Madras High Court
Ringfeder Power Transmission ... vs Rajesh Mootha on 11 July, 2023
ARB. O.P.(Com. Div) No.298 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 11.07.2023
CORAM
THE HON'BLE MR.JUSTICE ABDUL QUDDHOSE
ARB. O.P.(Com. Div) No.298 of 2023
and
Arb. Application No.184 of 2023,
O.A. No.293 of 2023 and A. No.2851 of 2023
Ringfeder Power Transmission India Private Ltd.,
Represented by its Managing Director
Mr.Dheepan Ramalingam
No.4, Mount Poonamallee Road,
Kattupakkam,
Chennai – 600 056. ... Petitioner
vs.
Rajesh Mootha
No.555, MKN Road,
Alandur,
Chennai – 600 016. ... Respondent
Prayer : Arbitration Original Petition (Commercial Division) filed under
Section 11(6) of the Arbitration and Conciliation Act, 1996 to appoint an
Arbitrator to adjudicate the dispute between the petitioner and the respondent in
terms of the Agreement dated 29.04.2021and to direct the respondents to pay
costs.
For Petitioner : Mr.C. Suraj
For Respondent : Mr.Anish Gopi
for M/s.P.B. Ramanujam Associates
https://www.mhc.tn.gov.in/judis
1/18
ARB. O.P.(Com. Div) No.298 of 2023
ORDER
Arbitration O.P. (Comm. Div.) No.298 of 2023 has been filed by the
petitioner seeking for appointment of an Arbitrator under Section 11 of the
Arbitration and Conciliation Act, 1996.
2. There seems to be a dispute between the petitioner and the respondent
under a Built Suit Facility Agreement dated 29.04.2021. Under the aforesaid
agreement, the respondent has agreed to construct a building and thereafter on
completion hand over possession of the same and grant sub lease in favour of
the petitioner for a specified period. Advance payments have been made by the
petitioner to the respondent under the Built Suit Facility Agreement dated
29.04.2021.
3. According to the petitioner, the respondent has committed breach of
contract by not adhering to the terms and conditions of the Built Suit Facility
Agreement dated 29.04.2021. There is an arbitration agreement in the Built
Suit Facility Agreement dated 29.04.2021 which is extracted hereunder :
12. GOVERNING LAW AND ARBITRATION :
12.1 Governing Law : This Agreement is governed by and shall be
construed in accordance with the laws of the Republic of India.
12.2 Dispute Resolution : The non-defaulting party may give written
notice of the Dispute to the defaulting party on the occurrence of the Event of
Default as provided under Clause 7(a), (b), (e), (f), (g), (h), (i), (j) & (k) of this
Agreement which gives rise to such dispute or on the day such event comes to
the notice of the applicable Party. If any dispute arising between the Parties
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
are not amicably settled within (7) seven days of commencement of attempts
to settle the dispute, the Dispute shall be referred to and be finally
adjudicated by Arbitration. For sake of clarity, the parties agree that the
seven days period herein provided runs simultaneously along with the seven
days exercise their right under Clause 8(a) & Clause 8(c) of this Agreement.
12.3 Arbitration : The Parties agree that the Seat of Arbitration
proceedings will be Chennai in the English language in accordance with the
provisions of the Arbitration and Conciliation Act, 1996 as it then would be
prevalent by a Sole arbitrator mutually appointed by the Parties. The
decision of the sole arbitrator shall be final and binding on the Parties.
4. The petitioner seeks for refund of the advance amount together with
interest and damages from the respondent for the alleged breach of contract
committed by the respondent under the Built Suit Facility Agreement dated
29.04.2021. The petitioner had sent a termination notice on 24.02.2023 to the
respondent terminating the contract i.e., Built Suit Facility Agreement dated
29.04.2021. The petitioner has also appointed an Arbitrator and has initiated
arbitration by invoking the Arbitration Clause available in the Built Suit
Facility Agreement dated 29.04.2021 by sending a notice of invocation to the
respondent on 29.03.2023. A reply dated 19.04.2023 has also been sent by the
respondent to the petitioner denying the contentions of the petitioner.
Thereafter, the petitioner had filed two applications under Section 9 of the
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
Arbitration and Conciliation Act, 1996 viz., Arbitration Application No.184 of
2023 and O.A. No.293 of 2023.
