In the matter of M/s. Arg Outlier Media Private Limited v/s HT Media Limited [2023 SCC Online Del 3885] dated 4th July 2023, the Hon’ble Delhi High Court has inter alia, held that even if there is an assumption of a mistake in the interpretation of the Maharashtra Stamp Act by the Arbitrator, it cannot be a valid ground to interfere with the Arbitral Award passed under Section 34 of the Act, especially when there has been no challenge in the initial stages of the proceedings.
In the present case, the petitioner M/s ARG Outlier Media Pvt Ltd filed a petition under section 34 of the Arbitration and Conciliation Act, 1996, to set aside the Arbitral Award which directed the petitioner to pay an amount of Rs. 5 crores along with interest to the Respondent, M/s HT Media Ltd. The learned Sole Arbitrator had passed the impugned award while adjudicating a dispute arising from an Agreement of Barter executed between the parties.
The impugned award was being challenged by the petitioner, inter alia on the, principal ground that the agreement containing the arbitral clause was insufficiently stamped and hence the learned Arbitrator should not have acted upon the same until the agreement was stamped and requisite penalty was paid. The counsel for the petitioner relied on the judgement of the Apex court in M/s N.N. Global Mercantile Private Limited v. M/s IndoUnique Flame Ltd. & Ors [2023 SCC Online SC 495] in support of its contention that the Agreement being improperly stamped, could not have been acted upon by the Arbitrator.
The admitted facts are that the Respondent is based in Delhi while the Petitioner is in Mumbai. The parties entered into an Agreement for Barter after sustained negotiations. The Respondent purchased the requisite stamp paper as per the Stamp Act applicable in Delhi and sent it to the Petitioner for his signatures. The opening para of the Agreement stated that it was “entered into at New Delhi, India on 19th day of April 2017”. The Agreement also stated that the courts/tribunals at New Delhi shall have the exclusive jurisdiction over any dispute relating to the subject matter of this Agreement, including Arbitration.
The petitioner’s case was that since the said Agreement was signed by the respondent at New Delhi and thereafter sent to the petitioner for its signatures at Mumbai, the said agreement should have been stamped in accordance with the Maharashtra Stamp Act, and since that was not done, the agreement should have been impounded during the arbitral proceedings.
The Respondent refuted this contention and reiterated that the Agreement was stamped in accordance with the Stamp duty applicable in Delhi and was therefore, enforceable.
Pursuant to hearing both sides, the court held that although an Agreement containing an arbitration clause must be properly stamped to be admitted as evidence, once the Arbitrator has admitted it and passed an award on the basis of it, such award cannot be set aside owing to the insufficient stamping of the agreement. The court clarified that in the exercise of its limited jurisdiction under Section 34 of the Act, the court was not a Court of Appeal against the findings of the Arbitral Tribunal. It further held that a contravention of a statute which is not linked to public policy cannot be aground to set aside an Arbitral Award. It took the view that the insufficient stamping of an agreement can only be challenged under the Stamp Act and the same cannot be a ground to set aside an arbitral award.
With respect to the petitioner’s averment that the Arbitrator erred in the application of the provisions of the Maharashtra Stamp Act, the court opined that even assuming that Arbitrator had committed a mistake while interpreting the provisions of the said Act, the same cannot constitute a ground to interfere with the Arbitral Award in view of the court’s limited jurisdiction under Section 34 of the Act. The court placed reliance on the decisions of the Supreme Court in SsangyongEngineering and Construction Company Limited v. National Highways Authority ofIndia (NHAI),(2019) 15 SCC 131 and Delhi Airport Metro Express Private Limited v. Delhi Metro RailCorporation Limited,(2022) 1 SCC 131 and opined that to set aside an award on the ground of “patent illegality” appearing on the face of the award, the illegality should be such that which goes to the root of the matter as opposed to a mere erroneous application of the law. Thus, not every erroneous application of law committed by an Arbitrator would fall within the expression of "patent illegality". Similarly, contravention of law unrelated to public policy or interest also cannot be categorized as "patent illegality”.
The Hon’ble Court was of the view that the petitioner’s reliance on the decision passed in the matter of M/s N.N. Global Mercantile Private Limited v/s M/s IndoUnique Flame Ltd. & Ors was not relevant in the present circumstances as the petitioner herein did not raise any challenge to the Agreement being insufficiently stamped during the initial stages of the arbitral proceedings, as well as at the time of filing affidavit of admission/denial of the documents, wherein the impugned Agreement was in fact, admitted by the petitioner.
Furthermore, as per Section 36 of the Indian Stamp Act, upon an instrument being admitted in evidence, such admission shall not, becalled in question at any stage of the proceeding or on the ground that the instrument has not been properly stamped, except as provided under Section 61 of the said Act which deals with Revision of decisions of Courts regarding the sufficiency of stamps. In this regard the court held that it does not have the powers vested under Section 61 of the Indian Stamp Act, 1899, as the Court does not act as a Court of appeal against the Arbitral award.
The court went ahead and observed that even if Section 61 of the Indian Stamp Act was applicable in the present case, the court could only impound the document and refer it to the Collector of Stamps for adjudicating on the stamp duty and penalty and the same would not have any effect on the enforcement or validity of the arbitral award.
In view of the above, the Hon’ble High Court dismissed the petition and upheld the arbitral award.
While prima facie it may appear that the present judgement of the Delhi High Court goes against the principles of the Constitution Bench of the Apex Court as laid down in M/s N.N. Global MercantilePrivate Limited v. M/s Indo Unique Flame Ltd. & Ors, a reading of the present case and its judgement will reflect the finer differences in the cases. The Hon’ble Court has captured the essence of the Supreme Court Judgement while discussing the differing circumstances in the two cases.