Stamp duty on arbitral awards must exclude interest component: Delhi High Court

The Delhi High Court recently held that stamp duty on an arbitral award must be calculated on the principal amount awarded and not on the interest component even where such interest forms part of the total sum awarded by an arbitral tribunal. [Patel KNR Infrastructure Ltd v. NHAI]

Justice Jasmeet Singh held that Section 23 of the Indian Stamp Act, 1899 makes it clear that the mere inclusion of an interest component in an instrument cannot result in an enhanced stamp duty liability.

"The interest component cannot be included in the computation of stamp duty merely because it forms part of the total amount awarded by the Arbitral Tribunal," the Court observed.

The Court delivered the ruling while dismissing a review petition filed by the National Highways Authority of India (NHAI) against an April 2024 order directing it to pay the balance interest due to Patel KNR Infrastructure Limited under an arbitral award.

NHAI argued that the arbitral award of ₹18.34 crore was insufficiently stamped because stamp duty had been calculated only on the principal amount of ₹11.75 crore, excluding approximately ₹6.49 crore awarded as interest.

It contended that the deficiency rendered the award unenforceable. Patel KNR, however, relied on Section 23 of the Stamp Act to argue that interest could not be included in the stamp-duty calculation.

The Court accepted this submission.

"In this regard, Section 23 of the Indian Stamp Act, 1899 is relevant. The provision specifically stipulates that where interest is expressly made payable by the terms of an instrument, such instrument shall not be chargeable with duty higher than that with which it would have been chargeable had no mention of interest been made therein."

It further reiterated that review proceedings cannot be used to reopen issues already considered.

"A review cannot be treated as an appeal in disguise or an opportunity to re-agitate issues which have already been considered," the Court said.

Finding no error apparent in its April 2024 order, the Court dismissed NHAI's review petition.

Advocates Swaroop George, Abhinandan Jain, Abhigyan Dwivedi, Shivam Prajapati, Jatin Sharma and Kartikey appeared for Patel KNR Infrastructure.

Central Government Standing Counsel Balendu Shekhar, along with advocates Tanisha Samanta, Krishna Chaitanya, Divyansh Singh Dev and Rajkumar Maurya represented NHAI.

The ruling comes amid a broader dispute over the stamping of arbitral awards.

On November 3, the Supreme Court stayed two Delhi High Court orders concerning the procedure for dealing with insufficiently stamped domestic arbitral awards, including one passed in URC Construction v. Airports Authority of India.

The Supreme Court, however, permitted execution proceedings to continue. The stay did not specifically address whether interest should be excluded while calculating stamp duty.

[Read Judgment]