“Whether a court, under the Arbitration and Conciliation Act,
1996, can entertain and grant any interim or ad-interim relief
in an application under Section 9 of the said Act when a
document containing arbitration clause is unstamped or
insufficiently stamped?”
2nd Question
“Whether, inter alia, in view of Section 11 (6A) of the
Arbitration and Conciliation Act, 1996, inserted by Arbitration
and Conciliation (Amendment) Act, 2016, it would be
necessary for the Court before considering and passing final
orders on an application under Section 11(6) of the Act to
await the adjudication by the stamp authorities, in a case
where the document objected to, is not adequately stamped?
Hence, the above two questions, firstly falling under
Section 9 of the ACA and secondly falling under Section 11 of
the ACA and having common features, namely, as to what is
the effect and consequence of the document being not
sufficiently stamped, when the court is called upon to exercise
jurisdiction under the provisions of Section 9 and Section 11 of
the ACA, are issues falling for consideration of this Bench.
Answer
Taking a overall view of the scheme of the ACA,
judgments delivered by the Supreme Court, we are of the view
that the party need not be put to a disadvantage merely
because an objection has been raised in respect of
insufficiency of the stamp on the agreement presented before
the court. Neither a contesting party could deprive legitimate
rights of a litigant in praying for timely intervention of the
court by praying for appointment of an arbitral tribunal nor for
interim reliefs in the fact situation of a case. That would be
rendering a party without any forum and in a given situation
the outcome would be, at times, catastrophic and disastrous
and the damage could be irreparable one. A balanced
approach, keeping in view the legislative intent and the view
adopted by the Supreme Court, needs to be adopted, so that
the purpose of enacting the provisions of Sections 11 and 9 of
the ACA as amended by the Amendment Act is not defeated.
119. If an application under Section 11 or under Section
9 is required to be postponed till the order of adjudication is
passed by the learned Collector of Stamps with such
uncertainty of the time it would take to decide and the
hierarchy of remedies after such order, as it would be subject
to an appeal or a revision, as the case may be and till such
time no order either under Section 11 of under Section 9
should be passed, then the Legislature would not have
provided for speedy disposal of the applications under Section
11 or under Section 9 of the Act by inserting sub-Section (13)
in Section 11 and sub-Section (2) in Section 9 of the Act.
(L) ANSWERS TO THE QUESTIONS FRAMED :
120. In view of the above deliberation, we answer the
questions as framed by us as follows :-
Sr. No.
Question Answer
1 Whether a court, under the
Arbitration and Conciliation Act,
1996, can entertain and grant any
interim or ad-interim relief in an
application under Section 9 of the
said Act when a document
containing arbitration clause is
unstamped or insufficiently
stamped
In the Affirmative
2 Whether, inter alia, in view of
Section 11 (6A) of the Arbitration
and Conciliation Act, 1996,
inserted by Arbitration and
Conciliation (Amendment) Act,
2016, it would be necessary for
the Court before considering and
passing final orders on an
application under Section 11(6) of
the Act to await the adjudication
by the stamp authorities, in a case
where the document objected to,
is not adequately stamped?
In the Negative
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.466 OF 2017
Gautam Landscapes Private Limited. Vs. Shailesh S.Shah
CORAM : NARESH H. PATIL, CJ.,
R. D. DHANUKA &
G. S. KULKARNI, JJ.
PRONOUNCED ON: APRIL 04, 2019.
JUDGMENT: (PER NARESH H. PATIL,CJ.)
This judgment is held not good law in view of Supreme court Judgment.Please see the link: https://www.lawweb.in/2019/04/sc-court-cant-appoint-arbitrator-when.html
(A) INTRODUCTION:
1. By an order dated 6th September 2018 passed by
the learned Single Judge in Arbitration Petition No.466 of 2017
(Gautam Landscapes Pvt. Ltd. Vs. Shailesh S. Shah and anr.),
and Arbitration Application No.246 of 2016 (Gautam
Landscapes Pvt. Ltd. Vs. Shailesh S. Shah), the learned Single
Judge observed in para 25.3 as under :-
“25.3 The question whether this Court under Section 2(e) of
the Act can entertain and grant any interim or ad-interim
relief in an application under Section 9 of the Act when the
Arbitration Agreement is contained in a document that is
unstamped or insufficiently stamped, needs to be referred to
a Larger Bench for determination. In my view, the Hon’ble
Chief Justice can be requested by this Court to refer the said
question / issue to a Larger Bench for consideration. The
Registry is therefore directed to place the papers and
proceedings before the Hon’ble the Chief Justice to enable the
Hon’ble the Chief Justice to refer the aforesaid question / issue
to a larger Bench for consideration.”
In pursuance of the above order, this Larger Bench
has been constituted.
2. By an order dated 25th October, 2018, this Bench
has framed following question of law which would arise for
consideration:-
“Whether a court, under the Arbitration and Conciliation Act,
1996, can entertain and grant any interim or ad-interim relief
in an application under Section 9 of the said Act when a
document containing arbitration clause is unstamped or
insufficiently stamped?”
3. In the proceedings of Arbitration Application No. 300
of 2018 in the case of Vijay Sharma vs. Vivek Makhija & anr. ,
the learned Single Judge of this court for reasons as set out in
an order dated 20th December 2018 referred the following
question of law for consideration of the Larger Bench and the
Registry was directed to place the papers and the proceedings
before the Chief Justice:
“Whether it would be necessary for the Court before
considering and passing final orders on an application under
Section 11(6) of the Arbitration and Conciliation Act, 1996, to
await the adjudication by the stamp authorities, in a case
where the document objected, is not adequately stamped?”
Accordingly, the issue was referred to a Larger
Bench on the similar lines, however, falling under Section 11 of
the Arbitration and Conciliation Act, 1996 (for short “the
ACA”).
4. The Chief Justice referred the said issue falling
under Section 11 of the ACA to this Larger Bench. By an order
dated 26th February, 2019, this Bench framed the following
question for its consideration :-
“Whether, inter alia, in view of Section 11 (6A) of the
Arbitration and Conciliation Act, 1996, inserted by Arbitration
and Conciliation (Amendment) Act, 2016, it would be
necessary for the Court before considering and passing final
orders on an application under Section 11(6) of the Act to
await the adjudication by the stamp authorities, in a case
where the document objected to, is not adequately stamped?
Hence, the above two questions, firstly falling under
Section 9 of the ACA and secondly falling under Section 11 of
the ACA and having common features, namely, as to what is
the effect and consequence of the document being not
sufficiently stamped, when the court is called upon to exercise
jurisdiction under the provisions of Section 9 and Section 11 of
the ACA, are issues falling for consideration of this Bench.
(B) ISSUE UNDER SECTION 9:
5. We would take up the issue falling under Section 9
of the ACA first.
6. Briefly stated the facts are:-
Arbitration Petition No. 466 of 2017 is filed by the
Petitioner – Gautam Landscapes Pvt. Ltd. against Respondent
No.1 – Shailesh S. Shah and Respondent No.2 – Gautam Estate,
under Section 9 of the ACA, seeking protective reliefs pending
the final disposal of the arbitration proceedings and the
enforcement and implementation of the Arbitration Award.
There is another proceeding being Arbitration Application
No.246 of 2016 filed by the said petitioner under Section 11 of
the ACA seeking appointment of a sole arbitrator for
adjudication of the disputes and differences that have arisen
between the parties. The case of the petitioner is that disputes
have arisen between the parties under a joint venture
agreement dated 27 October 2006. When the learned Single
Judge took up the Section 11 application filed by the petitioner,
on behalf of the respondent an objection was raised, that the
document was not adequately stamped and hence, be
impounded and sent to Collector of Stamps for adjudication.
This objection was contested on behalf of the petitioner, who
contended that the document was adequately stamped.
Learned Counsel for the petitioner however offered to hand
over original document to the Prothonotary and Senior Master
of this Court for being sent to Collector of Stamps for
adjudication. On this the learned Single Judge, by an order
dated 9 November 2017 impounded the document and
directed the Prothonotary and Senior Master, to forward the
said document within one week of its receipt to the
Superintendent of Stamps/Collector of Stamps, Mumbai, for
adjudication of the stamp duty. Upon adjudication the
Collector of Stamps by an order dated 15 March 2018 held that
the document was inadequately stamped and an amount of
Rs.1,12,52,500/- is due and payable as deficit stamp duty. The
petitioner did not accept the said order and filed a statutory
appeal on 17 April 2018 under Section 34B of Maharashtra
Stamp Act. The said appeal was pending.
7. When the matter was listed for hearing on this
background before the learned Single Judge on the Section 9
reliefs, the learned counsel appearing for the petitioner relied
upon the decision of the Division Bench of this Court in the
case “Universal Enterprises vs. Deluxe Laboratories Pvt.
Ltd.”1 wherein the Division Bench had taken a view that even
if an arbitration agreement contained in a document is
unstamped or insufficiently stamped and if a case is made out
for grant of ad-interim reliefs, the Court cannot refuse the
same merely on the ground that the agreement in question
needs to be adjudicated on the issue of payment of stamp
duty. Responding to this, on behalf of the respondent it was
argued that the judgment of the Division Bench in Universal
Enterprises (supra) was per incurium and was not good law in
view of the decision of the Supreme Court in “SMS Tea
Estates (P) Ltd. vs. Chandmari Tea Co. (P) Ltd”2 and the
decision of the Division Bench of this Court in Lakdawala
Developers Pvt. Ltd. vs. Badal Mittal & Ors. 3. The learned
Single Judge hence posed the following three issues which
would arise and on which a reference ought to be made to the
Chief Justice to constitute a larger bench to consider the
same:-
1 2016 (5) Mh.L.J.623
2 (2011) 4 SCC 66
3 Appeal (L) No.272 of 2013
(i) whether the Judgment of the Division Bench of this
Court in the case of Universal Enterprises (supra) is per
incurium?
(ii) alternatively whether the Judgment of the Division
Bench of this Court in the case of Universal Enterprises
(supra) is, on the face of it, bad in law as it is based on a
patent misreading of binding precedents? And
(iii) further, if the Judgment of the Division Bench of this
Court in Universal Enterprises (supra) is bad in law?
8. The learned Single Judge in an elaborate order
discussed the above issues and considered the decision of the
Division Bench of this Court in Universal Enterprises vs.
Deluxe Laboratories Pvt. Ltd.(supra), the decision of the
Supreme Court in SMS Tea Estates (P) Ltd. vs. Chandmari
Tea Co. (P) Ltd. (supra) and another the decision of the
Division Bench in Lakdawala Developers Pvt. Ltd. vs.
Badal Mittal & Ors. (supra) and the provisions of Section 33
of the Maharashtra Stamp Act, and referred the issue as set
out in paragraph 25.3 of the order, which we have already
quoted above.
9. The order of the Division Bench in Lakdawala
Developers Pvt. Ltd.(supra) which referred to the decision of
the Supreme Court in “SMS Tea Estates (P) Ltd.” (supra),
was also followed by the learned Single Judge in the case of
“Jayraj Devidas & Ors. Vs. Nilesh Shantilal Tank & Anr.”4
4 2014(6) Mh.L.J. 156
10. By our order dated 25 October 2018 we appointed
Dr.Milind Sathe, learned Senior Advocate as Amicus Curaie to
assist this Court. We have heard the learned Counsel for the
petitioner, Mr.Dani,learned Senior Counsel with Mr.Dande,
Advocate for the respondent and Dr.Milind Sathe, learned
Amicus Curiae.
11. As to some extent the issues are interlinked,
Dr.Sathe while making submissions on the issue falling under
Section 9 has also touched the facets of Section 11.
(C) 12. Broadly, the submissions of Dr. Sathe, learned
Amicus Curiae, are under the following heads:-
(i) SEVERABILITY OF ARBITRATION CLAUSE IN AN
AGREEMENT:
13. Dr. Milind Sathe has taken us through the relevant
provisions of the ACA Act, particularly provisions of Sections
2(b), 2(e), 2(h), Sections 7, 8, 9, 16 of the said Act and
provisions of Sections 32A, 33, 35, 37 and 58 of the
Maharashtra Stamp Act, 1958. On the issue of severability of
an arbitration clause in an agreement, Dr. Sathe submitted
that an arbitration agreement between the parties can be
contained in a standalone independent agreement and it can
also be in the form of a clause in the agreement. As per
definition of “arbitration agreement” in Section 7 several
contingencies and situations have been treated as “arbitration
agreement” such as exchange of communications, exchange
of pleadings etc., the question of levy of stamp duty on an
instrument under which the disputes arise will not arise in all
such contingencies. The question of levy of stamp duty
therefore concerns only in those cases where arbitration
agreement is a part of a contract or an agreement which also
contains other terms and conditions. It is undisputed that
arbitration agreement by itself is not “an instrument” on which
stamp duty is leviable nor such an agreement is required to be
compulsorily registered. The levy of stamp duty and
registration are thus applicable only to remaining part of the
document i.e. excluding the arbitration agreement. Arbitration
agreement has been held to be completely severable from the
remaining document. For the purpose of Sections 9 and 11,
the arbitration clause in an agreement between the parties
under which the disputes arise is to be severed from the main
contract itself and an arbitration agreement is independent of
other terms of the contract. Even if the main contract
contained in instrument (which requires stamping) is null and
void, it would not mean that the arbitration clause is rendered
invalid. This is further strengthened by Section 16(1)(a) of the
ACA. The learned counsel, therefore, submitted that an
arbitration clause contained in an agreement on the strength
of which Section 9 or Section 11 proceedings are filed, if
treated as an independent agreement on standalone basis, it
does not entail payment of stamp duty as it is not “an
instrument” nor does it find mention in Schedule I of the
Bombay Stamp Act or the Indian Stamp Act. Therefore, the
court in Sections 9 and 11 can treat an arbitration clause
contained in an agreement even though it is unstamped as a
separate agreement and pass necessary orders. The court
under Section 9 is therefore ‘acting upon” an arbitration
agreement and not on the contract contained in an instrument
which requires stamping.
14. Dr. Sathe has referred to the judicial
pronouncements in the context of Sections 9 and 11 of the
ACA, which we refer below.
15. On the judicial pronouncements in proceedings
falling under Sections 9 and 11, the learned senior counsel
submitted that insofar as the power of Court under Section 9
to grant interim measures, when Section 9 petition is filed on
the basis of an arbitration agreement when it is contained in a
document which requires payment of stamp duty and which is
insufficiently stamped, following judgments are required to be
noted. The only Judgment on Section 9 is of the Division
Bench this Court in the case of Universal Enterprises v/s.
Deluxe Laboratories Pvt. Ltd. (Supra) is a judgment which
takes a view that ad-interim reliefs can be granted by the
Section 9 court even if the document is not adequately
stamped. This judgment, which gave rise to the reference,
referred by the learned Single Judge is in conflict with other
Division Bench judgment in the case of Agility Logistic Pvt.
Ltd. vs. Jagannath Parmeshwar Mills5 and the order of the
Division Bench in Lakdawalla Developers Pvt. Ltd. (Supra)
and per incurium the Supreme Court judgment in SMS Tea
Estates (Supra). All the relevant judgments enumerated in the
chart below would indicate in what proceedings the issues had
arisen:
5 Appeal No. 479 of 2012
Sr.
No.
Name of Judgment Citation Proceedings
before the
Court
1 Universal Enterprises V/s
Deluxe Laboratories Pvt. Ltd.
2016 (5)
Mh.L.J.623
(Division Bench)
Section 37
appeal against
refusal of adinterim
2 SMS Tea Estates (P) Ltd. V/s.
Chandmari Tea Co. (P) Ltd.
(2011) 14 SCC 66
(2 Judges)
S. 11
3 Badal Mittal V/s. Lakadawala
Developers Pvt. Ltd.
Arbitration
Petition No.221
of 2013 (Single
Judge)
Section 9
4 Lakdawala Developers Pvt.
Ltd. V/s. Badal Mittal
Appeal (L) No.
272 of 2013
(Division Bench)
(Interim Order)
Appeal against
Section 9
5 Agility Logistics Pvt. Ltd. V/s.
Jagannath Parmeshwar Mills
Appeal No. 479
of 2012
Appeal against
Section 11
6 SBP & Co. V/s Patel
Engineering Ltd.
(2005) 8 SCC 618
(7 Judges)
Reference about
nature of
function of Chief
Justice under
Section 11
7 Jayraj Devidas V/s Nilesh
Shantilal Tank
2014 (6)
Mh.L.J.156
(Single Judge
Bombay High
Court)
Appeal against
Section 9 order
8 M/s. Duro Felguera V/s.
Gangavaram Port Ltd.
(2017) 9 SCC 729 Section 11(6A)
9 Coastal Marine Construction
and Engineering Ltd. V/s.
Garware Wall Ropes Ltd.
2018(3) Mh.L.J.22
(Single Judge,
Bombay High
Court)
Section 11 Sub
Section (6-A)
10 Mohinder Singh Dua V/s.
Kamla Landmarc
Construction Pvt. Ltd.
Commercial
Arbitration
Petition No. 51 of
2016 (Single
Judge Bombay
High Court)
Section 9 Petition
It is thus clear from the above chart that the judgment of the
Supreme Court i.e. SMS Tea Estates, was dealing with Section
11 of the ACA. Similarly, the Division Bench judgments of this
Court i.e. Agility Logistic Pvt. Ltd. V/s Jagannath
Parmeshwar Mills was also dealing with Section 11 of the
ACA.
