Case Note & Summary
The petitioner-plaintiff filed a suit for recovery of Rs.16,29,311.74 with interest. The suit was decreed ex parte on 10.04.2018. The defendant No.1 filed an application under Order IX Rule 13 CPC to set aside the ex parte decree, which was allowed on 20.02.2019, restoring the suit. Subsequently, on 20.03.2019, defendant No.1 filed an application under Section 8(1) of the Arbitration and Conciliation Act, 1996, seeking referral of the dispute to arbitration based on an alleged arbitration agreement. The trial court allowed that application on 22.08.2019, and later dismissed the petitioner's review application on 06.01.2022. The petitioner challenged both orders in this civil revision petition under Section 115 CPC. The High Court examined the issue of whether an unstamped or insufficiently stamped agreement containing an arbitration clause can be enforced under Section 8(1) of the Arbitration Act. The court held that as per Section 35 of the Karnataka Stamp Act, 1957, an instrument not duly stamped is not admissible in evidence for any purpose, and cannot be acted upon. Therefore, the trial court ought to have first examined whether the agreement was duly stamped before referring the parties to arbitration. The court set aside the impugned orders and remanded the matter to the trial court to decide the stamp duty issue afresh, after giving an opportunity to the parties to produce the original agreement and to lead evidence on the question of stamp duty. The court clarified that if the agreement is found to be duly stamped, the trial court may proceed to consider the Section 8(1) application in accordance with law.
Headnote
A) Arbitration Law - Referral to Arbitration - Section 8(1) of Arbitration and Conciliation Act, 1996 - Unstamped/Insufficiently Stamped Agreement - The court considered whether an arbitration clause in an unstamped or insufficiently stamped agreement can be enforced under Section 8(1) of the Act. Held that an instrument which is not duly stamped as per the Karnataka Stamp Act, 1957 is not admissible in evidence and cannot be acted upon, including for the purpose of referring parties to arbitration. The court set aside the trial court's order allowing the application under Section 8(1) and remanded the matter for consideration of the stamp duty issue first. (Paras 1-10) B) Civil Procedure - Review - Order IX Rule 13 CPC - Restoration of Suit - The suit was decreed ex parte and later restored upon defendant's application under Order IX Rule 13 CPC. The court noted that the restoration order was not challenged and became final. (Paras 2-3) C) Stamp Act - Impounding of Instrument - Sections 33 and 35 of Karnataka Stamp Act, 1957 - The court held that before referring parties to arbitration, the trial court must first examine whether the agreement is duly stamped. If not, the instrument must be impounded and sent to the Collector for adjudication of stamp duty. (Paras 8-10)
Issue of Consideration
Whether an arbitration agreement contained in an unstamped or insufficiently stamped instrument can be acted upon under Section 8(1) of the Arbitration and Conciliation Act, 1996.
Final Decision
The High Court allowed the civil revision petition, set aside the orders dated 22.08.2019 and 06.01.2022, and remanded the matter to the trial court for fresh consideration of the Section 8(1) application after first determining whether the agreement is duly stamped in accordance with the Karnataka Stamp Act, 1957. The trial court was directed to give an opportunity to the parties to produce the original agreement and to lead evidence on the stamp duty issue.
Law Points
- Section 8(1) of Arbitration and Conciliation Act
- 1996
- Section 35 of Karnataka Stamp Act
- 1957
- Section 33 of Karnataka Stamp Act
- Order IX Rule 13 CPC
- Section 115 CPC
