Bombay High Court: In an application filed under Section 11 of Arbitration and Conciliation Act, 1996 (‘A&C Act’) seeking appointment of an arbitrator based on arbitration clause in ‘Employee Non-Disclosure and Non-Solicitation Agreement’, executed between the parties on 15-11-2021 sought to be decided for stamp duty, Manish Pitale, J. finalized the stamp duty and penalty payable at Rs 144 and issued directions for the authorities as well as appellant.
Due to disputes between the parties, the applicant invoked the arbitration clause. And due to the failure of the agreed procedure for appointment of arbitrator, instant application was filed. It was contended that the subject agreement was simply a non-disclosure and non-solicitation agreement executed between the parties, having no monetary value assigned to it. The applicant therefore sought the opportunity to pay such stamp duty as may be demonstrated before the Court under the Maharashtra Stamp Act, 1958 and Schedule appended, to an officer of the Court who can then endorse the same and transfer the stamp duty deposited by the applicant to the Collector of Stamps.
Court’s Analysis of Stamp Duty on Unstamped Arbitration Agreement
The Court perused the subject agreement dated 15-11-2021 and acknowledged the fact that no monetary value was assignable to the said agreement since it was simply an employee non-disclosure and non-solicitation agreement. It referred to the majority opinion in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1 that unstamped or an insufficiently stamped agreement cannot be acted upon. The Court explained that if it was to consider the instant application under Section 11 of A&C Act, it would have to work on the deficiency of stamp duty and penalty, if any.
The Court suggested that “One of the ways in which this could be achieved, would be to impound the document and to refer the same to the Collector of Stamps for determination of the amount payable towards stamp duty and penalty, thereafter direct payment of the same before the Collector of Stamps by the applicant and upon an endorsement/certificate being issued by the Collector of Stamps, the subject agreement/document could be taken into consideration for hearing the present application under Section 11 of the Arbitration Act. The alternative would be to follow the course of action canvassed on behalf of the applicant.”
Since relied upon by the appellant, the Court referred to the relevant portions in Splendor Landbase Ltd. v. Aparna Ashram Society, 2023 SCC OnLine Del 5148. It further considered the procedure mandated under Section 33 of Stamp Act, 1899 post impounding of the unstamped instrument/agreement and citing N.N. Global (supra), the Court pointed out the two alternatives available to decide the stamp duty for arbitration agreement.
The Court expressed that for appropriate cases wherein, the quantum of stamp duty payable is not disputed, the Court may take recourse of Section 35 of Stamp Act to enable deposit of the requisite stamp duty in Court and act accordingly as also held in N.N. Global (supra). It added that “It would thus, be consistent with N.N. Global, for this Court to itself collect the requisite stamp duty with which the agreement/instrument is chargeable, together with ten times the amount of proper duty or deficient portion thereof, in terms of proviso (a) to Section 35.”
The Court was cautious that while taking recourse to Section 35 of Stamp Act, the law laid in Black Pearl Hotels (P) Ltd. v. Planet M. Retail Ltd., (2017) 4 SCC 498 had to be adhered to. The Court stated that although the Court could delegate the duty of examining and impounding the agreement to the Officer concerned, the duty of determining the nature of the instrument and the stamp duty payable could not be delegated and has to be performed by the Court itself. However, the Court could delegate the task regarding preparation of a ‘report’ to an officer which may assist in final determination by the Court.
The Court agreed with the applicant’s contention that since the Court was considering pari materia provisions of the Indian Stamp Act in Splendor Landbase (supra), the Court could in the instant matter be persuaded to follow the view taken by Delhi High Court in similar circumstances.
Calculation of Stamp Duty
The Court also perused Sections 33, 34, 37 and 41 of Maharashtra Stamp Act and was thereby convinced that in the instant matter, where there was no dispute regarding the amount payable towards stamp duty and penalty, the Court could determine the stamp duty payable by applying provisions of the Maharashtra Stamp Act read with the Schedule appended, and authorize an officer of the Court to collect the same and forward it to the Collector of Stamps. Such an officer so authorized would then be entitled to give an endorsement on the subject agreement to certify regarding deposit of the stamp duty along with penalty determined by the Court. Such an exercise would cure the defect of non-payment of stamp duty and penalty, and therefore, the arbitration agreement could be acted upon to facilitate hearing of application under Section 11 of A&C Act.
After perusing the Schedule appended to Maharashtra Stamp Act, the Court highlighted that the subject agreement would fall under Article 5(h)(B) under which no duty was chargeable, and the proper stamp duty payable was Rs 100. Further, the proviso to (a)(ii) to Section 34 of the Maharashtra Stamp Act would result in penalty payable @2% on the deficit stamp duty. Thus, in the instant matter, 2% stamp duty on entire amount of Rs 100 was Rs 2, and 22 months had elapsed from the date of agreement (15-11-2021), therefore, the stamp duty was calculated at Rs 144.
The Court issued further orders accordingly containing directions for the Prothonotary, Senior Master of the Court and the applicant regarding impounding the original agreement, collecting Rs 144 payable towards stamp duty and penalty, endorsing duly stamped subject agreement, issuing appropriate certificate, etc. And tasked the same to be completed within 10 days.
[John Cockerill India Limited v. Sanjay Kamalakar Navare, 2023 SCC OnLine Bom 2066, Order dated 12-09-2023]
Advocates who appeared in this case :
For Applicant: Advocate Rohan Kelkar, Advocate Sarah Navodia, Advocate Pragya Chandak; Cyril Amarchand Mangaldas
For Respondent: Advocate Piyush Raheja, Advocate Dharmesh Pandya; Kurdukar Associates