190415 Arbitration weekly update

In this update we analyze the decision of the Supreme Court in Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engineering Ltd.The Arbitration and Conciliation (Amendment) Act, 2015 (“Amendment Act”) introduced section 11 (6-A) in the Arbitration and Conciliation Act, 1996 (“Act”) which limited the role of the court while determining an application for appointment of an arbitrator such that the courts shall “confine to the examination of the existence of an arbitration agreement”. Prior to the Amendment Act, in SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd., (2011) 14 SCC 66 (“SMS Tea Estates”), the Supreme Court held that if an arbitration clause is contained in a document which is not duly stamped, such an arbitration clause cannot be acted upon. The Supreme Court held that the judge must first impound such document and only once the defect with respect to the stamp duty is cured, the court shall proceed further to determine the application filed under section 11 of the Act. In this backdrop, the question which arose for determination before the Supreme Court in an application under section 11 of the Act for the appointment of an arbitrator was whether the judge is now precluded from impounding an insufficiently stamped instrument while determining an application under section 11 of the Act in light of section 11 (6-A) of the Act. Based on its findings, the Supreme Court concluded that an arbitration agreement contained in an unstamped contract does not “exist” till the contract is stamped. Further, the Supreme Court reiterated that such contract shall be impounded and the defect with respect to stamp duty must be cured before the court proceeds to determine the application under section 11 of the Act.