Pendente Lite Transferee Cannot Resist or Obstruct Execution of a Decree

Jojy George Koduvath.

O. XXI r. 102, CPC bars placing obstruction by pendente lite transferees

Rule 99 of Order XXI of the CPC says that where any person other than the judgment debtor is dispossessed, he can make an application complaining of such dispossession.

Rule 101 directs that all questions (including questions relating to right, title or interest in the property) arising on the applications under Rule 99 shall be determined by the Court dealing with the application, and not by a separate suit.

Rule 102 bars placing such obstruction by pendente lite transferees.

Usha Sinha v. Dina Ram is the Classic decision. Held – If pendente lite transferee could resist, Every time he will transfer the property

Usha Sinha V. Dina Ram and others (2008) 7 SCC 144, is the classic decision on this subject. It is pointed out that if pendente lite transferee could resist or obstruct execution of a decree, every time the decree holder seeks execution, the judgment debtor will transfer the property. It is laid down in this decision-

  • Rule 102 declares that if the resistance is caused or obstruction is offered by a transferee pendente lite of the judgment debtor, he cannot seek benefit of Rule 98 or 100 of Order XXI.
  • If unfair, inequitable or undeserved protection is afforded to a transferee pendente lite, a decree holder will never be able to realize the fruits of his decree.
  • Every time the decree holder seeks a direction from a Court to execute the decree, the judgment debtor or his transferee will transfer the property and the new transferee will offer resistance or cause obstruction. To avoid such a situation, the rule has been enacted.
  • Rule 102, therefore, clarifies that there should not be resistance or obstruction by a transferee pendente lite.
  • Since the appellant is a purchaser pendente lite and as she has no right to offer resistance or cause obstruction and as her rights have not been crystallized in a decree, Rule 102 of Order 21 of the Code comes into operation. Hence, she cannot resist execution during the pendency of the suit instituted by her.

Scope of adjudication is confined to whether transfer was pendent lite

It is pointed out in Usha Sinha V. Dina Ram that it was held in Silverline Forum Pvt. Ltd. v. Rajiv Trust, (1998) 3 SCC 723, that where there is a the transfer pendente lite, the scope of adjudication is confined to a question whether he was a transferee during the pendency of a suit in which the decree was passed. Once the finding is in the affirmative, the Executing Court must hold that he had no right to resist or obstruct and such person cannot seek protection from the Executing Court.

Whether ‘Pendente Lite Transfer’ – if it was After Dismissal of Suit, for Default

In Jini Dhanraj Gir v. Shibu Mathew (SC, 16 May, 2023), one of the questions arisen was whether there was ‘pendente lite transfer’, if the transfer was made after dismissal (post-dismissal) of the suit for default (and before its restoration). It was argued that during the time when the transfer was effected there was no pending lis. The Executing Court posted the EP to determine the question as to whether the transfer would attract Rule 102.

The Apex Court observed that the claim raised by the Respondents, ‘cannot be thrown out at the threshold since it is well within their rights to contest the application under Order XXI Rule 97, CPC‘. The Apex Court directed that it was most appropriate for the Executing Court to determine the question as to whether the transfer would attract Rule 102.

Rules 97 to 102, Order XXI CPC

“Order XXI – Execution of decrees and orders

97. Resistance or obstruction to possession of immovable property –

  • .(1) Where the holder of a decree for the possession of immovable property or the purchaser of any such property sold in execution of a decree is resisted or obstructed by any person obtaining possession of the property, he may make an application to the Court complaining of such resistance or obstruction.
  • .(2) Where any application is made under sub­rule (1), the Court shall proceed to adjudicate upon the application in accordance with the provisions herein contained.

98. Orders after adjudication –

  • .(1) Upon the determination of questions referred to in rule 101, the Court shall, in accordance with such determination and subject to the provisions of sub­rule (2), ­
  • .a. make an order allowing the application and directing that the applicant be put into the possession of the property or dismissing the application; or
  • .b. pass such other order as, in the circumstances of the case, it may deem fit.
  • .(2) Where, upon such determination, the Court is satisfied that the resistance or obstruction was occasioned without any just cause by the judgment­ debtor or by some other person at his instigation or on his behalf, or by any transferee, where such transfer was made during the pendency of the suit or execution proceeding, it shall direct that the applicant be put into possession of the property, and where the applicant is still resisted or obstructed in obtaining possession, the Court may also, at the instance of the applicant, order the judgment­ debtor, or any person acting at his instigation or on his behalf, to be detained in the civil prison for a term which may extend to thirty days.

99. Dispossession by decree­ holder or purchaser –

  • .(1) Where any person other than the judgment debtor is dispossessed of immovable property by the holder of a decree for the possession of such property or, where such property has been sold in execution of a decree, by the purchaser thereof, he may make an application to the Court complaining of such dispossession.
  • .(2) Where any such application is made, the Court shall proceed to adjudicate upon the application in accordance with the provisions herein contained.

100. Order to be passed upon application complaining of dispossession –

  • Upon the determination of questions referred to in rule 101, the Court shall, in accordance with such determination, –
  • .a. make an order allowing the application and directing that the applicant be put into the possession of the property or dismissing the application; or
  • .b. pass such other order as, in the circumstances of the case, it may deem fit.

101. Question to be determined –

  • All questions (including questions relating to right, title or interest in the property) arising between the parties to a proceeding on an application under rule 97 or rule 99 or their representatives, and relevant to the adjudication of the application, shall be determined by the Court dealing with the application, and not by a separate suit and for this purpose, the Court shall, notwithstanding anything to the contrary contained in any other law for the time being in force, be deemed to have jurisdiction to decide such questions.

102. Rules not applicable to transferee pendente lite –

  • Nothing in rules 98 and 100 shall apply to resistance or obstruction in execution of a decree for the possession of immovable property by a person to whom the judgment­ debtor has transferred the property after the institution of the suit in which the decree was passed or to the dispossession of any such person.
  • Explanation – In this rule, “transfer” includes a transfer by operation of law.

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Land LawsTransfer of Property Act

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Law on Documents

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Easement

Stamp Act & Registration

Will

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Negotiable Instruments Act

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Easement Simplified

Saji Koduvath, Advocate, Kottayam.  

“An easement is a Right

  • It is a right possessed by the owner of a (dominant) land.
  • It is to use the (servient) land, of another for a specific thing.
  • It must be for the beneficial enjoyment of the (dominant) land.

Easement Does Not Confer Ownership or Possession

  • No Ownership is bestowed in the (servient) land (AIR 2004 All 359; AIR 1925 Bom 335).
  • No Possession obtained in the (servient) land. (2011 (2) KLT 605; AIR 1925 Bom 335)  
  • No Interest is created in the (servient) land. (2003 (1) KLT 320; AIR 1954 All 393).

Easement is Well Recognised; but Circumscribed by Law

  • Easement is a limited right touse’or ‘enjoyanother’s land.
  • It is to do, or to prevent to do, some specific thing.
  • It is to be exercised in a way least onerous to the ‘another’s land’.
  • It is not a right to build and enjoy.
  • The right gained cannot be enlarged.
    • An easement of way to a particular property cannot be extended to another property by the dominant owner; easement for residential purpose cannot be enlarged for an industrial purpose.
  • Servient owner can use his land in any manner (without disturbing enjoyment of the easement).

According to ‘Katiyar on Easements’:                                                                   

  • Easement is not a right to land or exclude owner.
  • It is not a right to permanent occupation. 
  • It does not confer exclusive right of user/enjoyment.
  • And, it is not a corporeal interest in land.

Easement – Definition under the Indian Easements Act

SECTION 4 of the Indian Easements Act defines Easements as under:

  • “An easement is a right
  • which the owner or occupier of certain land possesses,
    • as such,
  • for the beneficial enjoyment of that land 
  • to do and continue to do something, or to prevent and continue to prevent something being done,
  • in or upon, or in respect of, certain other land not his own.”

Salient Limitations of Easement under the Indian Easements Act

  • The owner of a land only ‘uses’or ‘enjoys‘ another’s land, as easement (Sec. 31)
  • Only ‘enjoyment’ of soil or things ‘subsisting’ thereon (Explanation in Sec. 4).
  • for limited enjoyment of (a) land & (b) advantages arising from its situation: S. 7
  • the right is to be exercised in a way least onerous to the ‘another’s land’: S. 22
  • secure full enjoyment, but cause as little inconvenience: S. 24 2017(2) KLT 63

It is Not a right to:                                            

  • tend to total destruction of servient tenement: S. 17 (2003 (1) KLT320)
  • make additional burden: S. 23
  • make constructions in, or cultivate upon: (2003 (1) KLT 320).
  • prevent servient owner to use: S. 27 : 2003 (1) KLT 320
  • enlarge purpose of, or accustomed, user: S. 28
  • substantially increase an easement: S. 29
  • prevent servient owner from obstructing excessive  ‘user’ of servient land – as ‘enjoyment of easement’: S. 31
  • increase burden by making permanent change in do. tent: S. 43
  • capable of forming grant – No easement, if Not capable of forming grant (without document or registration): 1987 (2) KLT 1037.

No easement if:

  • right claimed is incidents of ownership.
  • servient property belongs to him. Easement is a right with conscious knowledge that the servient property does not belong to him. AIR 1966 Raj 265. It must also be with proper animus as to easement: AIR 1973 Mad 173.

The word ‘Servient’ is derived from ‘Serve’

Sec. 4 Explains Dominant and Servient Heritages and Owners as under:

  • “Dominant and Servient Heritages and OwnersThe land for the beneficial enjoyment of which the right exists is called the dominant heritage, and the owner or occupier thereof the dominant owner; the land on which the liability is imposed is called the servient heritage, and the owner or occupier thereof the servient owner.”

Therefore, the person who claims the easement is the ‘dominant owner’ and his land is ‘dominant land’; and the land upon which the right is claimed is ‘servient’ (a word derived from ‘serve’) land and its owner is ‘servient owner’.

Easement is acquired; not arise out of ‘Express Permission’

Sec. 12, Easements Act states that an easement is acquired (under grant, partition or prescription) by the owner of an immovable property. Section 12, Indian Easements Act, 1882 reads as under:

  • 12. Who may acquire easements-An easement may be acquired by the owner of the immovable property for the beneficial enjoyment of which the right is created, or on his behalf, by any person in possession of the same.
  • One of two or more co-owners of immovable property may, as such, with or without the consent of the other or others, acquire an easement for the beneficial enjoyment of such property.
  • No lessee of immovable property can acquire, for the beneficial enjoyment of other immovable property of his own, an easement in or over the property comprised in his lease.

It is observed by the Apex Court in Bachhaj Nahar Vs. Nilima Mandal, AIR 2009 SC 1103, that the claimant of easement (prescription) should plead and prove that the right claimed was enjoyed independent of any agreement with the owner of the property over which the right is claimed, as any user with the express permission of the owner will be a licence and not an easement. 

Methods of Acquisition of Easements

The Indian Easements Act, 1882 refers to the different methods by which easements are acquired. They are, as pointed out in Ramkanya Bai v. Jagdish, AIR 2011 SC 3258, the following:

  1. easements by grant: a grant by the owner of the servient heritage
  2. easements of necessity: based on implied grants or reservations made by the owner of a servient heritage at the time of transfers or partitions
  3. easements by prescription: acquired by peaceable and open enjoyment, without interruption for twenty years and
  4. customary easements: acquired by virtue of a local custom.

For easement by prescription, it is not necessary that the user should be exclusive, but the claimant should exercise it under some claim existing in his own favour independently of all others.

Is profit-a-prendre incompatible with Easement

Explanation in Sec. 4 reads:

  • “…’to do something’ includes removal and appropriation .. of any part of the soil .. or anything growing or subsisting thereon ..”

From Explanation in Sec. 4 it is clear that easement included appropriation of certain tangible material things. They are made clear by the Illustrations to various sections. Eg.

  • Illustn.-(d) of S.4 speaks as to Graze cattle, take water and fish out from the tank, take timber from wood, take fallen leaves for manuring.
  • Illustn.- (b) of S. 22 states cutting  thatching- grass
  • Illustn.- (a) of S. 24 refers to easement to lay pipes.

Hence, it is clear: Easement is not a mere ‘Privilege’ (as in English Law); but, it includes:

  • limited (legally-recognised) enjoyment /user/interest in serviant heritage, and
  • a right for (expressly-recognised) profit.

Though Profit-a-prendre is allowed by Indian law considering the peculiarities of Indian situations, it is not a corporeal right on land.  And it does not allow maintaining a substantial interest over the servient land.  No profit-a-prendre in gross, ie. for the benefit of individuals (primarily because, it comes out from the ‘Explanation’ of the Definition of Easement). On a close look, it can be seen that it is definitely related to ‘user’ of servient land, by people living in a locality.

No right to build-and-enjoy

Easement is a Right for ‘enjoyment’ of things ‘subsisting’.  It is a Right for limited enjoyment, and advantages arising from its situation; and it does not allow to build-and-enjoy. It is further clear from Sec. 7 which indicates that easement is only a right for limited enjoyment of (a) land and (b) advantages arising from its situation.

“In or upon, or in respect of, certain other land not his own”

Easement is a right upon land of another; not his own. It is a Right to do something in or upon land of another. Even if the easement involves ‘construction’, it should be of another; because, Sec. 4: Explanation reads: “land” includes also things permanently attached to earth.

If the subsisting-construction is made by, or it belongs to, dominant owner, no doubt, there will be no easement. [1987 (2) Ker LT 1037 (Bund); AIR 1915 PC 131 (Jetty); AIR 1971 SC 1878].

Easement Not Allows to ‘Enjoy’ After Making a Construction.

Though the right allowed by the Easement Act is limited only to ‘enjoy’ things subsisting, as shown above, it is clear that it does not allow to ‘enjoy’ after making a construction. It is further clear from the Scheme of the Act.

  • S. 4 An easement is a ‘right which the owner or occupier of certain land possesses’ “as such”
  • S.4: Illustn. (d):  Graze cattle, take water and fish out from the tank, take timber from wood, take fallen leaves for manuring .
  • S. 7: Only a right for limited enjoyment of (a) land & (b) advantages arising from its situation. (It is stated:  Easements are restrictions of (a) Exclusive right (of owner) to enjoy immovable property, (b) Rights to advantages arising from its situation)
  • S. 12 An easement is acquired by owner an immovable property.
  • S. 17: Not a right – to tend to total destruction of the servient tenement. (2003 (1) KLT 320)
  • S. 21 An easement must not be used for any purpose not connected with enjoyment of the dominant heritage.
  • S. 22: Exercise easement – least onerous to servient tenement (Illustn.- b: can cut thatching- grass, not to destroy plants)
  • S. 23: Not to make additional burden (Illus.- b: not to advance eaves; Illus.- d: not another pollution)
  • S. 24: Secure full enjoyment, but cause as little inconvenience.  Illus. (a) easement to lay pipes
  • S. 27: Servient owner is entitled to use – consistent with  easement
  • S. 28: Easements of  necessity, Right of way, Other prescriptive rights not to enlarge purpose, accustomed user etc.
  • S. 29: Dominant owner Cannot substantially increase an easement
  • S. 31: If excessive user – servient owner may obstruct the user.
  • S. 43: Permanent change in the dominant heritage and the burden increased – easement is extinguished

Taken from: What is Easement? Does Right of Easement Allow to ‘Enjoy’ After Making a Construction?

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“Otherwise Through an Account” in Section 142, NI Act

Jojy George Koduvath.

Taken from the Blog: Where to file Cheque Bounce Cases (Jurisdiction of Court – to file NI Act Complaint)?

The Negotiable Instruments Act, 1881, Sub Sec. (2) of Sec. 142 reads as under:

  • “(2) The offence under section 138 shall be inquired into and tried only by a court within whose local jurisdiction
  • (a) if the cheque is delivered for collection through an account, the branch of the bank where the payee or holder in due course, as the case may be, maintains the account, is situated; or
  • (b) if the cheque is presented for payment by the payee or holder in due course otherwise through an account, the branch of the drawee bank where the drawer maintains the account, is situated.

The words ‘otherwise through an account‘ requires explanation. It can be simplified as under:

  • if the cheque is presented for payment by the payee or holder in due course directly# otherwise through an account in the bank of the drawer, (the proper court is that within whose local jurisdiction) the branch of the drawee bank where the drawer maintains the account, is situated.
  • #E.g. (i) a bearer cheque (contra-distinct to account-payee cheque), presented directly in the drawee Bank, over the counter” (Brijendra Enterprise v. State of Gujarat, 2016(3) Guj LH 143; Mahendra Kumar Kedarnath Modi v. State of Gujarat, 2018 (1) Guj LH 288; 2018 (2) Crimes 441).
  • E.g. (ii) Using Kiosk Banking facility – Reserve Bank of India introduced the system of Kiosk Banking under which specified persons can avail  the banking facilities like cheque transfers, money transfers, balance inquiries, cash deposits, remittances etc., similar to that of ATM/CDM facility (See: Mahendra Kumar Agarwal v. The State of West Bengal, 2021 Cr LJ 3889; 2022-3 BC 135).

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No Application Needed for Filing or Admitting Copy of Document

Taken from the Blog: Secondary Evidence of Documents & Objections to Admissibility – How & When?

Saji Koduvath, Advocate, Kottayam.

No Application Needed for Filing or Admitting Secondary Evidence

Section 65of the Evidence Act permits secondary evidence in the circumstances or contingencies mentioned therein. The admissibility of the evidence, and the question whether the conditions for leading the secondary evidence are satisfied or not, comes for consideration only in the trial and at the time of exhibiting the document. It is no doubt clear that before adducing the secondary evidence, the party concerned has to establish that the situation stipulated in section 65 exists.

No Petition required for Filing or Admitting Photocopy

Our Apex Court held in Dhanpat v. Sheo Ram, 2020 SCC Online SC 606, as under:

  • “20. There is no requirement that an application is required to be filed in terms of Section 65(c) of the Evidence Act before the secondary evidence is led. A party to the lis may choose to file an application which is required to be considered by the trial court but if any party to the suit has laid foundation of leading of secondary evidence, either in the plaint or in evidence, the secondary evidence cannot be ousted for consideration only because an application for permission to lead secondary evidence was not filed.”

In Satyam Kumar Sah v. Narcotic Control Bureau, 2019 SCC OnLine Del 8409, it is pointed out that Section 65 does not contemplate filing of any application or seeking prior permission of the court for leading secondary evidence; and that merely because an application under Section 65, Indian Evidence Act was filed and allowed, would not ipso facto make secondary evidence admissible, which is otherwise inadmissible.

Loss of Original: It is incumbent upon the party producing the secondary evidence to prove the loss of original under Sec. 65 Clause (c).  Permission is also needed to lead secondary evidence.

In a suit for specific performance, in Hira v. Smt. Gurbachan Kaur, 1988 (2) PLR 173, photocopy of the suit agreement alone was produced. After beginning evidence it was submitted that original was lost and application was filed seeking permission to adduce copy. Besides the delay in submitting loss of original, the plaintiff did not state when and under what circumstance the original was lost. In these circumstances the High Court found that the denial of permission to lead secondary evidence, by the trial court, was justifiable. (See also: Gurditta v. Balkar Singh, 1989 (1) PLR 418; Sobha Rani v. Ravikumar– AIR 1999 P&H 21).

