Madhya Pradesh High Court
M/S Sundaram Finance Ltd. vs Mukesh Parashar on 8 August, 2024
Author: Vivek Rusia
Bench: Vivek Rusia
1 MP-1872-2020
IN THE HIGH COURT OF MADHYA PRADESH
AT GWALIOR
BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA
&
HON'BLE SHRI JUSTICE RAJENDRA KUMAR VANI
ON THE 8th OF AUGUST, 2024
MISCELLANEOUS PETITION NO. 1872 OF 2020
M/S SUNDARAM FINANCE LIMITED
Versus
MUKESH PARASHAR AND ANOTHER
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Appearance:
Shri Kailash Narayan Gupta learned senior counsel with Ms Suhani
Dhariwal, learned counsel for the petitioner.
Shri Nikhil Rai, learned counsel for the respondents.
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ORDER
Per: Justice Vivek Rusia Petitioner has filed this present petition under Article 227 of the Constitution of India challenging the order dated 19.11.2019, whereby the execution application has been dismissed on the ground that the Award is not executable due to non-compliance of the order dated 25.09.2019, whereby the difference of stamp duty and penalty was imposed on the Award passed under the Arbitration and Conciliation Act, 1996.
2. The facts of the case, in short, are as under:-
(i) The petitioner is a Public Limited Company Signature Not Verified Signed by: ABHISHEK CHATURVEDI Signing time: 17-08-2024 02:52:41 PM 2 MP-1872-2020
incorporated under the Indian Companies Act, 1956 (now 2013) and engaged in the business of loan facilities for higher purchase of motor vehicles, machinery, leasing vehicles, equipment and machinery etc.
(ii) The respondent availed loan facility for the purchase Hyundai Eon Car Model, 2015 from the petitioner sometime in the month of September 2015. A loan agreement dated 14.09.2015 was entered between the parties, in which respondent No. 2 entered as guarantor for extending a loan amount of Rs.3,67,836/-. As per the terms and conditions of the contract, the aforesaid amount was returnable in 46 equal monthly installments commencing from 14.09.2015 till 10.06.2019. In order to extend the loan facility, the vehicle purchased by respondent No. 1 was hypothecated with the petitioner by creating an exclusive charge over the vehicle as a security of the repayment of the loan amount.
(iii) Respondent No. 1 paid the EMI up to the 13th installment thereafter he became the defaulter. Several notices were issued to settle the matter or to surrender the vehicle. Respondent No. 1 made repayment up to the 20th installment, which fell due on 10.04.2017. Thereafter petitioner Company initiated the legal proceedings by invoking an arbitration clause. Shri S.S. Mariappan, Retired Sub-Judge, Chennai was appointed as the sole Arbitrator to decide the dispute between the parties. The petitioner submitted a claim for recovery of Rs.1,98,490.67 before the Arbitrator. Respondent No. 1 did not appear before the Arbitrator, hence, proceeded ex parte. The sole Arbitrator passed Signature Not Verified Signed by: ABHISHEK CHATURVEDI Signing time: 17-08-2024 02:52:41 PM 3 MP-1872-2020 an Award at Chennai under the provisions of Section 31 of the Arbitration and Conciliation Act, 1996. Learned Arbitrator fixed stamp duty payable under Schedule-IA, Article 12 of the Indian Stamp Act as applicable in the State of Tamil Nadu, i.e., Rs.150/- and made the Award final on 22.09.2017. A copy of the Award was sent to the respondents for compliance. Respondents did not prefer any application under the provisions of the Arbitration and Conciliation Act to challenge the aforesaid Award. The petitioner had no option but to initiate the execution proceedings of the Award as provided under Section 36 of the Arbitration and Conciliation Act, 1996 after the expiry of the limitation prescribed under Section 34 of the Arbitration and Conciliation Act, 1996, i.e., 90 days.
(iv) The execution case was filed in the month of July 2018 before the Civil Court, Gwalior in order to recover an amount of Rs.2,50,669/- and registered as Arbitration Case No.83/2017. The notices were issued to the respondents being a judgment debtor. At the stage of issuing the warrant for attachment of the property, an objection was taken by the Court suo moto whether the arbitral award produced for execution is sufficiently stamped as per the provisions of the Indian Stamps Act, 1899 as applicable in the State of Madhya Pradesh. The petitioner explained to the court that the Award was passed in the State of Tamil Nadu and the stamp duty was affixed as per the Indian Stamp Act as applicable in the State of Tamil Nadu hence no penalty is liable to be paid on a payment of the difference amount Signature Not Verified Signed by: ABHISHEK CHATURVEDI Signing time: 17-08-2024 02:52:41 PM 4 MP-1872-2020 under Section 19-A of the Stamp Act as applicable in the State of Madhya Pradesh. It is also submitted that Section 35 has been amended by adding a proviso with effect from 23.10.2017, according to which, it is for the Court to accept the Stamp Duty at the rate of 2% of the stamp duty payable and the penalty should not be more than the stamp duty payable and the discretion of the Collector to impose a penalty upto 10% is omitted.
