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held that Section 45 does not require the judicial authority to give a final determination. The court observed that: “74. There are distinct advantages in veering to the view that Section 45 does not require a final determinative finding by the court. First, under the Rules of Arbitration of the International Chamber of Commerce (as in force with effect from 1-1-1998), as in the present case, invariably the Arbitral Tribunal is vested with the power to rule upon its own jurisdiction. Even if the court takes the view that the arbitral agreement is not vitiated or that it is not invalid, inoperative or unenforceable, based upon purely a prima facie view, nothing prevents the arbitrator from trying the issue fully and rendering a final decision thereupon. If the arbitrator finds the agreement valid, there is no problem as the arbitration will proceed and the award will be made. However, if the arbitrator finds the agreement invalid, inoperative or void, this means that the party who wanted to proceed for arbitration was given an opportunity of proceeding to arbitration, and the arbitrator after fully trying the issue has found that there is no scope for arbitration. Since the arbitrator's finding would not be an enforceable award, there is no need to take recourse to the judicial intercession available under Section 48(1)(a) of the Act.”

158Copy pinpoint158. When the referral court renders a prima facie opinion, neither the arbitral tribunal, nor the court enforcing the arbitral award will be bound by such a prima facie view. If a prima facie view as to the existence of an arbitration agreement is taken by the referral court, it still allows the arbitral tribunal to examine the issue in-depth. Such a legal approach will help the referral court in weeding out prima facie non-existent arbitration agreements. It will also protect the jurisdictional competence of the arbitral tribunals to decide on issues pertaining to the existence and validity of an arbitration agreement. I*. Harmonious construction of the Arbitration Act, the Stamp Act, and the Contract Act

159Copy pinpoint159. One of the cardinal principles of the interpretation of statutes is to discover and give effect to the legislative intention. If a statute is susceptible to two interpretations, the court will have to reject the construction which * Ed. Note: PART I

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1169 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

will defeat the plain intention of the legislation.150 The court has to ascertain the intention of the legislation by considering not only the clause to be interpreted, but also the entirety of the statute. The legislature often enacts a statute to give effect to legislative policy. When enacting a statute, the legislature often endeavors to ensure that the provisions of a statute do not contradict the provisions of the same statute or provisions of another statute. However, inconsistencies or contradictions may nonetheless arise between statutes. In such situations, it is left to the court to bring about a harmony between the working of such statutes.

160Copy pinpoint160. In Sultana Begum v. Prem Chand Jain,151 this Court analysed the relevant decisions of this Court and laid down the following principles pertaining to the harmonious construction of statutes: a. It is the duty of the courts to avoid a head-on clash between two sections of the Act and to construe the provisions which appear to be in conflict with each other in such a manner as to harmonise them; b. The provisions of one section of a statute cannot be used to defeat the other provisions unless the court, in spite of its efforts, finds it impossible to effect reconciliation between them; c. When there are two conflicting provisions in an Act, which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both. This is the essence of the rule of harmonious construction; d. The courts have also to keep in mind that an interpretation which reduces one of the provisions to a “dead letter” or “useless lumber” is not harmonious construction; and e. To harmonize is not to destroy any statutory provision or to render it otiose.

150 CIT v. Hindustan Bulk Carriers, (2003) 3 SCC 57 151 (1997) 1 SCC 373

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161Copy pinpoint161. In Kandla Export Corporation v. OCI Corporation152, the issue before this Court was whether an appeal which was not maintainable under Section 50 of the Arbitration Act was nonetheless maintainable under Section 13(1) of the Commercial Courts Act 2015. Section 50 the Arbitration Act provides that no appeal shall lie from the order refusing to: (a) refer the parties to arbitration under section 45; and (b) enforce a foreign award under section 48. Section 13(1) of the Commercial Courts Act, 2015 allows any person aggrieved by the decision of the Commercial Court or Commercial Division of a High Court to file an appeal before the Commercial Appellate Division of that High Court.

162Copy pinpoint162. This Court referred to the objects of both the statutes to observe that the Arbitration Act is meant to effectuate a speedy resolution of disputes between parties, while the Commercial Courts Act 2015 is for the speedy resolution of commercial disputes involving significant amounts of money. It was held that the provision of another appeal under Section 13(1) of the Commercial Courts Act 2015 in matters of foreign arbitration would be against the object of speedy enforcement of foreign arbitral awards. Therefore, this Court held that any construction of Section 13 of the Commercial Courts Act, 2015 which would lead to further delay, instead of an expeditious enforcement of a foreign award must be eschewed: “Even on applying the doctrine of harmonious construction of both statutes, it is clear that they are best harmonized by giving effect to the special statute i.e. the Arbitration Act, vis-à-vis the more general statute, namely, the Commercial Courts Act, being left to operate in spheres other than arbitration.”

163Copy pinpoint163. In Silpi Industries v. Kerala State Road Transport Corporation,153 the issue before this Court was whether a counter-claim was maintainable in arbitration proceedings initiated under Section 18(3) of the Micro, Small and Medium Enterprises Development Act 2006. Section 18(3) provides that where the conciliation proceedings initiated by any party are not successful and stand terminated without any settlement between the parties, the Micro and Small Enterprises Facilitation Council shall either take

152 (2018) 14 SCC 715 153 2021 SCC OnLine SC 439

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1171 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

up the dispute for arbitration or refer it to any institution or centre. The said provision further states that the provisions of the Arbitration Act shall then apply to the disputes as if the arbitration was in pursuance of an arbitration agreement referred to in Section 7(1) of the Arbitration Act.

164Copy pinpoint164. This Court noted that Section 23(2A) of the Arbitration Act gives the respondent a right to submit a counter-claim or plead a set-off, which shall be adjudicated upon by the arbitral tribunal. It was held that since Section 18(3) of the MSME Act expressly provides that proceedings initiated under Section 18(3) shall be carried out as if they were in pursuance of an arbitration agreement under Section 7(1) of the Arbitration Act, the right to make a counter-claim before the statutory authorities exists under the MSMED Act. In this way, the two statutes were harmonized.

165Copy pinpoint165. In the present reference, the challenge before this Court is to harmonize the provisions of the Arbitration Act and the Stamp Act. The object of the Arbitration Act is to inter alia ensure an efficacious process of arbitration and minimize the supervisory role of courts in the arbitral process. On the other hand, the object of the Stamp Act is to secure revenue for state. It is a cardinal principle of interpretation of statutes that provisions contained in two statutes must be, if possible, interpreted in a harmonious manner to give full effect to both the statutes.154 In providing a harmonious interpretation, this Court has to be cognizant of the fact that it does not defeat the purpose of the statutes or render them ineffective. 155 The challenge, therefore, before this Court is to preserve the workability and efficacy of both the Arbitration Act and the Stamp Act.156 i. The Arbitration Act will have primacy with respect to arbitration agreements

166Copy pinpoint166. As discussed in the preceding segments, the Arbitration Act is a legislation enacted to inter alia consolidate the law relating to arbitration in India. It will have primacy over the Stamp Act and the Contract Act in relation to arbitration agreements for multiple reasons.

154 Jagdish Singh v. Lt. Governor, Delhi, (1997) 4 SCC 435 155 State of Tamil Nadu v. M K Kandaswami, (1975) 4 SCC 745 156 CIT v. Hindustan Bulk Carriers, (2003) 3 SCC 57

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a. The Arbitration Act is a special law and the Indian Contract Act and the Stamp Act are general laws

167Copy pinpoint167. It is trite law that a general law must give way to a special law. This rule of construction stems from the doctrine generalia specialibus non derogant. In LIC v. D.J. Bahadur,157 this Court held: “52. In determining whether a statute is a special or a general one, the focus must be on the principal subject-matter plus the particular perspective. For certain purposes, an Act may be general and for certain other purposes it may be special and we cannot blur distinctions when dealing with finer points of law.” In Sundaram Finance Ltd. v. T. Thankam,158 this Court held: “13. … Once it is brought to the notice of the court that its jurisdiction has been taken away in terms of the procedure prescribed under a special statute, the civil court should first see whether there is ouster of jurisdiction in terms or compliance with the procedure under the special statute. The general law should yield to the special law—generalia specialibus non derogant. In such a situation, the approach shall not be to see whether there is still jurisdiction in the civil court under the general law. Such approaches would only delay the resolution of disputes and complicate the redressal of grievance and of course unnecessarily increase the pendency in the court.”

169Copy pinpoint169. The following position of law emerges from these precedents: a. The principal subject-matter as well as the particular perspective or focus illuminate the path to ascertain whether a law is a general law or a special law; and b. The court should examine whether its jurisdiction has been ousted in terms of the procedure prescribed by a special law.

