Aeren R Entertainment Pvt Ltd vs National Ingineering Industri on 24 September, 2013
Rajasthan High Court
Aeren R Entertainment Pvt Ltd vs National Ingineering Industri on 24 September, 2013
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
JAIPUR BENCH JAIPUR
ORDER
S.B.Arbitration Application No.54/2008
Aeren R Entertainment Pvt.Ltd.
Versus
National Engineering Industries Limited
DATE OF ORDER
:
SEPTEMBER
24, 2013
PRESENT
HON'BLE MR.JUSTICE
PREM SHANKER ASOPA
Mr.Sagar Mal Mehta, Sr.Advocate
assisted by Mr.Rahul Joshi, for the Applicant
Mr.N.K.Maloo, Sr.Advocate
assisted by Mr.V.K.Tamolia, for the Non-applicant
BY THE COURT
(1) This arbitration application is arising out of an agreement dated 21.5.2004 (Annexure-C)
executed between the Applicant and the Non-applicant, containing arbitration clause 8.
(2) Briefly stated, the facts of the case, are that the Applicant-Purchaser Aeren R.Entertainment
Pvt.Ltd. (formerly known as Samurai Entertainment Pvt. Ltd.) entered into an agreement dated
21.5.2004 (Annexure-C) with the Non-applicant-Seller National Engineering Industries Ltd. with
regard to the sale of land admeasuring 17.05 Acres (70,809 Sq.Meters) but at the site, the land
admeasured only 66,838 Sq.Meters, which is the subject matter of the aforesaid agreement to sell,
situated in Khasra No.118 at Village Manpur Devri, Tonk Road, Jaipur, for a total consideration of
Rs.20,05,15,000/- under Clause 1 of the said agreement and further contains Clauses 2 to 9 and
preceding to it there are ten opening paras, out of which in opening para No.6, there is clear
mention of the pendency of the writ petition against the order of the Board of Revenue dated
24.3.2004 passed in second appeal. Out of the aforesaid amount, a sum of Rs.11 lacs have been paid
as advance money as per Clause No.2 and further, as per Clause No.(3), Rs.19,94,15,000/- has been
agreed to be paid by the Purchaser to the Seller as per the details given below Clause 3 regarding
payment of Rs.9,97,07,500/- and in Clause 4, the details of the payment of the remaining amount of
Rs.9,97,07,500/- have been given, as mentioned in sub clauses (i) to (iv) of Clause 4 out of which, as
per sub clauses (i) and (ii) of Clause 4, the Seller shall sell, transfer and convey all its ownership and
beneficial rights and interests in the property in favour of the purchaser by virtue of the Deed of
Transfer / Deed of Sale / Conveyance Deed, as the case may be, and as per sub-clause (ii), the actual
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Aeren R Entertainment Pvt Ltd vs National Ingineering Industri on 24 September, 2013
vacant possession of the property was to be handed over by the Seller to the Purchaser. It is also
pertinent to mention here that the Applicant by its earlier name Samurai Entertainment Pvt.Ltd. has
been referred in the agreement dated 21.5.2004 as the Purchaser and the Non-applicant National
Engineering Industries Ltd. has been referred as the Seller.
(3) The arbitration application has been filed by the Applicant by referring itself as the Purchaser
and the Non-applicant as the Seller, therefore, for the sake of convenience, the Applicant is referred
as the 'Purchaser' and the Non-applicant as the 'Seller' in this order.
(4) The Applicant has further stated in the arbitration application that the agreement is a contingent
contract and based on happening of contingencies recorded in the agreement dated 21.5.2004 and
their performance / discharge of obligations by the parties. The Seller made all efforts to get
clearance from the revenue department. The Seller in its letter dated 23.5.2005 (Anx.D) took the
stand that the agreement is frustrated and incapable of performance and categorically repudiated,
which was denied by the Purchaser on 11.6.2005 (Anx.E). The same allegations have been repeated
by the Seller (Non-applicant) in his earlier letter dated 10.6.2005 and has also sent a cheque
No.023489 dated 10.7.2005 drawn on ICICI Bank Ltd. in lieu of the advance amount already
received by the Seller (Annexure-F). On receipt of the letter dated 10.6.2005, the Non-applicant vide
its letter dated 11.6.2005 (Anx.G) stated that there is no question of agreement dated 21.5.2004
frustrated or incapable of performance and there is no question for your company being entitled to
return the advance. Similar correspondence between the parties on subsequent dates took place.
However, it is relevant to mention here that the Purchaser (Applicant) has referred in the opening
para 6 of the agreement dated 21.5.2004 wherein the appeal before the Collector and second appeal
before the Board of Revenue culminated into an order against which the Seller has filed writ petition
challenging the order dated 24.3.2004 of the Board of Revenue before this Court. Thus, the earlier
stand taken by the Purchaser (Applicant) and the Seller (Non-applicant) remains the same and there
is subsequent correspondence marked as Annexure-J, K, L and M. There is reference of Clause 8 of
the agreement dated 21.5.2004 on consideration of which the, the Purchaser (Applicant) vide its
notice dated 3.9.2007 appointed the former Chief Justice of India, Shri V.N.Khare, resident of
B-247, Sector 26, Noida (UP) as an Arbitrator to adjudicate upon the dispute arising between the
parties for performance of the agreement. Thereafter, the present arbitration application has been
filed with the prayer to adjudicate the dispute arising out of the agreement dated 21.5.2004, as
stated in the arbitration application and referred to hereinabove, with the further prayer (a) to
confirm the nomination of the Former Chief Justice Shri V.N.Khare, R/o B-247, Sector 26, Noida
(UP) as an Arbitrator to commence and complete the arbitration proceedings without prejudice to
the above and in the alternate nominate and appoint a second Arbitrator who may appoint third
Arbitrator to constitute an Arbitral Tribunal comprising of three Arbitrators, (b) pass such other and
further orders, which this Hon'ble Court may deem fit, just and proper in the circumstances of the
case and in the interest of justice and (c) award cost.
(5) The aforesaid agreement dated 21.5.2004 contained the opening Paras 1 to 10 by referring the
same under heading WHEREAS. Thereafter, the Clauses of the Agreement have been mentioned
from Condition No.1 to 9. The relevant opening Para 6, Clauses No.2, 3, 4, 8 and 9 of the Agreement
dated 21.5.2004 (Anx.C) for the purpose of decision of this arbitration application, are as follows:
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Opening Para 6. Proceedings were initiated against SELLER under the provisions of The Rajasthan
Imposition of Ceiling on Agricultural Holdings Act 1973 on various lands including the Land allotted
to SELLER as per above. The said proceedings were initiated by the Sub divisional Officer, Jaipur.
The exercise of its power under the Act of 1973 by the Sub Divisional Officer was challenged by the
company by way of an appeal before the Collector (Appeals) and subsequently by way of second
appeal before the Revenue Board. The company has also filed a writ petition chalelnging the order of
the Revenue Board dated 24.3.2004 vide which the second appeal filed by the company was
dismissed by the Board of Revenue. The said writ petition is pending. However, while issuing the
draft statement under the provisions of Section 12 of the said Act of 1973, it was held that a total of
54 acres of land being in possession of SELLER falls within the ceiling limits. The Land situated in
Village Manpur Deori regarding which the lease deed was issued by the State of Rajasthan has been
selected by the SELLER to fall within the ceiling limits. Accordingly, a total of 17.5 Acres of land
situated in Manpur Deori and covered by the lease deed dated 5th June, 1978 constitutes a part of
54 Acres of land, which SELLER has sought to retain in their possession. (emphasis supplied)
Clause 2 That out of the said amount of Rs.20,05,15,000/- a sum of Rs.11,00,000/- (Rupees eleven
lacs only) has been paid by PURCHASER to SELLER as advance money, the receipt whereof is
hereby admitted and acknowledged by SELLER.
Clause 3 That the balance amount of Rs.19,94,15,000/- (Rupees Nineteen crore ninety four lac
fifteen thousand only) has been agreed to be paid to PURCHASER by SELLER as per details given
below:
Rs.9,97,07,500/- (Rupees Nine crore ninety seven lac seven thousand five hundred only) shall be
paid by PURCHASER to SELLER within a period of 45 days when the concerned government
authorities including Secretary, Revenue Department, Government of Rajasthan and the Secretary,
Industries Department, Government of Rajasthan confirm in writing of their having taken on rcord
and accepted the Notice as given by SELLER to them as per Annexure I and II, forming a part of this
Agreement and confirming that the said departments do not have any right or claim in the property
whatsoever and inter alia accepting SELLER as the absolute owner of the Property fully competent
to alienate the same and SELLER has marketable legal title with possession. (emphasis supplied)
Clause 4 - That the remaining amount of Rs.9,97,07,500/- (Rupees Nine crore ninety seven lac
seven thousand five hundred only) shall be paid by PURCHASER to SELLER within 45 days of the
payment made in pursuant to Clause 3 above. At the time of making this final payment, SELLER
shall:
i.sell, transfer and convey all its ownership and beneficial rights and interests in the Property in
favour of PURCHASER by virtue of Deed of Transfer /Deed of Sale / Conveyance Deed, as the case
may be:
ii.the actual vacant physical possession of the Property shall be handed over by SELLER to
PURCHASER;
iii.all the original title documents of the Property shall be handed over by SELLER to PURCHASER;
iv.all formalities required to be completed asper the local acts and rules shall be completed b
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Clause 8. That in the event any dispute arises out of the terms of this agreement or in connect
Clause 9. Jurisdiction for adjudication of all disputes shall be at Jaipur only.
(6)
The Non-applicant-Seller filed reply to the arbitration application and raised and pre
(i) The 'instrument' i.e. the agreement dated 21.5.2004 for sale consideration of Rs.20,05,15,000/-,
which has been executed on a stamp of Rs.100/-, is insufficiently stamped and therefore,
inadmissible in evidence as per Sec. 3 read with Article 5 of the Schedule appended to the Stamp
Act, 1899, and the same can be acted upon u/s Sec.35 of the Indian Stamp Act, 1889. The same is
the position in the State of Rajasthan under the Rajasthan Stamp Act, 1998, under Article 5(bb) of
the Schedule and the same cannot be acted upon as per Sec.39 of the Rajasthan Stamp Act, 1998,
where on the agreement of sale of immovable property within Rajasthan, stamp duty at the rate of
3% of the total consideration of the property, as set forth in the agreement, is payable u/s 3 read
with Item 5(bb) of the Schedule. The agreement of sale is on Rs.100/- stamp, therefore, the same is
insufficiently stamped and further, as per Section 35 of the Act of 1899 as well as Sec.39 of the
Rajasthan Stamp Act, 1998, the said document is not to be received in evidence or shall not be acted
upon.
