Gautam Landscapes Private Limited vs Shailesh S Shah And Anr

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ARBITRATION PETITION NO. 466 OF 2017 WITH ARBITRATION APPLICATION NO. 246 OF 2016 WITH ARBITRATION APPLICATION NO. 300 OF 2018

JUDGMENT

Index Contents Paragraph Nos.

A Introduction 1 to 4 B Issue Under Section 9 of Arbitration and 5 to 12 Conciliation Act, 1996 C Submission of learned Amicus Curiae 13 to 27 C(i) Severability of Arbitration Clause in an Agreement

C(ii) Effect of Amendment in Section 11 in 2015 C(iii) Stamp Act is a Fiscal Statute C(iv) Position in a Regular Civil Suit C(v) Meaning to be given to Phrase "Acted upon" D Submissions on behalf of the respondents 28 to 42 E Relevant provisions of the Acts 43 F Discussion / Legal Position as to what is the 44 to 47 Scope and Jurisdiction of the Court under Section 9 G Scope and Object of the Stamp Act 48 to 54 H Discussion on applicability of SMS Tea 55 to 63 Estates (P) Ltd. to proceedings under Section 9 of the ACA I Whether Court can entertain and grant 64 to 74

interim or ad-interim relief in an application under Section 9 of the ACA.

J Discussion on the question on Section 11 of 75 to 83 the ACA K Reasons and conclusions on the question 84 to 119 falling under Section 11 of the ACA L Answers to the questions framed 120 ::: Uploaded on - 04/04/2019 ::: Downloaded on - 05/04/2019 03:56:08 ::: PDP 2 FB-JT-ABP-466-17, ABA-246-16 & ABA-300-18-

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

ARBITRATION PETITION NO.466 OF 2017

Gautam Landscapes Private Limited. ) 4,Sheertal Building Ground floor, ) Rohan Nagar, Off.Chandavarkar Lane ) Borivali (West), Mumbai-400092 ) ..Petitioner

Vs.

1.Shailesh S.Shah ) Q 101-102, 1st Floor, "Q" Wing, ) Silent Park, Nr.Golden Nest Circle, ) Bhayander (E), Thane-401105 )

2. Gautam Estate ) Survey No.236(Part), Janubhai ) Rakhmi Marg, Radheshyam Satsang ) Gate, New 150 feet Road, ) Bhayandar (W), Thane-401101 ) ..Respondents

WITH ARBITRATION APPLICATION NO.246 OF 2016

Gautam Landscapes Private Limited. ) 4,Sheertal Building Ground floor, ) Rohan Nagar, Off.Chandavarkar Lane ) Borivali (West), Mumbai-400092 ) ..Applicant

Vs.

Shailesh S.Shah ) Q 101-102, 1st Floor, "Q" Wing, ) Silent Park, Nr.Golden Nest Circle, ) Bhayander (E), Thane-401105 ) ..Respondent

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WITH ARBITRATION APPLICATION NO.300 OF 2018

Vijay Sharma, ) Age 47 years, having address at ) 319, Naraina Vihar, New Delhi-110028. ) ...Applicant

Vs. 1.Vivek Makhija, ) Legal Heir and Son of Mr.Vijay Kumar ) Makhija, Age 86, having address at ) 15, Rajendra Park, New Delhi. )

2. Veenu Kundra, ) Legal Heir and Daughter of ) Mr.Vijay Makhija, residing at ) A-1, Maya Puri, Industrial Area, ) Phase 1, New Delhi 110046 ) (As per last known address) ) ...Respondents

Ms.Priya Rombade with Mr.Aniket Worlikar I/b. Deven Dwarkadas, for the Petitioner in Arbitration Petition No.466/17 and for Applicant in Arbitration Application no.246/16.

Mr.Ankit Lohia with Mr.Dinesh Tiwari, Mr.Swapnil Ambure, Mr.Mikhail Dey, Mr.Varun Nathani & Ms.Pooja Batra I/b. Dinesh Tiwari & Asso., for the Applicant in Arbitration Application no.300/18.

Mr. P. S. Dani, Senior Advocate with Mr. Tejash Dande, Mr. R. D. Suryawanshi, Mr.Bharat Gadhavi & Mr.Vishal Navale, for the Respondent in Arbitration Petition No.466/17 and Arbitration Application No.246/16.

Mr.Shrikrishna R.Ganbavale, for Respondents in Arbitration Application No.300/18.

Dr.Milind Sathe, Senior Advocate, Amicus Curiae in Arbitration Petition no.466/17 and Arbitration Application No.246/16.

Mr.Aspi Chinoy, Senior Advocate, Amicus Curiae in Arbitration Application No.300 of 2018.

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CORAM : NARESH H. PATIL, CJ., R. D. DHANUKA & G. S. KULKARNI, JJ.

RESERVED ON : MARCH 01, 2019.

PRONOUNCED ON: APRIL 04, 2019.

JUDGMENT: (PER NARESH H. PATIL,CJ.)

(A) INTRODUCTION:

1. By an order dated 6th September 2018 passed by

the learned Single Judge in Arbitration Petition No.466 of 2017

(Gautam Landscapes Pvt. Ltd. Vs. Shailesh S. Shah and anr.),

and Arbitration Application No.246 of 2016 ( Gautam

Landscapes Pvt. Ltd. Vs. Shailesh S. Shah), the learned Single

Judge observed in para 25.3 as under :-

"25.3 The question whether this Court under Section 2(e) of the Act can entertain and grant any interim or ad-interim relief in an application under Section 9 of the Act when the Arbitration Agreement is contained in a document that is unstamped or insufficiently stamped, needs to be referred to a Larger Bench for determination. In my view, the Hon'ble Chief Justice can be requested by this Court to refer the said question / issue to a Larger Bench for consideration. The Registry is therefore directed to place the papers and proceedings before the Hon'ble the Chief Justice to enable the Hon'ble the Chief Justice to refer the aforesaid question / issue to a larger Bench for consideration."

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In pursuance of the above order, this Larger Bench

has been constituted.

2. By an order dated 25th October, 2018, this Bench

has framed following question of law which would arise for

consideration:-

"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?"

3. In the proceedings of Arbitration Application No. 300

of 2018 in the case of Vijay Sharma vs. Vivek Makhija & anr.,

the learned Single Judge of this court for reasons as set out in

an order dated 20th December 2018 referred the following

question of law for consideration of the Larger Bench and the

Registry was directed to place the papers and the proceedings

before the Chief Justice:

"Whether it would be necessary for the Court before considering and passing final orders on an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, to await the adjudication by the stamp authorities, in a case where the document objected, is not adequately stamped?"

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Accordingly, the issue was referred to a Larger

Bench on the similar lines, however, falling under Section 11 of

the Arbitration and Conciliation Act, 1996 (for short "the

ACA").

4. The Chief Justice referred the said issue falling

under Section 11 of the ACA to this Larger Bench. By an order

dated 26th February, 2019, this Bench framed the following

question for its consideration :-

"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?

Hence, the above two questions, firstly falling under

Section 9 of the ACA and secondly falling under Section 11 of

the ACA and having common features, namely, as to what is

the effect and consequence of the document being not

sufficiently stamped, when the court is called upon to exercise

jurisdiction under the provisions of Section 9 and Section 11 of

the ACA, are issues falling for consideration of this Bench.

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(B) ISSUE UNDER SECTION 9:

5. We would take up the issue falling under Section 9

of the ACA first.

6. Briefly stated the facts are:-

Arbitration Petition No. 466 of 2017 is filed by the

Petitioner - Gautam Landscapes Pvt. Ltd. against Respondent

No.1 - Shailesh S. Shah and Respondent No.2 - Gautam Estate,

under Section 9 of the ACA, seeking protective reliefs pending

the final disposal of the arbitration proceedings and the

enforcement and implementation of the Arbitration Award.

There is another proceeding being Arbitration Application

No.246 of 2016 filed by the said petitioner under Section 11 of

the ACA seeking appointment of a sole arbitrator for

adjudication of the disputes and differences that have arisen

between the parties. The case of the petitioner is that disputes

have arisen between the parties under a joint venture

agreement dated 27 October 2006. When the learned Single

Judge took up the Section 11 application filed by the petitioner,

on behalf of the respondent an objection was raised, that the

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document was not adequately stamped and hence, be

impounded and sent to Collector of Stamps for adjudication.

This objection was contested on behalf of the petitioner, who

contended that the document was adequately stamped.

Learned Counsel for the petitioner however offered to hand

over original document to the Prothonotary and Senior Master

of this Court for being sent to Collector of Stamps for

adjudication. On this the learned Single Judge, by an order

dated 9 November 2017 impounded the document and

directed the Prothonotary and Senior Master, to forward the

said document within one week of its receipt to the

Superintendent of Stamps/Collector of Stamps, Mumbai, for

adjudication of the stamp duty. Upon adjudication the

Collector of Stamps by an order dated 15 March 2018 held that

the document was inadequately stamped and an amount of

Rs.1,12,52,500/- is due and payable as deficit stamp duty. The

petitioner did not accept the said order and filed a statutory

appeal on 17 April 2018 under Section 34B of Maharashtra

Stamp Act. The said appeal was pending.

7. When the matter was listed for hearing on this

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reliefs, the learned counsel appearing for the petitioner relied

upon the decision of the Division Bench of this Court in the

case "Universal Enterprises vs. Deluxe Laboratories Pvt.

Ltd."1 wherein the Division Bench had taken a view that even

if an arbitration agreement contained in a document is

unstamped or insufficiently stamped and if a case is made out

for grant of ad-interim reliefs, the Court cannot refuse the

same merely on the ground that the agreement in question

needs to be adjudicated on the issue of payment of stamp

duty. Responding to this, on behalf of the respondent it was

argued that the judgment of the Division Bench in Universal

Enterprises (supra) was per incurium and was not good law in

view of the decision of the Supreme Court in " SMS Tea

Estates (P) Ltd. vs. Chandmari Tea Co. (P) Ltd" 2 and the

decision of the Division Bench of this Court in Lakdawala

Developers Pvt. Ltd. vs. Badal Mittal & Ors. 3. The learned

Single Judge hence posed the following three issues which

would arise and on which a reference ought to be made to the

Chief Justice to constitute a larger bench to consider the

same:-

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(i) whether the Judgment of the Division Bench of this Court in the case of Universal Enterprises (supra) is per incurium?

(ii) alternatively whether the Judgment of the Division Bench of this Court in the case of Universal Enterprises (supra) is, on the face of it, bad in law as it is based on a patent misreading of binding precedents? And

(iii) further, if the Judgment of the Division Bench of this Court in Universal Enterprises (supra) is bad in law?

8. The learned Single Judge in an elaborate order

discussed the above issues and considered the decision of the

Division Bench of this Court in Universal Enterprises vs.

Deluxe Laboratories Pvt. Ltd.(supra), the decision of the

Supreme Court in SMS Tea Estates (P) Ltd. vs. Chandmari

Tea Co. (P) Ltd. (supra) and another the decision of the

Division Bench in Lakdawala Developers Pvt. Ltd. vs.

Badal Mittal & Ors. (supra) and the provisions of Section 33

of the Maharashtra Stamp Act, and referred the issue as set

out in paragraph 25.3 of the order, which we have already

quoted above.

9. The order of the Division Bench in Lakdawala

Developers Pvt. Ltd.(supra) which referred to the decision of

the Supreme Court in "SMS Tea Estates (P) Ltd." (supra),

was also followed by the learned Single Judge in the case of

"Jayraj Devidas & Ors. Vs. Nilesh Shantilal Tank & Anr."4

4 2014(6) Mh.L.J. 156

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10. By our order dated 25 October 2018 we appointed

Dr.Milind Sathe, learned Senior Advocate as Amicus Curaie to

assist this Court. We have heard the learned Counsel for the

petitioner, Mr.Dani,learned Senior Counsel with Mr.Dande,

Advocate for the respondent and Dr.Milind Sathe, learned

Amicus Curiae.

11. As to some extent the issues are interlinked,

Dr.Sathe while making submissions on the issue falling under

Section 9 has also touched the facets of Section 11.

(C) 12. Broadly, the submissions of Dr. Sathe, learned

Amicus Curiae, are under the following heads:-

(i) SEVERABILITY OF ARBITRATION CLAUSE IN AN AGREEMENT:

13. Dr. Milind Sathe has taken us through the relevant

provisions of the ACA Act, particularly provisions of Sections

2(b), 2(e), 2(h), Sections 7, 8, 9, 16 of the said Act and

provisions of Sections 32A, 33, 35, 37 and 58 of the

Maharashtra Stamp Act, 1958. On the issue of severability of

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an arbitration clause in an agreement, Dr. Sathe submitted

that an arbitration agreement between the parties can be

contained in a standalone independent agreement and it can

also be in the form of a clause in the agreement. As per

definition of "arbitration agreement" in Section 7 several

contingencies and situations have been treated as "arbitration

agreement" such as exchange of communications, exchange

of pleadings etc., the question of levy of stamp duty on an

instrument under which the disputes arise will not arise in all

such contingencies. The question of levy of stamp duty

therefore concerns only in those cases where arbitration

agreement is a part of a contract or an agreement which also

contains other terms and conditions. It is undisputed that

arbitration agreement by itself is not "an instrument" on which

stamp duty is leviable nor such an agreement is required to be

compulsorily registered. The levy of stamp duty and

registration are thus applicable only to remaining part of the

document i.e. excluding the arbitration agreement. Arbitration

agreement has been held to be completely severable from the

remaining document. For the purpose of Sections 9 and 11,

the arbitration clause in an agreement between the parties

under which the disputes arise is to be severed from the main

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contract itself and an arbitration agreement is independent of

other terms of the contract. Even if the main contract

contained in instrument (which requires stamping) is null and

void, it would not mean that the arbitration clause is rendered

invalid. This is further strengthened by Section 16(1)(a) of the

ACA. The learned counsel, therefore, submitted that an

arbitration clause contained in an agreement on the strength

of which Section 9 or Section 11 proceedings are filed, if

treated as an independent agreement on standalone basis, it

does not entail payment of stamp duty as it is not "an

instrument" nor does it find mention in Schedule I of the

Bombay Stamp Act or the Indian Stamp Act. Therefore, the

court in Sections 9 and 11 can treat an arbitration clause

contained in an agreement even though it is unstamped as a

separate agreement and pass necessary orders. The court

under Section 9 is therefore 'acting upon" an arbitration

agreement and not on the contract contained in an instrument

which requires stamping.

14. Dr. Sathe has referred to the judicial

pronouncements in the context of Sections 9 and 11 of the

ACA, which we refer below.

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15. On the judicial pronouncements in proceedings

falling under Sections 9 and 11, the learned senior counsel

submitted that insofar as the power of Court under Section 9

to grant interim measures, when Section 9 petition is filed on

the basis of an arbitration agreement when it is contained in a

document which requires payment of stamp duty and which is

insufficiently stamped, following judgments are required to be

noted. The only Judgment on Section 9 is of the Division

Bench this Court in the case of Universal Enterprises v/s.

Deluxe Laboratories Pvt. Ltd. (Supra) is a judgment which

takes a view that ad-interim reliefs can be granted by the

Section 9 court even if the document is not adequately

stamped. This judgment, which gave rise to the reference,

referred by the learned Single Judge is in conflict with other

Division Bench judgment in the case of Agility Logistic Pvt.

