Advocate Jainendra Kumar Ojha

13/12/2023

A seven-judge bench of the Hon'ble Supreme Court of India on Wednesday (December 13) ruled that arbitration clauses in unstamped or inadequately stamped agreements are enforceable. Insufficiency of stamping does not make the agreement void or unenforceable but makes it inadmissible in evidence. However, it is a curable defect as per the Indian Stamp Act, the Court pointed out.

The Court overruled the judgment rendered by a 5-judge bench in April this year in M/s. N.N. Global Mercantile Pvt. Ltd. v. M/s. Indo Unique Flame Ltd. And Ors which had by a 3:2 majority held that unstamped arbitration agreements are not enforceable.

The bench comprising Chief Justice of India DY Chandrachud, Justice Sanjay Kishan Kaul, Justice Sanjiv Khanna, Justice B R Gavai, Justice Surya Kant, Justice JB Pardiwala, and Justice Manoj Misra passed the judgement in the case In Re Interplay Between Arbitration Agreements Under The Arbitration And Conciliation Act 1996 And The Indian Stamp Act 1899.

Conclusions :

CJI DY Chandrachud read out the conclusions of the judgment as follows :

a. Agreements which are not stamped or inadequately stamped are not void ab initio or unenforceable, they are inadmissible in evidence.

b. Non-stamping or inadequate stamping is a curable defect.

c. An objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The concerned court must examine if an arbitration agreement prima facie exists.

d. Any objection in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal.

e. The decision in NN Global 2 and SMS Tea Estates are overruled.

CJI Chandrachud in his judgment pointed out that one of the objectives of the Arbitration and Conciliation Act is to minimise the supervisory role of courts in arbitration contracts. Obligating the Court to decide the issue of stamping under S 8 and 11 will defeat the purpose of the legislation.

Justice Sanjiv Khanna wrote a concurring opinion stating that unstamped agreements are not rendered void or void ab initio.

Background :
The 7-judge bench case arose out of a curative petition filed against its 2020 ruling in Bhaskar Raju and Brothers and Anr V. s Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram & Other Charities and Ors. While hearing the curative plea, a 5-judge bench referred the matter to a 7-judge bench in September this year to revisit the correctness of NN Global.
In 2020, the Supreme Court, in the case Bhaskar Raju and Brothers and Anr V. s Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram & Other Charities and Ors had observed that an arbitration clause in an agreement which is required to be duly stamped, if not sufficiently stamped, cannot be acted upon by the Court.

In the said case, one of the parties to the agreement filed a petition under Section 11(6) of the Arbitration Act before the High Court of Karnataka. The other party, entered appearance and contended that the lease deed being insufficiently stamped had to be mandatorily impounded under Section 33 of the Karnataka Stamp Act, 1957 and it could not be relied upon unless proper duty and penalty was paid. However, the High Court invoked the power under Section 11(6) of the Act, and appointed an Arbitrator to decide the dispute between the parties.

In appeal, the Apex Court bench comprising of then CJI SA Bobde, Justices BR Gavai and Surya Kant noted that admittedly, both the lease deeds are neither registered nor sufficiently stamped as required under the Karnataka Stamp Act, 1957. The bench had relied upon SMS Tea Estates Private Limited vs. Chandmari Tea Company Private Limited.

In April, a Constitution Bench of the Supreme Court by 3:2 majority had held that arbitration agreement in unstamped contract is unenforceable.

On July 18 this year, the 5-judge bench issued notice in the curative petition filed against the 2020 judgment in Bhaskar Raju and Brothers and Anr V. s Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram & Other Charities and Ors. While hearing the curative petition, the validity of the judgment delivered by a 5-judge bench in the case of M/s. N.N. Global Mercantile Pvt. Ltd. v. M/s. Indo Unique Flame Ltd. And Ors arose for consideration.

In NN Global, a Bench comprising Justice K.M. Joseph, Justice Ajay Rastogi, Justice Aniruddha Bose, Justice Hrishikesh Roy and Justice C.T. Ravikumar had answered the reference on the issue by a 3:2 majority. The majority had decided that an instrument which is not stamped cannot be said to be a contract enforceable in law within the meaning of S. 2(h) of the Contract Act. On September 26, a 5-judge bench had referred the issue to a larger bench to revisit the correctness of NN Global.

Arguments Before The Court
The petitioners argued that existence of an arbitration agreement and validity of the arbitration agreement were two different concepts. Further, under Section 11 of the Arbitration and Conciliation Act, 1996, the power of the court was confined to the examination of the existence of the agreement and not to the validity of the same. Thus, the court only had to determine if an agreement existed. The same, as per the petitioners, could be done by dissecting the nature of correspondence between the parties, including telecommunication, statements, zoom calls etc. However, the validity of the agreement was for the arbitrator to decide upon. Petitioners added that the ambit of Section 16, which deals with the competence of an arbitral tribunal to rule on its jurisdiction, was wide enough to allow the Arbitrator to make considerations with respect to the stamping of the document. They also relied upon the 'doctrine of separability' to argue that even if an agreement was null and void, the arbitration agreement within it would still survive as it was 'separate'.

