Introduction
In a recent Judgment, the Bombay High Court has shed light on the issue of stamp duty on Non-disclosure Agreements containing an arbitration clause. The Court, through its order passed under Section 11 of the Arbitration and Conciliation Act, 1996, has provided vital guidance on the steps to rectify deficiencies in stamp duty and penalties.

Background
The crux of the matter originated from an 'Employee Non-Disclosure and Non-Solicitation Agreement' dated 15 November, 2021. Following ensuing disputes, the Applicant invoked the arbitration clause and sought the intervention of the Court for the appointment of an Arbitrator. The Agreement, which had no monetary value assigned to it, was asserted to require appropriate stamp duty under the Maharashtra Stamp Act, 1958.

Court’s Analysis
The Court conducted a meticulous examination of the Agreement and recognized it as a mere non-disclosure and non-solicitation document with no assignable monetary value. Referencing the majority opinion in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2017) 4 SCC 498 the Court stated that unstamped or insufficiently stamped agreements are not actionable.

Two alternatives were contemplated for addressing the deficiency in stamp duty and penalty. The first involved impounding the document and referring it to the Collector of Stamps for assessment of the payable amount. The Court also cited the procedure mandated under Section 33 of the Stamp Act, 1899, to be followed subsequent to the impounding of an unstamped Instrument/Agreement.

Calculation and Directions
Upon scrutiny of the relevant articles of the Maharashtra Stamp Act, the Court concluded that the Agreement falls under Article 5(h)(B), where no duty is chargeable. Consequently, the proper stamp duty was ascertained to be ₹100. A monthly penalty of 2% on the deficit amounted to ₹2. Given the 22 months that had elapsed since the Agreement's execution, the total sum due was determined to be Rs.144/-.

Directions were given to the Prothonotary, Senior Master of the Court, and the Applicant, concerning the collection of this amount and endorsing the Agreement to certify the deposit of the stamp duty and penalty. The Court mandated the completion of this process within ten days.¹

By - Chaitanyaa Bhandarkar