Delhi High Court
Delhi Chemical & Pharmaceuticals ... vs Himgiri Realtors Pvt Ltd. on 4 August, 2015
Author: Manmohan Singh
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment pronounced on: 4th August, 2015
+ I.A. Nos.3160/2015 & 3226/2015 in O.M.P. No.392/2011
DELHI CHEMICAL & PHARMACEUTICALS WORKS PVT.
LTD. & ORS ..... Petitioners
Through Mr.Kailash Vasudev, Sr.Adv. with
Mr.Avneesh Garg & Mr.Ishan
Khanna, Advs.
versus
HIMGIRI REALTORS PVT LTD ..... Respondent
Through Mr.Sacchin Puri, Adv. with
Mr.Gurmehar S.Sistani &
Ms.Aastha Lumba, Advs.
CORAM:
HON'BLE MR.JUSTICE MANMOHAN SINGH
MANMOHAN SINGH, J.
1. By this order, I propose to decide two applications filed by the
petitioners i.e. one being I.A. No.3160/2015 seeking
modification/clarification of the judgment and order dated 4th July,
2011 and another being I.A. No.3226/2015 for stay of the
proceedings pending before the learned Arbitrator.
2. The modification is sought by the petitioners to the effect that
the directions with respect to commencement of arbitral proceedings
shall come into effect with the retrospective date thereof, only after
compliance of the provisions of the Indian Stamp Act, 1899 and the
provisions of the Registration Act, 1908 with respect to the
Collaboration Agreement dated 6th July, 2006.
3. The details of the relevant few facts are given as under:-
(i) The petitioners filed the petition under Section 14 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to
as the 'Act') seeking prayer to terminate the mandate of
Sh.Subhash Lakhotia to act as sole Arbitrator in the
proceedings. The main contention of the petitioners was that
the said sole Arbitrator was appointed at the behest of the
respondent who has personal interest in the suit property
with the family members of the petitioners.
(ii) After the arguments, the prayer in the said petition was
allowed by terminating the mandate of Sh.Subhash Lakhotia
as Arbitrator and the matter was referred to the arbitration to
be conducted under the aegis of the Delhi High Court
Arbitration Centre.
(iii) The respondent filed a review petition being R.A.
No.417/2011 seeking review of the order dated 4th July, 2011
on various grounds by referring judgment of the Division
Bench dated 16th May, 2011 passed in the case of Oriental
Structural Engineers Pvt. Ltd. v. Alcove Industries Ltd. &
Anr., FAO (OS) Nos.128/2008 and 129/2008. During the
course of the hearing of the said review petition, with the
mutual consent of the parties, a retired Judge of the
Supreme Court was appointed as the sole Arbitrator to
adjudicate upon all the disputes arising between the parties.
The parties also gave their consent to bear the fee of the
sole Arbitrator equally and the date for their appearance
before the sole Arbitrator was fixed on 31st August, 2012.
The review petition was accordingly disposed of by order
dated 3rd August, 2012. Since it was a consent order, it was
not challenged by any of the parties.
(iv) It is the admitted position that after passing the said order,
the parties duly appeared before the sole Arbitrator.
Counter-claim was filed by the petitioners/applicants in July,
2013. Even the petitioners filed the affidavit relating to the
admission/denial of the documents. In the affidavit, the
petitioners admitted the Collaboration Agreements dated 27th
April, 2006 and 6th July, 2006. The said documents were
annexed as Annexures C-2 and C-4.
(v) The petitioners also filed an application before the learned
Arbitrator under Section 17 of the Act praying for directions
to be issued to the respondent to handover the possession
of the land which is the subject matter of the arbitration
proceedings so as to enable the petitioners to arrange for
money and pay the dues of UPSIDC and in the alternative,
to issue directions to the respondent to deposit the entire
pending dues subject to the final Award to be made by the
Tribunal. The said application was considered by the
learned Arbitrator on 15th March, 2014. However, the same
was withdrawn by the petitioners and the petitioners also
filed the additional affidavit by way of admission/denial of the
documents to take on record the additional documents.
