Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 2973-2974 OF 2017

(Arising out of SLP (C) Nos.10635-10636 of 2014)

BLACK PEARL HOTELS (PVT) LTD Appellant(s)

VERSUS

M/S PLANET M RETAIL LTD Respondent(s)

J U D G M E N T

Dipak Misra, J.

Delay condoned.

2.Leave granted.

3.The present appeals, by special leave, call in question

the legal propriety of the order dated 11.1.2013 passed by

the learned Single Judge of the High Court of Karnataka at

Bangalore in CMP No.122 of 2012 and the order dated

17.12.2013 passed in review, i.e., I.A. No.1 of 2013.

4.The facts which are necessary to be stated for

adjudication of these appeals are that the appellant had

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entered into an agreement, which is called a “Conducting

Agreement”, with the respondent on 01.02.2008. In terms

of the agreement, the appellant was required to enable the

respondent to conduct its business from the premises and

to extend to it the benefit of permissions and licences

granted to the appellant. The appellant was further required

to secure an extension of its own lease in the premises in

order to enable the respondent to conduct the retail shop

from the premises and in return, the respondent was to pay

a fixed percentage of its net sales proceeds subject to a

minimum guaranteed sum of Rs. 11,00,000/- per month.

Additionally, the respondent was also liable to furnish the

appellant with an interest free refundable security deposit in

a sum of Rs. 99,00,000/-. The said agreement stipulated

that all disputes between the parties shall be referred to

arbitration. As the appellant felt certain breaches were

committed by the respondent, correspondences were made

between the parties and ultimately, the appellant filed a

petition under the Arbitration and Conciliation Act, 1996

(for brevity, “the 1996 Act”) before the City Civil Court,

Bangalore, inter alia, seeking for an order of temporary

3

injunction restraining the respondent from interfering with

the peaceful possession of the appellant in respect of the

premises pending conclusion of the arbitration proceedings.

Thereafter the appellant issued a notice on 13.06.2012

calling upon the respondent to concur in the appointment of

his nominated arbitrator as the sole arbitrator to adjudicate

the disputes between the parties. The said notice was

replied to by the respondent asserting, inter alia, that the

arbitration proceedings were required to be held in Mumbai

and not at Bangalore and refused to concur with the

appointment proposed by the appellant. That apart, it did

not propose to nominate any other arbitrator.

5.As the respondent failed to concur in the appointment

proposed by the appellant or to appoint an arbitrator as

required under the contract, the appellant filed a petition

under Section 11 of the 1996 Act. The Judge designated by

the Chief Justice took up the matter and issued notice on

C.M.P. No. 122 of 2012. On 11.01.2013 the learned Judge

prima facie was of the view that the “conducting agreement”

may be a lease of the immovable property. Learned counsel

for the appellant, as the impugned order would reflect,

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contended that it was not so and sought time to canvas

argument that it was a licence. Thereafter, the learned

Judge passed the following order:-

“Therefore, the matter shall be placed before

the Registrar (Judicial), who shall determine

whether the transaction is in the nature of lease

or licence and stamp duty that is attracted,

since whether it is lease or licence, the

agreement is apparently not duly stamped.

Therefore, he after determining whether lease or

licence, recover the duty and penalty and take

further steps and thereafter remit the matter for

further consideration.”

6.The appellant filed an application seeking review of the

aforesaid order and the learned Single Judge vide order

dated 17.12.2013 declined to entertain the same and in

that context held thus:-

“The matter having been referred to the

Registrar, notwithstanding the application in

I.A. 1/13, having been filed, the matter ought

not to have been listed before this Court.

Hence, the office is directed to place the matter

before the Registrar, who shall, in accordance

with the earlier direction, determine the stamp

duty payable on the document impounded as a

lease or licence and thereafter call upon the

petitioner to pay such duty or penalty and after

collection of such duty or penalty and after

complying with such steps, as provided in law,

place the matter for further consideration before

this Court.”

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7.It is submitted by Ms. Pritha Srikumar Iyer, learned

counsel for the appellant that the learned Judge has

erroneously focussed on the issue whether the document in

question was a lease or licence, for it is an agreement

simplicitor and incorporates an arbitration clause.

Alternatively, it is argued that whether it is a lease or a

licence was required to be decided by the learned Judge and

the said judicial determination could not have been

delegated to the Registrar of the Court. It is urged by her

that the Court can only require the Registrar for

determining whether the document deserves to be

impounded or not only after alluding to the nature of the

document under Sections 33 and 37 of the Karnataka

Stamp Act, 1957 (for short, “the 1957 Act”). To bolster the

said pronouncement, she has placed reliance on the

authority in Chillakuri Gangulappa vs. Revenue

Divisional Officer, Madanpalle & Anr.

