Gauhati High Court
M/S Hills Trade Agencies & Anr vs M/S Hills Trade Agencies & Anr on 27 July, 2017
Author: Arup Kumar Goswami
Bench: Arup Kumar Goswami
1
IN THE GAUHATI HIGH COURT
(THE HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Arbitration Petition No. 9/2013
1. M/s Hills Trade Agencies
A registered partnership firm having its head office at 407, 4th Floor,
P.B. Complex, A.T. Road, Guwahati-781001, Assam,
Represented by its partner Shri Ranbir Singh Gandhi.
2. Shri Ranbir Singh Gandhi
S/o Late Shri Kartar Singh Gandhi, Aged: 62 years,
Resident of 407, PB Complex, A.T. Road,
Guwahati-781001.
- Petitioners
-Versus-
Karbi Anglong Autonomous Council,
Diphu, Assam,
Represented by its Principal Secretary, Diphu.
- Respondent
For the petitioners : Mr. D. K. Mishra, Senior Advocate,
Mr. K. Goswami, Advocate,
For respondent : Mr. J. Chutia, SC, KAAC
Dates of hearing : 17.07.2017 and 27.07.2017
Date of judgment and order : 27.07.2017
BEFORE
HON'BLE MR. JUSTICE ARUP KUMAR GOSWAMI
JUDGEMENT AND ORDER
(ORAL)
Heard Mr. D. K. Mishra, learned Senior counsel, assisted by Mr. K. Goswami, learned counsel, appearing for the petitioners. Also heard Mr. J. Chutia along with Mr. R. M. Das, learned Standing counsel, Karbi Anglong Autonomous Council, appearing for the respondent.
2. By this application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short, "1996 Act"), the petitioner has prayed for appointment of an Arbitrator for resolution of disputes which had arisen between the petitioners and the Karbi Anglong autonomous Council (for short, "Council").
3. An agreement dated 02.11.2011 was entered into by and between the Council, represented by its Principal Secretary, and the petitioner No. 1, which is a registered partnership firm. The petitioner No. 2 is a partner of petitioner No. 1. By the aforesaid Arbitration Petition N o. 9/ 2013 2 agreement, the Council had agreed, amongst others, to fell, extract, cut and stack raw- materials (bamboo) and to supply the same from the operating area to the petitioner No. 1, and the petitioner No. 1 had agreed to buy the raw-materials and to transport the same from the operating areas to the factories to be set up under the provisions of the agreement. In consideration of supply of raw-material to be utilized by the petitioner No. 1, the petitioner No. 1 was required to pay to the Council an amount of Rs. 310/- per Metric tonne as royalty. The agreement was to be valid for a period of twenty years from the date of operation of the new working plan of bamboo of Karbi Anglong District, which is to be approved by the Ministry of Environment and Forest, Government of India. The period for which bamboo working plain remains unapproved for any year, will be included in the aforesaid period of twenty years and the petitioner No. 1 will not be entitled to receive any supply of bamboo from the Council for the period during which the working plan is not in force. The royalty was to be increased at the rate of 5% after the end of each year during the tenure of the agreement.
4. Clause 11 of the said agreement provides for dispute resolution and arbitration. It will be appropriate to extract herein-below Clause 11.1 and 11.2 of the agreement for a ready reference:
"11.1 In the event of any dispute, controversy or claim arising out of relating to this Agreement including without limitation, the breach, termination, performance, validity or invalidity or liabilities or application of this agreement or as to the rights, duties or liabilities of the parties hereunder (each, a "Dispute"), each party will appoint a representative to endeavour and amicably resolve such dispute. The representative shall be appointed within a period 30 (Thirty) days from the date of occurrence of the dispute. The parties shall endeavour to resolve such disputes through amicable discussions within 90 (Ninety) days from the date of appointment of the last of the representative or within such extended period as may be mutually agreed to between the parties to the dispute. 11.2 Any dispute which is not settled pursuant to the internal dispute resolution procedure or in case any party is unsatisfied by the result of the internal dispute resolution as set forth above, such dispute shall be settled by final and binding arbitration through an Arbitral Tribunal to be appointed by the Hon'ble Gauhati High Court in accordance with the provisions of the Arbitration and Conciliation Act, 1996."
