2025 (3) TMI 60 - SC - Indian Laws

Interest on Refund of the stamp duty paid on a lost e-stamp paper - whether the court should fold its hands and deny relief to a person who has lost the e-stamp paper only because the draftsman has omitted the use of such expression explicitly in the Statute? - HELD THAT - When a person is deprived of the use of his money to which he is legitimately entitled he has a right to be compensated for the deprivation which may be called interest or compensation. Interest is paid for the deprivation of the use of money in general terms which has returned or compensation for the use or retention by a person of a sum of money belonging to other. In the case of Secretary Irrigation Department Government of Orissa v. G.C. Roy 1991 (12) TMI 268 - SUPREME COURT a Constitution Bench of this Court opined that a person deprived of use of money to which he is legitimately entitled has a right to be compensated for the deprivation call it by any name. It may be called interest compensation or damages. This is also the principle of Section 34 of the Civil Procedure Code. Interest of normal accretion on capital - HELD THAT - If on facts of a case the doctrine of restitution is attracted interest should follow. Restitution in its etymological sense means restoring to a party on the modification variation or reversal of a decree or order what has been lost to him in execution of decree or order of the Court or in direct consequence of a decree or order. The term restitution is used in three senses firstly return or restoration of some specific thing to its rightful owner or status secondly the compensation for benefits derived from wrong done to another and thirdly compensation or reparation for the loss caused to another. In Hari Chand v. State of U.P. 2011 (2) TMI 1638 - ALLAHABAD HIGH COURT the Allahabad High Court dealing with similar controversy in a stamp matter held that the payment of interest is a necessary corollary to the retention of the money to be returned under order of the appellate or revisional authority. The High Court directed the State to pay interest @ 8% for the period the money was so retained i.e. from the date of deposit till the date of actual repayment/refund. Considering the reasons assigned by the learned Single Judge while taking the view that the respondents could not have declined to refund the amount and the fact that the retention of the said amount was for a long time and further the appellants were left with no other option but to approach the High Court it is opined that the appellants are entitled to have interest on Rs. 28, 10, 000/-. Conclusion - Interest is not a penalty or punishment at all but it is the normal accretion on capital. The appellants are entitled to hae interest. Appeal disposed off.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

• Whether the appellants are entitled to a refund of the stamp duty paid on a lost e-stamp paper.
• Whether the appellants are entitled to interest on the refunded amount of the stamp duty.
• The interpretation of statutory provisions regarding the refund of stamp duty and the applicability of constitutional principles such as Article 265 of the Constitution of India.
• The applicability of the doctrines of unjust enrichment and restitution in the context of the refund of stamp duty.

2. ISSUE-WISE DETAILED ANALYSIS

Refund of Stamp Duty on Lost E-Stamp Paper

• Relevant Legal Framework and Precedents: The case revolves around the interpretation of Section 49(a) of the Stamp Act, which deals with the refund of stamp duty. The appellants argued that the loss of the e-stamp paper should be considered under the term "obliterate" in the statute, allowing for a refund.
• Court's Interpretation and Reasoning: The Court adopted a practical interpretation of Section 49(a), suggesting that the term "obliterate" should include cases of lost e-stamp papers. The Court emphasized that denying a refund in such cases would contravene Article 14 of the Constitution, which ensures equality before the law.
• Key Evidence and Findings: The appellants provided a photocopy of the lost e-stamp paper and an indemnity bond, asserting the loss and ensuring indemnification for any potential misuse.
• Application of Law to Facts: The Court found that the taxing event had not occurred since the e-stamp paper was not used, and thus, retaining the stamp duty would be illegal.
• Treatment of Competing Arguments: The respondents' concerns about potential misuse of the lost e-stamp paper were deemed tenuous due to technological safeguards and the issuance of a new e-stamp paper for the same transaction.
• Conclusions: The Court concluded that the appellants were entitled to a refund of the principal amount of the stamp duty paid.

Entitlement to Interest on Refunded Amount

• Relevant Legal Framework and Precedents: The Court considered the principles of restitution and compensation for the deprivation of the use of money. The Court referred to several precedents that establish the right to interest as compensation for delayed payments.
• Court's Interpretation and Reasoning: The Court reasoned that interest is not a penalty but compensation for the deprivation of the use of money. It emphasized that the State's retention of the appellants' money without legal authority warranted compensation in the form of interest.
• Key Evidence and Findings: The Court noted the appellants' prompt actions to secure a refund and the prolonged retention of their funds by the State.
• Application of Law to Facts: The Court applied the principle of restitution, determining that the appellants were entitled to interest on the refunded amount due to the undue retention of their funds.
• Treatment of Competing Arguments: The respondents' argument that there was no statutory provision for interest was dismissed, as the Court found that constitutional and equitable principles necessitated the payment of interest.
• Conclusions: The Court awarded interest on the refunded amount, calculating it based on the period of retention and applicable interest rates.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: The Court stated, "Interest is not a penalty or punishment at all, but it is the normal accretion on capital... Hence equity demands that A should not only pay back the principal amount but also the interest thereon."
• Core Principles Established: The judgment reinforced the principle that the State cannot retain funds without legal authority and must compensate individuals for the deprivation of their money. It also highlighted the importance of interpreting statutory provisions in a manner consistent with constitutional principles.
• Final Determinations on Each Issue: The Court ordered the refund of the principal amount of Rs. 28,10,000/- and directed the respondents to pay interest amounting to Rs. 4,35,968/- on the refunded amount within two months.