The case was originally filed in the Commercial Court, which rejected arbitration due to the contract being unstamped. Indo Unique Flame Ltd. appealed to the Bombay High Court, which ruled ...
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 3802 -3803 OF 2020
M/S. N.N. GLOBAL MERCANTILE
PRIVATE LIMITED … APPELLANT(S)
VERSUS
M/S. INDO UNIQUE FLAME
LTD. & ORS. … RESPONDENT(S)
J U D G M E N T
K.M. JOSEPH, J.
Index
A. THE REFERENCE ............................................................................................................................... 2
B. A BIRD’S OVERVIEW OF THE FACTS IN N.N. GLOBAL ...................................................................... 3
C. THE FINDINGS IN N.N. GLOBAL IN REGARD TO THE QUESTION UNDER THE CAPTION ‘VALIDITY
OF AN ARBITRATION AGREEMENT IN AN UNSTAMPED AGREEMENT’................................................... 5
D. SUBMISSION OF THE PARTIES ....................................................................................................... 15
E. ANALYSIS ....................................................................................................................................... 29
F. THE ACT ......................................................................................................................................... 30
G. WHAT LED TO THE INSERTION OF SECTION 11(6A)? .................................................................... 32
H. THE SCHEME OF THE STAMP ACT ................................................................................................. 53
I. HINDUSTAN STEEL LIMITED ANALYSED ........................................................................................ 59
J. THE INDIAN CONTRACT ACT, 1872 - A SURVEY; DISSECTION OF GARWARE, VIDYA DROLIA AND
N.N. GLOBAL ......................................................................................................................................... 64
K. THE STAMP ACT – WHETHER A PROCEDURAL LAW? .................................................................... 88
L. SECTION 7 OF THE ACT – ITS IMPACT ........................................................................................... 97
M. THE ALTERNATIVE PERSPECTIVE ............................................................................................. 105
N. THE AMICUS CURIE SPRINGS A SURPRISE ................................................................................... 111
2
O. SECTIONS 33 AND 35 OF THE STAMP ACT; THE COURT OR THE ARBITRATOR TO ACT? ............ 124
P. ARBITRATION AGREEMENT, A DISTINCT AGREEMENT AND ITS IMPACT? ................................. 132
Q. CONCLUSIONS ............................................................................................................................. 137
1. We have perused the draft judgment s prepared by
our esteemed brothers Ajay Rastogi, J. and Hrishikesh
Roy, J. With profound respect to our learned Brothers,
we are unable to, however, concur with them in their
reasoning and conclusions save as will be made clear.
Hence, the following judgment.
A. THE REFERENC E
2. A Bench of three learned Judges disposed of Civil
Appeal Nos. 3802 -3803 of 2020 by Judgment dated
11.01.2021. The Judgment is reported in N.N. Global
Mercantile Private Limited v. Indo Unique Flame Limited
and others
1
. What is of relevance for the purpose of
the Reference is the following:
“56. We are of the considered view that the
finding in SMS Tea Estates [SMS Tea Estates (P)
Ltd. v. Chandmari Tea Co. (P) Ltd. , (2011) 14
SCC 66 : (2012) 4 SCC (Civ) 777]
and Garware [Garware Wall Ropes
Ltd. v. Coastal Marine Constructions & Engg.
Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ)
1
(2021) 4 SCC 379
3
324] that the non-payment of stamp duty on the
commercial contract would invalidate even the
arbitration agreement, and render it non -
existent in law, and unenforceable, is not the
correct position in law.
57. In view of the finding in paras 146 and
147 of the judgment in Vidya Drolia [Vidya
Drolia v. Durga Trading Corpn., (2021) 2 SCC 1
: (2021) 1 SCC (Civ) 549] by a coordinate
Bench, which has affirmed the judgment
in Garware [Garware Wall Ropes Ltd. v. Coastal
Marine Constructions & Engg. Ltd. , (2019) 9 SCC
209 : (2019) 4 SCC (Civ) 324] , the aforesaid
issue is required to be authoritatively settled
by a Constitution Bench of this Court.
58. We consider it appropriate to refer the
following issue, to be authoritatively settled
by a Constitution Bench of five Judges of this
Court:
“Whether the statutory bar contained in Section
35 of the Stamp Act, 1899 applicable to
instruments chargeable to stamp duty under
Section 3 read with the Schedule to the Act,
would also render the arbitration agreement
contained in such an instrument, which is not
chargeable to payment of stamp duty, as being
non-existent, unenforceable, or invalid,
pending paymen t of stamp duty on the
substantive contract/instrument?”
B. A BIRD’S OVERVIEW OF THE FACTS IN N.N. GLOBAL
3. The first respondent, who was awarded the Work
Order, entered into a sub -contract with the appellant .
4
Clause 10 of the Work Order, constituting the sub -
contract, provided for an Arbitration Clause. The
appellant had furnished a bank guarantee in terms of
Clause 9. The invocation of the said guarantee led to
a Suit by the appellant against the encashment of the
bank guarantee. The first respondent applied under
Section 8 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as, ‘the Act’, for short)
seeking Reference. A Writ Petition was filed by the
first respondent challenging the Order of the
Commercial Court rejecting the Application under
Section 8 of the Act. One of the contentions raised was
that the Arbitration Agreement became unenforceable as
the Work Order was unstamped . The High Court, however,
allowed the Writ Petition filed by t he first
respondent. The issue relevant to this Bench was,
whether the Arbitration Agreement would be enforceable
and acted upon, even if the Work Order is unstamped and
unenforceable under the Indian Stamp Act, 1899
(hereinafter referred to as, ‘the Stamp Act’, for
short).
5
C. THE FINDINGS IN N.N. GLOBAL IN REGARD TO THE
QUESTION UNDER THE CAPTION ‘VALIDITY OF AN
ARBITRATION AGREEMENT IN AN UNSTAMPED
AGREEMENT’
4. The Court found that an Arbitration Agreement is a
distinct and separate agreement, which is independent
from the substantive commercial contract in which it
is embedded. Under the Doctrine of Kompetenz –Kompetenz,
the Arbitral Tribunal had competence to rule on its own
jurisdiction, including objections with regard to the
existence, validity and s cope of the Arbitration
Agreement. Section 16(1) of the Act was relied upon.
The Court made a copious reference to case law in
support of the Doctrine of Kompetenz -Kompetenz. Section
5 of the Act contemplated minimal judicial
interference. The Court referr ed to the Maharashtra
Stamp Act, 1958. Section 34 of the said Act,
essentially, is pari materia with Section 35 of the
Stamp Act, 1899 hereinafter referred to as the Stamp
Act. There are other provisions, which essentially
follow the same pattern as is contained in the latter
Act. The Court, thereafter, went on t o refer to Item
6
63 of Schedule I of the Maharashtra Stamp Act, 1958 ,
which dealt with ‘Works Contract’. It was found that
the Stamp Act is a fiscal measure. Thereafter, the
Court went on to disc uss the Judgment of this Court
reported in SMS Tea Estates P rivate Limited v.
Chandmari Tea Co mpany Private Limited
2
. The Court
referred to the following part of the Judgment in SMS
Tea Estates (supra):
“19. Having regard to Section 35 of the Stamp
Act, unless the stamp duty and penalty due in
respect of the instrument is paid, the court
cannot act upon the instrument, which means
that it cannot act upon the arbitration
agreement also which is part of the instrument.
Section 35 of the Stamp Act is di stinct and
different from Section 49 of the Registration
Act in regard to an unregistered document.
Section 35 of the 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.
xxx xxx xxx
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
2
(2011) 14 SCC 66
7
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 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. ”
5. The Court further went on t o find that, at the time
SMS Tea Estates (supra) was decided, the law relating
to reference to Arbitration under Section 11 of the
Act, was expounded in the Constitution Bench decision
reported in SBP & Co. v. Patel Engineering Ltd. and
another
3
, among other cases. It was further found that
the law laid down was that in an Application under
Section 11(6) of the Act, the Court may determine
certain threshold issues, such as, whether the claim
was time-barred, or a stale claim; whether there was
accord and satisfaction, which would preclude the need
for reference to arbitration. Thereafter, the Court
refers to the amendment to Section 11 by the insertion
of Sub-Section (6A) in Section 11. The Court referred
3
(2005) 8 SCC 618
8
to the Judgment in Duro Felguera, S.A. v. Gangavaram
Port Limited
4
, to conclude that what was to be gone
into was only whether an Arbitration Agreement existed
or not. The Court noted that the said position was
affirmed by a Bench of three learned Judges in Mayavati
Trading Private Limited v. Pradyuat Deb Burman
5
. Still
further, the Court went on to notice the Judgm ent
rendered by the Bench of two learned Judges in Garware
Wall Ropes Limited v. Coastal Marine Constructions &
Engineering Limited
6
and referred to para 22 of the
said decision where this Court relied on Section 2 (h)
of the Indian Contract Act, 1872 (hereinafter referred
to as, ‘the Contract Act’, for short) and found that
an unstamped agreement to be unenforceable.
6. In Garware (supra), the Bench of two learned Judges
took the view that the Arbitration Clause contained in
the sub-contract would not exist as a matter of law
until the sub-contract was duly stamped. It was further
found that Section 11(6A) deal s with existence as
4
(2017) 9 SCC 729
5
(2019) 8 SCC 714
6
(2019) 9 SCC 209
9
opposed to Section 8 , and Section 45 of the Act [See
paragraph 29 of Garware (supra)]. The Bench o f three
learned Judges in its judgment in N.N. Global (supra),
containing the Order of Reference to the Constitution
Bench, found that an Arbitration Agreement is not
included in the Schedule as an instrument charge able
to stamp duty. The Court referred to Item 12 of Schedule
I of the Maharashtra Stamp Act, 1958, in this regard.
Thereafter, the Court went on to find that the Work
Order was chargeable to payment of stamp duty. The
Court, however, found that the non -payment or the
deficiency on the Work Order did not invalidate the
main contract. Section 34 of the Maharashtra Act
corresponding to Section 35 of the Stamp Act did not
make the unstamped instrument, invalid, non -existent
or unenforceable in law. The Court found that the
Arbitration Agreement was a distinct and an independent
contract. On the Doctrine of Separability, it would not
be rendered invalid, unenforceable or non -existing,
even if the substantive contract, in which it is
contained, was inadmis sible in evidence or could not
10
be acted upon, in view of it not being stamped. The
Bench in N.N. Global (supra) went on to hold as follows:
“26. In our view, there is no legal impediment
to the enforceability of the arbitration
agreement, pending payment of stamp duty on the
substantive contract. The adjudication of the
rights and obligations under the work order or
the substantive commercial contract would,
however, not proceed before complying with the
mandatory provisions of the Stamp Act.
27. The Stamp Act is a fiscal enactment for
payment of stamp duty to the State on certain
classes of instruments specified in the Stamp
Act. Section 40 of the Stamp Act, 1899 provides
the procedure for instruments which have been
impounded, and sub -section (1) of Section 42
requires the instrument to be endorsed after
it is duly stamped by the Collector concerned.
Section 42(2) provides that after the document
is duly stamped, it shall be admissible in
evidence, and may be acted upon.
28. In our view, the dec ision in SMS Tea
Estates [SMS Tea Estates (P) Ltd. v. Chandmari
Tea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4
SCC (Civ) 777] does not lay down the correct
position in law on two issues i.e. : ( i) that
an arbitration agreement in an unstamped
commercial contract cannot be acted upon, or
is rendered unenforceable in law; and ( ii) that
an arbitration agreement would be invalid where
the contract or instrument is voidable at the
option of a party, such as under Section 19 of
the Contract Act, 1872 .
11
29. We hold that since the arbitration
agreement is an independent agreement between
the parties, and is not chargeable to payment
of stamp duty, the non -payment of stamp duty
on the commercial contract, would not
invalidate the arbitration clause, or r ender
it unenforceable, since it has an independent
existence of its own. The view taken by the
Court on the issue of separability of the
arbitration clause on the registration of the
substantive contract, ought to have been
followed even with respect to t he Stamp Act.
The non-payment of stamp duty on the
substantive contract would not invalidate even
the main contract. It is a deficiency which is
curable on the payment of the requisite stamp
duty.
30. The second issue in SMS Tea Estates [SMS
Tea Estates (P) Ltd. v. Chandmari Tea Co. (P)
Ltd., (2011) 14 SCC 66 : (2012) 4 SCC (Civ)
777] that a voidable contract would not be
arbitrable as it affects the validity of the
arbitration agreement, is in our view not the
correct position in law. The allegations made
by a party that the substantive contract has
been obtained by coercion, fraud, or
misrepresentation has to be proved by leading
evidence on the issue. These issues can
certainly be adjudicated through arbitration.
31. We overrule the judgment in SMS Tea
Estates [SMS Tea Estates (P) Ltd. v. Chandmari
Tea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4
SCC (Civ) 777] with respect to the aforesaid
two issues as not laying down the correct
position in law.”
12
7. We may also notice paragraph-32 in N.N. Global
(supra):
”32.Garware [Garware Wall Ropes
Ltd. v. Coastal Marine Constructions & Engg.
Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ)
324] judgment has followed the judgment in SMS
Tea Estates [SMS Tea Estates (P)
Ltd. v. Chandmari Tea Co. (P) Ltd. , (2011) 14
SCC 66 : (2012) 4 SCC (Civ) 777] . The counsel
for the appellant has placed reliance on para
22 of the judgment to contend that the
arbitration clause would be non -existent in
law, and unenforceable, till stamp duty is
adjudicated and paid on the substantive
contract. We hold that this finding is
erroneous, and does not lay down the correct
position in law. We have already held that an
arbitration agreement is distinct and
independent from the underlying substantive
commercial contract. Once the a rbitration
agreement is held to have an independent
existence, it can be acted upon, irrespective
of the alleged invalidity of the commercial
contract.”
8. Thereafter, the Bench of three learned Judges in
N.N. Global (supra) noted that the Judgment in Garware
(supra) was cited with approval by a Bench of three
learned Judges in Vidya Drolia and others v. Durga
13
Trading Corporation
7
. The Court set out paragraph s 146
and 147 of Vidya Drolia (supra) and doubted the
correctness of the said view and found it appropriate
to refer the findings in paragraphs -22 and 29 of
Garware (supra) as affirmed in paragraph s 146 & 147 of
Vidya Drolia (supra) to the Constitution Bench. We deem
it appropriate to now refer to the following paragraphs
in N.N. Global (supra):
“35. The next issue which arises is as to which
authority would exercise the power of
impounding the instrument under Section 33 read
with Section 34 of the Maharashtra Stamp Act,
in a case where the substantive contract
contains an arbitration agreement.
36. In an arbitration agreement, the disputes
may be referred to arbitration by three modes.
36.1. The first mode is where the appointment
of the arbitrator takes place by the parties
consensually in accordance with the terms of
the arbitration agreement, or by a designated
arbitral institution, without the intervention
of the court. In such a case, the
arbitrator/tribunal is obligated by Section 33
of the Stamp Act, 1899 (or the applicable State
Act) to impound the instrument, and direct the
parties to pay the requisite stamp duty (and
penalty, if any), and obtain an endorsement
from the Collector concerned. This would be
7
(2021) 2 SCC 1
14
evident from the provisions of Section 34 of
the Stamp Act which prov ides that “any person
having by law or consent of parties authority
to receive evidence ” is mandated by law to
impound the instrument, and direct the parties
to pay the requisite stamp duty.
36.2. The second mode of appointment is where
the parties fail t o make the appointment in
accordance with the arbitration agreement, and
an application is filed under Section 11 before
the Court to invoke the default power for
making the appointment. In such a case, the
High Court, or the Supreme Court, as the case
may be, while exercising jurisdiction under
Section 11, would impound the substantive
contract which is either unstamped or
inadequately stamped, and direct the parties
to cure the defect before the
arbitrator/tribunal can adjudicate upon the
contract.
36.3. The third mode is when an application is
filed under Section 8 before a judicial
authority for reference of disputes to
arbitration, since the subject -matter of the
contract is covered by an arbitration
agreement. In such a case, the judicial
authority will make the reference to
arbitration. However, in the meanwhile, the
parties would be directed to have the
substantive contract stamped in accordance
with the provisions of the relevant Stamp Act,
so that the rights and obligations emanating
from the substantive contract can be
adjudicated upon.”
15
D. SUBMISSION OF THE PARTIES
9. Shri Gagan Sanghi, learned Counsel, appeared on
behalf of the appellant (M/s N.N. Global Mercantile
Private Limited). Initially, since there was no
appearance for the first respondent, we appointed Shri
Gourab Banerji, learned Senior Counsel as Amicus
Curiae. We also heard Ms. Mal avika Trivedi, learned
Senior Counsel, appearing by way of intervention. Shri
K Ramakanth Reddy, learned Senior Counsel appeared
thereafter for the first respondent and made his
submissions.
10. Shri Gagan Sanghi would take us through the
provisions of the Stamp Act and the Act and contended
that Section 35 of the Stamp Act barred admission of a
not duly stamped instrument in evidence for any purpose
in Court. Furthermore, a Court could not act u pon such
an instrument. Not even for a collateral purpose , ran
the argument. There is an absolute bar. An Arbitration
Agreement, even if contained in a Clause, in a Work
Order or in other commercial contract, cannot have a
separate existence as found in N.N. Global (supra). The
16
Doctrine of the Arbitration Agreement being distinct
and having a separate existence, has been erroneously
understood in the context of Sections 33 and 35 of the
Stamp Act. The Judgment in SMS Tea Estates (supra)
ought not to have been overruled. The Principle of
Stare Decisis could not have been overlooked. The
learned Counsel drew our attention to the fact that
several foreign countries have laws, which contain
provisions similar to Sections 33 and 35 of the Stamp
Act. In fact, he would contend that there was no
occasion to make the reference as the main case stood
disposed of. He would submit that even in an
Application under Section 11 of the Act, the Court was
bound to observe the mandate of the law con tained in
Sections 33 and 35 of the Stamp Act. The law has been
correctly laid down in SMS Tea Estates (supra) and
Garware (supra) and it was also correctly upheld in
Vidya Drolia (supra). The amendment to Section 11 by
the insertion of sub-Section (6A), could not authorise
a Court to overlook the dictate of Sections 33 and 35
of the Stamp Act.
17
11. Smt. Malvika Trivedi, learned Senior Counsel,
projected the same complaint against the view taken in
N.N. Global (supra). She, in fact, drew our attention
to the impact of the view taken in N.N. Global (supra)
to the proceedings under Section 9 of the Act. It is
her case that the requirement to comply with Sections
33 and 35 of the Stamp Act, would not stand displaced ,
even in an Application under Section 9 of the Act.
12. Shri Gourab Banerji, learned Amicus, contended
that actually, there were parts of Garware (supra),
Vidya Drolia (supra) and N.N. Global (supra), which did
lay down the law correctly. He began by pointing out
that the Bench in N.N. Global (supra) was not correct
in proceeding on the basis that , an Arbitration
Agreement, was not required to be stamped. He drew our
attention to Article 5 of Schedule I of the Maharashtra
Stamp Act, 1958 in this regard. It is his submission
that the existence and/or validity of an Arbitration
Agreement is not affected by the provisions of the
Stamp Act. Non -payment of the stamp duty will not
invalidate the instrument. It is a curable defect. A
true reading of Section 11(6A) would establish that the
18
impounding of an unstamped or deficiently stamped
instrument, is not to be done by the Judge under Section
11 but by the Arbitrator appointed under Section 11.
Section 11(6A) compels the Court to confine its
examination to the question of the existence of the
Arbitration Agreement. In view of the fact that,
neither Garware (supra) nor N.N. Global (supra) laid
down the law correctly, he requested that the reference
be reformulated as indicated later.
13. Relying upon the Judgment of this Court in
Hindustan Steel Ltd. v. Dilip Construction Company
8
, it
is contended that an unstamped document can be acted
upon, after payment of duty and penalty. Being a
curable defect, it could not be found that an unstamped
instrument did not exist in the eye of law. He drew our
attention to the Judgment of the Privy Council in
Lachmi Narayan Agarwalla and Others v. Braja Mohan
Singh (SINCE DECEASED)
9
, to contend that an unstamped
instrument, with penalty paid, became effective in law.
He further drew support from the following Judgments:
8
(1969) 1 SCC 597
9
51 Indian Appeals 332
19
i. Joyman Bewa v. Easin Sarkar
10
;
ii. Gulzari Lal Marwari v. Ram Gopal
11
iii. Purna Chandra Chakrabarty and others v. Kalipada
Roy and another
12
.
14. The aforesaid case law, unerringly points to the
conclusion that failure to stamp a document, did not
affect the validity of the document. It merely rendered
the document inadmissible in evidence. From the
Judgment of the Pakistan Supreme Court in United
Insurance Company of Pakistan Limited v. Hafiz Muhammad
Siddique
13
, the following words of Dorab Patel, J., are
enlisted before us:
“It would be against all cannons of
construction to enlarge the meaning of the
words in Section 35 so as to render invalid
instruments which fal l within mischief of the
section.”
15. The learned Amicus would point out that stamp duty
is levied with reference to the instrument and not the
transaction. The Stamp Act is a consolidating Act. It
10
AIR 1926 Calcutta 877
11
ILR 1937 1 Calcutta 257
12
AIR 1942 Calcutta 386
13
PLD 1978 SC 279
20
is a fiscal law. Securing revenue was the aim. It cannot
be used to clothe a litigant with an arm of
technicality. He drew our attention to Section 5 of the
Act interdicting judicial intervention . He pointed out
Section 8 of the Act, which, after the amend ment in the
year 2015, permits disallowing of making a reference
to arbitration, only if the Court found prima facie
that no valid Arbitration Agreement existed. Section
8, he pointed out, did refer to ‘validity’. He took us
through the decision in SMS Tea Estates (supra), in the
context of the law laid down in SBP (supra), by the
Constitution Bench, the Report of the Law Commission
of India and emphasised the need for minimal
interference and to give full meaning t o Section
11(6A), by ensuring minimal interference . He drew our
attention to the discussion by the high -level
Committee, which preceded the amendment in Section 11.
He commended for the Court’s acceptance , the view taken
by this Court in Duro Felguera
14
, wherein, Justice
Kurian Joseph, speaking for the Court inter alia, held
in the post Section 11(6A) scenario, as follows:
14
(2017) 9 SCC 729
21
“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. [SBP and
Co. v. Patel Engg. Ltd. , (2005) 8 SCC 618]
and Boghara Polyfab [National Insurance Co.
Ltd. v. Boghara Polyfab (P) Ltd. , (2009) 1 SCC
267 : (2009) 1 SCC (Civ) 117] . 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(6 -A)
ought to be respected.”
16. The learned Amicus would point out that non -
stamping did not render the agreement null and void.
In law and in point of fact, an unstamped instrument
bears life. He would point out that Duro Felguera
(supra) was approved by a Bench of three learned Jud ges
in Mayavati Trading (supra). He would attack the
finding in Garware (supra) that an unstamped instrument
was void as being incorrect. He would submit that what
is required in law, after the insertion of sub-Section
(6A) is clear as daylight. The existence of an
Arbitration Agreement, is all that should detain the
Judge in an application under Section 11 . No doubt, he
would point out that there may be cases where the actual
22
situation, which occasioned the Judgment in Vidya
Drolia (supra), may exist. This means that since
Section 5 of the Act makes certain disputes non-
arbitrable, it may detain a Judge, who is approached
under Section 11, to dissuade him from making a
reference. There may arise occasions, which may leave
the Judge with little choice but to decline the
reference. An instance may be an agreement demonstrat ed
to be made by a minor or a person of unsound mind. Such
exceptional cases apart, the learned Amicus would
request the Court to draw comfort from the thought that
the Arbitrator is fully competent by virtue of the
Doctrine of Kompetenz-Kompetenz, which stands
enshrined in Section 16 of the Act, to deal with all
sorts of objections. Having regard to the clear
legislative intent, discernible from the Report of the
Law Commission and the amendment to Section 11 of the
Act, which finds its ec ho in the change brought about
in Section 8 of the Act, by the same amendment, the
effort must be to facilitate an unhindered and smooth
passage for an Application seeking reference to
arbitration. The learned Amicus with reference to
23
paragraph-18 of SBP (supra), submits that the Court in
Garware (supra) erred in holding that only if the
Arbitrator was appointed, without intervention of the
Court, Section 16 would have full play. It is pointed
out that the Judgment in SBP (supra) will not have
life, after the amendment in 2015. He would also point
out that the Court in Garware (supra) erred in
paragraph-19, when it suggested that the Court was only
giving effect to a mandatory enactment, which purported
to protect the public reven ue. While it is correct, it
is pointed out that an agreement enforceable by law is
a contract and Section 2(g) of the Contract Act ,
provides that an agreement no t enforceable by law, is
said to be void, non-stamping or inadequate stamping
would not make an instrument void. It is pointed out
that the suggestion that, an unstamped document did not
become a contract, and that it was, therefore,
unenforceable in law was incorrect. He also would find
fault with the Court in Garware (supra), when it found
that an unstamped document would not ‘exist’ as a
matter of law. The solution suggested by the learned
Amicus is that an Arbitrator may be appointed and, to
24
allow the Arbitral Tribunal to fulfil its duties under
the Stamp Act. In other words, it is pointed out, in
keeping with the purpose of Section 11(6A) and the need
for minimal interference, as contemplated in Section 5
of the Act, on a prima facie examination as to existence
of an Arbitration Agreement, a reference must be made.
He further also would point out that the Judgment of
Justice Sanjiv Khanna in Vidya Drolia (supra) may
require a revisit. With reference to paragraph -31,
wherein Sanjiv Khanna, J., felt bound by the
Constitution Bench Judgment in SBP (supra), it is
pointed out that the learned Judge ignored the
amendments to Sections 8 and 11 brought about by the
amendment in 2015. He would further point out that in
paragraphs-81 to 154, under the ca ption ‘Who decides
non-arbitrability’, he calls for clarity to be brought.
In paragraph-98, it is pointed out that an error was
occasioned in coming to the conclusion that Sections 8
and 11 were complementary in nature and in exercising
power under the two provisions, the jurisdiction was
complementary. It is pointed out that the views of
Justice Sanjiv Khanna appear to be inconsistent with
25
that of the three-Judge Bench in Mayavati (supra). It
is submitted by the learned Amicus that the
observations of Justice Sanjiv Khanna, in paragraphs -
146, 147.1, 147.9 and paragraph -147.10 may require
recalibration. Paragraphs -146 to 154, it is the stand
of the Amicus Curiae, may have to be fine -tuned.
Learned Amicus would point out that the conclusion of
N.V. Ramana, J. in Paragraphs-237 and 244 may be
endorsed to the extent of inconsistency with that of
Justice Sanjiv Khanna. Coming to N.N. Global (supra),
the learned Amicus, apart from pointing out that
contrary to what was held, viz., that an Arbitration
Agreement was not exigible to stamp duty, it was,
indeed, liable. It is pointed out that the ratio in
paragraphs-22 and 26, would have to be supported. It
is the contention of the learned Amicus that Sections
8 and 11 of the Act could not be equated. The standard
to be applied may be the same, i.e., a prima facie
satisfaction of the existence of the Arbitration
Agreement. In Section 11, the Court operates as a
substitute of an Appointing Authority. There is only a
narrow scope. It is his case, that in an Application
26
under Section 8, the scope may be wider as one has to
see whether there was a valid Arbitration Agreement.
It is his submission that unless it is patently void,
‘subject matter arbitrability ’ should be left to the
Arbitrator. In a Section 8 Application, the Court
should not undertake the exercise of examin ing of the
issue relating to the stamp duty, which goes to
admissibility and not jurisdiction. The word
‘existence’ in Section 11(6A) meant legally enforceable
existence and not mere presence in the contract. The
scope of the Court must be circumscribed to narrow the
prima facie examination of:
i. Formal validity of the Arbitration Agreement at
the stage of contract formation, including as to
whether it is in writing;
ii. Whether the core contractual ingredients were
fulfilled?;
iii. On rare occasions, whether the dispute was
arbitrable;
17. The adjudication of stamp duty is a time -consuming
affair and it would not align with the goal of the Act,
27
which is to ensure the expeditious appointment of
Arbitrators and the conclusion of the proceedings with
the least judicial interference. If the Court refrained
from interfering on the score of disputes as to sta mp
duty and allow the Arbitrator to deal with the matter,
which, he is, in law, fully competent to deal with, it
would promote the very cause of speedy dispute
resolution, which is the very goal of the institution
of arbitration.
18. At the time of hearing Shr i K. Ramakanth Reddy,
learned senior counsel appeared for the first
respondent. He would contend that the court must adopt
a harmonious construction as between the Stamp Act and
the Act. He emphasises the importance of conforming to
Section 5 of the Act. H e drew our attention to the
judgment of this Court in Great Offshore Ltd. v.
Iranian Offshore Engg. & Construction Co.
15
In the said
judgment which is authored by a learned Single Judge ,
while dealing with a petition under Section 11 of the
Act, inter alia, held:
15
(2008) 14 SCC 240
28
55. Second, the plain language of Section 7
once again governs my conclusion. Section 7
does not require that the parties stamp the
agreement. It would be incorrect to disturb
Parliament's intention when it is so clearly
stated and when it in no way conflicts with
the Constitution.
60. Technicalities like stamps, seals and even
signatures are red tape that have to be removed
before the parties can get what they really
want—an efficient, effective and potentially
cheap resolution of their dispute.
The autonomie de la volonté doctrine is
enshrined in the policy objectives of the
United Nations Commission on International
Trade Law (UNCITRAL) Model Law on International
Commercial Arbitration, 1985, on which our
Arbitration Act is based. (See Preamble to the
Act.) The courts must implement legislative
intention. It would be improper and undesirable
for the courts to add a number of extra
formalities not envisaged by the legi slation.
The courts' directions should be to achieve the
legislative intention.
19. He drew our attention to the judgment of this Court
in Commissioner of Income Tax v. Hindustan Bulk
Carriers
16
, inter alia, that a Court should, faced with
two interpretations avoid the construction which
reduces the legislation to futility but accept a bolder
construction which will produce an effective result qua
the purpose sought to be achieved.
16
(2003) 3 SCC 57
29
20. Shri Debesh Panda, learned counsel appearing fo r
the Applicant (Intervention) in I.A.No.199969 of 2022
submitted that the Act constitutes a complete Code.
Since Section 5 of the Act contains a non -obstante
clause which declares that “notwithstanding anything
contained in any other law for the time bei ng in force”
despite the Stamp Act on the principle of minimum
interference except as provided in Part -I of the Act,
the Court should not be detained by Sections 33 and 35
of the Stamp Act. He also reiterates that what is
required under Section 11 is a prima facie
satisfaction. Parliament did not require the
consideration of validity when it enacted Section 11
(6A). There is a conscious distinction between Sections
8 and 11. In other words, there is a distinction between
the expressions ‘existence’ and ‘validity’. The width
of powers under Section 16 is untrammelled , it is
contended.
E. ANALYSIS
21. In view of the submission made by the learned
Amicus that the Court in N.N. Global (supra) was in
error in proceeding on the basis that the Arbit ration
30
Agreement would not be exigible to stamp duty , the very
premise of the Order of Reference would stand removed.
The reformulated question sans the words, ‘which is not
chargeable to payment of stamp duty’ , and words,
‘unenforceable or invalid’, would, therefore, be as
follows:
“Whether the statutory bar contained in Section
35 of the Stamp Act applicable to instruments
chargeable to stamp duty under Section 3 read
with the Schedule to the Act, would also render
the arbitration agreement contained in such an
instrument, as being non -existent, pending
payment of stamp duty on the substantive
contract/instrument?”
F. THE ACT
22. Section 2(b) of the Act defines an Arbitration
Agreement to be ‘ an agreement referred to in Section
7’.
23. Section 5 of the Act declares as follows: -
“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.”
24. Section 7 of the Act reads as follows:
“7 Arbitration agreement. —
31
(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 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.”
25. Section 11 deals with Appointment of Arbitrators.
Since we are concerned with the impact of Section
11(6A), which was inserted by Act 3 of 2016 w.e.f.
23.10.2015, we deem it appropriate to refer to the
same:
32
“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), shall, notwithstanding any
judgment, decree or order of any Court, confine
to the examination of the existence of an
arbitration agreement.”
It must be noticed that the aforesaid provision
stands omitted by Act 33 of 2019. But Act 33 of 2019
has not been brought into force.
G. WHAT LED TO THE INSERTION OF SECTION 11(6A )?
26. It is important to delve into the past and enquire
as to what led to the insertion of sub -Section (6A) in
Section 11 of the Act. The Act was passed in the year
1996. The Act is, undoubtedly, based on the UNCITRAL
MODEL Law. The Hundred and Seventy -Sixth Report of the
Law Commission of India made its recom mendations for
enacting amendments to the Act. This is followed by the
Justice B.P. Saraf Committee Report , which was
submitted on 29.01.2005. The nature of the power
exercised by the courts under Section 11 of the Act,
was the subject matter of considerab le case law.
Suffice it to notice, a Bench of seven learned Judges,
with a lone dissent, in SBP (supra), proceeded to hold
33
that the power exercised under Section 11(6) was a
judicial power and not an administrative power. In the
Majority Judgment, the Court had occasion to consider
the impact of Section 16 of the Act, which incorporates
the Principle of Kompetenz -Kompetenz. The Court held,
inter alia, as follows:
“12. … When the Tribunal decides these two
questions, namely, the question of
jurisdiction and the question of exceeding the
scope of authority or either of them, the same
is open to immediate challenge in an appeal,
when the objection is upheld and only in an
appeal against the final award, when the
objection is overruled. Sub -section (5)
enjoins that if the Arbitral Tribunal overrules
the objections under sub -section (2) or (3),
it should continue with the arbitral
proceedings and make an arbitral award. Sub -
section (6) provides that a party aggrieved by
such an arbitral award overruling the plea on
lack of jurisdiction and the exceeding of the
scope of authority, may make an application on
these grounds for setting aside the award in
accordance with Section 34 o f the Act. The
question, in the context of sub -section (7) of
Section 11 is, what is the scope of the right
conferred on the Arbitral Tribunal to rule upon
its own jurisdiction and the existence of the
arbitration clause, envisaged by Section
16(1), once the Chief Justice or the person
designated by him had appointed an arbitrator
after satisfying himself that the conditions
for the exercise of power to appoint an
arbitrator are present in the case. Prima
facie, it would be difficult to say that in
spite of the finality conferred by sub -section
(7) of Section 11 of the Act, to such a decision
34
of the Chief Justice, the Arbitral Tribunal can
still go behind that decision and rule on its
own jurisdiction or on the existence of an
arbitration clause. It also app ears to us to
be incongruous to say that after the Chief
Justice had appointed an Arbitral Tribunal, the
Arbitral Tribunal can turn round and say that
the Chief Justice had no jurisdiction or
authority to appoint the Tribunal, the very
creature brought into existence by the exercise
of power by its creator, the Chief Justice. The
argument of the learned Senior Counsel, Mr K.K.
Venugopal that Section 16 has full play only
when an Arbitral Tribunal is constituted
without intervention under Section 11(6) of th e
Act, is one way of reconciling that provision
with Section 11 of the Act, especially in the
context of sub -section (7) thereof. We are
inclined to the view that the decision of the
Chief Justice on the issue of jurisdiction and
the existence of a valid a rbitration agreement
would be binding on the parties when the matter
goes to the Arbitral Tribunal and at subsequent
stages of the proceeding except in an appeal
in the Supreme Court in the case of the
decision being by the Chief Justice of the High
Court or by a Judge of the High Court
designated by him.”
(Emphasis supplied)
27. We may next notice the Judgment rendered by a Bench
of two learned Judges in SMS Tea Estates (supra). They
dealt with three questions. What is of relevance, is
the second question, which was, ‘whether an Arbitration
Agreement in an unregistered instrument, which is not
35
duly stamped, is valid and enforceable’. The Court,
inter alia, held as follows:
“20. The Scheme for Appointment of Arbitrators
by the Chief Justice of Gauhati High Court,
1996 requires an application under Section 11
of the Act to be accompanied by the original
arbitration agreement or a duly certified copy
thereof. In fact, such a requirement is found
in the scheme/rules of almost all the High
Courts. If what is produced is a certified copy
of the agreement/contract/instrument
containing the arbitration clause, it should
disclose the stamp duty that has been paid on
the original. Section 33 casts a duty upon
every court, that is, a person having by law
authority to receive evidence (as also every
arbitrator who is a person having by consent
of parties, authority to receive evidence)
before whom an unregistered instrument
chargeable with duty is produced, to examine
the instrument in order to ascertain whether
it is duly stamped. If the court comes to the
conclusion that the instrument is not duly
stamped, it has to impound the document and
deal with it as per Section 38 of the Stamp
Act.
xxx xxx xxx
22. We may therefore sum up the procedure to
be adopted where the arbitration clause is
contained in a document which is not registered
(but compulsorily registerable) and which is
not duly stamped:
22.1. The court should, before admitting any
document into evidence or acting upon such
36
document, examine whether the
instrument/document is duly stamped and
whether it is an instrument which is
compulsorily registerable.
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 f ollow the procedure under
Sections 35 and 38 of the Stamp Act.
22.3. If the document is found to be duly
stamped, or if the deficit stamp duty and
penalty is paid, either before the court or
before the Collector (as contemplated in
Section 35 or 40 Sectio n of the Stamp Act),
and the defect with reference to deficit stamp
is cured, the court may treat the document as
duly stamped.”
(Emphasis supplied)
This view has been followed subsequently in Garware
(supra) and also in Dharmaratnakara Rai Bahadur Arcot
Narainswamy Mudaliar Chattram v. Bhaskar Raju & Bros.
17
We have omitted repetition of paragraphs -19 and 21,
which have been referred to earlier.
17
(2020) 4 SCC 612
37
28. Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd.
and another
18
was a case of international arbitration
arising under Section 45 of the Act . With a Bench of
three learned Judges deciding the case, the majority
with Justice Y.K. Sabharwal dissenting, took the view
that in deciding the question as to whether a reference
must be made to arbitration under Section 45, the
approach must be to find out whether a prima facie case
is made out and whether it was ‘plainly arguable’ that
an Arbitration Agreement was in existence. The Court,
in other words, took the view that there must be a
prima facie satisfaction that there was an Arbitration
Agreement, which is not null and void, inoperative or
incapable of being performed. Section 45, it must be
noticed, at the time when the case was decided, read
as follows:
“45. Power of judicial authority to refer
parties to arbitration. -Notwithstanding
anything contained in Part I or in the Code of
Civil Procedure , 1908 (5 of 1908), a judicial
authority, when seized of an action in a matter
in respect of which the parties have made an
agreement referred to in section 44, shall, at
the request of one of the parties or any person
18
(2005) 7 SCC 234
38
claiming through or under him, refer the
parties to arbitration, unless it finds that
the said agreement is null and void,
inoperative or incapable of being performed.”
(Emphasis supplied)
29. It was on the aforesaid statutory text that Justice
B.N. Srikrishna took the view that the finding as to
the existence of the Arbitration Agreement, was to be
a prima facie finding. Justice D.M. Dharmadhikari
agreed with Justice B.N. Srikrishna with certain
additions.
30. In National Insurance Company Limited v. Boghara
Polyfab Private Limited
19
, the question, which fel l
for consideration before the Bench of two learned
Judges, was as to in what circumstances, a Court would
refuse to refer a dispute relating to quantum to
arbitration even though the contract contemplated a
reference of such a dispute to arbitration. It al so
fell for consideration, as to whether the resistance
to the reference on the ground that the applicant under
Section 11 of the Act, received the amount and issued
a full and final discharge voucher, which he contented
19
(2009) 1 SCC 267
39
was issued under undue influence, c oercion and economic
compulsion, justified the refe rence. Justice R.V.
Raveendran, speaking for the Court, inter alia,
purported to follow the Judgment in SBP (supra) and
held as follows:
“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. [(2005) 8 SCC 618] 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:
40
(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 payme nt 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.
23. It is clear from the scheme of the Act as
explained by this Court in SBP & Co. [(2005) 8
SCC 618] , that in regard to issues falling
under the second category, if raised in any
application under Section 11 of the Act, the
Chief Justice/his designate may decide them,
if necessary, by taking evidence.
Alternatively, he may leave those issues open
with a direction to the Arbitral Tribunal to
decide the same. If the Chief Justice or his
designate chooses to examine the issue and
decides it, the Arbitral Tribunal cannot re -
examine the same issue. The Chief Justice/his
designate will, in choosing whether he will
decide such issue or leave it to the Arbitral
Tribunal, be guided by the object of the Act
(that is expediting the arbitration process
with minimum judicial intervention). Where
allegations of forgery/fabrication are made in
regard to the document rec ording discharge of
41
contract by full and final settlement, it would
be appropriate if the Chief Justice/his
designate decides the issue.
24. What is however clear is when a respondent
contends that the dispute is not arbitrable on
account of discharge of the contract under a
settlement agreement or discharge voucher or
no-claim certificate, and the claimant
contends that it was obtained by fraud,
coercion or undue influence, the issue will
have to be decided either by the Chief
Justice/his designate in the proceedings under
Section 11 of the Act or by the Arbitral
Tribunal as directed by the order under Section
11 of the Act. A claim for arbitration cannot
be rejected merely or solely on the ground that
a settlement agreement or discharge voucher had
been executed by the claimant, if its validity
is disputed by the claimant.”
31. It is to be noticed that, at the time when the
Court rendered SBP (supra) and SMS Tea Estates (supra),
Section 11(6) contemplated appointment being made of
an Arbitrator, essentially on the failure of parties
to agree on the appointment or to make the appointment.
It is in the context of the views expressed by the
Courts, as aforesaid, that the La w Commission of India
submitted the Two Hundred and Forty -Sixth Report in
August, 2014. In the said Report, after referring to
the Judgment in SBP (supra) and the views expressed in
42
National Insurance (supra), the Law Commission, inter
alia, submitted the following recommendations:
“31. The Commission is of the view that, in
this context, the same test regarding scope and
nature of judicial intervention, as applicable
in the context of Section 11, should also apply
to Sections 8 and 45 of the Act - since the
scope and nature of judici al intervention
should not change upon whether a party
(intending to defeat the arbitration
agreement) refuses to appoint an arbitrator in
terms of the arbitration agreement, or moves a
proceeding before a judicial authority in the
face of such an arbitrat ion agreement.
32. In relation to the nature of intervention,
the exposition of the law is to be found in
the decision of the Supreme Court in Shin Etsu
Chemicals Co. Ltd. v. Aksh Optifibre, (2005) 7
SCC 234, (in the context of Section 45 of the
Act), where the Supreme Court has ruled in
favour of looking at the issues/controversy
only prima facie.
33. It is in this context, the Commission has
recommended amendments to Sections 8 and 11 of
the Arbitration and Conciliation Act, 1996. The
scope of the jud icial intervention is only
restricted to situations where the
Court/Judicial Authority finds that the
arbitration agreement does not exist or is null
and void. In so far as the nature of
intervention is concerned, it is recommended
that in the event the Co urt/Judicial Authority
is prima facie satisfied against the argument
challenging the arbitration agreement, it
shall appoint the arbitrator and/or refer the
parties to arbitration, as the case may be. The
amendment envisages that the judicial
authority shall not refer the parties to
arbitration only if it finds that there does
not exist an arbitration agreement or that it
43
is null and void. If the judicial authority is
of the opinion that prima facie the arbitration
agreement exists, then it shall refer the
dispute to arbitration, and leave the existence
of the arbitration agreement to be finally
determined by the arbitral tribunal. However,
if the judicial authority concludes that the
agreement does not exist, then the conclusion
will be final and not prima facie. The
amendment also envisages that there shall be a
conclusive determination as to whether the
arbitration agreement is null and void. In the
event that the judicial authority refers the
dispute to arbitration and/or appoints an
arbitrator, Under Sec tions 8 and 11
respectively, such a decision will be final and
non-appealable. An appeal can be maintained
Under Section 37 only in the event of refusal
to refer parties to arbitration, or refusal to
appoint an arbitrator. ”
(Emphasis supplied)
32. It is, accordingly, accepting the Report that
Section 11(6A) came to be inserted. After having set
out the events, which led to the insertion of Section
11(6A), we may take the narrative forward. In Duro
Felguera (supra), we have noticed the view taken in
paragraph 59 in an earlier part of this judgment , in
essence, the duty to find out whether an arbitration
agreement exists or not. The learned Judge also made
observations in paragraph 48 wherein after quoting
Section 11(6A) he held as follows:
44
“…From a reading of Section 11(6 -A), the
intention of the legislature is crystal
clear i.e. the court should and need only
look into one aspect —the 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.”
33. In Garware (supra) a Bench of two learned Judges
dealt with a case under Section 11(6A) itself and that
too in the context of the Maharashtra Stamp Act, 1958.
The contention raised by the appellant was that the
Judgment in SMS Tea Estates (supra) continues to apply
even after the introduction of Section 11(6A). In other
words, notwithstanding the insertion of Section 11(6A),
the procedure contemplated in SMS Tea Estates (supra)
would have to be followed. The Court went on to hold,
inter alia, as noticed by us already and which has been
referred to in N.N. Global (supra):
22. When an arbitration Clause is contained "in
a contract", it is significant that the
agreement only becomes a contract if it is
enforceable by law. We have seen how, under the
Indian Stamp Act, an agreement does not become
45
a contract, namely, that it is n ot enforceable
in law, unless it is duly stamped. Therefore,
even a plain reading of Section 11(6A), when
read with Section 7(2) of the 1996 Act and
Section 2(h) of the Contract Act, would make
it clear that an arbitration Clause in an
agreement would not exist when it is not
enforceable by law. This is also an indicator
that SMS Tea Estates has, in no manner, been
touched by the amendment of Section 11(6A).
XXX XXX XXX
29. This judgment in Hyundai Engg. case is
important in that what was specificall y under
consideration was an arbitration Clause which
would get activated only if an insurer admits
or accepts liability. Since on facts it was
found that the insurer repudiated the claim,
though an arbitration Clause did "exist", so
to speak, in the polic y, it would not exist in
law, as was held in that judgment, when one
important fact is introduced, namely, that the
insurer has not admitted or accepted liability.
Likewise, in the facts of the present case, it
is clear that the arbitration Clause that is
contained in the sub-contract would not "exist"
as a matter of law until the sub -contract is
duly stamped, as has been held by us above.
The argument that Section 11(6A) deals with
"existence", as opposed to Section 8, Section
16, and Section 45, which dea l with "validity"
of an arbitration agreement is answered by this
Court's understanding of the expression
"existence" in Hyundai Engg. Case as followed
by us.”
34. We may notice that in Section 45 of the Act, for
the words ‘unless it finds’, by Act 33 of 2019, the
words ‘unless it prima facie finds’, were substituted.
46
This amounted to a legislative recognition of the
position taken by this Court through the Judgment
rendered by Justice B. N. Srikrishna in SMS Tea Estates
(supra).
35. In Mayavati Trading (P) Ltd. v. Pradyuat Deb
Burman
20
, a Bench of three learned Judges of this Court
inter alia held as follows:
10. This being the position, it is clear
that the law prior to the 2015 Amendment
that has been laid down by this Court, which
would have included going into whether
accord and satisfaction has taken place,
has now been legislatively overruled. This
being the position, it is difficult to
agree with the reason ing contained in the
aforesaid judgment [ United India Insurance
Co. Ltd. v. Antique Art Exports (P) Ltd. ,
(2019) 5 SCC 362 : (2019) 2 SCC (Civ) 785],
as Section 11(6 -A) is confined to the
examination of the existence of an
arbitration agreement and is to b e
understood in the narrow sense as has been
laid down in the judgment in Duro Felguera,
SA [Duro Felguera, SA v. Gangavaram Port
Ltd., (2017) 9 SCC 729 : (2017) 4 SCC (Civ)
764] — see paras 48 & 59 [Ed. : The said
paras 48 & 59 of Duro Felguera,
SA v. Gangavaram Port Ltd. , (2017) 9 SCC
729 : (2017) 4 SCC (Civ) 764, for ready
reference, read as follows:“ 48. Section
11(6-A) added by the 2015 Amendment, reads
as follows:“11. (6-A) The Supreme Court or,
as the case may be, the High Court, while
20
(2019) 8 SCC 714
47
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. ”(emphasis
supplied)From a reading of Secti on 11(6-A),
the intention of the legislature is crystal
clear i.e. the court should and need only
look into one aspect —the 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.***59. The scope of the power
under Section 1 1(6) of the 1996 Act was
considerably wide in view of the decisions
in SBP & Co. v. Patel Engg. Ltd., (2005) 8
SCC 618 and National Insurance Co.
