M/s. N.N. GLOBAL MERCANTILE PVT. LTD. v. M/s. INDO UNIQUE FLAME LTD. & OTHERS

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A reasonable and just interpretation of ‘existence’ requires understanding the context, the purpose and the relevant legal norms applicable for a binding and enforceable arbitration agreement. An agreement evidenced in writing has no meaning unless the parties can be compelled to adhere and abide by the terms. A party cannot sue and claim rights based on an unenforceable document. Thus, there are good reasons to hold that an arbitration agreement exists only when it is valid and legal. A void and unenforceable understanding is no agreement to do anything. Existence of an arbitration agreement means an arbitration agreement that meets and satisfies the statutory requirements of both the Arbitration Act and the Contract Act and when it is enforceable in law. We would proceed to elaborate and give further reasons : (i) In Garware Wall Ropes Ltd., this Court had examined the question of stamp duty in an underlying contract with an arbitration clause and in the context had drawn a distinction between the first and second part of Section 7(2) of the Arbitration Act, albeit the observations made and quoted above with reference to ‘existence’ and ‘validity’ of the arbitration agreement being apposite and extremely important, we would repeat the same by reproducing paragraph 29 thereof : E “29. This judgment in Hyundai Engg. case is important in that what was specifically under consideration was an arbitration clause which would get activated only if an insurer admits or accepts liability. Since on facts it was found that the insurer repudiated the claim, though an arbitration clause did “exist”, so to speak, in the policy, it would not exist in law, as was held in that judgment, when one important fact is introduced, namely, that the insurer has not admitted or accepted liability. Likewise, in the facts of the present case, it is clear that the arbitration clause that is contained in the subcontract would not “exist” as a matter of law until the sub-contract is duly stamped, as has been held by us above. The argument that Section 11(6A) deals with “existence”, as opposed to Section 8, Section 16 and Section 45, which deal with “validity” of an arbitration agreement is answered by this Court’s understanding of the expression “existence” H in Hyundai Engg. case, as followed by us.”

M/s. N.N. GLOBAL MERCANTILE PVT. LTD. v. M/s. INDO 983 UNIQUE FLAME LTD. & OTHERS [INDU MALHOTRA, J.]

Existence and validity are intertwined, and arbitration agreement A does not exist if it is illegal or does not satisfy mandatory legal requirements. Invalid agreement is no agreement.” 6.12 We doubt the correctness of the view taken in paragraph 92 of the three-judge bench in Vidya Drolia. We consider it appropriate to refer the findings in paras 22 and 29 of Garware B Wall Ropes Limited, which has been affirmed in paragraph 92 of Vidya Drolia, to a Constitution Bench of five judges.

7. The next issue which arises is as to which authority would exercise the power of impounding the instrument under Section 33 read with Section 34 of the Maharashtra Stamp Act, in a case where the substantive contract contains an arbitration agreement. 7.1 In an arbitration agreement, the disputes may be referred to arbitration by three modes. a) The first mode is where the appointment of the arbitrator takes place by the parties consensually in accordance with the terms of the arbitration agreement, or by a designated arbitral institution, without the intervention of the court. In such a case, the arbitrator/tribunal is obligated by Section 33 of the Indian Stamp Act, 1899 (or the applicable State Act) to impound the instrument, and direct the parties to pay the requisite Stamp Duty (and penalty, if any), and obtain an endorsement from the concerned Collector. This would be evident from the provisions of Section 34 of the Stamp Act which provides that “any person having by law or consent of parties authority to receive evidence” is mandated by law to impound the instrument, and direct the parties to pay the requisite stamp duty. b) The second mode of appointment is where the parties fail to make the appointment in accordance with the arbitration agreement, and an application is filed under Section 11 before the Court to invoke the default power for making the appointment. G In such a case, the High Court, or the Supreme Court, as the case may be, while exercising jurisdiction under Section 11, would impound the substantive contract which is either unstamped or inadequately stamped, and direct the parties to cure the defect before the arbitrator / tribunal can adjudicate upon the contract. H

