Supreme Court awards interest on delayed stamp duty refund: Dr. Poornima Advani vs. Government of NCT (2025)

Introduction

Date of the Judgment: February 18, 2025

Citation: 2025 INSC 262

Judges: Justices J.B. Pardiwala and R. Mahadevan

When a person is deprived of the use of money to which he is legitimately entitled, can he be compensated for the deprivation? The Supreme Court in Dr. Poornima Advani & Anr. vs. Government of NCT & Anr. addressed the issue of whether interest should be granted on a refunded amount of erroneously paid stamp duty. The Court considered the right to compensation for deprivation of legitimately entitled money. Justices J.B. Pardiwala and R. Mahadevan delivered the judgment.

Case Background

Dr. Poornima Advani and her spouse intended to purchase a property in New Delhi. They bought an e-stamp paper for ₹28,10,000 on July 6, 2016, paying from their joint bank account.

Pertinently, the e-stamp paper dated 06.07.2016 purchased by the petitioners, sets down the following details:

• Particulars of the property, which was proposed to be purchased;
• The names of the parties, who intended to execute the sale deed;
• The consideration to be paid for consummating the sale transaction;
• The value of e-stamp paper.

The sale deed execution was delayed due to loan transaction delays. On August 4, 2016, the broker informed them that the e-stamp paper was misplaced. A complaint was filed with the Delhi Police Crime Branch on the same day, and public notices were issued in newspapers on August 6, 2016.

To proceed with the sale, they purchased a fresh e-stamp paper on August 6, 2016, with the number IN-DL80452882772240, also paid from their joint account. Consequently, the sale deed was executed on August 8, 2016.

On August 11, 2016, they applied to the Sub-Divisional Magistrate for a refund of ₹28,10,000, citing the loss of the original e-stamp paper. They requested a refund after deducting cancellation charges and submitted an affidavit and indemnity bond.

After no action was taken, a letter was addressed to respondent No. 2 on September 8, 2016, highlighting that the transaction’s electronic nature allowed for easy verification and that the lost e-stamp paper could not be misused. However, the Collector of Stamps (HQ) rejected the refund application on October 21, 2018.

Timeline

Course of Proceedings

Aggrieved by the order dated 21.10.2016, the petitioners preferred a writ petition. The learned Single Judge partly allowed the writ petition and issued a writ of mandamus to refund ₹28,10,000 within two weeks. The petition was partly allowed as only the principal amount was ordered to be refunded, while the interest on the same was declined.

Dissatisfied with the non-grant of interest, the appellants preferred a Letters Patent Appeal. The appeal court dismissed the Letters Patent Appeal, stating that the issue of interest was raised for the first time in appeal.

Legal Framework

The legal framework considered by the court included:

• Article 14 of the Constitution: Deals with equality before the law.
• Article 265 of the Constitution: States that no tax shall be levied or collected except by authority of law.
• Section 34 of the Civil Procedure Code: Deals with interest.
• Section 49(a) of the Act: Deals with allowances for spoiled stamps.

Arguments

Appellants’ Arguments:

• The appellants contended that they are entitled to claim interest on the refunded amount of ₹28,10,000.
• They argued that when a person is deprived of the use of his money to which he is legitimately entitled, he has a right to be compensated for the deprivation, which may be called interest or compensation.
• The appellants relied on the concept of awarding interest on delayed payment, as explained in Authorised Officer Karnataka Bank vs. M/s R.M.S. Granites Pvt. Ltd. & Ors.

Respondents’ Arguments:

• The respondents submitted that there is no provision in the statute for the payment of interest on the refund of the amount of the e-stamp paper that was lost by the appellants.

Issues Framed by the Supreme Court

1. Whether in the facts and circumstances of the case, the appellants herein are entitled to claim interest on the refunded amount of Rs.28,10,000/- referred to above.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The court considered the following authorities:

Judgment

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

How each authority was viewed by the Court?

• Authorised Officer Karnataka Bank vs. M/s R.M.S. Granites Pvt. Ltd. & Ors.: The court relied on this case to explain the concept of awarding interest on delayed payment, emphasizing that interest is not a penalty but a normal accretion on capital.
• Secretary, Irrigation Department, Government of Orissa vs. G.C. Roy: The court referred to this Constitution Bench judgment, which opined that a person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation.
• Riches vs. Westminister Bank Ltd.: The court cited this case to explain that interest is a payment which becomes due because the creditor has not had his money at the due date.
• Commissioner of Income Tax vs. Dr. Sham Lal Narula: The court articulated the concept of interest, explaining that it is the return or compensation for the use or retention by one person of a sum of money belonging to or owed to another.
• Hello Minerals Water (P) Ltd. vs. Union of India: The court explained the concept of interest, stating that interest is the normal accretion on capital and not a penalty or punishment.
• Hari Chand vs. State of U.P.: The court held that the payment of interest is a necessary corollary to the retention of the money to be returned under the order of the appellate or revisional authority.
• O.N.G.C. Ltd. vs. Commissioner of Customs Mumbai: The court explained the principles of restitution, noting that the appellant is entitled to interest on the amount deposited on application of the principle of restitution.
• Union of India through Director of Income Tax vs. Tata Chemicals Ltd.: The court held that when the collection is illegal, the Revenue is obliged to refund such amount with interest as money so deposited was retained and enjoyed by it.

What weighed in the mind of the Court?

The sentiment analysis of the reasons given by the Supreme Court indicates that the following factors weighed heavily in the Court’s decision:

Fact:Law Ratio

Key Takeaways

• If a person is deprived of the use of money to which he is legitimately entitled, he has a right to be compensated for the deprivation.
• Interest is the normal accretion on capital, and its payment is a necessary corollary to the retention of money to be returned.
• The principle of restitution applies when a person has been deprived of money due to an incorrect order or decree.

Directions

The respondents were directed to pay an amount of ₹4,35,968 towards interest within two months from the date of the judgment.

Development of Law

The ratio decidendi of the case is that a person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, and interest is a normal accretion on capital.

Conclusion

The Supreme Court allowed the appeal, holding that the appellants were entitled to interest on the refunded amount of stamp duty. The Court emphasized the principle of restitution and the right to compensation for the deprivation of legitimately entitled money.