Clearing the ambiguity of Insufficiently Stamped Development Agreements

The stamping of documents has been an ongoing issue for a long period and different authorities have dealt with it differently over a period of time. The recent Judgment passed by the High Court of Madhya Pradesh, Indore Bench clears the ambiguity on the issue of documents being insufficiently stamped and is a step forward for the all the developers, builders and individuals facing the issue on documents being insufficiently stamped.

The High Court of Madhya Pradesh, Indore Bench (“Court”) set aside an order passed by Real Estate Regulatory Authority (“RERA”) which dismissed an application under Section 4 of Real Estate (Regulation and Development) Act, 2016 (“RERA Act”) for registration of a project for not being properly stamped.

The Judgment passed by the Court provides further clarity on the aspect that the document which is insufficiently stamped can be rectified by paying the difference in stamp duty amount to the Collector of Stamps. RERA ought not to dismiss an application for registration of document solely on the ground of document being insufficiently stamped.

When an applicant makes an application for registration of document to RERA, the officers would reject such application solely on ground that the document is insufficiently stamped document. Whereas, RERA has power to impound the document and direct the applicant to pay deficit stamp duty to the Collector of Stamps.

Similar situation was faced by one, Accrual Realities Pvt. Ltd. (“Accrual Realties”) who had entered into a development agreement dated 11 February 2021 with the land owners and presented the document for registration before RERA authorities.

Accrual Realities had paid the stamp duty of ₹12,45,630/- on the said document, however, RERA had rejected an application for registration solely on account of document being insufficiently stamped. Hence, Accrual Realities was compelled to go before the Court.

The Court noted the concerns of Accrual Realities and confirmed that issue of a document being an insufficiently stamped is a rectifiable error. The RERA authorities should be mindful of the same and ought not to dismiss an application for RERA registration only on account of document being insufficiently stamped.

Instead, RERA should provide the applicant an opportunity to rectify the error of insufficiency of stamp duty and directed the applicant to pay the appropriate stamp duty to the Collector of Stamps.

This decision is definitely a relief and a step forward for the various individuals, builders and developers as they will now not need to re-apply for registration of the projects which were not registered merely on the accounts of deficit of the payment of stamp duty.

In fact, the importance of paying appropriate stamp duty is not only limited to real estate documents but also has positive implication for seeking reliefs in an arbitration which has also been explained in detail in a separate article, you access the same by clicking here.

Purvi Asher is a Partner and Aakash Mehta is an Associate at Mansukhlal Hiralal & Co.