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In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899

Supreme Court of India · 13 December 2023 · 7 judges · 2023 INSC 1066

A seven-judge bench held that an unstamped or insufficiently stamped agreement is inadmissible in evidence but not void, and that objections about stamping are for the arbitral tribunal, not the referral court under Sections 8 or 11.

Facts

In N N Global 1 (2021) a three-judge bench held that an arbitration agreement in an unstamped work order was not invalid, differing from SMS Tea Estates and Garware Wall Ropes, and referred the question to five judges. In N N Global 2 (April 2023) the Constitution Bench held by 3:2 that an unstamped instrument containing an arbitration agreement is void, does not exist in law, and must be impounded by the court under Section 11. A curative petition seeking reconsideration of Bhaskar Raju, which had followed SMS Tea Estates, and a Section 11 petition in Seka Dobric, where non-stamping was raised, were listed together. On 26 September 2023 a five-judge bench, given the larger ramifications of N N Global 2, referred the matter to seven judges. The Court answered the question of law without going into the facts of the individual cases.

Questions before the Court

  1. Does non-stamping or insufficient stamping make an instrument void, or only inadmissible in evidence under Section 35 of the Stamp Act?
  2. Is an arbitration agreement in an unstamped or insufficiently stamped contract non-existent, invalid or unenforceable?
  3. Must the referral court under Sections 8 or 11 of the Arbitration Act examine and impound an unstamped instrument, or is stamping for the arbitral tribunal?
  4. Do N N Global 2 and SMS Tea Estates lay down the correct law?

What the Court held

  • Agreements that are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act, but are not void, void ab initio or unenforceable. Non-stamping is a curable defect, and Section 2(j) of the Contract Act is not attracted.
  • Under the competence-competence principle in Section 16, and the separability of the arbitration agreement, the arbitral tribunal decides questions of existence and validity. The referral court under Section 11(6A) only examines, on a prima facie basis, whether an arbitration agreement exists under Section 7.
  • Objections about stamping do not fall for determination under Sections 8 or 11; they belong to the arbitral tribunal, which can act under the Stamp Act, so the revenue's interest is protected. A referral court may act on a certified copy without checking whether it shows the duty paid.
  • N N Global 2 and SMS Tea Estates are overruled, and paragraphs 22 and 29 of Garware Wall Ropes are overruled to that extent. Vidya Drolia did not decide the effect of non-stamping on an arbitration agreement.

Why it matters

The judgment overrules the majority in N N Global 2 and SMS Tea Estates, and part of Garware Wall Ropes, on the effect of non-stamping. It separates admissibility from validity under the Stamp Act, treats the Arbitration Act as a self-contained code with primacy for arbitration agreements, and confines the referral court under Section 11(6A) to a prima facie check that an arbitration agreement exists, leaving stamping and other contested issues to the arbitral tribunal.

In the Court's words

Copied from the official judgment; each passage links to its page.

“The effect of not paying duty or paying an inadequate amount renders an instrument inadmissible and not void. Non-stamping or improper stamping does not result in the instrument becoming invalid. The Stamp Act does not render such an instrument void. The non-payment of stamp duty is accurately characterised as a curable defect. The Stamp Act itself provides for the manner in which the defect may be cured and sets out a detailed procedure for it. It bears mentioning that there is no procedure by which a void agreement can be “cured.””
Dr D.Y. Chandrachud, CJIPage 34 of the judgment
“The corollary of the doctrine of competence-competence is that courts may only examine whether an arbitration agreement exists on the basis of the prima facie standard of review. The nature of objections to the jurisdiction of an arbitral tribunal on the basis that stamp-duty has not been paid or is inadequate is such as cannot be decided on a prima facie basis. Objections of this kind will require a detailed consideration of evidence and submissions and a finding as to the law as well as the facts. Obligating the court to decide issues of stamping at the Section 8 or Section 11 stage will defeat the legislative intent underlying the Arbitration Act.”
Dr D.Y. Chandrachud, CJIPage 109 of the judgment
“Therefore, paragraphs 22 and 29 of Garware Wall Ropes (supra), which held that an arbitration agreement contained in an unstamped or insufficiently stamped contract would be non-existent in law, does not set forth the correct position of law.”
Dr D.Y. Chandrachud, CJIPage 123 of the judgment
“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; 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;”
Dr D.Y. Chandrachud, CJIPage 129 of the judgment

Provisions interpreted

Related judgments

Case and bench

Parties
In Re: Interplay between Arbitration Agreements under the Arbitration and Conciliation Act 1996 and the Indian Stamp Act 1899
Case
Curative Petition (C) No. 44 of 2023 in Review Petition (C) No. 704 of 2021 in Civil Appeal No. 1599 of 2020, with Arbitration Petition No. 25 of 2023
Decided
13 December 2023
Bench
Dr Dhananjaya Y Chandrachud, Sanjay Kishan Kaul, Sanjiv Khanna, B R Gavai, Surya Kant, J B Pardiwala, Manoj Misra
Opinions
Unanimous. Dr D.Y. Chandrachud, CJI wrote for himself and Kaul, Gavai, Surya Kant, Pardiwala and Manoj Misra, JJ.; Sanjiv Khanna, J. wrote a concurring opinion agreeing with the conclusions.

Questions on this case

From free Law Maker papers. Try each one before you open the answer.

  1. Question 1 · Legal Current Affairs: October 2026 (Part 1)

    In Shubham Equipment Private Limited v. Rothwell Water Company Limited (8 October 2026), a three-Judge Bench presided over by Chief Justice Surya Kant heard petitions to appoint an arbitrator for disputes under a joint venture agreement and an MoU. The respondents argued that the Korea-seated arbitration clause of an earlier licence agreement governed. The Court:

    1. A. appointed a sole arbitrator, as the referral court examines only the prima facie existence of the agreement
    2. B. referred every dispute to arbitration in Korea, holding that the three agreements were inseparably linked
    3. C. declined to appoint an arbitrator, holding that the clause in the mother agreement overrides later clauses
    4. D. declined to appoint an arbitrator, holding that a non-signatory subsidiary cannot be drawn into arbitration
    Show the answer

    A. appointed a sole arbitrator, as the referral court examines only the prima facie existence of the agreement

    Applying Section 11(6-A) and In re Interplay between Arbitration Agreements and the Stamp Act, (2024) 6 SCC 1, the Court held that once the arbitration agreement prima facie exists the referral court must refer. The JVA and MoU operated in different fields and had their own clauses; overlap with the licence agreement and the non-signatory subsidiary's position were left to the arbitrator. Justice R.D. Dhanuka was appointed sole arbitrator.