Judgment
Judgment
Judgment
VERSUS
JUDGMENT
R.F. NARIMAN, J.
1. Leave granted.
arbitration clause:
1
resolved by such parties [sic through] negotiation shall
be resolved by final and binding arbitration held in Pune.
The disputes shall be referred to a sole arbitrator to be
appointed by GWRL and COMACOE jointly in
agreement.”
stamped. This Court, in SMS Tea Estates (P) Ltd. v. Chandmari Tea
2
Co. (P) Ltd., (2011) 14 SCC 66 [“SMS Tea Estates”], has held that
the provisions of the Indian Stamp Act, 1899 [“Indian Stamp Act”]
agreement and ensure that stamp duty and penalty (if any) are paid
judgment.
and 35 of the Indian Stamp Act, which, as held in SMS Tea Estates
3
which cannot be admitted in evidence or cannot be acted upon until
to the 1996 Act, by which the Court is now to confine itself to the
(Amendment) Bill, 2015, Mr. Mehta argued that it was clear that the
(2005) 8 SCC 618 [“SBP & Co.”] and National Insurance Co. Ltd. v.
which the door was opened too wide, so that many preliminary issues
that it is these two judgments whose basis has been removed, leaving
upon which stamp duty and penalty (if any) are then to be paid, must
4
be followed as Section 11(6A) does not seek to interfere with the
his submissions.
particular, and made it clear that the object of the Amendment Act,
argued that the provisions of the Indian Stamp Act are a fiscal measure
Section 11 of the 1996 Act. The whole object of the amendment would
5
the arbitration clause. She also relied upon Section 11(13) of the 1996
notice, and that this would not be possible if questions relating to the
Stamp Act. She also argued that, in the present case, it is the appellant
who is to pay stamp duty under the Indian Contract Act, 1872, and
therefore, cannot take advantage of its own wrong in not doing so, as
has been correctly held in the impugned judgment. She also relied
first set out the relevant provisions contained in the 1996 Act. Section
6
Section 7 is important and deals with what is meant by an arbitration
7
order of the Supreme Court or any Court, refer the
parties to arbitration unless it finds that prima facie no
valid arbitration agreement exists.
(2) The application referred to in sub-section (1) shall not
be entertained unless it is accompanied by the original
arbitration agreement or a duly certified copy thereof.
Provided that where the original arbitration agreement
or a certified copy thereof is not available with the party
applying for reference to arbitration under sub-section
(1), and the said agreement or certified copy is retained
by the other party to that agreement, then, the party so
applying shall file such application along with a copy of
the arbitration agreement and a petition praying the court
to call upon the other party to produce the original
arbitration agreement or its duly certified copy before that
court.
(3) Notwithstanding that an application has been made
under sub-section (1) and that the issue is pending
before the judicial authority, an arbitration may be
commenced or continued and an arbitral award made.”
Section 11(6A), 11(7), and 11(13) are important for decision in this
8
xxx xxx xxx
(13) An application made under this section for
appointment of an arbitrator or arbitrators shall be
disposed of by the Supreme Court or the High Court or
the person or institution designated by such court, as the
case may be, as expeditiously as possible and an
endeavour shall be made to dispose of the matter within
a period of sixty days from the date of service of notice
on the opposite party.
xxx xxx xxx”
9
agreement is null and void, inoperative or incapable of
being performed.”
10
(3) For the purposes of this section, in cases of doubt,—
(a) the State Government may determine what
offices shall be deemed to be public offices; and
(b) the State Government may determine who
shall be deemed to be persons in charge of
public offices.
11
(c) nothing herein contained shall prevent the
admission of any instrument in evidence in any
proceeding in a Criminal Court, other than a
proceeding under Chapter IX or Part D of
Chapter X of the Code of Criminal Procedure,
1973;
(d) nothing herein contained shall prevent the
admission of any instrument in any Court when
such instrument has been executed by or on
behalf of the Government or where it bears the
certificate of the Collector as provided by
section 32 or any other provision of this Act;
(e) nothing herein contained shall prevent the
admission of a copy of any instrument or of an
oral admission of the contents of any
instrument, if the stamp duty or a deficient
portion of the stamp duty and penalty as
specified in clause (a) is paid.”
stood prior to the Amendment Act, 2015, has had a chequered history.
