The Supreme Court has clarified a long-contested point under the Andhra Pradesh Stamp Act, ruling that an agreement to sell does not attract stamp duty unless it is tied to the delivery of possession.
Setting aside a contrary view taken by the Andhra Pradesh High Court, the Court held that an agreement to sell cannot automatically be treated as a conveyance. Stamp duty, it said, becomes payable only when possession of the property follows the agreement or is demonstrably linked to it.
The ruling came from a bench of Justices B.V. Nagarathna and R. Mahadevan, in a dispute rooted in a decades-old landlord–tenant relationship. The appellant had occupied the property as a tenant for more than fifty years. In 2009, the landlady entered into an agreement to sell the property to him for ₹9 lakh, accepting ₹6.5 lakh as advance consideration. When the landlady later denied the agreement, the tenant approached the court seeking specific performance.
During trial, the landlady objected to the agreement being admitted as evidence, arguing that it amounted to a conveyance and therefore required payment of stamp duty and penalty under the Andhra Pradesh Stamp Act. Both the trial court and the High Court accepted this argument, directing that the document be stamped before it could be relied upon. This led to the appeal before the Supreme Court.
The apex court disagreed, holding that the agreement in question could not be treated as a “deemed sale.” The judgment explained that an agreement to sell is chargeable as a sale only if it either follows or records the delivery of possession pursuant to that agreement. There must be a direct and intimate link between the agreement and the transfer of possession.
Possession that already exists for independent reasons—such as long-standing tenancy—does not meet this standard. In this case, the appellant’s possession predated the agreement by several decades and was rooted in his status as a tenant, not in the agreement to sell.
Because possession was neither delivered nor promised under the agreement, the Court concluded that no stamp duty or penalty could be levied. It further held that the High Court had erred in assuming the existence of a deemed conveyance and in upholding the trial court’s direction to impound the document.
With this reasoning, the Supreme Court set aside the orders of both the High Court and the trial court, allowing the appeal and reinforcing a narrow, possession-linked reading of stamp duty liability under the Andhra Pradesh Stamp Act.
