Improper Or Under-Stamped Contract Containing Arbitration Clause Won’t Hinder Referring The Parties To Arbitration Agreement: Gauhati HC

The Gauhati High Court observed that an improper or an under-stamped underlying contract containing an arbitration clause or an agreement would not hinder referring the parties to an arbitration agreement.

The Court observed thus in a writ petition filed by the Union of India, challenging the orders of the Arbitrator in the arbitration proceedings.

A Single Bench of Justice Soumitra Saikia held, “… it is evident that the consistent view of the Courts is that under the scheme of the Arbitration and Conciliation Act, 1996, minimal Court interference is prescribed and at the stage of orders being passed under Section 11(6), the only requirement for the Courts is to see the existence of a valid arbitration agreement. Even an improperly or an understamped underlying contract containing an arbitration clause or an agreement would not hinder referring the parties to an arbitration agreement as the arbitration agreement has been presumed to be a separate contract from the underlying contract which may contain such an arbitration clause.”

The Bench added that, where the parties agree to refer the disputes to an arbitration and an Arbitral Tribunal is validly constituted under orders of the Court under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act), the jurisdiction of the Tribunal including the arbitrability of the dispute at the first instances is to be decided by the Arbitral.

CGC H. Gupta appeared on behalf of the petitioners while Senior Advocate A.K. Saraf appeared on behalf of the respondent.

Brief Facts -

The respondent company was allotted two contracts relating to Earthwork Filling to form embankment/sub-bank and construction of minor bridges, retaining wall, pucca approach road, alignment, and other ancillary works in connection with construction of the New BG Railway line from Bairabi to Sairang (Mizoram) under Contract Agreements. The said works were terminated by the petitioners/Railways leading to the disputes arising between the two. The respondent issued a notice for arbitration but the said notice was replied to by the Railway authorities, rejecting the demand for arbitration on the ground that Clause 47 of the Contract Agreement bars claims for arbitration beyond 20% of the SCA.

Thereafter, the respondent submitted a second notice demanding arbitration purportedly under arbitration Clauses 48 & 49 of the Agreement, treating the same to be additional special conditions or contract. Since the Railways declined to refer the matter to arbitration, the respondent approached the High Court, seeking appointment of an Arbitrator. The Bench concluded that, where the contentious issued have arisen because of incorrect use of clauses which are admitted by the Railway authorities himself, it would be best left to be decided by the Arbitral Tribunal and as to whether the claim raised before is arbitrable or not and not by the Court at the referral stage. It, therefore, appointed a Sole Arbitrator. Subsequently, the Arbitral Tribunal upheld the contentions of the respondent, holding that the disputes are arbitrable. Being aggrieved, the petitioners were before the High Court.

The High Court in view of the above facts, noted, “Any party aggrieved by the award of the Arbitral Tribunal has a right of appeal under Section 34 and further appeal under Section 37 as prescribed under the Act of 1996. … In view of the authoritative findings of the Apex Court, more particularly, in view of the recent law laid down by the Apex Court in RE:- Interplay between arbitration agreements under Arbitration Act, 1996 and the Indian Stamp Act, 1899 reported in 2024 (6) SCC 1, the conclusions and the findings arrived at by the Co- ordinate Bench in its order rendered in ATW (India Pvt. Ltd.) vs. Union of India reported 2024 SCC Online Gau 2602 will no longer be binding on this Court.”

The Court said that the power of writ under Article 227 of the Constitution is a constitutional power which cannot be curtailed by any statute and the same is available to a writ court in its supervisory jurisdiction to ensure subordinate courts and tribunals function within their powers/jurisdiction conferred.

“When any order is passed by such a tribunal exceeding their jurisdiction or order is obtained by fraud or it fails to exercise its jurisdiction then a writ court under Art 227 can certainly interfere. But such is not the case here. The tribunal has been conferred its jurisdiction by this court under sec 11(6) to decide the question of arbitrability of the dispute. Therefore it cannot be said that the Tribunal has assumed jurisdiction it did not have or that it failed to exercise its jurisdiction”, it further noted.

The Court emphasised that the powers of a writ Court under Article 226 or 227 cannot be excluded by any non-obstante clause under any statute including that of the A&C Act, however, in this case, there is no occasion which warrants the Court to invoke its powers to interfere with the orders of the Arbitrator.

“The parties have a forum for appeal under Section 34 & 37 of the Act of 1996 and the same would be available to be aggrieved party in the event of any award that is being passed by the Arbitral Tribunal”, it added.

Accordingly, the High Court dismissed the writ petition and permitted the Arbitral Tribunal to proceed with the arbitration proceedings without any further delay.

Cause Title- Union of India & Ors. v. M/s GSR Ventures Private Limited

Appearance:

Petitioners: CGC H. Gupta

Respondent: Senior Advocate A.K. Saraf and Advocate S. Bhattacharjee.

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