Hindustan Steel Ltd. v. Dilip Construction Co., (1969)

Introduction

This case deals with the evidentiary admissibility and enforceability of an unstamped arbitration award under the Indian Stamp Act, 1899. The judgment clarifies the interplay between Sections 35, 36, and 42 of the Act, specifically focusing on whether an unstamped document can be admitted in evidence and enforced by the court after stamp duty and penalty are paid.

Relevant provisions of the case

Section 35 – Instruments not duly stamped inadmissible in evidence: No instrument chargeable with duty shall be admitted in evidence or acted upon unless it is duly stamped.

Section 36 – Admission of instrument cannot be questioned later: Once a document has been admitted in evidence, its admissibility cannot be questioned later in the same proceeding on the ground that it was not duly stamped—except as provided in Section 61.

Section 33: Examination and Impounding of instruments: If any document presented before a court appears to be not duly stamped, the court is required to impound it

Section 42 Endorsement by Instrument:

1.  If the Collector is satisfied that the proper stamp duty and penalty have been paid, he certifies the document.
2. After certification, the document becomes admissible in evidence and can be used to enforce rights.

Facts of the Case

• The respondent (Dilip Construction Company) entered into a contract with the appellant (Hindustan Steel Ltd) to handle limestone at Nandini Mines.
• Upon arising of a dispute, the matter was referred to arbitration as per the contract.
• The arbitrators could not reach a majority decision, so the matter was referred to an umpire (a neutral third party).
• The umpire issued an arbitration award and submitted it to the District Court for enforcement. Both parties were notified. 
• The appellant challenged the award in court on the ground that it was unstamped and therefore inadmissible and unenforceable.
• The respondent requested that the award be impounded, stamp duty and penalty be paid, and then it should be treated as admissible evidence under Section 42 of the Stamp Act.

Case History

1. District Court: Agreed with the respondent and impounded the document. The court directed the respondent to pay stamp duty and penalty, and the document was sent to the Collector for certification.
2. High Court: Upheld the decision of the District Court and rejected the appellant’s contention that an unstamped award is void and cannot be acted upon. Hence, the appellant approached the Supreme Court via Special Leave Petition.

Legal Issues

1. Can an unstamped arbitration award be admitted in evidence under Section 35 of the Indian Stamp Act?
2. Can the court impound such a document and make it admissible after stamp duty and penalty are paid under Section 42 ?
3. Does Section 36 protect the admissibility of document once it has been accepted as evidence, even if it is unstamped?

Supreme Court’s Observations and Ratio Decidendi

1. The Supreme Court held that under Section 35 of the Indian Stamp Act, an unstamped document is neither admissible in evidence nor can any legal right be enforced on its basis.
2. However, in light of Section 42, the court has the authority to impound such a document and forward it to the Collector. 
3. If the Collector is satisfied that the appropriate stamp duty and penalty have been paid, he may certify the same, thereby making the document valid and admissible in evidence under the Stamp Act.
4. The Court further clarified that Section 36, which bars the challenge to the admissibility of a document once admitted, does not override Section 35.
5. If Section 36 were applied to admit unstamped documents without fulfilling the requirements of Section 35, it would render Section 35 redundant.
6. Thus, to harmonize Sections 35, 36, and 42, the Court concluded that:

A document may be admitted in evidence by the court, but no right can be enforced upon it until the requisite stamp duty and penalty duly paid and certified under the law.

 Final Decision

1. The unstamped arbitration award can become admissible but it will not be enforceable until stamp duty and penalty are paid.
2. The Court dismissed the appeal, upholding this interpretation of Sections 35, 36, and 42.