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DAMONT DEVELOPERS PVT. LTD. vs BRYS HOTELS PVT. LTD.
Damont Developers Pvt. Ltd. vs Brys Hotels Pvt. Ltd., Order dated 07.03.2019
Damont Developers Pvt. Ltd Petitioner
Versus
Brys Hotels Pvt. Ltd. Respondent
FACTS
The Petitioner sought for the appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996. There existed an arbitration agreement between the parties. The arbitration provision was provided under Clause 10(e) of the MOU dated 17th September 2016. It was agreed by the parties that in case of any dispute, the Transferee had the right to appoint a neutral third party as an arbitrator and all the proceedings shall be in accordance with the provisions of the Arbitration and Conciliation Act, 1996.
On 27th September 2018, the Petitioner invoked the arbitration agreement and suggested the name of a retired Supreme Court Judge to act as a sole arbitrator of the dispute. On 3rd November 2018, the Respondent replied to the said notice and refused the appointment of an arbitrator. According to the Respondent, Clause 10(e) of the MOU does not constitute a valid arbitration agreement because the MOU provides a remedy of specific performance, therefore, no arbitration can be carried out for resolution of disputes. The Respondent also contended that the MOU containing the arbitration agreement was neither registered nor requisite stamp duty has been paid thus, the document is liable to be impounded by the Court.
ISSUES
- Whether an arbitration agreement contained in an unregistered (but compulsorily registerable) instrument is valid and enforceable?
- Whether insufficient stamping on the arbitration agreement makes the arbitration agreement invalid?
RULES
- SMS Tea Estates Private Ltd. v. Chandmari Tea Company Private Ltd.- In this case, the Supreme Court held that the registration of an arbitration agreement is not compulsory under the Registration Act. An arbitration agreement contained in an unregistered (but compulsorily registerable) instrument is valid and can be enforced for dispute resolution by arbitration.
- Section 11(6A) of the Arbitration and Conciliation Act, 1996- The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.
- Duro Felguera, S.A. v. Gangavaram Port Limited- In this case, the Supreme Court considered the judgments preceding the 2015 Amendment of Arbitration and Conciliation Act, 1996. The Supreme Court held that the Courts need to see that only an arbitration agreement exists, nothing more nothing less. The judgment also stated that the 2015 Amendment has confined the power of the Courts only to the examination of the existence of an arbitration agreement.
- Sandeep Soni v. Sanjay Roy- In this case, it was held that the objections of inadequately stamped documents cannot impede the appointment of an arbitrator and it is for the arbitrator to examine such issues under section 33 of the Stamp Act.
APPLICATION/ ANALYSIS
It is a well-settled law that the 2015 Amendment of the Arbitration and Conciliation Act, 1996 has narrowed the powers of the Supreme Court and the High Courts. Prior to the 2015 Amendment, the Chief Justice of India had been given the power to examine the preliminary issues regarding the arbitration agreement. Subsequent, to the Amendment the powers of the Court have been restricted, now all preliminary issues relating to the agreement have to be decided by the Arbitration Tribunal only. Therefore, it was held that the invocation of the arbitration agreement by the Petitioner is valid and the arbitration clause in the MOU is enforceable.
In view of the second issue, the Court agreed with the opinion laid down in the case of Sandeep Soni v Sanjay Roy. Thus, in the present case, it was held that the objections of inadequately stamped documents cannot impede the appointment of an arbitrator. There is no merit in the objections of the Respondent.
CONCLUSION
In the present case, it was held that there is a valid arbitration agreement between the parties contained in Clause 10(e) of the MOU dated 17th September 2016.
- Section 11(6A) of the Arbitration and Conciliation Act, 1996
- Arbitration agreement contained in an unregistered (but compulsorily registerable) instrument
- Insufficient stamping on the arbitration agreement
