/2022 INSC 0077/
 IN THE SUPREME COURT OF INDIA
CIVIL ORIGINAL JURISDICTION
ARBITRATION PETITION (CIVIL)  NO. 12 O F  2019   
I NTER C ONTINENTAL  H OTELS  G ROUP  (I NDIA )  ….P ETITIONERS
P VT . L TD . & A NR .
V ERSUS
W ATERLINE  H OTELS  P VT . L TD    .... R ESPONDENT
J U D G M E N T   
N.V. R AMANA , CJI.   
1. This   petition   is   filed   under   Section   11(6)   r/w   11(12)(a)   of   the
Arbitration   &   Conciliation   Act,   1996   for   appointment   of   a   sole
arbitrator. 
2. The   brief   facts   which   are   necessary   for   adjudication   of   this
application   are   that   the   Intercontinental   Hotels   Group   (India)   Pvt.
Ltd   (Petitioner   No.1)   and   Intercontinental   Hotels   Group   (Asia­
Pacific)   Pvt   Ltd.   (Petitioner   2),   are   subsidiaries   of   Intercontinental
Hotels   Group   PLC   (IHG   Group),   based   out   of   India   and   Singapore
1 REPORTABLE

respectively.   The   parent   company   (IHG   Group)   is   a   British   multi­
national hotel based out of Denham, United Kingdom. 
3. The   respondent   is   an   Indian   company   engaged   in   hospitality
sector.   The   Respondent   had   agreed   to   run   and   operate   a   hotel   by
name Holiday Inn & Suites Bengaluru, Whitefield. 
4. The   respondent   entered   into   a   Hotel   Management   Agreement
(HMA) with the petitioners for renovating the existing infrastructure
in   accordance   with   the   brand   standards   established   by   the   IHG
group. The HMA elaborated on the rights and obligations of parties
from 17.09.2015 for initial ten years and further renewals were also
provided   thereunder.   The   petitioners   alleged   that   under   the   HMA,
the   petitioners   were   required   to   make   significant   investments   for
setting up the hotel in accordance with the brand standards. These
investments   were   to   be   recovered   gradually   from   the   profits   made
by the hotel in due course. 
5. The HMA mandated that for the renovation undertaken by the
petitioners, the respondent was contractually  bound to  pay  the fee
to petitioner no. 1, known as incentive management fee, at the end
of  every  month.   Further,  Petitioner   No.2  was  entitled  to   license  fee
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from the respondent for the use of brand and marks as well as an
agreed   sum   towards   “System   Fund   Contributions”,   “Technology
Service Fee” & “Technical Service Fee”. 
6. The   petitioners   allege   that   the   respondent   failed   to   pay   the
requisite   fee   which   it   was   contractually   bound   to   under   the   HMA
since   early   2016.   As   of   12.10.2018,   the   respondent   owed   the
petitioners   a   sum   amounting   to   USD   6,18,719,   excluding   interest
for the late payment as provided under Clause 21.3 of the HMA.
 
7. In   any   case,   the   respondent   sent   an   e­mail   on   12.10.2018
terminating the HMA. In the aforesaid e­mail, the respondent stated
that   the   hotel   was   rebranded   as   Miraya   Hotels,   and   all   guests
checking   into   the   hotel   after   noon   on   12.10.2018,   were   informed
that the management of the hotel had been handed over to Miraya.
On   the   same   day,   the   petitioners   replied   to   the   aforesaid
termination   letter   contending   that   unilateral   termination   of   the
HMA was not valid as there was no legal basis for the same. 
8. The  respondent  failed  to  retract  the   email  of  12.10.2018,  and
the   petitioners   invoked   Section   9   of   the   Arbitration   Act   seeking
interim   relief   before   the   High   Court   of   Karnataka   at   Bengaluru   in
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APIM   No.   3/2018.   The   High   Court,   on   23.10.2018,   passed   an   ad­
interim   order   directing   the   respondent   not   to   evict   the   petitioners
from  the  premises without  due process of  law until  further  orders.
However,   the   petitioners   allege   that   the   respondent   has   not   been
sincere in complying with the order and has taken steps to frustrate
the aforesaid order. 
