Asian Satellite Broadcast Pvt Ltd & Anr. vs Religare Finvest Limited & Anr.
- Court
- Delhi High Court
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 03.08.2026
Judgment pronounced on: 02.11.2026
# CNR No. DLHC010232502026
+ O.M.P. (COMM) 253/2026, I.A. 14326/2026, I.A. 14327/2026,
I.A. 14328/2026 & I.A. 14329/2026
ASIAN SATELLITE BROADCAST PVT LTD & ANR.
.....Petitioners
Through: Mr. Kunal Tandon, Sr. Advocate
with Mr. Aman Raj Gandhi, Mr.
Ojasvi Sharma, Ms. Natasha Singh,
Mr. Shreni Taran and Ms. Vanika
Kansal, Advocates.
versus
RELIGARE FINVEST LIMITED & ANR. .....Respondents
Through: Mr. Abhimanyu Bhandari, Sr. Adv
with Mr. Siddharth Sharma, Mr.
Mahesh Agarwal, Mr. Rishi
Agarwal, Mr. Maj. Nirvikar Singh,
Ms. Shruti Arora, Ms. Priyakshi,
Ms. Ishika Chauhan and Mr.
Daanish Abbasi, Advocates for R-
1.
# CNR No. DLHC010232512026
+ O.M.P. (COMM) 254/2026, I.A. 14338/2026, I.A. 14339/2026,
I.A. 14340/2026 & I.A. 14341/2026
WIDESCREEN HOLDINGS PVT LTD & ANR.
.....Petitioners
Through: Mr. Kunal Tandon, Sr. Advocate
with Mr. Aman Raj Gandhi, Mr.
Signature Not Verified
Signed By:GUNN
Signing Date:03.11.2026
18:20:03
O.M.P. (COMM) 253/2026 & conn. Page 1 of 110
Ojasvi Sharma, Ms. Natasha Singh,
Mr. Shreni Taran and Ms. Vanika
Kansal, Advocates.
versus
RELIGARE FINVEST LIMITED & ANR. .....Respondents
Through: Mr. Abhimanyu Bhandari, Sr. Adv
with Mr. Siddharth Sharma, Mr.
Mahesh Agarwal, Mr. Rishi
Agarwal, Mr. Maj. Nirvikar Singh,
Ms. Shruti Arora, Ms. Priyakshi,
Ms. Ishika Chauhan and Mr.
Daanish Abbasi, Advocates for R-
1.
# CNR No. DLHC010232522026
+ O.M.P. (COMM) 255/2026, I.A. 14342/2026, I.A. 14343/2026,
I.A. 14344/2026 & I.A. 14345/2026
EDISON INFRAPOWER AND MULTIVENTUTRES PVT LTD
FORMERLY KNOWN AS EDISONS UTILITY WORKS PVT
LTD .....Petitioner
Through: Mr. Kunal Tandon, Sr. Advocate
with Mr. Aman Raj Gandhi, Mr.
Ojasvi Sharma, Ms. Natasha Singh,
Mr. Shreni Taran and Ms. Vanika
Kansal, Advocates.
versus
RELIGARE FINVEST LIMITED & ANR. .....Respondents
Through: Mr. Abhimanyu Bhandari, Sr. Adv
with Mr. Siddharth Sharma, Mr.
Mahesh Agarwal, Mr. Rishi
Agarwal, Mr. Maj. Nirvikar Singh,
Ms. Shruti Arora, Ms. Priyakshi,
Ms. Ishika Chauhan and Mr.
Daanish Abbasi, Advocates for R-
Signature Not Verified
Signed By:GUNN
Signing Date:03.11.2026
18:20:03
O.M.P. (COMM) 253/2026 & conn. Page 2 of 110
1.
# CNR No. DLHC010232532026
+ O.M.P. (COMM) 256/2026, I.A. 14346/2026, I.A. 14347/2026,
I.A. 14348/2026 & I.A. 14349/2026
KONTI INFRAPOWER AND MULTIVENTURES PVT LTD &
ANR. .....Petitioners
Through: Mr. Kunal Tandon, Sr. Advocate
with Mr. Aman Raj Gandhi, Mr.
Ojasvi Sharma, Ms. Natasha Singh,
Mr. Shreni Taran and Ms. Vanika
Kansal, Advocates.
versus
RELIGARE FINVEST LIMITED & ANR. .....Respondents
Through: Mr. Abhimanyu Bhandari, Sr. Adv
with Mr. Siddharth Sharma, Mr.
Mahesh Agarwal, Mr. Rishi
Agarwal, Mr. Maj. Nirvikar Singh,
Ms. Shruti Arora, Ms. Priyakshi,
Ms. Ishika Chauhan and Mr.
Daanish Abbasi, Advocates for R-
1.
# CNR No. DLHC010320452026
+ O.M.P. (COMM) 323/2026, I.A. 19073/2026, I.A. 19074/2026 &
I.A. 19075/2026
RELIGARE FINVEST LIMITED .....Petitioner
Through: Mr. Abhimanyu Bhandari, Sr. Adv
with Mr. Siddharth Sharma, Mr.
Mahesh Agarwal, Mr. Rishi
Agarwal, Mr. Maj. Nirvikar Singh,
Ms. Shruti Arora, Ms. Priyakshi,
Ms. Ishika Chauhan and Mr.
Daanish Abbasi, Advocates.
Signature Not Verified
Signed By:GUNN
Signing Date:03.11.2026
18:20:03
O.M.P. (COMM) 253/2026 & conn. Page 3 of 110
versus
ASIAN SATELLITE BROADCAST PRIVATE LIMITED &
ORS. .....Respondents
Through: Mr. Kunal Tandon, Sr. Advocate
with Mr. Aman Raj Gandhi, Mr.
Ojasvi Sharma, Ms. Natasha Singh,
Mr. Shreni Taran and Ms. Vanika
Kansal, Advocates.
# CNR No. DLHC010322302026
+ O.M.P. (COMM) 327/2026, I.A. 19251/2026, I.A. 19252/2026 &
I.A. 19253/2026
RELIGARE FINVEST LIMITED .....Petitioner
Through: Mr. Abhimanyu Bhandari, Sr. Adv
with Mr. Siddharth Sharma, Mr.
Mahesh Agarwal, Mr. Rishi
Agarwal, Mr. Maj. Nirvikar Singh,
Ms. Shruti Arora, Ms. Priyakshi,
Ms. Ishika Chauhan and Mr.
Daanish Abbasi, Advocates.
versus
EDISONS INFRAPOWER AND MULTIVENTURES PRIVATE
LIMITED AND ANR & ANR. .....Respondents
Through: Mr. Kunal Tandon, Sr. Advocate
with Mr. Aman Raj Gandhi, Mr.
Ojasvi Sharma, Ms. Natasha Singh,
Mr. Shreni Taran and Ms. Vanika
Kansal, Advocates.
# CNR No. DLHC010322312026
+ O.M.P. (COMM) 328/2026, I.A. 19258/2026, I.A. 19259/2026 &
I.A. 19260/2026
RELIGARE FINVEST LIMITED .....Petitioner
Signature Not Verified
Signed By:GUNN
Signing Date:03.11.2026
18:20:03
O.M.P. (COMM) 253/2026 & conn. Page 4 of 110
Through: Mr. Abhimanyu Bhandari, Sr. Adv
with Mr. Siddharth Sharma, Mr.
Mahesh Agarwal, Mr. Rishi
Agarwal, Mr. Maj. Nirvikar Singh,
Ms. Shruti Arora, Ms. Priyakshi,
Ms. Ishika Chauhan and Mr.
Daanish Abbasi, Advocates.
versus
KONTI INFRAPOWER AND MULTIVENTURES PRIVATE
LIMITED & ORS. .....Respondents
Through: Mr. Kunal Tandon, Sr. Advocate
with Mr. Aman Raj Gandhi, Mr.
Ojasvi Sharma, Ms. Natasha Singh,
Mr. Shreni Taran and Ms. Vanika
Kansal, Advocates.
# CNR No. DLHC010322362026
+ O.M.P. (COMM) 331/2026, I.A. 19289/2026, I.A. 19290/2026 &
I.A. 19291/2026
RELIGARE FINVEST LIMITED .....Petitioner
Through: Mr. Abhimanyu Bhandari, Sr. Adv
with Mr. Siddharth Sharma, Mr.
Mahesh Agarwal, Mr. Rishi
Agarwal, Mr. Maj. Nirvikar Singh,
Ms. Shruti Arora, Ms. Priyakshi,
Ms. Ishika Chauhan and Mr.
Daanish Abbasi, Advocates.
versus
WIDESCREEN HOLDINGS PRIVATE LIMITED & ORS.
.....Respondent
Through: Mr. Kunal Tandon, Sr. Advocate
with Mr. Aman Raj Gandhi, Mr.
Ojasvi Sharma, Ms. Natasha Singh,
Signature Not Verified
Signed By:GUNN
Signing Date:03.11.2026
18:20:03
O.M.P. (COMM) 253/2026 & conn. Page 5 of 110
Mr. Shreni Taran and Ms. Vanika
Kansal, Advocates.
CORAM:
HON'BLE MR. JUSTICE OM PRAKASH SHUKLA
JUDGMENT
% 02.11.2026
INTRODUCTION
1. The present batch of petitions have been filed under Section 34 of
1
the Arbitration and Conciliation Act of 1996 , assailing the common
2
interim arbitral award dated 28.02.2026 , whereby the learned Sole
Arbitrator held that the loan agreements executed between the parties dated
3
15.03.2014, are governed by the Maharashtra Stamp Act of 1958 . The
learned Sole Arbitrator further held that Article 5(h)(B) of Schedule I to
the MSA is applicable to these agreements, thereby attracting a fixed stamp
duty of Rs. 100/- each.
2. This present dispute arises out of eight cross-petitions instituted by
the parties. OMP(COMM) Nos. 253/2026, 254/2026, 255/2026 and
256/2026 are filed by four distinct companies incorporated under the
Companies Act, 1956, all of which form part of the Zee Group of
4 5
companies . Religare Finvest Ltd. is the sole Respondent in the aforesaid
petitions.
1
“Act” hereinafter
2
“impugned award” hereinafter
3
“MSA” hereinafter
4
“Zee Group” hereinafter
5
“Religare” hereinafter
Signature Not Verified
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3. On the other hand, OMP(COMM) Nos. 323/2026, 327/2026,
328/2026 and 331/2026 are the cross-petitions preferred by Religare
against the Zee Group, assailing the very same interim arbitral award,
albeit on distinct grounds.
4. For the sake of convenience, these petitions are being heard together
and shall be adjudicated by way of a common judgment since they arise
out of a common interim arbitral award and involve overlapping questions
of fact and law.
THE DISPUTE
5. The present petitions revolve around a single issue, i.e., whether
6
MSA or ISA shall apply to the loan agreement(s) dated 15.03.2014? An
ancillary question arises: if MSA is to apply, then which provision governs
the applicable rate of stamp duty?
6. The facts leading up to the present dispute are that in March 2014,
Religare extended four distinct loan facilities to the Zee Group pursuant to
separate loan agreements, each executed on 15.03.2014.
7. However, due to alleged non-repayment by Zee Group, Religare
invoked the first round of arbitration inter se the parties.
6
Indian Stamp Act, 1899 (2 of 1899), as applicable in NCT of Delhi
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8. The question of adequate stamp duty on the loan agreement(s) dated
15.03.2014 arose before the learned Sole Arbitrator in the first round of
arbitration in the Section 16 application filed by the Zee Group.
9. By order dated 22.10.2020, the learned Sole Arbitrator held that the
MSA was applicable in view of Section 2(d) read with Section 24 therein.
Accordingly, Religare was directed to approach the Collector of Stamps,
Maharashtra, to determine the payable duty and penalty (if any) if it wished
to proceed with its claim, in the following terms:
“22. For the foregoing reasons the Tribunal finds no merit in the
submission of the claimant. The application under section 16 is allowed.
The original Loan Agreement has not been filed before the Tribunal. If
the claimant wishes to continue with its claim it should take the original
Loan Agreement to the Collector of Stamp Maharashtra who will within
three months determine the stamp duty payable on the same including
the penalty, if any, in terms of the Stamp Act. Both parties shall be at
liberty to approach the Tribunal after the requisite stamp duty on the
Loan Agreement is paid.
23. The matter is adjourned sine-die.”
10. Religare challenged the aforesaid decision before this Court under
Section 37(2)(a) of the Act.
11. On 10.01.2022, this Court, by way of a common judgment, held
that ISA was applicable to the loan agreements instead of MSA since these
agreements bore only the signatures of the Zee Group in Maharashtra and
hence, did not become ‘instruments’ to attract MSA. The matter was
consequently remanded to the learned Arbitrator in light of the aforesaid
finding.
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12. Being aggrieved, Zee Group challenged the abovementioned
judgment before the Hon’ble Supreme Court by way of Special Leave
7
Petitions .
8
13. The Hon’ble Supreme Court, by order dated 22.04.2022 , observed
that the original loan agreements were neither produced before the
Arbitrator nor before this Court in the Section 37 appeal, hence, the
agreements could not be impounded. The Hon’ble Supreme Court directed
that the learned Arbitrator may pass appropriate orders for production of
the same and only thereafter the learned Arbitrator may take a call on
impounding the loan agreements. Notably, the SLP was dismissed as
follows:
“Considering the fact that even the loan agreement which
contains the arbitration Clause which was sought to be impounded is
not produced before any Tribunal and/or Court and till then, there is no
question of impounding any document, the High Court is justified in
passing the impugned order.
Shri Kaul, learned Senior Advocate has submitted that the
original applicant(s) is not placing on record the original loan
agreement containing the arbitration Clause. If the original claimant
who has initiated the arbitration proceedings relying upon the
arbitration Clause contained in the loan agreement is not producing the
same, it is ultimately for the learned Arbitrator to pass an appropriate
order and to take into consideration such a conduct. So far as the
impounding of the document is concerned unless and until the same is
produced on record before any Court/Tribunal, there is no question of
any impounding the same, as observed hereinabove.
7
“SLP” hereinafter
8
SLP(C) No. 6826-6829/2022
Signature Not Verified
Signed By:GUNN
Signing Date:03.11.2026
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O.M.P. (COMM) 253/2026 & conn. Page 9 of 110
The Arbitrator may take call on the impounding of document
provided it is produced by the original claimant.
With the observation, the present Special Leave Petition stands
dismissed.”
9
14. Thereafter, the Zee Group preferred miscellaneous applications and
vide order dated 20.05.2022, the Hon’ble Supreme Court further clarified
that upon production of the original loan agreements, the learned Arbitrator
shall decide whether sufficient stamp duty had been paid or not. The
aforesaid is order is reproduced as thus:
“ORDER
In furtherance of our earlier order dated 22.04.2022, it is
observed and it goes without saying that as and when the original
document is produced before the learned Arbitrator, the question
whether the document is to be impounded or not is to be considered. The
Arbitrator has to take a call on whether the original document produced
is on a proper stamp duty or not. The same is to be considered in
accordance with law and on its own merits.
With this, the application stand disposed of.
Pending application(s), if any, shall stand disposed of.”
10
15. The Zee Group again filed miscellaneous applications before the
Hon’ble Supreme Court, this time with a specific prayer seeking a
conclusive finding with respect to whether the MSA or ISA would apply
to the loan agreements.
9
Miscellaneous Application Nos. 899-902/2022 in SLP(C) No. 6826-6829/2022
10
Miscellaneous Application Nos. 1547-1550/2022 in SLP(C) Nos. 6826-6829/2022
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16. In this light, by order dated 19.09.2022, the Hon’ble Supreme Court
clarified that, in view of the aforesaid order of 20.05.2022, the learned
Arbitrator, while deciding whether the stamp duty is sufficient or not, shall
also decide which of the two Stamp Acts is applicable to the loan
agreements. This order is reproduced hereinbelow for convenience:
“ORDER
In the present Miscellaneous Applications, in a disposed of
Special Leave Petition(s), the following prayers are sought:-
“a. provide a final and conclusive finding on the
question of law involved in the captioned SLP i.e.
whether the Maharashtra Stamp Act, 19587 or the
Indian Stamp Act, 1899 would be applicable to the
Loan Agreement;
b. direct the Arbitral Tribunal with respect to the
said question of law;”
At the outset, it is required to be noted that our earlier Order
dated 20.05.2022 in M.A. Nos. 899-902 of 2022 in the respective Special
Leave Petitioners is very clear. We have specifically observed that the
Arbitrator has to take a call on whether the original document produced
is on a proper stamp duty or not. For that purpose, the Arbitrator has
to decide whether the Maharashtra Stamp Act, 1958 or the Indian
Stamp Act, 1899 would be applicable to the Loan Agreement.
In that view of the matter the present miscellaneous applications
are untenable and the same deserves to be dismissed and are,
accordingly, dismissed.”
17. Accordingly, the matter was remanded for consideration by the
learned Arbitrator. However, the then learned Arbitrator recused herself
and another Arbitrator came to be appointed by this Court.
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18. It is the proceedings conducted before the subsequently appointed
Arbitrator which have culminated into the impugned interim award dated
28.02.2026 assailed before me.
19. The Zee Group questioned the maintainability of the proceedings
for want of adequate stamp duty on the loan agreements dated 15.03.2014
before the learned Arbitrator.
20. Accordingly, by way of the impugned interim award, the learned
Arbitrator held that the loan agreements would be governed by Sections
17 and 18 read with Article 5(h) B of Schedule I of the MSA as the
agreements did not stipulate any monetary value and since each of the four
loan agreements were executed on a Rs. 100/- stamp paper, the agreements
were held to be sufficiently stamped and did not warrant impounding.
21. Aggrieved thereby, both Zee Group and Religare filed their
respective objection petitions under Section 34 of the Act, assailing the
aforementioned interim award before this Court, but on distinct grounds.
22. The Zee Group assails the finding that Article 5(h) B of Schedule I
of MSA, stipulating Rs. 100/- stamp duty, is applicable. According to
them, while MSA is applicable, specifically Article 5(h)(A)(iv)(b) of
Schedule I to the MSA would be applicable, which mandates a rate of 0.2%
for stamp duty and not Article 5(h) B.
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23. On the other hand, Religare contests the application of MSA
altogether. Religare maintains that ISA is applicable since the agreements
became legally enforceable in New Delhi after their execution in New
Delhi or alternatively, if MSA is applicable then the learned Arbitrator was
correct in holding that the loan agreements were sufficiently stamped.
24. Thus, while the Zee Group disputes the quantum of stamp duty
determined under the MSA, Religare questions the very applicability of
the said enactment. The rival challenges, therefore, necessitate an
examination of the situs of execution of the loan agreements, the statutory
framework governing their chargeability to stamp duty, and the correctness
of the findings returned by the learned Arbitrator in the impugned award.
CONTENTIONS BY THE PARTIES
(i) On Maintainability
25. At the very outset, Mr. Abhimanyu Bhandari, learned Senior
Counsel on behalf of Religare raised a preliminary objection that all the
Section 34 petitions were liable to be dismissed since they assailed an order
passed under Section 16 of the Act and therefore, it could only be
challenged after passing of the final award in light of Section 16(5) and
16(6) of the Act. Mr. Bhandari contended that Religare’s petitions were
only filed as a matter of caution since the arbitral proceedings were kept at
abeyance.
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O.M.P. (COMM) 253/2026 & conn. Page 13 of 110
26. Per contra, Mr. Kunal Tandon, learned Senior Counsel for Zee
Group, resisted the preliminary objection so raised, by contending that in
the present case, the Section 16 application only pertained to the first round
of arbitration after which the learned Arbitrator recused herself and the
subsequent Arbitrator proceeded to frame four preliminary issues in light
of the directions of the Supreme Court. Thus, the impugned award did not
constitute an adjudication of the earlier applications under Section 16 of
the Act.
27. Mr. Tandon further submitted that in the post-amendment regime,
the Act does not leave any room for doubt that an arbitral award under
Section 2(c) of the Act includes an interim award defined under Section
31(6) of the Act.
28. In view of Section 31(6), the learned Senior Counsel submitted that
the preliminary issue regarding which stamp legislation is applicable, the
quantum thereof, and if the agreement is liable to be impounded were all
finally decided and could not be reopened in the final award, therefore, the
impugned award is necessarily an interim award amenable to challenge
under Section 34. It was further submitted that the style of the impugned
award clearly indicated that it was rendered as an interim award under
Section 31(6).
29. Mr. Tandon submitted that an appeal under Section 37 would be
triggered when the issue of jurisdiction is rejected and that if an issue was
decided in a Section 16 application, the procedure thereunder would
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follow, whilst if the question were finally decided as a preliminary issue,
an appeal under Section 34 would follow. It was further contended that the
impugned award did not pertain to the Section 16 applications at all, as
evident from the fact that the learned Arbitrator framed four preliminary
issues vide procedural order dated 03.12.2024 after the matter was
remanded from the Supreme Court and in furtherance of the directions of
the Supreme Court, whereby the learned Arbitrator was directed to
adjudicate which stamp legislation was to apply, if the duty was sufficient
and if the agreements were liable to be impounded. According to the
learned Senior Counsel these issues were finally decided after hearing both
the parties, permitting them to lead evidence and cross-examine witnesses.
