TMI Blog2018 (3) TMI 1750X X X X Extracts X X X X X X X X Extracts X X X X ..... n unstamped document? - Held that:- In the facts of the present case, there is no dispute with reference to the existence of the arbitration agreement. This being the case, I find that Mr. Kamat is not correct in submitting that the dispute cannot be referred to arbitration merely because the sub-contract dated 14th June, 2013 (and in which the arbitration clause is contained), is an unstamped document - It is not as if once the Arbitrator is appointed, the Respondent is precluded from raising the issue of stamping before the Arbitrator. The Arbitrator, if found that the document is insufficiently stamped, can always impound the same and send it to the necessary authorities under the Maharashtra Stamp Act, 1958 for adjudication. The liability to pay stamp duty was that of the Respondent. If the stamp duty, if any, has not been paid by the Respondent, the Respondent cannot take advantage of its own wrong and frustrate the arbitration agreement between the parties. If I was to do that, it would be only adding premium to dishonesty. Having said this, I must make it clear that these observations are only prima facie and if the arbitrator finds that the document is in fact insufficie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The Executive Engineer, Aul Embankment Division, Aul, District-Kendrapara floated a tender inviting bids inter alia for the installation of geo-textile tubes embankment with toe mound' at village Pentha in Odisha for protection against coastal erosion. The said tender was awarded to the Respondent, who in turn, further sub-contracted the work to the Petitioner pursuant to an Agreement dated 14th June, 2013 (Exhibit-A to the Application). As per the terms of the said sub-contract, the Petitioner procured two bank guarantees in favour of the Respondent, both in the sum of ₹ 1,18,37,281/- each. The first guarantee was a performance bank guarantee and second one was an advance payment bank guarantee. (c) It is the case of the Petitioner that vide their letter dated 2nd January, 2015, the Respondent wrongly terminated the sub-contract and proceeded to encash the aforementioned bank guarantees. In response thereto, the Petitioner by their letter dated 8th January, 2015 objected to the wrongful termination and encashment and instead considered the said act by the Respondent as a repudiatory breach. Thereafter, by their letter dated 7th October, 2015, the Petitioner call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to appoint an arbitrator as contemplated under Section 11 of the Arbitration and Conciliation Act, 1996. She submitted that in the facts of the present case, admittedly there was an arbitration clause that was contained in the sub-contract dated 14th June, 2013. Pursuant to this clause, the Petitioner had invoked arbitration and had called upon the Respondent to agree to the appointment of the Sole Arbitrator as suggested by the Petitioner. As the Respondent had failed to do so, the present application was filed. She therefore submitted that there was no impediment on this Court in invoking the provisions of Section 11 and referring the disputes and differences arising out of the sub-contract dated 14th June, 2013 to a Sole Arbitrator as contemplated under the contract. 3. On the other hand, Mr. Kamat, the learned counsel appearing on behalf of the Respondent, submitted that in the facts of the present case, the relief of appointing the Arbitrator cannot be granted on two grounds. They are:- (i) the contract is undisputedly unstamped and by appointing an Arbitrator, this Court would be acting upon an unstamped document which would be in violation of the provisions of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically contemplates that this Court, whilst appointing an arbitrator, must confine itself to the examination of the existence of an arbitration agreement. In the facts of the present case, she submitted that the Respondent had not denied the existence of the arbitration agreement and even assuming for the sake of argument that the document required stamping, the same did not affect the existence of the arbitration agreement or even the agreement as a whole. She was at pains to point out that this Court must not go into the issue of enforceability or validity of the agreement after the amendment to Section 11 in 2015. She submitted that the Legislature has consciously restricted judicial intervention under Section 11 in the clearest words possible to only the examination of the existence of the arbitration agreement and nothing more. She submitted that no case was made out to expand the scope of judicial intervention under Section 11 (6-A) to include the issue of validity, enforceability etc. According to Ms. Nyati, this was further emphasized by virtue of Section 11 (13) which was inserted again by the 2015 amendment. In this regard, she also placed reliance on the report of the La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, Ms. Nyati relied upon a decision of the Supreme Court in the case of Visa International Limited v/s Continental Resources (USA) Ltd. reported in AIR 2009 SC 1366. 9. I have heard the learned counsel for the parties at length and have perused the papers and proceedings in the present matter. I shall first deal with the argument of the Respondent that the invocation of the arbitration was premature. In this regard, I find considerable force in the argument canvassed by Ms. Nyati. The Arbitration Clause which has been invoked in the facts of the present case (and which has been reproduced above) states that any and all claims, disputes etc which cannot be finally resolved by such parties through negotiation, shall be resolved by a final and binding arbitration to be held in Pune. In the affidavit in rejoinder filed on behalf of the Petitioner, in paragraph 4, it is categorically denied that the Petitioner never initiated any settlement, negotiation and/or resolution process. It has been further stated that the Petitioner acting through Mr. Vivek Bansal, the Group-CEO, addressed numerous requests to Mr. Tiru Kulkarni, Vice President of the Respondent to schedule a meeting for neg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notwithstanding any judgment, decree or order of any Court, confine itself to the examination of the existence of an arbitration agreement. The purpose for bringing this provision into force can be seen from the 246th Report of the Commission on Amendment to the Arbitration and Conciliation Act, 1996 . Paragraphs 28 to 33 deal with scope and nature of pre-arbitral judicial intervention. After referring to certain decisions of the Supreme Court and more particularly under Section 11 of the Act, the Commission in paragraph 33 has stated thus:- 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 judicial 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 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about