Unstamped arbitration agreement not valid, can't be enforced, rules SC

Arbitration Agreements

A five-judge constitution bench of the Supreme Court in a majority verdict on April 25 held that unstamped arbitration agreements are not legally enforceable.

The law requires that the stamp duty for a document be paid for it to become enforceable legally. The case was referred to the constitution bench after two three-judge benches came to different conclusions on the issue.

The constitution bench too was divided on the matter with two justices dissenting from the verdict.

Justice Ajay Rastogi, one of the two dissenting justices, said the existence of a certified copy of an arbitration agreement whether unstamped or not is enforceable to appoint an arbitrator. It is for the arbitrator to adjudicate the preliminary issues on the document.

Justice Hrishikesh Roy, who, too, dissented, said the objective of the 1996 arbitration act was to avoid procedural complexities and litigations at various courts,  stamping the document will go against such an objective, as such an issue can be sorted at a later stage.

In 2020, a bench led by CJI NV Ramana had held that stamping of an arbitration agreement is mandatory for it to be referred to an arbitrator.

In 2021, a bench led by Justice DY Chandrachud, who would go on to be the CJI in late 2022, had opined that an arbitration agreement would not be rendered invalid, unenforceable or non-existent, on account of non-payment of stamp duty. The bench referred the case to a larger bench to settle the matter.

(This is a developing story, please come back for updates)