Impounding of Document in case of Memorandum of Understanding of joint venture agreement

A conjoint reading of the covenants of the said Memorandum of Understanding coupled with the averments in the Plaint lead to a conclusion that the land in question has been handed over to the Plaintiffs for development. Unless the possession is handed over, the various obligations which have been adverted to hereinabove cannot be fulfilled by the Plaintiffs. It is in the said context that the submissions of the learned counsel appearing for the Petitioners would have to be considered. Though the learned counsel for the Petitioners was at pains to point out that the said agreement postulates a Joint Venture Agreement to be executed, in my view, the said covenant would not take the case of the Plaintiffs any further. Merely because a Joint Venture Agreement was to be entered into, the same would not mean that the document in question would not be covered by Explanation-1 to Article 25of the said Act. The facility of having a joint venture was to see to it that the development of the property takes place and was not in the nature of a clause which postulates a further agreement to be executed, on the execution of which, possession was to be handed over. The Joint Venture Agreement was to be entered into merely to facilitate the development of the land in question and has nothing to do with handing over possession of the land. The covenant No. 16 as can be seen contemplates the development to be carried out within three years. The said covenant is a defining covenant in so far as the aspect of possession is concerned. There was no question of fixing a time frame if the possession was to be postponed to a future date as was sought to be contended by the learned counsel appearing for the Petitioners, though not with any great deal of conviction. Implicit in the said aspect of development being completed in three years is the acceptance of the fact that the possession in fact was handed over for the purposes of carrying out the intent and objects of the said Development Agreement. The Trial Court was right in recording that the exact nature of the transaction is not sought to be revealed by the Plaintiffs. Curiously the aspect of possession has not been covered in the Memorandum of Understanding and this can only be attributed to the fact that by clever drafting, the aspect of possession has been purposely kept away. It is to cover such eventualities where possession is handed over and the execution of the sale deed is avoided so as to avoid the payment of stamp duty that Explanation-1 to Article 25 was introduced in the said Act. The said aspect has been dealt with in the judgment in Balwantgir Giri's case (supra). In my view therefore a reading of the covenants and the averments made in the Plaint lead to an irresistible conclusion that the document is a conveyance and was therefore chargeable to stamp duty in terms of Article 25 of the said Act. The impugned order of the Trial Court impounding the document and sending it to the Collector of Stamps therefore cannot be taken exception to. No case for interference is therefore made out.1

2013(4)ALLMR28, 2013(4)MhLj202

IN THE HIGH COURT OF BOMBAY

Writ Petition No. 9210 of 2012

Decided On: 25.04.2013

Appellants: Shri Ashok Ganagsahai Singhal and Ors.
Vs.
Respondent: Shri Ramdhar Nankulal Yadav and Ors.

Hon'ble Judges/Coram:R.M. Savant, J.

1. Rule, with the consent of the learned counsel for the parties made returnable forthwith and heard. The writ jurisdiction of this Court is invoked against the order dated 6.02.2012 passed by the learned Joint Civil Judge, Senior Division Pune by which order the application in question being exhibit 54 filed by the Defendant No. 1 came to be partly allowed and the document in question i.e. the Deed dated 25.08.2005 was directed to be impounded and be sent to the Collector of Stamps for further action as per Section 35 of the Bombay Stamp Act, 1950.

2. Shorn of unnecessary details a few facts can be stated thus:

The Petitioner is the original Plaintiff who has filed Special Civil Suit No. 2096/2008 for specific performance of the agreement dated 25.08.2005. The subject matter of the said agreement is the suit property bearing Survey No. 119, Hissa No. 2B, situated at village Pimple Saudagar, Taluka Haveli, District Pune. The suit property admeasures 1 H. 50.5 Ares. The suit property is more particularly described in paragraph 1 of the Plaint. The Respondent No. 1 and the Petitioner entered into the said agreement styled as a Memorandum of Understanding. The said agreement is inter-alia a Development Agreement and the total consideration mentioned therein is an amount of Rs. 9,71,62,800/-. The schedule of payment is mentioned in the said agreement in Clause 'E'. The cause for filing of the Suit was the apprehension of the Plaintiffs that the Respondent No. 1 had entered into agreement with the other Defendants in the Suit. It is, therefore, that the Suit in question came to be filed for specific performance of the said agreement dated 25.08.2005. It is the case of the Petitioner that it has paid an amount of Rs. 50,00,000/-. However, inspite of the said payment, the Defendants to the Suit showed their reluctance to proceed with the said Development Agreement and in fact tried to enter into agreement with the other Defendants that the Suit in question came to be filed. In the said Suit, an application for temporary injunction came to be filed by the Plaintiffs which was opposed to on behalf of the Defendants. The said application for temporary injunction came to be rejected. It seems that contemporaneously the Defendant No. 1 had filed an application seeking dismissal of the Suit on the ground that the Memorandum of Understanding on which the Suit is based is not registered and is also not sufficiently stamped. The said application was contested by the Plaintiffs. The Trial Court considered the said application and as indicated above, by the impugned order directed its impoundment and directed that it be sent to the Collector of Stamps for adjudication of the stamp duty payable as per the Bombay Stamp Act, 1950 (for short 'the said Act). The Trial Court in arriving at the said conclusion held that the said document is covered by Article 25 of the said Act and was a conveyance deed. For arriving at the said conclusion, the Trial Court referred to paragraphs 3 and 4 of the Plaint. The Trial Court observed that the document itself reveals that it is a Development Agreement for the total consideration of Rs. 9,71,62,800/- to be paid by the Plaintiffs to the Defendants. The Trial Court was of the view that the Plaintiffs were making an attempt to conceal the exact nature of the document as at times they were contending that it was a Memorandum of Understanding and at other times they were contending that it was a Development Agreement. As indicated above, it is the said order which is impugned in the present Petition.

