No Stamp Duty Leviable On Award Of Compensation Passed By An Arbitrator Under Section 3G(5) Of The National Highways Act: Karnataka High Court

The Karnataka High Court has ruled that an award of compensation passed by an Arbitrator under Section 3G(5) of the National Highways Act, 1956 does not attract stamp duty. The Single Bench of Justice Suraj Govindaraj held that an award of compensation passed by the Land Acquisition Officer under the Land Acquisition Act or under any other similarly situated enactment, including the National Highways Act (NHA), is not amenable to payment of any stamp duty. The Court added that merely because the said award of compensation is passed by an Arbitrator under Section 3G(5) of NHA, the same would not attract stamp duty. The Court ruled that payment of stamp duty on the arbitral award rendered under NHA is an additional burden on the land owner to obtain compensation in lieu of the land acquired under NHA, which is highly unconscionable and not permissible. The petitioners' land was acquired by the National Highways Authority of India (NHAI) and the competent Authority passed an award awarding compensation with respect to the land acquired. Dissatisfied with the compensation awarded, the petitioners Shalini and Nitin Vijay Latthe referred the matter for arbitration under Section 3G(5) of the National Highway Act, 1956 (NHA). Thereafter, an award of compensation was passed by the Arbitrator. The respondent NHAI made part payment of the compensation awarded by the Arbitrator and failed to pay the balance amount to the petitioners. The petitioners filed an Execution Petition before the District Judge for enforcement of the arbitral award. The respondent NHAI raised an objection before the District Judge that the award passed by the Arbitrator was not stamped in terms of Article 11 of the Karnataka Stamp Act, 1957 and hence, no execution proceedings could be initiated with respect to the said arbitral award. The District Judge opined that the award passed by the Arbitrator was required to be stamped. The District Judge passed an order calling upon the petitioners/ award holders to pay the requisite stamp duty on the arbitral award within a specified period. Against this order, the petitioners filed a writ petition before the Karnataka High Court. Article 11 of the Karnataka Stamp Act, 1957 provides for levy of stamp duty on an 'Award'. The term 'Award' has been described therein to mean 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. The petitioners contended before the High Court that since a lower compensation was awarded by the competent authority to the petitioners in lieu of the land acquired under NHA, the petitioners made a reference to the statutory Arbitrator in terms of Section 3G (5) of NHA. The petitioners added that the statutory arbitration contemplated under NHA is not a private arbitration and, therefore, though the provisions of the Arbitration and Conciliation Act, 1996 (A&C Act) are applicable to the arbitral proceedings contemplated under Section 3G of NHA, the compensation awarded is not an award that falls within the ambit of Article 11 of the Karnataka Stamp Act. Therefore, the petitioners averred that since the arbitral award was in essence an award of compensation, no stamp duty was required to be paid on the said arbitral award which was rendered in discharge of the sovereign powers of the State. The NHAI submitted that since the arbitral award was sought to be enforced without being stamped, the said arbitral award was inchoate and it could not be brought in for execution without being stamped. The High Court observed that as per the provisions of Section 3G of NHA, the authorized competent authority is required to determine the compensation to be paid to the land owners in lieu of the land acquired under NHA. The Court noted that Section 3G(5) of NHA provides that in the event the amount of compensation so determined is not acceptable by NHAI or the land owner(s), either of the said parties could refer the matter for determination by an Arbitrator to be appointed by the Central Government. The Court ruled that the existence of an arbitration agreement is a pre-condition for conducting arbitral proceedings. The Court noted that as per the provisions of Section 7 of the A&C Act, an arbitration agreement is an agreement entered into between the parties to submit certain disputes to arbitration, which have arisen or which may arise between them, in respect of a defined legal relationship, whether contractual or not. The Court held that there was no legal relationship between the NHAI and the land owners, except that the land of the land owners was sought to be acquired under NHA. The Court added that there was no arbitration agreement existing between the land owners and the NHAI under Section 7(1) of the A&C Act to submit any dispute to arbitration and that only a ...

No Stamp Duty Leviable On Award Of Compensation Passed By An Arbitrator Under Section 3G(5) Of The National Highways Act: Karnataka High Court

Parina Katyal

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