INTRODUCTION
Parties to an agreement are required to pay stamp duty in accordance with the relevant stamp law. Unstamped agreements are not admissible in evidence[1]. In commercial transactions especially concerning real estate, the amount of stamp duty is considerable. Often when these transactions take the litigation route, questions on adequate stamping of the agreement are raised. To avoid challenge to the admissibility of the agreement, parties are cautious to pay stamp duty, but what happens to such heavy payment of stamp duty once the litigation is over?
Parties often ponder if they are entitled to a refund of the stamp duty if the transaction fails or is set aside by a court of law or if otherwise the parties are keen to reverse the transaction. It is this interesting aspect which was dealt with by the Hon’ble Supreme Court of India (“Supreme Court”) in the case of Rajeev Nohwar vs. Chief Controlling Revenue Authority Maharashtra State, Pune and Others[2]. The Supreme Court exercised its powers under Article 142 of the Constitution of India, 1950 (“Constitution”) and permitted refund of stamp duty to the Appellant, Rajeev Nohwar even though the application for refund of stamp duty was made after the statutory period of 6 months.
FACTS
The Appellant had booked a residential flat in Pune, Maharashtra, India in a township project for a consideration of Rs. 1,68,88,095/-. In accordance with the prevailing law, the Appellant had also paid stamp duty for an amount of Rs. 8,44,500/-. However, eventually disputes arose between the Appellant and the developer.
In view of the disputes that arose, the Appellant approached the National Consumer Dispute Redressal Commission (“NCDRC”) by filing a consumer complaint. The NCDRC by its order dated 6 May 2016 allowed the complaint filed by the Appellant. It also gave the Appellant the option to execute the final agreement with the developer, in which case the developer was to pay compensation of INR 10,00,000/- to the Appellant or as an alternative, the Appellant could seek a refund of the entire consideration paid by him alongwith interest at the rate of 12% per annum. The Appellant preferred the second option of seeking a refund of the consideration paid with interest.
After receiving the refund from the developer, the Appellant applied for refund of stamp duty. The application for refund was refused by the Deputy Inspector General of Registration on the basis that the refund was not applied within the statutorily provided time of 6 months under Section 48[3] of the Maharashtra Stamp Act, 1958 (“Act”).
Even the appeal to the Chief Controlling Revenue Authority under section 53(1A) of the Act was rejected on the same ground. The matter was carried further in writ proceedings before the Hon’ble Bombay High Court where again the decision of the revenue authorities was upheld. An appeal was filed before the Supreme Court against the decision of the Hon’ble Bombay High Court.
ARGUMENTS OF THE PARTIES
It was contended on behalf of the Appellant that the timelines provided in Section 48 of the Maharashtra Stamp Act and particularly sub-section (3) thereof will not apply since the case of the Appellant would not fall under Section 47[4] of the Act. It was argued that instead the provisions of Section 52A[5] should apply.
On behalf of the Respondent, it was contended that since the application for refund of stamp duty was specifically filed by the Appellant under Section 47, the provisions of Section 48 will necessarily apply, and the revenue authorities were therefore justified in rejecting the application for refund of stamp duty as being time barred under Section 48 of the Act.
SUPREME COURT’S DECISION
The Supreme Court held that the case of the Appellant would not fall under Section 47 of the Act. It further highlighted the specific cases when an application for refund of stamp duty can be said to be within the parameters of Section 47 such as when the impressed stamp is unfit for use or is otherwise spoiled or obliterated.
It also held that the provisions of Section 48 which deal with the timeline of 6 months for making an application for allowance, only applies when Section 47 applies and since in this case Section 47 does not apply, given its specific nature, the timelines provided under Section 48 will not apply.
The Supreme Court even analysed if the case of the Appellant could be set under Section 52[6] of the Act. It was held that even Section 52 would be of no assistance to the Appellant since the said provision itself contained a pre-requisite timeline of 6 months for the cases falling within its ambit. As per the Supreme Court this would mean that when the application for refund is to be made under Section 52, then either there is a permanent abandonment of the purpose (i.e., the contemplated transaction has been abandoned) or there is a contemplated delay of more than 6 months in the execution of the transaction, which would therefore make the party ask for an allowance under Section 52.
As per the Supreme Court, in the present case the stamp paper was purchased bona fide in the view of the agreement to sell. The dispute with the developer led to the institution of the proceedings before the NCDRC. There was no unreasonable delay on the part of the Appellant in awaiting the outcome of proceedings. The Appellant applied within two months from the order of NCDRC for the grant of refund. The conduct of the Appellant was not unreasonable nor was there any delay on the part of Appellant in applying for refund of stamp duty. Accordingly, the Supreme Court exercised its powers under Article 142 of the Constitution allowing the appeal and directed refund of the stamp duty alongwith interest at the rate pf 6% per annum.
PRACTICAL IMPLICATIONS
This decision is in aid of those litigants who after several anxious litigation years, would be keen for a refund of the stamp duty if the agreement is cancelled or the transaction is reversed. If the parties outside of litigation want refund of stamp duty, an application for refund of stamp duty
will have to be made in the normal course within a period of 6 months as provided under Section 48 of the Act.
A question remains if in similar situations such as this decision, the High Courts under Article 226 of the Constitution, can also exercise powers permitting parties to get refund of stamp duty when the statutory time limits have expired due to pending litigation. This is because in this decision of Rajeev Nohwar, the Supreme Court has exercised its powers under Article 142 of the Constitution which permits it to pass any decree or order to do complete justice whereas the same power is lacking with the High Courts[7].
Moreover, the Supreme Court has also held in the past[8] that the decisions passed in exercise of powers under Article 142 are not binding as they are passed purely to do justice and in accordance with equity and they do not otherwise constitute a binding precedent unlike Article 141.
This decision would therefore have to be tested in time to see if on the principles of ratio decidendi, the High Courts grant reliefs for refund of stamp duty, or the revenue authorities follow the decision for its principle.
- Jaideep Singh Khattar, Partner and Bhakti Joshi, Trainee
- The firm can be reached at connect@thefortcircle.com
|DISCLAIMER|
The information shared in this article is purely for information and is not intended to be a substitute for professional legal advice.
[1] See Section 34 of Maharashtra Stamp Act and Section 35 of Indian Stamp Act, 1899
[2] Civil Appeal no. 5970 of 2021 decided on 24 September 2021
[3] Section 48 provides for the timelines within which the application under Section 47 of the Maharashtra Stamp Act, 1958 is to be made.
[4] Section 47 provides for several circumstances under which allowance can be made by the Collector for impressed stamps, including where they are spoiled, obliterated or otherwise rendered unfit for the purpose intended.
[5] Section 52A provides for the pecuniary jurisdiction of the stamp authorities while dealing with the applications for allowance of stamp duty.
[6] Section 52 deals with permitting allowance for stamps, for which ‘there is no immediate use’ as opposed to Section 47 which provides for allowance where the impressed stamps are spoiled, obliterated, or otherwise rendered unfit.