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Delhi High Court

Alexis Global Pvt. Ltd. vs M/S Oma Living Pvt. Ltd. on 8 March, 2022

Author: Sanjeev Narula

Bench: Sanjeev Narula

                                             NEUTRAL CITATION NO: 2022/DHC/001068


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*       IN THE HIGH COURT OF DELHI AT NEW DELHI
                                                        Date of Decision: 08th March, 2022
+       ARB.P. 142/2022
        ALEXIS GLOBAL PVT. LTD.                                                     ..... Petitioner
                                        Through:      Mr. Rajnish Kumar Gaind, Advocate.

                                        versus

        M/S OMA LIVING PVT. LTD.                                                    ..... Respondent
                                        Through:      Mr. Vikas Mishra & Mr. Krishnadev
                                                      Yadav, Advocates.

        CORAM:
        HON'BLE MR. JUSTICE SANJEEV NARULA
                                        JUDGMENT

[VIA HYBRID MODE] SANJEEV NARULA, J. (Oral):

1. The present petition has been filed under Section 11 of the Arbitration and Conciliation Act, 1996 [hereinafter, 'the Act'], seeking appointment of a Sole Arbitrator for adjudication of disputes arising out of/ pertaining to a 'Service Agreement' dated 05th December, 2018 which contains an arbitration clause.

2. The Respondent does not dispute the existence of the arbitration agreement, but opposes the maintainability of the present petition, primarily on the ground that the Service Agreement is not sufficiently stamped as per the provisions of the Indian Stamp Act, 1899. In this regard, counsel for the Respondent submits that although, he is aware that this Court in IMZ ARB.P. 142/2022 Page 1 of 6 This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/001068 Corporate Pvt. Ltd. v. MSD Telematics,1 has taken a view contrary to the contention being urged by him, yet, reference of disputes to arbitration should be declined. He emphasises that while rendering decision in IMZ (Supra), the Court followed the judgment of Supreme Court in N. N. Global v. Indo Unique Flame,2 however, failed to notice that the judgment in N.N. Global (Supra) does not take into consideration an earlier view of the Supreme Court in Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram v. Bhaskar Raju & Bros.,3 wherein a three-judge bench, in unequivocal terms, upheld the dictum of law laid down in SMS Tea Estate v. Chandmari Tea Co. P. Ltd.4

3. The Court finds the above submissions to be devoid of merit. The holding of the judgment in N.N. Global (Supra) is clear and unequivocal in its overruling of the earlier judgment in SMS Tea Estate (Supra).

4. Pertinently, this Court has also been apprised of the recent judgement of the Supreme Court in Intercontinental Hotels Group (India) Pvt Ltd v. Waterline Hotels Pvt Ltd.,5 wherein while noticing that the bench in N. N. Global (Supra) had made reference to a larger Bench to settle the jurisprudence on this issue, expressed the following opinion which shall guide this court to decide the issue urged by the Respondent:

"22. Although we agree that there is a need to constitute a larger Bench to settle the jurisprudence, we are also cognizant of time-sensitivity when dealing with arbitration issues. All these matters are still at a pre-appointment stage, and we cannot leave them hanging until the larger Bench settles the issue. In view of the same, this Court - until the larger Bench decides on the interplay between Sections 11(6) and 16 - should ensure that arbitrations are 1 2021 SCC OnLine Del 3016.

(2021) 4 SCC 379.

(2020) 4 SCC 612 [See paragraphs no. 17-24].

(2011) 14 SCC 66 [See paragraphs no. 17-22].

2022 SCC OnLine SC 83.

This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/001068 carried on, unless the issue before the Court patently indicates existence of deadwood."

5. For the sake of clarity, let's examine the views of the Supreme Court with respect to arbitration agreements contained in unstamped documents. The 2011 judgment of SMS Tea Estates (Supra) - holding stamping to be a requirement for reference - was affirmed in 2019 in Garware Ropes (Supra). A three-judge bench in Dharmaratnakara Rai (Supra) in February, 2020 relied upon SMS Tea Estates (Supra) and refused reference to arbitration of disputes arising out of an unstamped lease deed. Later in the same year, another three judge bench in Vidya Drolia (Supra) affirmed Garware Ropes (Supra) (see paragraph no. 92), on the aspect of meaning of "existence" and "validity" of an arbitration agreement. Then, the judgment of N. N. Global (Supra) was delivered in January, 2021, wherein, another three-judge Bench of the Supreme Court, in paragraph no. 6.9, expressly stated that "we overrule the judgment on SMS Tea Estates". Further, in paragraph no. 6.10, it noted that, "the Garware judgment has followed the judgement in SMS Tea Estates", and "We hold that this finding is erroneous, and does not lay down the correct position in law. We have already held that an arbitration agreement is distinct and independent from the underlying substantive commercial contract. Once the arbitration agreement is held to have an independent existence, it can be acted upon, irrespective of the alleged invalidity of the commercial contract." In light of the above, the Bench therein preferred to refer the issue to a larger bench.