Ltd. v. Boghara Polyfab (P) Ltd. , (2009) 1
SCC 267 : (2009) 1 SCC (Civ) 117. 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(6 -
A) ought to be respected.”] .
36. The view taken in Garware (supra) [paragraphs -22
and 29 (supra)], came to be specifically approved by a
48
Bench of three learned Judges in the Judgment reported
in Vidya Drolia (supra). Therein, Justice Sanjiv Khanna
wrote for the Court and Justice N.V. Ramana
supplemented with his own Judgment. The Judgment was
rendered on a Reference dated 28.02.2009 and the
question was, whether landlord -tenant disputes,
governed by provisions of the Transfer of Property Act
were arbitrable or not. Apart from the said issue, the
other conundrum was as to who would decide, viz., the
Court at the reference stage, or the Arbitral Tribunal
in the arbitration proceedings. The Court also found
it fit to go into the question as to the scope and
ambit of the jurisdiction at the reference stage. It
is in the course of his Judg ement that he made the
following observations in pargraphs -146 and 147, 147.1
of Vidya Drolia (supra):
“146. We now proceed to examine the question,
whether the word “existence” in Section 11
merely refers to contract formation (whether
there is an arbitration agreement) and excludes
the question of enforcement (validity) and
therefore the latter falls outs ide the
jurisdiction of the court at the referral
stage. On jurisprudentially and textualism it
is possible to differentiate between existence
of an arbitration agreement and validity of an
49
arbitration agreement. Such interpretation can
draw support from the plain meaning of the word
“existence”. However, it is equally possible,
jurisprudentially and on contextualism, to
hold that an agreement has no existence if it
is not enforceable and not binding. Existence
of an arbitration agreement presupposes a vali d
agreement which would be enforced by the court
by relegating the parties to arbitration.
Legalistic and plain meaning interpretation
would be contrary to the contextual background
including the definition clause and would
result in unpalatable consequenc es. A
reasonable and just interpretation of
“existence” requires understanding the
context, the purpose and the relevant legal
norms applicable for a binding and enforceable
arbitration agreement. An agreement evidenced
in writing has no meaning unless the parties
can be compelled to adhere and abide by the
terms. A party cannot sue and claim rights
based on an unenforceable document. Thus, there
are good reasons to hold that an arbitration
agreement exists only when it is valid and
legal. A void and unenfo rceable understanding
is no agreement to do anything. Existence of
an arbitration agreement means an arbitration
agreement that meets and satisfies the
statutory requirements of both the Arbitration
Act and the Contract Act and when it is
enforceable in law.
147. We would proceed to elaborate and give
further reasons:
147.1. In Garware Wall Ropes Ltd. [Garware
Wall Ropes Ltd. v. Coastal Marine
Constructions & Engg. Ltd. , (2019) 9 SCC 209 :
50
(2019) 4 SCC (Civ) 324] , this Court had
examined the question of stamp duty in an
underlying contract with an arbitration clause
and in the context had drawn a distinction
between the first and second part of Section
7(2) of the Arbitration Act, albeit the
observations made and quoted above with
reference to “existence” and “validity” of the
arbitration agreement being apposite and
extremely important, we would repeat the same
by reproducing para 29 thereof : (SCC p. 238)
“29. This judgment in Hyundai Engg.
case [United India Insurance Co.
Ltd. v. Hyundai Engg. & Construction Co. Ltd. ,
(2018) 17 SCC 607 : (2019) 2 SCC (Civ) 530] is
important in that what was specifically under
consideration was an arbitration clause which
would get activated only if an insurer admits
or accepts liability. Since on facts it was
found that the insurer repudiated the claim,
though an arbitration clause did “exist”, so
to speak, in the policy, it would not exist in
law, as was held in that judgment, when one
important fact is introduced, namely, that the
insurer has not admitted or accepted liability.
Likewise, in the facts of the present case, it
is clear that the arbitration clause that is
contained in the sub-contract would not “exist”
as a matter of law until the sub -contract is
duly stamped, as has been held by us above.
The argument that Section 11(6 -A) deals with
“existence”, as opposed to Section 8, Section
16 and Section 45, which deal with “validity”
of an arbitration agreement is answered by this
Court's understanding of the expression
“existence” in Hyundai Engg. case [United
India Insurance Co. Ltd. v. Hyundai Engg. &
51
Construction Co. Ltd. , (2018) 17 SCC 607 :
(2019) 2 SCC (Civ) 530] , as followed by us.”
Existence and validity are intertwined, and
arbitration agreement does not exist if it is
illegal or does not satisfy mandatory legal
requirements. Invalid agreement is no
agreement.”
37. It is thereafter that in N.N. Global (supra), the
Court doubted the correctness of the view taken in the
aforesaid paragraphs and referred to the findings in
paragraph-22 and 29 in Garware (supra), which stood
affirmed in paragraphs -146 and 147 of Vidya Drolia
(supra). We may notice that par agraph-147 of Vidya
Drolia (supra) purported to give reasons in regard to
what was stated in paragraph -146. Paragraph-147 is
followed by paragraphs- 147.1 to 147.11. However, what,
apparently, the Court in N.N. Global (supra) doubted,
appears to be paragraphs-146 and 147, which we
understand in the context of this case, is to be
confined to paragraph -147.1.
38. We may resume survey of the Act to the extent it
is relevant. Section 16 enshrines the Principle of
Kompetenz-Kompetenz. It reads as follows:
52
“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 respec t 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 agre ement
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 invalidity 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.
(3) A plea that the arbitral tribunal is
exceeding the scope of its authority shall be
raised as soon as the matter alleged to be
beyond 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), admit a later plea if it considers
the delay justified.
(5) The arbitral tribunal shall decide on a
plea 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 proceedings and make an
arbitral award.
53
(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.”
H. THE SCHEME OF THE STAMP ACT
39. Section 2(6) defines the word ‘chargeable’ as
follows:
“2(6) “Chargeable”. — ―chargeable means, as
applied to an instrument executed or first
executed after the commencement of this Act,
chargeable under this Act, and, as applied to
any other instrument, chargeable under the law
in force in India when such instrument was
executed or, where several persons executed the
instrument at different times, first
executed:”
40. Section 2(11) defines the words ‘duly stamped’ as
follows:
“2(11) “Duly stamped”. — duly stamped, as
applied to an instrument, means that the
instrument bears an adhesive or impressed stamp
of not less than the proper amount and that
such stamp has been affixed or used in
accordance with the law for the time being in
force in India:”
41. Section 2(12) defines the word ‘executed’ with
reference to instruments as meani ng ‘signed’.
42. Section 2(14) defines the word ‘instrument’ as
‘including every document, by which any right or
54
liability is or purports to be created, transferred,
limited, extended, extinguished or recorded’.
43. Section 3 deals with the instruments indicated
therein being chargeable with duty , subject to what is
provided by way of exemptions contained in Schedule I.
44. Section 4 contemplates a situation, where there
are several instruments.
45. There are other provisions, which relate to other
transactions. Section 17 deals with the time of
stamping of instruments. Section 17 provides for
instruments executed in India. It declares that such
instruments, chargeable with duty, shall be stamped
before or at the time of execution. Section 31 deals
with adjudication as to proper stamp. The adjudication
is to be made by the Collector. Chapter IV contains
Section 33 and the Chapter heading is ‘Instruments not
duly stamped’. In the Stamp Act, Section 33 reads as
follows:
“33. Examination and impounding of
instruments. —
(1) Every person having by law or consent of
parties authority to receive evidence, and
every person in charge of a pubic office,
except an officer of police, before whom any
55
instrument, chargeable, in his opinion, with
duty, is produced or comes in the pe rformance
of his functions, shall, if it appears to him
that such instrument is not duly stamped,
impound the same.
(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 in force in India when such instrument was
executed or first executed: Provided that —
(a) nothing herein contained shall be deemed
to require any Magistrate o r Judge of a
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 XII or Chapter XXXVI of the Code of
Criminal Procedure, 1898 (V of 1989);
(b) in the case of a Judge of a High Court,
the duty of examining and impounding any
instrument under this section may be delegated
to such officer as the Court appoints in this
behalf.
(3) For the purposes of this section, in cases
of doubt, —
(a) the State Government may determine what
offices shall be deemed to be public offices;
(b) the State Government may determine who
shall be deemed to be persons in charge of
public offices.”
46. Next, we must notice Section 35, which reads as
follows:
56
“35. Instruments not duly stamped inadmissible
in evidence, etc. — No instrument chargeable
with duty shall be admitted in evidence for any
purpose by any person having by law or consent
of parties authority to receive evidence, or
shall be acted upon, registered or
authenticated by any such person or by any
public officer, unless such instrument is duly
stamped : Provided that —
(a) any such instrument shall be admitted in
evidence on payment of the duty with which the
same is chargeable, or, in the case of any
instrument insufficiently stamped, of the
amount required to make up such duty, together
with a penalty of five rupees, or, when ten
times the amount of the proper duty or
deficient portion thereof exceeds five rupees,
of a sum equal to ten times such duty or
portion;
(b) where any person from whom a stamped
receipt could have been demanded, has given an
unstamped receipt and such receipt, if stamped,
would be admissible in evidence against him,
then such receipt shall be admitted in evidence
against him on payment of a penalty of one
rupee by the person tendering it;
(c) Where a contract or agreement of any kind
is effected by correspondence consisting of two
or more letters and any one of the letters
bears the proper stamp, the contract or
agreement shall be deeme d to be duly stamped;
(d) nothing herein contained shall prevent the
admission of any instrument in evidence in
proceeding in a Criminal Court, other than a
proceeding under Chapter XII or Chapter XXXVI
of the Code of Criminal Procedure 1898 (V of
1898);
(e) nothing herein contained shall prevent the
admission of any instrument in any Court when
such instrument has been executed by or on
57
behalf of the Government, or where it bears the
certificate of the Collector as provided by
section 32 or any other pro vision of this Act.”
47. Equally, we must bear in mind Section 36. It
provides as follows:
“36. Admission of instrument where not to be
questioned. —Where an instrument has been
admitted in evidence, such admission shall not,
except as provided in section 61, be called in
question at any stage of the same suit or
proceeding on the ground that the instrument
has not been duly stamped.”
48. Section 38 deals with, how instruments, which are
impounded, must be dealt with. It reads as follows:
“38. Instruments impounded how dealt with. —
(1) When the person impounding an instrument
under section 33 has by law or consent of
parties authority to receive evidence and
admits such instrument in evidence upon payment
of a penalty as provided by section 35 or of
duty as provided by section 37, he shall send
to the Collector an authenticated copy of such
instrument, together with a certificate in
writing, stating the amount of duty and penalty
levied in respect thereof, and shall send such
amount to the Collector, or to such person as
he may appoint in this behalf.”
49. Section 42 is relevant and it reads as follows: -
“42. Endorsement of instruments on which duty
has been paid under sections 35, 40 or 41 — (1)
When the duty and penalty (if any), leviable
in respect of any instrument have been paid
under section 35, section 40 or section 41, the
58
person admitting such inst rument in evidence
or the Collector, as the case may be, shall
certify by endorsement thereon that the proper
duty or, as the case may be, the proper duty
and penalty (stating the amount of each) have
been levied in respect thereof, and the name
and residence of the person paying them.
(2) Every instrument so endorsed shall
thereupon be admissible in evidence, and may
be registered and acted upon and authenticated
as if it had been duly stamped, and shall be
delivered on his application in this behalf to
the person from whose possession it came into
the hands of the officer impounding it, or as
such person may direct:
Provided that—
(a) no instrument which has been admitted in
evidence upon payment of duty and a penalty
under section 35, shall be so deliv ered before
the expiration of one month from the date of
such impounding, or if the Collector has
certified that its further detention is
necessary and has not cancelled such
certificate;
(b) nothing in this section shall affect clause
3.”
50. Section 62(1)(b) makes it punishable with fine,
which may extend to Rs.500/- for a person to execute
or sign otherwise than as a witness, any instrument
chargeable with duty, without the same being duly
stamped. The proviso, no doubt, contemplates that if
59
any penalty has been paid under Section s 35, 40 or 61,
the same shall be reduced.
I. HINDUSTAN STEEL LIMITED ANALYSED
51. This Court in Hindustan Steel Limited v. Dilip
Construction Company
21
, was dealing with the following
set of facts:
An award was made by an Umpire under the Indian
Arbitration Act, 1940, which was filed in the
Court. The appellant applied to set aside the
Award, inter alia, contending that it was
unstamped. It contended that it was on that
account, invalid, illegal and liable to be set
aside. The respondent thereupon applied to the
District Court to have the Award impounded and
validated by the levy of stamp duty and penalty.
The Award was impounded and visited with duty and
penalty, which was duly paid and certified. Th e
contention of the appellant was that, not only
could an unstamped Award, be not admitted in
evidence, but it could not be acted upon, as the
21
(1969) 1 SCC 597
60
instrument had no existence in the eye of law. It
is thereupon that the Court had held, inter alia:
“5. An instrument which is not duly
stamped cannot be received in evidence by
any person who has authority to receive
evidence, and it cannot be acted upon by
that person or by any public officer.
Section 35 provides that the admissibility
of an instrument once admit ted in evidence
shall not, except as provided in Section
61, be called in question at any stage of
the same suit or proceeding on the ground
that the instrument has not been duly
stamped.
6. Relying upon the difference in the
phraseology between Sections 35 and 36 it
was urged that an instrument which is not
duly stamped may be admitted in evidence on
payment of duty and penalty, but it cannot
be acted upon because Section 35 operates
as a bar to the admission in evidence of
the instrument not dul y stamped as well as
to its being acted upon , and the
Legislature has by Section 36 in the
conditions set out therein removed the bar
only against admission in evidence of the
instrument. The argument ignores the true
import of Section 36. By that section an
instrument once admitted in evidence shall
not be called in question at any stage of
the same suit or proceeding on the ground
that it has not been duly stamped. Section
36 does not prohibit a challenge against an
instrument that it shall not be acted u pon
because it is not duly stamped, but on that
61
account there is no bar against an
instrument not duly stamped being acted
upon after payment of the stamp duty and
penalty according to the procedure
prescribed by the Act. The doubt, if any,
is removed by the terms of Section 42(2)
which enact, in terms unmistakable, that
every instrument endorsed by the Collector
under Section 42(1) shall be admissible in
evidence and may be acted upon as if it has
been duly stamped.”
We may also profitably refer to paragraph-8 as
well:
“8. Our attention was invited to the
statement of law by M.C. Desai, J., in Mst
Bittan Bibi v. Kuntu Lal [ILR (1952) 2 All
984] :
“A court is prohibited from admitting
an instrument in evidence and a court and
a public officer both are prohibited from
acting upon it. Thus a court is
prohibited from both admitting it in
evidence and acting upon it. It follows
that the acting upon is n ot included in
the admission and that a document can be
admitted in evidence but not be acted
upon. Of course it cannot be acted upon
without its being admitted, but it can be
admitted and yet be not acted upon. If
every document, upon admission, became
automatically liable to be acted upon,
the provision in Section 35 that an
instrument chargeable with duty but not
duly stamped, shall not be acted upon by
the Court, would be rendered redundant by
the provision that it shall not be
admitted in evidence for any purpose. To
62
act upon an instrument is to give effect
to it or to enforce it.”
“In our judgment, the learned Judge
attributed to Section 36 a meaning which
the legislature did not intend. Attention
of the learned Judge was apparently not
invited to Section 42(2) of the Act which
expressly renders an instrument, when
certified by endorsement that proper duty
and penalty have been levied in respect
thereof, capable of being acted upon as
if it had been duly stamped. ”
52. We draw the following conclusions, as to what has
been laid down by a Bench of three learned Judges in
Hindustan Steel (supra):
i. The Stamp Act is a fiscal measure intended
to raise revenue;
ii. The stringent provisions of the Act are
meant to protect the interest of the
Revenue;
iii. It is not intended to be used as a weapon
by a litigant to defeat the cause of the
opponent;
iv. Upon the endorsement being made under
Section 42(2) of the Stamp Act, the
63
document would be admissible in evidence
and can be acted upon.
We may only observe that the Court did not take
into consideration Section 17 of the Stamp Act, which
provides for the precise time, at which, the instrument
is to be stamped. Equally, the Court did not bear in
mind that Section 62 of the Stamp Act, penalises
transgression of Section 17, in ter alia. Still further,
the Court was dealing with an instrument after it was
impounded, and the payments made which were certified
under Section 42(2).
It is true that an unstamped instrument is
compulsorily impoundable under Section 33 of the Stamp
Act. The procedure to be followed thereafter is also
provided in the Act. After the procedure is followed
and the duty and the penalty is paid, the instrument
would come to be visited with the endorsement under
Section 42(2). Thereafter, it becomes enforceable and
it can be acted upon, as held in Hindustan Steel
(supra).
64
J. THE INDIAN CONTRACT ACT, 1872 - A SURVEY ;
DISSECTION OF GARWARE, VIDYA DROLIA AND N.N.
GLOBAL
53. Section 2(g) of the Contract Act provide s that an
agreement, not enforceable by law, is said to be void,
whereas, Section 2(h) declares that an agreement
enforceable by law, is a contract. Section 2(j) of the
same Act provides that a contract, which ceases to be
enforceable by law, become s void, when it ceases to be
enforceable. We may, at once, notice the distinction
between an agreement and a contract. Not every
agreement is a contract. Only those agreements, which
are enforceable, are treated as contract s. The result
of a contract, ceasing to b e enforceable, is that, the
contract becomes void. Next, we may notice Section 10.
It reads as follows:
“What agreements are contracts. - All
agreements are contracts, if they are made by
the free consent of parties, competent to
contract, for a lawful con sideration and with
a lawful object and are not hereby expressly
declared to be void.
Nothing herein contained shall affect any law
in force in India, and not hereby expressly
repealed, by which any contract is required to
be made in writing or in the pr esence of
65
witnesses, or any law relating to the
registration of documents.”
Section 10, in the first part, when broken down
into parts, consists of the following: ‘ Agreement must
be made by free consent of parties ’.
54. Section 14 defines ‘free consent’ and it reads:
“14. ‘Free consent’ defined. -Consent is said
to be free when it is not caused by -
(1) Coercion, as defined in section 15, or
(2) Undue influence, as defined in section 16,
or
(3) Fraud, as defined in section 17, or
(4) Misrepresentation as defined in section 18,
or
(5) Mistake, subject to the provisions of
sections 20, 21 and 22.
Consent is said to be so caused when it would
not have been given but for the existence of
such coercion, undue influence, fraud,
misrepresentation or mistake.”
55. The next part of Section 10 to be noticed is the
expression ‘parties competent to contract’. Section 11
of the Contract Act declares that every person is
competent to contract, according to the law, to which
he is subject, and who is of sound mind and is not
disqualified from contracting by any law to which he
is subject. Since Section 11 requires soundness of mind
for the person to be competent to contract, Section 12
66
articulates as to what is sound mind for the purpose
of the Contract Act. The next part in Section 1 0 is
that there must be ‘a lawful consideration and a lawful
object’. The said aspect is dealt with in Section 23.
It reads as follows:
“23. What consideration and objects are lawful,
and what not. - The consideration or object of
an agreement is lawful, unless -
It is forbidden by law; or
Is of such a nature that, if permitted, it
would defeat the provisions of any law, or is
fraudulent; or
Involves or implies, injury to the person or
property of another; or
The Court regards it as immoral, or opposed to
public policy.
In each of these cases, the consideration
or object of an agreement is said to be
unlawful. Every agreement of which the object
or consideration is unlawful is void.”
56. The last part of the first limb of Section 10
provides that all agreements are contrac ts ‘which are
not hereby declared to be void ’. Sections 24 to 30 are
the remaining provisions in Chapter II, which deal with
agreements, which are declared to be void within the
meaning of Section 10. This is apart from Section 20
as we shall notice later. Also, the second part of
67
Section 10 provides that peremptory requirements may
still have to be met to constitute a contract a law.
57. Further, we have already noticed that free consent
is indispensable for making an agreement, a contract,
under Section 10. Free consent has been defined in
Section 14 and it must be read in conjunction with
Sections 15 to 18 as Sections 15 to 18 define coercion,
undue influence, fraud and misrepresentation,
respectively. Now, the result of there being coercion,
fraud or misrepresentation in securing the consent of
a party, is provided for in Section 19 of the Contract
Act. The presence of the three elements results in what
is described as a contract voidable at the option of
the party, whose consent was so caused. The effect of
misrepresentation has been dealt with by this Court in
the judgment reported in Ganga Retreat & Towers Ltd.
v. State of Rajasthan
22
, as follows:
“28. According to Section 19 of the Contract
Act when consent to an agreement is caused by
misrepresentation, the agreement is a contract
voidable at the option of the party whose
consent was so caused. The latter may, if he
thinks fit, insist that the cont ract shall be
22
(2003) 12 SCC 91
68
performed and that he shall be put in the
position in which he would have been if the
representations made had been true. According
to Section 2 clause (i), an agreement which is
enforceable by law at the option of one or more
of the parties thereto, but not at the option
of the other or others, is a voidable contract.
It is not necessary for us to record a clear
finding whether there was a misrepresentation
on the part of the respondents or not. Suffice
it to observe that a voidable contract confers
the right of election on the party affected to
exercise its option to avoid the legal
relations created by the contract or to stand
by the contract and insist on its performance.
However, his election to stand by the contract
once exercised would h ave the effect of
ratification of the contract with the knowledge
of misrepresentation on the part of the other
party and that would extinguish its power of
avoidance. In the very nature of the right
conferred on the party affected, the law
expects it to exercise its option promptly and
communicate the same to the opposite party; for
until the right of avoidance is exercised, the
contract is valid, and things done thereunder
may not thereafter be undone.
29. A right to rescind for misrepresentation
can be lost in a variety of ways, some
depending on the right of election. A
representee on discovering the truth loses his
right to rescind if once he has elected not to
rescind. But he may lose even before he has
made any election where by reason of his
conduct or other circumstances it would be
unjust or inequitable that he retains the
right. For instance, where third parties have
acquired rights under the contract; again where
it would be unjust to the representor because
it is impossible to restore him to his original
position. Restitutio in integrum is not only a
consequence of rescission, its possibility is
indispensable to the right to rescind. Again,
69
delay in election may make it unjust that the
right to elect should continue. For this reason
the right to rescission for misrepresentation
in general must be promptly exercised. (See
Indian Contract and Specific Relief Acts,
Pollock and Mulla, 11th Edn., Vol. I, pp. 269 -
70.)”
Section 19A deals with there being no free consent
on account of the consent of a party being obtained by
undue influence. The said vitiating factor also, does
not result in a void agreement but a voidable contract.
Section 14, defining ‘free consent’, pro vides that
consent is said to be free, when it is not caused by
mistake, subject to the provisions of Sections 20, 21
and 22, after referring to the other four aspects,
which detract from free consent. We notice what Section
20 provides. Section 20 declare s that where both the
parties to an agreement are under a mistake as to a
matter of fact essential to the agreement, the
agreement is void. We may observe that this again is a
case of an agreement, which is declared void within the
meaning of Section 10, a part from Sections 24 to 30.
Section 21 provides that a mistake as to any law in
force in India, would not make the contract voidable.
Thus, while Section 10 sets out the core element for
70
an agreement to become a contract, the effect of non-
conformity varies. Therefore, the lack of competency
and absence of sound mind completely detract from the
formation of a ‘contract ’. The absence of free consent
arising from coercion, undue influence,
misrepresentation and even fraud will , however, result
in an agreement which is a ‘contract’ though voidable
(see Sections 19 and 19A of the Contract Act). The
effect of mistake, is again spelt out in Section 22,
insofar as it provides that a contract is not voidable
merely because one of the parties consented to the
contract, labouring under a mistake as to a matter of
fact. Section 37 comes under Chapter IV which deals
with performance of contracts and of contracts which
must be performed. Section 37 reads:
“37. Obligation of parties to contract. -The
parties to a contract must either perform, or
offer to perform, their respective promises,
unless such performance is dispensed with or
excused under the provisions of this Act, or
of any other law.
Promises bind the representatives of the
promisors in case of the dea th of such
promisors before performance, unless a
contrary intention appears from the contract.”
71
58. We have noticed that in the case of fraud,
misrepresentation or coercion, the person whose consent
is procured on the said basis, may insist that the
contract be performed and that he be put in the
position, in which he could have been, if the
representation had not been made. In this context, we
may notice, Section 64 of the Contract Act:
“64. Consequences of rescission of a voidable
contract. -When a person at whose option a
contract is voidable rescinds it, the other
party thereto need not perform any promise
therein contained in which he is the promisor.
The party rescinding a voidable contract shall,
if he had received any benefit thereunder from
another party to such contract, restore such
benefit, so far as may be, to the person from
whom it was received.”
59. As to what would happen, if an agreement is
discovered to be void or becomes void, is provided in
Section 65. It declares that when such an eventual ity
takes place, any person, who has, under such agreement
or contract, received any advantage, is bound to
restore it to the person from whom he has received it
or make compensation for the same. In the context of
Section 65, we may notice the nexus with Section 2(j)
of the Contract Act. Section 2(j), as we have noticed,
72
provides that, when the contract ceases to be
enforceable, it becomes void. Thus, what may be an
agreement and which fulfils the requirement that it is
enforceable and, therefore, becomes a contract, can
upon it ceasing to be enforceable, become void.
However, here we must notice the view expressed by the
Privy Council in the Judgement reported in Mahanth
Singh v. U Ba Yi
23
. Therein the Court, inter alia, held
as follows:
“A still more star tling result, however, is
brought about on this construction if s.2(j) is
read with s.65 of the Indian Contract Act, since
in such a case not only would every
unenforceable contract become void but each
party would be under the obligation of restoring
or making compensation for any benefit
received, no matter how much had been done
towards the performance by either party.
But it is not necessary to adopt a construction
leading to such surprising results.
The solution is, in their Lordships’ view, to
be found in the wording of s.2(j) itself. Not
every unenforceable contract is declared void,
but only those unenforceable by law, and those
words mean not unenforceable by reason of some
procedural regulation, but unenforceable by
the substantive law. For example, a contract
which was from its inception illegal, such as
a contract with an alien enemy, would be
avoided by s.2(g), and one which became illegal
in the course of its performance, such as a
contract with one who had been an alien friend
but later became an alien enemy, would be
23
AIR 1939 PC 110
73
avoided by s.2(j). A mere failure to sue within
the time specified by the statute of
limitations or an inability to sue by reason
of the provisions of one of the Orders under
the Civil Procedure Code would not cause a
contract to become void.”
60. A Full Bench of the Allahabad High Court, while
dealing with the effect of inclusion of non -
transferable occupancy rights, along with other
properties, which were transferable in a registe red
mortgage deed and, after referring to Section 23 of the
Contract Act, held, in Dip Narain Singh v. Nageshar
Prasad and another
24
, inter alia, as follows:
“There is a clear distinction between an
agreement which may be forbidden by law and one
which is merely declared to be void. In the
former case the legislature penalises it or
prohibits it. In the latter case, it merely
refuses to give effect to it . If a void
contract has been carried out and consideration
has passed, the promisor may not in equity be
allowed to go back upon it without restoring
the benefit which he has received. But if the
promise comes to court to enforce it he would
receive no help from a court of law. As pointed
out above, the transfer of an occupancy tenancy
is not actually forbid den by law but is
declared to be void.”
(Emphasis supplied)
24
AIR 1930 ALL 1 (FB) / 1929 SCC OnLine ALL 1
74
61. To the extent that N.N. Global (supra) proceeds on
the basis that the Stamp Act is a fiscal enactment and
the object is to raise revenue, there may not be any
serious room for objection.
As far as the finding in paragraph -28 of N.N.
Global (supra) that the decision in SMS Tea Estates
(supra) does not lay down the correct law, when it
holds that an Arbitration Agreement, in an unstamped
commercial contract, cannot be acted upon or is
rendered unenforceable, we are of the view that the
finding in N.N. Global (supra) does not appear to be
correct. A perusal of paragraph -29 would show that the
Court in N.N. Global (supra) proceeded on the basis
that the Arbitration Agreement, being an independent
contract is not chargeable to payment of stamp duty and
it would not invalidate the Arbitration Clause or
render it unenforceable, since it had an independent
existence of its own, cannot hold good in view of the
admitted position before us that an Arbitration
Agreement, in its own right, is exigible to stamp duty.
The whole premise of the Court in N.N. Global (supra)
being that the Arbitration Agreement, not being
75
exigible to duty and it having a separate existence,
the commercial contract in which the Arbitration
Agreement is contained, being unstamped, would not
impact the Arbitration Agreement, ca nnot hold good. The
reasoning in N.N. Global (supra) in paragraph -32, for
disapproving of Garware (supra) in paragraph -22
thereof, that the Arbitration Clause would be non -
existent in law and unenforceable till the stamp duty
in adjudicated and paid on the substantive contract,
is again on the premise that the Arbitration Agreement
is a separate agreement under the Stamp Act, which is
not exigible to stamp duty, which we have found is not
the case in law. In this regard, we may refer to Article
5 of the Stamp Act:
Description of
Instrument
Proper Stamp -
duty
[5. AGREEMENT OR
MEMORANDUM OF AN
AGREEMENT—
(a) if relating to
the sale of a bill
of exchange;
(b) if relating to
the sale of a
Government
security or share
in an
Two annas.
Subject to a
maximum of ten
rupees, one anna
for every Rs.
10,000 or part
thereof of the
value of the
76
incorporated
company or other
body corporate;
(c) if not otherwise
provided for
Exemptions
Agreement or memorandum
of agreement—
(a) for or relating
to the sale of goods or
merchandise exclusively,
not being a NOTE OR
MEMORANDUM chargeable
under No. 43;
(b) made in the form
of tenders to the Central
Government for or
relating to any loan;
security or
share.
Eight annas.
(Emphasis supplied)
62. While the Stamp Act is a fiscal enactment intended
to raise revenue, it is a law, which is meant to have
teeth. The point of time, at which the stamp duty is
to be paid is expressly provided for in Section 17 of
the Stamp Act. There cannot be any gainsaying, that
call it a fiscal enactment, it is intended that it is
to be implemented with full vigour. The duty of a Court
must be to adopt an interpretation which results in the
enforcement of the law, rather than allowing the law
to be flouted with impunity. Once this principle is
77
borne in mind, the task of the Court becomes less
difficult. The law, as contained in Se ction 33 read
with Section 35 of the Stamp Act, would result in the
following conclusions:
i. Every person having, by law or consent of
parties, the authority to receive evidence,
before whom, an instrument is produced, is
duty-bound to immediately impound the same.
This is upon his forming the opinion that the
instrument is not duly stamped. In a case,
where the instrument does not bear any stamp
at all, when it is exigible to stamp duty,
there can be little difficulty in the person
forming the opinion that it is not duly
stamped. No doubt, under Section 33(2), in
cases of ambiguity, the person sha ll examine
the instrument to arrive at the liability.
Apart from a person having authority to
receive evidence, which, no doubt, would
include a court and an Arbitrator, every
person In-charge of a Public Office, before
whom, such instrument is produced or comes in
78
the performance of his functions, has the duty
to impound the unstamped or insufficiently
stamped document, arises. This is no doubt
after ‘examining’ the instrument and
ascertaining as to whether the instrument was
stamped as required when the d ocument was
executed or first executed [See Section
33(2)]. One exception in Section 33 is an
Officer of the Police. In other words, the
Officer of the Police has no authority to
impound an unstamped or insufficiently stamped
document produced before him. No doubt, a
Criminal Court is not under compulsion vide
the proviso. Section 33, no doubt, authorises
delegation of power.
ii. Under Section 35, the Law -Giver has disabled
the admission in evidence of an instrument not
stamped or insufficiently stamped, for any
purpose. This would include even a collateral
purpose. This is in stark contrast with a
document, which is compulsorily r egisterable
but which is not registered. Under Section 49
79
of the Registration Act, 1908, an unregistered
document may be used for proving a collateral
transaction. Even this is impermissible, if
the document is not stamped or insufficiently
stamped. Sectio n 35 further proceeds to
declare that such an unstamped or
insufficiently stamped document shall not be
acted upon. It is important to juxtapose the
embargo cast on an unstamped document as
aforesaid with Section 2(h) of the Contract
Act. Section 2(h) of the Contract Act provides
that an agreement, which is enforceable in law
is a contract whereas Section 2(g), an
agreement not enforceable is void. The words
‘enforceable in law’ or ‘not enforceable in
law’, understood in the context of Sections 33
and 35 of the Stamp Act, would mean that upon
there being an occasion, which necessitates
one of the parties to the agreement having to
enforce the same through recourse to sanctions
available in law, the same should be
vouchsafed to him. Ordinarily, agreements are
80
enforced through actions in Civil Courts.
Remedies may be sought before Public
Authorities. Both the Civil Courts and the
Public Authorities are tabooed from giving
effect to an unstamped instrument. Section 33
does not give a choice to the person, who ha s
authority by law, or with consent, to take
evidence, or to any Public Officer, but to
impound the agreement. The unstamped or
insufficiently stamped document cannot be used
as evidence for any purpose. It would be
inconceivable, as to how, it could be in the
same breath, be found that an unstamped
document is yet enforceable in law or that it
is not enforceable in law. It is another
matter that the parties may act upon it. Goods
or services may change hands, for instance,
under a document, which may be o therwise
exigible to stamp duty. What is, however,
relevant is that the State will not extend its
protection, by appropriate sanctions. The
rights, which would otherwise have been
81
available, had the agreement been stamped,
would remain frozen or rather the y would not
exist. We are further reinforced in our view,
therefore, that the views expressed by this
Court in Garware (supra) in paragraph -22,
following SMS Tea Estates (supra), represent
the correct position in law.
iii. Next, we must pass on to the correctne ss of
the views expressed in paragraph -29 of Garware
(supra). The Court drew upon the Judgment in
United India Insurance Co mpany Limited and
another v. Hyundai Engineering & Construction
Company Limited and others
25
.
63. Justice Hrishikesh Roy in paragraph -84 of his draft
Judgement finds that in paragraph -29 in Garware
(supra), this Court relied on United India Insurance
Company Limited v. Hyundai Engineering and Construction
Company Limited
26
. Our learned Brother further notes in
paragraph-84.1 that in Hyundai (supra), the issue of
25
(2018) 17 SCC 607
26
(2018) 17 SCC 607
82
stamping was not in consideration and the question was
whether the matter fell within excepted matter as the
Arbitration Clause was dependant on whether the insurer
accepted liability. Justice Hrishikesh Roy further
finds that the approach in Garware (supra) in relying
upon Hyundai (supra) was incorrect. This is as Hyundai
(supra) has nothing to do with stamping and should have
been distinguished. Our learned Brother n otices the
contention of the learned Amicus that Hyundai (supra)
relied on Oriental Insurance Company v. Narbheram Power
and Steel Private Limited
27
, in which case, the Court
did not have occasion to interpret Section 11(6)(a) of
the Act.
64. It is true that in Hyundai (supra), this Court was
not dealing with the impact of the Stamp Act. The Court
was dealing rather with the issue as to the effect of
the Clause, in which it was agreed that there would be
no arbitration, if the insurer disputed or did not
accept liability under or irrespective of the policy.
In the context of the said Clause, this Court, in
27
(2018) 6 SCC 534
83
Hyundai (supra), went on to hold, inter alia, that the
denial of the plea about its liability by the insurer,
rendered the ‘making of the Arbitration Cl ause
ineffective and incapable of be ing enforced, if not
non-existent’. No doubt, in paragraph -29 of Garware
(supra), this Court found that ‘likewise in the facts
of the present case, it is clear that the Arbitration
Clause, i.e., contained in the sub -contract, would not
exist as a ‘matter of law’ until the sub-contract is
duly stamped as has been held by us above’. Therefore,
the rationale for finding that an Arbitration Agreement
in an unstamped sub -contract would not exist, was
already furnished in para graph-22. This Court was only
drawing support from Hyundai (supra) for the
proposition about non -existence of the instrument ‘in
law’. While, Hyundai (supra) did not relate to the
Stamp Act, and even, removing the reference to Hyundai
(supra), the finding about the non-existence of an
unstamped agreement, would be supportable on the
reasoning that what is contemplated in Section 11(6)(a)
is no mere facial existence or existence in fact but
also existence in law.
84
65. This Court in Garware (supra) took the view that
unless the sub contract was stamped , the arbitration
clause contained therein would not exist as a matter
of law. This finding has been rendered apparently on
the basis of the impact of the amendment leading to the
insertion of Section 11(6A). The Court in Garware
(supra) had in fact after setting out the law prior to
the amendment based on the Two Hundred and Forty-Sixth
Report of the Law Commission of India found in
paragraph-19 that the Law Commission Report did not
mention about SMS Tea Estates (supra). It is further
found that it is for the very good reason that the
court does not while deciding an app lication under
Section 11 decide any pre liminary issue. The Court
further found that it was giving effect to the
provisions of a mandatory enactment, which enjoins upon
the Court, under the provisions of the Stamp Act, to
first impound the agreement , and if only the penalty
and the duty is paid thereafter , to act upon it. The
Court had also found that it was not possible to
bifurcate the arbitration clause. We would find that
as found by us, being unstamped or insufficiently
85
stamped, the agreement would not be enforceable till
it is ‘validated’ which is permissible only in the
manner provided in the Stamp Act and till then it would
not exist ‘in law’.
66. In the context of Article 136 of the Limitation
Act, 1963, a Bench of three learned Judges in
Dr. Chiranji Lal (D) by Lrs. v. Hari Das (D) by Lrs.
28
had to deal with the argument that a Final Decree for
partition passed on 07.08.1981 became enforceable only
on 25.05.1982, on which day the Decree came to be
engrossed with stamp papers. Under Article 136, t he
period of twelve years begins to run when th e ‘Decree
or Order’ becomes ‘enforceable’, inter alia. The Court,
inter alia, held as follows:
“23. Such an interpretation is not
permissible having regard to the object and
scheme of the Indian Stamp Act, 1899. The
Stamp Act is a fiscal measure enacted with an
object to secure revenue for the State on
certain classes of instruments. It 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.
Once that object is secured according to law,
28
(2005) 10 SCC 746
86
the party staking his claim on the instrumen t
will not be defeated on the ground of initial
defect in the instrument (Hindustan Steel
Ltd. v. Dilip Construction Co. [(1969) 1 SCC
597]). …”
xxx xxx xxx
25. The engrossment of the final decree in a
suit for partition would relate back to the
date of the decree. The beginning of the
period of limitation for executing such a
decree cannot be made to depend upon date of
the engrossment of such a decree on the stamp
paper. The date of furnishing of stamp paper
is an uncertain act, within the domain,
purview and control of a party. No date or
period is fixed for furnishing stamp papers.
No rule has been shown to us requiring the
Court to call upon or give any time for
furnishing of stamp paper. A party by his own
act of not furnishing stamp paper cannot stop
the running of period of limitation. None can
take advantage of his own wrong. The
proposition that period of limitation would
remain suspended till stamp paper is
furnished and decree engrossed thereupon and
only thereafter the period of twelv e years
will begin to run would lead to absurdity.
In Yeswant Deorao Deshmukh v. Walchand
Ramchand Kothari [1950 SCC 766 : 1950 SCR 852
: AIR 1951 SC 16] it was said that the payment
of court fee on the amount found due was
entirely in the power of the dec ree-holder
and there was nothing to prevent him from
paying it then and there; it was a decree
capable of execution from the very date it
was passed.
87
26. Rules of limitation are meant to see
that parties do not resort to dilatory
tactics, but seek their r emedy promptly. As
above noted, there is no statutory provision
prescribing a time -limit for furnishing of
the stamp paper for engrossing the decree or
time-limit for engrossment of the decree on
stamp paper and there is no statutory
obligation on the court passing the decree to
direct the parties to furnish the stamp paper
for engrossing the decree. In the present
case the Court has not passed an order
directing the parties to furnish the stamp
papers for the purpose of engrossing the
decree. Merely becaus e there is no direction
by the Court to furnish the stamp papers for
engrossing of the decree or there is no time -
limit fixed by law, does not mean that the
party can furnish stamp papers at its sweet
will and claim that the period of limitation
provided under Article 136 of the Act would
start only thereafter as and when the decree
is engrossed thereupon. The starting of
period of limitation for execution of a
partition decree cannot be made contingent
upon the engrossment of the decree on the
stamp paper. …”
(Emphasis supplied)
67. However, the said view must be understood in the
context of the Law of Limitation standing in the peril
of being wholly defeated by ‘enforceability’ of a
Decree or Order within the meaning of Article 136,
being made dependant on an act of volition of a pa rty
88
to pay the requisite stamp duty . Here, in the case
before us, we are concerned with the duty of a Court,
inter alia, under Sections 33 and 35 of the Stamp Act
and its impact on an unstamped or insufficiently
stamped agreement containing an Arbitration Clause.
This is apart from the meaning to be attributed to the
words ‘existence of an Arbitration Agreement’ in
Section 11(6A) of the Act . We have explained the
concept of ‘enforceability’ in the context of the
Contract Act. What is closer to the facts is the concept
of enforceability or rather the lack of enforceability
resulting in the voidness of the contract in the sense
explained by us.
K. THE STAMP ACT – WHETHER A PROCEDURAL LAW?
68. In this context, it will be profitable to notice
the following discussion from the work Salmond on
Jurisprudence, Twelfth Edition. Dealing with Law of
Procedure, it is stated:
“What, then, is the true nature of the
distinction? The law of procedure may be
defined as that branch of the law which governs
the process of litigation. It is the law of
actions- jus quod ad actiones pertinent -using
the term action in a wide sense to include all
legal proceedings, civil or criminal. All the
89
residue is substantive law , and relates, not
to the process of litigation, but to its
purposes and subject-matter. Substantive law
is concerned with t Phe ends which the
administration of justice seeks; procedural
law deals with the means and instruments by
which those ends are to be attained. The latter
regulates the conduct and relations of courts
and litigants in respect of the litigation
itself; the former determines their conduct and
relations in respect of the matters litigated.”
(Emphasis supplied)
69. The Stamp Act, while it may be a fiscal measure,
it may not fall within the fold of proc edural law. The
mere fact that Sections 33 and 35 may apply at a stage,
when the person approaches a Court, inter alia, would
not mean that the Stamp Act, providing for a duty on
the executants to stamp the instrument at the point of
time, as declared in S ection 17, and what is more,
penalising a deviation under Section 62, falls within
the domain of procedural law. Pertinently, we may, in
the Fourteenth Edition of The Indian Contract and
Specific Relief Acts by Pollock and Mulla, note as
follows:
“Unenforceable Contracts
Unenforceable contracts are valid in all
respects, but may not be sued upon by the
parties. Such disability may arise for want of
90
registration; or because the time prescribed
for filing the suit has expired; or because the
plaintiff firm has not been registered; or the
document or instrument does not bear the
requisite stamp duty; or because the lender of
money does not possess a licence under money -
lending laws.”
(Emphasis supplied)
70. We would find that an agreement, which is
unenforceable on account of a substantive law, which
would include the Stamp Act, would not be a contract,
applying Section 2(h) of the Contract Act. It is only
if an agreement is enforceable, that it would become a
contract. It is only a ‘contract’, which would be the
‘Arbitration Agreement ’, which is contemplated in
Section 11(6A) of the Act. It may not be apposite to
merely describe an unstamped Arbitration Agreement as
a ‘curable defect’. As long it remains an unstamped
instrument, it cannot be taken notice of for any
purpose, as contemplated in Section 35 of the Stamp
Act. It remains unenforceable. Section 17 declares the
time at which an instrument, executed in India, must
be stamped. The said provision contemplates that
stamping of such an instrument must tak e place before
or at the time of the execution of document. No Public
91
Officer, nor Court nor Arbitrator, can permit any
person to ask them to act upon it or receive it as
evidence. In law, it is bereft of life. It is ‘not
enforceable in law’. In the said sense, it also cannot
exist in law. It would be void. Our view in this regard
that voidness is conflated to unenforceability receives
fortification from Section 2(j) of the Contract Act
which renders a contract which ceases to be enforceable
void.
71. What Section 11(6A) contemplates is a contract and
it is not an agreement which cannot be treated as a
contract. This is despite the use of the words
‘arbitration agreement’ in Section 11(6A). In other
words, contract must conform to Section 7 of the Act.
It must also, needless to say, fulfil the requirements
of the Contract Act.
72. A voidable contract within the meaning of Section
19 and 19A, undoubtedly stands in stark contrast to
void contracts. However, even in the categories of void
contracts as for instance, Sect ion 20 of the Contract
Act provides that if on a material point, the parties
were mistaken, the contract would be void. If in a
92
given case where this is the contention raised by a
party in a proceeding under Section 11 when the
agreement otherwise satisfie s the requirement of a
contract to make it exist as an Arbitration Agreement,
then, the Court would be justified in treating the
agreement as one which exists and leav e it open to the
Arbitrator to go into the question, which can be done
after the pleadings are laid and evidence is unfolded
before him. When an Arbitration Agreement is sought to
be brought under the cloud on the basis that it is a
voidable contract which has been avoided, again it may
be a matter where the principle of Kompetenz -Kompetenz
may be apposite and again the court under Section 11
would be justified in proceeding on the basis that an
arbitration agreement exists. The question must
undoubtedly be approached from t he standpoint of
advancing the sublime cause of speedy commencement ,
progress and conclusion of arbitration. When Parliament
intervened by amending the Act, while in Section 8, it
has employed the words prima facie, it has used the
word ‘examine’ to ascertain about the existence of an
arbitration agreement in Section 11 (6A). Likewise, in
93
Section 8 the law giver has used the word ‘valid’ which
is missing in Section 11(6A). Can it be said that an
invalid agreement can be said to exist in law for the
purpose of Section 11(6A)?
73. What is an invalid document or agreement? It is an
expression which is associated and often conflated with
the word void. We have already noticed Section 20 as
an instance where a common mistake of the parties on a
material subject rend ers the agreement void. We have
also noticed that in view of the very nature of the
voidness, a court under Section 11, may allow the
application under Section 11 when shelter is taken
under Section 20 of the Contract Act by the respondent.
It would turn upon the facts. Coming to invalidity, a
contract would be invalid as for instance if it is
executed by a person of unsound mind . This would
equally be the case where it is found that one of the
parties was a minor. As far as the word ‘invalid’ is
concerned, it has different shades of meaning. In the
context of a contract, we notice the following
94
statement in a judgment of the High Court of Karnataka
reported in Imambi v. Khaja Hussain alias Kh ajasab
29
:
“In the context that the words are used the
meaning is to be as laid down in Jones v. Bank
of Gumming as follows: -
“The word “invalid” as applied to a contract
does not always mean an absolute nullity, for
a contract may be so imperfect as not to be
enforceable, but not such an absolute nullity
that it cannot be perfected.”
(Vide Words & Phrases – Permanent Edition –
West Publishing Co. Volume 22A)”
74. The aforesaid statement appears apposite in the
context of an instrument which is unstamped or
insufficiently stamped. This is for the reason that on
the one hand as long as it is not stamped or is
insufficiently stamped , it is both liable to be
impounded under Section 33 of the Stamp Act and it
cannot be used as evidence or registered. This is a part
from the unambiguous bar against ‘acting upon’ such an
instrument. On the other hand, if after such an
instrument is impounded and duty and penalty is paid
and a certificate is endorsed upon it within the
meaning of Section 42(2) signals that the inst rument
29
AIR 1988 Karnataka 51
95
regains life, the bar in Section 35 of the Stamp Act
is removed permanently. Equally, under Section 36 in
the case of an instrument (not secondary evidence of
the instrument) which is allowed to be let in evidence
without objection, then it would qualify as evidence
founding a right. But this is an exception to the rule
which is found in Section 35 of the Stamp Act. Thus,
an unstamped or insufficiently stamped instrument
represents a case of an agreement which not being
enforceable, in the sense that the sanctions in law
through a civil action is impermissible, is in the said
sense, invalid. It is not invalid or void in the sense
of it being still born or null and void in the sense
that life cannot be poured into it. We may sum up. An
agreement which is unstamped or insufficient ly stamped
is not enforceable, as long as it remains in the said
condition. Such an instrument would be void a s being
not enforceable [See Section 2(g) of the Contract Act] .