5. A perusal of Clause 11.1 would go to show that in the event of there being any dispute, controversy or claim arising out of the agreement in question, each party is Arbitration Petition N o. 9/ 2013 3 required to appoint a representative to endeavour and amicably resolve such dispute. The representatives are to be appointed within a period of thirty days from the date of occurrence of the dispute. The parties should endeavour to resolve such dispute through amicable discussions within ninety days from the date of appointment of the last of the representatives, or within such extended period as may be mutually agreed upon by the parties. Clause 11.2 provides that any dispute which is not settled pursuant to the internal dispute resolution mechanism or in case any party is not satisfied with the result of the internal dispute resolution, such dispute shall be settled by arbitration through an Arbitral Tribunal to be appointed by this Court in terms of the provisions of the 1996 Act.
6. In view of emergence of certain disputes occasioned by the issuance of a notification dated 03.07.2012, issued by the Principal Secretary of the Council terminating the agreement dated 02.11.2011, the petitioner No. 1, by its letter dated 09.08.2012, appointed a representative to amicably settle the dispute. Request was made to the Council to appoint its representative in order to make an endeavour to settle the dispute amicably in terms of the agreement. The Council having not appointed a representative, thereby scuttling the offer for an amicable settlement of the dispute, the petitioner has approached this court by filing this instant application.
7. The Council had filed an affidavit on 28.02.2014 contending that the Principal Secretary of the Council had entered into the agreement, in question, without approval of the Executive Committee of the Council and, therefore, the Executive Committee, in its meeting held on 03.07.2012, nullified the agreement dated 02.11.2011. It is also pleaded that the agreement dated 02.11.2011 was not registered and, thus, it violated Section 17 of the Indian Registration Act, 1908 (for short, "Registration Act"). It is also pleaded that the agreement was executed without there being any new working plan for operation of bamboo and that an approved working plan is a condition precedent for felling of bamboo and that as the agreement was cancelled by the Executive Committee of the Council, the question of appointing an Arbitrator does not arise.
8. An additional affidavit was filed by the Principal Secretary of the Council, wherein a further plea is taken that the agreement dated 02.11.2011 was not only an unregistered agreement but the same was also not stamped in accordance with provisions of the Indian Stamp Act, 1899 (for short, "Stamp Act") and, thus, the same being an inadmissible document, cannot be acted upon and, therefore, the arbitration clause embodied in the agreement, necessarily, can also not be pressed into service.
Arbitration Petition N o. 9/ 2013 4
9. Mr. D. K. Mishra, learned Senior counsel appearing for the petitioners has submitted that the pleas taken by the Council in the affidavit and the additional affidavit to oppose this application for appointment of an Arbitrator are having no substance and are devoid of any merit. Placing reliance on Section 16 of the 1996 Act, Mr. Mishra submits that an arbitration clause, which forms part of the contract, shall be treated as an agreement independent of the other terms of the agreement and that even if a decision is taken by the Arbitral Tribunal that the contract is nullified, it shall not entail ipso jure the validity of the arbitration clause. He submits that the reliance placed by the respondent on Section 17 of the Registration Act is absolutely misconceived inasmuch as the agreement dated 02.11.2011 is not a document which falls within the ambit of Section 17 of the Registration Act requiring compulsory registration. He has emphasized that the document in question is not a lease agreement. Placing reliance on Section 7 of the Indian Stamp (Assam Amendment) Act, 2004 (for short, "Stamp (Assam) Act"), learned Senior counsel has submitted that, in fact, the document was executed by paying excess Stamp Duty inasmuch for the kind of agreement that was entered into in the present case, the Stamp Duty payable was Rs. 10/- and yet the agreement was executed on Stamp paper of Rs. 100/-. He has submitted that this Court ought to appoint an Arbitrator to adjudicate the dispute between the parties leaving the question, as to whether the agreement dated 02.11.2011 is void on account of the plea taken that the Principal Secretary of the Council was not authorized to enter into the aforesaid agreement, to be decided by the Arbitrator, as determination of such question will require leading of evidence. In support of his submissions, learned Senior counsel has placed reliance on the judgements of the Supreme Court in the cases of SBP & Co. vs. Patel Engineering Ltd. and Another, reported in (2005) 8 SCC 618, Today Homes and Infrastructure Private Limited vs. Ludhiana Improvement Trust and Another, reported in (2014) 5 SCC 68, Reva Electric Car Company Private Limited vs. Green Mobil, reported in (2012) 2 SCC 93 and Swiss Timings Limited vs. Commonwealth Games 2010 Organizing Committee, reported in (2014) 6 SCC 677,
