STAMPING OF AN ARBITRATION AGREEMENT

The High Court of Bombay in an Order dated 12 September 2023 once again upheld that the High Court can conduct the exercise of determining the stamp duty payable under an agreement and authorize an officer of this Court to collect the same which would be transferred to the Collector of Stamps. The officer, so authorized by the Court, would then be entitled to give an endorsement on the subject agreement/document, to certify that the stamp duty along with penalty, as determined by the Court, has been deposited with the Court and the same shall be transferred to the Collector of Stamps.

Brief Facts

John Cockerill India Limited (Company) had employed Mr Sanjay Navare (Employee) to render his services to the Company and accordingly, they had entered into Employee Non-Disclosure and Non-Solicitation Agreement dated 15 November 2021 (Agreement). The Agreement contemplated that the Employee shall be entitled to receive remuneration from the Company, however the quantum of the consideration was not mentioned in the Agreement.

Certain dispute arose between the parties and since, the Agreement provided for arbitration mechanism the Company had filed a Petition before High Court at Bombay seeking appointment of an arbitrator.

Since, the agreement did not mention any consideration payable to the Employee, the Company sought to pay the stamp duty as per the provisions of the Maharashtra Stamp Act, 1958 to the officer of the Court who would then endorse the same and transfer it to the Collector of Stamps, facilitating hearing and disposal of the Application filed under Section 11 of the Arbitration and Conciliation Act, 1996 (Act).

Main issue for consideration

Whether the officer of the Court is entitled to collect the stamp duty on behalf of the Collector of Stamps in cases where there is no dispute on the quantum of stamp duty?

High Court Judgement

The Company further submitted that High Court of Delhi in the matter of Splendor Landbase Limited v. Aparna Ashram Society (Splendor Judgment) considered a similar situation under Indian Stamp Act, 1899 and held that Court while considering an application under Section 11 of the Act, can undertake the exercise of determination of requisite stamp duty, enable deposit of the same, to be forwarded to the Collector of Stamps so that a defect, essentially curable in nature, could be cured and the application for appointment of arbitrator could proceed. It was further held that where the quantum of stamp duty payable is not in dispute, it is apposite to the Court to collect the stamp duty and transfer it to the Collector of Stamps enabling its disposal and appointment of an arbitrator.

The High Court of Bombay in light of the Splendor Judgment held that in the present case that, since the amount of stamp duty payable is not in dispute and the same can be determined by a simple exercise by applying the provisions of the Maharashtra Stamp Act and Schedule appended thereto, the officer of the Court is entitled to collect the stamp duty, transfer it to the Collector of Stamps and provide an endorsement for the same, facilitating hearing of the application under Section 11 of the Act.

MHCO Comment:

The Court has taken a mindful and progressive step to ensure that the error i.e. payment of stamp duty, which is curable in nature, can be cured forthwith by paying stamp duty and penalty thereon to the officer of the Court, and proceeding with the hearing of the applications seeking appointment of arbitrator in cases where there is no dispute on the quantum of the stamp duty. It will assist the Court in faster disposal of the cases seeking appointment of arbitrator without any revenue loss to the government bodies.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

 LEGAL UPDATE | ANALYSING LIMITATION PERIOD IN A SPECIFIC PERFORMANCE SUIT

The Hon’ble Supreme Court recently in the matter of A. Valliammai v. K.P. Murali and Others vide order dated 12 September 2023, clarified the limitation period that is applicable while filing a suit for specific performance of a contract under Article 54 of Part II of the Schedule to the Limitation Act, 1963 (Limitation Act). The Supreme Court held that in the event that there is no time fixed for Specific Performance of a contract, then the limitation period runs from the date on which the plaintiff has notice of the defendant’s refusal to perform his part of Contract.

BACKGROUND

A. Valliammai, the appellant, was the owner of 11 acres of land located in Tiruchirapalli district, India. She inherited this land from her late husband, Ayyamperumal. A land sale agreement was made between A. Valliammai and K. Sriram in 1988 for the sale of the 11-acre property. The sale was set at a rate of Rs. 2,95,000 per acre, and an advance payment of Rs. 1,00,000 was made. The balance sale consideration was to be paid within one year, with a later extension of six months. Disputes arose regarding the sale, including disagreements over the land's allocation to a trust and the timing of the sale. Legal notices were exchanged between the parties, with K. Sriram demanding the execution of the sale deed, which A. Valliammai refused. A suit for permanent injunction was filed by K. Sriram to restrain A. Valliammai from selling the property or creating any third party rights. A. Valliammai contested the suit. A temporary injunction order was issued in favour of K. Sriram, but the suit was later dismissed. K. Sriram subsequently assigned his rights under the sale agreement to K.P. Murali and S.P. Duraisamy. K.P. Murali and S.P. Duraisamy filed a suit for specific performance in 1995, and the case went through various legal proceedings.

ISSUE

A central issue in the case was whether the suit for specific performance was barred by the statute of limitations.

HELD

A suit for specific performance of a contract must be filed within the applicable limitation period, which is determined based on the date when the plaintiff has notice that the performance of the contract has been refused. When calculating the limitation period for particular performance lawsuits, two possible scenarios are described in Article 54 of Part II of the Schedule to the Limitation Act. First off, the limitation period for filing the lawsuit is three years from the date that is set for the contract’s execution. Alternatively, the three-year limitation period starts when the plaintiff learns of the defendant’s refusal to execute/perform, if a date is not mentioned.

In this specific case, the Court found that the limitation period began when the defendant refused to perform the contract, which was evident from the exchange of written notices and the filing of a suit for injunction by the plaintiff. As a result, the plaintiff’s suit for specific performance, filed after the limitation period, was barred by limitation. The Court also rejected various arguments related to constructive res judicata, the effect of allotment of property to a trust, and the need for the disposal of another pending suit as conditions for specific performance.

In the present case, the suit for specific performance was filed out of the limitation period and K.P. Murali and S.P. Duraisamy were not entitled to a decree allowing the suit. The Court however, using powers conferred under Article 142 of the Constitution of India, directed A. Valliammai to pay Rs 50,00,000/- (Rupees Fifty Lakhs Only) to K.P. Murali and S.P. Duraisamy. The Court also directed that in case Rs 50,00,000/- is not paid by A. Valliammai within 6 (six) months, she shall be liable to pay interest @ 8% per annum on Rs 50,00,000/- from the date of this judgment till the date on which the payment is actually made.

MHCO Comment:

The Division bench of the Supreme Court has further clarified that the period of limitation for specific performance of a contract when no time is fixed, runs from the date on which the plaintiff has notice of refusal to perform by the defendant. Further, it has also recognized that the Court has to determine the date on which the plaintiff had notice of refusal on part of the defendant to perform the contract.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.