Insufficiently Stamped Lease Deed Bars Arbitration Clause Until Deficit Duty and Penalty Are Paid

An arbitration agreement embedded in an insufficiently stamped lease deed cannot be acted upon for appointment of an arbitrator under section 11(6) until the instrument is impounded and the deficit stamp duty and penalty are paid. The Court applied the settled stamp-law principle that a document relied on to invoke arbitration must first be duly stamped; otherwise, it cannot be used to enforce the arbitration clause. As the required duty and penalty were not paid, the lease deed could not support appointment of an arbitrator, and the proposed appointment was unsustainable.

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Issues: Whether an arbitration clause contained in an insufficiently stamped lease deed could be acted upon for appointment of an arbitrator under section 11(6) of the Arbitration and Conciliation Act, 1996.

Analysis: The lease deed containing the arbitration clause was found to be insufficiently stamped. The relevant stamp law required such an instrument to be impounded and not acted upon unless the deficit duty and penalty were paid. The Court applied the settled principle that, when an instrument containing an arbitration agreement is relied upon, the court must first examine whether it is duly stamped. If it is not, the document cannot be acted upon for the purpose of enforcing the arbitration clause until the statutory requirements are complied with. The failure of the respondents to pay the deficit duty and penalty, despite the finding recorded by the Registrar (Judicial), meant that the High Court could not rely upon the lease deed for appointing an arbitrator.

Conclusion: The answer is in the negative. The arbitration clause in the insufficiently stamped lease deed could not be acted upon, and the appointment of the arbitrator was unsustainable.

Ratio Decidendi: An arbitration agreement embedded in an instrument that is not duly stamped cannot be acted upon by the court for appointment of an arbitrator unless the instrument is first impounded and the deficit stamp duty and penalty are paid in accordance with the applicable stamp law.

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