16. The learned Senior Counsel further submits that, as
can be seen from the above chart, there are two Division
Bench judgments of this court dealing with Section 9 of the
ACA i.e. Lakdawala Developers Pvt. Ltd. vs. Badal Mittal
(Supra) and Universal Enterprises vs. Deluxe
Laboratories Pvt. Ltd. (Supra). The judgment of this court
in Lakdawala Developers Pvt. Ltd. was an interim order
passed in an appeal under Section 9 of the ACA and cannot be
treated as a precedent. The judgment in Universal
Enterprises was dealing with an order refusing ad-interim
relief under Section 9 of the ACA. However, the order in the
case of Lakdawala Developers was passed as an interim
order in the appeal. The Division Bench in Universal
Enterprises (Supra) distinguishes the decision of the Supreme
Court in SMS Tea Estates as having been passed in the
proceedings under Section 11 and not under Section 9 of the
ACA.
17. The learned Senior Counsel submits that there are
two judgments delivered by the learned Single Judges of this
court dealing with Section 9, i.e. Jayraj Devidas vs. Nilesh
Shantilal Tank and Mohinder Singh Dua vs. Kamla
Landmarc Construction Pvt. Ltd.6 The judgment in the
case of Jayraj Devidas applies SMS Tea Estates (which was
dealing with Section 11) to the proceedings under Section 9
and also follows the interim order passed in Lakdawala
Developers Pvt. Ltd. The judgment in the case of
Mohinder Singh is passed in the proceedings arising out of
Section 9 follows the judgment of the learned Single Judge in
Jayraj Devidas (Supra).
18. The learned Senior Counsel submitted that the
judgment in the case of SMS Tea Estates only restricts its
scope to the proceedings under Section 11. It does not refer
to a judgment of the Supreme Court in the case of Firm
Ashok Traders vs. Gurumukh Das Saluja7 which lays down
6 Commercial Arbitration Petition No.51 of 2016
7 (2004) 3 SCC 155
the scope of powers under Section 9 of the ACA. It was held in
that case that in Section 9 proceedings all that the court is
concerned with is whether or not there is an arbitration
agreement between the parties and it has nothing to do with
the main relief which would be sought in the arbitral
proceedings or the right which is sought to be canvassed in
support of the relief, as what is relevant at that stage is only
the arbitration agreement. It is further held that the right
which a party exercises by filing a Section 9 petition does not
arise out of the main contract, but it arises out of the
arbitration agreement.
19. It is submitted that since the judgment in the case
of SMS Tea Estates was only dealing with Section 11
proceedings, it does not make reference to the judgment in the
case of Firm Ashok Traders (Supra) which continues to be a
binding precedent and governing the field insofar as Section 9
is concerned.
(ii) EFFECT OF AMENDMENT IN SECTION 11 IN 2015:
20. On the effect of amendment to Section 11 in the
year 2015, the learned Senior Counsel submitted that the
Arbitration and Conciliation Act, 2016 and in particular Section
11 was amended and a new clause i.e. sub-section (6A) was
introduced in Section 11. It is submitted that after the
insertion of this clause, under Section 11, the court can only
consider an issue as to the existence of the arbitration
agreement. This is apparent from the fact that the wordings
used in sub-section (6A) are that the court shall “confine” to
the examination of existence of an arbitration agreement. It
is therefore clear that after the amendment, Section 11 court
cannot examine any other issue except finding out whether
the arbitration agreement exists or not. This amendment also
will equally apply to the issue arising out of non-payment of
stamp duty under the provisions of the Maharashtra Stamp Act
and Indian Stamp Act. It is submitted that the judgment in the
case of SMS Tea Estates, which was dealing with Section 11. In
any case after insertion of sub-section (6A) in Section 11 by
amendment in 2015 the court will confine the inquiry limited to
the existence of an arbitration agreement notwithstanding any
judgment, decree or order of any court.
21. The learned Senior Counsel submitted that the
judgment of the Supreme Court in the case of M/s Duro
Felguera vs. Gangavaram Port Ltd.8 and particularly in
8 (2017) 8 SCC 729
para 18 of the judgment of Justice Bhanumati and in paras 48
and 59 of the supplementary judgment of Justice Kurian
Joseph, the court has interpreted the provisions of Section
11(6A) and held that the scope of inquiry under Section 11 is
therefore very very limited. This judgment has been followed
by a learned Single Judge of this court in Coastal Marine
Construction & Engineering Ltd. Vs. Garware Wall
Ropes Pvt. Ltd.9 This view by the learned Single Judge,
following the Supreme Court judgment, is the correct view,
considering amendment to Section 11 by insertion of subsection
(6A).
(iii) STAMP ACT IS A FISCAL STATUTE:
22. Dr. Sathe submits that the Maharashtra Stamp Act,
1958 and the Indian Stamp Act, 1899 are fiscal legislations and
these statutes are concerned with the recovery of the revenue
of the Government on the contract documents. The
judgment in the case of Hindustan Steel Ltd. vs. Dalip
Construction Co.10, in paras 6 and 7, has held that a Stamp
Act is a fiscal statute and it is not enacted to arm a litigant
with a weapon of technicality to meet the case of his opponent
9 2018 (3) Mh.L.J. 22
10 (1969) 1 SCC 597
and the stringent provisions of the Act are conceived in the
interest of the revenue. It is therefore submitted that in
proceedings under Section 9, the issue as to whether the
stamp duty is sufficiently paid on an instrument which contains
an arbitration clause need not be considered. This is the legal
position as the arbitration clause contained in such an
instrument (which requires stamping) can be severed from the
main contract / transaction and the court under Section 9 can
pass an order on the arbitration agreement and not the main
contract transaction. In fact, the Rules framed by this Court
for filing arbitration petitions specifically provide that these
proceedings can be filed by annexing a certified copy of the
original instrument and therefore the court under Sections 9
and 11 can impound the document and hand it for
adjudication under the provisions of the Stamp Act and still
pass necessary orders on the basis of certified copy of the
original instrument. This will make both the statutes workable.
(iv) POSITION IN A REGULAR CIVIL SUIT:
23. The learned Senior Counsel submits that the Civil
Courts have ample power to grant interim relief under Order
XXXIX and XL of the Code of Civil Procedure, 1908 to parties
even if the agreement on the strength of which the suit is filed
is unstamped. In this context, the following judgments are
relied:-
Sr.
No.
Name of Judgment Citation Proceedings
before the
Court
1 Morpheus Media Ventrues
Pvt. Ltd. V/s Anthony
Maharaj of Trinidad and
Tobago
2017 (2)
Bom.C.R. 459
(DB Bombay
High Court)
Appeal against
grant of interim
relief in suit
2 Mahendra Kumar Modi vs.
Gujarat State Fertilizers &
Chemicals Ltd.
2018 (2)
Bom.C.R. 469
(DB Bombay
High Court)
Appeal against
grant of interim
relief in suit.
3 Marine Container Services (I)
Pvt. Ltd. V/s. Rajesh Dhirajlal
Vora
2001 (4) Mh.L.J.
353 (Single
Judge Bombay
High Court)
O.38 R.5
Application
4 Pride Associates Vs.
Damodardas Bhaidas Bhuta
2013 (5) ABR
729 (Single
Judge Bombay
High Court)
O. 40 Application
in suit
5 Ashwatha Developers Vs.
Shree Vardhaman
Stanakvasi Jain Shravak
Sangh
2016 (4) ABR 1
(Single Judge
Bombay High
Court)
Appeal against
interim relief in
Suit
In the above judgments it has been held that the issue as to
insufficiency in payment of stamp duty or non-payment of
stamp duty can be considered at the stage of trial or evidence
and is not germane at the stage of deciding an application for
interim relief. It would therefore be preposterous to apply the
provisions as to non-payment of stamp duty at the stage of
Section 9 proceedings when the same cannot be applied at the
stage of interim relief in the suit. This would in fact deter
parties from entering into an arbitration agreement and the
purpose of ACA would itself be defeated.
(v) MEANING TO BE GIVEN TO PHRASE “ACTED UPON”:
24. The learned Senior Counsel submitted that once the
arbitration clause contained in an instrument, which requires
stamping and on which no stamp duty is paid, is severed from
the main contract, both courts under Sections 9 and 11, would
only act on the arbitration agreement and not the main
contract. It is submitted that the words “acted upon” referred
in Section 34 of the Bombay Stamp Act and Section 35 of the
Indian Stamp Act, therefore, would become relevant and
effective when the court is acting upon the instrument
contained in the main contract. The court in Sections 9 and 11
in fact only acts upon the clause in the arbitration agreement
which is to be construed as an independent and separate
agreement from the main contract contained in an instrument
which requires payment of stamp duty. Therefore, the words
“acted upon” in Section 34 of the Bombay Stamp Act and
Section 35 of the Indian Stamp Act will not apply to either
under Sections 9 or 11 when the court is acting upon only the
arbitration agreement.
25. This interpretation can also be viewed from a
different angle. SMS Tea Estates judgment was dealing with
the provisions of the Indian Stamp Act. The Maharashtra
Stamp Act has a provisions, i.e. Section 32A which in subsection
(3) uses the following language:
“32A(3) If any person referred to in section 33, before
whom any such instrument is produced or comes in the
performance of his functions, has reason to believe that the
market value of the immovable property which is the subject
matter of such instrument has not been truly set forth therein,
he may, after performing his function, in respect of such
instrument, refer the instrument alongwith a true copy of such
instrument to the Collector of the District for determination of
the true market value of such property and the proper duty
payable on the instrument.
Provided that if the person, before whom any such
instrument is produced or comes, in performance of his
functions, is an officer appointed as the Collector under clause
(f) of section 2, and he has reason to believe that the market
value of the immovable property which is the subject matter
of such instrument has not been truly set-forth therein, he
shall, for the purpose of assessing the stamp duty, determine
the true market value of such property in the manner laid
down in the Bombay Stamp (Determination of True Market
Value of Property) Rules, 1995.”
It is therefore submitted that the same meaning can
be ascribed to the provisions of Section 34 and after the
performance of the duty by the court under Sections 9 and 11,
the provisions of fiscal statutes, i.e. Indian Stamp Act and
Maharashtra Stamp Act, can be taken care of.
26. The learned Senior Counsel submits that even if the
instrument containing the main contract / transaction between
the parties is impounded, it can never amount to impounding
of an arbitration agreement. This is for the reason that
arbitration clause contained in such an instrument is a
separate and independent contract and it can still be acted
upon by courts under Sections 9 and 11 even though the main
instrument is impounded and sent for adjudication under the
Stamp Act. This interpretation is further strengthened by the
fact that in arbitration proceedings on an application for
interim relief made under Section 17, without intervention of
the court, will have no such fetter on the powers to grant
interim relief. The learned counsel submits that the two
judgments of the Supreme Court in Naina Thakker vs.
Annapurna Builders11 and M. Anausuya Devi vs. M.
11 (2013) 14 SCC 354
Manik Reddy12 have already held that SMS Tea Estates
judgment does not apply to proceedings under Sections 8 and
34 as it was only dealing with Section 11 and therefore same
logic cannot apply to the proceedings under Section 9.
27. To summarize, Dr. Sathe, the learned Senior Counsel
submitted that,
(i) the judgment in SMS Tea Estates was dealing with
only Section 11 proceedings and the same logic cannot be
made applicable to Section 9 proceedings;
(ii) the arbitration clause contained in an instrument
requiring stamp duty is a separate and independent
agreement which can be severed from the main instrument;
(iii) the judgment in SMS Tea Estates is not relevant for
the determination of issue in question after the insertion of
2015 amendment and the question as to stamping /
registration cannot be decided in Section 11 proceedings;
(iv) the judgment in the case of SMS Tea Estates cannot
be extended in its application to Section 9 proceedings. The
scope of proceedings under Section 9 and that in such
proceedings court is only acting upon an arbitration
agreement is conclusively held in the case of Firm Ashok
and that legal position continues to subsist;
(v) Section 9 court, while passing an order for interim
measure, is only “acting upon” the arbitration agreement and
not the instrument requiring stamp duty and therefore these
words in Section 34 of the Bombay Stamp Act will not apply
to Sections 9 proceedings and Section 11 proceedings after
insertion of clause 6A by amendment in 2015. The court in
Section 9 proceedings can therefore pass ad-interim as well
as final order unfettered by non-payment of stamp duty on
12 (2003) 8 SCC 565
the instrument;
(vi) the argument that because Section 9 Court is also
required to enter into merits of the main transaction
contained in the instrument requiring payment of stamp duty,
while passing order, is misconceived. This is for the reason
that although Section 9 court, while passing an order of
interim relief, may be required to get into the merits of the
transaction, but it is still acting on the basis of an arbitration
agreement and the order is passed not on the main
instrument, but on the arbitration agreement. If entering into
merits of the matter amounts to acting upon the instrument,
the court under Section 34 of ACA also would be required to
enter into the merits of the award, however, it can still pass
an order under Section 34 without entering into the question
of stamp duty and the question of stamp duty is left to be
decided at the stage of enforcing the award under Section 36
(Ref:- Anasuya Devi (Supra));
(vii) the court while entertaining an application under
Section 9 can pass orders by acting upon the arbitration
agreement to preserve the substance of arbitration
proceedings, which may be either pending, contemplated or
concluded.
(viii) this would be an appropriate course of action in view of
the fact that in several cases of arbitration agreements as
defined and falling under Section 7 or in civil suits, there is
no fetter on the court in passing interim orders and if such
fetter becomes applicable only when arbitration agreement is
contained in an instrument requiring levy of stamp duty, this
would be clearly unfair and inequitable and virtually a
deterrent on arbitration proceedings. Besides, in law also it is
not warranted;
(ix) in view of the amendment to Section 9, sub-section (2)
now requiring commencement of arbitral proceedings within
specified time, also takes care of the issue that the
arbitration proceedings are commenced expeditiously after
obtaining interim orders which would also expedite collection
of revenue on such documents.
(x) The learned Senior Counsel therefore submitted that
the answer to the question under reference is that the court
as defined in Section 2(e) of the ACA can entertain and grant
any interim or ad-interim relief on an application under
Section 9 when an arbitration agreement is contained in a
document, i.e. unstamped or insufficiently stamped. The
court’s power to grant interim / ad-interim relief under
Section 9 is not fettered by the provisions of the Maharashtra
Stamp Act, 1958 and the Indian Stamp Act, 1899. The
revenue of the State also can be protected by the court after
passing order under Section 9 directing the “document”
severed from Arbitration Agreement to be impounded and
sent for further action in accordance with law.
(D) SUBMISSIONS OF MR. P.S. DANI, LEARNED SENIOR
COUNSEL FOR THE RESPONDENT IN SECTION 9
PETITION:
28. On the other hand Mr. Dani learned Senior Counsel
for the respondents has made the following submissions :
i) It is contended that when the Court exercises jurisdiction
under section 9, it exercises judicial powers and restricted to
arbitration proceedings. According to Mr.Dani, this can be
clearly seen from the following words in sub-section (1) of
section 9 :
“The Court shall have the same powers for making orders as it has
for the purpose of and in relation to, in any proceedings before it.”
(ii) If a document is not sufficiently stamped then
necessarily, the Court exercising jurisdiction under section 9
under the mandate of the law, as laid down in SMS Tea
Estates is under an obligation to impound a document and
only after payment of the stamp duty, the Court can proceed
to pass orders on the section 9 application which would be
either ad-interim or interim and not before it is sufficiently
stamped.
(iii) The decision of the Supreme Court in SMS Tea Estates
(supra), in para 21 clearly holds, that the Court should
consider at the outset, whether an objection in that behalf is
raised or not and as to whether the document is properly
stamped. If it is not properly stamped, then it should be
impounded and dealt in a manner as specified under the
Maharashtra Stamp Act,1958. Till that time, the Court cannot
act upon the document and also arbitration agreeement
contained therein, and only after deficit stamp duty is paid or
the document is sufficiently stamped, the Court can act upon
the said document or document can be admitted in evidence.
(iv) The decision in SMS Tea Estates, (supra) is not in any
manner diluted by the amendment as incorporated, by
Arbitration Amendment Act (Act 3 of 2016 with effect from
23.10.2015) and or by incorporation of sub section (6A) in
Section 11 as Section 9 has remained untouched by any
incorporation of the nature as brought about by sub-section
(6A) in Section 11.
(v) Referring to section 33 of the Maharashtra Stamp Act, 1958
it is submitted that, it is a restriction on the power of the Court
exercising jurisdiction even under Section 9, as unless there is
compliance of payment of deficit stamp duty, or document to
be sufficiently stamped, the Court necessarily has to impound
the document as Section 33 of the Stamp Act would postulate,
and only thereafter proceed to pass any orders on a Section 9
Petition. Referring to the decision of the Supreme Court in
Commissioner of Customs (Import) Mumbai vs Dilip
Kumar & Company and others13, it is submitted that the
duty of the Court would be to act upon the true intention of the
legislation, as reflected by Section 33 of the Maharashtra
Stamp Act,1958 as it is a fiscal statute and therefore, it is
required to be strictly construed.
(vi) It is contended that before a document is acted upon, the
document is required to be sufficiently stamped, is further
13 (2018) 9 SCC 1
confirmed in the decision of the Supreme Court in Black
Pearls Hotels Private Limited vs Planet M.Retail
Limited14 wherein, the Supreme Court referring to the
decision in SMS Tea Estates (supra) has held that the Court
would be obliged to consider the nature of the document and
whether the document is required to be stamped or not and
whether requisite stamp duty has been paid on the same.
