IN THE SUPREME COURT OF INDIA

CIVIL REVIEW JURISDICTION

CIVIL APPEAL No. 3802-3803 of 2020

IN THE MATTER OF:

M/s N.N. Global Mercantile Pvt. Ltd. … Petitioner

Versus

M/s Indo Unique Flame Ltd. & Ors. …Respondent

NOTES OF SUBMISSIONS

Gourab Banerji, Senior Advocate (Amicus Curiae)

 INDEX

I. SCOPE OF THE REFERENCE & SUMMARY SUBMISSIONS .................................. 3

II. THE STAMP ACT, 1899.................................................................................................... 6

III. ARBITRATION & CONCILIATION ACT, 1996 ....................................................... 13

IV. REFERENCE JUDGMENTS: GARWARE, NN GLOBAL, AND VIDYA DROLIA

.................................................................................................................................................. 24

V. CONCLUDING SUBMISSIONS .................................................................................... 41

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 I. SCOPE OF THE REFERENCE & SUMMARY SUBMISSIONS

A. Scope of the reference

1. The scope of the reference is to be found in the judgment of N.N. Global

Mercantile (P) Ltd. v. Indo Unique Flame Ltd., (2021) 4 SCC 379. The relevant
paras are 34, and 56 to 58 which set out below:
“34. We doubt the correctness of the view taken in paras 146 and 147 of the
three-Judge Bench in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn.,
(2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] . We consider it appropriate to refer
the findings in paras 22 and 29 of Garware Wall Ropes Ltd. [Garware Wall
Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 :
(2019) 4 SCC (Civ) 324] , which has been affirmed in paras 146 and 147
of Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 :
(2021) 1 SCC (Civ) 549] , to a Constitution Bench of five Judges.
***
56. We are of the considered view that the finding in SMS Tea Estates [SMS Tea
Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 : (2012) 4
SCC (Civ) 777] and Garware [Garware Wall Ropes Ltd. v. Coastal Marine
Constructions & Engg. Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ) 324] that
the non-payment of stamp duty on the commercial contract would invalidate even
the arbitration agreement, and render it non-existent in law, and unenforceable,
is not the correct position in law.

57. In view of the finding in paras 146 and 147 of the judgment in Vidya
Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC
(Civ) 549] by a coordinate Bench, which has affirmed the judgment
in Garware [Garware Wall Ropes Ltd. v. Coastal Marine Constructions &
Engg. Ltd., (2019) 9 SCC 209 : (2019) 4 SCC (Civ) 324] , the aforesaid issue is
required to be authoritatively settled by a Constitution Bench of this Court.

58. We consider it appropriate to refer the following issue, to be authoritatively

settled by a Constitution Bench of five Judges of this Court:
“Whether the statutory bar contained in Section 35 of the Stamp Act, 1899
applicable to instruments chargeable to stamp duty under Section 3 read
with the Schedule to the Act, would also render the arbitration agreement
contained in such an instrument, which is not chargeable to payment of
stamp duty, as being non-existent, unenforceable, or invalid, pending
payment of stamp duty on the substantive contract/instrument?”

3
B. Summary of Submissions
1. Under Section 11 (6A) the Court appointing the arbitrator shall “notwithstanding
any judgment, decree or order of any Court, confine to the examination of the
existence of an arbitration agreement.”

2. The correct principle to be applied while construing Section 11 (6A) is reflected at

paragraph 59 of Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729,
where Kurian Joseph J, observed:

“59. … After the amendment, all that the courts need to see is whether an
arbitration agreement exists—nothing more, nothing less. The legislative policy
and purpose is essentially to minimise the Court's intervention at the stage of
appointing the arbitrator and this intention as incorporated in Section 11(6-A)
ought to be respected.”

3. The existence and/or validity of an arbitration agreement is not affected by the

provisions of the Stamp Act. Non-payment of stamp duty will not invalidate the
instrument. It is a curable defect.

4. A true reading of Section 11 (6A) of the ACA would establish that the stage of
impounding of an unstamped or deficiently stamped instrument is not to be done
by the Section 11 judge but by an arbitrator appointed under Section 11.

5. The Court should allow the arbitrator to deal with issues not relating to the
existence of the arbitration agreement, including the issue of insufficient stamping
of instruments.

6. Neither Garware nor NN Global lay down the correct law in their entirety. This
Constitution Bench has the luxury of not being fettered by three-judge bench
precedents.

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7. This Bench may decide the issue on principle keeping in mind the text and context,
i.e., language and intent of both sets of legislation as reflected in the legislative
history.

8. The reference question may have to reformulated thus:

“Whether the statutory bar contained in Section 35 of the Stamp Act, 1899
applicable to instruments chargeable to stamp duty under Section 3 read
with the Schedule to the Act, would also render the arbitration agreement
contained in such an instrument, which is not chargeable to payment of
stamp duty, as being non-existent, unenforceable, or invalid, pending
payment of stamp duty on the substantive contract/instrument?”

The reasons for this reformulation shall be explained in due course.

5
 II. THE STAMP ACT, 1899

1. Stamp duty, on instruments specified in Entry 91 of List I of the Seventh Schedule,

is levied by the Central Government under the Central Act, whereas stamp duty
on instruments on transactions other than those mentioned in Entry 91 of List I
are levied by the States under Entry 63 of List II of the Seventh Schedule.

A. Relevant Provisions

2. Section 3 which is titled ‘Instruments Chargeable with Duty’ makes it clear that
Stamp duty is levied with reference to the instrument and not to the transaction.
(Commissioner of Inland Revenue v. Angus, (1889) 23 QBD 579 followed in
Swadeshi Cotton Mills Company, Ltd., In re, AIR 1932 Allahabad 291)

3. The relevant entry in Schedule I is Article 5 which is titled “Agreement or

Memorandum of an Agreement”

Description of Instrument Proper Stamp-duty

5. AGREEMENT OR
MEMORANDUM OF AN
AGREEMENT—
(a) if relating to the sale of a bill of Two annas.
exchange;
(b) if relating to the sale of a Subject to a maximum of ten rupees,
Government security or share in an one anna
incorporated company or other body
for every Rs. 10,000 or part thereof of
corporate;
the value of the security or share.
(c) if not otherwise provided for
Eight annas.
Exemptions
Agreement or memorandum of
agreement—
(a) for or relating to the sale of goods

6
 or merchandise exclusively, not being a
NOTE OR
MEMORANDUM chargeable under
No. 43;
(b) made in the form of tenders to the
Central Government for or relating to
any loan;

4. The amendments to Schedule I of the Stamp Act by various States, as also the
various State Stamp Acts, all appear to have this residuary entry in Article 5.

5. Accordingly, a standalone arbitration agreement is liable to be stamped, as Article

5(c) covers all agreements if not otherwise provided for.

Note: - The observations in NN Global at Paragraphs 20 and 24 that the

Maharashtra Stamp Act does not subject an arbitration agreement to payment of
Stamp duty appears to be erroneous.

6. The next relevant provisions are found in Chapter IV titled ‘Instruments Not duly
stamped’ (Sections 33 to 48).

7. The key provisions are Sections 33 and 35. Section 33 is titled ‘Examination and
Impounding of Instruments’ while Section 35 is titled ‘Instruments not duly
stamped inadmissible in evidence, etc. Section 36 titled ‘Admission of instrument
where not to be questioned’ is also of importance.

8. Section 38 provides how instruments impounded are to be dealt with. Sections 40

and 42 are also relevant. Chapter III provides for Adjudication as to Stamps, and
Chapter VI provides for Reference and Revision.

