2022 (10) TMI 917 - SC - Indian Laws

Seeking appointment of a sole arbitrator to adjudicate upon the disputes arising out of the three agreements executed between the parties, being intrinsically connected with each other - Doctrine of separability - doctrine of kompetenz-kompetenz encompassed in the arbitration jurisprudence - Section 11(6) read with Section 11(12) of the Arbitration and Conciliation Act, 1996 - HELD THAT - Recently a three-judge Bench of this Court in case of Intercontinental Hotels Group (India) Pvt. Ltd. Anr. Vs. Waterline Hotels Private Limited 2022 (1) TMI 1171 - SUPREME COURT while dealing with an application filed under Section 11(6) read with Section 11(12)(e) of the Arbitration Act for appointment of a sole arbitrator on the basis of an arbitration clause contained in the agreement which was unstamped document, took notice of the earlier decisions as also the issue referred to the Constitution Bench and observed that 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 carried on, unless the issue before the Court patently indicates existence of deadwood. If the facts of the present petitions are examined, it deserves to be noted that the execution of three agreements, namely, Onshore Service Agreement, Lease Agreement and Drilling Service Agreement between the petitioner and the respondent has not been disputed. The identical clause-23 for Arbitration contained in all the three agreements has also not been disputed - The efforts to amicably resolve the disputes through Mediation having failed, the petitioner thereafter also agreed vide letter dated 1st September, 2021 to consolidate the disputes under the three agreements to be heard by a sole arbitrator in one single arbitration, as proposed by the respondent. The petitioner also proposed the names of the arbitrators, however, the said names were not agreeable to the respondent. The respondent also failed to propose any names for the appointment of a sole arbitrator. Since the arbitration agreements contained in all the three agreements namely, Onshore Service Agreement, Lease Agreement and Drilling Service Agreement were not disputed by the respondent, and since the respondent itself had proposed to consolidate the disputes under the said agreements and to refer them to a sole arbitrator in one single arbitration, the court is of the opinion that now it does not lie in the mouth of the respondent to say that the petitions seeking appointment of a sole arbitrator should not be entertained, as the matter with regard to the determination of requisite stamp duty under the Maharashtra Stamp Duty Act on the two agreements is pending before the Collector. Since the respondent had proposed and the petitioner had agreed to consolidate all the disputes arising out of the three agreements, namely, Onshore Service Agreement, Lease Agreement and Drilling Service Agreement, and to refer them to a sole arbitrator in a single arbitration for adjudication, it is ordered as such. Petition allowed.

Summary

Issues Involved:
1. Appointment of a sole arbitrator under Section 11(6) read with Section 11(12) of the Arbitration and Conciliation Act, 1996.
2. Validity of arbitration agreements in unstamped contracts under the Maharashtra Stamp Act, 1958.
3. Consolidation of disputes under three interconnected agreements into a single arbitration.

Detailed Analysis:

1. Appointment of a Sole Arbitrator:
The petitioner filed three arbitration petitions under Section 11(6) read with Section 11(12) of the Arbitration and Conciliation Act, 1996, seeking the appointment of a sole arbitrator to adjudicate disputes arising from three interconnected agreements. The agreements included an Onshore Lease Agreement, Onshore Drilling Service Agreement, and an Onshore Service Agreement. The court noted that the arbitration agreements contained in all three contracts were not disputed by the respondent. Given the respondent's initial proposal to consolidate disputes and refer them to a sole arbitrator, the court found it appropriate to appoint a sole arbitrator despite the pending issue of stamp duty determination.

2. Validity of Arbitration Agreements in Unstamped Contracts:
The respondent contended that two of the three agreements were not stamped as required under the Maharashtra Stamp Act, 1958, and cited a pending determination of stamp duty by the Collector. The court referred to the case of N.N. Global Mercantile Unique Pvt. Ltd. Vs. Indo. Unique Flame Ltd. and Others, which had referred the issue of whether the statutory bar under Section 35 of the Stamp Act would render an arbitration agreement contained in an unstamped instrument non-existent, unenforceable, or invalid, to a Constitution Bench. The court also considered the decision in Inter-continental Hotels Group (India) Private Limited and Another versus Waterline Hotels Private Limited, which held that arbitration matters should not be left unresolved due to pending stamp duty issues, emphasizing the time sensitivity in arbitration.

3. Consolidation of Disputes:
The court noted that the respondent had initially proposed and the petitioner had agreed to consolidate the disputes under the three agreements into a single arbitration. Given this mutual agreement and the interconnected nature of the agreements, the court found it appropriate to consolidate the disputes and refer them to a sole arbitrator. The court appointed Mr. Suresh C. Gupte, former Judge of the High Court of Bombay, as the sole arbitrator to adjudicate the consolidated disputes, with the arbitration proceedings to be conducted as per Clause 23 of the agreements.

Conclusion:
The court allowed the petitions, appointing a sole arbitrator to adjudicate the consolidated disputes arising from the three agreements, despite the pending issue of stamp duty determination. The court emphasized the doctrines of separability and kompetenz-kompetenz, which allow an arbitration agreement to be treated independently of the substantive contract, ensuring the enforceability of the arbitration agreement pending payment of stamp duty on the substantive contract. The arbitration proceedings will follow the terms and conditions outlined in Clause 23 of the agreements.