Karnataka High Court
State Of Karnataka vs M/S Siddharth Infotech Pvt Ltd on 19 September, 2025
Author: M.Nagaprasanna
Bench: M.Nagaprasanna
1
Reserved on : 12.08.2025
Pronounced on : 19.09.2025
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 19TH DAY OF SEPTEMBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
WRIT PETITION No.22542 OF 2025 (GM - CPC)
BETWEEN:
STATE OF KARNATAKA
THROUGH THE COMMISSIONER OF
PUBLIC INSTRUCTIONS
DEPARTMENT OF SCHOOL
EDUCATION AND LITERACY
K.R.CIRCLE, BENGALURU - 560 001.
... PETITIONER
(BY SRI ADITYA VIKRAM BHAT, AGA)
AND:
1. M/S. SIDDHARTH INFOTECH PVT. LTD.,
A COMPANY INCORPORATED UNDER
THE PROVISIONS OF THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT
NO.303, SHIVAPRAKRUTHI APARTMENT
TALACAUVERY LAYOUT, AMRUTHAHALLI
BENGALURU - 560 092
REPRESENTED BY ITS DIRECTOR
MR.B.G.KUMARSWAMY.
2
2. EVERONN EDUCATION LTD.,
(IN LIQUIDATION)
A COMPANY INCORPORATED UNDER
THE PROVISIONS OF THE COMPANIES ACT, 1956
REPRESENTED BY ITS OFFICIAL LIQUIDATOR
HIGH COURT OF MADRAS, CORPORATE BHAVAN
2ND FLOOR, NO.29, RAJAJI SALAI
NORTH BEACH ROAD, CHENNAI - 600 001.
... RESPONDENTS
(BY SRI CHINTAN CHINNAPPA, ADVOCATE FOR C/R-1)
THIS WRIT PETITION IS FILED UNDER ARTICLE 227 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED
03.07.2025, PASSED BY THE HON'BLE LXXXII ADDL. CITY CIVIL
AND SESSIONS JUDGE, COMMERCIAL COURT BENGALURU, CCH-
83, IN COM EX NO. 716/2023 PRODUCED AT ANNEXURE-A;
CONSEQUENTLY, ALLOW I.A NO.7 DATED 25.04.2025, FILED BY
THE PETITIONER, PRODUCED HEREWITH AS ANNEXURE-H.
THIS WRIT PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS ON 12.08.2025, COMING ON FOR PRONOUNCEMENT
THIS DAY, THE COURT MADE THE FOLLOWING:-
CORAM: THE HON'BLE MR JUSTICE M.NAGAPRASANNA
CAV ORDER
The petitioner/State of Karnataka-Judgment Debtor No.1 is
before this Court calling in question an order dated 03-07-2025
passed by the LXXXII Additional City Civil and Sessions Judge,
Commercial Court, Bengaluru on I.A.No.7 in Commercial Execution
No.716 pf 2023, whereby the application filed by the State under
3
Section 33 of the Karnataka Stamp Act, 1957 ('Karnataka Stamp
Act' for short) is rejected. The application filed was to impose stamp
duty and penalty upon the arbitral award that was sought to be
executed by the decree-holder.
2. Facts, in brief, germane are as follows:-
2.1. The petitioner is the State of Karnataka, in particular the
Department of Education. The 1st respondent is the decree-holder
one M/s Siddharth Infotech Private Limited. Dispute arose between
the two on certain payments that were to be made by the State for
a contract entered into between the State and the decree-holder.
The matter was referred to arbitration. The Arbitrator answering the
reference passes an award on 18-05-2022 in favour of the decree-
holder awarding ₹178,98,38,525/-. The judgment-debtor/petitioner
files a petition under Section 34 of the Arbitration and Conciliation
Act, 1996 ('the Act' for short) for setting aside the award, which
comes to be dismissed by the trial Court. The judgment-
debtor/petitioner has filed Commercial Appeal No.403 of 2023
4
under Section 37 of the Act challenging the rejection of Section 34
petition.
2.2. In the interregnum, the decree holder files an application
in Commercial Execution No.716 of 2023 seeking enforcement of
the arbitral award before the concerned Court on 20-12-2023. On
27-01-2024, the executing Court waives of the stamp duty payable
on the award, by relying on a judgment of this Court, on the ground
that the award was for payment of damages and not for movables
under Article 11 of the Karnataka Stamp Act. The judgment-debtor
files an application in I.A.No.5 challenging the order of waiver of
stamp duty granted by the trial Court which comes to be rejected,
the rejection of which was affirmed by this Court in Writ Petition
No.15601 of 2024. A Division Bench hearing the Commercial Appeal
No.403 of 2023, passes an order of stay directing the judgment-
debtor to deposit 75% of the arbitral award before the Registrar.
2.3. The executing court through an order dated 26-03-2025
allows I.A.No.6 filed by the decree-holder to send the original
arbitral award to the collector for the purpose of stamping wherein
5
the trial court directs the collector to collect stamp duty and
penalty. Subsequently, on 29-03-2025, the decree-holder, tries to
advance the case before the Executing Court/Trial Court and files
the original award along with the memo and challan showing
voluntary payment of Rs. 46,12,096 as stamp duty. The judgment-
debtor then files an application in I.A.No.7 before the concerned
Court under Section 33 of the Karnataka Stamp Act for impounding
the original arbitration award and to calculate the stamp duty and
penalty in accordance with the order dated 26-03-2025. The
executing Court rejects the application filed by the judgment-debtor
holding that the party shall pay the stamp duty and penalty after
the judgment in the writ petition pending before this Court. The
State being aggrieved by the said order is before this Court in the
subject petition.
3. Heard Sri Aditya Vikram Bhat, learned Additional
Government Advocate appearing for the petitioner and Sri Chintan
Chinnappa, leaned counsel appearing for respondent No.1.
