Orissa High Court
M/S. Tarini Prasad Mohanty vs M/S. Sunflag Iron And Steel Co. .... ... on 25 February, 2025
Author: S.K. Panigrahi
Bench: S.K. Panigrahi
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: AR-CUM-SR. SECRETARY
Reason: Authentication
Location: ORISSA HIGH COURT, CUTTACK
Date: 06-Mar-2025 17:02:27
IN THE HIGH COURT OF ORISSA AT CUTTACK
W.P.(C) No.20185 of 2024
(In the matter of an application under Articles 226 and 227 of the
Constitution of India, 1950).
M/s. Tarini Prasad Mohanty, .... Petitioner(s)
Keonjhar
-versus-
M/s. Sunflag Iron and Steel Co. .... Opposite Party (s)
Ltd., Nagpur
Advocates appeared in the case through Hybrid Mode:
For Petitioner(s) : Mr. Pitambar Acharya, Sr. Adv.
Along with
Mr. S. S. Tripathy, Adv.
For Opposite Party (s) : Mr. S. K. Padhi, Sr. Adv.
Along with
Mr. V. Rajsekharan, Adv.
Mr. B. Panigrahi, Adv.
CORAM:
DR. JUSTICE S.K. PANIGRAHI
DATE OF HEARING:-14.02.2025
DATE OF JUDGMENT:-25.02.2025
Dr. S.K. Panigrahi, J.
1. This Writ Petition is preferred by the Petitioner against order dated
30.5.2024 passed by the Ld. Arbitral Tribunal in I.A. No. 4, whereby the
Ld. Arbitral Tribunal held that the Stamp Duty payable on Agreement
dated 12.2.2004 and subsequent agreements/amendments thereto is
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governed by Article 5(c) of Schedule I of the Indian Stamp Act, 1899, i.e.
Agreement or Memorandum of Agreement.
I. FACTUAL MATRIX OF THE CASE:
2. The Petitioner is a sole proprietorship concern and is the holder of the
Mining Lease for Iron and Manganese Ore issued by the Government of
Odisha in respect of an area situated at village Naibaga and Katupali in
the District of Keonjhar, Odisha. The Opposite Party is a Public Limited
Company involved in the manufacturing of steel.
3. The facts giving rise to the present Petition can be pithily summarised
as under:
(i). On 25.11.1998, the Petitioner applied to the Department of Steel &
Mines, Government of Orissa for grant of mining lease for iron and
manganese ore for an area of over 48.117 hectares in the villages of
Naibaga and Katupali, District of Keonjhar, Odisha. After receiving
necessary approvals from the Union Ministries and State Departments,
on 17.11.2009, a Mining Lease deed was entered into between the
Government of Odisha and the Petitioner for a period of twenty years
for carrying out mining or other operations as prescribed by the
Government of India under the Mines and Minerals (Development and
Regulation) Act, 1957. By letter dated 27.06.2011, the Deputy Director
Mines, Joda, Department of Steel & Mines, Government of Odisha
allowed the Petitioner to operate the Mine. Subsequently, a
Supplementary Lease Deed was signed between the Government of
Odisha and the Petitioner extending the lease deed till 16.11.2059,
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subject to fulfilment of certain conditions as provided in Section 8A of
the MMDR Act, 1957.
(ii). On 12.02.2004, the Petitioner and Opposite Party entered into an
Agreement of Sale of Iron Ore (hereinafter referred to as the "Sale
Agreement") for a period of ten years from the date of commencement
of mining operations. As per Clauses 1.1, 1.2 and 4 of the Sale
Agreement, the Opposite Party was entitled to exclusive purchase of the
entire extracted iron ore from the mine of the Petitioner with at least
10,000 MT of iron ore on a monthly average over a quarter after twelve
months of commencement of mining operation. Furthermore, the said
clauses provided for a profit-sharing margin of 70% upon the sale of the
iron and manganese ore and a specific covenant that the Petitioner
cannot sell/part-with/dispose-off any manganese or iron ore from the
leasehold mine. The Sale Agreement was amended by a Supplementary
Agreement dated 23.12.2006, by an Agreement 13.7.2009 and by second
Ore Sales Amendment Agreement dated 9.1.2011.
(iii). The Opposite Party raised some claims arising out of the breach of the
Sale Agreement and subsequent amendments thereto. The Opposite
Party invoked arbitration under Clause 9 of the Sale Agreement. As the
Petitioner did not refer the disputes to arbitration, the Opposite Party
approached this Court under Section 11(6) of the Arbitration and
Conciliation Act, 1996 for appointment of an arbitrator. This Court by
its judgment dated 22.11.2022 in ARBP No. 29 of 2022, appointed the
Sole Arbitrator to adjudicate the disputes between the parties.
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(iv). The Statement of Claim was filed before the Sole Arbitrator on 30.1.2023
and the Statement of Defence and Counterclaims on 15.4.2023. In the
Statement of Defence, admittedly, the Petitioner did not raise any plea
under Section 16 of the Arbitration and Conciliation Act, 1996 that the
Arbitral Tribunal did not have jurisdiction to decide the disputes
between the parties. But the moot question was with respect to the
stamping of agreement and its consequences.
(v). On 25.4.2023, the majority of the judges of a Constitution Bench of the
Supreme Court in NN Global Mercantile Pvt Ltd v. Indo Unique Flame
Ltd & Ors1. held that an unstamped instrument containing an
arbitration agreement is void under Section 2(g) of the Indian Contract
Act, 1872. Such an unstamped instrument, not being a contract and not
enforceable in law, cannot exist in law and therefore the Arbitration
agreement in such aninstrument can be acted upon only if it is duly
stamped. Moreover, it was held that the "existence" of an arbitration
agreement contemplated under Section 11(6)(a) of the Arbitration and
Conciliation Act, 1996 is not merely a facial existence or existence in
fact, but also "existence in law". Therefore, it was concluded that the
Court acting under Section 11 of the Arbitration and Conciliation Act,
1996 cannot disregard the mandate of Sections 33 and 35 of the Stamp
Act, 1899 requiring it to examine and impound an unstamped or
insufficiently stamped instrument.
(vi). Subsequently, the Petitioner sought permission from the Ld. Sole
Arbitrator to raise preliminary issues with regards to the
(2023) 7 SCC 1
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maintainability of the arbitral proceeding which was permitted vide the
Ld. Sole Arbitrator's order dated 16.5.2023. Pursuant thereto, the
Petitioner filed an application on 4.8.2023 under Section 16 of the
Arbitration and Conciliation Act, 1996 raising the following three issues:
a). The Agreements executed between the parties (including the
arbitration agreement) are not adequately stamped, and
consequently, inadmissible, and non-est in law, therefore the arbitral
proceedings arising there under is not maintainable.
b). The arbitral proceedings have been initiated/ filed by Mr. Pawan
Kumar, who has not been duly authorized by the Claimant, and
therefore, the claims preferred by the Claimant are not maintainable.
c). In respect of the electronic records filed and relied upon by the
Claimant, they have not filed a supporting affidavit with the
required details as mandated under Section 65B of the Indian
Evidence Act, 1872.
(vii). It is pertinent to mention here that, upon the Petitioner's request, the
Tribunal segregated the aforesaid three issues into three different
applications, viz. IA-4, IA-5 and IA-6.
(viii). The present Petition pertains to the Impugned Order dated 30.5.2024
passed by the Ld. Tribunal in IA-4. The said IA-4 deals with the issue of
Agreement being insufficiently stamped under the Indian Stamp Act,
1899 as amended by the Indian Stamp Act (Odisha Amendment), 2021
(hereinafter referred to as "Stamp Act").
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(ix). By way of the Impugned Order, the Ld. Sole Arbitrator dismissed IA-4.
The Ld. Sole Arbitrator returned its finding that the Sale Agreement is
an 'agreement to sell' and not a conveyance or sale. As a result, the Sale
Agreement would fall under the category of Article 5(c) of Schedule I of
the Stamp Act i.e., Agreement or Memorandum of Agreement.
4. Aggrieved by the Impugned Order, the instant Petition has been
preferred. As the facts leading up to the instant Petition have been laid
down, this Court shall endeavour to summarise the contentions of the
Parties and the broad grounds that have been raised to seek the exercise
of this Court's writ jurisdiction.
II. PETITIONER'S SUBMISSIONS:
5. The Ld. Sr. Counsel appearing for the Petitioner Mr. Pitambar Acharya
contends that there has been a complete failure by the Arbitral Tribunal
in exercising jurisdiction and deciding the application under Section 16.
