29 July 2023 8:00 AM GMT
The Delhi High Court has ruled that though in terms of the judgment of the Supreme Court in M/s N.N. Global Mercantile Private Limited vs M/s Indo Unique Flame Ltd. & Ors., 2023 SCC OnLine SC 495, an Agreement containing an arbitration clause which is not properly stamped, cannot be admitted in evidence. However, once the Agreement has been admitted in evidence by the Arbitrator, who...
The Delhi High Court has ruled that though in terms of the judgment of the Supreme Court in M/s N.N. Global Mercantile Private Limited vs M/s Indo Unique Flame Ltd. & Ors., 2023 SCC OnLine SC 495, an Agreement containing an arbitration clause which is not properly stamped, cannot be admitted in evidence. However, once the Agreement has been admitted in evidence by the Arbitrator, who has passed an award by relying on the said Agreement, the award cannot be set aside on the ground that the Agreement was insufficiently/improperly stamped, the court said.
The bench of Justice Navin Chawla remarked that under Section 34 of the Arbitration and Conciliation Act, 1996, the court does not act as a court of appeal against the arbitral award and therefore, it may not even have the powers vested in Section 61 of the Indian Stamp Act, 1899.
Section 61 of the Indian Stamp Act deals with the power of the appellate court to revise the courts’ decision regarding the sufficiency of stamps.
The court added that even assuming that Section 61 of the Indian Stamp Act applied, the court could only impound the document and refer it to the Collector of Stamps for adjudication on the proper stamp duty and penalty. However, the same shall not, in any manner, effect the enforcement or the validity of the arbitral award, the bench held.
The court made the observation while noting that as per the Proviso (b) to Section 61(4), except for the purpose of prosecution by the Collector of Stamps, no declaration made under Section 61 shall affect the validity of any order admitting any instrument in evidence.
The petitioner, ARG Outlier Media Pvt Ltd, filed a petition under Section 34 of the A&C Act before the Delhi High Court, challenging the arbitral award passed by the Sole Arbitrator in favour of the claimant/ respondent, HT Media Ltd. The dispute between the parties had arisen under the ‘Agreement of Barter’ executed between them which contained an arbitration clause.
The petitioner, ARG Outlier, contended that the respondent, HT Media, appended its signatures on the said Agreement at New Delhi and thereafter transmitted the same to Mumbai for signatures of the petitioner. The petitioner pleaded that it had appended its signature on the Agreement at Mumbai. Therefore, in terms of Section 3(a) of the Maharashtra Stamp Act, 1958, the Agreement was chargeable to Stamp Duty in accordance with the Maharashtra Stamp Act only and not in accordance with the Indian Stamp Act, 1899, as applicable to the State of NCT of Delhi.
Thus, the petitioner argued that the said Agreement containing the arbitration clause, was improperly stamped and therefore, it should have been impounded by the Arbitrator. Until the Agreement was properly stamped and penalty was paid, as determined by the Collector of Stamps, the Agreement should not have been acted upon, it pleaded.
The court observed that the application filed by the petitioner under Section 16 of the A&C Act before the Sole Arbitrator, challenging the admissibility of the Agreement on the ground that it was not properly stamped, was rejected by the Sole Arbitrator. The Arbitrator in its order had found the Agreement to be properly stamped, noting that the Agreement itself recorded that the same had been executed at New Delhi.
In its order rejecting the Section 16 application, the Sole Arbitrator had ruled that even if it was accepted for the sake of argument that the document was executed in Mumbai when it was signed by the petitioner, then in law, it was the petitioner’s obligation to put the requisite stamp duty as per the Maharashtra Stamp Act.
The High Court observed that its jurisdiction under Section 34 of the A&C Act is limited and even a contravention of a statute, that is not linked to public policy or public interest, cannot be a ground for setting aside an arbitral award. Thus, the court held that even assuming that the Sole Arbitrator had made a mistake in the interpretation of the Maharashtra Stamp Act, the same cannot be a ground to interfere with the arbitral award.
