Supreme Court allows Stamp Duty Refund despite Technicalities: Bano Saiyed Parwaz vs. Chief Controlling Revenue Authority (2024)

Date of the Judgment: 17 May 2024

Citation: 2024 INSC 443

Judges: B.R. Gavai, J., Prashant Kumar Mishra, J.

Can a person be denied a refund of stamp duty paid on a property transaction that failed due to fraud, merely on technical grounds? The Supreme Court of India recently addressed this question in a case where a purchaser was defrauded by a vendor after paying stamp duty for a conveyance deed that was never registered. The bench, comprising Justices B.R. Gavai and Prashant Kumar Mishra, delivered the judgment, with Justice Prashant Kumar Mishra authoring the opinion.

Case Background

The appellant, Bano Saiyed Parwaz, agreed to purchase a property in Mumbai from Mohammed Hanif Ahmed Fitwala. A conveyance deed was prepared, and on May 7, 2014, it was sent for adjudication to the Chief Controlling Revenue Authority. The stamp duty assessed was ₹25,34,350, which the appellant paid on May 13, 2014. However, the conveyance deed was not registered because the vendor had fraudulently sold the property to a third party in 1992. Although the appellant had issued a public notice, no objections were raised at the time. Upon discovering the fraud, the appellant tried to contact the vendor, but he was unavailable, leading to a police complaint. The vendor eventually executed a cancellation deed on November 13, 2014. The appellant had already applied online for a refund of the stamp duty on October 22, 2014, and filed a written application with supporting documents on December 6, 2014.

Timeline

Course of Proceedings

The appellant’s claim for a refund was rejected by the respondent authorities on the ground that the application was filed beyond the limitation period specified in Section 48 of the Maharashtra Stamp Act, 1958. The High Court of Judicature at Bombay upheld this decision, leading the appellant to appeal to the Supreme Court.

Legal Framework

The appellant’s case is primarily based on Section 47(c) of the Maharashtra Stamp Act, 1958, which deals with circumstances for refund of stamp duty. Specifically, the appellant relied on:

• Section 47(c)(1): “the stamp used for an instrument executed by any party thereto which has been afterwards found by the party to be absolutely void in law from the beginning”
• Section 47(c)(5): “by reason of the refusal of any person to act under the same, or to advance any money intended to be thereby secured, or by the refusal or non-acceptance of any office thereby granted, totally fails of the intended purpose”

The appellant also referred to Rules 21 and 22A of the Bombay Stamp Rules, 1939:

• Rule 21: Deals with the procedure for claiming a refund, stating that the Collector may require oral deposition, oath, affirmation, or an affidavit and may call for evidence of witnesses.
• Rule 22A: Deals with the deduction from the amount of spoiled or misused or unused stamps, specifying the deduction of rupees ten for each stamp or printed form on stamped paper or amount equal to (ten per cent) of the value of such stamp or such printed form, whichever is more.

Section 48 of the Maharashtra Stamp Act, 1958, which is the limitation period for claiming refund, states that application for refund has to be made within six months of the date of the instrument.

Arguments

Appellant’s Submissions:

• The appellant argued that her case falls under Section 47(c)(1) and (5) of the Maharashtra Stamp Act, 1958, and Rules 21 and 22A of the Bombay Stamp Rules, 1939.
• She contended that the law of refund, as per Sections 47 and 48 of the Act and Rules 21 and 22A of the Rules, has two distinct stages: (i) making an application for refund within six months and (ii) holding an inquiry and leading evidence as per the Rules.
• The appellant submitted that her application was within time and should not have been rejected on the ground of limitation.
• The appellant argued that the High Court misconstrued the provisions of Sections 47 and 48 of the Act and overlooked Rules 21 and 22A of the Rules.

