BLACK PEARL HOTELS (PVT) LTD.versusM/S PLANET M RETAIL LTD.

                            [2017] 2 S.C.R. 50



A                BLACK PEARL HOTELS (PVT) LTD.
                                    v.
                     MIS PLANET M RETAIL LTD.
                   (Civil Appeal No. 2973-2974of2017)
B                         FEBRUARY 17, 20 l 7
               [DIPAK MISRA, R. BANUMATHI AND
               MOHAN M. SHANTANAGOUDAR, JJ.]
          Karnataka Stamp Act, 1957:
c         s. 33(2) Proviso (b) - Scope of - In petition u!s. 11 of
    Arbitration and Conciliation Act,1996, the Judge of High Court
    referred the matter to the Registrar - To examine the nature and
    character of the instrument and then to determine whether the
    instrument was duly stamped - Propriety of - Held: Proviso (b) to
    Sub-section (2) of s. 33 empowers the Judge of High Court only to
D
    examine the instrument for the purpose of determining as to whether
    the instrument is duly stamped or not and for impounding the
    same - The provision does not contemplate any adjudication as
    regarqs the nature and characJer of the instrument - Such
    determination is part of judicial function, and the same cannot be
E   delegated.
          Words and Phrases:
         'Duly stamped' - Meaning of, in the context of s. 2(l){e) of
    Karnataka Stamp Act, 1957.

F        Allowing the appeals and remitting the matter to High Court,
    the Court
          HELD: 1. Sub-section (1) of Section 33 ofKarnataka Stamp
    Act, 1957 stipulates that for the purpose of finding out as to
    whether the instrument is 'duly stamped' or not and consequently
G   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 pnrport of Section
    33(2)(b), it is necessary to refer to the dictionary clause. [Para
    15] [59-C-D]
H
                                    50
    BLACK PEARL HOTELS (PVT) LTD. v. M/S PLANET M                       51
                   RETAIL LTD.

      2. The definition "duly stamped" as contained in Section          A
2(l)(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 stamp of not less than the proper
amount and that such stamp has been affixed or used in accordance
with I~~ for the time being in force in the territories of the State
                                                                        B
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. [Para
15) [59-D-F]                                                            c
       3. Proviso (b) to Sub-Section (2) of Section 33, 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 delegation by a Judge of the High
Court will not clothe the officer the jurisdiction of determining       D
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              E
whether the instrument is duly stamped or not and for impounding
the same. Section 33(2)(b) does not ~ontemplate 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               F
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. [Para 16) [59-F-G, H;
60-A-C)
      4. The word "examination" used in proviso (b) to Section           G
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, is
examination by the officer of the Court is only to determinate as
                                                                         H
52            SUPREME COURT REPORTS                       [2017] 2 S.C.R.


A    to the adequacy or inadequacy of the stamp duty paid and to
     impound the instrument. [Para 16) [60-D-E)
            5. In the present case, the 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. A judicial functioning
B    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. Under the High Court Rules, in
c    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, the authority is not empowered to determine the nature
D    and character of the document. He may at the best send a report
     to .the Court expressing his views on a document which is subject
     to final determination by the Court. [Para 17) [60-E-H; 61-A]
           6. The matter is remitted to the High Court requiring the
     Single Judge to determine the nature and character of the
E    document and thereafter proceed with the matter in accordance
     with law. [Para 18] [61-B]
           Chillakuri Gangu/appa v. Revenue Divisional Officer,
           Madanpalle & Anr. (2001) 4 SCC 197 : (2001] 2 SCR
           419; SMS Tea Estates Private Limited v. Chandmari Tea
F          Company Private Limited (2011) 14 SCC 66 : [2011] 9
           SCR 382 - relied on.
                             Case Law Reference
     [2001] 2 SCR 419                relied on               Para7
     [2011] 9 SCR 382                relied on               Para 10
G
           CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2973-
     2974 of2017.
            From the Judgment and Order dated 11.01.2013 and 17.12.2013
     of the High Court of Karnataka at Bangalore in CMP Nos. 122 of2012.
H
    BLACK PEARL HOTELS (PVT) LTD. v. M/S PLANET M                              53
                   RETAIL LTD.

     Ms. Pritha Srikumar Iyer, Nikhil Nayyar, Viraj Parikh, Ms. Neha           A
Mathen, Advs. for the Appellant.
     Sandeep S. Ladda, Soumik Ghosal, Devvrat Singh, Advs. for the
Respondents.
      The Judgment of the Comt was delivered by
                                                                               B
      DIPAK MISRA, J. I. 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              c
and the order dated 17.12.2013 passed in review, i.e., I.A. No. I of2013.
       4. The facts which afe necessary to be stated for adjudication
of these appeals are that the appellant had 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           D
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
                                                                                E
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,           F
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 a/ia, seeking for an order of temporary injunction restraining the
respondent from interfering with the peaceful possession of the appellant
                                                                               G
in respect of the premises pending conclusion of the arbitration
 proceedings. Thereafter the appellant issued a notice on 13.06.2012
 calling upon the respondentto concur in the appointment ofhis nominated
 arbitrator as the sole arbitrator to adjudicate the disputes between the
 parties. The said notice was replied to by the respondent asserting, inter
                                                                                H
54             SUPREME COURT REPORTS                           (2017] 2 S.C.R.



