M/S N. N. GLOBAL MERCANTILE PRIVATE LIMITED versus M/S INDO UNIQUE FLAME LTD. & ORS.

[2023] 9 S.C.R. 285 : 2023 INSC 423

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED

M/s INDO UNIQUE FLAME LTD. & ORS.

(Civil Appeal Nos. 3802-3803 of 2020)

APRIL 25, 2023

[K. M. JOSEPH, AJAY RASTOGI, ANIRUDDHA BOSE,HRISHIKESH ROY AND C. T. RAVIKUMAR, JJ.]

Arbitration and Conciliation Act, 1996 – ss. 11(6A), 7, 8, 9,11 and 16 – Indian Stamp Act, 1899 – ss. 3, 33 & 35 – Contract Act,1872 – ss. 2(h), 10 – Appointment of Arbitrators by The Chief Justiceof India Scheme, 1996 – Arbitration Agreement in an unregisteredinstrument, which is not duly stamped, if valid and enforceable –Whether the statutory bar contained in s.35 of the Stamp Act, 1899applicable to instruments chargeable to stamp duty under s.3 readwith the Schedule to the Act, would also render the arbitrationagreement contained in such an instrument, which is not chargeableto payment of stamp duty, as being non-existent, unenforceable, orinvalid, pending payment of stamp duty on the substantive contract/instrument – Held [per K. M. Joseph, J. (for himself and forAniruddha Bose, J.)] : An instrument, which is exigible to stampduty, may contain an Arbitration Clause and which is not stamped,cannot be said to be contract, which is enforceable in law withinthe meaning of s.2(h) of the Contract Act and is not enforceableunder s.2(g) of the Contract Act – An unstamped instrument, whenit is required to be stamped, being not contract and not enforceablein law, cannot, therefore, exist in law – The true intention behindthe insertion of s.11(6A) in the Act was to confine the Court, actingunder s.11, to examine and ascertain about the existence of anArbitration Agreement – The Scheme permits the Court, under s.11of the Act, acting on the basis of the original agreement or on acertified copy –The certified copy must, however, clearly indicatethe stamp duty paid – If it does not do so, the Court should not acton such certified copy – If the original of the instrument isproduced and it is unstamped, the Court, acting under s.11, is duty-bound to act under s.33 of the Stamp Act – When it does so, theother provisions, which, in the case of the payment of the duty andpenalty would culminate in the certificate under s.42(2) of the Stamp

AAct, would also apply – When such stage arises, the Court will befree to process the Application as per law – An ArbitrationAgreement, within the meaning of s.7 of the Act, which attracts stampduty and which is not stamped or insufficiently stamped, cannot beacted upon, in view of s.35 of the Stamp Act, unless followingimpounding and payment of the requisite duty, necessary certificateBis provided under s.42 of the Stamp Act – The provisions of s.33and the bar under s.35 of the Stamp Act, applicable to instrumentschargeable to stamp duty under s.3 read with the Schedule to theStamp Act, would render the Arbitration Agreement contained insuch instrument as being non-existent in law unless the instrumentCis validated under the Stamp Act – Held (per C. T. Ravikumar, J.)(concurring): Being unstamped or insufficiently stamped, theagreement would not be available to be ‘admitted in evidence’ and‘to be acted upon’, till it is validated following the proceduresprescribed under the provisions of the Stamp Act and till then, itwould not exist ‘in law’ – When the original document carrying theDarbitration clause is produced and if it is found that it is unstampedor insufficiently stamped, the Court acting under s.11 is duty boundto act u/s.33 of the Indian Stamp Act – Held (per Ajay Rastogi, J.)(dissenting): The existence of copy/certified copy of an arbitrationagreement whether unstamped/insufficiently stamped at the pre-Ereferral stage is an enforceable document for purposes ofappointment of an Arbitrator under s.11(6A) of the Act, 1996 wherethe judicial intervention shall be minimal confined only to the primafacie examination of “existence of an arbitration agreement” alonekeeping in view the object of 2015 amendment and the courts muststrictly adhere to the time schedule for appointment of ArbitratorFprescribed under s.11(13) of the Act, 1996 – All the preliminary /debatable issues including insufficiently stamped/unduly stampedor validity of the arbitration agreement etc. are referrable to theArbitrator/Arbitral Tribunal under s.16 of the Act, 1996 which, byvirtue of the Doctrine of Kompetenz - Kompetenz has the power toGdo so – Held (per Hrishikesh Roy, J.) (dissenting): The examinationof stamping and impounding need not be done at the threshold by aCourt, at the pre-reference stage under s.11 of the Arbitration Act,1996 – Non-stamping /insufficient stamping of the substantivecontract/instrument would not render the arbitration agreement non-existent in law and unenforceable /void, for the purpose of referringH

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/sINDO UNIQUE FLAME LTD. & ORS.

matter for arbitration – An arbitration agreement should not berendered void if it is suffering stamp deficiency which is curabledefect.

Answering the reference, the Court

HELD:

per K. M. JOSEPH, J. (for himself and ANIRUDDHA BOSE, J.)

1.1. An agreement, which is unenforceable on account of asubstantive law, which would include the Stamp Act, would not bea contract, applying Section 2(h) of the Contract Act. It is only ifan agreement is enforceable, that it would become contract. Itis only ‘contract’, which would be the ‘Arbitration Agreement’,which is contemplated in Section 11(6A) of the Act. It may not beapposite to merely describe an unstamped Arbitration Agreementas ‘curable defect’. As long it remains an unstamped instrument,it cannot be taken notice of for any purpose, as contemplated inSection 35 of the Stamp Act. It remains unenforceable. Section17 declares the time at which an instrument, executed in India,must be stamped. The said provision contemplates that stampingof such an instrument must take place before or at the time ofthe execution of document. No Public Officer, nor Court norArbitrator, can permit any person to ask them to act upon it orreceive it as evidence. In law, it is bereft of life. It is ‘notenforceable in law’. In the said sense, it also cannot exist in law.It would be void. The voidness is conflated to unenforceabilityreceives fortification from Section 2(j) of the Contract Act whichrenders contract which ceases to be enforceable void. WhatSection 11(6A) contemplates is contract and it is not anagreement which cannot be treated as contract. This is despitethe use of the words ‘arbitration agreement’ in Section 11(6A).In other words, contract must conform to Section 7 of the Act. Itmust also, needless to say, fulfil the requirements of the ContractAct. [Paras 70 & 71][351-B-F]

1.2. An agreement which is unstamped or insufficientlystamped is not enforceable, as long as it remains in the saidcondition. Such an instrument would be void as being notenforceable [See Section 2(g) of the Contract Act]. It would not

ABCD

EFG

Ain the said sense exist in law. It can be “validated” by only theprocess contemplated in Section 33 and other provisions of theStamp Act. This necessarily means that the court would not viewit as enforceable, and therefore, existing in law. In the senseexplained, it would not be found as ‘not void’ and therefore ‘notinvalid’. Thus, in the context of the Act, the Stamp Act and theBContract Act, the opinion of this Court in SMS Tea Estates, in thisregard as reiterated in Garware and approved in Vidya Drolia iscorrect. [Para 74][353-E-G]

2. An instrument, which is exigible to stamp duty, mayCcontain an Arbitration Clause and which is not stamped, cannotbe said to be contract, which is enforceable in law within themeaning of Section 2(h) of the Contract Act and is not enforceableunder Section 2(g) of the Contract Act. An unstamped instrument,when it is required to be stamped, being not contract and notenforceable in law, cannot, therefore, exist in law. Therefore,Dparagraphs-22 and 29 of Garware are approved. To this extent,this Court also approves of Vidya Drolia, insofar as the reasoningin paragraphs-22 and 29 of Garware is approved. [Para 110][374-E-F]

3. The Scheme permits the Court, under Section 11 of theEAct, acting on the basis of the original agreement or on certifiedcopy. The certified copy must, however, clearly indicate the stampduty paid as held in SMS Tea Estates. If it does not do so, theCourt should not act on such certified copy. [Para 112][375-A]

4. The provisions of Sections 33 and the bar under SectionF35 of the Stamp Act, applicable to instruments chargeable to stampduty under Section 3 read with the Schedule to the Stamp Act,would render the Arbitration Agreement contained in suchinstrument as being non-existent in law unless the instrument isvalidated under the Stamp Act. [Para 115][375-D-E]GN.N. Global Mercantile Private Limited v. Indo UniqueFlame Limited and others (2021) 4 SCC 379 –overruled.

SMS Tea Estates Private Limited v. Chandmari TeaCompany Private Limited (2011) 14 SCC 66 : [2011] 9SCR 382; Garware Wall Ropes Limited v. Coastal MarineConstructions & Engineering Limited (2019) 9 SCC 209: [2019] 5 SCR 579; Vidya Drolia and others v. DurgaTrading Corporation (2021) 2 SCC 1;Dharmaratnakara Rai Bahadur Arcot NarainswamyMudaliar Chattram v. Bhaskar Raju & Bros. (2020) 4SCC 612 : [2020] 3 SCR 798; - affirmed.

SBP & Co. v. Patel Engineering Ltd. and another (2005)8 SCC 618 : [2005] 4 Suppl. SCR 688 – followed.

Hindustan Steel Ltd. v. Dilip Construction Company(1969) 1 SCC 597 : [1969] 3 SCR 736; United IndiaInsurance Company Limited v. Hyundai Engineeringand Construction Company Limited (2018) 17 SCC 607: [2018] 12 SCR 1085 and Govind Rubber Limited LouidsDreyfus Commodities Asia Private Limited (2015) 13SCC 477 : [2014] 12 SCR 488 – relied on.

Duro Felguera, S.A. v. Gangavaram Port Limited (2017)9 SCC 729 : [2017] 10 SCR 285; Mayavati TradingPrivate Limited v. Pradyuat Deb Burman (2019) 8 SCC714 : [2019] 1 SCR 123; Lachmi Narayan Agarwallaand Others v. Braja Mohan Singh (SINCE DECEASED)51 Indian Appeals 332; Joyman Bewa v. Easin SarkarAIR 1926 Calcutta 877; Great Offshore Ltd. v. IranianOffshore Engg. & Construction Co. (2008) 14 SCC 240: [2008] 12 SCR 515; Commissioner of Income Tax v.Hindustan Bulk Carriers (2003) 3 SCC 57 : [2002] 5Suppl. SCR 387; Shin-Etsu Chemical Co. Ltd. v. AkshOptifibre Ltd. and another (2005) 7 SCC 234 : [2005]2 Suppl. SCR 699; National Insurance Company Limitedv. Boghara Polyfab Private Limited (2009) 1 SCC 267: [2008] 13 SCR 638; Ganga Retreat & Towers Ltd. v.State of Rajasthan (2003) 12 SCC 91 : [2003] 6 Suppl.SCR 1134; Oriental Insurance Company v. NarbheramPower and Steel Private Limited (2018) 6 SCC 534 :[2018] 4 SCR 826; Dr. Chiranji Lal (D) by Lrs. v. HariDas (D) by Lrs. (2005) 10 SCC 746 : [2005] 1 Suppl.

ASCR 359; Hariom Agrawal v. Prakash Chand Malviya(2007) 8 SCC 514 : [2007] 10 SCR 772; M.R.Engineers & Contractors Private Limited v. Som DattBuilders Limited (2009) 7 SCC 696 : [2009] 10 SCR373 and Jupudi Kesava Rao v. Pulavarthi VenkataSubbarao and others (1971) 1 SCC 545 : [1971] 3 SCRB590 – referred to.

Dip Narain Singh v. Nageshar Prasad and another AIR1930 ALL 1 (FB) / 1929 SCC OnLine ALL 1; Imambiv. Khaja Hussain alias Khajasab AIR 1988 Karnataka51; Gulzari Lal Marwari v. Ram Gopal ILR 1937 1CCalcutta 257; Purna Chandra Chakrabarty and othersv. Kalipada Roy and another AIR 1942 Calcutta 386;United Insurance Company of Pakistan Limited v. HafizMuhammad Siddique PLD 1978 SC 279 and GautamLandscapes Pvt. Limited v. Shailesh S. Shah (2019) SCCDOnLine Bom 563 – referred to.

Heyman v. Darwins Limited (1942) AC 356 HL –referred to.

per C. T. RAVIKUMAR, J. (concurring)

E1. Receiving the very ‘instrument’ which is carrying thearbitration agreement or containing an arbitration clause fromthe party who asserts its existence is essentially an act of receivingthe 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), abstainFfrom proceeding further in terms of Section 33 if it appears to itthat such instrument produced before it, though required to bestamped, is unstamped or is not duly stamped. In terms of themandate under Sub-section (2) of Section 33, for that purpose,the Section 11 Judge who received evidence shall ‘examine’ theGinstrument so chargeable and so produced in order to ascertainwhether it is stamped with stamp of the value and descriptionrequired by the law in force in India, when such instrument wasexecuted or first executed. Proviso (b), would only permit Judgeof the High Court for delegation of the duty of examining andimpounding any such instrument to such officer as the Court mayH

appoint in that behalf. Thus, it only gives discretion to Judge ofthe High Court to delegate the duty of examining and impoundingany such instrument in the manner mentioned under the saidproviso if he chooses not to proceed in the manner provided forimpounding the instrument in accordance with the relevantprovision, by himself. When that be the provision under Section33 (1) and (2), conjoint reading of which obviously makes itmandatory for the Court exercising the power under Section 11(6) to proceed in terms of the mandate under Section 33 whenthe circumstances legally invites its invocation. contra view,would render Sub-section (2) of Section 33 and proviso (b)redundant and would defeat the very soul of the provisions asrelates their application in respect of application filed underSection 11(6) of the Act. [Para 5][379-C-H]

2. What is permissible to be produced as secondaryevidence i.e., other than the original document in terms of Section2(a) of the scheme framed under Section 11(10) of the Act, isnothing but certified copy. But such certified copy, would notbe available to be proceeded with under Section 33 of the StampAct if it is unstamped or insufficiently stamped. In suchcircumstances, such certified copy shall not be acted upon. [Para18][384-C-D]

SBP & Co. v. Patel Engineering Ltd. and another (2005)8 SCC 618 : [2005] 4 Suppl. SCR 688 – followed.

Mt. Bittan Bibi & Anr. v. Kuntu Lal & Anr. ILR [1952] 2All 984 – referred to.

per AJAY RASTOGI, J. (dissenting)

1. The limited scope of the Court under Section 11(6A) atthe pre-referral stage is to examine whether the arbitrationagreement, prima facie, exists as referred to under Section 7 ofthe Act, 1996, which includes only the determination of thefollowing factors : (i) Whether the arbitration agreement is inwriting? (ii) Whether the core contractual ingredients qua thearbitration agreement are fulfilled? (iii) On rare occasions, on aserious note of objection, if any, it may examine whether thesubject matter of dispute is arbitrable? [Para 92][420-E-F]

A2. (i) The existence of copy/certified copy of an arbitrationagreement whether unstamped/ 60 insufficiently stamped at thepre-referral stage is an enforceable document for the purposesof appointment of an Arbitrator under Section 11(6A) of the Act,1996 where the judicial intervention shall be minimal confinedonly to the prima facie examination of “existence of an arbitrationBagreement” alone keeping in view the object of 2015 amendmentand the courts must strictly adhere to the time schedule for theappointment of Arbitrator prescribed under Section 11(13) of theAct, 1996. (ii) All the preliminary/debatable issues includinginsufficiently stamped/unduly stamped or validity of the arbitrationCagreement etc. are referrable to the Arbitrator/Arbitral Tribunalunder Section 16 of the Act, 1996 which, by virtue of the Doctrineof Kompetenz - Kompetenz has the power to do so. (iii) Thedecision in SMS Tea Estates Private Limited stands overruled.Paras 22 and 29 of Garware Wall Ropes Limited which are approvedin paras 146 and 147 in Vidya Drolia and Others are overruled toDthat extent. [Para 97][422-H; 423-A-D]

N.N. Global Mercantile Private Limited v. Indo UniqueFlame Limited and others (2021) 4 SCC 379 – affirmed.

Vidya Drolia and others v. Durga Trading CorporationE(2021) 2 SCC 1; SMS Tea Estates Private Limited v.Chandmari Tea Company Private Limited (2011) 14SCC 66 : [2011] 9 SCR 382 and Garware Wall RopesLimited v. Coastal Marine Constructions & EngineeringLimited (2019) 9 SCC 209 : [2019] 5 SCR 579 –overruled.

Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao andothers (1971) 1 SCC 545 : [1971] 3 SCR 590 andHariom Agrawal v. Prakash Chand Malviya (2007) 8SCC 514 : [2007] 10 SCR 772 - relied on.

Naina Thakkar v. Annapurna Builders (2013) 14 SCC354; Government of Andhra Pradesh and Others v P.Laxmi Devi(Smt.) (2008) 4 SCC 720 : [2008] 3 SCR330; Enka Insaat Ve Sanayi AS v OOO InsuranceCompany Chubb (2020) UK SC 38; Shin-Etsu ChemicalCo. Ltd. v. Aksh Optifibre Ltd. and another (2005) 7

SCC 234 : [2005] 2 Suppl. SCR 699; Hindustan SteelLtd. v. Dilip Construction Company (1969) 1 SCC 597: [1969] 3 SCR 736; Vytla Sitanna v. Marivada VirannaAIR 1934 PC 105; Guru Nanak Foundation v. RattanSingh and Sons (1981) 4 SCC 634 : [1982] 1 SCR842; Food Corporation of India v. JoginderpalMohinderpal and Another (1989) 2 SCC 347 : [1989]1 SCR 880; SBP & Co. v. Patel Engineering Ltd. andanother (2005) 8 SCC 618 : [2005] 4 Suppl. SCR 688;Duro Felguera, S.A. v. Gangavaram Port Limited (2017)9 SCC 729 : [2017] 10 SCR 285; Mayavati TradingPrivate Limited v. Pradyuat Deb Burman (2019) 8 SCC714 : [2019] 1 SCR 123; Uttarakhand Purv SainikKalyan Nigam Limited v. Northern Coal Field Limited(2020) 2 SCC 455; World Sport Group (Mauritius)Limited v. MSM Satellite (Singapore) Pte. Limited (2014)11 SCC 639 : [2014] 1 SCR 796; Pravin ElectricalsPrivate Limited v. Galaxy Infra and Engineering PrivateLimited (2021) 5 SCC 671; United India InsuranceCompany Limited v. Hyundai Engineering andConstruction Company Limited (2018) 17 SCC 607 :[2018] 12 SCR 1085 – referred to.

per HRISHIKESH ROY, J. (dissenting)

1. On harmonious reading of the inconsistencies in theprovisions of the three different Acts, it is found that the generallaw must yield to the special law in the sense, that an arbitrationagreement cannot be rendered void on insufficient stamping by ageneral law, especially when none of the provisions of theArbitration Act, 1996 which is special Act provide for stamping.The requirement for the “formal” validity of an arbitrationagreement under Section 7 of the Arbitration Act, 1996 wouldtake precedence, considering the special nature of the Act andthe principle of minimal judicial intervention. Applying the ruleof construction that in cases of conflict between specific lawand general law, the specific law prevails and the general lawlike the Contract Act, 1872 applies only to such cases which arenot covered by the special law; therefore, Section2(e), 2(g) , 2(h)of the Contract Act, 1872 cannot override Section 7 contained in

Athe special law i.e. the Arbitration Act, 1996 when it comes toformal validity. Moreover, when the words of the statute in Section11 of the Arbitration Act, 1996 do not mention “validity” or even“inoperable and incapable of being performed” as mentioned inSection 45 of the Arbitration Act, 1996 or “prima facie no validBarbitration agreement” in Section 8 of the Arbitration Act, 1996,it must be understood that the general words in different statutesuch as the Contract Act, 1872 cannot override the specific wordsused in the special law. That is to say, that an arbitration agreementcannot be rendered “void” on insufficient stamping by Section11 judge when the scope of examination is only limited to theC“existence” of the arbitration agreement and not “validity”. [Paras79.1 & 79.2][473-B-F]

2. It is essential to interpret the special law in way thatgives effect to its specific provisions, while also ensuring that itis consistent with the general law to the extent possible.DImpounding at the stage of Section 11 would stall arbitralproceedings right at the outset because of the statutory barunder Section 35 of the Stamp Act, 1899. One way to harmoniseSection 35 of Stamp Act, 1899 and Section 11 of the ArbitrationAct, 1996 is for the Section 11 judge to defer necessary stampingEand impounding to the arbitrator/collector, as applicable. plainreading of Section 35 of the Stamp Act, 1899 makes it clear that itdoes not preclude an Arbitrator or Collector to impound theunstamped/insufficiently stamped document. [Para 79.4][474-E-F]

3. The Arbitrator under Section 16 has the jurisdiction toFdecide on “existence” and “validity”. plain reading of Section11(6A) would show that the examination by Court is confinedonly to “existence” and not even “validity”. Moreover, thepresent reference only concerns with the formal requirement ofstamping and not arbitrability. Applying contextual interpretationto render an arbitration agreement void on the formalGrequirement of stamping would defeat the very purpose of theArbitration Act, 1996. document cannot be rendered invalid orunenforceable especially if the defect is curable under the StampAct, 1899. Moreover, none of the provisions in the Stamp Act,1899 have the effect of rendering document invalid. Thus, theH

position in Vidya Drolia to the extent that it relies on Garware isincorrect. [Para 86.2][489-B-D]

N.N. Global Mercantile Private Limited v. Indo UniqueFlame Limited and others (2021) 4 SCC 379 – affirmed.

Vidya Drolia and others v. Durga Trading Corporation(2021) 2 SCC 1; Garware Wall Ropes Limited v. CoastalMarine Constructions & Engineering Limited (2019) 9SCC 209 : [2019] 5 SCR 579; SMS Tea Estates PrivateLimited v. Chandmari Tea Company Private Limited(2011) 14 SCC 66 : [2011] 9 SCR 382; United IndiaInsurance Company Limited v. Hyundai Engineeringand Construction Company Limited (2018) 17 SCC 607: [2018] 12 SCR 1085; - overruled.

SBP & Co v Patel Engg. Ltd. (2005) 8 SCC 618 : [2005]4 Suppl. SCR 688 – followed.

Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao andothers (1971) 1 SCC 545 : [1971] 3 SCR 590; HariomAgrawal v. Prakash Chand Malviya (2007) 8 SCC 514: [2007] 10 SCR 772 – relied on.

National Insurance Company Limited v. BogharaPolyfab Private Limited (2009) 1 SCC 267 : [2008] 13SCR 638; Govt. of AP. v P. Laxmi Devi (2008) 4 SCC720 : [2008] 3 SCR 330; Bengal Immunity Co v. Stateof Bihar (1955) 2 SCR 603; Govt. of India v. Vedanta(2020) 10 SCC 1; Amazon v. Future Retail (2022) 1SCC 209; Chloro Controls v Severn Trent WaterPurification Inc (2013) 1 SCC 641 : [2012] 13 SCR402; Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd.and another (2005) 7 SCC 234 : [2005] 2 Suppl. SCR699; Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.(2011) 8 SCC 333 : [2011] 11 SCR 1; Hindustan SteelLtd. v. Dilip Construction Company (1969) 1 SCC 597: [1969] 3 SCR 736; Chiranji Lal (Dr.) v. Hari Das(2005) 10 SCC 746 : [2005] 1 Suppl. SCR 359; JagdishNarain v. Chief Controlling Revenue Authority, AIR1994 All 371; RIO Glass Solar SA v. Shriram EPC Limited

and Ors. (2018) 18 SCC 313; Commissioner of IT v.Chandanben Maganlal (2000) 245 ITR 182; HameedJoharan v. Abdul Salam (2001) 7 SCC 573 : [2001] 1Suppl. SCR 469; Chiranji Lal (Dr.) v. Hari Das (2005)10 SCC 746 : [2005] 1 Suppl. SCR 359; Burjore andBhawani Prasad v Bhagana ILR 10 Cal 557; SainikMotors v State of Rajasthan 1962 (1) SCR 517; Stateof UP v Babu Ram AIR 1961 SC 751 : [1961] SCR679; ICICI Ltd. v. East Coast Boat Builders & EngineersLtd (1998) 9 SCC 728; KR Raveendranathan v. Stateof Kerala (1996) 10 SCC 35; Sundaram Finance Ltd.v. NEPC India Ltd (1999) 2 SCC 479 : [1999] 1 SCR89; Ador Samia Pvt Ltd. v. Peekay Holdings Ltd (1999)8 SCC 572 : [1999] 1 Suppl. SCR 658; KonkanRailways Corpn v. Mehul Construction Co (2000) 7 SCC201 : [2000] 2 Suppl. SCR 563; Konkan RailwaysCorpn v. Mehul Construction Co (2002) 2 SCC 388 :[2002] 1 SCR 728; A. Ayyasamy vs A. Paramasivam &Ors (2016) 10 SCC 386 : [2016] 11 SCR 521; BlackPearl Hotels v Planet M. Retail Ltd. (2017) 4 SCC 498: [2017] 2 SCR 50; Duro Felguera, S.A. v. GangavaramPort Limited (2017) 9 SCC 729 : [2017] 10 SCR 285;Mayavati Trading Private Limited v. Pradyuat DebBurman (2019) 8 SCC 714 : [2019] 1 SCR 123; PravinElectricals Private Limited v. Galaxy Infra andEngineering Private Limited (2021) 5 SCC 671; Fisserv. International Bank, 282 F.2d 231, 233 (2d Cir 1960);Travancore Devaswom Board v. Panchamy Pack, 200413 SCC 510; Union of India v Popular ConstructionCo 2001 (8) SCC 470 : [2001] 3 Suppl. SCR 619; St.Stephen’s College v. University of Delhi (1992) 1 SCC558 : [1991] 3 Suppl. SCR 121; Great Offshore Ltd. v.Iranian Offshore Engg. & Construction Co. (2008) 14SCC 240 : [2008] 12 SCR 515; Trimex InternationalFZE vs Vedanta Aluminum Limited, India 2010 (1)SCALE 574; Union of India v Kishorilal Gupta & Bros(1959) 1 SCR 493; National Agricultural Co-operativeMarketing federation India Ltd. v Gains Trading Limited

(2007) 5 SCC 692; Naihati Jute Mills Ltd. v KhayaliramJagannath AIR 1968 SC 522 : [1968] SCR 821; PManohar Reddy & Bros. v. Maharashtra Krishna ValleyDevelopment Corporation & Ors (2009) 2 SCC 494 :[2008] 17 SCR 1217; Oriental Insurance Company v.Narbheram Power and Steel Private Limited (2018) 6SCC 534 : [2018] 4 SCR 826; Guru Nanak Foundationv. Rattan Singh and Sons (1981) 4 SCC 634 : [1982] 1SCR 842; M/s Shree Vishnu Constructions v. TheEngineer in Chief Military Engineering Service andothers SLP(C) No. 5306/2022 dated 1.4.2022;Intercontinental Hotels Group (India) Private Ltd. v.Waterline Hotels Pvt. Ltd 2022 SCC OnLine SC 83 –referred to.J.M.A. Raju v Krishnamurthy Bhatt, AIR 1976 Guj 72;Gulzari Lal Malwari v Ram Gopal AIR 1937 Cal 765;Mattegunta Dhanalakshmi v Kantam Raju Saradamba,AIR 1977 AP 348; Puranchandra v Kallipada Roy, AIR1942 Cal 386; Boottam Pitchiah v Boyapati KoteswaraRao AIR 1964 AP 519; Board of Revenue v N.Narasimhan AIR 1961 Mad 504; A. Bapiraju v DistrictRegistrar AIR 1968 AP 142; Gulzari Lal Malwari v RamGopal AIR 1937 Cal 765; Chennai Container TerminalPvt Ltd v. Union of India, 2007 3 Arb LR 218 (Mad);United India Insurance Co. Ltd. V Kumar TexturisersAIR 1999 Bom 118 - referred to.

Enka Insaat Ve Sanayi AS v OOO Insurance CompanyChubb (2020) UKSC 38; United Insurance Companyof Pakistan Limited v. Hafiz Muhammad Siddique 1978PLD SC 279; House of Lords in Fiona Trust andHolding Corporation v. Privalov (2007) 1 AllER(Comm) 891; Buckeye Check Cashing Inc. v.Cardegna, 2006 SCC OnLine US SC 14; Henry Schein,Inc. v Archer and White Sales, Inc 2019 SCC OnlineUS SC 1; Weatherford Oiltool Middle East Limited vsBaker Hughes Singapore PTE 2022 SCC OnLine 1464;Badgerow v. Walters, 596 U.S. 2022 – referred to.

[2023] 9 S.C.R.

ACase Law Reference

In the judgement of K. M. JOSEPH

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/sINDO UNIQUE FLAME LTD. & ORS.

300SUPREME COURT REPORTS

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/sINDO UNIQUE FLAME LTD. & ORS.

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 3802-3803 of 2020.

From the Judgment and Order dated 30.09.2020 in WP No.1801of 2020 and dated 28.10.2020 in RAST No. 9819 of 2020 of the HighCourt of Judicature at Bombay at Nagpur.

Gourab Banerjee, Sr. Adv. (Amicus Curiae)

Gagan Sanghi, Rameshwar Prasad Goyal, Advs. for the Appellant.

K. Ramakanth Reddy, Ms. Malvika Trivedi, Sr. Advs., RajulShrivastav, Mohit D. Ram, Monish Handa, Ms. Charu Ambwani, RaghuGurram, Ms. Kavya Vijay, Ms. Komal Agarwal, Sanjay Kapur, Ms.Megha Karnwal, Surya Prakash, Arjun Bhatia, Ms. Akshata Joshi, Ms.Astha Gumber, Debesh Panda, Naman Maheshwari, Garv Malhotra,Neil Chatterjee, Udbhav Gady, Ms. Snehal Maheshwari, Rahul Totala,Eshan Aprameya Chaturvedi, Premlal Krishnan, Rahul Arya, MadhavBhatia, Ms. Bani Dixit, Yogesh Sharma, Shailendra Slaria, Arun Pandian,Shreshth Arya, Aditya Pandey, Himanshu Kapoor, Alok Tripathi, Ms.Sujal Gupta, Puneet Singh Bindra, Ms. Anshika Mishra, Ms. SimranJeet, Rishabh Gupta, Advs. for the Respondents.

The Judgments of the Court were delivered by

K. M. JOSEPH, J.

Index*

A.THE REFERENCE ........................................................ 2B.A BIRD’S OVERVIEW OF THE FACTS IN N.N.GLOBAL ........................................................................ 3

*Ed. Note: Pagination in the Index is as per the original judgment.

[2023] 9 S.C.R.

AC.THE FINDINGS IN N.N. GLOBAL IN REGARD TO THEQUESTION UNDER THE CAPTION ‘VALIDITY OFAN 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)?.......................................................................... 32C

H.THE SCHEME OF THE STAMP ACT ....................... 53

I.HINDUSTAN STEEL LIMITED ANALYSED .......... 59

J.THE INDIAN CONTRACT ACT, 1872 - SURVEY;DISSECTION OF GARWARE, VIDYA DROLIA AND

N.N. GLOBAL ............................................................. 64

K.THE STAMP ACT – WHETHER PROCEDURALLAW?............................................................................ 88

L.SECTION 7 OF THE ACT – ITS IMPACT ............... 97

M.THE ALTERNATIVE PERSPECTIVE .................... 105

N.THE AMICUS CURIE SPRINGS SURPRISE ...... 111

O.SECTIONS 33 AND 35 OF THE STAMP ACT; THE

FCOURT OR THE ARBITRATOR TO ACT? ........... 124P.ARBITRATION AGREEMENT, DISTINCT

AGREEMENT AND ITS IMPACT?......................... 132

Q.CONCLUSIONS ........................................................ 137

1. We have perused the draft judgments prepared by our esteemedbrothers Ajay Rastogi, J. and Hrishikesh Roy, J. With profound respectto our learned Brothers, we are unable to, however, concur with them intheir reasoning and conclusions save as will be made clear. Hence, theHfollowing judgment.

A. THE REFERENCE

2. Bench of three learned Judges disposed of Civil Appeal Nos.3802-3803 of 2020 by Judgment dated 11.01.2021. The Judgment isreported in N.N. Global Mercantile Private Limited v. Indo UniqueFlame Limited and others1. What is of relevance for the purpose of theReference is the following:

“56. We are of the considered view that the finding in SMS TeaEstates [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) 324] thatthe non-payment of stamp duty on the commercial contract wouldinvalidate even the arbitration agreement, and render it non-existentin law, and unenforceable, is not the correct position in law.

57. In view of the finding in paras 146 and 147 of the judgment inVidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021)2 SCC 1 : (2021) 1 SCC (Civ) 549] by coordinate Bench, whichhas affirmed the judgment in Garware [Garware Wall Ropes Ltd.v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC209 : (2019) 4 SCC (Civ) 324], the aforesaid issue is required tobe authoritatively settled by Constitution Bench of this Court.

58. We consider it appropriate to refer the following issue, to beauthoritatively settled by Constitution Bench of five Judges ofthis Court:

“Whether the statutory bar contained in Section 35 of the StampAct, 1899 applicable to instruments chargeable to stamp duty underSection 3 read with the Schedule to the Act, would also renderthe arbitration agreement contained in such an instrument, whichis not chargeable to payment of stamp duty, as being non-existent,unenforceable, or invalid, pending payment of stamp duty on thesubstantive contract/instrument?”

B. BIRD’S OVERVIEW OF THE FACTS IN N.N.GLOBAL

3. The first respondent, who was awarded the Work Order, enteredinto sub-contract with the appellant. Clause 10 of the Work Order,constituting the sub-contract, provided for an Arbitration Clause. The

Aappellant had furnished bank guarantee in terms of Clause 9. Theinvocation of the said guarantee led to Suit by the appellant against theencashment of the bank guarantee. The first respondent applied underSection 8 of the Arbitration and Conciliation Act, 1996 (hereinafterreferred to as, ‘the Act’, for short) seeking Reference. Writ Petitionwas filed by the first respondent challenging the Order of the CommercialBCourt rejecting the Application under Section 8 of the Act. One of thecontentions raised was that the Arbitration Agreement becameunenforceable as the Work Order was unstamped. The High Court,however, allowed the Writ Petition filed by the first respondent. Theissue relevant to this Bench was, whether the Arbitration AgreementCwould be enforceable and acted upon, even if the Work Order isunstamped and unenforceable under the Indian Stamp Act, 1899(hereinafter referred to as, ‘the Stamp Act’, for short).C. THE FINDINGS IN N.N. GLOBAL IN REGARD TOTHE QUESTION UNDER THE CAPTION ‘VALIDITY OF ANDARBITRATION AGREEMENT IN AN UNSTAMPEDAGREEMENT’

4. The Court found that an Arbitration Agreement is distinct andseparate agreement, which is independent from the substantivecommercial contract in which it is embedded. Under the Doctrine ofEKompetenz–Kompetenz, the Arbitral Tribunal had competence to ruleon its own jurisdiction, including objections with regard to the existence,validity and scope of the Arbitration Agreement. Section 16(1) of theAct was relied upon. The Court made copious reference to case lawin support of the Doctrine of Kompetenz-Kompetenz. Section 5 of theAct contemplated minimal judicial interference. The Court referred toFthe Maharashtra Stamp Act, 1958. Section 34 of the said Act, essentially,is pari material with Section 35 of the Stamp Act, 1899 hereinafterreferred to as the Stamp Act. There are other provisions, which essentiallyfollow the same pattern as is contained in the latter Act. The Court,thereafter, went on to refer to Item 63 of Schedule I of the MaharashtraGStamp Act, 1958, which dealt with ‘Works Contract’. It was found thatthe Stamp Act is fiscal measure. Thereafter, the Court went on todiscuss the Judgment of this Court reported inSMS Tea Estates PrivateLimited v. Chandmari Tea Company Private Limited2. The Courtreferred to the following part of the Judgment inSMS Tea Estates (supra):

H2 (2011) 14 SCC 66

“19. Having regard to Section 35 of the Stamp Act, unless thestamp duty and penalty due in respect of the instrument is paid,the court cannot act upon the instrument, which means that itcannot act upon the arbitration agreement also which is part ofthe instrument. Section 35 of the Stamp Act is distinct and differentfrom Section 49 of the Registration Act in regard to an unregistereddocument. Section 35 of the Stamp Act, does not contain provisolike Section 49 of the Registration Act enabling the instrument tobe used to establish collateral transaction.

xxxxxx

21. Therefore, when lease deed or any other instrument is reliedupon as contending the arbitration agreement, the court shouldconsider at the outset, whether an objection in that behalf is raisedor not, whether the document is properly stamped. If it comes tothe conclusion that it is not properly stamped, it should beimpounded and dealt with in the manner specified in Section 38 ofthe Stamp Act. The court cannot act upon such document orthe arbitration clause therein. But if the deficit duty and penalty ispaid in the manner set out in Section 35 or Section 40 of theStamp Act, the document can be acted upon or admitted inevidence.”

5. The Court further went on to find that, at the time SMS TeaEstates(supra) was decided, the law relating to reference to Arbitrationunder Section 11 of the Act, was expounded in the Constitution Bench3decision reported inSBP & Co. v. Patel Engineering Ltd. and another,among other cases. It was further found that the law laid down was thatin an Application under Section 11(6) of the Act, the Court may determinecertain threshold issues, such as, whether the claim was time-barred, ora stale claim; whether there was accord and satisfaction, which wouldpreclude the need for reference to arbitration. Thereafter, the Courtrefers to the amendment to Section 11 by the insertion of Sub-Section(6A) in Section 11. The Court referred to the Judgment inDuro Felguera,S.A. v. Gangavaram Port Limited4, to conclude that what was to begone into was only whether an Arbitration Agreement existed or not.The Court noted that the said position was affirmed by Bench of three

3 (2005) 8 SCC 618

4 (2017) 9 SCC 729

Alearned Judges in Mayavati Trading Private Limited v. Pradyuat DebBurman5. Still further, the Court went on to notice the Judgment renderedby the Bench of two learned Judges in Garware Wall Ropes Limited v.Coastal Marine Constructions & Engineering Limited6 and referredto para 22 of the said decision where this Court relied on Section 2 (h) ofthe Indian Contract Act, 1872 (hereinafter referred to as, ‘the ContractBAct’, for short) and found that an unstamped agreement to beunenforceable.

6. InGarware(supra), the Bench of two learned Judges took theview that the Arbitration Clause contained in the sub-contract would notexist as matter of law until the sub-contract was duly stamped. It wasCfurther found that Section 11(6A) deals with existence as opposed toSection 8, and Section 45 of the Act [See paragraph 29 of Garware(supra)]. The Bench of three learned Judges in its judgment in N.N.Global(supra), containing the Order of Reference to the ConstitutionBench, found that an Arbitration Agreement is not included in theDSchedule as an instrument chargeable to stamp duty. The Court referredto Item 12 of Schedule I of the Maharashtra Stamp Act, 1958, in thisregard. Thereafter, the Court went on to find that the Work Order waschargeable to payment of stamp duty. The Court, however, found thatthe non-payment or the deficiency on the Work Order did not invalidatethe main contract. Section 34 of the Maharashtra Act corresponding toESection 35 of the Stamp Act did not make the unstamped instrument,invalid, non-existent or unenforceable in law. The Court found that theArbitration Agreement was distinct and an independent contract. Onthe Doctrine of Separability, it would not be rendered invalid,unenforceable or non-existing, even if the substantive contract, in whichFit is contained, was inadmissible in evidence or could not be acted upon,in view of it not being stamped. The Bench inN.N. Global(supra) wenton to hold as follows:

“26. In our view, there is no legal impediment to the enforceabilityof the arbitration agreement, pending payment of stamp duty onGthe substantive contract. The adjudication of the rights andobligations under the work order or the substantive commercialcontract would, however, not proceed before complying with themandatory provisions of the Stamp Act.

5 (2019) 8 SCC 714H6 (2019) 9 SCC 209

27. The Stamp Act is fiscal enactment for payment of stampduty to the State on certain classes of instruments specified in theStamp Act. Section 40 of the Stamp Act, 1899 provides theprocedure for instruments which have been impounded, and sub-section (1) of Section 42 requires the instrument to be endorsedafter it is duly stamped by the Collector concerned. Section 42(2)provides that after the document is duly stamped, it shall beadmissible in evidence, and may be acted upon.

28. In our view, the decision in SMS Tea Estates [SMS TeaEstates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC66 : (2012) 4 SCC (Civ) 777] does not lay down the correct positionin law on two issues i.e. : (i) that an arbitration agreement in anunstamped commercial contract cannot be acted upon, or isrendered unenforceable in law; and (ii) that an arbitrationagreement would be invalid where the contract or instrument isvoidable at the option of party, such as under Section 19 of theContract Act, 1872.29. We hold that since the arbitration agreement is an independentagreement between the parties, and is not chargeable to paymentof stamp duty, the non-payment of stamp duty on the commercialcontract, would not invalidate the arbitration clause, or render itunenforceable, since it has an independent existence of its own.The view taken by the Court on the issue of separability of thearbitration 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 wouldnot invalidate even the main contract. It is deficiency which iscurable 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 voidable contract would not be arbitrableas it affects the validity of the arbitration agreement, is in ourview not the correct position in law. The allegations made by aparty that the substantive contract has been obtained by coercion,fraud, or misrepresentation has to be proved by leading evidenceon the issue. These issues can certainly be adjudicated througharbitration.

A31. We overrule the judgment in SMS Tea Estates [SMS TeaEstates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC66 : (2012) 4 SCC (Civ) 777] with respect to the aforesaid twoissues as not laying down the correct position in law.”

7. We may also notice paragraph-32 in N.N. Global (supra):

“32.Garware [Garware Wall Ropes Ltd. v. Coastal MarineConstructions & Engg. Ltd., (2019) 9 SCC 209 : (2019) 4 SCC(Civ) 324] judgment has followed the judgment in SMS TeaEstates [SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P)Ltd., (2011) 14 SCC 66 : (2012) 4 SCC (Civ) 777] . The counselCfor the appellant has placed reliance on para 22 of the judgmentto contend that the arbitration clause would be non-existent inlaw, and unenforceable, till stamp duty is adjudicated and paid onthe substantive contract. We hold that this finding is erroneous,and does not lay down the correct position in law. We have alreadyheld that an arbitration agreement is distinct and independent fromDthe underlying substantive commercial contract. Once thearbitration agreement is held to have an independent existence, itcan be acted upon, irrespective of the alleged invalidity of thecommercial contract.”

8. Thereafter, the Bench of three learned Judges in N.N. GlobalE(supra) noted that the Judgment in Garware (supra) was cited withapproval by Bench of three learned Judges inVidya Drolia and othersv. Durga Trading Corporation7. The Court set out paragraphs 146and 147 of Vidya Drolia(supra) and doubted the correctness of thesaid view and found it appropriate to refer the findings in paragraphs-22Fand 29 of Garware (supra) as affirmed in paragraphs 146 & 147 ofVidya Drolia(supra) to the Constitution Bench. We deem it appropriateto now refer to the following paragraphs in N.N. Global(supra):

“35. The next issue which arises is as to which authority wouldexercise the power of impounding the instrument under SectionG33 read with Section 34 of the Maharashtra Stamp Act, in casewhere the substantive contract contains an arbitration agreement.

36. In an arbitration agreement, the disputes may be referred toarbitration by three modes.

H7 (2021) 2 SCC 1

36.1. The first mode is where the appointment of the arbitratortakes place by the parties consensually in accordance with theterms of the arbitration agreement, or by designated arbitralinstitution, without the intervention of the court. In such case,the arbitrator/tribunal is obligated by Section 33 of the Stamp Act,1899 (or the applicable State Act) to impound the instrument, anddirect the parties to pay the requisite stamp duty (and penalty, ifany), and obtain an endorsement from the Collector concerned.This would be evident from the provisions of Section 34 of theStamp Act which provides that “any person having by law orconsent of parties authority to receive evidence” is mandatedby law to impound the instrument, and direct the parties to pay therequisite stamp duty.

36.2. The second mode of appointment is where the parties fail tomake the appointment in accordance with the arbitration agreement,and an application is filed under Section 11 before the Court toinvoke the default power for making the appointment. In such acase, the High Court, or the Supreme Court, as the case may be,while exercising jurisdiction under Section 11, would impound thesubstantive contract which is either unstamped or inadequatelystamped, and direct the parties to cure the defect before thearbitrator/tribunal can adjudicate upon the contract.

36.3. The third mode is when an application is filed under Section8 before judicial authority for reference of disputes to arbitration,since the subject-matter of the contract is covered by an arbitrationagreement. In such case, the judicial authority will make thereference to arbitration. However, in the meanwhile, the partieswould be directed to have the substantive contract stamped inaccordance with the provisions of the relevant Stamp Act, so thatthe rights and obligations emanating from the substantive contractcan be adjudicated upon.”

D. SUBMISSION OF THE PARTIES

9. Shri Gagan Sanghi, learned Counsel, appeared on behalf ofthe appellant (M/s N.N. Global Mercantile Private Limited). Initially,since there was no appearance for the first respondent, we appointedShri Gourab Banerji, learned Senior Counsel as Amicus Curiae. Wealso heard Ms. Malavika Trivedi, learned Senior Counsel, appearing

Aby way of intervention. Shri K Ramakanth Reddy, learned SeniorCounsel appeared thereafter for the first respondent and made hissubmissions.

10. Shri Gagan Sanghi would take us through the provisions ofthe Stamp Act and the Act and contended that Section 35 of the StampBAct barred admission of not duly stamped instrument in evidence forany purpose in Court. Furthermore, Court could not act upon such aninstrument. Not even for collateral purpose, ran the argument. Thereis an absolute bar. An Arbitration Agreement, even if contained in aClause, in Work Order or in other commercial contract, cannot have aseparate existence as found in N.N. Global (supra). The Doctrine ofCthe Arbitration Agreement being distinct and having separate existence,has been erroneously understood in the context of Sections 33 and 35 ofthe Stamp Act. The Judgment in SMS Tea Estates(supra) ought not tohave been overruled. The Principle of Stare Decisis could not havebeen overlooked. The learned Counsel drew our attention to the factDthat several foreign countries have laws, which contain provisions similarto Sections 33 and 35 of the Stamp Act. In fact, he would contend thatthere was no occasion to make the reference as the main case stooddisposed of. He would submit that even in an Application under Section11 of the Act, the Court was bound to observe the mandate of the lawcontained in Sections 33 and 35 of the Stamp Act. The law has beenEcorrectly laid down in SMS Tea Estates (supra) and Garware (supra)and it was also correctly upheld inVidya Drolia (supra). The amendmentto Section 11 by the insertion of sub-Section (6A), could not authorise aCourt to overlook the dictate of Sections 33 and 35 of the Stamp Act.