It was submitted that Issue No. 2 also demonstrated that the learned
Arbitrator unequivocally declined to decide whether the Section 16
application was disposed of or not.
30. It was contended that the connotation of “jurisdiction” depends on
the context it appears in. It was further contended that any aspect which
does not terminate arbitral proceedings cannot be considered as a
jurisdictional issue under Section 16. By placing reliance on IFFCO Ltd.
11
v. Bhadra Products , it was submitted that “jurisdiction” under Section
16 only pertains to the existence of a valid arbitration agreement, whether
the Tribunal is properly constituted and whether the matters submitted to
arbitration fall under the ambit of the arbitration agreement. It was further
advanced that the Supreme Court in In Re: Interplay Between Arbitration
11
(2018) 2 SCC 534; (Para 20)
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Agreements under Arbitration and Conciliation Act, 1996 and Stamp
12
Act, 1899 held that the principal of kompetenz-kompetenz empowers a
Tribunal to decide the issue of stamping. It was also submitted that while
stamping was held to be a jurisdictional issue, in no words did the aforesaid
decision mandate that the issue of stamping must only be decided under
Section 16. The decision does not stipulate any time or stage at which the
issue of stamping of the arbitral agreement is to be entertained, it only
clarifies that such objections fall within the ambit of the Tribunal.
Therefore, the objection of stamping could be considered by way of an
application, or under Section 16, or otherwise, as deemed fit by the
Tribunal.
31. Therefore, according to Mr. Tandon, for the purposes of Section 16,
a jurisdictional issue would be one which terminates the mandate of the
Tribunal and hence, stamping is not a jurisdictional issue since it is a
curable defect which can, by no stretch of imagination, terminate mandate
of the Arbitral Tribunal. It was also argued that Issue Nos. 3 and 4 were
finally decided by the learned Arbitrator and that doctrine of merger would
not apply while subsequently deciding Issue Nos. 5 and 6.
32. In support of his submissions, Mr. Tandon placed reliance on
13 14
IFFCO (supra) , H.S Nag v. Asian Hotel (North) Ltd. , NTPC Ltd. v.
15
Siemens Atkeingesellschaft , Aptec Advanced Protective Technologies
12
2023 SCC OnLine SC 1666
13
(Paras 8, 11, 15-21, 24-25 and 30)
14
2026 SCC OnLine Del 692; (Para 106)
15
(2007) 4 SCC 451; (Paras 12, 17 to 20)
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16
AG v. UOI , Cinda Engineering and Construction Pvt. Ltd. v. CY
17
Engineering India Pvt. Ltd. , McDermott International Inc. v. Burn
18 19
Standard Co. Ltd. , and UOI v. M/s Best Cast Construction (P) Ltd. .
33. Per contra , Mr. Bhandari argued that nomenclature or the style of
the award is not of any significance. Instead, the substance of the same and
the prayer sought shall be taken into consideration, as also held in Pepsi
20
Foods Ltd. v. Special Judicial Magistrate . It was also submitted that
neither the description nor the ground of a rejection order converts it into
an award. Reliance was placed on NHAI v. IRB Ahmedabad Vadodra
21
Super Express Tollways . Applying the aforesaid principles to the present
case, it was argued that the issues framed by the learned Arbitrator
specifically arose out of the Zee Group’s Section 16 application.
According to the learned Senior Counsel, there is no preliminary issue
independent of the Section 16 application and even if framed as
preliminary issues, does not change the legal nature of the issues as being
jurisdictional. It was emphasized that power under Section 16 could be
exercised at any stage of the arbitral proceedings.
34. Mr. Bhandari relied on Section 16(5) and 16(6) of the Act to contend
that rejection of a jurisdictional plea would oblige the learned Arbitrator to
proceed with rendering the final award and that this rejection is
16
2025 SCC OnLine Del 92; (Paras 26, 30)
17
O.M.P. (COMM) 67/2025 decided by this Court on 12.05.2026; (Paras 32 to 37, 50)
18
(2006) 11 SCC 181
19
Civil Revision Petition No. 248/2014 decided by High Court of Karnataka on 02.09.2014
20
(1998) 5 SCC 749
21
2024 SCC OnLine Del 2397
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undoubtedly assailable under Section 34, however, in the present case,
there was no such rejection. Further reliance was placed on the written
submissions of Zee Group before the learned Arbitrator whereby it was
stated that the question of stamping is a jurisdictional issue falling under
the ambit of Section 16 and that the question of MSA or ISA stems from
the Section 16 application.
35. It was reiterated that rejection of a jurisdictional plea under Section
16 would not conclude the arbitral proceedings and the learned Arbitrator
as per the provisions of the Act, shall proceed with the final award. It was
submitted that merely because the issues of jurisdiction relating to the
Stamp Act were decided by an award styled as an interim award under
Section 31 was not sufficient, as the substance matters, and hence a
challenge to such an award will have to be made after final award is
rendered. In this regard, reliance was placed on In Re: Interplay (supra)
and MCM Worldwide (P) Ltd. v. Construction Industry Development
22
Council .
36. Thereafter, Mr. Bhandari sought to distinguish the authorities relied
upon by the Zee Group. It was submitted that IFFCO (supra) pertained to
a preliminary issue of limitation and not a Section 16 application.
Similarly, McDermott (supra) and NTPC (supra) did not hold that
rejection of a jurisdictional plea amounts to an interim award. Further, H.S.
Nag (supra) was distinguished on the ground that it only delineated
22
2026 SCC OnLine SC 717
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general tests for an interim award and was not rendered in context of
Section 16(5) and 16(6). Thus, according to Mr. Bhandari, the
determination on stamp duty was either procedural and/or evidentiary in
23
nature, in which case the impugned decision is not an award at all or the
determination is jurisdictional, in which case rejection of Section 16 plea
can only be challenged after the final award is rendered as per MCM
Worldwide (supra) . It was stressed that no third category exists.
37. Lastly, it was averred that while Section 19 of the Act grants the
Tribunal freedom from the bounds of the Code of Civil Procedure, 1908
and Indian Evidence Act, 1872 and the Arbitrator is empowered to take up
any issue as preliminary, however, such freedom only governs the manner
of the decision. Ultimately, it was submitted, the power to render a decision
on the existence and validity of the arbitral agreement undoubtedly stems
from Kompetenz-Kompetenz as envisaged under Section 16.
38. In rejoinder , Mr. Tandon submitted that the reliance on MCM
Worldwide (supra) is misplaced and it instead supports the stance of Zee
Group. In the said decision, the High Court had granted liberty to file a
Section 16 application. Thus, undoubtedly Section 16 application was
being adjudicated by the Tribunal. Further, the Court carved out a
distinction between Section 16 and preliminary issues framed. According
to Mr. Tandon, this decision categorically holds that if an issue is decided
under Section 16 then the bar under Section 16(5) and 16(6) will apply and
23
Ranjiv Kumar, 2018 SCC OnLine Cal 4117 ; Amanulla, ILR 2004 Kar 4292 ; Rhiti Sports, 2018 SCC OnLine
Del 8678
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if preliminary issues are framed then the same would be decided by an
interim award amenable to challenge under Section 34 because once
decided, such an issue would no longer be open for consideration at the
time of final award. The decision further explained that in view of Section
16(5) and 16(6) of the Act, Section 37 appeal would be triggered if plea of
absence of jurisdiction is accepted. Pertinently, in the present case, there
was no such rejection or termination of proceedings to give rise to an
appeal under Section 37.
39. It was also contended that after the matter was remanded, Zee Group
filed an application for termination of the proceedings before the
subsequent Arbitrator on the grounds of insufficient stamp duty paid on
the loan agreements. Therefore, it was not a Section 16 application at all.
Accordingly, the impugned award, rendered upon the adjudication of
independently framed preliminary issues, could not be characterized as an
order passed under Section 16.
40. With respect to the submission advanced on behalf of Religare that
Zee Group itself categorized stamping as a jurisdictional issue, it was
submitted that Zee Group’s contention was limited to the aspect that the
Section 16 application remained pending and the applicability of MSA or
ISA ought to be considered de novo by the Arbitrator.
41. Lastly, Mr. Tandon vehemently emphasized that the arguments
advanced by Religare on maintainability of the present objection petitions,
lay directly in the teeth of its own conduct since Religare itself has filed
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four cross objection petitions before this Court. It was also submitted that
Religare pleaded merger before the learned Arbitrator and asserted that
nothing survived in the Section 16 application, however, it now contends
that every issue traces back to that very application. Therefore, it was
argued that Religare cannot be permitted to simultaneously approbate and
reprobate in the same proceedings.
(i) On Merits
42. Mr. Tandon vehemently contended that MSA will be applicable in
the present case and supported the impugned award to that extent. It was
submitted that the learned Arbitrator’s reasoning was cogent and based on
the constitutional distribution of legislative competence, i.e., Entry 91 of
List I of the Seventh Schedule prescribes the instruments covered by the
ISA and Entry 63 of List II grants powers to the States to fix rates for
instruments/documents other than those stipulated in List I.
43. Mr. Tandon placed reliance on Sections 2(d), 2(i) 3, 17 and 18 of
MSA and contended that the MSA is a self-contained statute wherein
Section 2(i) stipulates that “executed” or “execution” only means “signed”
or “signature”. Section 2(d) defines “chargeable” in association to an
instrument “ executed or, where several persons executed the instrument at
different times, first executed” . MSA defines an instrument to include
every document by which “any right or liability is, or purports to be
created” . Emphasis was laid on “purports to be created” to submit that
instruments signed by one party, which are yet to be converted into
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concluded contracts will also be covered in the ambit of “instruments”
under MSA. In this regard, reliance was placed on Hazrami Gangaram v.
24 25
Kamlabai and K.V. Abdulrahiman v. Sub Registrar .
44. Thereafter, Mr. Tandon relied upon the charging provision of MSA
i.e., Section 3, which stipulates the instruments chargeable with duty.
Section 3(a) provides that every instrument mentioned in Schedule I, not
having been previously executed, is executed in Maharashtra on or after
the commencement of MSA, will be chargeable under MSA. Further,
Section 3(b) provides that an instrument under Schedule I, not having been
previously executed, is executed out of the State, relates to any property or
matter or thing being done in Maharashtra, and is received in Maharashtra
shall be chargeable under MSA. Further, proviso to Section 3 stipulates
that even a copy of an instrument is chargeable. Sections 17 and 18 operate
to stipulate the time of stamping and applicable rate. Mr. Tandon calls for
a conjoint reading of the aforesaid provisions to submit that MSA attracts
liability when an instrument is first executed/signed in Maharashtra. Since
chargeability pertains to “first execution” as per the definition clause, it
was submitted that since the loan agreement was first executed/signed in
Mumbai on 15.03.2014, chargeability has been crystallized under Section
3 of MSA. This, according to the learned Senior Counsel, was evident from
the bare perusal of the loan agreements as they bear a stamp of Rs. 100/-
under MSA and only afterwards were they carried to Delhi for counter
signature of Religare. It was also emphasized that Religare affixed a Delhi
24
1966 SCC OnLine AP 250
25
2019 SCC OnLine Ker 1054
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stamp of Rs. 1000/- only in November 2019, after the stamping objection
was raised.
45. It was submitted that in arguendo, if execution as per law was
completed only at New Delhi and therefore, Section 3(a) of MSA is
defeated, even then Section 3(b) read with Section 18 of MSA will operate
as it pertains to matters done in Maharashtra and having been received in
Maharashtra. It was submitted in this regard that the loan was disbursed
from Religare’s account in Mumbai and transferred to Zee Group’s
account in Mumbai; the pledged debentures and the pledgor thereof are
entities in Maharashtra; further, the Power(s) of Attorney was executed at
Mumbai and even RW-2 deposed on 24.05.2025 that a copy of the
executed loan agreement was received at Zee Group’s Mumbai office.
46. To submit that MSA is attracted, reliance was placed on New
26
Central Jute Mills Co. Ltd. v. State of W.B. and Indian Hume Pipe Co.
27
Ltd. v. State of Mahashtra and Splendor Landbase Ltd. v. Aparna
28
Ashram Society .
47. It was also submitted that Religare adopted inconsistent positions
before the learned Arbitrator; in its reply to the Section 16 application, it
stated that stamp under MSA was wrongly paid. However, in its written
submissions dated 14.08.2020, Religare maintained that the loan
26
1963 SCC OnLine SC 201
27
2018 SCC OnLine Bom 452
28
2023 SCC OnLine Del 5148
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agreement was duly stamped under MSA with a duty of Rs. 100/-.
According to Mr. Tandon, these contradictory positions undermine
Religare’s present challenge to the applicability of the MSA.
48. Mr. Tandon argued that the Supreme Court remanded the question
regarding the applicable stamp legislation for fresh determination to the
learned Arbitrator. Such remittance was accepted by Religare without any
demur; therefore, the question of patent illegality does not arise in order to
warrant interference.
49. It was submitted that the question of law was not foreclosed by this
Court’s judgment dated 10.01.2022 whereby it was held that the loan
agreements were executed in New Delhi. It was highlighted that the SLP
filed by Zee Group was only dismissed since the original loan agreements
were not placed before the learned Arbitrator or before this Court while
deciding the Section 37 appeal. It was contended that the learned Arbitrator
acted in accordance with the explicit directions of the Supreme Court vide
orders dated 20.05.2022 and 19.09.2022.
29
50. Reliance was placed on Kunhayammed v. State of Kerala , and
Khoday Distilleries Ltd. v. Sri Mahadeshwara Sahakara Sakkare
30
Karkhane Ltd. to contend that dismissal of an SLP does not attract the
doctrine of merger. It was also argued that even absent the doctrine of
merger, the orders dated 20.05.2022 and 19.09.2022 of the Supreme Court
29
(2000) 6 SCC 359
30
(2019) 4 SCC 376
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operate in the same lis between the same parties, pertaining to the same
instrument, whereby the Court remanded the question of law to the learned
Arbitrator regarding the applicable stamp legislation.
51. Having strenuously supported the reasoning adopted by the learned
Arbitrator, Mr. Tandon then sought to bring out the aspect of the impugned
award which warrants interference by this Court, i.e., the applicable
provision under MSA stipulating the requisite stamp duty to be paid on the
loan agreements.
52. In this regard, Mr. Tandon submitted that residuary Article 5(h)(B)
to Schedule I of MSA, which is applicable when the instrument does not
stipulate a monetary value, was wrongly applied and that in the present
case, 0.2% as per Article 5(h)(A)(iv)(b) of Schedule I of the MSA is
applicable. This argument was advanced on the strength of the Facility
31
Schedule of Terms which stipulated the loan amounts. It was stressed that
these facilities were part and parcel of the loan agreements and not distinct
documents. Further, it was also argued that Section 24(1)(a) of the MSA
provides that an instrument “given upon the occasion of the deposit of any
marketable security, by way of security, for money, advanced, or to be
advanced by way of loan, or for an existing or future debt” shall be
chargeable “as it were an agreement or memorandum of an agreement
chargeable with duty under Article No. 5(h) of Schedule I”. Therefore, in
light of a specific charging provision, application of the residuary clause
31
“FST” hereinafter
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is impermissible and a patent error apparent on the face of the award,
thereby attracting interference under Section 34(2A) was called for.
32
Reliance was placed on Associate Builders v. DDA , Ssangyong Engg.
33
& Construction Co. Ltd. v. NHAI and Delhi Airport Metro Express (P)
34
Ltd. v. DMRC .
53. Mr. Tandon thereafter drew attention to the express clauses of the
loan agreement including Clause 1.1.6, 2.1 and 2.3, which conjointly
provide that the loan agreement is to be read along with the Schedule of
Terms, which is deemed to be a part of the loan agreement and that the
borrower agreed to borrow the amount for various facilities as per the
Schedule of Terms. Therefore, Mr. Tandon argued that the loan agreement
by its own is incapable of quantification without the FST. Further, attention
was drawn to Clause 16.1 invoked by Religare itself to constitute the
reference, which contains the arbitration agreement for disputes arising
pertaining to the loan agreement and the “Schedule of Terms/Repayment
Schedule/s attached hereto”. It was highlighted that even the FST booklets
stipulate that “This Schedule forms an integral part of the Agreement.”
Furthermore, it was submitted that Religare’s stance that the loan
agreement is a standard-form document containing no specified amount,
is of no avail. Stamp duty is attracted at the time of execution. If the loan
agreement does not stipulate any amount, then no obligation, right, or
32
(2015) 3 SCC 49
33
(2019) 15 SCC 131
34
(2022) 1 SCC 131
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interest was created at all. In such a scenario, the instrument would not
even attract the Rs. 100/- stamp duty or any duty payable under ISA.
54. It was vehemently argued that the impugned award records no
submission by either party that the loan agreement and FST were to be
treated as separate documents in order to determine the applicable stamp
duty. Therefore, it was argued that the award proceeded on a ground neither
pleaded nor argued by either party and is hence liable to be set aside on
this ground alone.
55. It was contended that applying the residual clause contradicted the
learned Arbitrator’s own findings of fact, as it was duly recorded that all
FSTs were signed by the parties on 15.03.2014, which was the exact date
of the loan agreements. Furthermore, even Religare pleaded in its
Statement of Claim that the facility was availed under both the loan
agreement and the FST dated 15.03.2014. It was submitted that when a
transaction is contained in multiple documents executed simultaneously
between the same parties, it is trite that these documents must be read
together as parts of a single transaction. Reliance was placed on S.
35
Chattanatha Karayalar v. Central Bank of India Ltd. , Infrastructure
36
Leasing and Financial Services Ltd. v. HDFC Bank Ltd. , Chloro
37
Controls India (P) Ltd. v. Severn Trent Water Purificiation Inc. and
38
Ameet Lalchand Shah v. Rishabh Enterprises .
35
(1965) 35 Comp Cas 610
36
2023 SCC OnLine SC 1371
37
(2013) 1 SCC 641
38
(2018) 15 SCC 678
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39
56. Support was also drawn from S.N. Mathur v. Board of Revenue
40
and Joginder Kumar Goyal v. GNCTD to aver that stamp duty is
ascertained by the substance of the transaction and not the form of the
instrument, the document must be read as a whole to determine its
dominant purpose and accordingly stamped. In the present case, the
transaction is a loan against securities of Rs. 150 crores drawn by the Zee
Group from Religare.
57. Mr. Tandon submitted that the loan agreement is liable to be
impounded and the award lies in teeth of public policy of India. It was
reiterated that an instrument having been found that it is insufficiently
stamped, is liable to be impounded under Section 33 of MSA and that such
instrument cannot be acted upon till the deficiency is cured. This position
of law is well-settled by various decisions including In Re: Interplay
(supra) and N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.
41
& Ors. . It was emphasised that stamp legislation is a fiscal measure
enacted in public interest, therefore, an interpretation which permits
evasion of stamp duty would be contrary to the fundamental policy of
Indian law. Accordingly, it was submitted that as per MSA, stamp duty of
0.2% i.e., Rs. 30,00,000 aggregate along with penalty of 2% per month till
date of actual payment must be paid to cure the defect.
39
(2009) 13 SCC 301
40
2016 SCC OnLine Del 3118
41
(2021) 4 SCC 379
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58. Per Contra , Mr. Bhandari vehemently maintained that the
impugned award is erroneous and is liable to be set aside in its entirety
since it holds that MSA is applicable on the loan agreements dated
15.03.2014. It was maintained that the Zee Group signed the agreements
in Mumbai, followed by Religare at New Delhi, which bore a stamp duty
of Rs. 100 franked on 12.03.2014. It was submitted that the originals
remained in New Delhi and that the Zee Group never pleaded or submitted
in evidence that the loan agreements were ever received in Maharashtra by
them.
59. Mr. Bhandari called for setting aside of the impugned award on the
strength of the decision rendered by this Court dated 10.01.2022 whilst
deciding Religare’s Section 37 appeals. It was submitted that the execution
of the loan agreements took place in New Delhi only after execution by all
necessary parties to a bilateral agreement and it cannot be said that
execution occurred in Mumbai solely by the Zee Group. Hence, ISA would
apply. It was argued that “first executed” relates to time of chargeability
and the agreements, with the signatures of the borrowers alone did not
constitute a valid “instrument”.
60. Drawing upon this Court’s decision, it was also submitted that the
Supreme Court dismissed the SLP filed against the said decision by a
speaking order dated 22.04.2022 which categorically holds that without
production of the original agreement, there can be no question of
impounding. It was argued that the Supreme Court did not interfere with
the law laid down by this Court that a bilateral agreement was required to
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be signed by all parties in order to be executed for the purposes of stamp
duty. Relying on Kunhayammed (supra) , it was argued that absent the
grant of leave by the Supreme Court, doctrine of merger did not arise. Mr.
