'State Cannot Unjustly Enrich Itself At Citizens' Cost': Bombay HC

Observing that  the State cannot unjustly enrich itself at the expense of its citizens, the Bombay High Court has ordered the refund of Rs60 lakh in stamp duty paid by a company for a failed property transaction. The Court’s judgment underscores the principle that when a transaction fails through no fault of the taxpayer, the state must ensure fairness and not benefit from the situation.

Company Paid Rs60 Lakh in Stamp Duty

The HC passed the order while hearing a petition by Qwick Supply Chain Pvt Ltd against the Chief Controlling Revenue Authority. The company had paid stamp duty of Rs17.5 lakh and Rs42.5 lakh in 2010 for two Deeds of Transfer, which were executed for the purchase of a flat and a plot in Mumbai’s Ashok Nagar Co-operative Housing Society in Vile Parle.

However, due to disputes between the parties, the transaction failed to materialise, no consideration was paid, and possession of the properties never changed hands.

Revenue Authority Rejected Refund Plea

After the transaction collapsed, the petitioner applied for a refund of the stamp duty. However, the revenue authority rejected the request, citing the absence of a formal Deed of Cancellation, as required under Section 52A(2) of the Maharashtra Stamp Act, 1958. Despite the failure of the transaction, the revenue authority  insisted on this technical formality, which the petitioner could not fulfill due to non-cooperation from the transferors.

The petitioner then appealed the decision, but the revenue authority dismissed the appeal, claiming that the order was administratively barred by Section 52A(3) of the Act. The petitioner then approached the high court. 

Affidavits and Indemnity Bond Held Sufficient

Justice Milind Jadhav criticized the revenue authority  for taking an overly “technical view” of the case and noted that the petitioner had provided all necessary documentation, including affidavits from the company’s directors and an indemnity bond in place of the formal Deed of Cancellation. The court held that these were sufficient to safeguard the interests of the State.

“State cannot unjustly enrich itself at the cost of its citizens. Failure of the transaction, once shown and proven in this case, entitled the petitioner to a refund of stamp duty paid once the transfer failed,” the court added. 

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The court also remarked that the insistence on a Deed of Cancellation in this case was a mere formality, especially when the failure of the transaction was not disputed. The court further highlighted that the state must act fairly and not exploit technicalities when a citizen’s claim is just.

HC Quashes Revenue Authority’s Orders

The HC quashed the previous orders of the revenue authority and directed the refund of Rs60 lakh in stamp duty, along with 4% annual interest, within four weeks.