Issue
Can a court grant interim reliefs/protections in accordance with Section 9 of the Arbitration and Conciliation Act, 1996 in a dispute arising out of an agreement that has not been duly stamped in accordance with the provisions of the Stamp Act, 1899?
Analysis
1. Section 9 of the Arbitration and Conciliation Act 1996[1] (“the A&C Act”) is in many ways, similar to Article 9 of the United Nations Commission on International Trade Law’s Model Law on International Commercial Arbitration[2] (“the UNCITRAL Model Law”). However, in order to invoke the jurisdiction of our Courts in accordance with Section 9 of the A&C Act mandates that an applicant ought to be ‘party’ to an ‘arbitration agreement’. While this does sound fairly simple to comprehend at first blush, the issue at hand requires context via views taken by our courts in this regard and even vis-à-vis existing legislation i.e. the Stamp Act, 1899[3] (“the Stamp Act”) and even the Contract Act, 1872[4] (“the Contract Act”). Before addressing the issue, it is of relevance to understand the scope of Section 9, as has been held by the Supreme Court before looking into the jurisprudence of stamping vis-à-vis the A&C Act.
2. Jurisprudence of the Scope of Section 9 of the A&C Act
2.1 In Sundaram Finance Ltd. v. NEPC India Ltd.[5] (“Sundaram Finance”), the Supreme Court inter alia dealt with the scope and ambit of Section 9 of the A&C Act by observing that interim protections granted by a Court in proceedings under Section 9 do not imply a waiver of arbitral proceedings, especially considering the language used in Section 9, which has been inspired by Article 9 of the UNCITRAL Model Law. The Court held that the phrase “before or during arbitral proceedings” as used in Section 9 of the A&C Act and Article 9 of the UNCITRAL Model Law would imply that arbitral proceedings are, in a sense, separate from proceedings under Section 9 and can be initiated or continued regardless of the stage of proceedings under Section 9. The relevant portions of Sundaram Finance[6] have been culled out and reproduced herein below:
“14. Section 9 of the [A&C] Act corresponds to Article 9 of the UNCITRAL Model Law which is as follows:
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This article recognises, just like Section 9 of the [A&C] Act, a request being made before a court for an interim measure of protection before arbitral proceedings. It is possible that in some countries, if a party went to the court seeking interim measure of protection, that might be construed under the local law as meaning that the said party had waived its right to take recourse to arbitration. Article 9 of the UNCITRAL Model Law seeks to clarify that merely because a party to an arbitration agreement requests the court for an interim measure ‘before or during arbitral proceedings’, such recourse would not be regarded as being incompatible with an arbitration agreement. To put it differently, the arbitration proceedings can commence and continue notwithstanding a party to the arbitration agreement having approached the court for an order for interim protection. The language of Section 9 of the [A&C] Act is not identical to Article 9 of the UNCITRAL Model Law but the expression ‘before or during arbitral proceedings’ used in Section 9 of the [A&C] Act seems to have been inserted with a view to give it the same meaning as those words have in Article 9 of the UNCITRAL Model Law. It is clear, therefore, that a party to an arbitration agreement can approach the court for interim relief not only during the arbitral proceedings but even before the arbitral proceedings. To that extent, Section 9 of the [A&C] Act is similar to Article 9 of the UNCITRAL Model Law.”
