Court Fee in Agreement to Sell Disputes: P&H High Court Holds Ad Valorem Fee Payable Only on Earnest Money, Not Entire Sale Consideration

Case Name: Khushboo Arora v. Gursahib Singh

Date of Judgment: 01 April 2026

Citation: CR-2534-2026

Bench: Justice Virinder Aggarwal

Held: The Punjab & Haryana High Court held that where a plaintiff, being an executant of an agreement to sell, seeks to avoid or nullify the agreement, ad valorem court fee is payable. However, in such cases where possession has not been transferred, the court fee is to be computed only on the earnest money and not on the entire sale consideration.

Summary: The petitioner challenged an order directing payment of ad valorem court fee on the entire sale consideration in a suit arising out of an agreement to sell.

The dispute arose when the petitioner entered into an agreement to sell property and received earnest money through cheques, which were later dishonoured. The petitioner terminated the agreement and forfeited the earnest money. Subsequently, litigation ensued between the parties, with competing claims over possession and rights in the property.

The respondent sought rejection of the plaint under Order VII Rule 11 CPC on the ground that proper court fee had not been paid. The Trial Court allowed the application and directed payment of ad valorem court fee on the entire sale consideration.

Before the High Court, the petitioner argued that the suit was merely for declaration of ownership and possession, and not for cancellation of the agreement, hence no ad valorem court fee was payable.

The Court, however, examined the substance of the plaint and noted that the petitioner had effectively sought to avoid and nullify the agreement to sell. It reiterated the settled principle that courts must look at the real nature of relief and not merely the drafting of the plaint.

Thus, it was held that the petitioner, being an executant of the agreement, was liable to pay ad valorem court fee.

However, the Court accepted the alternative contention that such court fee cannot be calculated on the entire sale consideration. Relying on consistent precedents, it held that where possession has not been transferred and the dispute relates to forfeiture/avoidance of agreement, the valuation must be confined to the earnest money involved.

Decision: The High Court partly allowed the revision petition and modified the Trial Court’s order, holding that ad valorem court fee is payable only on the earnest money and not on the total sale consideration.