Preeti Gupta And 4 Others vs Alcott Town Planners Private ...
2022 Latest Caselaw 7134 Tel

   IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD
                               ****


                    ARB.APPL No.37 of 2020



Between:

PREETI GUPTA & OTHERS
                                                      ...Applicants

AND



ALCOTT TOWN PLANNERS PVT. LTD. NOW KNOWN OYO HOTELS & HOMES
PVT. LTD. & ANOTHER
                                                ...Respondents



DATE OF JUDGMENT PRONOUNCED: 11-08-2020


SUBMITTED FOR APPROVAL:


1. Whether Reporters of local newspapers
   may be allowed to see the Judgment?             Yes/No


2. Whether the copies of judgment may be
   marked to Law Reporters/Journals                Yes/No

3. Whether Your Lordships wish to
   see the fair copy of the Judgment?             Yes/No



                                           _______________________
                                           A. RAJASHEKER REDDY, J
                                       2


             *THE HON'BLE SRI JUSTICE A. RAJASHEKER REDDY
                           + ARB.APPL No.37 of 2020




% 11-08-2020

# PREETI GUPTA & OTHERS

                                                       ...Applicants

VERSUS

$ ALCOTT TOWN PLANNERS PVT. LTD. NOW KNOWN OYO HOTELS &
HOMES PVT. LTD. & ANOTHER
                                                ...Respondents




< GIST:


> HEAD NOTE:


! Counsel for Applicant: Sri Zeeshan Adnan Mahmood

^Counsel for Respondent: Sri D. Raghavendar Rao


? Cases referred
1
  (2019 (9) SCC 209
2
  (2011) 14 SCC 66
3
  (2017) 9 SCC 729
4
  (2019) 8 SCC 714
5
  2012 (8) SCC 516
6
  2019 SCC OnLine SC 995
                                         3




           HON'BLE SRI JUSTICE A.RAJASHEKER REDDY
                       Arbitration Application No.37 of 2020

ORDER:

Arbitration application is filed under Section 11 (4) & (6) of the

Arbitration and Conciliation Act, 1996, (for short, "the Act") for

appointment of a sole Arbitrator to adjudicate the disputes and claims

between the parties arising out of the lease deed dated 31-03-2019

entered into by them in respect of lease of a building premises.

02. There is no dispute as to mentioning of an arbitration clause

under clause no.14.2 in the lease deed as a mechanism for dispute

resolution and invocation thereof by issuance of notice dated 03-02-

2020 wherein and whereby the applicants proposed the name of a former

Judge of this Court as their arbitrator, to which, the respondents,

issued reply notice dated 27-02-2020, and while refusing to accede to the

arbitrator proposed by the applicants, instead proposed the name of an

Advocate as their arbitrator. The applicants rejected the arbitrator

proposed by the respondents vide rejoinder dated 04-03-2020. Hence,

this arbitration application for appointment of an arbitrator.

03. Sri Zeeshan Adnan Mahmood, learned counsel for applicants

submitted that respondents having acted upon the arbitration clause by

way of reply notice dated 27-02-2020 and proposed their choice of

arbitrator, now cannot assail the validity of the lease deed and contend

it requires to be impounded and properly stamped. Learned counsel

further submitted that doctrine of "approbate and reprobate" estoppels

them from taking such pleas as those pleas did not form part of their

reply notice dated 27-02-2020. It is also submitted that since

respondents do not dispute arbitration clause and the dispute is only

with regard to the name of the arbitrator, this Court can appoint

independent arbitrator in the backdrop of Section 11 (6A) of the Act,

which confined the enquiry as to the "existence" of an arbitration

agreement. It is lastly submitted that factum of existence of arbitration

clause is admitted by the respondents in their reply notice and in

counter affidavit filed in this matter, the same need not be proved as

enunciated in Section 58 of the Indian Evidence Act, 1872.