9. As   the   settlement   talks   between   the   parties   failed,   and   the
respondent   remained   in   persistent   breach   of   the   HMA,   the
petitioners were left with no option other than to invoke Arbitration
under clause 18.2 of HMA, which reads as under: 
“Clause 18.2­ Dispute Resolution 
(a) All   disputes,   controversies   or   claims   arising   out   of
or in connection with this Agreement and/or any matters
incidental   hereto   and/or   the   interpretation   and/or
breach   hereof,   will   first   be   discussed   by   the   Owner   and
the Manager with the objective of resolving such dispute,
controversy   or   claim   in   a   fair,   amicable   and   friendly
manner.   If   such   efforts   fail   to   bring   a   resolution   within
ten   (10)   Business   Days   of   receipt   of   a   notice   issued   by
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one   party   to   another   seeking   resolution,   such   disputes,
controversies   or   claims   will   be   finally   determined   by
arbitration   in   accordance   with   the   Arbitration   Rules   of
Singapore   International   Arbitration   Centre   (“SIAC”)   for
the   time   being   in   force,   which   rules   are   deemed
incorporated by reference into this clause. 
(b) The   Tribunal   shall   consist   of   a   sole   Arbitrator.
However, in the event that the Parties are unable to agree
on   the   sole   Arbitrator   the   tribunal   shall   consist   of   three
Arbitrators, one to be appointed by each of Manager and
Owner,   and   the   third   to   be   appointed   by   mutual
agreement of the two appointed Arbitrators. In the event
the Arbitrators appointed by the Manager and the Owner
fail to mutually  agree on the third Arbitrator, such third
Arbitrator   shall   be   appointed   by   a   Competent   Court   of
Law   in   Bangalore.   The   Parties   herein   mutually   agree   to
exclude   the   applicability   of   rules   of   SIAC   to   this   extent
(i.e., regarding appointment of third Arbitrator). The place
of   arbitration   will   be   SIAC   in   Bengaluru   and   the   official
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language of the arbitration will be English. In reaching a
decision, the Arbitrators, will be bound by the terms and
provisions   of  this   Agreement.   The   decision   and  award   of
the   Arbitrator   will   be   final   and   binding   and   shall   be
enforceable by the Indian Courts…”
10. In   the   Notice   of   Arbitration,   the   petitioners   claimed   the
following reliefs: 
a. A declaration that: 
i. The   Respondent   is   in   breach   of   the
Management   Agreement   dated   7 th
  August
2015; and 
ii. The   Respondent   has   illegally   and   wrongfully
purported   to   terminate   the   Management
Agreement   by   its   email   dated   12 th
  October
2018. 
b. Direct   the   Respondent   to   pay   to   the
Claimants, 
i. The outstanding dues of USD 618,719 as on
8   October   2018   owed   to   the   Claimants   under
the Management Agreement;
ii. Interest   on   the   above   outstanding   amounts
from   the   dates   the   amounts   became   due   until
the  filing  of this  notice invoking  arbitration,  in
accordance   with   Clause   21.3   of   the
Management Agreement; 
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iii. Damages   due   to   the   wrongful
termination   of   the   Management   Agreement   for
the   remainder   Term   of   the   Management
Agreement   which   has   as   Initial   Term   of   10
years from 15 September 2015 with a potential
2 x 5 years of Renewal Term, in an amount to
be assessed later; and
iv. Such   other   future   sums   towards
damages   and   as   may   fall   due   under   the
Management   Agreement   and   as   the   Claimants
may put forth before the Hon’ble Tribunal in its
Statement of Case. 
c. Pendente   Lite   and   future   interest   on   all
sums   awarded   to   it   at   such   rate   as   the
Tribunal may deem fit, in accordance with Rule
32.9   of   the   SIAC   Rules   and   Arbitration   &
Conciliation Act, 1996; 
d. Award   of   costs   from   the   Respondent   and
interest on the costs awarded, till payment. 
e. Any   other   prayer   the   Hon’ble   Tribunal   may
deem fit in the interest of justice.,”
11. The   respondent   is   alleged   to   have   replied   to   the   aforesaid
Notice   of   Arbitration   by   stating   that   the   said   notice   dated
21.01.2019   was   not   a   notice,   and   consequently   did   not   require   a
reply.