6. Insofar as the maintainability of the petition is concerned, it is urged by
him that the provisions of the Act cannot oust the jurisdiction of the
High Courts under Article 226 and 227. While the said power ought to
be exercised sparingly, the jurisdiction of High Courts can not be ousted
especially when there is a manifest error committed by the Arbitral
Tribunal in that case, the High Court ought to exercise jurisdiction
under Article 227.
7. In this connection, Ld. Sr. Counsel for the Petitioner referred to the
judgments in Deep Industries Ltd. v. Oil and Natural Gas Corporation
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Ltd.2 and Bhaven Construction through Authorised Signatory
Premjibhai K. Shah v. Executive Engineer Sardar Sarovar Narmada
Nigam Ltd.3. Relying upon the judgment in Deep Industries (supra) his
submission was that in the said case the Supreme Court categorically
held that the jurisdiction of the writ court under Article 227 would not
be ousted.
8. Next, it is submitted that the total value of the claim made by the
Claimant in arbitration, on account of alleged short-supply or non-
supply of iron ore, exceeds ₹4,000 crores.
9. The Learned Tribunal returned its finding that the Agreement is an
"agreement to sell" and not a conveyance or sale. As a result, the Sale
Agreement would fall under the category of Article 5(c) of Schedule I of
the STAMP ACT, i.e., Agreement or Memorandum of Agreement. The
Tribunal has returned the aforesaid finding on the basis that the title or
property in the iron ore has not passed to the Claimant upon the
execution of the agreements. As set out in the following paragraphs, the
Petitioner submits that the impugned order is bad in law and suffers
from not only non-appreciation of material facts but also abject
misinterpretation of the settled position of law under the SOGA and the
STAMP ACT.
10. The Petitioner further submits that Section 2(10) of the STAMP ACT
provides the definition of "conveyance." It is contended that the Sale
Agreement falls under Article 23 of Schedule I of the Indian Stamp Act,
2019 SCC OnLine SC 1602
(2022) 1 SCC 75
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as amended by the Orissa Amendment, as the Sale Agreement would
amount to a "Conveyance" as defined under Section 2(10) of the
STAMP ACT.
11. It is submitted that as per the STAMP ACT, conveyance occurs when
the transfer of goods is effected between parties. It is the Opposite
Party's (the Claimant in the arbitration proceedings) own case that the
right in the iron ore vested in the Opposite Party from the date of the
Sale Agreement. In other words, the conveyance took place on the date
of the Sale Agreement.
12. The Petitioner further relied on the judgment of the Supreme Court in
State of Uttaranchal v. Khurana Brothers,4 wherein it has been held that
an agreement for the sale of crude resin was a conveyance under
Section 2(10) of the STAMP ACT, and therefore, it was chargeable to
stamp duty under Article 23, Schedule I-B.
13. It is further submitted that a perusal of the first purchase order dated
06.08.2011 ("1st PO"), which is one out of 89 purchase orders placed on
the Petitioner, along with Clause 5(c) and Clause 4 of the Sale
Agreement, would demonstrate that the 'transfer of property in goods'
was concluded as per the scheme of Section 4(4) of the SOGA as early as
in 2011.
14. The stamp duty presently paid on all agreements is only INR 100/-.
However, the amount or value of consideration under the Sale
Agreement exceeds INR 20,000/-. Therefore, even on a prima facie
assessment, it is apparent that the stamp duty paid is insufficient. For
2010 (14) SCC 334
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instance, in relation to the 1st PO alone, which amounts to INR
6,60,00,000/-, the stamp duty payable as per Article 23 of the STAMP
ACT would be INR 6,60,000/-. This further substantiates that the Sale
Agreement, read in conjunction with the purchase orders, qualifies as a
"conveyance" and should be subjected to appropriate stamp duty under
the STAMP ACT.
15. It is, therefore, submitted that the Tribunal failed to appreciate that until
the underlying instrument is impounded and adequate Stamp duty is
paid, determination of rights, liabilities, obligations and enforceability
of such an instrument must be kept in abeyance. Therefore, at this stage,
the arbitral proceedings ought to be kept in abeyance/suspension.
III. OPPOSITE PARTY'S SUBMISSIONS:
16. On the other hand, Ld. Sr. Counsel for the Opposite Party submits that
the orders of an Arbitral Tribunal are not amenable to writ jurisdiction.
17. The Counsel for the Opposite Party relied on multiple Supreme Court
pronouncements in Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.,5
Nivedita Sharma v. Cellular Operators Association of India,6 and
Thansingh Nathmal v. Superintendent of Taxes7 to argue that the
Arbitration Act is complete in itself and any interference by this court
shall be unwarranted and unnecessary. It is emphasized that the
Arbitration Act is a self-contained and specialized statute aimed at
(2011) 8 SCC 333
(2011) 14 SCC 337
AIR 1964 SC 1419
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ensuring swift and effective dispute resolution while minimizing
judicial interference.
18. Under Section 16, the only outcomes that are contemplated under the
Act are where the objection as to maintainability is upheld by the
Tribunal and whereby the Tribunal rejects the plea and continues with
the arbitral proceedings. In the former, when the plea is accepted by the
Tribunal under Section 16(2) or 16(3) of the Arbitration and Conciliation
Act, 1996, an appeal would lie under Section 37 of the Act. If the plea is
either rejected or no ruling is rendered by the Tribunal, the proceedings
would continue and the challenge if any would be only after the final
award is passed.
19. The Opposite Party further reiterates that the Learned Arbitral Tribunal
correctly held that the Sale Agreement is an "agreement to sell" and not
a conveyance or sale. The iron ore had not been immediately
transferred, and the transaction did not meet the legal requirements of a
conveyance under the Stamp Act. The agreements were sufficiently
stamped under Article 5(c) of Schedule I of the Stamp Act.
20. The Opposite Party denies that the Arbitral Tribunal erred in finding
that the iron ore to be extracted in the future did not pass to the
Claimant at the time of the execution of the agreements. The
Respondent reaffirms that the Sale Agreement was an executory
contract, and the property in the form of goods was to be transferred in
the future, subject to the conditions of the agreement.
21. The Opposite Party denies the Petitioner's assertion that iron ore worth
crores had been transferred under the Sale Agreement at the time of
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execution. The property in the iron ore had not passed at the time of
execution, and the agreement remained an "agreement to sell" until the
specified conditions were fulfilled.
22. The Opposite Party submits that the Petitioner's argument that
conveyance had occurred under the Sale Agreement lacks legal merit.
The Learned Arbitral Tribunal correctly interpreted the agreement as an
"agreement to sell," wherein the transfer of property would occur only
on a future date/ time.
23. The Opposite Party further agrees with the Learned Arbitral Tribunal's
application of Section 4(4) of the SOGA and denies the Petitioner's
assertion that the Tribunal failed to appreciate this provision. The
property in the form of goods was not transferred upon the execution of
the Sale Agreement but was subject to future conditions.
24. The Opposite Party denies that conveyance occurred under the
purchase orders issued under the Sale Agreement. The purchase orders
were part of the overall framework of the Sale Agreement, which
remained an "agreement to sell" and did not constitute a conveyance.
The Learned Arbitral Tribunal rightly classified the Sale Agreement as
such.
25. The Opposite Party denies that any additional consideration beyond
what was stipulated in the Sale Agreement was received by the
Petitioner. The Respondent denies that the findings of the Learned
Arbitral Tribunal are contrary to the judgment in Khurana Brothers
(supra). The facts of that case differ significantly from the present
matter, as Khurana Brothers (supra) dealt with an actual conveyance,
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whereas the present case involves an "agreement to sell." The
agreements in this case do not fall under the definition of "conveyance"
under Section 2(10) of the Stamp Act.
26. The Opposite Party categorically denies the Petitioner's contention that
the stamp duty paid on the Sale Agreement is insufficient. It is
reiterated that the stamp duty was duly and correctly calculated in
accordance with the applicable provisions of Article 5(c) of the Stamp
Act. The Petitioner's claim of insufficiency is entirely unfounded and
lacks any substantive legal basis. The agreements in question were duly
stamped at the time of execution, and there exists no deficiency in
compliance with the statutory requirements under the Stamp Act. The
mere fact that the Petitioner is now attempting to classify the Sale
Agreement as a "conveyance" to support its arguments does not alter
the legal position regarding the sufficiency of the stamp duty already
paid.
27. The Opposite Party further submits that the Petitioner's assertion that
the Sale Agreement transformed into a "sale" merely upon the issuance
of purchase orders is legally untenable and contrary to the fundamental
principles of contract law. It is evident from the explicit terms of the
Sale Agreement, as well as the nature of the transaction between the
parties, that the agreement was always intended to be an executory
contract.
