Case Note & Summary
The present appeal arises from a judgment of the Karnataka High Court appointing an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. The appellant, a charitable trust, had entered into two lease deeds with the respondent lessee for development of property. Disputes arose, and the trust filed a suit for injunction. After participating in the suit for over two years, the respondents invoked the arbitration clause and filed a petition under Section 11(6). The appellant objected on the ground that the lease deed dated 12.3.1997 was insufficiently stamped. The High Court referred the matter to the Registrar (Judicial), who found the document to be a lease deed and directed payment of deficit stamp duty and penalty of over Rs. 1 crore. However, the High Court, without considering this report, allowed the petition and appointed an arbitrator. The Supreme Court held that under Sections 33 and 34 of the Karnataka Stamp Act, 1957, an insufficiently stamped instrument cannot be admitted in evidence or acted upon for any purpose, including for invoking the arbitration clause. The High Court's order was set aside, and the appeal was allowed.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Unstamped Instrument - Section 11(6) of Arbitration and Conciliation Act, 1996 read with Sections 33 and 34 of Karnataka Stamp Act, 1957 - The High Court appointed an arbitrator under Section 11(6) based on a lease deed that was insufficiently stamped. The Supreme Court held that an instrument not duly stamped cannot be acted upon or admitted in evidence for any purpose, including for invoking the arbitration clause. The appointment was set aside. (Paras 17-18) B) Stamp Act - Impounding and Inadmissibility - Sections 33 and 34 of Karnataka Stamp Act, 1957 - The lease deed dated 12.3.1997 was found to be insufficiently stamped by the Registrar (Judicial) of the High Court. The High Court failed to consider this report before appointing the arbitrator. The Supreme Court held that the document could not be relied upon until proper stamp duty and penalty were paid. (Paras 12-13, 17-18)
Issue of Consideration
Whether an arbitration clause contained in an insufficiently stamped lease deed can be acted upon for appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court order dated 1.12.2014 appointing the arbitrator, and dismissed the petition under Section 11(6) of the Arbitration and Conciliation Act, 1996.
Law Points
- Arbitration agreement in unstamped document is void
- Section 11(6) appointment cannot be based on unstamped lease deed
- Karnataka Stamp Act Sections 33 and 34 mandate impounding and inadmissibility
