Delhi High Court rules it can receive deficient stamp duty; not mandatory to send impounded agreement to Collector of Stamps

Delhi High Court rules it can receive deficient stamp duty; not mandatory to send impounded agreement to Collector of Stamps

Provides the much-needed clarity on the Court’s procedure after the impounding of the insufficiently stamped deal

The Delhi High Court has reiterated that it is mandatory for the Court, exercising power under Section 11 of the Arbitration and Conciliation (A&C) Act, to impound the insufficiently stamped agreement.

The Bench comprising Justice Sachin Datta further stated that on its own the Court could collect the deficient/requisite stamp duty under Section 35 of the Stamps Act, 1899, and enable deposit, along with penalty.

It held that after impounding the agreement, the Court would have two options:

(i) Send the impounded instrument to the Collector of Stamps to follow the drill of Section 40-42 of the Act.

(ii) Take recourse to Section 35 and enable deposit of the requisite stamp duty along with penalty.

The Judge explained that in cases, particularly where the quantum of stamp duty payable was not in dispute, it was preferable for the Court to take recourse to Section 35 to enable the deposit of the requisite stamp duty in Court. Later, without sending it to the Collector of Stamps, it could act based on the arbitration agreement.

The Court further stated, “After payment of stamp duty, together with penalty, as contemplated under proviso (a) to Section 35 of the Stamp Act, an authenticated copy of the duly endorsed instrument (under Section 42), together with the certificate in writing, stating the amount of duty levied in respect thereof, and such amount shall be sent to the Collector or to any person authorized by the Collector in this behalf as per Section 38(1). It shall be open to the Collector, under Section 39, to refund any portion of the penalty paid/levied in respect of the agreement.”

The Bench hoped that such a procedure would not only be in consonance with N.N. Global but also effectuate the mandate under Section 11(13). It would ensure that disposal of the petitions under Section 11 was not inordinately delayed on account of the adjudicatory exercise to be carried out by the Collector of Stamps.

Justice Datta expected that while taking recourse to Section 35, the Court could delegate certain functions to an appointed officer or to the Registrar of the Court. However, the duty of determining the nature of the instrument and the stamp duty payable thereon could not be delegated. It had to be performed by the Court.

He laid down a list of tasks/functions to be delegated by the Court while taking recourse to Section 35 of the Stamps Act:

The duty of examining and impounding any instrument, which is unstamped or insufficiently stamped:

a) The duty of examining and impounding any instrument which is unstamped or insufficiently stamped.

b) Preparation of a ‘report’ on the nature and character of the document and the amount of duty and penalty payable thereon.

c) Endorsement on the original instrument in terms of Section 42(1) that the instrument is now duly stamped and the proper duty and penalty (stating the amount of each) have been levied in respect thereof, and the name and residence of the person paying them.

d) Preparation of a copy of the original instrument (after endorsement) thereby ensuring the genuineness and exactness of the contents thereof, at the expense of the party paying the stamp duty (along with penalty)/clearing the stamp defect, and expressly marking the copy thus prepared as an ‘authenticated copy’ of the original instrument.

e) Preparation of a ‘certificate’ as provided in Section 38(1) stating the amount of stamp duty and penalty levied in respect of the original instrument.

f) Transmission of the a) Authenticated Copy; b) Certificate; and c) the total amount of the stamp duty and penalty collected to the concerned Collector at the place where the instrument was executed.