M/S Urc Construction (P) Ltd vs Airports Authority Of India
- Court
- Delhi High Court
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment reserved on: 11.08.2026
Judgment pronounced on: 01.09.2026
# CNR No. DLHC010313232026
+ OMP (ENF.) (COMM.) 155/2026
M/S URC CONSTRUCTION (P) LTD .....Decree Holder
Through: Mr. Vikas Mehta and Ms. Nitika
Grover, Advs.
versus
AIRPORTS AUTHORITY OF INDIA .....Judgement Debtor
Through: Mr. Digvijay Rai, Standing
Counsel with Mr. Archit Mishra,
Adv. Ms. Aakriti, DGM and Ms.
Sonali Singh, Senior Manager.
CORAM:
HON'BLE MR. JUSTICE OM PRAKASH SHUKLA
JUDGMENT
% 01.09.2026
INDEX
S. No. Heading Pg. No.
1. Submissions 3
2. Analysis and Reasoning 17
- The Issue 19
- Arbitration and Conciliation Act of 1996 21
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- Stamp Duty and Section 34 of the Arbitration
24
Act
- Stamp Duty and Section 36 of the Arbitration
34
Act
- The Contours of In Re: Interplay (supra) 39
- The Stamp Act 48
- Overview of the Act 66
- The Act as Interpreted by the Supreme Court 69
- Interplay between the Stamp Act and the
80
Arbitration Act
- Obligation Imposed under Section 33 of the
81
Stamp Act
- Dichotomy in Timelines 88
- Impounding 93
- Penalty 110
- Time is of Essence 114
3. Conclusion: The Position That Emerges 121
4. Way Forward – An Act of the Court Should
124
Prejudice No One
5. The Sequitur 129
1. This execution petition filed under Section 36 of the Arbitration and
1
Conciliation Act, 1996 seeks enforcement of the Arbitral Award dated
1
“Arbitration Act” hereinafter
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26.03.2019, corrected vide order dated 07.05.2019 under Section 33 of the
Arbitration Act, whereby the Decree Holder was awarded a sum of
Rs.2,59,07,248.60/- crores along with pendente lite and future interest at
10% per annum.
2. Upon a perusal of the record, it is observed that initially the stamp
duty affixed on the aforesaid arbitral award was Rs. 100/-; however,
subsequently the Decree Holder paid the deficient stamp duty amounting
to Rs.25,850/- on 29.07.2026.
3. Accordingly, this Court raised a query as to the mechanism for
payment of stamp duty on the arbitral award and the process of remedying
the deficit stamp duty, along with payment of any penalty (if any), in light
2
of the Indian Stamp (Delhi Amendment) Act, 2010 and invited
submissions of the parties to the present execution petition as well as other
stake holders on the said aspect.
SUBMISSIONS
4. Given the aforesaid backdrop, Mr. Vikas Mehta, the learned Counsel
appearing for the Decree Holder in the present case submitted that they
have paid the requisite stamp duty on the arbitral award in terms of Article
3
12 to Schedule I of the Act. It was further submitted that since payment
of stamp duty is a curable defect, the need to impound under Section 33 of
2
“Act” or “Stamp Act” alternatively; except Schedule IA, this Act is pari materia to the Indian Stamp Act 1899
3
Schedule IA as applicable in NCT of Delhi
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the Act or the payment of penalty thereof does not arise in cases where the
deficit amount is willingly deposited. According to him, once the adequate
duty stands deposited, the objective of the Stamp Act i.e., collection of
revenue stands satisfied, hence, there exists no impediment for the
enforcement of the arbitral award.
5. Mr. Mehta urged for harmonious and purposive interpretation of
both statutes. It was vehemently submitted that a strict import of the Stamp
Act will defeat the very purpose of the Arbitration Act.
6. It was submitted that stamp duty becomes payable only when
enforcement of the arbitral award is sought. Reliance was placed on
4
Mohini Electricals Ltd. v. Delhi Jal Board to submit that the Court in
that matter was also seized with a similar situation whereby the Judgment
Debtor raised an objection that penalty was not paid along with deficit
stamp duty and hence the award was liable to be impounded. However, the
Court repelled the said objection by placing reliance on M. Anasuya Devi
5
v. M. Manik Reddy , to hold that the Arbitration Act casts no duty upon
the Tribunal or the parties to ensure that stamp duty is paid at the time
when the award is rendered; it is only when the award is to be enforced
under Section 36 of the Arbitration Act that the parties become obligated
to ensure that stamp duty is deposited. Therefore, in light of the aforesaid
decision, Mr. Mehta averred that the arbitral award came to be acted upon
4
2021 SCC OnLine Del 3506
5
(2003) 8 SCC 565
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for the first time in these enforcement proceedings, whereupon it deposited
the adequate stamp duty.
7. To further buttress his submission, reliance was also placed on
6
Punita Bhardwaj v. Rashmi Juneja , whereby this Court relied on
Mohini Electricals (supra) to hold that there was no need to impound the
instrument since adequate duty was already deposited. The Court clarified
that an instrument may be impounded if the Court finds that an instrument
is insufficiently stamped; however, if the decree holder deposits the deficit
duty without any such finding of the Court, the award cannot be
impounded. In this regard, reliance was also placed on Sharma
7
Fabricators and Erectors Pvt. Ltd. v. Bilt Graphic Paper Products Ltd.
8. It was further contended that the delay in payment of stamp duty
was due to the pending Section 34 petition and the Respondent itself had
challenged the award, hence, it cannot, at this stage, raise an objection on
such delay.
9. Mr. Mehta highlighted that there exists friction amongst the two
statutes and their respective timelines, i.e., the one-month time period
stipulated under proviso (a) to Section 32(3) of the Stamp Act is not in
consonance with Section 36 of the Arbitration Act. Section 36 of the
Arbitration Act provides that enforcement can be sought only after the
6
CM(M) 3640/2024 & CM. APPL. 61217-61218/2024 as decided on 18.10.2024
7
2025:DHC:4591
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8
Section 34 period expires , and that stamping is not a requirement in
Section 34 proceedings. In contrast, the Stamp Act requires duty to be paid
within one month from the execution of the award, which means that a
decree holder ought to approach the concerned authority and pay stamp
duty even before the last date for filing a Section 34 objection lapses.
Therefore, according to Mr. Mehta, while the Arbitration Act permits
stamping to be done at the later stage of enforcement under Section 36,
which undoubtedly is more than one month, the Stamp Act does not
provide such relaxation. This inconsistency, according to him, does
violence to the Arbitration Act and therefore cannot be allowed to stand.
10. In support of the aforesaid contention, Mr. Mehta placed reliance
on Section 5 of the Arbitration Act which envisages minimal judicial
intervention in the arbitral process. It was argued that the objective of
speedy resolution must be borne in mind and that the Stamp Act should
not be read in isolation. It was further argued that this tenet of expeditious
adjudication is present throughout Part I of the Arbitration Act, of which
Section 36 is also a constituent. Therefore, even Section 36 proceedings
must be expeditious, which would be impossible if the rigours of the Stamp
Act are followed i.e., if an award is impounded for want of stamp duty
and/or penalty thereof.
8
34. Application for setting aside arbitral award . — ( 3* ) An application for setting aside may not be made
after three months have elapsed from the date on which the party making that application had received the arbitral
award or, if a request had been made under section 33, from the date on which that request had been disposed of by
the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the
application within the said period of three months it may entertain the application within a further period of thirty
days , but not thereafter.
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11. In this light, Mr. Mehta submitted that In Re: Interplay Between
Arbitration Agreements under Arbitration and Conciliation Act, 1996
9
and Stamp Act, 1899 , the Supreme Court categorically held that the
Arbitration Act would prevail over the Stamp Act and the Contract Act
since it is a special law and hence Section 5 therein must be given due
regard, which envisages minimal judicial intervention. It was averred that
while this decision was rendered with respect to Sections 8 and 11, the
underlying principle shall also prevail at the stage of enforcement, else
such hyper-technical approach will defeat the purpose of the Arbitration
Act. Otherwise, if Section 33 of the Stamp Act is to be strictly applied,
then the same would be applicable at the stages of Section 8, 11 and 34,
which is already held to be impermissible by the Supreme Court.
12. It was also emphasised that there is no mandate under the
Arbitration Act requiring deposit of stamp duty. Section 31 of the
Arbitration Act was relied upon in this regard to submit that it was also not
incumbent on the Tribunal to ensure deposit of stamp duty. No doubt,
Section 17 of the Stamp Act provides that the arbitral award shall be duly
stamped before or at the time of execution, however, if the Act is to be
construed strictly, then it would be the Tribunal’s duty to ensure that the
award is duly stamped. Accordingly, it would be the Tribunal that is liable
for prosecution under Section 32 read with Section 62 of the Stamp Act. It
was again reiterated that Section 17 ought not to be applied strictly since a
9
(2024) 6 SCC 1: 2023 SCC OnLine SC 1666
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decree holder can only “act upon” or enforce an award till the time to file
an objection petition under Section 34 does not expire.
13. Thereafter, Mr. Mehta referred to the Stamp Act and placed reliance
on Section 42 therein to submit that the 30-day period was not for stamping
but for a different purpose i.e., to deliver back the instrument to the
impounding authority. It was submitted that this provision is titled
“Endorsement of instruments on which duty has been paid under sections
35, 40 or 41” and it does not stipulate the one month period for endorsing
an instrument under Sections 35, 40 or 41. Further, with respect to Section
33, it was submitted that since the decree holder has paid the requisite duty,
the question of impounding does not arise since no insufficiently stamped
instrument is placed before the competent authority, which is a pre-
condition to Section 33 of the Act.
14. It was further submitted that proviso (a) to Section 32(3) would
only be triggered if a party approaches the Collector for determination of
the duty payable under Section 31. According to Mr. Mehta, it is a mere
legal fiction that only after endorsement under this provision, does an
instrument become “duly stamped”.
15. It was reiterated that stamp duty is a curable defect i.e., it can be
paid at any stage and that the Stamp Act itself provides for such “cure”. In
this regard, reliance was placed on Section 41 to contend that the
component of penalty may be waived under certain circumstances
stipulated in the said provision.
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16. Thereafter, learned Counsel took this Court to the pre-2015
amendment Arbitration Act whereby mere filing of a Section 34 petition
would operate as a stay on the operation and/or enforcement of the arbitral
award. It was argued that to ask a party, who cannot enforce the award, to
pay stamp duty would not be proper, just or fair. The 2015 Amendment Act
was brought for speedy justice, as is evident from the Statement of Objects
of the Act, therefore a strict construction of the Stamp Act will derail such
objective of the legislature. To implement otherwise, Mr. Mehta argued,
would be cumbersome and adversely impact the efficacy of the arbitral
process since every time an enforcement petition is filed, the Court would
inquire into stamp duty, the award may have to impounded and forwarded
to Collector, who would thereupon adjudicate on the same, and such
adjudication is not time-bound.
17. It was also averred that sufficient cause for the purposes of delay
and/or limitation ought to be construed in accordance with the statute
concerned. In the present case, the Arbitration Act is a special law
providing for speedy resolution of disputes, hence, ancillary aspects
surrounding the process such as stamp duty, should be implemented in that
light. Accordingly, Mr. Mehta called for harmony between the two statutes.
18. Lastly, it was also argued that in the alternative, if the Court deems
that the decree holder satisfied the stamp duty at a belated stage, even then
penalty is not automatically attracted. Instead, it was submitted that the
Court ought to examine whether non-payment was intentional or not.
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Reliance was placed on Vodafone Idea Telecom Infrastructure Ltd. v.
10
Chief Controlling Revenue Authority .
19. Per contra, Mr. Digvijay Rai, learned Standing Counsel for the
Judgment Debtor resisted the arguments advanced by Mr. Mehta and
emphasised on the purport of the Stamp Act in black and white. It was
contended that the Act and its scheme must be construed strictly since it is
a fiscal statute.
20. At the outset, it was highlighted that the question isn’t whether the
decree holder can subsequently pay stamp duty or not but the rudimentary
issue would be that whether mere payment of the deficit duty would be
sufficient to remove the statutory bar under Section 35 of the Stamp Act.
Mr. Rai stressed that the answer lies in the negative. According to him, it
is only after the arbitral award is forwarded to the concerned Collector and
penalty is paid along with deficit duty, can the defect be made good and
merely curing the deficient duty would not serve the purpose and objective
of the Stamp Act.
21. It was also submitted that no doubt an arbitral award comes within
the ambit of the Stamp Act in light of the decisions in Mohini Electricals
11
(supra) and Indsao Construction Pvt. Ltd. v. Collector of Stamps .
However, it was argued that mere subsequent payment of stamp duty does
not cure the statutory defect especially since Section 17 of the Act
10
MANU/GJ/1917/2023; (2024) 2 GLR 1413
11
W.P.(C) 886/2021, as decided on 08.11.2021
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envisages that an instrument shall be stamped before or at the time of
execution. It is argued that this means nothing except that the arbitral
award must be stamped before or at the time it is signed, in light of the
12
meaning of “execution” provided under Section 2(12) of the Act.
22. It was further argued that by way of proviso (a) to Section 32(3),
the mandate of stamping the instrument before or at the time of affixing
signatures, is extended to up till one month from the date of such
execution. After expiry of such time, machinery under the Act, i.e.,
Sections 33, 35, 38, 40 and 42 would be triggered. It was submitted in this
regard that the time period under the Stamp Act pertains to execution of
the instrument and is not restricted to enforcement of an instrument.
Therefore, it cannot be shifted merely because Section 36 of the
Arbitration Act provides a 3-month (and additional thirty days in certain
cases) window to file for enforcement of the award. Thus, the time lines,
according to Mr. Rai, cannot be conflated or shifted as per the Arbitration
Act since the Stamp Act is an independent fiscal statute.
23. With respect to the duty of this Court under Section 33, Mr. Rai
contended that this duty stood attracted the moment an insufficiently
stamped award was placed before this Court and that such award must be
dealt in accordance with Sections 33, 35 and 38 of the Stamp Act, as was
affirmed in Mohini Electricals (supra) .
12
( 12 ) “ Executed” and “execution”. — “executed” and “execution” used with reference to instruments, mean
“signed” and “signature”:
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24. It was argued that Section 35 of the Act imposes a bar on any
authority, including this Court, from acting upon the award unless the
deficiency is cured. For such remedy, the provision further mandates in
unequivocal terms that deficit duty and penalty must be paid. According to
Mr. Rai, this position has been reaffirmed in In Re: Interplay (supra) .
25. It was submitted that reliance placed on Mohini Electricals (supra)
on behalf of the Decree Holder is of no avail since this decision is
distinguishable on facts.
26. Mr. Rai also sought to contest the reliance placed on Section 41 by
the Decree Holder. It was submitted that the power to waive penalty under
Section 41 is only granted to the Collector and not to a Court of law,
therefore, the Decree Holder ought to approach the concerned Collector
for such exemption. It was also emphasised that penalty may only be
excused if the specific conditions stipulated under Section 41 are met.
27. It was averred that the respective timelines under the Stamp Act and
Arbitration Act are not contradictory, instead, they operate independently
of each other. It was argued that Section 36 of the Arbitration Act only
determines when the arbitral award becomes enforceable as a decree and
it does not confer any exemption whatsoever from the independent
statutory requirement under the Stamp Act. Accordingly, it was submitted
that there exists no conflict requiring one statute to yield to the other. The
Stamp Act, in explicit terms, makes an award liable to be stamped within
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one month of its execution and this chargeability is not dependant on
enforceability.
28. It was emphasised that the Decree Holder initially produced the
original arbitral award without adequate stamp and only thereafter cured
the defect by depositing the deficit portion, which is not permissible under
the Act. Therefore, Mr. Rai submitted that the Decree Holder is statutorily
obligated to approach the Collector of Stamps in order to remedy the defect
in stamp duty for the purposes of the present enforcement proceedings.
29. In support of his submissions, Mr. Rai relied on State of A.P. v. P.
13
Laxmi Devi , M/S Agrawal Construction Company v. Executive
14 15
Enginee r , A. Karuppanna Pillai v. Nallathambi , M/s. MV Omni
16 17
Projects v. Union of India , Neeraj Arya v. Rakesh Arya , M.P. Power
18
Generation Co. Pvt. Ltd. v. Ansaldo, Energia Sps , Jitender Mohan
19
Malik v. Ravi Bhushan Malik , Eider Pwi Paging Limited v. Union of
20 21
India , Rajeswaran Nair v. District Collector, Trivandrum and In Re:
22
Interplay (supra) .
30. In course of proceedings, Dr. Amit George also ably assisted this
Court on this particular issue.
13
(2008) 4 SCC 720, Paras 16-19
14
Misc. Petition No. 702 of 2026, Paras 7 – 11
15
1999 SCC OnLine Mad 931 Para 10
16
OMP (ENF.) (COMM.) 213/2023 (Order dated 15.01.2024)
17
2023 SCC OnLine Del 7816, Paras 8-9, 22-26
18
2016 SCC OnLine MP 12126, Paras 20 & 21
19
2008 SCC OnLine Del 748, Paras 29 & 30
20
2010 SCC OnLine Del 410, Paras 6 – 14
21
2009 SCC OnLine Ker 2436, Paras 10 & 11
22
Paras 38, 39-48, 65-66 & 205-206
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31. Dr. George submitted that instruments ought to be stamped before
or at the time of execution in view of Section 17 of the Stamp Act by
23
placing reliance on Piyush Aggarwal v. State (NCT of Delhi) and G.T.M.
24
Builders & Promotors Pvt. Ltd. v. State of U.P.
32. Dr. George placed reliance on Uno Minda Ltd. v. Revenue
25
Department to highlight that proviso (a) to Section 32(3) precludes the
Collector from endorsing an instrument after one month from its
execution.
33. Further, to highlight the procedure to be adopted after impounding
of an instrument under Section 33 of the Stamp Act along with limitations
on the power of delegation exercised by a Judge of the High Court under
Section 33(2)(b) of the Act, reliance was placed on Splendor Landbase
26
Ltd. v. Aparna Ashram Society and Black Pearl Hotels (P) Ltd. v. Planet
27
M. Retail Ltd . Furthermore, emphasis was laid on the underlying scheme
of the Act as held by the Supreme Court in Seetharama Shetty v. Monappa
28
Shetty to contend that Chapter IV of the Stamp Act is both mandatory
and regulatory and that the objective of the statute is to obtain revenue.
34. Mr. Jayant Mehta, learned Senior Counsel also extended his
valuable assistance to this Court in this respect.
23
2005 SCC OnLine Del 242
24
2020 SCC OnLine All 10
25
2023 SCC OnLine Del 3598
26
2023 SCC OnLine Del 5148
27
(2017) 4 SCC 498
28
2024 SCC OnLine SC 2320
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35. At the outset, Mr. Mehta reiterated that an arbitral award is indeed
an instrument within the meaning of the Stamp Act, however, the aspect of
stamping only becomes relevant when the award is sought to be enforced
at the stage of Section 36 of the Arbitration Act. Therefore, according to
him, an arbitral award must bear adequate stamp duty for enforcement of
such award. In this respect, reliance was placed on M. Anasuya Devi
(supra) .
36. It was submitted that while Sections 33 to 42 of the Stamp Act lay
down a mechanism whereby an insufficiently stamped award may be
impounded and only upon payment of the deficit portion can the award be
admissible, however, this procedure is not absolute in light of Section 36
of the Stamp Act, which provides that if an insufficiently stamp award has
been admitted in evidence, the same cannot be questioned at a later stage.
37. It was also submitted that non-stamping of an arbitral does not
render it void, it only affects its admissibility. Reliance in this regard was
placed on M/s Tarini Prasad Mohanty v. M/s Sunflag Iron and Steel Co.
29
Ltd.
38. Mr. Mehta emphasised that the consequence of non-stamping is not
the invalidity of the underlying instrument as it does not go the root of the
arbitral award so as to create an absolute bar on enforcement proceedings.
In this regard, it was submitted that In Re: Interplay (supra) categorically
29
2026 INSC 566
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held that stamp duty is a curable defect and the effect of not paying duty
or inadequately paying duty renders an award inadmissible and not void.
This position has been reaffirmed in Krishnavathi Sharma v.
30
Bhagwandas Sharma .
39. It was also contended that Section 31 of the Stamp Act is an
enabling provision whereunder parties may seek opinion of the Collector
on the requisite stamp duty, however, this provision is not mandatory.
Further, Section 32 lays down the procedure to be followed once a Section
31 application is preferred. Proviso (a) to Section 32(3) bars the Collector
from endorsing an instrument after 30 days of execution of the award. This,
according to Mr. Mehta, is not to be construed as a bar on parties from
depositing stamp duty without recourse to Section 31.
40. The learned Senior Counsel submitted there might be situations
wherein the arbitral award is voluntarily satisfied without it being enforced
under Section 36 of the Arbitration Act, then the question of stamping will
altogether not arise for adjudication before an executing Court. Reliance
was placed on Mohini Electricals (supra) .
41. Mr. Mehta further sought to draw a parallel with Section 49 of the
Registration Act of 1908 by contending that unlike the Registration Act,
no absolute bar exists in the Stamp Act and even Section 49 permits use of
the instrument for a collateral purpose.
30
Civil Appeal No. 3476/2026, rendered on 23.03.2026
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31
42. Reliance was placed on Hari Om Aggarwal v. Prakash , and
32
Ashok Kamal Capital Builders v. State , to contend that the Stamp Act
does not envisage impounding a copy of the award. It is only the original
which can be impounded and this Court does not have the power to
summon the original instrument in case a copy is filed.
43. The learned Senior Counsel also advanced that one should not miss
the woods for the trees, i.e., if every award is to be presented to the
Collector for determination of stamp duty, it would dilute the purpose of
the Arbitration Act of ensuring speedy justice and it would only result in
delaying enforcement proceedings. It was emphatically stressed that if the
same is allowed, it would become a tool in the hands of unscrupulous
Judgment Debtors, as it would give them another ground to delay and/or
escape liability.
44. In an attempt to harmoniously read the Stamp Act and the
Arbitration Act, it was submitted that In Re: Interplay (supra) provided
that Courts were not required to deal with the issue of stamping at the stage
of granting interim measures under Section 9. Therefore, according to Mr.
Mehta, it follows that a Court in enforcement proceedings can consider
issuing interim measures of protection to preserve, protect and secure the
subject matter of the award as well.
31
(2007) 8 SCC 514
32
2009 SCC OnLine Del 2626
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ANALYSIS AND REASONING
45. I have heard the ardent submissions of the learned Counsel
appearing in this matter. The Court also extends its gratitude to Mr. Jayant
Mehta and Dr. Amit George, who extended their valuable assistance on
this subject matter at the request of this Court.
46. There is no doubt as to the proposition of law that an instrument
must be duly stamped before or at the time of execution as per Section 17
of the Stamp Act and the said time-period is extendable to a month after
the execution of such instrument as provided by proviso (a) to Section
32(3) of the Stamp Act.
47. It is also equally settled that an arbitral award is an “instrument”
under the Stamp Act. Therefore, for the purposes of enforcement, an
arbitral award must bear adequate stamp duty in accordance with the
provisions of the Stamp Act.
48. However, with respect to enforcement of arbitral awards, this Court
has regrettably observed a growing trend where the mandatory nature of
payment of stamp duty at the stage of enforcement has been diluted. A
substantial number of enforcement petitions under Section 36 of the
Arbitration Act have been filed before this Court with inadequately
stamped arbitral awards. Thus, a very significant issue arises for
consideration with respect to payment of stamp duty on arbitral awards
sought to be enforced and the implications of non-payment thereof.
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The Issue
49. As noted above, this Court has observed that controversy arises
when the Arbitration Act and the Stamp Act operate together.