It would not in the said sense exist in law. It can be
“validated” by only the process contemplated in Section
33 and other provisions of the Stamp Act. We find the
expression ‘validation’ used in the decision of this
96
Court in Hariom Agrawal v. Prakash Chand Malviya
30
which
we shall refer to in greater detail later. This
necessarily means that the court would not view it as
enforceable, and therefore, existing in law. In the
sense explained, it would not be found as ‘not void’
and therefore ‘not invalid’. Thus, in the context of
the Act, the Stamp Act and the Contract Act, we are of
the view that the opinion of this Court in SMS Tea
Estates (supra), in this regard as reiterated in
Garware (supra) and approved in Vidya Drolia (supra)
is correct.
75. Section 11(6A) cannot be understood as merely
predicating for an Arbitration Agreement existing
literally. This means that the mere existence of the
arbitration agreement for all intents and purposes on
the exterior purporting to project a contract duly
executed, may in certain situations, be insufficient
under Section 11 . If for reasons such as it being
unstamped when it is clearly required to be stamped,
then it cannot be said to be a case where the agreement
30
(2007) 8 SCC 514
97
exists for it would be no existence in law. While we
agree, the Court must be careful in selecting contracts
where an arbitration agreement which is produced is not
to be acted upon for the reason that it does not exist
in law, all we hold is that an Arbitration Agreement,
which is unstamped , does not exist and an unstamped
contract, containing an Arbitration Agreement, would
not exist as it has no existence in law.
L. SECTION 7 OF THE ACT – ITS IMPACT
76. Our learned Brother, J ustice Hrishikesh Roy, is
right in noticing that Section 7 of the Act provides
for what an Arbitration Agreement means for the purpose
of Part I. However, with great respect, we express our
inability to agree that a plain reading of Section 7
of the Act, would make it clear that an Arbitration
Agreement can be even non -contractual. For the purpose
of clarity, we may reproduce Section 7(1) of the Act
at this juncture:
“7(1) Arbitration agreement.(1) In this
Part, “arbitration agreement” means an
agreement by the parties to submit to
98
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.”
(Emphasis supplied)
77. We are inclined to hold that what Section 7(1)
contemplates is an Arbitration Agreement. We are also
inclined to think that what the Law -Giver has intended
to convey is that under the Arbitr ation Agreement, the
parties must submit disputes, which have arisen or
which may arise between them. The disputes may have
arisen or may arise in respect of a defined legal
relationship. The defined legal relationship, in turn,
can be either contractual o r otherwise. Therefore, what
can give rise to disputes can be a legal relationship,
which is non-contractual. The legal relationship may
arise from out of a Statute. It may arise in relation
to a tort but an Arbitration Agreement must always mean
an agreement. It is really a contract which is intended
as an agreement enforceable by law is a contract. An
Arbitration Agreement may be a Clause in an agreement
providing for Arbitration. It may be a separate or a
standalone agreement [Section 7(2) of the Act]. A n
Arbitration Agreement must be in writing [See Section
99
7(3) of the Act]. As to what all are comprehended within
the requirement that the Arbitration Agreement must be
in writing, is set out in Sections 7(4)(a) to 7(4)(c).
It includes a document which is s igned by the parties
[See Section 7(4)(a)]. An Arbitration Agreement would
be treated as contained in writing, if there is an
exchange of letters, telex, telegrams or other means
of telecommunications, including, communications
through electronic means whi ch provide a record of the
agreement [See Section 7(4)(b)]. Next, we may notice
that an Arbitration Agreement will be treated as
contained in writing, if there is an exchange of
statements of claims and defence, in which, the
existence of the agreement is alleged by a party and
not denied by the other [See Section 7(4)(c)]. Finally,
Section 7(5) contemplates an Arbitration Agreement by
incorporation, viz., a reference in a contract to a
document containing an Arbitration Clause, would
constitute an Arbitrat ion Agreement, if the contract
is in writing and the reference is such as to make that
Arbitration Clause part of the contract. The true scope
of Section 7(5) of the Act has been elaborately
100
considered in M.R. Engineers & Contractors Private
Limited v. Som Datt Builders Limited
31
.
78. Section 3(a) of the Stamp Act, no doubt,
contemplates that every instrument mentioned in the
Schedule, which, not having been previously executed
by any person, is executed in India on or after the
first day of July, 1899, is c hargeable with duty.
Clause (c) of Section 3 also contemplates ‘execution’
of a document out of India, being chargeable with duty.
Section 17 of the Stamp Act also contemplates that in
respect of documents executed in India, they shall be
stamped before or at the time of execution. Justice
Hrishikesh Roy would reason that an Arbitration
Agreement, as defined in Section 7 of the Act, need not
be an instrument chargeable to stamp duty as stamp duty
is payable under the Stamp Act only on instruments,
which are executed. The word ‘executed’ has been
defined in the Stamp Act as me aning ‘signed’.
79. Section 7(3)(b) of the Act contemplates that an
exchange of letters, telex, telegrams or other means
31
(2009) 7 SCC 696
101
of telecommunication, including communication through
electronic means, which provide a record of the
agreement, would constitute an Arbitr ation Agreement
in writing within the meaning of Section 7(3) of the
Act. We may notice that the proviso (c) to Section 35
of the Stamp Act reads as follows:
“(c) Where a contract or agreement of
any kind is effected by correspondence
consisting of two or more letters and
any one of the letters bears the proper
stamp, the contract or agreement shall
be deemed to be duly stamped;”
80. Thus, the Stamp Act does contemplate a contract o r
agreement being formed through correspondence through
two or more letters. It then suffices that any one of
the letters bears the proper stamp. Even proceeding on
the basis that an Arbitration Agreement is contained
in letters and it is signed and, theref ore, executed
within the meaning of the Stamp Act, then, it would
fall within the four corners of Sections 33 and 35 of
the Stamp Act.
81. We do notice that a Bench of two learned Judges
have, in the Judgment reported in Govind Rubber Limited
102
v. Louids Dreyfus Commodities Asia Private Limited
32
,
had this to say about the need for an Arbitration
Agreement being signed:
“15. A perusal of the aforesaid provisions
would show that in order to constitute an
arbitration agreement, it need not be
signed by all the parties. Section 7(3) of
the Act provides that the arbitration
agreement shall be in writing, which is a
mandatory requirement. Section 7(4) states
that the arbitration agreement shall be in
writing, if it is a document signed by all
the parties. But a per usal of clauses (b)
and (c) of Section 7(4) would show that a
written document which may not be signed by
the parties even then it can be arbitration
agreement. Section 7(4)( b) provides that an
arbitration agreement can be culled out
from an exchange of le tters, telex,
telegrams or other means of
telecommunication which provide a record of
the agreement.
16. On reading the provisions it can safely
be concluded that an arbitration agreement
even though in writing need not be signed
by the parties if the re cord of agreement
is provided by exchange of letters, telex,
telegrams or other means of
telecommunication. Section 7(4)( c)
provides that there can be an arbitration
agreement in the exchange of statements of
claims and defence in which the existence
of the agreement is alleged by one party
and not denied by the other. If it can be
prima facie shown that the parties are at
ad idem, then the mere fact of one party
32
(2015) 13 SCC 477
103
not signing the agreement cannot absolve
him from the liability under the agreement.
In the present day of e -commerce, in cases
of internet purchases, tele purchases,
ticket booking on internet and in standard
forms of contract, terms and conditions are
agreed upon. In such agreements, if the
identity of the parties is established, and
there is a record of agreement it becomes
an arbitration agreement if there is an
arbitration clause showing ad idem between
the parties. Therefore, signature is not a
formal requirement under Section 7(4)( b) or
7(4)(c) or under Section 7(5) of the Act.”
82. When it comes to Section 7(4)(c), what is
constituted as an Arbitration Agreement as being in
writing is an exchange of Statement of Cl aims and
Defence, wherein the existence of an agreement is
alleged by one party and not denied by another. There
must however be ‘an agreement’, the allegation of the
existence of which remains unrefuted. Since, Section
7(1) defines an arbitration agreement to be one, under
which, parties submit ‘all’ or ‘certain disputes’,
which have arisen or will arise, such an agreement must
be alleged to exist and the allegation must remain
undenied. The formation of such an agreement must
necessarily be tested with re ference to the
104
indispensable requirements, such as, competency to
contract and presence of sound mind.
83. All that we are holding is, an Arbitration
Agreement must satisfy the requirements in Section 7(1)
and, therefore, it must be an agreement. Sans an
agreement, there cannot be a reference to arbitration.
While Justice Hrishikesh Roy is right in holding that
Section 10 of the Contract Act recognises oral
agreements and that a written agreement is a sine qua
non for a valid Arbitration Agreement, Sec tion 10 of
the Contract Act, it must be noticed, in the second
part, provides that nothing contained in the first
part, would affect any law, which, inter alia, requires
that any contract is required to be made in writing.
Section 7(3) of the Act which insists that an
arbitration agreement must be in writing harmonises
with Section 10 of the Contract Act.
84. We would think that whenever an Arbitration
Agreement, as defined in Section 7 of the Act, also
attracts stamp duty under the Stamp Act, then, the
provisions of Sections 33 and 35 of the Stamp Act would
come into play. As held in SMS Tea Estates Private
105
Limited (supra), if an Arbitration Clause constitutes
the Arbitration Agreement and the instrument, viz., the
instrument or contract, in which the Arbitrati on Clause
is contained, is unstamped, when it is otherwise
exigible to stamp duty, then, the provisions of Section
33 as also Section 35 of the Stamp Act would operate.
The court acting under Section (11) of the Act is not
free to disregard their mandate.
85. An Arbitration Agreement, may be a Clause in an
instrument, which attracts stamp duty. In such a case,
the Court, acting under Section 11, is bound to act
under Sections 33 and 35 of the Stamp Act, if the
instrument is not stamped or insufficiently stamped .
If an Arbitration Agreement is a standalone agreement
and which attracts duty under the Stamp Act, then also,
the same position obtains.
M. THE ALTERNATIVE PERSPECTIVE
86. In Garware (supra), the Court referred to
paragraph-59 of Duro Felguera (supra) to find that, the
Court in the said case, proceeded on the basis that the
mischief that was sought to be remedied by the
106
insertion of Section 11(6A), was as contained in SBP
(supra) and National Insurance (supra). We must,
however, notice that in paragraph -18 of Garware
(supra), the Court referred to paragraph -12 of SBP
(supra), which we have already noticed and, thereafter,
the Court went on to hold, inter alia, as follows:
“19. It will be seen that neither in the
Statement of Objects and Reasons nor in the Law
Commission Report is there any mention of SMS
Tea Estates [SMS Tea Estates (P)
Ltd. v. Chandmari Tea Co. (P) Ltd. , (2011) 14
SCC 66 : (2012) 4 SCC (Civ) 777] . This is for
the very good reason that the Supreme Court or
the High Court, while deciding a Section 11
application, does not, in any manner, decide
any preliminary question that arises between
the parties. The Supreme Court or the High
Court is only giving effect to the provisions
of a mandatory enactment which, no doubt, is
to protect revenue. SMS Tea Estates [SMS Tea
Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd.,
(2011) 14 SCC 66 : (2012) 4 SCC (Civ) 777] has
taken account of the mandatory provisions
contained in the Stamp Act and held them
applicable to judicial authorities, which
would include the Supreme Court and the High
Court acting under Section 11. A close look at
Section 11(6-A) would show that when the
Supreme Court or the High Court considers a n
application under Sections 11(4) to 11(6), and
comes across an arbitration clause in an
agreement or conveyance which is unstamped, it
is enjoined by the provisions of the Stamp Act
to first impound the agreement or conveyance
and see that stamp duty and penalty (if any)
is paid before the agreement, as a whole, can
be acted upon. It is important to remember that
107
the Stamp Act applies to the agreement or
conveyance as a whole. Therefore, it is not
possible to bifurcate the arbitration clause
contained in such agreement or conveyance so
as to give it an independent existence, as has
been contended for by the respondent. The
independent existence that could be given for
certain limited purposes, on a harmonious
reading of the Registration Act, 1908 and the
1996 Act has been referred to by Raveendran,
J. in SMS Tea Estates [SMS Tea Estates (P)
Ltd. v. Chandmari Tea Co. (P) Ltd. , (2011) 14
SCC 66 : (2012) 4 SCC (Civ) 777] when it comes
to an unregistered agreement or conveyance.
However, the Stamp Act, containi ng no such
provision as is contained in Section 49 of the
Registration Act, 1908, has been held by the
said judgment to apply to the agreement or
conveyance as a whole, which would include the
arbitration clause contained therein. It is
clear, therefore, t hat the introduction of
Section 11(6-A) does not, in any manner, deal
with or get over the basis of the judgment
in SMS Tea Estates [SMS Tea Estates (P)
Ltd. v. Chandmari Tea Co. (P) Ltd. , (2011) 14
SCC 66 : (2012) 4 SCC (Civ) 777] , which
continues to apply even after the amendment of
Section 11(6-A).”
(Emphasis supplied)
87. This is apart from, the Court after referring to
Sections 2(g) and 2(h) of the Contract Act, going on
to make the observations at paragraph -22 and, finally,
paragraph-29 which we have noticed . In fact, in
paragraph-30, the Court went on to disapprove various
Judgments of High Courts, which included the Full Bench
of the High Court of Bombay in Gautam Landscapes Pvt.
108
Limited v. Shailesh S. Shah
33
, insofar as it related to
the High Court holding that after the insertion of
Section 11(6A) of the Act, the Court, acting under
Section 11(6), need not be detained by the aspect
relating to the document not bein g stamped.
88. Section 11(6A) of the Act, no doubt, contemplated
constraining the court to not stray into areas which
were permissible under the earlier regime which was set
out in SBP (supra) as explained in National Insurance
(supra). It must be understood that when the law giver
changes the law it would be indeed a wise approach and
fully commended in law to ascertain the mischief which
the legislature was dealing with. Equally , the court
would naturally enquire as to what is the relief
against the mischief which the law giver has provided.
The mischief as we understand was the perception that
courts were overstepping the limits of minimal
interference in consonance with the principle enshrined
in Section 5 of the Act. In other words, if we may bear
in mind paragraphs 22.2 and 22.3 of National Insurance
33
(2019) SCC OnLine Bom 563
109
Company (supra) it would appear that they fell outside
of the question relating to the existence of an
arbitration agreement. The Stamp Act is a law passed
by the same law-giver. It is a law which is meant to
have life, and therefore , to be enforced. The
legislature would not have possibly contemplated , when
it incorporated Section 11(6A), that the courts must
turn a blind eye to the injunction of a law and allow
it to be defeated. This to our minds involves adopting
an interpretation which would ignore the principle of
harmonious construction of statu tes.
89. As far as the conclusion in paragraph 55 of Great
Offshore Ltd. (supra) that since Section 7 of the Act
does not stipulate for stamping, stamping may not b e
required under the Stamp Act , does not commend itself
to us as the correct position in law. We are equally
unable to subscribe to the view that stamp duty, inter
alia, should be treated as a ‘technicality’. We are
also of the view that the view taken b y the learned
Single Judge otherwise in the said paragraph again does
not represent the correct position.
110
90. Section 5 no doubt provides for a non -obstante
clause. It provides against judicial interference
except as provided in the Act. The non-obstante clause
purports to proclaim so despite the presence of any law
which may provide for interference otherwise. Ho wever,
this does not mean that the operation of the Stamp Act,
in particular, Sections 33 and 35 would not have any
play. We are of the clear view that the purport of
Section 5 is not to take away the effect of Sections
33 and 35 of the Stamp Act. The Cour t under Section 11
purporting to give effect to Sections 33 and 35 cannot
be accused of judicial interference contrary to Section
5 of the Act.
91. It is nobody’s case that i f the contract which
contains the arbitration clause is an instrument within
the meaning of the Stamp Act is produced before the
court under Section 11 of the Act , and it is found to
be unstamped on the face of it , that Sections 33 and
35 and other allied provisions of the Stamp Act would
have no play. In fact, in N.N. Global (supra), this
Court directed the work order (the contract containing
the arbitration clause) to be impounded. Section 11
111
(6A) of the Act which requires the court to examine
whether an arbitration agreement exists , was the need
realized and articulated by Parliament to curb the
court from straying into other areas highlighted in
National Insurance (supra). In other words, proceeding
on the basis that an ‘unstamped agreement’ exists, it
would not deflect the court of its statutory duty to
follow the regime under Sections 33 and 3 5 of the Stamp
Act.
N. THE AMICUS CURIE SPRINGS A SURPRISE
92. This Court pointed out to the existence of the
Scheme prepared by the Supreme Court in exercise of the
powers under Section 11(10). Paragraph 2(a) of the
Scheme, inter alia, reads as follows:
“2. Submission of request. -The request to the
Chief Justice under sub -section (4) or sub -
section (5) or sub -section (6) of section 11
shall be made in writing and shall be
accompanied by-
(a) the original arbitration agreement or a
duly certified copy thereof; ”
93. Thereafter, when the curtains were about to be rung
down on the hearing, the learned Amicus brought the
following aspect to notice of the Court. He pointed out
112
that under the Scheme, the applicant need produce only
the certified copy of the Arbitration Agreement. He
would draw support from the Judgment s of this Court in
Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao and
others
34
and Hariom Agrawal (supra) to contend that even
applying Sections 33 and 35 by the Court at the stage
of Section 11 of the Act, the certified copy cannot be
impounded. He, thus, sought to take the wind out of the
sail of the appellant’s contention, by contending that
in most of the cases, since certified copies are alone
being filed and they cannot be impounded, and as after
reference to the Arbitrator based on the certified
copy, the Arbitrator is competent, in law, under
Sections 33 and 35 of the Stamp Act to do the needful,
this Court may bear this aspect in mind. Thereupon,
Shri Gagan Sanghi, would point out that even in the
certified copy, the factum of payment of the stamp du ty
must be entered. The said aspect, in fact, engaged the
attention of this Court in SMS Tea Estates (supra).
34
(1971) 1 SCC 545
113
94. Reference has been made to Jupudi Kesava Rao
(supra), to contend that a copy of an instrument,
cannot be treated as an instrument under the Stam p Act
for the purpose of Sections 33 and 35 of the Stamp Act.
A copy cannot be impounded under Section 33, it is
pointed out. Therefore, Section 33, which mandates
impounding of an unstamped instrument, would not apply
to a certified copy, which is permitt ed to be produced
under the Scheme. Reliance has been placed on
paragraphs-13 and 14 of Jupudi Kesava Rao (supra):
“13. The first limb of Section 35 clearly shuts
out from evidence any instrument chargeable
with duty unless it is duly stamped. The second
limb of it which relates to acting upon the
instrument will obviously shut out any
secondary evidence of such instrument, for
allowing such evidence to be let in when the
original admittedly chargeable with duty was
not stamped or insufficiently sta mped, would
be tantamount to the document being acted upon
by the person having by law or authority to
receive evidence. Proviso ( a) is only
applicable when the original instrument is
actually before the Court of law and the
deficiency in stamp with penalt y is paid by the
party seeking to rely upon the document.
Clearly secondary evidence either by way of
oral evidence of the contents of the unstamped
document or the copy of it covered by Section
63 of the Indian Evidence Act would not fulfil
the requirements of the proviso which enjoins
upon the authority to receive nothing in
evidence except the instrument itself. Section
114
25 is not concerned with any copy of an
instrument and a party can only be allowed to
rely on a document which is an instrument for
the purpose of Section 35. “Instrument” is
defined in Section 2(14) as including every
document by which any right or liability is,
or purports to be created, transferred,
limited, extended, extinguished or recorded.
There is no scope for inclusion of a copy o f a
document as an instrument for the purpose of
the Stamp Act.
14. If Section 35 only deals with original
instruments and not copies Section 36 cannot
be so interpreted as to allow secondary
evidence of an instrument to have its benefit.
The words “an instrument” in Section 36 must
have the same meaning as that in Section 35.
The legislature only relented from the strict
provisions of Section 35 in cases where the
original instrument was admitted in evidence
without objection at the initial stage of a
suit or proceeding. In other words, although
the objection is based on the insufficiency of
the stamp affixed to the document, a party who
has a right to object to the reception of it
must do so when the document is first tendered.
Once the time for raising objection to the
admission of the documentary evidence is
passed, no objection based on the same ground
can be raised at a later stage. But this in no
way extends the applicability of Section 36 to
secondary evidence adduced or sought to be
adduced in proof of the contents of a document
which is unstamped or insufficiently stamped. ”
(Emphasis supplied)
95. In Jupudi Kesava Rao (supra), the appellant relied
on oral evidence to pro ve the lease document which was
insufficiently stamped. The High Court held that oral
115
evidence could not be acted upon to prove the lease
agreement. The main question, which arose was, whether
secondary evidence of a written agreement to grant a
lease, was barred under Sections 35 and 36 of the Stamp
Act. The Court went on to find, on a survey of the
Evidence Act that it did not purport to deal with
admissibility of documents in evidence, which were
required to be stamped under the Stamp Act. It is
thereafter that the Court went on to hold what was done
in paragraphs-13 and 14 of the Judgment. While dealing
with Section 35 of the Act, the Court, inter alia, held
that ‘the second limb of Section 35 of the Stamp Act,
which related to acting upon the instrument, would
obviously shut out any secondary evidence of such
instrument, for allowing such evidence to be let in,
when the original, admittedly chargeable with duty, was
not stamped or insufficiently stamped, would tantamount
to the document being acted upon by the person having
by law or Authority, to receive evidence. Proviso (a)
is only applicable , it was found when the original
instrument is actually before the Court of Law and the
deficiency in stamp with penalty is paid by the party
116
seeking to rely upon the document. It is, thereafter,
the Court observed that ‘there is no scope for
inclusion of a copy of a doc ument as an instrument for
the purpose of the Stamp Act’. The Court also, in
paragraph-14, found that Section 36 of the Stamp Act,
which precludes a party, who did not object to the
admission of an unstamped or insufficiently stamped
document, in evidence, from raising the objection
later, did not apply to secondary evidence.
96. In Hariom Agrawal (supra), a Bench of three learned
Judges, was dealing with the impugned Order of the High
Court, by which, it held that a photocopy of the
original agreement, could neither be impounded nor
could it be accepted as secondary evidence. It was
after following Jupudi Kesava Rao (supra), the Court
held as follows:
“10. It is clear from the decisions of this
Court and a plain reading of Sections 33, 35
and 2(14) of the Act that an instrument which
is not duly stamped can be impounded and when
the required fee and penalty has been paid for
such instrument it can be tak en in evidence
under Section 35 of the Stamp Act. Sections 33
or 35 are not concerned with any copy of the
instrument and party can only be allowed to
rely on the document which is an instrument
within the meaning of Section 2(14). There is
117
no scope for the inclusion of the copy of the
document for the purposes of the Stamp Act. Law
is now no doubt well settled that copy of the
instrument cannot be validated by impounding
and this cannot be admitted as secondary
evidence under the Stamp Act, 1899.”
(Emphasis supplied)
97. The submission appears to be that the Scheme
provides for a certified copy of the Arbitration
Agreement and if the Arbitration Agreement is a part
of the cont ract, which is either not stamped or
insufficiently stamped and, since, it cannot be
impounded under Section 33 of the Stamp Ac t, cannot be
validated. All that the Court has to look into is,
whether an Arbitration Agreement exists.
98. It is, no doubt, true that under the Scheme, an
applicant can produce, either the Original or the
certified copy. What is a certified copy? A certified
copy is to be understood in the light of Section 76 of
the Indian Evidence Act, 1872 (hereinafter referred to
as, ‘the Evidence Act’, for short ). It reads as
follows:
“76. Certified copies of public documents. —
Every public officer having the custody of a
public document, which any person has a right
to inspect, shall give that person on demand a
118
copy of it on payment of the legal fees
therefor, together with a certifica te written
at the foot of such copy that it is a true copy
of such document or part thereof, as the case
may be, and such certificate shall be dated and
subscribed by such officer with his name and
his official title, and shall be sealed,
whenever such officer is authorized by law to
make use of a seal; and such copies so
certified shall be called certified copies. —
Every 3public officer having the custody of a
public document, which any person has a right
to inspect, shall give that person on demand a
copy of it on payment of the legal fees
therefor, together with a certificate written
at the foot of such copy that it is a true copy
of such document or part thereof, as the case
may be, and such certificate shall be dated and
subscribed by such officer with h is name and
his official title, and shall be sealed,
whenever such officer is authorized by law to
make use of a seal; and such copies so
certified shall be called certified copies."
Explanation. —Any officer who, by the ordinary
course of official duty, i s authorized to
deliver such copies, shall be deemed to have
the custody of such documents within the
meaning of this section.”
99. This necessarily would take us to Section 74 of
the Evidence Act, which defines what is a ‘public
document’. Section 74 reads a s follows:
“74. Public documents. —The following
documents are public documents: —
(1) Documents forming the acts, or records of
the acts—
(i) of the sovereign authority,
(ii) of official bodies and tribunals, and
119
(iii) of public officers, legislative,
judicial and executive, of any part of India
or of the Commonwealth, or of a foreign
country; of any part of India or of the
Commonwealth, or of a foreign country;
(2) Public records kept in any State of private
documents.”
100. We have already noticed that Section 35 of the
Stamp Act interdicts the registration of an instrument
unless it is duly stamped.
101. The interplay of the Evidence Act, the Stamp
Act and the Registration Act is to be understood as
follows:
In regard to an inst rument, which is executed in
India and which is liable to be stamped, then, stamping
has to take place before or at the time of the execution
of the instrument. It is after the instrument is
stamped that it can be presented for registration.
Section 17 of the Registration Act provides for
documents, which are compulsorily registrable. Section
18 permits registration of other documents at the
option of the persons concerned. An instrument, which
is registered, necessarily involves, it being duly
stamped before it is so registered. This result is
120
inevitable, having regard to the impact of Section 35
of the Stamp Act. In fact, an instrument, which is not
duly stamped and which is produced before the
Registering Authority, would be liable to be impounded
under Section 33 of the Stamp Act. What Section 74 read
with Section 76 of the Evidence Act provides for is,
the issuance of certified copies. Certified copies can
be issued only in respect of public documents. Section
62 inter alia of the Evidence Act defines pr imary
evidence as the document itself produced for the
inspection of the court. Section 63 of the Evidence Act
defines ‘secondary evidence’ as meaning and including ,
inter alia, ‘certified copies under the provisions
hereinafter contained’. The provisions ‘hereinafter
contained’ referred to in Section 63 must be understood
as Section 74 read with Section 76. A certified copy
can be given, no doubt, of ‘public records kept in any
State of private documents ’. Thus, if a sale deed
between two private parties c omes to be registered,
instead of producing the original document, a certified
copy of the sale deed, may qualify as secondary
evidence and a certified copy can be sought for and
121
issued under Section 76 of the Evidence Act. The
expression ‘public records k ept in any State of a
private document’ in Section 74 is not confined to
documents, which are registered under the Registration
Act. A private document, which is kept as a public
record, may qualify as a public document. What is
important is, to bear in mi nd that in view of Section
33 of the Stamp Act, an instrument, which is not duly
stamped, if it is produced before any Public Office,
it would become liable to be impounded and dealt with
as provided in the Stamp Act. Let us assume a case
where a contract, which contains an Arbitration Clause,
is registered. As we have noticed, if the contract, in
which the Arbitration Clause is contained, is exigible
to stamp duty, then, registration cannot be done
without the instrument being duly stamped. It is
keeping the same in mind that in SMS Tea Estates
(supra), this Court held that, ‘if what is produced is
a certified copy of the agreement/contract/instrument,
containing the Arbitration Clause, it should disclose
that the stamp duty has been paid on the original’.
This again is for the reason that a certified copy is
122
a true copy of the document. The Officer, who certifies
the document, must be the person having the custody of
the public document. The public document in the case
of public records of private documents , in the case of
a registered document, would necessarily involve the
document being stamped before registration. The Scheme
framed by the Chief Justice, permits the production of
a duly certified copy to relieve the party of the burden
of producing the or iginal but what is contemplated is
only the production of the certified copy, which duly
discloses the fact of payment of stamp duty. It is
worthwhile to also notice paragraph -5 of the Scheme.
It reads:
“5. Seeking further information. -The Chief
Justice or the person or the institution
designated by him under paragraph 3 may
seek further information or clarification
from the party making the request under
this Scheme.”
102. Therefore, it is not as if the Judge dealing
with an Application under Section 11 of the Act, is
bereft of authority to seek information or
clarification so as to be satisfied that the certified
123
copy satisfies the requirement as laid down in SMS Tea
Estates (supra) that stamp duty payable has been paid.
103. We have already indicated the scheme of the
Evidence Act in so far as it relates to the admission
of secondary evidence. We have also found that the
Scheme contemplates, without anything more, the
production of a form of secondary evidence, viz., a
certified copy of the Arbitration Agreement. Even if
an Arbitration Agreem ent between the two parties
becomes a public document under Section 74(c) of the
Evidence Act on the basis that it is a public record,
other than as being a registered document and on the
basis that, it was produced before any public office
and it became a public record of a private document ,
in keeping with the mandate of Section 33 of the Stamp
Act and other connected provisions, such a document
again would have been impounded, unless it was
originally stamped as per law. In other words, if a
certified copy is produced, along with a request under
Section 11 of the Act, to be treated as a document, on
which the Application under Section 11 could be
maintained, it must necessarily comply with the
124
requirement that it declares the stamp, which has been
paid in regard to the original.
104. The production of a copy of an instrument, may
not lead to the impounding of the copy as Section 33,
which mandates impounding, applies only in regard to
the original, which alone is treated as an instrument
under Section 2(14) of the Stamp Act. We must
understand the context of the ruling in Jupudi Kesava
Rao (supra) and Hariom Agrawal (supra) to be that a
party cannot ‘validate’ an instrument by producing a
copy and by getting it impounded and paying the duty
and penalty. In fact, as observed in paragraph -13 of
Jupudi Kesava Rao (supra), the Court cannot be invited
to act upon a copy of an instrument, which is
insufficiently stam ped. Thus, such a copy, while it
cannot be impounded under Section 33, it cannot also
be acted upon under Section 35.
O. SECTIONS 33 AND 35 OF THE STAMP ACT; THE COURT
OR THE ARBITRATOR TO ACT?
105. There was considerable debate at the Bar as
regards the wisdom in relegating the issue relating to
payment of stamp duty to the Arbitrator. On the one
125
hand, the learned Amicus, supported by learned Counsel
for the Respondent, would canvass that, bearing in mind
the object of the Act, and in particular, Section 5 of
the Act, prohibiting judicial interference, except as
provided, questions relating to non -payment of stamp
duty and the amount to be paid, are capable of being
dealt with by the Arbitrator. The co ncern of the Court,
that the interest of the Revenue is protected, is best
balanced with the overwhelming need to fastrack the
arbitration proceedings and they are best harmonised
by ensuring that the Arbitrator will look into the
matter and ensure that th e interest of the Revenue is
not jeopardised. On the other hand, the appellant and
the intervener would point out that the Court cannot
ignore the mandate of the law contained in Sections 33
and 35 of the Stamp Act and a view taken by this Court,
on the said lines, will only encourage evasion of the
law, whereas, if the Court follows the mandate of
Sections 33 and 35 of the Stamp Act and adhere s to what
has been laid down in Garware (supra), not only would
the law be observed, but, when the matter reaches t he
Arbitrator, the issue would have been given the
126
quietus. Such a view would also encourage persons
falling in line with the Stamp Act.
106. We see merit in the contention of the
appellant. Apart from the Court acting in consonance
with the law, when it adher es to Sections 33 and 35 of
the Stamp Act, where it applies, in our view, under the
watchful gaze of the Court, be it the High Court or the
Supreme Court, the issue relating to stamp duty, in a
case where there is no stamp duty paid, is best
resolved.
107. The question would arise as follows:
i. A document containing the Arbitration Clause may
not bear any stamp duty. We have already found that
even an Arbitration Agreement, on its own, may be
required to be stamped, as submitted by the learned
Amicus. But then the Court can proceed on the basis
that the amount of stamp duty, which the
Arbitration Agreement contained in an Arbitration
Clause, would be exigible to being extremely
meagre, there is very little likelihood of such an
agreement not being stamped. Therefo re, what the
Court is to consider is, whether when the contract,
127
in which the Arbitration Clause is contained, is
not duly stamped, it becomes the duty of the Court
to act under Sections 33 and 35 of the Stamp Act.
ii. We have already indicated the background,
consisting of the views expressed by this Court,
about the nature of review undertaken under Section
11, which led to the insertion of Section 11(6A).
Parliament clearly intended to deal with the Court
undertaking excessive review, in exercise of the
power under Section 11(6) of the Act. It was to
curtail excessive judicial interference, which was
in keeping also with the principle enshrined in
Section 5 of the Act that Parliament interfered
and enacted the amendment resulting in Section
11(6A) being inserted. Parliament was aware of the
view taken by this Court in SMS Tea Estates
(supra), namely that, if the Arbitration Agreement
was not duly stamped, then, it had to be impounded
and dealt with as provided therein. The mandate of
the Stamp Act did not conflict with the legislative
command contained in Section 11(6A), viz., to
examine whether an Arbitration Agreement existed.
128
Proceeding on the basis, in fact, that a contract,
containing the Arbitration Agreement, whic h is not
duly stamped, could be said to exist in law , it
would still not dislodge the duty cast on the Court
under Section 11 to follow the mandate of Sections
33 and 35 of the Stamp Act. In other words, on the
aforesaid view, following the command under
Section 11(6A), could not detract from, the Court
also at the same time, following the equally
binding mandate contained in the Stamp Act.
iii. The question further arises, as to whether, in view
of the power of the Court under Section 11, to find
only prima facie, the existence of the Arbitration
Agreement, it would enable the Court to make a
Reference and appointment and relegate the issue
of impounding of the document to the Arbitrator.
iv. Any shirking of the statutory duty by the Court
under Section 11 to act in tune with the peremptory
statutory dictate of the Stamp Act, appears to us
unjustifiable. Such abdication of its plain duty
is neither contemplated by the Law -Giver nor would
129
it be justifiable as causing the breach of Section
11(6A).
v. The view that cases under Section 11 of the Act
would consume more time and hinder the timely
progress of arbitration and that the matter must
be postponed so that the Arbitrator will more
suitably deal with it, does not appeal to us. While
the Stamp Act is primarily intende d to collect
revenue and it is not intended to arm a litigant
to raise ‘technical pleas’, this would hardly
furnish justification for the Court to ignore the
voice of the Legislature couched in unambiguous
terms. We find that the view expressed in SMS Tea
Estates (supra), being reiterated, despite the
insertion of Section 11(6A), would promote the
object of the Stamp Act and yet be reconcilable
with the mandate of Section 11(6A). We may,
however, qualify what we have said with a caveat.
There may be cases, where no stamp duty is seen
paid. It paves the way for the unambiguous
discharge of duty under Sections 33 and 35 of the
Stamp Act. There may, however, be cases, where it
130
may be stamped but the objection is taken by the
party that it is not duly stamped. I n such cases,
no doubt, it is ordinarily the duty of the Court
to examine the matter with reference to the duty
under Section 33(2). If the claim that it is
insufficiently stamped, appears to the Court to be
on the face of it, wholly without foundation, it
may make the Reference on the basis of the
existence of an Arbitration Agreement otherwise
and then leave it open to the Arbitrator to
exercise the power under Section 33 , should it
become necessary. This approach does justice to
the word ‘examine’ in Section 33(2) of the Stamp
Act while not ignoring the command of Section
11(6A) of the Act. It is not to be confused with
the duty to examine prima facie whether an
‘Arbitration Agreement’ exists under Section
11(6A) of the Act, but is related to the duty to
examine the matter under Section 33(2) of the Stamp
Act.
vi. Under the Evidence Act, production of only the
original document is permissible by way of evidence
131
(See Section 62). However, secondary eviden ce is
permissible under Section 63 and certified copies
are treated as secondary evidence. Under the
Scheme, in a proceeding under Section 11, without
following the procedure in the Evidence Act,
secondary evidence, in the form of certified copy,
is permitted. It may be true that since certified
copies are permitted to maintain an Application
under Section 11 and, in law, impounding cannot be
done of a certified copy, as it is not an
instrument, the duty of the Court to examine the
matter from the point of view of Section 33 of the
Stamp Act, may not exist as such. However, we have
explained what constitutes a certified copy, and
that, in view of SMS Tea Estates (supra), the stamp
duty paid must be indicated in the certified copy
and, in appropriate case, th e Court has power,
under paragraph-5 of the Scheme, to call for
information. It becomes the duty of the Court, in
cases, where a certified copy is produced, to be
satisfied that the production of the certified
copy, fulfils the requirement in law. As already
132
noticed, while the certified copy which does not
show that the stamp duty is paid cannot be
impounded under Section 33, it cannot be acted upon
under Section 35 of the Stamp Act.
P. ARBITRATION AGREEMENT, A DISTINCT AGREEMENT
AND ITS IMPACT?
i. The last question, which remains is, whether, if
the contract, in which, the Arbitration Clause is
located, is unstamped but the Arbitration Clause
is stamped, the Court can ignore the fact that the
instrument contain ing in the Contract is
unstamped. In the first place, such an eventuality
cannot arise. This for the reason that unless there
is misrepresentation or a fraud played, it is
incomprehensible as to how, when the contract is
produced, it will not be dealt with un der Section
33 of the Stamp Act among other provisions.
ii. The learned Amicus, in fact, points out that
invariably the Arbitration Agreement i s contained
as a clause in a larger agreement. The contract
would consist of the document containing the
Arbitration Agreement. This brings us to the
133
question as to whether the Arbitration Agreement
can be treated as a separate contract, and even if
the main contract is not stamped, it suffices if
the Arbitration Agreement alone is stamped.
iii. In N.N. Global (supra), in f act, the Court
proceeded to impound the main contract which was
the Work Order. The Doctrine of the Arbitration
Agreement being a distinct and a separate
agreement, is well-established.
The Doctrine of Kompetenz -Kompetenz has been
enshrined in Section 16 of the Act. Section 16,
undoubtedly, articulates the principle that the
Arbitral Tribunal may rule on its jurisdiction
including objections relating to the validity of
the Arbitration Agreement and its very existence
and, for that purpose, an Arbitration C lause
forming part of the contract, is to be treated as
an agreement independent from the other terms of
the contract. Equally, Section 16(1)(b) declares
that despite the Tribunal finding that the contract
was null and void, it would not invalidate the
Arbitration Clause. The evolution of the principle
134
that an Arbitration Agreement is a separate and
distinct agreement from the contract, would
indicate that it would have no play in the context
of the duty of a Court, within the meaning of
Sections 33 and 35 of the Stamp Act, to act in
consonance therewith. The efficacy of the
Arbitration Clause in a contract is preserved so
that the extinguishing of the contractual
obligations by termination or non -performance or
alleged performance, does not deprive the part ies
of their rights and the power of the Arbitrator to
adjudicate on disputes, which, otherwise fall
within the ambit of the Arbitration Clause.
The underlying principle behind treating the
Arbitration Agreement as a separate agreement is
to create a mechanism, which survives the contract
so that disputes, falling within the Arbitration
Agreement, are resolved. Thus, the rescission of
the main contract would not result in the death of
the Arbitration Clause. We agree that the
Arbitration Clause may be a collateral term [See
135
Heyman v. Darwins Limited
35
]. The Arbitration
Agreement, it is found in N.N. Global (supra),
‘exists and can be acted upon, irr espective of
whether the main substantive contract is valid or
not’ [See paragraph-4.10 of N.N. Global (supra)].
It may be true that, ordinarily, the invalidity of
the main agreement may not affect the Arbitration
Clause [See paragraph -4.12 of N.N. Global
(supra)]. However, proceeding on the basis that an
Arbitration Agreement contained as a clause in the
main contract, is a separate agreement and it can
exist independently, the fallacy behind such a line
of argument in the context of Sections 33 and 35
of the Stamp Act, can be demonstrated as follows:
The learned Amicus would urge that in N.N.
Global (supra) the Court erred in finding that the
Arbitration Agreement is not required to be
stamped. If so, the Arbitration Clause, being the
Arbitration Agreement, would require to be
stamped. Is it conceivable that a contract,
35
(1942) AC 356 HL
136
containing an Arbitration Clau se, would be stamped
only to cover the liability in regard to the
Arbitration Agreement and leave the main agreement
unstamped, when it is required to be stamped? Will
not acceptance of such a view require the Court to
adopt an interpretation that will pla inly
encourage parties to contravene the mandate of the
Stamp Act. We are afraid that, therefore, even
proceeding on the basis that an Arbitration
Agreement is a separate agreement, would be of no
avail in a case where the Arbitration Clause and
the main Agreement are both exigible to stamp duty.
108. As found in SMS Tea Estates (supra), in view
of the fact that there is a bar to the use of an
instrument, which is not stamped or insufficiently
stamped for any purpose (unlike Section 49 of the
Registration Act, which allows an unregistered document
to be used to prove a collateral transaction), an
unstamped instrument, in which, an Arbitration Clause
is part of, cannot be allowed to be used, as it would
be allowing the instrument to be used to establish a
collateral transaction. This is proceeding on the basis
137
that an Arbitration Agreement is a collateral term and
may have a distinct existence, separate from the main
agreement.
Q. CONCLUSIONS
109. The view taken in SMS Tea Estates (supra) as
followed in Garware (supra) and by the Bench in
Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar
Chattram and other Charities v. Bhaskar Raju and
Brothers and others
36
as to the effect of an unstamped
contract containing an Arbitration Ag reement and the
steps to be taken by the Court, represent the correct
position in law as explained by us hereinbefore . N.N.
Global (supra) was wrongly decided, when it held to the
contrary and overruled SMS Tea Estates (supra) and
Garware (supra).
110. An instrument, which is exigible to stamp
duty, may contain an Arbitration Clause and which is
not stamped, cannot be said to be a contract, which is
enforceable in law within the meaning of Section 2(h)
36
(2020) 4 SCC 612
138
of the Contract Act and is not enforceable under
Section 2(g) of the Contract Act. An unstamped
instrument, when it is required to be stamped, being
not a contract and not enforceable in law, cannot,
therefore, exist in law. Therefore, we approve of
paragraphs-22 and 29 of Garware (supra). To this
extent, we also approve of Vidya Drolia (supra),
insofar as the reasoning in paragraphs -22 and 29 of
Garware (supra) is approved.
111. The true intention behind the insertion of
Section 11(6A) in the Act was to confine the Court,
acting under Section 11, to examine and ascertain about
the existence of an Arbitration Agreement.
112. The Scheme permits the Court, under Section 11
of the Act, acting on the basis of the original
agreement or on a certified copy. The cer tified copy
must, however, clearly indicate the stamp duty paid as
held in SMS Tea Estates (supra). If it does not do so,
the Court should not act on such a certified copy.
113. If the original of the instrument is produced
and it is unstamped, the Court, actin g under Section
139
11, is duty-bound to act under Section 33 of the Stamp
Act as explained hereinbefore . When it does so,
needless to say, the other provisions, which, in the
case of the payment of the duty and penalty would
culminate in the certificate under Section 42(2) of the
Stamp Act, would also apply. When such a stage arises,
the Court will be free to process the Application as
per law.
114. An Arbitration Agreement, within the meaning
of Section 7 of the Act, which attracts stamp duty and
which is not stamped or insufficiently stamped, cannot
be acted upon, in view of Section 35 of the Stamp Act,
unless following impounding and payment of the
requisite duty, necessary certificate is provided under
Section 42 of the Stamp Act.
115. We further hold that the provi sions of
Sections 33 and the bar under Section 35 of the Stamp
Act, applicable to instruments chargeable to stamp duty
under Section 3 read with the Schedule to the Stamp
Act, would render the Arbitration Agreement contained
in such instrument as being non -existent in law unless
the instrument is validated under the Stamp Act.
140
116. In a given case, the Court has power under
paragraph-5 of the Scheme, to seek information from a
party, even in regard to stamp duty .
117. We make it clear that we have not pronounced
on the matter with reference to Section 9 of the Act.
The reference to the Constitution Bench shall stand
answered accordingly.
118. We record our deep sense of appreciation for
the efforts put in by Shri Gourab Bane rji, learned
senior counsel who has ably assisted this Court as
Amicus.
…………………………………………J.
[K.M. JOSEPH]
…………………………………………J.
[ANIRUDDHA BOSE]
NEW DELHI;
DATED: APRIL 25, 2023.
1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S). 3802-3803 OF 2020
M/S. N.N. GLOBAL MERCANTILE
PRIVATE LIMITED ….APPELLANT(S)
VERSUS
M/S INDO UNIQUE FLAME LTD. & ORS. ….RESPONDENT(S)
J U D G M E N T
Rastogi, J.
2
INDEX
Sr.
no.
Topic Page No.
I. Reference
3-4
II. Conflicting Judgments
4-20
III. Requirements under Indian Stamp Act,
1899 - Discussions on Provisions of Indian
Stamp Act, 1899 (Chapter IV- Sections 33-
48, More specifically Sections 33, 35, 36,
38, 40, 42)
20-31
IV. Historical Background of Arbitration in
India
31-37
V. Intent behind incorporation of Section
11(6A) of the Arbitration and Conciliation
Act,1996
37-41
VI. Scope of Section 11 (6A) w.r.t. Section 8,
Section 16, and Section 45 of the
Arbitration and Conciliation Act, 1996
42-53
VII. Limited Examination by Court under
Section 11(6A) of the Arbitration and
Conciliation Act, 1996
54-55
VIII. Interpretation of “Existence of Arbitration
Agreement”
55-57
IX. Clarification on Stamping of Arbitration
Agreement
57-59
X. Answer to the Reference
59-61
3
I. Reference
1. This case deals with the larger question regarding the scope and
ambit to which there should be an intervention of courts at the pre-
referral stage in the working of arbitration contracts.
2. A three-Judge Bench of this Court in M/s. N.N. Global
Mercantile Private Limited v. M/s. Indo Unique Flame Limited
and Others
1
has doubted the correctness of the view expressed in
paras 146 and 147.1 of the coordinate three-Judge Bench of this
Court in Vidya Drolia and Others v. Durga Trading Corporation
2
and referred the matter to be settled authoritatively by the
Constitution Bench of this Court.
3. The reference which has been made to settle authoritatively by
the Constitution Bench is referred as under:
“Whether the statutory bar contained in Section 35 of the
Stamp Act, 1899 applicable to instruments chargeable to stamp
duty under Section 3 read with the Schedule to the Act, would also
render the arbitration agreement contained in such an instrument,
which is not chargeable to payment of stamp duty, as being non-
existent, unenforceable, or invalid, pending payment of stamp duty
on the substantive contract/instrument?”
(emphasis added)
1
(2021) 4 SCC 379
2
(2021) 2 SCC 1
4
4. It is necessary to give background facts for better
appreciation of the reference made for our consideration.
II. Conflicting Judgments
5. In the case of SMS Tea Estates Private Limited v. Chandmari
Tea Company Private Limited ,
3
a two-Judge Bench of this Court
was considering the issue in a pre-2015 amendment regime of
whether an arbitration agreement in an unregistered and unstamped
lease deed, which required compulsory registration under the
Registration Act, 1908(hereinafter being referred to as the “Act 1908”)
was valid and enforceable. It was held as follows:
“19. Having regard to Section 35 of the Stamp Act, unless the stamp
duty and penalty due in respect of the instrument is paid, the court
cannot act upon the instrument, which means that it cannot act
upon the arbitration agreement also which is part of the instrument.
Section 35 of the Stamp Act is distinct and different from Section 49
of the Registration Act in regard to an unregistered document.
Section 35 of the 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.
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
3
(2011) 14 SCC 66
5
clause 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.”
6. The above decision was followed in the case of Naina Thakkar
v. Annapurna Builders,
4 wherein it was held as follows:
“7. It is true that the consequences provided in the Stamp Act, 1899
must follow where sufficient stamp duty has not been paid on an
instrument irrespective of the willingness of a party to the
instrument to pay deficit stamp duty but the procedure where the
arbitration clause is contained in a document which is not registered
although compulsorily registrable and which is not duly stamped as
summed up by this Court in SMS Tea Estates (P) Ltd. case shall
not be applicable to the proceedings under Section 8 of t he
[Arbitration and Conciliation] Act where the party making such
application does not express his/her readiness and willingness to
pay the deficit stamp duty and the penalty. It is not the duty of the
Court to adjourn the suit indefinitely until the defect with reference
to deficit stamp duty concerning the arbitration agreement is cured.
