2023 (7) TMI 1497 - HC - IBC

Arbitration agreement properly stamped under Maharashtra Stamp Act, stamp duty calculated on execution date transaction value

Kotak Mahindra Bank Ltd. Versus Williamson Magor and Co. Ltd. And Anr.

Kotak Mahindra Bank Ltd. Versus Williamson Magor and Co. Ltd. And Anr. - 2023:BHC - OS:7032 Issues Involved:1. Arbitrability of the dispute under the Recovery of Debts and Bankruptcy Act, 1993.2. Inclusion of respondent no.2 in the arbitration proceedings.3. Adequacy of stamp duty on the agreement containing the arbitration clause.Issue-Wise Detailed Analysis:1. Arbitrability of the Dispute:The primary issue was whether the dispute was arbitrable or should be resolved by the Debt Recovery Tribunal (DRT) under the Recovery of Debts and Bankruptcy Act, 1993. The applicant argued that the claim was not merely for recovery of debt but for specific performance of the agreement dated 12/04/2018. The applicant, a bank, invested in the respondent company with a 'Put Option' allowing it to sell shares back to the promoter. The applicant contended that this transaction was not a simple debt recovery but involved specific performance of contractual terms. The court examined whether the claim fell within the definition of 'debt' under Section 2(g) of the RDBA. The court noted that the term 'debt' is broadly defined but concluded that the specific performance sought by the applicant did not fall within the ambit of a debt recovery action. Thus, the court rejected the objection that the dispute was non-arbitrable.2. Inclusion of Respondent No.2 in Arbitration:The second issue was whether respondent no.2, who was not a signatory to the arbitration agreement, could be compelled to arbitrate. Respondent no.2 had executed a 'Deed of Guarantee' in favor of the applicant, which was part of the transaction documents. The court found that the deed of guarantee was a tripartite agreement involving the guarantor, the promoter company, and the investor. It was determined that the guarantor had agreed to secure the obligations of the promoter company, and the guarantee was a continuous obligation. The court held that the guarantor was bound by the arbitration agreement as the guarantee was integral to the transaction documents. The court dismissed the argument that the absence of an arbitration clause in the deed of guarantee excluded respondent no.2 from arbitration, noting previous court orders that recognized the interconnectedness of the agreements.3. Adequacy of Stamp Duty:The third issue concerned whether the agreement containing the arbitration clause was adequately stamped under the Maharashtra Stamp Act, 1958. The agreement was stamped with Rs. 15,000, and the deed of guarantee with Rs. 500. The respondent argued that the documents required higher stamp duty based on their monetary value. The applicant contended that the agreement related to the purchase or sale of shares and was correctly stamped under Article 5(c) of the Maharashtra Stamp Act. The court agreed with the applicant, finding that the agreement involved the purchase or sale of shares and was adequately stamped. The court concluded that the arbitration clause could be acted upon, as the document did not suffer from any legal infirmity regarding stamp duty.Conclusion:The court found that the dispute was arbitrable, respondent no.2 was bound by the arbitration agreement, and the agreement was adequately stamped. Consequently, the court appointed a nominee arbitrator for the respondents under Section 11(6) of the Arbitration and Conciliation Act, 1996, to adjudicate the disputes arising from the transaction documents. The court declined the respondent's request to stay the judgment.