A    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 cc:mcur in the appointment proposed
B    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 of2012. On J J.01.2013 the learned Judge
     primafacie was of the view that the "conducting agreement" may be a
     lease of the immovable property. Learned counsel for the appellant, as
c    the impugned order would reflect, 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
D            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."
E          6. The appe)lant filed an application seeking review of the
     aforesaid order and the learned Single Judge vide order dated 17.12.2013
     declined to entertain t!J~~ame and in that context held thus:-
             "The matter having been referred to the Registrar, notwithstanding
             the application in I.A. 1/13, having been tiled, the matter ought
F            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
G
             with such steps, as provided in law, place the matter for further
             consideration before this Court."
            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
H
      BLACK PEARL HOTELS (PVT) LTD. v. MIS PLANET M                            55
              RETAIL LTD. [DIPAK MISRA, J.]

an agreement simplicitor and incorporates an arbitration clause.               A
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
                                                                               B
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 Cllillakuri Gangulappa vs. Revenue Divisional Officer,
Madanpalle & Anr.'
       8. Mr. Sandeep S. Ladda, learned counsel for the respondent
                                                                               c
submits that the decision that has been placed reliance upon by the
appellant is distinguishable inasmuch 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)          D
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        E
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        F
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 nature and character of the document.
    I 0. In SMS Tea Estates Private Limited vs. Cftm1dmari Tea                 G
Company Private Limited' 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
------
' (2001) 4 sec 197
2
    (201IJ14 sec 66                                                            H
56            SUPREME COURT REPORTS                          [2017] 2 S.C.R.


A           should consider at.the outset, whether an objection in that behalf
            is raised or not, whether the document is properly stamped. lfit
            comes to the conclusion that it is not properly stamped, it should
            be impounded and dealt with in the manner specified in section
            3 8 of Stamp Ac\. The court cannot act upon such a document or
            the arbitration cla~se therein. But ifthe deficit duty and penalty
B
            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
c    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 whether it is an
            instrument which is compulsorily registerable.
            22.2. lfthe 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
E           upon. The court should then proceed to impound the document
            under Section 33 of the Stamp Act and follow the procedure
            under Sections 35 and 38 of the Stamp Act.
             22.3. lfthe document is found to be duly stamped, or ifthe deficit
             stamp duty and penalty is paid, either before the court or before
F            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
G            registerable. If the document is found to be not compulsorily
             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 r,gard to Section 16(l)(a) of the Act, the
H            court can delink the arbitration agreement from the main
    BLACK PEARL HOTELS (PVT) LTD. v. M/S PLANET M                              57
            RETAIL LTD. [DIPAK MISRA, J.]

       document, as an agreement independent of the other te,rms of            A
       the document, even if the document itself cannot in any way
       affect the property or cannot be received as evidence of any
       transaction affecting such property. The only exception is where
       the respondent in the application demonstrates that the arbitration
       agreement is also void and unenforceable, as pointed out in para
                                                                               B
        IS above. If the respondent raises any objection that the
       arbitration agreement was invalid, the court will consider the
       said objection before proceeding to appoint an arbitrator.
       22.6. Where the document is compulsorily registerable, but is
       not registered, but the arbitration agreement is valid and separable,
       what is required to be borne in mind is that the arbitrator appointed
                                                                               c
       in such a matter cannot rely upon the unregistered instrument
       except for two purposes, that is (a) as evidence of contract in a
       claim for specific performance, and (b) as evidence of any
       collateral transaction which does not require registration."
      12. There is no dispute that the present controversy is covered by       D
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.-(1) Where the
        person impounding an instrument under section 33 has by law or
        consent of parties authority to receive evidence and admits such      E
        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 F
        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 Clti/akuri
Gangulappa (supra) has ruled thus:-                                            G
        "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             H




                                                                                    )
58            SUPREME COURT REPORTS                           (2017) 2 S.C.R.


A           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
B
            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
c           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
D    have to analyse the anatomy of Section 33 of the 1957 Act which reads
     as follows:-
            "33. Examination and impounding of instruments.- (I) Every
            person having by law or consent of parties authority to receive
            evidence, and every person in charge of a public office, except
E           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, ifit appears to him that such instrument is
            not duly stamped, impound the same.
            (2) For that purpose every such person shall examine every
F           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,-
G           (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;
H
     BLACK PEARL HOTELS (PVT) LTD. v. MIS PLANET M                               59
             RETAIL LTD. [DIPAK MISRA, J.]

        (b) in the case ofaJudge of the High Court. the dutv of examining        A
        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

         (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 manifest        c
that sub-section (1) of Section 33 stipulates that for the purpose-of finding
out as to whether the instrument is 'duly stamped' ornot 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           D
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( I )(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               E
time being in force in the territories of the State ofKarnataka. 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
                                                                                 F
Karnataka.
        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
                                                                                 G
 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    H
60             SUPREME COURT REPORTS                           [2017] 2 S.C.R.


A . determining the nature and character of the instrument inasmuch as
    such fact needs to be detennined by the Judge while exercisingjudicial
    function. Such judicial function is not to be delegated to an officerofthe
    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
B
    is duly stamped or not and for impounding the same. We are disposed to
    d1inl(that Section 33(2)(b) does not contemplate or pennit 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
c of being "duly stamped", and the stamp duty payable on the same must
    be detennined 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 qocument. The word "examination" used in
    proviso (b) to Section 33(2) of the Act cannot be allowed to have such
D
    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
E instrument.
            17. It is evincible from the impugned order that the learned Judge
     has left both the aspects, that is, detennination 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
F    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 detennination
     of an instrument or, to explicate, to detennine when there is a contest a
     particular document to be of specific nature, the adjudication lias to be
     done by the Judge after hearing the counsel for the parties. It is a part
G    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
H    concerned. Thus analysed, we are inclined to think that the authority is
    BLACK PEARL HOTELS (PVT) LTD. v. MIS PLANET M                            61
            RETAIL LTD. [DIPAK MISRA, J.]

not empowered to detem1ine the nature and character of the document.         A
He may at the best send a report to the Court expressing his views on a
document which is subject to final deteffilination 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     B
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.


Kalpana K. Tripathy                                       Appeals allowed.