- INTRODUCTION
This note is prepared based on Indian law.
This note only sets out a general outline of Indian laws on certain topics and does not consider any particular set of facts, other than as specifically set out herein. This does not constitute legal advice.
- OVERVIEW
This note discusses in detail the judgement of the Delhi High Court (“Court”) in the case of ARG Outlier Media Private Limited vs. HT Media Limited (“Parties”). While the dispute in question covers a series of issues pertaining to an indemnity claim under the relevant agreement, this summary is concerned with the legal position of the admission of an un-stamped agreement as evidence in a legal proceeding.
i. Background of the case
There was a Barter Agreement (“Agreement”) between ARG Outlier Media Private Limited (“Petitioner”) and HT Media Limited (“Respondent”). In a dispute arising from the Agreement between the Parties, the learned sole arbitrator passed the impugned award directing the Petitioner to pay INR 5,00,00,000 (Indian Rupees Five Crores) along with the interest to the Respondent.
Aggrieved by the award, the Petitioner filed the current petition under section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”), contending that the Agreement containing the arbitration clause was improperly stamped as it should have been stamped according to the Maharashtra Stamp Act, 1958 (“Maharashtra Stamp Act”), and thus should not have been admitted as evidence by the learned arbitrator.
ii. Arguments presented the Petitioner:
The Petitioner challenged the award on the principle ground that the Agreement containing the arbitration clause was not sufficiently stamped. It was the Petitioner’s case that Respondent appended its signatures on the Agreement at New Delhi and thereafter transmitted the same to Mumbai where the Petitioner appended its signatures on the Agreement and, therefore, in terms of section 3(a) of the Maharashtra Stamp Act, the Agreement was chargeable to the stamp duty in accordance with the Maharashtra Stamp Act only. Since the Agreement was stamped as per the stamp duty levy applicable in Delhi (which was lesser than the applicable rate of the Maharashtra Stamp Act), the said Agreement was under-stamped.
The Petitioner relied on the judgement of the Supreme Court in M/s N.N. Global Mercantile Private Limited v. M/s Indo Unique Flame Ltd. & Ors (“NN Global Mercantile Case”) (MANU/SC/0445/2023), in support of its contention that the Agreement, being insufficiently/improperly stamped, could not have been acted upon by the arbitrator and should have been impounded during the arbitral proceedings.
iii. Arguments presented by the Respondent:
The Respondent submitted that the Agreement was executed at New Delhi, as recorded in the Agreement itself, including its recital. The Respondent further submitted that the Hon’ble Delhi High Court in an earlier order dated May 31, 2019, passed in the above referred petition, recorded that the Petitioner did not dispute the existence of the arbitration agreement or the invocation thereof. Therefore, as a corollary, the Petitioner did not dispute the adequacy of stamping of the Agreement. The plea by the Petitioner, in the submission of the Respondent, was later taken, only with a mala fide intent of denying the bona fide claims of the Respondent.
The Respondent thus refuted this contention and reiterated that the Agreement was properly stamped in accordance with the stamp duty applicable in Delhi and was therefore, enforceable.
iv. Decision of the Court
The Court clarified that the Court exercising jurisdiction under section 34 of the Act does not sit as a Court of Appeal on the findings of the arbitral tribunal. Its jurisdiction under section 34 of the Act is rather limited and the Court held that contravention of a statute that is not linked to a public policy or public interest, cannot be a ground for setting aside an arbitral award under section 34 of the Act.
The Court also relied on judgments from the Supreme Court, including Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI), (MANU/SC/0705/2019), and Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation Limited, (MANU/SC/0623/2021). The Court expressed the view that overturning an arbitral award due to “patent illegality” on its face requires the illegality to strike at the core of the matter, “… rather than being a mere incorrect application of the law…”. Therefore, not every mistaken legal application by an arbitrator falls under the category of “patent illegality.” Similarly, violations of the law unrelated to public policy or interest cannot be considered as “patent illegality.”
The Court also noted that the Petitioner in the current case did not bring forward any objections regarding the Agreement’s lack of proper stamping at the outset of the arbitration proceedings. Similarly, no challenges were raised when the Petitioner submitted their affidavit confirming or denying the authenticity of the documents.
Thus, the Court held that although an agreement containing an arbitration clause must be properly stamped to be admitted as evidence as stated in NN Global Mercantile Case, once the arbitrator has admitted it and passed an award on the basis of it, such award cannot be set aside owing to the insufficient stamping of the agreement as per section 36 of the Indian Stamp Act (“Stamp Act”) except under section 61 of the Stamp Act which deals with Revision of decisions of Courts regarding the sufficiency of stamps.
The Court made it clear that it does not act as an appellate court in relation to the award, thereby lacking the powers granted by section 61 of the Stamp Act. Even if section 61 were found to be applicable, the Court’s authority would be confined to impounding the document and referring it to the Collector of Stamps to ascertain the proper stamp duty and penalty. Thus, this process would not have any bearing on the enforceability or validity of the arbitral award.
Considering all the above provisions, the Court dismissed the petition.
- IMPACT
In the aftermath of the ruling in the NN Global Mercantile Case, which established that an agreement lacking proper stamping could not be accepted as evidence, this specific order of the Court presents an interesting counterpoint. This case asserts that if an inaccurately stamped agreement is admitted as evidence by an arbitrator, any award rendered based on such an agreement cannot be faulted on this basis alone. A series of questions continue to arise in the wake of the NN Global Mercantile case as well as this specific matter, especially in, inter-alia, instances where agreements are silent on the location of execution or where a seat & venue of arbitration or jurisdiction of disputes remains unclarified.
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