In Raj Kumari v. Lal Chand, 1994 (1) Civil Court Cases 477, an issue was raised as to whether the applicant was entitled to secondary evidence. Therefore, it was held that the loss of the document was not required to be proved before trial, on the application under Section 65 Evidence Act.

  • Note: It appears that in a proper case, in its very peculiar facts, it may be justified in non-suiting the plaintiff, taking a preliminary issue on non-production of original, or insufficiency of grounds for non-production of original; but, it appers, it cannot be taken as a general rule.

Photocopy is a Reliable Secondary Evidence

It falls under Sec. 63(2) it being the product of ‘mechanical processes which in themselves insure the accuracy of the copy‘.

As regards Photocopy, it is laid down in Surinder Kaur v. Mehal Singh, 2014(1) R.C.R. (civil) 467 (P&H) as under:

  • “a) Photostat copy of a document can be allowed to be produced only in absence of original document.
  • b) When a party seeks to produce Photostat copy it has to lay the foundational facts by proving that original document existed and is lost or is in possession of opposite party who failed to produce it.
  • Mere assertion of the party is not sufficient to prove these foundational facts.
  • c) The objections as to non existence of such circumstances or non existence of foundational facts must be taken at earliest by the opposite party after the photostat copy is tendered in evidence.
  • d) When the opposite party raises objection as to authenticity of the Photostat copy its authenticity has to be determined as every copy made from a mechanical process may not be accurate. Both the requirements of clause (2) of section 63 are to be satisfied.
  • e) Allowing production of Photostat copy in evidence does not amount to its proof. Its probative value has to be proved and assessed independently. It has to be shown that it was made from original at particular place and time.
  • f) In cases where the Photostat copy is itself suspicious it should not be relied upon. Unless the court is satisfied that the Photostat copy is genuine and accurate it should not be read in evidence.
  • g) The accuracy of Photostat copy shall be established on oath to the satisfaction of court by the person who prepared such copy or who can speak of its accuracy.”
    • Note: It appears that the proposition, ‘accuracy shall be established on oath’, is a surplusage (for, a photocopy, by itself, ‘insures the accuracy of the copy’ under Sec. 63, and the court is free to apply the presumptions under Sec. 114).

What are the instances where Notice is not required to render Secondary Evidence 

As per Section 66, there is no need to render a notice for tendering a secondary evidence:

  • “(1) when the document to be proved is itself a notice;
  • (2) when, from the nature of the case, the adverse party must know that he will be required to produce it;
  • (3) when it appears or is proved that the adverse party has obtained possession of the original by fraud or force;
  • (4) when the adverse party or his agent has the original in Court;
  • (5) when the adverse party or his agent has admitted the loss of the document;
  • (6) when the person in possession of the document is out of reach of, or not subject to, the process of the Court.”

Read Blog: Notice to Produce Documents in Civil Cases


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Sale Deeds Without Consideration – Void

Jojy George Koduvath.

Sale Deeds Without Consideration – Void

According to Sec. 54 of the Transfer of Property Act, 1882, ‘sale’ is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.

If a sale deed is executed without payment of price, it is not a sale. It is of no legal effect. Therefore, void (Kewal Krishnan v. Rajesh Kumar, AIR  2022 SC 564; Sujan Singh v. Lalsahab, TK Thommen, J., 1993 JLJ 552). It could be ignored.  In the light of these legal principles it was found in Kewal Krishnan v. Rajesh Kumar, AIR  2022 SC 564, that that the respondent-purchasers had no earning capacity and no evidence was adduced by them about the payment of the price mentioned in the sale deeds; and hence, the sale deeds were held as void.

A void deed need not be challenged by claiming a declaration

It was also held by the Apex Court in Kewal Krishnan v. Rajesh Kumar, AIR 2022 SC 564, that a void deed need not be challenged by claiming a declaration; and that a plea thereof can be set up and proved even in collateral proceedings.

Price constitutes an Essential ingredient of Sale

The Supreme Court held in Vidhyadhar v. Mankikrao,1999-3 SCC 573, that the sale under Sec. 54 of the TTP Act, being a transfer of ownership in exchange for a price paid or promised, in order to constitute a sale there must be exchange of a price. It is held as under:

  • “The definition further says that the transfer of ownership has to be for a “price paid or promised or part-paid and part-promised”. Price thus constitutes an essential ingredient of the transaction of sale. …”
  • “The real test is the intention of the parties. In order to constitute a “sale”, the parties must intend to transfer the ownership of the property and they must also intend that the price would be paid either in presenti or in future. The intention is to be gathered from the recital in the sale deed, conduct of the parties and the evidence on record.”

The Supreme Court in Kaliaperumal v. Rajagopal, 2009 4 SCC 193, held that payment of entire consideration is not a condition precedent for completion of sale and passing of title. In such a case the vendor cannot avoid the sale, though he is entitled to a charge upon the property for the unpaid part of the sale price, under Section 55(4)(b) of the Act. It was further pointed out that the true test of passing of property is the intention of parties. The Apex Court held as under:

  • “Such intention is primarily to be gathered and determined from the recitals of the sale deed. When the recitals are insufficient or ambiguous the surrounding circumstances and conduct of parties can be looked into for ascertaining the intention, subject to the limitations placed by Section 92 of the Evidence Act.”

It is noteworthy that the 1st proviso to Section 92 of the Evidence Act enables to give proof on ‘want or failure of consideration’ which would ‘invalidate the document’.

In Jant Ram Satnami v. Daya Das Satnami,  2019-2 CGLJ 168, 2019-1 Civ LJ 914, it was held that whether the vendor really intended to transfer the ownership by execution and registration, or contracted to do so only after receipt of the consideration as a condition precedent, would depend upon the terms of the contract.

Completion of “Sale” and Transfer of “Ownership”

Notwithstanding any recital of “sale” in a deed, it shall be open to show that a “ownership” was not transferred.

  • Sec. 55(4)(a) of the TP Act says – “The seller is entitled – (a) to the rents and profits of the property till the ownership thereof passes to the buyer ….”.
  • Sec. 55(5)(b) of the Act reads – “The buyer is bound – … (b) “pay or tender, at the time and place of completing the sale, the purchase money to the seller …”;

Admission of Consideration before Sub Registrar can be Withdrawn

Admission about receipt of consideration that is made before the Sub Registrar can be withdrawn under Sec 31 of the Evidence Act (Nagubai, AIR 1956 SC 593, Sujan Singh v. Lalsahab, TK Thommen, J., 1993 JLJ 552). The admission only shifts the onus. (Kishorilal, AIR 1959 SC 504).

Execution of a Registered Sale Deed is not Conclusive

It is pointed out in Sujan Singh v. Lalsahab, TK Thommen, J., 1993 JLJ 552, that the execution of a registered document is ‘not conclusive’ in the light of sub-Sec. (4) (a) and (5)(b), Sec. 55 of the TP Act, as shown above. If the “price” was not paid, the seller has the legal right to retain possession of the property and to enjoy “its rent and profits”. Law permits continuation of “ownership” on vendee notwithstanding any recital of “sale” in a deed. And, title will not stand legally passed on the execution of the document.


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Read in this Cluster  (Click on the topic):

Book No, 1 – Civil Procedure Code

Power of attorney

Title, ownership and Possession

Principles and Procedure

Admission, Relevancy and Proof

Land LawsTransfer of Property Act

Evidence Act – General

Sec. 65B

Law on Documents

Contract Act

Easement

Stamp Act & Registration

Will

Arbitration

Divorce

Book No. 2: A Handbook on Constitutional Issues

Religious issues

Book No. 3: Common Law of CLUBS and SOCIETIES in India

Book No. 4: Common Law of TRUSTS in India

Burden of Proof – Initial Burden and Shifting Onus of Proof

Saji Koduvath, Advocate, Kottayam & Jojy George Koduvath, Kottayam.

Taken from: Rules on Burden of proof and Adverse Inference

Key Takeaways

  • 1. Burden of proof is always static and does not shift; onus of proof shifts.
  • 2. Burden of proof it is upon whom who suffers, if no evidence on the question in dispute.
  • 3. Burden of proof would be on the party who asserts the affirmative of the issue.
  • 4. Burden of Proof loses significance if both parties adduced evidence.
  • 5. Onus of proofshifts’ on adducing adequate evidence by the party concerned.
  • 6. Adverse inference is drawn when a party withholds documents, even if he has no burden.
  • 7. Adverse inference is drawn if a party does not examine himself: But, it is Not an Invariable Rule.
  • 8. A Plaintiff has to win the title-suit on his evidence; not on the weakness of the adversary.
  • 9. Adverse inference is taken after considering (a) pleadings, (b) relevancy of the withheld evidence and (c) burden of proof.
  • 10. Presumption and adverse inference for non-production of evidence are always optional.
  • 11. Suit on title – If plaintiff discharges his burden by showing high degree of probability (that the title vests in him), onus shifts.
  • 12. If the defendant fails to release the onus shifted, the burden on plaintiff shall stand discharged (and the title with the plaintiff is inferred).
  • 13. If the defendant establishes his right to continue possession as lessee, licencee, mortgagee etc. (honouring title of the plaintiff) the plaintiff’s suit for possession will fail.

Abstract – Primary Principles on Burden of Proof

  • Burden of proof is static
    • The burden of proof is always static and does not shift.
  • Burden of proof lies on the person, who would fail if no evidence is adduced on either side.
  • Ordinarily, the burden of proof would be on the party who asserts the affirmative of the issue and it rests, after evidence is gone into, upon the party against whom, at the time the question arises, judgment would be given, if no further evidence were to be adduced by either side.
  • Burden of proof loses its importance
    • (a) if both parties adduced evidence
    • (b) if there is sufficient evidence on an issue.
    • In such a situation, it remains academic:
    • Chidambara Sivaprakasa Pandara Sannadhigal v. Veerama Reddi, 49 IA 286 303: AIR 1922 PC 292 (referred to in Seturatnam Aiyar v. Venkatachala Gounden, (1919)   47 IA 76, and Kumbham Lakshmanna v. Tangirala Venkateswarlu, AIR 1949 PC 278);
    • Sushil Kumar v. Rakesh Kumar, (2003) 8 SCC 673,
    • Raghunathi v. Raju Ramappa Shetty, AIR 1991 SC 1040;
    • Mohd.  Abdullah Azam Khan Vs. Nawab Kazim Ali Khan,(1976) 3 SCC 32
  • Burden of proof gets significance
    • (a) when no evidence at all on the question in dispute
    • (b) when a person on whom the burden of proof lay, failed to adduce any evidence altogether
    • (c) when no adequate evidence so as to shift onus, or
    • (d) when best evidence is withheld.
    • (e) when Court cannot “Make Up its Mind” from the evidence adduced (Kumbhan Lakshmanna v. Tangirala Venkateswarlu, AIR 1949 PC 278).
  • Onus of proof shifts’
    • Onus of proof ‘shifts’ on adducing ‘satisfactory’ (or high degree of) evidence by the party upon whom the onus lies, and thus discharging his burden.

‘Onus Probandi’ and Sec. 106 of the Evidence Act

The Latin maxim, Onus Probandi, means ‘burden of proof’.  This maxim generally conveys the rule and impression that one who asserts a positive fact has to prove it.

  • Sec. 101 to 103 of the Indian Evidence Act, 1872, deal with the burden of proof in general. Sec. 104 to 106 deal with specific situations.

In an election case, referring Sec. 106 and Sec. 114 of the Evidence Act, the Supreme Court, observed in Puneet Rai v. Dinesh Chaudharv, (2003) 8 SCC 204, that the onus was on the respondent to prove that he belongs to ‘Passi’ community which falls in the Schedule caste category.

In  Sushil Kumar v. Rakesh Kumar, (2003) 8 SCC 673, the Supreme Court found that the burden of proving the age of the elected candidate (above 25 years) was upon him. The Apex Court held as under:

  • “28. It is no doubt true that the burden of proof to show that a candidate who was disqualified as on the date of the nomination would be on the election petitioner.
  • 29. It is also true that the initial burden of proof, that nomination paper of an elected candidate has wrongly been accepted, is on the election petitioner.
  • 30. In terms of Section 103 of the Indian Evidence Act, however, the burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.
  • 31. Furthermore, in relation to certain matters, the fact being within the special knowledge of the respondent, the burden to prove the same would be on him in terms of Section 106 of the Indian Evidence Act. However, the question as to whether the burden to prove a particular matter is on the plaintiff or the defendant would depend upon the nature of the dispute.
  • 32. The age of a person, in an election petition has to be determined not only on the basis of the materials placed on records but also upon taking into consideration the circumstances attending thereto. The initial burden to prove the allegations made in the election petition although was upon the election petitioner but for proving the facts which were within the special knowledge of the respondent, the burden was upon him in terms of Section 106 of the Evidence Act.
  • It is also trite that when both parties have adduced evidence, the question of onus of proof becomes academic [See: Union of India and Others vs. Sugauli Sugar Works (P) Ltd., (1976) 3 SCC 32,(Para 14) and M/s Cox and Kines (Azents) Ltd. vs. Their Workmen and Others, AIR 1977 SC 1666, (Para 36)]. Furthermore, an admission on the part of a party to the lis shall be binding on him and in any event a presumption must be made that the same is taken to be established.”

‘Onus Probandi’ and Rule of ‘Best Evidence’

Rule of ‘Best Evidence’ requires a party to suit to produce all material evidence with him. If he fails to produce the best evidence, then illustration ‘g’ of Section 114 Evidence Act allows the court to take the presumption that, if that evidence had been produced, it would have been unfavourtable to him. In Dharampal v. State of Haryana (P& H, 2020) it is observed as under:

  • “20. Chapter VII in Part-Ill of the Evidence Act, 1872 examines the burden of proof and onus of proof or “onus probandi”. Section 101 lays down that whosoever, wants the court to give judgment as to any legal right or liability dependent on the existence of fact, which he asserts, must prove that those facts exist. However, Section 106 provides that any fact which is essentially within the knowledge of any person, the burden of proving that fact is upon him. Illustration-b to Section 106 specifically provides that if A is charged with travelling on a railway train without ticket, the burden of proving that he had bought a ticket is on the person who was found travelling. Still further, illustration ‘g’ of Section 114 require production of best evidence before the Court/authority. It lays down that the evidence which could be but is not produced, would be deemed to be unfavourable to the person who holds it from the Court/authority. It means that if a person fails to produce the best evidence which he could produce then the presumption would be that the aforesaid evidence, if had been produced, would be unfavourtable to the person, who withholds it.”

Suit on Title – If Plaintiff Shows High Degree of Probability, Onus Shifts

In R.V.E. Venkatachala Gounder v. Arulmigu Viswesaraswami, AIR 2003 SC 4548: (2003) 8 SCC 752, the law is stated in the following terms :

  • “29. In a suit for recovery of possession based on title it is for the plaintiff to prove his title and satisfy the court that he, in law, is entitled to dispossess the defendant from his possession over the suit property and for the possession to be restored to him. However, as held in A. Raghavamma v. A. Chenchamma there is an essential distinction between burden of proof and onus of proof: burden of proof lies upon a person who has to prove the fact and which never shifts. Onus of proof shifts. Such a shifting of onus is a continuous process in the evaluation of evidence. In our opinion, in a suit for possession based on title once the plaintiff has been able to create a high degree of probability so as to shift the onus on the defendant it is for the defendant to discharge his onus and in the absence thereof the burden of proof lying on the plaintiff shall be held to have been discharged so as to amount to proof of the plaintiff’s title.” (Quoted in: Anil. Rishi vs. Gurbaksh Singh, (2006) 5 SCC 558; City Municipal. Council, Bhalki Vs. Gurappa, (2016) 2 SCC 200)

In Smriti Debbarma v. Prabha Ranjan Debbarma, 2023 SCC OnLine SC 9,it is held bu our Apex Court as under:

  • “31. The burden of proof
    • [See Paragraph 19 in Anil Rishi v. Gurbaksh Singh, (2006) 5 SCC 558 where the expression ‘burden of proof’ is used in three ways, namely, (i) to indicate the duty of bringing forward evidence in support of a proposition at the beginning or later; (ii) to make that of establishing a proposition as against all counter-evidence; and (iii) an indiscriminate use in which it may mean either, or both of the others.]
  • to establish a title in the present case lies upon the plaintiff as this burden lies on the party who asserts the existence of a particular state of things on the basis of which she claims relief [See Addagada Raghavamma and Another v. Addagada Chenchamma and Another, AIR 1964 SC 136.] This is mandated in terms of Sec. 101
    • [Sec. 101: Burden of Proof.- Whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.]
  • of the Evidence Act, which states that burden on proving the fact rests with party who substantially asserts in the affirmative and not on the party which is denying it. This rule may not be universal and has exceptions,[See Ss. 103, 104 and 105 of the Evidence Act.] but in the factual background of the present case, the general principle is applicable. In terms of Sec. 102
    • [Sec. 102: On whom the burden of proof lies.- The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.]
  • of the Evidence Act, if both parties fail to adduce evidence, the suit must fail.[See Anil Rishi v. Gurbaksh Singh, (2006) 5 SCC 558.] Onus of proof, no doubt shifts and the shifting is a continuous process in the evaluation of evidence, but this happens when in a suit for title and possession, the plaintiff has been able to create a high degree of probability to shift the onus on the defendant. In the absence of such evidence, the burden of proof lies on the plaintiff and can be discharged only when he is able to prove title.[See R.V.E. Venkatachala Gounder  v. Arulmigu Viswesaraswami V.P. Temple and Another, (2003) 8 SCC 752.] The weakness of the defence cannot be a justification to decree the suit. [See Union of India and Others v. Vasavi Cooperative Housing Society Limited and Others, (2014) 2 SCC 269.] The plaintiff could have succeeded in respect of the Schedule ‘A’ property if she had discharged the burden to prove the title to the Schedule ‘A’ property which squarely falls on her. This would be the true effect of Ss. 101 and 102 of the Evidence Act. [See Sebastiao Luis Fernandes (DEAD) Through LRs. And Others v. K.V.P. Shastri (DEAD) Through LRs. And Others, (2013) 15 SCC 161.]
  • Therefore, it follows that the plaintiff should have satisfied and discharged the burden under the provisions of the Evidence Act, failing which the suit would be liable to be dismissed.”

No pleading; but, Issue Covered by Implication – Evidence can be relied on

The Supreme Court, in the matter of Standard Chartered Bank v. Andhra Bank Financial Services Ltd., (2006) 6 SCC 94, held that if parties know that a plea was involved in trial and if such a plea is covered by issue by implication then in such a case mere fact that the plea was not expressly taken in pleading would not necessary disentitle a party from relying upon it if it is satisfactorily proved by evidence.

Adverse Inference Drawn (Even if no burden), if one Withholds Documents

The Supreme Court observed in Gopal Krishnaji Ketkar v. Mahomed Haji Latif, AIR 1968 SC 1413, as under:

  • Even if the burden of proof does not lie on a party the Court may draw an adverse inference if he withholds important documents in his possession which can throw light on the facts at issue.”