Bhandari submitted that the Zee Group itself relied on the aforesaid
decision before the Tribunal to argue that merger did not occur.
61. Learned Senior Counsel submitted that after dismissal of the SLP,
42
the Zee Group thereafter moved two miscellaneous applications . By
orders dated 20.05.2022 and 19.09.2022, the Supreme Court only
reiterated that the question of impounding was contingent upon production
of the original and accordingly, the question of whether MSA or ISA is
applicable was left open.
62. Accordingly, it was submitted that an award which overlooks a
binding decision of the Court is liable to be set aside on the ground of
patent illegality. It was also submitted that the reliance placed on Hazrami
Gangaram (supra) by the Zee Group was of no avail since even this
decision recognizes that if an agreement requires execution by more than
one party then it shall become binding only upon execution by all parties.
63. It was averred that under Sections 2(l), 2(i) and 2(d) of the MSA,
only a “completed document signed by all necessary parties is an executed
instrument, and it is first executed when it so comes into existence”. It was
argued that Section 3 of the MSA attracts duty in only two situations, i.e.,
42
M.A. Nos. 899 to 902 of 2022 and 1547 to 1550 of 2022.
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(i) execution in Maharashtra or (ii) execution out of Maharashtra coupled
with the receipt of the instrument in the State. According to the learned
Senior Counsel, Section 3 is the only charging provision and Sections 17
and 18 merely stipulate the time at which stamp duty is attracted and they
only come into play after Section 3 is attracted. It was further submitted in
this light that the distinction between charging and machinery provisions
is settled: the charging provision creates the liability, and the machinery
provisions only enforce it, they cannot enlarge the charge or independently
determine the incidence of the levy. Reliance was placed on Board of
43
Revenue v. Arthur Paul Benthall and Hindustan Lever v. State of
44
Maharashtra . In view of the aforesaid, Mr. Bhandari argued that
situation (i) was not attracted, in line with the binding decision of this
Court. He further argued that situation (ii) was also inapplicable, as there
was neither any pleading nor any evidence showing that the loan
agreements were received in Maharashtra; in fact, the originals have
always remained in Delhi. It was submitted that the Tribunal directly
applied Sections 17 and 18 without entering any finding on the
applicability of Section 3. Furthermore, it was contended that the statement
of Zee Group’s witness (RW2 Dattatray Mane) dated 24.05.2025 that a
copy of the loan agreement was received in Mumbai, is entirely self-
serving and unsupported by any pleading or documentary evidence. In this
context, it was argued that the receipt of a mere copy is not tantamount to
the receipt of the executed instrument itself.
43
(1955) 2 SCC 195, AIR 1956 SC 35
44
(2004) 9 SCC 438
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64. Mr. Bhandari vehemently submitted that the loan agreements were
executed in New Delhi, as it was in New Delhi that the agreements were
signed by all contracting parties. Therefore, ISA, particularly Article 5(c)
of Schedule IA is applicable. It was further argued that the impugned award
fails to delve into the question of where the loan agreements actually
became executed instruments.
65. Thereafter, with respect to Section 18 of MSA, Mr. Bhandari sought
to place reliance on Clause 2.4 of the loan agreements which stipulate that
the borrower agrees that the lender is not bound to grant any facilities to
the borrower, and such decision shall be the exclusive discretion of the
lender. It was also agreed by this Clause that in the event, the lender does
not grant a facility to the borrower, the lender is not required to provide
any reason reasons thereof. According to Mr. Bhandari, this Clause implies
that the lending itself occurred due to Religare’s satisfaction at New Delhi.
66. It was further averred that as per Clause 2.1, the loan was disbursed
from New Delhi. The securities were to be furnished by the Zee Group to
Religare and assessed by it in New Delhi itself. Succinctly, learned Senior
Counsel submitted that every obligation arising out of the loan agreements
was to be acted upon by Religare at New Delhi and nothing was to be done
in Maharashtra. Upon a conjoint reading of Clauses 2.4, 1.15, 1.1.7, 2.6,
3.5 and 3.8 of the agreement, it was submitted that there was no obligation
per se on Religare to lend, the permissible loan amount was a function of
security that wasn’t yet offered or accepted or valued by Religare and it
remained liable to be re-computed or even reduced by Religare at any time.
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Therefore, the agreement did not have fixed monetary value to attract
Article 5(h)(A)(iv) under MSA, since stamp duty is payable on the
instrument and not the transaction, as affirmed in SBI v. State of
45
Maharashtra .
67. It was further averred that the liability to pay stamp duty fell on the
borrower i.e., Zee Group, as per Clause 2.10 of the agreement. According
to Mr. Bhandari, this Clause is not to be construed to mean that Religare
was to first pay the duty in Mumbai and then recover it from the Zee
Group. It was instead a reimbursement covenant which fixes the ultimate
burden on the borrowers and says nothing about the duty payable or under
which enactment. The stamp duty of Rs. 100/- paid on 12.03.2014 was
only anticipatory and pre-dated the execution, therefore it cannot fix the
situs of execution or determine the statute.
68. With respect to the FST and applicability of Rs. 100/- duty, Mr.
Bhandari maintained that the same was unimpeachable since it is evident
from the record that the FST was struck out and hence, the loan agreement,
by itself, did not record any monetary value.
69. In rebuttal , Mr. Tandon reiterated that chargeability arose at the
time of first execution under MSA. Even otherwise, the agreement was
first executed in Mumbai by Zee Group then taken to Delhi for execution
by Religare and then brought back to Mumbai because loan was advanced
45
2016 SCC OnLine Bom 1273
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in Mumbai. It was reiterated that the Zee Group availed the loan in
Mumbai, all its authorized signatories are in Mumbai, the witness who
signed the agreement was also in Mumbai, and the bank account where
money is received is in Mumbai. Further, it was submitted that there is a
stamp of Cosmos Co-op Bank Ltd. and franking on the agreement which
clearly shows that Religare was amenable to the fact that the agreement
was first executed in Mumbai.
70. With respect to the contention that Section 3 is the charging
provision and Sections 17 and 18 are only machinery provisions, it was
submitted that such a reading of the statute is incorrect. Sections 17 and 18
were invoked not to a certain chargeability, but to identify which statute is
applicable on an instrument that is partly executed in Maharashtra and
partly in Delhi since ISA is silent on this question.
71. According to Mr. Tandon, the attempt to distinguish Hazrami
Gangaram (supra) is also misconceived. The said decision, in no
ambiguous words, held that an instrument need not be valid in law before
it becomes chargeable and that chargeability arises upon execution/signing
of the instrument.
72. It was further submitted that the interpretation relied upon by
Religare of “first executed” in the MSA is otiose; such an interpretation is
46
impermissible as per Nathi Devi v. Radha Devi Gupta and Poppatlal
46
(2005) 2 SCC 271
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47
Shah v. State of Madras and would also further the very mischief that
the statute envisages to prevent since any transaction in Maharashtra could
then evade stamp duty under MSA by arranging the last signature to be
affixed outside the State.
73. The submission advanced on behalf of Religare that the franking
dated 12.03.2014 was only anticipatory actually affirms the stance of Zee
Group, inasmuch as Section 17 of MSA requires an instrument to be
stamped before or at the time of execution and the said franking at Mumbai
is in compliance of these terms. The aforesaid, according to Mr. Tandon,
establishes that Religare was also amenable to the fact that stamp duty
would be paid as per MSA. It was further contended that in view of the
judgment of this Court dated 10.01.2022 and the subsequent orders passed
by the Supreme Court, it was clear that the question of the applicable
statute was categorically remitted by the Supreme Court to the Tribunal for
fresh consideration and Religare having invited this determination without
any demur, could not now plead patent illegality.
74. Mr. Tandon sought to reiterate that the loan agreement and the FST
constitute a single instrument for an “amount agreed in the contract”,
which is chargeable under Section 24(1)(a) of MSA read with Article
5(h)(A)(iv)(b) of Schedule I.
47
AIR 1953 SC 274
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75. It was argued that the finding of the Tribunal that the loan agreement
did not ascertain a monetary value was incorrect in view of the various
Clauses of the agreement, including but not limited to Clause Nos. 1.16,
1.18, 1.10, 1.2.8, 2.1, 2.3 and 2.10. Clause 1.2.8 provides that Schedules,
sub-Schedules and Annexures to the loan Agreement shall form an integral
part of this agreement. Clause 2.1 stipulates that the lender shall lend
Facilities as per the FST and Clause 2.3 categorically states that the loan
agreement is to be read with along with FST. Further, the attention of this
Court was also drawn to Clause 28 which provides that the borrower
accepts the terms and conditions of the loan agreement “&/or Schedule(s)
of Terms relevant for the Facility”. It was also submitted that there was a
facility schedule in the loan booklet but since it was in a different format,
it was struck out and a separate one was executed, which was executed on
the same day as the loan agreement, i.e., 15.03.2014. It was further
emphasized that Clause 2 of the FST itself provided that unless provided
otherwise, the terms of the loan agreement were to be read as part and
parcel of the FST.
ANALYSIS AND REASONING
(i) On Maintainability
76. I have heard the learned Senior Counsel appearing for the parties
and perused the material on record.
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77. Before adverting to the controversy in question, it is apposite to first
address the issue of maintainability.
78. Mr. Bhandari contended that the present Section 34 petitions ought
to be dismissed since the impugned award was rendered in context of
disposing of the Section 16 applications filed by the Zee Group; therefore,
it cannot be challenged at this stage due to the statutory embargo under
Section 16(5) and (6) of the Act. It was argued that every preliminary issue
framed by the learned Arbitrator could be traced back to the Section 16
application, and that the Zee Group itself maintained that the said
application remained pending. Mr. Bhandari further urged that by merely
framing these questions as preliminary issues vide the procedural order
dated 03.12.2024, the same could not alter their fundamental character as
jurisdictional issues under Section 16 of the Act. Mr. Bhandari argued that
it is well-settled that a conclusive finding on a jurisdictional issue remains
a determination under Section 16 irrespective of the stage or manner of its
adjudication and therefore, the bar under Section 16(5) and (6) squarely
applies to the present case.
79. Mr. Tandon, on the other hand, refuted the aforesaid submissions
and argued that the impugned award was amenable to challenge under
Section 34 and the bar under Section 16 was not applicable since the issue
of stamping was decided as a preliminary issue. It was argued that what is
to be considered is the degree of finality of an issue and not the stage at
which it is decided; if the learned Arbitrator disposes of an issue
conclusively, inasmuch as it cannot be re-adjudicated and will not figure
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again in the final award, such a determination amounts to an “interim
award”.
80. Significantly, both parties have preferred their respective Section 34
objection petitions.
81. Before analysing the issue of maintainability arising in the present
case, it would be apposite to examine the contours of the Arbitration and
Conciliation Act, 1996, particularly the provisions governing the
jurisdiction of an arbitral tribunal and the scope of a challenge of an interim
award under Section 34.
82. Section 16 deals with the competence of an Arbitral Tribunal to rule
on its own jurisdiction. For perusal, Section 16 is reproduced hereinbelow:
“16. Competence of arbitral tribunal to rule on its jurisdiction.—
(1) The arbitral tribunal may rule on its own jurisdiction, including
ruling on any objections with respect to the existence or validity of the
arbitration agreement, and for that purpose,—
(a) an arbitration clause which forms part of a contract shall be treated
as an agreement independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void
shall not entail ipso jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be
raised not later than the submission of the statement of defence;
however, a party shall not be precluded from raising such a plea merely
because that he has appointed, or participated in the appointment of,
an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its
authority shall be raised as soon as the matter alleged to be beyond the
scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in sub-
section (2) or sub-section (3), admit a later plea if it considers the delay
justified.
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(5) The arbitral tribunal shall decide on a plea referred to in subsection
(2) or sub-section (3) and, where the arbitral tribunal takes a decision
rejecting the plea, continue with the arbitral proceedings and make an
arbitral award.
(6) A party aggrieved by such an arbitral award may make an
application for setting aside such an arbitral award in accordance with
Section 34.”
83. It is evident from a reading of Section 16(5) and (6) that if a plea
under Section 16(2) or (3) is rejected, such an award can only be
challenged under Section 34 after the final award is rendered by the
Tribunal.
84. On the other hand, if a plea under Section 16(2) or (3) is accepted,
the appeal would lie under Section 37(2)(a) of the Act since the mandate
of the Tribunal would come to an end, the same is reproduced hereinbelow:
“37. Appealable orders.—
(1) Notwithstanding anything contained in any other law for the time
being in force, an appeal shall lie from the following orders (and from
no others) to the Court authorised by law to hear appeals from original
decrees of the Court passing the order, namely:—
(a) refusing to refer the parties to arbitration under Section 8;
(b) granting or refusing to grant any measure under Section 9;
(c) setting aside or refusing to set aside an arbitral award under
Section 34.
(2) Appeal shall also lie to a court from an order of the arbitral
tribunal—
(a) accepting the plea referred to in sub-section (2) or subsection
(3) of Section 16; or
(b) granting or refusing to grant an interim measure under Section
17.
(3) No second appeal shall lie from an order passed in appeal under
this section, but nothing in this section shall affect or take away any
right to appeal to the Supreme Court.”
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85. Further, it is pertinent to note that Section 16, is expressly titled
“Competence of arbitral tribunal to rule on its jurisdiction”. The expression
‘ its jurisdiction’ assumes significance, as it is specifically confined to the
arbitral tribunal’s competence to determine its own jurisdiction. Therefore,
from the title itself, it is clear that not every issue decided by an arbitral
tribunal at a preliminary stage can necessarily be characterized as a
determination under Section 16.
86. With respect to interim awards, Section 31(6) is relevant. It reads as
follows:
“31. Form and contents of arbitral award.—
*
(6) The arbitral tribunal may, at any time during the arbitral
proceedings, make an interim arbitral award on any matter with respect
to which it may make a final arbitral award.”
87. Section 31(6) clearly provides the scope of an interim award,
inasmuch as that an interim award can be (i) rendered at any time during
the pendency of arbitral proceedings, (ii) with respect to any matter on
which the Tribunal may make a final award.
88. Section 2(c) of the Act stipulates that an “arbitral award” includes
within its ambit an interim award. It is trite that arbitral awards are
amenable to challenge under Section 34 of the Act.
89. In view of the aforesaid, there can be no quarrel with the statutory
framework that an “interim award” is deemed to be an “arbitral award”
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and that an “arbitral award” is amenable to challenge under Section 34.
Further, with respect to jurisdictional challenges under Section 16 of the
Act, when a plea under Section 16(2) and (3) is accepted, the same is
assailable under Section 37(2)(a) and when such objection is rejected, the
same is amenable to challenge under Section 34, however, such challenge
must be preferred after the passing of the final award in view of Section
16(5) and (6). In the same breath, it cannot be ignored, that Section 16
specifically refers to the arbitral tribunal’s competence to determine its
own jurisdiction and not every issue decided by an arbitral tribunal at a
preliminary stage would fall for determination under Section 16.
90. Therefore, the question of applicable stamp legislation can very well
fall within the ambit of “any matter” under Section 31(6) with respect to
which an arbitrator may make a final award “at any time” during the
pendency of arbitration. The issue involved in the present case pertains to
identifying the stamp legislation applicable to the underlying instruments.
Such a determination does not amount to a ruling on the arbitral tribunal’s
own jurisdiction since whether MSA or ISA would apply, does not, in any
way, affect the jurisdiction of the tribunal to continue with the arbitral
proceedings before it.
91. Had the controversy concluded at this juncture, there would have
been no occasion for further deliberation. However, the matter does not
end here. The issue pertaining to maintainability here presents yet another
facet which requires due consideration and cannot be left unaddressed.
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92. The Hon’ble Supreme Court in In Re: Interplay (supra) held that
stamping was a jurisdictional issue. It was held that an arbitral tribunal
possesses the authority to decide preliminary issues that affect its
jurisdiction, including questions concerning the sufficiency of stamping.
The relevant finding on this aspect reads as follows:
“125. In view of the above discussion, the issue that comes up for our
consideration is whether an issue of stamping is a jurisdictional issue.
Jurisdiction is generally defined as the power of a court or tribunal to
hear and determine a cause, and to adjudicate or exercise any judicial
power in relation to such cause.
126. Section 35 of the Stamp Act mandates that an unstamped
instrument cannot be acted upon unless it is duly stamped. The question
is whether a tribunal can effectively exercise its jurisdiction to settle the
claims between the parties until stamp duty is paid on the underlying
instrument. In view of the decision of this Court in Uttarakhand Purv
Sainik Kalyan Nigam Ltd (supra), the scope of an arbitral tribunal’s
authority is wide enough as to comprehend all preliminary issues
affecting its jurisdiction, including the issue of sufficiency of stamping
.”
93. Further, the Hon’ble Supreme Court in Tarini Prasad Mohanty v.
48
Sunflag Iron & Steel Co. Ltd. , reaffirmed that objections concerning the
sufficiency of stamping fall within the competence of the arbitral tribunal
under Section 16 of the Act. The Hon’ble Court reiterated that where an
arbitral tribunal rejects a jurisdictional objection under Section 16 and
continues with the proceedings, the aggrieved party must ordinarily await
the final award before challenging such determination under Section 34,
in accordance with Section 16 of the Act.
48
(2026) 268 Comp Cas 209
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94. Thus, it can be gathered that in In Re: Interplay (supra) , the
Hon’ble Supreme Court held that stamping is a “ jurisdictional issue ”, and
that Section 16 empowers an Arbitral Tribunal to decide jurisdictional
objections. Further, in Tarini Prasad Mohanty (supra) , the Hon’ble
Supreme Court dealt with a situation where an objection as to stamping
had expressly been raised under Section 16 on the ground that the
arbitration could not continue unless the agreements were properly
stamped and the Hon’ble Supreme Court held that rejection of such a
Section 16 objection was not ordinarily open to interference by invoking
writ jurisdiction during pendency of arbitration, instead, the challenge
must await the passing of a final award and may thereafter be raised under
Section 34.
95. Therefore, an issue concerning stamping is treated as a jurisdictional
objection falling within the Tribunal’s competence under Section 16.
Accordingly, the present matter, as a normal consequence, would not be
maintainable. However, in my considered view, the issue is not as
straightforward. It is pertinent to note that in the aforesaid decision, the
objection as to stamping was raised under a Section 16 application and not
as a preliminary issue.
96. Therefore, a facet to be examined in the instant case is that whether
the determination regarding stamp duty can be classified as an interim
award, given that In Re: Interplay (supra) calls it a jurisdictional issue.
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97. The answer to the above question is that the Hon’ble Supreme Court
in In Re: Interplay (supra) has expressly held that stamping is a
jurisdictional issue and that it is a curable defect. The Hon’ble Supreme
Court observed that Section 35 of the Stamp Act prohibits the concerned
authority from acting upon an instrument unless it is duly stamped, in
which case a Tribunal may not effectively exercise its jurisdiction over
such an insufficiently stamped instrument. Accordingly, the Tribunal's
authority extends to deciding preliminary issues affecting its own
jurisdiction, including the legal sufficiency of stamping.
98. However, the question arising in the present controversy is not one
concerning the sufficiency of stamp duty paid on the instrument or the
Tribunal’s own competence to continue exercising its powers. Rather, the
issue turns on a much narrower and anterior aspect i.e. which legislation
would be applicable to the underlying instruments in the first place.
99. Having delved deeper into the controversy at hand, this Court is of
the view that the abovementioned issue is purely a question of law, only
confined to the determination as to which statute would be applicable i.e.
MSA or ISA. According to this Court, this issue has nothing to do with the
Tribunal’s own jurisdiction or its competence to deal with the matter under
Section 16 of the Act.
100. To read In Re: Interplay (supra) as laying down that every
substantive question of law arising from a stamping issue is necessarily a
jurisdictional objection, would, in my view, be erroneous. Distinction has
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to be drawn between issues which are finally adjudicated as a preliminary
issue and an objection which goes to the root of a Tribunal’s jurisdiction.
101. Even in Tarini Prasad Mohanty (supra) , the objection regarding
stamping knocked at the door of the Tribunal’s own jurisdiction i.e.,
whether the Tribunal had the jurisdiction to proceed with the arbitration at
all. In contrast, the question in the present case boils down to whether MSA
or ISA applies to the loan agreements. It does not challenge the Tribunal’s
own jurisdiction since neither conclusion to this question would terminate
the mandate of the Tribunal.
102. More recently, the Hon’ble Supreme Court in MCM Worldwide
(supra) affirmed IFFCO (supra) and observed that if an issue is decided
in a manner that it will not “figure for consideration again before
arbitrator and would, therefore, not be dealt with again in the final award”
passed by the arbitrator, such an award would be an interim award
amenable to challenge under Section 34. It was delineated as follows:
“5. While so, at the stage of framing of issues by the learned Arbitrator,
the respondent filed an application under Order VII, Rule 11 of the Civil
Procedure Code, 1908, seeking rejection of the appellant's claim
petition on the ground that its claims were barred by limitation.
