Rung Lal Kalooram v. Kedar Nath Kesriwal .

The Judgment of the Court was as follows:—

Sanderson, C.J:— This is an appeal from the judgment of my learned brother Mr. Justice Ghose.

The main object of the suit was to set aside an award which it was alleged by the Plaintiffs was void, unenforceable and in no way binding upon them and they asked that the award should be cancelled.

The facts to which it is necessary for me to refer for the purpose of my judgment are as follows:—The Plaintiffs and the Defendant agreed to submit a dispute about some bales of goods to two persons. The agreement was in writing and it was signed by Rung Lal on behalf of the Plaintiffs and by Goberdhone Khemkar on behalf of the Defendant. The document is set out at p. 24 of the paper-book. It was an informal document but it was not disputed in this Court that it was an agreement to refer the matter in dispute to the arbitration of the two individuals. These two persons made an award, and it was endorsed upon the document which contained the submission to arbitration:

It was signed by the two arbitrators. That award was filed in pursuance of the provisions of the Arbitration Act. This suit was brought, as I have already said, for the purpose of having it declared that the award was void.

Several grounds were relied upon in the Court of first instance which have not been relied upon in this Court: and, the only ground upon which the learned Advocate-General has relied in this Court is that the agreement containing the submission to arbitration did not bear any stamp at all, and his argument is that inasmuch as it did not bear a stamp it was not open to the arbitrators to act upon it, that they had no jurisdiction to enter upon the arbitration and consequently had no jurisdiction to make an award; and that upon that ground the learned Judge ought to have decided in favour of the Plaintiffs.

There is one matter to which I ought to refer which to my mind is incidental to the main matter; at the trial the learned Judge insisted upon the document in question being stamped. The learned junior Counsel who was appearing for the Plaintiffs tendered the document as a piece of paper bearing the signatures of the arbitrators and pointing out that it was not stamped. Then the learned Judge insisted upon one of the parties stamping the document and paying the penalty. The result was that the Plaintiffs under those directions paid the stamp duty and the penalty which amounted in all to Rs. 5-8 annas, the amount of the stamp being 8 annas and the penalty Rs. 5. The learned Advocate-General urged that in this case inasmuch as the Plaintiffs were alleging that the award was invalid by reason of the submission bearing no stamp, the learned Judge ought not to have insisted on the document being stamped. On this occasion, I do not intend to express any opinion as to whether the learned Judge was right on that point and for the purpose of my judgment I propose to assume that the learned Advocate-General's argument upon that point is correct and to assume that this stamping of the document in the Court before my learned brother Mr. Justice Ghose does not affect the point which he has argued in this Court, namely, that inasmuch as the document containing the submission when presented to the arbitrators did not bear a stamp, they had no jurisdiction to act upon it. The matter depends first upon the provisions of the Arbitration Act and from those provisions it is clear that “submission” means a “written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not.”

In this case there is no dispute chat there was a written agreement signed by or on behalf of the parties concerned and therefore so far as the Arbitration Act is concerned there was a good submission to arbitration upon which the arbitrators were entitled to act and to make an award. But it is in respect of the provisions of the Stamp Act that the point arises. By sec. 35 of the Indian Stamp Act, it is provided “No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence or shall be acted upon, registered or authenticated by any such person or by any public officer unless such instrument is duly stamped.”

The first thing to notice about this section in my judgment, is that there are two classes of persons indicated by this section—first a person having by law or consent of parties authority to receive evidence and secondly a public officer.

We are not concerned in this case with “public officer;” we are concerned with a person or persons having by consent of parties authority to receive evidence. The instrument in this case is not stamped and therefore under the provisions of the first part of sec. 35 it should not have been admitted in evidence by a person having authority to receive evidence or acted upon by such person. That section seems to me to imply that the instrument which is referred to in the section is one which in the first instance is to be received in evidence before it can be acted upon. Whether that be so or not, in my judgment in this case the submission to arbitration must have been put in evidence before the arbitrators, before they could act upon it. The submission—the agreement in writing—must be produced to the arbitrators and if they are not satisfied as to the execution of the document, it is necessary that the execution of the document should lie proved before the arbitrators. In any event it seems to me clear that the submission in this case was a document which had to be put in evidence before the arbitrators. It was their duty to see that it was properly stamped. It was not stamped. If an objection had been taken at the time then the proviso to sec. 35 would have come into force, and upon payment of the stamp duty and the penalty the instrument would have been admitted in evidence in accordance with the proviso. That was not done. It is necessary therefore to refer to another section. Sec. 36—which provides, “where an instrument has been admitted in evidence, such admission shall not, except as provided in sec. 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped.” The provisions of sec. 61 are not material to the question which arises in this case. The submission was, in my judgment, admitted in evidence by the arbitrators, and having been admitted in evidence by the arbitrators, it was not open to either of the parties to call in question such admission in the arbitration proceedings on the ground that the submission had not been duly stamped. The award, therefore, which was made upon the submission, was in my judgment a valid award. It was filed in accordance with the provisions of the Arbitration Act. In my judgment it is not now open to the Plaintiffs who are parties to the submission, and who thereby agreed to the matter being referred to the arbitration of the two arbitrators and who raised no objection to the agreement, containing the submission, being admitted in evidence to rely upon the fact that the submission bore no stamp, for the purpose of showing that the award was invalid. It has to be remembered that the provisions in the Stamp Act were passed for the purpose of protecting the revenue and, in my judgment, the words, which have been relied upon by the learned Advocate-General of sec. 35, under the circumstances of this case and having regard to the proviso of sec. 35 and the terms of sec. 36 of the Stamp Act, have not the effect of rendering the award invalid.

