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TMI Blog2022 (10) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... ution 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 sing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Virgin Islands, engaged in the business of providing products and services for mud logging, drilling jars and fishing tools and exports of spare parts and oilfield equipments. The respondent is a company incorporated under the laws of Singapore and engaged in providing oilfield services, inter alia engaged in provision of well design, engineering, project management and well construction services to Vedanta Limited. ( Operator ). (ii) In the year 2018, the respondent was considering the possibility of providing services to the Operator-Vedanta Ltd. at the Operator s oil fields located in Rajasthan. The parties thereafter executed following three agreements: a) Onshore Lease Agreement No. BHGE-DSA-WDI-2018 dated 20th November, 2018 for the lease of Rigs on a day-rate basis ( Lease Agreement ), b) Onshore Drilling Service Agreement No. BHGE-DSA-WDI-2018 (INTL HOLDING BVI) dated 20th November, 2018 for drilling services ( Drilling Service Agreement ), and c) Agreement dated 05th February, 2019 to provide (a) mud logging; (b) drilling jars; (c) fishing tools; and other services, with a full complement of crew, equipment and materials at the Oil Fields ( Onshore Service A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. Thereafter, some correspondence had ensued between the parties, however the respondent did not propose any names of individuals for being appointed as a sole arbitrator in the consolidated arbitration. Hence, the petitioner has filed these three petitions. 3) The bone of contention raised by the Learned Senior Advocate, Mr. Jayant Mehta for the respondent is that out of the three agreements only one agreement was stamped and the other two were not stamped as required under the Maharashtra Stamp Act, 1958 (hereinafter referred as the Stamp Act ). Of course, he admitted that the matter in respect of determination of stamp duty for the other two agreements is pending with the Collector. However, according to him, a three-judge Bench of this Court, in case of N.N Global Mercantile Unique Pvt. Ltd. Vs. Indo. Unique Flame Ltd. and Others (2021) 4 SCC 379 has referred the issue as to whether the statutory bar contained in Section 35 of the Stamp Act 1899 applicable to instruments chargeable to stamp duty under Section 3 read with the Schedule to the Act, would also render arbitration agreement contained in such instrument which is not chargeable to the payment of stamp duty as bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Section 16 - Competence of arbitral tribunal to rule on its jurisdiction- (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,- (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. 8. The bare reading of the afore-stated provision makes it clear that arbitral tribunal is competent not only to rule on its own jurisdiction but to rule on the issue of the existence or validity of the arbitration agreement. It further clarifies that an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract, and that a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause. 9. The doctrine of separability and the doctrine of kompetenz-kompetenz encompassed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upra), the issue whether the arbitration agreement contained in an unstamped contract can be acted upon had also arisen and the court observed as under: 21. The issue which has arisen in the present case is whether the arbitration agreement incorporated in the unstamped work order dated 28-9-2015, would also be legally unenforceable, till such time that the work order is subjected to payment of stamp duty. Undisputedly, the work order is chargeable to payment of stamp duty under Item 63 of the First Schedule to the Maharashtra Stamp Act, 1958. 22. In our view, the non-payment or deficiency of stamp duty on the work order does not invalidate the main contract. Section 34 provides that an unstamped instrument would not be admissible in evidence, or be acted upon, till the requisite stamp duty is paid. This would amount only to a deficiency, which can be cured on the payment of the requisite stamp duty. 23. The point for consideration is whether the non-payment of stamp duty on the work order, would render the arbitration clause invalid, non-existent, or unenforceable in law, till the stamp duty is paid on the substantive commercial contract. 24. The arbitration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Court noticed that the judgment in Garware Wall Ropes Ltd. (supra) was cited with approval by the Co-ordinate Bench of this Court in Vidya Drolia v. Durga Trading Corporation (2021) 2 SCC 1, and therefore the court (in N.N. Global Mercantile case) observed as under: 33. We notice that the judgment in Garware Wall Ropes Ltd. has been cited with approval by a coordinate Bench of this Court in Vidya Drolia v. Durga Trading Corpn. [Vidya Drolia v. Durga Trading Corpn., Paras 146-147 of the judgment reads thus: (Vidya Drolia Case SCC pp. 115-16) 146. We now proceed to examine the question, whether the word existence in Section 11 merely refers to contract formation (whether there is an arbitration agreement) and excludes the question of enforcement (validity) and therefore the latter falls outside the jurisdiction of the court at the referral stage. On jurisprudentially and textualism it is possible to differentiate between existence of an arbitration agreement and validity of an arbitration agreement. Such interpretation can draw support from the plain meaning of the word existence . However, it is equally possible, jurisprudentially and on contextualism, to hold th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lause that is contained in the sub-contract would not exist as a matter of law until the sub-contract is duly stamped, as has been held by us above. The argument that Section 11(6-A) deals with existence , as opposed to Section 8, Section 16 and Section 45, which deal with validity of an arbitration agreement is answered by this Court's understanding of the expression existence in Hyundai Engg. case [United India Insurance Co. Ltd. v. Hyundai Engg. Construction Co. Ltd., (2018) 17 SCC 607 ] , as followed by us. Existence and validity are intertwined, and arbitration agreement does not exist if it is illegal or does not satisfy mandatory legal requirements. Invalid agreement is no agreement. 34. We doubt the correctness of the view taken in paras 146 and 147 of the three-Judge Bench in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1] . We consider it appropriate to refer the findings in paras 22 and 29 of Garware Wall Ropes Ltd. [Garware Wall Ropes Ltd. v. Coastal Marine Constructions Engg. Ltd., (2019) 9 SCC 209] , which has been affirmed in paras 146 and 147 of Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1] , to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of, relating to, or connected with this Agreement, the breach, termination or invalidity hereof, or the provisions contained herein or omitted here from (collectively, a Dispute ) will be referred to and finally resolved by arbitration under the Indian Arbitration and Conciliation Act, 1996 and the rules made thereunder, which are deemed to be incorporated by reference into this Article 23. The arbitration shall be conducted as follows: i. A sole arbitrator shall be mutually appointed in case the value of claim under dispute is less than US$10 million and in any other event by a panel of three arbitrators will be appointed with one arbitrator nominated by each Party and the presiding arbitrator selected by the nominated arbitrators. ii. The language of the arbitration proceedings shall be English. iii. The seat of arbitration shall be Mumbai, India. iv. The award made in pursuance thereof shall be final and binding on the Parties. v. The arbitrators will have no power to award damages of a type described in Article 11(k). 15. The letters of termination terminating the said three agreements by the respondent on 9th April, 2020, and other correspon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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