The court established that the stamp duty on an arbitral award is to be assessed based on the provisions in effect at the time the award was signed, and that penalties for insufficient stamping cannot be imposed when enforcing an arbitral award.

JUDGMENT

1. These two captioned petitions are filed by the decree holder as well as judgment debtors assailing the order passed by the Executing Court having determined the stamp duty payable at Rs.72, 500.00 on the arbitral award of Rs.1, 20, 000.00 with interest at the rate of 18% p.a. as also penalty imposed at Rs.7, 25, 000.00.

The decree holder has filed W.P.No.12935/2022 questioning the impugned order dtd. 11/2/2022 passed in Com.Ex.Pet.No.224/2021 with a further direction to the Registrar, City Civil Court, Bengaluru to refund Rs.7, 25, 000.00 which is imposed by way of penalty. In the alternative, the decree holder has also sought direction against the judgment debtors to pay stamp duty or penalty that is determined by the Executing Court.

The judgment debtors have filed W.P.No.8352/2022 questioning the stamp duty payable on the arbitral award and also consequent penalty imposed by the Executing Court. The judgment debtors claim that decree holder has to pay duty and penalty to an extent of Rs.3, 01, 16, 904.00. The said contention of judgment debtors is negatived by the Executing Court and therefore, the judgment debtors are also before this Court assailing the order dtd. 11/2/2022.

2. For the sake of convenience, the parties are referred to as per their rank before the Executing Court.

3. The facts leading to the case are as under: An agreement to lease was executed between the judgment debtors and decree holder with respect to their premises to be developed on subject property. The dispute arose between the decree holder and judgment debtors and since the agreement contemplated arbitration clause, the dispute was referred to arbitration in terms of the agreement.

An award is passed by the Arbitrator in the said arbitration proceedings and the judgment debtors are directed to pay a sum of Rs.1, 20, 00, 000.00 along with 18% interest p.a. from 26/2/2008 till the date of actual payment. The judgment debtors filed arbitration suit in Com.A.S.No.26/2012 challenging the arbitral award. The said suit was dismissed on 5/10/2020. Feeling aggrieved by the order dtd. 5/10/2020, the judgment debtors have filed a commercial appeal in C.A.No.4/2021 before this Court which is admitted on 1/7/2021.

The decree holder after dismissal of arbitral suit initiated execution proceedings against the judgment debtors in Com.Ex. No.224/2021 seeking enforcement of the award dtd. 1/12/2011. On registration of execution petition, the Executing Court collected stamp duty payable on the award dtd. 1/12/2011 and directed the decree holder to pay Rs.72, 500.00 as the stamp duty on the said award. In compliance of order dtd. 23/7/2021, decree holder paid stamp duty on 31/7/2021. The judgment debtors filed an application before the Executing Court seeking impounding of the award dtd. 1/12/2011. The said application was contested by the decree holder. The Executing Court allowed the application and directed the decree holder to pay penalty of ten times on the stamp duty determined. The decree holder has paid penalty of Rs.7, 25, 000.00 under protest. The judgment debtors filed a review petition challenging the order dtd. 11/2/2022 which is rejected by the Executing Court.

4. Learned counsel appearing for the decree holder reiterating the grounds urged in the petition would vehemently argue and contend that decree holder is entitled to stamp the arbitral award only at the time of execution of award. To buttress his arguments, he has placed reliance on the judgment rendered by the Hon'ble Apex Court in the case of M.Anasuya Devi vs. M.Manik Reddy, (2003) 8 SCC 565. He has also placed reliance on the judgment rendered by the coordinate Bench of this Court in the case of Dilli Babu vs. State of Karnataka, ILR 2105 Kar 4336 . Referring to the principles laid down by the Hon'ble Apex Court and coordinate Bench, he would point out that the decree holder has an option to take benefit of the instrument to pay stamp duty either before or at the time of execution