Courts cannot appoint arbitrator(s) when the contract containing the arbitration clause is insufficiently stamped.

[Case Brief] Garware Wall Ropes Ltd. v/s Coastal Marine Constructions & Engineering Ltd.

Case name Garware Wall Ropes Ltd. v/s Coastal Marine Constructions & Engineering Ltd.
Case number Civil Appeal Number 3631 of 2019
Court Supreme Court of India 
Bench Justice Rohinton Fali Nariman and Justice Vineet Saran
Author of the judgment Justice Rohinton Fali Nariman
Decided on  April 10, 2019
Relevant Act/Sections Arbitration and Conciliation Act, 1996- Section 12(5)
Author of the case brief  Lavanya Gupta ([email protected]

Brief Facts and Procedural History:

The Appellant and Respondent had entered into an agreement installation of geo-textile tubes embankment and the agreement contained a dispute resolution clause. As per the dispute resolution clause, all disputes were to be referred to the sole arbitrator appointed by both the parties jointly in agreement. During subsistence of the contract, disputes arose between the parties and the Respondent wrote to the Appellant about appointment of one Mihir Naniwadekar as sole arbitrator. The Appellant objected to the said appointment, as the invocation of the arbitration was premature. The Respondent then filed an application before the High Court of Bombay that was allowed and Mr Naniwadekar was appointed as the sole arbitrator. The Appellant appealed by way of the present case.

Issues before the Court of Law:

1) What is the effect of an arbitration clause contained in a contract, which requires to be stamped?

Ratio of the Court:

The Indian Stamp Act applies to an agreement or conveyance as a whole. Thus, the arbitration clause contained in a contract cannot be separated from the rest of the contract to give both an independent existence. It is a well-settled position in law than an arbitration clause becomes an agreement only if the contract is enforceable in law.

Decision Held:

The Court held that courts could decide an arbitration application only after the contract containing an arbitration clause is adequately stamped. In other words, courts cannot appoint arbitrator(s) when the contract containing the arbitration clause is insufficiently stamped.

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