WEATHERFORD OIL TOOL MIDDLE EAST LIMITED versus BAKER HUGHES SINGAPORE PTE
[2022] 13 S.C.R. 996, Supreme Court of India, 2022
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
A
B
C
D
E
F
G
H
996
SUPREME COURT REPORTS
[2022] 13 S.C.R.
[2022] 13 S.C.R. 996
996
WEATHERFORD OIL TOOL MIDDLE EAST LIMITED
v.
BAKER HUGHES SINGAPORE PTE
(Arbitration Petition No. 03 of 2022)
OCTOBER 20, 2022
[UDAY UMESH LALIT, CJI AND BELA M. TRIVEDI, J.]
Arbitration and Conciliation Act, 1996: s.11(6) read with
s.11(12) – Appointment of arbitrator – Arbitration agreement in
unstamped Contract – In the instant case, petitioner and respondent
entered into three agreements – Respondent issued letters to the
petitioner terminating the three agreements – Pursuant to this,
petitioner asked respondent to pay certain amount which was
refused by respondent – Thereafter, petitioner issued notices invoking
arbitration clauses containing in three agreements – In reply,
respondent raised a contention that stamp duty was not paid on
agreements – However, respondent proposed for referring the
dispute to mediation, but it failed eventually – Consequently,
respondent neither agreed nor suggested any of the names of
arbitrators – Three Arbitration petitions filed by the petitioner under
s.11(6) read with s.11(12) of the Act, 1996 seeking appointment of
a sole arbitrator to adjudicate upon the aforesaid disputes - Held:
Since the arbitration agreements contained in all the three
agreements were not disputed by the respondent, and since the
respondent itself had proposed to consolidate the disputes under
the said agreements and to refer them to a sole arbitrator in one
single arbitration, it
does not lie in the mouth of the respondent
now to say that the petitions seeking appointment of a sole arbitrator
should not be entertained, as the matter with regard to the
determination of requisite stamp duty under the Maharashtra Stamp
Duty Act on the two agreements is pending before the Collector –
There is no legal impediment to the enforceability of the arbitration
agreement pending payment of stamp duty on the substantive
contract – Of course, the said issue is pending under consideration
by the Constitution Bench, the matters which are still pending at a
pre-appointment stage, cannot be left hanging until the larger Bench
settled the issue – A former Judge of High Court appointed as a
sole arbitrator to adjudicate upon dispute – Stamp Duty.
A
B
C
D
E
F
G
H
997
Allowing the petitions, the Court
HELD: 1. When the facts of the present petitions are
examined, it deserves to be noted that the execution of three
agreements, namely, Onshore Service Agreement, Lease
Agreement and Drilling Service Agreement between the
petitioner and the respondent has not disputed. The letters of
termination terminating the said three agreements by the
respondent on 9th April, 2020, and other correspondence that
ensued between the parties as stated in the earlier part of the
judgment are also not disputed. Though the respondent, in
response to the arbitration notices given by the petitioner had
raised a contention in the letter dated 17th January 2021 that the
agreements were not stamped and that consequences would
follow as per the Maharashtra Stamp Act, the respondent
proposed to amicably resolve the disputes through Mediation,
and also suggested in the alternative to consolidate the disputes
under the three agreements to be heard by a sole arbitrator in
one single arbitration. The efforts to amicably resolve the disputes
through Mediation having failed, the petitioner thereafter also
agreed to consolidate the disputes under the three agreements
to be heard by a sole arbitrator in one single arbitration, as
proposed by the respondent. The petitioner also proposed the
names of the arbitrators, however, the said names were not
agreeable to the respondent. The respondent also failed to
propose any names for the appointment of a sole
arbitrator. [Paras
14 and 15][1008-G-H; 1009-E-H]
2. Since the arbitration agreements contained in all the
three agreements namely, Onshore Service Agreement, Lease
Agreement and Drilling Service Agreement were not disputed
by the respondent, and since the respondent itself had proposed
to consolidate the disputes under the said agreements and to
refer them to a sole arbitrator in one single arbitration, this court
is of the opinion that now it does not lie in the mouth of the
respondent to say that the petitions seeking appointment of a
sole arbitrator should not be entertained, as the matter with
regard to the determination of requisite stamp duty under the
Maharashtra Stamp Duty Act on the two agreements is pending
before the Collector. There is no legal impediment to the
WEATHERFORD OIL TOOL MIDDLE EAST LIMITED v.