3. Heard the learned counsel for the parties. The learned counsel Mr. Godbole appearing on behalf of the Petitioners would contend that since there is no covenant in respect of handing over possession of the Suit Property to the Plaintiffs, the said document could not be termed as a conveyance within the meaning of Article 25 of the said Act. The learned counsel would contend that the fact that the document is not a conveyance can be seen from the document itself as the document contemplates the execution of a joint venture and therefore cannot come within the mischief of Explanation-1 to Article25 of the said Act. The learned counsel in support of his said submission placed reliance to the judgment of a Division Bench of this Court reported inMANU/MH/0569/2006 : 2006 (5) Mh.L.J. 306 in the matter of Balwantgir, Ganpatgir Giri through his L.Rs. Nanibai wd/o. Balwant Giri & Ors. Vs. Manasi Construction and Developers wherein the Division Bench has held that when an agreement which restricts delivery of possession on execution of a sale deed, the same cannot be construed to be a conveyance within the meaning of Explanation-1 to Article 25 of the said Act. The learned counsel would contend that the application for temporary injunction filed by the Petitioner/Plaintiff has been rejected on the ground that the Plaintiff is not in possession which is another circumstance to indicate that the said document is not a conveyance covered by the provisions of Article 25 of the said Act. The learned counsel would lastly contend the nature of the document is to be seen which in the instant case is one for development and which further contemplates the execution of a Joint Venture Agreement and therefore Article 25 would have no application in terms of the law laid down by the Division Bench.

4. Per contra, the learned counsel appearing on behalf of the Respondent No. 1 Mr. Kudle would in supporting the impugned order would contend that a reading of the document discloses that the possession in fact has been handed over to the Plaintiffs for the purposes of development. The learned counsel would draw my attention to the averments made in the Plaint and especially paragraphs 3, 4, 15 and 16 of the Plaint and would contend that the said averments indicate the nature of the document in question and how the parties have understood the same. The learned counsel would contend that the impugned order has already been executed in as much as the Collector of Stamps has adjudicated upon the stamp duty payable by the Plaintiffs and has consequently issued a show cause notice to the Plaintiffs. The learned counsel would therefore contend that no interference is called for with the impugned order under Article 227 of the Constitution of India.

5. Having heard the learned counsel for the parties, I have given my anxious consideration to the rival contentions. The issue in the above Petition which arises for consideration is as to whether the document dated 25.08.2005 can be said to be a conveyance so as to come within the mischief of Explanation-1 to Article 25 of the said Act. It is required to be noted that though the Agreement has been styled as a Memorandum of Understanding, it is indubitably a Development Agreement. The relevant clauses of the said Agreement are clauses 2, 2D, 2E, 2I and 2K. The same are reproduced here in under for the sake of ready reference:

2. Whereas Describe property Column No. 1 purchased by me I am the sole & absolute owner of the said property. I wish to develop the said property, but due to financial conditions I cant develop said property. So I wish to give the said property to the party of the Second Part & party of the Second Part has accepted my proposal in following conditions:

D. Whereas the Party No. 1 & Party No. 2 had admitted that, after giving the units by the party No. 1, if any surplus land is kept vacant or remain Under Urban Land Ceiling Act, 1976. The Party No. 1 would bear the 75% loss of land cost and the party No. 2 will bear the 25% loss of land cost, which is fixed between the both parties.

Whereas the Party No. 2 hereby further admitted that, the construction cost of surplus building under U.L.C. Government scheme would be bear by party No. 2 only.

