Summary
In this 2019 decision, the Supreme Court held that the Section 11 appointment court had to impound an unstamped subcontract containing an arbitration clause before acting on it. The 2015 amendment restricting scrutiny to existence of an arbitration agreement did not displace mandatory stamp-law requirements. The arbitrator’s appointment was set aside and the matter remitted, with a procedure intended to reconcile stamp adjudication and expeditious disposal of the appointment application.
Issues
- Whether Section 11(6A) displaced the duty to impound an unstamped agreement before appointing an arbitrator.
- Whether separability allowed the arbitration clause to be acted upon despite the stamping defect.
- How stamp adjudication and speedy appointment were to be reconciled.
Provisions considered
- Section 11(6A), Arbitration and Conciliation Act, 1996The Court held that scrutiny of legal existence did not override the mandatory stamping requirements governing the instrument containing the arbitration clause. (¶¶ 7, 13–19, 24)
- Sections 33 and 34, Maharashtra Stamp Act, 1958The unstamped instrument had to be impounded and stamp duty and applicable penalty paid before it could be acted upon. (¶¶ 8, 16, 26–28)
- Section 11(13), Arbitration and Conciliation Act, 1996The expedition requirement was harmonised with stamp adjudication through a preferred forty-five-day adjudication period and prompt resumption of the appointment proceedings. (¶¶ 7, 26–27)
Held
- The 2015 amendment addressed the wider preliminary inquiries permitted by earlier appointment decisions. It did not remove the basis of SMS Tea Estates concerning mandatory stamp law, which the Court held continued to govern. (¶ 13–16)
- Unlike the treatment of an unregistered document for a collateral purpose, stamp law applied to the instrument as a whole. The Court declined to detach the embedded arbitration clause to avoid that bar, holding legal existence unavailable until stamping was cured. (¶¶ 14–19, 24)
- The appointment court was to impound the instrument and send it to the stamp authority for expeditious determination, preferably within forty-five days of receipt. After duty and applicable penalty were paid, a party could return it to the High Court for prompt disposal of the Section 11 application. (¶ 26–27)
- The argument that the party responsible for stamp payment should not benefit from its own omission did not displace mandatory law. Contrary cited High Court rulings were disapproved or overruled to the extent stated, including the contrary Section 11 answer in Gautam Landscapes. (¶¶ 25, 28)
Result
Appeal allowed. Bombay High Court appointment judgment set aside and matter remitted for disposal in accordance with the impounding and stamp-payment procedure laid down in this judgment.