1. DORAB PATEL, J.-The appellant is an insurance company and the respondent had insured his stocks of medicines with the appellant against the risk of fire. Although the policy issued by the appellant is not available, we were informed that it contained the usual clause for settling by arbitration disputes about the quantum of loss in the event of a loss by fire. Now, there was a fire in the respondent's premises on the night of 31st January 1970, which destroyed the insured goods.
2. However, instead of invoking the arbitration clause, the respondent filed a suit for Rs. 50,000 against the appellant in the District Court of Multan and obtained an ex parte decree against it. The appellant filed an application under Order XX of the Civil Procedure Code to set aside this ex parte decree, and after its application had been allowed, it filed another application under section 34 of the Arbitration Act for the stay of the suit on the ground that the parties had agreed to settle their disputes by arbitration. This application was allowed, and although the arbitration proceedings had a very chequered history, it is sufficient to state here that there were differences between the arbitrators nominated by the parties, therefore, these differences were referred to an umpire. The umpire gave an award for Rs. 50,000 in favour of the respondent on 31st July 1974, and this award was made the rule of the Court the next day. The appellant challenged the trial Court's decree in an appeal in the Lahore High Court on the ground that the decree had been passed behind its back.
3. As the High Court accepted this contention, the appeal was allowed, and the case was remanded to the trial Court in order to enable the appellant to file its objections to the award under section 30, of the Arbitration Act, 1940. The appellant filed its objections no the award within the statutory period of 30 days prescribed in the Limitation Act for challenging an award, but the only ground on.
4. Which the award was challenged was that the arbitrators and the umpire had committed misconduct. The learned Civil Judge held that the appellant had failed to prove its allegations of misconduct, and decreed the award by his judgment dated 20th April 1975.
5. The appellant filed an appeal against this judgment in the Lahore High Court but the learned Judge, who heard the appeal agreed with the trial Court's view that the appellant bad failed to prove its allegations of misconduct against the arbitrators and the umpire. But the appellant also raised a legal objection in this appeal. This was that the reference to arbitration was bad, because the arbitration agreement was not admissible in evidence, as it had not been stamped. This objection was raised long after the expiry of the statutory period of limitation for challenging an award, but the learned Judge rejected this objection, because the appellant had not filed the arbitration agreement in the trial Court, and, strangely enough, also because of the provisions of section 36 of the Stamp Act, 1899. Accordingly, as the learned Judge dismissed the appeal, the appellant filed a petition for leave in this Court, which was admitted in order to consider "whether there could be any valid arbitration proceedings in the face of the agreement not being duly stamped in violation of section 35 (of the Stamp Act), and, whether an objection could be entertained in the absence of the agreement."
6. The contention that the arbitration agreement was bad because it was unstamped is based on two assumptions. The first is that the arbitration agreement was in fact not stamped, as alleged, and the second is that the appellant is entitled to challenge in its appeal the validity of the arbitration agreement, although it did not plead this objection in its grounds for setting aside the award. I will presently examine these assumptions, but I would first examine section 35 of the Stamp Act, 1899 (hereafter called the said Act) on which the appellant bases its case.
7. Section 35 of the said Act is to be found in Chapter IV of the Act, the heading of which is "Instruments not duly stamped inadmissible in evidence, etc." Section 33, which is the first section in this Chapter, imposes obligations upon "every person having by law or consent of parties authority to receive evidence, and every person in charge of a public office, except an officer of police, before whom any instrument, chargeable. . . With duty. Is produced." The obligations imposed by the section on these persons are that if any instrument is produced before them, they have to examine it in order to ascertain whether it has been stamped in accordance with the provisions of the said Act, and if it is not duly stamped, these persons have to impound the instrument. And the Chapter contains elaborate provisions about the manner in which an instrument impounded under this section is to be disposed of. The next section deals with unstamped receipts and is not relevant to this appeal, except that the provisions of this section indicate that the object of the Legislature in enacting the said Act was to protect public revenues. Then comes section 35. 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 authenticated by any such person or by any public officer, unless such instrument is duly stamped: Provided that-
(a) any such instrument not being an instrument chargeable with a duty of one anna or half an anna only, or a bill of exchange or promissory note, shall, subject to all just exceptions, 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 the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion;
(b) where any person from whom a stamped receipt could have been demanded, has given an unstamped receipt and such receipt, if stamped, would be admissible in evidence against him, then such receipt shall be admitted in evidence against him on payment of a penalty of one rupee by the person tendering it;
(c) where a contract, or agreement of any kind is effected by correspondence consisting of two or more letters and any one of letters bears the proper stamp, the contract or agreement shall be deemed to be duly stamped;
(d) nothing herein contained shall prevent the admission of any instrument in evidence in any proceeding in a Criminal Court, other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898;
(e) nothing herein contained shall prevent the admission of any instru--ment in any Court when such instrument has been executed by or on behalf of the Government, or where it bears the certificate of the Collector as provided by section 32 or any other provision of this Act."
