Eider Pwi Paging Limited & Eider ... vs Union Of India & Ors
2010 Latest Caselaw 585 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                          OMP No.78/2003
                                                 Reserved on: January 28, 2010

                                             Pronounced on: February 3, 2010

EIDER PWI PAGING LIMITED & EIDER PW1 COMMUNICATIONS LTD.

                                                                   ...Petitioners.

                                  Through:       Mr. Sanjay Bhatt, Advocate
              VERSUS

UNION OF INDIA & ORS                                               ....Respondents

Through:

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

1. Whether the Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not? Yes

3. Whether the judgment should be reported in the Digest? Yes

% JUDGMENT

VALMIKI J.MEHTA, J

1. In this petition, filed under Section 34 of the Arbitration and Conciliation

Act, 1996, a preliminary issue has arisen with regard to whether the hearing of

the petition on merits can take place or the same is to be deferred till payment of

the requisite stamp duty and applicable penalty. The need for decision on this

preliminary issue has arisen because of the objection taken by this Court, suo

moto, with regard to the non-entitlement of the petitioner to argue the petition

OMP 78/2003 Page 1 unless the impugned Award is impounded under Section 33 of the Stamp Act,

1899 and stamp duty with penalty is paid either as per the orders of this Court

under Section 33 of the Stamp Act or by the Collector under Section 40 of the

said Act. The respondent Union of India was not represented at the hearing, and

as already stated by me, the objection under Section 33 of the Stamp Act has

been raised by this Court suo moto. There is another issue as to whether by one

petition two separate Awards can be challenged, but, I am not taking notice of

the same for the present.

2. The Awards came to be passed on account of the disputes which arose

between the parties wherein the petitioners were granted licences of the Radio

Paging Services by the respondent in terms of the Licence Agreements dated

9.9.1996. The License Agreements total to eleven in number and were for

different cities such as Delhi, Mumbai, Calcutta etc. The petitioners had lodged

a claim in the arbitration proceedings for Rs.1325 crores. One relevant

additional fact to be noted is that admittedly the Radio Paging Services were not

started in any of the eleven cities for which licences were granted to the

petitioners. The Arbitrator dismissed the claims of the petitioners and the

operative paragraph of each of the two Awards reads as under:-

"22. For the reasons discussed hereinabove, it is necessary to hold that none of the three claims (1) return back, with interest, of initial payment of licence fee (2) return back, with interest, of the money received from invocation of the bank guarantees; and (3) payment of wasted expenditure calculated in crores are correct.

The claim of paying back of all these claims are liable to be rejected. Similarly, the claim for remainder licence fee made on behalf of non-Claimant is not correct and is left undecided. However, the retention and appropriation of the initial payment and money received on invocation of bank guarantee respectively is permissible and

OMP 78/2003 Page 2 correct. This award is passed accordingly. The parties shall bear their own costs."

3. The Arbitrator while passing the Awards and dismissing the claims of

the petitioner has noted that he was forced to pass the Award on plain paper

because in spite of the directions, the claimant/petitioners failed to furnish the

stamp paper of the requisite value.

4. The issue therefore to be decided by this Court is, whether this Court

before hearing objections to the Award on merits, is entitled to impound the

Awards under Section 33 of the Stamp Act, 1899 and, only when the requisite

stamp duty is paid with appropriate penalty only then can the objections on

merits be heard.

5. The following Sections of the Stamp Act, 1899 are relevant for arriving at

a decision on this issue:-

"33. Examination and impounding of instruments.--(1) Every person having by law or consent of parties authority to receive evidence, and every person in charge of a public office, except an officer of police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not duly stamped, impound the same. (2) For that purpose every such person shall examine every 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 the law in force in India when such instrument was executed or first executed:

Provided that--

(a) nothing herein contained shall be deemed to require any Magistrate or Judge of a criminal court to examine or impound, if he does not think fit so to do, any instrument coming before him in the course of any proceeding other than a proceeding under Chapter XII of Chapter XXXVI of the Code of Criminal Procedure, 1898 (5 of 1898);

(b) in the case of a Judge of a High Court, the duty of examining and impounding any instrument under this section may be delegated to such officer as the Court appoints in this behalf.

