M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s INDO UNIQUE FLAME LTD. & ORS.

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A “7.8. By virtue of the non obstante clause incorporated in Section 11(6-A), previous judgments rendered in Patel Engg. [SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara Polyfab [National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267], were legislatively overruled. The scope of examination is now confined only to the existence of the arbitration B agreement at the Section 11 stage, and nothing more.”

84. What the Courts at the pre-referral stage can examine under Section 11(6A) is only the “existence” of the arbitration agreement, while the Arbitral Tribunal shall have the jurisdiction to examine “any objections with respect to the existence or validity of the arbitration agreement”. C

85. Section 45 of the Act, 1996 provides that: “Power of judicial authority to refer parties to arbitration.— Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908),a judicial authority, when seized D of an action in a matter in respect of which the parties have made an agreement referred to in section 44, shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, [unless it prima facie finds] that the said agreement is null and void, inoperative or incapable of being performed.” E (Emphasis added)

86. A plain comparison between Section 11(6A) and Section 45 manifests that the scope of Section 45 is much broader. Under Section 45, a judicial authority has to examine whether the agreement is “null F and void”, “inoperative”, or “incapable of being performed”.

87. This Court in World Sport Group (Mauritius) Limited v. MSM Satellite (Singapore) Pte. Limited,25 in paras 33 to 35 explained the difference between the terms ‘null and void’, ‘inoperative’ and ‘incapable of being performed’ as under:- G “33. Mr. Gopal Subramanium’s contention, however, is also that the arbitration agreement was inoperative or incapable of being performed as allegations of fraud could be enquired into by the court and not by the arbitrator. The authorities on the meaning of the words “inoperative or incapable of being performed” do H 25 (2014) 11 SCC 639

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s 417 INDO UNIQUE FLAME LTD. & ORS. [AJAY RASTOGI, J.]

not support this contention of Mr. Subramanium. The words A “inoperative or incapable of being performed” in Section 45 of the Act have been taken from Article II(3) of the New York Convention as set out in para 27 of this judgment. Redfern and Hunter on International Arbitration (5th Edn.) published by the Oxford University Press has explained the meaning of these B words “inoperative or incapable of being performed” used in the New York Convention at p. 148, thus: “At first sight it is difficult to see a distinction between the terms ‘inoperative’ and ‘incapable of being performed’. However, an arbitration clause is inoperative where it has ceased to have effect as a result, for example, of a failure by the parties to comply with C a time-limit, or where the parties have by their conduct impliedly revoked the arbitration agreement. By contrast, the expression ‘incapable of being performed’ appears to refer to more practical aspects of the prospective arbitration proceedings. It applies, for example, if for some reason it is impossible to establish the arbitral D tribunal.”

34. Albert Jan Van Den Berg in an article titled “The New York Convention, 1958 — An Overview” published in the website of ICCA(www.arbitrationicca.org/media/0/12125884227980/ new_york_convention_of-1958_overview.pdf), referring to Article E II(3) of the New York Convention, states: “The words ‘null and void’ may be interpreted as referring to those cases where the arbitration agreement is affected by some invalidity right from the beginning, such as lack of consent due to misrepresentation, duress, fraud or undue influence. F The word ‘inoperative’ can be said to cover those cases where the arbitration agreement has ceased to have effect, such as revocation by the parties. The words ‘incapable of being performed’ would seem to apply to those cases where the arbitration cannot be effectively set into G motion. This may happen where the arbitration clause is too vaguely worded, or other terms of the contract contradict the parties’ intention to arbitrate, as in the case of the so-called co- equal forum selection clauses. Even in these cases, the courts interpret the contract provisions in favour of arbitration.” H

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A 35. The book Recognition and Conferment of Foreign Arbitral Awards : A Global Commentary on the New York Convention by Kronke, Nacimiento, et al.(ed.) (2010) at p. 82 says: “Most authorities hold that the same schools of thought and approaches regarding the term null and void also apply to the B terms inoperative and incapable of being performed. Consequently, the majority of authorities do not interpret these terms uniformly, resulting in an unfortunate lack of uniformity. With that caveat, we shall give an overview of typical examples where arbitration agreements were held to be (or not to be) inoperative or incapable of being performed. C The terms inoperative refers to cases where the arbitration agreement has ceased to have effect by the time the court is asked to refer the parties to arbitration. For example, the arbitration agreement ceases to have effect if there has already been an arbitral award or a court decision with res judicata effect concerning the same subject-matter and parties. However, the mere existence of multiple proceedings is not sufficient to render the arbitration agreement inoperative. Additionally, the arbitration agreement can cease to have effect if the time-limit for initiating the arbitration or rendering the award has expired, provided that it was the parties’ intent no longer to be bound by the arbitration agreement due to the expiration of this time-limit. Finally, several authorities have held that the arbitration agreement ceases to have effect if the parties waive arbitration. There are many possible ways of waiving a right to arbitrate. Most commonly, F a party will waive the right to arbitrate if, in a court proceeding, it fails to properly invoke the arbitration agreement or if it actively pursues claims covered by the arbitration agreement.”

88. The aboveexplained examination does not arise in the language of Section 11(6A). That is to say, the legislature has not borrowed the language of Section 45 in Section 11(6A), which is limited to the ‘existence’ of the arbitration agreement. VII. Limited Examination by Court under Section 11(6A) of the Arbitration and Conciliation Act, 1996

89. The limited scope of Section 11(6A) of the Act, 1996 has been explained by a three-judge bench of this Hon’ble Court in Pravin

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s 419 INDO UNIQUE FLAME LTD. & ORS. [AJAY RASTOGI, J.]

Electricals Private Limited v. Galaxy Infra and Engineering Private A Limited26 at para 17 placing its reliance on Vidya Drolia and Others (supra) wherein it was held that the existence of an arbitration agreement means an agreement which satisfies the requirements of both the Act, 1996 and the Contract Act, 1872 and when it is enforceable in law. The judgment in United India Insurance Company Limited and Another B v. Hyundai Engineering& Construction Company Limited and Others27 was also relied upon in Pravin Electricals Private Limited (supra) to demonstrate that Section 11(6A) deals with “existence”, juxtaposed to Section 16 and Section 45, which deal with “validity” of an arbitration agreement. There indeed lies a distinction between the “existence” and the”validity” of an arbitration agreement. C

90. The UNCITRAL Model Law also supports a distinction between jurisdictional objections based on the alleged non-existence, invalidity, or illegality of the arbitration agreement, and jurisdictional objections based upon the scope of a concededly valid arbitration agreement. 28All issues of jurisdiction including the existence or validity D of the arbitration agreement can be decided by the Arbitral Tribunal, whether or not appointed through the intervention of the court under Section 16 of the Act, 1996. VIII. Interpretation of “Existence of Arbitration Agreement” E

91. In order to determine the “existence of an arbitration agreement” under Section 11(6A), the Act, 1899 may not have a bearing owing to the reason thatat the pre-referral stage,if the document is not duly stamped/insufficiently stamped that does not render the arbitration agreement non-existent as discussed and ascertained earlier. The only consideration that the courts/judicial authority at the pre-referral stage needs to follow is theprima facie existence of an arbitration agreement as referred under Section 7 of the Act, 1996 which provides: “7. Arbitration agreement.— (1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which 26 (2021) 5 SCC 671 27 (2018) 17 SCC 607 28 UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006,Availableat:https://uncitral.un.org/sites/uncitral.un.org/ files/media-documents/uncitral/en/19-09955_e_ebook.pdf H

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A 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. B (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.”

92. That is to say, the limited scope of the Court under Section 11(6A) at the pre-referral stage is to examine whether the arbitration agreement, prima facie, exists as referred to under Section 7 of the Act, 1996, which includes only the determination of the following factors: (i) Whether the arbitration agreement is in writing? (ii) Whether the core contractual ingredients qua the arbitration agreement are fulfilled? F (iii) On rare occasions, on a serious note of objection, if any, it may examine whether the subject matter of dispute is arbitrable? IX. Clarification on Stamping of Arbitration Agreement

G 93. In the reference Order and in paras 20, 24 and 58in particular, a reference has been made that Maharashatra Stamp Act, 1958 does not subject to arbitration agreement to payment of stamp duty. The relevant paragraphs of the M/S. N.N. Global Mercantile Private Limited (supra)29 are as follows:

H 29 (2021) 4 SCC 379

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s 421 INDO UNIQUE FLAME LTD. & ORS. [AJAY RASTOGI, J.]

“20. We have carefully perused the provisions of the Maharashtra A Stamp Act, 1958 and Schedule I appended thereto, which enlists the instruments specified in Section 3, on which stamp duty is chargeable. We find that an arbitration agreement is not included in the Schedule as an instrument chargeable to stamp duty. Item 12 of Schedule I to the Maharashtra Stamp Act, 1958 includes an award passed by an arbitrator to be chargeable for payment of stamp duty….. In Shriram EPC Ltd. v. Rioglass Solar SA [Shriram EPC Ltd. v. Rioglass Solar SA, (2018) 18 SCC 313], this Court held that the payment of stamp duty is applicable to awards made in India, but does not include a “foreign award” which has not been included in the Schedule to the Stamp Act, 1899.

24. …Section 3 of the Maharashtra Stamp Act does not subject an arbitration agreement to payment of stamp duty, unlike various other agreements enlisted in the Schedule to the Act. This is for the obvious reason that an arbitration agreement is an agreement to resolve disputes arising out of a commercial agreement, through the mode of arbitration. On the basis of the doctrine of separability, the arbitration agreement being a separate and distinct agreement from the underlying commercial contract, would survive independent of the substantive contract. The arbitration agreement would not be rendered invalid, unenforceable or non-existent, even if the substantive contract is not admissible in evidence, or cannot be acted upon on account of non-payment of stamp duty.

