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2022 (1) TMI 1171 - SC - Indian LawsAppointment of a sole arbitrator - Section 11(6) r/w 11(12)(a) of the Arbitration & Conciliation Act, 1996 - arbitration to the Singapore International Arbitration Centre (SIAC) was rejected, stating that the notice of arbitration was defective and was not curable - requirement of sufficient stamping of documents - Hotel Management Agreement (HMA) sufficiently stamped or not - HELD THAT:- This Court’s jurisdiction to adjudicate issues at the preappointment stage has been the subject matter of numerous cases before this Court as well as High Courts. The initial interpretation provided by this Court to examine issues extensively, was recognized as being against the proarbitration stance envisaged by the 1996 Act. Case by case, Courts restricted themselves in occupying the space provided for the arbitrators, in line with party autonomy that has been reiterated by this Court in VIDYA DROLIA AND OTHERS VERSUS DURGA TRADING CORPORATION [2020 (12) TMI 1227 - SUPREME COURT], which clearly expounds that Courts had very limited jurisdiction under Section 11(6) of the Act. Courts are to take a ‘prima facie’ view, as explained therein, on issues relating to existence of the arbitration agreement. Usually, issues of arbitrability/validity are matters to be adjudicated upon by arbitrators. The only narrow exception carved out was that Courts could adjudicate to ‘cut the deadwood’. In N.N. GLOBAL MERCANTILE PVT. LTD. VERSUS INDO UNIQUE FLAME LTD. AND ORS. [2021 (1) TMI 1121 - SUPREME COURT] this Court was of the opinion that the utility of the doctrine of separability overrides the concern under the respective Stamp Acts. Any concerns of nonstamping or under stamping would not affect the validity of the arbitration agreement. Although we agree that there is a need to constitute a larger Bench to settle the jurisprudence, we are also cognizant of time sensitivity when dealing with arbitration issues. All these matters are still at a preappointment stage, and we cannot leave them hanging until the larger Bench settles the issue. In view of the same, this Court – until the larger Bench decides on the interplay between Sections 11(6) and 16 – should ensure that arbitrations are carried on, unless the issue before the Court patently indicates existence of deadwood. Whether the issue of insufficient stamping raised by the respondent is deadwood and clearly indicative of an unworkable arbitration agreement, or there are deeper issues which can be resolved at a later stage? - HELD THAT:- Having perused Clause 22.1, it is necessary to note that the respondent is under an obligation to ensure that the agreement would be legally valid in India. If such an obligation was undertaken by the respondent, the extent to which the petitioners can rely on the respondent’s warranty, is clearly a debatable issue. Further, it is also a matter of adjudication whether the respondent could have raised the issue of validity of the arbitration agreement/substantive contract in view of the warranty. This aspect clearly mandates that the aforesaid issue is not deadwood. The issues whether the respondent is estopped from raising the contention of unenforceability of the HMA or the issue whether the HMA is insufficiently or incorrectly stamped, can be finally decided at a later stage. Moreover, the petitioners have reiterated that without prejudice, they have paid the required stamp duty, including the penalty that may be accruable and sought appointment of a sole arbitrator in light of the same. On the contrary, the respondent, in rebuttal to the payment of stamp duty, has challenged the same, contending that payment of stamp duty has been wrongly classified and stamp duty has been paid against Article 5(j) under the schedule of the Karnataka Stamp Act, 1957, which is erroneous. Therefore, the respondent contends that the HMA has not been properly stamped. It is deemed appropriate for this matter to be referred to arbitration, in terms of Clause 18.2 of the arbitration agreement - arbitration petition is allowed.
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