Damant Developer Pvt Ltd. Vs.BRYS Hotels Pvt. Ltd.
Facts of the case
The petitioner was willing for an appointment of an arbitrator under Section 11(6) of Arbitration and Conciliation Act,1996. The arbitration agreement between the parties under Clause 10(e) of an MOU dated to be 17th September 2016. The petitioner invoked the arbitration and referred the name of a retired Supreme Court judge as a sole arbitrator.
The petitioner contended that there is a valid arbitration agreement between the parties mentioned under Clause 10(e) dated 17th September 2016. However, the respondent constituted that under Clause 10 (e) on the date 17th September 2016 a valid arbitration agreement does not exist. The respondent also contended that an MOU renders services for specific performance and therefore no process of arbitration can take place for resolution of disputes. It was further contended the MOU date 17th September 2016 is a mandatory register document but neither did not register nor a requisite stamp duty has been paid. Thus, the document is liable to be impounded by the court and the document cannot be acted upon unless the stamp duty paid has been adequately paid.
The High Court of Delhi decided on the matter with the case, Sms Tea Estates Pvt. Ltd Vs. Chandmari Company private ltd. The Supreme Court held that arbitration agreement need not require registration under the Arbitration Act separately, an agreement that is unregistered but the mandatory registerable document can be acted upon and enforced.
Further, the High Court of Delhi referred various precedents similar to this case, with similar facts and circumstances and decide a judgment for the case, it was noticed that the Arbitration and Conciliation Act was amended on 23rd October 2015 by which several provisions of the Act was amended including Section 11(6A) of the Arbitration and Conciliation Act, the court has to confine to the existence of arbitration agreement only and the scope should not be beyond it. Further, the objections for insufficient non-stamping should not hamper the appointment of an arbitrator for resolving disputes between the parties and it is the arbitrator who decides the objections and exercise powers under Sec 33 and other provisions of the Stamp Act. The arbitration agreement is constituted at the time of entering into a contract where arbiter renders decisions based on the facts and circumstances and delivers justice for the aggrieved party. The decision of the arbitrator is binding on the parties.
Whether there was a valid arbitration agreement under Section 11(6A) of the Arbitration and Conciliation Act, 1996.
The judgment of the Court
High Court of Delhi held that, in the present case, there was an adequate arbitration agreement between the parties under Clause 10 (e) dated 17th September 2016. The petitioner has validly invoked the arbitration by a notice dated 27th September 2017. Under Sec 11(6A) of the Arbitration and Conciliation Act, 1996, the Court will confine to the existence of a valid arbitration agreement and other objection including the objection as to inadequate stamping will have to be considered by the arbitrator.
Brief on Sec 11(6A) of Arbitration and Conciliation Act
The 246th Law Commission report recommended the inserting on Se 11 (6A) which mentioned that the Court must refer the parties for arbitration and leaving the final determination of validity to the arbitrator.
 (2011) 14 SCC 66