8. This section is subject to section 36, which reads : "Where an instrument has been admitted in evidence; such admission shall not, except as provided in section 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped."
9. Section 37 deals with the admission of improperly stamped instruments.
10. Section 38 deals with impounded instruments, and if duty and penalty have been recovered on such an instrument under section 35, the person who has collected the duty and the penalty "shall send to the Collector an authenticated copy of such instrument, together with a certificate in writing, stating the amount of duty and penalty levied in respect thereof, and shall send such amount to the Collector, or to such person as he may appoint in this behalf." Subsection (2) of the section then prescribes that in all other cases "the persons so impounding an instrument shall send it in original to the Collector". The next two sections prescribe the manner in which the Collector has to dispose of the instruments received by him under section 38. The other sections in the Chapter deal with miscellaneous matters arising out of the levy of duties and penalties on instruments and the powers of revenue authorities and are not relevant to this appeal.
11. The only other section, which is relevant to this appeal, is section 6. This section is a corollary of section 36, and it expressly curtails the powers of appellate and revisional Courts with regard to instruments admitted under section 36. Section 36 prescribes that an instrument "admitted in evidence . . . . . Shall not, except as provided in section 61, be called in question at any stage of the same suit or proceeding . . . " Now normally the admis--sibility of a document wrongly admitted by the trial Court can be challenged in an appeal or in a revision. But section 61 prescribes that if the appellate or revisional Court is of the opinion that an intrument was wrongly admitted in evidence, all that the appellate or the revisional Court can do is to recover the duty and penalty for which the party would have been liable under section 35 of the said Act, and when such duty and penalty are recovered, the appellate or revisional Court has to give intimation of the same to the Collector.
12. I would now examine section 35 in some detail. It prescribes. That no instrument, which is not properly stamped, shall be admitted in evidence for any purpose . . . Or shall be acted upon. . . "
13. Now merely because an instrument cannot be admitted in evidence for any purpose as be--cause it cannot be acted upon by the persons specified in the section, does not mean that such an instrument is invalid, and it is not irrelevant to observe here that the words which I have quoted have to be construed strictly, because they are to be found in a provision of a penal nature Therefore, it would be against all cannons of construction to enlarge the meaning of these words, so as to render invalid instruments which fall within the mischief of the section. After all, instruments, which are not duly stamped, are executed every day, but I venture to think that most persons, who incur obligations under such instruments, honour their liabilities under such instruments, regardless of the provisions of section 35. In any event, this section is attracted only when an instrument is produced before the persons specified in the section. But, for example, an instrument would be produced in evidence only when there is a dispute about it, therefore, if the intention of the Legislature had been to render invalid all instruments not properly stamped, it would have made express provision in this respect, A and it would also have provided some machinery for enforcing its mandate in those cases in which the parties did not have occasion to produce unstamped instruments before the persons specified in the section.
