India: Stamp Duty On Foreign Arbitral Award

Last Updated: 27 November 2018
Article by Ashima Obhan and Shubhangi Agarwal

In a recent decision, the Supreme Court of India in M/S Shriram EPC Limited vs Rioglass Solar Sa1 has ruled that it is not necessary for a foreign arbitral award to be stamped. This judgement has put to rest an issue on which various High Courts of India had given differing opinions.

Facts

An ICC award was delivered in London ordering M/S Shriram EPC Limited (“Appellant“)to pay the damages along with the interest to Rioglass Solar Sa (“Respondents“). In furtherance to the award passed, the Appellant had challenged the same under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act“) in the High Court of Madras. However, the Single Bench passed an order in favor of the Respondents. The Respondents later filed a petition under Section 47 of the Arbitration Act for the enforcement of the foreign award. This petition of the Respondents was allowed by the High Court of Madras. The matter was further taken up to the Division Bench by the Appellants wherein one of their contentions was that since the stamp duty has not been paid on the foreign award, the same will not be enforceable. However, this appeal was dismissed. Consequently, a special leave petition was filed in the Supreme Court, but only to the extent of stamping of a foreign award.

Dispute

The fundamental question raised in the present appeal was whether the expression “award” will include a foreign award under the provisions of the Indian Stamp Act, 1899 (“Stamp Act“) and if an unstamped foreign award can be enforced under Sections 48 and 49 of the Arbitration Act.

Decision of the Supreme Court

The Supreme Court considered the history of the Stamp Act, former provisions of the Civil Procedure Code, 1882, erstwhile acts related to arbitration in India, principles propounded in the New York Convention and various judgements and held that the definition of award till date has not been amended to accommodate the term foreign award.

The Supreme Court held that the Stamp Act originally dealt with awards made in British India. However, the awards that were made under the princely states did not fall under the purview of the same Stamp Act. Thus, such awards were treated as foreign awards.The Supreme Court also discussed that in the present Arbitration Act as well, there has been a compartmentalisation between the domestic and the foreign awards.The Supreme Court stated that, “It will thus be seen that “award” under Item 12 of Schedule I of the Indian Stamp Act, 1899 has remained unchanged till date. As has been held by us hereinabove, in 1899, this “award” would refer only to a decision in writing by an arbitrator or umpire in a reference not made by an order of the Court in the course of a suit. This would apply only to such award made at the time in British India, and today, after the amendment of Section 1(2) of the Indian Stamp Act, 1899 by Act 43 of 1955, to awards made in the whole of India except the State of Jammu and Kashmir. This being the case, we are of the view that the expression “award” has never included a foreign award from the very inception till date.” The Supreme Court also discussed the meaning of foreign award under the Arbitration (Protocol and Convention) Act, 1937, the Foreign Awards (Recognition and Enforcement) Act, 1961, the New York Convention and the Geneva Convention.

The Appellants had relied on Senior Electric Inspector and Ors. vs Laxminarayan Chopra and Anr.2, to argue that an act must be construed as on date, despite the fact that the definition contained in an old Act may not literally fit the bill. The Supreme Court, keeping in mind the present situation, dismissed this case. Additionally, the Supreme Court said that the Stamp Act is a fiscal statute, the same must be construed literally and benefit must go to the assessee who is to pay stamp duty.

The Supreme Court placed reliance on judgment of the Madhya Pradesh High Court in Narayan Trading Co. vs. Abcom Trading Pvt. Ltd3. which held that when the Arbitration and Conciliation Act 1996 was amended, no amendment was made to the definition of the term "award" under the Stamp Act and that similar the Schedule in the Stamp Act that lays down the stamp duty payable was not amended to include a foreign award.

In the light of the above, the Supreme Court held that the mere fact that a foreign award has not borne stamp duty, would not make such foreign award unenforceable.

Footnotes

1 2018(5) ARBLR 161 (SC)

2 1962 3 SCR 146

3 (2013) 2 MP LJ 252

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