7
B. Relevant Judgments

(i) Hindustan Steel Ltd v M/s Dilip Construction Company

9. The key judgment is Hindustan Steel Ltd v M/s Dilip Construction Company,
(1969) 1 SCC 597 (Dilip Construction). In paragraph 2, the submission before
the Bench was whether an unstamped instrument “has no existence in the eye of
the law”. It was argued that upon payment of duty and penalty, the instrument
could be admitted in evidence but not acted upon.

10. The discussion at paragraphs 5 to 8 of the judgment, particularly paragraph 7 are

of importance in understanding the scope of the Stamp Act. The Bench in Dilip
Construction concluded that an unstamped instrument can be acted upon after
payment of duty and penalty. As the initial defect can be cured. Being a curable
defect, it is not a case where an unstamped instrument has no existence in the eye
of the law.

(ii) Privy Council and Patna High Court in Lachmi Narayan

11. In Lachmi Narayan Agarwalla v Braja Mohan Singh, 51 IA 332 (Lachmi

Narayan) the Privy Council held that the Proviso (a) to Section 35 makes it clear
that while an instrument cannot be acted upon (nothing can be recovered) unless
it has proper stamp, so, by the proviso if there is not a proper stamp it may be put
on afterwards on payment of a penalty and the instrument becomes effective.

12. The Privy Council decision in the Lachmi Narayan arose out of a decision of the
Patna High Court in Barja Mohan Singh v Lachmi Narayan Agarwalla, AIR 1920
Pat 50. At paragraph 20, the Patna High Court observed that the object of the
Stamp Act is not to alter the terms of the bargain between the parties but to protect
the revenue by excluding proof of the bargain by an instrument unduly stamped.
It further held that Section 35 provides the means by which in the case of the

8
 estimate proving deficient, the revenue can be amply protected, and the terms of
the bargain can be proved and given effect to.

(iii) Calcutta High Court Judgments

13. The Calcutta High Court in Joyman Bewa v Easin Sarkar, (1925-26) 30 CWN
609 (DB), at internal page 611: AIR 1926 Cal 877 (paragraph 15), held that the
failure duly to stamp a document which must needs be stamped by reason of the
provisions of the Stamp Act does not affect the validity of any contract therein
contained but renders the documents inadmissible in evidence.

14. The Calcutta High Court, further elaborately dealt with Section 35 of the Indian
Stamp Act, 1899 in Gulzari Lal Marwari v Ram Gopal, ILR 1937 (1) Cal 257. At
internal page 260, Lort-Williams J observed:

“The effect of the section is to make such an unstamped document

inadmissible in evidence, and unable to be acted upon by persons having
authority to receive evidence or by any public officer. It does not affect
the validity of the document.”

“There is a clear distinction to be drawn between invalidity and

inadmissibility of documents. Certain statutes and sections render
documents invalid if they are not stamped. No section of the Indian
Stamp Act has this effect.”

15. Subsequently, the Calcutta High Court, in Purna Chandra Chakarabarty v

Kalipada Roy, AIR 1942 Cal 386, following Joyman Bewa held that:

“Failure to stamp a document which has got to be stamped under the

provisions of the Stamp Act does not affect the validity of the transaction
embodied in the document – it merely renders the document inadmissible
in evidence.”

9
(iv) Pakistan Supreme Court Judgment in Hafiz Muhammad Siddique

16. In Union Insurance Company of Pakistan v Hafiz Muhammad Siddique, PLD

1978 Supreme Court 279, internal pages 5 to 8, the issue before the Pakistan
Supreme Court was “whether there could be any valid arbitration proceedings in
the face of the agreement not being duly stamped in violation of Section 35 of the
Stamp Act, and whether an objection could be entertained in the absence of the
agreement”.

17. The Court speaking through Dorab Patel, J analysed the language of Section 35
in some detail and held:

“It would be against all cannons of construction to enlarge the meaning

of the words in Section 35 so as to render invalid instruments which fall
within mischief of the section.”

18. He further observed that “the object of the legislature in enacting the Stamp Act
was to protect public revenue and not to interfere with commercial life by
invalidating instruments vital to the smooth flow of trade and commerce.”

19. He then observed that the history of the section was fatal to the appellants case of
invalidity. He noted that “the Legislature wanted to protect public revenues
without crippling the smooth flow of trade and commerce, therefore, it attached
certain disabilities to instruments which were not properly stamped, but it omitted
the said words in order to make it clear that instruments which fell within the
mischief of the section did not thereby become invalid.”

20. In so doing, he also referred to the following judgments to explain that non-
stamping of a document does not affect the validity of any contract therein
contained but renders the document inadmissible in evidence.

1) Joyman Bewa v Easin Sarkar, (1925-26) 30 CWN 609 (DB)

10
 2) Subramanian Chettiar v Revenue Divisional Officer, Devakottah, AIR 1956
Mad 454
3) Gopi Mal v Yidva Wanti, AIR 1942 Lah 260
4) Powell v London and Provincial Bank (1893) 2 Ch. 555 at page 560
5) Re: Indo-China Steam Navigation Company (1917) 2 Ch. 100

21. He then agreed with the view of the Lahore High Court in Gopi Mal v Yidya Wanti,
AIR 1942 Lah 260 which held that an unstamped decree was defective but not
invalid and overruled the subsequent decision of the Lahore High Court in
Pakistan Cement Industries Ltd, Rawalpindi v Teekayef Trading Co, PLD 1971
Lah 522.

22. On the facts, the appeal was dismissed and the judgments of the Courts below
decreeing the arbitral award was upheld.

C. Conclusion

i. Stamp duty is levied with reference to the instrument, and not the transaction.

ii. The Stamp Act is an Act to consolidate and amend the law relating to stamp. It is
fiscal enactment intended to secure revenue for the State.

iii. It is not enacted to arm a litigant with a weapon of technicality to meet the case of
his/her opponent.

iv. Failure to stamp a document which has got to be stamped under the provisions of
the Stamp Act does not affect the validity of the transaction embodied in the
document.
v. The object of the legislature in enacting the Stamp Act was to protect public
revenue and not to interfere with commercial life by invalidating instruments vital
to the smooth flow of trade and commerce.

11
vi. Once the object of the interests of the revenue is secured according to law, the
party staking his claim in the instrument will not be defeated on the ground of the
initial defect in the instrument.

vii. Inadequate/non-stamping of an instrument is a defect which is curable on payment

of the requisite stamp duty. It is therefore incorrect to state that an unstamped
instrument has no existence in the eye of the law.

12
 III. ARBITRATION & CONCILIATION ACT, 1996

A. The Relevant Provisions: Arbitration and Conciliation Act as amended in 2015

Note: Certain provisions of the 2019 Amendment Act inter alia deleting Section
11(6A), have not been notified yet.

1. Relevant provisions of the Arbitration and Conciliation Act, 1996 (ACA) are
noted below:

i. Section 2(3): “This Part shall not affect any other law for the time being
in force by virtue of which certain disputes may not be submitted to
arbitration.”

ii. Section 5 - “Extent of judicial intervention — 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.”

iii. Section 7 defines arbitration agreement.

iv. Section 8 - An amendment was brought about in 2015 with the following
language:

“unless it finds that prima facie no valid arbitration agreement

exists”
Note: It speaks about “validity”.

v. Section 11 is very important. [See Sections 11(6A), and 11(6B) [as

ultimately incorporated], and 11(13)]

Note: The following may be noted:

a) The non-obstante clause.

b) The scope is narrower than the recommendation of the

Law Commission.

c) Removes the SBP basis of judicial v. administrative

dispute.