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4. The learned Additional Government Advocate appearing for
the State would vehemently contend that the order of the
concerned Court bears no application of mind. The concerned Court
refers to a pending writ petition before this Court but, there is no
writ petition pending. What is pending is commercial appeal in
Commercial Appeal No.403 of 2023 filed by the State challenging
the rejection of Section 34 application. He would further contend
that the stamp duty and penalty ought to be paid by the decree
holder if it wants to execute the decree and the decree-holder has
undertaken to pay the stamp duty pending final outcome of the
proceedings before the Apex Court when the matter was taken to
the Apex Court by the State. The objections were overruled by the
concerned Court by a cryptic order and would submit that all
instruments sought to be executed are chargeable with duty and
executed by any person in the State of Karnataka shall be stamped
before its execution. He would seek to place reliance upon several
judgments to buttress his submissions.
5. Per contra, the learned counsel appearing for the 1st
respondent/decree holder would refute the submissions contending
7
that the issue with regard to imposition of penalty upon an arbitral
award is no longer res integra, as the coordinate Benches of this
Court have clearly held what should be the stamp duty or penalty
when arbitral awards are sought to be executed. He would also rely
upon several judgments to buttres his submissions. The judgments
relied on by the petitioner and the 1st respondent would bear
consideration qua their relevance in the course of the order.
6. I have given my anxious consideration to the submissions
made by the respective learned counsel and have perused the
material on record.
7. The afore-narrated facts are a matter of record. The State
suffers an arbitral award at the hands of the Arbitrator in terms of
his award dated 18-05-2022. The award of the Arbitrator is as
follows:
".... .... ....
AWARD
105. In the result, this Tribunal awards damages payable by
the respondent - State Government to the Claimant,
under the following heads of claim:
a. Costs incurred for Tender document
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preparation..............................................Rs.4,13,35,588/-
b. Earnest Money Deposit and delay in
return of the same.............................. Rs.1,32,31,438/-
c. Travel, Food and Beverage cost of employees
Deployed on the field......................... Rs.1,75,50,000/-
d. Salaries of Staff employed to oversee
the Project..............................................Rs. 75,60,000/-
e. Project Monitoring Software................Rs.5,97,87,030/-
f. Bank Guarantees..................................Rs.85,65,16,439/-
g. Purchase of Microsoft Operating System
Licenses......................................................Rs.10,47,30,952/-
h. Invoices towards supply of Computer Hardware
and other components and pending payments
payable, with interest.............................Rs.25,43,40,142/-
i. Payment of Costs towards excess supply
of furniture..............................................Rs.3,04,86,936/-
j. Post invocation of Bank guarantees the respondent's
failure to return the excess monies...Rs.83,00,000/-
k. Exemplary and Special Damages.......Rs.21,60,00,000/-
l. Legitimate expectation of the claimant in
terms of profit and future business.....Rs.18,00,00,000/-
-------------------------
Total: Rs.178,98,38,525/-
(Rupees One hundred and Seventy-eight Crore Ninety
Eight Lakhs Thirty Eight Thousand Five Hundred Twenty
Five only).
106. The claimant shall hence be paid a total sum of
Rs.178,98,38,525/- (Rupees One hundred and
Seventy eight Crore Ninety Eight Lakhs Thirty Eight
Thousand Five Hundred Twenty Five only) with
interest, at the rate of 18% per annum on the said total
amount, by the State Government-respondent, from the
date of Award till the date of payment. The respondent-
government shall also pay and bear the costs incurred by
the claimant in respect of this arbitration proceedings and
the stamp duty and registration fee, applicable in respect
of this Award."
9
Against the award, a petition is filed under Section 34 of the Act.
This comes to be dismissed on 31-07-2023. An appeal is filed under
Section 37 of the Act in Commercial Appeal No.403 of 2023 against
rejection of petition under Section 34 of the Act, which is said to be
pending before this Court. It is to be noticed at this juncture that
at the time of challenging the award under Section 34, the
judgment-debtors does not raise any contention with regard to
insufficient stamping of the arbitration award. The Court also does
not notice. The same happens in an appeal filed under Section 37 of
the Act. The award is said to be executed by the decree-holder in
Commercial Execution No.716 of 2023. The executing Court passes
the following order on 27-01-2024:
"The office is raised objection for payment of stamp duty
of Rs. 46,12,096/- on Arbitration ward.
The Advocate for the DHR argued that the stamp duty is
not applicable to the award. Since the arbitration award is not
deals with movable or immovable property.
In this regard DHR relied upon a decision reported
in Karnataka State Highways Improvement Project(
KSHIP - II) vs. M/S KMC - VDB (JV) WP No. 29440/2019
(GM - RES) passed by Hon'ble High Court of Karnataka
wherein held that
"When the award of the arbitrator deals with a
movable property or immovable property, by virtue of
the charging clause contained in Article 11 of the
Karnataka Stamp Act, 1957, such awards are bound
10
to suffer stamp duty before it is brought for
execution. In the case on hand, as rightly contended
by the learned counsel for the respondent, the award
does not deal with either movable property or
immovable property, but it awarded liquidated
damages payable to the respondent, arising out of a
construction contract. Therefore, the award does not
attract stamp duty as no provision is made in the
Karnataka Stamp Act, 1957 to collect stamp duty on
an award which deals with award of damages and
this court cannot supplement including the an
omission award in which the deals legislation by with
of grant damages.
In the present case the award discloses that
"On comprehensive view of matter it would be
just and fair to direct the State Government to pay
nominal damages, relatively, of a sum of Rs.
18,00,00,000/- to the claimant as compensation to
enable the claimant to put itself back on the rails, as
it were."
In view of the above decision I hold that in the
award the leaned arbitrator awarded liquidated damages
arising out of the contract. Therefore, the award not
attract the stamp duty. Hence office objection is waived
off."
(Emphasis added)
The executing Court waives of stamp duty, on the score that the
stamp duty does not get attracted in the case at hand following the
judgment of the coordinate Bench of this Court in Writ Petition
No.29440 of 2019. This is challenged by the State before this Court
in Writ Petition No.15601 of 2024. The coordinate Bench inter alia
holds as follows to reject the petition:
11
"8. A plain reading of the said provision of law mandates that
where the amount of the award exceeds Rs.5,00,00,000/-
(Rupees Five Crores only), a stamp duty of Rs.37,500/- plus
Rs.2,25,000/- plus 1/4% of the amount exceeding
Rs.5,00,00,000/- has to be paid as stamp duty on the award.
