Insufficiently stamped development agreement must be impounded before use in Section 9 proceedings, not deferred to arbitration.

A memorandum of understanding relied upon in Section 9 proceedings was prima facie insufficiently stamped because it contained substantive obligations for development, construction, financing, payment, and allocation of area. The Court had to examine the stamping objection at the threshold under Section 33(1) of the Bombay Stamp Act, 1958, and could not defer the issue to arbitration. As the document attracted Article 5(ga) of the Schedule, it had to be impounded and sent for adjudication of stamp duty and penalty before it could be acted upon.

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Issues: Whether a memorandum of understanding relied upon in proceedings under Section 9 of the Arbitration and Conciliation Act, 1996, which appeared to be insufficiently stamped, could be acted upon before determination and payment of stamp duty and penalty, and whether that question could be deferred to the arbitral proceedings.

Analysis: The memorandum of understanding contained substantive obligations relating to development, construction, financing, payment, and allocation of constructed area, and was not a mere ancillary record. In proceedings under Section 9, the Court was required to examine the stamping objection at the threshold. Section 33(1) of the Bombay Stamp Act, 1958 obliged the Court to deal with an insufficiently stamped instrument when it came before it, and the issue could not be postponed to arbitration. Article 5(ga) of the Schedule to the Bombay Stamp Act, 1958 applied to an agreement or memorandum relating to authority or power to a promoter or developer for construction, development, sale, or transfer of immovable property, and the document prima facie attracted stamp duty.

Conclusion: The memorandum of understanding was required to be impounded and sent for adjudication of stamp duty and penalty, and it could not be acted upon pending such adjudication.

Ratio Decidendi: When an instrument relied upon in judicial proceedings is prima facie insufficiently stamped, the Court must impound it and cannot defer the stamping objection to arbitration or act upon the document until the duty and penalty, if any, are duly determined and paid.

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