14. Additionally, I find nothing in the section which would support the appellant's plea that an instrument becomes invalid, if it falls within the mischief of the section. After all, if an instrument is invalid, it must be invalid for all purposes, but proviso (d) to the section expressly saves unstamped instruments in most criminal proceedings, whilst the other provisos to the section enable the parties to overcome the disabilities attached to an instrument not properly stamped by paying the requisite duty together with a penalty, therefore, this would suggest that the object of the section is to protect public revenue. Again, if an instrument is invalid, it should not be admissible in evidence, and it is so stated in section 35. But the next section prescribes that if an instrument has been admitted in evidence, howsoever erroneously, its admissibility cannot be questioned at any stage thereafter, and even the appellate Court's powers to entertain an objection about the admissibility of documents have been removed by section 61, which instead empowers the appellate Court to collect the duty payable on the unstamped instrument together with a penalty. These provisions as well as other provisions in Chapter IV of the said Act, such as sections 33, 38, 39 and 40, can only lead to the conclusion that the object of the Legislature in enacting the said Act was to protect public revenues and not to interfere with commercial life by invalidating instrument. Vital to the smooth flow of trade and commerce.
15. The history of the section is also fatal to the appellant's case. As I do not consider it necessary to go into the long history of the said Act, I would only observe here that provisions for the stamping of instruments and the penalties for the violation of these provisions were first contained in the Regulations of the Bengal, Madras and Bombay Codes, and, for example, the relevant Regulation of the Bombay Code War Regulation XVIII of 1827. This Regulation was examined by the Bombay High Court in two judgments reported in Girdhar Nagjishet v. Ganparl Moroba (11 Bom. H C Rep. 129), and in Gurpada'pa din Ira'pa v. Na'ro Vithal Kulkarni (I L R 13 Bom. 493), and as the latter case refers to the history of the section, it would be convenient to quote a passage from it. In allowing an appeal against an order that an unstamped instrument was invalid, Birdwood, J., observed: "Certaintly under section 10 of the Regulation no document requiring a stamp thereunder was valid unless duly stamped, and under Act, xXXVI of 1860, which repealed the Regulation, and under subsequent Stamp Act passed before Act I of 1879 became law, the provisions of section 10 of the Regulation still continued to apply to instruments executed while the Regulation was in force. . ."
16. This Regulation was repealed in due course, and I would only refer here to section XII of Act XXXVI of 1860 (which corresponds to section 35 of the said Act). Section XII reads: "Except as otherwise provided by this Act, no Deed, Instrument, or Writing for which any Duty shall be payable under section II of this Act, shall be received as creating, transferring or extinguishing any right or obligation, or as evidence in any Civil proceeding in any Court of Justice, whether established by Royal Charter or otherwise, or shall be acted upon in any such Court or by any public officer, or shall be registered in any public Office or authenticated by any Public officer, unless such Deed, Instrument, or Writing be upon a Stamp of value not less than that indicated to be proper for it by the said Schedule, Provided that every Deed, Instrument, or Writing liable to Stamp Duty shall be admitted as evidence in any Criminal proceeding . . . . : '
17. But, according to Section XIII, deeds and instruments which were not properly stamped could be received in evidence in Civil Courts "on payment into Court of the proper amount of Stamp Duty, and the penalty as by this Section imposed."
18. The difference between Section XII and section 35 of the said Act is that the words in section XII, which I have underlined' and to which I will refer as the said words, are not to be found in section 35.
19. They are words of wide import, but as the construction of section XII is not in issue before us, I would only observe that if the said words had not been omitted from section 35 of the said Act, they would have lent strong support to the appellant's submission that the object of the section was to render invalid all instruments which were not duly stamped. But they were omitted from section 34 of the Stamp Act, 1879 (which corresponds to section 35 of the said Act), and they were again omitted from section 35 of the said Act, although a few years later the Legislature enacted somewhat similar provisions in section 49 of the Arbitration Act. What was the intention of the Legislature in omitting the said words? I do not think there can be any doubt about the intention of the Legislature. The Legislature wanted to protect public revenues without crippling the smooth flow of trade and commerce, therefore, it attached certain disabilities to instruments which were not properly stamped, but it omitted the said words in order to make it clear that instruments which fell within the mischief of the section did not thereby become invalid.