(2000) 7 SCC 201 [“Konkan Railway I”], it was held that the powers of
the Chief Justice under Section 11(6) of the 1996 Act are
Rani Construction (P) Ltd., (2002) 2 SCC 388 [“Konkan Railway II”].
this view and held that the power to appoint an arbitrator under Section
12
11 is judicial and not administrative. The conclusions of the seven-
follows:
13
Chief Justice or his designate is bound to decide; (ii)
issues which he can also decide, that is, issues which he
may choose to decide; and (iii) issues which should be
left to the Arbitral Tribunal to decide.
22.1. The issues (first category) which the Chief
Justice/his designate will have to decide are:
(a) Whether the party making the application
has approached the appropriate High Court.
(b) Whether there is an arbitration agreement
and whether the party who has applied under
Section 11 of the Act, is a party to such an
agreement.
22.2. The issues (second category) which the Chief
Justice/his designate may choose to decide (or leave
them to the decision of the Arbitral Tribunal) are:
(a) Whether the claim is a dead (long-barred)
claim or a live claim.
(b) Whether the parties have concluded the
contract/transaction by recording satisfaction of
their mutual rights and obligation or by receiving
the final payment without objection.
22.3. The issues (third category) which the Chief
Justice/his designate should leave exclusively to the
Arbitral Tribunal are:
(i) Whether a claim made falls within the
arbitration clause (as for example, a matter
which is reserved for final decision of a
departmental authority and excepted or
excluded from arbitration).
(ii) Merits or any claim involved in the
arbitration.”
11. As a result of these judgments, the door was wide open for the
14
Commission of India, by its Report No. 246 submitted in August 2014,
Insofar as SBP & Co. (supra) and Boghara Polyfab (supra) are
which are relevant and which led to the introduction of Section 11(6A)
are as follows:
15
the scope of such powers – i.e. the scope of
arguments which a Court (Chief Justice) will
consider while deciding whether to appoint an
arbitrator or not – i.e. whether the arbitration
agreement exists, whether it is null and void,
whether it is voidable etc.; and which of these it
should leave for decision of the arbitral tribunal.
the nature of such intervention – i.e. would the
Court (Chief Justice) consider the issues upon a
detailed trial and whether the same would be
decided finally or be left for determination of the
arbitral tribunal.
30. After a series of cases culminating in the decision in
SBP v. Patel Engineering, (2005) 8 SCC 618, the
Supreme Court held that the power to appoint an
arbitrator under section 11 is a “judicial” power. The
underlying issues in this judgment, relating to the scope
of intervention, were subsequently clarified by
RAVEENDRAN J in National Insurance Co. Ltd. v. Boghara
Polyfab Pvt. Ltd., (2009) 1 SCC 267, where the Supreme
Court laid down as follows –
“1. The issues (first category) which Chief
Justice/his designate will have to decide are:
(a) Whether the party making the application
has approached the appropriate High Court?
(b) Whether there is an arbitration agreement
and whether the party who has applied under
section 11 of the Act, is a party to such an
agreement?
2. The issues (second category) which the Chief
Justice/his designate may choose to decide are:
(a) Whether the claim is a dead (long barred)
claim or a live claim?
(b) Whether the parties have concluded the
contract/transaction by recording satisfaction of
their mutual rights and obligation or by receiving
the final payment without objection?
3. The issues (third category) which the Chief
Justice/his designate should leave exclusively to the
arbitral tribunal are:
16
(a) Whether a claim falls within the arbitration
clause (as for example, a matter which is
reserved for final decision of a departmental
authority and excepted or excluded from
arbitration)?
(b) Merits of any claim involved in the
arbitration.”
31. The Commission is of the view that, in this context,
the same test regarding scope and nature of judicial
intervention, as applicable in the context of section 11,
should also apply to sections 8 and 45 of the Act – since
the scope and nature of judicial intervention should not
change upon whether a party (intending to defeat the
arbitration agreement) refuses to appoint an arbitrator in
terms of the arbitration agreement, or moves a
proceeding before a judicial authority in the face of such
an arbitration agreement.
32. In relation to the nature of intervention, the exposition
of the law is to be found in the decision of the Supreme
Court in Shin Etsu Chemicals Co. Ltd. v. Aksh Optifibre,
(2005) 7 SCC 234, (in the context of section 45 of the
Act), where the Supreme Court has ruled in favour of
looking at the issues/controversy only prima facie.
