An insufficiently stamped agreement does not invalidate the arbitration process; parties must be given a chance to rectify stamping deficiencies before proceedings are denied.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Stamp Act, 1899 - Agreement to sell - Insufficiently stamped agreement cannot be acted upon until the defect is cured; the court must allow parties the chance to pay dues before denial of the agreement's validity. (Paras 1, 11, 12, 28)

(B) The principle of minimal judicial intervention ought to be adhered to, ensuring rights granted under alternate dispute resolution mechanisms are not undermined by technicalities of stamping. (Paras 24, 25, 28)

Facts of the case:
The dispute arose from an agreement to sell land for Rs.65 lakh, later contested on grounds of inadequate stamping leading to arbitration proceedings.

Findings of Court:
The court observed that an arbitrator should allow for curing defects related to stamping during proceedings, crucial for rightful adjudication.

Issues: The main issue focused on whether the court can impound an unstamped agreement in the Section 34 proceedings without allowing an opportunity to cure defects.

Ratio Decidendi: The court held that non-stamping does not render an agreement invalid; proper procedures under the Stamp Act must be followed to ensure fairness and efficiency in arbitration.

Result: The impugned order is set aside; the matter is remitted back to decide objections afresh.

JUDGMENT

08/05/2025

AVNEESH JHINGAN, J:-

1. Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short ‘the 1996 Act’) is filed against the order dated 26.04.2024 passed by the Commercial Court, Alwar (hereinafter ‘court’) accepting the objection of the respondent filed under Section 34 of the 1996 Act.

2. The appellants and respondent on 21.10.2016 entered into agreement to sell a land for consideration of Rs.65 Lakh. The part payment was made and on failure of the respondent to execute the sale deed in favour of the appellants the arbitration proceedings were initiated as provided under Clause 7 of the agreement to sell. The proceedings culminated in award dated 03.12.2018. The claim of the appellants was allowed by awarding specific performance of the agreement to sell. The respondent was to execute sale deed of the land in question within a period of four weeks from the publication of the award and on receipt of the balance consideration. Damages of Rs.40,000/- per month with effect from 22.04.2017 till compliance of the directions were awarded. The cost was awarded in favour of the claimant.

3. The respondent filed objection under Section 34 of 1996 Act. During pendency of the objections, in view of the judgment of Seven Judges of the Supreme Court in In Re: Interplay Between Arbitration Agreements under Arbitration, 1996 & Stamp Act, 1899 reported in [(2024) 6 SCC 1] the appellants filed application on 20.12.2023 for impounding the agreement to sell to adjudicate the stamp duty payable. Without deciding the application, the award was set aside vide order dated 26.04.2024. It was held that the agreement to sell was insufficiently stamped and no notice in compliance as per Section 21 of the Act was issued.

4. Learned senior counsel for the appellants contended that the application for referring the matter to the Collector (Stamps) so that the stamp duty due, if any alongwith penalty can be paid was not decided. The objections were wrongly allowed holding that in view of limited power under Section 34 of the 1996 Act, the agreement to sell cannot be impounded. It is argued that Section 21 of the 1996 Act was duly complied.

5. Per contra, the scope of interference under Section 34 of the 1996 Act is limited and it was rightly held that the agreement to sell cannot be impounded. The contention is that only the arbitrator could have impounded the agreement to sell.

5.1 The submission is that no notice in compliance with Section 21 of 1996 Act was given for initiation of arbitration proceedings.

6. The impact of an unstamped or insufficiently stamped agreement was subject matter of the reference made to Seven Judges Bench of the Supreme Court in Re: Interplay (supra).

7. The Supreme Court dealt with the issue as to whether an unstamped or inadequately stamped arbitration agreement would be non-existent, unenforceable or invalid.

8. For deciding the issue an overall view of the Indian Stamps Act, 1899 (for short ‘the 1899 Act’) was considered.

8.1 Section 17 of the 1899 Act provides for stamp duty to be charged on the instrument as defined under the Act.

8.2 Section 33 of the 1899 Act empowers the person having authority to receive evidence either by law or consent of the parties to impound a document which in its opinion is not stamped or sufficiently stamped. The arbitration tribunal is covered in phrase ‘consent of the parties’.

8.3 The effect of Section 35 of the 1899 Act is that unless the instrument is duly stamped it shall not be admitted in evidence or be acted upon, registered or authenticated. Proviso (a) provides that the instrument shall be admissible in evidence on payment of stamp duty due and the penalty.

8.4 Under Section 43 of the 1899 Act the Collector has power to impound the instrument and in case of other authority doing so, the instrument shall be forwarded to the Collector. Thereafter it shall be decided as to whether the instrument is chargeable to duty and it has been paid. In case s

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