In a recent ruling, the Delhi High Court clarified that if any question of law forming the foundation of the court's judgment is subsequently altered or overturned by a higher court in a different case, such modification or reversal cannot be used as a basis for seeking a review of the original judgment. These observations were made by the bench comprising Justice Sachin Datta during a review of the court's order, which allowed the petition under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act). The court further emphasized that seeking a review based on the subsequent decision of the Supreme Court in N.N. Global Mercantile (P) Ltd. vs. Indo Unique Flame Ltd., is not permissible.
Brief Facts:
The petitioner, Ambience Developers and Infrastructure Pvt. Ltd., had filed an application under Section 11 of the Arbitration and Conciliation Act, 1996. The High Court court had previously allowed this application, implying that the court granted permission for the dispute between the petitioner and the respondent to proceed to arbitration.
In response to the High Court's decision, the respondent, Zesty Foods, filed a review petition seeking to review the order dated 20.03.2023. The respondent's review petition was based on the contention that the agreement, which contains the arbitration clause relevant to the dispute, is unstamped. Following a recent judgment in the case N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.,the respondent argued that the unstamped agreement is invalid in law and cannot be enforced. As a result, the respondent requested the court to review its previous order and impound the agreement under the provisions of the Stamp Act, 1899, and the Registration Act.
Observations by the Court:
However, the Delhi High Court, at the outset, observed that the contention of the respondent regarding the agreement's unstamped status was factually incorrect, as a stamp duty of Rs. 100 had been duly paid on the said agreement.
The court further noted that its order which allowed the petitioner's Section 11 application for arbitration, was a consent order. The said order specifically preserved the right of the respondent to raise preliminary objections concerning arbitrability and jurisdiction before the appointed arbitrator. These objections encompassed issues related to the insufficiency of stamp duty and non-registration of the agreement.
Moreover, the Delhi High Court emphasized that its order dated 20.03.2023 was in line with the judgment of the Supreme Court in Intercontinental Hotels Group (India) (P) Ltd. v. Waterline Hotels (P) Ltd., (2022) 7 SCC 662.
The Supreme Court, in the aforementioned Intercontinental Hotels Group (2022) case, had ruled that under Section 11(6) of the Arbitration and Conciliation Act, the court is not empowered to review or determine whether the stamp duty paid on the agreement is sufficient or appropriate.
The review of the order dated 20.03.2023 was sought on the basis of a subsequent decision by the Constitution Bench of the Supreme Court in N.N. Global Mercantile (2023).
In N.N. Global Mercantile (2023), the Apex Court clarified that when an objection is raised regarding the agreement's stamping, it is ordinarily the duty of the court to examine the matter with reference to Section 33(2) of the Indian Stamp Act, 1899. However, if the court finds that the claim of insufficiency of stamping is wholly without foundation, it may proceed with the arbitral reference based on the existence of an Arbitration Agreement. The arbitrator may then exercise power under Section 33 of the Indian Stamp Act, if necessary.
Based on these observations, the Delhi High Court concluded that N.N. Global (supra) itself indicates that in certain situations, it may be appropriate to leave it to the arbitrator to determine the issue of insufficiency of stamping. The court emphasized that, in the present case, since the arbitrator had already been appointed, the respondent was not precluded from raising appropriate objections regarding the alleged insufficiency of stamping before the arbitrator.
Additionally, the court remarked that in terms of the explanation to Order XLVII Rule 1 CPC, a review could not be sought on the basis of a subsequent decision of the Supreme Court in N.N. Global Mercantile (2023).
The court cited relevant precedents, such as Beghar Foundation vs. Justice K.S. Puttaswamy (Retired) & Ors., (2021) 3 SCC 1, Subramanian Swamy v. State of T.N., (2014) 5 SCC 75, and BSNL vs. Union of India & Ors., (2006) 3 SCC 1, which underscored the principle that a change in law or a subsequent decision of a coordinate or larger Bench does not warrant a review of an earlier judgment.
The decision of the Court:
In light of these considerations, the court dismissed the review petition, upholding its earlier order dated 20.03.2023, which allowed the petitioner's application for arbitration.
Case Name: Ambience Developers and Infrastructure Pvt Ltd vs Zesty Foods
Coram: Hon’ble Mr. Justice Sachin Datta
Case No.: Review Petition No. 161/2023 in ARB.P. 549/2022
Advocates of the Petitioners: Ms. Kittu Bajaj, Advocate.
Advocates of the Respondent: Mr. Amit Chaubey, Advocate
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