GARWARE WALL ROPES LTD. versus COASTAL MARINE CONSTRUCTIONS & ENGINEERING LTD.

Citation: [2019] 5 S.C.R. 579 · Decided: 10-04-2019 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Appeal(s) allowed

Cited by 9 judgment(s) · cites 9 · see the full citation network in Lexace

Judgment (excerpt)

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GARWARE WALL ROPES LTD.
v.
COASTAL MARINE CONSTRUCTIONS & ENGINEERING
LTD.
(Civil Appeal No. 3631 of 2019)
APRIL 10, 2019
[R. F. NARIMAN AND VINEET SARAN, JJ.]
Arbitration and Conciliation Act, 1996: s. 11(4), 11(6) and
11(6A) – Appointment of arbitrator – Arbitration clause contained
in a contract not stamped – Effect of – Held: When Supreme Court
or the High Court considers an application u/s. 11(4) to 11(6), and
comes across an arbitration clause in an agreement or conveyance
which is unstamped, the Court must impound the instrument which
is unstamped and hand it over to the authority under the Stamp Act,
who would decide issues qua payment of stamp duty and penalty as
expeditiously as possible, within the stipulated period – As soon as
stamp duty and penalty are paid on the instrument, any of the parties
can bring the instrument to the notice of the Court, which would
then dispose of the application u/s. 11 – Harmonious construction
is to be given to the provisions of the Stamp Act and s. 11(13) of the
1996 Act by which, if it is possible, both provisions ought to be
subserved – Furthermore, introduction of s. 11(6A) does not, in any
manner, deal with or get over the basis of the judgment in SMS Tea
Estates’s case that the mandatory provisions contained in the Stamp
Act are applicable to judicial authorities acting u/s. 11, continues
to apply even after the amendment of s. 11(6A) – On facts, the
arbitration clause contained in the sub-contract would not “exist”
as a matter of law until the sub-contract is duly stamped – Order
passed by the High Court allowing the application u/s. for
appointment of the arbitrator, to adjudicate upon the dispute, even
though the sub-contract was unstamped, is set aside and matter is
remitted back to the High Court – Maharashtra Stamp Act, 1958 –
ss. 33 and 34.
Allowing the appeal, the Court
HELD: 1.1 It will be noticed from the *SMS Tea Estates’
case that where an arbitration clause is contained in an agreement
   [2019] 5 S.C.R. 579
579
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SUPREME COURT REPORTS
[2019] 5 S.C.R.
or conveyance, different consequences ensue depending on
whether the agreement or conveyance is unregistered or
unstamped. It is settled by **SBP & Co.’s case that Section 16 of
the Arbitration and Conciliation Act, 1996 Act has full play only
after the arbitral tribunal is constituted, without intervention of
the Court under Section 11. In view of the law laid down by seven-
Judge Bench, it is difficult to accept the submission that Section
16 makes it clear that an arbitration agreement has an
independent existence of its own, and must be applied while
deciding an application under Section 11 of the 1996 Act. 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’s case. 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 case has taken account of the mandatory provisions
contained in the 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 clause in an agreement or conveyance which
is unstamped, it is enjoined by the provisions of the 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. 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. 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’s case, which continues to apply even after the amendment
of Section 11(6A). [Para 15, 16][602-G-H; 604-E-H; 605-A-D]
1.2 When an arbitration clause is contained “in a contract”,
it is significant that the agreement only becomes a contract if it is
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