4. From the pleadings, the learned Arbitrator framed the following
issues:-
"ISSUES ON STATEMENT OF CLAIMS
(1) Whether the claim of the claimant is time barred?
OPR
(2) Whether the claim of the claimant made on the basis
of the agreement dated 27.4.2006 and Collaboration
Agreement dated 6.7.2006 were vitiated by fraud and
if so, its effect? OPR
(3) Whether the claimant is entitled to get the execution
of Sale Deed/Transfer Deed in its favour from the
respondent in terms of the agreement dated 6.7.2006
and Minutes of the Meeting dated 23.5.2010?
(4) Whether the cancellation of the agreement dated
6.7.2006 and Minutes of Meeting dated 23.5.2010 is
legal and valid and whether the respondent was
justified in issuing a notice cancelling the agreement
and also the minutes? OPR
(5) If the answer to above issue is in the negative,
whether the claimant can still seek specific
performance of the agreement dated 6.7.2006 and
the Minutes of Meeting dated 23.5.2010?
(6) Whether the cancellation of authorization and power
of attorney dated 7.1.2010 by letters dated 3.3.2011
and 5.3.2011 by the respondents was illegal?
(7) Whether the claimant is still willing and ready to
perform its part of the obligation as per the
agreement dated 27.4.2006, the Minutes of Meeting
dated 23.5.2010 and Collaboration Agreement dated
6.7.2006 and if so its effect?
(8) Whether the claimant can claim and receive an
amount of Rs.20 crores from the respondent as
damages? If so, whether the claimant is also entitled
to any interest on the said amount under Section 31
of the Act and if so, at what rate and for which
period?
(9) Whether the claimant is entitled to any relief and if so
to what extent?
ISSUES ON COUNTER CLAIM:
(1) Whether the respondent is entitled to claim and
receive all the amounts as damages as mentioned in
the prayer made in the Counter Claims? If so whether
they would be entitled to receive any interest on the
aforesaid amount and if so, to what amount?
(2) Whether the respondent is also entitled to a direction
to the claimant to handover vacant and physical
possession of the property No.A-8, Site 4, UPSIDC
Industrial Area, Sahibabad, Uttar Pradesh?
(3) Whether the counter claims of the respondent are not
covered within the ambit of the arbitration clause and
therefore, not maintainable?
(4) Whether the parties are entitled to any costs and if
so, which party and to what amount thereof?"
5. The petitioners filed an application before the sole Arbitrator
under Section 35 read with Section 33 of the Indian Stamp Act, 1899
read with Section 49 of the Registration Act, 1908 seeking rejection of
the Collaboration Agreement dated 6th July, 2006 raising the
objection that the said document is inadmissible in evidence. The
prayer made in the said application is to reject the documents dated
27th April, 2006 and 6th July, 2006 filed by the respondent and
mentioned in the evidence by way of affidavit as Ex.CW-1/2 and
Ex.CW-1/4. After recording certain facts, on 9th February, 2015 the
matter was re-notified on 18th February, 2015 by the learned
Arbitrator.
6. On 11th February, 2015, the petitioners filed an application
before this Court being the present application being I.A.
No.3160/2015 seeking modification/clarification of the judgment and
order dated 4th July, 2011. Along with this application, the petitioners
also filed the application being I.A. No. 3226/2015 under Section 9 of
the Act read with Order XXXIX Rules 1 & 2 CPC for stay of the
proceedings pending before the learned Arbitrator till the disposal of
the application for modification.
7. These applications were listed before Court on 18th February,
2015 when the parties made the statement before the Court that they
would take the adjournment before the learned Arbitrator after the
date fixed by this Court. Thereafter, the matter was adjourned from
time to time on the request of the parties or otherwise. Both the
parties have made their submissions.
