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TMI Blog2021 (1) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... ame Ltd. ("Indo Unique") applied for grant of work of beneficiation/washing of coal to the Karnataka Power Corporation Ltd. ("KPCL") in an open tender. KPCL awarded the Work Order vide letter of Award No. A1M1B3/Washed Coal/1052 dated 18.09.2015 to Indo Unique. In pursuance of the Work Order dated 18.09.2015, the Respondent No. 1 Company furnished Bank Guarantees for Rs. 29.29 crores in favour of KPCL through its bankers, State Bank of India ("SBI"), the Respondent No. 2 herein. 1.2. Indo Unique, the Respondent No. 1 herein, subsequently entered into a sub-contract termed as a Work Order dated 28.09.2015 with the Appellant Company-M/s. N.N. Global Mercantile Pvt. Ltd. ("Global Mercantile"), for the transportation of coal from its washery at Village Punwat, District Yavatmal to the stockyard, siding, coal handling and loading into the wagons at Pandharpaoni siding, District Chanderpur, Maharashtra. Clause 9 of the Work Order provided for furnishing a security deposit which reads as: 9. Security Deposit: You will submit the Bank Guarantee for Rs. 5.00 crores for the average stock of washed coal lying at your stockyard. This Bank Guarantee can be issued from any nationalise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and independent contract, and did not contain any arbitration clause. 1.8. The Commercial Court vide Order dated 18.01.2018 rejected the application Under Section 8, and held that the arbitration Clause in the Work Order dated 28.09.2015 was not a general arbitration clause, which would cover the Bank Guarantee. The Bank Guarantee was an independent contract between SBI and Union Bank of India for due performance of the contract. The Court noted the contention of Global Mercantile that neither of the parties had performed any part of the Work Order dated 28.09.2015, and consequently held that the jurisdiction of the Commercial Court was not ousted by the arbitration agreement. 1.9. Indo Unique then filed Civil Revision Petition No. 9 of 2018 before the Bombay High Court challenging the Order passed by the Commercial Court. On an objection being raised on the maintainability of the Civil Revision Petition, the High Court vide Order dated 09.07.2020 permitted the withdrawal of the Civil Revision Petition, with liberty to file a petition Under Articles 226 and 227 of the Constitution of India. 1.10. Indo Unique filed W.P. No. 1801 of 2020 before the Bombay High Court to quash and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to challenge an Order rejecting an application for reference to arbitration Under Section 8 of the Arbitration Act? We will now deal with each of these issues. 3. Validity of an arbitration agreement in an unstamped agreement 3.1. It is well settled in arbitration jurisprudence that an arbitration agreement is a distinct and separate agreement, which is independent from the substantive commercial contract in which it is embedded. This is based on the premise that when parties enter into a commercial contract containing an arbitration clause, they are entering into two separate agreements viz. (i) the substantive contract which contains the rights and obligations of the parties arising from the commercial transaction; and, (ii) the arbitration agreement which contains the binding obligation of the parties to resolve their disputes through the mode of arbitration. 3.2. The autonomy of the arbitration agreement is based on the twin concepts of separability and kompetenz-kompetenz. The doctrines of separability and kompetenz-kompetenz though inter-related, are distinct, and play an important role in promoting the autonomy of the arbitral process. 3.3. The doctrine of separability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -contained contract collateral or ancillary to the shipbuilding agreement itself. 3.7. In Harbour Assurance v. Kansa General International Insurance [1993] 1 Lloyd's Rep. 455 (CA), the Court of Appeal held that if the arbitration Clause is not directly impeached, an arbitration agreement is capable of surviving the invalidity of the contract, so that the arbitrator has the jurisdiction to determine the initial validity of the contract. It was opined that: Once it became accepted that the arbitration Clause is a separate agreement, ancillary to the contract, the logical impediment to referring an issue of the invalidity of the contract to arbitration disappears. Provided that the arbitration Clause itself is not directly impeached (e.g. by a non-est factum plea), the arbitration agreement is as a matter of principled legal theory capable of surviving the invalidity of the contract. 