29. Learned Senior Counsel placed reliance on
paragraphs 9 to 22, 29 and 31 of the judgment of the
Supreme Court in the case of SMS Tea Estates (Supra) and
submits that the said judgment is not restricted to Section 11
of the ACA, but was also dealing with the powers of the Court
under section 9 of the said Act and had specifically dealt with
the issue as to whether the arbitration agreement in an
agreement compulsorily required to be stamped which is
unregistered and/or which is not duly stamped, is valid and
enforceable or not? He submits that while dealing with the
said issue, the Supreme Court held that if the Court
comes to the conclusion that the document containing the
arbitration agreement is not sufficiently stamped, it should be
impounded and dealt with in the manner specified in section
14 (2017) 4 SCC 498
38 of the Stamp Act. The Court cannot act upon the said
document or the arbitration clause therein. He also invited our
attention to the questions formulated by the Supreme
Court in the said judgment and more particularly paragraph
9(ii) thereof.
30. It is submitted by the learned senior counsel that
the questions framed by the Supreme Court in
paragraphs 9(i) and 9(ii) have been separately considered and
decided in the said judgment.
31. Insofar as reliance placed by Dr. Sathe, on section
16 of the ACA in support of the submission that the arbitration
agreement can be severed from the main agreement, he
submits that the said situation would arise only under section
16(1)(a) of the Act and that also only when the parties refer
the dispute to arbitration without intervention of the Court. He
submits that though the proviso to section 49 of the
Registration Act, 1908 provides that unregistered document
affecting the immovable property is required by the
Registration Act or Transfer of Property Act, 1882 to be
registered, it may still be received in evidence in a contract
for specific performance or evidence of any collateral
evidence, as there is no similar proviso to Section 35 of the
Maharashtra Stamp Act. He submits that though while
considering the application under section 11 of the ACA, Court
can severe the arbitration agreement from the main
agreement, the principles of severability permitted under
section 11, if any, cannot be mixed up with the powers of
Court while dealing with the application under section 9 of the
said Act.
32. Learned Senior Counsel placed reliance on the
judgment of the Supreme Court in case of Black
Pearl Hotel Private Limited (Supra) and more particularly
paragraphs 6, 8, 9 and 10 and would submit that the
Supreme Court in the said judgment delivered by three Judges
of the Supreme Court has reiterated the principles laid
down by the two Judges of the Supreme Court in case of
SMS Tea Estates (supra) and more particularly the principles
laid down in paragraph 22 of the said judgment. He submits
that the judgment of the Supreme Court in case of SMS Tea
Estates (supra) and in case of Black Pearl Hotel Private
Limited (supra) applies to the proceedings under section 9 of
the Act and thus the applicant in the said application not
having paid the stamp duty as required in law, could not claim
any interim measures under section 9 of the Act till such
document is sufficiently stamped.
33. All powers of Court under different provisions of
law, including the fetters created under the provisions of the
Maharashtra Stamp Act stand attracted to the proceedings
under section 9 of the act also. He submits that even if the
arbitration agreement is severed, for the purpose of granting
interim measures, the Court will have to arrive at a prima-facie
conclusion that whether the main agreement is enforceable in
law or not. While considering the application for interim
measures under section 9 of the Act, the Court has to consider
the validity of the main agreement and has to act upon the
said agreement. He submits that for the purpose of touching
upon the merits of the matter, the Court has to consider the
validity of the agreement on merits.
34. It is submitted by the learned senior counsel that a
document required to be stamped if is not duly stamped is
inadmissible in evidence. Such consequence is specifically
provided under section 34 of the Maharashtra Stamp Act,
1988. He submits that once the fiscal statute determines a
particular thing to be done in a particular manner, such
provisions have to be strictly followed.
35. Learned senior counsel placed reliance on the
judgment of the Supreme Court in case of Commissioner of
Customs (Import), Mumbai (Supra), and in particular
paragraphs 20 to 23 and would submit that when the words in
a statute are clear, plain and unambiguous and only one
meaning can be inferred, the Courts are bound to give effect to
the said meaning irrespective of consequences. He submits
that the petitioner thus cannot seek interim measures under
section 9 based on the argument that though the document is
not sufficiently stamped, if interim measures are not granted
immediately, it would lead to a serious hardship or
consequences. He submits that the hardship and
inconvenience cannot be the basis to alter the meaning and
language implied by legislation under section 34 of the
Maharashtra Stamp Act.
36. It is submitted by the learned senior counsel that
though the legislature had chosen to bring the amendment to
section 11 by inserting sub section (6-A), thereby providing
that the power of the Court is confined to see the existence of
the arbitration agreement, such amendment is not brought to
section 9 of ACA. He submits that it is thus clear that the
scheme of section 11 and 9 and the principles applicable to
both these proceedings are different.
37. Insofar as the submission of Dr. Sathe, learned
senior counsel that the photocopy cannot be impounded or no
stamp duty is required to be paid on a copy is concerned,
Mr.Dani, learned senior counsel placed reliance on section 3 of
the Maharashtra Stamp Act and more particularly proviso
thereto and would submit that if the original document is not
stamped, copy if relied upon will have to be stamped.
38. Learned senior counsel distinguished the judgment
of the Supreme Court in case of Firm Ashok Traders & Anr.
(Supra) and more particularly paragraph 13 of the said
judgment and would submit that the Supreme Court in the
said judgment held that a person who is not a party to the
arbitration agreement cannot enter the Court for protection
under section 9. He submits that the said judgment of the
Supreme Court would not assist the case of the petitioner.
39. Learned Senior Counsel submits that in view of the
proviso to section 9-A of the Code of Civil Procedure, 1908, the
Court is empowered to grant ad-interim relief even during the
pendency of adjudication of issue of jurisdiction raised by the
defendant. There is no such proviso under section 9 of the Act
empowering the Court to grant even ad-interim relief when an
issue of insufficiently of payment of stamp duty on the
document being under consideration is raised.
40. The learned Senior Counsel distinguished the
judgment of the Division Bench of this Court in the case of
Universal Enterprises (supra) on the ground that the
Division Bench in the said Judgment failed to notice paragraph
19 of the Judgment of the Supreme Court in the case of S.B.P.
& Co. vs. Patel Engineering Ltd.15. He submits that the
Supreme Court in the said Judgment had specifically held that
under Section 9 of the Act, if the opposite party disputes the
existence of arbitration agreement or raises a plea that the
dispute involved was not covered by the arbitration clause or
that the Court which was approached, had no jurisdiction to
pass any order in terms of Section 9 of the Act, that Court has
15 AIR 2006 SC 450
necessarily to decide whether it has jurisdiction, whether there
is an arbitration agreement which is valid in law, and whether
the dispute sought to be raised is covered by that agreement
or not.
41. It is submitted that unless the Court while
considering the application under Section 9 of the Act
considers the main agreement containing an arbitration
agreement, the Court cannot grant any interim measures
under Section 9 and without acting upon the said agreement.
He strongly placed reliance on Section 35 of Indian Stamp Act
in support of his submission that the Courts are barred from
acting upon the documents which are unstamped or under
stamped and the Court, while deciding an application under
Section 9 of the Act, is bound to go into the factual aspects
and find out the prima facie case or balance of convenience, or
other to grant or refuse any relief. He submits that such
scrutiny and examination of the actual contract would
ultimately require acting upon the said documents.
42. It is submitted that to examine the actual merits of
the case, the Court has to act upon the principal document, as
the Court cannot severe the arbitration clause from the main
agreement and grant injunction. Without acting upon the main
document, the Court cannot pass any injunction order.
(E) Discussion
43. To examine the controversy, the relevant provisions
of the ACA and Maharashtra Stamp Act,1958 are required to be
noted:
Arbitration and Conciliation Act 1996
Section 2. Definitions.—(1) In this Part, unless the context
otherwise
requires,—
(a) “arbitration” means any arbitration whether or not
administered by permanent arbitral institution;
(b) “arbitration agreement” means an agreement referred to in
section 7;
2[(e) “Court” means—
(i) in the case of an arbitration other than international commercial
arbitration, the principal Civil Court of original jurisdiction in a
district, and includes the High Court in exercise of its ordinary
original civil jurisdiction, having jurisdiction to decide the questions
forming the subject-matter of the arbitration if the same had been
the subject-matter of a suit, but does not include any Civil Court of
a grade inferior to such principal Civil Court, or any Court of Small
Causes;
(ii) in the case of international commercial arbitration, the High
Court in exercise of its ordinary original civil jurisdiction, having
jurisdiction to decide the questions forming the subject-matter of
the arbitration if the same had been the subject-matter of a suit,
and in other cases, a High Court having jurisdiction to hear appeals
from decrees of courts subordinate to that High Court;]
(h) “party” means a party to an arbitration agreement.
5. Extent of judicial intervention. —Notwithstanding anything
contained in any other law for the time being in force, in matters
governed by this Part, no judicial authority shall intervene except
where so provided in this Part.
ARBITRATION AGREEMENT
7. Arbitration agreement.—(1) In this Part, “arbitration
agreement” means an agreement by the parties to submit to
arbitration all or certain disputes which have arisen or which may
arise between them in respect of a defined legal relationship,
whether contractual or not.
(2) An arbitration agreement may be in the form of an arbitration
clause in a contract or in the form of a separate agreement.
(3) An arbitration agreement shall be in writing.
(4) An arbitration agreement is in writing if it is contained in--
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other means of
telecommunication [including communication through electronic
means] which provide a record of the agreement;
or
(c) an exchange of statements of claim and defence in which the
existence of the agreement is alleged by one party and not denied
by the other.
(5) The reference in a contract to a document containing an
arbitration clause constitutes an arbitration agreement if the
contract is in writing and the reference is such as to make that
arbitration clause part of the contract.
Section 9. Interim measures etc. by Court.— A party may,
before or during arbitral proceedings or at any time after the
making of the arbitral award but before it is enforced in accordance
with section 36, apply to a Court-
(i) for the appointment of a guardian for a minor or person of
unsound mind for the purposes of arbitral proceedings; or
(ii) for an interim measure of protection in respect of any of the
following matters, namely:-
(a) the preservation, interim custody or sale of any goods which are
the subject-matter of the arbitration agreement;
(b) securing the amount in dispute in the arbitration;
(c) the detention, preservation or inspection of any property or
thing which is the subject-matter of the dispute in arbitration, or as
to which any question may arise therein and authorising for any of
the aforesaid purposes any person to enter upon any land or
building in the possession of any party, or authorising any samples
to be taken or any observation to be made, or experiment to be
tried, which may be necessary or expedient for the purpose of
obtaining full information or evidence;
(d) interim injunction or the appointment of a receiver;
(e) such other interim measure of protection as may appear to the
Court to be just and convenient, and the Court shall have the same
power for making orders as it has for the purpose of, and in relation
to, any proceedings before it.
[(2) Where, before the commencement of the arbitral proceedings,
a Court passes an order for any interim measure of protection under
subsection
(i), the arbitral proceedings shall be commenced within a period of
ninety days from the date of such order or within such further time
as the Court may determine.
(3) Once the arbitral tribunal has been constituted, the Court shall
not entertain an application under sub-section (1), unless the Court
finds that circumstances exist which may not render the remedy
provided under section 17 efficacious.]
11. Appointment of Arbitrators.—(1) A person of any nationality
may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a
procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an
arbitration with three arbitrators, each party shall appoint one
arbitrator, and the two appointed arbitrators shall appoint the third
arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and —
(a) a party fails to appoint an arbitrator within thirty days from the
receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator
within thirty days from the date of their appointment, the
appointment shall be made, upon request of a party, by 1[the
Supreme Court or, as the case may be, the High Court or any
person or institution designated by such Court].
(5) Failing any agreement referred to in sub-section (2), in an
arbitration with a sole arbitrator, if the parties fail to agree on the
arbitrator within thirty days from receipt of a request by one party
from the other party to so agree the appointment shall be made,
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upon request of a party, by 1[the Supreme Court or, as the case
may be, the High Court or any person or institution designated by
such Court].
(6) Where, under an appointment procedure agreed upon by the
parties,--
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an
agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function
entrusted to him or it under that procedure, a party may request
1[the Supreme Court or, as the case may be, the High Court or any
person or institution designated by such Court] to take the
necessary measure, unless the agreement on the appointment
procedure provides other means for securing the appointment.
[(6A) The Supreme Court or, as the case may be, the High Court,
while considering any application under sub-section (4) or subsection
(5) or sub section (6), shall, notwithstanding any judgment,
decree or order of any Court, confine to the examination of the
existence of an arbitration agreement.
(13) An application made under this section for appointment of an
arbitrator or arbitrators shall be disposed of by the Supreme Court
or the High Court or the person or institution designated by such
Court, as the case may be, as expeditiously as possible and an
endeavour shall be made to dispose of the matter within a period of
sixty days from the date of service of notice on the opposite party.
JURISDICTION OF ARBITRAL TRIBUNAL
S ection 16. Competence of arbitral tribunal to rule on its
jurisdiction-(1) The arbitral tribunal may rule on its own
jurisdiction, including ruling on any objections with respect to the
existence or validity of the arbitration agreement, and for that
purpose,-
(a) an arbitration clause which forms part of a contract shall be
treated as an agreement independent of the other terms of the
contract, and
(b) a decision by the arbitral tribunal that the contract is null and
void shall not entail ipso jure the invalidy of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall
be raised not later than the submission of the statement of defence;
however, a party shall not be precluded from raising such a plea
merely because that he has appointed, or participated in the
appointment of, an arbitrator.
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(3) A plea that the arbitral tribunal is exceeding the scope of its
authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in
sub-section (2) or sub-section (3) and where the arbitral tribunal
takes a decision rejecting the plea continue with the arbitral
proeedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an
application for setting aside such an arbitral award in accordance
with section 34.”
Maharashtra Stamps Act
INSTRUMENTS NOT DULY STAMPED:
33. (1) Subject to the provisions of section 32A, every person
having by law or consent of parties authority to receive evidence,
and every person in charge of public office, except an officer of
police (or any other Officer, empowered by law to investigate
offences under any law for the time being in force) before whom
any instrument, chargeable in his opinion, with duty is produced or
comes in the performance of his functions shall, if it appears to him
that such instrument is not duly stamped, impound the same
(irrespective whether the instrument is or is not valid in law).
(2) For that purpose every such person shall examine every
instrument so chargeable and so produced or coming before him in
order to ascertain whether it is stamped with a stamp of the value
and description required by the law for the time being in force in
the State when such instrument was executed or first executed:
Provided that -
(a) nothing herein contained shall be deemed to require any
Magistrate or Judge of Criminal Court to examine or impound
if he does not think fit so to do, any instrument coming before
him in the course of any proceeding other than a proceeding
under (Chapter IX or Part D of Chapter X of the Code of
Criminal Procedure,1973).
(b) in the case of a Judge of a High Court, the duty of
examining and impounding any instruemnt under this section
may be delegated to such Officer as the Court may appoint in
this behalf.
(3) For the purpose of this section, in cases of doubt-
(a) the State Government may determine what offices shall
be deemed to be public offices; and
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(b) the State Government may determine who shall be
deemed to be persons in charge of public offices.
34: 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 (or if the instrument is written on sheet of paper
with impressed stamp (such stamp paper is purchased in the
name of one of the parties to the instrument);
Provided that,-
(a) any such instrument shall, subject to all just exceptions,
be admitted in evidence on payment of -
(i) the duty with which the same is chargeable, or in the case
of an instrument insufficiently stamped, the amount required
to make up such duty, and
(ii) any penalty at the rate of 2 per cent, of the deficient
portion of the stamp duty;
Provided that, in no case, the amount of the penalty shall
exceed (four times) the deficient portion of the stamp duty;
(b) where a contract or agreement of any kind is effected by
correspondence consisting of two or more letters and may
one of the letters bears the proper stamp, the contract or
agreement shall be deemed to be duly stamped;
(c) nothing therein contained shall prevent the admission of
any instrument in evidence in any proceeding in a Criminal
Court, other than a proceeding (under Chapter IX of Part D of
Chapter X of the Code of Criminal Procedure, 1973);
(d) Nothing herein contained shall prevent the admission of
any instrument 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 provisions of this Act;
(e) Nothing herein contained shall prevent the admission of a
copy of any instrument or of any oral admission of the
contents of any instrument, if the stamp duty or a deficient
portion of the stamp duty and penalty as specified in clauses
(a) is paid.
35. Where an instrument has been admitted in evidence,
such admission shall not, except as provided in section 58, be
called in question at any stage of the same suit or proceeding
on the ground that the instrument has not been duly
stamped.
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36. The State Government may make rules providing that,
where an instrument bears a stamp of sufficient amount but
of improper description, it may, on payment of the duty with
which the same is chargeable, be certified to be duly
stamped, and any instrument so certified shall then be
deemed to have been duly stamped as from the date of its
execution.
58. (1) When any Court in the exercise of its civil or revenue
jurisdiction or any Criminal Court in any proceeding (under
Chapter IX or Part D of
Chapter X of the Code of Criminal Procedure, 1973) makes
any order admitting any instrument in evidence as duly
stamped or as not requiring a stamp, or upon payment of
duty and a penalty under section 34, the Court to which
appeals lie form, or reference are made by, such first
mentioned Court may, of its own motion or on the application
of the Collector, take such order into consideration.