58. We consider it appropriate to refer the following issue, to be authoritatively settled by a Constitution Bench of five Judges of this Court: “Whether the statutory bar contained in Section 35 of the Stamp Act, 1899 applicable to instruments chargeable to stamp duty under Section 3 read with the Schedule to the Act, would also render the arbitration agreement contained in such an instrument, which is not chargeable to payment of stamp duty, as being non-existent, unenforceable, or invalid, pending payment of stamp duty on the substantive contract/instrument?” (Emphasis added) H

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A 94. There appears to be an error in the view taken by the 3-Judge Bench. The Schedule I to the Act, 1899 in its Article 5 titled “Agreement or Memorandum of Agreement” has a residuary entry which says (c) if not otherwise provided for- Eight annas. Article 5 has been reproduced as: B

95. The examination of the arbitration agreement at the stage of Section 11(pre-referral stage) should be done cautiously in a way that it does not breach the legislative intent behind the provisions by opening the door wide open for judicial intervention.

F 96. We, however, refrain ourselves to examine the question regarding the scope and ambit of Section 9 of the Act, 1996 of which a reference has been made by a three-Judge Bench in M/s. N.N. Global Mercantile Private Limited (supra) since the present reference is not concerned to examine the scope of Section 9 of the Act, 1996 and G leave it open to be examined in the appropriate proceedings. X. Answer to the Reference

97. To conclude, in our view: i) We accordingly hold that the existence of a copy/certified copy of an arbitration agreement whether unstamped/ H

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s 423 INDO UNIQUE FLAME LTD. & ORS. [AJAY RASTOGI, J.]

insufficiently stamped at the pre-referral stage is an A enforceable document for the purposes of appointment of an Arbitrator under Section 11(6A) of the Act, 1996 where the judicial intervention shall be minimal confined only to the prima facie examination of “existence of an arbitration agreement” alone keeping in view the object of 2015 B amendment and the courts must strictly adhere to the time schedule for the appointment of Arbitrator prescribed under Section 11(13) of the Act, 1996. ii) All the preliminary/debatableissues including insufficiently stamped/unduly stamped or validity of the arbitration agreement etc.are referrable to the Arbitrator/Arbitral C Tribunal under Section 16 of the Act, 1996 which, by virtue of the Doctrine of Kompetenz-Kompetenz has the power to do so. iii) The decision in SMS Tea Estates Private Limited (supra) stands overruled. Paras 22 and 29 of Garware Wall Ropes D Limited (supra) which are approved in paras 146 and 147 in Vidya Drolia and Others (supra) are overruled to that extent.

98. The reference is answered accordingly. E

99. We appreciate the contribution made by Mr. Gourab Banerjee, Amicus Curiae in answering the reference made to this Court.

HRISHIKESH ROY, J. A. Introduction F

B. Reference to the Constitution Bench C. Facts in NN Global D. Modification of the reference question G E. Submissions of Counsel F. Statutory scheme of the Stamp Act, 1899 G. Statutory scheme of the Arbitration Act, 1996 i) Evolution of law under Section 11(6) of the Arbitration Act, 1996 H

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A ii) Post-2015 Regime: Insertion of Section 11(6A) iii) Post-2019 Amendment and the Report of the High- level Committee to review the Institutionalisation of Arbitration in India H. Discussion on SMS Tea B I. Discussion on Garware J. Interplay between the Stamp Act, Arbitration Act and Contract Act. i) Arbitration Act is a special legislation C ii) Harmonious Construction K. Advent of Technology and the changing nature of transactions L. Doctrine of Separability D M. Kompetenz Kompetenz, & the issue of judicial logjam in India N. Discussion on Vidya Drolia O. Conclusion E A. Introduction

1. I had the benefit of reading the erudite opinion of my Learned Brother, Justice K.M. Joseph (for himself and Justice Aniruddha Bose) and the separate judgment of Learned Brother Justice C.T. Ravikumar. However, I regret my inability to agree with the majority opinion and the F concurring judgment. Echoing the words of Charles Evans Hughes 1 in one of his lectures delivered at the University of Columbia, let our minority opinion (self and Learned Brother Justice Ajay Rastogi, who has written a separate opinion), appeal to the brooding spirit of the future as also the powers of the legislature to examine the interplay between the Arbitration and Conciliation Act, 1996 (for short “Arbitration Act, 1996”) and the G Indian Stamp Act, 1899 (for short “Stamp Act, 1899”); and to emphatically resolve the imbroglio to avoid any confusion in the minds of the stakeholders in the field of arbitration.

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s 425 INDO UNIQUE FLAME LTD. & ORS. [HRISHIKESH ROY, J.]

2. The role of Courts in arbitral proceedings has been much debated A for years. Autonomy of the disputing party is the core of the arbitral process but if the parties fail to arrive at a consensus, the supervisory role of Courts becomes imperative. Redfern and Hunter on International Commercial Arbitration 2 describe the relationship between national courts and arbitral tribunals as follows: B “To the extent that the relationship between national courts and arbitral tribunals is said to be one of ‘partnership’, it is not a partnership of equals. Arbitration may depend upon the agreement of the parties, but it is also a system built on law, which relies upon that law to make it effective both nationally and internationally. National Courts could exist without arbitration, but arbitration could C not exist without the courts. The real issue is to define the point at which this reliance of arbitration on the national courts begins and at which it ends.” [Emphasis supplied] D

3. The supervisory role of Courts under the Arbitration Act, 1996 can be broadly categorized into three parts i.e., pre-commencement of arbitral proceedings, during the arbitral proceedings and at the post- arbitration stage. Section 8 and Section 11 in Part I of the Arbitration Act, 1996, and Section 45 in Part II of the Arbitration Act, 1996 specifically deal with the role of Courts before the initiation of arbitration proceedings. Section 8 deals with the “Power to refer parties to arbitration” where there is an arbitration agreement; it provides for a mandatory reference to arbitration, unless the Court is prima facie satisfied that no valid arbitration agreement exists. Section 11(6), on the other hand, provides for “Appointment of Arbitrators” when parties fail to mutually agree on the name of an arbitrator or appoint an arbitrator in terms of the arbitration agreement. Section 45 refers to the “Power of judicial authority to refer parties to arbitration” in Part II of the Arbitration Act, 1996.

4. Here in this reference, the extent of judicial intervention before the commencement of arbitral proceedings is being tested. It raises important issues of delays in the enforcement of arbitration agreements, subject to payment of stamp duty and whether an arbitration agreement

2 Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration (6th Edition, 2015, Oxford University Press), Chapter 7, Paragraph 7.03 H

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A would be non-existent, invalid/void, or unenforceable in law, if the underlying instrument is not stamped/insufficiently stamped, as per the relevant Stamp Act.

5. The moot question in this reference is whether the statutory bar under Section 35 titled “Instruments not duly stamped inadmissible in Evidence” of the Stamp Act, 1899 would be attracted when an arbitration agreement is produced under Section 11(6) of the Arbitration Act, 1996. As a corollary, this reference also tests the scopeand natureof the Court’s intervention specifically at the stage of appointment of arbitrator under Section 11 of the Arbitration Act, 1996. The conundrum over the scope of judicial review and the validity/enforceability of the unstamped/insufficiently stamped arbitration agreement contained in an underlying contract is expected to be resolved in this reference. B. Reference to the Constitution Bench

6. A 3-judge bench in M/S N.N. Global Mercantile Private D Limited v M/S Indo Unique Flame Limited and others3 (for short “NN Global”) by doubting the reasoning in Paragraphs 146 and 147 of a coordinate bench of this Court in Vidya Drolia and others v Durga Trading Corporation 4 (for short “Vidya Drolia”) considered it appropriate for the issue to be examined by a Bench of five judges. The matter before the Court in Vidya Drolia(supra) was related to subject- E matter arbitrability but while deciding the question, it cited with approval Paragraphs 22 and 29 of the 2-judge Bench judgment in Garware Wall Tropes Limited v Coastal Marine Constructions and Engineering Limited5 (for short “Garware”).

7. Following the decision in SMS Tea Estates (P) Ltd. v. F Chandmari Tea Co. (P) Ltd.6 (for short “SMS Tea”), it was held in Garware(supra) that non-payment of stamp duty on the commercial contract would invalidate even the arbitration agreement and render it non-existent in law and unenforceable.

8. This Court in NN Global (supra) overruled the 2-judge bench G decision in SMS Tea (supra) which was cited with approval in Garware (supra). 3 (2021) 4 SCC 379 4 (2021) 2 SCC 1 5 (2019) 9 SCC 209 6 H (2011) 14 SCC 66

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s 427 INDO UNIQUE FLAME LTD. & ORS. [HRISHIKESH ROY, J.]

9. NN Global (supra) relied inter alia, on the principle of A Kompetenz Kompetenz and the doctrine of Separability incorporated under Section 16 of the Arbitration and Conciliation Act, 1996 to doubt the correctness of the view taken in Vidya Drolia (supra) and Garware (supra). The relevant paragraphs which define the scope of this reference are extracted below: B “34. We doubt the correctness of the view taken in paras 146 and 147 of the three-Judge Bench in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] . We consider it appropriate to refer the findings in paras 22 and 29 of Garware Wall Ropes Ltd. [Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 : C (2019) 4 SCC (Civ) 324] , which has been affirmed in paras 146 and 147 of Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] , to a Constitution Bench of five Judges.

