1. This appeal is directed against the order and judgment dated 30th August, 2013 delivered by the learned Principal District Judge Thane allowing application filed by the respondents under section 9 of the Arbitration and Conciliation Act, 1996. The appellants have challenged the said orders on various grounds raised in the memorandum of appeal.
2. Mr.Madon learned senior counsel for the appellants however raises an issue of maintainability of application under section 9 of the Arbitration and Conciliation Act, 1996 itself filed by the respondents on the ground of the memorandum of understanding executed by and between the parties dated 6th August, 2008 being insufficiently stamped. Since both the learned senior counsel have addressed this court on this issue, without going into the other issues raised in the appeal memo and since decision on this issue will have bearing on the disposal of the appeal itself, I will deal with this issue raised by the appellants.
Some of the relevant facts for the purpose of deciding this issue are as under:-
3. It was case of the respondents herein (original applicants) in their application under section 9 of the Arbitration and Conciliation Act, 1996 that the appellants and the respondents entered into an agreement (MOU) in respect of the suit property by which the appellants granted the developments rights of the suit property inter alia to construct building on certain part of the said property and to obtain TDR in respect of certain area affected as road in development plan of Mira Bhayander Municipal Corporation and other rights in respect of the said property including right to sell the premises in such buildings to be constructed on the said property on the terms and conditions recorded in the said memorandum of understanding dated 6th November, 2008.
4. The appellants however disputed this contention on the part of the respondents and contended that no rights of any nature whatsoever was created by the appellants in favour of the respondents under the said MOU. The appellants however in their reply to the application under section 9 before the learned Principal District Judge opposed the said application on various grounds including the ground that the alleged memorandum of understanding dated 6th November 2008 could not be read in evidence for non payment of proper stamp duty and the same was also not registered with the office of Sub Registrar of Assurances.
5. Mr.Madon, learned Senior counsel for the appellants invited my attention to various part of pleadings filed by both parties and also the prima facie finding rendered by the learned Principal District Judge in order and judgment dated 30th August, 2013. It is submitted that the learned Principal District Judge has rendered a prima facie finding that the MOU dated 6th November, 2008 was not a bare agreement to execute another agreement or that simply it was an expression of the desire on the part of the respondents but it was a concluded contract to render services on the part of the respondents herein towards proposed development of the suit land. It is also held that the intention and purpose to execute full-fledged agreement as contemplated under clause 10 was for the purpose of earmarking the portions of the suit land and to demarcate the same for individual construction after apportionment of the FSI/TDR amongst both the parties. The Principal District Judge also gave a prima facie finding that the alleged MOU was a valid contract enforceable within the ambit of law.
6. Mr.Madon, learned senior counsel submits that though the appellants had raised a specific plea that such MOU was required to be stamped under schedule I of the Bombay Stamp Act and not having been stamped sufficiently and not having been registered, such document cannot be acted upon and thus no interim measures could be considered by the learned Principal District Judge in such application filed by the respondents herein under section 9 of the Arbitration and Conciliation Act, 1996, the learned principal District Judge did not decide this crucial issue in the impugned order and judgment and granted interim measures.
7. Learned senior counsel submits that the learned Principal District Judge having accepted the submission of the respondents herein that the said MOU was not a bare agreement to execute another agreement but was a concluded contract to render services on the part of the respondents herein towards the proposed development of the suit lands and the intention and purpose to execute the full-fledged agreement as contemplated under clause 10 was for the purpose of earmarking the portion of the suit land and to demarcate the same for individual construction after apportion of the FSI/TDR, the learned Principal District Judge could not have granted any interim measures and ought to have impounded the said documents and ought to have referred the document for adjudication for the purpose of payment of proper stamp duty and penalty.
8. Mr.Madon, learned senior counsel placed reliance on the judgment of Supreme Court in case of SMS Tea Estates Private Limited vs. Chandmari Tea Company Private Limited (2011) 14 SCC 66 in support of the submission that since the MOU attracted the payment of stamp duty under article 5(g-a) of Schedule I of the Bombay Stamps Act and the document not having been duly stamped, the Principal District Judge could not act upon such agreement including the arbitration agreement forming part of such agreement. Paragraph 3, 7, 8, 9, 17 to 22.6 of the said judgment read thus :
â3. Prior to the execution of the said lease deed, on 29.11.2006 the Respondent had offered to sell the two Tea estates to the Appellant for a consideration of Rupees four crores. The Appellant agreed to purchase them subject to detailed verification. The Appellant wrote a letter dated 27.6.2007 to the Respondent agreeing to purchase the said two Tea estates.
