Latest-Unstamped/insufficiently stamped arbitration agreements are enforceable or void but inadmissible as evidence

Curative Petition: Interplay Between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899

Supreme Court of India | Decided on 13.12.2023

While deciding a curative petition that sought to decide the issue concerning the effect of unstamped or insufficiently stamped arbitration agreement, the seven Judge Bench has discussed the essence of the difference between voidness and admissibility and concluded as follows:

a.    Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act but are not rendered as void or void ab initio or unenforceable in courts of law. Section 35 is significant because it gives teeth to the Stamp Act by ensuring that stamp-duty is paid before rights and obligations arising from an agreement are enforced.

b.    Non-stamping or inadequate stamping is a curable defect.

c.     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. When a party produces an arbitration agreement or its certified copy, the referral court only has to examine whether an arbitration agreement exists in terms of Section 7 of the Arbitration Act. The referral court under Section 11 is not required to examine whether a certified copy of the agreement/ instrument/ contract discloses the fact of payment of stamp duty on the original.

d.    Any objections in relation to the stamping of the agreement fall within the ambit of the Arbitral Tribunal.

e.    The decision in N.N Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd and SMS Tea Estates (P) Ltd. v. Chandmari Tea Co. (P) Ltd are overruled. Also Paragraphs 22 and 29 of Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engg. Ltd are overruled to that extent.