Misinterpretation of judicial precedents and the statutory provisions also
adds fuel to this fire, thereby giving rise to significant legal and practical
issues. Therefore, this Court aims to arrive at a certain degree of harmony
so that these statutes do not overshadow each other but exist in cohesion.
50. While a decree of the Court is enforceable from the day it is made,
an arbitral award, which must be enforced as a decree as well, becomes
enforceable only after three months (and additional thirty days if sufficient
cause is shown) from passing of the award in light of Section 36 of the
Arbitration Act.
51. The controversy further thickens in light of the legal position that
the objection of insufficient stamp duty on an arbitral award is premature
for setting aside the award at the Section 34 stage. M. Anasuya Devi
(supra) explicitly provides that insufficient stamp duty on an arbitral
award is not an impediment in Section 34 proceedings under the
Arbitration Act.
52. Thus, the problem arises at a subsequent stage, i.e., under Section
36 for the enforcement of an arbitral award.
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53. More often than not, this leads to a practical problem that by the
time Decree Holders reach the enforcement stage, the award is still
insufficiently stamped, which, even if curable, is undoubtedly an
impediment for enforcement proceedings.
54. Accordingly, to remedy this defect, a Decree Holder may
subsequently endeavour to make good the insufficient stamp duty when it
seeks enforcement of the arbitral award, however, this comes at a belated
stage, i.e., beyond one month from execution of the instrument/award, as
required under the Stamp Act.
55. Therefore, the aforesaid position begs the question whether
unilaterally depositing the adequate stamp by the Decree Holder at a
belated stage, i.e., by circumventing the payment of penalty as envisaged
under Sections 35 and 40 of the Act, is permissible and sufficient to cure
the defect for the purposes of enforcement. Some ancillary questions
would be whether this Court is empowered to do away with the penalty
component and as to whether this Court is necessarily bound by Section
33 of the Stamp Act or not.
56. Consequently, to bring coitus to this issue, this Court finds it
imperative to reiterate the legal framework governing stamp duty to ensure
procedural compliance, statutory adherence, and to eliminate fundamental
threshold objections to the enforcement of an arbitral award.
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57. For this purpose, I shall aim to balance out the interests of parties
and their autonomy, as safeguarded under the Arbitration Act along with
the fiscal obligations under the relevant Stamp Act.
33
58. The Supreme Court in Hameed Joharan v. Abdul Salam ,
cautioned that while the import of the Stamp Act is fiscal gain for the State,
nevertheless, it need not be used as a means to defeat the operation of
another statute operating in a different sphere. In Dr. Chiranji Lal (D) by
34
LRs. v. Hari Das (D) by LRs. , the Supreme Court cautioned that the
Stamp Act is not to be used as a weapon of technicality by a litigant to
defeat the case of his opponent.
59. That said, my focus in this endeavour would be to avoid any
interpretation or inference which may do unwarranted violence to the
statute or lead to absurdity or destroy the legislative intent behind it.
Arbitration and Conciliation Act of 1996
60. It is evident from Sections 5, 16 and 19 that the Arbitration Act
envisages minimal judicial intervention and preserves autonomy of the
parties and that of the Arbitral Tribunal.
33
(2001) 7 SCC 573 : 2001 SCC OnLine SC 944
34
(2005) 10 SCC 746
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61. While Section 34 lays down specific grounds to assail an arbitral
35
award within three months from the date of receipt of the award , Section
36 provides for its enforcement. Section 36 is reproduced thus:
“ 36. Enforcement.— (1) Where the time for making an application to
set aside the arbitral award under section 34 has expired, then, subject
to the provisions of sub-section (2), such award shall be enforced in
accordance with the provisions of the Code of Civil Procedure, 1908 (5
of 1908), in the same manner as if it were a decree of the Court.
(2) Where an application to set aside the arbitral award has been filed
in the Court under section 34, the filing of such an application shall not
by itself render that award unenforceable, unless the Court grants an
order of stay of the operation of the said arbitral award in accordance
with the provisions of sub-section (3), on a separate application made
for that purpose.
(3) Upon filing of an application under sub-section (2) for stay of the
operation of the arbitral award, the Court may, subject to such
conditions as it may deem fit, grant stay of the operation of such award
for reasons to be recorded in writing:
Provided that the Court shall, while considering the application for
grant of stay in the case of an arbitral award for payment of money,
have due regard to the provisions for grant of stay of a money decree
under the provisions of the Code of Civil Procedure, 1908 (5 of 1908).
Provided further that where the Court is satisfied that a Prima facie
case is made out that, —
(a) the arbitration agreement or contract which is the basis of the
award; or
(b) the making of the award,
was induced or effected by fraud or corruption, it shall stay the award
unconditionally pending disposal of the challenge under section 34 to
the award.
35
34. Application for setting aside arbitral award . — ( 3* ) An application for setting aside may not be made
after three months have elapsed from the date on which the party making that application had received the arbitral
award or, if a request had been made under section 33, from the date on which that request had been disposed of by
the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the
application within the said period of three months it may entertain the application within a further period of thirty
days, but not thereafter.
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Explanation. — For the removal of doubts, it is hereby clarified that
the above proviso shall apply to all Court cases arising out of or in
relation to arbitral proceedings, irrespective of whether the arbitral or
Court proceedings were commenced prior to or after the
commencement of the Arbitration and Conciliation (Amendment) Act,
2015 (3 of 2016).”
62. It is evident from the aforesaid provision that once the window to
file an objection petition under Section 34 expires, an arbitral award
becomes enforceable akin to a decree of the Court in accordance with the
36
Civil Procedure Code of 1908 .
63. In this light, it is trite that an instrument sought to be enforced must
be adequately stamped in terms of the applicable Stamp Act. However, the
question remains as to when the said obligation has to be fulfilled.
64. The Indian Stamp Act of 1899 was enacted to secure revenue on
certain instruments executed within India or executed out of India and
received in India. It is a fiscal statute and hence, it is mandatory in nature.
37
Accordingly, it must be interpreted and construed strictly .
65. There is no quarrel with the position that an arbitral award is a
chargeable instrument for the purposes of this Act, as is evident from
38
Article 12 read with Article 15 to Schedule IA which stipulates a 0.1%
ad valorem rate of stamp duty on arbitral awards. It is also clear that such
36
“CPC” hereinafter
37
Hindustan Steel Ltd. v. Dilip Construction Co., (1969) 1 SCC 597 ; 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, (2024) 6 SCC : 2023 SCC OnLine SC 1666
38
Indian Stamp (Delhi Amendment) Act, 2010
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duty must be paid on the principal amount excluding the interest
39
component in view of Section 23 of the Act .
Stamp Duty and Section 34 of the Arbitration Act
66. Before delving further into the Stamp Act itself, I deem it relevant
to iron out the legal position, insofar as its application has been altered by
judicial precedents.
67. The Supreme Court in M. Anasuya Devi (supra) , was seized with
the question of adequacy of stamp duty on an arbitral award in Section 34
proceedings under the Arbitration Act. One of the grounds undertaken
therein to assail the arbitral award was that it was inadmissible and
unenforceable for want of proper stamp duty and registration. The
Supreme Court held as follows:
“4. After we heard the matter, we are of the view that in the present case
this issue was not required to be gone into at the stage of the proceedings
under Section 34 of the Act. In fact, this issue was premature at that
stage. Section 34 of the Act provides for setting aside of the award on
the grounds enumerated therein. It is not in dispute that an application
for setting aside the award would not lie on any other ground, which
is not enumerated in Section 34 of the Act. The question as to whether
the award is required to be stamped and registered, would be relevant
only when the parties would file the award for its enforcement under
Section 36 of the Act. It is at this stage the parties can raise objections
regarding its admissibility on account of non-registration and non-
stamping under Section 17 of the Registration Act. In that view of the
matter, the exercise undertaken to decide the said issue by the civil Court
39
23. Instruments reserving interest.— Where interest is expressly made payable by the terms of an instrument,
such instrument shall not be chargeable with duty higher than that with which it would have been chargeable had
no mention of interest been made therein.
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as also by the High Court was entirely an exercise in futility. The
question whether an award requires stamping and registration is
within the ambit of Section 47 of the Code of Civil Procedure and not
covered by Section 34 of the Act .
5. For the aforesaid reasons, the judgment under challenge deserves to
be set aside. Consequently, it is set aside.
6. The appeals are, accordingly, allowed. Since the High Court has not
dealt with other objections raised under Section 34 of the Act, we remit
the matter to the High Court to decide the same. We make it clear that
the issue with regard to the stamping and registration of the award or
documentation thereof, it would be open to the parties to raise the same
before the Court at the stage of proceeding under Section 36 of the Act.
The High Court may decide the matter expeditiously and also consider
any interim prayer which may be made by the parties in the appeals.
There shall be no order as to costs.”
(emphasis supplied)
68. It is thus evident from the above excerpt that the Court went on to
hold that the question of adequate stamp duty was not one of the specific
grounds stipulated under Section 34 to set aside an award and hence was
premature for the purposes of Section 34. Instead, it was held that in view
of Section 47 of the CPC, the question of adequacy of stamp duty would
be relevant at the stage of enforcement of the award under Section 36 of
the Arbitration Act.
69. Thereafter, a coordinate bench of this Court also raised the
aforesaid question suo moto in Section 34 proceedings in Eider PW1
40
Paging Ltd. & Eider PW1 Communications Ltd. v. UOI . The learned
Single Judge analysed Sections 33, 38 and 40 of the Indian Stamp Act,
1899 and placed reliance on the decisions of the Supreme Court in
40
2010 SCC OnLine Del 422
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41
Government of A.P. v. P. Laxmi Devi and Ram Rattan v. Bajrang
42
Lal , which respectively provide that the Court under Section 33 of the
Stamp Act is duty bound to impound an insufficiently stamped instrument
and that no discretion can be exercised in this regard. Drawing from these
judgments, the learned Single Judge observed as follows:
“8. In view of the aforesaid judgments, and the provision of Section 33,
this Court is duty bound to mandatorily impound the Award which is
unstamped. As per the Schedule 1A of the Stamp Act, as applicable to
the Delhi, an Award as per Article 12 is to be stamped with the stamp
duty as applicable to a Bond under Article 15. A conjoint reading of
Articles 12 and 15 shows that the Award has basically to be stamped at
2% of the value of claims. In the facts of the present case, when the claim
of the petitioner was for Rs 1325 crores, 2% of this amount comes to
26.5 crores. It is only on account of the deliberate act of the petitioner
in failing to provide the necessary stamp papers to the arbitrator, that
the Award had to be written on a plain paper and hence penalty has also
to be paid. Ten times the penalty of Rs 26.5 crores therefore would come
to Rs 265 crores per Award. prima facie, and subject to the decision of
Collector under Section 40, of the Stamp Act, the total of the aforesaid
two amounts is the amount which would be payable by the petitioner
before the Award can be looked into by virtue of the provision of Section
33 of the Stamp Act.”
70. The Counsel for the Petitioner contested the suo motu inquiry in
light of the binding precedent laid down in M. Anasuya Devi (supra) ,
which was dealt with by the learned Single Judge in the following manner:
“10. In my opinion, though the observations in para 4 of the aforesaid
judgment seem to go in favour of the petitioner, however, this judgment
is of a Bench of two Judges of the year 2003 and wherein the earlier
judgment of three Judges in the case of Ram Rattan (Supra), which
holds that impounding is mandatory has not been considered. A
decision of the Supreme Court of a three-Judge Bench prevails over
the decision of a two-Judge Bench vide Union of India v. Raghubir
Singh, (1989) 2 SCC 754. Further, there is now a later 2009 decision
41
(2008) 4 SCC 720
42
(1978) 3 SCC 236
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of the Supreme Court whereby the provision of Section 33 of the
Stamp Act has been held to be mandatory viz. of P. Laxmi
Devi (supra). The aspect of whether the provision of Section 33 is
Directory or mandatory was not considered by the Supreme Court in
the case of M. Anasuya Devi's case (supra), and in fact, Section 33 of
the Stamp Act has not even been adverted to in the said judgment. The
Supreme Court in the case of N. Bhargavan Pillai v. State of Kerala,
(2004) 13 SCC 217 has laid down that when any judgment, even of a
Supreme Court, does not advert to a direct provision of law then, the
judgment is to be treated as having been rendered per incurriam . Para
14 of the judgment in the case of M. Bhargavan Pillai is relevant and
the same reads as under:
“14. Coming to the plea relating to benefits under the
Probation Act, it is to be noted that Section 18 of the said Act
clearly rules out application of the Probation Act to a case
covered under Section 5(2) of the Act. Therefore, there is no
substance in the accused-appellant's plea relating to grant of
benefit under the Probation Act. The decision in Bore Gowda
case 2 does not even indicate that Section 18 of the Probation
Act was taken note of. In view of the specific statutory bar the
view, if any, expressed without analysing the statutory
provision cannot in our view be treated as a binding precedent
and at the most is to be considered as having been rendered
per incuriam. Looked at from any angle, the appeal is sans
merit and deserves dismissal which we direct.”
(Emphasis supplied)
11. There is another reason, in my opinion, why the decision of M.
Anasuya Devi's case does not apply to the facts of the present case and
hence may not be binding. This is because facts of each case are
different and it is now settled law that difference of even one vital fact
would change the ratio of a judgment. The Constitution Bench of the
Supreme Court has said so in the case of Padma Sundara Rao v. State
of Tamil Nadu, (2002) 3 SCC 533. para 9 of this judgment is relevant
in this regard and the same reads as under:
“9. Courts should not place reliance on decisions without
discussing as to how the factual situation fits in with the fact
situation of the decision on which reliance is placed. There is
always peril in treating the words of a speech or judgment as
though they are words in a legislative enactment, and it is to
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be remembered that judicial utterances are made in the setting
of the facts of a particular case, said Lord Morris in British
Railways Board v. Herrington 9. Circumstantial flexibility,
one additional or different fact may make a world of difference
between conclusions in two cases.
(underlining added)”
*
14. Finally I may add that whereas till recently the Award was to be
stamped only on a fixed nominal amount of stamp duty of Rs 75,
however this position has changed inasmuch as Article 12 of the Stamp
Act with respect to the state of Delhi was amended w.e.f. from the year
2001 and whereby now the fixed stamp duty has been done away with
and now an Award has to be stamped with ad valorem stamp duty of 2%
of the value of the disputes. I prima facie feel that if a litigant is
deliberately allowed to flout the requirements of payment of the
necessary stamp duty as per Articles 12 and 15 of the Stamp Act as
applicable to Delhi, then, the intention of the legislature in requiring
payment of the higher stamp duty will be set at naught in cases where
an Award dismisses the claims of claimants and there is no insistence
of payment of stamp duty because it can be claimed on the basis of M.
Anasuya Devi's case that such issue should be taken up at the stage
of execution, whereas in these cases where the claims are dismissed,
there is in fact no issue of execution at all .”
(emphasis supplied)
71. Thus, the learned Single Judge observed that M. Anasuya Devi
(supra) was not binding in view of the decision of a larger Bench and one
other more recent Supreme Court judgment rendered on the same issue. It
was also held that M. Anasuya Devi (supra) was per incuriam as per the
ratio in N. Bhargavan Pillai (supra) since it did not directly advert to the
relevant provisions of the Stamp Act . The learned Single Judge then
proceeded to distinguish the decision on facts from the case at hand before
him.
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72. It was further reasoned that there may be cases whereby there is no
enforcement of the arbitral award at all and therefore, to hold that the
requirement of stamp duty may be done away with at the time of Section
34 proceedings is a view which overlooks the intent behind levy of stamp
duty in the first place.
73. In view of the foregoing, the learned Single Judge deemed it
appropriate to frame certain questions for the consideration of a larger
Bench of this Court. These questions are reproduced as thus:
“(i) Whether a Court cannot exercise power of impounding an
unstamped or an insufficiently stamped document, although, it is so
empowered under Section 33 of the Stamp Act, 1899 and also as so held
by the Supreme Court in the judgments of Government of A.P. v. P.
Laxmi Devi, (2008) 4 SCC 720 and Ram Rattan v. Bajrang Lal, (1978)
3 SCC 236 because such power can only be exercised at the stage of
enforcing of the Award under Section 36 of the Arbitration &
Conciliation Act, 1996?
(ii) Whether the decision in M. Anasuya Devi v. M. Manik Reddy,
(2003) 8 SCC 565 takes away the power of the Court to impound
insufficient or unstamped documents under Section 33 of the Stamp Act
if the Court seeks to suo moto exercise the power, and which is, in fact,
a duty of the Court as per Section 33 of the Stamp Act and the aforesaid
judgments in the cases of Govt. of A.P. v. P. Laxmi Devi and Ram
Rattan v. Bajrang Lal (supra)?
(iii) Can the decision in M. Anasuya Devi (supra) apply where a claim
petition including one for recovery of a monetary amount is dismissed
and there would therefore not arise any question of execution
proceedings of such an Award and therefore also the requirement of
consideration of this issue of the requirement of stamp duty on the
Award at the stage of execution?
(iv) Is the decision of M. Anasuya Devi, which has been rendered
without considering the relevant provisions including Section 33, 38
and 40 of the Stamp Act, 1899 is per incurriam as per the ratio of the
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decision of the Supreme Court in N. Bhargavan Pillai v. State of
Kerala, (2004) 13 SCC 217?
(v) Will such interpretation of Section 33 of the Stamp Act that the
requirement of impounding of unstamped Award can be taken only at
the execution stage, not negate the intention of the legislature in
amending Article 12 of the Stamp Act whereby the stamp duty on the
Award was enhanced from a fixed lump sum nominal amount to an ad
valorem duty of 2% of the value of the claims?”
74. These questions were placed before a Division Bench of this Court,
which called for the opinion of the Collector of Stamps on the issue.
75. The Collector of Stamps placed reliance on a decision of another
43
Division Bench of this Court in M/s Rajasthan Builder v. UOI & Ors. ,
whereby it was clarified that stamp duty ought to be paid on awarded
amount and not the amount so claimed, in the following words:
“ 8. Another objection raised was that the stamp paper did not bear a
proper stamp. Item 12 of Schedule 1 to Stamp Act provides that where
the amount of award does not exceed 1,000/- the same duty as Bond
(No.15) for such amount is to be paid. Now item 15(bond) provides that
where the amount or value does not exceed Rs. 100/-, 2 annas stamp is
to be paid. In the present case no amount has been awarded, and a
stamp of even 2 annas would have been sufficient. Mr. Aggarwal of
course, however, suggests that as the claim of the appellant was over a
lakh of rupees the stamp duty should have been calculated on that
amount. We find the argument unacceptable. The award has to bear the
stamp duty with reference to the amount awarded and not the claimed
amount. Award was therefore properly stamped.”
76. By placing reliance on M/s Rajasthan Builder (supra) , the
Division Bench opined that the learned Single Judge did not take into
43
FAO (OS) 46/1971, decided on 01.09.1980
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consideration the aforesaid ratio which essentially rendered the questions
so referred purely academic . Accordingly, the Court remanded the matter
to the learned Single Judge.
77. Therefore, the questions preferred by the learned Single Judge
remain unanswered on account of the decision in M/s Rajasthan Builder
(supra) , which notably pertains to the pre-amendment Arbitration Act of
1940.
78. Subsequently, a co-ordinate Bench took a divergent view in M. Sons
44
Enterprises (P) Ltd. v. Suresh Jagasia with respect to the ratio of M.
Anasuya Devi (supra) , as follows:
“10. The recent judgment of the Supreme Court in Anasuya
Devi (supra) cannot be brushed aside as per-incuriam or as sub-silentio
on the provisions of the Stamp Act. The Supreme Court was very much
conscious of the said provisions and it is not as if it pronounced the
judgment in ignorance of the same or that the provisions of the Stamp
Act have been given a go by. What the Supreme Court has held,
examining the scheme of the Arbitration Act, 1996, is that the objections
on account of deficiency in stamping and registration fall outside the
ambit of Section 34 of the Act. It is not as if, the Supreme Court by
adopting the said procedure has contravened the mandatory provisions
of the Stamp Act; it is not as if benefits have been permitted to be derived
under an insufficiently stamped award. The Supreme Court however has
held that the said objection has to be taken at the time of enforcement
of the award. In my humble opinion, this is but a pragmatic approach.
The common thread running through the 1996 Act is of expediency. If
objections under the Stamp Act or the Registration Act were to be
permitted to be taken at the stage of Section 34, it would indefinitely
delay the disposal of the said proceedings. The Supreme Court thus held
that the objections under Section 34 be decided expeditiously without
reference to the said pleas. In this manner, the rights of persons against
whom the award is pronounced have been preserved. If they are able to
establish that on account of insufficiency in stamping of the award or
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2011 SCC OnLine Del 82
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non-registration of the award, the person in whose favour the same is
made is not entitled to benefit thereof, the award would not be enforced
against them. I, therefore, do not find any merit in the contention of the
petitioners of the award being liable to be set aside for the said reason
and the same is dismissed.”
79. More recently, a Division Bench of this Court in NCS Sugars Ltd.
45
& Anr. v. PEC Ltd. , placed reliance on M. Anasuya Devi (supra) by
holding thus:
“11. As rightly noted by the learned Single Judge, insufficiency, if any,
concerning stamp duty, is an aspect which gains legal significance only
at a stage of enforcement of the award i.e., the execution.
12. As far as the right of a litigant to challenge an award within the
prescribed period for limitation is concerned, it gets triggered the
moment the award is rendered.
13. The learned Single Judge, in our view, has rightly appreciated the
principles enunciated by the Supreme Court in M. Anasuya Devi v. M.
Manik Reddy, (2003) 8 SCC 565.
14. The said judgment of the Supreme Court, in no uncertain terms,
states that insufficiency of stamp duty is not one of the grounds provided
in Section 34 of the Act for setting aside the award and therefore, this
aspect of the matter, as observed hereinabove, will have weight only at
a stage when an execution action is filed for enforcement of the award
by taking recourse to the provisions of Section 36 of the 1996 Act.
15. Therefore, the submission advanced by Mr. Kalra and Mr. Kislay
that the trigger point for commencing of limitation as prescribed under
Section 34 of the 1996 Act would be the date when the award bearing
the requisite stamp duty was served is completely untenable.”
80. Therefore, the position of law as enunciated in M. Anasuya Devi
(supra) echoes till today.
45
2024 SCC OnLine Del 2252
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81. In my considered view, the words employed in M. Anasuya Devi
(supra) , “ The question as to whether the award is required to be stamped
and registered, would be relevant only when the parties would file the
award for its enforcement under Section 36 of the Act”, cannot, in any
manner, be construed to mean that stamp duty was not required to be paid
at the stage of Section 34 or that stamp duty may only be paid when a
Decree Holder files for enforcement. In fact, the Supreme Court has
merely deferred the time to take such objections regarding the payment of
adequate stamp duty to the stage of enforcement only. According to this
Court, these words only mean that insufficient stamp duty is not a ground
to set aside an arbitral award under Section 34 of the Arbitration Act and
nothing more . The Supreme Court has not, in any manner, created an
exception to Section 33 of the Stamp Act.
82. Instead, it is the misinterpretation of this legal position, in my view,
that has led to the instant aberration of non-payment of adequate stamp
duty on the arbitral awards at the envisaged time, thus leading to a situation
wherein these awards remain insufficiently stamped at the enforcement
stage.
83. Therefore, the anomaly existing today is that while Courts are
proscribed from inquiring into adequacy of stamp duty at the Section 34
stage, the issue of adequate stamping of an arbitral award becomes a
question for enforcement under Section 36. However, this comes at a
belated stage as per the Stamp Act.
