Reference of Dispute To Arbitration Does Not Prevent Court From Examining Stamp Duty Issue In Writ Petition: Delhi High Court

Reference of Dispute To Arbitration Does Not Prevent Court From Examining Stamp Duty Issue In Writ Petition: Delhi High Court

Refers to Sections of the Indian Stamp Act asserting that the provisions ensured that the State was not deprived of its revenue

The Delhi High Court has allowed a writ petition enabling the petitioner to approach the Chief Controlling Revenue Authority to adjudicate on the amount payable on the instrument. This was despite the reference to the dispute arising out of the instrument under Section 8 of the Arbitration and Conciliation Act (A&C) Act, 1996.

The bench of Justice Subramonium Prasad held that merely because the arbitral tribunal was empowered to carry out the exercise, it could not deprive the High Court of entertaining a writ petition to determine if the state was deprived of the revenue.

The parties entered a Memorandum of Understanding (MoU) on 12 November 2014. It contained an arbitration clause for the resolution of the dispute.

Later, a dispute arose between the parties leading the petitioner to file a suit. Thereafter, the respondents filed an application under Section 8 of the A&C Act seeking reference of the dispute to arbitration under the arbitration clause in the MoU.

The Court allowed the petition and referred the dispute to arbitration. However, aggrieved by it, the petitioner preferred an LPA, which is pending consideration before the High Court.

Meanwhile, the petitioner filed the writ petition seeking directions, including the declaration of the agreement as null and void.

The petitioner made the following submissions:

• The respondents inadequately stamped the MoU, warranting a review by the authorities to determine if proper stamping occurred. The petition seeks a declaration that the MoU, as it creates rights in properties, constitutes conveyance under the Indian Stamp Act, 1899, and requires ad valorem stamping.

• Section 33(2) provides that in the case of a judge of a High Court, the duty of examining and impounding any instrument under the section may be delegated to such officer as the Court appoints on his behalf.

The respondent made the following counter-arguments:

• The issue was already decided by the Court while dealing with the application under Section 8. It had rendered a finding that the MoU was not inadmissible in evidence. The petition seeks to circumvent that finding by the Court.

• In terms of Section 16(1)(a), the arbitral tribunal was competent to deal with the objection raised by the petitioner. Section 16 empowers the tribunal to impound the non-stamped or insufficiently stamped instruments.

Justice Prasad referred to Sections 31, 33, and 56 of the Indian Stamp Act to hold that the provisions ensured that the state was not deprived of its revenue.

The Court held that any direction by the for the determination of the amount of stamp duty would not undo the findings given by the co-ordinate bench in the Section 8 application, as it was held that the stamping issue was not a relevant consideration for reference to arbitration. Therefore, the issue of the amount of stamp duty was not decided.

The bench clarified that merely because the exercise could be performed by the arbitral tribunal, it would not denude the jurisdiction of the High Court from entertaining the writ petition. The question was whether the State was deprived of the revenue of the stamp duty payable on the instrument.

Justifying that it was not making any observation on the merits of the case, the Court directed the petitioner to approach the Chief Controlling Revenue Authority to decide on the issue of sufficiency of stamp duty paid on the instrument.