Thus, in the instant case, the award is required to be stamped.
However, the petitioner herein is State of Karnataka and as per
the arbitral award which the petitioner has suffered, it has to
bear the cost incurred by the claimant in respect of the
arbitration proceedings and the stamp duty and registration fee
applicable in respect of the award. The stamp duty payable
under the Karnataka Stamp Act, 1957 goes to the treasury of
the Government and for that reason, Section 3 of the Karnataka
Stamp Act, 1957 reads as under:
"3. Instruments chargeable with duty-Subject to the
provisions of this Act and the exemptions contained in the
Schedule, the following instruments shall be chargeable with
duty of the amount indicated in that Schedule as the proper
duty therefor, respectively, that is to say.-
(a) every instrument mentioned in that Schedule which,
not having been previously executed by any person, is
executed in the territories of the State of Karnataka on
or after the commencement of this Act; and
(b) every instrument mentioned in that Schedule which,
not having been previously executed by any person, is
executed out of the State of Karnataka on or after that
day, relates to any property situate, or to any matter
or thing done or to be done, in the territories of the
State of Karnataka and is received in the territories of
the State of Karnataka:
Provided that no duty shall be chargeable in respect of.-
(1) any instrument, executed by, or on behalf of, or in
favour of, the State Government in cases where, but
for this exemption, the State Government would be
liable to pay the duty chargeable in respect of such
instrument;
(2) any instrument for sale, transfer or other disposition,
either absolutely or by way of mortgage or otherwise,
of any ship or vessel, or any part, interest, share or
property of or in any ship or vessel registered under
the Merchant Shipping Act, 1958".
12
As the stamp duty is paid to the Government itself, no
duty is chargeable in respect of any instrument executed
by or on behalf of or in favour of the State Government in
cases where, but for the exemption, the State
Government would be liable to pay the duty chargeable in
respect of such instrument.
9. For the aforementioned reason, I am of the
opinion that respondent no.1 in the instant case is not
liable to pay stamp duty on the award, as eventually the
State Government is liable to reimburse the same, though
the said reasoning is not assigned by the trial court while
rejecting the application filed by the petitioner herein.
10. For the aforementioned reason, the writ petition is
hereby dismissed."
(Emphasis supplied)
The Court holds that the petitioner/State, as per the arbitral award
which it has suffered shall bear the cost incurred by the claimant in
respect of arbitration proceedings and stamp duty and registration
fee applicable in respect of the awards. The decree-holder is not
liable to pay the stamp duty on the award, as eventually the
Government is liable to reimburse the same and thus upholds the
order of the concerned Court. The State challenges the said order
before the Apex Court. The Apex Court by the following order
rejects the SLP:
"2. Arising out of the judgment dated 27-06-2024 passed
by the High Court in Writ Petition No.15601 of 2024 by which
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the payment of the stamp duty by the respondent was waived,
the present special Leave Petition has been filed.
3. Learned counsel appearing on behalf of
Respondent No.1 on instructions, submits that he is ready
to pay the stamp duty subject to the outcome of the
proceedings pending before the High Court. It is further
requested by him that hearing of those proceedings may
be expedited. Learned counsel for the petitioner is having
no objection for early hearing of the proceedings pending
before the High Court.
4. In view of the above and as conceded before this
Court, the respondent shall pay the stamp duty. The said
payment is subject to final outcome of the proceedings
pending before the High Court. We request the High Court
to decide the pending proceedings as expeditiously as
possible."
(Emphasis supplied)
While so rejecting, the undertaking of the decree holder that he is
ready to pay the stamp duty subject to outcome of the proceedings
pending before this Court is noticed. It was further observed that
the parties requested expeditious hearing of the proceedings. In
view of the submission, the 1st respondent was directed to pay
stamp duty. The said payment was subject to outcome of the final
proceedings before this Court. The pending proceeding at that point
in time was only the one that was filed under Section 37 of the Act.
The said order of the Apex Court is passed on 17-03-2025.
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8. An application is filed by the State in I.A.No.7 under
Section 33 of the Karnataka Stamp Act demanding payment of
stamp duty and damages or penalty as the case would be. The
application and the affidavit of the State is as follows:
"INTERLOCUTORY APPLICATION UNDER SECTION 33 OF THE
KARNATAKA STAMP ACT, 1957 R/W SECTION 151 OF THE CODE
OF CIVIL PROCEDURE, 1908.
That for the reasons sworn to in the accompanying
affidavit, the Judgment Debtor No.1 herein most humbly prays
that this Hon'ble Court may be pleased to impound the Arbitral
Award dated 18-05-2022, and send it to the Sub-Registrar,
Department of Stamps and Registration, Mallehwaram, to
calculate the stamp duty and penalty payable as per the order
of this Hon'ble Court dated 26.03.2025, in the interest of justice
and equity."
.....
AFFIDAVIT
... ... ...
3. I state that this Hon'ble Court vide order dated 26-03-2025
was pleased to direct the Sub-Registrar, SRO, Malleshwaram
to calculate the applicable stamp duty and penalty.
Admittedly, the said order came to be passed at the behest
of the Decree Holder as forthcoming in the order dated 17-
03-2025, passed in S.L.P.(C) No.7179 of 2025.
4. I state that the Decree Holder purports to have advanced the
case and in the memorandum of facts, it is stated that the
Decree Holder has allegedly paid the stamp duty on the
award. The said amounts which have been paid, have been
paid prior to the order passed by this Hon'ble Court, and are
not proper. Further, the Decree Holder has deliberately failed
to pay the penalty under the provisions of Karnataka Stamp
Act.
15
5. I state that the award is not stamped to the appropriate
value in the manner known to law. I state that upon the
failure of the Sub-Registrar, Malleshwaram to compute the
appropriate stamp duty and penalty in accordance with the
order passed by this Court, it cannot be stated that the
award becomes executable in the manner known to law.