E. Where as the Party of the Second part has admitted that consideration amount of Rs. 9 crore 71 lakhs 62 thousand 8 hundred shall be give in the following manners--

E. And the remaining amount of Rs. 8 crores shall be paid as mutually decided by the parties and/or if the parties enter into a Joint Venture, the party of the second part shall pay 20% of the net profit to the party of the first part.

I. On the payment of Rs. 1,21,62,000/- as stated herein above the party of the first part shall enter in to a Joint Venture Agreement in such form and in such manner as may be solely decided by the party of the second part containing all usual terms and conditions and keeping in spirit of this M.O.U.

K. it is specifically agreed between the parties that one said amount of Rs. 50,00,000/- (Rs. Fifty Lakhs only) paid under this M.O.U. is towards part consideration towards acquisition of the said property and that the party of the Second part do have a legal charge as contemplated under the transfer of property Act.

(emphasis supplied)

At this stage, it would also be relevant to advert to the averments in the Plaint. The averments in the Plaint in paragraphs 3, 4, 15 and 16 are relevant. The same are reproduced here in under for the sake of ready reference:

3. The Plaintiffs submit that, in the year 2005 the Defendant No. 1, being the sole owner was desirous to develop the suit property. The defendant no. 1 however due to financial constraints was unable to develop the suit property on his own.

4. The Plaintiffs submit that, the Defendant No. 1 was intending to give the suit property for development to some third party. The Plaintiffs were in search of some huge portion of land within the Pimpri Chinchwad Municipal Corporation area for carrying out the development.

15. The Plaintiffs submit that it was also discussed and decided by the Plaintiffs and the Defendant No. 1 that they may enter into the Joint Venture Agreement for the purpose of development of the said property and in that case the Plaintiffs were to pay 20% of the net profit to the defendants. In that case the Plaintiffs were to complete the scheme within three years from the date of sanction of the plan from Pune Municipal Corporation subject to force majuere.

16. The Plaintiffs submit that as such by the said Memorandum of Understanding it was agreed between the parties,

a) to develop the said property by Joint Venture.

b) to complete the same within three years.

c) to commence the work of development after the Defendant No. 1 removes the encumbrance over the said property, which had cropped up due to litigation raised by the previous owner against the Defendant No. 1.

(emphasis supplied)

6. A conjoint reading of the covenants of the said Memorandum of Understanding coupled with the averments in the Plaint lead to a conclusion that the land in question has been handed over to the Plaintiffs for development. Unless the possession is handed over, the various obligations which have been adverted to hereinabove cannot be fulfilled by the Plaintiffs. It is in the said context that the submissions of the learned counsel appearing for the Petitioners would have to be considered. Though the learned counsel for the Petitioners was at pains to point out that the said agreement postulates a Joint Venture Agreement to be executed, in my view, the said covenant would not take the case of the Plaintiffs any further. Merely because a Joint Venture Agreement was to be entered into, the same would not mean that the document in question would not be covered by Explanation-1 to Article 25of the said Act. The facility of having a joint venture was to see to it that the development of the property takes place and was not in the nature of a clause which postulates a further agreement to be executed, on the execution of which, possession was to be handed over. The Joint Venture Agreement was to be entered into merely to facilitate the development of the land in question and has nothing to do with handing over possession of the land. The covenant No. 16 as can be seen contemplates the development to be carried out within three years. The said covenant is a defining covenant in so far as the aspect of possession is concerned. There was no question of fixing a time frame if the possession was to be postponed to a future date as was sought to be contended by the learned counsel appearing for the Petitioners, though not with any great deal of conviction. Implicit in the said aspect of development being completed in three years is the acceptance of the fact that the possession in fact was handed over for the purposes of carrying out the intent and objects of the said Development Agreement. The Trial Court was right in recording that the exact nature of the transaction is not sought to be revealed by the Plaintiffs. Curiously the aspect of possession has not been covered in the Memorandum of Understanding and this can only be attributed to the fact that by clever drafting, the aspect of possession has been purposely kept away. It is to cover such eventualities where possession is handed over and the execution of the sale deed is avoided so as to avoid the payment of stamp duty that Explanation-1 to Article 25 was introduced in the said Act. The said aspect has been dealt with in the judgment in Balwantgir Giri's case (supra). In my view therefore a reading of the covenants and the averments made in the Plaint lead to an irresistible conclusion that the document is a conveyance and was therefore chargeable to stamp duty in terms of Article 25 of the said Act. The impugned order of the Trial Court impounding the document and sending it to the Collector of Stamps therefore cannot be taken exception to. No case for interference is therefore made out.

The Writ Petition is accordingly dismissed.

Rule discharged with no order as to costs.

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