UP Stamp Act | 2021 Amendment Imposing Limitation On Refund Not Applicable To Agreement Entered Prior To Amendment: Allahabad HC

The Allahabad High Court has quashed an order rejecting refund of stamp duty, holding that a retrospective amendment in 2021 to the state stamp act imposing a limitation period cannot extinguish a right based on the agreement entered into prior to the amendment.Petitioners had purchased stamp papers worth ₹4,37,000 in 2015 for executing a tripartite sale and sublease agreement with the New Okhla Industrial Development Authority (NOIDA) and M/s AGC Realty Private Ltd. for a residential unit in “Homes 121,” Sector 121, Noida. Thereafter, an agreement was drawn upon these stamps, however, the same was not presented for registration and accordingly remained unused and unutilized. There was a restriction imposed on transfer and sale of flats by NOIDA in the project "Home 121" of which the property in question was a part. Consequently, the agreement did not fructify as the NOIDA did not assent/join in this transaction. The petitioners were not aware as to the restriction on sale and transfer of flats in the concerned project, till the time Noida Authority backed out from the agreement. The petitioners were under a bonafide belief that the agreement would be executed soon and kept awaiting its execution and registration.After surrendering their allotment in November 2023, the petitioners applied for a refund of the unused stamp duty on April 27, 2024. However, their application was rejected by the authorities on the ground that an amendment being U.P. Stamp (5th Amendment) Rules, 2021 was introduced whereby Rule 218 was substituted and a condition had been imposed which contemplates that stamp would not be renewed or returned after 8 years from its purchase. Hence the petitioners claim was time barred. Referring to the Supreme Court's decision in Harshit Harish Jain & Anr. vs. State of Maharashtra & Ors a division bench of Justice Shekhar B. Saraf and Justice Vipin Chandra Dixit said:"Upon perusal of the averments made, the documents annexed and after going through the ratio of Supreme Court in Harshit Harish Jain & Anr (supra), we are of the view that in the present case the impugned order rejecting the refund of the petitioners is passed on technical reasons only. From the facts, it is clear that the agreement between the parties has taken place prior to the amendment that has been carried in the stamp papers, and accordingly, following the ratio of the Supreme Court Judgment, it is crystal clear that the benefit of refund of the stamp duty would be applicable in the present case". Counsel for petitioners argued that the amendment the Rule providing for an 8-year limitation was added in 2021 and was not applicable to transactions made in 2015. Reliance was place on Harshit Harish Jain & Anr. vs. State of Maharashtra & Ors. where the Supreme Court held that the scheme of the stamp duty provides that where the transaction is rescinded for valid considerations, technical reasons like delay in claiming refund should not be reason for deny such claims. “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 measure of discretion or consideration for good faith conduct is not alien to statutory processes that safeguard citizens from unjust enrichment by the State,” held the Apex Court. Counsel for respondents argued that the the amended U.P. Stamp Act would apply in the present case as the petitioners' application for refund was made subsequent to the said amendment.The high court observed that the order rejecting refund of stamp duty did not consider the ratio of the Supreme Court judgement. It thus quashed the order and directed the concerned authority to once again examine the refund application of the petitioners keeping in view the judgment of the Supreme Court within a period of three months from date.Case Title: Seema Padalia And Another V. State Of U.P. And 4 Others [WRIT - C NO. - 39180 OF 2024]Counsel for Petitioners: Rahul Sahai, Saumitra Anand Counsel for Respondents: C.S.C., Kaushalendra Nath SinghClick Here To Read/Download Order

UP Stamp Act | 2021 Amendment Imposing Limitation On Refund Not Applicable To Agreement Entered Prior To Amendment: Allahabad HC

Upasna Agrawal

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