Partly allowed

Sri. R. Krishna v. Sri. Chandrashekar T B

Karnataka HC27 Mar 2024WP/56757/2018

Case brief

AI extract

What is this about?

A writ petition challenged a trial court's impounding of supplementary and tripartite agreements in a specific performance suit under the Karnataka Stamp Act. The court upheld impounding of the tripartite agreements and the agreement of sale, imposed equivalent-duty penalty citing Gangappa v. Fakkirappa, but set aside impounding of the supplementary agreements.

What did the court decide?

Agreement of sale impounded; petitioner directed to pay stamp duty under Art. 5(e)(i) plus equivalent penalty for admission in evidence; setting aside of impounding of supplementary agreements granted

Sri. R. Krishna Vs Sri. Chandrashekar T B — Specific Performance | Karnataka HC (2024)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 27^TH DAY OF MARCH, 2024

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BEFORE

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THE HON'BLE MR JUSTICE R. NATARAJ WRIT PETITION NO. 56757 OF 2018 (GM-CPC)

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BETWEEN:

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SRI. R. KRISHNA S/O LATE RANGAPPA, AGED ABOUT 48 YEARS, R/AT 37/11, 2^ND FLOOR, BRIGADE ROAD CROSS, BENGALURU-560 001

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…PETITIONER

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(BY SRI. S.SHIVANANDA, ADVOCATE)

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AND:

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SRI. CHANDRASHEKAR T.B. S/O LATE T.S. BASAVARAJ, HINDU, AGED ABOUT 40 YEARS,

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Digitally signed by BS RAVIKUMAR Location: HIGH COURT OF KARNATAKA

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SRI T.B.SANTHOSH S/O LATE T.S.BASAVARAJ, HINDU, AGED ABOUT 38 YEARS,

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NO.1 AND 2 ARE R/AT "ANUGRAHA", NO.699, 9^TH ‘A’ CROSS, OPP: MODI EYE HOSPITAL, WEST OF CHORD ROAD, RAJAJINAGAR 2^ND STAGE, BENGALURU-560 010.

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SRI.K.VASUDEVA MURTHY S/O SRI.R.KEMPAIAH, HINDU,

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AGED ABOUT 39 YEARS, R/AT BYRAVESHWARA NILAYA, DEVANNAPALYA, DASANAPURA, BENGALURU NORTH TALUK, BENGALURU.

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M/S LAKSHMI VACCUM HEAT TREATERS PVT. LTD., A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 HAVING ITS OFFICE AT NO.3, B-05, M.S.INDUSTRIAL COMPLEX, 14^TH CROSS, PEENYA 2^ND STAGE, BENGALURU-560 058 REPRESENTED BY ITS MANAGING DIRECTOR, SHERI. LAKSHMI NARASIMHA PRASAD.T.N

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…RESPONDENTS

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(BY SRI.N.G.SREEDHAR, ADVOCATE FOR R1 SRI. Y.S.H.REDDY, ADVOCATE AND SRI.N.M.THYAGARAJ, ADVOCATE FOR R-4 R-3 SERVED AND UNREPRESENTED)

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THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ORDERS DATED 22.10.2018 PASSED BY THE XXIV ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU CITY ON I.A.NO.X IN O.S.NO.10199 OF 2014, AS CONTAINED IN ANNEXURE-R.

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THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The plaintiff in O.S.No.10199/2014 on the file of

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XXIV Additional City Civil and Sessions Judge, Bengaluru

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has filed this writ petition challenging the correctness of an

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order dated 22.10.2018, by which the Court exercise power under Article 33 and 34 of the Karnataka Stamp Act, 1957 and impounded the supplementary agreements and the tripartite agreements which were placed on record by the plaintiff.

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The parties shall henceforth be referred to as they were arrayed before the Trial Court.

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The suit in O.S.No.10199/2014 was filed for specific performance of an agreement of sale dated 25.08.2012 by directing the defendants to execute a deed of absolute sale after receiving the balance sale consideration of Rs.60,00,000/-. Alternatively, the plaintiff sought for recovery of a sum of Rs.3,90,00,000/- being part of the agreed consideration paid and for damages of Rs.2,00,00,000/- for the alleged breach of contract by the respondents Nos.1 to 3. The plaintiff also sought for perpetual injunction restraining the defendants from alienating the suit schedule property.