(ii) The agreement dated 21.5.2004 (Anx.C) had become frustrated and incapable of performance
for the reason of pendency of other litigations under the Ceiling Law relating to the land in dispute,
reference of which has also been made in the opening Para 6 of the agreement dated 21.5.2004, and
further reference of invalid, void and nullity or incapable of performance on account of obtaining
multiple approval and permissions involving third party right i.e. governmental authorities, as
mentioned in the agreement, particularly the opening para 6 of the agreement about the pendency
of the ceiling writ petition wherein the matter of surplus land and land required to be retained by
the Applicant is still to be decided more particularly on account of challenge to the Draft Statement,
has been made and further reference of which has been made in the preliminary objection No.(c),
(g) and (h), and the judgment under the Ceiling Law will be judgment in rem, and any sale or
agreement of sale shall be deemed to have been made in order to defeat the provisions of the Ceiling
Act, 1973 and further as per other provisions of the said Act, no civil or revenue court shall have the
jurisdiction to entertain or proceed with a suit for specific performance of the contract for transfer of
land which affects the right of the State Government to the surplus land under this Act, therefore,
the arbitration application is not maintainable.
(7) The Seller (Non-applicant) detailed out the said preliminary objections and further in reply to
para 15 of the arbitration application, the Non-applicant has submitted specifically that there was no
obligation upon the Non-applicant of fulfilling certain conditions for obtaining the no objection
from the government authorities. It is settled principle of law that no agreement to sell can be
construed to operate indefinitely. It can operate only for a reasonable point of time and in the light
of pending litigation, with respect to the subject matter of sale, the refusal to grant approval by the
government authorities, it is clear that the contract has become incapable of performance. The
Applicant has accepted the advance money of Rs.11 lacs returned by the Non-applicant towards final
settlement of its obligation under the agreement. Then further in reply to para 16, it has been
mentioned that the Applicant himself has admitted that the writ petition is pending before the High
Court against the order of the Board of Revenue dated 24.3.2004 by which the second appeal filed
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by the Non-applicant against the order of the Collector was dismissed by the Board of Revenue.
Counsel while replying to para 20 of the Arbitration Application and further submitting reply,
explained that even if the arbitration clause survives, then as per Clause 8 of the agreement, there
cannot be any unilateral appointment of an Arbitrator vide letter dated 8.9.2007 specially in the
light of the fact that the arbitration agreement no more subsists between the parties.
(8) The Applicant has filed rejoinder to the reply and in reply to the aforesaid preliminary objection
stated in rejoinder, thereafter also filed two counter affidavits and two applications, relevant
contents of which are as follows:
(i) Section 5(bb) is not applicable as the possession has neither been given nor agreed to be given
and otherwise also, Rs.100/- stamp is sufficient under Article 5(c). According to the Applicant,
Rs.100/- stamp is sufficient as per Clause 5(c) of the Schedule appended to the Act of 1998 under
section 3, considering the nature of the agreement. Alternatively, he submitted that in case this
Court comes to the conclusion that the instrument agreement is insufficiently stamped, then the
power of examining and impounding any instrument under Section u/s 37(2)(b) of the Act of 1998,
this Court may delegate its power to such officer as the Court may appoint in this behalf being High
Court and thereafter, it may be further sent to the revenue authorities Collector or to such person as
he may appoint in this behalf, u/s 42 of the Act of 1998 for determination of the stamp duty and
penalty.
(ii) In reply to the aforesaid preliminary objection No.(ii) raised by the Non-applicant, counsel for
the Applicant has submitted that the litigations under the Ceiling Law and further the fact of
pendency of the writ petition against the order of the revenue authorities and the Board of Revenue
wherein there is stay order of status quo and the Applicant being impleaded as a party has no
bearing on the maintainability of this arbitration application. Counsel for the Applicant submitted
that it is wrong for the Non-applicant to submit that the said agreement is illegal and void and
further, the said document is a valid document and even if for the sake of arguments, it is assumed
that the agreement for sale dated 21.5.2004 (Anx.C) is void or invalid document, the arbitration
clause contained therein is sustainable for the reason that it is the settled position of law that even in
a case where the agreement is terminated, then the arbitration clause survives and the case of the
Applicant is to be considered for appointment of an Arbitrator. The jurisdiction of this Court under
section 11 of the Arbitration and Conciliation Act, 1996 is very limited and that too, is only with
regard to giving the finding whether the Applicant and the Non-applicant are parties to the
agreement and further, this Court has the territorial jurisdiction or not and precludes this Court
from entering into the controversy of two preliminary objections. The jurisdiction of the Arbitrator
under section 16 of the Act of 1996 is much wider who can decide the aforesaid issues under section
16 of the Act of 1996.
(9) In rejoinder to the same para, it has also been stated that in the said writ petition, an Application
under Order 1 Rule 10 CPC was filed by the Applicant for impleadment as a party stating therein
that the agreement was entered into by the Non-applicant with the Applicant on 21.5.2004 for sale
of the piece of agricultural land measuring 17.5 Acres in Khasra No.118, Village Manpur Devri, Tonk
Road, Jaipur for a total consideration of Rs.20,05,15,000/- on the terms and conditions mentioned
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therein. Vide order dated 29.8.2008, this Court allowed the application for impleadment as party
and the Applicant herein has been made a party respondent in the writ petition which is pending on
date and wherein, there is an order of status quo in force. The aforesaid order dated 29.8.2008 is as
follows:
Order dated 29.8.2008 passed by this Court in SBCWP No.2229/2004 National Engineering
Industries Ltd. Jaipur V. The State of Rajasthan and others.
Heard learned counsel for the parties on the application filed by the applicant for impleadment.
The learned counsel for the applicant submits that the petitioner-company has entered into an
agreement dated 21st May, 2004 during the pendency of the writ petition and has taken an advance
amount of Rs.11,00,000/- and now contending before this Court that the agreement dated 21st May,
2008 has been frustrated or is incapable of performance.
In the aforesaid facts and circumstances of the case, the applicant has filed an application for
impleadment on the ground that for the purpose of complete adjudication of the dispute, its
presence is necessary.
The submission of the learned counsel for the petitioner is that no direct interest of the applicant is
involved in the matter and the applicant is neither necessary nor proper party.
I have considered the aforesaid submissions of the parties and is of the view that the presence of the
applicant is necessary in order to adjudicate the controversy involved in the matter.
In view of the above, the application is accepted and the petitioner is directed to implead the
applicant as respondent No.5 in the writ petition.
The amended cause title be filed within three days.
(emphasis supplied) (10) The Non-applicant has also submitted in the counter affidavit dated
29.6.2011 that SBCWP No.2229/2004 titled as NEI V.State was filed by the Non-applicant seeking
the following relief(s), out of which relief No.(c) relates to quashing the draft statement dated
26.3.1992 issued by the State Government.
(a) To call for the entire record of the case from the Courts of the Board of Revenue for Rajasthan,
Ajmer, Add. Collector-III, Land Conversion, Jaipur and Sub Divisional Officer, Jaipur;
(b) To quash the impugned order dated 24.3.2004 passed by the Board of Revenue, order dated
13.2.2004 passed by the Additional Collector, Jaipur-III, Jaipur and order dated 31.3.1983 passed
by the Sub Divisional Officer, Jaipur;
(c) To quash the draft statement dated 26th March, 1992 issued by the State Government;
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(d) To restrain the respondents from taking possession of any land of the petitioner pursuant to the
order under challenge;
(e) To quash the entire Ceiling proceedings in respect of land of the petitioner company in Ceiling
Case No.29/1973.
(emphasis supplied) (11) Thereafter, an additional affidavit was filed on 29.6.2011 by the
Non-applicant and filed an application u/s 9 of the Act of 1996 which was transferred to the Addl.
Distt. Judge who on 15.4.2011 passed an order directing the petitioner to amend the petition and
further to file within 20 days the copy of the writ petition bearing No. SBCWP No.2229/2004 and
copy of the proceedings u/s 11 before this Court along with the orders passed by this Court in these
matters. The said application u/s 9 was disposed of by the Addl. Distt. Judge on 31.5.2011 taking
note of the fact that the interim order has been passed against the Non-applicant in the writ
petition. Under these circumstances, any other order contrary to this will not be justified. It has also
been further observed that there is no justification to pass any order on the application dated
18.1.1998 which was disposed of with the direction that the concerned party will be free to act legally
after disposal of the Writ Petition No.2229/2004. All these orders have been filed along with the
order dated 29.8.2008 passed on the application of the Applicant in the writ petition and marked as
Annexure-3 collectively.
(12) Counter affidavit has been filed by the Applicant to the said additional affidavit on 30.8.2011
submitting in Para (D) therein that the factum of pendency of the writ petition in the Hon'ble Court
was very much in the knowledge of the Non-applicant prior to the filing of their reply to the
Arbitration Application under section 11 of the Act of 1996 and this objection ought to have been
taken by the Non-applicant in its reply itself and the said objection is not open to the Non-applicant
at this stage. Secondly, the factum of pendency of the writ petition is not a bar on the maintainability
of this petition as the subject matter in the writ petition and Sec. 11 petition are different from each
other i.e. whereas the writ petition pertains to the rights and obligations of the respondent in respect
of 253.78 Acres of land (including the 17.5 Acres which are the subject matter of the agreement
dated 21.5.2004 executed between the Applicant and the Non-applicant). It has also been stated in
Para 10 of the additional affidavit that the existence of the Writ Petition No.2229 of 2004 has been
duly disclosed in the petition under section 11, however, the other facts, pertaining to the
impleadment of the Applicant in the said writ petition and grant of status quo order etc. are not
germane or and relevant to the present proceedings, thus, they have not been given in detail.
(13) SBCWP No.2229/2004 was ordered to be connected with this arbitration application vide order
dated 24.11.2011.
(14) In this arbitration application, the arguments were heard and order was reserved on 15.12.2011.