(2) If such Court after such consideration is of opinion that
such instrument should not have been admitted in evidence
without the payment of duty and penalty under section 34, or
without the payment of a higher duty and penalty than those
paid, it may record a declaration to that effect and determine
the amount of duty with which such instrument is chargeable
(and may required,-
(i) the party or person concerned to make the payment of
the property duty or the amount required to make up the
payment of the proper duty or the amount required to make
up the same, together with a penalty, under section 34, or
payment of a higher duty and penalty than those paid, to
itself or to the Collector; and
(ii) any person in whose possession or power such instrument
than is, to produce the same, and may impound the same
when produced.
(3) When any declaration has been recorded under subsection
(2), the Court recording the same shall send a copy
thereof to the Collector,and where the instrument to which it
relates has been impounded or is otherwise in the possession
of such Court shall also send him such instrument.
(3A) When the duty and penalty leviable in respect of any
instrument in accordance with the declaration made under
sub-section (3) and required to be paid thereunder are paid
to the Court or to the Collector, then the Court or,as the case
may be, the Collector shall certify by endorsement thereon
that the property duty and penalty,stating the amount of
each, have been levied in respect of such instrument, and the
name and residence of the person paying the same.
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(3B). Every instrument so endorsed shall thereupon be
delivered, on an application in this behalf, to the person from
whose possession the instrument came in the possession of
such Court, or as such person may direct to any other person
authorized by him.)
(4) The Collector may thereupon, notwithstanding anything
contained in the order admitting such instrument in evidence,
or in any certificate granted under section 41, or in section
42, prosecute any person for any offence against the stamp
law which the Collector considers him to have committed in
respect of such instrument'
Provided that-
(a) no such prosecution shal lbe instituted where the amount
including duty and penalty, which according to the
determination of such Court, was payable in respect of the
instrument under section 34, (is paid to the Court or the
Collector, unless the Collector thinks) that the offence was
committed with an intention of evading payment of the
property duty
(b) except for the purposes of such prosecution no
declaration made under this section shall affect the validity of
any order admitting any instrument in evidence, or of any
certificate, granted under section 41.”
(F) DISCUSSION / LEGAL POSITION AS TO WHAT IS THE
SCOPE AND JURISDICTION OF THE COURT UNDER
SECTION 9:
44. As noted above, the issue which would fall for
consideration is whether, “the Court under ACA can
entertain and grant any interim and/or ad-interim relief
in an application under Section 9 of the ACA when a
document contained arbitration clause is unstamped or
insufficiently stamped?” Section 9 of the ACA can be
invoked by a party only as an interim measure pending
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commencement of the proceeding or in the course of the
proceeding or at any time after making of the arbitration
award before it's enforcement in accordance with Section 36 of
the ACA. Any order which would be passed by the Court is
intended to protect the subject matter of the proceeding and
secure the interest of the parties. We are concerned with a
situation of an interim or ad-interim order pending the arbitral
proceedings. The relief which would be granted by the Court
under Section 9 is not a substantive final relief, for the reason
that a final relief can be granted only by an arbitral award.
45. For presetting the scope of Section 9 of the ACA, we
may refer to the following judgments :
(a) In the case of M/s Sundaram Finance Ltd. vs.
M/s NEPC India Ltd.16, in para 15, the Supreme Court
observed as under :
"15. Section 9 of the said Act corresponds to Article 9 of the
UNCITRAL Model Law which is as follows:
"It is not incompatible with an arbitration agreement for a
party to request, before or during arbitral proceedings, from a
Court an interim measure of protection and for a Court to grant
such measure".
This article recognises, just like Section 9 of the 1996 Act, a
request being made before a Court for an interim measure of
protection before arbitral proceedings. It is possible that in
some countries if a party went to the Court seeking interim
16 AIR 1999 SC 565
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measure of protection that might be construed under the local
law as meaning that the said party had waived its right to take
recourse to arbitration. Article 9 of the UNCITRAL Model Law
seeks to clarify that merely because a party to an arbitration
agreement requests the Court for an interim measure "before or
during arbitral proceedings" such recourse would not be
regarded as being incompatible with an arbitration agreement.
To put it differently the arbitration proceedings can commence
and continue notwithstanding a party to the arbitration
agreement having approached the Court for an order for interim
protection. The language of Section 9 of the 1996 Act is not
identical to Article 9 of the UNCITRAL Model Law but the
expression "before or during arbitral proceedings " used in
Section 9 of the 1996 Act seems to have been inserted with a
view to give it the same meaning as those words have in Article
9 of the UNCITRAL Model Law. It is clear, therefore, that a party
to an arbitration agreement can approach the Court for interim
relief not only during the arbitral proceedings but even before
the arbitral proceedings. To that extent Section 9 of the 1996
Act is similar to Article 9 of the UNCITRAL Model Law.
(emphasis added)
It can be derived from the provisions of Section 9 of
ACA and the observations of the Supreme Court that under
Section 9 the court has jurisdiction to pass orders before
commencement of the arbitration proceedings and
appointment of an Arbitrator. Before exercising jurisdiction
under Section 9, the court has to be satisfied that there is an
arbitration agreement between the parties and the applicant
will take effective steps for commencement of arbitral
proceedings. On the court being satisfied, jurisdiction can be
exercised under Section 9 of the ACA to pass such interim
orders by giving protection to the parties in the facts and
circumstances warrant in a given case.
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(b) In the Constitution Bench judgment of the Supreme
Court in the case of M/s. S. B. P. & Co. vs. M/s. Patel
Engineering Ltd. (Supra), Justice P. K. Balasubramanyan for
the majority observed as under :
"18. ....... Similarly, Section 9 enables a Court, obviously, as
defined in the Act, when approached by a party before the
commencement of an arbitral proceeding, to grant interim
relief as contemplated by the Section. When a party seeks an
interim relief asserting that there was a dispute liable to be
arbitrated upon in terms of the Act, and the opposite party
disputes the existence of an arbitration agreement as defined
in the Act or raises a plea that the dispute involved was not
covered by the arbitration clause, or that the Court which was
approached had no jurisdiction to pass any order in terms of
Section 9 of the Act, that Court has necessarily to decide
whether it has jurisdiction, whether there is an arbitration
agreement which is valid in law and whether the dispute
sought to be raised is covered by that agreement. There is no
indication in the Act that the powers of the Court are
curtailed on these aspects. On the other hand, Section 9
insists that once approached in that behalf, " the Court shall
have the same power for making orders as it has for the
purpose of and in relation to any proceeding before it" .
Surely, when a matter is entrusted to a civil Court in the
ordinary hierarchy of Courts without anything more, the
procedure of that Court would govern the adjudication [See
R.M.A.R.A. Adaikappa Chettiar and Anr. v. R. Chandrasekhara
Thevar ( AIR 1948 P.C.12)].
(Emphasis Supplied)
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(c) In the case of Firm Ashok Traders & Anr. (Supra),
in para 13, the Supreme Court observed as under :
“13. The A&C Act,1996 is a long leap in the direction of
alternate dispute resolution systems. It is based on
UNCITRAL Model. The decided cases under the preceding Act
of 1940 have to be applied with caution for determining the
issues arising for decision under the new Act. An application
under Section 9 under the scheme of A & C Act is not a suit.
Undoubtedly, such application results in initiation of civil
proceedings but can it be said that a party filling an
application under Section 9 of the Act is enforcing a right
arising from a contract? "Party" is defined in Clause (h) of
sub- Section (1) of Section 2 of A & C Act to mean 'a party to
an arbitration agreement'. So, the right conferred by Section
9 is on' a party to an arbitration agreement. The time or the
stage for invoking the jurisdiction of Court under Section 9
can be (i) before, or (ii) during arbitral proceeding, or (iii) at
any time after the making of the arbitral award but before it
is enforced in accordance with Section 36. With the
pronouncement of this Court in M/s Sundarum Finance Ltd. v.
M/s NEPC India Ltd., AIR (1999) SC 565 the doubts stand
cleared and set at rest and it is not necessary that arbitral
proceeding must be pending or at least a notice invoking
arbitration clause must have been issued before an
application under Section 9 is filed. A little later we will revert
again to this topic. For the moment suffice it to say that the
right conferred by Section 9 cannot be said to be one arising
out of a contract. The qualification which the person invoking
jurisdiction of the Court under Section 9 must possess is of
being a party to an arbitration agreement. A person not party
to an arbitration agreement cannot enter the Court for
protection under Section 9. This has relevance only to his
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locus standi as an applicant. This has nothing to do with the
relief which is sought for from the Court or the right which is
sought to be canvassed in support of the relief. The reliefs
which the Court may allow to a party under clauses (i) and (ii)
of Section 9 flow from the power vesting in the Court
exercisable by reference to 'contemplated', 'pending' or
'completed' arbitral proceedings. The Court is conferred with
the same power for making the specified orders as it has for
the purpose of and in relation to any proceedings before it
though the venue of the proceedings in relation to which the
power under Section 9 is sought to be exercised is the arbitral
tribunal. Under the scheme of A & C Act, the arbitration
clause is separable from other clauses of the Partnership
Deed. The arbitration clause constitutes an agreement by
itself. In short, filing of an application by a party by virtue of
its being a party to an arbitration agreement is for securing a
relief which the Court has power to grant before, during or
after arbitral proceedings by virtue of Section 9 of the A & C
Act. The relief sought for in an application under Section 9 of
A & C Act is neither in a suit nor a right arising from a
contract. The right arising from the partnership deed or
conferred by the Partnership Act is being enforced in the
arbitral tribunal; the Court under Section 9 is only formulating
interim measures so as to protect the right under
adjudication before the arbitral tribunal from being frustrated.
Section 69 of the Partnership Act has no bearing on the right
of a party to an arbitration clause to file an application under
Section 9 of A & C Act.”
(Emphasis Supplied)
46. The legal position which emerges from the reading
of the provisions of the ACA and the authoritative
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pronouncements on the powers of the court exercising
jurisdiction under Section 9, can be summarized as under :
(a) Section 9 enables the party to approach the court
before commencement of arbitral proceedings to seek interim
/ ad-relief on the basis that there exists an arbitration
agreement between the parties.
(b) On party approaching the court under the said
provisions, the court will have jurisdiction to pass orders of
interim / ad-interim nature protecting the party in a given
facts and circumstances.
(c) The right conferred under Section 9 to a party to
approach the court would not be of a nature of a right under
a contract. For invoking jurisdiction under Section 9, the party
must establish that there was an arbitration agreement and
he was party to the same.
(d) The basic requirement, therefore, for invoking
jurisdiction of the court under Section 9 would be that there
exists an “arbitration agreement” between the parties.
The concern of the court in the present case is of a
arbitration clause which is contained in an agreement, which is
not sufficiently stamped. It is quite clear that under the
scheme of the ACA, an arbitration clause is severable from
other clauses of the contract and an arbitration agreement is
not required to be stamped or required to be registered. There
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can also be a separate / independent arbitration agreement
between the parties which would be distinct from the principal
contract (see Section 7).
47. The doctrine of severability is, thus, applicable and
the following consequences would follow :-
(a) An arbitration agreement between the parties is
required to be severed from the principle contract and is
required to be given effect independently by a principal
contract between the parties.
(b) As seen from Sub section 2 of Section 7 an arbitration
agreement may be in the form of arbitration clause in any
contract or in the form of separate agreement. Further sub
section 1 (a) of Section 16 of the ACA provides that
arbitration clause which form part of the contract shall be
treated as agreement independently or the other terms of the
contract.
(c) The doctrine of severability of arbitration agreement,
therefore, can be clearly seen from the cumulative reading of
sub section 2 of Section 7 and sub section (1)(a) of Section
16 of the ACA.
(G) SCOPE AND OBJECT OF THE STAMP ACT:
48. The Stamp Act admittedly is a fiscal enactment.
The primary object of which is to ensure payment of stamp
duty on the documents on which stamp duty is required to be
paid.
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49. In the case of J.M.A. Raju vs. K. Bhatt 17, Full
Bench of the Gujarat High Court held that the court has to
consider the provisions of the Stamp Act as a fiscal measure,
the principal object of which is to secure revenue for the State.
The object of the enactment is not to enable parties to raise
technical objections to meet the case of their opponent.
50. In the case of Jagdish Narain vs. Chief
Controlling Revenue18, the Allahabad High Court held, in the
context of Indian Stamp Act which is an enactment pari
materia to the Maharashtra Stamp Act, that the sole object of
the Indian Stamp Act is to increase revenue and its provisions
must be construed as having in view only the protection of
revenue.
51. In the case of Javer Chand and ors. vs. Pukhraj
Surana19, the Supreme Court in para 4 considers a situation
when a document, which was not stamped, came to be
admitted in evidence and what would be the consequence. It
was observed as under:
17 AIR 1976 Gujarat 72 FB
18 AIR 1994 All 371
19 AIR 1961 SC 1655
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“ That section is categorical in its terms that when a
document has once been admitted in evidence, such
admission cannot be called in question at any stage of the
suit or the proceeding on the ground that the instrument had
not been duly stamped. The only exception recognised by the
section is the class of cases contemplated by S.61, which is
not material to the present controversy. Section 36 does not
admit of other exceptions. Where a question as to the
admissibility of a document is raised on the ground that it has
not been stamped, or has not been properly stamped, it has
to be decided then and there when the document is tendered
in evidence. Once the Court, rightly or wrongly, decides to
admit the document in evidence, so far as the parties are
concerned, the matter is closed. Section 35 is in the nature of
a penal provision and has far-reaching effects. Parties to a
litigation, where such a controversy is raised, have to be
circumspect and the party challenging the admissibility of the
document has to be alert to see that the document is not
admitted in evidence by the Court. The Court has to judicially
determine the matter as soon as the document is tendered in
evidence and before it is marked as an exhibit in the case.
The record in this case discloses the fact that the hundis were
marked as Exs. P. 1 and P. 2 and bore the endorsement
'admitted in evidence' under the signature of the Court. It is
not, therefore, one of those cases where a document has
been inadvertently admitted, without the Court applying its
mind to the question of its admissibility. Once a document has
been marked as an exhibit in the case and the trial has
proceeded all along on the footing that the document was an
exhibit in the case and has been used by the parties in
examination and cross-examination of their witnesses, S. 36
of the Stamp Act comes into operation. Once a document has
been admitted in evidence, as aforesaid, it is not open either
to the Trial Court itself or to a Court of Appeal or revision to go
behind that order. Such an order is not one of those judicial
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orders which are liable to be reviewed or revised by the same
Court or a Court of superior jurisdiction.”
52. In the case of M/s. K. I. Suratwala and Co. vs.
Mahmud Bidi Works Sholapur and ors.20, this court in para
22 observed as under :
“22. The learned trial Judge held that the agreement, Ex.42
was a bond, within the meaning of Section 2(c) of the Indian
Stamp Act and was liable to be stamped with an ad valorem
stamp duty due under Art.15. We, however, find that the
document had already been exhibited and used at the trial.
Under Section 35 of the Indian Stamp Act once a document is
so admitted in evidence and used it cannot be thereafter
questioned at any stage of the same proceedings or even in
appeal. We cannot, therefore, hold that it was open to the
learned Judge to hold in the judgment that the instrument
was inadmissible in evidence once it had been marked as an
exhibit and admitted in evidence. The Supreme Court has
also so held in the case of Javer Chand and Ors. v. Pukhraj
Surana, AIR 1961 SC 1655.”
(Emphasis Supplied)
53. In the case of Radhakisan Tijulal Agrawal vs.
Jayantilal Hargovindas and anr .21, the learned Single Judge
of this court observed as under:
“6. The main contention of the appellant is that the
plaintiff, after having obtained an insufficiently stamped pronote
(Ex.31) in connection with the suit transaction, cannot
base his suit on the original consideration i.e. the loan
20 AIR 1972 BOMBAY 238
21 1980 Mh.L.J. 120
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transaction. My attention was drawn to section 34 of the
Indian Stamp Act,1899. The relevant part of that section
reads as follows:
“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.”
There is no dispute that the payment of stamp duty
and penalty is not permissible if the case is of an
insufficiently stamped negotiable instrument or a
promissory note. Along with the above provision, Mr.
Mehadia relied upon the provisions of section 35 of the
Evidence Act which lays down that when the terms of a
contract have been reduced to writing, no evidence
except the document itself (of the secondary evidence)
is admissible On the basis of these two provisions, it
was contended that as the pro note (Ex. 31) is in
writing, no other evidence will be permissible except
that writing. Secondly the said writing itself is
inadmissible as it is insufficiently stamped. With this
hypothesis a contention is raised that the plaintiff
cannot base his claim on the pro-note. It should not,
however, be forgotten that the plaintiff has in fact not
based the suit claim on the pro-note. He has
specifically alleged in paragraph 6 of the plaint that he
was filing the suit on the original transaction.
9. What will be the effect of the execution of a pro-note or
a bill in connection with the advancement of money is
considered in Halsbury's Law of England, Volume VII page
243 in the following words:
“If a bill of exchange or note be taken on account of a
debt, and nothing be said at the time, the legal effect
of the transaction is that the original debt remains,
but the remedy for it is suspended till the maturity of
the instrument in the hands of the creditor. If the
security is paid when it becomes due, this is
equivalent to payment of the original debt, & if it is
paid in part, the original debt is discharged 'pro tanto'.
If the instrument is dishonoured, payment of the
original debt may be enforced as if no security had
been taken, unless the bill has been negotiated and is
outstanding at the time of action brought in the hands
of a third party, in which case the creditor's remedy
continue to be suspended.”
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10. The result, therefore, is that in the present case the
pleadings and the evidence make it abundantly clear that
the plaintiff mainly alleged that he advanced the amount of
loan to defendant No. 2. In such a case, mere execution of a
pro note would not mean that the transaction of loan has
incited into that of loan. The loan transaction still continues
to exist and there is nothing illegal if in these circumstances
the plaintiff bases his claim on the original consideration.
