Stamping of agreements/deeds is governed by the Indian Stamp Act, 1899 (“the Stamp Act”). If the document is not sufficiently stamped, then by virtue of Section 35 of the Stamp Act there is a bar on ‘admitting’ such a document in evidence or acting upon it.
Section 36 of the Stamp Act tells us that if this objection is not taken at the first instance, it stands waived and inadmissibility of the document cannot be argued later except as provided under Section 61 of the Stamp Act.
Further, Section 33 of the Stamp Act empowers the Court, acting as the protector of state revenue, to examine and impound an unstamped/insufficiently stamped document. The provision stipulates that, if an instrument chargeable with stamp duty is produced before a Court and is not duly stamped, the Court shall impound the same. Therefore, there is a mandate on the Court to impound the document when this issue is brought to its attention.
With the basics being thus, a couple of questions concerning this issue:
- Who can impound?
- Any person authorized to receive evidence either by law or by the consent of the parties;
- Any person in charge of public office;
- Includes a ‘Court’. Courts are under a statutory obligation to impound even suo motu.
- When can a document be impounded?
- When the document is produced or comes before the Court in performance of its functions.
- Production connotes voluntary production or in pursuance of a Court order (e.g.: Warrants cannot be issued against a person to compel him to produce a document for the purposes of impounding of the same).
- What kind of document? – Only the original.
3A. At what stage is this objection required to be decided?
It is important to note that as held in Javer Chand And Others vs. Pukhraj Surana 1961 AIR 1655 whenever a question as to the admissibility of a document is raised on the ground that it has not been stamped, or has not been properly stamped, that objection has to be decided first, before anything else. This is different from other objections which are merely recorded at trial and final decision deferred till appreciation of evidence.
This view is also supported by Bipin Shantilal Panchal vs. State of Gujarat 2001 (3) SCC 1 (3 judge bench), where it was noted:
“14. When so recast, the practice which can be a better substitute is this: Whenever an objection is raised during evidence taking stage regarding the admissibility of any material or item of oral evidence the trial Court can make a note of such objection and mark the objected document tentatively as an exhibit in the case (or record the objected part of the oral evidence) subject to such objections to be decided at the last stage in the final judgment. If the Court finds at the final stage that the objection so raised is sustainable the judge or magistrate can keep such evidence excluded from consideration. In our view, there is no illegality in adopting such a course. (However, we make it clear that if the objection relates to deficiency of stamp duty of a document the Court has to decide the objection before proceeding further. For all other objections, the procedure suggested above can be followed.)”Bipin Shantilal Panchal vs. State of Gujarat 2001 (3) SCC 1
Arbitration Clause in an Insufficiently Stamped/Unstamped Contract:
It was held in M/s SMS Teas Estates (P) Ltd vs. Chandmari Tea Co (P) Ltd. (2011) 14 SCC 66 that when the arbitration clause is contained in an insufficiently stamped/unstamped contract, a Court dealing with a petition under Section 11 of the Arbitration & Conciliation Act, 1996 (“the ACA”) cannot act upon such an arbitration clause and should impound the document under Section 33 of the Stamp Act and follow the procedure of impounding as per law.
Interestingly, a full bench of the High Court of Bombay in Gautam Landscapes Pvt. Ltd. vs. Sailesh S. Shah 2019 (3) Mh.LJ 231 dealt with the issue of an arbitration clause in an insufficiently stamped agreement under an application for interim measures by the Court as provided by Section 9 of the ACA. The High Court of Bombay distinguished the case from SMS Teas Estates (supra) on the ground that the scope of Section 9 and 11 of the ACA is different and held that “the issue relating to stamping of the document could further be dragged on before the revenue authority, which may take considerable time for its final decision or conclusion and by that time the party may suffer damage and would be without any remedy in respect of seeking protection under Section 9.” The Court further held that as the arbitration clause is a separate agreement from the main contract, only the arbitration clause will have relevancy for the purpose of an application under Section 9 of the ACA and the issue of non-payment of stamp duty can be raised at a later stage.
However, as held in Garware Wall Ropes Ltd v. Coastal Marine Construction & Engineering Ltd 2019 SCC OnLine SC 515, the view taken by the Full Bench of High Court of Bombay in Gautam Landascapes (supra) does not apply to a petition under Section 11 of the ACA. The Court also opined that the addition of Section 11(6A) was only to restrict the scope of judicial interference in an application under Section 11 of the ACA and the law propounded by SMS Teas Estates (supra) [SS1] continues to hold. SMS Teas Estates (supra) was also recently affirmed by the Supreme Court in[BC2] Dharmaratnakara Rai Charities and others vs. M/s Bhaskar Raju & Others, Civil Appeal No. 1599 of 2020.
The Supreme Court is yet to decide on the issue of admissibility of an insufficiently stamped/unstamped document under Section 9 of the ACA as the same was not in issue before the Court in SMS Tea Estates (supra) and Garware Wall Ropes (supra).
Step by Step Procedure of Impounding:
As gleaned from Chilakuri Gangulappa v. RDO, Madanpalle and Ors. 2001 (4) SCC 197 and provisions of Section 33 of the Stamp Act, the following are the steps taken by a Court when dealing with an insufficiently stamped or unstamped document: