Meezan Bank Ltd VS Chief Commissioner & others

JUDGMENT SHEET

IN THE ISLAMABAD HIGH COURT, ISLAMABAD

(JUDICIAL DEPARTMENT)

W.P. No. 4295 of 2021

Meezan Bank Limited Vs.

The Chief Commissioner ICT and 2 others

Petitioner by : Ch. Abdul Rauf Advocate.

Respondents by : Mr. Shafqat Mahmood, State Counsel.

Date of Hearing : 15-10-2026.

SHAHRUKH ARJUMAND, J.-

1.Through the instant petition, the petitioner has assailed (i) order dated 12.07.2021 (“Impugned Order-I”) passed respondent No. 3 [Additional Deputy Commissioner (Revenue) ICT] whereby application filed by the petitioner bank for refund of stamp paper amounting to Rs.6,800,000/- was dismissed being time barred; (ii) order dated 04.10.2021(“Impugned Order-II”) passed by respondent No. 2 [Deputy Commissioner/Collector Revenue, ICT] whereby appeal against Impugned Order-I was dismissed for want of jurisdiction.

2.Brief facts, as per memorandum of petition, are that petitioner bank entered into an agreement to sell dated 31-12-2019 with M/s MAAKSONS Engineering Corporation Limited and petitioner bank purchased stamp duty amount to Rs.6,800,000/- on 13-01-2021 from the State Bank of Pakistan. Due to some legal technicalities the sale deed in favour of petitioner bank

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was not executed and as a result the said stamp duty was applied for refund of the same on 08-7-2021 well within limitation described under Section 50 of the Stamp Act, 1899 (“Stamp Act”). The petitioner bank filed application before the respondent No. 3 on 08-7-2021 and respondent No. 3 without notice to the petitioner bank dismissed the said application on 12- 7-2021 being time barred. The order alleged was sent to ordinary post which did not reach the petitioner bank however, on probe, the petitioner bank came to know about the decision dated 12-7-2021. The petitioner bank filed appeal before respondent No. 2 which too was returned on the ground that the respondent No. 2 has no jurisdiction under the Stamp Act. Hence, this petition.

3.Learned counsel for the petitioner bank contended that the impugned orders are contrary to law and the facts of the case. Learned counsel submitted that the application for refund was filed within six months of the purchase of the stamp duty and that the rejection thereof, without identifying the applicable statutory provision or assigning any cogent reason, is unsustainable. Learned counsel further contended that the application was dismissed without affording the petitioner bank an opportunity of hearing and that the appellate authority also declined to examine the matter on an erroneous assumption regarding its jurisdiction. Learned counsel relied upon Muhammad Idrees v. District Officer (Revenue) and another (PLD 2016 Lahore 156) and prays that the Impugned Orders be set aside and the respondents be directed to refund the stamp duty.

4.Conversely, learned State Counsel controverted the submissions advanced on behalf of the petitioner bank and supports the Impugned Orders, maintaining that the same do not warrant interference by this Court.

5.I have heard learned counsel for the parties and have examined the available record with their assistance.

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Statutory Framework:

6.The controversy must be examined in the light of Sections 49 and 50 of the Stamp Act, which govern the allowance for spoiled stamps and prescribe the period within which an application for such relief is to be made. Section 49, to the extent relevant, reads as follows:

“49. Allowances for spoiled stamps. — Subject to such rules as may be made by the Provincial Government as to the evidence to be required, or the enquiry to be made, the Collector may, on application made within the period prescribed in section 50, and if he is satisfied as to the facts, make allowance for impressed stamps spoiled in the cases hereinafter mentioned, namely:—

(a)the stamp on any paper inadvertently and undesignedly spoiled, obliterated or by error in writing or any other means rendered unfit for the purpose intended before any instrument written thereon is executed by any person;

(b)the stamp on any document which is written out wholly or in part, but which is not signed or executed by any party thereto;

(d)the stamp used for an instrument executed by any party thereto which—

(1)has been afterwards found to be absolutely void in law from the beginning;

(2)has been afterwards found unfit, by reason of any error or mistake therein, for the purpose originally intended;

(3)by reason of the death of any person by whom it is necessary that it should be executed, without having executed the same, or of the refusal of any such person to execute the same, cannot be completed so as to effect the intended transaction in the form proposed;

(4)for want of the execution thereof by some material party, and his inability or refusal to sign the same, is in fact incomplete and insufficient for the purpose for which it was intended;

(5)by reason of the refusal of any person to act under the same, or to advance any money intended to be thereby secured, or by the refusal or non-acceptance of any office thereby granted, totally fails of the intended purpose.”

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Section 50 of the Stamp Act, in so far as relevant, provides:

“50. Application for relief under section 49 when to be made.— The application for relief under section 49 shall be made within the following periods, that is to say,—

(1)in the cases mentioned in clause (d) (5), within two months of the date of the instrument;

(2)in the case of a stamped paper on which no instrument has been executed by any of the parties thereto, within six months after the stamp has been spoiled;

(3)in the case of a stamped paper in which an instrument has been executed by any of the parties thereto, within six months after the date of the instrument, or, if it is not dated, within six months after the execution thereof by the person by whom it was first or alone executed.”