8. The first contention of Mr.Kailash Vasudev, learned Senior
counsel appearing on behalf of the petitioners is that the
Collaboration Agreement dated 6th July, 2006 is a document
mandatorily to be charged with the stamp duty as applicable in the
State of Uttar Pradesh (as the land in question is situated at District
Ghaziabad, (U.P.). Article 5(b-2) of the Indian Stamp Act, 1899 as
applicable to U.P. provides for payment of Stamp duty on such
agreements at the rate prescribed for conveyance under Article 23(a)
of the Schedule 1B. Accordingly, the said agreement dated 6th July,
2006, which is actually stamped with only Rs.100/-, violates the
provisions of the Indian Stamp Act, which provides for the mandatory
requirement of stamping such agreements with the appropriate stamp
duty under Section 35 of the said Act and prohibits acting upon such
agreements which are not duly stamped. Section 33 of the said Act
further creates an obligation on the authority/person, before whom
such document is produced, to impound the same for recovery of the
stamp duty along with the penalty prescribed. The said document is
invalid, unenforceable and not binding in view of the conditions
stipulated under Section 35 of the Indian Stamp Act.
9. His second argument is that in view of the said provisions of
law, the Collaboration Agreement could not have been acted upon
even for the commencement of the arbitral proceedings being
unstamped and unregistered document, thus, no term of the said
document could act upon and in view of the legal embargo, the
arbitration clause could not be relied upon for seeking reference to
arbitration. In support of his submissions, Mr.Vasudev, learned
Senior counsel has referred the decision of the Supreme Court in the
case of M/s SMS Tea Estates P. Ltd. v. M/s Chandmari Tea Co. P.
Ltd. 2011 (14) SCC 66, by stating that in the said judgment, it is held
in clear terms that in case of an agreement insufficiently stamped, the
arbitration proceeding cannot commence, unless proper stamp duty
is paid on such agreement. It has been further held that after
payment of stamp duty, the Court has to see the consequence of
non-registration of such document, independent of the fact that the
stamp duty is paid. A perusal of the said judgment shows that vide
the same, the Supreme Court has confirmed the applicability and
effect of Section 35 of the Indian Stamp Act on the arbitration
proceeding sought to be commenced under such insufficiently
stamped instrument.
10. Mr.Vasudev has also referred to the decision rendered by this
Court in the case of Vandana Batra v. Aerens Goldsouk
International Ltd., passed in CS(OS) No.988/2012 decided on 1st
October, 2014.
11. Lastly, counsel submits that in view of the said judgment of the
Supreme Court (although the matter is ripe for evidence), the
Collaboration Agreement dated 6th July, 2006 is non est, therefore,
the arbitration proceedings cannot be continued by the learned
Arbitrator before whom the petitioners have filed the similar
application under Section 35 read with Section 33 of the Indian
Stamp Act read with Section 49 of the Registration Act, 1908 and the
same is pending for adjudication.
12. Mr.Sacchin Puri, learned counsel appearing on behalf of the
respondent has referred Clause-32 of the Collaboration Agreement
dated 6th July, 2006 which is reproduced herein as under:-
"32. This Agreement is not compulsorily registered. Non
registration of this Agreement would not result in
absolving the respective obligations to be fulfilled by the
Land Owner and the Developer in this Agreement."
He submits that registration of agreement dated 27th April, 2006
and Collaboration Agreement dated 6th July, 2006 is not necessary.
They can enforce the agreement in arbitration proceedings, the
decision referred by the petitioners does not help them.
13. Let me first deal with the decision of the Supreme Court in the
case of SMS Tea Estates Private Limited (supra) which is heavily
relied upon by Mr.Kailash Vasudev, learned Senior counsel
appearing on behalf of the petitioners.
