22 Dec 2023
A seven-judge bench of the Supreme Court of India, while overruling its previous decisions in SMS Tea, Garware and N.N. Global II, has held that an unstamped or insufficiently stamped arbitration agreement is not void or unenforceable, and that courts are not required to determine the issue of stamping while dealing with applications under Sections 8, 9 and 11 of the Arbitration and Conciliation Act, 1996. This update analyses and discusses this proarbitration judgment in the context of the Indian arbitration landscape.
In a recent judgment delivered on 13 December 2023 in ‘In Re: Interplay between arbitration agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899,’ a seven-judge bench of the Supreme Court of India (headed by the Chief Justice of India) has overruled the decision rendered by its five-judge bench in M/s N.N. Global Mercantile Private Limited v M/s Indo Unique Flame Ltd. & Ors. (N.N. Global II) earlier this year and held that arbitration agreements that are unstamped or insufficiently stamped are not rendered void or void ab initio or unenforceable. Consequently, it also held that objections relating to stamping do not fall for the determination of courts at the stage of reference under Sections 8 and 11 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) and must be left to the determination of the arbitral tribunal. The Court also clarified that courts are not required to deal with the issue of stamping while deciding an application for interim reliefs under Section 9 of the Arbitration Act. Through this judgment, the Court has reinforced the fundamental principles of Indian arbitration law, including kompetenz kompetenz, minimal judicial intervention, separability and party autonomy.
The reference before a larger seven-judge bench of the Supreme Court arose in the context of the decision in N.N. Global II that sought to clarify disparate legal jurisprudence on the implications of an unstamped or insufficiently stamped agreement including, more specifically, on its enforceability at the stage of reference to arbitration under Sections 8 or 11 of the Arbitration Act.
To briefly recapitulate, on 25 April 2023, a five-judge bench of the Supreme Court in N.N. Global II (by a majority decision of 3:2) opined on the legality of an unstamped or insufficiently stamped arbitration agreement and held as under.
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