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Arbitration Request

A.R. No. 31 of 2009 - John J. Vilangadan Vs. General Manager, (2012) 261 KLR 409

posted Jul 22, 2012, 7:13 AM by Law Kerala   [ updated Jul 22, 2012, 7:13 AM ]

(2012) 261 KLR 409 

IN THE HIGH COURT OF KERALA AT ERNAKULAM

 

PRESENT: THE HONOURABLE MR.JUSTICE K.T.SANKARAN 

WEDNESDAY, THE 11TH DAY OF JULY 2012/20TH ASHADHA 1934 

AR.No. 31 of 2009 


APPLICANT: 

JOHNY J.VILANGADAN, RAILWAY CONTRACTOR, VILANGADAN HOUSE, VYTTILA POST KOCHI-682 019. 
BY ADVS.SRI.V.J.JOSEPH SMT.M.V.LIGI 

RESPONDENTS: 

1. THE GENERAL MANAGER, SOUTHERN RAILWAY, HEADQUARTERS OFFICE, PARK TOWN, CHENNAI-600 003. 
2. THE DIVISIONAL RAILWAY MANAGER(WORKS), SOUTHERN RAILWAY, DIVISIONAL RAILWAY OFFICE THIRUVANANTHAPURAM-695 014. 
BY ADV. SRI.M.C.CHERIAN,SR.SC.,RAILWAYS BY SRI.N.B.SUNIL NATH,SC, RAILWAYS 

THIS ARBITRATION REQUEST HAVING BEEN FINALLY HEARD ON 22.6.2012, ALONG WITH A.R.NO.32 OF 2009 AND CONNECTED CASES, THE COURT ON 11-07-2012 PASSED THE FOLLOWING: 


APPENDIX IN A.R.NO.31/2009 


PETITIONER'S EXHIBITS: 

  • ANNEXURE-A1 TRUE COPY OF THE AGREEMENT DATED 8.3.1991 BETWEEN THE APPLICANT AND THE RAILWAY ADMINISTRATION. 
  • ANNEXURE-A2 TRUE COPY OF THE NOTICE DATED 9.6.2004 SENT BY THE APPLICANT TO THE RESPONDENTS. 
  • ANNEXURE-A3 TRUE COPY OF THE DEMAND LETTER FOR ARBITRATION DATED 4.10.2004 TO THE FIRST RESPONDENT. 
  • ANNEXURE-A4 COPY OF THE ARBITRATION AGREEMENT (THE GENERAL CONDITIONS OF CONTRACT). 
  • ANNEXURE-A5 COPY OF THE PANEL SUBMITTED BY THE RAILWAY IN A.R. NO.43 OF 2004. 
  • ANNEXURE-A6 COPY OF THE JUDGMENT DATED 21.3.2006 IN A.R.NO.9/2005. 
  • ANNEXURE-A7 TRUE COPY OF THE LETTER DATED 3.4.2006 SENT BY THE APPLICANT TO THE FIRST RESPONDENT. 
  • ANNEXURE-A8 TRUE COPY OF THE PROCEEDINGS NO.G.16/DGM/ARB/2006/59 DATED 19.9.2006 OF THE FIRST RESPONDENT TO THE ARBITRAL TRIBUNAL, APPLICANT AND THE SECOND RESPONDENT. 
  • ANNEXURE-A9 TRUE COPY OF THE JUDGMENT DATED 13.12.2006 IN A.R.NO.32/2006 OF THIS COURT. 
  • ANNEXURE-A10 TRUE COPY OF THE TERMINATION OF ARBITRATION PROCEEDINGS DATED 30.4.2007 OF THE ARBITRAL TRIBUNAL. 
  • ANNEXURE-A11 COPY OF THE JUDGMENT DATED 7.12.2007 IN SLP(C) NO.14395/2007 OF THE SUPREME COURT OF INDIA. 
  • ANNEXURE-A12 TRUE COPY OF THE OBJECTION FILED BY THE SECOND RESPONDENT IN O.P.(ARB) NO.289/2008 BEFORE THE DISTRICT COURT, THIRUVANANTHAPURAM. 
  • ANNEXURE-A13 TRUE COPY OF THE LETTER DATED 21.8.2009 ISSUED BY THE APPLICANT TO THE FIRST RESPONDENT. 
  • ANNEXURE-A14 COPY OF THE ACKNOWLEDGEMENT CARD EVIDENCING RECEIPT OF ANNEXURE A13. 
  • ANNEXURE-A15 COPY OF THE ORDER DATED 14.8.2009 PASSED IN O.P.(ARB) NO.287/2008 ANNEXURE-A16 A COPY OF SLP.NO.14395/07 FILED BY THE RESPONDENTS. 

RESPONDENTS' EXHIBITS: 

  • ANNEXURE-R1 TRUE COPY OF PANEL OF ARBITRATORS SUBMITTED IN A.R.NO.42 OF 2004. 
  • ANNEXURE-R2 TRUE COPY OF LETTER DATED 7.1.2008 OF FIRST RESPONDENT TO THE PETITIONER. 
  • ANNEXURE-R3 TRUE COPY OF LETTER DATED 31.1.2008 OF THE FIRST RESPONDENT TO THE PETITIONER. 
  • ANNEXURE-R4 COPY OF THE LETTER DATED 6.2.2008 OF SECOND RESPONDENT TO THE PETITIONER. 
  • ANNEXURE-R5 TRUE COPY OF LETTER DATED 20.10.2009 OF THE FIRST RESPONDENT TO THE PETITIONER. 
  • ANNEXURE-R6 THE EXTRACT OF CLAUSES 63 AND 64 OF GENERAL CONDITIONS OF CONTRACT IN FORCE. 
  • ANNEXURE-R7 TRUE COPY OF THE LETTER DATED 26.10.2009 TO THE PETITIONER. ANNEXURE-R8 TRUE COPY OF LETTER DATED 10.11.2009 OF THE PETITIONER TO ARBITRATOR.

 //TRUE COPY// AHZ/ 

K.T.SANKARAN, J. 

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A.R. Nos.31, 32, 33, 34 of 2009, 36, 37 and 38 of 2010 

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Dated this the 11th day of July, 2012 

Head Note:-

Arbitration and Conciliation Act, 1996 - Sections 11(5) and (6) - Appointment of an independent and impartial arbitrator. 
Held:- If an independent Arbitrator is appointed, it would protect the interests of both the parties. I am also inclined to accept the contention of the applicant that technical qualifications are not required for the arbitrator for resolving the disputes involved in the cases. Even assuming that the arbitrator requires any assistance of a technical expert, he can very well seek such assistance at the request of any of the parties. Accordingly, the Arbitration Requests are allowed. Justice V.Ramkumar, a former Judge of the High Court of Kerala, is appointed as the sole Arbitrator to decide the disputes between the parties in the Arbitration Requests. The Arbitrator would be free to fix his fee. 