11. Smt. Malvika Trivedi, learned Senior Counsel, projected theFsame complaint against the view taken in N.N. Global (supra). She, infact, 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 thatthe requirement to comply with Sections 33 and 35 of the Stamp Act,would not stand displaced, even in an Application under Section 9 of theGAct.

12. Shri Gourab Banerji, learned Amicus, contended that actually,there were parts of Garware (supra), Vidya Drolia (supra) and N.N.Global(supra), which didlay down the law correctly. He began bypointing out that the Bench in N.N. Global (supra) was not correct inHproceeding on the basis that, an Arbitration Agreement, was not required

to be stamped. He drew our attention to Article 5 of Schedule I of theMaharashtra Stamp Act, 1958 in this regard. It is his submission that theexistence and/or validity of an Arbitration Agreement is not affected bythe provisions of the Stamp Act. Non-payment of the stamp duty will notinvalidate the instrument. It is curable defect. true reading of Section11(6A) would establish that the impounding of an unstamped or deficientlystamped instrument, is not to be done by the Judge under Section 11 butby the Arbitrator appointed under Section 11. Section 11(6A) compelsthe Court to confine its examination to the question of the existence ofthe Arbitration Agreement. In view of the fact that, neither Garware(supra) norN.N. Global(supra) laid down the law correctly, he requestedthat the reference be reformulated as indicated later.13. Relying upon the Judgment of this Court in Hindustan SteelLtd. v. Dilip Construction Company8, it is contended that an unstampeddocument can be acted upon, after payment of duty and penalty. Beinga curable defect, it could not be found that an unstamped instrument didnot exist in the eye of law. He drew our attention to the Judgment of thePrivy Council in Lachmi Narayan Agarwalla and Others v. BrajaMohan Singh (SINCE DECEASED)9, to contend that an unstampedinstrument, with penalty paid, became effective in law. He further drewsupport from the following Judgments:

i.Joyman Bewa v. Easin Sarkar10;

ii.Gulzari Lal Marwari v. Ram Gopal11

iii.Purna Chandra Chakrabarty and others v. Kalipada12Roy and another.

14. The aforesaid case law, unerringly points to the conclusionthat failure to stamp document, did not affect the validity of thedocument. It merely rendered the document inadmissible in evidence.From the Judgment of the Pakistan Supreme Court inUnited InsuranceCompany of Pakistan Limited v. Hafiz Muhammad Siddique13, thefollowing words of Dorab Patel, J., are enlisted before us:

8 (1969) 1 SCC 597

9 51 Indian Appeals 332

10 AIR 1926 Calcutta 877

11 ILR 1937 1 Calcutta 257

12 AIR 1942 Calcutta 386

13 PLD 1978 SC 279

A“It would be against all cannons of construction to enlarge themeaning of the words in Section 35 so as to render invalidinstruments which fall within mischief of the section.”

15. The learned Amicus would point out that stamp duty is leviedwith reference to the instrument and not the transaction. The Stamp ActBis consolidating Act. It is fiscal law. Securing revenue was the aim.It cannot be used to clothe litigant with an arm of technicality. Hedrew our attention to Section 5 of the Act interdicting judicial intervention.He pointed out Section 8 of the Act, which, after the amendment in theyear 2015, permits disallowing of making reference to arbitration, onlyif the Court found prima facie that no valid Arbitration AgreementCexisted. Section 8, he pointed out, did refer to ‘validity’. He took usthrough the decision in SMS Tea Estates(supra), in the context of thelaw laid down inSBP(supra), by the Constitution Bench, the Report ofthe Law Commission of India and emphasised the need for minimalinterference and to give full meaning to Section 11(6A), by ensuringDminimal interference. He drew our attention to the discussion by thehigh-level Committee, which preceded the amendment in Section 11.He commended for the Court’s acceptance, the view taken by this Courtin Duro Felguera14, wherein, Justice Kurian Joseph, speaking for theCourt inter alia, held in the post Section 11(6A) scenario, as follows:

E“59. The scope of the power under Section 11(6) of the 1996 Actwas considerably wide in view of the decisions in SBP andCo. [SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] andBoghara Polyfab [National Insurance Co. Ltd. v. BogharaPolyfab (P) Ltd., (2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117] .This position continued till the amendment brought about in 2015.FAfter the amendment, all that the courts need to see is whetheran arbitration agreement exists—nothing more, nothing less. Thelegislative policy and purpose is essentially to minimise the Court’sintervention at the stage of appointing the arbitrator and this intentionas incorporated in Section 11(6-A) ought to be respected.”

G16. The learned Amicus would point out that non-stamping did notrender the agreement null and void. In law and in point of fact, anunstamped instrument bears life. He would point out thatDuro Felguera(supra) was approved by Bench of three learned Judges in Mayavati

H14 (2017) 9 SCC 729

Trading(supra). He would attack the finding in Garware (supra) thatan unstamped instrument was void as being incorrect. He would submitthat what is required in law, after the insertion of sub-Section (6A) isclear as daylight. The existence of an Arbitration Agreement, is all thatshould detain the Judge in an application under Section 11. No doubt, hewould point out that there may be cases where the actual situation, whichoccasioned the Judgment inVidya Drolia (supra), may exist. This meansthat since Section 5 of the Act makes certain disputes non-arbitrable, itmay detain Judge, who is approached under Section 11, to dissuadehim from making reference. There may arise occasions, which mayleave the Judge with little choice but to decline the reference. An instancemay be an agreement demonstrated to be made by minor or personof unsound mind. Such exceptional cases apart, the learned Amicus wouldrequest the Court to draw comfort from the thought that the Arbitrator isfully competent by virtue of the Doctrine of Kompetenz-Kompetenz,which stands enshrined in Section 16 of the Act, to deal with all sorts ofobjections. Having regard to the clear legislative intent, discernible fromthe Report of the Law Commission and the amendment to Section 11 ofthe Act, which finds its echo in the change brought about in Section 8 ofthe Act, by the same amendment, the effort must be to facilitate anunhindered and smooth passage for an Application seeking reference toarbitration. The learned Amicus with reference to paragraph-18 ofSBP(supra), submits that the Court inGarware (supra) erred in holding thatonly if the Arbitrator was appointed, without intervention of the Court,Section 16 would have full play. It is pointed out that the Judgment inSBP(supra) will not have life, after the amendment in 2015. He wouldalso point out that the Court inGarware (supra) erred in paragraph-19,when it suggested that the Court was only giving effect to mandatoryenactment, which purported to protect the public revenue. While it iscorrect, it is pointed out that an agreement enforceable by law is contractand Section 2(g) of the Contract Act, provides that an agreement notenforceable by law, is said to be void, non-stamping or inadequatestamping would not make an instrument void. It is pointed out that thesuggestion that, an unstamped document did not become contract, andthat it was, therefore, unenforceable in law was incorrect. He also wouldfind fault with the Court in Garware (supra), when it found that anunstamped document would not ‘exist’ as matter of law. The solutionsuggested by the learned Amicus is that an Arbitrator may be appointedand, to allow the Arbitral Tribunal to fulfil its duties under the Stamp Act.

AIn other words, it is pointed out, in keeping with the purpose of Section11(6A) and the need for minimal interference, as contemplated in Section5 of the Act, on prima facie examination as to existence of an ArbitrationAgreement, reference must be made. He further also would point outthat the Judgment of Justice Sanjiv Khanna in Vidya Drolia (supra)Bmay require revisit. With reference to paragraph-31, wherein SanjivKhanna, J., felt bound by the Constitution Bench Judgment inSBP(supra),it is pointed out that the learned Judge ignored the amendments to Sections8 and 11 brought about by the amendment in 2015. He would furtherpoint out that in paragraphs-81 to 154, under the caption ‘Who decidesnon-arbitrability’, he calls for clarity to be brought. In paragraph-98, it isCpointed out that an error was occasioned in coming to the conclusionthat Sections 8 and 11 were complementary in nature and in exercisingpower under the two provisions, the jurisdiction was complementary. Itis pointed out that the views of Justice Sanjiv Khanna appear to beinconsistent with that of the three-Judge Bench in Mayavati(supra). ItDis submitted by the learned Amicus that the observations of Justice SanjivKhanna, in paragraphs-146, 147.1, 147.9 and paragraph-147.10 mayrequire recalibration. Paragraphs-146 to 154, it is the stand of the AmicusCuriae, may have to be fine-tuned. Learned Amicus would point outthat the conclusion of N.V. Ramana, J. in Paragraphs-237 and 244 mayEbe endorsed to the extent of inconsistency with that of Justice SanjivKhanna. Coming to N.N. Global(supra), the learned Amicus, apartfrom pointing out that contrary to what was held, viz., that an ArbitrationAgreement was not exigible to stamp duty, it was, indeed, liable. It ispointed out that the ratio in paragraphs-22 and 26, would have to besupported. It is the contention of the learned Amicus that Sections 8 andF11 of the Act could not be equated. The standard to be applied may bethe same, i.e., prima facie satisfaction of the existence of the ArbitrationAgreement. In Section 11, the Court operates as substitute of anAppointing Authority. There is only narrow scope. It is his case, that inan Application under Section 8, the scope may be wider as one has toGsee whether there was valid Arbitration Agreement. It is his submissionthat unless it is patently void, ‘subject matter arbitrability’ should be leftto the Arbitrator. In Section 8 Application, the Court should not undertakethe exercise of examining of the issue relating to the stamp duty, whichgoes to admissibility and not jurisdiction. The word ‘existence’ in Section11(6A) meant legally enforceable existence and not mere presence inH

the contract. The scope of the Court must be circumscribed to narrowthe prima facie examination of:

i.Formal validity of the Arbitration Agreement at the stageof 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 time-consuming affair andit would not align with the goal of the Act, which is to ensure theexpeditious appointment of Arbitrators and the conclusion of theproceedings with the least judicial interference. If the Court refrainedfrom interfering on the score of disputes as to stamp duty and allow theArbitrator to deal with the matter, which, he is, in law, fully competent todeal 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 Shri K. Ramakanth Reddy, learnedsenior counsel appeared for the first respondent. He would contend thatthe court must adopt harmonious construction as between the StampAct and the Act. He emphasises the importance of conforming to Section5 of the Act. He drew our attention to the judgment of this Court inGreat Offshore Ltd. v. Iranian Offshore Engg. & Construction Co.15In the said judgment which is authored by learned Single Judge, whiledealing with petition under Section 11 of the Act, inter alia, held:

55. Second, the plain language of Section 7 once again governsmy conclusion. Section 7 does not require that the parties stampthe agreement. It would be incorrect to disturb Parliament’sintention when it is so clearly stated and when it in no way conflictswith the Constitution.

60. Technicalities like stamps, seals and even signatures are redtape that have to be removed before the parties can get whatthey really want—an efficient, effective and potentially cheapresolution of their dispute. The autonomie de la volonté doctrineis enshrined in the policy objectives of the United NationsCommission on International Trade Law (UNCITRAL) Model Lawon International Commercial Arbitration, 1985, on which our

AArbitration Act is based. (See Preamble to the Act.) The courtsmust implement legislative intention. It would be improper andundesirable for the courts to add number of extra formalities notenvisaged by the legislation. The courts’ directions should be toachieve the legislative intention.

B19. He drew our attention to the judgment of this Court inCommissioner of Income Tax v. Hindustan Bulk Carriers16, interalia, that Court should, faced with two interpretations avoid theconstruction which reduces the legislation to futility but accept bolderconstruction which will produce an effective result qua the purpose soughtto be achieved.C

20. Shri Debesh Panda, learned counsel appearing for the Applicant(Intervention) in I.A.No.199969 of 2022 submitted that the Act constitutesa complete Code. Since Section 5 of the Act contains non-obstanteclause which declares that “notwithstanding anything contained in anyother law for the time being in force” despite the Stamp Act on theDprinciple of minimum interference except as provided in Part-I of theAct, the Court should not be detained by Sections 33 and 35 of theStamp Act. HHe also reiterates that what is required under Section 11 isa prima facie satisfaction. Parliament did not require the considerationof validity when it enacted Section 11 (6A). There is consciousEdistinction between Sections 8 and 11. In other words, there is distinctionbetween the expressions ‘existence’ and ‘validity’. The width of powersunder Section 16 is untrammelled, it is contended.

E. ANALYSIS

21. In view of the submission made by the learned Amicus thatFthe Court inN.N. Global(supra) was in error in proceeding on the basisthat the Arbitration Agreement would not be exigible to stamp duty, thevery premise of the Order of Reference would stand removed. Thereformulated question sans the words, ‘which is not chargeable topayment of stamp duty’, and words, ‘unenforceable or invalid’, would,therefore, be as follows:G

“Whether the statutory bar contained in Section 35 of the StampAct applicable to instruments chargeable to stamp duty underSection 3 read with the Schedule to the Act, would also renderthe arbitration agreement contained in such an instrument, as being

non-existent, pending payment of stamp duty on the substantivecontract/instrument?”

F. THE ACT

22. Section 2(b) of the Act defines an Arbitration Agreement tobe ‘an agreement referred to in Section 7’.

23. Section 5 of the Act declares as follows: -

“5. Extent of judicial intervention. -Notwithstanding anythingcontained in any other law for the time being in force, in mattersgoverned by this Part, no judicial authority shall intervene exceptwhere so provided in this Part.”

24. Section 7 of the Act reads as follows:

“7 Arbitration agreement. —

(1) In this Part, “arbitration agreement” means an agreement bythe parties to submit to arbitration all or certain disputes whichhave arisen or which may arise between them in respect of adefined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitrationclause in contract or in the form of separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in—

(a) document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means oftelecommunication which provide record of the agreement; or

(c) an exchange of statements of claim and defence in which theexistence of the agreement is alleged by one party and not deniedby the other.

(5) The reference in contract to document containing anarbitration clause constitutes an arbitration agreement if thecontract is in writing and the reference is such as to make thatarbitration clause part of the contract.”

25. Section 11 deals with Appointment of Arbitrators. Since weare concerned with the impact of Section 11(6A), which was inserted

Aby Act 3 of 2016 w.e.f. 23.10.2015, we deem it appropriate to refer tothe same:

“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 orderBof any Court, confine to the examination of the existence of anarbitration agreement.”

It must be noticed that the aforesaid provision stands omitted byAct 33 of 2019. But Act 33 of 2019 has not been brought into force.

G. WHAT LED TO THE INSERTION OF SECTIONC11(6A)?

26. It is important to delve into the past and enquire as to what ledto the insertion of sub-Section (6A) in Section 11 of the Act. The Actwas passed in the year 1996. The Act is, undoubtedly, based on theUNCITRAL MODEL Law. The Hundred and Seventy-Sixth Report ofDthe Law Commission of India made its recommendations for enactingamendments to the Act. This is followed by the Justice B.P. SarafCommittee Report, which was submitted on 29.01.2005. The nature ofthe power exercised by the courts under Section 11 of the Act, was thesubject matter of considerable case law. Suffice it to notice, Bench ofEseven learned Judges, with lone dissent, inSBP(supra), proceeded tohold that the power exercised under Section 11(6) was judicial powerand not an administrative power. In the Majority Judgment, the Courthad occasion to consider the impact of Section 16 of the Act, whichincorporates 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 scopeof authority or either of them, the same is open to immediatechallenge in an appeal, when the objection is upheld and only in anappeal against the final award, when the objection is overruled.Sub-section (5) enjoins that if the Arbitral Tribunal overrules theobjections under sub-section (2) or (3), it should continue with thearbitral proceedings and make an arbitral award. Sub-section (6)provides that party aggrieved by such an arbitral award overrulingthe plea on lack of jurisdiction and the exceeding of the scope ofauthority, may make an application on these grounds for setting

aside the award in accordance with Section 34 of the Act. Thequestion, in the context of sub-section (7) of Section 11 is, what isthe scope of the right conferred on the Arbitral Tribunal to ruleupon its own jurisdiction and the existence of the arbitration clause,envisaged by Section 16(1), once the Chief Justice or the persondesignated by him had appointed an arbitrator after satisfyinghimself that the conditions for the exercise of power to appoint anarbitrator are present in the case. Prima facie, it would be difficultto say that in spite of the finality conferred by sub-section (7) ofSection 11 of the Act, to such decision of the Chief Justice, theArbitral Tribunal can still go behind that decision and rule on itsown jurisdiction or on the existence of an arbitration clause. Italso appears to us to be incongruous to say that after the ChiefJustice had appointed an Arbitral Tribunal, the Arbitral Tribunalcan turn round and say that the Chief Justice had no jurisdictionor authority to appoint the Tribunal, the very creature brought intoexistence by the exercise of power by its creator, the Chief Justice.The argument of the learned Senior Counsel, Mr K.K. Venugopalthat Section 16 has full play only when an Arbitral Tribunal isconstituted without intervention under Section 11(6) of the Act, isone way of reconciling that provision with Section 11 of the Act,especially in the context of sub-section (7) thereof. We are inclinedto the view that the decision of the Chief Justice on the issue ofjurisdiction and the existence of valid arbitration agreement wouldbe binding on the parties when the matter goes to the ArbitralTribunal and at subsequent stages of the proceeding except in anappeal in the Supreme Court in the case of the decision being bythe Chief Justice of the High Court or by Judge of the HighCourt designated by him.”

(Emphasis supplied)

27. We may next notice the Judgment rendered by Bench oftwo learned Judges in SMS Tea Estates (supra). They dealt with threequestions. What is of relevance, is the second question, which was,‘whether an Arbitration Agreement in an unregistered instrument, whichis not duly stamped, is valid and enforceable’. The Court, inter alia, heldas follows:

“20. The Scheme for Appointment of Arbitrators by the ChiefJustice of Gauhati High Court, 1996 requires an application under

Section 11 of the Act to be accompanied by the originalarbitration agreement or duly certified copy thereof. In fact,such requirement is found in the scheme/rules of almost all theHigh Courts. If what is produced is certified copy of theagreement/contract/instrument containing the arbitration clause,it should disclose the stamp duty that has been paid on the original.Section 33 casts duty upon every court, that is, person havingby law authority to receive evidence (as also every arbitratorwho is person having by consent of parties, authority to receiveevidence) before whom an unregistered instrument chargeablewith duty is produced, to examine the instrument in order toascertain whether it is duly stamped. If the court comes to theconclusion that the instrument is not duly stamped, it has toimpound the document and deal with it as per Section 38 of theStamp Act.

xxxxxx

22. We may therefore sum up the procedure to be adopted wherethe arbitration clause is contained in document which is notregistered (but compulsorily registerable) and which is not dulystamped:

22.1. The court should, before admitting any document intoevidence or acting upon such document, examine whether theinstrument/document is duly stamped and whether it is aninstrument which is compulsorily registerable.

22.2. If the document is found to be not duly stamped, Section 35of the Stamp Act bars the said document being acted upon.FConsequently, even the arbitration clause therein cannot be actedupon. The court should then proceed to impound the documentunder Section 33 of the Stamp Act and follow the procedure underSections 35 and 38 of the Stamp Act.

22.3. If the document is found to be duly stamped, or if the deficitstamp duty and penalty is paid, either before the court or beforethe Collector (as contemplated in Section 35 or 40 Section of theStamp Act), and the defect with reference to deficit stamp iscured, 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 NarainswamyMudaliar Chattram v. Bhaskar Raju & Bros.17We have omittedrepetition of paragraphs-19 and 21, which have been referred to earlier.

28. Shin-Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd. andanother18 was case of international arbitration arising under Section45 of the Act. With Bench of three learned Judges deciding the case,the majority with Justice Y.K. Sabharwal dissenting, took the view thatin deciding the question as to whether reference must be made toarbitration under Section 45, the approach must be to find out whether aprima facie case is made out and whether it was ‘plainly arguable’ thatan Arbitration Agreement was in existence. The Court, in other words,took the view that there must be prima facie satisfaction that therewas an Arbitration Agreement, which is not null and void, inoperativeor incapable of being performed. Section 45, it must be noticed, at thetime 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 ofCivil Procedure , 1908 (5 of 1908), judicial authority, when seizedof an action in matter in respect of which the parties have madean agreement referred to in section 44, shall, at the request of oneof the parties or any person claiming through or under him, referthe 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 theArbitration Agreement, was to be prima facie finding. Justice D.M.Dharmadhikari agreed with Justice B.N. Srikrishna with certain additions.

30. In National Insurance Company Limited v. BogharaPolyfab Private Limited19, the question, which fell for considerationbefore the Bench of two learned Judges, was as to in what circumstances,a Court would refuse to refer dispute relating to quantum to arbitrationeven though the contract contemplated reference of such dispute to

17 (2020) 4 SCC 61218 (2005) 7 SCC 23419 (2009) 1 SCC 267

Aarbitration. It also fell for consideration, as to whether the resistance tothe reference on the ground that the applicant under Section 11 of theAct, received the amount and issued full and final discharge voucher,which he contented was issued under undue influence, coercion andeconomic compulsion, justified the reference. Justice R.V. Raveendran,speaking for the Court, inter alia, purported to follow the Judgment inBSBP (supra) and held as follows:

“22. Where the intervention of the court is sought for appointmentof an Arbitral Tribunal under Section 11, the duty of the ChiefJustice or his designate is defined in SBP & Co. [(2005) 8 SCC618] This Court identified and segregated the preliminary issuesCthat may arise for consideration in an application under Section 11of the Act into three categories, that is, (i) issues which the ChiefJustice or his designate is bound to decide; (ii) issues which hecan also decide, that is, issues which he may choose to decide;and (iii) issues which should be left to the Arbitral Tribunal toDdecide.

22.1. The issues (first category) which the Chief Justice/hisdesignate will have to decide are:

(a) Whether the party making the application hasapproached the appropriate High Court.

(b) Whether there is an arbitration agreement and whetherthe party who has applied under Section 11 of the Act, is aparty to such an agreement.

22.2. The issues (second category) which the Chief Justice/hisdesignate may choose to decide (or leave them to the decision ofFthe Arbitral Tribunal) are:

(a) Whether the claim is dead (long-barred) claim or alive claim.

(b) Whether the parties have concluded the contract/Gtransaction by recording satisfaction of their mutual rights andobligation or by receiving the final payment without objection.

22.3. The issues (third category) which the Chief Justice/hisdesignate should leave exclusively to the Arbitral Tribunal are:

(i) Whether claim made falls within the arbitration clause(as for example, matter which is reserved for final decision

of departmental authority and excepted or excluded fromarbitration).

(ii) Merits or any claim involved in the arbitration.

23. It is clear from the scheme of the Act as explained by thisCourt in SBP & Co. [(2005) 8 SCC 618] , that in regard to issuesfalling under the second category, if raised in any applicationunder Section 11 of the Act, the Chief Justice/his designate maydecide them, if necessary, by taking evidence. Alternatively, hemay leave those issues open with direction to the ArbitralTribunal to decide the same. If the Chief Justice or his designatechooses to examine the issue and decides it, the Arbitral Tribunalcannot re-examine the same issue. The Chief Justice/hisdesignate will, in choosing whether he will decide such issue orleave it to the Arbitral Tribunal, be guided by the object of theAct (that is expediting the arbitration process with minimumjudicial intervention). Where allegations of forgery/fabricationare made in regard to the document recording discharge ofcontract by full and final settlement, it would be appropriate ifthe Chief Justice/his designate decides the issue.

24. What is however clear is when respondent contends thatthe dispute is not arbitrable on account of discharge of the contractunder settlement agreement or discharge voucher or no-claimcertificate, and the claimant contends that it was obtained by fraud,coercion or undue influence, the issue will have to be decidedeither by the Chief Justice/his designate in the proceedings underSection 11 of the Act or by the Arbitral Tribunal as directed by theorder under Section 11 of the Act. claim for arbitration cannotbe rejected merely or solely on the ground that settlementagreement or discharge voucher had been executed by theclaimant, if its validity is disputed by the claimant.”31. It is to be noticed that, at the time when the Court renderedSBP(supra) and SMS Tea Estates(supra), Section 11(6) contemplatedappointment being made of an Arbitrator, essentially on the failure ofparties to agree on the appointment or to make the appointment. It is inthe context of the views expressed by the Courts, as aforesaid, that theLaw Commission of India submitted the Two Hundred and Forty-SixthReport in August, 2014. In the said Report, after referring to the Judgment

AinSBP(supra) and the views expressed in National Insurance (supra),the Law Commission, inter alia, submitted the followingrecommendations:

“31. The Commission is of the view that, in this context, the sametest regarding scope and nature of judicial intervention, asapplicable in the context of Section 11, should also apply to Sections8 and 45 of the Act - since the scope and nature of judicialintervention should not change upon whether party (intending todefeat the arbitration agreement) refuses to appoint an arbitratorin terms of the arbitration agreement, or moves proceeding beforea judicial authority in the face of such an arbitration agreement.

32. In relation to the nature of intervention, the exposition of thelaw is to be found in the decision of the Supreme Court in ShinEtsu Chemicals Co. Ltd. v. Aksh Optifibre,(2005) 7 SCC 234, (inthe context of Section 45 of the Act), where the Supreme Courthas ruled in favour of looking at the issues/controversy only primaDfacie.

33. It is in this context, the Commission has recommendedamendments to Sections 8 and 11 of the Arbitration and ConciliationAct, 1996. The scope of the judicial intervention is only restrictedto situations where the Court/Judicial Authority finds that theEarbitration agreement does not exist or is null and void. In so faras the nature of intervention is concerned, it is recommended thatin the event the Court/Judicial Authority is prima facie satisfiedagainst the argument challenging the arbitration agreement, it shallappoint the arbitrator and/or refer the parties to arbitration, as theFcase may be. The amendment envisages that the judicial authorityshall not refer the parties to arbitration only if it finds that theredoes not exist an arbitration agreement or that it is null and void.If the judicial authority is of the opinion that prima facie thearbitration agreement exists, then it shall refer the dispute toarbitration, and leave the existence of the arbitration agreementGto be finally determined by the arbitral tribunal. However, if thejudicial authority concludes that the agreement does not exist, thenthe conclusion will be final and not prima facie. The amendmentalso envisages that there shall be conclusive determination as towhether the arbitration agreement is null and void. In the eventthat the judicial authority refers the dispute to arbitration and/or

appoints an arbitrator, Under Sections 8 and 11 respectively, sucha decision will be final and non-appealable. An appeal can bemaintained Under Section 37 only in the event of refusal to referparties 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 theinsertion of Section 11(6A), we may take the narrative forward. InDuroFelguera(supra), we have noticed the view taken in paragraph 59 in anearlier part of this judgment, in essence, the duty to find out whether anarbitration agreement exists or not. The learned Judge also madeobservations in paragraph 48 wherein after quoting Section 11(6A) heheld as follows:

“…From reading of Section 11(6-A), the intention of thelegislature is crystal clear i.e. the court should and need only lookinto one aspect—the existence of an arbitration agreement. Whatare the factors for deciding as to whether there is an arbitrationagreement is the next question. The resolution to that is simple—it needs to be seen if the agreement contains clause whichprovides for arbitration pertaining to the disputes which have arisenbetween the parties to the agreement.”

33. InGarware(supra)a Bench of two learned Judges dealt witha case under Section 11(6A) itself and that too in the context of theMaharashtra Stamp Act, 1958. The contention raised by the appellantwas that the Judgment in SMS Tea Estates(supra) continues to applyeven after the introduction of Section 11(6A). In other words,notwithstanding the insertion of Section 11(6A), the procedurecontemplated in SMS Tea Estates(supra) would have to be followed.The Court went on to hold, inter alia, as noticed by us already and whichhas been referred to in N.N. Global (supra):

22. When an arbitration Clause is contained “in contract”, it issignificant that the agreement only becomes contract if it isenforceable by law. We have seen how, under the Indian StampAct, an agreement does not become contract, namely, that it isnot enforceable in law, unless it is duly stamped. Therefore, evena plain reading of Section 11(6A), when read with Section 7(2) ofthe 1996 Act and Section 2(h) of the Contract Act, would make it

clear that an arbitration Clause in an agreement would not existwhen it is not enforceable by law. This is also an indicator thatSMS Tea Estates has, in no manner, been touched by theamendment of Section 11(6A).

XXXXXX

29. This judgment in Hyundai Engg. case is important in that whatwas specifically under consideration was an arbitration Clausewhich would get activated only if an insurer admits or acceptsliability. Since on facts it was found that the insurer repudiated theclaim, though an arbitration Clause did “exist”, so to speak, in theCpolicy, it would not exist in law, as was held in that judgment,when one important fact is introduced, namely, that the insurerhas not admitted or accepted liability. Likewise, in the facts of thepresent case, it is clear that the arbitration Clause that is containedin the sub-contract would not “exist” as matter of law until thesub-contract is duly stamped, as has been held by us above. TheDargument that Section 11(6A) deals with “existence”, as opposedto Section 8, Section 16, and Section 45, which deal with “validity”of an arbitration agreement is answered by this Court’sunderstanding 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 faciefinds’, were substituted. This amounted to legislative recognition ofthe position taken by this Court through the Judgment rendered by JusticeB. N. Srikrishna in SMS Tea Estates (supra).

F35. In Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman20, aBench 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 the2015 Amendment that has been laid down by this Court, whichwould have included going into whether accord and satisfactionGhas taken place, has now been legislatively overruled. This beingthe position, it is difficult to agree with the reasoning containedin 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 theexamination of the existence of an arbitration agreement and isto be understood in the narrow sense as has been laid down inthe 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 & 59of Duro Felguera, SA v. Gangavaram Port Ltd., (2017) 9 SCC729 : (2017) 4 SCC (Civ) 764, for ready reference, read asfollows:”48. Section 11(6-A) added by the 2015 Amendment,reads as follows:”11. (6-A) The Supreme Court or, as the casemay be, the High Court, while considering any application undersub-section (4) or sub-section (5) or sub-section (6),shall, notwithstanding any judgment, decree or order of anycourt, confine to the examination of the existence of anarbitration agreement.”(emphasis supplied)From reading ofSection 11(6-A), the intention of the legislature is crystal cleari.e. the court should and need only look into one aspect—theexistence of an arbitration agreement. What are the factors fordeciding as to whether there is an arbitration agreement is thenext question. The resolution to that is simple—it needs to beseen if the agreement contains clause which provides forarbitration pertaining to the disputes which have arisen betweenthe parties to the agreement.***59. The scope of the powerunder Section 11(6) of the 1996 Act was considerably wide inview of the decisions in SBP & Co. v. Patel Engg. Ltd., (2005)8 SCC 618 and National Insurance Co. Ltd. v. BogharaPolyfab (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 whetheran arbitration agreement exists—nothing more, nothing less. Thelegislative policy and purpose is essentially to minimise the Court’sintervention at the stage of appointing the arbitrator and thisintention as incorporated in Section 11(6-A) ought to berespected.”] .

36. The view taken in Garware (supra) [paragraphs-22 and 29(supra)], came to be specifically approved by Bench of three learnedJudges in the Judgment reported in Vidya Drolia (supra). Therein,Justice Sanjiv Khanna wrote for the Court and Justice N.V. Ramanasupplemented with his own Judgment. The Judgment was rendered on

AReference dated 28.02.2009 and the question was, whether landlord-tenant disputes, governed by provisions of the Transfer of Property Actwere arbitrable or not. Apart from the said issue, the other conundrumwas as to who would decide, viz., the Court at the reference stage, orthe Arbitral Tribunal in the arbitration proceedings. The Court also foundit fit to go into the question as to the scope and ambit of the jurisdiction atBthe reference stage. It is in the course of his Judgement that he madethe following observations in pargraphs-146 and 147, 147.1 of VidyaDrolia(supra):“146. We now proceed to examine the question, whether the word“existence” in Section 11 merely refers to contract formationC(whether there is an arbitration agreement) and excludes thequestion of enforcement (validity) and therefore the latter fallsoutside the jurisdiction of the court at the referral stage. Onjurisprudentially and textualism it is possible to differentiatebetween existence of an arbitration agreement and validity of anDarbitration agreement. Such interpretation can draw support fromthe plain meaning of the word “existence”. However, it is equallypossible, jurisprudentially and on contextualism, to hold that anagreement has no existence if it is not enforceable and not binding.Existence of an arbitration agreement presupposes validagreement which would be enforced by the court by relegatingEthe parties to arbitration. Legalistic and plain meaning interpretationwould be contrary to the contextual background including thedefinition clause and would result in unpalatable consequences. Areasonable and just interpretation of “existence” requiresunderstanding the context, the purpose and the relevant legal normsFapplicable for binding and enforceable arbitration agreement.An agreement evidenced in writing has no meaning unless theparties can be compelled to adhere and abide by the terms. Aparty cannot sue and claim rights based on an unenforceabledocument. Thus, there are good reasons to hold that an arbitrationGagreement exists only when it is valid and legal. void andunenforceable understanding is no agreement to do anything.Existence of an arbitration agreement means an arbitrationagreement that meets and satisfies the statutory requirements ofboth the Arbitration Act and the Contract Act and when it isenforceable in law.

147. We would proceed to elaborate and give further reasons:

147.1. In Garware Wall Ropes Ltd. [Garware Wall RopesLtd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9SCC 209 : (2019) 4 SCC (Civ) 324] , this Court had examined thequestion of stamp duty in an underlying contract with an arbitrationclause and in the context had drawn distinction between thefirst and second part of Section 7(2) of the Arbitration Act, albeitthe observations made and quoted above with reference to“existence” and “validity” of the arbitration agreement beingapposite and extremely important, we would repeat the same byreproducing para 29 thereof : (SCC p. 238)

“29. This judgment in Hyundai Engg. case [United IndiaInsurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd.,(2018) 17 SCC 607 : (2019) 2 SCC (Civ) 530] is important in thatwhat was specifically under consideration was an arbitration clausewhich would get activated only if an insurer admits or acceptsliability. Since on facts it was found that the insurer repudiated theclaim, though an arbitration clause did “exist”, so to speak, in thepolicy, it would not exist in law, as was held in that judgment,when one important fact is introduced, namely, that the insurerhas not admitted or accepted liability. Likewise, in the facts of thepresent case, it is clear that the arbitration clause that is containedin the sub-contract would not “exist” as matter of law until thesub-contract is duly stamped, as has been held by us above. Theargument that Section 11(6-A) deals with “existence”, as opposedto Section 8, Section 16 and Section 45, which deal with “validity”of an arbitration agreement is answered by this Court’sunderstanding of the expression “existence” in Hyundai Engg.case [United India Insurance Co. Ltd. v. Hyundai Engg.&Construction Co. Ltd., (2018) 17 SCC 607 : (2019) 2 SCC(Civ) 530] , as followed by us.”

Existence and validity are intertwined, and arbitration agreementdoes not exist if it is illegal or does not satisfy mandatory legalrequirements. Invalid agreement is no agreement.”

37. It is thereafter that inN.N. Global (supra), the Court doubtedthe correctness of the view taken in the aforesaid paragraphs and referredto the findings in paragraph-22 and 29 inGarware(supra), which stood

Aaffirmed in paragraphs-146 and 147 of Vidya Drolia(supra). We maynotice that paragraph-147 of Vidya Drolia(supra) purported to givereasons in regard to what was stated in paragraph-146. Paragraph-147is 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 beBconfined 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 readsas follows:

C“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 existenceor validity of the arbitration agreement, and for that purpose,—

(a) an arbitration clause which forms part of contract shallDbe treated as an agreement independent of the other terms ofthe contract; and

(b) decision by the arbitral tribunal that the contract is nulland void shall not entail ipso jure the invalidity of the arbitrationclause.

(2) plea that the arbitral tribunal does not have jurisdictionshall be raised not later than the submission of the statementof defence; however, party shall not be precluded from raisingsuch plea merely because that he has appointed, orparticipated in the appointment of, an arbitrator.

(3) plea that the arbitral tribunal is exceeding the scope ofits authority shall be raised as soon as the matter alleged to bebeyond the scope of its authority is raised during the arbitralproceedings.

(4) The arbitral tribunal may, in either of the cases referred toGin sub-section (2) or sub-section (3), admit later plea if itconsiders the delay justified.

(5) The arbitral tribunal shall decide on plea referred to insub-section (2) or sub-section (3) and, where the arbitral tribunaltakes decision rejecting the plea, continue with the arbitralproceedings and make an arbitral award.

(6) party aggrieved by such an arbitral award may make anapplication for setting aside such an arbitral award inaccordance 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 aninstrument executed or first executed after the commencementof this Act, chargeable under this Act, and, as applied to anyother instrument, chargeable under the law in force in Indiawhen such instrument was executed or, where several personsexecuted 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 aninstrument, means that the instrument bears an adhesive orimpressed stamp of not less than the proper amount and thatsuch stamp has been affixed or used in accordance with thelaw for the time being in force in India:”

41. Section 2(12) defines the word ‘executed’ with reference toinstruments as meaning ‘signed’.

42. Section 2(14) defines the word ‘instrument’ as ‘including everydocument, by which any right or liability is or purports to be created,transferred, limited, extended, extinguished or recorded’.

43. Section 3 deals with the instruments indicated therein beingchargeable with duty, subject to what is provided by way of exemptionscontained in Schedule I.

44. Section 4 contemplates situation, where there are severalinstruments.

45. There are other provisions, which relate to other transactions.Section 17 deals with the time of stamping of instruments. Section 17provides for instruments executed in India. It declares that suchinstruments, chargeable with duty, shall be stamped before or at the timeof execution. Section 31 deals with adjudication as to proper stamp. Theadjudication is to be made by the Collector. Chapter IV contains Section33 and the Chapter heading is ‘Instruments not duly stamped’. In theStamp Act, Section 33 reads as follows:

“33. Examination and impounding of instruments. —

(1) Every person having by law or consent of parties authorityto receive evidence, and every person in charge of pubicoffice, except an officer of police, before whom any instrument,chargeable, in his opinion, with duty, is produced or comes inthe performance of his functions, shall, if it appears to him thatsuch instrument is not duly stamped, impound the same.

(2) For that purpose every such person shall examine everyinstrument so chargeable and so produced or coming beforehim, in order to ascertain whether it is stamped with stampof the value and description required by the law in force inIndia when such instrument was executed or first executed:Provided that—

(a) nothing herein contained shall be deemed to require anyMagistrate or Judge of Criminal Court to examine or impound,if he does not think fit so to do, any instrument coming beforehim in the course of any proceeding other than proceedingunder Chapter XII or Chapter XXXVI of the Code of CriminalProcedure, 1898 (V of 1989);

(b) in the case of Judge of High Court, the duty of examiningand impounding any instrument under this section may bedelegated 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 bedeemed to be public offices;

(b) the State Government may determine who shall be deemedto be persons in charge of public offices.”

46. Next, we must notice Section 35, which reads as follows:

“35. Instruments not duly stamped inadmissible in evidence,etc. — No instrument chargeable with duty shall be admittedin evidence for any purpose by any person having by law orconsent of parties authority to receive evidence, or shall beacted upon, registered or authenticated by any such person orby any public officer, unless such instrument is duly stamped :Provided that—

(a) any such instrument shall be admitted in evidence onpayment of the duty with which the same is chargeable, or, inthe case of any instrument insufficiently stamped, of the amountrequired to make up such duty, together with penalty of fiverupees, or, when ten times the amount of the proper duty ordeficient portion thereof exceeds five rupees, of sum equalto ten times such duty or portion;

(b) where any person from whom stamped receipt couldhave been demanded, has given an unstamped receipt and suchreceipt, if stamped, would be admissible in evidence againsthim, then such receipt shall be admitted in evidence againsthim on payment of penalty of one rupee by the persontendering it;

(c) Where contract or agreement of any kind is effected bycorrespondence consisting of two or more letters and any oneof the letters bears the proper stamp, the contract or agreementshall be deemed to be duly stamped;

(d) nothing herein contained shall prevent the admission of anyinstrument in evidence in proceeding in Criminal Court, otherthan proceeding under Chapter XII or Chapter XXXVI ofthe Code of Criminal Procedure 1898 (V of 1898);

(e) nothing herein contained shall prevent the admission of anyinstrument in any Court when such instrument has been executedby or on behalf of the Government, or where it bears thecertificate of the Collector as provided by section 32 or anyother provision 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, suchadmission shall not, except as provided in section 61, be calledin question at any stage of the same suit or proceeding on theground 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 theperson impounding an instrument under section 33 has by law

or consent of parties authority to receive evidence and admitssuch instrument in evidence upon payment of penalty asprovided by section 35 or of duty as provided by section 37, heshall send to the Collector an authenticated copy of suchinstrument, together with certificate in writing, stating theamount of duty and penalty levied in respect thereof, and shallsend such amount to the Collector, or to such person as hemay appoint in this behalf.”

49. Section 42 is relevant and it reads as follows: -

“42. Endorsement of instruments on which duty has been paidunder sections 35, 40 or 41— (1) When the duty and penalty(if any), leviable in respect of any instrument have been paidunder section 35, section 40 or section 41, the person admittingsuch instrument in evidence or the Collector, as the case maybe, shall certify by endorsement thereon that the proper dutyor, as the case may be, the proper duty and penalty (stating theamount of each) have been levied in respect thereof, and thename and residence of the person paying them.

(2) Every instrument so endorsed shall thereupon be admissiblein evidence, and may be registered and acted upon andauthenticated as if it had been duly stamped, and shall bedelivered on his application in this behalf to the person fromwhose possession it came into the hands of the officerimpounding it, or as such person may direct:

Provided that—

(a) no instrument which has been admitted in evidence uponpayment of duty and penalty under section 35, shall be sodelivered before the expiration of one month from the date ofsuch impounding, or if the Collector has certified that its furtherdetention 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 mayextend to Rs.500/- for person to execute or sign otherwise than as awitness, any instrument chargeable with duty, without the same beingduly stamped. The proviso, no doubt, contemplates that if any penaltyhas been paid under Sections 35, 40 or 61, the same shall be reduced.

I. HINDUSTAN STEEL LIMITED ANALYSED

51. This Court in Hindustan Steel Limited v. Dilip ConstructionCompany21, was dealing with the following set of facts:

An award was made by an Umpire under the Indian ArbitrationAct, 1940, which was filed in the Court. The appellant applied toset aside the Award, inter alia, contending that it was unstamped.It contended that it was on that account, invalid, illegal and liableto be set aside. The respondent thereupon applied to the DistrictCourt to have the Award impounded and validated by the levy ofstamp duty and penalty. The Award was impounded and visitedwith duty and penalty, which was duly paid and certified. Thecontention of the appellant was that, not only could an unstampedAward, be not admitted in evidence, but it could not be actedupon, as the instrument had no existence in the eye of law. It isthereupon that the Court had held, inter alia:

“5. An instrument which is not duly stamped cannot bereceived in evidence by any person who has authority to receiveevidence, and it cannot be acted upon by that person or by anypublic officer. Section 35 provides that the admissibility of aninstrument once admitted in evidence shall not, except asprovided in Section 61, be called in question at any stage of thesame suit or proceeding on the ground that the instrument hasnot been duly stamped.

6. Relying upon the difference in the phraseology betweenSections 35 and 36 it was urged that an instrument which isnot duly stamped may be admitted in evidence on paymentof duty and penalty, but it cannot be acted upon becauseSection 35 operates as bar to the admission in evidence ofthe instrument not duly stamped as well as to its being actedupon, and the Legislature has by Section 36 in the conditionsset out therein removed the bar only against admission inevidence of the instrument. The argument ignores the trueimport of Section 36. By that section an instrument onceadmitted in evidence shall not be called in question at any stageof the same suit or proceeding on the ground that it has notbeen duly stamped. Section 36 does not prohibit challenge

DEF

against an instrument that it shall not be acted upon because itis not duly stamped, but on that account there is no bar againstan instrument not duly stamped being acted upon after paymentof the stamp duty and penalty according to the procedureprescribed by the Act. The doubt, if any, is removed by theterms of Section 42(2) which enact, in terms unmistakable,that every instrument endorsed by the Collector under Section42(1) shall be admissible in evidence and may be acted upon asif 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 byM.C. Desai, J., in Mst Bittan Bibi v. Kuntu Lal [ILR (1952)2 All 984] :

“A court is prohibited from admitting an instrument inevidence and court and public officer both are prohibitedfrom acting upon it. Thus court is prohibited from bothadmitting it in evidence and acting upon it. It follows thatthe acting upon is not included in the admission and that adocument can be admitted in evidence but not be actedupon. Of course it cannot be acted upon without its beingadmitted, but it can be admitted and yet be not acted upon.If every document, upon admission, became automaticallyliable to be acted upon, the provision in Section 35 that aninstrument chargeable with duty but not duly stamped, shallnot be acted upon by the Court, would be renderedredundant by the provision that it shall not be admitted inevidence for any purpose. To act upon an instrument is togive effect to it or to enforce it.”“In our judgment, the learned Judge attributed to Section36 meaning which the legislature did not intend. Attentionof the learned Judge was apparently not invited to Section42(2) of the Act which expressly renders an instrument,when certified by endorsement that proper duty and penaltyhave been levied in respect thereof, capable of being actedupon as if it had been duly stamped.”

52. We draw the following conclusions, as to what has been laiddown by Bench of three learned Judges in Hindustan Steel(supra):

i.The Stamp Act is fiscal measure intended to raise revenue;A

ii.The stringent provisions of the Act are meant to protect theinterest of the Revenue;

iii.It is not intended to be used as weapon by litigant todefeat the cause of the opponent;

iv.Upon the endorsement being made under Section 42(2) ofthe Stamp Act, the document would be admissible inevidence and can be acted upon.

We may only observe that the Court did not take into considerationSection 17 of the Stamp Act, which provides for the precise time, atwhich, the instrument is to be stamped. Equally, the Court did not bear inmind that Section 62 of the Stamp Act, penalises transgression of Section17, inter alia. Still further, the Court was dealing with an instrument afterit was impounded, and the payments made which were certified underSection 42(2).

It is true that an unstamped instrument is compulsorily impoundableunder Section 33 of the Stamp Act. The procedure to be followedthereafter is also provided in the Act. After the procedure is followedand the duty and the penalty is paid, the instrument would come to bevisited with the endorsement under Section 42(2). Thereafter, it becomesenforceable and it can be acted upon, as held inHindustan Steel(supra).

