[Cites 11, Cited by 0]
Madhya Pradesh High Court
M/S Agrawal Construction Company vs Executive Engineer on 18 March, 2026
1 MP-702-2026
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VIVEK JAIN
ON THE 18th OF MARCH, 2026
MISC. PETITION No. 702 of 2026
M/S AGRAWAL CONSTRUCTION COMPANY
Versus
EXECUTIVE ENGINEER
Appearance:
Shri Shekhar Sharma - Sr. Senior Advocate with Shri Dhruv Singh -
Advocate for the petitioner.
Shri T.R. Pillai - P.L. for the respondents / State.
ORDER
The present petition is filed challenging the order dated 23-12-2025 by
which application for review of order dated 18-09-2024 has been rejected.
By the order dated 18-09-2024, the Executing Court had directed the
petitioner to pay stamp duty of Rs.4,13,186/- on the arbitral award in
question and further impounded the award and sent it to the Collector of
Stamps. The application for review of the said order has been rejected on 23-
12-2025 which is now under challenge before this Court.
2. There was an arbitral award in favour of the petitioner which has
been affirmed up to the Hon'ble Supreme Court in SLP Civil No.20041/2024
filed by the State Government and now the award dated 29-02-2016 is being
executed by the Executing Court. The Execution Petition was filed initially
in year 2016 but due to pendency of challenge to the award under Section 34
2 MP-702-2026
and then under Section 37 and thereafter before the Hon'ble Supreme Court,
the execution proceedings could not proceed for a substantial period of
time. Now the award has been finally affirmed by the Hon'ble Supreme
Court on 24.09.2025.
3 . The Executing Court on 18-09-2024 had held that stamp duty is
payable on the arbitral award and only a fixed stamp duty of Rs.400/- has
been paid though it ought to have been paid @ 2% of the awarded amount
which comes to Rs. 41,718/- and 10 times of it has to be paid as penalty i.e.,
the total amount of Rs.4,13816/- has to be paid and the Executing Court
impounded the award, assessed the stamp duty and the penalty and then sent
it to the Collector of Stamps for recovery of the deficit stamp duty.
4. Though learned counsel for the petitioner has argued that in the
year 2017 there has been some amendment to the Indian Stamp Act, 1899 as
applicable to the State of Madhya Pradesh and the stamp duty as well as
penalty has been modified and now the extent of penalty is maximum equal
to the amount of duty and the amended provisions would apply, but this
Court is not impressed with this assertion because in the present case not
only the award was passed when the unamended provisions were in
operation but also the award was put to execution in the year 2016 itself
prior to amendment which has been enforced from 23.10.2017. It may be a
different matter that subsequently on account of challenge made to award the
execution proceedings could not proceed but the award was put to
enforcement at the time when unamended Act was in force. The unamended
Sections 35 and 40 are relevant because the Executing Court has proceeded
3 MP-702-2026
under proceeded under proviso (a) to Section 35 which prior to amendment
was as under:-
"(a) any such instrument shall be admitted in evidence
on payment of the duty withwhich the same is
chargeable, or, in the case of an instrument
insufficiently stamped, of the amount required to make
up such duty, together with a penalty of five rupees, or,
when ten times the amount of the proper duty or
deficient portion thereof exceeds five rupees, of a sum
equal to ten times such duty or portion;"
5. Section 40 of the Act as applicable in the State of M.P. prior to
amendment of year 2017 was as under:-
"40. Collector's power to stamp instruments
impounded.- (1) When the Collector impounds any
instrument under section 33, or receives an instrument
sent to him under section 38, sub-section (2), not being
a receipt 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 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.
4 MP-702-2026
(2) Every certificate under clause (a) of sub-section (1)
shall, for the purposes of this Act, be conclusive
evidence of the matters stated there-in.
(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. It is therefore clear that there are two different provisions for
assessment of deficit stamp duty. One provision applies to the Courts which
is section 35 that does not grant any discretion in the Court to assess the
extent of penalty and it plainly contains that penalty shall be chargeable @
10 times of the Stamp duty, whereas as per Section 40 when the document is
sent to the Collector, then the Collector is having wide discretion and he may
charge penalty not exceeding 10 times or he may decide not to charge any
penalty or he may charge any penalty up to 10 times of the document which
is the maximum ceiling and therefore, a wide discretion is cast on the
Collector.
7. The aforesaid discretion cast on Collector has been interpreted
time and again by the Hon'ble Supreme Court and by this Court and
therefore the discretion being conferred to charge lesser penalty is not in
dispute.
