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Analysis of the M/s Global Mercantile case
M/s Global Mercantile case
Facts of the case
Indo unique limited (“Indo Unique”) being the respondents within the matter were awarded a piece order for beneficiation/washing of coal by Karnataka Power Corporation Limited (“KPCL”). after, Indo unique entered into a sub-contract with the appellant, N.N. global Mercantile Pvt. Ltd. (“Global Mercantile”), for transportation of coal from its washery to the yard. In pursuance of the terms of the sub-contract, global Mercantile had additionally furnished a Bank Guarantee in favour of Indo unique to secure the stocks at the curtilage. However, on account of bound disputes between Indo unique and KPCL below the principal contract, KPCL invoked the bank guarantee furnished by Indo unique, in consequence to that, Indo unique, any invoked the bank guarantee furnished by global Mercantile below the sub-contract[1].
Decisions Of the Commercial Court and Also the Bombay High Court
Indo unique filed an application below Section eight of the Arbitration and Conciliation Act, 1996, because it was aggrieved of invocation of their bank guarantee, seeking reference of the dispute for arbitration. The Industrial Court had refused to refer the parties to the arbitration. Consequently, Indo unique filed a civil revision petition before the Bombay judicature challenging the Impugned Order glided by the commercial Court. The tribunal allowed the petition filed by Indo unique and put aside the order of the commercial court. The judicature of Bombay additionally opined that “On the difficulty of the arbitration agreement being unenforceable since it was unstamped, it absolutely was held that the plaintiff/ Appellant, might raise the problem either below Section eleven of the Arbitration Act or before the arbitral tribunal at the suitable stage”.
ISSUE BEFORE THE SUPREME COURT
Aggrieved by the order of the high court of Bombay, global Mercantile filed a special leave petition before the Supreme Court to adjudicate upon the problems on ‘Whether non-payment of taxation on industrial Contract can invalidate an Arbitration Agreement” and additionally ‘Whether the fallacious invocation of the Bank Guarantee is arbitrable’
FINDINGS OF THE SUPREME COURT
While considering the difficulty relating to the validity of an arbitration agreement in an unstamped agreement, the bench of the Apex Court extensively analysed 2 landmark judgments particularly SMS Tea Estates Pvt. Ltd v. M/s Chandmari Tea Co. Pvt. Ltd[2]. and Garware Wall Ropes Limited v. Coastal Marine Constructions and Engineering limited[3]. The Supreme Court overruled the decision it made in the case of in SMS Tea Estate with regard to the 2 contentious problems – (a) that an unstamped commercial contract can't be acted upon, or is rendered unenforceable in law; and (b) that an arbitration agreement would be invalid wherever the contract or instrument is revokable at the choice of a party, like u/s. nineteen of the Indian Contract Act, 1872[4].
The Court control that since the arbitration agreement is a freelance agreement between the parties, and isn't chargeable to payment of taxation, the non-payment of taxation on the industrial contract, wouldn't invalidate the arbitration clause, or render it unenforceable, since it's a freelance existence of its own. On the second issue, the Court processed that the allegations created by a party that the substantive contract has been obtained by coercion, fraud, or falsity must be tried by leading proof on the issue and might definitely be adjudicated through arbitration.
[1] CIVIL APPEAL NOS. 3802 - 3803 / 2020
[2] CIVIL APPEAL NO. 5820 OF 2011
[3] CIVIL APPEAL NO. 3631 OF 2019
[4] https://legislative.gov.in/sites/default/files/A1872-09.pdf
(This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, or Religion, Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts made to ensure the accuracy and correctness of the information published, White Code VIA Mediation and Arbitration Centre Foundation shall not be responsible for any errors caused due to human error or otherwise.)
- Indo unique filed an application below Section eight of the Arbitration and Conciliation Act, 1996
- it was aggrieved of invocation of their bank guarantee, seeking reference of the dispute for arbitration.
- Aggrieved by the order of the high court of Bombay, global Mercantile filed a special leave petition before the Supreme Court to adjudicate upon the problems
