The Hon’ble High Court of Calcutta (“Court”), in the case of Sri. Bimal Chandra Roy v. Smt. Sobha Ghatak & Anr. (A.P. No. 927 of 2017), held that a petition under section 11(6) of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) would be maintainable against an insufficiently stamped development agreement executed before it was mandatory to stamp the agreement, and the same would not be impounded by the court.

Facts:

The parties had signed an MoU on June 5, 2007, which was an unstamped development agreement containing the arbitration clause. Stamping became mandatory only after the insertion of clause 5 (f) in schedule (I-A) of the Stamp Act, 1899 with effect from April 1, 2012.

When disputes arose between the parties, the petitioner filed an application under section 11 (6) of the Arbitration Act, praying for appointment of an arbitrator. 

Issue:

Whether in light of Section 35 of the Stamp Act, 1899 (which states that instruments which are not duly stamped will not be admitted as evidence or be acted upon unless the same is duly stamped), the Court should impound the development agreement not duly stamped, basis the fact that at the time of execution such instrument was not required to be stamped? 

Decision of the Court: 

The Hon’ble High Court held that, “From the above definitions of the expressions “chargeable” and “executed” and “execution”, respectively as well as the provisions of Section 17 of the Stamp Act, it is clear beyond any doubt that stamp duty is payable on an instrument mentioned either in schedule I of the Stamp Act or in schedule (I-A) thereof at the time of execution of the instrument, that is, when an instrument is signed by the parties thereto or where several persons execute the instrument at different times, first signed. Therefore, in the present case, when the said development agreement dated was executed on June 05, 2007 at a point of time when the same was not chargeable to stamp duty under the Stamp Act, I find that the petitioner is absolutely correct in its contention that in the present case there was no requirement of the said agreement being stamped.