SC Sets Aside Order Dismissing Application U/S 11 Of Arbitration Act On Ground Of Inadequately Stamping And Delay, Remands Matter For Fresh Consideration
|The Supreme Court has set aside the order passed by the Chhattisgarh High Court in view of the recent landmark decision of the 7-Judge Bench in Interplay Between Arbitration Agreements Under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899 (2023), which held that unstamped or inadequately unstamped arbitration agreements do not become void or void ab initio or unenforceable.
The Bench of Justice Pamidighantam Sri Narasimha and Justice Sandeep Mehta ordered, “In view of the subsequent development in Interplay Between Arbitration Agreements Under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899 reported in 2023 SCC Online 1666, as well as the recent decision rendered in the SBI General Insurance Co. Ltd. vs. Krish Spinning reported in 2024 SCC Online SC 1754, the appeal has to be allowed.”
AOR Prashant Bhushan appeared for the Petitioner whereas AOR Satya Kam Sharma and Advocate Anup Kumar Mishra appeared for the Respondents.
An appeal was filed against an order passed by the Chhattisgarh High Court dismissing an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (‘Act’) filed for the constitution of an arbitral tribunal.
The High Court had, after considering the matter, dismissed the application under Section 11 inter alia on the ground that it was barred by time and also that it was inadequately stamped in light of the judgment rendered in the case of N.N. Global Mercantile (P) Ltd. vs. Indo Unique Flame Ltd. (2023).
In that case, the Supreme Court by a three: two majority opinion had ruled that an instrument that is exigible to stamp duty, may contain an arbitration clause, and which is not stamped, cannot be said to be a contract, which is enforceable in law within the meaning of Section 2(h) of the Contract Act and is not enforceable under section 2(g) of the said Act.
While overruling the judgment in NN Global, the 7-Judge Bench had concluded that agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable. Further, non-stamping or inadequate stamping is a curable defect.
It also held that an objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act and the court must examine whether the arbitration agreement prima facie exists. Any objection in relation to the stamping of the agreement falls within the ambit of the tribunal.
The Court also relied upon the recent judgment in SBI General Insurance Co. Ltd. vs Krish Spinning (2024) which reiterated that the scope of enquiry at the stage of appointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agreement. The Court had observed that the question of “accord and satisfaction,” being a mixed question of law and fact, falls within the exclusive jurisdiction of the arbitral tribunal unless otherwise agreed upon by the parties. It had said that the dispute pertaining to the “accord and satisfaction” of claims does not attack or questions the existence of the arbitration agreement in any way.
Accordingly, the Court allowed the appeal and set aside the order passed by the High Court to consider it afresh.
Cause Title: Mohd. Arif Rokadia v. Mohd Salim Rokadia & Ors
Appearances:
Petitioner: AOR Prashant Bhushan and Advocate Anurag Tiwary
Respondents: AOR Satya Kam Sharma and Advocate Anup Kumar Mishra