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Stamp Duty and Section 36 of the Arbitration Act
84. Having delineated the legal position of stamp duty with respect to
Section 34 proceedings for completeness, the next decision relevant to this
discourse is enforcement of an arbitral award under Section 36 of the
Arbitration Act. In this regard, a co-ordinate Bench of this Court in
46
Jitender Mohan Malik v. Ravi Bhushan Malik , returned the following
findings:
“25. As observed by the Supreme Court in Dr. Chiranji Lal v. Hari
Das: (2005) 10 SCC 746, the Stamp Act is a fiscal statute with the object
of securing revenue for the State on certain classes of instruments. The
stringent provisions of the Act are conceived in the interest of the
revenue. Once that object is secured according to law, the party staking
his claim on the instrument will not be defeated on the ground of initial
defect in the instrument. The Supreme Court also observed that the
Stamp Act has not been enacted to arm a litigant with a weapon of
technicality to meet the case of his opponent. In the present case, the
judgment debtor is attempting to use the Stamp Act as a weapon of
technicality to delay and defeat the execution of the decree. The present
case has to be considered in the backdrop of the observations made by
the Supreme Court. The Court must ensure that the interest of the
revenue does not suffer while, at the same time, enabling the decree
holder to reap the benefits of the decree and prevent the judgment
debtor from defeating the decree.
*
29. The argument that the award is not required to be stamped because
there is no provision for paying stamp duty on an award under the
Arbitration and Conciliation Act, 1996, only needs to be stated to be
rejected. Stamp duty is provided under the Indian Stamp Act, 1899 and
not under the Arbitration and Conciliation Act, 1996. The further
argument of Mr. Qayam-ud-din that though Section 35 of the Indian
Stamp Act, 1899 relates to inadmissibility in evidence of an unstamped
or an insufficiently stamped instrument, the same is not applicable in
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2008 SCC OnLine Del 748
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the present case because the award in question is not being admitted in
evidence. He submitted that under the Arbitration Act, 1940, an award
had to be admitted in evidence before it was made a rule of the Court
and, therefore, Section 35 of the Indian Stamp Act, 1899 was relevant.
His contention was that under the new Act (1996 Act), Section 35 of the
Indian Stamp Act became irrelevant inasmuch as an award by itself
became executable by virtue of Section 36 of the Arbitration and
Conciliation Act, 1996. This argument, though attractive, unfortunately
does not advance the case of the decree holder. This is so because, even
for the sake of argument, if Section 35 of the Indian Stamp Act, 1899 is
kept aside for the time being, Section 33 of the said Act casts a duty
upon every person having by law or consent of parties, authority to
receive evidence, and every person in charge of a public office, except
an officer of police, before whom any instrument, chargeable, in his
opinion, with duty, is produced or comes in the performance of his
functions, to, if it appears to him that such instrument is not duly
stamped, impound the same. Therefore, de hors the question of its
admissibility in evidence, when an instrument which is not duly
stamped is produced before an authority as referred to in Section 33,
it is the duty of such authority to impound the same. It cannot be
denied that the original award has been produced before this Court
for the purposes of execution. If it appears to this Court that the
instrument (the award in question) is not duly stamped, then this
Court is duty bound under the provisions of Section 33 of the Indian
Stamp Act, 1899 to impound the same. It has already been discussed
above that the award in question was required to be stamped in
accordance with Article 45 of Schedule I to the said Act. The award has
been made on stamp paper of only Rs. 100/-. This is clearly inadequate.
Although the value of the property is not indicated, a clue can be taken
from the fact that the difference in the cost of land divided amongst the
decree holder and the judgment debtor itself has been computed in the
award as Rs. 15,20,000/-. Demonstrably, the stamp duty of Rs. 100/-
paid on the award is insufficient. In such a case, the only course of
action is to impound the same. Consequently, the award is impounded.
30. As indicated in Harish Chander Sharma v. Smt. Priti Sharma, etc.:
ILR (1976) 1 Del 142 , the next step for this Court is to send the
impounded instrument in original to the Collector in terms of Section
38(2) of the Indian Stamp Act, 1899. It is ordered accordingly. The
Collector shall follow the procedure as specified in Section 40 of the
said Act and after he has dealt with it, the Collector shall return the
original instrument to this Court for further proceedings .”
(emphasis supplied)
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85. It is evident from the above that the learned Single Judge rightly
understood the responsibility bestowed upon an executing Court with
respect to striking a balance between safeguarding the public exchequer
and the right of a decree holder to reap benefits of the decree. The learned
Judge further held that it is the duty of a Court under Section 33 of the
Stamp Act to impound an insufficiently stamped instrument.
86. Subsequently, again with respect to enforcement of an arbitral
award, this Court in Mohini Electricals (supra) held as follows:
“19. The plain language of these provisions show, as rightly contended
by the JD, that whenever an instrument is tendered before the Court, it
is the duty of the Court to examine whether the same invites payment of
duty and, if it does, see if it has been duly stamped. Section 35(a) is
unambiguous and states that if an instrument produced before the Court
is found to be not duly stamped, the same can neither be admitted in
evidence nor can it can be acted upon, irrespective of its purpose. In
case the instrument is not stamped as required, the Court must impound
the same and has absolutely no discretion in this regard. The JD is
therefore correct to contend that in case an instrument is found to be
inadmissible for not being stamped, the only way the defect can be cured
is by impounding the instrument under Section 33, and then sending it
to the Collector as per Section 38 of the Act whereafter it is for the
Collector to assess the stamp duty applicable as also the penalty
leviable for the initial lapse in paying the requisite duty
20. An award passed at the conclusion of arbitration is an ‘instrument’
within the meaning Section 2(14) of the Indian Stamp Act read with
Entry 12 of Schedule 1 thereof and, therefore, Sections 33 to 38 of that
Act would necessarily be applicable to an arbitral award when it is
sought to be enforced. In fact, this procedural necessity of duly stamping
an award has also been extended by the Court to one of the most
preliminary stages of an arbitration proceeding, viz. arbitration clauses
sought to be invoked and contained within agreements which are
statutorily required to be stamped. In SMS Tea Estates P.
Ltd. v. Chandmari Tea Co. P. Ltd., (2011) 4 SCC 66, relied upon by the
respondent/applicant, the Supreme Court held that an arbitration clause
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seated within an agreement which is not duly stamped was
unenforceable unless it was impounded. Reference in this regard may
be made to the observations in paragraph 22 of the decision in SMS Tea
Estates....”
87. The Court proceeded to discuss Sections 33, 35 and 38 of the Indian
Stamp Act, 1899 to hold that the Court was duty-bound under Section 33
to impound an insufficiently stamped award and cannot exercise any
discretion in this regard. It was held that the only way to cure the defect
was to impound the instrument and forward it to the concerned Collector,
who will then assess the applicable stamp duty and penalty thereof. To
buttress, the Court held that the aforesaid proposition was also made
applicable at the pre-referral stage by the decision in SMS Tea Estates P.
47
Ltd. v. Chandmari Tea Co. P. Ltd. , and was followed in Garware Wall
48
Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd.
88. Further, in the aforesaid matter, the learned Arbitrator had permitted
payment of stamp duty on the award at a belated stage, i.e., well after the
30-day period expired. In this regard, two contentions were raised on
behalf of the Decree Holder that since the (i) Arbitration Act does not
stipulate a time period within which the award shall be stamped and also
(ii) does not impose any duty on the Tribunal to stipulate or ensure such
payment, such an act by the Arbitrator was not permissible. The Court in
its reasoning placed reliance on Sections 31, 35 and 36 of the Arbitration
Act to hold as follows:
47
(2011) 14 SCC 66
48
(2019) 9 SCC 209
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“30. The extracted provisions hereinabove show that the sole duty cast
on the arbitral tribunal at the time of passing the award is to ensure
that a signed copy of the award is delivered to each party , but there is
no obligation on the tribunal to ensure that the requisite stamp duty
payable thereon stands paid at the time of passing of the award .
Section 36 of the Arbitration Act dealing with enforcement of the award
also proceeds to clarify that a domestic arbitral award shall be treated
as a decree of the Court and, subject to the outcome of any challenge
thereupon under Section 34 of the Arbitration Act, it can be simply
enforced as a decree of the Court in accordance with the provisions of
the Code of Civil Procedure, 1908 without any statutory requirement of
making it a Rule of Court, unlike Section 17 of the Indian Arbitration
Act, 1940. A combined reading of these provisions shows that let alone
the arbitral Tribunal, there is no need even for the parties to file the
award in Court and certainly no duty on their part to do so, unless
they intend to initiate proceedings under Sections 34 or 36 of the Act
31. Interestingly, I find that the Arbitration Act does not even create
a legal obligation on the parties in arbitration to pay stamp duty on an
award . It is only when they begin taking steps to enforce the award
that the parties are obligated to ensure that the instrument has been
duly stamped, at which point the Court shall be guided by the
provisions of Sections 33, 35 and 38 of the Indian Stamp Act, 1899.
This position was reiterated by the Supreme Court in M. Anusuya
Deviv. M. Manik Reddy 2003 Supp (4) SCR 853 when it held that the
question whether an award is stamped or not is only relevant for
enforcement proceedings, and not during the Section 34 proceedings
because an arbitral award cannot be set aside on the ground of
inadequate stamping. Thus, the Arbitration Act envisages that the
payment of requisite stamp duty on an award shall only be required
when a party is seeking to get the same enforced under Section 36 .
32. Once the question whether proper stamp duty was paid on the award
is precluded from being a valid ground to challenge the same under
Section 34, it is hard to imagine that the legislature intended to include
the power to make substantive directions on the subject fall in the core
jurisdiction of an arbitral tribunal . In other words, the issue of
stamping of the award is not the concern of the arbitral tribunal at all
and has to be examined only when a party approaches the Court for
enforcement of the award.
33. That being said, it is not necessarily true that every time a party
decides to enforce an award, it needs to ensure that the same is duly
stamped. For instance , a situation may arise in which both parties in
arbitration mutually decide to accept the award, thereby dispensing
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with the formality of instituting an enforcement petition. In such
cases, there would be absolutely no occasion for any of the parties to
pay the stamp duty .
34. That being said, when it comes to the question of paying stamp duty
on an arbitral award, I am inclined to accept the legal position
advanced by Ms. Salwan on behalf of the DH that the learned arbitrator
did not have any statutory power to direct that the stamp duty must be
paid within a specific period. Therefore, the direction of the learned
arbitrator granting 30 days' time for payment of stamp duty on the
award was a direction issued in excess of its powers under the Act . As
a result, a direction like this which was void could neither have created
an obligation on the part of the DH nor can be used to call into question
an act which was perfectly sustainable in the eyes of law, i.e. payment
of the stamp duty in February 2020. Thus, I have no hesitation in
rejecting the JD's contention that the payment of stamp duty applicable
upon the award, on 07.02.2020 was illegal or improper in any manner.”
(emphasis supplied)
89. Therefore, undoubtedly, the proposition that emerges out from this
decision as well is that adequacy of stamp duty is a relevant factor at the
stage of enforcement of an arbitral award and that the Arbitration Act does
not impose a duty upon the Arbitral Tribunal to ensure payment of stamp
duty. It was also held that there is no discretion granted to a Court under
Section 33 and that what must be impounded is the original instrument, a
copy/xerox thereof cannot be validated by paying deficit duty and penalty.
The Contours of In Re: Interplay (supra)
90. Before proceeding further, I deem it apposite to utilise this
opportunity to delineate the legal position, as altered and clarified by the
decisions rendered in SMS Tea Estates (supra) , Garware Wall Ropes
(supra) and In Re: Interplay (supra) .
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91. In SMS Tea Estates (supra) , the Supreme Court gave certain
guidelines on the procedure to be followed if an instrument containing the
arbitral agreement was found to be insufficiently stamped. These
guidelines were as follows:
“22. We may therefore sum up the procedure to be adopted where the
arbitration clause is contained in a document which is not registered
(but compulsorily registerable) and which is not duly stamped:
22.1. The Court should, before admitting any document into evidence
or acting upon such document, examine whether the
instrument/document is duly stamped and whether it is an instrument
which is compulsorily registerable.
22.2. If the document is found to be not duly stamped, Section 35 of the
Stamp Act bars the said document being acted upon. Consequently, even
the arbitration clause therein cannot be acted upon. The Court should
then proceed to impound the document under Section 33 of the Stamp
Act and follow the procedure under Sections 35 and 38 of the Stamp
Act.
22.3. If the document is found to be duly stamped, or if the deficit stamp
duty and penalty is paid, either before the Court or before the Collector
(as contemplated in Section 35 or 40 Section of the Stamp Act), and the
defect with reference to deficit stamp is cured, the Court may treat the
document as duly stamped.
22.4. Once the document is found to be duly stamped, the Court shall
proceed to consider whether the document is compulsorily registerable.
If the document is found to be not compulsorily registerable, the Court
can act upon the arbitration agreement, without any impediment.
22.5. If the document is not registered, but is compulsorily registerable,
having regard to Section 16(1)(a) of the Act, the Court can delink the
arbitration agreement from the main document, as an agreement
independent of the other terms of the document, even if the document
itself cannot in any way affect the property or cannot be received as
evidence of any transaction affecting such property. The only exception
is where the respondent in the application demonstrates that the
arbitration agreement is also void and unenforceable, as pointed out in
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para 15 above. If the respondent raises any objection that the
arbitration agreement was invalid, the Court will consider the said
objection before proceeding to appoint an arbitrator.
22.6. Where the document is compulsorily registerable, but is not
registered, but the arbitration agreement is valid and separable, what
is required to be borne in mind is that the arbitrator appointed in such
a matter cannot rely upon the unregistered instrument except for two
purposes, that is (a) as evidence of contract in a claim for specific
performance, and (b) as evidence of any collateral transaction which
does not require registration.”
92. It is borne out from a plain reading of the abovementioned excerpt
that the Court treated insufficient stamp duty as an absolute bar to arbitral
proceedings, in which case the arbitral award must be necessarily
impounded under Section 33 and the procedure under Section 35 and 38
must be followed. Only upon curing this defect could the instrument be
acted upon. Therefore, this decision permitted impounding of an
instrument at the stage of Section 11 by holding that an insufficiently
stamped arbitral agreement could not be acted upon by virtue of Section
35 of the Stamp Act. This decision was affirmed even after the 2015
amendment to the Arbitration Act in Garware Wall Ropes (supra) . To
harmonise the Stamp Act with the Arbitration Act, it was held that once an
insufficiently stamped instrument containing the arbitral agreement is
impounded, the concerned authority should expedite the process as far as
possible, preferably within 45 days. Once the deficiency is cured, any of
the parties could approach a competent Court, and the Court would also
expeditiously hear and dispose of the Section 11 application. The aforesaid
decisions were rendered by a two-Judge Benches of the Supreme Court.
Subsequently, a three-Judge Bench in Vidya Drolia v. Durga Trading
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Corp. cited Garware Wall Ropes (supra) to affirm that an arbitration
agreement exists only when it is valid and legal.
93. The aforesaid decisions, while they were correct in their
understanding and reasoning pertaining to the Stamp Act, they however
increased judicial interference at nascent stage of arbitral proceedings.
94. Accordingly, a Bench of seven Judges of the Supreme Court
overruled the proposition of law laid by SMS Tea Estates (supra) and
Garware Wall Ropes (supra) . The Court clarified the distinction between
enforceability and admissibility and held that “the effect of not paying duty
or paying inadequate amount renders an instrument inadmissible and not
void ”. It was held that stamping is a curable defect and the Act itself
provides ways to cure such defect. The Court emphasized on the
severability of the arbitral agreement from the underlying instrument
which contains it, along with the principles of minimum judicial
interference under Section 5 of the Arbitration Act, competence-
competence under Section 16 and party autonomy. It was reasoned that the
Arbitration Act did not envisage a Court determining the validity of an
arbitral agreement at a pre-arbitral stage.
95. The Court further called for harmonious construction between the
Arbitration Act and the Stamp Act (and the Contract Act). It was held that
the former statute, being a special law shall be granted primacy over the
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(2021) 2 SCC 1
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latter two legislations since they are of general nature. The relevant portion
is hereinbelow:
“176. In the present reference, the challenge before this Court is to
harmonize the provisions of the Arbitration Act and the Stamp Act. The
object of the Arbitration Act is to inter alia ensure an efficacious process
of arbitration and minimise the supervisory role of Courts in the arbitral
process. On the other hand, the object of the Stamp Act is to secure
revenue for state. It is a cardinal principle of interpretation of statutes
that provisions contained in two statutes must be, if possible, interpreted
in a harmonious manner to give full effect to both the statutes. [Jagdish
Singh v. State (NCT of Delhi), (1997) 4 SCC 435] In providing a
harmonious interpretation, this Court has to be cognizant of the fact
that it does not defeat the purpose of the statutes or render them
ineffective. [State of T.N. v. M.K. Kandaswami, (1975) 4 SCC 745] The
challenge, therefore, before this Court is to preserve the workability and
efficacy of both the Arbitration Act and the Stamp Act.
[CIT v. Hindustan Bulk Carriers, (2003) 3 SCC 57]”
96. The Court held that in view of Section 5 of the Arbitration Act,
Sections 33 and 35 of the Stamp Act could not be allowed to operate at the
stage of Section 11 or 8, as the case may be, in the following words:
“185. In the above segments, we have dealt with the scope of Section 5
of the Arbitration Act. It restricts the extent of judicial intervention in
various matters governed by Part I of the Arbitration Act. [CDC
Financial Services (Mauritius) Ltd. v. BPL Communications Ltd.,
(2003) 12 SCC 140; Empire Jute Co. Ltd. v. Jute Corpn. of India Ltd.,
(2007) 14 SCC 680; Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204; Bhaven Construction v. Sardar Sarovar
Narmada Nigam Ltd., (2022) 1 SCC 75 : (2022) 1 SCC (Civ) 374] The
non obstante clause in this provision is of particular significance. It
indicates that the rule in Section 5 (and consequently, the provisions of
the Arbitration Act) must take precedence over any other law for the
time being in force. Any intervention by the Courts (including
impounding an agreement in which an arbitration clause is contained)
is, therefore, permitted only if the Arbitration Act provides for such a
step, which it does not. Sections 33 and 35 cannot be allowed to operate
in proceedings under Section 11 (or Section 8, as the case may be), in
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view of the non obstante clause in Section 5. This being the case, we are
unable to agree with the decision in N.N. Global (2) [N.N. Global
Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1 : (2023)
3 SCC (Civ) 564] , that the Court in a proceeding under Section 11 must
give effect to Sections 33 and 35 of the Stamp Act despite the interdict
in Section 5…
186. Section 5 is effectively rendered otiose by the interpretation given
to it in N.N. Global (2)[N.N. Global Mercantile (P) Ltd. v. Indo Unique
Flame Ltd., (2023) 7 SCC 1 : (2023) 3 SCC (Civ) 564]. The Court failed
to provide a reason for holding that Section 5 of the Arbitration Act
does not have the effect of excluding the operation of Sections 33 and
35 of the Stamp Act in proceedings under Section 11 of the Arbitration
Act. The non obstante clause in Section 5 does precisely this. In
addition to the effect of the non obstante clause, the Arbitration Act is
a special law. We must also be cognizant of the fact that one of
objectives of the Arbitration Act was to minimise the supervisory role of
Courts in the arbitral process. [Statements of Objects and Reasons,
Arbitration Act.]”
(emphasis supplied)
97. Therefore, it is clear from a cumulative reading of the above that the
seven-Judge Bench held that insufficient stamp duty will not be an
impediment whilst referring a dispute to arbitration or at the stage of
appointment of an arbitrator.
98. The Court reasoned that Section 5 of the Arbitration Act contains a
non-obstante clause which shall preclude the operation of Sections 33 and
35 of the Stamp Act. It was further held that for the purposes of Section 8
or 11, the word “shall” employed in Sections 33 and 35 of the Stamp Act
shall be read as directory in order to preserve the scheme of the Act.
99. Thus, in essence, this decision aims to preserve the sanctity of the
arbitral process and its objective of speedy resolution. The Court did away
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with the possibility of prolonging the process of initiating arbitration and
prevented the occurrence of another adjudication before the Collector in
cases of impounding of the instrument.
100. While there is no iota of doubt that this is a binding position of law,
it must be understood within the confines of the question it answered.
101. Significantly, this decision pertains to the stage of Section 8 and 11
of the Arbitration Act and relates to stamp duty payable on the underlying
document containing the arbitration clause. Accordingly, the reading of the
provisions of the Stamp Act adopted in this decision is restricted to the
Section 8 and 11 stages. The decision does not contemplate the procedure
to be followed by a Court for enforcement of an arbitral award and is silent
on Section 36 of the Arbitration Act.
102. Therefore, the aforesaid position of law is restricted to a specific
stage in arbitration proceedings to maintain sanctity of the arbitral process
as envisaged by the Arbitration Act. Nowhere does the aforesaid decision
call for such an interpretation of the Stamp Act at the stage of enforcement
of the award as a decree of the Court.
103. In fact, save for Sections 8 and 11 of the Arbitration Act, the
decision delineates the following framework of the Stamp Act:
“44. In terms of Section 35, an instrument which is not duly stamped is
inadmissible in evidence for any purpose and it shall not be acted upon,
registered, or authenticated. [ Subject to the proviso to Section 35.]
Clause (a) of the proviso to Section 35 stipulates that the bar contained
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in the provision is removed upon the payment of duty and the penalty (if
any). The party or parties may pay the duty chargeable to the person
who has the authority to receive evidence by law or by consent of
parties. Section 35 is significant because it gives teeth to the Stamp
Act by ensuring that stamp duty is paid before rights and obligations
arising from an agreement are enforced .
*
47. In terms of Section 42 of the Stamp Act, an instrument is admissible
in evidence once the payment of duty and a penalty (if any) is
complete . It stipulates that either the person admitting the instrument in
evidence or the Collector, as the case may be, shall certify by
endorsement that the proper duty has been paid.
48. The procedure contemplated by the Stamp Act facilitates the
collection of revenue. It permits instruments to be impounded not only
by persons in charge of a public office or those who are empowered by
law to receive evidence but also by any person who is empowered to
receive evidence by consent of parties. The statute then sets out the
procedure to be followed upon impounding a document. This procedure
ensures that stamp duty is paid . After the payment of the appropriate
amount under the appropriate description in Schedule I and the
penalty (if any), the Stamp Act provides for the certification of such
payment by an endorsement by the appropriate authority. Once an
instrument has been endorsed, it may be admitted into evidence,
registered, acted upon or authenticated as if it had been duly
stamped .”
(emphasis supplied)
104. Although the Bench did not lay down any law with respect to
enforcement of an arbitral award, it did delineate the scheme of the Act. It
recognised that an insufficiently stamped instrument is inadmissible as
evidence and cannot be acted upon by virtue of Section 35, and this bar
can only be removed upon the payment of duty and penalty (if any) in light
of the said provision. The Court recognised that Section 35 “gave teeth”
to the Stamp Act by “ensuring that stamp duty is paid before rights and
obligations arising from an agreement are enforced” .
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105. The Court further observed that an instrument becomes admissible
only after payment of the deficit duty and penalty, if applicable, in view of
Section 42. It was further elaborated that the procedure of impounding
ensures that stamp duty is paid, which is nothing but collection of revenue
for the State.
106. The Court further held that the object of the Stamp Act is indeed
preserved, in the following words:
“205. The interpretation accorded to the Stamp Act by this Court in
the present judgment does not allow the law to be flouted . The Arbitral
Tribunal continues to be bound by the provisions of the Stamp Act,
including those relating to its impounding and admissibility. The
interpretation of the law in this judgment ensures that the provisions of
the Arbitration Act are given effect to while not detracting from the
purpose of the Stamp Act.