This is more so when, as discussed above, the pro-note has
not been taken in absolute discharge of the loan or as in
accord of full satisfaction of the loan transaction. Here the
loan and the pro note are not consideration for each other.
The result is that the appeal fails. The appeal is accordingly
dismissed with costs.”
(emphasis supplied)
54. In the case of Morpheus Media Ventures Pvt.
Ltd. vs. Anthony Maharaj of Trinidad and Tobago22, the
Division Bench of this court in paras 22, 23, 24, 26 and 27
observed as under :
22. Prior thereto and extensively until paragraph 20 of the
impugned judgment and order, the learned Judge sets out the
pleadings and deals with the arguments of all the defendants
that the document, particularly the promissory note, cannot
be relied upon. The learned Judge expressed an opinion that
the defect is a curable one. The learned Judge then referred
to all the provisions contained in the Indian Stamp Act, 1958.
He then concluded that the Indian Stamp Act is a fiscal
measure. It is enacted to secure revenue for the State on
certain class of instruments and is not enacted to arm a
litigant with a weapon of technicality to meet the case of his
opponent. The stringent provisions of the Act are conceived
in the interest of the revenue. (See Hindustan Steel Ltd. Vs.
Dilip Construction MANU/SC/0474/1969 MANU/SC/0474/1969 :
22 2017(2) Bom.C.R. 459
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AIR 1969 SC 1238). This judgment is followed by this Court
and particularly by a single Judge in the case referred to in
paragraph 16 of the impugned judgment.
23. Mr. Chinoy would submit that this principle could not
have been evoked and applied in the facts and
circumstances of the present case. We do not agree. We find
that all the stipulations, provisions and conditions contained
in Order XXXVII of the Code of Civil Procedure are complied
with. There is no dispute that the promissory note and the
two documents which have been referred extensively by the
learned single Judge can be the basis for institution of a
Summary Suit. The Summary Suit having been based
thereon could have been instituted and tried as such. There
is no substance in the defence and contentions of the
appellants on merit. Mr. Chinoy would submit that the
learned single Judge has accepted the legal position that
these instruments cannot be received in evidence or acted
upon. He has, therefore, proceeded to impound each of
them. Having so impounded them, he was not empowered to
pass a conditional order.
24. We do not agree with Mr. Chinoy further. We must not
forget that the Stamp Act envisages a duty on the
instrument. The Stamp Act is concerned with the instrument
and not the transaction embodied or contained in it. The
underlying transaction, therefore, does not enter into
consideration while determining the proper stamp duty,
adjudicating it and pass an order for ensuring payment of the
same. Thus, the above matters are not with which the Court
is concerned and it can in appropriate cases such as the one
before us proceed with the merits of the matter by ensuring
that the proper stamp duty is adjudicated and paid. The
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learned single Judge has precisely ensured that. He has not
allowed the appellants to rely on a technical plea and of the
nature referred above. The course adopted by him, in the
facts and circumstances of the case, cannot be faulted. We
have found that in all the instruments based on which the
suit has been laid and particularly those required by Order
XXXVII there is 'an admission of' the liability. There is no
denial on the execution of these documents. None of the
defendants have ever questioned the contents thereof nor is
there any interpretation other than the one placed by the
plaintiffs on the contents thereof and which can be deduced
from the defences raised. In such circumstances, allowing a
just and legitimate claim to be defeated and frustrated by
taking recourse to the fiscal measure was not permitted by
the learned single Judge.
25.... ….
26. This Judgment was followed in a later judgment in the
case of Dr. Chiranji Lal (D) by L. Rs. V/s. Hari Das (D) by L. Rs.
reported in MANU/SC/0396/2005 MANU/SC/0396/2005 : AIR
2005 SC 2564. Pertinently, Mr. Chinoy's extreme argument
that once impounded the instruments as above cannot be
relied upon to pass a conditional order is not borne out by
the legal provisions noted in Hindustan Steel and analysed
therein. That they are acted upon without adherence to the
Indian Stamp Act therefore is not a sound argument to
canvas in the facts of our case.
27. Beyond this contention and based on the applicability of
the Stamp Act nothing really is argued before us on merits.
Even otherwise we do not find that the defences raised have
any merit or can be termed as substantial. We also do not
find that the reliance placed on the SMS Tea Estates Pvt. Ltd.
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(supra) to be appropriate in the facts of our case. Any larger
or wider question based on the provisions of law, the power
of the court or the authority to receive unstamped
instruments in evidence need not be considered in further
details or gone into conclusively in this case. Purely going by
the facts and circumstances of the present case and the
conduct of the appellants, we do not think that the learned
single Judge can be faulted in the exercise that he undertook.
He was not obliged to postpone the adjudication until the
proper stamp duty was adjudicated and paid. He was not
obliged to reject the request of the respondent No. 1-plaintiff
or defer the hearing of the Summons for Judgment or dismiss
it. Purely in the facts and circumstances of the present case
and when he found that all that the defendants are doing is
to defeat and frustrate a just, legitimate and bona fide claim,
the learned Judge, by relying on the principle enunciated in
the Supreme Court Judgment, granted conditional leave to
defend. Such an order can neither be termed as perverse or
vitiated by any error law apparent on the face of the record. It
does not require any interference in our appellate jurisdiction.
The appeals are devoid of merits and are dismissed.”
(Emphasis Supplied)
(H) DISCUSSION ON APPLICABILITY OF SMS TEA ESTATE
(P) LTD. TO PROCEEDINGS UNDER SECTION 9 OF
THE ACA :
55. The decision of the Supreme Court in SMS Tea
Estates (Supra) was rendered in the context of Section 11 of
the ACA. The learned Chief Justice of the Gauhati High Court
had passed an order rejecting an application under Section 11
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of ACA on the ground that the arbitration agreement was
contained in lease deed which was not sufficiently stamped
and thus was inadmissible in evidence and unenforceable and
not binding. Having regard to Section 35 of the Stamp Act,
1899 and Clause 35 being arbitration clause, therefore, was
also invalid and unenforceable. The Supreme Court framed
the following questions for determination as referred in
paragraph 9 of the decision:-
“9. On the contention urged the following questions arise
for consideration:
(I) whether the arbitration agreement contained in an
unregistered (but compulsorily registrable) instrument is
valid and enforceable?
(II) Whether an arbitration agreement in an unregistered
instrument which is not duly stamped, is valid and
enforceable? And
(III) Whether there is an arbitration agreement between
the appellant and the respondent and whether an arbitrator
should be appointed?”
In paras 11 and 16, the Supreme Court observed as
under:
“11. Section 49 makes it clear that a document which is
compulsorily registrable, if not registered, will not affect the
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immovable property comprised therein in any manner. It will
also not be received as evidence of any transaction affecting
such property, except for two limited purposes. First is as
evidence of a contract in a suit for specific performance.
Second is as evidence of any collateral transaction which by
itself is not required to be effected by registered instrument.
A collateral transaction is not the transaction affecting the
immovable property, but a transaction which is incidentally
connected with that transaction. The question is whether a
provision for arbitration in an unregistered document (which
is compulsorily registrable) is a collateral transaction, in
respect of which such unregistered document can be
received as evidence under the proviso to Section 49 of the
Registration Act.
16. An arbitration agreement does not require registration
under the Registration Act. Even if it is found as one of the
clauses in a contract or instrument, it is an independent
agreement to refer the disputes to arbitration, which is
independent of the main contract or instrument. Therefore
having regard to the proviso to Section 49 of Registration Act
read with Section 16(1)(a) of the Act, an arbitration
agreement in an unregistered but compulsorily registrable
document can be acted upon and enforced for the purpose of
dispute resolution by arbitration.”
56. In regard to the second question namely if an
arbitration agreement contained in an unregistered (but
compulsorily registerable) instrument which is not duly
stamped, the Court referring to the provisions of Section 33
and 35 of the Indian Stamp Act observed that unless stamp
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duty and penalty due on the instrument is paid, the Court
cannot act upon the instrument, which means it cannot act
upon the arbitration agreement also which is part of the
instrument. It was held that Section 35 of the Indian Stamp Act
is distinct and different from Section 49 of the Registration Act
in regard to an unregistered document. Section 35 of the
Indian Stamp Act does not contain a proviso like Section 49 of
the Registration Act enabling the instrument to be used to
establish a collateral transaction. Considering the scheme for
appointment of arbitrators as framed by the Chief Justice of
Gauhati High Court,1996 it was observed that an application
under Section 11 of the Act was required to be accompanied
by the original arbitration agreement or a duly certified copy
thereof.
The Supreme Court accordingly in paragraphs 21
and 22.6 observed as under:-
“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 not properly
stamped, it should be impounded and dealt with in the
manner specified in Section 38 of the Stamp Act. The court
cannot act upon such a document or the arbitration clause
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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.
22.6 Where the document is compulsorily registerable, but
is not registered, but the arbitration agreement is valid and
separable, what is required to be borne in mind is that the
arbitrator appointed in such a matter cannot rely upon the
unregistered instrument except for two purposes, that is (a)
as evidence of contract in a claim for specific performance,
and (b) as evidence of any collateral transaction which does
not require registration.
In paragraphs 29 to 32 the court observed as under:
“29. An Arbitrator can no doubt be appointed in regard to any
disputes relating to the lease deed. But as noticed above, as
the lease deed was not registered, the Arbitrator can not rely
upon the lease deed or any term thereof and the lease deed
cannot affect the immovable property which is the subject
matter of the lease nor be received as evidence of any
transaction affecting such property. Therefore, the Arbitrator
will not be able to entertain any claim for enforcement of the
lease.
30. Lastly we may consider the claim for recovery of the
amounts allegedly spent towards the tea estates, as a
consequence of Respondents not selling the estates or not
permitting the Appellant to enjoy the lease for 30 years. If
this claim is treated as a claim for damages for breach in not
granting the lease for 30 years then it would be for
enforcement of the terms of the lease deed which is
impermissible under Section 49 of the Registration Act. If it is
treated as claim de hors the lease deed then the arbitrator
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may not have jurisdiction to decide the dispute as the
arbitration agreement (clause 35) is available only to settle
any dispute or difference arising between the parties in
relation to or in any manner touching upon the lease deed
and not in regard to disputes in general.
31. In paras 29 and 30 above, we have considered and stated
the general legal position for guidance in arbitrations, even
though the same does not directly arise for consideration
within the limited scope of the proceedings under Section 11
of the Act.
Conclusion
32. In view of the above this appeal is allowed, the order of
the High Court is set aside and the matter is remitted to the
learned Chief Justice of Guwahati High Court to first decide
the issue of stamp duty, and if the document is duly
stamped, then appoint an arbitrator in accordance with law.”
57. Applying the well settled principles of law on the
‘doctrine of precedents’ on a careful reading of the decision
in SMS Tea Estates it becomes quite clear that the principles
as laid down therein were required to be applied when the
court considered an application under section 11 of the ACA.
This decision is not an authority as to what section 9 of the
ACA envisages and is not a decision which was rendered in the
context of Section 9 of the ACA. There is certainly a difference
in the ambit and scope of jurisdiction the court would exercise
under these provisions. In saying so we may refer to the
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decision of the Constitution Bench of the Supreme Court in
“Union of India Vs. Chajju Ram”23 wherein the Supreme
Court in paragraph 23 has observed thus:-
“23. It is now well settled that a decision is an
authority for what it decides and not what can logically
be deducted therefrom. It is equally well settled that a
little difference in facts or additional facts may lead to a
different conclusion.”
58. We may also refer to the decision of the Supreme
Court in “Regional Manager Vs. Pawan Kumar Dubey”24
wherein the Supreme Court in paragraph 7 observed thus:
“7. It is the rule deducible from the application of law
to the facts and circumstances of a case which
constitutes its ratio decidendi and not some conclusion
based upon facts which may appear to be similar. One
additional or different fact can make a world of
difference between conclusions in two cases even when
the same principles are applied in each case to similar
facts.”
59. The decision of the Supreme Court in the case
“Union Of India & Ors vs Dhanwanti Devi & Ors”25 has
observed in paragraph 9 thus:-
9. Before adverting to and considering whether solatium
and interest would be payable under the Act, at the
outset, we will dispose of the objection raised by Shri
Vaidyanathan that Hari Kishan Khosla's case is not a
23 (2003) 5 SCC 568
24 (1976)3 SCC 334
25 1996(6) SCC 44
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binding precedent nor does it operate as ratio decidendi
to be followed as a precedent and per se per incuriam.
It is not everything said by a Judge while giving
judgment that constitutes a precedent. The only thing in
a judge decision binding a party is the principle upon
which the case is decided and for this reason it is
important to analyse a decision and isolate from it the
ratio decidendi. According to the well settled theory of
precedents, every decision contains three basic
postulates - (i) findings of material facts direct and
inferential. An inferential finding of facts is the inference
which the Judge draws from the direct, or perceptible
facts; (ii) statements of the principles of law applicable
to the legal problems disclosed by the facts; and (iii)
judgment based on the combined effect of the above. A
decision is only an authority for what it actually decides.
What is of the essence is decision is its ratio and not
every observation found therein nor what logically
follows from the various observations made in the
judgment. Every judgment must be read as applicable to
the particular facts provided, or assumed to be proved,
since the generality of the expressions which may be
found there is not intended to be exposition of the whole
law, but governed and qualified by the particular facts of
the case in which such expressions are to be found. It
would, therefore, be not profitable to extract a sentence
here and there from the judgment and to build upon it
because the essence of the decision is its ratio and not
every observation found therein. The enunciation of the
reason or principle on which a question before a court
has been decided is alone binding as a precedent. The
concrete decision alone is binding between the parties
to it, but it is the abstract ratio decidendi, ascertained
on a consideration of the judgment in relation to the
subject matter of the decision, which alone has the force
of law and which, when it is clear what it was, is binding.
It is only the principle laid down in the judgment that is
binding law under Article 141 of the Constitution.
A deliberate judicial decision arrived at after hearing an
argument on a question which arises in the case or is
put in issue may constitute a precedent, no matter for
what reason, and the precedent by long recognition may
mature into rule of Stare decisis. It is the rule deductible
from the application of law to the facts and
circumstances of the case which constitutes its ratio
decidendi.”
60. From the bare reading of the provisions of
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Section 9 and Section 11 of the ACA and the law on scope
and ambit of provisions of Sections 9 and 11 of ACA, we
would observe that not only the scope and ambit of said
provisions, but also the consequences as falling under
these provisions are entirely different. Section 11 pertains
to appointment of arbitrator and and Section 9 is a power
of the court to grant a relief to protect the subject matter
of the arbitration and/or substance of the arbitration.
61. In the case of Black Pearl Hotels Private
Limited (Supra), the Supreme Court in paras 4 and 8
observed as under:-
“4. As the respondent failed to concur in the
appointment proposed by the appellant or to appoint an
arbitrator as required under the contract, the appellant
filed a petition under Section 11 of the 1996 Act. The
Judge designated by the Chief Justice took up the matter
and issued notice on CMP No.122 of 2012. On 11-1-2013
the learned Judge prima facie was of the view that the
“concluding agreement” may be a lease of the
immovable property. The learned counsel for the
appellant, as the impugned order would reflect,
contended that it was not so and sought time to canvas
argument that it was a licence. Thereafter, the learned
Judge passed the following order” :
“ Therefore the matter shall be placed before
the Registrar (Judicial) who shall determine
whether the transaction is in the nature of lease
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or licence and stamp duty that is attracted, since
whether it is lease or licence, the agreement is
apparently not duly stamped. Therefore, he after
determining whether lease or licence, recover the
duty and penalty and take further steps and
thereafter remit the matter for further
consideration.”
8. At the outset, we think it appropriate to make it
clear that we are not determining whether the
agreement in question is a lease or licence or an
agreement simpliciter as put forth by the learned
counsel for the appellant. That is required to be dwelt
upon and addressed by the High Court while dealing with
an application under Section 11 of the Act. It is well
settled in law that while delving into the appointment of
an arbitrator under Section 11, regard being had to the
nature of agreement as stipulated under Section 7 of the
1996 Act, the Judge designated by the learned Chief
Justice is obliged to consider the nature of agreement
and whether the document requires to be stamped or
not, and if so, whether requisite stamp duty has been
duly paid on the same. We are so stating as in the
instant case there is a written instrument and there is
dispute as regards the nature and character of the
document. “
62. We may, therefore, observe that the consequence
of not granting ad-interim or interim reliefs in an application
under Section 9 of the ACA pending the arbitral proceedings
may be, at times, drastic and would cause severe hardship to
the parties who, in the facts of the case, deserve protection
under Section 9. If we accept the argument advanced on
behalf of the respondents that the court shall wait till the
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document is stamped and not to act upon the document for
granting relief under Section 9, may lead to severe
consequences which may cause irreparable damage, prejudice
to the cause brought before the court. The issue relating to
stamping of the document could further be dragged on before
the revenue authority, which may take considerable time for
its final decision or conclusion and by that time the party may
suffer damage and would be without any remedy in respect of
seeking protection under Section 9. While interpreting the
provisions and analyzing the effect of the provisions qua the
judgments of the courts cited above we keep in mind this facet
of the legal position which we are called upon to address.
63. Under the Stamp Act defect of non payment of
stamp duty is not an incurable defect. It can be cured at any
stage before it admitted in evidence. Once the document is
admitted in evidence, Section 35 provides that such an
admission shall not, except as provided under Section 58, be
called in question at any stage of the suit or proceeding on
the ground that the instrument has not been duly stamped.