(3) For the purposes of this section, in cases of doubt,--

(a) the State Government may determine what offices shall be deemed to be public offices; and

(b) the State Government may determine who shall be deemed to be persons in charge of public offices.

38. Instruments impounded how dealt with.--(1) Where the person impounding an instrument under Section 33 has by law or consent of parties authority to receive evidence

OMP 78/2003 Page 3 and admits such instrument in evidence upon payment of a penalty as provided by Section 35 or of duty as provided by Section 37, he shall send to the Collector an authenticated copy of such instrument, together with a certificate in writing, stating the amount of duty and penalty levied in respect thereof, and shall send such amount to the Collector, or to such person as he may appoint in this behalf.

(2) In every other case, the person so impounding an instrument shall send it in original to the Collector.

40. Collector's power to stamp instruments impounded.--(1) When the Collector impounds any instrument under Section 33, or receives any instrument sent to him under Section 38; sub-section (2), not being an instrument chargeable 1[with a duty not exceeding ten naye paise] only or a bill of exchange or promissory note, he shall adopt the following procedure:--

(a) if he is of opinion that such instrument is duly stamped, or is not chargeable with duty, he shall certify by endorsement thereon that it is duly stamped, or that it is not so chargeable, as the case may be;

(b) if he is of opinion that such instrument is chargeable with duty and is not duly stamped, he shall require the payment of the proper duty or the amount required to make up the same, together with a penalty of the five rupees; or, if he thinks fit, an amount not exceeding ten times the amount of the proper duty or of the deficient portion thereof, whether such amount exceeds or falls short of five rupees:

Provided that, when such instrument has been impounded only because it has been written in contravention of Section 13 or Section 14, the Collector may, if he thinks fit, remit the whole penalty prescribed by this section.

(2) Every certificate under clause (a) of sub-section (1), shall, for the purposes of this Act, be conclusive evidence of the matters stated therein.

(3) Where an instrument has been sent to the Collector under Section 38, sub-section (2), the Collector shall, when he has dealt with it as provided by this section, return it to the impounding officer."

6. A reading of the aforesaid sections show that when an instrument, which

ought to be stamped with the requisite non-judicial stamp paper, is not so

stamped, then, in such circumstances, such instrument is bound to be

impounded. I use the expression „bound‟ because Section 33 uses the

expression „shall‟. That the expression „shall‟ in Section 33 is a mandatory

expression and not a directory expression i.e. it has to be read as „shall‟ and not

„may‟ is no longer res integra. It has been held by the Supreme Court in its

recent judgment reported as Government of A.P. Vs. P.Laxmi Devi, (2008) 4

SCC 720, vide para 16 thereof, that the duty of the Court under Section 33 of

the Stamp Act is mandatory in nature and the person before whom such

OMP 78/2003 Page 4 insufficiently stamped instrument comes, is duty bound to impound such

instrument. The said para reads as under:-

16. A perusal of the said provision shows that when a document is produced (or comes in the performance of his functions) before a person who is authorised to receive evidence and a person who is in charge of a public office (except a police officer) before whom any instrument chargeable with duty is produced or comes in the performance of his functions, it is the duty of such person before whom the said instrument is produced to impound the document if it is not duly stamped. The use of the word shall in Section 33(1) shows that there is no discretion in the authority mentioned in Section 33(1) to impound a document or not to do so. In our opinion, the word shall in Section 33(1) does not mean may but means shall. In other words, it is mandatory to impound a document produced before him or which comes before him in the performance of his functions. Hence the view taken by the High Court that the document can be returned if the party does not want to get it stamped is not correct. (underlining mine)

In view of the aforesaid judgment in P.Laxmi Devi's case, there is no

discretion in the authority as mentioned under Section 33(1) to impound the

document or not to do so, such authority shall do so and is bound to do so.

7. To a similar effect is another judgment of a three judge Bench of the

Supreme Court reported as Ram Rattan Vs. Bajrang Lal, (1978) 3 SCC 236.

