Bombay High Court: In a petition filed under Section 14(2) of the Arbitration and Conciliation Act, 1996 (‘Arbitration Act’), seeking substitution of the Sole Arbitrator (‘the Arbitrator’) on grounds of lack of independence and impartiality, Somasekhar Sundaresan, J., stated that the conduct of Arbitrator was impeccable , in accordance with the law while approaching the stamping authority. The Stamp Authorities ought not to have insisted upon the original instrument to be produced to engross it with the requisite stamp duty. The Court stated that it trusted the Arbitrator to carry on the adjudicatory role in all fairness and objectivity uninfluenced by the untenable grounds raised in the petition and accordingly dismissed the present petition.
Background:
The arbitration proceedings arose out of a Technology Services Agreement dated 22-10-2020, which contained the arbitration clause. During the pendency of the arbitral proceedings, the issue of inadequate stamping of the agreement was raised. The Arbitrator impounded the instrument in accordance with the Stamp Act, 1899 (‘Stamp Act’) authenticated a copy, and directed the Respondents to approach the Stamp Authorities for proper stamping. However, the Stamp Authorities insisted on the original instrument, leading to the Arbitrator’s visit to the stamp office for clarifying procedural requirements. The original was eventually forwarded for stamping, and subsequently returned, enabling continuation of arbitration.
The petitioner alleged that the Arbitrator’s engagement with the Stamp Authorities reflected bias in favour of the respondents and amounted to misconduct. Additionally, the petitioner objected to the Arbitrator’s method of calculating arbitral fees by converting the claimed interest percentage into an absolute figure.
Feeling aggrieved by the same, the petitioner approached the Court under Section 14(2) of Arbitration Act, contending that the Arbitrator had become de jure or de facto unable to perform her functions and ought to be substituted.
Analysis, Law, and Decision
a. Stamp Duty Issue
The Court noted that since the Stamp Authorities insisted that the original instrument be provided, the original document was forwarded by the Arbitrator with a covering letter dated 26-8-2024. This led to the Stamp Authorities eventually stamping the original instrument, thereby enabling reliance upon the instrument for further conduct of the arbitration proceedings. Examining the record, the Court opined that the Sole Arbitrator’s reading of the law governing stamp duty was accurate and her conduct in this regard is impeccable. In the present case, it was for the Arbitrator to decide what was the best approach to discharging its administrative functions. If impounding is a statutory duty casted on the Arbitrator, having it stamped is also a duty cast upon the Arbitrator.
The Court stated that the insistence of the Stamp Authorities on providing the original instrument was untenable. The Arbitrator was justified in being apprehensive about parting with an original instrument and had transparently disclosed all that transpired to the parties. The Arbitrator diligently took care to record the efforts taken and ensured that the record reflected why the original was being parted with. Such diligence which was impartial, fair and evidently addressed at ensuring due process was followed, could not be permitted to be twisted into an allegation of canvassing the merits of one party’s case before the Stamp Authorities.
The Court rejecting the ground of stamp duty issue, stated that the implication of stamping may be perceived as being adverse, but such perception would not render the impeccable conduct of the Arbitrator to be called into question and be the basis of serious insinuation against a quasi-judicial officer.
b. Conversion of interest percentage into actual numbers
The Court stated that there is nothing inappropriate or wrong in converting the interest rate claimed by a party into actual figures. When interest is claimed in a proceeding, the party should be ready for all consequences of the rate sought. Merely because a party claimed interest at a certain rate and did not convert it into an actual number, such claim for interest could not be left as an inchoate element. The Court stated that it is entirely for the arbitral forum to value and assess the claim and the counter claims to determine the fees, as it is totally within the scope of a legitimate exercise of quasi-judicial duty by the Arbitrator, and she must be protected by this Court.
c. Conducting proceedings during pendency of stamping
Regarding conduct of proceedings even while the instrument was pending with the Stamp Authorities, the Court did not find anything violative in the conduct of the Arbitrator. The Court stated that the Arbitrator fairly and transparently apprised the parties about the way the impounding and the consequential stamping was being implemented.
The Court stated that if one were to accept that the Arbitrator’s visit to the Stamp Authorities and the petitioner’s perception of its implications gave the petitioner a right to challenge the Arbitral Tribunal’s independence and impartiality, the deadline to challenge would be 15 days from such date. If the Arbitral Tribunal disagreed with the challenge to its independence and impartiality, such rejection of the challenge would put the petitioner in possession of a ground for pressing a challenge to the arbitral award under Section 34 of the Arbitration Act. However, if that 15-day window is missed, the challenge is arguably not maintainable.
d. Future conduct on stamping
The Court stated that it was the wrongful insistence of the Stamp Authorities on production of the original instrument, that led to the Arbitrator having to explain her immaculate understanding of the law on stamp duty herself, in the absence of administrative support to engage with the Stamp Authorities. The Court stated that the issue of under-stamping is often weaponized in arbitral proceedings and used to trip up the adjudication of disputes by way of arbitration. Arbitrators, being private persons, tend to be timid and send the instruments to the Stamp Authorities despite being entitled to compute the stamp duty amount and penalty component themselves. The Stamp Authorities are advised to take note of this judgement and deal with future requests for stamping sent by Arbitral Tribunals in accordance with law.
Further the Court directed that this judgment be forwarded to the relevant authorities to ensure proper sensitisation and compliance, in line with the Supreme Court’s decision in In Re: Interplay Between Arbitration Agreement under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899, (2024) 6 SCC 1.
The Court also opined that any reasonable mind could get irritated at the least, when allegations of this nature are levelled. However, every adjudicatory mind is also aware that such interludes are par for the course when playing the role of adjudication of disputes. The Court trusted the Arbitrator to carry on the adjudicatory role in all fairness and objectivity uninfluenced by the untenable grounds raised in the Petition. Later Court by refraining imposing costs left the issue of costs for round of litigation open for consideration by Arbitral Tribunal at the stage of passing the final arbitral award, regardless of the outcome in the arbitral proceedings.
[Uvik Technologies (P) Ltd. v. Nearby Technologies (P) Ltd., 2025 SCC OnLine Bom 2741, decided on 23-7-2025]
Advocates who appeared in this case:
For the Petitioner: Hasit Seth, Hrishikesh Chavan, Sharmishtha Patil and Ashish T. Suryavanshi
For the Respondents: Vikram Aditya Singh
Buy Arbitration and Conciliation Act, 1996 HERE
