M/S Shriram EPC Limited v. Rioglass Solar SA
An ICC award was delivered in London 12.02.2015 in favour of the Respondent ordering the Claimant to pay a sum of €4,366,598.70. The Appellant then challenged the award under section 34 of the Arbitration Act but all objections to the stated award were rejected by the learned single judge of the Madras High Court. In pursuance of which, an appeal was filed before the division bench of the same court which was also held non-maintainable in view of section 50 of the Act.
Arguments challenging the validity of the award
The Appellant's Counsel argued that Article III of the New York Convention makes it clear that stamp duty, being in the nature of fees or charges for recognition and enforcement of a foreign award, shall be enforced in accordance with the rules and procedure of the territory in which the award is sought to be enforced. Therefore, the New York Convention itself recognizes that foreign awards may have to bear stamp duty for enforcement in the country in which they are sought to be enforced
Argument supporting the enforcement of the award
According to the Respondent's counsel, the expression "award" which occurs in Schedule I of the Indian Stamp Act, 1899 applies only to a domestic award and not a foreign award, the term "award" in the Indian Stamp Act has never been enlarged so as to include foreign awards. Also, according to the learned counsel, the only requirement for the enforcement of a foreign award is laid down in Section 47 of the Act, which does not require the award to be stamped. Also under Section 48(2)(b), even if a foreign award was required to be stamped, but is not stamped, enforcement of such an award would not be contrary to the fundamental policy of Indian law.
Issues before the court
Whether the Term 'Award' in Schedule I of the Indian Stamp Act, 1899 would include a foreign award?
The court, after observing the history of Arbitration in India since the first Indian Arbitration Act, 1899 and the Indian Stamp Act, 1899, came to a view that the expression "award" has never included a foreign award from the very inception till date.
The court while observing the Judgment cited by the Appellant in Senior Electric Inspector and Ors. v. Laxminarayan Chopra, where the Supreme Court had ruled that in a modern progressive society, it would be unreasonable to confine the intention of the legislature to the meaning attributable to a word used at the time the law was made, held that here in this case the Indian Stamp Act, 1899 is a fiscal statute and shall be construed literally.
The court rejected another judgment by the appellant, Gujrals Co. v. M.A. Morris, in which it had been held that an instrument which is executed out of India would relate to a matter not to be done in India making stamp duty payable on such an award, on the grounds that this judgment does not refer to the definition of "award" in Item 12 of Schedule I at all.
Instead the Supreme Court decided to rely upon Narayan Trading Co. v. Abcom Trading Pvt. Ltd. which explained why foreign awards do not have to suffer stamp duty. While Arbitration Act was enforced, no amendment was made in the definition of award given or in the Schedule in the Indian Stamp Act to include foreign award. The court also said even though section 47 of the Act does not require the award to be stamped, it also does not prohibit payment if it is otherwise payable by law.
The court was in addition of the view that Indian Stamp Act, 1899 is a fiscal statute and it certainly reflects the fundamental policy of Indian law. Consequently, a foreign award is not included in Schedule I of the Indian Stamp Act, 1899, and does not become unenforceable on not paying stamp duty. Therefore, this court upheld the decision of the Madras High Court and held that even if a foreign award has not borne stamp duty under the Indian Stamp Act, 1899, this would not render it unenforceable.
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