Accordingly, we are of the opinion that no fault can be found in the
order of the trial court in rejecting the application made under
Section 8 of the Act as the document on which the petitioner relied
upon was admittedly unregistered and insufficiently stamped.”
7. An amendment was brought in the Arbitration and Conciliation
Act, 1996 (hereinafter being referred to as the “Act, 1996”), and
Section 11(6A) was inserted in 2016.
8. A two-Judge Bench in Garware Wall Ropes Limited v.
Coastal Marine Constructions and Engineering Limited ,
5
dealt
4
(2013) 14 SCC 354
5
(2019) 9 SCC 209
6
with the issue whether an arbitration clause in an agreement which
requires compulsorily to be stamped under the relevant Indian
Stamp Act, 1899(hereinafter being referred to as the “Act, 1899”), but
is not duly stamped, would be enforceable even after the insertion of
clause (6A) to Section 11 of the Act, 1996. The Bench followed the
reasoning and upholding of the decision in SMS Tea Estates Private
Limited(supra), and held:
“19….A close look at Section 11(6-A) would show that when the
Supreme Court or the High Court considers an application under
Sections 11(4) to 11(6), and comes across an arbitration clause in
an agreement or conveyance which is unstamped, it is enjoined by
the provisions of the Stamp Act to first impound the agreement or
conveyance and see that stamp duty and penalty (if any) is paid
before the agreement, as a whole, can be acted upon. It is important
to remember that the Stamp Act applies to the agreement or
conveyance as a whole. Therefore, it is not possible to bifurcate the
arbitration clause contained in such agreement or conveyance so as
to give it an independent existence, as has been contended for by
the respondent. The independent existence that could be given for
certain limited purposes, on a harmonious reading of the
Registration Act, 1908 and the 1996 Act has been referred to by
Raveendran, J. in SMS Tea Estates when it comes to an unregistered
agreement or conveyance. However, the Stamp Act, containing no
such provision as is contained in Section 49 of the Registration Act,
1908, has been held by the said judgment to apply to the agreement
or conveyance as a whole, which would include the arbitration
clause contained therein. It is clear, therefore, that the introduction
of Section 11(6-A) does not, in any manner, deal with or get over the
basis of the judgment in SMS Tea Estates, which continues to apply
even after the amendment of Section 11(6-A).
22. When an arbitration clause is contained “in a contract”, it is
significant that the agreement only becomes a contract if it is
enforceable by law. We have seen how, under the Stamp Act, an
agreement does not become a contract, namely, that it is not
enforceable in law, unless it is duly stamped. Therefore, even a plain
7
reading of Section 11(6-A), when read with Section 7(2) of the 1996
Act and Section 2(h) of the Contract Act, would make it clear that
an arbitration clause in an agreement would not exist when it is not
enforceable by law. This is also an indicator that SMS Tea Estates
has, in no manner, been touched by the amendment of Section 11(6-
A).”
9. The decision in Garware Wall Ropes Limited(supra) was cited
in approval by a three-Judge Bench in the case of Vidya Drolia and
Others(supra) wherein it was held:
“146. We now proceed to examine the question, whether the word
“existence” in Section 11 merely refers to contract formation
(whether there is an arbitration agreement) and excludes the
question of enforcement (validity) and therefore the latter falls
outside the jurisdiction of the court at the referral stage. On
jurisprudentially and textualism it is possible to differentiate
between existence of an arbitration agreement and validity of an
arbitration agreement. Such interpretation can draw support from
the plain meaning of the word “existence”. However, it is equally
possible, jurisprudentially and on contextualism, to hold that an
agreement has no existence if it is not enforceable and not binding.
Existence of an arbitration agreement presupposes a valid
agreement which would be enforced by the court by relegating the
parties to arbitration. Legalistic and plain meaning interpretation
would be contrary to the contextual background including the
definition clause and would result in unpalatable consequences. A
reasonable and just interpretation of “existence” requires
understanding the context, the purpose and the relevant legal
norms applicable for a binding and enforceable arbitration
agreement. An agreement evidenced in writing has no meaning
unless the parties can be compelled to adhere and abide by the
terms. A party cannot sue and claim rights based on an
unenforceable document. Thus, there are good reasons to hold that
an arbitration agreement exists only when it is valid and legal. A void
and unenforceable understanding is no agreement to do anything.
Existence of an arbitration agreement means an arbitration
agreement that meets and satisfies the statutory requirements of
both the Arbitration Act and the Contract Act and when it is
enforceable in law.
8
147. We would proceed to elaborate and give further reasons:
147.1 In Garware Wall Ropes Ltd., this Court had examined the
question of stamp duty in an underlying contract with an arbitration
clause and in the context had drawn a distinction between the first
and second part of Section 7(2) of the Arbitration Act, albeit the
observations made and quoted above with reference to ‘existence’
and ‘validity’ of the arbitration agreement being apposite and
extremely important, we would repeat the same by reproducing
paragraph 29 thereof:
“29. This judgment in Hyundai Engg. case is important
in that what was specifically under consideration was
an arbitration clause which would get activated only if
an insurer admits or accepts liability. Since on facts it
was found that the insurer repudiated the claim,
though an arbitration clause did “exist”, so to speak, in
the policy, it would not exist in law, as was held in that
judgment, when one important fact is introduced,
namely, that the insurer has not admitted or accepted
liability. Likewise, in the facts of the present case, it is
clear that the arbitration clause that is contained in the
subcontract would not “exist” as a matter of law until
the sub-contract is duly stamped, as has been held by
us above. The argument that Section 11(6-A) deals with
“existence”, as opposed to Section 8, Section 16 and
Section 45, which deal with “validity” of an arbitration
agreement is answered by this Court's understanding of
the expression “existence” in Hyundai Engg. case, as
followed by us.”;
Existence and validity are intertwined, and arbitration agreement
does not exist if it is illegal or does not satisfy mandatory legal
requirements. Invalid agreement is no agreement.”
(Emphasis added)
10. Later, a three-Judge Bench in M/s. N.N. Global Mercantile
Private Limited(supra) held that in arbitration jurisprudence, an
“arbitration agreement is a distinct and separate agreement, which
is independent from the substantive commercial contract in which it
9
is embedded”. This three-Judge Bench made a reference to the
Constitution Bench, as it expressed its disagreements with the view
expressed in SMS Tea Estates Private Limited(supra), Garware
Wall Ropes Limited(supra), and Vidya Drolia and Others(supra). It
held:
“26. In our view, there is no legal impediment to the enforceability
of the arbitration agreement, pending payment of Stamp Duty on
the substantive contract. The adjudication of the rights and
obligations under the Work Order or the substantive commercial
contract would however not proceed before complying with the
mandatory provisions of the Stamp Act…
28. In our view, the decision in SMS Tea Estates does not lay down
the correct position in law on two issues i.e. (i) that an arbitration
agreement in an unstamped commercial contract cannot be acted
upon, or is rendered un-enforceable in law; and (ii) that an
arbitration agreement would be invalid where the contract or
instrument is voidable at the option of a party, such as u/s 19 of
the Indian Contract Act, 1872.
29. We hold that since the arbitration agreement is an independent
agreement between the parties, and is not chargeable to payment of
stamp duty, the non-payment of stamp duty on the commercial
contract, would not invalidate the arbitration clause, or render it un-
enforceable, since it has an independent existence of its own. The
view taken by the Court on the issue of separability of the arbitration
clause on the registration of the substantive contract, ought to have
been followed even with respect to the Stamp Act. The non-payment
of stamp duty on the substantive contract would not invalidate even
the main contract. It is a deficiency which is curable on the payment
of the requisite Stamp Duty.”
11. It also doubted the correctness of the view taken in SMS Tea
Estates Private Limited(supra), which was approved in Garware
10
Wall Ropes Limited(supra) and Vidya Drolia and Others(supra),
and held:
“56. We are of the considered view that the finding in SMS Tea
Estates and Garware that the non-payment of stamp duty on the
commercial contract would i nvalidate even the arbitration
agreement, and render it non-existent in law, and un-enforceable, is
not the correct position in law.
57. In view of the finding in paragraph 146 and 147 of the judgment
in Vidya Drolia by a co-ordinate bench, which has affirmed the
judgment in Garware, the aforesaid issue is required to be
authoritatively settled by a Constitution bench of this Court.”
12. As the Benches in both M/S. N.N. Global Mercantile Private
Limited(supra) and Vidya Drolia and Others(supra) are of equal
strength, this Constitution Bench has been called upon to
authoritatively rule on the issue. To adjudicate the issue, this Bench
at first needs to examine whether the requirements under the Act,
1899 at pre-referral stage are required to be examined for
appointment of Arbitrator under Section 11(6A) of the Act, 1996.
13. Mr. Gourab Banerjee, learned senior counsel, who appears as
Amicus Curiae to assist this Court, submits that the intention of the
Act, 1996 and the later amendments made from time to time were to
streamline the process and judicial intervention in arbitration
11
proceedings adds significantly to the delay in the arbitration process
and that negates the benefit of arbitration. The Arbitration &
Conciliation (Amendment) Act, 2015 (hereinafter being referred to as
the 2015 Amendment) was introduced to emphasize the speedy
disposal of cases relating to arbitration with minimal court
interference.
14. Mr. Banerjee submits that so far as the scope and ambit of
Section 11 is concerned, it is only to fill the gap and the Court is
merely functioning as an appointing authority where the parties fail
to appoint an Arbitrator. After the insertion of Section 11(6A) (2015
Amendment), the legislative policy and purport are essentially to
minimize the Court’s intervention at the stage of appointing the
Arbitrator and with this intention, Section 11(6A) has been
incorporated which ought to be respected.
15. Mr. Banerjee further submits that the scope of the Court should
be circumscribed to confine to the examination, prima facie, of the
formal existence of the arbitration agreement at the stage of contract
formation, including whether the agreement is in writing and the core
contractual ingredients qua the formation of the agreement are
fulfilled. On rare occasions, if a question is being raised by the
12
parties, to some extent, the Court may examine the subject matter of
dispute as arbitrable but that too as an exception. At the same time,
so far as the Act, 1899 is concerned, it is only a fiscal measure
enacted to secure revenue of the State in certain classes of
instruments but that may not be invoked to arm a litigant with a
weapon of technicality to meet the case of his/her opponent. Once
the object of the revenue is secured according to law, the party
staking his claim in the instrument will not be defeated on the ground
of the initial defect in the instrument.
16. Mr. Banerjee further submits that even non-payment of stamp
duty is a curable defect and this defect can be cured at any stage
before the instrument is admitted into evidence by the Arbitral
Tribunal. If the insufficiency of stamp or unduly stamped is being
examined/adjudicated at the pre-referral stage by the Court under
Section 11, it would be nothing but to encourage parasitical
challenges and dilatory tactics in resisting reference to arbitration.
The natural solution inevitable is to appoint the Arbitrator and to
allow the dispute resolution proceedings to commence and permit the
Arbitral Tribunal to fulfil its duty under the Act, 1996. There is no
13
reason why the Arbitral Tribunal cannot prevent the evasion of stamp
duty.
17. It is also brought to our notice that at the time of submitting an
application under Section 11 at the pre-referral stage, the parties are
not under an obligation to file an original arbitration agreement and
since the copy of the arbitration agreement is to be annexed with the
application, in true sense, it is not an instrument as being
contemplated under Section 2(14) of the Act, 1899, particularly at
the pre-referral stage, the question of invoking Sections 33 or 35 of
the Act, 1899 is not available to be invoked. In support of submission
Mr. Banerjee has placed reliance on the judgment of this Court
reported in Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao
and Others
6 which has been later followed by this Court in Hariom
Agrawal v. Prakash Chand Malviya
7.
18. Taking assistance thereof, Mr. Banerjee submits that Sections
33 or 35 are not concerned with any copy of the instrument and there
is no scope for the inclusion of the copy of the document for the
purpose of the Act, 1899. The copy of the instrument within the
6
(1971) 1 SCC 545
7
(2007) 8 SCC 514
14
meaning of Section 2(14) of the Act, 1899 cannot be validated by
impounding and it cannot be admitted as secondary evidence under
the Act, 1899.
19. Mr. Banerjee further submits that the very question raised for
consideration of this Court as to whether the arbitral agreement is
valid or is in existence in law, is not open to be examined at the pre-
referral stage for the reason that original instrument is not on record
(arbitral agreement) and a conjoint reading of Sections 33 and 35 is
not concerned with any copy of the instrument and the party can
only be allowed to rely on the document in evidence which is an
instrument withing the meaning of Section 2(14) and the validity of
the document is always open to be examined at the post -referral
stage by the Arbitrator/Arbitral Tribunal in its jurisdiction vested in
Section 16 of the Act, 1996.
20. Mr. Gagan Sanghi, learned counsel for the appellant, submits
that Section 35 of the Act, 1899 bars admission of unduly stamped
“instrument” in evidence “for any purpose” and also “acting upon it”
and it was held by this Court in Government of Andhra Pradesh
15
and Others v P. Laxmi Devi(Smt.)
8 that “shall” in Section 33 of the
Act, 1899 is mandatory and unstamped document must be
impounded. Even assuming that stamp duty is not payable on an
arbitration agreement under the Act, 1899, when arbitration
agreement is contained as a clause in an instrument on which stamp
duty is payable, such arbitration agreement as an instrument,
attracts the bar of Section 35 of the Act, 1899.
21. Mr. Sanghi further submits that separation of agreement from
the substantive contract is nothing but a legal fiction created by
Section 16 of the Act, 1996 and it cannot be an exception to Section
35 of the Act, 1899.
22. Mr. Sanghi further submits that the Doctrine of Separability
and Kompetenz - Kompetenz has no bearing on the issue of
enforceability of an arbitration agreement when proper stamp duty is
not paid on the instrument containing the arbitration agreement and
relied upon the judgment of the UK Supreme Court in Enka Insaat
Ve Sanayi AS v OOO Insurance Company Chubb
9 where it was held
that an “arbitration clause is nonetheless part of bundle of rights and
8
(2008) 4 SCC 720
9
(2020) UK SC 38
16
obligations recorded in the contractual document” and according to
him, the issue of stamping is to be looked into at the very threshold,
even if it is in exercise of Section 11 (6A), i.e. at the time of pre-arbitral
stage with respect to appointment of arbitrator. According to him,
an instrument would exist in law only when it is enforceable and
“existence” defined in Section 11(6A) of the Act, 1996 in respect of an
arbitration agreement, has to be a valid enforceable agreement and
it is always open to examine the issue of non-stamping or of
insufficiently stamped at the initial/pre-referral stage itself and
further highlighting three modes as provided in M/s. N.N. Global
Mercantile Private Limited (supra) i.e. impounding, payment of
stamp duty and appointment of arbitrator, on an application filed
under Section 11 of the Act, 1996, the Court is certainly “acting
upon” the arbitration clause which is contended to be barred by the
clear expression of Section 35 of the Act, 1899 and an Agreement,
unless enforceable by law, cannot be termed to be in existence under
Section 11(6A) of the Act, 1996.
23. Ms. Malvika Trivedi, learned senior counsel, who appears for
the intervenor in I.A. No.18516 of 2022, submits that the regimes of
the Act, 1899 and Act, 1908 are completely different. M/s. N.N.
17
Global Mercantile Private Limited (supra) wrongly applied the
principles of registration of a document to the requirement of
stamping a document. While the former is a curable defect, the latter
determines the very existence and completion of a
document/instrument. In the absence of registration, an instrument
shall remain in existence but without stamping, the instrument is
incomplete/inchoate.
24. Ms. Trivedi further submits that the Act, 1899 envisages the
payment of stamp duty, failing which the instrument, according to
her, cannot be acted upon for any purpose and there is no ambiguity
in the language of the Statute and we have to follow the golden
principles of interpretation of the Statute.
25. Ms. Trivedi further submits that the powers of the Court under
different provisions of law as well as the restrictions created in the
Act, 1899 apply to the proceedings conducted in accordance with
Section 9 of the Act, 1996 and submits that even if the arbitration
clause stands severed, the Court will have to reach a prima facie
conclusion as to whether the substantive contract which contained
18
the clause of arbitration is enforceable in law before granting interim
measures invoking Section 9 of the Act, 1996.
26. Mr. Debesh Panda, learned counsel for the Intervenor in I.A. No.
199969 of 2022 submits that Part I of Act, 1996 deals with Sections
8, 9 and 11, whereas Section 45 is dealt within Part II. Section 45
has been recognized as a provision under Part II which is a complete
code. The expression “unless it finds” in Section 45 was interpreted
by majority in Shin-Etsu Chemical Co. Ltd. v Aksh Optifibre Ltd.
and Another
10 as a consideration on a prima facie basis. In 2019,
Parliament amended Section 45 by substituting the expression
“unless it finds” with “unless it prima facie finds”, that brings the
statute in line with the position settled in Shin Etsu (supra). In this
background, the Act, 1899 merely creates a temporary infliction till
the stamp duty is recovered, with or without penalty. The affliction
only attaches to the instrument and not the transaction.
27. Mr. K. Ramakanth Reddy, learned senior counsel for
respondent no.1 took us through the relevant Lok Sabha debates
before the enactment of the Act, 1996 and taking assistance thereof
10
(2005) 7 SCC 234
19
submits that the provisions of the Act 1996, Act 1899 and the
Contract Act, 1872 (hereinafter being referred to as “Act, 1872”) has
to be harmonized. Section 17 of Act, 1899 has to be read with Section
31 of the Act, 1899. The plain language of Section 7 of the Act, 1996
does not require that the parties are under an obligation to stamp
the agreement. The legislative intention would be defeated, if the
Court insist on non-core technical requirements such as stamps,
seals and originals for the purpose of acting upon the arbitration
agreement at a pre-arbitration stage for appointment of an arbitrator
invoking power under Section 11(6A) of the Act, 1996.
28. Learned counsel for the respondents, further submits that in
the instant facts of the case, an application was filed under Section
8 for reference of disputes to arbitration and it was not maintainable
under Section 34 of the Maharashtra Stamp Act, 1958 which is
almost pari materia to the Act, 1899. The work order being an
unstamped document could not be received in evidence for any
purpose, or acted upon, unless it is duly stamped. In consequence
thereof, the arbitration clause in the unstamped agreement also
could not be acted upon or enforced since the arbitration clause
would have no existence in law, unless the applicable stamp duty
20
(and penalty, if any) is paid on the work order and placed reliance on
the judgment of this Court in Garware Wall Ropes Limited(supra).
29. Learned counsel further submits that the High Court, while
relying on the application under Section 8 had enforced a non -
existent arbitration clause which is in violation of Section 34 of the
Maharashtra Stamp Act, 1958 and further contended that the
respondent had not indicated its willingness to pay the stamp duty,
even though, at later stage, an objection was raised and, therefore,
no justification arises to grant any further opportunity to now pay
the stamp duty under the clause of arbitration.
30. We have heard learned counsel for the parties and with their
assistance perused the material available on record and before
delving into the reference, we feel apposite to discuss the statutory
provisions related to the reference.
III. Requirements under the Indian Stamp Act, 1899
31. The Act, 1899 is a fiscal statute laying down the law relating to
tax levied in the form of stamps on instruments recording
transactions. The stamp duties on instruments specified in Entry 91
of List I(Union List) of Schedule VII of the Constitution of India (viz.
21
Bills of Exchange, cheques, promissory notes, bills of lading, letters
of credit, policies of insurance, transfer of shares, debentures,
proxies and receipts) are levied by the Union Government. Similarly,
the stamp duties on instruments other than those mentioned in
Entry 91 of the Union List above are levied by the States as per Entry
63 of List II(State List) of the Schedule VII. Provisions other than
those relating to rates of duty fall within the legislative power of both
the Union and the States by virtue of Entry 44 of the List
III(Concurrent List). However, the stamp duties on all the
instruments are collected and kept by the concerned States.
32. The term ‘Instrument’ has been defined under Section 2(14) of
the Act, 1899 and the ‘Instrument chargeable to Duty’ is provided
under Section 3 whereas Section 17 provides that all instruments
chargeable with duty and executed by any person in India has to be
stamped.
33. Sections 2(14), 3 and 17 of the Act, 1899 are extracted
hereunder: -
“2(14) ― Instrument”. — instrument includes every document by
which any right or liability is, or purports to be, created, transferred,
limited, extended, extinguished or recorded:
22
3. Instruments chargeable with duty. —Subject to the provisions
of this Act and the exemptions contained in Schedule I, the following
instruments shall be chargeable with duty of the amount indicated
in that Schedule as the proper duty therefore respectively, that is to
say—
(a) every instrument mentioned in that Schedule which,
not having been previously executed by any person, is
executed in [India] on or after the first day of July, 1899;
(b) every bill of exchange [payable otherwise than on
demand] or promissory note drawn or made out of
[India] on or after that day and accepted or paid, or
presented for acceptance or payment, or endorsed,
transferred or otherwise negotiated, in [India]; and
(c) every instrument (other than a bill of exchange, or
promissory note) mentioned in that Schedule, which,
not having been previously executed by any person, is
executed out of [India] on or after that day, relates to
any property situate, or to any matter or thing done or
to be done, in [India] and is received in [India]:
Provided that no duty shall be chargeable in respect of— (1) any
instrument executed by, or on behalf of, or in favour of, the
Government in cases where, but for this exemption, the Government
would be liable to pay the duty chargeable in respect of such
instrument;
(2) any instrument for the sale, transfer or other disposition, either
absolutely or by way of mortgage or otherwise, of any ship or vessel,
or any part, interest, share or property of or in any ship or vessel
registered under the Merchant Shipping Act 1894, Act No. 57 & 58
Vict. c. 60 or under Act XIX of 1838 Act No. or the Indian
Registration of Ships Act, 1841, (CX of 1841) as amended by
subsequent Acts.
17. Instruments executed in India. — All instruments chargeable
with duty and executed by any person in [India] shall be stamped
before or at the time of execution.
18. Instruments other than bills and notes executed out of
India.—(1) Every instrument chargeable with duty executed only out
of [India], and not being a bill of exchange or promissory note, may
be stamped within three months after it has been first received in
[India]. (2) Where any such instrument cannot, with reference to the
23
description of stamp prescribed therefore, be duly stamped by a
private person, it may be taken within the said period of three
months to the Collector, who shall stamp the same, in such manner
as the [State Government] may by rule prescribe, with a stamp of
such value as the person so taking such instrument may require
and pay for.”
34. ‘Instrument’ as defined under Section 2(14) of the Act, 1899
includes every document by which any right or liability is, or purports
to be, created, transferred, limited, extended, extinguished, or
recorded. The term ‘Instrument’ as defined under Section 2(14) refers
to the original instrument and not a copy or a duly certified copy of
the same. It is only on production of the original instrument, the
deficiencies in the stamp duty/penalty can be paid to validate the
same.
35. Chapter IV (Section 33 to Section 48) of the Act, 1899 titled
‘Instruments not duly stamped’ provides for the procedure to be
followed when an instrument which ought to have been stamped is
not stamped.
36. Section 33 of the Act, 1899 provides for ‘Examination and
impounding of instruments’. Under sub-section (1) of Section 33,
“Every person having by law or consent of parties authority to receive
evidence, and every person in charge of a public office, except an
24
officer of police, 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”. Section 33(2) of the Act, 1899 provides
that every instrument chargeable with duty shall be examined by
such person as explained in sub-section (1), “in order to ascertain
whether it is stamped with a stamp of the value and description
required by the law in force in India when such instrument was
executed or first executed”. The definition of ‘duly stamped’ as
contained in Section 2(11) as applied to an instrument means that
the instrument bears an adhesive or impressed stamp of not less
than the proper amount and that such stamp has been affixed or
used in accordance with law for the time being in force in India.
37. A plain reading of Section 33 of the Act, 1899 thus explains that
when an instrument or a document is produced before the authority,
it is the duty of such authority to examine whether the instrument is
duly stamped or not, and if it is found that the instrument is not
“duly stamped” under Section 33(2), the concerned authority shall
impound the said instrument.
25
38. Section 34 of the Act, 1899 provides a discretion to the
concerned officer that if any receipt chargeable with a duty not
exceeding “ten naye paise” is tendered to or produced before them
unstamped in the course of the audit of any public account, such
officer may in their discretion, “instead of impounding the
instrument, require a duly stamped receipt to be substituted
therefore.”
39. A plain reading of Section 35 of the Act, 1899 suggests that an
inadmissible instrument because of being unstamped or
insufficiently stamped may be made admissible if the relevant stamp
duty and a penalty is paid later. This shows that the requirement
under Section 35 is not rigid, and can be rectified even at a later
stage. An unstamped or insufficiently stamped instrument is not
completely invalid, and it can be made valid and admissible in
evidence after fulfilling the conditions prescribed in the proviso to
Section 35.
40. Section 37 of the Act, 1899 deals with admission of improperly
stamped instruments. It provides that the State Government ma y
make rules providing that, where an instrument bears a stamp of
26
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.
41. Section 38 of the Act, 1899 provides for the procedure for how
the instruments impounded are to be dealt with. Sub-Section (1) of
Section 38 provides that when the person impounding an instrument
under Section 33 admits such instrument in evidence upon payment
of a penalty as provided by Section 35 or of duty as provided by
Section 37, he shall send to the Collector an authenticated copy of
such instrument, together with a certificate in writing, stating the
amount of duty and penalty levied in respect thereof, and shall send
such amount to the Collector, or to such person as he may appoint
in this behalf.
42. Sections 39 and 40 of the Act, 1899 provide a procedure of
exercising discretion by the Collector to either refund, certify the
instrument as duly stamped, or collect the stamp duty.
43. A plain reading of Sections 33, 35 and 2(14) of the Act, 1899
clearly demonstrates that the instrument which is not duly stamped
27
can be impounded and when the required fee and penalty has been
paid, the said instrument can be taken as an evidence under Section
35 of the Act, 1899. But, at the same time, Sections 33 and 35 are
not concerned with any copy of the instrument and party can be
allowed to rely on the document which is an instrument within the
meaning of Section 2(14) of the Act, 1899. This Court had an
occasion to consider the scope and ambit of Sections 33, 35 and 36
of the Act, 1899 and Section 63 of the Evidence Act, 1872 in Jupudi
Kesava Rao(supra) and it was held that:
“13. The first limb of Section 35 clearly shuts out from evidence any
instrument chargeable with duty unless it is duly stamped. The
second limb of it which relates to acting upon the instrument will
obviously shut out any secondary evidence of such instrument, for
allowing such evidence to be let in when the original admittedly
chargeable with duty was not stamped or insufficiently stamped,
would be tantamount to the document being acted upon by the
person having by law or authority to receive evidence. Proviso (a) is
only applicable when the original instrument is actually before the
court of law and the deficiency in stamp with penalty is paid by the
party seeking to rely upon the document. Clearly secondary evidence
either by way of oral evidence of the contents of the unstamped
document or the copy of it covered by Section 63 of the Indian
Evidence Act would not fulfil the requirements of the proviso which
enjoins upon the authority to receive nothing in evidence except the
instrument itself. Section 25 is not concerned with any copy of an
instrument and a party can only be allowed to rely on a document
which is an instrument for the purpose of Section 35. ‘Instrument’
is defined in Section 2(14) as including every document by which
any right or liability is, or purports to be created, transferred,
limited, extended, extinguished or recorded. There is no scope for
inclusion of a copy of a document as an instrument for the purpose
of the Stamp Act.
28
14. If Section 35 only deals with original instruments and not copies
Section 36 cannot be so interpreted as to allow secondary evidence
of an instrument to have its benefit. The words ‘an instrument’ in
Section 36 must have the same meaning as that in Section 35. The
legislature only relented from the strict provisions of Section 35 in
cases where the original instrument was admitted in evidence
without objection at the initial stage of a suit or proceeding. In other
words, although the objection is based on the insufficiency of the
stamp affixed to the document, a party who has a right to object to
the reception of it must do so when the document is first tendered.
Once the time for raising objection to the admission of the
documentary evidence is passed, no objection based on the same
ground can be raised at a later stage. But this in no way extends
the applicability of Section 36 to secondary evidence adduced or
sought to be adduced in proof of the contents of a document which
is unstamped or insufficiently stamped.”
(Emphasis added)
44. This view has been affirmed by a three-Judge Bench of this
Court in Hariom Agrawal(supra) wherein it has been held as under:
“10. It is clear from the decisions of this Court and a plain reading
of Sections 33, 35 and 2(14) of the Act that an instrument which is
not duly stamped can be impounded and when the required fee and
penalty has been paid for such instrument it can be taken in
evidence under Section 35 of the Stamp Act. Sections 33 or 35 are
not concerned with any copy of the instrument and party can only
be allowed to rely on the document which is an instrument within
the meaning of Section 2(14). There is no scope for the inclusion of
the copy of the document for the purposes of the Stamp Act. Law is
now no doubt well settled that copy of the instrument cannot be
validated by impounding and this cannot be admitted as secondary
evidence under the Stamp Act, 1899.”
(Emphasis added)
45. Law on the subject is well settled that duly certified
copy/photocopy of the alleged instrument cannot be validated by
impounding and this cannot be admitted in evidence under the Act,
1899. It leads to the conclusion that the deficiency in an instrument,
29
whether it is unduly stamped or insufficiently stamped, can be
rectified through a procedure as prescribed under the Act, 1899. It
clearly indicates that the requirement under the Act can indeed be
fulfilled even after the time when the instrument was executed. The
requirement under the Act is not rigid or strict, so as to make the
instrument invalid at the first instance.
46. It also shows that the purpose of the Act, 1899 is not to declare
an instrument as completely invalid if it is unstamped or
insufficiently stamped, but to collect the stamp duty on each
instrument. The object of the Act, 1899 is to secure revenue for the
state.
47. This Court, in the case of Hindustan Steel Ltd. v. Messrs Dilip
Construction Company,
11 dealt with the object of the Act, 1899 and
held:
“7. The Stamp Act is a fiscal measure enacted to secure revenue for
the State on certain classes of instruments: It 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 once that object is secured according to law,
the party staking his claim on the instrument will not be defeated
on the ground of the initial defect in the instrument. Viewed in that
light the scheme is clear. Section 35 of the Stamp Act operates as a
11
(1969) 1 SCC 597
30
bar to an unstamped instrument being admitted in evidence or being
acted upon; Section 40 provides the procedure for instruments
being impounded, sub-section (1) of Section 42 provides for
certifying that an instrument is duly stamped, and sub-section (2)
of Section 42 enacts the consequences resulting from such
certification.”
48. The Bench, after explaining that the scope of the Act, 1899 is to
secure revenue for the state and not to be used as means to harass
the litigant, concluded that unstamped instruments can be acted
upon after payment of duty and penalty. Initial defects can be cured
and it is never the intention of the legislature to treat an initially
unstamped instrument as non-est in law.
49. The Statute deals with the instances of failure to stamp a
document which has got to be stamped under the provisions of the
Act, 1899 but does not affect the validity of the transaction embodied
in the document. That Part IV of the Act, 1899 deals with the
contingencies of non-payment of stamp duties and once the object of
securing the interest of the revenue of State is secured, the claim
based on instrument can always be acted upon on payment of the
requisite stamp duty.
50. We, therefore, hold that the deficiencies under the Act, 1899
can be fulfilled, and do not render any instrument invalid
31
permanently. Now, it is to be seen whether the Court or Arbitral
Tribunal can order rectification of the deficiencies under the Act
1899, if any.
IV. Historical Background of Arbitration in India
51. Arbitration can be understood as a procedure of dispute
resolution in which the dispute is submitted, by the agreement of the
parties, to the appointed Arbitrator or the Arbitral Tribunal who are
having the jurisdiction to resolve the dispute in accordance with the
applicable law as agreed among the parties. Alternatively, it can be
understood as a mechanism to adjudicate disputes between the
parties outside the court in a quasi-judicial manner.
52. The process of arbitration as a preferable method of dispute
resolution is not new in India. According to the scholars of the
ancient Hindu literature, “Brhadaranayaka Upanishad ” is the
earliest known treatise that mentions a system that can be closely
associated with present-day arbitration as the same involved various
arbitral bodies such as “Puga” or the local courts, “Srenis” or the
people carrying out the same profession and “Kulas” or members
concerned with the social matters of the same part of the society. All
32
the above-explained bodies were called the Panchas and cumulatively
formed Panchayat. The same has been affirmed by the Privy Council
in the case of Vytla Sitanna v. Marivada Viranna
12 wherein it was
observed that the parties used to refer the dispute to the elected
panchayat and these adjudicating bodies were responsible to pass
the award which was based on the principle of fair and equitable
settlement of the dispute based on the prevalent legal as well as moral
grounds.
53. The arbitration regime in India further evolved with the
enactment of the first Bengal Regulation by the Britishers in the year
of 1772. Subsequent to this enactment, all the disputes were
submitted to arbitration and the award of the same had the same
value as that of any decree passed by the Court. Further, the Bengal
Regulation of 1781 also contained provision as reproduced herein:
“The judge do recommend and so far as he can without compulsion
prevail upon the parties to submit to the arbitration of one person,
to be mutually agreed upon by the parties … No award of any
arbitrator be set aside, except upon full proof, made by oath of two
creditable witnesses that the arbitrators had been guilty of gross
corruption or partially, in the course of which they had made their
award.”
13
12
AIR 1934 PC 105.
13
C. V. Nagarjuna Reddy, Role of Arbitration in the Wake of CPC (Amendment)
Act, 1999, The Indian Council of Arbitration,
33
54. It is quite evident from the above-mentioned clause that the
Bengal Regulations contained provisions to enable the parties to refer
the dispute to be settled by the process of arbitration as per the
mutual agreement of the parties, especially in disputes involving
breach of the contractual obligations and partnership deeds.
Arbitration also found a place in the earliest enacted legislation by
the State i.e., Code of Civil Procedure, 1859. Specifically, the
provision in Schedule II of the Code of Civil Procedure, 1908
contained the procedure relating to arbitration. These statutory
provisions primarily dealt with two types of arbitrations:
i) Arbitration initiated by the Courts in any pending civil
suit.
ii) Arbitration wherein there is no involvement or
intervention of the Court.
55. Apart from these two types of arbitration, there evolved a third
kind of arbitration known as “Statutory Arbitration” wherein the
https://www.icaindia.co.in/icanet/quterli/apr-june2002/ica5.html (Last
accessed on 22nd January, 2023 at 10:50 pm).
34
procedure of arbitration is governed by the provisions contained in
the statute.
56. The major development in the arbitration regime came with the
enactment of the Arbitration Act, 1899 which was quite comparable
to the English Arbitration Act, 1899. This enactment can be
understood as the first step in the direction of enforcement of
arbitration in India. The Arbitration Act, 1899 was initially
applicable to all the presidency towns and there existed judicial
intervention right from the initial reference of the dispute to the
process of arbitration.
57. With the rapidly changing times, the evolution of the arbitration
regime in India also gained momentum. The Code of Civil Procedure,
1908 was amended to insert the provision contained under Section
89 which exclusively dealt with the applicability and enforceability of
the arbitration. In the early 20
th century, arbitration emerged as an
acceptable mode of dispute resolution and in order to meet its
growing popularity, the Arbitration Act, 1940(hereinafter being
referred to as the “Act, 1940”) was enacted by the legislature. The
Act, 1940 was enacted with the primary motive of providing speedy
35
and less costly method of dispute resolution in the form of
arbitration. However, there existed many inadequacies in the
practical application of the provisions contained in the Act, 1940.
58. The Act, 1940 contained many provisions similar to the
provisions contained under the English Arbitration Act, 1934 but still
it did not have any provision for enforceability of the foreign award.
Also, the provisions contained in the Act, 1940 facilitated the
intervention of the judiciary at all the three stages of the arbitral
proceedings, i.e., before the dispute was referred to the arbitration,
during the pendency of the arbitral proceedings and after passing the
arbitral award.
59. The ineffective functioning of the provision contained under the
Act, 1940 was regularly criticised by the Judiciary. The following
observation by Justice D.A. Desai in the case of Guru Nanak
Foundation v. Rattan Singh and Sons
14 is quite relevant to be
mentioned here:
“1. Interminable, time consuming, complex and expensive Court
procedures impelled jurists to search for an alternative Forum, less
formal, more effective and speedy for resolution of disputes, avoiding
procedural claptrap and this led them to Arbitration Act, 1940.
However, the way in which the proceedings under the Act are
14
(1981) 4 SCC 634
36
conducted and without an exception challenged in Courts, has made
Lawyers laugh and legal philosophers weep.”
60. This Court further observed in the case of Food Corporation of
India v. Joginderpal Mohinderpal and Another
15 that the law
governing arbitration is supposed to be less technical and more
suitable to practical problems by ascertaining equity and fair play in
the entire process. Despite such severe criticism by this Court, no
amendment was brought in the Act, 1940 by the legislature for a long
period of time.
61. It was only by the late 20
th century, there came a major shift in
the development of arbitration in India. Due to the economic
liberalization and alike policies of the government in 1991, there was
a need felt to create a conducive environment for attracting foreign
investments. Therefore, based on the 76
th Report of the Law
Commission of India as well as the Model UNCITRAL law, the Act,
1996 was enacted by the legislature. The Act,1996 came into force
from 16
th August, 1996 with an object of making the process of
15
(1989) 2 SCC 347
37
arbitration cost effective, less technical and in accordance with the
prevalent international practices across the world.
V. Intent behind incorporation of Section 11(6A) of the
Arbitration and Conciliation Act, 1996
62. A major shift for the development of arbitration in India
happened with the enactment of the Act, 1996. Based on the 76
th
Report
16 of the Law Commission of India as well as the Model
UNCITRAL law, the Act, 1996 was enacted with an object of making
the process of arbitration cost effective, less technical and in
accordance with the prevalent international practices across the
world. The legislative intent was to provide effective and speedy
procedure for dispute resolution among the parties as well as to limit
the scope of judicial intervention in the process of arbitration.
17 India
is gradually moving in the direction of minimal judicial intervention
keeping abreast with the developments of arbitration in other
regimes.
16
Law Commission of India, 76th Report on Arbitration Act, 1940
17
Paragraph No. 4(v), Statement of Objects and Reasons, Arbitration and
Conciliation Act, 1996.
38
63. The Constitution Bench of this Court while examining the pre
2015 amendment regime in SBP & Co. v. Patel Engineering Ltd.
and Another
18 held that all the preliminary or threshold issues
pertaining to jurisdiction of the Arbitrator/Arbitral Tribunal should
be examined by the Court under Section 11 of the Act, 1996. This
position of law was sought to be changed by the Law Commission in
its 246th Report, which states as follows:
“In so far as the nature of intervention is concerned, it is
recommended that in the event the Court/Judicial Authority is
prima facie satisfied against the argument challenging the
arbitration agreement, it shall appoint the arbitrator and/or refer
the parties to arbitration, as the case may be. The amendment
envisages that the judicial authority shall not refer the parties to
arbitration only if it finds that there does not exist an arbitration
agreement or that it is null and void. If the judicial authority is of
the opinion that prima facie the arbitration agreement exists,
then it shall refer the dispute to arbitration, and leave the
existence of the arbitration agreement to be finally determined
by the arbitral tribunal. However, if the judicial authority
concludes that the agreement does not exist, then the conclusion
will be final and not prima facie. The amendment also envisages that
there shall be a conclusive determination as to whether the
arbitration agreement is null and void.”
19
(Emphasis added)
18
(2005) 8 SCC 618
19
LAW COMMISSION OF INDIA Report No. 246 Amendments to the Arbitration
and Conciliation Act 1996, pg. 43
39
64. In the said report, the Law Commission of India concluded that
the judicial intervention in arbitration proceedings adds significantly
to the delay in the arbitration process and ultimately negates the
benefit of arbitration. At paragraph 24, the Law Commission noted
as follows: “…[I]t is observed that a lot of time is spent for appointment
of arbitrators at the very threshold of arbitration proceedings.”
20
65. The Law Commission suggested the insertion of sub-Section
(6A) to Section 11 in the Act, 1996 which was accepted by the
Legislature by way of the 2015 amendment to the Act, 1996. Section
11(6A) unambiguously by its intention manifests that “[the] Supreme
Court or, as the case may be, the High Court, while examining an
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 examine only to the “existence of an arbitration
agreement”.
66. The 2015 amendment, including Section 11(6A), and the later
amendments are in line with this evolution of arbitration
jurisprudence. With the series of amendments to the principal Act,
20
Paragraph No. 24, Report No. 246, Law Commission of India.
40
1996, it is quite evident that the legislature is continuously engaging
with the rapidly evolving arbitration regime in India and the various
challenges allied it with the object to reduce the scope of intervention
by the courts in the arbitration processes. It can be expected that
the arbitration in India is conducted in accordance with the following
views expressed by Justice Sabyasachi Mukharji in the case of Food
Corporation of India(supra):
“7. We should make the law of arbitration simple, less technical and
more responsible to the actual realities of the situation, but must be
responsive to the canons of justice and fair play and make the
arbitrator adhere to such process and norms which will create
confidence, not only by doing justice between the parties, but by
creating a sense that justice appears to have been done.”
The above discussed appro ach of the legislature has been
acknowledged by this Court.
67. In the case of Duro Felguera, S.A. v. Gangavaram Port
Limited
21
, this Court explained the scope and effect of the changes
brought in by the 2015 amendment in the following words:
“48….. From a reading of Section 11(6-A), the intention of the
legislature is crystal clear i.e. the court should and need only look
into one aspect—the 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
21
(2017) 9 SCC 729
41
for arbitration pertaining to the disputes which have arisen between
the parties to the agreement…
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. [SBP and
Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara Polyfab
[National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1
SCC 267. 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(6-A) ought to be
respected.”
(Emphasis added)
68. This position was affirmed by a three-judge bench in Mayavati
Trading Private Limited v. Pradyuat Deb Burman
22:
“10. This being the position, it is clear that the law prior to the 2015
Amendment that has been laid down by this Court, which would
have included going into whether accord and satisfaction has taken
place, has now been legislatively overruled. This being the position,
it is difficult to agree with the reasoning contained in the aforesaid
judgment [United India Insurance Co. Ltd. v. Antique Art Exports (P)
Ltd., (2019) 5 SCC 362], as Section 11(6-A) is confined to the
examination of the existence of an arbitration agreement and is to
be understood in the narrow sense as has been laid down in the
judgment in Duro Felguera, S.A.…,”
(Emphasis added)
69. Thus, the 2015 amendment aims to limit the intervention of
Courts to minimal examining the existence and not the validity of an
arbitration agreement at the pre-referral stage of the arbitration
proceedings.
22
(2019) 8 SCC 714
42
VI. Scope of Section 11(6A) w.r.t. Section 8, Section 16 and
Section 45 of Arbitration and Conciliation Act, 1996
70. Section 11(6A) of the Act, 1996 reads as follows:
“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.”
71. The scope of inquiry under Section 11(6A) is restricted to
examine the “existence of an arbitration agreement”. The phrase
‘existence of an arbitration agreement’ is to be understood in a literal
sense keeping the intention of the legislature after the introduction
of the 2015 amendment. The position of law that prevails after the
insertion of 2015 amendment is that there should be minimal
interference by the Courts. The limited scope of the Court to examine
at the pre-referral stage is whether the arbitration agreement, prima
facie, exists as referred to under Section 7 of the Act, 1996 which
includes determination of the following factors:
(i) Whether the arbitration agreement is in writing;
(ii) Whether the core contractual ingredients qua the
arbitration agreement are fulfilled?
43
(iii) On rare occasions, on a serious note of objection, if any, it
may examine whether the subject matter of dispute is
arbitrable?
72. Section 8(1), which was replaced by the amendment of 2015,
mandates a judicial authority to refer parties to arbitration unless
there is prima facie finding that no valid arbitration agreement exists.
The language used in the provision is as follows:
“8. Power to refer parties to arbitration where there is an
arbitration agreement.—
(1)A judicial authority, before which an action is brought in a matter
which is the subject of an arbitration agreement shall, if a party to
the arbitration agreement or any person claiming through or under
him, so applies not later than the date of submitting his first
statement on the substance of the dispute, then, notwithstanding
any judgment, decree or order of the Supreme Court or any Court,
refer the parties to arbitration unless it finds that prima facie no
valid arbitration agreement exists.
(2) The application referred to in sub-section (1) shall not be
entertained unless it is accompanied by the original arbitration
agreement or a duly certified copy thereof:
[Provided that where the original arbitration agreement or a certified
copy thereof is not available with the party applying for reference to
arbitration under sub-section (1), and the said agreement or certified
copy is retained by the other party to that agreement, then, the party
so applying shall file such application along with a copy of the
arbitration agreement and a petition praying the Court to call upon
the other party to produce the original arbitration agreement or its
duly certified copy before that Court.]
(3) Notwithstanding that an application has been made under sub-
section (1) and that the issue is pending before the judicial authority,
44
an arbitration may be commenced or continued and an arbitral
award made.”
73. The Section provides that the Court can examine, whether
prima facie there does not exist an arbitration agreement. The scope
of this Section can be seen from the 246
th Law Commission Report
23,
which made the following note while suggesting amendment to
Section 8:
“….of the amendment contem plates a two-step process to be
adopted by a judicial authority when considering an application
seeking the reference of a pending action to arbitration. The
amendment envisages that the judicial authority shall not refer
the parties to arbitration only if it finds that there does not
exist an arbitration agreement or that it is null and void. If the
judicial authority is of the opinion that prima facie the arbitration
agreement exists, then it shall refer the dispute to arbitration, and
leave the existence of the arbitration agreement to be finally
determined by the arbitral tribunal. However, if the judicial
authority concludes that the agreement does not exist, then the
conclusion will be final and not prima facie. The amendment also
envisages that there shall be a conclusive determination as to
whether the arbitration agreement is null and void.”
74. A plain reading of the Section 8 indicates that it limits the
intervention of the Court to only one aspect i.e., when it finds that
prima facie no valid arbitration agreement exists or is null and void.
23
LAW COMMISSION OF INDIA Report No. 246 Amendments to the Arbitration
and Conciliation Act 1996, pg. 43
45
75. The scheme of the Act, 1996 manifests that Sections 8 and 11
are complementary in nature and both relate to reference to
arbitration and have the same scope and ambit with respect to
judicial interference. The Court, under Sections 8 and 11, has to
refer the matter to arbitration or to appoint an Arbitrator, provided
the party has established a prima facie existence of an arbitration
agreement, nothing more nothing less. At the same time, the Court
should refer the matter if the validity of the arbitration agreement
cannot be determined on a prima facie basis, as laid down above i.e.
“when in doubt, do refer”.
76. At this stage, we would like to observe that the statutory scheme
has been framed for appointment of an Arbitrator by various High
Courts and also by this Court - called the Appointment of Arbitrators
by the Chief Justice of India Scheme, 1996, the relevant portion of
the same is extracted hereunder:-
1. Short title. -This Scheme may be called The Appointment of
Arbitrators by the Chief Justice of India Scheme, 1996.
2. Submission of request. - The request to the Chief Justice under
sub-section (4) or sub-section (5) or sub-section (6) of section 11
shall be made in writing and shall be accompanied by-
(a) the original arbitration agreement or a duly certified copy
thereof;
46
(b) the names and addresses of the parties to the arbitration
agreement;
(c) the names and addresses of the arbitrators, if any, already
appointed;
(d) the name and address of the person or institution, if any, to
whom or which any function has been entrusted by the parties
to the arbitration agreement under the appointment procedure
agreed upon by them;
(e) the qualifications required, if any, of the arbitrators by the
agreement of the parties;
(f) a brief written statement describing the general nature of the
dispute and the points at issue;
(g) the relief or remedy sought; and
(h) an affidavit, supported by the relevant document, to the effect
that the condition to be satisfied under sub-section (4) or sub-
section (5) or sub-section (6) of section 11, as the case may be,
before making the request to the Chief Justice, has been
satisfied.
77. It is clear from the scheme of which a reference has been made
that while the applicant approaches the Court for appointment of an
Arbitrator, he is not supposed to file an original arbitration
agreement and attested copy of the agreement can be annexed at the
pre-referral stage which is indeed not an instrument as referred to
under Section 2(14) of the Act, 1899.
