A) ABSTRACT / HEADNOTE

The appeal concerns entitlement to interest on a delayed refund of stamp duty where the e-stamp paper purchased by the appellants on 06.07.2016 was misplaced and a fresh e-stamp was subsequently used to effect the transaction. The Delhi High Court (Single Judge) granted restitution of the principal sum of Rs. 28,10,000/ but declined interest; the Letters Patent Appeal was dismissed. The Supreme Court allowed the civil appeal, holding that where a public authority has retained money without lawful basis the claimant is entitled to compensation for deprivation of use commonly awarded as interest even in the absence of express statutory provision.

The Court applied principles of restitution, compensation and the constitutional prohibition on collection of tax without authority (Article 265), surveyed authorities (including Secretary, Irrigation Department v. G.C. Roy and Union of India v. Tata Chemicals Ltd.) and observed that interest is a corollary of returning money retained without right. On the facts (delay between the Single Judge’s order and actual refund/deposit), the Court computed interest at appropriate slabs and directed payment of Rs. 4,35,968/ within two months.

The reasoning emphasises equity, prevention of unjust enrichment and that monetary retention by the State without lawful justification attracts an obligation to make the claimant whole.

Keywords: interest; restitution; refund of stamp duty; Article 265; unjust enrichment; compensation.

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The appellants purchased an e-stamp paper dated 06.07.2016 for Rs. 28,10,000/ as consideration toward an intended immovable property transaction. The original e-stamp was misplaced (reported to police and public notices published) and, to avoid aborting the sale, the appellants procured a fresh e-stamp on 06.08.2016 and the sale deed was executed on 08.08.2016. An application for refund of the earlier stamp amount was filed before the Collector of Stamps (HQ) on 11.08.2016 along with an affidavit and an indemnity bond; the Collector rejected the refund on 21.10.2016. The appellants secured a writ in the Delhi High Court: the Single Judge ordered refund of Rs. 28,10,000/ but declined interest.

On LPA the relief was maintained. The Supreme Court entertained the civil appeal to determine whether interest should accompany the refund where there was no express statutory provision providing for interest on such refunds. The Court framed the question as one of entitlement to compensation for deprivation of use and whether doctrines of restitution, unjust enrichment and constitutional parameters (notably Article 265) require payment of interest where public authority has retained money without lawful basis.

D) FACTS OF THE CASE

The material facts are: the appellants paid Rs. 28,10,000/ for an e-stamp paper dated 06.07.2016 (payment from joint bank account), which was subsequently misplaced as informed by their broker on 04.08.2016. The appellants lodged a police complaint the same day and published notices in newspapers on 06.08.2016. To complete the sale, they bought a fresh e-stamp on 06.08.2016 (No. IN-DL80452882772240) and executed the sale deed on 08.08.2016 with M/s Scud Finlease Ltd. On 11.08.2016 they applied to the Collector for refund of the first stamp duty deposit and furnished an indemnity bond and supporting affidavit.

The Collector rejected the refund application on 21.10.2016, prompting the writ petition. The High Court (Single Judge) found the taxing event had not occurred as the instrument was not executed on the earlier stamp and that continued retention by the State was illegal; hence refund of the principal was ordered on 20.08.2018. The appellants challenged denial of interest before the appellate forum and ultimately the Supreme Court, which computed interest across the relevant periods and awarded Rs. 4,35,968/ as interest.

E) LEGAL ISSUES RAISED

i. Whether a person whose e-stamp has been lost and who has paid stamp duty is entitled to refund of the amount when the taxing event has not occurred?
ii. Whether, in absence of an express statutory provision, the State must pay interest on refunds of money collected and retained without lawful authority?
iii. Whether the doctrines of restitution and unjust enrichment compel awarding interest as compensation for deprivation of use of money?
iv. Whether the State’s retention of stamp duty without the chargeable event violates Article 265 and requires remedial compensation?

F) PETITIONER / APPELLANT’S ARGUMENTS

i. The appellants contended that the e-stamp dated 06.07.2016 was lost despite bona fide efforts (police complaint, newspaper notices) and hence the payment could not lawfully be retained because the taxing event (execution of instrument on that stamp) did not occur. Article 265 prohibits collection without authority of law.
ii. They argued that refund was permissible under the scheme of Chapter V and equitable principles; further safeguards (indemnity, enquiry) mitigate misuse risk.
iii. They sought interest as compensation for being deprived of the use of their money during the period of unlawful retention.