O R D E R 


In all these Arbitration Requests, the parties are the same and the questions involved are identical. Therefore, these Arbitration Requests were heard jointly and they are being disposed of by this common order. The applicant and the first respondent entered into different contracts and separate agreements were executed between them. The agreements contain similar arbitration clause. Clauses 64 (3)(a)(i) and 64(3)(a)(ii) read as follows: 

"64(3)(a)(i)-- In cases where the total value of all claims in question added together does not exceed Rs.10,00,000/- (Rupees Ten lakhs only), the Arbitral Tribunal consist of a sole arbitrator who shall be either the General Manager or a gazetted officer of Railway not below the grade of JA grade nominated by the General Manager in that behalf. The sole arbitration shall be appointed within 60 days from the day when a written and valid demand for arbitration is received by Railway." 
"64(3)(a)(ii) - In cases not covered by clause 64(3) (a)(i), the Arbitral Tribunal shall consist of a panel of three Gazetted Rly. Officers not below JA grade, as the arbitrators. For this purpose, the Railway will send a panel of more than 3 names of Gazetted Railway Officers of one or more departments, of the Railway to the contractor who will be asked to suggest to General Manager upto 2 names out of the panel for appointment as contractor's nominee. The General Manager shall appoint at least one out of them as the Contractor's nominee and will, also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the 'presiding arbitrator' from amongst the 3 arbitrators so appointed. While nominating the arbitrators it will be necessary to ensure that one of them is from the Accounts Department. An officer of Selection Grade of the Accounts Department shall be considered of equal status to the officers in SA grade of other departments of the Railways for the purpose of appointment of arbitrators." 

2. The arbitration clauses in the model agreement were modified and there is some confusion with respect to the appointment of the arbitrator in cases where the total value does not exceed Rupees Five lakhs. It is stated that in A.R.Nos.36, 37 and 38 of 2010, the contract amount involved is less than Rupees Five lakhs. I do not think that this confusion would have any relevance in deciding these Arbitration Requests. 


3. According to the applicant, agreements were entered into on 28.6.1995. The time stipulated for completing the work was 30.11.2005. On 9.6.2004, the applicant made the final claims, which were received by the respondents on 11.6.2004. According to the applicant, the works were completed within the extended time and amounts are due to him from the Southern Railway. The applicant made Annexure A2 final claim dated 9.6.2004. Since the amounts claimed by the applicant were not paid, he made a demand for resolving the dispute by arbitration (Annexure A3 dated 4.10.2004). Arbitrators were not appointed as per the request in Annexure A3. Therefore, the applicant filed A.R.Nos.41 to 47 of 2004 under Section 11(6) of the Arbitration and Conciliation Act. The respondents raised a contention that the said Arbitration Requests were premature. Arbitration Request Nos.41 to 47 of 2004 were later withdrawn by the applicant. 


4. Thereafter, the applicant filed Arbitration Request Nos.4 to 10 of 2005 under Section 11(6) of the Arbitration and Conciliation Act, which were disposed of as per Annexure A6 order dated 21.3.2006. The operative portion of Annexure A6 order reads as follows: 

"9. Having regard to the aforesaid circumstances, I am not inclined to grant the request as prayed for. However, if the applicant is willing to appoint any of the arbitrators named in the panel submitted by the Railways during the course of the proceedings before this Court in A.R.No.41/2004 and connected matters, as his arbitrator, he may do so by informing the first respondent in these proceedings, in writing, with copy to the Divisional Railway Manager, Southern Railway, Thiruvananthapuram by registered post, within a period of a fortnight from today and if the applicant takes such a course, the Railways will further do the needful in terms of clause 64(3)(b) of the Arbitration Agreement."

5. According to the applicant, he complied with Annexure A6 order and nominated his nominee arbitrator from Annexure A5 panel given by the respondents. According to the applicant, though he complied with Annexure A6 order by issuing Annexure A7 letter dated 3.4.2006 nominating Sri.K.Masthan Rao from among the panel submitted by the Railways, Arbitral Tribunal was not constituted as directed in Annexure A6 order. Therefore, the applicant filed A.R.Nos.30 to 36 of 2006 on 16.8.2006. After filing A.R.Nos.30 to 36 of 2006, the Deputy General Manager/General for General Manager of Southern Railways issued Annexure A8 proceedings dated 19.9.2006 constituting an Arbitral Tribunal. The Chief Justice disposed of A.R.Nos.30 to 36 of 2006 by Annexure A9 order dated 13.12.2006, the relevant portion of which reads as follows: 

"4. Counsel for the applicant vehemently contends that even though Sri.K.Masthan Rao may be one of the persons in the panel for appointment of Arbitrator in the applications earlier made which culminated into order dated 21st March, 2006, but the applicant had a limited choice at that time as it was only from the panel an Arbitrator could be appointed, but the respondents have now forfeited their right to appoint an Arbitrator as, surely, such an appointment is made after the filing of these applications. Learned counsel relies upon the decision of the Honourable Supreme Court in Punj Lloyd Ltd. v. Petronet MHB Ltd. [(2006) 2 SCC 638]. Counsel further contends that once the respondents have forfeited their right to make an appointment of an Arbitrator, the applicant would certainly seek appointment of an Independent Arbitrator and the very fact that Sri.K.Masthan Rao was named by the applicant himself as an Arbitrator earlier was under circumstances when the applicant had no other choice. 
5. There cannot be any exception to the contention of the learned counsel for the applicant. There is indeed an arbitration clause in the agreement and the matter has to be referred to an Arbitrator. For appointment of Arbitrator, there is no dispute. Once, the respondents have lost right to make appointment of Arbitrator, this Court would consider it appropriate to make appointment of a former Judge of this Court as Arbitrator. It is urged by the learned counsel for the Railways that an Engineer with M.Tech. Degree has to be an Arbitrator because of the subject requiring expertise of such a person. The Court only directs that the Arbitrator may seek assistance of an Engineer with M.Tech.Degree. Sri.Justice R.Bhaskaran, former Judge of this Court, residing at "Sreekrishna Kripa", Kaloor, Kochi - 682 017 is appointed as Arbitrator." 

6. Justice R.Bhaskaran entered upon the Arbitration Reference on 18.12.2006. It is contended that sixteen sittings were conducted by him and the respondents participated in the arbitration proceedings. In view of Annexure A9 order dated 13.12.2006 appointing Justice R.Bhaskaran as the Arbitrator, the Arbitral Tribunal constituted as per Annexure A8 proceedings dated 19.9.2006 was terminated as per Annexure A10 proceedings of the Arbitrators dated 30.4.2007. 


