LI Network
Published on: December 13, 2023 at 11:36 IST
In a groundbreaking decision, a seven-judge bench of the Supreme Court announced that arbitration clauses in agreements lacking proper stamping are indeed enforceable.
This ruling overturns the earlier judgment by a five-judge bench in April, which had held that unstamped arbitration agreements were not legally enforceable.
The seven-judge bench, comprising Chief Justice of India DY Chandrachud, Justice Sanjay Kishan Kaul, Justice Sanjiv Khanna, Justice B R Gavai, Justice Surya Kant, Justice JB Pardiwala, and Justice Manoj Misra, delivered the verdict in the case titled “In Re Interplay Between Arbitration Agreements Under The Arbitration And Conciliation Act 1996 And The Indian Stamp Act 1899.”
Key Conclusions of the Judgment:
a. Agreements lacking proper stamping are not void ab initio or unenforceable; instead, they are deemed inadmissible in evidence.
b. Non-stamping or inadequate stamping is a curable defect.
c. Objections related to stamping are not within the purview of Sections 8 or 11 of the Arbitration Act; the court must assess whether an arbitration agreement exists prima facie.
d. Any objection regarding the stamping of the agreement falls under the jurisdiction of the arbitral tribunal.
e. The previous decisions in NN Global and SMS Tea Estates are overruled.
Chief Justice Chandrachud emphasized that one of the primary objectives of the Arbitration and Conciliation Act is to minimize the supervisory role of courts in arbitration contracts. Requiring the court to decide stamping issues under Sections 8 and 11 would undermine the legislative intent of reducing court intervention.
Justice Sanjiv Khanna provided a concurring opinion, affirming that unstamped agreements are not rendered void or void ab initio.
Background:
The seven-judge bench case originated from a curative petition filed against the Supreme Court’s 2020 ruling in Bhaskar Raju and Brothers vs. Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram & Other Charities and Ors. During the consideration of the curative plea, a five-judge bench referred the matter to a seven-judge bench in September to reassess the correctness of NN Global.
In the 2020 case, the Supreme Court had observed that an arbitration clause in an agreement requiring proper stamping, if not sufficiently stamped, could not be acted upon by the court. The recent decision to overrule NN Global signifies a departure from this stance.
This development is a pivotal moment in Indian arbitration jurisprudence, providing clarity on the enforceability of arbitration clauses in agreements lacking proper stamping. The decision aligns with the principle of minimizing court intervention and promoting the autonomy of arbitration agreements.
Case Title: In Re Interplay Between Arbitration Agreements Under The Arbitration And Conciliation Act 1996 And The Indian Stamp Act 1899