Karnataka High Court

The State Of Karnataka vs M/S Siddharth Infotech Pvt Ltd on 27 June, 2024

                                            -1-
                                                          NC: 2024:KHC:24179
                                                        WP No. 15601 of 2024




                     IN THE HIGH COURT OF KARNATAKA AT BENGALURU

                         DATED THIS THE 27TH DAY OF JUNE, 2024

                                         BEFORE
                            THE HON'BLE MR JUSTICE M.I.ARUN
                       WRIT PETITION NO.15601 OF 2024 (GM-CPC)


                BETWEEN:

                1.    THE STATE OF KARNATAKA
                      THROUGH THE COMMISSIONER OF
                      PUBLIC INSTRUCTION
                      DEPARTMENT OF SCHOOL
                      EDUCATION AND LITERACY
                      K.R. CIRCLE, BENGALURU-560 001.


                                                                ...PETITIONER
                (BY SRI ADITYA VIKRAM BHAT, AGA,
                SMT. RANSA VASANTHI D.L., HCGP AND
                SRI AMOG SHETTY Y., ADVOCATE)

                AND:
Digitally
signed by V     1.    M/S. SIDDHARTH INFOTECH PVT. LTD.
MANJUSHA
BAI                   A COMPANY INCORPORATED UNDER
Location:             THE PROVISIONS OF COMPANIES ACT, 1956
High Court of
Karnataka             HAVING ITS REGISTERED OFFICE
                      AT NO.303, SHIVAPRAKRUTHI APARTMENT
                      TALACAUVERY LAYOUT
                      AMRUTHAHALLI
                      BENGALURU-560 092
                      REP. BY ITS DIRECTOR MR. B.G. KUMARASWAMY.

                2.    EVERONN EDUCATION LTD. (IN LIQUIDATION)
                      REP. BY ITS OFFICIAL LIQUIDATOR
                      HIGH COURT OF MADRAS
                      CORPORATE BHAVAN, 2ND FLOOR
                      NO.29, RAJAJI SALAI
                                -2-
                                           NC: 2024:KHC:24179
                                        WP No. 15601 of 2024




     NORTH BEACH ROAD
     CHENNAI-600 001.


                                                 ...RESPONDENTS

(BY SRI CHINTAN CHINNAPPA, ADVOCATE FOR R.1;
SRI K.S. MAHADEVAN, ADVOCATE FOR R.2.)

      THIS PETITION IS FILED UNDER ARTICLE 227 OF THE
CONSTITUTION OF INDIA, PRAYING TO ISSUE A WRIT OF
CERTIORARI       OR     ANY     OTHER      APPROPRIATE
WRIT/ORDER/DIRECTION TO QUASH THE ORDER DATED
27.05.2024 PASSED BY THE HON'BLE LXXXII ADDITIONAL CITY
CIVIL     AND     SESSIONS     JUDGE,     CCH-83     IN
COM.EX.NO.716/2023, PRODUCED AT ANNEXURE-A, ETC.

     THIS PETITION COMING ON FOR ORDERS, THROUGH
PHYSICAL HEARING/VIDEO CONFERENCING THIS DAY, THE
COURT MADE THE FOLLOWING:

                             ORDER

1. Aggrieved by the order dated 27.05.2024 passed by

LXXXII Additional City Civil and Sessions Judge, Bengaluru

on I.A.No.5 filed under Section 151 of CPC by judgment

debtor no.1 in Commercial Execution No.716/2023,

judgment debtor no.1 therein has preferred this writ

petition.

2. There was a commercial dispute between the

petitioner and the respondents herein which resulted in

NC: 2024:KHC:24179

the matter being referred to arbitration. The learned

Arbitrator has passed an award to a tune of

Rs.1,78,98,38,525/- payable by the petitioner to

respondent no.1. The amount awarded is under the

following heads:

"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 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/-

NC: 2024:KHC:24179

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)."

3. Further, the Arbitrator also held that the award

amount shall be paid with interest @ 18% per annum and

the petitioner herein is also liable to pay the stamp duty

and registration fee applicable in respect of the award.

Relevant portion of the award is extracted hereunder:

"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."

NC: 2024:KHC:24179

4. Respondent no.1 herein has sought for execution of

the said award and has preferred Commercial Execution

No.716/2023 on the file of LXXXII Additional City Civil and

Sessions Judge, Bengaluru. Initially, the office of the trial

court raised an objection for payment of stamp duty of

Rs.46,12,096/- on the award amount. However, the trial

court by its order dated 27.01.2024 held that the award

does not attract stamp duty and the office objection was

waived. After service of notice, the petitioner herein

entered appearance as judgment debtor no.1 and it has

filed an application under Section 151 of CPC with the

following prayer:

"That for 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 recall the Order dated 27.01.2024, waiving off the office objection raised on the non-payment of stamp duty on the Award dated 18.05.2022, in the interest of justice and equity."

5. The said application has been rejected by the

Executing Court by way of the impugned order and

NC: 2024:KHC:24179

aggrieved by the same, judgment debtor no.1 therein has

preferred this writ petition.

6. The question that arises for consideration in the

instant writ petition is whether respondent no.1 is liable to

pay the stamp duty on the award amount as contended by

the petitioner herein under the given facts and

circumstances of the case?

7. Schedule to Article 11 of the Karnataka Stamp Act

reads as under:

"Art. 11. Award, that is to say, The same duty as the any decision in writing by an conveyance [under Article arbitrator or umpire, not being an 20(1)] on the market value award directing a partition, on a of the such property, or reference made otherwise than by an consideration, whichever is order of the Court in the course of a higher. suit.

(a) If the property, which is the subject matter of award, is immovable property.

(b) If the property, which is the subject matter of award, is movable property,

(i) Where the amount or market ¾ % of the amount or value of the property, as set forth in market value.

NC: 2024:KHC:24179

the award, does not exceed Rupees fifty lakhs.

(ii) Where the amount or market Rupees thirty seven value of the property exceeds rupees thousand five hundred plus fifty lakhs but does not exceed ½ % of the amount or rupees five Crores. market value exceeding Rupees fifty lakhs.

(iii) Where the amount or market Rupees thirty seven value of the property exceeds rupees thousand five hundred plus five Crores. two lakhs twenty five thousand plus ¼ % of the amount or market value exceeding Rupees five crores."

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

NC: 2024:KHC:24179

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;

NC: 2024:KHC:24179

(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".

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.