28. The transfer of property in the iron ore was conditional and subject to
the fulfillment of specific contractual obligations, including compliance
with procedural and delivery requirements. The Learned Arbitral
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Tribunal, after due consideration of the contractual framework,
correctly determined that the Sale Agreement remained an "agreement
to sell" and did not constitute an immediate or outright sale.
29. The issuance of purchase orders did not, in any manner, alter the legal
nature of the agreement or result in the automatic transfer of ownership
in the iron ore. Therefore, the Respondent reiterates that the Tribunal's
findings on this issue are legally sound and should not be interfered
with.
30. The Opposite Party strongly refutes the Petitioner's contention that the
arbitral proceedings should be suspended or kept in abeyance pending
the alleged impounding of the Sale Agreement. It is submitted that
there exists no legal basis whatsoever for the impounding of the Sale
Agreement or for halting the arbitral proceedings. The Petitioner's
reliance on the Stamp Act to justify such a suspension is entirely
misplaced.
31. It is respectfully submitted that the arbitration must proceed without
any unwarranted delays, as there is no legitimate ground to suspend or
abate the matter at this stage
IV. ISSUES FOR CONSIDERATION
32. Having heard the parties and perused the materials available on record,
this Court has identified the following issues to be determined:
A. Whether this Court can exercise its writ jurisdiction to interfere with an
order passed by the Ld. Sole Arbitrator under Section 16 of the A&C
Act?
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B. Whether the Agreement dated 12.2.2004 and all subsequent agreements
thereof entered into between the Parties are governed by Article 5(C) of
Schedule I of the Indian Stamp Act, 1899?
C. Whether this Court ought to interfere with the impugned order?
V. ISSUE A: WHETHERTHIS COURT CAN EXERCISE ITS WRIT
JURISDICTION TO INTERFERE WITH AN ORDER PASSED BY
THE LD. SOLE ARBITRATOR UNDER SECTION 16 OF THE A&C
ACT?
33. The present Petitioner had preferred an Application under Section 16
before the Ld. Sole Arbitrator pursuant to the judgment of the Supreme
Court in Interplay Between Arbitration Agreements under Arbitration,
1996 & Stamp Act, 1899, In re8, wherein the Supreme Court was pleased
to arrive at the following conclusions:
"M. Conclusions
235. The conclusions reached in this judgment are
summarised below:
235.1. Agreements which are not stamped or are
inadequately stamped are inadmissible in evidence under
Section 35 of the Stamp Act. Such agreements are not
rendered void or void ab initio or unenforceable;
235.2. Non-stamping or inadequate stamping is a curable
defect;
(2024) 6 SCC 1
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235.3. An objection as to stamping does not fall for
determination under Sections 8 or 11 of the Arbitration Act.
The Court concerned must examine whether the arbitration
agreement prima facie exists;
235.4. Any objections in relation to the stamping of the
agreement fall within the ambit of the Arbitral Tribunal;
and
235.5. The decision in N.N. Global (2) [N.N. Global
Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7
SCC 1] and SMS Tea Estates [SMS Tea Estates (P)
Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66] are
overruled. Paras 22 and 29 of Garware Wall
Ropes [Garware Wall Ropes Ltd. v. Coastal Marine
Constructions & Engg. Ltd., (2019) 9 SCC 209] are
overruled to that extent."
34. It is pertinent to draw close attention to Paragraph 235.3 in Interplay
Between Arbitration Agreements under Arbitration, 1996 & Stamp Act,
1899, In re (supra) wherein the Court concluded that:
"An objection as to stamping does not fall for determination
under Sections 8 or 11 of the Arbitration Act. The Court
concerned must examine whether the arbitration agreement
prima facie exists".
35. If the said objection is not to fall under Section 8 or 11, then the 'Court'
i.e. the Ld. Tribunal's power to examine whether the arbitration
agreement prima facie exists falls under Section 16 of the A&C Act.
Section 16 of the A&C Act is reproduced hereunder for the sake of
convenience:
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"Section 16: (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.
(2) A plea that the arbitral tribunal does not have
jurisdiction shall be raised not later than the submission of
the statement of defence; however, a party shall not be
precluded from raising such a plea merely because that he
has appointed, or participated in the appointment of, an
arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of
its authority shall be raised as soon as the matter alleged to
be beyond the scope of its authority is raised during the
arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred
to in sub-section (2) or sub-section (3), admit a later plea if
it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in
sub-section (2) or sub-section (3) and, where the arbitral
tribunal takes a decision rejecting the plea, continue with
the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make
an application for setting aside such an arbitral award in
accordance with section 34."
(Emphasis supplied)
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36. Therefore, the Petitioner's application under Section 16 which was
moved after obtaining permission from the Ld. Sole Arbitrator was not
without basis or based on an erroneous interpretation of the Supreme
Court's judgment in Interplay Between Arbitration Agreements under
Arbitration, 1996 & Stamp Act, 1899, In re (supra).
37. In India, the maintainability of writ petitions in respect of arbitration
matters presents a nuanced legal challenge, requiring the balancing of
the extraordinary powers of High Courts under Articles 226 and 227 of
the Constitution of India with the objectives of the Arbitration and
Conciliation Act, 1996 (hereinafter "Arbitration Act").
38. Section 5 of the Arbitration Act minimises judicial interference in
arbitral proceedings, confining intervention strictly to the circumstances
outlined within the statute. However, courts have frequently grappled
with situations where exercising the writ powers was deemed necessary
to preserve the streams of justice. Over the years, landmark judgments
have delineated the scope of judicial intervention, affirming two
fundamental principles: (i) the writ jurisdiction of High Courts remains
intact despite Section 5 of the Arbitration Act; and (ii) its exercise must
be limited to rare and exceptional cases, such as those involving a
manifest lack of jurisdiction, bad faith, or violations of natural justice
principles.
39. This question assumes greater importance as arbitration continues to
gain prominence as an alternative dispute resolution mechanism in
India. While Arbitral Tribunals are afforded significant autonomy to
adjudicate disputes, judicial scrutiny is sometimes required to prevent
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the misuse of arbitration or a miscarriage of justice. Recent rulings of the
Apex Court have further clarified the contours of this balance,
emphasising that writ petitions should be entertained sparingly and in
line with the Arbitration Act's objective of efficient, independent
dispute resolution.
40. The extraordinary jurisdiction of High Courts in India, enshrined in
Articles 226 and 227 of the Constitution, serves as a foundation for
protecting fundamental rights and administering justice. Article 226
empowers High Courts to issue writs for the enforcement of
fundamental rights, offering a remedy against both legislative and
executive actions. Article 227, on the other hand, confers every High
Court with supervisory powers over all courts and tribunals within the
jurisdiction of such High Court. Together, these articles establish a
robust framework for judicial review, reinforcing the rule of law and
providing a mechanism to check the misuse of power.
41. The Arbitration Act establishes a robust legal framework designed to
facilitate efficient dispute resolution through arbitration. This landmark
legislation was crafted to minimise judicial intervention and enhance
party autonomy, thereby aligning Indian arbitration practices with
international norms and expectations. Section 5 of the Arbitration Act
embodies a fundamental principle: courts are expressly prohibited from
interfering in matters governed by the Arbitration Act, except as
explicitly stipulated within its framework. Through this provision, the
legislature aims to preserve the integrity of arbitration as a preferred
dispute resolution mechanism, ensuring that Arbitral Tribunals operate
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with the requisite independence to deliver fair and impartial awards. In
addition to defining the limits of judicial oversight, the Act
encompasses provisions that further reinforce the principle of minimal
intervention. It grants arbitrators substantial discretion to determine
procedural matters and the scope of their jurisdiction.
42. In Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.,9 the Supreme Court
characterised the Arbitration Act as a comprehensive and specialised
law designed to facilitate quick and efficient dispute resolution through
arbitration while reducing judicial interference.
43. One of the main objectives of the Arbitration Act is to minimise the
supervisory role of Courts in the arbitral process. Party autonomy and
settlement of disputes by an Arbitral Tribunal are the hallmarks of
arbitration law. Section 5 gives effect to the true intention of the parties
to have their disputes resolved through arbitration in a quick, efficient
and effective manner by minimising judicial interference in the arbitral
proceedings10.Parliament enacted Section 5 to minimise the supervisory
role of Courts in the arbitral process to the bare minimum, and only to
the extent "so provided" under the Part I of the Arbitration Act. In
doing so, the legislature did not altogether exclude the role of Courts or
judicial authorities in arbitral proceedings, but limited it to
circumstances where the support of judicial authorities is required for
the successful implementation and enforcement of the arbitral
process1112. The Arbitration Act in fact, envisages the role of Courts to
(2011) 8 SCC 333
Food Corpn. of India v. Indian Council of Arbitration, (2003) 6 SCC 564.
