The Supreme Court has set aside a Punjab and Haryana High Court order that had directed plaintiffs in a property dispute to pay ad valorem court fee, holding that the question of whether fixed or ad valorem court fee was payable could not be conclusively determined at the threshold when the issue depended on disputed facts concerning possession and the nature of the challenged property transfer. 

The bench of Justice S.V. Bhatti and Justice N.V. Anjaria has observed that the issue of court fee in the circumstances would have to be considered after evidence established the relevant facts.

The bench allowed the appeal, restored the Trial Court’s decision refusing to reject the plaint under Order VII Rule 11 of the Code of Civil Procedure, 1908 (CPC), and modified it by directing that the question of court fee be decided after evidence was led in the suit.

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The plaintiffs sought a declaration that they, along with the defendants, were co-owners of the property and were entitled to 1/4th shares. They also challenged the transfer of the property on the ground that it had allegedly been obtained through fraud and sought separate possession of their respective shares along with consequential permanent injunction.

One of the defendants subsequently filed an application under Order VII Rule 11 CPC seeking rejection of the plaint. The principal contention was that since the plaintiffs had sought separate possession and were allegedly not in possession of the property, they were required to pay ad valorem court fee calculated on the market value of the property. Since such fee had not been paid, it was argued that the plaint was liable to be rejected.

The plaintiffs resisted the application, asserting that the property was inherited and that they were co-owners. They maintained that they were not parties to the transfer document being challenged and therefore were not liable to pay ad valorem court fee. According to them, only fixed court fee was payable.

The Trial Court rejected the application under Order VII Rule 11 CPC. It proceeded on the settled principle that, while considering an application for rejection of plaint, the court has to examine the averments contained in the plaint and cannot rely upon allegations contained in the defendant’s written statement.

On examining the plaint and the reliefs claimed, the Trial Court found that the plaintiffs had claimed declaration and separate possession while asserting joint possession of the property. It also relied upon the Supreme Court’s earlier judgment in Suhrid Singh alias Sardool Singh v. Randhir Singh and Others concerning the distinction between a suit by an executant of a document seeking its cancellation and a suit by a non-executant seeking a declaration that the document was invalid or not binding upon him.

The Punjab and Haryana High Court, however, allowed the revision petition against the Trial Court’s order. It concluded that the pleadings showed that the plaintiffs were not in possession of the property and had sought separate possession according to their shares.

On that basis, the High Court held that the plaintiffs were liable to affix ad valorem court fee in accordance with the Court Fees Act, 1870. It granted them two weeks to deposit the requisite court fee and directed that the plaint would stand rejected if the fee was not paid within that period.

The Supreme Court disagreed with the High Court’s approach. It emphasised that the entire plaint had to be read while considering an application under Order VII Rule 11 CPC.

The Court noted that the plaintiffs had specifically pleaded that they and the defendants had resided in the suit property after its purchase and that the property was jointly owned. The plaint further stated that the parties had invested money in repairing and extending the house. These pleadings, according to the Supreme Court, amounted to an unequivocal assertion of joint possession.

The Court therefore found that there was no justification for rejecting the plaint at the threshold merely by accepting the defendant’s contention that ad valorem court fee was payable.

The dispute also involved serious allegations regarding how the property came to be transferred. According to the plaint, the property had been purchased by late Pushpa Sharma from joint family funds and her stridhan. She allegedly did not execute a Will or transfer the property during her lifetime.

The plaintiffs further alleged that a family member had obtained her signatures on blank papers and subsequently, around August 2016, caused the property to be transferred in his name by allegedly using forged documents before the Haryana Housing Board. The plaint also alleged that the property was subsequently mortgaged for a loan of ₹1.50 crore from Yes Bank, which was not repaid. The plaintiffs claimed that they continued to be co-owners in joint possession as legal heirs.

The Supreme Court considered these allegations relevant because the ultimate question of court fee depended not merely on the wording of the prayer for possession but also on the factual position concerning possession and the nature of the challenged transfer.

The Court also revisited its earlier decision in Suhrid Singh. That judgment dealt with the Court Fees Act, 1870 and distinguished between an executant of a document and a non-executant challenging its validity.

Where an executant seeks cancellation of a deed, cancellation has to be specifically sought and ad valorem court fee is payable on the consideration stated in the document. A non-executant, on the other hand, can seek a declaration that the deed is invalid, void, illegal or not binding upon him.

However, the court-fee consequences also depend upon possession. As explained in Suhrid Singh, a non-executant who remains in possession and merely seeks a declaration may be liable only for fixed court fee. Where the non-executant is not in possession and seeks consequential relief of possession, ad valorem court fee may become payable under Section 7(iv)(c) of the Court Fees Act.

A key aspect of the Supreme Court’s ruling is its distinction between deciding whether a plaint should be rejected at the threshold and ultimately determining the correct court fee.

The Court held that the plaintiffs’ assertion of joint possession was sufficient to prevent rejection of the plaint under Order VII Rule 11 CPC on the ground raised by the defendant. At the same time, the Court clarified that this did not mean that the plaintiffs had conclusively established their entitlement to pay only fixed court fee.

The question of court fee would depend upon several factual matters, including the possession position, the nature of the alleged transfer deed and other circumstances surrounding the property dispute. Those matters, the Court said, were issues to be established through evidence in the suit.

Accordingly, whether the plaintiffs ultimately had to pay ad valorem court fee or fixed court fee could not be conclusively determined at the preliminary stage. The Court held that the issue had to be deferred until the relevant facts were established through evidence.

The Supreme Court consequently set aside the Punjab and Haryana High Court’s order dated May 19, 2025, passed in Civil Revision Petition No. 2778 of 2022.

The Trial Court’s order refusing to reject the plaint under Order VII Rule 11 CPC was upheld. However, the Supreme Court modified the order by making it clear that the question of payment of court fee would be considered and decided after, and on the basis of, the evidence led in the suit.

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