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The plaintiff claimed that the defendant Nos.1

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to 3 had executed an agreement of sale dated 25.08.2012

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agreeing to sell the suit schedule property for a total consideration of Rs.4,50,00,000/- and they had received a sum of Rs.2,10,00,000/as part of agreed sale consideration on the date of agreement. The said agreement was duly registered before the concerned Subregistrar. In so far as, the possession of the suit schedule property is concerned, it was specifically stated as follows:

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“3.3) EVICTION OF TENANTS :

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That the portions of the Schedule Property are tenanted to the tenants as detailed in this Agreement. The Sellers undertake to evict the said tenants and deliver vacant possession of the Schedule Property at the time of the sale and it is a condition precedent”.

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It was further stated at Clause 9 as follows:

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“9) POSSESSION :

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The Sellers shall deliver and put the Purchaser in actual physical vacant possession of the Schedule Property at the time of sale deed after evicting the tenants therein namely (i) Sri.R.Prasanakumar and

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Sri.Y.P.Shivakumar, ii) M/s.Ahee Tech and Sri.Nagendra C.S., iii) Sri.Rajkumar J, Proprietor, M/s.Ace Concrete Blocks, (iv) M/s. Golden Wood Packers, (v) M/s. S & S Surface treatments, and (vi) M/s.Aaster Paints and any other person/s in occupation”.

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The defendant Nos.1 to 3 purportedly executed contemporaneous tripartite agreements dated 25.08.2012 in continuation of the agreement of sale dated 25.08.2012, in terms of which, the tenants in occupation of the suit schedule premises had attorned their tenancy in favour of the plaintiff and had agreed to pay the monthly rent payable to the defendant Nos.1 to 3. The plaintiff claimed that following these tripartite agreements, supplemental agreements dated 27.08.2012, 24.11.2012 and 15.03.2013 was entered into between the plaintiff and the defendant Nos.1 to 3 in terms of which the defendant Nos.1 to 3 acknowledged the receipt of Rs.50,00,000/-, Rs.70,00,000/-, Rs.60,00,000/towards the sale consideration and in all the defendant Nos.1 to 3 acknowledged the receipt of Rs.3,90,00,000/and

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extended the time for conclusion of sale till six months from 24.11.2012 and thereafter by nine months from 15.03.2013. Some of the Clauses of these tripartite agreements which commonly appear in all of them reads as follows:

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“WHEREAS the members of the First Party by an Agreement to Sell of this date have agreed to sell the Schedule ‘A’ Property in favour of Second Party by receiving huge advance and part payment.

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WHEREAS the First Party has agreed to direct the Third Party to pay the monthly rent of Schedule ‘B’ Property to the Second Party in view of First Party having received substantial payments under the aforesaid Sale Agreement and hence required Third party to pay the monthly rent of Schedule ‘B’ Property to the Second Party by attornment of tenancy in his favour, for which the members of Third Party have agreed.

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The members of the First Party hereby attorn the tenancy of the Third Party in the Schedule ‘B’ Property in favour of the Second Party. The Third Party hence hereby attorn themselves in favour of the Second Party and agree to pay the monthly rent of Schedule ‘B’ Property to the Second Party.

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The Third Party bind themselves to pay the monthly rent to the Second Party and will not withhold the payment of rent under any circumstance. The liability of the Third Party to pay the monthly rent to the Second Party continue to subsist until otherwise the First Party and Second Party give written instructions to Third Party. The First Party by themselves have no right to prevent or instruct the Third Party not to pay the monthly rent of Schedule ‘B’ Property of the Second Party.

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The authority conferred upon the Second Party is irrevocable and cannot be questioned by the members of the Third Party. The members of the Third Party agree and bind to perform all the obligations as lessees of Schedule ‘B’ Property including the terms mentioned in the aforesaid lease agreement towards the Second Party and also surrender vacant possession of the Schedule ‘B’ Property to the Second Party when the Third Party intends to vacate in terms of Lease Agreement.

