Calcutta High Court
Usha Martin Limited vs Al Sifah Minirals Private Limited on 1 October, 2024
Author: Sabyasachi Bhattacharyya
Bench: Sabyasachi Bhattacharyya
OCD-6
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
(Commercial Division)
AP-COM/809/2024
USHA MARTIN LIMITED
VS
AL SIFAH MINIRALS PRIVATE LIMITED
BEFORE:
The Hon'ble JUSTICE SABYASACHI BHATTACHARYYA
Date : 1st October , 2024
Appearance:
Mr. Chayan Gupta, Adv.
Mr. Souvik Kundu, Adv.
...for the petitioner
Mr. Ratul Das, Adv.
Mr. Chunky Agarwal, Adv.
Mr. Ram Maroo, Adv.
...for the respondent
The Court:- The present application has been filed under Section 9 of the Arbitration and Conciliation Act 1996. Learned counsel for the petitioner contends that initially the respondent, which is also the respondent in the arbitral proceeding, appeared before the arbitral tribunal. However, the respondent thereafter chose not to appear for a considerable period, after which such appearance was again resumed. In the meantime, the petitioner had applied for an interim award, which was granted by the arbitral tribunal. However, the respondent, thereafter, again started appearing in the arbitral proceeding and has taken out two applications, one under Section 16 of the 2 1996 Act challenging the competence of the arbitral tribunal to take up the arbitral proceeding and the second, urging that the agreement containing the arbitration clause is required to be impounded.
Learned counsel for the petitioner submits that in view of the pendency of the two applications, the remedy under Section 17 of the 1996 Act has been rendered illusory and inefficacious, since Section 16(5) of the 1996 Act mandates that the arbitral tribunal has to make a decision first rejecting the plea of competence before continuing with the arbitral proceedings.
Inasmuch as the challenge as to impoundment is concerned, it is argued that since the same goes to the root of the issue and the arbitral proceeding, it is rather obvious that unless the said issue is decided by the arbitral tribunal, an application of the petitioner under Section 17, even if filed, could not have been taken up.
Hence, it is submitted that the bar under Section 9(3) of the 1996 Act is not applicable in the present case.
Insofar as the objection taken by the respondent regarding the document in question being insufficiently stamped, learned counsel for the petitioner argues that the said objection is premised on Article 43 of Schedule IA of the Stamp Act (as amended in West Bengal).
However, it is contended that the present arbitral proceeding arises out of an agreement by which the respondent is to lift SMS slag. The agreement, it is argued, is a principal-to-principal contract and not one between a principal and an agent/broker. Hence, Article 43 does not apply at all. 3
It is next contended that even Article 5 of Schedule IA is not applicable in the present case. It is submitted by the learned counsel that the Exemption to Article 5, under Clause (a) thereof, pertains to agreements or memoranda of agreement for or relating to the sale of goods or merchandise exclusively, not being a note or memorandum chargeable under Serial no. 43 (Article 43). Since it has already been established that the document in question containing the arbitration clause does not come under Serial no. 43, but the same is one for sale of goods/ merchandise, the said agreement comes within the exemption clause of Article 5 and, as such, is not chargeable by stamp duty.
Learned counsel for the petitioner cites a judgment reported at (2024) 6 SCC 1 in support of his contention that an arbitration agreement is not chargeable by stamp duty. The ratio, in particular in paragraph 188 of the said judgment, is that as the Stamp Act preceded in time the Arbitration and Conciliation Act, 1996 and as the latter statute is a special statute governing arbitrations, the 1996 Act prevails over the Stamp Act. In view of neither Section 7 of the 1996 Act nor any other provision mandating that an arbitration agreement is required to be stamped, there cannot be levied any stamp duty on such an agreement.
The Supreme Court, as also argued by the counsel for the petitioner, also proceeded on the premise of the definition of an arbitration agreement in Section 7 of the 1996 Act which is not confined to a written agreement signed by the parties but also expands to exchange of letters, telex, telegrams or other means 4 of telecommunication including electronic media which provide a record of the agreement and also pertain to 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, none of which are required to be stamped.
Learned counsel for the petitioner also places reliance on Sepco Electric Power Construction Corporation vs. Power Mech Projects Ltd. reported at (2022) SCC online SC 1243 to argue that relief can be granted in a post arbitral award under Section 9 application as well, since the charter of the Court under Section 9 stretches from before the arbitral proceeding till the arbitral award is enforced.
Learned counsel for the respondent contends that although the interim award was passed as long back as on February 13, 2024, the present application under Section 9 has been filed only on August 29, 2024, without there being any explanation whatsoever for the prolonged delay in filing the same. It is contended that delay defeats equity and, as such, the relief sought by the petitioner ought to be turned down.
Learned counsel for the respondent next argues that the present application is categorically barred under Section 9(3) of the 1996 Act.