Plaintiff Fails to Establish ‘Probabilityand Defendant ‘Withholds Documents

From R.V.E. Venkatachala Gounder v. Arulmigu Viswesaraswami, AIR 2003 SC 4548: (2003) 8 SCC 752, the law is clear –

  • in a suit for possession based on title once the plaintiff has been able to create a high degree of probability so as to shift the onus on the defendant it is for the defendant to discharge his onus and in the absence thereof the burden of proof lying on the plaintiff shall be held to have been discharged so as to amount to proof of the plaintiff’s title.

From Gopal Krishnaji Ketkar v. Mahomed Haji Latif, AIR 1968 SC 1413, it is also clear –

  • Even if a party to the suit has no burden, the Court can draw an adverse inference if he withholds important documents in his possession.

From the above, it is definite that, in a proper case, if the defendant who withholds important document (admittedly) in his possession, the court can take the adverse presumption against the defendant, even if the plaintiff (who has the burden of proof or who is bound to create a high degree of probability) did not adduce any evidence.

Also Read: Best Evidence Rule in Indian Law

Party Does Not Examine -Adverse Inference if only he is a Material Witness

In Bijoy Kumar Karnani vs Lahori Ram Prasher,  AIR 1973 Cal 465, the High Court considered the argument as to non-examination of the plaintiff as a witness in the light of Section 114, illustration (g) of the Evidence Act which provides that the Court may presume that evidence which could be and is not produced would, if produced be unfavourable to the person who withholds it. The court pointed out that the plaintiff was not a material witness as to the disputed facts, sans admitted facts. Citing Gurbakhsh Singh v. Gurdial Singh, AIR 1927 PC 230, it was observed that the argument of the defendant would be apt if only the plaintiff was a material witness, as stated by the  Privy Council as under:

  • “The true object to be achieved by a Court of Justice can only be furthered with propriety by the testimony of the party who personally knowing the whole circumstances of the case can dispel the suspicions attaching to it. The story can then be subjected to all its particulars to cross-examination.”

Adverse Inference – if a Party Not Examine HimselfNot an Invariable Rule

In Iswar Bhai C. Patel vs. Harihar Behera, (1999) 3 SCC 457 the Supreme Court observed as under:

  • “17…..Having not entered into the witness-­box and having not presented himself for cross-­examination, an adverse presumption has to be drawn against him on the basis of the principles contained in Illustration (g) of Section 114 of the Evidence Act, 1872.” (Quoted in: Iqbal Basith v. N. Subbalakshmi, (2021) 2 SCC 718)

The Supreme Court also observed in Vidhyadhar v. Manikrao, AIR 1999 SC 1441, as under:

  • “Where a party to the suit does not appear in the witness box and states his own case on oath and does not offer himself to be cross examined by the other side, a presumption would arise that the case set up by him is not correct.”

In Janki Vashdeo Bhojwani v. Indusind Bank Ltd. our Apex Court followed Vidhyadhar v. Manikrao, AIR 2005 SC 439, and held as under:

  • No one can delegate the power to appear in witness box on behalf of himself. To appear in a witness box is altogether a different act. A general power of attorney holder cannot be allowed to appear as a witness on behalf of the plaintiff in the capacity of the plaintiff.”

But, it is not an invariable principle. Two contra-situations are pointed out by Kerala High Court:

  1. It is applied only against the party on whom the burden of proof lies;
  2. It is not applicable where there is no much scope for any oral evidence.

In Mammu Haji and Company Vs. Vasanthalakshmi, 2014 -3 KHC 213 that this proposition of law laid down by the Apex Court applies only in cases where the party on whom the burden of proof lies withholds himself from adducing evidence. It is held as under:

  • “In short, this decision can be applied against the party on whom the burden of proof lies; but did not adduce evidence. In the instance case, the burden of proof absolutely lies on the defendant who claims protection under S.106 of the Act. Therefore, the non-examination of the plaintiff is not fatal and no adverse inference can be drawn against the plaintiff, where the lease arrangement is admitted as such by the defendant, and the entire burden of proof lies on the defendant.”

In Upendra Rao v. Ammini,  ILR 2017-1 Ker 466, the Kerala High Court pointed out that the principle in Vidhyadhar v. Manikrao  (that when a party to a suit does not appear in the witness-box and does not offer himself to be cross-examined by the other side, adverse presumption  can be taken) cannot be applied to the facts of a case where there is not much scope for any oral evidence.

In P.  Sukumaran v. K. A.  Hamza Haji, ILR 2015-2 Ker 166, the Kerala High Court distinguished Vidhyadhar v. Manikrao observing as under”

  • “13. In Vidhyadhar’s case , the Apex Court was dealing with a case where the first defendant in the suit contended that, the sale deed executed by the second defendant in favour of the plaintiff was fictitious and the whole transaction was a bogus transaction as only Rs. 500/- was paid as sale consideration to the second defendant. He further claimed that payment of Rs. 4500/- to the second defendant at his home before the registration of the deed was wholly incorrect. This plea was not supported by the first defendant as he did not enter the witness box. It was in such circumstances, the Apex Court held that, the non-examination of the first defendant, by itself, is enough to reject his claim that the transaction of sale between second defendant and the plaintiff was a bogus transaction.
  • 14. But, in the case on hand, the tenancy in respect of the petition schedule building and the rate of rent are not in dispute. When a plea of discharge of rent is set up by the tenant, the burden is upon him to prove that plea of discharge and no adverse inference or a presumption under Section 114(g) of the Evidence Act, 1872, can be drawn against the landlord on his omission to appear as a witness and to state his own case on oath.”

Adverse Inference –When Court cannot “Make Up its Mind”

It is only if the Tribunal or the Court feels it cannot “make up its mind” as to which of the version is true, it will be held that the party on whom the burden lies has not discharged the burden (See Kumbhan Lakshmanna v. Tangirala Venkateswarlu, AIR 1949 PC 278.

  • This section (Sec. 102) shows that the initial burden of proving a prima facie case in his favour is cast on the plaintiff; when he gives such evidence as will support a prima facie case, the onus shifts on to the defendant to adduce rebutting evidence to meet the case made out by the plaintiff. As the case continues to develop the onus may shift back again to the plaintiff. It is not easy to decide at what particular stage in the course of the evidence the onus shifts from one side to the other. When, after the entire evidence is adduced, the tribunal feels it cannot make up its mind as to which of the versions is true, it will hold that the party on whom the burden lies has not discharged the burden; but if it has on the evidence no difficulty in arriving at a definite conclusion, then the burden of proof on the pleadings recedes into the background.” (Quoted in: Dulhin Mahabati Kuer v. Raghunandan Prasad Singh, AIR 1958 Pat 249, Surajbhan Kailash Chand v. Hari Shanker Vashsist, AIR 1976 Delhi 70, Krishne Gowda v. Ningegowda, ILR 1987 Kar 2883, Patel Ramanbhai Mathurbhai v. Govindbhai Chhotabhai Patel, 2020-1 GLH 261, Vinod Agrawal v. Bharat Kumar Lathi,  ILR  2012 MP 84)

Burden of Proof Not Relevant when “Both Sides had Adduced Evidence”

In Moran Mar Basselios Catholicos v. Thukalan paulo Avira, AIR 1959 SC 31, the Constitution bench of the Supreme Court held as under:

  • The question of burden of proof at the end of the case when both the parties have adduced their evidence is not of very great importance and the Court has to come to a decision on a consideration of all the materials.

In Kalwa Devadattam v. Union of India,  (1964) 3 SCR 191, the Supreme Court held as under:

  • “The question of onus probandi is certainly important in the early stages of a case. It may also assume importance where no evidence at all is led on the question in dispute by either side; in such a contingency the party on whom the onus lies to prove a certain fact must fail. Where however evidence has been led by the contesting parties on the question in issue; abstract considerations of onus are out of place; truth or otherwise of the case must always be adjudged on the evidence led by the parties. ” 

In Arumugham v. Sundarambal, AIR 1999 SC 2216, it has been held as under:

  • “On the question of burden of proof we are of the view that even assuming burden of proof is relevant in the context of the amended provision of Sec. 100 C.P.C., the same would not be relevant when both sides had adduced evidence. It would be relevant only if a person on whom the burden of proof lay, failed to adduce any evidence altogether.”

The Supreme Court, in Anil Rishi v. Gurbaksh Singh, AIR 2006 SC 1971, referring Sec. 102 of the Evidence Act (The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side), explained ‘burden of proof’ as under:

  • “Pleading is not evidence, far less proof. Issues are raised on the basis of the pleadings. The defendant-appellant having not admitted or acknowledged the fiduciary relationship between the parties, indisputably, the relationship between the parties itself would be an issue. The suit will fail if both the parties do not adduce any evidence, in view of Section 102 of the Evidence Act. Thus, ordinarily, the burden of proof would be on the party who asserts the affirmative of the issue and it rests, after evidence is gone into, upon the party against whom, at the time the question arises, judgment would be given, if no further evidence were to be adduced by either side.”

In Raghunathi v. Raju Ramappa Shetty, AIR 1991 SC 1040, it is observed that it is a settled law that once the parties have been permitted to produce evidence in support of their respective cases and it is not their grievance that any evidence was shut out the question of burden of proof loses significance and remains only academic.

It is held by the Supreme Court in Thiruvengada Pillai v. Navaneethammal, AIR 2008 SC 1541, that when the execution of an unregistered document put forth by the plaintiff was denied by the defendants, it was for the plaintiffs to establish that the document was forged or concocted. It is observed that the party who asserts something has to prove that thing. It is pointed out that when the plaintiff had come to Court alleging that the first defendant had executed an agreement of sale in his favour and when the defendant denied it, the burden was on the plaintiff to prove that the defendant had executed the agreement, and not on the defendant to prove the negative.

In K. Laxmanan v. Thekkayil Padmini, AIR 2009 SC 951, the Apex Court held that when there were suspicious circumstances regarding the execution of a Will, the onus was on the propounder to explain them to the satisfaction of the Court; and only when such responsibility was discharged, the Court would accept the Will as genuine. It was further observed that even where there were no such pleas, but circumstances gave rise to doubt, it was on the propounder to satisfy the conscience of the Court. These decisions are followed in Joseph John Peter Sandy v. Veronica Thomas Rajkumar, AIR 2013 SC 2028. 

The Privy Council in Seturatnam v. Venkatachella, AIR 1920 PC 67, observed that where the parties have led all the evidence and relevant facts were before the court and all that remained for decision was what interference was to be drawn from them, the question of burden of proof was not important. In Chidambara v. Veerama, AIR 1922 PC 292, the Privy Council held that when entire evidence was once before the court, the debate as to onus of proof was purely academic. (See: Legal Heirs of Renushree Lahkar v. Pradip Kumar Lahkar, 2018-4 Gau LT 733).

See also:

  • Mohd.  Abdullah Azam Khan v. Nawab Kazim Ali Khan, 2023 KLT OnLine 1084 (SC),
  • Standard Chartered Bank v. Andhra Bank Financial Services Ltd., (2006) 6 SCC 94,
  • Union of India v. Sugauli Sugar Works (P) Ltd., (1976) 3 SCC 32,
  • Cox and Kines (Azents) Ltd. v. Their Workmen, AIR 1977 SC 1666)

Presumption on a Registered Document – “It is VALIDLY EXECUTED

  • Section 35 in the Registration Act, 1908 says that the Registrar allows registration of a document (i) if only he is satisfied as to the identity of the person who executes the document, and (ii) if the executant admits the execution of the document.
  • Presumptions can be invoked in view of the Sec. 58 and 59 Sec. 60 (certificate) of the Registration Act. The presumption of regularity of official acts in Illustration (e) of Section 114 of the Evidence is also attached to a registered deed.
  • In short, the certificate endorsed on a registered deed by the registering officer is a relevant piece of evidence for proving its execution – Piara v. Fatnu, AIR 1929 Lah 711.
  • Therefore, there is a presumption – registered document is validly executed –
    • Prem Singh v. Birbal, AIR 2006 SC 3608;
    • Abdul Rahim v. Abdul Zabar, AIR 2010 SC 211
    • Jamila Begum v. Shami Mohd., AIR 2019 SC 72;
    • Manik Majumder v. Dipak Kumar Saha, AIR  2023 SC 506.
  • A registered document carries with it a presumption that it was executed in accordance with law – Bellachi v. Pakeeran, AIR 2009 SC 3293.
  • The facts spelled out by the endorsements made under Sections 58 and 59 of the Registration Act may be presumed to be correct without formal proof thereof – Bhagat Ram v. Suresh, AIR 2004 SC 43.

Registered Deeds: Proof of CORRECTNESS drawn, Invoking Presumption

  • Besides the presumption on a registered document that it is validly executed, there is also a presumption that the “transaction is a genuine one” (Vimal Chand Ghevarchand Jain v. Ramakant Eknath Jajoo, 2009- 5 SCC 713; Jamila Begum v. Shami Mohd., AIR 2019 SC 72) .
  • And, there is a presumption of Correctness also (Majumder v. Dipak Kumar Saha, AIR 2023 SC 506, BV Nagaratna, J.). The onus of proof, therefore, would be on the person who questions the same.

Do Presumptions as to VALID EXECUTION & CORRECTNESS Import TRUTH?

Two views emerge on registered documents-

  • First, Presumption as to VALID EXECUTION  & CORRECTNESS lead to further (invariable) Presumption as to ‘truth’.
  • Second (and more cogent), under Sec. 114 of the Evidence Act, court may presume the existence of any fact. In most cases, the court will infer ‘truth’ if there is presumption as to VALID EXECUTION  & CORRECTNESS. But, in proper cases, the court can desist to deduce ‘truth’ despite presumption as to VALID EXECUTION  & CORRECTNESS.

In short, Presumptions as to VALID EXECUTION & CORRECTNESS may Import TRUTH. It may result:

  • 1. Shift Burden in Most cases. The party in whom the ‘burden of proof’ rests can rely on ‘registration certificate’ as proof and truth of the contents of the deed.
    • The certificate endorsed on a registered deed by the registering officer is a relevant piece of evidence for proving its execution – Piara v. Fatnu, AIR 1929 Lah 711.
  • It being presumed to be VALID & CORRECT, it further gives a presumption as to truth of the contents also, under Sec. 114 Evid. Act (regard being had to the common course of natural events, human conduct etc.) .
  • There being presumption as to ‘VALID EXECUTION  & CORRECTNESS’ and thereby presumption as to truth of the contents also, the onus of proof is shifted upon the party who challenges the presumption as to truth of the contents.
  • 2. No Question of Shifting Burden in certain cases. But, the above proposition is not an invariable rule. If it comes out from the pleadings, documents or issues that the burden is upon the person who produced the registered document to prove its truth, the presumed presumption will not help him.
    • For example – The executant of the registered deed would not have executed such a deed, in all probabilities (regard being had to the common course of natural events, human conduct etc.) as revealed from the pleadings or documents produced; or, its untrue nature can be (prima facie) ‘judicially noticed’.

Sec. 114 Evid. Act

Sec. 114 Evid. Act reads as under:

  • “114. Court may presume existence of certain facts —The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case. Illustrations ……”

End Notes

Relevant provisions of the Evidence Act:

S. 101. Burden of proof.  Whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person.

S. 102.   On whom burden of proof lies.

The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.

S. 103. Burden of proof as to particular fact

The burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.

S.104. The burden of proving the fact to be proved to make evidence admissible

The burden of proving any fact necessary to be proved in order to enable any person to give evidence of any other fact is on the person who wishes to give such evidence.

S.105. The burden of proving that the case of accused comes within exceptions

When a person is accused of any offence, the burden of proving the existence of circumstances bringing the case within any of the General Exceptions in the Indian Penal Code, (45 of 1860), or within any special exception or proviso contained in any other part of the same Code, or in any law defining the offence, is upon him, and the Court shall presume the absence of such circumstances.

S.106. The burden of proving fact specially within knowledge.

When any fact is specially within the knowledge of any person, the burden of proving that fact is upon him.

S.107. The burden of proving the death of person known to have been alive within thirty years.

When the question is whether a man is alive or dead, and it is shown that he was alive within thirty years, the burden of proving that he is dead is on the person who affirms it.

 S.108. The burden of proving that person is alive who has not been heard of for seven years.

Provided that when the question is whether a man is alive or dead, and it is proved that he has not been heard of for seven years by those who would naturally have heard of him if he had been alive, the burden of proving that he is alive is shifted to the person who affirms it.

S.109. The burden of proof as to relationship in the case of partners, landlord and tenant, principal and agent

When the question is whether persons are partners, landlord and tenant, or principal and agent, and it has been shown that they have been acting as such, the burden of proving that they do not stand, or have ceased to stand to each other in those relationships respectively, is on the person who affirms it.

S.110. The burden of proof as to ownership

 When the question is, whether any person is the owner of anything of which he is shown to be in possession, the burden of proving that he is not the owner is on the person who affirms that he is not the owner.

S.111. Proof of good faith in transactions where one party is in the relation of active confidence.

Where there is a question as to the good faith of a transaction between parties, one of whom stands to the other in a position of active confidence, the burden of proving the good faith of the transaction is on the party who is in a position of active confidence.

S. 114.   Court may presume existence of certain facts.

The Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case.

Illustrations

The Court may presume —

  • (a) that a man who is in possession of stolen goods soon after the theft is either the thief or has received the goods knowing them to be stolen, unless he can account for his possession;
  • (b) that an accomplice is unworthy of credit, unless he is corroborated in material particulars;
  • (c) that a bill of exchange, accepted or endorsed, was accepted or endorsed for good consideration;
  • (d) that a thing or state of things which has been shown to be in existence within a period shorter than that within which such things or states of things usually cease to exist, is still in existence;
  • (e) that judicial and official acts have been regularly performed;
  • (f) that the common course of business has been followed in particular cases;
  • (g) that evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it;
  • (h) that if a man refuses to answer a question which he is not compelled to answer by law, the answer, if given, would be unfavourable to him;
  • (i) that when a document creating an obligation is in the hands of the obligor, the obligation has been discharged.

But the Court shall also have regard to such facts as the following, in considering whether such maxims do or do not apply to the particular case before it: —

  • as to illustration (a) — a shop-keeper has in his bill a marked rupee soon after it was stolen, and cannot account for its possession specifically, but is continually receiving rupees in the course of his business;
  • as to illustration (b) — A, a person of the highest character is tried for causing a man’s death by an act of negligence in arranging certain machinery. B, a person of equally good character, who also took part in the arrangement, describes precisely what was done, and admits and explains the common carelessness of A and himself;
  • as to illustration (b) — a crime is committed by several persons. A, B and C, three of the criminals, are captured on the spot and kept apart from each other. Each gives an account of the crime implicating D, and the accounts corroborate each other in such a manner as to render previous concert highly improbable;
  • as to illustration (c) — A, the drawer of a bill of exchange, was a man of business. B, the acceptor, was a young and ignorant person, completely under As influence;
  • as to illustration (d) — it is proved that a river ran in a certain course five years ago, but it is known that there have been floods since that time which might change its course;
  • as to illustration (e) — a judicial act, the regularity of which is in question, was performed under exceptional circumstances;
  • as to illustration (f) — the question is, whether a letter was received. It is shown to have been posted, but the usual course of the post was interrupted by disturbances;
  • as to illustration (g) — a man refuses to produce a document which would bear on a contract of small importance on which he is sued, but which might also injure the feelings and reputation of his family;
  • as to illustration (h) — a man refuses to answer a question which he is not compelled by law to answer, but the answer to it might cause loss to him in matters unconnected with the matter in relation to which it is asked;
  • as to illustration (i) — a bond is in possession of the obligor, but the circumstances of the case are such that he may have stolen it.

