Devinarayan Housing and Property Development (P) Ltd. vs C.R. Gobind

S. Ashok Kumar, J.—The respondent herein filed a Claim Petition before the Learned Sole Arbitrator as per the arbitration clause in the

agreement for deciding the disputes arising out of the Construction Agreement dated 18.8.201 entered into between the respondent and the

petitioner, who is the builder. During the course of the enquiry before the learned Arbitrator, the respondent wanted to mark the said Construction

Agreement dated 18.8.2001 as an Exhibit. At that time, the revision petitioner filed a memo stating that the Construction Agreement cannot be

marked as it is was insufficiently stamped and also that it was not registered. The respondent filed his counter to the memo and after a detailed

enquiry, the learned sole Arbitrator dismissed the said memo. Aggrieved over the same, the petitioner-builder has filed this revision.

According to the learned Counsel for the revision petitioner, in view of Section 35 and Section 36 of the Indian Stamp Act read with Article 5(i)

contained in Schedule I of the Indian Stamp Act read with Section 17(1)(f) of the Indian Registration Act and Section 49(c) of the Indian

Registration Act, the alleged agreement dated 18.8.2001 which is typed on on a non judicial stamp paper of the value of Rs. 20/= is insufficiently

stamped and since not registered, it cannot be received in evidence. If the respondent wants to rely upon the same, then as per Section 33 of the

Indian Stamp Act, the document has to be referred to the Collector for adjudication of proper Stamp Duty payable on it. Moreover a xerox copy

of the document cannot be permitted to be marked as Exhibit in view of Section 62 of the Indian Evidence Act. But the Arbitrator passed an order

without referring the document to the Collector and he himself interpreted the document which is the subject matter of the issues comes under

Article 5(j) of the Indian Stamp Act and not under Article 5(i). Aggrieved over the same, the petitioner preferred this revision contending that the

Arbitrator has exceeded in his jurisdiction when there is a specific bar created u/s 36 of the Indian Stamp Act making inadmissible of the document

in question for want of sufficient Stamp duty.

Learned Counsel for the revision petitioner also relied upon the amendment brought in by the Tamil Nadu Government to avoid evasion of

Stamp duty and registration fee on such agreements. Admittedly when the constitutional validity of the said amendment was challenged before this

Court the same was upheld and on appeal the Supreme Court also confirmed the decision of this Court.

Learned Counsel for the revision petitioner also contended that the Law of Arbitration and Conciliation being a procedural law it will not prevail

over the Stamp Act and Registration Act. The learned Counsel also emphasised Sections 35 and 36 of the Indian Stamp Act and also Section 49-

C of the Registration Act.

On the other hand, the learned Counsel appearing for the respondent submitted that the CRP itself is not maintainable as the order dated

13.12.2005 impugned in this CRP is passed only in the Memo dated 3.9.2005 which cannot be challenged before this Court under Article 227 in

view of the ruling laid down in the decision of the Apex Court in S.B.P. and Co. Vs. Patel Engineering Ltd. and Another, , wherein the

Constitutional Bench of the High Court held that order passed by the Arbtiral Tribunal cannot be challenged under Articles 26 or 227. The relevant

head note is as follows:

(E) Arbitration and Conciliation Act, Sections 34, 37- Constitution of India, Articles 226, 227--orders passed by arbitral Tribunal--Not open to

challenge under Articles 26, 227.

Per P.K. Balasubramanyan (For himself and on behalf of R.C. Lahoti, CJI, B.N. Agrawal, Arun Kumar, G.P. Mathur and A.K. Mathur, JJ):

It is seen that some High Courts have proceeded on the basis that any order passed by an arbitral tribunal during arbitration would be capable of

being challenged under Article 226 or 227 of the Constitution of India. Such an approach is Not warranted. Section 37 makes certain orders of

the arbitral Tribunal appealable. u/s 34, the aggrieved party has an avenue for ventilating his grievances against the award including any in between

orders that might have been passed by the arbitral Tribunal acting u/s 16 of the Act. The party aggrieved by any order of the arbitral Tribunal,

unless has a right of appeal u/s 37 of the Act has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. The

arbitral Tribunal is after all, the creature of a contract between the parties, the arbitration agreement, even though if the occasion arises, the Chief