Respondents’ Submissions:

• The respondents argued that the cancellation deed was executed on November 13, 2014, which was beyond the six-month limitation period from the date of purchasing the stamp duty (May 13, 2014).
• They contended that the last date for applying for a refund was November 12, 2014, as per Section 48 of the Act, and therefore, the appellant’s application was beyond the limitation period.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court did not explicitly frame specific issues in a separate section. However, the core issue before the court was whether the appellant’s application for a refund of stamp duty could be rejected on the ground of limitation under Section 48 of the Maharashtra Stamp Act, 1958, when the conveyance deed was not executed due to fraud by the vendor.

Treatment of the Issue by the Court

The following table demonstrates how the Court dealt with the issue:

Authorities

The Supreme Court considered the following authorities:

Cases:

• Committee-GFIL v. Libra Buildtech Private Limited & Ors., (2015) 16 SCC 31, Supreme Court of India: The Court relied on this case, which held that the State should not rely on technicalities when dealing with citizens and that the expiry of the limitation period may bar the remedy but not the right.
• Firm Kaluram Sitaram v. Dominion of India, [1953 SCC OnLine Bom 39 : AIR 1954 Bom 50], High Court of Judicature at Bombay: The Court cited this case, where M.C. Chagla, C.J. observed that the State should not rely on technicalities when dealing with a citizen, and if the State is satisfied that the citizen’s case is just, it should act as an honest person.

Statutes:

• Section 47(c) of the Maharashtra Stamp Act, 1958: This section provides for refund of stamp duty in certain circumstances, including when an instrument is found to be void or fails of its intended purpose.
• Section 48 of the Maharashtra Stamp Act, 1958: This section specifies the limitation period for claiming a refund of stamp duty, which is six months from the date of the instrument.

Rules:

• Rule 21 of the Bombay Stamp Rules, 1939: This rule outlines the procedure for claiming a refund, allowing the Collector to require evidence.
• Rule 22A of the Bombay Stamp Rules, 1939: This rule deals with deductions from the amount of spoiled or misused stamps.

Authority Table

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Supreme Court followed Committee-GFIL v. Libra Buildtech Private Limited & Ors., (2015) 16 SCC 31*, holding that the State should not rely on technicalities when dealing with citizens.
• The Supreme Court cited Firm Kaluram Sitaram v. Dominion of India, [1953 SCC OnLine Bom 39 : AIR 1954 Bom 50]*, to reinforce the principle that the State should act as an honest person and not rely on technicalities.
• The Court used Section 47(c) of the Maharashtra Stamp Act, 1958, to determine that the appellant’s situation fell under the circumstances for refund.
• The Court considered Section 48 of the Maharashtra Stamp Act, 1958, but interpreted it to mean that the initial application for refund must be made within six months, not that all supporting documents must be submitted within that time.
• The Court considered Rule 21 of the Bombay Stamp Rules, 1939, to understand the procedure for claiming a refund.
• The Court considered Rule 22A of the Bombay Stamp Rules, 1939, regarding deductions for spoiled or misused stamps.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the principle that the State should not rely on technicalities when dealing with citizens, especially in cases where a citizen has been defrauded. The Court emphasized that the appellant was a bona fide purchaser who had paid the stamp duty but could not register the conveyance deed due to the vendor’s fraud. The Court also highlighted that the appellant had pursued her legal remedies diligently and had applied for a refund within the stipulated time frame. The Court further held that the limitation period under Section 48 of the Maharashtra Stamp Act, 1958, applied to the initial application for refund, not to the submission of all supporting documents.

Fact:Law Ratio

Logical Reasoning:

The Court considered alternative interpretations of Section 48 of the Maharashtra Stamp Act, 1958, but rejected the interpretation that all supporting documents, including the cancellation deed, must be submitted within six months. The Court reasoned that this interpretation would cause undue hardship to individuals who are victims of fraud and are diligently pursuing their legal remedies. The Court emphasized that the initial application for refund was made within the six-month period, and the inquiry process under Section 47 is separate. The final decision was reached by applying the principle that the State should not rely on technicalities when dealing with citizens, especially in cases of fraud.

