Arbitral Awards Stamped In One State Don't Automatically Attract Extra Duty Elsewhere: Delhi High Court

The Delhi High Court on 9 October held that an arbitral award stamped in one State does not attract additional stamp duty merely because it is brought into another State for enforcement, unless a specific statutory provision imposes such liability.

Justice Om Prakash Shukla rejected Oil and Natural Gas Corporation Limited's (ONGC) objection to the stamp duty paid on an arbitral award in favour of Kirloskar Pneumatic Company Limited, holding that differential stamp duty cannot be imposed without statutory authority. The Bench observed:

“The material consideration, therefore, is the existence of a statutory provision attracting such additional liability. The mere fact that an instrument executed and stamped in one State is subsequently brought into another State does not, without more, establish an obligation to pay differential stamp duty”.

The dispute arose from an arbitral award dated 13 April 2023, corrected on 15 April 2023, in favour of Kirloskar against ONGC. The award was signed in Ahmedabad, Gujarat, and stamped under the Gujarat Stamp Act, 1958.

The Commercial Court at Ankleshwar subsequently set aside the interest component of the award under Section 34 of the Arbitration and Conciliation Act, 1996, leaving Rs. 3,78,22,968 payable to Kirloskar.

Kirloskar approached the Delhi High Court under Section 36 of the Arbitration Act to enforce the award. ONGC contended that enforcement in Delhi attracted differential stamp duty under the Indian Stamp Act, 1899, as applicable to Delhi, and questioned the delayed payment of the additional duty. Kirloskar maintained that the award was duly stamped in Gujarat and that Delhi's stamp law did not require additional payment merely because enforcement was sought there.

The Court explained that Section 17, read with Section 2(12) of the Indian Stamp Act, treats execution as the signing of an instrument, not its subsequent judicial enforcement. While insufficient stamping may be examined during enforcement proceedings, such proceedings do not independently create a fresh stamp duty liability.

It noted that States such as Maharashtra, Karnataka and Gujarat have specific provisions governing instruments executed outside their territories. It stated, “indeed, the legislative framework governing stamp duty is not uniform across all States. The Supreme Court has acknowledged that different States may prescribe different rates of stamp duty and that the relevant statutory provisions must be construed in a manner that gives effect to the legislative scheme governing instruments having connections with more than one State.”

Further, it added that these provisions demonstrate the need for express statutory authority to impose additional stamp duty in another State. It noted:

“These provisions show that the Legislature expressly provides for an additional incidence of stamp duty where an instrument bears the requisite territorial or transactional nexus with a State distinct from the one where the instrument was executed/signed. Equally, the existence of such provisions in certain State enactments underscores the necessity of identifying a corresponding statutory basis before imposing an analogous liability elsewhere.”

Justice Shukla also found no corresponding provision under the law applicable to Delhi imposing differential stamp duty merely because an instrument was brought into the territory or enforcement was sought there. Emphasising that courts cannot impose a duty without legislative authority, he observed:

“Thus, a liability unknown to the statute cannot be brought to life under the guise of judicial interpretation. This Court cannot transgress the confines of the statute or invent what the legislature did not envisage.”

Therefore, the Bench held that the award was sufficiently stamped under Article 13 of Schedule I to the Gujarat Stamp Act and rejected ONGC's objection.

It permitted Kirloskar to withdraw Rs. 3,78,22,968 upon furnishing an undertaking and indemnity bond, considering the pending appeal under Section 37 of the Arbitration Act. It also allowed ONGC's application for a refund of excess deposits and permitted revival of the enforcement proceedings, if necessary, after disposal of the appeal.

Accordingly, the High Court disposed of the application.

Appearances for petitioner (Kirloskar Pneumatic Company Limited): Senior Advocate Raj Shekhar Rao; Advocates Pratiksha Sharma, Ankit Aeharya, Sameer Mahajan, Sahil Bijliwala, Ritu Chaudhary, Ayush Jain, Mukesh Kumar and Ajay.

Appearances for respondent (Oil and Natural Gas Corporation Limited): Additional Solicitor General Chetan Sharma; Advocates Abhishek Gupta, Ikshita Singh, Amit Gupta, RV Prabhat, Shubham Sharma, Naman, Abhishek Pachauri and A S Vamsi Krishna