Declaration Disguised Won’t Defeat Court Fee Law: Executant Must Pay Fee Under Section 40 To Nullify Own Guarantee: Madras High Court”

"A plea for declaration that a document is void ab initio, when made by its own executant, is nothing but a claim for cancellation" — Madras High Court settles the law on court fee valuation in suits involving guarantees

In a significant ruling on 12th January 2026, the High Court of Judicature at Madras held that an executant of a document who seeks to render it void ab initio cannot escape the obligation to pay court fee on the value of the document under Section 40(1) of the Tamil Nadu Court Fees and Suits Valuation Act, 1955. The Court ruled that the true nature of relief — not its wording — determines the court fee payable and the pecuniary jurisdiction of the Court.

Dismissing the appeal filed by R. Subramanian, who had challenged an order of the Additional Commercial Court, Egmore, returning his plaint for insufficient valuation, the Division Bench comprising Justice C.V. Karthikeyan and Justice K. Kumaresh Babu firmly held that “when a party to a document seeks to declare it unenforceable due to impossibility of performance, it amounts to a prayer for cancellation and not a mere declaration.”

The Court was dealing with a suit filed by the appellant seeking a declaration that a ₹30 crore deed of guarantee executed by him in 2008 in favour of IndusInd Bank was void ab initio, incapable of performance, and hence unenforceable. According to him, the guarantee, which was issued for loans availed by Subiksha Trading Services Ltd., was legally unsustainable under Section 56 of the Indian Contract Act, 1872, since his personal net worth was allegedly under ₹5 crores.

"To Say a Document Is Void Is to Ask for Its Cancellation — When You Signed It Yourself"

The plaintiff attempted to bring the case under Section 25(d) of the Tamil Nadu Court Fees Act, valuing the suit at ₹25,01,000 and paying a court fee of ₹29,610. However, the Commercial Court found that since the plaintiff himself had executed the guarantee for ₹30 crores, and was now challenging its validity, the suit was one for cancellation. The court held that the suit should have been valued at ₹30 crores and proper court fee paid under Section 40(1), failing which the plaint could not be entertained.

The Division Bench of the High Court agreed. The Court ruled: “The actual relief which he seeks is for cancellation of the said document... When he is a party to the document and seeks cancellation of the document for any reason whatsoever, then the fee has to be computed only under Section 40(1) of the Act.”

Refusing to accept the argument that the plaintiff only sought a declaration and not a cancellation, the Court clarified that form cannot override substance in determining the nature of a claim.

“Impossibility of Performance Under Section 56 Is Not a Shortcut To Sidestep Court Fees”

The plaintiff had relied heavily on Section 56 of the Contract Act to argue that the guarantee was impossible of performance from the outset and therefore void ab initio. However, the Court held that even if the document was unenforceable, the act of seeking judicial intervention to declare it so required that the document be effectively cancelled — and hence attracted the rigours of Section 40(1).

As the Court observed: “A declaration that a document is impossible of performance under Section 56 necessarily results in nullifying the document. Such relief cannot be granted without cancelling the document in law. Court fee is therefore payable on the full value of the document.”

“Executant Cannot Claim Benefits of Section 25 — Only Third Parties Can Rely on That Exception”

The appellant had also cited M/s. Siddha Construction Pvt. Ltd. v. M. Shanmugam, (2006) 4 LW 176, where the Court had accepted a lower valuation and court fee under Section 25(b) since the plaintiffs were not parties to the impugned document. However, the Madras High Court distinguished that precedent in no uncertain terms, stating that:

“In the Siddha Construction case, the plaintiff was not a party to the sale deed. But in the present case, the appellant was the executant of the guarantee. Therefore, the judgment has no application.”

The Court relied instead on earlier binding decisions, including A.P. Arulandum Perumal Pillai v. Unknown, 1986 (1) MLJ 462 and Raju v. Venkataswami Naidu, 1959 (1) MLJ 118, where it was clearly held that “when an executant seeks to nullify a document he signed, court fee is payable under Section 40(1), calculated on the full value of the document.”

The Court found that the plaintiff’s undervaluation had a direct consequence on jurisdiction, stating that: “By valuing the suit at ₹25,01,000/- instead of ₹30 crores, the plaintiff had effectively invoked the jurisdiction of a court which was not competent to try the suit.”

Accordingly, the Court held that the Commercial Court rightly returned the plaint under Order VII Rule 10 CPC, and there was no error in the decision.

The Madras High Court’s judgment is a categorical affirmation of the doctrine that litigants cannot avoid payment of court fees by cleverly crafting prayers that mask the true nature of relief sought. The ruling is particularly relevant in the commercial context, where personal guarantees are frequently disputed, and reaffirms that where an executant challenges the validity of a document they signed, they must bear the full procedural burden under law — including court fee on the entire value.

The Court concluded: “We find no merit in the appeal. The plaint has been rightly returned for valuation under Section 40(1). The appeal stands dismissed.”

Date of Decision: 12 January 2026