AP Stamp Act | Agreement To Sell Attracts Stamp Duty Only If Followed By Delivery Of Possession: Supreme Court
Kiran Raj
The Supreme Court of India Division Bench of Justice B.V. Nagarathna and Justice R. Mahadevan on Thursday, January 15, held that stamp duty under the Andhra Pradesh Stamp Act is not payable on an agreement to sell unless it is followed by, or evidences, delivery of possession. The dispute arose in a tenant’s specific performance suit when the agreement was tendered in evidence and opposed as a conveyance attracting duty and penalty. The Court set aside the High Court’s view that the instrument was chargeable as a sale under Explanation I to Article 47A, finding the tenant’s possession was as lessee for decades and not linked to the agreement. It directed the trial court to mark the document as an exhibit and proceed expeditiously.
The dispute arose from an agreement to sell immovable property executed between a landlady and her tenant, who had been in possession of the property for over fifty years. The tenant agreed to purchase the property for a total consideration of ₹9,00,000, paying a substantial advance at the time of execution. When disputes later arose, the tenant instituted a suit seeking specific performance of the agreement, or in the alternative, refund of the advance amount with interest, along with an injunction against alienation of the property.
During the trial, the tenant sought to mark the agreement to sell as evidence. The landlady objected on the ground that the document amounted to a conveyance attracting stamp duty under Explanation I to Article 47A of Schedule I-A of the Andhra Pradesh Stamp Act. The Trial Court upheld the objection and directed payment of stamp duty and penalty.
Meanwhile, eviction proceedings initiated by the landlady under the Andhra Pradesh Buildings (Lease, Rent and Eviction) Control Act culminated in an eviction order against the tenant. The tenant’s challenge to the Trial Court’s order before the High Court was dismissed, and a subsequent review petition was also rejected.
The Court recorded that “The fact that the appellant has been in possession of the property for the last fifty years as noted in the said agreement to sell dated 14.10.2009 is significant and a critical fact in the instant case.” “It means that the appellant-tenant was not given possession of the suit property in the backdrop of the agreement to sell, either prior thereto or subsequently.”
On the statutory trigger for stamp duty under the Andhra Pradesh Stamp Act, the Court stated that “Under the A.P. Stamp Act, the delivery of possession of the property must follow the execution of the agreement to sell or if delivery of property has been made prior to the agreement to sell then it should be evidenced in the agreement to sell by a recital to that effect.” It added, “However, if the possession of the property by the vendee does not have any nexus to the agreement to sell, as in the present case where the possession of the property was with the appellant as a tenant for nearly five decades and the respondent vendor has decided to sell the same to the appellant vendee then, the said possession is not relatable to the agreement to sell.” “In such a case, neither is the sale within the meaning of Explanation I to Article 47A of Schedule I-A to the A.P. Stamp Act nor is it a case of deemed conveyance.”
Assessing the agreement alongside the eviction order, the Court observed that “it becomes clear that the appellant herein was a tenant and as a tenant, he entered into an agreement to buy the schedule property from the landlord.” It further stated, “The respondent-landlord did not treat the possession of the suit schedule property by the appellant-tenant pursuant to the agreement to sell dated 14.10.2009 as a vendee.” “Therefore, this is not a case where pursuant to the agreement to sell dated 14.10.2009 or in relation to it, or prior to the agreement to sell possession of the suit schedule property has been handed over to the appellant herein as a vendee.”
On the character of possession and the chargeability of the instrument, the Court recorded, “Thus, there is no express or implied surrender of the tenancy by the appellant in favour of the landlord vendor.” “Consequently, it is held that there is no “deemed conveyance” within the meaning of Explanation I to Article 47A of the A.P. Stamp Act, as the agreement to sell in the instant case does not come within the scope and ambit of the Explanation thereto.” It concluded on duty that “the stamp duty payable on the nature of the transaction being an agreement to sell simplicitor is just and proper.”
Addressing the impounding direction, the Court stated, “The Trial Court failed to notice this aspect of the matter and simply directed the appellant herein to pay the stamp duty as if it were a conveyance or sale and there was a transfer of title from the respondent to the appellant herein.” “The High Court in fact misdirected itself in assuming that there was in fact a deemed conveyance between the respondent and the appellant herein.” It held, “The appellant herein is not liable to pay any additional duty and penalty on the said instrument and neither is the said instrument liable to be impounded for the purpose of payment of duty and penalty.”
The Court directed that “both the impugned orders of the High Court as well as the order of the Trial Court are set aside. The Trial Court shall mark the agreement to sell dated 14.10.2009 as an Exhibit and proceed to dispose the suit as expeditiously as possible and preferably within a period of six months from the date of the next hearing before the Trial Court.
Advocates Representing the Parties
For the Appellant: Mr. M Srinivas R Rao, Adv. Mr. Abid Ali Beeran P, AOR Mr. Saswat Adhyapak, Adv. Ms. Namita Kumari, Adv.
For the Respondent: Mr. Anuj Kapoor, AOR Mr. Nandeesh Nanda, Adv. Mr. Shivom Sethi, Adv.
Case Title: Vayyaeti Srinivasarao v. Gaineedi Jagajyothi
Neutral Citation: 2026 INSC 59
Case Number: Civil Appeal Nos. of 2026
Bench: Justice B.V. Nagarathna, Justice R. Mahadevan