04. Sri D. Raghavendar Rao, learned counsel for the respondents, per

contra, contended that lease deed dated 31-03-2019 cannot be looked

into for the reasons it being insufficiently stamped and not a registered

instrument, which is otherwise a compulsory registrable document. It is

also submitted that the pleas viz., impounding of lease deed and it is a

compulsory registrable document being legal pleas, can be taken at any

stage of the proceedings; mere non-mention thereof in the reply notice is

not fatal and cannot be faulted on that count. Learned counsel placed

reliance on the decisions of the Apex Court in GARWARE WALL ROPES

LTD. vs. COASTAL MARINE CONSTRUCTIONS & ENGINEERING LTD.1

& SMS TEA ESTATES (P) LTD. vs. CHANDMARI TEA COMPANY (P)

LTD2 in support of his contentions.

05. Clause 14.2 of the lease deed provides for arbitration, reads as

under:-

2019 (9) SCC 209

(2011) (14) SCC 66

"14.2 Arbitration: Failing such an amicable settlement, any dispute, controversy or claim arising out of, or relating to the Deed within 30 days as the date requested by either party shall be referred to arbitration in accordance with the Indian Arbitration and Conciliation Act, 1996 at present in force."

06. Existence of a dispute between the parties and a mention of

arbitration clause in the lease deed is not disputed by the parties. The

decisions relied on by the applicants' counsel in DURO FELGUERA S.A.

vs. GANGAVARAM PORT LTD.3 & M/s.MAYAVATI TRADING PVT. LTD.

vs. PRADYUAT DEB BURMA4 reiterated that scope of Section 11(6A) is

to be confined to examination of existence of an arbitration clause and

nothing more and nothing less, and all other preliminary issues must be

left to the arbitrator. Curiously, Section 11(6-A) of the Act has been

omitted by Arbitration & Conciliation (Amendment) Act, 2019, although

it had not been given effect to as on this date.

07. In GARWARE WALL ROPES's case (1 supra), the Apex Court

considered the effect of an arbitration clause contained in a contract,

which is insufficiently stamped, under Section 11 of the Act. After

referring to the decisions on the subject of matter of issue including

SMS TEA ESTATES' case (2 supra), it was held that Courts could

decide an arbitration application only after the contract containing an

arbitration clause is adequately stamped. In other words, the decision

ordains that the Courts cannot appoint arbitrator, when the agreement

(2017) 9 SCC 729

(2019) (8) SCC 714

containing the arbitration clause is insufficiently stamped. The order at

paras 16 and 19 reads as under:-

"16. It will be seen that neither in the Statement of Objects and

Reasons nor in the Law Commission Report is there any mention of SMS

Tea Estates (supra). This is for the very good reason that the Supreme

Court or the High Court, while deciding a Section 11 application, does not,

in any manner, decide any preliminary question that arises between the

parties. The Supreme Court or the High Court is only giving effect to the

provisions of a mandatory enactment which, no doubt, is to protect

revenue. SMS Tea Estates (supra) has taken account of the mandatory

provisions contained in the Indian Stamp Act and held them applicable to

judicial authorities, which would include the Supreme Court and the High

Court acting under Section 11. A close look at Section 11(6A) would show

that when the Supreme Court or the High Court considers an application

under Section 11(4) to 11(6), and comes across an arbitration clause in an

agreement or conveyance which is unstamped, it is enjoined by the

provisions of the Indian Stamp Act to first impound the agreement or

conveyance and see that stamp duty and penalty (if any) is paid before the

agreement, as a whole, can be acted upon. It is important to remember that

the Indian Stamp Act applies to the agreement or conveyance as a whole.

Therefore, it is not possible to bifurcate the arbitration clause contained in

such agreement or conveyance so as to give it an independent existence,

as has been contended for by the respondent. The independent existence

that could be given for certain limited purposes, on a harmonious reading

of the Registration Act, 1908 and the 1996 Act has been referred to by

Raveendran, J. in SMS Tea Estates (supra) when it comes to an

unregistered agreement or conveyance. However, the Indian Stamp Act,

containing no such provision as is contained in Section 49 of the

Registration Act, 1908, has been held by the said judgment to apply to the

agreement or conveyance as a whole, which would include the arbitration

clause contained therein. It is clear, therefore, that the introduction of

Section 11(6A) does not, in any manner, deal with or get over the basis of

the judgment in SMS Tea Estates (supra), which continues to apply even

after the amendment of Section 11(6A).