56. We are of the considered view that the finding in SMS Tea D Estates [SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4 SCC (Civ) 777] and Garware [Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ) 324] that the non-payment of stamp duty on the commercial contract would invalidate even the arbitration agreement, and render it non-existent in law, and unenforceable, is not the correct position in law.

57. In view of the finding in paras 146 and 147 of the judgment in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] by a coordinate Bench, which has affirmed the judgment in Garware [Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ) 324] , the aforesaid issue is required to be authoritatively settled by a Constitution Bench of this Court.

58. We consider it appropriate to refer the following issue, to be authoritatively settled by a Constitution Bench of five Judges of this Court: “Whether the statutory bar contained in Section 35 of the Stamp Act, 1899 applicable to instruments chargeable to stamp duty under Section 3 read with the Schedule to the Act, would also H

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A render the arbitration agreement contained in such an instrument, which is not chargeable to payment of stamp duty, as being non-existent, unenforceable, or invalid, pending payment of stamp duty on the substantive contract/instrument?”

10. Thus, the correctness of the decisions in SMS Tea(supra), B Garware(supra), Vidya Drolia(supra), as well as other relevant decisions is to be evaluated during the course of the reference. It has been brought to the notice of this Court that conflicting decisions have created a vexed situation for arbitral proceedings and hence, this issue is expected to be settled through this reference.

C 11. The background facts in NN Global (supra) which gave rise to this reference are to be noted at the outset: C. Facts in N.N. Global7

12. Indo Unique Flame Ltd. (for short “Indo Unique Flame”) entered into a sub-contract Work Order with N.N. Global Mercantile D Pvt. Ltd (“NN Global”) on 28.09.2015 for transportation of coal. In terms of Clause 9 of the Work Order, NN Global furnished a Bank Guarantee to Indo Unique. Clause 10 of the Work Order provided for an arbitration clause. Due to certain disputes in the principal contrAct, Indo Unique invoked the Bank Guarantee furnished by NN Global. E Thereafter, NN Global filed a Civil Suit before the Commercial Court, Nagpur. An application under Section 8 of the Arbitration Act, 1996 was also filed seeking reference of the disputes to arbitration. The Commercial Court on 18.01.2018 rejected the application under Section 8 of the Arbitration Act, 1996 holding that the Bank Guarantee was an independent contract. Thereafter, Indo Unique filed a Writ Petition F against the order of the Commercial Court. On 30.9.2020, the Bombay High Court allowed the application under Section 8 of the Arbitration Act, 1996. It held that the non-stamping of Work Order can be raised at the stage of Section 11 of the Arbitration Act, 1996 or before the Arbitral Tribunal at the appropriate stage. It set aside the order of the G Commercial Court on 18.01.2018. An appeal was filed in this Court where NN Global contended that since the sub-contract was not stamped under the Maharashtra Stamp Act, 1958, the arbitration agreement would be rendered ‘unenforceable’. It is in this context that the Court doubted the correctness of previous decisions in Garware (supra) which 7 H (2021) 4 SCC 379

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s 429 INDO UNIQUE FLAME LTD. & ORS. [HRISHIKESH ROY, J.]

was cited with approval in Vidya Drolia (supra) declaring such A arbitration agreements to not exist in law and reconsideration of the issue was sought from this Constitution Bench. D. Modification of the reference question:

13. The original reference question in Para 58 of N.N. Global B (supra) was set out as under: “Whether the statutory bar contained in Section 35 of the Stamp Act, 1899 applicable to instruments chargeable to stamp duty under Section 3 read with Schedule to the Act, would also render the arbitration agreement contained in such an instrument, which is C not chargeable to payment of stamp duty as being non-existent, unenforceable in law, or invalid/void, pending payment of stamp duty on the substantive contract/instrument?” [emphasis supplied] Mr. Gourab Banerjee, learned Senior Counsel assisting this Court D as Amicus Curiaehowever proposed to reframe the question of reference, as under: “Whether the statutory bar contained in Section 35 of the Stamp Act, 1899 applicable to instruments chargeable to stamp duty under Section 3 read with Schedule to the Act, would also render the E arbitration agreement contained in such an instrument, which is not chargeable to payment of stamp duty as being non-existent, unenforceable in law, or invalid/void, pending payment of stamp duty on the substantive contract/instrument?” [Emphasis in original] F

14. It is seen that an erroneous observation pertaining to the Maharashtra Stamp Act, 1958 not subjecting an arbitration agreement to stamp duty was made in para 20, 24 and 58 in NN Global (supra). In each of our four opinions, Justice KM Joseph, Justice C.T. Ravikumar, Justice Ajay Rastogi (& self), we find that this is not the correct position G on the applicability of the Maharashtra Stamp Act, 1958. The Indian Stamp Act, 1899 is a fiscal enactment that levies a charge on the execution of instruments. Section 2(14) of the Stamp Act, 1899 defines “instrument” as “every document by which any right or liability is, or purports to be, created, transferred, limited, extended, extinguished or H

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A recorded”. Section 3 titled “Instruments chargeable with duty” provides inter alia that the instrument must be mentioned in the Schedule to the Act. It is essential to note that arbitration agreements are not specifically mentioned in Schedule I of the Stamp Act, 1899 as “instruments” which are required to be stamped. However, under the residuary entry in Article 5(c) of Schedule I of the Stamp Act, 1899 titled as “if not otherwise provided for”, stamp duty becomes payable. This residuary entry is contained in amendments to Schedule I of the Stamp Act, 1899, as well as various State Stamp Acts. I would therefore proceed on the basis that an arbitral agreement falls within the definition of “instrument” as stipulated under the Stamp Act, 1899 and would be subject to stamp duty. E. Submissions of the Counsel:

15. We have heard the elaborate submissions from Mr. Gourab Banerjee, Learned Senior Counsel assisting this Court as Amicus Curiae; Mr. Gagan Sanghi, Learned Counsel for the appellant; Ms. Malavika D Trivedi, Learned Senior Counsel for the Intervenor in IA 18516 of 2022; Mr. Ramakanth Reddy, Learned Senior Counsel for Respondent No. 1 and Mr. Debesh Panda, Learned Counsel for the Intervenor in IA 199969 of 2022. They have cited various decisions of this Court as well as of Courts in other jurisdictions. E

16. The learned Amicus Curiae makes the following specific submissions: 16.1. The Determination of whether an arbitration agreement is duly stamped or not, must be left to the arbitrator. Section 11(6A) of the Arbitration Act, 1996 circumscribes the scope of the appointing authority. It begins with a non-obstante clause and was specifically meant to overrule the 7-judge bench in SBP & Co v Patel Engg. Ltd8. (for short “SBP”) and National Insurance Co. Ltd. V Boghara Polyfab (P) Ltd9 (for short “Boghara Polyfab”). Moreover, the ambit of Section 16 of Arbitration Act, 1996 which deals with the competence of an arbitral tribunal to rule on its jurisdiction, is wide enough, according to Mr. Gourab Banerjee, to allow the arbitrator to make a determination with respect to the stamping of the instrument.

8 (2005) 8 SCC 618 9 H (2009) 1 SCC 267

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s 431 INDO UNIQUE FLAME LTD. & ORS. [HRISHIKESH ROY, J.]

16.2. The 246th Report of the Law Commission of India10 (for short “246th LCI Report) recommended that the scope of authority be limited to “existence” and “validity” of the arbitration agreement. The legislature went one step further and limited the scope of the appointing authority under Section 11(6A) of the Arbitration Act, 1996 to confine to the examination of only “existence” and not even “validity” of the arbitration agreement. Such approach is consistent with the objective of expeditious resolution of arbitration disputes. A Court under Section 11(6) of Arbitration Act, 1996 is in the nature of an appointing authority, to facilitate and assist arbitration. 16.3 The statutory bar in Section 35 of the Stamp Act, 1899 would be triggered only when there is a finding that the document is not duly stamped. For the same, there ought to be an inquiry into stamping. Only on triggering of Section 33(2) of the Stamp Act, 1899 titled “Examination and impounding of instruments”, Section 35 will follow. The examination under Section 33(2) of the Stamp Act, 1899 should not be undertaken by a Court under Section 11(6A) of the D Arbitration Act, 1996, but by the appointed arbitrator. 16.4. If the court finds under Section 11of the Arbitration Act, 1996 that there is no agreement, then it can take a final view. However, if the Court feels that a deeper consideration is required then the same can be left to the Arbitral Tribunal under Section 16 of the Arbitration E Act, 1996. According to Mr. Gourab Banerjee, the learned Senior Counsel, this is the appropriate way to harmonise Section 11(6A) with Section 16 of the Arbitration Act, 1996. 16.5. The absence of stamping or instrument inadequately stamped would at best be an issue of admissibility but not about jurisdiction. The F Stamp Act, 1899 is a fiscal measure enacted to secure revenue for the State for certain classes of instruments. It is, therefore, not enacted to arm a litigant with a weapon of technicality to meet the case of the opponent. 16.6. The learned Amicus Curiae points out that a Court exercising G power under Section 11(6A) of the Arbitration Act, 1996 is not a

10 Law Commission of India, ‘Amendments to the Arbitration and Conciliation Act 1996’ (246th Report, August 2014) Available at (https://cdnbbsr.s3waas.gov.in/ s3ca0daec69b5adc880fb464895726dbdf/uploads/2022/08/2022081615.pdf) <Last accessed on 19.3.2023> H