10. Mr. J. Chutia, learned counsel appearing for the Council, abiding by the stand taken in the affidavit and the additional affidavit, has submitted that with the nullifying of the agreement dated 02.11.2011, the arbitration clause would become non-existent and, therefore, the question of appointment of Arbitrator, on the strength of the said agreement, does not arise. He has emphasized that the Principal Secretary of the Council had no authority to enter into the agreement in question on his own and, therefore, the Executive Committee of the Council had nullified the agreement. Placing reliance on Clause 2.1 of the agreement dated 02.11.2011, under the heading "Land Allotment and Arbitration Petition N o. 9/ 2013 5 Setting up of Factories", he contends that the petitioner No. 1 was enjoined to set up three bamboo splitting/chipping units in Karbi Anglong District to effectuate the agreement and, for the said purpose, the petitioner No. 1 was required to apply to the concerned authority of the Council for allocation of 50 to 100 Bighas of land for each factory, at different sites and, therefore, in view of the said clause, the agreement partakes the character of a lease document, which is required to be compulsorily registered under Section 17 of the Registration Act and as the document was not registered, the same is not an admissible document. Mr. Chutia has also placed reliance on Item No. 23 of the Stamp Act.
11. In support of his arguments, Mr. Chutia has relied upon paragraph 16 of the judgement rendered by the Supreme Court in the case of SMS Tea Estates Private Limited vs. Chandmari Tea Company Private Limited, reported in (2011) 14 SCC 66.
12. I have considered the submissions of the learned counsel for the parties and have perused the materials on record.
13. What is the nature of the power of Chief Justice of a High Court or his designate under Section 11 of the Act of 1996 was considered by a Seven Judges' Bench in SBP & Co. (supra). The Supreme Court had held that while deciding such application, the Chief Justice of a High Court or his designate has to decide his own jurisdiction to entertain the request in the sense whether the party making the motion had approached the right High Court, whether there is a valid arbitration agreement as defined in the Act of 1996, and whether the person, who had made the request before him, is a party to such agreement. It was also held by the Supreme Court that the Chief Justice or his designate can also decide as to whether a claim is a dead one or whether a long-barred claim is sought to be resurrected and whether the parties had concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection.
14. Bearing in mind the considerations that have to engage the attention of the Court, let me deal with the contentions of the learned counsel for the parties.
15. The first question that has arisen for consideration is whether, with the nullifying of the agreement dated 02.11.2011 by the Executive Committee of the Council, the arbitration clause, at Clause 11 thereof, survives, requiring the Court to consider this application for appointment of an Arbitrator?
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16. Section 16(1) of the Act of 1996 is relevant in the aforesaid context and, therefore, it is considered appropriate to extract Section 16(1) for a better appreciation, which is as follows:
"16. Competence of arbitral tribunal to rule on its jurisdiction.--(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,--
(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause."
17. By Section 16 (1) of the 1996 Act, the Legislature makes it clear that while considering any objection with respect to the existence or validity of the arbitration agreement, the arbitration clause which formed part of the contract, has to be treated as an agreement independent of other terms of the contract. Section 16(1)(b) makes it clear that even if the Arbitral Tribunal concludes that the contract is null and void, as a matter of law, it will not bring about automatic invalidation of the arbitration clause.
18. In Reva Electric Car Company Private Limited (supra), the Supreme Court had laid down that Section 16(1) presumes the existence of a valid arbitration clause and mandates the same to be treated as an agreement independent of the other terms of the contract. The Supreme Court further held that by virtue of Section 16(1)(b), the arbitration clause continues to be enforceable notwithstanding a declaration of the contract being null and void. Accordingly, it was held that in view of the provisions contained in Section 16(1) of the 1996 Act, an arbitration clause would not cease to exist with the termination of the contract agreement.