For these reasons in my judgment the learned Judge's decision should be upheld and this appeal should be dismissed with costs.

Richardson, J.:— I agree. The submission to arbitration (perfectly good submission under the Indian Arbitration Act, 1890) was chargeable under the Indian Stamp Act, 1899, with a duty of eight annas and should have been stamped accordingly. It bore no stamp. Nevertheless it was received and acted upon by the arbitrators. Apparently, their attention was not drawn to the point. They made their award. The award was filed in Court and became enforceable as a decree under sec. 15 of the Arbitration Act.

The learned Advocate-General has contended that the submission was invalid because it was not duly stamped. He argues that the proceedings founded on the submission are thereby rendered wholly void and of no effect and that the Plaintiffs are entitled to succeed in this suit on that ground alone.

To my mind, however, the terms of sec. 36 of the Stamp Act are sufficient to show, that no such inconvenient result in entailed and that the want of a stamp did not go to the jurisdiction of the arbitrator to make an award.

A failure to comply with the Stamp Act may doubtless entail a penalty under that Act. The nature and extent of any such penally must depend on the relevant provisions according to their true construction. Speaking generally, however, the object of the legislature appears to have been to secure the public revenue so far as it is reasonably practicable to do so, and primâ facie it would seem hardly reasonable that the whole of possibly expensive proceedings should be vitiated and thrown away by the want, as in this case, of an eight anna stamp.

The learned Advocate-General relies on the imperative language of sec. 35. If that section stood alone, there might be more force in the argument addressed to us but sec. 35 must be read with sec. 36.

Sec. 35 seems to be based upon the assumption that every “person having by law or consent of parties authority to receive evidence” knows the law and will apply it. On that assumption, such person is given no discretion. He is not to admit in evidence for any purpose or to act upon any instrument chargeable with duty unless such instrument is duly stamped. That prohibition is subject to certain provisos, among which is proviso (a). Under that proviso, if the duty is paid, together with the prescribed penalty, the instrument is to be admitted “subject to all just exceptions.” I am not very clear as to the meaning of these last words but nothing turns upon them in the present connection.

In the present case, if the arbitrators had known the law and had insisted, as they should have done, on the duty and penalty being paid, nothing could have been said and all would have been well. The deficiency in the document would have been cured.

But while proviso (a) affords an easy escape from the consequences of the prohibition in the first part of sec. 35, the prohibition is none the less on that account definite and positive. An imperative duty is apparently imposed on those who have authority to receive evidence, and if sec. 35 stood by itself, there might well be a question what the result would be if the duty were not observed. At this point, however, the effect of sec. 36 has to be considered.

The legislature, as I understand the matter, did not forget that those who have authority to receive evidence might sometimes be ignorant of, or inattentive to the requirements of the Stamp Law, or that difficult and doubtful questions might arise as to the amount of duty chargeable, such cases are met by sec. 36, under which “where an instrument has been admitted in evidence”—that is where the instrument has been admitted in fact, whether in total or partial neglect of the provisions of sec. 35 “such admission shall not, except as provided in sec. 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped.”

Under that provision if any penalty is to be exacted, it can only be exacted under sec. 61. The revenue is then protected, so far as it is protected, by that section.

In my opinion, once an instrument is admitted in evidence in any proceeding, either under sec. 35 or under sec. 36, it is available in that proceeding for a purposes as if it had been properly stamped from the outset. The proceeding will go through to a valid termination and cannot afterwards be challenged for want of jurisdiction merely by reason of non-compliance with the Stamp Act.

Sec. 36 would be entirely nullified if on the conclusion of the proceeding in which the instrument is admitted, the proceeding could be set aside by a separate proceeding initiated by one of the parties on the sole ground that the person having authority to receive evidence had admitted or acted upon an unstamped or insufficiently stamped instrument.

Reading secs. 35 and 36 together and with the other provisions in Chap. IV of the Act, under the heading “Instruments not duly stamped,” I come to the conclusion that the legislature did not intend that the admission of an instrument not duly stamped should go to the jurisdiction of the Judge or other person admitting it. To my mind, the language of the Act, fairly interpreted, does not lead to that result but indicates the contrary. The revenue from stamps is sufficiently protected in other ways.

In the present suit, the learned Judge acted under sec. 35, proviso (a) and by his direction the Plaintiff paid the prescribed penalty. The present suit cannot, I think, he regarded as a subsequent stage of the proceeding before the arbitrators, but it is not necessary now to consider whether the learned Judge was right in acting under sec. 35, or whether, if so, he was right in making the Plaintiff pay the penalty. If the section applies, possibly the Defendant who relied on the submission should have paid the penalty rather than the Plaintiff who seeks to set aside the arbitration. It is not in the view I take necessary to decide any such question or to consider whether there is any other provision in the Act under which the learned Judge might more appropriately have proceeded.

Assuming, however, that the learned Judge was at liberty to deal with the document as he did under sec. 35(a), then without deciding the point I should be disposed to say that the document, having been admitted in the proceeding before him, could not be challenged in that proceeding for want of the proper stamp and for the purpose of that proceeding would fall to be treated as if it had been duly stamped from the outset. This, if correct, would be an additional reason why the appeal should fail.

I agree that the appeal should be dismissed with costs.

Mr. J.K Sarcar, Solicitor for the Appellant.

Messrs O.C Ganguly & Co., Solicitors for the Respondent.

P.K.C