However, the learned Arbitrator dismissed the application on merits, by
order dated 16.04.2022. Assailing the said order, the respondent filed
OMP (Comm.) No. 24 of 2022, an application under Section 34 of the
Arbitration Act, before the learned District Judge (Comm.), South-East,
Saket Courts, New Delhi. The application was rejected by the learned
District Judge on 11.11.2022, holding that the said order was not
amenable to challenge under Section 34 of the Arbitration Act. The
respondent assailed this order before the Delhi High Court in FAO
(Comm.) No. 50 of 2023. The High Court dismissed the same on
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24.02.2023 but granted liberty to the respondent to file an application
before the learned Arbitrator under Section 16 of the Arbitration Act .
6. Pursuant to such liberty, the respondent filed an application before
the learned Arbitrator under Section 16 of the Arbitration Act with the
following prayer:—
‘Dismiss the present statement of claim as the same is not
maintainable since the Ld. Sole Arbitrator does not possess
jurisdiction to entertain the same due to barred by limitation.’
This application was dismissed by the learned Arbitrator on
19.05.2023 . Aggrieved thereby, the respondent again filed an
application under Section 34 of the Arbitration Act in OMP (Comm.)
No. 64 of 2023 before the learned District Judge (Commercial Court-
01), South-East, Saket Courts, New Delhi. Significantly, the appellant
raised the issue of maintainability of this application under Section 34
of the Arbitration Act against an order passed under Section 16 thereof.
The specific contention of the appellant was that, in the scheme of the
Arbitration Act, an order rejecting the contention that the arbitrator
lacked jurisdiction could only be assailed after the award was made by
the arbitrator, upon conclusion of the arbitral proceedings, and not
prior thereto. While so, the respondent placed reliance on the decision
of this Court in Indian Farmers Fertilizer Cooperative
49
Limited v. Bhadra Products and the appellant conceded, on the
strength thereof, that the application under Section 34 of the Arbitration
Act was maintainable.
*
8. Having given our earnest consideration to the matter, we are of the
opinion that neither the learned District Judge nor the Division Bench
were correct in entertaining the matters brought before them, i.e., under
Section 34 and, thereafter, under Section 37, of the Arbitration Act. In
this regard, we may note that Section 16 of the Arbitration Act is titled
‘Competence of arbitral tribunal to rule on its jurisdiction’ and Section
16(1) provides that the arbitral tribunal may rule on its own
jurisdiction, including ruling on any objection with respect to existence
or validity of the arbitration agreement. Section 16(2) states that a plea
that the arbitral tribunal does not have jurisdiction should be raised not
later than the submission of the statement of defence, but a party would
not be precluded from raising such a plea merely because he has
appointed or participated in the appointment of the arbitrator. Section
16(3) states that a plea that the arbitral tribunal is exceeding the scope
49
(2018) 2 SCC 534 : (2018) 2 SCC (Civ) 208
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of its authority should be raised as soon as the matter alleged to be
beyond the scope of such authority is raised during the arbitral
proceedings. Section 16(4) stipulates that, in either of the cases referred
to in Section 16(2) or (3), the arbitral tribunal may admit a later plea,
if it considers the delay justified. Section 16(5) categorically mandates
that once the arbitral tribunal decides on a plea raised under Section
16(2) or (3) and where the arbitral tribunal rejects such plea, it shall
continue with the arbitral proceedings and make an arbitral award.
Section 16(6) states that the party aggrieved by such an arbitral award
may then make an application for setting it aside in accordance with
Section 34 of the Arbitration Act. It is also relevant to note that Section
37 of the Arbitration Act, titled ‘Appealable orders’, provides for an
appeal being filed only in the event an arbitrator upholds the plea of
lack of jurisdiction under Section 16(2) or (3), i.e., where the arbitrator
puts an end to the arbitration proceedings by accepting the plea that
he/she has no jurisdiction to proceed further.
*
12. We may note that this Court specifically held that a decision of the
arbitrator on limitation, taken up as a preliminary issue, would amount
to an interim award which would be amenable to challenge under
Section 34 of the Arbitration Act. This is logical as that issue, once it
stands decided, would no longer figure for consideration before the
arbitrator and would, therefore, not be dealt with again in the final
award that would be passed by the arbitrator. Unless such decision is
treated as an interim award, there would be no scope for the party
aggrieved thereby to challenge the correctness thereof .
13. However, if an arbitrator deals with the very same issue of
limitation on an application filed under Section 16 of the Arbitration
Act, on the ground that the arbitrator lacks jurisdiction on that count,
it would be traceable to Section 16(2) of the Arbitration Act and if the
arbitrator rejects that plea, Sections 16(5) and Section 16(6) would
apply . In that situation, there is no option for the party aggrieved by the
decision of the arbitrator upon the application filed under Section 16
except to wait till the conclusion of the arbitral proceedings and then
raise that issue by way of an application under Section 34 against the
final award.
14. Though the final award, even in this situation, would not focus upon
the issue of limitation as it already stood decided by the rejection of the
application filed under Section 16(2) of the Arbitration Act, the scheme
of Section 16 and, more particularly, Sections 16(5) and 16(6), would
keep the issue alive and enable the party aggrieved to challenge the
validity of the rejection order under Section 16 at the final stage, even
after the passing of the final award.
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15. However, the scheme of Sections 16(5) and 16(6) would not apply
if the arbitrator deals with limitation as a preliminary issue and makes
a decision thereon in favour of the claimant. That is the reason why
this Court observed that, in such a situation, the drill of Sections 16(5)
and 16(6) would not have to be followed. This Court went on to observe
that even such interim awards should be made amenable to challenge
under Section 34 of the Arbitration Act after the passing of the final
award, instead of going in for ‘piecemeal’ challenges.
16. The exclusion of an order passed by an arbitrator under Section
16(2), rejecting the plea of lack of jurisdiction is, therefore, manifest
from the aforestated observations of this Court, but this decision has
now been misunderstood to imply that, even the rejection of a plea under
Section 16(2) of the Arbitration Act must be treated as an interim award
and the same can be subjected to challenge under Section 34 of the
Arbitration Act. This understanding on the part of the learned District
Judge, which seems to have found favour with the Division Bench of the
Delhi High Court, is erroneous and unsustainable. Accepting such a
construction would do violence to the very scheme of the Arbitration Act
and render Section 37(2) thereof superfluous, as it is only an order
accepting the plea of lack of jurisdiction under Section 16(2) or (3) that
is amenable to appeal directly, without going through the process under
Section 34 thereof. This crucial aspect of the matter was entirely lost
sight of.
17. On the above analysis, the respondent was not entitled to file an
application under Section 34 of the Arbitration Act against the order
dated 19.05.2023 passed by the learned Arbitrator rejecting its plea of
lack of jurisdiction on the ground of limitation. As the said application
was not even maintainable, the question of an appeal under Section 37
of the Arbitration Act being entertained against the decision passed
thereon did not arise. The Delhi High Court erred in overlooking this
crucial aspect and in deciding the appeal on merits. The judgment dated
08.05.2025 passed by the Division Bench of the Delhi High Court in
FAO (Comm.) No. 83 of 2024 is, accordingly, set aside. It would be open
to the respondent to test the validity of the order dated 19.05.2023
passed by the learned Arbitrator only after passing of the final award
and if the situation so warrants, by way of an application under Section
34 of the Arbitration Act.”
(emphasis supplied)
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103. Thus, it was reasoned that once a preliminary issue is decided
finally, it cannot be re-adjudicated by the Tribunal in the final award.
Therefore, unless such decision is treated as an interim award, the
aggrieved party will not have a forum to challenge such decision.
104. The Court also explained that if the same issue is taken up under the
garb of a Section 16 application, the machinery under Section 16 would be
triggered and accordingly, the decision would either be assailed under
Section 37 or Section 34 after passing of the final award and that such
decision cannot be construed as an interim award.
105. In the present case, the Zee Group filed their Section 16 applications
before the predecessor Arbitrator seeking the following prayers:
th
“a. reject the Statement of Claim dated 30 May 2019 as there exist
no valid arbitration agreement between the Claimant and Respondent
No.1; or
b. in the alternative, the Claimant be asked to pay the adequate
th
stamp duty on the Loan Agreement dated 15 March 2014 and the said
Agreement be ordered to forthwith impounded by the Stamp authorities
unless the stamp duty is not paid as per Article 5(h)(iv)(b) of the
Maharashtra Stamp Act, 1958;
c. pass an Order awaiting costs in favour of Respondent No.1; and
pass any such other/further Order(s)/directions as this Hon’ble
Tribunal may deem fit in the interest of justice, equity and fair play”
106. On 22.10.2020, the learned Arbitrator allowed prayer (b) of the
application and adjourned the proceedings sine die.
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107. The learned Arbitrator’s decision was thereafter assailed under
Section 37(2)(a) before this Court and subsequently, an SLP was filed. On
22.04.2022, the Hon’ble Supreme Court dismissed the SLP and observed
that the question of impounding can only be decided when the original
agreements are furnished.
108. Thereafter, in view of the miscellaneous applications filed by the
Zee Group, on 20.05.2022, the Hon’ble Supreme Court clarified the
aforesaid Order as follows:
“ In furtherance of our earlier order dated 22.04.2022, it is observed
and it goes without saying that as and when the original document is
produced before the learned Arbitrator, the question whether the
document is to be impounded or not is to be considered. The Arbitrator
has to take a call on whether the original document produced is on a
proper stamp duty or not. The same is to be considered in accordance
with law and on its own merits.
With this, the applications stand disposed of.”
109. Therefore, it was directed that once the original document is
produced before the learned Arbitrator, the Arbitrator shall take a call on
whether the original is to be impounded or not.
110. Another batch of miscellaneous applications were filed by Zee
Group with the specific prayer seeking a conclusive finding on whether
ISA or MSA will apply. The Supreme Court by Order dated 19.09.2022
dismissed these applications and clarified that the question as to whether
MSA or ISA is applicable shall also be decided by the learned Arbitrator.
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111. Accordingly, the matter was remanded to the learned Arbitrator for
this particular issue.
112. The predecessor Arbitrator recused herself and thereafter another
Arbitrator entered upon reference. The successor Arbitrator framed four
preliminary issues, out of which it gave reasoning only for Issue Nos. 3
and 4. The issues so framed are as follows:
“ISSUES:
i. Whether the Arbitration proceeding is maintainable?
ii. Whether Application under Section 16 of the Arbitration and
Conciliation Act, 1996 filed by the Respondent stands disposed off?
iii. Whether The Maharashtra Stamp Act, 1958 is applicable or The
Indian Stamp Act, 1899 is applicable to the Loan Agreement in
question?
iv. Whether the Loan Agreement in question (Original is on record) has
properly been stamped or not?”
113. With respect to Issue No. 2, the Arbitrator returned the following
finding:
“Re: Issue No . (ii)
81. Further, in view of the fact that the arbitration proceedings are
maintainable, it is not necessary to decide whether the application
under Section 16 of the Arbitration and Conciliation, 1996 was disposed
off or not.”
114. It is evident from a plain reading of the above that the learned
Arbitrator was conscious of the fact that the Section 16 application was not
being decided.
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115. Accordingly, upon a conjoint reading of the statute, the relevant
precedents and the facts and circumstances of the present case, I am of the
considered view that it is in light of the abovementioned orders of the
Hon’ble Supreme Court that the learned Arbitrator framed the four
preliminary issues and not in furtherance of the Section 16 applications
filed by the Zee Group. It is also significant to note the learned Arbitrator’s
finding under Issue No. 2, whereby the learned Arbitrator deemed it fit to
not decide whether the Section 16 applications were disposed of or not.
116. It is pertinent to note that the scope of the remand was limited to the
question of the applicable stamp law and the adequacy of stamp duty
thereof.
117. By the impugned award, the learned Arbitrator only gave reasoning
pertaining to Issue Nos. 3 and 4. It was held that MSA was applicable and
that the stamp duty was sufficient as per Article 5(h) B, therefore, there
arose no question of impounding the agreements.
118. Therefore, in light of the ratio in IFFCO (supra) and MCM
Worldwide (supra) , such determination of preliminary issues framed
amounts to an interim award under Section 31(6) of the Act as it finally
decides an issue inter se the parties and would not be revisited at the stage
of final award. Therefore, it must be challenged under Section 34 of the
Act.
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119. Accordingly, in the opinion of this Court, the present batch of cross-
objection petitions filed under Section 34 of the Act are maintainable.
120. Now we shall delve into the merits of the matter at hand.
(ii) On Merits: MSA or ISA?
121. At the outset, I deem it fit to delineate the well settled principles
pertaining to stamp duty. In this regard, the Supreme Court in S.N. Mathur
50
v. Board of Revenue succinctly held as follows:
“12. The principles relating to charging stamp duty are well settled.
They are:
(i) The object of the Stamp Act is generation of revenue. It is
therefore a fiscal enactment and has to be interpreted accordingly.
(ii) Stamp duty is levied with reference to the instrument and not
in regard to the transaction , unless otherwise specifically provided in
the Act.
(iii) Stamp duty is determined with reference to the substance of
the transaction as embodied in the instrument and not with reference
to the title, caption or nomenclature of the instrument .
(iv) For classification of an instrument, that is, to determine whether
an instrument comes within a particular description in an article in the
Schedule to the Act, the instrument should be read and construed as a
whole.
(v) Where an instrument falls under two or more descriptions in the
Schedule to the Act, the instrument shall be chargeable with only one
duty, that is the highest of the duties applicable to the different
description. But where an instrument relates to several distinct matters,
it shall be chargeable with the aggregate amount of duties to which
separate instruments would be chargeable.
Merely because an instrument answers the definition of a “trust deed”
it does not cease to be a settlement deed for the purpose of stamp duty,
if it answers the definition of “settlement” also. It is well settled that all
50
(2009) 13 SCC 301
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trusts are not settlements, and all settlements are not trusts, but a deed
of trust can also be a deed of settlement.”
(emphasis supplied)
122. Further, to determine the applicable stamp law i.e. MSA or ISA, in
case when an instrument is executed by different parties in different States,
this Court shall first examine the relevant provisions of both statutes to
ascertain whether they adequately address such a situation.
123. In case no statutory guidance is found, this Court shall refer to
relevant judicial precedents to ascertain the relevant framework or
mechanism to be applied. However, in the absence of any statutory
provisions or binding judicial precedents, this Court may be constraint to
refer to established principles of statutory interpretation.
124. I shall proceed with the contours of both the statutes in light of the
aforesaid.
Overview of ISA and MSA
125. The ISA is a Central legislation pertaining to stamp duty and falls in
Entry No. 91 to the Union List under Schedule VII of the Constitution of
51
India . It is a fiscal statute pertaining to levy of tax in the form of stamp
duty on instruments recording transactions.
51
“91. Rates of stamp duty in respect of bills of exchange, cheques, promissory notes, bills of lading, letters of
credit, policies of insurance, transfer of shares, debentures, proxies and receipts.”
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126. Article 268 of our Constitution provides that stamp duty falling
under the Union List shall by levied by the Centre but shall be collected
by the States in the event that stamp duty is levied in a State and not a
Union Territory.
52
127. Stamp duty also finds place in Entry No. 63 to the State List and
53
Entry No. 44 to the Concurrent List under the Schedule VII of the
Constitution of India.
128. In view thereof, States have amended the ISA for its application in
the respective State or passed its own State legislation for levy of stamp
duty, which thereby forms part of the revenue of that State.
129. Being a fiscal statute, undoubtedly, ISA (and the respective State
amendments) must be construed strictly. Under the ISA, the taxable event
is the creation (“execution”) of an instrument within the meaning of the
Act; it is this instrument that becomes chargeable to stamp duty and not
the transaction.
130. The dispute at hand requires this Court to delve into ISA and MSA
both. Therefore, I deem it relevant to reproduce the provisions of both
statutes in a tabular form hereinbelow for ease of reference:
52
“63. Rates of stamp duty in respect of documents other than those specified in the provisions of List I with regard
to rates of stamp duty.”
53
“44. Stamp duties other than duties or fees collected by means of judicial stamps, but not including rates of stamp
duty.”
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ISA MSA
1. Short title, extent and
commencement. —( 1 ) This Act may be
called the Indian Stamp Act, 1899.
( 2 ) It extends to the whole of India:
Provided that it shall not apply to the
territories which, immediately before the
1st November, 1956, were comprised in
Part B States] (excluding the State of
Jammu and Kashmir) except to the extent
to which the provisions of this Act relate
to rates of stamp-duty in respect of the
documents specified in Entry 91 of List I
in the Seventh Schedule to the
Constitution.
( 3 ) It shall come into force on the first
day of July, 1899.
1. Short title, extent and
commencement. — (1) This Act may be
called the Maharashtra Stamp Act.
(2) It extends to the whole of the State of
Maharashtra.
(3) It shall come into force on such date
as the State Government may, by
notification in the Official Gazette,
direct.
2. Definitions. —
(d) “chargeable” means, as applied to an
instrument executed or first executed
after the commencement of this Act,
chargeable under this Act and as applied
to any other instruments, chargeable
under the law in force in the State when
such instrument was executed or, where
several persons executed the instrument
at different times, first executed
2. Definitions. —
(6) “chargeable” means, as applied to an
instrument executed or first executed
after the commencement of this Act,
chargeable under this Act, and, as
applied to any other instrument,
chargeable under the law in force in India
when such instrument was executed or,
where several persons executed the
instrument at different times, first
executed
(11) “duly stamped” , as applied to an
instrument, means that the instrument
bears an adhesive or impressed stamp of
not less than the proper amount and that
such stamp has been affixed or used in
accordance with the law for the time
being in force in India
(h) “duly stamped” as applied to an
instrument means that the instrument
bears an adhesive or impressed stamp of
not less than the proper amount and that
such stamp has been affixed or used in
accordance with the law for the time
being in force in the state
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( 12 ) “executed” and “execution” used
with reference to instruments, mean
“signed” and “signature” and includes
attribution of electronic record within the
meaning of section 11 of the Information
Technology Act, 2000 (21 of 2000)
(i) “executed” and “execution” used
with reference to instruments, mean
“signed” and “signature”.
Explanation.—The terms “signed” and
“signature” also include attribution of
electronic record as per section 11 of the
Information Technology Act, 2000
( 14 ) “instrument” includes—
( a ) every document, by which any right
or liability is, or purports to be, created,
transferred, limited, extended,
extinguished or recorded;
( b ) a document, electronic or otherwise,
created for a transaction in a stock
exchange or depository by which any
right or liability is, or purports to be,
created, transferred, limited, extended,
extinguished or recorded; and
( c ) any other document mentioned in
Schedule I, but does not include such
instruments as may be specified by the
Government, by notification in the
Official Gazette.
(l) “instrument ” includes every
document by which any right or liability
is, or purports to be, created, transferred,
limited, extended, extinguished or
recorded, but does not include a bill of
exchange, cheque, promissory note, bill
of lading, letter of credit, policy of
insurance, transfer of share, debenture,
proxy and receipt ;
Explanation.—The term “document”
also includes any electronic record as
defined in clause (t) of sub-section (1) of
section 2 of the
Information Technology Act, 2000
3. Instruments chargeable with
duty. —Subject to the provisions of this
Act and the exemptions contained in
Schedule I, the following instruments
shall be chargeable with duty of the
amount indicated in that Schedule as the
proper duty therefore respectively, that is
to say—
3. Instruments chargeable with
duty.— Subject to the provisions of this
Act and the exemptions contained in
Schedule I, the following instruments
shall be chargeable with duty of the
amount indicated in Schedule I as the
proper duty therefor respectively, that is
to say—
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( a ) every instrument mentioned in that
Schedule which, not having been
previously executed by any person, is
executed in India on or after the first day
of July, 1899;
( b ) every bill of exchange payable
otherwise than on demand or promissory
note drawn or made out of India on or
after that day and accepted or paid, or
presented for acceptance or payment, or
endorsed, transferred or otherwise
negotiated, in India; and
( c ) every instrument (other than a bill of
exchange, or promissory note)
mentioned in that Schedule, which, not
having been previously executed by any
person, is executed out of India on or
after that day, relates to any property
situate, or to any matter or thing done
or to be done, in India and is received in
India:
Provided that no duty shall be chargeable
in respect of—
( 1 ) any instrument executed by, or on
behalf of, or in favour of, the
Government in cases where, but for this
exemption, the Government would be
liable to pay the duty chargeable in
respect of such instrument;
( 2 ) any instrument for the sale, transfer
or other disposition, either absolutely or
byway of mortgage or otherwise, of any
ship or vessel, or any part, interest, share
or property of or in any ship or vessel
registered under the Merchant Shipping
Act 1894, Act No. 57 & 58 Vict. c. 60 or
under Act XIX of 1838 Act No. or the
(a) every instrument mentioned in
Schedule I, which, not having been
previously executed by any person, is
executed in the State on or after the date
of commencement of this Act ;
(b) every instrument mentioned in
Schedule I, which, not having been
previously executed by any person, is
executed out of the State on or after the
said date, relates to any property situate,
or to any matter or thing done or to be
done in this State and is received in this
State:
Provided that a copy or extract, whether
certified to be a true copy or not and
whether a fascimile image or otherwise
of the original instrument on which
stamp duty is chargeable under the
provisions of this section, shall be
chargeable with full stamp duty indicated
in the Schedule I if the proper duty
payable on such original instrument is
not paid:
Provided further that no duty shall be
chargeable in respect of—
(1) any instrument executed by or on
behalf of, or in favour of, the
Government in cases where, but for this
exemption, the Government would be
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Indian Registration of Ships Act, 1841,
(CX of 1841) as amended by subsequent
Acts.
liable to pay the duty chargeable in
respect of such instrument or where the
Government has undertaken to bear the
expenses towards the payment of the
duty.
