The Delhi High Court has formulated the procedural framework to be followed after impounding insufficiently stamped arbitration agreements. The ruling was in light of the judgment rendered by a Constitution Bench of the Supreme Court dated April 25, 2023 in N.N. Global Mercantile v. Indo Unique Flame Ltd.
In a recent decision in Splendor Landbase Ltd. v. Aparna Ashram Society & Anr. on August 22, 2023, it was held:
- With a properly stamped agreement, submitting a certified copy suffices, avoiding the need for the original instrument.
- When addressing the application under Section 11 of the Arbitration Act, 1996, this Court can either send the impounded agreement/instrument to the Stamp Collector for proper payment of necessary stamp and penalties under Section 40 of the Stamp Act or permit the parties to deposit the required stamp duty & penalties under proviso (a) to Section 35 of Stamp Act.
- While taking recourse to Section 35 and ancillary provisions of the Stamp Act for deposit of the concerned stamp duty and penalty leviable, the Court invoked Rule 3 of the Delhi High Court (Original Side) Rules, 2018, by delegating the task of impounding the insufficiently stamped/unstamped agreements to the Court’s Registrar.
- If the Court considers not to take recourse under Section 35 of the Stamp Act, then the Court can send the original impounded instrument to the Collector by providing a timeframe for expedient adjudication.
- The Court followed Supreme Court’s direction in New Central Jute Mills Co. Ltd. v. State of West Bengal, that if the document is executed in one State but acted upon in another State, then the document must be stamped following the rules of the first State. If the second State has a higher rate, only the excess amount needs to be stamped in the second State based on its Rules.