J. THE INDIAN CONTRACT ACT, 1872 - SURVEY;DISSECTION OF GARWARE, VIDYA DROLIA AND N.N.GLOBAL

53. Section 2(g) of the Contract Act provides that an agreement,not enforceable by law, is said to be void, whereas, Section 2(h) declaresthat an agreement enforceable by law, is contract. Section 2(j) of thesame Act provides that contract, which ceases to be enforceable bylaw, becomes void, when it ceases to be enforceable. We may, at once,notice the distinction between an agreement and contract. Not everyagreement is contract. Only those agreements, which are enforceable,are treated as contracts. The result of contract, ceasing to beenforceable, is that, the contract becomes void. Next, we may noticeSection 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

Acontract, for lawful consideration and with lawful object andare 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 isrequired to be made in writing or in the presence of witnesses, orBany law relating to the registration of documents.”

Section 10, in the first part, when broken down into parts, consistsof 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 isCnot 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 beengiven but for the existence of such coercion, undue influence,Efraud, 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 declaresthat every person is competent to contract, according to the law, to whichhe is subject, and who is of sound mind and is not disqualified fromFcontracting by any law to which he is subject. Since Section 11 requiressoundness of mind for the person to be competent to contract, Section12 articulates as to what is sound mind for the purpose of the ContractAct. The next part in Section 10 is that there must be ‘a lawfulconsideration and lawful object’. The said aspect is dealt with in Section23. It reads as follows:G

“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 nature that, if permitted, it would defeat the provisionsHof 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 anagreement is said to be unlawful. Every agreement of which theobject or consideration is unlawful is void.”

56. The last part of the first limb of Section 10 provides that allagreements are contracts ‘which are not hereby declared to be void’.Sections 24 to 30 are the remaining provisions in Chapter II, which dealwith agreements, which are declared to be void within the meaning ofSection 10. This is apart from Section 20 as we shall notice later. Also,the second part of Section 10 provides that peremptory requirementsmay still have to be met to constitute contract law.

57. Further, we have already noticed that free consent isindispensable for making an agreement, contract, under Section 10.Free consent has been defined in Section 14 and it must be read inconjunction with Sections 15 to 18 as Sections 15 to 18 define coercion,undue influence, fraud and misrepresentation, respectively. Now, theresult of there being coercion, fraud or misrepresentation in securing theconsent of party, is provided for in Section 19 of the Contract Act. Thepresence of the three elements results in what is described as contractvoidable at the option of the party, whose consent was so caused. Theeffect of misrepresentation has been dealt with by this Court in thejudgment reported in Ganga Retreat & Towers Ltd. v. State ofRajasthan22, as follows:

“28. According to Section 19 of the Contract Act when consentto an agreement is caused by misrepresentation, the agreement isa contract voidable at the option of the party whose consent wasso caused. The latter may, if he thinks fit, insist that the contractshall be performed and that he shall be put in the position in whichhe would have been if the representations made had been true.According to Section 2 clause (i), an agreement which isenforceable by law at the option of one or more of the partiesthereto, but not at the option of the other or others, is voidablecontract. It is not necessary for us to record clear finding whetherthere was misrepresentation on the part of the respondents or

Anot. Suffice it to observe that voidable contract confers the rightof election on the party affected to exercise its option to avoid thelegal relations created by the contract or to stand by the contractand insist on its performance. However, his election to stand bythe contract once exercised would have the effect of ratificationof the contract with the knowledge of misrepresentation on theBpart of the other party and that would extinguish its power ofavoidance. In the very nature of the right conferred on the partyaffected, the law expects it to exercise its option promptly andcommunicate the same to the opposite party; for until the right ofavoidance is exercised, the contract is valid, and things doneCthereunder may not thereafter be undone.

29. right to rescind for misrepresentation can be lost in varietyof ways, some depending on the right of election. representeeon discovering the truth loses his right to rescind if once he haselected not to rescind. But he may lose even before he has madeDany election where by reason of his conduct or other circumstancesit would be unjust or inequitable that he retains the right. Forinstance, where third parties have acquired rights under thecontract; again where it would be unjust to the representor becauseit is impossible to restore him to his original position. Restitutio inintegrum is not only consequence of rescission, its possibility isEindispensable to the right to rescind. Again, delay in election maymake it unjust that the right to elect should continue. For this reasonthe right to rescission for misrepresentation in general must bepromptly exercised. (See Indian Contract and Specific Relief Acts,Pollock and Mulla, 11th Edn., Vol. I, pp. 269-70.)”

FSection 19A deals with there being no free consent on account ofthe consent of party being obtained by undue influence. The said vitiatingfactor also, does not result in void agreement but voidable contract.Section 14, defining ‘free consent’, provides that consent is said to befree, when it is not caused by mistake, subject to the provisions of Sections20, 21 and 22, after referring to the other four aspects, which detractGfrom free consent. We notice what Section 20 provides. Section 20declares that where both the parties to an agreement are under mistakeas to matter of fact essential to the agreement, the agreement is void.We may observe that this again is case of an agreement, which isdeclared void within the meaning of Section 10, apart from Sections 24Hto 30. Section 21 provides that mistake as to any law in force in India,

would not make the contract voidable. Thus, while Section 10 sets outthe core element for an agreement to become contract, the effect ofnon-conformity varies. Therefore, the lack of competency and absenceof sound mind completely detract from the formation of ‘contract’.The absence of free consent arising from coercion, undue influence,misrepresentation and even fraud will, however, result in an agreementwhich is ‘contract’ though voidable (see Sections 19 and 19A of theContract Act). The effect of mistake, is again spelt out in Section 22,insofar as it provides that contract is not voidable merely because oneof the parties consented to the contract, labouring under mistake as toa matter of fact. Section 37 comes under Chapter IV which deals withperformance of contracts and of contracts which must be performed.Section 37 reads:

“37. Obligation of parties to contract. -The parties to contractmust either perform, or offer to perform, their respective promises,unless such performance is dispensed with or excused under theprovisions of this Act, or of any other law.

Promises bind the representatives of the promisors in case ofthe death of such promisors before performance, unless contraryintention appears from the contract.”

58. We have noticed that in the case of fraud, misrepresentationor 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. Inthis context, we may notice, Section 64 of the Contract Act:

“64. Consequences of rescission of voidable contract. -Whena person at whose option contract is voidable rescinds it, theother party thereto need not perform any promise therein containedin which he is the promisor. The party rescinding voidable contractshall, if he had received any benefit thereunder from another partyto such contract, restore such benefit, so far as may be, to theperson from whom it was received.”

59. As to what would happen, if an agreement is discovered to bevoid or becomes void, is provided in Section 65. It declares that whensuch an eventuality takes place, any person, who has, under suchagreement or contract, received any advantage, is bound to restore it tothe person from whom he has received it or make compensation for the

Asame. In the context of Section 65, we may notice the nexus with Section2(j) of the Contract Act. Section 2(j), as we have noticed, 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 isenforceable and, therefore, becomes contract, can upon it ceasing tobe enforceable, become void. However, here we must notice the viewBexpressed by the Privy Council in the Judgement reported in MahanthSingh v. U Ba Yi23. Therein the Court, inter alia, held as follows:

“A still more startling result, however, is brought about on thisconstruction if s.2(j) is read with s.65 of the Indian Contract Act,since in such case not only would every unenforceable contractCbecome void but each party would be under the obligation ofrestoring or making compensation for any benefit received, nomatter how much had been done towards the performance byeither party.

But it is not necessary to adopt construction leading to suchDsurprising results.

The solution is, in their Lordships’ view, to be found in thewording of s.2(j) itself. Not every unenforceable contract isdeclared void, but only those unenforceable by law, and thosewords mean not unenforceable by reason of some proceduralEregulation, but unenforceable by the substantive law. For example,a contract which was from its inception illegal, such as contractwith an alien enemy, would be avoided by s.2(g), and one whichbecame illegal in the course of its performance, such as contractwith one who had been an alien friend but later became an alienFenemy, would be avoided by s.2(j). mere failure to sue withinthe time specified by the statute of limitations or an inability to sueby reason of the provisions of one of the Orders under the CivilProcedure Code would not cause contract to become void.”

60. Full Bench of the Allahabad High Court, while dealing withGthe effect of inclusion of non-transferable occupancy rights, along withother properties, which were transferable in registered mortgage deedand, after referring to Section 23 of the Contract Act, held, inDip Narain24Singh v. Nageshar Prasad and another, inter alia, as follows:

23 AIR 1939 PC 110H24 AIR 1930 ALL 1 (FB) / 1929 SCC OnLine ALL 1

“There is clear distinction between an agreement which may beforbidden by law and one which is merely declared to be void. Inthe former case the legislature penalises it or prohibits it. In thelatter case, it merely refuses to give effect to it. If void contracthas been carried out and consideration has passed, the promisormay not in equity be allowed to go back upon it without restoringthe benefit which he has received. But if the promise comes tocourt to enforce it he would receive no help from court of law.As pointed out above, the transfer of an occupancy tenancy is notactually forbidden by law but is declared to be void.”

(Emphasis supplied)

61. To the extent that N.N. Global(supra) proceeds on the basisthat the Stamp Act is 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) thatthe decision in SMS Tea Estates(supra) does not lay down the correctlaw, when it holds that an Arbitration Agreement, in an unstampedcommercial contract, cannot be acted upon or is rendered unenforceable,we are of the view that the finding in N.N. Global(supra) does notappear to be correct. perusal of paragraph-29 would show that theCourt inN.N. Global (supra) proceeded on the basis that the ArbitrationAgreement, being an independent contract is not chargeable to paymentof stamp duty and it would not invalidate the Arbitration Clause or renderit unenforceable, since it had an independent existence of its own, cannothold good in view of the admitted position before us that an ArbitrationAgreement, in its own right, is exigible to stamp duty. The whole premiseof the Court inN.N. Global(supra) being that the Arbitration Agreement,not being exigible to duty and it having separate existence, thecommercial contract in which the Arbitration Agreement is contained,being unstamped, would not impact the Arbitration Agreement, cannothold good. The reasoning in N.N. Global (supra) in paragraph-32, fordisapproving of Garware (supra) in paragraph-22 thereof, that theArbitration Clause would be non-existent in law and unenforceable tillthe stamp duty in adjudicated and paid on the substantive contract, isagain on the premise that the Arbitration Agreement is separateagreement 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 referto Article 5 of the Stamp Act:

(Emphasis supplied)

62. While the Stamp Act is fiscal enactment intended to raiserevenue, it is law, which is meant to have teeth. The point of time, atEwhich the stamp duty is to be paid is expressly provided for in Section 17of the Stamp Act. There cannot be any gainsaying, that call it fiscalenactment, it is intended that it is to be implemented with full vigour. Theduty of Court must be to adopt an interpretation which results in theenforcement of the law, rather than allowing the law to be flouted withimpunity. Once this principle is borne in mind, the task of the CourtFbecomes less difficult. The law, as contained in Section 33 read withSection 35 of the Stamp Act, would result in the following conclusions:i.Every person having, by law or consent of parties, theauthority to receive evidence, before whom, an instrumentis produced, is duty-bound to immediately impound the same.GThis is upon his forming the opinion that the instrument isnot duly stamped. In case, where the instrument does notbear any stamp at all, when it is exigible to stamp duty,there can be little difficulty in the person forming the opinionthat it is not duly stamped. No doubt, under Section 33(2),in cases of ambiguity, the person shall examine theH

instrument to arrive at the liability. Apart from personhaving authority to receive evidence, which, no doubt, wouldinclude court and an Arbitrator, every person In-chargeof Public Office, before whom, such instrument isproduced or comes in the performance of his functions,has the duty to impound the unstamped or insufficientlystamped document, arises. This is no doubt after ‘examining’the instrument and ascertaining as to whether the instrumentwas stamped as required when the document was executedor first executed [See Section 33(2)]. One exception inSection 33 is an Officer of the Police. In other words, theOfficer of the Police has no authority to impound anunstamped or insufficiently stamped document producedbefore him. No doubt, Criminal Court is not undercompulsion vide the proviso. Section 33, no doubt, authorisesdelegation of power.

ii.Under Section 35, the Law-Giver has disabled the admissionin evidence of an instrument not stamped or insufficientlystamped, for any purpose. This would include even acollateral purpose. This is in stark contrast with document,which is compulsorily registerable but which is not registered.Under Section 49 of the Registration Act, 1908, anunregistered document may be used for proving collateraltransaction. Even this is impermissible, if the document isnot stamped or insufficiently stamped. Section 35 furtherproceeds to declare that such an unstamped or insufficientlystamped document shall not be acted upon. It is importantto juxtapose the embargo cast on an unstamped documentas aforesaid with Section 2(h) of the Contract Act. Section2(h) of the Contract Act provides that an agreement, whichis enforceable in law is contract whereas Section 2(g), anagreement not enforceable is void. The words ‘enforceablein law’ or ‘not enforceable in law’, understood in the contextof Sections 33 and 35 of the Stamp Act, would mean thatupon there being an occasion, which necessitates one ofthe parties to the agreement having to enforce the samethrough recourse to sanctions available in law, the sameshould be vouchsafed to him. Ordinarily, agreements areenforced through actions in Civil Courts. Remedies may be

Asought before Public Authorities. Both the Civil Courts andthe Public Authorities are tabooed from giving effect to anunstamped instrument. Section 33 does not give choice tothe person, who has authority by law, or with consent, totake evidence, or to any Public Officer, but to impound theagreement. The unstamped or insufficiently stampedBdocument cannot be used as evidence for any purpose. Itwould be inconceivable, as to how, it could be in the samebreath, be found that an unstamped document is yetenforceable in law or that it is not enforceable in law. It isanother matter that the parties may act upon it. Goods orCservices may change hands, for instance, under document,which may be otherwise exigible to stamp duty. What is,however, relevant is that the State will not extend itsprotection, by appropriate sanctions. The rights, which wouldotherwise have been available, had the agreement beenstamped, would remain frozen or rather they would not exist.DWe are further reinforced in our view, therefore, that theviews expressed by this Court in Garware (supra) inparagraph-22, followingSMS Tea Estates (supra), representthe correct position in law.iii.Next, we must pass on to the correctness of the viewsEexpressed in paragraph-29 of Garware (supra). The Courtdrew upon the Judgment in United India InsuranceCompany Limited and another v. Hyundai Engineering25& Construction Company Limited and others.

63. Justice Hrishikesh Roy in paragraph-84 of his draft JudgementFfinds that in paragraph-29 in Garware (supra), this Court relied onUnitedIndia Insurance Company Limited v. Hyundai Engineering and26Construction Company Limited. Our learned Brother further notesin paragraph-84.1 that in Hyundai(supra), the issue of stamping wasnot in consideration and the question was whether the matter fell withinGexcepted matter as the Arbitration Clause was dependant on whetherthe insurer accepted liability. Justice Hrishikesh Roy further finds thatthe approach in Garware(supra) in relying upon Hyundai(supra) wasincorrect. This is as Hyundai (supra) has nothing to do with stamping

25 (2018) 17 SCC 607H26 (2018) 17 SCC 607

and should have been distinguished. Our learned Brother notices thecontention of the learned Amicus that Hyundai (supra) relied onOriental Insurance Company v. Narbheram Power and Steel PrivateLimited27,in which case, the Court did not have occasion to interpretSection 11(6)(a) of the Act.

64. It is true that in Hyundai (supra), this Court was not dealingwith the impact of the Stamp Act. The Court was dealing rather with theissue as to the effect of the Clause, in which it was agreed that therewould be no arbitration, if the insurer disputed or did not accept liabilityunder or irrespective of the policy. In the context of the said Clause, thisCourt, inHyundai(supra), went on to hold, inter alia, that the denial ofthe plea about its liability by the insurer, rendered the ‘making of theArbitration Clause ineffective and incapable of being enforced, if notnon-existent’. No doubt, in paragraph-29 ofGarware(supra),this Courtfound that ‘likewise in the facts of the present case, it is clear that theArbitration Clause, i.e., contained in the sub-contract, would not exist asa ‘matter of law’ until the sub-contract is duly stamped as has been heldby us above’. Therefore, the rationale for finding that an ArbitrationAgreement in an unstamped sub-contract would not exist, was alreadyfurnished in paragraph-22. This Court was only drawing support fromHyundai(supra) for the proposition about non-existence of the instrument‘in law’. While, Hyundai(supra) did not relate to the Stamp Act, andeven, removing the reference to Hyundai(supra), the finding about thenon-existence of an unstamped agreement, would be supportable on thereasoning that what is contemplated in Section 11(6)(a) is no mere facialexistence or existence in fact but also existence in law.

65. This Court in Garware (supra) took the view that unless thesub contract was stamped, the arbitration clause contained therein wouldnot exist as matter of law. This finding has been rendered apparentlyon the basis of the impact of the amendment leading to the insertion ofSection 11(6A). The Court in Garware (supra) had infact after settingout the law prior to the amendment based on the Two Hundred andForty-Sixth Report of the Law Commission of India found in paragraph-19 that the Law Commission Report did not mention about SMS TeaEstates(supra). It is further found that it is for the very good reason thatthe court does not while deciding an application under Section 11 decide

Aany preliminary issue. The Court further found that it was giving effectto the provisions of mandatory enactment, which enjoins upon theCourt, under the provisions of the Stamp Act, to first impound theagreement, and if only the penalty and the duty is paid thereafter, to actupon it. The Court had also found that it was not possible to bifurcate thearbitration clause. We would find that as found by us, being unstampedBor insufficiently stamped, the agreement would not be enforceable till itis ‘validated’ which is permissible only in the manner provided in theStamp Act and till then it would not exist ‘in law’.66. In the context of Article 136 of the Limitation Act, 1963, aBench of three learned Judges in Dr. Chiranji Lal (D) by Lrs. v. HariCDas (D) by Lrs.28 had to deal with the argument that Final Decree forpartition 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, the period of twelve years begins to run when the‘Decree or Order’ becomes ‘enforceable’, inter alia. The Court, interDalia, held as follows:

“23. Such an interpretation is not permissible having regard to theobject and scheme of the Indian Stamp Act, 1899. The Stamp Actis fiscal measure enacted with an object to secure revenue forthe State on certain classes of instruments. It is not enacted toEarm litigant with weapon of technicality to meet the case ofhis opponent. The stringent provisions of the Act are conceived inthe interest of the Revenue. Once that object is secured accordingto law, the party staking his claim on the instrument will not bedefeated on the ground of initial defect in the instrument(Hindustan Steel Ltd. v. Dilip Construction Co. [(1969) 1 SCCF597]). …”

xxxxxxxxx

25. The engrossment of the final decree in suit for partitionwould relate back to the date of the decree. The beginning of theperiod of limitation for executing such decree cannot be madeGto depend upon date of the engrossment of such decree on thestamp paper. The date of furnishing of stamp paper is an uncertainact, within the domain, purview and control of party.No date orperiod is fixed for furnishing stamp papers. No rule has been shown

H28 (2005) 10 SCC 746

to us requiring the Court to call upon or give any time for furnishingof stamp paper. party by his own act of not furnishing stamppaper cannot stop the running of period of limitation. None cantake advantage of his own wrong. The proposition that period oflimitation would remain suspended till stamp paper is furnishedand decree engrossed thereupon and only thereafter the period oftwelve years will begin to run would lead to absurdity.In YeswantDeorao Deshmukh v. Walchand Ramchand Kothari [1950 SCC766 : 1950 SCR 852 : AIR 1951 SC 16] it was said that the paymentof court fee on the amount found due was entirely in the power ofthe decree-holder and there was nothing to prevent him frompaying it then and there; it was decree capable of executionfrom the very date it was passed.

26. Rules of limitation are meant to see that parties do not resortto dilatory tactics, but seek their remedy promptly. As abovenoted,there is no statutory provision prescribing time-limit for furnishingof the stamp paper for engrossing the decree or time-limit forengrossment of the decree on stamp paper and there is no statutoryobligation on the court passing the decree to direct the parties tofurnish the stamp paper for engrossing the decree. In the presentcase the Court has not passed an order directing the parties tofurnish the stamp papers for the purpose of engrossing the decree.Merely because there is no direction by the Court to furnish thestamp papers for engrossing of the decree or there is no time-limit fixed by law, does not mean that the party can furnish stamppapers at its sweet will and claim that the period of limitationprovided under Article 136 of the Act would start only thereafteras and when the decree is engrossed thereupon. The starting ofperiod of limitation for execution of partition decree cannot bemade contingent upon the engrossment of the decree on the stamppaper. …”

(Emphasis supplied)

67. However, the said view must be understood in the context ofthe Law of Limitation standing in the peril of being wholly defeated by‘enforceability’ of Decree or Order within the meaning of Article 136,being made dependant on an act of volition of party to pay the requisitestamp duty. Here, in the case before us, we are concerned with the dutyof Court, inter alia, under Sections 33 and 35 of the Stamp Act and itsimpact on an unstamped or insufficiently stamped agreement containing

Aan Arbitration Clause. This is apart from the meaning to be attributed tothe words ‘existence of an Arbitration Agreement’ in Section 11(6A) ofthe Act. We have explained the concept of ‘enforceability’ in the contextof the Contract Act. What is closer to the facts is the concept ofenforceability or rather the lack of enforceability resulting in the voidnessof the contract in the sense explained by us.BK. THE STAMP ACT – WHETHER PROCEDURALLAW?

68. In this context, it will be profitable to notice the followingdiscussion from the work Salmond on Jurisprudence, Twelfth Edition.CDealing with Law of Procedure, it is stated:

“What, then, is the true nature of the distinction? The law ofprocedure may be defined as that branch of the law which governsthe process of litigation.It is the law of actions- jus quod adactiones pertinent-using the term action in wide sense to includeDall legal proceedings, civil or criminal. All the residue is substantivelaw, and relates, not to the process of litigation, but to its purposesand subject-matter. Substantive law is concerned with tPhe endswhich the administration of justice seeks; procedural law dealswith the means and instruments by which those ends are to beattained. The latter regulates the conduct and relations of courtsEand litigants in respect of the litigation itself; the former determinestheir conduct and relations in respect of the matters litigated.”

(Emphasis supplied)

69. The Stamp Act, while it may be fiscal measure, it may notFfall within the fold of procedural law. The mere fact that Sections 33 and35 may apply at stage, when the person approaches Court, inter alia,would not mean that the Stamp Act, providing for duty on the executantsto stamp the instrument at the point of time, as declared in Section 17,and what is more, penalising deviation under Section 62, falls withinthe domain of procedural law. Pertinently, we may, in the FourteenthGEdition of The Indian Contract and Specific Relief Acts by Pollock andMulla, note as follows:

“Unenforceable Contracts

Unenforceable contracts are valid in all respects, but may notbe sued upon by the parties. Such disability may arise for want of

registration; or because the time prescribed for filing the suit hasexpired; or because the plaintiff firm has not been registered; orthe document or instrument does not bear the requisite stampduty; or because the lender of money does not possess licenceunder money-lending laws.”

(Emphasis supplied)

70. We would find that an agreement, which is unenforceable onaccount of substantive law, which would include the Stamp Act, wouldnot be contract, applying Section 2(h) of the Contract Act. It is only ifan agreement is enforceable, that it would become contract. It is onlya ‘contract’, which would be the ‘Arbitration Agreement’, which iscontemplated in Section 11(6A) of the Act. It may not be apposite tomerely describe an unstamped Arbitration Agreement as ‘curabledefect’. As long it remains an unstamped instrument, it cannot be takennotice of for any purpose, as contemplated in Section 35 of the StampAct. It remains unenforceable. Section 17 declares the time at which aninstrument, executed in India, must be stamped. The said provisioncontemplates that stamping of such an instrument must take place beforeor at the time of the execution of document. No Public Officer, norCourt nor Arbitrator, can permit any person to ask them to act upon it orreceive it as evidence. In law, it is bereft of life. It is ‘not enforceable inlaw’. In the said sense, it also cannot exist in law.It would be void. Ourview in this regard that voidness is conflated to unenforceability receivesfortification from Section 2(j) of the Contract Act which renders contractwhich ceases to be enforceable void.71. What Section 11(6A) contemplates is contract and it is notan agreement which cannot be treated as contract. This is despite theuse of the words ‘arbitration agreement’ in Section 11(6A). In otherwords, contract must conform to Section 7 of the Act. It must also,needless to say, fulfil the requirements of the Contract Act.

72. voidable contract within the meaning of Section 19 and19A, undoubtedly stands in stark contrast to void contracts. However,even in the categories of void contracts as for instance, Section 20 ofthe Contract Act provides that if on material point, the parties weremistaken, the contract would be void. If in given case where this is thecontention raised by party in proceeding under Section 11 when theagreement otherwise satisfies the requirement of contract to make itexist as an Arbitration Agreement, then, the Court would be justified in

Atreating the agreement as one which exists and leave it open to theArbitrator to go into the question, which can be done after the pleadingsare laid and evidence is unfolded before him. When an ArbitrationAgreement is sought to be brought under the cloud on the basis that it isa voidable contract which has been avoided, again it may be matterwhere the principle of Kompetenz-Kompetenz may be apposite and againBthe court under Section 11 would be justified in proceeding on the basisthat an arbitration agreement exists. The question must undoubtedly beapproached from the standpoint of advancing the sublime cause of speedycommencement, progress and conclusion of arbitration. When Parliamentintervened by amending the Act, while in Section 8, it has employed theCwords prima facie, it has used the word ‘examine’ to ascertain aboutthe existence of an arbitration agreement in Section 11 (6A). Likewise,in Section 8 the law giver has used the word ‘valid’ which is missing inSection 11(6A). Can it be said that an invalid agreement can be said toexist in law for the purpose of Section 11(6A)?

D73. What is an invalid document or agreement? It is an expressionwhich is associated and often conflated with the word void. We havealready noticed Section 20 as an instance where common mistake ofthe parties on material subject renders the agreement void. We havealso noticed that in view of the very nature of the voidness, courtunder Section 11,may allow the application under Section 11 when shelterEis taken under Section 20 of the Contract Act by the respondent. Itwould turn upon the facts. Coming to invalidity, contract would beinvalid as for instance if it is executed by person of unsound mind. Thiswould equally be the case where it is found that one of the parties wasa minor. As far as the word ‘invalid’ is concerned, it has different shadesFof meaning. In the context of contract, we notice the following statementin judgment of the High Court of Karnataka reported in Imambi v.Khaja Hussain alias Khajasab29:

“In the context that the words are used the meaning is to be aslaid down in Jones v. Bank of Gumming as follows: -G“The word “invalid” as applied to contract does not alwaysmean an absolute nullity, for contract may be so imperfect asnot to be enforceable, but not such an absolute nullity that it cannotbe perfected.”

H29 AIR 1988 Karnataka 51

(Vide Words & Phrases – Permanent Edition – West PublishingCo. Volume 22A)”

74. The aforesaid statement appears apposite in the context of aninstrument which is unstamped or insufficiently stamped. This is for thereason that on the one hand as long as it is not stamped or is insufficientlystamped, it is both liable to be impounded under Section 33 of the StampAct and it cannot be used as evidence or registered. This is apart fromthe unambiguous bar against ‘acting upon’ such an instrument. On theother hand, if after such an instrument is impounded and duty and penaltyis paid and certificate is endorsed upon it within the meaning of Section42(2) signals that the instrument regains life, the bar in Section 35 of theStamp Act is removed permanently. Equally, under Section 36 in thecase of an instrument (not secondary evidence of the instrument) whichis allowed to be let in evidence without objection, then it would qualify asevidence founding right. But this is an exception to the rule which isfound in Section 35 of the Stamp Act. Thus, an unstamped orinsufficiently stamped instrument represents case of an agreementwhich not being enforceable, in the sense that the sanctions in law througha civil action is impermissible, is in the said sense, invalid. It is not invalidor void in the sense of it being still born or null and void in the sense thatlife cannot be poured into it. We may sum up. An agreement which isunstamped or insufficiently stamped is not enforceable, as long as itremains in the said condition. Such an instrument would be void as beingnot enforceable [See Section 2(g) of the Contract Act]. It would not inthe said sense exist in law. It can be “validated” by only the processcontemplated in Section 33 and other provisions of the Stamp Act. Wefind the expression ‘validation’ used in the decision of this Court inHariomAgrawal v. Prakash Chand Malviya30 which we shall refer to in greaterdetail later. This necessarily means that the court would not view it asenforceable, and therefore, existing in law. In the sense explained, itwould not be found as ‘not void’ and therefore ‘not invalid’. Thus, in thecontext of the Act, the Stamp Act and the Contract Act, we are of theview that the opinion of this Court in SMS Tea Estates(supra), in thisregard as reiterated in Garware(supra) and approved in Vidya Drolia(supra) is correct.

75. Section 11(6A) cannot be understood as merely predicatingfor an Arbitration Agreement existing literally. This means that the mere

Aexistence of the arbitration agreement for all intents and purposes on theexterior purporting to project contract duly executed, may in certainsituations, be insufficient under Section 11. If for reasons such as itbeing unstamped when it is clearly required to be stamped, then it cannotbe said to be case where the agreement exists for it would be noexistence in law. While we agree, the Court must be careful in selectingBcontracts where an arbitration agreement which is produced is not to beacted upon for the reason that it does not exist in law, all we hold is thatan Arbitration Agreement, which is unstamped, does not exist and anunstamped contract, containing an Arbitration Agreement, would not existas it has no existence in law.

CL. SECTION 7 OF THE ACT – ITS IMPACT

76. Our learned Brother, Justice Hrishikesh Roy, is right in noticingthat Section 7 of the Act provides for what an Arbitration Agreementmeans for the purpose of Part I. However, with great respect, we expressour inability to agree that plain reading of Section 7 of the Act, wouldDmake 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 atthis juncture:

“7(1) Arbitration agreement.(1) In this Part, “arbitrationagreement” means an agreementby the parties to submit toEarbitrationall or certain disputes whichhave arisen or which mayarise between them in respect of defined legal relationship,whether contractual or not.”

(Emphasis supplied)

F77. We are inclined to hold that what Section 7(1) contemplates isan Arbitration Agreement. We are also inclined to think that what theLaw-Giver has intended to convey is that under the ArbitrationAgreement, the parties must submit disputes, which have arisen or whichmay arise between them. The disputes may have arisen or may arise inrespect of defined legal relationship. The defined legal relationship, inGturn, can be either contractual or otherwise. Therefore, what can giverise to disputes can be legal relationship, which is non-contractual. Thelegal relationship may arise from out of Statute. It may arise in relationto tort but an Arbitration Agreement must always mean an agreement.It is really contract which is intended as an agreement enforceable bylaw is contract. An Arbitration Agreement may be Clause in anH

agreement providing for Arbitration. It may be separate or standaloneagreement [Section 7(2) of the Act]. An Arbitration Agreement must bein writing [See Section 7(3) of the Act]. As to what all are comprehendedwithin the requirement that the Arbitration Agreement must be in writing,is set out in Sections 7(4)(a) to 7(4)(c). It includes document which issigned by the parties [See Section 7(4)(a)]. An Arbitration Agreementwould be treated as contained in writing, if there is an exchange ofletters, telex, telegrams or other means of telecommunications, including,communications through electronic means which provide record ofthe agreement [See Section 7(4)(b)]. Next, we may notice that anArbitration Agreement will be treated as contained in writing, if there isan exchange of statements of claims and defence, in which, the existenceof the agreement is alleged by party and not denied by the other [SeeSection 7(4)(c)]. Finally, Section 7(5) contemplates an ArbitrationAgreement by incorporation, viz., reference in contract to documentcontaining an Arbitration Clause, would constitute an ArbitrationAgreement, if the contract is in writing and the reference is such as tomake that Arbitration Clause part of the contract. The true scope ofSection 7(5) of the Act has been elaborately considered inM.R.Engineers & Contractors Private Limited v. Som Datt BuildersLimited31.

78. Section 3(a) of the Stamp Act, no doubt, contemplates thatevery instrument mentioned in the Schedule, which, not having beenpreviously executed by any person, is executed in India on or after thefirst day of July, 1899, is chargeable with duty. Clause (c) of Section 3also contemplates ‘execution’ of document out of India, beingchargeable with duty. Section 17 of the Stamp Act also contemplatesthat in respect of documents executed in India, they shall be stampedbefore or at the time of execution. Justice Hrishikesh Roy would reasonthat an Arbitration Agreement, as defined in Section 7 of the Act, neednot be an instrument chargeable to stamp duty as stamp duty is payableunder the Stamp Act only on instruments, which are executed. The word‘executed’ has been defined in the Stamp Act as meaning ‘signed’.79. Section 7(3)(b) of the Act contemplates that an exchange ofletters, telex, telegrams or other means of telecommunication, includingcommunication through electronic means, which provide record of theagreement, would constitute an Arbitration Agreement in writing within

31 (2009) 7 SCC 696

ABC

Athe 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 contract or agreement of any kind is effected bycorrespondence consisting of two or more letters and any one ofthe letters bears the proper stamp, the contract or agreement shallBbe deemed to be duly stamped;”

80. Thus, the Stamp Act does contemplate contract or agreementbeing formed through correspondence through two or more letters. Itthen suffices that any one of the letters bears the proper stamp. Evenproceeding on the basis that an Arbitration Agreement is contained inCletters and it is signed and, therefore, executed within the meaning of theStamp Act, then, it would fall within the four corners of Sections 33 and35 of the Stamp Act.

81. We do notice that Bench of two learned Judges have, in theJudgment reported in Govind Rubber Limited v. Louids DreyfusDCommodities Asia Private Limited32, had this to say about the need foran Arbitration Agreement being signed:

“15. perusal of the aforesaid provisions would show that in orderto constitute an arbitration agreement, it need not be signed by allthe parties. Section 7(3) of the Act provides that the arbitrationEagreement shall be in writing, which is mandatory requirement.Section 7(4) states that the arbitration agreement shall be in writing,if it is document signed by all the parties. But perusal of clauses(b) and (c) of Section 7(4) would show that written documentwhich may not be signed by the parties even then it can be arbitrationagreement. Section 7(4)(b) provides that an arbitration agreementFcan be culled out from an exchange of letters, telex, telegrams orother means of telecommunication which provide record of theagreement.

16. On reading the provisions it can safely be concluded that anarbitration agreement even though in writing need not be signedGby the parties if the record of agreement is provided by exchangeof letters, telex, telegrams or other means of telecommunication.Section 7(4)(c) provides that there can be an arbitration agreementin the exchange of statements of claims and defence in which the

existence of the agreement is alleged by one party and not deniedby the other. If it can be prima facie shown that the parties are atad idem, then the mere fact of one party not signing the agreementcannot absolve him from the liability under the agreement. In thepresent day of e-commerce, in cases of internet purchases, telepurchases, ticket booking on internet and in standard forms ofcontract, terms and conditions are agreed upon. In suchagreements, if the identity of the parties is established, and thereis record of agreement it becomes an arbitration agreement ifthere is an arbitration clause showing ad idem between the parties.Therefore, signature is not formal requirement under Section7(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 anArbitration Agreement as being in writing is an exchange of Statementof Claims and Defence, wherein the existence of an agreement is allegedby one party and not denied by another. There must however be ‘anagreement’, the allegation of the existence of which remains unrefuted.Since, Section 7(1) defines an arbitration agreement to be one, underwhich, parties submit ‘all’ or ‘certain disputes’, which have arisen or willarise, such an agreement must be alleged to exist and the allegationmust remain undenied. The formation of such an agreement mustnecessarily be tested with reference to the indispensable requirements,such as, competency to contract and presence of sound mind.83. All that we are holding is, an Arbitration Agreement mustsatisfy the requirements in Section 7(1) and, therefore, it must be anagreement. Sans an agreement, there cannot be reference toarbitration. While Justice Hrishikesh Roy is right in holding that Section10 of the Contract Act recognises oral agreements and that writtenagreement is sine qua non for valid Arbitration Agreement, Section10 of the Contract Act, it must be noticed, in the second part, providesthat nothing contained in the first part, would affect any law, which, interalia, requires that any contract is required to be made in writing. Section7(3) of the Act which insists that an arbitration agreement must be inwriting harmonises with Section 10 of the Contract Act.

84. We would think that whenever an Arbitration Agreement, asdefined in Section 7 of the Act, also attracts stamp duty under the StampAct, then, the provisions of Sections 33 and 35 of the Stamp Act wouldcome into play. As held in SMS Tea Estates Private Limited(supra), if

Aan Arbitration Clause constitutes the Arbitration Agreement and theinstrument, viz., the instrument or contract, in which the Arbitration Clauseis contained, is unstamped, when it is otherwise exigible to stamp duty,then, the provisions of Section 33 as also Section 35 of the Stamp Actwould operate. The court acting under Section (11) of the Act is not freeto disregard their mandate.B

85. An Arbitration Agreement, may be Clause in an instrument,which attracts stamp duty. In such case, the Court, acting under Section11, is bound to act under Sections 33 and 35 of the Stamp Act, if theinstrument is not stamped or insufficiently stamped. If an ArbitrationAgreement is standalone agreement and which attracts duty under theCStamp Act, then also, the same position obtains.

M. THE ALTERNATIVE PERSPECTIVE

86. In Garware(supra), the Court referred to paragraph-59 ofDuro Felguera(supra) to find that, the Court in the said case, proceededDon the basis that the mischief that was sought to be remedied by theinsertion of Section 11(6A), was as contained inSBP(supra) andNationalInsurance (supra). We must, however, notice that in paragraph-18 ofGarware (supra), the Court referred to paragraph-12 of SBP (supra),which we have already noticed and, thereafter, the Court went on tohold, inter alia, as follows:E

“19. It will be seen that neither in the Statement of Objects andReasons nor in the Law Commission Report is there any mentionof SMS Tea Estates [SMS Tea Estates (P) Ltd. v. ChandmariTea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4 SCC (Civ) 777] .This is for the very good reason that the Supreme Court or theFHigh Court, while deciding Section 11 application, does not, inany manner, decide any preliminary question that arises betweenthe parties. The Supreme Court or the High Court is only givingeffect to the provisions of mandatory enactment which, no doubt,is to protect revenue.SMS Tea Estates [SMS Tea Estates (P)GLtd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 : (2012)4 SCC (Civ) 777] has taken account of the mandatory provisionscontained in the Stamp Act and held them applicable to judicialauthorities, which would include the Supreme Court and the HighCourt acting under Section 11. 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 comesacross an arbitration clause in an agreement or conveyance whichis unstamped, it is enjoined by the provisions of the Stamp Act tofirst impound the agreement or conveyance and see that stampduty and penalty (if any) is paid before the agreement, as whole,can be acted upon. It is important to remember that the StampAct applies to the agreement or conveyance as whole. Therefore,it is not possible to bifurcate the arbitration clause contained insuch agreement or conveyance so as to give it an independentexistence, as has been contended for by the respondent. Theindependent existence that could be given for certain limitedpurposes, on harmonious reading of the Registration Act, 1908and the 1996 Act has been referred to by Raveendran, J. in SMSTea Estates [SMS Tea Estates (P) Ltd. v. Chandmari Tea Co.(P) Ltd., (2011) 14 SCC 66 : (2012) 4 SCC (Civ) 777] when itcomes to an unregistered agreement or conveyance. However,the Stamp Act, containing no such provision as is contained inSection 49 of the Registration Act, 1908, has been held by thesaid judgment to apply to the agreement or conveyance as whole,which would include the arbitration clause contained therein. It isclear, therefore, that the introduction of Section 11(6-A) does not,in any manner, deal with or get over the basis of the judgmentin SMS Tea Estates [SMS Tea Estates (P) Ltd. v. ChandmariTea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4 SCC (Civ) 777] ,which continues to apply even after the amendment of Section11(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 atparagraph-22 and, finally, paragraph-29 which we have noticed. In fact,in paragraph-30, the Court went on to disapprove various Judgments ofHigh Courts, which included the Full Bench of the High Court of Bombayin Gautam Landscapes Pvt. Limited v. Shailesh S. Shah33, insofar asit related to the High Court holding that after the insertion of Section11(6A) of the Act, the Court, acting under Section 11(6), need not bedetained by the aspect relating to the document not being stamped.

A88. Section 11(6A) of the Act, no doubt, contemplated constrainingthe court to not stray into areas which were permissible under the earlierregime which was set out in SBP (supra) as explained in NationalInsurance (supra). It must be understood that when the law giver changesthe law it would be indeed wise approach and fully commended in lawto ascertain the mischief which the legislature was dealing with. Equally,Bthe court would naturally enquire as to what is the relief against themischief which the law giver has provided. The mischief as we understandwas the perception that courts were overstepping the limits of minimalinterference in consonance with the principle enshrined in Section 5 ofthe Act. In other words, if we may bear in mind paragraphs 22.2 andC22.3 of National Insurance Company(supra) it would appear that theyfell outside of the question relating to the existence of an arbitrationagreement. The Stamp Act is law passed by the same law-giver. It isa law which is meant to have life, and therefore, to be enforced. Thelegislature would not have possibly contemplated, when itincorporatedSection 11(6A), that the courts must turn blind eye to theDinjunction of law and allow it to be defeated. This to our minds involvesadopting an interpretation which would ignore the principle of harmoniousconstruction of statutes.89. As far as the conclusion in paragraph 55 of Great OffshoreLtd.(supra) that since Section 7 of the Act does not stipulate for stamping,Estamping may not be required under the Stamp Act, does not commenditself to us as the correct position in law. We are equally unable tosubscribe to the view that stamp duty, inter alia, should be treated as a‘technicality’. We are also of the view that the view taken by the learnedSingle Judge otherwise in the said paragraph again does not representFthe correct position.

90. Section 5 no doubt provides for non-obstante clause. Itprovides against judicial interference except as provided in the Act. Thenon-obstante clause purports to proclaim so despite the presence of anylaw which may provide for interference otherwise. However, this doesGnot mean that the operation of the Stamp Act, in particular, Sections 33and 35 would not have any play. We are of the clear view that thepurport of Section 5 is not to take away the effect of Sections 33 and 35of the Stamp Act. The Court under Section 11 purporting to give effectto Sections 33 and 35 cannot be accused of judicial interference contraryto Section 5 of the Act.H

91. It is nobody’s case that if the contract which contains thearbitration clause is an instrument within the meaning of the Stamp Actis produced before the court under Section 11 of the Act, and it is foundto be unstamped on the face of it, that Sections 33 and 35 and otherallied provisions of the Stamp Act would have no play. In fact, in N.N.Global(supra), this Court directed the work order (the contract containingthe arbitration clause) to be impounded. Section 11 (6A) of the Act whichrequires the court to examine whether an arbitration agreement exists,was the need realized and articulated by Parliament to curb the courtfrom straying into other areas highlighted inNational 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 theregime under Sections 33 and 35 of the Stamp Act.

N. THE AMICUS CURIE SPRINGS SURPRISE

92. This Court pointed out to the existence of the Scheme preparedby 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 undersub-section (4) or sub-section (5) or sub-section (6) of section 11shall be made in writing and shall be accompanied by-

(a) the original arbitration agreement or duly certified copythereof;”

93. Thereafter, when the curtains were about to be rung down onthe hearing, the learned Amicus brought the following aspect to noticeof the Court. He pointed out that under the Scheme, the applicant needproduce only the certified copy of the Arbitration Agreement. He woulddraw support from the Judgments of this Court inJupudi Kesava Raov. Pulavarthi Venkata Subbarao and others34 and Hariom Agrawal(supra) to contend that even applying Sections 33 and 35 by the Court atthe 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’scontention, by contending that in most of the cases, since certified copiesare alone being filed and they cannot be impounded, and as after referenceto 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

ACourt may bear this aspect in mind. Thereupon, Shri Gagan Sanghi,would point out that even in the certified copy, the factum of payment ofthe stamp duty must be entered. The said aspect, in fact, engaged theattention of this Court in SMS Tea Estates(supra).

94. Reference has been made to Jupudi Kesava Rao (supra), toBcontend that copy of an instrument, cannot be treated as an instrumentunder the Stamp Act for the purpose of Sections 33 and 35 of the StampAct. copy cannot be impounded under Section 33, it is pointed out.Therefore, Section 33, which mandates impounding of an unstampedinstrument, would not apply to certified copy, which is permitted to beproduced under the Scheme. Reliance has been placed on paragraphs-C13 and 14 of Jupudi Kesava Rao (supra):

“13. The first limb of Section 35 clearly shuts out from evidenceany instrument chargeable with duty unless it is duly stamped.The second limb of it which relates to acting upon the instrumentwill obviously shut out any secondary evidence of such instrument,Dfor allowing such evidence to be let in when the original admittedlychargeable with duty was not stamped or insufficiently stamped,would be tantamount to the document being acted upon by theperson having by law or authority to receive evidence. Proviso(a) is only applicable when the original instrument is actually beforeEthe Court of law and the deficiency in stamp with penalty is paidby the party seeking to rely upon the document.Clearly secondaryevidence either by way of oral evidence of the contents of theunstamped document or the copy of it covered by Section 63 ofthe Indian Evidence Act would not fulfil the requirements of theproviso which enjoins upon the authority to receive nothing inFevidence except the instrument itself. Section 25 is not concernedwith any copy of an instrument and party can only be allowed torely on document which is an instrument for the purpose ofSection 35. “Instrument” is defined in Section 2(14) as includingevery document by which any right or liability is, or purports to beGcreated, transferred, limited, extended, extinguished or recorded.There is no scope for inclusion of copy of document as aninstrument for the purpose of the Stamp Act.

14. If Section 35 only deals with original instruments and not copiesSection 36 cannot be so interpreted as to allow secondary evidenceof an instrument to have its benefit. The words “an instrument” inH

Section 36 must have the same meaning as that in Section 35.The legislature only relented from the strict provisions of Section35 in cases where the original instrument was admitted in evidencewithout objection at the initial stage of suit or proceeding. Inother words, although the objection is based on the insufficiencyof the stamp affixed to the document, party who has right toobject to the reception of it must do so when the document is firsttendered.Once the time for raising objection to the admission ofthe documentary evidence is passed, no objection based on thesame ground can be raised at later stage. But this in no wayextends the applicability of Section 36 to secondary evidenceadduced or sought to be adduced in proof of the contents of adocument which is unstamped or insufficiently stamped.”

