| CITATION | SCC OnLine SC 495 |
| DATE OF JUDGMENT | 25 April, 2023 |
| COURT | Supreme court of India |
| APPELANT | NN GLOBAL MERCANTILE PRIVATE LIMITED |
| RESPONDENT | INDO UNIQUE FLAME LTD.& ORS. |
| BENCH | JUSTICE D.Y. CHANDRACHUD, JUSTICE INDU MALHOTRA AND JUSTICE INDIRA BANERJEE |
| REFERRED | Section 8 of Arbitration and Conciliation Act,1996 |
FACTS OF THE CASE
Indo Unique Flame Limited was distributed a tender by Karnataka Power Corporation Limited (KPCL) for the force of coal, in an open tender. latterly, Indo Unique Flame Limited (IUFL) entered into a sub-contract with Global Mercantile Private Limited (GMPL) to supply the coal. Along analogous lines, KPCL was handed a guarantee by IUFL and farther IUFL handed a guarantee by GMPL for the force. The guarantee was extended from time to time by the parties over the period of the contract. KPCL due to certain differences with IUFL led to the incantation of the guarantee handed by IUFL. Further, IUFL invoked the guarantee handed by the GMPL. This incantation of guarantee by IUFL led to the proceedings in the marketable court initiated by the GMPL stating that “Indo Unique hadn’t distributed any work under the Work Order, nor were any checks raised, or payments made by it. Accordingly, there was no loss suffered which would justify the incantation of the Bank Guarantee ” The main contract entered by the parties i.e., IUFL and GMPL is at the launch of the contract which has a clause pertaining the controversies to the arbitration. After that all the deals overwrite the main contract via the Work Order generated by the IUFL, this allows the arbitration clause to continue on the base of the doctrine of separabilityIUFL made an operation to the Commercial Court pertaining to Section 8 of the Arbitration and Conciliation Act, 1996 asking for pertaining the disagreement to the adjudicator for resolution. GMPL opposed the operation stating that a bank guarantee is a different contract and there’s no clause pertaining to the arbitration .That since neither party performed their part of work the court held that, it would not accept the operation made by the IUFL and would apply itsjurisdiction.
ISSUES OF THE CASE
Whether the arbitration clause mentioned in the main contract is enforceable if the substantial underpinning contract (main contract) isn’t stamped?
JUDGMENT OF THE CASE
Majority Judgment
The maturity decision was handed down by Hon’ble Justice Joseph Kurian and Hon’ble Justice Aniruddha Bose, with a concurring judgment of Hon’ble Justice CT Ravi kumar. The Majority Judgment held that the view taken in SMS Tea, as followed in Garware, represents the correct position in law. It was further held that N.N. Global- 1 was incorrectly decided, in as important as it overruled SMS Tea. The maturity further concluded that an unstamped instrument/ contract, which is eligible to stamp duty, and which may contain an arbitration clause, cannot be said to be a contract that’s enforceable in law. thus, such a contract, and the arbitration agreement therein, cannot be said to live in law. Although, the maturity view appreciated that a court in an operation under Section 11 of the Arbitration Act is only needed to examine and ascertain the actuality of an arbitration agreement, it was held that an unstamped/ under- stamped agreement is effectively void and, thus, the test of actuality doesn’t standsatisfied.Going a step further, it was also held that a court acting under Section 11 of the Arbitration Act, is duty bound to act in terms of Section 33 of the Stamp Act and impound the unstamped contract. It was clarified that the court could do further with the Section 11 operation only once the disfigurement in payment of stamp duty iscured.
Minority Judgments
The Minority upheld the overruling of the decision in SMS Tea. In this regard, the non-age reiterated the view in NN Global- 1 to the extent that that non-stamping or inadequate stamping of the substantial contract or instrument would not render the arbitration agreement missing in law and unenforceable/ void, in so far as reference to arbitration is concerned. It was further held that the actuality of a dupe/ certified dupe of an arbitration agreement whether unstamped/ rightly stamped at the pre-reference stage is an enforceable document for the purposes of appointment of an Adjudicator under Section 11( 6A) of the Arbitration Act. The Minority Judgments were also of the view that the examination of stamping and impounding as well as all other primary or debatable issues, including insufficiency of stamp duty as well as validity of arbitration agreement, were matters referrable to the arbitral bench and would be decided in agreement with Section 16 of the Arbitration Act. The Minority Judgments were handed down by Hon’ble Justice Ajay Rastogi and Hon’ble Justice Hrishikesh Roy.
CONCLUSION
The SC while interpreting both the houses, upheld the supremacy of Indian Stamp Act over the Arbitration Act. The stage of the court is inconsistent from its former bones which have so far encouraged arbitration. The maturity judgment opens up a new avenue for judicial intervention, which is contrary to the fundamentals of arbitration which else restricts judicial intervention in agreement with the Arbitration Act. At the onset itself, it detainments disposal of the section 11 operation as the party counting on the agreement would have to first cure the disfigurement of stamp duty outstanding in order to gain relief from the court This judgment is anticipated to beget resistance on the pro-arbitration image that India is endeavouring to produce encyclopaedically over the last decade by posting legislative emendations similar as Arbitration Act (Amendment), Act 2015 and 2019. It may delay the bar in SS promoting a speedier and more effective arbitration process as compass of judicial intervention now stands enlarged as it’s likely to act as an manacle for seeking critical interim reliefs and administering exigency awards. In order to avoid similar awaited resistance, the time has arrived to propel appointment of the adjudicator( s) by designated arbitration institutions.
REFERENCES
Written by Varuna an intern under legal vidhiya.
