New Delhi
The Supreme Court reversed its previous ruling, stating that an arbitration agreement is not automatically invalidated if the underlying contract lacks proper stamping. In a unanimous decision, a 7-judge Constitution Bench, led by CJI D.Y. Chandrachud, emphasized that non-stamping or insufficient stamping does not make the agreement void but renders it inadmissible as evidence.
The Constitution Bench deemed non-stamping or insufficient stamping a curable defect under the Indian Stamp Act, 1899. The court asserted that compelling the determination of stamping issues at the pre-referral stage would undermine the goals of the Arbitration and Conciliation Act, 1996. Justice Sanjiv Khanna, in a separate concurring opinion, held that inadequate or non-stamping of an arbitration agreement does not render it invalid.
The decision came after the Supreme Court decided to refer the matter to a 7-judge bench due to the significant impact of the NN Global Mercantile Pvt Ltd vs. Indo Unique Flame Ltd & Ors case. In April of the same year, a five-judge Constitution Bench ruled, by a 3:2 ratio, that non-stamped or insufficiently-stamped arbitration agreements are not legally enforceable. The majority opinion deemed such agreements void, while two minority judges argued that stamp deficiency could be rectified, and unstamped arbitration agreements were valid at the pre-referral stage. With the latest ruling, the 7-judge bench has overturned the earlier ratio.