Thereafter, one more judgment of the Supreme Court in Transmission Corpn. of A.P.Ltd. and others
V. Lanco Kondapalli Power (P) Ltd. (2006) 1 SCC 540) was given by Mr.Ashok Gaur, Sr.Advocate,
counsel for the Applicant, therefore, in order to provide opportunity to both the parties, to make
submissions on the aforesaid judgment, the present arbitration application was listed on 23.2.2012
in the category To be Mentioned. On a perusal of the order sheets of the writ petition, it was
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revealed that the same has not been admitted, therefore, on 24.8.2012, the writ petition was
segregated from this arbitration application with liberty to the parties to get the writ petition listed
for admission. The aforesaid orders dated 24.11.2011 passed in this arbitration application and
further order passed in the writ petition on 24.8.2012 (photo stat copy of which has been placed on
record of this arbitration application) are as follows:
Order dated 24.11.2011 passed in the arbitration application List on 08.12.2011 along with Civil Writ
Petition No.2229/2004 NEIL V. State of Rajasthan.
Order dated 24.8.2012 passed in the writ petition This writ petition, which was tagged with SB
Arbitration Application No.54/2008, has not been admitted so far, therefore, the same be
segregated form SB Arbitration Application No.54/2008.
The parties are at liberty to get the writ petition listed for admission.
(15) On 6.9.2013, the order was reserved in this arbitration application.
(16) It is also appropriate to refer that the Applicant, during the pendency of this arbitration
application, has filed two applications (i) Application No.30166/2012 was for impounding the
agreement under section 9 read with Sec.37(2)(b) of the Rajasthan Stamp Act, 1998 if it is
insufficiently stamped and it was prayed that the original agreement to sale may be impounded and
the same authority may be directed to assess the stamp duty payable by the Applicant company and
the said application was withdrawn on 21.8.2013 vide Application No.14209/2013 by keeping the
objection of the Non-applicant alive that the agreement is insufficiently stamped and reply thereof
filed by the Applicant that no stamp duty is required to be filed as taken in the rejoinder. Another
application was filed for change of the name of the Applicant and filing the amended memo of
parties on the ground that the Applicant is ordered to be merged by the Delhi High Court in
M/s.Aeren R. Enterprises Pvt.Ltd. on which the counsel for the Non-applicant has raised the
objection that the issue of stamp duty on the amalgamation order was kept open by the Delhi High
Court with the observation that the said order of the Delhi High Court has not exempted payment of
stamp duty on amalgamation order in para 6, therefore, on 21.8.2013, this Court passed an order
that on production of the amalgamation certificate, either with stamp duty or exemption thereof, the
name of the present Applicant shall be deemed to be substituted by the name of Aeren R Enterprises
Pvt. Ltd. in this arbitration application and further proceedings thereon.
Order on the Application No.14209/2013; for withdrawal of application No.30166/2012:
The application No.14209/2013 for withdrawal of Application No.30166/2012 is allowed and
Application No.30166/2012 is allowed to be withdrawn keeping the objection of the non-applicant
alive that the agreement is insufficiently stamped and reply thereof filed by the applicant that no
further stamp duty is required to be filed in the agreement as taken in the rejoinder. (Emphasis
supplied) Order on the Application No.30167/2012 to amend the cause title of the arbitration
application and for taking on record the amended memo of parties.
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I have considered the aforesaid submissions of counsel for both the parties.
In my view, now the question remains is with regard to the limited compliance of the judgment /
order of the Delhi High Court regarding stamp duty is chargeable or not on the amalgamation
certificate.
In view of the above, the application is disposed of in the manner that on production of
amalgamation certificate either with stamp duty or exemption thereon, the name of the present
applicant shall be deemed to be substituted by the name of M/s.Aeren R Enterprises Pvt. Ltd. In this
arbitration application and further proceedings thereon.
(emphasis supplied) Put up on 2nd September, 2013.
(17) The aforesaid preliminary objections raised by the counsel for the Non-applicant and replied to
by the counsel for the Applicant can be summarized in the form of Questions, which are as follows:
(i) Whether the agreement to sell dated 21.5.2004 (Anx.C) for the sale consideration of
Rs.20,05,15,000/- on a Rs.100/- stamp is sufficiently stamped. Even if it is insufficiently stamped,
after withdrawal of the application for impounding and determination of the stamp duty on
21.8.2013, can the instrument be now sent for impounding as the Designate Judge while exercising
power u/s 11 of the Act of 1996 to such officer as the Court appoints in this behalf as per Sec.37(2)(b)
of the Rajasthan Stamp Act, 1998 and for determination of the stamp duty by the revenue authority
and the arbitration application is maintainable.
(ii) Whether the agreement to sell dated 21.5.2004 (Anx.C) executed between the parties during the
pendency of the ceiling proceedings under the Rajasthan Imposition of Ceiling on Agricultural
Holding Act, 1973, more particularly under Sec.3,6 and 36 agreement to sell shall be deemed to have
been made to defeat the provisions of the Ceiling Act, 1973 and further the same shall not be
recognised and no civil court or revenue court can initiate proceedings for specific performance of
the contract entered into during the pendency of ceiling proceedings, the agreement is void or
invalid and is incapable of performance, more particularly, when the judgments of the revenue
authorities, are under challenge in the pending SBCWP No.2229/2004 filed against the State of
Rajasthan and the revenue authorities, wherein the Applicant is also impleaded as a respondent on
29.8.2008 and status quo order is in force which has no bearing on the arbitration considering the
scope of jurisdiction of this Court u/Sec.11 and the jurisdiction of the Arbitrator under Sec.16 of the
Act of 1996 and the Arbitrator can be appointed.
(18) Before consideration of Question No.(i), it is appropriate to refer the relevant provisions of
Sec.2(xi), 3(a), 18(1), 37, 39 and Schedule 5(bb), 5(cc) and Article 21 along with Explanation No.(i)
with proviso thereof, which are as follows:
Sec. 2(xi), 3(a), Sec.18(1), Sec.37,Sec.39 Article 5(bb),5(c) & 21 of the Schedule to the Rajasthan
Stamp Act, 1998.
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Sec.2(xi) Conveyance includes,(i) a conveyance on sale,
(ii) every instrument,
(iii) every decree or final order of any Civil Court,
(iv) every order made by the High Court under section 394 of the Companies Act, 1956 (1 of 1956) in
respect of amalgamation of the companies,
(v) sale of air rights,
(vi) sale / consent related to below surface rights, by which property, whether movable or
immovable, or any estate or interest in any property is transferred to, or vested in, any other person,
intervivos, and which is not otherwise specifically provided for by the schedule.
Sec.3. Instrument chargeable with duty. Subject to the provisions of this Act and the exemptions
contained in the Schedule, the following instruments shall be chargeable with duty on the amount
indicated in the Schedule as the proper duty therefore respectively, that is to say,(emphasis supplied)
(a) every instrument mentioned in that Schedule, which, not having been previously executed by ay
person, is executed in the State on or after the date of commencement of this Act;
(b) ......
Sec.18. Instruments other than bills and notes executed out of State. (1) Every instrument
chargeable with duty executed out of the State and not being a bill of exchange, or promissory note,
may be stamped within three months after it has been first received in the State.
(2) ......
Sec.37. Examination and impounding of instruments.- (1) Every person having by law or consent of
parties authority to receive evidence, and every person incharge of a public office, except an officer
of a 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 duly
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 the State when such instrument was executed
or first executed:
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Provided that, (a) nothing herein contained shall be deemed to require any Magistrate or Judge of a Criminal Court
to examine or impound, if he does not think fit so to do, any instrument coming before him in the
course of any proceeding other than a proceeding under Chapter XI or Part D of Chapter X of the
Code of Criminal Procedure, 1973 (Act No.2 of 1974);
(b) in the case of a Judge of a High Court, the duty of examining and impounding any in
(3)
For the purposes of this section in cases of doubt, -
(a) the State Government may determine what offices shall be deemed to be public office
(b) the State Government may determine who shall be deemed t be persons incharge of pub
(4) When a person incharge of a public office, during the course of inspection or otherwise detects
from an instrument or coy thereof or when it appears therefrom to the person referred to in sub
section (1) that the instrument is not duly stamped, such person shall forthwith make a reference to
the Collector in that matter.
(5) The Collector may, suo moto or on such reference, call for the original instrument for
ascertaining whether it is duly stamped and the instrument so produced shall be deemed to have
been produced or come before him in the performance of his functions and in case the original
instrument is not produced within the period specified by the Collector, he may require the payment
of the proper duty or the amount required to make up the same together with the penalty under
section 44.
Section 3)
THE SCHEDULE
(See
Description of Instrument
Proper Stamp Duty
5. Agreement or memorandum of an agreement, -
(bb) if relat
Three percent of the total consideration of the property as set forth in the agreement or
memorandum of agreement: Provided that the stamp duty paid on such agreement shall at the time
of the execution of a conveyance in pursuance of such agreement subsequently by adjusted towards
the total amount of duty chargeable on the conveyance if such conveyance deed is executed within
three years from the date of agreement.
(c) if not otherwise provided for. Exemption:
One hundred rupees
Agreement or memorandum
(emphasis supplied)
Article 21. Conveyance as defined by Sec.2(xi),(i) if relating to immovable property;
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(ii) if relating to movable property,
(iii) if relating to amalgamation of companies by the order of the High Court
Section
under 394
Exemption:- Assignment of copy right by entry made under the Copy Right Act, 1957 (Act No.14 of
Explanation:- (i)
For the purpose of this article an agreement o sell an immovable property or
Provided that the provisions
section
of 51 shall be applicable mutatis mutandis to such agreeme
Provided further that th stamp duty already paid on such agreement or power of attorney or
instrument shall at the time of the execution of a conveyance or lease in pursuance of such
instruments subsequently, be adjusted towards the total amount of duty chargeable on the
conveyance or lease.
Explanation (ii) For the purposes of clause (iii), the market value of the property shall be deemed to
be the amount of total value of shares issued or allotted by Transferee Company, either in exchange
or otherwise, and the amount of consideration, if any, paid for such amalgamation.
Sec.39 of the Act of 1998
39. Instruments not duly stamped inadmissible in evidence, etc. No instrument chargeable with
duty under this Act 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. (emphasis
supplied) Provided that (a) to (g) .....
Submissions on the Preliminary Objection No.(i), by both the parties along with the citations (19)
Both the parties placed reliance on the Schedule under section 3, Sec.2(xi), 3(a) and (b) and Article
5(bb) of the Schedule under the Rajasthan Stamp Act, 1998. However, Mr.Maloo, Sr.Advocate
appearing for the Non-applicant, placed reliance on Article 21.1 read with the Explanation No.I
wherein in case of transfer of the possession of such property before, at the time of or after the
execution of any such instrument will be a conveyance as defined under Sec. 2(xi) and there is no
dispute between the parties that presently, the stamp duty of 11% mentioned in the Schedule is 5%,
of the Rajasthan Stamp Act, 1988 to distinguish the judgment of this Court, whereas Mr.S.M.Mehta,
Sr.Advocate additionally placed reliance on Sec.18 and Article 5(c) of the Schedule u/s 3 of the Act of
1998 to substantiate his reply to the preliminary objection that Rs.100/- stamp is sufficient.