7. Thereafter in May 2007, the respondents filed S.L.P.(Civil) N0.14395 of 2007 before the Honourable Supreme Court challenging the order in A.R.No.30 of 2006. It is submitted by the learned counsel for the applicant that the orders in A.R.Nos.31 to 36 of 2006 were not challenged before the Honourable Supreme Court. The Honourable Supreme Court granted special leave to appeal and disposed of the appeal as per Annexure A11 order dated 7.12.2007. The Honourable Supreme Court held thus: 

"We fail to understand how can a Judge be appointed dehors the law of this Court. It was held by this Court in the case of ACE Pipeline Contracts (P) Ltd. versus Bharat Petroleum Corpn. Ltd. reported in 2007 (5) SCC 304 that "the departmental lethargy in making appointment of arbitrators in terms of the arbitration clause is well known. Therefore, mandamus can be issued by the Courts in exercise of powers under Section 11(6) of the Act but the demand should be in the event of failure by the authorities to appoint arbitrators within a reasonable time. Courts are not powerless to issue mandamus to the authorities to appoint arbitrators as far as possible as per the arbitration clause. But in large number of cases if it is found that it would not be conducive in the interest of parties or for any other reasons to be recorded in writing, the choice can go beyond the designated persons or institutions in appropriate cases. But court should normally adhere to the terms of arbitration clause and appoint the arbitrator/arbitrators named therein except in exceptional cases for reasons to be recorded or where both parties agree for common name." (Page 306) Therefore, in view of the aforesaid decision, the view taken by the learned Single Judge cannot be sustained. The same is set aside and the Arbitrator appointed by the Railways shall proceed in the matter and dispose of the whole matter preferably within a period of six months from today. The appeal is accordingly, allowed." 

8. According to the applicant, the Arbitral Tribunal constituted by the Railways as per Annexure A8 dated 19.9.2006 was expected to proceed with the arbitration. However, according to the respondents, they could constitute a fresh Arbitral Tribunal. 


9. The applicant filed O.P.(Arb.) No.287 of 2008 before the District Court, Thiruvananthapuram, under Sections 14 and 15 of the Arbitration and Conciliation Act to decide on the termination of the mandate of the Arbitral Tribunal and to pass an order to the effect that the mandate of the Arbitral Tribunal was terminated and the Arbitral Tribunal had no jurisdiction to enter upon the reference and adjudicate upon the disputes. In O.P.(Arb.) No.287 of 2008 (Annexure A18), the applicant contended that the period of six months prescribed in the judgment of the Honourable Supreme Court was over and the Arbitral Tribunal did not enter upon the reference and adjudicate upon the matters in dispute and pass the award within the time stipulated. The respondents filed Annexure A12 objection in O.P.(Arb.) No.287 of 2008, in which it was contended, inter alia, thus: 

"17. Averments in paras 4 and 5 of the petition are false and hence denied. The allegation that because of the laches, delay and breach of the contract on the part of respondents 1 and 2, that the petitioner suffered huge loss is against true facts and denied emphatically. In accordance with the arbitration request made by the contractor, the railway was making all preparations to constitute the Arbitral Tribunals. But even before the period available for the same, the contractor rushed to the Hon'ble High Court with the arbitration requests 41/04 to 47/04 and finally on getting realised that the said requests are premature, the contractor himself represented that he is withdrawing the Arbitration Requests. Thereafter the very same petitioner approached the Hon'ble High Court with another bundle of petitions as AR Nos.4/05 to 10/05. In the said petitions, the Hon'ble High Court passed an order on 21.3.06 directing the petitioner to nominate one among the panel of the Gazetted Officers of the Southern Railway submitted by the respondents during the course of the proceedings in A.R.No.41/04 to A.R.47/04. On the request of the contractor the railway had constituted the Arbitral Tribunal with Sri.K.Masthan Rao as the sole Arbitrator and further a three member Tribunal with Sri.K.Masthan Rao as the presiding Arbitrator was also constituted. In the meanwhile the contractor again rushed to the High Court with Arbitration requests Nos.30/06 to 36/06. After filing such applications, the contractor refrained from participating in the arbitration proceedings. Finally in A.R.30/06 the Hon'ble High Court appointed Justice R.Bhaskaran (Retd) as the Arbitrator and thereby the Arbitrators appointed by the 1st respondent lost their mandate. After the appointment of Justice R.Bhaskaran as the Sole Arbitrator by the Hon'ble High Court, Railway also participated in his proceedings till the order of the Hon'ble Supreme Court stayed the common order of the Hon'ble High Court of Kerala in A.Rs.30 to 36/06. During the course of the above said SLP, Justice R.Bhaskaran was the Arbitrator. As on the date of the order of the Apex Court the Arbitrators appointed by the Railway was not functioning as the Arbitrators and the proceedings were terminated. Hence the spirit of the order of the Apex court regarding the direction that "the arbitrator appointed by the railways shall proceed in the matter" can only be the new arbitrators to be appointed by the Railway shall proceed with the matter and dispose of the same. It is in consonance with the spirit of the Apex Court order that the railway had appointed Sri.P.Jayakumar as the sole Arbitrator and also tried to constitute the other three Member Tribunal with the co- operation of the contractor which he never extended. 
18. Averments in paras 6 to 9 of the petition are false and hence denied. As stated earlier as on the date of the order of the Apex Court, the Arbitrators appointed by the Railway were not in existence. Those Arbitrators lost their mandate even as on the date of the appointment of Justice R.Bhaskaran as the Arbitrator by the Hon'ble High Court. The Hon'ble Supreme Court did not pass any order reviving the proceedings of the Railway by which the Arbitrators were appointed by the proceedings dated 19.9.06. Respondents 3 to 5 were not having the authority to enter upon the reference and adjudicate the disputes since the proceedings were already terminated. The appointment of new Arbitral Tribunal with 3 members could not be done due to the intentional misconduct of the contractor and non- cooperation in the proceedings. 
19. Averments in paras 10 to 12 of the petition are false and hence denied. There was no reason for the contractor to abstain from participating in the arbitral proceedings since Sri.K.Masthan Rao, the previous sole Arbitrator happened to be abroad on deputation and hence the contractor was directed to give his choice from among the panel submitted by the Railways, which also remained without any response and so also returning the letters sent to him. It may be submitted that the Railway is ready to constitute the Tribunal and get the disputes resolved through the Arbitrators to be appointed as per the terms of the agreement, provided the contractor gives his choice of the Arbitrator. Simply because of the period of six months had expired from the date of the order of the Apex Court, the authority of the 1st Respondent in constituting the Arbitral Tribunal, was not lost and especially because the 3 Member Tribunal could not be constituted due to the complete lack of co-operation from the side of the Contractor. Also every attempt was made to get the order of the Apex Court modified and even at present there is no strict direction as to the period within which the disputes are to be answered."

10. The District Court disposed of O.P.(Arb.) No.287 of 2008 as per Annexure A15 order dated 14.8.2009, which reads as follows: 

"Counter filed. In view of the contention in the counter that the mandate of the arbitrator appointed earlier has been terminated with effect from 30.04.2007 and in view of the endorsement made by the counsel for the petitioner that the O.P. can be closed in view of the above contention, the petition is dismissed as not pressed with liberty for the petitioner to agitate the validity of the arbitral tribunal alleged to have been later constituted in appropriate proceedings. The parties are directed to bear their respective costs." 