Union of India v. Popular Construction Co., (2001) 8 SCC 470
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"support arbitration process"13 by providing necessary aid and assistance
when required by law in certain situations.
44. Section 5 begins with the expression "notwithstanding anything contained
in any other law for the time being in force." The non obstante clause is
Parliament's addition to Article 5 of the Model Law. It is of a wide
amplitude and sets forth the legislative intent of limiting judicial
intervention during the arbitral process. In the context of Section 5, this
means that the provisions contained in Part I of the Arbitration Act
ought to be given full effect and operation irrespective of any other law
for the time being in force. It is now an established proposition of law
that the legislature uses non-obstante clauses to remove all obstructions
which might arise out of the provisions of any other law, which stand in
the way of the operation of the legislation which incorporates the non
obstante clause.14
45. In Chandavarkar Sita Ratna Rao v. Ashalata S. Guram15 , Sabyasachi
Mukharji, J. explained the purport of non obstante clause in the following
terms :
"67. A clause beginning with the expression
"notwithstanding anything contained in this Act or in some
particular provision in the Act or in some particular Act or
in any law for the time being in force, or in any contract" is
more often than not appended to a section in the beginning
with a view to give the enacting part of the section in case of
conflict an overriding effect over the provision of the act or
P. Anand Gajapathi Raju v. P.V.G. Raju, (2000) 4 SCC 539
Swiss Timing Ltd. v. Commonwealth Games 2010 Organising Committee, (2014) 6 SCC 677
State of Bihar v. Bihar Rajya M.S.E.S.K.K. Mahasangh, (2005) 9 SCC 129
(1986) 4 SCC 447
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the contract mentioned in the non obstante clause. It is
equivalent to saying that in spite of the provision of the Act
or any other Act mentioned in the non obstante clause or
any contract or document mentioned the enactment
following it will have its full operation or that the provisions
embraced in the non obstante clause would not be an
impediment for an operation of the enactment."
46. Although a non obstante clause must be allowed to operate with full
vigour, its effect is limited to the extent intended by the legislature.
In ICICI Bank Ltd. v. Sidco Leathers Ltd.,16 the High Court held that a
non-obstante clause must be interpreted by confining it to the legislative
policy. Thus, even if a non obstante clause has wide amplitude, the
extent of its impact has to be measured in view of the legislative
intention and legislative policy. In view of this settled legal position, the
issue that arises for our consideration is the scope of the non obstante
clause contained in Section 5 of the Arbitration Act.
47. Section 5 has two facets; positive and negative. The positive facet vests
judicial authorities with jurisdiction over arbitral proceedings in matters
expressly allowed in or dealt with under Part I of the Arbitration Act.
The flip side to this approach is that judicial authorities are prohibited
from intervening in arbitral proceedings in situations where the Arbitral
Tribunal has been bestowed with exclusive jurisdiction. This is the
negative facet of Section 5. The non obstante clause limits the extent of
judicial intervention in respect of matters expressly provided under the
Arbitration Act. In Bhaven Construction v. Sardar Sarovar Narmada
Nigam Ltd. (supra), the Apex Court observed that the:
(2006) 10 SCC 452
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"12. ... non obstante clause is provided to uphold the
intention of the legislature as provided in the Preamble to
adopt Uncitral Model Law and Rules, to reduce excessive
judicial interference which is not contemplated under the
Arbitration Act."
48. The interplay between the legislative framework under the Arbitration
Act and the constitutional powers of the High Courts under Articles 226
and 227 of the Constitution has been discussed in several matters. These
rulings have not only elucidated the parameters within which High
Courts may exercise their writ powers but have also reinforced the
fundamental principles underlining the Arbitration Act.
49. In Union of India v. R. Gandhi, President Madras Bar Association,17 the
Supreme Court observed on the question as to what constitutes 'Courts'
and 'Tribunals' as under:
"38. The term 'Courts' refers to places where justice is
administered or refers to Judges who exercise judicial
functions. Courts are established by the state for
administration of justice that is for exercise of the judicial
power of the state to maintain and uphold the rights, to
punish wrongs and to adjudicate upon disputes. Tribunals
on the other hand are special alternative institutional
mechanisms, usually brought into existence by or under a
statute to decide disputes arising with reference to that
particular statute, or to determine controversies arising out
of any administrative law. Courts refer to Civil Courts,
Criminal Courts and High Courts. Tribunals can be
either private Tribunals (Arbitral Tribunals), or
Tribunals constituted under the Constitution (Speaker
or the Chairman acting under Para 6(1) of the Tenth
(2010) 11 SCC 1
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Schedule) or Tribunals authorized by the Constitution
(Administrative Tribunals under Article 323A and
Tribunals for other matters under Article 323B) or
Statutory Tribunals which are created under a statute
(Motor Accident Claims Tribunal, Debt Recovery
Tribunals and consumer fora). Some Tribunals are
manned exclusively by Judicial Officers (Rent Tribunals,
Motor Accidents Claims Tribunal, Labour Courts and
Industrial Tribunals). Other statutory Tribunals have
Judicial and Technical Members (Administrative Tribunals,
TDSAT, Competition Appellate Tribunal, Consumer fora,
Cyber Appellate Tribunal, etc)."
(Emphasis supplied)
50. Similar observations were made by the Supreme Court in Srei
Infrastructure Finance Ltd. v. Tuff Drilling (P) Ltd.18,as under:
"14. Arbitration is a quasi judicial proceeding, equitable in
nature or character which differs from a litigation in a
Court. The power and functions of arbitral tribunal are
statutorily regulated. The tribunals are special arbitration
with institutional mechanism brought into existence by or
under statute to decide dispute arising with reference to that
particular statute or to determine controversy referred to
it. The tribunal may be a statutory tribunal or
tribunal constituted under the provisions of the
Constitution of India. Section 9 of the Civil Procedure
Code vests into the Civil Court jurisdiction to entertain and
determine any civil dispute. The constitution of tribunals
has been with intent and purpose to take out different
categories of litigation into the special tribunal for speedy
and effective determination of disputes in the interest of the
society. Whenever, by a legislative enactment jurisdiction
exercised by ordinary civil court is transferred or entrusted
(2018) 11 SCC 470
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to tribunals such tribunals are entrusted with statutory
power. The arbitral tribunals in the statute of 1996 are
no different, they decide the lis between the parties,
follows Rules and procedure conforming to the
principle of natural justice, the adjudication has
finality subject to remedy provided under the 1996
Act. Section 8 of the 1996 Act obliges a judicial authority in
a matter which is a subject of an agreement to refer the
parties to arbitration. The reference to arbitral tribunal thus
can be made by judicial authority or an arbitrator can be
appointed in accordance with the arbitration agreement
under Section 11 of the 1996 Act."
(Emphasis Supplied)
51. Thus, the Supreme Court has time and again held that arbitral tribunals
are private tribunals unlike those tribunals set up under the statute or
specialized tribunals under the Constitution of India. Thus, a Petition
under Article 227 challenging orders of an Arbitral Tribunal would be
maintainable.
Scope and extent of interference
52. Coming now to the question as to what would be the scope of
interference under Article 226/227 against orders passed by the Arbitral
Tribunals, though, a number of judgments have been cited by both
parties, recent decisions of the Supreme Court and of this Court have
settled the issue.
53. Until 2019, an order passed by an arbitral tribunal dismissing a Section
16 application preferred by either of the parties could not have been
challenged at any court in India. The party aggrieved by such a
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dismissal was left with no remedy and had to wait for the arbitrator to
pass the final award and then challenge the same on the grounds of
dismissal at a court of law. This was the scenario until 2019 when a
three Judge Bench of the Supreme Court in a judgement authored by
Justice R.F Nariman in the case of M/S Deep Industries Ltd. v Oil And
Natural Gas Corporation (supra) held that it is possible to challenge
such a dismissal order through a writ at a High Court under Articles
226 and 227 of the Constitution of India, but the same laid down some
stringent terms to challenge a Section 16 dismissal order.