13
 d) Plain language – ‘confined to the examination of
existence of an arbitration agreement’.

e) Deleted by the 2019 Amendment.

vi. Section 16 states that 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”. The Tribunal has a
wide jurisdiction.

vii. Section 34 sets out the grounds for setting aside an arbitral award, and
includes:

a) Section 34(2)(a)(ii)- arbitration agreement not valid

b) Section 34(2)(a)(iv) – award deals with a dispute beyond

the arbitration agreement.

c) Section 34(2)(b)(i)- subject matter not capable of

settlement

viii. Section 45, Part II is titled “Power of judicial authority to refer parties to
arbitration”. It states:

“…unless it prima facie finds that the said agreement is

null and void, inoperative or incapable of being
performed”
Note:

i. The 2019 Amendment introduced the phrase ‘prima facie’ in

Section 45 and has been notified.

ii. The phrase ‘null and void, inoperative or incapable of being

performed’ has been taken from Article II (3) on the New York
Convention, 1958.

14
Certain Relevant Phrases used in the ACA:

i) “subject-matter of the dispute is not capable of settlement by arbitration

under the law for the time being in force” i.e. subject matter arbitrability.
[Section 34(2)(b)(i). Also see, Section 2(3)]

ii) “existence of an arbitration agreement”, (Section 11 (6A)

iii) “validity of arbitration agreement” (is it null and void?), [Section 16]

iv) “inoperative or incapable of being performed”. [Section 45]

v) “jurisdiction, including ruling on any objections with respect to the

existence or validity of the arbitration agreement” [Section 16]

B. Chequered History of the Case Law Under Section 11

[See paragraphs 8 to 14 of Garware Wall Ropes Ltd. v. Coastal Marine Constructions

& Engg. Ltd., (2019) 9 SCC 209]

1. One of the main objects of the 1996 Act was to minimise the supervisory role of
the courts in the arbitral process [Statement of Objects and Reasons of the 1996
Act, at 4(v)]

2. Consequently, Section 5 in Part I of the ACA brings in a non obstante clause

(“notwithstanding anything contained in any other law for the time being in
force”) which limits the intervention of judicial authorities except where
provided.

3. The purpose of Section 11 (modelled on Article 11) is only to fill a gap when the
parties’ agreement fails to provide for a procedure for appointment of the arbitral
tribunal, or the parties fail to take steps under such procedure.

4. The 246th Law Commission Report concluded that judicial intervention in

arbitration proceedings adds significantly to the delay in the arbitration process
and ultimately negates the benefit of arbitration.

15
 5. The 246th Law Commission Report further observed that a lot of time is spent for
appointment of arbitrations at the very threshold of arbitral proceedings as
application under Section 11 are kept pending for many years. The Law
Commission proposed certain amendments at paragraph 24 of its report.

6. The Statement of Objects and Reasons of the 2015 Act emphasises the speedy
disposal of cases relating to arbitration with least court interference, and was
brought in to overcome the difficulties of some court judgments giving rise to
delay in disposal of proceedings and increase in interference of court in
arbitration matters. [Paragraph 2 of the Statement of Objects and Reasons]

7. The Statement of Objects and Reasons of the Arbitration and Conciliation

(Amendment) Act, 2019 emphasises that the High Court Committee had
recommended amendments to the Act to “minimise the need to approach the
Courts for appointment of arbitrators”. [Paragraph 4 of the Statement of Objects
and Reasons].

C. 246th Law Commission Report

1. The relevant portion of the Law Commission report is to be found at paragraphs

22 to 33 of the Report

2. At paragraph 24, the Law Commission noted as follows:

“…[I]t is observed that a lot of time is spent for appointment of

arbitrators at the very threshold of arbitration proceedings.”
3. Paragraphs 28 refers to the “scope and nature of judicial intervention”.

4. In paragraph 29, the Law Commission expressed its view that “unfortunately,
however, the question before the Supreme Court was framed in terms of whether
such a power is a “judicial” or an “administrative” power – which obfuscates the
real issue underlying such nomenclature/description as to firstly, the scope of
such powers, and secondly, as to the nature of such intervention.

5. After noting the judgments in SBP v Patel Engineering, (2005) 8 SCC 618 and
setting out the three categories in National Insurance Co. Ltd v Boghara Polyfab

16
 Pvt Ltd, (2009) 1 SCC 267; the Law Commission gave its views in paragraphs
31 to 33.

6. So far as the scope of intervention is concerned it recommended amendments to

Sections 8 and 11 such that “the scope of 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.”

7. The proposed amendment to Section 8 is at page 42 to 44, at page 43 of the Report

which inter alia provides that no reference shall be made only in cases where “…
where the judicial authority finds that the arbitration agreement does not exist or
is null and void.”

8. The proposed amendments to Section 11 are discussed at pages 45 to 47 of the

Report.

9. The proposed amendments to Section 11 included, inter alia, the introduction of

Sections 11 (6A), 11 (6B) and 11 (13).

10. Under Section 11 (6A) as proposed the scope of judicial intervention was stated
to be “only if the High Court finds the arbitration agreement does not exist or is
null and void.”

11. Explanation 2 to proposed Section 11 (6A) clarified that the reference by the High
Court to any person or institution designated by it shall not be regarded as a
delegation of judicial power.

12. Proposed Section 11 (13) required the High Court and Supreme Court to dispose
of the application for appointment of arbitrator as expeditiously as possible and
an endeavour has to be made to dispose the matter within 60 days from the date
of service of notice on the opposite party.

13. An appeal under Section 37 was proposed where there was a refusal to appoint
an arbitrator or refusing to refer such appointment to a designated person or
institution.

17
D. The High Level Committee to Review the Institutionalisation of Arbitration
Mechanism in India

14. The discussion by the High-Level Committee supporting amendments to Section

11 of the ACA is at pages 73 to 76 of the Report.

15. The High Level Committee observed that the SC decision in SBP “had the effect
of keeping arbitral institutions which are qualified to act as appointing
authorities for arbitrators away from the appointment process under section 11.”

16. The High Level Committee also observed that the 2015 amendments were geared
towards facilitating speedy disposal of Section 11 applications.

17. It however observed that while the amendments no doubt facilitate the speedy
disposal of Section 11 application to a large extent, they do not go all the way in
limiting court interference.

18. The High Level Committee, while noting that the default procedure for
appointment of arbitrators in other jurisdictions do not require extensive court
involvement as in India, recommended the adoption of the practices followed in
Singapore and Hong Kong by recommending that in India to ensure speedy
appointment of arbitrators, Section 11 maybe be amended to provide that
appointment shall be made by designated arbitral institutes.

E. Cases Which Have Laid Down the Correct Legal Position re: The True Scope
Section 11 (6A)

I. Duro Felguera, S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729 (“Duro
Felguera”):

1. This case involved the question as to whether 6 separate contracts (5 for works
and 1 Corporate Guarantee), which contained 6 separate arbitration clauses,
could be the subject of one composite reference to one Arbitral Tribunal. The
Court held that it could not.

18
2. However, the issue of group of companies of doctrine has evolved since this
judgement, and is now the subject matter of a separate pending reference in Cox
& Kings Ltd. v. SAP India (P) Ltd., (2022) 8 SCC 1.

