I.P.MUKERJI,J. - (1.) The Court: On 1st August 2017 in a section 11 application, Mr. Dipak Basu, Senior Advocate and Barrister-at-Law was appointed as the learned Arbitrator. On 12th December 2017 the claimant filed their statement of claim before him. On 8th January 2018 the respondents filed an application in this Court for setting aside of the order dated 1st August 2017 on the ground that the agreement for the alleged sale on which the section 11 application was founded was unstamped or understamped following SMS Tea Estates Private Limited v. Chandmari Tea Company Private Limited reported in (2011) 14 SCC 66. I am told that a section 16 application was also made before the learned Arbitrator. Paragraph 18, 19, 21 and 22 of the said judgment are inserted below: "18. section 35 of the Stamp Act provides that instruments not only stamped are inadmissible in evidence and cannot be acted upon. The relevant portion of the said section is extracted below: "35. Instruments not duly stamped inadmissible in evidence, etc. - No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or unauthenticated by any such person or by any public officer, unless such instrument is duly stamped: Provided that - (a) any such instrument shall be admitted in evidence on payment of the duty with which the same is chargeable or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion;" 19. Having regard to section 35 of the Stamp Act, unless the stamp duty and penalty due in respect of the instrument is paid, the court cannot act upon the instrument, which means that it cannot act upon the arbitration agreement also which is part of the instrument. section 35 of the Stamp Act is distinct and different from section 49 of the Registration Act in regard to an unregistered document. section 35 of the Stamp Act, does contain a proviso like section 49 of the Registration Act enabling the instrument to be used to establish a collateral transaction. ... ... 21. Therefore, when a lease deed or any other instrument is relied upon as contending the arbitration agreement, the court should consider at the outset, whether an objection in that behalf is raised or not, whether the document is properly stamped. If it comes to the conclusion that it is properly stamped, it should be impounded and dealt with the manner specified in section 38 of the Stamp Act. The Court cannot act upon such a document 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. 22. We may therefore sum up the procedure to be adopted whether the arbitration clause is contained in a document which is registered (but compulsorily registerable) and which is duly stamped:"
(2.) The Supreme Court drew a distinction between section 35 of the Stamp Act and section 49 of the Registration Act. The latter contained a proviso that an unregistered document could be used to establish a collateral transaction. However, an unstamped document could used for any purpose.
(3.) Mr. Laha contended that on this basis the Court could have acted on the arbitration clause. Therefore, the appointment of the learned Arbitrator was bad and the said order dated 1st August 2017 appointing the Arbitrator should be set aside.;