Supreme Court to reevaluate validity of unstamped arbitration agreements

The majority opinion delivered held that arbitration agreements not validated by Stamp Act would stand non est in law rendering them void or unenforceable in law.

New Delhi: The Supreme Court on Tuesday agreed to reconsider its decision laying down that non-stamping or insufficient stamping of an arbitration agreement will make it invalid.

A 5-judge bench headed by CJI D.Y. Chandrachud and comprising Justices S.K. Kaul, Sanjiv Khanna, B.R. Gavai and Surya Kant agreed for referring the issue to a 7-judge bench having regard to the larger ramifications of the decision rendered in the case of NN Global Mercantile Pvt Ltd vs. Indo Unique Flame Ltd & Ors.

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In that case, a five-judge Constitution Bench in April this year laid down by a ratio of 3:2 that non-stamped or insufficiently-stamped arbitration agreements are not enforceable in the eyes of law.

The majority opinion delivered held that arbitration agreements not validated by Stamp Act would stand non est in law rendering them void or unenforceable in law.

On the other hand, two judges in their distinct minority judgments, opined that stamp deficiency may be cured and unstamped arbitration agreements are valid at the pre-referral stage.

The question whether an arbitration agreement would be invalid if the underlying contract was not stamped as per the relevant Stamp Act, was referred to a five-judge constitution bench for an authoritative pronouncement after two three-judge benches of the apex court came to conflicting conclusions on the issue.