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2019 (4) TMI 716 - SC - Indian LawsWhat is the effect of an arbitration clause contained in a contract which requires to be stamped? Held that:- 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 a contract, namely, that it is not 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. Stamp duty, when paid with penalty (if any), would require adjudication by the stamp authorities, which would take far more than the 60-day period that is laid down by Section 11(13). Undoubtedly, Section 11(13), which was also introduced by Amendment Act 3 of 2016, was enacted keeping one of the important objectives of the 1996 Act in mind, namely, speedy disposal of disputes by the arbitral tribunal, and appointment of an arbitrator having to be made as expeditiously as possible, therefore. Thus, a harmonious construction needs to be given to the provisions of the Maharashtra Stamp Act and Section 11(13) of the 1996 Act by which, if it is possible, both provisions ought to be subserved. A harmonious construction needs to be given to the provisions of the Maharashtra Stamp Act and Section 11(13) of the 1996 Act by which, if it is possible, both provisions ought to be subserved. We have already seen that under the Maharashtra Stamp Act, the object of impounding an instrument that is unstamped is to ensure that stamp duty and penalty (if any) must be paid on such instrument before it is acted upon by any authority. Likewise, under Section 11(13) of the 1996 Act, an application made under Section 11 for appointment of an arbitrator should be disposed of as expeditiously as possible, and, in any event, an endeavour shall be made to dispose of such application at least within a period of 60 days from the date of service of notice on the opposite party. Arguments taken of prejudice, namely, that on the facts of this case, the appellant had to pay the stamp duty and cannot take advantage of his own wrong, are of no avail when it comes to the application of mandatory provisions of law. Even this argument, therefore, must be rejected. The matter is remitted to the Bombay High Court to dispose of the same - appeal allowed by way of remand.
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