170Copy pinpoint170. To determine which of the three statutes that this Court is faced with is a special law, it is necessary to first refer to their subject-matter:

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a. The Stamp Act is a law governing the payment of stamp-duty for all manner of instruments. Schedule I to the Stamp Act sets out various types instruments which fall within the ambit of the said legislation; b. The Contract Act, as the name suggests, sets out the rules in relation to contracts in general. An arbitration agreement is one of the many different types of contracts to which it is applicable; and c. The Arbitration Act contains the law relating to domestic arbitration, international commercial arbitration, the enforcement of foreign arbitral awards, and conciliation.

171Copy pinpoint171. Second, the “particular perspective” of this case pertains to whether an unstamped arbitration agreement is rendered unenforceable pending the payment of stamp-duty so as to interpose a bar on the referral court to refer parties to arbitration. The issue is not whether all agreements are rendered unenforceable under the provisions of the Stamp Act but whether arbitration agreements in particular are unenforceable.

172Copy pinpoint172. The Arbitration Act is a special law in the context of this case because it governs the law on arbitration, including arbitration agreements – Section 2(1)(b) and Section 7 of this statute define an arbitration agreement. In contrast, the Stamp Act defines ‘instruments’159 as a whole and the Contract Act defines ‘agreements’160 and ‘contracts.’161

173Copy pinpoint173. It is not only the definition of ‘arbitration agreement’ but also the other provisions of the Arbitration Act and the purpose for which it was enacted that makes it a special law. As observed by this Court in Bhaven Construction. (supra), “the Arbitration Act is a code in itself.”162 It provides for a detailed mechanism by which arbitration may be conducted, with a view to ensuring its success as a speedy and efficacious alternative to the courts. The Statements of Objects and Reasons of the Arbitration Act

159 Section 2(14), Stamp Act 160 Section 2(e), Contract Act 161 Section 2(h), Contract Act 162 Ibid at paragraph 12

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records that the main objective of this law was to comprehensively cover international and commercial arbitration and conciliation as also domestic arbitration and conciliation. b. Section 5 of the Arbitration Act

174Copy pinpoint174. In the above segments, we have dealt with the scope of Section 5 of the Arbitration Act. It restricts the extent of judicial intervention in various matters governed by Part I of the Arbitration Act.163 The non- obstante clause in this provision is of particular significance. It indicates that the rule in Section 5 (and consequently, the provisions of the Arbitration Act) must take precedence over any other law for the time being in force. Any intervention by the courts (including impounding an agreement in which an arbitration clause is contained) is, therefore, permitted only if the Arbitration Act provides for such a step, which it does not. Sections 33 and 35 cannot be allowed to operate in proceedings under Section 11 (or Section 8 as the case may be), in view of the non-obstante clause in Section 5. This being the case, we are unable to agree with the decision in N N Global 2 (supra), that the court in a proceeding under section 11 must give effect to Sections 33 and 35 of the Stamp Act despite the interdict in Section 5. The court held: “129. Section 5 no doubt provides for a non obstante clause. It provides against judicial interference except as provided in the Act. The non obstante clause purports to proclaim so despite the presence of any law which may provide for interference otherwise. However, this does not mean that the operation of the Stamp Act, in particular, Sections 33 and 35 would not have any play. We are of the clear view that the purport of Section 5 is not to take away the effect of Sections 33 and 35 of the Stamp Act. The Court under Section 11 purporting to give effect to Sections 33 and 35 cannot be accused of judicial interference contrary to Section 5 of the Act.”

163 CDC Financial Services (Mauritius) Ltd. v. BPL Communications Ltd., (2003) 12 SCC 140; Empire Jute Co. Ltd. v. Jute Corpn. of India Ltd., (2007) 14 SCC 680; Associate Builders v. DDA, (2015) 3 SCC 49; Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1175 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

175Copy pinpoint175. Section 5 is effectively rendered otiose by the interpretation given to it in N N Global 2 (supra). The court failed to provide a reason for holding that Section 5 of the Arbitration Act does not have the effect of excluding the operation of Sections 33 and 35 of the Stamp Act in proceedings under Section 11 of the Arbitration Act. The non-obstante clause in Section 5 does precisely this. In addition to the effect of the non-obstante clause, the Arbitration Act is a special law. We must also be cognizant of the fact that one of objectives of the Arbitration Act was to minimise the supervisory role of courts in the arbitral process.164

176Copy pinpoint176. In Hameed Joharan v. Abdul Salam,165 this Court made the following observations on the interplay between the Stamp Act and the Limitation Act 1963: “38. … The intent of the legislature in engrafting the Limitation Act shall have to be given its proper weightage. Absurdity cannot be the outcome of interpretation by a court order and wherever there is even a possibility of such absurdity, it would be a plain exercise of judicial power to repel the same rather than encouraging it. The whole purport of the Indian Stamp Act is to make available certain dues and to collect revenue but it does not mean and imply overriding the effect over another statute operating in a completely different sphere.” c. Parliament was aware of the Stamp Act when it enacted the Arbitration Act

177Copy pinpoint177. Parliament was aware of the Stamp Act when it enacted the Arbitration Act. Yet, the latter does not specify stamping as a pre-condition to the existence of a valid arbitration agreement. Further, Section 11(6-A) of the Arbitration Act requires the court to confine itself to the examination of the existence of the arbitration agreement. This provision stands in contrast to Section 33(2) of the Stamp Act which also uses the word “examine.” Section 33(2) requires the person before whom an instrument is produced, to examine whether it is stamped with a stamp of the value and description required by the law when such instrument was executed or first executed.

164 Statements of Objects and Reasons, Arbitration Act 165 (2001) 7 SCC 573

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Although Parliament was aware of the mandate of Section 33(2), it did not require the court acting under Section 11 to also undertake the examination required by Section 33(2). ii. Harmonious construction of the three statutes under consideration a. The effect of the competence-competence doctrine

178Copy pinpoint178. In A. Ayyasamy v. A. Paramasivam,166 a two-judge Bench of this Court of which one of us, DY Chandrachud, J, was a part emphasized that arbitration must provide a “one-stop forum” for the resolution of disputes and held that (a) Courts must give effect to the commercial understanding of parties to arbitration agreements that arbitration is efficacious; and (b) This can be done by minimising judicial intervention: “48. 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. …

53. … Jurisprudence in India must evolve towards strengthening the institutional efficacy of arbitration. Deference to a forum chosen by parties as a complete remedy for resolving all their claims is but part of that evolution. Minimising the intervention of courts is again a recognition of the same principle.” (emphasis supplied)

179Copy pinpoint179. The decision of the majority in N N Global 2 (supra) assumes that the inadmissibility of the document in evidence renders it unenforceable.

166 (2016) 10 SCC 386

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1177 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

However, the effect of the principle of competence-competence is that the arbitral tribunal is vested with the power and authority to determine its enforceability. The question of enforceability survives, pending the curing of the defect which renders the instrument inadmissible. By appointing a tribunal or its members, this Court (or the High Courts, as the case may be) is merely giving effect to the principle enshrined in Section 16. The appointment of an arbitral tribunal does not necessarily mean that the agreement in which the arbitration clause is contained as well as the arbitration agreement itself are enforceable. The arbitral tribunal will answer precisely these questions.

180Copy pinpoint180. In terms of Section 10 of the Contract Act, agreements are contracts if they are: a. Made by the free consent of parties competent to contract; b. For a lawful consideration; c. With a lawful object; and d. Not expressly declared to be void under its provisions.

181Copy pinpoint181. These requirements do not affect any law in force and not expressly repealed, which:167 a. Requires contracts to be made in writing; b. Requires contracts to be made in the presence of witnesses; or c. Laws relating to the registration of documents.

182Copy pinpoint182. In addition, Section 7 of the Arbitration Act specifies the requirements for the existence of an arbitration agreement.

183Copy pinpoint183. It is the arbitral tribunal and not the court which may test whether the requirements of a valid contract and a valid arbitration agreement are met. If the tribunal finds that these conditions are not met, it will decline to hear the dispute any further. If it finds that a valid arbitration agreement exists, it may assess whether the underlying agreement is a valid contract.

167 Section 10, Contract Act

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184Copy pinpoint184. By enacting Section 16 of the Arbitration Act, Parliament has (in a manner of speaking) permitted an agreement to arbitrate to be preliminarily enforced even if it is only an agreement. After parties have been referred to arbitration under Section 8 of the Arbitration Act or after the appointment of arbitrators under Section 11 of the Arbitration Act the arbitral tribunal will have jurisdiction to determine all questions and issues in dispute between the parties. The legitimate concerns of the revenue in the realization of stamp duty are not defeated because the arbitral tribunal has the jurisdiction to act in pursuance of the provisions of the Stamp Act.