1

8.Mr. Sandeep S. Ladda, learned counsel for the

respondent submits that the decision that has been placed

reliance upon by the appellant is distinguishable inasmuch

1

(2001) 4 SCC 197

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as that the said authority deals with Section 38 of the

Indian Stamp Act, 1899 and is not a judgment rendered in

the context of the 1957 Act. Learned counsel would further

expound that regard being had to the language employed

under Section 33(2)(b) of the 1957 Act, the order passed by

the High Court is absolutely impeccable.

9.At the outset, we think it appropriate to make it clear

that we are not determining whether the agreement in

question is a lease or licence or an agreement simplicitor as

put forth by the learned counsel for the appellant. That is

required to be dwelt upon and addressed by the High Court

while dealing with an application under Section 11 of the

Act. It is well settled in law that while delving into the

appointment of an arbitrator under Section 11, regard being

had to the nature of agreement as stipulated under Section

7 of the 1996 Act, the Judge designated by the learned

Chief Justice is obliged to consider the nature of agreement

and whether the document requires to be stamped or not,

and if so, whether requisite stamp duty has been duly paid

on the same. We are so stating as in the instant case there

is a written instrument and there is dispute as regards the

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nature and character of the document.

10.In SMS Tea Estates Private Limited vs. Chandmari

Tea Company Private Limited

2

the Court has ruled that:-

“21. Therefore, when a lease deed or any

other instrument is relied upon as contending

the arbitration agreement, the court should

consider at the outset, whether an objection in

that behalf is raised or not, whether the

document is properly stamped. If it comes to the

conclusion that it is not properly stamped, it

should be impounded and dealt with in the

manner specified in section 38 of Stamp Act.

The court cannot act upon such a document or

the arbitration clause therein. But if the deficit

duty and penalty is paid in the manner set out

in section 35 or section 40 of the Stamp Act,

the document can be acted upon or admitted in

evidence.”

11.After so stating, the Court laid down the procedure to

be adopted where the arbitration clause is contained in an

agreement which is not registered but is required to be

compulsorily registered and which is not duly stamped.

Thereafter, the Court set out the duty of the Court in a

chronological manner. The said passage is extracted

below:-

“22.1. The court should, before admitting any

document into evidence or acting upon such

document, examine whether the

instrument/document is duly stamped and

2 (2011) 14 SCC 66

8

whether it is an instrument which is compulso-

rily registerable.

22.2. If the document is found to be not duly

stamped, Section 35 of the Stamp Act bars the

said document being acted upon. Consequently,

even the arbitration clause therein cannot be

acted upon. The court should then proceed to

impound the document under Section 33 of the

Stamp Act and follow the procedure under Sec-

tions 35 and 38 of the Stamp Act.

22.3. If the document is found to be duly

stamped, or if the deficit stamp duty and

penalty is paid, either before the court or before

the Collector (as contemplated in Section 35 or

40 Section of the Stamp Act), and the defect

with reference to deficit stamp is cured, the

court may treat the document as duly stamped.

22.4. Once the document is found to be duly

stamped, the court shall proceed to consider

whether the document is compulsorily register-

able. If the document is found to be not compul-

sorily registerable, the court can act upon the

arbitration agreement, without any impediment.

22.5. If the document is not registered, but is

compulsorily registerable, having regard to Sec-

tion 16(1)(a) of the Act, the court can delink the

arbitration agreement from the main document,

as an agreement independent of the other terms

of the document, even if the document itself

cannot in any way affect the property or cannot

be received as evidence of any transaction af-

fecting such property. The only exception is

where the respondent in the application demon-

strates that the arbitration agreement is also

void and unenforceable, as pointed out in para

15 above. If the respondent raises any objection

that the arbitration agreement was invalid, the

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court will consider the said objection before pro-

ceeding to appoint an arbitrator.

22.6. Where the document is compulsorily regis-

terable, but is not registered, but the arbitration

agreement is valid and separable, what is re-

quired to be borne in mind is that the arbitrator

appointed in such a matter cannot rely upon the

unregistered instrument except for two pur -

poses, that is (a) as evidence of contract in a

claim for specific performance, and (b) as evi-

dence of any collateral transaction which does

not require registration.”

