Blog Detail

LEGALITY OF UNSTAMPED ARBITRATION AGREEMENTS

The Hon’ble Supreme Court by a seven Judges bench decision overrules 'N.N. Global Mercantile' Judgment.

In Re Interplay Between Arbitration Agreements Under The Arbitration And Conciliation Act 1996 And The Indian Stamp Act 1899:  And With Arbitration Petition No. 25 of 2023:

Date of decision:- 13.12.2023

In a unanimous ruling, a seven-judge panel of the Hon’ble Supreme Court has held that unstamped or inadequately unstamped arbitration agreements do not automatically become void or unenforceable from the outset. According to the Court, objections to an arbitral tribunal's jurisdiction based on inadequate or unpaid stamp duty cannot be decided on an initial or surface level examination. Resolving such objections necessitates a thorough review of evidence, submissions, and legal as well as factual findings. The bench emphasized that compelling courts to address stamping issues during Section 8 or Section 11 proceedings would contradict the legislative intent behind the Arbitration Act.

Conclusion:

Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable. Non stamping or inadequate stamping is a curable defect. An objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The concerned court must examine whether the arbitration agreement prima facie exists. Any objection in relation to the stamping of the agreement fall within the ambit of the tribunal The decision in N.N. Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. is overruled to that extent.