Limitation May Bar A Remedy, But It Cannot Extinguish A Legitimate Right — Bombay High Court Orders Refund of ₹1.17 Crore Stamp Duty Despite Delay

“State Cannot Enrich Itself Through Failed Transactions” , In a significant ruling pronounced Bombay High Court ordered the refund of ₹1,17,08,200/- paid as stamp duty on a Share Purchase Agreement (SPA) that was rendered void-ab-initio due to government refusal under FDI regulations. The Court held that “technical limitation cannot be a ground to deny substantive justice”, and quashed the rejection order of the Inspector General of Registration and Controller of Stamps dated 09.10.2023.

“When The State Deals With Its Citizens, It Must Act As An Honest Person” — Rejection Solely On Limitation Found Unsustainable

The dispute arose when Armstrong Machine Builders Pvt. Ltd. entered into an SPA on 13.07.2021 with Dematic Holdings UK Ltd. for a massive equity transfer worth ₹585.37 crores. To execute the SPA, the petitioner paid ₹1.17 crores as stamp duty.

However, due to Press Note No.3 (2020 series) issued by the Ministry of Commerce and Industry, any foreign investment from a country sharing land borders with India required prior government approval. As the beneficial owner of Dematic Holdings fell under this restriction, an application was made for FDI clearance — which was ultimately rejected on 24.03.2022.

Consequently, the SPA never fructified and became void, prompting the petitioner to file a refund application under Section 47(c)(1) of the Maharashtra Stamp Act, 1958. However, the application was rejected by the revenue authorities solely on the ground that it was filed beyond the six-month limitation period prescribed under Section 48 of the Act.

“No Statute Allows the State to Retain Money Without Justification” — High Court Condemns Procedural Denial of Refund

Justice Milind N. Jadhav pulled no punches in criticising the rejection of refund solely on technical delay. In a detailed 20-page judgment, the Court held:

“Limitation period may bar a remedy, but it does not extinguish the right. When a transaction becomes void and the party has derived no benefit from the instrument, the State cannot be allowed to unjustly enrich itself by retaining the stamp duty.”

The Court emphasized that no statutory provision under the Maharashtra Stamp Act expressly excludes the applicability of Section 5 of the Limitation Act, and thus, equity and justice must prevail.

“Merely referring to the wrong provision or delay caused by a third-party process like Government approval cannot defeat a genuine right to refund,” the Court observed.

“The Share Purchase Agreement Became Void Only Upon Rejection of Government Approval” — Delay Found Justified

The Court accepted the petitioner’s plea that no cause of action for refund could arise before the SPA was officially rendered void. Since the FDI approval was rejected only on 24.03.2022, the limitation period should be computed from that date, not from the date of stamp duty payment.

“Conduct of the petitioner is not in question. He was entirely reliant on the Government approval. Once that was rejected, the SPA fell through and could not be fructified,” the Court reasoned.

“The Court Must Prioritise Substance Over Form” — Technical Errors Cannot Defeat Legal Entitlements

The Court condemned the hyper-formalistic approach of the authorities: “Merely because the petitioner referred to Section 47 in his application cannot defeat the claim if entitlement flows from the statute. Substance prevails over form.”

In support, the Court relied on the landmark ruling in Committee-GFIL v. Libra Buildtech Pvt. Ltd. [(2015) 16 SCC 31], where the Supreme Court had ruled: “The expiry of period of limitation prescribed under any law may bar the remedy but not the right… the applicants are entitled to claim the refund of stamp duty from the State.”

The Court also quoted Bano Saiyed Parwad v. Chief Controlling Revenue Authority, observing: “When the State deals with a citizen, it should not ordinarily rely on technicalities… it must act as an honest person.”

“Equity, Justice and Fairness Cannot Be Sacrificed at the Altar of Limitation” — Refund Granted With 4% Interest

Finding the rejection order devoid of merit, the Court ordered: “The impugned order dated 09.10.2023 is quashed and set aside. The Respondents are directed to refund the stamp duty amount of ₹1,17,08,200/- to the Petitioner along with simple interest at 4% per annum within four weeks.”

Justice Jadhav concluded with a strong reaffirmation of constitutional fairness: “To deny refund solely on the ground of limitation would offend equity, justice and fairness in the present case.”

This judgment sets a powerful precedent in favour of substantive justice over procedural rigidity, particularly in matters involving statutory refunds and foreign investment compliance. The Court’s insistence that “State must not rely on technicalities to deny rightful claims” will resonate across regulatory regimes.

Date of Decision: 3rd September 2025