P L D 2002 Supreme Court 310 (PLP)

Ch. Tariq Mahmood Khokhar, Additional Advocate-Geuera1, Punjab and Rao Muhammad Yousaf Khan, Advocate-on-Record for Respondents. Date of hearing: 21st September, 2001. NAZIM HUSSAIN SIDDIQUI, J.--These appeals by leave of this Court are directed against the judgment dated 3-5-1999 of a learned Judge, Lahore High Court, passed in Civil Revision No. 1915 of 1998, whereby said revision was partly accepted in terms of the impugned judgment.

2. The appellant, M/s. Jame's Construction Company (Pvt.) Limited (Respondents in C.A. No. 1520 of 1999), hereinafter referred to as "the Company", undertook to build Chichawatni Overhead Bridge in the year 1991. Soon after the commencement of work, differences arose between the Company and the respondents, which forced the Company to seek settlement thereof through intervention of Court by way of arbitration, as per terms and conditions of the contract/agreement between the parties. The Company filed the suit on 24-4-1996 under section 20 of the Arbitration Act, 1940, hereinafter called "the Act of 1940", before learned Civil Judge First Class, Lahore. It is alleged that said Judge by consent of the parties appointed two Arbitrators, each party nominating its own Arbitrator. By order dated 12-10-1997, a reference was made to the Arbitrators, directing them to announce their Award on each and every claim separately and submit the same before the Court on 28-2-1997, Learned Arbitrators submitted their unanimous Award on 31-3-1997, and the matter was fixed for further proceedings. On 3-5-1997, the respondents submitted their objections to the Award and the Company did not challenge the Award, but had tiled its reply to the Objection Petition tiled by the respondents.

3. Learned trial Court framed issues and the parties led their evidences in support of their respective pleas. Both parties closed their evidence and on 31-10-1998 the matter was fixed for arguments.

4. It is alleged that on the aforesaid date the respondents made an application to trial Court for "de-exhibiting the Award" as it was unstamped and was liable to be impounded. It was vehemently opposed by the Company.

5. It was contended before trial Court that since the Award had come into existence through intervention of Court in a suit, therefore, it was not chargeable with stamp duty. -In the alternative, it was submitted, that the Award under reference already stood admitted in evidence, that the parties led evidence for and against it, that section 35 of the Stamp Act, 1899 was not attracted.

6. It is alleged that learned trial Court without adverting to above submissions had accepted the application of the respondents; impounded the document and directed the Company to pay 10 times Stamp Duty with ratio of 3% of the value of the subject-matter up to 30-11-1998.

7. Above order was impugned before High Court through Civil Revision No. 1915 of 1998. Learned High Court having taken into consideration the pleas raised on behalf of the parties and the provisions of Sections 33, 35, and 61 of the Stamp Act, 1899, hereinafter referred to as "the Act of 1899" held that the Stamp Duty on the Award was deficient; therefore, it should not have been admitted in evidence. Also it was held that direction given by learned trial Court for payment of Stamp Duty with ratio of .3% on the subject-matter was according to law and said finding was upheld.

8. In para. I1 of impugned judgment, High Court also observed that imposition of 10 times penalty by trial Court was not justified, as the fault could not be attributed to the Company. Accordingly, the finding of the trial Court to that extent was set aside. In the concluding para. it was observed that revision was partly accepted and the Company was directed to make payment of deficient Stamp Duty at aforesaid rate within the period of two months from said order i.e. 3-5-1999.

9. The Company has impugned said judgment, inter alia, on the grounds that the Award came into existence through intervention of the Court, as distinguished from a private Award and was not liable to be stamped under Article 12 of the Act of 1899, as amended by the Punjab Finance Act (Act VI) of 1995 leving 3% duty on Award, that trial Court could not impound Award once it was admitted into evidence, that High Court upheld the judgment of the trial Court without applying its independent judicial mind as to the facts and the circumstances of the case.

10. Province of Punjab (appellant in C.A. No. 1520 of 1999) challenged above judgment on the grounds that 10 times penalty imposed trial Judge could not be set aside, as no valid reason was shown for doing so. Further, it is alleged that the Company could not take advantage of its own ignorance and no excuse what so ever in that regard was liable to be accepted.