3. The true relevance of this judgment is to be found in the concurring judgment

of Kurian Joseph J. After framing the question at paragraphs 47 as to what
would be the effect of introduction of Section 11(6A), he observed at paragraph
48 as follows:

“From a reading of Section 11(6-A), the intention of the

legislature is crystal clear i.e. the court should and need only look
into one aspect—the existence of an arbitration agreement. […]”

4. Further, at Paragraph 56 Kurian Joseph J. pointed out that this being one of the
first cases on Section 11(6A), he thought it necessary to outline ‘the scope and
extent of the power of the High Court and the Supreme Court under Sections
11(6) and Sections 11(6A).’ After tracing the history of Section 11, and noting
SBP and Boghara, he observed at paragraph 59 as follows:

“59. The scope of the power under Section 11(6) of the 1996 Act
was considerably wide in view of the decisions in SBP and Co.
and Boghara Polyfab. This position continued till the amendment
brought about in 2015. After the amendment, all that the courts
need to see is whether an arbitration agreement exists—nothing
more, nothing less. The legislative policy and purpose is
essentially to minimise the Court's intervention at the stage of
appointing the arbitrator and this intention as incorporated in
Section 11(6-A) ought to be respected.”
Submission

5. It is submitted that the correct legal position is laid down in paragraph 59 of

Duro Felguera, and in particular, the following sentence has laid down the
correct test:

“… After the amendment, all that the courts need to see is whether
an arbitration agreement exists—nothing more, nothing less. ...”

19
 6. The issue of stamping requires the Court to examine something more than
existence of an agreement, even assuming existence includes validity. Non-
stamping does not render an instrument null and void. The arbitration agreement
exists in fact and law, even if unstamped.

II. Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd., (2020)
2 SCC 455 (“Uttaranchal Purv”):

1. Here, it was decided that the bar of limitation should be raised before the
Arbitral Tribunal. The discussion is at Paragraph 7. After mentioning the effect
of the amendment in Paragraph 7.3, the prior history of Section 11 was traced
in Paragraph 7.4 onwards. The key findings are at Paragraphs 7.8 and 7.10, set
out below:

“7.8. By virtue of the non obstante clause incorporated in Section

11(6-A), previous judgments rendered in Patel Engg. and
Boghara Polyfab , were legislatively overruled. The scope of
examination is now confined only to the existence of the
arbitration agreement at the Section 11 stage, and nothing more.”
***
“7.10. In view of the legislative mandate contained in Section
11(6-A), the Court is now required only to examine the existence
of the arbitration agreement. All other preliminary or threshold
issues are left to be decided by the arbitrator under Section 16,
which enshrines the kompetenz-kompetenz principle.”

2. At Paragraph 7.11, the concept of doctrine of kompetenz-kompetenz was

mentioned and it was observed thus:

“7.11. The doctrine of “kompetenz-kompetenz”, also referred to

as “compétence-compétence”, or “compétence de la
recognized”, implies that the Arbitral Tribunal is empowered and
has the competence to rule on its own jurisdiction, including
determining all jurisdictional issues, and the existence or validity
of the arbitration agreement. This doctrine is intended to
minimise judicial intervention, so that the arbitral process is not

20
 thwarted at the threshold, when a preliminary objection is raised
by one of the parties.”

Note: There is some loose language in Paragraph 7.11 where the phrase “or the
disputes beyond the scope of the arbitration agreement” has been used.

Paragraph 7.12 and 7.13 are equally critical.

3. It is submitted that Duro Felguera and Uttaranchal Purv lay down the correct
legal test as to the scope of enquiry under Section 11(6A).

III. Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman, (2019) 8 SCC 714
(“Mayavati Trading”)

1. Notably, Paragraphs 48 and 59 of Duro Felguera have been specifically

approved by the three-judge bench in Mayavati Trading at Paragraph 10. The
three-judge bench observed that ‘Section 11(6-A) is confined to the examination
of the existence of an arbitration agreement and is to be understood in the
narrow sense as has been laid down in the judgment in Duro Felguera, SA -
see paras 48 & 59’.

2. Indeed, this was the basis on which Mayavati Trading overruled India
Insurance Co. Ltd. v. Antique Art Exports (P) Ltd., (2019) 5 SCC 362. It was
observed that ‘the law prior to the 2015 Amendment, that has been laid down
by this Court which would have included going into whether accord and
satisfaction has taken place has now been legislatively overruled’.

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F. World Sport Group (Mauritius) Ltd. v. MSM Satellite (Singapore) Pte. Ltd.,
(2014) 11 SCC 639 (“WSG”) – A Part II Judgment Construing ‘Null and Void,
Inoperative or Incapable of being performed’.

1. In WSG, the dispute related to a facilitation deed providing ICC arbitration in

Singapore. The Bombay High Court injuncted the arbitration proceedings,
observing that the deed itself was null and void on account of fraud and
misrepresentation. The Supreme Court vacated the injunction.

2. While so doing, it construed Section 45 contained in Part II of the ACA, which

requires a judicial authority to refer the parties to arbitration, unless it finds that
the said agreement is ‘null and void, inoperative or incapable of being
performed’. This language is borrowed from Article II (3) of the New York
Convention.

3. The Supreme Court recognized the principle of separability in Paragraph 30 of

the Judgment and observed that the arbitration agreement stands apart from the
main agreement and the test is to see whether it is null and void or not.

4. The three relevant paragraphs which explain the difference between the phrases
‘null and void’, ‘inoperative’ and ‘incapable of being performed’ are Paragraphs
33 to 35.

5. ‘Null and void’ refers to those cases where the arbitration agreement is affected
by some invalidity right from the beginning. ‘Inoperative’ covers those cases
where an arbitration agreement has subsequently ceased to have effect.
‘Incapable of being performed’ would seem to apply to those cases where the
arbitration cannot effectively be set into motion.

6. Lack of/inadequate stamping of the arbitration agreement does not render it null
and void. At best, it could fall within the category of ‘incapable of being
performed’ though even this may not be correct as non-stamping is a curable
defect, and not a permanent disability making the arbitration agreement
incapable of being performed.

22
 7. The phrases ‘inoperative’ and ‘incapable of being performed’ refer to a
permanent disability.

8. ‘Null and void’ means void. The French and Spanish versions of the New York
Convention use only one word.

9. In one of the commentaries, it has been mentioned as follows:

“This is perhaps a remnant of older times when Solicitors were

paid by the word in drafting documents”.
10. WSG explains that ‘null and void’ has a specific meaning which cannot be
extended to cases where the arbitration agreement is inoperative or incapable of
being performed.

11. Pertinently, the legislature has not used the Section 45 language in Section
11(6A), which is limited to ‘existence’ of the arbitration agreement.

G. Conclusion
1. The word ‘confined’ has a specific meaning. In P Ramanatha Aiyar’s Advanced
Law Lexicon, 5th Edition, at page 1037, one of the definitions of the word
‘confine’ is ‘to keep within circumscribing limits.’ Further, in English to Hindi
lexicon published on the Legislative Department, Ministry of Law and Justice,
Government of India, the word confine is also defined as “to restrict”.

2. The word existence has a specific meaning. It should be restricted to the

existence and validity (at most) of the arbitration clause.

3. Validity would mean that the arbitration agreement is not null and void i.e. it
should be restricted to formal validity at the stage of contract formation, i.e. that
the agreement should be in writing, and core contractual ingredients are fulfilled
qua the arbitration agreement.

4. By no means can it extend to whether a document is inadmissible as being

unstamped. ‘Inadmissibility’ and ‘invalidity’ are different legal concepts.

5. The lack of stamping/inadequately stamped would at the highest be an issue of

admissibility and not of jurisdiction.

23
 IV. REFERENCE JUDGMENTS: GARWARE, NN GLOBAL, AND VIDYA
DROLIA

A. Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd.,
(2019) 9 SCC 209 (Garware).