8. A Division Bench of this Court in the case of Umesh Kumar Vs.
Rajaram reported in 2010 SCC OnLine MP 18 has held that the trial Court
under section 35 has no discretion to reduce the amount of penalty and
discretion is cast with the Collector under section 40 to charge lesser penalty.
5 MP-702-2026
Then if the deficit duty and penalty is not paid by the party who has produced
the document which has been impounded, then it has to be sent in original to
the Collector which has been done in the present case by the Court. The
Division Bench is held as under:-
"13. Section 38(1) if is read and understood in
accordance with the scheme of the Act, it would appear
that when a person impounding an instrument under
section 33 has to receive evidence and admits such
instrument in evidence upon payment and penalty as
provided by section 35 or of duty as provided by
section 37, then the Court shall be entitled to admit the
document in evidence if the party producing the
document is ready and willing to pay the duty and
penalty ten times. Once amount of duty and penalty is
deposited by the person producing the document, then
the document shall be admitted in evidence and then the
person who is receiving the document (in the present
case, the Court) shall send to the Collector an
authenticated copy of such instrument, together with a
certificate in writing, stating the amount of duty and
penalty and shall also send such amount to the Collector
or to such person as the Collector may appoint in this
behalf, sub-section (1) of section 38 deals with the
situation where the Court before receiving evidence
decides the question of duty and penalty, the person
desirous of producing the document in evidence is
ready and willing to pay the duty and penalty and then
thereafter duty and penalty is received and the
document is admitted in evidence. In a case where the
Court decides the question of duty and penalty, but the
person, who is obliged to pay the said duty, does not
pay the same, then the document would continue to be
inadmissible in evidence, but as it has already been
impounded by the Court, the Court has to refer the
matter to the Collector under sub-section (2) of section
38 of the Act.
14. Section 40 of the Indian Stamp Act provides
that whenever the Collector impounds any instrument
6 MP-702-2026
under section 33 or receives an instrument sent to him
under section 38 sub-section (2), then he has to adopt a
particular procedure. It is to be noted that powers of the
Collector are different in different situation. When he
himself is impounding the document under section 33,
then he has to consider the matter and when a document
is referred to the Collector under sub-section (2) of
section 38 by a Court, or by a person authorized to
receive evidence under the law with consent of the
parties, then the Collector has to decide the question
whether the document is duly stamped or not. If the
same is not duly stamped, then what duty and penalty is
to be paid on the said document. When the document is
produced in the Court and the Court impounds the
same, the Collector would have no jurisdiction to
impound the document under section 33 of the Act but
the Collector will have to receive the document from a
Court and then proceed in accordance with law. Once
the matter is referred to the Collector under sub-section
(2) of section 38 of the Indian Stamp Act, then he has to
decide that the said instrument is duly stamped or not.
Once he decides that the document is duly stamped,
then he shall certify by endorsement thereon that the
document is duly stamped or that it is not so chargeable
with the duty. However, if the Collector comes to the
conclusion that such instrument is chargeable with duty
and is not duly stamped, he shall require the payment of
the proper duty or amount required to make up the
same, together with a penalty of 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."
9. In the present case, what the trial Court has done is that it has
impounded the document, assessed the stamp duty and then referred it in
original to the Collector of Stamps. The trial Court, if it had assessed the duty
could have get it paid but if the party had refused to pay the deficit stamp
duty and penalty assessed by the trial Court, then the trial court would have
7 MP-702-2026
referred the matter to the Collector under Section 38(2) which has been done
and therefore the trial court was rightly proceeding as if the party has refused
to pay the deficit court fees and penalty assessed by the trial Court.
10. Then in such circumstances when the document in original is
referred to the Collector then the Collector would get jurisdiction under
Section 40 and the Collector would arrive at the duty and penalty which
would be at the discretion of Collector not exceeding 10 times of the basic
stamp duty.
11. Therefore, the impugned order is modified to the extent that the
penalty assessed by the trial Court shall not be binding upon the Collector of
Stamps and the Collector of Stamps shall be at liberty to arrive at his own
adjudication of duty and penalty in terms of Section-40 and the petitioner
may pay the aforesaid duty and penalty and then the trial Court shall proceed
as per law in the execution petition.
12. With the aforesaid direction, the petitioner is allowed and
disposed off.
(VIVEK JAIN)
JUDGE
nks