2.2 In Firm Ashok Traders v. Gurumukh Das Saluja [7] (“Ashok Traders”), the Supreme Court whilst relying on Sundaram Finance[8], reiterated that the provisions of Section 9 of the A&C Act were similar to Article 9 of the UNCITRAL Model Law. However, and more interestingly, the Court held that the initiation of proceedings under Section 9 of the A&C Act does not arise out of a contract and that the litigant invoking such jurisdiction must only be able to ascertain his locus standi by way of an arbitration agreement. The relevant portions of Ashok Traders[9] have been culled out and reproduced hereinbelow:
“13. The A&C Act […] is a long leap in the direction of alternate dispute resolution systems. It is based on UNCITRAL Model. The decided cases under the preceding Act of 1940 have to be applied with caution for determining the issues arising for decision under the [A&C] Act. An application under Section 9 under the scheme of the A&C Act is not a suit. Undoubtedly, such application results in initiation of civil proceedings but can it be said that a party filing an application under Section 9 of the Act is enforcing a right arising from a contract? ‘Party’ is defined in clause (h) of sub-section (1) of Section 2 of the A&C Act to mean ‘a party to an arbitration agreement’. So, the right conferred by Section 9 is on a party to an arbitration agreement. The time or the stage for invoking the jurisdiction of court under Section 9 can be: (i) before, or (ii) during arbitral proceedings, or (iii) at any time after the making of the arbitral award but before it is enforced… With the pronouncement of this Court in [Sundaram Finance][10] the doubts stand cleared and set at rest and it is not necessary that arbitral proceedings must be pending or at least a notice invoking arbitration clause must have been issued before an application under Section 9 is filed … suffice it to say that the right conferred by Section 9 cannot be said to be one arising out of a contract. The qualification which the person invoking jurisdiction of the court under Section 9 must possess is of being a ‘party’ to an arbitration agreement. A person not party to an arbitration agreement cannot enter the court for protection under Section 9. This has relevance only to his locus standi as an applicant. This has nothing to do with the relief which is sought from the court or the right which is sought to be canvassed in support of the relief. The reliefs which the court may allow to a party under clauses (i) and (ii) of Section 9 flow from the power vesting in the court exercisable by reference to ‘contemplated’, pending or ‘completed’ arbitral proceedings. The court is conferred with the same power for making the specified orders as it has for the purpose of an in relation to any proceedings before it though the venue of the proceedings in relation to which the power under Section 9 is sought to be exercised is the Arbitral Tribunal. Under the scheme of the A&C Act, the arbitration clause … constitutes an agreement by itself. In short, filing an application by a party by virtue of its being a party to an arbitration agreement is for securing a relief which the court has power to grant before, during or after arbitral proceedings by virtue of Section 9 of the A&C Act. The relief sought for in an application under Section 9 of the A&C Act is neither in a suit not a right arising from a contract … the court under Section 9 is only formulating interim measures so as to protect the right under adjudication before the Arbitral Tribunal from being frustrated…”
(emphasis supplied)
2.3 In SBP and Co. v. Patel Engineering Ltd. [11] (“SBP”), the 7-Judge Constitution Bench of the Supreme Court inter alia observed (per majority)[12] that litigants do invoke the jurisdiction of courts under Section 9 of the A&C Act prior to the commencement of arbitral proceedings in order obtain interim reliefs/protections. The judgment per majority further observed that in proceedings under Section 9 of the A&C Act, a Court would have to inter alia decide whether the arbitration agreement, pursuant to which the Section 9 proceedings have been initiated, is a valid agreement in law or not. The relevant portion of the judgment (per majority) in SBP[13] has been culled out and reproduced hereinbelow:
“19.… Similarly, Section 9 [of the A&C Act] enables a court, obviously, as defined in the Act, when approached by a party before the commencement of an arbitral proceeding, to grant interim relief asserting that there was a dispute liable to be arbitrated upon in terms of the [A&C] Act, and the opposite party disputes the existence of an arbitration agreement as defined in the Act or raises a plea that the dispute involved was not covered by the arbitration clause, or that the court which was approached had no jurisdiction to pass any order in terms of Section 9 of the [A&C] Act, that the court has necessarily to decide whether it has jurisdiction, whether there is an arbitration agreement which is valid in law and whether the dispute sought to be raised is covered by that agreement. There is no indication in the [A&C] Act that the powers of the court are curtailed on these aspects. On the other hand, Section 9 [of the A&C Act] insists that once approached in that behalf, ‘the court shall have the same power for making orders as it has for the purpose of an in relation to any proceeding before it’. Surely, when a matter is entrusted to a civil court in the ordinary hierarchy of courts without anything more, the procedure of that court would govern the adjudication…”