The cumulative reading of Section 35 and Section 58 of the
Maharashtra Stamp Act show that the Stamp Act is fiscal
measure enacted to secure revenue for the State on certain
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classes of instruments. We are, therefore, of the view that the
respondents cannot insist applying decision of the Supreme
Court in the Case of SMS Tea Estates (supra) in proceedings
under Section 9 and contend that the document needs to be
adequately stamped before the court considering the
application under Section 9 to grant interim or ad-interim
reliefs.
(I) WHETHER THE COURT CAN ENTERTAIN AND GRANT
INTERIM OR AD-INTERIM RELIEF IN AN
APPLICATION UNDER SECTION 9 :
64. The learned counsel for the respondents placed
heavy reliance on the judgment of the Supreme Court in the
case of SMS Tea Estates. In our view, considering the facts
of the case, the view adopted by the Supreme Court, emerging
from Guhati High Court in the observation of the Supreme
Court the provisions of the ACA and Stamp Act, we are of the
considered opinion that the judgment of the Supreme Court in
SMS Tea Estates was not delivered arising out of an
application under Section 9 of the ACA but was delivered
arising out of an order passed under Section 11 of the ACA.
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65. In the case of Firm Ashok Traders and anr.
(Supra), the Supreme Court has held that the right conferred
by Section 9 cannot be said to be one arising out of a contract.
The qualification which the person invoking jurisdiction of the
court under Section 9 must possess, is of being a party to an
arbitration agreement. This is nothing to do with the relief
which is sought for from the court or the right which is sought
to be canvassed in support of the relief. The arbitration clause
constitutes an agreement by itself.
66. It is, therefore, held that the arbitration clause
being a separate agreement from the main contract and
accordingly it is only the arbitration agreement which would
have relevancy for the purpose of an application under Section
9 of the ACA. In our view, the judgment of the Supreme Court
in the case of Firm Ashok Traders and anr. (supra) would
squarely apply to the facts and situation at hand.
67. The respondents pressed into service the bar under
Section 34 of the Maharashtra Stamp Act while entertaining an
application under Section 9 of the ACA. We are inclined to
accept the submission of Dr. Sathe, the learned Senior
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Counsel, that for the purpose of granting interim measures,
whether by way of interim or ad-interim, under Section 9, the
said relief is not arising out of a contract containing an
arbitration agreement. We are, therefore, of the view that
even if the main agreement containing arbitration agreement
is not stamped or insufficiently stamped, there could not be
any bar against the court hearing the application under
Section 9 of the ACA for interim measures to grant ad-interim
or interim relief to a party.
68. We are not inclined to accept the submission of Mr.
Dani, learned Senior Counsel appearing for respondent in
Arbitration Application No.246 of 2016 that for the purpose of
interim measures, the court has to act upon the main
agreement containing arbitration agreement and, thus till such
time, such an agreement is stamped in accordance with the
provisions of the Maharashtra Stamp Act, 1958, irrespective of
the urgency and though case is made out for grant of adinterim
or interim relief, the court does not have power to
grant any such relief. This clearly for the reason that the court
in considering a relief under Section 9 is acting upon the
arbitration agreement only, and not the main contract. An
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arbitration agreement would not require any stamping.
69. In our view, the argument of Mr. Dani, if accepted,
would be in conflict with the scheme of the legislation and
intent of the provisions of Section 9 of the ACA. Under the
scheme of the ACA and in view of the judgments cited above
and considering the submissions advanced, we are of the
considered view that the legislative intent and purpose would
be served by providing the efficacious and expeditious relief to
a party to an arbitration agreement and that is prescribed
under Section 9 of the ACA. In case the submissions of Mr.
Dani is accepted, the exercise of jurisdiction under Section 9 of
the ACA would be completely eclipsed and party would be
deprived to approach a forum for any urgent relief of adinterim
or interim nature. This obviously cannot be implication
and intent of the statutory interpretation.
70. The entire purpose of granting interim measures is
to protect the matters set out specifically under Section 9 (1)
(ii)(a) to (e) during the pendency of the arbitral proceedings
and even after making of the arbitral award before it is
enforced in accordance with Section 36 of the Act, would be
defeated if we accept the interpretation placed on the
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provisions by the learned Senior Counsel Mr. Dani. If an
objection about insufficiency of stamp is entertained and
accepted at the stage of hearing of the application under
Section 9 for interim measures, a party who has good chances
of succeeding in the arbitral proceedings finally and if not
granted interim measures to protect the subject-matter of
such proceedings, there would be gross injustice to such party.
71. The Supreme Court in Naina Thakkar (supra),
has held that the Judgment of the Supreme Court in the case
of SMS Tea Estates (supra), would not be applicable to the
proceedings under Section 8 of the Act where party making
such an application does not express willingness to pay the
deficit stamp duty and the penalty. In our view, the principles
laid down by the Supreme Court in the said Judgment can be
extended even to an application under Section 11 of the Act
for appointment of an arbitrator. An application under Section
8 is filed in a pending suit before a judicial authority to refer
the parties to arbitration.
72. The Supreme Court in M. Anasuya Devi and
another (supra), has held that the question as to whether an
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arbitral award is required to be stamped and registered would
be relevant only when the parties would file the award for its
enforcement under Section 36 of the Act. It is at that stage
the parties can raise objections regarding its maintainability
on account of non-registration and non-stamping under
Section 17 of the Registration Act. It is held that the question
whether an award requires stamping and registration is within
the ambit of Section 47 of the Code of Civil Procedure and not
covered by Section 34 of the Act. In our view, the principles
laid down by the Supreme Court can be extended to the
applications under Section 9 of the Act. The issue of
insufficiency of stamp duty, if any, can be raised by the other
party at the stage when the instrument containing an
arbitration agreement is tendered in evidence before the
Arbitral Tribunal.
73. In the light of the above deliberation, we are of the
considered opinion that the decision of the Division Bench in
Universal Enterprises (Supra) takes a correct view that
the court can grant an ad-interim reliefs in exercise of its
jurisdiction under Section 9 of the ACA even if the document
containing the arbitration agreement is not sufficiently
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stamped. We may thus further observe that the court under
Section 9 of the ACA would be empowered to grant ad-interim
and interim reliefs even if the document, containing
arbitration agreement, is not adequately stamped.
74. Thus, in our view, the question of law i.e. whether a
Court, under the Arbitration and Conciliation Act, 1996, can
entertain and grant any interim or ad interim relief in an
application under Section 9 of the said Act when a document
containing arbitration clause is unstamped or insufficiently
stamped, is required to be answered in the affirmative.
(J) DISCUSSION ON THE QUESTION ON SECTION 11 OF
THE ACA :
75. Mr. Aspi Chinoy, learned Amicus Curiae, has made
submissions on the scheme of Section 11 of the ACA, the
legislative intention and the broad principles which would be
required to be taken into consideration in adjudication of an
application falling under Section 11 of the ACA. Mr. Chinoy,
referring to the provisions of sub-section (6A) of Section 11
and the decision in Duro Felguera (Supra) submits that the
existence of arbitration agreement between the parties would
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now be the primary consideration for the court in adjudication
of Section 11(6) applications. Mr. Chinoy has taken us through
the judgment of the Supreme Court in Durgo Felguera
(Supra) as also the decision of the learned Single Judge in
Coastal Marine Construction & Engineering Ltd. (Supra).
Mr. Chinoy would also contend that the intention of the
legislature is clearly an expeditious appointment of an arbitral
tribunal so that the efficacy of the dispute resolution
mechanism as envisaged under the provisions of the Act
becomes a reality. Mr. Chinoy would also submit that the
intention of the legislature can be clearly seen from the
provisions of the amending Act of 2016.
76. Mr. Lohia, learned counsel appearing for the
applicant in Arbitration Application No. 300 of 2018 submits
that there is an arbitration clause in the agreement for sale
dated 2nd June 2009. Issue was raised before the learned
Single Judge that the agreement was not stamped and thus
was required to be impounded and forwarded to the Stamp
Authorities. The learned Single Judge of this court (one of us
G. S. Kulkarni,J.) formulated a question and referred the issue
for consideration by a Larger Bench.
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77. The learned counsel placed reliance on the
judgment of the Supreme Court in the case of S.B.P. &
Company vs. Patel Engineering Ltd. (Supra) and National
Insurance Co. Ltd. vs. Boghra Polyfab Pvt. Ltd.26 In the
submission of the learned counsel these two judgments were
delivered prior to insertion of sub-section (6A) in Section 11 of
ACA with effect from 23rd October 2015.
78. The learned counsel placed reliance on paras 21
and 22 of the judgment of the Supreme Court in the case of
SMS Tea Estates (Supra) to submit that the scheme of
inquiry under Section 11(6) was expanded to include suo-motu
inquiry into the aspect of payment of stamp duty. The
arbitration agreement can be separated from the main
agreement.
79. While placing reliance on Section 11(6A) of the ACA
and 246th Report of Law Commission on Amendment to the
ACA, it is submitted that the scope and power of the court is to
examine the existence of the arbitration agreement. It is
submitted that none of the judgments, including the judgment
in the case of SMS Tea Estates (Supra) would apply to the
26 (2009) 1 SCC 267
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arbitral proceedings commenced after 23rd October, 2015.
While placing reliance on the judgment in the case of M/s.
Duro Felguera (Supra), it is submitted that the Supreme
Court, after considering the provisions of Section 11(6A) held
that the powers of the court are curtailed for dealing with the
application under Section 11(6). The issue of insufficiency of
stamp duty of the document cannot be gone into by the court.
It has to be decided by the arbitral tribunal. Section 5 of the
Act will have to be read with Section 11(6A), according to the
learned counsel, which would be in consonance with the
intention of the legislature in minimizing the judicial
intervention.
80. While referring to Section 33(1) of the Indian Stamp
Act 1889, the learned counsel submits that the expression
“other person” prescribed in the said provision would also
include an arbitrator. The arbitral tribunal, during the
proceedings, within its power can impound the document and
send it for adjudication, if such document is found insufficiently
stamped.
81. Mr. Ganbavale, learned counsel appearing for the
respondents submits that while deciding an application under
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Section 11, it was the duty of the court to see whether any
statutory requirement is to be met, including the requirement
of stamp duty in case of document being insufficiently
stamped. A dispute can only thereafter be referred to
arbitration. According to the learned counsel, Section 11(6A)
be read with Section 7(1) of ACA.
82. The learned counsel further submitted that the
court while deciding an application under Section 11 exercises
judicial powers and, therefore, it is necessary for the court to
examine as to whether there is any bar prescribed under any
provisions of law from appointing an arbitrator. The learned
counsel placed reliance on Section 33 of the Stamp Act in
support of his submission.
83. After closure of the arguments, the learned counsel
submitted a written note wherein reliance is placed on the
order passed by the Supreme Court on 28th February 2019 in
the case of Vidya Drolia and ors. Vs. Durga Trading
Corporation27. It is submitted that two Judge Bench in the
27 Civil Appeal No.2402 of 2019
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said order, after referring to the judgments in the case of
Himangi Enterprises vs. Kamaljeet Singh Ahluwalia28
and in the case of Durgo Felguera (Supra), referred the issue
to the Larger Bench.
(K) REASONS AND CONCLUSIONS ON THE QUESTION
FALLING UNDER SECTION 11 OF THE ACA :
84. The question as required to be answered by us is,
“Whether, inter alia, in view of Section 11 (6A) of the
Arbitration and Conciliation Act, 1996, inserted by Arbitration
and Conciliation (Amendment) Act, 2016, it would be
necessary for the Court before considering and passing final
orders on an application under Section 11(6) of the Act to
await the adjudication by the stamp authorities, in a case
where the document objected to, is not adequately stamped?
85. The parties did not dispute that an arbitration
agreement exists in the main agreement entered into between
the parties. During the course of hearing, the respondents
raised an issue of insufficiency of stamp duty in the main
agreement and prayed for impounding of the said document
while an application filed under Section 11(6) of the ACA was
being heard. A request was made to refer the document for
28 (2017) 10 SCC 706
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adjudication to the stamp authority.
86. Section 11(6) and (6A) of the ACA read thus :-
“11. Appointment of arbitrators.- (1) ……
(2) …….
(3) …….
(4) …….
(5) …….
(6) Where, under an appointment procedure agreed upon by
the parties,--
(a) a party fails to act as required under that
procedure; or
(b) the parties, or the two appointed arbitrators, fail to
reach an agreement expected of them under that
procedure; or
(c) a person, including an institution, fails to perform any
function entrusted to him or it under that procedure,
a party may request 1[the Supreme Court or, as the case
may be, the High Court or any person or institution
designated by such Court] to take the necessary measure,
unless the agreement on the appointment procedure
provides other means for securing the appointment.
(6A) The Supreme Court or, as the case may be, the High
Court, while considering any application under sub-section
(4) or sub-section (5) or sub section (6), shall,
notwithstanding any judgment, decree or order of any Court,
confine to the examination of the existence of an arbitration
agreement.
87. In the case of S.B.P. & Co. vs. Patel
Engineering Ltd.(Supra), the Supreme Court held that the
order passed by the Chief Justice of the High Court or the Chief
Justice of India under Section 11(6) of the Act was not an
administrative order. It is passed in exercise of a judicial power.
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The Supreme Court in para 47 of the said judgment observed
thus:-
“47. We, therefore, sum up our conclusions as follows:
(i) The power exercised by the Chief Justice of the High
Court or the Chief Justice of India under Section 11(6) of the
Act is not an administrative power. It is a judicial power.
(ii) The power under Section 11(6) of the Act, in its
entirety, could be delegated, by the Chief Justice of the High
Court only to another Judge of that Court and by the Chief
Justice of India to another Judge of the Supreme Court.
(iii) In case of designation of a Judge of the High Court or of
the Supreme Court, the power that is exercised by the
designated Judge would be that of the Chief Justice as
conferred by the statute.
(iv) The Chief Justice or the designated Judge will have the
right to decide the preliminary aspects as indicated in the
earlier part of this judgment. These will be his own
jurisdiction to entertain the request, the existence of a valid
arbitration agreement, the existence or otherwise of a live
claim, the existence of the condition for the exercise of his
power and on the qualifications of the arbitrator or arbitrators.
The Chief Justice or the designated Judge would be entitled to
seek the opinion of an institution in the matter of nominating
an arbitrator qualified in terms of Section 11(8) of the Act if
the need arises but the order appointing the arbitrator could
only be that of the Chief Justice or the designated Judge.
(v) Designation of a District Judge as the authority under
Section 11(6) of the Act by the Chief Justice of the High Court
is not warranted on the scheme of the Act.
(vi) Once the matter reaches the Arbitral Tribunal or the
sole arbitrator, the High Court would not interfere with the
ordes passed by the arbitrator or the Arbitral Tribunal during
the course of the arbitration proceedings and the parties
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could approach the Court only in terms of Section 37 of the
Act or in terms of Section 34 of the Act.
(vii) Since an order passed by the Chief Justice of the High
Court or by the designated Judge of that Court is a judicial
order, an appeal will lie against that order only under Artilce
136 of the Constitution to the Supreme Court.
(viii) There can be no appeal against an order of the Chief
Justice of India or a Judge of the Supreme Court designated by
him while entertaining an application under Section 11(6) of
the Act.
(ix) In a case where an Arbitral Tribunal has been
constituted by the parties without having recourse to Section
11(6) of the Act, the Arbitral Tribunal will have the jurisdiction
to decide all matters as contemplated by Section 16 of the
Act.
(x) Since all were guided by the decision of this Court in
Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. and
orders under Section 11(6) of the Act have been made based
on the position adopted in that decision, we clarify that
appointments of arbitrators or Arbitral Tribunals thus far
made, are to be treated as valid, all objections being left to be
decided under Section 16 of the Act. As and from this date,
the position as adopted in this judgment will govern even
pending applications under Section 11(6) of the Act.
(xi) Where District Judges had been designated by the
Chief Justice of the High Court under Section 11(6) of the Act,
the appointment orders thus far made by them will be treated
as valid; but applications if any pending before them as on
this date will stand transferred, to be dealt with by the Chief
Justice of the High Court concerned or a Judge of that Court
designated by the Chief Justice.
(xii) The decision in Konkan Rly. Corpn. Ltd. vs. Rani
Construction (P) Ltd. Is overruled.
The judgment in the case of S.B.P. & Co. Vs. Patel
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Engineering Ltd. (Supra) was delivered by the Supreme
Court on 26th October, 2005.
88. We may also refer to the relevant part of the
Statement of Objects and Reasons of the Arbitration Bill 2015,
which would indicate that the intention of the legislature in
bringing about the Arbitration Amendment Act (Act 3 of 2016)
was to provide for speedy disposal of cases relating to
arbitration with least court intervention and a matter of
concern on the delay of disposal of arbitration proceedings and
increase in interference of courts in arbitration matters, which
tend to defeat the object of the Act. It would be imperative to
extract the Statement of Objects and Reasons, which read
thus:-
“ STATEMENT OF OBJECTS AND REASONS
The general law relating to arbitration is contained in the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as
the Act). The Act, which is based on the UNCITRAL Model Law
on International Commercial Arbitrations, as adopted in 1985 by
the United Nations Commission on International Trade Law
(UNCITRAL), applies to both international as well as domestic
arbitration.
2. The Act was enacted to provide for speedy disposal of cases
relating to arbitration with least court intervention. With the
passage of time, some difficulties in the applicability of the Act
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have been noticed. Interpretation of the provisions of the Act by
courts in some cases have resulted in delay of disposal of
arbitration proceedings and increase in interference of courts in
arbitration matters, which tend to defeat the object of the Act.