54. In Deep Industries (supra) decided on 28th November, 2019, the
Supreme Court considered S.B.P. & Company v. Patel Engineering
Ltd.19 and Fuerst Day Lawson Limited v. Jindal Exports Limited20 and
observed as under:
"15. Given the aforesaid statutory provision and given the
fact that the 1996 Act repealed three previous enactments in
order that there be speedy disposal of all matters covered by
it, it is clear that the statutory policy of the Act is that not
only are time limits set down for disposal of the arbitral
proceedings themselves but time limits have also been set
down for Section 34 references to be decided. Equally,
in Union of India v. Varindera Const. Ltd., dated
17.09.2018, disposing of SLP (C) No. 23155/2013, this
Court has imposed the self-same limitation on first appeals
Under Section 37 so that there be a timely resolution of all
matters which are covered by arbitration awards.
16. Most significant of all is the non-obstante Clause
contained in Section 5 which states that notwithstanding
(2005) 8 SCC 618
(2011) 8 SCC 333
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anything contained in any other law, in matters that arise
under Part I of the Arbitration Act, no judicial authority
shall intervene except where so provided in this Part.
Section 37 grants a constricted right of first appeal against
certain judgments and orders and no others. Further, the
statutory mandate also provides for one bite at the cherry,
and interdicts a second appeal being filed (See Section 37(2)
of the Act).
17. This being the case, there is no doubt whatsoever
that if petitions were to be filed Under Articles
226/227 of the Constitution against orders passed in
appeals Under Section 37, the entire arbitral process
would be derailed and would not come to fruition for
many years. At the same time, we cannot forget that
Article 227 is a constitutional provision which
remains untouched by the non-obstante Clause of
Section 5 of the Act. In these circumstances, what is
important to note is that though petitions can be filed
Under Article 227 against judgments allowing or
dismissing first appeals Under Section 37 of the Act,
yet the High Court would be extremely circumspect in
interfering with the same, taking into account the
statutory policy as adumbrated by us herein above so that
interference is restricted to orders that are passed which are
patently lacking in inherent jurisdiction."
(Emphasis supplied)
55. In Punjab State Power Ltd. v. Emta Coal Ltd.21 again the Hon'ble
Supreme Court considered Deep Industries Ltd. (supra) and held:
"We are of the view that a foray to the writ Court
from a section 16 application being dismissed by the
Arbitrator can only be if the order passed is so
(2020) 17 SCC 93
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perverse that the only possible conclusion is that there
is a patent lack in inherent jurisdiction. A patent lack
of inherent jurisdiction requires no argument
whatsoever - it must be the perversity of the order
that must stare one in the face. Unfortunately, parties
are using this expression which is in our judgment in Deep
Industries Ltd., to go to the 227 Court in matters which do
not suffer from a patent lack of inherent jurisdiction. This is
one of them. Instead of dismissing the writ petition on the
ground stated, the High Court would have done well to have
referred to our judgment in Deep Industries Ltd. and
dismiss the 227 petition on the ground that there is no such
perversity in the order which leads to a patent lack of
inherent jurisdiction. The High Court ought to have
discouraged similar litigation by imposing heavy costs. The
High Court did not choose to do either of these two things.
In any case, now that Shri Vishwanathan has argued this
matter and it is clear that this is not a case which falls under
the extremely exceptional category, we dismiss this special
leave petition with costs of Rs. 50,000/- to be paid to the
Supreme Court Legal Services Committee within two
weeks."
(Emphasis supplied)
56. In Bhaven Constructions (supra), the Supreme Court was dealing with
a similar situation where an order passed by the arbitrator under
Section 16(2) of the Act was assailed in a petition under article 226/227.
In the said case, the ld. Arbitrator held that he had jurisdiction to
adjudicate the dispute. The Supreme Court considered the question of
maintainability of the writ petition and held:
"....10. Having heard both parties and perusing the
material available on record, the question which needs to
be answered is whether the arbitral process could be
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interfered under Article 226/227 of the Constitution,
and under what circumstance?
11. We need to note that the Arbitration Act is a code in
itself. This phrase is not merely perfunctory, but has definite
legal consequences. One such consequence is spelled out
under Section 5 of the Arbitration Act, which reads as
under "Notwithstanding anything contained in any other
law for the time being in force, in matters governed by this
Part, no judicial authority shall intervene except where so
provided in this Part." The non-obstante clause is provided
to uphold the intention of the legislature as provided in the
Preamble to adopt UNCITRAL Model Law and Rules, to
reduce excessive judicial interference which is not
contemplated under the Arbitration Act.
12. The Arbitration Act itself gives various procedures and
forums to challenge the appointment of an arbitrator. The
framework clearly portrays an intention to address most of
the issues within the ambit of the Act itself, without there
being scope for any extra statutory mechanism to provide
just and fair solutions.
13. Any party can enter into an arbitration agreement for
resolving any disputes capable of being arbitrable. Parties,
while entering into such agreements, need to fulfill the basic
ingredients provided under Section 7 of the Arbitration Act.
Arbitration being a creature of contract, gives a flexible
framework for the parties to agree for their own procedure
with minimalistic stipulations under the Arbitration Act.
14. If parties fail to refer a matter to arbitration or to
appoint an arbitrator in accordance with the procedure
agreed by them, then a party can take recourse for court
assistance under Section 8 or 11 of the Arbitration Act.
15. In this context, we may state that the Appellant acted in
accordance with the procedure laid down under the
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agreement to unilaterally appoint a sole arbitrator, without
Respondent No. 1 mounting a judicial challenge at that
stage. Respondent No. 1 then appeared before the sole
arbitrator and challenged the jurisdiction of the sole
arbitrator, in terms of Section 16(2) of the Arbitration Act.
16. Thereafter, Respondent No. 1 chose to impugn the order
passed by the arbitrator under Section 16(2) of the
Arbitration Act through a petition under Article 226/227 of
the Indian Constitution. In the usual course, the
Arbitration Act provides for a mechanism of challenge
under Section 34. The opening phrase of Section 34 reads as
'Recourse to a Court against an arbitral award may be made
only by an application for setting aside such award in
accordance with subsection (2) and sub-section (3)'. The use
of term 'only' as occurring under the provision serves two
purposes of making the enactment a complete code and lay
down the procedure.
17. In any case, the hierarchy in our legal framework,
mandates that a legislative enactment cannot curtail a
Constitutional right. In Nivedita Sharma v. Cellular
Operators Association of India, (2011) 14 SCC 337, this
Court referred to several judgments and held:
"11. We have considered the respective
arguments/submissions. There cannot be any dispute that
the power of the High Courts to issue directions, orders or
writs including writs in the nature of habeas corpus,
certiorari, mandamus, quo warranto and prohibition under
Article 226 of the Constitution is a basic feature of the
Constitution and cannot be curtailed by parliamentary
legislation - L. Chandra Kumar v. Union of India, (1997) 3
SCC 261. However, it is one thing to say that in exercise of
the power vested in it under Article 226 of the Constitution,
the High Court can entertain a writ petition against any
order passed by or action taken by the State and/or its
agency/instrumentality or any public authority or order
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passed by a quasi-judicial body/authority, and it is an
altogether different thing to say that each and every petition
filed under Article 226 of the Constitution must be
entertained by the High Court as a matter of course
ignoring the fact that the aggrieved person has an effective
alternative remedy. Rather, it is settled law that when a
statutory forum is created by law for redressal of grievances,
a writ petition should not be entertained ignoring the
statutory dispensation.(emphasis supplied)"
57. It is therefore, prudent for a Judge to not to exercise discretion to allow
judicial interference beyond the procedure established under the
enactment. This power needs to be exercised in exceptional rarity,
wherein one party is left remediless under the statute or a clear 'bad
faith' shown by one of the parties or in case which allowed to go
unchecked would result in a situation of patent illegality being
perpetuated. This high standard set by this Court is in terms of the
legislative intention to make the arbitration fair and efficient.
58. In this context, this Court may revert to Deep Industries (supra) wherein
interplay of Section 5 of the Arbitration Act and Article 227 of the
Constitution was analyzed as under:
"15. Most significant of all is the nonobstante clause
contained in Section 5 which states that notwithstanding
anything contained in any other law, in matters that arise
under Part I of the Arbitration Act, no judicial authority
shall intervene except where so provided in this Part.
Section 37 grants a constricted right of first appeal against
certain judgments and orders and no others. Further, the
statutory mandate also provides for one bite at the cherry,
and interdicts a second appeal being filed (See Section 37(2)
of the Act)
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16. This being the case, there is no doubt whatsoever that if
petitions were to be filed under Articles 226/227 of the
Constitution against orders passed in appeals under Section
37, the entire arbitral process would be derailed and would
not come to fruition for many years. At the same time, we
cannot forget that Article 227 is a constitutional provision
which remains untouched by the non-obstante clause of
Section 5 of the Act. In these circumstances, what is
important to note is that though petitions can be filed under
Article 227 against judgments allowing or dismissing first
appeals under Section 37 of the Act, yet the High Court
would be extremely circumspect in interfering with the
same, taking into account the statutory policy as
adumbrated by us herein above so that interference is
restricted to orders that are passed which are patently
lacking in inherent jurisdiction."