3.8. In Lesotho Highlands Development Authority v. Impregilo SpA and Ors. [2005] UKHL 43 : [2006] 1 A.C. 221 at [21], the House of Lords affirmed the view taken in Harbour Assurance (supra), wherein it was held that an arbitration agreement is a distinct and separable agreement from the unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forceable on grounds which relate to the arbitration agreement itself, and not merely as a consequence of the invalidity of the underlying contract, that the courts may refuse reference to arbitration. To discourage parasitical challenges and dilatory tactics in resisting reference to arbitration, the Court of Appeal held in paragraph 38 that: 38. ... As we have sought to explain, once the separability of the arbitration agreement is accepted, there cannot be any question but that there is a valid agreement. ... If there is a contest about whether an arbitration agreement had come into existence at all, the court would have a discretion as to whether to determine that issue itself, but that will not be the case where there is an overall contract which is said for some reason to be invalid e.g. for illegality, misrepresentation or bribery and the arbitration agreement is merely part of the contract. ... 3.12. In the Appeal filed in the Fiona Trust case before the House of Lords, in Fili Shipping Co. Ltd. and Ors. v. Premium Nafta Products Ltd. and Ors. [2007] UKHL 40, Lord Hoffman opined: It amounts to saying that because the main agreement and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he arbitration agreement and is not merely a consequence of the invalidity of the main agreement [2007] 4 ALL ER 951 at 960, at paragraph 19. 3.14. On the issue of whether a claim of fraud in the inducement of the entire contract is to be decided by the court, or the arbitrator, was considered by the U.S. Supreme Court in Prima Paint Corporation v. Flood & Conklin MFG. CO., 388 US 395 (1967). The Court held that: If the claim is fraud in the inducement of the arbitration Clause itself an issue which goes to the 'making' of the agreement to arbitrate--the federal court may proceed to adjudicate it. But the statutory language does not permit the federal court to consider claims of fraud in the inducement of the contract generally....... In so concluding, we not only honor the plain meaning of the statute but also the unmistakably clear congressional purpose that the arbitration procedure, when selected by the parties to a contract, be speedy and not subject to delay and obstruction in the courts. 3.15. The United States Supreme Court in Buckeye Check Cashing, Inc. v. Cardegna et. al. US SC 440 (2006), followed the earlier decisions in Prima Paint and Southl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d., at 447 (the severability Rule is based on Section 2). ...... The Court asserts that its holding flows logically from Prima Paint Corporation v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967), in which the Court held that consideration of a contract revocation defense is generally a matter for the arbitrator, unless the defense is specifically directed at the arbitration clause, id., at 404. We have treated this holding as a severability rule: When a party challenges a contract, "but not specifically its arbitration provisions, those provisions are enforceable apart from the remainder of the contract." Buckeye Check Cashing, Inc. v. Cardegna, 546 US 440, 446 (2006). ...... The second line of cases bearing on who decides the validity of an arbitration agreement, as the Court explains, involves the Prima Paint rule. See ante, at 71. That Rule recognizes two types of validity challenges. One type challenges the validity of the arbitration agreement itself, on a ground arising from an infirmity in that agreement. The other challenges the validity of the arbitration agreement tangentially--via a claim that the entire contract (of which the arbitration a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application Under Sub-section (4) or Sub-section (5) or Sub-section (6), shall, notwithstanding any judgment, decree or order of any court, confine to the examination of the existence of an arbitration agreement. (emphasis supplied) 7.8. By virtue of the non obstante Clause incorporated in Section 11(6-A), previous judgments rendered in Patel Engg. and Boghara Polyfab, were legislatively overruled. The scope of examination is now confined only to the existence of the arbitration agreement at the Section 11 stage, and nothing more. 7.9. Reliance is placed on the judgment in Duro Felguera S.A. v. Gangavaram Port Ltd. [Duro Felguera S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729 : (2017) 4 SCC (Civ) 764. Refer to TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72], wherein this Court held that: (SCC p. 759, para 48) 48. ... From a reading of Section 11(6-A), the intention of the legislature is crystal clear i.e. the court should and need only look into one aspect--the existence of an arbitration agreement. What are the factors for deciding as to whether there is an arbitration agreement is the next question. The resolution t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made". 