With a view to overcome the difficulties, the matter was referred
tot he Law Commission of India, which examined the issue in
detail and submitted its 176th Report……..
3. On a reference made again in pursuance of the above, the
Law Commission examined and submitted its 246th Report on
“Amendments to the Arbitration and Conciliation Act, 1996” in
August 2014 and recommended various amendments in the Act.
The proposed amendments to the Act would facilitate and
encourage Alternative Dispute Mechanism, especially
arbitration, for settlement of disputes in a more user-friendly,
cost effective and expeditious disposal of cases since India is
committed to improve its legal framework to obviate in disposal
of cases.
4. As India has been ranked at 178 out of 189 nations in the
world in contract enforcement, it is high time that urgent steps
are taken to facilitate quick enforcement of contracts, easy
recovery of monetary claims and award of just compensation for
damages suffered andreduce the pendency of cases in courts
and hasten the process of dispute resolution through arbitration,
so as to encourage investment and economic activity.
5. …..
6. It is proposed to introduce the Arbitration and Conciliation
(Amendment) Bill, 2015, to replace the Arbitration and
Conciliation (Amendment) Ordinance, 2015, which inter alia,
provides for the following, namely:—
(i) to amend the definition of “Court” to provide that in the
case of international commercial arbitrations, the Court
should be the High Court;
(ii) to ensure that an Indian Court can exercise jurisdiction to
grant interim measures, etc., even where the seat of the
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arbitration is outside India;
(iii) an application for appointment of an arbitrator shall be
disposed of by the High Court or Supreme Court, as the case
may be, as expeditiously as possible and an endeavour
should be made to dispose of the matter within a period of
sixty days;
(iv) to provide that while considering any application for
appointment of arbitrator, the High Court or the Supreme
Court shall examine the existence of a prima facie arbitration
agreement and not other issues;
(v) to provide that the arbitral tribunal shall make its award
within a period of twelve months from the date it enters
upon the reference and that the parties may, however,
extend such period up to six months, beyond which period
any extension can only be granted by the Court, on sufficient
cause;
(vi) to provide that a model fee Schedule on the basis of
which High Courts may frame rules for the purpose of
determination of fees of arbitral tribunal, where a High Court
appoints arbitrator in terms of section 11 of the Act;
(vii) to provide that the parties to dispute may at any stage
agree in writing that their dispute be resolved through fast
track procedure and the award in such cases shall be made
within a period of six months;
(viii) to provide for neutrality of arbitrators, when a person is
approached in connection with possible appointment as an
arbitrator;
(ix) to provide that application to challenge the award is to
be disposed of by the Court within one year.
(Emphasis Supplied)
The Notes on Clauses on Section 11 are also required
to be noted. In regard to the proposed amendment to Section 11,
Clause 6 of the Notes on Clauses reads thus:-
“Clause 6 of the Bill seeks to amend section 11 of the
principal Act to provide that appointment of arbitrator shall
be made by the Supreme Court or the High Court, as the
case may be, instead of the Chief Justice of India or the Chief
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Justice of the High Court. Sub-section (6A) is inserted to
provide that the Supreme Court or the High Court while
considering application under sub-section (4) to (6) shall
confine to the examination of an arbitration agreement. In
sub-section (7), it is clarified that a decision on a matter
entrusted under sub-section (4) to (6) shall be final and no
appeal including Letters Patent Appeal shall lie against such
decision. A new sub-section (13) is inserted to provide that
an application for appointment of arbitrator(s) shall be
disposed of as expeditiously as possible and an endeavor
shall be made to dispose of the matter within a period of
sixty days from the date of service of notice on the opposite
party. A new sub-section (14) is inserted to empower the
High Court to frame rules for the purpose of determination
of fees of the arbitral tribunal and the manner of such
payment. The High Court while framing rules shall take into
account the rates of fee specified in the Fourth Schedule.
(Emphasis Supplied)
89. We may observe that the Parliament accordingly
amended the ACA by Amending Act No. 3 of 2016 (with effect
from 23/10/2015) and incorporated amendments to the
various provisions of the ACA. In the context of the present
discussion, the relevant amendment is the incorporation of
sub-section (6A), as noted above, which provides that the
Supreme Court or, as the case may be, the High Court, while
considering any application under sub-section (4) or subsection
(5) or sub-section (6), shall, notwithstanding any
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judgment, decree or order of nay court, confine to the
examination of the existence of an arbitration agreement. The
scope of the inquiry in adjudication of such applications falling
under Section 11 is now confined the examination of existence
of an arbitration agreement. The use of the words
“notwithstanding any judgment, decree or order of any court”
in the said provision would also indicate that any other facet or
issue which would impede or inhibit the requirement of
examination of the existence of an arbitration agreement even
if contained in any judgment, decree or order of any court,
stands discarded, when the court is called upon to exercise
jurisdiction under Section 11.
90. By the same amendment, sub-section (13) was also
inserted in Section 11 by which it was provided that an
application made under Section 11 for appointment of an
arbitrator or arbitrators shall be disposed of by the Supreme
Court or the High Court, or the person or institution
designated by such Court, as the case may be, as
expeditiously as possible and an endeavour shall be made to
dispose of the matter within a period of sixty days from the
date of service of notice on the opposite party.
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91. Such an interpretation, as noted by us above, can
also be noticed in the recent decisions of the Supreme Court.
92. We may thus profitably refer to the decision of the
Supreme Court in Wexford Financial Inc.Panama Vs.
Bharat Heavy Electricals Ltd.29 Which a decision after the
Arbitration Amendment Act was brought into force. In
paragraph 9, the Supreme Court observed thus:-
“.. ….. There is, in that view, no gainsaying that the present
petition under Sections 11(5) and 11(12) shall have to be
allowed with appropriate directions, particularly when this
Court is concerned primarily with the question whether an
arbitration agreement exists between the parties and if so
whether the disputes falling within the scope of the
agreement have arisen for determination. ….... ….”
93. We also refer to the decision of the Supreme Court
in TRF Limited vs. Energo Engineering Projects
Limited,30 wherein a three Judge Bench of the Supreme Court,
while examining Section 11(6A) held as under:-
42. We are referring to the same as learned counsel for the
parties have argued at length with regard to the disclosure
made by the arbitrator and that has also been referred to by
the designated Judge. In this context, we may profitably refer
to sub-section (6A) of Section 11 of the Act which reads as
follows:
29 (2016) 8 SCC 267
30 (2017) 8 SCC 377
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“11.(6A). The Supreme Court or, as the case may
be, the High Court, while considering any
application under sub-section (4) or sub-section
(5) or sub-section (6), shall, notwithstanding any
judgment, decree or order of any Court, confine
to the examination of the existence of an
arbitration agreement.”
43. The purpose of referring to the said provision is that the
amended law requires the Court to confine the examination of
the existence of an arbitration agreement notwithstanding
any judgment of the Supreme Court or the High Court while
considering an application under Section 11(6) of the Act. As
the impugned order would indicate, the learned Judge has
opined that there had been no failure of procedure, for there
was a request for appointment of an arbitrator and an
arbitrator has been appointed. It is apt to state here that the
present factual score projects a different picture altogether
and we have to carefully analyse the same.”
94. In the case of Duro Felguera (Supra), the Supreme
Court had referred to the position prior to Amendment Act 3 of
2016. Paras 15 and 16 of the said judgment read as under :
“15. Under Section 11(6) of the Arbitration and Conciliation
Act, 1996, as it stood prior to Amendment Act 3 fo 2016, on
an application made by any of the parties, the Chief Justice of
the High Court appoints an arbitrator for adjudication.
Initially, the line of decisions ruled that the appointment of
arbitrator is an administrative order passed by the Chief
Justice. In Konkan Railway Corpn. Ltd. v. Mehul Construction
Co., it was held that the powers of the Chief Justice under
Section 11(6) of the Arbitration and Conciliation Act, 1996 are
of administrative nature and that the Chief Justice or his
designates does not act as a judicial authority while
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appointing an arbitrator. The same view was reiterated in the
subsequent judgment of this Court in Konkan Railway Corpn.
Ltd. v. Rani Construction (P) Ltd.
16. However, in the year 2005, a Constitution Bench of
seven Judges in SBP and Co. v. Patel Engg. Ltd. made a
departure from the previous judgments and held that the
order passed by the Chief Justice is not administrative but
judicial in nature and hence the same is subject to appeal
under Article 136 of the Constitution of India. The Court
further held that in deciding the appointment of an arbitrator,
the Chief Justice could first by way of a preliminary decision
decide the court’s own jurisdiction of that matter to entertain
the arbitration petition, the existence of a valid arbitration
agreement, the subsistence of a “live cliam i.e. the claim that
is not barred by limitation”.
In regard to the changes effected by the
Amendment Act 3 of 2016, the Supreme Court in para 18 of
the said judgment observed as under :-
“18. The language in Section 11(6) of the Act “the Chief
Jutice or any person or institution designated by him” has
been substituted by “Supreme Court or as the case may be
the High Court or any person or institution designated by
such Court”. Now, as per sub-section (6-A) of Section 11, the
power of the Court has now been restricted only to see
whether there exists an arbitration agreement. The amended
provision in sub-section (7) of Section 11 provides that the
order passed under Section 11(6) shall not be appealable and
thus finality is attached to the order passed under this
section…..
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In para 19, the Supreme Court has referred as
under:
“19. The effect of the Arbitration and Conciliation
(Amendment) Act, 2015 in Section 11 of the Act has been
succinctly elucidated in the textbook “Law Relating to
Arbitration and Conciliation” by Dr. P. C. Markanda, which
reads as under:
“The changes made by the amending Act are as follows:
1. The words “Chief Justice or any person or institution
designated by him” shall be substituted by the words “the
Supreme Court or, as the case may be, the High Court or any
person or institution designated by such Court”. Thus, now it
is not only the Chief Justice who can hear applications under
Section 11, the power can be delegated to any Judge as well.
2. As per sub-section (6-A), the power of the Court has
now been restricted only to examination of the existence of
an arbitration agreement. Earlier, the Chief Justice had been
given the power to examine other aspects as well i.e.
limitation, whether the claims were referable for arbitration,
etc., in terms of the judgments of the Supreme Court in SBP
and Co. vs. Patel Engg. Ltd. and National Insurance Co. Ltd. v.
Boghara Polyfab (P) Ltd. Now all preliminary issues have
been left for the Arbitral Tribunal to decide in terms of
Section 16 of the Act.
3. The amending Act has categorically provided in subsection
(6-B) that designation of any person or institution by
the Supreme Court or High Court would not be construed as
delegation of judicial power. The order passed by a
designated person or institution would continue to be
regarded as a judicial order.
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4. It has been provided in sub-section (7) that the order
passed under this section shall not be appealable. This
change means that finality is attached to the order passed
under this section and it would not be subject to further
examination by an appellate court.
5. Sub-section (8) has been amended to bring it in
conformity with amended Section 12 with regard to ensuring
independence and impartiality of the arbitrator. Before
appointing any arbitrator, a disclosure in writing has to be
obtained in terms of Section 12(1) of the Act. This is to
ensure that the appointed arbitrator shall be independent
and impartial and also harmonizes the provisions of Sections
11 and 12 of the Act.
6. The amending Act has introduced sub-section (13)
which provides that the disposal of the application under this
section has to be expeditious and endeavour shall be made
to dispose of the application within a period of 60 days from
the date of service of notice on the opposite party. This subsection
would ensure speedy disposal of applications under
this section and all contentious issues have been left to be
decided by the Arbitral Tribunal.
7. For determining the fee structure of the Arbitral
Tribunal, it has been recommended that the High Courts may
frame the necessary rules and for that purpose, a model fee
structure has been provided in the Fourth Schedule of the
amending Act. However, this sub-section would not be
applicable for the fee structure in case of international
commercial arbitrations and domestic arbitrations where the
parties have agreed for determination of fee as per rules of
an arbitral institution. This sub-section has been inserted to
ensure a reasonable fee structure since the cost of arbitration
has increased manifold due to high charges being levied on
the parties by the Arbitral Tribunal and other incidental
expenses.”
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In para 22, the Supreme Court observed as under:-
22. On behalf of GPL, it was repeatedly urged that the works
are intrinsically connected, inseparable, integrated,
interlinked and that they are one composite contract and that
they were split up only on the request and representations
given by Duro Felguera and FGI. As discussed earlier, as per
amended provision Section 11 (6A), the power of the
Supreme Court or the High Court is only to examine the
existence of an arbitration agreement. From the record, all
that we could see are five separate Letters of Award; five
separate Contracts; separate subject matters; separate and
distinct work; each containing separate arbitration clause
signed by the respective parties to the contract.”
(Emphasis Supplied)
95. In the concurring Judgment of Mr. Justice Kurian
Joseph (as His Lordship then was), in paragraphs 47, 48, 58
and 59 it was observed thus:-
“47. What is the effect of the change introduced by the Arbitration and
Conciliation (Amendment) Act, 2015 (hereinafter referred to as “the
2015 Amendment”) with particular reference to Section 11(6) and the
newly added Section 11(6A) of the Arbitration and Conciliation Act,
1996 (hereinafter referred to as “the 1996 Act”) is the crucial question
arising for consideration in this case.
48. Section 11(6A) added by the 2015 Amendment, reads as follows:
“11(6A) The Supreme Court or, as the case may be, the High
Court, while considering any application under subsection
(4)
or subsection
(5) or subsection
(6), shall, notwithstanding
any judgment, decree or order of any Court, confine to the
examination of the existence of an arbitration agreement.”
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From a reading of Section 11(6A), the intention of the legislature is
crystal clear i.e. the Court should and need only look into one aspectthe
existence of an arbitration agreement. What are the factors for
deciding as to whether there is an arbitration agreement is the next
question. The resolution to that is simple it
needs to be seen if the
agreement contains a clause which provides for arbitration pertaining
to the disputes which have arisen between the parties to the
agreement.
58. This position was further clarified in National Insurance Co.
Ltd. v. Boghara Polyfab (P) Ltd. To quote: (2009) 1 SCC 267
22. Where the intervention of the court is sought for
appointment of an Arbitral Tribunal under Section 11, the duty of the
Chief Justice or his designate is defined in SBP & Co. This Court
identified and segregated the preliminary issues that may arise for
consideration in an application under Section 11 of the Act into three
categories, that is, (i) issues which the Chief Justice or his designate is
bound to decide; (ii) issues which he can also decide, that is, issues
which he may choose to decide; and (iii) issues which should be left to
the Arbitral Tribunal to decide.
22.1 The issues (first category) which the Chief Justice / his
designate will have to decide are:
(a) Whether the party making the application has
approached the appropriate High Court.
(b) Whether there is an arbitration agreement and
whether the party who has applied under Section 11 of
the Act, is a party to such an agreement.
22.2 The issues (second category) which the Chief Justice /
his designate may choose to decide (or leave them to the decision of
the Arbitral Tribunal) are:
(a) Whether the claim is dead (longbarred)
claim or a
live claim.
(b) Whether the parties have concluded the contract/
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transaction by recording satisfaction of their mutual
rights and obligation or by receiving the final payment
without objection.
22.3 The issues (third category) which the Chief Justice / his
designate should leave exclusively to the Arbitral Tribunal are :
(i) Whether a claim made falls within the arbitration
clause (as for example, a matter which is reserved for
final decision of a departmental authority and excepted
or excluded from arbitration).
(ii) Merits or any claim involved in the arbitration.”
59. The scope of the power under Section 11(6) of the 1996 Act
was considerably wide in view of the decisions in SBP and Co. and
Boghara Polyfab. This position continued till the amendment brought
about in 2015. After the amendment, all that the courts need to see is
whether an arbitration agreement exists – nothing more, nothing less.
The legislative policy and purpose is essentially to minimise the
Court’s intervention at the stage of appointing the arbitrator and this
intention as incorporated in Section 11(6A)
ought to be respected.
(Emphasis Supplied)
96. The scope of power of the Court under Section
11(6-A) thus came to be considered, in great detail, in the
judgment of the Supreme Court in the case of Duro
Felguera, S.A. (supra). The Supreme Court held that as per
sub-section (6-A), the power of the Court has now been
restricted only to examine the existence of the arbitration
agreement. Earlier, the Chief Justice had been given the
power to examine other aspects as well, i.e. limitation,
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whether the claims were referable for arbitration, etc. in terms
of the Judgments of the Supreme Court in SBP & CO. vs.
Patel Engineering Ltd. and anr. (supra), and National
Insurance Co. Ltd. vs. Boghara Polyfab (P) Ltd. (Supra).
It is held that all preliminary issues have been left for the
Arbitral Tribunal in terms of Section 16 of the Act. The
Supreme Court also considered sub-section (13) of Section 11
inserted by Amending Act of 2015 providing for disposal of the
application within a period of sixty days from the date of
service of notice on the opposite party.
97. It is held that the sub-section (13) would ensure
speedy disposal of the applications under that section and all
contentious issues have been left to be decided by the Arbitral
Tribunal. The Supreme Court, in the said Judgment held that
since the dispute between the parties arose in 2016, the
amended provision of sub-section (6-A) of Section 11 shall
govern the issue as per which the power of Court is confined
only to examine the existence of the arbitration agreement.
The Hon'ble Supreme Court considered the Judgment in
National Insurance Co. Ltd. vs. Boghara Polyfab (P) Ltd.
