"Recently, a Single Judge Bench of the Delhi High Court issued significant directives regarding petitions filed under Section 11 of the Arbitration and Conciliation Act, 1996, specifically in cases involving unstamped arbitration agreements or arbitration clauses embedded in unstamped instruments or agreements.
Following the Supreme Court's Constitution Bench judgment in the case of N.N. Global Mercantile (P) vs. Indo Unique Flame Ltd., several complexities arose in arbitrator appointment cases associated with inadequately stamped agreements. On August 22, 2023, in the matter of Splendor Landbase Ltd. vs. Arpana Ashram Society & Anr. and related cases, the Delhi High Court's Single Judge Bench issued a set of directives aimed at resolving these issues. The key points of these directives are as follows:
1. When entertaining a petition under Section 11 of the Act, the High Court is obligated to assess the stamping status of the instrument or agreement. However, the court has the discretion to delegate the task of examining and impounding any unstamped or insufficiently stamped instrument to a designated officer.
2. Petitioners filing Section 11 petitions based on unstamped or insufficiently stamped agreements must submit the original executed instrument. However, if the instrument is duly stamped, the original may not be necessary, provided a true or certified copy is filed, accompanied by a clear statement confirming proper stamping. Nevertheless, the court retains the authority to demand the original agreement if stamping sufficiency is questioned at any stage.
3. In cases where Section 11 petitions are based on unstamped or insufficiently stamped agreements, the court has two options:
(i) Forward the impounded agreement to the relevant Stamp Collector, who will oversee proper stamp duty payment along with penalties. Once completed, the Collector will certify the proper duty and penalty levied, making the instrument admissible as evidence, and allowing the court to proceed under Section 11 of the Act. The court can issue time-bound directives to the Collector to expedite the Stamp Act adjudication.
OR
(ii) Allow the parties to deposit the required stamp duty and a penalty equal to ten times the amount with the court itself. Subsequently, an authenticated copy of the instrument, endorsed with the duty levied and a written certificate indicating the penalty, is sent to the Collector along with the collected amount. The Collector has the authority to refund a portion of the paid penalty if deemed necessary. If the Collector disputes the court's decision on duty or penalty, they can appeal to the relevant appellate court under Section 61 of the Stamp Act.
4. When the court opts for the second option of enabling parties to deposit stamp duty and penalty, it is mandatory for the court to determine the instrument's nature and the applicable stamp duty. This task cannot be delegated to any court-appointed officer. However, the court may delegate the preparation of a report on this matter to one of its officers, and the final determination is made by the court upon report submission.
5. In cases where the court follows the second option, it can delegate specific tasks to its officer or Registrar, depending on the circumstances. These tasks include examining and impounding unstamped or insufficiently stamped instruments, preparing a report on the instrument's nature and duty payable, endorsing the original instrument as duly stamped, preparing an authenticated copy, issuing a certificate stating the duty and penalty levied, and transmitting these documents and the total amount collected to the concerned Collector where the instrument was executed.
6. In situations where an instrument is executed in one state but pertains to property or actions in another state and is received there, the law articulated by the Supreme Court in the case of New Central Jute Mills Co. Ltd. v. State of W.B. must be adhered to. According to this judgment, such instruments must be stamped according to the first state's laws, and no additional stamping is required in the second state if its stamp duty rates are equal to or lower than those of the first state. However, if the second state's rates are higher, additional stamping is needed only for the excess amount under the second state's rates.
In conclusion,
The Delhi High Court has issued a comprehensive set of directives addressing concerns arising from the N.N. Global judgment. These directives aim to provide clarity to litigants and lawyers in matters concerning the court's appointment of arbitrators."
TAGS: Delhi High Court Section 11 Arbitration and Conciliation Act 1996 Unstamped Agreement Constitution Bench Supreme Court Splendor Landbase Ltd. Arbitrator Appointment Directives Stamp Duty Stamp Act Authenticated Copy Collector of Stamps Arbitration Clause.