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A c) The third mode is when an application is filed under Section 8 before a judicial authority for reference of disputes to arbitration, since the subject matter of the contract is covered by an arbitration agreement. In such a case, the judicial authority will make the reference to arbitration. However, in the meanwhile, the parties would be directed to have the substantive contract stamped in accordance with the provisions of the relevant Stamp Act, so that the rights and obligations emanating from the substantive contract can be adjudicated upon. 7.2 In the case of an application under Section 9 of the Arbitration Act, 1996 the situation would be different. If an application for urgent interim reliefs is filed under Section 9 before the Court, and it is brought to the attention of the Court that the substantive contract is not duly stamped, the Court would grant ad-interim relief to safeguard the subject-matter of the arbitration. However, the substantive contract would then be impounded, and the concerned party be directed to take the necessary steps for payment of the requisite stamp duty in accordance with the provisions of the relevant Stamp Act, within a time-bound period. It is made clear that the payment of Stamp Duty on the substantive contract as assessed by the Collector, would however be subject to the right of revision / appeal available under the relevant Stamp Act.

8Copy pinpoint8. Whether the fraudulent invocation of the Bank Guarantee is arbitrable? 8.1 In the present case, the Appellant-Plaintiff in the Commercial F Suit inter alia submitted that the Bank Guarantee was furnished to ensure due execution of the Work Order dated 28.09.2015. It was submitted on behalf of the Appellants that the invocation of the bank guarantee was fraudulent, since the agreement had never been acted upon. There was no invoice raised or payment received G under the Work Order. In the absence of any legal liability for payment under the Work Order, the invocation of the bank guarantee was fraudulent. 8.2 The High Court held that the allegations of fraud made in this case are simple, which do not in the normal course constitute any criminal offence, nor are the allegations so complex in nature H

M/s. N.N. GLOBAL MERCANTILE PVT. LTD. v. M/s. INDO 985 UNIQUE FLAME LTD. & OTHERS [INDU MALHOTRA, J.]

which would entail extensive evidence being led, hence the disputes could be resolved through arbitration. 8.3 Under the Arbitration Act, the earliest decision on the issue of arbitrability of allegations of fraud was considered by a two-judge bench in N. Radhakrishnan v. Maestro Engineers.29 In this case, the applicant had made serious allegations against the respondents of having committed malpractices in the account books, and mani-pulation of finances of the partnership firm. An application under Section 8 was filed by the respondents for reference of disputes to arbitration. The Court took the view that since the issues involved detailed investigation into the allegations and production of elaborate evidence, it could not be properly dealt by an arbitrator, and ought to be settled by a court of law. This decision relied on the judgment in Abdul Kadir v. Madhav Prabhakar, 30 which was passed under the 1940 Act. The judgment in Abdul Kadir in turn relied upon an English judgment rendered in Russel v. Russel,31 wherein it was held that a party against whom an allegation of fraud is made, has the right to defend himself in a public forum. 8.4 The judgment in N. Radhakrishnan (supra) is based on an outdated view of the law propounded in Russel v. Russel, which ante-dates even the first English Arbitration Act of 1899. E Arbitrability of fraud is no longer an issue relating to the competence of the arbitrator, or dealing with voluminous evidence. Arbitrators are competent to deal with allegations of civil fraud. The judgment in Russel is obsolete, which would be evident from the various enactments of the English Arbitration Act. Under Section 24(2) of the 1950 Act, the court could revoke the authority of a tribunal F to deal with claims involving issues of fraud. This provision was repealed by Section 107(2) of the English Arbitration Act, 1996 Act. Russel in his Commentary on Arbitration observed that an 29 (2010) 1 SCC 72. Followed in G Ivory Properties & Hotels Pvt. Ltd. v. Nusli Neville Wadia, 2011 (2) Arb LR 479 (Bom); See also article by Justice D.R. Dhanuka (Retd.) reported in Journal Section of 2010 (2) Arb LR 13; RRB Energy Ltd. v. Vestas Wind System & Ors., (2015) 219 DLT 516. 30 AIR 1962 SC 406: [1962] 3 SCR 702. 31 [1880] 14 Ch. D 471. H