3. Jurisprudence on the Applicability, Scope and Extent of the Stamp Act in the Context of the A&C Act
3.1 In SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd.[14] (“SMS Tea Estates”), the Supreme Court inter alia addressed the applicability of the provisions of the Stamp Act to the A&C Act. While considering the provisions of the Stamp Act, the Court concluded that any document containing an arbitration clause, which is required to be stamped and is not stamped, cannot be acted upon by the Court. The Court, however, did also hold that should such a document be subsequently impounded by the Collector and stamp duty (along with penalty fee, if any) be fully paid, the Court may then act upon such a document. The relevant portions of SMS Tea Estates[15] have been culled out and reproduced hereinbelow:
“19. Having regard to Section 35 of the Stamp Act, unless the stamp duty and penalty due in respect of the instrument paid, the court cannot act upon the instrument, which means that it cannot act upon the arbitration agreement which is part of the instrument…”
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21. Therefore, when a lease deed or any other instrument is relied upon as contending the arbitration agreement, the court should consider at the outset, whether an objection in that behalf is raised or not, whether the document is properly stamped. If it comes to the conclusion that it is not properly stamped, it should be impounded and dealt with in the manner specified in Section 38 of the Stamp Act. The court cannot act upon such a document or the arbitration clause therein. But if the deficit duty and penalty is paid in the manner set out in Section 35 of Section 40 of the Stamp Act, the document can be acted upon or admitted in evidence.
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22.1. The court should, before admitting any document into evidence or acting upon such document, examine whether the instrument/document is duly stamped …
22.2. If the document is found to be not duly stamped, Section 35 of the Stamp Act bars the said document being acted upon. The court should then proceed to impound the document under Section 33 of the Stamp Act and follow the procedure under Sections 35 and 38 of the Stamp Act.
22.3. If the document is found to be duly stamped, or if the deficit stamp duty and penalty is paid, either before the court or before the Collector (as contemplated in Section 35 or Section 40 of the Stamp Act), and the defect with reference to deficit stamp is cured, the court may treat the document as duly stamped.”
(emphasis supplied)
3.2 In Gautam Landscapes (P) Ltd. v. Shailesh S. Shah [16] (“Gautam Landscapes”), a Full Bench of the Bombay High Court inter alia specifically considered the applicability of the provisions of the Stamp Act vis-à-vis Section 9 of the A&C Act. Upon examining these provisions of law, the Court held that the Stamp Act is a fiscal law enacted to secure revenue for the State on certain classes of instruments. As the invocation of Section 9 of the A&C Act is for seeking ad interim or interim reliefs and protections, application of SMS Tea Estates[17] would defeat the purpose of Section 9 of the A&C Act seeing as non-payment of stamp duty is not an incurable defect. The Court further held that the procedure of impounding and payment under the scheme of the Stamp Act could even be subject to appeal, thereby defeating the speedy nature of adjudication provided for in Section 9 of A&C Act – this could not have been the intent of the legislature. Simply put, the Bombay High Court held that the defence of non-payment of stamp duty in a document (which requires to be stamped per the Stamp Act) containing an arbitration clause would not be valid in law. It would be prudent here to mention that the Bombay High Court also looked into the applicability of the provisions of the Stamp Act vis-à-vis Sections 11(6) and 11(6-A) of the A&C Act[18] and held that a Court need not await adjudication by the stamp authorities in order to pass an order appointing an arbitrator(s) in terms of Section 11(6) of the A&C Act. However, the authors are not presently addressing the second question, seeing as the Supreme Court, in Garware Wall Ropes[19] has overruled Gautam Landscapes[20] in this aspect and laid down the law in that regard. The relevant portions of Gautam Landscapes[21], with regard to its observations on the applicability of the Stamp Act to proceedings under Section 9 of the A&C Act, have been culled out and reproduced hereinbelow:
“63. Under the Stamp Act defect of non-payment of stamp duty is not an incurable defect. It can be cured at any stage before it is admitted in evidence … the Stamp Act is a fiscal measure enacted to secure revenue for the State on certain classes of instruments. We are, therefore, of the view that the respondents cannot insist applying decision of the Supreme Court […] [SMS Tea Estates[22]] […] in proceedings under Section 9 and contend that the document needs to be adequately stamped before the Court considering the application under Section 9 to grant interim or ad interim reliefs.