12.There is no dispute that the present controversy is

covered by the 1957 Act. However, we think it apposite to

refer to Section 38 of the Indian Stamp Act, 1899. The said

provision reads as follows:-

“38. Instruments impounded, how dealt

with.-(l) Where the person impounding an

instrument under section 33 has by law or

consent of parties authority to receive evidence

and admits such instrument in evidence upon

payment of a penalty as provided by section 35

or of duty as provided by section 37, he shall

send to the Collector an authenticated copy of

such instrument, together with a certificate in

writing, stating the amount of duty and penalty

levied in respect thereof, and shall send such

amount to the Collector, or to such person as he

may appoint in this behalf.

(2) In every other case, the person so

impounding an instrument shall send it in

original to the Collector.”

13.Interpreting the said provision, this Court in

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Chilakuri Gangulappa (supra) has ruled thus:-

“It is clear from the first sub-section extracted

above that the court has a power to admit the

document in evidence if the party producing the

same would pay the stamp duty together with a

penalty amounting to ten times the deficiency of

the stamp duty. When the court chooses to

admit the document on compliance of such

condition the court need forward only a copy of

the document to the Collector, together with the

amount collected from the party for taking

adjudicatory steps. But if the party refuses to

pay the amount aforesaid the Collector has no

other option except to impound the document

and forward the same to the Collector. On

receipt of the document through either of the

said avenues the Collector has to adjudicate on

the question of the deficiency of the stamp duty.

If the Collector is of the opinion that such

instrument is chargeable with duty and is not

duly stamped 'he shall require the payment of

the proper duty or the amount required to make

up the same together with a penalty of an

amount not exceeding ten times the amount of

the proper duty or of the deficient portion

thereof'.”

14.As the factual matrix would further unfurl, there was

no consent by the appellant and, therefore, even under the

Stamp Act, the matter has to be sent to the competent

authority. In this context, we have to analyse the anatomy

of Section 33 of the 1957 Act which reads as follows:-

“33. Examination and impounding of

instruments.- (1) Every person having by law or

consent of parties authority to receive evidence,

and every person in charge of a public office,

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except an officer of police, before whom any

instrument, chargeable in his opinion, with

duty, is produced or comes in the performance

of his functions, shall, if it appears to him that

such instrument is not duly stamped, impound

the same.

(2) For that purpose every such person shall

examine every instrument so chargeable and so

produced or coming before him, in order to

ascertain whether it is stamped with a stamp of

the value and description required by the law in

force in the State of Karnataka when such

instrument was executed or first executed:

Provided that,—

(a) nothing herein contained shall be deemed to

require any Magistrate or Judge of a Criminal

Court to examine or impound, if he does not

think fit so to do, any instrument coming before

him in the course of any proceeding other than

a proceeding under Chapter XII or Chapter

XXXVI of the Code of Criminal Procedure, 1898;

(b) in the case of a Judge of the High Court, the

duty of examining and impounding any

instrument under this section may be delegated

to such officer as the Court appoints in this

behalf.

(3) For the purposes of this section, in cases of

doubt, the Government may determine,—

(a) what offices shall be deemed to be public

offices; and

(b) who shall be deemed to be persons in charge

of public offices.”

[underlining is ours]

15.On a plain reading of the aforesaid provision, it is

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manifest that sub-section (1) of Section 33 stipulates that

for the purpose of finding out as to whether the instrument

is ‘duly stamped’ or not and consequently as to whether

such instrument liable to be impounded or not,

examination of the instrument is necessary. Thus,

Section 33 fundamentally pertains to the examination and

impounding of an instrument. To appreciate the sweep and

purport of Section 33(2)(b), it is necessary to refer to the

dictionary clause. The definition “duly stamped” as

contained in Section 2(1)(e) of 1957 Act postulates that

unless the context otherwise requires “Duly Stamped” as

applied to an instrument, means that the instrument bears

an adhesive stamps of not less than the proper amount and

that such stamp has been affixed or used in accordance

with law for the time being in force in the territories of the

State of Karnataka. Thus, the “Duly Stamped” instrument

should comply with three requirements, namely, (i) the

stamp must be of a proper amount; (ii) should bear proper

description of stamp; and (iii) the stamp must have been

affixed and used according to law for the time being in force

in the State of Karnataka.