(v) The aforesaid objection was not considered by the learned Court and vide order dated 25.09.2019 held that the arbitral award is insufficiently stamped as per the law applicable in the State of Madhya Pradesh in view of Section 19-A of the Stamp Act. The amendment made on 23.10.2017 shall not apply to the arbitration award passed on 22.09.2017. Hence, it cannot be sent to the Collector for adjudication. Learned Trial Court directed the petitioner to pay the deficit stamp duty along with 10-time penalty amounting to Rs.42,017.95. Upon failure of the payment of the aforesaid stamp duty and penalty vide order dated 19.11.2019 execution proceedings have been closed as the Award is not executable as per order dated 25.09.2019. Hence, this petition before this Court.
3. We have heard the learned counsel for the parties and perused the provisions of the Arbitration Act as well as the Indian Stamp Act applicable in the State of Madhya Pradesh.
4. The facts as stated above are not disputed by the respondents, therefore, legal issues are liable to be examined in this matter.
Signature Not Verified Signed by: ABHISHEK CHATURVEDI Signing time: 17-08-2024 02:52:41 PM5 MP-1872-2020
5. At the outset, Shri Gupta, learned senior counsel submits that the petitioner is not challenging the applicability of Section 19-A of the Indian Stamp Act, 1899, whereby an additional amount of stamp duty is liable to be paid on the Award under Schedule-IA Clause 12, i.e., 2% of the Award amount or the market value of the property to which Award relates, whichever is higher. The petitioner is ready to pay the difference amount of stamp duty. The Petitioner is only aggrieved by the imposition of penalty under Section 35 of the Indian Stamp Act, 1899. Learned senior counsel submits that Section 35 of the Indian Stamp Act as amended on 23.10.2017 will apply in this case as the Award has been put to execution after 23.10.2017. It is further submitted by the learned senior counsel that the Learned Court has wrongly applied the provisions of unamended Section 35. It is further submitted that it is not a case of imposing 10 times penalty on the appellant as the award cannot be said to be insufficiently stamped, which was passed in the State of Tamil Nadu and the stamp duty payable there, had already been paid. The Petitioner is only liable to pay the difference of stamp duty as per Section 19-A of the Stamp Act. In support of his contention, learned senior counsel has placed reliance on Magma Fincorp Ltd. Vs. Omshanker and another reported in 2020 Legal Eagle (MP) 148, Emp., MGMT of Ramkanali Colliery of M/s BCCL Vs. Workmen by Secy. Rasht. Colliery Mazdoor Sangh reported in (2001) 4 SCC 236 and Trustees of H.C. Dhanda Trust Vs. State of Madhya Pradesh and others reported in 2021 (2) MPLJ 36.
Signature Not Verified Signed by: ABHISHEK CHATURVEDI Signing time: 17-08-2024 02:52:41 PM6 MP-1872-2020
6. Learned counsel appearing on behalf of respondents submits that since the Award has been passed prior to 23.10.2017, therefore, provisions of unamended Section 35 will apply in this case. Hence, no interference is called for.
We have heard the learned counsel for the parties at length and perused the record of the case.
7. The Award is defined under Section 2 of the Arbitration and Conciliation Act, 1996, according to which, "arbitral award"
includes "interim award". Section 31(1) provides that the arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal. After the arbitral award is made, a signed copy shall be delivered to each party. Section 34, provides recourse to the Court against arbitral award by way of an application for setting aside such award in accordance with sub-sections (2) and (3), for which, an application may be made within a period of three months. Section 35 of the Arbitration and Conciliation Act, mandates that arbitral award shall be final and binding on the parties and persons claiming under it respectively. Section 36 of the Arbitration and Conciliation Act, provides enforcement of the Award, where the time for making an application for setting aside the arbitral award under Section 34 has elapsed, then the subject to provisions of sub-section (2), such award shall be enforced in accordance with the provisions of Code of Civil Procedure, 1908 in the same manner as if it were a decree of Court. Under the aforesaid provisions, an application for execution was filed before the Court at Gwalior. Admittedly the Award under execution has Signature Not Verified Signed by: ABHISHEK CHATURVEDI Signing time: 17-08-2024 02:52:41 PM 7 MP-1872-2020 become final under the provisions of the Arbitration and Conciliation Act as no application is filed under Section 34 and it is executable like a decree of civil Court.