(Emphasis supplied)

95. In Jupudi Kesava Rao(supra), the appellant relied on oralevidence to prove the lease document which was insufficiently stamped.The High Court held that oral evidence could not be acted upon to provethe lease agreement. The main question, which arose was, whethersecondary evidence of written agreement to grant lease, was barredunder Sections 35 and 36 of the Stamp Act. The Court went on to find,on survey of the Evidence Act that it did not purport to deal withadmissibility of documents in evidence, which were required to be stampedunder the Stamp Act. It is thereafter that the Court went on to hold whatwas done in paragraphs-13 and 14 of the Judgment. While dealing withSection 35 of the Act, the Court, inter alia, held that ‘the second limb ofSection 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, admittedlychargeable with duty, was not stamped or insufficiently stamped, wouldtantamount to the document being acted upon by the person having bylaw or Authority, to receive evidence.Proviso (a) is only applicable, itwas found when the original instrument is actually before the Court ofLaw and the deficiency in stamp with penalty is paid by the party seekingto rely upon the document. It is, thereafter, the Court observed that‘there is no scope for inclusion of copy of document as an instrumentfor the purpose of the Stamp Act’. The Court also, in paragraph-14,found that Section 36 of the Stamp Act, which precludes party, whodid not object to the admission of an unstamped or insufficiently stamped

Adocument, in evidence, from raising the objection later, did not apply tosecondary evidence.

96. InHariom Agrawal(supra), Bench of three learned Judges,was dealing with the impugned Order of the High Court, by which, itheld that photocopy of the original agreement, could neither beBimpounded nor could it be accepted as secondary evidence. It was afterfollowing Jupudi Kesava Rao (supra), the Court held as follows:

“10. It is clear from the decisions of this Court and plain readingof Sections 33, 35 and 2(14) of the Act that an instrument whichis not duly stamped can be impounded and when the required feeCand penalty has been paid for such instrument it can be taken inevidence under Section 35 of the Stamp Act. Sections 33 or 35are not concerned with any copy of the instrument and party canonly be allowed to rely on the document which is an instrumentwithin the meaning of Section 2(14). There is no scope for theinclusion of the copy of the document for the purposes of theDStamp Act. Law is now no doubt well settled that copy of theinstrument cannot be validated by impounding and this cannot beadmitted as secondary evidence under the Stamp Act, 1899.”

(Emphasis supplied)

E97. The submission appears to be that the Scheme provides for acertified copy of the Arbitration Agreement and if the ArbitrationAgreement is part of the contract, which is either not stamped orinsufficiently stamped and, since, it cannot be impounded under Section33 of the Stamp Act, cannot be validated. All that the Court has to lookinto is, whether an Arbitration Agreement exists.F

98. It is, no doubt, true that under the Scheme, an applicant canproduce, either the Original or the certified copy. What is certifiedcopy? certified copy is to be understood in the light of Section 76 ofthe Indian Evidence Act, 1872 (hereinafter referred to as, ‘the EvidenceAct’, for short). It reads as follows:

“76. Certified copies of public documents.—Every public officerhaving the custody of public document, which any person has aright to inspect, shall give that person on demand copy of it onpayment of the legal fees therefor, together with certificatewritten at the foot of such copy that it is true copy of suchHdocument or part thereof, as the case may be, and such certificate

shall be dated and subscribed by such officer with his name andhis official title, and shall be sealed, whenever such officer isauthorized by law to make use of seal; and such copies socertified shall be called certified copies.—Every 3public officerhaving the custody of public document, which any person has aright to inspect, shall give that person on demand copy of it onpayment of the legal fees therefor, together with certificatewritten at the foot of such copy that it is true copy of suchdocument or part thereof, as the case may be, and such certificateshall be dated and subscribed by such officer with his name andhis official title, and shall be sealed, whenever such officer isauthorized by law to make use of seal; and such copies socertified shall be called certified copies.” Explanation. —Anyofficer who, by the ordinary course of official duty, is authorizedto deliver such copies, shall be deemed to have the custody ofsuch documents within the meaning of this section.”

ABC

99. This necessarily would take us to Section 74 of the EvidenceAct, which defines what is ‘public document’. Section 74 reads asfollows:

“74. Public documents. —The following documents are publicdocuments: —

(1) Documents forming the acts, or records of the acts—

(i) of the sovereign authority,

(ii) of official bodies and tribunals, and

(iii) of public officers, legislative, judicial and executive, of anypart of India or of the Commonwealth, or of foreign country;Fof any part of India or of the Commonwealth, or of foreigncountry;

(2) Public records kept in any State of private documents.”

100. We have already noticed that Section 35 of the Stamp Actinterdicts the registration of an instrument unless it is duly stamped.

101. The interplay of the Evidence Act, the Stamp Act and theRegistration Act is to be understood as follows:

In regard to an instrument, which is executed in India and whichis liable to be stamped, then, stamping has to take place before or at the

Atime of the execution of the instrument. It is after the instrument isstamped that it can be presented for registration. Section 17 of theRegistration Act provides for documents, which are compulsorilyregistrable. Section 18 permits registration of other documents at theoption of the persons concerned. An instrument, which is registered,necessarily involves, it being duly stamped before it is so registered.BThis result is inevitable, having regard to the impact of Section 35 of theStamp Act. In fact, an instrument, which is not duly stamped and whichis produced before the Registering Authority, would be liable to beimpounded under Section 33 of the Stamp Act. What Section 74 readwith Section 76 of the Evidence Act provides for is, the issuance ofCcertified copies. Certified copies can be issued only in respect of publicdocuments. Section 62 inter alia of the Evidence Act defines primaryevidence as the document itself produced for the inspection of the court.Section 63 of the Evidence Act defines ‘secondary evidence’ as meaningand including, inter alia, ‘certified copies under the provisions hereinaftercontained’. The provisions ‘hereinafter contained’ referred to in SectionD63 must be understood as Section 74 read with Section 76. certifiedcopy can be given, no doubt, of ‘public records kept in any State ofprivate documents’. Thus, if sale deed between two private partiescomes to be registered, instead of producing the original document, acertified copy of the sale deed, may qualify as secondary evidence andEa certified copy can be sought for and issued under Section 76 of theEvidence Act. The expression ‘public records kept in any State of aprivate document’ in Section 74 is not confined to documents, which areregistered under the Registration Act. private document, which is keptas public record, may qualify as public document. What is importantis, to bear in mind that in view of Section 33 of the Stamp Act, anFinstrument, which is not duly stamped, if it is produced before any PublicOffice, it would become liable to be impounded and dealt with as providedin the Stamp Act. Let us assume case where contract, which containsan Arbitration Clause, is registered. As we have noticed, if the contract,in which the Arbitration Clause is contained, is exigible to stamp duty,Gthen, registration cannot be done without the instrument being dulystamped. It is keeping the same in mind that inSMS Tea Estates (supra),this Court held that, ‘if what is produced is certified copy of theagreement/contract/instrument, containing the Arbitration Clause, it shoulddisclose that the stamp duty has been paid on the original’. This again isfor the reason that certified copy is true copy of the document. TheH

Officer, who certifies the document, must be the person having thecustody of the public document. The public document in the case ofpublic records of private documents, in the case of registered document,would necessarily involve the document being stamped beforeregistration. The Scheme framed by the Chief Justice, permits theproduction of duly certified copy to relieve the party of the burden ofproducing the original but what is contemplated is only the production ofthe certified copy, which duly discloses the fact of payment of stampduty. It is worthwhile to also notice paragraph-5 of the Scheme. It reads:

“5. Seeking further information. -The Chief Justice or the personor the institution designated by him under paragraph 3 may seekfurther information or clarification from the party making therequest under this Scheme.”

102. Therefore, it is not as if the Judge dealing with an Applicationunder Section 11 of the Act, is bereft of authority to seek information orclarification so as to be satisfied that the certified copy satisfies therequirement as laid down in SMS Tea Estates(supra) that stamp dutypayable has been paid.

103. We have already indicated the scheme of the Evidence Actin so far as it relates to the admission of secondary evidence. We havealso found that the Scheme contemplates, without anything more, theproduction of form of secondary evidence, viz., certified copy of theArbitration Agreement. Even if an Arbitration Agreement between thetwo parties becomes public document under Section 74(c) of theEvidence Act on the basis that it is public record, other than as being aregistered document and on the basis that, it was produced before anypublic office and it became public record of private document,inkeeping with the mandate of Section 33 of the Stamp Act and otherconnected provisions, such document again would have been impounded,unless it was originally stamped as per law. In other words, if certifiedcopy is produced, along with request under Section 11 of the Act, to betreated as document, on which the Application under Section 11 couldbe maintained, it must necessarily comply with the requirement that itdeclares the stamp, which has been paid in regard to the original.

104. The production of copy of an instrument, may not lead tothe impounding of the copy as Section 33, which mandates impounding,applies only in regard to the original, which alone is treated as an

Ainstrument under Section 2(14) of the Stamp Act. We must understandthe context of the ruling in Jupudi Kesava Rao (supra) and HariomAgrawal(supra) to be that party cannot ‘validate’ an instrument byproducing copy and by getting it impounded and paying the duty andpenalty. In fact, as observed in paragraph-13 of Jupudi Kesava Rao(supra), the Court cannot be invited to act upon copy of an instrument,Bwhich is insufficiently stamped. Thus, such copy, while it cannot beimpounded under Section 33, it cannot also be acted upon under Section35.

O. SECTIONS 33 AND 35 OF THE STAMP ACT; THECOURT OR THE ARBITRATOR TO ACT?C

105. There was considerable debate at the Bar as regards thewisdom in relegating the issue relating to payment of stamp duty to theArbitrator. On the one hand, the learned Amicus, supported by learnedCounsel for the Respondent, would canvass that, bearing in mind theobject of the Act, and in particular, Section 5 of the Act, prohibitingDjudicial interference, except as provided, questions relating to non-payment of stamp duty and the amount to be paid, are capable of beingdealt with by the Arbitrator. The concern of the Court, that the interestof the Revenue is protected, is best balanced with the overwhelmingneed to fastrack the arbitration proceedings and they are best harmonisedEby ensuring that the Arbitrator will look into the matter and ensure thatthe interest of the Revenue is not jeopardised. On the other hand, theappellant and the intervener would point out that the Court cannot ignorethe mandate of the law contained in Sections 33 and 35 of the StampAct and view taken by this Court, on the said lines, will only encourageevasion of the law, whereas, if the Court follows the mandate of SectionsF33 and 35 of the Stamp Act and adheres to what has been laid down inGarware (supra), not only would the law be observed, but, when thematter reaches the Arbitrator, the issue would have been given the quietus.Such view would also encourage persons falling in line with the StampAct.G106. We see merit in the contention of the appellant. Apart fromthe Court acting in consonance with the law, when it adheres to Sections33 and 35 of the Stamp Act, where it applies, in our view, under thewatchful gaze of the Court, be it the High Court or the Supreme Court,the issue relating to stamp duty, in case where there is no stamp dutyHpaid, is best resolved.

107. The question would arise as follows:

i.A document containing the Arbitration Clause may not bearany stamp duty. We have already found that even anArbitration Agreement, on its own, may be required to bestamped, as submitted by the learned Amicus. But then theCourt can proceed on the basis that the amount of stampduty, which the Arbitration Agreement contained in anArbitration Clause, would be exigible to being extremelymeagre, there is very little likelihood of such an agreementnot being stamped. Therefore, what the Court is to consideris, whether when the contract, in which the ArbitrationClause is contained, is not duly stamped, it becomes theduty of the Court to act under Sections 33 and 35 of theStamp Act.

ii.We have already indicated the background, consisting ofthe views expressed by this Court, about the nature ofreview undertaken under Section 11, which led to theinsertion of Section 11(6A). Parliament clearly intended todeal with the Court undertaking excessive review, inexercise of the power under Section 11(6) of the Act. Itwas to curtail excessive judicial interference, which was inkeeping also with the principle enshrined in Section 5 of theAct that Parliament interfered and enacted the amendmentresulting in Section 11(6A) being inserted. Parliament wasaware of the view taken by this Court in SMS Tea Estates(supra), namely that, if the Arbitration Agreement was notduly stamped, then, it had to be impounded and dealt withas provided therein. The mandate of the Stamp Act did notconflict with the legislative command contained in Section11(6A), viz., to examine whether an Arbitration Agreementexisted. Proceeding on the basis, in fact, that contract,containing the Arbitration Agreement, which is not dulystamped, could be said to exist in law, it would still notdislodge the duty cast on the Court under Section 11 tofollow the mandate of Sections 33 and 35 of the StampAct. In other words, on the aforesaid view, following thecommand under Section 11(6A), could not detract from,the Court also at the same time, following the equally bindingmandate contained in the Stamp Act.

iii.The question further arises, as to whether, in view of thepower of the Court under Section 11, to find only primafacie, the existence of the Arbitration Agreement, it wouldenable the Court to make Reference and appointmentand relegate the issue of impounding of the document tothe Arbitrator.

iv.Any shirking of the statutory duty by the Court under Section11 to act in tune with the peremptory statutory dictate ofthe Stamp Act, appears to us unjustifiable. Such abdicationof its plain duty is neither contemplated by the Law-Givernor would it be justifiable as causing the breach of SectionC11(6A).

v.The view that cases under Section 11 of the Act wouldconsume more time and hinder the timely progress ofarbitration and that the matter must be postponed so thatthe Arbitrator will more suitably deal with it, does not appealto us. While the Stamp Act is primarily intended to collectrevenue and it is not intended to arm litigant to raise‘technical pleas’, this would hardly furnish justification forthe Court to ignore the voice of the Legislature couched inunambiguous terms. We find that the view expressed inSMS Tea Estates (supra), being reiterated, despite theinsertion of Section 11(6A), would promote the object ofthe Stamp Act and yet be reconcilable with the mandate ofSection 11(6A). We may, however, qualify what we havesaid with caveat. There may be cases, where no stampduty is seen paid. It paves the way for the unambiguousdischarge of duty under Sections 33 and 35 of the StampAct. There may, however, be cases, where it may bestamped but the objection is taken by the party that it is notduly stamped. In such cases, no doubt, it is ordinarily theduty of the Court to examine the matter with reference tothe duty under Section 33(2). If the claim that it isinsufficiently stamped, appears to the Court to be on theface of it, wholly without foundation, it may make theReference on the basis of the existence of an ArbitrationAgreement otherwise and then leave it open to the Arbitratorto 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 thecommand of Section 11(6A) of the Act. It is not to beconfused with the duty to examine prima facie whether an‘Arbitration Agreement’ exists under Section 11(6A) of theAct, but is related to the duty to examine the matter underSection 33(2) of the Stamp Act.

vi.Under the Evidence Act, production of only the originaldocument is permissible by way of evidence (See Section62). However, secondary evidence is permissible underSection 63 and certified copies are treated as secondaryevidence. Under the Scheme, in proceeding under Section11, without following the procedure in the Evidence Act,secondary evidence, in the form of certified copy, ispermitted. It may be true that since certified copies arepermitted to maintain an Application under Section 11 and,in law, impounding cannot be done of certified copy, as itis not an instrument, the duty of the Court to examine thematter from the point of view of Section 33 of the StampAct, may not exist as such. However, we have explainedwhat constitutes certified copy, and that, in view ofSMSTea Estates(supra), the stamp duty paid must be indicatedin the certified copy and, in appropriate case, the Court haspower, under paragraph-5 of the Scheme, to call forinformation. It becomes the duty of the Court, in cases,where certified copy is produced, to be satisfied that theproduction of the certified copy, fulfils the requirement inlaw. As already noticed, while the certified copy which doesnot show that the stamp duty is paid cannot be impoundedunder Section 33, it cannot be acted upon under Section 35of the Stamp Act.

P. ARBITRATION AGREEMENT, DISTINCTAGREEMENT AND ITS IMPACT?

i.The last question, which remains is, whether, if the contract,in which, the Arbitration Clause is located, is unstampedbut the Arbitration Clause is stamped, the Court can ignorethe fact that the instrument containing in the Contract isunstamped. In the first place, such an eventuality cannot

arise. This for the reason that unless there ismisrepresentation or fraud played, it is incomprehensibleas to how, when the contract is produced, it will not bedealt with under Section 33 of the Stamp Act among otherprovisions.

ii.The learned Amicus, in fact, points out that invariably theArbitration Agreement is contained as clause in largeragreement. The contract would consist of the documentcontaining the Arbitration Agreement. This brings us to thequestion as to whether the Arbitration Agreement can betreated as separate contract, and even if the main contractis not stamped, it suffices if the Arbitration Agreement aloneis stamped.

iii.

In N.N. Global(supra), in fact, the Court proceeded toimpound the main contract which was the Work Order. TheDoctrine of the Arbitration Agreement being distinct anda separate agreement, is well-established.

The Doctrine of Kompetenz-Kompetenz has beenenshrined in Section 16 of the Act. Section 16, undoubtedly,articulates the principle that the Arbitral Tribunal may ruleon its jurisdiction including objections relating to the validityof the Arbitration Agreement and its very existence and,for that purpose, an Arbitration Clause forming part of thecontract, is to be treated as an agreement independent fromthe other terms of the contract. Equally, Section 16(1)(b)declares that despite the Tribunal finding that the contractwas null and void, it would not invalidate the ArbitrationClause. The evolution of the principle that an ArbitrationAgreement is separate and distinct agreement from thecontract, would indicate that it would have no play in thecontext of the duty of Court, within the meaning ofSections 33 and 35 of the Stamp Act, to act in consonancetherewith. The efficacy of the Arbitration Clause in acontract is preserved so that the extinguishing of thecontractual obligations by termination or non-performanceor alleged performance, does not deprive the parties of theirrights and the power of the Arbitrator to adjudicate on

disputes, which, otherwise fall within the ambit of theArbitration Clause.

The underlying principle behind treating the ArbitrationAgreement as separate agreement is to create amechanism, 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 thedeath of the Arbitration Clause. We agree that theArbitration Clause may be collateral term [See Heymanv. Darwins Limited35]. The Arbitration Agreement, it isfound inN.N. Global (supra), ‘exists and can be acted upon,irrespective of whether the main substantive contract is validor not’ [See paragraph-4.10 of N.N. Global(supra)]. It maybe true that, ordinarily, the invalidity of the main agreementmay not affect the Arbitration Clause [See paragraph-4.12ofN.N. Global(supra)]. However, proceeding on the basisthat an Arbitration Agreement contained as clause in themain contract, is separate agreement and it can existindependently, the fallacy behind such line of argument inthe context of Sections 33 and 35 of the Stamp Act, can bedemonstrated as follows:The learned Amicus would urge that inN.N. Global(supra) the Court erred in finding that the ArbitrationAgreement is not required to be stamped. If so, theArbitration Clause, being the Arbitration Agreement, wouldrequire to be stamped. Is it conceivable that contract,containing an Arbitration Clause, would be stamped only tocover the liability in regard to the Arbitration Agreementand leave the main agreement unstamped, when it is requiredto be stamped? Will not acceptance of such view requirethe Court to adopt an interpretation that will plainlyencourage parties to contravene the mandate of the StampAct. We are afraid that, therefore, even proceeding on thebasis that an Arbitration Agreement is separate agreement,would be of no avail in case where the Arbitration Clauseand the main Agreement are both exigible to stamp duty.

ABC

A108. As found in SMS Tea Estates (supra), in view of the factthat there is bar to the use of an instrument, which is not stamped orinsufficiently stamped for any purpose (unlike Section 49 of theRegistration Act, which allows an unregistered document to be used toprove collateral transaction), an unstamped instrument, in which, anArbitration Clause is part of, cannot be allowed to be used, as it wouldBbe allowing the instrument to be used to establish collateral transaction.This is proceeding on the basis that an Arbitration Agreement is collateralterm and may have distinct existence, separate from the mainagreement.

Q. CONCLUSIONSC

109. The view taken in SMS Tea Estates(supra) as followed inGarware (supra) and by the Bench in Dharmaratnakara Rai BahadurArcot Narainswamy Mudaliar Chattram and other Charities v.Bhaskar Raju and Brothers and others36 as to the effect of anunstamped contract containing an Arbitration Agreement and the stepsDto be taken by the Court, represent the correct position in law as explainedby us hereinbefore. N.N. Global(supra) was wrongly decided, when itheld to the contrary and overruledSMS Tea Estates (supra) andGarware(supra).

110. An instrument, which is exigible to stamp duty, may containEan Arbitration Clause and which is not stamped, cannot be said to be acontract, which is enforceable in law within the meaning of Section2(h) of the Contract Act and is not enforceable under Section 2(g) ofthe Contract Act. An unstamped instrument, when it is required to bestamped, being not contract and not enforceable in law, cannot,Ftherefore, exist in law. Therefore, we approve of paragraphs-22 and29ofGarware(supra). To this extent, we also approve ofVidya Drolia(supra), insofar as the reasoning in paragraphs-22 and 29 ofGarware(supra) is approved.

111. The true intention behind the insertion of Section 11(6A) inGthe Act was to confine the Court, acting under Section 11, to examineand 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 certified copy. The

certified copy must, however, clearly indicate the stamp duty paid asheld in SMS Tea Estates (supra). If it does not do so, the Court shouldnot act on such certified copy.

113. If the original of the instrument is produced and it is unstamped,the Court, acting under Section 11, is duty-bound to act under Section 33of the Stamp Act as explained hereinbefore. When it does so, needlessto say, the other provisions, which, in the case of the payment of the dutyand penalty would culminate in the certificate under Section 42(2) of theStamp Act, would also apply. When such stage arises, the Court willbe free to process the Application as per law.

114. An Arbitration Agreement, within the meaning of Section 7of the Act, which attracts stamp duty and which is not stamped orinsufficiently stamped, cannot be acted upon, in view of Section 35 ofthe Stamp Act, unless following impounding and payment of the requisiteduty, necessary certificate is provided under Section 42 of the StampAct.

115. We further hold that the provisions of Sections 33 and thebar under Section 35 of the Stamp Act, applicable to instrumentschargeable to stamp duty under Section 3 read with the Schedule to theStamp Act, would render the Arbitration Agreement contained in suchinstrument as being non-existent in law unless the instrument is validatedunder the Stamp Act.

116. In given case, the Court has power under paragraph-5 ofthe Scheme, to seek information from party, even in regard to stampduty.

117. We make it clear that we have not pronounced on the matterwith reference to Section 9 of the Act. The reference to the ConstitutionBench shall stand answered accordingly.

118. We record our deep sense of appreciation for the efforts putin by Shri Gourab Banerji, learned senior counsel who has ably assistedthis Court as Amicus.

AC. T. RAVIKUMAR, J.

1. I have had the advantage of reading the erudite opinion of mylearned brother Justice K. M. Joseph, for himself and learned brotherJustice Aniruddha Bose, and the separate opinion of learned brotherJustice Hrishikesh Roy, concurring with the opinion of learned brotherJustice Ajay Rastogi, but disagreeing with the opinion of learned brotherBJustice K.M. Joseph. Regretfully, I record my inability to agree with theopinion of learned brother Justice Ajay Rastogi as also with the concurrentopinion of learned brother Justice Hrishikesh Roy. While fully endorsingthe opinion of learned brother Justice K. M. Joseph, to which my learnedbrother Justice Aniruddha Bose has concurred, I wish to add conciseCaddendum as under, in respect of some of the issues, of course, only insupport of findings returned thereon.

2. The issue(s) under reference, the modification of the referredquestion and the allied questions cropped up for consideration have beenelaborately dealt with and answered in the erudite draft judgment of mylearned brother Justice K.M. Joseph and hence, it is absolutely unessentialDto refer them. While considering the power of the Court under Section11(6) of the Arbitration and Conciliation Act, 1996 it is to be noted thatthe position of Section 11(6) before and after the amendment and Section11(6A), inserted by Act 2 of 2016 with effect from 23.10.2015 havebeen referred to in all the three opinions. Hence, I do not think it necessaryto extract those provisions to avoid the risk of repetition. Certainly, theEpowers conferred under Section 16 of the Act often referred to as‘Kompetenz-Kompetenz’ make it clear that the Arbitral Tribunal isempowered and thus got competence to rule on its own jurisdiction,including on all jurisdictional issues and existence or validity of thearbitration agreement. This provision would have its full-play whenFappointment of the arbitrator takes place, on consensus, by the parties,in accordance with the terms of the arbitration agreement or by designatedarbitration institution, without the intervention of the Court. But then, theprovision under Section 11 (6) of the Act applies when the proceduresenvisaged under the arbitration agreement have not worked and anapplication is filed for invocation of the power thereunder before theGCourt for making appointment of the Arbitrator(s). The controversy inregard 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 theinsertion of Section 11 (6A) in the Act. An application for ‘AppointmentH1 (2005) 8 SCC 618

of Arbitrators’ is filed, by one party asserting the existence of an arbitrationagreement or arbitration clause in an ‘instrument’ executed between theparties concerned. Therefore, invariably what is to be decided, ininvocation of the said powers, is the asserted factum of existence ofarbitration agreement or arbitration clause in the said instrument andinvariably, in this regard the party who invoked the said power underSection 11(6), has to produce that very relied on instrument for inspection.The question is whether while passing an order the Court exercising thepower under Section 11 (6) receives any evidence, for the limited purposeof ascertaining the truth of the assertion that the document thus producedis an arbitration agreement or an instrument containing arbitration clause.In this regard it is only apposite to refer to the meaning ascribable to theterm ‘evidence’. As per Peter Murphy in ‘A Practical Approach toEvidence (Second Edition), 1985, ‘evidence’ may be defined as any‘material’ which tends to persuade the Court of the truth or probity ofsame fact asserted before it. As noted hereinbefore, in such an applicationunder Section 11 (6), invariably the fact to be asserted would be theexistence of ‘arbitration agreement’ and in proof thereof the materialviz., the document would be produced. I will refer to the relevant provisionin the statutory scheme viz., the Appointment of Arbitrators by the ChiefJustice of India Scheme, 1996, later. Now, when that is received, it isnothing but receiving evidence to that limited purpose for deciding thequestion whether the ‘instrument’ produced is one executed betweenthe parties is an arbitration agreement or whether the instrument containedan arbitration clause. Necessarily, if the answer is in the affirmative, anorder appointing Arbitrator(s) would be passed and an answer in thenegative would be the end of such proceedings. In that view of thematter, it can safely be said that what is to be decided while performingthe function under Section 11 (6) is relating ‘jurisdictional aspect’ asonly on returning finding that there exists an arbitration agreement orarbitration clause, in the material so produced, that arbitrator(s) wouldbe appointed. The answering of that question, on receiving the‘instrument’, is the performance of the function describable as “actingupon” the document thus produced. In other words, as discernible fromthe 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 opinionof learned brother Justice K.M. Joseph), ‘acting upon’ is not included in

ABC

DEFG

Athe act of admitting an instrument, though it can be acted upon, later,subject to permissibility in law therefor.

3. The cleavage in opinion occurs on the issue as to whether theCourt called upon to invoke the power under Section 11 (6) should orcould exercise the power coupled with duty under Section 33 of theBIndian Stamp Act, 1899, when the document carrying the arbitrationagreement or arbitration clause is found unstamped or insufficiently

stamped or without going into such matter, should it confine its exerciseof power in the matter of appointment of Arbitrator(s) only and refrainitself from proceeding further in view of the mandate under Section 33of the Indian Stamp Act, 1899.I have already recorded my agreementCwith the opinion of my learned brother K.M. Joseph that exercise ofpower coupled with duty under Section 33 of the Stamp Act cannot beaccused of judicial interference in contravention to Section 5 of the Actand further that it shall not be confused with examination whether anarbitration agreement or arbitration clause in the said instrument, existsDso 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 rider for the exercise of the said powerunder Section 33 of the Stamp Act.4. In the aforesaid context, it is relevant to refer to Sub-sectionsE(1), (2) and clause (b) of Sub-section 2, of Section 33 of the IndianStamp Act, 1899. They read thus:-

“33. Examination and impounding of instruments. —

(1) Every person having by law or consent of parties authorityto receive evidence, and every person in charge of publicFoffice, except an officer of police, before whom anyinstrument, chargeable, in his opinion, with duty, is producedor comes in the performance of his functions, shall, if itappears to him that such instrument is not duly stamped,impound the same.

G(2) For that purpose every such person shall examine everyinstrument so chargeable and so produced or coming beforehim, in order to ascertain whether it is stamped with stampof the value and description required by the law in force in 2[India] when such instrument was executed or first executed:Provided that—H

(a) nothing herein contained shall be deemed to require anyMagistrate or Judge of Criminal Court to examine orimpound, if he does not think fit so to do, any instrumentcoming before him in the course of any proceeding other thana proceeding under Chapter XII or Chapter XXXVI of theCode of Criminal Procedure, 1898 (V of 1898);

(b) in the case of Judge of High Court, the duty ofexamining and impounding any instrument under this sectionmay be delegated to such officer as the Court appoints in thisbehalf.

5. I have already found that receiving the very ‘instrument’ whichis carrying the arbitration agreement or containing an arbitration clausefrom the party who asserts its existence is essentially an act of receivingthe evidence, in that limited sense. Therefore, how can the Court, whichis having authority and competence to receive evidence, for the purposeof invoking the power under Section 11 (6), abstain from proceedingfurther in terms of Section 33 if it appears to it that such instrumentproduced before it, though required to be stamped, is unstamped or isnot duly stamped. According to me, in terms of the mandate under Sub-section (2) of Section 33, for that purpose, the Section 11 Judge whoreceived evidence shall ‘examine’ the instrument so chargeable and soproduced in order to ascertain whether it is stamped with stamp of thevalue and description required by the law in force in India, when suchinstrument was executed or first executed. Proviso (b) which is extractedhereinbefore, would only permit Judge of the High Court for delegationof the duty of examining and impounding any such instrument to suchofficer as the Court may appoint in that behalf. Thus, it only givesdiscretion to Judge of the High Court to delegate the duty of examiningand impounding any such instrument in the manner mentioned under thesaid proviso if he chooses not to proceed in the manner provided forimpounding the instrument in accordance with the relevant provision, byhimself. When that be the provision under Section 33 (1) and (2), aconjoint reading of which obviously makes it mandatory for the Courtexercising the power under Section 11 (6) to proceed in terms of themandate under Section 33 when the circumstances legally invites itsinvocation. contra view, according to me, would render Sub-section(2) of Section 33 and proviso (b) redundant and would defeat the verysoul of the provisions as relates their application in respect of applicationfiled under Section 11(6) of the Act.

A6. The Bar under Section 35 of the Stamp Act on admission ofinstruments not duly stamped in evidence, as is evident from proviso (a)to it, is not permanent and is curable by following procedures providedthereunder and making an endorsement as provided under Section 42(1)of the Stamp Act. Sub-section (2) of Section 42 makes it clear thatevery such instrument so endorsed shall thereupon be admissible inBevidence and be acted upon and authenticated as it had been dulystamped. The upshot of the discussion is that being unstamped orinsufficiently stamped, the agreement would not be available to be‘admitted in evidence’ and ‘to be acted upon’, till it is validated followingthe procedures prescribed under the provisions of the Stamp Act and tillCthen, it would not exist ‘in law’.

7. Another point which I intend to make in addition to the opinionof my learned brother Justice K. M. Joseph, is with respect to the meaningascribable to the expression ‘certified copy’ which is permissible to beproduced along with the application for appointment of Arbitrator(s) inDterms of paragraph 2 (a) of the scheme framed by the Hon’ble theChief Justice of India, in exercise of power under Section 11(10) of theAct, namely, the Appointment of Arbitrators by the Chief Justice of IndiaScheme, 1996. Paragraph 2 and sub-paragraph (a) thereof read thus:-

2. Submission of Request:- The request to the Chief JusticeEunder Sub-section (4) or Sub-section (5) or Sub-section (6) ofSection 11 shall be made in writing and shall be accompanied by –

(a) the original arbitration agreement or duly certified copythereof.

8. In the opinion of my learned brother Justice K. M. Joseph thisFissue has been elaborately considered from paragraphs 77 to 89. Whileconcurring with the conclusions and findings thereof, I would like to givemy own reasons as to why the expression ‘certified copy’ should beunderstood with reference to Section 74 and 76 of the Indian EvidenceAct, 1872, (hereinafter referred to as ‘Evidence Act’) and why the saidGform of secondary evidence is available to be ‘acted upon’ without formalproof of existence and execution of the original document.

9. Section 62 defines ‘primary evidence’ thus:-

62. Primary evidence. –– Primary evidence means thedocument itself produced for the inspection of the Court.HExplanation 1. ––Where document is executed in several

parts, each part is primary evidence of the document. Wherea document is executed in counterpart, each counterpart beingexecuted by one or some of the parties only, each counterpartis primary evidence as against the parties executing it.Explanation 2. –– Where number of documents are all madeby one uniform process, as in the case of printing, lithographyor photography, each is primary evidence of the contents ofthe rest; but, where they are all copies of common original,they are not primary evidence of the contents of the original.

person is shown to have been in possession of number ofplacards, all printed at one time from one original. Any oneof the placards is primary evidence of the contents of anyother, but no one of them is primary evidence of the contentsof the original.

10. Section 63 of the Indian Evidence Act defines secondaryevidence which reads thus: -

“63. Secondary evidence. –– Secondary evidence means andincludes ––

(1) certified copies given under the provisions hereinaftercontained;

(2) copies made from the original by mechanical processeswhich in themselves ensure the accuracy of the copy, andcopies compared with such copies;

(3) copies made from or compared with the original;

(4) counterparts of documents as against the parties who didnot execute them;

(5) oral accounts of the contents of document given by someperson who has himself seen it.”

11. Thus, the definition ‘secondary evidence’ means and includeswhat are mentioned in clauses ‘1 to 5’.Though, the inclusive definitionspeaks of different kinds of secondary evidence, such as, mentionedunder clauses ‘1 to 5’, careful scanning of the Evidence Act wouldreveal that copies which fall under clause (1) of Section 63 alone carrythe presumption of genuineness and correctness, by virtue of the provisionunder Section 79 of the Evidence Act. Section 79 reads thus:-

“A79. Presumption as to genuineness of certified copies. ––The Court shall presume [to be genuine] every documentpurporting to be certificate, certified copy or otherdocument, which is by Law declared to be admissible asevidence of any particular fact, and which purports to beduly certified by any officer [of the Central Government orBof State Government, or by any officer [in the State of Jammuand Kashmir] who is duly authorized thereto by the CentralGovernment]:

Provided that such document is substantially in the form andpurports to be executed in the manner directed by law in thatCbehalf. The Court shall also presume that any officer by whomany such document purports to be signed or certified, held,when he signed it, the official character which he claims insuch paper.”

12. Thus, it can be said that the genuineness and correctness ofDcopies falling under clause 1 of Section 63 shall be presumed underSection 79 of the Evidence Act. The definition of ‘shall presume’ isdefined under Section 4 of the Evidence Act, thus:-

“Shall presume”.––Whenever it is directed by this Act thatthe Court shall presume fact, it shall regard such fact asEproved, unless and until it is disproved.

13. Section 79 proceeds upon the maxim ‘omnia praesumunturrite esse acta, i.e., all acts are presumed to be done rightly and regularly.When the acts of official nature went through the process, the presumptionarises in favour of the regular performance.F

14. Section 65 of the Evidence Act, in so far as, it is relevantreads thus:-

65. Cases in which secondary evidence relating to documentsmay be given.––Secondary evidence may be given of theexistence, condition, or contents of document in the followingGcases: ––

(e) when the original is public document within the meaningof section 74;

(f) when the original is document of which certified copyis 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 EvidenceAct certified copy of document allegedly carrying an arbitrationclause is produced and that document can be received in evidence forthe purpose of Section 11 (6) of the Act and by virtue of Section 79 ofthe Evidence Act, the Court shall presume the genuineness of thedocument which could be accepted as evidence and shall presume thegenuineness of the contents of the document unless the presumption isnot rebutted by other evidence. Thus, it can be seen that besidespermitting to produce the original document which is primary evidencein terms of Section 62 of the Evidence Act, despite the existence ofdifferent kinds of secondary evidence, under paragraph 2 (a) of Schemeframed by the Hon’ble the Chief Justice of India, only certified copyalone is permitted to be adduced, purposefully, as by virtue of Section 79of Evidence Act presumption of genuineness and correctness of thecertified copies of the documents mentioned under Section 63 (1) of theEvidence Act shall have to be presumed. In other words, the other modesof production of secondary evidence would not permit the Court to drawthe presumption of genuineness and correctness and that is why inparagraph 2(a) of the scheme framed in terms of the provisions underSection 11 (10) provides only for production of certified copy of theprimary evidence to act upon for the purpose of applying for appointmentof Arbitrator under Section 11 (6) of the Act, in the alternative ofproduction of the original instrument.

16. As already found the nature of exercise of power under Section11 (6) is ‘judicial’ and therefore, it was thought only fit to permit toexercise such power only on the original instrument or else, on its certifiedcopy, to be understood with reference to Section 63 (1) read with Section74 and 76 of the Evidence Act. When once the intention behind paragraph2(a) of the scheme is understood in that manner with reference to theprovisions under Section 63 (1), 74, 76 and 79 of the Evidence Act, theexpression ‘certified copy’ employed in paragraph 2(a) of the schemeframed under Section 11(10) of the Act cannot be interpreted to meanany other kind of copies provided under Section 63 of the Evidence Actother than under Section 63 (1) of the Evidence Act.

ABC

A17. Learned brother Justice K. M. Joseph, after explaining as tohow the expression ‘certified copy’ must be understood, held that theCourt exercising the power under Section 11 (6) has to exercise thepower under Section 33 of the Indian Stamp Act when the original isproduced before the Court. In other words, according to me, it is rightfullyBheld that when the original document carrying the arbitration clause isproduced 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 33of the Indian Stamp Act as held in the draft judgment.

18. I am also concurring with the view that what is permissible toCbe produced as secondary evidence i.e., other than the original documentin terms of Section 2(a) of the scheme framed under Section 11(10) ofthe Act, is nothing but certified copy as mentioned earlier. But such acertified copy, would not be available to be proceeded with under Section33 of the Stamp Act if it is unstamped or insufficiently stamped. In suchcircumstances, such certified copy shall not be acted upon.D

19. In the contextual situation, to understand the differencebetween ‘certified copy’ and ‘a copy certified to be true copy’, it is onlyappropriate to refer to Rule 1 of Order VIII of the Supreme Court Rules,2013, framed invoking the power conferred by Article 145 of theConstitution of India. Rule 1 of Order VIII reads thus: -E

“1. The officers of the Court shall not receive any pleading,petition, affidavit or other document, except original exhibitsand certified copies of public documents, unless it is fairlyand legibly written, type-written or lithographed in double-Fline spacing, on one side of standard petition paper, demy-foolscap size, or of the size of 29.7 cm x 21 cm, or paperwhich is ordinarily used in the High Courts for the purpose.Copies filed for the use of the 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 differencein the said expressions, under paragraph 2 (a) ‘certified copy’ alone waspermitted to be appended along with the application under Section 11 of

the Act, unintentionally. I am of the considered view that it was soprescribed, fully understanding the nature of exercise of power underSection 11 (6) of the Act and also the presumption of genuineness andcorrectness of ‘certified copy’ available by virtue of Section 79 of theEvidence Act.

With this addendum, I fully endorse all the conclusions and findingsin the judgment of my learned brother Justice K. M. Joseph.

RASTOGI, J.

INDEX*

*Ed. Note: Pagination in the Index is as per the original judgment.

CDEFG

AI. Reference

1. This case deals with the larger question regarding the scopeand ambit to which there should be an intervention of courts at the pre-referral stage in the working of arbitration contracts.

2. three-Judge Bench of this Court in M/s. N.N. GlobalBMercantile PrivateLimited v. M/s. Indo Unique Flame Limited andOthers[1]has doubted the correctness of the view expressed in paras 146and 147.1 of the coordinate three-Judge Bench of this Court in VidyaDrolia and Others v. Durga Trading Corporation[2]and referred thematter to be settled authoritatively by the Constitution Bench of thisCourt.C

3. The reference which has been made to settle authoritatively bythe Constitution Bench is referred as under:

“Whether the statutory bar contained in Section 35 of the StampAct, 1899 applicable to instruments chargeable to stamp duty underDSection 3 read with the Schedule to the Act, would also renderthe arbitration agreement contained in such an instrument,which-is not chargeable to payment of stamp duty, as being nonexistent,unenforceable, or invalid, pending payment of stamp duty on thesubstantive contract/instrument?”

(emphasis added)

4. It is necessary to give background facts for better appreciationof 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 wasconsidering the issue in pre-2015 amendment regime of whether anarbitration agreement in an unregistered and unstamped lease deed, whichrequired compulsory registration under the Registration Act, 1908(hereinafter being referred to as the “Act 1908”) was valid andGenforceable. It was held as follows:

“19. Having regard to Section 35 of the Stamp Act, unless thestamp duty and penalty due in respect of the instrument is paid,

1 (2021) 4 SCC 3792 (2021) 2 SCC 1H3 (2011) 14 SCC 66

the court cannot act upon the instrument, which means that itcannot act upon the arbitration agreement also which is part ofthe instrument. Section 35 of the Stamp Act is distinct and differentfrom Section 49 of the Registration Act in regard to an unregistereddocument. Section 35 of the Stamp Act, does not contain provisolike Section 49 of the Registration Act enabling the instrument tobe used to establish collateral transaction.

21. Therefore, when lease deed or any other instrument is reliedupon as contending the arbitration agreement, the court shouldconsider at the outset, whether an objection in that behalf is raisedor not, whether the document is properly stamped. If it comes tothe conclusion that it is not properly stamped, it should be impoundedand dealt with in the manner specified in Section 38 of the StampAct. The court cannot act upon such document or the arbitrationclause therein. But if the deficit duty and penalty is paid in themanner set out in Section 35 or Section 40 of the Stamp Act, thedocument can be acted upon or admitted in evidence.”

6. The above decision was followed in the case of Naina Thakkarv. 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 paidon an instrument irrespective of the willingness of party to theinstrument to pay deficit stamp duty but the procedure where thearbitration clause is contained in document which is not registeredalthough compulsorily registrable and which is not duly stampedas summed up by this Court in SMS Tea Estates (P) Ltd. caseshall not be applicable to the proceedings under Section 8 of the[Arbitration and Conciliation] Act where the party making suchapplication does not express his/her readiness and willingness topay the deficit stamp duty and the penalty. It is not the duty of theCourt to adjourn the suit indefinitely until the defect with referenceto deficit stamp duty concerning the arbitration agreement is cured.Accordingly, we are of the opinion that no fault can be found in theorder of the trial court in rejecting the application made under Section8 of the Act as the document on which the petitioner relied uponwas admittedly unregistered and insufficiently stamped.”

388SUPREME COURT REPORTS

A7. An amendment was brought in the Arbitration and ConciliationAct, 1996 (hereinafter being referred to as the “Act, 1996”), and Section11(6A) was inserted in 2016.

8. two-Judge Bench in Garware Wall Ropes Limited v.Coastal Marine Constructions and Engineering Limited,[5] dealt withBthe issue whether an arbitration clause in an agreement which requirescompulsorily to be stamped under the relevant Indian Stamp Act,1899(hereinafter being referred to as the “Act, 1899”), but is not dulystamped, would be enforceable even after the insertion of clause (6A)to Section 11 of the Act, 1996. The Bench followed the reasoning andupholding of the decision in SMS Tea Estates Private Limited (supra),Cand held:“19….A close look at Section 11(6-A) would show that when theSupreme Court or the High Court considers an application underSections 11(4) to 11(6), and comes across an arbitration clause inan agreement or conveyance which is unstamped, it is enjoinedDby the provisions of the Stamp Act to first impound the agreementor conveyance and see that stamp duty and penalty (if any) ispaid before the agreement, as whole, can be acted upon. It isimportant to remember that the Stamp Act applies to the agreementor conveyance as whole. Therefore, it is not possible to bifurcateEthe arbitration clause contained in such agreement or conveyanceso as to give it an independent existence, as has been contendedfor by the respondent. The independent existence that could begiven for certain limited purposes, on harmonious reading of theRegistration Act, 1908 and the 1996 Act has been referred to byFRaveendran, J. in SMS Tea Estates when it comes to anunregistered agreement or conveyance.However, the Stamp Act,containing no such provision as is contained in Section 49 of theRegistration Act, 1908, has been held by the said judgment toapply to the agreement or conveyance as whole, which wouldinclude the arbitration clause contained therein. It is clear,Gtherefore, that the introduction of Section 11(6-A) does not, inany manner, deal with or get over the basis of the judgment inSMS Tea Estates, which continues to apply even after theamendment of Section 11(6-A).

22. When an arbitration clause is contained “in contract”, it issignificant that the agreement only becomes contract if it isenforceable by law. We have seen how, under the Stamp Act, anagreement does not become contract, namely, that it is notenforceable in law, unless it is duly stamped. Therefore, even aplain reading of Section 11(6-A), when read with Section 7(2) ofthe 1996 Act and Section 2(h) of the Contract Act, would make itclear that an arbitration clause in an agreement would not existwhen it is not enforceable by law. This is also an indicator thatSMS Tea Estates has, in no manner, been touched by theamendment of Section 11(6-A).”

9. The decision in Garware Wall Ropes Limited (supra)wascited in approval by three-Judge Bench in the case of Vidya Droliaand 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 thequestion of enforcement (validity) and therefore the latter fallsoutside the jurisdiction of the court at the referral stage. Onjurisprudentially and textualism it is possible to differentiatebetween existence of an arbitration agreement and validity of anarbitration agreement. Such interpretation can draw support fromthe plain meaning of the word “existence”. However, it is equallypossible, jurisprudentially and on contextualism, to hold that anagreement has no existence if it is not enforceable and not binding.Existence of an arbitration agreement presupposes validagreement which would be enforced by the court by relegatingthe parties to arbitration. Legalistic and plain meaning interpretationwould be contrary to the contextual background including thedefinition clause and would result in unpalatable consequences. Areasonable and just interpretation of “existence” requiresunderstanding the context, the purpose and the relevant legal normsapplicable for binding and enforceable arbitration agreement.An agreement evidenced in writing has no meaning unless theparties can be compelled to adhere and abide by the terms. Aparty cannot sue and claim rights based on an unenforceabledocument. Thus, there are good reasons to hold that an arbitrationagreement exists only when it is valid and legal. void and

unenforceable understanding is no agreement to do anything.Existence of an arbitration agreement means an arbitrationagreement that meets and satisfies the statutory requirements ofboth the Arbitration Act and the Contract Act and when it isenforceable in law.