7. The Respondent denied that they had agreed to sell the two tea estates to the Respondent for a consideration of Rupees four crores. The Appellant also denied that the Respondent had invested any amount in the tea estates. It contended that as the lease deed itself was invalid, the Appellant could not claim appointment of an arbitrator under the arbitration agreement forming part of the said deed.
8. The learned Chief Justice of Guwahati High Court dismissed the Appellant's application by order dated 28.5.2010. He held that the lease deed was compulsorily registrable under Section 17 of the Registration Act and Section 106 of the TP Act; and as the lease deed was not registered, no term in the said lease deed could be relied upon for any purpose and therefore Clause 35 could not be relied upon for seeking reference to arbitration. The High Court also held that the arbitration agreement contained in Clause 35 could not be termed as a collateral transaction, and therefore, the proviso to Section 49 of the Registration Act would not assist the Appellant. The said order is challenged in this appeal by special leave.
9. On the contentions urged the following questions arise for consideration:
(i) Whether an arbitration agreement contained in an unregistered (but compulsorily registrable) instrument is valid and enforceable?
(ii) Whether an arbitration agreement in an unregistered instrument which is not duly stamped, is valid and enforceable?
(iii) Whether there is an arbitration agreement between the Appellant and Respondent and whether an Arbitrator should be appointed?
17. What if an arbitration agreement is contained in an unregistered (but compulsorily registrable) instrument which is not duly stamped? To find an answer, it may be necessary to refer to the provisions of the Indian Stamp Act, 1899 ('Stamp Act' for short). Section 33 of the Stamp Act relates to examination and impounding of instruments. The relevant portion thereof is extracted below:
â33. Examination and impounding of instruments.-
(1) Every person having by law or consent of parties authority to receive evidence, and every person in charge of a pubic office, except an officer of police, before whom any instrument, chargeable, in his opinion, with duty, is produced or comes in the performance of his functions, shall, if it appears to him that such instrument is not dull stamped, impound the same.
(2) For that purpose every such person shall examine every instrument so chargeable and so produced or coming before him in order to ascertain whether it is stamped with a stamp of the value and description required by the law in force in India when such instrument was executed or first executed:â
18. Section 35 of Stamp Act provides that instruments not duly stamped is inadmissible in evidence and cannot be acted upon. The relevant portion of the said section is extracted below:
â35. Instruments not duly stamped inadmissible in evidence, etc. -- No instrument chargeable with duty shall be admitted in evidence for any purpose by any person having by law or consent of parties authority to receive evidence, or shall be acted upon, registered or authenticated by any such person or by any public officer, unless such instrument is duly stamped:
Provided that--
(a) any such instrument shall be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion.â
19. Having regard to Section 35 of Stamp Act, unless the stamp duty and penalty due in respect of the instrument is paid, the court cannot act upon the instrument, which means that it cannot act upon the arbitration agreement also which is part of the instrument. Section 35 of Stamp Act is distinct and different from Section 49 of Registration Act in regard to an unregistered document. Section 35 of Stamp Act, does not contain a proviso like to Section 49 of Registration Act enabling the instrument to be used to establish a collateral transaction.
20. The scheme for appointment of arbitrators by the Chief Justice of Guwahati High Court 1996 requires an application under Section 11 of the Act to be accompanied by the original arbitration agreement or a duly certified copy thereof. In fact, such a requirement is found in the scheme/rules of almost all the High Courts. If what is produced is a certified copy of the agreement/contract/instrument containing the arbitration clause, it should disclose the stamp duty that has been paid on the original. Section 33 casts a duty upon every court, that is a person having by law authority to receive evidence (as also every arbitrator who is a person having by consent of parties, authority to receive evidence)before whom an unregistered instrument chargeable with duty is produced, to examine the instrument in order to ascertain whether it is duly stamped. If the court comes to the conclusion that the instrument is not duly stamped, it has to impound the document and deal with it as per Section 38 of the Stamp Act.
