In a significant ruling on stamp duty liability in real estate development agreements, the Bombay High Court has dismissed two writ petitions filed by developer M/s. Kamla Developers and upheld the levy of stamp duty on two development agreements executed in 1987.
Justice M.M. Sathaye, by a common judgment dated 5 August 2026 in Writ Petition Nos. 542 of 2011 and 544 of 2011, confirmed the orders of the Chief Controlling Revenue Authority, Maharashtra, which had rejected the developer’s appeals against the Collector of Stamps, Borivali. The Collector had adjudicated the documents and demanded stamp duty of ₹5,11,300 and ₹11,39,400 respectively, along with 2% penalty.
The agreements, dated 27 March 1987 and 20 August 1987, were executed by Bombay Veerashaiva Co-operative Housing Society Limited in favour of Kamla Developers for development of plots at Chincholi Bundar Road, Malad (West), Mumbai. Under the pacts, the developer was required to construct residential flats and shops. Approximately 60% of the built-up area (about 9,800 sq.ft.) was to be handed over to the society members, while the remaining 40% (consuming roughly 6,535 sq.ft. FSI) was to be retained by the developer for sale to third-party purchasers of its choice.
The original agreements were reported lost during the 2005 Mumbai monsoon deluge. Photocopies, along with a police complaint, were presented for adjudication in September 2008. The Collector of Stamps treated the documents as conveyances and raised the demand. The developer’s appeals were dismissed by the Chief Controlling Revenue Authority in December 2010, prompting the present writ petitions. The High Court had earlier admitted the petitions and stayed the impugned orders on condition of deposit of the differential stamp duty.
Kamla Developers argued that the documents were pure construction contracts and not conveyances. It contended that mere inventory share of 40% could not be treated as a transfer of title, that the developer acted only as an agent, and that there was no absolute present transfer of property. The developer further submitted that Article 5(g-a) of the Bombay Stamp Act, introduced with effect from 7 February 1990, could not apply to agreements of 1987. Reliance was placed on several decisions, including Prabha Laxman Ghate, Vaidehi Akash Housing, Suhas Damodar Sathe, Chief Controlling Revenue Authority v. Reliance Industries, and Adityaraj Builders.
The State supported the revenue authorities’ view, submitting that the overall reading of the agreements showed that the developer received full control over 40% of the construction with the right to sell it for any consideration it deemed fit. It was argued that substance must prevail over form and that the documents clearly created rights and interest amounting to a conveyance under Sections 2(g) and 2(l) of the Bombay Stamp Act, read with Explanation-I to Article 25.
The High Court rejected the developer’s contentions. It noted that the revenue authority itself had not applied Article 5(g-a) because the agreements pre-dated its introduction; hence that argument did not survive. The Court held that the documents were correctly treated under Article 5(h) read with Explanation-I to Article 25 (the explanation having come into force in December 1985).
Examining the operative clauses, the Court observed that the developer was not only authorised to construct but was also given the authority to sell the 40% component “on such consideration as the developer deems fit.” This created definite rights and interest capable of specific performance. The monetary terms further reinforced the character of a conveyance: the society was to pay the developer construction cost at ₹170 per sq.ft. for the 60% portion, while the developer agreed to pay the society ₹65 per sq.ft. for the right to exploit the remaining 40%. The Court held that this “monetary give and take,” coupled with transfer of possession, showed that the society had parted with control over 40% of the development and that the developer stood in the shoes of an owner to that extent.
The Court distinguished the precedents cited by the developer. The observations in Vaidehi Akash arose in a contractual dispute involving termination of an agreement and a second developer; they could not control the characterisation of a document for stamp duty purposes, especially when the present agreements had not been terminated. Applying the tests laid down in Suhas Damodar Sathe, the Court found that the society had lost control over the 40% portion because the developer received the independent right to alienate it and collect consideration. Other decisions relied upon were held to be distinguishable on facts.
The Court also rejected the argument that the requirement for 40% purchasers to become members of the same society indicated lack of control by the developer. It described the clause as a safeguard for the society and irrelevant to the stamp duty question.
Holding that no perversity was made out in the impugned orders and that the view taken by the revenue authorities was a probable one based on the material on record, the High Court dismissed both writ petitions and discharged the rule. No order as to costs was made.
In light of the dismissal, the Court directed the Registry to release the amount deposited by the petitioner, along with accrued interest, to the District Collector of Stamps, Borivali. The amount is to be adjusted towards the dues under the adjudication orders. Considering that the deposit was made under the Court’s interim order, the authorities were directed not to charge separate interest from the date of the deposit.
The judgment reaffirms that development agreements under which a co-operative society hands over land, pays construction cost for its share, and grants the developer independent rights to construct and sell the remaining portion for its own consideration can be treated as conveyances for stamp duty purposes, even if executed before the introduction of specific provisions relating to development agreements and even if titled merely as “agreements.”
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