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2022 Supreme(Online)(Bom) 1956
HIGH COURT OF BOMBAY
G.S. Kulkarni, J
B4U Broadband (India) Pvt. Ltd. – Appellant
Versus
Affluence Movies Pvt. Ltd. – Respondent
Commercial Arbitration Application (L.) No.22197 of 2021
For the Appellants/Petitioners: Mr. Nitesh Bhutekar, Ms. Gargi Warunjikar
For the Respondents: Mr. Rashmin Khandekar, Mr. Deepak Deshmukh, Ms. Pritha Mitra
An unstamped arbitration agreement cannot be enforced until the necessary stamp duty is paid, as mandated by law.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 11 - Appointment of arbitral tribunal - The applicant sought appointment of an arbitral tribunal under Section 11 regarding a dispute under a Co-Production Agreement. The agreement’s validity was challenged by the respondent on stamp duty grounds citing decisions from Garware Wall Ropes Ltd. and SMS Tea Estates, which stipulate that unstamped documents cannot be acted upon. (Paras 1, 2, 12, 14)
(B) Stamp Act - Applicability to agreements - Clarification on the necessity of stamp duty for arbitration clauses and agreements, underscoring that insufficiently stamped agreements require adjudication by stamp authorities. The Supreme Court's perspective reinforces this directive until resolved by a higher authority. (Paras 10, 14)
Facts of the case:
There were disputes arising from a Co-Production Agreement dated July 9, 2015, which the respondent alleged was insufficiently stamped, raising significant legal implications concerning the enforceability of the arbitration clause.
Findings of Court:
The document is to be impounded for a stamp duty determination, with the parties directed to comply with notification from the stamp authority within a stipulated timeframe.
Issues: The primary issue was the validity of the arbitration clause given the stamp duty dispute and whether the agreement's enforceability should be assumed.
Ratio Decidendi: The court held that documents lacking adequate stamp duty must be impounded, preventing the initiation of arbitration until rectified, reaffirming existing legal principles.
Result: The application was adjourned pending the stamp authority's decision.
| Table of Content |
|---|
| 1. application under section 11 seeks appointment of an arbitral tribunal. (Para 1) |
| 2. challenge to the agreement's stamping raises legal implications for arbitration. (Para 2 , 5) |
| 3. dispute over required stamp duty escalates the legal circumstances. (Para 3 , 4) |
| 4. the necessity of stamp duty for agreements impacts the enforceability of arbitration clauses. (Para 6 , 10 , 12) |
| 5. impounding of the document is mandated until the stamp authority resolves duty initially owed. (Para 14 , 16) |
1. By this application filed under Section 11 of the Arbitration and Conciliation Act ,1996 (for short ‘the Act’), the applicant has prayed for appointment of an arbitral tribunal to adjudicate the disputes and differences which have arisen between the parties under a Co- Production Agreement for Television Programme dated 09 July, 2015. The arbitration agreement is contained in clause 8 of the said agreement on which there is no dispute. The parties have agreed for Mumbai to be the place of arbitration as also, the agreement in question was entered at Mumbai. Also, both the parties are from Mumbai. Thus, the seat of the arbitration as agreed between the parties is at Mumbai.
2. At the hearing of this application on behalf of the respondent, an objection is raised to the agreement in question not being sufficiently stamped. Respondent contends that in view of the decision of the Supreme Court in Garware Wall Ropes Ltd. vs. Coastal Marine Constructions & Engg. Ltd, (2019) 9 SCC 209, the agreement needs to be impounded and only after the agreement in question is sufficiently stamped, the present application for appointment of an arbitral tribunal be entertained. In Garware Wall Ropes (supra), the Supreme Court was concerned with the effect of an arbitration clause contained in a document which was not “duly” stamped. The Court held that when an arbitration clause is contained in an agreement or conveyance, different consequences ensue depending on whether the agreement or conveyance is not registered or not duly stamped. The Court also held that the judgment in SMS Tea Estates vs. Chandmari Tea Co. (P) Ltd, (2011) 14 SCC 66 would continue to hold the field even after the 2015 amendment to the Act and if a document was not duly stamped, then the Court under section 11 of the Act would first impound the document and only after the entire stamp duty and penalty (if any) is paid, such document would be acted upon for appointment of an arbitral tribunal.
3. A reply affidavit on behalf of the respondent dated 23 March, 2022 is placed on record, wherein the following contention has been raised in regard to the document in question not being sufficiently stamped:-
“e. Therefore, in the present case, the total stamp duty payable on the Agreement ought to be approximately Rs. 26,240/- (Rupees Twenty Six Thousand Two Hundred and Forty Only). However, this stamp duty is not paid by the Applicant.”
4. To the above objection as raised on behalf of the respondent, a rejoinder affidavit is placed on record on behalf of the applicant which is merely in the nature of a denial. The relevant paragraphs of the rejoinder affidavit are required to be noted which read thus:-
“4. I say that, the stamp duty of Rs.900 is paid and the said Agreement is sufficiently stamped. Thus, there is no insufficiency of stamp as alleged by the Respondent.
……...
9. With respect of paragraph no. 2 d, it is denied that article 5 h (A) (iv) of Schedule 1 of the Maharashtra Stamp Act, 1957 is applicable to the agreement which is subject matter of application. It is denied that the stamp duty shall be calculated at 0.2% of the amount agreed in contract.
10. As far as the averments made in paragraph no. 2 e are concerned, I deny and do not accept that the total stamp duty payable on the Agreement ought to be approximately Rs. 26,240/- and the same has not been paid by the Applicant.”
5. Thus, as seen from the pleadings, the respondent has come with a case that the document i