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A Court as defined in Section 2(1)(e) of the Arbitration Act, 1996 which has the authority to ‘receive evidence’. In some sense, under Section 11(6A), the Court is to only form a prime facie opinion. 16.7. Significantly, the parties are not under an obligation to file an original arbitration agreement and only the copy can be annexed which B however is not an “instrument” as provided in Section 2(14) of the Stamp Act, 1899. The reading of Section 33 or 35 of the Stamp Act, 1899 would pointedly suggest that these provisions are not concerned with the copy of the instrument. Validity is always open to examination at the post-referral stage. [Jupudi Kesava Rao v Pulavarthi Venkata C Subbarao and others 11 , Hariom Agrawal v Prakash Chand Malviya 12]

17. Projecting the contrary view, Mr. Gagan Sanghi, learned Counsel for the appellant makes the following submissions: 17.1. Section 35 of the Indian Stamp Act, 1899 bars admission of unduly stamped “instrument” in evidence “for any purpose” and also “acting upon it”. In Govt. of AP. v P. Laxmi Devi13, it was held that “shall” in Section 33 of Stamp Act, 1899 is mandatory and unstamped document must be impounded. 17.2. Even assuming that stamp duty is not payable on an arbitration agreement under Stamp Act, 1899, when arbitration agreement is contained as a clause in an instrument on which stamp duty is payable, such arbitration agreement as an instrument, attracts the bar of Section 35 of the Stamp Act, 1899. 17.3. The learned counsel argues that separation of agreement from the substantive contract is a legal fiction created by Section 16 of the Arbitration Act, 1996. Section 16 of Arbitration Act, 1996 cannot be an exception to Section 35 of the Indian Stamp Act, 1899. [Bengal Immunity Co vs State of Bihar14, Para 69, 70 of Govt. of India v Vedanta15; Amazon V Future Retail16] G 11 (1971)1SCC 545 12 (2007) 8 SCC 514 13 (2008) 4 SCC 720 14

(1955) 2 SCR 603

15 (2020)10 SCC 1 16 H (2022) 1 SCC 209

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s 433 INDO UNIQUE FLAME LTD. & ORS. [HRISHIKESH ROY, J.]

17.4. According to Mr. Sanghi, Doctrine of Separability and A Kompetenz Kompetenz has no bearing on the issue of enforceability of an arbitration agreement when proper stamp duty is not paid on the instrument containing the arbitration agreement. The learned counsel relied on the decision of UK Supreme Court in Enka Insaat v OOO Insurance Company17 where it was held that an “arbitration clause is nonetheless part of bundle of rights and obligations recorded in the contractual document”. 17.5. The issue of stamping is to be looked into at the very threshold, even if it is in exercise of Section 11 (6A) of the Arbitration Act, 1996, i.e. at the time, the consideration with respect to appointment of arbitrator is undertaken. According to the learned counsel, an instrument would exist in law only when it is enforceable. Therefore, when the Court under Section 11(6A) of the Arbitration Act, 1996 is considering the “existence” of the arbitration agreement, it can examine the issue of non-stamping or of inadequate stamping at that stage itself. 17.6. Highlighting that three modes are provided in NN Global D (supra) i.e. impounding, payment of stamp duty and then appointment of arbitrator, it is argued that when an arbitrator is appointed in a Section 11 application, the Court is certainly “acting upon” the arbitration clause which is contended to be barred by the clear wordings of Section 35 of the Stamp Act, 1899. An Agreement, unless “enforceable”, is not in E “existence”.

18. The learned Senior Advocate, Ms. Malvika Trivedi, intervening on behalf of the Appellant made the following submissions: 18.1. The Regimes of the Stamp Act, 1899 and Registration Act, 1908 are completely different. NN Global (supra) wrongly applied F the principles of registration of a document to the requirement of stamping a document. While the former is a curable defect, the latter determines the very existence and completion of a document/instrument. In the absence of registration, an instrument still remains in existence but without stamping, the instrument is incomplete/inchoate. G 18.2. The Stamp Act, 1899 envisages the payment of stamp duty, failing which the instrument according to Ms. Trivedi cannot be acted upon for any purpose. There is no ambiguity in the language of the Statute and plain reading should be opted. 17 [2020] UKSC 38 H

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A 18.3. The powers of the Court under different provisions of law, as well as the restrictions created in the Stamp Act, 1899 apply to the proceedings conducted in accordance with Section 9 of the Arbitration Act, 1996. It is, therefore, argued that even if the arbitration clause stands severed, the Court will have to reach a prima facie conclusion on whether the main agreement is enforceable in law before granting B interim measures.

19. Learned Counsel for the Respondent No. 1, Mr. Ramakanth Reddy, took us through the relevant Lok Sabha debates before the enactment of the Arbitration Act, 1996 and makes the following submissions: C 19.1 Provisions of Arbitration Act, 1996; Stamp Act, 1899 and Contract Act, 1872 can be harmonized. Section 17 of Stamp Act, 1899 has to be read with Section 31 of Stamp Act, 1899. 19.2 Plain language of Section 7 of the Arbitration Act, 1996 D does not require that the parties stamp the agreement. The legislative intention would be defeated, if the Court insists on non-core technical requirements such as stamps, seals and originals.

20. In his turn, Mr. Debesh Panda, learned Counsel for the Intervenor submits the following: E 20.1 Part I of Arbitration Act, 1996 deals with Section 8,9 and 11 whereas Section 45 is dealt with in Part II. Section 45 has been recognized as a provision falling under Part II which is a “complete code”. [See Chloro Controls v Severn Trent Water Purification Inc18] The expression “unless it finds” in Section 45 was interpreted F per majority in Shin-Etsu Chemical Co. Ltd. v Aksh Optifibre Ltd19 (for short “Shin-Etsu) as a consideration on a “prima facie basis” only. In 2019, Parliament amended Section 45. It substituted the expression “unless it finds.” with “unless it prima facie finds”. It thus brings the statute in line with the position settled in Shin Etsu (supra). In this background, the Stamp Act, 1899 merely creates a G temporary infliction till the stamp duty is recovered, with or without penalty (as the case may be). The affliction only attaches to the instrument and not the transaction.

18 (2013) 1 SCC 641 19 H (2005) 7 SCC 234

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s 435 INDO UNIQUE FLAME LTD. & ORS. [HRISHIKESH ROY, J.]

20.2 The Arbitration Act, 1966 has always been held to be an exhaustive legislation in the nature of a complete Code. [Paragraphs 83-84, 89 inFuerst Day Lawson Ltd. v. Jindal Exports Ltd. 20 ] According to Mr. Panda, the impounding of the parent instrument that contains the arbitration agreement by a forum that exercises power under the complete Code, either under Section 8, 9 and 11 within Part I, or under Section 45 within Part-II, is inconsistent with the character of Arbitration Act, 1996 which is in the nature of a complete code.

21. Looking at the respective projection by the learned Amicus Curiae and other counsels, the following questions fall for our consideration: C i) Whether the non-stamping of the substantive contract/ instrument would render the arbitration agreement non- existent in law, void and unenforceable at the stage of Section 11 of the Arbitration Act, 1996 for the purpose of referring a matter for arbitration? D ii) Whether the examination of stamping and impounding should be done at the threshold by the Section 11 judge or should it be left to the arbitrator? F. The Statutory framework of the Stamp Act, 1899

22. Let us begin by examining the objective behind the enactment of the Stamp Act, 1899. The 67th Law Commission Report21 suggests that the idea of a fiscal enactment for the purpose of collecting revenue for the State first originated in Holland and thereafter, the Bengal Regulation 6 of 1797 was enacted in India. This was initially limited to Bengal, Bihar, Orissa and Banaras. Subsequently, various stamp regulations were introduced in Bombay and Madras. The Stamp duties were primarily intended to compensate for the deficiency in public revenue due to abolition of tax for the maintenance of police establishments, leviable on “Indian Merchants and Traders”. However, the Regulation paved way for later enactments relating to stamp duty. In 1860, the first Act relating to Stamp duties was enacted in India. This was repealed by the Act of 1862, 1869, 1879 and subsequently, the Act of 1899 was enacted which is the current legislation. 20 (2011) 8 SCC 333 21 Law Commission of India, ‘Indian Stamp Act’ (67th Report, February,1997) available at https://lawcommissionofindia.nic.in/report_seventh/accessed on 11March 2023 H

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A 23. Reflecting on the objective of the Stamp Act, 1899, a 3-judge bench of this Court in Hindustan Steel Ltd. v. Dilip Construction Co.22 (for short “Hindustan Steel”) speaking through J.C. Shah J. made the following pertinent observation: “7. The Stamp Act is a ûscal measure enacted to secure revenue B for the State on certain classes of instruments: It is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent.”

24. Learned Amicus Curiae, Mr. Gourab Banerjee cited the decision of the Pakistan Supreme Court in Union Insurance Company C of Pakistan Ltd. v Hafiz Muhammad Siddique23 which addressed this issue as early as 1978, following the ratio in Hindustan Steel (supra). Faced with the question of whether there would be any valid arbitral proceedings, if the arbitration agreement is unduly stamped and hence, inadmissible in evidence under Section 35 of the Stamp Act, 1899; the Court attributed a purely fiscal purpose to stamping, holding that stamping is not meant to interfere in commercial life. Discussing the provisions of the Stamp Act, 1899 including Section 61 which empowers appellate Courts to revise decisions on “sufficiency” of stamps, Dorab Patel J concluded that: “the object of the legislature in enacting the Stamp Act was to protect public revenue and not to interfere with commercial life by invalidating instruments vital to the smooth flow of trade and commerce.” [emphasis supplied]

F 25. Thus, the object is to see that the revenue for the State is realised to the utmost extent24 and not to affect the validity of the document. Its provisions must be construed narrowly to that extent. In the same judgment, it was elaborated by the Pakistan Supreme Court as under: “For example, an instrument would be produced in evidence only G when there is a dispute about it, therefore, if the intention of the 22 (1969) 1 SCC 597 23 1978 PLD SC 279 24 J.M.A. Raju v Krishnamurthy Bhatt, AIR 1976 Guj 72; Chiranji Lal (Dr.) v. Hari Das (2005) 10 SCC 746; Jagdish Narain v. Chief Controlling Revenue Authority, AIR 1994 H All 371.

