In a landmark decision today, a seven-judge bench of the Supreme Court has issued a groundbreaking ruling on the validity and enforceability of arbitration clauses in agreements lacking proper stamping or with insufficient stamping. This decision marks a departure from a previous judgment delivered by a five-judge bench earlier in the year and carries broad implications for arbitration practices in India.

The court overturned the decision made by a 5-judge bench in April of this year in the case of M/s. N.N. Global Mercantile Pvt. Ltd. v. M/s. Indo Unique Flame Ltd. And Ors. In the previous ruling, a 3:2 majority determined that arbitration agreements without proper stamping were not legally enforceable.

The present verdict was delivered by a bench composed of Chief Justice of India DY Chandrachud, Justice Sanjay Kishan Kaul, Justice Sanjiv Khanna, Justice B R Gavai, Justice Surya Kant, Justice JB Pardiwala, and Justice Manoj Misra. The ruling establishes that agreements lacking proper stamping are not inherently void or unenforceable but are instead deemed inadmissible as evidence.

The Chief Justice delivered the key findings of the judgment, stating that agreements lacking proper stamping or with inadequate stamping are not inherently void or unenforceable; rather, they are considered inadmissible in evidence. He emphasized that non-stamping or insufficient stamping is a correctable flaw and that objections related to stamping should not be addressed under Sections 8 or 11 of the Arbitration Act. Instead, the court's role is to assess the prima facie existence of an arbitration agreement. Furthermore, any objection regarding the stamping of the agreement falls within the jurisdiction of the arbitral tribunal, and the decisions in NN Global 2 and SMS Tea Estates are overturned.

He also underscored the legislative goal of minimizing the supervisory role of courts in arbitration contracts, noting that obligating the court to decide stamping issues under Sections 8 and 11 would go against the intended purpose of the Arbitration and Conciliation Act.

Justice Sanjiv Khanna, concurring with the judgment, added that unstamped agreements are not automatically rendered void or void ab initio.

The legal dispute originated from a curative petition challenging a 2020 Supreme Court ruling in the case of Bhaskar Raju and Brothers and Anr v. Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram & Other Charities and Ors. During the consideration of the curative plea, a 5-judge bench, in September of this year, directed the matter to be reviewed by a larger 7-judge bench to reevaluate the accuracy and appropriateness of the NN Global ruling. The recent decision reaffirms that the absence of stamping or insufficient stamping is a correctable flaw. Importantly, objections related to stamping are not within the purview of determination under Sections 8 or 11 of the Arbitration Act.

This judgment is expected to enhance the effectiveness and enforceability of arbitration agreements in India, offering clarity on the division of powers between the court and the arbitrator in this context. However, the decision has prompted inquiries into the court's curative jurisdiction and its potential to address injustices in individual cases. Questions have arisen regarding the extent to which the court can exercise its curative powers to rectify specific instances of perceived injustice. This aspect introduces a nuanced consideration of the court's role in addressing legal issues and ensuring fairness in the application of the law.

Case: In Re Interplay Between Arbitration Agreements Under The Arbitration And Conciliation Act 1996 And The Indian Stamp Act 1899,

Curative Pet(C) No. 44/2023 In R.P.(C) No. 704/2021 In C.A. No. 1599/2020.