- The learned counsel for the respondents placed heavy reliance on the judgment of the Supreme Court in SMS Tea Estates[23]. In our view, considering the facts of the case, the view adopted by the Supreme Court, emerging from [Gauhati] High Court in the observation of the Supreme Court the provisions of the [A&C Act] and [the] Stamp Act, we are of the considered opinion that the judgment of the Supreme Court in SMS Tea Estates[24] was not delivered arising out of an application under Section 9 of the [A&C Act] but was delivered arising out of an order passed under Section 11 of the [A&C Act].
- In [Ashok Traders][25], the Supreme Court has held that the right conferred by Section 9 [of the A&C Act] cannot be said to be one arising out of a contract. The qualification which the person invoking jurisdiction of the Court under Section 9 must possess, is of being a party to an arbitration agreement. This is nothing to do with the relief which is sought for from the Court or the right which is sought to be canvassed in support of the relief. The arbitration clause constitutes an agreement by itself.
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67.… We are … of the view that even if the main agreement containing arbitration agreement is not stamped or insufficiently stamped, there could not be any bar against the Court hearing the application under Section 9 of the [A&C] Act for interim measures to grant ad interim or interim relief to a party.
- We are not inclined to accept the submission of Mr Dani, learned Senior Counsel appearing for respondent in Arbitration Application No. 246 of 2016 that for the purpose of interim measures, the Court has to act upon the main agreement containing arbitration agreement and, thus till such time, such an agreement is stamped … irrespective of the urgency and though case is made out for grant of ad interim or interim relief, the Court does not have power to grant any such relief. This clearly for the reason that the Court in considering a relief under Section 9 [of the A&C Act] is acting upon the arbitration agreement only, and not the main contract. An arbitration agreement would not require any stamping.
- In our view, the argument of Mr Dani, if accepted, would be in conflict with the scheme of the legislation and intent of the provisions of Section 9 of the [A&C Act]. Under the scheme of the [A&C Act] … we are of the considered view that the legislative intent and purpose would be served by providing the efficacious and expeditious relief to a party to an arbitration agreement and that is prescribed under Section 9 of the [A&C Act]. In case the submission of Mr Dani is accepted, the exercise of jurisdiction under Section 9 of the [A&C Act] would be completely eclipsed and party would be deprived to approach a forum for any urgent relief of ad interim or interim nature. This obviously cannot be implication and intent of the statutory interpretation.
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- Thus, in our view, the question of law i.e. whether a Court under the [A&C] Act […] can entertain and grant any interim or ad interim relief in an application under Section 9 of the [A&C] Act when a document containing arbitration clause is unstamped or insufficiently stamped, is required to be answered in the affirmative.
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- Thus postponing application for consideration, filed under … Section 9 [of the A&C Act], to indefinite period till the final decision of the issue raised under the Stamp Act, would also not be in conformity of the legislative policy and intent to provide speedy remedy under … Section 9 of the [A&C Act].
- The basic principles guiding judicial decision-making, in the context of arbitration matters, the Court would surely be concerned with the efficacy of the arbitral process. The recognition of the legislative intent can also be clearly seen from the decision of the Supreme Court in A. Ayyasamy v. A Paramasivam [26], wherein D.Y. Chandrachud, J. concurring with the judgment of A.K. Sikri, J. (as His Lordship then was), observed that [t]he basic principle which must guide judicial decision-making is that arbitration is essentially a voluntary assumption of an obligation by contracting parties to resolve their disputes through a private tribunal. The intent of the parties is expressed in the terms of their agreement. Where commercial entities and persons of business enter into such dealings, they do so with a knowledge of the efficacy of the arbitral process. The commercial understanding is reflected in the terms of the agreement between the parties. The duty of the Court is to impart to that commercial understanding a sense of business efficacy.