1. The key paragraphs are 18 to 22, and 28 and 29. However, it is necessary to examine
the background facts.

2. In paragraph 3 of Garware, the question was framed thus:

“What is the effect of an arbitration clause contained in a contract which

requires to be stamped […]”

3. In the same paragraph, after referring to SMS Tea Estates (P) Ltd. v. Chandmari
Tea Co. (P) Ltd., (2011) 14 SCC 66. (SMS Tea Estates), it was further observed:

“[…] The question is whether Section 11(6-A), which has been introduced by
way of the Arbitration and Conciliation (Amendment) Act, 2015 (the
Amendment Act, 2015), has removed the basis of this judgment, so that the
stage at which the instrument is to be impounded is not by the Judge hearing
the Section 11 application, but by an arbitrator who is appointed under Section
11, as has been held by the impugned judgment.”

[Emphasis added]

4. The submissions of Ms. Ridhi Niyati at paragraph 5 are important, as she gives
several reasons to support the interpretation accepted by the Full Bench of the
Bombay High Court in Gautam Landscapes Pvt Ltd v. Sailesh S. Shah, 2019 (3)
Mah LJ 231 (FB). [However, there may be a slight issue in her submissions in that
it was asserted that the provisions of the Stamp Act, if at all, would go to its
validity.]

5. After setting out the relevant provisions of the Arbitration and Conciliation Act,
1996 (ACA) and the Maharashtra Stamp Act, 1958, the Court traced out the
chequered history of the case law under Section 11 from paragraph 8 onwards.

24
6. At paragraph 12 it was observed that as a result of SBP and Boghara, ‘the door was
wide open for the Chief Justice or his designate to decide a large number of
preliminary aspects which could otherwise have been left to be decided by the
arbitrator under Section 16 of the 1996 Act.’

7. Thereafter, paragraphs 28 to 33 of the 246th Law Commission Report were quoted,

as also the Statements of Objects and Reasons of the 2015 Amendment Act. SMS
Tea Estates was discussed at paragraphs 15 to 17.

8. The reasoning in Garware is to be found in paragraphs 18 to 22.

9. This deserves careful examination.

10. The first error is at paragraph 18, when the two-judge bench purports to follow the
seven-judge bench in SBP, which had held that Section 16 of the ACA has full play,
only after the Arbitral Tribunal is constituted without intervention of the Court
under Section 11 and it was therefore difficult to accede to the argument that
Section 16 makes is clear that an arbitration agreement has an independent
existence of its own, and must be applied in deciding the application under Section
11 of the Act.

11. This reasoning is, with respect, incorrect inasmuch as the entire basis of SBP has
been removed by the 2015 Amendment. Section 16 has to be given its full play. All
issues of jurisdiction including existence or validity of the arbitration agreement
can be decided by the arbitral tribunal, whether or not appointed through
intervention of court.

12. The second error is at paragraph 19, which suggests that Section 11(6A) does not
in any manner get over the judgment in SMS Tea Estates because the Supreme

25
 Court or the High Court is only giving effect to the provisions of a mandatory
enactment, which no doubt is to protect revenue.

13. The impugned judgment also does not analyse the language of Section 11(6A)
when it comes to the conclusion that it is enjoined by the Stamp Act to first impound
the agreement and see that stamp duty and penalty is paid before the agreement as
a whole can be acted upon.

14. The third and most critical error has crept in at paragraph 22.

15. Paragraphs 20 and 21 no doubt correctly reflect the scope of Section 7 of the ACA
and Sections 2(a), (b), (g), (h) of the Indian Contract Act (“ICA”). However, the
law has been wrongly applied in Paragraph 22.

16. While it is correct that an agreement enforceable by law is a contract, Section 2(g)
states that an agreement not enforceable by law is said to be void. As already
demonstrated, inadequate stamping of an instrument does not render the arbitration
agreement void. Non-stamping is merely a curable defect and gives rise to an
evidentiary bar. Hence, the following sentence in Garware is inapposite.

“We have seen how, under the Stamp Act, an agreement does not become a
contract, namely, that it is not enforceable in law, unless it is duly stamped.”

17. This is incorrect for the reasons already shown. Further, the plain language of
Section 11(6A) confines the scope of enquiry to existence of an arbitral agreement
alone.

18. Paragraphs 28 and 29 of the judgment discusses Hyundai, which itself does not
appear to lay down the correct legal position. A parallel is drawn with Hyundai,
stating as follows:

“[…] Likewise, in the facts of the present case, it is clear that the arbitration
clause that is contained in the sub-contract would not “exist” as a matter of law
until the sub-contract is duly stamped, as has been held by us above.”

26
19. This is a misreading of the effect of the provisions of the Stamp Act.

20. The balance part of the judgment talks about speedy disposal of disputes and
harmonisation of the provisions at paragraphs 31 to 37. At paragraph 38, the
argument of prejudice is rejected on the basis that it is of are of ‘no avail when it
comes to the application of mandatory provisions of law’.

Some Remarks on Garware Wall Ropes

21. The object behind the ACA amendment is to severely limit of judicial intervention
at the stage of appointment of arbitrators.

22. Even in Garware, the Court acknowledged that the adjudication of stamp duty is a
time-consuming process that does not naturally align with the stated goal of the
ACA to ensure expeditious appointment of arbitrator.

23. Moreover, there is no discussion in the judgment as to why the arbitral tribunal
cannot prevent the evasion of stamp duty.

24. The natural solution to this scenario is to appoint the arbitrator and allow the dispute
resolution proceedings to commence and permit the arbitral tribunal to fulfil its
duty under the Stamp Act.

25. The Supreme Court’s decision in Garware ignores the possibility of the appeals
under the Stamp Act and seeks to impose an unrealistic of deadline of forty-five
days for adjudicating and payment of stamp duty, when no such deadline exist
under the Stamp Act.

26. In fact, courts must endeavour to adhere to the sixty-day timeline for the
appointment of arbitration prescribed under Section 11(6).

27
B. United India Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd.,
(2018) 17 SCC 607 (“Hyundai”) - Contrary to the True Scope of Section 11(6A)

27. Hyundai is important as it forms the basis of the reasoning in Garware at

paragraphs 28 and 29.

28. Hyundai is also referred to in Vidya Drolia by Khanna J. in paragraphs 114-115,

and 147.10. However, it may be noted that Ramana J. considers Hyundai very
differently at Paragraph 203 of the judgment in Vidya Drolia.

29. It is therefore important to understand the reasoning in Hyundai.

The Judgment in Hyundai

30. In Hyundai, the insurance company argued that the arbitration clause could be
invoked only when the liability to pay was admitted by the insurer.

31. Reliance was placed on Vulcan Insurance Co. Ltd. v. Maharaj Singh, (1976) 1 SCC
943 and various High Court judgments.

32. The reasoning of the Learned Single Judge of the Madras High Court is at
Paragraphs 13 to 18 of her judgment. She distinguished an earlier decision of the
Chief Justice of the Madras High Court in Jumbo Bags on the basis that the Chief
Justice considered the law prior to the amendment and appointed an arbitrator.

33. This judgment was however, overruled by this Hon’ble Court in Hyundai. The
reasoning of the three-judge Bench is contained in paragraphs 10 to 13.

34. At paragraph 10, the Court followed the earlier three-Judge bench in Oriental
Insurance Co. Ltd. v. Narbheram Power and Steel (P) Ltd., (2018) 6 SCC 534

28
 (Narbheram), which had approved the Madras High Court’s decision in Jumbo
Bags Ltd. v. New India Assurance Co. Ltd., (2016) 2 LW 769.

35. As noted by Khanna J. at paragraph 114 of Vidya Drolia and Ramana J. at

paragraph 202 and Vidya Drolia, Narbheram Power does not refer or interpret
Section 11(6A) of the ACA. Thus, Narbheram Power cannot be of assistance.

36. In paragraph 11, the Court distinguished Duro Felguera, saying it laid down a
general observation and followed Vulcan Insurance, which arose under the
Arbitration Act of 1940 and not under the 1996 Act.

