Stamp duty is a charge placed on legal papers such as contracts, deeds, and various other papers that produce, transfer, or extinguishes any right, title, or interest in immovable or movable property. The stamp duty is computed as a percentage of the transaction’s value or the amount that was paid, whichever is greater. The stamp duty is paid to the nation’s government in order for the document to be validated and legally enforceable. The amount of stamp duty paid on any instrument in India is determined by the stamp-related statute prevailing in the state where the document has been signed or entered into for execution or otherwise.
WHAT EXACTLY IS AN ARBITRAL AWARD?
An arbitral award is a final, legally binding ruling made by an arbitrator or panel of arbitrators. The decision is made after considering the information presented by the parties and their arguments. Like a court ruling, the award establishes the parties’ obligations and rights. The arbitrator or arbitrators sign the written award.
STATUS OF STAMP DUTY OF ARBITRAL AWARDS IN INDIA
The treatment of stamp duty on arbitral awards varies from state to state in India. Despite the fact that some states specifically exempt arbitral awards from paying stamp duty, others demand it. Stamp duty on arbitral awards is a hotly debated topic, with supporters arguing that it is necessary to preserve government revenue and prevent stamp duty evasion and opponents claiming that it is a redundant additional expense that impedes the expansion of arbitration as a form of dispute resolution. The Arbitration and Conciliation Act, 1996 which oversees arbitration cases in India, makes no mention of stamp duty on arbitral awards in any detail. Instead, the relevant state acts are in charge of stamp duty on arbitral awards.
For instance, the state of Haryana has done the same thing by exempting arbitral awards from paying stamp duty. The state’s stamp law was altered by the Haryana Stamp (Amendment) Act of 2018 to exclude “any award made by an arbitrator” from paying stamp duty. Arbitral awards rendered both domestically and abroad are immune from this requirement.
ARGUMENTS FOR STAMP DUTY ON ARBITRAL AWARDS
*Revenue for the government
*Levelling the playing field
*Encouraging compliance
*Promoting transparency
ARGUMENTS AGAINST STAMP DUTY ON ARBITRAL AWARDS:
*Increased Cost: Costs might rise as a result of adding stamp duty on arbitral awards, which would deter parties from utilizing arbitration to settle their differences. Various fees, such as those for the arbitrators, are already expected of the parties involved in the arbitration. The arbitration procedure may become even more costly if extra stamp duty payments are imposed.
*Double Taxation: Stamp duty on arbitral awards is allegedly subject to double taxation, according to some. This is so because the agreements or contracts that were the subject of the arbitration already had stamp duty paid on them. It may be considered unjust double taxation to impose additional stamp duty payments on the award itself.
*Inconsistency: Creating discrepancy in the legal system is another defence offered against the imposition of stamp duty on arbitral awards. While stamp duty is sometimes only applied to court orders, it is sometimes also applied to arbitral awards. If the parties to the arbitration operate in separate states, this may cause them confusion and doubt.
*Unnecessary burden: Last but not least, some contend that the imposition of stamp duty on arbitral decisions places an undue burden on the parties to the arbitration. The goal of arbitration is to settle conflicts more quickly and affordably than via regular judicial action. Additional stamp duty charges may make arbitration more difficult and deter parties from choosing it as a dispute resolution method.
CONCLUSION
In conclusion, there are both advantages and disadvantages to applying stamp duty on arbitral verdicts. While it can help the government make money and ensure that stamp duty laws are followed, it can also present practical difficulties for the parties to arbitration. These difficulties consist of figuring out the right amount of stamp duty to pay, the due date, non-payment, enforcing the due date, and the effect on arbitration agreements.