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A arbitral tribunal does not have the jurisdiction to impose criminal sanctions on a party, its power is limited to the civil consequences of fraud.32 8.5 In Bharat Rasiklal Ashra v. Gautam Rasiklal Ashra,33 a two-judge bench took a different view by holding that at the pre- B reference stage under Section 11, the court is not required to examine the allegations of fraud and forgery. The scope of examination is only the existence of a valid and enforceable arbitration agreement as a condition precedent for making a reference. The ground that allegations of fraud, forgery and fabrication are likely to involve recording of evidence, or involve C some delay in disposal, were not relevant grounds to be considered at the pre-reference stage. 8.6 The legislature amended sub-section (1) of Section 8 to provide that a judicial authority shall refer the parties to arbitration, ‘unless it finds that prima facie no valid agreement exists’. The amended D Section 8 reads : “8. Power to refer parties to arbitration where there is an arbitration agreement.- (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any E person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists. F (2) … (3) … ’’ The issue of arbitrability of fraud was subsequently considered by a two-judge bench in A. Ayyasamy v. A. Paramasivam & Ors.34. The Court held that Section 8 mandates reference to arbitration, unless G the arbitration agreement is found to be invalid. It has been recognised that certain categories of disputes which are of public nature, are not

32 Russel on Arbitration, Pg.72, para 2-083, and Pg.83, para 2-107. 33 (2012) 2 SCC 144. H 34 (2016) 10 SCC 386.

M/s. N.N. GLOBAL MERCANTILE PVT. LTD. v. M/s. INDO 987 UNIQUE FLAME LTD. & OTHERS [INDU MALHOTRA, J.]

capable of adjudication and settlement by arbitration, which is a private forum constituted by consent of parties. The Court made a distinction between cases where there are allegations of serious fraud and fraud simplicitor. Mere allegations of fraud simplicitor are not a sufficient ground to decline reference to arbitration. Parties may be referred to arbitration where allegations of fraud pertain to disputes between parties inter se, and have no implication for third parties. The courts may, however, refuse to make a reference to arbitration only in those cases where there are very serious allegations of fraud, which make a virtual case of criminal offence of fraud, or where allegations of fraud are so complicated, that it becomes absolutely essential that such complex issues be decided only by the civil courts on appreciation of voluminous evidence. This would also include those cases where there are serious allegations of forgery or fabrication of documents, or where fraud is alleged with respect to the arbitration clause itself, or where the fraud alleged is of such a nature that it permeates the entire contract, including the agreement to arbitrate. The judicial authority must carefully sift the materials for the purpose of determining whether the defence is merely a pretext to avoid arbitration. It was opined that the Arbitration Act must be interpreted to bring it in consonance with the prevailing arbitration jurisprudence in the common law world. 8.7 The judgment in Ayyasamy (supra) was followed in Rashid E Raza v. Sadaf Akhtar,35 wherein the twin test laid down in para 25 of Ayyasamy was followed i.e. : (i) does the plea of fraud permeate the entire contract and above all, the agreement of arbitration, rendering it void, or (ii) whether the allegations of fraud touch upon the internal affairs of the parties inter se having no implication in the public domain. F

8.8 In the subsequent decision of Ameet Lalchand Shah & Ors. v. Rishabh Enterprises & Anr.,36 allegations of fraud arising from criminal breach of trust and misrepresentation regarding the equipment procured and leased for the setting up and operating of a Photovoltaic solar plant were made. A civil suit was filed praying G for a declaration that all the agreements were vitiated by fraud and misrepresentation. An application was filed under Section 8 seeking reference of the disputes to arbitration 35 (2019) 8 SCC 710. 36 (2018) 15 SCC 678. H

