Supreme Court of India: No Stamp duty for enforcement of foreign award in India;

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In the case of M/S.Shriram Epc Limited vs Rioglass Solar Sa Civil Appeal no. 9515 of 2018 the Supreme Court of India dealt with an issue of whether a foreign award, which is not stamped under the Indian Stamp Act, 1899 (the Stamp Act), can be enforced in India under the Indian Arbitration Act (the Act). Read the detailed case analysis below:

Factual Matrix

A foreign award (ICC) (the Award) was sought to be enforced after it was unsuccessfully challenged by the Appellant. Challenging the enforcement of the Award, the Appellant argued that a foreign award is bound by the Stamp Act and stamp duty not having been paid, the Award cannot be enforced. Relying on a Gujarat High Court judgement of Orient Middle East Lines Ltd., Bombay and Anr. v. Brace Transport Corporation of Monrovia and Ors., the Appellant contended that under Article III, the New York Convention itself recognizes that foreign awards may have to bear stamp duty for enforcement in the country in which they are sought to be enforced being in the nature of fees or charges for recognition and enforcement of a foreign award.

The Respondent reasoned its argument on the two judgements from Delhi High Court and Madhya Pradesh High Court contending that the expression “award” which occurs in Schedule I of the Stamp Act applies only to a domestic award and not a foreign award. It was further contended that since the Stamp Act was passed in 1899, the scope of the term “award” was never widened to include foreign award in it.

Applicable Legal Principles

Item No.12 of Schedule I of the Stamp Act

“12. AWARD, that is to say, any decision in writing by an arbitrator or umpire, not being an award directing a partition, on a reference made otherwise than by an order of the Court in the course of a suit.—

(a) where the amount or value of the property to which the award relates as set forth in such award does not exceed Rs. 1000; The same duty as a bond (No. 15) for such

amount.

(b) in any other case. Five rupees.

Exemption

Award under the Bombay District Municipal Act, 1873 (Bom. Act 6 of 1873), Section 81, or the Bombay Hereditary Offices Act, 1874 (Bom. Act 3 of 1874), Section 18.”

Analysis

The Court went back to the year 1899 to see the state of the law insofar as arbitration is concerned when the Stamp Act was passed and observed that at that time there were two sets of laws dealing with arbitration: the Code of Civil Procedure, 1882 & the Indian Arbitration Act, 1899. The Court concluded that the only “award” that is referred to in the Stamp Act is an award that is made in the territory of British India provided that such award is not made pursuant to a reference made by an order of the Court in the course of a suit. The position remained the same in amended in 1908.

The Court also articulated the evolution of the Arbitration Act in India and concluded that the present Act, that came into force repealing the Arbitration (Protocol and Convention) Act, 1937, The Arbitration Act, 1940, and the Foreign Awards (Recognition and Enforcement) Act, 1961 brought, with certain important changes, which included domestic awards within Part I, foreign awards relatable to the New York Convention within Chapter I of Part II, and foreign awards relatable to the Geneva Convention within Chapter II of Part II.

The Court concluded that “award” under Item 12 of Schedule I of the Stamp Act has remained unchanged till date and therefore, the expression “award” would refer only to a decision in writing by an arbitrator or umpire in a reference not made by an order of the Court in the course of a suit. This would apply only to such award made at the time in British India, and today, after the amendment of Section 1(2) of Stamp Act, 1899 by Act 43 of 1955, to awards made in the whole of India except the State of Jammu and Kashmir.

For Article III of the New York Convention, the Court observed that for the said Article to apply, stamp duty must first be leviable on a foreign award, which is not the case.

The Court also made an obiter that the Stamp Act, being a fiscal statute levying stamp duty on instruments, is also an Act which deals with the economy of India, and would, on a parity of reasoning, be an Act reflecting the fundamental policy of Indian law.

Conclusion

The Court concluded that the expression “award” has never included a foreign award from the very inception till date and consequently, a foreign award not being includible in Schedule I of the Stamp Act is not liable for stamp duty.

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