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12. Accordingly,   the   petitioners   communicated   their   intention   to
invoke arbitration to the Singapore International Arbitration Centre
(SIAC). They also approached the SIAC for suggesting names of sole
arbitrators   or   to   invoke   the   mechanism   of   appointing   a   three­
member   tribunal   if   the   respondent   does   not   agree   on   a   single
name.   SIAC   further   sent   a   notice   dated   15.02.2019   to   the
respondent   for   appointment   of   a   suitable   arbitrator.   Interestingly,
the   respondent   replied  to   the  notice  sent   by   the  SIAC   stating   that
the   notice   of   arbitration   dated   21.01.2019   was   defective   and   was
not curable. In any case, the respondent alleges as under: 
“Strictly   without   prejudice,   we   do   not
accept IHG’s proposal to appoint any of the
3   Arbitrators   named   in   its   Notice,   dated
08.02.2019, as a sole arbitrator. Nor do we
wish   to   propose   and   names   of   a   sole
arbitrator. Further, there is no question of
proposing   or   agreeing   to   Arbitration   by   a
Tribunal   of   3   Arbitrators   for   the   same
reason. The  reasons  have  been  elaborately
narrated   hereinabove   and   bear   no
repetition. 
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Clearly   SIAC   and   its   Associate   Counsel
have   turned   a   complete   blind   eye   to   the
legal   position,   facts   of   the   case   and
conduct of IHG and its Advocates. It would
not   be   out   place   to   mention   that,   in   the
given   circumstances   SIAC   would   not   be
entitled to exclusion of liability under Rule
38, SIAC Rules.”
13. Aggrieved   by   the   respondent’s   denial   to   appoint   a   suitable
Arbitrator,   the   petitioners   have   filed   this   petition   seeking
appointment of an Arbitrator.
14. When   this   matter   was   listed   on   16.04.2019,   this   Court   was
pleased   to   issue   notice.   Thereafter,   the   respondent   entered
appearance   and   filed   a   counter­affidavit   dated   24.07.2019,
pointing   out   that   the   purported   HMA,   which   contains   the
arbitration agreement, was an unstamped document. It notes that
this   Court,   in   Garware   Wall   Ropes   Ltd.   v   Coastal   Marine
Constructions   and   Engineering   Ltd.,   (2019)   9   SCC   209   has
earlier   held   that   an   agreement   which   is   not   duly   stamped   cannot
be   relied   on   or   acted   upon   unless   the   unstamped   document   is
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impounded, and the applicable stamp duty and penalty is assessed
and paid. 
15. On   02.03.2020,   this   Court,   at   the   request   of   the   petitioners,
allowed four weeks to file an application. In line with the aforesaid
permission,   the   petitioners   filed   an   application   for   permission   to
file   additional   documents   dated   23.06.2020  which   reads   inter   alia
as under: 
“ ………..
3. Without prejudice to the above, the Petitioner
No.1   has   taken   the   necessary   step   to   pay   the
stamp   duty   applicable   to   the   HMA.   In
accordance   with   Section   2(6)   of   the   Indian
Stamp   Act,   1899,   the   stamping   of   the   HMA
would be governed by the Karnataka Stamp Act,
1957 (“Karnataka Stamp Act”) because the HMA
was   first   executed   in   Bengaluru,   the   place   of
performance   is   Bengaluru   and   the   subject
matter of the HMA is situated in Bengaluru. 
4.   The   Schedule   of   the   Karnataka   Stamp   Act
enumerates   different   types   of   instruments   that
attract   stamp   duty   and   the   corresponding   duty
that   is   payable.   Article   5   of   the   Schedule
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provides the duty applicable to different types of
agreements,   The   HMA   is   a   services   agreement
which   is   not   specifically   provided   for   in   Article
5, and therefore, it would  be covered under  the
residuary   provisions,   Article   5(j),   “ Agreement   or
[its   records   or]   Memorandum   of   an   Agreement   if
not   otherwise   provided   for ”.   The   corresponding
stamp duty is INR 200. In order to establish its
bona   fide   and   to   avert   any   argument   regarding
the adequacy of the stamp duty paid, Petitioner
No.   1   has   also   paid   the   maximum   penalty   i.e.,
ten­times   that   duty   amounting   to   INR   2,000   in
accordance with the proviso to Section 34 of the
Karnataka Stamp Act. 