- We may thus observe that the Stamp Act is a fiscal statute and its purpose is collection of revenue. The said purpose will be achieved by impounding the document and sending it to the stamp authorities if it is found to be insufficiently stamped. At the same time, the Court need not wait for outcome of the said adjudication. It would not be appropriate to put restrictions on the Court’s powers to exercise its such jurisdiction under the provisions of the [A&C Act], if the party deserves such intervention by the Court.
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118.… we are of the view that the party need not be put to a disadvantage merely because an objection has been raised in respect of insufficiency of the stamp on the agreement presented before the Court. Neither a contesting party could deprive legitimate rights of a litigant in praying for timely intervention of the Court by praying for appointment of an arbitral tribunal nor for interim reliefs in the fact situation of a case. That would be rendering a party without any forum and in a given situation the outcome would be, at times, catastrophic and disastrous and the damage could be irreparable one. A balanced approach … so that the purpose of enacting the provisions of Section[…] 9 of the [A&C Act] is not defeated.
-
If an application under … Section 9 [of the A&C Act] is required to be postponed till the order of adjudication is passed by the learned Collector of Stamps with such uncertainty of the time it would take to decide and the hierarchy of remedies after such order, as it would be subject to an appeal or a revision, as the case may be and till such time no order … under Section 9 should be passed, then the Legislature would not have provided for speedy disposal of the applications under … Section 9 of the [A&C] Act.”
3.3. In Garware Wall Ropes Ltd. v. Coastal Marine Constructions and Engineering Ltd.[27] (“Garware Wall Ropes”), the Supreme Court, while reiterating the ruling in SMS Tea Estates[28], rejected the argument that an arbitration clause in an agreement ought to be considered an agreement independent of the agreement of which such arbitration clause is a part. The Supreme Court further held that a harmonious reading of the provisions of the Stamp Act, the A&C Act and the Contract Act would suggest that in the event an agreement (including its arbitration clause) is not duly stamped, then it cannot be said to be a valid agreement or a contract. It is important here to reiterate that these observations of the Supreme Court are in the context of Sections 11(6) and 11(6-A) of the A&C Act. The relevant portions of Garware Wall Ropes[29] have been culled out and reproduced hereinbelow:
“17.… when it came to an unstamped lease deed which contained an arbitration clause, this Court, [in SMS Tea Estates[30]], after setting out Sections 33 and 35 of the Stamp Act held: […]
[…]
18…It will be noticed from [SMS Tea Estates][31] that where an arbitration clause is contained in an agreement or conveyance, different consequences ensue depending on whether the agreement or conveyance is unregistered or unstamped… it is difficult to accede to the argument made by the learned counsel on behalf of the respondent that … an arbitration agreement has an independent existence of its own …
19.… It is important to remember that the 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 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 [A&C] Act has been referred to by Raveendran, J. in SMS Tea Estates[32] when it comes to an unregistered agreement or conveyance. However, the Stamp Act, containing no such provision as is contained in Section 49 of the Registration Act, 1908 has been held [in SMS Tea Estates[33]] to apply to the agreement or conveyance as a whole, which would include the arbitration clause contained therein…
-
Looked at from a slightly different angle, an arbitration agreement which is contained in an agreement or conveyance is dealt with in Section 7(2) of the [A&C] Act. We are concerned with the first part of Section 7(2) on the facts of the present case, and therefore, the arbitration clause that is contained in the sub-contract in question is the subject-matter of the present appeal. It is significant that an arbitration agreement may be in the form of an arbitration clause ‘in a contract.’
