Interest Component Of Arbitral Award Not To Be Included While Calculating Stamp Duty: Delhi High Court

The Delhi High Court has held that the interest component of an arbitral award cannot be included when computing the stamp duty payable on it, in view of Section 23 of the Indian Stamp Act, 1899.

The Court observed that Section 23 makes it clear that the mere inclusion of an interest component in an instrument cannot result in a higher stamp duty liability.

The Court dismissed a review petition filed by the National Highways Authority of India (NHAI). NHAI had argued that the arbitral award in favour of Patel KNR Infrastructure Ltd. was insufficiently stamped and therefore could not be enforced through execution proceedings.

The Bench of Justice Jasmeet Singh observed, “The decree holder has accordingly contended that the interest component is liable to be excluded while computing the stamp duty in terms of Section 23 of the Indian Stamp Act, 1899. I find merit in this submission. The interest component cannot be included in the computation of stamp duty merely because it forms part of the total amount awarded by the Arbitral Tribunal.”

Advocate Swaroop George appeared for the Decree Holder, while CGSC Balendu Shekhar appeared for the Judgment Debtor.

Brief Facts

The review petition sought review of the Court’s order, which had disposed of the execution petition. That order directed NHAI, the judgment debtor, to pay the balance interest as calculated by the decree holder.

The arbitral award was for ₹18,34,02,838. Of this, ₹11,75,05,551 was the principal or claim amount and ₹6,48,97,287 was interest, covering past, pendente lite and future interest.

Contentions of the Parties

NHAI’s main ground was that the award was not executable when the execution petition was filed, because the requisite stamp duty had not been paid. It argued that stamp duty at 0.1% of the awarded amount came to ₹1,83,402.80, while the decree holder had paid only ₹1,18,105, besides ₹500 towards stamp paper. It therefore contended that no further interest was payable, particularly when the award itself was not enforceable.

The decree holder relied on Section 23 of the Indian Stamp Act, which provides that where interest is expressly made payable by the terms of an instrument, the instrument shall not be chargeable with duty higher than it would have been had no mention of interest been made in it. It submitted that stamp duty is not payable on the interest component of the award, so the duty had rightly been calculated on the principal amount and there was no deficiency.

Observations/Findings of the Court

The question before the Court was whether the stamp duty on the arbitral award is to be calculated on the entire awarded amount, including interest, or only on the principal amount awarded by the Arbitral Tribunal.

Interpreting Section 23, the Court held, "The provision, therefore, makes it clear that the mere inclusion of an interest component in an instrument cannot result in an enhanced stamp duty liability."

NHAI relied on the Madhya Pradesh High Court’s decision in Brajesh Kumar Pannalal v. IndusInd Bank Limited. The Court noted that the decision dealt with when an arbitral award must be stamped and the stage at which an objection on deficient stamp duty may be raised. It held that “the issue of exclusion of the interest component in the computation of stamp duty in terms of Section 23 of the Indian Stamp Act, 1899 was not under consideration therein.”

It similarly held that the judgment in Quadrant Televentures Ltd. v. ATC Telecom Infrastructure (P) Ltd. did not deal with Section 23 and did not advance NHAI’s case.

On the scope of review, the Court observed, “A review cannot be treated as an appeal in disguise or an opportunity to re-agitate issues which have already been considered.” It added that once the interest component is excluded under Section 23, “the very basis of the objection raised by the judgment debtor does not survive.”

Finding no error apparent on the face of the record in the order, the Court dismissed the review petition.

Cause Title: Patel KNR Infrastructure Ltd. v. National Highways Authority of India [OMP (ENF.) (COMM.) 14/2023; Review Pet. 292/2024]

Appearances:

Decree Holder: Advocates Swaroop George, Abhinandan Jain, Abhigyan Dwivedi, Shivam Prajapati, Jatin Sharma and Kartikey.

Judgment Debtor: CGSC Balendu Shekhar, Advocates Tanisha Samanta, Krishna Chaitanya, Divyansh Singh Dev and Rajkumar Maurya.

Click here to read/download the Order