 
5. The Petitioners further submit that since they
have   paid   the   requisite   stamp   duty   along   with
the   maximum   penalty   prescribed   under   the
Karnataka   Stamp   Act,   this   Hon’ble   Court   may
proceed to appoint a sole Arbitrator who has the
jurisdiction   to   deal   with   all   disputes   that   arise
between the parties.”
16. The   respondent,   while   objecting   to   the   aforesaid   application
filed by the petitioners, stated as under: 
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“4.   I   state   that   at   the   time   of   hearing   of   the
above   cited   Petition   on   the   02.03.2020,   the
learned Sr. Counsel appearing for the Petitioner
had   tendered   a   Letter   dated   28.02.2020
annexing   therewith   a   single   e­Stamp   paper
bearing   Unique   Doc.   Reference   No.
SUBINKAKABACSL0850557522508599R   dated
29.07.2020 for  Rs.2,200/­ classifying the HMA
as   “Bond”   under   Article   12   of   the   Schedule   to
the   Karnataka   Stamp   Act,   1957   and   the
Consideration Prices as Zero….
5.   That   this   Hon’ble   Court,   had   by   its   Order
dated 02.03.2020 directed the Petitioners to file
the   said   single   e­Stamp   paper,   dated
29.07.2019 along with a proper Application. 
6. I state that, the Petitioners have not filed the
said   single   e­Stamp   Paper,   dated   29.07.2019,
classifying   the   HMA   as   “Bond”.   Instead,
purportedly   in   furtherance   of   this   Hon’ble
Court’s Order dated 02.03.2020, the Petitioners
have   filed   a   completely   different   set   of   11   e­
Stamp   Papers   of   Rs.200/­   each   all   dated
10.06.2020 this time classifying the agreement
under   Article   5(j)   of   the   Schedule   to   the
Karnataka   Stamp   Act,   1957   and   annexing   the
HMA   dated   07.08.2015   therewith,   under   the
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above   cited   Application   seeking   permission   to
file   Additional   Documents   being   I.A   D.   No.
60764 of 2020. 
7.   I   state   that   it   is   not   true   that,   vide   this
Hon’ble   Court’s   Order,   dated   02.03.2020,   the
Petitioners   were   granted   permission   to   file   the
11   e­Stamp   Papers,   for   Rs.200/­   each,   all
dated   10.06.2020,   that   have   been   filed   along
with   the   above   cited   Application   seeking
permission   to   file   Additional   Documents   being
I.A D. No. 60764 of 2020. 
8.   I   submit   that   the   Petitioners   have   not   paid
the   proper   Stamp   Duty   and   penalty   under   the
Karnataka   Stamp   Act,   1957   nor   has   the
procedure of adjudication of proper stamp duty
and   penalty   payable   been   followed   by   the
Petitioner   as   per   law.   The   Petitioners   have,   in
fact,   arrogated   to   themselves   the   power   of
adjudication   under   the   Karnataka   Stamp   Act,
1957. 
9. I state that there is no procedure whereby a
party   self   adjudicates   and   self   certifies   the
proper  stamp duty  and  the penalty  payable on
a Document as sought to be done twice by the
Petitioners as under: 
SELF ADJUDICATION BY THE PETITIONERS WITH
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THE MAXIMUM PENALTY OF 10 TIMES
29.07.2019 10.06.2020
Single   e­Stamp   paper
for Rs.2,200/­ 11   e­Stamp   Papers
for Rs.200/­ each
Description of Doc.
Art 12 Bond  Description   of   Doc.
Art 5(j) Agreement
(In any other cases)
Property Description 
Description 
Hotel   Management
Agreement  Property
Agreement 
Consideration Price 
(Rs.) 0 
(Zero)  Consideration Price 
(Rs.) 0 
(Zero)
17. We   have   heard   learned   counsel   for   the   parties   and   perused
the documents available on record.
