No Stamp Duty Is Payable On An Instrument Executed By, Or On Behalf Of, Or In Favour Of The Government, N.N. Global Not Applicable To Such Instruments: Delhi High Court

The bench of Justice Rekha Palli held that the recent judgment by the Constitution Bench of the Supreme Court in N.N. Global would have no application to an agreement executed by or on behalf or in favour of the government. It held that the Court exercising powers under Section 11 of the A&C Act would not refuse to appoint arbitrator once it ascertained that instrument falls within the exception created by the stamps act for government.

The Court also held that once the entity which had executed the agreement containing arbitration clause has been acquired by another entity, the acquiring party would step in the shoes of the executing party, therefore, it can invoke the arbitration clause.

The Court also reiterated that pre-arbitration reference to DRC would not come in the way of appointment of arbitrator when the request of the contractor to refer the dispute to DRC was not acted upon by the engineer. It held that the respondent would be estopped from raising the plea of petition being pre-mature after it failed to act upon the request of the contractor.

Facts

A work order dared 15.02.2016 was issued by the respondent in favour of the M/s Satya Narain. The work order was governed by the General Conditions of Contract (GCC) which contained an arbitration clause as well.

Subsequently, M/s Satya Narnian was acquired by the petitioner. A dispute arose between the parties, accordingly, the petitioner vide its letter dated 06.06.2022 requested the Chief Engineer, employed by the respondent, to refer the dispute to DRC as contemplated by the dispute resolution clause. However, upon the failure of the Chief Engineer to act upon its request, the petitioner approached the Court for the appointment of the arbitrator.

Submissions by the parties

The respondent made the following submissions against the appointment of the arbitrator:

• The petitioner is not a signatory to the arbitrator agreement, therefore, it cannot invoke the arbitration.
• The petition is pre-mature as the petitioner has not exhausted the pre-arbitration steps provided under the agreement.
• The agreement is not stamped. Therefore, it cannot be acted upon and no arbitrator can be appointed on the basis of an unstamped agreement.

Analysis by the Court

The Court observed that the signatory of the agreement, M/s Satya Narain, has been acquired by the petitioner and it has stepped into the shoes of the executor, therefore, it cannot be said that petitioner cannot invoke the arbitration clause contained in the agreement.

Next, the Court dealt with the objection regarding the petition being pre-mature. The Court observed that the petitioner had issued a letter to the respondent requesting it to refer the dispute to DRC, however, it failed to act upon such a request. It held that the respondent cannot be allowed to take the plea of petition being pre-mature.

Next, the Court dealt with the objection regarding the non-stamping of the agreement. The Court observed that proviso (1) to Section 3 of the Indian Stamps Act exempt instruments executed by, on behalf of or in favour of the government from payment of stamp duty. The Court held that Section 3 which is the charging section, exempts such instruments from payment of stamp duty, therefore, the agreement in question which is executed on behalf of the government would not be liable to payment of stamp duty and the judgment in N.N. Global would not apply.

Accordingly, the Court rejected the objections and appointed the arbitrator.

Case Title: M/s SVK Infrastructures v. Delhi Tourism and Transportation Development Corporation Ltd

Citation: 2023 LiveLaw (Del) 968

Date: 12.10.2023

Counsel for the Petitioner: Mr.Avinash Kr. Trivedi, Ms. Ritika Trivedi, Mr.Anurag Kaushik, Mr. Rhythem Nagpal and Mr. Jatin Arora, Advs.

Counsel for the Respondent: Ms. Shobana Takiar, Adv.

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