Executing Court must ascertain stamp duty payment issue before enforcement of Arbitral Award - unilateral appointment of the Arbitrator without the petitioner’s consent could render the award void

Executing Court Must Ascertain Stamp Duty Payment Issue Before Enforcement Of Arbitral Award: Mp High Court 

Executing Court must ascertain stamp duty payment issue before enforcement of Arbitral Award: MP High Court 

The Court held that unilateral appointment of the Arbitrator without the petitioner’s consent could render the award void under Section 34 of the Arbitration and Conciliation Act, 1996 

 Published on June 21, 2024By Ritu  

Madhya Pradesh High Court: In a miscellaneous petition filed under Article 227 of the Constitution of India seeking to set aside the order dated 04-09-2023 passed by the Principal District Judge in Execution preceding for the arbitral award, a single-judge bench of Duppala Venkata Ramana, J., set aside the Principal District Judge’s order and instructed the Executing Court to address the stamp duty issue on the arbitral award and take appropriate actions per law. In the instant matter, the respondent-Bank initiated an arbitration proceeding against the petitioner for the recovery of an overdue loan. The Arbitrator ruled in favor of the Bank on 31-03-2017, awarding Rs. 2,03,600/- with costs of Rs. 500/-. The respondent filed an execution petition under Order 21 Rule 11(2) of CPC and Section 36 of the Arbitration and Conciliation Act, 1996, seeking recovery of the award amount with 18% interest per annum, in total Rs. 2,66,439/-. The petition included a request for attachment of movables. The petitioner objected under Section 47 of CPC, Order 21 Rule 58 of CPC, and Section 35 of the Stamp Act, 1899 and argued that the Arbitrator was unilaterally appointed by the Bank and did not declare impartiality. It was contended that the award was not adequately stamped. The petitioner who belonged to the ST community further claimed protection from attachment under Section 165 of the Madhya Pradesh Land Revenue Code, 1956. However, the respondent contended that the Arbitrator was appointed under a pre-amendment agreement, making the appointment valid. It was contended that the Arbitrator was impartial, and the execution proceedings are in accordance with law. It was further contended that the petitioner’s objections are a tactic to delay proceedings. The Court noted that Section 17 of the Stamp Act states that the instruments must be stamped before execution and an inadequately stamped award cannot be enforced. The Court stated that the Executing Court erred in not determining if the award was adequately stamped as required by Schedule 1-A Article 12 of the Stamp Act. The Court referred to M. Anasuya Devi v. M. Manik Reddy, (2003) 8 SCC 565, where the Supreme Court highlighted that the objections to non-stamping should be raised at the enforcement stage. The Court held that the award must be stamped before or at the time of execution and the absence of adequate stamping invalidates the execution. The Court noted that as per the Arbitration and Conciliation (Amendment) Act, 2015, unilateral appointments by an interested party are invalid. The Court stated that the unilateral appointment of the Arbitrator by the Bank, post-amendment, is invalid, as it breaches impartiality requirements. The Court further noted that Section 165 of the MP Land Revenue Code protects certain properties of ST community members from attachment and therefore, the petitioner’s properties cannot be attached as per Section 165 of the MP Land Revenue Code. The Court allowed the miscellaneous petition and set aside the order dated 04-09-2023, with instructions to the Executing Court to address the issue of stamp duty payment for enforcement of the arbitral award and to pass an appropriate order accordingly.

 [Brajesh Kumar Pannalal v. Indusind Bank Ltd., Misc. Petition No. 5538 of 2023, order dated 16-05-2024]