Stamp Duty Must Be Refunded If Sale Agreement Was Never Executed : Bombay High Court

The Bombay High Court has held that stamp duty paid for a property transaction that never went through must be refunded, even if the application is filed beyond the six-month limitation period under the law.

A single-judge bench of Justice Somasekhar Sundaresan said the state cannot keep money collected as stamp duty when no sale agreement was ever executed. “Stamp Duty is not a transaction tax but a duty payable on an instrument, which necessarily has to conform to the definition set out in the Act,” the court said.

It added, "In the instant case is that the document has not even been executed. The term “executed” is defined in Section 2(i) with reference to instruments as “signed.” Therefore, what is clear is that in the instant case, in the absence of “execution”, no “instrument” has come into existence in the eyes of the law. Since the execution draft of the agreement for sale was never signed and therefore not executed, no instrument came into being for it to be chargeable with Stamp Duty"

The writ plea was filed by Mumbai resident Suresh Ramchandra Sancheti and his wife Sunita. In July 2019, Sancheti paid Rs 10.80 lakh as stamp duty for a proposed agreement to buy a neighbouring flat for Rs 1.80 crore. A draft agreement was prepared, but it was never signed.

According to the petition, when the COVID-19 pandemic struck in 2020, the family abandoned the purchase and decided to use the funds for Sunita's medical treatment. Sunita suffers from 100 percent locomotor and mental disability following a stroke, and Sancheti is her court-appointed legal guardian.

When Sancheti later applied for a refund, stamp authorities rejected the request solely on the ground that it was filed more than six months after the stamp duty was paid. The authorities did not dispute that the agreement had never been executed. His statutory appeal was also dismissed on the same ground, prompting the couple to approach the High Court.

Allowing the writ petition, the court said the limitation period under the Stamp Act is procedural and cannot defeat a genuine claim in appropriate cases, particularly where the applicant is not at fault.

Retaining the stamp duty in a case where no instrument ever came into existence, the court held, would amount to unjust enrichment by the state. It also clarified that while stamp authorities are bound by statutory timelines, the High Court can exercise its writ jurisdiction where refusal of relief would result in manifest injustice.

Case Title: Suresh Ramchandra Sancheti & Anr. vs The State of Maharashtra & Ors

Citation: 2026 LLBiz HC(BOM) 15

Case Number: Writ Petition No. 8365 of 2024

For Petitioners: Advocate S. R. Nargolkar

For Respondents: Advocate Y. D. Patil