Returning Expired Stamp Papers Is No Refund in Law: Supreme Court Directs State to Pay ₹3.99 Lakhs Despite Limitation under UP Stamp Rules

“Compliance Must Be in Spirit, Not Just in Form” – In a ruling that underscores the supremacy of Supreme Court directives over administrative technicalities, the Supreme Court on January 5, 2026, held that the State of Uttar Pradesh was duty-bound to refund the monetary value of non-judicial stamp papers worth ₹3,99,100 to a litigant, despite objections under Rule 218 of the U.P. Stamp Rules, 1942.

Delivering its verdict in the contempt case Dharmendra Sharma v. M. Arunmozhi & Another, a bench comprising Justice Vikram Nath and Justice Sandeep Mehta clarified that the Court’s earlier direction to “return” the stamp papers was not merely physical in nature, but carried a clear equitable intent for full monetary refund.

“This Court’s order cannot be reduced to a farce by returning expired stamp papers that are of no use or value,” observed the bench, noting that compliance must not only be “literal”, but must honour the object and equity underlying the Court’s judgment.

“Rule 218 Cannot Override Supreme Court's Mandate”: Court Overrules State's Limitation Defence

The controversy arose after the Supreme Court, in its earlier ruling dated 6 September 2024 in Dharmendra Sharma v. Agra Development Authority, directed the Agra Development Authority to return stamp papers worth ₹3,99,100 to the appellant as part of a refund package in a failed property transaction. While the ADA refunded other amounts and paid ₹15 lakh as compensation, it merely returned the 22 original stamp papers, now expired and unusable.

The Registration Department later rejected the appellant’s application for monetary refund, citing Rule 218 of the U.P. Stamp Rules, which prohibits refund of unused stamp papers after eight years from purchase. The rejection order dated 21 July 2025 also claimed that the 2017 amendment to the Rules had fixed 20 December 2018 as the outer limit for seeking refunds of pre-amendment stamp papers.

However, the Supreme Court found this approach flawed. It noted that the direction issued in its 2024 judgment was binding and carried the force of law. “The order of this Court must be understood in substance and not mechanically applied to return expired instruments with no legal utility,” said the bench.

In the contempt proceedings, the Court also addressed the position taken by the State of Uttar Pradesh, which was later impleaded as a party. The State conceded that it acted based on a bona fide interpretation of Rule 218, but tendered an unconditional apology and confirmed that it was ready to comply with the Court’s direction.

“Judicial Equity Cannot Be Defeated by Administrative Rigidity” – Court Directs Refund Within Two Months

Refusing to delve into the merits of the Stamp Rules or limitation objections, the Court ruled unequivocally:

“We are inclined to dispose of the present contempt petitions by issuing a direction simpliciter to respondent no. 2 to refund a sum of ₹3,99,100 to the petitioner, upon return of the non-judicial stamp papers received by him from respondent no. 1, within a period of two months from today.”

Emphasizing that judicial orders cannot be diluted by departmental hurdles, the Court declared that the contempt petition against ADA stood closed, but the State was now under a binding obligation to release the refund in full compliance with Article 129 of the Constitution.

In doing so, the Court carefully balanced the principles of equity, justice, and constitutional supremacy. It acknowledged the State’s apology but made clear that compliance was not optional. “An unconditional apology is not a shield when substantive compliance is absent,” the judgment implied.

“Refund Is Not a Paper Ritual—It Must Achieve Real Restitution”

This ruling stands as a strong message to government departments and statutory authorities that mechanical interpretations of rules cannot override constitutional directions. The Court reminded all public functionaries that the rule of law requires both obedience and understanding of judicial intent.

While closing the contempt proceedings, the Court reinforced the idea that citizens must not be shortchanged under the guise of procedure, especially when the highest court of the country has directed otherwise.

The decision in Dharmendra Sharma v. M. Arunmozhi & Another is now a vital precedent on the binding nature of Supreme Court orders, especially in cases where statutory limitations are cited to deny equitable relief.

Date of Decision: January 5, 2026