(2) any instrument for the sale, transfer
or other disposition, either absolutely or
by way of mortgage or otherwise, of any
ship or vessel, or any part, interest, share
or property of or in any ship or vessel
registered under the Bombay Coasting
Vessels Act, 1838, or Merchant Shipping
Act, 1958
17. Instruments executed in India. —
All instruments chargeable with duty and
executed by any person in India shall be
stamped before or at the time of
execution.
17. Instruments executed in State.—
All instruments chargeable with duty and
executed by any person in this State shall
be stamped before or at the time of
execution or
immediately thereafter on the next
working day following the day of
execution:
Provided that the clearance list described
in Article 19, 20, 21, 22 or 23 of
Schedule I may be stamped by an officer
authorised by the State Government by
rules made under this Act, if such
clearance list is submitted for stamping
by the clearing house of an Association
in accordance with its rules and bye-laws
with the requisite amount of stamp duty,
within two months from the date of its
execution.
18. Instruments other than bills and
notes executed out of India.—
18. Instruments executed out of
State.—
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(1) Every instrument chargeable with
duty executed only out of India and not
being a bill of exchange or promissory
note, may be stamped within three
months after it has been first received in
India.
(2) Where any such instrument cannot,
with reference to the description of stamp
prescribed therefor, be duly stamped by
a private person, it may be taken within
the said period of three months to the
Collector, who shall stamp the same, in
such manner as the State Government
may by rule prescribe, with a stamp of
such value as the person so taking such
instrument may require and pay for.
(1) Every instrument chargeable with
duty executed only out of this State may
be stamped within three months after it
has been first received in this State.
(2) Where any such instrument cannot,
with reference to the description of stamp
prescribed therefore, be duly stamped by
a private person, it may be taken within
the said period of three months to the
Collector, who shall stamp the same, in
such manner as the State Government
may by rule prescribe, with a stamp of
such value as the person so taking such
instrument may require and pay for.
131. A cumulative reading of relevant provisions of both statutes reveals
that Section 2 sets out various definitions of terms employed throughout
these statutes, whereas Section 3 is the charging provision specifying the
kind of instruments that attract stamp duty. The rate or quantum of the duty
is prescribed under the respective Schedules appended to the statutes. An
instrument not mentioned in these Schedules is not liable to be stamped.
Further, the question as to when such instruments ought to be stamped is
answered by Sections 17 and 18 of these statutes.
132. In particular, Section 18 of both Acts provides the method for
stamping instruments executed outside the territory wherein the statute is
applicable. Accordingly, this provision pertains to instruments executed
outside India and Maharashtra under ISA and MSA respectively.
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133. The most rudimentary yet crucial aspect is the chargeability of an
instrument. Chargeability, in simple terms, is whether an instrument is
legally amenable to stamp duty under the applicable legislation. An
54
instrument is said to attract stamp duty when it is executed (signed) .
134. While the ISA and MSA adopt an identical meaning of the words
“execution” and “executed”. This meaning is, however, distinct from their
common understanding. Both statutes restrict the meaning of “execution”
and “executed” to merely mean “sign” or “signature”. The definition does
not stipulate any other qualification whatsoever; that is to say, there is no
explicit specification as to how many persons must sign an instrument in
order for it to be considered as “executed” to attract stamp duty under
Section 3.
135. In other words, the “chargeable event” for levy of stamp duty on an
instrument is its execution, which is nothing but affixing signatures to the
instrument. However, whether signature of a single party to a multilateral
agreement is sufficient to attract stamp duty remains a question that falls
for determination before this Court.
136. In the quest to find an answer to this question, let us begin by
analysing the relevant provisions of the MSA.
MSA
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Vijay v. Union of India, (2023) 17 SCC 455
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137. At the outset, an instrument is said to be “duly stamped” under MSA
if it bears an “adhesive or impressed stamp of not less than the proper
amount and that such stamp has been affixed or used in accordance with
55
the law for the time being in force in the State” .
138. Section 2(d) defines “chargeable” as follows:
“(d) “chargeable” means, as applied to an instrument executed or first
executed after the commencement of this Act, chargeable under this Act
and as applied to any other instruments, chargeable under the law in
force in the State when such instrument was executed or, where several
persons executed the instrument at different times, first executed ”
(emphasis supplied)
139. It is evident from the above that an instrument would be chargeable
under the Act in force at the time of its execution. This definition is pari
materia to the definition under the ISA, save that the former uses the term
“State” and the latter employs the term “India”.
140. This provision clarifies which law applies for determining
“chargeability” and for this purpose, it uses execution of an instrument as
the point of reference. It cannot be said that this provision squarely answers
the question “when is an instrument chargeable”; which is more
appropriately answered by Sections 17 and 18.
141. Briefly stated, Section 2(d) defines the scope of “chargeable” with
respect to instruments executed at different points in time. Specifically, if
55
Section 2(h) of MSA
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an instrument was executed or first executed after the MSA came into
force, it would be chargeable under the MSA. Conversely, if an instrument
was executed before the MSA came into force, it would be governed by
the stamp legislation in effect at that relevant time.
142. Therefore, Section 2(d) identifies the statute governing an
instrument's chargeability with reference to the “time of execution”.
143. Section 3, being the charging provision, is highly relevant to this
discourse. This Court is of the view that Section 3 is the singular provision
that sheds light upon this otherwise dense thicket of statutory uncertainty.
It is reproduced as follows:
“3. Instruments chargeable with duty. — Subject to the provisions of this
Act and the exemptions contained in Schedule I, the following
instruments shall be chargeable with duty of the amount indicated in
Schedule I as the proper duty therefor respectively, that is to say—
(a) every instrument mentioned in Schedule I, which, not having been
previously executed by any person, is executed in the State on or after
the date of commencement of this Act;
(b) every instrument mentioned in Schedule I, which, not having been
previously executed by any person, is executed out of the State on or
after the said date, relates to any property situate, or to any matter or
thing done or to be done in this State and is received in this State:
Provided that a copy or extract, whether certified to be a true copy or
not and whether a fascimile image or otherwise of the original
instrument on which stamp duty is chargeable under the provisions of
this section, shall be chargeable with full stamp duty indicated in the
Schedule I if the proper duty payable on such original instrument is not
paid:
Provided further that no duty shall be chargeable in respect of—
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(1) any instrument executed by or on behalf of, or in favour of, the
Government in cases where, but for this exemption, the Government
would be liable to pay the duty chargeable in respect of such instrument
or where the Government has undertaken to bear the expenses towards
the payment of the duty.
(2) any instrument for the sale, transfer or other disposition, either
absolutely or by way of mortgage or otherwise, of any ship or vessel, or
any part, interest, share or property of or in any ship or vessel
registered under the Bombay Coasting Vessels Act, 1838, or Merchant
Shipping Act, 1958”
(emphasis supplied)
144. As understood, Section 3 is the charging provision that determines
when an instrument becomes liable to stamp duty under the MSA. Section
3 identifies two scenarios in which an instrument becomes chargeable to
stamp duty in Maharashtra.
145. Section 3(a) simply stipulates that instruments executed in
Maharashtra shall be stamped as per MSA. Whereas Section 3(b) provides
that instruments executed outside Maharashtra will attract MSA if: (i) it
pertains to any property in the State or any matter or a thing done or to be
done in the State, and (ii) is received in Maharashtra.
146. Notably, to invoke Section 3(b), it is evident from the use of the
word “and” that both the conditions (i) and (ii) ought to be met.
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147. Upon a cumulative reading of the provisions of the MSA, it seems
to be that Section 3 is confined to identifying the circumstances in which
an instrument becomes qualified for duty to be attracted under the MSA.
148. However, in view of this Court, Section 3 of the MSA does not
prescribe a conclusive rule for determining which State legislation shall
conclusively govern an instrument executed by different parties in
different States.
149. Notably, the expression “ not having been previously executed by any
person ” qualifies the class of instruments attracting chargeability under
Sections 3(a) and 3(b). However, it does not constitute an independent or
exclusive provision determining which stamp legislation would follow if
an instrument were signed by different parties in different States.
150. I say so because Section 3(b) itself imposes the chargeability of
instruments executed outside Maharashtra, subject to the prescribed
territorial connection and receipt within the State. Section 19 further
recognizes the possibility of stamp duty already having been paid under
another applicable law.
151. Thus, upon a holistic reading of MSA and keeping in mind the nexus
between the ISA and MSA, it is clear that the MSA does not treat the place
of first execution as the sole answer for determining applicability of the
legislation. The reason being that MSA itself contemplates an instrument
to be executed in one State and thereafter being received in Maharashtra,
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wherein it shall again attract stamp duty. Therefore, if the place of first
execution was the sole determinative factor as to which State legislation
would apply, there would be no room for this additional charging
mechanism.
152. The use of the phrase “ not having been previously executed by any
person” in this provision falls short of a determinative answer as to how
many signatures would constitute “executed” or “execution” with respect
to a multilateral agreement.
153. Consequently, the question of which State legislation governs the
stamp duty of an instrument executed by different parties in different States
cannot be conclusively answered merely by referring to the words “ not
having been previously executed by any person ” in Section 3. The
applicability of each relevant State legislation must be examined with
reference to its respective charging provisions.
154. Thus, having gone through the relevant provisions of the MSA, this
Court is of the view that although MSA answers when the MSA itself will
be applicable, however, it does not answer which statute will apply when
different parties execute an instrument in different States.
155. Accordingly, since this Court does not find a definitive resolution to
the present controversy within the provisions of MSA, it is necessary to
examine the provisions of the ISA, to ascertain if they offer any further
clarity.
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ISA
156. At the outset, it must be candidly stated that an examination of the
relevant provisions of the ISA reveals that they, too, fail to provide a
definitive answer to the question in controversy.
157. In these circumstances, I shall briefly proceed to analyse the relevant
provisions of ISA and demonstrate why they as well fail to guide this Court
in the present discourse.
158. While the earlier Indian Stamp Act of 1879 (Act I of 1879) defined
“chargeability” as it is defined today, it did not stipulate what “executed”
or “execution” meant.
159. Notably, this definition was introduced for the first time in the ISA,
1899. This definition has been borrowed from Section 122(1) of the
56
English Stamp Act, 1891 .
160. Accordingly, Section 2(12) of the ISA also defines “execution” and
“executed” to mean “signed” and “signature”. Further, Section 17 requires
instruments chargeable with duty (executed within India) to be stamped
before or at the time of execution. Section 18 requires instruments
56
“The expressions " executed " and " execution," with reference to instruments not under seal, mean signed and
signature”
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executed outside India but received in India to be stamped within three
months of being received in India.
161. Therefore, since these provisions of ISA are pari materia to that of
MSA, they are riddled with the same limitations as laid out in the foregoing
discussion. The ISA as well does not answer the question as to how many
signatures to a multilateral instrument would render an instrument to be
“executed” and as to which State legislation shall apply if multiple
contracting parties sign the instrument in different States.
162. Having delineated the scheme of ISA and MSA, I shall proceed to
certain relevant judicial authorities.
The Tapestry of Judicial Precedents
163. At this stage, I deem it relevant to reiterate that ISA and MSA are
fiscal statutes enacted to secure revenue for the State. Accordingly, they
57
must be construed strictly and in due regard to their purpose .
164. The Hon’ble Supreme Court much rightly cautioned that these
statutes are not meant to “ arm a litigant with a weapon of technicality to
58
meet the case of his opponent ” .
57
; Hameed Joharan v. Abdul Salam, (2001) 7 SCC 573; In Re: Interplay Between Arbitration Agreements under
Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, 2023 SCC OnLine SC 1666
58
Hindustan Steel Ltd. v. Dilip Construction Co., (1969) 1 SCC 597
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165. More recently, seven Judges of the Hon’ble Supreme Court in In
Re: Interplay (supra) have reiterated that stamp duty shall not be an
obstacle at the nascent stage of the arbitral process i.e., the Section 8 and
11 stages.
166. It was held that non-stamping or inadequate stamping is a curable
defect. It was reasoned that the Parliament was aware of the Stamp Act
when it enacted the Arbitration Act and yet the Parliament in its wisdom
chose to not provide that an arbitration agreement ought to be duly
stamped. The Apex Court invoked inter alia the principle of severability
and the effect of the competence-competence doctrine to hold the
following:
“235.3. An objection as to stamping does not fall for determination
under Sections 8 or 11 of the Arbitration Act. The Court concerned must
examine whether the arbitration agreement prima facie exists;
235.4. Any objections in relation to the stamping of the agreement fall
within the ambit of the Arbitral Tribunal;”
167. Accordingly, this Court is mindful that the issue of stamping falls
within the domain of the learned Arbitrator and that this Court must not
interfere merely because another view is plausible.
168. This Court is also mindful that while interpreting statutes, if two
interpretations are plausible, courts must give effect to the legislative intent
and reject any interpretation which will defeat the basic intent of the
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legislation. Courts must also take into consideration the entirety of the
59
statute .
169. A Full Bench of the Hon’ble Supreme Court in New Central Jute
60
Mills Co. Ltd. v. State of W.B. considered the question that whether an
instrument pertaining to property in West Bengal and bearing the stamp of
West Bengal is liable to be stamped in Uttar Pradesh on account of it being
executed in Uttar Pradesh.
170. This decision pertains to a mortgaged deed executed in Uttar
Pradesh but pertaining to property in West Bengal, where the deed was
received thereafter for registration. This deed was stamped as per rates
applicable in West Bengal, but the Supreme Court held that the officers in
Uttar Pradesh were bound to hold that the deed was not adequately
stamped as per laws in Uttar Pradesh. It was reasoned as follows:
“9. There cannot be any doubt that when it becomes necessary for any
public officer of a State – using that word to mean an officer in charge
of a public office – to decide whether an instrument is or is not “duly
stamped” the law has to apply is the Indian Stamp Act in the light of the
appropriate modifications made by the State Legislature. So, when the
Uttar Pradesh public officers had to decide in the present case whether
the original mortgage deed was or was not “duly stamped” they had to
examine for the purpose the Indian Stamp Act as it stood after its
amendment by the Uttar Pradesh Legislature. Section 3 of the Stamp
Act creates a liability for stamp duty. Section 3 after its amendment by
the U.P. legislature stands thus:
“3. Subject to the provisions of this Act and the exemptions contained
in Schedule I, the following instruments shall be chargeable with duty
59
CIT v. Hindustan Bulk Carriers, (2003) 3 SCC 57 ; In Re: Interplay Between Arbitration Agreements under
Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, 2023 SCC OnLine SC 1666
60
1963 SCC OnLine SC 201
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of the amount indicated in that Schedule as the property duty therefor,
respectively, that is to say:-
(a) every instrument mentioned in that schedule which, not having
been previously executed by any person, is executed in the States on
or after the first day of July, 1899;
(b) every bill of exchange (payable otherwise then on demand) or
promissory note drawn or made of the States on or after that day and
accepted or paid, or presented for acceptance or payment, or
endorsed, transferred or otherwise negotiated, in the States; and
(c) every instrument (other than a bill of exchange, or promissory
note) mentioned in that Schedule which, not having been previously
executed by any person, is executed out of the States on or after that
day, relates to any property situate, or to any matter or thing done or
to be done, in the States and is received in the States:-
Provided that except as otherwise expressly provided in this Act, and
notwithstanding anything contained in clauses (a), (b) and (c) of this
section or in Schedule I or I-A the following instruments shall subject
to the exemptions contained in Schedule I-A or I-B be chargeable with
duty of the amount indicated in Schedule I-A or I-B as the proper duty
therefor respectively, that is to say-
(aa) every instrument mentioned in Schedule I-A or I-B which not
having been previously executed by any person was executed in
Uttar Pradesh-
(aa) every instrument mentioned in Schedule I-A or I-B which not
having been previously executed by any person was executed in
Uttar Pradesh-
(i) in the case of instruments mentioned in Schedule I-A on or after
the date on which the U.P. Stamp (Amendment) Act, 1948, came
into force, and
(ii) in the case of instruments mentioned in Schedule I-B on or
after the date on which the U.P. Stamp (Amendment) Act, 1952,
comes into force
(bb) every instrument mentioned in Schedule I-A or I-B which not
having been previously executed by any person, was executed out
of Uttar Pradesh-
(i) in the case of instruments mentioned in Schedule I-A, on or after
the date on which the U.P. Stamp (Amendment) Act, 1948 came into
force and
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(ii) In the case of instruments mentioned in Schedule I-B on or
after the date the U.P. Stamp (Amendment) Act, 1952 comes into
force, and relates to any property situated, or to any matter or
thing done or to be done in Uttar Pradesh and is received in Uttar
Pradesh:
Provided also that no duty shall be chargeable in respect of
(1) any instrument executed by, or on behalf of, or in favour of, the
Government in cases where, but for this exemption, the Government
would be liable to pay the duty chargeable in respect of such
instrument;
(2) any instrument for sale, transfer or other disposition, either
absolutely or by way of mortgage or otherwise, of any ship or vessel,
or any part, interest share or property of or in any shop or vessel
registered under the Merchant Shipping Act, 1894, or under Article
19 of 1838, or, the Indian Registration of Ships Act, 11841, (10 of
1841), as amended by subsequent Acts.”
10. Another important change in the legal position was effected by
framing rules under the Act. While Section 74empowers the State
Government to make rules relating to the sale of stamps, Section 75
empowers the Government generally to make rules “to carry out
generally the purposes of the Act”. Section 76 provides that all rules
made under the Act shall be published in the Official Gazette and on
such publication shall have effect as if enacted by the act. Of the rules
framed by the Uttar Pradesh Government it is necessary to consider in
the present case Rule 3 which is in these words:
“3. Except as otherwise provided by the Stamp Act or by these rules-
(i) all duties with which an instrument is chargeable shall be paid,
and such payment shall be indicated on such instrument, by means
of stamp issued by the Government for the purposes of the Act, and
(ii) a stamp which by any word or words on the face of it is
appropriated to any particular kind of instrument shall not be used
for an instrument of any other kind.
(2) There shall be two kinds of stamps for indicating the payment of
duty with which instruments are chargeable namely:
(a) impressed stamps overprinted with the words “Uttar Pradesh”
or the letters “U.P.”, and
(b) adhesive stamps overprinted with the letters “U.P.”,
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Provided that the payment of stamp duty on instruments,
executed in any part of British India other than Uttar Pradesh and
governed by Section 19-A of the said Act, as amended in its application
to the Uttar Pradesh, may be indicated by such stamps as may be
prescribed for use in that part to the extent of the duty payable there,
the additional duty, if any chargeable in the Uttar Pradesh being paid
by means of stamps prescribed in this rule. Sub-rule (2) of this rule shall
st
take effect from 1 April, 1942:
Provided further that all impressed and adhesive stamps for
indicating the payment of duty with which instruments are chargeable
and which are not overprinted with words “Uttar Pradesh” or “U.P.”
respectively, shall be consumed or exchanged at the treasuries in Uttar
Pradesh, provided that they are undamaged and unpolished, with
overprinted stamps of the name and denomination and description
st
before 1 April 1942, after which date the use or exchange of impressed
and adhesive stamps not so overprinted, shall not be permissible, except
to the extent indicated in the first proviso.”
The effect of Section 76 already mentioned above is that this rule
operates as a part of the Stamp Act. In deciding whether the instrument
had been duly stamped or not the public officer had to consider not only
the provisions of the Act but also the provisions of the rules. The position
that confronted the officers may be summarised thus : The document
had been executed in Uttar Pradesh. So, it became liable to pay duty
under Section 3(aa) of the Act as amended in Uttar Pradesh. Rule 3
required that the liability had to be discharged by using stamps
overprinted with the words “Uttar Pradesh” or “U.P.” The instrument
did in fact bear stamps overprinted with the words “West Bengal” and
not with the words “Uttar Pradesh” or “U.P.” The public officer was
therefore bound to hold that it had not been stamped in accordance with
the law in force in Uttar Pradesh.
