Gupta Private Loan Committee vs Ganesh Dass Kudyar and Sons

(1) The respondent herein instituted an application under section 33 of the Arbitration Act against the petitioner in the court of the Sub Judge,

Jammu challenging the existence and the validity of an arbitration agreement alleged to have been entered into between the parties on 23101969.

In the course of the trial of this application the agreement aforesaid was produced in the court. An objection was raised by the respondent herein

regarding the admissibility of the document on the ground that it was a bond and was not sufficiently stamped as such. The trial court vide its order

dated 1511974 held that the document in question was a bond within the meaning of Section 2(5) of the stamp Ace and was chargeable as such, It

was, therefore, directed by the trial court that the petitioner shall make up the deficiency in stamps and pay a penalty in addition to the deficient

stamp duty, whereby alone the document would stand admitted in evidence. The Petitioner disputes the correctness of this order by means of this

revision application.

(2) I have perused the order of the court below and heard the counsel for the parties in regard thereto. The contents of the document in question

have also been examined by me In view of the order which I propose to pass it is not necessary to determine as to whether the document read as

a whole does or does not fall within the definition of the word 'bond' occurring In Section 2(5) of the Stamp Act of the State in my opinion that

question does not strictly fall for consideration. Admittedly the court below trying an application under Section 33 of the Arbitration Act, is

concerned only with the existence or the validity of the arbitration clause contained in the aforesaid document. The other terms of the document are

wholly irrelevant for purposes of the said application. The admissibility of the document in the proceedings under Section 33 of the Arbitration Act

has to be confined only to the arbitration clause contained in the aforesaid document. The document bears a stamp of a rupee and a half which is

the duty chargeable on an arbitration agreement. If the document in question would not have contained any other clause there could possibly be no

dispute as to the sufficiency of the stamp duty paid by the petitioner. The dispute arises only because the document in question contained clauses

other than the one relating to arbitration In a case of this nature therefore the court below was in error in holding the document in question not

sufficiently stamped on the ground that it contains clause other than the one relating to arbitration which made the document a bond within the

meaning of Section 2(5) of the Stamp Act. The court below while determining the sufficiency of the stamp duty should have taken into account only

that pare of the agreement which related to arbitration. Judged from that view there could be no difficulty in holding that the document was

sufficiently stamped. The document in question was not required to be admitted to provide an evidence of the liability of the petitioner to pay the

amount undertaken to be paid by the said document but was intended to prove the existence and the validity of the arbitration agreement. Under

these circumstances therefore the portion of the document unconnected with the arbitration clause had to be excluded from the consideration* The

question of admissibility of a document and the sufficiency of the stamp duty chargeable must necessarily depend upon the scope of the trial or the

enquiry as the case may be which a court proposes to hold in a particular cause*

(3) I am supported in this view by a judgment of the Supreme Court in M/s. R. N. Ganekar and Co., v. M/s Hindustan Wires Ltd., reported as A.

I. R. 1974 S C 303. In para 11 of the aforesaid judgment Palekar J who spoke on behalf of the Court observed as under :

Section 33 contemplates an application for three purposes, viz. (i) when it is desired to challenge the existence of an arbitration agreement, (ii)

when it is desired to challenge the validity of that agreement and (iii) when it is desired to have the effect of the arbitration agreement determined In

all these cases it is the arbitration agreement only which is the subjectmatter for consideration before the Court. Where an arbitration agreement

arises out of a term contained in a contract which deals with various other matters relating to the contract, S. 33 is concerned only with the terms

relating to arbitration in the contract and with the other terms of the contract which do not arise for consideration on an application under that

section.''

(4) Mr. Kuldip Raj Gupta counsel for respondent challenged the maintainability of this revision application on the ground that an order like the one

impugned in this revision application was revisable by the District Court being the court to which an appeal would ordinarily lie from a judgment or

a decree of the court of SubJudge. Section 6i(l) of the Stamp Act reads as under :

''61(1) When any Court in the exercise of its civil or revenue jurisdiction or any Criminal Court in any proceeding under Chapter XII of Chapter

XCCVI of the Code of Criminal Procedure, makes an order admitting any instrument in evidence as duty stamped or as not requiring a stamp or

upon payment of duty and a penalty under section 35, the Court to which appeals lie from, or references are made by such first mentioned Court

may, of its own motion or on the application of the Collector take such order into consideration.

(5) It is true that the District Court has jurisdiction under Section 61 of the Stamp Act to determine the amount of duty with which such an

instrument is chargeable but in the instant case the question as to whether the instrument in question is or is not a bond does not strictly arise for

consideration. The only question which arises is whether the trial court could not determine the playability of the stamp duty on a document of a

composite nature inter alia containing an arbitration clause. Such a question in my opinion is beyond the purview of Section 61 of the Stamp Act,

as admittedly the stamp duty paid on the instrument, treating it to be an arbitration agreement alone,' is sufficient. There can, therefore be no valid

objection to the maintainability of the revision application. The objection is accordingly overruled.

(6) As the question whether the clauses other than the one relating to arbitration contained in the instrument in question do or do not bring the

document within the definition of a bond given in Section 2 (5) of the Stamp Act being left out of consideration, being irrelevant, no reference to the

authorities cited by Mr. Gupta is needed.

(7) In the result this revision application succeeds and is accordingly allowed. The order of court below is set aside. The document in question in so

far as it contains an arbitration clause is held to be duly stamped. The trial court shall now proceed to dispose of the application under Section 33

of the Arbitration Act in the light of the observations made above and in accordance with law. Parties are directed to appear before the trial court

on 2211974.