{"id":290734,"date":"2023-04-27T17:00:55","date_gmt":"2023-04-27T11:30:55","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=290734"},"modified":"2023-04-28T15:19:56","modified_gmt":"2023-04-28T09:49:56","slug":"we-dissent-here-why-2-out-of-5-judges-of-supreme-court-ruled-unstamped-arbitration-agreements-are-valid-in-law-legal-research-legal-news-updates","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2023\/04\/27\/we-dissent-here-why-2-out-of-5-judges-of-supreme-court-ruled-unstamped-arbitration-agreements-are-valid-in-law-legal-research-legal-news-updates\/","title":{"rendered":"We Dissent! Here’s why 2 out of 5 Judges of Supreme Court ruled unstamped arbitration agreements are valid at pre-referral stage"},"content":{"rendered":"
\n

Supreme Court:<\/b> Resolving the conundrum over the scope of judicial review and the validity\/enforceability of the unstamped\/insufficiently stamped arbitration agreement contained in an underlying contract, the 5-Judge Bench comprising of K.M. Joseph, Ajay Rastogi, Aniruddha Bose, Hrishikesh Roy and C.T. Ravikumar, JJ. by a 3:2 majority, held that unstamped arbitration agreements are not valid in law. While Justices Ajay Rastogi and Hrishikesh Roy, JJ. dissented and opined that unstamped arbitration agreements are valid at the pre-referral stage.<\/p>\n

Issue:<\/h4>\n

Whether the non-stamping of the substantive contract\/instrument would render the arbitration agreement non-existent in law, void and unenforceable at the stage of Section 11<\/a> of the Arbitration Act, 1996<\/a> for the purpose of referring a matter for arbitration?<\/p>\n

Whether the examination of stamping and impounding should be done at the threshold by the Section 11 judge, or should it be left to the arbitrator?<\/p>\n

Analysis:<\/h4>\n

Justice Rastogi said that a plain reading of Section 35<\/a> of the Stamp Act, 1899<\/a> (\u2018Act, 1899\u2019) suggests that an inadmissible instrument because of being unstamped or insufficiently stamped may be made admissible if the relevant stamp duty and a penalty is paid later. This shows that the requirement under Section 35 is not rigid and can be rectified even at a later stage. An unstamped or insufficiently stamped instrument is not completely invalid, and it can be made valid and admissible in evidence after fulfilling the conditions prescribed in the proviso to Section 35.<\/p>\n

Placing reliance on Hariom Agrawal<\/i> v. Prakash Chand Malviya<\/i>, (2007) 8 SCC 514<\/a>, Justice Rastogi said that the law on the subject is well settled that duly certified copy\/photocopy of the alleged instrument cannot be validated by impounding, and this cannot be admitted in evidence under the Act, 1899<\/a>. Thus, the deficiency in an instrument, whether it is unduly stamped or insufficiently stamped, can be rectified through a procedure as prescribed under the Act, 1899<\/a>. It clearly indicates that the requirement under the Act can indeed be fulfilled even after the time when the instrument was executed. The requirement under the Act is not rigid or strict, to make the instrument invalid at the first instance.<\/p>\n

He further stated that the purpose of the Act, 1899<\/a> is not to declare an instrument as completely invalid if it is unstamped or insufficiently stamped, but to collect the stamp duty on each instrument. The object of the Act 1899<\/a> is to secure revenue for the state.<\/p>\n

Justice Roy said that the legislative intent and object behind the Act, 1899<\/a>, is to secure revenue for the State and it is an Act reflecting the fundamental policy of Indian law. Thus, policy considerations and securing revenue must also be kept in mind while interpreting the provisions of the Stamp Act, 1899<\/a>.<\/p>\n

He said that the objective behind the enactment of the Arbitration and Conciliation Act, 1996<\/a> (\u2018Act, 1996\u2019) was to, inter alia, avoid procedural complexity and the delay in litigation before Courts. Impounding and stamping at the Section 11 stage would frustrate the very purpose of the amended Arbitration Act, 1996<\/a> as the enforcement of arbitration agreements would be stalled on an issue, which is capable of being resolved at a later stage. To defer stamping to the stage of the arbitrator would achieve the objective of both the Arbitration Act, 1996<\/a> and the Stamp Act, 1899<\/a>.<\/p>\n

Thus, in his opinion the examination of stamping and impounding need not be done at the threshold by a Court, at the pre-reference stage under Section 11 of the Act, 1996<\/a>. Further, non-stamping\/insufficient stamping of the substantive contract\/instrument would not render the arbitration agreement non- existent in law and unenforceable\/void, for the purpose of referring a matter for arbitration.<\/p>\n

As per Justice Roy, the Court in Garware Wall Ropes Ltd.<\/i> v. Coastal Marine Constructions and Engineering Limited<\/i>, (2019) 9 SCC 209<\/a> wrongly applied the principle given in United India Insurance Co. Ltd.<\/i> v. Hyundai Engg. & Construction Co. Ltd.<\/i>, (2018) 17 SCC 607<\/a> to hold that an arbitration agreement would not exist-in-law if it is unstamped\/insufficiently stamped. An arbitration agreement should not be rendered void if it is suffering stamp deficiency which is a curable defect. To this extent, he said that Garware(supra) and Hyundai(supra) do not set out the correct law.<\/p>\n

The Dissenting Judges held that that the existence of a copy\/certified copy of an arbitration agreement whether unstamped\/ insufficiently stamped at the pre-referral stage is an enforceable document for the purposes of appointment of an Arbitrator under Section 11(6A)<\/a> of the Act, 1996<\/a> where the judicial intervention shall be minimal confined only to the prima facie examination of \u201cexistence of an arbitration agreement\u201d alone keeping in view the object of 2015 amendment and the courts must strictly adhere to the time schedule for the appointment of Arbitrator prescribed under Section 11(13)<\/a> of the Act, 1996<\/a>.<\/p>\n

The Dissenting Judges held that all the preliminary\/debatable issues including insufficiently stamped\/unduly stamped or validity of the arbitration agreement etc. are referrable to the Arbitrator\/Arbitral Tribunal under Section 16<\/a> of the Act, 1996<\/a> which, by virtue of the Doctrine of Kompetenz – Kompetenz has the power to do so.<\/p>\n

Further, the Judges overruled the decision in SMS Tea Estates (P) Ltd.<\/i> v. Chandmari Tea Co. (P) Ltd.<\/i>, (2011) 14 SCC 66<\/a>. Also, overruled Paragraphs 22 and 29 in Garware (supra) which were approved in paragraphs 146 and 147 in Vidya Drolia<\/i> v. Durga Trading Corpn.<\/i>, (2021) 2 SCC 1<\/a><\/p>\n

\n

Also Read: Unstamped Arbitration Agreements are not Valid in Law: SC | SCC Blog (scconline.com)<\/a><\/b><\/p>\n