Ltd. vs. Jagannath Parmeshwar Mills5 and the order of the

Division Bench in Lakdawalla Developers Pvt. Ltd. (Supra)

and per incurium the Supreme Court judgment in SMS Tea

Estates (Supra). All the relevant judgments enumerated in the

chart below would indicate in what proceedings the issues had

arisen:

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Sr. Name of Judgment Citation Proceedings No. before the Court 1 Universal Enterprises V/s 2016 (5) Section 37 Deluxe Laboratories Pvt. Ltd. Mh.L.J.623 appeal against (Division Bench) refusal of ad- interim 2 SMS Tea Estates (P) Ltd. V/s. (2011) 14 SCC 66 S. 11 Chandmari Tea Co. (P) Ltd. (2 Judges) 3 Badal Mittal V/s. Lakadawala Arbitration Section 9 Developers Pvt. Ltd. Petition No.221 of 2013 (Single Judge) 4 Lakdawala Developers Pvt. Appeal (L) No. Appeal against Ltd. V/s. Badal Mittal 272 of 2013 Section 9 (Division Bench) (Interim Order) 5 Agility Logistics Pvt. Ltd. V/s. Appeal No. 479 Appeal against Jagannath Parmeshwar Mills of 2012 Section 11 6 SBP & Co. V/s Patel (2005) 8 SCC 618 Reference about Engineering Ltd. (7 Judges) nature of function of Chief Justice under Section 11 7 Jayraj Devidas V/s Nilesh 2014 (6) Appeal against Shantilal Tank Mh.L.J.156 Section 9 order (Single Judge Bombay High Court) 8 M/s. Duro Felguera V/s. (2017) 9 SCC 729 Section 11(6A) Gangavaram Port Ltd. 9 Coastal Marine Construction 2018(3) Mh.L.J.22 Section 11 Sub and Engineering Ltd. V/s. (Single Judge, Section (6-A) Garware Wall Ropes Ltd. Bombay High Court) 10 Mohinder Singh Dua V/s. Commercial Section 9 Petition Kamla Landmarc Arbitration Construction Pvt. Ltd. Petition No. 51 of 2016 (Single Judge Bombay High Court)

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It is thus clear from the above chart that the judgment of the

Supreme Court i.e. SMS Tea Estates, was dealing with Section

11 of the ACA. Similarly, the Division Bench judgments of this

Court i.e. Agility Logistic Pvt. Ltd. V/s Jagannath

Parmeshwar Mills was also dealing with Section 11 of the

ACA.

16. The learned Senior Counsel further submits that, as

can be seen from the above chart, there are two Division

Bench judgments of this court dealing with Section 9 of the

ACA i.e. Lakdawala Developers Pvt. Ltd. vs. Badal Mittal

(Supra) and Universal Enterprises vs. Deluxe

Laboratories Pvt. Ltd. (Supra). The judgment of this court

in Lakdawala Developers Pvt. Ltd. was an interim order

passed in an appeal under Section 9 of the ACA and cannot be

treated as a precedent. The judgment in Universal

Enterprises was dealing with an order refusing ad-interim

relief under Section 9 of the ACA. However, the order in the

case of Lakdawala Developers was passed as an interim

order in the appeal. The Division Bench in Universal

Enterprises (Supra) distinguishes the decision of the Supreme

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Court in SMS Tea Estates as having been passed in the

proceedings under Section 11 and not under Section 9 of the

ACA.

17. The learned Senior Counsel submits that there are

two judgments delivered by the learned Single Judges of this

court dealing with Section 9, i.e. Jayraj Devidas vs. Nilesh

Shantilal Tank and Mohinder Singh Dua vs. Kamla

Landmarc Construction Pvt. Ltd.6 The judgment in the

case of Jayraj Devidas applies SMS Tea Estates (which was

dealing with Section 11) to the proceedings under Section 9

and also follows the interim order passed in Lakdawala

Developers Pvt. Ltd. The judgment in the case of

Mohinder Singh is passed in the proceedings arising out of

Section 9 follows the judgment of the learned Single Judge in

Jayraj Devidas (Supra).

18. The learned Senior Counsel submitted that the

judgment in the case of SMS Tea Estates only restricts its

scope to the proceedings under Section 11. It does not refer

to a judgment of the Supreme Court in the case of Firm

Ashok Traders vs. Gurumukh Das Saluja 7 which lays down

6 Commercial Arbitration Petition No.51 of 2016 7 (2004) 3 SCC 155

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the scope of powers under Section 9 of the ACA. It was held in

that case that in Section 9 proceedings all that the court is

concerned with is whether or not there is an arbitration

agreement between the parties and it has nothing to do with

the main relief which would be sought in the arbitral

proceedings or the right which is sought to be canvassed in

support of the relief, as what is relevant at that stage is only

the arbitration agreement. It is further held that the right

which a party exercises by filing a Section 9 petition does not

arise out of the main contract, but it arises out of the

arbitration agreement.

19. It is submitted that since the judgment in the case

of SMS Tea Estates was only dealing with Section 11

proceedings, it does not make reference to the judgment in the

case of Firm Ashok Traders (Supra) which continues to be a

binding precedent and governing the field insofar as Section 9

is concerned.

(ii) EFFECT OF AMENDMENT IN SECTION 11 IN 2015:

20. On the effect of amendment to Section 11 in the

year 2015, the learned Senior Counsel submitted that the

Arbitration and Conciliation Act, 2016 and in particular Section

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11 was amended and a new clause i.e. sub-section (6A) was

introduced in Section 11. It is submitted that after the

insertion of this clause, under Section 11, the court can only

consider an issue as to the existence of the arbitration

agreement. This is apparent from the fact that the wordings

used in sub-section (6A) are that the court shall "confine" to

the examination of existence of an arbitration agreement. It

is therefore clear that after the amendment, Section 11 court

cannot examine any other issue except finding out whether

the arbitration agreement exists or not. This amendment also

will equally apply to the issue arising out of non-payment of

stamp duty under the provisions of the Maharashtra Stamp Act

and Indian Stamp Act. It is submitted that the judgment in the

case of SMS Tea Estates, which was dealing with Section 11. In

any case after insertion of sub-section (6A) in Section 11 by

amendment in 2015 the court will confine the inquiry limited to

the existence of an arbitration agreement notwithstanding any

judgment, decree or order of any court.

21. The learned Senior Counsel submitted that the

judgment of the Supreme Court in the case of M/s Duro

Felguera vs. Gangavaram Port Ltd .8 and particularly in

8 (2017) 8 SCC 729

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para 18 of the judgment of Justice Bhanumati and in paras 48

and 59 of the supplementary judgment of Justice Kurian

Joseph, the court has interpreted the provisions of Section

11(6A) and held that the scope of inquiry under Section 11 is

therefore very very limited. This judgment has been followed

by a learned Single Judge of this court in Coastal Marine

Construction & Engineering Ltd. Vs. Garware Wall

Ropes Pvt. Ltd.9 This view by the learned Single Judge,

following the Supreme Court judgment, is the correct view,

considering amendment to Section 11 by insertion of sub-

section (6A).

(iii) STAMP ACT IS A FISCAL STATUTE:

22. Dr. Sathe submits that the Maharashtra Stamp Act,

1958 and the Indian Stamp Act, 1899 are fiscal legislations and

these statutes are concerned with the recovery of the revenue

of the Government on the contract documents. The

judgment in the case of Hindustan Steel Ltd. vs. Dalip

Construction Co.10, in paras 6 and 7, has held that a Stamp

Act is a fiscal statute and it is not enacted to arm a litigant

with a weapon of technicality to meet the case of his opponent

9 2018 (3) Mh.L.J. 22 10 (1969) 1 SCC 597

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and the stringent provisions of the Act are conceived in the

interest of the revenue. It is therefore submitted that in

proceedings under Section 9, the issue as to whether the

stamp duty is sufficiently paid on an instrument which contains

an arbitration clause need not be considered. This is the legal

position as the arbitration clause contained in such an

instrument (which requires stamping) can be severed from the

main contract / transaction and the court under Section 9 can

pass an order on the arbitration agreement and not the main

contract transaction. In fact, the Rules framed by this Court

for filing arbitration petitions specifically provide that these

proceedings can be filed by annexing a certified copy of the

original instrument and therefore the court under Sections 9

and 11 can impound the document and hand it for

adjudication under the provisions of the Stamp Act and still

pass necessary orders on the basis of certified copy of the

original instrument. This will make both the statutes workable.

(iv) POSITION IN A REGULAR CIVIL SUIT:

23. The learned Senior Counsel submits that the Civil

Courts have ample power to grant interim relief under Order

XXXIX and XL of the Code of Civil Procedure, 1908 to parties

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even if the agreement on the strength of which the suit is filed

is unstamped. In this context, the following judgments are

relied:-

Sr. Name of Judgment Citation Proceedings No. before the Court 1 Morpheus Media Ventrues 2017 (2) Appeal against Pvt. Ltd. V/s Anthony Bom.C.R. 459 grant of interim Maharaj of Trinidad and (DB Bombay relief in suit Tobago High Court) 2 Mahendra Kumar Modi vs. 2018 (2) Appeal against Gujarat State Fertilizers & Bom.C.R. 469 grant of interim Chemicals Ltd. (DB Bombay relief in suit.

High Court) 3 Marine Container Services (I) 2001 (4) Mh.L.J. O.38 R.5 Pvt. Ltd. V/s. Rajesh Dhirajlal 353 (Single Application Vora Judge Bombay High Court) 4 Pride Associates Vs. 2013 (5) ABR O. 40 Application Damodardas Bhaidas Bhuta 729 (Single in suit Judge Bombay High Court) 5 Ashwatha Developers Vs. 2016 (4) ABR 1 Appeal against Shree Vardhaman (Single Judge interim relief in Stanakvasi Jain Shravak Bombay High Suit Sangh Court)

In the above judgments it has been held that the issue as to

insufficiency in payment of stamp duty or non-payment of

stamp duty can be considered at the stage of trial or evidence

and is not germane at the stage of deciding an application for

interim relief. It would therefore be preposterous to apply the

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provisions as to non-payment of stamp duty at the stage of

Section 9 proceedings when the same cannot be applied at the

stage of interim relief in the suit. This would in fact deter

parties from entering into an arbitration agreement and the

purpose of ACA would itself be defeated.

(v) MEANING TO BE GIVEN TO PHRASE "ACTED UPON":

24. The learned Senior Counsel submitted that once the

arbitration clause contained in an instrument, which requires

stamping and on which no stamp duty is paid, is severed from

the main contract, both courts under Sections 9 and 11, would

only act on the arbitration agreement and not the main

contract. It is submitted that the words "acted upon" referred

in Section 34 of the Bombay Stamp Act and Section 35 of the

Indian Stamp Act, therefore, would become relevant and

effective when the court is acting upon the instrument

contained in the main contract. The court in Sections 9 and 11

in fact only acts upon the clause in the arbitration agreement

which is to be construed as an independent and separate

agreement from the main contract contained in an instrument

which requires payment of stamp duty. Therefore, the words

"acted upon" in Section 34 of the Bombay Stamp Act and

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Section 35 of the Indian Stamp Act will not apply to either

under Sections 9 or 11 when the court is acting upon only the

arbitration agreement.

25. This interpretation can also be viewed from a

different angle. SMS Tea Estates judgment was dealing with

the provisions of the Indian Stamp Act. The Maharashtra

Stamp Act has a provisions, i.e. Section 32A which in sub-

section (3) uses the following language:

"32A(3) If any person referred to in section 33, before whom any such instrument is produced or comes in the performance of his functions, has reason to believe that the market value of the immovable property which is the subject matter of such instrument has not been truly set forth therein, he may, after performing his function, in respect of such instrument, refer the instrument alongwith a true copy of such instrument to the Collector of the District for determination of the true market value of such property and the proper duty payable on the instrument.

Provided that if the person, before whom any such instrument is produced or comes, in performance of his functions, is an officer appointed as the Collector under clause

(f) of section 2, and he has reason to believe that the market value of the immovable property which is the subject matter of such instrument has not been truly set-forth therein, he shall, for the purpose of assessing the stamp duty, determine the true market value of such property in the manner laid down in the Bombay Stamp (Determination of True Market Value of Property) Rules, 1995."

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It is therefore submitted that the same meaning can

be ascribed to the provisions of Section 34 and after the

performance of the duty by the court under Sections 9 and 11,

the provisions of fiscal statutes, i.e. Indian Stamp Act and

Maharashtra Stamp Act, can be taken care of.

26. The learned Senior Counsel submits that even if the

instrument containing the main contract / transaction between

the parties is impounded, it can never amount to impounding

of an arbitration agreement. This is for the reason that

arbitration clause contained in such an instrument is a

separate and independent contract and it can still be acted

upon by courts under Sections 9 and 11 even though the main

instrument is impounded and sent for adjudication under the

Stamp Act. This interpretation is further strengthened by the

fact that in arbitration proceedings on an application for

interim relief made under Section 17, without intervention of

the court, will have no such fetter on the powers to grant

interim relief. The learned counsel submits that the two

judgments of the Supreme Court in Naina Thakker vs.

Annapurna Builders11 and M. Anausuya Devi vs. M.

11 (2013) 14 SCC 354

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Manik Reddy12 have already held that SMS Tea Estates

judgment does not apply to proceedings under Sections 8 and

34 as it was only dealing with Section 11 and therefore same

logic cannot apply to the proceedings under Section 9.

27. To summarize, Dr. Sathe, the learned Senior Counsel

submitted that,

(i) the judgment in SMS Tea Estates was dealing with only Section 11 proceedings and the same logic cannot be made applicable to Section 9 proceedings;

(ii) the arbitration clause contained in an instrument requiring stamp duty is a separate and independent agreement which can be severed from the main instrument;

(iii) the judgment in SMS Tea Estates is not relevant for the determination of issue in question after the insertion of 2015 amendment and the question as to stamping / registration cannot be decided in Section 11 proceedings;

(iv) the judgment in the case of SMS Tea Estates cannot be extended in its application to Section 9 proceedings. The scope of proceedings under Section 9 and that in such proceedings court is only acting upon an arbitration agreement is conclusively held in the case of Firm Ashok and that legal position continues to subsist;

(v) Section 9 court, while passing an order for interim measure, is only "acting upon" the arbitration agreement and not the instrument requiring stamp duty and therefore these words in Section 34 of the Bombay Stamp Act will not apply to Sections 9 proceedings and Section 11 proceedings after insertion of clause 6A by amendment in 2015. The court in Section 9 proceedings can therefore pass ad-interim as well as final order unfettered by non-payment of stamp duty on 12 (2003) 8 SCC 565

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the instrument;

(vi) the argument that because Section 9 Court is also required to enter into merits of the main transaction contained in the instrument requiring payment of stamp duty, while passing order, is misconceived. This is for the reason that although Section 9 court, while passing an order of interim relief, may be required to get into the merits of the transaction, but it is still acting on the basis of an arbitration agreement and the order is passed not on the main instrument, but on the arbitration agreement. If entering into merits of the matter amounts to acting upon the instrument, the court under Section 34 of ACA also would be required to enter into the merits of the award, however, it can still pass an order under Section 34 without entering into the question of stamp duty and the question of stamp duty is left to be decided at the stage of enforcing the award under Section 36 (Ref:- Anasuya Devi (Supra));

(vii) the court while entertaining an application under Section 9 can pass orders by acting upon the arbitration agreement to preserve the substance of arbitration proceedings, which may be either pending, contemplated or concluded.

(viii) this would be an appropriate course of action in view of the fact that in several cases of arbitration agreements as defined and falling under Section 7 or in civil suits, there is no fetter on the court in passing interim orders and if such fetter becomes applicable only when arbitration agreement is contained in an instrument requiring levy of stamp duty, this would be clearly unfair and inequitable and virtually a deterrent on arbitration proceedings. Besides, in law also it is not warranted;

(ix) in view of the amendment to Section 9, sub-section (2) now requiring commencement of arbitral proceedings within

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specified time, also takes care of the issue that the arbitration proceedings are commenced expeditiously after obtaining interim orders which would also expedite collection of revenue on such documents.

