Insufficiency of stamp duty on the arbitration agreement is a jurisdictional issue: Delhi High Court.
The Delhi High Court has passed a judgement on 10-01-2022 in the case of Religare Finvest Ltd. Vs Asian Satellite Broadcast Pvt. Ltd ARB. A. (COMM.) 6/2021 & I.A. 2614/2021. Justice Sanjeev Narula allowed this petition.
FACTS O THE CASE
In March 2014, seven companies forming part of the Zee Group of Companies approached the Appellant viz. Religare Finvest Limited to avail loan facilities for investment and consolidation of promoters’ interest in their group companies.
Separate Loan Agreements dated, all on 15th March, 2014 [hereinafter referred to as the “Loan Agreements”] were entered into between Religare and (i) Asian Satellite Broadcast Pvt. Ltd., (ii) Konti Infrapower & Multiventures Pvt. Ltd. (iii) Widescreen Holdings Pvt.Ltd., and (iv) Edisons Infrapower & Multiventures Pvt. Ltd.4 [hereinafter collectively referred to as the “Zee Companies”].
Zee Companies failed to repay their debt on time, constraining Religare to issue notices dated 7th May, 2019 invoking arbitration viz. Clause 16.1 contained in the Loan Agreements. Consequently, a common Sole Arbitrator was appointed on 7th May, 2019 and four separate arbitration proceedings ensued.
Zee Companies filed applications in each of the proceedings, challenging the scope of proceedings and jurisdiction of the Arbitrator under Section 16 of the A&C Act. It was inter-alia contended that, as the Loan Agreements were first executed in Mumbai, they should have been stamped in accordance with Section 24 read with Entry 5(h)(A)(iv)(b) of Schedule I of the Maharashtra Stamp Act, 1958 at the rate of 0.2%, and since the Loan Agreements are insufficiently stamped, they are unenforceable. Thus, unless deficient Stamp Duty is paid, the proceedings should be terminated. Religare contested the application raising several jurisdictional objections and on merits contended that the Loan Agreements are duly stamped as per Article 5(c) of Schedule I-A of the Indian Stamp Act, 1899 (as applicable to the National Capital Territory of Delhi).
JUDGMENT
In the opinion of the Court, the learned Arbitrator erred in concluding that the Loan Agreements were chargeable to Stamp Duty in Mumbai. Further, even if Stamp Duty has been affixed as per the MSA, it does not ipso facto, under law, render the instruments amenable to the MSA. A party’s understanding would not preclude it from disputing/contesting the question of chargeability of Stamp Duty under law. Under Section 19 of MSA, an instrument would be chargeable to duty in Maharashtra only when it is received in the State and not otherwise. The documents with signatures of only Zee Companies were not ‘instruments’ to attract the said provision.
Accordingly, the impugned Order is set aside to a limited extent – qua findings rendered apropos applicability of the MSA. The matter is remanded back to the Arbitral Tribunal for issuing fresh directions in light of the afore- said findings. The learned Arbitrator shall examine if the instruments are sufficiently stamped under Article 5(c) of Schedule 1A of the ISA as applicable to Delhi, and issue appropriate directions.
The petition was allowed.
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ARTICLE WRITTEN BY ABHINAV CHATURVEDI