Burden of Proof General Principles and Nuances of Sections 101 to 106

Our Apex Court in Mohd.  Abdullah Azam Khan Vs. Nawab Kazim Ali Khan, 2023 KLT OnLine 1084 (SC), authoritatively lays down the General principles as to Burden of Proof. It reads:

  • 12.1. The legal scheme governing various aspects of ‘burden of proof’ in the Indian context, is contained in Sections 101 to 106 of the Indian Evidence Act.
  • 12.2. As per Section 101 of the Indian Evidence Act, when a person is bound to prove the existence of any fact, it is said that the burden of proof lies on that person. This section is based on the rule, ei incumbit probatio qui dicit, non qui negat, which means that the burden of proving a fact rests on the party who substantially asserts the affirmative of the issue and not upon the party who denies it, because a negative is usually incapable of proof. The burden of proving a fact always lies upon the person who asserts and until such burden is discharged, the other party is not required to be called upon to prove his case. The court has to examine as to whether the person upon whom the burden lies has been able to discharge his burden. However, the above rule is subject to the general principle that things admitted need not be proved.
  • 12.3. The question as to whether burden of proof has been discharged by a party to the lis or not, would depend upon the facts and circumstances of the case. If the facts are admitted or, if otherwise, sufficient materials have been brought on record so as to enable a Court to arrive at a definite conclusion, it is idle to contend that the party on whom the burden of proof lies would still be liable to produce direct evidence, vide National Insurance Co. Ltd. vs. Rattani (2009) 2 SCC 75: AIR 2009 SC 1499.
  • 12.4. Burden to prove documents lie on plaintiff alone as onus is always on the person asserting a proposition or fact which is not self­evident. This position is summarised in the observation to the effect that, an assertion that a man who is alive was born requires no proof; the onus, is not on the person making the assertion, because it is self­evident that he had been born. But to assert that he had been born on a certain date, if the date is material, requires proof; the onus is on the person making the assertion, vide Robins vs. National Trust & Co. Ltd. 1927 AC 515: 101 IC 903.
  • 12.5. It is also to be noted at this juncture that there is an essential distinction between burden of proof and onus of proof. Burden of proof lies upon a person who has to prove the fact and it never shifts, onus of proof on the other hand, shifts. Such a shifting of onus is a continuous process in the evaluation of evidence. For instance, In a suit for possession based on title, once the plaintiff has been able to create a high degree of probability so as to shift the onus on the defendant, it is for the defendant to discharge his onus and in the absence thereof, the burden of proof lying on the plaintiff shall be held to have been discharged so as to amount to proof of the plaintiffs title, vide RVE Venkatachala Gounder vs. Arulmigu Viswesaraswami and VP Temple AIR 2003 SC 4548: (2003) 8 SCC 752.
  • 12.6. In terms of section 102 of the Evidence Act, the initial burden to prove its claim is always on the plaintiff and if he discharges that burden and makes out a case which entitles him to a relief, the onus shifts to the defendant to prove those circumstances, if any, which would disentitle the plaintiff of the same.
  • 12.7. Where, however, evidence has been led by the contesting parties, abstract considerations of onus are out of place and truth or otherwise must always be adjudged on the evidence led by the parties [Kalwa Devadattam vs. Union, AIR 1964 SC 880]
  • 12.8. As per Section 103, the burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person. This section amplifies the general rule in section 101 that the burden of proof lies on the person who asserts the affirmative of the issue. It lays down that if a person wishes the court to believe in the existence of a particular fact, the onus of proving that fact, is on him, unless the burden of proving it is cast by any law on any particular person.
  • 12.9. Section 105 is an application of the rule in section 103. When parties to a dispute adduce evidence to substantiate their claim, onus becomes academic and divided, entailing each party to prove their respective plea.
  • 12.10. Section 106 is an exception to the general rule laid down in Section 101, that the burden of proving a fact rest on the party who substantially asserts the affirmative of the issue. Section 106 is not intended to relieve any person of that duty or burden but states that when a fact to be proved is peculiarly within the knowledge of a party, it is for him to prove it. It applies to cases where the fact is especially within a party’s knowledge and to none else. The expression ‘especially’ used in Section 106 means facts that are eminently or exceptionally within one’s knowledge. This means a party having personal knowledge of certain facts has a duty to appear as a witness and if he does not go to the witness box, there is a strong presumption against him. In an Election Petition, the initial burden to prove determination of age of returned candidate lies on the petitioner, however, burden lies on the respondent to prove facts within his special knowledge. (Sushil Kumar vs. Rakesh Kumar [ (2003) 8 SCC 673) ]. 
  • 12.11. The provisions of Section 106 are unambiguous and categorical in laying down that when any fact is especially within the knowledge of a person, the burden of proving that fact is upon him. If he does so, he must be held to have discharged his burden but if he fails to offer an explanation on the basis of facts within his special knowledge, he fails to discharge the burden cast upon him by Section 106. [Source: Sarkar on Law of Evidence, 20th Edition, Volume 2.]
  • 12.12. In Sushil Kumar vs. Rakesh Kumar (supra), the controversy was with regard to the improper acceptance of the nomination of the sole respondent therein on the premise that he was under qualified to contest the Bihar Legislative Assemble election from 181, Parbatta Constituency. In the said case, inter alia, the horoscope of the respondent therein and admission register of New St. Xaviers School, Boring Road, Patna and transfer certificate issued by Swami Vivekananda Vidyalaya, Mithapur, Patna, were produced as documents to prove that the successful candidate therein was not eligible to contest the said Assembly election. In the said case, Section 35 of the Indian Evidence Act was referred to and it was observed that the register maintained in terms of a statute or by a statutory authority in regular course of business would be a relevant fact and if such vital evidence had been produced, it would clinch the issue. It was observed that there is no reliable evidence on record to show that the date of birth was recorded in the school register on the basis of the statement of any responsible person and that the admission register or a transfer certificate issued by a primary school do not satisfy the requirements of Section 35 of the Evidence Act.

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Book No, 1 – Civil Procedure Code

Power of attorney

Title, ownership and Possession

Principles and Procedure

Admission, Relevancy and Proof

Land LawsTransfer of Property Act

Evidence Act – General

Sec. 65B

Law on Documents

Contract Act

Easement

Stamp Act & Registration

Will

Arbitration

Divorce

Book No. 2: A Handbook on Constitutional Issues

Religious issues

Book No. 3: Common Law of CLUBS and SOCIETIES in India

Book No. 4: Common Law of TRUSTS in India

What is Collateral Purpose?

Jojy George Koduvath, Kottayam.

Introspection

Does the law allow to use unstamped or insufficiently stamped document in evidence?  NoSec. 35 of the Indian Stamp Act is the relevant provision.
But, it can be used for collateral purposes; or the substantive purpose after payment of penalty (except promissory note).
Does the law allow to use unregistered (compulsory registrable) deed in evidence?  NoSec. 49 of the Registration Act bars.
But, it can be used for collateral purposes.
Should the court exclude an unregistered (compulsory registrable) deed even if marked without objection?Yes (2008) 8 SCC 564
But, it can be used for collateral purposes.
When does question of using a document for ‘collateral purpose‘ arise?  ….In case of an unregistered (compulsorily registrable)  document: Sec. 49 of the Registration Act.
Can the court allow to use an unstamped or insufficiently stamped document for ‘collateral purpose‘?  NoIt is the duty of every Judge not  to  admit a document that is not duly stamped, even if no objection to other side. 2017-3 AIR(Kar)(R) 570; AIR 2015 Kar 175.
Can a document, required to be registered, but not registered, be used in a suit for specific performance.YesIt may be used in a suit for specific performance under Proviso to Sec. 49 of the Registration Act. And, it can be received as evidence of an oral agreement of sale.
S. Kaladevi v. V.R. Somasundaram, (2010) 5 SCC 401; Ameer Minhaj v. Dierdre Elizabeth (Wright) Issar, 2018 (7) SCC  639.

What is Collateral Purpose?

The word ‘collateral’ signifies something beyond or parallel. According to Law Lexicon it means “that which is by the side, and not the direct line; that which is additional to or beyond a thing” (Amit Khanna.  Vs Suchi Khanna, 2008-10 ADJ 426; 2009-75 AllLR 34; 2009-1 AWC 929).

The Apex Court in K.B. Saha and Sons Private Limited v. Development Consultant Ltd., (2008) 8 SCC 564: 2008 AIR SCW 4829, held as under:

  • “A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration.”
  • “A collateral transaction must be a transaction not itself required to be effected by a registered document, that is, a transaction creating, etc. any right, title or interest in immovable property of the value of one hundred rupees and upwards.”

Yellapu Uma Maheswari v. Buddha Jagadheeswararao, (2015) 16 SCC 787, is an authority to see, what is ‘collateral purpose’. It is held that following matters can be proved with an unregistered partition deed, as ‘collateral purpose’-

  • severancy of title,
  • nature of possession of various shares;
    • but not primary purpose, i.e. division of joint properties by metes and bounds.

It is held as under:

  • “In a suit for partition, an unregistered document can be relied upon for collateral purpose i.e. severancy of title, nature of possession of various shares but not for the primary purpose i.e. division of joint properties by metes and bounds. An unstamped instrument is not admissible in evidence even for collateral purpose, until the same is impounded. Hence, if the appellant-defendant wants to mark these documents for collateral purpose it is open for them to pay the stamp duty together with penalty and get the document impounded and the trial court is at liberty to mark Exts. B-21 and B-22 for collateral purpose subject to proof and relevance.” 

Should an opportunity be given to cure defect, by paying deficit Stamp Duty?

In Kalaivani @ Devasena v. J. Ramu, 2010(1) CTC 27,  it was held that an opportunity should be given to the party who produces the document with insufficient stamp, to pay the deficit stamp duty and penalty so that the document could be exhibited; and that if penalty is not paid, the document should be impounded. It is held as under:

  • “24. .. It is well settled that even an unregistered document is admissible in evidence for collateral purpose provided it is adequately stamped under the Stamp act. If the document is both unstamped and unregistered, as the document in question here, it is no doubt true that it cannot be looked into for collateral purpose also. But such a document should not be thrown out at the threshold itself and an opportunity must be extended to the party who wants to mark the document on his side by directing him to pay the deficit stamp duty along with the penalty upto date, then the document could be admitted in evidence for collateral purpose. If the person does not pay the Court, then the document is to be impounded and sent to the Collector for taking action under the law.”

Unstamped or Insufficiently Stamped Pro-note

Unstamped or insufficiently stamped promissory note cannot be marked in evidence. The weight of authority is on the side that says it is incurable. Hence no secondary evidence can also be lead on the same. It cannot be used for collateral purpose also. But the creditor can prosecute a suit upon ‘original consideration’.

See Blog: (CLICK): Adjudication as to Proper Stamp under Stamp Act

 No Adjudication Needed If Power of Attorney is Sufficiently Stamped

Can Unregistered Agreement be admitted in a suit for specific performance?

  • It is held in S. Kaladevi Vs. V.R. Somasundaram, (2010) 5 SCC 401, that a document required to be registered, if unregistered, can be admitted in evidence as evidence of a contract in a suit for specific performance.
  • It is followed in Ameer Minhaj v. Dierdre Elizabeth (Wright) Issar, 2018 (7) SCC  639.

Relevant Provisions in the Registration Act:

Sec. 17(1) (g) and 49 are the relevant provisions. They read as under:

  • “17. Documents of which registration is  compulsory– (1) The following documents shall be registered, …, namely:
  • (State Amendment –AP) Agreement of sale of immovable property of the value of one hundred rupee and upwards. (Similar State Amendment in Tamil Nadu and Kerala also.)
  • “49. Effect of non-registration of documents required to be  registered.– No document required by section 17 …. to be registered shall-
  • (a) affect any immovable property comprised therein
  • (b) ….
  • (c) be received as evidence of any transaction affecting such property or conferring such power, unless it has been registered:
    • Provided that an unregistered document affecting immovable property and required by this Act or the Transfer of Property Act, 1882 (4 of 1882), to be registered may be received as evidence of a contract in a suit for specific performance under Chapter II of the Specific Relief Act, 1877 (3 of 1877), or as evidence of any collateral transaction not required to be effected by registered instrument.”

K.B. Saha and Sons Private Limited v. Development Consultant Ltd.

The Apex Court in K.B. Saha and Sons Private Limited v. Development Consultant Ltd., (2008) 8 SCC 564: 2008 AIR SCW 4829, has laid down the principle in respect of the collateral purpose.

  •        “34. From the principles laid down in the various decisions of this Court and the High Courts, as referred to here-in-above, it is evident that :-
  •        A document required to be registered is not admissible into evidence under section 49 of the Registration Act.
  •       Such unregistered document can however be used as an evidence of collateral purpose as provided in the Proviso to section 49 of the Registration Act.
  •        A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration.
  •       A collateral transaction must be a transaction not itself required to be effected by a registered document, that is, a transaction creating, etc. any right, title or interest in immovable property of the value of one hundred rupees and upwards.
  •      If a document is inadmissible in evidence for want of registration, none of its terms can be admitted in evidence and that to use a document for the purpose of proving an important clause would not be using it as a collateral purpose.

‘Collateral Purpose‘ under Sec. 49 Registration Act

Section 49 of the Registration Act expressly states admissibility of unregistered documents  in evidence for collateral purposes.

The Supreme  Court observed in Sri Venkoba Rao Pawar v. Sri S. Chandrashekar, that the collateral purpose/transaction must be independent of, or divisible from the transaction which requires registration.

In S. Kaladevi Vs. V.R. Somasundaram, (2010) 5 SCC 401, Our Apex Court held as under:

  • “11. The main provision in Section 49 provides that any document which is required to be registered, shall not affect any immovable property comprised therein nor such document shall be received as evidence of any transaction affecting such property. The proviso, however, would show that an unregistered document affecting immovable property and required by the 1908 Act or the Transfer of Property Act, 1882 to be registered may be received as an evidence to the contract in a suit for specific performance or as evidence of any collateral transaction not required to be affected by registered instrument. By virtue of the proviso, therefore, an unregistered sale deed of an immovable property of the value of Rs.100 and more could be admitted in evidence as evidence of a contract in a suit for specific performance of the contract. Such an unregistered sale deed can also be admitted in evidence as an evidence of any collateral transaction not required to be effected by registered document. When an unregistered sale deed is tendered in evidence, not as evidence of a completed sale, but as proof of an oral agreement of sale, the deed can be received in evidence making an endorsement that it is received only as evidence of an oral agreement of sale under the proviso to Section 49 of the 1908, Act.”
  • 12. Recently in the case of K.B. Sahaand Sons Private Limited v. Development Consultant Limited ,(2008) 8 SCC 564, this Court noticed the following statement of Mulla in his Indian Registration Act, 7th Edition, at page 189:
    • “……The High Courts of Calcutta, Bombay, Allahabad, Madras, Patna, Lahore, Assam, Nagpur, Pepsu, Rajasthan, Orissa, Rangoon and Jammu & Kashmir; the former Chief Court of Oudh; the Judicial Commissioner’s Court at Peshawar, Ajmer and Himachal Pradesh and the Supreme Court have held that a document which requires registration under Section 17 and which is not admissible for want of registration to prove a gift or mortgage or sale or lease is nevertheless admissible to prove the character of the possession of the person who holds under it……”
  • “This Court then culled out the following principles (K.B. Saha case, SCC p. 577, para 334):
    • “1. A document required to be registered, if unregistered is not admissible into evidence under Section 49 of the Registration Act.
    • 2. Such unregistered document can however be used as an evidence of collateral purpose as provided in the proviso to Section 49 of the Registration Act.
    • 3. A collateral transaction must be independent of, or divisible from, the transaction to effect which the law required registration.
    • 4. A collateral transaction must be a transaction not itself required to be effected by a registered document, that is, a transaction creating, etc. any right, title or interest in immovable property of the value of one hundred rupees and upwards.
    • 5. If a document is inadmissible in evidence for want of registration, none of its terms can be admitted in evidence and that to use a document for the purpose of proving an important clause would not be using it as a collateral purpose.
  • To the aforesaid principles, one more principle may be added, namely, that a document required to be registered, if unregistered, can be admitted in evidence as evidence of a contract in a suit for specific performance.”

It is held in Ameer Minhaj v. Dierdre Elizabeth (Wright) Issar, 2018 (7) SCC  639, after quoting Sec. 17 Registration Act, as under:

  • 10. On a plain reading of this provision, it is amply clear that the document containing contract to transfer the right, title or interest in an immovable property for consideration is required to be registered, if the party wants to rely on the same for the purposes of Section 53A of the 1882 Act to protect its possession over the stated property. If it is not a registered document, the only consequence provided in this provision is to declare that such document shall have no effect for the purposes of the said Section 53A of the 1882 Act.
  • The issue, in our opinion, is no more res integra. In S. Kaladevi Vs. V.R. Somasundaram and Ors., (2010) 5 SCC 401, this Court has restated the legal position that when an unregistered sale deed is tendered in evidence, not as evidence of a completed sale, but as proof of an oral agreement of sale, the deed can be received as evidence making an endorsement that it is received only as evidence of an oral agreement of sale under the proviso to Section 49 of the 1908 Act. 

After quoting Sec. 49 Registration Act it is observed by the Apex Court as under:

  • 11. In the reported decision (i.e. S. Kaladevi Vs. V.R. Somasundaram, (2010) 5 SCC 401), this Court has adverted to  the principles delineated in K.B. Saha and Sons Private Limited  v. Development Consultant Limited, (2008) 8 SCC 564 and has added one more principle  thereto that a document is required to be registered, but  if unregistered, can still be admitted as evidence of a contract in a suit for specific performance. In view of this exposition, the conclusion recorded by the High Court in the impugned judgment that the sale agreement dated 9th July, 2003 is inadmissible in evidence, will have to be understood to mean that the document though exhibited, will bear an endorsement that it is admissible only as evidence of the agreement to sell under the proviso to Section 49 of the 1908  Act and shall not have any effect for the purposes of  Section 53A of the 1882 Act. In that, it is received as evidence of a contract in a suit for specific performance and nothing more. The genuineness, validity and binding nature of the document or the fact that it is hit by the provisions of the 1882 Act or the 1899 Act, as the case may be, will have to be adjudicated at the appropriate stage as noted by the Trial Court after the parties adduce oral and documentary evidence.”

Basis of the Erudite Decision in S Kaladevi (as stated in Para 11 of the decision)

  1. Proviso in Section 49:
    1. “The proviso, however, would show that an unregistered document affecting immovable property and a document ‘required to be registered, but  if unregistered’, may, still, be received as an evidence to the contract in a suit for specific performance …. “
  2. Admitted as proof of an oral agreement of sale
    1. “Such an unregistered sale deed … can be received in evidence ….. as evidence of an oral agreement of sale.”

