The Punjab and Haryana High Court has clarified a critical principle governing court fee computation in suits involving agreements to sell. In a significant ruling, the Court held that when a plaintiff seeks cancellation of such an agreement but has not received possession of the property, the ad valorem court fee must be calculated solely on the amount of earnest money paid, not the full sale consideration. This decision resolves a recurring point of contention in civil litigation and provides clear guidance to practitioners.
Background & Facts
The Dispute
The petitioner, Khushboo Arora, entered into an agreement to sell dated 15.04.2024 with the respondent, Gursahib Singh, for the sale of a property. The agreement stipulated a total sale consideration of Rs. 1,05,00,000 (Rupees One Crore and Five Lakh only), payable in installments through cheques. The respondent issued three cheques towards earnest money, all of which were dishonored. The petitioner thereafter issued legal notices terminating the agreement and forfeiting the earnest money. The respondent, in response, filed a civil suit on 27.09.2024 seeking possession of the property and an injunction against the petitioner and her father, alleging that the property was mortgaged and that he had been denied possession.
Key Facts
- The agreement to sell was executed on 15.04.2024
- The total sale consideration was Rs. 1,05,00,000
- The earnest money amount was Rs. 1,05,00,000, paid via three cheques
- The cheques were dishonored, leading to termination of the agreement on 10.08.2024
- The petitioner issued legal notices on 12.08.2024 and 20.08.2024, both unacknowledged
- The respondent filed Suit No. 234/2024 on 27.09.2024 seeking possession and injunction
- The petitioner filed her own suit on 15.10.2024 seeking declaration of ownership and permanent injunction
- On 17.10.2024, the Trial Court directed status quo on the property
- On 03.01.2025, the petitioner withdrew her claim for declaration of nullity and amended her suit to seek only declaration of ownership and possession
Procedural History
- 15.04.2024: Agreement to sell executed
- 10.08.2024: Petitioner terminated agreement and forfeited earnest money
- 27.09.2024: Respondent files suit for possession and injunction
- 15.10.2024: Petitioner files suit for declaration of ownership and possession
- 17.10.2024: Trial Court issues status quo order
- 03.01.2025: Petitioner withdraws claim for declaration of nullity
- 11.10.2025: Respondent files application under Order VII Rule 11 CPC seeking rejection of plaint for insufficient court fee
- 04.11.2025: Trial Court allows application, directs petitioner to pay ad valorem court fee on entire sale consideration
- 24.03.2026: Revision petition heard
- 01.04.2026: Judgment pronounced
Relief Sought
The petitioner sought quashing of the order dated 04.11.2025, and a direction that ad valorem court fee be computed only on the earnest money amount of Rs. 1,05,00,000, not the full sale consideration. She also sought costs and clarification that her suit was not for cancellation of the agreement but for declaration of ownership.
The Legal Issue
The central question was whether, in a suit seeking declaration of ownership and possession where the plaintiff is an executant of an agreement to sell and has not received possession, the ad valorem court fee must be computed on the entire sale consideration, or whether it is limited to the amount of earnest money forfeited.
Arguments Presented
For the Petitioner
The petitioner’s counsel argued that the suit was strictly for declaration of ownership and possession, not for cancellation of the agreement. Relying on Suhrid Singh @ Sardool Singh v. Randhir Singh (2010) 4 SCC 585, they contended that where no prayer is made to set aside a document, ad valorem court fee is not exigible. In the alternative, even if the suit was construed as seeking cancellation, the court fee must be computed only on the earnest money, not the full sale consideration, citing Anil Kumar v. Maninderbir Singh (2025) 2 RCR (Civil) 240 and Subhash Chander v. Dinesh Kumar (2026) 2 RCR (Civil) 331. They emphasized that since possession had not been transferred, the value of the relief claimed was limited to the forfeited earnest money.