(x) The learned Senior Counsel therefore submitted that the answer to the question under reference is that the court as defined in Section 2(e) of the ACA can entertain and grant any interim or ad-interim relief on an application under Section 9 when an arbitration agreement is contained in a document, i.e. unstamped or insufficiently stamped. The court's power to grant interim / ad-interim relief under Section 9 is not fettered by the provisions of the Maharashtra Stamp Act, 1958 and the Indian Stamp Act, 1899. The revenue of the State also can be protected by the court after passing order under Section 9 directing the "document" severed from Arbitration Agreement to be impounded and sent for further action in accordance with law.

(D) SUBMISSIONS OF MR. P.S. DANI, LEARNED SENIOR COUNSEL FOR THE RESPONDENT IN SECTION 9 PETITION:

28. On the other hand Mr. Dani learned Senior Counsel

for the respondents has made the following submissions :

i) It is contended that when the Court exercises jurisdiction

under section 9, it exercises judicial powers and restricted to

arbitration proceedings. According to Mr.Dani, this can be

clearly seen from the following words in sub-section (1) of

section 9 :

"The Court shall have the same powers for making orders as it has for the purpose of and in relation to, in any proceedings before it."

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(ii) If a document is not sufficiently stamped then

necessarily, the Court exercising jurisdiction under section 9

under the mandate of the law, as laid down in SMS Tea

Estates is under an obligation to impound a document and

only after payment of the stamp duty, the Court can proceed

to pass orders on the section 9 application which would be

either ad-interim or interim and not before it is sufficiently

stamped.

(iii) The decision of the Supreme Court in SMS Tea Estates

(supra), in para 21 clearly holds, that the Court should

consider at the outset, whether an objection in that behalf is

raised or not and as to whether the document is properly

stamped. If it is not properly stamped, then it should be

impounded and dealt in a manner as specified under the

Maharashtra Stamp Act,1958. Till that time, the Court cannot

act upon the document and also arbitration agreeement

contained therein, and only after deficit stamp duty is paid or

the document is sufficiently stamped, the Court can act upon

the said document or document can be admitted in evidence.

(iv) The decision in SMS Tea Estates, (supra) is not in any

manner diluted by the amendment as incorporated, by

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Arbitration Amendment Act (Act 3 of 2016 with effect from

23.10.2015) and or by incorporation of sub section (6A) in

Section 11 as Section 9 has remained untouched by any

incorporation of the nature as brought about by sub-section

(6A) in Section 11.

(v) Referring to section 33 of the Maharashtra Stamp Act, 1958

it is submitted that, it is a restriction on the power of the Court

exercising jurisdiction even under Section 9, as unless there is

compliance of payment of deficit stamp duty, or document to

be sufficiently stamped, the Court necessarily has to impound

the document as Section 33 of the Stamp Act would postulate,

and only thereafter proceed to pass any orders on a Section 9

Petition. Referring to the decision of the Supreme Court in

Commissioner of Customs (Import) Mumbai vs Dilip

Kumar & Company and others13, it is submitted that the

duty of the Court would be to act upon the true intention of the

legislation, as reflected by Section 33 of the Maharashtra

Stamp Act,1958 as it is a fiscal statute and therefore, it is

required to be strictly construed.

(vi) It is contended that before a document is acted upon, the

document is required to be sufficiently stamped, is further

13 (2018) 9 SCC 1

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confirmed in the decision of the Supreme Court in Black

Pearls Hotels Private Limited vs Planet M.Retail

Limited14 wherein, the Supreme Court referring to the

decision in SMS Tea Estates (supra) has held that the Court

would be obliged to consider the nature of the document and

whether the document is required to be stamped or not and

whether requisite stamp duty has been paid on the same.

29. Learned Senior Counsel placed reliance on

paragraphs 9 to 22, 29 and 31 of the judgment of the

Supreme Court in the case of SMS Tea Estates (Supra) and

submits that the said judgment is not restricted to Section 11

of the ACA, but was also dealing with the powers of the Court

under section 9 of the said Act and had specifically dealt with

the issue as to whether the arbitration agreement in an

agreement compulsorily required to be stamped which is

unregistered and/or which is not duly stamped, is valid and

enforceable or not? He submits that while dealing with the

said issue, the Supreme Court held that if the Court

comes to the conclusion that the document containing the

arbitration agreement is not sufficiently stamped, it should be

impounded and dealt with in the manner specified in section

14 (2017) 4 SCC 498

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38 of the Stamp Act. The Court cannot act upon the said

document or the arbitration clause therein. He also invited our

attention to the questions formulated by the Supreme

Court in the said judgment and more particularly paragraph

9(ii) thereof.

30. It is submitted by the learned senior counsel that

the questions framed by the Supreme Court in

paragraphs 9(i) and 9(ii) have been separately considered and

decided in the said judgment.

31. Insofar as reliance placed by Dr. Sathe, on section

16 of the ACA in support of the submission that the arbitration

agreement can be severed from the main agreement, he

submits that the said situation would arise only under section

16(1)(a) of the Act and that also only when the parties refer

the dispute to arbitration without intervention of the Court. He

submits that though the proviso to section 49 of the

Registration Act, 1908 provides that unregistered document

affecting the immovable property is required by the

Registration Act or Transfer of Property Act, 1882 to be

registered, it may still be received in evidence in a contract

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for specific performance or evidence of any collateral

evidence, as there is no similar proviso to Section 35 of the

Maharashtra Stamp Act. He submits that though while

considering the application under section 11 of the ACA, Court

can severe the arbitration agreement from the main

agreement, the principles of severability permitted under

section 11, if any, cannot be mixed up with the powers of

Court while dealing with the application under section 9 of the

said Act.

32. Learned Senior Counsel placed reliance on the

judgment of the Supreme Court in case of Black

Pearl Hotel Private Limited (Supra) and more particularly

paragraphs 6, 8, 9 and 10 and would submit that the

Supreme Court in the said judgment delivered by three Judges

of the Supreme Court has reiterated the principles laid

down by the two Judges of the Supreme Court in case of

SMS Tea Estates (supra) and more particularly the principles

laid down in paragraph 22 of the said judgment. He submits

that the judgment of the Supreme Court in case of SMS Tea

Estates (supra) and in case of Black Pearl Hotel Private

Limited (supra) applies to the proceedings under section 9 of

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the Act and thus the applicant in the said application not

having paid the stamp duty as required in law, could not claim

any interim measures under section 9 of the Act till such

document is sufficiently stamped.

33. All powers of Court under different provisions of

law, including the fetters created under the provisions of the

Maharashtra Stamp Act stand attracted to the proceedings

under section 9 of the act also. He submits that even if the

arbitration agreement is severed, for the purpose of granting

interim measures, the Court will have to arrive at a prima-facie

conclusion that whether the main agreement is enforceable in

law or not. While considering the application for interim

measures under section 9 of the Act, the Court has to consider

the validity of the main agreement and has to act upon the

said agreement. He submits that for the purpose of touching

upon the merits of the matter, the Court has to consider the

validity of the agreement on merits.

34. It is submitted by the learned senior counsel that a

document required to be stamped if is not duly stamped is

inadmissible in evidence. Such consequence is specifically

provided under section 34 of the Maharashtra Stamp Act,

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1988. He submits that once the fiscal statute determines a

particular thing to be done in a particular manner, such

provisions have to be strictly followed.

35. Learned senior counsel placed reliance on the

judgment of the Supreme Court in case of Commissioner of

Customs (Import), Mumbai (Supra), and in particular

paragraphs 20 to 23 and would submit that when the words in

a statute are clear, plain and unambiguous and only one

meaning can be inferred, the Courts are bound to give effect to

the said meaning irrespective of consequences. He submits

that the petitioner thus cannot seek interim measures under

section 9 based on the argument that though the document is

not sufficiently stamped, if interim measures are not granted

immediately, it would lead to a serious hardship or

consequences. He submits that the hardship and

inconvenience cannot be the basis to alter the meaning and

language implied by legislation under section 34 of the

Maharashtra Stamp Act.

36. It is submitted by the learned senior counsel that

though the legislature had chosen to bring the amendment to

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section 11 by inserting sub section (6-A), thereby providing

that the power of the Court is confined to see the existence of

the arbitration agreement, such amendment is not brought to

section 9 of ACA. He submits that it is thus clear that the

scheme of section 11 and 9 and the principles applicable to

both these proceedings are different.

37. Insofar as the submission of Dr. Sathe, learned

senior counsel that the photocopy cannot be impounded or no

stamp duty is required to be paid on a copy is concerned,

Mr.Dani, learned senior counsel placed reliance on section 3 of

the Maharashtra Stamp Act and more particularly proviso

thereto and would submit that if the original document is not

stamped, copy if relied upon will have to be stamped.

38. Learned senior counsel distinguished the judgment

of the Supreme Court in case of Firm Ashok Traders & Anr.

(Supra) and more particularly paragraph 13 of the said

judgment and would submit that the Supreme Court in the

said judgment held that a person who is not a party to the

arbitration agreement cannot enter the Court for protection

under section 9. He submits that the said judgment of the

Supreme Court would not assist the case of the petitioner.

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39. Learned Senior Counsel submits that in view of the

proviso to section 9-A of the Code of Civil Procedure, 1908, the

Court is empowered to grant ad-interim relief even during the

pendency of adjudication of issue of jurisdiction raised by the

defendant. There is no such proviso under section 9 of the Act

empowering the Court to grant even ad-interim relief when an

issue of insufficiently of payment of stamp duty on the

document being under consideration is raised.

40. The learned Senior Counsel distinguished the

judgment of the Division Bench of this Court in the case of

Universal Enterprises (supra) on the ground that the

Division Bench in the said Judgment failed to notice paragraph

19 of the Judgment of the Supreme Court in the case of S.B.P.

& Co. vs. Patel Engineering Ltd.15. He submits that the

Supreme Court in the said Judgment had specifically held that

under Section 9 of the Act, if the opposite party disputes the

existence of arbitration agreement or raises a plea that the

dispute involved was not covered by the arbitration clause or

that the Court which was approached, had no jurisdiction to

pass any order in terms of Section 9 of the Act, that Court has

15 AIR 2006 SC 450

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necessarily to decide whether it has jurisdiction, whether there

is an arbitration agreement which is valid in law, and whether

the dispute sought to be raised is covered by that agreement

or not.

41. It is submitted that unless the Court while

considering the application under Section 9 of the Act

considers the main agreement containing an arbitration

agreement, the Court cannot grant any interim measures

under Section 9 and without acting upon the said agreement.

He strongly placed reliance on Section 35 of Indian Stamp Act

in support of his submission that the Courts are barred from

acting upon the documents which are unstamped or under

stamped and the Court, while deciding an application under

Section 9 of the Act, is bound to go into the factual aspects

and find out the prima facie case or balance of convenience, or

other to grant or refuse any relief. He submits that such

scrutiny and examination of the actual contract would

ultimately require acting upon the said documents.

42. It is submitted that to examine the actual merits of

the case, the Court has to act upon the principal document, as

the Court cannot severe the arbitration clause from the main

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agreement and grant injunction. Without acting upon the main

document, the Court cannot pass any injunction order.

(E) Discussion

43. To examine the controversy, the relevant provisions

of the ACA and Maharashtra Stamp Act,1958 are required to be

noted:

Arbitration and Conciliation Act 1996

Section 2. Definitions.--(1) In this Part, unless the context otherwise requires,--

(a) "arbitration" means any arbitration whether or not administered by permanent arbitral institution;

(b) "arbitration agreement" means an agreement referred to in section 7;

2[(e) "Court" means--

(i) in the case of an arbitration other than international commercial arbitration, the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such principal Civil Court, or any Court of Small Causes;

(ii) in the case of international commercial arbitration, the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, and in other cases, a High Court having jurisdiction to hear appeals from decrees of courts subordinate to that High Court;]

(h) "party" means a party to an arbitration agreement.

5. Extent of judicial intervention. --Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.

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ARBITRATION AGREEMENT

7. Arbitration agreement.--(1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

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

(3) An arbitration agreement shall be in writing.

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

(a) a document signed by the parties;

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

or

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

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

Section 9. Interim measures etc. by Court.-- A party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a Court-

(i) for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or

(ii) for an interim measure of protection in respect of any of the following matters, namely:-

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as

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to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party, or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.

[(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under subsection

(i), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.

(3) Once the arbitral tribunal has been constituted, the Court shall not entertain an application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious.]

11. Appointment of Arbitrators.--(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.

(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.

(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.

(4) If the appointment procedure in sub-section (3) applies and --

(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or

(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by 1[the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court].

(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made,

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upon request of a party, by 1[the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court].

(6) Where, under an appointment procedure agreed upon by the parties,--

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

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

(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request 1[the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court] to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

[(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) or sub section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.

(13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.

JURISDICTION OF ARBITRAL TRIBUNAL

Section 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 existence or validity of the arbitration agreement, and for that purpose,-

(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract, and

(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidy of the arbitration clause.

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

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(3) A plea that the arbitral tribunal is exceeding the scope of its authority is raised during the arbitral proceedings.

(4) The arbitral tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3) and where the arbitral tribunal takes a decision rejecting the plea continue with the arbitral proeedings and make an arbitral award.

(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34."

Maharashtra Stamps Act

INSTRUMENTS NOT DULY STAMPED:

33. (1) Subject to the provisions of section 32A, every person having by law or consent of parties authority to receive evidence, and every person in charge of public office, except an officer of police (or any other Officer, empowered by law to investigate offences under any law for the time being in force) before whom any instrument, chargeable in his opinion, with duty is produced or comes in the performance of his functions shall, if it appears to him that such instrument is not duly stamped, impound the same (irrespective whether the instrument is or is not valid in law).

(2) For that purpose every such person shall examine every instrument so chargeable and so produced or coming before him in order to ascertain whether it is stamped with a stamp of the value and description required by the law for the time being in force in the State when such instrument was executed or first executed:

Provided that -

(a) nothing herein contained shall be deemed to require any Magistrate or Judge of Criminal Court to examine or impound if he does not think fit so to do, any instrument coming before him in the course of any proceeding other than a proceeding under (Chapter IX or Part D of Chapter X of the Code of Criminal Procedure,1973).

(b) in the case of a Judge of a High Court, the duty of examining and impounding any instruemnt under this section may be delegated to such Officer as the Court may appoint in this behalf.

(3) For the purpose of this section, in cases of doubt-

(a) the State Government may determine what offices shall be deemed to be public offices; and

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

34: No instrument chargeable with duty ****** shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer unless such instrument is duly stamped (or if the instrument is written on sheet of paper with impressed stamp (such stamp paper is purchased in the name of one of the parties to the instrument); Provided that,-

(a) any such instrument shall, subject to all just exceptions, be admitted in evidence on payment of -

(i) the duty with which the same is chargeable, or in the case of an instrument insufficiently stamped, the amount required to make up such duty, and

(ii) any penalty at the rate of 2 per cent, of the deficient portion of the stamp duty;

Provided that, in no case, the amount of the penalty shall exceed (four times) the deficient portion of the stamp duty;

(b) where a contract or agreement of any kind is effected by correspondence consisting of two or more letters and may one of the letters bears the proper stamp, the contract or agreement shall be deemed to be duly stamped;

(c) nothing therein contained shall prevent the admission of any instrument in evidence in any proceeding in a Criminal Court, other than a proceeding (under Chapter IX of Part D of Chapter X of the Code of Criminal Procedure, 1973);

(d) Nothing herein contained shall prevent the admission of any instrument in any Court when such instrument has been executed by or on behalf of the Government or where it bears the certificate of the Collector as provided by section 32 or any other provisions of this Act;

(e) Nothing herein contained shall prevent the admission of a copy of any instrument or of any oral admission of the contents of any instrument, if the stamp duty or a deficient portion of the stamp duty and penalty as specified in clauses

(a) is paid.

35. Where an instrument has been admitted in evidence, such admission shall not, except as provided in section 58, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped.