BAKER HUGHES SINGAPORE PTE
A
B
C
D
E
F
G
H
998
SUPREME COURT REPORTS
[2022] 13 S.C.R.
enforceability of the arbitration agreement pending payment of
stamp duty on the substantive contract. Of course, the said issue
is pending under consideration by the Constitution Bench, the
matters which are still pending at a pre-appointment stage, cannot
be left hanging until the larger Bench settled the issue. [Para
16][1010-B-E]
N.N Global Mercantile Unique Pvt. Ltd. v. Indo. Unique
Flame Ltd. and Others (2021) 4 SCC 379, Inter-
continental Hotels Group (India) Private Limited and
Another v. Waterline Hotels Private Limited (2022) 7
SCC 662 – followed.
SMS Tea Estates (P) Ltd v. Chandmari Tea Co. (P) Ltd
(2011) 14 SCC 66 : [2011] 9 SCR 382, Garware Wall
Ropes Ltd. v. Coastal Marine Constructions & Engg.
Ltd (2019) 9 SCC 209 : [2019] 5 SCR 579, Vidya Drolia
v. Durga Trading Corporation (2021) 2 SCC 1 –
referred to.
Case Law Reference
(2021) 4 SCC 379
followed
Para 3
(2022) 7 SCC 662
followed
Para 4
[2011] 9 SCR 382 
referred to
Para 11
[2019] 5 SCR 579
referred to
Para 11
(2021) 2 SCC 1
referred to
Para 11
CIVIL ORIGINAL JURISDICTION: Arbitration Petition No. 03
of 2022.
Petition under Section 11(6) read with Section 11(12)(a) of the
Arbitration and Conciliation Act, 1996 filed by the Petitioner for
appointment of a Sole Arbitrator.
With
Arbitration Petition Nos. 52 of 2021 and 02 of 2022.
Amit Sibal, N Ritin Rai, Sr. Advs., Dr. Rishab Gupta, Sairam
Subramanian, Neelabh Shreesh, S. S. Shroff, Advs. for the
Petitioner.
Jayant Mehta, Sr. Adv., Puneet Singh Bindra, Ms. Anshika Misra,
Aditya Bhatt, Parimal Kashyap, Ms. Simran Jeet, Advs. for the
Respondent.
A
B
C
D
E
F
G
H
999
The Judgment of the Court was delivered by
BELA M. TRIVEDI, J.
1. All these three Arbitration petitions filed by the petitioner under
Section 11(6) read with Section 11(12) of the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as Arbitration Act, 1996), seeking
appointment of a sole arbitrator to adjudicate upon the disputes arising
out of the three agreements executed between the parties, being
intrinsically connected with each other were heard together, and are
being disposed of by this common order.
2. The bare facts germane for deciding these petitions may be
stated as under:-
(i)
The petitioner is a company incorporated in the British Virgin
Islands, engaged in the business of providing products and
services for mud logging, drilling jars and fishing tools and
exports of spare parts and oilfield equipments. The
respondent is a company incorporated under the laws of
Singapore and engaged in providing oilfield services, inter
alia engaged in provision of well design, engineering, project
management and well construction services to Vedanta
Limited. (“Operator”).
(ii)
In the year 2018, the respondent was considering the
possibility of providing services to the Operator-Vedanta
Ltd. at the Operator’s oil fields located in Rajasthan. The
parties thereafter executed following three agreements:
a)
Onshore Lease Agreement No. BHGE-DSA-WDI-
2018 dated 20th November, 2018 for the lease of Rigs
on a day-rate basis (“Lease Agreement”),
b)
Onshore Drilling Service Agreement No. BHGE-
DSA-WDI-2018 (INTL HOLDING BVI) dated 20th
November, 2018 for drilling services (“Drilling
Service Agreement”), and
c)
Agreement dated 05th February, 2019 to provide (a)
mud logging; (b) drilling jars; (c) fishing tools; and
other services, with a full complement of crew,
equipment and materials at the Oil Fields (“Onshore
Service Agreement”). The said Agreement was
WEATHERFORD OIL TOOL MIDDLE EAST LIMITED v.
BAKER HUGHES SINGAPORE PTE
A
B
C
D
E
F
G
H
1000
SUPREME COURT REPORTS
[2022] 13 S.C.R.
amended vide the amendment agreements dated 22nd
November, 2019 and dated 7th January, 2020.
(iii)
The respondent on April 9, 2020 issued three letters
(identical) to the petitioner terminating the said three
agreements. Pursuant to the said Termination Letters, the
petitioner on April 13, 2020 informed the respondent of its
obligation to pay the amount equivalent to the residual value
of the “call out orders” in terms of the Agreements.
However, the respondent denied to make payments to the
petitioner. The petitioner thereafter issued three notices all
dated December 18, 2020 invoking the arbitration clause
contained in the respective three agreements raising its
claims against the respondent.
(iv)
The respondent in response to the said three Arbitration
Notices gave a common reply on January 17, 2021 raising
contentions inter alia that the stamp duty was not paid on
the agreements and therefore, consequences would follow
as per the Maharashtra Stamp Act, 1958. The respondent
however made a proposal in the said letter for referring
the disputes under the Agreements to Mediation. The
respondent also made proposal for consolidation of the
disputes under the Agreements and for referring the
disputes for adjudication by a sole arbitrator, consolidating
into a single arbitration. The respondent however, did not
agree to any of the names of arbitrators suggested by the
petitioner, and reserved its right to propose the
names of
arbitrators.
(v)
On January 29, 2021, the petitioner agreed to the
respondent’s suggestion to refer the disputes to the
Mediation. However, the Mediation having failed, the
petitioner vide the Letter dated 1st September, 2021 agreed
for the consolidation of disputes under the three agreements
i.e., the Onshore Service Agreement, Lease Agreement and
Drilling Service Agreement, to be heard by a sole arbitrator
in one single arbitration, and further suggested two names
of arbitrators. The petitioner in the alternative suggested
that the Mumbai Centre of International Arbitration
(“MCIA”) as the appointing authority under Rule 7.8 of
A
B
C
D
E
F
G
H
1001
MCIA Rules, 2016 may appoint a sole arbitrator in the
Consolidated Arbitration.
(vi)
The respondent did not agree to any of the proposals made
by the petitioner vide the Letter dated September 07, 2021,
nor did it propose any name for the appointment of a sole
arbitrator. Thereafter, some correspondence had ensued
between the parties, however the respondent did not propose
any names of individuals for being appointed as a sole
arbitrator in the consolidated arbitration. Hence, the
petitioner has filed these three petitions.
3) The bone of contention raised by the Learned Senior Advocate,
Mr. Jayant Mehta for the respondent is that out of the three agreements
only one agreement was stamped and the other two were not stamped
as required under the Maharashtra Stamp Act, 1958 (hereinafter referred
as the “Stamp Act”). Of course, he admitted that the matter in respect
of determination of stamp duty for the other two agreements is pending
with the Collector. However, according to him, a three-judge Bench of
this Court, in case of N.N Global Mercantile Unique Pvt. Ltd. Vs.
Indo. Unique Flame Ltd. and Others1 has referredthe issue as to
whether the statutory bar contained in Section 35 of the Stamp Act 1899
applicable to instruments chargeable to stamp duty under Section 3 read
with the Schedule to the Act, would also render arbitration agreement
contained in such instrument which is not chargeable to the payment of
stamp duty as being non-existent,
unenforceable or invalid, pending
payment of stamp duty on the substantive contract/instrument, to the
Constitution Bench of five judges, and therefore the present petitions
filed by the petitioner seeking appointment of a sole arbitrator may not
be entertained at this stage.
4. Per-contra, Learned Senior Advocate, Mr. Amit Sibal for the
petitioner placing heavy reliance on the decision of this Court in case of
Inter-continental Hotels Group (India) Private Limited and Another
versus Waterline Hotels Private Limited2 submitted that the three-
judge Bench in the said case, after considering all the earlier judgments
as also taking note of the reference of the issue made to the Constitution
Bench, had entertained the Arbitration Petition filed under Sections 11(6)
1 (2021) 4 SCC 379
2 (2022) 7 SCC 662
WEATHERFORD OIL TOOL MIDDLE EAST LIMITED v.
BAKER HUGHES SINGAPORE PTE [BELA M. TRIVEDI, J.]
A
B
C
D
E
F
G
H
1002
SUPREME COURT REPORTS
[2022] 13 S.C.R.
read with Section 11(12) of the Arbitration Act, holding that considering
the time sensitivity in arbitration matters, the Court could not leave the
matters hanging until the larger bench settled the issue. He further
submitted that the insufficient payment or non-payment of stamp duty is
a curable defect and there is no legal impediment to the enforceability of
the arbitration agreement, pending payment of stamp duty on the
substantive contract. He further submitted that even otherwise as per
the settled legal position, the Court is required to examine only the issue
of existence of arbitration agreement and may not go into the issue of
validity of the agreements in which the arbitration clause is contained.
5. At the outset, it may be noted that Sub-section 6A of Section 11
of the Arbitration Act, 1996 was inserted by the Act 3 of 2016 with
retrospective effect from 23.10.2015, which read as under:-
“(6A) 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.”
6. The said sub-sections 6 A came to be omitted by the Act 33 of
2019 which came into force on 30.08.2019. Meaning thereby the said
sub-section (6A) stands omitted as on the date.
7. Further, Section 16 of the Arbitration
Act pertains to the
competence of Arbitral Tribunal to rule on its own jurisdiction. The
relevant sub-section 1 of Section 16 reads as under: -
“Section 16 - Competence of arbitral tribunal to rule on its
jurisdiction- (1) The arbitral tribunal may rule on its own jurisdiction,
including ruling on any objections with respect to the existence or
validity of the arbitration agreement, and for that purpose,-
(a)
an arbitration clause which forms part of a contract shall
be treated as an agreement independent of the other
terms of the contract; and
(b)
a decision by the arbitral tribunal that the contract is null
and void shall not entail ipso jure the invalidity of the
arbitration clause.”
8. The bare reading of the afore-stated provision makes it clear
that arbitral tribunal is competent not only to rule on its own jurisdiction
A
B
C
D
E
F
G
H
1003
but to rule on the issue of the existence or validity of the arbitration
agreement. It further clarifies that an arbitration clause which forms
part of a contract shall be treated as an agreement independent of the
other terms of the contract, and that a decision by the arbitral tribunal
that the contract is null and void shall not entail ipso jure the invalidity of
the arbitration clause.
9. The doctrine of separability and the doctrine of kompetenz-
kompetenz encompassed in the arbitration jurisprudence, have been
succinctly explained by a three-judge Bench of this Court in the recent
case of N.N. Global Mercantile(P) Ltd. (supra):
“4. It is well settled in arbitration jurisprudence that an arbitration
agreement is a distinct and separate agreement, which is
independent from the substantive commercial contract in which it
is embedded. This is based on the premise that when parties enter
into a commercial contract containing an arbitration clause, they
are entering into two separate agreements viz.: (i) the substantive
contract which contains the rights and obligations of the parties
arising from the commercial transaction; and (ii) the arbitration
agreement which contains the binding obligation of the parties to
resolve their disputes through the mode of arbitration.
