Case Note & Summary
The appellant, Iqbal Trading Company, filed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, challenging an order dated October 21, 2011 passed by the Learned District Judge, Pune, which refused to appoint an arbitrator under Section 11 of the Act. The dispute arose out of a contract between the appellant and the respondents (Union of India and others) for supply of goods. The appellant invoked the arbitration clause, but the respondents objected on the ground that the agreement was unstamped and therefore void. The District Judge upheld the objection and dismissed the application. The appellant appealed to the Bombay High Court. The High Court examined the scope of Section 11(6A) of the Arbitration Act, which limits the court's role to examining the existence of an arbitration agreement. The court held that the issue of stamp duty does not go to the root of the arbitration agreement; an unstamped document is not void ab initio but merely inadmissible in evidence until stamp duty and penalty are paid. The court further held that the arbitrator has the power to rule on his own jurisdiction under Section 16 of the Act, including any objections as to the validity of the underlying contract. The court also noted that the arbitration agreement survives the death of a party under Section 40 of the Act. Accordingly, the court allowed the appeal, set aside the impugned order, and appointed an arbitrator to adjudicate the disputes between the parties.
Headnote
A) Arbitration Law - Appointment of Arbitrator - Section 11(6A) of Arbitration and Conciliation Act, 1996 - Court's limited role - The court, while appointing an arbitrator, is only to examine the existence of an arbitration agreement and not the validity or stamping of the underlying contract. The issue of stamp duty is a matter for the arbitrator under Section 16 of the Act. (Paras 1-10) B) Stamp Act - Stamp Duty Deficiency - Sections 33, 35 of Bombay Stamp Act, 1958 - Admissibility of unstamped agreement - An unstamped or insufficiently stamped agreement is not void ab initio but is inadmissible in evidence until stamp duty and penalty are paid. The arbitration agreement contained therein remains valid and enforceable. (Paras 11-20) C) Arbitration Law - Termination of Arbitration Agreement - Section 40 of Arbitration and Conciliation Act, 1996 - Death of party - An arbitration agreement is not discharged by the death of a party; it may be enforced by or against the legal representatives of the deceased. (Paras 21-25)
Issue of Consideration
Whether an arbitration agreement contained in an unstamped or insufficiently stamped document is void ab initio or unenforceable, and whether the court can refuse to appoint an arbitrator on that ground.
Final Decision
The appeal is allowed. The impugned order dated October 21, 2011 passed by the Learned District Judge, Pune is set aside. The court appoints an arbitrator to adjudicate the disputes between the parties.
Law Points
- Arbitration agreement survives even if underlying contract is unstamped
- Stamp duty deficiency is not a bar to appointment of arbitrator
- Section 11(6A) limits court's role to existence of arbitration agreement
- Section 16 of Arbitration Act empowers arbitrator to rule on own jurisdiction
