Case: M/S DHARMARATNAKARA RAI BAHADUR ARCOT NARAINSWAMY  MUDALIAR CHATTRAM &amp; OTHER  CHARITIES &amp; ORS Vs. M/S BHASKAR RAJU &amp; BROTHERS  &amp; ORS

of the Stamp Act. 21. Therefore, when a lease deed or any other instrument is relied upon as contending the arbitration agreement, the court should con- sider at the outset, whether an objection in that behalf is raised or not, whether the doc- ument 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 the Stamp Act. The court cannot act upon such a docu- ment 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. 20. It can thus clearly be seen, that this Court has in unequivocal terms held, that when a lease deed or any other instrument is relied upon as containing the arbitration agreement, the Court is required to consider at the outset, whether the document is properly stamped or not. It has been held, that even when an objection in that behalf is not raised, it is the duty of the Court to consider the issue. It has further been held, that if the Court comes to the conclusion, that the instrument is not properly stamped, it should be impounded and dealt with, in the manner specified in Section 38 of the Stamp Act, 1899. It has also been held, that the Court cannot act upon such a document or the arbitration clause therein. However, if the deficit duty and penalty is paid in the manner set out in Section 35 or Section 40 of the Stamp Act, 1899, the document can be acted upon or admitted in evidence. It is needless to state, that the provisions that fell for consideration before this Court are analogous with the provisions of Sections 33 and 34 of the Karnataka Stamp Act, 1957. In this view of the matter, we are of the considered view, that in view of the law laid down in the case of SMS Tea Estates Private Limited (supra), that the lease deed containing the arbitration clause which is required to be duly stamped, was not sufficiently stamped and though the Registrar (Judicial) had directed the respondent Nos. 1 and 2 to pay deficit stamp duty and penalty of Rs.1,01,56,388/- (Rupees One crore One lakh fifty-six thousand Three hundred and Eighty-eight only), the respondents failed to do so, the High Court has erred in relying on the said lease dated 12.3.1997. 21. Though the appellants deserve to succeed only on the aforesaid question of law, we find, that even on equity the respondents are not entitled to any relief. 22. After lease deed was executed in the year 1996-1997, though the respondent Nos. 1 and 2 have placed on record some settlement deeds with tenants executed in 1998, except one bald statement, that last of the tenants was evicted in the year 2010, nothing has been placed on record. It appears, that only after the appellants had filed a suit for injunction against the respondents which was duly contested by the respondents by filing written statement on 18.6.2011, the respondents after participating in the suit proceedings for a period of about 2 years and 3 months, filed the present application before the High Court under Section 11(6) of the Arbitration Act. It is further to be noted, that if in the pursuit of the respondents, the lease deed dated 12.3.1997 was legal and valid document and it could be relied on for referring the dispute to arbitration in view of clause 36 thereof, nothing precluded them from filing an application under Section 8 of the Arbitration Act before the City Civil Court at Bangalore in O.S. No.8952 of 2010 at the earliest opportunity available. It appears, that the respondent Nos. 1 and 2 are taking self-contradictory stands. In the written statement before the City Civil Court at Bangalore, they have admitted, that the document was a lease deed, whereas before the High Court they have taken a stand, that the document was an agreement for developing the property after the property is made vacant by evicting the tenants. The stand is also totally contrary to the terms expressed in the lease deed. It will be relevant to refer to clause 5 of the lease deed dated 12.3.1997, which reads thus: 5. The tenure of the lease shall be 38 years commencing from the date of signing of this lease deed. 23. It can thus clearly be seen, that the tenure of the lease deed was to be 38 years from the date of signing of the lease deed. 24. A perusal of the clauses of the lease deed dated 12.3.1997 would also reveal, that the lessee had undertaken all the responsibility of obtaining vacant possession of Schedule B property and to secure vacant possession by ejecting the unauthorised occupants. Responsibility of sanctioning the building plans was also undertaken by the respondents. It would further reveal, that it was also agreed between the parties, that in the event of any of the tenants approaching a court of law, such period of litigation shall not in any manner affect the agreed tenure of the lease deed of 38 years. 25. In that view of the matter, the submission made by Shri Balaji Srinivasan, learned counsel for the respondents, that the agreement was to be registered only after all the tenants were evicted and the building plans were sanctioned is not supported by any of the terms in the lease deed dated 12.3.1997. 26. In that view of the matter, we find, that the High Court has totally erred in relying on the lease deed dated 12.3.1997, which was found to be insufficiently stamped and brushing aside the report of the Registrar (Judicial), when the respondents had failed to pay the insufficient stamp duty and penalty as determined by the Registrar (Judicial) of the High Court of Karnataka.