Justice may constitute it based on the contract between the parties, but that would Not alter the status of the arbitral Tribunal. It will still be a forum

chosen by the parties by agreement. The stand adopted by some of the High Courts that any order passed by the arbitral Tribunal is capable of

being corrected by the High Court under Article 226 or 227 of the Constitution of India is disapproved. Such an intervention by the High Courts is

not permissible. The object of minimising judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if

the High Court could be approached under Article 227 of the Constitution of India or under Article 226 of the Constitution of India against every

order made by the arbitral Tribunal. Therefore, it is necessary to indicate that once the arbitration has commenced in the arbitral tribunal, parties

have to wait until the award is pronounced unless, of course, a right of appeal is available to them u/s 37 of the Act even at an earlier stage.

In view of the above decision of the Apex Court, this CRP is liable to be dismissed on this ground alone. Even with regard to the merits of the

impugned order, whether the agreement is to be stamped as per Article 5(i) of Schedule I of the Indian Stamp Act or it is sufficient if the same is

stamped as per Article 5(j) Act, the learned Arbitrator relied on the judgement of this Court reported in AIR 1990 Mad. 251 wherein the Division

Bench of this Court interpreted Article 5(i) of the Stamp Act and in what circumstances it can be invoked. The Division Bench unambiguously held

that the scope of Article 5(i) is confined only one kind of transaction, in which the owner of the land must also become the contractor for the

building put up at the cost of the vendee of the land. The Government also took the same defence. A reading go statement of objects and reasons

for introducing the amendment to Stamp Act and Registration Act reveals that when the owner of a land constructs apartments and thereafter

conveys joint right in the site and individual right in each of the instruments to several persons the instrument evidencing the transaction would be

liable to Stamp duty on the market value of the land and the apartments. In sum and substance the Division Bench held that Article 5(i) could be

applied only in respect of an agreement to construct a building or part of building entered into between a Vendor of the land, who had already sold

a portion or a share of his interest in the land or the entire land to the other party to the agreement and thereafter the vendor of the land agrees to

be the building contractor for the vendee for a portion or for entirety of a building.

But in the case on hand, the respondent did not enter into a Construction Agreement with the owner o the land but only with the Developer and

that is the crux of the entire case. In the instant case, the vendor of the undivided share of the land in favour of the claimants is one Mrs. Sugantha

Kumari, who is entirely a different person other than the builder. It is also not the case of the builder that at any stage the vendor and the builder

are the same person. The petitioner is only a building contractor with whom the claimants have entered into separate identical agreements. In such

circumstances, the learned Arbitrator after elaborately discussing the ruling of the Division Bench in the said decision, came to the right conclusion

that if no transfer of immovable property takes place, Article 5(i) of the Stamp Act cannot be attracted so as to hold that the agreement should be

sufficiently stamped as per Article 5(i) and consequently they ought to have been registered u/s 17(1)(f) of the Registration Act.

Apart from that Section 17(1)(f) of the Registration Act relates to instrument of agreement relating to construction of multiunit house building on

land by several persons as referred to in Clause (i) of Article 5 of Schedule I of the Stamp Act. Also, the agreement does Not require registration

because the same is exempted u/s 17(2)(v) of the Registration Act. Apart from the agreement dated 18.8.2001, a separate sale deed was

executed by the owner of the land and the same was duly stamped and registered after paying the necessary Stamp duty and registration fee.

The learned Arbitrator also held that there is no conflict between the Arbitration Act on the one hand and the Stamp Act and Registration Act

on the other hand, more particularly when there is Clause 35 in the agreement itself which provides for arbitration. In the above circumstances,

viewed from any angle, the CRP is liable to be dismissed and accordingly the same is dismissed. No costs. Connected Miscellaneous Petitions are

closed.