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The members of the First Party are liable for refund to Third Party the Interest Free Refundable Security Deposit of Rs.7,80,000/- (Rupees Seven Lakhs Eighty Thousand Only) at the time of vacating the Schedule ‘B’ Property. The First Party has agreed to retain the Security Deposit till the expiry/termination of the lease and refund the

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same without any interest on delivery of vacant possession of Schedule ‘B’ Property thereof to Second Party.”

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The plaintiff contended in the plaint that:

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“ In pursuance of the said five Tripartite Agreements, the tenants in occupation of the portions of the schedule property used to pay rent directly to the Plaintiff till they vacated the premises about one year back. Now all the tenants have vacated the schedule premises and delivered the vacant possession to the plaintiff who thereafter is in actual possession of the entire schedule property by keeping the same under lock and key and by appointing a security person to keep watch and ward of the same. Even now the Plaintiff continues to be in possession of the suit schedule property in part performance of the suit contract .”

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The plaintiff therefore did not seek for the recovery of possession of the suit schedule property, but sought perpetual injunction to restrain the defendants from alienating or encumbering the suit schedule property and also from “dispossessing the plaintiff from the schedule property”.

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The suit was contested by the defendant Nos.1

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to 3 and defendant No.5. They did not dispute the execution of sale agreements in favour of the plaintiff. However, they contended that they have had conveyed the suit property to the defendant No.5 and had delivered the actual and physical possession of the said property to defendant No.5 on 07.04.2014. The defendants denied the execution of the tripartite agreements set up by the plaintiff. The defendant Nos.1 to 3 admitted that they had received a sum of Rs.2,70,00,000/- from the plaintiff and not a sum of Rs.3,90,00,000/- as contended.

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When the suit was set down for trial, the plaintiff was examined as PW.1 and at the time of marking the suit documents, an application was filed by defendant Nos.1 to 3 under Sections 33 and 34 The Karnataka Stamp Act, 1957 to impound supplementary agreements as well as the tripartite agreements referred above on the ground that they were not sufficiently stamped. The application was contested by the plaintiff who contended that under

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the supplementary agreements, what was paid was part of the sale consideration that was agreed under the sale agreement dated 25.08.2012. He contended that the supplementary agreements were in continuation of the sale agreement dated 25.08.2012 and hence no stamp duty was payable on them. He contended that even if stamp duty is payable under Article 5 (j) then Rs.200/was paid on each of them, as prescribed. He contended that tripartite agreements only evidenced the fact that the tenants in occupation of the suit premises had attorned the tenancy in favour of the plaintiff and there was no transfer of any property or the handing over of possession therefore, no stamp duty was payable on that document. He contended that stamp duty if payable was under Article 5(j).

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The Trial Court after considering the

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contentions raised by both the parties held that by virtue of the tripartite agreements, the plaintiff was claiming that he was in possession of the suit schedule property.

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Therefore, it held that sufficient stamp duty ought to have been paid on these documents. It therefore directed the registry to calculate the duty and penalty to be paid on the documents. Being aggrieved by the said order, this writ petition is filed.

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Learned counsel for the plaintiff contended that the execution of the sale agreements by the defendant Nos.1 to 3 is admitted. He submits that by way of supplementary agreements what was acknowledged by the defendant Nos.1 to 3 was the receipt of balance sale consideration payable under the agreement dated 25.08.2012. Therefore, he submits that the supplementary agreements were in the nature of receipts in continuation of the agreement of sale dated 25.08.2012 and no stamp duty was payable on the said documents. He contends that the impugned order passed by the Trial Court impounding the said supplementary agreements is therefore improper and warrants interference. In so far as, the tripartite agreements are concerned, the learned

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counsel contends that under the sale agreement dated 25.08.2012, the possession of the property was agreed to be delivered at the time of execution and registration of a deed of absolute sale. He contends that the applicable stamp duty was paid on the agreement of sale. He contended that a mere attornment of tenancy does not result in delivery of possession of the property, as the purpose of these tripartite agreements was to compel the tenants in occupation of the premises to pay the rent to the plaintiff. He contends that, the documents has to be stamped on the basis of what it conveys and not based on some future event.