Alternatively, he submitted that in case this Court finds that Rs.100/- stamp is insufficient, then the
same can now be sent for impounding and determination of the stamp duty u/s 37(2)(b) and Sec. 40
of the Act of 1998.
(20) Since Mr.Mehta has first given reply to the preliminary objections raised by Mr.Maloo and
Mr.Maloo has further distinguished the same, the relevant provisions of law cited by both the
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parties and submission of Mr.Mehta are being considered first.
(21) The judgments cited by Mr.S.M.Mehta, Sr.Advocate are as follows:
(i) New Central Jute Mills Co. Ltd. and others V.State of W.B. and others (AIR 1963 SC 1307) Para
21
21. The mortgage deed which is the subject matter of the present petition was executed in Uttar
Pradesh, though it related to property situated in West Bengal and was received in that state for
registration. The first dutiable event was the execution, which took place in U.P., the second dutiable
event was the receipt in West Bengal. When it came before the officers of Uttar Pradesh for decision
whether it was duly stamped or not, the officers of Uttar Pradesh were bound to hold for the reasons
we have discussed earlier that the instrument was not duly stamped as it did not bear Uttar Pradesh
stamps. The fact that the instrument was not stamped in accordance with the law of West Bengal
could not justify a conclusion tat it had been stamped in accordance with the law in force in India.
The Officers of the State of U.P. therefore, rightly held that the original mortgage deed was not duly
stamped. (emphasis supplied)
(ii) Deepak Soni & another V.Kodar Mal & another (2013) 2 WLC (Raj.) 155, Paras 16, 17, 17, 18 and
19.
16. After hearing learned counsel for the parties, I have perused clause 5(bb) of the Act of 1998
which reads as under:
(bb) if relating to Three percent of the total purchase of sale of an consideration of the property,
immvable property when as set forth in the agreement or possession is neither given nor
memorandum of agreement agreed to be given:
Provided that the stamp duty paid on such agreement shall at the time of the execution of a
conveyance in pursuance of such agreement subsequently be adjusted towards the total amount of
duty chargeable on the conveyance if, such conveyance deed is executed within three years from the
date of agreement.
17. Upon perusal of clause 5(bb), it is rvealed that if any agreement or memorandum of agreemnt
relating to purchase or sale of an immovable property, when possession is neither given nor yet to be
given, then, 3% of the total cost of the property is payable for stamp duty. After perusal of the
aforesaid provision, I have perused Annex.1 agreement filed with the writ petition which is written
on stamp of Rs.100/-. Para 9 of the said agreement is as follows: (emphasis supplied)
9. ?? ?? ???? ?????? ???? ?? ????? ??? ???? ?????? ?????? ???? ??? ?????? ???? ???? ??????? ?????????
?? ????? ????????? ??????? ?? ???? ? ??? ???? ?? ??? ????? ??. 370 ??, 367, 357, 348, 332, 352, 343,
340, 354 ? 339 ?? ????? ??????? ?? ???? ?
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17. It is true that in this agreement there is no assertion that possession has been given to the
petitioner but, at the same time, in para 9, it is specifically agreed that possession will be given at the
time of registration of the sale deed. In view of above, I am of the opinion that the trial Court has
committed grave error while sending the agreement in question to the District Collector for
determining the stamp duty and penalty which is not attracted in this case.
18. In view of the above, there is no strength in the argument of learned counsel for the respondents
that the document in question is not admissible in evidence. It is also worthwhile to observe that in
two other suits filed by the petitioners and decided by Addl. District Judge (Fast Track) No.2,
Udaipur being suits No.38/2007 and No.40/2007, the same document was accepted and, after
taking into consideration the said document, decree was passed in favour of the petitioners,
therefore, it can be said that objection taken by the respondent with regard to inadmissibility of the
document has no force of law.
19. In view of the above, all these writ petitions are allowed. Impugned order dated 05.11.2008 is
quashed and set aside with direction to the trial Court to exhibit the said document for the purpose
of adjudication of the controversy in the suit.
(iii) SMS Tea Estates Pvt.Ltd. V. Chandmari Tea Co. Pvt.Ltd. (2011) 4 Arb.LR 265 (SC) Para 12
(while dealing with an application u/s 11 of the Act of 1996 and Sec.33 and 35 of the Indian Stamp
Act, 1899).
12. 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:
(i) 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.
(ii) If the document is found to be not duly stamped, Section 35 of the 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 Sections 35 and 38 of the Stamp Act.
(iii) 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.
(iv) 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. (emphasis supplied)
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(v) 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
anyway 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.
(vi) 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.
(22) The judgments cited / distinguished by Mr.N.K.Maloo, Sr.Advocate on Preliminary Objection
No.(i) are as follows:
(i) Naina Thakkar V. M/s.Annapurna Builders (2012 (7) SCALE 236) Pars 2,6 and 7 wherein the
Supreme Court has clarified the fact that it is not the duty of the Court to adjourn the suit
indefinitely until the defect with reference to deficit stamp duty concerning the arbitration
agreement is cured. The conduct and willingness of the party is also to be seen. He further
submitted that in this particular case, opportunity was available with the Applicant before filing the
arbitration application and thereafter also on taking objection in reply and then again also after
filing of the Application No. 30166/2013 which has been withdrawn, therefore, it appears that the
Applicant himself is not willing to impound and determine the stamp duty. Paras 2,6 and 7 are as
under:
2. Learned counsel for the petiiner places reliance upon a decision of this Court in M/s.SMS Tea
Estates Pvt.Ltd. Vs. M/s.Chandmari Tea Co.Pvt.Ltd. and submits that the 2nd Additional Chief
Judge, City Civil Court at Hyderabad in his order dated July 20, 2010 in the application made by the
petitioner under Section 8 of the Arbitration and Conciliation Act, 1996 (for short, the Act) having
held that the lease deed dated December 19, 2005 is insufficiently stamped ought to have
impounded the said lease deed and followed the procedure prescribed under Sections 35 and 38 of
the Indian Stamp Act, 1899 and, if the document was found to be not duly stamped, should have
given an opportunity to the petitioner to make up the deficit stamp duty and pay penalty if directed
by the Collector. Having not followed the above procedure, the said court committed serious
illegality in rejecting petitioner's application under Section 8 of the Act and the High Court was in
error in not interfering with such illegal order.
6. In the light of the above legal position, when we look at the facts of the present case, we find that
while pressing the application under Section 8 of the Act, the petitioner did not show any inclination
to pay the deficit stamp duty on the lease deed dated December 19, 2005 nor expressed her desire
that she was willing to pay the penalty as may be imposed by the Collector if the document was
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impounded and stamp duty payable thereon was determined.
(emphasis supplied)
7. It is true that the consequences provided in the Indian Stamp Act, 1899 must follow where
sufficient stamp duty has not been paid on an instrument irrespective of the willingness of a party to
the instrument to pay deficit stamp duty but the procedure where the arbitration clause is contained
in a document which is not registered although compulsorily registrable and which is not duly
stamped as summed up by this Court in M/s. SMS Tea Estates Pvt.Ltd case (supra) shall not be
applicable to the proceedings under Section 8 of the Act where the party making such application
does not express his / her readiness and willingness to pay the deficit stamp duty and the penalty. It
is not the duty of Court to adjourn the suit indefinitely until the defect with reference to deficit
stamp duty concerning the arbitration agreement is cured. Accordingly, we are of the opinion that
no fault can be found in the order of the trial court in rejecting the application made under Section 8
of the Act as the document on which the petitioner relied upon was admittedly unregistered and
insufficiently stamped. (emphasis supplied)
(i) He further cited the following judgments:
Paras 8 and 9 of Raj Kumar V.Commissioner Jhansi Division, Jhansi and others (MANU / UP /
1032 /2012)
8. The short question that arises for adjudication is whether the agreement for sale in question was
liable to be treated as a deed of conveyance under the Explanation to Article 23 of Schedule1-B of
the Indian Stamp Act, and be subjected to stamp duty as payable thereon. If the answer to this
question is in the negative then the agreement in question would be liable to stamp duty on the
consideration set forth in the agreement, as per clause (b-1) of Article 5 of Schedule 1-B, resulting in
abatement of the proceedings under Section 47-A, as they are to be instituted to determine the
market value of the subject-matter of the instrument, where the incidence of stamp duty is
dependent on the market value of the subject-matter of the instrument.
9. I have carefully read the agreement for sale dated 22.8.2001, which is the subject-matter of the
proceeding. A perusal thereof goes to show that it does not disclose that the possession was
delivered in the past or was agreed to be delivered without executing the deed of conveyance. There
is also nothing in the agreement which may show that the possession was being delivered at the time
of its execution. In fact, the agreement clearly records that the possession of the subject-matter of
agreement has not been delivered. (emphasis supplied) Paras 9, 12 and 13 of Balwantgir Ganpatgir
Giri V. Manasi Construction and Developers and Ors. (MANU / MH / 0569 / 2006)
9. The fact that the agreement in question clearly contemplates delivery of possession only on
execution of the sale deed being not in dispute, in fact, that itself is sufficient to reject all the
contentions sought to be raised on behalf of the appellants. Besides, as rightly submitted on behalf
of the respondent,s the Explanation to Article 25, the delivery of possession which transposes an
agreement into a conveyance in terms of the said Explanation is only in case of agreement to deliver
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the possession in terms of the agreement and not in terms of the sale deed agreed to be executed
consequent to such agreement. Indeed, in case of execution of the sale deed it would carry the stamp
duty which is required to be paid on a conveyance in accordance with the Article 25 of Schedule-I.