59. Furthermore, the Apex Court in Estralla Rubber v. Dass Estate (P)
Ltd.22, has observed that the High Court's power under Article 227 of
the Constitution of India is limited to ensuring that inferior courts and
tribunals act within their jurisdiction and perform their duties lawfully.
It is not a tool for correcting every error or hardship within the
subordinate courts' jurisdiction but is reserved for cases of serious
dereliction of duty or violation of fundamental principles of law, where
failure to intervene would result in grave injustice. The relevant excerpt
from the judgement is produced hereinbelow:
"6. The scope and ambit of exercise of power and
jurisdiction by a High Court under Article 227 of the
Constitution of India is examined and explained in a
number of decisions of this Court. The exercise of power
(2001) 8 SCC 97
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under this article involves a duty on the High Court to keep
inferior courts and tribunals within the bounds of their
authority and to see that they do the duty expected or
required of them in a legal manner. The High Court is not
vested with any unlimited prerogative to correct all kinds of
hardship or wrong decisions made within the limits of the
jurisdiction of the subordinate courts or tribunals. Exercise
of this power and interfering with the orders of the courts or
tribunals is restricted to cases of serious dereliction of duty
and flagrant violation of fundamental principles of law or
justice, where if the High Court does not interfere, a grave
injustice remains uncorrected. It is also well settled that the
High Court while acting under this article cannot exercise
its power as an appellate court or substitute its own
judgment in place of that of the subordinate court to correct
an error, which is not apparent on the face of the record. The
High Court can set aside or ignore the findings of facts of an
inferior court or tribunal, if there is no evidence at all to
justify or the finding is so perverse, that no reasonable
person can possibly come to such a conclusion, which the
court or tribunal has come to.
7. This Court in Ahmedabad Mfg. & Calico Ptg. Co.
Ltd. v. Ram TahelRamnand [(1972) 1 SCC 898 : AIR 1972
SC 1598] in AIR para 12 has stated that the power under
Article 227 of the Constitution is intended to be used
sparingly and only in appropriate cases, for the purpose of
keeping the subordinate courts and tribunals within the
bounds of their authority and, not for correcting mere
errors. Reference also has been made in this regard to the
case Waryam Singh v. Amarnath [AIR 1954 SC 215 : 1954
SCR 565] . This Court in BathutmalRaichand
Oswal v. Laxmibai R. Tarte [(1975) 1 SCC 858 : AIR 1975
SC 1297] has observed that the power of superintendence
under Article 227 cannot be invoked to correct an error of
fact which only a superior court can do in exercise of its
statutory power as a court of appeal and that the High
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Court in exercising its jurisdiction under Article 227
cannot convert itself into a court of appeal when the
legislature has not conferred a right of appeal. Judged by
these pronounced principles, the High Court clearly
exceeded its jurisdiction under Article 227 in passing the
impugned order."
60. A perusal of the above-mentioned decisions, shows that the following
principles are well settled, in respect of the scope of interference under
Article 226/227 in challenges to orders by an arbitral tribunal including
orders passed under Section 16 of the Act:
(i). An arbitral tribunal is a 'tribunal' against which a petition under
Article 226/227 would be maintainable;
(ii). The non-obstante clause in section 5 of the Act does not apply in
respect of exercise of powers under Article 227 which is a
Constitutional provision;
(iii). For interference under Article 226/227, there have to be 'exceptional
circumstances';
(iv). Though interference is permissible, unless and until the order is so
perverse that it is patently lacking in inherent jurisdiction, the writ
court would not interfere;
(v). Interference is permissible only if the order is completely perverse i.e.,
that the perversity must stare in the face;
(vi). High Courts ought to discourage litigation which necessarily interfere
with the arbitral process;
(vii). Excessive judicial interference in the arbitral process is not
encouraged;
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(viii). It is prudent not to exercise jurisdiction under Article 226/227;
(ix). The power should be exercised in 'exceptional rarity' or if there is 'bad
faith' which is shown;
(x). Efficiency of the arbitral process ought not to be allowed to diminish
and hence interdicting the arbitral process should be completely
avoided.
61. The Supreme Court, while acknowledging that the hierarchy in our
legal framework mandates that a legislative enactment cannot curtail a
constitutional right, has observed that it is settled law that when a
statutory forum is created by law for redressal of grievances, a writ
petition would not 'ordinarily' be entertained ignoring the statutory
dispensation. This power needs to be exercised in exceptional rarity,
wherein the illegality or perversity in the order of the Ld. Sole
Arbitrator stares one in the face.
62. Furthermore, it is also well settled that availability of an alternative
remedy does not prohibit the High Courts from entertaining a writ
petition in an appropriate case. The High Courts may entertain a writ
petition, notwithstanding the availability of an alternative remedy,
particularly (i) where the writ petition seeks enforcement of a
fundamental right, (ii) where there is failure of principles of natural
justice, (iii) where the impugned orders or proceedings are wholly
without jurisdiction or (iv) the vires of an act is under challenge.
63. This Court concludes that the High Court "can" exercise its powers
under writ jurisdiction in spite of Section 5 of the A&C Act or the
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remedies provided in Section 16 of the A&C Act, but whether it "ought"
to in this present case remains to be seen.
VI. ISSUE B: WHETHERTHE AGREEMENT DATED 12.2.2004 AND ALL
SUBSEQUENT AGREEMENTS THEREOF ENTERED INTO
BETWEEN THE PARTIES ARE GOVERNED BY ARTICLE 5(C) OF
SCHEDULE I OF THE INDIAN STAMP ACT, 1899?
64. As the agreements between the parties were entered into in Odisha, the
provisions of the Stamp Act, 1899 as amended by Orissa/Odisha
Amendments Acts from time to time will be applicable.
65. Section 2(10) of the STAMP ACT provides the definition of
"conveyance". It states that:
"conveyance includes a conveyance on sale every
instrument by which property, whether moveable or
immoveable is transferred inter vivos and which is not
otherwise specifically provided for by Schedule I, Schedule I-
A or Schedule I-B, as the case may be."
66. It is the Petitioner's case that the Sale Agreement entered into between
the parties was a 'Sale Agreement' and not an 'Agreement to Sell".
Therefore, being in the nature of a conveyance, where the movable
property is transferred between the Parties, the stamp duty payable on
the Agreements would be as per Article 23 of Schedule 1 of the Indian
Stamp Act, 1899. Article 23 of Schedule 1 of the Indian Stamp Act, 1899
on which the Petitioner relies on is extracted hereunder:
"23. Conveyance [as defined by Sec. 2(10)], not being a
transfer charged or exempted under No. 62 -
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where the amount or value of the consideration for such
conveyance as set forth therein does not exceed Rs. 50 -
Eight annas where it exceeds Rs. 50 but does not exceed Rs.
100 - One Rupee and for every Rs. 500 or part thereof in
excess of Rs. 1,000 - Five Rupees"
67. On the other hand, the Opposite Party contends that the Sale
Agreement entered into between the Parties is an 'Agreement to Sell'
and therefore, stamp duty payable on the Agreements would be as per
Article 5(C) of Schedule 1 of the Indian Stamp Act, 1899.
68. Article 5 of Schedule 1 of the Indian Stamp Act, 1899 on which the
Opposite Party relies on is extracted hereunder:
"5. AGREEMENT OR MEMORANDUM OF AN
AGREEMENT--
(a) if relating to the sale of a bill of exchange - Two annas.
(b) if relating to the sale of a Government security or share
in an incorporated company or other body corporate -
Subject to a maximum of ten rupees, one anna for every Rs.
10,000 or part thereof of the value of the security or share.
(c) if not otherwise provided for - Eight annas."
69. At this juncture it is relevant to refer to Section 4 of the Sale Of Goods
Act which reads as follows:
"Sale and agreement to sell.
(1) A contract of sale of goods is a contract whereby the
seller transfers or agrees to transfer the property in goods
to the buyer for a price. There may be a contract of sale
between one part-owner and another.
(2) A contract of sale may be absolute or conditional.