11. On behalf of the petitioner it is urged that even so the officer should
have held that the document was duly stamped. Reliance is placed for
this contention on the definition of the words “duly stamped” in Section
(2)(ii) of the Act. The definition runs thus:
“duly stamped” as applied to an instrument means that the
instrument bears an adhesive or impressed stamp or not less than
the proper amount and that such stamp has been affixed or used in
accordance with the law for the time being in force in India”
Leaving out of consideration for the present, the question of what should
be the proper amount of the stamp, it is necessary to consider whether
when the officer found that the stamp had not been affixed or used “in
accordance with the law for the time being in force in Uttar Pradesh:
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he was entitled to say also that the stamp had not been affixed or used
in accordance with the law for the time being in force in “India”. It is
pointed out that like the Uttar Pradesh legislature the Bengal legislature
had also amended the stamp law and framed its own rules. The
amendment of Section 3 in Bengal was by the addition of a proviso in
these words:
“Provided that, except as otherwise expressly provided in this Act,
and notwithstanding anything contained in Clause(a), (b) or (c) of
this section or in Schedule 1, the amount indicated in Schedule 1-A
to this Act shall, subject to the exemptions contained in that
Schedule, be the duty chargeable under this Act on the following
instruments, mentioned in clauses (aa) and (bb) of this proviso as
the proper duty therefor respectively.
(aa) every instrument, mentioned in Schedule 1-A as chargeable
with duty under that Schedule, which, not having been previously
executed by any person, is executed by any person, is executed
in Bengal on or after the first day of April 1922; and
(bb) every instrument mentioned in Schedule 1-A, as chargeable
with duty under that Schedule, which, not having been previously
executed by any person, is executed out of Bengal on or after the
first day of April, 1922, and relates to any property situated, or
to any matter or thing done or to be done in Bengal, and is
received in Bengal.”
The Bengal Government also framed rules under Section 76 which were
duly published in the Gazette and on such publication became part of
the Act. Rule 3 of these rules, as it now stands requires that the duty
payable must be paid by means of stamps overprinted with the words
“West Bengal”. The instrument in the present case is mentioned in
Schedule 1-A of the Stamp Act as in force in West Bengal and though
executed out of West Bengal it relates to property situated in West
Bengal and was for the purposes of registration received in West
Bengal. It was therefore chargeable under Section 3(bb) of the Stamp
Act as in force in Bengal. This duty was paid by stamps overprinted with
the words “West Bengal” in accordance with the stamp rules in force in
West Bengal. On behalf of the petitioner it is urged that the stamp law
in force in West Bengal was as much a law in force in India as the stamp
law in Uttar Pradesh is the law in force in India. It is argued that in
deciding whether an instrument is “duly stamped” within the meaning
of the Stamp Act it was necessary for the officer in Uttar Pradesh to
ascertain the law in other parts of India also in order to decide whether
or not “stamp” has been affixed or used in accordance with the law for
the time being in force in India.
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13. The problem is therefore reduced to this: Where an officer in Uttar
Pradesh finds that an instrument has not been stamped in accordance
with the law in force in Uttar Pradesh, how is he to proceed? It is easy
to see that similar problems may arise before public officers of other
States. Thus, an officer in Bihar who has to decide whether a particular
instrument has been duly stamped, may find that it has been stamped in
accordance with the law in force in Madras but not in accordance with
the law in force in Bihar. Should he hold that the instrument has been
duly stamped, in such circumstances?
14. Primarily, the liability of an instrument to stamp duty arises on
execution. Execution in India itself made the instrument liable to stamp
duty under Section 3(a) as it stood before the amendment. Under Section
3(c) execution out of India, where the instrument relates to property
situated or any matter or thing done or to be done in India together with
the further fact that the instrument is received in India, made the
instrument chargeable with duty. In amending the Stamp Act what the
State legislatures substantially did was to treat the particular State as
equivalent to India. Thus, after the amendment by the U.P. legislature
the position in law is that execution of an instrument in Uttar Pradesh
is made the primary dutiable event and liability to stamp duty arises on
such execution. Apart from that, liability also arises where the
instrument though executed out of Uttar Pradesh relates to property
situated or any matter or thing done or to be done in Uttar Pradesh and
is received in Uttar Pradesh. It may be mentioned that the changes in
the law made by the other State legislatures are exactly similar.
15. It is clear that in many cases the only one liability viz. the liability
on execution of the document will arise. After the amendment of the Act
the liability can no longer be said to arise generally in India but must
be held to arise in the particular State where the instrument is executed.
It stands to reason that liability having arisen in a particular State it
cannot be held to be discharged in accordance with the law in force in
India unless it is discharged in accordance with the law of the State
where it arises. In other words, where the only liability of an instrument
to stamp duty is the execution in Uttar Pradesh it must bear stamps of
the amount and description in accordance with the law of the State
concerned – the law including not only the Act but also the rules framed
under the Act.
16. Some complications arise in the cases where both the liabilities arise
– i.e. where the instrument is executed in one State but is related to
property situated in or to things done or to be done in another State and
is received in the second State. In these cases the liability to stamp duty
arises first under the stamp law of the first State on account of the
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execution in the State; a second liability arises under the law of the
second State when the instrument is received in that second State.”
171. Therefore, the Court recognized that the liability to stamp would
first arise in the State where the instrument is executed. The Court further
acknowledged that after respective State amendments, a second liability
would arise where an instrument executed in one State pertains “to
property situated or any matter or thing done or to be done” in another
State. Accordingly, the Court held that liability in such cases must be
discharged in the following manner:
“17. How is the liability to be discharged? Has it to be discharged in
accordance with the law in force in the State where execution takes
place or in accordance with the law in force in the State where the
second dutiable event viz. the receipt in the second State occurred?
Obviously, an officer, of the first State may reasonably think that it is the
law of his State which must prevail and so even if the document has been
stamped in accordance with the law of the other State he may ignore
that stamping as not done in accordance with the law in India and
proceed to demand that it must bear stamps in accordance with the law
of his State. It was to avoid the hardships that may conceivably result
from such a situation that the legislatures of different States enacted
Section 19-A of the Stamp Act. This section of the Uttar Pradesh Act
runs thus:
"19. A “Where any instrument has become chargeable in any
part of the States other than the Uttar Pradesh with duty under
this Act or under any other law for the time being in force in
any part of the States and thereafter becomes, chargeable with
a higher rate of duty in the Uttar Pradesh under clause (bb) of
the first proviso to Section 3, then,
(i) notwithstanding anything contained in the first proviso to
Section 3 the amount of duty chargeable on such instrument
shall be the amount chargeable on it under Schedule 1-A, or
Schedule 1-B, less the amount of duty, if any, already paid on
it in the States; and
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(ii) in addition to the stamps, if any, already affixed thereto,
such instrument shall be stamped with the stamps necessary
for the payment of the amount of duty chargeable on it under
(1) in the same manner and at the same time and by the same
persons as though such instrument were an instrument
received in the States for the first time at the time when it be-
comes chargeable with the higher duty."
18. Therefore, where the rate of duty in Uttar Pradesh for an
instrument which becomes chargeable for stamp duty as mentioned
above, (i.e., an instrument executed out of Uttar Pradesh and relating
to property situated or to any matter or thing done or to be done in Uttar
Pradesh) with a higher rate of duty in Uttar Pradesh than in West
Bengal, only the excess has to be paid in Uttar Pradesh and it is only
this excess which requires to be paid in Uttar Pradesh stamps. (Vide
Rule 3 of the Uttar Pradesh Rules).”
172. It is also to be noted that in New Central Jute Mills (supra) , the
controversy before the Hon'ble Supreme Court proceeded upon the
admitted execution of a complete and chargeable mortgage instrument
within the State of Uttar Pradesh, and the principal question therein was
whether such instrument could be regarded as duly stamped
notwithstanding that the stamp affixed thereto had been issued by the State
of West Bengal and not Uttar Pradesh. The Court, in that context,
recognised execution as the primary dutiable event. However, the
judgment did not examine the anterior question of what constitutes
execution where an instrument, by its very character and terms, requires
signatures from multiple parties in multiple States before it can acquire the
character necessary for chargeability.
173. Moving forward, three Judges of the Madras High Court in Chief
Controlling Revenue Authority Madras v. Canara Industrial and
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61
Banking Syndicate Ltd. answered a question highly relevant to this
discourse, i.e., “ whether instruments in general are to be stamped on
execution notwithstanding that other conditions which validate the
transfer of rights which the instruments purport to make are not present?” .
The Court answered the reference in the following manner:
“An interesting decision on this aspect is (Firm) Shamdin v. Collector,
Amritsar [(1936) I.L.R. 17 Lah. 223; AIR 1936 Lah 449]. During the
course of the judgment of the Special Bench the learned Judges
observed, wish reference to the definition in S. 2 (12) at page 451:
“……the intention of the new clause was to make it clear at
that time a document becomes executed so as to be chargeable
with stamp duty under S. 3 of the Act……for the purpose of the
Stamp Act, the clause makes all documents which are
chargeable with duty, when executed, chargeable as soon as
they are signed by the executant.”
With respect, we may point out that the words “by the executant”
occurring in this passage, are a distinct addition to the definition in S.
2 (12) and, hence, not warranted. If ‘executed’ means 'signed', and
“execution” means “signature” it is clearly that this will include the
signatures of all persons, who were required by a character of the
document to sign in the document, in order to give that document
effect according to law. We have no doubt, therefore, that if a
document is of such a character that both parties to the document
should sign it, to constitute it a binding agreement between them it
should contain the signatures of both; similarly, if it had to be signed
by two other attestors, in order to make it legal, this will also be
necessarily part of the definition. But once a document it complete in
execution in sense, and the effective words of disposition are there,
immediately transferring rights by the very virtue of the document, the
question of its subsequent registration is a distinct matter altogether,
and the document is certainly liable to stamp duty with reference to the
relevant Article of the Stamp Act, since execution is complete.”
(emphasis supplied)
61
1967 SCC OnLine Mad 102
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174. The aforesaid matter pertained to a conveyance deed, and it was
contended by the Respondent therein that since the instrument was not
registered, it was not a valid conveyance and hence, could not be liable to
stamp duty. In view of Sections 2(6), 3(a) and 17, the Court accepted the
proposition that stamp law envisages a document liable to stamp duty at
the time of its execution, which may be prior to its registration.
175. The Court referred to the decision in Shamdin v. Collector,
62
Amritsar , which held that instruments become chargeable as soon as they
are “signed by the executant”. The Court specifically rejected this and held
that “by the executant” is nowhere found under Section 2(12).
Accordingly, the Court clarified that the signatures of all persons who, by
the very nature of the instrument, are required to sign it, would constitute
“execution” under Section 2(12). This may even include witnesses.
176. On the other hand, five Judges of the Andhra Pradesh High Court in
63
Hazrami Gangaram v. Kamlabai arrived at a different conclusion from
the Madras High Court Bench. The Court was seized with the question that
whether the document in question was a mortgage deed within the meaning
of Section 2(17) of the Stamp Act or not. The Bench held that signing of
the instrument is the sole formality required to give rise to chargeability
and no other steps such as delivery or registration of the instrument or
62
(1936) I.L.R. 17 Lah. 223; AIR 1936 Lah 449
63
A.I.R. 1968 A.P. 213
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attestation by witnesses is required to attract stamp duty. It was held as
follows:
“11. Under section 2(6) of the Stamp Act “Chargeable” means, as
applied to an instrument executed or first executed after the
commencement of this Act. chargeable under this Act, and, as applied
to any other instrument, chargeable under the law in force in India when
such instrument was executed or, where several persons executed the
instrument at different times, first executed. “It maybe noticed” that
according to this definition, what is chargeable is what is liable to duty
at the time of execution. Under section 2(12) “Executed” and
“execution” used with reference to instruments, means “signed” and
“signature.” A reading of these two definitions of “Chargeable” and
“Executed” under sections 2(6) and 2(12) of the Stamp Act would
make it clear that an instrument is chargeable with duty as soon as it
is signed by the executant. Under the Stamp Act of 1879, there was no
definition of the terms “executed” or “execution” and it was held
in Bkatoanji Harbhum v. Devji Punja [(1895) I.L.R. 19 Bom. 635.] ,
that a hundi was duly stamped if the stamp was affixed and cancelled at
the time of delivery, but under the present Act, liability to stamp the
instrument would be at the time of signing it, so that it is clear that
once the instrument is signed or executed, no other formality fequired
(sic) to give legal validity to the instrument under the general law such
as delivery or attestation by witnesses is necessary to make the
instrument liable to stamp duty under the Stamp Act.
12. The word “Instrument” under section 2(14) of the Stamp Act is
defined to include “every document by which any right or liability is, or
purports to be, created, transferred, limited, extended, extinguished or
recorded.” Under this definition, what is made liable to duty is the
document which satisfies the requirements of section 2(14). The test is
whether the document creates or purports to create a right, and every
such instrument as defined under section 2(17) would be liable to
stamp duty at the time of execution i.e., at the time when it is signed,
because the crucial time as to when a document is liable to stamp duty
is undoubtedly the date of execution, i.e., the date on which it is signed
and nothing else. To hold that an instrument must be a valid
instrument under law before it is liable to stamp duty would be to
ignore the requirements of the definition or to make them otiose. That
this is not so is further demonstrated by some of the other provisions of
the Stamp Act. Under section 13 cf (sic) the Stamp Act, every instrument
written on a stamped paper shall be written in such manner that the
stamp may appear on the face of the instrument and cannot be used for
or applied to any other instrument and under section 14, no second
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instrument chargeable with duty shall be written upon a piece of
stamped paper upon which an instrument chargeable with duty has
already been written. . Section 15 of the Stamp Act says that every
instrument written in contravention of section 13 or section 14 shall be
deemed to be unstamped.
13. The time at which an instrument executed in India should be
stamped is specifically provided for under section 17 which states that
“all instruments chargeable with duty and executed by any person in
India shall be stamped before or at the time of execution”. In view of
this requirement, a document not signed is clearly not liable to stamp
duty. It is interesting to note that in Burma, formal documents written
on palm leaves are by custom treated as completed documents and
admitted in evidence though not signed. But under section 2(12) being
unsigned, such documents will not be liable to stamp duty as they are
not executed. Thus it has been held by a Full Bench of the Burma Chief
Court in Re the Application of Chet Po [(1914) 22 I.C. 75.] , that an
instrument chargeable with stamp duty on being executed is not liable
to duty until it is signed, although this fact does not necessarily imply
that the unsigned document is incomplete for the purpose for which it
was drawn up. Again in Maung Po Din v. Maung Po Nyein [(1922) 66
I.C. 360.] , it was observed that unsigned Burmese instruments made
since the Indian Stamp Act of 1899 came into force cannot be treated as
executed for the purpose of the Stamp Law. In Shams Din v. The
Collector, Amritsa [(1936) I.L.R. 17 Lah. 223.] , a special Bench of the
Lahore High Court consisting of Addison, Goldstream and Abdul
Rashid, JJ., explained that before section 2(12) of the Stamp Act was
enacted, there was no such provision in the Stamp Act and the intention
of the new clause was to make it clear at what time a document became
executed so as to be chargeable with stamp duty under section 3 of the
Stamp Act. At page 228, Goldstream, J., delivering the judgment of
Bench said:
“Signature alone will not, in all cases, complete the execution
of a document for the purpose of giving it legal validity, for
instance, a will may not be legally executed until it is duly
attested by witnesses, a Hundi is not executed until it is
delivered (see Bhawanji Harbhum v. Devji Punja [(1895)
I.L.R. 19 Bom. 635.] , but for the purpose of the Stamp Act the
clause msikes (sic) all documents which are chargeable with
duty when executed, chargeable as soon as they are signed by
the executant.”
14. It may, however, be noticed that the definition in section 2(12) does
not give an indication as to when the document is complete. Take for
instance a contract which is complete when the last party signs it,
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though in some cases it may be a valid agreement with only one
signature. But for the requirement of the Stamp Act, the document
must be stamped before or at the time of execution, viz., at the time
when it is signed, and not necessarily when the agreement is
completed or the document is validly executed. Under the aforesaid
provision of section 17 the question has also arisen as to whether the
stamping and execution are part of the same transaction making it
permissible to stamp the instrument immediately after the execution or
whether it should be stamped before the execution. The Madras High
Court in Surij Mull v. Hudson [(1901) I.L.R. 24 Mad. 259.] , held that
it is sufficient if stamping and execution are part of the same transaction
so that it is permissible to stamp it immediately after the execution. But
the Bombay High Court in Rohini v. A.I. Fernandes [AIR 1956 Bom
421.] distinguished the Madras decision on facts and differing from the
ratio in that, case has held that a promissory note stamped after
execution was not duly stamped under section 17 of the Stamp Act. What
is meant by the expression “at the time of execution” in section 17 has
been considered by their Lordships of the Privy Council under section
19 of the Zanzibar Stamp decree, which is in pari materia with section
17 of the Act, in M. Takim & Co. v. Fazal Kassam Velji [L.R. (1955) A.C.
617.] . After citing and considering the decision in In re Tinnel Mining
Co. (Pool's case) [L.R. (1887) 35 Ch. D. 579.] their Lordships of the
Privy Council observed at page 626:
“The provision, as to the meaning of execution is ‘unless the
context otherwise requires’. The word ‘at’ in the phrase ‘at or
before’ in the proviso to section 19 cannot mean
simultaneously with signing, and must therefore cover a
reasonable time after signing.”
*
18. Sections 62 to 69 provides for various penalties for transgressing
the provisions of the Act, one of which is penalty for executing
instruments not duly stamped . The definitions and the terms of every
section of the Stamp Act indicate clearly that an instrument need not
be valid in law or meet the requirements of law as a valid document,
before it is chargeable to stamp duty under the Act. It is chargeable to
stamp duty before or at the time of its being signed or executed. It is not
necessary that it must be attested, or registered when such registration
is an essential requirement for validity of the document. In our
opinion, there is not the slightest indication in any of the provisions
of the Stamp Act to lend support to the contention that a document
must be validly executed either under the provisions of the Transfer
of Property Act or under the Registration Act or, for that matter, under
any other provision of law, before it is chargeable to stamp duty. As
Signature Not Verified
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rightly pointed out by the learned Government Pleader, Mr. Sambasiva
Rao, the admissibility of a document or instrument is dealt, with both
under section’35 of the Stamp Act as well as under section 49 of the
Registration Act. While the Stamp Act prohibits instruments chargeable
with duty from being admitted in evidence unless such instruments are
duly stamped, the Registration Act prohibits receipt of unregistered
documents which are required by section 17 of that Act or any of the
provisions of the Transfer, of Property Act to be registered. The
admissibility of a document or instrument has been dealt with both by
the Stamp Act as well as the Registration Act to achieve their respective
purposes. It cannot, therefore, be said that the determination of the
question as to what is a completed document or at what point of time a
document should be stamped has to be considered with reference to any
Act other than the Stamp Act.”
(emphasis supplied)
177. Thus, the principal issue before the Bench was regarding a
document purporting to create a mortgage and whether it had to satisfy
other formalities such as registration before attracting stamp duty.
Therefore, what the Court held was that an instrument need not be “valid”
under the Transfer of Property Act or the Contract Act or Registration Act
etc., in order to attract stamp duty. Simply put, legal validity under another
legislation would not be a prerequisite to attract liability under the Stamp
Act.
178. A Division Bench of the High Court of Kerala considered the two
64
aforesaid decisions in Manohar Kammath v. Ram Mohan Kammath
and found itself in agreement with the Madras High Court, by holding as
follows:
64
1992 (2) KLT 714: AIR 1992 Ker 128: 1991 SCC OnLine Ker 98
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“13. The definition of the words “executed” and “execution” has been
taken from Section 122(1) of the English Stamp Act. In an old decision
reported in ILR 19 Bombay 635 (Bhavaji Harbum v. Devi Punja),
Farran, J. observed thus: “executed” means completed and the term
“execution” when applied to a document is the last act or series of acts
which completes it. It might be defined as a formal completion. Thus,
execution of deeds is the signing, sealing and delivery of them in the
presence of witnesses. Execution of a will includes attestation. In each
class of instruments we have to consider when the instrument is formally
complete.
14. The definition of executed and execution in a way restricts and
confines it to mean signed, and signature. It is possible to say that it
may include the signature of all persons, who are required by the
character of the document to sign in the document. This we say
because there may be cases where both parties have to sign in the
document, and if one of the parties alone has signed, it will be difficult
for us to hold that the document is executed. This is important because
the chargeability of stamp duty depends upon execution of the
document. It is also perhaps possible to hold in this context that if a
document had to be signed by attesting witnesses in order to make it a
valid execution of the document the signatures of the attesting witnesses
are also to be necessary to treat the document as an instrument,
executed falling within the definition of that category of instruments,
chargeable with stamp duty. But, once a document is complete in
execution in the sense that all persons required to be signed in the
document have signed, then at once, the chargeability under the
Stamp Act is attracted . A liability to stamp duty is brought down upon
the instrument with reference to the relevant articles as soon as it is
executed. We give emphasis to this aspect of the matter, for the reason
that the liability to stamp duty is the cause for holding that the
instrument is not properly stamped, and the liability commences and
continues as soon as the instrument is executed. Perhaps, the
instrument may not be valid in law for other reasons, Nevertheless, it
attracts the liability for stamp duty, when the execution of it is
completed.”