6. I state that the judgment debtor No.1 being the State
Government, also has an interest in the payment of Stamp
duty on the arbitral award. The incorrect of stamp duty,
without following the order passed by this Hon'ble Court shall
cause loss to the State exchequer.
7. I state that in the event the accompanying application is not
allowed, the Judgment Debtor No.1 will be put to grave
hardship and irreparable injury. Per contra, no hardship will
be caused to the Decree Holder if the application is allowed."
The concerned Court rejects the application on the following
reasoning:
"9. From the arguments of both sides it is relevant to note that
this court has pass the order dated 27.01.2024 as the award
does not attract stamp duty as no provision is made in
Karnataka Stamp Act, 1957 to collect stamp duty on an award
which deals with award of damages. Being aggrieved by the
such order the JDR has prepared WP before the Hon'ble High
Court of Karnataka. Subsequently, the said order of this court
and Hon'ble High Court was challenged before the Hon'ble
Supreme Court in SLP No. 7179/2025. On 17.03.2025, the said
SLP was disposed off by passed the order as thus:
"The learned counsel appearing on behalf of Respondent
No.1, on instructions, submits that he is ready to pay the
stamp duty subject to the outcome of the proceedings
pending before the High Court. It is further requested by
him that hearing of those proceedings may be expedited.
Learned counsel for the petitioner is having no objection for
early hearing of the proceedings pending before the High
court.
16
In view of the above and as conceded before this court, the
respondent shall pay the stamp duty. The said payment is
subject to final outcome of the proceedings pending before
the High court. We request the High Court to decide the
pending proceedings as expeditiously as possible".
10. On perusal of the order of the Hon'ble Supreme court
where in it is mentioned the stamp duty and penalty has
to be paid by the DHR. Further, also it is observed by the
Hon'ble Apex court that the respondent shall pay stamp
duty. The said payment is subject to out come of the
proceedings pending before the Hon'ble High Court. The
payment of stamp duty was not fixed by the Apex court.
But it is also subject to outcome of WP. However, the
DHR has voluntarily paid the stamp duty before the
Senior Sub Registrar, Malleshwarm for Rs. 46,12,096/-
online challen dated 24.03.2025. On the basis of the said
payment, the Sub-Registrar, Malleshwaram, Bengaluru
has issued the receipt No. 1319739. Therefore, the
inability as made out an original award was not
forwarded to the sub-registrar for the endorsement. In
view of such circumstances, a stamp duty was paid by the
DHR.
11. The JDR has taken a contention that the penalty was
not paid. Furthermore, the payment of stamp duty is
subject to the outcome of the judgment in the writ
petition. The Relevant citations and the order of the
Hon'ble Apex Court have been considered. In my opinion,
the stamp duty and penalty are to be paid on the award
in question after the judgment in WP by the Hon'ble High
Court of Karnataka. Hence, I answer this point in the
Negative.
12. Point No.2: Accordingly, I pass the following;
ORDER
The I.A. No. 7 filed by the JDR No.1 under Section 33 of the Karnataka Stamp Act, 1957 read with Section 151 of CPC is hereby dismissed."
(Emphasis added) 17 The concerned Court holds that on a perusal of the order of the Apex Court supra the stamp duty and penalty have to be paid by the decree-holder. The Apex Court holds that it would be subject to the outcome of the proceedings before this Court. The payment of stamp duty was not fixed by the Apex Court.
9. The decree-holder has voluntarily paid the stamp duty before the Sub-Registrar, Malleshwaram to the tune of ₹46,12,096/-. The judgment-debtor now contends that penalty is not paid, but only stamp duty is paid. Therefore, the issue now boils down to whether penalty amount is to be paid by the decree-holder to execute the arbitral award. The issue of stamp duty is now laid to rest, as the decree-holder himself offered to pay stamp duty and has paid the same, which is subject to outcome of the pending appeal under Section 37 of the Act.
10. Whether penalty needs to be paid during the proceedings for enforcement of arbitral award before the executing Court need not detain this Court for long or delve deep into the matter.
1810.1. The Apex Court in the case of M.ANASUYA DEVI v.
M.MANIK REDDY1, has holds as follows:
"4. After we heard the matter, we are of the view that in the present case this issue was not required to be gone into at the stage of the proceedings under Section 34 of the Act. In fact, this issue was premature at that stage. Section 34 of the Act provides for setting aside of the award on the grounds enumerated therein. It is not in dispute that an application for setting aside the award would not lie on any other ground, which is not enumerated in Section 34 of the Act. The question as to whether the award is required to be stamped and registered, would be relevant only when the parties would file the award for its enforcement under Section 36 of the Act. It is at this stage the parties can raise objections regarding its admissibility on account of non- registration and non-stamping under Section 17 of the Registration Act. In that view of the matter, the exercise undertaken to decide the said issue by the civil court as also by the High Court was entirely an exercise in futility. The question whether an award requires stamping and registration is within the ambit of Section 47 of the Code of Civil Procedure and not covered by Section 34 of the Act."
(Emphasis supplied) The Apex court holds that the question regarding stamping and registration of a document under Section 17 of the Registration Act,1908 can only be raised at the stage of enforcement of the award under Section 36 of the Act.
1(2003) 8 SCC 565 19 10.2 A Co-ordinate Bench of this Court in the case of SHAKEEL PASHA v. M/s CITY MAX HOTELS2 holds that the executing court during execution proceedings, cannot under Sections 33 and 34 of the Karnataka Stamp Act, impound and impose penalty over an insufficiently stamped arbitral award and by way of the deeming fiction under Section 36 of the Act, an arbitral award is to be treated as a decree. The court holds as follows:
"..... .... .....
