DATE OF JUDGEMENT:
11th August 2021
BENCH:
Mr Justice C. Hari Shankar
PARTIES
Petitioner- Bhagwati Devi Gupta &Anr.
Respondent- Star Infratech Pvt.Ltd
SUBJECT
- The Delhi High Court held that once a Supreme Court bench has doubted the correctness of an earlier bench of equal strength and referred the issue to a larger bench, the lower courts may not be bound to follow the earlier decision.
OVERVIEW
- The present petition was filed under Section 11(5) of the Arbitration and Conciliation Act, 1996, for the appointment of an arbitrator to arbitrate on the dispute between the parties.
- The petitioner has issued a notice to invoke arbitration proceedings to the respondent. The parties failed to arrive at any agreement regarding the arbitrator to arbitrate on the disputes, thereafter which, the petitioner has approached this Court under Section 11(5) of the 1996 Act.
- The contention raised by the respondent was that the agreement between the parties was inadequately stamped and that till this defect is rectified, the Court cannot refer the dispute to arbitration.
- In reply to the contention, the petitioner stated that the arbitration agreement is not insufficiently stamped and that this aspect could be decided by the learned Arbitrator.
LEGAL PROVISIONS
- Section 11(5) of the Arbitration and Conciliation Act, 1996 :
Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
ISSUE
- Whether an inadequate stamp duty on the work order would invalidate the main contract?
- Once a bench of the Supreme Court has doubted the correctness of an earlier bench of equal strength and referred the issue to a larger bench, whether the lower court may be bound to follow the earlier decision?
JUDGEMENT ANALYSIS
- The respondent cited the decision of the Supreme Court in N.N.Global Mercantile Pvt. Ltd. v.M/s Indo Unique Flame Ltd. (2021) 4 SCC 379 to support the contention raised and held that till the defect is rectified, the court cannot refer the dispute to arbitration.
- Firstly, the Apex Court had held that the non-payment or deficiency of stamp duty on the work order does not invalidate the main contract. The court held that it is a deficiency that is curable on the payment of the requisite stamp duty.
- Thereafter, the respondent cited another Supreme Court judgement Vidya Drolia v. Durga Trading Corn ( 2021) 2 SCC 1 to support his contention.
- Further, the court had doubted the correctness of the three-judge bench in the Vidya Drolia case. Therefore, the court had referred to the findings in the case of Garware Wall Ropes Ltd.(2019) 9 SCC 209 in this matter to a constitutional bench of five judges.
- The Delhi High Court held that the practice of the lower courts in the hierarchy continuing to follow the earlier decision, once a bench of the Supreme Court has doubted the correctness of an earlier bench and referred the issue to a larger bench, appears to be debatable.
CONCLUSION
The court held that in the matter of dispute to arbitration, the parties were referred to the Delhi International Arbitration Centre, which would appoint a suitable arbitrator to arbitrate the matter. Therefore, the court disposed of the petition.
Click here to download the original copy of the judgement
