Article

Recently, a Single Bench of Hon’ble Delhi High Court issued a common order in the matter
of twenty petitions under section 11 of the Arbitration Act where either the arbitration
agreements or the agreement incorporating the arbitration clause were unstamped. The
matters were dealt in consonance with the judgment rendered by a Constitution Bench of the
Supreme Court in the case of N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd
(2023) 7 SCC 1 wherein it has been held that the agreement would have no ‘existence’ under
section 11(6-A) of the Arbitration and Conciliation Act, 1996 (the “Act”) in law where it is
required to be stamped under the Stamp Act and is unstamped or is not duly stamped.
Similarly, an unstamped contract, containing an arbitration agreement, cannot be said to be a
contract enforceable in law within the meaning of Section 2(h) of the Contract Act and is not
enforceable under Section 2(g) of the Contract Act and therefore would not exist as it has no
existence in law. The intention behind the insertion of Section 11(6-A) in the Act was to
confine the Court, acting under Section 11, to examine and ascertain about the existence of an
arbitration agreement

The stamping has to take place before or at the time of the execution of the instrument after
which it can be taken before Registry Office for registration. In other words, an instrument,
which is registered, necessarily involves being duly stamped before it is so registered. On
other hand, an instrument, which is not duly stamped and which is produced before the
Registering Authority, would be liable to be impounded under Section 33 of the Stamp Act
and sent for collection of stamp duty and penalty. Similarly, if the original of the instrument
is produced and it is unstamped, the Court, acting under Section 11 is duty-bound to act under
Section 33 of the Stamp Act. When it does so, the other provisions, which, in the case of the
payment of the duty and penalty would culminate in the certificate under Section 42(2) of the
Stamp Act, would also apply. An arbitration agreement, within the meaning of Section 7 of
the Act, which attracts stamp duty and which is not stamped or insufficiently stamped, cannot
be acted upon, in view of Section 35 of the Stamp Act, unless following impounding and
payment of the requisite duty, necessary certificate is provided under Section 42 of the Stamp
Act.

In the light of the findings in the case of NN Global, the Single Bench of the Delhi High
Court was set to examine as to how to maintain a harmony between Section 11(13) of the Act
which mandates that application under Section 11 for appointment of arbitrator be disposed
of as expeditiously as possible and an endeavour be made to dispose of the matter within a
period of sixty days from the date of service of notice on the opposite party on one hand and
the obligation imposed vide the judgement in N. N. Global i.e. to act in tune with the
statutory dictate of the Indian Stamp Act, 1899 and to impound agreements which are
unstamped or insufficiently stamped for appropriate action. The Court, in order to carve
essential procedure and modalities, framed the four issues for consideration. The issues
frames and the conclusion reached by the Court have been provided here under:

(i) Whether it is incumbent on the petitioner, in a petition filed under Section 11 of
the Arbitration and Conciliation Act, 1996, to file the original of the duly stamped
arbitration agreement/contract or whether it would suffice for a ‘true copy’ thereof
to be filed?

Conclusion: Since what is liable to be impounded under Section 33 of the Stamp
Act, is the original of the concerned agreement, which alone is to be treated as an
instrument under Section 2(14) of the Stamp Act, the Court concluded that it is
incumbent for a petitioner who files a petition under Section 11 of the Act, on the
basis of an unstamped/ insufficiently stamped arbitration agreement, to file the
original instrument as executed. In cases where the arbitration agreement is duly
stamped, the Court was of the opinion that the filing of the original instrument can
be obviated provided the true copy or certified copy thereof clearly indicates that
it has been duly and properly stamped and it is also accompanied by a clear and
cogent statement to that effect in the petition filed under Section 11 of the Act.
(ii) Whether in terms of proviso (b) to Section 33(2) read with proviso (a) to Section
35, Section 38 and Section 42 of the Indian Stamp Act, 1899, is it permissible for
the petitioner to pay the deficient stamp duty together with penalty in these
proceedings or whether it is incumbent/mandatory to send the concerned
agreement/contract to the Collector for adjudication as to the proper stamp and
penalty payable thereon?

Conclusion: The Court concluded that it has two options after impounding of the
instrument as may be deemed expedient by the Court, depending upon the facts
and circumstances of the case:
(a) Send the impounded agreement/ instrument to the concerned Collector of
Stamps who shall proceed as per section 40 of the Stamp Act and then
under section 42 of the Stamp Act to endorse the payment of stamp duty
and grant a certificate; or
(b) Take recourse to Section 35 of the Stamp Act and enable deposit of the
requisite stamp duty along with penalty as contemplated under proviso
(a) to Section 35 of the Stamp Act. In such case, it is open for this Court
to delegate [under proviso (b) of Section 33(2) of the Stamp Act] the duty
of examining and impounding the concerned instrument, preparation of
report on nature and character of document and amount of duty payable
and endorsement on the original instrument in terms of Section 42(1) that
the instrument is now duly stamped, preparation of copy of the original,
preparation of certificate and transmission of the a) Authenticated Copy;
b) Certificate; and c) the total amount of the stamp duty and penalty
collected to the concerned Collector to such officer as the Court appoints
in that behalf or to Registrar of this court in exercise of the power
conferred under Rule 3 (61) of the Chapter-II of the Delhi High Court

(Original Side) Rules, 2018. The duty of determining the nature of the
instrument and the stamp duty payable thereon cannot be delegated and
the same has to be performed by the Court itself, it being part of judicial
function. [reliance was placed on Black Pearl Hotels Pvt. Ltd. v. Planet
M. Retail Ltd. (2017) 4 SCC 498]

(iii) Whether the adjudication by the Collector under Section 40 of the Indian Stamp
Act can be made time bound?

Conclusion: As per the Court, it shall be open for Court to issue time bound
directions to the concerned Collector to perform the adjudicatory functions in
terms of the relevant provisions of the Stamp Act. The Court relied upon Uno
Minda Ltd. v. Revenue Department 2023 SCC OnLine Del 3598 wherein the
Court directed that the Collector of Stamps shall usually adjudicate the stamp duty
payable and communicate the same to parties within 30 days. The Court reasoned
that as per Rule 16 of the Delhi High Court (Original Side) Rules, 2018, the Court
has inherent power to make such orders as may be necessary for the ends of
justice or to prevent abuse of the process of Court. Consequently, it would be
apposite for this Court to issue time bound directions to the concerned Collector
(Stamps), to ensure that the statutory mandate under Section 11(13) of the Act is
not defeated.
(iv) Whether the stamping of the arbitration agreement/contract must conform to the
local laws/stamping rate(s) prescribed at the place where the arbitration
agreement/contract was executed and/or whether the same are required to conform
to the relevant prescription at the place where the petition under Section 11 of the
Arbitration and Conciliation Act, 1996 has been filed?
Conclusion: The Court concluded that in answer to the said question, the same is
required to be adherent to the law enunciated by the Constitution Bench of the
Supreme Court in New Central Jute Mills Co. Ltd. v. State of W.B. AIR 1963 SC
1307 wherein it was clarified that “if an instrument after becoming liable to duty
in one State on execution there becomes liable to duty also in another State on
receipt there, it must first be stamped in accordance with the law of the first State
and it will not require to be further stamped in accordance with the law of the
second State when the rate of that second State is the same or lower; and where
the rate of the second State is higher, it will require to be stamped only with the
excess amount and that in accordance with the law and the rules in force in the
second State.”
Thus, all the broad but substantial aspects of the modalities for due implementation of the
judgment in N.N. Global was decided by the Single Judge Bench and the individual cases
were left to be heard separately on the next date of hearing.