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]18. Admittedly, both the lease deeds are neither registered nor sufficiently stamped as required under the Karnataka Stamp Act, 1957. Admittedly, the Registrar (Judicial) of the High Court of Karnataka had submitted a report to the High Court pointing out, that the document of 1997 executed/entered into between the parties was a lease deed and not an agreement to lease and passed an order directing the respondent Nos. 1 and 2 to pay deficit stamp duty and penalty of Rs. 1,01,56,388 /- (Rupees One crore One lakh Fifty-Six thousand Three hundred and Eighty- Eight only). It is also an admitted fact, that the respondent Nos. 1 and 2 have not complied with the said directions and have not paid the deficit stamp duty and penalty19. The issue is no longer res integra. This Court in the case of SMS Tea Estates Private Limited vs. Chandmari Tea Company Private Limited (2011) 14 SCC 66 had occasion to consider the provisions which are in pari materia with the provisions of the Karnataka Stamp Act, 195720. It can thus clearly be seen, that this Court has in unequivocal terms held, that when a lease deed or any other instrument is relied upon as containing the arbitration agreement, the Court is required to consider at the outset, whether the document is properly stamped or not. It has been held, that even when an objection in that behalf is not raised, it is the duty of the Court to consider the issue. It has further been held, that if the Court comes to the conclusion, that the instrument is not properly stamped, it should be impounded and dealt with, in the manner specified in Section 38 of the Stamp Act, 1899. It has also been held, that the Court cannot act upon such a document or the arbitration clause therein. However, if the deficit duty and penalty is paid in the manner set out in Section 35 or Section 40 of the Stamp Act, 1899, the document can be acted upon or admitted in evidence. It is needless to state, that the provisions that fell for consideration before this Court are analogous with the provisions of Sections 33 and 34 of the Karnataka Stamp Act, 1957. In this view of the matter, we are of the considered view, that in view of the law laid down in the case of SMS Tea Estates Private Limited (supra), that the lease deed containing the arbitration clause which is required to be duly stamped, was not sufficiently stamped and though the Registrar (Judicial) had directed the respondent Nos. 1 and 2 to pay deficit stamp duty and penalty of Rs.1,01,56,388/- (Rupees One crore One lakh fifty-six thousand Three hundred and Eighty-eight only), the respondents failed to do so, the High Court has erred in relying on the said lease dated 12.3.199721. Though the appellants deserve to succeed only on the aforesaid question of law, we find, that even on equity the respondents are not entitled to any relief22. After lease deed was executed in the year 1996-1997, though the respondent Nos. 1 and 2 have placed on record some settlement deeds with tenants executed in 1998, except one bald statement, that last of the tenants was evicted in the year 2010, nothing has been placed on record. It appears, that only after the appellants had filed a suit for injunction against the respondents which was duly contested by the respondents by filing written statement on 18.6.2011, the respondents after participating in the suit proceedings for a period of about 2 years and 3 months, filed the present application before the High Court under Section 11(6) of the Arbitration Act. It is further to be noted, that if in the pursuit of the respondents, the lease deed dated 12.3.1997 was legal and valid document and it could be relied on for referring the dispute to arbitration in view of clause 36 thereof, nothing precluded them from filing an application under Section 8 of the Arbitration Act before the City Civil Court at Bangalore in O.S. No.8952 of 2010 at the earliest opportunity available. It appears, that the respondent Nos. 1 and 2 are taking self-contradictory stands. In the written statement before the City Civil Court at Bangalore, they have admitted, that the document was a lease deed, whereas before the High Court they have taken a stand, that the document was an agreement for developing the property after the property is made vacant by evicting the tenants. The stand is also totally contrary to the terms expressed in the lease deed23. It can thus clearly be seen, that the tenure of the lease deed was to be 38 years from the date of signing of the lease deed24. A perusal of the clauses of the lease deed dated 12.3.1997 would also reveal, that the lessee had undertaken all the responsibility of obtaining vacant possession of Schedule B property and to secure vacant possession by ejecting the unauthorised occupants. Responsibility of sanctioning the building plans was also undertaken by the respondents. It would further reveal, that it was also agreed between the parties, that in the event of any of the tenants approaching a court of law, such period of litigation shall not in any manner affect the agreed tenure of the lease deed of 38 years25. In that view of the matter, the submission made by Shri Balaji Srinivasan, learned counsel for the respondents, that the agreement was to be registered only after all the tenants were evicted and the building plans were sanctioned is not supported by any of the terms in the lease deed dated 12.3.199726. In that view of the matter, we find, that the High Court has totally erred in relying on the lease deed dated 12.3.1997, which was found to be insufficiently stamped and brushing aside the report of the Registrar (Judicial), when the respondents had failed to pay the insufficient stamp duty and penalty as determined by the Registrar (Judicial) of the High Court of Karnataka.