Being so, once the sale deed is executed by paying required stamp duty in terms of Article 25, the
occasion to deprive the Government revenue cannot arise. For the said reason, once the agreement
discloses that delivery would be on execution of the sale deed, it is needless to say that there could
be no opportunity for the parties to defraud the Government. Being so, an agreement which restricts
delivery of possession on execution of the sale deed cannot be by any stretch of imagination
construed to be a conveyance within the meaning of the said expression under Explanation-I to
Article 25 of Schedule-I of the said Act. (emphasis supplied)
12. One more factor which is to be noted in the matter in hand is that the agreement for sale dated
3.3.2000 discloses that the conveyance of the property was agreed for the total consideration of
Rs.12,30,000/- and out of the said amount, sum of Rs.1,00,000/- was paid on execution of the
agreement, the sum of Rs.2,00,000/- was agreed to be paid on or before 25.3.2000 and the balance
of Rs.9,30,000/- by 25.1.2001. The sale deed was agreed to be executed ony after payment of the
entire amount. And only thereafter possession was agreed to be delivered. These facts clearly
disclose that the document wa clearly an agreement for sale whereby even the entire consideration
which is agreed to be paid was not paid on the date of the execution of the agreement. Though mere
non payment of consideration by itself may not relieve the parties from their obligation to pay stamp
duty, in terms of Explanation-I to Article 25 when the delivery of possession of the property is made
or agreed to be in terms of the agreements, yet when these facts disclose the intention of the parties
as well as the conduct of the parties, both factors being relevant to ascertain the real nature of the
transaction between the parties, and that the possession was to be delivered after conclusion of sale
deed, the agreement cannot be said to be conveyance within the meaning of the said expression
under the Explanation-I to Article 25 of Schedule-I of the said Act. (emphasis supplied)
13. Taking into consideration all the facts and circumstances on record, it is therefore, clear that the
agreement dated 3.3.2000 is purely an agreement for sale wherein there is no recital for delivery of
possession in terms of the agreement. On the contrary, the terms of agreement are to the effect that
the possession would be delivered on execution of the sale deed. Hence, such an agreement cannot
be construed as a conveyance within the meaning of the said expression under Explanation-I to
Article 25 of Schedule-I of the said Act. (emphasis supplied) Veena Hasmukh Jain and another V.
State of Maharashtra and others (1999) 5 SCC 725, Para 5
5.The High Court also examined the scope of Explanation I to Article 25 of Schedule I of the Bombay
Stamp Act and held that the same was attracted to the case. Under the agreement there is an
obligation to hand over the possession even before execution of a conveyance and, therefore, it was a
"conveyance" for the purpose of duty payable under the Bombay Stamp Act and there was no
obligation in the agreement to enter into a conveyance at a later stage and clearly it was a case which
attracted said Explanation. Handing over of the possession on the very date of execution was not
relevant for determining the nature of the document. On that basis the High Court upheld the stand
taken by the State in the matter of levy of duty. Other questions raised in the Writ Petition are not
the subject matter of these appeals and, therefore, we do not advert to those questions. On the
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conclusion reached by the High Court the Writ Petition stood dismissed. (emphasis supplied)
Balmukund Pandey V. V.K.Singh (AIR 2010 MP 115) Paras 6 and 7
6. To appreciate the contention of petitioner, relevant provision as contained in Article 5(e) of
Schedule I-A of the Act may be looked into, which reads as under:
(e) If relating to sale of immovable property:
(i) When possession of the property is delivered or is agreed to be delivered without executing the
conveyance.
The same duty as a conveyance (No.20) on the market value of the property.
(ii) When possession of the property is not given One per cent of the total consideration of the
property set forth in the agreement or memorandum of agreement.
(emphasis supplied)
7. The aforesaid provision specifically provides that the stamp duty of agreement or memorandum
of an agreement when possession of the property is not given shall be @ 1% of the total
consideration of the property set forth in the agreement. The aforesaid provision is very clear and
provides payment of stamp dty of 1% of the total consideration of the property set forth in the
agreement. The trial Court ignoring the aforesaid provision directed payment of deficit stamp duty
on the basis of earnest money paid in the agreement. (emphasis supplied)
(ii) As regards the judgment of Deepak Soni & another V.Kodar Mal & another (2013) 2 WLC (Raj.)
155, he submitted, by making reference to the facts and law by making reference of Article 21.1 read
with Explanation (i) and Sec.2(xi) of the Act of 1998, that the same is per incurium and further
submitted that Article 5(c) does not relate to agreement to sale or for sale of immovable property.
(iii) While referring to Sec.18 an 20 of the Act of 1998, he also distinguished the judgment of the
Supreme Court in New Central Jute Mills Co. Ltd. and others V.State of W.B. and others (AIR 1963
SC 1307) cited by the counsel for the Applicant, that the same relates to the mortgage deed which
was compulsorily registrable, therefore, it cannot be said that the stamp duty on the agreement is to
be payable at the time of presenting the document for registration in Rajasthan.
Consideration of Preliminary Question No.(i) (23) On consideration of the aforesaid submissions
along with the provisions of law and citations of the parties, the case of New Central Jute Mills Co.
Ltd. and others V.State of W.B. and others (supra) of the Supreme Court is mainly relating to the
stamp duty on mortgage deed executed in UP relating to the property in West Bengal which is
required to be compulsorily registered and stamped and further, that it must be stamped in
accordance with law of the first State and it will not be required to pay stamp duty in accordance
with the law of the second State and the judgment of this Court in Deepak Soni (supra) is
distinguished on facts and law, more particularly, the case where the possession has neither been
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given nor agreed to be given by covering the same under Article 5(bb) but still, 3% stamp duty has
not been taken into consideration and agreement on Rs.100/- stamp has been held to be sufficient
and further the present case as per the aforesaid case and law is covered by Article 5(bb) of the
Rajasthan Stamp Act, 1988 according to which 3% stamp duty was required to be paid which has not
been paid. As regards impounding of the same, this Court cannot delegate its power to any other
subordinate court under Article 37(2)(b) being High Court and further, the Applicant has not
availed of the following opportunities available to it for getting the document impounded and duly
stamped in case the same is insufficiently stamped:
(i) before filing of the arbitration application;
(ii) Filing of the reply to the arbitration application wherein the said preliminary objection has been
taken;
(iii) Then again, in between rejoinder to filing of the application for impounding of the same and
determination of the stamp duty which was withdrawn on 21.8.2013, as detailed out hereinabove,
keeping the reply to the objection that no further stamp duty is required to be paid.
(24) In view of the aforesaid opportunities, available to the Applicant, which have not been availed
of by it, I am of the view that Para 12 of SMS Tea Estate (supra) is not applicable to the facts of the
present case and the provisions of law more particularly Sec.37(2)(b) of the Rajasthan Stamp Act,
1988 according to which, this Court has to appoint an officer for impounding the document and
then send the same for determination of the stamp duty, which is not permissible under section 11 of
the Act of 1996. For the aforesaid reason, the judgment of the Supreme Court in SMS Tea Estate is
not applicable and only the preliminary objection raised by the respondent was decided but here in
the present case, the application filed by the Applicant for impounding and determination of the
stamp duty has been withdrawn and further opportunity has not been availed of. As per Paras 2,6
and 7 of Naina Thakkar of the Supreme Court, conduct of the parties is to be seen and the Court is
not to wait indefinitely for cure of the defect of stamp duty and further, the judgments in Raj Kumar
V.Commissioner Jhansi Division, Jhansi and others (supra), Balwantgir Ganpatgir Giri V. Manasi
Construction and Developers and Ors. (supra), Veena Hasmukh Jain and another V. State of
Maharashtra and others (supra) and Balmukund Pandey V. V.K.Singh (supra) cited by Mr.Maloo,
Sr.Advocate with regard to the payment of stamp duty in case the possession has not been given nor
agred to be given, are applicable.
Answer to the Question No.(i) (25) I hold that the agreement to sale dated 21.5.2004 (Anx.C) being
on Rs.100/- stamp is insufficiently stamped, whereon 3% stamp duty is chargeable, which has not
been paid and further the Applicant is not entitled for getting it impounded from this Court on
account of the restriction imposed by Sec.37(2)(b) of the Rajasthan Stamp Act, 1998 by appointing
an officer as the Court may appoint in this behalf, which is not possible for me while exercising the
power of the Designate Judge in a proceeding u/s 11 of the Act of 1996, therefore, as per Sec.39 of
the Act of 1998, the said agreement being insufficiently stamped cannot be acted upon.
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Consideration of Preliminary Objection No.(ii) (26) It would be appropriate to refer the relevant
provisions of the Ceiling Law i.e. Sec. 3,6 and 36 of the Act of 1973 and Sec.11 and 16 of the Act of
1996, which are as follows:
Sec.3, 6 and 36 of the Act of 1973
3. Act to override other laws, contracts etc.- The provisions of this Act shall have effect
notwithstanding anything inconsistent contained in any other law for the time being in force, or any
custom, usage or contract or decree or order of a court or other authority.
6. Non-recognition of certain transfers.- (1) Notwithstanding anything contained in any law for the
time being in force, every transfer of land whether by way of sale, gift, exchange, assignment,
surrender, bequest, creation of trust or otherwise made on or after 26th September, 1970, except a
bona fide transfer made before 1st January, 1973, shall be deemed to have been made in order to
defeat the provisions of this Act and shall not be recognized or taken into consideration in
determining the ceiling area applicable to a person:
(2) The burden of proving the transfer to be bona fide shall be on the transferor.
(emphasis supplied)
36. Bar of jurisdiction of civil courts.- (1) No civil or revenue court shall have jurisdiction to decide
or deal with any question or matter which is by or under this Act required to be decided or dealt with
by the Authorised Officer or any other authority.
Sec.11
(2) No civil or revenue court shall have jurisdiction to entertain or proceed with a su
and 16 of the Act of 1996
Sec.11 of the Act of 1996
11. Appointment of arbitrators
(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the pa
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appoin
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three
(4) If the appointment procedure in sub-section (3) applies and -
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a req
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty d
the appointment shall be made, upon request of a party, by the Chief Justice or any person or i
(5) 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.
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(6) Where, under an appointment procedure agreed upon by the parties (a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under
that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that
procedure, a party may request the Chief Justice or any person or institution designated by him to
take the necessary measure, unless the agreement on the appointment procedure provides other
means for securing the appointment.
(emphasis supplied) Section 16
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 indepe
b. a decision by the arbitral tribunal that the contract is null and void shall not entail ipso
2. A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the
submission of the statement of defence; however, a party shall not be precluded from raising such a
pica merely because that he has appointed, or participated in the appointment of, an arbitrator.
3. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as
the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings.
4. The arbitral tribunal may, in either of the cases referred it, in sub-section (2) or sub-section (3),
admit a later plea if it considers the delay justified.
