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Synopsis

The Supreme Court has said a measure of discretion or consideration for good faith conduct is not alien to statutory processes that safeguard citizens from unjust enrichment by the State, as it allowed a plea for refund of stamp duty, denied due to change in limitation period.

"Denying a legitimate refund solely on technical grounds of limitation, especially when the timing of registration fell close to the legislative amendment, fails to strike the equitable balance ordinarily expected in fiscal or quasi-judicial determinations," a bench of Justices Vikram Nath, Sanjay Karol and Sandeep Mehta said.

The court also emphasised the statutory authorities can't exercise powers not conferred under the law, even though the parties participated in such proceedings.

The appeal assailed the final judgment and order of April 18, 2024, rendered by the High Court of Judicature at Bombay, whereby the writ petition preferred by the appellants stood dismissed. The dispute concerned the rejection of the appellants’ claim for refund of stamp duty under the provisions of the Maharashtra Stamp Act, 1958.

Meanwhile, by an amendment of April 24, 2015 to Section 48(1) of the Act, the time limit for seeking a refund of stamp duty on a registered cancellation deed was curtailed from two years to six months (counted from the date of registration of such deed).

On August 06, 2016, the appellants filed an application for refund of the stamp duty amounting to Rs 27,34,500, contending that they were governed by the earlier (pre amendment) statutory regime, since their cancellation deed was executed before April 24, 2015.

The refund application was initially allowed by the Chief Controlling Revenue Authority, Maharashtra State, Pune (CCRA), by its order of January 08, 2018. Soon thereafter, however, the same authority, by a subsequent order on March 03, 2018, recalled its earlier decision and rejected the refund request as time barred, citing the amended limitation period.

Aggrieved by the order recalling the earlier sanction of refund, the appellants first attempted to challenge it before the Chief Controlling Revenue Authority (CCRA) by way of an appeal under Section 53 of the Act. The CCRA dismissed the appeal on April 16, 2019, prompting the appellants to file writ petition before the High Court of Judicature at Bombay. In its judgment in 2022, the High Court remanded the matter for a fresh consideration but the CCRA passed an order again rejecting the refund claim.

The appellants again approached the High Court which dismissed the plea for refund.

The court here examined the primary issue whether the amended six-month limitation, introduced by the April 24, 2015 amendment to Section 48(1) of the Act governs the appellants’ claim for stamp duty refund, particularly when the cancellation deed was executed prior to the amendment but registered thereafter.

The appellants asserted that, although the cancellation deed was registered on April 28, 2015, it was executed on March 17, 2015 — prior to the amendment dated April 24, 2015, which curtailed the time limit for seeking a refund from two years to six months. They relied upon Section 47 of the Registration Act, 1908, emphasising that “a registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made.”

In other words, the operative date for their right to seek refund would be March 17, 2015, placing them under the un-amended regime, they said.

In its judgment, the bench said, "In our view, this contention carries substantial weight. The High Court laid undue emphasis on the registration date without fully appreciating that the appellants’ accrued right to claim a refund arose the moment the cancellation deed was validly executed. The legislative scheme governing the earlier proviso to Section 48(1) of the Act, contemplated a broader two-year window."

The court felt constricting that window retroactively, merely because registration happened post-amendment, unduly defeats a vested cause of action.

"Even if one were to hold that the appellants’ claim is examined under the amended six-month period, we are of the considered opinion that a mere technical delay should not, by itself, extinguish an otherwise valid claim. The scheme of stamp duty refund provisions is designed to ensure fairness when the underlying transaction is rescinded for bona fide reasons. The appellants were compelled to cancel the purchase due to the developer’s inability to deliver timely possession (of flat) and were in no way remiss or at fault," the bench said.

The court also found merit in the appellants’ submission that the CCRA, having once granted a refund by its order on January 08, 2018, lacked any express statutory power to review or recall that decision.

"A quasi-judicial authority can only exercise such powers as the statute confers. There is no provision in the Act enabling the CCRA to sit in review of its own orders," the bench said.

In the absence of any enabling clause, the bench said, the subsequent orders of March 03, 2018, April 16, 2019, and ultimately December 16, 2022, reversing the earlier sanction of the refund, cannot be sustained solely because the appellants participated in the proceedings.

"We are unable to concur with the High Court’s reasoning that the appellants “submitted themselves” to the authority’s review process or somehow acquiesced in the second decision. Jurisdiction cannot be created by consent or waiver. The law does not permit a statutory functionary to assume powers not conferred upon it, regardless of how the parties engage in subsequent litigation. Hence, we see clear infirmity in the High Court’s endorsement of the CCRA’s review-like exercise," the bench said.

The court thus held the findings recorded by the High Court in the impugned judgment warranted interference.

"The High Court’s focus on the date of registration as determinative of the applicable legal regime under Section 48(1) of the Act overlooks the accrued right crystallising at the time of execution of the cancellation deed. Further, its refusal to disturb the recall of the earlier refund order, despite acknowledging the absence of statutory review power, is difficult to sustain. Participation in a erroneous procedure cannot, in our considered view, confer review jurisdiction upon the CCRA where none exists in law," the bench said.

The court here held that the appellants’ claim for refund falls under the unamended proviso to Section 48(1) of the Maharashtra Stamp Act, 1958. Consequently, the court set aside impugned judgment of April 18, 2024 of the High Court of Judicature at Bombay and allowed the writ petition.

The court found that the amount of Rs 27,34,500 had been wrongly retained by the State from January 08, 2018 for almost seven years.

"We are of the view that the appellant would be entitled to simple interest at the rate of 6 per cent per annum on the amount from the date of the first order of CCRA dated January 08, 2018 till the date it is paid," the court said.

The court directed the authorities to make the payment within four weeks, making it clear that any further delay would entail interest at the rate of 12% per annum.