33. It is in this context, the Commission has
recommended amendments to sections 8 and 11 of the
Arbitration and Conciliation Act, 1996. The scope of the
judicial intervention is only restricted to situations where
the Court/Judicial Authority finds that the arbitration
agreement does not exist or is null and void. In so far as
the nature of intervention is concerned, it is
recommended that in the event the Court/Judicial
Authority is prima facie satisfied against the argument
challenging the arbitration agreement, it shall appoint the
arbitrator and/or refer the parties to arbitration, as the
case may be. The amendment envisages that the judicial
authority shall not refer the parties to arbitration only if it
finds that there does not exist an arbitration agreement
or that it is null and void. If the judicial authority is of the
opinion that prima facie the arbitration agreement exists,
then it shall refer the dispute to arbitration, and leave the
existence of the arbitration agreement to be finally
17
determined by the arbitral tribunal. However, if the
judicial authority concludes that the agreement does not
exist, then the conclusion will be final and not prima
facie. The amendment also envisages that there shall be
a conclusive determination as to whether the arbitration
agreement is null and void. In the event that the judicial
authority refers the dispute to arbitration and/or appoints
an arbitrator, under sections 8 and 11 respectively, such
a decision will be final and non-appealable. An appeal
can be maintained under section 37 only in the event of
refusal to refer parties to arbitration, or refusal to appoint
an arbitrator.”
18
(iv) to provide that while considering any application for
appointment of arbitrator, the High Court or the Supreme
Court shall examine the existence of a prima facie
arbitration agreement and not other issues;
(v) to provide that the arbitral tribunal shall make its
award within a period of twelve months from the date it
enters upon the reference and that the parties may,
however, extend such period up to six months, beyond
which period any extension can only be granted by the
Court, on sufficient cause;
(vi) to provide that a model fee Schedule on the basis of
which High Courts may frame rules for the purpose of
determination of fees of arbitral tribunal, where a High
Court appoints arbitrator in terms of section 11 of the Act;
(vii) to provide that the parties to dispute may at any
stage agree in writing that their dispute be resolved
through fast track procedure and the award in such
cases shall be made within a period of six months;
(viii) to provide for neutrality of arbitrators, when a person
is approached in connection with possible appointment
as an arbitrator;
(ix) to provide that application to challenge the award is
to be disposed of by the Court within one year.
7. The amendments proposed in the Bill will ensure that
arbitration process becomes more user-friendly, cost
effective and lead to expeditious disposal of cases.
xxx xxx xxx”
felt that the judgments in SBP & Co. (supra) and Boghara Polyfab
concerned, the Supreme Court or, as the case may be, the High Court,
19
confine itself to the examination of the existence of an arbitration
Estates (supra) has also been done away with by the expression
14. In SMS Tea Estates (supra), this Court was confronted with an
judgment set out the questions that arose for consideration as follows:
20
“12. When a contract contains an arbitration agreement,
it is a collateral term relating to the resolution of disputes,
unrelated to the performance of the contract. It is as if
two contracts—one in regard to the substantive terms of
the main contract and the other relating to resolution of
disputes—had been rolled into one, for purposes of
convenience. An arbitration clause is therefore an
agreement independent of the other terms of the contract
or the instrument. Resultantly, even if the contract or its
performance is terminated or comes to an end on
account of repudiation, frustration or breach of contract,
the arbitration agreement would survive for the purpose
of resolution of disputes arising under or in connection
with the contract.
13. Similarly, when an instrument or deed of transfer (or
a document affecting immovable property) contains an
arbitration agreement, it is a collateral term relating to
resolution of disputes, unrelated to the transfer or
transaction affecting the immovable property. It is as if
two documents—one affecting the immovable property
requiring registration and the other relating to resolution
of disputes which is not compulsorily registerable—are
rolled into a single instrument. Therefore, even if a deed
of transfer of immovable property is challenged as not
valid or enforceable, the arbitration agreement would
remain unaffected for the purpose of resolution of
disputes arising with reference to the deed of transfer.
14. These principles have now found statutory
recognition in sub-section (1) of Section 16 of the
Arbitration and Conciliation Act, 1996 which is extracted
below:
“16. Competence of Arbitral Tribunal to rule on its
jurisdiction.—(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
21
(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.”