11. Thereafter, the present Arbitration Requests were filed by the applicant under Section 11(5) and (6) of the Arbitration and Conciliation Act praying for appointment of an independent and impartial arbitrator. The present Arbitration Requests (A.R.Nos.31 to 34 of 2009) were filed on 25.9.2009. Before filing the Arbitration Requests, the applicant sent Annexure A13 notice dated 21.8.2009 to the respondents nominating Sri.Venkatanarayanan, Deputy Chief Signal Telecommunication Engineer and Sri.A.K.Maurya, Senior Divisional Electrical Engineer. Annexure A13 letter was sent in reply to the letters dated 7.1.2008 (Annexure R2) and 31.1.2008 (Annexure R3), which, according to the applicant, were served on him only on 14.8.2009 through his counsel along with the objection in O.P.(Arb.)Nos.287 of 2008, 288 of 2008, 289 of 2008 and 290 of 2008, District Court, Thiruvananthapuram. (It would appear that the applicant filed O.P.(Arb.) Nos.288, 289 and 290 of 2008 before the District Court making similar prayers as made in O.P.(Arb.)No.287 of 2008, which was disposed of as per Annexure A15 order.) The applicant contended that even after the issue of Annexure A13 letter, the respondents did not constitute the Arbitral Tribunal within thirty days. 


12. After filing the present Arbitration Requests, as per Annexure R5 dated 20.10.2009, an Arbitral Tribunal was constituted by the Deputy General Manager/General for General Manager of the Southern Railway. It is submitted by the applicant that the first sitting of the Arbitral Tribunal constituted as per Annexure R5 was on 12.8.2010, beyond the period of six months from the date of constitution of the Tribunal. It is contended by the applicant that the Arbitral Tribunal constituted after the filing of the Arbitration Requests would not take away the jurisdiction of the Chief Justice to deal with the application under Section 11(6) of the Arbitration and Conciliation Act. The learned counsel for the petitioner relied on the decisions reported in Datar Switchgears Ltd. v. Tata Finance Ltd. and another ((2000) 8 SCC 151), Punj Lloyd Ltd. v. Petronet MHB Ltd. ((2006) 2 SCC 638), Union of India v. Bharat Battery Manufacturing Co.(P) Ltd. ((2007) 7 SCC 684) and Divisional Railway Manager v. West Coast Agencies (2005 (2) KLT 734) in this context. Learned counsel for the applicant contended that in view of the terms in the agreements and the works undertaken, no technical qualification is required for the Arbitrator to resolve the disputes involved in the case and, therefore, clause (a) of sub- section (8) of Section 11 of the Arbitration and Conciliation Act may not as such apply. The counsel also relied on the order dated 26.9.2006 in A.R.No.36 of 2005 (M/s.K.A.Pillai & Co. v. Union of India and another) in which this Court appointed a retired Judge as the Arbitrator in respect of a contract entered into between the applicant therein and the Southern Railway. The counsel also relied on the decision of the Supreme Court in Denel (Proprietary Limited) v. Bharat Electronics Ltd. and another (CDJ 2010 SC 484) wherein a retired Judge of the Supreme Court was appointed as the sole Arbitrator in spite of the fact that the arbitration clause stipulated appointment of the Managing Director of the respondent therein as the Arbitrator. 


13. Sri.M.C.Cherian, learned counsel appearing for the respondents contended that all through out the applicant was avoiding settlement of disputes by the Arbitral Tribunal and he does not really want to resolve the disputes. It is contended that the intention of the applicant is only to drag the proceedings. Before the respondents could take appropriate proceedings for constituting Arbitral Tribunal, the applicant rushed to this Court to pre-empt the proceedings of the respondents. It is pointed out that after Annexure A11 order was passed by the Honourable Supreme Court, the Railways issued Annexure R2 letter dated 7.1.2008 to the applicant requesting to nominate his nominee. But that letter was returned as unclaimed. Two other letters were also issued to the applicant, but those letters were also returned as unclaimed. The counsel also contended that the applicant was waiting to expire the period fixed by the Supreme Court and he did not issue any letter making his nomination till the expiry of the period. The counsel also pointed out that Annexures R7 to R13 letters were issued by the Arbitral Tribunal to the applicant, but he did not participate in the proceedings. 


14. In Datar Switchgears Ltd. v. Tata Finance Ltd. and another ((2000) 8 SCC 151), the Supreme Court held thus: 

"19. So far as cases falling under Section 11(6) are concerned-- such as the one before us-- no time limit has been prescribed under the Act, whereas a period of 30 days has been prescribed under Section 11 (4) and Section 11(5) of the Act. In our view, therefore, so far as Section 11(6) is concerned, if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within 30 days of the demand, the right to appoint does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the court under Section 11, that would be sufficient. In other words, in cases arising under Section 11(6), if the opposite party has not made an appointment within 30 days of demand, the right to make appointment is not forfeited but continues, but an appointment has to be made before the former files application under Section 11 seeking appointment of an arbitrator. Only then the right of the opposite party ceases. ...." 

15. In Punj Lloyd Ltd. v. Petronet MHB Ltd. ((2006) 2 SCC 638), a three Judge Bench of the Supreme Court relied on the decision in Datar Switchgears Ltd. v. Tata Finance Ltd. and another ((2000) 8 SCC 151). 


16. In Union of India v. Bharat Battery Manufacturing Co. (P) Ltd. ((2007) 7 SCC 684), the Supreme Court relied on the decisions in Datar Switchgears Ltd. v. Tata Finance Ltd. and another ((2000) 8 SCC 151) and Punj Lloyd Ltd. v. Petronet MHB Ltd. ((2006) 2 SCC 638) and held thus: 

"As already noticed, the respondent filed Section 11(6) petition on 30.3.2006 seeking appointment of an arbitrator. The appellant, thereafter, said to have appointed one Dr.Gita Rawat on 15.5.2006 as a sole arbitrator, purportedly in terms of Clause 24 of the agreement. Once a party files an application under Section 11(6) of the Act, the other party extinguishes its right to appoint an arbitrator in terms of the clause of the agreement thereafter. The right to appoint arbitrator under the clause of agreement ceases after Section 11 (6) petition has been filed by the other party before the Court seeking appointment of an arbitrator." 