Unregistered Agreement can be used in Specific performance Even After the Amendment on Sec. 17

In C.  Ramya Vs. C.  Ganambal, 2020-5 Mad LJ 416 the Madras Court pointed out that the Madras and Andhra High Courts took the view that even after the amendment on Sec. 17 (Agreement of sale of immovable property is a compulsorily registrable document), non-registration of an agreement of sale does not operate as a total bar to look into the contract, since proviso to Section 49 has carved out two exceptions –

  • (i) a document ‘required to be registered, but  if unregistered,’ may, still, be received as an evidence to the contract in a suit for specific performance, and
  • (ii) it can be used for any ‘collateral purpose’.

The following are the cases referred to by the Madras High Court:

  • G. Veeramani Vs. N. Soundaramoorthy, 2019(6) CTC 580;
  • D. Devarajan v. Alphonsa Mary, 2019 (2) CTC 290;
  • Minor Ravi Bharathi Vs. P. Balasubramani, 2014(3) MWN (Civil) 578.

Unregd. Partition Deed Admissible to see Severance & No Suit for Partition lie

In Chinnapareddigari Pedda Muthyalareddy v. Chinnappareddigari Venkatareddy,AIR 1969 AP 242, unregistered partition lists were drawn up showing the properties allotted to the respective sharers. The lists were construed as partition deeds and were held by the trial Court to be inadmissible in evidence for proving division by metes and bounds. No oral evidence was held to be admissible under section 91 of the Evidence Act to prove the factum of partition or the nature of possession.

In appeal the Andhra Pradesh High Court (FB-Jaganmohan Reddy, C.J.) held that the unregistered partition deed was admissible not for proving terms of the partition or as the source of title, but for the purpose of showing that there was a disruption (division/severance) in status and that no suit for partition would lie on the basis that the properties were still joint family properties. This decision is relied on in Booraswami v. Rajakannu, 1978-1 MLJ 248; and held further, relying on K. Kanna Reddy v. K. Venkata Reddy, AIR 1965 AP 274, that for determining status and the nature of the possession oral evidence was also admissible (for proving the factum of partition).

Effect of Marking a Document Without Objection

Unregistered (Compulsorily Registrable) Documents:

With respect to unregistered documents it is held by the Apex Court in K.B. Saha and Sons Private Limited v. Development Consultant Ltd, (2008) 8 SCC 564: 2008 AIR SCW 4829, held as under:

  • “34. From the principles laid down in the various decisions of this Court and the High Courts, as referred to here-in-above, it is evident that :
  • A document required to be registered is not admissible into evidence under section 49 of the Registration Act.
  • Such unregistered document can however be used as an evidence of collateral purpose as provided in the Proviso to section 49 of the Registration Act. ….”

In the light of the Supreme Court decision in K.B. Saha and Sons Private Limited , it appears that the observation of the Karnataka High Court in Nanda Behera v. Akhsaya Kumar Behera, 2017AIR (CC) 1893, that once the Court, rightly or wrongly, decides to admit the documents in evidence, so far as the parties are concerned, the matter is closed, is not applicable to unregistered (compulsorily registrable) documents.

However, the Calcutta High Court in Dipak Kumar Singh v. Park Street Properties (P) Limited, AIR 2014 Cal 167, distinguished K.B. Saha & Sons Private Limited, (2008) 8 SCC 564, and other decisions saying that ‘the question of admissibility of a document, which had been admitted in evidence, was not taken up for consideration’ in those decisions.

The High Court relied on Javer Chand v. Pukhraj Surana, AIR 1961 SC 1655 (question as to admissibility on the ground that it has not been stamped), which held that once a document had been marked as an exhibit in a case and the trial had proceeded all along on the footing that the document was an exhibit in the case and had been used by the parties in examination and cross-examination of their witnesses, it was not open either to the trial court itself or to a court of appeal or revision to go behind that order.

The other decisions referred to and distinguished in Dipak Kumar Singh v. Park Street Properties (P) Limited are the following:

  • Ram Kumar Das v. Jagdish Chandra Deo, Dhabal Deb: AIR 1952 SC 23,
  • Satish Chand Makhan v. Govardhan Das Byas: (1984) 1 SCC 369,
  • Anthony v. K.C. Ittoop: (2000) 6 SCC 394,
  • Surya Kumar Manji v. Trilochan Nath: AIR 1955 Cal 495,
  • Kunju Kesavan v. M.M. Philip: AIR 1964 SC 164,
  • Prasanta Ghosh  v. Pushkar Kumar Ash: 2006 (2) CHN 277.

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N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. and Ground Realities of Indian Situation in Arbitration Process

Taken from: No Valid Arbitration Agreement ‘Exists’ – Can Arbitration Clause be Invoked?

Jojy George Koduvath & Saji Koduvath, Kottayam.

Contents in a Nutshell

  • The 5-Judge Bench of our Apex Court, in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, by majority (3:2), held that existence of a valid arbitration agreement (with sufficient stamp) was necessary for ‘reference to arbitrator’, under Sec. 8 of the Arbitration and Conciliation Act, 1996.
  • After 2015 Amendment on Arbitration and Conciliation Act, for ‘referring’  parties to arbitration (under Sec. 8) the courts should have “FOUND“, ‘PRIMA FACIE’ –
    • (i) the EXISTENCE of the arbitration agreement and
    • (ii) the VALIDITY thereof.
  • Sec. 8(1), as amended, reads as under:
    • A judicial authority …. shall … refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”
  • The scope of judicial review and jurisdiction of the court under Sec. 8 (for reference to arbitrator) and Sec. 11 (for appointing arbitrator) of the Arbitration Act are identical.

PART I

N.N. Global Mercantile v. Indo Unique Flame – Contentions, in Substance

The legal disputes in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, was placed before the Apex Court, treading following course:

  • A suit was filed by the appellant, to enforce a contract.
  • The defendant applied for reference under Section 8 of the Arbitration and Conciliation Act, the contract being contained an arbitration clause.
  • Trial Court rejected the application.
  • A Writ Petition was filed by the defendant challenging the Order. It was contended that the Arbitration Agreement was unenforceable as the (main) contract was unstamped.
  • The High Court allowed the Writ Petition. (Hence the plaintiff became the appellant before the Supreme Court.)

It was argued before the Apex Court that the Arbitration Agreement in the contract was enforceable and could have been acted upon, even if the contract was unstamped and unenforceable under the Indian Stamp Act. The 2-Judge Bench of the Supreme Court, referred the matter to 3-Judge Bench.

The 3-Judge Bench of the Supreme Court, referred the case to 5-Judge Bench, pointing out that an arbitration clause would stand as a distinct, separate and independent from the substantive contract.  This is based on the doctrine of severability or separability. That is, when the parties enter into such a contract, there are two separate agreements,

  • (i) the substantive contract and
  • (ii) the arbitration agreement.

In this premise, the 3-Judge Bench opined as under: 

  • Even if the main contract was bad for it was unstamped or insufficiently stamped, the arbitration clause could be enforced.
  • The defect on insufficiency of stamp could be cured as provided in the Stamp Act, and therefore, it could not be said that an unstamped or insufficiently stamped instrument did not exist in the eye of the law.
  • The failure to stamp a document, did not affect the validity or unenforceability of the document, but it merely rendered the document inadmissible in evidence.

Before the 5-Judge Bench of the Supreme Court, it was argued –

  • by the respondents/defendants, on the basis of the relevant provisions of the Arbitration Act (especially Sec. 16), that an arbitration clause would stand as a distinct, separate and independent from the substantive contract and that an arbitration reference can be made by the court even if the arbitration agreement was insufficiently stamped; and
  • by the appellant/plaintiff, in view of the provisions in the Indian Stamp Act (especially Sec. 33 and 35), that the arbitration reference could not be made by the court on the basis of an insufficiently stamped agreement. It was pointed out that unstamped or insufficiently stamped documents cannot be used as evidence for any purpose, as provided in the Stamp Act; and that for reference under Sec. 8 of the Arbitration Act the court has to specifically find that prima facie a “valid arbitration agreement exists“.

N.N. Global held – If Arb. Agreement Unstamped, NoValid Arb. Agreement Exists

It is held, by majority (3:2), in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, that an arbitration reference cannot be made by the court under Sec. 8 of the Arb. Act, on the basis of an unstamped or insufficiently stamped agreement.

The Majority affirmed the findings in this regard, in the two earlier 3-Judge Bench decisions.

  • (i) Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 (it was held that an arbitration reference cannot be made on the basis of an unstamped or insufficiently stamped agreement).
  • (ii) Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1 (it was held that landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations).

The majority judgment Para 110 and 111 of N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, reads as under:

  • “110. An instrument, which is eligible to stamp duty, may contain an Arbitration Clause and which is not stamped, cannot be said to be a contract, which is enforceable in law within the meaning of Section 2(h) of the Contract Act and is not enforceable under Section 2(g) of the Contract Act. An unstamped instrument, when it is required to be stamped, being not a contract and not enforceable in law, cannot, therefore, exist in law. Therefore, we approve of paragraphs-22 and 29 of Garware (supra). To this extent, we also approve of Vidya Drolia (supra), insofar as the reasoning in paragraphs-22 and 29 of Garware (supra) is approved.
  • 111. The true intention behind the insertion of Section 11(6A) in the Act was to confine the Court, acting under Section 11, to examine and ascertain about the existence of an Arbitration Agreement.”

PART II -_Relevant Provisions of Law

Arbitration and Conciliation Act on Arbitrability

Sec. 8(1), Sec. 11(6A) and Sec. 16 of the Arbitration Conciliation Act requires consideration in this regard.

There is a major change in the concept of ‘separability’ of the arbitration clause in a contract, after 2015 Amendment. The Amendment directed that the existence or validity of an arbitration agreement has to be ‘found’ by the Court, before referring the parties to arbitration, and appointing arbitrator, under the Arbitration and Conciliation Act.

Sec. 8(1) of the Arbitration Conciliation Act reads (after 2015 Amendment) as under:

  • 8. Power to refer parties to arbitration where there is an arbitration agreement – (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”

Sec. 11(6A) of the Arbitration Act (inserted by 2015 Amendment) reads as under:

  • “11. Appointment of arbitrators – (1) … (2) … (3) … (4) … (5) …
  • (6A). The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.”

Sec. 16, Arbitration and Conciliation Act reads as under:

  • 16. Competence of arbitral tribunal to rule on its jurisdiction – (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose –
  • (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
  • (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.”

Section 33 and 35 of the Indian Stamp Act, 1899

Section 33 of the Indian Stamp Act, 1899 reads as under:

  • 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 public 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) … (3) …

Section 35 of the Indian Stamp Act, 1899 reads as under:

  • 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;
  • (b) …. (c) ….. (d) …. (e) …..

PART III -_Decisive Earlier Decisions

SBP and Co. v. Patel Engg. Ltd.

Our Apex Court had occasion to consider the apparent inconsistency between Sec. 16 and Sec. 11 of the Arbitration Act, in SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618.

  • Sec.16 enjoins the arbitral tribunal ‘to rule on its own jurisdiction’, including ruling on any objections with respect to the ‘existence or validity’ of the arbitration agreement and it is made clear that the arbitration clause shall be treated as an agreement independent of the other terms of the contract.
  • Sect. 11(7) conferred finality to the decision of the Chief Justice, as regards the ‘reference’ to arbitration.

The explanation placed by the learned Senior Counsel, Mr. K.K. Venugopal, was pointed out by the Court.  He argued that Sect. 16 had ‘full play’ only when an Arbitral Tribunal was constituted without intervention under Sec. 11.

In SBP and Co. our Apex Court held as under:

  • “Prima facie, it would be difficult to say that in spite of the finality conferred by sub-section (7) of Section 11 of the Act, to such a decision of the Chief Justice, the Arbitral Tribunal can still go behind that decision and rule on its own jurisdiction or on the existence of an arbitration clause.”

In Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209, it was observed as under:

  • “It is settled by SBP & Co. that Section 16 of the 1996 Act has full play only after the arbitral tribunal is constituted, without intervention of the Court under Section 11.”

Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd.

As regards the enforceability of an unstamped agreement and the bifurcation of an arbitration clause, it is held in Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209, as under:

  • “… A close look at Section 11(6A) would show that when the Supreme Court or the High Court considers an application under Sections 11(4) to 11(6), and comes across an arbitration clause in an agreement or conveyance which is unstamped, it is enjoined by the provisions of the Stamp Act to first impound the agreement or conveyance and see that stamp duty and penalty (if any) is paid before the agreement, as a whole, can be acted upon. It is important to remember that the Stamp Act applies to the agreement or conveyance as a whole. Therefore, it is not possible to bifurcate the arbitration clause contained in such agreement or conveyance so as to give it an independent existence, as has been contended for by the respondent. The independent existence that could be given for certain limited purposes, on a harmonious reading of the Registration Act, 1908 … “
  • “22. When an arbitration Clause is contained “in a contract”, it is significant that the agreement only becomes a contract if it is enforceable by law. We have seen how, under the Indian Stamp Act, an agreement does not become a contract, namely, that it is not enforceable in law, unless it is duly stamped. Therefore, even a plain reading of Section 11(6A), when read with Section 7(2) of the 1996 Act and Section 2(h) of the Contract Act, would make it clear that an arbitration Clause in an agreement would not exist when it is not enforceable by law. This is also an indicator that SMS Tea Estates has, in no manner, been touched by the amendment of Section 11(6A).”
  • “29. This judgment in Hyundai Engg. case is important in that what was specifically under consideration was an arbitration Clause which would get activated only if an insurer admits 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 sub-contract would not “exist” as a matter of law until the sub-contract 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 as followed by us.”

Vidya Drolia v. Durga Trading Corporation

Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, made it clear-

  • For appointing an arbitrator, Courts shall make a Prima Facie ‘finding’ under Sec. 11(6A) as to “Non­-arbitrability of disputes”; and 
  • the prima facie examination is to make a “check”and to protect parties from being forced to arbitrate when the matter is demonstrably “non-­arbitrable”.

It is held in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, as under:

  • “133. Prima facie case in the context of Section 8 is not to be confused with the merits of the case put up by the parties which has to be established before the Arbitral Tribunal. It is restricted to the subject-matter of the suit being prima facie arbitrable under a valid arbitration agreement. Prima facie case means that the assertions on these aspects are bona fide.
  • 134. Prima facie examination is not full review but a primary first review to weed out manifestly and ex facie non-existent and invalid arbitration agreements and non-arbitrable disputes. The prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straight forward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage. Only when the court is certain that no valid arbitration agreement exists or the disputes/subject-matter are not arbitrable, the application under Section 8 would be rejected. At this stage, the court should not get lost in thickets and decide debatable questions of facts. Referral proceedings are preliminary and summary and not a mini trial… …
  • 139. … Conversely, if the court becomes too reluctant to intervene, it may undermine effectiveness of both the arbitration and the court. There are certain cases where the prima facie examination may require a deeper consideration. The court’s challenge is to find the right amount of and the context when it would examine the prima facie case or exercise restraint. The legal order needs a right balance between avoiding arbitration obstructing tactics at referral stage and protecting parties from being forced to arbitrate when the matter is clearly non-arbitrable.”

The Apex Court further observed as under:

  • “146. We now proceed to examine the question, whether the word existence” in Section 11 merely refers to contract formation (whether there is an arbitration agreement) and excludes the question of enforcement (validity) and therefore the latter falls outside the jurisdiction of the court at the referral stage. On jurisprudentially and textualism it is possible to differentiate between existence of an arbitration agreement and validity of an arbitration agreement. Such interpretation can draw support from the plain meaning of the word “existence”. However, it is equally possible, jurisprudentially and on contextualism, to hold that an agreement has no existence if it is not enforceable and not binding. Existence of an arbitration agreement presupposes a valid agreement which would be enforced by the court by relegating the parties to arbitration. Legalistic and plain meaning interpretation would be contrary to the contextual background including the definition clause and would result in unpalatable consequences. A reasonable and just interpretation of “existence” requires understanding the context, the purpose and the relevant legal norms applicable for a binding and enforceable arbitration agreement. An agreement evidenced in writing has no meaning unless the parties can be compelled to adhere and abide by the terms. A party cannot sue and claim rights based on an unenforceable document. Thus, there are good reasons to hold that an arbitration agreement exists only when it is valid and legal. A void and unenforceable understanding is no agreement to do anything. Existence of an arbitration agreement means an arbitration agreement that meets and satisfies the statutory requirements of both the Arbitration Act and the Contract Act and when it is enforceable in law.
  • 147. We would proceed to elaborate and give further reasons:
  • 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 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 sub-contract would not “exist” as a matter of law until the sub-contract is duly stamped, as has been held by us above. The argument that Section 11(6-A) 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.”
  • “153. Accordingly, we hold that the expression ‘existence of an arbitration agreement’ in Section 11 of the Arbitration Act, would include aspect of validity of an arbitration agreement, albeit the court at the referral stage would apply the prima facie test on the basis of principles set out in this judgment. In cases of debatable and disputable facts, and good reasonable arguable case, etc., the court would force the parties to abide by the arbitration agreement as the Arbitral Tribunal has primary jurisdiction and authority to decide the disputes including the question of jurisdiction and non-arbitrability.”
  • 154.2. Scope of judicial review and jurisdiction of the court under Sections 8 and 11 of the Arbitration Act is identical but extremely limited and restricted.
  • 154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. ”
    • The afore stated passages from Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, is quoted and followed in NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389.

BSNL and Anr. v. Nortel Networks India (P) Ltd.

In BSNL and Anr. v. Nortel Networks India (P) Ltd., (2021) 5 SCC 738, it is held held as under:

  • “45.1 …While exercising jurisdiction under Section 11 as the judicial forum, the court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere “only” when it is “manifest” that the claims are ex facie time-barred and dead, or there is no subsisting dispute…” (quoted and followed in NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389).

NTPC Ltd. v. SPML Infra Ltd.

NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389, without changing the foundations laid down by the Apex Court in earlier decisions, Dr. DY Chandrachud; CJI, made clear the position of law with clarity and emphasis. It is observed as under:

  • “24. Following the general rule and the principle laid down in Vidya Drolia (supra), this Court has consistently been holding that the arbitral tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. In Pravin Electricals Pvt. Ltd. v. Galaxy Infra and Engg. Pvt. Ltd., (2021) 5 SCC 671, Sanjiv Prakash v. Seema Kukreja, (2021) 9 SCC 732, and Indian Oil Corporation Ltd. v. NCC Ltd., (2022) SCC OnLine SC 896, the parties were referred to arbitration, as the prima facie review in each of these cases on the objection of non-arbitrability was found to be inconclusive. Following the exception to the general principle that the court may not refer parties to arbitration when it is clear that the case is manifestly and ex facie non-arbitrable, in BSNL and Anr. v. Nortel Networks India (P) Ltd., (2021) 5 SCC 738, and Secunderabad Cantonment Board v. B. Ramachandraiah , arbitration was refused as the claims of the parties were demonstrably time-barred.
  • 25. Eye of the Needle: The above-referred precedents crystallise the position of law that the pre-referral jurisdiction of the courts under Section 11(6) of the Act is very narrow and inheres two inquiries. The primary inquiry is about the existence and the validity of an arbitration agreement, which also includes an inquiry as to the parties to the agreement and the applicant’s privity to the said agreement. These are matters which require a thorough examination by the referral court. The secondary inquiry that may arise at the reference stage itself is with respect to the non- arbitrability of the dispute.
  • 27. The standard of scrutiny to examine the non-arbitrability of a claim is only prima facie. Referral courts must not undertake a full review of the contested facts; they must only be confined to a primary first review and let facts speak for themselves. This also requires the courts to examine whether the assertion on arbitrability is bona fide or not. The prima facie scrutiny of the facts must lead to a clear conclusion that there is not even a vestige of doubt that the claim is non-arbitrable. On the other hand, even if there is the slightest doubt, the rule is to refer the dispute to arbitration.
  • 28. The limited scrutiny, through the eye of the needle, is necessary and compelling. It is intertwined with the duty of the referral court to protect the parties from being forced to arbitrate when the matter is demonstrably non-arbitrable. It has been termed as a legitimate interference by courts to refuse reference in order to prevent wastage of public and private resources. Further, as noted in Vidya Drolia (supra), if this duty within the limited compass is not exercised, and the Court becomes too reluctant to intervene, it may undermine the effectiveness of both, arbitration and the Court. Therefore, this Court or a High Court, as the case may be, while exercising jurisdiction under Section 11(6) of the Act, is not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen arbitrator, as explained in DLF Home Developers Limited v. Rajapura Homes Pvt. Ltd., 2021 SCC OnLine SC 781″

PART III -_ Conclusion

In N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, taking note of the divergence in the debated points among Judges, Hrishikesh Roy, J., one of the (two) judges who dissented from the view of the majority, laid down the following-

  •  “… Let our minority opinion (self and Learned Brother Justice Ajay Rastogi, who has written a separate opinion), appeal to the brooding spirit of the future as also the powers of the legislature to examine the interplay between the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899; and to emphatically resolve the imbroglio to avoid any confusion in the minds of the stakeholders in the field of arbitration.”

Let the pointers be that as it may.

In any event, the legislatures (and the courts also) – as they are duty bound to ponder the welfare of the ‘downtrodden which is the majority’ – will have to consider whether the following are ground realities-

  • 1. The majority of Execution Petitions that come before the Execution (civil) Courts are for realisation of amounts below Rupees 10 Lakh ; and the lion’s share of it is filed by the persons who are engaged, directly or indirectly, in Money Lending activity, or initiated by similar “Service Providers”; and the opposite parties thereof belong (comparatively) to lower strata.  
  • 2. A large number of Execution Petitions that come before the Execution (civil) Courts are that from the uncontested Arbitration Awards from “Outside-States”.
  • 3. There is no effective “legal frame” (rules) for fixing remuneration of the Arbitrators.

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Book No, 1 – Civil Procedure Code

Power of attorney

Title, ownership and Possession

Principles and Procedure

Land LawsTransfer of Property Act

Evidence Act – General

Contract Act

Easement

Stamp Act & Registration

Will

Arbitration

Divorce

Book No. 2: A Handbook on Constitutional Issues

Book No. 3: Common Law of CLUBS and SOCIETIES in India

Book No. 4: Common Law of TRUSTS in India

No Valid Arbitration Agreement ‘Exists’ – Can Arbitration Clause be Invoked?

No; Courts to make a “Finding”, Prima Facie, as to Existence of a Valid Arb. Agreement, for ‘Reference to, or Appointment of’, Arbitrator.

Jojy George Koduvath & Saji Koduvath Advocate, Kottayam.

PART – I

Contents in a Nutshell

  • There is a major change by 2015 Amendment on Arbitration and Conciliation Act, 1996 as regards (i) the reference for arbitration under Sec. 8, and (ii) the appointment of arbitrator under Sec. 11.
  • After 2015 Amendment, for referring  parties to arbitration and for appointing arbitrator, the courts should have “FOUND“, ‘PRIMA FACIE’
    • (i) the EXISTENCE of the arbitration agreement and
    • (ii) the VALIDITY thereof
    • (in short, legitimacy of arbitrability).
  • Sec. 8(1), as amended, reads as under:
    • A judicial authority …. shall … refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”
  • The arbitration agreement should be a ‘binding’ and ‘subsisting’ one, for qualifying it to be “valid” and “existing”.
  • Referral proceedings are preliminary and summary  in nature, and do not envisage a “mini trial”. But, there are certain cases where the prima facie examination may require a deeper consideration. This prima facie examination is to make a “check” and to protect parties from being forced to arbitrate when the matter is demonstrably “non-­arbitrable” (See: Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1).
  • The limited scrutiny, through the eye of the needle, is necessary and compelling. ” If there is the slightest doubt, the rule is to refer the dispute to arbitration” (NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389).
  • The 5-Judge Bench of our Apex Court, in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, affirmed the views in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, as to the requirement of a valid arbitration agreement for reference under Sec. 8 of the Arbitration Act.
  • It is held by majority (3:2) in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. that an arbitration reference cannot be made by the court on the basis of an insufficiently stamped agreement.

Appointment of Arbitrators, Before 2015

Sec. 16(1)(a) of the Arbitration and Conciliation Act, 1996 provides that the arbitration clause in a contract is treated as independent of the other terms of the contract.

There being no specific direction (to the court) in the Arbitration Act, before 2015 Amendment, to decide on existence or validity of an arbitration agreement, while referring the parties to arbitration, under Sec. 8(1), and appointing arbitrator under Sec. 11, courts could have taken a liberal stand.

After 2015 Amendment

Courts Decide – Existence of Arb. Agreement and its Non­-arbitrability

There is a major change in the concept of ‘separability’ of the arbitration clause, after 2015 Amendment. The Amendment directed that the existence or validity of an arbitration agreement has to be ‘found’ by the Court, before referring the parties to arbitration, and appointing arbitrator, under the Arbitration and Conciliation Act..

Even before 2015, the general rule prevailed was that the arbitration agreement would cease to ‘exist’ by the expiry (end) of contract by efflux of time. It was made clear in P. Manohar Reddy & Bros. v. Maharashtra Krishna Valley Development Corporation, (2009) 2 SCC 494. It was pointed out-

  • “An arbitration clause, as is well known, is a part of the contract. It being a collateral term need not, in all situations, perish with coming to an end of the contract. It may survive. This concept of separability of the arbitration clause is now widely accepted.”

Sec. 8(1) – Existence of a Valid Arbitration Agreement must be “Found”

Sec. 8(1) of the Arbitration Conciliation Act reads (after 2015 Amendment) as under:

  • 8. Power to refer parties to arbitration where there is an arbitration agreement (1). A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”

Sec. 11(6A) existence of an arbitration agreement

Sec. 11(6A) of the Arbitration Act (inserted by 2015 Amendment) reads as under:

  • “11. Appointment of arbitrators – (1) … (2) … (3) … (4) … (5) …
  • (6A). The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.”

Arbitration Agreement is a Collateral Term, Independent of other Terms

In SMS Tea Estates Pvt Ltd. v. Chandmari Tea Co Pvt. Ltd., 2011-14 SCC 66, it is observed as under:

  • “12. When a contract contains an arbitration agreement, it is a collateral term relating to the resolution of disputes, unrelated to the performance of the contract. It is as if two contracts — one in regard to the substantive terms of the main contract and the other relating to resolution of disputes — had been rolled into one, for purposes of convenience. An arbitration clause is therefore an agreement independent of the other terms of the contract or the instrument. Resultantly, even if the contract or its performance is terminated or comes to an end on account of repudiation, frustration or breach of contract, the arbitration agreement would survive for the purpose of resolution of disputes arising under or in connection with the contract.”

In Garware Wall Ropes Ltd. v. Coastal Marine Constructions and Engineering Ltd., SCC 2019-9 SCC 209, it is pointed out that “these principles found statutory recognition” in Sec. 16(1). It reads as under:

  • 16. Competence of arbitral tribunal to rule on its jurisdiction – (1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose
  • (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and
  • (b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.”
    • See also: SMS Tea Estates Pvt Ltd. v. Chandmari Tea Co Pvt. Ltd., 2011-14 SCC 66, Enercon (India) Ltd. v. Enercon GMBH, 2014-5 SCC 1; Avitel Post Studioz Limited v. HSBC  Holdings (Mauritius) Limited, 2021-4 SCC 713.
  • Note: It is beyond doubt that the intention of Sec. 16(1) the Act is not to resurrect an arbitration clause that cannot be invoked in cases –
    • (i)  where the period of limitation provided for suits is elapsed;
    • (ii) where there is death or end of contract by ‘breach’ by one party; or
    • (iii) where there is a rescission or alteration of contract under Sec. 62 of the Contract Act, and thereby the parties need not have performed the original contract.

Existence’ of Contract, Necessary – for Operation of Arbitration Clause

It was held by the Supreme Court, in Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362 (a case on rescission or alteration of contract under Sec. 62 of the Contract Act), as under:

  • “10. The following principles relevant to the present case emerge from the aforesaid discussion:
    • (1) An arbitration clause is a collateral term of a contract as distinguished from its substantive terms; but nonetheless it is an integral part of it;
    • (2) however comprehensive the terms of an arbitration clause may be, the existence of the contract is a necessary condition for its operation; it perishes with the contract;
    • (3) … (4) … (5) … (6) …..”
  • The afore-stated passage in Union of India v. Kishorilal Gupta is quoted in:
    • Indian Drugs and Pharmaceuticals Limited v. Indo Swiss Synthetics Gem Manufacture Company Limited, 1996-1 SCC 54;
    • Sanjiv Prakash v. Seema Kukreja, 2021-9 SCC 732;
    • Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1.

The Apex Court decision, Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362, is referred to in Union of India v. Jagdish Kaur, AIR 2007 All-  67, as under:  

  • “20. The suit was instituted by the landlady on 1 -7-2004 after expiry of term of agreement. Courts below have rightly held that after expiry of five years, the agreement was non-existent and the arbitration clause was not applicable. This view finds support from the law laid down by Hon’ble the Apex Court in Union of India v. Kishori Lal Gupta and Brothers, (1959) AIR SC 1362.”

See also: Cosme Farma Laboratories Ltd.  v. Shwarde Pharmaceutical Pvt.  Ltd., 2013-2 GoaLR 559.

Expiry of Contract by Efflux of Time – Can Arbitration Clause be Invoked?

It is beyond doubt that the arbitration clause cannot be invoked in a case where the period of limitation provided for suits is elapsed.

If the period fixed in a contract for sale of a property (where time is essence of contract) is over, and the vendor alleges breach from the part of purchaser, there will not be a valid and subsisting contract from the viewpoint of the vendor. In such a case –

  • if a dispute arises (even within the limitation period for taking legal action), the “existence or validity of an arbitration agreementhas to be decided by the Court, for referring the parties to arbitration, under Sec. 8(1), and appointing arbitrator under Sec. 11, of the Arbitration and Conciliation Act.

End of Contract by Breach – Court to decide – Whether Arb. Clause be Invoked

Before the 2015 amendment, in Branch Manager, Magma Leasing & Fin. Ltd. v.  Potluri Madhavilata  (2009) 10 SCC 103,  the core question considered was whether the arbitration agreement would survive for the purpose of resolution of disputes arising under or in connection with the contract even if its performance has come to an end on account of termination due to breach. It was held as under:

  • “18. The statement of law expounded by Viscount Simon, L.C. in the case of Heyman as noticed above, in our view, equally applies to situation where the contract is terminated by one party on account of the breach committed by the other particularly in a case where the clause is framed in wide and general terms. Merely because the contract has come to an end by its termination due to breach, the arbitration clause does not get perished nor rendered inoperative; rather it survives for resolution of disputes arising “in respect of” or “with regard to” or “under” the contract. This is in line with the earlier decisions of this Court, particularly as laid down in Kishori Lal Gupta & Bros.”

It is legitimate to say that this position does not continue in view of the amended provisions, after 2015.

If the Contract (with arbitration clause) says that the contract will “stand cancelled” or “become void” or “come to an end”, on breach of that contract, whether the arbitration clause will work in such a case, for fixing damages, may be, still, a matter of adjudication by the arbitrator. In any case, ‘arbitrability’ of the same has to be decided by the “court”, in the light of Sec. 8(1) and 11(6A).

WhyPrima Facie’ Review and Finding by ‘Courtu/S. 8(1) and 11 ?

  • For referring the parties to arbitration, under Sec. 8(1) of the Arbitration and Conciliation Act, 1996 (as amended in 2015), and for appointing arbitrator under Sec. 11
    • the standard of scrutiny to examine the non-arbitrability of a claim by Referral courts is only prima facie; and the referral courts must not undertake a full review of the contested facts; they must only be confined to a primary first review (See: Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1; NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389)); and
    • the court has to (prima facie) “find” that a “valid arbitration agreement exists“.
  • That is, the arbitration agreement should be a ‘binding’ and ‘subsisting’ one, for qualifying it to be “valid” and “existing”.
  • There will be no “arbitrable” dispute if-
    • the contract is ‘ended’ (by virtue of the provisions of the contract), for breach by one party, and the party in breach is ready to pay the predetermined damages for breach (and nothing remains for arbitration).

Arbitration Clause in a Perished/Expired Contract, Arbitrator Not Appointed

Relying on Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362, it is held in Eigen Technical Service Pvt.  Ltd.  v. Vatika Limited,  2013-172 Pun LR  27: 2013-4 Arb LR 367, that arbitration clause in a redundant and perished contractby efflux of time, cannot be invoked. The court relied on an Allahabad decision stating as under:

  • “High Court of Allahabad in a judgment dated 10.11.2006 passed in Writ Petition No. 21275 of 2006 titled as Union of India Thru. Secry., Ministry of Postal v. Jagdish Kaur has also observed that arbitration clause contained in an expired agreement is also deemed as expired and is no more valid.”

Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1

Our Apex Court, in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, made it clear-

  • For appointing an arbitrator, Courts shall make a Prima Facie ‘finding’ under Sec. 11(6A) as to “Non­-arbitrability of disputes”; and 
  • the prima facie examination is to make a “check” and to protect parties from being forced to arbitrate when the matter is demonstrably “non-­arbitrable”.

It is held in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, as under:

  • “133. Prima facie case in the context of Section 8 is not to be confused with the merits of the case put up by the parties which has to be established before the Arbitral Tribunal. It is restricted to the subject-matter of the suit being prima facie arbitrable under a valid arbitration agreement. Prima facie case means that the assertions on these aspects are bona fide.
  • 134. Prima facie examination is not full review but a primary first review to weed out manifestly and ex facie non-existent and invalid arbitration agreements and non-arbitrable disputes. The prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straight forward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage. Only when the court is certain that no valid arbitration agreement exists or the disputes/subject-matter are not arbitrable, the application under Section 8 would be rejected. At this stage, the court should not get lost in thickets and decide debatable questions of facts. Referral proceedings are preliminary and summary and not a mini trial… …
  • 139. … Conversely, if the court becomes too reluctant to intervene, it may undermine effectiveness of both the arbitration and the court. There are certain cases where the prima facie examination may require a deeper consideration. The court’s challenge is to find the right amount of and the context when it would examine the prima facie case or exercise restraint. The legal order needs a right balance between avoiding arbitration obstructing tactics at referral stage and protecting parties from being forced to arbitrate when the matter is clearly non-arbitrable.”

The Apex Court further observed as under:

  • “153. Accordingly, we hold that the expression ‘existence of an arbitration agreement’ in Section 11 of the Arbitration Act, would include aspect of validity of an arbitration agreement, albeit the court at the referral stage would apply the prima facie test on the basis of principles set out in this judgment. In cases of debatable and disputable facts, and good reasonable arguable case, etc., the court would force the parties to abide by the arbitration agreement as the Arbitral Tribunal has primary jurisdiction and authority to decide the disputes including the question of jurisdiction and non-arbitrability.”
  • 154.2. Scope of judicial review and jurisdiction of the court under Sections 8 and 11 of the Arbitration Act is identical but extremely limited and restricted.
  • 154.4. Rarely as a demurrer the court may interfere at Section 8 or 11 stage when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non-arbitrable, though the nature and facet of non-arbitrability would, to some extent, determine the level and nature of judicial scrutiny. ”
    • The afore stated passages from Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, is quoted and followed in NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389.

Though Scope of scrutiny is Limited, it is Necessary and Compelling

NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389, without changing the foundations laid down by the Apex Court in earlier decisions, Dr. DY Chandrachud; CJI, made clear the position of law with clarity and emphasis. It is observed as under:

  • “24. Following the general rule and the principle laid down in Vidya Drolia (supra), this Court has consistently been holding that the arbitral tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. In Pravin Electricals Pvt. Ltd. v. Galaxy Infra and Engg. Pvt. Ltd., (2021) 5 SCC 671, Sanjiv Prakash v. Seema Kukreja, (2021) 9 SCC 732, and Indian Oil Corporation Ltd. v. NCC Ltd., (2022) SCC OnLine SC 896, the parties were referred to arbitration, as the prima facie review in each of these cases on the objection of non-arbitrability was found to be inconclusive. Following the exception to the general principle that the court may not refer parties to arbitration when it is clear that the case is manifestly and ex facie non-arbitrable, in BSNL and Anr. v. Nortel Networks India (P) Ltd., (2021) 5 SCC 738, and Secunderabad Cantonment Board v. B. Ramachandraiah , arbitration was refused as the claims of the parties were demonstrably time-barred.
  • 25. Eye of the Needle: The above-referred precedents crystallise the position of law that the pre-referral jurisdiction of the courts under Section 11(6) of the Act is very narrow and inheres two inquiries. The primary inquiry is about the existence and the validity of an arbitration agreement, which also includes an inquiry as to the parties to the agreement and the applicant’s privity to the said agreement. These are matters which require a thorough examination by the referral court. The secondary inquiry that may arise at the reference stage itself is with respect to the non- arbitrability of the dispute.
  • 26. As a general rule and a principle, the arbitral tribunal is the preferred first authority to determine and decide all questions of non-arbitrability. …
  • 27. The standard of scrutiny to examine the non-arbitrability of a claim is only prima facie. Referral courts must not undertake a full review of the contested facts; they must only be confined to a primary first review and let facts speak for themselves. This also requires the courts to examine whether the assertion on arbitrability is bona fide or not. The prima facie scrutiny of the facts must lead to a clear conclusion that there is not even a vestige of doubt that the claim is non-arbitrable. On the other hand, even if there is the slightest doubt, the rule is to refer the dispute to arbitration.
  • 28. The limited scrutiny, through the eye of the needle, is necessary and compelling. It is intertwined with the duty of the referral court to protect the parties from being forced to arbitrate when the matter is demonstrably non-arbitrable. It has been termed as a legitimate interference by courts to refuse reference in order to prevent wastage of public and private resources. Further, as noted in Vidya Drolia (supra), if this duty within the limited compass is not exercised, and the Court becomes too reluctant to intervene, it may undermine the effectiveness of both, arbitration and the Court. Therefore, this Court or a High Court, as the case may be, while exercising jurisdiction under Section 11(6) of the Act, is not expected to act mechanically merely to deliver a purported dispute raised by an applicant at the doors of the chosen arbitrator, as explained in DLF Home Developers Limited v. Rajapura Homes Pvt. Ltd., 2021 SCC OnLine SC 781″

In BSNL and Anr. v. Nortel Networks India (P) Ltd., (2021) 5 SCC 738, it is held held as under:

  • “45.1 …While exercising jurisdiction under Section 11 as the judicial forum, the court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction of the courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Court can interfere “only” when it is “manifest” that the claims are ex facie time-barred and dead, or there is no subsisting dispute…” (quoted and followed in NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389).