(supra), which had laid down three categories of issues i.e.
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(i) issues which the Chief Justice or his designate is bound to
decide; (ii) issues which he can also decide, that is, issues
which he may choose to decide; and (iii) issues which should
be left to the arbitral Tribunal. The Hon'ble Supreme Court in
the said judgment of National Insurance Co. Ltd. vs.
Boghara Polyfab (P) Ltd. (supra) had held that the issues
which the Chief Justice or his designate must choose to decide
or leave them to the decision of the Arbitral Tribunal are; (a)
whether the claim is a dead (long-barred) claim or a live claim;
(b) whether the parties have concluded the
contract/transaction by recording satisfaction of their mutual
rights and obligation or by receiving the final payment without
objection.
98. It is further held in the said Judgment that the
issues which Chief Justice or his designate should leave
exclusively to the Arbitral Tribunal are, (1) whether a claim
made falls within the arbitration clause (as for example, a
matter which is reserved for final decision of a departmental
authority and excepted or excluded from arbitration); and (2)
merits of any claim involved in the arbitration. After
considering the categories carved out by the Hon'ble Supreme
Court in the case of National Insurance Co. Ltd. vs.
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Boghara Polyfab (P) Ltd. (supra) and after considering
Section 11(6-A), the Hon'ble Supreme Court in the case of
Duro Felguera, S.A. (supra), held that the legislative policy
and purpose is essentially to minimise the Court's intervention
at the stage of appointing the arbitrator and this intention as
incorporated in Section 11(6-A) ought to be respected. It was
also held that the position of law in the cases of SBP and Co.
vs. Patel Engineering Ltd. (supra) and National Insurance
Co. Ltd. vs. Boghara Polyfab (P) Ltd. (supra) continued till
the amendment brought in 2015. The Judgment of the
Supreme Court in the case of Duro Felguera, S.A. (supra),
has been followed thereafter in the later judgment of the
Hon'ble Supreme Court and also by this Court in several
matters.
99. We have noticed that in view of the categories
carved out in the Judgment of the Supreme Court n the case of
National Insurance Co. Ltd. vs. Boghara Polyfab (P) Ltd.
(supra) several contentious issues used to be raised by the
Respondents in the application under Section 11(6) of the Act,
thereby delaying the disposal of applications for appointment
of arbitrators, though are required to be disposed of
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PDP 103 FB-JT-ABP-466-17, ABA-246-16 & ABA-300-18-
expeditiously. The legislative wisdom thus prevailed and subsection
(6-A) was inserted in Section 11 to minimise the
intervention of Court at the stage of appointing an arbitrator.
The Supreme Court in the said Judgment also made specifically
clear that the position of law laid down in SBP and Co. vs.
Patel Engineering Ltd. (supra) and National Insurance
Co. Ltd. vs. Boghara Polyfab (P) Ltd. (supra) continued till
the amendment was brought about in 2015. In our opinion,
reliance placed on the principles laid down by the Supreme
Court in the case of SBP and Co. vs. Patel Engineering
Ltd. (supra) and National Insurance Co. Ltd. vs. Boghara
Polyfab (P) Ltd. (supra) by the respondents is thus
misplaced.
100. It is thus clear that when the court adjudicates an
application under Section 11(6) of the ACA, the ambit of the
inquiry is now confined only to the examination of the
existence of an arbitration agreement between the parties and
if such an agreement exists, the disputes which are falling
within the scope of the agreement would be required to be
referred for adjudication by appointing an arbitral tribunal.
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PDP 104 FB-JT-ABP-466-17, ABA-246-16 & ABA-300-18-
101. In Vidya Drolia and ors. (Supra), as relied upon by
Mr.Ganbavale, the learned counsel appearing for the
respondents, the issue before the Supreme Court was arising
out of a tenancy agreement in an application filed under
Section 11(6) of the Act. The Supreme Court referred the issue
as to whether the word “existence” would include weeding out
arbitration clauses in agreement which indicates that the
subject matter is incapable of arbitration. In our view, till such
issue is decided by the Larger Bench, the principle of law laid
down by the Supreme Court in the case of Duro Felgurea
(Supra) holds the field. Now the question arises for
consideration of this court is, whether in view of Section
11(6A), as per the Supreme Court judgment in the case of
Duro Felguera (Supra), the issue of insufficiency of stamp
duty on the agreement containing arbitration clause is
required to be decided while deciding the application under
Section 11(6A) of the ACA by the court itself at the threshold or
such an issue can be decided by arbitral tribunal upon
constitution of such tribunal by the court under Section 11(6)
of the Act. In the case of Duro Felguera, the Supreme Court
has held that after amendment to Section 11(6) by sub-section
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PDP 105 FB-JT-ABP-466-17, ABA-246-16 & ABA-300-18-
(6A) all that the court has to see is whether an arbitration
agreement exists – nothing more, nothing less. The Supreme
Court, by referring to provisions of Section 5 of the Act and the
legislative policy, further observed that the purpose of the
provision is to ensure speedy disposal of application and all
contentious issues are to be left to be decided by the arbitral
tribunal. This is to minimize the court’s intervention at the
stage of appointing an arbitrator.
102. After considering the judgments cited before us and
in view of the legislative intent of the amended provisions, we
are of the view that the import of the provisions of Section
11(6A) indicates that the power of the Supreme Court or, as
the case may be, the High Court, while considering the
application under Section 11(6) shall notwithstanding any
judgment, decree or order of any court, confine to the
examination of the existence of an arbitration agreement. The
issue as to whether sufficiency or otherwise of the stamp duty
on the said agreement can be left to the decision of the
arbitral tribunal. Section 7 of the ACA defines arbitration
agreement. Section 7(4) of the ACA reads as under :-
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PDP 106 FB-JT-ABP-466-17, ABA-246-16 & ABA-300-18-
“7.Arbitration agreement. - (1) ….
(2) ……
(3) ……
(4) An arbitration agreement is in writing if it is contained in -
(a) a document signed by the parties;
(b) an exchange of letters, telex, telegrams or other
means of telecommunication including communication
through electronic mans which provide a record of the
agreement; or
(c) an exchange of statements of claim and defence in which
the existence of the agreement is alleged by one party and
not denied by the other.
103. It is not a case of the respondents that arbitration
agreement, if a standalone agreement recorded under Section
7(4)(b) or (c) requires payment of any stamp duty under the
provisions of Maharashtra Stamp Act. It is clear that the
arbitration agreement, even if part of the main agreement, is
severed from the main agreement, would not stand invalidated
even if the main agreement is declared as null and void by the
arbitral tribunal.
104. In our view, there is no substance in the submission
of Mr. Dani, learned Senior Counsel for the Respondents (in
Arbitration Application No. 246/2016) that the principle of
severability is confined only to application under Section 16
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of the Act before the arbitral Tribunal and not at the stage of
hearing of the application under Section 9, as well as under
Section 11 of the Act. In our view, the Judgment of the Hon’ble
Supreme Court in the case of Reliance Industries Ltd. &
anr. (supra), relied upon by Dr. Sathe, learned Senior Advocate
would be an answer to this submission made by Mr. Dani,
learned Counsel for the Respondents.
105. The learned Counsel appearing for the parties have
invited our attention to various paragraphs of the Judgment of
the Hon’ble Supreme Court in the case of SMS Tea Estates
(supra) in support of their rival contentions as to whether the
said Judgment was delivered by the Hon’ble Supreme Court
under Section 11 only or would also apply to the applications
under Section 9 of the Act or not?
106. We may refer to some of the paragraphs of the
judgment in SMS Tea Estates (Supra):-
“12. When a contract contains an arbitration agreement, it
is a collateral term relating to the resolution of disputes,
unrelated to the performance of the contract. It is as if two
contracts – one in regard to the substative terms of the main
contract and the other relating to resolution of disputes – had
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PDP 108 FB-JT-ABP-466-17, ABA-246-16 & ABA-300-18-
been rolled into one, for purposes of convenience. An
arbitration clause is therefore an agreement independent of
the other terms of the contract or the instrument.
Resultantly, even if the contract or its performance is
terminated or comes to an end on account of repudiation,
frustration or breach of contract, the arbitration agreement
would survive for the purpose of resolution of disputes arising
under or in connection with the contract.
22.2 If the document is found to be not duly stamped,
Section 35 of the Stamp Act bars the said document being
acted upon. Consequently, even the arbitration clause therein
cannot be acted upon. The court should then proceed to
impound the document under Section 33 of the Stamp Act
and follow the procedure under Sections 35 and 38 of the
Stamp Act.
22.3 If the document is found to be duly stamped, of if the
deficit stamp duty and penalty is paid, either before the court
or before the Collector (as contemplated in Section 35 or 40
Section of the Stamp Act), and the defect with reference to
deficit stamp is cured, the court may treat the document as
duly stamped.
107. It is thus clear that even the said Judgment of the
Supreme Court in case of SMS Tea Estates (P) Ltd. (supra),
in so far as application under Section 11 is concerned, makes it
clear that the arbitration agreement can be severed from the
main agreement.
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PDP 109 FB-JT-ABP-466-17, ABA-246-16 & ABA-300-18-
108. In so far as the Judgment of the Supreme Court
Black Pearls Hotels Private Limited (supra) relied upon by
Mr. Dani, learned Senior Counsel for the Respondent is
concerned, a perusal of the said Judgment also clearly
indicates that the said Judgment was also delivered by the
Supreme Court while considering an appeal arising out of an
order passed by the Karnataka High Court under Section 11 of
the Act and not under Section 9 of the Act. The said Judgment,
thus, would not advance the case of the Respondent in so far
as insufficiency of stamp, if any, on the main agreement,
including arbitration agreement is concerned.
109. In so far as the submission of Mr Ganbavale, learned
Counsel for the Respondent in Arbitration Application
No.300/2018 that it is the duty of the Court to see whether any
further statutory requirement is to be made under Section
11(6) is concerned, in our view, there is no merit in this
submission of the learned Counsel in view of the limited power
that vests in the Court under Section 11(6) read with subsection
(6A) of the Act. Similarly, the contention in respect of
the statutory requirement has already been rejected by the
Supreme Court in the case of Duro Felguera (supra).
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PDP 110 FB-JT-ABP-466-17, ABA-246-16 & ABA-300-18-
110. We are inclined to accept the submission made by
Dr. Sathe, learned Senior Counsel and Mr. Lohia, learned
Counsel for the Applicant in Arbitration Application
No.300/2018 that in view of insertion of sub-section (6-A) in
Section 11 with effect from 23.10.2015, the principles laid
down by the Hon’ble Supreme Court in the case of SBP and
Co. vs. Patel Engineering Ltd. (supra) and National
Insurance Co. Ltd. vs. Boghara Polyfab (P) Ltd. (supra)
and even for this purpose the decision in SMS Tea Estates
(Supra) cannot be made applicable to the applications filed
after 23.10.2015.
111. The learned Single Judge of this Court in Coastal
Marine Construction and Engineering Ltd. (supra),
considering the legislative regime on incorporation of subsection
(6A) in Section 11, has distinguished the Judgment of
the Hon’ble Supreme Court in the case of SMS Tea Estates
(P) Ltd., (supra) and also the judgment of the Division Bench
of this Court in the case of Lakdawala Developers Pvt. Ltd.
(supra) and following the principles of law laid down by the
Supreme Court in Duro Felguera (supra) has reached to a
conclusion that the Judgment of the Supreme Court in the case
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PDP 111 FB-JT-ABP-466-17, ABA-246-16 & ABA-300-18-
of SMS Tea Estates (P) Ltd., (supra) which was not rendered
under Section 11 of the Act would not be applicable. This also
recognizes the principle that the provisions of the Stamp Act
are enacted for the purpose of securing revenue for the
Government and not to arm a litigant with a technical defence.
The learned Single Judge rightly applied the principles of law
laid down by the Hon’ble Supreme Court in Hindustan Steel
Ltd. (supra) holding that the Stamp Act is a fiscal statute and
it is not enacted to arm a litigant with a weapon of technicality
to meet the case of his opponent.
112. We have considered the provisions of Sections 32A
to 39 of the Maharashtra Stamp Act 1958. In our view, even if
an instrument is required to be stamped, which is not
otherwise stamped at all or insufficiently stamped, such defect
is curable which can be cured on payment of requisite amount
of penalty under the Act of 1958.
113. Under the scheme of provisions of the Maharashtra
Stamp Act it is prescribed that an order passed by the
adjudicating authority is appealable one. A remedy of revision
is also prescribed. It is our experience that in large number
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PDP 112 FB-JT-ABP-466-17, ABA-246-16 & ABA-300-18-
of matters the stamping authorities take substantial time to
take a decision and even after the decision is taken, said
orders are amenable to challenge in higher forums. The
question is whether a party should be made to wait till the
issue under the Stamp Act is finally determined, depriving the
parties for seeking remedy under Section 11 or Section 9 of
the ACA. There is all the possibility that a litigant may raise an
issue under the Stamp Act which would deny a party urgent
interim reliefs if the party so deserves. If the court will have
no jurisdiction to deal with such an application of interim
nature and there is no certainty that the issue under the
Stamp Act would be determined expeditiously in a time bound
manner, it would substrate out the genuine application where
timely intervention is required by the court under the
provisions of the ACA.
114. Thus postponing application for consideration, filed
under Section 11 or Section 9, to indefinite period till the final
decision of the issue raised under the Stamp Act, would also
not be in conformity of the legislative policy and intent to
provide speedy remedy under Section 11 or Section 9 of the
ACA.
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PDP 113 FB-JT-ABP-466-17, ABA-246-16 & ABA-300-18-
115. The basic principles guiding judicial decision
making, in the context of arbitration matters, the court would
surely be concerned with the efficacy of the arbitral process.
The recognition of the legislative intent can also be clearly
seen from the decision of the Supreme Court in A. Ayyasamy
vs. A. Paramasivam and ors.31, wherein Dr. Justice D. Y.
Chandrachud concurring with the judgment of Mr. Justice A. K.
Sikri (as His Lordship then was), observed that The basic
principle which must guide judicial decision-making is that
arbitration is essentially a voluntary assumption of an
obligation by contracting parties to resolve their disputes
through a private tribunal. The intent of the parties is
expressed in the terms of their agreement. Where commercial
entities and persons of business enter into such dealings, they
do so with a knowledge of the efficacy of the arbitral process.
The commercial understanding is reflected in the terms of the
agreement between the parties. The duty of the court is to
impart to that commercial understanding a sense of business
efficacy.
31 (2016) 10 SCC 386
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PDP 114 FB-JT-ABP-466-17, ABA-246-16 & ABA-300-18-
116. We may thus observe that the Stamp Act is a fiscal
statute and its purpose is collection of revenue. The said
purpose will be achieved by impounding the document and
sending it to the stamp authorities if it is found to be
insufficiently stamped. At the same time, the court need not
wait for outcome of the said adjudication. It would not be
appropriate to put restrictions on the court’s powers to
exercise its such jurisdiction under the provisions of ACA, if
the party deserves such intervention by the court.
117. We have also considered the provisions of law under
which the Civil Court functions, even if a document is not
sufficiently stamped.
118. Taking a overall view of the scheme of the ACA,
judgments delivered by the Supreme Court, we are of the view
that the party need not be put to a disadvantage merely
because an objection has been raised in respect of
insufficiency of the stamp on the agreement presented before
the court. Neither a contesting party could deprive legitimate
rights of a litigant in praying for timely intervention of the
court by praying for appointment of an arbitral tribunal nor for
interim reliefs in the fact situation of a case. That would be
rendering a party without any forum and in a given situation
the outcome would be, at times, catastrophic and disastrous
and the damage could be irreparable one. A balanced
approach, keeping in view the legislative intent and the view
adopted by the Supreme Court, needs to be adopted, so that
the purpose of enacting the provisions of Sections 11 and 9 of
the ACA as amended by the Amendment Act is not defeated.
119. If an application under Section 11 or under Section
9 is required to be postponed till the order of adjudication is
passed by the learned Collector of Stamps with such
uncertainty of the time it would take to decide and the
hierarchy of remedies after such order, as it would be subject
to an appeal or a revision, as the case may be and till such
time no order either under Section 11 of under Section 9
should be passed, then the Legislature would not have
provided for speedy disposal of the applications under Section
11 or under Section 9 of the Act by inserting sub-Section (13)
in Section 11 and sub-Section (2) in Section 9 of the Act.
(L) ANSWERS TO THE QUESTIONS FRAMED :
120. In view of the above deliberation, we answer the
questions as framed by us as follows :-
Sr.
No.
Question Answer
1 Whether a court, under the
Arbitration and Conciliation Act,
1996, can entertain and grant any
interim or ad-interim relief in an
application under Section 9 of the
said Act when a document
containing arbitration clause is
unstamped or insufficiently
stamped
In the Affirmative
2 Whether, inter alia, in view of
Section 11 (6A) of the Arbitration
and Conciliation Act, 1996,
inserted by Arbitration and
Conciliation (Amendment) Act,
2016, it would be necessary for
the Court before considering and
passing final orders on an
application under Section 11(6) of
the Act to await the adjudication
by the stamp authorities, in a case
where the document objected to,
is not adequately stamped?
In the Negative
121. We heartily appreciate the valuable assistance
rendered to the Court by the learned Senior Counsel Dr. Milind
R. Sathe and Mr. Aspi Chinoy, who appeared as Amicus
Curiae.
122. Office shall now place these matters before the
learned Single Judge for their disposal.
CHIEF JUSTICE
R. D. DHANUKA,J.
G. S. KULKARNI,J.
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