5. Arbitration Application No.184 of 2023 was filed seeking for a
direction to the respondent to furnish security by way of a Bank Guarantee to
the extent of the advance amounts paid by the applicant and O.A. No.293 of
2023 was filed for an injunction to restrain the respondent from not putting up
any further construction and from handing over possession of the property to a
third party. The respondent had entered appearance in the said applications and
they have filed an application in Application No.2851 of 2023 seeking for
dismissal of Arbitration Application No.184 of 2023 filed by the applicant on
the ground that the Arbitration Agreement, which the applicant relies upon is
contained in an insufficiently stamped document. All the three applications are
still pending consideration and is listed before this Court today. Subsequent to
the filing of the aforesaid applications, Arbitration O.P. (Comm. Div.) No.298
of 2023 has been filed under Section 11 of the Arbitration and Conciliation Act,
1996 by the applicant based on the Arbitration Agreement seeking for
appointment of an Arbitrator by this Court.
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
6. The learned counsel for the respondent in Arbitration O.P. (Comm.
Div.) No.298 of 2023 would submit that the contentions of the respondent,
which have been stated in Application No.2851 of 2023, wherein the
respondent had filed an application to dismiss the application namely
Arbitration Application No.184 of 2023 filed by the applicant under Section 9
of the Arbitration and Conciliation Act, 1996 can be treated as counter to the
application filed by the applicant under Section 11 of the Arbitration and
Conciliation Act, 1996 seeks for appointment of an Arbitrator by this Court.
7. The sum and substance of the dispute between the parties in this
Section 11 application viz., Arbitration O.P. (Comm. Div.) No.298 of 2023 is
whether the Built Suit Facility Agreement dated 29.04.2021 is an agreement
which comes under the purview of Article 5(i) of Indian Stamp Act, 1899,
which deals with an agreement relating to construction, or will it fall under the
purview of Article 5(j) which deals with an agreement not specifically provided
for under Article 5. The contention of the petitioner in this Section 11
application is that the agreement which the petitioner has entered into with the
respondent is in the nature of an agreement to enter into a lease and therefore,
Article 5(j) gets attracted and the stamp duty payable for the said Agreement is
only Rs.20/-. According to the applicant, the Built Suit Facility Agreement
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
dated 29.04.2021, has been sufficiently stamped in accordance with Article 5(j)
of the Indian Stamp Act, 1899 by affixing a stamp duty of Rs.20/-. However,
according to the respondent, the Built Suit Facility Agreement dated
29.04.2021 is insufficiently stamped. According to the learned counsel for the
respondent being an agreement relating to construction of a building, the stamp
duty payable by the petitioner for the said agreement will fall within the
purview of Article 5(i) of the Indian Stamp Act, 1899, which relates to
construction of building. According to him, as per the said Article, the Stamp
duty payable is Rupee one for every Rs.100/- or part thereof of the cost of the
proposed construction or the value of the construction or the consideration
specified in the agreement, whichever is higher.
8. The learned counsel for the petitioner relied upon relevant Clauses in
the Built Suit Facility Agreement dated 29.04.2021, wherein an arbitration
agreement is found. After relying upon the said Clauses, he would submit that
the Built Suit Facility Agreement dated 29.04.2021 is only an agreement to
enter into a future lease as the petitioner has not been put in possession of the
property. The learned counsel for the petitioner also relied upon Section
17(2)(v) of the Registration Act, 1908 and would submit that since the Built
Suit Facility Agreement dated 29.04.2021 merely creates a right for the
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
petitioner to obtain another document in the nature of a sublease agreement
from the respondent, the question of payment of Stamp duty as per Section
(5)(i) will not arise. He would also submit that as on date, the petitioner does
not have any vested right over the super structure constructed by the respondent
and therefore, the stamp duty payable by the petitioner under the Built Suit
Facility Agreement dated 29.04.2021 is only under Article 5(j) of the Indian
Stamp Act i.e., Rupees twenty only.
