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Inadequately Stamped Arbitral Awards
Arbitration is a procedure in which a dispute is submitted, by consent of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for an out of court settlement.
Is stamping of domestic arbitral award mandatory for enforcement?
For an arbitral award to be enforceable, there are a number of obligatory and non-obligatory requirements that ought to be fulfilled. One of such requirements is stamping and registration of domestic arbitral awards. Insufficiency or any inadequacy in stamping of documents impact its validity and enforceability. Some of the major legislations and provisions governing such matters are, Section 34 and Section 36
of Arbitration and Conciliation Act 1996, Section 17 and Section 3 of Indian Stamps Act, 1899.
Issues pertaining to unstamped domestic arbitral awards
On completion of the process of arbitration, finality to the merits is given by pronouncing an arbitral award. Consequent to the passing of an award, there are two possible outcomes namely, setting aside of arbitral award and enforcement of such award by execution under Sections 34 and 36 of Arbitration and Conciliation Act, 1996 respectively.
As per Section 33 of the Stamps Act, a public officer is obligated to impound any document which is inadequately stamped or unstamped. It is an obligatory clause and not merely directory. The Supreme Court in the case of N. Bhargavan Pillai v. State of Kerala while referring to the said provision ordered that such public officer while exercising his power under Section 33 of the Stamps Act, 1899 cannot force the parties to produce documents and also, has the power to impound only original instruments and not copy of it. As per Section 31(5) of the Act, after pronouncement of an arbitral award each party is to be delivered a copy of the award. Therefore, in order to rectify the conflict between Section 33 of Stamps Act, 1899 and Section 34 of the Arbitration Act of 1996, the Delhi High Court practice directions are to be followed, according to which, on notice from Registry of High Court, Arbitrator is mandated to forward the original arbitral award along with the respective arbitral record to the Registry of High Court.
In the case of Eider PW1 Paging Limited and Eider PW1 Communications Ltd. vs. Union of India, the question was regarding validity of judgment passed in the case of M Anasuya Devi vs. M Manik Reddy i.e. whether an unstamped arbitral award challenged under Section 34 of Arbitration and Conciliation Act can be impounded on the basis of Section 33 of Stamps Act, 1899. The Delhi High Court in this case held that the judgment given in Anasuya's case by the Apex court to be per incuriam and further pronounced that the provision under Section 33 of Stamps Act, 1899 is mandatory and thereby, an unstamped arbitral award under Section 34 for setting aside arbitral award is liable to be impounded as per Section 33 of the Stamps Act, 1899.
However, the Delhi High Court in the case of M. Sons Enterprises Pvt. Ltd. and Anr vs. Suresh Jagasia and Anr took another path while considering the interplay between Section 34 of Arbitration Act and Section 33 of Stamps Act. It held in contrast to the judgment given in Eider's case, stating that, the verdict passed by Supreme Court in Anasuya's case cannot be invalidated as per incuriam as it was silent over the provisions under Stamps Act.
Considering the contentions and contradictory judgments delivered by the Supreme Court and High Courts, the question of the interplay between Section 33 of the Stamps Act, 1899 and Section 34 of the Arbitration and Conciliation Act, 1996 still remains vague and ambiguous.
- Legal provisions
- Judgements
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