MANU/MH/1955/2022

IN THE HIGH COURT OF BOMBAY

Commercial Arbitration Application (L.) No. 22197 of 2021
Decided On: 04.04.2022
B4U Broadband (India) Pvt. Ltd. Vs. Affluence Movies Pvt. Ltd.
Hon'ble Judges/Coram:
G.S. Kulkarni, J.
Counsels:
For Appellant/Petitioner/Plaintiff: Nitesh Bhutekar and Gargi Warunjikar
For Respondents/Defendant: Rashmin Khandekar, Deepak Deshmukh and Pritha Mitra i/b
Naik Naik & Co.
Case Category:
ARBITRATION MATTERS: ARBITRATION PETITIONS UNDER SECTION 11 OF
ARBITRATION AND CONCILIATION ACT, 1996
ORDER
G.S. Kulkarni, J.
1 . By this application filed under Section 11 of the Arbitration and Conciliation Act,
1996 (for short 'the Act'), the applicant has prayed for appointment of an arbitral
tribunal to adjudicate the disputes and differences which have arisen between the
parties under a Co-Production Agreement for Television Programme dated 09 July,
2015. The arbitration agreement is contained in clause 8 of the said agreement on
which there is no dispute. The parties have agreed for Mumbai to be the place of
arbitration as also, the agreement in question was entered at Mumbai. Also, both the
parties are from Mumbai. Thus, the seat of the arbitration as agreed between the parties
is at Mumbai.
2. At the hearing of this application on behalf of the respondent, an objection is raised
to the agreement in question not being sufficiently stamped. Respondent contends that
in view of the decision of the Supreme Court in Garware Wall Ropes Ltd. vs. Coastal
Marine Constructions & Engg. Ltd. MANU/SC/0511/2019 : (2019) 9 SCC 209, the
agreement needs to be impounded and only after the agreement in question is
sufficiently stamped, the present application for appointment of an arbitral tribunal be
entertained. In Garware Wall Ropes (supra), the Supreme Court was concerned with the
effect of an arbitration clause contained in a document which was not "duly" stamped.
The Court held that when an arbitration clause is contained in an agreement or
conveyance, different consequences ensue depending on whether the agreement or
conveyance is not registered or not duly stamped. The Court also held that the
judgment in SMS Tea Estates vs. Chandmari Tea Co. (P) Ltd. MANU/SC/0836/2011 :
(2011) 14 SCC 66 would continue to hold the field even after the 2015 amendment to
the Act and if a document was not duly stamped, then the Court under section 11 of the
Act would first impound the document and only after the entire stamp duty and penalty
(if any) is paid, such document would be acted upon for appointment of an arbitral
tribunal.

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3 . A reply affidavit on behalf of the respondent dated 23 March, 2022 is placed on
record, wherein the following contention has been raised in regard to the document in
question not being sufficiently stamped:-
"e. Therefore, in the present case, the total stamp duty payable on the
Agreement ought to be approximately Rs. 26,240/- (Rupees Twenty Six
Thousand Two Hundred and Forty Only). However, this stamp duty is not paid
by the Applicant."
4. To the above objection as raised on behalf of the respondent, a rejoinder affidavit is
placed on record on behalf of the applicant which is merely in the nature of a denial.
The relevant paragraphs of the rejoinder affidavit are required to be noted which read
thus:-
"4. I say that, the stamp duty of Rs. 900 is paid and the said Agreement is
sufficiently stamped. Thus, there is no insufficiency of stamp as alleged by the
Respondent.
9 . With respect of paragraph no. 2 d, it is denied that article 5 h (A) (iv) of
Schedule 1 of the Maharashtra Stamp Act, 1957 is applicable to the agreement
which is subject matter of application. It is denied that the stamp duty shall be
calculated at 0.2% of the amount agreed in contract.
10. As far as the averments made in paragraph no. 2 e are concerned, I deny
and do not accept that the total stamp duty payable on the Agreement ought to
be approximately Rs. 26,240/- and the same has not been paid by the
Applicant."