37. Consequently, at paragraphs 12 and 13, the three-Judge bench went into the width
of the arbitration clause and in particular, whether the excepted category of
repudiation and denial of liability would fall within the jurisdiction of the arbitrator.

38. In other words, the Court decided on what was an excepted matter, which even
under the pre-2015 Boghara test, was a category three issue which should have
been left to the arbitrator.

39. It is therefore submitted that Hyundai does not lay down the correct law.

40. Further, both Hyundai and Narbheram have been inconsistently addressed in the
two judgments in Vidya Drolia.

Khanna J’s comments on Narbheram and Hyundai in Vidya Drolia:

41. Khanna J. observes at paragraph 115 that ‘the question of non-arbitrability relating
to the enquiry whether the dispute was governed by the arbitration clause, can be
examined by the courts at the reference stage and may not be left unanswered to be
examined and decided by the Arbitral Tribunal.’

29
42. Under Section 34(2)(a)(iv), one ground for setting aside is that the award deals with
a dispute not contemplated by or not falling within the terms of the submissions to
arbitration. This is a separate and distinct ground from 34(2)(a)(ii), which addresses
validity of an arbitration agreement under law.

43. The text and purpose of the UNCITRAL Model Law supports a distinction between
jurisdictional objections based on the alleged non-existence, invalidity, or illegality
of the arbitration agreement, and jurisdictional objections based upon the scope of a
concededly valid arbitration agreement.

44. Awards that exceed the scope of the arbitration agreement or the arbitrator’s
jurisdiction, ought not to be the subject matter of Section 8 or Section 11 based on
this textual distinction.

45. It is submitted that the observations at paragraph 115 may require reconsideration.
Arbitrability as explained by Khanna J, in paragraph 15 of his judgment has
multiple meanings. The issue in Vidya Drolia related only to subject matter
arbitrability. What is described as arbitrability relating to the enquiry whether the
dispute was governed by the arbitration clause is not a matter of arbitrability, but
of jurisdiction, which is to be left to the arbitral tribunal for a first look in terms of
Section 16 and second look under Section 34(2)(a)(iv) of the ACA. This is the third
category in Boghara.

46. Similarly, as regards the observations made by Khanna J. at paragraph 147.10, the
issue as to whether the claim was not covered by the Arbitration agreement, does
not fall within the limited scope of Section 11(6A) which is confined to the
existence/validity of the arbitration agreement.

Ramana J’s comments on Narbheram and Hyundai in Vidya Drolia:

47. Ramana J, in paragraphs 211 and 212 confines his discussion to subject-matter
arbitrability.

30
48. As regards Narbheram and Hyundai, Ramana J, observes thus:

“202. However, in Oriental Insurance Co. Ltd. v. Narbheram Power &

Steel (P) Ltd. (“Oriental Insurance”), a three-Judge Bench of this Court,
following the decision in Vulcan Insurance Co. Ltd. v. Maharaj Singh
(1976) 1 SCC 943, dismissed an application under Section 11 of the Act
after examining the arbitrability of the dispute. It may be noted that the
Court did not answer the question as to the power of the Court under
Section 11 of the Act in this case.

203. Similarly, in United India Insurance Co. Ltd. v. Hyundai Engg. &
Construction Co. Ltd. (2018) 17 SCC, the Court examined the
arbitrability of the dispute as well as whether the dispute fell within the
ambit of an excepted matter by placing heavy reliance on the decision in
Oriental Insurance. These two cases are, by necessary implication to be
restricted to the facts and circumstances of the case.”

49. It may be noted that Ramana J. could not have overruled Narbheram and Hyundai
in a three-judge bench but contented himself with the fact that Hyundai and
Narbheram should be “by necessary implication to be restricted to the facts and
circumstances of the case.”

C. Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1

50. Since the reference order in the present case specifies paragraphs 146 and 147 of
Vidya Drolia, it would be necessary for the Constitution Bench to examine the
reasoning in Vidya Drolia (3-judge) Bench for this purpose.

51. Vidya Drolia requires deeper study as wide-ranging comments have been on the
scope of Section 11 (6A) ACA.

52. There appear to be material inconsistencies between the judgment of Sanjiv Khanna
J and the supplementary opinion of Ramana J.

53. The precise question that was referred by the two-judge bench was whether a
dispute arising under the Transfer of Property Act, 1882 as between landlord and

31
 tenant (as opposed to a case under the Rent Act) is arbitrable or not, i.e., whether
the subject matter is incapable of arbitration.

54. At the outset it should be noted that though the precise scope of reference was
limited to subject-matter arbitrability (reference Sections 2(3), and 34(2)(b)(i) of
ACA), yet Khanna, J considers other cases of alleged non-arbitrability (see
paragraph 15), whereas Ramana J, limits himself to subject-matter arbitrability
(paragraphs 211 to 212).

55. Importantly, Ramana J, observes at paragraph 243 that it would not have been
appropriate to delve into the second question of whether tenancy disputes are
arbitrable (paragraph 165(ii)) as this issue was to be left to the arbitrator. Yet he
approves the conclusion reached by Khanna J, on the four-fold test of subject-
matter arbitrability (paragraph 76 of the judgment of Khanna J).

56. Some more important comments of Ramana J are at paragraphs 160 and 161, where
he justifies the need for a separate opinion and emphasises the necessity to be more
accommodating to an arbitral tribunal.

57. In his discussion at paragraph 194, he criticises Patel Engineering as follows:

“194. In our consideration, Patel Engineering case [SBP & Co. v. Patel Engg.
Ltd., (2005) 8 SCC 618] was heavily caught in the obfuscated concept of
judicial or administrative duty, and there is scarce observation on the
appropriate standards of judicial enquiry or what aspects does the court need
to consider, while referring a matter to arbitration.”

58. An important paragraph is 209, where he comments:

“209. In this context, we need to examine the meaning of “validity of arbitration
agreement” as occurring under Section 8 of the Act. There is no doubt that
“validity” to be examined under Section 8(2) of the Act, could be interpreted to
mean formal validity as expressed under Section 7 of the Act. Such an
interpretation would operate as a full application of the negative facet of
Section 16, as the jurisdiction of the court to step-in at the reference stage would
be limited. However, the burden of the precedents stops us from accepting such
a narrow interpretation.”

32
59. His conclusion on Section 8 at paragraph 227 is equally important, where he
observes:
“… In line with the amended language and the statutory scheme, the
examination of the subject-matter arbitrability may not be appropriate at the
stage of reference under Section 8 of the Arbitration Act. It is more appropriate
to be taken up by the court at the stage of enforcement under Section 34 of the
Act. Having said so, in clear cases where the subject-matter arbitrability is
clearly barred, the court can cut the deadwood to preserve the efficacy of the
arbitral process.”

60. He further emphasises the narrow scope of Section 8 and 11 at paragraph 234 as
follows:
“234. The amendment to the aforesaid provision was meant to cut the deadwood
in extremely limited circumstances, wherein the respondent is able to ex facie
portray non-existence of valid arbitration agreement, on the documents and the
pleadings produced by the parties. …”

61. The summary paragraphs, which it is submitted lays down the correct law are
paragraphs 237 (237.1 to 237.4) and 244, (particularly 244.5).

Comments on Sanjiv Khanna J’s judgment:

62. Though this judgment is wide ranging and considers a number of foreign judgments
and academic articles, yet, it is most respectfully submitted some portions of the
judgment may need to be revisited by the Constitutional Bench.

