Proven Failure Of Transaction Entitles Applicant To Refund Of Stamp Duty Paid; State Can’t Unjustly Enrich Itself At Cost Of Citizens: Bombay High Court

The High Court was considering two petitions challenging the orders passed by the Chief Controlling Revenue Authority whereby two Applications filed by Petitioners under Section 47(c)(5) of the Maharashtra Stamp Act, 1958, seeking a refund of Stamp Duty came to be rejected.

Highlighting that the Petitioners had already suffered the non-fructification of their transactions, the Single Bench of Justice Milind N. Jadhav stated, “State cannot unjustly enrich itself at the cost of its citizens. Failure of the transaction once shown and proven in this case entitles the Applications / Petitioners to refund of stamp duty paid once the transfer fails. Here is a case wherein the Vendors are reluctant to execute the Deed of Cancellation. In the alternate the necessary documentation i.e. personal Affidavits of Directors of the Company alongwith Indemnity Bond having been filed are adequate substitutes in such circumstances filed the Petitioners. Petitioners have acted bonafidely. Case of Petitioners is a just once wherein they have bonafidely paid the stamp duty with the prospect and hope of fructifying the Transaction, but it did not go through and got shelved. Stamp duty amount is paid for registration of the Conveyance / Sale Deed.”

Advocate Vikramaditya Deshmukh represented the Petitioner, while AGP Aloka Nadkarni represented the Respondent.

Factual Background

The incident dates back to the year 2010, when the Petitioner Company, formerly known as New Empire Millennium Investments and Trading Pvt. Ltd., as Purchaser proposed to enter into a Deed of Transfer with the Vendors / Transferors for the transfer of a flat in Ashok Nagar Co-operative Housing Society for a total consideration of Rs 3,50,00,000. In another transaction, the Company as Purchasers entered into a second Deed of Transfer with the same Vendors in respect of 45% undivided share in the leasehold rights in another Plot. Both aforesaid Deeds of Transfer were undated, though duly signed by parties. The Company paid Stamp Duty of Rs 17,50,000 and Rs 42,50,000 respectively on the above two Deeds of Transfer. However, owing to disputes and differences between parties, transfers did not fructify, and both unregistered Deeds of Transfer failed their intended purpose.

The Company filed two Applications for a refund of Stamp Duty. In the interregnum, the National Company Law Tribunal, the Petitioner company, stood amalgamated into Reliance Petro Distribution Pvt. Ltd and later into Fine Tech Corporation Pvt. Ltd. The Company’s Applications for refund were rejected on the ground that it had failed to furnish a duly executed Deed of Cancellation. The appeals were also dismissed, leading to the filing of the instant petition.

Reasoning

The Bench noted that both the proposed Deeds of Transfer, though executed by parties, were undated and unregistered, no consideration was paid by the Company to the proposed Vendors, and possession of the properties remained with the Vendors. The Bench found that the transactions never fructified and failed at inception.

Reference was made to an Affidavitcum-Indemnity Bond, which recorded that a Deed of Cancellation could not be executed due to the non-cooperation of the Vendors. “Hence, in my opinion, these documents sufficiently safeguarded the revenue and served the very same purpose as a formal Deed of Cancellation. The Petitioners cannot be put to loss and the State cannot unjustly enrich itself for no fault of the Petitioners”, the Bench said.

Considering that the sole reason assigned by the Authority was the absence of the Cancellation Deed, the Bench stated that such insistence amounts to a hypertechnical view by the Authority. “Section 47(c)(5) of the said Act is enacted to prevent unjust enrichment of the State when a transaction fails at inception”, it added.

The Bench further stated, “The reasons for non-fructification of Transfers are not doubted. It is an admitted position. Certain disputes and issues occurred between parties due to which it was not possible for the Transfers to be fructified between parties. There is nothing untoward observed in the conduct of the Petitioners in making the Applications for refund of Stamp duty thereafter. State cannot insist on Deed of Cancellation especially due to Vendor's reluctance.”

Considering that the Conveyance Deed was never lodged for registration and the Petitioners were not lax in their approach towards seeking refund of stamp duty amount, the Bench ordered, “In view of the above observations and findings, Respondents are directed to refund the Stamp Duty amount of Rs.17,50,000/- and Rs.42,50,000/- to the Petitioners alongwith simple interest at the rate of 4% from the date of Application for refund within a period of 4 weeks from today.”

Cause Title: Qwik Supply Chain Pvt Ltd v. Chief Controlling Revenue Authority (Neutral Citation: 2025:BHC-AS:36924-DB)

Appearance

Petitioner: Advocates Vikramaditya Deshmukh, Ketan Dave, Gaurav Gangal, A.S. Dayal & Associates

Respondent: AGP Aloka Nadkarni

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