It is contended that there are judgments of different High Courts which deal with similar aspects.
One such judgment, delivered by a learned Single Judge of the Chhattisgarh High Court, in the matter of Shivam Infrastructure vs. South East Central Railway (SECR) and Ors. reported at MANU/CG/0280/2017, holds that if no action is taken by the petitioner before the arbitral tribunal in seeking reliefs 5 akin to those claimed in the Section 9 application, it cannot be urged that the remedy before the tribunal under section 17 would not be efficacious, to justify a breach of Section 9(3) of the 1996 Act.
Learned counsel also cites a judgment of this Court where it was held, inter alia, that the last limb of Sub-Section (3) of Section 9 of the 1996 Act does not pertain to the jurisdiction of the arbitral tribunal but contemplates situations where, beyond the control of the parties or the tribunal, the tribunal is not in a position to exercise its jurisdiction, such as, when due to illness or some other inability of the named Arbitrator(s) forming the tribunal, the tribunal cannot commence or cannot continue with the arbitration for the time being.
Learned counsel for the respondent next cites Arcelor Mittal Nippon Steel India Limited vs. Essar Bulk Terminal Limited, reported at (2022) 1 SCC 712 as well as a Division Bench judgment of this Court in the matter of STA-CC reported at MANU/WB/0675/2024 in support of his contention that Section 9(3) of the 1996 Act debars the Court from even entertaining an application under Section 9 of the 1996 Act.
In the above narrative, I have omitted to refer to one of the judgments cited by the petitioner on the issue of principal-to-principal agreements.
Learned counsel for the petitioner also cites The Superintendent of Stamps vs. Ramkrishnalal Dahyabhai reported at AIR 1947 Bom 343, where a Full Bench of the Bombay High Court, in dealing with a similar contract, held that the contract comes within the ambit of a principal-to-principal contract and is not covered by Article 43 of the Stamp Act.
6
Upon a careful perusal of the materials on record and hearing learned counsel for the parties, this Court arrives at the following conclusions:
Insofar as the 'stampability' of the arbitration clause in the instant case is concerned, which is also one of the probable defenses to the present application under Section 9 even independent of the self-same objection urged before the tribunal, the Court has to look at Articles 43 and 5 of Schedule IA of the Stamp Act (as amended in West Bengal) in proper perspective.
Learned counsel for the petitioner is justified, as also substantiated by the Full Bench judgment of the Bombay High Court in The Superintendent of Stamps (supra), that the tenor of the agreement containing the arbitral clause in the present case clearly shows that the same is a principal-to-principal contract and not one between a principal and an agent; as such, it is excluded from the purview of Article 43 of Schedule IA. In fact, Article 5 is also not applicable for the reasons as argued by learned counsel for the petitioner, it being that it is exempted under Exemption (a) of Article 5.
Thus, prima facie, this Court is of the opinion that the objection that the agreement containing the arbitration clause is insufficiently stamped cannot be a deterrent at this stage for the Section 9 Court to entertain the matter.
Even otherwise, the judgments cited by the petitioner sufficiently go on to substantiate that an arbitration agreement/clause per se is not required to be stamped. Such view is strengthened by the judgment of the Supreme Court reported at (2024) 6 SCC 1.
7
Insofar as the next objection is concerned, a point arises as to whether the delay in making the present application from the date of passing of the interim award is fatal to the present application.
The cause of action of an application for interim relief under Section 9 or, for that matter, under Section 17 of the 1996 Act is to be elicited from the pleadings made therein. Cause of action can only arise when a legal right of a party is infringed by the other. In the present case, going by the averments made in the Section 9 application, which are to be taken as sacrosanct at the prima facie stage in the absence of any controversy by written objection at this premature stage, go on to show that in paragraph 27 thereof, the petitioner has alleged that it has come to learn that the respondent is (in the present tense) in the process of removing of or disposing of its assets and properties with a view to defraud its creditors and also to render the interim award infructuous.
The Court has to proceed on the said premise alone at this juncture, till the same is controverted by a written objection/affidavit-in-opposition.
As such, on the face of the application, the same is not marred by any inordinate delay, so as to defeat equity.
The last but not the least, rather the most cardinal issue, is whether sub- Section (3) of Section 9 of the 1996 Act operates as a bar in the present case.
In the judgment cited by the respondent, I do not find anything to hold in favour of the respondent on such count. Insofar as Arcelor Mittal and STA-CC (JV) are concerned, those deal with general situations where Section 9(3) is 8 applicable. The law has been elucidated in the said judgments. However, in none of the judgments facts similar to the present case transpired.