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He further submits that the tripartite agreements which were in the nature of attornment of tenancy and as such, no stamp duty was payable thereon. He contends that since, even if the tripartite agreements are treated as an agreement, there is no provision to pay a stamp duty under Article 5(e)(i) and if at all, any stamp duty has to be paid, it is only under Article 5(j). Thus, he

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contends that the Trial Court committed an error in requiring the plaintiff to pay stamp duty. In support of his contention, he relied upon the judgment of the High Court of Andhra Pradesh in the case of Shankaramma, Baby Bhagya Lakshmi, Baby Navneetha, Baby Sugunamma Vs. Mohammed Abdul Hameed, Janikiram . He also relied upon a judgment of Co-ordinate Bench of this Court in ILR 2014 KAR 4350 and WP No.52902/2016.

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Per contra, the learned counsel for the defendant Nos.1 to 3 submitted that under Article 5(e)(i), if the possession of the property is delivered or is agreed to be delivered before executing the conveyance, then the tripartite agreement which is in the nature of delivering the possession of the property before a conveyance was executed has to be treated as a document falling within Article 5(e)(i) and therefore, stamp duty as prescribed therein has to be paid. He contends that in the tripartite agreement, the sale agreement dated 25.08.2012 is referred to and therefore all the three documents had to

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be construed as one and if so done, the plaintiff was liable to pay the stamp duty as provided under Article 5(e)(i). He further submits that the supplementary agreement dated 27.08.2012 and 15.03.2013 were executed in consideration of the attornment of tenancy of the tenants in occupation of the schedule property in favour of the plaintiff and therefore, it should be construed that possession was delivered to the plaintiff even before the conveyance was executed. He relied upon the judgment of the Division Bench of this Court in Digambar Warty Vs. District Registrar reported in ILR 2013 KAR 2099 and ILR 2016 KAR 1707 . He submitted that, once an insufficiently stamped document is produced before the Court, it is bound to not only impound the document, but also collect duty and penalty and there is no escape for the Court from doing so. He submitted that the Civil Court has no discretion, but to impose the penalty of ten times the duty and it is only upon paying such duty and penalty, does the document become properly stamped and admissible in evidence.

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I have considered the submissions made by the learned counsel for the plaintiff and the learned counsel for the defendants.

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A perusal of the agreement of sale dated 25.08.2012 indeed shows that the possession of the property was agreed to be delivered only at the time of execution and registration of a deed of absolute sale. This document was duly registered and the stamp duty as provided under Article 5(e)(i) of the Stamp Act was paid. The plaintiff had entered into tripartite agreement on the same day i.e., on 25.08.2012 in terms of which, the defendant Nos.1 to 3 had agreed to direct the tenants to pay the monthly rent of the portion of the property to the plaintiff, in view of the defendant Nos.1 to 3 receiving substantial payments under the sale agreement dated 25.08.2012. This is evident from Clause 1 and 2 of the tripartite agreement dated 25.08.2012 which reads as follows:

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1) “The members of the first party (defendant Nos.1 to 3) hereby declare and confirm that they have agreed to sell the Schedule ‘A’ Property to the Second Party in terms of an Agreement to Sell of this date.

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2) The members of the First Party hereby attorn the tenancy of the Third Party in the Schedule ‘B’ Property in favour of the Second party(plaintiff). The Third Party hence hereby attorn themselves in favour of the Second party and agree to pay the monthly rent of Schedule ‘B’ Property to the Second Party”.

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Towards the end of Clause 5, it is stated as follows:

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“The members of the Third Party agree and bind to perform all the obligations as lessees of Schedule ‘B’ Property including the terms mentioned in the aforesaid lease agreement towards the Second Party and also surrender vacant possession of the Schedule ‘B’ Property to the Second Party when the Third Party intends to vacate in terms of Lease Agreement”.