185Copy pinpoint185. The corollary of the doctrine of competence-competence is that courts may only examine whether an arbitration agreement exists on the basis of the prima facie standard of review. The nature of objections to the jurisdiction of an arbitral tribunal on the basis that stamp-duty has not been paid or is inadequate is such as cannot be decided on a prima facie basis. Objections of this kind will require a detailed consideration of evidence and submissions and a finding as to the law as well as the facts. Obligating the court to decide issues of stamping at the Section 8 or Section 11 stage will defeat the legislative intent underlying the Arbitration Act.

186Copy pinpoint186. The purpose of vesting courts with certain powers under Sections 8 and 11 of the Arbitration Act is to facilitate and enable arbitration as well as to ensure that parties comply with arbitration agreements. The disputes which have arisen between them remain the domain of the arbitral tribunal (subject to the scope of its jurisdiction as defined by the arbitration clause). The exercise of the jurisdiction of the courts of the country over the substantive dispute between the parties is only possible at two stages: a. If an application for interim measures is filed under Section 9 of the Arbitration Act; or b. If the award is challenged under Section 34. Issues which concern the payment of stamp-duty fall within the remit of the arbitral tribunal. The discussion in the preceding segments also make it evident that courts are not required to deal with the issue of stamping at the stage of granting interim measures under Section 9.

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187Copy pinpoint187. One of the intervenors, the Singapore International Arbitration Centre, submitted that the decision in N N Global 2 (supra) reversed the prima facie standard by observing that the court may refer a dispute to the arbitral tribunal if objections as to its being duly stamped are “on the face of it, wholly without foundation.” We agree with this submission.

188Copy pinpoint188. Once the arbitral tribunal has been appointed, it will act in accordance with law and proceed to impound the agreement under Section 33 of the Stamp Act if it sees fit to do so. It has the authority to receive evidence by consent of the parties, in terms of Section 35. The procedure under Section 35 may be followed thereafter. In this manner, the competence-competence doctrine is given life and arbitration proceedings can continue to remain a faster alternative to suits before the trial courts or other, similar actions. b. The effect of the word “shall” in Sections 33 and 35 of the Stamp Act

189Copy pinpoint189. Sections 33 and 35 of the Stamp Act use the word “shall.” While this ordinarily indicates that the provision is mandatory, it may be read as directory. In Sainik Motors v. State of Rajasthan, 168 this Court held: “The word ‘shall’ is ordinarily mandatory, but it is sometimes not so interpreted if the context or the intention otherwise demands.”

190Copy pinpoint190. In State of U.P. v. Babu Ram Upadhya,169 this Court held that the principles for the construction of statutes which used the mandatory word “shall” were as follows: “29. The relevant rules of interpretation may be briefly stated thus : When a statute uses the word “shall”, prima facie, it is mandatory, but the Court may ascertain the real intention of the legislature by carefully attending to the whole scope of the statute. For ascertaining the real intention of the Legislature the Court may consider, inter alia, the nature and the design of the statute, and the consequences which would follow from construing it the one way or the other, the

168 1961 SCC OnLine SC 15 169 1960 SCC OnLine SC 5

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impact of other provisions whereby the necessity of complying with the provisions in question is avoided, the circumstance, namely, that the statute provides for a contingency of the non-compliance with the provisions, the fact that the non-compliance with the provisions is or is not visited by some penalty, the serious or trivial consequences that flow therefrom, and, above all, whether the object of the legislation will be defeated or furthered.”

191Copy pinpoint191. This Court must therefore interpret Sections 33 and 35 to assess whether they are mandatory in relation to a court presiding over proceedings under Section 8 or Section 11 by examining: a. Whether the context indicates that the provision is directory; b. The scope of the statute; c. The nature and design of the statute; d. The consequences which would follow from construing it one way or another; e. The impact of other provisions; f. The consequences of non-compliance; and g. Whether the object of the legislation will be furthered or destroyed.

192Copy pinpoint192. The decisions adverted to in the preceding paragraphs were delivered in the context of a single provision in a single statute. Additional factors must be considered in cases such as the present one, where multiple statutes appear to operate in relation to a single issue (or a single agreement such as the arbitration agreement in the present case). To this list of considerations which must animate the court’s evaluation of whether a provision is mandatory or directory, we would add that the scope, nature, and design of all the statutes which appear to operate simultaneously must be considered. Their interplay and the intention of the legislature must be evaluated in the context of all such statutes. The question of whether the object(s) of the applicable legislation(s) will be furthered or destroyed must also be considered in view of all such statutes.

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c. The object of the Stamp Act is preserved

193Copy pinpoint193. In N N Global 2 (supra), the majority judgment observed as follows: “92. While the Stamp Act is a fiscal enactment intended to raise revenue, it is a law, which is meant to have teeth. The point of time, at which the stamp duty is to be paid is expressly provided for in Section 17 of the Stamp Act. There cannot be any gainsaying, that call it a fiscal enactment, it is intended that it is to be implemented with full vigour. The duty of a Court must be to adopt an interpretation which results in the enforcement of the law, rather than allowing the law to be flouted with impunity. Once this principle is borne in mind, the task of the Court becomes less difficult.”

194Copy pinpoint194. The interpretation accorded to the Stamp Act by this Court in the present judgment does not allow the law to be flouted. The arbitral tribunal continues to be bound by the provisions of the Stamp Act, including those relating to its impounding and admissibility. The interpretation of the law in this judgment ensures that the provisions of the Arbitration Act are given effect to while not detracting from the purpose of the Stamp Act.

195Copy pinpoint195. The interests of revenue are not jeopardised in any manner because the duty chargeable must be paid before the agreement in question is rendered admissible and the lis between the parties adjudicated. The question is at which stage the agreement would be impounded and not whether it would be impounded at all. The courts are not abdicating their duty but are instead giving effect to: a. The principle of minimal judicial intervention in Section 5 of the Arbitration Act; b. The prima facie standard applicable to Sections 8 and 11 of the Arbitration Act; and c. The purpose of the Stamp Act which is to protect the interests of revenue and not arm litigants with a weapon of technicality by which they delay the adjudication of the lis. d. The interpretation of the law must give effect to the purpose of the Arbitration Act in addition to the Stamp Act

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196Copy pinpoint196. The decision of the Constitution Bench in N N Global 2 (supra) gives effect exclusively to the purpose of Stamp Act. It prioritises the objective of the Stamp Act, i.e., to collect revenue at the cost of the Arbitration Act. As discussed previously, the purpose of the Arbitration Act is to ensure that a speedy and efficacious alternative dispute resolution system is available to parties both commercial and otherwise. This purpose is in danger of being undermined by the interpretation accorded to the Stamp Act in N N Global 2 (supra). The impounding of an agreement which contains an arbitration clause at the stage of the appointment of an arbitrator under Section 11 (or Section 8 as the case may be) of the Arbitration Act will delay the commencement of arbitration. It is a well-known fact that courts are burdened with innumerable cases on their docket. This has the inevitable consequence of delaying the speed at which each case progresses. Arbitral tribunals, on the other hand, deal with a smaller volume of cases. They are able to dedicate extended periods of time to the adjudication of a single case before them. If an agreement is impounded by the arbitral tribunal in a particular case, it is far likelier that the process of payment of stamp-duty and a penalty (if any) and the other procedures under the Stamp Act are completed at a quicker pace than before courts. J*. SMS Tea Estates and Garware Wall Ropes were wrongly decided i. SMS Tea Estates

197Copy pinpoint197. The genesis of the present issue stems from a two-Judge Bench decision of this Court in SMS Tea Estates (supra). In that case, the appellant and respondent executed a lease deed with respect to two tea estates in favor of the appellant. The lease deed provided for the settlement of disputes between the parties by arbitration. When the appellant sought to invoke the arbitration clause, the respondent opposed the same on the ground that the lease deed was unregistered and not duly stamped, and was therefore invalid, unenforceable, and not binding. The High Court dismissed the appellant’s application for the appointment of an arbitrator. On appeal, inter alia the following issues came for consideration before this Court: first, whether an arbitration agreement contained in an unregistered (but compulsorily registerable) instrument is valid and enforceable; and second, whether an arbitration agreement in an unregistered instrument which is not duly stamped, is valid and enforceable.