78. So far as the reference made of submitting a certified copy of
the arbitration agreement is concerned, suffice it to say, that
arbitration agreement executed between the parties relating to the
business/commercial transactions is not required to be compulsorily
47
registered under the Act, 1908. The obligation to register the
document is invoked under provisions of the substantive law,
namely, Transfer of Property Act, 1882, while Section 17 of the Act,
1908 mandates that the non-testamentary instrument that created
any right, title or interest of the value of Rs.100/- or upwards in an
immovable property must be compulsorily registered. If document is
not registered, transfer is void, there is no valid transfer, and the
property described in the instrument does not pass on, for example,
mortgage does not become complete and enforceable until it is
registered under the Act, 1908.
79. Indisputably, the arbitration agreement is not a public
document to which compulsory registration as referred to under
Section 17 of the Act, 1908 is required and one can obtain a certified
copy of the public document under Sections 74 or 75 of the Evidence
Act, 1872. The Public Officer having the custody of a public
document can make available its certified copy as referred to under
Section 76 of the Evidence Act, 1872. In the absence of the
arbitration agreement being required to be compulsorily registered,
within the scope and ambit of Section 17 of the Act, 1908, such
arbitration agreement/document is not accessible in public domain
48
and is not a public document of which certified copy can be obtained,
as referred to under Section 74 of the Evidence Act, 1872, failing
which the question of presumption as to genuineness of document
purporting to be a certified copy as referred to under Section 79 of
the Evidence Act, 1872 may not arise.
80. In other words, when the arbitration agreement is not required
to be compulsorily registered as referred to under Section 17 of the
Act, 1908 the reference of a certified copy under the Scheme of Rules,
1996 appears to be of an authenticated copy of the arbitration
agreement that qualifies the requirement of Section 7 of the Act, 1996
at the pre-referral stage for the purposes of appointment of an
Arbitrator under Section 11(6A) of the Act, 1996. Hence, the question
of raising objection regarding the arbitration agreement not being
stamped or insufficiently stamped at the pre-referral stage may not
arise.
81. Section 16 of the Act, 1996 is referred to as under:-
“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,—
49
(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 invalidity 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 appoi nted, or participated in the
appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its
authority shall be raised as soon as the matter alleged to be beyond
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), admit a later plea if it considers
the delay justified.
(5) The arbitral tribunal shall decide on a plea 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 proceedings
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.”
82. Section 16(1) of the Act, 1996 envisaged that an Arbitral
Tribunal can rule upon own jurisdiction, “including ruling on any
objection with respect to the existence or validity of the arbitration
agreement”. The provision is based on the doctrine of Kompetenz-
Kompetenz and the doctrine of Separability. The doctrine of
Kompetenz-Kompetenz means that the Arbitral Tribunal is competent
50
enough to rule on its own jurisdiction. At the same time, the Doctrine
of Separability severs the arbitration clause from the commercial
contract. Section 16(1)(a) presupposes the existence of a clause of
arbitration and mandates the same to be treated as independent to
the other terms of the contract. Under Section 16, the Arbitral
Tribunal shall have the jurisdiction to determine the validity of the
arbitration agreement.
83. A division Bench of this Court in Uttarakhand Purv Sainik
Kalyan Nigam Limited v. Northern Coal Field Limited
24
while
placing reliance on Duro Felguera (supra) held that issues related
to limitation must be raised before the Arbitral Tribunal. The Court
observed the following:
“7.8. By virtue of the non obstante clause incorporated in Section
11(6-A), previous judgments rendered in Patel Engg. [SBP & Co. v.
Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara Polyfab [National
Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267],
were legislatively overruled. The scope of examination is now
confined only to the existence of the arbitration agreement at the
Section 11 stage, and nothing more.”
84. What the Courts at the pre-referral stage can examine under
Section 11(6A) is only the “existence” of the arbitration agreement,
24
(2020) 2 SCC 455
51
while the Arbitral Tribunal shall have the jurisdiction to examine
“any objections with respect to the existence or validity of the
arbitration agreement”.
85. Section 45 of the Act, 1996 provides that:
“Power of judicial authority to refer parties to arbitration.—
Notwithstanding anything contained in Part I or in the Code of Civil
Procedure, 1908 (5 of 1908), a judicial authority, when seized of an
action in a matter in respect of which the parties have made an
agreement referred to in section 44, shall, at the request of one of
the parties or any person claiming through or under him, refer the
parties to arbitration, [unless it prima facie finds] that the said
agreement is null and void, inoperative or incapable of being
performed.”
(Emphasis added)
86. A plain comparison between Section 11(6A) and Section 45
manifests that the scope of Section 45 is much broader. Under
Section 45, a judicial authority has to examine whether the
agreement is “null and void”, “inoperative”, or “incapable of being
performed”.
87. This Court in World Sport Group (Mauritius) Limited v. MSM
Satellite (Singapore) Pte. Limited,
25
in paras 33 to 35 explained
the difference between the terms ‘null and void’, ‘inoperative’ and
‘incapable of being performed’ as under:-
25
(2014) 11 SCC 639
52
“33. Mr. Gopal Subramanium's contention, however, is also that the
arbitration agreement was inoperative or incapable of being
performed as allegations of fraud could be enquired into by the court
and not by the arbitrator. The authorities on the meaning of the
words “inoperative or incapable of being performed” do not support
this contention of Mr. Subramanium. The words “ inoperative or
incapable of being performed” in Section 45 of the Act have been
taken from Article II(3) of the New York Convention as set out in para
27 of this judgment. Redfern and Hunter on International Arbitration
(5th Edn.) published by the Oxford University Press has explained
the meaning of these words “ inoperative or incapable of being
performed” used in the New York Convention at p. 148, thus:
“At first sight it is difficult to see a distinction between the terms
‘inoperative’ and ‘incapable of being performed’. However, an
arbitration clause is inoperative where it has ceased to have effect
as a result, for example, of a failure by the parties to comply with a
time-limit, or where the parties have by their conduct impliedly
revoked the arbitration agreement. By contrast, the expression
‘incapable of being performed’ appears to refer to more practical
aspects of the prospective arbitration proceedings. It applies, for
example, if for some reason it is impossible to establish the arbitral
tribunal.”
34. Albert Jan Van Den Berg in an article titled “The New York
Convention, 1958 — An Overview” published in the website of
ICCA(www.arbitrationicca.org/media/0/12125884227980/new_yo
rk_convention_of-1958_overview.pdf), referring to Article II(3) of the
New York Convention, states:
“The words ‘null and void’ may be interpreted as referring to those
cases where the arbitration agreement is affected by some invalidity
right from the beginning, such as lack of consent due to
misrepresentation, duress, fraud or undue influence.
The word ‘inoperative’ can be said to cover those cases where the
arbitration agreement has ceased to have effect, such as revocation
by the parties.
The words ‘incapable of being performed’ would seem to apply to
those cases where the arbitration cannot be effectively set into
motion. This may happen where the arbitration clause is too vaguely
worded, or other terms of the contract contradict the parties'
intention to arbitrate, as in the case of the so-called co-equal forum
selection clauses. Even in these cases, the courts interpret the
contract provisions in favour of arbitration.”
53
35. The book Recognition and Conferment of Foreign Arbitral Awards
: A Global Commentary on the New York Convention by Kronke,
Nacimiento, et al.(ed.) (2010) at p. 82 says:
“Most authorities hold that the same schools of thought and
approaches regarding the term null and void also apply to the terms
inoperative and incapable of being performed. Consequently, the
majority of authorities do not interpret these terms uniformly,
resulting in an unfortunate lack of uniformity. With that caveat, we
shall give an overview of typical examples where arbitration
agreements were held to be (or not to be) inoperative or incapable of
being performed.
The terms inoperative refers to cases where the arbitration
agreement has ceased to have effect by the time the court is asked
to refer the parties to arbitration. For example, the arbitration
agreement ceases to have effect if there has already been an arbitral
award or a court decision with res judicata effect concerning the
same subject-matter and parties. However, the mere existence of
multiple proceedings is not sufficient to render the arbitration
agreement inoperative. Additionally, the arbitration agreement can
cease to have effect if the time-limit for initiating the arbitration or
rendering the award has expired, provided that it was the parties'
intent no longer to be bound by the arbitration agreement due to the
expiration of this time-limit.
Finally, several authorities have held that the arbitration agreement
ceases to have effect if the parties waive arbitration. There are many
possible ways of waiving a right to arbitrate. Most commonly, a party
will waive the right to arbitrate if, in a court proceeding, it fails to
properly invoke the arbitration agreement or if it actively pursues
claims covered by the arbitration agreement.”
88. The above explained examination does not arise in the language
of Section 11(6A). That is to say, the legislature has not borrowed the
language of Section 45 in Section 11(6A), which is limited to the
‘existence’ of the arbitration agreement.
54
VII. Limited Examination by Court under Section 11(6A) of the
Arbitration and Conciliation Act, 1996
89. The limited scope of Section 11(6A) of the Act, 1996 has been
explained by a three-judge bench of this Hon’ble Court in Pravin
Electricals Private Limited v. Galaxy Infra and Engineering
Private Limited
26
at para 17 placing its reliance on Vidya Drolia
and Others(supra) wherein it was held that the existence of an
arbitration agreement means an agreement which satisfies the
requirements of both the Act, 1996 and the Contract Act, 1872 and
when it is enforceable in law. The judgment in United India
Insurance Company Limited and Another v. Hyundai
Engineering & Construction Company Limited and Others
27
was
also relied upon in Pravin Electricals Private Limited(supra) to
demonstrate that Section 11(6A) deals with “existence”, juxtaposed
to Section 16 and Section 45, which deal with “validity” of an
arbitration agreement. There indeed lies a distinction between the
“existence” and the “validity” of an arbitration agreement.
26
(2021) 5 SCC 671
27
(2018) 17 SCC 607
55
90. The UNCITRAL Model Law also supports a distinction between
jurisdictional objections based on the alleged non -existence,
invalidity, or illegality of the arbitration agreement, and jurisdictional
objections based upon the scope of a concededly valid arbitration
agreement.
28 All issues of jurisdiction including the existence or
validity of the arbitration agreement can be decided by the Arbitral
Tribunal, whether or not appointed through the intervention of the
court under Section 16 of the Act, 1996.
VIII. Interpretation of “Existence of Arbitration Agreement”
91. In order to determine the “existence of an arbitration
agreement” under Section 11(6A), the Act, 1899 may not have a
bearing owing to the reason that at the pre-referral stage, if the
document is not duly stamped/insufficiently stamped that does not
render the arbitration agreement non-existent as discussed and
ascertained earlier. The only consideration that the courts/judicial
authority at the pre-referral stage needs to follow is the prima facie
28 UNCITRAL Model Law on International Commercial Arbitration (1985), with
amendments as adopted in 2006 , Available at:
https://uncitral.un.org/sites/uncitral.un.org/files/media-
documents/uncitral/en/19-09955_e_ebook.pdf
56
existence of an arbitration agreement as referred under Section 7 of
the Act, 1996 which provides:
“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.”
92. That is to say, the limited scope of the Court under Section
11(6A) at the pre-referral stage is to examine whether the arbitration
agreement, prima facie, exists as referred to under Section 7 of the
Act, 1996, which includes only the determination of the following
factors:
57
(i) Whether the arbitration agreement is in writing?
(ii) Whether the core contractual ingredients qua the
arbitration agreement are fulfilled?
(iii) On rare occasions, on a serious note of objection, if any, it
may examine whether the subject matter of dispute is
arbitrable?
IX. Clarification on Stamping of Arbitration Agreement
93. In the reference Order and in paras 20, 24 and 58 in particular,
a reference has been made that Maharashatra Stamp Act, 1958 does
not subject to arbitration agreement to payment of stamp duty. The
relevant paragraphs of the M/S. N.N. Global Mercantile Private
Limited (supra)
29 are as follows:
“20. We have carefully perused the provisions of the Maharashtra
Stamp Act, 1958 and Schedule I appended thereto, which enlists the
instruments specified in Section 3, on which stamp duty is
chargeable. We find that an arbitration agreement is not included in
the Schedule as an instrument chargeable to stamp duty. Item 12
of Schedule I to the Maharashtra Stamp Act, 1958 includes an
award passed by an arbitrator to be chargeable for payment of
stamp duty…..
In Shriram EPC Ltd. v. Rioglass Solar SA [Shriram EPC Ltd. v.
Rioglass Solar SA, (2018) 18 SCC 313], this Court held that the
payment of stamp duty is applicable to awards made in India, but
does not include a “foreign award” which has not been included in
the Schedule to the Stamp Act, 1899.
24. …Section 3 of the Maharashtra Stamp Act does not subject an
arbitration agreement to payment of stamp duty, unlike various
29
(2021) 4 SCC 379
58
other agreements enlisted in the Schedule to the Act. This is for the
obvious reason that an arbitration agreement is an agreement to
resolve disputes arising out of a commercial agreement, through the
mode of arbitration. On the basis of the doctrine of separability, the
arbitration agreement being a separate and distinct agreement from
the underlying commercial contract, would survive independent of
the substantive contract. The arbitration agreement would not be
rendered invalid, unenforceable or non -existent, even if the
substantive contract is not admissible in evidence, or cannot be
acted upon on account of non-payment of stamp duty.
58. We consider it appropriate to refer the following issue, to be
authoritatively settled by a Constitution Bench of five Judges of this
Court:
“Whether the statutory bar contained in Section 35 of the Stamp
Act, 1899 applicable to instruments chargeable to stamp duty under
Section 3 read with the Schedule to the Act, would also render the
arbitration agreement contained in such an instrument, which is
not chargeable to payment of stamp duty, as being non-existent,
unenforceable, or invalid, pending payment of stamp duty on the
substantive contract/instrument?”
(Emphasis added)
94. There appears to be an error in the view taken by the 3-Judge
Bench. The Schedule I to the Act, 1899 in its Article 5 titled
“Agreement or Memorandum of Agreement” has a residuary entry
which says (c) if not otherwise provided for- Eight annas. Article 5
has been reproduced as:
5. Agreement or Memorandum of an Agreement
(a) If relating to the sale of a Bill of Exchange; Two annas
(b) If relating to the sale of a Government Security or
share in an incorporated Company or other body
corporate
Subject to maximum of
ten rupees, one anna
for every Rs. 10000/-
or part thereof of the
value of the security or
share
(c) if not otherwise provided for Eight annas
Exemptions
59
Agreement or memorandum of agreement –
(a) for or relating to the sale of goods or Merchandise
exclusively, not being a NOTE OR
MEMORANDUM chargeable under No. 43;
(b) made in the form of tenders to the Central
Government for or relating to any loan;
95. The examination of the arbitration agreement at the stage of
Section 11(pre-referral stage) should be done cautiously in a way that
it does not breach the legislative intent behind the provisions by
opening the door wide open for judicial intervention.
96. We, however, refrain ourselves to examine the question
regarding the scope and ambit of Section 9 of the Act, 1996 of which
a reference has been made by a three-Judge Bench in M/s. N.N.
Global Mercantile Private Limited(supra) since the present
reference is not concerned to examine the scope of Section 9 of the
Act, 1996 and leave it open to be examined in the ap propriate
proceedings.
X. Answer to the Reference
97. To conclude, in our view:
i) We accordingly hold that the existence of a copy/certified
copy of an arbitration agreement whether unstamped/
60
insufficiently stamped at the pre-referral stage is an
enforceable document for the purposes of appointment of an
Arbitrator under Section 11(6A) of the Act, 1996 where the
judicial intervention shall be minimal confined only to the
prima facie examination of “existence of an arbitration
agreement” alone keeping in view the object of 2015
amendment and the courts must strictly adhere to the time
schedule for the appointment of Arbitrator prescribed under
Section 11(13) of the Act, 1996.
ii) All the preliminary/debatable issues including insufficiently
stamped/unduly stamped or validity of the arbitration
agreement etc. are referrable to the Arbitrator/Arbitral
Tribunal under Section 16 of the Act, 1996 which, by virtue
of the Doctrine of Kompetenz - Kompetenz has the power to
do so.
iii) The decision in SMS Tea Estates Private Limited(supra)
stands overruled. Paras 22 and 29 of Garware Wall Ropes
Limited(supra) which are approved in paras 146 and 147 in
Vidya Drolia and Others(supra) are overruled to that extent.
61
98. The reference is answered accordingly.
99. We appreciate the contribution made by Mr. Gourab Banerjee,
Amicus Curiae in answering the reference made to this Court.
……………………………..J.
(AJAY RASTOGI)
NEW DELHI;
APRIL 25, 2023.
Page1of78
REPORTABLE
INTHESUPREMECOURTOFINDIA
CIVILAPPELLATEJURISDICTION
CIVILAPPEALNOS.3802-3803OF2020
M/SN.N.GLOBALMERCANTILEPVT.LTD. APPELLANT(S)
VERSUS
M/SINDOUNIQUEFLAMELTD.&ORS. RESPONDENT(S)
JUDGMENT
HrishikeshRoy,J.
A.Introduction
B.ReferencetotheConstitutionBench
C.FactsinNNGlobal
D.Modificationofthereferencequestion
E.SubmissionsofCounsel
F.StatutoryschemeoftheStampAct,1899
G.StatutoryschemeoftheArbitrationAct,1996
i) EvolutionoflawunderSection11(6)oftheArbitrationAct,1996
ii)Post-2015Regime:InsertionofSection11(6A)
iii)Post-2019AmendmentandtheReportoftheHigh-levelCommittee
toreviewtheInstitutionalisationofArbitrationinIndia
H.DiscussiononSMSTea
I.DiscussiononGarware
J.InterplaybetweentheStampAct,ArbitrationActandContractAct.
i) ArbitrationActisaspeciallegislation
ii)HarmoniousConstruction
K.AdventofTechnologyandthechangingnatureoftransactions
L.DoctrineofSeparability
M.KompetenzKompetenz,&theissueofjudiciallogjaminIndia
N.DiscussiononVidyaDrolia
O.Conclusion
Page2of78
A.Introduction
1.IhadthebenefitofreadingtheeruditeopinionofmyLearnedBrother,Justice
K.M.Joseph(forhimselfandJusticeAniruddhaBose)andtheseparate
judgmentofLearnedBrotherJusticeC.T.Ravikumar.However,Iregretmy
inabilitytoagreewiththemajorityopinionandtheconcurringjudgment.
EchoingthewordsofCharlesEvansHughes
1
inoneofhislecturesdelivered
attheUniversityofColumbia,letourminorityopinion(selfandLearned
BrotherJusticeAjayRastogi,whohaswrittenaseparateopinion),appealto
thebroodingspiritofthefutureasalsothepowersofthelegislatureto
examinetheinterplaybetweentheArbitrationandConciliationAct,1996(for
short“ArbitrationAct,1996”)andtheIndianStampAct,1899(forshort“Stamp
Act,1899”);andtoemphaticallyresolvetheimbrogliotoavoidanyconfusion
inthemindsofthestakeholdersinthefieldofarbitration.
2.TheroleofCourtsinarbitralproceedingshasbeenmuchdebatedforyears.
Autonomyofthedisputingpartyisthecoreofthearbitralprocessbutifthe
partiesfailtoarriveataconsensus,thesupervisoryroleofCourtsbecomes
imperative.RedfernandHunteronInternationalCommercialArbitration
2
describetherelationshipbetweennationalcourtsandarbitraltribunalsas
follows:
“Totheextentthattherelationshipbetweennationalcourtsandarbitral
tribunalsissaidtobeoneof‘partnership’,itisnotapartnershipofequals.
Arbitrationmaydependupontheagreementoftheparties,butitisalsoa
systembuiltonlaw,whichreliesuponthatlawtomakeiteffectiveboth
nationallyandinternationally.NationalCourtscouldexistwithout
arbitration,butarbitrationcouldnotexistwithoutthecourts.Thereal
1
CharlesEvansHughes,TheSupremeCourtofTheUnitedStatesItsFoundations,Methods
andAchievements,(ColumbiaUniversityPress)68(1928)
2
AlanRedfernandMartinHunter,RedfernandHunteronInternationalArbitration(6th
Edition,2015,OxfordUniversityPress),Chapter7,Paragraph7.03
Page3of78
issueistodefinethepointatwhichthisrelianceofarbitrationonthe
nationalcourtsbeginsandatwhichitends.”
[Emphasissupplied]
3.ThesupervisoryroleofCourtsundertheArbitrationAct,1996canbebroadly
categorizedintothreepartsi.e.,pre-commencementofarbitralproceedings,
duringthearbitralproceedingsandatthepost-arbitrationstage.Section8
andSection11inPartIoftheArbitrationAct,1996,andSection45inPartII
oftheArbitrationAct,1996specificallydealwiththeroleofCourtsbeforethe
initiationofarbitrationproceedings.Section8dealswiththe“Powertorefer
partiestoarbitration”wherethereisanarbitrationagreement;itprovidesfor
amandatoryreferencetoarbitration,unlesstheCourtisprimafaciesatisfied
thatnovalidarbitrationagreementexists.Section11(6),ontheotherhand,
providesfor“AppointmentofArbitrators”whenpartiesfailtomutuallyagree
onthenameofanarbitratororappointanarbitratorintermsofthe
arbitrationagreement.Section45referstothe“Powerofjudicialauthorityto
referpartiestoarbitration”inPartIIoftheArbitrationAct,1996.
4.Hereinthisreference,theextentofjudicialinterventionbeforethe
commencementofarbitralproceedingsisbeingtested.Itraisesimportant
issuesofdelaysintheenforcementofarbitrationagreements,subjectto
paymentofstampdutyandwhetheranarbitrationagreementwouldbenon-
existent,invalid/void,orunenforceableinlaw,iftheunderlyinginstrumentis
notstamped/insufficientlystamped,aspertherelevantStampAct.
5.ThemootquestioninthisreferenceiswhetherthestatutorybarunderSection
35titled“InstrumentsnotdulystampedinadmissibleinEvidence”ofthe
Page4of78
StampAct,1899wouldbeattractedwhenanarbitrationagreementis
producedunderSection11(6)oftheArbitrationAct,1996.Asacorollary,this
referencealsoteststhescopeandnatureoftheCourt’sintervention
specificallyatthestageofappointmentofarbitratorunderSection11ofthe
ArbitrationAct,1996.Theconundrumoverthescopeofjudicialreviewand
thevalidity/enforceabilityoftheunstamped/insufficientlystamped
arbitrationagreementcontainedinanunderlyingcontractisexpectedtobe
resolvedinthisreference.
B.ReferencetotheConstitutionBench
6.A3-judgebenchinM/SN.N.GlobalMercantilePrivateLimitedvM/SIndo
UniqueFlameLimitedandothers
3
(forshort“NNGlobal”)bydoubtingthe
reasoninginParagraphs146and147ofacoordinatebenchofthisCourtin
VidyaDroliaandothersvDurgaTradingCorporation
4
(forshort“VidyaDrolia”)
considereditappropriatefortheissuetobeexaminedbyaBenchoffive
judges.ThematterbeforetheCourtinVidyaDrolia(supra)wasrelatedto
subject-matterarbitrabilitybutwhiledecidingthequestion,itcitedwith
approvalParagraphs22and29ofthe2-judgeBenchjudgmentinGarware
WallTropesLimitedvCoastalMarineConstructionsandEngineering
Limited
5
(forshort“Garware”).
7.FollowingthedecisioninSMSTeaEstates(P)Ltd.v.ChandmariTeaCo.(P)
Ltd.
6
(forshort“SMSTea”),itwasheldinGarware(supra)thatnon-paymentof
stampdutyonthecommercialcontractwouldinvalidateeventhearbitration
agreementandrenderitnon-existentinlawandunenforceable.
3
(2021)4SCC379
4
(2021)2SCC1
5
(2019)9SCC209
6
(2011)14SCC66
Page5of78
8.ThisCourtinNNGlobal(supra)overruledthe2-judgebenchdecisioninSMS
Tea(supra)whichwascitedwithapprovalinGarware(supra).
9.NNGlobal(supra)reliedinteralia,ontheprincipleofKompetenzKompetenz
andthedoctrineofSeparabilityincorporatedunderSection16ofthe
ArbitrationandConciliationAct,1996todoubtthecorrectnessoftheview
takeninVidyaDrolia(supra)andGarware(supra).Therelevantparagraphs
whichdefinethescopeofthisreferenceareextractedbelow:
“34.Wedoubtthecorrectnessoftheviewtakeninparas146and147
ofthethree-JudgeBenchinVidyaDrolia[VidyaDroliav.Durga
TradingCorpn.,(2021)2SCC1:(2021)1SCC(Civ)549].We
consideritappropriatetoreferthefindingsinparas22and29of
GarwareWallRopesLtd.[GarwareWallRopesLtd.v.CoastalMarine
Constructions&Engg.Ltd.,(2019)9SCC209:(2019)4SCC(Civ)
324],whichhasbeenaffirmedinparas146and147ofVidyaDrolia
[VidyaDroliav.DurgaTradingCorpn.,(2021)2SCC1:(2021)1SCC
(Civ)549],toaConstitutionBenchoffiveJudges.
56.WeareoftheconsideredviewthatthefindinginSMSTeaEstates
[SMSTeaEstates(P)Ltd.v.ChandmariTeaCo.(P)Ltd.,(2011)14
SCC66:(2012)4SCC(Civ)777]andGarware[GarwareWallRopes
Ltd.v.CoastalMarineConstructions&Engg.Ltd.,(2019)9SCC209:
(2019)4SCC(Civ)324]thatthenon-paymentofstampdutyonthe
commercialcontractwouldinvalidateeventhearbitrationagreement,
andrenderitnon-existentinlaw,andunenforceable,isnotthe
correctpositioninlaw.
57.Inviewofthefindinginparas146and147ofthejudgmentin
VidyaDrolia[VidyaDroliav.DurgaTradingCorpn.,(2021)2SCC1:
(2021)1SCC(Civ)549]byacoordinateBench,whichhasaffirmed
thejudgmentinGarware[GarwareWallRopesLtd.v.CoastalMarine
Constructions&Engg.Ltd.,(2019)9SCC209:(2019)4SCC(Civ)
324],theaforesaidissueisrequiredtobeauthoritativelysettledbya
ConstitutionBenchofthisCourt.
58.Weconsideritappropriatetoreferthefollowingissue,tobe
authoritativelysettledbyaConstitutionBenchoffiveJudgesofthis
Court:
“WhetherthestatutorybarcontainedinSection35ofthe
StampAct,1899applicabletoinstrumentschargeableto
stampdutyunderSection3readwiththeScheduletothe
Act,wouldalsorenderthearbitrationagreementcontained
insuchaninstrument,whichisnotchargeabletopayment
ofstampduty,asbeingnon-existent,unenforceable,or
Page6of78
invalid,pendingpaymentofstampdutyonthesubstantive
contract/instrument?”
10. Thus,thecorrectnessofthedecisionsinSMSTea(supra),Garware(supra),
VidyaDrolia(supra),aswellasotherrelevantdecisionsistobeevaluated
duringthecourseofthereference.Ithasbeenbroughttothenoticeofthis
Courtthatconflictingdecisionshavecreatedavexedsituationforarbitral
proceedingsandhence,thisissueisexpectedtobesettledthroughthis
reference.
11. ThebackgroundfactsinNNGlobal(supra)whichgaverisetothis
referencearetobenotedattheoutset:
C.FactsinN.N.Global
7
12. IndoUniqueFlameLtd.(forshort“IndoUniqueFlame”)enteredintoa
sub-contractWorkOrderwithN.N.GlobalMercantilePvt.Ltd(“NNGlobal”)on
28.09.2015fortransportationofcoal.IntermsofClause9oftheWorkOrder,
NNGlobalfurnishedaBankGuaranteetoIndoUnique.Clause10oftheWork
Orderprovidedforanarbitrationclause.Duetocertaindisputesinthe
principalcontract,IndoUniqueinvokedtheBankGuaranteefurnishedbyNN
Global.Thereafter,NNGlobalfiledaCivilSuitbeforetheCommercialCourt,
Nagpur.AnapplicationunderSection8oftheArbitrationAct,1996wasalso
filedseekingreferenceofthedisputestoarbitration.TheCommercialCourt
on18.01.2018rejectedtheapplicationunderSection8oftheArbitrationAct,
1996holdingthattheBankGuaranteewasanindependentcontract.
Thereafter,IndoUniquefiledaWritPetitionagainsttheorderofthe
CommercialCourt.On30.9.2020,theBombayHighCourtallowedthe
7
(2021)4SCC379
Page7of78
applicationunderSection8oftheArbitrationAct,1996.Itheldthatthenon-
stampingofWorkOrdercanberaisedatthestageofSection11ofthe
ArbitrationAct,1996orbeforetheArbitralTribunalattheappropriatestage.It
setasidetheorderoftheCommercialCourton18.01.2018.Anappealwas
filedinthisCourtwhereNNGlobalcontendedthatsincethesub-contractwas
notstampedundertheMaharashtraStampAct,1958,thearbitration
agreementwouldberendered‘unenforceable’.Itisinthiscontextthatthe
CourtdoubtedthecorrectnessofpreviousdecisionsinGarware(supra)which
wascitedwithapprovalinVidyaDrolia(supra)declaringsucharbitration
agreementstonotexistinlawandreconsiderationoftheissuewassought
fromthisConstitutionBench.
D.Modificationofthereferencequestion:
13. TheoriginalreferencequestioninPara58ofN.N.Global(supra)wasset
outasunder:
“WhetherthestatutorybarcontainedinSection35oftheStamp
Act,1899applicabletoinstrumentschargeabletostampduty
underSection3readwithScheduletotheAct,wouldalsorender
thearbitrationagreementcontainedinsuchaninstrument,
whichisnotchargeabletopaymentofstampdutyasbeingnon-
existent,unenforceableinlaw,orinvalid/void,pendingpayment
ofstampdutyonthesubstantivecontract/instrument?”
[emphasissupplied]
Mr.GourabBanerjee,learnedSeniorCounselassistingthisCourtasAmicus
Curiaehoweverproposedtoreframethequestionofreference,asunder:
“WhetherthestatutorybarcontainedinSection35oftheStamp
Act,1899applicabletoinstrumentschargeabletostampduty
underSection3readwithScheduletotheAct,wouldalsorender
thearbitrationagreementcontainedinsuchaninstrument,which
isnotchargeabletopaymentofstampdutyasbeingnon-existent,
unenforceableinlaw,orinvalid/void,pendingpaymentofstamp
dutyonthesubstantivecontract/instrument?”
Page8of78
[Emphasisinoriginal]
14. ItisseenthatanerroneousobservationpertainingtotheMaharashtra
StampAct,1958notsubjectinganarbitrationagreementtostampdutywas
madeinpara20,24and58inNNGlobal(supra).Ineachofourfouropinions,
JusticeKMJoseph,JusticeC.T.Ravikumar,JusticeAjayRastogi(&self),we
findthatthisisnotthecorrectpositionontheapplicabilityofthe
MaharashtraStampAct,1958.TheIndianStampAct,1899isafiscal
enactmentthatleviesachargeontheexecutionofinstruments.Section2(14)
oftheStampAct,1899defines“instrument”as“everydocumentbywhichany
rightorliabilityis,orpurportstobe,created,transferred,limited,extended,
extinguishedorrecorded”.Section3titled“Instrumentschargeablewith
duty”providesinteraliathattheinstrumentmustbementionedinthe
ScheduletotheAct.Itisessentialtonotethatarbitrationagreementsarenot
specificallymentionedinScheduleIoftheStampAct,1899as“instruments”
whicharerequiredtobestamped.However,undertheresiduaryentryin
Article5(c)ofScheduleIoftheStampAct,1899titledas“ifnototherwise
providedfor”,stampdutybecomespayable.Thisresiduaryentryiscontained
inamendmentstoScheduleIoftheStampAct,1899,aswellasvariousState
StampActs.Iwouldthereforeproceedonthebasisthatanarbitralagreement
fallswithinthedefinitionof“instrument”asstipulatedundertheStamp
Act,1899andwouldbesubjecttostampduty.
E.SubmissionsoftheCounsel:
15.WehaveheardtheelaboratesubmissionsfromMr.GourabBanerjee,Learned
SeniorCounselassistingthisCourtasAmicusCuriae;Mr.GaganSanghi,
Page9of78
LearnedCounselfortheappellant;Ms.MalavikaTrivedi,LearnedSenior
CounselfortheIntervenorinIA18516of2022;Mr.RamakanthReddy,
LearnedSeniorCounselforRespondentNo.1andMr.DebeshPanda,
LearnedCounselfortheIntervenorinIA199969of2022.Theyhavecited
variousdecisionsofthisCourtaswellasofCourtsinotherjurisdictions.
16.ThelearnedAmicusCuriaemakesthefollowingspecificsubmissions:
16.1.TheDeterminationofwhetheranarbitrationagreementisdulystamped
ornot,mustbelefttothearbitrator.Section11(6A)oftheArbitrationAct,1996
circumscribesthescopeoftheappointingauthority.Itbeginswithanon-
obstanteclauseandwasspecificallymeanttooverrulethe7-judgebenchin
SBP&CovPatelEngg.Ltd
8
.(forshort“SBP”)andNationalInsuranceCo.Ltd.V
BogharaPolyfab(P)Ltd
9
(forshort“BogharaPolyfab”).Moreover,theambitof
Section16ofArbitrationAct,1996whichdealswiththecompetenceofan
arbitraltribunaltoruleonitsjurisdiction,iswideenough,accordingtoMr.
GourabBanerjee,toallowthearbitratortomakeadeterminationwithrespect
tothestampingoftheinstrument.
16.2.The246
th
ReportoftheLawCommissionofIndia
10
(forshort“246
th
LCI
Report)recommendedthatthescopeofauthoritybelimitedto“existence”and
“validity”ofthearbitrationagreement.Thelegislaturewentonestepfurther
andlimitedthescopeoftheappointingauthorityunderSection11(6A)ofthe
ArbitrationAct,1996toconfinetotheexaminationofonly“existence”andnot
8
(2005)8SCC618
9
(2009)1SCC267
10
LawCommissionofIndia,‘AmendmentstotheArbitrationandConciliationAct1996’
(246thReport,August2014)Availableat
(https://cdnbbsr.s3waas.gov.in/s3ca0daec69b5adc880fb464895726dbdf/uploads/2022/0
8/2022081615.pdf)<Lastaccessedon19.3.2023>
Page10of78
even“validity”ofthearbitrationagreement.Suchapproachisconsistentwith
theobjectiveofexpeditiousresolutionofarbitrationdisputes.ACourtunder
Section11(6)ofArbitrationAct,1996isinthenatureofanappointingauthority,
tofacilitateandassistarbitration.
16.3ThestatutorybarinSection35oftheStampAct,1899wouldbetriggered
onlywhenthereisafindingthatthedocumentisnotdulystamped.Forthe
same,thereoughttobeaninquiryintostamping.OnlyontriggeringofSection
33(2)oftheStampAct,1899titled“Examinationandimpoundingof
instruments”,Section35willfollow.TheexaminationunderSection33(2)ofthe
StampAct,1899shouldnotbeundertakenbyaCourtunderSection11(6A)of
theArbitrationAct,1996,butbytheappointedarbitrator.
16.4.IfthecourtfindsunderSection11oftheArbitrationAct,1996thatthere
isnoagreement,thenitcantakeafinalview.However,iftheCourtfeelsthata
deeperconsiderationisrequiredthenthesamecanbelefttotheArbitral
TribunalunderSection16oftheArbitrationAct,1996.AccordingtoMr.Gourab
Banerjee,thelearnedSeniorCounsel,thisistheappropriatewaytoharmonise
Section11(6A)withSection16oftheArbitrationAct,1996.
16.5.Theabsenceofstampingorinstrumentinadequatelystampedwouldat
bestbeanissueofadmissibilitybutnotaboutjurisdiction.TheStamp
Act,1899isafiscalmeasureenactedtosecurerevenuefortheStateforcertain
classesofinstruments.Itis,therefore,notenactedtoarmalitigantwitha
weaponoftechnicalitytomeetthecaseoftheopponent.
16.6.ThelearnedAmicusCuriaepointsoutthataCourtexercisingpower
underSection11(6A)oftheArbitrationAct,1996isnotaCourtasdefinedin
Page11of78
Section2(1)(e)oftheArbitrationAct,1996whichhastheauthorityto‘receive
evidence’.Insomesense,underSection11(6A),theCourtistoonlyforma
primefacieopinion.
16.7.Significantly,thepartiesarenotunderanobligationtofileanoriginal
arbitrationagreementandonlythecopycanbeannexedwhichhoweverisnot
an“instrument”asprovidedinSection2(14)oftheStampAct,1899.The
readingofSection33or35oftheStampAct,1899wouldpointedlysuggestthat
theseprovisionsarenotconcernedwiththecopyoftheinstrument.Validityis
alwaysopentoexaminationatthepost-referralstage.[JupudiKesavaRaov
PulavarthiVenkataSubbaraoandothers
11
,HariomAgrawalvPrakashChand
Malviya
12
]
17.Projectingthecontraryview,Mr.GaganSanghi,learnedCounselforthe
appellantmakesthefollowingsubmissions:
17.1.Section35oftheIndianStampAct,1899barsadmissionofunduly
stamped“instrument”inevidence“foranypurpose”andalso“actinguponit”.
InGovt.ofAP.vP.LaxmiDevi
13
,itwasheldthat“shall”inSection33ofStamp
Act,1899ismandatoryandunstampeddocumentmustbeimpounded.
17.2.Evenassumingthatstampdutyisnotpayableonanarbitration
agreementunderStampAct,1899,whenarbitrationagreementiscontainedas
aclauseinaninstrumentonwhichstampdutyispayable,sucharbitration
agreementasaninstrument,attractsthebarofSection35oftheStamp
Act,1899.
11
(1971)1SCC545
12
(2007)8SCC514
13
(2008)4SCC720
Page12of78
17.3.Thelearnedcounselarguesthatseparationofagreementfromthe
substantivecontractisalegalfictioncreatedbySection16oftheArbitrationAct,
1996.Section16ofArbitrationAct,1996cannotbeanexceptiontoSection35of
theIndianStampAct,1899.[BengalImmunityCovsStateofBihar
14
,Para69,70
ofGovt.ofIndiavVedanta
15
;AmazonVFutureRetail
16
]
17.4.AccordingtoMr.Sanghi,DoctrineofSeparabilityandKompetenz
Kompetenzhasnobearingontheissueofenforceabilityofanarbitration
agreementwhenproperstampdutyisnotpaidontheinstrumentcontaining
thearbitrationagreement.ThelearnedcounselreliedonthedecisionofUK
SupremeCourtinEnkaInsaatvOOOInsuranceCompany
17
whereitwasheld
thatan“arbitrationclauseisnonethelesspartofbundleofrightsandobligations
recordedinthecontractualdocument”.
17.5.Theissueofstampingistobelookedintoattheverythreshold,evenifit
isinexerciseofSection11(6A)oftheArbitrationAct,1996,i.e.atthetime,the
considerationwithrespecttoappointmentofarbitratorisundertaken.
Accordingtothelearnedcounsel,aninstrumentwouldexistinlawonlywhen
itisenforceable.Therefore,whentheCourtunderSection11(6A)ofthe
ArbitrationAct,1996isconsideringthe“existence”ofthearbitrationagreement,
itcanexaminetheissueofnon-stampingorofinadequatestampingatthat
stageitself.
17.6.HighlightingthatthreemodesareprovidedinNNGlobal(supra)i.e.
impounding,paymentofstampdutyandthenappointmentofarbitrator,itis
14
(1955)2SCR603
15
(2020)10SCC1
16
(2022)1SCC209
17
[2020]UKSC38
Page13of78
arguedthatwhenanarbitratorisappointedinaSection11application,the
Courtiscertainly“actingupon”thearbitrationclausewhichiscontendedtobe
barredbytheclearwordingsofSection35oftheStampAct,1899.An
Agreement,unless“enforceable”,isnotin“existence”.
18.ThelearnedSeniorAdvocate,Ms.MalvikaTrivedi,interveningonbehalfofthe
Appellantmadethefollowingsubmissions:
18.1.TheRegimesoftheStampAct,1899andRegistrationAct,1908are
completelydifferent.NNGlobal(supra)wronglyappliedtheprinciplesof
registrationofadocumenttotherequirementofstampingadocument.While
theformerisacurabledefect,thelatterdeterminestheveryexistenceand
completionofadocument/instrument.Intheabsenceofregistration,an
instrumentstillremainsinexistencebutwithoutstamping,theinstrumentis
incomplete/inchoate.
18.2.TheStampAct,1899envisagesthepaymentofstampduty,failingwhich
theinstrumentaccordingtoMs.Trivedicannotbeacteduponforanypurpose.
ThereisnoambiguityinthelanguageoftheStatuteandplainreadingshould
beopted.
18.3.ThepowersoftheCourtunderdifferentprovisionsoflaw,aswellasthe
restrictionscreatedintheStampAct,1899applytotheproceedingsconducted
inaccordancewithSection9oftheArbitrationAct,1996.Itis,therefore,argued
thatevenifthearbitrationclausestandssevered,theCourtwillhavetoreach
aprimafacieconclusiononwhetherthemainagreementisenforceableinlaw
beforegrantinginterimmeasures.
Page14of78
19.LearnedCounselfortheRespondentNo.1,Mr.RamakanthReddy,tookus
throughtherelevantLokSabhadebatesbeforetheenactmentoftheArbitration
Act,1996andmakesthefollowingsubmissions:
19.1ProvisionsofArbitrationAct,1996;StampAct,1899andContractAct,
1872canbeharmonized.Section17ofStampAct,1899hastobereadwith
Section31ofStampAct,1899.
19.2PlainlanguageofSection7oftheArbitrationAct,1996doesnotrequire
thatthepartiesstamptheagreement.Thelegislativeintentionwouldbe
defeated,iftheCourtinsistsonnon-coretechnicalrequirementssuchas
stamps,sealsandoriginals.
20.Inhisturn,Mr.DebeshPanda,learnedCounselfortheIntervenorsubmits
thefollowing:
20.1PartIofArbitrationAct,1996dealswithSection8,9and11whereas
Section45isdealtwithinPartII.Section45hasbeenrecognizedasaprovision
fallingunderPartIIwhichisa“completecode”.[SeeChloroControlsvSevern
TrentWaterPurificationInc
18
]Theexpression“unlessitfinds”inSection45was
interpretedpermajorityinShin-EtsuChemicalCo.Ltd.vAkshOptifibreLtd
19
(forshort“Shin-Etsu)asaconsiderationona“primafaciebasis”only.In2019,
ParliamentamendedSection45.Itsubstitutedtheexpression“unlessitfinds.”
with“unlessitprimafaciefinds”.Itthusbringsthestatuteinlinewiththe
positionsettledinShinEtsu(supra).Inthisbackground,theStampAct,1899
merelycreatesatemporaryinflictiontillthestampdutyisrecovered,withor
18
(2013)1SCC641
19
(2005)7SCC234
Page15of78
withoutpenalty(asthecasemaybe).Theafflictiononlyattachestothe
instrumentandnotthetransaction.
20.2TheArbitrationAct,1966hasalwaysbeenheldtobeanexhaustive
legislationinthenatureofacompleteCode.[Paragraphs83-84,89inFuerst
DayLawsonLtd.v.JindalExportsLtd.
20
]AccordingtoMr.Panda,the
impoundingoftheparentinstrumentthatcontainsthearbitrationagreement
byaforumthatexercisespowerunderthecompleteCode,eitherunderSection
8,9and11withinPartI,orunderSection45withinPart-II,isinconsistent
withthecharacterofArbitrationAct,1996whichisinthenatureofacomplete
code.
21.LookingattherespectiveprojectionbythelearnedAmicusCuriaeandother
counsels,thefollowingquestionsfallforourconsideration:
i) Whetherthenon-stampingofthesubstantivecontract/instrument
wouldrenderthearbitrationagreementnon-existentinlaw,voidand
unenforceableatthestageofSection11oftheArbitrationAct,1996
forthepurposeofreferringamatterforarbitration?
ii)Whethertheexaminationofstampingandimpoundingshouldbe
doneatthethresholdbytheSection11judgeorshoulditbeleftto
thearbitrator?
F.TheStatutoryframeworkoftheStampAct,1899
20
(2011)8SCC333
Page16of78
22.LetusbeginbyexaminingtheobjectivebehindtheenactmentoftheStamp
Act,1899.The67
th
LawCommissionReport
21
suggeststhattheideaofafiscal
enactmentforthepurposeofcollectingrevenuefortheStatefirstoriginatedin
Hollandandthereafter,theBengalRegulation6of1797wasenactedinIndia.
ThiswasinitiallylimitedtoBengal,Bihar,OrissaandBanaras.Subsequently,
variousstampregulationswereintroducedinBombayandMadras.TheStamp
dutieswereprimarilyintendedtocompensateforthedeficiencyinpublicrevenue
duetoabolitionoftaxforthemaintenanceofpoliceestablishments,leviableon
“IndianMerchantsandTraders”.However,theRegulationpavedwayforlater
enactmentsrelatingtostampduty.In1860,thefirstActrelatingtoStampduties
wasenactedinIndia.ThiswasrepealedbytheActof1862,1869,1879and
subsequently,theActof1899wasenactedwhichisthecurrentlegislation.
23.ReflectingontheobjectiveoftheStampAct,1899,a3-judgebenchofthis
CourtinHindustanSteelLtd.v.DilipConstructionCo.
22
(forshort“Hindustan
Steel”)speakingthroughJ.C.ShahJ.madethefollowingpertinentobservation:
“7.TheStampActisafiscalmeasureenactedtosecurerevenuefor
theStateoncertainclassesofinstruments:Itisnotenactedtoarma
litigantwithaweaponoftechnicalitytomeetthecaseofhis
opponent.”
24.LearnedAmicusCuriae,Mr.GourabBanerjeecitedthedecisionofthe
PakistanSupremeCourtinUnionInsuranceCompanyofPakistanLtd.vHafiz
MuhammadSiddique
23
whichaddressedthisissueasearlyas1978,followingthe
ratioinHindustanSteel(supra).Facedwiththequestionofwhethertherewould
beanyvalidarbitralproceedings,ifthearbitrationagreementisundulystamped
21
LawCommissionofIndia,‘IndianStampAct’(67thReport,February,1997)availableat
https://lawcommissionofindia.nic.in/report_seventh/accessedon11March2023
22
(1969)1SCC597
23
1978PLDSC279
Page17of78
andhence,inadmissibleinevidenceunderSection35oftheStampAct,1899;the
Courtattributedapurelyfiscalpurposetostamping,holdingthatstampingis
notmeanttointerfereincommerciallife.DiscussingtheprovisionsoftheStamp
Act,1899includingSection61whichempowersappellateCourtstorevise
decisionson“sufficiency”ofstamps,DorabPatelJconcludedthat:
“theobjectofthelegislatureinenactingtheStampActwastoprotect
publicrevenueandnottointerferewithcommerciallifebyinvalidating
instrumentsvitaltothesmoothflowoftradeandcommerce.”
[emphasissupplied]
25.Thus,theobjectistoseethattherevenuefortheStateisrealisedtothe
utmostextent
24
andnottoaffectthevalidityofthedocument.Itsprovisions
mustbeconstruednarrowlytothatextent.Inthesamejudgment,itwas
elaboratedbythePakistanSupremeCourtasunder:
“Forexample,aninstrumentwouldbeproducedinevidenceonly
whenthereisadisputeaboutit,therefore,iftheintentionofthe
Legislaturehadbeentorenderinvalidallinstrumentsnotproperly
stamped,itwouldhavemadeexpressprovisioninthisrespectandit
wouldhavealsoprovidedsomemachineryforenforcingitsmandate
inthosecasesinwhichthepartiesdidnothaveoccasiontoproduce
unstampedinstrumentsbeforethepersonsspecifiedinthesection.”
26.ThisCourtinRIOGlassSolarSAv.ShriramEPCLimitedandOrs.