20. It is strange that the question whether an unstamped instrument is valid or not has seldom come up before the Courts. But in Joyman Bewa v. Easin Sarkar (AIR 1926 Cal. 877), the Calcutta High Court held that the failure "duly to stamp a document... Does not affect the validity of any contract therein contained, but renders the document inadmissible in evidence." Thirty years later the Madras High Court took the same view in Subramanian Chettiar v. Revenue Divisional Officer, Devakottah anal another (AIR 1956 Mad. 454). And, as I will presently show, on the whole, this appears to have been the view of the Lahore High Court in Gopl Mal v. Yidva Wanti, etc. (AIR 1942 Lah. 260 ). And further as English Law is not dissimilar, 1 cannot do better than quote the dictum of Lindley, L. J., Powell v. London and Provincial Bank ((1893) 2 Ch. 555), at page 560: "No case that I know of can be cited to show that . . . . An erroneous stamp would invalidate the deed."
21. Similarly in In re : Indo-China Steam Navigation Company ((1917) 2 Ch. 100), a transferor, who had executed a transfer deed for the sale of his shares attempted to repudiate the sale, on the ground that the transfer deed was invalid, because it was unstamped. The Court rejected this plea and held that the transferor could not contend "that the transfer was void and his signature a nullity".
22. I agree with the view taken in these judgments, which coincides with my own views, and, I would hold that an arbitration agreement, which is unstamped or is not properly stamped, is subject only to the disabilities specified in section 35 and these disabilities can be removed in the marine prescribed in sections 35 and 36. But such an agreement is not invalid.
23. I now turn to the question whether the arbitration agreement was not stamped, and, at the outset, I would emphasize that there is a difference between an appeal against a decree making an award the rule of the Court. As the appellant had to make out cause for setting aside the award passed against it, it had to prove that the arbitration agreement executed by it was unstamped, because this was one of the grounds on which it was entitled to challenge the award. Therefore, as it had to prove that this agreement was unstamped, it should have produced the agreement or had it produced. As it took no steps in this respect, the Court has to presume under section 89 of the Evidence Act that this agreement was "stamped and executed in the manner required by law". In order to overcome this difficulty, Mr. Maqbul Ahmad, who was uncertain whether this agreement had been filed in Court or not, wanted us to permit him to produce this agreement, if it was not filed. But the appellant has not made out any case whatever for the production of additional evidence under rule 27 of Order XLI of the Civil Procedure Code, and to allow this request would have been to put a premium on gross negligence. Additionally the facts in the instant case are so startling. It was the respondent, who had filed a suit, but the appellant insisted that the respondent's claim should be referred to arbitration. Then somehow the award was made the rule of the Court ex parte, therefore, this gave the appellant another opportunity to contend that the award was illegal, because of the alleged defect in the arbitration agreement. But instead, it filed an appeal in the High Court in which its prayer was that the case should be remanded in order to enable it to contest the claim before the arbitrator. This request was allowed, and the award was pronounced after the appellant had been heard. In these circumstances, it would reduce the law to a mockery, if we were to allow the appellant to produce evidence in this final appeal in order to give it an opportunity to show that the award was invalid. We, therefore, rejected this request.
24. I now turn to the second assumption on which the order granting leave was based, and it is necessary to refer to it, because the respondent has expressly pleaded that this objection is not fit to be entertained, because it "was not taken in the trial Court". As this plea has reference to section 30 of the Arbitration Act, I may explain here that the law of arbitration was originally enacted as a part of the Codes of Civil Procedure of 1859 of 1882 and of 1908. And section 324 of the Code of Civil Procedure of 1859 corresponded to section 30 of the Arbitration Act, whilst section 325 of that Code was the provision which prescribed that judgments could be pronounced on an award, if no cause was shown for settling it aside. I may pause to point out here that this section is similar but not identical to section 17 of the Arbitration Act. But section 324 was very different from section 30 of the Arbitration Act. The grounds on which an award could be challenged under this section were very narrow, and as a corollary to the narrow scope of this section, the defendant was entitled, as in England, to file a suit to challenge an award or an arbitration: agreement. The grounds on which an award could be challenged were, however,* enlarged by the relevant provisions of the Codes of Civil Procedure of 1882 and of 1908, but neither of these Codes abolished the right of a defendant to file a suit in order to challenge an award or an arbitration agreement. However, section 32 of the Arbitra--petition Act abolished the right of a defendant to file a suit in order to challenge an award or any arbitration agreement, and, therefore, the provisions of section 30 were made exhaustive of the grounds on which an award could be challenged. Now I observed earlier that the provisions of section 17 of the Arbitration Act were somewhat similar to the corresponding provisions in the Codes of Civil Procedure, but although the provision remained similar, it acquired a new significance, because the right to file a suit to challenge an award was abolished. As long as that right existed, the defendant could nullify the order of the Court decreeing the award by filing a suit.
