Arbitration: Review Of Section 11 Petition Order Can’t Be Sought On Subsequent Decision Of Supreme Court In N.N. Global: Delhi High Court

The respondent, Zesty Foods, sough a review of the High Court’s order dated 20.03.2023 where it had appointed a Sole Arbitrator, on the ground that the agreement executed between the parties containing the arbitration clause was not duly/sufficiently stamped. It thus sought a review on the basis of the subsequent decision of the Apex Court in N.N. Global Mercantile (2023)

The bench of Justice Sachin Datta remarked that N.N. Global (2023) itself contemplates that in certain situations, the issue as to whether the stamping is insufficient, may be left to the arbitrator to determine, who would then take recourse to Section 33 of the Indian Stamp Act, 1899. Section 33 of the Indian Stamp Act deals with the examination and impounding of instruments which are not duly stamped.

Noting that the High Court’s order was consistent with the earlier judgment of the Supreme Court in Intercontinental Hotels Group (India) (P) Ltd. vs Waterline Hotels (P) Ltd., (2022) 7 SCC 662, the bench further ruled that even otherwise, a review was precluded in terms of the explanation to Order XLVII Rule 1 of the Code of Civil Procedure, 1908 (CPC).

The explanation to Order XLVII Rule 1 CPC provides that where any question of law on which the judgment of the Court is based, has been reversed or modified by a subsequent decision of a superior Court in any other case, the same shall not be a ground for review of such judgment.

In its review petition, the respondent, Zesty Foods, alleged that the agreement containing the arbitration clause executed between it and the petitioner, Ambience Developers and Infrastructure Pvt Ltd, was unstamped. It contended that after the judgment of the Supreme Court in N.N. Global Mercantile (2023), the agreement was invalid in law and could not be acted upon, and therefore, it was liable to be impounded by the court.

At the outset, the court remarked that the contention of the respondent that the agreement was unstamped, was factually incorrect after noting that stamp duty of Rs. 100 had been paid on the agreement.

The bench further observed that its order dated 20.03.2023 allowing the Section 11 petition, was a consent order which specifically reserved the right of the respondent to raise preliminary objections with regard to the arbitrability/jurisdiction before the Arbitrator. The same included objections on account of insufficiency of stamp duty, and/or with respect to non-registration of the agreement.

The court said that its order dated 20.03.2023 was consistent with the judgment of the Supreme Court in Intercontinental Hotels Group (2022).

The top court in Intercontinental Hotels Group (2022) had ruled that the court under Section 11(6) of the A&C Act, cannot review or go into the aspect of whether the stamp duty paid on the agreement is insufficient or appropriate.

The High Court observed that review of the order dated 20.03.2023 was sought on the basis of a subsequent decision of the Constitution Bench of the Supreme Court in N.N. Global Mercantile (2023).

In N.N. Global Mercantile (2023), the Apex Court had ruled that where an objection has been raised that the agreement has not been duly stamped, in such cases, it is ordinarily the duty of the Court to examine the matter with reference to the duty under Section 33(2) of the Indian Stamp Act, 1899. However, the court had added that if the claim that the agreement is insufficiently stamped, appears to the Court to be on the face of it, wholly without foundation, it may make the arbitral reference on the basis of the existence of an Arbitration Agreement. The court may then leave it open to the Arbitrator to exercise power under Section 33 of the Indian Stamp Act, if necessary, the Supreme Court had said.

The court, therefore, concluded, “Thus, N.N. Global (supra) itself contemplates that in certain situations, it may be expedient to leave it to the arbitrator to determine the issue as to whether stamping is insufficient, and if so, the arbitrator would take recourse to Section 33 of the Stamp Act.”

It added: “In the present case, the arbitrator having already been appointed, the applicant is not in any manner constrained from taking appropriate plea/s regarding alleged insufficiency of stamping, before the arbitrator.”

The bench further remarked that in terms of the explanation to Order XLVII Rule 1 CPC, a review could not be sought on the basis of the subsequent decision of the Supreme Court in N.N. Global Mercantile (2023).

Referring to Order XLVII Rule 1 CPC, the court said, “Thus, where any question of law on which the judgment of the Court is based, has been reversed or modified by a subsequent decision of a superior Court in any other case, the same shall not be a ground for the review of such judgment.”

The court took note that in Beghar Foundation vs Justice K.S. Puttaswamy (Retired) & Ors., (2021) 3 SCC 1, it has been observed by the Supreme Court that a change in law or a subsequent decision/ judgement of a Coordinate or larger Bench, does not afford a ground for review.

“Thus, the applicant has failed to make out any case of review of the judgment/order dated 20.03.2023,” the court said while dismissing the review petition.

Case Title: Ambience Developers and Infrastructure Pvt Ltd vs Zesty Foods

Citation: 2023 LiveLaw (Del) 621

Counsel for the Petitioner: Ms. Kittu Bajaj, Advocate.

Counsel for the Respondent: Mr. Amit Chaubey, Advocate

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