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36. The State Government may make rules providing that, where an instrument bears a stamp of sufficient amount but of improper description, it may, on payment of the duty with which the same is chargeable, be certified to be duly stamped, and any instrument so certified shall then be deemed to have been duly stamped as from the date of its execution.

58. (1) When any Court in the exercise of its civil or revenue jurisdiction or any Criminal Court in any proceeding (under Chapter IX or Part D of Chapter X of the Code of Criminal Procedure, 1973) makes any order admitting any instrument in evidence as duly stamped or as not requiring a stamp, or upon payment of duty and a penalty under section 34, the Court to which appeals lie form, or reference are made by, such first mentioned Court may, of its own motion or on the application of the Collector, take such order into consideration.

(2) If such Court after such consideration is of opinion that such instrument should not have been admitted in evidence without the payment of duty and penalty under section 34, or without the payment of a higher duty and penalty than those paid, it may record a declaration to that effect and determine the amount of duty with which such instrument is chargeable (and may required,-

(i) the party or person concerned to make the payment of the property duty or the amount required to make up the payment of the proper duty or the amount required to make up the same, together with a penalty, under section 34, or payment of a higher duty and penalty than those paid, to itself or to the Collector; and

(ii) any person in whose possession or power such instrument than is, to produce the same, and may impound the same when produced.

(3) When any declaration has been recorded under sub- section (2), the Court recording the same shall send a copy thereof to the Collector,and where the instrument to which it relates has been impounded or is otherwise in the possession of such Court shall also send him such instrument.

(3A) When the duty and penalty leviable in respect of any instrument in accordance with the declaration made under sub-section (3) and required to be paid thereunder are paid to the Court or to the Collector, then the Court or,as the case may be, the Collector shall certify by endorsement thereon that the property duty and penalty,stating the amount of each, have been levied in respect of such instrument, and the name and residence of the person paying the same.

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(3B). Every instrument so endorsed shall thereupon be delivered, on an application in this behalf, to the person from whose possession the instrument came in the possession of such Court, or as such person may direct to any other person authorized by him.)

(4) The Collector may thereupon, notwithstanding anything contained in the order admitting such instrument in evidence, or in any certificate granted under section 41, or in section 42, prosecute any person for any offence against the stamp law which the Collector considers him to have committed in respect of such instrument'

Provided that-

(a) no such prosecution shal lbe instituted where the amount including duty and penalty, which according to the determination of such Court, was payable in respect of the instrument under section 34, (is paid to the Court or the Collector, unless the Collector thinks) that the offence was committed with an intention of evading payment of the property duty

(b) except for the purposes of such prosecution no declaration made under this section shall affect the validity of any order admitting any instrument in evidence, or of any certificate, granted under section 41."

(F) DISCUSSION / LEGAL POSITION AS TO WHAT IS THE SCOPE AND JURISDICTION OF THE COURT UNDER SECTION 9:

44. As noted above, the issue which would fall for

consideration is whether, "the Court under ACA can

entertain and grant any interim and/or ad-interim relief

in an application under Section 9 of the ACA when a

document contained arbitration clause is unstamped or

insufficiently stamped?" Section 9 of the ACA can be

invoked by a party only as an interim measure pending

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commencement of the proceeding or in the course of the

proceeding or at any time after making of the arbitration

award before it's enforcement in accordance with Section 36 of

the ACA. Any order which would be passed by the Court is

intended to protect the subject matter of the proceeding and

secure the interest of the parties. We are concerned with a

situation of an interim or ad-interim order pending the arbitral

proceedings. The relief which would be granted by the Court

under Section 9 is not a substantive final relief, for the reason

that a final relief can be granted only by an arbitral award.

45. For presetting the scope of Section 9 of the ACA, we

may refer to the following judgments :

(a) In the case of M/s Sundaram Finance Ltd. vs.

M/s NEPC India Ltd.16, in para 15, the Supreme Court

observed as under :

"15. Section 9 of the said Act corresponds to Article 9 of the UNCITRAL Model Law which is as follows:

"It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a Court an interim measure of protection and for a Court to grant such measure".

This article recognises, just like Section 9 of the 1996 Act, a request being made before a Court for an interim measure of protection before arbitral proceedings. It is possible that in some countries if a party went to the Court seeking interim 16 AIR 1999 SC 565

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measure of protection that might be construed under the local law as meaning that the said party had waived its right to take recourse to arbitration. Article 9 of the UNCITRAL Model Law seeks to clarify that merely because a party to an arbitration agreement requests the Court for an interim measure " before or during arbitral proceedings" such recourse would not be regarded as being incompatible with an arbitration agreement. To put it differently the arbitration proceedings can commence and continue notwithstanding a party to the arbitration agreement having approached the Court for an order for interim protection. The language of Section 9 of the 1996 Act is not identical to Article 9 of the UNCITRAL Model Law but the expression "before or during arbitral proceedings " used in Section 9 of the 1996 Act seems to have been inserted with a view to give it the same meaning as those words have in Article 9 of the UNCITRAL Model Law. It is clear, therefore, that a party to an arbitration agreement can approach the Court for interim relief not only during the arbitral proceedings but even before the arbitral proceedings. To that extent Section 9 of the 1996 Act is similar to Article 9 of the UNCITRAL Model Law.

(emphasis added)

It can be derived from the provisions of Section 9 of

ACA and the observations of the Supreme Court that under

Section 9 the court has jurisdiction to pass orders before

commencement of the arbitration proceedings and

appointment of an Arbitrator. Before exercising jurisdiction

under Section 9, the court has to be satisfied that there is an

arbitration agreement between the parties and the applicant

will take effective steps for commencement of arbitral

proceedings. On the court being satisfied, jurisdiction can be

exercised under Section 9 of the ACA to pass such interim

orders by giving protection to the parties in the facts and

circumstances warrant in a given case.

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(b) In the Constitution Bench judgment of the Supreme

Court in the case of M/s. S. B. P. & Co. vs. M/s. Patel

Engineering Ltd. (Supra), Justice P. K. Balasubramanyan for

the majority observed as under :

"18. ....... Similarly, Section 9 enables a Court, obviously, as defined in the Act, when approached by a party before the commencement of an arbitral proceeding, to grant interim relief as contemplated by the Section. When a party seeks an interim relief asserting that there was a dispute liable to be arbitrated upon in terms of the Act, and the opposite party disputes the existence of an arbitration agreement as defined in the Act or raises a plea that the dispute involved was not covered by the arbitration clause, or that the Court which was approached had no jurisdiction to pass any order in terms of Section 9 of the Act, that Court has necessarily to decide whether it has jurisdiction, whether there is an arbitration agreement which is valid in law and whether the dispute sought to be raised is covered by that agreement. There is no indication in the Act that the powers of the Court are curtailed on these aspects. On the other hand, Section 9 insists that once approached in that behalf, " the Court shall have the same power for making orders as it has for the purpose of and in relation to any proceeding before it" . Surely, when a matter is entrusted to a civil Court in the ordinary hierarchy of Courts without anything more, the procedure of that Court would govern the adjudication [See R.M.A.R.A. Adaikappa Chettiar and Anr. v. R. Chandrasekhara Thevar ( AIR 1948 P.C.12)].

(Emphasis Supplied)

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(c) In the case of Firm Ashok Traders & Anr. (Supra),

in para 13, the Supreme Court observed as under :

"13. The A&C Act,1996 is a long leap in the direction of alternate dispute resolution systems. It is based on UNCITRAL Model. The decided cases under the preceding Act of 1940 have to be applied with caution for determining the issues arising for decision under the new Act. An application under Section 9 under the scheme of A & C Act is not a suit. Undoubtedly, such application results in initiation of civil proceedings but can it be said that a party filling an application under Section 9 of the Act is enforcing a right arising from a contract? "Party" is defined in Clause (h) of sub- Section (1) of Section 2 of A & C Act to mean 'a party to an arbitration agreement'. So, the right conferred by Section 9 is on' a party to an arbitration agreement. The time or the stage for invoking the jurisdiction of Court under Section 9 can be (i) before, or (ii) during arbitral proceeding, or (iii) at any time after the making of the arbitral award but before it is enforced in accordance with Section 36. With the pronouncement of this Court in M/s Sundarum Finance Ltd. v. M/s NEPC India Ltd., AIR (1999) SC 565 the doubts stand cleared and set at rest and it is not necessary that arbitral proceeding must be pending or at least a notice invoking arbitration clause must have been issued before an application under Section 9 is filed. A little later we will revert again to this topic. For the moment suffice it to say that the right conferred by Section 9 cannot be said to be one arising out of a contract. The qualification which the person invoking jurisdiction of the Court under Section 9 must possess is of being a party to an arbitration agreement. A person not party to an arbitration agreement cannot enter the Court for protection under Section 9. This has relevance only to his

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locus standi as an applicant. This has nothing to do with the relief which is sought for from the Court or the right which is sought to be canvassed in support of the relief. The reliefs which the Court may allow to a party under clauses (i) and (ii) of Section 9 flow from the power vesting in the Court exercisable by reference to 'contemplated', 'pending' or 'completed' arbitral proceedings. The Court is conferred with the same power for making the specified orders as it has for the purpose of and in relation to any proceedings before it though the venue of the proceedings in relation to which the power under Section 9 is sought to be exercised is the arbitral tribunal. Under the scheme of A & C Act, the arbitration clause is separable from other clauses of the Partnership Deed. The arbitration clause constitutes an agreement by itself. In short, filing of an application by a party by virtue of its being a party to an arbitration agreement is for securing a relief which the Court has power to grant before, during or after arbitral proceedings by virtue of Section 9 of the A & Act. The relief sought for in an application under Section 9 of A & C Act is neither in a suit nor a right arising from a contract. The right arising from the partnership deed or conferred by the Partnership Act is being enforced in the arbitral tribunal; the Court under Section 9 is only formulating interim measures so as to protect the right under adjudication before the arbitral tribunal from being frustrated. Section 69 of the Partnership Act has no bearing on the right of a party to an arbitration clause to file an application under Section 9 of A & C Act."

(Emphasis Supplied)

46. The legal position which emerges from the reading

of the provisions of the ACA and the authoritative

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pronouncements on the powers of the court exercising

jurisdiction under Section 9, can be summarized as under :

(a) Section 9 enables the party to approach the court before commencement of arbitral proceedings to seek interim / ad-relief on the basis that there exists an arbitration agreement between the parties.

(b) On party approaching the court under the said provisions, the court will have jurisdiction to pass orders of interim / ad-interim nature protecting the party in a given facts and circumstances.

(c) The right conferred under Section 9 to a party to approach the court would not be of a nature of a right under a contract. For invoking jurisdiction under Section 9, the party must establish that there was an arbitration agreement and he was party to the same.

(d) The basic requirement, therefore, for invoking jurisdiction of the court under Section 9 would be that there exists an "arbitration agreement" between the parties.

The concern of the court in the present case is of a

arbitration clause which is contained in an agreement, which is

not sufficiently stamped. It is quite clear that under the

scheme of the ACA, an arbitration clause is severable from

other clauses of the contract and an arbitration agreement is

not required to be stamped or required to be registered. There

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can also be a separate / independent arbitration agreement

between the parties which would be distinct from the principal

contract (see Section 7).

47. The doctrine of severability is, thus, applicable and

the following consequences would follow :-

(a) An arbitration agreement between the parties is required to be severed from the principle contract and is required to be given effect independently by a principal contract between the parties.

(b) As seen from Sub section 2 of Section 7 an arbitration agreement may be in the form of arbitration clause in any contract or in the form of separate agreement. Further sub section 1 (a) of Section 16 of the ACA provides that arbitration clause which form part of the contract shall be treated as agreement independently or the other terms of the contract.

(c) The doctrine of severability of arbitration agreement, therefore, can be clearly seen from the cumulative reading of sub section 2 of Section 7 and sub section (1)(a) of Section 16 of the ACA.

(G) SCOPE AND OBJECT OF THE STAMP ACT:

48. The Stamp Act admittedly is a fiscal enactment.

The primary object of which is to ensure payment of stamp

duty on the documents on which stamp duty is required to be

paid.

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49. In the case of J.M.A. Raju vs. K. Bhatt17, Full

Bench of the Gujarat High Court held that the court has to

consider the provisions of the Stamp Act as a fiscal measure,

the principal object of which is to secure revenue for the State.

The object of the enactment is not to enable parties to raise

technical objections to meet the case of their opponent.

50. In the case of Jagdish Narain vs. Chief

Controlling Revenue18, the Allahabad High Court held, in the

context of Indian Stamp Act which is an enactment pari

materia to the Maharashtra Stamp Act, that the sole object of

the Indian Stamp Act is to increase revenue and its provisions

must be construed as having in view only the protection of

revenue.

51. In the case of Javer Chand and ors. vs. Pukhraj

Surana19, the Supreme Court in para 4 considers a situation

when a document, which was not stamped, came to be

admitted in evidence and what would be the consequence. It

was observed as under:

17 AIR 1976 Gujarat 72 FB 18 AIR 1994 All 371 19 AIR 1961 SC 1655

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" That section is categorical in its terms that when a document has once been admitted in evidence, such admission cannot be called in question at any stage of the suit or the proceeding on the ground that the instrument had not been duly stamped. The only exception recognised by the section is the class of cases contemplated by S.61, which is not material to the present controversy. Section 36 does not admit of other exceptions. Where a question as to the admissibility of a document is raised on the ground that it has not been stamped, or has not been properly stamped, it has to be decided then and there when the document is tendered in evidence. Once the Court, rightly or wrongly, decides to admit the document in evidence, so far as the parties are concerned, the matter is closed. Section 35 is in the nature of a penal provision and has far-reaching effects. Parties to a litigation, where such a controversy is raised, have to be circumspect and the party challenging the admissibility of the document has to be alert to see that the document is not admitted in evidence by the Court. The Court has to judicially determine the matter as soon as the document is tendered in evidence and before it is marked as an exhibit in the case. The record in this case discloses the fact that the hundis were marked as Exs. P. 1 and P. 2 and bore the endorsement 'admitted in evidence' under the signature of the Court. It is not, therefore, one of those cases where a document has been inadvertently admitted, without the Court applying its mind to the question of its admissibility. Once a document has been marked as an exhibit in the case and the trial has proceeded all along on the footing that the document was an exhibit in the case and has been used by the parties in examination and cross-examination of their witnesses, S. 36 of the Stamp Act comes into operation. Once a document has been admitted in evidence, as aforesaid, it is not open either to the Trial Court itself or to a Court of Appeal or revision to go behind that order. Such an order is not one of those judicial

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orders which are liable to be reviewed or revised by the same Court or a Court of superior jurisdiction."

52. In the case of M/s. K. I. Suratwala and Co. vs.

Mahmud Bidi Works Sholapur and ors.20, this court in para

22 observed as under :

"22. The learned trial Judge held that the agreement, Ex.42 was a bond, within the meaning of Section 2(c) of the Indian Stamp Act and was liable to be stamped with an ad valorem stamp duty due under Art.15. We, however, find that the document had already been exhibited and used at the trial. Under Section 35 of the Indian Stamp Act once a document is so admitted in evidence and used it cannot be thereafter questioned at any stage of the same proceedings or even in appeal. We cannot, therefore, hold that it was open to the learned Judge to hold in the judgment that the instrument was inadmissible in evidence once it had been marked as an exhibit and admitted in evidence. The Supreme Court has also so held in the case of Javer Chand and Ors. v. Pukhraj Surana, AIR 1961 SC 1655."

(Emphasis Supplied)

53. In the case of Radhakisan Tijulal Agrawal vs.

Jayantilal Hargovindas and anr.21, the learned Single Judge

of this court observed as under:

"6. The main contention of the appellant is that the plaintiff, after having obtained an insufficiently stamped pro- note (Ex.31) in connection with the suit transaction, cannot base his suit on the original consideration i.e. the loan

20 AIR 1972 BOMBAY 238 21 1980 Mh.L.J. 120

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transaction. My attention was drawn to section 34 of the Indian Stamp Act,1899. The relevant part of that section reads as follows:

"No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped."

