Karnataka High Court on whether an interim order by an arbitrator would be amenable to stamp duty

The main issue which fell for consideration before the Hon’ble Karnataka High Court in the attached case, was whether the expression ‘award’ as used by the legislature in Article 11 of the Karnataka Stamp Act, 1957 (“Stamp Act”) would include an order passed by the arbitrator under section 17 the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). Facts in brief The respondents had entered into a Joint Development Agreement (“JDA”) with the respondents and also executed a Power of Attorney (“PoA”). The respondents committed breach of the terms of the JDA and the PoA which led to disputes between the parties and commencement of arbitration. The arbitrators heard the parties and by an order dated November 28, 2017 directed the respondents to pay certain outstanding dues subject to the result of the arbitration proceedings. The respondents were required to pay this amount by December 24, 2017. Being aggrieved by the said order the respondents filed an appeal under section 37 of the Arbitration Act. The counsel for the petitioners inter alia argued on the issue on inadequacy of payment on stamp duty and the trial court held that the order passed by the arbitrator on November 28, 2017 is an interim award and therefore the stamp duty is required to be paid on it as provided under Article 11 of the Stamp Act. Judgment and analysis It was observed by the Hon’ble Karnataka High Court that the provisions of the Stamp Act carve out a distinction between an award and an order. While section 9 of the Arbitration Act grants power to the court to pass an order by way of an interim measure, section 17 grants power to the arbitrator to pass an order by way of an interim measure and the order passed by an arbitrator is enforceable under the Code of Civil Procedure as if its an order of the court. Thus, by way of legal fiction an order passed by an arbitrator has to be treated like an order of the court for the purpose of execution. The Court went on to hold that the order passed by the arbitrator was subject to final disposal of the proceedings pending before the arbitrator and thus it cannot be treated as an interim award as it does not finally adjudicate upon the claims of the parties and is subject to the final award to be passed by the arbitrator. Therefore, the same cannot be treated as an award or an interim award and would not fall within the purview of the expression ‘award’ as defined under the Stamp Act. Download Pdf