For the Respondent
The respondent’s counsel contended that the suit, though framed as declaratory, was in substance a suit for cancellation of the agreement, as the petitioner sought to negate the agreement’s effect. Relying on Shamsher Singh v. Rajinder Prashad (AIR 1973 SC 2384) and Faqir Chand v. Harnam Kaur (1977) 1 SCR 68, they argued that courts must look beyond the form of the prayer to the substance of the relief. They cited Manoj Kumar Gupta v. Sheela Devi and Parveen v. Adeep Wadhawan to assert that any suit by an executant challenging the agreement must attract ad valorem court fee on the full consideration.
The Court's Analysis
The Court undertook a detailed examination of the plaint and the nature of the relief sought. It acknowledged the petitioner’s concession that the suit, in substance, aimed to avoid the agreement to sell, as evident from paragraph 5 of the plaint, which alleged termination and forfeiture. However, the Court emphasized that the legal character of the suit must be determined not merely by the form of the prayer but by the actual relief claimed and its effect.
The Court distinguished between suits for cancellation of a document and suits for declaration of ownership where the document is merely challenged as void or terminated. It held that while the suit may have the effect of negating the agreement, the absence of a specific prayer for cancellation or setting aside the document, coupled with the non-transfer of possession, rendered the claim distinct from a suit for specific performance or rescission.
"Since vestment of complete title in the vendor takes place only on the execution of the registered deed of conveyance, and, when at the said stage, the remaining sale consideration is also liquidated by the vendee to the vendor, thus, in the presence of the registering officer concerned... therefore, on the plaintiff concerned, instituting a suit for specific performance... is required to be affixing court fees ad valorem to the entire sale consideration.. However reiterated, as stated (supra) the defendant did not do so, where bys, this Court reiterated concludes, that he is estopped to claim that the plaintiff is ill asserting qua the rendition of a decree for rescinding the agreement to sell... Importantly, when there is no parting of possession of the suit property from the plaintiff to the defendant nor any consequential relief in the said regard became espoused. Resultantly, court fees ad valorem to the asked for forfeited earnest money, but is required to be affixed on the plaint, than court fees ad valorem to the entire sale consideration."
The Court reaffirmed its own precedents in Anil Kumar and Subhash Chander, holding that where possession has not been delivered and the plaintiff seeks only to assert ownership after forfeiture of earnest money, the court fee must be computed on the earnest money alone. The respondent’s reliance on judgments involving actual cancellation prayers or specific performance was found inapposite.
The Court further noted that the Trial Court had failed to appreciate this distinction and had mechanically directed payment of court fee on the full consideration without examining the nature of the relief claimed.
The Verdict
The revision petition was partly allowed. The order dated 04.11.2025 of the Civil Judge (Junior Division), Amritsar, was modified to the extent that the petitioner is required to pay ad valorem court fee only on the amount of earnest money of Rs. 1,05,00,000, and not on the entire sale consideration. The Court clarified that this ruling is confined to the issue of court fee and does not prejudice any substantive claim in the pending suit. The petitioner shall deposit the revised court fee within four weeks from the date of this order.
What This Means For Similar Cases
Court Fee Is Tied to Relief, Not Document Value
- Practitioners must now assess the actual relief claimed in the plaint, not the value of the underlying document, to determine court fee liability
- Suits for declaration of ownership after forfeiture of earnest money, without seeking cancellation or possession, attract court fee only on the earnest money amount
- Drafting a suit as declaratory does not automatically exempt it from ad valorem fee, but the fee is capped at the value of the relief sought
Possession Transfer Is a Critical Factor
- Where possession has not been delivered, courts must not equate the value of the agreement with the value of the relief claimed
- This principle applies equally to suits by vendors and vendees seeking to enforce or avoid agreements
- Any future claim for specific performance or cancellation must be separately pleaded and attract corresponding court fee
Strategic Implications for Drafting Pleadings
- Lawyers should avoid including prayers for cancellation unless necessary, to limit court fee exposure
- Where termination and forfeiture are alleged, the plaint should clearly state that the agreement is void ab initio or terminated, not that it is being cancelled
- The distinction between "declaration of title" and "cancellation of instrument" remains legally significant for fee computation
