In commercial real estate transactions, parties often seek lease renewal options to ensure stability. However, the Maharashtra Stamp Act, 1958, under Article 36 of Schedule I, mandates that renewal periods be included in the lease term for stamp duty calculation. For instance, a 10-year lease with a 10-year renewal clause is treated as a 20-year lease for stamp duty purposes, potentially imposing significant financial burdens on the parties involved.

Recently, in National Insurance Company Ltd. v. Deputy Inspector General of Registration and Deputy Controller of Stamps, Nagpur and others,^[1] National Insurance Company Ltd. challenged a directive from the Deputy Controller of Stamps, Nagpur, which required payment of deficit stamp duty based on the lease’s renewal clause. The Bombay High Court quashed the Controller’s Order, ruling that the renewal clause granted discretionary authority to both the lessor and lessee. This discretion distinguishes it from an automatic extension, asserting that renewal clauses should not extend to the total lease term for stamp duty calculations.

The High Court’s decision provides essential clarity, benefiting pending disputes on this issue and ensuring certainty in stamp duty calculations for lease transactions involving renewal clauses.

[1] National Insurance Company Ltd., through its Regional Manager v. Deputy Inspector General of Registration and Deputy Controller of Stamps, Nagpur and others, Writ Petition No. 5184 of 2022.