9. The learned counsel for the petitioner would also submit that the
decision of the Hon'ble Supreme Court in the case of N.N.Global Mercantile
Private Ltd., vs. Indo Unique Flame Ltd. And others reported in 2023 SCC
Online SC 495 has no applicability to the facts of the instant case. He would
submit that in the aforesaid decision of the Hon'ble Supreme Court, it has been
made clear that the said decision was pronounced by the Hon'ble Supreme
Court not with reference to an application under Section 9 of the Arbitration
and Conciliation Act, 1996. He would also submit that the facts of the case in
the decision of the Hon'ble Supreme Court referred to supra are totally different
from the facts of the instant case. According to the learned counsel for the
petitioner, since the petitioner was not put in possession and does not have any
vested right as on date over the constructed portion of the building nor over the
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
land, the decision of the Hon'ble Supreme Court referred to supra has no
applicability to the facts of the instant case. In support of his stand that only in
cases where it is evident that possession, right or title is passed on to the
applicant under the agreement, the question of payment of Stamp duty under
Article 5(i) may arise. He relied upon a judgment of the Hon'ble Supreme
Court in the case of Food Corporation of India and others vs. Babulal
Agrawal reported in 2004 2 SCC 712. He would submit that in the said
judgment, it has been made clear that only in cases, where under an agreement
a person has been put in possession and a right or title has been created in his
favour at the time of the agreement, the document requires to be stamped as per
Article 5(i) of the Stamp Act and is admissible in evidence.
10. Learned counsel for the petitioner would submit that in the case on
hand, under the Built Suit Facility Agreement dated 29.04.2021, it has been
made clear that it is in the nature of an agreement to enter into a lease as the
sublease agreement will be entered into between the parties only after the due
performance of the Built Suit Facility Agreement dated 29.04.2021 by the
respondent. He would submit that being in the nature of an agreement to enter
into a lease, it is only an executory agreement and not an agreement creating
rights in the immovable property in favour of the petitioner and therefore, the
requirement to pay Stamp Duty as per Article 5(i) will not arise.
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
11. Per contra, learned counsel appearing for the respondent would
reiterate the contents of the application filed by the respondent seeking for
dismissal of Section 9 applications filed by the applicant by stating that the
Built Suit Facility Agreement dated 29.04.2021 is in the nature of an agreement
for construction and therefore, the stamp duty payable will fall under the
purview of Article 5(i) of the Indian Stamp Act, 1899 and not under Article
5(j). He also drew the attention of this Court to the decision of the Hon'ble
Supreme Court in the case of case of N.N.Global Mercantile Private Ltd., vs.
Indo Unique Flame Ltd. And others reported in 2023 SCC Online SC 495
referred to supra. In particular, he referred to paragraphs 117, 118, 120 of the
said judgment. He would submit that as seen from the aforesaid decision of the
Hon'ble Supreme Court, an instrument, which is exigible to stamp duty, which
contains an Arbitration Clause and which is insufficiently stamped, cannot be
said to be a contract within the meaning of Section 2(h) of the Contract Act
and enforceable as per Section 2(g) of the Contract Act. He would further
submit that as seen from the aforesaid decision of the Hon'ble Supreme Court
an arbitration agreement in an unstamped instrument, when it is mandatorily
required to be stamped is not an enforceable arbitration agreement.
12. Relying upon the aforesaid decision of the Hon'ble Supreme Court,
the learned counsel for the respondent would submit that the Built Suit
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
Facility Agreement dated 29.04.2021 which contains the Arbitration Clause has
been insufficiently stamped and therefore, not admissible in evidence and
therefore, the Arbitration agreement contained therein cannot be acted upon by
the applicant for the purpose of seeking appointment of an Arbitrator by this
Court under Section 11 of the Arbitration and Conciliation Act, 1996.
Discussion :
13. As seen from the terms and conditions of the Built Suit Facility
Agreement dated 29.04.2021 entered into between the petitioner and the
respondent it is in the nature of an agreement to enter into a lease. The
petitioner has agreed to enter upon the property which has been allotted to the
respondent by SIPCOT on completion of the construction by the respondent as
per the Built Suit Facility Agreement dated 29.04.2021. The same is also not
disputed by the respondent as seen from his application filed to dismiss the
Section 9 application filed by the petitioner. The relevant Clauses in the Built
Suit Facility Agreement dated 29.04.2021 also confirms that the petitioner will
be put in possession of the property only after the completion of the
construction by the respondent as per the Built Suit Facility Agreement dated
29.04.2021. Admittedly, the Built Suit Facility Agreement dated 29.04.2021
contains an Arbitration agreement which is stated supra.