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A under all the four agreements. This Court held that only where the court is satisfied that the allegations of fraud are serious and complicated in nature, would it be more appropriate for the court to deal with the subject matter of the disputes, rather than relegate the parties to arbitration. It is the duty of the court to impart a sense of business efficacy to commercial transactions, and mere allegations of fraud would not be sufficient to decline reference of disputes to arbitration. 8.9 In a recent judgment delivered in Avitel Post Studioz Ltd. & Ors. v. HSBC PI Holdings (Mauritius Limited),37 which pertains to an international commercial contract, the issue of arbitrability of fraud arose for consideration. This Court held that the same set of facts may have civil as well criminal consequences. If it is clear that a civil dispute involves questions of fraud, misrepresentation, etc. which can be the subject matter of a proceeding under Section 17 of the Indian Contract, 1872, and/or the tort of deceit, the mere fact that criminal proceedings can or have been instituted in respect of the same subject matter, would not lead to the conclusion that a dispute which is otherwise arbitrable, ceases to be so. This view has been affirmed by a co-ordinate bench in E Deccan Paper Mills v. Regency Mahavir38 and Vidya Drolia & Others v. Durga Trading Corporation39. 8.10 In our view, all civil or commercial disputes, either contractual or non-contractual, which can be adjudicated upon by a civil court, in principle, can be adjudicated and resolved through arbitration, F unless it is excluded either expressly by statute, or by necessary implication. The Arbitration and Conciliation Act, 1996 does not exclude any category of disputes as being non arbitrable. Section 2(3) of the Arbitration Act however recognizes that certain categories of disputes by law may not be submitted to arbitration.40 In all jurisdictions, certain categories of disputes are reserved by G

37 (2020) SCCOnLine SC 656. 38 (2020) SCCOnLine SC 655. 39 Civil Appeal No.2402 of 2019 decided vide Judgment dated 14.12.2020. 40 Section 2(3). This Part shall not affect any other law for the time being in force by H virtue of which certain disputes may not be submitted to arbitration.

M/s. N.N. GLOBAL MERCANTILE PVT. LTD. v. M/s. INDO 989 UNIQUE FLAME LTD. & OTHERS [INDU MALHOTRA, J.]

the legislature, as a matter of public policy, to be adjudicated by a A court of law, since they lie in the realm of public law. 8.11 Traditionally, disputes relating to rights in rem are required to be adjudicated by courts and / or statutory tribunals. A right in rem is a right exercisable against the world at large. Actions in rem refer to actions which create a legal status such as citizenship, divorce, testamentary and probate issues, etc. A lis in rem is not arbitrable by a private tribunal constituted by the consent of parties. Actions in personam determine the rights and interests of parties to the subject matter of the dispute, which are arbitrable. The broad categories of disputes which are considered to be non arbitrable are penal offences which are visited with criminal sanction; offences pertaining to bribery / corruption; matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody and guardianship matters, which pertain to the status of a person; testamentary matters which pertain to disputes relating to the validity of a Will, grant of probate, letters of administration, succession, which pertain to the status of a person, and are adjudicated by civil courts. Certain categories of disputes such as consumer disputes41; insolvency and bankruptcy proceedings; oppression and mismanagement, or winding up of a company; disputes relating to trusts, trustees and beneficiaries of a trust42 are governed by special enactments. This Court in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd.43 has recognized some examples of disputes which are not arbitrable, and held that : F “36. The well recognized examples of non-arbitrable disputes are : (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency G and winding up matters; (v) testamentary matters (grant of

41 Emaar MGF Land Limited v. Aftab Singh, (2019) 12 SCC 751. 42 Vimal Kishor Shah & Others v. Jayesh Dinesh Shah & Others. (2016) 8 SCC 788. 43 (2011) 5 SCC 532. H

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A probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes.” B 8.12 The civil aspect of fraud is considered to be arbitrable in contemporary arbitration jurisprudence, with the only exception being where the allegation is that the arbitration agreement itself is vitiated by fraud or fraudulent inducement, or the fraud goes to the validity of the underlying contract, and impeaches the arbitration clause itself. Another category of cases is where the substantive C contract is “expressly declared to be void” under Section 1044 of the Indian Contract Act, 1872 where the agreement is entered into by a minor (without following the procedure prescribed under the Guardian and Wards Act, 1890) or a lunatic, which would be with a party incompetent to enter into a contract. D 8.13 The civil aspect of fraud can be adjudicated by an arbitral tribunal. The civil aspect of fraud is defined by Section 17 of the Indian Contract Act, 1872 as follows : “17. Fraud defined. – Fraud means and includes any of the following acts committed by a party to a contract, or with his E connivance, or by his agent, with intent to deceive another party thereto or his [agent], or to induce him to enter into the contract: (1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; F (2) the active concealment of a fact by one having knowledge or belief of the fact;

44 Section 10. What agreements are contracts.—All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall affect any law in force in India, and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents. Section 11. Who are competent to contract.—Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject.