14. In the said decision, admittedly, the Chief Justice of Gauhati
High Court dismissed the petitioners' application under Section 11 of
the Act on 28th May, 2010 wherein it was held that the lease deed
was compulsorily registerable under Section 17 of the Registration
Act and Section 106 of the Transfer of Property Act and as the lease
deed was not registered, no term in the said lease deed could be
relied upon for any purpose, therefore, the arbitration clause could
not be relied upon. After discussing the relevant provisions and
question No.(i) framed in para 9 of the said judgment [SMS Tea
Estates Private Limited (supra)], the Supreme Court in para 16 held
as under:-
"16. An arbitration agreement does not require
registration under the Registration Act. Even if it is found
as one of the clauses in a contract or instrument, 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 registerable document can
be acted upon and enforced for the purpose of dispute
resolution by arbitration."
In view of the decision referred by the petitioners, the argument
to the effect that documents unregistered and compulsorily
registerable is rejected.
15. With regard to the next argument of Mr. Vasudev, learned
Senior counsel that the Collaboration Agreement is unstamped, the
Supreme Court in para 22 of the above said judgment has held as
under:-
"22. We may therefore sum up the procedure to be
adopted where the arbitration clause is contained in a
document which is not registered (but compulsorily
registerable) and which is not duly stamped:
22.1 The court should, before admitting any document
into evidence or acting upon such document, examine
whether the instrument/document is duly stamped and
whether it is an instrument which is compulsorily
registerable.
22.2 If the document is found to be not duly stamped,
Section 35 of Stamp Act bars the said document being
acted upon. Consequently, even the arbitration clause
therein cannot be acted upon. The court should then
proceed to impound the document under Section 33 of
the Stamp Act and follow the procedure under Sections
35 and 38 of the Stamp Act.
22.3 If the document is found to be duly stamped, or if
the deficit stamp duty and penalty is paid, either before
the Court or before the Collector (as contemplated in
Sections 35 or 40 of the Stamp Act), and the defect with
reference to deficit stamp is cured, the court may treat the
document as duly stamped.
22.4 Once the document is found to be duly stamped,
the court shall proceed to consider whether the document
is compulsorily registerable. If the document is found to
be not compulsorily registerable, the court can act upon
the arbitration agreement, without any impediment.
22.5 If the document is not registered, but is compulsorily
registerable, having regard to Section 16(1)(a) of the Act,
the court can de-link the arbitration agreement from the
main document, as an agreement independent of the
other terms of the document, even if the document itself
cannot in any way affect the property or cannot be
received as evidence of any transaction affecting such
property. The only exception is where the Respondent in
the application demonstrates that the arbitration
agreement is also void and unenforceable, as pointed out
in para 15 above. If the respondent raises any objection
that the arbitration agreement was invalid, the court will
consider the said objection before proceeding to appoint
an arbitrator.
22.6 Where the document is compulsorily registerable,
but is not registered, but the arbitration agreement is valid
and separable, what is required to be borne in mind is
that the Arbitrator appointed in such a matter cannot rely
upon the unregistered instrument except for two
purposes, that is (a) as evidence of contract in a claim for
specific performance and (b) as evidence of any collateral
transaction which does not require registration."
16. The submission of Mr.Sacchin Puri is that both the Agreements
are properly stamped. The objection raised by the petitioners is an
after-thought and not sustainable in law. Mr.Puri has referred Rates
of Stamp Duty in Delhi.
17. In the present case, it is an undisputed fact that the agreement
was executed in Delhi. Both parties are residing and carrying on
business in Delhi. No arguments were addressed on behalf of
petitioners that the stamp duty is not paid in accordance with Delhi
rates. Admittedly, both the documents are stamped on the stamp
paper of Rs.100/-. The extract of the Rules of Stamp Duty in Delhi,
Schedule-1A which contained the description of instrument and
proper stamp duty in relation to agreement or memorandum of an
agreement in item 5 reproduced below :-
5. AGREEMENT OR
MEMORANDUM OF AN
AGREEMENT
(a) If relating to the sale of a One rupee for every Rs.10,000
bill of exchange; or part thereof
(b) If relating to the sale of a One rupee for every Rs.10000
Government Security or or part thereof the value of the
share in an incorporated security share subject to
company or other body maximum Rs.1000
corporate.