B147. We would proceed to elaborate and give further reasons:

147.1 In Garware Wall Ropes Ltd., this Court had examined thequestion of stamp duty in an underlying contract with an arbitrationclause and in the context had drawn distinction between thefirst and second part of Section 7(2) of the Arbitration Act, albeitCthe observations made and quoted above with reference to‘existence’ and ‘validity’ of the arbitration agreement being appositeand extremely important, we would repeat the same by reproducingparagraph 29 thereof:

“29. This judgment in Hyundai Engg. case is important in thatwhat was specifically under consideration was an arbitrationclause which would get activated only if an insurer admits oraccepts liability. Since on facts it was found that the insurerrepudiated the claim, though an arbitration clause did “exist”,so to speak, in the policy, it would not exist in law, as was heldin 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 arbitrationclause that is contained in the subcontract would not “exist” asa matter of law until the sub-contract is duly stamped, as hasbeen held by us above.The argument that Section 11(6-A) dealswith “existence”, as opposed to Section 8, Section 16 andSection 45, which deal with “validity” of an arbitrationagreement is answered by this Court’s understanding of theexpression “existence” in Hyundai Engg. case, as followed byus.”;

GExistence and validity are intertwined, and arbitration agreementdoes not exist if it is illegal or does not satisfy mandatory legalrequirements. Invalid agreement is no agreement.”

(Emphasisadded)

10. Later, three-Judge Bench in M/s. N.N. Global MercantileHPrivate Limited (supra) held that in arbitration jurisprudence, an

“arbitration agreement is distinct and separate agreement, which isindependent from the substantive commercial contract in which it isembedded”. This three-Judge Bench made reference to the ConstitutionBench, as it expressed its disagreements with the view expressed inSMS Tea Estates Private Limited (supra), Garware Wall RopesLimited (supra), and Vidya Drolia and Others (supra). It held:

“26. In our view, there is no legal impediment to the enforceabilityof the arbitration agreement, pending payment of Stamp Duty onthe substantive contract. The adjudication of the rights andobligations under the Work Order or the substantive commercialcontract would however not proceed before complying with themandatory provisions of the Stamp Act…

28. In our view, the decision in SMS Tea Estates does not laydown the correct position in law on two issues i.e. (i) that anarbitration agreement in an unstamped commercial contract cannotbe acted upon, or is rendered un-enforceable in law; and (ii) thatan arbitration agreement would be invalid where the contract orinstrument is voidable at the option of party, such asu/s 19 of theIndian Contract Act, 1872.

29. We hold that since the arbitration agreement is an independentagreement between the parties, and is not chargeable to paymentof stamp duty, the non-payment of stamp duty on the commercialcontract, would not invalidate the arbitration clause, or render itun-enforceable, since it has an independent existence of its own.The view taken by the Court on the issue of separability of thearbitration 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 wouldnot invalidate even the main contract. It is deficiency which iscurable on the payment of the requisite Stamp Duty.”11. It also doubted the correctness of the view taken in SMS TeaEstates Private Limited (supra),which was approved in Garware WallRopes Limited (supra) and Vidya Drolia and Others (supra), andheld:

“56. We are of the considered view that the finding in SMS TeaEstates and Garware that the non-payment of stamp duty on thecommercial contract would invalidate even the arbitration

Aagreement, 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 judgmentin Vidya Drolia by co-ordinate bench, which has affirmed thejudgment in Garware, the aforesaid issue is required to beBauthoritatively settled by Constitution bench of this Court.”

12. As the Benches in both M/S. N.N. Global MercantilePrivate Limited (supra) and Vidya Drolia and Others (supra) are ofequal strength, this Constitution Bench has been called upon toauthoritatively rule on the issue. To adjudicate the issue, this Bench atCfirst needs to examine whether the requirements under the Act, 1899 atpre-referral stage arerequired to be examined for appointment ofArbitrator under Section 11(6A) of the Act, 1996.

13. Mr. Gourab Banerjee, learned senior counsel, who appears asAmicus Curiae to assist this Court, submits that the intention of the Act,1996 and the later amendments made from time to time were toDstreamline the process and judicial intervention in arbitration proceedingsadds significantly to the delay in the arbitration process and that negatesthe benefit of arbitration.The Arbitration & Conciliation (Amendment)Act, 2015(hereinafter being referred to as the 2015 Amendment) wasintroduced to emphasize the speedy disposal of cases relating to arbitrationEwith minimal court interference.

14. Mr. Banerjee submits that so far as the scope and ambit ofSection 11 is concerned, it is only to fill the gap and the Court is merelyfunctioning as an appointing authority where the parties fail to appointan Arbitrator. After the insertion of Section 11(6A)(2015 Amendment),Fthe legislative policy and purport are essentially to minimize the Court’sintervention 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 shouldbe circumscribed to confine to the examination, prima facie, of the formalGexistence of the arbitration agreement at the stage of contract formation,including whether the agreement is in writing and the core contractualingredients qua the formation of the agreement are fulfilled. On rareoccasions, if question is being raised by the parties, to some extent, theCourt may examine the subject matter of dispute as arbitrable but thattoo as an exception. At the same time, so far as theAct, 1899 is concerned,H

it is only fiscal measure enacted to secure revenue of the State incertain classes of instruments but that may not be invoked to arm alitigant with weapon of technicality to meet the case of his/her opponent.Once the object of the revenue is secured according to law, the partystaking his claim in the instrument will not be defeated on the ground ofthe initial defect in the instrument.

16. Mr. Banerjee further submits that even non-payment of stampduty is curable defect and this defect can be cured at any stage beforethe instrument is admitted into evidence by the Arbitral Tribunal. If theinsufficiency of stamp or unduly stamped is being examined/adjudicatedat the pre-referral stage by the Court under Section 11, it would benothing but to encourage parasitical challenges and dilatory tactics inresisting reference to arbitration. The natural solution inevitable is toappoint the Arbitrator and to allow the dispute resolution proceedings tocommence and permit the Arbitral Tribunal to fulfil its duty under theAct, 1996. There is no reason why the Arbitral Tribunal cannot preventthe evasion of stamp duty.17. It is also brought to our notice that at the time of submitting anapplication under Section 11 at the pre-referral stage, the parties are notunder an obligation to file an original arbitration agreement and since thecopy of the arbitration agreement is to be annexed with the application,in true sense,it is not an instrument as being contemplated under Section2(14) of the Act, 1899, particularly at the pre-referral stage, the questionof invoking Sections 33 or 35 of the Act, 1899is not available to be invoked.In support of submissionMr. Banerjeehas placed reliance on the judgmentof this Court reported in Jupudi Kesava Rao v. Pulavarthi VenkataSubbarao and Others[6] which has been later followed by this Court inHariom Agrawal v. Prakash Chand Malviya[7].

18. Taking assistance thereof, Mr. Banerjee submits thatSections33 or 35 are not concerned with any copy of the instrument and there isno scope for the inclusion of the copy of the document for the purposeof the Act, 1899. The copy of the instrument within the meaning ofSection 2(14) of the Act, 1899 cannot be validated by impounding and itcannot be admitted as secondary evidence under the Act, 1899.

6 (1971) 1 SCC 545

7 (2007) 8 SCC 514

A19. Mr. Banerjee further submits that the very question raised forconsideration of this Court as to whether the arbitral agreement is validor isin existence in law, is not open to be examined at the pre-referralstage for the reason that original instrument is not on record (arbitralagreement) and conjoint reading of Sections 33 and 35 is not concernedwith any copy of the instrument and the party can only be allowed toBrely on the document in evidence which is an instrument withing themeaning of Section 2(14) and the validity of the document is alwaysopen to be examined at the post-referral stage by the Arbitrator/ArbitralTribunal in its jurisdiction vested in Section 16 of the Act, 1996.

20. Mr. Gagan Sanghi, learned counsel for the appellant, submitsCthat 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 andOthers v P. Laxmi Devi(Smt.)[8] that “shall” in Section 33 of the Act,1899 is mandatory and unstamped document must be impounded.EvenDassuming that stamp duty is not payable on an arbitration agreementunder the Act, 1899, when arbitration agreement is contained as clausein an instrument on which stamp duty is payable, such arbitrationagreement as an instrument, attracts the bar of Section 35 of the Act,1899.E21. Mr. Sanghi further submits that separation of agreement fromthe substantive contract is nothing but legal fiction created by Section16 of the Act, 1996 and it cannot be an exception to Section 35 of theAct, 1899.

22. Mr. Sanghi further submits that the Doctrine of SeparabilityFand Kompetenz-Kompetenz has no bearing on the issue of enforceabilityof an arbitration agreement when proper stamp duty is not paid on theinstrument containing the arbitration agreement and relied upon thejudgment of the UK Supreme Court in Enka Insaat Ve Sanayi AS vOOO Insurance Company Chubb[9] where it was held that an “arbitrationclause is nonetheless part of bundle of rights and obligations recorded inGthe contractual document” and according to him, the issue of stampingis to be looked into at the very threshold, even if it is in exercise ofSection 11 (6A), i.e. at the time of pre-arbitral stage with respect to

8 (2008) 4 SCC 720H9 (2020) UKSC 38

appointment of arbitrator. According to him, an instrument would exist inlaw 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 validenforceable agreement and it is always open to examine the issue ofnon-stamping or of insufficiently stamped at the initial/pre-referral stageitself and further highlighting three modes as provided in M/s. N.N. GlobalMercantile Private Limited (supra) i.e. impounding, payment of stampduty and appointment of arbitrator, on an application filed underSection11 of the Act, 1996, the Court is certainly “acting upon” the arbitrationclause which is contended to be barred by the clear expression of Section35 of the Act, 1899 and an Agreement, unless enforceable by law, cannotbe termed to be in existence under Section 11(6A) of the Act, 1996.

23. Ms. Malvika Trivedi, learned senior counsel, who appears forthe intervenor in I.A. No.18516 of 2022, submits that the regimes of theAct, 1899 and Act, 1908 are completely different. M/s. N.N. GlobalMercantile Private Limited (supra) wrongly applied the principles ofregistration of document to the requirement of stamping document.While the former is curable defect, the latter determines the veryexistence and completion of document/instrument. In the absence ofregistration, an instrument shall remain in existence but without stamping,the instrument is incomplete/inchoate.

24. Ms. Trivedi further submits that the Act, 1899 envisages thepayment of stamp duty, failing which the instrument, according to her,cannot be acted upon for any purpose and there is no ambiguity in thelanguage of the Statute and we have to follow the golden principlesofinterpretation of the Statute.

25. Ms. Trivedi further submits that the powers of the Court underdifferent provisions of law as well as the restrictions created in the Act,1899 apply to the proceedings conducted in accordance with Section 9of the Act, 1996 and submits that even if the arbitration clause standssevered, the Court will have to reach prima facie conclusion as towhether the substantive contract which contained the clause of arbitrationis enforceable in law before granting interim measures invoking Section9 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 Sections8, 9 and 11, whereas Section 45 is dealt within Part II. Section 45 has

Abeen recognized as provision under Part II which is complete code.The expression “unless it finds” in Section 45 was interpreted by majorityin Shin-Etsu Chemical Co. Ltd. v Aksh Optifibre Ltd. and Another[10]as consideration on prima facie basis. In 2019, Parliament amendedSection 45 by substituting the expression “unless it finds” with “unless itprima facie finds”, that brings the statute in line with the position settledBin Shin Etsu (supra). In this background, the Act, 1899 merely creates atemporary infliction till the stamp duty is recovered, with or withoutpenalty. The affliction only attaches to the instrument and not thetransaction.

27. Mr. K. Ramakanth Reddy, learned senior counsel forCrespondent no.1 took us through the relevant Lok Sabha debates beforethe enactment of the Act, 1996 and taking assistance thereof submitsthat 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.DThe plain language of Section 7 of the Act, 1996 does not require thatthe parties are under anobligation to stamp the agreement. The legislativeintention would be defeated, if the Court insist on non-core technicalrequirements such as stamps, seals and originals for the purpose of actingupon the arbitration agreement at pre-arbitration stage for appointmentof an arbitrator invoking power under Section 11(6A) of the Act, 1996.E28. Learned counsel for the respondents, further submits that inthe instant facts of the case, an application was filed under Section 8 forreference of disputes to arbitration and it was not maintainable underSection 34 of the Maharashtra Stamp Act, 1958 which is almostparimateria to the Act, 1899. The work order being an unstampedFdocument could not be received in evidence for any purpose, or actedupon, unless it is duly stamped. In consequence thereof, the arbitrationclause in the unstamped agreement also could not be acted upon orenforced since the arbitration clause would have no existence in law,unless the applicable stamp duty(and penalty, if any) is paid on the workGorder and placed reliance on the judgment of this Court in GarwareWall Ropes Limited (supra).

29. Learned counsel further submits that the High Court, whilerelying on the application under Section 8 had enforced non-existent

arbitration clause which is in violation of Section 34 of the MaharashtraStamp Act, 1958 and further contended that the respondent had notindicated its willingness to pay the stamp duty, even though, at laterstage, an objection was raised and, therefore, no justification arises togrant any further opportunity to now pay the stamp duty under the clauseof arbitration.

30. We have heard learned counsel for the parties and with theirassistance perused the material available on record and before delvinginto the reference, we feel apposite to discuss the statutory provisionsrelated to the reference.

III. Requirements under the Indian Stamp Act, 1899

31. The Act, 1899 is fiscal statute laying down the law relatingto tax levied in the form of stamps on instruments recording transactions.The stamp duties on instruments specified in Entry 91 of List I(UnionList) of Schedule VII of the Constitution of India (viz. Bills of Exchange,cheques, promissory notes, bills of lading, letters of credit, policies ofinsurance, transfer of shares, debentures, proxies and receipts) are leviedby the Union Government. Similarly, the stamp duties on instrumentsother than those mentioned in Entry 91 of the Union List above arelevied by the States as per Entry 63 of List II(State List) of the ScheduleVII. Provisions other than those relating to rates of duty fall within thelegislative power of both the Union and the States by virtue of Entry 44of the List III(Concurrent List). However, the stamp duties on all theinstruments 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 providedunder Section 3 whereas Section 17 provides that all instrumentschargeable with duty and executed by any person in India has to bestamped.

33. Sections 2(14), 3 and 17 of the Act, 1899 are extractedhereunder: -

“2(14) ¯Instrument”. — instrument includes every documentby which any right or liability is, or purports to be, created,transferred, limited, extended, extinguished or recorded:

3. Instruments chargeable with duty. —Subject to theprovisions of this Act and the exemptions contained in Schedule I,

the following instruments shall be chargeable with duty of theamount indicated in that Schedule as the proper duty thereforerespectively, that is to say—

(a) every instrument mentioned in that Schedule which, nothaving 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 afterthat day and accepted or paid, or presented for acceptance orpayment, or endorsed, transferred or otherwise negotiated, in[India]; and

(c) every instrument (other than bill of exchange, orpromissory note) mentioned in that Schedule, which, not havingbeen previously executed by any person, is executed out of[India] on or after that day, relates to any property situate, orto any matter or thing done or to be done, in [India] and isreceived in [India]:

Provided that no duty shall be chargeable in respect of— (1) anyinstrument executed by, or on behalf of, or in favour of, theGovernment in cases where, but for this exemption, theEGovernment would be liable to pay the duty chargeable in respectof such instrument;

(2) any instrument for the sale, transfer or other disposition, eitherabsolutely or by way of mortgage or otherwise, of any ship orvessel, or any part, interest, share or property of or in any ship orFvessel registered under the Merchant Shipping Act 1894, Act No.57 & 58 Vict. c. 60 or under Act XIX of 1838 Act No. or theIndian Registration of Ships Act, 1841, (CX of 1841) as amendedby subsequent Acts.

17. Instruments executed in India. — All instrumentschargeable with duty and executed by any person in [India] shallGbe stamped before or at the time of execution.

18. Instruments other than bills and notes executed out ofIndia.—(1) Every instrument chargeable with duty executed onlyout of [India], and not being 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 referenceto the description of stamp prescribed therefore, be duly stampedby private person, it may be taken within the said period of threemonths to the Collector, who shall stamp the same, in such manneras the [State Government] may by rule prescribe, with stamp ofsuch value as the person so taking such instrument may requireand pay for.”

34. ‘Instrument’ as defined under Section 2(14) of the Act, 1899includes every document by which any right or liability is, or purports tobe, created, transferred, limited, extended, extinguished, or recorded.The term ‘Instrument’ as defined under Section 2(14) refers to the originalinstrument and not copy or duly certified copy of the same. It is onlyon production of the original instrument, the deficiencies in the stampduty/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 followedwhen an instrument which ought to have been stamped is not stamped.

36. Section 33 of the Act, 1899 provides for ‘Examination andimpounding of instruments’. Under sub-section (1) of Section 33, “Everyperson having by law or consent of parties authority to receive evidence,and every person in charge of public office, except an officer of police,before whom any instrument, chargeable, in his opinion, with duty, isproduced or comes in the performance of his functions, shall, if it appearsto him that such instrument is not duly stamped, impound the same”.Section 33(2) of the Act, 1899 provides that every instrument chargeablewith duty shall be examined by such person as explained in sub-section(1), “in order to ascertain whether it is stamped with stamp of thevalue and description required by the law in force in India when suchinstrument was executed or first executed”. The definition of ‘dulystamped’ as contained in Section 2(11) as applied to an instrument meansthat the instrument bears an adhesive or impressed stamp of not lessthan the proper amount and that such stamp has been affixed or used inaccordance with law for the time being in force in India.

37. plain reading of Section 33 of the Act, 1899 thus explainsthat when an instrument or document is produced before the authority,it is the duty of such authority to examine whether the instrument is dulystamped or not, and if it is found that the instrument is not “duly stamped”

Aunder Section 33(2), the concerned authority shall impound the saidinstrument.

38. Section 34 of the Act, 1899 provides discretion to theconcerned officer that if any receipt chargeable with duty not exceeding“ten naye paise” is tendered to or produced before them unstamped inBthe course of the audit of any public account, such officer may in theirdiscretion, “instead of impounding the instrument, require duly stampedreceipt to be substituted therefore.”

39. plain reading of Section 35 of the Act, 1899 suggests that aninadmissible instrument because of being unstamped or insufficientlyCstamped may be made admissible if the relevant stamp duty and penaltyis paid later. This shows that the requirement under Section 35 is notrigid, and can be rectified even at later stage. An unstamped orinsufficiently stamped instrument is not completely invalid, and it can bemade valid and admissible in evidence after fulfilling the conditionsprescribed in the proviso to Section 35.D

40. Section 37 of the Act, 1899 deals with admission of improperlystamped instruments. It provides that the State Government may makerules providing that, where an instrument bears stamp of sufficientamount but of improper description, it may, on payment of the duty withwhich the same is chargeable, be certified to be duly stamped, and anyEinstrument so certified shall then be deemed to have been duly stampedas from the date of its execution.

41. Section 38 of the Act, 1899 provides for the procedure forhow the instruments impounded are to be dealt with. Sub-Section (1) ofSection 38 provides that when the person impounding an instrument underFSection 33 admits such instrument in evidence upon payment of penaltyas provided by Section 35 or of duty as provided by Section 37, he shallsend to the Collector an authenticated copy of such instrument, togetherwith certificate in writing, stating the amount of duty and penalty leviedin respect thereof, and shall send such amount to the Collector, or toGsuch person as he may appoint in this behalf.

42. Sections 39 and 40 of the Act, 1899 provide procedure ofexercising discretion by the Collector to either refund, certify theinstrument as duly stamped, or collect the stamp duty.

43. plain reading of Sections 33, 35 and 2(14) of the Act, 1899Hclearly demonstrates that the instrument which is not duly stamped

can be impounded and when the required fee and penalty has beenpaid, the said instrument can be taken as an evidence under Section 35of the Act, 1899. But, at the same time, Sections 33 and 35 are notconcerned with any copy of the instrument and party can be allowedto rely on the document which is an instrument within the meaning ofSection 2(14) of the Act, 1899. This Court had an occasion to considerthe scope and ambit of Sections 33, 35 and 36 of the Act, 1899andSection 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 evidenceany instrument chargeable with duty unless it is duly stamped.The second limb of it which relates to acting upon the instrumentwill obviously shut out any secondary evidence of such instrument,for allowing such evidence to be let in when the original admittedlychargeable with duty was not stamped or insufficiently stamped,would be tantamount to the document being acted upon by theperson having by law or authority to receive evidence. Proviso(a) is only applicable when the original instrument is actually beforethe court of law and the deficiency in stamp with penalty is paidby the party seeking to rely upon the document. Clearly secondaryevidence either by way of oral evidence of the contents of theunstamped document or the copy of it covered by Section 63 ofthe Indian Evidence Act would not fulfil the requirements of theproviso which enjoins upon the authority to receive nothing inevidence except the instrument itself. Section 25 is not concernedwith any copy of an instrument and party can only be allowed torely on document which is an instrument for the purpose ofSection 35. ‘Instrument’ is defined in Section 2(14) as includingevery document by which any right or liability is, or purports to becreated, transferred, limited, extended, extinguished or recorded.There is no scope for inclusion of copy of document as aninstrument for the purpose of the Stamp Act.

14. If Section 35 only deals with original instruments and notcopies Section 36 cannot be so interpreted as to allow secondaryevidence of an instrument to have its benefit. The words ‘aninstrument’ in Section 36 must have the same meaning as that inSection 35. The legislature only relented from the strict provisionsof Section 35 in cases where the original instrument was admitted

Ain evidence without objection at the initial stage of suit orproceeding. In other words, although the objection is based onthe insufficiency of the stamp affixed to the document, partywho has right to object to the reception of it must do so whenthe document is first tendered. Once the time for raising objectionto the admission of the documentary evidence is passed, noBobjection based on the same ground can be raised at laterstage. But this in no way extends the applicability of Section 36to secondary evidence adduced or sought to be adduced in proofof the contents of document which is unstamped or insufficientlystamped.”

(Emphasis added)

44. This view has been affirmed by three-Judge Bench of thisCourt in Hariom Agrawal (supra) wherein it has been held as under:

“10. It is clear from the decisions of this Court and plain readingDof Sections 33, 35 and 2(14) of the Act that an instrument whichis not duly stamped can be impounded and when the required feeand penalty has been paid for such instrument it can be taken inevidence under Section 35 of the Stamp Act. Sections 33 or 35are not concerned with any copy of the instrument and party canonly be allowed to rely on the document which is an instrumentEwithin the meaning of Section 2(14). There is no scope for theinclusion of the copy of the document for the purposes of theStamp Act. Law is now no doubt well settled that copy of theinstrument 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 impoundingand this cannot be admitted in evidence under the Act, 1899. It leads tothe conclusion that the deficiency in an instrument, whether it is undulyGstamped or insufficiently stamped, can be rectified through procedureas prescribed under the Act, 1899. It clearly indicates that the requirementunder the Actcan indeed be fulfilled even after the time when theinstrument was executed. The requirement under the Actis not rigid orstrict, 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 declarean instrument as completely invalid if it is unstamped or insufficientlystamped, but to collect the stamp duty on each instrument. The object ofthe Act, 1899 is to secure revenue for the state.

47. This Court, in the case of Hindustan Steel Ltd. v. MessrsDilip Construction Company,[11] dealt with the object of the Act, 1899and held:

“7. The Stamp Act is fiscal measure enacted to secure revenuefor the State on certain classes of instruments: It is not enacted toarm litigant with weapon of technicality to meet the case ofhis opponent. The stringent provisions of the Act are conceived inthe interest of the revenue once that object is secured accordingto law, the party staking his claim on the instrument will not bedefeated on the ground of the initial defect in the instrument.Viewed in that light the scheme is clear. Section 35 of the StampAct operates as bar to an unstamped instrument being admittedin evidence or being acted upon; Section 40 provides the procedurefor instruments being impounded, sub-section (1) of Section 42provides for certifying that an instrument is duly stamped, andsub-section (2) of Section 42 enacts the consequences resultingfrom such certification.”

48. The Bench, after explaining that the scope of the Act, 1899 isto secure revenue for the state and not to be used as means to harassthe litigant, concluded that unstamped instruments can be acted uponafter payment of duty and penalty. Initial defects can be cured and it isnever the intention of the legislature to treat an initially unstampedinstrument as non-est in law.

49. The Statute deals with the instances of failure to stamp adocument which has got to be stamped under the provisions of theAct, 1899 but does not affect the validity of the transaction embodiedin the document. That Part IV of the Act, 1899 deals with thecontingencies of non-payment of stamp duties and once the object ofsecuring the interest of the revenue of State is secured, the claim basedon instrument can always be acted upon on payment of the requisitestamp duty.

50. We, therefore, hold that the deficiencies under the Act, 1899can be fulfilled, and do not render any instrument invalid permanently.Now, it is to be seen whether theCourt orArbitral Tribunal can orderrectification of the deficiencies under the Act 1899, if any.

IV. Historical Background of Arbitration in India

51. Arbitration can be understood as procedure of disputeresolution in which the dispute is submitted, by the agreement of theparties, to the appointed Arbitrator or the Arbitral Tribunal who are havingthe jurisdiction to resolve the dispute in accordance with the applicablelaw as agreed among the parties. Alternatively, it can be understood asCa mechanism to adjudicate disputes between the parties outside the courtin quasi-judicial manner.

52. The process of arbitration as preferable method of disputeresolution is not new in India. According to the scholars of the ancientHindu literature, “Brhadaranayaka Upanishad” is the earliest knownDtreatise that mentions system that can be closely associated withpresent-day arbitration as the same involved various arbitral bodies suchas “Puga” or the local courts, “Srenis” or the people carrying out thesame profession and “Kulas” or members concerned with the socialmatters of the same part of the society. All the above-explained bodieswere called the Panchas and cumulatively formed Panchayat. The sameEhas been affirmed by the Privy Council in the case of Vytla Sitanna v.Marivada Viranna[12] wherein it was observed that the parties used torefer the dispute to the elected panchayat and these adjudicating bodieswere responsible to pass the award which was based on the principle offair and equitable settlement of the dispute based on the prevalent legalFas well as moral grounds.

53. The arbitration regime in India further evolved with theenactment of the first Bengal Regulation by the Britishers in the year of1772. Subsequent to this enactment, all the disputes were submitted toarbitration and the award of the same had the same value as that of anyGdecree passed by the Court. Further, the Bengal Regulation of 1781 alsocontained provision as reproduced herein:

“The judge do recommend and so far as he can without compulsionprevail upon the parties to submit to the arbitration of one person,

to be mutually agreed upon by the parties … No award of anyarbitrator be set aside, except upon full proof, made by oath oftwo creditable witnesses that the arbitrators had been guilty ofgross corruption or partially, in the course of which they had madetheir award.”[13]

54. It is quite evident from the above-mentioned clause that theBengal Regulations contained provisions to enable the parties to referthe dispute to be settled by the process of arbitration as per the mutualagreement of the parties, especially in disputes involving breach of thecontractual obligations and partnership deeds. Arbitration also found aplace in the earliest enacted legislation by the State i.e., Code of CivilProcedure, 1859. Specifically, the provision in Schedule II of the Codeof 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 interventionof the Court.

55. Apart from these two types of arbitration, there evolved athird kind of arbitration known as “Statutory Arbitration” wherein theprocedure of arbitration is governed by the provisions contained in thestatute.

56. The major development in the arbitration regime came withthe enactment of the Arbitration Act, 1899 which was quite comparableto the English Arbitration Act, 1899. This enactment can be understoodas the first step in the direction of enforcement of arbitration in India.The Arbitration Act, 1899 was initially applicable to all the presidencytowns and there existed judicial intervention right from the initial referenceof the dispute to the process of arbitration.

57. With the rapidly changing times, the evolution of the arbitrationregime in India also gained momentum. The Code of Civil Procedure,1908 was amended to insert the provision contained under Section 89which exclusively dealt with the applicability and enforceability of thearbitration. In the early 20[th] century, arbitration emerged as an acceptable

13 C. V. Nagarjuna Reddy, Role of Arbitration in the Wake of CPC (Amendment) Act,-1999, The Indian Council of Arbitration, https://www.icaindia.co.in/icanet/quterli/aprjune2002/ica5.html(Last accessed on 22nd January, 2023 at 10:50 pm).

Amode 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 withthe primary motive of providing speedy and less costly method of disputeresolution in the form of arbitration. However, there existed manyinadequacies in the practical application of the provisions contained inBthe Act, 1940.

58. The Act, 1940 contained many provisions similar to theprovisions contained under the English Arbitration Act, 1934 but still itdid not have any provision for enforceability of the foreign award. Also,the provisions contained in the Act, 1940 facilitated the intervention ofCthe judiciary at all the three stages of the arbitral proceedings, i.e., beforethe dispute was referred to the arbitration, during the pendency of thearbitral proceedings and after passing the arbitral award.

59. The ineffective functioning of the provision contained underthe Act, 1940 was regularly criticised by the Judiciary. The followingDobservation by Justice D.A. Desai in the case of Guru NanakFoundation v. Rattan Singh and Sons[14] is quite relevant to be mentionedhere:

“1. Interminable, time consuming, complex and expensive Courtprocedures impelled jurists to search for an alternative Forum,Eless 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 Actare conducted and without an exception challenged in Courts, hasmade Lawyers laugh and legal philosophers weep.”F60. ThisCourt further observed in the case of

F60. ThisCourt further observed in the case of Food Corporationof India v. Joginderpal Mohinderpal and Another[15] that the lawgoverning arbitration is supposed to be less technical and more suitableto practical problems by ascertaining equity and fair play in the entireprocess. Despite such severe criticism by thisCourt, no amendment wasGbrought in the Act, 1940 by the legislature for long period of time.

61. It was only by the late 20[th] century, there came major shiftin the development of arbitration in India. Due to the economic

14 (1981) 4 SCC 634H15 (1989) 2 SCC 347

liberalization and alike policies of the government in 1991, there was aneed felt to create conducive environment for attracting foreigninvestments. Therefore, based on the 76[th] Report of the Law Commissionof India as well as the Model UNCITRAL law, the Act, 1996 was enactedby the legislature. The Act,1996 came into force from 16[th] August, 1996with anobject of making the process of arbitration cost effective, lesstechnical and in accordance with the prevalent international practicesacross the world.

V. Intent behind incorporation of Section 11(6A) of theArbitration and Conciliation Act, 1996

62. major shift for the development of arbitration in Indiahappened 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 anobject of making the process ofarbitration cost effective, less technical and in accordance with theprevalent international practices across the world. The legislative intentwas to provide effective and speedy procedure for dispute resolutionamong the parties as well as to limit the scope of judicial intervention inthe process of arbitration.[17] India is gradually moving in the direction ofminimal judicial intervention keeping abreast with the developments ofarbitration in other regimes.

63. The Constitution Bench of this Court while examining the pre2015 amendment regime in SBP & Co. v. Patel Engineering Ltd. andAnother[18] held that all the preliminary or threshold issues pertaining tojurisdiction of the Arbitrator/Arbitral Tribunal should be examined by theCourt under Section 11 of the Act, 1996. This position of law was soughtto be changed by the Law Commission in its 246th Report, which statesas follows:

“In so far as the nature of intervention is concerned, it isrecommended that in the event the Court/Judicial Authority is primafacie satisfied against the argument challenging the arbitrationagreement, it shall appoint the arbitrator and/or refer the partiesto arbitration, as the case may be. The amendment envisages that

16 Law Commission of India, 76th Report on Arbitration Act, 1940

17 Paragraph No. 4(v), Statement of Objects and Reasons, Arbitration and ConciliationAct, 1996.

18 (2005) 8 SCC 618

Athe judicial authorityshall not refer the parties to arbitration only ifit finds that there does not exist an arbitration agreement or that itis null and void. If the judicial authority is of the opinion thatprima facie the arbitration agreement exists, then it shallrefer the dispute to arbitration, and leave the existence ofthe arbitration agreement to be finally determined by theBarbitral tribunal. However, if the judicial authority concludesthat the agreement does not exist, then the conclusion will be finaland not prima facie. The amendment also envisages that thereshall be conclusive determination as to whether the arbitrationagreement is null and void.”[19]

(Emphasis added)

64. In the said report, the Law Commission of India concludedthat the judicial intervention in arbitration proceedings adds significantlyto the delay in the arbitration process and ultimately negates the benefitof arbitration. At paragraph 24, the Law Commission noted as follows:D“…[I]t is observed that lot of time is spent for appointment ofarbitrators 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 Legislatureby way of the 2015 amendment to the Act, 1996. Section 11(6A)Eunambiguously by its intention manifests that “[the] Supreme Court or,as the case may be, the High Court, while examining an applicationunder sub-section (4) or sub-section (5) or sub-section (6), shall,notwithstanding any judgment, decree or order of any Court, confine toexamine only to the “existence of an arbitration agreement”.

F66. The 2015 amendment, including Section 11(6A), and the lateramendments are in line with this evolution of arbitration jurisprudence.With the series of amendments to the principal Act,1996, it is quite evidentthat the legislature is continuously engaging with the rapidly evolvingarbitration regimein India and the various challenges allied it with theobject to reduce the scope of intervention by the courts in the arbitrationGprocesses. It can be expected that the arbitration in India is conducted inaccordance with the following views expressed by Justice SabyasachiMukharji in the case of Food Corporation of India (supra):

19 LAW COMMISSION OF INDIA Report No. 246 Amendments to the Arbitrationand Conciliation Act 1996, pg. 43H20 Paragraph No. 24, Report No. 246, Law Commission of India.

“7.We should make the law of arbitration simple, less technicaland more responsible to the actual realities of the situation, butmust be responsive to the canons of justice and fair play andmake the arbitrator adhere to such process and norms which willcreate confidence, not only by doing justice between the parties,but by creating sense that justice appears to have been done.”

The above discussed approach of the legislature has beenacknowledged by this Court.

67. In the case of Duro Felguera, S.A. v. Gangavaram PortLimited[21], this Court explained the scope and effect of the changesbrought in by the 2015 amendment in the following words:

“48….. From reading of Section 11(6-A), the intention of thelegislature is crystal clear i.e. the court should and need only lookinto one aspect—the existence of an arbitration agreement.Whatare the factors for deciding as to whether there is an arbitrationagreement is the next question. The resolution to that is simple—it needs to be seen if the agreement contains clause whichprovides for arbitration pertaining to the disputes which have arisenbetween the parties to the agreement…

59. The scope of the power under Section 11(6) of the 1996 Actwas considerably wide in view of the decisions in SBP and Co.[SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] andBogharaPolyfab [National Insurance Co. Ltd. v. BogharaPolyfab(P) Ltd., (2009) 1 SCC 267. This position continued till theamendment brought about in 2015. After the amendment, all that—the courts need to see is whether an arbitration agreement existsnothing more, nothing less. The legislative policy and purpose isessentially to minimise the Court’s intervention at the stage ofappointing the arbitrator and this intention as incorporated in Section-”11(6A) ought to be respected.

(Emphasis added)

68. This position was affirmed by three-judge bench in MayavatiTrading Private Limited v. Pradyuat Deb Burman[22]:

“10. This being the position, it is clear that the law prior to the2015 Amendment that has been laid down by this Court, which

21 (2017) 9 SCC 729

22 (2019) 8 SCC 714

DEF

Awould have included going into whether accord and satisfactionhas taken place, has now been legislatively overruled. This beingthe position, it is difficult to agree with the reasoning contained inthe aforesaid judgment [United India Insurance Co. Ltd. v. AntiqueArt Exports (P) Ltd., (2019) 5 SCC 362], as Section 11(6-A) isconfined to the examination of the existence of an arbitrationBagreement and is to be understood in the narrow sense as hasbeen laid down in the judgment in Duro Felguera, S.A.…,”

(Emphasis added)

69. Thus, the 2015 amendment aims to limit the intervention ofCourts to minimal examining the existence and not the validity of anCarbitration agreement at the pre-referral stage of the arbitrationproceedings.

VI. Scope of Section 11(6A) w.r.t. Section 8, Section 16 andSection 45 of Arbitration and Conciliation Act, 1996

D70. 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 theexistence of an arbitration agreement.”E

71. The scope of inquiry under Section 11(6A) is restricted toexamine the “existence of an arbitration agreement”. The phrase‘existence of an arbitration agreement’ is to be understood in literalsense keeping the intention of the legislature after the introduction of the2015 amendment. The position of law that prevails after the insertion ofF2015 amendment is that there should be minimal interference by theCourts. The limited scope of the Court to examine at the pre-referralstage is whether the arbitration agreement, prima facie, exists as referredto under Section 7 of the Act, 1996 which includes determination of thefollowing factors:G(i)Whether the arbitration agreement is in writing;

(ii)Whether the core contractual ingredients qua the arbitrationagreement are fulfilled?

(iii)On rare occasions, on serious note of objection, if any, itmay examine whether the subject matter of dispute isHarbitrable?

72. Section 8(1), which was replaced by the amendment of 2015,mandates judicial authority to refer parties to arbitration unless there isprima facie finding that no validarbitration agreement exists. Thelanguage used in the provision is as follows:

“8. Power to refer parties to arbitration where there is anarbitration agreement.—

(1)A judicial authority, before which an action is brought in matterwhich is the subject of an arbitration agreement shall, if party tothe arbitration agreement or any person claiming through or underhim, so applies not later than the date of submitting his firststatement on the substance of the dispute, then, notwithstandingany judgment, decree or order of the Supreme Court or any Court,refer the parties to arbitration unless it finds that prima facie novalid arbitration agreement exists.

(2) The application referred to in sub-section (1) shall not beentertained unless it is accompanied by the original arbitrationagreement or duly certified copy thereof:

[Provided that where the original arbitration agreement or acertified copy thereof is not available with the party applying forreference to arbitration under sub-section (1), and the saidagreement or certified copy is retained by the other party to thatagreement, then, the party so applying shall file such applicationalong with copy of the arbitration agreement and petitionpraying the Court to call upon the other party to produce theoriginal arbitration agreement or its duly certified copy beforethat Court.]

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority,an arbitration may be commenced or continued and an arbitralaward made.”

73. The Section provides that the Court can examine, whetherprima facie there does not exist an arbitration agreement. The scope ofthis Section can be seen from the 246[th] Law Commission Report[23], whichmade the following note while suggesting amendment to Section 8:

23 LAW COMMISSION OF INDIA Report No. 246 Amendments to the Arbitrationand Conciliation Act 1996, pg. 43

A“….of the amendment contemplates two-step process to beadopted by judicial authority when considering an applicationseeking the reference of pending action to arbitration. Theamendment envisages that the judicial authority shall not referthe parties to arbitration only if it finds that there does notexist an arbitration agreement or that it is null and void. IfBthe judicial authority is of the opinion that prima facie the arbitrationagreement exists, then it shall refer the dispute to arbitration, andleave the existence of the arbitration agreement to be finallydetermined by the arbitral tribunal. However, if the judicial authorityconcludes that the agreement does not exist, then the conclusionCwill be final and not prima facie. The amendment also envisagesthat there shall be conclusive determination as to whether thearbitration agreement is null and void.”

74. plain reading of the Section 8 indicates that it limits theintervention of the Court to only one aspect i.e., when it finds that primaDfacie no valid arbitration agreement exists or is null and void.

75. The scheme of the Act, 1996 manifests that Sections 8 and 11are complementary in nature and both relate to reference to arbitrationand have the same scope and ambit with respect to judicial interference.The Court, under Sections 8 and 11, has to refer the matter to arbitrationEor to appoint an Arbitrator, provided the party has established primafacie existence of an arbitration agreement, nothing more nothing less.At the same time, the Court should refer the matter if the validity of thearbitration agreement cannot be determined on prima facie basis, aslaid down above i.e. “when in doubt, do refer”.

76. At this stage, we would like to observe that the statutory schemehas been framed for appointment of an Arbitrator by various High Courtsand also by this Court - called the Appointment of Arbitrators by theChief Justice of India Scheme, 1996,the relevant portion of the same isextracted hereunder:-

G1. Short title.-This Scheme may be called The Appointment ofArbitrators by the Chief Justice of India Scheme, 1996.

2. Submission of request.-The request to the Chief Justice undersub-section (4) or sub-section (5) or sub-section (6) of section 11shall be made in writing and shall beaccompanied by-

(a) the original arbitration agreement or duly certified copythereof;

(b) the names and addresses of the parties to the arbitrationagreement;

(c) the names and addresses of the arbitrators, if any, alreadyappointed;

(d) the name and address of the person or institution, if any, towhom or which any function has been entrusted by the parties tothe arbitration agreement under the appointment procedure agreedupon by them;

(e) the qualifications required, if any, of the arbitrators by theagreement of the parties;

(f) brief written statement describing the general nature of thedispute and the points at issue;

(g) the relief or remedy sought; and

(h) an affidavit, supported by the relevant document, to the effectthat 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 reference has beenmade that while the applicant approaches the Court for appointment ofan Arbitrator, he is not supposed to file an original arbitration agreementand attested copy of the agreement can be annexed at the pre-referralstage which is indeed not an instrument as referred to under Section2(14) of the Act, 1899.

78. So far as the reference made of submitting certified copy ofthe arbitration agreement is concerned, suffice it to say, that arbitrationagreement executed between the parties relating to the business/commercial transactions is not required to be compulsorily registeredunder the Act, 1908. The obligation to register the document is invokedunder provisions of the substantive law, namely, Transfer of PropertyAct, 1882, while Section 17 of the Act, 1908 mandates that the non-testamentary instrument that created any right, title or interest of thevalue of Rs.100/- or upwards in an immovable property must becompulsorily registered. If document is not registered, transfer is void,

Athere is no valid transfer, and the property described in the instrumentdoes not pass on, for example, mortgage does not become complete andenforceable until it is registered under the Act, 1908.

79. Indisputably, the arbitration agreement is not public documentto which compulsory registration as referred to under Section 17 of theBAct, 1908 is required and one can obtain certified copy of the publicdocument under Sections 74 or 75 of the Evidence Act, 1872. The PublicOfficer having the custody of public document can make available itscertified copy as referred to under Section 76 of the Evidence Act, 1872.In the absence of the arbitration agreement being required to becompulsorily registered, within the scope and ambit of Section 17 of theCAct, 1908, such arbitration agreement/document is not accessiblein publicdomain and is not public document of which certified copy can beobtained, as referred to under Section 74 of the Evidence Act, 1872,failing which the question of presumption as to genuineness of documentpurporting to be certified copy as referred to under Section 79 of theDEvidence Act, 1872 may not arise.80. In other words, when the arbitration agreement is not requiredto be compulsorily registered as referred to under Section 17 of the Act,1908 the reference of certified copy under the Scheme of Rules, 1996appears to be of an authenticated copy of the arbitration agreement thatEqualifies the requirement of Section 7 of the Act, 1996 at the pre-referralstage for the purposes of appointment of an Arbitrator under Section11(6A) of the Act, 1996.Hence, the question of raising objection regardingthe arbitration agreement not being stamped or insufficiently stamped atthe pre-referral stage may not arise.F81. 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, includingruling on any objections with respect to the existence or validityof the arbitration agreement, and for that purpose,—

G(a) an arbitration clause which forms part of contract shall betreated as an agreement independent of the other terms of thecontract; and

(b) decision by the arbitral tribunal that the contract is null andvoid shall not entail ipso jure the invalidity of the arbitration clause.

(2) plea that the arbitral tribunal does not have jurisdiction shallbe raised not later than the submission of the statement of defence;however, party shall not be precluded from raising such pleamerely because that he has appointed, or participated in theappointment of, an arbitrator.

(3) plea that the arbitral tribunal is exceeding the scope of itsauthority shall be raised as soon as the matter alleged to be beyondthe scope of its authority is raised during the arbitral proceedings.

(4) The arbitral tribunal may, in either of the cases referred to insub-section (2) or sub-section (3), admit later plea if it considersthe delay justified.

(5) The arbitral tribunal shall decide on plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takesa decision rejecting the plea, continue with the arbitral proceedingsand make an arbitral award.

(6) party aggrieved by such an arbitral award may make anapplication for setting aside such an arbitral award in accordancewith section 34.”

82. Section 16(1) of the Act, 1996envisaged that an Arbitral Tribunalcan rule upon own jurisdiction, “including ruling on any objection withrespect to the existence or validity of the arbitration agreement”. Theprovision is based on the doctrine of Kompetenz- Kompetenz and thedoctrine of Separability. The doctrine of Kompetenz-Kompetenz meansthat the Arbitral Tribunal is competent enough to rule on its ownjurisdiction. At the same time, the Doctrine of Separability severs thearbitration clause from the commercial contract. Section 16(1)(a)presupposes the existence of clause of arbitration and mandates thesame to be treated as independent to the other terms of the contract.Under Section 16, the Arbitral Tribunal shall have the jurisdiction todetermine the validity of the arbitration agreement.

83. division Bench of this Court in Uttarakhand Purv SainikKalyan Nigam Limited v. Northern Coal Field Limited[24]while placingreliance on Duro Felguera (supra) held that issues related to limitationmust be raised before the Arbitral Tribunal. The Court observed thefollowing:

24 (2020) 2 SCC 455

A“7.8. By virtue of the non obstante clause incorporated in Section11(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 ofexamination is now confined only to the existence of the arbitrationBagreement at the Section 11 stage, and nothing more.”

84. What the Courts at the pre-referral stage can examine underSection 11(6A) is only the “existence” of the arbitration agreement, whilethe Arbitral Tribunal shall have the jurisdiction to examine “any objectionswith respect to the existence or validity of the arbitration agreement”.C

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 ofCivil Procedure, 1908 (5 of 1908),a judicial authority, when seizedDof an action in matter in respect of which the parties have madean agreement referred to in section 44, shall, at the request of oneof the parties or any person claiming through or under him, referthe parties to arbitration, [unless it prima facie finds] that the saidagreement is null and void, inoperative or incapable of beingperformed.”E

(Emphasis added)

86. plain comparison between Section 11(6A) and Section 45manifests that the scope of Section 45 is much broader. Under Section45, judicial authority has to examine whether the agreement is “nullFand 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 explainedthe difference between the terms ‘null and void’, ‘inoperative’ and‘incapable of being performed’ as under:-

G“33. Mr. Gopal Subramanium’s contention, however, is also thatthe arbitration agreement was inoperative or incapable of beingperformed as allegations of fraud could be enquired into by thecourt and not by the arbitrator. The authorities on the meaning ofthe 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 45of the Act have been taken from Article II(3) of the New YorkConvention as set out in para 27 of this judgment. Redfern andHunter on International Arbitration (5th Edn.) published bythe Oxford University Press has explained the meaning of thesewords “inoperative or incapable of being performed” used inthe New York Convention at p. 148, thus:

“At first sight it is difficult to see distinction between the terms‘inoperative’ and ‘incapable of being performed’. However, anarbitration clause is inoperative where it has ceased to have effectas result, for example, of failure by the parties to comply witha time-limit, or where the parties have by their conduct impliedlyrevoked the arbitration agreement. By contrast, the expression‘incapable of being performed’ appears to refer to more practicalaspects of the prospective arbitration proceedings. It applies, forexample, if for some reason it is impossible to establish the arbitraltribunal.”