Para-7 of the judgment is relevant, and which shows that an insufficiently

stamped instrument has necessarily to be impounded, and which paragraph

reads under:-

7. Mr Desai then contended that where an instrument not duly stamped or insufficiently stamped is tendered in evidence, the court has to impound it as obligated by Section 33 and then proceed as required by Section 35 viz. to recover the deficit stamp duty along with penalty.

Undoubtedly, if a person having by law authority to receive evidence and the civil court is one such person before whom any instrument chargeable with duty is produced and it is found that such instrument is not duly stamped, the same has to be impounded. The duty and penalty has to be recovered according to law. Section 35, however, prohibits its admission in evidence till such duty and penalty is paid. The plaintiff has neither

OMP 78/2003 Page 5 paid the duty nor penalty till today. Therefore, stricto sensu the instrument is not admissible in evidence. Mr Desai, however, wanted us to refer the instrument to the authority competent to adjudicate the requisite stamp duty payable on the instrument and then recover the duty and penalty which the party who tendered the instrument in evidence is in any event bound to pay and, therefore, on this account it was said that the document should not be excluded from evidence. The duty and the penalty has to be paid when the document is tendered in evidence and an objection is raised. The difficulty in this case arises from the fact that the learned trial Judge declined to decide the objection on merits and then sought refuge under Section 36. The plaintiff was, therefore, unable to pay the deficit duty and penalty which when paid subject to all just exceptions, the document has to be admitted in evidence. In this background while holding that the document Ext. I would be inadmissible in evidence as it is not duly stamped, we would not decline to take it into consideration because the trial court is bound to impound the document and deal with it according to law. (underlining added)

8. In view of the aforesaid judgments, and the provision of Section 33, this

Court is duty bound to mandatorily impound the Award which is unstamped.

As per the Schedule 1A of the Stamp Act, as applicable to the Delhi, an Award

as per Article 12 is to be stamped with the stamp duty as applicable to a Bond

under Article 15. A conjoint reading of Articles 12 and 15 shows that the

Award has basically to be stamped at 2% of the value of claims. In the facts of

the present case, when the claim of the petitioner was for Rs. 1325 crores, 2% of

this amount comes to 26.5 crores. It is only on account of the deliberate act of

the petitioner in failing to provide the necessary stamp papers to the Arbitrator,

that the Award had to be written on a plain paper and hence penalty has also to

be paid. Ten times the penalty of Rs.26.5 crores therefore would come to

Rs.265 crores per Award. Prima facie, and subject to the decision of Collector

under Section 40, of the Stamp Act, the total of the aforesaid two amounts is the

OMP 78/2003 Page 6 amount which would be payable by the petitioner before the Award can be

looked into by virtue of the provision of Section 33 of the Stamp Act.

9. The counsel for the petitioner has however placed reliance upon M.

Anasuya Devi & Anr. Vs. M. Manik Reddy and others, (2003) 8 SCC 565 in

which there are observations that the requirement of stamping of the Award has

to be considered at the stage of enforcement of the Award under Section 36 of

the Arbitration and Conciliation Act, 1996 viz in execution proceedings. Para 4

of this judgment is relevant and the same reads as under:-

"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)

10. In my opinion, though the observations in para 4 of the aforesaid

judgment seem to go in favour of the petitioner, however, this judgment is of a

Bench of two Judges of the year 2003 and wherein the earlier judgment of three

Judges in the case of Ram Rattan (Supra), which holds that impounding is

mandatory has not been considered. A decision of the Supreme Court of a three

Judge Bench prevails over the decision of a two Judge Bench vide Union of

OMP 78/2003 Page 7 India Vs. Raghubir Singh (1989) 2 SCC 754. Further, there is now a later 2009

