KASTURI LAL Vs. BHARAT FINANCE CO

JUDGEMENT

(1.) Two questions have been referred to this Bench, as according to one of us, who initially heard this revision petition, the view taken by this Court in Gupta Private Loan Committee v. M. Ganesh Dass Kudyar & Sons, 1975 Kash LJ 272 upon which the order impugned in this petition is based, was open to question. These are :

(2.) The factual background in which these questions have arisen is like this : The first respondent, Bharat Finance Co., brought an application under Section 20 of the Arbitration Act against the petitioner and the second respondent in the court of City Judge, Jammu, for referring certain disputes to the named arbitrator, which was opposed by the party inter alia on the ground that there was no valid agreement between the parties to refer the disputes to an arbitrator. Respondent No. 1 relied upon two documents viz : agreement of loan and agreement of guarantee, both of which contained an arbitration clause. While statement of one of the witnesses for respondent No. 1 was being recorded to prove these documents, an objection was raised that these documents which were in fact bond and agreement of guarantee respectively, being insufficiently stamped, were inadmissible in evidence, even to prove the arbitration clause contained therein. The trial court overruled the objection and held that even though the documents were insufficiently stamped as bond and agreement of guarantee, yet they were sufficiently stamped as agreements containing the arbitration clause. While holding so, it relied upon the following observations made by a learned single Judge of this court (D. D. Thakur, J. as he then was) in 1975 Kash LJ 272 (supra) :

(3.) Section 3 is a charging section and provides that subject to certain exceptions every instrument mentioned in Schedule I to the Act shall be chargeable with duty prescribed therein. Section 35 enacts that an instrument chargeable with duty shall not be admitted in evidence for any purpose, or otherwise acted upon, unless it is duly stamped. Unlike Section 49 of the Registration Act, which permits a document compulsorily registerable under Section 17 to be admitted in evidence for collateral purposes. Section 35 creates a complete prohibition against permitting a document to be used for any purpose, including a collateral purpose, unless the requirements of the proviso to this section are fulfilled. This inference becomes irresistible, once the words "for any purpose" used in Section 35 are given their plain and natural meaning. (See Ram Rattan v. Parma Nand, AIR 1946 PC 51, and Sanjeeva Reddi v. Johanputra Reddi, AIR 1972 Andh Pra 373). Duly stamped under Section 2 (11), as applied to an instrument means that the instrument bears stamp of proper description of not less than the proper amount affixed or used in accordance with the law for the time being in force in the State. Unless, therefore, an instrument bears stamp not less than the proper amount, it cannot be said to be duly stamped, and consequently cannot be admitted in evidence for any purpose under Section 35, unless the proviso to the section can be made applicable to it. The stamp which an instrument is required to bear has to be calculated in accordance with Schedule I read with certain sections, as the facts of a given case may warrant. Section 4, for instance, provides that when in the case of a sale, mortgage, or settlement, several instruments are used to complete the transaction, only the principal shall be chargeable with duty mentioned in the Schedule, whereas all other instruments shall be chargeable with duty of one rupee each. Similarly, Section 6 lays down that if an instrument falls within two or more of the descriptions given in Schedule I, it shall be chargeable only with the highest of the duties, where the duties chargeable under it are different. Section 5, which is material, reads as under :