ArbritrationRulings

HC states that objections of insufficiently stamped document cannot impede the appointment of an arbitrator

Damont Developers Pvt. Ltd. vs. BRYS Hotels Pvt. Ltd.

HC finds existence of arbitration agreement between the parties; allows petition and appoints sole arbitrator to adjudicate claims.

In the present matter, DAMONT DEVELOPERS PVT. LTD (Petitioner) has filed a petition seeking appointment of arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 to resolve the disputes with BRYS HOTELS PVT. LTD (Respondent). Petitioner submits that there is a valid arbitration agreement between the parties contained in Clause 10 (e) of the MOU and it has validly invoked the said arbitration vide a notice. Respondent argues that the MOU is not a valid arbitration agreement and MOU provides a remedy of specific performance and therefore, no arbitration can be carried out for resolution of disputes. Respondent further argues that the MOU is a compulsorily registerable document but is neither registered nor has the requisite stamp duty been paid thereon and therefore, the document is liable to be impounded and cannot be acted upon till the requisite stamp duty is paid thereon.

HC examines the facts of the case and finds that Section 11(6A) of the Arbitration and Conciliation Act requires the Court to confine itself to the existence of an arbitration agreement.

HC observes that in SMS Tea Estates Private Ltd. v. Chandmari Tea Company Private Ltd. (2011) 14 SCC 66, the Supreme Court held that an arbitration agreement does not require registration under the Registration Act and therefore, an arbitration agreement contained in an unregistered but compulsorily registerable document, can be acted upon and enforced.

HC observes that with respect to inadequacy of the stamp duty, as per the ratio laid down in SMS Tea Estates Private Ltd. v. Chandmari Tea Company Private Ltd. (supra), the document is to be impounded and proceeded in accordance with Sections 35 and 38 of the Stamp Act before appointment of an arbitrator.  HC observes that the amendment of The Arbitration and Conciliation Act effected on 23rd October, 2015 amended Section 11(6A) which provides that the Court has to confine its examination to the existence of an arbitration agreement only. HC further observes that Section 11(6A) was considered by the Supreme Court in Duro Felguera, S.A. v. Gangavaram Port Limited (2017) 9 SCC 729 in which the Supreme Court considered the judgments prior to the 2015 amendment and held that the Courts need to see only whether an arbitration agreement exists – nothing more nothing less.

HC further observes that in Sandeep Soni v. Sanjay Roy  2018 SCC OnLine Del 11169, HC after considering SMS Tea Estates Private Ltd. v. Chandmari Tea Company Private Ltd. (supra) and Duro Felguera, S.A. v. Gangavaram Port Limited (supra), held that the objections of insufficiently stamped document cannot impede the appointment of an arbitrator and it is for the arbitrator to consider the objections and exercise the powers under Section 33 and other attendant provisions of the Stamp Act. It was held that – “….. 21. Therefore, as contended on behalf of the petitioner, the Collaboration Agreement even if found to be inadequately stamped cannot impede the appointment of an Arbitrator. The Arbitrator can exercise the power available under Section 33 and other attendant provisions of the Stamp Act if he comes to the conclusion that the Collaboration Agreement is deficient in stamp duty.”

HC observes the presence of a valid arbitration agreement between the parties as contained in Clause 10(e) of the MOU and finds that invocation of arbitration by the Petitioner vide notice is valid.

HC states that as per Section 11(6A) of the Arbitration and Conciliation Act, it has to confine only to the existence of an arbitration agreement and all other objections including the objection as to insufficient stamping have to be considered by the arbitrator.  HC concurs with the view taken in Sandeep Soni (supra) and finds no impediment to the appointment of an arbitrator in the present case.

HC finds no merit in the objections of the respondent and allows the petition; appoints Justice A.K. Sikri (Retd.)  as sole arbitrator.

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