Interlinking the relevant provisions of Arbitration and Conciliation Act and Stamp Act
19. Taking note of the interplay of both the Acts, it is evident that an award cannot be acted upon by the court unless it is duly stamped. The Hon'ble Apex Court in the case of Anasuya Devi (supra) opined that the question of stamping the award is uncalled for at the stage of setting aside proceedings under Section 34 of the Act of 1996. Further, Apex Court has held that non- stamping of the arbitral award is not a ground for challenge under Section 34 of the Act of 1996, but can be considered as a ground to object at the stage of enforcing the award under Section 36 of the Act of 1996. Various High Courts while taking note of the Hon'ble Apex Court judgment rendered in Anasuya Devi (supra) have often faced difficulties as the law regarding impounding unstamped, insufficiently stamped award while hearing a petition under Section 34 of the Act of 1996 is unsettled. In the above backdrop, the anomaly with respect to the application of Section 33 of Stamp Act while hearing a petition for setting aside an award under Section 34 of the Act of 1996 still continues to subsist.
2W.P.No.8352 of 2022 decided on 28-07-2023 20
20. Several recommendations are made by the Law Commissions in the light of the Arbitrators appointed under the New Act have raised several questions as to what should be done when the original award once it is signed. There have been recommendations to incorporate a new provisions to Section 31(1) of 1996 Act on the lines of Section 14(2) of Arbitration Act, 1940 which would clear all the problems relating to stamping of arbitral award. The recommendations are also made to amend Sections 31(1) and 31(5) of the Act of 1996 and in addition provide that if the award requires compulsory registration under Section 17(1)(b) of Registration Act to have it duly registered. Therefore, unless there is an amendment to Section 31(1) of the Act of 1996, mandating award to be duly stamped and compulsory registration wherever it is required, this anomaly will continue.
21. In the present case on hand, the question that requires consideration is, as to whether Executing Court was justified in imposing penalty. An insufficiently stamped instrument if tendered in evidence has to be immediately impounded by the Court or an officer receiving the document. We are dealing with a case of arbitral award which requires stamping only at the stage of enforcement. It is trite law that a domestic award has to be stamped just before its execution. Therefore, I am not inclined to accept the mandate under Section 33 imposing the duty on the court to immediately impound in respect of insufficiently stamped arbitral award. We are dealing with an arbitral award which by fiction assume the character of a decree. Therefore, stamping and registration of an award is a matter which the Court has to see only when the parties file an award for its enforcement. The concept of imposing penalty on an insufficiently stamped instrument cannot be applied to an arbitral award in an execution proceedings.
22. In the light of discussion made supra, if an arbitral award by fiction assumes a character of a decree, the Executing Court cannot impose penalty. An arbitral award is sought to be enforced and is not subject matter of adversial lis which cannot be tendered in evidence for want of sufficiently stamped duty. The principles applicable to an insufficiently stamped instrument under 21 Sections 33 and 34 of the Karnataka Stamp Act cannot be extended to an arbitral award when the same is sought to be executed under Section 36 of the Act of 1996. A decree holder has not tendered an arbitral award for adjudication. On adjudication, an arbitral award is passed by an Arbitrator. The said award on dismissal of application in arbitration suit Com.A.S.No.26/2012 is sought to be enforced by the decree holder. If a decree holder has paid stamp duty and has sought for enforcement of a decree, even if the stamp duty deposited by the decree holder is found to be insufficient that will not attract the provisions of Sections 33 and 34 of the Stamp Act in execution proceedings.
23. As rightly pointed out by learned counsel appearing for the decree holder, it is really agonizing to learn that the decree holder is unable to enjoy the fruits of an arbitral award. The decree holder is virtually compelled to go through so much struggle to execute what has already been granted in his favour after a hard and arduous battle.
24. The intent of Arbitration Act to provide speedy resolution of the disputes gets completely defeated if judgment debtors are permitted to raise untenable defences in execution proceedings. An arbitral award without any provision for its speedy disposal is an anathema to the arbitration proceedings. Therefore, the Executing Court erred in impounding the arbitral award and the consequent imposition of ten times penalty is also not sustainable. As stated supra, the decree holder while seeking enforcement of an arbitral award has filed execution petition and has voluntarily deposited the stamp duty which is accepted by the Executing Court. Therefore, the question of imposing penalty would not arise and therefore, the order of the Executing Court in imposing penalty is liable to be set aside by this Court. The stamp duty collected by the Executing Court is also contrary to the law laid down by the Hon'ble Apex Court in the case of Anasuya Devi (supra).
25. In the present case on hand, the decree holder having filed a petition seeking enforcement of arbitral award has 22 deposited the stamp duty. The execution petition is filed on 23.07.2021. The Executing Court has calculated the stamp duty payable at Rs.72,500/- at first instance. The decree holder has deposited the stamp duty on 31.07.2021. On 05.10.2021, the judgment debtors have come up with an application under Section 33 read with Section 34 of the Karnataka Stamp Act for impounding the arbitral award. The question of impounding an arbitral award in an execution proceedings would not arise. All that the decree holder is required to do is pay the requisite stamp duty to enforce the arbitral award seeking recovery of money. Accordingly, point Nos.2 and 3 are answered in the negative."
(Emphasis supplied) The order of the learned single Judge in the case of SHAKEEL PASHA supra is challenged before the Apex Court in the case of SHAKEEL PASHA v. M/s CITY MAX HOTELS INDIA PVT. LTD.3 The Apex Court disposed it of, by the following order:
"Leave granted.
Heard the learned senior counsel appearing for the parties.
The issue of inadequacy of the stamp duty payable on an Award made by the Arbitral Tribunal under the Arbitration and Conciliation Act, 1996 was raised by the appellants in execution of the Award. Obviously, the appellants, who are the judgment- debtors, raised this objection which delayed the execution.
Now, there is no dispute between the parties that the stamp duty payable on the Award will be in terms of the Article 11 of the Schedule to the Karnataka Stamp Act, 1957 (for short "the Karnataka Stamp Act"). To that extent, clause (iii) of 3 Civil Appeal Nos. 2139-2140 of 2024 decided on 12-02-2024 23 paragraph 26 of the operative part of the impugned order is modified, as clause 11(b) was brought on the Schedule by a subsequent amendment with effect from 1st March, 2014 and the Award was made before the said date.