21. Therefore, when a lease deed or any other instrument is relied upon as contending the arbitration agreement, the court should consider at the outset, whether an objection in that behalf is raised or not, whether the document is properly stamped. If it comes to the conclusion that it is not properly stamped, it should be impounded and dealt with in the manner specified in Section 38 of Stamp Act. The court cannot act upon such a document or the arbitration clause therein. But if the deficit duty and penalty is paid in the manner set out in Section 35 or Section 40 of the Stamp Act, the document can be acted upon or admitted in evidence.
22. We may therefore sum up the procedure to be adopted where the arbitration clause is contained in a document which is not registered (but compulsorily registrable) and which is not duly stamped:
22.1. The court should, before admitting any document into evidence or acting upon such document, examine whether the instrument/document is duly stamped and whether it is an instrument which is compulsorily registrable.
22.2. If the document is found to be not duly stamped, Section 35 of Stamp Act bars the said document being acted upon. Consequently, even the arbitration clause therein cannot be acted upon. The court should then proceed to impound the document under Section 33 of the Stamp Act and follow the procedure under Section 35 and 38 of the Stamp Act.
22.3. If the document is found to be duly stamped, or if the deficit stamp duty and penalty is paid, either before the Court or before the Collector (as contemplated in Section 35 or 40 of the Stamp Act), and the defect with reference to deficit stamp is cured, the court may treat the document as duly stamped.
22.4. Once the document is found to be duly stamped, the court shall proceed to consider whether the document is compulsorily registrable. If the document is found to be not compulsorily registrable, the court can act upon the arbitration agreement, without any impediment.
22.5. If the document is not registered, but is compulsorily registrable, having regard to Section 16(1)(a) of the Act, the court can de-link the arbitration agreement from the main document, as an agreement independent of the other terms of the document, even if the document itself cannot in any way affect the property or cannot be received as evidence of any transaction affecting such property. The only exception is where the Respondent in the application demonstrates that the arbitration agreement is also void and unenforceable, as pointed out in para 8 above. If the Respondent raises any objection that the arbitration agreement was invalid, the court will consider the said objection before proceeding to appoint an arbitrator.
22.6. Where the document is compulsorily registrable, but is not registered, but the arbitration agreement is valid and separable, what is required to be borne in mind is that the Arbitrator appointed in such a matter cannot rely upon the unregistered instrument except for two purposes, that is (a) as evidence of contract in a claim for specific performance and (b) as evidence of any collateral transaction which does not require registration.â
9. Mr.Madon, learned senior counsel also placed reliance on the order and judgment of the Division Bench of this court delivered on 25th June, 2013 in Appeal (L) No. 272 of 2013 in case of Lakadawala Developers Pvt. Ltd. Vs. Badal Mittal and Ors., Paragraph 1 to 6 of the said order/judgment read thus :
â1. At the hearing of the application under Section 9 of the Arbitration and Conciliation Act, 1996, an objection was raised on behalf of the Appellant on the ground that the Memorandum of Understanding (MOU) dated 29 July 2011 was insufficiently stamped and that in consequence, the document could not be acted upon unless the stamp duty and penalty, if any, payable thereon was adjudicated upon. Reliance was placed on the decision of the Supreme Court in SMS Tea Estates Pvt. Ltd. Vs. Chandmari Tea Co. Pvt.Ltd., 2011(4)-Arb.L.R. - 265(S.C.) - At paragraphs 10 and 11 where the Supreme Court held as follows :
"10. ... ... ... ... ⦠... ... ... ... â¦
xxx xxx xxx
Having regard to Section 35 of the Stamp Act, unless the stamp duty and penalty due in respect of the instrument is paid, the court cannot act upon the instrument, which means that it cannot act upon the arbitration agreement also which is part of the instrument. ... ... ... ..."
"11. ... ... ... ... Therefore, when a lease deed or any other instrument is relied upon as contending the arbitration agreement, the court should consider at the outset, whether an objection in that behalf is raised or not, whether the document is properly stamped. If it comes to the conclusion that it is not properly stamped, it should be impounded and dealt with in the manner specified in Section 38 of the Stamp Act. The court cannot act upon such a document or the arbitration clause therein. But if the deficit duty and penalty is paid in the manner set out in Section 35 or Section 40 of the Stamp Act, the document can be acted upon or admitted in evidence."