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(3) Where under a contract of sale the property in the
goods is transferred from the seller to the buyer, the
contract is called a sale, but where the transfer of the
property in the goods is to take place at a future time or
subject to some condition thereafter to be fulfilled, the
contract is called an agreement to sell.
(4) An agreement to sell becomes a sale when the
time elapses or the conditions are fulfilled subject to
which the property in the goods is to be transferred."
(Emphasis supplied)
70. Now, this court shall embark on a perusal of the true intention of the
Parties by examining the Agreement itself as it is settled in law, that the
mere title of the document would not be indicative of the true nature of
the document itself. The recital in the Sale Agreement dated 12.02.2004
states the following:
"..AND WHEREAS upon knowing the desire of the Mine
Owner as aforesaid, the Buyer offered to enter into a long-
term contract with the Mine Owner for purchase of the
entire output of the said Mine as a sole buyer...
... AND WHEREAS Mr. Tarini Prasad Mohanty the Mine
Owner hereby further declares that it has the right and the
authority to enter into and execute this agreement with
SISCO and that SISCO is entitled to the undsitrubed
purchase of the entire Iron Ore excavated by SIPL but at
least 10,000MT on monthly average of a quarter after
12 months of operation from the lease hold area without
interference, interruption claim or demand whatsoever from
or by Mr. Tarini Prasad Mohanty or any one claiming
under this subject, or course, to the specification of
composition, contents, etc."
Designation: AR-CUM-SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 06-Mar-2025 17:02:27
71. Clause 1 of this Agreement is extracted hereunder:
"1. Sale of Material
1.1. Mr. Tarini Prasad Mohanty shall, during the
period often years from the date of start of mining
operation sell and SISICO shall purchase the entire
Iron Ore excavated by SIPL from the mine of Mr.
Tarini Prasad Mohanty.
1.2 During the subsistence of this Agreement, Mr. Tarini
Prasad Mohanty agrees and covenants not to sell,
dispose or part with Iron Ore excavated by SIPL from
the leasehold area to any other party other than
SISCO or any one nominated by SISCO and SISCO shall
have sole and exclusive right to purchase the same from Mr.
Tarini Prasad Mohanty either by itself or by its nominee. In
the event Tarini Prasad Mohanty sells to any of the parties
nominated by SISCO and sustain losses, if any, it shall be
on account of SISCO.
1.3 In the event SISCO refuses to purchase Iron Ore either
by itself or through its nominees, Mr. Tarini Prasad
Mohanty shall be entitled to adjust the value of unsold ore
against advance, if any, even by SISCO. In the event such
advance is not sufficient enough to cover value of uplifted
ore, Mr. Tarini Prasad Mohanty shall be entitled to sell
such portion of the uplifted ore to a third party as is
sufficient enough to cover the unadjusted amount.
1.4. In the event any other minerals/substances are
excavated from the leasehold area, the same shall also be
available for sale to SISCO on mutually agreed term s. In
the event the terms are not agreed upon, Mr. Tarini Prasad
Mohanty shall have the right to sell the same to any third
party. In the event, during the pendency of this agreement if
iron ore is not available in the lease hold area in required."
Designation: AR-CUM-SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 06-Mar-2025 17:02:27
72. Sub-Clause 1.1 of Clause 1 of the Agreement dated 12.02.2004 extracted
above shows that Mr. Tarini Prasad Mohanty, during the tenure from
the start of mining operation, 'shall' sell and SISCO 'shall' purchase the
entire iron ore excavated by SIPL from the mine of Mr. Tarini Prasad
Mohanty for an exclusive period of 10 years. The seller was also
injuncted from selling to any third party during the said period.
73. On 9.1.2011, a second amendment agreement was entered into between
the parties (hereafter referred to as the "Second Ore Sales Amendment
Agreement (SOSAA)'') in terms of which a pre determined sale
consideration was payable by the Petitioner to the Opposite Party fixing
a price component. The SOSAA extended the term of the agreement to
11 years from 10 years, amended the scope of supply of iron ores from
iron ore lumps to calibrated lumpy ores, iron ore fines and rejects and
further stipulated that the rights and obligations of the parties were
subject to such limitations or restrictions as may be imposed by the
applicable law and further that the mine owner would not transfer the
mining lease in any manner. According to the Petitioner, the SOSAA
was intended to supersede the first two agreements. The Petitioner has
stated that up to this point, it had paid more than Rs.5 crores to the
Opposite Party.
74. It is also pertinent to note that the Sale Agreement entered into by and
between the parties has been "acted upon", in the sense that 89
purchase orders have been issued by virtue of the understanding
contained in the Sale Agreement. The same purchase orders have been
issued in performance of the contract conditions and have to be read to
Designation: AR-CUM-SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 06-Mar-2025 17:02:27
a part of the contract itself. It is thus clear that the agreements have been
acted upon and form a concluded contract with the meaning of the
Indian Contract Act, 1872.
75. The intention of the Parties makes it abundantly clear that all the
minerals so excavated from the Mines of the Opposite Party would
stand vested in the Petitioner for a period of ten years, commensurate to
which the consideration was already fixed and paid. Therefore, it is
grossly erroneous and perverse that the Ld. Sole Arbitrator has merely
relied on the title of the document without endeavouring to examine the
true intention of the parties and the manner in which the contract has
been worked out between the parties. The conveyance of the goods in
question has been done and as such nothing remains to be performed in
the future upon fulfilment of any contingency.
76. When faced with a similar question, the Apex Court in State of
Uttaranchal v. Khurana Brothers23, held as follows:
"5. The short question that arises for consideration is
whether the above contract of sale for crude resin amounts
to "conveyance" as defined under Section 2(10) of the
Stamp Act, 1899 (for short "the Stamp Act") and, if the
answer is in the affirmative, whether stamp duty is
chargeable thereon. In order to answer the aforesaid
question, the true and real meaning of the document needs
to be ascertained. When we look at the contract, it would be
seen that in consideration of the price stated in the contract,
the State Government agreed to deliver the specified
quantity of the crude resin to the writ petitioner
(purchaser). The parties agreed that quantity may increase
(2010) 14 SCC 334
Designation: AR-CUM-SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 06-Mar-2025 17:02:27
or decrease by 10% and the resin will have to be removed by
the purchaser within 60 days from the date of approval of
sale and it will not be removed in more than 60 instalments.
As per the terms of the contract, the purchaser was required
to pay the amount of sale price irrespective of the fact
whether the contracted quantity of resin was lifted by it or
not. By a subsequent communication dated 7-4-2001, the
purchaser was informed of the acceptance of the bid for the
stated resin lot(s) in its favour and it was asked to arrange
for lifting of the same within 60 days of the issuance of that
letter.
...
7. The essence of sale is the transfer of the property in a
thing from one person to another for a price. As per Section
4, the contract of sale includes an agreement to sell. It is not
necessary that contract of sale must be absolute. It may be
conditional as well. The essential feature that distinguishes
the contract of sale from an agreement to sell is that in a
contract of sale the property in the goods is transferred from
the seller to the buyer immediately whereas in an agreement
to sell property is transferred on a future date(s). An
agreement to sell becomes a sale on fulfilment of the
conditions or when the time provided in the agreement
elapses.
...
13. Under Section 2(10), inter alia, every document by
which movable property is transferred is "conveyance".
Does the contract of sale for crude resin entered into
between the partiesamount to transfer of movable property?
In our opinion, it does. In the contract under consideration,
all essential conditions of transfer of movable property are
satisfied. By this document right in auctioned lot of crude
resin has been created in favour of the writ petitioner.
Correspondingly, the State Government is under obligation
to deliver the quantity of crude resin specified in the
document. Pertinently, Clause 1(B) provides that resin sold
Designation: AR-CUM-SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 06-Mar-2025 17:02:27
will remain at the purchaser's risk from the date of
acceptance of its bid and the seller will not be responsible for
any loss and damage which may occur thereto from any
cause whatsoever. The document read as a whole leaves no
manner of doubt that property in the auctioned lot of crude
resin vested in the purchaser as a result of the subject
contract and, thus amounts to transfer of movable property.
Even if the document dated 24-3-2001 is treated as an
agreement to sell, in view of the acceptance letter dated 7-4-
2001 whereby the writ petitioner has been informed that
public auction is accepted in its name and that it must
arrange for lifting of the auctioned resin within 60 days
from the issuance of this letter, it is very clear that the
contract of sale dated 24-3-2001 read with the letter dated 7-
4-2001 amounts to "conveyance" within the meaning of
Section 2(10) and is chargeable to stamp duty under Article
23, Schedule I-B as admittedly there is no exemption from
payment of stamp duty in respect of such conveyance under
Article 62."