34. Albert Jan Van Den Berg in an article titled “The New YorkConvention, 1958 — An Overview” published in the website ofICCA(www.arbitrationicca.org/media/0/12125884227980/new_york_convention_of-1958_overview.pdf), referring to ArticleII(3) of the New York Convention, states:

“The words ‘null and void’ may be interpreted as referring tothose cases where the arbitration agreement is affected by someinvalidity right from the beginning, such as lack of consent due tomisrepresentation, duress, fraud or undue influence.

The word ‘inoperative’ can be said to cover those cases wherethe arbitration agreement has ceased to have effect, such asrevocation by the parties.

The words ‘incapable of being performed’ would seem to applyto those cases where the arbitration cannot be effectively set intomotion. This may happen where the arbitration clause is toovaguely worded, or other terms of the contract contradict theparties’ intention to arbitrate, as in the case of the so-called co-equal forum selection clauses. Even in these cases, the courtsinterpret the contract provisions in favour of arbitration.”

ABC

A35. The book Recognition and Conferment of Foreign ArbitralAwards : Global Commentary on the New York Conventionby Kronke, Nacimiento, et al.(ed.) (2010) at p. 82 says:

“Most authorities hold that the same schools of thought andapproaches regarding the term null and void also apply to theBterms inoperative and incapable of being performed.Consequently, the majority of authorities do not interpret theseterms uniformly, resulting in an unfortunate lack of uniformity.With that caveat, we shall give an overview of typical exampleswhere arbitration agreements were held to be (or not to be)inoperative or incapable of being performed.C

The terms inoperative refers to cases where the arbitrationagreement has ceased to have effect by the time the court isasked to refer the parties to arbitration. For example, the arbitrationagreement ceases to have effect if there has already been anarbitral award or court decision with res judicata effectDconcerning the same subject-matter and parties. However, themere existence of multiple proceedings is not sufficient to renderthe arbitration agreement inoperative. Additionally, the arbitrationagreement can cease to have effect if the time-limit for initiatingthe arbitration or rendering the award has expired, provided that itEwas the parties’ intent no longer to be bound by the arbitrationagreement due to the expiration of this time-limit.

Finally, several authorities have held that the arbitration agreementceases to have effect if the parties waive arbitration. There aremany possible ways of waiving right to arbitrate. Most commonly,Fa party will waive the right to arbitrate if, in court proceeding, itfails to properly invoke the arbitration agreement or if it activelypursues claims covered by the arbitration agreement.”

88. The aboveexplained examination does not arise in the languageof Section 11(6A). That is to say, the legislature has not borrowed theGlanguage of Section 45 in Section 11(6A), which is limited to the‘existence’ of the arbitration agreement.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 hasHbeen explained by three-judge bench of this Hon’ble Court in Pravin

Electricals Private Limited v. Galaxy Infra and Engineering PrivateLimited[26]at para 17 placing its reliance on Vidya Drolia and Others(supra) wherein it was held that the existence of an arbitration agreementmeans an agreement which satisfies the requirements of both the Act,1996 and the Contract Act, 1872 and when it is enforceable in law. Thejudgment in United India Insurance Company Limited and Anotherv. Hyundai Engineering& Construction Company Limited andOthers[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 anarbitration agreement. There indeed lies distinction between the“existence” and the”validity” of an arbitration agreement.90. The UNCITRAL Model Law also supports distinctionbetween jurisdictional objections based on the alleged non-existence,invalidity, or illegality of the arbitration agreement, and jurisdictionalobjections based upon the scope of concededly valid arbitrationagreement. [28]All issues of jurisdiction including the existence or validityof the arbitration agreement can be decided by the Arbitral Tribunal,whether or not appointed through the intervention of the court underSection 16 of the Act, 1996.

VIII. Interpretation of “Existence of Arbitration Agreement”

91. In order to determine the “existence of an arbitrationagreement” under Section 11(6A), the Act, 1899 may not have bearingowing to the reason thatat the pre-referral stage,if the document is notduly stamped/insufficiently stamped that does not render the arbitrationagreement non-existent as discussed and ascertained earlier. The onlyconsideration that the courts/judicial authority at the pre-referral stageneeds to follow is theprima facie existence of an arbitration agreementas referred under Section 7 of the Act, 1996 which provides:

“7. Arbitration agreement.—

(1) In this Part, “arbitration agreement” means an agreement bythe parties to submit to arbitration all or certain disputes which

26 (2021) 5 SCC 671

27 (2018) 17 SCC 607

28 UNCITRAL Model Law on International Commercial Arbitration (1985), withamendments as adopted in 2006,Availableat:https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/19-09955_e_ebook.pdf

Ahave arisen or which may arise between them in respect of adefined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitrationclause in contract or in the form of separate agreement.

(3) An arbitration agreement shall be in writing.

B(4) An arbitration agreement is in writing if it is contained in—

(a) document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means oftelecommunication [including communication through electronicCmeans] which provide record of the agreement; or

(c) an exchange of statements of claim and defence in whichthe existence of the agreement is alleged by one party and notdenied by the other.

(5) The reference in contract to document containing anDarbitration clause constitutes an arbitration agreement if thecontract is in writing and the reference is such as to make thatarbitration clause part of the contract.”

92. That is to say, the limited scope of the Court under Section11(6A) at the pre-referral stage is to examine whether the arbitrationEagreement, prima facie, exists as referred to under Section 7 of the Act,1996, which includes only the determination of the following factors:

(i)Whether the arbitration agreement is in writing?

(ii)Whether the core contractual ingredients qua the arbitrationagreement are fulfilled?

(iii)On rare occasions, on serious note of objection, if any, itmay examine whether the subject matter of dispute isarbitrable?

IX. Clarification on Stamping of Arbitration Agreement

G93. In the reference Order and in paras 20, 24 and 58in particular,a reference has been made that Maharashatra Stamp Act, 1958 doesnot subject to arbitration agreement to payment of stamp duty. Therelevant paragraphs of the M/S. N.N. Global Mercantile PrivateLimited (supra)[29] are as follows:

“20. We have carefully perused the provisions of the MaharashtraStamp Act, 1958 and Schedule I appended thereto, which enliststhe instruments specified in Section 3, on which stamp duty ischargeable. We find that an arbitration agreement is not includedin the Schedule as an instrument chargeable to stamp duty. Item12 of Schedule I to the Maharashtra Stamp Act, 1958 includes anaward passed by an arbitrator to be chargeable for paymentof stamp duty…..

In Shriram EPC Ltd. v. Rioglass Solar SA [Shriram EPC Ltd.v. Rioglass Solar SA, (2018) 18 SCC 313], this Court held thatthe payment of stamp duty is applicable to awards made in India,but does not include “foreign award” which has not been includedin the Schedule to the Stamp Act, 1899.

24. …Section 3 of the Maharashtra Stamp Act does not subjectan arbitration agreement to payment of stamp duty, unlike variousother agreements enlisted in the Schedule to the Act.This is forthe obvious reason that an arbitration agreement is an agreementto resolve disputes arising out of commercial agreement, throughthe mode of arbitration. On the basis of the doctrine of separability,the arbitration agreement being separate and distinct agreementfrom the underlying commercial contract, would surviveindependent of the substantive contract. The arbitration agreementwould not be rendered invalid, unenforceable or non-existent, evenif the substantive contract is not admissible in evidence, or cannotbe acted upon on account of non-payment of stamp duty.

58. We consider it appropriate to refer the following issue, to beauthoritatively settled by Constitution Bench of five Judges ofthis Court:

“Whether the statutory bar contained in Section 35 of the StampAct, 1899 applicable to instruments chargeable to stamp duty underSection 3 read with the Schedule to the Act, would also renderthe arbitration agreement contained in such an instrument, whichis not chargeable to payment of stamp duty, as being non-existent,unenforceable, or invalid, pending payment of stamp duty on thesubstantive contract/instrument?”

(Emphasis added)

ABC

A94. There appears to be an error in the view taken by the 3-JudgeBench. The Schedule I to the Act, 1899 in its Article 5 titled “Agreementor Memorandum of Agreement” has residuary entry which says (c) ifnot otherwise provided for- Eight annas. Article 5 has been reproduced

95. The examination of the arbitration agreement at the stage ofSection 11(pre-referral stage) should be done cautiously in way that itdoes not breach the legislative intent behind the provisions by openingthe door wide open for judicial intervention.

96. We, however, refrain ourselves to examine the questionregarding the scope and ambit of Section 9 of the Act, 1996 of which areference has been made by three-Judge Bench in M/s. N.N. GlobalMercantile Private Limited (supra) since the present reference isnot concerned to examine the scope of Section 9 of the Act, 1996 andGleave it open to be examined in the appropriate proceedings.

X. Answer to the Reference

97. To conclude, in our view:

i)We accordingly hold that the existence of copy/certifiedcopy of an arbitration agreement whether unstamped/

insufficiently stamped at the pre-referral stage is anenforceable document for the purposes of appointment ofan Arbitrator under Section 11(6A) of the Act, 1996 wherethe judicial intervention shall be minimal confined only tothe prima facie examination of “existence of an arbitrationagreement” alone keeping in view the object of 2015amendment and the courts must strictly adhere to the timeschedule for the appointment of Arbitrator prescribed underSection 11(13) of the Act, 1996.

ii)All the preliminary/debatableissues including insufficientlystamped/unduly stamped or validity of the arbitrationagreement etc.are referrable to the Arbitrator/ArbitralTribunal under Section 16 of the Act, 1996 which, by virtueof the Doctrine of Kompetenz-Kompetenz has the powerto do so.

iii)The decision in SMS Tea Estates Private Limited (supra)stands overruled. Paras 22 and 29 of Garware Wall RopesLimited (supra) which are approved in paras 146 and 147in Vidya Drolia and Others (supra) are overruled to thatextent.

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.

HRISHIKESH ROY, J.

A.Introduction

B.Reference to the Constitution Bench

C.Facts in NN Global

D.Modification of the reference question

E.Submissions of Counsel

F.Statutory scheme of the Stamp Act, 1899

G.Statutory scheme of the Arbitration Act, 1996

i)Evolution of law under Section 11(6) of theArbitration Act, 1996

Aii)Post-2015 Regime: Insertion of Section 11(6A)

iii)Post-2019 Amendment and the Report of the High-level Committee to review the Institutionalisation ofArbitration in India

H.Discussion on SMS TeaB

I.Discussion on Garware

J.Interplay between the Stamp Act, Arbitration Act andContract Act.

i)Arbitration Act is special legislation

ii)Harmonious Construction

K.Advent of Technology and the changing nature oftransactions

L.Doctrine of Separability

M.Kompetenz Kompetenz, & the issue of judicial logjam inIndia

N.Discussion on Vidya Drolia

O.Conclusion

EA. Introduction

1. I had the benefit of reading the erudite opinion of my LearnedBrother, Justice K.M. Joseph (for himself and Justice Aniruddha Bose)and the separate judgment of Learned Brother Justice C.T. Ravikumar.However, I regret my inability to agree with the majority opinion and theFconcurring judgment. Echoing the words of Charles Evans Hughes[1] inone of his lectures delivered at the University of Columbia, let our minorityopinion (self and Learned Brother Justice Ajay Rastogi, who has writtena separate opinion), appeal to the brooding spirit of the future as also thepowers of the legislature to examine the interplay between the Arbitrationand Conciliation Act, 1996 (for short “Arbitration Act, 1996”) and theGIndian Stamp Act, 1899 (for short “Stamp Act, 1899”); and toemphatically resolve the imbroglio to avoid any confusion in the minds ofthe stakeholders in the field of arbitration.

1 Charles Evans Hughes, The Supreme Court of The United States Its Foundations,HMethods and Achievements,(Columbia University Press) 68 (1928)

2. The role of Courts in arbitral proceedings has been much debatedfor years. Autonomy of the disputing party is the core of the arbitralprocess but if the parties fail to arrive at consensus, the supervisoryrole of Courts becomes imperative. Redfern and Hunter onInternational Commercial Arbitration[2] describe the relationshipbetween national courts and arbitral tribunals as follows:

“To the extent that the relationship between national courts andarbitral tribunals is said to be one of ‘partnership’, it is not apartnership of equals. Arbitration may depend upon the agreementof the parties, but it is also system built on law, which relies uponthat law to make it effective both nationally and internationally.National Courts could exist without arbitration, but arbitration couldnot exist without the courts. The real issue is to define the pointat which this reliance of arbitration on the national courtsbegins and at which it ends.”

[Emphasis supplied]

3. The supervisory role of Courts under the Arbitration Act, 1996can be broadly categorized into three parts i.e., pre-commencement ofarbitral proceedings, during the arbitral proceedings and at the post-arbitration stage. Section 8 and Section 11 in Part I of the ArbitrationAct, 1996, and Section 45 in Part II of the Arbitration Act, 1996specifically deal with the role of Courts before the initiation of arbitrationproceedings. Section 8 deals with the “Power to refer parties toarbitration” where there is an arbitration agreement; it provides for amandatory reference to arbitration, unless the Court is prima faciesatisfied that no valid arbitration agreement exists. Section 11(6), onthe other hand, provides for “Appointment of Arbitrators” when partiesfail to mutually agree on the name of an arbitrator or appoint an arbitratorin terms of the arbitration agreement. Section 45 refers to the “Powerof judicial authority to refer parties to arbitration” in Part II of theArbitration Act, 1996.

4. Here in this reference, the extent of judicial intervention beforethe commencement of arbitral proceedings is being tested. It raisesimportant issues of delays in the enforcement of arbitration agreements,subject to payment of stamp duty and whether an arbitration agreement

2 Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration(6th Edition, 2015, Oxford University Press), Chapter 7, Paragraph 7.03

Awould be non-existent, invalid/void, or unenforceable in law, if theunderlying instrument is not stamped/insufficiently stamped, as per therelevant Stamp Act.

5. The moot question in this reference is whether the statutorybar under Section 35 titled “Instruments not duly stamped inadmissibleBin Evidence” of the Stamp Act, 1899 would be attracted when anarbitration agreement is produced under Section 11(6) of the ArbitrationAct, 1996. As corollary, this reference also tests the scopeand natureofthe Court’s intervention specifically at the stage of appointment ofarbitrator under Section 11 of the Arbitration Act, 1996. The conundrumover the scope of judicial review and the validity/enforceability of theCunstamped/insufficiently stamped arbitration agreement contained in anunderlying contract is expected to be resolved in this reference.

B. Reference to the Constitution Bench

6. 3-judge bench in M/S N.N. Global Mercantile PrivateDLimited v M/S Indo Unique Flame Limited and others[3] (for short“NN Global”) by doubting the reasoning in Paragraphs 146 and 147 of acoordinate bench of this Court in Vidya Drolia and others v DurgaTrading Corporation[4] (for short “Vidya Drolia”) considered itappropriate for the issue to be examined by Bench of five judges. Thematter before the Court in Vidya Drolia(supra) was related to subject-Ematter arbitrability but while deciding the question, it cited with approvalParagraphs 22 and 29 of the 2-judge Bench judgment in Garware WallTropes Limited v Coastal Marine Constructions and EngineeringLimited[5 ](for short “Garware”).

7. Following the decision in SMS Tea Estates (P) Ltd. v.FChandmari Tea Co. (P) Ltd.[6 ](for short “SMS Tea”), it was held inGarware(supra) that non-payment of stamp duty on the commercialcontract would invalidate even the arbitration agreement and render itnon-existent in law and unenforceable.

8. This Court in NN Global (supra) overruled the 2-judge benchGdecision in SMS Tea (supra) which was cited with approval in Garware(supra).

3 (2021) 4 SCC 3794 (2021) 2 SCC 15 (2019) 9 SCC 209H6 (2011) 14 SCC 66

9. NN Global (supra) relied inter alia, on the principle ofKompetenz Kompetenz and the doctrine of Separability incorporatedunder Section 16 of the Arbitration and Conciliation Act, 1996 todoubt the correctness of the view taken in Vidya Drolia (supra) andGarware (supra). The relevant paragraphs which define the scope ofthis reference are extracted below:

“34. We doubt the correctness of the view taken in paras 146 and147 of the three-Judge Bench in Vidya Drolia [Vidya Drolia v.Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549]. We consider it appropriate to refer the findings in paras 22 and29 of Garware Wall Ropes Ltd. [Garware Wall Ropes Ltd. v.Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 :(2019) 4 SCC (Civ) 324] , which has been affirmed in paras 146and 147 of Vidya Drolia [Vidya Drolia v. Durga Trading Corpn.,(2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] , to ConstitutionBench of five Judges.

56. We are of the considered view that the finding in SMS TeaEstates [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) 324] that thenon-payment of stamp duty on the commercial contract wouldinvalidate even the arbitration agreement, and render it non-existentin law, and unenforceable, is not the correct position in law.

57. In view of the finding in paras 146 and 147 of the judgment inVidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2SCC 1 : (2021) 1 SCC (Civ) 549] by coordinate Bench, whichhas 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 beauthoritatively settled by Constitution Bench of this Court.

58. We consider it appropriate to refer the following issue, to beauthoritatively settled by Constitution Bench of five Judges ofthis Court:

“Whether the statutory bar contained in Section 35 of the StampAct, 1899 applicable to instruments chargeable to stamp dutyunder Section 3 read with the Schedule to the Act, would also

428SUPREME COURT REPORTS

Arender the arbitration agreement contained in such aninstrument, which is not chargeable to payment of stamp duty,as being non-existent, unenforceable, or invalid, pendingpayment of stamp duty on the substantive contract/instrument?”

10. Thus, the correctness of the decisions in SMS Tea(supra),BGarware(supra), Vidya Drolia(supra), as well as other relevantdecisions is to be evaluated during the course of the reference. It hasbeen brought to the notice of this Court that conflicting decisions havecreated vexed situation for arbitral proceedings and hence, this issue isexpected to be settled through this reference.

C11. The background facts in NN Global (supra) which gave riseto this reference are to be noted at the outset:

C. Facts in N.N. Global[7]

12. Indo Unique Flame Ltd. (for short “Indo Unique Flame”)entered into sub-contract Work Order with N.N. Global MercantileDPvt. Ltd (“NN Global”) on 28.09.2015 for transportation of coal. Interms of Clause 9 of the Work Order, NN Global furnished BankGuarantee to Indo Unique. Clause 10 of the Work Order provided foran arbitration clause. Due to certain disputes in the principal contrAct,Indo Unique invoked the Bank Guarantee furnished by NN Global.EThereafter, NN Global filed Civil Suit before the Commercial Court,Nagpur. An application under Section 8 of the Arbitration Act, 1996was also filed seeking reference of the disputes to arbitration. TheCommercial Court on 18.01.2018 rejected the application under Section8 of the Arbitration Act, 1996 holding that the Bank Guarantee was anindependent contract. Thereafter, Indo Unique filed Writ PetitionFagainst the order of the Commercial Court. On 30.9.2020, the BombayHigh Court allowed the application under Section 8 of the ArbitrationAct, 1996. It held that the non-stamping of Work Order can be raised atthe stage of Section 11 of the Arbitration Act, 1996 or before theArbitral Tribunal at the appropriate stage. It set aside the order of theGCommercial Court on 18.01.2018. An appeal was filed in this Courtwhere NN Global contended that since the sub-contract was not stampedunder the Maharashtra Stamp Act, 1958, the arbitration agreementwould be rendered ‘unenforceable’. It is in this context that the Courtdoubted the correctness of previous decisions in Garware (supra) which

H7 (2021) 4 SCC 379

was cited with approval in Vidya Drolia (supra) declaring sucharbitration agreements to not exist in law and reconsideration of theissue was sought from this Constitution Bench.

D. Modification of the reference question:

13. The original reference question in Para 58 of N.N. Global(supra) was set out as under:

“Whether the statutory bar contained in Section 35 of the StampAct, 1899 applicable to instruments chargeable to stamp duty underSection 3 read with Schedule to the Act, would also render thearbitration agreement contained in such an instrument, which isnot chargeable to payment of stamp duty as being non-existent,unenforceable in law, or invalid/void, pending payment of stampduty on the substantive contract/instrument?”

[emphasis supplied]

Mr. Gourab Banerjee, learned Senior Counsel assisting this Courtas Amicus Curiaehowever proposed to reframe the question ofreference, as under:

“Whether the statutory bar contained in Section 35 of the StampAct, 1899 applicable to instruments chargeable to stamp duty underSection 3 read with Schedule to the Act, would also render thearbitration agreement contained in such an instrument, which isnot chargeable to payment of stamp duty as being non-existent,unenforceable in law, or invalid/void, pending payment of stampduty on the substantive contract/instrument?”

[Emphasis in original]

14. It is seen that an erroneous observation pertaining to theMaharashtra Stamp Act, 1958 not subjecting an arbitration agreementto stamp duty was made in para 20, 24 and 58 in NN Global (supra). Ineach of our four opinions, Justice KM Joseph, Justice C.T. Ravikumar,Justice Ajay Rastogi (& self), we find that this is not the correct positionon the applicability of the Maharashtra Stamp Act, 1958. The IndianStamp Act, 1899 is fiscal enactment that levies charge on theexecution of instruments. Section 2(14) of the Stamp Act, 1899 defines“instrument” as “every document by which any right or liability is, orpurports to be, created, transferred, limited, extended, extinguished or

Arecorded”. Section 3 titled “Instruments chargeable with duty” providesinter alia that the instrument must be mentioned in the Schedule to theAct. It is essential to note that arbitration agreements are not specificallymentioned in Schedule I of the Stamp Act, 1899 as “instruments” whichare required to be stamped. However, under the residuary entry in Article5(c) of Schedule I of the Stamp Act, 1899 titled as “if not otherwiseBprovided for”, stamp duty becomes payable. This residuary entry iscontained in amendments to Schedule I of the Stamp Act, 1899, as wellas various State Stamp Acts. I would therefore proceed on the basisthat an arbitral agreement falls within the definition of “instrument” asstipulated under the Stamp Act, 1899 and would be subject to stampCduty.

E. Submissions of the Counsel:

15. We have heard the elaborate submissions from Mr. GourabBanerjee, Learned Senior Counsel assisting this Court as Amicus Curiae;Mr. Gagan Sanghi, Learned Counsel for the appellant; Ms. MalavikaDTrivedi, Learned Senior Counsel for the Intervenor in IA 18516 of 2022;Mr. Ramakanth Reddy, Learned Senior Counsel for Respondent No. 1and Mr. Debesh Panda, Learned Counsel for the Intervenor in IA 199969of 2022. They have cited various decisions of this Court as well as ofCourts in other jurisdictions.E16. The learned Amicus Curiae makes the following specificsubmissions:

16.1. The Determination of whether an arbitration agreement isduly stamped or not, must be left to the arbitrator. Section 11(6A) of theArbitration Act, 1996 circumscribes the scope of the appointingFauthority. It begins with non-obstante clause and was specifically meantto overrule the 7-judge bench in SBP & Co v Patel Engg. Ltd[8]. (forshort “SBP”) and National Insurance Co. Ltd. V Boghara Polyfab(P) Ltd[9](for short “Boghara Polyfab”). Moreover, the ambit of Section16 of Arbitration Act, 1996 which deals with the competence of anGarbitral tribunal to rule on its jurisdiction, is wide enough, according toMr. Gourab Banerjee, to allow the arbitrator to make determinationwith respect to the stamping of the instrument.

8 (2005) 8 SCC 618H9 (2009) 1 SCC 267

16.2. The 246[th ]Report of the Law Commission of India[10](forshort “246[th] LCI Report) recommended that the scope of authority belimited to “existence” and “validity” of the arbitration agreement. Thelegislature went one step further and limited the scope of the appointingauthority under Section 11(6A) of the Arbitration Act, 1996 to confineto the examination of only “existence” and not even “validity” of thearbitration agreement. Such approach is consistent with the objective ofexpeditious resolution of arbitration disputes. Court under Section11(6) of Arbitration Act, 1996 is in the nature of an appointing authority,to facilitate and assist arbitration.

16.3 The statutory bar in Section 35 of the Stamp Act, 1899would be triggered only when there is finding that the document is notduly stamped. For the same, there ought to be an inquiry into stamping.Only on triggering of Section 33(2) of the Stamp Act, 1899 titled“Examination and impounding of instruments”, Section 35 willfollow. The examination under Section 33(2) of the Stamp Act, 1899should not be undertaken by Court under Section 11(6A) of theArbitration Act, 1996, but by the appointed arbitrator.

16.4. If the court finds under Section 11of the Arbitration Act,1996 that there is no agreement, then it can take final view. However,if the Court feels that deeper consideration is required then the samecan be left to the Arbitral Tribunal under Section 16 of the ArbitrationAct, 1996. According to Mr. Gourab Banerjee, the learned SeniorCounsel, this is the appropriate way to harmonise Section 11(6A) withSection 16 of the Arbitration Act, 1996.

16.5. The absence of stamping or instrument inadequately stampedwould at best be an issue of admissibility but not about jurisdiction. TheStamp Act, 1899 is fiscal measure enacted to secure revenue for theState for certain classes of instruments. It is, therefore, not enacted toarm litigant with weapon of technicality to meet the case of theopponent.

16.6. The learned Amicus Curiae points out that Court exercisingpower under Section 11(6A) of the Arbitration Act, 1996 is not

10 Law Commission of India, ‘Amendments to the Arbitration and Conciliation Act1996’ (246th Report, August 2014) Available at (https://cdnbbsr.s3waas.gov.in/s3ca0daec69b5adc880fb464895726dbdf/uploads/2022/08/2022081615.pdf) <Lastaccessed on 19.3.2023>

ACourt as defined in Section 2(1)(e) of the Arbitration Act, 1996 whichhas the authority to ‘receive evidence’. In some sense, under Section11(6A), the Court is to only form prime facie opinion.

16.7. Significantly, the parties are not under an obligation to file anoriginal arbitration agreement and only the copy can be annexed whichBhowever is not an “instrument” as provided in Section 2(14) of theStamp Act, 1899. The reading of Section 33 or 35 of the Stamp Act,1899 would pointedly suggest that these provisions are not concernedwith the copy of the instrument. Validity is always open to examinationat the post-referral stage. [Jupudi Kesava Rao v Pulavarthi VenkataCSubbarao and others[11], Hariom Agrawal v Prakash ChandMalviya[12]]17. Projecting the contrary view, Mr. Gagan Sanghi, learnedCounsel for the appellant makes the following submissions:

17.1. Section 35 of the Indian Stamp Act, 1899 bars admissionDof unduly stamped “instrument” in evidence “for any purpose” and also“acting upon it”. In Govt. of AP. v P. Laxmi Devi[13], it was held that“shall” in Section 33 of Stamp Act, 1899 is mandatory and unstampeddocument must be impounded.

17.2. Even assuming that stamp duty is not payable on an arbitrationEagreement under Stamp Act, 1899, when arbitration agreement iscontained as clause in an instrument on which stamp duty is payable,such arbitration agreement as an instrument, attracts the bar of Section35 of the Stamp Act, 1899.

17.3. The learned counsel argues that separation of agreementFfrom the substantive contract is legal fiction created by Section 16 ofthe Arbitration Act, 1996. Section 16 of Arbitration Act, 1996 cannotbe an exception to Section 35 of the Indian Stamp Act, 1899. [BengalImmunity Co vs State of Bihar[14], Para 69, 70 of Govt. of India vVedanta[15]; Amazon V Future Retail[16]]G

11 (1971)1SCC 54512 (2007) 8 SCC 51413 (2008) 4 SCC 72014 (1955) 2 SCR 60315 (2020)10 SCC 1H16 (2022) 1 SCC 209

17.4. According to Mr. Sanghi, Doctrine of Separability andKompetenz Kompetenz has no bearing on the issue of enforceability ofan arbitration agreement when proper stamp duty is not paid on theinstrument containing the arbitration agreement. The learned counselrelied on the decision of UK Supreme Court in Enka Insaat v OOOInsurance Company[17 ]where it was held that an “arbitration clauseis nonetheless part of bundle of rights and obligations recorded inthe contractual document”.

17.5. The issue of stamping is to be looked into at the very threshold,even if it is in exercise of Section 11 (6A) of the Arbitration Act,1996, i.e. at the time, the consideration with respect to appointment ofarbitrator is undertaken. According to the learned counsel, an instrumentwould exist in law only when it is enforceable. Therefore, when theCourt under Section 11(6A) of the Arbitration Act, 1996 is consideringthe “existence” of the arbitration agreement, it can examine the issue ofnon-stamping or of inadequate stamping at that stage itself.

17.6. Highlighting that three modes are provided in NN Global(supra) i.e. impounding, payment of stamp duty and then appointmentof arbitrator, it is argued that when an arbitrator is appointed in Section11 application, the Court is certainly “acting upon” the arbitration clausewhich is contended to be barred by the clear wordings of Section 35 ofthe Stamp Act, 1899. An Agreement, unless “enforceable”, is not in“existence”.

18. The learned Senior Advocate, Ms. Malvika Trivedi, interveningon behalf of the Appellant made the following submissions:

18.1. The Regimes of the Stamp Act, 1899 and RegistrationAct, 1908 are completely different. NN Global (supra) wrongly appliedthe principles of registration of document to the requirement of stampinga document. While the former is curable defect, the latter determinesthe very existence and completion of document/instrument. In theabsence of registration, an instrument still remains in existence but withoutstamping, the instrument is incomplete/inchoate.

18.2. The Stamp Act, 1899 envisages the payment of stamp duty,failing which the instrument according to Ms. Trivedi cannot be actedupon for any purpose. There is no ambiguity in the language of the Statuteand plain reading should be opted.

A18.3. The powers of the Court under different provisions of law,as well as the restrictions created in the Stamp Act, 1899 apply to theproceedings conducted in accordance with Section 9 of the ArbitrationAct, 1996. It is, therefore, argued that even if the arbitration clausestands severed, the Court will have to reach prima facie conclusionon whether the main agreement is enforceable in law before grantingBinterim measures.

19. Learned Counsel for the Respondent No. 1, Mr. RamakanthReddy, took us through the relevant Lok Sabha debates before theenactment of the Arbitration Act, 1996 and makes the followingsubmissions:C

19.1 Provisions of Arbitration Act, 1996; Stamp Act, 1899 andContract Act, 1872 can be harmonized. Section 17 of Stamp Act,1899 has to be read with Section 31 of Stamp Act, 1899.

19.2 Plain language of Section 7 of the Arbitration Act, 1996Ddoes not require that the parties stamp the agreement. The legislativeintention would be defeated, if the Court insists on non-core technicalrequirements such as stamps, seals and originals.

20. In his turn, Mr. Debesh Panda, learned Counsel for theIntervenor submits the following:

E20.1 Part I of Arbitration Act, 1996 deals with Section 8,9and 11 whereas Section 45 is dealt with in Part II. Section 45 hasbeen recognized as provision falling under Part II which is “completecode”. [See Chloro Controls v Severn Trent Water PurificationInc[18]] The expression “unless it finds” in Section 45 was interpretedFper majority in Shin-Etsu Chemical Co. Ltd. v Aksh Optifibre Ltd[19](for short “Shin-Etsu) as consideration on “prima facie basis”only. In 2019, Parliament amended Section 45. It substituted theexpression “unless it finds.” with “unless it prima facie finds”. Itthus brings the statute in line with the position settled in Shin Etsu(supra). In this background, the Stamp Act, 1899 merely creates aGtemporary infliction till the stamp duty is recovered, with or withoutpenalty (as the case may be). The affliction only attaches to theinstrument and not the transaction.

18 (2013) 1 SCC 641H19 (2005) 7 SCC 234

20.2 The Arbitration Act, 1966 has always been held to be anexhaustive legislation in the nature of complete Code. [Paragraphs83-84, 89 inFuerst Day Lawson Ltd. v. Jindal Exports Ltd.[20]]According to Mr. Panda, the impounding of the parent instrument thatcontains the arbitration agreement by forum that exercises power underthe complete Code, either under Section 8, 9 and 11 within Part I, orunder Section 45 within Part-II, is inconsistent with the character ofArbitration Act, 1996 which is in the nature of complete code.

21. Looking at the respective projection by the learned AmicusCuriae and other counsels, the following questions fall for ourconsideration:

i)Whether the non-stamping of the substantive contract/instrument would render the arbitration agreement non-existent in law, void and unenforceable at the stage ofSection 11 of the Arbitration Act, 1996 for the purpose ofreferring matter for arbitration?

ii)Whether the examination of stamping and impounding shouldbe done at the threshold by the Section 11 judge or should itbe left to the arbitrator?

F. The Statutory framework of the Stamp Act, 1899

22. Let us begin by examining the objective behind the enactmentof the Stamp Act, 1899. The 67[th] Law Commission Report[21] suggeststhat the idea of fiscal enactment for the purpose of collecting revenuefor the State first originated in Holland and thereafter, the BengalRegulation 6 of 1797 was enacted in India. This was initially limited toBengal, Bihar, Orissa and Banaras. Subsequently, various stampregulations were introduced in Bombay and Madras. The Stamp dutieswere primarily intended to compensate for the deficiency in public revenuedue to abolition of tax for the maintenance of police establishments,leviable on “Indian Merchants and Traders”. However, the Regulationpaved way for later enactments relating to stamp duty. In 1860, the firstAct relating to Stamp duties was enacted in India. This was repealed bythe Act of 1862, 1869, 1879 and subsequently, the Act of 1899 wasenacted which is the current legislation.

20 (2011) 8 SCC 333

21 Law Commission of India, ‘Indian Stamp Act’ (67th Report, February,1997) availableat https://lawcommissionofindia.nic.in/report_seventh/accessed on 11March 2023

A23. Reflecting on the objective of the Stamp Act, 1899, 3-judgebench of this Court in Hindustan Steel Ltd. v. Dilip Construction Co.[22](for short “Hindustan Steel”) speaking through J.C. Shah J. made thefollowing pertinent observation:

“7. The Stamp Act is ûscal measure enacted to secure revenueBfor the State on certain classes of instruments: It is not enacted toarm litigant with weapon of technicality to meet the case ofhis opponent.”

24. Learned Amicus Curiae, Mr. Gourab Banerjee cited thedecision of the Pakistan Supreme Court in Union Insurance CompanyCof Pakistan Ltd. v Hafiz Muhammad Siddique[23]which addressed thisissue as early as 1978, following the ratio in Hindustan Steel (supra).Faced with the question of whether there would be any valid arbitralproceedings, if the arbitration agreement is unduly stamped and hence,inadmissible in evidence under Section 35 of the Stamp Act, 1899; theCourt attributed purely fiscal purpose to stamping, holding that stampingDis not meant to interfere in commercial life. Discussing the provisions ofthe Stamp Act, 1899 including Section 61 which empowers appellateCourts to revise decisions on “sufficiency” of stamps, Dorab Patel Jconcluded that:

“the object of the legislature in enacting the Stamp Act was toEprotect public revenue and not to interfere with commercial lifeby invalidating instruments vital to the smooth flow of trade andcommerce.”

[emphasis supplied]

F25. Thus, the object is to see that the revenue for the State isrealised to the utmost extent[24] and not to affect the validity of thedocument. Its provisions must be construed narrowly to that extent. Inthe same judgment, it was elaborated by the Pakistan Supreme Court asunder:

“For example, an instrument would be produced in evidence onlyGwhen there is dispute about it, therefore, if the intention of the

22 (1969) 1 SCC 59723 1978 PLD SC 279

24 J.M.A. Raju v Krishnamurthy Bhatt, AIR 1976 Guj 72; Chiranji Lal (Dr.) v. Hari Das(2005) 10 SCC 746; Jagdish Narain v. Chief Controlling Revenue Authority, AIR 1994HAll 371.

Legislature had been to render invalid all instruments not properlystamped, it would have made express provision in this respectand it would have also provided some machinery for enforcing itsmandate in those cases in which the parties did not have occasionto produce unstamped instruments before the persons specifiedin the section.”

26. This Court in RIO Glass Solar SA v. Shriram EPC Limitedand Ors.[25] while holding that foreign awards need not be stamped notedthat the Stamp Act, 1899 reflects the fundamental policy of Indian law.A 2-judge bench speaking through Nariman J. noted as under:

“ 34. ……The fundamental policy of Indian law, as has been heldin Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp(1) SCC 644, and followed in Associate Builders v. DelhiDevelopment Authority, (2015) 3 SCC 49, makes it clear that if astatute like the Foreign Exchange Regulation Act, 1973 dealingwith the economy of the country is concerned, it would certainlycome within the expression “fundamental policy of Indian law”.The Indian Stamp Act, 1899, being fiscal statute levyingstamp duty on instruments, is also an Act which deals with theeconomy of India, and would, on parity of reasoning, bean Act reflecting the fundamental policy of Indian law.”

[emphasis supplied]

27. The object of the Stamp Act can be further understood fromS. Krishnamurthy Aiyar’s Commentary[26] on the Stamp Act, 1899 wherediscussing the judgments in Hindustan Steel(supra) and J.M.A Raju vKrishnamurthy Bhatt[27], the object is stated as under:

“The object of the Stamp Act is purely fiscal regulation. Its soleobject is to increase the revenue and all its provisions must beconstrued as having in view the protection of revenue. It is notenacted to arm litigant with weapon of technicality to meetthe case of his opponent. The whole object is to see that therevenue of the State is realised to the utmost extent”

25 (2018) 18 SCC 313

26 S. Krishnamurthy Aiyar, The Indian Stamp Act, An Exhaustive Summary with StateAmendments; 7[th] Edn, P. 22

27 AIR 1976 Guj 72

It is plain that the legislative intent and object behind the StampAct, 1899, is to secure revenue for the State and it is an Act reflectingthe fundamental policy of Indian law. Thus, policy considerations andsecuring revenue must also be kept in mind while interpreting theprovisions of the Stamp Act, 1899.

27.1. In the case of Commissioner of IT v. ChandanbenMaganlal[28], it was held that any provision relating to tax statute mustbe interpreted so that the meaning of such provision must harmonisewith the legislature’s intention behind the law. Let us now consider Section35&36 of the Stamp Act, 1899 with which we are directly concerned.They are extracted below:

“35. Instruments not duly stamped inadmissible in evidence, etc.—No instrument chargeable with duty shall be admitted in evidencefor any purpose by any person having by law or consent of partiesauthority to receive evidence, or shall be acted upon, registeredDor authenticated by any such person or by any public officer, unlesssuch instrument is duly stamped: Provided that—

(a) any such instrument [shall], be admitted in evidenceon payment of the duty with which the same is chargeable,or, in the case of an instrument insufficiently stamped, of theamount required to make up such duty, together with penaltyof five rupees, or, when ten times the amount of the properduty or deficient portion thereof exceeds five rupees, of sumequal to ten times such duty or portion;

(b) where any person from whom stamped receipt couldhave been demanded, has given an unstamped receipt andsuch receipt, if stamped, would be admissible in evidenceagainst him, then such receipt shall be admitted in evidenceagainst him, on payment of penalty of one rupee by the persontendering it;

(c) where contract or agreement of any kind is effected bycorrespondence consisting of two or more letters and any oneof the letters bears the proper stamp, the contract or agreementshall be deemed to be duly stamped;

(d) nothing herein contained shall prevent the admissionof any instrument in evidence in any proceeding in aCriminal Court, other than proceeding under ChapterXII or Chapter XXXVI of the Code of Criminal Procedure,1898 (5 of 1898);

(e) nothing herein contained shall prevent the admissionof any instrument in any Court when such instrument hasbeen executed by or on behalf of 66 [the 67 [Government]]or where it bears the certificate of the Collector as providedby section 32 or any other provision of this Act.”

“36. Admission of instrument where not to be questioned.—Wherean instrument has been admitted in evidence, such admission shallnot, except as provided in section 61, be called in question at anystage of the same suit or proceeding on the ground that theinstrument has not duly stamped.”

28. Section 35 proscribes authorities from considering unstampeddocuments but the exceptions to the statutory bar under Section 35 asprovided in 35(a),(b),(d) and (e) and Section 36, would clearly suggestthat non-payment of stamp duty is curable defect and the documentwould not be rendered void at the first instance, if the requisite Stampduty is not paid. Thus, there is no absolute bar. It is also well-settled inlaw that failure to stamp document does not affect the validity of thetransaction embodied in the document; it merely renders documentinadmissible in evidence[29].

28.1. K. Krishnamurthy[30] in the Commentary on the Indian StampAct, 1899 discusses the proviso to Section 35 of Stamp Act, 1899 asunder:

“This proviso enables Courts and Arbitrators to admit in evidencedocuments unstamped or deficiently stamped on payment of theproper duty and penalty. An instrument not duly stamped shall beadmitted in evidence on payment of the duty and penalty. Aninstrument not duly stamped shall be admitted in evidence on

29 Gulzari Lal Malwari v Ram Gopal AIR 1937 Cal 765; Mattegunta Dhanalakshmi vKantam Raju Saradamba,AIR 1977 AP 348; See also Puranchandra v Kallipada Roy,AIR 1942 Cal 386;Boottam Pitchiah v Boyapati Koteswara Rao AIR 1964 AP 51930 K. Krishnamurthy, The Indian Stamp Act, An Exhaustive Summary with StateAmendments;12[th] Edition P. 372-373

Apayment of the duty with which the same is chargeable or in thecase of an instrument insufficiently stamped, of the amountrequired to make up such together with penalty[31]. An award whichis not engrossed on stamped paper or is engrossed on aninsufficiently stamped paper may be validated withretrospective effect by payment of the duty or deficit duty[32].BWhere an award is not stamped, the defect in the award canbe cured by impounding the document and after the defect isremoved it can be brought on record and made rule of theCourt.[33]”

[emphasis supplied]

29. Similarly, Section 42(2) of the Stamp Act, 1899 which dealswith the consequence of non-stamping provides as follows:

“42. Endorsement of instruments in which duty has been paidunder section 35, 40 or 41.—

(1) When the duty and penalty (if any) leviable in respect of anyinstrument have been paid under section 35, section 40 or section41, the person admitting such instrument in evidence or theCollector, as the case may be, shall certify by endorsementthereon that the proper duty or, as the case may be, the properEduty and penalty (stating the amount of each) have been leviedin respect thereof, and the name and residence of the personpaying them.

(2) Every instrument so endorsed shall thereupon beadmissible in evidence, and may be registered and acted uponFand authenticated as if it had been duly stamped, and shallbe delivered on his application in this behalf to the personfrom whose possession it came into the hands of the officerimpounding it, or as such person may direct:

Provided that—

(a) no instrument which has been admitted in evidence uponpayment of duty and penalty under section 35, shall be sodelivered before the expiration of one month from the date of

31 Omprakash v. Laxminarayan 2014(1) SCC 618

32 Pattoolal Sharma v Rajadhiraj Umrao Singh AIR 1955 NUC 2621

33 Wilson & Co. Pvt. Ltd. V K.S. Lokavinayagam AIR 1992 Mad 100

such impounding, or if the Collector has certified that its furtherdetention is necessary and has not cancelled such certificate;

(b) nothing in this section shall affect the Code of Civil Procedure,1882 (14 of 1882), section 144 clause 3.”

[emphasis supplied]

30. The phraseology of Sections 36, 35 and 42 of the StampAct, 1899 was considered in Hindustan Steel(supra). The factualbackdrop therein was that Hindustan Steel made an application underSection 30 and 33 of the Indian Arbitration Act, 1940 for settingaside the award on the ground that it was unstamped and as such, voidab initio. This Court, however, held that there is no bar against aninstrument not duly stamped being “acted upon”,after payment of stampduty and penalty according to the procedure prescribed in the Act. Itwas pertinently observed as follows:

“6. Relying upon the difference in the phraseology betweenSections 35 and 36 it was urged that an instrument which is notduly stamped may be admitted in evidence on payment of dutyand penalty, but it cannot be acted upon because Section 35operates as bar to the admission in evidence of the instrumentnot duly stamped as well as to its being acted upon, and theLegislature has by Section 36 in the conditions set out thereinremoved the bar only against admission in evidence of theinstrument. The argument ignores the true import of Section36.

By that section an instrument once admitted in evidence shallnot be called in question at any stage of the same suit orproceeding on the ground that it has not been duly stamped.Section 36 does not prohibit challenge against an instrumentthat it shall not be acted upon because it is not duly stamped,but on that account there is no bar against an instrument notduly stamped being acted upon after payment of the stampduty and penalty according to the procedure prescribed bythe Act. The doubt, if any, is removed by the terms of Section42(2) which enAct, in terms unmistakable, that everyinstrument endorsed by the Collector under Section 42(1)

Ashall be admissible in evidence and may be acted upon as if”it has been duly stamped.

(emphasis supplied)

31. The above would indicate that there is no absolute bar againstthe instrument being “acted upon” since at later stage the defect isBcurable.

31.1. Arguing that the above course is not available, Ms. MalavikaTrivedi, learned Senior Counsel for the intervenor had contended thatSection 35 provides for statutory bar, where the agreement shall notbe admitted in evidence for any purpose nor shall it be acted upon,Cregistered or authenticated by any such person or by any public officer.It is, therefore, submitted that when Court appoints an arbitrator underSection 11 of Arbitration Act, 1996, it is certainly “acting upon” thearbitration clause, which is barred by the clear language of Section 35of the Stamp Act, 1899. Let us now proceed to test the above argument.