7.13. In view of the provisions of Section 16, and the legislative policy to restrict judicial intervention at the pre-reference stage, the issue of limitation would require to be decided by the arbitrator. Sub-section (1) of Section 16 provides that the Arbitral Tribunal may Rule on its own jurisdiction, "including any objections" with respect to the existence or validity of the arbitration agreement. Section 16 is as an inclusive provision, which would comprehend all preliminary issues touching upon the jurisdiction of the Arbitral Tribunal. The issue of limitation is a jurisdictional issue, which would be required to be decided by the arbitrator Under Section 16, and not the High Court at the pre-reference stage Under Section 11 of the Act. Once the existence of the arbitration agreement is not disputed, all issues, including jurisdictional objections are to be decided by the arbitrator. 4.3. In A. Ayyasamy v. Parmasivam and Ors. (2016) 10 SCC 386., Dr. D.Y. Chandrachud, J. in his separate opinion observed that: 53. The Arbitratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed by the Collector. Non-payment of stamp duty would not render the agreement unenforceable, but was a curable defect. 5.3. Statutory scheme under the Maharashtra Stamp Act, 1958.-- (a) Section 3 of the Maharashtra Stamp Act, 1958 is the charging section, which specifies the instruments which are chargeable to stamp duty of the amount specified in Schedule I of the Act. Section 3 provides: 3. Instruments chargeable with duty.-- Subject to the provisions of this Act and the exemptions contained in Schedule I, the following instruments shall be chargeable with duty of the amount indicated in Schedule I as the proper duty therefore respectively, that is to say-- (a) every instrument mentioned in Schedule I, which, not having been previously executed by any person, is executed in the State on or after the date of commencement of this Act; (b) Section 30 provides: 30.-Duties by whom payable.- In the absence of an agreement to the contrary, the expense of providing the proper stamp shall be borne,- (a) in the case of any instrument described in any of the following articles of Schedule I, namely: ... & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of any proceeding other than a proceeding under Chapter IX or Part D of Chapter X of the Code of Criminal Procedure, 1973; (b) in the case of a Judge of a High Court, the duty of examining and impounding any instrument under this Section may be delegated to such officer as the Court appoints in this behalf. Section 33 casts a statutory obligation on every person empowered by law, or holding a public office, or a person who by consent of parties (which would include an arbitrator) is empowered to receive evidence, to examine the instrument presented before him, and ascertain whether the instrument is duly stamped. This would include the court being an authority empowered to receive an instrument in evidence. In view of the statutory interdict, the bar against the admissibility of an unstamped instrument, is absolute in nature, including for a collateral purpose. Avinash Kumar Chauhan v. Vijay Krishna Mishra, (2009) 2 SCC 532. The phrase "duly stamped" implies that the instrument must be stamped with the requisite amount of duty determined in accordance with the Schedule to the Act. Black Pearl Hotels (P) Ltd. v. Planet M. Retail Ltd., (2017) 4 SCC 498. If it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admission of a copy of any instrument or of an oral admission of the contents of any instrument, if the stamp duty or a deficient portion of the stamp duty and penalty as specified in Clause (a) is paid. (f) Section 35 provides that: 35. Admission of instrument where not to be questioned.--Where an instrument has been admitted in evidence, such admission shall not, except as provided in Section 58, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped. (g) Section 36 provides that: 36. Admission of improperly stamped instruments.--The State Government may make Rules providing that, where an instrument bears a stamp of sufficient amount but of improper description, it may, on payment of the duty with which the same is chargeable, be certified to be duly stamped, and any instrument so certified shall then be deemed to have been duly stamped as from the date of its execution. (h) Section 37 provides that: 37. Instruments impounded how dealt with.- (1) When the person impounding an instrument Under Section 33 has by law or consent of parties authority to receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 34, 39 or 40- (1) When the duty and penalty (if any) leviable in respect of any instrument (not being any instrument referred to in Sub-section (1) of Section 32A), have been paid Under Section 34, Section 39 or Section 40, the person admitting such instrument in evidence or the Collector, as the case may be, shall certify by endorsement thereon that the proper duty or, as the case may be, the proper duty and penalty (stating the amount of each) have been levied in respect thereof, and the name and residence of the person paying them. (2) Subject to the provisions of Section 53A, every instrument so