77. This Court, in view of the discussion hereinabove concludes that, the
Sale Agreement and agreements pursuant thereto, amounts to
"conveyance" within the meaning of Section 2(10) and is chargeable to
stamp duty under Article 23, Schedule I-B. The terms of the
arrangement between the Parties leave no doubt that the essentials of
transfer are satisfied. A right has been created in favour of the
Petitioner, corresponding to which the Opposite Party has to deliver the
quantity of minerals specified. Moreover, the right of the Petitioner is
sole and exclusive. It is also pertinent to note that an advance had
already been given by the Petitioner to the Opposite Party which could
be utilised in case the Petitioner was not able to purchase the ore,
Designation: AR-CUM-SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 06-Mar-2025 17:02:27
meaning thereby that all the ore that was excavated was already in a
sense paid for and remained vested in the Petitioner.
VII. ISSUE C: WHETHERTHIS COURT OUGHT TO INTERFERE WITH
THE IMPUGNED ORDER?
78. The majority judgment of the Apex Court in N.N. Global (2)24 summed
up its holding in the following terms:
"109. ... An agreement which is unstamped or
insufficiently stamped is not enforceable, as long as it
remains in the said condition. Such an instrument would be
void as being not enforceable [see Section 2(g) of the
Contract Act]."
The above observation conflates the distinction between enforceability
and admissibility.
79. Section 35 of the Stamp Act carries an air of unequivocal clarity. It
stipulates:
"No instrument chargeable with duty shall be admitted in
evidence..."
(Emphasis supplied)
80. The term "admitted in evidence" refers to the admissibility of the
instrument. Sub-section (2) of Section 42, too, states that an instrument
in respect of which stamp duty is paid and which is endorsed as such
will be "admissible in evidence". The effect of not paying duty or
paying an inadequate amount renders an instrument inadmissible and
not void. Non-stamping or improper stamping does not result in the
N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2023) 7 SCC 1
Designation: AR-CUM-SR. SECRETARY
Location: ORISSA HIGH COURT, CUTTACK
Date: 06-Mar-2025 17:02:27
instrument becoming invalid. The Stamp Act does not render such an
instrument void. The non-payment of stamp duty is accurately
characterised as a curable defect. The Stamp Act itself provides for the
manner in which the defects may be cured and sets out a detailed
procedure for it. It bears mentioning that there is no procedure by
which a void agreement can be "cured".
81. In N.N. Global (2) (supra), the Supreme Court held that the failure to
stamp an arbitration agreement is not a "curable defect". Relying on the
provisions of the Contract Act as well as Section 11(6-A) of the
Arbitration Act, it held that an unstamped arbitration agreement is
void. The relevant paragraphs of the judgment of the majority are
extracted below :
"103. ... It may not be apposite to merely describe an
unstamped arbitration agreement as a "curable defect". As
long it remains an unstamped instrument, it cannot be
taken notice of for any purpose, as contemplated in Section
35 of the Stamp Act. It remains unenforceable. ... It is "not
enforceable in law". In the said sense, it also cannot exist in
law. It would be void. Our view in this regard that voidness
is conflated to unenforceability receives fortification from
Section 2(j) of the Contract Act which renders a contract
which ceases to be enforceable void."
82. However, the above observation of the Apex Court in N.N. Global
(2) was held to be incorrect by the Court in Interplay Between
Arbitration Agreements under Arbitration, 1996 & Stamp Act, 1899, In
re (supra).
Designation: AR-CUM-SR. SECRETARY
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Date: 06-Mar-2025 17:02:27
83. The Stamp Act is a fiscal legislation which is intended to raise revenue
for the Government. It is a mandatory statute. In Hindustan Steel
Ltd. v. Dilip Construction Co.25, the Supreme Court dealt with the
import of Sections 35, 36 and 42 of the Stamp Act. One of the parties
relied on the difference in the phraseology between Sections 35 and 36
to argue that an instrument which was insufficiently stamped or not
stamped could be admitted in evidence upon the payment of duty and
a penalty (if any) but that it could not be acted upon, once admitted. It
was argued that Section 35 operates as a bar in two respects, namely,
the admission of an instrument into evidence as well as acting upon that
instrument. It was argued that Section 36, in contrast to Section 35,
removed the bar in one respect alone: the admissibility of the
instrument into evidence. The Supreme Court rejected this argument
and held that the provisions of the Stamp Act clearly provide that an
instrument could be admitted into evidence as well as acted upon once
the appropriate duty has been paid and the instrument is endorse. The
relevant excerpt is produced hereinunder:
"6. ... The argument ignores the true import of Section 36.
By that section an instrument once admitted in evidence
shall not be called in question at any stage of the same suit
or proceeding on the ground that it has not been duly
stamped. Section 36 does not prohibit a challenge against an
instrument that it shall not be acted upon because it is not
duly stamped, but on that account there is no bar against an
instrument not duly stamped being acted upon after
payment of the stamp duty and penalty according to the
procedure prescribed by the Act. The doubt, if any, is
(1969) 1 SCC 597
Designation: AR-CUM-SR. SECRETARY
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Date: 06-Mar-2025 17:02:27
removed by the terms of Section 42(2) which enact, in terms
unmistakable, that every instrument endorsed by the
Collector under Section 42(1) shall be admissible in
evidence and may be acted upon as if it has been duly
stamped."
84. In declaring so, the Supreme Court made a significant observation
about the purpose of the Stamp Act and the manner in which it is to be
interpreted by courts when it observed that the Stamp Act is a fiscal
measure enacted to secure revenue for the State on certain classes of
instruments. It is not enacted to arm a litigant with a weapon of
technicality to meet the case of his opponent. The stringent provisions
of the Act are conceived in the interest of the revenue once that object is
secured according to law, the party staking his claim on the instrument
will not be defeated on the ground of the initial defect in the instrument.
85. The Stamp Act is a legislation which is enacted in the interest of the
revenue. The statute must be interpreted with due regard to its purpose.
86. Furthermore, it is pertinent to note that in view of the law enunciated
by the 7 Judge Bench of the Supreme Court in Interplay Between
Arbitration Agreements under Arbitration, 1996 & Stamp Act, 1899, In
re (supra), the Ld. Sole Arbitrator did not have jurisdiction till the time
the "existence and validity" of the Sale Agreement has been revived by
the payment of appropriate stamp duty. The Ld. Sole Arbitrator was
bound by the law declared by the Supreme Court and ought to have
impounded the Sale Agreement and sent it for collection of deficient
stamp duty and meanwhile could have been kept the arbitration in
abeyance, awaiting the curing the defect of payment of deficit stamp
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Date: 06-Mar-2025 17:02:27
duty on the instrument. It is pertinent to note that in view of the above
discussion, that the existence of an agreement also covers within its fold
the "existence in law". The authoritative pronouncement of the Apex
Court is quite clear in that regard as to what is to be done in situations
as in the present one.
87. Given this Court's conclusion in Issue B and the reasons discussed
above, this Court believes that the present matter comes within the
meaning of "exceptional" and writ jurisdiction ought to be exercised in
the face of such patent illegality, which necessitates interference.
VIII. CONCLUSION:
88. Therefore, in light of the discussion above, keeping the settled
principles of law in mind and for the reasons given above, this Court is
of the considered view that the impugned order merits interference.
89. The Arbitral Tribunal has to mandatorily impound the Agreement/s
which is not duly stamped as per Article 23, Schedule I-B of the Indian
Stamp Act, 1899 in terms of Sections 33 and 35 of the aforementioned
Act.
90. The Arbitral Tribunal after impounding the instrument, which is not
duly stamped as per the provisions of the Indian Stamp Act, 1899, will
forward it to the Collector. The Collector then, shall, direct the
appropriate stamp duty at the rate of 5% of the Sale Agreement value
and levy penalty.
91. In this regard, it is clarified that the Collector while determining the
applicable stamp duty will take the summation of all 89 purchase orders
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Date: 06-Mar-2025 17:02:27
as the Sale Agreement value. Upon payment, the Collector shall endorse
that the proper stamp duty has been paid under Section 42 of the Indian
Stamp Act, 1899. This endorsed instrument shall be returned to the Ld.
Tribunal, after which the same can be acted upon. Till such time, the
arbitration proceedings shall remain in abeyance.
92. Ergo, the present petition is allowed and disposed of.
93. All pending I.As stand disposed of in light of the directions
hereinabove. Ordered accordingly.
94. No order to costs.
(Dr. S.K. Panigrahi)
Judge
Orissa High Court, Cuttack,
Dated the 25th February, 2025/