2. The learned Single Judge in the judgment which is impugned in appeal held that the question as to whether the MOU was insufficiently stamped, could be decided in the arbitral proceedings before the arbitrator and the arbitration agreement could be delinked from the other provisions of the MOU so as to enable the Court to grant interim measures. This view of the learned Single Judge is prima facie contrary to the judgment of the Supreme Court.
3. On behalf of the Respondents it has been submitted that the MOU dated 29 July 2011 contemplates in Clause-15 that parties would enter into a final agreement with respect to the development and construction of the rehabilitation and free sale buildings for each part of each phase of the property. Hence, it has been urged by the learned counsel for the Respondents that the stamp duty would be payable only on the execution of the final agreement for each phase.
4. The agreement between the parties which is contained in the MOU dated 29 July 2011, prima facie, does contemplate that the Respondents will finance the construction of and construct the rehabilitation and free sale buildings on the property in question. In consideration thereof, Clause-4 stipulates that the Appellant would hand over to the Respondents a certain proportion of the constructed area of the free sale buildings. Clause-6 required the Respondents to pay a sum of Rs.1.50 crores to the Appellant to enable the Appellant to finance transit accommodation for the slum dwellers which was payable every month on and from 1 April 2011 till the completion of the development of the entire property. In the event of default on the part of the Respondents in making the said payment, the Appellant was required to repay the entire amount received and the cost of construction incurred by the Respondents on the property till the date of default. Clause-11 of the MOU cast specific obligations on the Respondents to construct the rehabilitation and free sale buildings; work being required to be commenced after requisite permissions were received. The construction was required to be completed within 36 months after receipt of requisite permissions for each building.
5. The objection in regard to the document being insufficiently stamped ought to have been considered by the learned Single Judge when the document came before the Court in the course of the proceedings under Section 9. A consideration of the issue could not have been deferred to the arbitration proceedings having regard to the provisions of Section 33(1) of the Bombay Stamp Act, 1958. Article 5(ga) of the Schedule relates to the stamp duty payable on an agreement or MOU where it relates to giving authority or power to a promoter or a developer by whatever name called for construction on, development of or sale or transfer (in any manner whatsoever) of any immovable property. Prima facie, the document would require stamping and has been insufficiently stamped having regard to the provisions of Article 5(ga) of the Schedule to the Bombay Stamp Act, 1958.
6. In the circumstances, we pass the following order:
(i) The MOU dated 29 July 2011 (Exhibit-D) is impounded. An authenticated copy of the MOU shall be forwarded by the Prothonotary and Senior Master to the Collector of Stamps, Mumbai Suburban District, for adjudication of the stamp duty and penalty, if any, payable on the document under the provisions of the Bombay Stamp Act, 1958;
(ii) The Collector of Stamps, Mumbai Suburban District shall expedite the determination in terms of clause (i) above and complete the exercise within a period of four weeks of the receipt of a duly authenticated copy of the document together with an authenticated copy of this order from the Prothonotary and Senior Master;
(iii) Pending further orders, the direction contained in the impugned order of the learned Single Judge dated 29 April 2013 shall remain stayed;
(iv) The further hearing of the appeal shall stand over to 19 August 2013.â
10. Mr.Jahagirdar, learned senior counsel for the respondents herein submits that under section 9 of the Arbitration and Conciliation Act, court does not act on any part of the contract entered into between the parties but exercises independent power to grant interim measures. It is submitted by the learned senior counsel that the requisite conditions of section 11 for appointment of an arbitrator cannot be applied to the powers of court under section 9 and if such requirement is extended to application under section 9, the very purpose of section 9 would be frustrated. It is submitted that even if the proper stamp duty is not paid on the document containing arbitration agreement, application filed under section 9 of the Arbitration and Conciliation Act, 1996 would be still maintainable. Mr.Jahagirdar learned senior counsel placed reliance on the judgment of Supreme Court in case of Ashok Traders (Firm) and Another vs. Gurumukh Das Sanuja and others AIR 2004 SC 1433. Reliance is placed on paragraphs 6, 13 and 17. It is submitted by the learned senior counsel that the supreme court after considering the provisions under section 69 (2) of the Indian Partnership Act, 1932 which provides for effect of non registration of a partnership firm has held that an unregistered partnership firm is not prevented from filing an application under section 9 of the Arbitration and Conciliation Act, 1996. The court while granting interim measures has to prima facie come to the conclusion that the arbitration agreement exist between the parties. Court has to see that the applicant has locus standi to file such application and is party to an arbitration agreement. Paragraphs 6, 13 and 17 of the said judgment in case of Ashok Traders (supra) reads thus:-
