INTERCONTINENTAL HOTELS GROUP (INDIA) PVT. LTD. & ANR. versus WATERLINE HOTELS PVT. LTD.

Citation: [2022] 13 S.C.R. 859 · Decided: 25-01-2022 · Supreme Court of India · Bench: N.V. RAMANA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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[2022] 13 S.C.R. 859
859
INTERCONTINENTAL HOTELS GROUP (INDIA)
PVT. LTD. & ANR.
v.
WATERLINE HOTELS PVT. LTD.
(Arbitration Petition No. 12 of 2019)
JANUARY 25, 2022
[N. V. RAMANA, CJI, SURYA KANT AND
HIMA KOHLI, JJ.]
Arbitration and Conciliation Act, 1996 – ss. 11(6), 11(12)(a)
& 16 – Appointment of Arbitrator – Karnataka Stamp Act – Stamp
Duty on Arbitration Agreement – Respondent, an Indian Company
engaged in hospitality sector, entered into a Hotel Management
Agreement (HMA) with Petitioners – HMA mandated that for the
renovation undertaken by the petitioners, respondent was
contractually bound to pay the fee to the petitioner as incentive
fees – As per the petitioner, respondent failed to pay the requisite
fee – Respondent via mail on 12.10.2018 terminated the HMA stating
that the Hotel was rebranded – Petitioner invoked the arbitration
clause provided under HMA – Aggrieved by the respondent’s denial
to appoint a suitable arbitrator, the petitioner have filed petition
for appointment of sole arbitrator – Respondent contended that the
Arbitration Agreement was an unstamped document and the
petitioners have not paid stamp duty under the Karnataka Stamp
Act – Held: Usually, issues of arbitrability/validity are matters to be
adjudicated upon by arbitrators – This Court, until the larger Bench
decides on the interplay between Sections 11(6) and 16, should
ensure that arbitrations are carried on, unless the issue before the
Court patently indicates existence of deadwood – The issues whether
the respondent is estopped from raising the contention of
unenforceability of the HMA or the issue whether the HMA is
insufficiently or incorrectly stamped, can be finally decided at a
later stage – The petitioners, have themselves attempted to self-
adjudicate the required stamp duty and have paid, a stamp duty of
Rs 2,200/-, describing the HMA as a “bond” and further purchased
11 e-stamps for Rs. 200/- each, describing the HMA as an
‘agreement’ under article 5(j) – From the above it is clear, that stamp
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SUPREME COURT REPORTS
[2022] 13 S.C.R.
duty has been paid, whether it be insufficient or appropriate is a
question that maybe answered at a later stage.
Allowing the petition, the Court
HELD: 1. The initial interpretation provided by this Court
to examine issues extensively, was recognized as being against
the pro-arbitration stance envisaged by the 1996 Act. Case by
case, Courts restricted themselves in occupying the space
provided for the arbitrators, in line with party autonomy that has
been reiterated by this Court in Vidya Drolia v. Durga Trading
Corporation, (2021) 2 SCC 1, which clearly expounds that Courts
had very limited jurisdiction under Section 11(6) of the Act. Courts
are to take a ‘prima facie’ view, as explained therein, on issues
relating to existence of the arbitration agreement. Usually, issues
of arbitrability/validity are matters to be adjudicated upon by
arbitrators. The only narrow exception carved out was that Courts
could adjudicate to ‘cut the deadwood’. Ultimately the Court held
that the watch word for the Courts is ‘when in doubt, do refer’.
However, this Court considered it appropriate to refer the issue
for authoritative settlement by a Constitution Bench in the light
of Vidya Drolia, citing the ratio in Garware Wall Ropes. Although
this Court agrees that there is a need to constitute a larger Bench
to settle the jurisprudence, this Court is also cognizant of time-
sensitivity when dealing with arbitration issues. All these matters
are still at a pre-appointment stage, and we cannot leave them
hanging until the larger Bench settles the issue. In view of the
same, this Court – until the larger Bench decides on the interplay
between Sections 11(6) and 16 – should ensure that arbitrations
are carried on, unless the issue before the Court patently indicates
existence of deadwood. [Paras 18, 20 & 22][868-H; 869-A-B;
871-F; 873-B]
2. Upon reading Vidya Drolia, the issue of ‘existence’ and/
or ‘validity’ of the arbitration clause, would not be needed to be
looked into herein, as payment of stamp duty, sufficient or
otherwise, has taken place herein. In order to ascertain whether
adequate stamp duty has been paid in terms of the Karnataka
Stamp Act, this Court needs to examine the nature of the
substantive agreement, the nature of the arbitration agreement,
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and whether a separate stamp fee would be payable for the
arbitration agreement at all. It may 

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