17. In Divisional Railway Manager v. West Coast Agencies (2005 (2) KLT 734), a Division Bench of this Court held thus: 

"11. Chapter III of the Act relates to Composition of Arbitral Tribunal. S.11 therein relates to Appointment of Arbitrators. Sub-s.(2) of S.11 provides that subject to sub-s. (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. Sub-s.(6) to which sub-s.(2), as noticed above, is subject to, provides that where, under an appointment procedure agreed upon by the parties, a party fails to act as required under that procedure, a party may request the Chief Justice or his designate to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. Therefore, in our view, when the writ petitioner has failed to act as required under the procedure agreed upon by the parties in sub-clause 64(1)(i) of GCC, the compulsion in sub-cl. 64(3)(a)(iii) of GCC that no person other than a Gazetted Railway Officer should act as an Arbitrator would not survive. This is so because sub-s.(5) of S.11 provides that when an agreement on a procedure for appointing the Arbitrators referred to in sub-s.(2) fails, the appointment shall be made upon the request of a party by the Chief Justice or his designate. In doing so, the Chief Justice or his designate shall have due regard to the provisions contained in sub-s.(8) of S.11 which works as a legislative guideline for the Chief Justice or his designate in making the choice of the person to be appointed as the Arbitrator. If it were the intention of the Legislature that the measure taken by the Chief Justice or his nominee can be to appoint only the arbitrator identified by name or office in the agreement, such a stipulation would have been expressly provided in sub-s.(8). The absence of such a provision therein and the prescription in sub-s.(8) that in taking the measure, the Chief Justice or his nominee shall, in appointing an arbitrator, have due regard to (a) any qualifications required of arbitrator by the agreement of the parties; and (b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator, the two factors enumerated in the said sub-section, go to show that the power to appoint an arbitrator while taking such measure as is required, includes the power to choose. The factor (b) noticed above enables the Chief Justice to secure the appointment of independent and impartial arbitrator. This is sufficient indication that the Chief Justice need not limit his choice to the arbitrator identified by name or office in the agreement (in this case, to a Railway Officer). Therefore, such power to appoint cannot be tied down to the terms as to appointment contained in the agreement as regards the identity of the arbitrator. 
12. In our considered view, the object sought to be achieved by such a mechanism ensures that a party, who has the right to make the appointment of the Arbitrator, having not done so on request by the party seeking reference for arbitration, should not be permitted to urge before the Chief Justice or his nominee that notwithstanding the fact that it had rejected the request for arbitration or has refused to make the appointment, the Chief Justice or his nominee exercising the statutory power under S.11(6) of the Act is tied down to the preference dictated by the opposite party (Railways in this case) in the matter of choosing the arbitrator. Such a contention, if it is accepted, will lead to fetter the power of the Chief Justice or his nominee to take the necessary measure as warranted by the situation for which they are empowered in terms of S.11(6) subject only to the legislative guidelines contained in sub-s.(8) of S.11. In our view, any other construction would lead to whittling down the quality of power conferred by sub-s.11(6) on a high office. 
..... 
....... 
15. Referring to para 23 of the judgment in Datar Switchgear's case (supra), the learned counsel for the writ petitioner emphasised that the parties having entered into the contract and settled on a procedure, due importance has to be given to such procedure and that the Court has to respect the terms of the contract entered into by the parties and endeavour to give importance and effect to it. It is urged that when the party has not disputed the arbitration clause, normally he is bound by it and obliged to comply with the procedure laid down under the said clause. These observations have been made by the Apex Court in the context of the facts of that case wherein the crux of the issue was that appointment of arbitrator was made by the respondent therein before the filing of the Arbitration Request under S.11(6). As we have already held, the effect of the provisions of the agreement would stand superseded by the authority of the Chief Justice and his nominee conferred by S.11(6), in cases where the appointment is not made before the Arbitration Request is made by the presentation of the request in the form of an application in the Court, in terms of the Scheme for Appointment of Arbitrators by the Chief Justice of High Court of Kerala, 1996 and the Kerala Arbitration and Conciliation (Court) Rules, 1997. In the instant case, no appointment having been made before the filing of such request by the 1st respondent, the writ petitioner is precluded from claiming that the Chief Justice or his nominee could have either appointed or directed the Railways to appoint only a Gazetted Railway Officer as provided under sub-cl. 64(3)(a) (iii) of GCC." 

18. In Indian Oil Corporation Limited and others v. Raja Transport Private Limited ((2009) 8 SCC 520), the Supreme Court held thus: 

"38. Before parting from this issue, we may however refer to a ground reality. Contractors in their anxiety to secure contracts from Government/statutory bodies/public sector undertakings, agree to arbitration clauses providing for employee arbitrators. But when subsequently disputes arise, they baulk at the idea of arbitration by such employee arbitrators and tend to litigate to secure an "independent" arbitrator. The number of litigations seeking appointment of independent arbitrator bears testimony to this vexed problem. 
39. It will be appropriate if Governments/statutory authorities/public sector undertaking reconsider their policy providing for arbitration by employee arbitrators in deference to the specific provisions of the new Act reiterating the need for independence and impartiality in arbitrators. A general shift may in future be necessary for understanding the word "independent" as referring to someone not connected with either party. That may improve the credibility of arbitration as an alternative dispute resolution process. Be that as it may. 
Re: Question (ii) 
40. Where the arbitration agreement names or designates the arbitrator, the question whether the Chief Justice or his designate could appoint any other person as the arbitrator, has been considered by this Court in several decisions.  
41. In Ace Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corpn. Ltd. ((2007) 5 SCC 304), a two-Judge Bench of this Court held that where the appointing authority does not appoint an arbitrator after receipt of request from the other party, a direction can be issued under Section 11(6) to the authority concerned to appoint an arbitrator as far as possible as per the arbitration clause. It was held that normally the court should adhere to the terms of the arbitration agreement except in exceptional cases for reasons to be recorded or where both the parties agree for a common name. 
42. In Union of India v. Bharat Battery Mfg. Co. (P) Ltd. ((2007) 7 SCC 684), another two-Judge Bench of this Court held that once the notice period provided for under the arbitration clause for appointment of an arbitrator elapses and the aggrieved party files an application under Section 11(6) of the Act, the right of the other party to appoint an arbitrator in terms of the arbitration agreement stands extinguished. 
43. The divergent views expressed in Ace Pipeline ((2007) 5 SCC 304) and Bharat Battery ((2007) 7 SCC 684) were sought to be harmonised by a three- Judge Bench of this Court in Northern Railway Admn. v. Patel Engg. Co.Ltd. ((2008) 10 SCC 240). After examining the scope of sub-section (6) and (8) of Section 11, this Court held: 
"11. The crucial expression in sub-section (6) is 'a party may request the Chief Justice or any person or institution designated by him to take the necessary measure' (emphasis in original). This expression has to be read along with requirement in sub-section (8) that the Chief Justice or the person or an institution designated by him in appointing an arbitrator shall have 'due regard' to the two cumulative conditions relating to qualifications and other considerations as are likely to secure the appointment of an independent and impartial arbitration. 
12. A bare reading of the scheme of Section 11 shows that the emphasis is on the terms of the agreement being adhered to and/or given effect as closely as possible. In other words, the Court may ask to do what has not been done. The Court must first ensure that the remedies provided for are exhausted. It is true as contended by Mr.Desai, that it is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations. 
13. The expression 'due regard' means that proper attention to several circumstances have been focussed. The expression 'necessary' as a general rule can be broadly stated to be those things which are reasonably required to be done or legally ancillary to the accomplishment of the intended act. Necessary measures can be stated to be the reasonable steps required to be taken. 
14. ... It needs no reiteration that appointment of the arbitrator or arbitrators named in the arbitration agreement is not a must, but while making the appointment the twin requirements of sub-section (8) of Section 11 have to be kept in view, considered and taken into account." 