198Copy pinpoint198. With regard to the first issue, the Court analysed Section 49 of the Registration Act. Section 49 of the Registration Act provides that an * Ed. Note: PART J

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1183 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

unregistered document cannot be received as evidence of any transaction affecting such property or conferring such power unless it has been registered. However, the proviso to Section 49 provides that an unregistered instrument can be used as evidence of any collateral transaction not required to be effected by such instrument. In view of the aforesaid provision, this Court held that an arbitration agreement contained in an unregistered instrument is a collateral term relating to the resolution of disputes, which was unrelated to the performance of the contract. Therefore, it was held that an arbitration agreement contained in an unregistered but compulsorily registerable document can be acted upon and enforced for the purpose of dispute resolution by arbitration.

199Copy pinpoint199. With regard to the second issue, it was noted that Section 35 of the Stamp Act does not contain a proviso like Section 49 of the Registration Act enabling the unstamped instrument to be used for a collateral purpose. Thereafter, this Court observed that Section 33 casts a duty upon every court, as also an arbitrator, before whom an unregistered instrument chargeable with stamp duty is produced to examine the instrument in order to ascertain whether it is duly stamped. If the Court or arbitrator comes to the conclusion that the instrument is not duly stamped, it has to necessarily impound the document. The Court laid down the procedure to be adopted when an arbitration is contained in a document which is not duly stamped in the following terms: a. The Court should, before admitting any document into evidence or acting upon such document, examine whether the instrument/ document is duly stamped and whether it is an instrument which is compulsorily registerable. b. 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. c. If the document is found to be duly stamped, or if the deficit stamp duty and penalty is paid, either before the court or before

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the Collector (as contemplated in Section 35 of Section 49 of the Stamp Act), and the defect with reference to deficit duty is cured, the court may treat the document as duly stamped.

200Copy pinpoint200. SMS Tea Estates (supra) allowed the courts to impound the document under Section 33 of the Stamp Act at the Section 11 stage. Thus, the courts were mandated to intervene at the pre-arbitral stage before the arbitral tribunal could assume jurisdiction. SMS Tea Estates (supra) was decided in 2011. At that time, Patel Engineering (supra) and Boghara Polyfab (supra) held the field, which held that the referral courts had wide powers to decide a large number of preliminary issues, including the existence and validity of arbitration agreements. As discussed in the segments above, the Law Commission of India recommended amendments to Sections 8 and 11 with a view to restrict the scope of the judicial intervention “to situations where the Court/Judicial Authority finds that the arbitration agreement does not exist or is null and void.”

201Copy pinpoint201. Pursuant to the recommendations of the Law Commission of India, Parliament incorporated Section 11(6A) which clarified that the scope of judicial intervention was limited to the examination of the existence of an arbitration agreement. The legislative note on Clause 11(6A) states that “[s]ub-section (6A) is inserted to provide that the Supreme Court or the High Court while considering applications under sub-section (4) to (6) shall confine to the examination of an arbitration agreement.” More importantly, the said provision contains a non-obstante clause which reads: “notwithstanding any judgment, decree or order of any Court.”

202Copy pinpoint202. In Emmar MGF Land Ltd. v. Aftab Singh,170 this Court was examining the purport of Section 8 which included a similar non-obstante clause as contained in Section 11(6A). This Court explained the purpose of the non-obstante clause contained in Section 8 in the following terms: “52. […] The words “notwithstanding any judgment, decree or order of the Supreme Court or any court” added by amendment in Section 8 were with intent to minimise the intervention of judicial authority in the context of arbitration agreement. As per the amended Section 8(1),

170 (2019) 12 SCC 751

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1185 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

the judicial authority has only to consider the question “whether the parties have a valid arbitration agreement?” The Court cannot refuse to refer the parties to arbitration “unless it finds that prima facie no valid arbitration agreement exists”. The amended provision, thus, limits the intervention by judicial authority to only one aspect i.e. refusal by judicial authority to refer is confined to only one aspect, when it finds that prima facie no valid arbitration agreement exists.”

203Copy pinpoint203. In Emmar MGF Land (supra), this Court clarified that the expression “notwithstanding any judgment” referred to in Section 8(1) relates to those judicial precedents which explained the discretion and power of judicial authority to examine various aspects while exercising powers under Section 8. In a similar vein, Section 11(6A) intended to minimize judicial interference to the examination of the existence of an arbitration agreement. Accordingly, the non-obstante clause contained in Section 11(6A) pertains to those judicial precedents which delved into the discretion and power of referral courts to intervene and examine the existence and validity of an arbitration agreement at the Section 11 stage. This includes SMS Tea Estates (supra) considering the fact that it mandated the referral court to judicially intervene in the arbitration process by impounding the unstamped instrument containing the arbitration agreement. Therefore, we hold that Section 11(6A) also legislatively altered the basis of SMS Tea Estates (supra) to the extent that it dealt with judicial intervention at the Section 11 stage. ii. Garware Wall Ropes

204Copy pinpoint204. In Garware Wall Ropes (supra), a Bench of two Judges of this Court was called upon to decide the effect of an arbitration clause contained in a contract which requires to be stamped. Since SMS Tea Estates (supra) was decided before the introduction of Section 11(6A) of the Arbitration Act, another pertinent issue before this Court was whether introduction of this provision removed the basis for the decision in SMS Tea Estates (supra) to the extent that an unstamped instrument could be impounded not by the referral court under Section 11 but by the arbitrator. This Court held that the referral court under Section 11(6A) would be bound by the mandatory provisions of the Stamp Act to examine and impound the unstamped instrument. It was further observed that since the Stamp Act applied to the

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instrument as a whole, it was not possible to bifurcate the arbitration clause contained in such instrument and give it an independent existence.

205Copy pinpoint205. This Court in Garware Wall Ropes (supra) further analysed the purport of the word “existence” contained in Section 11 of the Arbitration Act. It was held that an arbitration agreement contained in an unstamped instrument would not exist in law. The relevant paragraph is extracted below: “22. When an arbitration clause is contained “in a contract”, it is significant that the agreement only becomes a contract if it is enforceable by law. We have seen how, under the Stamp Act, an agreement does not become a contract, namely, that it is not enforceable in law, unless it is duly stamped. Therefore, even a plain reading of section 11(6-A), when read with Section 7(2) of the 1996 Act and Section 2(h) of the Contract Act, would make it clear that an arbitration clause in an agreement would not exist when it is not enforceable by law. This is also an indicator that SMS Tea Estates has, in no manner, been touched by the amendment of Section 11(6-A).”

206Copy pinpoint206. Further, this Court noted Section 11(13) of the Arbitration Act which provides a timeline of sixty days for disposal of any application for appointment of an arbitrator. In view of Section 11(13), this Court held that the provisions of the Stamp Act and the Arbitration Act need to be harmoniously construed. Accordingly, the Court held that once the High Court impounds an unstamped instrument at the Section 11 stage, it shall hand it over to the relevant authority under the Maharashtra Stamp Act to be decided within a period of forty-five days from which such authority receives the instrument. Once the stamp duty and penalty was paid, the High Court could proceed expeditiously to hear and dispose of the Section 11 application.

207Copy pinpoint207. The conclusions of this Court in Garware Wall Ropes (supra) can be summarized as follows: first, there was no legislative intent to overrule SMS Tea Estates (supra) because neither the Statement of Objects and Reasons of the 2015 Amendment Act nor the Law Commission of India Report, 2014 mentions it; second, the referral court at the Section 11 stage is only giving effect to the provisions of the Stamp Act and not deciding any preliminary issues between the parties; third, the separability presumption could only be applied for limited purposes. Since the Stamp Act applies to the instrument as a whole, it is not possible to bifurcate the arbitration

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1187 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

clause contained in such agreement; and fourth, an arbitration clause in an unstamped contract would not exist, leading to the conclusion that Section 11(6A) has not overruled SMS Tea Estates (supra).

208Copy pinpoint208. The Statement of Objects and Reasons of the 2015 Amendment Act are as follows: “(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.”

209Copy pinpoint209. The above extract indicates that the Supreme Court or High Court at the stage of the appointment of an arbitrator shall “examine the existence of a prima facie arbitration agreement and not other issues”. These other issues not only pertain to the validity of the arbitration agreement, but also include any other issues which are a consequence of unnecessary judicial interference in the arbitration proceedings. Accordingly, the “other issues” also include examination and impounding of an unstamped instrument by the referral court at the Section 8 or Section 11 stage. The process of examination, impounding, and dealing with an unstamped instrument under the Stamp Act is not a time-bound process, and therefore does not align with the stated goal of the Arbitration Act to ensure expeditious and time-bound appointment of arbitrators. Therefore, even though the Law Commission of India Report or the Statement of Objects and Reasons of the 2015 Amendment Act do not specifically refer to SMS Tea Estates (supra), it nevertheless does not make any difference to the position of law as has been set out above.