18. At the outset, we need to state that this Court’s jurisdiction to
adjudicate   issues   at   the   pre­appointment   stage   has   been   the
subject matter of numerous cases before this Court as well as High
Courts. The initial interpretation provided by this Court to examine
issues   extensively,   was   recognized   as   being   against   the   pro­
arbitration stance envisaged by the 1996 Act. Case by case, Courts
restricted   themselves   in   occupying   the   space   provided   for   the
arbitrators, in line with party autonomy that has been reiterated by
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this Court in  Vidya Drolia v. Durga Trading Corporation , (2021)
2   SCC   1,   which   clearly   expounds   that   Courts   had   very   limited
jurisdiction   under   Section   11(6)   of   the   Act.   Courts   are   to   take   a
‘ prima   facie ’   view,   as   explained   therein,   on   issues   relating   to
existence   of   the   arbitration   agreement.   Usually,   issues   of
arbitrability/validity   are   matters   to   be   adjudicated   upon   by
arbitrators. The only narrow exception carved out was that Courts
could   adjudicate   to   ‘ cut   the   deadwood’ .   Ultimately   the   Court   held
that   the   watch   word   for   the   Courts   is   ‘ when   in   doubt,   do   refer’ .
This Court concluded as under: 
“225.   From   a   study   of   the   above   precedents,
the   following   conclusion,   with   respect   to
adjudication   of   subject­matter   arbitrability
Under Section 8 or 11 of the Act, are pertinent:
225.1   In line with the categories laid down by
the   earlier   judgment   of   Boghara   Polyfab
[National   Insurance   Co.   Ltd.   v.   Boghara
Polyfab (P) Ltd., (2009) 1 SCC 267] the Courts
were examining 'subject­matter arbitrability' at
the   pre­arbitral   stage,   prior   to   the   2015
amendment.
225.2   Post   the   2015   amendment,   judicial
interference   at   the   reference   stage   has   been
substantially curtailed.
225.3   Although   subject   matter   arbitrability
and   public   policy   objections   are   provided
separately   Under   Section   34   of   the   Act,   the
Courts herein have understood the same to be
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interchangeable   under   the   Act.   Further,
subject matter arbitrability is inter­linked with
in­rem rights.
225.4   There   are   special   classes   of   rights   and
privileges,   which   enure   to   the   benefit   of   a
citizen, by virtue of constitutional or legislative
instrument,   which   may   affect   the   arbitrability
of a subject­matter.”
Following   is   the   opinion   of   one   of   us   (N.   V.   Ramana,   J.,   as   His
Lordship then was):­
“ 244.  Before we part, the conclusions reached,
with respect to question No. 1, are:
244.1   Sections   8   and   11   of   the   Act   have   the
same   ambit   with   respect   to   judicial
interference.
244.2   Usually,   subject   matter   arbitrability
cannot be decided at the stage of Sections 8 or
11   of   the   Act,   unless   it's   a   clear   case   of
deadwood.
244.3   The   Court,   Under   Sections   8   and   11,
has   to   refer   a   matter   to   arbitration   or   to
appoint   an   arbitrator,   as   the   case   may   be,
unless   a   party   has   established   a   prima   facie
(summary   findings)   case   of   non­existence   of
valid   arbitration   agreement,   by   summarily
portraying   a   strong   case   that   he   is   entitled   to
such a finding.
244.4   The   Court   should   refer   a   matter   if   the
validity of the arbitration agreement cannot be
determined   on   a   prima   facie   basis,   as   laid
down above, i.e., 'when in doubt, do refer'.
244.5   The   scope   of   the   Court   to   examine   the
prima facie validity of an arbitration agreement
includes only:
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244.5.1   Whether  the arbitration agreement
was in writing? or
244.5.2   Whether  the arbitration agreement
was   contained   in   exchange   of   letters,
telecommunication etc?
244.5.3   Whether   the   core   contractual
ingredients   qua   the   arbitration   agreement
were fulfilled?
244.5.4   On   rare   occasions,   whether   the
subject­matter of dispute is arbitrable?”
