Supreme Court Sets Aside Impounding of Unstamped Agreement in Specific Performance Suit Pending for 29 Years — Refund of Stamp Duty on Cancelled Conveyance Permitted. The court held that impounding under Section 35 of Indian Stamp Act, 1899 is discretionary and would be unjust where appellant had already paid stamp duty on a conveyance that was cancelled due to setting aside of consent decree.

Civil appeal against order of Division Bench of Calcutta High Court directing impounding of unstamped agreement to sell in a pending suit for specific performance.

Appellant sought to set aside the order of the Division Bench directing impounding of the agreement to sell dated 15th January 1990.

The respondent filed an application to impound the unstamped agreement to sell under Section 35 of the Indian Stamp Act, 1899 during pendency of the suit.

Single Judge of Calcutta High Court refused to impound the document on 14th February 2017; Division Bench reversed and directed impounding on 13th April 2017.

Whether the High Court was justified in directing impounding of an unstamped agreement to sell under Section 35 of the Indian Stamp Act, 1899, in the peculiar facts where the appellant had already paid stamp duty on a conveyance deed that was subsequently cancelled. Whether impounding the agreement at this stage would be unjust and frustrate the appellant's claim after the suit had been pending for 29 years.

Appellant argued that impounding the document would frustrate its claim and that it had already paid stamp duty on the conveyance deed which was cancelled, and it was entitled to refund of that duty. Respondent argued that the agreement to sell was unstamped and therefore liable to be impounded under Section 35, and the refund of stamp duty on the conveyance was a separate matter.

Section 35 of the Indian Stamp Act, 1899, which provides for impounding of unstamped instruments, is not mandatory but discretionary. In the peculiar facts where the appellant had already paid full stamp duty on a conveyance deed executed pursuant to a consent decree that was later set aside, and the appellant was entitled to refund of that duty, impounding the underlying agreement to sell would be unjust and would frustrate the appellant's claim. The court may refuse to impound where it would cause injustice or where the party has already paid stamp duty on a related document.

In the peculiar facts and circumstances, where the parties to the proceedings originally in Suit No. 240 of 1990 filed at the instance of the appellant have consented to obtain a consent decree of specific performance dated 2nd August, 1991 pursuant to which deed of conveyance was executed on 3rd August, 1991 and full stamp duty of Rs. 1,85,000/- was paid by the appellant and no objection was raised by the respondent at any stage in reference to the agreement to sell dated 15th January, 1990 in the suit for specific performance and the decree dated 2nd August, 1991 although it has been set aside by this Court at the instance of the third party to the proceedings, namely, M/s. the New Red Bank Tea Company Private Ltd. and once the finding has been affirmed that the appellant is entitled for refund of Rs. 1,85,000/- towards stamp duty which was paid on the deed of conveyance, the appellant who has always shown his bonafides in transfer of full consideration and payment of stamp duty, we are of the view that it will be unjust to non-suit the claim of the appellant after the suit remain pending in the Court for almost 29 years. We are of the view that the order passed by the Division Bench of the High Court directing to impound the document (dt. 15th January, 1990) is not justified in the peculiar facts and circumstances of the case.

Appellant filed Suit No. 240 of 1990 for specific performance in Calcutta High Court. Single Judge refused interim injunction on 1st April 1991. Appellant appealed; during appeal, parties compromised and Division Bench passed consent decree on 2nd August 1991. Conveyance deed executed on 3rd August 1991. The New Red Bank Tea Company Private Ltd. challenged consent decree in Supreme Court in Civil Appeal No. 3569 of 1991. Supreme Court set aside consent decree on 9th September 1991 and directed both suits to be heard together. Thereafter, respondent filed application to impound agreement to sell. Single Judge refused on 14th February 2017. Division Bench reversed on 13th April 2017. Appellant appealed to Supreme Court.

• Indian Stamp Act, 1899: Section 35