210Copy pinpoint210. Garware Wall Ropes (supra) relied on Patel Engineering (supra) to observe that “it is difficult to accede to the argument made by the learned counsel on behalf of the respondent that Section 16 makes it clear that an arbitration agreement has an independent existence of its own, and must be applied while deciding an application under Section 11 of the 1996 Act.” In view of this observation, it was held that the separability presumption cannot be applied in case of an unstamped instrument because the Stamp Act applies to the instrument as a whole. As discussed in the preceding segments, the separability presumption ensures the validity of an arbitration

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agreement notwithstanding the invalidity, illegality, or non-existence of the underlying contract.

211Copy pinpoint211. The scope of authority of an arbitral tribunal under Section 16 is wide because it can deal with issues pertaining to the existence and validity of an arbitration agreement. In his dissenting opinion in NN Global 2 (supra), Justice Roy correctly observes that since “[s]ection 16 specifically deals with both existence and validity whereas Section 11 only deals with existence, the former should be given more weight.” This observation comports with the stated goal of the Arbitration Act to minimize the supervisory role of courts in the arbitral process. Post the 2015 Amendment Act the referral courts are only required to prima facie determine the existence or validity of an arbitration agreement. The basis for such prima facie determination lies in the fact that the arbitral tribunal will later have the competence to rule on the issue of existence and validity of the arbitration agreement. Therefore, the separability presumption applies at the referral stage.

212Copy pinpoint212. In Intercontinental Hotels Group (India) (P) Ltd v. Waterline Hotels (P) Ltd.,171 the issue before a Bench of three Judges of this Court in a Section 11 application was: whether the court can proceed to appoint an arbitrator when the underlying contract is incorrectly stamped. In that case, it was observed that although “stamp duty has been paid, whether it be insufficient or appropriate is a question that may be answered at a later stage as this Court cannot review or go into this aspect under Section 11(6).”

213Copy pinpoint213. The discussion in preceding segments has held that non-stamping or insufficient stamping of an instrument does not render it invalid or non- existent. Therefore, paragraphs 22 and 29 of Garware Wall Ropes (supra), which held that an arbitration agreement contained in an unstamped or insufficiently stamped contract would be non-existent in law, does not set forth the correct position of law. K*. The Appointment of Arbitrators by the Chief Justice of India Scheme, 1996

214Copy pinpoint214. In N N Global 2 (supra), the majority considered the Appointment of Arbitrators by the Chief Justice of India Scheme, 1996.172 Para 2 of the 1996 Scheme reads as follows:

* Ed. Note: PART K 171 (2022) 7 SCC 662 172 “1996 Scheme”

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1189 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

“2. Submission of request.- The request to the Chief Justice under sub-section (4) or sub-section (5) or sub-section (6) of section 11 shall be made in writing and shall be accompanied by- (a) the original arbitration agreement or a duly certified copy thereof; The 1996 Scheme provides that an application under Section 11 for the appointment of an arbitrator shall be accompanied by the original arbitration agreement or a duly certified copy.

215Copy pinpoint215. In SMS Tea Estates (supra), it was observed that a certified copy of the agreement/ contract/ instrument containing the arbitration clause should disclose the stamp duty that has been paid on the original. N N Global 2 (supra) has endorsed this view. In that case, this Court further referred to paragraph 5 of the 1996 Scheme which allows the Chief Justice or the person or the institution designated by him under para 3 to seek further information or clarification from the party making request under the Scheme. Consequently, it was held that a Judge dealing with an application under Section 11 could seek further clarification or information with respect to the payment of stamp duty to satisfy the requirements as laid down in SMS Tea Estates (supra).

216Copy pinpoint216. N N Global 2 (supra) also refers to the two-Judge Bench decision of this Court in Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao173 where it was held that Section 35 of the Stamp Act renders any secondary evidence of an unstamped or insufficiently stamped instrument inadmissible in evidence. It was further held that any secondary evidence of such instrument cannot be acted upon in terms of Section 35. Subsequently, a three-Judge Bench of this Court in Hariom Agrawal v. Prakash Chand Malviya 174 affirmed Jupudi Kesava Rao (supra) by observing that Sections 33 and 35 of the Stamp Act are not concerned with any copy of the instrument. The relevant paragraph is extracted below: “10. It is clear from the decisions of this Court and a plain reading of Sections 33, 35 and 2(14) of the Act that an instrument which is not duly stamped can be impounded and when the required fee and penalty has been paid for such instrument it can be taken in

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evidence under Section 35 of the Stamp Act. Sections 33 or 35 are not concerned with any copy of the instrument and party can only be allowed to rely on the document which is an instrument within the meaning of Section 2(14). There is no scope for the inclusion of the copy of the document for the purposes of the Stamp Act. Law is now no doubt well settled that copy of the instrument cannot be validated by impounding and this cannot be admitted as secondary evidence under the Stamp Act, 1899.”

217Copy pinpoint217. An arbitration agreement or its certified copy is not rendered void or unenforceable because it is unstamped or insufficiently stamped. We accordingly clarify that the position of law laid down in Jupudi Kesava Rao (supra) and Hariom Agrawal (supra) cannot constrain a referral court at Section 11 stage (as well as Section 8 stage) from acting upon a certified copy of an arbitration agreement and referring the parties to arbitral tribunal.

218Copy pinpoint218. The discussion in preceding segments indicates that the referral court at Section 11 stage should not examine or impound an unstamped or insufficiently stamped instrument, but rather leave it for the determination by the arbitral tribunal. When a party produces an arbitration agreement or its certified copy, the referral court only has to examine whether an arbitration agreement exists in terms of Section 7 of the Arbitration Act. The referral court under Section 11 is not required to examine whether a certified copy of the agreement/ instrument/ contract discloses the fact of payment of stamp duty on the original. Accordingly, we hold that the holding of this Court in SMS Tea Estate (supra), as reiterated in N N Global 2 (supra), is no longer valid in law. L*. Vidya Drolia does not deal with the issue of stamping

219Copy pinpoint219. The genesis of these proceedings lies in N N Global 1 (supra) doubting the correctness of the finding in Vidya Drolia (supra). N N Global 1 (supra) doubted the correctness of the view taken in paragraphs 146 and 147 of the co-ordinate Bench in Vidya Drolia (supra), where the three-Judge Bench relied on Garware Wall Ropes (supra).

220Copy pinpoint220. In paragraph 146, this Court was dealing with the issue of whether the expression “existence” as contained in Section 11(6A) also presupposes the validity of an arbitration agreement. The Court answered this proposition by observing that an arbitration agreement “exists” only * Ed. Note: PART L

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1191 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [DR. DHANANJAYA Y CHANDRACHUD, CJI ]

when it is valid and enforceable. Accordingly, it was held that existence of an arbitration agreement means an arbitration agreement which satisfies the requirements of both the Arbitration Act and the Contract Act. In the succeeding paragraphs, this Court sought to reinforce its conclusion. In the process, it referred to various precedents of this Court including Garware Wall Ropes (supra).

221Copy pinpoint221. Paragraph 147.¹ clarifies that it is referring to Garware Wall Ropes (supra) only for the purposes of establishing the correlation between existence and validity of an arbitration agreement. The relevant paragraph of Garware Wall Ropes (supra) refers to United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd.175 in which the arbitration clause was triggered only if one of the parties admitted or accepted its liability. In that case, since the relevant party (the insurer) did not accept its liability, the court held that the arbitration clause did not exist in law although it existed in fact. Garware Wall Ropes (supra) relied on Hyundai Engg. (supra) to hold, albeit incorrectly, that an unstamped agreement would not exist as a matter of law until the underlying instrument is duly stamped. We are of the opinion that Vidya Drolia (supra) did not, in any manner, determine the effect of an unstamped or insufficiently stamped underlying contract on an arbitration agreement. It referred to Garware Wall Ropes (supra) only to buttress its interpretation that an arbitration agreement does not exist if it is invalid or illegal, which has been clarified in the above segments of this judgment.

222Copy pinpoint222. Significantly, a two-Judge Bench of this Court in Career Institute Educational Society v. Om Shree Thakurji Educational Society176 clarified that Vidya Drolia (supra) referred to Garware Wall Ropes (supra) only “to interpret the word ‘existence’, and whether an ‘invalid’ arbitration agreement can be said to exist” The two-Judge Bench further clarified that Vidya Drolia (supra) did not decide the issue of the effect of an unstamped or insufficiently stamped underlying contract on the arbitration clause. The relevant extract is as follows: “3. The judgement in Vidya Drolia v. Durga Trading Corporation did not examine and decide the issue of effect of unstamped or under-

175 (2018) 17 SCC 607 176 2023 SCC OnLine SC 586

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stamped underlying contract on the arbitration agreement. As this issue and question has not been decided in Vidya Drolia (supra), the decision is not a precedent on this question.”