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s 437 INDO UNIQUE FLAME LTD. & ORS. [HRISHIKESH ROY, J.]

Legislature had been to render invalid all instruments not properly A stamped, it would have made express provision in this respect and it would have also provided some machinery for enforcing its mandate in those cases in which the parties did not have occasion to produce unstamped instruments before the persons specified in the section.” B

26. This Court in RIO Glass Solar SA v. Shriram EPC Limited and Ors.25 while holding that foreign awards need not be stamped noted that the Stamp Act, 1899 reflects the fundamental policy of Indian law. A 2-judge bench speaking through Nariman J. noted as under: “ 34. ……The fundamental policy of Indian law, as has been held in Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, and followed in Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, makes it clear that if a statute like the Foreign Exchange Regulation Act, 1973 dealing with the economy of the country is concerned, it would certainly come within the expression “fundamental policy of Indian law”. The Indian Stamp Act, 1899, being a fiscal statute levying stamp duty on instruments, is also an Act which deals with the economy of India, and would, on a parity of reasoning, be an Act reflecting the fundamental policy of Indian law.” E [emphasis supplied]

27. The object of the Stamp Act can be further understood from S. Krishnamurthy Aiyar’s Commentary26 on the Stamp Act, 1899 where discussing the judgments in Hindustan Steel(supra) and J.M.A Raju v Krishnamurthy Bhatt27, the object is stated as under: F “The object of the Stamp Act is a purely fiscal regulation. Its sole object is to increase the revenue and all its provisions must be construed as having in view the protection of revenue. It is not enacted to arm a litigant with a weapon of technicality to meet the case of his opponent. The whole object is to see that the G revenue of the State is realised to the utmost extent”

25 (2018) 18 SCC 313 26 S. Krishnamurthy Aiyar, The Indian Stamp Act, An Exhaustive Summary with State Amendments; 7 th Edn, P. 22 27 AIR 1976 Guj 72 H

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A It is plain that the legislative intent and object behind the Stamp Act, 1899, is to secure revenue for the State and it is an Act reflecting the fundamental policy of Indian law. Thus, policy considerations and securing revenue must also be kept in mind while interpreting the provisions of the Stamp Act, 1899. B 27.1. In the case of Commissioner of IT v. Chandanben Maganlal28, it was held that any provision relating to a tax statute must be interpreted so that the meaning of such provision must harmonise with the legislature’s intention behind the law. Let us now consider Section 35&36 of the Stamp Act, 1899 with which we are directly concerned. C They are extracted below: “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 instrument 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, 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; G (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;

28 H (2000) 245 ITR 182

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s 439 INDO UNIQUE FLAME LTD. & ORS. [HRISHIKESH ROY, J.]

(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 66 [the 67 [Government]] or where it bears the certificate of the Collector as provided by section 32 or any other provision of this Act.” “36. Admission of instrument where not to be questioned.—Where C 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 duly stamped.”

28. Section 35 proscribes authorities from considering unstamped documents but the exceptions to the statutory bar under Section 35 as provided in 35(a),(b),(d) and (e) and Section 36, would clearly suggest that non-payment of stamp duty is a curable defect and the document would not be rendered void at the first instance, if the requisite Stamp duty is not paid. Thus, there is no absolute bar. It is also well-settled in law that failure to stamp a document does not affect the validity of the transaction embodied in the document; it merely renders a document inadmissible in evidence29. 28.1. K. Krishnamurthy30 in the Commentary on the Indian Stamp Act, 1899 discusses the proviso to Section 35 of Stamp Act, 1899 as under: F “This proviso enables Courts and Arbitrators to admit in evidence documents unstamped or deficiently stamped on payment of the proper duty and penalty. An instrument not duly stamped shall be admitted in evidence on payment of the duty and penalty. An instrument not duly stamped shall be admitted in evidence on G

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A 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 together with penalty31. An award which is not engrossed on stamped paper or is engrossed on an insufficiently stamped paper may be validated with retrospective effect by payment of the duty or deficit duty32. B Where an award is not stamped, the defect in the award can be cured by impounding the document and after the defect is removed it can be brought on record and made a rule of the Court. 33” [emphasis supplied] C

M/s N. N. GLOBAL MERCANTILE PRIVATE LIMITED v. M/s 441 INDO UNIQUE FLAME LTD. & ORS. [HRISHIKESH ROY, J.]

such impounding, or if the Collector has certified that its further A detention is necessary and has not cancelled such certificate; (b) nothing in this section shall affect the Code of Civil Procedure, 1882 (14 of 1882), section 144 clause 3.” [emphasis supplied] B

30. The phraseology of Sections 36, 35 and 42 of the Stamp Act, 1899 was considered in Hindustan Steel(supra). The factual backdrop therein was that Hindustan Steel made an application under Section 30 and 33 of the Indian Arbitration Act, 1940 for setting aside the award on the ground that it was unstamped and as such, void C ab initio. This Court, however, held that there is no bar against an instrument not duly stamped being “acted upon”,after payment of stamp duty and penalty according to the procedure prescribed in the Act. It was pertinently observed as follows: “6. Relying upon the difference in the phraseology between D Sections 35 and 36 it was urged that an instrument which is not duly stamped may be admitted in evidence on payment of duty and penalty, but it cannot be acted upon because Section 35 operates as a bar to the admission in evidence of the instrument not duly stamped as well as to its being acted upon, and the Legislature has by Section 36 in the conditions set out therein E removed the bar only against admission in evidence of the instrument. The argument ignores the true import of Section 36. - F By that section an instrument once admitted in evidence shall not be called in question at any stage of the same suit or proceeding on the ground that it has not been duly stamped. Section 36 does not prohibit a challenge against an instrument that it shall not be acted upon because it is not duly stamped, but on that account there is no bar against an instrument not G duly stamped being acted upon after payment of the stamp duty and penalty according to the procedure prescribed by the Act. The doubt, if any, is removed by the terms of Section 42(2) which enAct, in terms unmistakable, that every instrument endorsed by the Collector under Section 42(1) H

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A shall be admissible in evidence and may be acted upon as if it has been duly stamped.” (emphasis supplied)

31. The above would indicate that there is no absolute bar against the instrument being “acted upon” since at a later stage the defect is curable. 31.1. Arguing that the above course is not available, Ms. Malavika Trivedi, learned Senior Counsel for the intervenor had contended that Section 35 provides for a statutory bar, where the agreement shall not be admitted in evidence for any purpose nor shall it be acted upon, registered or authenticated by any such person or by any public officer. It is, therefore, submitted that when a Court appoints an arbitrator under Section 11 of Arbitration Act, 1996, it is certainly “acting upon” the arbitration clause, which is barred by the clear language of Section 35 of the Stamp Act, 1899. Let us now proceed to test the above argument.

D 31.2 In Hameed Joharan v. Abdul Salam34 in the context of an unstamped decree for partition, 2 judges of this Court had the occasion to interpret Section 35 of the Stamp Act, 1899 and the interplay with Article 136 of the Limitation Act, 1963. It was contended in that case that an instrument not duly stamped, cannot be “acted upon”. The issue therein was whether a decree passed in a suit for partition can be acted upon/enforced, without engrossing on stamp paper. It was also argued that the period of limitation begins to run from the date when the decree becomes enforceable i.e. when the decree is engrossed on the stamp paper. In this context, the Court opined that: “38. …..Undoubtedly, Section 2(15) includes a decree of partition and Section 35 of the Act of 1899 lays down a bar in the matter of unstamped or insufficient stamp being admitted in evidence or being acted upon — but does that mean that the prescribed period shall remain suspended until the stamp paper is furnished and the partition decree is drawn thereon and subsequently signed by the Judge? The result would however be an utter absurdity. As a matter of fAct, if somebody does not wish to furnish the stamp paper within the time specified therein and as required by the civil court to draw up the partition decree or if someone does not at all furnish the stamp paper, does that 34 H (2001) 7 SCC 573