15. But where the contract or instrument is voidable at
the option of a party (as for example under Section 19 of
the Contract Act, 1872), the invalidity that attaches itself
to the main agreement may also attach itself to the
arbitration agreement, if the reasons which make the
main agreement voidable, exist in relation to the making
of the arbitration agreement also. For example, if a
person is made to sign an agreement to sell his property
under threat of physical harm or threat to life, and the
said person repudiates the agreement on that ground,
not only the agreement for sale, but any arbitration
agreement therein will not be binding.
16. An arbitration agreement does not require
registration under the Registration Act. Even if it is found
as one of the clauses in a contract or instrument, it is an
independent agreement to refer the disputes to
arbitration, which is independent of the main contract or
instrument. Therefore having regard to the proviso to
Section 49 of the Registration Act read with Section
16(1)(a) of the Act, an arbitration agreement in an
unregistered but compulsorily registerable document can
be acted upon and enforced for the purpose of dispute
resolution by arbitration.”
22
Act, does not contain a proviso like Section 49 of the
Registration Act enabling the instrument to be used to
establish a collateral transaction.
20. The Scheme for Appointment of Arbitrators by the
Chief Justice of Gauhati High Court, 1996 requires an
application under Section 11 of the Act to be
accompanied by the original arbitration agreement or a
duly certified copy thereof. In fact, such a requirement is
found in the scheme/rules of almost all the High Courts.
If what is produced is a certified copy of the
agreement/contract/instrument containing the arbitration
clause, it should disclose the stamp duty that has been
paid on the original. Section 33 casts a duty upon every
court, that is, a person having by law authority to receive
evidence (as also every arbitrator who is a person having
by consent of parties, authority to receive evidence)
before whom an unregistered instrument chargeable with
duty is produced, to examine the instrument in order to
ascertain whether it is duly stamped. If the court comes
to the conclusion that the instrument is not duly stamped,
it has to impound the document and deal with it as per
Section 38 of the Stamp Act.
21. Therefore, when a lease deed or any other
instrument is relied upon as contending the arbitration
agreement, the court should consider at the outset,
whether an objection in that behalf is raised or not,
whether the document is properly stamped. If it comes to
the conclusion that it is not properly stamped, it should
be impounded and dealt with in the manner specified in
Section 38 of the Stamp Act. The court cannot act upon
such a document or the arbitration clause therein. But if
the deficit duty and penalty is paid in the manner set out
in Section 35 or Section 40 of the Stamp Act, the
document can be acted upon or admitted in evidence.
22. We may therefore sum up the procedure to be
adopted where the arbitration clause is contained in a
document which is not registered (but compulsorily
registerable) and which is not duly stamped:
22.1. The court should, before admitting any document
into evidence or acting upon such document, examine
whether the instrument/document is duly stamped and
23
whether it is an instrument which is compulsorily
registerable.
22.2. If the document is found to be not duly stamped,
Section 35 of the Stamp Act bars the said document
being acted upon. Consequently, even the arbitration
clause therein cannot be acted upon. The court should
then proceed to impound the document under Section 33
of the Stamp Act and follow the procedure under
Sections 35 and 38 of the Stamp Act.
22.3. If the document is found to be duly stamped, or if
the deficit stamp duty and penalty is paid, either before
the court or before the Collector (as contemplated in
Section 35 or 40 Section of the Stamp Act), and the
defect with reference to deficit stamp is cured, the court
may treat the document as duly stamped.
xxx xxx xxx”
(supra) that Section 16 of the 1996 Act has full play only after the
24
“12. Section 16 of the Act only makes explicit what is
even otherwise implicit, namely, that the Arbitral Tribunal
constituted under the Act has the jurisdiction to rule on its
own jurisdiction, including ruling on objections with
respect to the existence or validity of the arbitration
agreement. Sub-section (1) also directs that an
arbitration clause which forms part of a contract shall be
treated as an agreement independent of the other terms
of the contract. It also clarifies that a decision by the
Arbitral Tribunal that the contract is null and void shall
not entail ipso jure the invalidity of the arbitration clause.
