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The Bench of Justices RF Nariman and Indu Malhotra of the Supreme Court of India has finally settled the issue regarding payment of stamp duty for enforcement of Foreign Awards in India. It has held that since a foreign award, is not contained within the expression “award” in Item 12 of Schedule I, it is not taxable under the Indian Stamp Act, 1899
The Bench was hearing an appeal against the judgment of a Single Judge of the Madras High Court which had allowed a petition to enforce a foreign award.
The limited issue before the Bench in the matter titled as M/s Shriram Epc Limited vs. Rioglass Solar SA was whether an award that has not been stamped can be enforced under Sections 48 and 49 of the Arbitration and Conciliation Act, 1996.
Relying on a judgment of the Punjab and Haryana High Court in Gujrals Co. v. M.A. Morris, Senior Advocate KV Viswanathan, appearing on behalf of the Appellant submitted that given the provisions of the Indian Stamp Act, 1899, it is clear that a foreign award would be covered by the said Act.
Since stamp duty has not been paid, the said foreign award cannot be enforced. He further relied upon the 194th Law Commission Report, which had suggested changes insofar as stamp duty is concerned in Part II of the 1996 Act.
On the other hand, the Respondent contended that the expression “award” which occurs in Schedule I of the Indian Stamp Act, 1899 applies only to a domestic award and not a foreign award. Reliance was placed on the fact that the Indian Stamp Act was enacted in 1899, in which “award” has never been enlarged so as to include foreign awards after the Arbitration (Protocol and Convention) Act, 1937 and/or the Foreign Awards (Recognition and Enforcement) Act, 1961 were enacted.
Also, it was contended that the only requirement for the enforcement of a foreign award is laid down in Section 47 of the Act, which does not require the award to be stamped. Lastly, a ‘without prejudice argument’ was also made that under Section 48(2)(b), even if a foreign award was required to be stamped, but is not stamped, enforcement of such award would not be contrary to the fundamental policy of Indian law.
At the outset, the Court pointed out that “award” under Item 12 of Schedule I of the Indian Stamp Act, 1899 has remained unchanged till date. Further, the Court observed that in 1899, the meaning of the term “award” as mentioned in the schedule 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 awards 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.
For the foregoing reasons, the Court held that the expression “award” has never included a foreign award from the very inception till date and therefore, a foreign award not being covered by Schedule I of the Indian Stamp Act, 1899, is not liable for stamp duty.
On the basis of the judgment in Senior Electric Inspector and Ors. v. Laxminarayan Chopra and Anr., Viswanathan had also argued that an Act must be construed as on date, despite the fact that the definition contained in an old Act may not literally fit the bill. However, the Court held that the said judgment is wholly distinguishable.
Rejecting the said contention, the Court held that the Indian Stamp Act, 1899 is a fiscal statute which must be construed literally. Any ambiguity in the said statute would be construed to the benefit of the assessee who has to pay stamp duty.
The Court also rejected the contention of the Respondent that under Section 48(2)(b), even if a foreign award were required to be stamped, but is not stamped, enforcement of such award would not be contrary to the fundamental policy of Indian law. The Court clarified that 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
Lastly, the Court held that since a foreign award, is not contained within the expression “award” in Item 12 of Schedule I, it is, therefore, not an “instrument” which is taxable under Section 3(c) of the Indian Stamp Act, 1899.