206. The interests of the Revenue are not jeopardised in any manner
because the duty chargeable must be paid before the agreement in
question is rendered admissible and the lis between the parties
adjudicated. The question is at which stage the agreement would be
impounded and not whether it would be impounded at all. The Courts
are not abdicating their duty but are instead giving effect to:
206.1. The principle of minimal judicial intervention in Section 5 of the
Arbitration Act;
206.2. The prima facie standard applicable to Sections 8 and 11 of the
Arbitration Act; and
206.3. The purpose of the Stamp Act which is to protect the interests of
the Revenue and not arm litigants with a weapon of technicality by
which they delay the adjudication of the lis.”
(emphasis supplied)
107. Thus, even the Bench of seven Judges of the Supreme Court held
that the purpose behind the Stamp Act shall be preserved while striking a
balance with the objectives behind the Arbitration Act. It is clearly held
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that the Court is not doing away with the procedure envisaged under the
Stamp Act but only delineating the stage at which it may be invoked.
108. The aforesaid observation is crucial to the present discourse,
inasmuch as it draws a bridge between payment of sufficient stamp duty
on an instrument and its enforceability. It therefore recognises payment of
stamp duty as a pre-requisite to enforcement of an arbitral award.
The Stamp Act
109. Having delineated the backdrop of necessity of stamp duty at
different stages of arbitral proceedings in light of various precedents, I
deem it fit at this juncture to advert to the Stamp Act itself. For this
purpose, it is apposite to reproduce relevant provisions of the Act
hereinbelow:
“ 2. Definitions. —In this Act, unless there is something repugnant in the
subject or context,—
*
(6) Chargeable .—“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 . —“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
(12) Executed and execution . —“executed” and “execution” used with
reference to instruments, mean “signed” and “signature” and includes
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attribution of electronic record within the meaning of section 11 of the
Information Technology Act, 2000 (21 of 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.”
110. It is evident from the above that an arbitral award is an
“instrument” for the purposes of the Act. Such an instrument becomes
chargeable when it is “executed”, which means nothing but “signed” by
the party(s) to such instrument.
111. Pertinently, these are the definition clauses. The charging provision
50
under the Act is Section 3, which, when read with Schedule IA , stipulates
rates of stamp duty. The same is reproduced thus:
“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—
(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
50
Schedule IA of the Indian Stamp (Delhi Amendment) Act, 2010
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(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 Indian Registration of Ships Act,
1841, (CX of 1841) as amended by subsequent Acts.”
Description of Instrument Proper Stamp-duty
12. AWARD , that is to say, any
decision in writing by an arbitrator
or umpire, not being an award
directing a partition on a reference
made otherwise than by an order of
the Court in the course of a suit-
(a) where the amount or value of
the property to which the award
relates as set forth in such award,
does not exceed Rs. 1,000;
(b) if it exceeds Rs. 1,000/- but does
not exceed Rs. 5,000, and for every
additional Rs. 1,000 or part thereof
in excess of Rs. 5,000.
The same duty as a Bond (No.15)
for such amount.
One rupee for every one thousand
rupees or part thereof of the value of
the property to which the award
relates.
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15. BOND as defined by section
2(5), not being a Debenture (No.
27), and not being otherwise
provided for by this Act, or by the
Court-fees Act, 1870-
See ADMINISTRATION BOND
(No.2), BOTTOMRY BOND (No.
16), CUSTOMS BOND (No. 26),
INDEMNITY BOND (No. 34),
RESPONDENTIA BOND (No. 56),
SECURITY BOND (No. 57).
2% and 0.5% on bond issued by the
local authority.
Exemption
Bond when executed by any person
for the purpose of guaranteeing
that the local income derived from
the private subscription to a
charitable dispensary or hospital
or to any other object of public
utility, shall not be less than a
specified sum per mensem.
112. Therefore, it is evident from a conjoint reading of definition of
“chargeable” under Section 2(6), Section 3, along with Articles 12 and 15
to Schedule IA, that affixing signature on an instrument is the chargeable
event, at which point, the rate as stipulated under Schedule IA must be paid
on such instrument. Thus, there is no explicit and exclusive link between
enforcement of an instrument (arbitral award in this case) and the payment
of stamp duty on such instrument. In other words, the Stamp Act does not
envisage enforcement of an instrument as the trigger event for payment of
stamp duty.
113. On the other hand, Sections 17 and 18 envisage payment of stamp
duty as follows:
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“ 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.”
“18. Instruments other than bills and notes executed out of India. —
(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 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.”
“62. Penalty for executing, etc., instrument not duly stamped. ––(1)
Any person––
(a) drawing, making, issuing, endorsing or transferring, or signing
otherwise than as a witness, or presenting for acceptance or payment,
or accepting, paying or receiving payment of, or in any manner
negotiating, any bill of exchange payable otherwise than on demand or
promissory note without the same being duly stamped; or
(b) executing or signing otherwise than as a witness any other
instrument chargeable with duty without the same being duly stamped;
or
(c) voting or attempting to vote under any proxy not duly stamped, shall
for every such offence be punishable with fine which may extend to five
hundred rupees:
Provided that, when any penalty has been paid in respect of any
instrument under section 35, section 40 or section 61, the amount of
such penalty shall be allowed in reduction of the fine, (if any)
subsequently imposed under this section in respect of the same
instrument upon the person who paid such penalty.
(2) If a share-warrant is issued without being duly stamped, the
company issuing the same, and also every person who, at the time when
it is issued, is the managing director or secretary or other principal
officer of the company, shall be punishable with fine which may extend
to five hundred rupees.”
114. Therefore, the aforesaid provisions are to be read keeping in mind
that stamp duty must ideally be paid before or at the time of execution, i.e.,
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signing of the instrument. Section 17 clarifies that for all instruments
executed in India (i.e., a domestic arbitral award for this discourse), such
duty must be paid before or at the time of execution i.e., before or at the
time of affixing signatures to such instrument. Whereas, Section 62
imposes penalty for non-compliance of Section 17.
115. Section 18 further mandates that instruments executed outside of
India shall be duly stamped within three months of receiving it in India. To
reiterate, for the purposes of this Act, execution means “signature”.
116. To digress a little, Sections 13 to 15 of the Act are also noteworthy.
These provisions are reproduced hereinbelow:
“13. Instruments stamped with impressed stamps how to be written. —
Every instrument written upon paper stamped with an impressed stamp
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.
14. Only one instrument to be on same stamp. —No second instrument
chargeable with duty shall be written upon a piece of stamped paper
upon which an instrument chargeable with duty has already been
written:
Provided that nothing in this section shall prevent any endorsement
which is duly stamped or is not chargeable with duty being made upon
any instrument for the purpose of transferring any right created or
evidenced thereby, or of acknowledging the receipt of any money or
goods the payment or delivery of which is secured thereby.
15. Instrument written contrary to section 13 or 14 deemed
unstamped. —Every instrument written in contravention of section 13
or section 14 shall be deemed to be unstamped.”
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117. Section 13 envisages instruments to be prepared on stamp paper.
Section 14 provides that two instruments cannot be prepared on the same
stamp paper. Further, Section 15 stipulates that if an instrument is prepared
in contravention of these two provisions, such an instrument would be
deemed as unstamped.
118. Proceeding further, Section 31 empowers the Collector to adjudicate
upon the proper stamp duty payable. A party may also approach the
Collector for his opinion regarding the duty, if any, to be paid on an
instrument, even if such instrument has not been previously executed or
stamped. Notably, there is no stipulation of a time-period under Section 31
for adjudication by the Collector. It also does not stipulate any period of
time or stage of proceedings at which parties may approach the Collector.
Upon such adjudication, as per Section 32, the Collector may certify by
way of endorsement that such instrument is duly stamped, or that the
instrument is not chargeable. However, proviso (a) to Section 32(3)
categorically restricts the Collector from making such an endorsement if
an instrument executed in India is brought after the expiry of one month
from the date of its execution/signature. Therefore, it provides somewhat
of a relaxation to the requirement as stipulated under Section 17. I deem it
apposite to reproduce Sections 31 and 32 hereinbelow:
“31. Adjudication as to proper stamp. — (1) When any instrument,
whether executed or not and whether previously stamped or not, is
brought to the Collector, and the person bringing it applies to have the
opinion of that officer as to the duty (if any) with which it is chargeable,
and pays a fee of such amount (not exceeding five rupees and not less
than fifty naye paise) as the Collector may in each case direct, the
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Collector shall determine the duty (if any) with which, in his judgment,
the instrument is chargeable.
(2) For this purpose the Collector may require to be furnished with an
abstract of the instrument, and also with such affidavit or other evidence
as he may deem necessary to prove that all the facts and circumstances
affecting the chargeability of the instrument with duty, or the amount of
the duty with which it is chargeable, are fully and truly set forth therein,
and may refuse to proceed upon any such application until such abstract
and evidence have been furnished accordingly:
Provided that —
(a) no evidence furnished in pursuance of this section shall be used
against any person in any civil proceeding, except in an inquiry as to
the duty with which the instrument to which it relates is chargeable; and
(b) every person by whom any such evidence is furnished, shall, on
payment of the full duty with which the instrument to which it relates, is
chargeable, be relieved from any penalty which he may have incurred
under this Act by reason of the omission to state truly in such instrument
any of the facts or circumstances aforesaid.”
“32. Certificate by Collector. — (1) When an instrument brought to the
Collector under section 31 is, in his opinion, one of a description
chargeable with duty, and
(a) the Collector determines that it is already fully stamped, or
(b) the duty determined by the Collector under section 31, or such a sum
as, with the duty already paid in respect of the instrument, is equal to
the duty so determined, has been paid, the Collector shall certify by
endorsement on such instrument that the full duty (stating the amount)
with which it is chargeable has been paid.
(2) When such instrument is, in his opinion, not chargeable with duty,
the Collector shall certify in manner aforesaid that such instrument is
not so chargeable.
(3) Any instrument upon which an endorsement has been made under
this section, shall be deemed to be duly stamped or not chargeable with
duty, as the case may be; and, if chargeable with duty, shall be
receivable in evidence or otherwise, and may be acted upon and
registered as if it had been originally duly stamped:
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Provided that nothing in this section shall authorize the Collector to
endorse—
(a) any instrument executed or first executed in India and brought to
him after the expiration of one month from the date of its execution
or first execution, as the case may be;
(b) any instrument executed or first executed out of India and brought
to him after the expiration of three months after it has been first received
in India; or
(c) any instrument chargeable with a duty not exceeding ten naye paise,
or any bill of exchange or promissory note, when brought to him, after
the drawing or execution thereof, on paper not duly stamped.”
(emphasis supplied)
119. Therefore, at the cost of repetition, the plain words of the Stamp Act
provide that stamp duty must be paid on or before execution of an
instrument as per Section 17. Section 31, in a way, provides for deferred
payment of such stamp duty, and Section 32 lays down a caveat that it can
be deferred only up to one month from execution of an instrument.
120. Moving further, Chapter IV of the Stamp Act deals with instruments
not duly stamped.
121. Section 33 entails that (i) every person having authority to receive
evidence by law or by consent of parties, (ii) every person in charge of a
public office, (iii) but not a police officer, before whom an instrument
chargeable with duty is produced, is under a statutory obligation to
impound such instrument if it appears to be not duly stamped. Section 33
is reproduced hereinbelow:
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“33. Examination and impounding of instruments.—( 1) Every person
having by law or consent of parties authority to receive evidence, and
every person in charge of a public office, except an officer of police,
before whom any instrument, chargeable, in his opinion, with duty, is
produced or comes in the performance of his functions, shall, if it
appears to him that such instrument is not duly stamped, impound the
same.
(2) For that purpose every such person shall examine every instrument
so chargeable and so produced or coming before him, in order to
ascertain whether it is stamped with a stamp of the value and
description required by the law in force in 1[India] when such
instrument was executed or first executed:
Provided that—
(a) nothing herein contained shall be deemed to require any Magistrate
or Judge of a Criminal Court to examine or impound, if he does not
think fit so to do, any instrument coming before him in the course of any
proceeding other than a proceeding under Chapter XII or Chapter
XXXVI of the Code of Criminal Procedure, 1898 (V of 1898);
(b) in the case of a Judge of a High Court, the duty of examining and
impounding any instrument under this section may be delegated to such
officer as the Court appoints in this behalf.
(3) For the purposes of this section, in cases of doubt, —
(a) the State Government may determine what offices shall be deemed
to be public offices; and
(b) the State Government may determine who shall be deemed to be
persons in charge of public offices.”
122. It is evident from a plain reading that this provision imposes a duty
on the authorities stipulated therein to impound a chargeable but
insufficiently stamped award. The mandatory nature of this duty is evident
from the word “shall”, from the bar provided under Section 35 and from
the stipulation of penalty under Section 62 for non-stamping.
123. Section 35 creates a clear bar against admitting an inadequately
stamped instrument into evidence or acting upon it for any purpose, subject
to the validation mechanisms and penalties prescribed thereunder:
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“ 35. Instruments not duly stamped inadmissible in evidence, etc.— No
instrument chargeable with duty shall be admitted in evidence for any
purpose by any person having by law or consent of parties authority to
receive evidence, or shall be acted upon, registered or authenticated by
any such person or by any public officer, unless such instrument is duly
stamped:
Provided that —
(a) any such instrument shall be admitted in evidence on payment of the
duty with which the same is chargeable, or, in the case of any instrument
insufficiently stamped, of the amount required to make up such duty,
together with a penalty of five rupees, or, when ten times the amount of
the proper duty or deficient portion thereof exceeds five rupees, of a sum
equal to ten times such duty or portion;
(b) where any person from whom a stamped receipt could have been
demanded, has given an unstamped receipt and such receipt, if stamped,
would be admissible in evidence against him, then such receipt shall be
admitted in evidence against him on payment of a penalty of one rupee
by the person tendering it;
(c) where a contract or agreement of any kind is effected by
correspondence consisting of two or more letters and any one of the
letters bears the proper stamp, the contract or agreement shall be
deemed to be duly stamped;
(d) nothing herein contained shall prevent the admission of any
instrument in evidence in any proceeding in a Criminal Court, other
than a proceeding under Chapter XII or Chapter XXXVI of the Code of
Criminal Procedure 1898 (V of 1898);
(e) nothing herein contained shall prevent the admission of any
instrument in any Court when such instrument has been executed by or
on behalf of the Government, or where it bears the certificate of the
Collector as provided by section 32 or any other provision of this Act.”
124. This provision, in the words of the Supreme Court in In Re:
Interplay (supra) , “gives teeth” to the Stamp Act and ensures that rights
and liabilities are enforced only after payment of adequate stamp duty and
penalty, if any.
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125. Section 35 prohibits a Court from admitting in evidence,
registration or authentication of such instruments or acting upon such
instrument.
126. In my considered view, “acted upon” has a wide import which
includes enforcement of an instrument. Therefore, in the present case, it
would include within its ambit the enforcement of an arbitral award under
Section 36 of the Arbitration Act.
127. While Section 35 imposes a bar on this Court from acting upon an
insufficiently stamped instrument, it also reminds us that stamp duty is a
curable defect. In this regard, proviso (a) mandates that insufficiently
stamped instruments can be admitted as evidence or acted upon only after
deposit of the deficient duty along with penalty.
128. It is also pertinent to note that Section 35 earlier read as “not being
an instrument chargeable with a duty not exceeding ten naye paise only,
or a bill of exchange or promissory note, shall, subject to all just
exceptions” . However, evidently, it now employs the word “shall”.
Therefore, the shift from permitting just exceptions to solely using the
word “shall” indicates that only upon the payment of deficient duty along
with stamp, can the instrument be acted upon. Notably, this provision does
not provide room for only the payment of deficient duty without penalty
to render an instrument admissible as evidence or to act upon it for
enforcement.
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129. Therefore, Section 35 does two things: (i) it restricts this Court from
acting upon an insufficiently stamped instrument and, (ii) permits this
Court to act upon such instrument after payment of deficit along with
51
penalty .
130. Thereafter, Section 36 of the Stamp Act grants protection to certain
instruments in the following manner:
“ 36. Admission of instrument where not to be questioned. — Where an
instrument has been admitted in evidence, such admission shall not,
except as provided in section 61, be called in question at any stage of
the same suit or proceeding on the ground that the instrument has not
been duly stamped.”
131. Section 37 provides that in cases where an instrument bears
sufficient stamp duty but of improper description, State Governments are
empowered to make rules to certify such instruments to be duly stamped,
as follows:
“ 37. Admission of improperly stamped instruments. — The State
Government may make rules providing that, where an instrument bears
a stamp of sufficient amount but of improper description, it may, on
payment of the duty with which the same is chargeable, be certified to
be duly stamped, and any instrument so certified shall then be deemed
to have been duly stamped as from the date of its execution.”
132. Section 38 further delineates the procedure for handling an
impounded instrument, as follows:
51
Ram Rattan v. Bajrang Lal , (1978) 3 SCC 236; Avinash Kumar Chauhan v. Vijay Krishna Mishra , (2009) 2
SCC 532 (para 25); Sanjeeva Reddi v. Johanputra Reddi , AIR 1972 AP 373 (para 9); T. Bhaskar Rao v. T.
Gabriel, AIR 1981 AP 175 (para 5)
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“ 38. Instruments impounded, how dealt with.—
(1) When the person impounding an instrument under section 33 has by
law or consent of parties authority to receive evidence and admits such
instrument in evidence upon payment of a penalty as provided by section
35 or of duty as provided by section 37, he shall send to the Collector
an authenticated copy of such instrument, together with a certificate in
writing, stating the amount of duty and penalty levied in respect thereof,
and shall send such amount to the Collector, or to such person as he
may appoint in this behalf.
(2) In every other case, the person so impounding an instrument shall
send it in original to the Collector.”
133. Thus, where an instrument is admitted in evidence upon payment
of penalty as per Section 35 (or payment of duty as per Section 37), (i) an
authenticated copy along with (ii) the collected amount and a (iii)
certificate in writing stipulating the amount of duty and penalty, must be
forwarded to the concerned Collector. In all other cases, i.e., if the
instrument is not admitted as evidence upon payment of duty and penalty,
the impounding authority “shall” forward the original instrument to the
Collector. The use of “shall” reiterates the mandatory nature of the
provision.
134. Section 38(1) clarifies that a Court is empowered to admit the
instrument upon payment of stamp duty and penalty. If the Court adopts
this procedure, it need only forward an authenticated copy to the Collector
with the amount so collected.
135. Notably, Section 39 grants discretion to the Collector to refund the
amount of penalty paid under Section 38(1).
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136. Therefore, as noted in the preceding paragraphs, after an
insufficiently stamped instrument is impounded under Section 33, it is
either admitted in evidence by payment of deficit duty and penalty (if any)
by the authority under Section 33 or the original instrument is forwarded
to the Collector in terms of Section 38(1) and 38(2) respectively.
137. Upon receipt of such instrument, the Collector acts in accordance
with Section 40, which stipulates the Collector’s power to stamp
impounded instruments as follows:
“40. Collectors power to stamp instruments impounded.— (1) When
the Collector impounds any instrument under section 33, or receives
any instrument sent to him under section 38, sub-section (2), not being
an instrument chargeable with a duty not exceeding ten naye paise only
or a bill of exchange or promissory note, he shall adopt the following
procedure: —
(a) if he is of opinion that such instrument is duly stamped, or is not
chargeable with duty, he shall certify by endorsement thereon that it is
duly stamped, or that it is not so chargeable, as the case may be;
(b) if he is of opinion that such instrument is chargeable with duty and
is not duly stamped, he shall require the payment of the proper duty or
the amount required to make up the same, together with a penalty of five
rupees; or, if he thinks fit, an amount not exceeding ten times the amount
of the proper duty or of the deficient portion thereof, whether such
amount exceeds or falls short of five rupees:
Provided that, when such instrument has been impounded only because
it has been written in contravention of section 13 or section 14, the
Collector may, if he thinks fit, remit the whole penalty prescribed by this
section.
(2) Every certificate under clause (a) of sub-section (1) shall, for the
purposes of this Act, be conclusive evidence of the matters stated
therein.
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(3) Where an instrument has been sent to the Collector under section
38, sub-section (2), the Collector shall, when he has dealt with it as
provided by this section, return it to the impounding officer.”
138. Section 40 therefore provides that if the Collector is satisfied that
the impounded instrument is duly stamped (or not chargeable), he may
endorse it. However, if the Collector is of the opinion that an instrument
chargeable with duty is not duly stamped, he “shall require” payment of
proper duty “together with” the statutory penalty. After compliance of the
aforesaid, the Collector is bound to return such instrument to the
impounding authority.
139. Therefore, in Section 40(1)(b), it is evident from the use of the
words “together with” that there is no discretion to the waive the penalty
component. However, discretion is granted with respect to the quantum of
penalty levied, as it apparent from the words “if he thinks fit”.
140. Accordingly, it emerges from a reading of Sections 33, 35, 38 and
40 that the question of payment of penalty will arise in cases wherein a
chargeable yet insufficiently stamped arbitral award is brought before any
of the competent authorities stipulated under Section 33. It is only upon
the payment of adequate duty along with penalty can such an award be
acted upon by an enforcing Court. The deficit duty and penalty may be
deposited before the impounding authority under Section 38(1) (calculated
as per Section 35) or the Collector under Section 40.
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141. The aforesaid stipulation of payment of penalty is relaxed by
Sections 39 and 41, which makes for an interesting read.
142. Section 39 empowers the Collector to exercise discretion for the
refund of the penalty paid under Section 38(1), i.e., before the impounding
authority, as is evident from the use of the phrase “if he thinks fit”. This
discretion may be exercised to waive “any portion of the penalty”. Section
39 reads as thus:
“ 39. Collector’s power to refund penalty paid under section 38, sub-
section (1). — (1) When a copy of an instrument is sent to the Collector
under section 38, sub-section (1), he may, if he thinks fit, refund any
portion of the penalty in excess of five rupees which has been paid in
respect of such instrument.
(2) When such instrument has been impounded only because it has been
written in contravention of section 13 or section 14, the Collector may
refund the whole penalty so paid.”
143. Further, the Collector under Section 41 need not direct deposit of
penalty if a party approaches him within one year from the execution of
the instrument offering to pay the deficit duty and if the Collector is
satisfied that grounds of either mistake, accident or urgent necessity are
made out for not depositing the requisite stamp duty in accordance with
the Act. Section 41 is hereinbelow:
“41. Instruments unduly stamped by accident.— If any instrument
chargeable with duty and not duly stamped, not being an instrument
chargeable with a duty not exceeding ten naye paise only or a bill of
exchange or promissory note, is produced by any person of his own
motion before the Collector within one year from the date of its
execution or first execution, and such person brings to the notice of the
Collector the fact that such instrument is not duly stamped and offers to
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pay to the Collector the amount of the proper duty, or the amount
required to make up the same, and the Collector is satisfied that the
omission to duly stamp such instrument has been occasioned by
accident, mistake or urgent necessity, he may, instead of proceeding
under sections 33 and 40, receive such amount and proceed as next
herein-after prescribed.”
144. Once the requisite stamp duty and penalty, if any, have been duly
paid (whether under Section 35, Section 40, or Section 41), the Collector
or the authority under Section 33 admitting this instrument in evidence,
shall endorse the instrument under Section 42. In doing so, the concerned
authority is to certify that the proper duty and penalty have been levied. It
is only upon such endorsement that the instrument regains statutory
admissibility and can be acted upon in enforcement proceedings. Section
42 is as follows:
“42. Endorsement of instruments on which duty has been paid under
section 35, 40 or 41.— (1) When the duty and penalty (if any), leviable
in respect of any instrument have been paid under section 35, section
40 or section 41, the person admitting such instrument in evidence or
the Collector, as the case may be, shall certify by endorsement thereon
that the proper duty or, as the case may be, the proper duty and penalty
(stating the amount of each) have been levied in respect thereof, and the
name and residence of the person paying them.