223Copy pinpoint223. We agree with these observations in Career Institute Educational Society (supra). Vidya Drolia (supra) did not deal with the issue of the effect of an unstamped or insufficiently stamped instrument on the existence or validity of an arbitration agreement. Therefore, the reasoning in Vidya Drolia (supra) does not lead to the conclusion that Garware Wall Ropes (supra) was rightly decided either on the aspect of examination and impounding of unstamped or insufficiently stamped instrument with respect to arbitration proceedings, or the validity of on arbitration agreement contained in an unstamped or insufficiently stamped underlying contract. M*. Conclusions

224Copy pinpoint224. The conclusions reached in this judgment are summarised below: a. Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable; b. Non-stamping or inadequate stamping is a curable defect; c. An objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The concerned court must examine whether the arbitration agreement prima facie exists; d. Any objections in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal; and e. The decision in NN Global 2 (supra) and SMS Tea Estates (supra) are overruled. Paragraphs 22 and 29 of Garware Wall Ropes (supra) are overruled to that extent.

225Copy pinpoint225. The Registry is directed to take administrative directions from Hon’ble Chief Justice of India for placing the matters before an appropriate Bench.

* Ed. Note: PART M

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1193 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [SANJIV KHANNA, J.]

SANJIV KHANNA, J. I respectfully agree with the view expressed by the Hon’ble the Chief Justice of India Dr. D.Y. Chandrachud in his elaborate exposition of the different contours which arise for consideration in the present reference. Complementing the same, I would like to provide additional justifications for the final conclusion,viz., unstamped or insufficiently stamped instruments inadmissible in evidence in terms of Section 35 of the Indian Stamp Act, 18991, are not rendered void and void ab initio; an objection as to the under-stamping or non-stamping of the underlying contract will not have any bearing when the prima facie test, “the existence of arbitration agreement”, is applied by the courts while deciding applications under Sections 82 or 113 of the Arbitration

1 For short, “the Stamp Act” 2 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 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. (2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof. Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that court. (3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. 3 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

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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, upon request of a party, by 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 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. (6B) The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court. (7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub- section (6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision. (8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to— (a) any qualifications required for the arbitrator by the agreement of the parties; and (b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator. (9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Supreme Court or the person or institution designated by that Court] may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities. (10) The Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to it. (11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, different High Courts or their designates, the High Court or its designate to whom the request has been first made] under the relevant sub-section shall alone be competent

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1195 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [SANJIV KHANNA, J.]

and Conciliation Act, 19964; and an objection as to insufficient stamping of the underlying agreement can be examined and decided by the arbitral tribunal. Accordingly, the majority decision of the Constitution Bench in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.⁵ should be overruled.

2. The judgment authored by Hon’ble the Chief Justice, under the heading ‘D. Indian Stamp Act, 1899’, gives an overall view of the Stamp Act, and the procedures it prescribes. It also refers to Sections 33, 35and 36 of the Stamp Act, which I would like to elaborate on and elucidate.

3. Sections 33 and 35 of the Stamp Act are reproduced for reference: “33. Examination and impounding of instruments.—(1) Every person having by law or consent of parties authority to receive evidence, and every person in charge of a public office, except an officer of police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his

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functions, shall, if it appears to him that such instrument is not duly stamped, impound the same. (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 in force in India when such instrument was executed or first executed: Provided that— (a) nothing herein contained shall be deemed to require any Magistrate or Judge of a 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 XII or Chapter XXXVI of the Code of Criminal Procedure, 1898 (5 of 1898); (b) in the case of a Judge of a High Court, the duty of examining and impounding any instrument under this section may be delegated to such officer as the Court appoints in this behalf. (3) For the purposes of this section, in cases of doubt,— (a) the State Government may determine what offices shall be deemed to be public offices; and (b) the State Government may determine who shall be deemed to be persons in charge of public offices.” ×× ×× ×× 35.Instruments not duly stamped inadmissible in evidence, etc.— 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 instruments is duly stamped: Provided that— (a) any such instrument shall be admitted in evidence on payment of the duty with which the same is chargeable or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty,

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1197 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [SANJIV KHANNA, J.]

together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion; (b) where any person from whom a stamped receipt could have been demanded, has given an unstamped receipt and such receipt, if stamped, would be admissible in evidence against him, then such receipt shall be admitted in evidence against him on payment of a penalty of one rupee by the person tendering it; (c) where a contract or agreement of any kind is effected by correspondence consisting of two or more letters and any one of the letters bears the proper stamp, the contract or agreement shall be deemed to be duly stamped; (d) nothing herein contained shall prevent the admission of any instrument in evidence in any proceeding in a Criminal Court, other than a proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898 (5 of 1898); (e) 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 provision of this Act.”

4. Section 33 of the Stamp Act is cautiously worded,to not over expand its ambit and scope. The section applies on production of an instrument before a person who by law or consent of the parties has the authority to receive evidence.6 It also applies when an instrument is produced before a person in charge of a public office. Production of the instrument must be during the course of performance of functions by such person orpublic officer. The proviso states that Section 33 shall not be deemed to require any Magistrate or Judge of a criminal court to examine or impound an instrument if he does not think fit to do so, except in proceedings under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898 (Chapter X(D) and Chapter IX of the Code of Criminal Procedure, 1973).Police officers are not public officers under Section 33 of the Stamp Act.

6 Hereinafter also referred to as ‘such person’.

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5. Sub-section (3) to Section 33 states that in case of doubt, the State Government may determine which offices shall be deemed to be public offices and who shall be deemed to be persons in charge of the public offices.

6. Sub-section (2) to Section 33 states that for the purpose of sub- section (1), such person or public officer shall examine the instrument so chargeable and so produced or coming before him,in order to ascertain whether it is duly stamped as per the law in force in India when the instrument was executed or first executed.

7. Section 35 states that an instrument not duly stamped and chargeable with duty shall not be admitted in evidence by any person having by law or by consent of the parties the authority to receive evidence. The words “for any purpose” mean that the instrument cannot be relied upon for a collateral purpose either. Further, the instrument shall not be acted upon, registered or authenticated by such person or by any public officer, unless it is duly stamped. The words ‘acted upon’ are with reference to the acts or the proceedings before such officer or public officer, as the case may be.

8. Section 35 permits admission of an unstamped or under-stamped instrument after the same instrument is duly stamped. Proviso (a) requires payment of the chargeable duty and penalty, before an insufficiently stamped instrument is admitted in evidence, or is acted upon, registered or authenticated.

9. Section 40(1)(b) of the Stamp Act provides for payment of proper duty if the instrument impounded is not duly stamped. Section 42(1) provides for certifying that proper duty has been paid on the impounded instrument. Sub-section (2) of Section 42 provides that after certification the instrument shall be admissible in evidence, and may be registered, acted upon and authenticated as if it has been duly stamped.

10. Sections 33 and 35donot apply when an instrument is produced or is acted upon by the parties themselves, or by a person who does not have authority by law or by consent of the parties to receive evidence, or a person who is not a public officer. Sections 33 does not authorise a police officer to examine and impound an instrument, even when insufficiently stamped. A Magistrate or a Judge of a criminal court may not examine or impound an instrument coming before him,and can admit an insufficiently stamped

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1199 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [SANJIV KHANNA, J.]

instrument in evidence, other than in the proceeding under Chapter XII or Chapter XXXVI of the Code of Criminal Procedure, 1898 (Chapter X(D) and Chapter IX of the Code of Criminal Procedure, 1973).Thus, the same instrument may be admissible and acted upon before a criminal court, while being inadmissible before a civil court, public officer etc.

11. The negative stipulations in Sections 33 and 35 are specific, albeit not so absolute as to make the instrument invalid in law. A “void ab initio” instrument, which is stillborn,has no corporeality in the eyes of law. It cannot confer or give rights, or create obligations. However, an instrument which is “inadmissible” exists in law, albeit cannot be admitted in evidence by such person, or be registered, authenticated or be acted upon by such person or a public officer till it is duly stamped. As rightly observed by Hon’ble the Chief Justice, Section 35 deals with admissibility etc. of an instrument and not invalidity.