63. At Paragraph 2, Khanna J. crystallises the two distinct aspects of the order of
reference: (i) non-arbitrability, i.e., when the subject matter of the dispute is not
capable of arbitration, and (ii) the conundrum of who decides the question of non-
arbitrability (i.e., the scope and ambit at the stage of Section 8 or Section 11
proceedings).

64. Non-arbitrability is discussed by the Hon’ble Judge at paragraphs 15 to 17. Khanna

J. observes at paragraph 15 that non-arbitrability has multiple meanings, but in fact,
the only issue that fell for decision of the Hon’ble Court in Vidya Drolia was

33
 subject-matter arbitrability. Thus, various observations on other types of alleged
non-arbitrability appear to be obiter (see the observations at paragraphs 26 to 28).
It is a moot point whether such disputes should be left to the arbitrator or decided
at the stage of Section 11.

65. The first error is at Paragraph 31. There is a finding by Khanna J. that the court is
clearly bound by the dictum of the Constitution Bench judgment in SBP & Co. v.
Patel Engg. Ltd., (2005) 8 SCC 618., that the scope and ambit of Court’s
jurisdiction under Sections 8 or 11 of the Arbitration Act is similar. This ignores
the specific amendments to Sections 8 and 11 brought by the Arbitration and
Conciliation (Amendment) Act, 2015 (“2015 Amendment”).

66. At paragraph 76, Khanna J has devised a fourfold test to determine when the
subject-matter of a dispute in an arbitration agreement is not arbitrable. Stricto
sensu, the issue of subject-matter arbitrability is not the subject-matter of the
present reference.

67. The next section of Khanna J’s judgment from paragraph 81 to 154, is under the
head ‘Who decides non-arbitrability’? This is an area which may require
clarification from the Constitution Bench, to lay down the true scope of Section
11(6A) untrammelled by the burden of any 3-Judge precedent. In fact, the answer
to the question in the present reference boils down to what would be the true scope
of Section 11(6A).

68. At paragraphs 83 to 85, Khanna J recognises the various Indian case laws at
variance on the subject. At paragraph 86, he divides the legal question into four
phases and clarifies that one is concerned with the third phase, i.e., from the time
the 2015 Amendment came into effect on 23.10.2015 till the commencement of the
Arbitration and Conciliation (Amendment) Act, 2019 (“2019 Amendment”).

34
69. The erroneous reliance on SBP at paragraph 31 finds reflection at the finding at
paragraph 98, where reliance is placed on the 7-judge Bench to come to the
conclusion that Section 8 and 11 are complementary in nature and the Court while
exercising powers under the two sections whether the matter should be referred to
arbitration enjoys equal power, otherwise it would lead to an anomalous situation
in that a judicial authority has a wider power under Section 8 but a lesser power of
examination under Section 11.

70. Though at paragraphs 106 and 107, Justice Khanna refers to the 3-Judge bench in
Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman, (2019) 8 SCC 714, which
affirms the two-judge bench in Duro Felguera to assert that the new regime has
diluted and overruled the effect and ratio of the judgment in Patel Engineering, yet
on the scope of Section 11, his views appear to be inconsistent with the ratio of
three-judge bench in Mayavati Trading.

71. The next part of the judgment notes Garware Wall Ropes v Coastal Marine
Constructions & Engg. Ltd, Oriental Insurance Co. Ltd v Narbheram, and United
India Insurance Co Ltd v Hyundai Engg. & Construction Co. Ltd. is at paragraphs
111 to 115. Importantly, it is observed that in Narbheram there no reference to
Section 11 (6A).

72. At paragraph 124, paragraphs 24 and 31 to 33 of the 246th Law Commission Report
have been extracted, (but not Paragraph 29). Khanna J, has come to a categoric
finding at paragraph 132 that courts perform judicial functions when they decide
objections in terms of Section 8 and 11 of the Arbitration Act.

73. Paragraph 134 explains the scope of prima facie examination as being a primary
first review to weed out manifestly and ex facie non-existent and invalid
agreements and non-arbitrable disputes. This para appears to reflect the main thrust
of the judgment and is unexceptionable.

35
74. At paragraph 138, Justice Khanna relies on Boghara Polyfab, a case decided before
the 2015 Amendment and expands the first category, which does not appear to
follow from either the language of Section 11 or from the legislative history.

75. Finally, at paragraph 143 onwards, Section 11(6A) is analysed.

Controversial Portion of the Judgment

76. A controversial portion of the judgment from paragraphs 146 to 154 holds that the
existence of an arbitration agreement would include validity, which has been
extended to include issues like ex-facie time barred claims etc.

77. Reliance has been placed on Garware at Paragraph 147.1 and Patel Engineering
at Paragraph 147.5, as also on Narbheram and Hyundai.

78. Though at paragraph 146 Khanna J, does consider the possibility that existence
merely refers to contract formation, he reads it to mean validity which according to
him includes the question of enforcement as well. This paragraph is the basis on
which he justifies his conclusions in the judgment.

79. The true scope of the word existence has not been clarified and some portion of his
discussion, particularly at paragraphs 146, 147.1, 147. 9, and 147.10 may require
recalibration. Similarly, paragraphs 149 and 150 do not per se relate to subject-
matter arbitrability but to the scope of an arbitration clause, which does not raise
the question of existence or validity but rather a wider question of jurisdiction
Accordingly, paragraphs 146 to 154 may have to be fine-tuned.

80. It is therefore submitted that the conclusion of Ramana J, in paragraphs 237 and
244 may be endorsed and preferred to the extent that they are inconsistent with
Khanna J.

36
81. Tellingly, while actually disposing of the matter, the issue of arbitrability was left
to the Tribunal which was amenable to challenge under Section 34 of the Act. (See
Section 34(2)(b)(i) of the Act)

D. NN Global Mercantile Pvt Ltd v Indo Unique Flame Ltd & Ors, (2021) 4
SCC 371 (NN Global)

82. At paragraph 1 the factual background was set out.

• A back-to-back contract was entered into regarding beneficiation/washing of
coal between KPCL and Indo Unique, who entered into a subcontract with NN
Global.

• KPCL invoked Indo Unique’s bank guarantee under the principal contract. Indo
Unique invoked NN Global’s bank guarantee.

• NN Global filed Suit No. 62 of 2017 in re invocation of the bank guarantee,

wherein an interim order of status quo was passed.

• Indo Unique filed a Section 8 application, which was dismissed by the

Commercial Court on the basis that the bank guarantee was an independent
contract.

• The issue of stamping was raised before the High Court which held that this issue
could be raised either during the Section 11 stage or before the arbitral tribunal
at the appropriate stage.

83. Paragraph 2.1 formulates the relevant issue:

“(i) Whether an arbitration agreement would be enforceable and acted upon,
even if the work order dated 28-9-2015 is unstamped and unenforceable under
the Stamp Act?”

The other issues at paragraphs 2.2 and 2.3 are not strictly relevant to the reference.

84. Paragraphs 4 and 5 are of considerable importance.

37
85. Under the head “validity of an arbitration agreement in an unstamped agreement”,
paragraph 4 elaborately explains the concept of separability and kompetenz-
kompetenz. (Paragraph 4.3 is particularly important).

86. At paragraph 4.11, the emphasis is to discourage “parasitical challenges and

dilatory tactics in resisting reference to arbitration”.

87. In paragraph 5, the legislative policy of minimal interference is reiterated and parts
of the judgment in Uttarakhand Purva are extracted.