19. Same view was taken in Today Homes and Infrastructure Private Limited (supra), wherein the Supreme Court observed that by virtue of section 16(1)(b) of the 1996 Act, an arbitration clause continues to be enforceable notwithstanding a declaration that the contract was null and void.
20. In Swiss Timings Limited (supra), the Supreme Court had held that having provided for resolution of disputes through arbitration, the parties cannot be permitted to avoid arbitration, without satisfying the Court that it will be just and in the interest of the parties not to proceed with the arbitration. It was further held that a conjoint reading of Section 5 and 16 of the 1996 Act would demonstrate that all matters, including the issue Arbitration Petition N o. 9/ 2013 7 as to whether the main contract was void/voidable, can be referred to arbitration as, otherwise, it would be a handy tool available to the unscrupulous parties to avoid arbitration by raising the bogey of the underlying contract being void. It was further held that the Court ought to decline reference to arbitration only when the Court reaches a conclusion that the contract is void on a meaningful reading of the contract document itself without requiring any further proof.
21. Therefore, the plea raised by Mr. Chutia that the arbitration clause ceases to exist with the nullifying of the agreement dated 02.11.2011 by the Executive Committee of the Council is without any merit and, as such, the same is rejected.
22. So far as the plea taken with regard to the inadmissibility of the document on the ground of the agreement being not a registered document is concerned, it is to be noted that Registration Act does not require that all documents are to be compulsorily registered. The documents which are required to be compulsorily registered are mentioned in Section 17 of the Registration Act. Pressing into service Clause 2 of the agreement in question, a faint attempt was made by Mr. Chutia to contend that as the Council will have to allocate land to the petitioner No. 1 for the purpose of setting up three bamboo splitting/chipping units, the agreement had taken the colour of a lease agreement, which requires compulsory registration under Section 17 of the Registration Act.
23. The argument of Mr. Chutia is noted only to be rejected as Clause 2, in very specific terms, refers to a future event, namely, that the petitioner No. 1 shall have to apply for allocation of land in future. Therefore, the agreement cannot be construed to be a lease agreement.
24. Reliance placed by Mr. Chutia on Item No. 23 of the Stamp Act is also misplaced. Item No. 23 deals with conveyance and stamp duty will vary depending on the value of consideration for such conveyance. In the instant case, there is no conveyance of any property with specific value and, therefore, I am inclined to agree with the submission of Mr. Mishra that description of the instrument would be in terms of Item No. 5 of the Stamp (Assam) Act. Item No. 5 is on the subject an agreement or a memorandum of agreement. As the agreement in question is not a document, as indicated in clause (a),
(b), (c) or (d) of Item No. 5, clause (e), which is applicable for agreements, etc. not covered under clause (a), (b), (c) and (d) thereof, will get attracted. In respect of such a document, as per clause (e), the stamp duty payable is Rs. 10/-.
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25. In SMS Tea Estates Private Limited (supra), the Supreme Court had held that an arbitration agreement in not compulsorily registerable under the Registration Act and having regard to the proviso to Section 49 of the Registration Act read with Section 16(1)(a) of the Act of 1996, it was further held that an arbitration clause in an unregistered but compulsorily registerable document can be acted upon and enforced by an Arbitral Tribunal for resolution of disputes. It was also held in the said case that a Court cannot act upon a document which is not properly stamped and in case the Court comes to a conclusion that the document is not properly stamped, it would be impounded and dealt with in the manner specified in Section 38 of the Stamp Act.
26. It has already been discussed that, in the instant case, it is found that the document in question had been properly stamped.
27. In view of the above discussions, I am of the considered opinion that this application deserves to be allowed.
28. Accordingly, Hon'ble Mr. Brojendra Prasad Katakey, a retired Judge of this Court, with address at House No. 30, Kharghuli Road, 2nd Bye Lane (Left), Opposite Sitala Enclave, Guwahati-781004, is appointed as the Arbitrator.
29. The Court makes it clear that it will be open for the Council to raise the question of validity of the agreement dated 01.11.2011 before the Arbitrator.
30. Registry will forward a copy of this order to Hon'ble Mr. Justice Brojendra Prasad Katakey (Retired).
31. Arbitration petition stands allowed and disposed of.
JUDGE RK Arbitration Petition N o. 9/ 2013 9 Arbitration Petition N o. 9/ 2013