12. Section 36 of the Stamp Act refers to the situation where the admission of an instrument is not to be questioned, and reads: “36. Admission of instrument where not to be questioned.—Where an instrument has been admitted in evidence, such admission shall not, except as provided in Section 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped.” Thus, where an instrument has been admitted in evidence, such admission shall not be called in question, except as provided in Section 61, at any stage of the same suit or proceedings on the ground that the instrument is not duly stamped. Consequently, where an instrument has been admitted in evidence, such instrument cannot be impounded as it cannot be called in question at any stage of the same suit or proceeding on the ground of insufficient stamping.

13. An instrument which is void ab initio or void, cannot be validated by mere consent or waiver, unless consent or wavier undoes the cause of invalidity. On the other hand, Section 36 of the Stamp Act incorporates the doctrine of waiver, estoppel and implied consent. That apart,after due stamping as per the Stamp Act, the unstamped or insufficiently stamped

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instrument can be admitted in evidence, or be registered, authenticated or be acted upon by such person or public officer.

14. This has long been a recognised position of law, as accepted by this Court in several decisions, which I would like to refer to.

15. In Javer Chand and Others. v. Pukhraj Surana⁷, way back in 1961, a four Judges’ Bench of this Court had examined the interplay between Sections 35 and 36 of the Stamp Act to hold that Section 36 is categorical in terms that when a document has been admitted in evidence, such admission cannot be called in question at any stage of the suit or proceedings on the ground that the instrument had not been duly stamped. The only exception recognised by Section 36 is the class of cases contemplated by Section 61 of the Stamp Act. Section 36 does not admit of any other exception. It does not matter whether the court has wrongly decided to admit the document in evidence. Section 35 is in the nature of a penal provision which has far reaching effects. The parties to the litigation have to be circumspect and have to be alert so as to challenge the admissibility of an instrument before it is admitted in evidence.

16. A five Judges’ Bench in The State of Biharv. M/s Karam Chand Thapar and Brothers Ltd.⁸, has held that the instrument that can be validated under Section 35 is only the original, when it is unstamped or insufficiently stamped. A copy cannot be validated and acted upon,albeit where multiple copies are prepared and signed and sent to respective parties, each one would be an original instrument.

17. In Jupudi Kesava Raov. Pulavarthi Venkata Subbarao and Others9, a two Judges’ Bench of this Court observed that The Indian Evidence Act, 1872 does not purport to deal with admissibility of the documents which are required to be stamped under the provisions of the Stamp Act. Thereafter, it is observed: “13. The first limb of Section 35 clearly shuts out from evidence any instrument chargeable with duty unless it is duly stamped. The second

7 AIR 1961 SC 1655. 8 AIR 1962 SC 110. 9 (1971) 1 SCC 545.

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1201 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [SANJIV KHANNA, J.]

limb of it which relates to acting upon the instrument will obviously shut out any secondary evidence of such instrument, for allowing such evidence to be let in when the original admittedly chargeable with duty was not stamped or insufficiently stamped, would be tantamount to the document being acted upon by the person having by law or authority to receive evidence. Proviso (a) is only applicable when the original instrument is actually before the Court of law and the deficiency in stamp with penalty is paid by the party seeking to rely upon the document. Clearly secondary evidence either by way of oral evidence of the contents of the unstamped document or the copy of it covered by Section 63 of the Indian Evidence Act would not fulfil the requirements of the proviso which enjoins upon the authority to receive nothing in evidence except the instrument itself. Section 25 is not concerned with any copy of an instrument and a party can only be allowed to rely on a document which is an instrument for the purpose of Section 35. “Instrument” is defined in Section 2(14) as including every document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recorded. There is no scope for inclusion of a copy of a document as an instrument for the purpose of the Stamp Act.

14. If Section 35 only deals with original instruments and not copies Section 36 cannot be so interpreted as to allow secondary evidence of an instrument to have its benefit. The words “an instrument” in Section 36 must have the same meaning as that in Section 35. The legislature only relented from the strict provisions of Section 35 in cases where the original instrument was admitted in evidence without objection at the initial stage of a suit or proceeding. In other words, although the objection is based on the insufficiency of the stamp affixed to the document, a party who has a right to object to the reception of it must do so when the document is first tendered. Once the time for raising objection to the admission of the documentary evidence is passed, no objection based on the same ground can be raised at a later stage. But this in no way extends the applicability of Section 36 to secondary evidence adduced or sought to be adduced in proof of the contents of a document which is unstamped or insufficiently stamped.”

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This judgment also holds that a copy of the instrument cannot be validated. It overruled the dictum that Section 36 will also apply where secondary evidence of an instrument unduly stamped, has been wrongly admitted.

18. In Hameed Joharan (਄ਅਁ਄) and Others v. Abdul Salam (਄ਅਁ਄) by LRs. and Others10, this Court observed that applicability of the Stamp Act stands restricted to the scheme of the Stamp Act. The Stamp Act being a true fiscal statute in nature, strict construction and not liberal interpretation is required to be effected . Section 2(15) includes a decree of partition and Section 35 lays down a bar on unstamped or insufficient stamp being admitted in evidence or being acted upon. The law however does not prescribe that the period for filing appeal shall remain suspended still stamp paper is furnished and the partition decree is drawn thereon and signed by the judge. The whole purport of the Stamp Act is to make available certain dues and collect revenue, but it does not mean and imply an overriding effect on another statute operating in a completely different sphere. Enforceability of a decree cannot be a subject matter of Section 35 of the Stamp Act, neither can the limitation be said to be under suspension. The heading of Section 35 itself denotes the limited sphere of applicability.

19. In Dr. Chiranji Lal (D) by LRs. v. Hari Das (D) by LRs.11, a three Judge Bench of this Court rejected the contention that an unstamped preliminary decree is not enforceable and, therefore, the period of limitation begins to run when the decree is engrossed on the stamp paper. The Stamp Act is a fiscal measure with the object to secure revenue for the State on certain classes of instruments. The Stamp Act is not enacted to arm the litigant with a weapon of technicality to meet the case of his opponent. As there is no rule which prescribes any time for furnishing of stamp paper or to call upon a person to pay stamp duty on a preliminary decree of partition, the proposition that period of limitation would remain suspended till stamp paper is furnished and decree engrossed thereon was rejected.

10 (2001) 7 SCC 573. 11 (2005) 10 SCC 746.

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1203 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [SANJIV KHANNA, J.]

20. In Hariom Agrawal v. Prakash Chand Malviya12, a three Judge Bench has referred to Karam Chand Thapar (supra), Jupudi Kesava Rao (supra), to observe: “10. It is clear from the decisions of this Court and a plain reading of Sections 33, 35 and 2(14) of the Act that an instrument which is not duly stamped can be impounded and when the required fee and penalty has been paid for such instrument it can be taken in evidence under Section 35 of the Stamp Act. Sections 33 or 35 are not concerned with any copy of the instrument and party can only be allowed to rely on the document which is an instrument within the meaning of Section 2(14). There is no scope for the inclusion of the copy of the document for the purposes of the Stamp Act. Law is now no doubt well settled that copy of the instrument cannot be validated by impounding and this cannot be admitted as secondary evidence under the Stamp Act, 1899.”

21. In Shyamal Kumar Roy v. Sushil Kumar Agarwal13, this Court observed that Section 36 is a standalone clause which categorically prohibits the court of law from reopening the matter with regard to the sufficiency or otherwise of the stamp duty paid on an instrument in the event the same has been admitted in evidence, the only exception being Section 61 providing for reference and revision. Reliance was placed on Javer Chand (supra).

22. Avinash Kumar Chauhanv. Vijay Krishna Mishra¹⁴ expounds the meaning of the words ‘for any purpose’ used in Section 35 of the Stamp Act. These words are to be given natural meaning and effect. They would include collateral purpose, as was held in the decision of the Privy Council in Ram Rattanv. Parma Nand15. Distinction was drawn between non-effect of registration of a document in terms of Section 49 of the Registration Act, 1908, which does not bar use of an unregistered document for a collateral purpose. Section 35 is differently worded, and when applicable, bars use of insufficiently stamped instrument for a collateral purpose.

12 (2007) 8 SCC 514. 13 (2006) 11 SCC 331. 14 (2009) 2 SCC 532. 15 AIR 1946 PC 51.

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23. It is necessary to affirm this legal position, as we enter into contracts or agreements several times in our interactions with others during the course of the day. Even written documents in the form of invoices, receipts or standard format agreements are often exchanged, and form the terms of the interactions. An unstamped or under-stamped contract or agreement cannot be impounded, except when it is produced for being received in evidence before a person authorised to do so or a public officer in terms of Section 33 of the Stamp Act. To hold that insufficiently stamped instrument does not exist in law, will cause disarray and disruption.