Perusing the facts of the case, the bench noted that the plea that the Agreement was not properly stamped was not raised by the petitioner in its reply to the legal notices or in the reply to the Section 11 petition filed by the respondent-claimant seeking appointment of Arbitrator. “Even in the affidavit of admission/denial of the documents of the respondent, filed by the petitioner herein on 12.10.2019 in the Arbitration Proceedings, the Agreement was admitted and no such objection to its admissibility in evidence was taken by the petitioner,” the court said, noting that the Sole Arbitrator had, therefore, admitted the Agreement in evidence.
The court further observed that in the arbitral award, the Sole Arbitrator had held that at the stage of final arguments ‘no new’ submission was made by the petitioner on the issue of insufficient/improper stamping of the Agreement.
The bench thus concluded that the petitioner cannot now be allowed to challenge the award on the said ground. “The Arbitrator had given an opportunity to the petitioner to re-agitate the issue of the Agreement not being properly stamped, however, the petitioner chose not to avail of such opportunity. Now, by operation of law, the petitioner is debarred from challenging the Award based on such Agreement,” the court remarked.
The court further took note that as per Section 36 of the Indian Stamp Act, where an instrument has been admitted in evidence, such admission shall not be called in question at any stage of the same suit or proceeding or on the ground that the instrument has not been duly stamped.
The bench referred to the Apex Court’s decision in Javer Chand & Ors. vs Pukhraj Surana, (1962) 2 SCR 333, where the top court had ruled that the only exception recognized by Section 36 of the Indian Stamp Act is the class of cases contemplated by Section 61. The Supreme Court had thus held that once the court, rightly or wrongly, decides to admit the document in evidence, so far as the parties are concerned, the matter is closed; it is not open either to the Trial Court or a Court of Appeal or Revision Court to go behind the order admitting such an instrument in evidence.
Section 61 of the Indian Stamp Act provides that where the appellate court is of the opinion that an instrument should not have been admitted in evidence by the lower court without the payment of duty and penalty, or without the payment of a higher duty and penalty than paid, it may record a declaration to that effect, and determine the amount of duty. Further, the court may impound the instrument and send the same to the Collector, who may, under Section 61(4), prosecute the concerned person for any offence against the Stamp-law.
The High Court concluded, “...though in terms of the judgment of the Supreme Court in N.N. Global (supra), the Agreement, not being properly stamped, could not have been admitted in evidence, however, once having been admitted in evidence by the Arbitrator, the Award passed by relying thereon cannot be faulted on this ground.” It added that since it doesn’t act as a court of appeal against the award, it may not even have the powers vested in Section 61 of the Indian Stamp Act.
“Even assuming that Section 61 of the Indian Stamp Act applies, in view of the Proviso (b) to Section 61 of the Indian Stamp Act, the Court would only impound the document (in the present case by calling upon the petitioner to produce the original of the same) and refer it to the Collector of Stamps for adjudication on the proper stamp duty and penalty (in the present case to be paid by the petitioner), however, the same shall not, in any manner, effect the enforcement or the validity of the Arbitral Award,” the court ruled.
The court thus dismissed the petition and upheld the award.
Case Title: ARG Outlier Media Private Limited vs HT Media Limited
Citation: 2023 LiveLaw (Del) 638
Counsel for the Petitioner: Mr.Sandeep Sethi, Sr. Adv. & Ms.Malvika Trivedi, Sr. Adv. with Mr.Bani Dikshit, Mr.Uddhav Khanna, Ms.Diya Dutta, Ms.Sujal Gupta, Mr.Shailendra Slaria, Ms.Shreya Sethi, Mr.Vikram Singh Dalal & Ms.Tanvi Tewari, Advs.
Counsel for the Respondent: Mr.Ashok Kumar Singh, Sr. Adv. with Mr.Sonal Kr. Singh, Mr.Shivang Singh, Mr.Obhirup Ghosh, Ms.Meghna Butolia, Mr.Gagan Kr. Sharma, Mr.Kunal Nema & Ms.Saloni Singh, Advs.
Click Here To Read/Download Order