(c) If not otherwise provided Fifty rupees.
for;
Exemptions
Agreement or memorandum
of agreement:-
(a) For or relation to the sale
of goods or merchandise
exclusively, not being a Note
or Memorandum chargeable
under No.43;
(b) Made in the form of
tenders to the Central Govt.
for or relating to any loan.
18. It is evident that prima facie both the documents are duly
executed in Delhi and are properly stamped as per the rates of stamp
duty in Delhi (Schedule 1-A). There is no force in submission made
on behalf of the petitioners that the rate of stamp duty ought to have
been paid as applicable to Uttar Pradesh (UP) as the documents
were executed in Delhi. The appointment of the Tribunal by the
consent order, therefore, is not against the law.
19. It is also pertinent to mention here that the consent order for
appointment of Tribunal was passed on 3rd August, 2012 i.e. after the
decision of Supreme Court on 20th July, 2011 in the case of SMS Tea
Estates Private Limited (supra). The petitioners were aware about
the stamp duty affixed on the said documents on that date. Even
before the learned Arbitrator, the petitioners did not raise the said
objection either at the time of filing their counter-claim at the time of
admission/denial of documents or at the time of framing of issues.
The same was again raised after the expiry of more than 3 years.
20. In the case of Jupudi Kesava Rao v. Pulavarthi Venkata
Subbarao and others, reported in (1971) 1 Supreme Court Cases
545, in para 14, the Supreme Court has held as under:-
"14. If Section 35 only deals with original instruments
and not copies Section 36 cannot be so interpreted as to
allow secondary evidence of an instrument to have its
benefit. The words "an instrument" in Section 36 must
have the same meaning as that in Section 35. The
legislature only relented from the strict provisions of
Section 35 in cases where the original instrument was
admitted in evidence without objection at the initial stage
of a suit or proceeding. In other words, although the
objection is based on the insufficiency of the stamp
affixed to the document, a party who has a right to object
to the reception of it must do so when the document is
first tendered. Once the time for raising objection to the
admission of the documentary evidence is passed, no
objection based on the same ground can be raised at a
later stage. But this in no way extends the applicability of
Section 36 to secondary evidence adduced or sought to
be adduced in proof of the contents of a document which
is unstamped or insufficiently stamped."
21. Even otherwise, the application for modification is not
maintainable as it appears that the petitioners intended to seek the
prayer of review of order dated 4th July, 2011, though in the
application, it is mentioned as modification/clarification of the order.
The Explanation of Order XLVII CPC says that no ground for review
on the basis of subsequent judgment would be available once the
final order is passed and the matter is disposed of. The said
Explanation reads as under:-
"Explanation - The fact that the decision on a question of
law on which the judgment of the Court is based has been
reversed or modified by the subsequent decision of a
superior Court in any other case, shall not be a ground for
the review of such judgment."
22. As far as the reliance on Vandana Batra (supra) is concerned,
the findings therein do not help the case of the petitioners as the facts
and circumstances are materially different. In the said case, the lease
deed was not stamped. The objection was raised by the party at the
initial stage itself and further after hearing, the learned Arbitrator had
arrived at finding and terminated the proceedings himself. The said
decision is not applicable to the facts of the present case.
23. The petitioners had filed the applications in February, 2015. The
same is otherwise highly belated and an after-thought. The
petitioners' application in the arbitration proceedings is still pending. If
so advised, they may request the Arbitral Tribunal to consider the
same and if the Tribunal is satisfied, the same be decided on merits.
24. In view of aforesaid reasons, both the applications are
accordingly dismissed.
(MANMOHAN SINGH)
JUDGE
AUGUST 04, 2015