5. The arbitral tribunal shall decide on a plea referred to in sub section (2) or subsection (3) and,
where the arbitral tribunal takes a decision rejecting the plea, continue with die arbitral proceedings
and make an arbitral award.
6. A party aggrieved by such an arbitral award may make an application for setting aside such an
arbitral award in accordance with section 34.
(27) Mr.Mehta, Sr.Advocate submitted that the ceiling proceedings have no bearing on the present
arbitration application as the scope of jurisdiction of this Court under Sec. 11 of the Act is limited
whereas jurisdiction of the Arbitrator under section 16 of the Act is much wider than Sec. 11,
therefore, the issue of specific performance of the contract is an arbitral issue which can also be
referred to him, who will decide the objection u/s 16 of the Act of 1996. Mr.Mehta further submitted
that the arbitration agreement dated 21.5.2004 (Anx.C) is a valid agreement and even if, for the sake
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of arguments, the same is taken to be invalid, then also, the arbitration clause survives. He placed
reliance on M.R.Engineers & Contractors Pvt.Ltd. V. Som Datt Builders Ltd. (2009(3) Arb.LR 1 (SC)
(Para 15), Hythro Power Corporation Ltd. V.Delhi Transco Ltd. (2003 (3) Vol.52 Arbitration Law
Reporter 1 (Para 11), National Insurance Co. Ltd. V. Boghara Polyfab Private Limited (2009) 1 SCC
267) (Para 22) which derived its origin from the Constitution Bench Judgment in SBP & Co. V. Patel
Engg. Ltd. (2005) 8 SCC 618, as referred in Paras 19 to 23 of the judgment of this Court in
M/s.Electrosteel Castings Ltd. V. Rajasthan Urban Infrastructure Dev. Project (SB Civil Arbitration
Application No.22/2009, decided on 8.12.2011) wherein the scope of Sec.11 and 16 of the Act of 1996
has also been explained, Indian Oil Corporation Limited V. SPS Engineering Limited (2011) 3 SCC
507) Para 14, S.N.Prasad, Hitek Industries (Bihar) Limited V.Monnet Finance Limited and others
(2011) 1 SCC 320) Para 28, Reva Electric Car Co. P. Ltd. V.Green Mobil (2011 (4) Arb. LR 296 (SC)
Para 34 and N. Srinivasa V.Kuttukaran Machine Tools Limited (2009) 5 SCC 182, Para 37 and the
judgment dated 8.12.2011 passed in SB Arbitration Application No.22/2009 M/s.Electrosteel
Castings Ltd. V.Rajasthan Urban Infrastructure Dev. Project (Relevant portion of Para 28, at pages
22 to 25 along with Question No.1 in Para 32 and finding thereon in Para No.37 and Question No.2
with conclusions in Paras 40 and 41 which relates to the finding of fact.
M.R.Engineers & Contractors Pvt.Ltd. V. Som Datt Builders Ltd. (2009(3) Arb.LR 1 (SC) (Para 15)
15. The work order (sub-contract), relevant portions of which have been extracted in para 3 above,
shows that the intention of the parties was not to incorporate the main contract (between the PW
Department and respondent) in entirety into the sub contract. The use of the words "This
sub-contract shall be carried out on the terms and conditions as applicable to main contract" in the
work order would indicate an intention that only the terms and conditions in the main contract
relating to execution of the work, were adopted as a part of the sub-contract between respondent
and appellant, and not the parts of the main contract which did not relate to execution of the work,
as for example the terms relating to payment of security deposit, mobilization advance, the itemised
rates for work done, payment, penalties for breach etc., or the provision for dispute resolution by
arbitration. An arbitration clause though an integral part of the contract, is an agreement within an
agreement. It is a collateral term of a contract, independent of and distinct from its substantive
terms. It is not a term relating to `carrying out' of the contract. In the absence of a clear or specific
indication that the main contract in entirety including the arbitration agreement was intended to be
made applicable to the sub-contract between the parties, and as the wording of the sub-contract
discloses only an intention to incorporate by reference the terms of the main contract relating to
execution of the work as contrasted from dispute resolution, we are of the view that the arbitration
clause in the main contract did not form part of the sub-contract between the parties. We are
fortified in this view, by the decision in Alimenta SA. v. National Agricultural Co-op. Marketing
Federation of India Ltd. (1987) 1 SCC 615 = 1987 (1) Arb.LR 78(SC). The NAFED - the respondent
therein entered into two contracts with Alimenta S.A. for the supply of certain goods referred to
HPS. Clause 11 of the first contract stipulated that "other terms and conditions as per FOSFA- 20
contract terms". (FOSFA-20 being a standard form of contract of the Federation of Oils, Seeds and
Fats Association Ltd. containing an Arbitration clause). Clause 9 of the second contract provided
that "all other terms and conditions for supply not specifically shown and covered hereinabove shall
be as per previous contract signed between us for earlier supplies of HPS". The question before this
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court was whether the arbitration clause in FOSFA -20 was incorporated in the first contract by way
of Clause 11 and in the second contract by virtue of Clause 9. The Court held that while the
Arbitration clause was incorporated in the first contract, the same was not incorporated in the
second contract. The following reasoning of the Court while dealing with the second contract is
relevant for our purpose:
(emphasis supplied) "There is a good deal of difference between Clause 9 of this
contract and Clause 11 of the first contract. Clause 11 has been couched in general
words, but Clause 9 refers to all other terms and conditions for supply. The High
Court has taken the view that by Clause 9 the terms and conditions of the first
contract which had bearing on the supply of HPS were incorporated into the second
contract, and the term about arbitration not being incidental to supply of goods,
could not be held to have been lifted as well from the first contract into the second
one."
"It is, however, contended on behalf of the appellant that the High Court was wrong
in its view that a term about arbitration is not a term of supply of goods. We do not
think that the contention is sound. It has been rightly pointed out by the High Court
that the normal incidents of terms and conditions of supply are those which are
connected with supply, such as, its mode and process, time factor, inspection and
approval, if any, reliability for transit, incidental expenses etc. We are unable to
accept the contention of the appellant that an arbitration clause is a term of supply.
There is no proposition of law that when a contract is entered into for supply of
goods, the arbitration clause must form part of such a contract. The parties may
choose some other method for the purpose of resolving any dispute that may arise
between them. But in such a contract the incidents of supply generally form part of
the terms and conditions of the contract. The first contract includes the terms and
conditions of supply and as Clause 9 reference to these terms and conditions of
supply, it is difficult to hold that the arbitration clause is also referred to and, as such,
incorporated into the second contract. When the incorporation clause refers to
certain particular terms and conditions, only those terms and conditions are
incorporated and not the arbitration clause. In the present case, Clause 9 specifically
refers to the terms and conditions of supply of the first contract and the second
contract and accordingly, only those terms and conditions are incorporated into the
second contract and not the arbitration clause. The High Court has taken the correct
view in respect of the second contract also".
(emphasis already in original) Para 11 of Hythro Power Corporation Ltd. V.Delhi Transco Ltd. (2003
(3) Vol.52 Arbitration Law Reporter 1
11. Keeping in view the law as settled by this Court, the designate of the Chief Justice acting under
Section 11 of the Act and the Division Bench of the High Court in exercise of power under Article 226
of the Constitution both acted under a misconception of law and wrongly held that the disputes were
not referable to the arbitration. The appellant sought reference of its disputes with the respondent /
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company for adjudication through the arbitration in accordance with arbitration clause in the
alleged agreement arrived at between them. Whether on the facts mentioned above an arbitration
agreement can be said to have existed by recourse to arbitration clause in NIT was itself a dispute
which deserved to be referred to the arbitral tribunal in accordance with the arbitration clause.
Section 16 empowers the arbitral tribunal to decide the question of existence and validity of the
arbitration agreement.
Para 22 of National Insurance Co. Ltd. V. Boghara Polyfab Private Limited (2009) 1 SCC 267) has
already been quoted in Electrosteel Castings Ltd. (supra).
Para 14 of Indian Oil Corporation Limited V. SPS Engineering Limited (2011) 3 SCC 507)
14. To find out whether a claim is barred by res judicata, or whether a claim is mala fide, it will be
necessary to examine the facts and relevant documents. What is to be decided in an application
under Section 11 of the Act is whether there is an arbitration agreement between the parties. The
Chief Justice or his designate is not expected to go into the merits of the claim or examine the
tenability of the claim, in an application under Section 11 of the Act. The Chief Justice or his
designate may however choose to decide whether the claim is a dead (long-barred) claim or whether
the parties have, by recording satisfaction, exhausted all rights, obligations and remedies under the
contract, so that neither the contract nor the arbitration agreement survived. When it is said that the
Chief Justice or his designate may choose to decide whether the claim is a dead claim, it is implied
that he will do so only when the claim is evidently and patently a long time-barred claim and there is
no need for any detailed consideration of evidence. We may elucidate by an illustration: if the
contractor makes a claim a decade or so after completion of the work without referring to any
acknowledgment of a liability or other factors that kept the claim alive in law, and the claim is
patently long time-barred, the Chief Justice or his designate will examine whether the claim is a
dead claim (that is, a long time-barred claim). On the other hand, if the contractor makes a claim for
payment, beyond three years of completing of the work but say within five years of completion of
work, and alleges that the final bill was drawn up and payments were made within three years
before the claim, the Court will not enter into a disputed question whether the claim was barred by
limitation or not. The Court will leave the matter to the decision of the Tribunal. If the distinction
between apparent and obvious dead claims, and claims involving disputed issues of limitation is not
kept in view, the Chief Justice or his designate will end up deciding the question of limitation in all
applications under Section 11 of the Act.
Para 28 of S.N.Prasad, Hitek Industries (Bihar) Limited V.Monnet Finance Limited and others
(2011) 1 SCC 320)
28. We cannot examine these aspects in an appeal arising from a proceeding under Section 11 of the
Act. In a proceeding under Section 11 of the Act, what is relevant is existence of arbitration
agreement and not the defence on merits. Further, in view of our finding on the first contention, it is
not necessary to examine this contention. It is open to the appellant to urge this contention, if and
when the first respondent initiates action against him in accordance with law.