4.1. The autonomy of the arbitration agreement is based on the
twin concepts of separability and kompetenz-kompetenz. The
doctrines of separability and kompetenz-kompetenz though inter-
related, are distinct, and play an important role in promoting the
autonomy of the arbitral process.
4.2. The doctrine of separability of the arbitration agreement
connotes that the invalidity, ineffectiveness, or termination of the
substantive commercial contract, would not affect the validity of
the arbitration agreement, except if the arbitration agreement itself
is directly impeached on the ground that the arbitration agreement
is void ab initio.
4.3. The doctrine of kompetenz-kompetenz implies that the Arbitral
Tribunal has the competence to determine and rule on its own
jurisdiction, including objections with respect to the existence,
validity, and scope of the arbitration agreement, in the first instance,
which is subject to judicial scrutiny by the courts at a later stage
of the proceedings. Under the Arbitration Act, the challenge before
WEATHERFORD OIL TOOL MIDDLE EAST LIMITED v.
BAKER HUGHES SINGAPORE PTE [BELA M. TRIVEDI, J.]
A
B
C
D
E
F
G
H
1004
SUPREME COURT REPORTS
[2022] 13 S.C.R.
the Court is maintainable only after the final award is passed as
provided by sub-section (6) of Section 16. The stage at which the
order of the tribunal regarding its jurisdiction is amenable to judicial
review, varies from jurisdiction to jurisdiction. The doctrine of
kompetenz-kompetenz has evolved to minimise judicial intervention
at the pre-reference stage, and reduce unmeritorious challenges
raised on the issue of jurisdiction of the Arbitral Tribunal.”
10. In the said case of N.N. Global Mercantile (P) Ltd. (supra),
the issue whether the arbitration agreement contained in an unstamped
contract can be acted upon had also arisen and the court observed as
under:
“21. The issue which has arisen in the present case is whether
the arbitration agreement incorporated in the unstamped work
order dated 28-9-2015, would also be legally unenforceable, till
such time that the work order is subjected to payment of stamp
duty. Undisputedly, the work order is chargeable to payment of
stamp duty under Item 63 of the First Schedule to the Maharashtra
Stamp Act, 1958.
22. In our view, the non-payment or deficiency of stamp duty on
the work order does not invalidate the main contract. Section 34
provides that an unstamped instrument would not be admissible in
evidence, or be acted upon, till the requisite stamp duty is paid.
This would amount only to a deficiency, which can be cured on
the payment of the requisite stamp duty.
23. The point for consideration is whether the non-payment of
stamp duty on the work order, would render the arbitration clause
invalid, non-existent, or unenforceable in law, till the stamp duty is
paid on the substantive commercial contract.
24. The arbitration agreement contained in the work order is
independent and distinct from the underlying commercial contract.
The arbitration agreement is an agreement which provides the
mode of dispute resolution. Section 3 of the Maharashtra Stamp
Act does not subject an arbitration agreement to payment of stamp
duty, unlike various other agreements enlisted in the Schedule to
the Act. This is for the obvious reason that an arbitration agreement
is an agreement to resolve disputes arising out of a commercial
agreement, through the mode of arbitration. On the basis of the
A
B
C
D
E
F
G
H
1005
doctrine of separability, the arbitration agreement being a separate
and distinct agreement from the underlying commercial contract,
would survive independent of the substantive contract. The
arbitration agreement would not be rendered invalid, unenforceable
or non-existent, even if the substantive contract is not admissible
in evidence, or cannot be acted upon on account of non-payment
of stamp duty.
26. In our view, there is no legal impediment to the enforceability
of the arbitration agreement, pending payment of stamp duty on
the substantive contract. The adjudication of the rights and
obligations under the work order or the substantive commercial
contract would, however, not proceed before complying with the
mandatory provisions of the Stamp Act.
27. The Stamp Act is a fiscal enactment for payment of stamp
duty to the State on certain classes of instruments specified in the
Stamp Act. Section 40 of the Stamp Act, 1899 provides the
procedure for instruments which have been impounded, and sub-
section (1) of Section 42 requires the instrument to be endorsed
after it is duly stamped by the Collector concerned. Section 42(2)
provides that after the document is duly stamped, it shall be
admissible in evidence, and may be acted upon.”
11. The three-judge Bench in the said case (N.N. Global
Mercantile(P) Ltd.)overruled the judgment in SMS Tea Estates (P)
Ltd v. Chandmari Tea Co. (P) Ltd.3 in which it was held that an
arbitrationagreement in an unstamped
commercial contract cannot be
acted upon and is unenforceable in law. The court further held therein
that the Judgment in case of Garware Wall Ropes Ltd. v. Coastal
Marine Constructions & Engg. Ltd.4 whichhad followed the judgment
in SMS Tea Estates (supra) did not lay down the correct position in law.
However, the Court noticed that the judgment in Garware Wall Ropes
Ltd. (supra) was cited with approval by the Co-ordinate Bench of this
Court in Vidya Drolia v. Durga Trading Corporation5, and therefore
the court (in N.N. Global Mercantile case) observed as under:
3 (2011) 14 SCC 66
4 (2019) 9 SCC 209
5 (2021) 2 SCC 1
WEATHERFORD OIL TOOL MIDDLE EAST LIMITED v.
BAKER HUGHES SINGAPORE PTE [BELA M. TRIVEDI, J.]
A
B
C
D
E
F
G
H
1006
SUPREME COURT REPORTS
[2022] 13 S.C.R.
“33. We notice that the judgment in Garware Wall Ropes Ltd.
has been cited with approval by a coordinate Bench of this Court
in Vidya Drolia v. Durga Trading Corpn. [Vidya Drolia v.
Durga Trading Corpn., Paras 146-147 of the judgment reads
thus: (Vidya Drolia Case SCC pp. 115-16)
“146. We now proceed to examine the question, whether
the word “existence” in Section 11 merely refers to contract
formation (whether there is an arbitration agreement) and excludes
the question of enforcement (validity) and therefore the latter falls
outside the jurisdiction of the court at the referral stage. On
jurisprudentially and textualism it is possible to differentiate
between existence of an arbitration agreement and validity of an
arbitration agreement. Such interpretation can draw support from
the plain meaning of the word “existence”. However, it is equally
possible, jurisprudentially and on contextualism, to hold that an
agreement has no existence if it is not enforceable and not binding.
Existence of an arbitration agreement presupposes a valid
agreement which would be enforced by the court by relegating
the parties to arbitration. Legalistic and plain meaning interpretation
would be contrary to the contextual background including the
definition clause and would result in unpalatable consequences. A
reasonable and just interpretation of “existence” requires
understanding the context, the purpose and the relevant legal norms
applicable for a binding and enforceable arbitration agreement.
An agreement evidenced in writing has no meaning unless the
parties can be compelled to adhere and abide by the terms. A
party cannot sue and claim rights based on an unenforceable
document. Thus, there are good reasons to hold that an arbitration
agreement exists only when it is valid and legal. A void and
unenforceable understanding is no agreement to do anything.
Existence of an arbitration agreement means an arbitration
agreement that meets and satisfies the statutory requirements of
both the Arbitration Act and the Contract Act and when it is
enforceable in law.