8. In the present case, the Award was passed in the State of Tamil Nadu and admittedly stamp duty payable on the Award in that State had been paid by the learned Arbitrator at the time of signing of the Award, therefore, in the State of Tamil Nadu, Award was not insufficiently stamped. By virtue of Section 36, it was put to execution in the State of Madhya Pradesh. In the State of Madhya Pradesh, Section 19-A has been inserted in the Stamp Act, which says that where any instrument has become chargeable in any part of India other than Madhya Pradesh with the duty under this Act or under any other enactment for the time being in force in any part of India and thereafter become chargeable with a higher rate of duty in the Madhya Pradesh under Clause (bb) of first proviso to Section 3. The amount of the duty chargeable on such instrument shall notwithstanding anything contained in the first proviso to Section 3, be the amount chargeable or it under Schedule-IA, less the amount of duty if any already paid in India.
This section nowhere says that the documents/ deed/ instrument shall be taken up under the provisions of Sections 33 and 35 of the Indian Stamp Act. This section only mandates the payment of difference of stamp duty under Schedule IA, Clause 12 provides only 2% of the award amount or the market value of the property to which the award relates whichever is higher. In the present case, the petitioner is only liable to pay 2% of the Award when it is put Signature Not Verified Signed by: ABHISHEK CHATURVEDI Signing time: 17-08-2024 02:52:41 PM 8 MP-1872-2020 to execution in the State of Madhya Pradesh.
9. Section 33 of the Indian Stamp Act deals with the stage when any instrument which is liable to be stamped is produced in the evidence. Section 33, Sub-section (1) provides that every person having by law or consent of parties authority to receive evidence and every person in charge of a public office before whom any instrument, chargeable in his opinion is produced or comes in the performance of his functions shall examine whether the instrument is not duly stamped, impound the same. Such person shall examine the instrument so chargeable and so produced or coming before him in order to ascertain whether it is stamped with a stamp of the value and description required by law in force in India when such instrument was executed or first executed. Therefore, the date of execution is important for deciding the payment of the duty payable on the stamp. Sub- section (3) of Section 33 says that for the purpose of this Section, the State Government may determine what offices shall be deemed to be a public office and the State Government may determine who shall be deemed to be persons in charge of the public office.
10. Section 35 of the Indian Stamp Act comes into operation when any instrument not duly stamped comes before the trial court for admission as a piece of evidence. This section says that no instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence or shall be acted upon registered or authenticated by such person or by any public officer unless such Signature Not Verified Signed by: ABHISHEK CHATURVEDI Signing time: 17-08-2024 02:52:41 PM 9 MP-1872-2020 instrument is duly stamped and as per the proviso, the impounding penalty is liable to be imposed but in the present case, the Award has not been produced for the purpose of admission as evidence. In this case, the admissibility of the Award is not in dispute in view of Section 36 of the Arbitration and Conciliation Act, therefore, Section 35 of the Stamp Act would not be attracted in this case, especially for imposition of penalty.
11. In such facts and circumstances, the Award is liable to be dealt with under Section 19-A read with Section 33 of the Stamp Act for payment of difference of stamp duty under Schedule IA, Clause 12 of the Arbitration and Conciliation Act.
12. Recently, the Apex Court in the case of Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and Stamp Act, 1899 In Re. reported in (2024) 6 SCC 1 has held that there should be harmonization of the provisions of Arbitration and Conciliation Act and Stamp Act. The object of the Arbitration Act is to inter alia ensure the efficacious process of arbitration and minimize the supervisory role of the Court in the arbitration process. On the other hand, the object of the Stamp Act is to secure the revenue for the State. It is a cardinal principle of interpretation of the statute that the provisions contained in two statutes must be interpreted harmoniously to give full effect to both statutes. It is further held that the interpretation of law must give effect to the purpose of the Arbitration Act in addition to the Stamp Act and finally concluded that the agreements which are not stamped or inadequately stamped, are Signature Not Verified Signed by: ABHISHEK CHATURVEDI Signing time: 17-08-2024 02:52:41 PM 10 MP-1872-2020 inadmissible in evidence under Section 35 of the Indian Stamp Act. Such agreements are not rendered void or void ab initio or enforceable.
13. As held above (supra) the non-stamping or inadequate stamping is a curable defect. Therefore, by reading Section 36 of the Arbitration and Conciliation Act and Sections 19-A and 33 of the Indian Stamp Act as applicable in the State of Madhya Pradesh harmoniously only the difference of stamp duty is liable to be paid which the petitioner is ready to pay. Therefore, the learned Court has wrongly assessed the penalty payable by the petitioner and wrongly dismissed the execution proceedings for want of payment of stamp duty and penalty. The execution proceedings are hereby restored. The petitioner shall pay the difference of amount as per Schedule-I, Article 12 on the arbitral award under execution.
14. Resultantly, the petition is allowed. No order as to cost.
(VIVEK RUSIA) (RAJENDRA KUMAR VANI)
JUDGE JUDGE
Abhi
Signature Not Verified
Signed by: ABHISHEK
CHATURVEDI
Signing time: 17-08-2024
02:52:41 PM