5 . Thus, as seen from the pleadings, the respondent has come with a case that the
document in question was required to be duly stamped as per the provisions of Article 5
(h-A) (iv) of the Schedule I of the Stamp Act, however, the response of the applicant to
such specific contention of the respondent is merely of a denial. The applicant is not
taking a clear position that the document needs to be considered to be not duly
stamped as per law at Rs. 900/-. Thus, in the absence of any such position being taken
by the applicant, the only inference which can be drawn is to accept what the
respondent has contended that the document is not duly stamped as per law. Ultimately
all these are issues which are required to be decided by the stamp authorities. The
sequel to this would be to impound the document and refer it for adjudication as to the
deficit stamp duty payable on it in accordance with the law as laid down by the
Supreme Court in Garware Wall Ropes (supra). The Supreme Court in Garware Wall
Ropes (supra) has observed thus:
"19. It will be seen that neither in the Statement of Objects and Reasons nor in
the Law Commission Report is there any mention of SMS Tea Estates (supra).
This is for the very good reason that the Supreme Court or the High Court,
while deciding a Section 11 application, does not, in any manner, decide any
preliminary question that arises between the parties. The Supreme Court or the
High Court is only giving effect to the provisions of a mandatory enactment
which, no doubt, is to protect revenue. SMS Tea Estates (supra) has taken
account of the mandatory provisions contained in the Indian Stamp Act and
held them applicable to judicial authorities, which would include the Supreme
Court and the High Court acting under Section 11. A close look at Section
11(6A) would show that when the Supreme Court or the High Court considers
an application under Section 11(4) to 11(6), and comes across an arbitration
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 clause in an agreement or conveyance which is unstamped, it is enjoined by the
provisions of the Indian Stamp Act to first impound the agreement or
conveyance and see that stamp duty and penalty (if any) is paid before the
agreement, as a whole, can be acted upon. It is important to remember that the
Indian Stamp Act applies to the agreement or conveyance as a whole.
Therefore, it is not possible to bifurcate the arbitration clause contained in such
agreement or conveyance so as to give it an independent existence, as has been
contended for by the respondent. The independent existence that could be
given for certain limited purposes, on a harmonious reading of the Registration
Act, 1908 and the 1996 Act has been referred to by Raveendran, J. in SMS Tea
Estates (supra) when it comes to an unregistered agreement or conveyance.
However, the Indian Stamp Act, containing no such provision as is contained in
Section 49 of the Registration Act, 1908, has been held by the said judgment to
apply to the agreement or conveyance as a whole, which would include the
arbitration clause contained therein. It is clear, therefore, that the introduction
of Section 11(6A) does not, in any manner, deal with or get over the basis of
the judgment in SMS Tea Estates (supra), which continues to apply even after
the amendment of Section 11(6A).
37. One reasonable way of harmonising the provisions contained in Sections 33
and 34 of the Maharashtra Stamp Act, which is a general statute insofar as it
relates to safeguarding revenue, and Section 11(13) of the 1996 Act, which
applies specifically to speedy resolution of disputes by appointment of an
arbitrator expeditiously, is by 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 penalty
(if any) as expeditiously as possible. and preferably within a 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 Section 11 application is allowed and an arbitrator is
appointed, the arbitrator can then proceed to decide the dispute within the time
frame provided by Section 29A of the 1996 Act."
(emphasis supplied)
6. However, Mr. Bhutekar, learned counsel for the applicant would not agree and would
submit that it is not necessary to impound the document. He would contend that even if
the document is not duly stamped, the Court can nonetheless appoint an arbitral
tribunal by exercising its jurisdiction under Section 11 of the Act. Mr. Bhutekar supports
this submission relying on the decision of the Supreme Court in Intercontinental Hotels
Group (India) Pvt. Ltd. v. Waterline Hotels N.N. Global Mercantile (P) Ltd. v. Indo
Unique Flame Ltd. and a decision of the learned Single Judge of this Court in case of
Pigments & Allieds vs. Carboline (India) Pvt. Ltd. & Anr.1.