11. Vide order dated 24-11-1999, leave to appeal in these matters was granted to consider the following:- "4 Mr Raja Abdul Razzaque, learned Advocate-on-Record appearing in support of his clients' case has forcefully contended that (1) the Award having come about through the intervention of the Court, the A same was not liable to stamp duty in terms of Article 12 of the Stamp Act (No. 11) of 1899; (2) the award stood admitted in evidence according to the respondents as well and the result is that under section 36 of the Stamp Act, 1899 its admission could not be challenged in the suit on the allegation that the same is being deficiently stamped; (3) the case reported as Mst. Farida Malik and others v. Dr. Khalida Malik and others (1998 SCMR 816) ruled that an Award coming into existence without the intervention of the Court is compulsorily registrable under section 14 of the Registration Act (No.XVI) of 1908 otherwise it will be an invalid document, sans creating any rights notwithstanding amendment it section 49 of the Registration Act and that (4) although a precedent from across the border by Delhi High Court i.e. Darshan Singh v. M/s. Forward India Finance (P) Ltd., New Delhi and others (AIR , 1984 Delhi 140), favouring him but there is no authoritative pronouncement by this Court on points 1 to 3 above:

5. Mr. Ghulam Haider Al. Ghazali, learned Additional Advocate- General, Punjab did not controvert the stand taken by the learned counsel for the petitioner-company and contended that the case oil the Provincial Government to the effect that no person or authority can be permitted to thrive on his/its ignorance of law certainly revolves around the resolution of the controversy, one way or the other.

6. Leave is granted in both the petitions to consider the afore-referred points."

12. Before dealing with the respective contentions of the parties, it would be advantageous to reproduce the description of Award as per Article 12 of the Schedule I Stamp Act Duty. It is as follows:-- "

12. Award, that is to say [Three rupees for every one any decision in writing hundred rupees or part thereof] by an arbitrator or for the amount or value of the umpire, not being an property to which the Award Award directing the relates as set forth in such partition, on a reference Award." made otherwise than by an order of the Court in the course of a suit,

13. Section 20 of the Act of 1940 is attracted when the arbitration agreement was already entered into before filing of a suit with respect to the subject-matter of agreement relating to which differences had arisen between the parties to which the agreement was applicable. This section is under Chapter III of the Act of 1940, which deals with "Arbitration with intervention of a Court where there is no suit pending". Chapter 11 of the Act of 1940 is for arbitration without intervention of a Court.

14. Section 21 of the Act is under Chapter IV, which deals with arbitration in suits. By virtue of this section the parties of the suit are competent before the decree to make an agreement regarding the settlement of the dispute.

15. The prime object of the Stamp Act is to realize and safeguard the public revenue. Section 35 lays down that an instrument, which is not duly stamped is inadmissible in evidence for any purpose. It, however, does not mean that such instrument is invalid, but it is admissible subject to the conditions imposed by section

35. The 'validity' and 'admissibility' are two different expressions and convey different meaning. Their scope is also different. The validity relates to the correctness, propriety and legality of a document, while admissibility determines the issue of bringing it on record. Under section 35 instrument can be admitted in evidence on payment of deficient duty and penalty.

16. Under section 36 of the Act, 1899 when an instrument is admitted in evidence, such admission except, as provided in section 61 cannot be called in question. "Admitted in evidence" with reference to section 36 means admission of a document after judicial consideration of the circumstances relating to its admissibility. The principle laid down by this section is once a document is admitted in evidence, it could not later on be challenged on the ground of its being insufficiently stamped.

17. It is noted that to safeguard the public revenue section 61 of the Act, 1899 provided further mechanism for its recovery in the way that if the Appellate Court is of opinion that such instrument should not have been admitted in evidence without payment of duty and penalty or without the payment of higher duty and penalty in such case the Appellate Court can determine the amount of duty chargeable on such instrument and it may impound the same. It is significant to note that it does not curtail the scope of section 36 and only speaks about the steps taken by Legislature for recovering revenue, which escaped notice of trial Court.

