Summary
Weatherford sought appointment of a sole arbitrator under Section 11(6) for disputes under three oilfield services agreements with identical arbitration clauses, after Baker Hughes terminated them. Baker Hughes objected that two agreements were unstamped under the Maharashtra Stamp Act, duty determination being pending before the Collector, and that the effect of non-stamping had been referred to a Constitution Bench in N.N. Global. The Supreme Court allowed the petitions. Under N.N. Global an arbitration agreement is separable and nothing bars its enforcement pending stamp duty on the main contract; following Intercontinental Hotels, pre-appointment matters cannot be left hanging until the larger bench rules. The clauses were undisputed and Baker Hughes had itself proposed a consolidated sole-arbitrator reference, so a former Bombay High Court judge was appointed.
Issues
- Whether petitions under Section 11(6) for appointing an arbitrator should be entertained where two of the underlying agreements are unstamped and the effect of non-stamping on arbitration agreements is pending before a Constitution Bench.
Provisions considered
- Section 11(6) read with Section 11(12)(a), Arbitration and Conciliation Act, 1996The Court appointed a sole arbitrator for the consolidated disputes, given the undisputed arbitration clauses and failure of the parties to agree on an arbitrator. (¶¶ 1, 16, 17)
- Section 16(1), Arbitration and Conciliation Act, 1996The arbitral tribunal may rule on its own jurisdiction, including the existence or validity of the arbitration agreement, which is treated as independent of the main contract. (¶¶ 7, 8, 9)
- Stamp duty on the agreements, Maharashtra Stamp Act, 1958Non-payment of stamp duty on the substantive contract, pending determination by the Collector, does not bar enforcement of the arbitration agreement at the pre-appointment stage. (¶¶ 3, 10, 16)
Held
- By the doctrines of separability and kompetenz-kompetenz, an arbitration agreement is distinct from the main contract and is not rendered non-existent or unenforceable merely because the main contract is unstamped. (¶¶ 9, 10)
- Though the issue is pending before a Constitution Bench, pre-appointment matters cannot be left hanging in view of the time-sensitivity of arbitration, and arbitrations should proceed unless the issue patently shows deadwood. (¶¶ 13, 16)
- Since the arbitration clauses were undisputed and the respondent had itself proposed consolidating the disputes before a sole arbitrator, it could not resist the petitions on the ground that stamp duty determination was pending. (¶¶ 14, 15, 16)
Result
Petitions allowed; the disputes under the three agreements consolidated into a single arbitration and Mr. Suresh C. Gupte, former Judge of the Bombay High Court, appointed sole arbitrator, other terms to follow clause 23 of the agreements.