25. But the abolition by section 32 of the Arbitration Act of this right to file a suit made a sweeping departure from the earlier law of arbitration, and the effect of this change in the law was considered by Chagla, C. J. In A. R. Savkur v. Amritlal Kalidas and others (AIR 1954 Bom. 293) in an extremely able judgment (I say so with respect), which supports Maulvi Sirajul Haq's plea to the hilt.
26. But leaves has not been granted to examine this question as the respondent was absent when leave was granted. In these circumstances, I would refrain from p deciding . This question, but I must make it very clear that I must not be understood as having approved of the proposition that an appellant can challege an award in an appeal on a ground not raised in the application for setting aside the award. And I would further give a warning here about judgments on the law of arbitration contained in the Code of Civil Procedure, 1908, which was repealed by the Arbitration Act. The Arbitration Act has made a sweeping departure from the earlier law, therefore, judgments on the repealed law have become obsolete in so far as the Arbitration Apt has changed the law.
27. I now turn to two judgments of the - Lahore High Court reported in Gopi Mal v. Vidya Wanti etc. (AIR 1942 Lah 260) and in Pakistan Cement Industries Ltd., Rawalpindi v. Teekayef Trading Co. (PLD 1971 Lah 522) on which Mr. Maqbul Ahmad relied, and, as far as I see, these judgments were the sheet anchor of his case. But I regret to say that in my opinion, both these judgments are irrelevant to this appeal, because the question of the bar of section 30 of the Arbitration Act, read with section 17 of that Act, did not arise for examination in these judgments, and with this observation, I would now examine them.
28. "It is nowhere laid down in the Code itself that decree in a partition suit will not be a valid decree unless it is stamped and consequently it cannot be urged that an unstamped decree is no decree at all.
29. I respectfully agree with the view of Din Mohammad, J. But as an unstamped decree fails within the mischief of section 35, the view of Din Mohammad, J, is fatal, by parity of reasoning, to the appellant's plea that the arbitration agreement in the instant case was invalid, because there is nothing in the Arbitration Act itself to render an unstamped agreement invalid.
30. I was unable to understand how this judgment supports the appellant's case but according to Mr. Maqbul Ahmad, it supported the appellant's case, because the Court had examined and rejected the contention that the decree obtained by the respondent was an instrument which had been admitted in evidence within the meaning of section 36. Now it is obvious that there was no question in the case cited of producing the decree in evidence, but a Court necessarily acts on a decree when it executes it. Therefore, this judgment would be relevant only if the appellant could prove that the arbitra--petition agreement had not been produced in evidence in the instant case, and it is not enough for it to prove that this agreement had been acted upon. But the position taken by it in its appeal in the High Court was that the arbitration agreement had been produced in evidence, and, similarly the very first ground in its petition for leave before us is that the learned Judge "has erred in holding that the arbitration agreement has not been placed on the record."
31. Confronted with this difficulty, learned counsel submitted that the arbitration agreement had "not been placed on the record", but a litigant cannot be permitted to take inconsistent positions on a question of fact and further, we were not referred to any evidence which could show whether the arbitration agreement had or had not been admitted in evidence within the meaning of section 36, therefore, this judgment does not lend any support to the case of the appellant, and, on the contrary it is fatal to the appellant's claim, as is apparent from the observations of Din Mohammad, J., which I quoted.
