In accordance with the arbitration provision in the Memorandum of Understanding ("MoU") dated January 1, 2020 ("MoU") signed with MSD Telematics Pvt. Ltd. ("Respondent"), IMZ Corporate Pvt. Ltd. ("Petitioner") filed a petition under Section 11 of the Act before the Hon'ble High Court of Delhi ("Court") for the appointment of an arbitrator. There had been disagreements between the parties, and the petitioner claimed that the respondent had violated the MoU in major ways that also constituted crimes. As a result, the Petitioner requested arbitration through a notification dated July 4, 2020. The petitioner sought that an arbitrator is appointed by the Delhi International Arbitration Centre (DIAC). As a result, the Respondent also received a warning from DIAC regarding the same. The Respondent had not responded, therefore the Petitioner approached the Court.
In the instant case titled M/s IMZ Corporate Pvt Ltd vs MSD Telematics Pvt Ltd.The issues raised for clarification before the Delhi High Court were:
Whether the petition can be maintained?
Can the arbitration clause in the Memorandum of Understanding be used if it wasn't stamped?
With regard to the first issue, the Court declared that no court has made a definitive determination regarding claims of fraud and forgery, and as a result, the Court was inclined to adhere to the maxim "when in doubt, do refer" as stated in Vidya Drolia v. Durga Trading Corporation. The Court further found that requiring the parties to undergo any pre-arbitration procedures and relegating them to mutual discussions would be pointless because the parties had already begun criminal proceedings and litigation before the NCLT. It was further noted that simply because the director of the Petitioner filed a petition with the NCLT alleging tyranny and poor management against the Respondent does not exclude the submission of contractual problems to arbitration. As a result, the non-arbitrability argument would fail. As a result, the non-arbitrability argument would fail. The Court further ruled that Section 11's contingencies had been properly satisfied. The Court determined that none of the Respondent's arguments supports dismissing the Petition.
With regard to the second issue, The Court initially considered confiscating the MoU for failing to pay stamp duty. The Supreme Court's ruling in the case of N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd., where it was decided that failure to pay stamp duty on a commercial contract would not render the arbitration agreement invalid and unenforceable, led the Court to believe that such recourse is not necessary after hearing from the parties. The idea of separability of the arbitration agreement serves as the foundation for such a decision. The arbitration agreement is a separate and different agreement from the underlying business contract, the Supreme Court had said. It would therefore endure regardless of the actual contract.
The Court categorically stated that,
"t is clarified that MSD would be free to take up all such objections as are available in law under Section 16 of the Act, including the dispute regarding the existence or validity of the agreement, before the learned Arbitrator. The parties shall also be entitled to raise their claims and counter-claims before the Learned Arbitrator in accordance with the law. It is further clarified that the learned Arbitrator shall decide all the issues without being influenced by the observations made by this Court which are only prima facie in nature. All rights and contentions of the parties are left open.”
Due to the arbitration agreement being a different contract and not being impacted by the main agreement's failure to be stamped, this decision will aid in preventing parties from using a delay tactic based on a technical claim that the main agreement's stamp duty was not paid.