Stamp Duty Payable On Arbitration Agreement

If an agreement is not stamped, the court applies only to the provisions of a coercion decree to protect revenue. The Stamps Act requires the courts to enter into an agreement first and to ensure that stamp duty and penalty are paid before the agreement can be implemented as a whole. Given the imperative nature and power of the stamp law, the Garware Supreme Court also rejected the argument that the application of a technical objection would reject a party`s legitimate claim, particularly where the litigant is itself contractually responsible for the payment of stamp duty. On November 28, 2019, in S. Satyanarayana v. West Quay Multisport Private Limited, the Bombay High Court (“Tribunal”) issued an order stating that, where an arbitration agreement defines a state in which arbitration is to take place, that state`s stamp duty is applicable to that arbitration agreement. The West Quay surveyor develops berths in various ports in India. The Vishakhapatnam Port Trust awarded West Quay a construction contract for the development of a berth on a wharf in Vishakhapatnam. The respondent appointed S Satyanrayana (applicant) as a subcontractor under two 05.12.2012 employment agreements/contracts. These were for the supply of equipment and work for the construction of a composite wall for a stacking yard on this pier to the west of the Essar pallet factory at Vishakhapatnam port. West Quay did not argue about the validity of the arbitration clause, but argued that, since the arbitration clause requires, arbitration will be made in Mumbai, Maharashtra Stamp Act 1958 applies to that agreement. West Quay referred to the Supreme Court`s decision in Garware Wall Ropes Ltd.

v. Coastal Marine Constructions – Engineering Ltd (“Garware case”). In Garware, the Supreme Court ruled that an agreement is an indivisible unit. If there is a compromise clause, the appointment of the arbitrator should arise from that clause itself and the document must therefore be duly stamped. In SMS Tea Estates, the deed of tenancy was neither stamped nor registered, and it was therefore established that “if a rental deed or other deed is used as a means of recourse against the arbitration agreement, the court should check in advance whether a single objection is made on that behalf or not, whether the document is properly stamped. If it concludes that it is not properly stamped, it should be seized and processed in accordance with the procedure under Section 38 of the Stamp Act. The court cannot react to such a document or to the compromise clause it contains. However, if the right to the deficit and the penalty are paid in the manner defined in section 35 or section 40 of the Stamp Act, the document may be completed/admitted as evidence” “If a contract contains an arbitration agreement, it is an accompanying clause related to the settlement of disputes, which has nothing to do with the performance of the contract. It is as if two contracts, one on the material terms of the main contract and the other on dispute resolution, had been merged into a single contract for convenience. On April 4, 2019, in the case of Gautam Landscapes Private Ltd. and Ors v. Shailesh S. Shah and Ors, the Bombay High Court had to rule on two issues: (i) whether a document subject to a compromise clause is not stamped or insufficiently stamped; and (ii) In light of Section 11 (6A) of the Arbitration and Conciliation Act, 1996, inserted by arbitration and conciliation (Amendment) Act, 2016, it would be necessary for the Court of Justice to await the decision of the audit authorities before reviewing and issuing final orders under section 11, paragraph 6 of the Act, if the contested document is not properly labelled.

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