In this case, the Executing Court, in purported exercise of powers under Sections 33 and 34 of the Karnataka Stamp Act, directed penalty to be paid on account of non-payment of stamp duty on the Arbitral Award. The observations made in the impugned judgment will have to be understood in the context in which the same have been made. Under the Karnataka Stamp Act, there is no power conferred on the Courts to direct payment of penalty and it is the power of the appropriate authorities under the Karnataka Stamp Act to impose penalty.
In terms of the modification made of clause (iii) of paragraph 26 of the operative part of the impugned judgment and the clarification made above, the appeals are allowed in part on the above terms.
Now, the execution will proceed."
(Emphasis supplied) The Apex Court holds that the directions of the learned single Judge will have to be understood in the contest of the Karnataka Stamp Act and holds there is no power conferred on the Courts to direct payment of penalty, as it is only the power of the appropriate Authority.
2410.3 Another Co-ordinate Bench of this court while answering the issue of whether an award passed by the Arbitral Tribunal, under the provisions of the Act, can be impounded by the Executing Court, on the ground that it is insufficiently stamped and whether penalty as contemplated in clause (a) of Section 35 of the Indian Stamp Act, 1899 (which is pari-materia to Section 34 of the Karnataka Stamp Act) is leviable on the award in the case of M/s KANYAKUMARI BUILDERS v. M/s SPRING BOREWELL,4 holds as follows:
"An interesting question arises in this writ petition filed under Article 227 of the Constitution of India. Question is whether an award passed by the Arbitral Tribunal, under the provisions of the Arbitration and Conciliation Act, 1996, can be impounded by the Executing Court, on the ground that it is insufficiently stamped and whether penalty as contemplated in clause (a) of Section 35 of the Indian Stamp Act, 1899 is leviable on the award?
..... ..... .....
3. Learned Counsel for the petitioner brings to the notice of this Court a decision of a co-ordinate Bench in the case of Mr.Shakeel Pasha and Others Vs. M/s. City Max Hotels (India) Pvt. Ltd. in W.P.No.8352/2022, clubbed with W.P.12935/2022 dated 28.07.2023. It is submitted that having considered a judgment of the Hon'ble Supreme Court in the case of M.Anasuya Devi & Ors. Vs. M Manik Reddy & Ors. (2003) 8 SCC 565 and several other judgment of this Court including Sri Dilli Babu Vs. The State of Karnataka, reported in ILR 2015 KAR. 4336, the co-ordinate bench held that after 4 WP 45699 of 2019, Decided on 23-11-2024 25 completion of the arbitration process the merits are given finality by issuing an arbitral award. By way of a legal fiction, the award is to be treated as decree. Such legal fiction is created for the limited purpose of enforcement of an award as a decree. Arbitral award is tendered in execution proceedings for enforcement of an award.
Further, having regard to Sections 33 and 34 of the Karnataka Stamp Act, it was held that the award stemming from arbitration is possibly misconstrued by executing court to be an instrument. It was therefore held that the executing court erred in impounding the arbitral award in executing proceedings under Section 36 of the 1996 Act. It was also held that it is agonizing to see that a decree holder who has voluntarily deposited the requisite stamp duty is saddled with 10 times penalty. It was also directed that unless rules are framed and mechanism is brought into force indicating as to how arbitral award needs stamping and at what point of time it needs stamping, the executing courts should not impose penalty under Sections 33 and 34 of the Karnataka Stamp Act on arbitral awards.
..... .... .....
6. On hearing the learned Counsels and on perusing the petition papers, this Court finds that there are several loose ends in the provisions of the Act, 1996, insofar as payment of stamp duty on arbitral awards is concerned. In this regard, it would be relevant to notice the 194th Report of Law Commission on "Verification of Stamp Duties and Registration of Arbitral Awards". The issues discussed in the Law Commission were regarding stamp duties and registration in respect of arbitral awards. The Law Commission found that so far as stamp duties are concerned, the Indian Stamp Act, 1899 applies in respect to arbitral awards throughout India, but some States have passed separate Stamp Acts to govern the stamp duties in their States. So far as registration of award is concerned, the Registration Act 1908, deals with registration of documents. It was noticed that Section 35 of the Indian Stamp Act, 1899, (and corresponding provision in the State Act) says that documents which are required to be stamped, if they are not stamped or are inadequately stamped, will not be admissible in evidence 'for any purpose'. Section 33 deals with impounding of documents presented before the public authority who is entitled to record evidence. The Schedule to the Indian Stamp Act, 1899 contain a specific 26 provision in Article 12 mentioning the stamp duty payable on the 'arbitration awards'. Section 33 and 35 of the Stamp Act are thus attracted if the award is not stamped or is insufficiently stamped. The Law Commission noticed that in a judgment of the Madras High Court a question arose as to whether the Registry of the High Court would be justified in impounding a copy of the arbitral award where it was filed along with application under Section 34(1) of the Act, 1996, and it is also possible that such question may arise in an application filed under Section 36 of the Act, for enforcement of the award. It was noticed that the Madras High Court, in the case of M/s.Wilson and Co. Pvt. Ltd., Vs. K. S.Lokavinayagam, AIR 1992 Mad. 100, had held that the award could not be admitted in evidence and it gave direction for impounding the award in terms of Section 33 of the Stamp Act. Subsequently, a different view was taken by the Madras High Court in cases decided under the new Act, 1966 inasmuch as, the new Act, 1996 does not compel the parties to file the original award into court, while observing that the principles laid down in M/s.Wilson and Co., which arose under the 1940 Act does not apply.