decision of the Supreme Court whereby the provision of Section 33 of the

Stamp Act has been held to be mandatory viz of P.Laxmi Devi (supra). The

aspect of whether the provision of Section 33 is directory or mandatory was not

considered by the Supreme Court in the case of M.Anasuya Devi's case

(supra), and in fact, Section 33 of the Stamp Act has not even been adverted to

in the said judgment. The Supreme Court in the case of N. Bhargavan Pillai

Vs. State of Kerala 2004 (13) SCC 217 has laid down that when any judgment,

even of a Supreme Court, does not advert to a direct provision of law then, the

judgment is to be treated as having been rendered per incurriam. Para 14 of the

judgment in the case of M.Bhargavan Pillai is relevant and the same reads as

under:-

"14. Coming to the plea relating to benefits under the Probation Act, it is to be noted that Section 18 of the said Act clearly rules out application of the Probation Act to a case covered under Section 5(2) of the Act. Therefore, there is no substance in the accused-appellant‟s plea relating to grant of benefit under the Probation Act. The decision in Bore Gowda case2 does not even indicate that Section 18 of the Probation Act was taken note of. In view of the specific statutory bar the view, if any, expressed without analysing the statutory provision cannot in our view be treated as a binding precedent and at the most is to be considered as having been rendered per incuriam. Looked at from any angle, the appeal is sans merit and deserves dismissal which we direct." (Emphasis supplied)

11. There is another reason, in my opinion, why the decision of M.Anasuya

Devi's case does not apply to the facts of the present case and hence may not be

binding. This is because facts of each case are different and it is now settled

law that difference of even one vital fact would change the ratio of a judgment.

The Constitution Bench of the Supreme Court has said so in the case of Padma OMP 78/2003 Page 8 Sundara Rao Vs. State of Tamil Nadu, (2002) 3 SCC 533. Para 9 of this

judgment is relevant in this regard and the same reads as under:-

"9. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in British Railways Board v. Herrington 9. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases.

(underlining added)

12. The facts of M.Anasuya Devi's case (supra) are different than the facts

of the present case inasmuch as whereas in the present case firstly, it is this

Court which is suo moto taking an objection under Section 33 of the Stamp Act

whereas in the said case the objection was raised on behalf of a party to the

case, and secondly, the decision in M.Anasuya Devi‟s case was passed with

respect to objection to an Award passed in a family dispute where the issue

therein of partition was of joint Hindu family properties and the issue was not

of impounding of the Award but of the Award being set aside on account of the

same not being sufficiently stamped. In the present case, I am not seeking to set

aside the Award and hold the same as invalid and without jurisdiction as was

done by the High Court in the case of M.Anasuya Devi and therefore, which

finding was set aside by the Supreme Court, but, in the present case, I am only

seeking to impound the unstamped Award under Section 33 of the Stamp Act.

13. The issue which arises for decision in the present case is of vital

importance because in cases where a person makes a huge claim of money and

OMP 78/2003 Page 9 whose claims are dismissed, then obviously in these cases, there would not arise

the issue of execution of the Awards because the claims are dismissed.

Therefore, there arises no question of enforcement of the Award as was

considered to be the aspect in the case before the Supreme Court in M.Anasuya

Devi's case. Not only this, if Section 33 of the Stamp Act is not invoked by a

court, in spite of the fact that on the face of it a recalcitrant litigant deliberately

fails to provide the stamp papers for making the Award, then, in my opinion,

very serious consequences will ensue for the arbitration proceedings. The

serious consequences are that no person who knows his claims will be

dismissed, will file the necessary non-judicial stamp papers for drawing up of

the Award and would on the basis of the judgment of the Supreme Court in

M.Anasuya Devi contend that objections be heard in spite of the petitioner

deliberately flouting the provisions of the Stamp Act, 1899. I may note that

unlike in suits before Civil Courts where the stamp duty in the form of court fee

is payable at the outset by a litigant who approaches the court, in the arbitration

proceedings, the necessary stamp duty under the Stamp Act, is only payable at

the time of delivering of the Award which has to be affixed on a non-judicial

stamp paper, and it is this which will cause, if I can say so, a havoc in

arbitration proceedings whereby most frivolous claims of very high

disproportionate amounts would be filed and even in spite of dismissal of the

same, there would be no fear to a person of anything adverse against him

because it can be contended relying on M.Anasuya Devi‟s case that no stamp

OMP 78/2003 Page 10 duty need be paid and which issue can be raised only in execution proceedings.

I am of the opinion that the Supreme Court in M.Anasuya Devi‟s case did not

intend such an eventuality in cases where claim petitions before the Arbitrator

are dismissed and there consequently did not arise any issue of execution of

such Awards and thereby consequently the issue of stamping to be raised in

execution proceedings.

