HC quashes lower court order mandating stamp duty at old rate

The company approached the HC challenging this August 31, 2019 order, and sought for a direction to the lower Court to calculate the stamp duty as provided under Article 11 b of the Karnataka Stamp Act which had come into effect on March 1, 2014.As per this amendment, the proper stamp duty that is required to be paid on the arbitral award is 34 per cent of the value of the arbitral award i.e., 0.75 per cent of the value of the arbitral award. The company had won the arbitration in April, 2016 when the amendment was already in force.

The High Court of Karnataka has stepped in to correct a lower court order, which had mandated stamp duty at the old rate of six per cent instead of the new rate of 0.75 per cent.

Justice Vishwajith Shetty's judgement came recently at the Kalburgi bench of the HC in a petition filed by Shriram City Union Finance Ltd, which had initiated arbitration proceedings against three persons for recovery of loans that were overdue. In April 2016, an order was passed in favour of the company to recover Rs 8,10,251 with interest at 18 per cent, following which it filed an execution petition to recover the dues.

The company was ordered to file stamp duty at six per cent of the amount recoverable by the lower court. When it was not paid, the execution petition was dismissed by the Court of First Additional District and Sessions Judge, Kalaburagi. The company approached the HC challenging this August 31, 2019 order, and sought direction from the lower Court to calculate the stamp duty as provided under Article 11 (b) of the Karnataka Stamp Act which had come into effect on March 1, 2014.

As per this amendment, ''the proper stamp duty that is required to be paid on the arbitral award is 3/4 per cent of the value of the arbitral award i.e., 0.75 per cent of the value of the arbitral award.'' The company had won the arbitration in April 2016 when the amendment was already in force. ''I am of the considered view that the executing court had failed to take note of the amendment by way of substitution of Article 11(b) of the Schedule to the Karnataka Stamp Act and thereby had erred in directing the petitioner to pay the stamp duty at six per cent on the valuation of the award amount,'' the HC said in its judgement.

It quashed the orders passed by the lower court and directed the collection of stamp duty as per the amended rates.