18. Article 12 of the Schedule of the Act, 1899 describes Award with reference to stamp duty. In fact, the fate of these appeals hinges on interpretation of the expression "Award". It is noted that all Awards do not require stamp duty. On the contrary, the stamp duty is to be charged on any decision in writing by an Arbitrator or Umpire on a reference made, otherwise than by order of the Court in the course of a suit. The expression "otherwise than by an order of the Court" is of extreme importance for determining the nature of the Award. It curtails the scope of earlier part of the definition of Award. In absence of above expression any decision in writing by an arbitrator or umpire would have been subjected to stamp duty. When the parties refer their dispute to arbitration in such eventuality entire proceedings right from the stage of institution of proceedings till conclusion 1remain under the control of the Court. This happens when the proceedings are initiated under section 20 of the Act, 1940. The Award under these circumstances arises by an order of the Court in the course of a suit". It is different from the proceedings, which falls under Chapter II of the Act, 1940 i.e arbitration without intervention of a Court, spreading over from sections 3 to

19. The powers of the Court under section 20 have been widened. If the parties do not agree, the Court has power to appoint another arbitrator. If the Award is with intervention of a Court, it is- not subject to stamp duty. It is an admitted fact that after dispute arose between the parties the company sought intervention of the Court by way of arbitration. The word "intervene" means as follows:-- to come or be between; to occur between points of time: to happen so as to interrupt to interpose in an action to which one was not a first party (law).

19. Thus, the Award in this case has come through intervention of the Court, which is substantially and materially different from an Award made on private reference. There is a rationale of not imposing stamp duty on such Award. The arbitrators perform the functions entrusted to them under supervision of the Court. They are paid their fee separately, which of course is paid by the contesting parties. They are not obliged to pay stamp duty. Additional liability on the parties to pay stamp duty, under such circumstances, would not be justified. Until the Award is made rule of the Court, it cannot be legally enforced. If it is not made rule of the Court, it cannot be taken as legal Award. For above reasons, may be many others, the Legislature in its wisdom has not fixed stamp duty on such Award.

20. Learned Additional Advocate-General appearing for the respondents argued that reference made under section 20 of the Act, 1940 is per se a reference made otherwise than by an order of the Court, as such, it is subject to the stamp duty under Article 12 (ibid). The contention is misconceived and ignores the fact that proceedings initiated under section 20 are with reference to the intervention of a Court for filing the agreement in Court. An application under said section is numbered and registered as a suit, although in strict sense it is not a suit. When such application is instituted a show cause notice is issued to all the parties to the agreement requiring them to explain why. agreement should not be filed. If sufficient cause is not shown, the agreement is ordered to be filed. If the application is disposed of and the agreement is not ordered to be filed in the Court, no further action is required. It is clear from above that, under such circumstances, there would be no question of Award.

21. Learned counsel for the Company and of the respondents have relied upon on the case from Indian Jurisdiction reported as Darshan Singh v. M/s. Forward India Finance (P.) Ltd., New Delhi and others (AIR 1984 Delhi 40). It deals with Article 12 of the Act, 1899 and section 20 of the Act, 1940. Paras. 14 and 15 of said judgment are as follows:-- "

14. A reference to arbitration can normally be made by a Court either under section 20 of the Arbitration Act, or during the course of any suit. However, if a reference is made in some other proceedings, such as say, a Company Petition or a Writ Petition or some other kind of a reference, there should be no difference in the application of the Article. What the Article visualiz6s is a reference made by the Court and the words 'in a suit' are merely explanatory and do not control the operation of the Article

15. In our view the way the Articles is to be understood is that if the reference is made through a Court in a suit or in. some other proceedings, then the Award does not require to be stamped. If the Award is made on the private reference, i.e. without the intervention of the Court, then the Award is to be stamped."

22. In view of above discussion, we hold that the Award in question was not required to be stamped, as such, there was no question of its being impounded nor any penalty could be imposed upon the Company. The case of Mst. Farida Malik and others v. Dr. Khalida Malik and others (1998 SCMR 816) referred to in the leave granting order is not attracted; as in the paid case reference to arbitration was made without intervention of Court.

23. In consequence, the Appeal No, 1519 of 1999 of the Company is allowed and the Appeal No. 1520 of 1999 of the Province of Punjab is U dismissed. The impugned orders of trial Court and High Court are set aside. Further proceedings be taken by trial Court according to law.

24. Under the circumstances, the parties will bear their own costs. S.A.K./J-18/S Order accordingly.