The Bombay High Court directed Maharashtra government authorities to refund ₹70.12 lakh stamp duty to a developer after a Development Agreement (DA) for a Pune real estate project failed to materialise and was subsequently cancelled. The court held that a development transaction that fails before the intended development occurs is entitled to a refund under the Maharashtra Stamp Act, 1958.
The case involved a developer, through its partnership firm, entering into a Development Agreement (DA) with a landowner in Pune’s Balewadi area in April 2013 for the development of 8,000 sq m (over 86,111 sq ft). The developer paid ₹70.12 lakh in stamp duty on the agreement.
However, the proposed project could not proceed as the building plans were not sanctioned, leading to disputes between the developer and the landowner. The parties subsequently cancelled the DA by way of a registered Cancellation Deed in February 2014.
Following the cancellation, the developer approached the Maharashtra stamp authorities to seek a refund of the ₹70.12 lakh stamp duty, arguing that the transaction had failed and that the Development Agreement could not be acted upon. The authorities rejected the refund application, prompting the developer to approach the Bombay High Court.
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Maharashtra authorities’ argument in the Bombay HC
The Maharashtra government told the Bombay High Court that the building plans were not sanctioned, leading to a dispute. It argued that the Development Agreement was cancelled on the grounds that ‘possession of the property’ was not handed over within the stipulated time. It argued that the refund application had to be filed within six months of the Development Agreement, i.e. on or before October 14, 2013.
However, the developer filed the refund application on April 12, 2014, after the six-month deadline had expired. On this ground, the state authorities argued that the petition should be dismissed.
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The Maharashtra government argued that the refund application was delayed by about six months and 22 days, making the petitioner ineligible for a refund. It also submitted that while stamp duty for several instruments under the Stamp Act is determined with reference to Article 25, this does not mean that every such document is covered by Article 25.
The state further opposed the refund application on several other technical grounds, citing various provisions of the Stamp Act.
Bombay High Court’s verdict
The Bombay HC said that, “material on record shows that the proposed transaction failed before the intended development could be carried into effect and the agreement was thereafter cancelled through a registered instrument. Consequently, the Petitioner (developer) is entitled to have its claim for refund considered and allowed in accordance with Section 47 read with the applicable proviso to Section 48(1) of the Maharashtra Stamp Act, 1958.”
The court said that the developer is entitled to refund of the stamp duty amount of Rs.70,12,500/ and directed the authorities to refund among with simple interest at the rate of 6% per annum from 7 April 2014, being the date of the application for refund, till its actual payment; subject to consequential directions regarding payment and interest.
The court said that the amount of refund together with accrued interest shall be paid to the developer within a period of six weeks from the date of uploading this judgment and order.
The developer could not be reached for a comment.
