Arbitration is increasingly used as tool for dispute resolution. Hence, any provision relating to arbitral award is of intense scrutiny. Karnataka Stamp Act 1957 and the other similar stamp acts applicable in other states consider an arbitral award as an instrument chargeable with duty.
Schedule 1 Article 11 of Karnataka Stamp Act says
Award:- that is to say, any decision in writing by an arbitrator or umpire, not being an award directing a partition, on a reference made otherwise than by an order of the Court in the course of a suit :
The same duty as a conveyance ( under Article no 20 (1) on the amount or market value of the property (which is subject matter of the award) which ever is higher
Similar such provisions are available in stamp acts of other states as well.
From this it is very clear that Arbitration award relating to certain types of issues mentioned above attracts stamp duty. However, it is not very clear who is bound to pay stamp duty on an arbitral award relating to an arbitral award in relation to a contractual dispute.
Section 30 of the Karnataka Stamp Act provides Stamp Duty by whom payable: “In the absence of an agreement to the contrary, the expenses of providing the proper stamp shall be borne:
(a) in the case of any instrument described in any of the following articles of the schedule namely No. 2( administration bond, No.6 Agreement relating to deposit of tiled deeds pawn or pledge) No 12( Bond) , No 13 ( bottomry bond) No 23( customs bond) , No 27 (Further charge), No 29 ( indemnity bond) , No 34 Mortgage deed) , No 45 ( release) , No 46 (Respondential Bond) , N0 47 Security Bond or Mortgage deed), No 48 Settlement, No 52 (a) transfer of debentures, being marketable securities, whether the debenture is liable to duty or not) No 52 (b) transfer of any interest secured by a bond, mortgage deed or policy of insurance) by the person daring , making or executing such instrument,
(b) in the case of a conveyance (including a re-conveyance of mortgaged property) by the grantee; in the case of a lease or agreement to lease-by the lessee or intended lessee;
(c) in the case of a counterpart of lease__by the lessor;
[ca) in the case of power of attorney - by the principal.]
(d) din the case of an instrument of exchange __ by the parties in equal shares;
[(dd) in the case of a certificate of enrolment in the roll of Advocates maintained by the State Bar Council __ by the Advocate enrolled)];
(e) in the case of a certificate of sale__by the purchaser of the property to which such certificate relates; and
(f) in the case of an instrument of partition by the parties thereto in proportion to their respective shares in the whole property partitioned, or, when the partition is made in execution of an order passed by a Revenue authority or Civil Court or Arbitrator, in such proportion as such authority, Court or Arbitrator direct
From the above it is not very clear whether for arbitral awards other than awards relating to partition of property stamp duty is payable by whom.
Another question is whether the court should look in to the aspects of payment of stamp duty on the arbitral award while admitting petitions for setting aside such arbitration awards is highly debated.
Section 31 (5) of the Arbitration Act award merely says that arbitrator should provide a signed copy of the award to each party. The Arbitration Act does not mention anything about the stamp duty and the person responsible to pay the stamp duty. On the other hand section 34 of the Arbitration Act is very clear that an aggrieved party to an arbitral award has a resource to file an application to setting aside the arbitral award. The copy of the arbitral award received from the arbitrator if provided in a court of law with a petition to setting aside the said award whether courts in such instances should look in and confirm that the stamp duty is paid on the arbitral award ?
Supreme court of India’s judgement in M. Anasooyadevi Vs M. Manik Reddy (2003) 8 SCC 565 considered this question. This case was a case against the order of the Andhra Pradesh high court. The Andhra Pradesh high court took a view that since the award was not stamped and registered, it was there fore invalid. The Supreme Court on the other hand opined that the question as to whether the award is required to be relevant only when the parties filed the award for enforcement under section 36 of the Arbitration Act. The question whether an award requires stamping and registration should be considered only at the execution stage and not in a proceedings to set aside the arbitral award.
By: Rajesh Vellakkat