6. Disputes arose giving rise to complaints by the members of Group 'A' complaining of the violation of their rights as partners at the hands of Group 'B'. Group 'A' complained of their being denied access to accounts of Group 'B' indulging in mismanagement of affairs and siphoning off of the funds and so on. Ajay Arora (of Group "A") filed a civil suit which was held to be not-maintainable in view of Section 69(3) of the Indian Partnership Act, 1932; the name of Ajay Arora having not been shown in the Register of Firms as a partner of the firm. According to Group "A", a notice was issued on 2.6.2003 to the other partners invoking the arbitration clause and calling upon them to join in the appointment of arbitrator/s consistently with the arbitration clause so as to adjudicate upon the disputes between the partners. The contesting respondents do not admit the receipt of the notice. On 22.7.2003, Gurumukh Das Saluja of Group "A" filed an application under Section 9 of The Arbitration and Conciliation Act, 1996 wherein the principal relief sought for is the appointment of a receiver under Section 9(ii)(d) of the Act to take charge of the entire business of the firm. Other incidental injunctions are also sought for. Group "B" contested the application on very many grounds and mainly by submitting that the application was not maintainable in view of the bar enacted by Section 69(3) of the Partnership Act as the name of the applicant does not figure in the Register of Firms as partner of the firm. The plea has prevailed with the learned Additional District Judge resulting in dismissal of the application. Gurumukh Das Saluja preferred an appeal before the High Court under Section 37(1) (a) of the A and C Act. During the pendency of the appeal an application under Section 9 pleading similar facts and seeking similar reliefs, as was done before the Trial Court, was filed. Group "8" contested the application on all possible grounds. The factum of Group "A" being partners of the firm so far as the contract for the year 2003-04 is concerned was vehemently denied. It was reiterated that the application was hit by Section 69(3) of the Partnership Act and hence was liable to be dismissed. The High Court has allowed the appeal. It has held that the applicability of Section 69(3) is not attracted to an application under Section 9 of A and C Act. But on merits the High Court has found substance in the grievance raised by Group "A". The High Court has also held that the business in the year 2003-04 was continuing under the Partnership Deed dated 5.3.2002, i.e., Partnership - II; and that prima facie the existence of the Partnership Deed dated 6.3.2003 (Partnership - III) was doubtful and accompanied by suspicious circumstances raising doubts about the genuineness of any new partnership having come into existence on 6.3.2003 superseding the Partnership -II. The High Court seems to have made efforts at resolving the controversy and finding out at least some such solution as would take care of the disputes for the moment and protect the interests of all the parties and then concluded as under:-
"Various options were explored at the time of hearing of the appeal. It was suggested that the Excise Commissioner may be appointed as a receiver. But that does not appear to be feasible. Further, the running of liquor business requires an expertise of its own and as such it would not be proper to entrust the management of the business to third person who might not be aware of its Intricacies. Therefore, it would be proper that the partners themselves should manage the business as receivers. It is found that the contesting respondents No. 2, 6 and 7 have run this business in March, 2003 and also from 1.4.2003 and they are still doing so. The present liquor contract is upto 31.3.2004. It would be proper to appoint the respondents No. 2, 6 and 7 to continue to run this business as receivers subject to their complying with the provisions given in Order 40 Rules 1 to 4 CPC. They shall submit their accounts before the court in which the application under section 9 of the Act was considered i.e. Court of Vth Additional District Judge, Bhopal. Further, from 1.1.2004 it would be just and equitable to entrust the management and running, of the business by the appellant* and the respondents No. 8 and 9* who together have 20% share in the firm. therefore, they are appointed as receivers from 1.1.2004 to 31,3.2004 and they will take over the management of the business of this firm as receivers from that date. The other respondents will hand over the management of the business of this firm to them from 1.1.2004. The appellant and respondents No. 8 and 9 will submit full accounts to the court of Vth Additional District Judge, Bhopal every month and will abide by the Order 40 Rules 1 to 4 CPC. In case of any difficulty the parties will be free to approach the court of Vth Additional District Judge, Bhopal for necessary orders. The Court of Vth Additional District Judge, Bhopal will monitor the functioning of the receivers and issue necessary directions from time to time. This direction is as per decision of the Supreme Court in V.T. Sipahimalani v. Kanta MANU/SC/0067/2000 : (2000)2SCC498 . The Applicant will take steps for the appointment of arbitrator as early as possible. This direction is being given as per decision of Supreme court in Sundaram Finance Ltd. v. NEPC India Ltd. MANU/SC/0012/1999 : [1999]1SCR89.