M/s. N.N. GLOBAL MERCANTILE PVT. LTD. v. M/s. INDO 991 UNIQUE FLAME LTD. & OTHERS [INDU MALHOTRA, J.]

(3) a promise made without any intention of performing it; A (4) any other act fitted to deceive; (5) any such act or omission as the law specially declares to be fraudulent.” 8.14 We will now consider whether voidable agreements are arbitrable. Voidable agreements are defined by Section 19 of the Contract Act as : “19. Voidability of agreements without free consent.—When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused. A party to a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representation made had been true. Exception.—If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of Section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence. Explanation.—A fraud or misrepresentation which did not cause the consent to a contract of the party of whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable.” F In the case of voidable agreements, such disputes would be arbitrable, since the issue whether the consent was procured by coercion, fraud, or misrepresentation requires to be adjudicated upon by leading cogent evidence, which can very well be decided through arbitration. Until it so proved and upheld as per Sections 2(i) and (j) of the Indian Contract Act, 1872 such an agreement would remain enforceable, and G is not void. 8.15 In Swiss Timing Ltd. v. Commonwealth Games 2010 Organising Committee,45 a single judge (exercising powers u/S. 45 (2014) 6 SCC 677. H

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A 11) opined that when a plea is taken to avoid arbitration on the ground of the underlying contract being void, the court is required to ascertain the true nature of the defence. Often, the terms ‘void’ and ‘voidable’ are used loosely and interchangeably. The court ought to examine the plea by keeping in mind the provisions of the Indian Contract Act, 1872. In cases where the court comes to a B conclusion that the contract is void without receiving any evidence, it may be justified in declining the reference to arbitration in a few isolated cases. These would be cases where the court can readily conclude that the contract is void upon a meaningful reading of the contract document itself. However, it would not be permissible C to circumvent arbitration where the defence taken is that the contract is voidable, which are cases covered under circumstances mentioned inter alia in Sections 12, 14, 15, 16, 17, 18 of the Indian Contract Act, 1872. Even though Swiss Timing Ltd. was a decision of a D designate of the Chief Justice under Section 11 of the 1996 Act (prior to the Amendment), and would have no precedential value in view of the judgment of this Court in State of West Bengal v. Associated Contractors,46 the reasoning in Swiss Timing Ltd. has been cited with approval by this Court in Avitel Post Studioz Ltd. & Ors. v. HSBC PI Holdings (Mauritius Limited)47. E 8.16 The ground on which fraud was held to be non arbitrable earlier was that it would entail voluminous and extensive evidence, and would be too complicated to be decided in arbitration. In contemporary arbitration practice, arbitral tribunals are required to traverse through volumes of material in various kinds of disputes such as oil, natural gas, construction industry, etc. The ground that allegations of fraud are not arbitrable is a wholly archaic view, which has become obsolete, and deserves to be discarded. However, the criminal aspect of fraud, forgery, or fabrication, which would be visited with penal consequences and criminal sanctions can be adjudicated only by a court of law, since it may result in a conviction, which is in the realm of public law.48

46 (2015) 1 SCC 32. 47 (2020) SCCOnLine SC 656. 48 Malhotra’s Commentary on the Law of Arbitration, [4th ed., Wolters Kluwer (2020)], H p.339, Volume I.

M/s. N.N. GLOBAL MERCANTILE PVT. LTD. v. M/s. INDO 993 UNIQUE FLAME LTD. & OTHERS [INDU MALHOTRA, J.]

8.17 In the present case, the allegations of fraud with respect A to the invocation of the Bank Guarantee are arbitrable, since it arises out of disputes between parties inter se, and is not in the realm of public law.

