India: Supreme Court holds that stamp duty is not necessary for enforcement of foreign awards in India*

Last Updated: 21 September 2018
Article by Surjendu Sankar Das and Trishala Kulkarni

Brief Facts

The arbitral award ("Award") was delivered in London under the ICC Rules on 12 February 2015 in the arbitration between Shriram EPC Limited ("Petitioner") and Rio Glass Solar SA ("Respondent").  The Petitioner challenged the Award under Section 34 of the Arbitration and Conciliation Act, 1996 ("Arbitration Act") which was dismissed on 27 September 2016 with an observation that a petition under Section 34 would not be maintainable against a foreign award in light of the judgment in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552.

Thereafter, the Respondent filed a petition under Section 47 of the Arbitration Act to enforce the Award. The Single Judge of the High Court of Madras on 9 February 2010, allowed the petition for enforcement of the Award. The appeal under Section 50 of the Arbitration Act before the Division Bench was held to be non-maintainable. The Petitioner filed a Special Leave Petition before the Supreme Court. 

Issue I

Whether the expression 'award' in Schedule I of the Indian Stamp Act, 1899 ("Stamp Act") would include a foreign award?

Issue II

Whether an award which has not been stamped, can be enforced under Section 48 and 49 of the Arbitration Act?

Judgment

Issue I: The 'award' under Item 12 of Schedule I of the Stamp Act refers to only a decision in writing by an arbitrator or umpire in reference and not made by an order of court in a suit. This applies to award made at the time of British India and today to awards made in India (except J&K). The expression 'award' never included a 'foreign award' from the inception of the Stamp Act till date. Consequently, a foreign award not being includible in Schedule I of the Stamp Act, is not liable for stamp duty.

Issue II: The Court approved the decision of the High Court of Madhya Pradesh in Narayan Trading Co. v. Abcom Trading Pvt. Ltd.[1] which had held that while enforcing the Arbitration Act, the law makers were of the view that a foreign award shall be enforceable as if it were a decree of a court and no amendment was bought either in the definition of award or in the schedule relating to payment of stamp duty on an award.

Additionally, the Court also referred to Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.[2] wherein it was held that foreign award is already 'stamped' and enforceable as a decree under the Arbitration Act. Furest Day Lawson (Supra) followed Thyssen Stahlunion GMBH v. Steel Authority of India[3] which held that a foreign award is stamped already meaning that foreign award is to be regarded as a decree and the expression 'stamped' means 'regarded'.  The Court rejected the argument that even though Section 47 of the Arbitration Act only requires three things for enforcement and stamp duty not being one of them, the same cannot be levied. The Court has interpreted that in no manner does Section 47 of the Arbitration Act interdict the payment of stamp duty even if it is otherwise payable in law.

The Court also rejected the argument that under Section 48(2) (b) of the Arbitration Act, even if stamp duty was payable on foreign award, would not be contrary to public policy of India. It held that Stamp Act 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.

In conclusion, the Court upheld the decision of the Single Judge and held that the fact that a foreign award has not borne stamp duty under the Stamp Act would not render it unenforceable.

Analysis

The judgment reinforces the position that foreign award is not liable to stamp duty under the Stamp Act. Consequently, non-payment of stamp duty does not render a foreign award unenforceable. The decision boosts pro arbitration image of India and can be reckoned as another positive step in easing the process of enforcement of foreign awards in India.


* Authored by Surjendu Sankar Das, Partner and Trishala Kulkarni, Associate; M/s Shriram EPC Limited v. Rioglass Solar SA, Civil Appeal No. 9515 of 2018, Supreme Court, judgment dated 13 September 2018.
Quorum: R F Nariman and Indu Malhotra JJ


[1] (2013) 2 MPLJ 252.

[2] (2001) 6 SCC 356.

[3] (1999) 9 SCC 334.

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