Brief facts of the case:
After having entered into 3 different agreements, the Respondent vide 3 letters terminated the agreements. The Petitioner informed the Respondent of the obligation to pay the amount equal to the residual value of the “call out orders” in terms of the agreements and issued three notices regarding the same.
The Respondent replied to these notices alleging that since no stamp duty was paid on the agreements, it is the Maharashtra Stamp Act, 1958 that would apply.
The Respondent further suggested referring the disputes for mediation and later made another proposal to consolidate the agreements and refer the dispute to arbitration by a sole arbitrator but did not agree on the names proposed by the Petitioner rather he reserved the right to propose the names of the arbitrator. Mediation took place but it did not serve any purpose, so the parties decided to go for arbitration by a sole arbitrator. However, the Respondent neither agreed on the names suggested by the Petitioner nor did he suggest any names himself which is why the present petitions are being filed. All the 3 Arbitration petitions are being filed to seek an appointment of a sole arbitrator to adjudicate the disputes.
Contentions of the Respondent:
It was contended that out of the three agreements, two were not stamped as per the Maharashtra Stamp Act,1958. He relied on the case of N.N. Global Mercantile Unique Pvt. Ltd. V. Indo Unique Flame Ltd. And Ors. (2021 4 SCC 379) (hereinafter referred to as “NN Global case”) which is pending before a 5- Judge Constitution Bench and deals with the question of law whether the statutory bar of Section 35 of the Stamp Act, 1899 would also render arbitration agreement contained in an instrument that is not stamped as unenforceable and invalid. Based on this it is argued that the present petition shall not be entertained as the issue is yet to be determined by a larger bench.
Contentions of the Petitioner:
Placing reliance on the case of Inter-continental Hotel Groups (India) Pvt. Ltd. and Anr. V. Waterline Hotels Pvt. Ltd. (2022 7 SCC 662) (hereinafter referred to as “Intercontinental Hotels Group”) it was argued that the matters cannot be left hanging merely because the issue is to be settled by a larger bench. It was also contended that insufficient payment or non-payment of stamp duty is a curable defect and that the Court is only required to examine the existence of the arbitration agreement and not whether the agreement is valid or not.
Observations of the Court:
The Court noted that as per Section 16 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Arbitration Act”) the Arbitral Tribunal is competent to rule on its own jurisdiction as well as on the existence or validity of an arbitration agreement. It is a settled law that an arbitration agreement is an independent agreement and that the nullity of a contract does not ipso facto entail that even the arbitration agreement is void.
The Court also noted that in the NN Global Mercantile case it was held that there is no legal impediment to the enforceability of the arbitration agreement despite the stamp duty on the underlying contract being unpaid/pending. In the case of Intercontinental Hotels Group, the Court after considering all the previously held cases concluded that cases cannot be left hanging because an issue is to be settled by a larger bench, and therefore, the petition was entertained in this case.
Findings of the Court:
In the present case, the Court observed that the three agreements are not disputed by the Respondent, and he proposed to consolidate the disputes and refer them to a sole arbitrator. The Respondent cannot be allowed to claim that the petition seeking the appointment of an arbitrator should not be entertained.
In light of the aforementioned reasons, the petitions were allowed, and a sole arbitrator was appointed by the Court.
Cause Title: Weatherford Oil Tool Middle East Limited v. Baker Hughes Singapore PTE
Bench: Hon'ble Mr. Justice U.U. Lalit and Hon'ble Ms. Justice Bela M. Trividedi
Decided on: October 20th, 2022
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