7.Sections 53 and 54 of the Stamp Act are also relevant which are reproduced hereunder for ready reference:

“Section 53. Allowance for spoiled or misused stamps how to be made: In any case in which allowance is made for spoiled or misused stamps, the Collector may give in lieu thereof: a) other stamps of the same description and value; or b) if required and he thinks fit, stamps of any other description to the same amount in value; or, c) at his discretion, the same value in money, deducting one anna for each rupee or fraction of a rupee.”

“Section 54. Allowance for stamps not required for use: When any person is possessed of a stamp or stamps which have not been spoiled or rendered unfit or useless for the purpose intended, but for which he has no immediate use, the Collector shall repay to such person the value of such stamp or stamps in money, deducting one anna for each rupee or portion of a rupee, upon such person delivering up the same to be cancelled, and proving to the Collector's satisfaction:

(a)that such stamp or stamps were purchased by such person with a bona fide intention to use them; and

(b)that he has paid the full price thereof; and

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(c)that they were so purchased within the period of six months next preceding the date on which they were so delivered:

Provided that, where the person is a licensed vendor of stamps, the Collector may, if he thinks fit, make the repayment of the sum actually paid by the vendor without any such deduction as aforesaid.”

The provision distinguishes between the admissibility of an allowance and the manner in which it is to be granted. Where the claim falls within Sections 49 or 52, the form of relief is governed by Section 53, and a cash allowance remains subject to the discretion conferred upon the Collector and the statutory deduction. The provision does not, however, independently create a right to a refund in every case in which a proposed transaction is not completed.

7.A combined reading of Sections 49, 50, 53 and 54 of the Stamp Act reveals that the legislature has provided distinct statutory mechanisms for different situations. Sections 49 and 50 govern allowances for spoiled stamps and prescribe the applicable limitation periods; Section 53 regulates the manner in which an allowance for spoiled or misused stamps may be granted; whereas Section 54 deals with stamps which have not been spoiled or rendered unfit or useless but are no longer immediately required for use. The applicability of these provisions depends upon the actual condition of the stamp papers and the circumstances in which they ceased to be required for the intended transaction.

8.The distinction is material. Where an instrument has been written on a stamp paper but remains unsigned or unexecuted, Section 49(b), read with the relevant provision of Section 50, may be attracted. Where the stamp paper has been spoiled or rendered useless in circumstances covered by Section 49, the corresponding limitation provision must be applied by reference to the statutory starting point. Conversely, where the stamps remain unused and have not been spoiled or rendered unfit or useless, Section 54 requires consideration, subject to its conditions concerning

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bonafide purchase, payment of the full price and delivery of the stamps for cancellation within the prescribed period. The date of purchase alone cannot determine the applicability of every provision, nor can the claim be rejected without first identifying the statutory category into which it falls.

9.The power conferred upon the Collector is undoubtedly subject to the statutory conditions. The expression “if he is satisfied as to the facts” requires the authority to examine the material placed before it and determine whether the case falls within any of the specified categories. It does not authorize an arbitrary rejection, nor does it dispense with the obligation to record reasons demonstrating that the relevant statutory conditions have been considered. The object of the provisions is to regulate the grant of an allowance in defined circumstances; it is not to permit a claim to be defeated through a mechanical application of limitation divorced from the nature of the transaction.

Precedent governing the controversy:

10.The above interpretation finds support in Muhammad Idrees (Supra) wherein the Lahore High Court considered the rejection of an application for refund of non-judicial stamp papers on the ground of limitation. In that case, the revenue authorities had treated the claim as falling under Section 49(d)(5), read with Section 50(1), of the Stamp Act, thereby applying a period of two months. The Court, however, examined the actual circumstances of the transaction and found that the intended sale deed had not been completed owing to a dispute between the parties, which was subsequently resolved, and that a sale deed was registered between the same parties on new stamp papers. The Court observed, in substance, that the rejection was not sustainable because the original order was not a speaking order and the authorities had failed to apply their judicial mind to the facts and the applicable statutory provisions. It held that the circumstances attracted Section 49(d)(6), read with Section 50(3), and that the application for refund had been filed within the prescribed period. The

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Court accordingly accepted the petition, set aside the impugned orders and directed the respondents to issue the refund.

11.The principle material to the present controversy is that limitation under Sections 49 and 50 must be determined with reference to the statutory category actually attracted by the facts, and not by mechanically invoking a provision prescribing a shorter period for a different contingency. The decision also underscores the importance of a speaking order where the authority is called upon to determine a claim for refund under the Stamp Act.

