Article 23A And Section 53A Of TPA: Delhi High Court Clarifies Stamp Duty Obligations

Background:

The dispute centres around a property located at F-20, Geetanjali Enclave, New Delhi, owned by Respondent 2. On October 24, 2010, Respondent 2 entered into a Collaboration Agreement with Respondent 1 for the demolition and reconstruction of the property. The agreement stipulated the construction of a building comprising a basement, ground floor, first floor, second floor, and third floor with a terrace. According to the agreement, Respondent 1 was granted the right to sell the second floor of the newly constructed building.

Subsequently, on November 14, 2011, Respondent 1 entered into an Agreement to Sell (ATS) with the appellants, agreeing to sell the second floor to them. The appellants paid the full sale consideration, totalling ₹ 2,85,00,000, within the agreed timeline, and possession of the second floor was handed over to them on July 25, 2012.

Disputes and Arbitration Proceedings

Disputes arose between the appellants and Respondent 1 concerning the ATS. As per Clause 14 of the ATS, disputes were to be resolved through arbitration. The appellants approached the court under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an arbitrator. On May 2, 2022, the court appointed an advocate as the arbitrator, allowing Respondent 2 to participate in the arbitration, despite not being a party to the ATS. The arbitrator commenced the proceedings and is currently handling the case.

During the arbitration, Respondent 2 filed an application under Section 16 read with Section 23 of the Arbitration and Conciliation Act, 1996, arguing that the ATS was insufficiently stamped. The arbitrator, in an order dated June 7, 2023, upheld Respondent 2’s plea, finding that the ATS was not adequately stamped as per Article 23A of Schedule I-A of the Indian Stamp Act, 1899, applicable to Delhi, in conjunction with Section 53A of the Transfer of Property Act, 1882 (TPA).

Arguments Presented:

Mr. Sahni, representing the appellants, contended that Article 23A of Schedule I-A of the Stamp Act did not apply to the ATS. He argued that Article 23A pertains to documents that convey immovable property, and since the ATS did not involve the conveyance of immovable property, it should not fall under Article 23A. Instead, he posited that the document should be subject to stamp duty as per Article 23. He further argued that Section 53A of the TPA applies only when possession is taken in part performance of the contract. He emphasized that possession was handed over after the ATS execution, thus implying that Section 53A should not apply.

Mr. Paul, representing Respondent 2, contended that the applicable law in Delhi, as articulated in Article 23A of Schedule I-A of the Stamp Act, specifically covers contracts for the transfer of immovable property under Section 53A of the TPA. He argued that the ATS was correctly classified under Article 23A, as possession was handed over pursuant to the ATS, thus invoking the applicability of Section 53A of the TPA. Mr. Paul also cited the Possession Letter dated July 25, 2012, which explicitly stated that possession was handed over per the ATS, establishing a clear link between the possession and the ATS.

Legal Analysis and Key Issues

The primary legal question is whether the ATS falls under the purview of Article 23A of Schedule I-A of the Stamp Act, as applicable to Delhi, in conjunction with Section 53A of the TPA. Article 23A covers documents executed in pursuance of contracts for the transfer of immovable property, where possession has been delivered or is agreed to be delivered. In this case, the appellants took possession of the property following the execution of the ATS, establishing a clear connection between the contract and the possession. Section 53A of the TPA, which protects the transferee’s right to retain possession of the property against the transferor, supports the applicability of Article 23A to the ATS.

The arbitrator found that the ATS was insufficiently stamped. According to Indian law, an agreement that falls under Section 53A of the TPA requires stamping as per Article 23A. The appellants argued that the ATS did not convey property and thus should not be classified under Article 23A. However, the possession letter and the nature of the transaction suggest that the contract effectively involved part performance, thus invoking the provisions of Section 53A and Article 23A. The arbitrator’s decision was influenced by several judicial precedents, including:

1. Suresh Kumar v. Satish Mehra: This case dealt with the interpretation of Article 23A and its applicability to documents involving the transfer of immovable property.
2. Dilawar Singh v. Amandeep Singh: Highlighted the applicability of Section 53A of the TPA in similar circumstances.
3. Patel Natwarlal Rupji v. Shri Kondh Group Kheti Vishayak: Discussed the scope of Section 53A as a shield for the transferee in possession.

These cases supported the arbitrator’s view that the ATS was insufficiently stamped under Article 23A, as it involved the transfer of possession under a contract covered by Section 53A of the TPA.

Conclusion:

The case revolves around the proper classification and stamping of the ATS under the Indian Stamp Act, read with the TPA. The arbitrator’s finding that the ATS was insufficiently stamped under Article 23A, considering the transfer of possession under Section 53A of the TPA, appears legally sound. The appellants’ argument that the ATS did not involve the conveyance of property does not hold, as the possession was granted per the ATS, fulfilling the requirements of Section 53A.

The appeal under Section 37(2)(a) of the Arbitration and Conciliation Act, 1996, challenging the arbitrator’s decision on the stamping issue, is unlikely to succeed, given the clear legal framework and judicial interpretations supporting the arbitrator’s findings.