Per contra, the respondents questioned the Supreme Court five judge bench's decision of referring the matter to a seven judge bench in its curative jurisdiction. It was asserted that the court's curative jurisdiction could only be exercised with regards to injustice done in an individual cause.

Case Title: In Re Interplay Between Arbitration Agreements Under The Arbitration And Conciliation Act 1996 And The Indian Stamp Act 1899 Curative Pet(C) No. 44/2023 In R.P.(C) No. 704/2021 In C.A. No. 1599/2020

09/12/2023

Recently, the Supreme Court (on December 04) categorically held that in proceedings initiated for bounced cheques (under Section 138 of the Negotiable Instruments Act), the defence that there are sufficient funds in the other bank accounts cannot be appreciated.

“In a proceeding under Section 138 of the Negotiable Instruments Act, the accused cannot rely upon other bank accounts for the dishonoured cheque which relates to specific bank account of the accused," held the bench of Justices Hrishikesh Roy and Sanjay Karol.

In the present case, the complainant/ respondent (Dharam Singh) filed complaints for the dishonor of different cheques issued by the same accused, Harpal Singh. As per the case of the complainant, he invested various amounts from time to time in the company of the accused. The investment was made on the assurance given by the accused that the complainant would receive a certain amount of money. Consequently, to discharge his liability, the accused handed over several cheques to the complainant.

However, when deposited, one of the cheques was returned unpaid due to insufficiency of funds. After receiving no response from the complainant, the accused filed a complaint under the relevant section of the NI Act. Additionally, the offence of cheating under IPC was also included. The trial court convicted the appellant and passed directions with respect to the compensation. The same was challenged before the High Court. Though the High Court modified the sentence, it did not interfere with the conviction. In this background, the matter came before the Apex Court.

Before the Supreme Court, Senior Advocate Maninder Singh appeared for the appellant. The advocate contended that in the year 2015, the concerned bank account was frozen.

However, the Court took objection to this argument. The Court stated that when the cheques were issued, the appellant did not have sufficient funds.

“However, it is seen from the impugned judgment itself that although ten cheques totaling a sum of Rupees Eighty Lakhs was issued by the petitioner, at the relevant point of time, the concerned bank account had a maximum deposit of Rs. 18,52,033/.”

Further, the counsel's argument related to the availability of funds with the appellant in different bank accounts did not find favor with Court. As mentioned above, the Court held the accused cannot rely upon other bank accounts for the dishonoured cheque which relates to specific bank account.

“Accordingly, the argument advanced by Mr. Maninder Singh, learned Senior Counsel of having adequate funds by reference to the other bank accounts of the company, cannot be of any assistance to the accused.,” the Court added.

In view of this, the Court dismissed the appeal.

Case Title: HARPAL SINGH vs. THE STATE OF HARYANA., Diary No.- 44330 - 2023

06/12/2023

Recently, the Supreme Court (on November 30) while quashing the criminal proceedings for the offence of cruelty under Section 498A of the Indian Penal Code, 1860, observed that one occurrence, unless serious, with no clear evidence of involvement in the complainant's life, is not sufficient to implicate a person under this provision.

“One instance unless portentous, in the absence of any material evidence of interference and involvement in the marital life of the complainant, may not be sufficient to implicate the person as having committed cruelty under section 498A of the IPC.,” the bench of Justices Sanjiv Khanna and S.V.N Bhatti observed.

In the instant case, the wife added the sister and the cousins of the husband as accused in the complaint. The sisters and cousins of the husband filed a petition before the Karnataka High Court for quashing of the charge sheet. However, the same was dismissed by the High Court via its impugned judgment. Thus, the present appeal.

The Apex Court perused the written complaint as well as the charge sheet. To begin with, the Court observed that out of the two allegations made against the sister of the accused, only one was substantiated in the charge sheet - that the first appellant had thrown certain belongings of the wife on the ground and had cursed her in foul language.

Apart from this, the Court also noted that the sister was living and working in Canada. Further, even the other appellants were residing separately and not at the marital home.

Thus, the Court observed that the assertions made in the charge sheet are very vague and general.

“Given that the appellants were not residing at the marital home, and appellant no.1 was not even living in India, the absence of specific details that constitute cruelty, we would accept the present appeal.,” the Top Court added.

In view of this above projection, the Court quashed the criminal proceedings against the appellant. However, before parting, the Court also made it clear that the Trial Court could proceed against them if any evidence came on record.

Case Title: MAHALAKSHMI vs. THE STATE OF KARNATAKA., Diary No.- 13940 - 2019

Regards
Jainendra Kumar Ojha
Advocate & Mediator Supreme Court of India

21/05/2023

21/05/2023

Honey Trap issue....

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10/11/2022

Important information from Hon'ble Chief Justice of India Justice DY Chandrachud on Thursday said that he has issued directions to the Registrar Listing for automatic listing of freshly filed cases on specified dates.