The Bombay High Court has quashed the order issued by the Maharashtra’s Inspector General of Registration & Controller of Stamps asking the engineering major L&T to pay additional stamp duty of Rs 64.69 crore for its development agreement inked with City and Industrial Development Corporation (Cidco) to implement development of integrated complex at Seawoods railway station in Navi Mumbai.
The high court has upheld L&T’s argument that under the development agreement no interest in land was transferred and it does not create a lease nor was intended to create any interest in the land or demise it in their favour. The court on L&T petition also ruled that it was only for the limited purpose of construction and development of the land that the agreement has been entered into.
Justice S C Dharmadhikari also said the right to create sublease, concession, licence of the commercial facilities developed in the air space or any part thereof, can only be upon execution of the lease deed. The right to sell the commercial facilities can only accrue on executing the lease deed with Cidco.
L&T official confirmed the high court order terming it as landmark one. A senior state government official told Business Standard “The state government, which was respondent number 1, will file an appeal before a division bench challenging the single bench order.”
L&T’s bid was accepted by Cidco on March 19, 2008 for the development of Seawoods project and the plot was subsequently allotted for the former. L&T and Cidco entered into a Development Agreement on April 21, 2008. After joint district registrar determined the market value of the properties to Rs 1800 crore it asked L&T to pay stamp duty of Rs 18.53 crore at the rate of 1 per cent under the provisions of Bombay Stamp Act. L&T had paid Rs 18.44 crore on April 16, 2008 and paid the balance Rs 9.50 lakh on May 15, 2008. Furthermore, L&T had made a payment of Rs 759 crore to Cidco and expended in excess of Rs 150 crore towards the development works being carried out at the project.
However, the joint district registrar in the adjudication case treated the development agreement between L&T and Cidco as agreement to lease and not as a development agreement. L&T argued that the development agreement was subject o large number of conditions precedent, reciprocal obligations and receipt of various approvals and provisions, which may or may not happen to fructify it leading to demise and execution of lease.
Therefore, until the demise and execution of lease the development agreement remains a development agreement. The joint district registrar overruled L&T argument and issued order on July 16, 2011 asking L&T to pay additional Rs 64.69 crore towards stamp duty. Subsequently, Inspector General of Registration & Controller of Stamps issued the order in this regard to L&T.
Moreover, L&T also brought to the court’s notice that the development agreement did not attract payment of stamp duty under article 36 of schedule I of the Bombay Stamp Act.