There is no dispute that the payment of stamp duty and penalty is not permissible if the case is of an insufficiently stamped negotiable instrument or a promissory note. Along with the above provision, Mr. Mehadia relied upon the provisions of section 35 of the Evidence Act which lays down that when the terms of a contract have been reduced to writing, no evidence except the document itself (of the secondary evidence) is admissible On the basis of these two provisions, it was contended that as the pro note (Ex. 31) is in writing, no other evidence will be permissible except that writing. Secondly the said writing itself is inadmissible as it is insufficiently stamped. With this hypothesis a contention is raised that the plaintiff cannot base his claim on the pro-note. It should not, however, be forgotten that the plaintiff has in fact not based the suit claim on the pro-note. He has specifically alleged in paragraph 6 of the plaint that he was filing the suit on the original transaction.

9. What will be the effect of the execution of a pro-note or a bill in connection with the advancement of money is considered in Halsbury's Law of England, Volume VII page 243 in the following words:

"If a bill of exchange or note be taken on account of a debt, and nothing be said at the time, the legal effect of the transaction is that the original debt remains, but the remedy for it is suspended till the maturity of the instrument in the hands of the creditor. If the security is paid when it becomes due, this is equivalent to payment of the original debt, & if it is paid in part, the original debt is discharged 'pro tanto'. If the instrument is dishonoured, payment of the original debt may be enforced as if no security had been taken, unless the bill has been negotiated and is outstanding at the time of action brought in the hands of a third party, in which case the creditor's remedy continue to be suspended."

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10. The result, therefore, is that in the present case the pleadings and the evidence make it abundantly clear that the plaintiff mainly alleged that he advanced the amount of loan to defendant No. 2. In such a case, mere execution of a pro note would not mean that the transaction of loan has incited into that of loan. The loan transaction still continues to exist and there is nothing illegal if in these circumstances the plaintiff bases his claim on the original consideration. This is more so when, as discussed above, the pro-note has not been taken in absolute discharge of the loan or as in accord of full satisfaction of the loan transaction. Here the loan and the pro note are not consideration for each other. The result is that the appeal fails. The appeal is accordingly dismissed with costs."

(emphasis supplied)

54. In the case of Morpheus Media Ventures Pvt.

Ltd. vs. Anthony Maharaj of Trinidad and Tobag o22, the

Division Bench of this court in paras 22, 23, 24, 26 and 27

observed as under :

22. Prior thereto and extensively until paragraph 20 of the impugned judgment and order, the learned Judge sets out the pleadings and deals with the arguments of all the defendants that the document, particularly the promissory note, cannot be relied upon. The learned Judge expressed an opinion that the defect is a curable one. The learned Judge then referred to all the provisions contained in the Indian Stamp Act, 1958.

He then concluded that the Indian Stamp Act is a fiscal measure. It is enacted to secure revenue for the State on certain class of instruments and is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. The stringent provisions of the Act are conceived in the interest of the revenue. (See Hindustan Steel Ltd. Vs. Dilip Construction MANU/SC/0474/1969 MANU/SC/0474/1969 :

22 2017(2) Bom.C.R. 459

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AIR 1969 SC 1238). This judgment is followed by this Court and particularly by a single Judge in the case referred to in paragraph 16 of the impugned judgment.

23. Mr. Chinoy would submit that this principle could not have been evoked and applied in the facts and circumstances of the present case. We do not agree. We find that all the stipulations, provisions and conditions contained in Order XXXVII of the Code of Civil Procedure are complied with. There is no dispute that the promissory note and the two documents which have been referred extensively by the learned single Judge can be the basis for institution of a Summary Suit. The Summary Suit having been based thereon could have been instituted and tried as such. There is no substance in the defence and contentions of the appellants on merit. Mr. Chinoy would submit that the learned single Judge has accepted the legal position that these instruments cannot be received in evidence or acted upon. He has, therefore, proceeded to impound each of them. Having so impounded them, he was not empowered to pass a conditional order.

24. We do not agree with Mr. Chinoy further. We must not forget that the Stamp Act envisages a duty on the instrument. The Stamp Act is concerned with the instrument and not the transaction embodied or contained in it. The underlying transaction, therefore, does not enter into consideration while determining the proper stamp duty, adjudicating it and pass an order for ensuring payment of the same. Thus, the above matters are not with which the Court is concerned and it can in appropriate cases such as the one before us proceed with the merits of the matter by ensuring that the proper stamp duty is adjudicated and paid. The

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learned single Judge has precisely ensured that. He has not allowed the appellants to rely on a technical plea and of the nature referred above. The course adopted by him, in the facts and circumstances of the case, cannot be faulted. We have found that in all the instruments based on which the suit has been laid and particularly those required by Order XXXVII there is 'an admission of' the liability. There is no denial on the execution of these documents. None of the defendants have ever questioned the contents thereof nor is there any interpretation other than the one placed by the plaintiffs on the contents thereof and which can be deduced from the defences raised. In such circumstances, allowing a just and legitimate claim to be defeated and frustrated by taking recourse to the fiscal measure was not permitted by the learned single Judge.

25.... ....

26. This Judgment was followed in a later judgment in the case of Dr. Chiranji Lal (D) by L. Rs. V/s. Hari Das (D) by L. Rs. reported in MANU/SC/0396/2005 MANU/SC/0396/2005 : AIR 2005 SC 2564. Pertinently, Mr. Chinoy's extreme argument that once impounded the instruments as above cannot be relied upon to pass a conditional order is not borne out by the legal provisions noted in Hindustan Steel and analysed therein. That they are acted upon without adherence to the Indian Stamp Act therefore is not a sound argument to canvas in the facts of our case.

27. Beyond this contention and based on the applicability of the Stamp Act nothing really is argued before us on merits. Even otherwise we do not find that the defences raised have any merit or can be termed as substantial. We also do not find that the reliance placed on the SMS Tea Estates Pvt. Ltd.

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(supra) to be appropriate in the facts of our case. Any larger or wider question based on the provisions of law, the power of the court or the authority to receive unstamped instruments in evidence need not be considered in further details or gone into conclusively in this case. Purely going by the facts and circumstances of the present case and the conduct of the appellants, we do not think that the learned single Judge can be faulted in the exercise that he undertook. He was not obliged to postpone the adjudication until the proper stamp duty was adjudicated and paid. He was not obliged to reject the request of the respondent No. 1-plaintiff or defer the hearing of the Summons for Judgment or dismiss it. Purely in the facts and circumstances of the present case and when he found that all that the defendants are doing is to defeat and frustrate a just, legitimate and bona fide claim, the learned Judge, by relying on the principle enunciated in the Supreme Court Judgment, granted conditional leave to defend. Such an order can neither be termed as perverse or vitiated by any error law apparent on the face of the record. It does not require any interference in our appellate jurisdiction. The appeals are devoid of merits and are dismissed."

(Emphasis Supplied)

(H) DISCUSSION ON APPLICABILITY OF SMS TEA ESTATE (P) LTD. TO PROCEEDINGS UNDER SECTION 9 OF THE ACA :

55. The decision of the Supreme Court in SMS Tea

Estates (Supra) was rendered in the context of Section 11 of

the ACA. The learned Chief Justice of the Gauhati High Court

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of ACA on the ground that the arbitration agreement was

contained in lease deed which was not sufficiently stamped

and thus was inadmissible in evidence and unenforceable and

not binding. Having regard to Section 35 of the Stamp Act,

1899 and Clause 35 being arbitration clause, therefore, was

also invalid and unenforceable. The Supreme Court framed

the following questions for determination as referred in

paragraph 9 of the decision:-

"9. On the contention urged the following questions arise for consideration:

(I) whether the arbitration agreement contained in an unregistered (but compulsorily registrable) instrument is valid and enforceable?

(II) Whether an arbitration agreement in an unregistered instrument which is not duly stamped, is valid and enforceable? And

(III) Whether there is an arbitration agreement between the appellant and the respondent and whether an arbitrator should be appointed?"

In paras 11 and 16, the Supreme Court observed as under:

"11. Section 49 makes it clear that a document which is compulsorily registrable, if not registered, will not affect the

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immovable property comprised therein in any manner. It will also not be received as evidence of any transaction affecting such property, except for two limited purposes. First is as evidence of a contract in a suit for specific performance. Second is as evidence of any collateral transaction which by itself is not required to be effected by registered instrument. A collateral transaction is not the transaction affecting the immovable property, but a transaction which is incidentally connected with that transaction. The question is whether a provision for arbitration in an unregistered document (which is compulsorily registrable) is a collateral transaction, in respect of which such unregistered document can be received as evidence under the proviso to Section 49 of the Registration Act.

16. An arbitration agreement does not require registration under the Registration Act. Even if it is found as one of the clauses in a contract or instrument, it is an independent agreement to refer the disputes to arbitration, which is independent of the main contract or instrument. Therefore having regard to the proviso to Section 49 of Registration Act read with Section 16(1)(a) of the Act, an arbitration agreement in an unregistered but compulsorily registrable document can be acted upon and enforced for the purpose of dispute resolution by arbitration."

56. In regard to the second question namely if an

arbitration agreement contained in an unregistered (but

compulsorily registerable) instrument which is not duly

stamped, the Court referring to the provisions of Section 33

and 35 of the Indian Stamp Act observed that unless stamp

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duty and penalty due on the instrument is paid, the Court

cannot act upon the instrument, which means it cannot act

upon the arbitration agreement also which is part of the

instrument. It was held that Section 35 of the Indian Stamp Act

is distinct and different from Section 49 of the Registration Act

in regard to an unregistered document. Section 35 of the

Indian Stamp Act does not contain a proviso like Section 49 of

the Registration Act enabling the instrument to be used to

establish a collateral transaction. Considering the scheme for

appointment of arbitrators as framed by the Chief Justice of

Gauhati High Court,1996 it was observed that an application

under Section 11 of the Act was required to be accompanied

by the original arbitration agreement or a duly certified copy

thereof.

The Supreme Court accordingly in paragraphs 21

and 22.6 observed as under:-

"21. Therefore, when a lease deed or any other instrument is relied upon as contending the arbitration agreement, the court should consider at the outset, whether an objection in that behalf is raised or not, whether the document is properly stamped. If it comes to the conclusion that it is not properly stamped, it should be impounded and dealt with in the manner specified in Section 38 of the Stamp Act. The court cannot act upon such a document or the arbitration clause

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therein. But if the deficit duty and penalty is paid in the manner set out in Section 35 or Section 40 of the Stamp Act, the document can be acted upon or admitted in evidence.

22.6 Where the document is compulsorily registerable, but is not registered, but the arbitration agreement is valid and separable, what is required to be borne in mind is that the arbitrator appointed in such a matter cannot rely upon the unregistered instrument except for two purposes, that is (a) as evidence of contract in a claim for specific performance, and (b) as evidence of any collateral transaction which does not require registration.

In paragraphs 29 to 32 the court observed as under:

"29. An Arbitrator can no doubt be appointed in regard to any disputes relating to the lease deed. But as noticed above, as the lease deed was not registered, the Arbitrator can not rely upon the lease deed or any term thereof and the lease deed cannot affect the immovable property which is the subject matter of the lease nor be received as evidence of any transaction affecting such property. Therefore, the Arbitrator will not be able to entertain any claim for enforcement of the lease.

30. Lastly we may consider the claim for recovery of the amounts allegedly spent towards the tea estates, as a consequence of Respondents not selling the estates or not permitting the Appellant to enjoy the lease for 30 years. If this claim is treated as a claim for damages for breach in not granting the lease for 30 years then it would be for enforcement of the terms of the lease deed which is impermissible under Section 49 of the Registration Act. If it is treated as claim de hors the lease deed then the arbitrator

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may not have jurisdiction to decide the dispute as the arbitration agreement (clause 35) is available only to settle any dispute or difference arising between the parties in relation to or in any manner touching upon the lease deed and not in regard to disputes in general.

31. In paras 29 and 30 above, we have considered and stated the general legal position for guidance in arbitrations, even though the same does not directly arise for consideration within the limited scope of the proceedings under Section 11 of the Act.

Conclusion

32. In view of the above this appeal is allowed, the order of the High Court is set aside and the matter is remitted to the learned Chief Justice of Guwahati High Court to first decide the issue of stamp duty, and if the document is duly stamped, then appoint an arbitrator in accordance with law."

57. Applying the well settled principles of law on the

'doctrine of precedents' on a careful reading of the decision

in SMS Tea Estates it becomes quite clear that the principles

as laid down therein were required to be applied when the

court considered an application under section 11 of the ACA.

This decision is not an authority as to what section 9 of the

ACA envisages and is not a decision which was rendered in the

context of Section 9 of the ACA. There is certainly a difference

in the ambit and scope of jurisdiction the court would exercise

under these provisions. In saying so we may refer to the

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decision of the Constitution Bench of the Supreme Court in

"Union of India Vs. Chajju Ram "23 wherein the Supreme

Court in paragraph 23 has observed thus:-

"23. It is now well settled that a decision is an authority for what it decides and not what can logically be deducted therefrom. It is equally well settled that a little difference in facts or additional facts may lead to a different conclusion."

58. We may also refer to the decision of the Supreme

Court in "Regional Manager Vs. Pawan Kumar Dubey "24

wherein the Supreme Court in paragraph 7 observed thus:

"7. It is the rule deducible from the application of law to the facts and circumstances of a case which constitutes its ratio decidendi and not some conclusion based upon facts which may appear to be similar. One additional or different fact can make a world of difference between conclusions in two cases even when the same principles are applied in each case to similar facts."

59. The decision of the Supreme Court in the case

"Union Of India & Ors vs Dhanwanti Devi & Ors"25 has

observed in paragraph 9 thus:-

9. Before adverting to and considering whether solatium and interest would be payable under the Act, at the outset, we will dispose of the objection raised by Shri Vaidyanathan that Hari Kishan Khosla's case is not a

23 (2003) 5 SCC 568 24 (1976)3 SCC 334 25 1996(6) SCC 44

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binding precedent nor does it operate as ratio decidendi to be followed as a precedent and per se per incuriam. It is not everything said by a Judge while giving judgment that constitutes a precedent. The only thing in a judge decision binding a party is the principle upon which the case is decided and for this reason it is important to analyse a decision and isolate from it the ratio decidendi. According to the well settled theory of precedents, every decision contains three basic postulates - (i) findings of material facts direct and inferential. An inferential finding of facts is the inference which the Judge draws from the direct, or perceptible facts; (ii) statements of the principles of law applicable to the legal problems disclosed by the facts; and (iii) judgment based on the combined effect of the above. A decision is only an authority for what it actually decides. What is of the essence is decision is its ratio and not every observation found therein nor what logically follows from the various observations made in the judgment. Every judgment must be read as applicable to the particular facts provided, or assumed to be proved, since the generality of the expressions which may be found there is not intended to be exposition of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found. It would, therefore, be not profitable to extract a sentence here and there from the judgment and to build upon it because the essence of the decision is its ratio and not every observation found therein. The enunciation of the reason or principle on which a question before a court has been decided is alone binding as a precedent. The concrete decision alone is binding between the parties to it, but it is the abstract ratio decidendi, ascertained on a consideration of the judgment in relation to the subject matter of the decision, which alone has the force of law and which, when it is clear what it was, is binding. It is only the principle laid down in the judgment that is binding law under Article 141 of the Constitution.

A deliberate judicial decision arrived at after hearing an argument on a question which arises in the case or is put in issue may constitute a precedent, no matter for what reason, and the precedent by long recognition may mature into rule of Stare decisis. It is the rule deductible from the application of law to the facts and circumstances of the case which constitutes its ratio decidendi."