19. In the peculiar facts and circumstances of the case, I am of the view that it is just and necessary to appoint an independent arbitrator. The applicant complains that the respondents did not properly constitute the Arbitral Tribunal, while the respondents contend that the applicant was protracting the proceedings and avoiding appointment of arbitrators as per the terms of the arbitration agreement. It is not disputed and it is clear from the facts narrated above that the parties were before this Court in three sets of Arbitration Requests in 2004, 2005 and 2006. The present Arbitration Requests are the fourth in the series. The agreements were signed between the parties in 1995. Final claim was made by the applicant in 2004. Even now, the disputes between the parties have not been resolved. Had there been no arbitration clause, probably civil courts would have disposed of the cases and resolved the disputes much earlier. The purpose and object of the Arbitration and Conciliation Act is to resolve the disputes expeditiously. In the present cases, even after several rounds of litigation, the arbitration proceedings have not really commenced. Both parties accuse each other for the delay. The applicant even disputes the impartiality of the officers of the Railways in view of the nature of the disputes in the various proceedings before this Court and the District Court. It is submitted by the learned counsel for the applicant that the respondents did not disclose the correct facts before the Honourable Supreme Court. It is submitted that though Justice R.Bhaskaran, who was appointed as per Annexure A9 order, conducted sixteen sittings, the respondents did not disclose the same in the Special Leave Petition filed before the Honourable Supreme Court thereafter. The applicant also contends that the Arbitral Tribunal constituted in compliance of Annexure A6 order dated 21.3.2006 terminated their proceedings as per Annexure A10 dated 30.4.2007 and that fact was also not brought to the notice of the Honourable Supreme Court. It is also relevant to note here that from the pleadings and records produced in the cases, it would appear that only the order in A.R.No.30 of 2006 was challenged before the Honourable Supreme Court. The orders in A.R.Nos.31 to 36 of 2006 were not challenged before the Supreme Court. It is clear that though the parties fought several litigations, both the parties could be blamed for making a hide and seek game. 


20. If an independent Arbitrator is appointed, it would protect the interests of both the parties. I am also inclined to accept the contention of the applicant that technical qualifications are not required for the arbitrator for resolving the disputes involved in the cases. Even assuming that the arbitrator requires any assistance of a technical expert, he can very well seek such assistance at the request of any of the parties. Accordingly, the Arbitration Requests are allowed. Justice V.Ramkumar, a former Judge of the High Court of Kerala, is appointed as the sole Arbitrator to decide the disputes between the parties in the Arbitration Requests. The Arbitrator would be free to fix his fee. 


(K.T.SANKARAN) Judge 

ahz/ 


A.R. No. 37 of 2011 - Lifetime Realty (P) Ltd. Vs. Poddar Udyog Ltd., 2012 (2) KLJ 102

posted Mar 30, 2012, 8:17 AM by Kesav Das   [ updated Jun 19, 2012, 8:32 AM by Law Kerala ]

IN THE HIGH COURT OF KERALA AT ERNAKULAM


Antony Dominic, J.
A.R. No. 37 of 2011
Dated this the 2nd day of March, 2012
Head Note:-
Kerala Stamp Act, 1959 - Sections 33, 34 and 37 - Held, the authenticated copy of the arbitration agreement cannot be impounded and forwarded to the Collector and is inadmissible in evidence.
For Petitioner:- 
  • P.B. Krishnan
  • P.B. Subramanyan 
For Respondents :- 
  • Bechu Kurian Thomas
  • Devan Ramachandran
  • K.M. Aneesh
O R D E R

1. This Arbitration Request has been filed under section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act' for short), seeking the appointment of an Arbitrator to resolve the disputes between the applicant and the respondents, arising out of Annexure A agreement. When the matter was heard, counsel for the first respondent contended that the agreement was not duly stamped as required under the Kerala Stamp Act. This contention is therefore considered as a preliminary issue.

2. Annexure A is the notarised copy of the agreement for sale dated 18th March 2008 between the applicant and the 1st respondent and its original is engrossed on stamp paper of ?100, only. Clauses 1 and 2 of the agreement, being relevant, are extracted below for reference:-
1) The Vendor shall sell to the Purchaser and/or its nominee/nominees appointed in writing and the Purchaser agrees to purchase from the Vendor the entire shareholding of Goldview Vyaapar Pvt. Ltd., on completion of the demerger as aforesaid and if for any reason the process of demerger is not completed by 30th September, 2008 the Vendor shall sell to the purchaser and/or its nominee/nominees and the Purchaser has agreed to purchase from the Vendor the aforesaid business of Hope Plantations consisting of Glenmary, Kuduakarnam and Ladrum estates and comprising the scheduled property together with all plantations, buildings, factories and other erections and fixtures and such other immovable properties thereon, with all kinds of rights, privileges, easements and all appurtenances thereto as a going concern, together with the business, goodwill, rights, benefits, privileges and all powers, licenses, liberties and export and import quotas of the Vendor and the benefits of all leases and tenancy and all other contracts entered into by the Vendor, arising or incidental thereto, together with all furniture, fixtures, vehicles and other movables properties therein. 
2) The total consideration payable by the Purchaser to the Vendor for purchase of the entire shareholding in the Goldview Vyaapar Pvt. Ltd. shall be Rs.58,50,00,000/- (Rupees Fifty Eight Crores and Fifty Lakhs only). If for any reason the demerger is not completed within the agreed time frame, the aforesaid consideration shall be considered as the price for the purchase of the business of Hope Plantations as aforesaid and in which event Rs.57,00,89,000 (Rupees Fifty Seven Crores and Eighty Nine Thousand) is for the land and tea and other plantations thereon Rs.75,00,000 (Rupees Seventy Five Lakhs) is for the building and other fixtures and Rs.74,11,000/- (Rupees Seventy Four Lakhs and Eleven Thousand) is for the machinery, vehicles and other movables".
3. Both sides are in agreement that by Annexure I order, the scheme of demerger has been confirmed by the High Court of Calcutta. Therefore, the performance of the agreement requires transfer of shares of the demerged company, the second respondent herein, to the Applicant and the question is whether such an agreement is a duly stamped one?

4. This question has to be answered with reference to the provisions of the Kerala Stamp Act. Section 3 of the Act provides that every instrument mentioned in the schedule to the Act executed after the commencement of the Act, shall be chargeable with duty of the extent indicated in the schedule. Serial No.5 to the Schedule provides as follows;

 

Description of Instrument

Proper Stamp Duty

5.

Agreement or memorandum of an agreement-

a) if relating to the sale of a bill of exchange:

b) if relating to the sale of Government security or share in an incorporated company or other body corporate;

One rupee

One rupee for every (1000) or part

thereof of the value of the security or share


5. The agreement is for sale of shares of the demerged Company, the 2nd respondent, and therefore, stamp duty payable is as per the above provision of the Act. From the extracted clauses of the agreement, it is evident that the consideration payable for the shares is Rs. 58.50 crores. The agreement is engrossed on stamp paper of Rs. 100 only. Therefore this is an agreement which is not duly stamped.

6. The manner in which an agreement produced in an arbitration request, which is not duly stamped as per the applicable stamp act is to be dealt with, was considered by the Apex Court in its judgment in M/s. SMS Tea Estates Pvt. Ltd. v. M/s.Chandmari Tea Co. Pvt. Ltd., 2011 (7) SCALE 747. In that judgment, the question posed by the Apex Court was:
"Whether an arbitration agreement in an unregistered instrument which is not duly stamped, is valid and enforceable?
7. This question has been considered in the light of sections 33 and 35 of the Indian Stamp Act, 1899, which are in pari materia to sections 33 and 34 of the Kerala Stamp Act 1959, and was answered as follows:
10. What if an arbitration agreement is contained in an unregistered (but compulsorily registrable) instrument which is not duly stamped? To find an answer, it may be necessary to refer to the provisions of the Indian Stamp Act, 1899 ('Stamp Act' for short). Section 33 of the Stamp Act relates to examination and impounding of instruments. The relevant portion thereof is extracted below: 
33.Examination and impounding of instruments. - (1) Every person having by law or consent of parties authority to receive evidence, and every person in charge of a pubic office, except an officer of 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 India when such instrument was executed or first executed: 
x x x x 
Section 35 of Stamp Act provides that instruments not duly stamped is inadmissible in evidence and cannot be acted upon. The relevant portion of the said section is extracted below: 
35. Instruments not duly stamped inadmissible in evidence, etc. - No instrument chargeable with duty 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: 
Provided that— 
(a) any such instrument shall be admitted in evidence on payment of the duty with which the same is chargeable, or, in the case of an instrument insufficiently stamped, of the amount required to make up such duty, together with a penalty of five rupees, or, when ten times the amount of the proper duty or deficient portion thereof exceeds five rupees, of a sum equal to ten times such duty or portion. 
x x x x 
Having regard to Section 35 of Stamp Act, unless the stamp duty and penalty due in respect of the instrument is paid, the court cannot act upon the instrument, which means that it cannot act upon the arbitration agreement also which is part of the instrument. Section 35 of Stamp Act is distinct and different from Section 49 of Registration Act in regard to an unregistered document. Section 35 of Stamp Act, does not contain a proviso like to Section 49 of Registration Act enabling the instrument to be used to establish a collateral transaction. 
11. The scheme for appointment of arbitrators by the Chief Justice of Guwahati High Court 1996 requires an application under Section 11 of the Act to be accompanied by the original arbitration agreement or a duly certified copy thereof. In fact, such a requirement is found in the scheme/rules of almost all the High Courts. If what is produced is a certified copy of the agreement/contract/instrument containing the arbitration clause, it should disclose the stamp duty that has been paid on the original. Section 33 casts a duty upon every court, that is a person having by law authority to receive evidence (as also every arbitrator who is a person having by consent of parties, authority to receive evidence) before whom an unregistered instrument chargeable with duty is produced, to examine the instrument in order to ascertain whether it is duly stamped. If the court comes to the conclusion that the instrument is not duly stamped, it has to impound the document and deal with it as per Section 38 of the Stamp Act. Therefore, when a lease deed or any other instrument is relied upon as contending the arbitration agreement, the court should consider at the outset, whether an objection in that behalf is raised or not, whether the document is properly stamped. If it comes to the conclusion that it is not properly-stamped, it should be impounded and dealt with in the manner specified in Section 38 of Stamp Act. The court cannot act upon such a document or the arbitration clause therein. But if the deficit duty and penalty is paid in the manner set out in Section 35 or Section 40 of the Stamp Act, the document can be acted upon or admitted in evidence. 
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 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 Section 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. 
(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 any way 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.
8. The above principles laid down by the Apex Court are a complete answer to the issue before this Court also. However, counsel for the applicant made an attempt to tide over this hurdle contending that the applicant had filed O.P. (Arbitration) 24/2011 before the Court of the District Judge, Thodupuzha, under section 9 of the Arbitration and Conciliation Act 1996 and that the case was allowed as per Annexure H order. It was pointed out that, in the said proceedings, on consent of the parties, the agreement was admitted in evidence and was marked as Ext.P2. According to him, in view of section 35 of the Kerala Stamp Act, when an instrument has been admitted in evidence, such admission shall not, except as provided in section 59 thereof, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped. Counsel also relied on the following judgments of the Apex Court and this Court:
1) Ettuthara Warrier Vs. Kochunarayana Menon, 1962 KLT 228 
2) P.C. Purushotahama Reddiar Vs. S. Peru mal, AIR 1972 SC 608 
3) Chiranji Lal Vs. Haridas, 2005 (2) KLT 1018 
4) Abdu Vs. Gopalakrishnan, 2006 (1) KLT 701 
5) Shyamal Kumar Roy Vs. Sushil Kumar Agarwal, AIR 2007 SC 637
9. To answer this contention, reference has to be made to section 35 of the Kerala Stamp Act, 1959 and this section reads as under:
"35. Admission of instrument where not to be questioned:- Where an instrument has been admitted in evidence such admission shall not, except as provided in section 59, be called in question at any stage of the same suit or proceeding on the ground that the instrument has not been duly stamped."
10. As held by the Apex Court in Chiranji Lai Vs. Haridas, 2005 (2) KLT 1018, Stamp Act is a fiscal measure enacted with an object to secure revenue for the State on certain classes of instruments. Therefore, the provisions of the Stamp Act should receive strict construction. If section 35 of the Act is analysed, it can be seen that this provision applies only in a case where a document has been admitted in evidence. This section further provides that "such admission" shall not be called in question "at any stage of the same suit or proceeding" except as provided under Section 59. Therefore, what cannot be called in question is "such admission", which means the admission of the document in question in evidence in the suit or proceedings and the prohibition is only "at any stage of the same suit or proceeding". In other words, if an instrument has been admitted in evidence in a suit or proceeding, such admission of the instrument cannot be challenged at a later stage of the same suit or proceeding. Therefore, the inadmissibility of the instrument can be raised in a subsequent suit or proceeding and in such a case, this section will have no application.

11. Faced with this situation, counsel for the applicant contended that proceedings under section 9 of the Arbitration and Conciliation Act are a part of the proceedings under section 11 of the Act. Having considered the arguments of both sides, I am unable to uphold the contention of the applicant. Though section 9 of the Act provides for interim measures etc., by Court, proceedings under that section, are independent and separate from the proceedings under section 11 of the Act. Therefore, the fact that Annexure A1 agreement has been admitted in evidence in the proceedings under section 9 does not prevent the 1st respondent from raising the plea of insufficiency of stamp in a proceedings under section 11.