25
while
holdingthatforeignawardsneednotbestampednotedthattheStamp
Act,1899reflectsthefundamentalpolicyofIndianlaw.A2-judgebench
speakingthroughNarimanJ.notedasunder:
“34.……ThefundamentalpolicyofIndianlaw,ashasbeenheldinRenusagar
PowerCo.Ltd.v.GeneralElectricCo.,1994Supp(1)SCC644,andfollowedin
AssociateBuildersv.DelhiDevelopmentAuthority,(2015)3SCC49,makesit
clearthatifastatuteliketheForeignExchangeRegulationAct,1973dealing
24
J.M.A.RajuvKrishnamurthyBhatt,AIR1976Guj72;ChiranjiLal(Dr.)v.HariDas
(2005)10SCC746;JagdishNarainv.ChiefControllingRevenueAuthority,AIR1994All
371.
25
(2018)18SCC313
Page18of78
withtheeconomyofthecountryisconcerned,itwouldcertainlycomewithin
theexpression“fundamentalpolicyofIndianlaw”.TheIndianStampAct,1899,
beingafiscalstatutelevyingstampdutyoninstruments,isalsoanActwhich
dealswiththeeconomyofIndia,andwould,onaparityofreasoning,beanAct
reflectingthefundamentalpolicyofIndianlaw.”
[emphasissupplied]
27.TheobjectoftheStampActcanbefurtherunderstoodfromS.
KrishnamurthyAiyar’sCommentary
26
ontheStampAct,1899wherediscussing
thejudgmentsinHindustanSteel(supra)andJ.M.ARajuvKrishnamurthyBhatt
27
,theobjectisstatedasunder:
“TheobjectoftheStampActisapurelyfiscalregulation.Itssole
objectistoincreasetherevenueandallitsprovisionsmustbe
construedashavinginviewtheprotectionofrevenue.Itisnot
enactedtoarmalitigantwithaweaponoftechnicalitytomeetthe
caseofhisopponent.Thewholeobjectistoseethattherevenueof
theStateisrealisedtotheutmostextent”
ItisplainthatthelegislativeintentandobjectbehindtheStampAct,1899,isto
securerevenuefortheStateanditisanActreflectingthefundamentalpolicy
ofIndianlaw.Thus,policyconsiderationsandsecuringrevenuemustalsobe
keptinmindwhileinterpretingtheprovisionsoftheStampAct,1899.
27.1.InthecaseofCommissionerofITv.ChandanbenMaganlal
28
,itwas
heldthatanyprovisionrelatingtoataxstatutemustbeinterpretedsothat
themeaningofsuchprovisionmustharmonisewiththelegislature’s
intentionbehindthelaw.LetusnowconsiderSection35&36oftheStamp
Act,1899withwhichwearedirectlyconcerned.Theyareextractedbelow:
“35.Instrumentsnotdulystampedinadmissibleinevidence,etc.—
Noinstrumentchargeablewithdutyshallbeadmittedinevidence
foranypurposebyanypersonhavingbylaworconsentofparties
authoritytoreceiveevidence,orshallbeactedupon,registeredor
26
S.KrishnamurthyAiyar,TheIndianStampAct,AnExhaustiveSummarywithState
Amendments;7
th
Edn,P.22
27
AIR1976Guj72
28
(2000)245ITR182
Page19of78
authenticatedbyanysuchpersonorbyanypublicofficer,unless
suchinstrumentisdulystamped:Providedthat—
(a)anysuchinstrument[shall],beadmittedinevidenceon
paymentofthedutywithwhichthesameischargeable,or,in
thecaseofaninstrumentinsufficientlystamped,ofthe
amountrequiredtomakeupsuchduty,togetherwitha
penaltyoffiverupees,or,whententimestheamountofthe
properdutyordeficientportionthereofexceedsfiverupees,of
asumequaltotentimessuchdutyorportion;
(b)whereanypersonfromwhomastampedreceiptcouldhave
beendemanded,hasgivenanunstampedreceiptandsuch
receipt,ifstamped,wouldbeadmissibleinevidenceagainst
him,thensuchreceiptshallbeadmittedinevidenceagainst
him,onpaymentofapenaltyofonerupeebytheperson
tenderingit;
(c)whereacontractoragreementofanykindiseffectedby
correspondenceconsistingoftwoormorelettersandanyone
ofthelettersbearstheproperstamp,thecontractor
agreementshallbedeemedtobedulystamped;
(d)nothinghereincontainedshallpreventtheadmissionof
anyinstrumentinevidenceinanyproceedinginaCriminal
Court,otherthanaproceedingunderChapterXIIorChapter
XXXVIoftheCodeofCriminalProcedure,1898(5of1898);
(e)nothinghereincontainedshallpreventtheadmissionofany
instrumentinanyCourtwhensuchinstrumenthasbeen
executedbyoronbehalfof66[the67[Government]]or
whereitbearsthecertificateoftheCollectorasprovidedby
section32oranyotherprovisionofthisAct.”
“36.Admissionofinstrumentwherenottobequestioned.—Where
aninstrumenthasbeenadmittedinevidence,suchadmissionshall
not,exceptasprovidedinsection61,becalledinquestionatany
stageofthesamesuitorproceedingonthegroundthatthe
instrumenthasnotdulystamped.”
28.Section35proscribesauthoritiesfromconsideringunstampeddocuments
buttheexceptionstothestatutorybarunderSection35asprovidedin
35(a),(b),(d)and(e)andSection36,wouldclearlysuggestthatnon-paymentof
stampdutyisacurabledefectandthedocumentwouldnotberenderedvoidat
thefirstinstance,iftherequisiteStampdutyisnotpaid.Thus,thereisno
absolutebar.Itisalsowell-settledinlawthatfailuretostampadocument
Page20of78
doesnotaffectthevalidityofthetransactionembodiedinthedocument;it
merelyrendersadocumentinadmissibleinevidence
29
.
28.1.K.Krishnamurthy
30
intheCommentaryontheIndianStampAct,1899
discussestheprovisotoSection35ofStampAct,1899asunder:
“ThisprovisoenablesCourtsandArbitratorstoadmitinevidence
documentsunstampedordeficientlystampedonpaymentoftheproper
dutyandpenalty.Aninstrumentnotdulystampedshallbeadmittedin
evidenceonpaymentofthedutyandpenalty.Aninstrumentnotduly
stampedshallbeadmittedinevidenceonpaymentofthedutywith
whichthesameischargeableorinthecaseofaninstrument
insufficientlystamped,oftheamountrequiredtomakeupsuchtogether
withpenalty
31
.Anawardwhichisnotengrossedonstampedpaperoris
engrossedonaninsufficientlystampedpapermaybevalidatedwith
retrospectiveeffectbypaymentofthedutyordeficitduty
32
.Wherean
awardisnotstamped,thedefectintheawardcanbecuredby
impoundingthedocumentandafterthedefectisremoveditcanbebrought
onrecordandmadearuleoftheCourt.
33
”
[emphasissupplied]
29.Similarly,Section42(2)oftheStampAct,1899whichdealswiththe
consequenceofnon-stampingprovidesasfollows:
“42.Endorsementofinstrumentsinwhichdutyhasbeenpaid
undersection35,40or41.—
(1)Whenthedutyandpenalty(ifany)leviableinrespectofany
instrumenthavebeenpaidundersection35,section40orsection
41,thepersonadmittingsuchinstrumentinevidenceorthe
Collector,asthecasemaybe,shallcertifybyendorsementthereon
thattheproperdutyor,asthecasemaybe,theproperdutyand
penalty(statingtheamountofeach)havebeenleviedinrespect
thereof,andthenameandresidenceofthepersonpayingthem.
(2)Everyinstrumentsoendorsedshallthereuponbeadmissiblein
evidence,andmayberegisteredandacteduponandauthenticated
asifithadbeendulystamped,andshallbedeliveredonhis
29
GulzariLalMalwarivRamGopalAIR1937Cal765;MatteguntaDhanalakshmivKantam
RajuSaradamba,AIR1977AP348;SeealsoPuranchandravKallipadaRoy,AIR1942Cal
386;BoottamPitchiahvBoyapatiKoteswaraRaoAIR1964AP519
30
K.Krishnamurthy,TheIndianStampAct,AnExhaustiveSummarywithState
Amendments;12
th
EditionP.372-373
31
Omprakashv.Laxminarayan2014(1)SCC618
32
PattoolalSharmavRajadhirajUmraoSinghAIR1955NUC2621
33
Wilson&Co.Pvt.Ltd.VK.S.LokavinayagamAIR1992Mad100
Page21of78
applicationinthisbehalftothepersonfromwhosepossessionitcame
intothehandsoftheofficerimpoundingit,orassuchpersonmay
direct:
Providedthat—
(a)noinstrumentwhichhasbeenadmittedinevidenceupon
paymentofdutyandapenaltyundersection35,shallbeso
deliveredbeforetheexpirationofonemonthfromthedateofsuch
impounding,oriftheCollectorhascertifiedthatitsfurther
detentionisnecessaryandhasnotcancelledsuchcertificate;
(b)nothinginthissectionshallaffecttheCodeofCivilProcedure,
1882(14of1882),section144clause3.”
[emphasissupplied]
30.ThephraseologyofSections36,35and42oftheStampAct,1899was
consideredinHindustanSteel(supra).Thefactualbackdropthereinwasthat
HindustanSteelmadeanapplicationunderSection30and33oftheIndian
ArbitrationAct,1940forsettingasidetheawardonthegroundthatitwas
unstampedandassuch,voidabinitio.ThisCourt,however,heldthatthereis
nobaragainstaninstrumentnotdulystampedbeing“actedupon”,after
paymentofstampdutyandpenaltyaccordingtotheprocedureprescribedin
theAct.Itwaspertinentlyobservedasfollows:
“6.Relyinguponthedifferenceinthephraseologybetween
Sections35and36itwasurgedthataninstrumentwhichis
notdulystampedmaybeadmittedinevidenceonpaymentof
dutyandpenalty,butitcannotbeacteduponbecause
Section35operatesasabartotheadmissioninevidenceof
theinstrumentnotdulystampedaswellastoitsbeingacted
upon,andtheLegislaturehasbySection36intheconditions
setoutthereinremovedthebaronlyagainstadmissionin
evidenceoftheinstrument.Theargumentignoresthetrue
importofSection36.
-
Bythatsectionaninstrumentonceadmittedinevidenceshall
notbecalledinquestionatanystageofthesamesuitor
proceedingonthegroundthatithasnotbeendulystamped.
Section36doesnotprohibitachallengeagainstaninstrument
thatitshallnotbeacteduponbecauseitisnotdulystamped,
butonthataccountthereisnobaragainstaninstrumentnot
Page22of78
dulystampedbeingacteduponafterpaymentofthestamp
dutyandpenaltyaccordingtotheprocedureprescribedbythe
Act.Thedoubt,ifany,isremovedbythetermsofSection42(2)
whichenact,intermsunmistakable,thateveryinstrument
endorsedbytheCollectorunderSection42(1)shallbe
admissibleinevidenceandmaybeacteduponasifithas
beendulystamped.”
(emphasissupplied)
31.Theabovewouldindicatethatthereisnoabsolutebaragainstthe
instrumentbeing“actedupon”sinceatalaterstagethedefectiscurable.
31.1.Arguingthattheabovecourseisnotavailable,Ms.MalavikaTrivedi,
learnedSeniorCounselfortheintervenorhadcontendedthatSection35
providesforastatutorybar,wheretheagreementshallnotbeadmittedin
evidenceforanypurposenorshallitbeactedupon,registeredorauthenticated
byanysuchpersonorbyanypublicofficer.Itis,therefore,submittedthat
whenaCourtappointsanarbitratorunderSection11ofArbitrationAct,1996,it
iscertainly“actingupon”thearbitrationclause,whichisbarredbytheclear
languageofSection35oftheStampAct,1899.Letusnowproceedtotestthe
aboveargument.
31.2InHameedJoharanv.AbdulSalam
34
inthecontextofanunstamped
decreeforpartition,2judgesofthisCourthadtheoccasiontointerpretSection
35oftheStampAct,1899andtheinterplaywithArticle136oftheLimitation
Act,1963.Itwascontendedinthatcasethataninstrumentnotdulystamped,
cannotbe“actedupon”.Theissuethereinwaswhetheradecreepassedina
suitforpartitioncanbeactedupon/enforced,withoutengrossingonstamp
paper.Itwasalsoarguedthattheperiodoflimitationbeginstorunfromthe
34
(2001)7SCC573
Page23of78
datewhenthedecreebecomesenforceablei.e.whenthedecreeisengrossedon
thestamppaper.Inthiscontext,theCourtopinedthat:
“38.…..Undoubtedly,Section2(15)includesadecreeofpartitionand
Section35oftheActof1899laysdownabarinthematterof
unstampedorinsufficientstampbeingadmittedinevidenceorbeing
actedupon—butdoesthatmeanthattheprescribedperiodshallremain
suspendeduntilthestamppaperisfurnishedandthepartitiondecreeis
drawnthereonandsubsequentlysignedbytheJudge?Theresultwould
howeverbeanutterabsurdity.Asamatteroffact,ifsomebodydoesnot
wishtofurnishthestamppaperwithinthetimespecifiedthereinandas
requiredbythecivilcourttodrawupthepartitiondecreeorifsomeone
doesnotatallfurnishthestamppaper,doesthatmeanandimply,no
periodoflimitationcanbesaidtobeattractedforexecutionora
limitlessperiodoflimitationisavailable.Theintentofthelegislaturein
engraftingtheLimitationActshallhavetobegivenitsproperweightage.
Absurditycannotbetheoutcomeofinterpretationbyacourtorderand
whereverthereisevenapossibilityofsuchabsurdity,itwouldbea
plainexerciseofjudicialpowertorepelthesameratherthan
encouragingit.ThewholepurportoftheIndianStampActistomake
availablecertainduesandtocollectrevenuebutitdoesnotmeanand
implyoverridingtheeffectoveranotherstatuteoperatinginacompletely
differentsphere.”
[Emphasissupplied]
31.3.Thus,itwasheldthattheStampAct,1899cannotoverridetheeffectof
anotherstatutesuchastheLimitationAct,1963operatinginacompletely
differentsphere.Further,theexpression“executability”and“enforceability”
wasdistinguishedtomeanthat“enforceability”cannotbeasubjectmatterof
Section35ofStampAct,1899.Itwasconclusivelyheldthatenforceability
cannotbesuspendeduntilfurnishingofstamppaper.Atmost,adocument
canberenderednon-executable.
31.4.Thereafter,a3-judgebenchofthisCourtinChiranjiLal(Dr.)v.Hari
Das
35
afterdiscussingtheabovejudgmentinHameedJoharan(supra)onthe
questionofperiodoflimitationbeginningtorunfromthedateofthedecree
beingengrossedonthestamppaper,pertinentlyheldasunder:
35
2005)10SCC746
Page24of78
“23.Suchaninterpretationisnotpermissiblehavingregardtotheobjectand
schemeoftheIndianStampAct,1899.TheStampActisafiscalmeasure
enactedwithanobjecttosecurerevenuefortheStateoncertainclassesof
instruments.Itisnotenactedtoarmalitigantwithaweaponoftechnicality
tomeetthecaseofhisopponent.ThestringentprovisionsoftheActare
conceivedintheinterestoftheRevenue.Oncethatobjectissecured
accordingtolaw,thepartystakinghisclaimontheinstrumentwillnotbe
defeatedonthegroundofinitialdefectintheinstrument(HindustanSteel
Ltd.v.DilipConstructionCo.[(1969)1SCC597]).”
[emphasissupplied]
31.5.Itwasspecificallyheldthat“thestartingofperiodoflimitationfor
executionofapartitiondecreecannotbemadecontingentuponthe
engrossmentofthedecreeonthestamppaper.”
31.6.Thus,unstamped/insufficientlystampeddocumentdoesnotaffectthe
enforceabilityofadocumentnordoesitrenderadocumentinvalid
36
.Aplain
readingoftheprovisionswouldalsomakeitclearthatadocumentcanbe
“actedupon”atalaterstage.Itisthereforeacurabledefect.
32.ThelearnedCounselfortheAppellant,Mr.GaganSanghiarguedthat
Section35and33aremandatoryprovisionsasitusestheword“shall”andan
unstampeddocumentmustbeimpoundedatthethreshold.InPrinciplesof
StatutoryInterpretationbyJusticeG.P.Singh
37
ontheuseoftheword“shall”
andpresumptionofthewordbeingimperative,itisstated:
“….thisprimafacieinferenceabouttheprovisionbeingimperative
mayberebuttedbyotherconsiderationsflowingfromsuch
construction.Therearenumerouscaseswheretheword“shall”has
thereforebeenconstruedasmerelydirectory.Theword‘shall’,
observesHIDAYATULLAH,J.“isordinarilymandatorybutsometimes
notsointerpretedifthecontextortheintentionotherwisedemands
36
GulzariLalMalwarivRamGopalAIR1937Cal765;MatteguntaDhanalakshmivKantam
RajuSaradamba,AIR1977AP348;SeealsoPuranchandravKallipadaRoy,AIR1942Cal
386;BoottamPitchiahvBoyapatiKoteswaraRaoAIR1964AP519
37
JusticeG.P.Singh:PrinciplesofStatutoryInterpretation,(LexisNexis,2016)atP.450-451;
BurjoreandBhawaniPrasadvBhaganaILR10Cal557;SainikMotorsvStateofRajasthan
1962(1)SCR517;StateofUPvBabuRamAIR1961SC751
Page25of78
andpointsoutSUBBARAOJ.“whenastatuteusestheword‘shall’,
primafacieitismandatory,butthecourtmayascertainthereal
intentionofthelegislaturebycarefullyattendingtothewholescopeof
thestatute.”
[emphasissupplied]
32.1.P.B.MaxwellintheCommentaryonInterpretationofStatutes
38
notesthat
anActistoberegardedinitsentiretyanddiscussesthefollowingthreewaysof
interpretation:
“PassingfromtheexternalaspectsoftheStatutetoitscontents,itisanelementary
rulethatconstructionistobemadeofallpartstogether,andnotofonepartonly
byitself”
i) Individualwordsarenotconsideredinisolation,butmaybehavetheir
meaningdeterminedbyotherwordsintheSectioninwhichtheyoccur.
ii) Themeaningofasectionmaybecontrolledbyotherindividualsections
inthesameAct.
iii)Lastly,themeaningofasectionmaybedetermined,notsomuchby
referencetootherindividualprovisionsoftheStatute,asbytheschemeof
theActregardedingeneral”
[emphasissupplied]
32.2.JusticeG.P.SinghinInterpretationofStatutesfurthernotes
39
:
“Theprinciplethatthestatutemustbereadasawholeisequallyapplicableto
differentpartsofthesamesection.Thesectionmustbeconstruedasawhole
whetherornotoneofthepartsisasavingclauseoraproviso.SubbaraoJcalls
it"anelementaryrulethatconstructionofasectionistobemadeofallthe
partstogether” [emphasissupplied]
32.3.Thus,onaconsolidatedreadingofSection35,36andtheprovisoto
Section35and42;theuseoftheword“actedupon”inallthesesectionsor
eveninthesamesection,readwiththeobjectiveandlegislativeintentofthe
StampAct1899,itisclearthatthebarunderSection35isnotintendedtobe
absolute;non-paymentofstampdutyisacurabledefectastheobjectiveisto
protectrevenue.Moreover,noneoftheprovisionsoftheStampAct,1899have
theeffectofrenderingadocumentinvalidorvoidabinitio.
38
PStJLangan,MaxwellonTheInterpretationofStatutes(NMTripathiPrivateLtd,1976);
P.58-64
39
JusticeG.P.Singh:PrinciplesofStatutoryInterpretation,(LexisNexis,2016)atP.46;
Page26of78
G.TheStatutorySchemeoftheArbitrationAct,1996
33.Itisappositetorefertotheparliamentaryintentbehindtheenactmentof
theArbitrationAct,1996whichreplacedtheArbitrationAct,1940.Thefirstlaw
onthesubjectwastheArbitrationAct,1899withlimitedapplicationinthe
PresidencytownsofCalcutta,BombayandMadras.Thereafter,thesecond
scheduleoftheprovisionsoftheCivilProcedureCode,1908dealtwith
arbitration.ThemajorconsolidatedlegislationwastheArbitrationAct,1940
whichwasbasedonthe(English)ArbitrationAct,1940.TheLawCommissionin
its246
th
LCIReport(supra)notesthatthisarbitralregimewasbasedonthe
mistrustofthearbitralprocessand“The1996ActisbasedontheUNCITRAL
ModelLawonInternationalCommercialArbitration,1985andtheUNCITRAL
ConciliationRules,1980.”TherelevantpartoftheStatementofObjectand
Reasonsisextractedbelow:
(i)tocomprehensivelycoverinternationalcommercialarbitration
andconciliationasalsodomesticarbitrationandconciliation;
(ii)tomakeprovisionforanarbitralprocedurewhichisfair,
efficientandcapableofmeetingtheneedsofthespecific
arbitration;
(iii)toprovidethatthearbitraltribunalgivesreasonsforits
arbitralaward;
(iv)toensurethatthearbitraltribunalremainswithinthelimits
ofitsjurisdiction;
(v)tominimisethesupervisoryroleofcourtsinthearbitralprocess;
(vi)topermitanarbitraltribunaltousemediation,conciliation
orotherproceduresduringthearbitralproceedingstoencourage
settlementofdisputes;
(vii)toprovidethateveryfinalarbitralawardisenforcedinthe
samemannerasifitwereadecreeofthecourt;
Page27of78
(viii)toprovidethatasettlementagreementreachedbythe
partiesasaresultofconciliationproceedingswillhavethesame
statusandeffectasanarbitralawardonagreedtermsonthe
substanceofthedisputerenderedbyanarbitraltribunal;and
(ix)toprovidethat,forpurposesofenforcementofforeignawards,
everyarbitralawardmadeinacountrytowhichoneofthetwo
InternationalConventionsrelatingtoforeignarbitralawardsto
whichIndiaisapartyapplies,willbetreatedasaforeignaward.”
[emphasissupplied]
34.Further,onreadingArticle5oftheModelLawandSection5ofthe
ArbitrationAct,1996,whichcovertheprovisionsforjudicialinterventionin
arbitralproceedings,itisclearthattheParliamentwentbeyondArticle5of
theUNCITRALModellawandaddedanon-obstanteclause.Tosubstantiate
thispoint,itispertinenttoquotetheprovisionsinfull.
Article5oftheUNCITRALModelLaw,1985readsasunder:
“Article5.ExtentofCourtintervention-Inmattersgovernedbythis
Law,nocourtshallinterveneexceptwheresoprovidedinthisLaw.”
Section5oftheArbitrationAct,1996readsasunder:
“5.Extentofjudicialintervention.—Notwithstandinganything
containedinanyotherlawforthetimebeinginforce,inmatters
governedbythisPart,nojudicialauthorityshallinterveneexcept
wheresoprovidedinthisPart.”
[emphasissupplied]
35.Additionally,reflectingonthepurposeofArticle5,Dr.PeterBinderin
UNCITRALModelLawonInternationalCommercialArbitration,1985
40
notes:
“1-107:AccordingtotheCommissionReport,thepurposeofArticle
5was“toachieveacertaintyastothemaximumextentofjudicial
intervention,includingassistance,ininternationalcommercial
arbitration,bycompellingthedrafterstolistinthe(model)lawon
internationalcommercialarbitrationallinstancesofcourt
intervention.TheAnalyticalCommentarydescribestheeffectof
Article5asbeing“toexcludeanygeneralorresidualpowersgivento
40
P.Binder,InternationalCommercialArbitrationAndConciliationInUNCITRALModelLaw
Jurisdictions274(2nded.,Sweet&MaxwellLondon2005)P.50-51
Page28of78
thecourtsinadomesticsystemwhicharenotlistedinthemodel
law”
Inadditiontothegreatadvantageofprovidingclarityoflaw,whichis
particularlyimportantforforeignparties(protectingthemfrom
unwantedlegalsurprises,Article5alsofunctionstoacceleratethe
arbitralprocessinallowinglessofachanceofdelaycausedby
intentionalanddilatorycourtproceedings.”
[emphasissupplied]
36.AcollectivereadingoftheStatementofObjectandReasonsofthe
ArbitrationAct,1996r/wSection5oftheAct,andArticle5oftheModelLaw,
wouldmakeitabundantlyclearthatthelegislativeintentbehindthe
enactmentwastointeralia,minimisetheinterventionoftheCourtsand
providefortimelyresolutionofdisputes.Byaddinganon-obstanteclause,the
ParliamentthroughSection5madeasignificantdeparturefromArticle5and
gaveanoverridingeffectovertheprovisionsofanyotherlawforthetimebeing
inforce.Itcircumscribedtheroleofthejudicialauthority,especiallyincontext
oftheCourtsexercisinganyresidualpowerthatmayaccruetothemthrough
anyprovisioninanylaw.
37.LetusnowrefertotheunamendedSection11(6)oftheArbitrationAct,1996
whichisbasedontheArticle11oftheUNCITRALModellaw:
“11Appointmentofarbitrators.—
(6)Where,underanappointmentprocedureagreeduponbythe
parties,—
(a)apartyfailstoactasrequiredunderthatprocedure;or
(b)theparties,orthetwoappointedarbitrators,failtoreachan
agreementexpectedofthemunderthatprocedure;or
(c)aperson,includinganinstitution,failstoperformanyfunction
entrustedtohimoritunderthatprocedure,apartymayrequestthe
ChiefJusticeoranypersonorinstitutiondesignatedbyhimtotakethe
necessarymeasure,unlesstheagreementontheappointment
procedureprovidesothermeansforsecuringtheappointment.”
Page29of78
38.EventhoughthekeyprovisionsintheArbitrationAct,1996areprimarily
basedontheUNCITRALModelLaw,thelegislaturehasalsomadesignificant
departures,whileamendingSection11andSection8oftheArbitrationAct,1996.
39.Next,itwouldbeappropriatetobrieflytracethejurisprudentialhistoryof
Section11(6)oftheArbitrationAct,1996forthepurposeofthisreference.
i)EvolutionoflawunderSection11(6)ofArbitrationAct,1996
40.A2-judgeBenchofthisCourtinICICILtd.v.EastCoastBoatBuilders&
EngineersLtd
41
takingintoconsiderationdelaysinappointmentofarbitrators
underSection11(6),referredthequestionofjurisdictionofaSection11judge
toconsiderarbitrabilityofadisputetoathree-judgebench.Itwasnotedthat
inKRRaveendranathanv.StateofKerala
42
,anothertwoJudgeBenchofthis
CourthadalreadyreferredtoalargerBench,asimilarquestion.
41.Thereafter,inSundaramFinanceLtd.v.NEPCIndiaLtd
43
,a2-judgebench
opinedthat:
"12.…underthe1996Act,appointmentofarbitrator(s)ismadeas
pertheprovisionsofsection11,whichdoesnotrequiretheCourtto
passajudicialorderappointing[the]arbitrator(s)."
42.Theaboveobiterwasaffirmedbya2-judgeBenchinAdorSamiaPvtLtd.v.
PeekayHoldingsLtd
44
(forshort“AdorSamia”).Dealingwiththequestionof
appealunderArticle136oftheConstitutionofIndia,fromanordermadeby
theChiefJusticeofaHighCourtappointinganarbitrator,thisCourtheldthat
anorderunderSection11oftheArbitrationAct,1996wasanadministrative
order.Thiswasaffirmedbyathree-JudgeBenchinKonkanRailwaysCorpnv.
41
(1998)9SCC728
42
(1996)10SCC35
43
(1999)2SCC479
44
(1999)8SCC572
Page30of78
MehulConstructionCo
45
(forshort“KonkanRailways(I)”)wherethemattercame
upforreconsiderationoftheratioinAdorSamia(supra).Itwasobservedas
under:
"4.…WhenthematterisplacedbeforetheChiefJusticeorhis
nomineeunderSection11oftheActitisimperativeforthesaidChief
Justiceorhisnomineetobearinmindthelegislativeintentthatthe
arbitralprocessshouldbesetinmotionwithoutanydelaywhatsoever
andallcontentiousissuesarelefttoberaisedbeforetheArbitral
Tribunalitself.AtthatstageitwouldnotbeappropriatefortheChief
Justiceorhisnomineetoentertainanycontentiousissuebetweenthe
partiesanddecidethesame.AbarereadingofSections13and16of
theActmakesitcrystalclearthatquestionswithregardtothe
qualifications,independenceandimpartialityofthearbitrator,andin
respectofthejurisdictionofthearbitratorcouldberaisedbeforethe
arbitratorwhowoulddecidethesame.”
43.Thethree-judgebenchdecisionwassubsequentlyaffirmedbyfivejudgesin
KonkanRailwaysCorpnv.MehulConstructionCo
46
(forshort“KonkanRailways
(II)”).ThisCourtheldthereinthatthepowerexercisedbytheChiefJusticeor
'anypersonorinstitution'designatedbyhimundersection11isnot
adjudicatory.Followingadetailedreviewoftheprecedents,itwasheldthatthe
functionoftheChiefJusticeorhisdesignateunderSection11istoonly"fill
thegapleft"andappointanarbitratorforexpeditiousconstitutionand
commencementofarbitrationproceedings.
44.ThesevenjudgesofthisCourtinSBP(supra)overturnedthedecisionin
KonkanRailways(II)(supra).Itwasheldthereinthatdecidinganapplication
forappointmentisanexerciseof‘judicial’power,asopposedtoan
‘administrative’powerandthattheCourtisalsoauthorizedtorecordevidence:
“39.….[f]orthepurposeoftakingadecisionontheseaspects,the
ChiefJusticecaneitherproceedonthebasisofaffidavitsandthe
45
(2000)7SCC201
46
(2002)2SCC388
Page31of78
documentsproducedortakesuchevidenceorgetsuchevidence
recorded”
45.However,JusticeC.K.Thakkerdissentedfromthemajorityopinionand
cametotheconclusionthatitwasanadministrativepowerinthefollowing
passage:
“85.…Thereis[…]nodoubtinmymindthatatthatstage,the
satisfactionrequiredismerelyofprimafacienatureandtheChief
Justicedoesnotdecidelisnorcontentiousissuesbetweenthe
parties.Section11neithercontemplatesdetailedinquiry,nortrial
norfindingsoncontroversialorcontestedmatters.”
46.Thefourmainreasonsbehindthedissentcanbesummarisedas
under:
“111.….Firstly,thefunctionoftheCourtistointerpretthe
provisionasitisandnottoamend,alterorsubstituteby
interpretativeprocess.Secondly,itisforthelegislaturetomakea
lawapplicabletocertainsituationscontemplatedbyitandthe
judiciaryhasnopowerinenteringinto‘legislativewisdom’.Thirdly,
asheldbyme,the‘decision’oftheChiefJusticeismerelyprima
faciedecisionandsub-section(1)ofSection16confersexpress
poweronthearbitraltribunaltoruleonitsownjurisdiction.
Fourthly,itprovidesthatremedytodealwithsituationscreatedby
theorderpassedbythearbitraltribunal.Thesheetanchorofhis
dissentisthatintheguiseofinterpretingastatute,judicial
legislationisnotpermissible.”
47.InthedissentingopinioninParagraph95&96,JusticeThakkarfurther
heldasunder:
“95.Now,letusconsiderSection16oftheAct.Thissectionisnew
anddidnotfindplaceintheoldActof1940.Sub-section(1)ofthat
sectionenablestheArbitralTribunaltoruleonitsownjurisdiction.It
furtherprovidesthatthejurisdictionoftheTribunalincludesruling
onanyobjectionswithrespecttoexistenceorvalidityofthe
arbitrationagreement.Sub-sections(2),(3)and(4)laydownprocedure
ofraisingpleaastothejurisdictionoftheArbitralTribunaland
entertainingsuchplea.Sub-section(5)mandatesthattheArbitral
Tribunal“shalldecide”suchpleaand,“wheretheArbitralTribunal
takesadecisionrejectingtheplea,continuewiththearbitral
proceedingsandmakeanarbitralaward”.Sub-section(6)isequally
importantandexpresslyenactsthatapartyaggrievedbyanarbitral
awardmayinvokeSection34oftheActforsettingasidesuchaward.
Page32of78
Theprovisionappearstohavebeenmadetopreventdilatorytactics
andabuseofimmediaterighttoapproachthecourt.Ifanaggrieved
partyhasrighttomovethecourt,itwouldnothavebeenpossibleto
precludethecourtfromgrantingstayorinterimreliefwhichwould
bringthearbitrationproceedingstoagrindinghalt.Theprovisionsof
Section16(6)readwithSection5nowmakethelegalpositionclear,
unambiguousandfreefromdoubt.
96. Section16(1)incorporatesthewell-knowndoctrine
ofKompetenz-Kompetenzorcompetencedelacompetence.It
recognisesandenshrinesanimportantprinciplethatinitiallyand
primarily,itisfortheArbitralTribunalitselftodeterminewhetherit
hasjurisdictioninthematter,subjectofcourse,toultimatecourt-
control.Itisthusaruleofchronologicalpriority.Kompetenz-
Kompetenzisawidelyacceptedfeatureofmoderninternational
arbitration,andallowstheArbitralTribunaltodecideitsown
jurisdictionincludingrulingonanyobjectionswithrespecttothe
existenceorvalidityofthearbitrationagreement,subjecttofinal
reviewbyacompetentcourtoflawi.e.subjecttoSection34ofthe
Act.”
48.TheabovelineofreasoninginJusticeThakkar’sdissentresonateswiththe
internationallyrecognizedprincipleofKompetenzKomptenzandthedoctrineof
separability.ThemajorityopinioninSBP(supra)suggeststhataSection11
Courtcouldconductamini-trialatthepre-referralstage.Thejurisprudential
correctnessofSBP(supra)hasbeendoubtedandwasconsideredasexcessive
judicialinterventionbythe246
th
LCIReport(supra).Ithasbeenlegislatively
overruledbysubsequentamendmentsintheArbitrationAct,1996whichwillbe
discussedlaterinthisjudgment.
49.Thereafter,atwo-judgebenchinBogharaPolyfab(supra)whichfollowed
SBP(supra),allowedthecourttoexamine,interalia,thefollowingissues:
“22.2.(a)Whethertheclaimisadead(longbarred)claimoraliveclaim.
(b)Whetherthepartieshaveconcludedthecontract/
transactionbyrecordingsatisfactionoftheirmutualrightsand
obligationorbyreceivingthefinalpaymentwithoutobjection.”
Page33of78
50.The246
th
LCIreport(supra),discussingbothSBP(supra)andBoghara(supra)
significantlynotedthattherealissueisthe“scope”and“nature”ofjudicial
intervention:
“29.TheSupremeCourthashadoccasiontodeliberateuponthe
scopeandnatureofpermissiblepre-arbitraljudicialintervention,
especiallyinthecontextofsection11oftheAct.Unfortunately,
however,thequestionbeforetheSupremeCourtwasframedinterms
ofwhethersuchapowerisa“judicial”oran“administrative”power–
which obfuscates the realissue underlying such
nomenclature/descriptionasto:
-thescopeofsuchpowers–i.e.thescopeofargumentswhicha
Court(ChiefJustice)willconsiderwhiledecidingwhetherto
appointanarbitratorornot–i.e.whetherthearbitration
agreementexists,whetheritisnullandvoid,whetheritis
voidableetc;andwhichoftheseitshouldleavefordecisionof
thearbitraltribunal.
-thenatureofsuchintervention–i.e.wouldtheCourt(Chief
Justice)considertheissuesuponadetailedtrialandwhether
thesamewouldbedecidedfinallyorbeleftfordeterminationof
thearbitraltribunal”
[emphasissupplied]
51.Asregardsnature,the246
th
LCIReport(supra)notedthattheexpositionof
lawonthepointistobefoundinShinEtsu(supra)wherethisCourtwhile
interpretingSection45oftheArbitrationAct,1996heldthattheissueshouldbe
lookedatona“primafacie”basisonly.Onscope,itwasrecommendedthatthe
Courtshouldrestricttotheexaminationofwhethertheagreementis“nulland
void”andiftheCourtfindsthattheagreementdoesnotexist,thatdecision
wouldbefinal.ItmadethefollowingrecommendationasregardsSection8and
11oftheArbitrationAct,1996:
“33.…Thescopeofthejudicialinterventionisonlyrestrictedto
situationswheretheCourt/JudicialAuthorityfindsthatthe
arbitrationagreementdoesnotexistorisnullandvoid.Insofarasthe
natureofinterventionisconcerned,itisrecommendedthatinthe
eventtheCourt/JudicialAuthorityisprimafaciesatisfiedagainstthe
argumentchallengingthearbitrationagreement,itshallappointthe
arbitratorand/orreferthepartiestoarbitration,asthecasemaybe.”
Page34of78
52.The2015-Amendmentsignificantlyrestrictedthescopeofinterventioneven
furtheraswewillnoticebelow.
ii)Post-2015Regime:InsertionofSection11(6A)
53.Therehasbeenamajorshiftpost-2015amendmentwiththeinsertionof
Section11(6A)intheArbitrationAct,1996.Thelegislativeintentisclearfrom
theplainreadingofSection11(6A)asextractedbelow:
"TheSupremeCourtor,asthecasemaybe,theHighCourt,
whileconsideringanyapplicationundersub-section(4)orsub-
section(5)orsub-section(6),shall,notwithstandingany
judgment,decreeororderofanyCourt,confinetothe
examinationoftheexistenceofanarbitrationagreement.”
[emphasissupplied]
54.Thebasisforthisamendment,asexplainedin246
th
LCIReport(supra),was
toundotheeffectofSBP(supra)andBoghara(supra)whichwidenedthescope
ofinquiryandinterventionbyaCourtunderSection11(6)oftheArbitration
Act,1996.Section11(6A)usesthephrase“notwithstandinganyjudgment,
decreeororderofanyCourt”andeffectivelyoverrulesjudgmentswhich
widenedthescopeofinquiry.Section11(6A)doesnotusetheword“nulland
void”asrecommendedbytheLawCommission.Thus,thelegislaturewentone
stepfurtherandconfinedtheexaminationtothe“existence”ofthearbitration
agreement.
55.NowletusnoticethelanguageusedinSections8,11and45ofthe
ArbitrationAct,1996,allofwhichdealwiththepowerofCourtsatthepre-
arbitralstage.
55.1.Section8oftheArbitrationAct,1996titled“Powertoreferpartiesto
arbitrationwherethereisanarbitrationagreement”hasbeenamendedin2015
Page35of78
withthefollowinglanguage:“unlessitfindsthatprimafacienovalidarbitration
agreementexists”.
55.2.Section45inPartIItitled“Powerofjudicialauthoritytoreferpartiesto
arbitration”hasalsobeenamendedandnotifiedin2019.Theamendmentin
Section45wasmadeafterthejudgmentofthreejudgesinShinEtsu(supra)
whereinacaseofinternationalarbitration,thequestionbeforethisCourtwas
whenanapplicationunderSection45ismoved,istheCourtrequiredtopassa
primafaciefindingorafinal-findingbasedonthemeritsofthecase,which
wouldresultinafull-fledgedtrial?Inthemajorityopinion,itwasheldas
under:
“105.…theobjectoftheActwouldbedefeatedifproceedingsremain
pendinginthecourtevenaftercommencingofthearbitration.Itis
preciselyforthisreasonthatIaminclinedtotheviewthatatthepre-
referencestagecontemplatedbySection45,thecourtisrequiredto
takeonlyaprimafacieviewformakingthereference,leavingthe
partiestoafulltrialeitherbeforetheArbitralTribunalorbeforethe
courtatthepost-awardstage”
55.3.PursuanttoShinEtsu(Supra),the2019AmendmenttoSection45states:
“…unlessitprimafaciefindsthatthesaidagreementisnullandvoid,
inoperativeorincapableofbeingperformed”.Thus,fromtheabovediscussionit
isclearthatSection8usestheword“validity”andSection45usesthephrase
“nullandvoid,inoperativeorincapableofbeingperformed”.Inthatsense,
Section11(6A)isauniqueprovisionwhichisconfinedtothe“existence”ofthe
arbitrationagreementandnotits“validity”.Theamendedprovisionalsodoes
notfindplaceintheUNCITRALModelLaw.LearnedAmicusCuriaepointedto
Page36of78
thedefinitionofconfineinP.RamanathaAiyar’sAdvancedLawLexicons
47
whichstates:“imprison;holdincustody.Tokeepwithincircumscribinglimits”.
56.OnreadingthelanguageinSection11(6A)withSection5oftheArbitration
Act1996,andaninterpretationbasedonlegislativeintent,itisapparentthat
thescopeunderSection11(6A)isverynarrow.
iii)Post-2019AmendmentandtheReportoftheHigh-
LevelCommitteetoReviewtheInstitutionalisationof
ArbitrationMechanisminIndia.
57.TheCommitteeledbyJusticeSrikrishna
48
hadrecommendedfurther
changestotheArbitrationAct,1996.Ithadrecommendedforthedeletionof
Section11(6A)withthepowerofappointmentofarbitratorsbeingleftentirelyto
thearbitralinstitutions.DrawinginspirationfromSingapore,HongKong,
UnitedKingdometc.,theCommitteerecommendedthatthiswouldprevent
furtherdelaysandsetthemomentumforinstitutionalarbitrationinIndia.
UndertheamendedSection11(6),theappointmentofarbitratorsistobedone
bythearbitralinstitution:
“…theappointmentshallbemade,onanapplicationoftheparty,by
thearbitralinstitutiondesignatedbytheSupremeCourt,incaseof
internationalcommercialarbitration,orbytheHighCourt,incase
ofarbitrationsotherthaninternationalcommercialarbitration,as
thecasemaybe.”
58.InsertionofSection6(B)byAct3of2016whichisyettonotifiedreadsas
under:
47
P.RamanathaAiyar,TheEncyclopaedicLawDictionarywithWordsandPhrases,Legal
MaximsandLatinterms(5
th
Edition);P.1037
48
GovernmentofIndia,‘ReportoftheHighLevelCommitteetoReviewtheInstitutionalisation
ofArbitrationMechanisminIndia(HLCReport,July2017)Availableat
https://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf<Lastaccessedon
19.3.2023>
Page37of78
“(6B)ThedesignationofanypersonorinstitutionbytheSupreme
Courtor,asthecasemaybe,theHighCourt,forthepurposesofthis
sectionshallnotberegardedasadelegationofjudicialpowerbythe
SupremeCourtortheHighCourt.]”
[emphasissupplied]
Eventhoughtheamendmentsarenotnotifiedyetandthereislimitedclarity
ontheprocess,wemaytakeacueabouttheintentionofthelegislaturewhich
seemstobetoensureminimaljudicialinterventionatthepre-referralstageof
appointmentofarbitrator.
59.Itwouldbeappositetorefernowtotheprevalentpositionamongstthe
most-preferredarbitralinstitutionsi.e.theInternationalChamberof
CommerceCourt(ICCCourt),theLondonCourtofInternationalArbitration
(LCIA),theHongKongInternationalArbitrationCentre(HKIAC),theSingapore
InternationalArbitrationCentre(SIAC)andtheArbitrationInstituteofthe
StockholmChambersofCommerce(SCC)whichwerementionedinthereport
oftheHigh-levelCommitteeandthosecanbebroadlynotedasunder:-
1.ICCArbitrationRules,2021:
“Article6.EffectoftheArbitrationAgreement.—
(4)InallcasesreferredtotheCourtunderArticle6(3)…The
arbitrationshallproceedifandtotheextentthattheCourt
isprimafaciesatisfiedthatanarbitrationagreementunderthe
Rulesmayexist.
(5)InallmattersdecidedbytheCourtunderArticle6(4),any
decisionastothejurisdictionofthearbitraltribunal,exceptas
topartiesorclaimswithrespecttowhichtheCourtdecidesthat
thearbitrationcannotproceed,shallthenbetakenbythe
arbitraltribunalitself.”
2.HKIACArbitrationRules:
“Article11–HKIAC’sPrimaFaciePowertoProceed
11.1Thearbitrationshallproceedifandtotheextentthat
HKIACissatisfied,primafacie,thatanarbitrationagreement
undertheseProceduresmayexist.Anyquestionastothe
jurisdictionofthearbitraltribunalshallbedecidedbythearbitral
tribunalonceconstituted.
Page38of78
11.2HKIAC’sdecisionpursuanttoArticle11.1iswithout
prejudicetotheadmissibilityormeritsofanyparty’spleas.”
3.LCIAArbitrationRules:
“Article23.JurisdictionandAuthority
23.1TheArbitralTribunalshallhavethepowertoruleuponits
ownjurisdictionandauthority,includinganyobjectiontothe
initialorcontinuingexistence,validity,effectivenessorscopeof
theArbitrationAgreement.”
4.SIACInternationalArbitrationCentreRules,2016:
“Article28.JurisdictionoftheTribunal
28.1Ifanypartyobjectstotheexistenceorvalidityofthe
arbitrationagreementortothecompetenceofSIACto
administeranarbitration,beforetheTribunalconstituted,the
Registrarshalldetermineifsuchobjectionshallbereferredto
theCourt.IftheRegistrarsodetermines,theCourtshalldecide
ifitisprimafaciesatisfiedthatthearbitrationshallproceed.
ThearbitrationshallbeterminatediftheCourtisnotso
satisfied.AnydecisionbytheRegistrarortheCourtthatthe
arbitrationshallproceediswithoutprejudicetothepowerofthe
Tribunaltoruleonitsownjurisdiction.
28.2TheTribunalshallhavethepowertoruleonitsown
jurisdiction,includinganyobjectionswithrespecttothe
existence,validityorscopeofthearbitrationagreement.An
arbitrationagreementwhichformspartofacontractshallbe
treatedasanagreementindependentoftheothertermsofthe
contract.”
5.ArbitrationInstituteofSCCRules:
“Article11.DecisionsbytheBoard
TheBoardtakesdecisionsasprovidedundertheseRules,
includingdeciding:
(i)whethertheSCCmanifestlylacksjurisdictionoverthe
disputepursuanttoArticle12(i);
Article12(i).Dismissal
TheBoardshalldismissacase,inwholeorinpart,if:
(i) theSCCmanifestlylacksjurisdictionoverthedispute;…”
60.Thus,theapproachofthereputedarbitralinstitutionsworldwidewould
showthatthereisexpressrecognitionoftheprincipleofKompetenz-
KompetenzandroleofCourtsislimitedtopreliminaryprimafacieexamination.
Areadingoftheaboveruleswouldalsoshowthatarbitralinstitutionshave
recognizedtheprima-facietesttodeterminetheexistenceofthearbitration
agreement.Discussingtherulesofthemajorinternationalarbitralinstitutions,
Page39of78
WilliamParkinanarticletitled“ChallengingArbitralJurisdiction:TheRoleof
InstitutionalRules”
49
writes:
“Onoccasion,however,arbitrationshavebeenfiledwithouteven
minimalindiciaofconsenttothearbitralprocess.Nodocumentseems
toexistsayingtherespondentactuallyagreedtoarbitratewiththe
claimant.Insuchinstances,efficiencywillbeservedbyearly
considerationofarespondent’sargumentthatthecaseshouldnot
proceed.Tothisend,theICCRulespermittheICCCourttoconsider
obviousjurisdictionaldefects,witharbitrationgoingforwardonlytothe
extenttheICCCourtisprimafaciesatisfiedthatanarbitration
agreementmayexist.”
61.Thus,theobjectivebehindtheprima-facietestwhilereferringapartyto
arbitration,istoalsoensurethatanon-consentingpartyisnotboundtothe
processofarbitrationandthedoctrineofpartyautonomyisupheldwith
minimalinterventionofCourts.
62.ChandrachudJ.(ashethenwas)intheconcurringopinioninA.
AyyasamyvsA.Paramasivam&Ors
50
(forshort“Ayyasamy”)noted,inter
alia,thatjurisprudenceinIndiamuststrengtheninstitutionalefficacyof
arbitrationwithminimalinterventionofCourts:
“53.TheArbitrationandConciliationAct,1996,shouldinmyview
beinterpretedsoastobringinlinetheprinciplesunderlyingits
interpretationinamannerthatisconsistentwithprevailing
approachesinthecommonlawworld.JurisprudenceinIndiamust
evolvetowardsstrengtheningtheinstitutionalefficacyofarbitration.
Deferencetoaforumchosenbypartiesasacompleteremedyfor
resolvingalltheirclaimsisbutpartofthatevolution.Minimisingthe
interventionofcourtsisagainarecognitionofthesameprinciple.”