31.2 In Hameed Joharan v. Abdul Salam[34 ]in the context of anDunstamped decree for partition, 2 judges of this Court had the occasionto interpret Section 35 of the Stamp Act, 1899 and the interplay withArticle 136 of the Limitation Act, 1963. It was contended in that casethat an instrument not duly stamped, cannot be “acted upon”. The issuetherein was whether decree passed in suit for partition can be actedEupon/enforced, without engrossing on stamp paper. It was also arguedthat the period of limitation begins to run from the date when the decreebecomes enforceable i.e. when the decree is engrossed on the stamppaper. In this context, the Court opined that:“38. …..Undoubtedly, Section 2(15) includes decree of partitionFand Section 35 of the Act of 1899 lays down bar in the matter ofunstamped or insufficient stamp being admitted in evidence orbeing acted upon — but does that mean that the prescribedperiod shall remain suspended until the stamp paper isfurnished and the partition decree is drawn thereon andGsubsequently signed by the Judge? The result would howeverbe an utter absurdity. As matter of fAct, if somebody does notwish to furnish the stamp paper within the time specified thereinand as required by the civil court to draw up the partition decreeor if someone does not at all furnish the stamp paper, does that

H34 (2001) 7 SCC 573

mean and imply, no period of limitation can be said to be attractedfor execution or limitless period of limitation is available. Theintent of the legislature in engrafting the Limitation Act shallhave to be given its proper weightage. Absurdity cannot be theoutcome of interpretation by court order and wherever there iseven possibility of such absurdity, it would be plain exercise ofjudicial power to repel the same rather than encouraging it. Thewhole purport of the Indian Stamp Act is to make availablecertain dues and to collect revenue but it does not mean andimply overriding the effect over another statute operating ina completely different sphere.”

[Emphasis supplied]

31.3. Thus, it was held that the Stamp Act, 1899 cannot overridethe effect of another statute such as the Limitation Act, 1963 operatingin completely different sphere. Further, the expression “executability”and “enforceability” was distinguished to mean that “enforceability”cannot be subject matter of Section 35 of Stamp Act, 1899. It wasconclusively held that enforceability cannot be suspended untilfurnishing of stamp paper. At most, document can be rendered non-executable.

31.4. Thereafter, 3-judge bench of this Court in Chiranji Lal(Dr.) v. Hari Das[35]after discussing the above judgment in HameedJoharan (supra) on the question of period of limitation beginning to runfrom the date of the decree being engrossed on the stamp paper, pertinentlyheld as under:

“23. Such an interpretation is not permissible having regardto the object and scheme of the Indian Stamp Act, 1899. TheStamp Act is fiscal measure enacted with an object to securerevenue for the State on certain classes of instruments. It is notenacted to arm litigant with weapon of technicality tomeet the case of his opponent. The stringent provisions of theAct are conceived in the interest of the Revenue. Once that objectis secured according to law, the party staking his claim on theinstrument will not be defeated on the ground of initial defect inthe instrument (Hindustan Steel Ltd. v. Dilip ConstructionCo. [(1969) 1 SCC 597]).”

[emphasis supplied]

A31.5. It was specifically held that “the starting of period of limitationfor execution of partition decree cannot be made contingent upon theengrossment of the decree on the stamp paper.”

31.6. Thus, unstamped/insufficiently stamped document does notaffect the enforceability of document nor does it render documentBinvalid[36]. plain reading of the provisions would also make it clear thata document can be “acted upon” at later stage. It is therefore curabledefect.

32.The learned Counsel for the Appellant, Mr. Gagan Sanghiargued that Section 35 and 33 are mandatory provisions as it uses theCword “shall” and an unstamped document must be impounded at thethreshold. In Principles of Statutory Interpretation by Justice G.P.Singh[37] on the use of the word “shall” and presumption of the wordbeing imperative, it is stated:

“ ….this prima facie inference about the provision being imperativemay be rebutted by other considerations flowing from suchDconstruction. There are numerous cases where the word “shall”has therefore been construed as merely directory. The word ‘shall’,observes HIDAYATULLAH, J. “is ordinarily mandatory butsometimes not so interpreted if the context or the intention otherwisedemands and points out SUBBARAO J. “when statute usesEthe word ‘shall’, prima facie it is mandatory, but the court mayascertain the real intention of the legislature by carefullyattending to the whole scope of the statute.”

[emphasis supplied]

32.1. P.B. Maxwell in the Commentary on Interpretation ofFStatutes[38 ]notes that an Act is to be regarded in its entirety and discussesthe following three ways of interpretation:

“Passing from the external aspects of the Statute to its contents,it is an elementary rule that construction is to be made of all partstogether, and not of one part only by itself”

G36 Gulzari Lal Malwari v Ram Gopal AIR 1937 Cal 765; Mattegunta Dhanalakshmi vKantam Raju Saradamba, AIR 1977 AP 348; See also Puranchandra v Kallipada Roy,AIR 1942 Cal 386;Boottam Pitchiah v Boyapati Koteswara Rao AIR 1964 AP 51937 Justice G.P. Singh: Principles of Statutory Interpretation,(LexisNexis,2016) at P. 450-451; Burjore and Bhawani Prasad v Bhagana ILR 10 Cal 557; Sainik Motors v State ofRajasthan 1962 (1) SCR 517 ; State of UP v Babu Ram AIR 1961 SC 751

38 PSt J Langan, Maxwell on The Interpretation of Statutes (N M Tripathi Private Ltd,H1976); P. 58-64

i)Individual words are not considered in isolation, butAmay be have their meaning determined by otherwords in the Section in which they occur.

ii)The meaning of section may be controlled by otherindividual sections in the same Act.

iii)Lastly, the meaning of section may bedetermined, not so much by reference to otherindividual provisions of the Statute, as by thescheme of the Act regarded in general”

[emphasis supplied]

32.2. Justice G.P. Singh in Interpretation of Statutes furthernotes[39]:

“ The principle that the statute must be read as whole is equallyapplicable to different parts of the same section. The sectionmust be construed as whole whether or not one of the parts is asaving clause or proviso. Subbarao J calls it “an elementary rulethat construction of section is to be made of all the parts together”

[emphasis supplied]

32.3. Thus, on consolidated reading of Section 35,36 and theproviso to Section 35 and 42 ; the use of the word “acted upon” in allthese sections or even in the same section, read with the objective andlegislative intent of the Stamp Act 1899, it is clear that the bar underSection 35 is not intended to be absolute; non-payment of stamp duty isa curable defect as the objective is to protect revenue. Moreover, noneof the provisions of the Stamp Act, 1899 have the effect of rendering adocument invalid or void ab initio.

G. The Statutory Scheme of the Arbitration Act, 1996

33. It is apposite to refer to the parliamentary intent behind theenactment of the Arbitration Act, 1996 which replaced the ArbitrationAct, 1940. The first law on the subject was the Arbitration Act, 1899with limited application in the Presidency towns of Calcutta, Bombayand Madras. Thereafter, the second schedule of the provisions of theCivil Procedure Code, 1908 dealt with arbitration. The majorconsolidated legislation was the Arbitration Act, 1940 which was based

39 Justice G.P. Singh: Principles of Statutory Interpretation,(LexisNexis,2016) at P. 46;

Aon the (English) Arbitration Act, 1940. The Law Commission in its246[th ]LCI Report (supra) notes that this arbitral regime was based onthe mistrust of the arbitral process and “The 1996 Act is based on theUNCITRAL Model Law on International Commercial Arbitration, 1985and the UNCITRAL Conciliation Rules, 1980.” The relevant part of theStatement of Object and Reasons is extracted below:B

(i) to comprehensively cover international commercial arbitrationand conciliation as also domestic arbitration and conciliation;

(ii) to make provision for an arbitral procedure which is fair,efficient and capable of meeting the needs of the specificCarbitration;(iii) to provide that the arbitral tribunal gives reasons for its arbitralaward;

(iv) to ensure that the arbitral tribunal remains within the limits ofits jurisdiction;

D(v) to minimise the supervisory role of courts in the arbitralprocess;

(vi) to permit an arbitral tribunal to use mediation, conciliation orother procedures during the arbitral proceedings to encourageEsettlement of disputes;(vii) to provide that every final arbitral award is enforced in thesame manner as if it were decree of the court;

(viii) to provide that settlement agreement reached by the partiesas result of conciliation proceedings will have the same statusFand effect as an arbitral award on agreed terms on the substanceof the dispute rendered by an arbitral tribunal; and

(ix) to provide that, for purposes of enforcement of foreignawards, every arbitral award made in country to which one ofthe two International Conventions relating to foreign arbitralGawards to which India is party applies, will be treated as aforeign award.”

[emphasis supplied]

34. Further, on reading Article 5 of the Model Law and Section 5of the Arbitration Act, 1996, which cover the provisions for judicial

intervention in arbitral proceedings, it is clear that the Parliament wentbeyond Article 5 of the UNCITRAL Model law and added non-obstanteclause. To substantiate this point, it is pertinent to quote the provisions infull.

Article 5 of the UNCITRAL Model Law, 1985 reads as under:

“ Article 5. Extent of Court intervention- In matters governedby this Law, no court shall intervene except where so providedin this Law.”

Section 5 of the Arbitration Act, 1996 reads as under:

“5. Extent of judicial intervention.—Notwithstanding anythingcontained in any other law for the time being in force, inmatters governed by this Part, no judicial authority shallintervene except where so provided in this Part.”

[emphasis supplied]

35. Additionally, reflecting on the purpose of Article 5, Dr. PeterBinder in UNCITRAL Model Law on International CommercialArbitration, 1985[40] notes:

“1-107 : According to the Commission Report, the purpose ofArticle 5 was “to achieve certainty as to the maximum extent ofjudicial intervention, including assistance, in internationalcommercial arbitration, by compelling the drafters to list in the(model) law on international commercial arbitration all instancesof court intervention. The Analytical Commentary describes theeffect of Article 5 as being “to exclude any general or residualpowers given to the courts in domestic system which are notlisted in the model law”

In addition to the great advantage of providing clarity of law,which is particularly important for foreign parties(protecting themfrom unwanted legal surprises, Article 5 also functions toaccelerate the arbitral process in allowing less of chanceof delay caused by intentional and dilatory court”proceedings.

[emphasis supplied]

40 P. Binder, International Commercial Arbitration And Conciliation In UNCITRALModel Law Jurisdictions 274 (2nd ed., Sweet & Maxwell London 2005) P. 50-51

A36. collective reading of the Statement of Object and Reasonsof the Arbitration Act, 1996 r/w Section 5 of the Act, and Article 5 ofthe Model Law, would make it abundantly clear that the legislative intentbehind the enactment was to inter alia,minimise the intervention of theCourts and provide for timely resolution of disputes. By adding non-obstante clause, the Parliament through Section 5 made significantBdeparture from Article 5 and gave an overriding effect over the provisionsof any other law for the time being in force. It circumscribed the role ofthe judicial authority, especially in context of the Courts exercising anyresidual power that may accrue to them through any provision in anylaw.C37. Let us now refer to the unamended Section 11(6)of theArbitration Act, 1996 which is based on the Article 11 of theUNCITRAL Model law:

“11 Appointment of arbitrators. —D(6) Where, under an appointment procedure agreed upon by theparties,—

(a) party fails to act as required under that procedure; or

(b) the parties, or the two appointed arbitrators, fail to reach anEagreement expected of them under that procedure; or

(c) person, including an institution, fails to perform any functionentrusted to him or it under that procedure, party may requestthe Chief Justice or any person or institution designated by him toFtake the necessary measure, unless the agreement on theappointment procedure provides other means for securing theappointment.”

38. Even though the key provisions in the Arbitration Act, 1996are primarily based on the UNCITRAL Model Law, the legislature hasGalso made significant departures, while amending Section 11 and Section8 of the Arbitration Act, 1996.

39. Next, it would be appropriate to briefly trace the jurisprudentialhistory of Section 11(6) of the Arbitration Act, 1996 for the purposeof this reference.

i) Evolution of law under Section 11(6) of Arbitration Act, 1996

40. 2-judge Bench of this Court in ICICI Ltd. v. East CoastBoat Builders & Engineers Ltd[41 ]taking into consideration delays inappointment of arbitrators under Section 11(6), referred the question ofjurisdiction of Section 11 judge to consider arbitrability of dispute to athree-judge bench. It was noted that in KR Raveendranathan v. Stateof Kerala[42], another two Judge Bench of this Court had already referredto larger Bench, similar question.

41. Thereafter, in Sundaram Finance Ltd. v. NEPC India Ltd[43],a 2-judge bench opined that:

“12. …under the 1996 Act, appointment of arbitrator(s) is madeas per the provisions of section 11, which does not require theCourt to pass judicial order appointing [the] arbitrator(s).”

42. The above obiter was affirmed by 2-judge Bench in AdorSamia Pvt Ltd. v. Peekay Holdings Ltd[44] (for short “Ador Samia”).Dealing with the question of appeal under Article 136 of the Constitutionof India, from an order made by the Chief Justice of High Courtappointing an arbitrator, this Court held that an order under Section 11of the Arbitration Act, 1996 was an administrative order. This wasaffirmed by three- Judge Bench in Konkan Railways Corpn v. MehulConstruction Co[45](for short “Konkan Railways(I)”) where the mattercame up for reconsideration of the ratio in Ador Samia (supra). It wasobserved as under:“ 4. …When the matter is placed before the Chief Justice or hisnominee under Section 11 of the Act it is imperative for the saidChief Justice or his nominee to bear in mind the legislative intentthat the arbitral process should be set in motion without any delaywhatsoever and all contentious issues are left to be raised beforethe Arbitral Tribunal itself. At that stage it would not be appropriatefor the Chief Justice or his nominee to entertain any contentiousissue between the parties and decide the same. bare reading ofSections 13 and 16 of the Act makes it crystal clear that questions

41 (1998) 9 SCC 72842 (1996) 10 SCC 3543 (1999) 2 SCC 47944 (1999) 8 SCC 57245 (2000) 7 SCC 201

Awith regard to the qualifications, independence and impartiality ofthe arbitrator, and in respect of the jurisdiction of the arbitratorcould be raised before the arbitrator who would decide the same.”

43. The three-judge bench decision was subsequently affirmedby five judges in Konkan Railways Corpn v. Mehul ConstructionBCo[46](for short “Konkan Railways (II)”). This Court held therein thatthe power exercised by the Chief Justice or ‘any person or institution’designated by him under section 11 is not adjudicatory. Following detailedreview of the precedents, it was held that the function of the ChiefJustice or his designate under Section 11 is to only “fill the gap left” andappoint an arbitrator for expeditious constitution and commencement ofCarbitration proceedings.

44. The seven judges of this Court in SBP (supra) overturned thedecision in Konkan Railways(II) (supra). It was held therein that decidingan application for appointment is an exercise of ‘judicial’ power, asopposed to an ‘administrative’ power and that the Court is also authorizedDto record evidence:

“39. ….[f]or the purpose of taking decision on these aspects,the Chief Justice can either proceed on the basis of affidavits andthe documents produced or take such evidence or get suchevidence recorded”E45. However, Justice C.K. Thakker dissented from the majorityopinion and came to the conclusion that it was an administrative powerin the following passage:

“85. …There is […] no doubt in my mind that at that stage, theFsatisfaction required is merely of prima facie nature and the ChiefJustice does not decide lis nor contentious issues between theparties. Section 11 neither contemplates detailed inquiry, nor trialnor findings on controversial or contested matters.”

46. The four main reasons behind the dissent can be summarisedas under:G

“111. ….Firstly, the function of the Court is to interpret the provisionas it is and not to amend, alter or substitute by interpretativeprocess. Secondly, it is for the legislature to make law applicable

to certain situations contemplated by it and the judiciary has nopower in entering into ‘legislative wisdom’. Thirdly, as held byme, the ‘decision’ of the Chief Justice is merely prima facie decisionand sub-section (1) of Section 16 confers express power on thearbitral tribunal to rule on its own jurisdiction. Fourthly, it providesthat remedy to deal with situations created by the order passed bythe arbitral tribunal. The sheet anchor of his dissent is that in theguise of interpreting statute, judicial legislation is not permissible.”

47. In the dissenting opinion in Paragraph 95 & 96, Justice Thakkarfurther held as under:

“95. Now, let us consider Section 16 of the Act. This section isnew and did not find place in the old Act of 1940. Sub-section (1)of that section enables the Arbitral Tribunal to rule on its ownjurisdiction. It further provides that the jurisdiction of the Tribunalincludes ruling on any objections with respect to existence or validityof the arbitration agreement. Sub-sections (2), (3) and (4) laydown procedure of raising plea as to the jurisdiction of the ArbitralTribunal and entertaining such plea. Sub-section (5) mandates thatthe Arbitral Tribunal “shall decide” such plea and, “where theArbitral Tribunal takes decision rejecting the plea, continue withthe arbitral proceedings and make an arbitral award”. Sub-section(6) is equally important and expressly enacts that party aggrievedby an arbitral award may invoke Section 34 of the Act for settingaside such award. The provision appears to have been made toprevent dilatory tactics and abuse of immediate right to approachthe court. If an aggrieved party has right to move the court, itwould not have been possible to preclude the court from grantingstay or interim relief which would bring the arbitration proceedingsto grinding halt. The provisions of Section 16(6) read with Section5 now make the legal position clear, unambiguous and free fromdoubt.

96. Section 16(1) incorporates the well-known doctrineof Kompetenz-Kompetenz or competence de la competence. Itrecognises and enshrines an important principle that initially andprimarily, it is for the Arbitral Tribunal itself to determine whetherit has jurisdiction in the matter, subject of course, to ultimate court-control. It is thus rule of chronological priority. Kompetenz-Kompetenz is widely accepted feature of modern international

Aarbitration, and allows the Arbitral Tribunal to decide its ownjurisdiction including ruling on any objections with respect to theexistence or validity of the arbitration agreement, subject to finalreview by competent court of law i.e. subject to Section 34 ofthe Act.”

B48. The above line of reasoning in Justice Thakkar’s dissentresonates with the internationally recognized principle of KompetenzKomptenz and the doctrine of separability. The majority opinion in SBP(supra) suggeststhat Section 11 Court could conduct mini-trial at thepre-referral stage. The jurisprudential correctness of SBP(supra) hasbeen doubted and was considered as excessive judicial intervention byCthe 246[th] LCI Report (supra). It has been legislatively overruled bysubsequent amendments in the Arbitration Act, 1996 which will bediscussed later in this judgment.

49. Thereafter, two-judge bench in Boghara Polyfab (supra)which followed SBP (supra), allowed the court to examine, inter alia,Dthe following issues:

“22.2. (a) Whether the claim is dead (long barred) claim or alive claim.

(b) Whether the parties have concluded the contract/Etransaction by recording satisfaction of their mutual rightsand obligation or by receiving the final payment withoutobjection.”

50. The 246[th ]LCI report (supra), discussing both SBP (supra)and Boghara (supra) significantly noted that the real issue is the “scope”Fand “nature” of judicial intervention:

“29. The Supreme Court has had occasion to deliberate upon thescope and nature of permissible pre-arbitral judicial intervention,especially in the context of section 11 of the Act. Unfortunately,however, the question before the Supreme Court was framed interms of whether such power is “judicial” or an “administrative”Gpower – which obfuscates the real issue underlying suchnomenclature/description as to:

-the scope of such powers – i.e. the scope of argumentswhich Court (Chief Justice) will consider while decidingwhether to appoint an arbitrator or not – i.e. whether theH

arbitration agreement exists, whether it is null and void, whetherit is voidable etc; and which of these it should leave for decisionof the arbitral tribunal.

-the nature of such intervention – i.e. would the Court (ChiefJustice) consider the issues upon detailed trial and whetherthe same would be decided finally or be left for determinationof the arbitral tribunal”

[emphasis supplied]

51. As regards nature, the 246[th] LCI Report(supra) noted thatthe exposition of law on the point is to be found in Shin Etsu (supra)wherethis Court while interpreting Section 45 of the Arbitration Act, 1996held that the issue should be looked at on “prima facie” basis only. Onscope, it was recommended that the Court should restrict to theexamination of whether the agreement is “null and void” and if the Courtfinds that the agreement does not exist, that decision would be final. Itmade the following recommendation as regards Section 8 and 11 of theArbitration Act, 1996:

“33. …The scope of the judicial intervention is only restricted tosituations where the Court/Judicial Authority finds that thearbitration agreement does not exist or is null and void. In sofar as the nature of intervention is concerned, it is recommendedthat in the event the Court/Judicial Authority is prima facie satisfiedagainst the argument challenging the arbitration agreement, it shallappoint the arbitrator and/or refer the parties to arbitration, as thecase may be.”

52. The 2015-Amendment significantly restricted the scope ofintervention even further as we will notice below.

ii) Post-2015 Regime: Insertion of Section 11(6A)

53. There has been major shift post-2015 amendment with theinsertion of Section 11(6A) in the Arbitration Act, 1996. The legislativeintent is clear from the plain reading of Section 11(6A) as extractedbelow:

”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,

Adecree or order of any Court, confine to the examination of theexistence of an arbitration agreement.”

[emphasis supplied]

54. The basis for this amendment, as explained in 246[th] LCI Report(supra), was to undo the effect of SBP (supra) and Boghara (supra)Bwhich widened the scope of inquiry and intervention by Court underSection 11(6) of the Arbitration Act, 1996. Section 11(6A) uses thephrase “notwithstanding any judgment, decree or order of any Court”and effectively overrules judgments which widened the scope of inquiry.Section 11(6A) does not use the word “null and void” as recommendedCby the Law Commission. Thus, the legislature went one step further andconfined the examination to the “existence” of the arbitration agreement.

55. Now let us notice the language used in Sections 8,11 and 45of the Arbitration Act, 1996, all of which deal with the power of Courtsat the pre-arbitral stage.

D55.1. Section 8 of the Arbitration Act, 1996 titled “Power torefer parties to arbitration where there is an arbitration agreement” hasbeen amended in 2015 with the following language: “unless it findsthat prima facie no valid arbitration agreement exists”.

55.2. Section 45 in Part II titled “Power of judicial authority toErefer parties to arbitration” has also been amended and notified in2019. The amendment in Section 45 was made after the judgment ofthree judges in Shin Etsu(supra) where in case of internationalarbitration, the question before this Court was when an application underSection 45 is moved, is the Court required to pass prima facie findingFor final-finding based on the merits of the case, which would result ina full-fledged trial? In the majority opinion, it was held as under:“105. …the object of the Act would be defeated if proceedingsremain pending in the court even after commencing of thearbitration. It is precisely for this reason that I am inclined to theview that at the pre-reference stage contemplated by Section 45,Gthe court is required to take only prima facie view for makingthe reference, leaving the parties to full trial either before theArbitral Tribunal or before the court at the post-award stage”

55.3. Pursuant to Shin Etsu(Supra), the 2019 Amendment toSection 45 states: “…unless it prima facie finds that the saidH

agreement is null and void, inoperative or incapable of beingperformed”. Thus, from the above discussion it is clear that Section 8uses the word “validity” and Section 45 uses the phrase “null and void,inoperative or incapable of being performed”. In that sense, Section11(6A) is unique provision which is confined to the “existence” of thearbitration agreement and not its “validity”. The amended provision alsodoes not find place in the UNCITRAL Model Law. Learned AmicusCuriae pointed to the definition of confine in P. Ramanatha Aiyar’sAdvanced Law Lexicons[47] which states: “imprison; hold in custody.To keep within circumscribing limits”.

56. On reading the language in Section 11(6A) with Section 5 ofthe Arbitration Act 1996, and an interpretation based on legislativeintent, it is apparent that the scope under Section 11(6A) is very narrow.

iii) Post- 2019 Amendment and the Report of the High-LevelCommittee to Review the Institutionalisation of Arbitration Mechanismin India.

57. The Committee led by Justice Srikrishna[48] had recommendedfurther changes to the Arbitration Act, 1996. It had recommended forthe deletion of Section 11(6A) with the power of appointment ofarbitrators being left entirely to the arbitral institutions. Drawing inspirationfrom Singapore, Hong Kong, United Kingdom etc., the Committeerecommended that this would prevent further delays and set themomentum for institutional arbitration in India. Under the amendedSection 11(6), the appointment of arbitrators is to be done by the arbitralinstitution:

“…the appointment shall be made, on an application of the party,by the arbitral institution designated by the Supreme Court, in caseof international commercial arbitration, or by the High Court, incase of arbitrations other than international commercial arbitration,as the case may be.”

47 P. Ramanatha Aiyar, The Encyclopaedic Law Dictionary with Words and Phrases,Legal Maxims and Latin terms(5[th] Edition); P. 1037

48 Government of India, ‘Report of the High Level Committee to ReviewtheInstitutionalisation of Arbitration Mechanism in India (HLC Report, July 2017)Available at https://legalaffairs.gov.in/sites/default/files/Report-HLC.pdf<Last accessedon 19.3.2023>

A58. Insertion of Section 6(B) by Act 3 of 2016 which is yet tonotified reads as under:

“(6B) The designation of any person or institution by the SupremeCourt or, as the case may be, the High Court, for the purposes ofthis section shall not be regarded as delegation of judicialBpower by the Supreme Court or the High Court.]”

[emphasis supplied]

Even though the amendments are not notified yet and there islimited clarity on the process, we may take cue about the intention ofthe legislature which seems to be to ensure minimal judicial interventionat the pre-referral stage of appointment of arbitrator.

59. It would be apposite to refer now to the prevalent positionamongst the most-preferred arbitral institutions i.e. the InternationalChamber of Commerce Court (ICC Court), the London Court ofInternational Arbitration (LCIA), the Hong Kong InternationalDArbitration Centre (HKIAC), the Singapore International ArbitrationCentre (SIAC) and the Arbitration Institute of the StockholmChambers of Commerce (SCC) which were mentioned in the report ofthe High-level Committee and those can be broadly noted as under:-

1. ICC Arbitration Rules, 2021:

“Article 6. Effect of the Arbitration Agreement.—

(4) In all cases referred to the Court under Article 6(3)…Thearbitration shall proceed if and to the extent that the Courtis prima facie satisfied that an arbitration agreement underthe Rules may exist.

(5) In all matters decided by the Court under Article 6(4), anydecision as to the jurisdiction of the arbitral tribunal, except asto parties or claims with respect to which the Court decidesthat the arbitration cannot proceed, shall then be taken by thearbitral tribunal itself.”

2. HKIAC Arbitration Rules:

“Article 11 – HKIAC’s Prima Facie Power to Proceed

11.1 The arbitration shall proceed if and to the extent thatHKIAC is satisfied, prima facie, that an arbitration agreement

under these Procedures may exist. Any question as to thejurisdiction of the arbitral tribunal shall be decided bythe arbitral tribunal once constituted.

11.2 HKIAC’s decision pursuant to Article 11.1 is withoutprejudice to the admissibility or merits of any party’s pleas.”

3. LCIA Arbitration Rules:

“Article 23. Jurisdiction and Authority

23.1 The Arbitral Tribunal shall have the power to rule upon itsown jurisdiction and authority, including any objection to theinitial or continuing existence, validity, effectiveness or scopeof the Arbitration Agreement.”

4. SIAC International Arbitration Centre Rules, 2016:

“Article 28. Jurisdiction of the Tribunal

28.1 If any party objects to the existence or validity of thearbitration agreement or to the competence of SIAC toadminister an arbitration, before the Tribunal constituted, theRegistrar shall determine if such objection shall be referred tothe Court. If the Registrar so determines, the Court shall decideif it is prima facie satisfied that the arbitration shall proceed.The arbitration shall be terminated if the Court is not so satisfied.Any decision by the Registrar or the Court that the arbitrationshall proceed is without prejudice to the power of the Tribunalto rule on its own jurisdiction.

28.2 The Tribunal shall have the power to rule on its ownjurisdiction, including any objections with respect to the existence,validity or scope of the arbitration agreement. An arbitrationagreement which forms part of contract shall be treated asan agreement independent of the other terms of the contract.”

5. Arbitration Institute of SCC Rules:

“Article 11. Decisions by the Board

The Board takes decisions as provided under these Rules,including deciding:

(i) whether the SCC manifestly lacks jurisdiction over thedispute pursuant to Article 12 (i);

AArticle 12(i). Dismissal

The Board shall dismiss case, in whole or in part, if:

(i) the SCC manifestly lacks jurisdiction over the dispute;…”

60. Thus, the approach of the reputed arbitral institutions worldwideBwould show that there is express recognition of the principle ofKompetenz- Kompetenz and role of Courts is limited to preliminaryprima facie examination. reading of the above rules would also showthat arbitral institutions have recognized the prima- facie test to determinethe existence of the arbitration agreement. Discussing the rules of themajor international arbitral institutions, William Park in an article titledC“Challenging Arbitral Jurisdiction: The Role of Institutional Rules”[49]writes:

“ On occasion, however, arbitrations have been filed without evenminimal indicia of consent to the arbitral process. No documentseems to exist saying the respondent actually agreed to arbitrateDwith the claimant. In such instances, efficiency will be served byearly consideration of respondent’s argument that the case shouldnot proceed. To this end, the ICC Rules permit the ICC Court toconsider obvious jurisdictional defects, with arbitration goingforward only to the extent the ICC Court is prima facie satisfiedEthat an arbitration agreement may exist.”61. Thus, the objective behind the prima-facie test while referringa party to arbitration, is to also ensure that non-consenting party is notbound to the process of arbitration and the doctrine of party autonomy isupheld with minimal intervention of Courts.

F62. Chandrachud J.(as he then was) in the concurring opinion inA. Ayyasamy vs A. Paramasivam & Ors[50](for short “Ayyasamy”)noted, inter alia, that jurisprudence in India must strengthen institutionalefficacy of arbitration with minimal intervention of Courts:

“53. The Arbitration and Conciliation Act, 1996, should in my viewGbe interpreted so as to bring in line the principles underlying itsinterpretation in manner that is consistent with prevailingapproaches in the common law world. Jurisprudence in India must

49 Park, William. “Challenging Arbitral Jurisdiction: The Role of Institutional Rules”,Boston University School of Law, Public Law Research Paper (2015).H50 (2016) 10 SCC 386

evolve towards strengthening the institutional efficacy ofarbitration. Deference to forum chosen by parties as completeremedy for resolving all their claims is but part of that evolution.Minimising the intervention of courts is again recognitionof the same principle.”

[emphasis supplied]

63. It upheld the one-stop arbitration principle propounded by theHouse of Lords in Fiona Trust and Holding Corporation v.Privalov[51].

“46. In Fiona Trust and Holding Corpn. v. Privalov [FionaTrust and Holding Corpn. v. Privalov, (2007) 1 All ER (Comm)891 : 2007 Bus LR 686 (CA)] , the Court of Appeal emphasisedthe need to make fresh start in imparting business efficacy toarbitral agreements. The Court of Appeal held that : (Bus LR pp.695 H-696 & F, paras 17 & 19)

“17. … For our part we consider that the time has nowcome for line of some sort to be drawn and fresh startmade at any rate for cases arising in an internationalcommercial context. Ordinary businessmen would be surprisedat the nice distinctions drawn in the cases and the time takenup by argument in debating whether particular case fallswithin one set of words or another very similar set of words. Ifbusinessmen go to the trouble of agreeing that their disputesbe heard in the courts of particular country or by tribunal oftheir choice they do not expect (at any rate when they aremaking the contract in the first place) that time and expensewill be taken in lengthy argument about the nature of particularcauses of action and whether any particular cause of actioncomes within the meaning of the particular phrase they havechosen in their arbitration clause. If any businessman did wantto exclude disputes about the validity of contrAct, it wouldbe comparatively simple to say so.

19. One of the reasons given in the cases for liberalconstruction of an arbitration clause is the presumption in favour

of one-stop arbitration. It is not to be expected that anycommercial man would knowingly create system whichrequired that the court should first decide whether the contractshould be rectified or avoided or rescinded (as the case mightbe) and then, if the contract is held to be valid, required thearbitrator to resolve the issues that have arisen. This is indeeda powerful reason for liberal construction.”

Arbitration must provide one-stop forum for resolution ofdisputes. The Court of Appeal held that if arbitrators candecide whether contract is void for initial illegality, there isno reason why they should not decide whether contract isCprocured by bribery, just as much as they can decide whethera contract has been vitiated by misrepresentation or non-disclosure.

[Emphasis supplied]

64. Thus, the one-stop arbitration approach would ensure that allDissues on initial illegality or whether contract is void can be decided bythe arbitral institutions subject, of course, to the ultimate supervisoryjurisdiction of the Courts. An arbitral award can be set aside by Courtsas per the legislative mandate in Section 34 of the Arbitration Act,1996. This would prevent multiplicity of proceedings in Courts andtribunals and ensure minimal judicial intervention.E

H. Discussion on SMS Tea:

65. Having broadly discussed the legislative scheme of the StampAct, 1899 and the Arbitration Act, 1996, let us now examine thecorrectness of the decisions referred to in NN Global(supra).F66. The judicial position on the enforceability of an arbitration

F66. The judicial position on the enforceability of an arbitrationagreement contained in an unstamped or insufficiently stamped agreementcan be traced from this Court’s 2011 decision in SMS Tea (supra). Thefacts of the case were that the appellant was granted lease of two teaestates for term of 30 years. The leases deed contained an arbitrationclause. On abrupt eviction by the respondent from the tea estates, theGappellant filed an application under Section 11 of the Arbitration Act,1996 for the appointment of arbitrator. The learned Chief Justice ofGuwahati High Court dismissed the Section 11 application and held thatthe lease deed was compulsorily registrable under Section 17 of theRegistration Act, 1908 and Section 106 of the Transfer of PropertyHAct, 1882 ; and as the lease deed was not registered, even the arbitration

clause would be rendered invalid. The matter reached this Court whereone of the questions was whether an arbitration agreement in anunregistered instrument which is not duly stamped, is valid andenforceable. It was observed that the arbitration agreement in anunstamped or insufficiently stamped instrument is invalid, given thatSection 35 of the Stamp Act, 1899 expressly bars the authority beforewhich such unstamped or insufficiently stamped instrument is presentedto act on such an instrument. At this stage, it is important to keep in mindthat decision in SMS (supra)came at time when SBP (supra) andBoghara Polyfab (supra) continued to hold the field i.e. prior to theinsertion of Section 11(6A) to the Act. Thus, even at the Section 11stage, under the law which existed before the 2015 Amendment, theCourt had wide powers and could also conduct detailed adjudication.Even though this Court in SMS Tea(supra) succinctly recognized thedoctrine of separability in the context of Registration Act, 1908, it heldthat strict and mandatory provisions of the Stamp Act, 1899 on non-payment of Stamp duty could not be read harmoniously with the relevantprovisions of the Arbitration Act, 1996. It was held as under:

“22.1. The court should, before admitting any document intoevidence or acting upon such document, examine whether theinstrument/document is duly stamped and whether it is aninstrument which is compulsorily registerable.

22.2. If the document is found to be not duly stamped, Section 35of the Stamp Act bars the said document being acted upon.Consequently, even the arbitration clause therein cannot be actedupon. The court should then proceed to impound the documentunder Section 33 of the Stamp Act and follow the procedure underSections 35 and 38 of the Stamp Act.”

67. The judgment in SMS Tea(supra) has been upheld in NainaThakkar(supra) and Black Pearl Hotels v Planet M. Retail Ltd.[52](for short “Black Pearl Hotels”). It has also been cited with approval ina recent judgement by 3 judges of this Court in Dharmaratnakara (supra).As noted earlier, the Court in Garware (supra) also followed SMS Tea(supra) which has been cited with approval in Vidya Drolia (supra).This legal proposition is doubted by this Court in NN Global (supra) andreferred to us.

A68. Section 11(6A) as we have noted above begins with non-obstante clause viz. “notwithstanding any judgment, decree or order ofany Court” and effectively overrules all judgments which widened theambit of examination.

69. The first submission before us by Mr. Gagan Sanghi, learnedBCounsel for the Appellant on this aspect was that the observations oftwo different three- Judge Bench decisions in Dharmaratnakara (supra)and Black Pearl Hotels (supra) have not been considered in NNGlobal(supra) which is another three-judge bench and that this seriouslycalls into question the finding of NN Global(supra).

C70. It is significant to note here that the above two judgments didnot consider the recent 11(6A) Amendment. Black Pearl Hotels(supra)was delivered pre-11(6A) and hence stands legislatively overruled. InDharmaratnakara (supra), it appears that the amendment to Section11(6A) was not brought to the notice of the Court and the earlier judgmentin Garware(supra) was not considered. This could also be because theDCourt considered the order which was passed prior to introduction ofSection 11(6A). In Dharmaratnakara (supra), the issue before theCourt was whether document executed between parties was leasedeed or an “agreement to lease”, and whether arbitration could be invokedunder the said document. Even after determination by the RegistrarE(Judicial) of the Karnataka High Court that the concerned documentwas lease deed, the deficit stamp duty was not paid. The Court reliedon SMS Tea(supra), to hold that the arbitration agreement could not beacted upon, unless stamp duty is paid.

71. From the discussion above, it is clear that DharmaratnakaraF(supra) does not lay down the correct position in light of the post-2015amendment regime. Through the Amending Act, SMS Tea (supra) standslegislatively overruled.

72.The correct exposition of law after the insertion of Section11(6A) is to be found in Duro Felguera, S.A. v. Gangavaram PortGLtd[53] (for short “Duro Felguera”) where it was held that, ”(a)fter the(2015) amendment, all that the courts need to see is whether anarbitration agreement exists—nothing more, nothing less. Thelegislative policy and purpose is essentially to minimise the Court’sintervention at the stage of appointing the arbitrator and this

H53 (2017) 9 SCC 729

intention as incorporated in Section 11(6-A) ought to be respected.”This has been re-affirmed by 3-judge bench in Mayavati TradingPrivate Limited v. Pradyuat Deb Burman[54]where it was held as under:

“10. This being the position, it is clear that the law prior to the2015 Amendment that has been laid down by this Court, whichwould have included going into whether accord and satisfactionhas taken place, has now been legislatively overruled. This beingthe position, it is difficult to agree with the reasoning contained inthe aforesaid judgment as Section 11(6A) is confined to the 15examination of the existence of an arbitration agreement and is tobe understood in the narrow sense as has been laid down in thejudgment Duro Felguera, S.A. (supra) – see paras 48 & 59.”73. The following extract from Pravin Electricals (P) Ltd. v.Galaxy Infra & Engg. (P) Ltd.[55]is equally pertinent where the Courtinterpreted Section 11 (6A) to conclusively hold that Section 11 judgecannot conduct mini-trial at that stage:

“29. The facts of this case remind one of Alice in Wonderland. InChapter II of Lewis Caroll’s classic, after little Alice had gonedown the Rabbit hole, she exclaims “Curiouser and curiouser!”and Lewis Caroll states “(she was so much surprised, that for themoment she quite forgot how to speak good English)”. This is acase which eminently cries for the truth to come out between theparties through documentary evidence and cross-examination.Large pieces of the jigsaw puzzle that forms the documentaryevidence between the parties in this case remained unfilled. Theemails dated 22nd July, 2014 and 25th July, 2014 produced herefor the first time as well as certain correspondence betweenSBPDCL and the Respondent do show that there is some dealingbetween the Appellant and the Respondent qua tender floatedby SBPDCL, but that is not sufficient to conclude that there is aconcluded contract between the parties, which contains anarbitration clause. Given the inconclusive nature of the finding byCFSL together with the signing of the agreement in Haryana byparties whose registered offices are at Bombay and Bihar quaworks to be executed in Bihar; given the fact that the Notary who

54 (2019) 8 SCC 714

55 (2021) 5 SCC 671

EFG

Asigned the agreement was not authorised to do so and variousother conundrums that arise on the facts of this case, it is unsafeto conclude, one way or the other, that an arbitration agreementexists between the parties. The prima facie review spoken of inVidya Drolia (supra) can lead to only one conclusion on thefacts of this case - that deeper consideration of whether anBarbitration agreement exists between the parties must be leftto an Arbitrator who is to examine the documentary evidenceproduced before him in detail after witnesses are cross-examined on the same. For all these reasons, we set aside theimpugned judgment of the Delhi High Court in so far as itCconclusively finds that there is an Arbitration Agreement betweenthe parties.”

[emphasis supplied]

74. At this point, it would suffice to note that the Court in SMSTea(supra) held that an arbitral agreement would be renderedDinadmissible in evidence if the underlying contract is not stamped. Itdid not, however, state that an unstamped arbitration agreement wouldbe rendered voidas held in Garware(supra) in the later decision. WhileSMS Tea(supra) extended the separability presumption in the context ofthe Registration Act, 1908 we will notice below that this presumptionEcan also be extended in the context of Stamp Act, 1899 throughharmonious construction.

I. Discussion on Garware

75. The facts in Garware(supra) were that sub-contrAct, forthe installation of geo-textile tubes embankment with toe mound at villageFPentha in Odisha, was provided by the employer for prevention fromcoastal erosion. Owing to disputes between parties, the sub-contractwas terminated. The Respondent filed petition under Section 11 whichwas allowed by the Bombay High Court and sole arbitrator was appointed.On appeal, this Court primarily relied on SMS Tea(supra) to hold thatGthe arbitration agreement in an unstamped document cannot be actedupon and hence, an arbitrator could not be appointed until the unstampedagreement in question was impounded. Despite considering the amendedSection 11(6A) and the 246[th] LCI Report(supra) to note that SBP(supra)and Boghara(supra) have been overruled, the Court held that “SMSTea Estates ha(d), in no manner, been touched by the amendment of

Section 11(6-A)” since it was not excluded by either the 246[th] LCIReport(supra) or the Statement of Object and Reasons of the 2015Amendment. It was further held that as per Section 2(h) of the IndianContract Act1872, an agreement becomes contract only if it isenforceable by law and hence, an unstamped document would beunenforceable due to the bar under Section 35 of the Stamp Act, 1899.The following paragraph has been doubted by NN Global(supra):

“22. When an arbitration clause is contained “in contract”, it issignificant that the agreement only becomes contract if it isenforceable by law. We have seen how, under the Stamp Act, anagreement does not become contrAct, namely, that it is notenforceable in law, unless it is duly stamped. Therefore, even aplain reading of Section 11(6-A), when read with Section 7(2) ofthe 1996 Act and Section 2(h) of the Contract Act, would make itclear that an arbitration clause in an agreement would not existwhen it is not enforceable by law. This is also an indicator thatSMS Tea Estates has, in no manner, been touched by theamendment of Section 11(6-A).”

76. The above proposition of law in Garware(supra) appears tobe incorrect. As noted earlier, the judgment in SMS Tea(supra) standslegislatively overruled as it was delivered in the pre-2015 amendmentregime. Even though there is no express mention in the 246[th] LCI Report(supra), the non-obstante clause effectively overrules it.

77. Now let us consider Section 2(g) and 2(h) of the IndianContract Act, 1872 which read as under:

“(g) An agreement not enforceable by law is said to be void;

(h) An agreement enforceable by law is contract;”

Incorporating the principle in Garware(supra) would mean thatas per Section 2(g) and (h) of the Contract Act, 1872, an agreementwould be rendered void-ab-initio, if it is not stamped. This wouldhowever be contrary to the legislative scheme of the Stamp Act, 1899as per which non-stamping/insufficient stamping is curable defect asdiscussed earlier. Moreover, stamp duty is levied on the instrument andnot the transaction.[56]

56 Board of Revenue v N. Narasimhan AIR 1961 Mad 504; A. Bapiraju v DistrictRegistrar AIR 1968 AP 142

A77.1. In Gulzari Lal Malwari v Ram Gopal[57 ]Lord Williams Jwhile discussing Section 35 of the Stamp Act, 1899 noted that there isno provision in the Stamp Act, 1899 which renders document invalid:

“There is clear distinction to be drawn between invalidity andinadmissibility of documents. Certain statutes and sections renderBdocuments invalid if they are not stamped. No section of theIndian Stamp Act has this effect but an instance of documentbeing rendered invalid by the omission of stamps is containedin the English Stamp Act, s. 93, which provides:—

contract for sea insurance (other than such insurance as isCreferred to, in the fifty-fifth section of the Merchant ShippingAct, Amendment Act, 1862) shall not be valid unless the sameis expressed in policy of sea insurance”

[emphasis supplied]

77.2. Moreover, the language of Section 11(6A) confines the scopeDof enquiry to only “existence.” and not even whether contract is nulland void, as recommended by the 246[th] LCI Report(supra). The questionon validity and existence can be gone into by the arbitrator under Section16 of the Arbitration Act, 1996 and not by the Court under Section 11of the Arbitration Act, 1996.

EJ. Interplay between the Stamp Act 1899, Contract Act 1872 andthe Arbitration Act, 1996

i) Arbitration Act, 1996 is special legislation

78. In order to understand the interplay between the three Acts,reference to the relevant provisions is necessary.F

i) Stamp Act, 1899:

The residuary entry in Article 5(c) of Schedule I of the IndianStamp Act, 1899 with the title “Agreements” as noted earlier, states “ifnot otherwise provided for” which, as held by us, brings under itsambit even an Arbitration Agreement.G

Now, Instrument is defined under Section 2(14) as under:

“(14) ”Instrument” includes every document by which any rightor liability is, or purports to be, created, transferred, limited,extended, extinguished or record.”

H57 AIR 1937 Cal 765

Section 17 provides for the timing of stamping:

“ Instruments executed in India.—All instrument chargeablewith duty and executed by any person in [India] shall bestamped before or at the time of execution.”

“Execution” is defined in Section 2(12):

“Executed” or “Execution” used with reference to instruments,

mean “signed” and “signature”

ii) Indian Contract Act, 1872:

An agreement under the Indian Contract Act, 1872 is definedin Section 2(e) as under:

“Every promise and every set of promises, forming theconsideration for each other, is an agreement”.

Sections 2(g), 2(h) and 2(j) and Section 10 of the Indian ContractAct, 1872 state:

“(g) An agreement not enforceable by law is said to be void;

(h) An agreement enforceable by law is contract;”

(j) contract which ceases to be enforceable by law becomesvoid when it ceases to be enforceable

(10) All agreements are contracts if they are made by the freeconsent of parties competent to contrAct, for lawfulconsideration and with lawful object, and are not herebyexpressly declared to be void.

iii) Arbitration Act, 1996:

Section 2(b) provides as under:

“(b) arbitration agreement” means an agreement referred toin section 7"

Let us now consider Section 7 of the Arbitration Act, 1996which specifically defines Arbitration agreement:

“7 Arbitration agreement. —

(1) In this Part, “arbitration agreement” means an agreement bythe parties to submit to arbitration all or certain disputes which

Ahave arisen or which may arise between them in respect of adefined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitrationclause in contract or in the form of separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in—

(a) document signed by the parties;

(b) an exchange of letters, telex, telegrams or [any otherelectronic means] other means of telecommunication whichCprovide record of the agreement; or

(c) an exchange of statements of claim and defence in whichthe existence of the agreement is alleged by one party and notdenied by the other.