(2) Every instrument so endorsed shall thereupon be admissible in
evidence, and may be registered and acted upon and authenticated as if
it had been duly stamped, and shall be delivered on his application in
this behalf to the person from whose possession it came into the hands
of the officer impounding it, or as such person may direct:
Provided that—
(a) no instrument which has been admitted in evidence upon payment of
duty and a penalty under section 35, shall be so delivered before the
expiration of one month from the date of such impounding, or if the
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Collector has certified that its further detention is necessary and has
not cancelled such certificate;
(b) nothing in this section shall affect the Code of Civil Procedure (XIV
of 1882), section 144, clause 3.”
145. Therefore, in addition to Sections 35 and 38, even Section 42
envisages the payment of deficit duty along with penalty. It does not
provide an option to not pay penalty by using terms like “or” and other
such disjunctive conjunctions. The only discretion in this regard is granted
to the Collector by virtue of Sections 39 and 41 as stated in the preceding
paragraphs.
146. In my considered view, the use of expression “if any” in conjunction
with “penalty” does not render the penalty merely optional. This
expression must be understood in the context of other provisions of the Act
such as Section 37, 39 and 41 and not read in isolation. These provisions
empower the State Government and the Collector respectively to do away
with penalty. Therefore, this expression merely accommodates exemptions
and does not, in any manner whatsoever, confer discretion upon this Court
to waive penalty.
Overview of the Act
147. It emerges from the scheme of the Act that Section 17 requires an
instrument to be stamped before or at the time of execution/signed and
relaxation of one month from the execution of the instrument is granted by
proviso (a) to Section 32(3), after which the Collector becomes functus
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officio and cannot endorse any instrument executed in India, i.e., a
domestic arbitral award in the present case.
148. Notably, Section 31 does not provide any time limit for adjudication
by the Collector or any such period within which parties should approach
the Collector. Hence, if parties approach the Collector within a month, the
Collector may endorse the instrument upon payment of requisite duty
without the payment of any penalty. However, if they approach after a
month, the Collector cannot directly endorse such instrument due to the
bar imposed by Section 32, and would have to impound the instrument
under Section 33 and thereafter, proceed under Section 40 and 42 of the
Act. Alternatively, any other competent authority before which such
instrument is produced, shall impound and either proceed under Section
35(1) or Section 38(2).
149. Undoubtedly, instruments not duly stamped are inadmissible as
evidence under Section 35 and the Court is prevented from acting upon the
same. Further, if such an instrument falls before an authority as stipulated
under Section 33, such authority is duty-bound to impound the instrument.
Thereafter, the procedures under Section 35, 38 and 40 of the Act are
triggered.
150. Proviso (a) to Section 35 permits an insufficiently stamped
instrument to be admitted in evidence only after the deposit of deficient
duty along with penalty. The provision employs the term “duty, together
with a penalty”. Therefore, there is no room under this proviso to discard
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the penalty component. The use of “if any” with respect to penalty is only
to provide room for discretion granted to the Collector. The Court is not
accorded with such discretion.
151. Thereafter, Section 38 permits the concerned authority besides the
Collector to either (i) receive deficient duty and penalty under Section 35
or only duty under Section 37 (specific cases) and forward an authenticated
copy of the instrument to the Collector along with the collected amount
and requisite details or (ii) in other cases, send the impounded original
instrument to the Collector.
152. Once the Collector receives such insufficiently stamped instrument
impounded under Section 38(2) or impounds himself under Section 33, he
“shall” require payment of the deficit along with penalty, as under Section
40(1)(b). Therefore, there is no room under this provision as well to do
away with the penalty component altogether; discretion lies with respect
to the quantum of penalty.
153. Subsequently, the instruments so impounded under Sections 35, 40
or 41, may be endorsed by the Collector (or the authority admitting such
instrument in evidence) only after the duty and if applicable, penalty is
paid as per Section 42.
154. Notably, the Collector may, under Section 41, do away with penalty
and require payment of the deficit duty if the conditions stipulated under
this Section are satisfied.
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155. Consequently, from a bare and conjoint reading of Sections 17, 32,
33, 35, 40, and 42, no occasion arises for a Decree Holder to unilaterally
pay the stamp duty or the deficit duty at a belated stage, i.e., any time after
one month from execution of the instrument (arbitral award herein),
without the penalty component (if applicable) being paid either to the
impounding authority under Section 33 or the Collector. Thus, an
insufficiently stamped award ought to be impounded by an authority under
Section 33 or Decree Holder may approach the concerned Collector, who
shall then proceed to endorse the award as per Section 42 after the pre-
requisites under the Act are satisfied. No discretion is granted to this Court
by the statute to waive penalty; such discretion has been vested with the
Collector.
The Act as Interpreted by the Supreme Court
156. Having delineated the scheme of the Act, I shall now refer to certain
decisions of the Supreme Court that may further act as a guiding compass
in order to ascertain how should the Stamp Act be understood.
52
157. The Supreme Court in Ram Rattan v. Bajrang Lal reiterated that
if competent authority comes across insufficiently stamped instrument, the
same shall be impounded and that such instrument cannot be admitted as
evidence until duty and penalty is paid. The relevant excerpt is below:
52
(1978) 3 SCC 236 : 1978 SCC OnLine SC 157
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“7. Mr Desai then contended that where an instrument not duly stamped
or insufficiently stamped is tendered in evidence, the Court has to
impound it as obligated by Section 33 and then proceed as required by
Section 35 viz. to recover the deficit stamp duty along with penalty.
Undoubtedly, if a person having by law authority to receive evidence
and the civil Court is one such person before whom any instrument
chargeable with duty is produced and it is found that such instrument is
not duly stamped, the same has to be impounded. The duty and penalty
has to be recovered according to law. Section 35, however, prohibits its
admission in evidence till such duty and penalty is paid. The plaintiff
has neither paid the duty nor penalty till today. Therefore, stricto
sensu the instrument is not admissible in evidence. Mr Desai, however,
wanted us to refer the instrument to the authority competent to
adjudicate the requisite stamp duty payable on the instrument and then
recover the duty and penalty which the party who tendered the
instrument in evidence is in any event bound to pay and, therefore, on
this account it was said that the document should not be excluded from
evidence. The duty and the penalty has to be paid when the document is
tendered in evidence and an objection is raised. The difficulty in this
case arises from the fact that the learned trial Judge declined to decide
the objection on merits and then sought refuge under Section 36. The
plaintiff was, therefore, unable to pay the deficit duty and penalty which
when paid subject to all just exceptions, the document has to be admitted
in evidence. In this background while holding that the document Ext. I
would be inadmissible in evidence as it is not duly stamped, we would
not decline to take it into consideration because the trial Court is bound
to impound the document and deal with it according to law.”
53
158. In Shanti Devi L. Singh v. Tax Recovery Officer , the Supreme
Court held the following:
“11. There are two provisions in the Stamp Act which provide for the
adjudication of stamp duty. Under Section 31, it is open to the
executants of any document, at any stage but within the time limit set
out in Section 32, to produce a document before the Collector of Stamps
and require him to adjudicate on the question whether the document
should bear any stamp duty. The Collector thereupon may adjudicate
the stamp duty himself or refer the matter to the Chief Controlling
Revenue Authority of the State. In turn, it is open to the Chief
Controlling Revenue Authority to refer the matter to the High Court for
53
(1990) 3 SCC 605 : 1990 SCC (Tax) 356 : (1990) 183 ITR 481 : 1990 SCC OnLine SC 219
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an authoritative decision (Sections 32 and 56). This procedure could
have been followed by the petitioners if they wished to seek an answer
to the question whether the certificate of sale is liable to stamp duty but
they have not done it and the time limit under Section 32 has run out.
The other provision that may become applicable is Section 33. Under
this section, if any document (and this includes a certificate of sale) is
presented to the Registrar for registration and the Registrar is of
opinion that it is a document which should bear stamp duty but that it
has not been stamped, it is his duty to impound the document and send
it on to the Collector of Stamps for necessary adjudication (Section 38).
This contingency has also not happened. The third contingency, also
provided for in Section 33 is when a party wishes to rely upon the
certificate of sale as a piece of evidence before a Court or an authority
entitled to take evidence. Such Court or authority will also have to
impound the document and shall not admit the same in evidence unless
the stamp duty chargeable and the stipulated penalty are paid. This
situation has not arisen so far but may arise at some time in future. It is
unnecessary to anticipate the same and decide the issue. We shall
therefore leave the issue of stamp duty to be adjudicated upon in the
normal course, as and when found necessary, and express no views
thereon at this stage.”
159. The Court highlighted the two ways for adjudication of stamp duty
under the Act, i.e., Section 31 and 33. The former applies if parties
themselves approach the Collector within the time period stipulated under
Section 32. If this time period expires, the recourse is Section 33, whereby
the instrument shall first be impounded, thereafter the duty and penalty be
paid to make good the instrument, and only then will the Collector endorse
such instrument. Upon such endorsement, the instrument becomes eligible
to be admitted in evidence or otherwise acted upon.
54
160. More recently, the Supreme Court in Vijay v. UOI & Ors. ,
reiterated the underlying scheme of Section 35 as follows:
54
2023 INSC 1030
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“27. The object of the Stamp Act is to collect proper stamp duty on an
instrument or conveyance on which such stamp duty is payable. Section
35 is a provision to cater for the instruments not being properly stamped
and, as such, not being admissible in evidence. A document not duly
stamped cannot be admitted for any purposes. To impose the bar of
admissibility provided under this section, the following twin conditions
are required to be fulfilled:
(i) Instrument must be chargeable with duty;
(ii) It is not duly stamped.
28. If the documents sought to be admitted are not chargeable with duty,
Section 35 has no application…”
161. In Bidyut Sarkar & Anr. v. Kanchilal Pal (Dead) through LRs &
55
Anr. , the Supreme Court recapitulated the scheme of the Act:
“21. According to the language of the section 35 of the Stamp Act,
instruments not duly stamped would be inadmissible in evidence, and
any instrument chargeable with duty would be admissible in evidence
only and only if such instrument is duly stamped . The proviso gives
illustration as to how the instrument would become admissible upon
payment of duty with which it was chargeable or in case of instruments
insufficiently stamped, the payment is made to make up such duty
along with penalty mentioned therein. It also refers to exceptions where
a document could be admissible in evidence under a given situation. As
elaborated in clauses (b), (c), (d) and (e) of the proviso, the instrument
in question i.e. agreement to sell dated 23.03.1999 does not fall under
any exception.
22. Section 36 of the Stamp Act provides for admissibility of an
instrument not being questioned if the same had been admitted in
evidence on the ground that it is not duly stamped except as provided
under section 61 of the Stamp Act...
23. Section 40 of the Stamp Act gives power to the Collector to stamp
such instruments which have been impounded. The Collector will
determine the proper duty payable on such instrument along with
penalty as provided in clause (b) of section 41 (sic).
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2024 INSC 704
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24. Section 42 of the Stamp Act provides that when duty and penalty, if
any, leviable in respect of any instrument has been paid under sections
35, 40 or 41 upon endorsement by the Collector that such duty has been
paid, instrument shall thereupon be admissible in evidence.”
(emphasis supplied)
56
162. Thereafter, in Aman Bhatia v. State (GNCT of Delhi) , the Apex
Court held that:
“32. Section 35 is of particular significance to the issue before this
Court as it renders instruments which are not duly stamped
inadmissible in evidence for any purpose and imposes a prohibition
on such instruments from being acted upon, registered, or
authenticated . However, the bar is removed on payment of duty and
the penalty . The Collector, again, by powers vested in him under
Section 40 is authorised to levy penalty . Section 42 reinforces that the
purpose of stamping is in payment of duty, as once the payment of duty
and a penalty is complete, the instrument is admissible .
33. The common thread running across the above-mentioned
provisions is that the Government desires that the holder of the
instrument pays appropriate stamp duty . To fulfil this objective, the
Government ensures there is sufficient availability of stamps through
licensed stamp vendors. It is for this reason the Government
remunerates a stamp vendor as he is facilitating the accessibility of
stamps on behalf of the Government, and thus the role being performed
by licensed stamp vendor is nothing short of a highly important public
duty, essential for ensuring the efficient collection of revenue on behalf
of the State.”
(emphasis supplied)
163. The aforesaid excerpt succinctly reiterates the foregoing discussion
that the Stamp Act ensures collection of revenue. At the cost of repetition,
Section 35 bars a Court from admitting in evidence or otherwise acting
upon an insufficiently stamped instrument. This bar is lifted upon payment
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2025 INSC 618
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of duty and penalty (if applicable), thereby reaffirming the curable nature
of stamping an instrument.
164. With respect to the aspect of penalty, the Supreme Court gave
57
detailed guidelines in H.C. Dhanda Trust v. State of M.P. . The relevant
portion is hereinbelow:
“15. Section 40 of the Stamp Act, 1899 provides for Collector's power
to stamp instruments impounded. Section 40(1) which is relevant for the
present case is as follows:
“ 40. Collector's power to stamp instruments impounded .—
(1) When the Collector impounds any instrument under Section
33, or receives any instrument sent to him under Section 38,
sub-section (2), not being an instrument chargeable with a duty
not exceeding ten naye paise only or a bill of exchange or
promissory note, he shall adopt the following procedure—
(a) if he is of opinion that such instrument is duly stamped, or
is not chargeable with duty, he shall certify by endorsement
thereon that it is duly stamped, or that it is not so chargeable,
as the case may be;
(b) if he is of opinion that such instrument is chargeable with
duty and is not duly stamped, he shall require the payment of
the proper duty or the amount required to make up the same,
together with a penalty of five rupees; or, if he thinks fit, an
amount not exceeding ten times the amount of the proper duty
or of the deficient portion thereof, whether such amount
exceeds or falls short of five rupees:
Provided that, when such instrument has been impounded only
because it has been written in contravention of Section 13 or
Section 14, the Collector may, if he thinks fit, remit the whole
penalty prescribed by this section.”
16. According to Section 40(1)(b) if the Collector is of opinion that such
instrument is chargeable with duty and is not duly stamped, he shall
require the payment of the proper duty or the amount required to make
up the same, together with a penalty of five rupees; or, if he thinks fit,
57
(2020) 9 SCC 510 : 2020 SCC OnLine SC 753
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an amount not exceeding ten times the amount of the proper duty or of
the deficient portion thereof. The statutory scheme of Section 40(1)(b)
as noticed above indicates that when the Collector is satisfied that
instrument is not duly stamped, he shall require the payment of proper
duty together with a penalty of five rupees. The relevant part of Section
40(1)(b) which falls for consideration in these appeals is:
“or, if he thinks fit, an amount not exceeding ten times the
amount of the proper duty or deficient portion thereof.”
(emphasis supplied)
17. The amount of penalty thus can be an amount not exceeding ten
times. The expression “an amount not exceeding ten times” is preceded
by expression “if he thinks fit”. The statutory scheme, thus, vests the
discretion to the Collector to impose the penalty amount not exceeding
ten times. Whenever statute transfers discretion to an authority the
discretion is to be exercised in furtherance of objects of the enactment.
The discretion is to be exercised not on whims or fancies rather the
discretion is to be exercised on rational basis in a fair manner. The
amount of penalty not exceeding ten times is not an amount to be
imposed as a matter of force. Neither imposition of penalty of ten times
under Section 40(1)(b) is automatic nor can be mechanically imposed.
The concept of imposition of penalty of ten times of a sum equal to ten
times of the proper duty or deficiency thereof has occurred in other
provisions of the Act as well.
18. We may refer to Section 35(a) in this context which is as follows:
“ 35. Instruments not duly stamped inadmissible in evidence,
etc .—No instrument chargeable with duty shall be admitted in
evidence for any purpose by any person having by law or
consent of parties authority to receive evidence, or shall be
acted upon, registered or authenticated by any such person or
by any public officer, unless such instrument is duly stamped:
Provided that—
(a) any such instrument shall be admitted in evidence on
payment of the duty with which the same is chargeable, or, in
the case of any instrument insufficiently stamped, of the
amount required to make up such duty, together with a penalty
of five rupees, or, when ten times the amount of the proper duty
or deficient portion thereof exceeds five rupees, of a sum equal
to ten times such duty or portion;”
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19. It is relevant to notice that Section 35 contemplates that when ten
times the amount of the proper duty of or deficient portion thereof
exceeds five rupees, of a sum equal to ten times such duty or portion is
required to be deposited. Under Section 39 the Collector is empowered
to refund penalty. As noticed above under Section 35(a) there is no
option except to pay sum equal to ten times of such duty or deficient
portion but Section 39 empowers the Collector to refund any portion of
the penalty in excess of five rupees which is expressed in the following
words:
“if he thinks fit refund any portion of the penalty in excess of
five rupees which has been paid in respect of such instrument.”
20. The legislative intent which is clear from reading of Sections 33, 35,
38 and 39 indicates that with respect to the instrument not duly stamped,
ten times penalty is not always retained and power can be exercised
under Section 39 to reduce penalty in regard to that there is a statutory
discretion in the Collector to refund penalty.
21. Section 39(1)(b) of the Stamp Act, 1899 came for consideration
before this Court
in Gangappa v. Fakkirappa [Gangappa v. Fakkirappa, (2019) 3 SCC
788 : (2019) 2 SCC (Civ) 415] (of which one of us Ashok Bhushan, J.
was a member). This Court noticed the legislative scheme and held that
the legislature has never contemplated that in all cases penalty to the
extent of ten times should be ultimately realised. In para 16 the
following has been laid down by this Court: (SCC p. 794)
“16. The Deputy Commissioner under Section 38 is
empowered to refund any portion of the penalty in excess of
five rupees which has been paid in respect of such instrument.
Section 38 sub-section (1) again uses the expression “if he
thinks fit”. Thus, in cases where penalty of 10 times has been
imposed, the Deputy Commissioner has discretion to direct the
refund of the penalty in facts of a particular case. The power
to refund the penalty under Section 38 clearly indicates that
the legislature has never contemplated that in all cases penalty
to the extent of 10 times should be ultimately realised. Although
the procedural part which provides for impounding and
realisation of duty and penalty does not give any discretion
under Section 33 for imposing any lesser penalty than 10 times,
however, when provision of Section 38 is read, the discretion
given to the Deputy Commissioner to refund the penalty is akin
to exercise of the jurisdiction under Section 39 where while
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determining the penalty he can impose the penalty lesser than
10 times.”
(emphasis in original)
The expression “if he thinks fit” also occurs in Section 40(1)
clause (b). The same legislative scheme as occurring in Section
39 is also discernible in Section 40(1)(b), there is no legislative
intendment that in all cases penalty to the extent of ten times
the amount of proper stamp duty or deficient portion should be
realised. The discretion given to the Collector by use of the
expression “if he thinks fit” gives ample latitude to the
Collector to apply his mind on the relevant factors to determine
the extent of penalty to be imposed for a case where instrument
is not duly stamped. Unavoidable circumstances including the
conduct of the party, his intent are the relevant factors to come
to a decision.
22. The purpose of penalty generally is a deterrence and not retribution.
When a discretion is given to a public authority, such public authority
should exercise such discretion reasonably and not in oppressive
manner. The responsibility to exercise the discretion in reasonable
manner lies more in cases where discretion vested by the statute is
unfettered. Imposition of the extreme penalty i.e. ten times of the duty or
deficient portion thereof cannot be based on the mere factum of evasion
of duty. The reason such as fraud or deceit in order to deprive the
Revenue or undue enrichment are relevant factors to arrive at a decision
as to what should be the extent of penalty under Section 40(1)(b).
23. We may refer to the judgment of this Court in Peteti Subba
Rao v. Anumala S. Narendra [Peteti Subba Rao v. Anumala S.
Narendra, (2002) 10 SCC 427] . This Court had occasion to consider
in the above case provisions of Section 40 of the Stamp Act, 1899.
Referring to Section 40 this Court made the following observation in
para 6: (SCC p. 429)
“6. … The Collector has the power to require the person
concerned to pay the proper duty together with a penalty
amount which the Collector has to fix in consideration of all
aspects involved. The restriction imposed on the Collector in
imposing the penalty amount is that under no circumstances
the penalty amount shall go beyond ten times the duty or the
deficient portion thereof. That is the farthest limit which meant
only in very extreme situations the penalty need be imposed up
to that limit. It is unnecessary for us to say that the Collector
is not required by law to impose the maximum rate of penalty
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as a matter of course whenever an impounded document is sent
to him. He has to take into account various aspects including
the financial position of the person concerned.”
24. This Court in the above case categorically held that it is only in the
very extreme situation that penalty needs to be imposed to the extent of
ten times.
25. The Collector by imposing ten times penalty in his order has given
the reason for imposition as “the party has not mentioned the actual
nature of the document with the intention to escape the duty”. When the
Collector found intention to escape the duty, it was the case of
imposition of penalty but whether the reason given by the Collector is
sufficient for imposition of extreme penalty of ten times is the question
which needs to be further considered. The High Court while considering
the question of imposition of penalty of ten times has also given almost
same reason in the following words: (H.C. Dhanda Trust case [H.C.
Dhanda Trust v. State of M.P., 2017 SCC OnLine MP 1755 : (2018) 1
MP LJ 318] , SCC OnLine MP paras 31-32)
“31. … But in the present case the complete title has been
transferred by Trust to Jogesh Dhanda and Ishan Dhanda in
the name of deed of assent. Therefore, there was intention to
evade the heavy stamp duty on such transaction. Therefore, the
Collector of Stamps has rightly imposed 10 times penalty
which is maximum under the Act.
32. In view of the above, I do not find any merit in this writ
petition. The same is hereby dismissed.”
26. No other reasons have been given either by the Collector or by the
High Court justifying the imposition of maximum penalty of ten times.
It is not the case of the Collector that the conduct of the appellant was
dishonest or contumacious. The High Court in its judgment [H.C.
Dhanda Trust v. State of M.P., 2017 SCC OnLine MP 1755 : (2018) 1
MP LJ 318] has noticed that although the resolution was passed on 6-
4-2005 to execute the deed of transfer by trustees in favour of Jogesh
Dhanda and Ishan Dhanda, but later on they deliberately executed the
deed in the name of deed of assent on a stamp paper of Rs 200. For the
reason given by the Collector as well as by the High Court that there
was intention to evade the stamp duty in describing the document as
deed of assent the imposition of the penalty was called for but in the
facts and circumstances and the reasons which have been given by the
Collector of Stamps as noticed above we are satisfied that this was not
a case of imposition of extreme penalty of ten times of deficiency of
stamp duty. Taking into consideration all facts and circumstances of the
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case, we are of view that ends of justice will be served in reducing the
penalty imposed to the extent of the half i.e. five times of deficiency in
the stamp duty.”
165. Therefore, the Court in H.C. Dhanda Trust (supra) emphasised that
the purpose of imposing penalty is deterrence and is not a matter of
ordinary course.
166. It emerges from the aforesaid decision that the Court placed reliance
on Section 40 of the Act to hold that Section 40(1)(b) allows the Collector
to require payment of duty and penalty. The penalty shall be of five rupees
or if deemed fit, any amount not exceeding ten times the amount of
property duty or the deficit amount. It was reasoned that this provision
grants discretion to the Collector to impose any penalty from the minimum
of five rupees to the maximum of up to ten times the proper or deficit stamp
duty. In this light, it was emphasised that such statutory discretion is to be
exercised in accordance with the object of the statute, in a rational and fair
manner, and the Collector shall not act on whims.
167. The key element herein was that imposition of ten times penalty
under Section 40(1)(b) was not automatic. This is evident from the words
employed under Section 35 proviso (a), which stipulates penalty “of five
rupees, or, when ten times the amount of the proper duty or deficient
portion thereof exceeds five rupees, of a sum equal to ten times such duty
or portion”. Thus, this is starkly distinct from Section 40(1)(b).
