Indian Kanoon - Search engine for Indian Law

Mr. Rohit Das, Ms. Ashapurna Roy, Ms. Shradha Rekhechea ... for the appellant Mr. Debasish Kundu, Sr. Adv., Mr. Swatarup Banerjee, Mr. R.N. Ghose ... for the respondent Heard on : 26.11.2015, 01.12.2015, 02.12.2015, 11.12.2015, 14.12.2015, 21.12.2015, 04.01.2015.

Judgment on : January 29, 2016.

Sahidullah Munshi, J.:-

This appeal under Section 37(1)(a) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Arbitration Act') arises from an order dated 24th September, 2015, passed by the Hon'ble Single Judge in an application under Section 9 of the Arbitration Act, filed by the respondent (Srei Equipment Finance Ltd.) being A.P. No.1974 of 2014 (Srei Equipment Finance Ltd. - Vs. - Saumya Mining Ltd.). While considering the respondent's application under Section 9 of the Arbitration Act an objection was raised by the appellant herein that if an arbitration agreement contains a clause for hypothecation the same could not be relied upon unless stamped as per Article 40(b) of Schedule IA of the Indian Stamp Act, 1899. The Hon'ble Single Judge answered in the negative and held that -

It is the contention of the appellant that the Hon'ble Single Judge ought not to have invoked jurisdiction under Section 9 of the Arbitration Act since the arbitration agreement could not have been relied upon, the same not being sufficiently stamped. It is the contention of the appellant that the clause in the agreement is in the nature of mortgage and the agreement should have been treated to be a mortgage deed and required proper stamping in accordance with Article 40(b) of the Stamp Act. Rather the same ought to have been impounded and dealt with by the Hon'ble Single Judge in accordance with Sections 35 and 38 of the Stamp Act. It is the contention of the appellant that -

a) Hypothecation deed or an instrument consisting of an express hypothecation clause ought to be treated as a mortgage deed as defined under Section 2(17) of the Stamp Act;

b) The document should have been stamped within the meaning of Article 40(b) of Schedule IA under Bengal Stamp (Amendment) Act, 1922 and the Indian Stamp (Bengal Amendment) Act 1935 read with Sections 3 and 2(17) of the Stamp Act;

c) Section 35 of the Stamp Act provides that no instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of party authority to receive evidence or shall be acted upon, registered or authenticated by any such person or by any public officer unless such instrument is duly stamped;

Referring to the case of Hindustan Construction Co. - Vs. - Board of Revenue reported in AIR 1986 Kerala 142, as cited by the learned counsel we hold that the document was not chargeable to stamp duty under Article 37 as a deed of mortgage.

On consideration of the materials on record and the rival contentions made by the parties we hold that the Hon'ble Single Judge has committed no error in invoking the jurisdiction under Section 9 of the Arbitration Act and there are no infirmities in the order under appeal. We hold that the relevant clause in the agreement being clause No.4.1 comes within the second exemption under Article 40(2) of Schedule IA of the Stamp Act. Letter of hypothecation accompanying a Bill of exchange being exempted, by implication, all the other types of hypothecations fall within the ambit of the said Article and payment of stamp duty is not mandatory.