The 5-judge Constitution Bench of Supreme Court has ruled on a significant point of law as to whether Arbitration Clause in Unstamped Instrument exigible to Stamp Duty can be invoked or not.

The Bench of Justice KM Joseph, Justice Ajay Rastogi, Justice Aniruddha Bose, Justice Hrishikesh Roy and Justice CT Ravikumar with 3:2 majority has ruled that invoking the same is not valid in law.

"An instrument which is exigible to stamp duty may contain an arbitration clause and which is not stamped cannot be said to be a contract enforceable in law within the meaning of S. 2(h) of the Contract Act and is not enforceable under S 2(g) of the Contract Act," the majority view reads.

Justice KM Joseph, Justice Aniruddha Bose and Justice CT Ravikumar wrote the majority view while Justice Ajay Rastogi and Justice Hrishikesh Roy dissented, opining that unstamped arbitration agreements are valid at the pre-referral stage.

It was their observation that non-stamping or insufficient stamping of the substantive instrument would not render the arbitration agreement unenforceable as stamp deficiency is a curable defect and the same would not render the arbitration agreement void.

The majority view was that Court at pre-referral stage under Section 11 Arbitration and Conciliation Act is bound to examine the instrument and if found to be unstamped or insufficiently stamped the instrument is to be impounded at this stage itself while the minority was of the view that the examination of the stamping and impounding may not be done at this stage.

It was their opinion that deciding on the stamp duty at the threshold also stalls the process, leading to procedural complexity and delay in litigation before the Courts.

"Copy or certified copy of arbitration agreement whether unstamped or insufficiently stamped, at the pre-reference stage, is an enforceable document for the appointment of the arbitrator," the minority view reads.

The majority upheld the view taken in M/s. SMS Tea Estates Pvt. Ltd. Vs. M/s. Chandmari Tea Co. Pvt. Ltd. and Garware Wall Ropes Ltd. Vs. Coastal Marine Constructions & Engineering Ltd. that non-payment of stamp duty on the commercial contract would invalidate even the arbitration agreement, and render it non-existent in law, and unenforceable, is not the correct position in law and clarified that certified copy can be produced at the Section 11 stage only if it clearly indicates the stamp duty paid. If the same is not mentioned, the Court should not act on the said certified copy.

CASE TITLE: M/s. N.N. Global Mercantile Pvt. Ltd. Vs. M/s. Indo Unique Flame Ltd.
CASE DETAILS: Civil Appeal No. 3802-3803 of 2020 
CORAM: Hon'ble Mr. Justice KM Joseph, Hon'ble Mr. Justice Ajay Rastogi, Hon'ble Mr.  Justice Aniruddha Bose, Hon'ble Mr.  Justice Hrishikesh Roy and Hon'ble Mr.  Justice CT Ravikumar
CITATION: 2021 Latest Caselaw 12 SC
Advocates for Petitioner/ Appellant: Mr. Gagan Sanghi, Adv. Mr. Rameshwar Prasad Goyal, AOR
Advocates for Respondent:Mr. K Rama Kant Reddy, Sr. Adv. Mr. Rajul Srivastava, Adv. Ms. Charu Ambwani, AOR Ms. Komal Agarwal, Adv. Mr. Amit Khare, Adv. Ms. Manisha Ambwani, Adv. Mr. Sanjay Kapur, AOR Ms. Megha Karnwal, Adv. Mr. Surya Prakash, Adv. Mr. Arjun Bhatia, Adv. Mr. Lalit Rajput, Adv. Mr. Devesh Dubey, Adv. Mr. Debesh Panda, AOR, Mr. Naman Maheshwari, Adv. Mr. Garv Malhotra, Adv. Mr. Udbhav Gady, Adv. Mr. Neil Chatterjee, Adv. Mrs. Snehal Maheshwari, Adv. Mr. Rahul Totala, Adv. Mr. Eshan Aprameya Chaturvedi, Adv. Mr. Kanishk Aggrawal, Adv. Ms. Malvika Trivedi, Sr. Adv. Mr. Premlal Krishnan, Adv. Mr. Rahul Arya, Adv. Mr. Madhav Bhatia, Adv. Mr. Shailendra Slaria, Adv. Ms. Bani Dixit, Adv. Mr. Himanshu Kapoor, Adv. Mr. Alok Tripathi, AOR Mr. Puneet Singh Bindra, AOR

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