- Sections 2(a), 2(b), 2(g) and 2(h) of the Contract Act […] … read as under:[…]
- When an arbitration clause is contained ‘in a contract’, it is significant that the agreement only becomes a contract if it is enforceable by law. We have seen how, under the Stamp Act, an agreement does not become a contract, namely, that it is not enforceable in law, unless it is duly stamped. Therefore … Section 7(2) of the [A&C] Act and Section 2(h) of the Contract Act, would make it clear that an arbitration clause in an agreement would not exist when it is not enforceable by law…
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- [The] judgment in [United India Insurance Co. Ltd. v. Hyundai Engg. and Construction Co. Ltd.][34] is important in that what was specifically under consideration was an arbitration clause which would get activated only if an insurer admits or accepts liability. Since on facts it was found that the insurer repudiated the claim, though an arbitration clause did ‘exist’, so to speak, in the policy, it would not exist in law, as was held in that judgment, when one important fact is introduced, namely, that the insurer has not admitted or accepted liability. 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…”
3.4 Seeing as the observations and holding in Garware Wall Ropes[35] were in the context of Sections 11(6) and 11(6-A) of the A&C Act, Single Judge Benches of the Bombay High Court, in Saifee Developers (P) Ltd. v. Shanklesha Constructions [36] (“Saifee Developers”) and IREP Credit Capital (P) Ltd. v. Tapaswi Mercantile (P)Ltd.[37] (“IREP Credit Capital”) respectively, did not accept the arguments favouring the application of the Stamp Act to proceedings under Section 9 of the A&C Act because, primarily, this specific question (viz. the issue at hand) is currently being considered by the Supreme Court in an appeal[38] assailing Gautam Landscapes[39]. Additionally, the Bombay High Court did not favourably view the arguments in favour of the application of the Stamp Act to proceedings under Section 9 of the A&C Act because the Supreme Court has not stayed Gautam Landscapes[40] and therefore concluded that a Single Judge Bench of the Bombay High Court would be bound be Gautam Landscapes[41] seeing as it is a Full Bench verdict. The relevant portions of Saifee Developers[42] have been culled out and reproduced hereinbelow:
“10. I am not persuaded to accept the respondents’ contention that the Court at this stage of the proceedings cannot consider grant of any ad interim relief in the proceeding filed under Section 9 of the [A&C] Act, on the ground that the document is not sufficiently stamped. This for the reason that Full Bench of this Court in [Gautam Landscapes][43] has held that it is permissible for the Court in proceedings under Section 9 of the [A&C] Act, to grant ad interim/interim reliefs even when the document in question on the basis of which a relief is sought, is not sufficiently stamped. The Full Bench in this context has observed thus: […]
The decision of the Supreme Court in Garware Wall Ropes[44] is rendered in the context of Section 11 of the Act and not in a proceeding under Section 9 of the Act. The decision of the Full Bench in the context of Section 9 of the Act is subject-matter of challenge before the Supreme Court in [Shailesh Shah v. Gautam Landscapes (P) Ltd. ]. By an order dated [29-4-2019], passed by the Supreme Court, on the said petition, while issuing notice to the respondents, the Supreme Court has not stayed the decision of the Full Bench. The Supreme Court, however, observed that Section 9 petition may continue, in the meanwhile judgment delivered thereon shall not be implemented without leave of the Court. Thus, as the judgment of the Full Bench is binding on this Court, and the same being not stayed by the Supreme Court, it is not possible to accept the contention as urged on behalf of respondent that this Court cannot grant any ad interim relief.”
The relevant portions of IREP Credit Capital[45] have been culled out and reproduced hereinbelow:
“30. The argument, however, is on the footing that if insufficiency of stamps will not permit a Section 11 petition or will not permit the appointment of an Arbitral Tribunal, then no order can be made in a Section 9 proceeding either. As far as I am concerned, the question is no longer res integra. It was squarely before G.S. Kulkarni, J. in [Saifee Developers][46]. The submissions today are precisely those that were before Kulkarni, J. (see para 8). He held, after considering the Supreme Court decision in [Garware Wall Ropes Ltd.][47] and the ratio in [Gautam Landscapes][48]that this submission can have no bearing on the petition under Section 9. Garware Wall Ropes[49], as Kulkarni, J. said, was a matter under Section 11. Gautam Landscapes[50] was under both Section 9 and Section 11. In Garware Wall Ropes[51], the Supreme Court held that the Full Bench decision in Gautam Landscapes[52] did not correctly state the law on Section 11. The Supreme Court did not address the question of stamping being required even for a Section 9 petition. Kulkarni, J. noted that in fact there is a special leave petition pending in the Gautam Landscapes matter and that, on [29] April 2019, the Supreme Court issued notice but did not stay the Full Bench decision. It said that the Section 9 petition may continue, but any judgment on it would not be implemented without leave of the Supreme Court. Kulkarni, .J held in para 11 of Saifee Developers[53] that he was bound by the decision of the Full Bench on the Section 9 aspect in Gautam Landscapes and that the contention (that without stamp being paid no order could be made even on a Section 9 petition) was without merit.”