Sub-section (2) of Section 16 enjoins that a party
wanting to raise a plea that the Arbitral Tribunal does not
have jurisdiction, has to raise that objection not later than
the submission of the statement of defence, and that the
party shall not be precluded from raising the plea of
jurisdiction merely because he has appointed or
participated in the appointment of an arbitrator. Sub-
section (3) lays down that 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. When
the Tribunal decides these two questions, namely, the
question of jurisdiction and the question of exceeding the
scope of authority or either of them, the same is open to
immediate challenge in an appeal, when the objection is
upheld and only in an appeal against the final award,
when the objection is overruled. Sub-section (5) enjoins
that if the Arbitral Tribunal overrules the objections under
sub-section (2) or (3), it should continue with the arbitral
proceedings and make an arbitral award. Sub-section (6)
provides that a party aggrieved by such an arbitral award
overruling the plea on lack of jurisdiction and the
exceeding of the scope of authority, may make an
application on these grounds for setting aside the award
in accordance with Section 34 of the Act. The question,
in the context of sub-section (7) of Section 11 is, what is
the scope of the right conferred on the Arbitral Tribunal to
rule upon its own jurisdiction and the existence of the
arbitration clause, envisaged by Section 16(1), once the
Chief Justice or the person designated by him had
appointed an arbitrator after satisfying himself that the
25
conditions for the exercise of power to appoint an
arbitrator are present in the case. Prima facie, it would
be difficult to say that in spite of the finality conferred by
sub-section (7) of Section 11 of the Act, to such a
decision of the Chief Justice, the Arbitral Tribunal can still
go behind that decision and rule on its own jurisdiction or
on the existence of an arbitration clause. It also appears
to us to be incongruous to say that after the Chief Justice
had appointed an Arbitral Tribunal, the Arbitral Tribunal
can turn round and say that the Chief Justice had no
jurisdiction or authority to appoint the Tribunal, the very
creature brought into existence by the exercise of power
by its creator, the Chief Justice. The argument of the
learned Senior Counsel, Mr K.K. Venugopal that Section
16 has full play only when an Arbitral Tribunal is
constituted without intervention under Section 11(6) of
the Act, is one way of reconciling that provision with
Section 11 of the Act, especially in the context of sub-
section (7) thereof. We are inclined to the view that the
decision of the Chief Justice on the issue of jurisdiction
and the existence of a valid arbitration agreement would
be binding on the parties when the matter goes to the
Arbitral Tribunal and at subsequent stages of the
proceeding except in an appeal in the Supreme Court in
the case of the decision being by the Chief Justice of the
High Court or by a Judge of the High Court designated
by him.”
26
16. It will be seen that neither in the Statement of Objects and
SMS Tea Estates (supra). This is for the very good reason that the
that arises between the parties. The Supreme Court or the High Court
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
see that stamp duty and penalty (if any) is paid before the agreement,
27
existence, as has been contended for by the respondent. The
any manner, deal with or get over the basis of the judgment in SMS
Section 7(2) of the 1996 Act. We are concerned with the first part of
Section 7(2) on the facts of the present case, and therefore, the
28
18. Sections 2(a), 2(b), 2(g) and 2(h) of the Indian Contract Act, 1872
enforceable by law. We have seen how, under the Indian Stamp Act,
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
29
(supra) has, in no manner, been touched by the amendment of Section
11(6A).
20. We now come to some of the judgments cited by both the sides.
21. Learned counsel for the respondent relied heavily upon Enercon
(India) Ltd. & Ors. v. Enercon GmbH & Anr., (2014) 5 SCC 1
follows:
as follows:
30
“79. In our opinion, all the issues raised by the appellants
about the non-existence of a concluded contract pale
into insignificance in the face of “Heads of Agreement on
the proposed IPLA dated 23-5-2006”. Clause 3 of the
Heads of Agreement provides as under:
“3. Governing law and jurisdiction
3.1 This paragraph is legally binding.
3.2 This Heads of Agreement is (and all
negotiations and any legal agreements
prepared in connection with the IPLA shall be)
governed by and construed in accordance with
the law of Germany.
3.3 The parties irrevocably agree that Clause
18 of the proposed draft IPLA shall apply to
settle any dispute or claim that arises out of or
in connection with this memorandum of
understanding and negotiations relating to the
proposed IPLA.”
A bare perusal of this clause makes it abundantly clear
that the parties have irrevocably agreed that Clause 18
of the proposed IPLA shall apply to settle any dispute or
claim that arises out of or in connection with this
memorandum of understanding and negotiations relating
to IPLA.”