N.N. Global Mercantile v. Indo Unique Flame – Contentions, in Substance

The legal disputes in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, was placed before the Apex Court, treading following course:

  • A suit was filed by the appellant, to enforce a contract.
  • The defendant applied for reference under Section 8 of the Arbitration and Conciliation Act, the contract being contained an arbitration clause.
  • Trial Court rejected the application.
  • A Writ Petition was filed by the defendant challenging the Order. It was contended that the Arbitration Agreement was unenforceable as the (main) contract was unstamped.
  • The High Court allowed the Writ Petition. (Hence the plaintiff became the appellant before the Supreme Court.)

It was argued before the Apex Court that the Arbitration Agreement in the contract was enforceable and could have been acted upon, even if the contract was unstamped and unenforceable under the Indian Stamp Act. The 2-Judge Bench of the Supreme Court, referred the matter to 3-Judge Bench.

The 3-Judge Bench of the Supreme Court, referred the case to 5-Judge Bench, pointing out that an arbitration clause would stand as a distinct, separate and independent from the substantive contract.  This is based on the doctrine of severability or separability. That is, when the parties enter into such a contract, there are two separate agreements,

  • (i) the substantive contract and
  • (ii) the arbitration agreement.

In this premise, the 3-Judge Bench opined as under: 

  • Even if the main contract was bad for it was unstamped or insufficiently stamped, the arbitration clause could be enforced.
  • The defect on insufficiency of stamp could be cured as provided in the Stamp Act, and therefore, it could not be said that an unstamped or insufficiently stamped instrument did not exist in the eye of the law.
  • The failure to stamp a document, did not affect the validity or unenforceability of the document, but it merely rendered the document inadmissible in evidence.

Before the 5-Judge Bench of the Supreme Court, it was argued –

  • by the respondents/defendants, on the basis of the relevant provisions of the Arbitration Act (especially Sec. 16), that an arbitration clause would stand as a distinct, separate and independent from the substantive contract and that an arbitration reference can be made by the court even if the arbitration agreement was insufficiently stamped; and
  • by the appellant/plaintiff, in view of the provisions in the Indian Stamp Act (especially Sec. 33 and 35), that the arbitration reference could not be made by the court on the basis of an insufficiently stamped agreement. It was pointed out that unstamped or insufficiently stamped documents cannot be used as evidence for any purpose, as provided in the Stamp Act; and that for reference under Sec. 8 of the Arbitration Act the court has to specifically find that prima facie a “valid arbitration agreement exists“..

N.N. Global held – If Arb. Agreement Unstamped, No ‘Valid Arb. Agreement Exists

It is held, by majority (3:2), in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, that an arbitration reference cannot be made by the court under Sec. 8 of the Arb. Act, on the basis of an unstamped or insufficiently stamped agreement.

The Majority affirmed the findings in this regard, in the two earlier 3-Judge Bench decisions.

  • (i) Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd., (2019) 9 SCC 209 (it was held that an arbitration reference cannot be made on the basis of an unstamped or insufficiently stamped agreement).
  • (ii) Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1 (it was held that landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations).

The majority judgment Para 110 and 111 of N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, reads as under:

  • “110. An instrument, which is eligible to stamp duty, may contain an Arbitration Clause and which is not stamped, cannot be said to be a contract, which is enforceable in law within the meaning of Section 2(h) of the Contract Act and is not enforceable under Section 2(g) of the Contract Act. An unstamped instrument, when it is required to be stamped, being not a contract and not enforceable in law, cannot, therefore, exist in law. Therefore, we approve of paragraphs-22 and 29 of Garware (supra). To this extent, we also approve of Vidya Drolia (supra), insofar as the reasoning in paragraphs-22 and 29 of Garware (supra) is approved.
  • 111. The true intention behind the insertion of Section 11(6A) in the Act was to confine the Court, acting under Section 11, to examine and ascertain about the existence of an Arbitration Agreement.”

Section 33 and 35 of the Indian Stamp Act, 1899

Section 33 of the Indian Stamp Act, 1899 reads as under:

  • 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 public 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) … (3) …

Section 35 of the Indian Stamp Act, 1899 reads as under:

  • 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;
  • (b) …. (c) ….. (d) …. (e) …..

PART – II

Dispute Must have been Covered by the Arbitration Clause

It is held by the Supreme Court, in Zenith Drugs & Allied Agencies Pvt. Ltd. v. Nicholas Piramal India Ltd., AIR 2019 SC 3785, 2020-17 SCC 419, that for appointment of an arbitrator, there must have been an arbitration agreement, and the existence of the arbitration dispute must have been covered by an arbitration clause.

Effect of Fraud on Arbitration Agreement

In A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386, it was held as under:

  • “25. ……..It is only in those cases where the court, while dealing with Section 8 of the Act, finds that there are very serious allegations of fraud which make a virtual case of criminal offence  or where allegations of fraud are so complicated that it becomes absolutely essential that such complex issues can be decided only by the civil court on the appreciation of the voluminous evidence that needs to be produced, the court can sidetrack the agreement by dismissing the application under Section 8 and proceed with the suit on merits. It can be so done also in those cases where there are serious allegations of forgery/fabrication of documents in support of the plea of fraud or where fraud is alleged against the arbitration provision itself or is of such a nature that permeates the entire contract, including the agreement to arbitrate, meaning thereby in those cases where fraud goes to the validity of the contract itself of the entire contract which contains the arbitration clause or the validity of the arbitration clause itself…….”. (Quoted in: Zenith Drugs & Allied Agencies Pvt. Ltd. v. Nicholas Piramal India Ltd., AIR 2019 SC 3785, 2020-17 SCC 419)

It was pointed out in Zenith Drugs & Allied Agencies Pvt. Ltd. v. Nicholas Piramal India Ltd., AIR 2019 SC 3785, 2020-17 SCC 419, that the plea of fraud being raised in entering the compromise, the merits of such a plea could be decided only by the Civil Court upon consideration of the evidence adduced by the parties.

Validity Decided by Court; Arbitrators have no Conclusive Power

In Uttar Pradesh Rajkiya Nirman Nigam Limited v. Indure Private Limited, 1996-2 SCC 667: AIR 1996 SC 1373, it is held (even prior to 2015 Amendment) as under:

  • 14. In “Law of Arbitration” by Justice Bachawat (2nd Edn.) at page 155 it is stated that
    • “the question whether matters referred to were within the ambit of clause for reference of any difference or dispute which may arise between the parties, it is for the Court to decide”. ….
  • 15. The clear settled law thus is that the existence or validity of an arbitration agreement shall be decided by the Court alone. Arbitrators, therefore, have no power or jurisdiction to decide or adjudicate conclusively by themselves the question since it is the very foundation on which the arbitrators proceed to adjudicate the disputes.”

Conclusion

In N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495, it was argued –

  • by one side, on the basis of the relevant provisions of the Arbitration and Conciliation Act, that an arbitration reference can be made by the court even if the arbitration agreement was insufficiently stamped; and,
  • by the other side, in view of the provisions in the Indian Stamp Act, that the arbitration reference could not be made by the court on the basis of an insufficiently stamped agreement.

The Majority (3 Judges) pronounced the verdict accepting the latter contention.

Taking note of the divergence in the debated points, among Judges, it is observed by Hrishikesh Roy, J., one of the (two) judges who dissented from the view of the majority, laid down the following-

  •  “… Let our minority opinion (self and Learned Brother Justice Ajay Rastogi, who has written a separate opinion), appeal to the brooding spirit of the future as also the powers of the legislature to examine the interplay between the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899; and to emphatically resolve the imbroglio to avoid any confusion in the minds of the stakeholders in the field of arbitration.”

Let the pointers be that as it may.

In any event, the legislature – as it is duty bound to ponder the welfare of the downtrodden, which is the majority – will have to consider the following are ground realities-

  • 1. The majority of Execution Petitions that come before the Execution (civil) Courts are for realisation of amounts below Rupees 10 Lakh ; and the lion’s share of it is filed by the persons who are engaged, directly or indirectly, in Money Lending activity, or initiated by similar “Service Providers”; and the opposite parties thereof belong (comparatively) to lower strata.  
  • 2. A large number of Execution Petitions that come before the Execution (civil) Courts are that from the uncontested Arbitration Awards from “Outside-States”.
  • 3. There is no effective “legal frame” (rules) for fixing remuneration of the Arbitrators.

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Foot Note:

Sec. 8 of the Arbitration And Conciliation Act, 1996 (after 2015 Amendment)
Power to refer parties to arbitration where there is an arbitration agreement.
 (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:
Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.


Sec. 11 A of the Arbitration And Conciliation Act, 1996
11. Appointment of arbitrators.
(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and—
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment,
the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court.
(6) Where, under an appointment procedure agreed upon by the parties,—
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,
a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.
(6B) The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision.
(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to—
(a) any qualifications required for the arbitrator by the agreement of the parties; and
(b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Supreme Court or the person or institution designated by that Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to it.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, different High Courts or their designates, the High Court or its designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to the "Supreme Court or, as the case may be, the High Court" in those sub-sections shall be construed as a reference to the "Supreme Court"; and
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any other arbitration, the reference to the Supreme Court or, as the case may be, the High Court in those sub-sections shall be construed as a reference to the "High Court" within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court itself is the Court referred to in that clause, to that High Court.
(13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.
(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.
Explanation.— For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.

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What are Arbitrable Disputes?What are Non-Arbitrable Disputes? When does a Dispute, in spite of Arbitration Clause, Not Referred to Arbitration?

Jojy George Koduvath.

Introspection

  • 1. For referring the parties to arbitration, as per Sec. 8(1) and appointing arbitrator under Sec. 11 of the Arbitration Conciliation Act (as amended in 2015), the court has to (“prima facie“) find that a “valid arbitration agreement exists“.
    • That is, the Arbitration agreement should be one that is ‘binding’ and ‘subsisting’.
  • 2. SBP & Co. v. Patel Engg. Ltd., 2005-8 SCC 618 (seven-Judge Bench decision), conferred larger powers to arbitrators, it being held –
    • it was the Arbitral Tribunal that had to decide, whether there existed a live claim.
    • Note: It was prior to 2015 Amendment in the Arbitration Act. (After the Amendment it is not in the exclusive domain of the Arbitrator.)
  • 3. The legislative policy, as revealed from Sect. 11(6) of the Arbitration Act, is to minimise court’s interference at the pre-arbitral stage.
    • (See: SBP & Co. v. Patel Engg. Ltd., (2005) 8 SCC 618, National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267, Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, and Pravin Electricals v. Alaxy Infra and Engineering Pvt. Ltd., (2021) 5 SCC 671)
  • 4. Sec. 11(6A) was inserted (in 2015) also with a view to minimise judicial interference at the pre-arbitral stage.
    • It said – Courts jurisdiction, while considering arbitration-application, shall stand confined to the examination of the “existence of an arbitration agreement“.
  • 5. The scope of the judicial interference was (indirectly) increased for the following-
    • (i) under Sec. 8(1) of the Arbitration Conciliation Act (as amended in 2015), the court has to (prima facie) “find” that a “valid arbitration agreement exists“.
    • (ii) the insertion of Sec. 11(6A) directed – Courts shall examine as to “existence of an arbitration agreement“.
  • 6. Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, made it clear – Courts shall make a Prima Facie finding under Sec. 11(6A) – as to “Non­Arbitrability of disputes”.
    • It is held that it is to make a “check” and to protect parties from being forced to arbitrate when the matter is demonstrably “non­arbitrable”, and it is also to cut off the deadwood.
  • 7. The limited scrutiny, through the eye of the needle, is necessary and compelling. “If there is the slightest doubt, the rule is to refer the dispute to arbitration” (NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389).

Non-arbitrable matters

Existence of a valid, binding and concluded arbitration agreement is necessary for appointment of an arbitrator by the court.

  • Sundaram Finance Ltd. v NEPC India Ltd., 1999 2 SCC 479
  • Wellington Associates Limited v. Kirit Mehta, 2000 4 SCC 272
  • Panchsheel Constructions v. Davinder Pal Singh Chauhan, 2019 SCCOnlineDel 7176
  • Quick Heal Technologies Limited v. NCS Computech Private Limited and another, 2020 SCCOnlineBom 693

Following are non-arbitrable matters –

  • (i) criminal offences
  • (ii) matrimonial disputes
  • (iii) guardianship matters
  • (ix) discharge of the contract – National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd, (2009) 1 SCC 267; New India Assurance Co. Ltd. v. Genus Power Infrastructure Ltd.[2015) 2 SCC 424
  • (x) disputes between licensor/ landlord  and licensee/ tenant – Natraj Studios (P) Ltd. v. Navrang Studios, 1981-1 SCC 523
  • (xi) obtained by fraud, coercion, duress or undue influence, and prima facie, appears it to be lacking in credibility – Union of India v. Master Construction Co.[(2011) 12 SCC 349.
  • (xii) time-expired contract – Arshad Hussain v. General Officer Commanding , (2022, J&K High Court); Royal Orchid Associated Hotels Private Limited Vs. Kesho Lal Goyal, 2021-276 DLT 713,
  • (iv) testamentary matters
  • (v) eviction or tenancy matters (Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., 2011-5 SCC 532)
  • (vi) absence of a concluded contract (Enercon (India) Ltd. v. Enercon GMBH, 2014-5 SCC 1)
  • (vii) dead claim and long-barred claim
  • (viii) insolvency and winding-up matters

Sec. 7(3) of the Arbitration Act – Arbitration arises from a Specific Written Contract

In Harsha Construction v. Union of India, (2014) 9 SCC 246, it is held as under:

  •   “18. Arbitration arises from a contract and unless there is a specific written contract, a contract with regard to arbitration cannot be presumed. Sec. 7(3) of the Act clearly specifies that the contract with regard to arbitration must be in writing. Thus, so far as the disputes which have been referred to in Clause 39 of the contract are concerned, it was not open to the Arbitrator to arbitrate upon the said disputes as there was a specific clause whereby the said disputes had been “excepted “. Moreover, when the law specifically makes a provision with regard to formation of a contract in a particular manner, there cannot be any presumption with regard to a contract if the contract is not entered into by the mode prescribed under the Act.

Arbitrator NOT to decide Matters which are Not Arbitrable, even if an Issue framed

In Harsha Construction v. Union of India, (2014) 9 SCC 246, it is held as under:

  •   “19. If a non­arbitrable dispute is referred to an Arbitrator and even if an issue is framed by the Arbitrator in relation to such a dispute, in our opinion, there cannot be a presumption or a conclusion to the effect that the parties had agreed to refer the issue to the Arbitrator. In the instant case, the respondent authorities had raised an objection relating to the arbitrability of the aforestated issue before the Arbitrator and yet the Arbitrator had rendered his decision on the said “excepted ” dispute. In our opinion, the Arbitrator could not have decided the said “excepted ” dispute. We, therefore, hold that it was not open to the Arbitrator to decide the issues which were not arbitrable; and the award, so far as it relates to disputes regarding non­arbitrable disputes is concerned, is bad in law and is hereby quashed. ” (Referred to in- Emaar India Ltd.  v. Tarun Aggarwal Projects,  AIR  2022 SC 4678)

Sec. 8(1) Existence of a Valid Arbitration Agreement must be “Found”

Sec. 8(1) of the Arbitration Conciliation Act reads (after 2015 Amendment) as under:

  • “(1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.”

Sec. 11(6A) Amendment – Courts are bound to decide on “Non­arbitrability”

Sec. 11(6A) of the Arbitration Act reads as under:

  • “(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.”

An Arbitral Tribunal may lack jurisdiction for several reasons and non­arbitrability has multiple meanings. (See: Emaar India Ltd.  v. Tarun Aggarwal Projects,  AIR  2022 SC 4678)

If only there is an arbitrable dispute, on the facet of the matter, then only the dispute should be left to the arbitrator. (See: Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1)

  • It is with a view to protect parties from being forced to undergo an empty formality and a cumbersome procedure.
  • When it is manifestly and ex facie NOT certain – whether the dispute is arbitrable or not, it should be best left to the arbitrator in an application under Sec. 16 of the Arbitration Act
  • That is, if it is found at Sec. 8 or 11 stage that it requires further/deeper consideration, it should be best left to the arbitrator.
  • In such a case, it is for the arbitrator to decide the arbitrability of the dispute, first.

Non-Arbitrable Dispute – After Sec. 11(6A) Amendment, in 2015

  • NTPC Ltd. v. SPML Infra Ltd. (2023 SCC OnLine SC 389)discharge of the contract, (i) for, the SPML had withdrawn the Writ Petition, and therefore, there was discharge of the contract by accord and satisfaction, and (ii) for the Contract stood discharged/novated in terms of the Settlement Agreement.
  • VGP Marine Kingdom Pvt Ltd v. Kay Ellen Arnold, 2023-1 SCC 597 – unless on the facet it is found that the dispute is not arbitrable, and if it requires further/deeper consideration, the dispute with respect to the arbitrability should be left to the arbitrator.
  • Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1 – the court should determine the level and nature of judicial scrutiny as to the arbitrability.  It  should not be left to the arbitrator when it is manifestly and ex facie certain that the arbitration agreement is non-existent, invalid or the disputes are non­arbitrable. At the stage of Sec. 11, a preliminary inquiry is permissible if a dispute is raised with respect to the arbitrability.
  • Arshad Hussain v. General Officer Commanding , (2022, J&K High Court) it is pointed out that for appointing an arbitrator under Sec. 11,  there should be a live dispute/claim subsisting which is capable of being arbitrated upon; and the  Chief Justice or his designate in appointing an arbitrator under Sec. 11(6) of the Act was enjoined upon to examine the existence of the arbitration agreement between the parties and whether there existed a live arbitral claim/dispute. In this case the petition for appointment of an independent arbitrator to resolve the dispute regarding renewal of allotment of shop was dismissed, inter alia, for the agreement clearly provided that it was valid only for a period of one year and be renewed for the next year.  It was not mandatory to renew the agreement and it was not renewed. Therefore, it was held that the petitioner was not entitled for appointment of an arbitrator for want of an arbitration agreement, existence of arbitral dispute.

Expiry of Contract by Efflux of Time – Arbitration Clause Cannot be Invoked

It was held by the Supreme Court, in Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362, as under:

  • “10. The following principles relevant to the present case emerge from the aforesaid discussion:
    • (1) An arbitration clause is a collateral term of a contract as distinguished from its substantive terms; but nonetheless it is an integral part of it;
    • (2) however comprehensive the terms of an arbitration clause may be, the existence of the contract is a necessary condition for its operation; it perishes with the contract;
    • (3) … (4) … (5) … (6) …..”

The aforesaid Apex Court decision, Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362, was referred to in Union of India v. Jagdish Kaur, AIR 2007 All-  67 as under:  

  • “20. The suit was instituted by the landlady on 1 -7-2004 after expiry of term of agreement. Courts below have rightly held that after expiry of five years, the agreement was non- existent and the arbitration clause was not applicable. This view finds support from the law laid down by Hon’ble the Apex Court in Union of India v. Kishori Lal Gupta and Brothers, (1959) AIR SC 1362.”

