Objection On Deficiency Of Stamp Duty Can Be Raised At Stage Of Execution Of Arbitration Award: Madhya Pradesh HC
The Madhya Pradesh High Court observed that objection with regard to the deficiency of stamp duty can be raised at the stage of execution of the Arbitration award.
The Court was hearing a miscellaneous petition filed under Article 227 of the Constitution of India seeking to set aside an order passed by the Court in Execution Arbitration.
While referring to the Supreme Court decision in M.Ansuya Devi v. M. Manik Reddy where according to the Court the apex Court has held that at the time of enforcement of the award under Section 36 of the Arbitration and Conciliation Act, the parties can object to account of non-registration and also for non-stamping under Section 17(e) of the Registration Act, the bench of Justice Duppala Venkata Ramana observed, “therefore, it is clear that with regard to the deficiency of stamp duty, objection can always be raised at the stage of execution of the said award.”
Advocate Rahul Pathak appeared for the Appellant and Advocate Manhar Dixit appeared for the Respondent.
Brief Facts-
The respondent Indusind Bank Limited initiated arbitration proceedings against the Petitioner Brajesh Kumar Pannalal to recover an overdue loan. The Arbitrator ruled in favour of the Bank in its award. The Bank subsequently filed an execution petition under Order 21 Rule 11(2) of CPC and Section 36 of the Arbitration and Conciliation Act, 1996, seeking the award amount with 18% interest per annum and requested attachment of movables under Order 21 Rule 41(2) of CPC. The petitioner objected under Section 47 of CPC, Order 21 Rule 58 of CPC, and Section 35 of the Indian Stamp Act, 1899, arguing that the recovery was based on a unilateral award by an arbitrator appointed solely by the Bank after seizing a financed tractor due to a missed instalment.
While noting that Section 36(1) of the Arbitration Act, 1996 provides for execution of arbitral award the Court said that the act does not expressly lay down any legal requirement that mandates the parties to an arbitration agreement to pay stamp duties on an arbitral award.
The Court mentioned the decision in M. Anasuya Devi v. M. Manik Reddy and according to the Court, the Apex Court has held that the objection as to non-stamping of the arbitral award is required to be dealt with at the stage of enforcement of arbitral award and not at the stage of objections under Section 34 of the Arbitration Act.
The Court perused Section 17 of the Indian Stamp Act 1989 and observed, “it clear that an instrument/award shall be stamped before or at the time of execution. Therefore, it is an option given to the parties in whose favour the arbitral award has been passed to pay the applicable stamp duty either before or at the time of execution.”
The Court further said that if the Arbitrator is appointed unilaterally and the award is passed as a result of such unilateral appointment, the same would be decided under Section 34 of the Arbitration Act.
The Court said that if an award is not set aside under the procedure established in Section 34 of the Arbitration Act, the Courts, at the stage of execution can step in and declare a unilateral appointment award as non-est in law, declaring the same as nullity.
According to the Court, the impugned order passed by the Executing Court cannot be sustained.
Finally, the Court allowed the miscellaneous petition.
Cause Title: Brajesh Kumar Pannalal v. Indusind Bank Limited