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168. The aforesaid observation also buttresses my view that the
impounding authority or the Courts do not have any discretion in the levy
of penalty, as is evident from the comparison between Section 35 and 40.
169. The Court considered the relaxation granted under Section 39 to
waive penalty and held that the penalty need not always be ten times.
Discretion must be exercised reasonably and not in an oppressive manner.
170. The statutory import, therefore, is that in order to impose maximum
penalty, mere intent to evade stamp duty will not suffice. Instead, there
must exist an element of fraud or deceit to unjustly enrich from public
exchequer and such other extreme cases.
171. Therefore, in view of the foregoing legal position as drawn from
binding precedents and the statute itself, it is safe to say that while stamp
duty is a curable defect, the cure must necessarily be in accordance with
the Stamp Act, which mandates payment of the deficient duty and penalty
as stipulated.
Interplay between the Stamp Act and the Arbitration Act
172. The interaction between these two Acts has resulted in certain legal
and pragmatic issues in enforcement proceedings for both Decree Holders
and Judgment Debtors alike.
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173. The dichotomy is that, on one hand, inadequate stamping is not a
ground to set aside an award under Section 34 of the Arbitration Act as
held in M. Anasuya Devi (supra) ; apparently, the Arbitration Act also does
not stipulate deposit of stamp duty on the award or mandate the Tribunal
to ensure the same. However, on the other hand, it is trite that an instrument
must be duly stamped for its enforcement. Therefore, obstacle arises at the
stage of Section 36 i.e., enforcement of the award, which can only be
invoked after the statutory three-month period from passing of the award
has expired.
174. The issue gains further prominence since the Stamp Act does not
expressly provide room for such three-month window and instead
stipulates a maximum of one month for stamping the award from its
execution/signing. The Act also prevents a competent authority from
acting upon an insufficiently stamped arbitral award, which undoubtedly
includes enforcement of such award. The Act lifts this bar only upon
deposit of adequate stamp duty along with penalty, if applicable.
175. This is an apparent disconnect between the two statutory regimes
that ought to be brought to a coitus.
Obligation Imposed under Section 33 of the Stamp Act
176. This Court is mindful that while “shall”, in the ordinary sense,
implies a mandatory nature, however, other factors may make it derogable
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and render it directory. These factors may be, inter alia, the legislative
58
intent, the context of the whole Act, statutory purpose . However, prima
facie “shall” indicates mandatory nature.
177. If there is a statutory mandate to perform a duty in a certain manner
or within a specific time period, the prescription may be mandatory unless
59
shown otherwise . Further, if a statue lays down consequences for failure
60
to comply with a requirement, it must be strictly followed and is
ordinarily construed to not be directory.
61
178. The Supreme Court in State of A.P. v. P. Laxmi Devi , held that
“shall” under Sector 33 of the Stamp Act is mandatory and leaves no room
for discretion in the following words:
“16. A perusal of the said provision shows that when a document is
produced (or comes in the performance of his functions) before a person
who is authorised to receive evidence and a person who is in charge of
a public office (except a police officer) before whom any instrument
chargeable with duty is produced or comes in the performance of his
functions, it is the duty of such person before whom the said instrument
is produced to impound the document if it is not duly stamped. The use
of the word shall in Section 33(1) shows that there is no discretion in
the authority mentioned in Section 33(1) to impound a document or not
to do so. In our opinion, the word shall in Section 33(1) does not
mean may but means shall. In other words, it is mandatory to impound
a document produced before him or which comes before him in the
performance of his functions. Hence the view taken by the High Court
58
Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur , 1964 SCC OnLine SC 119; Collector of Monghyr v.
Keshav Prasad Goenka, 1962 SCC OnLine SC 93; Hiralal Agarwal v. Rampadarath Singh, 1968 SCC OnLine SC
264; Sainik Motors v. State of Rajasthan, 1961 SCC OnLine SC 15; Central Organisation for Railway
Electrification v. ECI SPIC SMO MCML (JV) , (2025) 4 SCC 641 : (2025) 2 SCC (Civ) 1 : 2024 SCC OnLine SC
3219
59
Karnal Improvement Trust v. Parkash Wanti, (1995) 5 SCC 159
60
State of Jharkhand v. Ambay Cements, (2005) 1 SCC 368
61
(2008) 4 SCC 720
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that the document can be returned if the party does not want to get it
stamped is not correct.”
62
179. The aforesaid view has echoed in various other decisions of the
Supreme Court as well.
180. In Seetharama Shetty (supra) , the Supreme Court held that Chapter
IV of the Karnataka Stamp Act, 1957 (analogous to the Stamp Act in the
present case) is both “mandatory and regulatory”. It was held that Section
33 mandates every competent authority to impound an insufficiently
stamped instrument when such instrument is produced. The Court
highlighted the objective of the Act in the following words:
“17. The object of the Act is not to exclude evidence or to enable parties
to avoid obligations on technical grounds. Rather, the object is to obtain
revenue even from such instruments which are at the first instance
unstamped or insufficiently stamped. The said objective has the twin
elements of recovering the due stamp duty and penalty, and also the
public policy of binding parties to the agreed obligations…”
181. A Division Bench of the Karnataka High Court in Sandra Lesley
63
Anna Bartels v. P. Gunavathy , though in context of the Karnataka Stamp
64
Act of 1957 , aptly articulated as follows:
“12. Court cannot say that it would impound the document only when
the document is tendered in evidence for marking. There may be
instances where duty and penalty payable may be very high and the
party may not choose to rely upon such insufficiently stamped
document in order to avoid stamp duty and penalty. In such
circumstances, it would result in loss of revenue to the exchequer . The
62
Ram Rattan v. Bajrang Lal, (1978) 3 SCC 236; Avinash Kumar Chauhan v. Vijay Krishna Mishra, (2009)
2 SCC 532; Tirupati Developers v. State of Uttarakhand, (2013) 9 SCC 332
63
2012 SCC OnLine Kar 8770
64
Section 33(1) of the Karnataka Stamp Act 1957 is pari materia to the Indian Stamp Act, 1899
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power of impounding a document is to collect stamp duty and penalty
whenever there is an escape of duty. Therefore, when it is brought to the
notice of the Court that a document is insufficiently stamped, the Court
exercising its power under Section 33 of the Act has to pass an order at
the first instance for impounding the document . Though there is a
discretion vested in the Court to exercise powers under Sections 33 and
34 of the Act, no Court can hold that it would wait till the document is
tendered in evidence. In such circumstances, there may be chances of
loss of revenue to the exchequer.”
(emphasis supplied)
182. A Division Bench of this Court in Dalip Singh Sachar, Col. (Retd.)
65
v. Prabodh Chander Puri, Major General (Retd.) , held as follows:
“10. Faced with this situation, the learned Counsel for the appellant in
this appeal made the following two submissions:
(A) For a decree to be passed on the basis of admissions, admissions
have to be clear, unambiguous and unqualified and for this purpose,
entire written statement is to be read and not the isolated portions. He
referred to the following judgments in support of his submission:
(i) Balraj Taneja v. Sunil Madan, AIR 1999 C 3381.
(ii) Manisha Commercial Ltd. v. N.R. Dongre, AIR 2000 Del 176 :
(2000) 52 DRJ 578.
(iii) Parivar Seva Sansthan v. Dr.(Mrs.) Veena Kalra, AIR 2000 Del
349 : (2000) 54 DRJ 914 (DB).
(iv) Madhav Leasing Finance (P) Ltd. v. Erose Educational Infotech
Pvt. Ltd., 1997 V AD (Delhi) 627.
There is no doubt about the principles of law contained in the aforesaid
judgments. However, in the present case, we find that Ext. P1 is clear
and unqualified acknowledgment and acceptance of the liability. Not
only it confirms that the respondent had given the loan in question, it
also gives the particulars of the demand drafts vide which the loan was
given. It also states the purpose for which the money was utilised. It also
mentions that the appellant was pledging the shares of the company for
repayment of the loan. It even mentions the interest which this loan was
to carry [See Balraj Taneja v. Sunil Madan, AIR 1999 SC 3381]. The
object of Order XII Rule 6 CPC is to enable the parties to obtain speedy
judgments and, therefore, Courts are not to unduly narrow down the
65
2007 SCC OnLine Del 728
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scope and meaning of this Rule. In Shikharchand v. Mst. Bari Bai, AIR
1974 MP 75, the Court held that a judgment under Order XII Rule 6
CPC can be based on a statement made by the parties de hors the
pleadings and such admissions could be either expressed or
constructive. This Court in K.N. Construction v. JVG Finance Ltd.,
(2004) 111 DLT 437 : (2004) 74 DRJ 483, concurred with the aforesaid
view. We may also, quote for our benefit, the following observations of
a Division Bench of this Court in Delhi Jal Board v. Surendra P. Malik,
2003 III AD (Delhi) 419 : (2003) 68 DRJ 284 (DB):
“9. The test, therefore, is (i) whether admission of fact
arise in the suit (ii) whether such admissions are plain,
unambiguous and unequivocal (iii) whether the defence set up
is such that it requires evidence for determination of the issues
and (iv) whether objections raised against rendering the
judgment are such which go to the root of the matter or
whether these are inconsequential making it impossible for the
party to succeed even if entertained. It is immaterial at what
stage the judgment is sought or whether admissions of fact are
found expressly in the pleadings or not because such
admissions could be gathered even constructively for the
purpose of rendering a speedy judgment.”
The present case fulfills the aforesaid test.
(B) Ext. P1 could not have even been considered, as it is an
unstamped document, though it required stamp of rupee one and,
therefore, is inadmissible under Section 35 of the Stamp Act. He
submitted that the document is termed as ‘acknowledgment’ and is
required to be stamped as per Article 1 of Schedule 1 to the Stamp Act.
The submission of the learned Counsel was that Section 35 lays down
that an unstamped document cannot be looked into as evidence and
passing judgment on the basis of such a document was totally untenable.
He referred to the judgment in the case of Smt Gita Devi Shah v. Smt
Chandra Moni Karnani, AIR 1993 Cal 280 wherein it was held that even
if the objection of stamp duty was not taken by a party, the Court was
under obligation to look into this question as it was an independent
obligation of the Court to look into admissibility of the evidence.
We have the following two answers to this contention of the learned
Counsel for the appellant:
(i) even if the document is unstamped, Court can impugn the
document and get the same adjudicated in so far as the payment of
stamp duty is concerned. The penalty up to 10 times of the stamp duty
payable can be levied. Since the document requires, admittedly,
stamp duty of one rupee, the respondent will have to pay stamp worth
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ten rupees even if maximum penalty is imposed. On payment of this
duty the document can be read into evidence.
The High Court of Himachal Pradesh in Narender Kumar v. Hans Raj,
AIR 1986 HP 75 has explained the legal position in the following words:
“7. The approach of the learned Sub-Judge in the matter in my view
was wholly erroneous and has resulted in his failure to exercise his
lawful jurisdiction. So as to call for interference by this Court It is an
admitted position that the document sought to be produced by the
petitioners before the trial Court was an unstamped one. In a situation
of this type when a document chargeable with duty is found
unstamped or insufficiently stamped and is produced before a Court,
the Court is under a legal obligation in terms of Section 33 of the
Indian Stamp Act to impound such a document In other words, the
Court is duty bound to take such document into legal custody. After
the document is so impounded there are two courses open to the Court.
The first course is to admit the document into evidence of course
subject to all just exceptions, upon payment of the duty chargeable
thereon and the penalty as provided under Section 35 of the Indian
Stamp Act if so tendered by the party producing the document. After
the stamp duty and the panelty are so paid, the Court is required to
send to the Collector an authenticated copy of the document together
with a certificate in writing stating the amount of duty and penalty
levied in respect thereof and also to send such amount to the Collector
as provided by Sub-section (1) of Section 36 of the Stamp Act. The
second course is when the party producing the document fails to pay
the duty and penalty as provided under Section 35 of the Stamp Act,
the Court must send the original document to the Collector who shall
then take necessary steps for realising the stamp duty and the penalty.
There is no third course open to the Court like keeping the unstamped
document on the record without first realising the stamp duty and the
penalty.
8. Again if we look to the provisions of Section 35 of the Indian
Stamp Act, it is obvious that the bar against admittance in evidence of
an unstamped or insufficiently stamped instrument of the nature like the
one under consideration as placed by Section 35 of the Stamp Act is
not an absolute bar and the same would stand removed as soon as the
duty chargeable on the instrument or the deficiency in such duty along
with the prescribed penalty are paid . The party producing an
unstamped or insufficiently stamped instrument of this nature has,
therefore, the right to claim that the instrument be admitted in evidence
on payment of the deficient stamp duty and the penalty which right as
earlier stated is, of course, subject to all just exceptions.”
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This view found support in the judgment of the Supreme Court in Peteti
Subba Rao v. Anumala S. Narendra, (2002) 10 SCC 427. We, therefore,
take this document, namely, Ext. P1 into legal custody and direct the
respondent to pay the requisite stamp duty along with penalty, which
would be Rs 10. Since the learned Counsel the respondent, during the
course of arguments, had stated that such duty would be paid, we admit
the document into evidence, which otherwise stands proved as it is an
admitted document and can proceed with the case on the basis of this
document. We, however, make it clear that after the stamp duty and
the penalty are paid, the Registry shall send to the Collector, an
authenticated copy of the document together with a certificate in
writing stating that the amount of duty and penalty levied has been
paid. The embargo, as sought to be created by the appellant in admitting
this document into evidence, thus vanishes and with that goes the basis
of submission of the learned Counsel for the appellant.
(ii) The learned Counsel for the respondent had submitted that
apart from Ext. P1, the pleadings, namely, the plaint and the written
statement would clearly bear out that there was hardly any dispute
raised by the appellant in so far as liability to make the payment is
concerned.”
(emphasis supplied)
183. Therefore what is apparent from the aforesaid decisions, the scheme
of the Act and Section 33 itself is that it does in fact, impose an imperative
duty upon a Court to safeguard the public exchequer. This Court in Mohini
Electricals (supra) and Jitender Mohan Malik (supra) also adopted the
aforesaid reading of Section 33 of the Stamp Act. The Supreme Court in
In Re: Interplay (supra) also underscored this intent.
184. In my considered view, Section 33 is in no words ambiguous.
Inasmuch as it uses the word “shall”, Section 33 does not provide for any
other alternatives or grants any degree of discretion. The only caveat is that
a competent authority must come across such instrument during the course
of its duties. I also arrive at this view bearing in the mind the statutory
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purpose behind this legislation, i.e., to secure revenue for the State and
safeguarding the public exchequer. Therefore, treating this duty as merely
directory would essentially permit parties to circumvent the mandate of
paying stamp duty and thereby defeating the purpose behind a fiscal
statute.
Dichotomy in Timelines
185. The two statutes appear to be temporally inconsistent.
186. On the face of it, the Stamp Act demands compliance within a month
from affixing signatures on an arbitral award (without attracting penalty),
but the Arbitration Act and judicial precedents somewhat relax this
mandate at the Section 34 stage, which thereafter becomes relevant at the
Section 36 stage, i.e., after the lapse of at least three months (additional
thirty days with sufficient cause) from the execution of the award.
187. However upon a closer look, one may see that there is no dichotomy
at all. The statutes operate independently of each other. This is evident
from a conjoint reading of Sections 2(6), 2(12), 3, 17 and 32. I shall
reproduce them again hereinbelow for ease of reference:
“(6) “Chargeable”. — “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;”
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“(12) “ Executed” and “execution”. — “executed” and “execution”
used with reference to instruments, mean “signed” and “signature”:”
“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—
(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 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 Merchant Shipping Act 1894, Act No. 57 & 58 Vict. c. 60 or
under Act XIX of 1838 Act No. or the Indian Registration of Ships Act,
1841, (CX of 1841) as amended by subsequent Acts.”
“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.”
“32. Certificate by Collector. — (1) When an instrument brought to the
Collector under section 31 is, in his opinion, one of a description
chargeable with duty, and
(a) the Collector determines that it is already fully stamped, or
(b) the duty determined by the Collector under section 31, or such a sum
as, with the duty already paid in respect of the instrument, is equal to
the duty so determined, has been paid, the Collector shall certify by
endorsement on such instrument that the full duty (stating the amount)
with which it is chargeable has been paid.
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(2) When such instrument is, in his opinion, not chargeable with duty,
the Collector shall certify in manner aforesaid that such instrument is
not so chargeable.
(3) Any instrument upon which an endorsement has been made under
this section, shall be deemed to be duly stamped or not chargeable with
duty, as the case may be; and, if chargeable with duty, shall be
receivable in evidence or otherwise, and may be acted upon and
registered as if it had been originally duly stamped:
Provided that nothing in this section shall authorize the Collector to
endorse —
(a) any instrument executed or first executed in India and brought to
him after the expiration of one month from the date of its execution or
first execution, as the case may be;
(b) any instrument executed or first executed out of India and brought
to him after the expiration of three months after it has been first received
in India; or
(c) any instrument chargeable with a duty not exceeding ten naye paise,
or any bill of exchange or promissory note, when brought to him, after
the drawing or execution thereof, on paper not duly stamped.”
188. Thus, it is evident from the above that the Stamp Act, in no words,
envisages enforcement of an instrument as the chargeable event. It
operates independent of the Arbitration Act.
189. Under the Stamp Act, the chargeable event is the execution/signing
of an instrument/arbitral award. Thus, the stamp duty is to be paid either
(i) before the execution or signing of the award or (ii) at the time of
execution or signing of the award or (iii) within one month from execution
or signing of the award.
190. Having said that, I now turn to the Arbitration Act and its import,
whereunder Section 36 imposes a bar on enforcement of an arbitral award
until the expiry of three months and an additional thirty days in some cases.
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191. In addition to this embargo under Section 36(1), M. Anasuya Devi
(supra) also holds that the objection of inadequate stamping is premature
for the purposes of Section 34.
192. This has unfortunately caused Decree Holders to wait till the
enforcement stage to pay stamp duty, which may come after disposal of
Section 34 petitions or appeals under Section 37 or SLPs filed before the
Supreme Court. At which point, the time period under the Stamp Act
expires and such decree holders are required to make good the deficit
amount along with penalty.
193. To achieve this, this Court has observed that Decree Holders are
paying e-stamp for the deficit amount and filing proof thereof.
194. However, in the opinion of this Court, this unilateral mechanism is
not permissible by the statute as it overlooks the procedure provided by the
Act including and not restricted to Sections 32(3) and 33. These provisions
respectively prevent a Collector from endorsing an instrument after one
month from its execution and mandate a competent authority before whom
such insufficiently stamped instrument is brought, to impound the same.
195. As discussed in the foregoing discussions, the penalty component
cannot be waived by this Court and only the Collector, in specific
situations, can do away with payment of penalty. Therefore, it is not
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apposite for decree holders to unilaterally pay deficit amount without
penalty.
196. Even M. Anasuya Devi (supra) does not grant any exemption from
the payment of stamp duty. The requirement of payment of adequate stamp
duty does not depend on when an instrument is sought to be enforced.
Therefore, the time period under Section 36 of the Arbitration Act does not
“cure” the stamping defect.
197. M. Anasuya Devi (supra) only holds that insufficient stamp duty is
not one of the grounds stipulated under Section 34 for setting aside an
arbitral award, therefore, an objection to that effect does not hold water for
Section 34 purposes and nothing more.
198. A harmonious view would be, in fact, to permit willing Decree
Holders to deposit the deficit amount and proceed with enforcement.
However, there is no provision in the Act to allow parties to unilaterally
make good the deficit stamp duty after expiry of the one month from
execution. However, this Court is of the view that especially keeping in
mind the intent behind the Arbitration Act, the pendency of Section 34
objection petition or an appeal under Section 37 or an SLP, is a cogent
ground for the Collector to waive and/or impose minimal penalty in
accordance with the Stamp Act.
199. This Court is also mindful that it is not exercising writ jurisdiction
and is only acting within the garb of proceedings under Section 36 of the
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Arbitration Act and therefore must act within confines of the statute, which
in no ambiguous words provides that an arbitral award must be stamped
within one month of its execution and if failed to do so, it must be
impounded and thereafter be dealt with under Section 35 or 38. Only
thereafter such award shall be endorsed under Section 42.
Impounding
200. In view of the preceding discussion, this Court is clear in its mind
that Section 33 imposes an unconditional duty on the authorities stipulated
therein to impound insufficiently stamped instruments brought before
them in the course of their duties.
201. Further, it is also well settled that only the original instrument shall
be impounded since a photocopy is not an “instrument” for the purposes
66
of Section 2(14) of the Stamp Act .
202. This position has been well settled in Hari Om
67
Aggarwal v. Prakash by the Supreme Court. The relevant portion is
reproduced thus:
“ 7 . Section 33 gives power to the authority to check whether the
instrument has been duly stamped and in case it is not duly stamped, to
take steps to impound the same by proper stamp duty on the said
document. This power can be exercised in regard to an “instrument”.
Section 2(14) of the Act defines “instrument” as:
66
State of Bihar v. Karamchand Thapar and Bros. Ltd., AIR 1962 SC 110
67
(2007) 8 SCC 514
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“2. (14) Instrument.—‘Instrument’ includes every document by
which any right or liability is, or purports to be, created,
transferred, limited, extended, extinguished or recorded;”
8. The instrument as per definition under Section 2(14) has a reference
to the original instrument. In State of Bihar v. Karam Chand Thapar &
Bros. Ltd. [AIR 1962 SC 110] this Court in para 6 of the judgment held
as under: (AIR p. 113)
“6. It is next contended that as the copy of the award in Court
was unstamped, no decree could have been passed thereon.
The facts are that the arbitrator sent to each of the parties a
copy of the award signed by him and a third copy also signed
by him was sent to the Court. The copy of the award which was
sent to the Government would appear to have been
insufficiently stamped. If that had been produced in Court, it
could have been validated on payment of the deficiency and
penalty under Section 35 of the Indian Stamp Act, 1899. But
the Government has failed to produce the same. The copy of
the award which was sent to the respondents is said to have
been seized by the police along with other papers and is not
now available. When the third copy was received in Court, the
respondents paid the requisite stamp duty under Section 35 of
the Stamp Act and had it validated. Now the contention of the
appellant is that the instrument actually before the Court is,
what it purports to be, ‘a certified copy’, and that under
Section 35 of the Stamp Act there can be validation only of the
original, when it is unstamped or insufficiently stamped, that
the document in Court which is a copy cannot be validated and
‘acted upon’ and that in consequence no decree could be
passed thereon. The law is no doubt well settled that the copy
of an instrument cannot be validated. That was held in Rajah
of Bobbili v. Inuganti China Sitarasami Garu [(1898-99) 26 IA
262] where it was observed:
‘The provisions of this section (Section 35) which allow
a document to be admitted in evidence on payment of
penalty, have no application when the original
document, which was unstamped or was insufficiently
stamped, has not been produced; and, accordingly,
secondary evidence of its contents cannot be given. To
hold otherwise would be to add to the Act a provision
which it does not contain. Payment of penalty will not
render secondary evidence admissible, for under the
stamp law penalty is leviable only on an unstamped or
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insufficiently stamped document actually produced in
Court and that law does not provide for the levy of any
penalty on lost documents.’ ”
9. This Court had an occasion again to consider the scope and ambit of
Sections 33(1), 35 and 36 of the Act and Section 63 of the Evidence Act
in Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao [(1971) 1 SCC
545 : AIR 1971 SC 1070] and held that: (SCC pp. 550-51, paras 13-14)
“13. The first limb of Section 35 clearly shuts out from
evidence any instrument chargeable with duty unless it is duly
stamped. The second limb of it which relates to acting upon the
instrument will obviously shut out any secondary evidence of
such instrument, for allowing such evidence to be let in when
the original admittedly chargeable with duty was not stamped
or insufficiently stamped, would be tantamount to the
document being acted upon by the person having by law or
authority to receive evidence. Proviso (a) is only applicable
when the original instrument is actually before the Court of
law and the deficiency in stamp with penalty is paid by the
party seeking to rely upon the document. Clearly secondary
evidence either by way of oral evidence of the contents of the
unstamped document or the copy of it covered by Section 63 of
the Indian Evidence Act would not fulfil the requirements of the
proviso which enjoins upon the authority to receive nothing in
evidence except the instrument itself . Section 35 is not
concerned with any copy of an instrument and a party can
only be allowed to rely on a document which is an instrument
for the purpose of Section 35. ‘Instrument’ is defined in
Section 2(14) as including every document by which any
right or liability is, or purports to be created, transferred,
limited, extended, extinguished or recorded. There is no
scope for inclusion of a copy of a document as an instrument
for the purpose of the Stamp Act .