32. I now turn to the judgment of the Lahore High Court reported in Pakistan Cement Industries Ltd. v.
33. Teekayef Trading Co. The facts in this case were that the arbitrator, who was a retired Judge of this Court, had entered on the reference, although the arbitration agreement was unstamped, and as he failed to give his award within the statutory period of four months, the respondent applied for extension of time under sec--petition 28 of the Arbitration Act. But despite the applicant's objection that the arbitration agreement was unstamped, the respondent made no attempt to pay the duty for which it was liable under the said Act together with the penalty prescribed under section 35. The trial Court rejected the applicant's objection on the ground of acquiescence and extended time to the arbitrator for pronouncing his award. The applicant challenged this order in a revision in the Lahore High Court, which was allowed with the observation that the arbitration agreement was invalid, because it was unstamped. Maulvi Sirajul Haq attempted to distinguish the judgment on the ground that there was no question in the case cited of the arbitration agreement being admitted in evidence, but in the instant case, the appellant had expressly pleaded in its petition for leave that the High Court "has erred in holding that the arbitration agreement has not been placed on the record." No doubt the judgment is distinguishable on this ground, but it is also distinguishable on a much more fundamental ground. This is that there was no question in the case cited of the bar of section ?0 of the Arbitration Act, read with section 17 of that Act, and, on the other hand, the respondent in the case cited had only sought extension of time under section 28 of the Arbitration Act, and the considerations germane to the exercise of the Court's discretion under this section have no relevance to the question whether an award should or should not be set aside, which is the real question in the instant case.
34. However, although the case cited is distinguishable on more grounds than one, the observation that an unstamped arbitration agreement is invalid fully support Mr. Maqbul Ahmad's submission.
35. But, with the utmost respect, I have to point out that this observation is inconsistent with the view taken earlier by the Lahore High Court in Gopi Mal's case. It is true that the question in Gopi Mal's case was whether an unstamped decree was invalid, whilst the question in the Pakistan Cement Industries Ltd.'s case was whether an arbitration agreement w is invalid, because it was unstamped. However, nothing turns on this distinction, because unstamped decrees and unstamped arbitration agreements both fall within the mischief of section 35 of the said Act, and the true ratio of Gopi Mal's case is that an instrument which falls within the mischief of this section is defective, but not invalid. There is, therefore, a cleavage of opinion in the Lahore High Court on the proper construction of this section, which needs to be resolved. And, with the utmost respect, for the reasons given by me earlier, I would approve of the view taken in Gopi Mal's case.
36. I know turn to Mr. Maqbul Ahmad's last submission. This was that the award was decreed illegally, as it was a nullity, and it was a nullity. Because it was unstamped, therefore, the appeal had to be allowed on this ground. This objection was not raised either in the trial Court of in the High Court. It was raised in the petition for leave, but leave was not granted to examine it. And we do not normally entertain appeals on questions on which leave has not been granted. In order to overcome the difficulty, learned counsel submitted that this Court had sometimes even allowed appeals on questions of law for the examination of which leave had not been granted. I would only observe on this plea that this Court some--times hears an appellant on a question of law, even though it may not have been pleaded, and even though leave may not have been granted to examine it. But the question is of our discretion, and as the question is of our discretion, Mr. Maqbul- Ahmad stressed the fact that the plea raised by him affected the jurisdiction of the arbitrators to pronounce their award. Even if that be so, the objection is of a technical nature, as pleas about jurisdiction sometimes are. This is not a circumstance which impresses me. Additionally, if we were to allow learned counsel to raise this objection in his arguments before us, it would enable the appellant to defeat the provisions of section 30 of the Arbitration Act. Accordingly, in all the circumstances discussed, we did not permit him to argue this objection.
37. The appeal is without merit and is dismissed but as there was a cleavage of opinion in the Lahore High Court on the proper construction of section 35 of the said Act, the appeal is dismissed without costs.
38. MUHAMMAD AKRAM, J.-I agree with the conclusion in dismissing the appeal without costs.
39. S. A. H.