19. While   holding   as   above,   this   Court   by   majority   opinion
speaking through Justice Sanjiv Khanna held as under:
“ 147.1.   In   Garware   Wall   Ropes   Ltd.   [ Garware
Wall   Ropes   Ltd.   v.   Coastal   Marine
Constructions & Engg. Ltd. , (2019) 9 SCC 209 :
(2019)   4   SCC   (Civ)   324]   ,   this   Court   had
examined   the   question   of   stamp   duty   in   an
underlying  contract  with  an  arbitration  clause
and   in   the   context   had   drawn   a   distinction
between   the   first   and   second   part   of   Section
7(2)   of   the   Arbitration   Act,   albeit   the
observations   made   and   quoted   above   with
reference   to   “existence”   and   “validity”   of   the
arbitration   agreement   being   apposite   and
extremely   important,   we   would   repeat   the
same by reproducing para 29 thereof : (SCC p.
238)
“ 29 .   This   judgment   in   Hyundai   Engg.
case   [ United   India   Insurance   Co.
Ltd.   v.   Hyundai   Engg.   &   Construction   Co.   Ltd. ,
(2018) 17 SCC 607 : (2019) 2 SCC (Civ) 530] is
important   in   that   what   was   specifically   under
consideration  was an  arbitration  clause which
would   get   activated   only   if   an   insurer   admits
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or accepts liability. Since on facts it was found
that   the   insurer   repudiated   the   claim,   though
an   arbitration   clause   did   “exist”,   so   to   speak,
in the policy, it would not exist in law, as was
held   in   that   judgment,   when   one   important
fact   is   introduced,   namely,   that   the   insurer
has   not   admitted   or   accepted   liability.
Likewise, in the facts of the present case, it is
clear   that   the   arbitration   clause   that   is
contained in the sub­contract would not “exist”
as   a   matter   of   law   until   the   sub­contract   is
duly   stamped,   as   has   been   held   by   us   above.
The   argument   that   Section   11(6­A)   deals   with
“existence”,   as   opposed   to   Section   8,   Section
16 and Section 45, which deal with “validity” of
an   arbitration   agreement   is   answered   by   this
Court's   understanding   of   the   expression
“existence”   in   Hyundai   Engg.   case   [ United
India   Insurance   Co.   Ltd.   v.   Hyundai   Engg.   &
Construction   Co.   Ltd. ,   (2018)   17   SCC   607   :
(2019) 2 SCC (Civ) 530] , as followed by us.”
Existence   and   validity   are   intertwined,   and
arbitration   agreement   does   not   exist   if   it   is
illegal   or   does   not   satisfy   mandatory   legal
requirements.   Invalid   agreement   is   no
agreement.”
20. In   any   case,   again   in   N.N.   Global   Mercantile   Private
Limited   v.   Indo   Unique   Flame   Limited ,   (2021)   4   SCC   379,   this
Court   doubted   the   above   proposition   as   held   in   Garware   Wall
Ropes   (supra),   and   was   of   the   opinion   that   the   utility   of   the
doctrine of separability  overrides the concern under the respective
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Stamp   Acts.   Any   concerns   of   non­stamping   or   under   stamping
would not affect the validity of the arbitration agreement.  However,
this   Court   considered   it   appropriate   to   refer   the   issue   for
authoritative   settlement   by   a   Constitution   Bench   in   the   light   of
Vidya   Drolia   (supra),   citing   the   ratio   in   Garware   Wall   Ropes
(supra).   The   relevant   observations   made   in   N.N.   Global   (supra)
read as under:
“ 56.   We   are   of   the   considered   view   that   the
finding   in   SMS   Tea   Estates   [SMS   Tea   Estates
(P) Ltd. v. Chandmari Tea Co. (P) Ltd.,  (2011) 14
SCC   66]   and   Garware   [ Garware   Wall   Ropes
Ltd.   v.   Coastal   Marine   Constructions   &   Engg.
Ltd. , (2019) 9 SCC 209]     that the non­payment
of   stamp   duty   on   the   commercial   contract
would   invalidate   even   the   arbitration
agreement,   and   render   it   non­existent   in   law,
and  un­enforceable, is  not  the  correct position
in law.