7 . Mr. Bhutekar's contention relying on the said decisions is two fold. Firstly, that the
arbitration agreement would be required to be held to be distinct and separate de'hors
from the document in which it finds a place, being a settled principle in law as
recognized by the SupremeCourt in the case of Intercontinental Hotels Group (India)
Pvt. Ltd. (supra) as also in the case of N.N. Global Mercantile (P) Ltd. (supra). His
submission is that the question on a document being duly stamped can be answered at

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a later stage and this Court ought not to go into this aspect at this stage while
exercising jurisdiction under Section 11 of the Act referring to the observations of the
Supreme Court in paragraph 27 of the decision of Intercontinental Hotels Group (India)
Pvt. Ltd. (supra). In the context of Mr. Bhutekar's submission, paragraphs 21, 23 and 24
of the said decision of the Supreme Court are required to be noted, so as to appreciate
as to what has been said by the Supreme Court in paragraph 27. The observations as
made in the said paragraphs read thus:-
"21. In any case, again in N.N. Global Mercantile Private Limited v. Indo Unique
Flame Limited, MANU/SC/0014/2021 : (2021) 4 SCC 379, this Court doubted
the above proposition as held in Garware Wall Ropes (supra), and was of the
opinion that the utility of the doctrine of separability overrides the concern
under the respective Stamp Acts. Any concerns of non-stamping or under
stamping would not affect the validity of the arbitration agreement. However,
this Court considered it appropriate to refer the issue for authoritative
settlement by a Constitution Bench in the light of Vidya Drolia (supra),
citing the ratio in Garware Wall Ropes (supra). The relevant
observations made in N.N. Global (supra) read as under:
"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.,
MANU/SC/0836/2011 : (2011) 14 SCC 66] andGarware [Garware Wall
Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd.,
MANU/SC/0511/2019 : (2019) 9 SCC 209]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.,
MANU/SC/0939/2020 : (2021) 2 SCC 1by a co-ordinate Bench, which
has affirmed the judgment in Garware T Garware Wall Ropes Ltd. v.
Coastal Marine Constructions & Engg. Ltd.. MANU/SC/0511/2019 :
(2019) 9 SCC 2091. The aforesaid issue is required to be
authoritatively settled by a Constitution bench of this Court.
5 8 . 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
Indian 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?"
59. In light of the same, the Registry may place this matter before the
Hon'ble Chief Justice of India for appropriate orders/directions."
.............

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 23. Although we agree that there is a need to constitute a larger Bench to settle
the jurisprudence, we are also cognizant of time-sensitivity when dealing with
arbitration issues. All these matters are still at a pre-appointment stage, and we
cannot leave them hanging until the larger Bench settles the issue. In view of
the same, this Court-until the larger Bench decides on the interplay between
Sections 11(6) and 16- should ensure that arbitrations are carried on, unless
the issue before the Court patently indicates existence of deadwood.
2 4 . This brings us to the only issue at hand: whether the issue of
insufficient stamping raised by the respondent is deadwood and clearly
indicative of an unworkable arbitration agreement, or there are deeper
issues which can be resolved at a later stage. The counsel for the
petitioners has sought to draw our attention to Clause 22(1) (b) of the HMA, to
contend that the respondent has presented a warranty to ensure the said HMA
would be valid and legally enforceable. Clause 22.1(b) of the HMA reads as
follows:
"22.1. Owner represents and warrants to Manager upon execution of
this Agreement and again on the Commencement Date that: ...
b) it has obtained or shall obtain (with Manager's assistance as it is
reasonably able to provide) all necessary governmental permissions,
licenses and permits (including but not limited construction,
occupancy, liquor, bar, restaurant, sign and hotel accommodation
licenses) to enable Manager to operate the Hotel in accordance with the
Brand Standards and to ensure this Agreement is fully valid and
enforceable in the Country.
27. Upon reading Vidya Drolia (supra), the issue of 'existence' and/or
'validity' of the arbitration clause, would not be needed to be looked
into herein, as payment of stamp duty, sufficient or otherwise, has
taken place herein. In order to ascertain whether adequate stamp duty
has been paid in terms of the Karnataka Stamp Act, this Court needs
to examine the nature of the substantive agreement, the nature of the
arbitration agreement, and whether a separate stamp fee would be
payable for the arbitration agreement at all. It may be noted that the
petitioners, have themselves attempted to self-adjudicate the required
stamp duty and have paid, on 29.07.19, a stamp duty of Rs. 2,200/-,
describing the HMA as a "bond". On 10.06.2020, the petitioners further
purchased 11 estamps for Rs. 200/- each, describing the HMA as an 'agreement'
under article 5(j). Therefore, it falls upon the Court, under the stamp act to
review the nature of the agreement in order to ascertain the stamp duty
payable. From the above it is clear, that stamp duty has been paid, whether it
be insufficient or appropriate is a question that maybe answered at a later stage
as this court cannot review or go into this aspect under Section 11(6). If it was
a question of complete non stamping, then this court, might have had an
occasion to examine the concern raised in N.N. Global (supra), however, this
case, is not one such scenario."
