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July 2024

Arbitration Clauses in Unstamped Agreements

By Dr Anup P. Shah,Chartered Accountant
Reading Time 14 mins

INTRODUCTION

An agreement often contains a clause for arbitration. An agreement is an instrument under the meaning of the Stamp Act and if it falls within the Articles contained in the Schedule to the Stamp Act, then the agreement needs to be stamped. An interesting question arose as to what would be the status of the arbitration clause in an event where the underlying agreement itself is inadequately stamped? Would the reference to arbitration survive since the main agreement itself is not properly stamped? A seven-judge Bench has given its final opinion on this issue in the case of 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.

Judicial History

A three-judge Bench of the Supreme Court in its decision N N Global Mercantile (P) Ltd. vs. Indo Unique Flame Ltd. (2021) 4 SCC 379 held that an arbitration agreement, being separate and distinct from the underlying commercial contract, would not be rendered invalid, unenforceable, or non-existent. The Court held

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