SRI. T.V. RAMANATHA SHETTY v. M/s. SHEKAR BUILDERS AND DEVELOPERS

#2. SRI. G.E. DORESWAMY GOWDA S/O HIRIYAPPA GOWDA AGED ABOUT 58 YEARS

#3. SMT. R. KAVITHA W/O G E DORESWAMY GOWDA AGED ABOUT 51 YEARS BOTH ARE R/A NO.1847, 2ND FLOOR 6TH CROSS, 8TH MAIN ROAD 2ND STAGE, J P NAGARA BANGALORE-560 078. (BY SRI. PRAKASH M S.,ADVOCATE FOR R1 NOTICE TO R2 AND R3 IS DISPENSED WITH) …RESPONDENTS THIS WRIT PETITION IS FILED UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO CALL FOR THE RECORDS AND SET ASIDE THE IMPUGNED ORDER DATED 19TH JUNE 2023 PASSED BY THE XXIV A AND SJ BANGALORE IN OS NO. 461/2015 VIDE ANNEXURE-A. TO DIRECT THE R-1 TO PAY THE REQUIRED STAMP DUTY ON MOU AND ETC. THIS PETITION COMING ON FOR ORDERS, THIS DAY ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE R. NATARAJ ORAL ORDER The defendant Nos.1 and 2 in O.S No.461/2015 on the file of Prl. City Civil and Sessions Judge, Bangalore have filed this petition challenging an order dated 19.06.2023, by which the Court held that the memorandum of understanding for joint development agreement dated 20.01.2012 cannot be impounded for collection of duty and penalty. - 3 - NC: 2024:KHC:43724 WP No. 21072 of 2023

#2. The suit in O.S No.461/2015 was filed for recovery of sum of Rs.75,00,000/- along with interest at 18% p.a. The relief was based on a memorandum of understanding dated

20.01.2012. The defendants contested the suit and denied their liability. When the suit was set down for evidence, the plaintiff submitted the memorandum of understanding for marking. The defendants opposed the marking of said document on the ground that it was not sufficiently stamped. The plaintiff submitted that he was ready to pay the deficit stamp on the memorandum of understanding. The Trial Court, in terms of the impugned order held that, the memorandum of understanding cannot be impounded as it contemplated the execution of another contract and did not create any interest in any immovable property. Being aggrieved by the said order, the defendants are before this Court.

#3. Learned counsel for the defendants submitted that a perusal of memorandum of understanding shows that the defendants had entered into memorandum of understanding with the plaintiff and that plaintiff had allegedly paid a sum of Rs.75,00,000/- under the said memorandum of understanding. Therefore, he contends that a reading of terms of - 4 - NC: 2024:KHC:43724 WP No. 21072 of 2023 memorandum of understanding indicates that it was an agreement between the plaintiff and the defendants regarding development of land and therefore, duty as prescribed had to be paid on the memorandum of understanding. He contends that even if a document is marked, the Court does not loose jurisdiction to collect duty and penalty payable and forward it to the concerned officer to adjudicate Under Section 37 of the Karnataka Stamp Act, 1957. He contends that there is no escape for the Court from this. In support of her contention, she relied upon the judgment of Apex Court in the case of M/s. N. N. Global Mercantile Private Limited Vs. M/s. Indo Unique Flame Limited and others [(2021) 4 SCC 379].

#4. Per contra, the learned counsel for the plaintiff contended that memorandum of understanding did not create any interest in any property but was in anticipation of execution of a joint development agreement. He therefore, contends that the agreement did not create any interest in any immovable property and hence, no stamp duty was payable and that the duty paid on the document is just and sufficient. - 5 - NC: 2024:KHC:43724 WP No. 21072 of 2023

#5. I have considered the submission made by the learned counsel for the plaintiff and learned counsel for the defendants.

