Case Note & Summary
The applicant, S Satyanarayana & Co, a partnership firm based in Visakhapatnam, filed an application under Section 11 of the Arbitration and Conciliation Act, 1996, seeking appointment of an arbitrator. The respondent, West Quay Multiport Private Limited, based in Mumbai, had awarded two work orders dated 5 December 2012 to the applicant as a subcontractor for construction work at Visakhapatnam Port. The work orders contained an arbitration clause (Clause 55.2) providing for arbitration in Mumbai and a jurisdiction clause referring to Mumbai courts. Disputes arose, and the applicant invoked arbitration. The respondent opposed the application on the ground that the work orders were not stamped in Maharashtra and were therefore inadmissible. The key legal issue was whether the contract, executed and performed entirely in Andhra Pradesh, was liable to stamp duty in Maharashtra under Section 3 of the Maharashtra Stamp Act, 1958, because the arbitration was to be held in Mumbai. The court analyzed the phrase 'thing done or to be done' in Section 3, which extends the stamp duty to instruments executed outside Maharashtra if they relate to any property situated in Maharashtra or any matter or thing done or to be done in Maharashtra. The court held that arbitration is not a 'thing done' under the instrument; it is a mode of dispute resolution that is ancillary to the contract. The substantive obligations under the contract were to be performed in Visakhapatnam, and the contract was executed there. The mere fact that the arbitration is seated in Mumbai does not mean that the contract is 'done' in Maharashtra. The court also noted that the instrument must be examined at the time of its execution, and subsequent events like filing an arbitration application do not create a new stamp duty liability. Accordingly, the court rejected the respondent's objection and allowed the application, appointing a sole arbitrator to adjudicate the disputes.
Headnote
A) Stamp Act - Territorial Nexus - Section 3 of Maharashtra Stamp Act, 1958 - 'Thing done or to be done' - Interpretation - The court considered whether arbitration proceedings in Mumbai constitute a 'thing done or to be done' in Maharashtra for the purpose of attracting stamp duty on an instrument executed and performed entirely outside the state. Held that arbitration is not a 'thing done' under the instrument but a mode of dispute resolution; the instrument itself is not executed or performed in Maharashtra, and therefore no stamp duty is payable in Maharashtra. (Paras 1, 10-14) B) Arbitration - Seat vs. Thing Done - Section 11 of Arbitration and Conciliation Act, 1996 - The court distinguished between the seat of arbitration and the performance of the contract. The mere fact that arbitration is seated in Mumbai does not mean that the contract is 'done' in Maharashtra. The arbitration clause is ancillary and does not alter the location of the substantive obligations. (Paras 11-13) C) Stamp Act - Instrument - Execution - Section 3 of Maharashtra Stamp Act, 1958 - The court held that the instrument must be examined at the time of its execution; subsequent events like filing of an arbitration application do not create a new liability. Since the contract was executed and performed in Andhra Pradesh, it is not chargeable to stamp duty in Maharashtra. (Paras 10, 14)
Issue of Consideration
Whether a contract executed and to be performed outside Maharashtra, but containing an arbitration clause providing for arbitration in Mumbai, is liable to stamp duty in Maharashtra under Section 3 of the Maharashtra Stamp Act, 1958, on the ground that arbitration is a 'thing done or to be done' in Maharashtra.
Final Decision
The court allowed the application and appointed a sole arbitrator to adjudicate the disputes between the parties. The objection regarding stamp duty was rejected.
Law Points
- Interpretation of Section 3 of Maharashtra Stamp Act
- 1958
- Arbitration as a 'thing done' under stamp laws
- Territorial nexus for stamp duty
- Section 11 of Arbitration and Conciliation Act
- 1996