Insofar as the judgment in Shivam Infrastructure is concerned, the Chhattisgarh High Court went on to observe that if the petitioner does not file an application seeking similar reliefs as the Section 9 application before the Tribunal itself, its application under Section 9 ought not to be entertained due to the bar under Section 9(3). However, the facts of the present case are somewhat different from the said case. It is correct that the petitioner has not approached the arbitral tribunal with similar relief as sought herein, under Section 17 of the 1996 Act. However, the distinguishing feature is that the respondent has taken out two applications before the Tribunal which hit at the root of the jurisdiction of the arbitral tribunal.
Although this court has held in Tata Capital Limited (Supra) that jurisdiction cannot be a mitigating circumstance under Section 9(3) of the 1996 Act, the context of use of the expression "jurisdiction" was different in the said case than the present one. In the said case, an objection was taken as to the jurisdiction of the arbitral Court to take up the Section 9 application. Objection had been raised before the Section 9 Court itself as regards the tribunal having jurisdiction as well.
In the present case, however, it is not in issue that this Court does not have jurisdiction to take up the matter and/or that the tribunal did not otherwise have jurisdiction to take up the arbitral proceeding. The objection as to jurisdiction before the tribunal by way of an application under Section 16 of 9 the 1996 Act stems from the respondent's argument that although the parent agreement contains an arbitration clause, there were subsequent extensions, which do not contain any arbitration clause. Thus, the source of authority of the Tribunal, that is, the parent agreement is not in dispute as such.
That apart, here is a case where not merely an objection has been taken before this Court but an application has been filed under Section 16 of the 1996 Act before the Arbitral Tribunal, invoking the kompetenz kompetenz principle.
As rightly argued by the petitioner, Section 16 (5) of the 1996 Act is couched in such a language that the Arbitral Tribunal shall have to proceed to take up the arbitral proceeding only after adjudicating on the issue of jurisdiction. The exact language used in Section 16(5) is that the Arbitral Tribunal shall decide on a plea referred to in sub-Section (2) or sub-Section (3) and, where it takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award. In fact, the said provision has been directly borrowed from the UNCITRAL Model Law of Arbitration, of course, sans the attending provision of challenge at that stage itself which is incorporated in the Model Law. Hence, the very premise of vesting full power on the arbitral tribunal at the stage of the arbitral proceeding is that the arbitral tribunal has to decide such objection first, before continuing with the arbitral proceeding. The said provision itself creates an insurmountable impediment to the arbitral tribunal in proceeding with the arbitral proceeding, including any interlocutory applications, before deciding first the Section 16 application of the respondent. Hence, the inefficacious nature of the alternative remedy of Section 17 is 10 inherent in Section 16(5) of the 1996 Act itself, seen in conjunction with the fact of such an application having been actually filed by the respondent.
Although learned counsel for the respondent contends that the application regarding objection as to insufficient stamp has been heard by the arbitral tribunal and judgment has been reserved on the same, it is made clear that nothing in this order shall prejudice influence or prejudice the tribunal in deciding independently on such count. However, fact remains that the Section 16 application is still to be finally heard or decided by the arbitral tribunal.
In view of the above, I am of the opinion that the present case comes within the exemption under Section 19(3) of the 1996 Act inasmuch as the remedy available under Section 17 is not efficacious in the circumstances of the present case.
Insofar as the prima facie case of the petitioner is concerned, the petitioner is armed with an interim award, which has the force of a final award, which is staring at the face of the respondent.
Thus, since an adjudication has already been done by way of an interim award, it cannot be said that the respondent has any defence, unless the interim award is set aside or stayed by a competent forum. Here, however, no challenge under Section 34 has even been preferred as yet.
Another aspect of the matter ought to be touched before parting with it. A question inevitably came to the mind of the Court as to whether the present Section 9 application is being sought to be used as a substitute of enforcement under Section 36. However, the Court has been satisfied on such score by the 11 arguments of the petitioner to the effect that since the respondent itself takes a plea that no signed copy or copy of the award has been served on it by the arbitral tribunal, the time for filing a challenge against the same under Section 34 of the 1996 Act has not yet commenced. If so, an application under Section 36 may arguably be barred, since the time for filing a challenge under Section 34 is not yet exhausted, although such issue is still debatable.
Seen in the above context, the petitioner is entitled to an ad interim order as prayed for. Accordingly, the respondent shall remain restrained from operating its bank accounts except without setting apart a sum of Rs.1,07,83,568/- to secure the amount awarded in favour of the petitioner by the interim award. It is made clear, however, that nothing in this order shall prevent the respondent from operating its bank accounts after setting apart the sum as indicated above. This order shall continue till November 30, 2024 or until further order, whichever is earlier.
The respondent shall file its affidavit-in-opposition within November 14, 2024. Reply, if any, shall be filed by November 21, 2024. The matter shall be listed on November 25, 2024.
(SABYASACHI BHATTACHARYYA, J.) S.Bag/sp