Under Section 11 of the Arbitration Act, 1996, it is mandatory for the Court to impound the insufficiently stamped agreement and can itself collect the deficient/ requisite stamp duty.
In this judgment, the Hon’ble High Court considered the issue of taking either the original or the true copy of the agreement along with the petition under Section 11 of the Act and the modality pertaining to the same. The High Court rightly suggested that when prima facie it is evident that the concerned agreement is duly stamped the requirement to file the original of the same can be obviated as per the scheme of appointment of arbitrators framed by the Delhi High Court. The judgment also provides clarity as to the procedure to be equipped with after impounding the insufficiently stamped agreement.
This judgment is a result of all the matters listed together as the relevant arbitration agreements on the basis of which the Section 11 petitions were filed, was admittedly unstamped or incorporated in an instrument/ agreement which is unstamped. Considering the judgment of the N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., the High Court laid down several issues and provided clarifications to that as well.
Issues raised/ discussed:
There were several issues identified by the Hon’ble High Court, with regard to a mandatory requirement of filing the original of the duly stamped arbitration agreement, whether it is mandatory to send the concerned agreement to the collector for adjudication as to the proper stamp and penalty payable, whether such adjudication u/s 40 of the Stamp Act can be made time bound and whether the stamping of the arbitration agreement must conform to the local laws of the place where the arbitration agreement was executed or where the Section 11 petition was filed. These issues were clarified by the High Court defining the concept of impounding the Arbitration Agreement.
As per the provisions of the 1996 Act, Stamp Act, 1899 and after considering the judgment of the Hon’ble Supreme Court in N.N. Global Mercantile, the Delhi High Court held that it would not be inconsistent with the judgment of the Hon’ble Apex Court to obviate the requirement to file the original of the concerned agreement if prima facie it can be established that the same agreement is duly stamped and a statement to this effect is made in the petition u/s 11 of the 1996 Act. The High Court considered the procedure post impounding of the unstamped agreement as mandated u/s 33 of the Stamp Act. As per the same, it was noted that the High Court can either send the impounded agreement to the collector of stamps who shall adopt the procedure u/s 40 of the Stamp Act or can take a recourse u/s 35 of the Stamp Act and enable the deposit of the requisite stamp duty along with the penalty. If the Court is taking the recourse of the 2nd option, and if the Collector of stamp is aggrieved with the said decision of the Court, it is open for the Collector to move the concerned appellate Court u/s 61 of the Stamp Act.
The High Court after relying upon Rule 16 of the Delhi High Court (Original Side) Rules, 2018, held that if the Court sends the original of the impounded instrument to the concerned collector, it is open for the court to make it time bound for the collector to perform the adjudicatory functions in terms of the provisions of the Act. For the last issue identified for consideration, the High Court relied upon the judgment of the Hon’ble Supreme Court of New Central Jute Mills Co. Ltd. v. State of West Bengal, wherein, it was held that the liability of the instrument to stamp duty arises on execution.
Through this judgment, the Hon’ble High Court has provided the much-needed clarity pertaining to the insufficiently stamped agreements and impounding of the same as per the Stamp Act, 1899. The judgment of the Hon’ble Supreme Court in N.N. Global Mercantile harmonized the obligation imposed to act in tune with the statutory mandate of the Stamp Act, in the aftermath of the judgment, there were a few issues that needed to be focused upon by the Courts to enable the litigants to be in compliance with the statutory requirements of the act and to provide primacy to the arbitration proceedings initiated under Section 11 of the Act.