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A 31.5. It was specifically held that “the starting of period of limitation for execution of a partition decree cannot be made contingent upon the engrossment of the decree on the stamp paper.” 31.6. Thus, unstamped/insufficiently stamped document does not affect the enforceability of a document nor does it render a document B invalid36. A plain reading of the provisions would also make it clear that a document can be “acted upon” at a later stage. It is therefore a curable defect. 32.The learned Counsel for the Appellant, Mr. Gagan Sanghi argued that Section 35 and 33 are mandatory provisions as it uses the word “shall” and an unstamped document must be impounded at the threshold. In Principles of Statutory Interpretation by Justice G.P. Singh37 on the use of the word “shall” and presumption of the word being imperative, it is stated: “ ….this prima facie inference about the provision being imperative may be rebutted by other considerations flowing from such construction. There are numerous cases where the word “shall” has therefore been construed as merely directory. The word ‘shall’, observes HIDAYATULLAH, J. “is ordinarily mandatory but sometimes not so interpreted if the context or the intention otherwise demands and points out SUBBARAO J. “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.” [emphasis supplied] 32.1. P.B. Maxwell in the Commentary on Interpretation of F Statutes38 notes that an Act is to be regarded in its entirety and discusses the following three ways of interpretation: “Passing from the external aspects of the Statute to its contents, it is an elementary rule that construction is to be made of all parts together, and not of one part only by itself” G 36 Gulzari Lal Malwari v Ram Gopal AIR 1937 Cal 765; Mattegunta Dhanalakshmi v Kantam Raju Saradamba, AIR 1977 AP 348; See also Puranchandra v Kallipada Roy, AIR 1942 Cal 386;Boottam Pitchiah v Boyapati Koteswara Rao AIR 1964 AP 519 37 Justice G.P. Singh: Principles of Statutory Interpretation,(LexisNexis,2016) at P. 450- 451; Burjore and Bhawani Prasad v Bhagana ILR 10 Cal 557; Sainik Motors v State of Rajasthan 1962 (1) SCR 517 ; State of UP v Babu Ram AIR 1961 SC 751 38 PSt J Langan, Maxwell on The Interpretation of Statutes (N M Tripathi Private Ltd, H 1976); P. 58-64

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i) Individual words are not considered in isolation, but may be have their meaning determined by other words in the Section in which they occur. ii) The meaning of a section may be controlled by other individual sections in the same Act. iii) Lastly, the meaning of a section may be determined, not so much by reference to other individual provisions of the Statute, as by the scheme of the Act regarded in general” [emphasis supplied] C 32.2. Justice G.P. Singh in Interpretation of Statutes further 39 notes : “ The principle that the statute must be read as a whole is equally applicable to different parts of the same section. The section must be construed as a whole whether or not one of the parts is a D saving clause or a proviso. Subbarao J calls it “an elementary rule that construction of a section is to be made of all the parts together” [emphasis supplied] 32.3. Thus, on a consolidated reading of Section 35,36 and the proviso to Section 35 and 42 ; the use of the word “acted upon” in all E these sections or even in the same section, read with the objective and legislative intent of the Stamp Act 1899, it is clear that the bar under Section 35 is not intended to be absolute; non-payment of stamp duty is a curable defect as the objective is to protect revenue. Moreover, none of the provisions of the Stamp Act, 1899 have the effect of rendering a F document invalid or void ab initio. G. The Statutory Scheme of the Arbitration Act, 1996

33. It is apposite to refer to the parliamentary intent behind the enactment of the Arbitration Act, 1996 which replaced the Arbitration Act, 1940. The first law on the subject was the Arbitration Act, 1899 G with limited application in the Presidency towns of Calcutta, Bombay and Madras. Thereafter, the second schedule of the provisions of the Civil Procedure Code, 1908 dealt with arbitration. The major consolidated legislation was the Arbitration Act, 1940 which was based 39 Justice G.P. Singh: Principles of Statutory Interpretation,(LexisNexis,2016) at P. 46; H

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A on the (English) Arbitration Act, 1940. The Law Commission in its 246th LCI Report (supra) notes that this arbitral regime was based on the mistrust of the arbitral process and “The 1996 Act is based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL Conciliation Rules, 1980.” The relevant part of the Statement of Object and Reasons is extracted below: B (i) to comprehensively cover international commercial arbitration and conciliation as also domestic arbitration and conciliation; (ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific C arbitration; (iii) to provide that the arbitral tribunal gives reasons for its arbitral award; (iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction; D (v) to minimise the supervisory role of courts in the arbitral process; (vi) to permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes; (vii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court; (viii) to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal; and (ix) to provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two International Conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award.” [emphasis supplied]

34. Further, on reading Article 5 of the Model Law and Section 5 of the Arbitration Act, 1996, which cover the provisions for judicial H

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intervention in arbitral proceedings, it is clear that the Parliament went beyond Article 5 of the UNCITRAL Model law and added a non-obstante clause. To substantiate this point, it is pertinent to quote the provisions in full. Article 5 of the UNCITRAL Model Law, 1985 reads as under: “ Article 5. Extent of Court intervention- In matters governed by this Law, no court shall intervene except where so provided in this Law.” Section 5 of the Arbitration Act, 1996 reads as under: “5. Extent of judicial intervention.—Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.” [emphasis supplied]

35. Additionally, reflecting on the purpose of Article 5, Dr. Peter D Binder in UNCITRAL Model Law on International Commercial Arbitration, 198540 notes: “1-107 : According to the Commission Report, the purpose of Article 5 was “to achieve a certainty as to the maximum extent of judicial intervention, including assistance, in international commercial arbitration, by compelling the drafters to list in the (model) law on international commercial arbitration all instances of court intervention. The Analytical Commentary describes the effect of Article 5 as being “to exclude any general or residual powers given to the courts in a domestic system which are not listed in the model law” In addition to the great advantage of providing clarity of law, which is particularly important for foreign parties(protecting them from unwanted legal surprises, Article 5 also functions to accelerate the arbitral process in allowing less of a chance of delay caused by intentional and dilatory court proceedings.” [emphasis supplied] 40 P. Binder, International Commercial Arbitration And Conciliation In UNCITRAL Model Law Jurisdictions 274 (2nd ed., Sweet & Maxwell London 2005) P. 50-51 H

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A 36. A collective reading of the Statement of Object and Reasons of the Arbitration Act, 1996 r/w Section 5 of the Act, and Article 5 of the Model Law, would make it abundantly clear that the legislative intent behind the enactment was to inter alia,minimise the intervention of the Courts and provide for timely resolution of disputes. By adding a non- obstante clause, the Parliament through Section 5 made a significant B departure from Article 5 and gave an overriding effect over the provisions of any other law for the time being in force. It circumscribed the role of the judicial authority, especially in context of the Courts exercising any residual power that may accrue to them through any provision in any law. C

37. Let us now refer to the unamended Section 11(6)of the Arbitration Act, 1996 which is based on the Article 11 of the UNCITRAL Model law: “11 Appointment of arbitrators. — D (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 Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.”

38. Even though the key provisions in the Arbitration Act, 1996 are primarily based on the UNCITRAL Model Law, the legislature has also made significant departures, while amending Section 11 and Section 8 of the Arbitration Act, 1996.

39. Next, it would be appropriate to briefly trace the jurisprudential history of Section 11(6) of the Arbitration Act, 1996 for the purpose of this reference. H

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i) Evolution of law under Section 11(6) of Arbitration Act, 1996 A

40. A 2-judge Bench of this Court in ICICI Ltd. v. East Coast Boat Builders & Engineers Ltd41 taking into consideration delays in appointment of arbitrators under Section 11(6), referred the question of jurisdiction of a Section 11 judge to consider arbitrability of a dispute to a three-judge bench. It was noted that in KR Raveendranathan v. State B of Kerala42, another two Judge Bench of this Court had already referred to a larger Bench, a similar question.

41. Thereafter, in Sundaram Finance Ltd. v. NEPC India Ltd43, a 2-judge bench opined that: “12. …under the 1996 Act, appointment of arbitrator(s) is made C as per the provisions of section 11, which does not require the Court to pass a judicial order appointing [the] arbitrator(s).”

42. The above obiter was affirmed by a 2-judge Bench in Ador Samia Pvt Ltd. v. Peekay Holdings Ltd 44 (for short “Ador Samia”). Dealing with the question of appeal under Article 136 of the Constitution D of India, from an order made by the Chief Justice of a High Court appointing an arbitrator, this Court held that an order under Section 11 of the Arbitration Act, 1996 was an administrative order. This was affirmed by a three- Judge Bench in Konkan Railways Corpn v. Mehul Construction Co45 (for short “Konkan Railways(I)”) where the matter came up for reconsideration of the ratio in Ador Samia (supra). It was observed as under: “ 4. …When the matter is placed before the Chief Justice or his nominee under Section 11 of the Act it is imperative for the said Chief Justice or his nominee to bear in mind the legislative intent that the arbitral process should be set in motion without any delay whatsoever and all contentious issues are left to be raised before the Arbitral Tribunal itself. At that stage it would not be appropriate for the Chief Justice or his nominee to entertain any contentious issue between the parties and decide the same. A bare reading of Sections 13 and 16 of the Act makes it crystal clear that questions G

41 (1998) 9 SCC 728 42 (1996) 10 SCC 35 43 (1999) 2 SCC 479 44 (1999) 8 SCC 572 45 (2000) 7 SCC 201 H

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A with regard to the qualifications, independence and impartiality of the arbitrator, and in respect of the jurisdiction of the arbitrator could be raised before the arbitrator who would decide the same.”

43. The three-judge bench decision was subsequently affirmed by five judges in Konkan Railways Corpn v. Mehul Construction B Co46 (for short “Konkan Railways (II)”). This Court held therein that the power exercised by the Chief Justice or ‘any person or institution’ designated by him under section 11 is not adjudicatory. Following a detailed review of the precedents, it was held that the function of the Chief Justice or his designate under Section 11 is to only “fill the gap left” and appoint an arbitrator for expeditious constitution and commencement of arbitration proceedings.

