27 October 2023

                            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.

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