#6. The memorandum of understanding refers to the land bearing survey No.10/2 which belonged to Sri Venkataswamy Reddy. The children of Sri Venkataswamy Reddy had executed a sale deed dated 05.05.2003 in favour of Sri Ramanath Shetty, in respect of site bearing No.6 measuring 2018 sq.ft. They also conveyed another site to Sri M L Prakash Gupta. Thereafter, they conveyed an area measuring 3,484 sq.ft to Sri Ramanath Shetty. Similarly, they executed another sale deed dated 20.04.2004 in favour of Sri D Varadaraju, Sri M P Shamala and Sri T R Navarathna. It also discloses that the defendants were the owners of 16,500 sq.ft of land of survey No.10/2. It shows that defendants were introduced to one Sri Doreswamy Gowda and his wife, who expressed interest to develop property by settling the disputes pending before various Courts. Accordingly, they collected a sum of Rs.75,00,000/-, which had to be deducted from out of the money payable by the plaintiff in favour of defendants, after joint development agreement was executed. The - 6 - NC: 2024:KHC:43724 WP No. 21072 of 2023 memorandum of understanding provided that the plaintiff shall pay sum of Rs.2,00,00,0000/- to one Sri Chettiyappa Shetty and a sum of Rs.1,00,00,000/- to one Sri Hanumantha Reddy and his brother. The amount of Rs.75,00,000/-, which was the subject matter of the suit was the one purportedly paid by the plaintiff to Sri Doreswamy Gowda at the behest of the defendants. Therefore, the above facts make it clear that, the memorandum of understanding was not an agreement to sell any property. Nonetheless, stamp duty of 0.1% on the consideration is payable on a memorandum of understanding under Article 5(c)(ii) of Stamp Act, 1957. In the instant case, the memorandum of understanding related to payment of Rs.3,00,00,000/-. Therefore, the plaintiff was bound to pay stamp duty at 0.1%. In view of the law declared by the Hon'ble Division Bench of this Court in the case of Digambar Warthy Vs. District Registrar [ILR 2013 Karnataka 2099], the plaintiff was bound to pay duty of 0.1% of Rs.3,00,00,000/- and ten times of duty as penalty. After the duty and penalty was collected, the Trial Court was bound to forward the amount so collected to the concerned officer under Section 37 of the Karnataka Stamp Act, 1957. The contentions of the learned - 7 - NC: 2024:KHC:43724 WP No. 21072 of 2023 counsel for the plaintiff that the documents once marked, cannot be looked into for the purpose of collecting deficit stamp duty is well considered by the judgment of the Apex Court in the case of M/s. N. N. Global (Supra), where the Apex Court held that the benefit of Section 35 of the Act is available only when the Court had applied its mind to the documents produced before it, to ascertain whether the proper stamp duty was paid or not. In the case on hand, the Court merely marked the document without considering the question whether the proper stamp duty was paid. Therefore, the contention of learned counsel for the plaintiff, is not acceptable. Even otherwise, as held by the Apex Court in the case of M/s. N N Global (supra), if the plaintiff desires to act upon the memorandum of understanding, the said document has to suffer the stamp duty as prescribed in law. This is also the judgment of the Co-ordinate Bench of this Court in the case of Krishna Vs Sanjeev [ILR 2003 KAR 3716]. In that view of the matter, the Court was bound to collect the stamp duty even if, the document was marked. The impugned order therefore suffers from non application of mind and fails to address - 8 - NC: 2024:KHC:43724 WP No. 21072 of 2023 the question of law. In that view of the matter, the impugned order warrants interference.

#7. Hence, the writ petition is disposed off. The impugned order is set-aside. The plaintiff is directed to pay duty of 0.1% on sum of Rs.3,00,00,000/- and penalty of ten times the duty. After the amount is paid, the Trial Court shall forward the duty and penalty to the concerned District Registrar, who shall determine the amount of penalty payable on the document. Sd/- (R. NATARAJ) JUDGE THM List No.: 1 Sl No.: 14