The Supreme Court’s decision was based on the following reasons:

• The appellant was a bona fide purchaser who was defrauded by the vendor.
• The appellant had paid the stamp duty but could not register the conveyance deed due to the vendor’s fraud.
• The appellant applied for a refund online within six months of the date of the instrument.
• The inquiry process under Section 47 of the Maharashtra Stamp Act, 1958, is separate from the initial application.
• The State should not rely on technicalities when dealing with citizens, especially in cases of fraud.
• The principle that the expiry of the limitation period may bar the remedy but not the right.

“The legal position is thus settled in Libra Buildtech (supra) that when the State deals with a citizen it should not ordinarily rely on technicalities, even though such defences may be open to it.”

“We draw weight from the aforesaid judgment and are of the opinion that the case of the appellant is fit for refund of stamp duty in so far as it is settled law that the period of expiry of limitation prescribed under any law may bar the remedy but not the right.”

“the appellant is held entitled to claim the refund of stamp duty amount on the basis of the fact that the appellant has been pursuing her case as per remedies available to her in law and she should not be denied the said refund merely on technicalities as the case of the appellant is a just one wherein she had in bonafide paid the stamp duty for registration but fraud was played on her by the Vendor which led to the cancellation of the conveyance deed.”

There were no minority opinions in this judgment. Both judges on the bench agreed on the decision.

The Court’s reasoning was based on a combined analysis of the facts, the relevant provisions of the Maharashtra Stamp Act, 1958, and the legal principles established in previous cases. The Court applied the principle that the State should not rely on technicalities when dealing with citizens, especially when the citizen is a victim of fraud. The Court also interpreted the limitation period under Section 48 of the Act to apply to the initial application for refund, not to the submission of all supporting documents.

The decision has potential implications for future cases involving refunds of stamp duty. It clarifies that the limitation period under Section 48 of the Maharashtra Stamp Act, 1958, applies to the initial application for refund, not to the submission of all supporting documents. It also reinforces the principle that the State should act fairly and not rely on technicalities when dealing with citizens, especially in cases of fraud. This could lead to a more lenient approach in granting refunds of stamp duty in cases where the transaction fails due to no fault of the applicant.

The Court did not introduce any new doctrines or legal principles. Instead, it applied existing principles of fairness and justice to the specific facts of the case. The Court emphasized the importance of ensuring that citizens are not denied their rights due to technicalities, especially when they have been victims of fraud.

Key Takeaways

• The Supreme Court held that the State should not rely on technicalities when dealing with citizens, especially in cases of fraud.
• The limitation period under Section 48 of the Maharashtra Stamp Act, 1958, applies to the initial application for refund, not to the submission of all supporting documents.
• A person who has been defrauded and has paid stamp duty for a transaction that did not materialize is entitled to a refund, provided they apply within the limitation period.
• This judgment reinforces the principle that the expiry of the limitation period may bar the remedy but not the right.
• The decision may lead to a more lenient approach in granting refunds of stamp duty in cases where the transaction fails due to no fault of the applicant.

Directions

The Supreme Court directed the State to refund the stamp duty amount of ₹25,34,400/- deposited by the appellant.

Development of Law

The ratio decidendi of this case is that the State should not rely on technicalities to deny a refund of stamp duty to a bona fide purchaser who has been defrauded. The judgment clarifies that the limitation period under Section 48 of the Maharashtra Stamp Act, 1958, applies to the initial application for refund, not to the submission of all supporting documents. This is a reiteration of the principle that the expiry of the limitation period may bar the remedy but not the right. While not a new position of law, it reinforces the importance of fairness and justice in dealing with citizens, especially in cases of fraud.

Conclusion

The Supreme Court allowed the appeal, setting aside the High Court’s order and the orders of the respondent authorities. The Court directed the State to refund the stamp duty amount to the appellant, emphasizing that the State should not rely on technicalities to deny a refund to a bona fide purchaser who has been defrauded. This decision underscores the importance of fairness and justice in dealing with citizens, particularly in cases where they have been victims of fraud.