Unstamped Agreement, Quantum Not Disputed, Court Can Collect While Deciding Section 11 Petition: Bombay High Court

The bench of Justice Manish Pitale relied upon the recent judgment of the Delhi High Court in Spendor Landbase v. Aparna Ashram Society^[1] to hold that the Court would be within its powers to determine and collect the unpaid stamp duty, especially, when the quantum of amount to be paid is not seriously disputed. It held that the Court can either impound the agreement and sent it to the Collector of Stamps and direct the parties to pay the requisite stamp duty along with the penalty or itself perform such a task through an officer.

Facts

The parties entered into an agreement titled as ‘Employee Non-Disclosure and Non-Solicitation Agreement’ dated 15.11.2021. The agreement contained an arbitration clause, however, it was not stamped.

A dispute arose between the parties and the petitioner invoked the arbitration clause. Upon the failure of the parties to mutually appoint the arbitrator, the petitioner filed an application under Section 11 of the A&C Act. The respondent objected to the maintainability of the petition on the ground that the agreement in which the arbitration agreement is embedded in not stamped, therefore, it cannot be acted upon. The respondent placed reliance upon the recent judgment of the Constitution Bench of the Hon’ble Supreme Court wherein the Apex Court held the non-stamped arbitration agreements to be non-enforceable.

Submissions

The petitioner made the following submissions in support of the petition:

• The agreement in question is simply a non-disclosure and non-solicitation agreement executed between the parties, having no monetary value assigned to it.
• That under the provisions of the Maharashtra Stamp Act, 1958 (Maharashtra Stamp Act) and the Schedule appended thereto, the stamp duty payable on such an unstamped subject agreement can be determined by a simple exercise. Thereafter, this Court may grant an opportunity to the petitioner to pay such stamp duty before an officer of this Court, who can then endorse the same and transfer the stamp duty, deposited by the applicant along with an authenticated copy of the subject agreement, to the Collector of Stamps, facilitating hearing and disposal of the present application filed under Section 11 of the Arbitration Act.
• The High Court of Delhi in a recent judgment in Splendor Landbase (supra) has adopted a similar course to expeditiously decide the arbitration petitions and harmonise the purpose of the stamps act with Section 11(13) of the A&C Act.
• The stamp duty to be paid upon the agreement would be as per Article 5(h)(A) and (B) of the Maharashtra Stamps Act which would be 100 rupees and the penalty for 22 months would come to Rs. 44 rupees, therefore, the total duty including the penalty is Rs. 144, which the petitioner is ready to deposit before the Court.

The respondent did not seriously dispute the manner or the quantum of the stamp duty to be paid.

Analysis by the Court

The Court held that the Court exercising power under Section 11 of the A&C Act can itself determine and collect the unpaid or deficit stamp duty payable upon the unstamped or insufficiently stamped agreement.

The Court relied upon the recent judgment of the Delhi High Court in Spendor Landbase v. Aparna Ashram Society^[2] to hold that the Court would be within its powers to determine and collect the unpaid stamp duty, especially, when the quantum of amount to be paid is not seriously disputed. It held that the Court can either impound the agreement and sent it to the Collector of Stamps and direct the parties to pay the requisite stamp duty along with the penalty or itself perform such a task through an officer.

The Court observed that the agreement in question is a simple non-disclosure and non-solicitation agreement and there is no monetary value assignable to it, therefore, it would attract a stamp duty of Rs. 100 in terms of Section 5(h)(B) of the agreement.

Accordingly, the Court directed the Prothonotary and Senior Master to impound the original agreement and collect the determined amount and forward the same to the collector of stamps. It held that upon the payment of the stamp duty, the Prothonotary and Senior Master shall endorse the agreement, as having been duly stamped and issue a certificate in writing and forward such amount to the collector of stamps. The Court directed the officers to complete the whole exercise within 10 days.

Case Title: John Cockerill India Limited v. Sanjay Kamlakar Navare, Commercial Arbitration Application (L) No. 10282 of 2023

Date: 12.09.2023

Counsel for the Petitioner: Mr. Rohan Kelkar a/w. Ms. Sarah Navodia and Ms. Pragya Chandak

Counsel for the Respondent: Mr. Piyush Raheja a/w. Mr. Dharmesh Pandya

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[1] Arb. P. No. 366 of 2021