147. We would proceed to elaborate and give further
reasons:
147.1. (i) In Garware Wall Ropes Ltd. this Court had
examined the question of stamp duty in an underlying contract
A
B
C
D
E
F
G
H
1007
with an arbitration clause and in the context had drawn a distinction
between the first and second part of Section 7(2) of the Arbitration
Act, albeit the observations made and quoted above with reference
to “existence” and “validity” of the arbitration agreement being
apposite and extremely important, we would repeat the same by
reproducing para 29 thereof : (SCC p. 238)
‘29. This judgment in Hyundai Engg. case [United India
Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd.,
(2018) 17 SCC 607] is important in that what was specifically
under consideration was an arbitration clause which would get
activated only if an insurer admits or accepts liability. Since on
facts it was found that the insurer repudiated the claim, though an
arbitration clause did “exist”, so to speak, in the policy, it would
not exist in law, as was held in that judgment, when one important
fact is introduced, namely, that the insurer has not admitted or
accepted liability. Likewise, in the facts of the present case, it is
clear that the arbitration clause that is contained in the sub-contract
would not “exist” as a matter of law until the sub-contract is duly
stamped, as has been held by us above. The argument that Section
11(6-A) deals with “existence”, as opposed to Section 8, Section
16 and Section 45, which deal with “validity” of an arbitration
agreement is answered by this Court’s understanding of the
expression “existence” in Hyundai Engg. case [United India
Insurance Co. Ltd. v. Hyundai Engg. & Construction Co. Ltd.,
(2018) 17 SCC 607 ] , as followed by us.’
Existence and validity are intertwined, and arbitration
agreement does not exist if it is illegal or does not satisfy mandatory
legal requirements. Invalid agreement is no agreement.”
34.  We doubt the correctness of the view taken in paras
146 and 147 of the three-Judge Bench in Vidya Drolia [Vidya
Drolia v. Durga Trading Corpn., (2021) 2 SCC 1] . We consider
it appropriate to refer the findings in paras 22 and 29 of Garware
Wall Ropes Ltd. [Garware Wall Ropes Ltd. v. Coastal Marine
Constructions & Engg. Ltd., (2019) 9 SCC 209] , which has
been affirmed in paras 146 and 147 of Vidya Drolia [Vidya
Drolia v. Durga Trading Corpn., (2021) 2 SCC 1] , to a
Constitution Bench of five Judges.”
WEATHERFORD OIL TOOL MIDDLE EAST LIMITED v.
BAKER HUGHES SINGAPORE PTE [BELA M. TRIVEDI, J.]
A
B
C
D
E
F
G
H
1008
SUPREME COURT REPORTS
[2022] 13 S.C.R.
12. The Court ultimately referred the following issue to be
authoritatively settled by a Constitution Bench of five Judges: -
“58. We consider it appropriate to refer the following issue, to be
authoritatively settled by a Constitution Bench of five Judges of
this Court:
“Whether the statutory bar contained in Section 35 of the
Stamp Act, 1899 applicable to instruments chargeable to stamp
duty under Section 3 read with the Schedule to the Act, would
also render the arbitration agreement contained in such an
instrument, which is not chargeable to payment of stamp duty, as
being non-existent, unenforceable, or invalid, pending payment of
stamp duty on the substantive contract/instrument?”
13. It may further be noted that recently a three-judge Bench of
this Court in case of Intercontinental Hotels Group (India) Pvt. Ltd.
& Anr. Vs. Waterline Hotels Private Limited6 while dealing with an
application filed under Section 11(6) read with Section 11(12)(e) of the
Arbitration Act for appointment of a sole arbitrator on the basis of an
arbitration clause contained in the agreement which was unstamped
document, took notice of the earlier decisions as also the issue referred
to the Constitution Bench and observed as under:-
“25. Although we agree that there is a need to constitute a larger
Bench to settle the jurisprudence, we are 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.”
14. In the light of the afore-stated legal position, if the facts of the
present petitions are examined, it deserves to be noted that the execution
of three agreements, namely, Onshore Service Agreement, Lease
Agreement and Drilling Service Agreement between the petitioner and
the respondent has not been disputed. The identical clause-23 for
Arbitration contained in all the three agreements has also not been
disputed. The said clause reads as under:
6 (2022) 7 SCC 662
A
B
C
D
E
F
G
H
1009
“ARBITRATION:
Any dispute, controversy or claim between the parties arising out
of, relating to, or connected with this Agreement, the breach,
termination or invalidity hereof, or the provisions contained herein
or omitted here from (collectively, a “Dispute”) will be referred to
and finally resolved by arbitration under the Indian Arbitration
and Conciliation Act, 1996 and the rules made thereunder, which
are deemed to be incorporated by reference into this Article 23.