endorsed shall thereupon be admissible in evidence, and may be registered and acted upon and authenticated as if it had been duly stamped, and shall be delivered on the application in this behalf, to the person who produced it or to the person from whose possession it came into the hands of the Officer impounding it, or to any other person according to the directions of such person: Provided that- (a) no instrument which has been admitted in evidence upon payment of duty and a penalty Under Section 34, shall be so delivered before the expiration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , stating the amount of each, have been le-vied in respect of such instrument, and the name and residence of the person paying the same. (3B) Every instrument so endorsed shall thereupon be delivered, on an application in this behalf, to the person from whose possession the instrument came in the possession of such Court, or as such person may direct, to any other person authorised by him. (4) The Collector may thereupon, notwithstanding anything contained in the order admitting such instrument in evidence, or in any certificate granted Under Section 41, or in Section 42, prosecute any person for any offence against the stamp law which the Collector considers him to have committed in respect of such instrument: Provided that- (a) no such prosecution shall be instituted where the amount including duty and penalty, which, according to the determination of such Court, was payable in respect of the instrument Under Section 34, is paid to the Court or the Collector, unless the Collector thinks that the offence was committed with an intention of evading payment of the proper duty; (b) except for the purposes of such prosecution no declaration made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vides that upon payment of Stamp Duty and endorsement by the concerned Collector, the defect of admissibility and legality of such instrument would stand cured. 5.6. This Court in SMS Tea Estates Pvt. Ltd. v. M/s. Chandmari Tea Co. Pvt. Ltd. (2011) 14 SCC 66. Followed in Naina Thakkar v. Annapurna Builders, (2013) 14 SCC 354. considered the issue whether an arbitration agreement in an unregistered and unstamped lease deed, which required compulsory registration Under Sections 17 and 19 of the Registration Act 1908, was valid and enforceable, being a part of the said lease deed which was invalid and unenforceable. A two-judge bench of this Court considered the following two issues: (i) Whether an arbitration agreement contained in an unregistered (but compulsorily registrable) instrument is valid and enforceable? (ii) Whether an arbitration agreement in an unregistered instrument which is not duly stamped, is valid and enforceable? With respect to the first issue, the Court held as follows: 11. Section 49 makes it clear that a document which is compulsorily registrable, if not registered, will not affect the immovable property comprised therein in any m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strument, it is an independent agreement to refer the disputes to arbitration, which is independent of the main contract or instrument. Therefore having regard to the proviso to Section 49 of the Registration Act read with Section 16(1)(a) of the Act, an arbitration agreement in an unregistered but compulsorily registrable document can be acted upon and enforced for the purpose of dispute resolution by arbitration. With respect to a contract or instrument which is voidable at the option of a party (as by way of illustration Under Section 19 of the Indian Contract Act, 1872) in paragraph 15 of the judgment, it was held that the invalidity which attaches itself to the main agreement, may also attach itself to the arbitration agreement, if the reasons which make the main agreement voidable, exist in relation to the making of the arbitration agreement also. Paragraph 15 reads as follows: 15. But where the contract or instrument is voidable at the option of a party (as for example Under Section 19 of the Contract Act, 1872), the invalidity that attaches itself to the main agreement may also attach itself to the arbitration agreement, if the reasons which make the main agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he claim was time-barred, a stale claim, or whether there had been accord and satisfaction, which would preclude the necessity of reference to arbitration. 5.8. Section 11 was amended by the 2016 Amendment Act, which inserted Clause (6A), which now provides that notwithstanding any judgment, decree or order of any Court, the examination would be confined only to the existence of an arbitration agreement. The amendment of 2016 legislatively overruled the position with respect to the jurisdiction Under Section 11 of the Arbitration Act, and confined the examination only to the existence of an arbitration agreement. In Duro Felguera v. Gangavaram Port Ltd. (2017) 9 SCC 729 it was held that the legislative intent was clear that at the pre-reference stage, there must be minimal judicial intervention, and the only issue to be decided would be the existence of the arbitration agreement, and nothing more. This position was affirmed by a three-judge bench in Mayavati Trading Private Limited v. Pradyuat Deb Burman (2019) 8 SCC 714. 