\n

[N.N. Global Mercantile Pvt. Ltd. v. Indo Unique Flame Ltd., 2023 SCC OnLine SC 495<\/a>, decided on 25-04-2023<\/span>]<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The practice of dissent in judicial decision-making process plays a critical role in revealing constitutional commitment to deliberative democracy. Allowing judges to express differing views and engage in a dialogue about the law and its interpretation can potentially lead to a more nuanced and refined understanding of the law, as the Court grapples with competing interpretations and seeks to reconcile them in a principled manner.<\/i><\/p>\n","protected":false},"author":67512,"featured_media":290763,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[3,9],"tags":[10111,31199,5951,5363],"class_list":["post-290734","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-supremecourt","tag-arbitration-agreement","tag-dissent","tag-stamp-duty","tag-supreme-court"],"yoast_head":"\nSupreme Court Dissent upholding validity of unstamped arbitration agreement | SCC Blog<\/title>\n<meta name=\"description\" content=\"2 out of 5 Judges of Supreme Court upheld validity of unstamped arbitration agreement with a view that deficiencies under Stamp Act can be corrected.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.scconline.com\/blog\/post\/2023\/04\/27\/we-dissent-here-why-2-out-of-5-judges-of-supreme-court-ruled-unstamped-arbitration-agreements-are-valid-in-law-legal-research-legal-news-updates\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"We Dissent! 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Big ruling on unstamped arbitration agreement","author":"Editor","date":"May 2, 2023","format":false,"excerpt":"Don\u2019t miss out on the 5-Judge Bench verdict pertaining to non-admissibility of an unstamped arbitration agreement and Constitution Bench hearing pertaining to the petitions seeking legal recognition of same sex marriage under several Acts, including the SMA, 1954, the FMA, 1969 and HMA, 1955.","rel":"","context":"In "Legal RoundUp"","block_context":{"text":"Legal RoundUp","link":"https:\/\/www.scconline.com\/blog\/post\/category\/columns-for-roundup\/"},"img":{"alt_text":"supreme court constitution bench april 2023","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/supreme-court-constitution-bench-april-2023-1.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/supreme-court-constitution-bench-april-2023-1.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/supreme-court-constitution-bench-april-2023-1.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/05\/supreme-court-constitution-bench-april-2023-1.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":309167,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/12\/13\/7-judge-bench-verdict-supreme-court-judgment-on-validity-of-unstamped-arbitration-agreement\/","url_meta":{"origin":290734,"position":3},"title":"7-Judge Bench Verdict | Supreme Court Judgment on validity of Unstamped Arbitration Agreement","author":"Apoorva","date":"December 13, 2023","format":false,"excerpt":"\u201cThe concept of separability or severability of an arbitration agreement from the underlying contract is a legal fiction which acknowledges the separate nature of an arbitration agreement. The separate nature of the arbitration agreement from the underlying contract is one of the cornerstones of arbitration law\u201d","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/12\/MicrosoftTeams-image-195.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/12\/MicrosoftTeams-image-195.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/12\/MicrosoftTeams-image-195.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/12\/MicrosoftTeams-image-195.jpg?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":283291,"url":"https:\/\/www.scconline.com\/blog\/post\/2023\/02\/06\/supreme-court-to-decide-validity-of-unstamped-arbitration-agreement-legal-research-legal-news-updates-stamp-act-arbitration-conciliation-act-constitution-bench-judgment-reserved\/","url_meta":{"origin":290734,"position":4},"title":"EXPLAINED| Stamp Act versus Arbitration Act issue on validity of an Unstamped Arbitration Agreement as Supreme Court reserves Judgment","author":"Editor","date":"February 6, 2023","format":false,"excerpt":"The Constitution bench considered a question of law : whether the instrument was duly stamped or not, was not only contrary to the plain language of Section 11(6A) of the Arbitration Act, but also wholly defeated the legislative intention of the Arbitration and Conciliation (Amendment) Act, 2015, and puts a\u2026","rel":"","context":"In "Case Briefs"","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2023\/02\/MicrosoftTeams-image-301.png?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":249317,"url":"https:\/\/www.scconline.com\/blog\/post\/2021\/06\/09\/unstamped-contract\/","url_meta":{"origin":290734,"position":5},"title":"\u00ad\u00ad\u00ad\u00adEnforceability of an Arbitration Agreement Embedded in an Unstamped Contract N.N. 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Indo Unique Flame Ltd. : A case comment","author":"Editor","date":"June 9, 2021","format":false,"excerpt":"by Shuchi Sejwar* and Akshata Sharma**","rel":"","context":"In "Op Eds"","block_context":{"text":"Op Eds","link":"https:\/\/www.scconline.com\/blog\/post\/category\/op-ed\/legal-analysis\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/06\/MicrosoftTeams-image-7.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/06\/MicrosoftTeams-image-7.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/06\/MicrosoftTeams-image-7.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/06\/MicrosoftTeams-image-7.png?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2021\/06\/MicrosoftTeams-image-7.png?resize=1050%2C600&ssl=1 3x"},"classes":[]}],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/290734","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/users\/67512"}],"replies":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/comments?post=290734"}],"version-history":[{"count":0,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/posts\/290734\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media\/290763"}],"wp:attachment":[{"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/media?parent=290734"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/categories?post=290734"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.scconline.com\/blog\/wp-json\/wp\/v2\/tags?post=290734"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}