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16.In this context, proviso (b) to Sub-Section (2) of

Section 33, has to be appreciated. It is quite plain that it

empowers the Judge of the High Court to delegate the duty

of examination and impounding the instrument to such

officer as the Court appoints in that behalf. The question

arises where the nature of document is disputed, the same

can be done by the delegated authority. For example, if a

document tendered is a sale deed and dispute arises with

regard to its character, namely, sale deed or deed of

mortgage, can it be done by the officer concerned. The

stamp duty payable on a lease deed or a licence may be

different. The delegation by a Judge of the High Court will

not clothe the officer the jurisdiction of determining the

nature and character of the instrument inasmuch as such

fact needs to be determined by the Judge while exercising

judicial function. Such judicial function is not to be

delegated to an officer of the Court by the Judge of the High

Court. What is delegated under the proviso (b) of

sub-section (2) of Section 33 is only to examine the

instrument for the purpose of determining as to whether the

instrument is duly stamped or not and for impounding the

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same. We are disposed to think that Section 33(2)(b) does

not contemplate or permit any adjudication as regards the

nature and character of the instrument. The delegated

power has to be restricted to cover the area, that is, whether

the instrument bears the proper stamp and thus complies

with the requirement of being “duly stamped”, and the

stamp duty payable on the same must be determined only

with reference to the terms of the instrument. Proviso (b) to

sub-section 33(2) does not empower the Judge of the High

Court to direct the officer of the High Court to enquire and

to find out the nature and character of the document. The

word “examination” used in proviso (b) to Section 33(2) of

the Act cannot be allowed to have such wide amplitude as

the context does not so envisage. It has to be conferred

restricted meaning which is in consonance with the

provision and the scheme of the 1957 Act. And the narrow

meaning, as we find, is examination by the officer of the

Court is only to determinate as to the adequacy or

inadequacy of the stamp duty paid and to impound the

instrument.

17.It is evincible from the impugned order that the

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learned Judge has left both the aspects, that is,

determination of the nature and character of the document

and impounding of the same to the Registrar. Therefore, the

sentinel question that arises for consideration is whether

the learned Single Judge for the purpose of determining the

character of the instrument could have delegated the

authority to the Registrar. A judicial functioning has to be

done in a judicial manner. The duty of determination of an

instrument or, to explicate, to determine when there is a

contest a particular document to be of specific nature, the

adjudication has to be done by the Judge after hearing the

counsel for the parties. It is a part of judicial function and

hence, the same cannot be delegated. Be it noted, under

the High Court Rules, in certain High Courts, the

computation is done by the authorities in the Registry with

regard to the court fees but that also is subject to challenge

before the Court when the applicability of a particular

provision of the Court-fees Act, 1870 is concerned. Thus

analysed, we are inclined to think that the authority is not

empowered to determine the nature and character of the

document. He may at the best send a report to the Court

16

expressing his views on a document which is subject to

final determination by the Court.

18.In view of the aforesaid analysis, we allow the appeals,

set aside the order passed in the main case as well as in the

review and remit the matter to the High Court requiring the

learned Single Judge to determine the nature and character

of the document and thereafter proceed with the matter in

accordance with law. There shall be no order as to costs.

...........................................J.

(Dipak Misra)

...........................................J.

(R. Banumathi)

…........................................J.

(Mohan M. Shantanagoudar)

New Delhi;

February 17, 2017.

ITEM NO.53 COURT NO.2 SECTION IVA

S U P R E M E C O U R T O F I N D I A

RECORD OF PROCEEDINGS

Petition(s) for Special Leave to Appeal (C) No(s). 10635-10636/2014

(Arising out of impugned final judgment and order dated 11/01/2013

in CMP No. 122/2012 17/12/2013 in CMP No. 122/2012 passed by the

High Court Of Karnataka At Bangalore)

BLACK PEARL HOTELS (PVT) LTD Petitioner(s)

VERSUS

M/S PLANET M RETAIL LTD Respondent(s)

(with appln. (s) for c/delay in filing SLP and directions and

interim relief and office report)

Date : 17/02/2017 These petitions were called on for hearing today.

CORAM : HON'BLE MR. JUSTICE DIPAK MISRA

HON'BLE MRS. JUSTICE R. BANUMATHI

HON'BLE MR. JUSTICE MOHAN M. SHANTANAGOUDAR

For Petitioner(s) Ms. Pritha Srikumar Iyer, AOR

Mr. Nikhil Nayyar, AOR

Mr. Viraj Parikh, AOR

Ms. Neha Mathen, AOR

For Respondent(s) Mr. Sandeep S. Ladda, AOR

Mr. Soumik Ghosal, AOR

Mr. Devvrat Singh, AOR

UPON hearing the counsel the Court made the following

O R D E R

Delay condoned.

Leave granted.

The appeals are allowed in terms of the signed reportable

judgment. The order passed in the main case as well as in the

review is set aside and the matter is remitted to the High Court

requiring the learned Single Judge to determine the nature and

character of the documents and thereafter proceed with the matter

in accordance with law. There shall be no order as to costs.

(Gulshan Kumar Arora) (H.S. Parasher)

Court Master Court Master

(Signed reportable judgment is placed on the file)