(5) The reference in contract to document containing anDarbitration clause constitutes an arbitration agreement if thecontract is in writing and the reference is such as to make thatarbitration clause part of the contract.”

[emphasis supplied]

E78.1. The following conclusions can be drawn from consolidatedreading of the above provisions in the three enactments:

i)There are no specific requirements in Section 7 of theArbitration Act, 1996 or any other provision in theArbitration Act, 1996 as whole, which provide forFnecessary stamping for validity of an arbitration agreementor elaborate generally on the same.

ii)Even though Section 10 of the Indian Contract Act, 1872recognises oral agreements, written agreement is sine-qua-non for valid arbitration agreement.

Giii)“Signing” is just an example of one of the conditions thatmay satisfy the form of an arbitration agreement. Thus, themandatory requirement of signature is ruled out for anarbitration agreement in Section 7 of the Arbitration Act,1996. Since Section 7(2)(c) of the Arbitration Act, 1996recognises even exchange of claim and defence as written

arbitration agreements, there is no signing requirement. Evenif written arbitration agreement is not signed, the partiescan still be bound to an arbitration agreement[58]. However,Section 17 of the Stamp Act, 1899 provides for the timingof stamping i.e. before or at the time of execution and theterm “execution” is defined in the Stamp Act, 1899 to mean“signature”

iv)Even though arbitral “awards” are liable to stamp duty underItem 12 of the Stamp Act, 1899 and are specificallymentioned in Schedule I ; the arbitration agreement for thepurpose of stamp duty, gets covered only under theresiduary entry viz “if not otherwise provided for” inArticle 5(c). The Stamp Act, 1899 does not specificallyrefer to an arbitration agreement.

v)As per Section 7 of the Arbitration Act, 1996, ArbitrationAgreement can even be non-contractual.

vi)Section 7(4)(c) of Arbitration Act, 1996 envisages thatthe scope of arbitration is not limited to the dispute initiallyreferred to arbitration, but also encompasses any disputesthat are included in the pleadings of the parties i.e. statementof claim and defence.

78.2 The Appointment Of Arbitrators By The Chief Justice OfIndia Scheme, 1996 provides inter alia for the original or certifiedcopy of the “arbitration agreement” for Section 11(6) application. Icompletely agree with the opinion of my Learned Brother, Justice K.M.Joseph that an arbitration agreement has to comply with the indispensablerequirements under the Contract Act, 1872 such as competency tocontract and presence of sound mind. However, when it comes to“formal” validity which could include requirements of signature, stamps,seals; I’m unable to concur that the evidentiary bar under Section 35 ofthe Stamp Act, 1899 should be juxtaposed with Section 2(g) and (2h)of the Contract Act, 1872 to make the agreement “void”. For example,as per Section 10 of the Contract Act, 1872, even oral agreements are

58 Chennai Container Terminal Pvt Ltd v. Union of India, 2007 3 Arb LR 218 (Mad),Fisser v. International Bank, 282 F.2d 231, 233 (2d Cir 1960), Travancore DevaswomBoard v. Panchamy Pack, 2004 13 SCC 510; Also see, David St. John Sutton, JudithGill and Matthew Gearing, Russell on Arbitration(24[th] Edition); P. 49

Avalid but as per the “form” of arbitration agreement provided in Section7 of Arbitration Act, 1996, it has to necessarily be in writing. Anotherpoint worth noting is that if an arbitration agreement can be for example,even non-contractual and does not necessarily require signature, howfar the general provisions of Stamp Act, 1899 and the Contract Act,1872 can apply to prove “formal” validity of an arbitration agreementBproduced under Section 11(6) of the Arbitration Act, 1996? Section 2(h)of the Contract Act, 1872 states that an agreement enforceable by lawis contract but plain reading of Section 7 of the Arbitration Act,1996 may also prove that an “arbitration agreement” can be non-contractual. This is not to say that the provisions of the Contract Act,C1872 or Stamp Act, 1899 would not apply. As rightly held in VidyaDrolia(supra) and noted by my Learned Brother Justice K.M. Joseph,pre-conditions to formation of contract under the Contract Act, 1872must be met which includes free consent of the parties, absence offraud and misrepresentation etc. However, in my view, in this reference,we are concerned with formal requirement. The point being that whenDa special law provides for the specific requirements for the “formal”validity of an arbitration agreement, it cannot be rendered void by ageneral law. An Arbitration agreement has special attributes[59] and is nota conventional agreement in that sense. Moreover, none of the provisionsof the Stamp Act, 1899 would lead us to the conclusion that an arbitration

Eagreement would be invalid/void-ab-initio when it is not stamped. Thus,the conclusion in Garware(supra) that an unstamped agreement wouldbe rendered void is not only inconsistent with Section 7 of the ArbitrationAct, 1996 but also the Stamp Act, 1899 as per which document canat most, be rendered inadmissible in evidence.F78.3 In the context of Arbitration Act, 1996 being Special law,CR Datta’s treatise titled Law Relating to Commercial & DomesticArbitration[60 ]notes:

“The Act of 1996 is special Act and Central Act which providesthat this Act will prevail over any other law so far as the mattersGgoverned by this Act are concerned. The Authority of the Law

59 O.P. Malhotra and Indu Malhotra, The Law and Practice of Arbitration andConciliation, Lexis Nexis,2[nd] Edition; P. 270

60 CR Datta, Law Relating to Commercial and Domestic Arbitration(Along with ADR)P. 98; Union of India v Popular Construction Co 2001 (8) SCC 470; United IndiaHInsurance Co. Ltd. V Kumar Texturisers AIR 1999 Bom 118

Courts has been curtailed. The Courts cannot intervene in anymanner dealt with by Part I of this Act unless specificallyempowered to do so. judicial authority may intervene or exerciseits powers to the extent specified in Sections 8, 9, 11, 13, 14, 16,1727, 34, 36, 37, 42, 43, 45, 50, 54, 58, 59, 70, 74, 77, 81 and 82 ofthe Act. See Union of India v Popular Construction Co. 2001 8SCC 470, United India Insurance Companty v Kumar TexturisersAIR 1999 Bom 118) Section 5 restrains the Courts from interferingwith the process of arbitration except in the manner provided inthe 1996. CDC Financial Services (Mauritius) Ltd v BPICommunications Ltd. 2005 (Supp.) Arb LR 558(SC)”

[Emphasis supplied]

78.4 At the cost of repetition, let us now refer to Section 5 of theArbitration Act, 1996 to understand the special nature of the Act. Asnoted above, Arbitration Act, 1996 is special legislation and Section5 begins with non-obstante clause which overrides powers of judicialauthorities acting under any other law other than the Arbitration Act,1996. As argued by the learned Counsel for the Intervenor, DebeshPanda, the special nature of the Act is also established from the non-obstante clause in Section 5 of the Arbitration Act, 1996. On theArbitration Act being self-contained code, Justice Indu Malhotra[61],comments as under:

“The Arbitration and Conciliation Act, 1996 is self-containedcode governing the law relating to Arbitration, including Section 5which gives it an overriding effect over statutes. Once it is heldthat the 1996 Act is self-contained code and is exhaustive, itcarries with it the negative import that only such acts which arepermissible in the statute may be done, and none others.”

78.5 The use of the expression “so provided” in Section 5,disregards all forms of intervention except that, which is specified inPart I. Such intention is apparent from the language of the non-obstanteclause. As noted earlier, this provision is yet another instance whereParliament went step beyond the language employed in the UNCITRALModel Law of 1985.

78.6 The doctrine of generalia specialibus non derogant i.e.general law will yield to the special law is well-established in Indian

61 Justice Indu Malhotra, Commentary on the Law of Arbitration, Vol. I, 4th Ed., P. 248

Ajurisprudence. In the concurring opinion of Chandrachud DY J. (as hethen was) in Ayyasamy(supra) on Section 8 of the Arbitration Act,1996, it was noted:

“44. ….Once an application in due compliance of Section 8 ofthe Arbitration Act is filed, the approach of the civil court shouldBbe not to see whether the court has jurisdiction. It should be tosee whether its jurisdiction has been ousted. There is lot ofdifference between the two approaches. Once it is brought to thenotice of the court that its jurisdiction has been taken away interms of the procedure prescribed under special statute, thecivil court should first see whether there is ouster of jurisdiction inCterms or compliance of the procedure under the special statute.The general law should yield to the special law - generaliaspecialibus non derogant. In such situation, the approach shallnot be to see whether there is still jurisdiction in the civil courtunder the general law. Such approaches would only delay theDresolution of disputes and complicate the redressal of grievancesand of course unnecessarily increase the pendency in the court.”

78.7 Having noted that the Arbitration Act, 1996 is speciallegislation, and that general law should yield to special law, let us nowexamine the principle of harmonious construction for the purpose of thisreference.E

ii) Harmonious Construction

79. It would be apposite to refer to the application of principle ofharmonious construction as explained by Kasliwal, J. while expressinghis partial dissent in St. Stephen’s College v. University of Delhi[62] :F“140. … The golden rule of interpretation is that words should beread in the ordinary, natural and grammatical meaning and theprinciple of harmonious construction merely applies the rule thatwhere there is general provision of law dealing with subject,and special provision dealing with the same subject, the specialprevails over the general. If it is not constructed in that way theGresult would be that the special provision would be wholly defeated.The House of Lords observed in Warburton v. Loveland [(1831)2 Dow & Cl 480 : 6 ER 806 : (1824-34) All ER Rep 589 (HL)] asunder: (ER p. 814)

‘No rule of construction can require that, when the words ofone part of statute convey clear meaning … it shall benecessary to introduce another part of the statute whichspeaks with less perspicuity, and of which the words may becapable of such construction, as by possibility to diminishthe efficacy of the [first part][63].’

[emphasis supplied]

79.1. On harmonious reading of the inconsistencies in theprovisions of the three different Acts quoted earlier, we find that thegeneral law must yield to the special law in the sense, that an arbitrationagreement cannot be rendered void on insufficient stamping by generallaw, especially when none of the provisions of the Arbitration Act, 1996which is special Act provide for stamping. The requirement for the“formal” validity of an arbitration agreement under Section 7 of theArbitration Act, 1996 would take precedence, considering the specialnature of the Act and the principle of minimal judicial intervention. Applyingthe rule of construction that in cases of conflict between specific lawand general law, the specific law prevails and the general law like theContract Act, 1872 applies only to such cases which are not coveredby the special law; I therefore, hold that Section 2(e), 2(g), 2(h) of theContract Act, 1872 cannot override Section 7contained in the speciallaw i.e. the Arbitration Act, 1996 when it comes to formal validity.

79.2. Moreover, when the words of the statute in Section 11 ofthe Arbitration Act,1996 do not mention “validity” or even “inoperableand incapable of being performed” as mentioned in Section 45 ofthe Arbitration Act, 1996 or “prima facie no valid arbitrationagreement” in Section 8 of the Arbitration Act, 1996, it must beunderstood that the general words in different statute such as theContract Act, 1872 cannot override the specific words used in the speciallaw. That is to say, that an arbitration agreement cannot be rendered“void” on insufficient stamping by Section 11 judge when the scope of

63 Anandji Haridas and Co. (P) Ltd. v. S.P. Kasture [AIR 1968 SC 565 : (1968) 1 SCR661] , Patna Improvement Trust v. Lakshmi Devi [AIR 1963 SC 1077 : 1963 Supp (2)SCR 812] , Ethiopian Airlines v. Ganesh Narain Saboo [(2011) 8 SCC 539 : (2011) 4SCC (Civ) 217] , Usmanbhai Dawoodbhai Memon v. State of Gujarat [(1988) 2 SCC271 : 1988 SCC (Cri) 318] , South India Corpn. (P) Ltd. v. Board of Revenue [AIR1964 SC 207 : (1964) 4 SCR 280] , Maharashtra State Board of Secondary and HigherSecondary Education v. Paritosh Bhupeshkumar Sheth [(1984) 4 SCC 27]

Aexamination is only limited to the “existence” of the arbitration agreementand not “validity”.

79.3. Coming back to the evidentiary bar under Section 35 of theStamp Act, 1899 it is important to understand that since the scope of aSection 11 judge is limited, the court cannot receive evidence in suchBcases. Before the 2015 Amendment to the Arbitration Act, 1996, asper the position laid down in SBP(supra), the Chief Justice had widepowers to receive evidence, including affidavits, and get evidencerecorded at the stage of appointment of arbitrator. Under the amendedSection 11, as noted before, the scope is “confined” to the examinationof the “existence” of the arbitration agreement. Thus, post-amendment,Cit can most certainly not admit evidence. Section 11 Court is “not anauthority to receive evidence” as provided in Section 35 of the StampAct, 1899. Moreover, it is an undisputed position that Section 35 of theArbitration Act, 1996 does not preclude an arbitrator to impound oradmit evidence. It states “any person having by law or consent of parties,Dauthority to receive evidence.” Thus, the statutory bar under Section35 of the Stamp Act, 1899 would not apply when document is producedat the stage of Section 11 proceeding of the Arbitration Act, 1996.79.4. It is essential to interpret the special law in way that giveseffect to its specific provisions, while also ensuring that it is consistentEwith the general law to the extent possible. Impounding at the stage ofSection 11 would stall arbitral proceedings right at the outset becauseof the statutory bar under Section 35 of the Stamp Act, 1899. One wayto harmonise Section 35 of Stamp Act, 1899 and Section 11 of theArbitration Act, 1996 is for the Section 11 judge to defer necessarystamping and impounding to the arbitrator/collector, as applicable. plainFreading of Section 35 of the Stamp Act, 1899 makes it clear that it doesnot preclude an Arbitrator or Collector to impound the unstamped/insufficiently stamped document.

79.5. In this context, even if we are to assume that the StampAct, 1899 is substantive law, the view taken by us is not intended toGundermine the Stamp Act, 1899 in any substantial way. This is becausethe primary objective being revenue generation, could still be achievedeven if the collection of stamp duty is deferred to the arbitrator and notat the stage of judge referring the matter for arbitration. Additionally, ifsuch contention is raised before the referring judge, she/he can alsoHcaution the arbitrator on the aspect of no/deficient stamp duty on the

concerned instrument. Such course will also protect the interest of therevenue and the substantive law.

K. Implication of changing nature of transaction and the advent of thetechnology

80. As we are proceeding on the basis that an arbitrationagreement is liable to stamp duty, this Court cannot also be oblivious ofthe technological advancements as commercial transactions are goingbeyond pen and paper agreements. The 2015 amendment to Section 7of the Arbitration Act, 1996 which defines arbitration agreementrecognizes electronic communication, bringing the process in conformitywith Article 7 of the UNCITRAL Model law which was amended in2006. It modernized and broadened the form of arbitration agreement toconform with international contract practices. The exchange of letters,telex, telegrams or other means of telecommunication includingcommunication through electronic means which provide record ofthe agreement are now recognized as valid arbitration agreement.

80.1. Dr. Peter Binder in International Commercial Arbitrationand Mediation in UNCITRAL Model Law Jurisdictions[64 ]notes:

“The wording in “exchange of letters,telex, telegrams or othermeans of telecommunication” indicates Model law’s flexibilitytowards future means of communication by being geared solelyat the “record of the agreement” rather than the strict directsignature of the agreement. Incidentally, Article 5(Section III)of the Montreal Protocol No. 4 to the Warsaw Convention whichconcerns the formal requirements of an air waybill, provided theimpetus for the wording “Any other means which would preservea record of the carriage to be performed may, with the consent ofthe consigner, be substituted for the delivery of an air waybill.”The Protocol specifically had electronic means of communicationin mind, as the aviation industry was among the first to use thistechnology in business.”

[emphasis supplied]

80.2. What logically follows from the above is that the traditionallaws must not render these new forms of agreements unenforceable oninsufficient stamping. Recently, the Stockholding Corporation of India

ALtd. has been authorised to provide e-stamp services, which allows forthe payment of stamp duties for some Indian States. The Indian StampAct (Collection of Stamp-Duty Through Stock Exchanges, ClearingCorporations and Depositories) Rules 2019 as amended through theFinance Act, 2021 has been brought about to build pan-India securitiesmarket and to enhance revenue. It amended the definition of “execution”Bto include signature even in electronic form.80.3. However, the definition of “duly stamped” in Section 2(11)of the Stamp Act, 1899 remains unchanged:“‘Duly Stamped’ as applied to an instrument means that theCinstrument bears an adhesive or impressed stamp of not lessthan the proper amount and that such stamp has been affixed orused in accordance with the law for time being in force.”

[emphasis supplied]

80.4. The penalty for an instrument which is not “duly stamped”Dis provided in Section 62 of the Stamp Act, 1899. In this discussion, wemust be conscious that the Stamp Act, 1899 was enacted nearly 125years ago and the lawmakers could not have contemplated the march oflaw and the myriad issues which would crop up through the advent oftechnology and also the new enactments such as the Arbitration Act,E1996. The legal framework pertaining to e-contracts is still at nascentstage in India.

80.5. Richard Susskind in his book[65], “The End of Lawyers?Rethinking the Nature of Legal Services,” suggests that newtechnologies and processes, such as artificial intelligence and blockchain,Fmay be able to simplify and streamline the arbitration process in thefuture. We now have the phenomenon of smart contracts and metaversein the sphere of commercial transactions where technology and artificialintelligence are integrated. The developments in the legal frameworkmust attune to such developing trends in technology and be conscious oftheir implications today and for the future.

80.6. Noticing the emerging trends, the Chief Justice of India in arecent conference observed[66] that legal professionals across the globe

65 Richard Susskind, The End of Lawyers? Rethinking the Nature of Legal Services,Oxford University Press, 2010

66 Dr D.Y. Chandrachud, International Conference: Arbitration in the Era of GlobalizationH(4th Edn., Dubai, 19-3-2022).

are recommending smart contract arbitration. Describing smart contractsand how arbitration can be used to resolve disputes, Chief Justice DYChandrachud commented:

“Technology and artificial intelligence are integrated intocommercial transactions. One such example of integration oftechnology and contracts is smart contrAct, where the termsand conditions of the contract are encoded. breach in the termsof the contract would automatically enforce the contract.

80.7. Modern arbitration law focuses on substance over form[67].Learned Counsel, Mr. Ramakanth Reddy appearing for Respondent No.1, referred to judgment delivered in 2008 in Great Offshore Ltd. v.Iranian Offshore Engineering and Construction Company[68] wherethe Court speaking through Dalveer Bhandari J. held as under:

“59. The court has to translate the legislative intention especiallywhen viewed in light of one of the Act’s “main objectives”: “tominimise the supervisory role of Courts in the arbitral process.[See: Statements of Objects and Reasons of Section 4(v] of theAct].If this Court adds number of extra requirements suchas stamps, seals and originals, we would be enhancing ourrole, not minimising it. Moreover, the cost of doing business wouldincrease. It takes time to implement such formalities. What iseven more worrisome is that the parties’ intention to arbitratewould be foiled by formality. Such stance would run counter tothe very idea of arbitration, wherein tribunals all over the worldgenerally bend over backwards to ensure that the parties’ intentionto arbitrate is upheld. Adding technicalities disturbs the parties’“autonomy of the will” (l’ autonomie de la volonti), i.e., theirwishes. [For general discussion on this doctrine see Lawand Practice of International Commercial Arbitration, Alan Redfernand Martin Hunter, Street & Maxwell, London, 1986 at pages 4and 53].

60. Technicalities like stamps, seals and even signatures arered tape that have to be removed before the parties can getwhat they really want - an efficient, effective and potentiallycheap resolution of their dispute. The autonomie de la volonti

67 Supra at Note 59; P. 274

68 (2008) 14 SCC 240

Adoctrine is enshrined in the policy objectives of the United NationsCommission on International Trade Law (“UNCITRAL”) ModelLaw on International Commercial Arbitration, 1985, on whichour Arbitration Actis based. [See Preamble to the Act]. Thecourts must implement legislative intention. It would beimproper and undesirable for the courts to add number ofBextra formalities not envisaged by the legislation. The courtsdirections should be to achieve the legislative intention.”

[emphasis supplied]

80.8 Relying on the above case, in Trimex International FZE vsCVedanta Aluminum Limited, India[69], this Court held that theimplementation of contract cannot be affected merely because offerand acceptance was made via email.

80.9 In the context of the evolving law, it is important to observethat although an arbitration agreement is liable to stamp duty under theDresiduary entry, the technicality of stamping places hurdles in ensuringefficiency and efficacy in arbitration proceedings. An arbitrationagreement does not even mandatorily require signature for it to be validas per Section 7 of the Arbitration Act, 1996. The Stamp Act, 1899 isrooted in the past and does not take into account the changing nature oftransactions and enactments such as the Arbitration Act, 1996. This isEan aspect which would require the attention of the legislature.

J. Doctrine of Separability

81. It appears that the Court in Garware(supra) rejected theconcept of separability when it held:

F“15. …..it is difficult to accede to the argument made by the learnedcounsel on behalf of the respondent that Section 16 makes it clearthat an arbitration agreement has an independent existence of itsown, and must be applied while deciding an applicationunder Section 11 of the 1996 Act.”

G81.1. Historically, an arbitration agreement was treated as anaccessory to the main contract[70]. Even if the main contract was foundto be invalid or unenforceable, the arbitration agreement contained

69 2010 (1) SCALE 57470 Gary B. Born, International Commercial Arbitration (3rd ed., Kluwer Law InternationalH2014) P. 380

therein was also considered void[71]. This diminished the effectivenessof arbitration as dispute resolution mechanism since it made theenforceability of arbitration agreements dependent on the validity ofthe underlying contract. Arbitration clauses are uniformly regarded inalmost every jurisdiction as separate from and not “an integral part” ofthe parties’ underlying contract. It is regarded as general principlereflected in International Arbitration Conventions, national arbitrationlegislations, judicial decisions, institutional arbitration rules and arbitralawards[72]. The early statutory recognition of the separability doctrinehas also been recognized in United States with the separabilitypresumption being matter of substantive federal arbitration law.[73]Even in English law, the principle of separability stands codified underSection 7 of the English Arbitration Act, 1996. It has been identifiedas one of the cornerstones of arbitration in multiple jurisdictions.

81.2 The argument advanced by the learned Counsel, Gagan Sanghifor the Appellants that the doctrine of separability is legal fiction, shouldnot be accepted in light of the well-established jurisprudence in India asthis doctrine has been consistently upheld by this Court[74]. Moreover, itstands codified in Section 16(1) of the Arbitration Act, 1996 whichreads as under:

“16(1) The arbitral tribunal may rule on its own jurisdiction,including ruling on any objections with respect to the existence orvalidity of the arbitration agreement, and for that purpose, –

(i)an arbitration clause which forms part of contract shallbe treated as an agreement independent of the other termsof the contract; and

(ii)a decision by the arbitral tribunal that the contract is nulland void shall not entail ipso jure the invalidity of thearbitration clause.”

71 Union of India v Kishorilal Gupta & Bros (1959) 1 SCR 493

72 Supra at note 70; Page 379-380.

73 Buckeye Check Cashing Inc. v. Cardegna, 2006 SCC OnLine US SC 14

74 National Agricultural Co-operative Marketing federation India Ltd. v Gains TradingLimited (2007) 5 SCC 692; Naihati Jute Mills Ltd. v Khayaliram Jagannath AIR 1968SC 522; P Manohar Reddy & Bros. v. Maharashtra Krishna Valley DevelopmentCorporation & Ors (2009) 2 SCC 494

ABC

A81.3This Court in NN Global(supra) discussed judgments inUS,UK and France, noting the importance of this principle in modernand contemporary arbitral jurisprudence:

“4. It is well settled in arbitration jurisprudence that an arbitrationagreement is distinct and separate agreement, which isBindependent from the substantive commercial contract in which itis embedded. This is based on the premise that when parties enterinto commercial contract containing an arbitration clause, theyare entering into two separate agreements viz. (i) the substantivecontract which contains the rights and obligations of the partiesarising from the commercial transaction; and, (ii) the arbitrationCagreement which contains the binding obligation of the parties toresolve their disputes through the mode of arbitration.”

81.4 My learned Brother, Justice K.M. Joseph in the majorityDopinion notes that the entire basis of the reference stands removed sincewe are proceeding on the basis that even standalone arbitrationagreement is liable to stamp duty. His opinion that the objective behindthe principle of treating an arbitration agreement as separate agreementis to create mechanism, wherein, the arbitral agreement survives theContract so that the disputes falling within the Arbitration AgreementEcan be resolved, is correct. But I’m unable to agree with the propositionthat is canvassed that since an arbitration agreement is liable to stampduty, the separability presumption doesn’t take us further in this case.Let me set out the reason for my disinclination to accept such proposition.

81.5 As earlier stated in this opinion, the separability doctrineFprotects the arbitration clause even if the validity of the main contract isattacked. Therefore, if an arbitration agreement remains unaffected evenif the main contract is null/void on issues of fraud or misrepresentation,it should not logically render an arbitration agreement, void on atechnicality/formality, like stamping. The underlying rationale behind theGprinciple of separability would then be made nugatory. The idea that anarbitration agreement is separate and independent with its own validityrequirements, is to ensure that there is no hindrance to the enforceabilityof an arbitration agreement. This doctrine is also important to reducecircumstances in which the arbitral process may be halted/delayed. InHSMS Tea(supra), it was noted that the doctrine of separability can extendto an unregistered document, but not to an unstamped document as thebar under Section 35 is absolute. As I have noted above, the bar underSection 35 can be cured and the stamp duty can be collected at laterstage. Thus, NN Global(supra) rightly overruled SMS Tea(supra) onthis aspect. Historically, the separability doctrine was introduced in orderto protect the arbitration clause which, in turn, enabled arbitrators toadjudicate on the validity of the main contract[75]. Even though the doctrineof separability and Kompetenz Kompetenz are distinct as noted in NNGlobal(supra), reconciling the two principles would ensure that anarbitrator can rule on the objections of validity, existence as well asnecessary stamping, if required. The doctrine of Kompetenz Kompetenzis discussed in greater detail in the next section.

82. Turning to the decision in Garware(supra), it appears thatthe Court in Garware(supra) rejected the concept of severability onlyby relying on SBP(Supra) when it held:

“15. In view of the law laid down by seven-JudgeBench,[SBP(Supra)] it is difficult to accede to the argument madeby the learned counsel on behalf of the respondent that Section16 makes it clear that an arbitration agreement has an independentexistence of its own, and must be applied while deciding anapplication under Section 11 of the 1996 Act.”

83. In SBP(Supra), as we have noticed earlier in this opinion,stood legislatively overruled as judge at the Section 11 stage couldconduct detailed adjudication and make conclusive determination atthe pre-referral stage without deferring it to the arbitrator. As highlightedabove, Section 16 and Section 11 of the Arbitration Act, 1996 indicatesthat there is an overlap when it comes to the word “existence”. AsSection 16 specifically deals with both existence and validity whereasSection 11 only deals with existence, the former should be given moreweight. As such, the doctrine of Kompetenz Kompetenz comes intoplay as the arbitrator can decide on the validity of an agreement and thereferral judge needs to confine his scrutiny to the existence of thearbitration agreement. However, in SBP(supra) it was generally heldthat the referral judge should decide on all aspects. If such view is tobe applied for answering the present reference, mini-trial will have to

75 HM Holtzmann and JE Neuhaus,A Guide to the UNCITRAL Model Law onInternational Commercial Arbitration: Legislative History and Commentary (KluwerLaw and Taxation The Hague 1989) 485

Abe conducted by the referral judge. The question to be asked here isshould we then push the Section 11 judge to deal with so many thingsthat he/she left in situation like Little Alice in the play Alice inWonderland as described in Praveen Electricals(supra)?

84. In the referral order in NN Global(supra),the paragraph 29Bin Garware(supra) was doubted. In the Garware(supra) decision, thisCourt relied on United India Insurance Co. ltd. v. Hyundai Engg.& Construction Co. Ltd. [76](for short “Hyundai Engg.). Theparagraph 29 is extracted below for the discussion to be followedthereafter:

C“29. This judgment in Hyundai Engg. case [United India InsuranceCo. Ltd. v. Hyundai Engg. & Construction Co. Ltd., (2018) 17SCC 607: (2019) 2 SCC (Civ) 530] is important in that what wasspecifically under consideration was an arbitration clause whichwould get activated only if an insurer admits or accepts liability.Since on facts it was found that the insurer repudiated the claim,Dthough an arbitration clause did “exist”, so ‘to speak, in the policy,it would not exist in law, as was held in that judgment, when oneimportant fact is introduced, namely, that the insurer has notadmitted or accepted liability. Likewise. in the facts of the presentcase. it is clear that the arbitration clause that is contained in theEsub-contract would not “exist” as matter of law until the sub-contract is duly stamped, as has been held by us above. Theargument that Section 11 (6-A) deals with “existence”, as opposedto Section 8. Section 16 and Section 45, which deal with “validity”of an arbitration agreement is answered by this Court’sunderstanding of the expression “existence” in Hyundai Engg.Fcase [United India Insurance Co. Ltd. v. Hyundai Engg. &Construction Co. Ltd., (2018) 17 SCC 607 : (2019) 2 SCC (Civ)530] . as followed by us.”

84.1. In Hyundai(supra), the issue of stamping was not at all amatter of consideration and the Court decided on the arbitrability of theGdispute and whether it was an excepted matter and in that process, heldthat the arbitration agreement would not “exist-in-law”, as the arbitrationclause was contingent on whether the insurer accepted liability. In thesecircumstances, the application of the proposition in Hyundai

H76 (2018) 7 SCC 607

Engg(supra) to deal with the issue of unstamped document inGarware(supra) appears to be an incorrect approach. This is becausein Garware(supra), the Court found that the issue of stamping wouldgo into the existence of the arbitration agreement in law. This was doneby erroneously importing the principle enunciated in Hyundai(supra)and therefore the earlier Hyundai(supra) which had nothing to do withthe stamping of the document, should have been distinguished. At thispoint, we may also notice the argument of the Learned Amicus whoargued that the Court in Hyundai Engg(supra) relied on OrientalInsurance Co. Ltd. v. Narbheram Power and Steel (P) Ltd[77]whichnever had the occasion to interpret Section 11(6A). For these reasons, Iam of the considered view that applying the Hyundai(supra) principleto Garware(supra) is not acceptable. Consequently, the finding of theCourt in Para 147.1 in Vidya Drolia(supra) placing reliance on theabove paragraph viz. Para 29 in Garware(supra) also appears to beincorrect. The proposition of law in NN Global(supra) is therefore foundto be correct.

L. Kompetenz Kompetenz and the issue of Judicial Logjam in India

85. Legal scholars have noted that the principle of KompetenzKomptenz has been adopted in various forms in different countries[78].Article 16 of the UNCITRAL Model Law adopted the principle ofKompetenz Kompetenz providing that an arbitral tribunal has thejurisdiction to investigate and rule on its own jurisdiction. In recentdecision of the US Supreme Court in Henry Schein, Inc. v Archer andWhite Sales, Inc[79], it was held that where an arbitration clause delegatesthe decision of arbitrability to arbitrators, Courts should have no sayeven if they consider the argument in favour as “wholly groundless”.Justice Brett Kavanaugh opined:“Just as Court may not decide merits question that the partieshave delegated to an arbitrator, Court may not decide anarbitrability question that the parties have delegated to anarbitrator.”

77 (2018) 6 SCC 534

78 John J. Barcello III, Who Decides the Arbitrators’ Jurisdiction? Separability andCompetence-Competence in Transnational Perspective, Vanderbilt Journal ofTransnational Law, Vol. 36, No.4, October 2003

79 2019 SCCOnline US SC 1

AProceeding further, Section 16(1) of the Arbitration Act, 1996reads 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 existenceBor validity of the arbitration agreement, and for that purpose,—

(a) an arbitration clause which forms part of contract shall betreated as an agreement independent of the other terms of thecontract; and

C(b) decision by the arbitral tribunal that the contract is null andvoid shall not entail ipso jure the invalidity of the arbitration clause.”

85.1 It is clear from Section 16(1) of Arbitration Act, 1996which uses the word “including” that an arbitral tribunal can not onlyrule on its own jurisdiction but also “any” objections on existence orDvalidity. This Court in Weatherford Oiltool Middle East Limited vsBaker Hughes Singapore PTE[80] where the issue concerned the validityof an unstamped document, noted as under:

“8. The bare reading of the afore-stated provision makes it clearthat arbitral tribunal is competent not only to rule on its ownjurisdiction but to rule on the issue of the existence or validity ofEthe arbitration agreement. It further clarifies that an arbitrationclause which forms part of contract shall be treated as anagreement independent of the other terms of the contrAct, andthat decision by the arbitral tribunal that the contract is null andvoid shall not entail ipso jure the invalidity of the arbitration clause.”

F85.2. Discussing the Kompetenz Kompetenz principles in NNGlobal(supra), it was noted:

“4.3. The doctrine of kompetenz – kompetenz implies that thearbitral tribunal has the competence to determine and rule on itsown jurisdiction, including objections with respect to the existence,Gvalidity, and scope of the arbitration agreement, in the first instance,which is subject to judicial scrutiny by the courts at later stageof the proceedings. Under the 8 Arbitration Act, the challengebefore the Court is maintainable only after the final award is passed

as provided by sub-section (6) of Section 16. The stage at whichthe order of the tribunal regarding its jurisdiction is amenable tojudicial review, varies from jurisdiction to jurisdiction. The doctrineof kompetenz – kompetenz has evolved to minimize judicialintervention at the pre-reference stage, and reduceunmeritorious challenges raised on the issue of jurisdictionof the arbitral tribunal.”

[emphasis supplied]

85.3. Justice Thakker emphasized this in his dissenting opinion inSBP(supra) where it was held that the legislature intended to allow thetribunal to rule on its own jurisdiction and the function of the Chief Justiceunder Section 11(6) was only to “appoint an arbitrator without wastingany time.”

85.4. At this point we may benefit by referring to George A.Bermann whose article titled “Role of Courts at the threshold ofArbitration”[81] would havesome relevance in this discussion:

“Positions at the polar ends of the spectrum of judicial involvementare not especially attractive. system that permits plenary judicialenquiries into all aspects of enforceability of arbitration agreementsprior to arbitration risks inviting costs, delay and judicial involvementin very big way, contrary to arbitration’s basis premises. On theother hand, system that treats access to court for thesepurposes as wholly off-limits, irrespective of the seriousness ofthe challenge, risks exacting too great price in terms of arbitrallegitimacy. Efficacy may be achievable through less drasticmeans.”

85.5. Specific to the Indian context, while discussing KompetenzKompetenz, the overburdened judiciary and huge pendency of cases inour Courts cannot also be overlooked. The intent behind preferringarbitration would stand defeated, if the Court is expected to deal notonly with the issue of existence but also validity of the agreement, at thestage of appointment of the arbitrator. In this context, the followingobservations were made in the 246[th ]LCI report (supra) noted:

81 George A. Bermann, The Role of National Courts at the Threshold of Arbitration, 28American Review of International Arbitration 291 (2017) Available at https://scholarship.law.columbia.edu/faculty_scholarship/3012

A“22. Judicial intervention in arbitration proceedings adds significantlyto the delays in the arbitration process and ultimately negates thebenefits of arbitration. Two reasons can be attributed to suchdelays. First, the judicial system is over-burdened with work andis not sufficiently efficient to dispose cases, especially commercialcases, with the speed and dispatch that is required. Second, theBbar for judicial intervention (despite the existence of section5 of the Act) has been consistently set at low threshold bythe Indian judiciary, which translates into many moreadmissions of cases in Court which arise out of or are relatedto the Act.”

[emphasis supplied]

85.6.Considering the large pendency of cases as noted by the246[th ]LCI Report(supra), it is essential that Section 16 of the ArbitrationAct, 1996 is given full play. Discussing the history of arbitration law inIndia, the 246[th] LCI Report(supra) quoted the observations of JusticeDD.A. Desai in Guru Nanak Foundation v Ratan Singh and Sons[82]where commenting on the working of the Arbitration Act, 1940, it wasnoted that the challenge to arbitral proceedings in Courts have made“lawyers laugh and legal philosophers weep”. The situation is not differenttoday as was recently observed by this Court in M/s Shree VishnuEConstructions v. The Engineer in Chief Military Engineering Serviceand others[83]where it was noted that several applications under section11 were decided and disposed of after period of four years whichdefeated the very purpose of the amended Arbitration Act, 1996. Suchobservation was made on detailed report/statement on the number ofpending section 11 applications before the Telangana High Court. ThisFCourt noticed that even an application filed in the year 2006 was stillpending. The High Court Chief Justices across the country wereaccordingly requested to ensure that applications under section 11, bedecided within period of six months.

85.7 This Court in the recent judgment in Intercontinental HotelsGGroup (India) Private Ltd. v. Waterline Hotels Pvt. Ltd[84]on theissue of insufficiently /incorrectly stamped documents, proceeded toappoint the arbitrator under Section 11(6), considering the time-

82 (1981) 4 SCC 63483 SLP(C) No. 5306/2022 dated 1.4.2022H84 2022 SCC OnLine SC 83

sensitivity while dealing with arbitration. It left open the issue ofstamping to be decided at later stage.

85.8 Importantly, Section 11(13) of the Arbitration Act, 1996provides that appointment of Arbitrators should be made within 60 daysand such provision makes it amply clear that substantive adjudicationcannot be done by Courts, at the pre-referral stage. This was canvassedin Garware(supra) but the Court instead set deadline for 45 days foradjudication and 15 days for appointment of arbitrator with the followingobservation:

“37. One reasonable way of harmonising the provisions containedin Sections 33 and 34 of the Maharashtra Stamp Act, which is ageneral statute insofar as it relates to safeguarding revenue, andSection 11(13) of the 1996 Act, which applies specifically to speedyresolution of disputes by appointment of an arbitrator expeditiously,is by declaring that while proceeding with the Section 11application, the High Court must impound the instrument whichhas not borne stamp duty and hand it over to the authority underthe Maharashtra Stamp Act, who will then decide issues quapayment of stamp duty and penalty (if any) as expeditiously aspossible, and preferably within period of 45 days from the dateon which the authority receives the instrument. As soon as stampduty and penalty (if any) are paid on the instrument, any of theparties can bring the instrument to the notice of the High Court,which will then proceed to expeditiously hear and dispose of theSection 11 application. This will also ensure that once Section11 application is allowed and an arbitrator is appointed, thearbitrator can then proceed to decide the dispute within the timeframe provided by Section 29A of the 1996 Act.”

85.9 The above enunciation in Garware(supra) as is apparentgoes against the legislative mandate which had prescribed the deadlineof 60 days for appointment of arbitrators under Section 11(13) of theArbitration Act, 1996. The criticism that deadline of 45 days wouldbe impractical, cannot also be brushed aside lightly.

N. Discussion on Vidya Drolia

86. This case was concerned with the arbitrability of landlord-tenant disputes and the forum before which the issue of arbitrability

Amust first be raised. The paragraph 146 as quoted below may require arelookin the context of the issue under consideration.

“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 theBquestion of enforcement (validity) and therefore the latter fallsoutside the jurisdiction of the court at the referral stage. Onjurisprudentially and textualism it is possible to differentiatebetween existence of an arbitration agreement and validity of anarbitration agreement. Such interpretation can draw support fromthe plain meaning of the word “existence”. However, it is equallyCpossible, jurisprudentially and on contextualism, to hold that anagreement has no existence if is not enforceable and not binding.Existence of an arbitration agreement presupposes validagreement which would be enforced by the court by relegatingthe parties to arbitration. Legalistic and plain meaning interpretationDwould be contrary to the contextual background including thedefinition clause and would result in unpalatable consequences. Areasonable and just interpretation of existence requiresunderstanding the context. the purpose and the relevant legal normsapplicable for binding and enforceable arbitration agreement.An agreement evidenced in writing has no meaning unless theEparties can be compelled to adhere and abide by the terms. Aparty cannot sue and claim rights based on an unenforceabledocument. Thus, there are good reasons to hold that an arbitrationagreement exists only when it is valid and legal. void andunenforceable understanding is no agreement to do anything.

FExistence of an arbitration agreement means an arbitrationagreement that meets and satisfies the statutory requirements ofboth the Arbitration Act and the Contract Act and when it isenforceable in law.”

86.1. As can be seen, the Court equated existence and validityGand it was held that contract only exists if it is valid. And it is valid onlyif it is enforceable. As far as the issue in the present case is concerned,the authors’ Comments in Russell on Arbitration[85](24[th] Edition) in thecontext of English law provide useful pointers in this context:

“Existence and Validity of the arbitration agreement. .. theCourt draws distinction between existence of the arbitrationagreement, which is likely to be matter for the Court(unless astay under the inherent jurisdiction is granted) and its validity, whichwherever possible should be left to the arbitrators.”

[emphasis in original]

86.2 I have already discussed that in the Indian regime, theArbitrator under Section 16 has the jurisdiction to decide on “existence”and “validity”. plain reading of Section 11(6A) would show that theexamination by Court is confined only to “existence” and not even“validity”. Moreover, in the present reference, we are only concernedwith the formal requirement of stamping and not arbitrability. Applyingcontextual interpretation to render an arbitration agreement void on theformal requirement of stamping would defeat the very purpose of theArbitration Act, 1996. document cannot be rendered invalid orunenforceable especially if the defect is curable under the Stamp Act,1899 as noted earlier. Moreover, none of the provisions in the StampAct, 1899 have the effect of rendering document invalid. Thus, wefind the position in Vidya Drolia(supra)to the extent that it relies onGarware(supra) to be incorrect.

O. Conclusion

87. Harking back to Charles Evans Hughes with whose wordswe began the judgment, let us conclude with the following quote of thesame judge reflected in Prophets By Honor[86]:

“There are some who think it desirable that dissents should not bedisclosed as they detract from the force of the judgement.Undoubtedly, they do. When unanimity can be obtained withoutsacrifice of conviction, it strongly commends the decision to publicconfidence. But unanimity, which is merely formal, which isrecorded at the expense of strong, conflicting views, is not desirablein court of last resort, whatever may be the effect on publicopinion at the time. This is so because what must ultimately sustainthe court in public confidence of is the character and independenceof the judges.”

A87.1 The practice of dissent in judicial decision-making processplays critical role in revealing constitutional commitment to deliberativedemocracy. Allowing judges to express differing views and engage in adialogue about the law and its interpretation can potentially lead toa morenuanced and refined understanding of the law, as the Court grapplesBwith competing interpretations and seeks to reconcile them in principledmanner.

87.2 Confronted with similar situation which is confrontingus today where the present opinion is the minority one, Justice StephenBreyer of the US Supreme Court in his dissenting opinion[87] in aCquestion in the context of Federal Arbitration Act (FAA) spoke ofinterpreting not only the purpose of the Statute but also the likelyconsequence:

“When interpreting statute, it is often helpful to consider notsimply the statute’s literal words, but also the statute’s purposesDand the likely consequences of our interpretation. Otherwise, werisk adopting an interpretation that, even if consistent with text,creates unnecessary complexity and confusion.”

87.3. The objective behind the enactment of the ArbitrationAct, 1996 was to, inter alia, avoid procedural complexity and theEdelay in litigation before Courts. Impounding and stamping at the Section11 stage would frustrate the very purpose of the amended ArbitrationAct, 1996 as the enforcement of arbitration agreements would bestalled on an issue, which is capable of being resolved at later stage.To defer stamping to the stage of the arbitrator would in my viewFachieve the objective of both the Arbitration Act, 1996 and the StampAct, 1899.

87.4. The contours of the jurisdiction of the judge referring mattersfor arbitration, cannot be permitted to suffer from confusion andambiguity. As can be seen, the present 5 judge-Bench could not provideGclarity on the issue referred to us, on account of the fractured verdict,leading to legal uncertainty. The constitution of larger Bench in thisCourt is certainly not commonplace as the last occasion when 7 judgesassembled was in the year 2017. Around 5 matters as I am informed,

H87 Badgerow v. Walters, 596 U.S. 2022

are already awaiting the attention of 7 judges Bench. In such backdrop,the interplay between the Acts and how its objective is to be achievedin the course of Arbitral proceedings either at the referral stage orthereafter is much too important to be left lingering for clarificatoryverdict by larger Bench. Therefore, I would appeal to the legislativewing of the State to revisit the Amendments which may be necessaryin the Stamp Act, 1899 in its application to the Arbitration Act, 1996.The State might put into place convenient mechanism which wouldefface the inconsistencies in both the Arbitration Act, 1996 and theStamp Act, 1899. If we look at the legislative intent of the ArbitrationAct, 1996 and what our country is hoping to be as the destination ofchoice for Arbitration, I’m of the considered opinion that it would beappropriate to interpret the statutory interplay in constructive mannerwithout defeating the legislative intent and thwarting the speedy referralto arbitration.88. Following the above discussion, my opinion on the referredissue are as follows:

i)The examination of stamping and impounding need not bedone at the threshold by Court, at the pre-reference stageunder Section 11 of the Arbitration Act, 1996.

ii)Non-stamping/insufficient stamping of the substantivecontract/instrument would not render the arbitrationagreement non-existent in law and unenforceable/void,for the purpose of referring matter for arbitration.Garware(supra) wrongly applied the principle inHyundai(supra) to hold that an arbitration agreement wouldnot exist-in-law if it is unstamped/insufficiently stamped.An arbitration agreement should not be rendered void if itis suffering stamp deficiency which is curable defect. Tothis extent, Garware(supra) and Hyundai(supra) do notset out the correct law.

iii)The decision in SMS Tea(supra) stands overruled.Paragraphs 22 and 29 in Garware (supra) which wereapproved in paragraphs 146 and 147 in Vidya Drolia(supra)are overruled to that extent.

[2023] 9 S.C.R.

A89. The invaluable assistance rendered by Mr. Gourab Banerjee,learned Senior Counsel as the Amicus Curiae deserves special mentionin finalizing this opinion.

Bibhuti Bhushan Bose

B(Assisted by : Shubhansh Thakur, Sahil Rajanand Rahul Rathi, LCRAs)

Reference answered.