12.It is true that the factual circumstances in Muhammad Idrees (Supra) included the subsequent execution of a sale deed between the same parties on new stamp papers. The present case, as pleaded, concerns a sale deed which could not be executed owing to legal impediments. Thus, the particular clause applicable to the present transaction must be determined on its own facts. Nevertheless, the governing principle concerning the proper identification of the statutory provision and the determination of limitation remains relevant. The cited judgment is relied upon for the limited proposition that a claim for allowance must be examined in the light of the circumstances established by the record and the statutory provision applicable thereto. It does not dispense with compliance with the conditions prescribed by the Stamp Act, nor does it establish an unconditional right to a cash refund in every case where the intended transaction is not completed.

Application of law to the facts and entitlement to refund:

13.Applying the foregoing principles to the present case, the record, as summarized in the memorandum of petition, reflects that the petitioner bank entered into an agreement to sell dated 31.12.2019 with M/s MAAKSONS Engineering Corporation Limited and subsequently purchased stamp duty amounting to Rs.6,800,000/- on 13.01.2021. As the intended sale deed was not executed, the petitioner applied for refund on

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08.07.2021. The decisive question, however, is whether the stamp papers were written upon, spoiled or rendered useless, or whether they remained unused and were no longer required for the intended transaction. That factual determination is essential to identifying the applicable statutory provision.

14.If the stamp papers were written upon but the instrument remained unsigned or unexecuted, the claim would require examination under Section 49(b), read with the relevant provision of Section 50. If the stamps were spoiled or rendered useless in circumstances falling within Section 49, the corresponding clause and limitation period would have to be identified. If, on the other hand, the stamp papers remained unused and had not been spoiled or rendered unfit or useless, the claim would require consideration under Section 54. In the latter situation, the Collector would have to determine whether the statutory conditions concerning bonafide purchase, payment of the full price and delivery of the stamps for cancellation within the prescribed period had been fulfilled.

15.The dates pleaded by the petitioner for purchase on 13.01.2021 and application on 08.07.2021 are relevant but are not, by themselves, conclusive of entitlement. Under Section 50(2), the prescribed period is calculated from the date on which the stamp was spoiled. Under Section 54, the relevant six-month period is linked to the date on which the stamps are delivered for cancellation. The authority was, therefore, required to determine the applicable provision and the event from which the statutory period commenced, rather than reject the claim through an unexplained conclusion of limitation.

16.Section 53 further demonstrates why the precise classification of the claim is necessary. Where an allowance for spoiled or misused stamps is admissible under the relevant statutory provisions, the Collector must determine the permissible form of relief in accordance with Section 53. A

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cash allowance under that provision is discretionary and subject to the prescribed deduction. Where Section 54 applies, the repayment mechanism and its express conditions govern the claim. The Court cannot, therefore, direct an unconditional cash refund without first establishing the statutory basis of entitlement and addressing the conditions governing the form and amount of repayment.

17.The principle emerging from Muhammad Idrees (Supra) is that a claim for allowance cannot lawfully be rejected by mechanically invoking a limitation provision without examining the circumstances of the transaction and identifying the statutory category that governs it. Although the facts of that case differ from those presently before this Court, the requirement of a reasoned determination in accordance with the applicable provisions of the Stamp Act is equally relevant here.

18.In the present case, respondent No. 3 rejected the application as time-barred without adequately identifying the statutory category applicable to the claim, determining the relevant starting point of limitation or explaining how the prescribed period had expired. Respondent No. 2 declined to entertain the appeal on the ground of want of jurisdiction, leaving the petitioner's claim without an effective determination on its merits. In these circumstances, the impugned orders cannot be sustained. The appropriate course is to remit the matter to the competent authority for a fresh, speaking order after examining the original stamp-duty instruments, the circumstances in which the proposed transaction could not be completed, the applicable statutory provision and the relevant rules in force in Islamabad Capital Territory.

19.In view of above reasons, this petition is ALLOWED. The Impugned Orders dated 12.07.2021 and 04.10.2021 are set aside. The matter is remitted to the competent authority for fresh determination of the petitioner's application for allowance/refund of stamp duty amounting to Rs.6,800,000/-, in accordance with Sections 49, 50, 53 and 54 of the Stamp

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Act, 1899, to the extent applicable, and the relevant rules and amendments in force in Islamabad Capital Territory. The competent authority shall examine the original stamp-duty instruments, determine the statutory category applicable to the claim, ascertain compliance with the relevant limitation period and other statutory conditions, afford the petitioner an opportunity of hearing, and pass a reasoned order. If the claim is found admissible, the allowance or repayment shall be granted in the manner and subject to the conditions authorized by the applicable provision of law. No opinion is expressed on the petitioner's ultimate entitlement to a cash refund.

20.The respondents shall decide the matter in accordance with law within fifteen days of receipt of certified copy of this judgment. The office is directed to supply certified copy of this judgment to the respondents immediately.

(SHAHRUKH ARJUMAND)

JUDGE

Approved for reporting.

JUDGE

Tanveer Ahmed/*