SUPREME COURT HOLDS THAT AD VALOREM COURT FEES CAN BE DECIDED AFTER CONSIDERING WHETHER THE PLAINTIFF WAS A PARTY TO THE SALE
A two-Judge Bench of the Supreme Court, comprising of Justice C.T. Ravikumar and Justice Sudhanshu Dhulia, passed a judgment dated 28.07.2023 in the matter of B.P. Naagar & Ors. Vs. Raj Pal Sharma [Civil Appeal No. (SLP (C) No.5812 of 2020) of 2023], wherein, the Bench observed that the central focus of this case was a prolonged disagreement over the valuation of a civil suit. The heart of the matter lay in the question of the appropriate ad valorem court fee for a lawsuit that sought both a declaration and the cancellation of property documents.
Fact:
i) The property in question, House No.173, E. Block, Kamla Nagar, New Delhi (225 Sq. yards), was initially owned by Shri G.D. Mal. When Shri G.D. Mal passed away, and through a Will dated 18.06.1971, he left the property to his wife, Pritam Devi.
ii) After the demise of Shri G.D. Mal, Pritam Devi executed a registered gift deed on 27.04.2010, transferring the property to her grandsons: Shri Balraj Sharma, Shri Hemant Parashar, and Shri Rahul Parashar. The grandsons through the Sale Deed dated 10.01.2011 sold the property for amount of Rs. 1 Crore.
iii) The Respondent (Raj Pal Sharma) and Shri Ram Pal Sharma, who was initially part of the case but was removed on 03.03.2021, are the sons of late Shri G.D. Mal.
iv) They filed a suit with the Trial Court seeking ownership declaration and an injunction for the first and second floors of the property. However, they withdrew the suit later.
v) The Respondent and Ram Pal Sharma then filed the current suit [C.S. (O.S.) No.809 of 2011] against the Appellants (B.P. Naagar). They sought a permanent injunction, declaration, and the cancellation of the registered gift deed and sale deed in the High Court. The suit was valued for court fee and jurisdiction purposes at Rs. 1 Crore.
vi) In response to the suit, the Appellants, who were the defendants, filed an application under Order VII Rule 11, Civil Procedure Code, 1908 (CPC)[1].
vii) They requested the rejection of the Plaintiff’s claim due to insufficient court fee payment, which was based on the suit’s declared value of Rs. 1 Crore.
Trial Court:
Order dated 01.07.2017 in CS(OS) No.612960/2016, pertains to an application filed under Order VII Rule 11 CPC by defendant No.5 (second Appellant). In the application invoking Order VII Rule 11, CPC, before the Trial Court, defendant No.5 (second Appellant) argued that the suit lacked proper valuation for Court fee purposes and the required fee had not been paid. It was emphasized that the Plaintiff (Respondent) had valued the suit at Rs.1 Crore, necessitating the payment of ad valorem Court fee on this amount. Plaintiff resisted the plea for rejecting the Plaint. Following a thorough assessment of the arguments, the Trial Court, through an Order dated 01.07.2017, ruled as follows:
(a) The suit’s improper valuation and inadequate court fee warrant its rejection under Order 7 Rule 11 CPC.
(b) The Application under Order 7 Rule 11 CPC is allowed, but the Plaintiff is granted time until the next hearing to rectify the suit’s valuation and pay the deficient court fee.
Despite the decision to reject the suit, it is noteworthy that the Order dated 01.07.2017 scheduled the suit for further proceedings on 13.07.2017. Meanwhile, the Plaintiff (first Respondent) submitted four Applications under Order VI Rule 17[2] to amend the Plaint. Among these, two were settled based on the Plaintiff’s representation. Subsequently, Applications dated 14.08.2017 and 28.02.2019, were dismissed on 02.03.2019. After declining the Applications under Order VI Rule 17 and Section 151, CPC, for amending the Plaint, a separate Order was issued on the same date (02.03.2019) endorsing the rejection of the Plaint by granting the Application under Order VII Rule 11, CPC, filed by defendant No.5 (second Appellant).
High Court:
Aggrieved by the Orders of Trial Court dated 01.07.2017 and 02.03.2019, the Respondent filed C.M. (M) No.686 of 2019 before the High Court, culminating in the impugned Order of 02.12.2019. Within the same context, C.M. (App.) No. 20889 of 2019 was filed, seeking leave to amend the Plaint. The High Court, in its Order, acknowledged the dismissal of the Application for Amendment under Order VI Rule 17, CPC, followed by the rejection of the suit under Order VII Rule 11, CPC. It then examined whether the suit required valuation and payment of the requisite court fee. The High Court noted that the question regarding ad valorem court fees is a mixed question of fact and law, and clarified that payment of court fees depends on whether the Plaintiff is a party to the relevant deeds. The Court directed the Trial Court to frame an issue regarding the suit’s valuation, to be resolved during the final stage. The High Court directed the Plaintiff to amend the suit, allowing it to proceed further.