5.9. The issue whether an arbitration Clause in a document/agreement/conveyance which requires compulsorily to be stamped under the relevant Stamp Act, but is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates, which continues to apply even after the amendment of Section 11(6-A). ... 22. When an arbitration Clause is contained "in a contract", it is significant that the agreement only becomes a contract if it is enforceable by law. We have seen how, under the Stamp Act, an agreement does not become a contract, namely, that it is not enforceable in law, unless it is duly stamped. Therefore, even a plain reading of Section 11(6-A), when read with Section 7(2) of the 1996 Act and Section 2(h) of the Contract Act, would make it clear that an arbitration Clause in an agreement would not exist when it is not enforceable by law. This is also an indicator that SMS Tea Estates has, in no manner, been touched by the amendment of Section 11(6-A). ... 29. This judgment in Hyundai Engg. case [United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd., (2018) 17 SCC 607 : (2019) 2 SCC (Civ) 530] is important in that what was specifically under consideration was an arbitration Clause which would get activated only if an insurer admits or accepts liability. Since on facts it was found that the insurer repudiated the claim, though an arbitration Clause d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Item 12 of Schedule I to the Maharashtra Stamp Act, 1958 includes an Award passed by an arbitrator to be chargeable for payment of Stamp Duty, which reads as follows: Description of Instrument Proper Stamp Duty 12. AWARD, that is to say, any decision in writing by an arbitrator or umpire, not being an award directing a partition, on a reference made otherwise than by an order of the Court in the course of a suit- (a) where the amount of value of the property to which the award relates as set forth in such award does not exceed Rs. 1,000; The same duty as a Bond (No. 15) for such amount. (b) in any other case Five rupees. Exemption Award under the Bombay District Municipal Act, 1873, Section 81, or the Bombay Hereditary Offices Act, 1874, Section 18. In Shriram EPC Limited v. Rioglass Solar SA (2018) 18 SCC 313, this Court held that the payment of Stamp Duty is applicable to awards made in India, but does not include a "foreign award" which has not been included in the Schedule to the Stamp Act, 1899. 6.1. The issue which has arisen in the present case is whether the arbitration agreement incorpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereon. On the instrument so received the Collector may adjudge whether it is duly stamped and he may require penalty to be paid thereon, if in his view it has not been duly stamped. If the duty and penalty are paid, the Collector will certify by endorsement on the instrument that the proper duty and penalty have been paid. 5. An instrument which is not duly stamped cannot be received in evidence by any person who has authority to receive evidence, and it cannot be acted upon by that person or by any public officer. Section 35 provides that the admissibility of an instrument once admitted in evidence shall not, except as provided in Section 61, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped. 6. Relying upon the difference in the phraseology between Sections 35 and 36 it was urged that an instrument which is not duly stamped may be admitted in evidence on payment of duty and penalty, but it cannot be acted upon because Section 35 operates as a bar to the admission in evidence of the instrument not duly stamped as well as to its being acted upon, and the Legislature has by Section 36 in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpounded, and Sub-section (1) of Section 42 requires the instrument to be endorsed after it is duly stamped by the concerned Collector. Section 42(2) provides that after the document is duly stamped, it shall be admissible in evidence, and may be acted upon. 6.8. In our view, the decision in SMS Tea Estates does not lay down the correct position in law on two issues i.e. (i) that an arbitration agreement in an unstamped commercial contract cannot be acted upon, or is rendered un-enforceable in law; and (ii) that an arbitration agreement would be invalid where the contract or instrument is voidable at the option of a party, such as Under Section 19 of the Indian Contract Act, 1872. We hold that since the arbitration agreement is an independent agreement between the parties, and is not chargeable to payment of stamp duty, the non-payment of stamp duty on the commercial contract, would not invalidate the arbitration clause, or render it un-enforceable, since it has an independent existence of its own. The view taken by the Court on the issue of separability of the arbitration