14. If Section 35 only deals with original instruments and not
copies Section 36 cannot be so interpreted as to allow
secondary evidence of an instrument to have its benefit. The
words ‘an instrument’ in Section 36 must have the same
meaning as that in Section 35. The legislature only relented
from the strict provisions of Section 35 in cases where the
original instrument was admitted in evidence without
objection at the initial stage of a suit or proceeding. In other
words, although the objection is based on the insufficiency of
the stamp affixed to the document, a party who has a right to
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object to the reception of it must do so when the document is
first tendered. Once the time for raising objection to the
admission of the documentary evidence is passed, no objection
based on the same ground can be raised at a later stage. But
this in no way extends the applicability of Section 36 to
secondary evidence adduced or sought to be adduced in proof
of the contents of a document which is unstamped or
insufficiently stamped.”
10. It is clear from the decisions of this Court and a plain reading of
Sections 33, 35 and 2(14) of the Act that an instrument which is not duly
stamped can be impounded and when the required fee and penalty has
been paid for such instrument it can be taken in evidence under Section
35 of the Stamp Act. Sections 33 or 35 are not concerned with any copy
of the instrument and party can only be allowed to rely on the
document which is an instrument within the meaning of Section
2(14). There is no scope for the inclusion of the copy of the document
for the purposes of the Stamp Act . Law is now no doubt well settled
that copy of the instrument cannot be validated by impounding and this
cannot be admitted as secondary evidence under the Stamp Act, 1899.”
(emphasis supplied)
203. Therefore, there is no quarrel with the proposition that only an
original instrument may be impounded under the Stamp Act.
204. However, Mr. Jayant Mehta placed reliance on Ashok Kamal
Capital Builders (supra) to submit that the Court does not have authority
to direct production of an original award if a copy is filed. The aforesaid
decision places reliance on District Registrar and Collector, Hyderabad
68
& Anr. v. Canara Bank & Ors. , to arrive at the said conclusion. It was
reasoned that no power vests with the authorities in NCT of Delhi to
compel production of an original instrument for the purposes of
impounding the same.
68
(2005) 1 SCC 496
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205. Accordingly, difficulty arises in view of the ratio laid down by the
Supreme Court in Canara Bank (supra) , which provides that a Court
cannot compel production of the original in the exercise of its powers
under Section 33 of the Stamp Act.
206. This Court in Kotak Mahindra Bank Ltd. v. Yogesh Baweja &
69
Anr. placed reliance on Canara Bank (supra) and held as follows:
“9. Section 33 of the Stamp Act, 1899 which relates to impounding of
the documents is applicable only when the original document is actually
and voluntarily brought before the Court of law. Further contrary to
forcing any party to produce the original document it is only when the
document chargeable is produced or comes in the performance of the
working that the same can be ordered to be impounded.
10. The Court is bound with the domain of the procedure envisaged in
the Civil Procedure Code, 1908. The Court is authorized to receive
evidence and can for this purpose issue summons for attendance and
adducing evidence under different provisions of Civil Procedure Code.
Order 16 Rule 10 of the Code of Civil Procedure, 1908 is designed to
protect the interest of a party against a “Non Cooperative” witness for
which purpose it confers power upon a Court to ensure the attendance
and “Co-operation” of the witness.
11. Section 33 of the Stamp Act, 1899 is applicable when the original
document is actually and voluntarily brought before the Court. The
words “is produced or comes in the performance of his function” used
in Section 33 of the Stamp Act, 1899 mean the production of the
instrument voluntarily by the party relying on it. It is for the party alone
to produce the document and the Court cannot force the production of
the same.
12. The Supreme Court in its judgment passed in District Registrar Vs.
Canara Bank, AIR 2005 SC 186 held that Section 31 of the Stamp Act,
1899 involves an element of voluntariness in the persons seeking
adjudication to apply before the collector and under that provision the
69
CM(M) 168/2011 and 16 connected matters, decided on 22.07.2013; 2013 SCC OnLine Del 2738
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collector cannot compel its production. Section 33 of the Stamp Act,
1899 confers power of impounding a document deficiently stamped if
the document is produced or comes before the authority in performance
of its functions.
13. Thus, it is clear from the law settled on this aspect that the levy of
stamp duty upon voluntary production of the instrument is an essential
characteristic of the Stamp Duty Act. If the authorities are allowed to
issue direction for the production of the original documents not
produced then it would lead to invasion of the house of the person in
whose possession the document lies. Further non-payment of the stamp
duty is not a criminal offence and as such the party in those possession
the document lies cannot be compelled to produce the same or to
forcefully pay the penalty.”
207. This poses certain difficulties in effectuating the mandate of the
Stamp Act.
208. A question now arises as to how shall a Court proceed in cases where
only true copies of an instrument are placed before it and it is blatantly
evident from the same that adequate duty has not been paid?
209. It is to be borne in mind is that substantial amount of the precedents
proscribing calling for the original instrument for impounding were either
not rendered in context of arbitration and particularly enforcement of an
arbitral award and the ones so rendered, were in context of the earlier
Arbitration Act of 1940, whereby the original award was required to be
filed in Court to make it a decree. This is starkly different from the present
Arbitration Act, which provides that an arbitral award shall automatically
be enforced like a decree of the Court without any application being
preferred.
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210. With respect to the present Arbitration Act, the Supreme Court in
70
Widescreen Holdings Pvt. Ltd. & Anr. v. Religare FInvest Ltd. & Anr. ,
held 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.
The Arbitrator may take call on the impounding of document provided
it is produced by the original claimant.”
211. Therefore, it is reiterated by the aforesaid decision that only the
original instrument can be impounded. There lies no dispute with this
proposition.
212. Further, what is clear from the above excerpt is that the Apex Court
envisages to preserve the element of voluntariness while producing an
instrument under Section 33. However, the Court does empower the
Tribunal to “pass appropriate order” if the original is not produced and take
note of such conduct.
70
Special Leave to Appeal (C) Nos. 6826-6829/2022, as decided on 22.04.2022
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213. Significantly, since the Arbitration Act does not mandate filing of
the original award with the accompanying Section 36 petition, no occasion
would arise for this Court to examine the adequacy of stamp duty and
impound the same, even if found insufficient.
214. This position of law, in my considered view, leads to an absurdity
and renders the Stamp Act otiose by preventing an otherwise competent
authority from discharging its statutory duty under Section 33 of the Stamp
Act.
215. If allowed to thrive, such construction would lead to situations of
brazen evasion from paying stamp duty on arbitral awards sought to be
enforced, since a decree holder would advertently or inadvertently file a
copy of the inadequately stamped award. An enforcing Court, in the
absence of an original award, would be unable to impound the same, but
at the same time, it would also be prevented from acting upon such award
in view of the bar under Section 35 of the Act. Such an impasse, according
to this Court, cannot be what the statutes envisage.
216. For the sake of legal coherence and public interest, I deem it fit to
further highlight this prevailing anomaly.
217. The Stamp Act pertains to public exchequer and ensures collection
of revenue of the State. The Arbitration Act protects party autonomy and
provides speedy dispute resolution.
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218. Keeping the aforesaid in mind, while there is no cavil with the
position that only the original award can be impounded, the preposition
that a Court cannot direct furnishing the original award under Section 33
leads to inconsistencies in law and gives rise to practical issues.
219. A Court is bound to impound an instrument which is insufficiently
stamped under Section 33. The Court is also barred from acting upon such
instrument in any manner until the duty is made good as per Section 35,
which can only happen after impounding of such instrument if one month
period has expired. Further, only the original instrument can be
impounded, however, the original cannot be called for by the Court for this
purpose and it has to await voluntary production.
220. In the face of such unavoidable contradiction, Joseph Heller’s
Catch-22 comes to mind.
221. The aforesaid problem renders the Stamp Act nugatory and permits
evasion of the statutory obligation to pay stamp duty.
222. In the practical sense, this position allows a decree holder to file for
enforcement of an arbitral award under Section 36 of the Arbitration Act,
which can be done without filing the original arbitral award. Now, even if
it is apparent from the record that the said award lacks stamp duty, the
Court would be unable to call for the original to impound the same. This
not only disregards the Court’s statutory duty under Section 33 of the
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Stamp Act but also permits a decree holder to take away from the public
exchequer while compelling the Court to be a mere bystander.
223. Since the Supreme Court has held that stamp duty is a defect which
may be cured at any stage, the Decree Holder would be permitted to
unjustly reap the benefits of the award without paying adequate stamp
duty. However, at the same time, the statute itself imposes a bar on this
Court preventing it from proceeding further and acting upon such award.
According to this Court, such diametrically opposite positions cannot
stand simultaneously.
224. Therefore, in my view, an interpretation which renders the Court
powerless and reduces it to a mere observer whilst parties are permitted to
evade the responsibility under a fiscal statute, cannot be adopted.
225. Accordingly, in the opinion of this Court, judgments are not to be
read like Euclid’s theorem and surrounding facts and circumstances must
be taken into account.
226. Canara Bank (supra) was not rendered in the context of
enforcement proceedings. Instead, it was rendered in the context of right
to privacy and penal consequences of criminal nature. The Court struck
down Section 73 introduced vide the Andhra Pradesh State Amendment
Act of 1986. This provision empowered the Collector or any one
authorised by him to enter any premises, inspect any public office and
officer having in his custody books, records etc. and permitted him to make
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copies of the same, seize and impound if required. By placing reliance on
71 72
Maneka Gandhi v. UOI , and Air India v. Nergesh Meerza , it was
opined that if a statute grants a power without laying down guiding
principles or fetters to the same, such power is liable to be struck down.
227. It is pertinent to note that Section 33 of the Stamp Act is not a power
but a duty of the authority concerned (a Court of law herein).
228. Therefore, an invasive provision (Section 73 of A.P. Act) cannot be
considered to be on the same footing as Section 33 of the Stamp Act which
only imposes a statutory public duty upon the competent authority to
impound insufficiently stamped instruments that it comes across in the
course of its duties.
73
229. In Tata Teleservices Limited v. State of Uttar Pradesh , it was held
as follows:
“14. Decided cases have interpreted the words “produced or come in
the performance of his functions” as having been voluntarily produced
vide Ujjal Singh v. A.Y. Khan, AIR 1936 Lahore 95, In re Narayandas
Nathuram Marwadi, AIR 1943 Nagpur 97, Uttam Chand v. Perman
Nand, AIR 1942 Lahore 265, Raja Mohd. v. Deputy Commissioner,
1956 ALJ 220 : (AIR 1956 All 453) (FB), Government of U.P. v. Mohd.
Amir, AIR 1961 SC 787, R.A. Remington v. Deputy Commissioner, 1966
ALJ 514, Varghese v. State of Kerala, AIR 1989 Kerala 248, Som Dutt
Buildersv. State of U.P., AIR 2005 All. 234 : (2005 All LJ 2346)
and District Registrar v. Canara Bank, (2005) 1 SCC 496 : (AIR 2005
SC 186). In Lala Uttam Chand v. Perman Nand it was held that no
Court has a right to compel a party to produce a document against his
wishes. If a party does not produce a material document the party will
71
(1978) 1 SCC 248
72
(1981) 4 SCC 335
73
2008 SCC OnLine All 897
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suffer its consequences. The word ‘produced’ in Section 33 of the
Indian Stamp Act was defined to mean production in the ordinary
course of law and not under compulsion. In Re, Narayandas Nathuram
AIR 1943 Nagpur 97 Vivian Bose, J. held that the word ‘produced’ has
a technical meaning and means either produced in response to summons
or produced voluntarily for some judicial purpose such for instance as
evidence and not to documents which fall accidentally or incidentally
into a Judge's hands. The learned Judge has given the example of a
document submitted mistakenly under the impression that it is another
document. In such a case there is no intention to produce the document.
The same view was taken by the Full Bench of this Court in Raja
Mohammad v. Deputy Commissioner, Sitapur, 1956 ALJ 220 : (AIR
1956 All 453). That was a case in which an instrument was produced
before the Collector for his opinion about the stamp duty required to be
paid thereon. It was held that after determining the duty payable the
Collector became functus officio and he could not impound the
instrument if the duty determined was not paid. It was held that the
words “is produced or comes in the performance of his functions”
used in Section 33 of the Act mean the production of the instrument
concerned in evidence or for the purposes of placing reliance upon it
by one party or the other. The decision of this Court in Raja
Mohammad's case was affirmed in appeal by the Apex Court
in Government of U.P. v. Raja Mohammad Amir Ahmad Khan, AIR
1961 SC 787. In District Registrar and Collector v. Canara
Bank (supra) the provisions of Sections 31, 33 and 36 were again
considered and it was held in the context of Section 33 that to attract
the provision the document must have been voluntarily produced or
come before the authority or person in charge in performance of its
functions. It is to be noted that there is no provision in the Stamp Act
requiring a person to get the stamp duty assessed such as by filing a
return. Even the production of the instrument for the purposes of
Registration is voluntary. When however the instrument is produced for
registration the adequacy of stamp duty can be examined under Section
47-A. From the scheme of the provisions of the Stamp Act and the cases
above referred to it appears that duty can be charged only upon a
voluntary production of the original instrument. But what does a
voluntary production mean. It would appear from the cases aforesaid
that if a document is summoned in evidence and produced by a party
called upon to produce it would be a ‘production’ within the meaning of
Section 33 and the document can be impounded vide. In Re Narayandas
Nathuram (supra). In such a situation it cannot be said that the
production was not voluntary. But if a party refuses to produce it
despite the summons it may suffer the consequences of withholding
evidence in the cake, but it cannot be compelled to produce it for the
purposes of the Stamp Act . But it appears from the cited cases that it
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was in the context of proceedings to recover the duty that it was
observed that the proceedings could be initiated only on a voluntary
production of the instrument.”
(emphasis supplied)
230. It is evident from the preceding paragraphs that an element of
voluntariness is required under Section 33.
231. For the purposes of the present discourse, I shall refer to the words
of Section 33(1) in black and white, they are as follows:
“ 33. Examination and impounding of instruments. — (1) Every
person having by law or consent of parties authority to receive evidence,
and every person in charge of a pubic office, except an officer of police,
before whom any instrument, chargeable, in his opinion, with duty, is
produced or comes in the performance of his functions , shall , if it
appears to him that such instrument is not duly stamped, impound the
same.”
)
(emphasis supplied
232. With respect to the competent authorities under this provision, I
shall refer to a Court of law for ease of reference.
233. Accordingly, the first condition to be met is that an instrument
chargeable with duty is either (i) produced before a Court or (ii) the Court
encounters such instrument in performance of its normal duties. The
second condition being, this instrument should not be duly stamped in the
opinion of the Court.
234. An arbitral award is to be enforced like a decree of the Court in
accordance with CPC. Such award is undoubtedly an “instrument” which
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a Court comes across in the performance of its duties in Section 36
enforcement proceedings, thereby maintaining the voluntariness as
envisaged by Section 33 and the Supreme Court. This Court is conscious
of the judicial confines and accordingly does not deem it apposite to
compel Decree Holders to furnish the original instrument. However, in the
same breath, this Court is also conscious of the bar imposed on it by virtue
of Section 35. Accordingly, it would be the prerogative of the Decree
Holders to furnish the same in order to cure the defect for the purposes of
enforcement.
235. To place a technical embargo on an otherwise reasonable and
fettered duty imposed on a Court will defeat the purpose of the Stamp Act.
236. According to this Court, enforcement proceedings stand on a
different footing and an enforcing Court is granted certain powers by the
CPC by virtue of Section 51 and Order XII. The only caveat is that an
enforcing Court cannot go behind the decree. In my view, calling for the
original award does not amount to going beyond the decree especially if it
is blatant from the record that such award is inadequately or not stamped
at all.
237. Section 51 grants powers to a Court for enforcement, as follows:
“ 51. Powers of Court to enforce execution.— Subject to such
conditions and limitations as may be prescribed, the Court may, on the
application of the decree-holder, order execution of the decree—
(a) by delivery of any property specifically decreed;
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(b) by attachment and sale or by the sale without attachment of any
property;
(c) by arrest and detention in prison for such period not exceeding the
period specified in section 58, where arrest and detention is permissible
under that section;
(d) by appointing a receiver; or
(e) in such other manner as the nature of the relief granted may
require:
Provided that, where the decree is for the payment of money, execution
by detention in prison shall not be ordered unless, after giving the
judgment-debtor an opportunity of showing cause why he should not be
committed to prison, the Court, for reasons recorded in writing, is
satisfied—
(a) that the judgment-debtor, with the object or effect of obstructing or
delaying the execution of the decree,—
(i) is likely to abscond or leave the local limits of the jurisdiction of the
Court, or
(ii) has, after the institution of the suit in which the decree was passed,
dishonestly transferred, concealed, or removed any part of his property,
or committed any other act of bad faith in relation to his property, or
(b) that the judgment-debtor has, or has had since the date of the decree,
the means to pay the amount of the decree or some substantial part
thereof and refuses or neglects or has refused or neglected to pay the
same, or
(c) that the decree is for a sum for which the judgment-debtor was bound
in a fiduciary capacity to account.
Explanation. —In the calculation of the means of the judgment-debtor
for the purposes of clause (b), there shall be left out of account any
property which, by or under any law or custom having the force of law
for the time being in force, is exempt from attachment in execution of
the decree.”
(emphasis supplied)
238. Therefore, an executing Court has wide mandate of powers
especially in light of the residuary clause under Section 51(e). It is trite
that such powers must be exercised in a fettered manner.
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239. It is also pertinent to note that this Court issued Practice Direction
No. 26/Rules/DHC dated 30.08.2010, whereby it was directed that once
notice is issued in a petition filed under Section 34 of the Arbitration Act,
the Registry of this Court will issue a letter to the concerned Arbitrator to
transfer the arbitral record including the award. This is as follows:
“HIGH COURT OF DELHI, NEW DELHI
No. 26/Rules/DHC Dated: 30/08/10
PRACTICE DIRECTION
Hon’ble the Chief Justice has been pleased to issue the following
practice direction:-
As soon as notice is issued in the petitions filed under Section 34
of the Arbitration & Conciliation Act, 1996, the Registry shall
send a letter of request to the Arbitrator to transmit the record
of arbitral proceedings as well as award to this Court after the
conclusion of arbitration.
This Practice Direction will come into force immediately.”
240. Another Practice Direction No. 33/Rules/DHC dated 08.04.2015
was issued stating that the original signed award would be received by this
Court, digitally scanned and signed. The original award and the order
sheets would be retained, in the following words:
“HIGH COURT OF DELHI AT NEW DELHI
No. 33/Rules/DHC Dated: 08.04.2015
PRACTICE DIRECTIONS
Hon’ble the Chief Justice, on the recommendations of Hon'ble
the Judge-In-Charge (Original Side) has been pleased to issue
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following practice directions for information and compliance by all
concerned :-
1. After receiving the original signed Award, the proceedings and
the arbitral record from the learned Arbitrator / Arbitral
Tribunal, it will be scanned by the Registry and the scanned
copies will be digitally signed by the Deputy Registrar/ Assistant
Registrar (Original), Delhi High Court.
2. The original signed Award and the proceedings i.e., order sheets
will be retained. The remaining record will be returned after two
months of its receipt during which period each party will be free
to point out discrepancies/shortcomings, if any, in the
scanning/digitization of the records to the Court. The Registry
will in that event, rectify the shortcomings pointed out and the
remaining record shall thereafter be returned to the learned
Arbitrator/Arbitral Tribunal.
These Practice Directions shall come into force immediately.”
241. Therefore, it is not alien for this Court to receive the original award
sought to be enforced. Even the parties concerned are empowered to move
an application to requisition the original record.
242. In 2015, e-filing was made mandatory for this Court in arbitration
matters on the original side. Accordingly, now requisition request is made
to transmit the digitized arbitral record including the original award.
243. In view of the foregoing, since this Court requisitions the arbitral
record which includes the original award as well, it need not specifically
direct parties to furnish the original for the purpose of impounding the
same. In this manner, the Court is in adherence of the binding precedent,
whilst also not defeating the purpose of the fiscal statute.
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Penalty
244. This Court is mindful that there exist practical exigencies where an
otherwise bona fide decree holder, may not have paid requisite stamp duty
due to pending Section 34 petition, a Section 37 appeal or an SLP
thereafter, and has only approached an enforcing Court after these judicial
avenues have been exhausted.
245. From the lens of justice, while there is exist genuine reasons for such
failure to deposit requisite duty by a Decree Holder, who is otherwise
willing to make such deposit at the outset of enforcement proceedings, this
Court cannot come to his rescue even if it believes that sufficient reasons
exist to waive such penalty as the said power is invariably vested with the
Collector.
246. I arrive at the aforesaid position due to lack of any statutory
discretion granted to the Court with respect to penalty. This is evident from
the careful words of Sections 35 and 40, as follows:
“ 35. Instruments not duly stamped inadmissible in evidence, etc. —
No instrument chargeable with duty shall be admitted in evidence for
any purpose by any person having by law or consent of parties authority
to receive evidence, or shall be acted upon, registered or authenticated
by any such person or by any public officer, unless such instrument is
duly stamped :
Provided that —
(a) any such instrument shall be admitted in evidence on payment of the
duty with which the same is chargeable, or, in the case of any instrument
insufficiently stamped, of the amount required to make up such duty,
together with a penalty of five rupees, or, when ten times the amount of
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the proper duty or deficient portion thereof exceeds five rupees, of a
sum equal to ten times such duty or portion ;
(b) where any person from whom a stamped receipt could have been
demanded, has given an unstamped receipt and such receipt, if stamped,
would be admissible in evidence against him, then such receipt shall be
admitted in evidence against him on payment of a penalty of one rupee
by the person tendering it…”
(emphasis supplied)
247. Proviso (a) to Section 35 allows an authority under Section 33 to
require payment of deficit duty and penalty. When ten times the deficiency
does not exceed Rs.5/-, the penalty is Rs.5/- but if ten times the adequate
amount or deficient amount exceeds Rs.5/- then the penalty is ten times
the deficiency.
248. Section 40 on the other hand pertains to the Collector’s power to
require payment of deficit duty and penalty, as follows:
“ 40. Collectors power to stamp instruments impounded. — (1) When
the Collector impounds any instrument under section 33, or receives
any instrument sent to him under section 38, sub-section (2), not being
an instrument chargeable with a duty not exceeding ten naye paise only
or a bill of exchange or
promissory note, he shall adopt the following procedure: —
(a) if he is of opinion that such instrument is duly stampeded or is not
chargeable with duty, he shall certify by endorsement thereon that it is
duly stamped, or that it is not so chargeable, as the case may be;
(b) if he is of opinion that such instrument is chargeable with duty and
is not duly stamped, he shall require the payment of the proper duty or
the amount required to make up the same, together with a penalty of
five rupees; or, if he thinks fit, an amount not exceeding ten times the
amount of the proper duty or of the deficient portion thereof, whether
such amount exceeds or falls short of five rupees :
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Provided that, when such instrument has been impounded only because
it has been written in contravention of section 13 or section 14, the
Collector may, if he thinks fit, remit the whole penalty prescribed by this
section.