24. Predictability and certainty are central tenets of law, especially in matters of commercial and routine nature. Adherence to the principle of stare decisis is essential for parties to be able to rely on the law to define their conduct in commercial or ordinary day to day dealings. Transient laws undermine public legitimacy and faith in the mandate of Rule of Law. This Court has previously observed that before reviewing and revising its earlier decision, the Court must satisfy itself whether it is necessary to do so in the interest of public good or for any other compelling reason, and the Court must endeavour to maintain certainty and continuity in the interpretation of the law in the country.16 On several occasions, this Court has emphasised on certainty and consistency in judicial pronouncements as being the cornerstone of the administration of justice.17 Consistency in judicial decisions is conducive to reassuring parties of the consequences of the transactions forming part of their daily affairs.18

25. An instrument is to be stamped as per Section 33 when it is executed or first executed. The expressions ‘executed’ and ‘execution’ have been defined in clause (12) to Section 2 of the Stamp Act to mean ‘signed’ or ‘signature’.19 It includes attribution of electronic record within the meaning

16 Keshav Mills Co. Ltd. v. Commissioner of Income Tax, Bombay North, Ahmedabad,AIR 1965 SC 1636. 17 Government of Andhra Pradeshand Others v. A.P. Jaiswal and Others, (2001) 1 SCC 748. 18 Total Environment Building Systems Pvt. Ltd. v. Deputy Commissioner of Commercial Taxes and Others, 2022 SCC OnLine SC 953; Union of Indiaand Another v. Raghubir Singh (Dਅਁ਄) by LRs. etc., (1989) 2 SCC 754. 19 2. Definitions.—In this Act, unless there is something repugnant in subject or context,— (12) Executed and execution.—“Executed” and “execution”, used with reference

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1205 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [SANJIV KHANNA, J.]

of Section 11 of the Information Technology Act, 200020. I shall now analyse the relevance of execution or ‘signature’, with reference to an arbitration agreement as defined in Section 7 of the Arbitration Act.

26. Section 7of the Arbitration Act reads: “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.”

to instruments, mean “signed” and “signature”and includes attribution of electronic record within the meaning of Section 11 of the Information Technology Act, 2000 (21 of 2000). 20 11. Attribution of electronic records.—An electronic record shall be attributed to the originator— (a) if it was sent by the originator himself; (b) by a person who had the authority to act on behalf of the originator in respect of that electronic record; or (c) by an information system programmed by or on behalf of the originator to operate automatically.

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An ‘arbitration agreement’ is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or may arise between them. The disputes may be in respect of a defined legal relationship, whether contractual or not. An arbitration agreement has to be in writing.

27. Sub-section (4) to Section 7 specifies when an arbitration agreement can be said to be in writing. Clause (a) to sub-section (4) states that an arbitration agreement can be a document signed by the parties. According to clause (b) to sub-section (4) to Section 7, an arbitration agreement can be established or inferred from exchange of letters, telex, telegrams or other forms of communication, including communication through electronic means. The provision does not mention the need for ‘execution’ or signatures of the parties.21 Similarly, clause (c) to sub-section (4) to Section 7 which refers to exchange of statements of claim and defence, in which the existence of the arbitration agreement is alleged by one party and not denied by the other, does not refer to an instrument which is signed by the parties. Clause (c) incorporates the principle wherein the parties by “consent” agree to the existence of an arbitration agreement, or impliedly agree by not denying its existence when alleged by one party and not denied by the other. An arbitration agreement is defined in the widest terms, and may be in the form of a clause in the underlying contract or separate from an underlying agreement. Significantly, even when it is a clause of the underlying agreement, it is treated as a separate agreement, an aspect to which I shall advert.

28. Section 1622 of the Arbitration Act, empowers the arbitral tribunal

21 Caravel Shipping Services (P) Ltd. v. Premier Sea Foods Exim (P) Ltd. (2019) 11 SCC 461; Govind Rubber Ltd. v. Louis Dreyfus Commodities Asia Pvt. Ltd. (2015) 13 SCC 477. 22 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 invalidity 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

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1207 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [SANJIV KHANNA, J.]

to rule on its own jurisdiction. This includes the authority to decide the existence and validity of the arbitration agreement. This has reference to Section 7 of the Arbitration Act, which I have examined. As per Section 16, an arbitration agreement is an agreement independent of the other terms of the contract, even when it is only a clause in the underlying contract. The section specifically states that a decision by the arbitral tribunal holding the underlying contract to be null and void, will not lead to ipso jure the invalidity of the arbitration clause. The existence of an arbitration agreement is to be ascertained with reference to the requirements of Section 7 of the Arbitration Act. In a given case the underlying contract may be null and void, but the arbitration clause may exist and be enforceable. Invalidity of an underlying agreement may not,unless relating to its formation, result in invalidity of the arbitration clause in the underlying agreement. Hon’ble the Chief Justice has elaborately explained the negative and positive contours of the doctrine of separability in reference to an arbitration agreement, with which I respectfully agree.

29. In this connection, I may note a decision of the Singapore High Court in the case of BNA v. BNB and Another23 which holds that a defect in the arbitration agreement does not render it void ab initio unless the defect is so fundamental or irretrievable as to negate the parties’ intent or agreement to arbitrate. This principle is based upon the observations of the Court of Appeal of Singapore in the judgment in Insigma Technology Co Ltd v. Alstom Technology Ltd24.

from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. (3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond 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), admit a later plea if it considers the delay justified. (5) The arbitral tribunal shall decide on a plea 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 proceedings 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. 23 [2019] SGHC 142. 24 [2009] SGCA 24.

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30. Jurisprudentially it is important to distinguish the terms and consequences of an agreement void ab initio, and a voidable agreement, and the effect of illegality and violation of law on an agreement.

31. As per the Indian Contract Act, 1872 25, an agreement not enforceable by law is said to be void, and an agreement enforceable by law is a contract.26 A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.27

32. The requirements of Section 10 of the Contract Act28 are that the contract should be made by parties competent to contract, for lawful consideration and with lawful object. Consent of the parties should be free. The contract should not be expressly declared to be void. Section 2 has to be read with Section 10 and not in isolation, in order to avoid contradiction and to harmoniously apply the two sections.

33. Sections 1129 and 1230 deal with persons entitled to contract. In instances where a person is explicitly declared as incompetent or does not fall within the definition of a competent person under the aforesaid provisions, like a minor or a person of unsound mind, a contract entered into by such person would be void. An agreement is also rendered void when both parties are under mistake of fact31. As per Section 24, agreements are void if consideration and objects are unlawful in part.32 This section does not have any application to the present issue, and neither are we concerned with Section 25, which relates to agreements without consideration and in

25 For short, “the Contract Act”. 26 2 (g) An agreement not enforceable by law is said to be void;(h) An agreement enforceable by law is a contract 27 2 (j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. 28 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 writingor in the presence of witnesses, or any law relating to the registration of documents. 29 Section 11, The Indian Contract Act, 1872. 30 Section 12, The Indian Contract Act, 1872. 31 Section 20, The Indian Contract Act, 1872. 32 Section 24, The Indian Contract Act, 1872.

IN RE: INTERPLAY BETWEEN ARBITRATION AGREEMENTS UNDER 1209 THE ARBITRATION AND CONCILIATION ACT 1996 AND THE INDIAN STAMP ACT 1899 [SANJIV KHANNA, J.]

which situation they have to be treated as void³³. Agreements which are in restraint of marriage or in restraint of trade are void.³⁴ Agreements by way of wager are also void.³⁵ Agreements, the meaning of which is not certain, or capable of being made certain, are void.³⁶ Section 28 states that agreements in restraint of legal proceedings are void, but Exception 1 states that a contract by which parties agree for disputes arising between them to be referred to arbitration shall not render the contract illegal.³⁷

34. Sections 13 to 19A relate to consent³⁸, free consent³⁹, coercion⁴⁰, undue influence⁴¹, fraud⁴², misrepresentation⁴³, void ability of agreements without free consent⁴⁴, and power to set aside contract induced by undue influence⁴⁵. The Contract Act declares contracts affected by the preceding provisions to be voidable at the option of the aggrieved party.

35. Under Section 21, a contract is not voidable because it is caused by mistake as to law enforced in India⁴⁶, and a contract where mistake of fact is made by one party is also not voidable as per Section 2247.

36. According to Section 23 of the Contract Act, the consideration or object of an agreement is lawful unless it is forbidden by law or is of such nature as to defeat the provisions of law, or is fraudulent. Neither are these provisions applicable in case of unstamped or insufficiently stamped instruments, nor is the consideration or object unlawful as it involves or implies injury to a person or property of another. The last clause of Section 23 applies when the consideration or object of an agreement is regarded as

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