The Allahabad High Court clarified that stamp authorities can still assess and recover deficient stamp duty even if the underlying dispute is already before an arbitrator.
A petitioner asked the Allahabad High Court to order the District Collector of Gautam Budh Nagar to indefinitely halt stamp-duty recovery proceedings because the underlying dispute was already in arbitration.
The Single Bench of Justice Piyush Agrawal said, “This Court also could not find any observation or direction of the Apex Court restraining the stamp authorities to initiate the proceedings, if the agreement found to be deficit of stamp duty. It is not in dispute between the parties that the Arbitrator has been appointed and matter is pending before the Arbitrator and it is not the stage of appointment of an Arbitrator. Once the said fact is not disputed, the judgement relied upon by the learned Senior counsel for the petitioner in the case of Inteplay (supra) is of no aid to him.”
The High Court held that stamp authorities may continue recovery proceedings for deficient stamp duty even when arbitration is underway. Citing Supreme Court precedent, the Court noted that arbitration cannot be halted over stamp deficiencies and arbitrators can impound insufficiently stamped documents. Since nothing in the precedent bars stamp officials from acting, the Court found the Collector’s proceedings against the petitioner to be within jurisdiction.
The Court stressed that stamp authorities must give parties a meaningful opportunity to be heard before levying additional duty: a clear show-cause notice outlining the proposed grounds is indispensable. Such a notice, however, is only a procedural step and does not itself prejudice the party’s rights. Because the petitioner’s challenge targeted these preliminary notices—issued solely to invite an explanation—the Court deemed the writ premature. It therefore rejected the petition, holding that the stamp authority’s proceedings could lawfully continue alongside the pending arbitration.
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