Debatable If Lower Courts Bound By Supreme Court Decision When Another SC Bench Refers It To A Larger Bench: Delhi High Court

The Delhi High Court recently remarked that once a Supreme Court Bench has doubted the correctness of an earlier bench of equal strength and referred the issue to a larger bench,  the lower courts may not be bound to follow the earlier decision.

Justice C. Hari Shankar opined so while hearing a petition filed under Section 11(5) of the Arbitration and Conciliation Act for the appointment of an arbitrator to arbitrate on the dispute between the parties.

Advocate Rakesh Saini appearing for the respondent objected to this reference of the dispute to arbitration on the ground that the agreement between the parties was inadequately stamped.

To support this argument, he relied on the decision of the Supreme Court in N.N.Global Mercantile Pvt. Ltd. v. M/s Indo Unique Flame Ltd. to contend that, till this defect is rectified, the Court cannot refer the dispute to arbitration. 

Responding to this, Advocate Shalabh Singhal for the petitioner submitted that the arbitration agreement is not insufficiently stamped and that, even if it were, this aspect could be decided by the Arbitrator. 

The Court noted that in the very decision cited by the respondent, the Apex Court had held that the non-payment or deficiency of Stamp Duty on the Work Order does not invalidate the main contract.

Thereafter, the respondent made another attempt to defend his case by relying on an earlier decision of the Supreme Court in Vidya Drolia v. Durga Trading Corpn. 

The High Court however noticed that in the first judgment produced by the respondent, namely, the N.N.Global Mercantile case, the Apex Court had doubted the correctness of the view taken by the three-judge bench in the Vidya Drolia case. 

Additionally, the Court had referred the findings of this matter to a Constitution Bench of five judges.

Upon finding these aspects, the Single Bench of the High court remarked thus:

"The question of whether, once a bench of the Supreme Court has doubted the correctness of an earlier bench of co-equal strength, and referred the issue to a larger bench, Courts lower in the hierarchy should continue to follow the earlier decision, appears to be debatable." 

The respondent thereby agreed to refer the dispute to arbitration and the parties were accordingly referred to the Delhi International Arbitration Centre, which would appoint a suitable arbitrator to arbitrate thereon.

Case Title: Bhagwati Devi Gupta & Anr v. Star Infratech Pvt Ltd.

Click Here To Download The Order