(emphasis supplied)
7. In the report of the Law Commission, various problems regarding payment of stamp duty and registration or the arbitral awards were discussed. The Law Commission noticed conflicting judgments and observations of the Courts that a signed copy of the award was not the same thing as the original award. It was noticed that in Rikhabdass Vs. Ballabhadas, AIR 1962 SC 551, the Hon'ble Supreme Court held that the remittal of defective award (passed under the 1940 Act), to the Arbitrators for reiterating the award on stamp paper was not correct and the proper remedy was to direct parties to take steps to cure the defect by paying the stamp duty along with such penalties as may be levied. The Andhra Pradesh High Court, in Indurthi Srinivasa Rao Vs. Indurthi V.Narasimha Rao, AIR 1963 AP 193, held that the Arbitrators become functus officio as soon as the award is signed and hence they cannot rewrite the award on stamp paper. A Full Bench of the Andhra Pradesh High Court, in M.Venkataratnam Vs. M.Chelamayya, AIR 1967 AP 257 (FB) held that if the original award was unstamped and a copy of the award written on stamp papers was filed along with the original award, though the original award could not be regarded as duly stamped, the stamps on the copy of the award might be treated as 27 intended to serve as payment of stamp duty so as to enable the original award to be submitted in evidence under Section 35 of the Stamp Act. It treated the original award and copy thereof as a single document. When the said matter was taken up before the Hon'ble Supreme Court, in M.Chelamayya Vs. M.Venkataratnam, AIR 1972 SC 1121, the Hon'ble Supreme Court accepted the view taken by the Full Bench of the Andhra Pradesh High Court. In Jupudi V. Pulavarthi, 1970 SC 1070, the Hon'ble Supreme Court held that Section 35 of the Stamp Act imposes a bar on the reception of any document except the original and forbids the reception of secondary evidence and Section 36 of the Stamp Act, lifts the bar imposed under Section 35 only in a case where the original unstamped or insufficiently stamped document was admitted into evidence without objection. Further, the Madras High Court, subsequently pointed out in many cases that there may be a situation where a party feels it necessary to file an urgent application for stay of enforcement of award and if the Court insists on production of the original award which may not be available with the applicant, it can cause serious and grave hardship which sometimes cannot even be compensated in restitution proceedings if the award is later set aside. The Law Commission noticed that though Section 36 of the 1996 Act, states that enforcement of the award is not to be permitted if an application for setting aside the award is pending, it is possible that the opposite party may well nigh contend that there is no valid application under Section 34 as the signed copy of the award does not disclose that the original award bears the required stamp or that it is duly registered. The Law Commission also found that when an application is filed under Section 36 of the Act, the losing party may contend that the award is inexecutable because only a signed copy of the award is filed and that either the original award be filed or there must be a proof that the original award is properly stamped and duly registered.
8. The Madras High Court therefore gave an interim workable solution that the applicant will have to deposit the requisite stamp papers or equivalent value in cash in the Court, with a right to refund after the original award is called for and produced. The Law Commission has also discussed the problems arising under the registration laws, concerning the arbitral awards. The Law Commission concluded that in view of the provisions of Section 35 of the Stamp Act, 1899, the award which requires to be stamped is not stamped or is inadequately stamped, is 28 inadmissible for 'all purposes' and an award which requires to be registered, if it falls within Section 17(1)(b) of the Registration Act, 1908, and if it is not registered, is not a valid document and cannot be treated as affecting immovable property. It was noticed that whenever such problems arise in applications under Section 34(1) or application under Section 36 of the Act, 1996, initially the Court has no material before it to verify whether the original award has been duly stamped. Hence, it cannot issue notice on the applications. It was therefore concluded that this problem has arisen in the 1996 Act, in view of the fact that Section 31(5) requires the Arbitrators to send only signed copies of the award to the parties. These problems did not arise under the 1940 Act, because Section 14(2) of that Act required the filing of the original award in the Court and the parties could also apply to the Court to direct the Arbitrators to file the original award into Court. The Law Commission opined that the Madras High Court felt that this is a matter for legislative amendment and referred the matter to the Law Commission.
9. In Chapter III of the report of the 194th Report of the Law Commission, the interim workable solution suggested by the Madras High Court was discussed. It was suggested by the Madras High Court that the difficulty faced to find out whether stamp duty has been collected or not can be resolved by a simple amendment to Section 31(1) of the 1996 Act. It was proposed that Section 31(1) should be substituted as, 'an arbitral award shall be made in writing, duly stamped and shall be signed by the members of the Arbitral Tribunal.' Subsequently, by other orders, the Madras High Court directed that it is open to the party either to pay necessary stamp duty or to deposit the sum of money equivalent to the value of the stamp duty, in the Registry and it is also open to the Registry to recover the amount in cash.
10. After discussing the different solutions, the Law Commission recommended as a first alternative that Section 31(1) should be modified in terms of Section 14(2) of the Arbitration Act, 1940. As a second alternative, it was suggested that Sections 31(1) and 31(5) could be amended to state that the Arbitral Tribunal shall have to get the award duly stamped and in addition provide that if the award requires compulsory registration under Section 17(1)(b) of the Arbitration Act, 1908, to have it duly registered. A provision is necessary that the photocopies of the award shall be sent to the parties with an endorsement that the 29 award is duly stamped and wherever it requires compulsory registration, that it has been so registered. It was also noticed that the word 'duly stamped' can create some doubts and it will be difficult for the Court in which the copy is filed by the parties with such an endorsement, to find out if the stamp papers on which the original is engrossed are sufficient in value according to the law applicable. It was therefore recommended that the new provision must further require that the Arbitral Tribunal should specify in that endorsement, the value of the stamp duty paid on the original award.
11. Despite the recommendations made by the Law Commission, the provisions of the Act, 1996, have not been amended suitably. It is therefore not surprising that the problem persists and there is no proper guidance to the court, the lawyers and the litigant public. This court also finds that unlike other instruments/documents which require payment of stamp duty and registration, there is certainty, but, an award passed by the arbitrator, under the Arbitration and Conciliation Act, remain uncertain, till it attains finality. The successful party has to await and anticipate an appeal being filed by the aggrieved party, under Section 34 of the Act. The chances of the award being modified or varied, is also not ruled out. If stamp duty is paid by a party and thereafter, the award is modified, either reducing or increasing the value, then again the problem of payment of additional stamp duty or seeking refund of the stamp duty would arise. Moreover, question of levy of penalty would arise when there is certainty and yet stamp duty is not paid. Having regard to the uncertainty prevailing regarding payment of stamp duty on arbitral awards, Courts should not issue directions for payment of penalty. Rules in this regard, is therefore required at the earliest.