60. From the bare reading of the provisions of

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Section 9 and Section 11 of the ACA and the law on scope

and ambit of provisions of Sections 9 and 11 of ACA, we

would observe that not only the scope and ambit of said

provisions, but also the consequences as falling under

these provisions are entirely different. Section 11 pertains

to appointment of arbitrator and and Section 9 is a power

of the court to grant a relief to protect the subject matter

of the arbitration and/or substance of the arbitration.

61. In the case of Black Pearl Hotels Private

Limited (Supra), the Supreme Court in paras 4 and 8

observed as under:-

"4. As the respondent failed to concur in the appointment proposed by the appellant or to appoint an arbitrator as required under the contract, the appellant filed a petition under Section 11 of the 1996 Act. The Judge designated by the Chief Justice took up the matter and issued notice on CMP No.122 of 2012. On 11-1-2013 the learned Judge prima facie was of the view that the "concluding agreement" may be a lease of the immovable property. The learned counsel for the appellant, as the impugned order would reflect, contended that it was not so and sought time to canvas argument that it was a licence. Thereafter, the learned Judge passed the following order" :

" Therefore the matter shall be placed before the Registrar (Judicial) who shall determine whether the transaction is in the nature of lease

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or licence and stamp duty that is attracted, since whether it is lease or licence, the agreement is apparently not duly stamped. Therefore, he after determining whether lease or licence, recover the duty and penalty and take further steps and thereafter remit the matter for further consideration."

8. At the outset, we think it appropriate to make it clear that we are not determining whether the agreement in question is a lease or licence or an agreement simpliciter as put forth by the learned counsel for the appellant. That is required to be dwelt upon and addressed by the High Court while dealing with an application under Section 11 of the Act. It is well settled in law that while delving into the appointment of an arbitrator under Section 11, regard being had to the nature of agreement as stipulated under Section 7 of the 1996 Act, the Judge designated by the learned Chief Justice is obliged to consider the nature of agreement and whether the document requires to be stamped or not, and if so, whether requisite stamp duty has been duly paid on the same. We are so stating as in the instant case there is a written instrument and there is dispute as regards the nature and character of the document. "

62. We may, therefore, observe that the consequence

of not granting ad-interim or interim reliefs in an application

under Section 9 of the ACA pending the arbitral proceedings

may be, at times, drastic and would cause severe hardship to

the parties who, in the facts of the case, deserve protection

under Section 9. If we accept the argument advanced on

behalf of the respondents that the court shall wait till the

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document is stamped and not to act upon the document for

granting relief under Section 9, may lead to severe

consequences which may cause irreparable damage, prejudice

to the cause brought before the court. The issue relating to

stamping of the document could further be dragged on before

the revenue authority, which may take considerable time for

its final decision or conclusion and by that time the party may

suffer damage and would be without any remedy in respect of

seeking protection under Section 9. While interpreting the

provisions and analyzing the effect of the provisions qua the

judgments of the courts cited above we keep in mind this facet

of the legal position which we are called upon to address.

63. Under the Stamp Act defect of non payment of

stamp duty is not an incurable defect. It can be cured at any

stage before it admitted in evidence. Once the document is

admitted in evidence, Section 35 provides that such an

admission shall not, except as provided under Section 58, be

called in question at any stage of the suit or proceeding on

the ground that the instrument has not been duly stamped.

The cumulative reading of Section 35 and Section 58 of the

Maharashtra Stamp Act show that the Stamp Act is fiscal

measure enacted to secure revenue for the State on certain

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classes of instruments. We are, therefore, of the view that the

respondents cannot insist applying decision of the Supreme

Court in the Case of SMS Tea Estates (supra) in proceedings

under Section 9 and contend that the document needs to be

adequately stamped before the court considering the

application under Section 9 to grant interim or ad-interim

reliefs.

(I) WHETHER THE COURT CAN ENTERTAIN AND GRANT INTERIM OR AD-INTERIM RELIEF IN AN APPLICATION UNDER SECTION 9 :

64. The learned counsel for the respondents placed

heavy reliance on the judgment of the Supreme Court in the

case of SMS Tea Estates. In our view, considering the facts

of the case, the view adopted by the Supreme Court, emerging

from Guhati High Court in the observation of the Supreme

Court the provisions of the ACA and Stamp Act, we are of the

considered opinion that the judgment of the Supreme Court in

SMS Tea Estates was not delivered arising out of an

application under Section 9 of the ACA but was delivered

arising out of an order passed under Section 11 of the ACA.

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65. In the case of Firm Ashok Traders and anr.

(Supra), the Supreme Court has held that the right conferred

by Section 9 cannot be said to be one arising out of a contract.

The qualification which the person invoking jurisdiction of the

court under Section 9 must possess, is of being a party to an

arbitration agreement. This is nothing to do with the relief

which is sought for from the court or the right which is sought

to be canvassed in support of the relief. The arbitration clause

constitutes an agreement by itself.

66. It is, therefore, held that the arbitration clause

being a separate agreement from the main contract and

accordingly it is only the arbitration agreement which would

have relevancy for the purpose of an application under Section

9 of the ACA. In our view, the judgment of the Supreme Court

in the case of Firm Ashok Traders and anr. (supra) would

squarely apply to the facts and situation at hand.

67. The respondents pressed into service the bar under

Section 34 of the Maharashtra Stamp Act while entertaining an

application under Section 9 of the ACA. We are inclined to

accept the submission of Dr. Sathe, the learned Senior

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Counsel, that for the purpose of granting interim measures,

whether by way of interim or ad-interim, under Section 9, the

said relief is not arising out of a contract containing an

arbitration agreement. We are, therefore, of the view that

even if the main agreement containing arbitration agreement

is not stamped or insufficiently stamped, there could not be

any bar against the court hearing the application under

Section 9 of the ACA for interim measures to grant ad-interim

or interim relief to a party.

68. We are not inclined to accept the submission of Mr.

Dani, learned Senior Counsel appearing for respondent in

Arbitration Application No.246 of 2016 that for the purpose of

interim measures, the court has to act upon the main

agreement containing arbitration agreement and, thus till such

time, such an agreement is stamped in accordance with the

provisions of the Maharashtra Stamp Act, 1958, irrespective of

the urgency and though case is made out for grant of ad-

interim or interim relief, the court does not have power to

grant any such relief. This clearly for the reason that the court

in considering a relief under Section 9 is acting upon the

arbitration agreement only, and not the main contract. An

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arbitration agreement would not require any stamping.

69. In our view, the argument of Mr. Dani, if accepted,

would be in conflict with the scheme of the legislation and

intent of the provisions of Section 9 of the ACA. Under the

scheme of the ACA and in view of the judgments cited above

and considering the submissions advanced, we are of the

considered view that the legislative intent and purpose would

be served by providing the efficacious and expeditious relief to

a party to an arbitration agreement and that is prescribed

under Section 9 of the ACA. In case the submissions of Mr.

Dani is accepted, the exercise of jurisdiction under Section 9 of

the ACA would be completely eclipsed and party would be

deprived to approach a forum for any urgent relief of ad-

interim or interim nature. This obviously cannot be implication

and intent of the statutory interpretation.

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

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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.

71. The Supreme Court in Naina Thakkar (supra),

has held that the Judgment of the Supreme Court in the case

of SMS Tea Estates (supra), would not be applicable to the

proceedings under Section 8 of the Act where party making

such an application does not express willingness to pay the

deficit stamp duty and the penalty. In our view, the principles

laid down by the Supreme Court in the said Judgment can be

extended even to an application under Section 11 of the Act

for appointment of an arbitrator. An application under Section

8 is filed in a pending suit before a judicial authority to refer

the parties to arbitration.

72. The Supreme Court in M. Anasuya Devi and

another (supra), has held that the question as to whether an

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arbitral award is required to be stamped and registered would

be relevant only when the parties would file the award for its

enforcement under Section 36 of the Act. It is at that stage

the parties can raise objections regarding its maintainability

on account of non-registration and non-stamping under

Section 17 of the Registration Act. It is held that the question

whether an award requires stamping and registration is within

the ambit of Section 47 of the Code of Civil Procedure and not

covered by Section 34 of the Act. In our view, the principles

laid down by the Supreme Court can be extended to the

applications under Section 9 of the Act. The issue of

insufficiency of stamp duty, if any, can be raised by the other

party at the stage when the instrument containing an

arbitration agreement is tendered in evidence before the

Arbitral Tribunal.

73. In the light of the above deliberation, we are of the

considered opinion that the decision of the Division Bench in

Universal Enterprises (Supra) takes a correct view that

the court can grant an ad-interim reliefs in exercise of its

jurisdiction under Section 9 of the ACA even if the document

containing the arbitration agreement is not sufficiently

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stamped. We may thus further observe that the court under

Section 9 of the ACA would be empowered to grant ad-interim

and interim reliefs even if the document, containing

arbitration agreement, is not adequately stamped.

74. Thus, in our view, the question of law i.e. 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, is required to be answered in the affirmative.

(J) DISCUSSION ON THE QUESTION ON SECTION 11 OF THE ACA :

75. Mr. Aspi Chinoy, learned Amicus Curiae, has made

submissions on the scheme of Section 11 of the ACA, the

legislative intention and the broad principles which would be

required to be taken into consideration in adjudication of an

application falling under Section 11 of the ACA. Mr. Chinoy,

referring to the provisions of sub-section (6A) of Section 11

and the decision in Duro Felguera (Supra) submits that the

existence of arbitration agreement between the parties would

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now be the primary consideration for the court in adjudication

of Section 11(6) applications. Mr. Chinoy has taken us through

the judgment of the Supreme Court in Durgo Felguera

(Supra) as also the decision of the learned Single Judge in

Coastal Marine Construction & Engineering Ltd. (Supra).

Mr. Chinoy would also contend that the intention of the

legislature is clearly an expeditious appointment of an arbitral

tribunal so that the efficacy of the dispute resolution

mechanism as envisaged under the provisions of the Act

becomes a reality. Mr. Chinoy would also submit that the

intention of the legislature can be clearly seen from the

provisions of the amending Act of 2016.

76. Mr. Lohia, learned counsel appearing for the

applicant in Arbitration Application No. 300 of 2018 submits

that there is an arbitration clause in the agreement for sale

dated 2nd June 2009. Issue was raised before the learned

Single Judge that the agreement was not stamped and thus

was required to be impounded and forwarded to the Stamp

Authorities. The learned Single Judge of this court (one of us

G. S. Kulkarni,J.) formulated a question and referred the issue

for consideration by a Larger Bench.

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77. The learned counsel placed reliance on the

judgment of the Supreme Court in the case of S.B.P. &

Company vs. Patel Engineering Ltd. (Supra) and National

Insurance Co. Ltd. vs. Boghra Polyfab Pvt. Ltd.26 In the

submission of the learned counsel these two judgments were

delivered prior to insertion of sub-section (6A) in Section 11 of

ACA with effect from 23rd October 2015.

78. The learned counsel placed reliance on paras 21

and 22 of the judgment of the Supreme Court in the case of

SMS Tea Estates (Supra) to submit that the scheme of

inquiry under Section 11(6) was expanded to include suo-motu

inquiry into the aspect of payment of stamp duty. The

arbitration agreement can be separated from the main

agreement.

79. While placing reliance on Section 11(6A) of the ACA

and 246th Report of Law Commission on Amendment to the

ACA, it is submitted that the scope and power of the court is to

examine the existence of the arbitration agreement. It is

submitted that none of the judgments, including the judgment

in the case of SMS Tea Estates (Supra) would apply to the

26 (2009) 1 SCC 267

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arbitral proceedings commenced after 23 rd October, 2015. While placing reliance on the judgment in the case of M/s.

Duro Felguera (Supra), it is submitted that the Supreme

Court, after considering the provisions of Section 11(6A) held

that the powers of the court are curtailed for dealing with the

application under Section 11(6). The issue of insufficiency of

stamp duty of the document cannot be gone into by the court.

It has to be decided by the arbitral tribunal. Section 5 of the

Act will have to be read with Section 11(6A), according to the

learned counsel, which would be in consonance with the

intention of the legislature in minimizing the judicial

intervention.

80. While referring to Section 33(1) of the Indian Stamp

Act 1889, the learned counsel submits that the expression

"other person" prescribed in the said provision would also

include an arbitrator. The arbitral tribunal, during the

proceedings, within its power can impound the document and

send it for adjudication, if such document is found insufficiently

stamped.

81. Mr. Ganbavale, learned counsel appearing for the

respondents submits that while deciding an application under

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Section 11, it was the duty of the court to see whether any

statutory requirement is to be met, including the requirement

of stamp duty in case of document being insufficiently

stamped. A dispute can only thereafter be referred to

arbitration. According to the learned counsel, Section 11(6A)

be read with Section 7(1) of ACA.

82. The learned counsel further submitted that the

court while deciding an application under Section 11 exercises

judicial powers and, therefore, it is necessary for the court to

examine as to whether there is any bar prescribed under any

provisions of law from appointing an arbitrator. The learned

counsel placed reliance on Section 33 of the Stamp Act in

support of his submission.

83. After closure of the arguments, the learned counsel

submitted a written note wherein reliance is placed on the

order passed by the Supreme Court on 28 th February 2019 in

the case of Vidya Drolia and ors. Vs. Durga Trading

Corporation27. It is submitted that two Judge Bench in the

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said order, after referring to the judgments in the case of

Himangi Enterprises vs. Kamaljeet Singh Ahluwalia 28

and in the case of Durgo Felguera (Supra), referred the issue

to the Larger Bench.

(K) REASONS AND CONCLUSIONS ON THE QUESTION FALLING UNDER SECTION 11 OF THE ACA :

84. The question as required to be answered by us is,

"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?

85. The parties did not dispute that an arbitration

agreement exists in the main agreement entered into between

the parties. During the course of hearing, the respondents

raised an issue of insufficiency of stamp duty in the main

agreement and prayed for impounding of the said document

while an application filed under Section 11(6) of the ACA was

being heard. A request was made to refer the document for

28 (2017) 10 SCC 706

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adjudication to the stamp authority.

86. Section 11(6) and (6A) of the ACA read thus :-

"11. Appointment of arbitrators.- (1) ......

(2) .......

(3) .......

(4) .......

(5) .......

(6) Where, under an appointment procedure agreed upon by the parties,--

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

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

(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,

a party may request 1[the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court] to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

(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) or sub section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.

87. In the case of S.B.P. & Co. vs. Patel

Engineering Ltd.(Supra), the Supreme Court held that the

order passed by the Chief Justice of the High Court or the Chief

Justice of India under Section 11(6) of the Act was not an

administrative order. It is passed in exercise of a judicial power.

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The Supreme Court in para 47 of the said judgment observed

thus:-

"47. We, therefore, sum up our conclusions as follows:

(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is not an administrative power. It is a judicial power.

(ii) The power under Section 11(6) of the Act, in its entirety, could be delegated, by the Chief Justice of the High Court only to another Judge of that Court and by the Chief Justice of India to another Judge of the Supreme Court.

(iii) In case of designation of a Judge of the High Court or of the Supreme Court, the power that is exercised by the designated Judge would be that of the Chief Justice as conferred by the statute.

(iv) The Chief Justice or the designated Judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be his own jurisdiction to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators.

The Chief Justice or the designated Judge would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the designated Judge.

(v) Designation of a District Judge as the authority under Section 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act.

(vi) Once the matter reaches the Arbitral Tribunal or the sole arbitrator, the High Court would not interfere with the ordes passed by the arbitrator or the Arbitral Tribunal during the course of the arbitration proceedings and the parties

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could approach the Court only in terms of Section 37 of the Act or in terms of Section 34 of the Act.

(vii) Since an order passed by the Chief Justice of the High Court or by the designated Judge of that Court is a judicial order, an appeal will lie against that order only under Artilce 136 of the Constitution to the Supreme Court.

(viii) There can be no appeal against an order of the Chief Justice of India or a Judge of the Supreme Court designated by him while entertaining an application under Section 11(6) of the Act.