13. The A and C Act, 1996 is a long leap in the direction of alternate dispute resolution systems. It is based on UNCITRAL Model. The decided cases under the preceding Act of 1940 have to be applied with caution for determining the issues arising for decision under the new Act. An application under Section 9 under the scheme of A and C Act is not a suit. Undoubtedly, such application results in initiation of civil proceedings but can it be said that a party filing an application under Section 9 of the Act is enforcing a right arising from a contract? "Party" is defined in Clause (h) of Sub-section (1) of Section 2 of A and C Act to mean a party to an arbitration agreement'. So, the right conferred by Section 9 is on a party to an arbitration agreement. The time or the stage for invoking the jurisdiction of Court under Section 9 can be (i) before, or (ii) during arbitral proceedings, or (iii) at any time after the making of the arbitral award but before it is enforced in accordance with Section 36. With the pronouncement of this Court in Sundaram Finance Ltd. v. NEPC India Ltd . - MANU/SC/0012/1999 : [1999]1SCR89 the doubts stand cleared and set at rest and it is not necessary that arbitral proceedings must be pending or at least a notice invoking arbitration clause must have been issued before an application under Section 9 is filed. A little later we will revert again to this topic. For the moment suffice it to say that the right conferred by Section 9 cannot be said to be one arising out of a contract. The qualification which the person invoking jurisdiction of the Court under Section 9 must possess is of being a "party' to an arbitration agreement, A person not party to an arbitration agreement cannot enter the Court for protection under Section 9. This has relevance only to his locus standi as an applicant. This has nothing to do with the relief which is sought for from the Court or the right which is sought to be canvassed in support of the relief. The reliefs which the Court may allow to a party under Clauses (i) and (ii) of Section 9 flow from the power vesting in the Court exercisable by reference to 'contemplated', 'pending' or 'completed' arbitral proceedings. The Court is conferred with the same power for making the specified orders as it has for the purpose of and in relation to any proceedings before it though the venue of the proceedings in relation to which the power under Section 9 is sought to be exercised is the arbitral tribunal. Under the scheme of A and C Act, the arbitration clause is separable from other clauses of the Partnership Deed. The arbitration clause constitutes an agreement by itself. In short, filing of an application by a party by virtue of its being a party to an arbitration agreement is for securing a relief which the Court has power to grant before, during or after arbitral proceedings by virtue of Section 9 of the A and C Act. The relief sought for in an application under Section 9 of A and C Act is neither in a suit nor a right arising from a contract. The right arising from the partnership deed or conferred by the Partnership Act is being enforced in the arbitral tribunal; the Court under Section 9 is only formulating interim measures so as to protect the right under adjudication before the arbitral tribunal from being frustrated. Section 69 of the Partnership Act has no bearing on the right of a party to an arbitration clause to file an application under Section 9 of A and C Act.
17. There are two other factors which are weighing heavily with us and which we proceed to record. As per the law laid 'down by this Court in M/s. Sundaram Finance Ltd. An application under Section 9 seeking interim relief is maintainable even before commencement of arbitral proceedings. What does that mean? In M/s. Sundaram Finance Ltd., itself the Court has said :
It is true that when an application under Section 9 is filed before the commencement of the arbitral proceedings there has to be manifest intention on the part of the applicant to take recourse to the arbitral proceedings.