12. In the light of the discussion hereinabove, this Court is of the considered opinion that the executing courts dealing with an application under Section 36 of the Act, shall not direct payment of penalty in terms of Section 35 of the Indian Stamp Act, 1899 or under the Karnataka Stamp Act. This Court deems it necessary to reiterate that the Hon'ble Apex Court, in the case of Shakeel Pasha and others Vs. M/s. City Max Hotels, in Civil Appeal Nos.2139-2140/2024 (supra) has recently held that under the Karnataka Stamp 30 Act (more particularly Section 33) there is no power conferred on the courts to direct payment of penalty and such powers are conferred only on the appropriate authorities under the Karnataka Stamp Act to impose penalty."
(Emphasis supplied) In the aforesaid judgment, the Co-ordinate Bench holds that, the executing courts while dealing with an application under Section 36 of the Act, shall not direct payment of penalty in terms of Section 35 of the Indian Stamp Act, 1899 or under the Karnataka Stamp Act, 1957. The Co-ordinate Bench further states that an award passed by the arbitrator, under the Act, remains uncertain, till it attains finality as the successful party has to await and anticipate an appeal being filed by the aggrieved party, under Section 34 of the Act, due to which the chances of the award being modified or varied, is also not ruled out. If stamp duty is paid by a party and thereafter, the award is modified, either reducing or increasing the value, then again the problem of payment of additional stamp duty or seeking refund of the stamp duty would arise. Further, the question of levy of penalty would only arise when there is certainty and yet stamp duty is not paid. Due to the prevailing uncertainty 31 regarding payment of stamp duty on arbitral awards, Executing Courts should not issue directions for payment of penalty. The executing courts dealing with an application under Section 36 of the Act, shall not direct payment of penalty in terms of Section 35 of the Indian Stamp Act, 1899 or under the Karnataka Stamp Act, 1957.
10.4. The Co-ordinate Bench of this Court in the case of DR.
BANTWAL MOHAN MAHESH RAO v. VRISHABENDRAKUMAR G5 holds as follows:
"2. Learned counsel appearing petitioner/plaintiff contended that, in for the view of the judgment of the Apex Court in the case of SEETHARAMA SHETTY vs. MONAPPA SHETTY reported in AIR 2024 SC 5327, the trial court has no power to calculate the penalty and stamp duty. Under the same Act, they are to be referred to the competent authority, i.e., the District Registrar. The relevant portion relied upon by the learned counsel is extracted below:
"21.8. The scheme does not prohibit a party to a document to first invoke directly the jurisdiction of the District Registrar and present the instrument before Court/Every Person after complying with the requirement of duty and penalty. In such an event, the available objection under Sections 33 or 34 of the Act is erased beforehand. The quantum of penalty is primarily between the authority/court and the opposing party has little role to discharge.5
W.P.No.5075 of 2024 decided on 23rd January 2025 32
22. Reverting to the circumstances of the case by keeping in perspective the steps summarised in the preceding paragraph, we notice that, before the stage of admission of the instrument in evidence, the respondent raised an objection on the deficit stamp duty. Therefore, it was the respondent who required the suit agreement to be impounded and then sent to the District Registrar to be dealt with under Section 39 of the Act. In this case, the respondent desired the impounding of the suit agreement and collect the deficit stamp duty and penalty. The trial court is yet to exercise its jurisdiction under Section 34 of the Act. On the contrary, the trial court has called for a report from the District Registrar, so for all purposes, the suit instrument is still at one or the other steps summed up in paragraph 21. Therefore, going by the request of the respondent, the option is left for the decision of the District Registrar. Contrary to these admitted circumstances, though the suit instrument is insufficiently stamped, still the penalty of ten times under Section 34 of the Act is imposed through the impugned orders. The imposition of penalty of ten times at this juncture in the facts and circumstances of this case is illegal and contrary to the steps summed up in paragraph 21. The instrument is sent to the District Registrar, thereafter the District Registrar in exercise of his jurisdiction under Section 39 of the Act, decides the quantum of stamp duty and penalty payable on the instrument. The appellant is denied this option by the impugned orders. It is trite law that the appellant must pay what is due, but as is decided by the District Registrar and not the Court under Section 34 of the Act.
23. Hence, for the above reasons, the direction to pay ten times the penalty of the deficit stamp duty merits interference and accordingly is set aside. The trial court is directed to send the agreement of sale dated 29.06.1999 to the District Registrar to determine the deficit stamp duty and penalty payable. Upon receipt of the compliance certificate from the District Registrar, without reference to an objection under the Act, the suit document be received in evidence. All objections available to the respondents except the above are left open for consideration."
3. The same is not disputed by the learned counsel for the respondent.
334. In view of the above, the following order is passed:
(i) The writ petition is allowed.
(ii) The order dated 31.10.2023 passed by the trial
court in O.S.No.1164/2021 is set aside.
(iii) The trial court is directed to send the agreement dated 22.10.2019 to the District Registrar to determine the requisite stamp duty and penalty payable.
(iv) The trial court, upon receipt of the compliance certificate from the District Registrar, can proceed with the matter."
(Emphasis supplied)
11. On a reading of the law laid down by the Apex Court and the Co-ordinate Benches of this court, what would unmistakably emerge is that, during the pendency of the arbitration proceedings, the court cannot direct the payment of a specified amount of stamp duty and penalty over the arbitral award, particularly in execution proceedings. However, in the case at hand, liberty must be reserved to the Collector/Deputy Commissioner to collect stamp duty and impose penalty if required, only after the appeal under Section 37 of the Act has been concluded and the arbitration award attains finality. A caveat, in the case at hand, the decree holder himself has volunteered to pay stamp duty which would be subject 34 to the outcome of the Commercial Appeal No. 403 of 2023. In that light, I deem it appropriate to uphold the order passed by the concerned court, making it subject to the proceedings in the Commercial Appeal No. 403 of 2023. Ordered accordingly.
12. Accordingly, petition stands dismissed.
Interim order of any kind subsisting shall stand dissolved.
Sd/-
(M.NAGAPRASANNA) JUDGE bkp CT:MJ