57.   In   view   of   the   finding   in   paras   146   and
147   of   the   judgment   in   Vidya   Drolia   [ Vidya
Drolia v. Durga Trading Corpn.,   (2021) 2 SCC 1
by a co­ordinate Bench, which has affirmed the
judgment   in   Garware   [ Garware   Wall   Ropes
Ltd.   v.   Coastal   Marine   Constructions   &   Engg.
Ltd. ,   (2019)   9   SCC   209],   the   aforesaid   issue   is
required   to   be   authoritatively   settled   by   a
Constitution bench of this Court.
58.   We   consider   it   appropriate   to   refer   the
following  issue, to be authoritatively settled by
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a   Constitution   Bench   of   five   Judges   of   this
Court:
“Whether   the   statutory   bar   contained   in
Section   35   of   the   Indian   Stamp   Act,   1899
applicable to instruments chargeable to Stamp
Duty   under   Section   3   read   with   the   Schedule
to   the   Act,   would   also   render   the   arbitration
agreement   contained   in   such   an   instrument,
which   is   not   chargeable   to   payment   of   stamp
duty,   as   being   non­existent,   unenforceable,   or
invalid, pending payment of stamp duty on the
substantive contract/instrument?”
59.   In   light   of   the   same,   the   Registry   may
place   this   matter   before   the   Hon'ble   Chief
Justice   of   India   for   appropriate
orders/directions.”
21. The   reasoning   for   the   above   was   provided   in   the   captioned
judgment as follows:
“ 24.   The arbitration agreement contained in
the   Work   Order   is   independent   and   distinct
from   the   underlying   commercial   contract.   The
arbitration   agreement   is   an   agreement   which
provides   the   mode   of   dispute   resolution.
Section   3   of   the   Maharashtra   Stamp   Act   does
not   subject   an   arbitration   agreement   to
payment   of   Stamp   Duty,   unlike   various   other
agreements enlisted in the Schedule to the Act.
This   is   for   the   obvious   reason   that   an
arbitration   agreement   is   an   agreement   to
resolve   disputes   arising   out   of   a   commercial
agreement,   through   the   mode   of   arbitration.
On the basis of the doctrine of separability, the
arbitration   agreement   being   a   separate   and
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distinct   agreement   from   the   underlying
commercial   contract,   would   survive
independent   of   the   substantive   contract.   The
arbitration   agreement   would   not   be   rendered
invalid, un­enforceable or  non­existent,  even  if
the   substantive   contract   is   not   admissible   in
evidence,  or   cannot   be  acted  upon   on  account
of non­payment of Stamp Duty.”
22. Although  we  agree  that  there  is  a  need  to  constitute  a  larger
Bench   to   settle   the   jurisprudence,   we   are   also   cognizant   of   time­
sensitivity   when   dealing   with   arbitration   issues.   All   these   matters
are   still   at   a   pre­appointment   stage,   and   we   cannot   leave   them
hanging   until   the   larger   Bench   settles   the   issue.   In   view   of   the
same, this Court – until the larger Bench decides on the interplay
between   Sections   11(6)   and   16   –   should   ensure   that   arbitrations
are carried on, unless the issue before the Court patently indicates
existence of deadwood.
23. This brings us to the only issue at hand: whether the issue of
insufficient   stamping   raised   by   the   respondent   is   deadwood   and
clearly indicative of an unworkable arbitration agreement, or there
are   deeper   issues   which   can   be   resolved   at   a   later   stage.   The
counsel   for   the   petitioners   has   sought   to   draw   our   attention   to
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Clause   22(1)(b)   of   the   HMA,   to   contend   that   the   respondent   has
presented   a   warranty   to  ensure   the   said   HMA   would   be   valid   and
legally enforceable. Clause 22.1 (b) of the HMA reads as follows:
“22.1.   Owner   represents   and   warrants   to
Manager   upon   execution   of   this   Agreement   and
again on the Commencement Date that:
…
b) it has obtained or shall obtain (with Manager’s
assistance as it is reasonably able to provide) all
necessary   governmental   permissions,   licenses
and   permits   (including   but   not   limited
construction, occupancy, liquor, bar, restaurant,
sign and hotel accommodation licenses) to enable
Manager to operate the Hotel in accordance with
the   Brand   Standards   and   to   ensure   this
Agreement   is   fully   valid   and   enforceable   in   the
Country.”
