MP Stock Exchange Rajani Bhawan vs CMC Limited and Another

Abhay M. Naik, J.—This petition has been preferred under Article 227 of the Constitution of India against the order dated 05.02.2011 (Annexure P/10) passed by the Court of 5th Additional District Judge, Indore in Arbitration Case No. 01/2009.

Briefly stated relevant facts are that a claim was made by Respondent No. 1 against the Petitioner, which was registered as Arbitration Case No. 1217. Matter was referred to the Indian Council of Arbitration for arbitral proceedings, which was constituted by the Presiding Arbitrator plus two Arbitrators. The two Arbitrators submitted their separate awards, which were not in consonance with each other. The Presiding Arbitrator agreed with the award of one of the Arbitrators on 20th October, 2003. Accordingly, majority of award was passed on 20th October, 2003, directing thereby the Petitioner to pay a sum of Rs. 71,50,000/-with interest at the rate of 12% with effect from 04.01.2001 within one month from the date of receipt of copy of award. In case of failure, they were directed to make payment at the rate of 10% per annum on the said sum of Rs. 71,50,000/-until recovery of the amount. This award was prepared on a stamp of Rs. 10,010/-, copy of the same is on record as Annexure P/2. It was intimated to the Petitioner vide Annexure P/3 on 24.12.2003. Petitioner submitted an application-cum-objection on 05.04.2004 u/s 34 of the Arbitration & Conciliation Act, 1996 on various grounds, inter alia, that the award is inadmissible in evidence, as it does not bear sufficient stamp duty. Prayer was made for rejection of the award on this ground. The application was opposed. Learned trial Judge by the impugned order dated 05.02.2011 rejected the Petitioner''s application; copy of the same is Annexure P/10.

Shri Sethi, learned senior advocate contended that the arbitral award in question does not bear sufficient stamp duty. It, being an instrument within the meaning of the Stamp Act, was not liable to be received in evidence by the Court in absence of proper stamp duty and the same is liable to be rejected. According to him, the Court was competent to impound it and to send it to the Collector with a certificate in writing stating the amount of duty and penalty levied thereon. Reliance for this purpose has been placed on the decision of the Hon''ble Supreme Court of India in the case of Hindustan Steel Ltd. Vs. Messrs Dilip Construction Company, .

Shri Shekhar Bhargava, learned senior advocate appearing for Respondent supported the impugned order.

After considering the rival submissions, we are of the opinion that the petition is highly misconceived.

Petitioner has submitted an application u/s 34 of the Arbitration & Conciliation Act, 1996 for setting aside the arbitral award. Sub-section (2) of it provides grounds for setting aside the arbitral award. We quote below the relevant Sub-section:

Section 34. Application for setting aside arbitral award.

(2) An arbitral award may be set aside by the Court only if-

(a) the party making the application furnishes proof that-

(i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or failing such agreement, was not in accordance with this Part; or

(b) the Court finds that-

(i) thesubject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

Explanation. -Without prejudice to the generality of Sub-clause (ii) of Clause (b), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81

Perusal of the aforesaid makes it clear that an arbitral award may be set aside only on any of the grounds enumerated therein. They do not provide for setting aside the arbitral award on the ground of deficiency with respect to stamp duty.

In case of Hindustan Steel Limited (supra), the Apex Court was dealing with Sections 35, 36 and 42 of the Stamp Act. Taking into consideration the definition of ''instrument'' as contained in Section 2(14) of the Stamp Act, an arbitral award has been held to be an instrument. Considering further Sections 33(1), 35 and 36 of the Stamp Act, it has been further observed:

The award, which is an "instrument" within the meaning of the Stamp Act was required to be stamped. Being unstamped, the award could not be received in evidence by the Court, nor could it be acted upon. But the Court was competent to impound it and to send it to the Collector with a certificate in writing stating the amount of duty and penalty levied thereon. On the instrument so received the Collector may adjudge whether it is duly stamped and he may require penalty to be paid thereon, if in his view it has not been duly stamped. If the duty and penalty are paid, the Collector will certify by endorsement on the instrument that the proper duty and penalty have been paid.

An instrument which is not duly stamped cannot be received in evidence by any person who has authority to receive evidence, and it cannot be acted upon by that person or by any public officer. Section 35 provides that the admissibility of an instrument once admitted in evidence shall not, except as provided in Section 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped

Ultimately, it has been held that an arbitral award unless certified that it is duly stamped or proper duty and penalty have been levied in respect thereof, is not capable of being acted upon.

It may be seen that the aforesaid provisions of the Stamp Act come into play when an arbitral award is to be received in evidence. In the instant case, there was no occasion to receive the arbitral award in evidence, at the stage of dealing with an application u/s 34 of the Arbitration & Conciliation Act, 1996. Specific grounds are provided in Section 34 for setting aside the arbitral award. Insufficiency of stamp duty in respect of arbitral award has not been made a ground by legislature to set aside the award. Such a ground cannot be added by the method of interpretation by invoking provisions of Stamp Act. The Apex Court in the case of Hindustan Steel Limited (supra) has concluded that it would not be capable of being acted upon in case of not duly stamped. Thus, deficiency in respect of stamp duty is not within the purview of Section 34 of the Act of 1996.

We may also successfully refer to the subsequent decision of the Apex Court in the case of M. Anasuya Devi and Anr. v. M. Manik Reddy and Ors. (2003) 8 SC 565, wherein it has been held that such an objection may be raised only at the stage of enforcement of an award u/s 36. It has been clearly observed: -

After we heard the matter, we are of the view that in the present case this issue was not required to be gone into at the stage of the proceedings u/s 34 of the Act. In fact, this issue was premature at that stage. Section 34 of the Act provides for setting aside of the award on the ground enumerated therein. It is not in dispute that an application for setting aside the award would not lie on any other ground, which is not enumerated in Section 34 of the Act. The question as to whether the award is required to be stamped and registered, would be relevant only when the parties would file the award for its enforcement u/s 36 of the Act. It is at this stage the parties can raise objections regarding its admissibility on account of non-registration and non-stamping u/s 17 of the Registration Act. In that view of the matter, the exercise undertaken to decide the said issue by the civil court as also by the High Court was entirely an exercise in futility. The question whether an award requires stamping and registration is within the ambit of Section 47 of the CPC and not covered by Section 34 of the Act.

In the result, the petition fails and is hereby dismissed, with a liberty to the Petitioner to agitate its objection about deficiency with regard to stamp duty before the trial Court at the stage of proceedings u/s 36 of the Act.

No order as to costs.

C. c. as per rules.