this amendment, I find considerable force in the argument of Ms Nyati that what has to be looked into is only about the existence of the arbitration agreement and nothing more or nothing less. 13. In the facts of the present case, and as rightly submitted by Ms. Nyati, the existence of the arbitration agreement is not disputed. Even assuming for the sake of argument that the document is insufficiently stamped, that would not by itself affect the existence of the arbitration agreement that was contained in the sub-contract awarded by the Respondent to the Petitioner dated 14th June, 2013. In fact, Mr. Kamat, the learned counsel appearing for the Respondent, fairly conceded before me that there was no dispute about the existence of the arbitration agreement. This being the case, I find that the reliance placed by Ms. Nyati on sub-section 6-A of Section 11 is clearly well founded. In the view that I take, I am supported by a decision of the Supreme Court in the case of Duro Felguera, S. A. v/s Gangavaram Port Limited reported in (2017) 9 SCC 729. The Supreme Court after considering Section 11 prior to its amendment and also after its amendment, at paragraph 19 observed thus: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6. The amending Act has introduced sub-section (13) which provides that the disposal of the application under this section has to be expeditious and endeavour shall be made to dispose of the application within a period of 60 days from the date of service of notice on the opposite party. This sub-section would ensure speedy disposal of applications under this section and all contentious issues have been left to be decided by the Arbitral Tribunal. 7. For determining the fee structure of the Arbitral Tribunal, it has been recommended that the High Courts may frame the necessary rules and for that purpose, a model fee structure has been provided in the Fourth Schedule of the amending Act. However, this sub-section would not be applicable for the fee structure in case of international commercial arbitrations and domestic arbitrations where the parties have agreed for determination of fee as per rules of an arbitral institution. This sub-section has been inserted to ensure a reasonable fee structure since the cost of arbitration has increased manifold due to high charges being levied on the parties by the Arbitral Tribunal and other incidental expenses. [Reference: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the arbitration agreement. This being the case, I find that Mr. Kamat is not correct in submitting that the dispute cannot be referred to arbitration merely because the sub-contract dated 14th June, 2013 (and in which the arbitration clause is contained), is an unstamped document. 17. There is yet another reason for taking this view. It is now well settled that the provisions of the Stamp Act are enacted for the purposes of securing the revenue for the Government and not to arm a dishonest litigant with a technical defence. If one needs to refer to any decision on this aspect, the observations of the Supreme Court in the case of Hindustan Steel Ltd v/s Messrs Dilip Construction Company reported in (1969) 1 SCC 597 are apposite. The relevant paragraph reads thus:- 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng upon the Respondent to refer the matter to arbitration. This application was opposed by the Respondent who contended that the unregistered lease deed was invalid, unenforceable and not binding upon the parties. The further contention was that the said lease deed was not duly stamped and therefore invalid, unenforceable and not binding, having regard to Section 35 of the Stamp Act, 1899. In these facts, the matter went to the Supreme Court. Before the Supreme Court, three questions were raised, namely (i) Whether an arbitration agreement contained in an unregistered (but compulsorily registrable) instrument is valid and enforceable? (ii) Whether an arbitration agreement is an unregistered instrument which is not duly stamped, is valid and enforceable? (iii) Whether there is an arbitration agreement between the appellant and the respondent and whether an arbitrator should be appointed? 20. Whilst answering the first question, the Supreme Court inter alia held that when the contract contains an arbitration agreement, it is a collateral term relating to the resolution of disputes, unrelated to the performance of the contract. It is as if two contracts; one in regard to the substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, and in my view correctly so. This being the case, I find that the reliance placed by Mr. Kamat on the decision of the Supreme Court in the case of SMS Tea Estates Private Limited (supra), is wholly misconceived. Whether the document is properly stamped or not is an issue that can certainly be decided by the arbitrator once the matter is referred to arbitration. It is not as if the arbitrator is powerless to impound the document if found insufficiently stamped and thereafter forward to the appropriate authority for adjudication and recovery of stamp duty. Taking into consideration the purpose for which the amendments were brought about and especially the finding given in the 246th report of the Law Commission of India that India has been ranked at 178 out of 189 nations in the world for enforcement of contracts, I think this is exactly what the Legislature intended. In any event, the wording of Section 11(6- A) are clear and unambiguous and leave no real scope for judicial interpretation. 21. All the other decisions relied upon by Mr. Kamat with the exception of (Lakdawala Developers Pvt Ltd's case), were under the Stamp Act and were not with reference to any of the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads thus:- ROYALTIES / LICENSES/ MINING PERMITS / OTHER STATUTORY REQUIREMENTS ETC It will be GWRL responsibility to obtain all requisite statutory Licenses/Permits from various Government State/Local Bodies/Authorities (apart from MoEF, CRZ and state pollution control board permissions which are in scope of ICZMP, State Project Management Unit-Odisha being owner), and to pay necessary levies/fees/taxes/duties/royalties (if applicable to GWRL scope of work), costs thereof at their own cost. COMACOE's responsibility will be limited to labour license and maintenance of proper record of such payments and submit the royalty receipts along with each invoice to GWRL. 24. On going through this clause carefully, I am prima facie satisfied that the liability to pay stamp duty was that of the Respondent. If the stamp duty, if any, has not been paid by the Respondent, the Respondent cannot take advantage of its own wrong and frustrate the arbitration agreement between the parties. If I was to do that, it would be only adding premium to dishonesty. Having said this, I must make it clear that these observations are only prima facie and if the arbitrator finds that the docu ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