Clause on the registration of the substantive contract, ought to have been followed even with respect to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt has no existence if it is not enforceable and not binding. Existence of an arbitration agreement presupposes a valid agreement which would be enforced by the court by relegating the parties to arbitration. Legalistic and plain meaning interpretation would be contrary to the contextual background including the definition Clause and would result in unpalatable consequences. A reasonable and just interpretation of 'existence'requires understanding the context, the purpose and the relevant legal norms applicable for a binding and enforceable arbitration agreement. An agreement evidenced in writing has no meaning unless the parties can be compelled to adhere and abide by the terms. A party cannot sue and claim rights based on an unenforceable document. Thus, there are good reasons to hold that an arbitration agreement exists only when it is valid and legal. A void and unenforceable understanding is no agreement to do anything. Existence of an arbitration agreement means an arbitration agreement that meets and satisfies the statutory requirements of both the Arbitration Act and the Contract Act and when it is enforceable in law. We would proceed to elaborate and give further r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the appointment of the arbitrator takes place by the parties consensually in accordance with the terms of the arbitration agreement, or by a designated arbitral institution, without the intervention of the court. In such a case, the arbitrator/tribunal is obligated by Section 33 of the Indian Stamp Act, 1899 (or the applicable State Act) to impound the instrument, and direct the parties to pay the requisite Stamp Duty (and penalty, if any), and obtain an endorsement from the concerned Collector. This would be evident from the provisions of Section 34 of the Stamp Act which provides that "any person having by law or consent of parties authority to receive evidence" is mandated by law to impound the instrument, and direct the parties to pay the requisite stamp duty. b) The second mode of appointment is where the parties fail to make the appointment in accordance with the arbitration agreement, and an application is filed Under Section 11 before the Court to invoke the default power for making the appointment. In such a case, the High Court, or the Supreme Court, as the case may be, while exercising jurisdiction Under Section 11, would impound the substantive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld entail extensive evidence being led, hence the disputes could be resolved through arbitration. 8.3. Under the Arbitration Act, the earliest decision on the issue of arbitrability of allegations of fraud was considered by a two-judge bench in N. Radhakrishnan v. Maestro Engineers (2010) 1 SCC 72. Followed in Ivory Properties & Hotels Pvt. Ltd. v. Nusli Neville Wadia, 2011 (2) Arb LR 479 (Bom); See also article by Justice D.R. Dhanuka (Retd.) reported in Journal Section of 2010 (2) Arb LR 13; RRB Energy Ltd. v. Vestas Wind System and Ors., (2015) 219 DLT 516. In this case, the Applicant had made serious allegations against the Respondents of having committed malpractices in the account books, and manipulation of finances of the partnership firm. An application Under Section 8 was filed by the Respondents for reference of disputes to arbitration. The Court took the view that since the issues involved detailed investigation into the allegations and production of elaborate evidence, it could not be properly dealt by an arbitrator, and ought to be settled by a court of law. This decision relied on the judgment in Abdul Kadir v. Madhav Prabhakar AIR 1962 SC 406: [1962] 3 SCR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists. (2) ... (3) ... The issue of arbitrability of fraud was subsequently considered by a two-judge bench in A. Ayyasamy v. A. Paramasivam and Ors. (2016) 10 SCC 386. . The Court held that Section 8 mandates reference to arbitration, unless the arbitration agreement is found to be invalid. It has been recognised that certain categories of disputes which are of public nature, are not capable of adjudication and settlement by arbitration, which is a private forum constituted by consent of parties. The Court made a distinction between cases where there are allegations of serious fraud and fraud simplicitor. Mere allegations of fraud simplicitor are not a sufficient ground to decline reference to arbitration. Parties may be referred to arbitration where allegations of fraud pertain to disputes between parties inter se, and have no implication for third parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to decline reference of disputes to arbitration. 