The Bench of the Bombay High Court comprising of Chief Justice NH Patil, Justice RD Dhanuka and Justice GS Kulkarni answered on the scope and applicability of the Arbitration and Conciliation Act on arbitration clauses in unstamped or insufficiently stamped documents. The Bench was hearing two separate matters which were referred to a larger bench by the single judge benches and heard the same together. The following questions were placed before it for reference as follows:

  1. Whether a court, under the Arbitration and Conciliation Act, 1996, can entertain and grant any interim or ad-interim relief in an application under Section 9 of the said Act when a document containing arbitration clause is unstamped or insufficiently stamped?
  2. Whether, inter alia, in view of Section 11 (6A) of the Arbitration and Conciliation Act, 1996, inserted by Arbitration and Conciliation (Amendment) Act, 2016, it would be necessary for the Court before considering and passing final orders on an application under Section 11(6) of the Act to await the adjudication by the stamp authorities, in a case where the document objected to, is not adequately stamped?

 

APPLICABILITY OF SECTION 9:

On the issue of applicability of Section 9 for interim reliefs, the Bench observed that the arbitration clause, being severable from the other clauses to the agreement under dispute, is to be treated as a separate agreement in itself and as such need not be required to be stamped or registered. The Bench further observed on the impact of the objection to the insufficiently stamped agreement as follows:

“70. The entire purpose of granting interim measures is to protect the matters set out specifically under Section 9 (1) (ii)(a) to (e) during the pendency of the arbitral proceedings and even after making of the arbitral award before it is enforced in accordance with Section 36 of the Act, would be defeated if we accept the interpretation placed on the provisions by the learned Senior Counsel Mr. Dani. If an objection about insufficiency of stamp is entertained and accepted at the stage of hearing of the application under Section 9 for interim measures, a party who has good chances of succeeding in the arbitral proceedings finally and if not granted interim measures to protect the subject-matter of such proceedings, there would be gross injustice to such party.”

The Bench relied on the judgments in Firm Ashok Traders vs. Gurumukh Das Saluja (2004) 3 SCC 155 and Universal Enterprises vs. Deluxe Laboratories Pvt. Ltd. 2016 (5) Mh.L.J.623 and held in the affirmative the application of Section 9 proceedings to insufficiently stamped or unstamped agreements.

 

APPLICABILITY OF SECTION 11:

The Bench then answered in the affirmative to the scope of Section 11 petitions arising out of an insufficiently stamped or unstamped agreement. The Bench relied on the judgment in M/s. Duro Felguera V/s. Gangavaram Port Ltd. (2017) 9 SCC 729 and as per Para 19 of the judgement, the Supreme Court observed:

  1. As per sub-section (6-A), the power of the Court has now been restricted only to examination of the existence of an arbitration agreement. Earlier, the Chief Justice had been given the power to examine other aspects as well i.e. limitation, whether the claims were referable for arbitration, etc., in terms of the judgments of the Supreme Court in SBP and Co. vs. Patel Engg. Ltd. and National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd. Now all preliminary issues have been left for the Arbitral Tribunal to decide in terms of Section 16 of the Act.

 

The Bench further made relevant observations into the objectives of the Stamp Act as follows:

“116. We may thus observe that the Stamp Act is a fiscal statute and its purpose is collection of revenue. The said purpose will be achieved by impounding the document and sending it to the stamp authorities if it is found to be insufficiently stamped. At the same time, the court need not wait for outcome of the said adjudication. It would not be appropriate to put restrictions on the court’s powers to exercise its such jurisdiction under the provisions of ACA, if the party deserves such intervention by the court.”

The Bench therefore concluded its observations in the affirmative to the applicability of Section 9 of the Arbitration Act of insufficiently stamped agreements and also negated on the necessity of stamping of agreements for hearing and disposing off an application under Section 11 of the Arbitration Act.

 

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Judgment: Arbitration in Unstamped Documents