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
14. The only issue that arises for consideration in this Section 11
application is whether the agreement viz., the Built Suit Facility Agreement
dated 29.04.2021 has been properly stamped or not. According to the petitioner
it is properly stamped, whereas the respondent contends that it is insufficiently
stamped. According to the respondent, the agreement viz., Built Suit Facility
Agreement dated 29.04.2021 is in the nature of an agreement for construction
and therefore Article 5(i) of the Indian Stamp Act, 1899 applies, whereas the
petitioner contends that the Built Suit Facility Agreement, dated 29.04.2021
will fall under Article 5(j) of the Stamp Act and hence the stamp duty paid at
Rs.20/- is correct.
15. Article 5(i) and 5(j) of the Indian Stamp Act, 1899 reads as follows :-
5(i) If relating to construction of One rupee for every hundred
building rupees or part thereof of the
cost of the proposed
construction or the value of
construction or the
consideration specified in
the agreement, whichever is
higher.
Explanation – For the purpose of this clause, “building” includes any unit, residential,
commercial, institutional, industrial or otherwise proposed to be constructed on an
undivided share of land
5(j) If not otherwise provided [Twenty rupees]
Exemptions :-
Agreement or memorandum of agreement : (a) for or relating to the purchase or sale of
goods or merchandise exclusively not being an agreement or memorandum of agreement
chargeable under clause (d), clause (e), clause (f), clause (g), or clause (h) of this article
or a note or memorandum chargeable under No.43; (b) made in the form of tenders to
the Central Government for, or relating to any loan
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
16. When it is not in dispute that the petitioner has not been put in
possession of the property and no rights over the property has been created in
its favour under the Built Suit Facility Agreement dated 29.04.2021, the
question of payment of Stamp Duty as per Article 5(i) of the Indian Stamp Act,
1989 will not arise for the following reasons :-
a) The Built Suit Facility Agreement dated 29.04.2021 does not
confer any vested right over the property in favour of the petitioner.
b) The petitioner has paid only the advance amounts to the
respondent under the Built Suit Facility Agreement dated 29.04.2021
and according to the petitioner, the respondent has committed breach of
contract. It is also seen from the Clauses contained in the agreement
that only after completion of the construction by the respondent and on
payment of the consideration by the petitioner, the respondent will put
the petitioner in possession of the property, whereas that stage has not
arisen as of now.
c) The Built Suit Facility Agreement dated 29.04.2021 also
stipulates that in future, the parties will have to enter into a sub lease
agreement on completion of the construction by the respondent under
which, the petitioner will be put in possession of the property.
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
d) Article 5(j) of the Indian Stamp Act, 1899 which deals with
agreements which are not otherwise provided will get attracted in view
of the fact that the nature of the Built Suit Facility Agreement dated
29.04.2021 is only in the nature of an agreement to enter into a lease
and is not the final agreement which the parties have agreed to enter
into in the near future on completion of the construction by the
respondent.
17. It is clear from the Hon'ble Supreme Court's decision relied upon by
the learned counsel for the petitioner in the case of Food Corporation of India
and others vs. Babulal Agrawal reported in 2004 2 SCC 712, that when no
possession, right or title has passed on to the petitioner in praesenti at the time
of the execution of the agreement, such an agreement is only an executory
agreement and not an agreement creating rights in the immovable property.
The Built Suit Facility Agreement dated 29.04.2021 which contains an
Arbitration Clause is one such agreement which has not created any rights as on
date of the agreement for the petitioner over the property in question. Hence,
the petitioner has properly valued the said agreement by paying the proper
stamp duty of Rs.20/- as per Article 5(j) of the Indian Stamp Act, 1899.
18. The petitioner has also terminated the contract by its termination
notice dated 24.02.2023 on account of the alleged breach of contract committed
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
by the respondent. The petitioner is also not seeking any rights over the
property in question and therefore, the Stamp Duty of Rs.20/- affixed in the
Built Suit Facility Agreement dated 29.04.2021 which contains an Arbitration
Clause is correct and only in accordance with the residuary Clause viz., Article
5(j) of the Indian Stamp Act, 1899, the stamp duty has been paid at Rs.20/-
19. The Constitution Bench judgment of the Hon'ble Supreme Court
relied upon by the learned counsel for the respondent in the case of
N.N.Global Mercantile Private Ltd., vs. Indo Unique Flame Ltd. And others
reported in 2023 SCC Online SC 495 has no applicability to the facts of the
instant case as in that decision, possession was delivered to the respondent.