(IPLA) were arbitrable, this Court held that the arbitration agreement in
the facts of that case was separate from the main contract, making it a
case which falls under the second part (and not under the first part) to
31
Section 7(2), namely, that an arbitration agreement may be in the form
respondent very much further. It may only be noted that the judgment
22. The other judgment strongly relied upon by the learned counsel
This judgment also makes it clear that the mischief that was sought to
judgments of SBP & Co. (supra) and Boghara Polyfab (supra). This
32
judgment does not, in any manner, answer the precise issue that is
before us.
Bench of this Court, while dealing with an arbitration clause that arose
follows:
33
appellant at no point of time raised any such
dispute. The appellant company in its letter
dated July 5 and 29, 1963 repudiated the claim
altogether. Under clause 13 the company was
not required to mention any reason of rejection
of the claim nor did it mention any. But the
repudiation of the claim could not amount to the
raising of a dispute as to the amount of any
loss or damage alleged to have been suffered
by Respondent 1. If the rejection of the claim
made by the insured be on the ground that he
had suffered no loss as a result of the fire or
the amount of loss was not to the extent
claimed by him, then and then only, a difference
could have arisen as to the amount of any loss
or damage within the meaning of clause 18. In
this case, however, the company repudiated its
liability to pay any amount of loss or damage as
claimed by Respondent 1. In other words, the
dispute raised by the company appertained to
its liability to pay any amount of damage
whatsoever. In our opinion, therefore, the
dispute raised by the appellant company was
not covered by the arbitration clause.
12. As per clause 13 on rejection of the
claim by the company an action or suit,
meaning thereby a legal proceeding which
almost invariably in India will be in the nature of
a suit, has got to be commenced within three
months from the date of such rejection;
otherwise, all benefits under the policy stand
forfeited. The rejection of the claim may be for
the reasons indicated in the first part of clause
13, such as, false declaration, fraud or wilful
neglect of the claimant or on any other ground
disclosed or undisclosed. But as soon as there
is a rejection of the claim and not the raising of
a dispute as to the amount of any loss or
damage, the only remedy open to the claimant
is to commence a legal proceeding, namely, a
suit, for establishment of the company's liability.
It may well be that after the liability of the
34
company is established in such a suit, for
determination of the quantum of the loss or
damage reference to arbitration will have to be
resorted to in accordance with clause 18. But
the arbitration clause, restricted as it is by the
use of the words ‘if any difference arises as to
the amount of any loss or damage’, cannot take
within its sweep a dispute as to the liability of
the company when it refuses to pay any
damage at all.”
xxx xxx xxx
14. From the line of authorities, it is clear that the
arbitration clause has to be interpreted strictly. The
subject clause 7 which is in pari materia to clause 13 of
the policy considered by a three-Judge Bench in Oriental
Insurance Company Limited (supra), is a conditional
expression of intent. Such an arbitration clause will get
activated or kindled only if the dispute between the
parties is limited to the quantum to be paid under the
policy. The liability should be unequivocally admitted by
the insurer. That is the precondition and sine qua non for
triggering the arbitration clause. To put it differently, an
arbitration clause would enliven or invigorate only if the
insurer admits or accepts its liability under or in respect
of the concerned policy. That has been expressly
predicated in the opening part of clause 7 as well as the
second paragraph of the same clause. In the opening
part, it is stated that the “(liability being otherwise
admitted)”. This is reinforced and re-stated in the second
paragraph in the following words:
“It is clearly agreed and understood that no
difference or dispute shall be referable to
arbitration as herein before provided, if the
Company has disputed or not accepted liability
under or in respect of this Policy.”
15. Thus understood, there can be no arbitration in
cases where the insurance company disputes or does
not accept the liability under or in respect of the policy.
16. The core issue is whether the communication sent on
21st April, 2011 falls in the excepted category of
repudiation and denial of liability in toto or has the effect
35
of acceptance of liability by the insurer under or in
respect of the policy and limited to disputation of
quantum. The High Court has made no effort to examine
this aspect at all. It only reproduced clause 7 of the
policy and in reference to the dictum in Duro Felguera
(supra) held that no other enquiry can be made by the
Court in that regard. This is misreading of the said
decision and the amended provision and, in particular,
mis-application of the three-Judge Bench decisions of
this Court in Vulcan Insurance Co. Ltd. (supra) and in
Oriental Insurance Company Ltd. (supra).