(ix) In a case where an Arbitral Tribunal has been constituted by the parties without having recourse to Section 11(6) of the Act, the Arbitral Tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act.

(x) Since all were guided by the decision of this Court in Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. and orders under Section 11(6) of the Act have been made based on the position adopted in that decision, we clarify that appointments of arbitrators or Arbitral Tribunals thus far made, are to be treated as valid, all objections being left to be decided under Section 16 of the Act. As and from this date, the position as adopted in this judgment will govern even pending applications under Section 11(6) of the Act.

(xi) Where District Judges had been designated by the Chief Justice of the High Court under Section 11(6) of the Act, the appointment orders thus far made by them will be treated as valid; but applications if any pending before them as on this date will stand transferred, to be dealt with by the Chief Justice of the High Court concerned or a Judge of that Court designated by the Chief Justice.

(xii) The decision in Konkan Rly. Corpn. Ltd. vs. Rani Construction (P) Ltd. Is overruled.

The judgment in the case of S.B.P. & Co. Vs. Patel

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Engineering Ltd. (Supra) was delivered by the Supreme

Court on 26th October, 2005.

88. We may also refer to the relevant part of the

Statement of Objects and Reasons of the Arbitration Bill 2015,

which would indicate that the intention of the legislature in

bringing about the Arbitration Amendment Act (Act 3 of 2016)

was to provide for speedy disposal of cases relating to

arbitration with least court intervention and a matter of

concern on the delay of disposal of arbitration proceedings and

increase in interference of courts in arbitration matters, which

tend to defeat the object of the Act. It would be imperative to

extract the Statement of Objects and Reasons, which read

thus:-

" STATEMENT OF OBJECTS AND REASONS

The general law relating to arbitration is contained in the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act). The Act, which is based on the UNCITRAL Model Law on International Commercial Arbitrations, as adopted in 1985 by the United Nations Commission on International Trade Law (UNCITRAL), applies to both international as well as domestic arbitration.

2. The Act was enacted to provide for speedy disposal of cases relating to arbitration with least court intervention. With the passage of time, some difficulties in the applicability of the Act

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have been noticed. Interpretation of the provisions of the Act by courts in some cases have resulted in delay of disposal of arbitration proceedings and increase in interference of courts in arbitration matters, which tend to defeat the object of the Act. With a view to overcome the difficulties, the matter was referred tot he Law Commission of India, which examined the issue in detail and submitted its 176th Report........

3. On a reference made again in pursuance of the above, the Law Commission examined and submitted its 246 th Report on "Amendments to the Arbitration and Conciliation Act, 1996" in August 2014 and recommended various amendments in the Act. The proposed amendments to the Act would facilitate and encourage Alternative Dispute Mechanism, especially arbitration, for settlement of disputes in a more user-friendly, cost effective and expeditious disposal of cases since India is committed to improve its legal framework to obviate in disposal of cases.

4. As India has been ranked at 178 out of 189 nations in the world in contract enforcement, it is high time that urgent steps are taken to facilitate quick enforcement of contracts, easy recovery of monetary claims and award of just compensation for damages suffered andreduce the pendency of cases in courts and hasten the process of dispute resolution through arbitration, so as to encourage investment and economic activity.

5. .....

6. It is proposed to introduce the Arbitration and Conciliation (Amendment) Bill, 2015, to replace the Arbitration and Conciliation (Amendment) Ordinance, 2015, which inter alia, provides for the following, namely:--

(i) to amend the definition of "Court" to provide that in the case of international commercial arbitrations, the Court should be the High Court;

(ii) to ensure that an Indian Court can exercise jurisdiction to grant interim measures, etc., even where the seat of the

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arbitration is outside India;

(iii) an application for appointment of an arbitrator shall be disposed of by the High Court or Supreme Court, as the case may be, as expeditiously as possible and an endeavour should be made to dispose of the matter within a period of sixty days;

(iv) to provide that while considering any application for appointment of arbitrator, the High Court or the Supreme Court shall examine the existence of a prima facie arbitration agreement and not other issues;

(v) to provide that the arbitral tribunal shall make its award within a period of twelve months from the date it enters upon the reference and that the parties may, however, extend such period up to six months, beyond which period any extension can only be granted by the Court, on sufficient cause;

(vi) to provide that a model fee Schedule on the basis of which High Courts may frame rules for the purpose of determination of fees of arbitral tribunal, where a High Court appoints arbitrator in terms of section 11 of the Act;

(vii) to provide that the parties to dispute may at any stage agree in writing that their dispute be resolved through fast track procedure and the award in such cases shall be made within a period of six months;

(viii) to provide for neutrality of arbitrators, when a person is approached in connection with possible appointment as an arbitrator;

(ix) to provide that application to challenge the award is to be disposed of by the Court within one year.

(Emphasis Supplied)

The Notes on Clauses on Section 11 are also required to be noted. In regard to the proposed amendment to Section 11, Clause 6 of the Notes on Clauses reads thus:-

"Clause 6 of the Bill seeks to amend section 11 of the principal Act to provide that appointment of arbitrator shall be made by the Supreme Court or the High Court, as the case may be, instead of the Chief Justice of India or the Chief

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Justice of the High Court. Sub-section (6A) is inserted to provide that the Supreme Court or the High Court while considering application under sub-section (4) to (6) shall confine to the examination of an arbitration agreement. In sub-section (7), it is clarified that a decision on a matter entrusted under sub-section (4) to (6) shall be final and no appeal including Letters Patent Appeal shall lie against such decision. A new sub-section (13) is inserted to provide that an application for appointment of arbitrator(s) shall be disposed of as expeditiously as possible and an endeavor shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party. A new sub-section (14) is inserted to empower the High Court to frame rules for the purpose of determination of fees of the arbitral tribunal and the manner of such payment. The High Court while framing rules shall take into account the rates of fee specified in the Fourth Schedule.

(Emphasis Supplied)

89. We may observe that the Parliament accordingly

amended the ACA by Amending Act No. 3 of 2016 (with effect

from 23/10/2015) and incorporated amendments to the

various provisions of the ACA. In the context of the present

discussion, the relevant amendment is the incorporation of

sub-section (6A), as noted above, which provides that 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

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judgment, decree or order of nay court, confine to the

examination of the existence of an arbitration agreement. The

scope of the inquiry in adjudication of such applications falling

under Section 11 is now confined the examination of existence

of an arbitration agreement. The use of the words

"notwithstanding any judgment, decree or order of any court"

in the said provision would also indicate that any other facet or

issue which would impede or inhibit the requirement of

examination of the existence of an arbitration agreement even

if contained in any judgment, decree or order of any court,

stands discarded, when the court is called upon to exercise

jurisdiction under Section 11.

90. By the same amendment, sub-section (13) was also

inserted in Section 11 by which it was provided that an

application made under Section 11 for appointment of an

arbitrator or arbitrators shall be disposed of by the Supreme

Court or the High Court, or the person or institution

designated by such Court, as the case may be, as

expeditiously as possible and an endeavour shall be made to

dispose of the matter within a period of sixty days from the

date of service of notice on the opposite party.

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91. Such an interpretation, as noted by us above, can

also be noticed in the recent decisions of the Supreme Court.

92. We may thus profitably refer to the decision of the

Supreme Court in Wexford Financial Inc.Panama Vs.

Bharat Heavy Electricals Ltd.29 Which a decision after the

Arbitration Amendment Act was brought into force. In

paragraph 9, the Supreme Court observed thus:-

".. ..... There is, in that view, no gainsaying that the present petition under Sections 11(5) and 11(12) shall have to be allowed with appropriate directions, particularly when this Court is concerned primarily with the question whether an arbitration agreement exists between the parties and if so whether the disputes falling within the scope of the agreement have arisen for determination. ....... ...."

93. We also refer to the decision of the Supreme Court

in TRF Limited vs. Energo Engineering Projects

Limited,30 wherein a three Judge Bench of the Supreme Court,

while examining Section 11(6A) held as under:-

42. We are referring to the same as learned counsel for the parties have argued at length with regard to the disclosure made by the arbitrator and that has also been referred to by the designated Judge. In this context, we may profitably refer to sub-section (6A) of Section 11 of the Act which reads as follows:

29 (2016) 8 SCC 267 30 (2017) 8 SCC 377

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"11.(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) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement."

43. The purpose of referring to the said provision is that the amended law requires the Court to confine the examination of the existence of an arbitration agreement notwithstanding any judgment of the Supreme Court or the High Court while considering an application under Section 11(6) of the Act. As the impugned order would indicate, the learned Judge has opined that there had been no failure of procedure, for there was a request for appointment of an arbitrator and an arbitrator has been appointed. It is apt to state here that the present factual score projects a different picture altogether and we have to carefully analyse the same."

94. In the case of Duro Felguera (Supra), the Supreme

Court had referred to the position prior to Amendment Act 3 of

2016. Paras 15 and 16 of the said judgment read as under :

"15. Under Section 11(6) of the Arbitration and Conciliation Act, 1996, as it stood prior to Amendment Act 3 fo 2016, on an application made by any of the parties, the Chief Justice of the High Court appoints an arbitrator for adjudication. Initially, the line of decisions ruled that the appointment of arbitrator is an administrative order passed by the Chief Justice. In Konkan Railway Corpn. Ltd. v. Mehul Construction Co., it was held that the powers of the Chief Justice under Section 11(6) of the Arbitration and Conciliation Act, 1996 are of administrative nature and that the Chief Justice or his designates does not act as a judicial authority while

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appointing an arbitrator. The same view was reiterated in the subsequent judgment of this Court in Konkan Railway Corpn. Ltd. v. Rani Construction (P) Ltd.

16. However, in the year 2005, a Constitution Bench of seven Judges in SBP and Co. v. Patel Engg. Ltd. made a departure from the previous judgments and held that the order passed by the Chief Justice is not administrative but judicial in nature and hence the same is subject to appeal under Article 136 of the Constitution of India. The Court further held that in deciding the appointment of an arbitrator, the Chief Justice could first by way of a preliminary decision decide the court's own jurisdiction of that matter to entertain the arbitration petition, the existence of a valid arbitration agreement, the subsistence of a "live cliam i.e. the claim that is not barred by limitation".

In regard to the changes effected by the

Amendment Act 3 of 2016, the Supreme Court in para 18 of

the said judgment observed as under :-

"18. The language in Section 11(6) of the Act "the Chief Jutice or any person or institution designated by him" has been substituted by "Supreme Court or as the case may be the High Court or any person or institution designated by such Court". Now, as per sub-section (6-A) of Section 11, the power of the Court has now been restricted only to see whether there exists an arbitration agreement. The amended provision in sub-section (7) of Section 11 provides that the order passed under Section 11(6) shall not be appealable and thus finality is attached to the order passed under this section.....

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In para 19, the Supreme Court has referred as

under:

"19. The effect of the Arbitration and Conciliation (Amendment) Act, 2015 in Section 11 of the Act has been succinctly elucidated in the textbook "Law Relating to Arbitration and Conciliation" by Dr. P. C. Markanda, which reads as under:

"The changes made by the amending Act are as follows:

1. The words "Chief Justice or any person or institution designated by him" shall be substituted by the words "the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court". Thus, now it is not only the Chief Justice who can hear applications under Section 11, the power can be delegated to any Judge as well.

2. 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.

3. The amending Act has categorically provided in sub- section (6-B) that designation of any person or institution by the Supreme Court or High Court would not be construed as delegation of judicial power. The order passed by a designated person or institution would continue to be regarded as a judicial order.

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4. It has been provided in sub-section (7) that the order passed under this section shall not be appealable. This change means that finality is attached to the order passed under this section and it would not be subject to further examination by an appellate court.

5. Sub-section (8) has been amended to bring it in conformity with amended Section 12 with regard to ensuring independence and impartiality of the arbitrator. Before appointing any arbitrator, a disclosure in writing has to be obtained in terms of Section 12(1) of the Act. This is to ensure that the appointed arbitrator shall be independent and impartial and also harmonizes the provisions of Sections 11 and 12 of the Act.

6. The amending Act has introduced sub-section (13) which provides that the disposal of the application under this section has to be expeditious and endeavour shall be made to dispose of the application within a period of 60 days from the date of service of notice on the opposite party. This sub- section would ensure speedy disposal of applications under this section and all contentious issues have been left to be decided by the Arbitral Tribunal.

7. For determining the fee structure of the Arbitral Tribunal, it has been recommended that the High Courts may frame the necessary rules and for that purpose, a model fee structure has been provided in the Fourth Schedule of the amending Act. However, this sub-section would not be applicable for the fee structure in case of international commercial arbitrations and domestic arbitrations where the parties have agreed for determination of fee as per rules of an arbitral institution. This sub-section has been inserted to ensure a reasonable fee structure since the cost of arbitration has increased manifold due to high charges being levied on the parties by the Arbitral Tribunal and other incidental expenses."

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In para 22, the Supreme Court observed as under:-

22. On behalf of GPL, it was repeatedly urged that the works are intrinsically connected, inseparable, integrated, interlinked and that they are one composite contract and that they were split up only on the request and representations given by Duro Felguera and FGI. As discussed earlier, as per amended provision Section 11 (6A), the power of the Supreme Court or the High Court is only to examine the existence of an arbitration agreement. From the record, all that we could see are five separate Letters of Award; five separate Contracts; separate subject matters; separate and distinct work; each containing separate arbitration clause signed by the respective parties to the contract."

(Emphasis Supplied)

95. In the concurring Judgment of Mr. Justice Kurian

Joseph (as His Lordship then was), in paragraphs 47, 48, 58

and 59 it was observed thus:-

"47. What is the effect of the change introduced by the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as "the 2015 Amendment") with particular reference to Section 11(6) and the newly added Section 11(6A) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the 1996 Act") is the crucial question arising for consideration in this case.

48. Section 11(6A) added by the 2015 Amendment, reads as follows:

"11(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) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement."

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From a reading of Section 11(6A), the intention of the legislature is crystal clear i.e. the Court should and need only look into one aspect- the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution to that is simple - it needs to be seen if the agreement contains a clause which provides for arbitration pertaining to the disputes which have arisen between the parties to the agreement.

58. This position was further clarified in National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd. To quote: (2009) 1 SCC 267

22. Where the intervention of the court is sought for appointment of an Arbitral Tribunal under Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This Court identified and segregated the preliminary issues that may arise for consideration in an application under Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to decide; and (iii) issues which should be left to the Arbitral Tribunal to decide.

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

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

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

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

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

(b) Whether the parties have concluded the contract/

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transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection.

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

(i) Whether a claim made falls within the arbitration clause (as for example, a matter which is reserved for final decision of a departmental authority and excepted or excluded from arbitration).

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

59. The scope of the power under Section 11(6) of the 1996 Act was considerably wide in view of the decisions in SBP and Co. and Boghara Polyfab. This position continued till the amendment brought about in 2015. After the amendment, all that the courts need to see is whether an arbitration agreement exists - nothing more, nothing less. The legislative policy and purpose is essentially to minimise the Court's intervention at the stage of appointing the arbitrator and this intention as incorporated in Section 11(6-A) ought to be respected.

(Emphasis Supplied)

96. The scope of power of the Court under Section

11(6-A) thus came to be considered, in great detail, in the

judgment of the Supreme Court in the case of Duro

Felguera, S.A. (supra). The Supreme Court held that as per

sub-section (6-A), the power of the Court has now been

restricted only to examine the existence of the arbitration

agreement. Earlier, the Chief Justice had been given the

power to examine other aspects as well, i.e. limitation,

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whether the claims were referable for arbitration, etc. in terms

of the Judgments of the Supreme Court in SBP & CO. vs.

Patel Engineering Ltd. and anr. (supra), and National

Insurance Co. Ltd. vs. Boghara Polyfab (P) Ltd. (Supra).