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Para 34 of Reva Electric Car Co. P. Ltd. V.Green Mobil (2011 (4) Arb. LR 296 (SC)
34. The aforesaid provision has been enacted by the legislature keeping in mind the provisions
contained in Article 16 of the UNCITRAL Model Law. The aforesaid Article reads as under :"Article
(1)
The
(2) xxx
(3) xxx
16
-
Competence
arbitral
tribunal
xxx
xxx
of
arbitral
may
rule
tribunal
on
its
to
own
rule
on
its
jurisdiction,
in
xxx
xxx
Under Section 16(1), the legislature makes it clear that while considering any objection with respect
to the existence or validity of the arbitration agreement, the arbitration clause which formed part of
the contract, has to be treated as an agreement independent of the other terms of the contract. To
ensure that there is no misunderstanding, Section 16(1)(b) further provides that even if the arbitral
tribunal concludes that the contract is null and void, it should not result, as a matter of law, in an
automatic invalidation of the arbitration clause. Section 16(1)(a) presumes the existence of a valid
arbitration clause and mandates the same to be treated as an agreement independent of the other
terms of the contract. By virtue of Section 16(1)(b), it continues to be enforceable notwithstanding a
declaration of the contract being null and void. In view of the provisions contained in Section 16(1)
of the Arbitration and Conciliation Act, 1996, it would not be possible to accept the submission of
Ms.Ahmadi that with the termination of the MOU on 31st December, 2007, the arbitration clause
would also cease to exist. As noticed earlier, the disputes that have arisen between the parties clearly
relate to the subject matter of the relationship between the parties which came into existence
through the MOU. Clearly, therefore, the disputes raised by the petitioner needs to be referred to
arbitration. Under the arbitration clause, a reference was to be made that the disputes were to be
referred to a single arbitrator. Since the parties have failed to appoint an arbitrator under the agreed
procedure, it is necessary for this Court to appoint the Arbitrator.
Para 37 of N. Srinivasa V.Kuttukaran Machine Tools Limited (2009) 5 SCC 182,
37. It is well settled that even if an agreement ceases to exist, the arbitration clause remains in force
and any dispute pertaining to the agreement ought to be resolved according to the conditions
mentioned in the arbitration clause. Therefore, in our view, the High Court was not justified in
setting aside the order of the trial court directing the parties to maintain status quo in the matter of
transferring, alienating or creating any third-party interest in the same till the award is passed by
the sole arbitrator. (emphasis supplied) (28) SB Arbitration Application No.22/2009
M/s.Electrosteel Castings Ltd. V.Rajasthan Urban Infrastructure Dev. Project decided on 08.12.2011
(Relevant portion of Para 28 from Page 21 to 25 wherein Paras 19 to 23 of National Insurance Co.
along with the relevant portion of SBP & C. more particularly exercising power of Sec. 11 and 16 of
the Act of 1996 have been discussed, along with Question No.1 in Para 32 and finding thereon in
Para No.37 and Question No.2 with conclusions in Paras 40 and 41 of Electrosteel Castings Ltd. In
SBP & Co. Constitution Bench in Paras 39, 49(iv), 12 and 20 was of the view that where
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jurisdictional legal issues are involved, the decision of the Chief Justice on the issue of jurisdiction
and the existence of a valid arbitration agreement would be binding on the parties when the matter
goes to the Arbitral Tribunal and further, the Arbitral Tribunal u/s 16 cannot be empowered to
ignore the decision given by the judicial authority or the Chief Justice before reference to it was
made on account of attaining the finality to the order under section 11 of the Act of 1996, therefore,
the matters falling within his competence under section 11 of the Act of 1996 are incapable of being
reopened before the Arbitral Tribunal. In Para 22, 22.1(a) the issues required to be necessarily
decided by the Chief Justice / Designate Judge whereas in Para 22.1(b), there is discretionary power
to decide the said issues available to the Chief Justice / Designate Judge and Para 22(c) has been left
to be decided by the Arbitral Tribunal. Relevant portion of Para 28 of M/s.Electrosteel Castings Ltd.
V.Rajasthan Urban Infrastructure Dev. Project (supra) pages 21 to 25 of wherein Paras 18 (Sec.16 of
the Act of 1996 has been referred), 19, 20, 21, 22 and 23 of National Insurance Co. (supra) have been
referred and discussed by following the Constitution Bench judgment in SBP & Co. (supra). The
same are as under:
18. Section 16 of the Act bestows upon the Arbitral Tribunal, the competence to rule on its own
jurisdiction. Sub-section (1) of the section reads thus: (emphasis supplied)
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.
(emphasis supplied)
19. In SBP & Co. v. Patel Engg. Ltd. {(2005) 8 SCC 618}, a seven-Judges Bench of this Court
considered the scope of Section 11 of the Act and held that the scheme of Section 11 of the Act
required the Chief Justice or his designate to decide whether there is an arbitration agreement in
terms of Section 7 of the Act before exercising his power under Section 11(6) of the Act and its
implications. It was of the view that sub-sections (4), (5) and (6) of Section 11 of the New Act,
combined the power vested in the court under Sections 8 and 20 of the old Act (the Arbitration Act,
1940). This Court held: (SCC pp.660-61 & 663, paras 39 & 47)
39. It is necessary to define what exactly the Chief Justice, approached with an application under
Section 11 of the Act, is to decide at that stage. Obviously, he has to decide his own jurisdiction in the
sense, whether the party making the motion has approached the right High Court. He has to decide
whether there is an arbitration agreement, as defined in the Act and whether the person who has
made the request before him, is a party to such an agreement. It is necessary to indicate that he can
also decide the question whether the claim was dead one; or a long-barred claim that was sought to
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be resurrected and whether the parties have concluded the transaction by recording satisfaction of
their mutual rights and obligations or by receiving the final payment without objection. It may not
be possible at that stage, to decide whether a live claim made, is one which comes within the
purview of the arbitration clause. It will be appropriate to leave that question to be decided by the
Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration.
The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an
arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the
Chief Justice can either proceed on the basis of affidavits and the documents produce or take such
evidence or get such evidence recorded, as may be necessary. We think that adoption of this
procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of
expediting the process of arbitration, without too many approaches to the court at various stages of
the proceedings before the Arbitral Tribunal.
47.(iv)The Chief Justice or the Designated Judge will have the right to decide the preliminary
aspects as indicated in the earlier part of this judgment. These will be his own jurisdiction to
entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a
live claim, the existence of the condition for the exercise of his power and on the qualifications of the
arbitrator or arbitrators.
20.
This Court in SBP & Co. (supra) also examined the competence of the Arbitral Tribunal t
12.....We are inclined to the view that the decision of the Chief Justice on the issue
20.
Section 16 is said to be recognition of the principle of Kompetenz-Kompetenz. The
21. It is thus clear that when a contract contains an arbitration clause and any dispute in respect of
the said contract is referred to arbitration without the intervention of the court, the Arbitral
Tribunal can decide the following questions affecting its jurisdiction: (a) whether there is an
arbitration agreement; (b) whether the arbitration agreement is valid; (c) whether the contract in
which the arbitration caluse is found is null and void, and if so, whether the invalidity extends to the
arbitration clause also. It follows, therefore, that if the respondent before the Arbitral Tribunal
contends that the contract has been discharged by reason of the claimant accepting payment made
by the respondent in full and final settlement, and if the claimant counters it by contending that the
discharge voucher was extracted from him by practicing fraud, undue influence, or coercion, the
Arbitral Tribunal will have to decide whether the discharge of contract was vitiated by any
circumstance which rendered the discharge voidable at the instance of the claimant. If the Arbitral
Tribunal comes to the conclusion that there was a valid discharge by voluntary execution of a
discharge voucher, it will refuse to examine the claim on merits, and reject the claim as not
maintainable. On the other other hand, if the Arbitral Tribunal comes to the conclusion that such
discharge of contract was vitiated by any circumstance which rendered it void, it will ignore the
same and proceed to decide the claim on merits.
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22. Where the intervention of the court is sought for appointment of an Arbitral Tribunal under
Section 11, the duty of the Chief Justice or his designate is defined in SBP & Co. This Court identified
and segregated the preliminary issues that may arise for consideration in an application under
Section 11 of the Act into three categories, that is, (i) issues which the Chief Justice or his designate
is bound to decide; (ii) issues which he can also decide, that is, issues which he may choose to
decide; and (iii) issues which should be left to the Arbitral Tribunal to decide. (emphasis supplied)
22.1.The issues (first category) which the Chief Justice/his designate will have to decide are;
(a) Whether the party making the application has approached the appropriate High Court.
(b) Whether there is an arbitration agreement and whether the party who has applied under Section
11 of the Act, is a party to such an agreement.
22.2.The issues (second category) which the Chief Justice/his designate may choose to decide (or
leave them to the decision of the Arbitral Tribunal) are:
(a) Whether the claim is a dead (long-barred) claim or a live claim.
(b)Whether the parties have concluded the contract/transaction by recording satisfaction of their
mutual rights and obligation or by receiving the final payment without objection.
22.3.The issues (third) category which the Chief Justice/his designate should leave exclusively to the
Arbitral Tribunal are:
(i) Whether a claim made falls within the arbitration clause (as for example, a matter which is
reserved for final decision of a departmental authority and excepted or excluded from arbitration)
(ii)Merits or any claim involved in the arbitration.
(emphasis supplied)
23. It is clear from the scheme of the Act as explained by this Court in SBP & Co.(supra), that in
regard to issues falling under the second category, if raised in any application under Section 11 of the
ct, the Chief Justice/his designate may decide them, if necessary, by taking evidence. Alternatively,
he may leave those issues open with a direction to the Arbitral Tribunal to decide the same. If the
Chief Justice or his designate chooses to examine the issue and decides it, the Arbitral Tribunal
cannot re-examine the same issue. The Chief Justice/his designate will, in choosing whether he will
decide such issue or leave it to the Arbitral Tribunal, be guided by the object of the Act (that is
expediting the arbitration process with minimum judicial intervention). Where allegations of
forgery/fabrication are made in regard to the document recording discharge of contract by full and
final settlement, it would be appropriate if the Chief Justice/his designate decides the issue.
(emphasis supplied) (29) Mr.Maloo, Sr.Advocate has submitted that the agreement dated 21.5.2004
(Anx.C) entered into between the parties during the ceiling proceedings is illegal, void and incapable
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of performance as per Sec.3,6 and 36(2) of the Rajasthan Imposition of Ceiling on Agricultural
Holdings Act, 1973 (in short the Ceiling Act) and Sec.23 of the Indian Contract Act, 1899 and
further, arbitration clause 8 cannot be acted upon on account of the aforesaid provision of law and
pendency of the writ petition between the parties and third party State wherein status quo order is
in force and the issue of surplus land and the land which can be retained by the Non-applicant is not
finalised and even after decision in the said writ petition, the same will not attain finality on account
of availability of further remedies to the parties.