[emphasissupplied]
49
Park,William."ChallengingArbitralJurisdiction:TheRoleofInstitutionalRules",Boston
UniversitySchoolofLaw,PublicLawResearchPaper(2015).
50
(2016)10SCC386
Page40of78
63.Itupheldtheone-stoparbitrationprinciplepropoundedbytheHouseof
LordsinFionaTrustandHoldingCorporationv.Privalov
51
.
“46.InFionaTrustandHoldingCorpn.v.Privalov[FionaTrustand
HoldingCorpn.v.Privalov,(2007)1AllER(Comm)891:2007BusLR
686(CA)],theCourtofAppealemphasisedtheneedtomakeafresh
startinimpartingbusinessefficacytoarbitralagreements.TheCourtof
Appealheldthat:(BusLRpp.695H-696B&F,paras17&19)
“17.…Forourpartweconsiderthatthetimehasnowcomeforalineof
somesorttobedrawnandafreshstartmadeatanyrateforcasesarising
inaninternationalcommercialcontext.Ordinarybusinessmenwouldbe
surprisedatthenicedistinctionsdrawninthecasesandthetimetakenup
byargumentindebatingwhetheraparticularcasefallswithinonesetof
wordsoranotherverysimilarsetofwords.Ifbusinessmengotothetrouble
ofagreeingthattheirdisputesbeheardinthecourtsofaparticularcountry
orbyatribunaloftheirchoicetheydonotexpect(atanyratewhentheyare
makingthecontractinthefirstplace)thattimeandexpensewillbetakenin
lengthyargumentaboutthenatureofparticularcausesofactionand
whetheranyparticularcauseofactioncomeswithinthemeaningofthe
particularphrasetheyhavechosenintheirarbitrationclause.Ifany
businessmandidwanttoexcludedisputesaboutthevalidityofacontract,
itwouldbecomparativelysimpletosayso.
***
19.Oneofthereasonsgiveninthecasesforaliberalconstructionofan
arbitrationclauseisthepresumptioninfavourofone-stoparbitration.Itis
nottobeexpectedthatanycommercialmanwouldknowinglycreatea
systemwhichrequiredthatthecourtshouldfirstdecidewhetherthe
contractshouldberectifiedoravoidedorrescinded(asthecasemightbe)
andthen,ifthecontractisheldtobevalid,requiredthearbitratortoresolve
theissuesthathavearisen.Thisisindeedapowerfulreasonforaliberal
construction.”
Arbitrationmustprovideaone-stopforumforresolutionofdisputes.
TheCourtofAppealheldthatifarbitratorscandecidewhetheracontract
isvoidforinitialillegality,thereisnoreasonwhytheyshouldnotdecide
whetheracontractisprocuredbybribery,justasmuchastheycan
decidewhetheracontracthasbeenvitiatedbymisrepresentationornon-
disclosure.
[Emphasissupplied]
64.Thus,theone-stoparbitrationapproachwouldensurethatallissueson
initialillegalityorwhetheracontractisvoidcanbedecidedbythearbitral
institutionssubject,ofcourse,totheultimatesupervisoryjurisdictionofthe
Courts.AnarbitralawardcanbesetasidebyCourtsasperthelegislative
51
(2007)1AllER(Comm)891(Paras17-18)
Page41of78
mandateinSection34oftheArbitrationAct,1996.Thiswouldprevent
multiplicityofproceedingsinCourtsandtribunalsandensureminimal
judicialintervention.
H.DiscussiononSMSTea:
65.HavingbroadlydiscussedthelegislativeschemeoftheStampAct,1899and
theArbitrationAct,1996,letusnowexaminethecorrectnessofthedecisions
referredtoinNNGlobal(supra).
66.Thejudicialpositionontheenforceabilityofanarbitrationagreement
containedinanunstampedorinsufficientlystampedagreementcanbetraced
fromthisCourt’s2011decisioninSMSTea(supra).Thefactsofthecasewere
thattheappellantwasgrantedleaseoftwoteaestatesforatermof30years.
Theleasesdeedcontainedanarbitrationclause.Onabruptevictionbythe
respondentfromtheteaestates,theappellantfiledanapplicationunder
Section11oftheArbitrationAct,1996fortheappointmentofarbitrator.The
learnedChiefJusticeofGuwahatiHighCourtdismissedtheSection11
applicationandheldthattheleasedeedwascompulsorilyregistrableunder
Section17oftheRegistrationAct,1908andSection106oftheTransferof
PropertyAct,1882;andastheleasedeedwasnotregistered,eventhe
arbitrationclausewouldberenderedinvalid.ThematterreachedthisCourt
whereoneofthequestionswaswhetheranarbitrationagreementinan
unregisteredinstrumentwhichisnotdulystamped,isvalidandenforceable.It
wasobservedthatthearbitrationagreementinanunstampedorinsufficiently
stampedinstrumentisinvalid,giventhatSection35oftheStampAct,1899
expresslybarstheauthoritybeforewhichsuchunstampedorinsufficiently
Page42of78
stampedinstrumentispresentedtoactonsuchaninstrument.Atthisstage,it
isimportanttokeepinmindthatdecisioninSMS(supra)cameatatimewhen
SBP(supra)andBogharaPolyfab(supra)continuedtoholdthefieldi.e.priorto
theinsertionofSection11(6A)totheAct.Thus,evenattheSection11stage,
underthelawwhichexistedbeforethe2015Amendment,theCourthadwide
powersandcouldalsoconductdetailedadjudication.EventhoughthisCourt
inSMSTea(supra)succinctlyrecognizedthedoctrineofseparabilityinthe
contextofRegistrationAct,1908,itheldthatstrictandmandatoryprovisions
oftheStampAct,1899onnon-paymentofStampdutycouldnotberead
harmoniouslywiththerelevantprovisionsoftheArbitrationAct,1996.Itwas
heldasunder:
“22.1.Thecourtshould,beforeadmittinganydocumentintoevidenceor
actinguponsuchdocument,examinewhethertheinstrument/document
isdulystampedandwhetheritisaninstrumentwhichiscompulsorily
registerable.
22.2.Ifthedocumentisfoundtobenotdulystamped,Section35ofthe
StampActbarsthesaiddocumentbeingactedupon.Consequently,even
thearbitrationclausethereincannotbeactedupon.Thecourtshould
thenproceedtoimpoundthedocumentunderSection33oftheStamp
ActandfollowtheprocedureunderSections35and38oftheStamp
Act.”
67.ThejudgmentinSMSTea(supra)hasbeenupheldinNainaThakkar(supra)
andBlackPearlHotelsvPlanetM.RetailLtd.
52
(forshort“BlackPearlHotels”).
Ithasalsobeencitedwithapprovalinarecentjudgementby3judgesofthis
CourtinDharmaratnakara(supra).Asnotedearlier,theCourtinGarware
(supra)alsofollowedSMSTea(supra)whichhasbeencitedwithapprovalin
VidyaDrolia(supra).ThislegalpropositionisdoubtedbythisCourtinNN
Global(supra)andreferredtous.
52
(2017)4SCC498
Page43of78
68.Section11(6A)aswehavenotedabovebeginswithanon-obstanteclause
viz.“notwithstandinganyjudgment,decreeororderofanyCourt”and
effectivelyoverrulesalljudgmentswhichwidenedtheambitofexamination.
69.ThefirstsubmissionbeforeusbyMr.GaganSanghi,learnedCounselfor
theAppellantonthisaspectwasthattheobservationsoftwodifferentthree-
JudgeBenchdecisionsinDharmaratnakara(supra)andBlackPearl
Hotels(supra)havenotbeenconsideredinNNGlobal(supra)whichisanother
three-judgebenchandthatthisseriouslycallsintoquestionthefindingofNN
Global(supra).
70.Itissignificanttonoteherethattheabovetwojudgmentsdidnotconsider
therecent11(6A)Amendment.BlackPearlHotels(supra)wasdeliveredpre-
11(6A)andhencestandslegislativelyoverruled.InDharmaratnakara(supra),it
appearsthattheamendmenttoSection11(6A)wasnotbroughttothenoticeof
theCourtandtheearlierjudgmentinGarware(supra)wasnotconsidered.
ThiscouldalsobebecausetheCourtconsideredtheorderwhichwaspassed
priortointroductionofSection11(6A).InDharmaratnakara(supra),theissue
beforetheCourtwaswhetheradocumentexecutedbetweenpartieswasa
leasedeedoran“agreementtolease”,andwhetherarbitrationcouldbe
invokedunderthesaiddocument.EvenafterdeterminationbytheRegistrar
(Judicial)oftheKarnatakaHighCourtthattheconcerneddocumentwasa
leasedeed,thedeficitstampdutywasnotpaid.TheCourtreliedonSMS
Tea(supra),toholdthatthearbitrationagreementcouldnotbeactedupon,
unlessstampdutyispaid.
Page44of78
71.Fromthediscussionabove,itisclearthatDharmaratnakara(supra)does
notlaydownthecorrectpositioninlightofthepost-2015amendmentregime.
ThroughtheAmendingAct,SMSTea(supra)standslegislativelyoverruled.
72.ThecorrectexpositionoflawaftertheinsertionofSection11(6A)istobe
foundinDuroFelguera,S.A.v.GangavaramPortLtd
53
(forshort“Duro
Felguera”)whereitwasheldthat,"(a)fterthe(2015)amendment,allthatthe
courtsneedtoseeiswhetheranarbitrationagreementexists--nothingmore,
nothingless.Thelegislativepolicyandpurposeisessentiallytominimisethe
Court'sinterventionatthestageofappointingthearbitratorandthisintentionas
incorporatedinSection11(6-A)oughttoberespected."Thishasbeenre-affirmed
bya3-judgebenchinMayavatiTradingPrivateLimitedv.PradyuatDeb
Burman
54
whereitwasheldasunder:
“10.Thisbeingtheposition,itisclearthatthelawpriortothe2015
AmendmentthathasbeenlaiddownbythisCourt,whichwouldhaveincluded
goingintowhetheraccordandsatisfactionhastakenplace,hasnowbeen
legislativelyoverruled.Thisbeingtheposition,itisdifficulttoagreewiththe
reasoningcontainedintheaforesaidjudgmentasSection11(6A)isconfinedto
the15examinationoftheexistenceofanarbitrationagreementandistobe
understoodinthenarrowsenseashasbeenlaiddowninthejudgmentDuro
Felguera,S.A.(supra)–seeparas48&59.”
73.ThefollowingextractfromPravinElectricals(P)Ltd.v.GalaxyInfra&Engg.
(P)Ltd.
55
isequallypertinentwheretheCourtinterpretedSection11(6A)to
conclusivelyholdthataSection11judgecannotconductamini-trialatthat
stage:
“29.ThefactsofthiscaseremindoneofAliceinWonderland.In
ChapterIIofLewisCaroll’sclassic,afterlittleAlicehadgonedown
theRabbithole,sheexclaims“Curiouserandcuriouser!”and
LewisCarollstates“(shewassomuchsurprised,thatforthe
53
(2017)9SCC729
54
(2019)8SCC714
55
(2021)5SCC671
Page45of78
momentshequiteforgothowtospeakgoodEnglish)”.Thisisa
casewhicheminentlycriesforthetruthtocomeoutbetweenthe
partiesthroughdocumentaryevidenceandcross-examination.
Largepiecesofthejigsawpuzzlethatformsthedocumentary
evidencebetweenthepartiesinthiscaseremainedunfilled.The
emailsdated22ndJuly,2014and25thJuly,2014producedhere
forthefirsttimeaswellascertaincorrespondencebetween
SBPDCLandtheRespondentdoshowthatthereissomedealing
betweentheAppellantandtheRespondentquaatenderfloatedby
SBPDCL,butthatisnotsufficienttoconcludethatthereisa
concludedcontractbetweentheparties,whichcontainsan
arbitrationclause.Giventheinconclusivenatureofthefindingby
CFSLtogetherwiththesigningoftheagreementinHaryanaby
partieswhoseregisteredofficesareatBombayandBiharqua
workstobeexecutedinBihar;giventhefactthattheNotarywho
signedtheagreementwasnotauthorisedtodosoandvarious
otherconundrumsthatariseonthefactsofthiscase,itisunsafe
toconclude,onewayortheother,thatanarbitrationagreement
existsbetweentheparties.Theprimafaciereviewspokenofin
VidyaDrolia(supra)canleadtoonlyoneconclusiononthefactsof
thiscase-thatadeeperconsiderationofwhetheranarbitration
agreementexistsbetweenthepartiesmustbelefttoanArbitrator
whoistoexaminethedocumentaryevidenceproducedbeforehim
indetailafterwitnessesarecross-examinedonthesame.Forall
thesereasons,wesetasidetheimpugnedjudgmentoftheDelhi
HighCourtinsofarasitconclusivelyfindsthatthereisan
ArbitrationAgreementbetweentheparties.”
[emphasissupplied]
74.Atthispoint,itwouldsufficetonotethattheCourtinSMSTea(supra)held
thatanarbitralagreementwouldberenderedinadmissibleinevidenceifthe
underlyingcontractisnotstamped.Itdidnot,however,statethatan
unstampedarbitrationagreementwouldberenderedvoidasheldin
Garware(supra)inthelaterdecision.WhileSMSTea(supra)extendedthe
separabilitypresumptioninthecontextoftheRegistrationAct,1908wewill
noticebelowthatthispresumptioncanalsobeextendedinthecontextof
StampAct,1899throughharmoniousconstruction.
I.DiscussiononGarware
Page46of78
75.ThefactsinGarware(supra)werethatasub-contract,fortheinstallationof
geo-textiletubesembankmentwithtoemoundatvillagePenthainOdisha,was
providedbytheemployerforpreventionfromcoastalerosion.Owingto
disputesbetweenparties,thesub-contractwasterminated.TheRespondent
filedapetitionunderSection11whichwasallowedbytheBombayHighCourt
andsolearbitratorwasappointed.Onappeal,thisCourtprimarilyreliedon
SMSTea(supra)toholdthatthearbitrationagreementinanunstamped
documentcannotbeacteduponandhence,anarbitratorcouldnotbe
appointeduntiltheunstampedagreementinquestionwasimpounded.Despite
consideringtheamendedSection11(6A)andthe246
th
LCIReport(supra)tonote
thatSBP(supra)andBoghara(supra)havebeenoverruled,theCourtheldthat
"SMSTeaEstatesha(d),innomanner,beentouchedbytheamendmentof
Section11(6-A)"sinceitwasnotexcludedbyeitherthe246
th
LCIReport(supra)
ortheStatementofObjectandReasonsofthe2015Amendment.Itwasfurther
heldthatasperSection2(h)oftheIndianContractAct1872,anagreement
becomesacontractonlyifitisenforceablebylawandhence,anunstamped
documentwouldbeunenforceableduetothebarunderSection35ofthe
StampAct,1899.ThefollowingparagraphhasbeendoubtedbyNN
Global(supra):
“22.Whenanarbitrationclauseiscontained“inacontract”,itis
significantthattheagreementonlybecomesacontractifitis
enforceablebylaw.Wehaveseenhow,undertheStampAct,an
agreementdoesnotbecomeacontract,namely,thatitisnot
enforceableinlaw,unlessitisdulystamped.Therefore,evenaplain
readingofSection11(6-A),whenreadwithSection7(2)ofthe1996Act
andSection2(h)oftheContractAct,wouldmakeitclearthatan
arbitrationclauseinanagreementwouldnotexistwhenitisnot
enforceablebylaw.ThisisalsoanindicatorthatSMSTeaEstateshas,
innomanner,beentouchedbytheamendmentofSection11(6-A).”
Page47of78
76.TheabovepropositionoflawinGarware(supra)appearstobeincorrect.As
notedearlier,thejudgmentinSMSTea(supra)standslegislativelyoverruledas
itwasdeliveredinthepre-2015amendmentregime.Eventhoughthereisno
expressmentioninthe246
th
LCIReport(supra),thenon-obstanteclause
effectivelyoverrulesit.
77.NowletusconsiderSection2(g)and2(h)oftheIndianContractAct,1872
whichreadasunder:
“(g)Anagreementnotenforceablebylawissaidtobevoid;
(h)Anagreementenforceablebylawisacontract;”
IncorporatingtheprincipleinGarware(supra)wouldmeanthatasperSection
2(g)and(h)oftheContractAct,1872,anagreementwouldberenderedvoid-
ab-initio,ifitisnotstamped.Thiswouldhoweverbecontrarytothe
legislativeschemeoftheStampAct,1899asperwhichnon-
stamping/insufficientstampingisacurabledefectasdiscussedearlier.
Moreover,stampdutyisleviedontheinstrumentandnotthetransaction.
56
77.1.InGulzariLalMalwarivRamGopal
57
LordWilliamsJwhilediscussing
Section35oftheStampAct,1899notedthatthereisnoprovisioninthe
StampAct,1899whichrendersadocumentinvalid:
“Thereisacleardistinctiontobedrawnbetweeninvalidityand
inadmissibilityofdocuments.Certainstatutesandsectionsrender
documentsinvalidiftheyarenotstamped.NosectionoftheIndian
StampActhasthiseffectbutaninstanceofadocumentbeing
renderedinvalidbytheomissionofstampsiscontainedintheEnglish
StampAct,s.93,whichprovides:—
Acontractforseainsurance(otherthansuchinsuranceasis
referredto,inthefifty-fifthsectionoftheMerchantShippingAct,
AmendmentAct,1862)shallnotbevalidunlessthesameisexpressed
inapolicyofseainsurance”
56
BoardofRevenuevN.NarasimhanAIR1961Mad504;A.BapirajuvDistrictRegistrar
AIR1968AP142
57
AIR1937Cal765
Page48of78
[emphasissupplied]
77.2.Moreover,thelanguageofSection11(6A)confinesthescopeofenquiryto
only“existence.”andnotevenwhetheracontractisnullandvoid,as
recommendedbythe246
th
LCIReport(supra).Thequestiononvalidityand
existencecanbegoneintobythearbitratorunderSection16oftheArbitration
Act,1996andnotbytheCourtunderSection11oftheArbitrationAct,1996.
J.InterplaybetweentheStampAct1899,ContractAct1872andtheArbitration
Act,1996
i)ArbitrationAct,1996isaspeciallegislation
78.InordertounderstandtheinterplaybetweenthethreeActs,referenceto
therelevantprovisionsisnecessary.
i) StampAct,1899:
TheresiduaryentryinArticle5(c)ofScheduleIoftheIndianStampAct,1899
withthetitle“Agreements”asnotedearlier,states“ifnototherwiseprovided
for”which,asheldbyus,bringsunderitsambitevenanArbitration
Agreement.
Now,InstrumentisdefinedunderSection2(14)asunder:
“(14)“Instrument”includeseverydocumentbywhich
anyrightorliabilityis,orpurportstobe,created,
transferred,limited,extended,extinguishedorrecord.”
Section17providesforthetimingofstamping:
“InstrumentsexecutedinIndia.—Allinstrument
chargeablewithdutyandexecutedbyanyperson
in[India]shallbestampedbeforeoratthetimeof
execution.”
Page49of78
“Execution”isdefinedinSection2(12):
“Executed”or“Execution”usedwithreferenceto
instruments,mean“signed”and“signature”
ii)IndianContractAct,1872:
AnagreementundertheIndianContractAct,1872isdefinedinSection2(e)as
under:
“Everypromiseandeverysetofpromises,formingthe
considerationforeachother,isanagreement”.
Sections2(g),2(h)and2(j)andSection10oftheIndianContractAct,1872state:
“(g)Anagreementnotenforceablebylawissaidtobevoid;
(h)Anagreementenforceablebylawisacontract;”
(j)Acontractwhichceasestobeenforceablebylawbecomes
voidwhenitceasestobeenforceable
(10)Allagreementsarecontractsiftheyaremadebythefree
consentofpartiescompetenttocontract,foralawful
considerationandwithalawfulobject,andarenothereby
expresslydeclaredtobevoid.
iii)ArbitrationAct,1996:
Section2(b)providesasunder:
“(b)arbitrationagreement”meansanagreementreferredtoin
section7”
LetusnowconsiderSection7oftheArbitrationAct,1996whichspecifically
definesArbitrationagreement:
“7Arbitrationagreement.—
(1)InthisPart,“arbitrationagreement”meansanagreementby
thepartiestosubmittoarbitrationallorcertaindisputeswhich
havearisenorwhichmayarisebetweentheminrespectofa
definedlegalrelationship,whethercontractualornot.
(2)Anarbitrationagreementmaybeintheformofanarbitration
clauseinacontractorintheformofaseparateagreement.
(3)Anarbitrationagreementshallbeinwriting.
(4)Anarbitrationagreementisinwritingifitiscontainedin—
(a)adocumentsignedbytheparties;
(b)anexchangeofletters,telex,telegramsor[anyother
electronicmeans]othermeansoftelecommunication
whichprovidearecordoftheagreement;or
Page50of78
(c)anexchangeofstatementsofclaimanddefencein
whichtheexistenceoftheagreementisallegedbyone
partyandnotdeniedbytheother.
(5)Thereferenceinacontracttoadocumentcontaining
anarbitrationclauseconstitutesanarbitrationagreement
ifthecontractisinwritingandthereferenceissuchasto
makethatarbitrationclausepartofthecontract.”
[emphasissupplied]
78.1.Thefollowingconclusionscanbedrawnfromaconsolidatedreadingof
theaboveprovisionsinthethreeenactments:
i) TherearenospecificrequirementsinSection7oftheArbitration
Act,1996oranyotherprovisionintheArbitrationAct,1996asawhole,
whichprovidefornecessarystampingforvalidityofanarbitration
agreementorelaborategenerallyonthesame.
ii)EventhoughSection10oftheIndianContractAct,1872recognises
oralagreements,awrittenagreementissine-qua-nonforavalid
arbitrationagreement.
iii)“Signing”isjustanexampleofoneoftheconditionsthatmaysatisfy
theformofanarbitrationagreement.Thus,themandatory
requirementofasignatureisruledoutforanarbitrationagreementin
Section7oftheArbitrationAct,1996.SinceSection7(2)(c)ofthe
ArbitrationAct,1996recognisesevenexchangeofclaimanddefence
aswrittenarbitrationagreements,thereisnosigningrequirement.
Evenifawrittenarbitrationagreementisnotsigned,thepartiescan
stillbeboundtoanarbitrationagreement
58
.However,Section17of
58
ChennaiContainerTerminalPvtLtdv.UnionofIndia,20073ArbLR218(Mad),Fisserv.
InternationalBank,282F.2d231,233(2dCir1960),TravancoreDevaswomBoardv.
Page51of78
theStampAct,1899providesforthetimingofstampingi.e.beforeor
atthetimeofexecutionandtheterm“execution”isdefinedinthe
StampAct,1899tomean“signature”
iv)Eventhougharbitral“awards”areliabletostampdutyunderItem12
oftheStampAct,1899andarespecificallymentionedinScheduleI;
thearbitrationagreementforthepurposeofstampduty,getscovered
onlyundertheresiduaryentryviz“ifnototherwiseprovidedfor”in
Article5(c).TheStampAct,1899doesnotspecificallyrefertoan
arbitrationagreement.
v)AsperSection7oftheArbitrationAct,1996,ArbitrationAgreement
canevenbenon-contractual.
vi)Section7(4)(c)ofArbitrationAct,1996envisagesthatthescopeof
arbitrationisnotlimitedtothedisputeinitiallyreferredtoarbitration,
butalsoencompassesanydisputesthatareincludedinthepleadings
ofthepartiesi.e.statementofclaimanddefence.
78.2TheAppointmentOfArbitratorsByTheChiefJusticeOfIndiaScheme,1996
providesinteraliafortheoriginalorcertifiedcopyofthe“arbitrationagreement”
foraSection11(6)application.Icompletelyagreewiththeopinionofmy
LearnedBrother,JusticeK.M.Josephthatanarbitrationagreementhasto
complywiththeindispensablerequirementsundertheContractAct,1872such
ascompetencytocontractandpresenceofsoundmind.However,whenit
comesto“formal”validitywhichcouldincluderequirementsofsignature,
stamps,seals;I’munabletoconcurthattheevidentiarybarunderSection35
PanchamyPack,200413SCC510;Alsosee,DavidSt.JohnSutton,JudithGilland
MatthewGearing,RussellonArbitration(24
th
Edition);P.49
Page52of78
oftheStampAct,1899shouldbejuxtaposedwithSection2(g)and(2h)ofthe
ContractAct,1872tomaketheagreement“void”.Forexample,asperSection10
oftheContractAct,1872,evenoralagreementsarevalidbutasperthe“form”
ofarbitrationagreementprovidedinSection7ofArbitrationAct,1996,ithasto
necessarilybeinwriting.Anotherpointworthnotingisthatifanarbitration
agreementcanbeforexample,evennon-contractualanddoesnotnecessarily
requiresignature,howfarthegeneralprovisionsofStampAct,1899andthe
ContractAct,1872canapplytoprove“formal”validityofanarbitration
agreementproducedunderSection11(6)oftheArbitrationAct,1996?Section
2(h)oftheContractAct,1872statesthatanagreementenforceablebylawisa
contractbutaplainreadingofSection7oftheArbitrationAct,1996mayalso
provethatan“arbitrationagreement”canbenon-contractual.Thisisnotto
saythattheprovisionsoftheContractAct,1872orStampAct,1899wouldnot
apply.AsrightlyheldinVidyaDrolia(supra)andnotedbymyLearnedBrother
JusticeK.M.Joseph,pre-conditionstoformationofcontractunderthe
ContractAct,1872mustbemetwhichincludesfreeconsentoftheparties,
absenceoffraudandmisrepresentationetc.However,inmyview,inthis
reference,weareconcernedwithaformalrequirement.Thepointbeingthat
whenaspeciallawprovidesforthespecificrequirementsforthe“formal”
validityofanarbitrationagreement,itcannotberenderedvoidbyagenerallaw.
AnArbitrationagreementhasspecialattributes
59
andisnotaconventional
agreementinthatsense.Moreover,noneoftheprovisionsoftheStamp
Act,1899wouldleadustotheconclusionthatanarbitrationagreementwould
59
O.P.MalhotraandInduMalhotra,TheLawandPracticeofArbitrationandConciliation,
LexisNexis,2
nd
Edition;P.270
Page53of78
beinvalid/void-ab-initiowhenitisnotstamped.Thus,theconclusionin
Garware(supra)thatanunstampedagreementwouldberenderedvoidisnot
onlyinconsistentwithSection7oftheArbitrationAct,1996butalsotheStamp
Act,1899asperwhichadocumentcanatmost,berenderedinadmissiblein
evidence.
78.3InthecontextofArbitrationAct,1996beingaSpeciallaw,CR
Datta’streatisetitledLawRelatingtoCommercial&Domestic
Arbitration
60
notes:
“TheActof1996isaspecialActandaCentralActwhich
providesthatthisActwillprevailoveranyotherlawsofaras
themattersgovernedbythisActareconcerned.The
AuthorityoftheLawCourtshasbeencurtailed.TheCourts
cannotinterveneinanymannerdealtwithbyPartIofthis
Actunlessspecificallyempoweredtodoso.Ajudicial
authoritymayinterveneorexerciseitspowerstotheextent
specified in Sections
8,9,11,13,14,16,1727,34,36,37,42,43,45,50,54,58,59,70,74,
77,81and82oftheAct.SeeUnionofIndiavPopular
ConstructionCo.20018SCC470,UnitedIndiaInsurance
CompantyvKumarTexturisersAIR1999Bom118)Section5
restrainstheCourtsfrominterferingwiththeprocessof
arbitrationexceptinthemannerprovidedinthe1996.CDC
FinancialServices(Mauritius)LtdvBPICommunicationsLtd.
2005(Supp.)ArbLR558(SC)”
[Emphasissupplied]
78.4Atthecostofrepetition,letusnowrefertoSection5oftheArbitrationAct,
1996tounderstandthespecialnatureoftheAct.Asnotedabove,Arbitration
Act,1996isaspeciallegislationandSection5beginswithanon-obstante
clausewhichoverridespowersofjudicialauthoritiesactingunderanyother
60
CRDatta,LawRelatingtoCommercialandDomesticArbitration(AlongwithADR)P.98;
UnionofIndiavPopularConstructionCo2001(8)SCC470;UnitedIndiaInsuranceCo.Ltd.
VKumarTexturisersAIR1999Bom118
Page54of78
lawotherthantheArbitrationAct,1996.AsarguedbythelearnedCounselfor
theIntervenor,DebeshPanda,thespecialnatureoftheActisalsoestablished
fromthenon-obstanteclauseinSection5oftheArbitrationAct,1996.Onthe
ArbitrationActbeingaself-containedcode,JusticeInduMalhotra
61
,comments
asunder:
“TheArbitrationandConciliationAct,1996isaself-containedcode
governingthelawrelatingtoArbitration,includingSection5which
givesitanoverridingeffectoverstatutes.Onceitisheldthatthe
1996Actisaself-containedcodeandisexhaustive,itcarrieswithit
thenegativeimportthatonlysuchactswhicharepermissibleinthe
statutemaybedone,andnoneothers.”
78.5Theuseoftheexpression“soprovided”inSection5,disregardsallforms
ofinterventionexceptthat,whichisspecifiedinPartI.Suchintentionis
apparentfromthelanguageofthenon-obstanteclause.Asnotedearlier,this
provisionisyetanotherinstancewhereParliamentwentastepbeyondthe
languageemployedintheUNCITRALModelLawof1985.
78.6Thedoctrineofgeneraliaspecialibusnonderoganti.e.generallawwill
yieldtothespeciallawiswell-establishedinIndianjurisprudence.Inthe
concurringopinionofChandrachudDYJ.(ashethenwas)inAyyasamy(supra)
onSection8oftheArbitrationAct,1996,itwasnoted:
“44.….OnceanapplicationinduecomplianceofSection8ofthe
ArbitrationActisfiled,theapproachofthecivilcourtshouldbe
nottoseewhetherthecourthasjurisdiction.Itshouldbetosee
whetheritsjurisdictionhasbeenousted.Thereisalotof
differencebetweenthetwoapproaches.Onceitisbroughttothe
noticeofthecourtthatitsjurisdictionhasbeentakenawayin
termsoftheprocedureprescribedunderaspecialstatute,the
civilcourtshouldfirstseewhetherthereisousterofjurisdiction
intermsorcomplianceoftheprocedureunderthespecial
statute.Thegenerallawshouldyieldtothespeciallaw-generalia
61
JusticeInduMalhotra,CommentaryontheLawofArbitration,Vol.I,4thEd.,P.248
Page55of78
specialibusnonderogant.Insuchasituation,theapproachshall
notbetoseewhetherthereisstilljurisdictioninthecivilcourt
underthegenerallaw.Suchapproacheswouldonlydelaythe
resolutionofdisputesandcomplicatetheredressalofgrievances
andofcourseunnecessarilyincreasethependencyinthecourt.”
78.7HavingnotedthattheArbitrationAct,1996isaspeciallegislation,
andthatgenerallawshouldyieldtospeciallaw,letusnowexaminethe
principleofharmoniousconstructionforthepurposeofthisreference.
ii)HarmoniousConstruction
79.Itwouldbeappositetorefertotheapplicationofprincipleofharmonious
constructionasexplainedbyKasliwal,J.whileexpressinghispartialdissent
inSt.Stephen'sCollegev.UniversityofDelhi
62
:
“140.…Thegoldenruleofinterpretationisthatwordsshouldbe
readintheordinary,naturalandgrammaticalmeaningandthe
principleofharmoniousconstructionmerelyappliestherulethat
wherethereisageneralprovisionoflawdealingwithasubject,
andaspecialprovisiondealingwiththesamesubject,thespecial
prevailsoverthegeneral.Ifitisnotconstructedinthatwaythe
resultwouldbethatthespecialprovisionwouldbewholly
defeated. The House of Lords observed
inWarburtonv.Loveland[(1831)2Dow&Cl480:6ER806:
(1824-34)AllERRep589(HL)]asunder:(ERp.814)
‘Noruleofconstructioncanrequirethat,whenthewordsofone
partofastatuteconveyaclearmeaning…itshallbenecessaryto
introduceanotherpartofthestatutewhichspeakswithless
perspicuity,andofwhichthewordsmaybecapableofsuch
construction,asbypossibilitytodiminishtheefficacyofthe[first
part]
63
.’
[emphasissupplied]
62
(1992)1SCC558
63
AnandjiHaridasandCo.(P)Ltd.v.S.P.Kasture[AIR1968SC565:(1968)1SCR
661],PatnaImprovementTrustv.LakshmiDevi[AIR1963SC1077:1963Supp(2)SCR
812],EthiopianAirlinesv.GaneshNarainSaboo[(2011)8SCC539:(2011)4SCC(Civ)
217],UsmanbhaiDawoodbhaiMemonv.StateofGujarat[(1988)2SCC271:1988SCC
(Cri)318],SouthIndiaCorpn.(P)Ltd.v.BoardofRevenue[AIR1964SC207:(1964)4SCR
280],MaharashtraStateBoardofSecondaryandHigherSecondaryEducationv.Paritosh
BhupeshkumarSheth[(1984)4SCC27]
Page56of78
79.1.Onaharmoniousreadingoftheinconsistenciesintheprovisionsof
thethreedifferentActsquotedearlier,wefindthatthegenerallawmust
yieldtothespeciallawinthesense,thatanarbitrationagreementcannot
berenderedvoidoninsufficientstampingbyagenerallaw,especiallywhen
noneoftheprovisionsoftheArbitrationAct,1996whichisaspecialAct
provideforstamping.Therequirementforthe“formal”validityofan
arbitrationagreementunderSection7oftheArbitrationAct,1996wouldtake
precedence,consideringthespecialnatureoftheActandtheprincipleof
minimaljudicialintervention.Applyingtheruleofconstructionthatincases
ofconflictbetweenaspecificlawandagenerallaw,thespecificlawprevails
andthegenerallawliketheContractAct,1872appliesonlytosuchcases
whicharenotcoveredbythespeciallaw;Itherefore,holdthatSection2(e),
2(g),2(h)oftheContractAct,1872cannotoverrideSection7containedin
thespeciallawi.e.theArbitrationAct,1996whenitcomestoformalvalidity.
79.2.Moreover,whenthewordsofthestatuteinSection11ofthe
ArbitrationAct,1996donotmention“validity”oreven“inoperableand
incapableofbeingperformed”asmentionedinSection45oftheArbitration
Act,1996or“primafacienovalidarbitrationagreement”inSection8ofthe
ArbitrationAct,1996,itmustbeunderstoodthatthegeneralwordsina
differentstatutesuchastheContractAct,1872cannotoverridethespecific
wordsusedinthespeciallaw.Thatistosay,thatanarbitrationagreement
cannotberendered“void”oninsufficientstampingbyaSection11judge
whenthescopeofexaminationisonlylimitedtothe“existence”ofthe
arbitrationagreementandnot“validity”.
Page57of78
79.3.ComingbacktotheevidentiarybarunderSection35oftheStamp
Act,1899itisimportanttounderstandthatsincethescopeofaSection11
judgeislimited,thecourtcannotreceiveevidenceinsuchcases.Beforethe
2015AmendmenttotheArbitrationAct,1996,asperthepositionlaiddown
inSBP(supra),theChiefJusticehadwidepowerstoreceiveevidence,
includingaffidavits,andgetevidencerecordedatthestageofappointment
ofarbitrator.UndertheamendedSection11,asnotedbefore,thescopeis
“confined”totheexaminationofthe“existence”ofthearbitrationagreement.
Thus,post-amendment,itcanmostcertainlynotadmitevidence.ASection
11Courtis“notanauthoritytoreceiveevidence”asprovidedinSection35
oftheStampAct,1899.Moreover,itisanundisputedpositionthatSection
35oftheArbitrationAct,1996doesnotprecludeanarbitratortoimpoundor
admitevidence.Itstates“anypersonhavingbylaworconsentofparties,
authoritytoreceiveevidence.”Thus,thestatutorybarunderSection35of
theStampAct,1899wouldnotapplywhenadocumentisproducedatthe
stageofaSection11proceedingoftheArbitrationAct,1996.
79.4.Itisessentialtointerpretthespeciallawinawaythatgiveseffectto
itsspecificprovisions,whilealsoensuringthatitisconsistentwiththe
generallawtotheextentpossible.ImpoundingatthestageofSection11
wouldstallarbitralproceedingsrightattheoutsetbecauseofthestatutory
barunderSection35oftheStampAct,1899.OnewaytoharmoniseSection
35ofStampAct,1899andSection11oftheArbitrationAct,1996isforthe
Section11judgetodefernecessarystampingandimpoundingtothe
arbitrator/collector,asapplicable.AplainreadingofSection35oftheStamp
Page58of78
Act,1899makesitclearthatitdoesnotprecludeanArbitratororCollector
toimpoundtheunstamped/insufficientlystampeddocument.
79.5.Inthiscontext,evenifwearetoassumethattheStampAct,1899isa
substantivelaw,theviewtakenbyusisnotintendedtounderminethe
StampAct,1899inanysubstantialway.Thisisbecausetheprimary
objectivebeingrevenuegeneration,couldstillbeachievedevenifthe
collectionofstampdutyisdeferredtothearbitratorandnotatthestageofa
judgereferringthematterforarbitration.Additionally,ifsuchacontention
israisedbeforethereferringjudge,she/hecanalsocautionthearbitrator
ontheaspectofno/deficientstampdutyontheconcernedinstrument.
Suchacoursewillalsoprotecttheinterestoftherevenueandthe
substantivelaw.
K.Implicationofchangingnatureoftransactionandtheadventofthe
technology
80.Asweareproceedingonthebasisthatanarbitrationagreementisliable
tostampduty,thisCourtcannotalsobeobliviousofthetechnological
advancementsascommercialtransactionsaregoingbeyondpenandpaper
agreements.The2015amendmenttoSection7oftheArbitrationAct,1996
whichdefinesarbitrationagreementrecognizeselectroniccommunication,
bringingtheprocessinconformitywithArticle7oftheUNCITRALModellaw
whichwasamendedin2006.Itmodernizedandbroadenedtheformof
arbitrationagreementtoconformwithinternationalcontractpractices.The
exchangeofletters,telex,telegramsorothermeansoftelecommunication
includingcommunicationthroughelectronicmeanswhichprovidearecordof
theagreementarenowrecognizedasvalidarbitrationagreement.
Page59of78
80.1.Dr.PeterBinderinInternationalCommercialArbitrationandMediationin
UNCITRALModelLawJurisdictions
64
notes:
“Thewordingin“exchangeofletters,telex,telegramsorother
meansoftelecommunication”indicatesModellaw’sflexibility
towardsfuturemeansofcommunicationbybeinggearedsolelyat
the“recordoftheagreement”ratherthanthestrictdirectsignature
oftheagreement.Incidentally,Article5(SectionIII)ofthe
MontrealProtocolNo.4totheWarsawConventionwhich
concernstheformalrequirementsofanairwaybill,providedthe
impetusforthewording“Anyothermeanswhichwouldpreserve
arecordofthecarriagetobeperformedmay,withtheconsentof
theconsigner,besubstitutedforthedeliveryofanairwaybill.”
TheProtocolspecificallyhadelectronicmeansofcommunication
inmind,astheaviationindustrywasamongthefirsttousethis
technologyinbusiness.”
[emphasissupplied]
80.2.Whatlogicallyfollowsfromtheaboveisthatthetraditionallawsmustnot
renderthesenewformsofagreementsunenforceableoninsufficientstamping.
Recently,theStockholdingCorporationofIndiaLtd.hasbeenauthorisedto
providee-stampservices,whichallowsforthepaymentofstampdutiesfor
someIndianStates.TheIndianStampAct(CollectionofStamp-DutyThrough
StockExchanges,ClearingCorporationsandDepositories)Rules2019as
amendedthroughtheFinanceAct,2021hasbeenbroughtabouttobuilda
pan-Indiasecuritiesmarketandtoenhancerevenue.Itamendedthedefinition
of“execution”toincludesignatureeveninelectronicform.
80.3.However,thedefinitionof“dulystamped”inSection2(11)oftheStamp
Act,1899remainsunchanged:
“'DulyStamped'asappliedtoaninstrumentmeansthatthe
instrumentbearsanadhesiveorimpressedstampofnotless
thantheproperamountandthatsuchstamphasbeenaffixedor
usedinaccordancewiththelawfortimebeinginforce.”
[emphasissupplied]
64
Supraatnote40;P.67-68
Page60of78
80.4.Thepenaltyforaninstrumentwhichisnot“dulystamped”isprovidedin
Section62oftheStampAct,1899.Inthisdiscussion,wemustbeconscious
thattheStampAct,1899wasenactednearly125yearsagoandthelawmakers
couldnothavecontemplatedthemarchoflawandthemyriadissueswhich
wouldcropupthroughtheadventoftechnologyandalsothenewenactments
suchastheArbitrationAct,1996.Thelegalframeworkpertainingtoe-contracts
isstillatanascentstageinIndia.
80.5.RichardSusskindinhisbook
65
,"TheEndofLawyers?Rethinkingthe
NatureofLegalServices,"suggeststhatnewtechnologiesandprocesses,such
asartificialintelligenceandblockchain,maybeabletosimplifyandstreamline
thearbitrationprocessinthefuture.Wenowhavethephenomenonofsmart
contractsandmetaverseinthesphereofcommercialtransactionswhere
technologyandartificialintelligenceareintegrated.Thedevelopmentsinthe
legalframeworkmustattunetosuchdevelopingtrendsintechnologyandbe
consciousoftheirimplicationstodayandforthefuture.
80.6Noticingtheemergingtrends,theChiefJusticeofIndiainarecent
conferenceobserved
66
thatlegalprofessionalsacrosstheglobeare
recommendingsmartcontractarbitration.Describingsmartcontractsandhow
arbitrationcanbeusedtoresolvedisputes,ChiefJusticeDYChandrachud
commented:
“Technologyandartificialintelligenceareintegratedintocommercial
transactions.Onesuchexampleofintegrationoftechnologyand
contractsisasmartcontract,wherethetermsandconditionsofthe
65
RichardSusskind,TheEndofLawyers?RethinkingtheNatureofLegalServices,Oxford
UniversityPress,2010
66
DrD.Y.Chandrachud,InternationalConference:ArbitrationintheEraofGlobalization
(4thEdn.,Dubai,19-3-2022).
Page61of78
contractareencoded.Abreachinthetermsofthecontractwould
automaticallyenforcethecontract.
80.7.Modernarbitrationlawfocusesonsubstanceoverform
67
.Learned
Counsel,Mr.RamakanthReddyappearingforRespondentNo.1,referredtoa
judgmentdeliveredin2008inGreatOffshoreLtd.v.IranianOffshore
EngineeringandConstructionCompany
68
wheretheCourtspeakingthrough
DalveerBhandariJ.heldasunder:
“59.Thecourthastotranslatethelegislativeintention
especiallywhenviewedinlightofoneoftheAct's"main
objectives":"tominimisethesupervisoryroleofCourtsinthe
arbitralprocess.[See:StatementsofObjectsandReasons
ofSection4(v]oftheAct].IfthisCourtaddsanumberofextra
requirementssuchasstamps,sealsandoriginals,wewouldbe
enhancingourrole,notminimisingit.Moreover,thecostofdoing
businesswouldincrease.Ittakestimetoimplementsuch
formalities.Whatisevenmoreworrisomeisthattheparties'
intentiontoarbitratewouldbefoiledbyformality.Suchastance
wouldruncountertotheveryideaofarbitration,wherein
tribunalsallovertheworldgenerallybendoverbackwardsto
ensurethattheparties'intentiontoarbitrateisupheld.Adding
technicalitiesdisturbstheparties'"autonomyofthewill"(l'
autonomiedelavolonti),i.e.,theirwishes.[Forageneral
discussiononthisdoctrineseeLawandPracticeof
InternationalCommercialArbitration,AlanRedfernandMartin
Hunter,Street&Maxwell,London,1986atpages4and53].
60.Technicalitieslikestamps,sealsandevensignaturesarered
tapethathavetoberemovedbeforethepartiescangetwhat
theyreallywant-anefficient,effectiveandpotentiallycheap
resolutionoftheirdispute.Theautonomiedelavolontidoctrine
isenshrinedinthepolicyobjectivesoftheUnitedNations
CommissiononInternationalTradeLaw("UNCITRAL")Model
LawonInternationalCommercialArbitration,1985,onwhich
ourArbitrationActisbased.[SeePreambletotheAct].The
courtsmustimplementlegislativeintention.Itwouldbeimproper
andundesirableforthecourtstoaddanumberofextra
formalitiesnotenvisagedbythelegislation.Thecourtsdirections
shouldbetoachievethelegislativeintention.”
[emphasissupplied]
67
SupraatNote59;P.274
68
(2008)14SCC240
Page62of78
80.8Relyingontheabovecase,inTrimexInternationalFZEvsVedanta
AluminumLimited,India
69
,thisCourtheldthattheimplementationofa
contractcannotbeaffectedmerelybecauseofferandacceptancewasmadevia
email.
80.9Inthecontextoftheevolvinglaw,itisimportanttoobservethatalthough
anarbitrationagreementisliabletostampdutyundertheresiduaryentry,the
technicalityofstampingplaceshurdlesinensuringefficiencyandefficacyin
arbitrationproceedings.Anarbitrationagreementdoesnotevenmandatorily
requiresignatureforittobevalidasperSection7oftheArbitrationAct,1996.
TheStampAct,1899isrootedinthepastanddoesnottakeintoaccountthe
changingnatureoftransactionsandenactmentssuchastheArbitration
Act,1996.Thisisanaspectwhichwouldrequiretheattentionofthelegislature.
J.DoctrineofSeparability
81.ItappearsthattheCourtinGarware(supra)rejectedtheconceptof
separabilitywhenitheld:
“15.…..itisdifficulttoaccedetotheargumentmadebythelearned
counselonbehalfoftherespondentthatSection16makesitclearthat
anarbitrationagreementhasanindependentexistenceofitsown,and
mustbeappliedwhiledecidinganapplicationunderSection11ofthe
1996Act.”
81.1.Historically,anarbitrationagreementwastreatedasanaccessorytothe
maincontract
70
.Evenifthemaincontractwasfoundtobeinvalidor
unenforceable,thearbitrationagreementcontainedthereinwasalso
consideredvoid
71
.Thisdiminishedtheeffectivenessofarbitrationasadispute
69
2010(1)SCALE574
70
GaryB.Born,InternationalCommercialArbitration(3rded.,KluwerLawInternational
2014)P.380
71
UnionofIndiavKishorilalGupta&Bros(1959)1SCR493
Page63of78
resolutionmechanismsinceitmadetheenforceabilityofarbitration
agreementsdependentonthevalidityoftheunderlyingcontract.Arbitration
clausesareuniformlyregardedinalmosteveryjurisdictionasseparatefrom
andnot“anintegralpart”oftheparties’underlyingcontract.Itisregardedasa
generalprinciplereflectedinInternationalArbitrationConventions,national
arbitrationlegislations,judicialdecisions,institutionalarbitrationrulesand
arbitralawards
72
.Theearlystatutoryrecognitionoftheseparabilitydoctrine
hasalsobeenrecognizedinUnitedStateswiththeseparabilitypresumption
beingamatterofsubstantivefederalarbitrationlaw.
73
EveninEnglishlaw,the
principleofseparabilitystandscodifiedunderSection7oftheEnglish
ArbitrationAct,1996.Ithasbeenidentifiedasoneofthecornerstonesof
arbitrationinmultiplejurisdictions.
81.2TheargumentadvancedbythelearnedCounsel,GaganSanghiforthe
Appellantsthatthedoctrineofseparabilityisalegalfiction,shouldnotbe
acceptedinlightofthewell-establishedjurisprudenceinIndiaasthisdoctrine
hasbeenconsistentlyupheldbythisCourt
74
.Moreover,itstandscodifiedin
Section16(1)oftheArbitrationAct,1996whichreadsasunder:
“16(1)Thearbitraltribunalmayruleonitsownjurisdiction,including
rulingonanyobjectionswithrespecttotheexistenceorvalidityofthe
arbitrationagreement,andforthatpurpose,–
72
Supraatnote70;Page379-380.
