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Bombay High Court affirms the applicability of Section 5 of the Limitation Act, 1963 vis-à-vis the Maharashtra Stamp Act, 1958 to condone delay in stamp duty refund applications

A 2 (two) judge bench of the Hon’ble Bombay High Court (“Bombay HC”) in Nanji Dana Patel vs. State of Maharashtra, Through Government Pleader and Others[1] has upheld the applicability of section 5[2] of the Limitation Act, 1963 (“Limitation Act”) to the Maharashtra Stamp Act, 1958 (“Stamp Act”) for the purpose of condoning delay in filing of refund application. The Bombay HC noted that there is nothing in the Stamp Act that excludes the applicability of the Limitation Act. Accordingly, the delay in filing the application for a refund was condoned, and the matter was remanded to the Inspector General of Registrar and Controller of Stamps (“Controller”) to be considered de novo on merits, with a specific deadline of October 31, 2024.

Brief facts

Nanji Patel, the Petitioner had entered into a development agreement dated March 3, 2014, with a counter-party, and a stamp duty of INR 78,65,000 (Indian Rupees seventy-eight lakh sixty-five thousand) was paid under the provisions of the Stamp Act.

Subsequently, in 2015, the parties decided to cancel the development agreement and convey the property to the Petitioner for valuable consideration. A cancellation deed and a conveyance deed both dated June 24, 2015, were executed, and an additional stamp duty of INR 1,00,00,000 (Indian Rupees one crore) was paid on the conveyance deed.

On February 15, 2018, the Petitioner filed an application for refund of INR 78,65,000 (Indian Rupees seventy-eight lakh sixty-five thousand) stamp duty paid on the now-cancelled development agreement. However, the Controller rejected the refund application on the grounds that it was filed beyond the 6 (six) month period mandated under Section 48(1) of the Stamp Act.

Aggrieved by the above rejection, the Petitioner filed a writ petition before the Bombay HC.

Issues

1. Whether Section 5 of the Limitation Act is applicable to the Stamp Act?
2. If ‘sufficient cause’ exists, can delay in filing a refund application be condoned?

Analysis and Findings

The Bombay HC, upon consideration of the submissions adduced by the parties and the relevant provisions of the Limitation Act and the Stamp Act, opined that –

1. while Section 48 of the Stamp Act provides for a 6 (six) month limitation for filing refund applications, there is no specific exclusion of the Limitation Act, especially Section 5 of the Limitation Act. This allows for the condonation of delay in filing such applications when ‘sufficient cause’ is demonstrated;
2. in the present case, the Bombay HC accepted the Petitioner’s argument that the delay was caused by being ‘ill-advised’, which constitutes ‘sufficient cause’ under Section 5 of the Limitation Act;
3. to support its decision, reliance was placed on the judgement of Abaad Ali vs. Directorate of Revenue Prosecution Intelligence[3], which held that, unless a statute (general or special) expressly excludes the applicability of the Limitation Act, Section 5 can be invoked to condone delays;
4. furthermore, the Bombay HC also extensively relied on the principles laid down in Bano Saiyed vs. Chief Controlling Revenue Authority and Inspector General of Registration and Controller of Stamps[4], which directs the State to not ordinarily rely on technicalities when dealing with a citizen. It was the Bombay HC’s view that if the State is satisfied that the case of a citizen is a just one, even though the legal defences may be open to it, it must act as an honest person;
5. moreover, the Bombay HC highlighted that a fiscal lis is not an adversarial proceeding, and the State must act as an honest party, especially where excess payments have been made. In this case, the retention of INR 78,65,000 (Indian Rupees seventy-eight lakh sixty-five thousand) by the State was deemed contrary to Articles 265 and 300A of the Constitution of India (“Constitution”), which prohibit the retention of taxes without legal authority; and
6. accordingly, applying the above-stated principles to the present matter, the Bombay HC treated the writ petition as an application under Section 5 of the Limitation Act and permitted condonation of delay in filing the refund application.

The Bombay HC quashed the order of the Controller rejecting the refund application and remanded the matter for de novo consideration on merits, after condoning the delay. The Controller was directed to pass a reasoned order on or before October 31, 2024, and provide the Petitioner with notice for a personal hearing at least 5 (five) working days in advance.

Conclusion

This judgment establishes a significant precedent for allowing delayed applications for stamp duty refunds under the Maharashtra Stamp Act by invoking Section 5 of the Limitation Act. The Bombay HC reaffirmed that, unless expressly excluded, Section 5 can be applied to condone delays, provided ‘sufficient cause’ is demonstrated.

However, a gap remains regarding which authority has the power to condone such delays under the Stamp Act, as the Stamp Act itself does not provide for this. As a result, individuals seeking refunds may still need to approach the High Court under Article 226 of the Constitution for delay condonation, placing an undue burden on both citizens and the judiciary. Legislative reform may be required to address this procedural gap.

Despite this, the judgment delivers much-needed clarity and relief, reiterating that citizens should not be penalized for procedural delays when seeking refunds for excess payments. It also reinforces the State’s obligation to avoid unjust enrichment by retaining excess payments, as such retention would violate Articles 265 and 300A of the Constitution.

This Prism is prepared by:

Varghese Thomas Partner

Ahsan Allana Senior Associate

Kabir Saund Associate

For more details, please contact [email protected]

[1] 2024 SCC OnLine Bom 2817

[2] Section 5 of the Limitation Act, 1963 permits the condonation of delay in preferring an appeal or making an application in certain cases where the court is satisfied that the delay was due to ‘sufficient cause’.

[3] (2024) 7 SCC 91

[4] 2024 SCC OnLine SC 979