Once Parties Acknowledge Existence Of Arbitration Clause, Court Can Appoint Arbitrator Even If Stamp Duty Is Insufficiently Paid: Bombay High Court

The Bombay High Court has recently observed that once the parties have acknowledged that an arbitration clause was embodied in the substantive contract, insufficiency of stamps cannot prevent the court from disposing an application under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of arbitrators. Single Judge AK Menon said,"Arbitration is seen as a speedy remedy but if applicants and respondents who may have counter-claims, have to await the fate of adjudication of documents for stamping and conclusion of the statutory challenge, the purpose of arbitration may be defeated. In my view, once parties are ad-idem on the fact that they have signed the writing containing an arbitration clause, the parties having acknowledged that an arbitration clause was embodied in the substantive contract, cannot prevent the court from disposing an application under Section 11 and the High Court, in my view, need not await the decision of the claimant in the case at hand as to whether or not to pay stamp-duty, as adjudicated. If this is not to be so, a large number of arbitration proceedings will be held up right at the inception, which is not desirable."The Court dealt with an application filed under Section 11 whereby the applicant, Pigments & Allieds, sought appointment of a Sole Arbitrator to adjudicate upon disputes between the applicant and the respondents under a Tripartite Agreement dated 6th February 2013. The application was opposed by the 1st respondent-Carboline. The 2nd respondent-Octamec was in liquidation and accordingly, the Official Liquidator of the 2nd respondent was impleaded as respondent no. 2. The original Tripartite Agreement dated 6th February 2013 was not available with any of the parties. The issues that were canvassed before the judge were: -whether a copy of an instrument can be impounded and stamped with stamp-duty;-whether in the arbitration agreement providing for three arbitrators, a Sole Arbitrator can be appointed; -whether on account of insufficiency of stamps, there is a prohibition against appointing an Arbitrator in view of the decision in Inter Continental Hotels Group (India) Pvt. Ltd. & Anr. Vs. Waterline Hotels Pvt. Ltd., and -whether no reference should be made because this is a case of 'deadwood' and no purpose is served by appointing an Arbitrator. FindingsThe single judge noted that though none of the parties were in possession of the original, however, none of them dispute the existence of the agreement."Non-availability of the original agreement at this stage will not prevent this court from appointing an Arbitrator. It is possible that the document is still lying undiscovered with either of one of the parties. If it is with any of the parties, it could surface tomorrow and the agreement and its contents having been accepted and relied upon by both sides, there is no merit in contending that absent the original agreement, no reference can be made."As far as liability of duty on the instrument is concerned, the Court noted as per Section 3 (Instrument Chargeable with Duty) of the Maharashtra Stamp Act, 1958, every instrument mentioned in Schedule-I of the Act, which is not previously executed by any person and is executed in the State on and after the commencement of the Act, shall be chargeable with duty, as set out in Schedule-I.Since in this case the document was not available, it noted that as per the proviso to Section 3(b), a copy, whether true copy or not, including a facsimile image of the original instrument, on which duty is chargeable under the provisions of this section, shall also be chargeable with full stamp duty, as set out in Schedule-I, if proper duty is not paid on such original instrument. "Chargeablity of a copy to duty is obvious from Section 7 of the Stamp Act and this has been considered in the case of Hariom Agrawal Vs. Prakash Chand Malviya, (2007) 8 SCC 514, in which the challenge to the constitutional validity of the provision, which required a copy to be stamped when brought into the State of Maharashtra, has been repelled. In the case of Hariom Agrawal (Supra) , documents evidencing security created in favour of banks and financial institutions outside the State of Maharashtra and in Gujarat were sought to be made chargeable to duty in Mumbai since the borrower companies had their registered office in Mumbai and were required to register a charge with the Registrar of Companies in relation to such property based on a copy of the agreement. The original, no doubt, had been stamped, as required under the Stamp Act as applicable in the State of Gujarat, where the duty was lower, but when the document was brought into the State of Maharashtra, the copy was found to be chargeable with additional stamp duty. That challenge has been repelled, as seen from paragraphs 4 and 5, read with paragraphs 14, 17 and 19, of the decision in Hariom Agrawal. Thus, it is evident...

Once Parties Acknowledge Existence Of Arbitration Clause, Court Can Appoint Arbitrator Even If Stamp Duty Is Insufficiently Paid: Bombay High Court

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Once Parties Acknowledge Existence Of Arbitration Clause, Court Can Appoint Arbitrator Even If Stamp Duty Is Insufficiently Paid: Bombay High Court

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