Stamp Duty Objection Cannot Be Used to Derail Pending Arbitration: Supreme Court Says Tribunal Must Decide First, Challenge Lies Under Section 34

Held: The Supreme Court held that a writ court should ordinarily not entertain a challenge to an arbitral tribunal’s order under Section 16 of the Arbitration and Conciliation Act, 1996 rejecting an objection that the underlying agreements were insufficiently stamped. The Court held that after the Constitution Bench decision in Re: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899, non-stamping or insufficient stamping is only a curable defect and not a fatal jurisdictional defect. Therefore, such stamping objections fall within the authority of the arbitral tribunal, and any grievance against the tribunal’s decision can be raised after the award under Section 34, unless the case shows patent lack of inherent jurisdiction or perversity staring on the face of the record.

Summary: The dispute arose from an agreement for sale of iron ore and supplementary agreements between M/s Tarini Prasad Mohanty and M/s Sunflag Iron and Steel Company Limited. During arbitration, the mine owner filed an application under Section 16 contending that the agreements were insufficiently stamped because the transaction amounted to “conveyance” under the Indian Stamp Act. The arbitrator rejected the objection, holding that the documents were agreements to sell and were properly stamped. The mine owner challenged this order through a writ petition under Articles 226 and 227. The Single Judge entertained the writ petition, held that the documents were insufficiently stamped, and directed impounding. The Division Bench reversed that order. The Supreme Court upheld the Division Bench, observing that the Single Judge impermissibly entered into the merits of the contractual arrangement and interpreted the agreements while arbitration was still pending. The Court reiterated that arbitration law requires minimal judicial interference and that errors by an arbitrator on stamping or interpretation do not automatically become jurisdictional errors warranting writ interference.

Decision: The Supreme Court dismissed the civil appeal and upheld the Division Bench judgment setting aside the Single Judge’s order. It held that the writ appeal was maintainable because the original writ petition invoked both Articles 226 and 227 and substantive writ reliefs were granted. The Court clarified that the question whether the agreement dated February 12, 2004 and the supplementary agreements amounted to “conveyance” or merely agreements for sale was left open and may be raised by the aggrieved party under Section 34 of the Arbitration and Conciliation Act, 1996, if the need arises after the award. No order as to costs was passed, and pending applications were disposed of.