(emphasis supplied)
8 . The learned Single Judge of this Court (A.K. Menon, J.) in Pigments & Allieds Vs.
Carboline (India) Pvt. Ltd. & Ors. (supra) in the facts of the said case and considering
an earlier order dated 21 November, 2018 passed in such proceedings, under which the
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document in question was impounded, in consonance to the decision of the Supreme
Court in Garware Wall Ropes Ltd. (supra), observed that the stamp authorities having
acted upon the direction of this Court and having ascertained the duty payable on the
instrument and as the facts before the Court were similar to the facts in the case before
the Supreme Court in Intercontinental Hotels Group (India) Pvt. Ltd.'s case (supra). The
learned Single Judge accordingly proceeded to appoint an arbitral tribunal. The learned
Single Judge in the facts of the case thought it appropriate that the Court would not go
into the issue as to whether, nonetheless, the agreement was sufficiently stamped and
proceeded to appoint an arbitral tribunal. The Learned Single Judge observed thus:-
"37. In the present case, on a fair reading of provisions of the Maharashtra
Stamp Act, as applicable in Maharashtra, it is evident under definition 2(d) that
the agreement in question was required to be stamped when it was first
executed. The agreement was first executed, it was executed by Carboline
presumably with appropriate stamp duty since it is not the case of Carboline
that it was under-stamped in Chennai. The only contention is that the
agreement is executed in Mumbai, as seen from the face of the document. Thus,
clearly, when the document was first executed, stamp duty was payable, that
has been paid. The only issue now remains whether it was insufficiently
stamped and whether a copy could be stamped with the duty payable. That
aspect Mr. Ankhad has submitted is not for this court to go into now since the
decision in Inter Continental Hotels Group (Supra) clearly states that, when in
doubt, one must refer the matter to arbitration. I have already dealt with the
effect of Sections 3, 7 and 19 and the provisions of Sections 33 and 34 of the
Act and taking an overall view, I have no doubt that an Arbitrator would have to
be appointed. The notice invoking arbitration has nominated an Arbitrator. It
now seeks appointment of an Arbitrator on behalf of the respondent and
accordingly, the application must succeed, reserving all rights and contentions
of the parties on merits."
9 . In my opinion, the facts before the Supreme Court in the case of Intercontinental
Hotels Group (India) Pvt. Ltd. (supra) as also before the learned Single Judge in the
case of Pigments & Allieds (supra) were completely different from the facts of the
present case, as seen from the record. In Intercontinental Hotels Group (India) Pvt. Ltd.
(supra), the Supreme Court in paragraph 27 ascertained whether adequate stamp duty
was paid in terms of Karnataka Stamp Act and examined the nature of the substantive
agreement, the nature of the arbitration agreement and whether the stamp duty would
be payable on the arbitration agreement at all. It was observed by the Supreme Court
that the petitioners therein had themselves attempted to self-adjudicate the required
stamp duty and in fact on 29 July 2019, paid a stamp duty of Rs. 2,200/-, describing
the document as a "bond". Thereafter, on 10 June, 2020, the said petitioners further
purchased 11 e-stamps for Rs. 200/- each, describing the document as an 'agreement'
under article 5(j). In these circumstances, it was observed that it would fall upon the
Court under the Stamp Act, to review the nature of the agreement in order to ascertain
the stamp duty payable. A categorical finding in that regard was recorded. From such
facts, it was clear, that the stamp duty was paid and once such stamp duty was paid,
whether it is insufficient or appropriate was a question that may be answered at a later
stage, as it was observed that the Supreme Court cannot review or delve into this
aspect under Section 11 (6) of the Act. Similar was the situation before the learned
Single Judge in Pigments and Allieds (supra) wherein the document was already
impounded and was the subject matter of consideration by the stamp authority. The
learned Single Judge has recorded a clear finding in paragraph 37 that on a fair reading
of provisions of the Maharashtra Stamp Act, as applicable in Maharashtra, it was evident
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from the provision of Section 2(d) that the agreement in question was required to be
stamped when it was first executed. However, in the said case, the agreement was first
executed with appropriate stamp duty in Chennai and it was not the case of respondent
no. 1 therein, that it was not stamped at Chennai. The question considered by the
learned Single Judge was to the effect that when the agreement was also executed in
Mumbai, as seen from the face of the document, whether the document could be
considered to be insufficiently stamped and whether a copy could be stamped with the
duty payable. It is in these facts, the learned Single Judge applying the observations of
the Supreme Court in the case of Intercontinental Hotels Group (India) Pvt. Ltd.