(emphasis supplied)
179. The Division Bench referred to Canara Bank (supra) in the
following manner:
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65
“21. The Full Bench decision reported in AIR 1969 Mad 1 definitely
restricted the scope and application of the ratio of the decision reported
66
in AIR 1953 Mad 764 . The Full Bench considered the import of the
definition executed. It said, a document has to be considered as
chargeable to stamp duty, when it is executed, which term executed
itself has to be interpreted in the light of the definition embodied in
Section 2(12). It also said under Section 2(12), executed means signed
and execution means signature; so it is clear that this will include the
signatures of all persons, who are required by the character of the
document to sign in the document, in order to give that document
effect according to law. Further the Full Bench said, if a document is
of such a character that both parties to the document should sign it to
constitute it a binding agreement between them, it should contain the
signatures of both; similarly if it had to be signed by two attesters in
order to make it legal, this will also be necessarily part of the
definition. After saying so, the Full Bench held that once a document is
complete in execution with the above requirements and the effective
words of disposition are there, immediately transferring rights by the
very virtue of the document, the question of its subsequent registration
is a distinct matter altogether and the document is certainly liable to
stamp duty with reference to the relevant articles of the Stamp Act, since
execution is complete. The Full Bench made it clear that though
registration is necessary under the law, to give legal effect to the
document (we would use the term enforceability of the document), it is
not merely a power of the executant to register the document, the party
to which the interest is conveyed can also have it compulsorily
registered. Obviously, the category under which an instrument falls
cannot be affected by the mere absence of registration, if the document
is otherwise fully dispositive in character and duly executed. Obviously
from what we have adverted to above, the Full Bench AIR 1969 Mad 1
has given importance to the execution of the document, which will
transfer the property or the right contemplated under the instrument in
question. But, considering the definition of execution in the Stamp Act,
the Full Bench was prepared, we would say, to extend the scope of the
definition executed and execution to include the signing or the
signatures of not only the parties, but also the attesters, if the document
requires attestation. But, the Full Bench decision of the Andhra
Pradesh High Court did not go to this extent. The Andhra Pradesh
High Court said that the decision reported in AIR 1953 Mad 764 is not
good law.
65
Chief Controlling Revenue Authority Madras v. Canara Industrial and Banking Syndicate Ltd., 1967 SCC
OnLine Mad 102
66
Crompton Engineering Co. Madras Ltd. v. Chief Controller Revenue Authority, Madras, (1953) 1 M.L.J.
620(F.B.)
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22. We may also refer to the decision reported in AIR 1963 SC 1307
(New Central Jute Mills v. State of West Bengal) wherein the Supreme
Court has said that “primarily, the liability of an instrument to stamp
duty arises on execution”. We may also refer to the following
observations of the learned Judges in the decision reported in AIR 1969
Mad 1, with reference to the earlier Full Bench decision of the same
court (AIR 1953 Mad 764).
“The real question is, did the case in AIR 1953 Mad 764 (FB)
purport to decide that, even though a document is otherwise
complete as a conveyance, or a deed of mortgage and the
recitals therein fully transfer the relevant rights in the
property, it is still not liable to stamp duty, either as a
conveyance or as a deed of mortgage, purely because it has
not been registered.”
True, the Full Bench (AIR 1953 Mad 764) observed at the end of the
judgment that “The very difference between the definition of an
agreement in Sec. 2(14) and a mortgage deed in Section 2(17) should
show that the transfer provided for in Sec. 2(17) is a transfer valid in
law, to make a document liable to stamp duty as a mortgage deed, it is
not enough if the document purports to effect a transfer. It must
transfer”. This observation of course, would indicate that a purported
transfer without satisfying the legal requirements will not attract the
liability of stamp duty. It will be an erroneous understanding and
interpretation of the judgment based on a truncated portion of the
judgment not taking into account the various features of the document
in question adverted to by the Full Bench and further, we have to hold
that if what is stated in the quote above is the ratio of the decision and
the dicta laid down in that decision; we respectfully disagree.”
(emphasis supplied)
180. Thereafter, the Division Bench referred to Hazrami Gangaram
(supra) as follows:
“24. Now we shall advert to the decision reported in AIR 1968 AP 213
(Hazrami Gangaram v. Kamlabai). This is a Full Bench decision
consisting of five judges — P. Jaganmohan Reddy, C.J., Basi Reddy,
Chandrasekhara Sastry, Anantanarayana Ayyar and Krishna Rao, JJ.
This was also a case of a document which was purported to be a
mortgage. There was some controversy as regards the real character of
the document. In short, what was considered on this aspect of the matter
was whether the document was a mortgage within the meaning of
section 2(17) of the Act. After referring to the relevant provisions of the
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Stamp Act and also the Transfer of Property Act and the Registration
Act, the court said for the purpose of the Stamp Act, the crucial time for
determining whether an instrument chargeable with duty and is duly
stamped or not is before or at the time of its execution, and no other
formalities under any law need be satisfied. In considering this
question, the court further said, there is no warrant for the importation
of the requirements of either of the Transfer of Property Act or the
Registration Act to construe documents or instruments under the Stamp
Act as the latter Act itself specifically defines the terms used therein. It
is pertinent to quote the following passage from this decision.
“To hold that an instrument must be a valid one under law
before it is liable to stamp duty will be to ignore the
requirements of the definition or to make them otiose. Further,
if the document required registration for legal validity before
it can be considered whether it is liable for stamp duty or not,
then the Registrar cannot impound it before registration,
though he is so authorised under S. 33 and under S. 35 unless
an instrument is duly stamped, it cannot be registered or
received in evidence. In other words, the definition and the
terms of every section of the Act indicate clearly that an
instrument need not be valid in law or meet the requirements
of law as a valid document before it is chargeable to stamp
duty under the Act.”
25. We are of opinion, when the Full Bench of the Andhra Pradesh
High Court said that an instrument need not be valid in law or meet
the requirements of law as a valid document, only indicates that it is
not a document of a particular category or character, which is
enforceable in law. We say so, because if a document is per se invalid,
on account of the fact that it has not been properly executed, it cannot
be said that even though it is not a valid document in law, stamp duty
has to be paid. When a document is executed and that document
requires further formalities to be complied with, like registration for
making it an enforceable document, it cannot be said that it is not a
valid document, for the purpose of stamp duty. A document can be a
valid document, but it may not be an enforceable document. All valid
documents at all times, may not be enforceable. Nevertheless, they
may retain the character or be included in the category of the
document in question and perhaps, continue to be a valid document.
It is informative to note that in Burma, formal documents written on
palm leaves are by custom treated as completed documents and
admitted in evidence, though not signed. But under Section 2(12) being
unsigned, such documents will not be liable to stamp duty as they are
not executed. Thus it has been held by a Full Bench of the Burma Chief
Court in In re. Chet Po. 22 Ind Cas 75 : AIR 1914 Law Bur 219 (FB)
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that an instrument chargeable with stamp duty on being executed is not
liable to duty until it is signed, although this fact does not necessarily
imply that the unsigned document is incomplete for the purpose for
which it was drawn up. Again in AIR 1936 Lah 449 (Shams
Din v. Collector, Amritsar) a special bench of the Lahore High Court
held that the intention behind the definition given under Section 2(12)
of the Stamp Act was to make it clear at what time, a document became
executed so as to be chargeable with stamp duty under Section 3 of the
Stamp Act. Coldstream, J. delivering the judgment of the Bench said at
page Lah. 451:—
“Signature alone will not, in all cases, complete the execution
of a document for the purpose of giving it legal validity, for
instance a will may not be legally executed until it is duly
attested by witnesses, a Hundi is not executed until it is
delivered (See (1895) ILR 19 Bom 635), but for the purpose of
Stamp Act, the clause makes all documents which are
chargeable as soon as they are signed by the executant.””
(emphasis supplied)
181. Therefore, the Division Bench understood Hazrami Gangaram
(supra) in its true perspective and in the context of the question it
answered. The Court construed the decision in a manner that avoids doing
violence to the statutory scheme of the Stamp Act.
182. The Bench carved out a clear distinction between the execution,
validity, and enforceability of an instrument. It was observed that when the
Andhra Pradesh Bench held that an instrument need not be valid in law in
order to attract stamp duty, the same is not to be understood literally. The
Division Bench clarified that Hazrami Gangaram (supra) merely held
that an instrument need not satisfy additional statutory formalities in law
such as registration, to attract stamp duty; in other words, an instrument
does not have to be legally enforceable to be exigible to stamp duty. The
key observation made in Manohar Kammath (supra) is as follows:
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“…because if a document is per se invalid, on account of the fact that
it has not been properly executed, it cannot be said that even though it
is not a valid document in law, stamp duty has to be paid.”
183. In Himachal Futuristic Communications Ltd. v. State of
67
Rajasthan , the Division Bench of the Rajasthan High Court examined
the territorial limitations on the imposition of stamp duty under Section 3
68
of the Rajasthan Stamp Act, 1998 (Section 3 of the Rajasthan Stamp Act,
1998 is pari materia to MSA), in the context of an amalgamation
sanctioned outside Rajasthan, involving certain immovable properties
situated within the State of Rajasthan.
184. The Court distinguished between instruments executed within the
State under Section 3(a) and instruments executed outside the State under
Section 3(b), holding that the latter could attract stamp duty only upon
satisfaction of the prescribed territorial requirements. The Court further
held that Rajasthan could impose stamp duty with reference to the
immovable properties situated within its territory but could not extend the
charge to the value of shares issued pursuant to the amalgamation, which
lacked the requisite territorial connection with Rajasthan. It was observed
as follows:
“28. Literal interpretation of the provision contained in Section 3(b) of
the Stamp Act of 1998, on its fair and reasonable construction, would
clearly mean that an instrument mentioned in the Schedule, executed
outside the State of Rajasthan, would be chargeable with duty when it
67
Special Appeal (Writ) No. 1063/2019, decided on 29.07.2022; 2022 SCC OnLine Raj 1183
68
Act 14 of 1999
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bears a territorial nexus. It is not that every instrument as specified in
the Schedule appended to the Stamp Act of 1998, executed outside the
State, becomes chargeable to stamp duty, but only those relating to any
property situated in the State or relating to any matter or thing done or
to be done in the State and received in the State.
*
34. Applying the aforesaid test as laid down by the Hon'ble Supreme
Court, a plain reading of Section 3(b) of the Stamp Act of 1998 reveals
that every instrument mentioned in the Schedule appended to the Stamp
Act of 1998, which is executed out of the State, is chargeable with stamp
duty under the Stamp Act of 1998, a State legislation, when it relates to
any property situated, or to any matter or thing done or to be done in
the State and is received in the State. Therefore, the provision clearly
provides for the taxing event, which makes an instrument, though
executed out of the State of Rajasthan, chargeable with stamp duty
under the State legislation, i.e. the Stamp Act of 1998. The taxing event,
in view of expression, “relates to any property situate, or to any matter
or thing done or to be done in the State and is received in the State”
bears connection in the nature of territorial nexus. In the absence of
aforesaid legal requirement under Section 3 of the Stamp Act of 1998,
an instrument as defined under the Stamp Act of 1998 even though as a
conveyance and mentioned in the Schedule appended to the Stamp Act
of 1998, could not be subjected to stamp duty. Further, if the first legal
requirement under expression, i.e., “relates to any property situate, or
to any matter or thing done or to be done in the State”, is absent, even
if it is received in the State, it may not be chargeable with stamp duty
under the State legislation, i.e., the Rajasthan Stamp Act, 1998.
Therefore, it is not enough that the instrument is a conveyance as
covered by entry at Serial No. 21 in the Schedule appended to the Stamp
Act of 1998, but it must bear territorial nexus as required under sub-
section (b) of Section 3 of the Stamp Act of 1998, if the instrument
happens to be an instrument executed out of the State.
*
30.(sic) If Section 3 of the Stamp Act of 1998 providing for chargeability
to duty is interpreted as held by the learned Single Judge and argued by
learned Additional Advocate General appearing on behalf of the State,
then an instrument, which is executed outside the State of Rajasthan, the
taxing event having no territorial nexus, would also become chargeable
to stamp duty in the State of Rajasthan. Such an interpretation would
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render otiose the expression, “relates to any property situate, or to any
matter or thing done or to be done in the State”, which would be against
one of the most cardinal principles of interpretation of statutes, for ,
such an interpretation would be based on rejection of words and
expressions consciously used by the legislature. Secondly, such an
interpretation would do serious violation to another cardinal principle
that the legislative intention is to be primarily gathered from the
language of the statute. Thirdly, such an interpretation would render the
State legislation itself unconstitutional because it would also be in
excess of legislative powers conferred under Article 245 of the
Constitution of India, which clearly provides that the Legislature of
State may make laws for whole area or any part of the State. We have
noticed hereinabove that in the three decisions, i.e., State of
Bombay v. R.M.D. Chamarbaugwala (supra), Tata Iron & Steel Co.
Ltd. v. State of Bihar (supra) and Hoechst Pharmaceuticals Ltd.v. State
of Bihar (supra), territorial nexus theory was applied in relation to
fiscal legislations. Therefore, an interpretation, which saves the
constitutionality of the provision, has to be preferred and not the one,
which renders the provision unconstitutional.
44. It is well settled that various entries in three lists of Seventh
Schedule of the Constitution of India are not “powers” of legislation,
but “fields” of legislation. Article 245 of the Constitution of India
provides for extent of laws made by the Parliament and by the
Legislatures of States. It is well settled that taxation is considered to be
a distinct matter for the purposes of legislative competence. There is
distinction made between general subjects of legislation and taxation.
The general subjects of legislation are dealt with in one group of entries
and power as also taxation in a separate group. Hence, the power to tax
cannot be deduced from a general legislative entry as an ancillary
power. It is, thus, clear that an interpretation giving wide sweep of
legislative power to the State legislature, so as to levy stamp duty on
instruments executed outside the State even when it does not relate to
any taxing event having any territorial nexus within the State, would be
violative of Article 245 of the Constitution of India.”
185. The Court emphasised that the taxing power of a State Legislature
is constitutionally circumscribed and necessarily requires a real and legally
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sufficient nexus between the subject of taxation and the taxing State. It was
also held that a tax may not be imposed unless the language imposing such
levy is unambiguous. The Court placed reliance on inter alia
Commissioner of Customs (Import), Mumbai v. Dilip Kumar and
69
Company wherein the Supreme Court held as follows:
“55. There is abundant jurisprudential justification for this. In the
governance of rule of law by a written Constitution, there is no implied
power of taxation. The tax power must be specifically conferred and it
should be strictly in accordance with the power so endowed by the
Constitution itself. It is for this reason that the courts insist upon strict
compliance before a State demands and extracts money from its citizens
towards various taxes. Any ambiguity in a taxation provision, therefore,
is interpreted in favour of the subject/assessee. The statement of law that
ambiguity in a taxation statute should be interpreted strictly and in the
event of ambiguity the benefit should go to the subject/assesee may
warrant visualising different situations. For instance, if there is
ambiguity in the subject of tax, that is to say, who are the persons or
things liable to pay tax, and whether the Revenue has established
conditions before raising and justifying a demand. Similar is the case in
roping all persons within the tax net, in which event the State is to prove
the liability of the persons, as may arise within the strict language of
the law. There cannot be any implied concept either in identifying the
subject of the tax or person liable to pay tax. That is why it is often said
that subject is not to be taxed, unless the words of the statute
unambiguously impose a tax on him, that one has to look merely at the
words clearly stated and that there is no room for any intendment nor
presumption as to tax. It is only the letter of the law and not the spirit of
the law to guide the interpreter to decide the liability to tax ignoring any
amount of hardship and eschewing equity in taxation. Thus, we may
emphatically reiterate that if in the event of ambiguity in a taxation
liability statute, the benefit should go to the subject/assessee. But, in a
situation where the tax exemption has to be interpreted, the benefit of
doubt should go in favour of the Revenue, the aforesaid conclusions are
69
(2018) 9 SCC 1
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expounded only as a prelude to better understand jurisprudential basis
for our conclusion. We may now consider the decisions which support
our view.”
The Legal Position Emerging from the aforesaid Judicial Authorities
and the Relevant Statutes
186. Having examined the relevant judicial authorities on the issue, this
Court is unable to find a single binding precedent establishing that when
multiple parties execute a single instrument across different States, the
State where the first signature is affixed must exclusively supply the
governing stamp law. Equally, there is no binding authority holding that
the State where the final necessary signature is appended must apply.
187. Instead, what emerges from an analysis of the existing jurisprudence
is that while “execution” refers to “sign” or “signature”, the precise
requirements constituting such “execution” must depend upon the inherent
character of the instrument itself. Further, it is also clear that an instrument
executed in one State may subsequently attract stamp duty in another State.
188. Consequently, the applicable State law cannot be determined
without paying heed to the entirety of a situation as the question may
involve more than one taxing States.
189. Coming to the statute, at the first blush, Section 3 of the MSA read
with the definition of “execution” under Section 2(i) of the MSA, may
suggest that an instrument becomes chargeable as soon as it is signed.
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However, the position becomes considerably more complex where an
instrument is required to be executed by multiple parties, particularly when
those parties sign it at different times and/or in different jurisdictions. The
provisions under MSA refer to an instrument having not been previously
executed by any person and distinguish between instruments executed
within and outside Maharashtra. However, they do not specifically address
a situation where a multilateral instrument is signed by multiple parties in
different States, nor do they clearly explain how the applicable stamp duty
is to be determined in such circumstances.
190. Notably, Section 3 of MSA merely states that where an instrument
has not been previously executed, stamp duty becomes payable at the time
of its execution in the State. Thus, in the considered view of this Court, the
question in the present matter remains unresolved i.e. what constitutes
“executed” or “execution” in case of a multilateral instrument when
different parties sign it in different States.
191. In these circumstances, an important question of interpretation of
statute arises as to whether it would it be lawful and equitable to treat the
affixation of the first signature on a multi-party instrument as the decisive
factor for determining the applicable stamp law.
192. Before adopting a construction of Section 3 that elevates the first
signature on an instrument to a decisive factor, the Court must carefully
evaluate the anomalous or problematic consequences that may flow from
such an application.
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193. To appreciate the implications of adopting such an interpretation, it
has to be kept in mind that the ISA is a pre-independence statute, which
was enacted on 27 January 1899 and came into force on 1 July 1899. Its
original legislative framework was developed at a time when the execution
of legal instruments predominantly involved physical documents and
handwritten signatures.
194. It should also be noticed that Section 3 of the ISA contains the
expression “ not having been previously executed by any person ”. This
expression appears in both Sections 3(a) and 3(b). Interestingly, an
identical wording existed in Section 5(a) and Section 5(c) of the Indian
Stamp Act, 1879 (Act I of 1879) as well, which was carried forward to the
ISA of 1899 in force today.
195. Thus, the legislative tenet underlying the said expression is
demonstrably at the very least 147-years old. That is to say, it predates
electronic documents, digital signatures and modern electronic execution
mechanisms by more than a century.
196. It is pertinent to bear in mind that at the time when the Stamp Act
was originally enacted more than a century ago, the legislature could
hardly have envisaged a situation where an instrument could be transmitted
from one geographical location to another, within the same day by
electronic means or otherwise. It would have been almost impossible at
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that time that the very same instrument could be executed by different
parties at two geographically distant locations on the same day.
197. Thus, in the context of contemporary commercial transactions,
attaching the liability of stamp duty conclusively to the place of first
signature can lead to some difficult consequences.
198. Needless to state, instruments nowadays are increasingly executed
electronically by parties situated in different States.
199. In the present digital economy, parties are no longer required to be
physically present at a common location for execution of an instrument.
An agreement may be negotiated and/or finalised entirely within one State,
while a contracting party may electronically sign the same instrument from
another State merely because of temporary travel or incidental presence.
This Court is of the considered opinion that if the geographical location of
the first physical signature is treated as conclusively determining the
applicable State legislation of a particular State, the consequence would be
that liability of stamp duty could vary solely according to the accidental
location of the first signatory to a multilateral agreement.
200. Furthermore, another critical aspect warrants consideration; in cases
of electronic execution, the physical location of a signatory may not
necessarily be ascertainable from instrument itself.
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201. This difficulty is particularly apparent in the event an instrument is
required to be executed by multiple parties across different jurisdictions.
In such circumstances, the question of whether fixation of the first
signature constitutes the definitive execution of a chargeable instrument
cannot be evaded merely by referring to the expression “not having been
previously executed by any person” in Section 3 of the MSA. Instead, that
phrase must be interpreted in alignment with the broader statutory
framework with due regard to the specific character of the instrument in
question.
202. The Supreme Court in State of Punjab v. Amritsar Beverages
70
Ltd. , recognised the necessity of interpreting existing statutory
provisions in light of technological developments and the legal difficulties
arising from electronic records. Such an approach is particularly relevant
where legislation formulated in an earlier technological environment is
sought to be applied in the modern digital era.