19. When an arbitration clause is contained "in a contract", it is

significant that the agreement only becomes a contract if it is enforceable

by law. We have seen how, under the Indian Stamp Act, an agreement

does not become a contract, namely, that it is not enforceable in law,

unless it is duly stamped. Therefore, even a plain reading of Section

11(6A), when read with Section 7(2) of the 1996 Act and Section 2(h) of the

Contract Act, would make it clear that an arbitration clause in an

agreement would not exist when it is not enforceable by law. This is also

an indicator that SMS Tea Estates (supra) has, in no manner, been

touched by the amendment of Section 11(6A)". (underlining supplied)

08. The decision relied on by the applicants' counsel in AHMEDSAHEB

(DEAD) BY LRS vs. SAYED ISMAIL5 was a case where the rent deed was

not registered, but the same was marked and relied on by the trial Court

and lower appellate Court and decreed the suit, but the High Court in

Second Appeal reversed it on the ground that rent deed was an un-

registered deed and inadmissible in evidence. In SLP to the Apex Court,

the judgment of the High Court was reversed holding that the rent deed

was admitted, the relationship of landlord and tenant was established

factor including the rate of rent, mere fact that an un-registered

instrument came into existence would not stand in the way of the Court

to determine whether there was in fact a lease otherwise than through

such deed. But, the issue whether the rent deed was properly stamped or

not was not the issue before the Apex Court in that case, as such the

decision is not applicable to the facts of the present case, more so in

(2012) 8 SCC 516

view of the dicta in GARWARE WALL ROPES's case (1 supra) which is a

direct case arising under the Arbitration and Conciliation Act, 1996.

09. The arbitration agreement need not be in any particular form and

what is required to be ascertained is the intention of the parties to settle

their disputes through arbitration and the essential elements or

attributes of an arbitration agreement is the agreement to refer their

disputes or differences to arbitration, which is expressly or impliedly

spelt out from a clause in an agreement, separate agreement or

documents/correspondence exchanged between the parties. (see

MAHANAGAR TELEPHONE NIGAM LTD. vs. CANARA BANK6). It is true

that there is no form specified, but in the instant case the arbitration

clause is in the lease deed, which itself is a compulsory registrable

document, and it is not possible to bifurcate the arbitration clause

contained in the lease deed so as to give it an independent existence. In

the light of the mandate contained GARWARE WALL ROPES's case (1

supra), the instant lease deed cannot be considered until it is impounded

and it being a statutory compliance, though the scope of enquiry under

Section 11 (6A) of the Act is restricted to existence of an arbitration

clause as detailed in MAYAVATI TRADING PRIVATE LTD's case (4

supra). Though it is argued by learned counsel for the applicants at the

first blush that admitted documents need not be proved as per Section

58 of the Indian Evidence Act, 1872, sounds to be correct, but the fact

remains that even in case of referring the matter to the Arbitrator, the

Arbitrator has to go into the contents, validity of the lease deed for

2019 SCC OnLine SC 995

granting the relief and as such the contention of the applicants' counsel

is not tenable more particularly in the light of the decision GARWARE

WALL ROPES's case (1 supra). The decision in SUZUKI

PARASRAMPURIA SUTTINGS PVT. LTD. vs. OFFICIAL LIQUIDATOR OF

MAHENDRA PETROCHEMICALS LTD.7 is not applicable to the facts of

the case as in this case the applicants raised legal pleas and such a

course is permissible in law.

10. In the circumstances, this Court is of the opinion that the lease

deed dated 31-03-2019 requires to be properly stamped. As such, the

applicants are directed to take steps to impound the lease deed dated

31-03-2019 as early as possible and file proof thereof. The Registry to

list the matter after filing proof of impounding the document.

__________________________ A.RAJASHEKER REDDY,J

Dated: 11th August, 2020 NRG

(2018) 10 SCC 707

HON'BLE SRI JUSTICE A.RAJASHEKER REDDY

Arbitration Application No.37 of 2020

Dated 11 .08.2020

NRG