Since the petitioner has satisfied that the document, viz., Built Suit Facility
Agreement dated 29.04.2021 has been properly stamped in accordance with
law, the Constitution Bench judgment of the Hon'ble Supreme Court relied
upon by the learned counsel for the respondent in the case of N.N.Global
Mercantile Private Ltd., vs. Indo Unique Flame Ltd. And others reported in
2023 SCC Online SC 495 has no bearing for the instant case as that was a
decision, where the subject document was insufficiently stamped and the
Hon'ble Supreme Court has held that an Arbitration agreement contained in the
insufficiently stamped document cannot be acted upon. Whereas in the instant
case since the agreement viz., Built Suit Facility Agreement dated 29.04.2021
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
which contains an Arbitration Clause has been sufficiently stamped in
accordance with Article 5(j) of the Indian Stamp Act 1899, the arbitration
agreement contained therein is a valid arbitration agreement and is an
enforceable one.
20. For the foregoing reasons, the petition filed by the petitioner in
Arbitration O.P. (Comm. Div.) No.298 of 2023 under Section 11 of the
Arbitration and Conciliation Act, 1996 seeking for appointment of an
Arbitrator by this Court is maintainable as the arbitration agreement in the Built
Suit Facility Agreement dated 29.04.2021 is a valid arbitration agreement. The
petitioner has invoked the arbitration prior to the filing of this petition by
sending a notice to the respondent on 29.03.2023, which has been duly
acknowledged by the respondent, who has also sent a reply on 19.04.2023.
Since there was no consensus between the parties with regard to the name of
the Arbitrator, the petitioner was constrained to file this application under
Section 11 of the Arbitration and Conciliation Act seeking for appointment of
an Arbitrator.
21. For the foregoing reasons, necessarily, this Court will have to appoint
an Arbitrator since there is a valid arbitration agreement and there has been no
consensus between the parties for appointment of an Arbitrator. Accordingly,
this petition is allowed as prayed for in Arbitration O.P. (Comm. Div.) No.298
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
of 2023 by appointing Mr.P.V. Balasubramaniam, learned Senior Advocate as
Arbitrator to decide the disputes / differences between the parties arising out of
the Built Suit Facility Agreement dated 29.04.2021 on merits and in
accordance with law and pass an Arbitral Award accordingly by issuing the
following directions :
(a) This Court appoints Mr.P.V. Balasubramaniam, learned
Senior Advocate, who is having office at No.47/2, Rams Surabhi
Apartments, 1st Main Road, R.A.Puram, Chennai - 600 028, (Mobile
No.9841041888) as a sole Arbitrator to decide the disputes between
the petitioner and the respondent arising out of the Built Suit Facility
Agreement, dated 29.04.2021.
(b) The Arbitrator shall be paid his remuneration / fees in
accordance with the 4th schedule of the Arbitration and Conciliation
Act, 1996.
(c) Both the parties shall equally share the arbitrator's fees.
(d) The Arbitrator shall conduct the arbitration in accordance
with the provisions of the Arbitration and Conciliation Act, 1996 and
shall complete the arbitration within the specified time as prescribed
under the said Act.
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
22. The Section 9 applications viz., Arbitration Application No.184 of
2023 and O.A. No.293 of 2023 are disposed of by directing the applicant to
approach the Arbitrator for seeking the said reliefs by filing applications under
Section 17 of the Arbitration and Conciliation Act, 1996. It is for the
Arbitrator to decide the merits of those interim applications as and when they
are filed and decide the same in accordance with law. Consequently
application Nos.2851 of 2023 filed by the respondent is closed. No costs.
11.07.2023
vsi2
https://www.mhc.tn.gov.in/judis
ARB. O.P.(Com. Div) No.298 of 2023
ABDUL QUDDHOSE, J.
vsi2
ARB. O.P.(Com. Div) No.298 of 2023
11.07.2023
https://www.mhc.tn.gov.in/judis
