Unstamped Arbitration Agreement must be Filed in Original: Delhi HC

On August 22, 2023, the Delhi High Court rendered a common order holding that if a petition under Section 11 of the Arbitration and Conciliation Act, 1996, has been filed on the basis of an unstamped or insufficiently stamped arbitration agreement, the original instrument must be filed along with the petition. On the other hand, if the arbitration agreement is duly stamped, the filing of true copy or certified copy of the instrument will suffice.

The Single Judge Bench of Justice Sachin Datta heard multiple matters concerning arbitration agreements that were admittedly unstamped and/ or were incorporated in an unstamped agreement. In the case of Pearson India Education Services Pvt Ltd v. Mr Gautam Barkataki son of Late Mr Sashi Kanta Barkataki (ARB.P. 1307/2022), Adv. Saurabh Bindal, Partner at Fox Mandal & Associates appeared for the petitioner.

At the outset, the Court stated that the judgment pronounced in M/s NN Global Mercantile Private Limited vs. M/s Indo Unique Flame Ltd. & Ors. (CA No. 3802-03/ 2020) applied to the case at hand.

The issues framed in May 2023 pertained to the filing of the original arbitration agreement, manner of payment of deficient stamp duty, adjudication by the Collector under the Indian Stamp Act, 1899, and State law applicable for stamping.

While observing that it would be consistent with the Apex Court’s decision in NN Global, for the Court itself to collect the deficient stamp duty along with the penalty (instead of sending the impounded agreement to the Collector of Stamps), the Court held that tasks such as preparation of report, impounding of document, etc. can be delegated to its officer or the Registrar.

In situations where the Court decides to send the original impounded instrument to the Collector of Stamps for adjudication as to the stamp duty and penalty payable (i.e., instead of the Court itself collecting the deficient stamp duty and penalty), the Court may issue time-bound directions to the Collector.

With respect to the State law applicable for stamping, the Court extracted relevant paragraphs from the Supreme Court judgment in New Central Jute Mills Co. Ltd. v. State of W.B.[1] wherein it was observed as follows:

“…if an instrument after becoming liable to duty in one State on execution there becomes liable to duty also in another State on receipt there, it must first be stamped in accordance with the law of the first State and it will not require to be further stamped in accordance with the law of the second State when the rate of that second State is the same or lower; and where the rate of the second State is higher, it will require to be stamped only with the excess amount and that in accordance with the law and the rules in force in the second State.”

The matters have been listed for individual consideration and further directions on September 1, 2023.

[1] AIR 1963 SC 1307