3.5 In Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram and other charities v. Bhaskar Raju and Bros. [54] (“Bhaskar Raju”), the Supreme Court reiterated the law laid down in SMS Tea Estates[55], and held that it is the duty of a Court to preliminarily consider whether the instrument it is dealing with has been stamped or not, even if an objection to that effect has not been raised by the litigants before it. The relevant portions of Bhaskar Raju[56] have been culled out and reproduced hereinbelow:
“20. It can thus clearly be seen, that this Court [in SMS Tea Estates[57]] has in unequivocal terms held, that when a lease deed or any other instrument is relied upon as containing the arbitration agreement, the Court is required to consider at the outset, whether the document is properly stamped or not. It has been held, that even when an objection in that behalf is not raised, it is the duty of the Court to consider the issue. It has further been held, that if the Court comes to the conclusion, that the instrument is not properly stamped, it should be impounded and dealt with in the manner specified in Section 38 of the Stamp Act […]. It has also been held, that the Court cannot act upon such a document or arbitration clause therein. However, if the deficit duty and penalty is paid in the manner set out in Section 35 or Section 40 of the Stamp Act […], the document can be acted upon or admitted in evidence …”
4. Addressing the Issue 
4.1 What we understand from Sundaram Finance[58], Ashok Traders[59] and SBP[60] is that Section 9 of the A&C Act is invoked to secure interim protections from a Court, that such protections may be of interest to a party to an arbitration agreement, that these proceedings can be initiated or continued before or during arbitral proceedings and that these proceedings are independent of arbitration. This view has also found acceptance in the legal community in India at large.
4.2 Where there seems to be difference in our courts’ views, and the view of the legal community in India as well, lies in the applicability of the Stamp Act vis-à-vis proceedings under Section 9 of the A&C Act:
4.2.1 In Gautam Landscapes[61], the Bombay High Court’s conclusions appear to be on the basis of equity and legislative intent i.e. that applicants in proceedings under Section 9 of the A&C Act must not be denied ad interim or interim reliefs/protections merely because an agreement containing an arbitration clause is not stamped in accordance with the Stamp Act. This equity-based view adopted by the Bombay High Court stems from the fact that the Stamp Act is fiscal statute meant to secure revenue for the Government and therefore ought not to be used as a line of defence by a respondent to the proceedings under Section 9 of the A&C Act. This view taken by the Bombay High Court is seemingly consistent with the Supreme Court’s decision in Ashok Traders[62] – where it was held that the rights adjudicated upon in proceedings under Section 9 of the A&C Act do not stem from a contract;
4.2.2 In Garware Wall Ropes[63], however, the Supreme Court looks at this predicament from a different angle. As mentioned earlier, Garware Wall Ropes[64] does not specifically address the issue at hand, but some of its observations are in conflict with Gautam Landscapes[65]. In fact, Garware Wall Ropes[66] has overruled Gautam Landscapes[67]vis-à-vis the application of the Stamp Act in proceedings under Section 11(6) of the A&C Act. The Supreme Court in Garware Wall Ropes[68] has, in a way, harmoniously read SMS Tea Estates[69], the provisions of the Stamp Act, the A&C Act and the Contract Act to hold that an arbitration clause in an agreement cannot be legally valid if the agreement itself is not legally valid. To elaborate, the Supreme Court found that an agreement (which also contains an arbitration clause) that is not duly stamped cannot be an agreement that is valid in law i.e. it is not a contract that legally binds parties, unless the agreement is subsequently stamped. This view adopted in Garware Wall Ropes[70] can also be read in conjunction with the Constitutional Bench’s views in SBP[71] and, if this view adopted by the Supreme Court in Garware Wall Ropes[72] does stand the test of time and judicial interpretation, Gautam Landscapes[73] could well be overruled vis-à-vis the issue at hand.
