STAMP DUTY NOT NECESSARY FOR ENFORCEMENT OF FOREIGN ARBITRATION AWARDS IN INDIA: SUPREME COURT

The Supreme Court Bench of Justice RF Nariman and Justice Indu Malhotra has, in the case of M/s. Shriram EPC Limited v. Rioglass Solar SA dated 13.09.2018, settled a long standing contentious issue by holding that the payment of stamp duty under the Indian Stamp Act, 1899 (the Act) is not necessary for the enforcement of foreign arbitration awards in India.

The main bone of contention in the aforesaid Appeal was whether the expression “award” would include a foreign award or not. The issue arose out of a Madras High Court Judgment dated 09.02.2017, in which a petition filed to enforce a foreign award was allowed. The Judgment overruled the objections to an International Chamber of Commerce (ICC) award (Award) delivered in London dated February 12, 2015.

The counsel for the appellant, Sri KV Vishwanathan, argued before the Apex Court that the Award cannot be enforced as per Section 47 of the Indian Arbitration and Conciliation Act 1996 as amended thereof unless it is stamped in accordance with the Act. He submitted that given the provisions of the Act, it is clear that a foreign award would be covered by the said Act. That being so, and stamp duty not being paid, the said foreign Award could not be enforced.

On the contrary, learned counsel for the Respondent argued that the expression “award” which occurs in Item 12 of Schedule I of the Act applies only to a domestic award and not a foreign award. He relied on the fact that the Act was enacted in 1899, in which “award” has never been enlarged so as to include foreign awards and the only requirement for the enforcement of a foreign award is laid down in Section 47 of the Arbitration and Conciliation Act, 1956, which does not require the award to be stamped.

Tracing the history of the Act and the erstwhile provisions of the Code of Civil Procedure, 1882 which dealt with arbitration, the Apex Court concluded that the Act originally dealt with awards made in British India. It also noted that there were several princely states in India governed by sovereign rulers which had their own laws. The arbitration laws, if any, in the aforesaid princely states, if they were to culminate in awards, would not be “awards” under either the Code of Civil Procedure, 1882 or the Indian Arbitration Act, 1899. They would, therefore, be foreign awards in so far as British India is concerned.

The main reason behind the verdict is the reasoning that a foreign award is not covered by the term “award” mentioned in Item 12 of Schedule I of the Act. The Supreme Court, thus, held as follows:

“It will thus be seen that “award” under Item 12 of Schedule I of the Indian Stamp Act, 1899 has remained unchanged till date. As has been held by us hereinabove, in 1899, 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 to date. Consequently, a foreign award, not being includible in Schedule I of the Indian Stamp Act, 1899, is not liable for stamp duty.”

Thus, the Supreme Court in this case held that the foreign Award not bearing the stamp duty under the Act would not be rendered unenforceable.

Surabhi Aggarwal

Senior Associate

The Indian Lawyer