Skip to main content

No bar under Sec 11 of Arbitration Act on appointing arbitrator even when agreement is unstamped

In M/S IMZ CORPORATE PVT LTD vs MSD TELEMATICS PVT LTD, petition was filed before the Delhi High Court appointment of a Sole Arbitrate based on an MOU signed between the parties.

Among the objections raised by the Respondents, it was argued that the MoU in question is an unstamped document. The same is therefore not a contract enforceable by law. Non-payment of stamp duty on a commercial contract would invalidate the arbitration agreement and render it non-existent and unenforceable in law. The Court cannot consider the same while exercising jurisdiction under Section 11 of the Act. Without prejudice to other contentions, the Court can impound the original MoU which does not bear stamp duty and once the issue of stamp duty and penalty is decided by the concerned authority, then IMZ must bring the MoU to the notice of the Court, whereupon the Petition can be adjudicated in accordance with law. The Respondent had further argued that notwithstanding the judgment of the Supreme Court in N.N. Global (supra), the position in law remain unchanged in light of the judgment of the Supreme Court in Vidya Drolia (supra). In N.N. Global (supra), a three- judge bench of the Supreme Court has referred the question of enforceability of insufficiently stamped instruments containing arbitration agreement to be settled by a bench of five judges. Mr. Kamat contended that till the time the law is settled by a larger bench, the ruling of a two-judge bench of the Supreme Court in Garware Wa Ropes Ltd. v. Coastal Marine Constructions and Engg. Ltd., 3 as affirmed by a three-judge bench in Vidya Drolia (supra), would continue to hold the field. In support of this contention, Mr. Kamat relied upon the decision in M. S. Bhati v. National Insurance Company.

Rejecting the argument of the Respondents, the court held that the documents in question, is titled ‘Memorandum of Understanding’. The court had initially, without going into the merits of the objection contemplated impounding the document and directing IMZ to deposit the leviable penalty, having regard to the fact that the agreement would be amenable to stamp duty in terms of Article 5 clause (c) of Schedule 1A of th Indian Stamp Act, 1899, attracting stamp duty of only Rs. 50/- and consequently under Section 35 of the of the Indian Stamp Act, 1899, the maximum penalty leviable on such a document would be ten times the stamp duty payable, which amounts to no more than Rs. 500/-. However subsequent to hearing the parties, in the opinion of the Court, such a recourse is not necessary in view of the judgment of the Supreme Court in the case of N.N Global Mercantile Pvt. Ltd v. Indo Unique Flame Ltd. wherein it was held that the arbitration agreement contained in the Work Order is independent and distinct from the underlying commercial contract. The arbitration agreement is an agreement which provides the mode of dispute resolution. Section 3 of the Maharashtra Stamp Act does not subject an arbitration agreement to payment of Stamp Duty, unlike various other agreements enlisted in the Schedule to the Act. This is for the obvious reason that a arbitration agreement is an agreement to resolve disputes arising out of a commercial agreement, through the mode of arbitration. On the basis of the doctrine of separability, the arbitration agreement being a separate and distinct agreement from the underlying commercial contract, would survive independent of the substantive contract. The arbitration 33 agreement would not be rendered invalid, un-enforceable or non-existent, even if the substantive contract is not admissible in evidence, or cannot be acted upon on account of non-payment of Stamp Duty.

Comments

Most viewed this month

The recovery of vehicles by the financier not an offence - SC

Special Leave Petition (Crl.) No. 8907  of 2009 Anup Sarmah (Petitioner) Vs Bhola Nath Sharma & Ors.(Respondents) The petitioner submitted that  respondents-financer had forcibly taken away the vehicle financed by them and  illegally deprived the petitioner from its lawful possession  and  thus,  committed  a crime. The complaint filed by the petitioner had been  entertained  by  the Judicial Magistrate (Ist Class), Gauhati (Assam) in Complaint Case  No.  608 of 2009, even directing the interim custody of the vehicle (Maruti  Zen)  be given to the petitioner vide order dated  17.3.2009.  The respondent on approaching the Guwahati High  Court against this order, the hon'ble court squashed the criminal  proceedings  pending   before  the  learned Magistrate. After hearing both sides, the Hon'ble Supreme Court decided on 30th...

When debt is bona fide disputed and the defence is a substantial one, the court will not wind up the company

In SHITAL FIBERS LTD.  vs  INDIAN ACRYLICS LIMITED, as per the respondent, appellant had made a payment of Rs.61,83,218/­. However, there was an outstanding balance of Rs.8,92,723/­ as on 28.7.2008. Since despite repeated requests, balance amount was not paid, the respondent issued a statutory notice to the appellant. The same was duly responded to. As the payment was not made despite notice being duly served on the appellant, the respondent filed the aforesaid Company Petition seeking winding up of the present appellant for its inability to pay admitted debts. The learned Company Judge vide order dated 28.9.2015 admitted the Company Petition. However, while doing so, the learned Company Judge observed, that since the appellant was an on­going concern, an opportunity should be granted to it to settle the accounts with the respondent by 31.12.2015. Only in case of failure of the settlement, the citation was directed to be published. On appeal, the Division Bench of the High Cou...

Abusing in-laws a ground for divorce: SC

Abusing in-laws and not allowing them to reside in the matrimonial home by a woman amounts to cruelty to her spouse, ground enough for grant of divorce, the Supreme Court has ruled while allowing an NRI's plea for legal separation from his wife. A bench of Justices Vikaramajit Sen and A M Sapre said such incidents could not be termed as "wear and tear" of family life as held by Madras High Court which had said that a couple must be prepared to face such situations in matrimonial relationship. The NRI had filed a divorce petition alleging that his wife was abusive to his family members and did not allow his parents and siblings to stay in his house when they visited the US. Referring to an incident, the husband told the court that his wife had once locked him and his sister out of the house and abused them saying they belonged to a 'prostitute family'. She refused to allow her sister-in-law to enter the house and even lodged a police complaint against her hu...