9Copy pinpoint9. Maintainability of the Writ Petition 9.1 We are of the view that the Writ Petition filed by the B Respondent No. 1 to challenge the Order dated 18.01.2018 passed by the Special Commercial Court / District Judge-I in Commercial Dispute No. 62/2017 was not maintainable, since a statutory remedy under the amended Section 37 of the Arbitration Act is available. Section 37(1) has been amended by Act 3 of 201649. C Section 37(1)(a) provides for an appeal to be filed against an Order refusing to refer the parties to arbitration. Section 37(1)(a) reads as : “37. Appealable orders. – (1) An appeal shall lie from the following orders (and from no others) to the Court authorised D by law to hear appeals from original decrees of the Court passing the order, namely:- (a) Refusing to refer the parties to arbitration under section 8;…” E 9.2 Since the judgment and order of the Commercial Court dated 18.01.2018 refusing to refer the parties to arbitration was an appealable order under Section 37(1)(a) of the Arbitration Act, the Writ Petition was not maintainable. The appeal would lie before the Commercial Appellate Division of the High Court under Section 13(1A) of the Commercial Courts Act, 2015. Section 13(1A) read as : F “13. Appeals from decrees of Commercial Courts and Commercial Divisions.–(1) Any person aggrieved by the judgment or order of a Commercial Court below the level of a District Judge may appeal to the Commercial Appellate Court within a period of 60 days from the date of judgment or order. G (1A) Any person aggrieved by the judgment or order of a Commercial Court at the level of District Judge exercising original civil jurisdiction or, as the case may be, Commercial

49 which came into effect on 23.10.2015. H

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A Division of a High Court may appeal to the Commercial Appellate Division of that High Court within a period of sixty days from the date of the judgment or order: Provided that an appeal shall lie from such orders passed by a Commercial Division or a Commercial Court that are specifically enumerated under Order XLIII of the Code of Civil Procedure, 1908 (5 of 1908) as amended by this Act and Section 37 of the Arbitration and Conciliation Act, 1996 (26 of 1996).” In view of the availability of a statutory remedy, the judgment of the High Court passed under Articles 226 and 227 of the Constitution is liable to be set aside on the ground of maintainability.

10Copy pinpoint10. In the present case, since both parties have admitted the existence of the arbitration agreement between the parties, as recorded in the judgment of the High Court, and even before this Court during oral submissions, parties may either appoint a sole arbitrator consensually; failing which, an application u/S. 11 for appointment of the arbitrator may be made before the High Court.

11Copy pinpoint11. In view of the discussion hereinabove, we hold that : E (i) The impugned judgment and order dated 30.09.2020 in W.P. No. 1801 of 2020 passed by the Bombay High Court is set aside; (ii) We direct the Secretary General of this Court to impound the Work Order dated 28.09.2015, and forward it to the F concerned Collector in Maharashtra for assessment of the Stamp Duty payable on the said instrument, to be completed within a period of 45 days from receipt of the same; (iii) On determination of the Stamp Duty payable, the Appellant / Plaintiff is directed to make the payment assessed by the G Collector u/S.30(f-a) of the Maharashtra Stamp Act, 1958 within a period of four weeks from the date of receipt of communication of the Order; The Stamp Duty assessed by the Collector will, however, be subject to the statutory right available to file a revision / H appeal under the Maharashtra Stamp Act.

M/s. N.N. GLOBAL MERCANTILE PVT. LTD. v. M/s. INDO 995 UNIQUE FLAME LTD. & OTHERS [INDU MALHOTRA, J.]

(iv) With respect to the invocation of the Bank Guarantee, the A Appellant may seek interim relief u/S. 9 of the Arbitration and Conciliation Act, 1996. We extend the stay granted by the High Court for a further period of eight weeks.

12Copy pinpoint12. We are of the considered view that the finding in SMS Tea B Estates and Garware that the non-payment of stamp duty on the commercial contract would invalidate even the arbitration agreement, and render it non-existent in law, and un-enforceable, is not the correct position in law. In view of the finding in paragraph 92 of the judgment in Vidya C Drolia by a co-ordinate bench, which has affirmed the judgment in Garware, the aforesaid issue is required to be authoritatively settled by a Constitution bench of this Court. We consider it appropriate to refer the following issue, to be authoritatively settled by a Constitution bench of five judges of this Court: D “Whether the statutory bar contained in Section 35 of the Indian Stamp Act, 1899 applicable to instruments chargeable to Stamp Duty under Section 3 read with the Schedule to the Act, would also render the arbitration agreement contained in such an instrument, which is not chargeable to payment of stamp duty, as E being non-existent, un-enforceable, or invalid, pending payment of stamp duty on the substantive contract / instrument ?’’ In light of the same, the Registry may place this matter before the Hon’ble Chief Justice of India for appropriate orders/directions. F

Ankit Gyan Issue referred to Constitution Bench.