6. It is in these circumstances that another three-judge bench, in January, 2022 in Intercontinental Hotels (Supra), took a pragmatic and arbitration- friendly view - as has been quoted above. In fact, this Court, while passing ARB.P. 142/2022 Page 3 of 6 This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/001068 the decision in IMZ (Supra), was conscious of the divergent views expressed by two benches of the same strength in Vidya Drolia (Supra) and N.N. Global (Supra) and the consequent referral of Garware (Supra) to a larger bench.

7. Upon a reading of Intercontinental Hotels (Supra), another aspect comes to fore: the distinction between arbitration agreements in unstamped vis-à-vis insufficiently stamped agreements. In the facts of Intercontinental Hotels (Supra), the Petitioner, in response to Respondent's submission in its counter affidavit of non-stamping, submitted additional documents to show that stamp duty was paid in accordance with Section 5(j) of the Karnataka Stamp Act, 1957, and further, stated that it had also paid the maximum possible penalty (Rs. 2000/-) to dissuade the argument of non-stamping made by the Respondent. The Respondent therein, took a strong objection to the same, alleging inadequacy of amount paid. In light of such arguments, the Supreme Court took a view that as long as stamp duty was stated to be paid, the adequacy thereof was a question of fact which would fall under the domain of the Arbitral Tribunal. It was also noted that:

"Therefore, it falls upon the Court, under the stamp act to review the nature of the agreement in order to ascertain the stamp duty payable. From the above it is clear, that stamp duty has been paid, whether it be insufficient or appropriate is a question that maybe answered at a later stage as this court cannot review or go into this aspect under Section 11(6). If it was a question of complete non stamping, then this court, might have had an occasion to examine the concern raised in N. N. Global (supra), however, this case, is not one such scenario."

8. Now, after the decision of the Supreme Court in Intercontinental Hotels (Supra), there is certainly no ambiguity or scope of doubt as to what course of action should be taken by the High Court in issues pertaining to insufficiency of stamp duty, when urged. Moreover, in several other ARB.P. 142/2022 Page 4 of 6 This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/001068 decisions, this Court has followed the dictum of the Supreme Court in N.N. Global (Supra) and proceeded to appoint an Arbitrator in petitions under Section 11 of the Act, leaving the question of insufficiency or inadequacy of stamp duty to be urged in arbitration.

9. However, in stark juxtaposition to the facts of the above-mentioned case, Respondents herein have shown no cogent objection qua stamp duty. Upon a perusal of its reply, it is noted that the Respondent does not mention whether this is a case of insufficiency or total absence of payment of stamp duty. No averment is made as to the quantum of stamp duty required to be paid, or whose obligation it was to ensure that the Agreement is duly stamped. Instead, bald and generic averments are made and emphasis is laid on the judgements of Garware Ropes (Supra) and Vidya Drolia (Supra). The Respondent could have taken this objection at the stage of invocation of arbitration, but chose to be conspicuously silent. In light of these circumstances, it seems that the objection of non-stamping is merely a routine and convenient excuse to delay and deny the adjudication of disputes at the time and cost of the Petitioner. The same does not find favour with this Court. This plea/ objection of stamp duty can be urged by the Respondent before the Arbitrator.

10. For the reasons afore-said, the court is not persuaded by the submissions of the Respondent. The petition deserves to be allowed.

11. In view of the above, the present petition is allowed and accordingly, Mr. Shashank Garg, Advocate [Contact No.: +91 9811526671] is appointed as the Sole Arbitrator to adjudicate the disputes arising out of/ pertaining to a Service Agreement dated 5th December, 2018.

12. The parties are directed to appear before the learned Sole Arbitrator as ARB.P. 142/2022 Page 5 of 6 This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/001068 and when notified. This is subject to the learned Arbitrator making necessary disclosure(s) under Section 12(1) of the Act and not being ineligible under Section 12(5) of the Act.

13. The Arbitrator will be entitled to charge their fee in terms of the provisions of the Fourth Schedule appended to the Act.

14. It is clarified that the Court has not examined any of the claims of the parties and all rights and contentions on merits are left open. Both the parties shall be free to raise their claims/ counterclaims before the learned Arbitrator in accordance with law.

15. The petition is allowed.

SANJEEV NARULA, J MARCH 8, 2022 gj (corrected and released on 26th March 2022) ARB.P. 142/2022 Page 6 of 6 This is a digitally signed Judgement.