MP HC: Section 16 Arbitration Act Rejection Must Be Challenged Under Section 34, Not Writ

Suncity Dhoot Colonizers Pvt. Ltd. Vs Ram Chandra Patidar (Madhya Pradesh High Court)

The Madhya Pradesh High Court considered a writ petition under Article 226 of the Constitution challenging the order dated 26.10.2023 passed by the Sole Arbitrator in Arbitration Case No. 03/2022 rejecting the petitioner’s application under Section 16 of the Arbitration and Conciliation Act, 1996. The dispute arose from a Memorandum of Understanding (MoU) dated 01.12.2017 executed between the petitioner company and respondent No. 1 for construction of model houses on eleven plots in a residential colony. The MoU contained an arbitration clause. Following disputes regarding performance of the MoU, respondent No. 1 filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator, which was allowed on 11.11.2022 by appointing a Sole Arbitrator.

Before the Sole Arbitrator, the petitioner filed an application under Section 16 of the Arbitration and Conciliation Act, 1996 contending that the arbitration clause contained in an unstamped document could not be acted upon and seeking a direction requiring payment of proper stamp duty on the MoU. By order dated 26.10.2023, the Arbitrator dismissed the application, holding that the MoU was in the nature of an agreement to sale where possession had not been delivered, requiring stamp duty of Rs. 1,000/-, which had already been paid. The Arbitrator therefore held that there was no insufficiency of stamp duty.