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Introduction
The Hon'ble Bombay High Court, in the Commercial Arbitration Petition filed in Sachin Corporation & Anr. v. Kusuma Bhandary Construction Private Limited & Ors., the Petitioner sought directions under Section 27 of the Arbitration and Conciliation Act, 1996 ("the Arbitration Act") to the Collector of Stamps for a speedy assessment of stamp duty and penalty, thereby enabling the relevant instruments to be relied upon during arbitral proceedings.
The Court took cognizance of the recurring procedural issue where Arbitral Tribunals routinely forward instruments to stamp authorities for assessment of stamp duty and penalty—often without regard to the nature of the instrument or the transaction evidenced. Such practices frequently resulted in arbitral proceedings being delayed or suspended, leading to repeated requests for extension of the Tribunal's mandate due to the time lost awaiting assessment and return of stamped instruments.
Facts and Legal Issue
In the instant petition, the petitioners invoked Section 27 of the Arbitration Act, seeking the Court's assistance in taking evidence in respect of an inadequately stamped instrument. The key issue before the Court was whether an Arbitral Tribunal could independently assess and collect stamp duty on an inadequately stamped instrument or whether such authority was exclusively vested in the Collector of Stamps under the Maharashtra Stamp Act, 1958 ("the Stamp Act").
Court's Observations and Findings
The Court held that an Arbitral Tribunal is empowered to examine whether an instrument is inadequately stamped and, except for instruments falling under Section 32A(1) of the Stamp Act, can compute and collect the requisite stamp duty. Upon payment, the Tribunal may admit the instrument into evidence following the procedure prescribed under the Stamp Act.
To elucidate its reasoning, the Court delved into the relevant provisions of the Stamp Act, summarizing them as follows:
Section 33 – Impounding of Instruments
Any person authorized by law to receive evidence must impound an instrument chargeable with stamp duty if it appears to be inadequately stamped or unstamped.
Section 32A – Instruments Requiring Adjudication by Collector
This section applies to instruments that warrant registration under the Registration Act, 1908, and those where stamp duty depends on the market value of the property, such as conveyances, exchanges, gifts, certificates of sale, partitions, or powers of attorney involving consideration. Adjudication of such instruments lies within the exclusive jurisdiction of the Collector.
Section 34 – Admission of Inadequately Stamped Instruments
This provision mandates that no inadequately stamped instrument shall be received in evidence, acted upon, registered, or authenticated unless duly stamped.
Section 35 – Effect of Admission in Evidence
Once an instrument is admitted in evidence, such admission cannot be questioned later on the ground of being inadequately stamped, except as provided under Section 58.
Section 37 – Procedure After Admission in Evidence
When a person under Section 33 admits an instrument in evidence after collecting duty or penalty, they must send an authenticated copy along with a certificate specifying the amount of duty and penalty to the Collector. The instrument itself must also be forwarded to the Collector.
Section 39 – Collector's Role
Upon receiving an instrument under Sections 33 or 37(2), the Collector examines it, determines the correct stamp duty, levies any penalty, and certifies the instrument as duly stamped. This section underscores the procedural interplay between the authority admitting the document and the Collector.
Section 41 – Certification of Duty Paid
The person admitting the instrument into evidence must endorse a certification confirming payment of duty. Such authority extends not only to the Collector but also to any person authorized under Section 33.
Section 58 – Appellate Court's Power
Section 58 empowers an appellate court, either suo motu or on the Collector's application, to declare that an instrument admitted in evidence was inadequately stamped. The court may then collect the deficient duty itself or forward the matter to the Collector for recovery, confirming that the Collector is not the sole authority empowered to assess or collect stamp duty.
Implications for Arbitral Tribunals
A combined reading of these provisions indicates that an Arbitral Tribunal qualifies as a person under Section 33 of the Stamp Act, authorized to receive evidence and therefore duty-bound to examine whether instruments are adequately stamped.
Under Sections 34, 37(1), and 39, an Arbitral Tribunal may:
* Impound inadequately stamped instruments,
* Compute the stamp duty and penalty,
* Collect and remit the same to the Collector along with an authenticated copy, and
* Admit the instrument into evidence.
This process applies to all instruments except those covered under Section 32A, where the adjudication must be carried out exclusively by the Collector.
The Court expressly discouraged the prevailing practice of Tribunals forwarding instruments to the stamp authorities and suspending arbitral proceedings pending their return. Such delays undermine the objective of speedy dispute resolution enshrined in the Arbitration Act. Instead, if the stamp authorities later determine that additional duty is payable, they retain the right to initiate proceedings for its recovery—without halting the arbitration process.
Conclusion
In conclusion, the Hon'ble Bombay High Court held that since the instrument in question did not fall within the ambit of Section 32A of the Stamp Act, the Arbitral Tribunal was competent to assess the stamp duty and admit the document into evidence after following the prescribed procedure.
The judgment reinforces the point that Arbitral Tribunals are empowered to independently deal with issues of stamp duty, thereby preventing unnecessary procedural delays and ensuring that arbitration proceedings continue efficiently and expeditiously.
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