2018 (3) TMI 1750 - HC - Indian Laws

Appointment of a sole Arbitrator - Section 11 of the Arbitration and Conciliation Act 1996 - denial of appointment of arbitrator on the ground that the contract is undisputedly unstamped and also on the ground that the Petitioner has not followed the mandatory pre-arbitral agreed procedure prescribed by the arbitration agreement. Whether the invocation of the arbitration was premature? - Held that - There is no substance in the argument on behalf of the Respondent that since there was no negotiation between the parties before invoking the arbitration the same was premature. From these text messages (sent on Whatsapp) it is quite clear that on several occasions a request was made for a meeting to which there was no positive response. This being the case I find that the Petitioner was fully justified in invoking the arbitration clause as contained in Annexure-III to the sub-contract dated 14th June 2013 (the commercial terms and conditions). Whether the parties can be referred to arbitration on the basis of what the Respondent alleges is an unstamped document? - Held that - In the facts of the present case there is no dispute with reference to the existence of the arbitration agreement. This being the case I find that Mr. Kamat is not correct in submitting that the dispute cannot be referred to arbitration merely because the sub-contract dated 14th June 2013 (and in which the arbitration clause is contained) is an unstamped document - It is not as if once the Arbitrator is appointed the Respondent is precluded from raising the issue of stamping before the Arbitrator. The Arbitrator if found that the document is insufficiently stamped can always impound the same and send it to the necessary authorities under the Maharashtra Stamp Act 1958 for adjudication. The liability to pay stamp duty was that of the Respondent. If the stamp duty if any has not been paid by the Respondent the Respondent cannot take advantage of its own wrong and frustrate the arbitration agreement between the parties. If I was to do that it would be only adding premium to dishonesty. Having said this I must make it clear that these observations are only prima facie and if the arbitrator finds that the document is in fact insufficiently stamped and directs further action on the same it will be for the appropriate authorities to adjudicate the stamp duty as well as who is liable to pay the same. Arbitration Petition is allowed - Mr. Mihir Naniwadekar (Advocate) is appointed as a Sole Arbitrator under Section 11 of the Arbitration and Conciliation Act 1996 to adjudicate upon the disputes which have been arisen between the Petitioner and the Respondent herein under or in relation to and/or connected with the sub-contract dated 14th June 2013.

Summary

Issues Involved:
1. Appointment of a Sole Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996.
2. Validity of the unstamped sub-contract under the Maharashtra Stamp Act, 1958.
3. Premature invocation of arbitration.

Detailed Analysis:

Issue 1: Appointment of a Sole Arbitrator
The petitioner sought the appointment of a sole arbitrator to adjudicate disputes arising from a sub-contract dated 14th June 2013, which included an arbitration clause. The respondent objected, leading to the invocation of Section 11 of the Arbitration and Conciliation Act, 1996. The court noted that the arbitration clause was undisputed and invoked by the petitioner after failed negotiations. The court appointed Mr. Mihir Naniwadekar as the Sole Arbitrator to resolve the disputes.

Issue 2: Validity of the Unstamped Sub-Contract
The respondent argued that the sub-contract was unstamped, thus invalid under Sections 33 and 34 of the Maharashtra Stamp Act, 1958. The court examined whether an unstamped document could be acted upon for arbitration purposes. The court referred to Section 11(6-A) of the Arbitration and Conciliation Act, 1996, which restricts judicial intervention to the examination of the existence of an arbitration agreement. The court concluded that the existence of the arbitration agreement was not in dispute and that the arbitrator could address the issue of stamping. The court cited the Supreme Court's decision in Duro Felguera, S.A. v. Gangavaram Port Limited, emphasizing that the court's role is limited to confirming the existence of an arbitration agreement.

Issue 3: Premature Invocation of Arbitration
The respondent contended that the arbitration was prematurely invoked as the petitioner did not follow the mandatory pre-arbitral negotiation process. The court found evidence of multiple requests for negotiation by the petitioner, which were ignored by the respondent. The court referred to the Supreme Court's decision in Visa International Limited v. Continental Resources (USA) Ltd., which supported the petitioner's position. The court concluded that the petitioner was justified in invoking arbitration due to the respondent's non-cooperation in negotiations.

Conclusion:
The court allowed the arbitration petition, appointing Mr. Mihir Naniwadekar as the Sole Arbitrator. The petitioner was directed to file the necessary disclosures, and the arbitrator was tasked with giving further directions regarding fees and procedural matters. The court emphasized that the issue of stamping could be addressed by the arbitrator, ensuring compliance with the Maharashtra Stamp Act, 1958, without allowing the respondent to use it as a technical defense to delay arbitration. The arbitration petition was disposed of with no order as to costs.