73
BuckeyeCheckCashingInc.v.Cardegna,2006SCCOnLineUSSC14
74
NationalAgriculturalCo-operativeMarketingfederationIndiaLtd.vGainsTrading
Limited(2007)5SCC692;NaihatiJuteMillsLtd.vKhayaliramJagannathAIR1968SC
522;PManoharReddy&Bros.v.MaharashtraKrishnaValleyDevelopmentCorporation&
Ors(2009)2SCC494
Page64of78
(i) anarbitrationclausewhichformspartofacontractshallbe
treatedasanagreementindependentoftheothertermsofthe
contract;and
(ii)adecisionbythearbitraltribunalthatthecontractisnulland
voidshallnotentailipsojuretheinvalidityofthearbitration
clause.”
81.3ThisCourtinNNGlobal(supra)discussedjudgmentsinUS,UKandFrance,
notingtheimportanceofthisprincipleinmodernandcontemporaryarbitral
jurisprudence:
“4.Itiswellsettledinarbitrationjurisprudencethatanarbitration
agreementisadistinctandseparateagreement,whichisindependent
fromthesubstantivecommercialcontractinwhichitisembedded.This
isbasedonthepremisethatwhenpartiesenterintoacommercial
contractcontaininganarbitrationclause,theyareenteringintotwo
separateagreementsviz.(i)thesubstantivecontractwhichcontainsthe
rightsandobligationsofthepartiesarisingfromthecommercial
transaction;and,(ii)thearbitrationagreementwhichcontainsthe
bindingobligationofthepartiestoresolvetheirdisputesthroughthe
modeofarbitration.”
81.4MylearnedBrother,JusticeK.M.Josephinthemajorityopinionnotes
thattheentirebasisofthereferencestandsremovedsinceweareproceeding
onthebasisthatevenastandalonearbitrationagreementisliabletostamp
duty.Hisopinionthattheobjectivebehindtheprincipleoftreatingan
arbitrationagreementasaseparateagreementistocreateamechanism,
wherein,thearbitralagreementsurvivestheContractsothatthedisputes
fallingwithintheArbitrationAgreementcanberesolved,iscorrect.ButI’m
unabletoagreewiththepropositionthatiscanvassedthatsinceanarbitration
agreementisliabletostampduty,theseparabilitypresumptiondoesn’ttakeus
Page65of78
furtherinthiscase.Letmesetoutthereasonformydisinclinationtoaccept
suchproposition.
81.5Asearlierstatedinthisopinion,theseparabilitydoctrineprotectsthe
arbitrationclauseevenifthevalidityofthemaincontractisattacked.
Therefore,ifanarbitrationagreementremainsunaffectedevenifthemain
contractisnull/voidonissuesoffraudormisrepresentation,itshouldnot
logicallyrenderanarbitrationagreement,voidonatechnicality/formality,like
stamping.Theunderlyingrationalebehindtheprincipleofseparabilitywould
thenbemadenugatory.Theideathatanarbitrationagreementisseparateand
independentwithitsownvalidityrequirements,istoensurethatthereisno
hindrancetotheenforceabilityofanarbitrationagreement.Thisdoctrineis
alsoimportanttoreducecircumstancesinwhichthearbitralprocessmaybe
halted/delayed.InSMSTea(supra),itwasnotedthatthedoctrineof
separabilitycanextendtoanunregistereddocument,butnottoanunstamped
documentasthebarunderSection35isabsolute.AsIhavenotedabove,the
barunderSection35canbecuredandthestampdutycanbecollectedata
laterstage.Thus,NNGlobal(supra)rightlyoverruledSMSTea(supra)onthis
aspect.Historically,theseparabilitydoctrinewasintroducedinordertoprotect
thearbitrationclausewhich,inturn,enabledarbitratorstoadjudicateonthe
validityofthemaincontract
75
.Eventhoughthedoctrineofseparabilityand
KompetenzKompetenzaredistinctasnotedinNNGlobal(supra),reconcilingthe
twoprincipleswouldensurethatanarbitratorcanruleontheobjectionsof
75
HMHoltzmannandJENeuhaus,AGuidetotheUNCITRALModelLawonInternational
CommercialArbitration:LegislativeHistoryandCommentary(KluwerLawandTaxationThe
Hague1989)485
Page66of78
validity,existenceaswellasnecessarystamping,ifrequired.Thedoctrineof
KompetenzKompetenzisdiscussedingreaterdetailinthenextsection.
82.TurningtothedecisioninGarware(supra),itappearsthattheCourtin
Garware(supra)rejectedtheconceptofseverabilityonlybyrelyingon
SBP(Supra)whenitheld:
“15.Inviewofthelawlaiddownbyseven-JudgeBench,[SBP(Supra)]itis
difficulttoaccedetotheargumentmadebythelearnedcounselon
behalfoftherespondentthatSection16makesitclearthatan
arbitrationagreementhasanindependentexistenceofitsown,andmust
beappliedwhiledecidinganapplicationunderSection11ofthe1996
Act.”
83.InSBP(Supra),aswehavenoticedearlierinthisopinion,stoodlegislatively
overruledasajudgeattheSection11stagecouldconductdetailed
adjudicationandmakeaconclusivedeterminationatthepre-referralstage
withoutdeferringittothearbitrator.Ashighlightedabove,Section16and
Section11oftheArbitrationAct,1996indicatesthatthereisanoverlapwhenit
comestotheword“existence”.AsSection16specificallydealswithboth
existenceandvaliditywhereasSection11onlydealswithexistence,theformer
shouldbegivenmoreweight.Assuch,thedoctrineofKompetenzKompetenz
comesintoplayasthearbitratorcandecideonthevalidityofanagreement
andthereferraljudgeneedstoconfinehisscrutinytotheexistenceofthe
arbitrationagreement.However,inSBP(supra)itwasgenerallyheldthatthe
referraljudgeshoulddecideonallaspects.Ifsuchaviewistobeappliedfor
answeringthepresentreference,amini-trialwillhavetobeconductedbythe
referraljudge.Thequestiontobeaskedhereisshouldwethenpushthe
Section11judgetodealwithsomanythingsthathe/sheleftinasituationlike
Page67of78
LittleAliceintheplayAliceinWonderlandasdescribedinPraveen
Electricals(supra)?
84.InthereferralorderinNNGlobal(supra),theparagraph29in
Garware(supra)wasdoubted.IntheGarware(supra)decision,thisCourtrelied
onUnitedIndiaInsuranceCo.ltd.v.HyundaiEngg.&ConstructionCo.Ltd.
76
(forshort“HyundaiEngg.).Theparagraph29isextractedbelowforthe
discussiontobefollowedthereafter:
“29.ThisjudgmentinHyundaiEngg.case[UnitedIndiaInsuranceCo.
Ltd.v.HyundaiEngg.&ConstructionCo.Ltd.,(2018)17SCC607:
(2019)2SCC(Civ)530]isimportantinthatwhatwasspecificallyunder
considerationwasanarbitrationclausewhichwouldgetactivatedonly
ifaninsureradmitsoracceptsliability.Sinceonfactsitwasfoundthat
theinsurerrepudiatedtheclaim,thoughanarbitrationclausedid
"exist",so'tospeak,inthepolicy,itwouldnotexistinlaw,aswasheld
inthatjudgment,whenoneimportantfactisintroduced,namely,that
theinsurerhasnotadmittedoracceptedliability.Likewise.inthefacts
ofthepresentcase.itisclearthatthearbitrationclausethatis
containedinthesub-contractwouldnot"exist"asamatteroflawuntil
thesub-contractisdulystamped,ashasbeenheldbyusabove.The
argumentthatSection11(6-A)dealswith"existence",asopposedto
Section8.Section16andSection45,whichdealwith"validity"ofan
arbitrationagreementisansweredbythisCourt'sunderstandingofthe
expression"existence"inHyundaiEngg.case[UnitedIndiaInsurance
Co.Ltd.v.HyundaiEngg.&ConstructionCo.Ltd.,(2018)17SCC607:
(2019)2SCC(Civ)530].asfollowedbyus.”
84.1.InHyundai(supra),theissueofstampingwasnotatallamatterof
considerationandtheCourtdecidedonthearbitrabilityofthedisputeand
whetheritwasanexceptedmatterandinthatprocess,heldthatthe
arbitrationagreementwouldnot“exist-in-law”,asthearbitrationclausewas
contingentonwhethertheinsureracceptedliability.Inthesecircumstances,
theapplicationofthepropositioninHyundaiEngg(supra)todealwiththeissue
ofunstampeddocumentinGarware(supra)appearstobeanincorrect
76
(2018)7SCC607
Page68of78
approach.ThisisbecauseinGarware(supra),theCourtfoundthattheissueof
stampingwouldgointotheexistenceofthearbitrationagreementinlaw.This
wasdonebyerroneouslyimportingtheprincipleenunciatedinHyundai(supra)
andthereforetheearlierHyundai(supra)whichhadnothingtodowiththe
stampingofthedocument,shouldhavebeendistinguished.Atthispoint,we
mayalsonoticetheargumentoftheLearnedAmicuswhoarguedthatthe
CourtinHyundaiEngg(supra)reliedonOrientalInsuranceCo.Ltd.v.
NarbheramPowerandSteel(P)Ltd
77
whichneverhadtheoccasiontointerpret
Section11(6A).Forthesereasons,Iamoftheconsideredviewthatapplying
theHyundai(supra)principletoGarware(supra)isnotacceptable.Consequently,
thefindingoftheCourtinPara147.1inVidyaDrolia(supra)placingrelianceon
theaboveparagraphviz.Para29inGarware(supra)alsoappearstobe
incorrect.ThepropositionoflawinNNGlobal(supra)isthereforefoundtobe
correct.
L.KompetenzKompetenzandtheissueofJudicialLogjaminIndia
85.LegalscholarshavenotedthattheprincipleofKompetenzKomptenzhas
beenadoptedinvariousformsindifferentcountries
78
.Article16ofthe
UNCITRALModelLawadoptedtheprincipleofKompetenzKompetenzproviding
thatanarbitraltribunalhasthejurisdictiontoinvestigateandruleonitsown
jurisdiction.InarecentdecisionoftheUSSupremeCourtinHenrySchein,Inc.
vArcherandWhiteSales,Inc
79
,itwasheldthatwhereanarbitrationclause
77
(2018)6SCC534
78
JohnJ.BarcelloIII,WhoDecidestheArbitrators’Jurisdiction?Separabilityand
Competence-CompetenceinTransnationalPerspective,VanderbiltJournalofTransnational
Law,Vol.36,No.4,October2003
79
2019SCCOnlineUSSC1
Page69of78
delegatesthedecisionofarbitrabilitytoarbitrators,Courtsshouldhavenosay
eveniftheyconsidertheargumentinfavouras“whollygroundless”.Justice
BrettKavanaughopined:
“JustasaCourtmaynotdecideameritsquestionthatthepartieshave
delegatedtoanarbitrator,aCourtmaynotdecideanarbitrability
questionthatthepartieshavedelegatedtoanarbitrator.”
Proceedingfurther,Section16(1)oftheArbitrationAct,1996readsasunder:
“16.Competenceofarbitraltribunaltoruleonitsjurisdiction.—
(1)Thearbitraltribunalmayruleonitsownjurisdiction,includingruling
onanyobjectionswithrespecttotheexistenceorvalidityofthe
arbitrationagreement,andforthatpurpose,—
(a)anarbitrationclausewhichformspartofacontractshallbetreated
asanagreementindependentoftheothertermsofthecontract;and
(b)adecisionbythearbitraltribunalthatthecontractisnullandvoid
shallnotentailipsojuretheinvalidityofthearbitrationclause.”
85.1ItisclearfromSection16(1)ofArbitrationAct,1996whichusesthe
word“including”thatanarbitraltribunalcannotonlyruleonitsown
jurisdictionbutalso“any”objectionsonexistenceorvalidity.ThisCourtin
WeatherfordOiltoolMiddleEastLimitedvsBakerHughesSingaporePTE
80
wheretheissueconcernedthevalidityofanunstampeddocument,notedas
under:
“8.Thebarereadingoftheafore-statedprovisionmakesitclearthat
arbitraltribunaliscompetentnotonlytoruleonitsownjurisdiction
buttoruleontheissueoftheexistenceorvalidityofthearbitration
agreement.Itfurtherclarifiesthatanarbitrationclausewhichforms
partofacontractshallbetreatedasanagreementindependentofthe
othertermsofthecontract,andthatadecisionbythearbitral
tribunalthatthecontractisnullandvoidshallnotentailipsojurethe
invalidityofthearbitrationclause.”
80
2022SCCOnLine1464
Page70of78
85.2.DiscussingtheKompetenzKompetenzprinciplesinNNGlobal(supra),it
wasnoted:
“4.3.Thedoctrineofkompetenz–kompetenzimpliesthatthearbitral
tribunalhasthecompetencetodetermineandruleonitsown
jurisdiction,includingobjectionswithrespecttotheexistence,validity,
andscopeofthearbitrationagreement,inthefirstinstance,whichis
subjecttojudicialscrutinybythecourtsatalaterstageofthe
proceedings.Underthe8ArbitrationAct,thechallengebeforetheCourt
ismaintainableonlyafterthefinalawardispassedasprovidedbysub-
section(6)ofSection16.Thestageatwhichtheorderofthetribunal
regardingitsjurisdictionisamenabletojudicialreview,variesfrom
jurisdictiontojurisdiction.Thedoctrineofkompetenz–kompetenzhas
evolvedtominimizejudicialinterventionatthepre-referencestage,and
reduceunmeritoriouschallengesraisedontheissueofjurisdictionofthe
arbitraltribunal.”
[emphasissupplied]
85.3.JusticeThakkeremphasizedthisinhisdissentingopinioninSBP(supra)
whereitwasheldthatthelegislatureintendedtoallowthetribunaltoruleon
itsownjurisdictionandthefunctionoftheChiefJusticeunderSection11(6)
wasonlyto“appointanarbitratorwithoutwastinganytime.”
85.4.AtthispointwemaybenefitbyreferringtoGeorgeA.Bermannwhose
articletitled“RoleofCourtsatthethresholdofArbitration”
81
wouldhavesome
relevanceinthisdiscussion:
“Positionsatthepolarendsofthespectrumofjudicialinvolvementare
notespeciallyattractive.Asystemthatpermitsplenaryjudicialenquiries
intoallaspectsofenforceabilityofarbitrationagreementspriorto
arbitrationrisksinvitingcosts,delayandjudicialinvolvementinavery
bigway,contrarytoarbitration’sbasispremises.Ontheotherhand,a
systemthattreatsaccesstoacourtforthesepurposesaswhollyoff-
limits,irrespectiveoftheseriousnessofthechallenge,risksexactingtoo
greatapriceintermsofarbitrallegitimacy.Efficacymaybeachievable
throughlessdrasticmeans.”
81
GeorgeA.Bermann,TheRoleofNationalCourtsattheThresholdofArbitration,28
AmericanReviewofInternationalArbitration291(2017)Availableat
https://scholarship.law.columbia.edu/faculty_scholarship/3012
Page71of78
85.5.SpecifictotheIndiancontext,whilediscussingKompetenzKompetenz,
theoverburdenedjudiciaryandhugependencyofcasesinourCourtscannot
alsobeoverlooked.Theintentbehindpreferringarbitrationwouldstand
defeated,iftheCourtisexpectedtodealnotonlywiththeissueofexistence
butalsovalidityoftheagreement,atthestageofappointmentofthe
arbitrator.Inthiscontext,thefollowingobservationsweremadeinthe246
th
LCIreport(supra)noted:
“22.Judicialinterventioninarbitrationproceedingsaddssignificantlyto
thedelaysinthearbitrationprocessandultimatelynegatesthebenefits
ofarbitration.Tworeasonscanbeattributedtosuchdelays.First,the
judicialsystemisover-burdenedwithworkandisnotsufficiently
efficienttodisposecases,especiallycommercialcases,withthespeed
anddispatchthatisrequired.Second,thebarforjudicialintervention
(despitetheexistenceofsection5oftheAct)hasbeenconsistentlysetata
lowthresholdbytheIndianjudiciary,whichtranslatesintomanymore
admissionsofcasesinCourtwhichariseoutoforarerelatedtotheAct.”
[emphasissupplied]
85.6.Consideringthelargependencyofcasesasnotedbythe246
th
LCI
Report(supra),itisessentialthatSection16oftheArbitrationAct,1996isgiven
fullplay.DiscussingthehistoryofarbitrationlawinIndia,the246
th
LCI
Report(supra)quotedtheobservationsofJusticeD.A.DesaiinGuruNanak
FoundationvRatanSinghandSons
82
wherecommentingontheworkingof
theArbitrationAct,1940,itwasnotedthatthechallengetoarbitral
proceedingsinCourtshavemade“lawyerslaughandlegalphilosophersweep”.
ThesituationisnotdifferenttodayaswasrecentlyobservedbythisCourtin
M/sShreeVishnuConstructionsv.TheEngineerinChiefMilitaryEngineering
Serviceandothers
83
whereitwasnotedthatseveralapplicationsunder
82
(1981)4SCC634
83
SLP(C)No.5306/2022dated1.4.2022
Page72of78
section11weredecidedanddisposedofafteraperiodoffouryearswhich
defeatedtheverypurposeoftheamendedArbitrationAct,1996.Such
observationwasmadeonadetailedreport/statementonthenumberof
pendingsection11applicationsbeforetheTelanganaHighCourt.ThisCourt
noticedthatevenanapplicationfiledintheyear2006wasstillpending.The
HighCourtChiefJusticesacrossthecountrywereaccordinglyrequestedto
ensurethatapplicationsundersection11,bedecidedwithinaperiodofsix
months.
85.7ThisCourtintherecentjudgmentinIntercontinentalHotelsGroup(India)
PrivateLtd.v.WaterlineHotelsPvt.Ltd
84
ontheissueofinsufficiently
/incorrectlystampeddocuments,proceededtoappointthearbitratorunder
Section11(6),consideringthetime-sensitivitywhiledealingwitharbitration.It
leftopentheissueofstampingtobedecidedatalaterstage.
85.8Importantly,Section11(13)oftheArbitrationAct,1996providesthat
appointmentofArbitratorsshouldbemadewithin60daysandsucha
provisionmakesitamplyclearthatsubstantiveadjudicationcannotbedone
byCourts,atthepre-referralstage.ThiswascanvassedinGarware(supra)
buttheCourtinsteadsetadeadlinefor45daysforadjudicationand15days
forappointmentofarbitratorwiththefollowingobservation:
“37.Onereasonablewayofharmonisingtheprovisionscontainedin
Sections33and34oftheMaharashtraStampAct,whichisageneral
statuteinsofarasitrelatestosafeguardingrevenue,andSection11(13)of
the1996Act,whichappliesspecificallytospeedyresolutionofdisputes
byappointmentofanarbitratorexpeditiously,isbydeclaringthatwhile
proceedingwiththeSection11application,theHighCourtmustimpound
theinstrumentwhichhasnotbornestampdutyandhanditovertothe
84
2022SCCOnLineSC83
Page73of78
authorityundertheMaharashtraStampAct,whowillthendecideissues
quapaymentofstampdutyandpenalty(ifany)asexpeditiouslyas
possible,andpreferablywithinaperiodof45daysfromthedateonwhich
theauthorityreceivestheinstrument.Assoonasstampdutyandpenalty
(ifany)arepaidontheinstrument,anyofthepartiescanbringthe
instrumenttothenoticeoftheHighCourt,whichwillthenproceedto
expeditiouslyhearanddisposeoftheSection11application.Thiswill
alsoensurethatonceaSection11applicationisallowedandan
arbitratorisappointed,thearbitratorcanthenproceedtodecidethe
disputewithinthetimeframeprovidedbySection29Aofthe1996Act.”
85.9TheaboveenunciationinGarware(supra)asisapparentgoesagainst
thelegislativemandatewhichhadprescribedthedeadlineof60daysfor
appointmentofarbitratorsunderSection11(13)oftheArbitrationAct,
1996.Thecriticismthatadeadlineof45dayswouldbeimpractical,
cannotalsobebrushedasidelightly.
N.DiscussiononVidyaDrolia
86.Thiscasewasconcernedwiththearbitrabilityoflandlord-tenantdisputes
andtheforumbeforewhichtheissueofarbitrabilitymustfirstberaised.The
paragraph146asquotedbelowmayrequirearelookinthecontextoftheissue
underconsideration.
“146.Wenowproceedtoexaminethequestion,whethertheword
"existence"inSection11merelyreferstocontractformation(whether
thereisanarbitrationagreement)andexcludesthequestionof
enforcement(validity)andthereforethelatterfallsoutsidethe
jurisdictionofthecourtatthereferralstage.Onjurisprudentiallyand
textualismitispossibletodifferentiatebetweenexistenceofan
arbitrationagreementandvalidityofanarbitrationagreement.Such
interpretationcandrawsupportfromtheplainmeaningoftheword
"existence".However,itisequallypossible,jurisprudentiallyandon
contextualism,toholdthatanagreementhasnoexistenceifisnot
enforceableandnotbinding.Existenceofanarbitrationagreement
presupposesavalidagreementwhichwouldbeenforcedbythecourtby
relegatingthepartiestoarbitration.Legalisticandplainmeaning
interpretationwouldbecontrarytothecontextualbackgroundincluding
thedefinitionclauseandwouldresultinunpalatableconsequences.A
Page74of78
reasonableandjustinterpretationofexistencerequiresunderstanding
thecontext.thepurposeandtherelevantlegalnormsapplicablefora
bindingandenforceablearbitrationagreement.Anagreementevidenced
inwritinghasnomeaningunlessthepartiescanbecompelledtoadhere
andabidebytheterms.Apartycannotsueandclaimrightsbasedon
anunenforceabledocument.Thus,therearegoodreasonstoholdthat
anarbitrationagreementexistsonlywhenitisvalidandlegal.Avoid
andunenforceableunderstandingisnoagreementtodoanything.
Existenceofanarbitrationagreementmeansanarbitrationagreement
thatmeetsandsatisfiesthestatutoryrequirementsofboththe
ArbitrationActandtheContractActandwhenitisenforceableinlaw.”
86.1.Ascanbeseen,theCourtequatedexistenceandvalidityanditwasheld
thatacontractonlyexistsifitisvalid.Anditisvalidonlyifitisenforceable.
Asfarastheissueinthepresentcaseisconcerned,theauthors’Commentsin
RussellonArbitration
85
(24
th
Edition)inthecontextofEnglishlawprovide
usefulpointersinthiscontext:
“ExistenceandValidityofthearbitrationagreement...theCourt
drawsadistinctionbetweenexistenceofthearbitrationagreement,
whichislikelytobeamatterfortheCourt(unlessastayunderthe
inherentjurisdictionisgranted)anditsvalidity,whichwherever
possibleshouldbelefttothearbitrators.”
[emphasis in
original]
86.2IhavealreadydiscussedthatintheIndianregime,theArbitratorunder
Section16hasthejurisdictiontodecideon“existence”and“validity”.Aplain
readingofSection11(6A)wouldshowthattheexaminationbyCourtisconfined
onlyto“existence”andnoteven“validity”.Moreover,inthepresentreference,
weareonlyconcernedwiththeformalrequirementofstampingandnot
arbitrability.Applyingcontextualinterpretationtorenderanarbitration
agreementvoidontheformalrequirementofstampingwoulddefeatthevery
purposeoftheArbitrationAct,1996.Adocumentcannotberenderedinvalidor
unenforceableespeciallyifthedefectiscurableundertheStampAct,1899as
85
Supraatnote58;Chapter7,P.369
Page75of78
notedearlier.Moreover,noneoftheprovisionsintheStampAct,1899havethe
effectofrenderingadocumentinvalid.Thus,wefindthepositioninVidya
Drolia(supra)totheextentthatitreliesonGarware(supra)tobeincorrect.
O.Conclusion
87.HarkingbacktoCharlesEvansHugheswithwhosewordswebeganthe
judgment,letusconcludewiththefollowingquoteofthesamejudgereflected
inProphetsByHonor
86
:
"Therearesomewhothinkitdesirablethatdissentsshouldnotbe
disclosedastheydetractfromtheforceofthejudgement.
Undoubtedly,theydo.Whenunanimitycanbeobtainedwithout
sacrificeofconviction,itstronglycommendsthedecisiontopublic
confidence.Butunanimity,whichismerelyformal,whichisrecorded
attheexpenseofstrong,conflictingviews,isnotdesirableinacourt
oflastresort,whatevermaybetheeffectonpublicopinionatthe
time.Thisissobecausewhatmustultimatelysustainthecourtin
publicconfidenceofisthecharacterandindependenceofthe
judges."
87.1Thepracticeofdissentinjudicialdecision-makingprocessplaysa
criticalroleinrevealingconstitutionalcommitmenttodeliberative
democracy.Allowingjudgestoexpressdifferingviewsandengageina
dialogueaboutthelawanditsinterpretationcanpotentiallyleadtoamore
nuancedandrefinedunderstandingofthelaw,astheCourtgrappleswith
competinginterpretationsandseekstoreconciletheminaprincipled
manner.
87.2Confrontedwithasimilarsituationwhichisconfrontingustodaywhere
thepresentopinionistheminorityone,JusticeStephenBreyeroftheUS
SupremeCourtinhisdissentingopinion
87
inaquestioninthecontextof
86
AlanBarth,ProphetswithHonor,1974Ed.P3-6
87
Badgerowv.Walters,596U.S.2022
Page76of78
FederalArbitrationAct(FAA)spokeofinterpretingnotonlythepurposeofthe
Statutebutalsothelikelyconsequence:
“Wheninterpretingastatute,itisoftenhelpfultoconsider
notsimplythestatute’sliteralwords,butalsothestatute’s
purposesandthelikelyconsequencesofourinterpretation.
Otherwise,weriskadoptinganinterpretationthat,evenif
consistentwithtext,createsunnecessarycomplexityand
confusion.”
87.3.TheobjectivebehindtheenactmentoftheArbitrationAct,1996wasto,
interalia,avoidproceduralcomplexityandthedelayinlitigationbefore
Courts.ImpoundingandstampingattheSection11stagewouldfrustrate
theverypurposeoftheamendedArbitrationAct,1996astheenforcementof
arbitrationagreementswouldbestalledonanissue,whichiscapableof
beingresolvedatalaterstage.Todeferstampingtothestageofthe
arbitratorwouldinmyviewachievetheobjectiveofboththeArbitration
Act,1996andtheStampAct,1899.
87.4.Thecontoursofthejurisdictionofthejudgereferringmattersfor
arbitration,cannotbepermittedtosufferfromconfusionandambiguity.As
canbeseen,thepresent5judge-Benchcouldnotprovideclarityonthe
issuereferredtous,onaccountofthefracturedverdict,leadingtolegal
uncertainty.TheconstitutionofalargerBenchinthisCourtiscertainlynot
commonplaceasthelastoccasionwhen7judgesassembledwasintheyear
2017.Around5mattersasIaminformed,arealreadyawaitingtheattention
of7judgesBench.Insuchbackdrop,theinterplaybetweentheActsand
howitsobjectiveistobeachievedinthecourseofArbitralproceedings
eitheratthereferralstageorthereafterismuchtooimportanttobeleft
lingeringforaclarificatoryverdictbyalargerBench.Therefore,Iwould
Page77of78
appealtothelegislativewingoftheStatetorevisittheAmendmentswhich
maybenecessaryintheStampAct,1899initsapplicationtotheArbitration
Act,1996.TheStatemightputintoplaceaconvenientmechanismwhich
wouldeffacetheinconsistenciesinboththeArbitrationAct,1996andthe
StampAct,1899.IfwelookatthelegislativeintentoftheArbitrationAct,1996
andwhatourcountryishopingtobeasthedestinationofchoicefor
Arbitration,I’moftheconsideredopinionthatitwouldbeappropriateto
interpretthestatutoryinterplayinaconstructivemannerwithoutdefeating
thelegislativeintentandthwartingthespeedyreferraltoarbitration.
88.Followingtheabovediscussion,myopiniononthereferredissueareas
follows:
i) Theexaminationofstampingandimpoundingneednotbedoneatthe
thresholdbyaCourt,atthepre-referencestageunderSection11of
theArbitrationAct,1996.
ii)Non-stamping/insufficient stamping of the substantive
contract/instrumentwouldnotrenderthearbitrationagreementnon-
existentinlawandunenforceable/void,forthepurposeofreferringa
matterforarbitration.Garware(supra)wronglyappliedtheprinciple
inHyundai(supra)toholdthatanarbitrationagreementwouldnot
exist-in-lawifitisunstamped/insufficientlystamped.Anarbitration
agreementshouldnotberenderedvoidifitissufferingstamp
deficiencywhichisacurabledefect.Tothisextent,Garware(supra)
andHyundai(supra)donotsetoutthecorrectlaw.
Page78of78
iii)ThedecisioninSMSTea(supra)standsoverruled.Paragraphs22and
29inGarware(supra)whichwereapprovedinparagraphs146and
147inVidyaDrolia(supra)areoverruledtothatextent.
89.TheinvaluableassistancerenderedbyMr.GourabBanerjee,learned
SeniorCounselastheAmicusCuriaedeservesaspecialmentioninfinalizing
thisopinion.
……….……………………J.
[HRISHIKESHROY]
NEWDELHI
APRIL25,2023
CA No. 3802-3803 of 2020 Page 1 of 19
Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
Civil Appeal Nos. 3802-3803 of 2020
M/S N.N. GLOBAL MERCANTILE
PRIVATE LIMITED
…Appellant
Versus
M/S INDO UNIQUE FLAME LTD. & ORS.
…Respondents
J U D G M E N T
C.T. RAVIKUMAR, J.
1. I have had the advantage of reading the erudite
opinion of my learned brother Justice K. M. Joseph, for
himself and learned brother Justice Aniruddha Bose, and
the separate opinion of learned brother Justice
Hrishikesh Roy, concurring with the opinion of learned
brother Justice Ajay Rastogi, but disagreeing with the
opinion of learned brother Justice K.M. Joseph .
Regretfully, I record my inability to agree with the
opinion of learned brother Justice Ajay Rastogi as also
with the concurrent opinion of learned brother Justice
CA No. 3802-3803 of 2020 Page 2 of 19
Hrishikesh Roy. While fully endorsing the opinion of
learned brother Justice K. M. Joseph, to which my
learned brother Justice Aniruddha Bose has concurred, I
wish to add a concise addendum as under, in respect of
some of the issues, of course, only in support of findings
returned thereon.
2. The issue(s) under reference, the modification of
the referred question and the allied questions cropped
up for consideration have been elaborately dealt with
and answered in the erudite draft judgment of my
learned brother Justice K.M. Joseph and hence, it is
absolutely unessential to refer them. While considering
the power of the Court under Section 11(6) of the
Arbitration and Conciliation Act, 1996 it is to be noted
that the position of Section 11(6) before and after the
amendment and Section 11(6A), inserted by Act 2 of 2016
with effect from 23.10.2015 have been referred to in all
the three opinions. Hence, I do not think it necessary to
extract those provisions to avoid the risk of repetition.
Certainly, the powers conferred under Section 16 of the
Act often referred to as ‘Kompetenz-Kompetenz’ make it
clear that the Arbitral Tribunal is empowered and thus
got competence to rule on its own jurisdiction, including
on all jurisdictional issues and existence or validity of the
CA No. 3802-3803 of 2020 Page 3 of 19
arbitration agreement. This provision would have its
full-play when appointment of the arbitrator takes place,
on consensus, by the parties, in accordance with the
terms of the arbitration agreement or by designated
arbitration institution, without the intervention of the
Court. But then, the provision under Section 11 (6) of the
Act applies when the procedures envisaged under the
arbitration agreement have not worked and an
application is filed for invocation of the power
thereunder before the Court for making appointment of
the Arbitrator(s). The controversy in regard to the
nature of the function to be performed under Section 11
(6) has been set at rest by the Seven-Judge Bench
decision in SBP & Co. v. Patel Engg. Ltd.
1 by holding
that it is ‘judicial’. It continues to be ‘judicial’ despite the
amendment brought to the said section and even after
the insertion of Section 11 (6A) in the Act. An application
for ‘Appointment of Arbitrators’ is filed, by one party
asserting the existence of an arbitration agreement or
arbitration clause in an ‘instrument’ executed between
the parties concerned. Therefore, invariably what is to
be decided, in invocation of the said powers, is the
1
(2005) 8 SCC 618
CA No. 3802-3803 of 2020 Page 4 of 19
asserted factum of existence of arbitration agreement or
arbitration clause in the said instrument and invariably,
in this regard the party who invoked the said power
under Section 11(6), has to produce that very relied on
instrument for inspection. The question is whether while
passing an order the Court exercising the power under
Section 11 (6) receives any evidence, for the limited
purpose of ascertaining the truth of the assertion that the
document thus produced is an arbitration agreement or
an instrument containing arbitration clause. In this
regard it is only apposite to refer to the meaning
ascribable to the term ‘evidence’. As per Peter Murphy
in ‘A Practical Approach to Evidence (Second Edition),
1985, ‘evidence’ may be defined as any ‘material’ which
tends to persuade the Court of the truth or probity of
same fact asserted before it. As noted hereinbefore, in
such an application under Section 11 (6), invariably the
fact to be asserted would be the existence of ‘arbitration
agreement’ and in proof thereof the material viz., the
document would be produced. I will refer to the relevant
provision in the statutory scheme viz., the Appointment
of Arbitrators by the Chief Justice of India Scheme, 1996,
later. Now, when that is received, it is nothing but
receiving evidence to that limited purpose for deciding
CA No. 3802-3803 of 2020 Page 5 of 19
the question whether the ‘instrument’ produced is one
executed between the parties is an arbitration
agreement or whether the instrument contained an
arbitration clause. Necessarily, if the answer is in the
affirmative, an order appointing Arbitrator(s) would be
passed and an answer in the negative would be the end
of such proceedings. In that view of the matter, it can
safely be said that what is to be decided while
performing the function under Section 11 (6) is relating a
‘jurisdictional aspect’ as only on returning a finding that
there exists an arbitration agreement or arbitration
clause, in the material so produced, that arbitrator(s)
would be appointed. The answering of that question, on
receiving the ‘instrument’, is the performance of the
function describable as “acting upon” the document thus
produced. In other words, as discernible from the
statement of law by M.C. Desai, J. in Mt. Bittan Bibi &
Anr. v. Kuntu Lal & Anr.
.2
, (the relevant paragraph 8
extracted in the opinion of learned brother Justice K.M.
Joseph), ‘acting upon’ is not included in the act of
admitting an instrument, though it can be acted upon,
later, subject to permissibility in law therefor.
2
ILR [1952] 2 All 984
CA No. 3802-3803 of 2020 Page 6 of 19
3. The cleavage in opinion occurs on the issue as to
whether the Court called upon to invoke the power
under Section 11 (6) should or could exercise the power
coupled with duty under Section 33 of the Indian Stamp
Act, 1899, when the document carrying the arbitration
agreement or arbitration clause is found unstamped or
insufficiently stamped or without going into such matter,
should it confine its exercise of power in the matter of
appointment of Arbitrator(s) only and refrain itself from
proceeding further in view of the mandate under Section
33 of the Indian Stamp Act, 1899. I have already recorded
my agreement with the opinion of my learned brother
K.M. Joseph that exercise of power coupled with duty
under Section 33 of the Stamp Act cannot be accused of
judicial interference in contravention to Section 5 of the
Act and further that it shall not be confused with
examination whether an arbitration agreement or
arbitration clause in the said instrument, exists so as to
appoint arbitrator in invocation of the power under
Section 11(6) of the Act. In that view of the matter, the
provisions under Section 11(6A) or 16 of the Act cannot
act as a rider for the exercise of the said power under
Section 33 of the Stamp Act.
CA No. 3802-3803 of 2020 Page 7 of 19
4. In the aforesaid context, it is relevant to refer to
Sub-sections (1), (2) and clause (b) of Sub-section 2, of
Section 33 of the Indian Stamp Act, 1899. They read
thus:-
“33. Examination and impounding of
instruments. —
(1) Every person having by law or consent of
parties authority to receive evidence, and every
person in charge of a public office, except an
officer of police, before whom any instrument,
chargeable, 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.
(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 in force
in 2 [India] when such instrument was executed or
first executed: Provided that—
(a) nothing herein contained shall be deemed to
require any Magistrate or Judge of a Criminal
Court to examine or impound, if he does not think
fit so to do, any instrument coming before him in
CA No. 3802-3803 of 2020 Page 8 of 19
the course of any proceeding other than a
proceeding under Chapter XII or Chapter XXXVI
of the Code of Criminal Procedure, 1898 (V of
1898);
(b) in the case of a Judge of a High Court, the duty
of examining and impounding any instrument
under this section may be delegated to such officer
as the Court appoints in this behalf.
5. I have already found that receiving the very
‘instrument’ which is carrying the arbitration agreement
or containing an arbitration clause from the party who
asserts its existence is essentially an act of receiving the
evidence, in that limited sense. Therefore, how can the
Court, which is having authority and competence to
receive evidence, for the purpose of invoking the power
under Section 11 (6), abstain from proceeding further in
terms of Section 33 if it appears to it that such instrument
produced before it, though required to be stamped, is
unstamped or is not duly stamped. According to me, in
terms of the mandate under Sub-section (2) of Section 33,
for that purpose, the Section 11 Judge who received
evidence shall ‘examine’ the instrument so chargeable
and so produced in order to ascertain whether it is
stamped with a stamp of the value and description
CA No. 3802-3803 of 2020 Page 9 of 19
required by the law in force in India, when such
instrument was executed or first executed. Proviso (b)
which is extracted hereinbefore, would only permit a
Judge of the High Court for delegation of the duty of
examining and impounding any such instrument to such
officer as the Court may appoint in that behalf. Thus, it
only gives discretion to a Judge of the High Court to
delegate the duty of examining and impounding any
such instrument in the manner mentioned under the said
proviso if he chooses not to proceed in the manner
provided for impounding the instrument in accordance
with the relevant provision, by himself. When that be
the provision under Section 33 (1) and (2), a conjoint
reading of which obviously makes it mandatory for the
Court exercising the power under Section 11 (6) to
proceed in terms of the mandate under Section 33 when
the circumstances legally invites its invocation. A contra
view, according to me, would render Sub-section (2) of
Section 33 and proviso (b) redundant and would defeat
the very soul of the provisions as relates their application
in respect of application filed under Section 11(6) of the
Act.
6. The Bar under Section 35 of the Stamp Act on
admission of instruments not duly stamped in evidence,
CA No. 3802-3803 of 2020 Page 10 of 19
as is evident from proviso (a) to it, is not permanent and
is curable by following procedures provided thereunder
and making an endorsement as provided under Section
42(1) of the Stamp Act. Sub-section (2) of Section 42
makes it clear that every such instrument so endorsed
shall thereupon be admissible in evidence and be acted
upon and authenticated as it had been duly stamped. The
upshot of the discussion is that being unstamped or
insufficiently stamped, the agreement would not be
available to be ‘admitted in evidence’ and ‘to be acted
upon’, till it is validated following the procedures
prescribed under the provisions of the Stamp Act and till
then, it would not exist ‘in law’.
7. Another point which I intend to make in addition to
the opinion of my learned brother Justice K. M. Joseph, is
with respect to the meaning ascribable to the expression
‘certified copy’ which is permissible to be produced
along with the application for appointment of
Arbitrator(s) in terms of paragraph 2 (a) of the scheme
framed by the Hon’ble the Chief Justice of India, in
exercise of power under Section 11(10) of the Act,
namely, the Appointment of Arbitrators by the Chief
Justice of India Scheme, 1996. Paragraph 2 and sub-
paragraph (a) thereof read thus:-
CA No. 3802-3803 of 2020 Page 11 of 19
2. Submission of Request:- The request to the
Chief Justice under Sub-section (4) or Sub-
section (5) or Sub-section (6) of Section 11 shall
be made in writing and shall be accompanied by
–
(a) the original arbitration agreement or a duly
certified copy thereof.
8. In the opinion of my learned brother Justice K. M.
Joseph this issue has been elaborately considered from
paragraphs 77 to 89. While concurring with the conclusions
and findings thereof, I would like to give my own reasons as
to why the expression ‘certified copy’ should be understood
with reference to Section 74 and 76 of the Indian Evidence
Act, 1872, (hereinafter referred to as ‘Evidence Act’) and why
the said form of secondary evidence is available to be ‘acted
upon’ without formal proof of existence and execution of the
original document.
9. Section 62 defines ‘primary evidence’ thus:-
62. Primary evidence. –– Primary evidence
means the document itself produced for the
inspection of the Court. Explanation 1. ––Where a
document is executed in several parts, each part is
primary evidence of the document. Where a
document is executed in counterpart, each
CA No. 3802-3803 of 2020 Page 12 of 19
counterpart being executed by one or some of the
parties only, each counterpart is primary evidence
as against the parties executing it. Explanation 2. –
– Where a number of documents are all made by
one uniform process, as in the case of printing,
lithography or photography, each is primary
evidence of the contents of the rest; but, where
they are all copies of a common original, they are
not primary evidence of the contents of the
original.
A person is shown to have been in possession of a
number of placards, all printed at one time from
one original. Any one of the placards is primary
evidence of the contents of any other, but no one of
them is primary evidence of the contents of the
original.
10. Section 63 of the Indian Evidence Act defines
secondary evidence which reads thus: -
“63. Secondary evidence. –– Secondary evidence
means and includes ––
(1) certified copies given under the provisions
hereinafter contained;
(2) copies made from the original by mechanical
processes which in themselves ensure the
CA No. 3802-3803 of 2020 Page 13 of 19
accuracy of the copy, and copies compared with
such copies;
(3) copies made from or compared w ith the
original;
(4) counterparts of documents as against the
parties who did not execute them;
(5) oral accounts of the contents of a document
given by some person who has himself seen it.”
11. Thus, the definition ‘secondary evidence’ means
and includes what are mentioned in clauses ‘1 to 5’.
Though, the inclusive definition speaks of different kinds
of secondary evidence, such as, mentioned under
clauses ‘1 to 5’, a careful scanning of the Evidence Act
would reveal that copies which fall under clause (1) of
Section 63 alone carry the presumption of genuineness
and correctness, by virtue of the provision under Section
79 of the Evidence Act. Section 79 reads thus:-
“79. Presumption as to genuineness of certified
copies. –– The Court shall presume [to be
genuine] every document purporting to be a
certificate, certified copy or other document,
which is by Law declared to be admissible as
evidence of any particular fact, and which purports
to be duly certified by any officer [of the Central
CA No. 3802-3803 of 2020 Page 14 of 19
Government or of a State Government, or by any
officer [in the State of Jammu and Kashmir] who is
duly authorized thereto by the Central
Government]:
Provided that such document is substantially in the
form and purports to be executed in the manner
directed by law in that behalf. The Court shall also
presume that any officer by whom any such
document purports to be signed or certified, held,
when he signed it, the official character which he
claims in such paper.”
12. Thus, it can be said that the genuineness and
correctness of copies falling under clause 1 of Section 63
shall be presumed under Section 79 of the Evidence Act.
The definition of ‘shall presume’ is defined under Section
4 of the Evidence Act, thus:-
“Shall presume”.––Whenever it is directed by this
Act that the Court shall presume a fact, it shall
regard such fact as proved, unless and until it is
disproved.
13. Section 79 proceeds upon the maxim ‘ omnia
praesumuntur rite esse acta, i.e., all acts are presumed to
be done rightly and regularly. When the acts of official
CA No. 3802-3803 of 2020 Page 15 of 19
nature went through the process, the presumption arises
in favour of the regular performance.
14. Section 65 of the Evidence Act, in so far as, it is
relevant reads thus:-
65. Cases in which secondary evidence relating
to documents may be given. ––Secondary
evidence may be given of the existence, condition,
or contents of a document in the following cases: –
–
……
(e) when the original is a public document within
the meaning of section 74;
(f) when the original is a document of which a
certified copy is permitted by this Act, or by any
other law in force in [India] to be given in evidence;
15. In terms of the provisions under Section 79 of the
Evidence Act a certified copy of a document allegedly
carrying an arbitration clause is produced and that
document can be received in evidence for the purpose
of Section 11 (6) of the Act and by virtue of Section 79 of
the Evidence Act, the Court shall presume the
genuineness of the document which could be accepted
as evidence and shall presume the genuineness of the
contents of the document unless the presumption is not
CA No. 3802-3803 of 2020 Page 16 of 19
rebutted by other evidence. Thus, it can be seen that
besides permitting to produce the original document
which is primary evidence in terms of Section 62 of the
Evidence Act, despite the existence of different kinds of
secondary evidence, under paragraph 2 (a) of Scheme
framed by the Hon’ble the Chief Justice of India, only
certified copy alone is permitted to be adduced,
purposefully, as by virtue of Section 79 of Evidence Act
presumption of genuineness and correctness of the
certified copies of the documents mentioned under
Section 63 (1) of the Evidence Act shall have to be
presumed. In other words, the other modes of
production of secondary evidence would not permit the
Court to draw the presumption of genuineness and
correctness and that is why in paragraph 2(a) of the
scheme framed in terms of the provisions under Section
11 (10) provides only for production of certified copy of
the primary evidence to act upon for the purpose of
applying for appointment of Arbitrator under Section 11
(6) of the Act, in the alternative of production of the
original instrument.
16. As already found the nature of exercise of power
under Section 11 (6) is ‘judicial’ and therefore, it was
thought only fit to permit to exercise such power only on
CA No. 3802-3803 of 2020 Page 17 of 19
the original instrument or else, on its certified copy, to
be understood with reference to Section 63 (1) read with
Section 74 and 76 of the Evidence Act. When once the
intention behind paragraph 2(a) of the scheme is
understood in that manner with reference to the
provisions under Section 63 (1), 74, 76 and 79 of the
Evidence Act, the expression ‘certified copy’ employed
in paragraph 2(a) of the scheme framed under Section
11(10) of the Act cannot be interpreted to mean any other
kind of copies provided under Section 63 of the Evidence
Act other than under Section 63 (1) of the Evidence Act.
17. Learned brother Justice K. M. Joseph, after
explaining as to how the expression ‘certified copy’ must
be understood, held that the Court exercising the power
under Section 11 (6) has to exercise the power under
Section 33 of the Indian Stamp Act when the original is
produced before the Court. In other words, according
to me, it is rightfully held that when the original
document carrying the arbitration clause is produced
and if it is found that it is unstamped or insufficiently
stamped, the Court acting under Section 11 is duty
bound to act under Section 33 of the Indian Stamp Act as
held in the draft judgment.
CA No. 3802-3803 of 2020 Page 18 of 19
18. I am also concurring with the view that what is
permissible to be produced as secondary evidence i.e.,
other than the original document in terms of Section 2(a)
of the scheme framed under Section 11(10) of the Act, is
nothing but certified copy as mentioned earlier. But such
a certified copy, would not be available to be proceeded
with under Section 33 of the Stamp Act if it is unstamped
or insufficiently stamped. In such circumstances, such
certified copy shall not be acted upon.
19. In the contextual situation, to understand the
difference between ‘certified copy’ and ‘a copy certified
to be true copy’, it is only appropriate to refer to Rule 1
of Order VIII of the Supreme Court Rules, 2013, framed
invoking the power conferred by Article 145 of the
Constitution of India. Rule 1 of Order VIII reads thus: -
“1. The officers of the Court shall not receive any
pleading, petition, affidavit or other document,
except original exhibits and certified copies of
public documents, unless it is fairly and legibly
written, type-written or lithographed in double-line
spacing, on one side of standard petition paper,
demy-foolscap size, or of the size of 29.7 cm x 21 cm,
or paper which is ordinarily used in the High Courts
for the purpose. Copies filed for the use of the
CA No. 3802-3803 of 2020 Page 19 of 19
Courts shall be neat and legible, and shall be
certified to be true copies by the advocate-on-
record, or by the party in person, as the case may
be.” (Emphasis added)
20. It cannot be presumed that despite the
conspicuous difference in the said expressions, under
paragraph 2 (a) ‘certified copy’ alone was permitted to
be appended along with the application under Section
11 of the Act, unintentionally. I am of the considered
view that it was so prescribed, fully understanding the
nature of exercise of power under Section 11 (6) of the
Act and also the presumption of genuineness and
correctness of ‘certified copy’ available by virtue of
Section 79 of the Evidence Act.
With this addendum, I fully endorse all the
conclusions and findings in the judgment of my learned
brother Justice K. M. Joseph.
……………………, J.
(C.T. Ravikumar)
New Delhi;
April 25, 2023
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