G) RESPONDENT’S ARGUMENTS

i. The respondents contended there is no express statutory provision in the Indian Stamp Act or rules entitling payment of interest on refund of stamp duty in the circumstances of loss of stamp paper; therefore interest cannot be awarded.
ii. Concern was raised about potential misuse and loss to the exchequer if refunds were allowed without production of original stamp papers; administrative safeguards justify refusal.

H) JUDGEMENT 

The Supreme Court analysed constitutional limits on collection (Article 265), administrative scheme under the Stamp Act (Sections such as 49(a) and 52), and equitable doctrines. It emphasised that retention of money by the State where no taxing event occurred is illegal and that equity requires restitution with compensation. Authorities were reviewed: Secretary, Irrigation Department v. G.C. Roy (right to be compensated for deprivation), O.N.G.C. Ltd. v. Commissioner of Customs (interest under restitution), and Union of India v. Tata Chemicals Ltd. (state obliged to refund illegally collected taxes with interest).

The Court rejected the respondents’ technical objection that absence of express provision precluded interest. Relying on principles that interest is not a penalty but compensation for deprivation and that money retained without right carries with it liability to pay interest, the Court held that where restitution is ordered, interest ordinarily follows. On quantification the Court computed interest for discrete periods (from Single Judge’s order 20.08.2018 to part payment 29.02.2020; subsequent periods with due adjustments for fixed deposit earnings) and awarded Rs. 4,35,968/ to be paid within two months.

The Court also observed that administrative safeguards (verification, indemnity) had been provided, reducing risk of misuse, and that doctrinal distinctions between unjust enrichment and retention do not prevent restitution plus interest in these facts.

a. RATIO DECIDENDI

Where a public authority retains money without lawful basis (i.e., taxing event not triggered), the claimant is entitled to restitution and, as a necessary corollary, compensation for deprivation of use commonly quantified as interest even absent express statutory provision. This follows from constitutional imperatives (Article 265), principles of restitution/unjust enrichment and precedents that recognise interest as equitable relief to prevent the State from pocketing accretions on retained funds.

b. OBITER DICTA 

The Court noted that Parliament may prescribe statutory machinery for refunds but that administrative lacunae cannot be a licence for the State to retain funds unlawfully. Comparative jurisprudence (including Pakistani authorities) and prior Indian decisions were discussed to illustrate that superior courts should adopt a beneficial, pragmatic construction of statutes where necessary to prevent denial of remedy. Also emphasised that interest is compensatory and not punitive.

c. GUIDELINES 

i. Where lost/unused stamp papers are claimed, authorities should verify electronic records and transaction particulars before rejecting refund applications.
ii. Claimants may be required to furnish indemnity bonds and follow procedural safeguards; absence of original does not ipso facto defeat refund if bona fides demonstrated.
iii. If money collected was retained without lawful basis, interest should ordinarily be awarded from the date of retention or appropriate judicial order until actual repayment, subject to adjustments for interim investment earnings.
iv. Administrative authorities must not use procedural technicalities to defeat constitutional guarantees against unlawful tax collection.

I) CONCLUSION & COMMENTS

The judgment aligns constitutional safeguards, equitable doctrines and restitutionary principles to prevent the State from being unjustly enriched through retention of amounts where the chargeable event did not occur. Awarding interest serves the remedial aim of placing the claimant in the position he would have occupied had the money not been wrongfully withheld. Practically, the decision compels stamp authorities to adopt transparent verification mechanisms for e-stamp transactions, to consider indemnities and secondary evidence where originals are lost, and to process refund claims without undue delay to avoid accruing liability for interest.

The ruling clarifies that absence of express statutory interest provision does not automatically immunise the State from compensatory obligations when it has retained funds without authority. For practitioners, the case reinforces the utility of constitutional writs to secure both restitution and compensation and provides a template for computing interest with adjustments for interim yields.

J) REFERENCES

a. Important Cases Referred

1. Dr. Poornima Advani & Anr. v. Government of NCT & Anr., 2025 2 S.C.R. 1178 : 2025 INSC 262.

2. Secretary, Irrigation Department, Government of Orissa v. G.C. Roy, (1992) 1 SCC 508.

3. Union of India through Director of Income Tax v. Tata Chemicals Ltd., (2014) 6 SCC 335.

4. O.N.G.C. Ltd. v. Commissioner of Customs Mumbai, JT 2007 (10) SC 76.

5. Riches v. Westminster Bank Ltd., 1947 (1) ALL ER 469.

6. Mafatlal Industries Ltd. & Ors. v. Union of India & Ors. (as discussed in the judgment).

b. Important Statutes Referred

1. Constitution of India, arts. 226, 265.

2. Indian Stamp Act, 1899 — Section 49(a), Section 52 (as referred to in judgment).