Bombay High Court Allows Refund Of Stamp Duty Paid On Cancelled Development Agreement

The Bombay High Court, vide judgment dated 20 August 2026 in Sai Innovation v. Joint District Registrar and Collector of Stamps, Pune City & Ors. (Writ Petition No. 7566 of 2016), has held that a Development Agreement which fails to achieve its intended purpose and is subsequently cancelled can qualify for refund of stamp duty under Section 47(c)(5) of the Maharashtra Stamp Act, 1958 (“the Stamp Act”), and that such an agreement can avail the extended limitation period under the proviso to Section 48(1) where stamp duty has been calculated with reference to Article 25 of Schedule I.

Background:

Sai Innovation had entered into a Development Agreement (“said Agreement”) dated 15 April 2013 with the owners of land at Village Mauje Balewadi, Pune, for development of approximately 8,000 sq. metres of land and paid stamp duty under Article 25 read with Article 5 of Schedule I to the Stamp Act. The owners were unable to obtain sanction of the building plans within a reasonable time, and disputes subsequently arose between the parties. The said Agreement was therefore cancelled by a registered Deed of Cancellation (“said Deed”) dated 18 February 2014, registered on 24 February 2014, and the consideration received was returned. Sai Innovation thereafter applied on 7 April 2014 for refund of the stamp duty. The Respondent Nos 1&2 vide their orders dated 11 August 2014 and 6 December 2014 (“Impugned Orders”) respectively, rejected the refund application of the Petitioner, principally on the ground that the said Agreement was not a “conveyance” and therefore did not fall within the proviso to Section 48(1) of the Stamp Act.

Issue:

The Court dealt with the following issues:

• Whether the said Agreement had failed to achieve its intended purpose to attract Section 47(c)(5) of the Stamp Act;
• Whether a Development Agreement could avail the benefit of the proviso to Section 48(1), particularly where stamp duty was calculated as per Article 25 of Schedule I;
• Whether the reference to “actual, open possession” in Clause 13 of said Agreement be interpreted as transfer of possession to the developer, notwithstanding Clause 11 of the said Agreement which described the developer as a licensee; and
• Whether the Respondents could subsequently rely upon the alleged transfer of possession as a ground for rejecting the refund claim, when the refund claim had initially been rejected by the Impugned Orders on other grounds, and the issue of possession did not form part of the reasons recorded in those orders.

Key Findings

The Court, while differentiating between Section 47 and Section 48 of the Stamp Act, held that while Section 47 is the main provision that gives the right to a refund of stamp duty, Section 48 only deals with the time limit. In the present case, the proposed development under the said Agreement was never acted upon, and the parties later cancelled the said Agreement by the said Deed. As a result, the transaction had clearly failed to achieve its intended purpose under Section 47(c)(5) of the Stamp Act. The Court therefore said the refund claim had to be examined first under Section 47 and could not be turned down simply by pointing to the limitation period.

On the question of possession, the Court held that Clause 13 of the said Agreement could not be read in isolation from Clause 11. Although Clause 13 referred to “actual, open possession”, Clause 11 expressly described the developer’s rights as those of “a licensee for development”. Reading the Agreement as a whole, the Court concluded that the developer was granted only a limited contractual licence to enter the property and undertake development activities, and that there was no transfer of legal or exclusive possession. The Court also noted that the absence of a separate possession receipt, by itself, did not establish that possession had been transferred.

Held

In light of the above reasoning, the Court allowed the writ petition and quashed the Impugned Orders passed by the Respondents. The Court held that the refund application was filed within the extended period prescribed under the proviso to Section 48(1) of the Stamp Act and, accordingly, rejected the Respondents’ objection that the claim was barred by the ordinary six-month limitation period.

MHCO Comment

Parties seeking refund of stamp duty on a cancelled Development Agreement should note that Section 47 governs the substantive entitlement to refund, while the proviso to Section 48(1) determines the applicable limitation period. Further, the legal character of a Development Agreement should be assessed by reading the same meaningfully and not in isolation from other clauses provided therein.