4.3 While the Supreme Court has not yet clearly provided an answer on the applicability of the provisions of the Stamp Act vis-à-vis Section 9 of the A&C Act, what will be interesting to see is what route the Supreme Court shall take in the appeal[74] assailing Gautam Landscapes[75] while adjudicating this question of law – one based on equity (as has been held in Ashok Traders[76] and Gautam Landscapes[77]) or one based on statutory interpretation and stare decisis (as has been in Garware Wall Ropes[78]). Till such time, Gautam Landscapes[79], Saifee Developers[80] and IREP Credit Capital[81] shall perhaps continue to serve as precedent in all the proceedings under Section 9 of the A&C Act.
* Advocate, Bombay High Court, BA LLB, National Law University (Jodhpur), LLM, Columbia Law School (New York)
** Advocate, Bombay High Court, BA LLB, Symbiosis Law School (Pune)
[Authors’ Note: The views expressed herein are personal and independent. No third party has funded inter alia the issuance of this paper or the research conducted by the authors. The authors have based their views in this research paper on prevalent legislation, judicial opinions/interpretations pertaining to the same and their experience as practicing advocates in India.]
[1] Arbitration and Conciliation Act, 1996
[2] UNCITRAL Model Law on International Commercial Arbitration
[3] The Stamp Act, 1899
[4] The Contract Act, 1872
[6]ibid
[8]Supra Note 5
[9]Supra Note 7
[10]Supra Note 5
[12] C.K. Thakker, J. delivered the dissenting opinion.
[13]Supra Note 11
[15]Ibid
[17]Supra Note 15
[18]These provisions pertain to proceedings before Court vis-à-vis appointing an arbitrator(s). The specific question that the Bombay High Court considered in this context was “Whether, inter alia, in view of Section 11(6A) of the Arbitration and Conciliation Act 1996, inserted by the Arbitration and Conciliation (Amendment Act) 2016, it would be necessary for the Court before considering and passing final orders on an application under Section 11(6) of the Act to await the adjudication by the stamp authorities, in a case where the document objected to, is not adequately stamped?”
[19]Infra Note 28
[20]Supra Note 17
[21]Ibid
[22]Supra Note 15
[23]Ibid
[24]Supra Note 15
[28]Supra Note 15
[29]Supra Note 28
[30]Supra Note 15
[31]Ibid
[32]Supra Note 15
[33]Ibid
[35]Supra Note 28
[36]Commercial Arbitration Petition No. 627 of 2019, order dated 15-7-2019
[38]Shailesh S. Shah v. Gautam Landscapes (P) Ltd., SLPs (C) Nos. 10232-233/2019
[39]Supra Note 17
[40]Supra Note 17
[41]Ibid
[42]Supra Note 37
[43]Supra Note 17
[44]Supra Note 28
[45]Supra Note 38
[46]Supra Note 37
[47]Supra Note 28
[48]Supra Note 17
[49]Supra Note 28
[50]Supra Note 17
[51]Supra Note 28
[52]Supra Note 17
[53]Supra Note 37
[54] 2020 SCC OnLine SC 183: (2020) 4 SCC 612
[55]Supra Note 15
[56]Supra Note 55
[57]Supra Note 15
[58]Supra Note 5
[59]Supra Note 7
[60]Supra Note 11
[61]Supra Note 17
[62]Supra Note 7
[63]Supra Note 28
[64]Ibid
[65]Supra Note 17
[66]Supra Note 28
[67]Supra Note 17
[68]Supra Note 28
[69]Supra Note 15
[70]Supra Note 28
[71]Supra Note 11
[72]Supra Note 28
[73]Supra Note 17
[74]Supra Note 39
[75]Supra Note 17
[76]Supra Note 7
[77]Supra Note 17
[78]Supra Note 28
[79]Supra Note 17
[80]Supra Note 37
[81]Supra Note 38