203. The expression “ not having been previously executed by any
person ” cannot, merely by reference to the geographical location of the
first electronic signature, be treated as deciding factor for determining the
applicable stamp law for a multilateral instrument to be signed in other
jurisdiction(s) as well.
70
(2006) 7 SCC 607
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204. This Court is of the considered view that the traditional
understanding of “execution”, developed in an era when instruments were
ordinarily prepared, stamped and signed in physical form, cannot be
mechanically applied to modern digital transactions without examining the
consequences of such an interpretation.
Doctrine of Territorial Nexus: The Resultant Legal Position
205. The Doctrine of Territorial Nexus emanates from Article 245 of the
Constitution of India. It governs the territorial limits of legislative
competence and requires a sufficient connection or nexus between the
subject matter of legislation and the legislating State.
206. This Doctrine is well established and admits of no dispute.
207. In this regard, Stjepan Gadžo explains that the territorial nexus
principle requires a qualifying connection between the State exercising its
taxing authority and the taxable subject or object, thereby providing a
71
jurisdictional foundation for the exercise of its fiscal sovereignty .
208. The Doctrine also assumes significance in stamp law, which is
nothing but another of form of fiscal levy. Under certain circumstances, a
State may seek to impose fiscal liability upon persons, property or
transactions situated partly or wholly beyond its territorial boundaries.
71
The Principle of ‘Nexus’ or ‘Genuine Link’ as a Keystone of International Income Tax Law: A Reappraisal
(2018) 46(3) Intertax 194–209.
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This Doctrine gives teeth to the premise that a mere territorial connection
i.e. geographical location where the first signature is affixed, does not
necessarily constitute a legally sufficient nexus. This distinction is of
significance in today’s increasingly globalised world, where a single legal
arrangement may give rise to incidental geographical connections with
multiple jurisdictions.
209. The Hon’ble Supreme Court in State of Bombay v. R.M.D.
72
Chamarbaugwala laid down two essential conditions for establishing
sufficient territorial nexus. It was held that firstly, the connection between
the taxing State and the subject of taxation must be real and not illusory;
and secondly, the liability sought to be imposed must be pertinent to that
connection. The relevant excerpt is as thus:
“35. The next point urged by the petitioners is that under Articles 245
and 246 the Legislature of a State can only make a law for the State or
any part thereof and consequently the legislature overstepped the limits
of its legislative field when by the impugned Act it purported to affect
men residing and carrying on business outside the State. It is submitted
that there is no sufficient territorial nexus between the State and the
activities of the petitioners who are not in the State. The doctrine of
territorial nexus is well established and there is no dispute as to the
principles. As enunciated by the learned counsel for the petitioners, if
there is a territorial nexus between the person sought to be charged and
the State seeking to tax him the taxing statute may be upheld. Sufficiency
of the territorial connection involves a consideration of two elements,
namely, (a) the connection must be real and not illusory and (b) the
liability sought to be imposed must be pertinent to that connection . It
is conceded that it is of no importance on the question of validity that
the liability imposed is or may be altogether disproportionate to the
72
(1957) 1 SCC 600
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territorial connection. In other words, if the connection is sufficient
in the sense mentioned above, the extent of such connection affects
merely the policy and not the validity of the legislation . Keeping these
principles in mind we have to ascertain if in the case before us there was
sufficient territorial nexus to entitle the Bombay Legislature to make the
impugned law.”
(emphasis supplied)
210. Thus, the Doctrine requires a scrutiny of the relationship between
the taxing State and the subject matter of taxation, and not mere existence
of geographical connection with an incidental signature. Consequently,
since territorial nexus remains an essential pre-requisite, whether a
signature first affixed to a multilateral instrument constitutes a sufficient
territorial connection, must be assessed in light of the precise chargeable
event prescribed by the relevant stamp legislation.
211. The mere physical presence of one contracting party within a State
may not conclusively constitute a deciding factor for imposing stamp duty
upon an otherwise wholly foreign instrument.
212. Bearing in mind S.N. Mathur (supra) and R.M.D.
Chamarbaugwala (supra) , the applicable stamp legislation in cases
where different parties execute an instrument in different States must
therefore be determined by reference to the “substance of the transaction
as embodied in the instrument”, rather than the geographical location of
execution.
213. The raison d’être is that territorial jurisdiction to impose taxation
should ordinarily be founded upon a real and meaningful connection
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between the stamping State and the instrument sought to be stamped,
whereas execution may separately serve as the event determining when
such liability crystallizes.
Applicability to the Facts of the Present Case
214. At this stage, I deem it fit to refer to the reasoning adopted by the
learned Arbitrator with respect to the question as to whether MSA or ISA
shall apply. It is reproduced as follows:
“41. From the Loan Agreement(s) dated 15.03.2014, the following
facts emerge:
i. The Loan Agreement(s) do not quantify any specific amount.
ii. The Respondent No. 1 of each case signed their respective Loan
Agreement(s), on 15.03.2014. It contains signature of Common
Witness, Mr. Datta. The Place of signature is at Mumbai.
iii. The Loan Agreement(s) bears stamp Duty of Rs. 100/-(Rupees
Hundred Only) each of Maharashtra.
iv. The Loan Agreement(s) bears stamp Duty of Rs. 100/-(Rupees
Hundred Only) of State of Maharashtra.
v. Authorised signatory of Religare Finvest Limited (Claimant)
signed on same day, i.e., 15.03.2014. The place of signature is at
New Delhi. One Grijesh Kumar is being shown as Witness of the
Claimant in all Loan Agreement(s).
42. From the aforesaid facts, the Tribunal holds that Loan
Agreement(s) dated 15.03.2014, were 'first signed' by Respondent No. 1
of each case at Mumbai. Thereafter, the Loan Agreement(s), were taken
by the representatives of the Claimant to New Delhi. The Claimant
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signed the Loan Agreement(s), in presence of their witness at New
Delhi.
60. The question is whether Section 17 and 18 of Maharashtra
Stamp Act, 1958, will be applicable in the present case in absence of
any similar provision under the Indian Stamp Act, 1899.
61. The provisions of Indian Stamp Act, 1899, applies to whole of
India. The rates of stamp duty are prescribed in the Indian Stamp Act,
1899, in respect of instruments specified in Entry 91 of the List I - Union
List, in the Seventh Schedule to the Constitution of India, as under:
SEVENTH SCHEDULE
(Article 246)
List I–Union List
1. *
91. Rates of stamp duty, in respect of bills of exchange, cheques,
promissory notes, bills of lading, letter of credit, policies of
insurance, transfer of shares, debentures, proxies, and receipts."
62. Entry 63 of the List II State List, in the Seventh Schedule to the
Constitution of India empowers the State fix the rates of stamp duty in
respect of documents other than those in the provisions of List 1- Union
List, which is as follows:
SEVENTH SCHEDULE
(Article 246)
List I–Union List
1. *
63. Rates of stamp duty in respect of documents other than those
specified in the provisions of List I with regard to rates of stamp
duty."
63. The Maharashtra Stamp Act, 1958, has been enacted by the State in
exercise of its powers conferred under Entry 63 of the List II - State List,
in respect of the documents not covered by Indian Stamp Act, 1899.
64. The Schedule I of the Maharashtra Stamp Act, 1958, contains the
list of documents and instruments not covered by the Indian Stamp Act,
1899, on which duty is to be levied.
65. The instrument/Loan Agreement(s) in question relates to:
"creation of obligation, right and interest". It is not covered under any
Signature Not Verified
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of the articles of the Schedule 1-A of the Indian Stamp Act, 1899 (as
applicable to State of Delhi).
66. Entry 91 of List 1 Union List, do not provide for rates of stamp
duty, in respect of instruments, relates to: "creation of obligation, right
and interest. For the said reason, the State of Maharashtra in exercise
of powers conferred by Entry 63 of List-II-State List, has fixed the rates
of stamp duty in respect of instruments creating obligation, right and
interest.
67. The Indian Stamp Act, 1899, is also silent on the question with
respect to stamp duty payable on instruments executed in one State and
the other State.
68. For the said reason, in exercise of powers conferred by Entry 63
of List II State List, the State of Maharashtra has made specific
provisions with respect to 'Instruments Executed in the State' (Section
17) and 'Instruments Executed out of the State' (Section 18).
69. Indian Stamp Act, 1899, governs the law of 'stamp duty payable
in India', which is a general law. Whereas, Section 17 and 18 of the
Maharashtra Stamp Act, 1958, governs specific stamp duty payable on
the instrument executed in one State, the State of Maharashtra and
executed outside the State of Maharashtra.
70. Schedule 1-A of Indian Stamp Act, 1899, governs rates of stamp
duty payable on the instrument, in respect of bills of exchange, cheque,
promissory notes, bills of lading, letter of credit, policies of insurance,
transfer of shares, debentures, proxies, in respect of receipts, which are
general in nature.
71. On the other hand, Schedule 1 of the Maharashtra Stamp Act,
1958, relates to rates of stamp duty in respect of documents, other than
those provided in provisions of List I- Union List.
72. In view of the aforesaid position of law, the Tribunal holds that
the rates of stamp duty payable on Loan Agreement(s) dated
15.03.2014, executed in the State of Maharashtra and the State of Delhi,
will be governed by Section 17 and Section 18 read with Schedule 1 of
Maharashtra Stamp Act, 1958, in absence of any such provisions in the
Indian Stamp Act, 1899.”
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215. The learned Arbitrator held that the MSA would apply on the loan
agreements. In arriving at this conclusion, the learned Arbitrator observed
that the loan agreements were first signed in Mumbai and subsequently
signed in New Delhi. It was reasoned that ISA applied to the whole of India
and prescribed rates of stamp duty for instruments specified under Entry
91 of List I (Union List) in the VII Schedule to the Constitution of India
and that by Entry 63 of List II (State List), the State legislature was
empowered to fix rates of stamp duty for all other instruments. It was thus
observed that loan agreements did not fall under the Union List. Upon
noting that loan agreements do not fall under the Union List, the learned
Arbitrator invoked the principle of generalia specialibus non derogant to
hold that that ISA is a general law and does not provide for situations
wherein instruments were executed across different States. Consequently,
because the MSA specifically addresses such a situation under Sections 17
and 18, the learned Arbitrator concluded that the State legislation must
prevail.
216. In the present case, it appears from the record that the loan
agreements dated 15.03.2014 were signed by the Zee Group in Mumbai.
Thereafter, they were signed by Religare in New Delhi on 15.03.2014.
Each of these agreements bore stamp duty of Rs. 100/- as per MSA. It is
further made out that Religare deposited further stamp duty of Rs. 1000/-
as per ISA on each agreement.
217. In view of the foregoing discussion, this Court is not in agreement
with the finding of the learned Arbitrator that the loan agreements are
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chargeable under the MSA, This Court also does not subscribe to the
learned Arbitrator’s reasoning that the said agreements do not quantify a
specific amount. In this regard, the findings of the learned Arbitrator are
as follows:
“43. Risk Disclosure Document-Loan Against Securities (LAS)', seen
and signed by the representatives of each of the Respondent No. 1,
shows inherent risk associated with the borrowing, where the value of
loan/finance amount is denoted by value of securities forming part of
the percentage of margin required to be maintained by the parties. No
specific loan amount has been shown therein. The example shown
therein shows the manner in which 20% of margin of 'Loan Against
Securities' will be calculated, as under:
48. The Facility Schedule of Terms Loan Against Securities (LAS)'
were sought by the Respondent No. 1 of each case from time to time.
The 'Facility Schedule of Terms Loan Against Securities (LAS)' are for
different amount, signed on different dates after the execution of the
Loan Agreement(s).
49. Facility Schedule of Terms Loan Against Securities (LAS)' were
executed after the Loan Agreement(s) were signed between the parties,
is evident from the following facts:
49.1. WIDESCREEN HOLDINGS PRIVATE LIMITED- First
'Facility Schedule of Terms' was signed by the parties on 20.03.2014
and the amount of Facility was up to 40,00,00,000/- (Rupees Forty
Crores Only), as apparent from the Opening Paragraph:-
"The Facility Schedule of Terms is executed on 20th day of
March 2014 (hereinafter referred to as "the Facility Schedule of
Terms") by and between Widescreen Holdings Pvt. Ltd.
(hereinafter referred to as "the Borrower") and Religare Finvest
Limited (hereinafter referred to as "the Lender") pursuant to the
loan agreement dated 15.03.2014 (hereinafter referred to as "the
Agreement") executed between the Borrower and the Lender."
49.2. Another Facility Schedule of Terms was executed by the parties on
30.03.2015, known as 'Renewal Facility Amount for Rs. 40,00,00,000/-
(Rupees Forty Crores Only), as under:
Signature Not Verified
Signed By:GUNN
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"The Facility Schedule of Terms is executed on 30th day of
March 2015 (hereinafter referred to as "the Facility Schedule of
Terms") by and between Widescreen Holdings Pvt. Ltd.
(hereinafter referred to as "the Borrower") and Religare Finvest
Limited (hereinafter referred to as "the Lender") in connection
with renewal of the Loan facility (hereinafter referred to as "the
Facility") availed by the Borrower from the Lender under the
terms of the loan agreement dated 15.03.2014 (hereinafter
referred to as "the Agreement") executed between the Parties.
49.3. ΚΟNTI INFRAPOWER & MULTIVENTURES PRIVATE
LIMITED (Formerly known as Continental Drug Company Private
Limited)- The Facility Schedule of Terms' was signed by the parties on
15.03.2014. The amount of Facility was up to Rs. 50,00,00,000/-
(Rupees Fifty Crores Only), as apparent from the Opening Paragraph:-
"The Facility Schedule of Terms is executed on 15th day of
March 2014 (hereinafter referred to as "the Facility Schedule of
Terms") by and between Continental Drug Co. Pvt. Ltd.
(hereinafter referred to as "the Borrower") and Religare Finvest
Limited (hereinafter referred to as "the Lender") pursuant to the
loan agreement dated 15.03.2014 (hereinafter referred to as "the
Agreement") executed between the Borrower and the Lender."
49.4. Another Facility Schedule of Terms was executed by the parties
on 30.03.2015, known as 'Renewal Facility Amount for Rs.
50,00,00,000/- (Rupees Fifty Crores Only), as under:-
"The Facility Schedule of Terms is executed on 30th day of
March 2015 (hereinafter referred to as "the Facility Schedule of
Terms") by and between Continental Drug Co. Pvt. Ltd.
(hereinafter referred to as "the Borrower") and Religare Finvest
Limited (hereinafter referred to as "the Lender") in connection
with renewal of the Loan facility (hereinafter referred to as "the
Facility") availed by the Borrower from the Lender under the
terms of the loan agreement dated 15.03.2014 (hereinafter
referred to as "the Agreement") executed between the Parties."
49.5. EDISONS INFRAPOWER & MULTIVENTURES PRIVATE
LIMITED (Formerly known as Edisons Utility Works Private Limited)
The 'Facility Schedule of Terms' was signed by the parties on
15.03.2014 and the amount of Facility was up to Rs. 50,00,00,000/-
(Rupees Fifty Crores Only), as apparent from the Opening Paragraph:-
Signature Not Verified
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"The Facility Schedule of Terms is executed on 15th day of
March 2014 (hereinafter referred to as "the Facility Schedule of
Terms") by and between Edisons Utility Works Pvt. Ltd.
(hereinafter referred to as "the Borrower") and Religare Finvest
Limited (hereinafter referred to as "the Lender") pursuant to the
loan agreement dated 15.03.2014 (hereinafter referred to as "the
Agreement") executed between the Borrower and the Lender."
49.6. Another Facility Schedule of Terms was executed by the parties
on 30.03.2015, known as 'Renewal Facility Amount' for Rs.
50,00,00,000/- (Rupees Fifty Crores Only), as under:-
"The Facility Schedule of Terms is executed on 30th day of
March 2015 (hereinafter referred to as "the Facility Schedule of
Terms") by and between Fdisons Utility Works Pvt. Ltd.
(hereinafter referred to as "the Borrower") and Religare Finvest
Limited (hereinafter referred to as "the Lender") in. connection
with renewal of the Loan facility (hereinafter referred to as "the
Facility") availed by the Borrower from the Lender under the
terms of the loan agreement dated 15.03.2014 (hereinafter
referred to as "the Agreement") executed between the Parties."
49.7. ASIAN SATELLITE BROADCAST PRIVATE LIMITED
The Facility Schedule of Terms' was signed by the parties on 15.03.2014
and the amount of Facility was up to 10,00,00,000/-(Rupees Ten Crores
Only), as apparent from the Opening Paragraph:-
"The Facility Schedule of Terms is executed on 15th day of
March 2014 (hereinafter referred to as "the Facility Schedule of
Terms") by and between Asian Satellite Broadcast Put. Ltd.
(hereinafter referred to as "the Borrower") and Religare Finvest
Limited (hereinafter referred to as "the Lender") pursuant to the
loan agreement dated 15.03.2014 (hereinafter referred to as "the
Agreement") executed between the Borrower and the Lender."
49.8. Another Facility Schedule of Terms was executed by the parties
on 30.03.2015, known as 'Renewal Facility Amount for Rs.
10,00,00,000/- as under:
"The Facility Schedule of Terms is executed on 30th day of
March 2015 (hereinafter referred to as "the Facility Schedule of
Terms") by and between Asian Satellite Broadcast Put. Ltd.
(hereinafter referred to as "the Borrower") and Religare Finvest
Limited (hereinafter referred to as "the Lender") in connection
Signature Not Verified
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with renewal of the Loan facility (hereinafter referred to as "the
Facility") availed by the Borrower from the Lender under the
terms of the loan agreement dated 15.03.2014 (hereinafter
referred to as "the Agreement") executed between the Parties."
50. The Facility Schedule of Terms, executed as referred and
accepted above is different than the 1-page format contained in the
booklet of Loan Against Securities.”
218. It appears from the record that the FST did indeed stipulate the loan
amounts, which is also observed by the learned Arbitrator. However, the
learned Arbitrator overlooked the terms of the loan agreement which
provided that the FST was to be read as part and parcel of the loan
agreements, thus, amounting to ignoring of vital evidence.
219. Clause 1.1.6 of the agreement provides that FST pertains to the
facility availed by a borrower and the schedule for such facility granted
from time to time. Therefore, it acknowledges that FST may be executed
from time to time. Clause 2.1 clarifies that the borrower agrees to borrow
the amount as per the FST. Clause 2.3 further clarifies that the terms and
conditions of the loan shall be read along with the “concerned Facility
Documents (which includes the relevant Schedule of Terms and Security
Documents)”.
220. The learned Arbitrator proceeds on a mere technicality in this
respect by observing that the FST which were actually executed were
different from the one-page format contained in the loan booklet. Such a
technical approach, in the opinion of this Court, completely rewrites the
commercial bargain inter se the parties without any warrant and ignores
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the vital contractual arrangement going to the root of the controversy
between the parties.
221. For completeness, this Court deems it apposite to advert to Section
3(b) read with Section 18 of the MSA as well. It was argued that in the
event this Court does not find that Section 3(a) of the MSA is attracted, it
shall also consider that a copy of the loan agreements was received in
Mumbai, thereby attracting chargeability under MSA by virtue of Section
3(b) read with Section 18.
222. Applying the doctrine of territorial nexus, as enunciated by the
Supreme Court in R.M.D. Chamarbaugwala (supra ), the territorial
connection between the stamping State and the instrument must be real and
not illusory, and that the liability imposed must be pertinent to such
connection.
223. Thereafter, applying this principle to the facts of the present case,
this Court is of the view that Delhi possessed the requisite territorial nexus,
as the loan agreements came to be executed after they were signed by all
contracting parties i.e., upon their execution by Religare (lender) in Delhi.
Although the borrowers had initially appended their signatures in Mumbai,
in the considered opinion of this Court, such signatures do not, by
themselves, constitute the completed chargeable instruments without
execution of the instrument by the lender. Accordingly, the requisite
connection between the taxable event and the taxing jurisdiction arose in
Delhi.
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224. Having said so, this Court is mindful of its circumscribed
jurisdiction under Section 34 of the Arbitration and Conciliation Act of
1996. However, in the present case, since the question as to which stamp
legislation is applicable to the loan agreements goes to the root of the
matter, this Court deems it fit to intervene.
225. Therefore, in light of the foregoing discussion and considering the
scheme of MSA and ISA and the discussion above, the loan agreements
dated 15.03.2014 are held to be “executed” in Delhi. A logical corollary
would be that the loan agreements are liable to be stamped as per ISA, as
applicable in NCT of Delhi.
226. Accordingly, the impugned arbitral award dated 28.02.2026 is set
aside.
227. The petitions bearing Nos. OMP(COMM) Nos. 323/2026,
327/2026, 328/2026 and 331/2026 filed by Religare are allowed in the
aforesaid terms. The petitions being OMP(COMM) Nos. 253/2026,
254/2026, 255/2026 and 256/2026 filed by the Zee Group are dismissed.
228. Pending applications, if any, stand disposed of. No order as to costs.
OM PRAKASH SHUKLA, J
NOVEMBER 2, 2026/pa
Signature Not Verified
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