14. Finally I may add that whereas till recently the Award was to be stamped

only on a fixed nominal amount of stamp duty of Rs.75, however this position

has changed inasmuch as Article 12 of the Stamp Act with respect to the state of

Delhi was amended w.e.f. from the year 2001 and whereby now the fixed stamp

duty has been done away with and now an Award has to be stamped with ad

valorem stamp duty of 2% of the value of the disputes. I prima facie feel that if

a litigant is deliberately allowed to flout the requirements of payment of the

necessary stamp duty as per Articles 12 and 15 of the Stamp Act as applicable

to Delhi, then, the intention of the legislature in requiring payment of the higher

stamp duty will be set at naught in cases where an Award dismisses the claims

of claimants and there is no insistence of payment of stamp duty because it can

be claimed on the basis of M.Anasuya Devi‟s case that such issue should be

taken up at the stage of execution, whereas in these cases where the claims are

dismissed, there is in fact no issue of execution at all.

15. Since, this is a question of vital importance affecting the state exchequer,

I think it fit that this issue should be decided by a larger Bench if Hon‟ble the

OMP 78/2003 Page 11 Chief Justice thinks it so to be appropriate. Accordingly, in accordance with

Chapter-3, Part-B, Rule 1 Proviso of Volume 5 of the Punjab High Court Rules

as applicable to this Court and read with all other enabling provisions, I place

the papers before Hon‟ble the Chief Justice for considering the placing of the

issue at hand for decision by a larger Bench. The issues which, inter alia,

requires the consideration of a larger Bench, are as under:

(i) Whether a Court cannot exercise power of impounding an unstamped or

an insufficiently stamped document, although, it is so empowered under Section

33 of the Stamp Act, 1899 and also as so held by the Supreme Court in the

judgments of Government of A.P.Vs P. Laxmi Devi, (2008) 4SCC 720 and

Ram Rattan Vs Bajrang Lal, (1978) 3SCC 236 because such power can only be

exercised at the stage of enforcing of the Award under Section 36 of the

Arbitration &Conciliation Act, 1996?

(ii) Whether the decision in M.Anasuya Devi and Anr. Vs. M.Manik Reddy

and others, (2003) 8 SCC 565 takes away the power of the court to impound

insufficient or unstamped documents under Section 33 of the Stamp Act if the

court seeks to suo moto exercise the power, and which is, in fact, a duty of the

Court as per Section 33 of the Stamp Act and the aforesaid judgments in the

cases of Govt. of A.P. Vs. P.Laxmi Devi and Ram Rattan Vs. Bajrang Lal

(supra) ?

(iii) Can the decision in M.Anasuya Devi (supra) apply where a claim petition

including one for recovery of a monetary amount is dismissed and there would

OMP 78/2003 Page 12 therefore not arise any question of execution proceedings of such an Award and

therefore also the requirement of consideration of this issue of the requirement

of stamp duty on the Award at the stage of execution ?

(iv) Is the decision of M.Anasuya Devi, which has been rendered without

considering the relevant provisions including Section 33, 38 and 40 of the

Stamp Act 1899 is per incurriam as per the ratio of the decision of the Supreme

Court in N. Bhargavan Pillai Vs. State of Kerala 2004 (13) SCC 217 ?

(v) Will such interpretation of Section 33 of the Stamp Act that the

requirement of impounding of unstamped Award can be taken only at the

execution stage, not negate the intention of the legislature in amending Article

12 of the Stamp Act whereby the stamp duty on the Award was enhanced from

a fixed lump sum nominal amount to an ad valorem duty of 2% of the value of

the claims?

16. Accordingly, let the papers of this case along with the present order be

placed before Hon‟ble the Chief Justice for his consideration as stated above.

Since many cases are coming up before this Court where reliance is being

placed upon Anasuya Devi‟s case, I may request that if a larger bench is to be

constituted, then the larger bench may be constituted at an early date.

                                                    VALMIKI J.MEHTA, J


February 3, 2010
ib
OMP 78/2003                                                               Page 13