2018 (9) TMI 847 - SC - Indian Laws

Foreign arbitration award in India not invalidated by lack of stamp duty. Enforcement upheld under Arbitration Act.

M/s SHRIRAM EPC LIMITED Versus RIOGLASS SOLAR SA

The court held that a foreign award is not required to be stamped under the Indian Stamp Act, 1899, and its non-stamping does not render it unenforceable ... Enforceability of foreign award - award has not born stamp duty in India - whether the expression “award” would include a foreign award? - Arbitration and Conciliation Act, 1996 - Indian Stamp Act, 1899. Held that:- The only “award” that is referred to in the Indian Stamp Act, 1899 is an award that is made in the territory of British India provided that such award is not made pursuant to a reference made by an order of the Court in the course of a suit. At this point in time, it is important to note that there were several princely states in India governed by sovereign rulers which had their own laws. Arbitration laws, if any, in the aforesaid princely states, if they were to culminate in awards, would not be “awards” under either the Civil Procedure Code, 1882 or the Indian Arbitration Act, 1899. They would therefore be foreign awards insofar as British India is concerned. An award made in a princely state, or in a foreign country, if enforced by means of a suit in British India, would not be covered by the expression “award” contained in Item 12 of Schedule I of the Indian Stamp Act, 1899. Only awards which are decisions in writing by an arbitrator or umpire, made in British India, on a reference made otherwise than by an order of the Court in the course of a suit would be included. “Award” under Item 12 of Schedule I of the Indian Stamp Act, 1899 has remained unchanged till date - this “award” would refer only to a decision in writing by an arbitrator or umpire in a reference not made by an order of the Court in the course of a suit. This would apply only to such award made at the time in British India, and today, after the amendment of Section 1(2) of the Indian Stamp Act, 1899 by Act 43 of 1955, to awards made in the whole of India except the State of Jammu and Kashmir. This being the case, we are of the view that the expression “award” has never included a foreign award from the very inception till date. Consequently, a foreign award not being includible in Schedule I of the Indian Stamp Act, 1899, is not liable for stamp duty. There is no doubt whatsoever that if stamp duties are leviable in India on foreign awards, the imposition should not be substantially more onerous than the stamp duty that is imposed on recognition or enforcement of domestic arbitral awards - The Indian Stamp Act, 1899, being a fiscal statute levying stamp duty on instruments, is also an Act which deals with the economy of India, and would, on a parity of reasoning, be an Act reflecting the fundamental policy of Indian law. The fact that a foreign award has not borne stamp duty under the Indian Stamp Act, 1899 would not render it unenforceable - Appeal dismissed. Issues Involved:1. Whether a foreign award is required to be stamped under the Indian Stamp Act, 1899.2. Whether the non-stamping of a foreign award renders it unenforceable under Sections 48 and 49 of the Arbitration and Conciliation Act, 1996.Issue-Wise Detailed Analysis:1. Whether a foreign award is required to be stamped under the Indian Stamp Act, 1899:The core issue is whether the term 'award' under Item 12 of Schedule I of the Indian Stamp Act, 1899 includes a foreign award, thereby necessitating stamp duty for its enforceability in India. The court analyzed the historical context of the Indian Stamp Act, 1899, and arbitration laws prevailing at that time, including the Code of Civil Procedure, 1882 and the Indian Arbitration Act, 1899. It was observed that the term 'award' referred to decisions made within British India and did not encompass awards made in princely states or foreign countries. This interpretation remained consistent even after subsequent legislative changes, including the enactment of the Arbitration and Conciliation Act, 1996. The court concluded that the expression 'award' in the Indian Stamp Act, 1899 has never included a foreign award, and thus, foreign awards are not liable for stamp duty under this Act.2. Whether the non-stamping of a foreign award renders it unenforceable under Sections 48 and 49 of the Arbitration and Conciliation Act, 1996:The appellant argued that a foreign award must be stamped under the Indian Stamp Act, 1899, and its non-stamping renders it unenforceable. The court examined various judgments, including those from the Punjab and Haryana High Court, Delhi High Court, and Madhya Pradesh High Court. The court noted that the Punjab and Haryana High Court judgment did not consider the specific definition of 'award' under the Indian Stamp Act, 1899, and thus, was not persuasive. The Delhi High Court's reliance on the Supreme Court's judgment in M. Anasuya Devi was also found to be misplaced, as it pertained to domestic awards and their enforceability under Section 36 of the 1996 Act, not foreign awards.The court found the Madhya Pradesh High Court's reasoning more aligned with the legislative intent, emphasizing that the definition of 'award' in the Indian Stamp Act, 1899 had not been amended to include foreign awards, even after the enactment of the Arbitration and Conciliation Act, 1996. The court also rejected the appellant's reliance on Article III of the New York Convention and the 194th Law Commission Report, as they did not alter the conclusion that foreign awards are not subject to stamp duty under the Indian Stamp Act, 1899.The court further addressed the respondent's arguments, clarifying that Section 47 of the Arbitration and Conciliation Act, 1996, which outlines the requirements for enforcing a foreign award, does not preclude the imposition of stamp duty if it were otherwise payable. However, since foreign awards are not included in the definition of 'award' under the Indian Stamp Act, 1899, they are not subject to stamp duty. The court also rejected the argument that non-stamping of a foreign award would not be contrary to the public policy of India, affirming that the Indian Stamp Act, 1899 reflects the fundamental policy of Indian law.Conclusion:The court held that a foreign award is not required to be stamped under the Indian Stamp Act, 1899, and its non-stamping does not render it unenforceable under Sections 48 and 49 of the Arbitration and Conciliation Act, 1996. The appeal was dismissed, upholding the enforceability of the foreign award without the necessity of stamp duty.