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The Bombay High Court (BHC) decided that once parties acknowledge the arbitration clause's existence, the court may appoint, even if the required amount of stamp duty is not paid, an arbiter.
In the instant case titled Pigments and Allieds v. Carboline (India) Private Limited and Official Liquidator and Liquidator of Octamec Engineering Limited, the issue raised for clarification before the Bombay High Court was:
Whether the court can appoint an arbitrator even if there is a stamp obligation once the parties recognise the presence of an arbitration clause?
With regard to this issue, the BHC believed that, pending the Collector of Stamps' determination, the absence of the original Agreement at this point would not prevent the BHC from appointing an arbitrator. The BHC stated that it was feasible that the document might still be sitting unnoticed with either of one of the parties and could surface any day. There was no value in arguing that because the original Agreement was missing, no reference could be made because it had been accepted and relied upon by both parties. Furthermore, according to BHC, one does not need to wait for the claimant in the current case to decide whether or not to pay stamp duty after the decision has been made.
The court stated that although arbitration is viewed as a speedy remedy, if applicants and respondents, who may have counterclaims, must wait for the stamping of documents and conclusion of the statutory challenge, the purpose of arbitration may be defeated.
The Court categorically stated that,
“Merely because Octamec is in liquidation does not mean that the application is rendered ineffective or deadwood. Octamec is not the defendant. Pursuant to the order passed in Company Application No.501 of 2016, the contesting party, as I see, is only Carboline. It was upto the applicant to decide whether it has a claim against the Liquidator or not and proceed in accordance with law. The applicant has chosen not to proceed against the company in liquidation.”