Section 9 permits application being filed in the Court before the commencement of the arbitral proceedings but the provision does not give any indication of how much before. The word 'before' means, inter alia, "ahead of; in presence or sight of; under the consideration or cognizance of. The two events sought to be interconnected by use of the term 'before' must have proximity of relationship by reference to occurrence; the later event proximately following the preceding event as a foreseeable or 'within sight' certainty. The party invoking Section 9 may not have actually commenced the arbitral proceedings but must be able to satisfy the Court that the arbitral proceedings are actually contemplated or manifestly intended (as M/s Sundaram Finance Ltd. puts it) and are positively going to commence within a reasonable time. What is a reasonable time will depend on the facts and circumstances of each case and the nature of Interim relief sought for would itself give an indication thereof. The distance of time must not be such as would destroy the proximity of relationship of the two events between which it exists and elapses. The purpose of enacting Section 9, read in the light of the Model Law and UNCITRAL Rules is to provide 'interim measures of protection'. The order passed by the Court should fall within the meaning of the expression 'an interim measure of protection' as distinguished from an all-time or permanent protection.
11. Without prejudice to this submission, Mr.Jahagirdar learned senior counsel submits that if clauses 6, 9, 10 and 15 of the MOU are considered, it would be clear that the stage for payment of stamp duty had not arisen and only when the possession was earmarked, further agreement was to be executed and at that stage it would have attracted payment of stamp duty on execution of such further document.
12. By a separate order passed by this court in arbitration petition no.9 of 2013 filed by the respondents herein under section 11 of the Arbitration and Conciliation Act, 1996, it is prima facie held that the said document required payment of stamp duty under Article 5(g-a) of Schedule I of the Bombay Stamp Act, 1958 and the said document is impounded. By the said order, the registrar of this court has been directed to send a certified copy of the said document to the Collector of Stamp, Thane for adjudication of stamp duty and penalty.
13. In my view the respondents herein having taken a stand that the said MOU was not a bare agreement to enter into another agreement but had been created rights in favour of the respondents for development on the suit plot and to sell the premises, respondents cannot be permitted to take a stand now that the said document did not create any right at this stage and the stamp duty could have been attracted only in future on happening of certain eventualities. In case any further instrument is executed in future in furtherance of the MOU, respondents can pay the difference of stamp duty payable by the respondents on such document. The respondents have not impugned the findings of the learned Principal District Judge on this issue.
14. On perusal of the memorandum of understanding I am of the prima facie view that the said instrument is required to be stamped under Article 5(g-a) of Schedule 1 of Bombay Stamps Act, 1958. Though the appellants had specifically raised this issue before the learned Principal District Judge in the affidavit in reply filed opposing application under section 9, a perusal of the order and judgment of the learned Principal District Judge clearly indicates that this issue raised by the appellants has not been considered at all in the impugned order and judgment. Supreme Court in case of SMS Tea Estates Private Limited (supra) has after construing section 33 and 35 of the Stamp Act which are in pari-materia with section 33 and 34 of the Bombay Stamp Act, 1958 has held that unless the stamp duty and penalty due in respect of a instrument is paid, the court cannot act upon such instrument and held that it cannot act upon the arbitration agreement also which is the part of the instrument. It is held that when such document is relied upon as containing the arbitration agreement, the court should consider at the outset though an objection in that regard is raised or not whether the document is properly stamped and if it comes to the conclusion that it is not properly stamped, it should be impounded and dealt with in the manner specified in section 38 of the Stamp Act. The court cannot act upon such a document or the arbitration clause therein.
15. Division Bench of this court in case of Lakdawala Developers Pvt. Ltd. (supra) after adverting to the judgment of Supreme Court in case of SMS Tea Estates Private Limited (supra), in the appeal arising out of an order passed by the learned Single Judge in arbitration petition filed under section 9 of the Arbitration and Conciliation Act, 1996 after considering similar provisions in the memorandum of understanding held that the objection with regard to the document being insufficiently stamped ought to have been considered by the learned Single Judge when the document came before the court in the course of the proceedings under section 9 and such issue could not have been deferred to the arbitration proceedings having regard to the provisions of section 33(1) of the Bombay Stamps Act, 1958. Division Bench has also held that article (g-a) of the schedule I relates to giving authority or power to a promoter or a developer by whatever name called for construction of, development of, or sale or transfer in any manner whatsoever of any immoveable property. The Division Bench passed an order for impounding of the memorandum of understanding and directed the Prothonotary and Senior Mater of Collector of Stamp to adjudication of the stamp duty and penalty if any payable on the document under the provisions of the Bombay Stamps Act, 1958. The Division Bench stayed the operation of the directions contained in the order passed by the learned Single Judge till then. In my view both these judgments are squarely applicable to the facts of this case.