12. Once Annexure A1 agreement is held insufficiently stamped, the course to be adopted is that indicated by the Apex Court in its judgment in M/s. SMS Tea Estates Pvt. Ltd. (supra), which is to impound the instrument in question under section 33 and sent it to the Collector for adjudication as provided in section 37 of the Kerala Stamp Act 1959, However, such a course can be pursued only if the document produced before this court is an "instrument" as defined in the Stamp Act, which alone can be impounded under the Act.

13. Along with the arbitration request, the applicant has produced only an authenticated copy of the agreement between the parties and the question that arises is whether copy of a document, even if it is an authenticated one, can be considered an 'instrument' as defined in the Stamp Act. The expression 'instrument' has been defined in section 2(j) of the Kerala Stamp Act as follows:
"2(j) "instrument" includes every document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recorded but does not include a bill of exchange, promissory note, bill of lading, letter of credit, policy of insurance, transfer of share, debenture, proxy and receipt. "
14. Interpreting section 2(14), which defines the expression "instrument" in the Indian Stamp Act, in its judgment in Jupudi Kesava Rao Vs. Pulavarthi Venkata Subbarao and others, AIR 1971 SC 1070 the Apex Court held that in the light of the definition, there is no scope for inclusion of a copy of a document as an instrument for the purposes of the Stamp Act. This judgment has been followed in Hariom Agrawal v. Prakash Chand Malviya, AIR 2008 SC 166. Though these judgments are rendered in the context of the provisions contained in the Indian Stamp Act, the expression "instrument" has been defined in exactly similar terms in the Kerala Stamp Act also. Therefore, the principles laid down by the Apex Court in these judgments are applicable to this case also. Thus, it is trite that the definition of instrument contained in the Kerala Stamp Act does not include copy of a document.

15. The further question is whether copy of a document can be impounded. This issue has been considered by the Apex Court in its judgment in Hariom Agrawal v. Prakash Chand Malviya, AIR 2008 SC 166 where it has been held thus:
7. The instrument as per definition under Section 2(14) has a reference to the original instrument. In State of Bihar v. M/s. Karam Chand Thapar and Brothers Ltd., AIR 1962 SC 110 this Court in paragraph 6 of the judgment held as under :- 
"6. It is next contended that as the copy of the award in court was unstamped, no decree could have been passed thereon. The facts are that the arbitrator sent to each of the parties a copy of the award signed by him and a third copy also signed by him was sent to the court. The copy of the award which was sent to the Government would appear to have been insufficiently stamped. If that had been produced in court, it could have been validated on payment of the deficiency and penalty under Sec. 35 of the Indian Stamp Act, 1899. But the Government has failed to produce the same. The copy of the award which was sent to the respondents is said to have been seized by the police along with other papers and is not now available. When the third copy was received in court, the respondents paid the requisite stamp duty under 5.35 of the Stamp Act and had it validated. Now the contention of the appellant is that the instrument actually before the court is, what it purports to be, a certified copy, and that under Sec. 35 of the Stamp Act there can be validation only of the original, when it is unstamped or insufficiently stamped, that the document in court which is a copy cannot be validated and acted upon and that in consequence no decree could be passed thereon. The law is no doubt well-settled that the copy of an instrument cannot be validated. That was held in Rajah of Bobbili Vs. Inuganti China Sitaramasami Garu, 26 Ind App 262, where it was observed : 
"The provisions of this section (section 35) which allow a document to be admitted in evidence on payment of penalty, have no application when the original document, which was unstamped or was insufficiently stamped, has not been produced; and, accordingly, secondary evidence of its contents cannot be given. To hold otherwise would be to add to the Act a provision which it does not contain. Payment of penalty will not render secondary evidence admissible, for under the stamp law penalty is leviable only on an unstamped or insufficiently stamped document actually produced in Court and that law does not provide for the levy of any penalty on lost documents". 
This Court had an occasion again to consider the scope and ambit of Sections 33(1), 35 and 36 of the Act and Section 63 of the Indian Evidence Act in Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao and others, AIR 1971 SC 1070 and held that :- 
"13. The first, limb of Section 35 clearly shuts out from evidence any instrument chargeable with duty unless it is duly stamped. The second limb of it which relates to acting upon the instrument will obviously shut out any secondary evidence of such instrument, for allowing such evidence to be let in when the original admittedly chargeable with duty was not stamped or insufficiently stamped, would be tantamount to the document being acted upon by the person having by law or authority to receive evidence. Proviso (a) is only applicable when the original instrument is actually before the Court of law and the deficiency in stamp with penalty is paid by the party seeking to rely upon the document. Clearly secondary evidence either by way of oral evidence of the contents of the unstamped document or the copy of it covered by Section 63 of the Indian Evidence Act would not fulfil the requirements of the proviso which enjoins upon the authority to receive nothing in evidence except the instrument itself. Section 35 is not concerned with any copy of an instrument and a party can only be allowed to rely on a document which is an instrument for the purpose of Section 35. 'Instrument is defined in Section 2(14) as including every document by which any right or liability is, or purports to be created, transferred, limited, extended, extinguished or recorded. There is no scope for inclusion of a copy of a document as an instrument for the purpose of the Stamp Act. 
14. If Section 35 only deals with original instruments and not copies Section 36 cannot be so interpreted as to allow secondary evidence of an instrument to have its benefit. The words an instrument in Section 36 must have the same meaning as that in Section 35. The legislature only relented from the strict provisions of Section 35 in cases where the original instrument was admitted in evidence without objection at the initial stage of a suit or proceeding. In other words, although the objection is based on the insufficiency of the stamp affixed to the document, a party who has a right to object to the reception of it must do so when the document is first tendered. Once the time for raising objection to the admission of the documentary evidence is passed, no objection based on the same ground can be raised at a later stage. But this in no way extends the applicability of Sec.36 to secondary evidence adduced or sought to be adduced in proof of the contents of a document which is unstamped or insufficiently stamped." 
8. It is clear from the decisions of this Court and a plain reading of Sections 33, 35 and 2(14) of the Act that an instrument which is not duly stamped can be impounded and when the required fee and penalty has been paid for such instrument it can be taken in evidence under Section 35 of the Stamp Act. Sections 33 or 35 are not concerned with any copy of the instrument and party can only be allowed to rely on the document which is an instrument within the meaning of Section 2(14). There is no scope for the inclusion of the copy of the document for the purposes of the Indian Stamp Act. Law is now no doubt well settled that copy of the instrument cannot be validated by impounding and this cannot be admitted as secondary evidence under the Indian Stamp Act, 1899.
16. From the above discussion, it is clear that Annexure A1, the authenticated copy of the agreement cannot be impounded and forwarded to the Collector, in terms of section 33 and 37 of the Kerala Stamp Act. Consequently, in view of section 34 of the Act, this document is inadmissible in evidence and cannot be acted upon.

In such circumstances, this Court can only reject this Arbitration Request and it is ordered accordingly.

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