(2) Every certificate under clause (a) of sub-section (1) shall, for the
purposes of this Act, be conclusive evidence of the matters stated
therein.
(3) Where an instrument has been sent to the Collector under section
38, sub section (2), the Collector shall, when he has dealt with it as
provided by this section, return it to the impounding officer.”
(emphasis supplied)
249. Section 40(1)(b) is distinct from proviso (a) to Section 35 in two
ways: (i) it uses the words “if he thinks fit”, which is an explicit provision
of discretion and (ii) penalty “not exceeding ten times”, indicates that any
amount up to ten times the deficit can be levied as penalty. This is not
present in Section 35, which says, “a sum equal to”. Meaning thereby, this
Court must levy penalty of Rs.5/- or ten times the deficit portion or duty.
250. Accordingly, this Court does not have the discretion to waive
penalty or reduce it thereof.
251. Additionally, the power to leavy penalty by the Collector is not
unfettered and the Supreme Court has laid down guiding principles for the
same in H.C. Dhanda Trust (supra) , whereby it cautioned that maximum
penalty must only be imposed in extreme cases where an element of fraud
or deceit exists. This position was reiterated in Peteti Subba Rao v.
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Anumala S. Narendra , whereby it was held that maximum penalty
cannot be imposed mechanically, and other factors must be considered
including the financial position of the concerned person.
252. The Supreme Court in Seetharama Shetty (supra) also duly
acknowledged the distinction in the level of discretion accorded to the
Court and the Deputy Commissioner (Collector in the present case), as
follows:
“14.1. Gangappa's case (supra), analysed a situation on an
insufficiently stamped document produced before a Court, and
compared Sections 34 and 39 of the Act and held that the discretion
conferred by the provision is different by the text and the context of these
provisions. This Court upheld the ratio laid in Digambar Warty (supra)
and held that even though no discretion was provided to the Court to
impose a reduced penalty, Section 38 of the Act empowered the Deputy
Collector to refund the duty so collected. In paragraph 18 of the
Judgment, it is recorded that:
“18. The above view of the Karnataka High Court that there is
no discretion vested with the authority impounding the
document in the matter of collecting duty under Section 33, is
correct. The word used in the said proviso is “shall”. Sections
33 and 34 clearly indicate that penalty imposed has to be 10
times. The Division Bench of the Karnataka High Court
in Digambar Warty [Digambar Warty v. Bangalore Urban
District, 2012 SCC OnLine Kar 8776 : ILR 2013 Kar 2099]
has rightly interpreted the provisions of Sections 33 and 34 of
the Act. We, thus, are of the view that the High Court in the
impugned judgment [Fakkirappa v. Gangappa, 2014 SCC
OnLine Kar 12775] did not commit any error in relying on the
judgment of the Division Bench in Digambar Warty
[Digambar Warty v. Bangalore Urban District, 2012 SCC
OnLine Kar 8776 : ILR 2013 Kar 2099]. We thus have to
uphold the above view expressed in the impugned
judgment [Fakkirappa v. Gangappa, 2014 SCC OnLine Kar
12775].
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(2002) 10 SCC 427
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However, as a one-time measure, this Court allowed closing
the matter by confirming the payment of deficit duty with the
double penalty as imposed by the trial Court. The precedent
interpreted the discretionary limits under Section 34 of the Act.
14.2. In United Precision Engineers Private Limited (supra), the
question arose as to the extent of power exercised by Deputy
Commissioner under Section 37(2) of the Act. The Court observed that
the phrase “in every other case” contained in Section 37(2) of the Act
will have to be understood to include not only an instrument which is
merely impounded and referred but also an instrument impounded,
relating to which duty and penalty determined but not paid by the party.
The Court observed that as per the combined reading of the sections, if
the impounding authority determined the penalty under Section 37(1) of
the Act, and thereafter, sends the document to Deputy Commissioner
under Section 37(2) of the Act, then the Deputy Commissioner will have
the power to reduce the penalty under Section 38 of the Act. The ratio
deals with the interplay between Sections 37 and 38 of the Act.”
253. Therefore, to reiterate, with respect to the authorities (besides the
Collector) under Section 33, particularly an enforcing Court under Section
36 of the Arbitration Act, for instruments that are chargeable but
insufficiently stamped and have been therefore impounded under Section
33, payment of penalty is not an option but a mandate, as is evident from
a conjoint reading of Sections 35, 38 and 40. Where the Act does provide
relaxation is under Sections 37, 39 and 41, which is either the prerogative
of the State Government or the Collector.
Time is of Essence
254. This Court is mindful that enforcement proceedings are time-
sensitive and that requiring a Decree Holder to approach the Collector for
payment of adequate stamp duty and penalty, if any, is essentially adding
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another adjudicatory process, which may cause delay in enforcement of
the arbitral award. However, it must also be borne in mind that Section 33
requires this Court to impound an insufficiently stamped award and
Section 35 prohibits this Court from acting upon such award. Therefore,
balance must be struck between practical consequences and statutory
prohibitions.
255. To do away with another adjudication altogether, the Court may
proceed under Section 35 read with Section 38(1) and act upon the
instrument upon payment of deficit duty and penalty. In this case, only an
authenticated copy of the instrument and the collected amount shall be
forwarded to the Collector. Only if a Decree Holder refuses to pay under
Section 35, should the Court impound the instrument and send it to the
Collector. This procedure, in my opinion, would achieve the desired result
and also not prolong the process.
256. The aforesaid was adopted in Peteti Subba Rao (supra) , wherein it
was held that if a party is unwilling or unable to pay the deficit duty as per
Section 35, then the instrument may be impounded under Sectio 38(2).
This would allow enforcement to proceed without adjudication before the
Collector. However, even this route under the Act envisages payment of
penalty.
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257. The Supreme Court in Chilakuri Gangulappa v. Revenue
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Divisional Officer , also adopted the aforesaid approach in the following
manner:
“12. It is clear from the first sub-section extracted above that the Court
has the power to admit the document in evidence if the party
producing the same would pay the stamp duty together with a penalty
amounting to ten times the deficiency of the stamp duty . When the
Court chooses to admit the document on compliance with such
condition the Court need forward only a copy of the document to the
Collector, together with the amount collected from the party for taking
adjudicatory steps. But if the party refuses to pay the amount aforesaid
the Court has no other option except to impound the document and
forward the same to the Collector. On receipt of the document through
either of the said avenues the Collector has to adjudicate on the
question of the deficiency of the stamp duty. If the Collector is of the
opinion that such instrument is chargeable with duty and is not duly
stamped “he shall require the payment of the proper duty or the amount
required to make up the same together with a penalty of an amount not
exceeding ten times the amount of the proper duty or of the deficient
portion thereof”.”
(emphasis supplied)
258. Another solution, in my mind, would be to expedite the adjudication
before the Collector.
259. In this regard, Rule 16 of Chapter I of the Delhi High Court (Original
Side) Rules, 2018 provide that:
“16. Inherent power of the Court not affected. — Nothing in these Rules
shall be deemed to limit or otherwise affect the inherent powers of the
Court to make such orders as may be necessary for the ends of justice
or to prevent abuse of the process of Court.”
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(2001) 4 SCC 197
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260. In light of the aforesaid, it would be apposite to issue time-bound
directions to the concerned Collector of Stamps/SDM.
261. This approach was also adopted by a co-ordinate Bench of this Court
in Uno Minda Ltd. (supra) , whereby it was duly recognised that an
instrument executed in India must be stamped within one month from its
execution. Thereupon, directions were issued to ensure timely adjudication
by the Collector, in the following words:
“11. In view thereof, since the activities of individuals and companies
would be depended upon various documents, instruments of transfer,
etc., and the first step would be to seek adjudication of the stamp duty
under Section 31 of the Indian Stamps Act, 1899, a time limit would be
required to be followed by the Collector of Stamps for the said
adjudication.
12. Under these circumstances, it is opined that reasonable time ought
to be fixed in order to enable the parties to have some certainty as to
the stamp duty payable. Accordingly, it is directed that the Collector of
Stamps shall usually adjudicate the stamp duty payable and
communicate the same to parties within 30 days. However, if the same
involves any complexity/extraordinary circumstances, the adjudication
of stamp duty can be extended for a maximum period of three months
from the date of application.
13. The present order shall be communicated to the Chief Secretary,
GNCTD for ensuring compliance. In addition, the Chief Secretary,
GNCTD shall also consider adding a specific entry in the Delhi Act,
2011 in respect of adjudication of stamp duty with a reasonable time
limit being fixed so that the same can be followed by the Collector of
Stamps. Till the addition of the said entry in the Delhi Act, 2011, the
aforementioned timeline shall operate.”
262. Therefore, it may be fruitful to request the Collector of Stamps/SDM
concerned to expedite the adjudication in light of the pending enforcement
proceedings.
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263. At this juncture, I deem it relevant to advert to the remaining
unanswered contentions.
264. Mr. Vikas Mehta, the learned Counsel for the Decree Holder
submitted that requisite stamp duty was deposited when award was sought
to be enforced and hence, no question for impounding arises, which would
otherwise also delay the enforcement and allow the Judgment Debtor to
escape.
265. In light of the foregoing observations, Section 33 is a mandatory
duty of this Court and is triggered the moment it comes across an
insufficiently stamped instrument in the course of its functions. Further,
there is no provision in the Act which provides that endorsement of an
award after more than a month from its execution can be done by a Decree
Holder unilaterally. However, this Court is mindful of the practical
repercussions, therefore, it deems it fit to not dispose of the enforcement
petition, and direct the concerned Collector to act in accordance with the
statute within a time-bound manner.
266. The reliance placed on Punita Bhardwaj (supra) is of no avail since
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(i) unlike in the present case , adequate stamp duty was paid before the
enforcement petition was filed and (ii) the question of law as to how an
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Instant petition filed on 13.07.2026 and stamp duty was deposited on 03.08.2026
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instrument is to be treated if duty is deposited after one month from
execution of the award was not considered.
267. Further, Sharma Fabricators and Erectors Pvt. Ltd. (supra)
actually goes against the case of the Decree Holder inasmuch as it duly
recognises that, “An instrument that requires to be stamped does not cease
to be an instrument if not stamped and at best, the legal consequence of
insufficient stamping or not stamping is that the instrument is liable to be
impounded” . It was also held that an award would become enforceable as
a decree the moment it is signed and pronounced, therefore, the effect and
operation of the award does not depend on the date of payment of stamp
duty. This Court has no quarrel with the aforesaid position, however, the
same does not help the case of the Decree Holder as it merely reiterates
that the effect of an award is from the date it is signed and pronounced.
268. With respect to the contention that the timelines under both statutes
ought not to be conflated, I am of the view that M. Anasuya Devi (supra)
does not envisage that stamp duty is not to be paid on arbitral awards. It
only provides that an objection on such grounds can be deferred to a later
stage, i.e., the enforcement stage under Section 36. It holds that inadequacy
of stamp duty is not a ground to set aside an award under Section 34
proceedings in view of the specific grounds mentioned in Section 34 and
nothing more.
269. To reiterate, both statutes are independent of each other. While
adequacy of stamp duty is relevant for the enforcement stage under Section
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36 of the Arbitration Act, the Stamp Act makes execution/signing of the
award as the chargeable event. The Arbitration Act is a special law and it
is trite that special provisions prevail over general ones. However, even
this does not come to the rescue of the Decree Holder since Section 36 of
the Arbitration Act only stipulates that an award becomes enforceable after
three months from the date of the award; this provision, in no terms,
provides that since the award is enforceable after three months, stamp duty
is also to be paid after three months. The Stamp Act continues to govern
the procedure for deposit of stamp duty, which unequivocally provides that
stamping is connected to execution/signing of the award and not the
enforceability of such award.
270. There is no quarrel with the proposition laid down in Vodafone Idea
Telecom Infrastructure Ltd. (supra) that maximum penalty need not be
imposed. However, such discretion is granted to the Collector under
Section 40 and not an authority (other than the Collector) under Section 33
of the Stamp Act. There is also no quarrel with the finding in M/s Tarini
Prasad Mohanty (supra) that non-stamping does not render an award as
unenforceable, it only prohibits its admissibility, and is therefore, a curable
defect.
271. Mr. Jayant Mehta placed reliance on Krishnavathi Sharma (supra)
to contend that non-payment of stamp duty is curable defect. This decision
categorically holds that an insufficiently stamped instrument is
inadmissible and if produced before a competent authority, has to be
mandatorily impounded under Section 33. This decision pertains to the
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Karnataka Stamp Act, 1957, whereby procedure adopted is analogous to
that of the Stamp Act applicable herein. In paragraph nos. 15 to 18, it is
held that there is no discretion with respect to the quantum of penalty when
the instrument is to be admitted by the Court without forwarding it to the
District Commissioner (Collector herein), only upon payment of deficit
amount along with the “penalty at ten times”, a copy of such instrument
would be forwarded to the concerned authority. However, if the instrument
is itself forwarded to the concerned authority (Collector herein), such
authority is granted the discretion to impose penalty in excess of five
rupees but not exceeding ten times the deficit duty.
Conclusion: The Position That Emerges
272. I deem it fit to summarize the findings arrived at in the preceding
discussion as follows:
(i) The Arbitration Act and the Stamp Act operate independently
of each other and this Court must read them harmoniously as far as
possible.
(ii) Enforcement of an arbitral award is not the chargeable event
envisaged by the Stamp Act. Instead, execution/signing of an award
is when stamp duty is attracted.
(iii) M. Anasuya Devi (supra) does not grant any exemption from
the payment of stamp duty, only defers such an objection at the
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Section 34 stage since non-payment of stamp duty is not a ground
to set aside an arbitral award.
(iv) The three-month (and an additional thirty days) window
under Section 36 of the Arbitration Act does not grant exemption
from the requirement of stamp duty.
(v) Section 17 of the Stamp Act envisages that a domestic arbitral
award must be stamped before or at the time of its execution.
(vi) Proviso (a) to Section 32(3) unequivocally prohibits the
Collector from endorsing a domestic arbitral award after lapse of
one month from its execution.
(vii) The competent authorities under Section 33 are duty-bound
to impound insufficiently stamped arbitral awards produced before
it or which come in performance of its functions.
(viii) Section 35 bars the competent authority from admitting an
award, which is chargeable but not adequately stamp, in evidence or
even otherwise acting upon it unless deficit duty and penalty (if
applicable) have been paid. There is no discretion in the quantum of
penalty under proviso (a) herein.
(ix) Section 38(1) empowers the impounding authority under
Section 33 to admit such an award in evidence upon payment of
deficit duty and penalty as stipulated under Section 35. In this case,
(i) an authenticated copy, (ii) a written certificate stating the amount
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of duty and penalty imposed along with (iii) the amount collected
must be forwarded to the Collector. In all other cases, Section 38(2)
requires such authority to forward the original award to the
concerned Collector.
(x) The statute does not empower this Court to waive the penalty
component.
(xi) Section 40 empowers the Collector to require payment of
adequate duty or the deficit amount along with penalty. A penalty of
five rupees or if deemed fit, an amount not exceeding ten times the
adequate duty or the deficit portion may be levied. The Collector is
granted discretion with respect to the quantum of penalty.
(xii) Upon payment of duty and penalty (if applicable), the
competent authority or Collector is empowered to endorse such an
award. It is upon such endorsement that an award may be acted upon
for its enforcement.
(xiii) There is no provision in the Stamp Act which permits Decree
Holders to deposit adequate stamp duty on an arbitral award after
lapse of one month from its execution unilaterally and without
payment of penalty (if applicable).
(xiv) An insufficiently stamped arbitral award sought to be
enforced is to be impounded under Section 33 and dealt with either
under Section 35 or 38(2).
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(xv) Bona fide pendency of Section 34 objection petition or appeal
under Section 37 or an SLP would be cogent grounds for the
concerned Collector to waive or impose minimal penalty.
Way Forward – An Act of the Court Should Prejudice No One
273. In the foregoing view of the matter, it is explicitly clear that
provisions of the Stamp Act cannot be circumvented for the purposes of
Section 36 of the Arbitration Act, i.e., for the enforcement of an arbitral
award as a decree of the Court.
274. The preceding discussion establishes the legal contours regarding
stamp duty on arbitral awards and the stage at which insufficient stamping
becomes relevant. However, practical difficulties remain. The lack of
requirement to ascertain sufficient stamp duty at the stage of Section 34 of
the Arbitration Act as held in M. Anasuya Devi (supra) more often than
not results in inadequately stamped awards in enforcement proceedings.
275. Another important aspect for the purposes of enforcement of an
arbitral award is the requirement of registration under Section 17 of the
Registration Act, 1908.
276. Where an arbitral award being a non-testamentary instrument falls
under the ambit of Section 17 of the Registration Act, 1908, it mandatorily
requires registration. In the absence of registration, Section 49 of the
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Registration Act bars such an award from affecting any immoveable
property comprised therein or being received as evidence of any
transaction affecting such property.
277. Against this backdrop and to give operational effect to the statutory
framework of the Stamp Act, this Court issued Practice Directions vide
Notification No. 01/Original/DHC/2026 dated 13.07.2026, directing that
every enforcement petition under Section 36 of the Arbitration Act must
mandatorily contain an express declaration by the Decree
Holder/Petitioner regarding the sufficiency of stamp duty paid on the
award. These Directions are as follows:
“HIGH COURT OF DELHI: NEW DELHI
PRACTICE DIRECTIONS
No. 01/Original/DHC/2026 Dated:13.07.2026
Hon’ble the Chief Justice has been pleased to direct that in every
execution petition under Section 36 of the Arbitration & Conciliation
Act, 1996, the Petitioner/Decree Holder shall make a declaration in
bold capital letters on the top of the index that he has paid the stamp
duty on the award.
As regards, pending execution petition under Section 36 of the
Arbitration & Conciliation Act, 1996, the Petitioner/Decree Holder
shall pay the stamp duty on the award (where not paid) within a period
of four weeks from the date of issue of this practice direction.
By Order
Sd/-
(H.K. ARORA)
Registrar (Original, IPD & JJC)”
278. It is evident from the aforesaid that by the way of these practice
directions, this Court had granted a final indulgence of four weeks to
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Decree Holders to deposit adequate stamp duty on the arbitral awards
sought to be enforced. This Court finds that these practices directions have
not been followed in their true letter and spirit. It is observed that the
declaration regarding stamp duty is only in present in fresh execution
petitions and not “ every execution petition under Section 36” as envisaged
by these directions.
279. Accordingly, to enforce strict statutory compliance under the Indian
Stamp Act, 1899, the Registration Act, 1908, and the procedural mandates
of this Court, the following directions are issued for all petitions filed
under Section 36 of the Arbitration Act:
(i) Declaration: All execution petitions under Section 36 shall
bear a declaration on the first page of the e-file on the top regarding
stamp duty. This declaration shall the following:
(1) Date of Award
(2) Date of Payment of Stamp Duty
(3) Awarded Amount
(4) Quantum of Stamp Duty to be paid on such Award as
per the applicable rates.
(ii) Registry Scrutiny Mandate: In addition to the declaration
required from the Decree Holder at the top of the index, verified
proof of payment of sufficient stamp duty and registration (where
applicable) must be annexed to the petition. The Registry is strictly
directed not to list any enforcement petition that lacks such proof.
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(iii) Office Noting Requirement: The Registry shall explicitly
record an Office Note detailing whether adequate stamp duty has
been paid (specifically quantifying the amount paid versus
chargeable) or if it remains unpaid.
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(iv) Pending Filings (On or before 13.08.2026 ): All petitions
filed on or before 13.08.2026 where the arbitral award is
inadequately stamped are liable to be impounded under Section 33
of the Stamp Act. These petitions shall be directly listed before the
Joint Registrar, who shall either proceed under Section 35 or Section
38(2) depending upon the facts and circumstances of each case.
These petitions shall be listed before the Court only upon due
satisfaction in accordance with the Act.
(v) Future Filings (After 13.08.2026): For petitions filed after
13.08.2026 accompanied by an arbitral award that is inadequately
stamped, the Registry shall return the petition under objections and
the award shall be impounded forthwith. For this purpose, such
petitions shall be listed before the Joint Registrar. The Joint
Registrar is at liberty to proceed either under Section 35 or Section
38(2) depending upon the facts and circumstances of each case.
These petitions shall be listed before the Court upon satisfaction of
stamp duty.
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When Practice Directions issued vide Notification No. 01/Original/DHC/2026 dated 13.07.2026 ceased to operate
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(vi) To balance out the objective behind the Arbitration Act and
the bar under Section 35 of the Stamp Act, these petitions shall not
be disposed of for want of stamp duty and interim orders (if any)
shall continue till the defect is cured by Decree Holders.
(vii) Existing Pending Petitions: Parties in pending enforcement
petitions lacking adequate stamp duty, if deemed fit, are also
permitted to withdraw the petition with liberty to seek restoration as
and when the situation arises and after due satisfaction of the stamp
duty.
(viii) Encumbered / Stayed Proceedings: In cases where a stay on
the operation of the award is subsisting in connected proceedings
under Section 34 or Section 37 of the Arbitration Act, or where a
moratorium under the Insolvency and Bankruptcy Code of 2016 is
imposed or liquidation proceedings are ongoing, parties are granted
liberty to withdraw the enforcement petition, with liberty to re-file
or seek restoration as and when the statutory or judicial impediment
ceases to operate.
(ix) Power to Call Original Award: In cases where the arbitral
award is not requisitioned, the Registrar General / Joint Registrar of
this Court may call for the original arbitral award. If not furnished
voluntarily, the Court may not impose any penalty. However, the bar
under Section 35 of the Stamp Act will continue to operate.
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(x) Registration Act of 1908: Where applicable, if an award is
liable to be registered by virtue of Section 17 of the Registration Act
of 1908, and is not so registered, the Decree Holders are directed to
ensure necessary compliance in view of Section 49 of the
Registration Act.
The Sequitur
280. In light of the foregoing discussion and the duty cast upon this
Court under Section 33 of the Act, the arbitral award dated 26.03.2019,
along with order dated 07.05.2019 under Section 33 of the Arbitration Act
is liable to be impounded.
281. To cure the defect of stamp duty, the Decree Holder is to furnish the
original award before Joint Registrar.
282. List before Joint Registrar on 08.09.2026 for the needful in
accordance with the Act.
283. Keeping in view the objective of expeditious and speedy disposal as
envisaged by the Arbitration Act, the concerned Collector of Stamps/SDM
is requested to expedite the process as far as possible, preferably within a
period of six weeks from the date when the arbitral award is sent to the
Collector concerned.
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284. List this matter before this Court after requisite stamp duty and
penalty (if applicable) is deposited as per the Act.
285. Needless to state that the aforesaid directions do not apply to
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foreign arbitration awards .
286. Let a copy of this Judgment be forwarded by the worthy Registrar
General of this Court for information and compliance to:
1. The Principal District & Sessions Judges of all District Courts
for proper circulation amongst all Commercial Courts Judges.
2. The Principal Secretary (Law, Justice & LA), GNCTD.
3. The Divisional Commissioner, Office of the Collector of
Stamps (Headquarters) for proper circulation amongst all Deputy
Commissioners of each Revenue District and all concerned Officers
under the Deputy Commissioner.
4. The Director, Delhi Judicial Academy.
OM PRAKASH SHUKLA, J.
SEPTEMBER 01, 2026/ gunn
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Shriram EPC Ltd. v. Rioglass Solar Sa, (2018) 18 SCC 313
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