(supra), referred the matter to arbitration.
10. It is clearly seen that a doubt was raised to the correctness of law as laid down in
Garware Wall Ropes Ltd. (supra) by a Bench of three learned Judges in N.N. Global
Mercantile (P) Ltd. (supra). In this decision, the Supreme Court clearly noted that a co-
ordinate bench of the Supreme Court in Vidya Drolia having affirmed the judgment in
Garware Wall Ropes Ltd. (supra), hence, the issue as to whether the decision in
Garware Wall Ropes Ltd. (supra) lays down the correct position in law was required to
be settled by a Constitution bench of the Supreme Court. In paragraph 58, their
Lordships framed the following issue for consideration of a Constitution Bench:
"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 Indian 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, un-
enforceable, or invalid, pending payment of stamp duty on the
substantive contract/instrument? "
1 1 . It is thus clear from the observations as made in paragraphs 56 to 58 of the
decision of N.N. Global Mercantile (P) Ltd. (supra), that the decision in Garware Wall
Ropes Ltd. (supra) has continued to hold the field and unless there is an authoritative
pronouncement of the Constitution Bench, it would be required to be held that the law
as laid down in such decision is binding on all Courts.
12. For the above reasons, I am also not persuaded to accept Mr. Bhutekar's contention
relying on Pigments & Allieds Vs. Carboline (India) Pvt. Ltd. & Ors. (supra) wherein the
Court in the facts of the said case had clearly considered the applicability of the
decision of the Supreme Court in Intercontinental Hotels Group (India) Pvt. Ltd.
(supra). Thus in the present facts, the reliance of Mr. Bhutekar on the decision in
Intercontinental Hotels Group (India) Pvt. Ltd. (supra) as also the decision of the Single
Judge in Pigments & Allieds Vs. Carboline (India) Pvt. Ltd. & Ors. (supra) is not well
founded.
13. At the fag end of the dictation of this order, Mr. Bhutekar has referred to another
order passed by the learned Single Judge of this Court (A.K. Menon, J.) in the case of
Vivek Mehta & Anr. vs. KaRRs Designs & Developments & Ors.2. As clearly seen from
the said decision,although the Court has made observations on the decision of the
Supreme Court in Intercontinental Hotels Group (India) Pvt. Ltd. (supra) and N.N.
Global Mercantile (P) Ltd. (supra), in making an order appointing an arbitral tribunal,
however, the learned Single Judge has not taken a view that the law as laid down in

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Garware Wall Ropes (supra) is no more good law. Mr. Bhutekar is not correct in
canvassing the proposition as noted above, as the Section 11 Court does not have any
plenary powers or any inherent jurisdiction to pass orders, as the Supreme Court wields
under Article 142 of the Constitution to do complete justice. The decision of the
Supreme Court in Garware Wall Ropes (supra) would continue to hold the field until the
Constitution Bench holds such judgment to be no more good law as also observed by
their Lordships in N.N. Global Mercantile (P) Ltd. (supra) and in Intercontinental Hotels
Group (India) Pvt. Ltd. (supra).
14. For the above reasons, the document in question namely Co-Production Agreement
for Television Programme dated 09 July, 2015 would be required to be impounded. The
applicant is directed to deposit the original of the said document with the Prothonotary
& Senior Master of this Court within one week from the day copy of this order is
available, who shall forward the document to the concerned Sub-Registrar of Stamps to
adjudicate the appropriate stamp duty payable on such document. The Sub-Registrar to
pass an appropriate order and in the event, stamp duty becomes payable, direct the
parties by whom the stamp duty is payable on the agreement in question to pay/deposit
such deficit stamp duty as per law. Awaiting the decision of the stamp authority, the
proceedings are required to be adjourned.
15. In accordance to the observation of the Supreme Court as made in paragraph 37 in
Garware Wall Ropes Ltd., let the appropriate stamp authority take a decision in
accordance with law within a period of 45 days from the day the document is received.
16. The parties are at liberty to move the Court after the document is duly stamp as per
law.

1 Arbitration Application No. 225 of 2016

2 Arbitration Application No. 101 of 2016, decided on 28 February, 2022
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