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In a very interesting observation, the Supreme Court has opined on the validity of an arbitration clause and the arbitral appointment made under such clause contained in an unstamped agreement.The case of Garware Wall Ropes v. Coastal Marine Constructions & Engineering Ltdhas been used as precedent and wherein an arbitrator was appointed pursuant to Section 11 of the Arbitration and Conciliation Act, 1996.The Supreme Court, and has been set aside and remitted back to the Bombay High Court for a fresh determination. It has held that if an arbitration clause is contained in an unstamped agreement, the Judge would be required to impound the agreement and ensure that stamp duty and penalty are paid.
While in the application of the arbitrator the Court, should confine themselves to the examination of the existence of an arbitration agreement. It was further stated that an arbitration clause cannot be bifurcated entirely from the agreement it is contained in.Under Section 11(13) of the Act, an application for appointment of an arbitrator must be disposed of as expeditiously as possible, and in any event within a period of 60 days from the date of service of notice on the other party. The Supreme Court held that Section 11(13) must be harmoniously construed with Sections 33 and 34 of the Maharashtra Stamp Act, 1958. Although the procedure to impound an agreement and payment of stamp duty can take more than 45 days, the aim to meet this 45 day deadline is the first step towards a speedy system.
Lastly, certain guidelines have been provided for the times when the underlying agreement is unstamped. Firstly, the High Court must impound the agreement upon which stamp duty has not been paid. Secondly, the agreement should be handed over to the relevant authority under the Maharashtra Stamp Act, 1958, who will decide the issues relating to stamp duty and penalty (if any) as expeditiously as possible, and preferably within a period of 45 days from the date on which the authority receives the agreement. And, lastly, As soon as stamp duty and penalty are paid, the parties can bring the instrument to the notice of the High Court which will proceed to expeditiously hear and dispose of the Section 11 application.
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