88. In paragraph 9, Indo Unique submissions are noted particularly, the submission that
“non-payment of stamp duty would not render the contract unenforceable but was
a curable defect”

89. In paragraph 18, the scope of Section 11 is explained thus:

“Section 11 was amended by the 2016 Amendment Act, which inserted sub-
section (6-A), which now provides that notwithstanding any judgment, decree or
order of any court, the examination would be confined only to the existence of
an arbitration agreement. The amendment of 2016 legislatively overruled the
position with respect to the jurisdiction under Section 11 of the Arbitration Act,
and confined the examination only to the existence of an arbitration agreement.
In Duro Felguera S.A. v. Gangavaram Port Ltd. [Duro Felguera
S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729: (2017) 4 SCC (Civ) 764] it
was held that the legislative intent was clear that at the pre-reference stage, there
must be minimal judicial intervention, and the only issue to be decided would be
the existence of the arbitration agreement, and nothing more. This position was
affirmed by a three-Judge Bench in Mayavati Trading (P) Ltd. v. Pradyuat Deb
Burman [Mayavati Trading (P) Ltd. v. Pradyuat Deb Burman, (2019) 8 SCC
714 : (2019) 4 SCC (Civ) 441] .”

90. However, in paragraph 20 and 24, the bench falls into error when it observes
“20. We have carefully perused the provisions of the Maharashtra Stamp Act,
1958 and Schedule I appended thereto, which enlists the instruments specified
in Section 3, on which stamp duty is chargeable. We find that an arbitration
agreement is not included in the Schedule as an instrument chargeable to stamp
duty.
***

38
 24. … Section 3 of the Maharashtra Stamp Act does not subject an arbitration
agreement to payment of stamp duty, unlike various other agreements enlisted
in the Schedule to the Act. ...”

91. As already noted, this may not be correct. An arbitration agreement would fall into
the residual category of Article 5 of Schedule I of the Maharashtra Stamp Act, 1958.

92. Nevertheless, the ratio at para 22 and 26 remains intact

“22. In our view, the non-payment or deficiency of stamp duty on the work order
does not invalidate the main contract. Section 34 provides that an unstamped
instrument would not be admissible in evidence, or be acted upon, till the
requisite stamp duty is paid. This would amount only to a deficiency, which can
be cured on the payment of the requisite stamp duty.
***
26. In our view, there is no legal impediment to the enforceability of the
arbitration agreement, pending payment of stamp duty on the substantive
contract. The adjudication of the rights and obligations under the work order or
the substantive commercial contract would, however, not proceed before
complying with the mandatory provisions of the Stamp Act.”

93. In paragraphs 28 to 31, SMS Tea Estates is overruled. Since Garware has been
approved in Vidya Drolia, the matter has been referred to the Constitution Bench
in terms of paragraph 34.

94. The half-way house suggested in paragraph 36 may not be appropriate if the present
submissions made are accepted. If not, the said guidelines may be followed.

95. The operative part of the judgment is at paragraph 54 to 58.

Note: The problem in the Court itself adjudicating upon the issue of Stamp duty at the
Section 8 or 11 stage is manifest from the facts of the present case. NN Global filed IA
24652 of 2021 questioning the classification of the instrument as a works contract
rather than a mere agreement and consequently, questioning the amount of stamp duty
to be paid; apart from the party who was supposed to pay the Stamp duty. However,

39
the IA was dismissed. Surely these are not questions which a Section 8 or Section 11
court should be called upon to adjudicate.

Section 8 Some Observations

96. Sections 8 and 11 cannot necessarily be equated. The question is not whether the
power is being exercised by a judicial authority as suggested in Patel Engineering
but what is the scope of the inquiry under each section.

97. The issue is two-fold. Firstly, what is the scope of the issues raised in a Section 11
Petition, as opposed to the scope of the issues which can be raised in a Section 8.
The standard to be applied may be the same, i.e., prima facie satisfaction of the
arbitration agreement, or final satisfaction of non-existence of arbitration, whereas
in Section 11 the court operates as a substitute for an appointing authority,
necessitated by the failure of the party, and has a narrow scope.

98. In a Section 8 application, prephas the scope may be wider because one has to see
whether there is a valid arbitration agreement.

99. Then the question that arises is whether in Section 8 proceedings, the Court should
go into subject matter arbitrability. It is submitted unless it is patently void, subject
matter arbitrability, if it is arbitrable, should be left to the arbitrator. This is
consistent with the legislative intention.

100. In any event, Section 8 is limited to prima facie satisfaction of a valid arbitration
agreement. It should not be extended to an examination of stamp duty, which goes
to admissibility not jurisdiction.

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 V. CONCLUDING SUBMISSIONS

1. Historically, the Indian Arbitration regime has been prone to severe delay. The
intention of the 1996 Act and the Amendments was to streamline the process.

2. Judicial intervention in arbitration proceedings adds significantly to the delay in the

arbitration process and negates the benefit of arbitration.

3. The 2015 Amendment Act was introduced to emphasise the speedy disposal of
cases relating to arbitration with least court interference.

4. The purpose of Section 11 is only to fill a gap: the Court is merely functioning as
an appointing authority where the parties fail to appoint an arbitrator.

5. After the amendment, all that the Courts need to see is whether an arbitration
agreement exists – nothing more, nothing less.

6. The legislative policy and purpose are essentially to minimise the Court's
intervention at the stage of appointing the arbitrator and this intention as
incorporated in Section 11(6A) ought to be respected.

7. The word ‘existence’ under Section 11(6A) means legally enforceable existence
and not mere presence in the contract.

8. The Scope of the Court should be circumscribed to confine to the examination,

prima facie, of the formal validity of the arbitration agreement at the stage of
contract formation, including only whether the agreement is in writing, whether
the core contractual ingredients qua the formation of the agreement were fulfilled
(Quare: on rare occasions, whether the subject matter of dispute is arbitrable?).

9. The Stamp Act is a fiscal measure enacted to secure revenue of the State in certain
classes of instruments.

10. It is not enacted to arm a litigant with a weapon of technicality to meet the case of
his/her opponent.

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11. Once the object of the interests of the revenue is secured according to law, the
party staking his claim in the instrument will not be defeated on the ground of the
initial defect in the instrument.

12. The object of the legislature in enacting the Stamp Act was to protect public
revenue and not to interfere with commercial life by invalidating instruments vital
to the smooth flow of trade and commerce.

13. Failure to stamp a document which has got to be stamped under the provisions of
the Stamp Act does not affect the validity of the transaction embodied in the
document – it merely renders the document inadmissible in evidence.

14. Non-payment is a curable defect and this defect may be cured at any stage before
the instrument is admitted into evidence by the Arbitral Tribunal.

15. The ground of inadequate stamping appears at first flush to be an issue of merit.
To stall the entire arbitration process only to ensure compliance of a curable defect
doesn’t seem to be the correct approach.

16. The importance of dues owed to the exchequer is understandable and cannot be
denied.

17. The adjudication of stamp duty is a time-consuming process that does not naturally
align with the stated goal of the ACA to ensure expeditious appointment of
arbitrators.

18. Compelling the judge under Section 11 to adjudicate stamp duty would be to
encourage parasitical challenges and dilatory tactics in resisting reference to
arbitration.

19. The natural solution to this scenario is to appoint the arbitrator and allow the
dispute resolution proceedings to commence and permit the arbitral tribunal to
fulfil its duty under the Stamp Act.

20. There is no reason why the Arbitral Tribunal cannot prevent the evasion of stamp
duty.

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21. If the court refrains from interfering at the Section 11 stage, and allows the
arbitrator to deal with the issue relating to insufficient stamping, this would create
a perfect balance where arbitration is proceeded without delay, while the revenue
due to the exchequer is also ensured.

22. Balancing the scheme of ACA, the purpose of stamp law, and the parties
commercial understanding regarding efficacy of arbitration, the legitimate rights
of the parties in praying for timely intervention cannot be defeated on the ground
of inadequate stamping.

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