44. The seven judges of this Court in SBP (supra) overturned the decision in Konkan Railways(II) (supra). It was held therein that deciding an application for appointment is an exercise of ‘judicial’ power, as opposed to an ‘administrative’ power and that the Court is also authorized to record evidence: “39. ….[f]or the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded” E

45. However, Justice C.K. Thakker dissented from the majority opinion and came to the conclusion that it was an administrative power in the following passage: “85. …There is […] no doubt in my mind that at that stage, the F satisfaction required is merely of prima facie nature and the Chief Justice does not decide lis nor contentious issues between the parties. Section 11 neither contemplates detailed inquiry, nor trial nor findings on controversial or contested matters.”

46. The four main reasons behind the dissent can be summarised as under: G “111. ….Firstly, the function of the Court is to interpret the provision as it is and not to amend, alter or substitute by interpretative process. Secondly, it is for the legislature to make a law applicable

46 H (2002) 2 SCC 388

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to certain situations contemplated by it and the judiciary has no power in entering into ‘legislative wisdom’. Thirdly, as held by me, the ‘decision’ of the Chief Justice is merely prima facie decision and sub-section (1) of Section 16 confers express power on the arbitral tribunal to rule on its own jurisdiction. Fourthly, it provides that remedy to deal with situations created by the order passed by the arbitral tribunal. The sheet anchor of his dissent is that in the guise of interpreting a statute, judicial legislation is not permissible.”

47. In the dissenting opinion in Paragraph 95 & 96, Justice Thakkar further held as under: “95. Now, let us consider Section 16 of the Act. This section is new and did not find place in the old Act of 1940. Sub-section (1) of that section enables the Arbitral Tribunal to rule on its own jurisdiction. It further provides that the jurisdiction of the Tribunal includes ruling on any objections with respect to existence or validity of the arbitration agreement. Sub-sections (2), (3) and (4) lay down procedure of raising plea as to the jurisdiction of the Arbitral D Tribunal and entertaining such plea. Sub-section (5) mandates that the Arbitral Tribunal “shall decide” such plea and, “where the Arbitral Tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award”. Sub-section (6) is equally important and expressly enacts that a party aggrieved by an arbitral award may invoke Section 34 of the Act for setting aside such award. The provision appears to have been made to prevent dilatory tactics and abuse of immediate right to approach the court. If an aggrieved party has right to move the court, it would not have been possible to preclude the court from granting stay or interim relief which would bring the arbitration proceedings to a grinding halt. The provisions of Section 16(6) read with Section 5 now make the legal position clear, unambiguous and free from doubt.

96. Section 16(1) incorporates the well-known doctrine of Kompetenz-Kompetenz or competence de la competence. It G recognises and enshrines an important principle that initially and primarily, it is for the Arbitral Tribunal itself to determine whether it has jurisdiction in the matter, subject of course, to ultimate court- control. It is thus a rule of chronological priority. Kompetenz- Kompetenz is a widely accepted feature of modern international H

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A arbitration, and allows the Arbitral Tribunal to decide its own jurisdiction including ruling on any objections with respect to the existence or validity of the arbitration agreement, subject to final review by a competent court of law i.e. subject to Section 34 of the Act.”

B 48. The above line of reasoning in Justice Thakkar’s dissent resonates with the internationally recognized principle of Kompetenz Komptenz and the doctrine of separability. The majority opinion in SBP (supra) suggeststhat a Section 11 Court could conduct a mini-trial at the pre-referral stage. The jurisprudential correctness of SBP(supra) has been doubted and was considered as excessive judicial intervention by the 246th LCI Report (supra). It has been legislatively overruled by subsequent amendments in the Arbitration Act, 1996 which will be discussed later in this judgment.

49. Thereafter, a two-judge bench in Boghara Polyfab (supra) which followed SBP (supra), allowed the court to examine, inter alia, the following issues: “22.2. (a) Whether the claim is a dead (long barred) claim or a live claim. (b) Whether the parties have concluded the contract/ E transaction by recording satisfaction of their mutual rights and obligation or by receiving the final payment without objection.”

50. The 246th LCI report (supra), discussing both SBP (supra) and Boghara (supra) significantly noted that the real issue is the “scope” F and “nature” of judicial intervention: “29. The Supreme Court has had occasion to deliberate upon the scope and nature of permissible pre-arbitral judicial intervention, especially in the context of section 11 of the Act. Unfortunately, however, the question before the Supreme Court was framed in terms of whether such a power is a “judicial” or an “administrative” G power – which obfuscates the real issue underlying such nomenclature/description as to: -the scope of such powers – i.e. the scope of arguments which a Court (Chief Justice) will consider while deciding whether to appoint an arbitrator or not – i.e. whether the H

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arbitration agreement exists, whether it is null and void, whether it is voidable etc; and which of these it should leave for decision of the arbitral tribunal. -the nature of such intervention – i.e. would the Court (Chief Justice) consider the issues upon a detailed trial and whether the same would be decided finally or be left for determination of the arbitral tribunal” [emphasis supplied]

51. As regards nature, the 246th LCI Report(supra) noted that the exposition of law on the point is to be found in Shin Etsu (supra)where this Court while interpreting Section 45 of the Arbitration Act, 1996 held that the issue should be looked at on a “prima facie” basis only. On scope, it was recommended that the Court should restrict to the examination of whether the agreement is “null and void” and if the Court finds that the agreement does not exist, that decision would be final. It made the following recommendation as regards Section 8 and 11 of the D Arbitration Act, 1996: “33. …The scope of the judicial intervention is only restricted to situations where the Court/Judicial Authority finds that the arbitration agreement does not exist or is null and void. In so far as the nature of intervention is concerned, it is recommended that in the event the Court/Judicial Authority is prima facie satisfied against the argument challenging the arbitration agreement, it shall appoint the arbitrator and/or refer the parties to arbitration, as the case may be.”

52. The 2015-Amendment significantly restricted the scope of intervention even further as we will notice below. ii) Post-2015 Regime: Insertion of Section 11(6A)

53. There has been a major shift post-2015 amendment with the insertion of Section 11(6A) in the Arbitration Act, 1996. The legislative intent is clear from the plain reading of Section 11(6A) as extracted below: ”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, H

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A decree or order of any Court, confine to the examination of the existence of an arbitration agreement.” [emphasis supplied]

54. The basis for this amendment, as explained in 246th LCI Report (supra), was to undo the effect of SBP (supra) and Boghara (supra) B which widened the scope of inquiry and intervention by a Court under Section 11(6) of the Arbitration Act, 1996. Section 11(6A) uses the phrase “notwithstanding any judgment, decree or order of any Court” and effectively overrules judgments which widened the scope of inquiry. Section 11(6A) does not use the word “null and void” as recommended C by the Law Commission. Thus, the legislature went one step further and confined the examination to the “existence” of the arbitration agreement.

55. Now let us notice the language used in Sections 8,11 and 45 of the Arbitration Act, 1996, all of which deal with the power of Courts at the pre-arbitral stage. D 55.1. Section 8 of the Arbitration Act, 1996 titled “Power to refer parties to arbitration where there is an arbitration agreement” has been amended in 2015 with the following language: “unless it finds that prima facie no valid arbitration agreement exists”. 55.2. Section 45 in Part II titled “Power of judicial authority to refer parties to arbitration” has also been amended and notified in

2019. The amendment in Section 45 was made after the judgment of three judges in Shin Etsu(supra) where in a case of international arbitration, the question before this Court was when an application under Section 45 is moved, is the Court required to pass a prima facie finding or a final-finding based on the merits of the case, which would result in a full-fledged trial? In the majority opinion, it was held as under: “105. …the object of the Act would be defeated if proceedings remain pending in the court even after commencing of the arbitration. It is precisely for this reason that I am inclined to the view that at the pre-reference stage contemplated by Section 45, G the court is required to take only a prima facie view for making the reference, leaving the parties to a full trial either before the Arbitral Tribunal or before the court at the post-award stage” 55.3. Pursuant to Shin Etsu(Supra), the 2019 Amendment to Section 45 states: “…unless it prima facie finds that the said H

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agreement is null and void, inoperative or incapable of being performed”. Thus, from the above discussion it is clear that Section 8 uses the word “validity” and Section 45 uses the phrase “null and void, inoperative or incapable of being performed”. In that sense, Section 11(6A) is a unique provision which is confined to the “existence” of the arbitration agreement and not its “validity”. The amended provision also does not find place in the UNCITRAL Model Law. Learned Amicus Curiae pointed to the definition of confine in P. Ramanatha Aiyar’s Advanced Law Lexicons47 which states: “imprison; hold in custody. To keep within circumscribing limits”.

56. On reading the language in Section 11(6A) with Section 5 of the Arbitration Act 1996, and an interpretation based on legislative intent, it is apparent that the scope under Section 11(6A) is very narrow. iii) Post- 2019 Amendment and the Report of the High-Level Committee to Review the Institutionalisation of Arbitration Mechanism in India. D

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A 58. Insertion of Section 6(B) by Act 3 of 2016 which is yet to notified reads as under: “(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.]” [emphasis supplied] Even though the amendments are not notified yet and there is limited clarity on the process, we may take a cue about the intention of the legislature which seems to be to ensure minimal judicial intervention at the pre-referral stage of appointment of arbitrator.