24. Having   perused   Clause   22.1,   it   is   necessary   to   note   that   the
respondent   is   under   an   obligation   to   ensure   that   the   agreement
would   be   legally   valid   in   India.   If   such   an   obligation   was
undertaken by the respondent, the extent to which the petitioners
can rely on the respondent’s warranty, is clearly a debatable issue.
Further, it is also a matter of adjudication whether the respondent
could   have   raised   the   issue   of   validity   of   the   arbitration
agreement/substantive   contract   in   view   of   the   warranty.   This
aspect clearly mandates that the aforesaid issue is not deadwood.
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The   issues   whether   the   respondent   is   estopped   from   raising   the
contention of unenforceability of the HMA or the issue whether the
HMA is insufficiently or incorrectly stamped, can be finally decided
at a later stage.
25. Moreover,   the   petitioners   have   reiterated   that   without
prejudice,   they   have   paid   the   required   stamp   duty,   including   the
penalty   that   may   be   accruable   and   sought   appointment   of   a   sole
arbitrator in light of the same.   On the contrary,  the respondent, in
rebuttal   to   the   payment   of   stamp   duty,   has   challenged   the   same,
contending that payment of stamp duty has been wrongly classified
and   stamp   duty   has   been   paid   against   Article   5(j)   under   the
schedule   of   the   Karnataka   Stamp   Act,   1957,   which   is   erroneous.
Therefore,   the   respondent   contends   that   the   HMA   has   not   been
properly stamped.       
26. Upon   reading   Vidya   Drolia   (supra),   the   issue   of   ‘existence’
and/or   ‘validity’   of   the   arbitration   clause,   would   not   be   needed   to
be   looked   into   herein,   as   payment   of   stamp   duty,   sufficient   or
otherwise,   has   taken   place   herein.   In   order   to   ascertain   whether
adequate   stamp   duty   has   been   paid   in   terms   of   the   Karnataka
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Stamp   Act,   this   Court   needs   to   examine   the   nature   of   the
substantive   agreement,   the   nature   of   the   arbitration   agreement,
and   whether   a   separate   stamp   fee   would   be   payable   for   the
arbitration   agreement   at   all.   It   may   be   noted   that   the   petitioners,
have   themselves   attempted   to   self­adjudicate   the   required   stamp
duty   and   have   paid,   on   29.07.19,   a   stamp   duty   of   Rs   2,200/­,
describing   the   HMA   as   a   “bond”.   On   10.06.2020,   the   petitioners
further   purchased  11  e­stamps  for  Rs.  200/­  each,  describing  the
HMA   as   an   ‘agreement’   under   article   5(j).   Therefore,   it   falls   upon
the   Court,   under   the   stamp   act   to   review   the   nature   of   the
agreement in order to ascertain the stamp duty payable. From the
above   it   is   clear,   that   stamp   duty   has   been   paid,   whether   it   be
insufficient or appropriate is a question that maybe answered at a
later stage as this court cannot review or go into this aspect under
Section 11(6). If it was a question of complete non stamping, then
this   court,   might   have   had   an   occasion   to   examine   the   concern
raised in   N. N. Global   (supra), however, this case, is not one such
scenario.
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27. Therefore,   we   deem   it   appropriate   for   this   matter   to   be
referred   to   arbitration,   in   terms   of   Clause   18.2   of   the   arbitration
agreement.
28. Accordingly, we appoint Mr. Justice   A.V. Chandrashekara, a
former Judge of the High Court of Karnataka as a sole arbitrator to
adjudicate   the   issues.   The   parties   are   directed   to   take   steps   to
convey this order to the SIAC to proceed in terms of the SIAC rules.
29. The arbitration petition is allowed in the above terms.
  
...........................................CJI.
                                                                                                                      (N.V. RAMANA)
                                                                 ..............................................J.
                        (SURYA KANT)
..............................................J.
                        (HIMA KOHLI)
NEW DELHI;
JANUARY 25, 2022
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