The arbitration shall be conducted as follows:
i.
A sole arbitrator shall be mutually appointed in case the
value of claim under dispute is less than US$10 million and
in any other event by a panel of three arbitrators will be
appointed with one arbitrator nominated by each Party and
the presiding arbitrator selected by the nominated arbitrators.
ii.
The language of the arbitration proceedings shall be English.
iii.
The seat of arbitration shall be Mumbai, India.
iv.
The award made in pursuance thereof shall be final and
binding on the Parties.
v.
The arbitrators will have no power to award damages of a
type described in Article 11(k).”
15. The letters of termination terminating the said three agreements
by the respondent on 9th April, 2020, and other correspondence that
ensuedbetween the parties as stated in the earlier part of the judgment
are also not disputed. Though the respondent, in response to the arbitration
notices given by the petitioner had raised a contention in the letter
dated
17th January 2021 that the agreements were not stamped and that
consequences would follow as per the Maharashtra Stamp Act, the
respondent proposed to amicably resolve the disputes through Mediation,
and also suggested in the alternative to consolidate the disputes under
the three agreements to be heard by a sole arbitrator in one single
arbitration. The efforts to amicably resolve the disputes through Mediation
having failed, the petitioner thereafter also agreed vide letter dated 1st
September, 2021 to consolidate the disputes under the three agreements
to be heard by a sole arbitrator in one single arbitration, as proposed by
the respondent. The petitioner also proposed the names of the arbitrators,
however, the said names were not agreeable to the respondent. The
WEATHERFORD OIL TOOL MIDDLE EAST LIMITED v.
BAKER HUGHES SINGAPORE PTE [BELA M. TRIVEDI, J.]
A
B
C
D
E
F
G
H
1010
SUPREME COURT REPORTS
[2022] 13 S.C.R.
respondent also failed to propose any names for the appointment of a
sole arbitrator.
16. In view of the above, since the arbitration agreements contained
in all the three agreements namely, Onshore Service Agreement, Lease
Agreement and Drilling Service Agreement were not disputed by the
respondent, and since the respondent itself had proposed to consolidate
the disputes under the said agreements and to refer them to a sole
arbitrator in one single arbitration, the court is of the opinion that now it
does not lie in the mouth of the respondent to say that the petitions
seeking appointment of a sole arbitrator should not be entertained, as the
matter with regard to the determination of requisite stamp duty under
the Maharashtra Stamp Duty Act on the two agreements is pending
before the Collector. As held by this Court in N.N. Global Mercantile
(supra) there is no legal impediment to the enforceability of the arbitration
agreement pending payment of stamp duty on the substantive contract.
Of course, the said issue is pending under consideration by the Constitution
Bench, nonetheless as observed by this Court in Intercontinental Hotels
Group (India Pvt. Ltd.) (supra), the matters which are still pending at
a pre-appointment stage, cannot be left hanging until the larger Bench
settled the issue. Following the said proposition and considering the time
sensitivity in the arbitration cases, we deem it appropriate to
entertain
the present petitions and allow the same.
17. Since the respondent had proposed and the petitioner had
agreed to consolidate all the disputes arising out of the three agreements,
namely, Onshore Service Agreement, Lease Agreement and Drilling
Service Agreement, and to refer them to a sole arbitrator in a single
arbitration for adjudication, it is ordered as such. Accordingly, we appoint
Mr. Suresh C. Gupte, former Judge, High Court of Bombay as a sole
arbitrator to adjudicate upon the disputes arising out of the said three
agreements treating it as one single arbitration. The other terms and
conditions of the arbitration shall be as per Clause 23 contained in the
three agreements, as may be suitably made applicable to the arbitration
proceedings.
18. All the three petitions stand allowed accordingly.
Devika Gujral
Petitions allowed.
(Assisted by : Shevali Monga, LCRA)