It is held that all preliminary issues have been left for the

Arbitral Tribunal in terms of Section 16 of the Act. The

Supreme Court also considered sub-section (13) of Section 11

inserted by Amending Act of 2015 providing for disposal of the

application within a period of sixty days from the date of

service of notice on the opposite party.

97. It is held that the sub-section (13) would ensure

speedy disposal of the applications under that section and all

contentious issues have been left to be decided by the Arbitral

Tribunal. The Supreme Court, in the said Judgment held that

since the dispute between the parties arose in 2016, the

amended provision of sub-section (6-A) of Section 11 shall

govern the issue as per which the power of Court is confined

only to examine the existence of the arbitration agreement.

The Hon'ble Supreme Court considered the Judgment in

National Insurance Co. Ltd. vs. Boghara Polyfab (P) Ltd.

(supra), which had laid down three categories of issues i.e.

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(i) issues which the Chief Justice or his designate is bound to

decide; (ii) issues which he can also decide, that is, issues

which he may choose to decide; and (iii) issues which should

be left to the arbitral Tribunal. The Hon'ble Supreme Court in

the said judgment of National Insurance Co. Ltd. vs.

Boghara Polyfab (P) Ltd. (supra) had held that the issues

which the Chief Justice or his designate must choose to decide

or leave them to the decision of the Arbitral Tribunal are; (a)

whether the claim is a dead (long-barred) claim or a live claim;

(b) whether the parties have concluded the

contract/transaction by recording satisfaction of their mutual

rights and obligation or by receiving the final payment without

objection.

98. It is further held in the said Judgment that the

issues which Chief Justice or his designate should leave

exclusively to the Arbitral Tribunal are, (1) whether a claim

made falls within the arbitration clause (as for example, a

matter which is reserved for final decision of a departmental

authority and excepted or excluded from arbitration); and (2)

merits of any claim involved in the arbitration. After

considering the categories carved out by the Hon'ble Supreme

Court in the case of National Insurance Co. Ltd. vs.

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Boghara Polyfab (P) Ltd. (supra) and after considering

Section 11(6-A), the Hon'ble Supreme Court in the case of

Duro Felguera, S.A. (supra), held that the legislative policy

and purpose is essentially to minimise the Court's intervention

at the stage of appointing the arbitrator and this intention as

incorporated in Section 11(6-A) ought to be respected. It was

also held that the position of law in the cases of SBP and Co.

vs. Patel Engineering Ltd. (supra) and National Insurance

Co. Ltd. vs. Boghara Polyfab (P) Ltd. (supra) continued till

the amendment brought in 2015. The Judgment of the

Supreme Court in the case of Duro Felguera, S.A. (supra),

has been followed thereafter in the later judgment of the

Hon'ble Supreme Court and also by this Court in several

matters.

99. We have noticed that in view of the categories

carved out in the Judgment of the Supreme Court n the case of

National Insurance Co. Ltd. vs. Boghara Polyfab (P) Ltd.

(supra) several contentious issues used to be raised by the

Respondents in the application under Section 11(6) of the Act,

thereby delaying the disposal of applications for appointment

of arbitrators, though are required to be disposed of

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expeditiously. The legislative wisdom thus prevailed and sub-

section (6-A) was inserted in Section 11 to minimise the

intervention of Court at the stage of appointing an arbitrator. The Supreme Court in the said Judgment also made specifically

clear that the position of law laid down in SBP and Co. vs.

Patel Engineering Ltd. (supra) and National Insurance

Co. Ltd. vs. Boghara Polyfab (P) Ltd. (supra) continued till

the amendment was brought about in 2015. In our opinion,

reliance placed on the principles laid down by the Supreme

Court in the case of SBP and Co. vs. Patel Engineering

Ltd. (supra) and National Insurance Co. Ltd. vs. Boghara

Polyfab (P) Ltd. (supra) by the respondents is thus

misplaced.

100. It is thus clear that when the court adjudicates an

application under Section 11(6) of the ACA, the ambit of the

inquiry is now confined only to the examination of the

existence of an arbitration agreement between the parties and

if such an agreement exists, the disputes which are falling

within the scope of the agreement would be required to be

referred for adjudication by appointing an arbitral tribunal.

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101. In Vidya Drolia and ors. (Supra), as relied upon by

Mr.Ganbavale, the learned counsel appearing for the

respondents, the issue before the Supreme Court was arising

out of a tenancy agreement in an application filed under

Section 11(6) of the Act. The Supreme Court referred the issue

as to whether the word "existence" would include weeding out

arbitration clauses in agreement which indicates that the

subject matter is incapable of arbitration. In our view, till such

issue is decided by the Larger Bench, the principle of law laid

down by the Supreme Court in the case of Duro Felgurea

(Supra) holds the field. Now the question arises for

consideration of this court is, whether in view of Section

11(6A), as per the Supreme Court judgment in the case of

Duro Felguera (Supra), the issue of insufficiency of stamp

duty on the agreement containing arbitration clause is

required to be decided while deciding the application under

Section 11(6A) of the ACA by the court itself at the threshold or

such an issue can be decided by arbitral tribunal upon

constitution of such tribunal by the court under Section 11(6)

of the Act. In the case of Duro Felguera, the Supreme Court

has held that after amendment to Section 11(6) by sub-section

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(6A) all that the court has to see is whether an arbitration

agreement exists - nothing more, nothing less. The Supreme

Court, by referring to provisions of Section 5 of the Act and the

legislative policy, further observed that the purpose of the

provision is to ensure speedy disposal of application and all

contentious issues are to be left to be decided by the arbitral

tribunal. This is to minimize the court's intervention at the

stage of appointing an arbitrator.

102. After considering the judgments cited before us and

in view of the legislative intent of the amended provisions, we

are of the view that the import of the provisions of Section

11(6A) indicates that the power of the Supreme Court or, as

the case may be, the High Court, while considering the

application under Section 11(6) shall notwithstanding any

judgment, decree or order of any court, confine to the

examination of the existence of an arbitration agreement. The

issue as to whether sufficiency or otherwise of the stamp duty

on the said agreement can be left to the decision of the

arbitral tribunal. Section 7 of the ACA defines arbitration

agreement. Section 7(4) of the ACA reads as under :-

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"7.Arbitration agreement. - (1) ....

(2) ......

(3) ......

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

(a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication including communication

through electronic mans which provide a record of the agreement; or

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

103. It is not a case of the respondents that arbitration

agreement, if a standalone agreement recorded under Section

7(4)(b) or (c) requires payment of any stamp duty under the

provisions of Maharashtra Stamp Act. It is clear that the

arbitration agreement, even if part of the main agreement, is

severed from the main agreement, would not stand invalidated

even if the main agreement is declared as null and void by the

arbitral tribunal.

104. In our view, there is no substance in the submission

of Mr. Dani, learned Senior Counsel for the Respondents (in

Arbitration Application No. 246/2016) that the principle of

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of the Act before the arbitral Tribunal and not at the stage of

hearing of the application under Section 9, as well as under

Section 11 of the Act. In our view, the Judgment of the Hon'ble

Supreme Court in the case of Reliance Industries Ltd. &

anr. (supra), relied upon by Dr. Sathe, learned Senior Advocate

would be an answer to this submission made by Mr. Dani,

learned Counsel for the Respondents.

105. The learned Counsel appearing for the parties have

invited our attention to various paragraphs of the Judgment of

the Hon'ble Supreme Court in the case of SMS Tea Estates

(supra) in support of their rival contentions as to whether the

said Judgment was delivered by the Hon'ble Supreme Court

under Section 11 only or would also apply to the applications

under Section 9 of the Act or not?

106. We may refer to some of the paragraphs of the

judgment in SMS Tea Estates (Supra):-

"12. When a contract contains an arbitration agreement, it is a collateral term relating to the resolution of disputes, unrelated to the performance of the contract. It is as if two contracts - one in regard to the substative terms of the main contract and the other relating to resolution of disputes - had

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been rolled into one, for purposes of convenience. An arbitration clause is therefore an agreement independent of the other terms of the contract or the instrument. Resultantly, even if the contract or its performance is terminated or comes to an end on account of repudiation, frustration or breach of contract, the arbitration agreement would survive for the purpose of resolution of disputes arising under or in connection with the contract.

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

22.3 If the document is found to be duly stamped, of if the deficit stamp duty and penalty is paid, either before the court or before the Collector (as contemplated in Section 35 or 40 Section of the Stamp Act), and the defect with reference to deficit stamp is cured, the court may treat the document as duly stamped.

107. It is thus clear that even the said Judgment of the

Supreme Court in case of SMS Tea Estates (P) Ltd. (supra),

in so far as application under Section 11 is concerned, makes it

clear that the arbitration agreement can be severed from the

main agreement.

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108. In so far as the Judgment of the Supreme Court

Black Pearls Hotels Private Limited (supra) relied upon by

Mr. Dani, learned Senior Counsel for the Respondent is

concerned, a perusal of the said Judgment also clearly

indicates that the said Judgment was also delivered by the

Supreme Court while considering an appeal arising out of an

order passed by the Karnataka High Court under Section 11 of

the Act and not under Section 9 of the Act. The said Judgment,

thus, would not advance the case of the Respondent in so far

as insufficiency of stamp, if any, on the main agreement,

including arbitration agreement is concerned.

109. In so far as the submission of Mr Ganbavale, learned

Counsel for the Respondent in Arbitration Application

No.300/2018 that it is the duty of the Court to see whether any

further statutory requirement is to be made under Section

11(6) is concerned, in our view, there is no merit in this

submission of the learned Counsel in view of the limited power

that vests in the Court under Section 11(6) read with sub-

section (6A) of the Act. Similarly, the contention in respect of

the statutory requirement has already been rejected by the

Supreme Court in the case of Duro Felguera (supra).

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110. We are inclined to accept the submission made by

Dr. Sathe, learned Senior Counsel and Mr. Lohia, learned

Counsel for the Applicant in Arbitration Application

No.300/2018 that in view of insertion of sub-section (6-A) in

Section 11 with effect from 23.10.2015, the principles laid

down by the Hon'ble Supreme Court in the case of SBP and

Co. vs. Patel Engineering Ltd. (supra) and National

Insurance Co. Ltd. vs. Boghara Polyfab (P) Ltd. (supra)

and even for this purpose the decision in SMS Tea Estates

(Supra) cannot be made applicable to the applications filed

after 23.10.2015.

111. The learned Single Judge of this Court in Coastal

Marine Construction and Engineering Ltd. (supra),

considering the legislative regime on incorporation of sub-

section (6A) in Section 11, has distinguished the Judgment of

the Hon'ble Supreme Court in the case of SMS Tea Estates

(P) Ltd., (supra) and also the judgment of the Division Bench

of this Court in the case of Lakdawala Developers Pvt. Ltd.

(supra) and following the principles of law laid down by the

Supreme Court in Duro Felguera (supra) has reached to a

conclusion that the Judgment of the Supreme Court in the case

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of SMS Tea Estates (P) Ltd., (supra) which was not rendered

under Section 11 of the Act would not be applicable. This also

recognizes the principle that the provisions of the Stamp Act

are enacted for the purpose of securing revenue for the

Government and not to arm a litigant with a technical defence. The learned Single Judge rightly applied the principles of law

laid down by the Hon'ble Supreme Court in Hindustan Steel

Ltd. (supra) holding that the Stamp Act is a fiscal statute and

it is not enacted to arm a litigant with a weapon of technicality

to meet the case of his opponent.

112. We have considered the provisions of Sections 32A

to 39 of the Maharashtra Stamp Act 1958. In our view, even if

an instrument is required to be stamped, which is not

otherwise stamped at all or insufficiently stamped, such defect

is curable which can be cured on payment of requisite amount

of penalty under the Act of 1958.

113. Under the scheme of provisions of the Maharashtra

Stamp Act it is prescribed that an order passed by the

adjudicating authority is appealable one. A remedy of revision

is also prescribed. It is our experience that in large number

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of matters the stamping authorities take substantial time to

take a decision and even after the decision is taken, said

orders are amenable to challenge in higher forums. The

question is whether a party should be made to wait till the

issue under the Stamp Act is finally determined, depriving the

parties for seeking remedy under Section 11 or Section 9 of

the ACA. There is all the possibility that a litigant may raise an

issue under the Stamp Act which would deny a party urgent

interim reliefs if the party so deserves. If the court will have

no jurisdiction to deal with such an application of interim

nature and there is no certainty that the issue under the

Stamp Act would be determined expeditiously in a time bound

manner, it would substrate out the genuine application where

timely intervention is required by the court under the

provisions of the ACA.

114. Thus postponing application for consideration, filed

under Section 11 or Section 9, to indefinite period till the final

decision of the issue raised under the Stamp Act, would also

not be in conformity of the legislative policy and intent to

provide speedy remedy under Section 11 or Section 9 of the

ACA.

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115. The basic principles guiding judicial decision

making, in the context of arbitration matters, the court would

surely be concerned with the efficacy of the arbitral process.

The recognition of the legislative intent can also be clearly

seen from the decision of the Supreme Court in A. Ayyasamy

vs. A. Paramasivam and ors.31, wherein Dr. Justice D. Y.

Chandrachud concurring with the judgment of Mr. Justice A. K.

Sikri (as His Lordship then was), observed that The basic

principle which must guide judicial decision-making is that

arbitration is essentially a voluntary assumption of an

obligation by contracting parties to resolve their disputes

through a private tribunal. The intent of the parties is

expressed in the terms of their agreement. Where commercial

entities and persons of business enter into such dealings, they

do so with a knowledge of the efficacy of the arbitral process.

The commercial understanding is reflected in the terms of the

agreement between the parties. The duty of the court is to

impart to that commercial understanding a sense of business

efficacy.

31 (2016) 10 SCC 386

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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.

117. We have also considered the provisions of law under

which the Civil Court functions, even if a document is not

sufficiently stamped.

118. Taking a overall view of the scheme of the ACA,

judgments delivered by the Supreme Court, we are of the view

that the party need not be put to a disadvantage merely

because an objection has been raised in respect of

insufficiency of the stamp on the agreement presented before

the court. Neither a contesting party could deprive legitimate

rights of a litigant in praying for timely intervention of the

court by praying for appointment of an arbitral tribunal nor for

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interim reliefs in the fact situation of a case. That would be

rendering a party without any forum and in a given situation

the outcome would be, at times, catastrophic and disastrous

and the damage could be irreparable one. A balanced

approach, keeping in view the legislative intent and the view

adopted by the Supreme Court, needs to be adopted, so that

the purpose of enacting the provisions of Sections 11 and 9 of

the ACA as amended by the Amendment Act is not defeated.

119. If an application under Section 11 or under Section

9 is required to be postponed till the order of adjudication is

passed by the learned Collector of Stamps with such

uncertainty of the time it would take to decide and the

hierarchy of remedies after such order, as it would be subject

to an appeal or a revision, as the case may be and till such

time no order either under Section 11 of under Section 9

should be passed, then the Legislature would not have

provided for speedy disposal of the applications under Section

11 or under Section 9 of the Act by inserting sub-Section (13)

in Section 11 and sub-Section (2) in Section 9 of the Act.

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(L) ANSWERS TO THE QUESTIONS FRAMED :

120. In view of the above deliberation, we answer the

questions as framed by us as follows :-

Sr. Question Answer No. 1 Whether a court, under the Arbitration and Conciliation Act, 1996, can entertain and grant any interim or ad-interim relief in an In the Affirmative 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 In the Negative

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?

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121. We heartily appreciate the valuable assistance

rendered to the Court by the learned Senior Counsel Dr. Milind

R. Sathe and Mr. Aspi Chinoy, who appeared as Amicus

Curiae.

122. Office shall now place these matters before the

learned Single Judge for their disposal.

CHIEF JUSTICE

R. D. DHANUKA,J.

G. S. KULKARNI,J.

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