(30) He placed reliance on State of Rajathan and others V. Sardar Pushpendra Singh and others
(1994) Supp (2) SCC 363 (Para 4) and Union of India V. Colonel L.S.N.Murthy and another (supra).
He further referred Pollock & Mulla, Indian Contract and Specific Relief Act, 13th Edn. Vol.I
wherein commentary on 'defeating the provisions of law' has been made and further placed reliance
on the order dated 29.8.2008 passed by this Court in SBCWP No. 2229/2004 on the application of
the present Applicant to be impleaded as party.
Para 4 of State of Rajathan and others V. Sardar Pushpendra Singh and others (1994) Supp (2) SCC
363
4. Since the respondents, landowners, are governed by the ceiling laws and as the ceiling
proceedings are pending in the courts, the LAO while making the award, could not decide as to
which extent of the land he could make the award for the payment of compensation. He, therefore,
stated that such payment would be subject to the decision by the High Court or this Court in the
ceiling cases. We are informed that this Court had already disposed of the cases of the respondents
under the ceiling law and so the matter, has to, necessarily go back to the ceiling authorities to
determine the excess area which the landowners are liable to surrender after opting to retain the
land within ceiling limit for which they would be entitled to obtain payment of compensation under
the Land Acquisition Act. Until that is determined, the question of payment of compensation would
remain uncertain and in a nebulous state. Considering from this perspective, we think that the High
Court was not justified in giving the impugned directions extracted hereinbefore. (emphasis
supplied) Union of India V. Colonel L.S.N.Murthy and another (2012) 1 SCC 718 Paras 16 to 18
16. For deciding whether an agreement is void and is not enforceable, we have to refer to Section 23
of the contract Act, which is quoted hereinbelow:
23. What considerations and objects are lawful, and what not.- The consideration or object of an
agreement is lawful, unless it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any
law; or is fraudulent; or involves or implies injury to the person or property of another; or the court
regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every
agreement of which the object or consideration is unlawful is void.
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Section 23 of the Contract Act inter alia states that the consideration or object of an agreement is
lawful, unless the consideration or object of an agreement is of such a nature that, if permitted, it
would defeat the provisions of law and in such a case the consideration or object is unlawful and the
agreement is void. (emphasis supplied)
17. In Pollock & Mulla, Indian Contract and Specific Relief Acts, 13th Edn., Vol.I published by
LexisNexis Butterworths, it is stated at p.668:
The words 'defeat the provisions of any law' must be taken as limited to defeating the intention
which the legislature has expressed, or which is necessarily implied from the express terms of an
Act. It is unlawful to contract to do that which it is unlawful to do; but an agreement will not be void,
merely because it tends to defeat some purpose ascribed to the legislature by conjecture, or even
appearing, as a matter of history, from extraneous evidence, such as legislative debates or
preliminary memoranda, not forming part of the enactment.
(emphasis supplied) It is thus clear that the word law in the expression defeat the provisions of any
law in Section 23 of the Contract Act is limited to the expressed terms of an Act of the legislature.
18. In Lachoo Mal V.Radhey Shyam this Court while deciding whether an agreement was void and
not enforceable under Section 23 of the Contract Act held: (SCC pp. 622-23, para 7)
7...What makes an agreement, which is otherwise legal, void is that its performance is impossible
except by disobedience of law. Clearly no question of illegality can arise unless the performance of
the unlawful act was necessarily the effect of an agreement. (emphasis supplied) (31) I would also
like to refer Paras 17, 18 and 19 of India Household and Healthcare Ltd. V. LG Household and
Healthcare Ltd. wherein Transmission Corpn. of AP Ltd. (copy of which was given after the
judgment was reserved on earlier occasion) was also considered and it was held that when two
proceedings are pending before the Court, then the Court should not pass any order which may
violate the earlier order passed by the same court. Paras 17, 18 and 19 are as follows:
17. This aspect of the matter has been considered in A Treatise on the Law Governing Injunctions by
Spelling and Lewis wherein it is stated:
Section 8. Conflict and loss of jurisdiction.- Where a court having general jurisdiction and having
acquired jurisdiction of the subject matter has issued an injunction, a court of concurrent
jurisdiction will usually refuse to interfere by issuance of a second injunction. There is no
established rule of exclusion which would deprive a court of jurisdiction to issue an injunction
because of the issuance of an injunction between the same parties appertaining to the same subject
matter, but there is what may properly be termed a judicial comity on the subject. And even where it
is a case of one court having refused to grant an injunction while such refusal does not exclude
another coordinate court or Judge from jurisdiction, yet the granting of the injunction by a second
Judge may lead to complications and retaliatory action...
(See also Transmission Corpn. of A.P. Ltd. V.Lanco Kondapalli Power (P) Ltd. and Morgan Securit
(emphasis supplied)
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Aeren R Entertainment Pvt Ltd vs National Ingineering Industri on 24 September, 2013
In Manohar
18.
Lal Chopra V.Seth Hiralal this Court injuncted a party from prosecuting a suit w
19. A court while exercising its judicial function would ordinarily not pass an order w
Consideration of Preliminary Objection No.(ii)
(32) I am conscious of the fact that the jurisdiction of this Court u/s 11 is limited whereas the
jurisdiction of the Arbitrator under Sec.16 of the Act is much wider but where the jurisdictional or
legal issues are involved, this Court can decide the same u/s 11 as held in Paras No.12,20,39 and
47(iv) of Constitution Bench judgment in SBP & Co. which has already been discussed hereinabove
while considering the National Insurance Co. and Electrosteel. On consideration of the aforesaid
judgments cited by Mr.Mehta, Sr.Advocate with regard to Sec.11 and 16 of the Act of 1996, which
have been either considered in National Insurance Co. or Electrosteel (supra) except one or two
which are also on the same line. I am of the view that the preliminary objection No.(ii) can also be
decided by me as per Para 22.1 and 22.2 of National Insurance Co. In Electrosteel the issue of
estoppel was involved which is a question of fact and the same was required to be decided after
taking evidence of the parties by the Arbitrator. In the present case, on consideration of the
judgments cited by Mr.Maloo, Sr.Advocate in State of Rajasthan V. Sardar Pushpendra Singh and
others (supra) and Union of India V. Col. LSN Murthy and another from Paras 16 to 18 (supra)
wherein the Ceiling Law and aforesaid provision of Sec. 23 of the Contract Act with regard to
defeating the provisions of law has been considered and it was held that the contract is void
therefore, the Question No.(ii) is jurisdictional and legal issue. The Question No.(ii) is that the
validity of the arbitration agreement has been challenged on the legal and jurisdictional grounds
that the same cannot be acted upon considering the Ceiling Law, more particularly Sec.6 and 36(2)
of the Act of 1973 according to which the contract shall be deemed to be not recognized and further
made to defeat the provisions of law as per Sec.36(2), no civil suit for specific performance of the
contract is maintainable, which makes the arbitration agreement as well as the arbitration clauses
invalid, illegal or void. As considered hereinabove, following the conclusions of the Constitution
Bench of the Supreme Court in SBP & Co. more particularly paras 12, 20, 39 and 47(iv) regarding
jurisdiction of Sec.11 and 16 of the Act of 1996,as detailed out from pages 21 to 25 in Electrosteel's
case (supra). I can exercise the power as per Para 22(i)(a) and I have also chosen to invoke the
power under Para 22.1.(2) of National Insurance Co. (supra). In case of National Insurance Co. as
well as Electrosteel, the factual aspect on the issue of estoppel which required evidence to be
adduced by both the parties, therefore, the same were referred to the Arbitrator as per Clause
22.2(a) and (b) and 22.3 but here in the instant case, I have chosen to decide the issues of Para 22.2
of National Insurance Co. for the aforesaid reason. The preliminary issue No.(ii) raised by the
parties is also jurisdictional and legal, as considered hereinabove. As per the citations of both the
parties, more particularly Sec. 3,6 and 36 of the Act of 1973 and pending writ petition, the
agreement dated 21.5.2004 (Anx.C) is not recognised as per Sec. 6 of the Act of 1973 and the same
has been executed in order to defeat the provisions of the said Act and further, no suit for specific
performance of the contract for transfer of land which affects the rights of the State to the surplus
land is maintainable, therefore, the same is illegal and void and the arbitration application is not
maintainable under section 11 of the Act of 1996, as the agreement as well as the arbitration clause is
illegal, invalid or incapable of performance.
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Aeren R Entertainment Pvt Ltd vs National Ingineering Industri on 24 September, 2013
Answer to the Preliminary Objection No.(ii) (33) The pendency of the ceiling proceedings, pending
in the writ petition before this Court, has been mentioned in the opening para of the agreement and
further on consideration of Sec. 3, 6 and 36(2), on account of giving the over riding effect to the
Ceiling Law as considered hereinabove, and further considering the words defeating the provisions
of law means that defeating the provision of the legislature and interpretation of void as per Sec.23
of the Contract Act i.e. incapable of performance, therefore, the agreement and the arbitration
clause 8 both are illegal.
(34) Both the aforesaid preliminary objections are legal and relating to the jurisdiction of this Court
under Sec. 11 of the Act of 1996. On consideration of submissions of counsel for both the parties on
Preliminary Issues No.(i) and (ii) relating to the 3% stamp duty payable under the Rajasthan Stamp
Act, 1998 on the agreement dated 21.5.2004 (Anx.C) which has been written on a stamp of Rs.100/for the sale consideration of Rs.20,05,15,000/- and the non-obstante clause 3, 6 and 36(2) of the Act
of 1973 and Sec.23 of the Contract Act and further status quo order in SBCWP No.2229/2004 filed
against the State of Rajasthan third party, reference of which has been made in the opening para 6
and Clause No.3 of the agreement dated 21.5.2004 (Anx.C) in relation to the ceiling proceedings,
wherein the Applicant has been impleaded as a party respondent, the aforesaid agreement dated
21.5.2004 (Anx.C.) and the arbitration clause 8 are void and are not enforceable and the same is
incapable of specific performance, as desired by the Applicant in this arbitration application.
Conclusion (35) Both the questions, relating to the preliminary objections of maintainability of
arbitration application, have been answered in favour of the Non-applicants, therefore, the
arbitration application is dismissed.
(P.S.Asopa) J.
Gopal All corrections made in the judgment/order have been incorporated in the judgment/order
being e-mailed.
Gopal Lal Sharma Private Secretary
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