8.9. In a recent judgment delivered in Avitel Post Studioz Ltd. and Ors. v. HSBC PI Holdings (Mauritius Limited), which pertains to an international commercial contract, the issue of arbitrability of fraud arose for consideration. This Court held that the same set of facts may have civil as well criminal consequences. If it is clear that a civil dispute involves questions of fraud, misrepresentation, etc. which can be the subject matter of a proceeding Under Section 17 of the Indian Contract, 1872, and/or the tort of deceit, the mere fact that criminal proceedings can or have been instituted in respect of the same subject matter, would not lead to the conclusion that a dispute which is otherwise arbitrable, ceases to be so. This view has been affirmed by a co-ordinate bench in Deccan Paper Mills v. Regency Mahavir and Vidya Drolia and Ors. v. Durga Trading Corporation Civil Appeal No. 2402 of 2019 decided vide Judgment dated 14.12.2020.. 8.10. In our view, all civil or commercial disputes, either contractual or non-contractual, which can be adjudicated upon by a civil court, in principle, can be adjudicated and resolved through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding up matters; (v) testamentary matters (grant of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes. 8.12. The civil aspect of fraud is considered to be arbitrable in contemporary arbitration jurisprudence, with the only exception being where the allegation is that the arbitration agreement itself is vitiated by fraud or fraudulent inducement, or the fraud goes to the validity of the underlying contract, and impeaches the arbitration Clause itself. Another category of cases is where the substantive contract is "expressly declared to be void" Under Section 10 Section 10. What agreements are contracts.--All agreements are contracts if they are made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of Section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence. Explanation.--A fraud or misrepresentation which did not cause the consent to a contract of the party of whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable. In the case of voidable agreements, such disputes would be arbitrable, since the issue whether the consent was procured by coercion, fraud, or misrepresentation requires to be adjudicated upon by leading cogent evidence, which can very well be decided through arbitration. Until it so proved and upheld as per Sections 2(i) and (j) of the Indian Contract Act, 1872 such an agreement would remain enforceable, and is not void. 8.15. In Swiss Timing Ltd. v. Commonwealth Games 2010 Organising Committee (2014) 6 SCC 677, a single judge (exercising powers Under Section 11) opined that when a plea is taken to avoid arbitration on the ground of the underlying contract being void, the court is required to ascertain th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are of the view that the Writ Petition filed by the Respondent No. 1 to challenge the Order dated 18.01.2018 passed by the Special Commercial Court/District Judge-I in Commercial Dispute No. 62/2017 was not maintainable, since a statutory remedy under the amended Section 37 of the Arbitration Act is available. Section 37(1) has been amended by Act 3 of 2016 which came into effect on 23.10.2015. Section 37(1)(a) provides for an appeal to be filed against an Order refusing to refer the parties to arbitration. Section 37(1)(a) reads as: 37. Appealable orders.-(1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely: (a) Refusing to refer the parties to arbitration Under Section 8; ... 9.2. Since the judgment and order of the Commercial Court dated 18.01.2018 refusing to refer the parties to arbitration was an appealable order Under Section 37(1)(a) of the Arbitration Act, the Writ Petition was not maintainable. The appeal would lie before the Commercial Appellate Division of the High Court Under Section 13(1A) of the Commercial Courts Act, 2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , be subject to the statutory right available to file a revision/appeal under the Maharashtra Stamp Act. (iv) With respect to the invocation of the Bank Guarantee, the Appellant may seek interim relief Under Section 9 of the Arbitration and Conciliation Act, 1996. We extend the stay granted by the High Court for a further period of eight weeks. 12. We are of the considered view that the finding in SMS Tea Estates and Garware that the non-payment of stamp duty on the commercial contract would invalidate even the arbitration agreement, and render it non-existent in law, and un-enforceable, is not the correct position in law. In view of the finding in paragraph 92 of the judgment in Vidya Drolia by a co-ordinate bench, which has affirmed the judgment in Garware, the aforesaid issue is required to be authoritatively settled by a Constitution bench of this Court. We consider it appropriate to refer the following issue, to be authoritatively settled by a Constitution bench of five judges of this Court: Whether the statutory bar contained in Section 35 of the Indian Stamp Act, 1899 applicable to instruments chargeable to Stamp Duty Under Section 3 read with the Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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