17. Reverting to the communication dated 21 st April,
2011, we have no hesitation in taking the view that the
appellants completely denied their liability and
repudiated the claim of the JV (respondent Nos. 1 & 2)
for the reasons mentioned in the communication. The
reasons are specific. No plea was raised by the
respondents that the policy or the said clause 7 was
void. The appellants repudiated the claim of the JV and
denied their liability in toto under or in respect of the
subject policy. It was not a plea to dispute the quantum
to be paid under the policy, which alone could be
referred to arbitration in terms of clause 7. Thus, the plea
taken by the appellants is of denial of its liability to
indemnify the loss as claimed by the JV, which falls in the
excepted category, thereby making the arbitration clause
ineffective and incapable of being enforced, if not non-
existent. It is not actuated so as to make a reference to
arbitration. In other words, the plea of the appellants is
about falling in an excepted category and non-arbitrable
matter within the meaning of the opening part of clause 7
and as re-stated in the second paragraph of the same
clause.
18. In view of the above, it must be held that the dispute
in question is non-arbitrable and respondent Nos. 1 & 2
ought to have resorted to the remedy of a suit. The plea
of respondent Nos. 1 & 2 about the final repudiation
expressed by the appellants vide communication dated
17th April, 2017 will be of no avail. However, whether that
factum can be taken as the cause of action for institution
of the suit is a matter which can be debated in those
36
proceedings. We may not be understood to have
expressed any opinion either way in that regard.
(emphasis in original)
“exist”, so to speak, in the policy, it would not exist in law, as was held
the insurer has not admitted or accepted liability. Likewise, in the facts
Section 8, Section 16, and Section 45, which deal with “validity” of an
followed by us.
25. Other High Court judgments were relied upon in the context of
Fitness India Pvt. Ltd., (2019) SCC OnLine Del 6483, B.D. Sharma v.
Swastik Infra Estate Pvt. Ltd. & Ors., (2018) SCC OnLine Del 13279,
37
Sandeep Soni v. Sanjay Roy, (2018) SCC OnLine Del 11169, and
N.D. Developers Pvt. Ltd. v. Bharathi & Ors., (2018) SCC OnLine
have not declared the law correctly, and are consequently, overruled. A
Landscapes Pvt. Ltd. v. Shailesh Shah and Ors., Arb. Pet. No. 466
framed by it as follows:
to be incorrectly decided.
38
26. Learned counsel for the respondent relied strongly upon Section
11(13) of the 1996 Act to show that the 60-day period would be
Section 11(6) application. Stamp duty, when paid with penalty (if any),
far more than the 60-day period that is laid down by Section 11(13).
Stamp Act and Section 11(13) of the 1996 Act by which, if it is possible,
(if any) must be paid on such instrument before it is acted upon by any
39
within a period of 60 days from the date of service of notice on the
opposite party.
40
In J.K. Cotton Spinning & Weaving Mills Co. Ltd. v. State of U.P.,
effect to thus:
41
In Chief Inspector of Mines v. Lala Karam Chand Thapar, (1962) 1
Section 31(4) of the Mines Act, 1952 and Section 24 of the General
42
regulations will continue to exist, in accordance with the
provisions of Section 24 of the General Clauses Act. This
construction will give reasonable effect to Section 31(4)
of the Mines Act, 1923 and at the same time not frustrate
the very salutary object of Section 24 of the General
Clauses Act. ……”
(at pp. 19-20)
In Anwar Hasan Khan v. Mohd. Shafi, (2001) 8 SCC 540, this Court
construction, thus:
43
declaring that while proceeding with the Section 11 application, the
High Court must impound the instrument which has not borne stamp
duty and hand it over to the authority under the Maharashtra Stamp
Act, who will then decide issues qua payment of stamp duty and
period of 45 days from the date on which the authority receives the
instrument. As soon as stamp duty and penalty (if any) are paid on the
instrument, any of the parties can bring the instrument to the notice of
the High Court, which will then proceed to expeditiously hear and
dispose of the Section 11 application. This will also ensure that once a
arbitrator can then proceed to decide the dispute within the time frame
case, the appellant had to pay the stamp duty and cannot take
44
29. We, therefore, allow the appeal and set aside the judgment of the
Bombay High Court. The matter is remitted to the Bombay High Court
……........................... J.
(R.F. NARIMAN)
……........................... J.
(VINEET SARAN)
New Delhi;
April 10, 2019.
45