For Failed Deal: Bombay High Court

On Tuesday, 29 September, the Bombay High Court held that refund of stamp duty cannot be denied merely because a failed property transaction was documented as an “Agreement for Assignment” rather than an “Agreement to Sale”.

Justice Amit Borkar directed the Maharashtra authorities to refund Rs. 29.75 lakh paid by Solanki Tea Company Private Limited, holding that the relief available under the Maharashtra Stamp Act depends on whether the transaction intended through the instrument had failed, and not merely on the nomenclature of the document. The Bench observed:

“The principle which comes from the above discussion is that stamp duty is paid for an instrument and for the transaction which is intended to be carried out through that instrument. If that transaction totally fails and the instrument becomes ineffective for the purpose for which it was made, the statute provides a remedy for seeking relief. The Legislature has not provided that the relief will disappear merely because a different name is given to the document.”

The company had entered into an Agreement for Assignment concerning a property and paid Rs. 29.75 lakh as stamp duty. However, the property was mortgaged with a bank and the transaction did not materialise.

Later, the company purchased the same property through the bank's auction under a separate sale deed and paid stamp duty again. The earlier agreement was subsequently cancelled through a registered Cancellation Deed.

The authorities rejected the company's refund claim, holding that the document was an Agreement for Assignment covered by Article 60 of Schedule I to the Maharashtra Stamp Act, and not an Agreement to Sale covered by Article 25. They therefore contended that the benefit under Sections 47 and 48 was unavailable.

The Court rejected this interpretation, holding that Section 47(c)(5) does not restrict the relief to an Agreement to Sale. It said the relevant question was whether the instrument had become ineffective because the purpose for which it was executed had totally failed.

It found that the first transaction did not result in the company acquiring the property, was subsequently cancelled, and the property was later purchased separately through the bank auction. The Bench therefore held that the intended purpose of the first instrument had totally failed.

Accordingly, the High Court quashed the order rejecting the refund and directed the authorities to refund Rs. 29.75 lakh, subject to any lawful deduction permissible under the Maharashtra Stamp Act and Rules. The amount is to be processed and paid within six weeks.

For the Petitioner: Ms. Leela D. Malu, instructed by Leela D. Malu & Associates

For the State: Ms. S.D. Chipade, AGP