59. It would be apposite to refer now to the prevalent position amongst the most-preferred arbitral institutions i.e. the International Chamber of Commerce Court (ICC Court), the London Court of International Arbitration (LCIA), the Hong Kong International D Arbitration Centre (HKIAC), the Singapore International Arbitration Centre (SIAC) and the Arbitration Institute of the Stockholm Chambers of Commerce (SCC) which were mentioned in the report of the High-level Committee and those can be broadly noted as under:-

1. ICC Arbitration Rules, 2021: E “Article 6. Effect of the Arbitration Agreement.— (4) In all cases referred to the Court under Article 6(3)…The arbitration shall proceed if and to the extent that the Court is prima facie satisfied that an arbitration agreement under the Rules may exist. F (5) In all matters decided by the Court under Article 6(4), any decision as to the jurisdiction of the arbitral tribunal, except as to parties or claims with respect to which the Court decides that the arbitration cannot proceed, shall then be taken by the arbitral tribunal itself.” G

2. HKIAC Arbitration Rules: “Article 11 – HKIAC’s Prima Facie Power to Proceed 11.1 The arbitration shall proceed if and to the extent that HKIAC is satisfied, prima facie, that an arbitration agreement H

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under these Procedures may exist. Any question as to the A jurisdiction of the arbitral tribunal shall be decided by the arbitral tribunal once constituted. 11.2 HKIAC’s decision pursuant to Article 11.1 is without prejudice to the admissibility or merits of any party’s pleas.”

3. LCIA Arbitration Rules: B

“Article 23. Jurisdiction and Authority 23.1 The Arbitral Tribunal shall have the power to rule upon its own jurisdiction and authority, including any objection to the initial or continuing existence, validity, effectiveness or scope of the Arbitration Agreement.”

4. SIAC International Arbitration Centre Rules, 2016: “Article 28. Jurisdiction of the Tribunal 28.1 If any party objects to the existence or validity of the arbitration agreement or to the competence of SIAC to administer an arbitration, before the Tribunal constituted, the Registrar shall determine if such objection shall be referred to the Court. If the Registrar so determines, the Court shall decide if it is prima facie satisfied that the arbitration shall proceed. The arbitration shall be terminated if the Court is not so satisfied. E Any decision by the Registrar or the Court that the arbitration shall proceed is without prejudice to the power of the Tribunal to rule on its own jurisdiction. 28.2 The Tribunal shall have the power to rule on its own jurisdiction, including any objections with respect to the existence, F validity or scope of the arbitration agreement. An arbitration agreement which forms part of a contract shall be treated as an agreement independent of the other terms of the contract.”

5. Arbitration Institute of SCC Rules: “Article 11. Decisions by the Board G

The Board takes decisions as provided under these Rules, including deciding: (i) whether the SCC manifestly lacks jurisdiction over the dispute pursuant to Article 12 (i); H

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A Article 12(i). Dismissal The Board shall dismiss a case, in whole or in part, if: (i) the SCC manifestly lacks jurisdiction over the dispute;…”

60. Thus, the approach of the reputed arbitral institutions worldwide B would show that there is express recognition of the principle of Kompetenz- Kompetenz and role of Courts is limited to preliminary prima facie examination. A reading of the above rules would also show that arbitral institutions have recognized the prima- facie test to determine the existence of the arbitration agreement. Discussing the rules of the major international arbitral institutions, William Park in an article titled C “Challenging Arbitral Jurisdiction: The Role of Institutional Rules” 49 writes: “ On occasion, however, arbitrations have been filed without even minimal indicia of consent to the arbitral process. No document seems to exist saying the respondent actually agreed to arbitrate with the claimant. In such instances, efficiency will be served by early consideration of a respondent’s argument that the case should not proceed. To this end, the ICC Rules permit the ICC Court to consider obvious jurisdictional defects, with arbitration going forward only to the extent the ICC Court is prima facie satisfied that an arbitration agreement may exist.”

61. Thus, the objective behind the prima-facie test while referring a party to arbitration, is to also ensure that a non-consenting party is not bound to the process of arbitration and the doctrine of party autonomy is upheld with minimal intervention of Courts.

F 62. Chandrachud J.(as he then was) in the concurring opinion in A. Ayyasamy vs A. Paramasivam & Ors 50 (for short “Ayyasamy”) noted, inter alia, that jurisprudence in India must strengthen institutional efficacy of arbitration with minimal intervention of Courts: “53. The Arbitration and Conciliation Act, 1996, should in my view G be interpreted so as to bring in line the principles underlying its interpretation in a manner that is consistent with prevailing approaches in the common law world. Jurisprudence in India must 49 Park, William. “Challenging Arbitral Jurisdiction: The Role of Institutional Rules”, Boston University School of Law, Public Law Research Paper (2015). 50 H (2016) 10 SCC 386

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evolve towards strengthening the institutional efficacy of A 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] B

63. It upheld the one-stop arbitration principle propounded by the House of Lords in Fiona Trust and Holding Corporation v. Privalov 51. “46. In Fiona Trust and Holding Corpn. v. Privalov [Fiona Trust and Holding Corpn. v. Privalov, (2007) 1 All ER (Comm) C 891 : 2007 Bus LR 686 (CA)] , the Court of Appeal emphasised the need to make a fresh start in imparting business efficacy to arbitral agreements. The Court of Appeal held that : (Bus LR pp. 695 H-696 B & F, paras 17 & 19) “17. … For our part we consider that the time has now come for a line of some sort to be drawn and a fresh start made at any rate for cases arising in an international commercial context. Ordinary businessmen would be surprised at the nice distinctions drawn in the cases and the time taken up by argument in debating whether a particular case falls within one set of words or another very similar set of words. If businessmen go to the trouble of agreeing that their disputes be heard in the courts of a particular country or by a tribunal of their choice they do not expect (at any rate when they are making the contract in the first place) that time and expense will be taken in lengthy argument about the nature of particular causes of action and whether any particular cause of action comes within the meaning of the particular phrase they have chosen in their arbitration clause. If any businessman did want to exclude disputes about the validity of a contrAct, it would be comparatively simple to say so. G ***

19. One of the reasons given in the cases for a liberal construction of an arbitration clause is the presumption in favour

51 (2007) 1 All ER(Comm) 891(Paras 17-18) H

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A of one-stop arbitration. It is not to be expected that any commercial man would knowingly create a system which required that the court should first decide whether the contract should be rectified or avoided or rescinded (as the case might be) and then, if the contract is held to be valid, required the arbitrator to resolve the issues that have arisen. This is indeed B a powerful reason for a liberal construction.” Arbitration must provide a one-stop forum for resolution of disputes. The Court of Appeal held that if arbitrators can decide whether a contract is void for initial illegality, there is no reason why they should not decide whether a contract is procured by bribery, just as much as they can decide whether a contract has been vitiated by misrepresentation or non- disclosure. [Emphasis supplied]

64. Thus, the one-stop arbitration approach would ensure that all issues on initial illegality or whether a contract is void can be decided by the arbitral institutions subject, of course, to the ultimate supervisory jurisdiction of the Courts. An arbitral award can be set aside by Courts as per the legislative mandate in Section 34 of the Arbitration Act,

1996. This would prevent multiplicity of proceedings in Courts and tribunals and ensure minimal judicial intervention. E H. Discussion on SMS Tea:

65. Having broadly discussed the legislative scheme of the Stamp Act, 1899 and the Arbitration Act, 1996, let us now examine the correctness of the decisions referred to in NN Global(supra).

F 66. The judicial position on the enforceability of an arbitration agreement contained in an unstamped or insufficiently stamped agreement can be traced from this Court’s 2011 decision in SMS Tea (supra). The facts of the case were that the appellant was granted lease of two tea estates for a term of 30 years. The leases deed contained an arbitration clause. On abrupt eviction by the respondent from the tea estates, the G appellant filed an application under Section 11 of the Arbitration Act, 1996 for the appointment of arbitrator. The learned Chief Justice of Guwahati High Court dismissed the Section 11 application and held that the lease deed was compulsorily registrable under Section 17 of the Registration Act, 1908 and Section 106 of the Transfer of Property H Act, 1882 ; and as the lease deed was not registered, even the arbitration

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clause would be rendered invalid. The matter reached this Court where one of the questions was whether an arbitration agreement in an unregistered instrument which is not duly stamped, is valid and enforceable. It was observed that the arbitration agreement in an unstamped or insufficiently stamped instrument is invalid, given that Section 35 of the Stamp Act, 1899 expressly bars the authority before which such unstamped or insufficiently stamped instrument is presented to act on such an instrument. At this stage, it is important to keep in mind that decision in SMS (supra)came at a time when SBP (supra) and Boghara Polyfab (supra) continued to hold the field i.e. prior to the insertion of Section 11(6A) to the Act. Thus, even at the Section 11 stage, under the law which existed before the 2015 Amendment, the C Court had wide powers and could also conduct detailed adjudication. Even though this Court in SMS Tea(supra) succinctly recognized the doctrine of separability in the context of Registration Act, 1908, it held that strict and mandatory provisions of the Stamp Act, 1899 on non- payment of Stamp duty could not be read harmoniously with the relevant D provisions of the Arbitration Act, 1996. It was held as under: “22.1. 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. E 22.2. If the document is found to be not duly stamped, Section 35 of the Stamp Act bars the said document being acted upon. Consequently, even the arbitration clause therein cannot be acted upon. The court should then proceed to impound the document under Section 33 of the Stamp Act and follow the procedure under Sections 35 and 38 of the Stamp Act.” F

67. The judgment in SMS Tea(supra) has been upheld in Naina Thakkar(supra) and Black Pearl Hotels v Planet M. Retail Ltd.52 (for short “Black Pearl Hotels”). It has also been cited with approval in a recent judgement by 3 judges of this Court in Dharmaratnakara (supra). As noted earlier, the Court in Garware (supra) also followed SMS Tea G (supra) which has been cited with approval in Vidya Drolia (supra). This legal proposition is doubted by this Court in NN Global (supra) and referred to us.

52 (2017) 4 SCC 498 H