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It further stated “the first party (defendant

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Nos.1 to 3) has agreed to retain the security deposit till

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the expiry/termination of the lease and refund the same without any interest on delivery of vacant possession of Schedule ‘B’ Property thereof to Second Party(plaintiff).” The same set of Clauses are found in all the tripartite agreements dated 25.08.2012 entered into between the plaintiff and the defendant Nos.1 to 3. The plaintiff has purportedly thereafter paid certain additional consideration to the defendant Nos.1 to 3 which were evidenced by supplemental agreement dated 27.08.2012, 24.11.2012 and 15.03.2013 in terms of which, the plaintiff had purportedly paid an additional sale consideration of Rs.1,80,00,000/-. Amongst the three supplementary agreements, the two namely the agreements dated 27.08.2012 and 15.03.2013 indicated that the amounts were paid to attorn the tenancy of the tenants occupying the portions of the property agreed to be conveyed. It is therefore evident that between the plaintiff and the defendant Nos.1 to 3, it was agreed that the possession of the property would be delivered even before a conveyance was executed and the plaintiff in order to avoid the

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payment of stamp duty had entered into a tripartite agreement of even date with the defendant Nos.1 to 3 in terms of which, the tenants had attorned the tenancy in favour of the plaintiff and had agreed to deliver up possession of the property after receipt of the security deposit. This is fortified by the averments made in the plaint which are extracted above. Therefore, it is invariably found that the plaintiff has surreptitiously tried to avoid mentioning that the possession of the property was agreed to be delivered before execution of a sale deed and therefore the event of collecting stamp duty under Article 5 to 5(e)(i) of the Stamp Act, 1957 had arisen and hence the stamp duty as prescribed under Article 5(e)(i) was payable on the tripartite agreements dated 25.08.2012 as well as the agreement of sale dated 25.08.2012.

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The contention of the learned counsel for the plaintiff that, a mere attornment of tenancy would not result in delivery of possession, is raised only to be

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rejected as the tripartite agreement specifically mentioned that the possession of the property would be delivered to the plaintiff soon after the tenants vacated the premises and soon after they received their security deposit. The agreements dated 27.08.2012 and 15.03.2013 shows that consideration was paid to attorn the tenancy of the tenants. Therefore, it is more than apparent that the tripartite agreement did not deal with only attornment of tenancy, but also contemplated the receipt of possession of the suit property before a sale deed was executed by defendant Nos.1 to 3 in favour of the plaintiff. As far as, the supplemental agreements are concerned, they were in the nature of receipts in terms of which, the defendant Nos.1 to 3 had purportedly acknowledged the receipt of further sale consideration payable under the agreement of sale dated 25.08.2012 and no stamp duty was payable on the said supplemental agreements. In that view of the matter, the impugned order passed by the Trial Court impounding the tripartite agreements dated 25.08.2012 is just and proper and does not warrant any interference.

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However, the impugned order in so far as it relates to impounding the supplementary agreements, it warrants interference and the same deserves to be set aside.

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In view of the judgment of the Hon'ble Apex Court in the case of Gangappa Vs. Fakkirappa and having regard to the amount of consideration agreed to be paid under the agreement of sale dated 25.08.2012, this Court considers it appropriate to impose an equivalent amount of stamp duty payable as penalty, instead of ten times as held by the Division Bench of this Court in ILR 2013 KAR 2099 .

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In view of the above, this petition is allowed in part . The agreement of sale dated 25.08.2012 is impounded and the petitioner is directed to pay stamp duty on the agreement of sale dated 25.08.2012 as provided under Article 5(e)(i) of the Karnataka Stamp Act, 1957 and also pay an equivalent sum as penalty on the said document as penalty, upon which, the said document would be admitted in evidence. It is needless to mention

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that the plaintiff shall be entitled to denoting the value of the stamp duty paid on the agreement dated 25.08.2012,

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in the event he succeeds in the suit for specific performance and in the event the Court decides to execute a sale deed in favour of the plaintiff. The impugned order in so far as impounding the supplementary agreements dated 27.08.2012, 24.11.2012 and 15.03.2013 is set aside. It is needless to mention that the stamp duty payable shall be at such rates as was prevalent as on the date of execution of the agreement dated 25.08.2012.

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Sd/JUDGE

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GSR

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List No.: 1 Sl No.: 22

Sri. R. Krishna v. Sri. Chandrashekar T B

Case brief

What is this about?

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Sri. R. Krishna v. Sri. Chandrashekar T B

Case brief

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