See also: Cosme Farma Laboratories Ltd.  Vs. Shwarde Pharmaceutical Pvt.  Ltd., 2013-2 GoaLR 559.

Expiry of Contract by Efflux of Time – Can Arbitration Clause be Invoked?

It is beyond doubt that the arbitration clause cannot be invoked in a case where the period of limitation provided for suits is elapsed.

If the period fixed in a contract for sale of a property (where time is essence of contract) is over and the vendor alleges breach from the part of purchaser, there will not be a valid and subsisting contract from the view of the vendor. In such a case –

  • if a dispute arises (even within the limitation period for taking legal action), the “existence or validity of an arbitration agreement” has to be decided by the Court, for referring the parties to arbitration, under Sec. 8(1), and appointing arbitrator under Sec. 11, of the Arbitration Conciliation Act.

Arbitration Clause in an Expired Contract, Cannot be invoked

Relying on Union of India v. Kishorilal Gupta and Bros., AIR 1959 SC 1362 it is held in Eigen Technical Service Pvt.  Ltd.  v. Vatika Limited,  2013-172 Pun LR  27: 2013-4 Arb LR 367, that one cannot invoke arbitration clause in a redundant, and perished contract by efflux of time. The court relied on an Allahabad decision stating as under:

  • “ High Court of Allahabad in a judgment dated 10.11.2006 passed in Writ Petition No. 21275 of 2006 titled as Union of India Thru’ Secry., Ministry of Postal v. Jagdish Kaur has also observed that arbitration clause contained in an expired agreement is also deemed as expired and is no more valid.”

Validity of Arbn. Agmnt. Decided by Court; Arbitrators have no Conclusive Power

In Uttar Pradesh Rajkiya Nirman Nigam Limited v. Indure Private Limited, 1996-2 SCC 667: AIR 1996 SC 1373, it is held as under:

  • 14. In “Law of Arbitration” by Justice Bachawat (2nd Edn.) at page 155 it is stated that
    • “the question whether matters referred to were within the ambit of clause for reference of any difference or dispute which may arise between the parties, it is for the Court to decide”. ….
  • 15. The clear settled law thus is that the existence or validity of an arbitration agreement shall be decided by the Court alone. Arbitrators, therefore, have no power or jurisdiction to decide or adjudicate conclusively by themselves the question since it is the very foundation on which the arbitrators proceed to adjudicate the disputes.”

An arbitration clause is to be strictly construed

The parties are bound by the clauses in the agreement.  The Court will not rewrite any clause in equity. An arbitration clause is required to be strictly construed. (See: Oriental Insurance Co Ltd. v. Narbheram Power and Steel (P) Ltd., (2018) 6 SCC 534; (Referred to in- Emaar India Ltd.  v. Tarun Aggarwal Projects,  AIR  2022 SC 4678)).

In Rajasthan State Industrial Development and Investment Corporation v. Diamond and Gem Development Corporation Ltd.; (2013) 5 SCC 470, it is held that a party cannot claim anything more than what is covered by the terms of the contract, for the reason that the contract is a transaction between two parties and has been entered into with open eyes and by understanding the nature of contract; and that thus the contract being a creature of an agreement between two or more parties has to be interpreted giving literal meanings unless there is some ambiguity therein. The contract is to be interpreted giving the actual meaning to the words contained in the contract and it is not permissible for the Court to make a new contract, however reasonable, if the parties have not made it themselves. It is further observed that the terms of the contract have to be construed strictly without altering the nature of a contract as it may affect the interest of either of the parties adversely. (Referred to in- Emaar India Ltd.  v. Tarun Aggarwal Projects,  AIR  2022 SC 4678)

Different Facets of Non­-Arbitrability

In Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, (on a reference to three-judge-bench) referring Booz Allen and Hamiltan Inc. Vs. SBI Home Finance Ltd., (2011) 5 SCC 532, it is held that there are facets of non­arbitrability, as under:

  • “(i) Whether the disputes are capable of adjudication and settlement by arbitration? That is, whether the disputes, having regard to their nature, could be resolved by a private forum chosen by the parties (the Arbitral Tribunal) or whether they would exclusively fall within the domain of public fora (courts).
  • (ii) Whether the disputes are covered by the arbitration agreement? That is, whether the disputes are enumerated or described in the arbitration agreement as matters to be decided by arbitration or whether the disputes fall under the “excepted matters ” excluded from the purview of the arbitration agreement.
  • (iii) Whether the parties have referred the disputes to arbitration? That is, whether the disputes fall under the scope of the submission to the Arbitral Tribunal, or whether they do not arise out of the statement of claim and the counterclaim filed before the Arbitral Tribunal.
  • A dispute, even if it is capable of being decided by arbitration and falling within the scope of an arbitration agreement, will not be “arbitrable ” if it is not enumerated in the joint list of disputes referred to arbitration, or in the absence of such a joint list of disputes, does not form part of the disputes raised in the pleadings before the Arbitral Tribunal. “

It is ultimately concluded in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, in para 76 as under:

  • “45. In view of the above discussion, we would like to propound a four­fold test for determining when the subject matter of a dispute in an arbitration agreement is not arbitrable:
  • (1) When cause of action and subject­-matter of the dispute relates to actions in rem, that do not pertain to subordinate rights in personam that arise from rights in rem.
  • (2) When cause of action and subject-­matter of the dispute affects third­party rights; have erga omnes effect; require centralized adjudication, and mutual adjudication would not be appropriate and enforceable;
  • (3) When cause of action and subject-matter of the dispute relates to inalienable sovereign and public interest functions of the State and hence mutual adjudication would be unenforceable;
  • (4) When the subject-­matter of the dispute is expressly or by necessary implication non­arbitrable as per mandatory statute(s).
  • These tests are not watertight compartments; they dovetail and overlap, albeit when applied holistically and pragmatically will help and assist in determining and ascertaining with great degree of certainty when as per law in India, a dispute or subject matter is non­arbitrable. Only when the answer is affirmative that the subject matter of the dispute would be non­arbitrable.
  • However, the aforesaid principles have to be applied with care and caution as observed in Olympus Superstructures (P) Ltd. Vs. Meena Vijay Khetan and Ors.; (1999) 5 SCC 651: (SCC p. 669, para 35)
  • “35. …Reference is made there to certain disputes like criminal offences of a public nature, disputes arising out of illegal agreements and disputes relating to status, such as divorce, which cannot be referred to arbitration.
  • It has, however, been held that if in respect of facts relating to a criminal matter, say, physical injury, if there is a right to damages for personal injury, then such a dispute can be referred to arbitration (Keir v. Leeman). Similarly, it has been held that a husband and a wife may refer to arbitration the terms on which they shall separate, because they can make a valid agreement between themselves on that matter (Soilleux v. Herbst, Wilson v. Wilson and Cahill v. Cahill). ” (Quoted in- Emaar India Ltd.  v. Tarun Aggarwal Projects,  AIR  2022 SC 4678)

As regards the Prima facie examination of Courts, it is held in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, as under:

  • “87. Prima facie examination is not full review but a primary first review to weed out manifestly and ex facie non-existent and invalid arbitration agreements and non-arbitrable disputes. The prima facie review at the reference stage is to cut the deadwood and trim off the side branches in straight forward cases where dismissal is barefaced and pellucid and when on the facts and law the litigation must stop at the first stage.”

In Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, our Apex Court overruled two decisions.

  • 1. N. Radhakrishnan v. Maestro Engineers, (2010) 1 SCC 72 (which, inter alia, observed that allegations of fraud can be made a subject matter of arbitration when they relate to a civil dispute).
  • 2.  Himangni Enterprises v. Kamaljeet Singh Ahluwalia, (2017) 10 SCC 706 (which held that landlord-tenant disputes are arbitrable as the Transfer of Property Act does not forbid or foreclose arbitration).

It was pointed out in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, (i)  that fraud, which would vitiate and invalidate the arbitration clause, is an aspect relating to non- arbitrability; they are non-arbitrable; and (ii) that the landlord-tenant disputes covered and governed by rent control legislation would not be arbitrable when specific court or forum has been given exclusive jurisdiction to apply and decide special rights and obligations. Such rights and obligations can only be adjudicated and enforced by the specified court/forum, and not through arbitration.

Who Decides Non­arbitrability – Prima Facie Test by Court

As to ‘who decides on non­arbitrability of the dispute’, it is observed in Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1, there is only limited scope for review by the court. It is to check and protect parties from being forced to arbitrate when the matter is demonstrably “non­arbitrable” and to cut off the deadwood. It is held in Vidya Drolia v. Durga Trading Corporation as under:

  •  “96. Discussion under the heading ‘Who decides Arbitrability?’ can be crystallized as under:
  • (a) Ratio of the decision in Patel Engineering Ltd. (SBP & Co. v. Patel Engg. Ltd., 2005 8 SCC 618) on the scope of judicial review by the court while deciding an application under Sections 8 or 11 of the Arbitration Act, post the amendments by Act 3 of 2016 (with retrospective effect from 23­.10.­2015) and even post the amendments vide Act 33 of 2019 (with effect from 9­.8­.2019), is no longer applicable.
  • (b) Scope of judicial review and jurisdiction of the court under Section 8 and 11 of the Arbitration Act is identical but extremely limited and restricted.
  • (c) The general rule and principle, in view of the legislative mandate clear from Act 3 of 2016 and Act 33 of 2019, and the principle of severability and competence­ competence, is that the arbitral tribunal is the preferred first authority to determine and decide all questions of non­ arbitrability. The court has been conferred power of “second look” on aspects of non­arbitrability post the award in terms of-
    • sub­clauses (i), (ii) or (iv) of Section 34(2)(a) or
    • sub­clause (i) of Section 34(2)(b) of the Arbitration Act.
  •  (d)  Rarely as a demurrer the court may interfere at the Section 8 or 11 stage when it is manifestly and ex facie certain that
    • the arbitration agreement is non­existent,
    • invalid or
    • the disputes are non­arbitrable,
  • though the nature and facet of non­arbitrability would, to some extent, determine the level and nature of judicial scrutiny.
  • The restricted and limited review is to check and protect parties from being forced to arbitrate when the matter is demonstrably “non­arbitrable”, and to cut off the deadwood. The court by default would refer the matter when contentions relating to non­arbitrability are plainly arguable; when consideration in summary proceedings would be insufficient and inconclusive; when facts are contested; when the party opposing arbitration adopts delaying tactics or impairs conduct of arbitration proceedings. This is not the stage for the court to enter into a mini trial or elaborate review so as to usurp the jurisdiction of the arbitral tribunal but to affirm and uphold integrity and efficacy of arbitration as an alternative dispute resolution mechanism.” (Quoted in: Emaar India Ltd.  v. Tarun Aggarwal Projects,  AIR  2022 SC 4678; NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389)

In NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389, it is held (Dr. Dhananjaya Y. Chandrachud; CJI) as under:

  • “25. Eye of the Needle: The above-referred precedents crystallise the position of law that the pre-referral jurisdiction of the courts under Section 11(6) of the Act is very narrow and inheres two inquiries. The primary inquiry is about the existence and the validity of an arbitration agreement, which also includes an inquiry as to the parties to the agreement and the applicant’s privity to the said agreement. These are matters which require a thorough examination by the referral court. The secondary inquiry that may arise at the reference stage itself is with respect to the nonarbitrability of the dispute.”

In NTPC Ltd. v. SPML Infra Ltd., 2023 SCC OnLine SC 389, sub-section (6A) added to Section 11, with respect to “pre-referral jurisdiction”, was referred to, and the following decisions were relied on-

  • Vidya Drolia v. Durga Trading Corporation, 2021-2 SCC 1,
  • National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267,
  • Union of India v. Master Construction Co., (2011) 12 SCC 349,  
  • New India Assurance Co. Ltd. v. Genus Power Infrastructure Ltd., (2015) 2 SCC 424,
  • United India Insurance Co. Ltd. v. Antique Art Exports Pvt. Ltd., (2019) 5 SCC 362.

In Union of India v. Master Construction Co., (2011) 12 SCC 349, it was observed as under:

  • “18. In our opinion, there is no rule of the absolute kind. In a case where the claimant contends that a discharge voucher or no-claim certificate has been obtained by fraud, coercion, duress or undue influence and the other side contests the correctness thereof, the Chief Justice/his designate must look into this aspect to find out at least, prima facie, whether or not the dispute is bona fide and genuine. Where the dispute raised by the claimant with regard to validity of the discharge voucher or no-claim certificate or settlement agreement, prima facie, appears to be lacking in credibility, there may not be a necessity to refer the dispute for arbitration at all.”

In New India Assurance Co. Ltd. v. Genus Power Infrastructure Ltd., (2015) 2 SCC 424, it was observed as under:

  • “10. In our considered view, the plea raised by the respondent is bereft of any details and particulars, and cannot be anything but a bald assertion. Given the fact that there was no protest or demur raised around the time or soon after the letter of subrogation was signed, that the notice dated 31-3-2011 itself was nearly after three weeks and that the financial condition of the respondent was not so precarious that it was left with no alternative but to accept the terms as suggested, we are of the firm view that the discharge in the present case and signing of letter of subrogation were not because of exercise of any undue influence. Such discharge and signing of letter of subrogation was voluntary and free from any coercion or undue influence. In the circumstances, we hold that upon execution of the letter of subrogation, there was full and final settlement of the claim. Since our answer to the question, whether there was really accord and satisfaction, is in the affirmative, in our view no arbitrable dispute existed so as to exercise power under Section 11 of the Act. The High Court was not therefore justified in exercising power under Section 11 of the Act.”

In United India Insurance Co. Ltd. v. Antique Art Exports Pvt. Ltd., (2019) 5 SCC 362, it was observed as under:

  • “21. In the instant case, prima facie no dispute subsisted after the discharge voucher being signed by the respondent without any demur or protest and claim being finally settled with accord and satisfaction and after 11 weeks of the settlement of claim a letter was sent on 27-7-2016 for the first time raising a voice in the form of protest that the discharge voucher was signed under undue influence and coercion with no supportive prima facie evidence being placed on record in absence thereof, it must follow that the claim had been settled with accord and satisfaction leaving no arbitral dispute subsisting under the agreement to be referred to the arbitrator for adjudication.
  • 22. In our considered view, the High Court has committed a manifest error in passing the impugned order and adopting a mechanical process in appointing the arbitrator without any supportive evidence on record to prima facie substantiate that an arbitral dispute subsisted under the agreement which needed to be referred to the arbitrator for adjudication.”

Earlier View

Arbitrator to decide – whether valid arbitration agreement, claim barred

 In SBP & Co. v. Patel Engg. Ltd., 2005 8 SCC 618, a seven-Judge Bench of the Apex Court  held as under:

  • “39. It is necessary to define what exactly the Chief Justice, approached with an application under Section 11 of the Act, is to decide at that stage. Obviously, he has to decide his own jurisdiction in the sense, whether the party making the motion has approached the right High Court. He has to decide whether there is an arbitration agreement, as defined in the Act and whether the person who has made the request before him, is a party to such an agreement. It is necessary to indicate that he can also decide the question whether the claim was a dead one; or a long-barred claim that was sought to be resurrected and whether the parties have concluded the transaction by recording satisfaction of their mutual rights and obligations or by receiving the final payment without objection.

Matters that Require Evidence

In SBP & Co. v. Patel Engg. Ltd., 2005 8 SCC 618, a seven-Judge Bench of the Apex Court  held further as under:

  • “It may not be possible at that stage, to decide whether a live claim made, is one which comes within the purview of the arbitration clause. It will be appropriate to leave that question to be decided by the Arbitral Tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the court at various stages of the proceedings before the Arbitral Tribunal. (quoted in: Ashapura Mine -Chem Ltd.  v. Gujarat Mineral Development Corporation,  2015-8 SCC 193)

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End Notes:

Sec. 8 of the Arbitration And Conciliation Act, 1996 (after 2015 Amendment)
Power to refer parties to arbitration where there is an arbitration agreement.
 (1) A judicial authority, before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute, then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the parties to arbitration unless it finds that prima facie no valid arbitration agreement exists.
(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof:
Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (1), and the said agreement or certified copy is retained by the other party to that agreement, then, the party so applying shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court.
(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made.


Sec. 11 A of the Arbitration And Conciliation Act, 1996
11. Appointment of arbitrators.
(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.
(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.
(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.
(4) If the appointment procedure in sub-section (3) applies and—
(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or
(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment,
the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court.
(6) Where, under an appointment procedure agreed upon by the parties,—
(a) a party fails to act as required under that procedure; or
(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure,
a party may request the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.
(6A) The Supreme Court or, as the case may be, the High Court, while considering any application under sub-section (4) or sub-section (5) or sub-section (6), shall, notwithstanding any judgment, decree or order of any Court, confine to the examination of the existence of an arbitration agreement.
(6B) The designation of any person or institution by the Supreme Court or, as the case may be, the High Court, for the purposes of this section shall not be regarded as a delegation of judicial power by the Supreme Court or the High Court.
(7) A decision on a matter entrusted by sub-section (4) or sub-section (5) or sub-section (6) to the Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court is final and no appeal including Letters Patent Appeal shall lie against such decision.
(8) The Supreme Court or, as the case may be, the High Court or the person or institution designated by such Court, before appointing an arbitrator, shall seek a disclosure in writing from the prospective arbitrator in terms of sub-section (1) of section 12, and have due regard to—
(a) any qualifications required for the arbitrator by the agreement of the parties; and
(b) the contents of the disclosure and other considerations as are likely to secure the appointment of an independent and impartial arbitrator.
(9) In the case of appointment of sole or third arbitrator in an international commercial arbitration, the Supreme Court or the person or institution designated by that Court may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.
(10) The Supreme Court or, as the case may be, the High Court, may make such scheme as the said Court may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or sub-section (6), to it.
(11) Where more than one request has been made under sub-section (4) or sub-section (5) or sub-section (6) to the Chief Justices of different High Courts or their designates, different High Courts or their designates, the High Court or its designate to whom the request has been first made under the relevant sub-section shall alone be competent to decide on the request.
(12) (a) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in an international commercial arbitration, the reference to the "Supreme Court or, as the case may be, the High Court" in those sub-sections shall be construed as a reference to the "Supreme Court"; and
(b) Where the matters referred to in sub-sections (4), (5), (6), (7), (8) and sub-section (10) arise in any other arbitration, the reference to the Supreme Court or, as the case may be, the High Court in those sub-sections shall be construed as a reference to the "High Court" within whose local limits the principal Civil Court referred to in clause (e) of sub-section (1) of section 2 is situate, and where the High Court itself is the Court referred to in that clause, to that High Court.
(13) An application made under this section for appointment of an arbitrator or arbitrators shall be disposed of by the Supreme Court or the High Court or the person or institution designated by such Court, as the case may be, as expeditiously as possible and an endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.
(14) For the purpose of determination of the fees of the arbitral tribunal and the manner of its payment to the arbitral tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.
Explanation.— For the removal of doubts, it is hereby clarified that this sub-section shall not apply to international commercial arbitration and in arbitrations (other than international commercial arbitration) in case where parties have agreed for determination of fees as per the rules of an arbitral institution.

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