Supreme Court:
Aggrieved by the High Court Order dated 02.12.2019, the Appellant filed a Civil Appeal No. (SLP (C) No.5812 of 2020) of 2023 before the Supreme Court. The Apex Court vide Order dated 28.07.2023, made the following observations:
(1) That the High Court’s Order is based solely on the question of ad valorem court fee for a non-party seeking a declaration on a sale deed. The Trial Court reasoned the dual reliefs of ‘declaration’ and ‘cancellation’ needed a proper valuation for fee and jurisdiction. Thus, while observing that the plaint could be rejected under Order 7 Rule 11 CPC, it allowed time for the Plaintiff to correct the valuation and pay the deficient court fee. The Apex Court noted this Order challenged in the High Court, which, in its impugned Order, overturned the conclusions, permitting the Respondent to amend the Plaint and instructing the Trial Court to address suit valuation and adjudication at the final stage.Top of Form
(2) The Respondent herein, as the petitioner, prayed before the High Court to permit the amendment under Order VI Rule 17, along with Section 151[3] of the CPC, to modify paragraph 33 of the Plaint concerning court fee and jurisdiction. The requested amendment also involved eliminating the terms ‘cancellation’ and ‘cancelling’ from prayer paragraphs ‘A’ and ‘B’. They simultaneously sought the dismissal of the application submitted by the 5th Respondent, the 2nd Appellant herein, under Order VII Rule 11 of the CPC. The application dated 14.08.2017, filed by the Respondent Plaintiff, and provided as detailed the amendment sought in paragraph 33 of the Plaint:
“33. The value of the suit for the purpose of court fee and jurisdiction for the relief of declaration is Rs. 200/- and for the relief of permanent and mandatory injunction is also Rs. 200/-. Requisite court fee has been duly paid.”
(3) Clearly, both the Trial Court’s Order dated 01.07.2017 and the subsequent Order dated 02.03.2019 leaned on the decisions of the Delhi High Court in Bharat Sanchar Nigam Ltd.’s case, emphasizing that a Plaintiff should value the suit consistently for both court fees and jurisdiction, barring exceptions specified under Section 7 of the Court Fees Act, 1870. Pertinently, the decision in RM. AR. S. SP. Sathappa Chettiar v. S. RM. AR. RM Ramanathan Chettiar[4] adds insight. This Court held that the value for jurisdiction in such cases relies on Section 7(iv) of the Court Fees Act, 1870 along with Section 8 of the Suits Valuation Act. The value determined for court fees essentially determines the value for jurisdiction, as the two must coincide for suits falling under Section 7(iv) of the Act. The Plaintiff’s stated value for court fees governs the value for jurisdiction, establishing a clear hierarchy.
(4) In the Article 227[5] petition before the High Court, the Respondent (Petitioner) relied on the Punjab & Haryana High Court’s decision in Bawa Bir Singh v. Ali Niwan Khan[6]. The contention was that if a suit falls under Section 7(iv)(c) of the Court Fees Act and assigns distinct values for court fees and jurisdiction, the value for court fees should dictate the value for jurisdiction, rendering the separate jurisdictional value insignificant.
(5) As earlier mentioned, the amendment sought aligns the values for both court fees and jurisdiction. Notably, the Order of 01.07.2017 from the Trial Court concluded that the Plaintiff’s case did not fall under any of the exceptions outlined in Section 7 of the Court Fees Act, 1870. Moreover, the Plaintiff’s argument before the Trial Court, based on Section 7(vi)(d) read with entry 17(vi) of Schedule II[7] of the Court Fees Act as applied in Delhi, was rejected.
(6) It’s important to highlight that despite the mentioned circumstances and the involvement of several relevant and important questions, the High Court permitted the petitioner to amend the Plaint without even referring to the proposed amendment. If the amendment sought before the High Court aligns with what the Plaintiff/Respondent originally requested at the Trial Court and has been granted as per the High Court’s Order, a potential query arises regarding the continued relevance of the ad valorem court fee. Similarly, it’s worth considering whether the Court of Additional District Judge-II, Central, Tis Hazari Courts, Delhi moves forward with framing and adjudicating the issues after the amendment is approved.
(7) Examining the High Court’s Order indicates that it did not address the aforementioned questions and related matters, despite the Trial Court delving into these aspects.
In view of the above observations, the Supreme Court sent the case back to the High Court for a fresh review. The impugned Order was set aside and both parties were directed to appear before the High Court and argue the matter on merits in order to enable the court to decide the matter. The Court further directed that the High Court should conclude the matter within 6 months.
Conclusion –
The Supreme Court decided that the main question in the Appeal was whether ad valorem court fees was required to be paid. The Court further held that this would be a question that could be answered by looking closely at the facts. The main question of fact and law, to be decided was if the plaintiff is a party to the gift deed and sale deed, then court fee is liable to be paid but if the Plaintiff is not a party, no court fee would be liable to be paid.
Udit Krishna
Associate
Indian Lawyer & Allied Services
[1] Order VII Rule 11 – Rejection of Plaint
[2] Order VI Rule 17 – Amendment of Pleadings
[3] Section 151 – Saving of Inherent powers of Court
[4] AIR 1958 SC 245
[5] Article 227 – Power of superintendence over all courts by the High Court
[6] [AIR 1964 Punjab 381]
[7] entry 17(vi) of Schedule II –(vi) every other suit where it is not possible to estimate at a money-value the subject matter in dispute, and which is not otherwise provided for by this Act.