Matter: Intercontinental Hotels Group (India) Pvt. Ltd. & Anr. v. Waterline Hotels Pvt. Ltd.
Order dated: 25 January 2022
Waterline Hotels Pvt. Ltd. (“Waterline”) had entered into an agreement with Intercontinental Hotels Group (India) Pvt. Ltd. and Intercontinental Hotels Group (Asia-Pacific) Pvt. Ltd (collectively, “Intercontinental”). As disputes arose between Waterline and Intercontinental, Waterline invoked the arbitration clause in the agreement. Aggrieved by Waterline’s refusal to appoint an arbitrator, Intercontinental filed a petition under the Arbitration Act before the SC, seeking appointment of an arbitrator. Waterline opposed the petition on the ground that the agreement which contains the arbitration agreement, was an unstamped document that cannot be relied on or acted upon unless the unstamped document is impounded, and the applicable stamp duty/ penalty is assessed and paid.
The issue before the SC was whether insufficient stamping of an agreement rendered the arbitration agreement as unworkable. Pertinently, due to previous conflicting judgments of the SC, this issue has already been referred to a larger bench for clarification. The SC observed that courts have very limited jurisdiction with respect to appointment of an Arbitral Tribunal under the Arbitration Act, and such jurisdiction is limited to examining issues relating to existence of the arbitration agreement. Issues of arbitrability of a dispute or validity of the arbitration agreement are matters to be adjudicated upon by the Arbitral Tribunal. Further, the SC being cognizant of the time-sensitivity while dealing with arbitration issues and considering that all matters at a pre-appointment stage cannot be left hanging until the larger bench of the SC settles the issue, held that until the larger bench decides on the court’s
jurisdiction on appointment of Arbitral Tribunal on the basis of an unstamped or insufficiently stamp agreement, Indian courts should ensure that arbitrations are carried on unless the issue before the court patently indicates existence of deadwood.
Therefore, on the issue of enforceability of an arbitration clause contained in an unstamped or insufficiently stamped agreement, the SC held that a court hearing a petition for appointment of arbitrator under the Arbitration Act cannot determine the sufficiency of stamp duty payable on any agreement and the same is a question which is to be decided at a later stage by the Arbitral Tribunal.