16. In so far as judgment of the Supreme Court in case of Firm Ashok Traders (supra) relied upon by Mr.Jahagirdar, learned senior counsel is concerned, the Supreme Court has considered the provisions of section 69 of the Indian Partnership Act while considering an maintainability of an application under section 9 of the Arbitration and Conciliation Act, 1996. It is held by the Supreme Court that under the scheme of the Arbitration and Conciliation Act, the arbitration clause is separable from other clauses of the partnership deed. Section 69 of the Partnership Act has no bearing on the right of a party to an arbitration clause to file an application under section 9 of the Arbitration and Conciliation Act, 1996. It is held that the right conferred by section 9 cannot said to be one arising out of a contract. In the said judgment the Supreme Court has held that an application under section 9 under the scheme of the Arbitration and Conciliation Act, 1996 is not a suit.
17. On conjoint reading of section 69 of the Indian Partnership Act with section 33 and 34 of the Bombay Stamps Act makes it clear that effect of non registration of a partnership firm would be on the suit to enforce a right arising from a contract or conferred by the Indian Partnership Act filed on or behalf of any person showing as a partner in a firm against the firm or any person alleged to be or have been a partner in the firm however there is a complete bar under sections 33 and 34 of the Bombay Stamps Act from admitting an insufficiently stamped instrument in evidence or even acted upon by any public officer or any authority empower to receive such document in evidence.
18. Be that as it may, the Supreme Court in case of SMS Tea Estates Private Limited (supra) which judgment is delivered at subsequent point of time has interpreted the provisions of Stamp Act which are in pari-materia with sections 33 and 34 of the Bombay Stamp Act and has held that insufficiently paid instrument cannot be acted upon by the court including the arbitration agreement. Division Bench of this court has specifically held that single judge while hearing application under section 9 of the Arbitration and Conciliation Act has to consider whether such an instrument containing arbitration agreement attracts payment of stamp duty and if so whether it is sufficiently paid and if not paid shall impound such document. I am respectfully bound by the judgment of the Supreme Court in case of SMS Tea Estates Private Limited (supra) and order and judgment of Division Bench of this court which is taken after adverting to the judgment of Supreme Court in case of SMS Tea Estates Private Limited (supra) and dealing with sections 33 and 34 of the Bombay Stamps Act while dealing with an application under section 9 of the Arbitration and Conciliation Act, 1996. In my view the judgment of Supreme Court in case of Firm Ashok Traders (supra) is clearly distinguishable and is of no assistance to the respondents.
19. In my view the memorandum of understanding attracted payment of stamp duty under Article 5(g-a) of Schedule I of Bombay Stamp Act and thus the learned Principal District Judge ought to have considered this issue and ought to have impounded the instrument and should have issued directions for adjudication of the instrument for the purpose of payment of stamp duty and penalty. Till such process was over, the learned Principal District Judge could not have acted upon such instrument including the arbitration agreement. Though this issue was raised specifically by the appellants in the affidavit in reply, the same has not been considered by the learned Principal District Judge.
20. Since I am inclined to allow this appeal on the ground that the instrument containing arbitration agreement is insufficiently stamped and thus the learned Principal District Judge could not have acted upon such instrument and could not have granted interim measures under section 9 of the Arbitration and Conciliation Act, 1996, I need not deal with the other issues raised in the memorandum of appeal. I therefore pass the following order:-
(a) Arbitration Appeal No.45 of 2013 is allowed.
(b) Order dated 30th August, 2013 passed by the learned Principal District Judge in Civil Misc. Application No.21 of 2013 is set aside. Civil Misc. Application No.21 of 2013 filed by the respondents is dismissed.
(c) The respondents would be at liberty to seek interim measures after adjudication of the stamp duty and penalty by the Collector of Stamps, Thane and after such payment is effected by the respondents. If any such application is made by the respondents under section 9 for interim measures after the instrument is sufficiently stamped and penalty is paid, the learned District Judge shall dispose of such application for interim measures on its own merits.
(d) In view of the disposal of the arbitration appeal, Civil Application No.41 of 2013 does not survive and is accordingly disposed of.
(e) There shall be no order as to costs.
On the oral application made by the learned counsel appearing for the respondents, order passed by the learned Principal District Judge in Civil Misc. Application No. 21 of 2013 is continued for a period of six weeks from today.