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2020 Supreme(Telangana) 834

IN THE HIGH COURT OF STATE OF TELANGANA
A. Rajasekhar Reddy, J.
Preeti Gupta and Ors. – Appellants
Versus
Alcott Town Planners Pvt. Ltd. and Ors. – Respondents
Arb. Appln. No. 37 of 2020
Decided On : 11-08-2020

Advocates:
Advocate Appeared:
For the Appellant : Zeeshan Adnan Mahmood
For the Respondent: D. Raghavendar Rao

Point of Law: The arbitration agreement need not be in any particular form and what is required to be ascertained is the intention of the parties to settle their disputes through arbitration and the essential elements or attributes of an arbitration agreement is the agreement to refer their disputes or differences to arbitration, which is expressly or impliedly spelt out from a clause in an agreement.

Headnote:

Arbitration and Conciliation Act, 1996 - Section 7(2) , 11(4) and (6) - Indian Evidence Act, 1872 - Section 58 - Registration Act, 1908 - Section 49 – Indian Contract Act, 1872 - Section 2(h) - Appointment of Sole Arbitrator - Lease deed - Doctrine of "approbate and reprobate" estoppels – Respondents contended that lease deed cannot be looked into for the reasons it being insufficiently stamped and not a registered instrument, which is otherwise a compulsory registrable document – Whether such contention is valid –

Finding of the court: when an arbitration clause is contained "in a contract", it is significant that the agreement only becomes a contact if it is enforceable by law - Under the Indian Stamp Act, an agreement does not become a contract, namely, that it is not enforceable in law, unless it is duly stamped - Even a plain reading of Section 11(6-A), when read with Section 7(2) of the 1996 Act and Section 2(h) of the Contract Act, would make it clear that an arbitration clause in an agreement would not exist when it is not enforceable by law - The arbitration agreement need not be in any particular form and what is required to be ascertained is the intention of the parties to settle their disputes through arbitration and the essential elements or attributes of an arbitration agreement is the agreement to refer their disputes or differences to arbitration, which is expressly or impliedly spelt out from a clause in an agreement, separate agreement or documents/correspondence exchanged between the parties - Lease deed, which itself is compulsory registrable document and it is not possible to bifurcate the arbitration clause contained in the lease deed so as to give it an independent existence

Result : Ordered accordingly

ORDER :

A. Rajasekhar Reddy, J.

1. Arbitration application is filed under Section 11(4) and (6) of the Arbitration and Conciliation Act, 1996, (for short, "the Act") for appointment of a Sole Arbitrator to adjudicate the disputes and claims between the parties arising out of the lease deed dated 31.3.2019 entered into by them in respect of lease of a building premises.

2. There is no dispute as to mentioning of an arbitration clause under Clause No. 14.2 in the lease deed as a mechanism for dispute resolution and invocation thereof by issuance of notice dated 3.2.2020 wherein and whereby the applicants proposed the name of a former Judge of this Court as their Arbitrator, to which, the respondents, issued reply notice dated 27.2.2020, and while refusing to accede to the Arbitrator proposed by the applicants, instead proposed the name of an Advocate as their Arbitrator. The applicants rejected the Arbitrator proposed by the respondent vide rejoinder dated 4.3.2020. Hence, this arbitration application for appointment of an Arbitrator.

3. Sri Zeeshan Adnan Mahmood, learned Counsel for applicants submitted that respondents having acted upon the arbitration clause by way of reply notice dated 27.2.2020 and proposed their choice of Arbitrator, now cannot assail the validity of the lease deed and contend it requires to be impounded and properly stamped. Learned Counsel further submitted that doctrine of "approbate and reprobate" estoppels them from taking such pleas as those pleas did not form part of their reply notice dated 27.2.2020. It is also submitted that since respondents do not dispute arbitration clause and the dispute is only with regard to the name of the Arbitrator, this Court can appoint independent Arbitrator in the backdrop of Section 11(6-A) of the Act, which confined the enquiry as to the "existence" of an arbitration agreement. It is lastly submitted that factum of existence of arbitration clause is admitted by the respondents in their reply notice and in counter-affidavit filed in this matter, the same need not be proved as enunciated in Section 58 of the Indian Evidence Act, 1872.

4. Sri D. Raghavendar Rao, learned Counsel for the respondents, per contra, contended that lease deed dated 31.3.2019 cannot be looked into for the reasons it being insufficiently stamped and not a registered instrument, which is otherwise a compulsory registrable document. It is also submitted that the pleas viz., impounding of lease deed and it is a compulsory registrable document being legal pleas, can be taken at any stage of the proceedings; mere non-mention thereof in the reply notice is not fatal and cannot be faulted on that count. Learned Counsel placed reliance on the decisions of the Apex Court in Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engineering Ltd., (2019) 9 SCC 209 and SMS Tea Estates (P) Ltd. v. Chandmari Tea Company (P) Ltd., 2011 (5) ALD 149 (SC) : (2011) 14 SCC 66, in support of his contentions.

5. Clause 14.2 of the lease deed provides for arbitration, reads as under :

    "14.2 Arbitration:--Failing such an amicable settlement, any dispute, controversy or claim arising out of, or relating to the deed within 30 days as the date requested by either party shall be referred to arbitration in accordance with the Indian Arbitration and Conciliation Act, 1996 at present in force."

6. Existence of a dispute between the parties and a mention of arbitration clause in the lease deed is not disputed by the parties. The decisions relied on by the applicants Counsel in Duro Felguera S.A. v. Gangavaram Port Ltd., (2017) 9 SCC 729 and M/s. Mayavati Trading Pvt. Ltd. v. Pradyuat Deb Burma, (2019) 8 SCC 714, reiterated that scope of Section 11(6-A) is to be confined to examination of existence of an arbitration clause and nothing more and nothing less, and all other preliminary issues must be left to the Arbitrator. Curiously, Section 11(6-A) of the Act has been omitted by Arbitration & Conciliation (Amendment) Act, 2019, alt

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