No Stamp Duty on Instruments Executed by or on Behalf of the Government

The Delhi High Court held on October 12, 2023, in the case of M/s SVK Infrastructures v. Delhi Tourism and Transportation Development Corporation Ltd, that no stamp duty is chargeable on instruments executed by, on behalf of or in favour of the Government. Hence, unstamped work order could be relied upon to invoke arbitration.

In the instant case, the petitioner, a partnership firm, had taken over the assets and liabilities of a sole proprietorship, M/s Satya Narain. A work order dated February 15, 2016, was issued by the respondent in favour of M/s Satya Narain which included an arbitration clause. On a dispute arising between the parties, the petitioner requested the Chief Engineer, employed by the respondent, to refer the dispute to the Dispute Resolution Committee as stipulated in the work order. The Chief Engineer’s failure to do so resulted in the present petition being filed under Section 11 of the Arbitration and Conciliation Act, 1996.

The petitioner contended that upon acquisition, it had stepped into the shoes of M/s Satya Narain and was entitled to invoke arbitration in terms of the work order. Moreover, through a communication dated May 30, 2022, the respondent had already acknowledged the petitioner as the successor of M/s Satya Narain. In addition, as per proviso (1) to Section 3 of the Indian Stamp Act, 1899, no stamp duty was payable on the work order as it fell under the term ‘agreement’ executed by the Government.

The respondent opposed the petition on three grounds; that there was no valid arbitration agreement, that the petitioner had directly approached the Court before approaching the Dispute Resolution Committee and that the agreement was unstamped and therefore could not be relied upon. The respondent placed reliance on the judgement of the Supreme Court in the case of M/s. N.N. Global Mercantile Private Limited v. Indo Unique Flame Ltd. & Ors. (2023 SCC OnLine SC 495) to contend that any agreement executed in Delhi for which no specific provision has been made in the schedule, is required to be stamped in accordance with Clause 5(c) of Schedule IA of the Indian Stamp Act, 1899.

The court observed that the petitioner was entitled to invoke arbitration since it was an admitted position that the petitioner was the successor of M/s Satya Narain and especially when the sole proprietor himself was a partner in the petitioner firm. The court also noted that the respondent having failed to refer the dispute to the Dispute Resolution Committee, despite the specific request of the petitioner, was estopped from raising a plea that the petition was premature.

Further, Clause 5(c) of Schedule IA of the Indian Stamp Act, 1899 only required the affixation of stamp duty on agreements or memorandum of agreement which were not covered by any specific provision of the act. However, as per proviso (1) to Section 3 of the Indian Stamp Act, 1899 it was evident that no stamp duty was chargeable on an instrument that had been executed by, on behalf of or in favour of the Government and therefore no stamp duty was payable on the work order that was executed on behalf of the Government. Thus, the court held that the decision in the case of M/s. N.N. Global Mercantile Private Limited v. Indo Unique Flame Ltd. & Ors. (2023 SCC OnLine SC 495) was inapplicable in the facts and circumstances of the present case.